AMERICAN ENERGY GROUP LTD - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - AMERICAN ENERGY GROUP LTD	Financial_Report.xls
EX-32.1 - CERTIFICATION - AMERICAN ENERGY GROUP LTD	aegg_ex321.htm
EX-31.1 - CERTIFICATION - AMERICAN ENERGY GROUP LTD	aegg_ex311.htm

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, 2013

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

As of May 15, 2013, the number of Common shares outstanding was 44,052,949

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		11

Items 4 and 4T.	Controls and Procedures		11

PART II-OTHER INFORMATION

Item 1.	Legal Proceedings		12

Item 1A.	Risk Factors		13

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		13

Item 3.	Defaults Upon Senior Securities		13

Item 4.	Mine Safety Disclosures		13

Item 5.	Other Information		13

Item 6.	Exhibits		13

PART I-FINANCIAL INFORMATION

THE AMERICAN ENERGY GROUP, LTD.

Balance Sheets

Assets
	March 31, 2013 (Unaudited)			June 30, 2012

Current Assets
Cash	$	62,540		$	82,433
Oil and gas sales receivable		1,734,462			819,590
Prepaid expenses		2,851			30,750
Total Current Assets		1,799,853			932,773
Property and Equipment
Office equipment		30,417			30,417
Leasehold improvements		26,458			26,458
Accumulated depreciation		(41,282	)		( 37,732	)

Net Property and Equipment		15,593			19,143
Other Assets
Investment in oil and gas working interest – related party		1,583,914			1,583,914
Security deposit		16,312			16,312
Total Other Assets		1,600,226			1,600,226
Total Assets	$	3,415,672		$	2,552,142

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	54,436		$	58,190
Security deposits		13,200			13,200
Note payable		-			24,854
Accrued liabilities		285,264			232,216
Total Current Liabilities		352,900			328,460
Total Liabilities		352,900			328,460
Stockholders’ Equity
Common stock, par value $0.001 per share;
authorized 80,000,000 shares; 43,749,429 and
39,432,761 shares issued and outstanding, respectively		43,749			39,433
Capital in excess of par value		12,999,216			12,336,385
Accumulated deficit		(9,980,193	)		(10,152,136	)
Total Stockholders’ Equity		3,062,772			2,223,682
Total Liabilities and Stockholders’ Equity	$	3,415,672		$	2,552,142

See accompanying unaudited notes to the financial statements.

THE AMERICAN ENERGY GROUP, LTD.

Statements of Operations

For the Three Months and Nine Months Ended March 31, 2013 and 2012

Unaudited

	Three Months Ended						Nine Months Ended
	March 31,			March 31,			March 31,			March 31,
	2013			2012			2013			2012

Revenue	$	298,290		$	242,028		$	914,871		$	545,230
Cost of Goods Sold		0			0			0			0

Gross Profit		298,290			242,028			914,871			545,230
Expenses
Administrative salaries		112,640			108,201			319,342			301,791
Legal and professional		86,518			67,232			225,468			164,082
General and administrative		37,503			47,303			120,399			145,526
Office overhead expenses		15,692			13,253			48,079			36,303
Depreciation		1,184			1,297			3,550			3,891

Total Expenses		253,537			237,286			716,838			651,593
Net Operating Income (Loss)		44,753			4,742			198,033			(106,363	)
Other Income and (Expense)
Warrant settlements		(-	)		-			(19,647	)		( -	)
Interest expense		(2,139	)		(1,751	)		(6,443	)		( 5,444	)

Total Other Income (Expense)		(2,139	)		(1,751	)		(26,090	)		( 5,444	)

Net Income (Loss) Before Tax		42,614			2,991			171,943			(111,807	)
Income Tax		0			0			0			0

Net Income (Loss)	$	42,614		$	2,991		$	171,943		$	(111,807	)

Earnings (Loss) per Share
Basic	$	.00		$	.00		$	.00		$	( .00	)
Fully Diluted	$	.00		$	.00		$	.00		$	N/A

Weighted Average Number of Shares Outstanding
Basic		42,927,429			37,469,960			40,755,119			35,638,468
Fully Diluted		45,287,429			39,829,960			43,115,119			37,998,468

See accompanying unaudited notes to the financial statements.

THE AMERICAN ENERGY GROUP, LTD.

Statements of Cash Flows

For the Nine Months Ended March 31, 2013 and 2012

(Unaudited)

	2013			2012
Cash Flows From Operating Activities
Net Income (Loss)	$	171,943		$	( 111,807	)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation		3,550			3,891
Warrant expense		19,647			40,000
Common stock issued for services		45,000			-
Changes in operating assets and liabilities:
(Increase) decrease in oil and gas sales receivable		( 914,872	)		( 514,840	)
(Increase) decrease in prepaid expenses		3,045			33,430
Increase (decrease) in accounts payable		( 3,754	)		( 2,756	)
Increase (decrease) in accrued expenses
and other current liabilities		73,048			43,666

Net Cash (Used In) Operating Activities		( 602,393	)		( 508,416	)

Cash Flows From Investing Activities
Expenditures for office equipment		( -	)		( 1,152	)

Net Cash Provided By (Used In) Investing Activities		( -	)		( 1,152	)

Cash Flows From Financing Activities
Proceeds from the issuance of common stock		582,500			275,000
Net Cash Provided By Financing Activities		582,500			275,000
Net Increase (Decrease) in Cash		( 19,893	)		( 234,568	)
Cash and Cash Equivalents, Beginning of Period		82,433			246,061
Cash and Cash Equivalents, End of Period	$	62,540		$	11,493

Cash Paid For:
Interest	$	4,304		$	5,444
Taxes	$	-		$	-

Non-Cash Financing Activities:
Common stock issued for payment of debt	$	20,000		$	823,000
Common stock issued for services	$	45,000		$	40,000

See accompanying unaudited notes to the financial statements.

THE AMERICAN ENERGY GROUP, LTD.

Notes to the Financial Statements

March 31, 2013

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, 2012 Annual Report on Form 10-K. Operating results for the three months and nine months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending June 30, 2013.

Note 2 – Basic Loss Per Share of Common Stock

	Three Months Ended				Nine Months Ended
	March 31,		March 31,		March 31,		March 31,
	2013		2012		2013		2012

Income (loss) (numerator)	$	42,614	$	2,991	$	171,943	$	( 111,807	)

Basic Shares (denominator)		42,927,429		37,469,960		40,755,119		35,638,468

Fully Diluted Shares (denominator)		45,287,429		39,829,960		43,115,119		37,998,468

Basic Income (Loss) Per Share	$	0.00	$	0.00	$	0.00	$	( 0.00	)

Fully Diluted Income (Loss) Per Share	$	0.00	$	0.00	$	0.00	$	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 August, 2012, the Company issued 1,046,668 shares of common stock for cash at $0.15 per share.

During September, 2012, the Company issued 200,000 shares of common stock for cash at $0.15 per share.

During October, 2012, the Company issued 400,000 shares of common stock for cash at $0.15 per share.

During November, 2012, the Company issued 200,000 shares of common stock for cash at $0.15 per share.

During December, 2012, the Company issued 566,667 shares of common stock for cash at $0.15 per share.

THE AMERICAN ENERGY GROUP, LTD.

Notes to the Financial Statements

December 31, 2012

Note 4 - Common Stock (continued)

During January, 2013, the Company issued 700,000 shares of common stock for cash at $0.15 per share.

During January, 2013, the Company issued 433,333 shares of common stock for cash at $0.15 per share.

During March, 2013, the Company issued 770,000 shares of common stock for cash at $0.15 per share

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 - Warrants

During the quarter ended December 31, 2012, the Company amended the terms of 1,260,000 of its outstanding warrants. The original terms of the warrants provided that 1,260,000 shares of the Company could be purchased at prices ranging from $0.75 to $1.75 per share. The purchase price on these warrants was amended to $0.15 per share. The Company had previously recorded $88,715 of expense upon original issuance of these warrants. In accordance with ASC 718-20-35-3, additional expense of $19,647 was recorded for the incremental value of the warrant modification. The incremental expense of these warrants was calculated using the Black-Scholes option pricing model using the following assumptions:

Dividend yield	0
Expected volatility	113%
Risk free interest	.05%
Expected lives	2 years

Note 7 – Subsequent Events

In accordance with ASC 855-10, management of the Company has reviewed all material events from March 31, 2013 through the date the financial statements were issued. Subsequent to March 31, 2013, the Company issued 303,520 shares of common stock for settlement of debt at $0.15 per share . There were no other material events that warrant any additional disclosure.

Note 8 – 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, 2013, 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 has received its initial two royalty payments from the operator of the Pakistan petroleum concession and based upon management’s expectation of continuous production in future periods, management expects that a regular royalty revenue stream will be forthcoming.

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 18% overriding royalty interest in the Yasin Block. Drilling of the first well in Pakistan as to which our overriding royalty 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. 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 has 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.

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, suspended the monthly revenue payments due to Hycarbex’s financial difficulties and advised that it would continue to accrue the revenues 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 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. In November, 2011 and February, 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 working capital requirements should the pending litigation not result in the near term resumption of production revenue payments to the Company.

Results of Operations

Our operations for the three months ended March 31, 2013 reflected net operating income of $44,753 as compared to $4,742 for the three months ended March 31, 2012. The increase in net income from operations in the amount of $40,011 for the quarter ended March 31, 2013 as compared to the quarter ended March 31, 2012 is predominantly a result of oil and gas revenue earned during the current quarter in the amount of $298,290, an increase of $56,262 over the quarter ended March 31, 2012. 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 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 to the Company until it resolved its financial difficulties. As a result, the accrued production revenues due to the Company from August, 2011 through the date of this report have not been distributed to the Company.

The production rate volumes reported by Hycarbex to the Pakistan Oil Ministry indicate that the average daily production for the quarter exceeded 10.2 million cubic feet per day based upon a monthly total of 328 million cubic feet for January, 2013, 296 million cubic feet for February, 2013 and 296 million cubic feet for March, 2013. We have had to base our production and revenue accrual estimates and assumptions based upon these reported estimated figures due to Hycarbex’s failure to directly provide us with updated, accurate production and sale information which is a direct breach of Hycarbex’s contractual obligations. 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 reported 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 the period, would result in an estimated accrual to the Company for the quarter of $298,290. Actual monthly accruals for the period could be higher or lower depending upon the actual BTU content.

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 1,903,333 shares of stock to private investors for $285,500 during the quarter ended March 31, 2013, 1,166,667 shares of stock for $175,000 during the quarter ended December 31, 2012 and 1,246,668 shares for $187,000 during the quarter ended September 30, 2012. 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 8 – Going Concern footnote to Financial Statements above).

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 Common Stock to private investors, including 1,246,668 shares during the quarter ended September 30, 2012 for $187,000, 1,166,667 shares for $175,000 during the quarter ended December 31, 2012 and an additional 1,903,333 shares for $285,500 during the quarter ended March 31, 2013. The funds have been and will continue to be utilized for general and administrative expenses incurred by the Company, including the non-recurring legal costs associated with the pending litigation in Pakistan which was initiated in December, 2011 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. 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 8 – 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, we are optimistic and pending litigation in Pakistan will be successful in causing a resumption of monthly payments. 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 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 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.

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 an 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 1,000 kilometers of good quality 2D seismic including 350 kilometers of new, good quality data acquired in late 2010. Heritage has mapped a number of structural leads and a drilling program is under consideration.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during the three months ended March 31, 2013.

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

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2013, these disclosure controls and procedures were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no material changes in internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, 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.

Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of March 31, 2013.

Inherent Limitations Over Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

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 Court immediately issued 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. 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 scheduled to be heard prior to the end of June, 2013.

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 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.].” The 3-arbitrator panel has been appointed. During the prior quarter, we filed an application for interim relief seeking an interim order that Hycarbex pay to the Company 18% of all sale proceeds from August 2011 through December 2012 and continue to pay on a monthly basis thereafter pending final rulings on the arbitration claims. Hycarbex has not responded as of the date of this report. A final hearing on the merits of the Company’s claims is expected to occur before the arbitration panel during calendar 2013. A hearing on the application for interim relief and to set the terms of reference for the arbitration of all claims on the merits is set before the Arbitration panel for June 13, 2013.

ITEM 1A-RISK FACTORS

Not applicable.

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

During the quarter ended March 31, 2013, we sold to private investors 1,903,333 shares for $285,500. 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.

ITEM 3-DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4-MINE SAFETY DISCLOSURES

None.

ITEM 5-OTHER INFORMATION

None.

ITEM 6-EXHIBITS

The following documents are filed as Exhibits to this report:

Exhibit 31.1 –	Certification by R. Pierce Onthank, President, Chief Executive Officer and 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.

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 15, 2013	By:	/s/ R. Pierce Onthank
		R. Pierce Onthank, President, Chief Executive
		Officer, Principal Financial Officer and Director

AMERICAN ENERGY GROUP LTD - FORM 10-Q - May 15, 2013

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AMERICAN ENERGY GROUP LTD Reports