SEC Info - American Energy Group Ltd - ‘424B3’ on 11/8/06

Filed Pursuant to Rule 424(b)(3)

Under the Securities Exchange Act of 1934

THE AMERICAN ENERGY GROUP, LTD.

6,190,855 SHARES OF COMMON STOCK

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

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

Our Common Stock currently trades in the Over the Counter Bulletin Board under the symbol "AEGG." On October 3, 2006, the last reported sales price of our Common Stock was $0.82 per share.

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

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

THE DATE OF THIS PROSPECTUS IS NOVEMBER 6, 2006.

TABLE OF CONTENTS

PROSPECTUS SUMMARY

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

The Company

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

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

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

THE OFFERING

RISK FACTORS

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

Risks Related to the Company

We may incur operating losses.

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

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

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

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

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

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

We may experience potential fluctuations in results of operations.

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

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

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

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

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

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

Cumulative voting is not available to stockholders.

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

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

As of October 3, 2006, our directors and executive officers and their respective affiliates collectively and beneficially owned approximately 17.8% of the outstanding common stock, including all warrants exercisable within 60 days. This concentration of their voting interest gives the directors and executive officers substantial influence over any matters which require a shareholder vote, including, without limitation, the election of directors, even if their interests may conflict with those of other shareholders. It could also have the effect of delaying or preventing a change in control of or otherwise discouraging a potential acquirer from attempting to obtain control. This could have a material adverse effect on the market price of the common stock or prevent the shareholders from realizing a premium over the then prevailing market prices for their shares of common stock.

We may have conflicts of interest with key personnel.

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

We are dependent on key personnel.

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

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

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

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

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

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

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

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

We are solely dependent upon capital from outside sources.

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

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

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

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

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

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

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

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

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

General Risks of the Oil and Gas Business

Investment in the oil and gas business is risky.

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

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

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

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

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

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

Oil and gas properties are subject to unanticipated depletion.

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

Oil and gas prices are volatile.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CAUTIONARY STATEMENT CONCERNING

FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

THE BUSINESS

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

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

Overview—Post-Bankruptcy

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

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

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

Galveston County, Texas Assets

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

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

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

Bankruptcy Proceedings and Sale of Hycarbex Subsidiary

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

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

American Energy Operating Corp.

Our 2002 bankruptcy proceedings did not include our inactive subsidiary, American Energy Operating Corp. (“AEOC”), our operating subsidiary which became inactive after certain producing oil and gas leases in Fort Bend County, Texas were foreclosed by the first lien creditor in early 2003. However, at the time of the initiation of our bankruptcy proceedings, AEOC carried on its books in excess of $250,000 in operating liabilities related to its operations on these oil and gas leases in Fort Bend County, Texas. In 2003, AEOC received notice from the enforcement division of the Railroad Commission of Texas (“Railroad Commission”) that three (3) abandoned wells in the North Dayton Field previously operated by AEOC several years prior to 2003 were required to be plugged in accordance with Railroad Commission procedures and rules. We were not made a party to the proceedings by the Railroad Commission to enforce the plugging obligations. At that time, the plugging costs were estimated at less than $50,000 based upon estimates made by the Railroad Commission. These uncertain plugging costs, including potential daily penalties for non-compliance by AEOC, together with the high liabilities previously carried on our books related to AEOC’s prior operations, formed the basis for us to cause AEOC to file for a voluntary Chapter 7 bankruptcy liquidation on April 14, 2005 in the Southern District of Texas, Houston Division in Cause No. 05-35757. These proceedings did not involve the Company. In January 2006, the Railroad Commission of Texas plugged the three wells with State of Texas funds and thereafter demanded from AEOC reimbursement of the costs from AEOC based upon federal bankruptcy statutory exclusions to discharge in bankruptcy related to environmental matters. In July, 2006, these bankruptcy proceedings were closed by the acting Trustee. The closure of the proceedings did not eliminate the plugging responsibility assigned by the State of Texas to AEOC due to these statutory exclusions. In order to resolve the liability of AEOC and to avoid potential claims against the former officers of AEOC, on July 28, 2006, we agreed to a settlement with the Railroad Commission under which $57,701.21 will be paid by us to the Railroad Commission of Texas in equal installments over eighteen months beginning August 28, 2006. (See also, “Legal Proceedings” herein).

Pakistan Activities and Additional Opportunities

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

Relevant Features of Pakistan Oil and Gas Laws

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

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

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

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

Gas Pricing in Pakistan

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

Early Drilling Efforts on Concession Acreage

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

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

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

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

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

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

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

The Al-Ali No. 1 Well

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

Other Factors Affecting Pakistan Exploration Opportunities

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

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

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

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

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

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

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

Summary of Forward Business Plan

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

Sources of Financing Employed by Company to Date

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

EMPLOYEES

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

RESEARCH AND DEVELOPMENT EXPENDITURES

During fiscal 2006, we did not have any expenses for research and development costs.

GOVERNMENTAL REGULATIONS AND THE COST OF COMPLIANCE

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

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

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

DESCRIPTION OF PROPERTY

Our principal executive offices are located at 1 Gorham Island, Suite 303, Westport, Connecticut. The office space contains approximately 3,574 square feet and is leased under a 5-year lease commencing April 1, 2006, at a rate of $11,913.33 per month for the initial year, $12,211.17 per month for the second year, $12,509.00 per month for the third year, $12,806.83 per month for the fourth year, and $13,104.67 per month for the final year. The lease contains a 5-year option period with base rental ranging from $13,402.50 in the first year of the option period to $14,593.83 in the final option year. For the year ending June 30, 2006, office rentals totaled $27,243. We have subleased by three separate subleases a portion of our space to unrelated third parties. Two of the subleases provide for two year terms with combined rentals of $3,500 per month. The third sublease is on a month-to-month basis and provides for rentals of $2,000 per month. We believe the remaining space is adequate for our needs.

LEGAL PROCEEDINGS

On January 12, 2006, a lawsuit was filed in the 281^st Judicial District Court of Harris County, Texas against the Company, the Company’s subsidiary, The American Energy Operating Corp., Hycarbex-American Energy, Inc., Pierce Onthank, individually, Iftikhar Zahid, individually, and Georg Friedher Von Canal, individually, titled: M.S. Moin Hussain, Saleem Z. Khan and Khan & Piracha vs. The American Energy Group, Ltd., The American Energy Operating Corp., Hycarbex-American Energy, Inc. f/k/a Hycarbex, Inc., Pierce Onthank, Iftikhar Ahmed Zahid and Georg Friedher Von Canal. The Plaintiffs are Moin Hussain, who originally incorporated Hycarbex, Inc. in 1985, and Saleem Khan, and Khan & Piracha, who are Pakistan-based attorneys. According to the Plaintiffs’ pleadings, the Plaintiffs allege that in 1995, shortly after the petroleum exploration license covering the Jacobabad Block 2768-4 was awarded to Hycarbex, Inc., The American Energy Group, Ltd. acquired all of the outstanding common stock of Hycarbex, Inc. and changed the name of the company to Hycarbex-American Energy, Inc. (“Hycarbex”) The Plaintiffs further state in their pleadings that consideration for the sale of the stock included a 1% overriding royalty assigned to Hussain, and that Hussain subsequently assigned two tenths of one percent of same to Saleem Khan. Plaintiffs further assert that in connection with the subsequent acquisition by Hycarbex of the Yasin block in 2001, Khan & Piracha assisted in the acquisition and were allegedly promised by Hycarbex that they would receive twenty percent (20%) working interest in the Yasin Concession. The Plaintiffs specifically allege that Defendants, through Hycarbex, entered into a written agreement whereby Hycarbex agreed to hold their respective portions of the concession in trust for Khan and Piracha. The Plaintiffs allege that the several Defendants have failed to honor the alleged commitments without identifying the specific party responsible for the alleged obligation. As of June 30, 2006, Mr. Zahid and Mr. Von Canal have not been personally served and have not otherwise made an appearance in the lawsuit. Furthermore, American Energy Operating Corp. was dismissed from the suit by the Plaintiffs very soon after the filing. The Company, Hycarbex, American Energy Operating Corp. and Pierce Onthank have answered the lawsuit denying all liability. The Company, Hycarbex, and Pierce Onthank have likewise filed a counterclaim against Saleem Khan, and Khan & Piracha alleging a breach of fiduciary duty and coercion on their part in relation to their attempts to obtain a 20% working interest in the concession while serving as legal counsel to Hycarbex. As of the date of this report, the parties are engaged in discovery. The Plaintiffs have moved for a partial summary judgment on the issue of the ownership of the 1% overriding royalty which the Company has opposed. We intend to vigorously defend the allegations of the Plaintiffs and to prosecute the counterclaim.

During the period ended June 30, 2004, The American Energy Operating Corp. (“AEOC”), our operating subsidiary which has been inactive since the producing Fort Bend County, Texas oil and gas leases were foreclosed in 2003, received notice from the enforcement division of the Railroad Commission of Texas, the agency responsible for regulating oil and gas activities in the State of Texas, that three (3) abandoned wells in the North Dayton Field previously operated by AEOC many years ago were required to be plugged in accordance with Commission procedures and rules. At that time, the plugging costs were estimated at less than $50,000 based upon estimates made by the Railroad Commission. At the time of the initiation of our bankruptcy proceedings in 2002, AEOC carried on its books in excess of $250,000 in operating liabilities related to its operations on these South Texas oil and gas leases. These uncertain plugging costs, including potential daily penalties for non-compliance by AEOC, together with the high liabilities previously carried on our books related to AEOC’s prior operations, formed the basis for us to cause AEOC to file for a voluntary Chapter 7 bankruptcy liquidation on April 14, 2005 in the Southern District of Texas, Houston Division in Cause No. 05-35757. These proceedings did not involve us. In January 2006, the Railroad Commission of Texas plugged the three wells with State of Texas funds and thereafter demanded from AEOC reimbursement of the costs from AEOC based upon federal bankruptcy statutory exclusions to discharge in bankruptcy related to environmental matters. In July 2006, the AEOC acting Trustee fully administered and closed the bankruptcy case. The closure of the proceedings did not eliminate the plugging responsibility assigned by the State of Texas to AEOC due to these statutory exclusions. In order to resolve the liability of AEOC and to avoid potential claims against the former officers of AEOC, on July 28, 2006, we agreed to a settlement with the Railroad Commission under which $57,701.21 will be paid by us to the Railroad Commission of Texas in equal installments over eighteen months beginning August 28, 2006.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AND PLAN OF OPERATIONS

Forward-Looking Statements

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

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

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

Overview

Prior to our bankruptcy proceedings initiated on June 28, 2002, we were an active oil and gas exploration and development company. The foreclosure of our Fort Bend County, Texas oil and gas leases by the secured creditor in early calendar 2003 resulted in the loss of our only revenue producing asset. We intend to initiate new business activities by prudent management of our Pakistan asset and our Galveston, Texas interests and if we are successful in generating working capital from these investments or from sales of securities, we intend to pursue investment opportunities in the oil and gas business.

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

Comparison of Fiscal Year Ended June 30, 2006 to June 30, 2005

Results of Operations

Our operations for the period ending June 30, 2006 reflected a net loss of $903,066 as compared to $694,264 for the period ending June 30, 2005. The difference between the two periods is attributable almost entirely to additional legal and professional fees. The aggregate loss for the period is a result of salaries paid to the directors, legal and professional fees, office overhead, and administrative expense. There were no revenues from operations and our sole business during the fiscal year consisted of management of our Pakistan and Texas assets. All of our previously owned producing oil and gas leases were foreclosed by the first lien lender in early calendar 2003. As a result, subsequent to emerging from bankruptcy, we have had no recurring income stream and are solely dependent upon cash infusion from the sale of securities and loans. The loans and securities sales which occurred during the fiscal year and subsequent to the end of the fiscal year have been used and will continue to be used to finance salaries, legal expenses and administrative overhead until the revenues from gas sales from the successful Haseeb No. 1 Well begin. These gas sales are now expected to begin in early 2007 based upon Hycarbex’s most recent estimates.

Other expenses were $1,487,841 for the year ended June 30, 2006 as compared to $12,406 for the year ended June 30, 2005. Other expenses for the year ended June 30, 2006 include $1,396,199 of expense related to the costs of warrant issuances, as calculated under the Black Scholes option pricing model of which $1,240,039 relate to warrants issued to investors under the terms of the Company’s $3.95M placement of its common stock and $156,160 attributable to other warrants issued during the year.

Other expenses also include $57,701 of expense related to plugging liabilities incurred on behalf of our wholly-owned subsidiary during the year ended June 30, 2006 as discussed above.

Liquidity and Capital Resources

Since emerging from bankruptcy, we have been funded through the private sale of convertible debt securities totaling $575,000 pursuant to Second Amended Plan of Reorganization, all of which has been converted to common stock. During the fiscal year ending June 30, 2005, we obtained a loan facility from a private party for $300,000 for near term operating capital, the terms of which are accrual of interest at Wall Street Prime plus one percent, no prepayment penalty, and a maturity of one year, with the right to extend the maturity for an additional year by the payment of an extension fee of $20,000. The loan agreement originally provided for a $200,000 loan, but was amended twice to increase the available principal under the loan to $300,000.00. As of June 30, 2006 there was no balance outstanding on this loan. We likewise obtained from a private party a separate $25,000 loan due and payable December 31, 2005, and which was to accrue interest at JPMorgan Chase Bank Prime plus three percent. This $25,000 loan was converted to 50,000 warrants at an exercise price of $1.75 after the end of the fiscal year. In the early part of the current fiscal year, we raised $130,000.00 (including the $25,000 loan referenced in the preceding paragraph) through the placement with private parties of 260,000 warrants to purchase our Common Stock. The warrants have a three year term and provide for the purchase of the stock during the term, if exercised, at a price of $1.50 per share as to 160,000 warrants, and a price of $1.75 per share as to 100,000 warrants. We also consummated a sale to an existing shareholder to purchase 122,222 Common shares at $0.90 per share, or a total of $110,000.00. Finally, as discussed above, in the fourth quarter we sold $3.95M of our Common stock. Of this amount, we have deposited $2,000,000 with Hycabex in trust for future acquisitions of additional royalty interests in Pakistan. We anticipate that the capital obtained from these transactions will provide sufficient working capital through early calendar 2007. We anticipate that in early 2007 gas sales from the Haseeb No. 1 Well will begin and that actual production revenues will then meet our working capital needs. However, there can be no assurance that the gas sales will begin at the time anticipated and we may require additional operating capital to meet future needs.

During the fourth quarter of the prior fiscal year, we registered 2,000,000 Common shares on a Form S-8 Registration Statement for issuance to key consultants. We anticipate that some critical services rendered by third party consultants during the 2007 fiscal year will be paid with common stock instead of cash assets.

Business Strategy and Prospects

We believe that there have been positive developments resulting from the bankruptcy proceedings. We have eliminated our debt burden, diminished our labor force and significantly reduced all facets of general and administrative overhead. The cancellation and reissuance of new securities have reduced the outstanding shares from over sixty six million shares to just over twenty-nine million shares, a number which both permits the issuance of additional securities in the future as needed to obtain strategic assets or funding from investors, and which provides an opportunity for enhanced shareholder value if the current assets become cash generating assets, as anticipated. Our registration of 2,000,000 Common shares on Form S-8 during the quarter ended June 30, 2005 provided a means of compensating key consultants.

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

On May 12, 2006, we entered into a Non-exclusive Agency Agreement with Hycarbex - American Energy, Inc.. an entity for which our Director, Dr. Iftikhar Zahid, serves as president, under which Hycarbex will attempt to locate for the Company, and to negotiate on behalf of the Company, royalty purchase opportunities within the Republic of Pakistan. The Agreement provides for a finder’s fee to Hycarbex equal to $50,000 for each royalty purchase which is actually consummated. We may, in our discretion, deposit funds with Hycarbex which are to be used solely for such acquisition purposes and subject to our approval of the transaction. As of June 30, 2006, we had deposited a total of $2,000,000 with Hycarbex for application solely to possible royalty or concession purchases which may be consummated in Pakistan. In the event that no acquisitions are consummated, then we are entitled, at any time, to terminate the agency relationship and the funds will be returned.

We will continue to manage our Pakistan royalty and our Galveston County, Texas oil and gas leases while we await production revenues from the sale of gas from the Haseeb No. 1 well in Pakistan and the results of the Al Ali No. 1 Well commenced in Pakistan shortly after the end of the current quarter, we expect to negotiate the purchase of one or more additional royalty interests on one or more additional oil and gas concessions in Pakistan using the proceeds of the recently consummated $3.950,000 institutional private offering. We also expect to analyze the recently acquired Smith Energy seismic data and to begin negotiations for a deep test well on the Galveston County oil and gas leases.

Pakistan Overriding Royalty Interest

We, through our former subsidiary, Hycarbex, expended in excess of $10,000,000 on drilling and seismic on the Jacobabad and Yasin Concessions in the Republic of Pakistan comprised of over 2,200 square kilometers. The structure, to date, has no Proved Reserves as that term and the calculation for discounted future net cash flows for reporting purposes is mandated by the Financial Accounting Standards Board in Statement of Financial Accounting Standards No. 69, titled “Disclosures About Oil and Natural Gas Producing Activities”. While we did not obtain a commercial discovery well in any of our previous Pakistan drilling efforts, we have announced the success of the Haseeb No. 1 well drilled in the fourth quarter of 2005 based upon all available test results. We further announced subsequent to the end of our fiscal year 2005 the completion of 110 kilometers of additional seismic research by Hycarbex which provided valuable data for selection of the second well on the concession (the Al-Ali) which was drilled during May 2006. We strongly believe that the concession acreage contains oil and gas producing physical structures which are worthy of further exploration. If successfully developed, our reserved 18% overriding royalty interest will likely be a good source of cash revenues because the royalty, by its nature, entitles us to share in gross, rather than net, production. We expect to use these anticipated revenues for further investment in other revenue generating assets or business activities. The financial risks inherent in oil and gas drilling in Pakistan will no longer be borne by us because an overriding royalty interest is not subject to such costs.

While continuous production and favorable hydrocarbon prices are necessary for the overriding royalty interest to demonstrate real value, we are optimistic that the recent successful drilling of the Haseeb No. 1 Well, the proximity of a pipeline for gas sales and the additional seismic and technical data collected will enhance the chances of continued success on the concession despite the customary risks inherent with oil and gas drilling in general.

Galveston County, Texas Leases

In 1997, we purchased the interests of Luck Petroleum Corporation from its bankruptcy trustee in two oil and gas leases in Galveston County, Texas. The leases are situated in an area which is productive in multiple zones or horizons and the leases themselves have produced commercial quantities of oil and gas from both shallow and mid-range zones. In 1986, Luck Petroleum Corporation assigned these mid-range zones to Smith Energy, reserving for itself an “after-payout” 15% back-in working interest. Luck Petroleum Corporation also limited the depths assigned to Smith Energy, thereby resulting in depths generally greater than 10,000 feet being reserved to Luck Petroleum Corporation. We succeeded to the interests of Luck Petroleum Corporation as a result of the 1997 purchase from the bankruptcy trustee. With regard to the mid-range zones, our research to date has given rise to the belief that “payout” has occurred, as defined in the 1986 conveyance by Luck Petroleum Corporation to Smith Energy. If we are correct, then we are entitled to receive 15% of the monthly working interest production from the existing Smith Energy wells on the leases. Based upon our research, we believe that the deeper zones also have development potential. We are exploring the various opportunities to realize value from these deep rights, including potential sale. We have not yet determined the best course for these assets. These leases are held in force by third party production and, therefore, the leases do not require development of these rights by a certain date. We believe that we will be able to continue our research and conduct future negotiations toward a development path which best suits our goals and our cash flow position.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements during the fiscal year ended June 30, 2006.

MARKET FOR COMMON EQUITY

AND RELATED STOCKHOLDER MATTERS

Market Information.

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

The following chart sets forth the high and low bid prices for each quarter since inception of trading. Such prices represent quotations between dealers, without dealer markup, markdown or commissions, and may not represent actual transactions.

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

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

Record Holders.

As of June 30, 2006, we had approximately 56 registered holders of our common stock (excluding holders in “street name”). As of October 3, 2006, there were 29,867,705 shares of common stock issued and outstanding.

Dividends

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

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

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

USE OF PROCEEDS

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

DIRECTORS, EXECUTIVE OFFICERS,

PROMOTERS AND CONTROL PERSONS

MANAGEMENT OF THE COMPANY

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

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

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

BOARD OF DIRECTORS

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

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

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

Compensation of Directors

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

Summary Compensation Table

R.Pierce Onthank⁽¹⁾	President, CEO and Sec. Treas.	2006 2005 2004	$192,000 $192,000 $ 68,000	-0- -0- -0-	-0- -0- -0-	-0- -0- 1,500,000	-0- 1,000,000 -0-	-0- -0- -0-	-0- -0- -0-
Dr. Iftikhar A. Zahid⁽¹⁾	(2)	2006 2005 2004	$180,000 $180,000 $ 65,000	-0- -0- -0-	-0- -0- -0-	-0- -0- 1,500,000	-0- 1,000,000 -0-	-0- -0- -0-	-0- -0- -0-

Notes to Summary Compensation Table:

Stock Option/SAR and Warrant Grants

There were no grants of stock options, SAR’s or Warrants to executive officers or directors during the fiscal year ended June 30, 2006. There are currently no outstanding stock options or SAR’s.

Aggregated Option/SAR/Warrant Exercises In

Last Fiscal Year and FY-End Option/SAR Values

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

Long-Term Incentive Plans

We currently have no Long-Term Incentive Plans.

Employment contracts and change-in-control arrangements

CODE OF ETHICS

In September 2004, we adopted a Code of Ethics that is applicable to all directors, officer and employees. A copy of the Code of Ethics was previously attached as Exhibit 14.1 to our Form 10-KSB for the fiscal year ended June 30, 2006, which was filed with the SEC on October 13, 2006. Copies may be obtained without charge by writing to: The American Energy Group, Ltd., 1 Gorham Island Suite 303, Westport, Connecticut 06880.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT

The following table sets forth certain information as of October 3, 2006, with respect to the beneficial ownership of shares of common stock by (i) each person known to us who owns beneficially more than 5% of the outstanding shares of common stock, (ii) each of our Directors, (iii) each of our Executive Officers and (iv) all of our Executive Officers and Directors as a group. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares shown. As of October 3, 2006, we had 29,867,705 shares of common stock issued and outstanding.

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

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

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

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

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

On May 12, 2006, we entered into a non-exclusive Agency Agreement with Hycarbex - American Energy, Inc., an entity for which our director, Dr. Iftikhar Zahid, serves as President, under which Hycarbex will attempt to locate for the Company, and negotiate on behalf of the Company, royalty purchase opportunities within the Republic of Pakistan. The Agreement provides for a finder’s fee to Hycarbex equal to $50,000 for each royalty purchase which is actually consummated. Under the terms of the Agency Agreement, we may, in our discretion, deposit funds with Hycarbex which are to be used solely for such acquisition purposes and subject to our approval of the transaction. As of June 30, 2006, we had deposited a total of $2,000,000 with Hycarbex for application solely to potential royalty or concession purchases which may be consummated in Pakistan. In the event that no acquisitions are consummated, then we may, at any time, terminate the agency relationship and the funds will be returned to us. A copy of the Agency Agreement is attached hereto as Exhibit 99.3.

SELLING STOCKHOLDERS

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

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

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

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

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

PLAN OF DISTRIBUTION

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

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

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

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

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

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

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

DESCRIPTION OF SECURITIES

General

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

Common Stock

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

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

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

Preferred Stock

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

Schedule of Warrants

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

Anti-Takeover Provisions

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

Transfer Agent

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

INTEREST OF NAMED EXPERTS AND COUNSEL

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

EXPERTS

The financial statements of The American Energy Group, ltd. at June 30, 2006 and 2005, included in and made a part of this document have been audited by Chisolm, Bierwolf & Nilson, independent auditors, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

COMMISSION POSITION ON

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

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

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

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

WHERE YOU CAN FIND MORE INFORMATION

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

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

Common Stock Offered		Up to 2,323,529 shares of common stock held by certain selling stockholders and 3,867,326 shares of common stock issuable upon the exercise of warrants, which warrants have an exercise price range of $0.75 to $1.70 per share (with a weighted average price of $1.33).

Offering Price		Determined at the time of sale by the selling stockholders.

Proceeds		We will not receive any proceeds from the sale of the common stock offered by the selling stockholders that may be sold pursuant to this prospectus. We will, however, receive proceeds of approximately $5,147,454 upon the exercise of and payment for the warrants held by certain selling stockholders for which we have registered the underlying shares, if all such warrants are exercised. Proceeds, if any, received from the exercise of warrants will be used for general corporate purposes.

Risk Factors		The securities offered hereby involve a high degree of risk. See “Risk Factors” herein.

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

Equity Compensation Plan Information As of June 30, 2006
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	-0-	-0-	-0-
Equity compensation plans not approved by security holders	2,000,000	$1.00	-0-
Total	2,000,000	N/A	-0-

SUMMARY COMPENSATION TABLE
			ANNUAL COMPENSATION			LONG TERM COMPENSATION
Name	Title	Year	Salary	Bonus	Other Annual Comp-ensation	Awards		Payouts	All Other Comp-ensation
						Restricted Stock Awarded	Options/ SARs Warrants (#)	LTIP payouts ($)

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

American Energy Group Ltd – ‘424B3’ on 11/8/06

On: Wednesday, 11/8/06, at 4:11pm ET · Accession #: 1144204-6-45923 · File #: 333-136312

Prospectus — Rule 424(b)(3)
Filing Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

PROSPECTUS SUMMARY	1
RISK FACTORS	2
CAUTIONARY STATEMENT CONCERNING
FORWARD LOOKING STATEMENTS	10
BUSINESS	12
LEGAL PROCEEDINGS	21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION	22
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	27
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE	28
USE OF PROCEEDS	28
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS	29
SECURITY OWNERSHIP OF CERTAIN
BENEFICAL OWNERS AND MANAGEMENT	32
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	33
SELLING STOCKHOLDERS	34
PLAN OF DISTRIBUTION	36
DESCRIPTION OF SECURITIES	38
INTEREST OF NAMED EXPERTS AND COUNSEL	39
EXPERTS	39
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES	39
WHERE YOU CAN FIND MORE INFORMATION	40
FINANCIAL STATEMENTS	F-1

Name	Age	Position

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

Name and address of beneficial owner	Title of Class of Stock	Number of Shares of Common Stock	Percentage of Common Stock ⁽¹⁾
R. Pierce Onthank 1 Gorham Island Suite 303 Westport, Connecticut 06680	Common stock	2,500,000 ⁽²⁾	8.0% ⁽²⁾
Dr. Iftikhar A. Zahid 1 Gorham Island Suite 303 Westport, Connecticut 06680	Common stock	2,780,000⁽²⁾	9.0%⁽²⁾
Karl Welser 1 Gorham Island Suite 303 Westport, Connecticut 06680	Common stock	259,000	0.86%

All Officers and Directors as a group (total of three)	Common stock	5,539,000⁽³⁾	17.86%

		Before the Offering		After the Offering
Name of Selling Stockholder	Position, Office or Other Material Relationship	Total Number of Shares of common stock Beneficially Owned Prior to the Offering ⁽¹⁾	Number of Shares to be Offered for the Account of the Selling Stockholder ⁽²⁾	Number of Shares to be Owned after this Offering ⁽³⁾	Percentage to be Beneficially Owned after this Offering ⁽⁴⁾
Common Stock

Cumberland Partners (5)	None	496,740	496,740	-0-	-0-
Cumber International S.A. (5)	None	140,360	140,360	-0-	-0-
Long View Partners B, L.P. (5)	None	116,790	116,790	-0-	-0-
Cumberland Benchmarked Partners, L.P. (5)	None	336,690	336,690	-0-	-0-
HRF HE Platinum Master Trust (5)	None	35,110	35,110	-0-	-0-
Cumberland Long Partners, L.P. (5)	None	1,300	1,300	-0-	-0-
Summer Street Cumberland Investors, LLC (5)	None	49,480	49,480	-0-	-0-
Spectra Capital Management (6)	None	247,794	235,294	12,500	<1%
Arclight Capital, LLC (7)	None	176,471	176,471	-0-	-0-
Redwood Partners II, LLC (8)	None	238,165	117,647	120,518
GLG North American Opportunity Fund (9)	None	617,647	617,647	-0-	-0-

		TOTAL	2,323,529

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

		TOTAL	3,867,326

(1)	Includes shares of common stock for which the selling security holder has the right to acquire beneficial ownership within 60 days.
(2)	This table assumes that each selling security holder will sell all shares offered for sale by it under this registration statement. Security holders are not required to sell their shares.
(3)	Assumes that all shares of Common Stock registered for resale by this prospectus have been sold.
(4)	Based on 29,867,705 shares of Common stock issued and outstanding as of June 30, 2006.

(5)	The Manager of Cumberland Associates LLC (Investment Manager for the selling stockholder) holds the investment decision and voting power for this non-natural entity. These persons are: Bruce G. Wilcox, Andrew M. Wallach and Gary G. Tynes. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes. At the time of the investment, there were no agreements or understandings, directly or indirectly, with any person to distribute the securities.
(6)	The Managers of Spectra Capital Management (Andrew Burton and Greg Porges) hold the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes. At the time of the investment, there were no agreements or understandings, directly or indirectly, with any person to distribute the securities.
(7)	The Manager of Arclight Capital, LLC (Andrew Burton) holds the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes. At the time of the investment, there were no agreements or understandings, directly or indirectly, with any person to distribute the securities.
(8)	The Manager of Redwood Partners II, LLC (Michael Schwartz) holds the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes. At the time of the investment, there were no agreements or understandings, directly or indirectly, with any person to distribute the securities.
(9)	The Managing Directors of GLG Partners, LP (Investment Manager for the selling stockholder) hold the investment decision and voting power for this non-natural entity. These persons are: Noam Gottesman, Pierre Lagrange and Emmanuel Roman. GLG Partners, LP is approximately 20% owned by Lehman Brothers International. Lehman Brothers International has no investment decision or voting power on behalf of the selling stockholder. The shares were acquired by the selling stockholder for cash in the normal course of business for investment purposes. At the time of the investment, there were no agreements or understandings, directly or indirectly, with any person to distribute the securities.
(10)	The Managing Director of Dahlman, Rose & Co., LLC, Mr. David Frischkorn, holds the investment decision and voting power for this non-natural entity. The shares were acquired by the selling stockholder as payment for services as Placement Agent in the normal course of business for investment purposes. At the time of the investment, there were no agreements or understandings, directly or indirectly, with any person to distribute the securities.

(11)	Includes 1,500,000 shares of common stock and 1,000,000 warrants to purchase common stock held by the selling stockholder.
(12)	Includes 1,780,000 shares of common stock and 2,000,000 warrants to purchase common stock held by the selling stockholder.
(13)	Includes 149,200 shares of common stock and 150,000 warrants to purchase common stock held by the selling stockholder.
(14)	Includes 49,000 shares of common stock and 50,000 warrants to purchase common stock held by the selling stockholder.
(15)	Includes 42,000 shares of common stock and 60,000 warrants to purchase common stock held by the selling stockholder.

Strike Price	Number of Warrants	Expiration Date

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

Independent Auditors’ Reports			F-3

Consolidated Balance Sheets			F-4

Consolidated Statements of Operations			F-5

Consolidated Statements of Stockholders’ Equity			F-6-7

Consolidated Statements of Cash Flows			F-8

Notes to the Consolidated Financial Statements			F-9

	June 30,
	2006			2005

Assets
Current Assets
Cash (Note 1)	$	1,138,209		$	227
Funds reserved for acquisitions		2,000,000			-
Prepaid expenses		39,318			60,178

Total Current Assets		3,177,527			60,405

Property and Equipment
Office equipment		6,786			3,286
Accumulated depreciation		( 966	)		( 246	)

Net Property and Equipment		5,820			3,040

Other Assets
Security deposit		22,209			-

Total Assets	$	3,205,556		$	63,445


Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	46,030		$	17,632
Accrued liabilities		15,000			35,209
Convertible debt		-			25,000
Current portion of long-term debt		-			292,000

Total Current Liabilities		61,030			369,841

Liabilities Not Subject to Compromise
Accrued postpetition expenses		57,701			-

Liabilities Subject to Compromise
Prepetition trade accounts payable		238,588			238,588
Prepetition accrued liabilities		45,500			45,500
Current portion of capital lease obligation		679			679

Total Liabilities Subject to Compromise		284,767			284,767

Total Liabilities		403,498			654,608

Stockholders’ Equity (Notes 7 & 8)
Common stock, par value $0.001 per share;
authorized 80,000,000 shares; 29,867,705 and
27,139,584 shares issued and outstanding, respectively		29,868			27,140
Capital in excess of par value		7,610,563			1,860,545
Expenses prepaid with common stock		-			( 31,382	)
Accumulated deficit		(4,838,373	)		( 2,447,466	)

Total Stockholders’ Equity		2,802,058			( 591,163	)

Total Liabilities and Stockholders’ Equity	$	3,205,556		$	63,445

		2006			2005
Revenue
Oil and gas sales	$	-		$	-
General and Administrative Expenses
Legal and professional		373,014			180,550
Depreciation and amortization expense		720			246
General and administrative		529,332			513,468
Total Expenses		903,066			694,264
Net Operating Loss		903,066			694,264
Other Income and (Expense)
Interest income		2,865			-
Interest expense		( 36,806	)		( 12,406	)
Plugging expense settlement		( 57,701	)		-
Warrant issuance		( 1,396,199	)		-
Total Other Income and (Expense)		(1,487,841	)		( 12,406	)
Net Loss	$	(2,390,907	)	$	( 706,670	)
Basic Loss per Common Share	$	( 0.09	)	$	( 0.03	)
Weighted Average Number of Shares Outstanding		27,624,094			25,319,754

	Common Stock
	Shares		Amount		Capital in Excess of Par Value			Prepaid Expense			Accumulated Deficit			Totals

Balance, June 30, 2004	24,698,518	$	24,699	$	1,312,490		$	-		$	(1,740,796	)	$	( 403, 607	)

July 2004, new shares issued
for services at $0.10 per share	250,000		250		24,750			-			-			25,000

December 2004, new shares
issued for services at $0.32
per share	76,520		77		24,923			-			-			25,000

December 2004, new shares
issued for convertible debt
at $0.20 per share	1,932,482		1,932		384,564			-			-			386,496

March 2005, new shares issued
for services at $1.25 per share	26,000		26		32,474			-			-			32,500

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

June 2005, new shares issued for
services at $0.33, $1.05, $1.12,
$2.08 and $1.80 per share	120,304		120		81,380			-			-			81,500

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

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

Balance June 30, 2005	27,139,584	$	27,140	$	1,860,545		$	(31,382	)	$	( 2,447,466	)	$	(591,163	)

April 2006, new shares issued for
payables at $1.60 per share	12,181		12		19,488					-			19,500

April 2006, new shares issued for
payables at $1.89 per share	10,582		11		19,989					-			20,000

May and June 2006, new shares
Through private placement at
$1.70 per share	2,323,529		2,324		3,947,676					-			3,950,000

May 2006, valuation expense
for 1,161,766 warrants issued
in accordance with terms of
private placement	-		-		1,240,039					-			1,240,039

Offering costs related to
private placement	-		-		( 237,000	)				-			( 237,000	)

Net (loss) for the year ended
June 30, 2006										( 2,390,907	)		( 2,390,907	)

Balance June 30, 2006	29,867,705	$	29,868	$	7,610,563		$	--	$	(4,838,373	)	$	( 2,802,058	)

		2006			2005

Cash Flows From Operating Activities
Net loss	$	(2,390,907	)	$	( 706,670	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		720			246
Common stock issued for current debt and services		259,511			114,940
Additional expense for warrant issuance		1,396,199			-
Changes in operating assets and liabilities
(Increase) decrease in prepaid expenses		20,860			( 20,000	)
Increase (decrease) in accounts payable		28,398			17,632
Increase (decrease) in accrued postpetition liabilities		57,701			-

Increase (decrease) in accrued expenses and other current liabilities		20,209			22,466

Net Cash Provided By (Used In) Operating Activities		( 607,309	)		(571,386	)

Cash Flows From Investing Activities
Funds reserved for acquisitions		(2,000,000	)		-
Deposits		(22,209	)		-
Expenditures for property and equipment		( 3,500	)		( 3,286	)

Net Cash (Used In) Investing Activities		( 2,025,709	)		( 3,286	)

Cash Flows From Financing Activities
Proceeds from convertible debt		25,000			317,000
Principal payments on long term debt		( 292,000	)		-
Proceeds from the issuance of common stock		4,195,000			-
Offering costs of common stock issuance		( 237,000	)		-
Proceeds from the issuance of warrants		80,000			-

Net Cash Provided By Financing Activities		3,771,000			317,000

Net Increase (Decrease) in Cash		1,137,982			(257,672	)

Cash and Cash Equivalents, Beginning of Year		227			257,899

Cash and Cash Equivalents, End of Year	$	1,138,209		$	227

Cash Paid For:
Interest	$	43,195		$	-
Taxes	$	-		$	-

Non-Cash Financing Activities:
Common stock issued in satisfaction of accounts payable	$	14,597		$	12,500
Common stock issued for services rendered	$	259,511		$	114,940
Common stock for prepaid services	$	-		$	36,560
Common stock issued for accrued interest on debt	$	-		$	11,946
Common stock issued for convertible debt	$	-		$	375,000
Warrants issued for payment of debt	$	50,000		$	-

	For the Year Ended June 30, 2006			For the Year Ended June 30, 2005
Loss (numerator)	$	(2,390,907	)	$	( 706, 670	)

Shares (denominator)		27,624,094			25,319,754

Per Share Amount	$	( 0.09	)	$	(0.03	)

	Year Ended June 30,
	2006			2005
Income tax benefit at statutory rate	$	908,545		$	268,535
Change in Valuation allowance		(908,545	)		( 268,535	)

Income Tax Expense	$	-		$	-

Year Ending June 30, 2006
Total minimum lease commitments	$	709
Less: amount representing interest		( 30	)
Total capital lease obligations		679
Less: current portion		( 679	)
Total Long-Term Capital Lease Obligations	$	-

Year ended June 30, 2007	$	143,254
Year ended June 30, 2008		146,830
Year ended June 30, 2009		153,386
Year ended June 30, 2010		156,958
Year ended June 30, 2011		144,155

	$	744,583

Year ended June 30, 2007	$	44,000
Year ended June 30, 2008		42,000
	$	84,000

American Energy Group Ltd – ‘424B3’ on 11/8/06

On: Wednesday, 11/8/06, at 4:11pm ET · Accession #: 1144204-6-45923 · File #: 333-136312

Prospectus — Rule 424(b)(3)Filing Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

Prospectus — Rule 424(b)(3)
Filing Table of Contents

	2006			2005
Net loss as reported	$	(2,390,907	)	$	( 700,670	)
Adjustment calculated in accordance with SFAS 123		( 500,000	)		( 500,000	)
Proforma net loss	$	(2,890,907	)	$	(1,200,670	)
Net loss per common share as reported	$	( 0.10	)	$	( 0.03	)
Proforma net loss per common share	$	( 012	)	$	( 0.05	)

	Stock Warrants		Exercise Price		Weighted Ave. Exercise Price
Outstanding, June 30, 2004		-	$	-	$	-
Granted		2,000,000		1.00		1.00
Expired/Canceled		-		-		-
Exercised		-		-		-
Outstanding, June 30, 2005		2,000,000	$	1.00	$	1.00
Granted		1,942,326	$	1.50-1.75		1.70
Expired/Canceled		-		-		-
Exercised		-		-		-
Outstanding, June 30, 2006		3,942,326	$	1.00-1.7	$	1.34

Number of			Remaining				Weighted
Common Stock			Contracted		Exercise		Ave Exer.
Equivalents	Expir. Date		Life (Years)		Price		Price

160,000		September 2008		1.250	$	1.50	$	1.50
100,000		September 2008		1.250	$	1.75	$	1.75
75.000		December 2008		1.500	$	1.50	$	1.50
1,000,000		December 2010		3.875	$	0.75	$	0.75
500,000		December 2010		3.875	$	1.00	$	1.00
500,000		December 2010		3.875	$	1.50	$	1.50
1,607,326		May 2011		4.917	$	1.70	$	1.70

This ‘424B3’ Filing	Date	Other Filings

	6/30/11	10-K, 10-K/A, NT 10-K
	5/31/11
	6/30/10	10-K, NT 10-K
	5/31/10
	6/30/09	10-K, NT 10-K
	5/31/09
	6/30/08	10-K/A, 10KSB, NT 10-K
	6/6/08
	5/31/08
	6/30/07	10KSB, NT 10-K
	5/31/07
Filed on:	11/8/06
	11/6/06	8-K
	10/13/06	10KSB
	10/3/06
	9/15/06
	8/28/06
	7/28/06
	7/24/06
	6/30/06	10KSB, 10KSB/A, NT 10-K
	5/12/06
	4/30/06
	4/20/06
	4/14/06
	4/1/06
	3/31/06	10QSB, 10QSB/A, NT 10-Q
	1/18/06
	1/12/06
	12/31/05	10QSB, 10QSB/A
	9/30/05	10QSB, 10QSB/A
	6/30/05	10KSB, 10KSB/A, 5, NT 10-K
	6/15/05
	4/14/05
	3/31/05	10QSB
	12/31/04	10QSB, 10QSB/A, NTN 10Q
	12/16/04
	6/30/04	10-K, NT 10-K
	4/1/04
	2/1/04
	1/31/04
	1/30/04
	1/29/04
	10/26/03
	9/3/03
	7/1/03
	6/30/03	10KSB
	6/28/02
	9/11/01
	8/11/01
	6/30/01	10-K, NT 10-K
	6/30/95
	11/18/94
	9/30/94
	9/22/94
		List all Filings