As filed with the Securities and Exchange Commission on November 22, 2000
Registration No. _________
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE AMERICAN ENERGY GROUP, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 87-0448843
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
9315 F.M. 1489, SIMONTON, TEXAS, U.S.A.
(281) 346-0414
(ADDRESS AND TELEPHONE NUMBER OF 77476
PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
CHUCK VALCESCHINI
9315 F.M. 1489
SIMONTON, TEXAS 77476
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(281) 346-0414
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------
(APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: FROM TIME TO TIME
AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
-------------------
Copy to:
LINDOW & TREAT, L.L.P.
112 E. Pecan, Suite 2700
San Antonio, Texas 78205
Attn: James M. Hughes
(210) 227-4195
Direct Line: (210) 227-2200
Fax No.: (210) 2274602
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment
plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to RULE 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to RULE 462(B) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to RULE 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH PROPOSED
CLASS OF AMOUNT MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE(2)
- ----------------- ---------- ----------------- ------------------ ------------
Common Stock, 14,564,093
$0.001 Par Value shares $0.945 $13,763,067.88 $4,060.00
(1) Includes 2,181,529 shares of Common Stock that may be issued pursuant to the
exercise of Warrants (plus in accordance with Rule 416(a) of the Securities
Act of 1933, an indeterminate number of shares issuable as a result of the
antidilution/adjustment provisions of the Warrants), and includes 1,500,000
shares of Common Stock that may be issued upon conversion of an outstanding
Original Issue Discount Note, face amount $1,500,000.00.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rules 457(c) and (457(g) of the Securities Act of 1933 based on the
average of the high and low reported prices on November 16, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
THE AMERICAN ENERGY GROUP, LTD.
CROSS REFERENCE SHEET SHOWING LOCATION OF INFORMATION REQUIRED BY PART I OF FORM
S-3 - PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-3 ITEM NUMBER LOCATION/HEADING IN PROSPECTUS
1. Forepart of Registration Forepart and Outside
Statement and Outside Front Front Cover Page
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page;
Cover Page of Prospectus Where You Can Find More
Information; Incorporation
of Documents by Reference
3. Summary Information, Risk Factors Risk Factors; otherwise not
and Ratio of Earnings to Fixed applicable
Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Dilution
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Description of Securities
Registered
10. Interests of Named Experts and Not applicable
Counsel
11. Material Changes Not applicable
12. Incorporation of Certain Information Incorporation of
Documents by Reference
13. Disclosure of Commission Position on Commission Position on
Indemnification for Securities Act Indemnification
Liabilities
PROSPECTUS
SUBJECT TO COMPLETION DATED NOVEMBER 21, 2000
THE AMERICAN ENERGY GROUP, LTD.
14,564,093 SHARES OF COMMON STOCK
This Prospectus relates to 14,564,093 shares of the Common Stock, par
value $0.001 (the "Common Stock"), of The American Energy Group, Ltd. (the
"Company"), which may be offered from time to time pursuant to the Registration
Statement to which this Prospectus pertains by any of the non-affiliate selling
stockholders named herein (the "Selling Stockholders"). The 14,564,093 Common
shares being registered are comprised of (i) 10,882,564 Common shares currently
held by the identified Selling Stockholders, (ii) 1,600,000 Common shares that
may be issued to one Selling Stockholder under four 400,000-share warrants
presently exercisable at $1.00 per share and expiring on September 17, 2001,
2002, 2003 and 2004, respectively, (iii) 556,529 Common shares which may be
issued to a Selling Stockholder under five warrants presently exercisable at
$0.36 per share and expiring on September 17, 2004 and July 24, July 31,
September 22, September 29 and October 2, 2005, respectively, (iv) 25,000 Common
shares which may be issued to a Selling Stockholder under a warrant presently
exercisable at $0.75 per share and expiring February 14, 2007 (collectively with
the foregoing 1,600,000 Warrants and 556,529 Warrants, the "Warrants") and (v)
1,500,000 Common shares that may be issued to one Selling Stockholder upon
conversion, at the rate of one Common share per one dollar of principal, of his
Original Issue Discount Note for $1,500,000.00, maturing March 17, 2002 (the
"Convertible Debt").
The shares of Common Stock may be sold or distributed from time to time by
or for the account of the Selling Stockholders through underwriters or dealers,
through brokers or other agents, or directly to one or more purchasers,
including pledgees, at market prices prevailing at the time of sale or at prices
otherwise negotiated. This Prospectus may also be used, with the Company's
consent, by donees of the Selling Stockholders, or by other persons acquiring
shares and who wish to offer and sell such securities requiring its use. The
Company will receive proceeds from the issuance of Common Stock upon exercise of
the Warrants, but will receive no part of the proceeds of sale of the Common
Stock sold by the Selling Stockholders. See "Selling Stockholders". All expenses
of registration incurred in connection with this offering are being borne by the
Company, but all direct selling and other expenses incurred by each of the
Selling Stockholders in the nature of commissions and discounts of underwriters,
dealers or agents, will be borne by each such Selling Stockholder.
The Common Stock is traded on the National Association of Securities
Dealers, Inc.'s OTC Bulletin Board ("OTCBB") under the symbol "AMEL.OB". On
November 16, 2000, the average of the high and low reported prices of a share of
Common Stock on the OTCBB was $0.945.
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INVESTMENT IN THE SECURITIES COVERED BY THIS PROSPECTUS INVOLVES
A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 FOR RELEVANT INFORMATION RELATED
TO SUCH RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering described herein, and , if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Selling Stockholder. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, nor shall there be any sale of these
securities by any person in any jurisdiction in which it is unlawful for such
person to make such offer, solicitation or sale. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
The date of this Prospectus is November 21, 2000.
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TABLE OF CONTENTS
PAGE
RISK FACTORS ........................................................... 5
Cautionary Notice Regarding Forward Looking Information .......... 5
Limited Operating History; Rapid Growth .......................... 5
Title To Domestic Properties ..................................... 5
Title to Pakistan License ........................................ 6
Available Domestic Markets and Pricing ........................... 6
International Markets and Pricing ................................ 6
Uncertainty of Reserve Estimates ................................. 6
Competition ...................................................... 7
Operating Conditions ............................................. 7
Compliance with Governmental Regulations ......................... 7
Need for Additional Funds ........................................ 8
Control by Management and Principal Stockholders ................. 8
Factors Inhibiting Takeover ...................................... 9
Lack of Dividends ................................................ 9
Effects Upon Market Liquidity of Penny Stock Reform Act .......... 8
Limitations on Director Liability ................................ 9
Shares Eligible for Future Sale .................................. 10
Future Issuances of Stock; Authorized Preferred Stock ............ 10
THE COMPANY ............................................................ 10
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DESCRIPTION OF SECURITIES .............................................. 13
DILUTION ............................................................... 16
SELLING STOCKHOLDERS ................................................... 16
PLAN OF DISTRIBUTION ................................................... 21
USE OF PROCEEDS ........................................................ 22
DOCUMENTS INCORPORATED BY REFERENCE .................................... 23
INDEMNIFICATION ........................................................ 23
LEGAL MATTERS .......................................................... 24
EXPERTS ................................................................ 24
WHERE YOU CAN FIND MORE INFORMATION .................................... 24
4
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should carefully
consider the following factors, in addition to other information contained
elsewhere in this Prospectus. An investment in the shares is suitable only for
those purchasers who can bear the risk of loss of their entire investment.
CAUTIONARY NOTICE REGARDING FORWARD LOOKING INFORMATION
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Then used in this report, the words, "believe,"
"anticipate," "think," "intend," "plan," "will be," "expect" and similar
expressions identify such forward-looking statements. Such statements regarding
future events and/or the future financial performance of the Company are subject
to certain risks and uncertainties, which could cause actual events or the
actual future results of the Company to differ materially from any forward
looking statement. Such risks and uncertainties include among other things, the
availability of any needed financing, the Company's ability to implement its
business plan, the impact of competition, the management of growth, and other
risks and uncertainties that may be detailed from time to time in the Company's
reports filed with the Securities and Exchange Commission. In light of the
significant risks and uncertainties inherent in the forward-looking statements
included herein, the inclusion of such statements should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
LIMITED OPERATING HISTORY; RAPID GROWTH
The Company was incorporated in 1987. Since 1994, the Company's efforts
have been focused upon exploration and development of its Texas-based
properties. Since the commencement of these operations, the Company operating
expenses have grown rapidly and the Company intends to continue to expand
operations as it pursues the exploration and development of its Texas-based and
Pakistan-based properties. The likelihood of the success of the Company must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with a developing business and the
competitive environment in which the Company will operate. There can be no
assurance the Company will be able to implement its business plans or manage the
growth of its operations.
TITLE TO DOMESTIC PROPERTIES
The Company's Texas-based properties are oil and gas leasehold interests
which, according to their general terms, must be maintained by development
operations or continuous hydrocarbon production without cessation or
interruption, except for temporary cessation or interruption. Certain of the
leases further require development of the covered acreage according to a
specified schedule. The consequences of non-compliance with these operational
and
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developmental obligations are forfeiture of the particular lease, in the case of
non-temporary cessation of operations and production of hydrocarbons, and
forfeiture of portions of the lease or undeveloped geologic horizons within the
covered acreage covered by a particular lease, in the case of non-compliance
under leases which contain scheduled development requirements.
TITLE TO PAKISTAN LICENSE
The Company's exploration license in the Jacobabad region of the Republic
of Pakistan contains time sensitive development and rental funding obligations
which, if not timely fulfilled, would likely result in a forfeiture of the
concession. While the estimated potential recoverable hydrocarbon reserves under
the acreage covered by the concession are not included within the Company's
stated reserves in its financial statements contained within its Forms 10-K and
10-Q incorporated by reference, loss of the concession as a result of
non-compliance would likely have a substantial adverse impact upon the market
for the Company's securities.
AVAILABLE DOMESTIC MARKETS AND PRICING
There is an existing and available market for the oil produced from the
Company's Texas-based properties. However, the prices which the Company obtains
for its production are subject to market fluctuations which are affected by many
factors, including supply and demand. The Company relies upon favorable pricing
to meet its operational expenses. Extended periods of depressed oil prices would
result in the inability to meet these operational expenses and could expose the
Company to the risk of loss of its properties because of the financial inability
to meet ongoing maintenance and development requirements.
INTERNATIONAL MARKETS AND PRICING
The Company has not established production on its concession in the
Republic of Pakistan. Should further development result in a well or wells
capable of producing hydrocarbons, sales of those hydrocarbons could not be made
without completing connections to existing pipeline facilities. The Company's
ability to generate a favorable return on its investment in Pakistan will be
dependent upon market prices and conditions present at the time it achieves
commercial production, if at all.
UNCERTAINTY OF RESERVE ESTIMATES
Estimating quantities of reserves and future net cash flows is not an
exact science. There are numerous uncertainties inherent in estimating
quantities of proved oil and gas reserves. Reserve reports rely upon various
assumptions, including those prescribed by the Commission, such as future oil
and gas prices, drilling and operating expenses, capital expenditures, taxes and
availability of funds. The process of estimating oil and gas reserves is
complex, requiring significant decisions and assumptions in the evaluation of
available geological, engineering and
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economic data for each reservoir. As a result, any such estimate is inherently
an imprecise estimation of reserve quantities and estimated future net revenue
therefrom. Actual future production, revenue, taxes, development expenditures,
operating expenses and quantities of recoverable oil and gas reserves will vary
from those assumed in the estimate. Any significant variance from the
assumptions could materially affect the quantity and value of the Company's
reserves as compared to the estimates set forth in reserve report. In addition,
these reserves may be subject to downward or upward revision, based upon
production history, results of future exploration and development, prevailing
oil and gas prices and other factors.
COMPETITION
The Company operates in a highly competitive environment. The Company
competes with major and independent oil and gas companies for the acquisition of
oil and gas properties, as well as for the equipment and labor required to
develop and operate such properties. Many of these competitors have financial
and other resources substantially greater than those of the Company.
OPERATING CONDITIONS
The oil and gas business involves a variety of operating risks, including
the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured
formations and environmental hazards such as oil spills, gas leaks, ruptures or
discharges of toxic gases. The occurrence of any of the preceding events could
result in substantial losses to the Company due to injury or loss of life,
severe damage to or destruction of property, natural resources and equipment,
pollution or other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In accordance with
customary industry practice, the Company has maintained insurance against some,
but not all, of the risks described above. There can be no assurance that any
insurance obtained by the Company will be adequate to cover any losses or
liabilities. The Company cannot predict the continued availability of insurance
or the availability of insurance at premium levels that justify its purchase.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS
Oil and gas operations are subject to various national, state and local
governmental regulations which may be changed from time to time in response to
economic or political conditions. Matters subjects to regulation including
discharge permits for drilling operations, drilling and abandonment bonds,
reports concerning operations, the spacing of wells, unitization and pooling of
properties and taxation. From time to time, regulatory agencies have imposed
price controls and limitations on production by restricting the rate of flow of
oil and gas wells below actual production capacity in order to conserve supplies
of oil and gas. In addition, the
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production, handling, storage, transportation and disposal of oil and gas,
by-products thereof and other substances and materials produced or used in
connection with oil and gas operations are subject to regulation under national,
state and local laws and regulations primarily relating to protection of human
health and the environment.
NEED FOR ADDITIONAL FUNDS
Since the production derived from the Texas-based properties is
insufficient to meet its future capital requirements for both Texas and Pakistan
operations, the Company will need additional financing to meet these projected
operating capital of requirements. The Company does not currently have a line of
credit or other credit facility available to it to meet these cash requirements.
Additional financing will be pursued, as needed, by seeking credit facilities,
sales of the Companies' securities, sales of assets and joint ventures. No
assurance can be given that the Company will be successful in obtaining
additional financing on favorable terms, if at all.
CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Current management of the Company owns, in the aggregate, approximately 3%
of the outstanding Common Stock (including options held by management).
Additional grants of stock or options to acquire stock may be delivered to
members of management in the future as bonuses, as compensation or pursuant to a
retirement plan. The election of directors is by plurality vote and there is no
cumulative voting. Accordingly, the existing management may be able to
significantly influence the election of the Board of Directors of the Company
and to direct the affairs of the Company.
FACTORS INHIBITING TAKEOVER
Certain provisions of the Company's Amended Articles of Incorporation and
Bylaws may be deemed to have anti-takeover effects and may delay, defer or
prevent a takeover attempt that a stockholder might consider in the Company's or
the stockholder's best interest. The Company's Amended Articles of incorporation
authorize the Board of Directors to determine the rights, preferences,
privileges and restrictions of unissued series of preferred stock and the
designation of any such series, without any vote or action by the Company's
stockholders. Thus, the Board of Directors can authorize and issue shares of
preferred stock with voting or conversion rights that could adversely affect the
voting or other rights of holders of the Company's Common Stock. In addition,
the issuance of preferred stock may have the effect of delaying, deferring or
preventing a change of control of the Company, since the terms of any preferred
stock which might be issued could contain terms which could contain special
voting rights or increase the costs of acquiring the Company.
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LACK OF DIVIDENDS
The Company has not paid any dividends on its Common Stock since its
inception and does not anticipate paying any dividends on its Common Stock in
the foreseeable future. Earnings, if any, will be used to finance the
development and expansion of the Company's business.
EFFECTS UPON MARKET LIQUIDITY OF PENNY STOCK REFORM ACT
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. In addition, if the Company's
securities do not meet an exception to the penny stock regulations cited above,
trading in the Company's securities would be covered by Rule 1 5g-9 promulgated
under the Exchange Act for non-Nasdaq and non-national securities exchange
listed securities. Under such rule, broker/dealers who recommend such securities
to persons other than established customers and accredited investors (generally,
individuals with net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses) must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities are exempt from this rule
if the market price is at least $5.00 per share.
Since the Company's securities are subject to the regulations applicable
to penny stocks, the market liquidity for Company securities could be adversely
affected because the regulations on penny stocks could limit the ability of
broker/dealers to sell the Company's securities and thus the ability of
purchasers of the Company's securities to sell their securities in the secondary
market.
LIMITATIONS ON DIRECTOR LIABILITY
The General corporation Law of Nevada provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, with certain
exceptions. These provisions may discourage stockholders from bringing suit
against a director for breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of the Company against a
director. The Company's Amended Articles of Incorporation and Bylaws provide for
indemnification of directors and officers.
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SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock will have on the market price of the shares of Common
Stock prevailing from time to time. Sales of substantial amounts of Common
stock, or the perception that these sales could occur, could adversely affect
prevailing market prices for the Common stock and could impair the ability of
the Company to raise additional capital through the sale of its equity
securities or through debt financing.
FUTURE ISSUANCES OF STOCK; AUTHORIZED PREFERRED STOCK
As of the date of this Prospectus, the Company has 80,000,000 shares of
Common Stock authorized, of which 52,020,074 shares are issued and outstanding,
and an additional 11,435,000 shares will have been reserved for issuance
underlying outstanding warrants with exercise prices ranging from $0.75 per
share to $5.31 per share and in term from one year to seven years. The Company
also has 20,000,000 shares of Preferred Stock, $.001 par value per share,
authorized of which 41,500 are outstanding as of the date hereof.
The Company's Amended Articles of Incorporation authorize the issuance of
the Preferred Stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. The balance of the Company's authorized shares of common
Stock and all of the Preferred Stock are not reserved for any purpose and may be
issued without any action or approval by the Company's stockholders.
THE COMPANY
The American Energy Group, Ltd. (formerly Belize-American Corp.
Internationale)(formerly Dim, Inc.)[hereinafter "Company"] was organized in the
State of Nevada on July 21, 1987, as a wholly owned subsidiary of Dimension
Industries, Inc. a Utah Corporation (hereinafter "Dimension"). As the time of
organization, the Company issued 1,366,250 shares of voting Common Stock to
Dimension, which was the sole stockholder. On April 28, 1989, a filing submitted
by the Company on form S-18 with the United States Securities and Exchange
Commission was declared effective. Dimension distributed the 1,366,250 shares it
held to the stockholders of Dimension as a dividend. Also distributed were
1,566,250 warrants to purchase 1 share of voting Common Stock of the Company for
each warrant held. The warrant offering expired on August 11, 1989. Exercise of
the warrants by shareholders resulted in the Company issuing 1,547,872 shares of
voting Common Stock issued and outstanding.
In 1987, the Company engaged in marketing an automobile carburetor
modification kit. The efforts were not successful and were abandoned. From 1987
to 1990, the Company was
10
inactive. In October, 1990, the shareholders of the Company 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. As a special
meeting of shareholders, resolutions to change the name of the Company to
"Belize-American Corp. Internationale", forward split the voting Common Stock
ten for one (10:1) and a vote to ratify the Oil Prospecting License received a
vote of approval.
During 1991, the Company attempted various means to attract sufficient
capital investment to develop the oil prospect in Belize, but was not
successful. The license expired due to the lack of performance by the Company.
From 1992 until 1994, Company activities consisted of attempting to raise
capital for a business venture and solicitation of other business enterprises
for a possible merger. On September 22, 1994, the Company entered into an
agreement with Simmons Oil Company, Inc., a Texas corporation (hereinafter
"Simmons") whereby the Company issued 2,074,521 shares of Convertible Voting
Preferred Stock to the shareholders of Simmons in order to acquire Simmons and
two subsidiaries of Simmons, Simmons Drilling Company and Sequoia Operating
Company. The agreement was effective September 30, 1994. Prior to the
acquisition of Simmons, Simmons had acquired certain oil and gas properties
located in Texas. Subsequent to the acquisition, the Company acquired additional
oil and gas properties in the same general area through its subsidiaries.
In April 1995, the Company acquired all of the outstanding shares of
Hycarbex, Inc., a Texas corporation (hereinafter "Hycarbex") for 120,000 shares
of voting Common Stock of the Company, a 1% Overriding Royalty Interest in the
revenues generated through the development of Hycarbex's Pakistan Concession,
and an agreement to pay the sole shareholder $200,000 conditioned upon the
success of that development. For accounting purposes, this acquisition was
treated as a pooling of interests. The Company changed the name of Hycarbex,
Inc. to Hycarbex-American Energy, Inc. and it is operating as a wholly owned
subsidiary of the Company. Hycarbex hold an oil and gas Concession and
Exploration License granted by the government of Pakistan. The Concession is
located in the Middle Indus Basin near Jacobabad, Pakistan. In addition to the
above acquisition consideration, the Company, upon closing, provided a $551,000
Financial Guarantee Bond to the Government of Pakistan to assure performance of
Concession requirements. Subsequent seismic surveys performed and the drilling
conducted in 1997 and 1998 by the Company have satisfied the Concession
requirements to date.
The Company began producing commercial quantities of oil on its
Texas-based properties and emerged from the development stage during the year
ended June 30, 1997. At that time, the Company, was engaged in a program of
drilling and reworking developmental wells on its properties. The Company has
continued to evaluate its inventory of oil and gas properties, and to pursue
capital investment to finance a comprehensive drilling and production program,
both in Texas and Pakistan.
In June, 1997, the Company purchased oil and gas properties totaling
approximately 1,400 acres in Texas. During the year ended June 30, 1999, the
Company drilled eight
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developmental wells on these properties, of which seven wells are currently
producing. One additional commercial well was completed in Texas after June 30,
1999.
RECENT DEVELOPMENTS
During the year ended June 30, 1999, the Company drilled its second and
third exploratory wells in central Pakistan, the David #1 and #1A wells,
Although both wells encountered gas shows, both were plugged and abandoned as
non-commercial. No additional drilling was undertaken during the year ended June
30, 2000, and the Company obtained an extension from the Pakistan Government to
commence a substitute well by November 30, 2000, conditioned upon the completion
of additional seismic surveys on the acreage. The required seismic surveys were
completed and based on the preliminary testing of the initial well drilled in
1997, the Kharnhak #1, and the geological information obtained while drilling
the second and third exploratory wells, the Company determined that further
drilling and testing in Pakistan is warranted. The extension until November 30,
2000 for the drilling of a substitute well on its Pakistan Concession was
brought about when the Company plugged and abandoned its David #1A well in the
Spring of 1999 after encountering carbon dioxide and dangerous levels of
hydrogen sulfide gas. The extension is conditioned upon the Company's compliance
with all other requirements of the exploration license, including the
requirement that a minimum of $1,100,000 be maintained on deposit in its
Pakistan operating account toward the anticipated costs associated with the
drilling of the substitute well. An additional $1,100,000 for the anticipated
costs of the next exploration well required by the exploration license are also
required to be placed on deposit prior to drilling that well. At the
commencement of the current fiscal quarter, the Company had slightly in excess
of $1,100,00 on deposit in Pakistan. Under the applicable local rules pertaining
to petroleum concessions, the Government of Pakistan can revoke the exploration
license for any material breach which is not cured within sixty days of written
notice of noncompliance. Hycarbex has not received a notice of default as of the
date of this report. A failure to make the required deposits after a default
notice from the Pakistan Government could result in a forfeiture of the
exploration license and a loss of the concession. The exploration license could
also be revoked if Hycarbex is unable to comply with the November 30, 2000
drilling deadline for the replacement well. Upon any revocation of the license,
Hycarbex could remain liable to the Pakistan Government for liquidated damages
equal to the required deposit amounts.
The Company's cash position is critical given the possibility of cost
overruns related to the near term drilling of the substitute well and the future
deposit requirements in Pakistan, as well as future development requirements
under certain of its Texas oil and gas leases if those leases are not sold in
the near future, as anticipated. Management intends to continue to explore and
pursue all available sources of working capital through potential loans, sales
of securities, sales of assets, joint venture affiliations, and other
transactions in order to meet its anticipated near term needs. In conjunction
with these efforts, the Company has retained an investment banking firm to
assist in these efforts. There can be no assurance that these efforts will
continue to prove successful. In the event that additional capital raising
efforts by the Company are
12
unsuccessful, the likely effects would be ultimate forfeiture of the Pakistan
concession and, if the Texas oil and gas leases are not sold, a slowdown or
postponement of scheduled reactivation and development activities on those Texas
properties.
During the quarter ended March 31, 2000, the Company announced its
intention to sell its Texas oil and gas leases in order to focus the Company's
activities and resources toward the development of its Pakistan concession and
immediately engaged in active negotiations with interested parties. The timing
of the decision was anticipated to permit the Company to take advantage of
opportunities for a more favorable sale created by recent increases in market
prices for oil. On May 9, 2000, the Company entered into an agreement with
Northern Lights Energy, Ltd. to sell its Texas oil and gas leases for four
million dollars after considering the relative terms of a number of verbal and
written offers from the interested parties. Northern Lights Energy, Ltd. failed
to consummate the transaction and management initiated litigation during the
quarter commencing October 1, 2000, to cancel the contract, while simultaneously
commencing efforts to market the oil and gas leases to alternative prospective
purchasers. There can be no assurance that such a sale will be consummated or,
if consummated, will generate sufficient cash resources to meet all of the near
term capital requirements in Pakistan. It is likely that such cash resources
will have to be supplemented by capital from the sale of the Company's
securities, loans or other sources. Sale of the Texas leases would also
eliminate the Company's ongoing revenue stream which would create the need for a
reserve from the sale proceeds or the need for capital from other sources in
order to meet near term administrative and operating expenses. The Company does
not currently have a line of credit or other credit facility which can meet
these needs and there can be no assurance that efforts to sell its securities or
raise capital by other means will be successful.
The Company recorded a net loss on its books for the year ending June 30,
2000 of $12,283,248 based, in part, upon the deemed asset impairment loss of
$11,643,262 recorded by the Company pursuant to SFAS 121 titled "Accounting for
the Impairment of Long-Lived Assets" resulting from the contract to sell those
assets for four million dollars, as described above. The asset loss calculation
is derived from the difference between the four million dollar sale price and
the value attributed to those assets previously on the books of the Company.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 80,000,000 shares of Common stock, par
value $.001 per share, and 20,000,000 shares of Preferred Stock, par value $.001
per share. As of the date of this Prospectus, there were 52,020,074 shares of
Common Stock and 41,500 shares of Preferred Stock issued and outstanding.
COMMON STOCK
Subject to the rights of the holders of any shares of Preferred Stock
which may be issued in the future, holders of shares of Common Stock of the
Company are entitled to cast one vote for
13
each share held at all stockholders' meetings for all purposes, including the
election of the Board of Directors. Holders of Common Stock have the right to
share ratably in such dividends on shares of Common Stock as may be declared by
the Board of Directors out of funds legally available therefore. Upon
liquidation or dissolution, each outstanding share of Common Stock will be
entitled to share equally in the assets of the Company legally available for
distribution to stockholders after the payment of all debts and other
liabilities, subject to any superior rights of the holders of Preferred Stock.
Holders of Common Stock have no preemptive rights. There are no conversion or
redemption privileges or sinking fund provisions with respect to the Common
stock. All of the outstanding shares of Common Stock are, and all of the shares
of Common Stock offered hereby will be, validly issued, fully paid and
nonassessable. The Common Stock does not have cumulative voting rights so
holders of more than 50% of the outstanding Common Stock can elect 100% of the
Directors of the Company if they choose to do so, subject to the rights of
holders of Preferred Stock, if any.
PREFERRED STOCK
The Board of Directors is empowered to issue Preferred Stock from time to
time in one or more series, without stockholder approval, and with respect to
each series to determine (subject to limitations prescribed by law) (1) the
number of shares constituting such series, (2) the dividend rate on the shares
of such series, whether such dividends shall be cumulative and the relation of
such dividends to the dividends payable on any other class of stock, (3) whether
the shares of each series shall be redeemable and the terms of any redemption
thereof, (4) whether the shares shall be convertible into Common stock or other
securities and the terms of any conversion privileges, (5) the amount per share
payable on each series or other rights of holders of such shares on liquidation
or dissolution of the Company, (6) the voting rights, if any, for shares of each
series, (7) the provision of a sinking fund, if any, for each series, and (8)
generally any other rights and privileges not in conflict with the Certificate
of Incorporation for each series and qualifications, limitations or restrictions
thereof. The Company has outstanding one class of Preferred Stock. Block E
Preferred Stock, of which 41,500 shares are outstanding, originally provided for
convertibility on a one-for-five basis to Common Stock at the election of the
holder for a specified period. The convertibility period has expired for these
shares and the Company has the right to redeem these shares at $0.50 per share.
WARRANTS
In the course of its business operations and past capital raising efforts,
the Company has issued Warrants to purchase Common Stock to former and present
management and key personnel, consultants and certain subscribing shareholders
providing for exercise prices which range from $0.75 to $5.31 per share and
providing for terms which range upward to seven (7) years. Each Warrant, if
exercised, would entitle the holder to one share of Common Stock. As of the date
of this Prospectus, there are 11,435,000 unexpired Warrants outstanding, of
which, 7,730,000 are held by the Company's former and present officers and
directors as a group.
14
The Warrants covered by this registration statement are not held by any
current member or former member of this officer/director group. Zubair Kazi, one
Selling Stockholder, acquired 1,600,000 Warrants in four-400,000 share
certificates exercisable at any time prior to September 17, 2001, 2002, 2003 and
2004, respectively, in a September 17, 1999 private placement transaction. The
Warrants provide for a $1.00 per share exercise price, but if the five-day
average bid price for the underlying Common Stock is less than $1.40 at the time
of exercise, the exercise price is reset to the greater of $0.40 per share or
sixty percent (60%) of the five day average bid price. The 556,529 Warrants held
by Crary, Onthank & O'Neill, L.L.C, constitute a portion of the compensation for
serving as the placement agent in the Kazi placement, in the December 1999
private placement in which Brian Perry acquired 133,334 of his Common shares and
a subsequent calendar 2000 private placement in which the Group 2 Selling
Stockholders acquired their Common shares. These Warrants are exercisable at
$0.36 and expire five years after issuance. The 25,000 Warrants held by Cal
Crary, a principal in Crary, Onthank & O'Neill, L.L.C., were acquired for
services as a member of the Company's disclosure committee. These Warrants are
exercisable at $0.75 and expire February 14, 2007. These 25,000 Warrants also
contain a provision permitting, in the alternative, exercise without cash
consideration by relinquishment of a sufficient number of shares to cover the
exercise price based upon the ten-day average closing price for the ten days
preceding exercise.
The shares of Common Stock which are to be issued to Mr. Kazi upon
exercise of his Warrants were required to be registered by the Company under the
Securities Act of 1933 within ninety (90) days of the transaction. A
registration statement was also required to be filed by the Company in
connection with the shares underlying his Convertible Debt within the same time
period. The Crary, Onthank & O'Neill, L.L.C. Warrants and Cal Crary do not
obligate the Company to register the underlying Common shares but do provide for
the right of the holder to "piggyback" to any registration statement actually
filed by the Company.
The Warrants do not confer upon any holder any rights as a
stockholder of the Company, including the right to vote. The Warrants contain
provisions to protect the holder against dilution by adjusting the price at
which the Warrants are exercisable and the number of shares issuable upon
exercise of the Warrants upon the occurrence of certain events. These events
include the payment of stock dividends, distributions, stock splits, and
reclassifications.
CONVERTIBLE DEBT
Mr. Kazi acquired, on September 17, 1999, an Original Issue Discount
Promissory Note, face value $1,500,000.00, which matures March 17, 2002, and
which provides for conversion by the holder prior to maturity into Common Stock,
in whole or in part, in $10,000.00 increments. The conversion ratio is one share
of Common Stock for each one dollar of face amount of principal indebtedness
converted. Pursuant to a reset provision, should the five day average bid price
for the Common Stock preceding the date of conversion be less than $1.02 per
share, the difference between the five day average bid price (but not less than
$0.40) and $1.02 for each dollar of principal indebtedness converted is to be
paid to the holder in cash or Common Stock,
15
at the election of the Company. As indicated above, the registration
requirements for the Common Stock underlying the Convertible Debt transaction
required registration within ninety (90) days. The failure to meet this
obligation results in a monthly penalty equal to 3.0% of the indebtedness until
the registration requirement is satisfied, payable in stock or cash at the
election of the Company. The Common shares held by Mr. Kazi covered by the
registration statement to which this Prospectus pertains were acquired as
penalty shares.
TRANSFER AGENT
The transfer agent for the Company's Common Stock is Signature Stock
Transfer, Inc., 14675 Midway Road, Suite 221, Addison, Texas 75001.
DILUTION
The interest in the Company of each holder of the Common Stock will be
diluted to the extent that the Warrants and/or the Convertible Debt covered by
this Prospectus are exercise. Assuming all of the Warrants and Convertible Debt
covered by this Prospectus are exercised, a total of 3,681,529 shares of Common
Stock will be issued by the Company. On November 16, 2000, the exercise price
for the 556,529 Warrants held by Crary, Onthank & O'Neill, L.L.C. was $0.74
below the last quoted sale price of the Common Stock, the exercise price for the
Crary Warrants was $0.20 below the last quoted sale price of the Common Stock
and the exercise price for the 1,600,000 Warrants held by Zubair Kazi was $0.05
above the last quoted sale price of the Common Stock.
SELLING STOCKHOLDERS
MATERIAL RELATIONSHIPS
None of the Selling Stockholders has had, within the three years prior to
the filing of the registration statement to which this Prospectus pertains, any
material relationship with the Company, its predecessors or affiliates. Crary,
Onthank & O'Neill, L.L.C., one of the two Warrant holders, has served as a
placement agent to the Company in the private placement to the Group 1 and Group
2 Selling Stockholders. Mr. Crary, a principal in Crary, Onthank & O'Neill,
L.L.C. also serves on a disclosure committee created by the Board of Directors,
for which he has received, separately, 25,000 Warrants exercisable at $0.75 and
expiring in February 14, 2007.
OWNERSHIP OF SELLING STOCKHOLDERS BEFORE AND AFTER OFFERING
All of the Common Stock beneficially owned by the Selling Stockholders is
being offered under this registration statement and none of the Selling
Stockholders owns, prior to this offering, more than one percent of the
outstanding Common Stock of the Company except, Zubair Kazi, who beneficially
owns 6.9% (assuming conversion of all outstanding Warrants and
16
Convertible Debt pursuant to Securities Rule 13d-3), Buhrer & Co., which
beneficially owns 3.0% of the Common Stock prior to this offering, Appalachian
Energy Development, Inc., which beneficially owns 1.6% of the Common Stock prior
to this offering, David French, who owns 1.3% of the Common Stock prior to this
offering, Boris Wagner, who owns 1.2% of the Common Stock prior to this
offering, Daniel Stoll, who owns 1.2% of the Common Stock prior to this offering
and Rahn & Bodmer, which beneficially owns 1.1% of the Common Stock prior to
this offering. Subsequent to the offering, assuming all of the offered Common
Stock is sold (including stock underlying the Warrants and Convertible Debt),
none of the Selling Stockholders will beneficially own any remaining Common
Stock except Mr. Kazi, who will own 91,141 Common shares not covered by this
offering.
The following table sets forth certain information with respect to the
Selling Stockholders as of November 20, 2000:
17
COMMON STOCK REGISTERED IN THIS OFFERING
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
OUTSTANDING SHARES TO BE ACQUIRED TO BE ACQUIRED
NAME OF SELLING OF COMMON STOCK ON EXERCISE ON CONVERSION
STOCKHOLDERS BEING REGISTERED OF WARRANTS OF DEBT
- ------------------------------------- ------------------ -------------- --------------
GROUP 1 STOCKHOLDERS(1)
Zubair Kazi .................... 1,241,322 1,600,000 1,500,000
GROUP 2 STOCKHOLDERS(2)
Brian Perry .................... 333,334 N/A N/A
John Barkal .................... 83,334 N/A N/A
David French ................... 666,668 N/A N/A
Rahn & Bodmer .................. 583,334 N/A N/A
Mario Lombardi ................. 83,334 N/A N/A
Jodi Cologgi and
Kenneth Biebel ................. 100,000 N/A N/A
Edward Owczarek ................ 100,000 N/A N/A
Thomas J. Ellich ............... 83,334 N/A N/A
Jerry Niedfelt ................. 100,000 N/A N/A
Joseph DeLuca and
Sharon S. Yoon-DeLuca .......... 83,334 N/A N/A
Gabor Haizer ................... 83,334 N/A N/A
Donald B. Kelly ................ 41,667 N/A N/A
Tom E. Kurtz ................... 100,000 N/A N/A
18
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
OUTSTANDING SHARES TO BE ACQUIRED TO BE ACQUIRED
NAME OF SELLING OF COMMON STOCK ON EXERCISE ON CONVERSION
STOCKHOLDERS BEING REGISTERED OF WARRANTS OF DEBT
- ------------------------------------- ------------------ -------------- --------------
Bradley J. Manning and
Kimberly T. Manning ............ 83,334 N/A N/A
James Tolster .................. 83,334 N/A N/A
Cal Crary ...................... 100,000 25,000(5) N/A
Harry Willner .................. 400,000 N/A N/A
James C. Newborn ............... 41,667 N/A N/A
James Boyle and
Diane Boyle .................... 90,000 N/A N/A
Appalachian Energy
Development, Inc. .............. 833,334 N/A N/A
GROUP 3 STOCKHOLDERS(3)
Christoph Nater ................ 43,500 N/A N/A
Caroline Dechsle ............... 40,000 N/A N/A
Silvia Schmid .................. 170,000 N/A N/A
Fugen Schmid ................... 170,000 N/A N/A
Philippe Pfister ............... 100,000 N/A N/A
Beat Schlagenaul ............... 65,000 N/A N/A
Esther Crameri ................. 34,000 N/A N/A
Polo Haberlin .................. 96,000 N/A N/A
Hans Bodmer .................... 150,000 N/A N/A
David Lottenbanch .............. 80,000 N/A N/A
Stefan Huhn .................... 167,000 N/A N/A
19
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
OUTSTANDING SHARES TO BE ACQUIRED TO BE ACQUIRED
NAME OF SELLING OF COMMON STOCK ON EXERCISE ON CONVERSION
STOCKHOLDERS BEING REGISTERED OF WARRANTS OF DEBT
- ------------------------------------- ------------------ -------------- --------------
Dr. B. Sorg .................... 100,000 N/A N/A
Buhrer & Co. ................... 1,590,000 N/A N/A
Hanspeter Konig ................ 16,700 N/A N/A
Boris Wagner ................... 650,000 N/A N/A
Ulrich Grasberger .............. 83,400 N/A N/A
Heinz Fischer .................. 335,000 N/A N/A
Bernhard Nageli ................ 90,000 N/A N/A
Oski Kalin ..................... 34,000 N/A N/A
Christian Jost ................. 33,500 N/A N/A
Alice Loacker .................. 70,000 N/A N/A
Frau Frikart ................... 34,000 N/A N/A
Giuseppe Fiorenza .............. 300,000 N/A N/A
Mario Bagnato .................. 100,000 N/A N/A
Dr. Florian Salzgeber .......... 140,000 N/A N/A
Martin Gauch ................... 100,000 N/A N/A
Josef Sommer ................... 50,000 N/A N/A
M. Blacks ...................... 100,000 N/A N/A
Michael Riebensahm ............. 83,300 N/A N/A
Daniel Stoll ................... 632,500 N/A N/A
GROUP 4 STOCKHOLDERS(4)
Crary, Onthank & O'Neill, L.L.C N/A 556,529 N/A
TOTALS: ............................. 10,882,564 2,181,529 1,500,000
20
(1) Mr. Kazi's 1,600,000 Warrants were acquired in private placements of
$400,000 of Preferred Stock and $1,500,000 Convertible Debt in September
1999. The Warrants are exercisable at $1.00 per share, subject to
adjustment, and expire, in 400,000-share blocks, in September 2001,
September 2002, September 2003 and September 2004, respectively, if not
exercised. Mr. Kazi's Convertible Debt is convertible prior to its
maturity on March 17, 2002, at one share per one dollar of principal,
subject to adjustment. The Convertible Debt placement to Mr. Kazi
contained 90-day registration obligations on the part of the Company which
if not met, trigger a monthly penalty payable by the Company in cash or
stock. Mr. Kazi acquired his Common shares covered by this Prospectus as
penalty shares.
(2) The Group 2 Selling Stockholders acquired their shares in a calendar 2000
private placement except that Mr. Perry acquired 133,334 of his Common
shares in a December 1999 private placement.
(3) The Group 3 Selling Stockholders acquired their shares in a calendar 2000
private placement.
(4) The Group 4 Selling Stockholder acquired its Warrants as compensation for
serving as placement agent for the private placement to the Group 1 and
Group 2 Selling Stockholders above.
(5) Mr. Crary acquired his Warrants for services as a member of the Company's
disclosure committee.
PLAN OF DISTRIBUTION
The shares of Common Stock covered by this Prospectus are being
registered by the Company for the account of the Selling Stockholders. The
Company will not receive any of the proceeds from the offering hereunder. The
Company will receive the exercise price of all expenses of registration incurred
in connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the individual Selling Stockholders will be borne
by such Selling Stockholders.
The shares of Common Stock covered by this Prospectus may be offered
and sold from time to time by the Selling Stockholders through brokers, in the
over the counter market, in privately negotiated transactions, or otherwise, at
the prices prevailing at the time of such sales, at prices related to such
prevailing market prices, or at negotiated prices. To the Company's knowledge,
no specific brokers or dealers have been designated by the Selling Stockholders
nor has any agreement been entered into in respect of brokerage commissions or
for the exclusive or coordinated sale of any securities which may be offered
pursuant to this Prospectus. The Company will pay all expenses of preparing and
reproducing this Prospectus, but will not receive
21
the proceeds from sales by the Selling Stockholders. Sales will be made at
prices prevailing at the times of such sales.
In addition, a Selling Stockholder may deliver shares of Common Stock
offered by this Prospectus from time to time to cover short sales made by such
Selling Stockholder. The Selling Stockholder may effect the transactions by
selling the shares of Common Stock to or through brokers and the brokers may
receive compensation in the form of commissions from the Selling Stockholders.
The Selling Stockholders and any broker, dealer or agent executing sell orders
on behalf of the Selling Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event commissions received by the
broker, dealer or agent and the profit on any resale of the shares of Common
Stock may be deemed to be underwriting commissions under the Securities Act.
In effecting the sale of the shares of Common Stock offered by this
Prospectus, a Selling Stockholder who is participating in a distribution, as
defined in Regulation M under the Exchange Act, will be required to comply with
Rule 102 of Regulation M. Rule 102 will require such Selling Stockholder, as
well as any person who acts in concert with the Selling Stockholder, and the
broker, if any, who sells the shares on behalf other Selling Stockholder, to
suspend all purchases of shares of the Common Stock at least one and possibly
five business days prior to and until completion of the Selling Stockholder's
participation in the distribution. In the event that any of the Selling
Stockholders are deemed to be affiliates of the Company under the Exchange Act,
Rule 102, if applicable, will also require the Company and all persons who are
in a control relationship with the Company to suspend all purchases of the
Company's Common Stock at least one and possibly five business days prior to and
until completion of an affiliate Selling Stockholder's participation in a
distribution. When considered appropriate by the Company, the Company will
require the Selling Stockholders and each of their underwriters, brokers, or
dealers, if applicable, to provide a letter that evidences inapplicability of or
represents compliance with Rule 102 before the Company will authorize the
transfer of the Selling Shareholders' shares of Common Stock.
The Company has agreed to indemnify the Group 1, 2 and 4 Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act in connection with their respective registration rights.
USE OF PROCEEDS
The shares covered by this Prospectus are being offered by the Selling
Stockholders and not by the Company. Consequently, the Company will not receive
any proceeds from the sale of these shares. The Company will receive the
exercise price of the Warrants if and when exercised. See "Selling
Stockholders".
22
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, and all documents subsequently filed by The American
Energy Group, Ltd. (the "Company") pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
prior to the filing of a post-effective amendment to the Registration Statement
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and shall be deemed to be a part hereof
from the date of the filing of such documents:
(a) the Company's Report on Form 8-K/A dated September 29, 1998;
(b) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2000, filed October 13, 2000; and
(c) the Company's Quarterly Report on Form 10-Q for the quarter ending
September 30, 2000, filed November 17, 2000.
INDEMNIFICATION
Section 78.037 of the Nevada Revised Statutes provides generally and
in pertinent part that a Nevada corporation may contain a provision eliminating
or limiting the personal liability of a director or officer to the corporation
or its shareholders for damages for breach of fiduciary duty as a director other
than acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law. Additionally, Section 78.751 of the Nevada Corporation Code
permits indemnification of directors and officers for all actions that they take
on behalf of the corporation that they had reasonable cause to believe was
legal. This indemnification can include any and all civil, criminal and
administrative action. Additionally, Nevada law permits a corporation to make
financial arrangements to provide a buffer against potential liability,
including the creation of a trust fund, the establishment of a program of self
insurance, securing an obligation with a lien on corporate assets, or the
establishment of a credit, guarantee or other surety. Article IX of the Articles
of Incorporation and Article VIII of the Bylaws of the Company provide, in
general, that a director or officer of the Company shall be indemnified from his
or her expenses incurred in the defense of any proceeding so long as his or her
actions were undertaken in good faith.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling
23
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
LEGAL MATTERS
Certain legal matters in connection with the common stock offered by this
Prospectus will be passed on for the Company by Lindow & Treat, L.L.P., San
Antonio, Texas.
EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus from the Company's Annual Report on Form 10-K for the year ending
June 30, 2000 have been audited by HJ & Associates, L.L.C., independent
auditors, as stated in their report, which is incorporated in this Prospectus by
reference. These financial statements have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the SEC under SEC File No.
0-26402. Reports, proxy statements and other information filed by the Company
can be inspected and copies at the public reference facilities of the SEC,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies can be
obtained by mail at prescribed rates. Requests should be directed to the SEC's
Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please contact the SEC at 1-800-SEC-0330 for further information on
the Public Reference Section. The SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy statements and information
statements and other information regarding issuers that file electronically with
the SEC, including the Company.
The Company furnishes its stockholders with annual reports containing
financial statements audited by its independent certified public accountants and
with quarterly reports containing unaudited summary financial information for
each of the first three quarters of each fiscal year.
The Company has filed with the SEC herewith a registration statement on
Form S-3 with respect to the Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. Any person to whom this Prospectus is delivered may obtain a copy of
the registration statement, including any exhibits thereto, without charge, upon
the oral or written request of such person. Such requests should be directed to
Linda Gann, Secretary of The American Energy Group, Ltd., P.O. Box 105,
Simonton, Texas 77476. The Company's telephone number is (281) 346-0414.
24
PART II
INFORMATION NOT REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All expenses (other than fees and expenses of legal or other advisors to
the Selling Stockholders) in connection with the offering described in this
Registration Statement will be paid by the Company. Such expenses are as
follows:*
Securities and Exchange Commission registration fee .. $ 4,060
Accounting fees and expenses ......................... $10,000
Legal fees and expenses .............................. $25,000
Miscellaneous ........................................ $ 5,000
-------
Total .................................... $44,060
* The amounts set forth, except for the filing fees for the Securities and
Exchange Commission, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.037 of the Nevada Revised Statutes provides generally and in
pertinent part that a Nevada corporation may contain a provision eliminating or
limiting the personal liability of a director or officer to the corporation or
its shareholders for damages for breach of fiduciary duty as a director other
than acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law. Additionally, Section 78.751 of the Nevada Corporation Code
permits indemnification of directors and officers for all actions that they take
on behalf of the corporation that they had reasonable cause to believe was
legal. This indemnification can include any and all civil, criminal and
administrative action. Additionally, Nevada law permits a corporation to make
financial arrangements to provide a buffer against potential liability,
including the creation of a trust fund, the establishment of a program of self
insurance, securing an obligation with a lien on corporate assets, or the
establishment of a credit, guarantee or other surety. Article IX of the Articles
of Incorporation and Article VIII of the Bylaws of the Company provide, in
general, that a director or officer of the Company shall be indemnified from his
or her expenses incurred in the defense of any proceeding so long as his or her
actions were undertaken in good faith.
The indemnification provisions contained in the Amended Articles of
Incorporation Bylaws may be sufficiently broad to permit indemnification of the
Registrant's executive officers and directors for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"). For information as to
a limitation on indemnification of directors, officers and controlling persons
of the Registrant, see the last undertaking in Item 17 of this Registration
Statement.
II-1
ITEM 16. EXHIBITS
EXHIBIT NUMBER
AND DESCRIPTION
(4) Instruments Defining Rights of Security Holders
4.1 Form of Warrant
(5) Opinion re legality
5.1 Opinion of Lindow & Treat, L.L.P.
(23) Consents of experts and counsel
23.1 Consent of Lindow & Treat, L.L.P. (included in its
opinion filed as Exhibit 5.1)
23.2 Consent of H J & Associates, L.L.C.
(24) Power of attorney
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
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Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Simonton, State of Texas, on November 21 2000.
THE AMERICAN ENERGY GROUP, LTD.
By:/s/ CHUCK VALCESCHINI
Chuck Valceschini, President, Chief
Executive Officer and Chief Financial
Officer
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