<Page>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934

                     For the fiscal year ended June 30, 2002

                         Commission file number: 0-26402

                         THE AMERICAN ENERGY GROUP, LTD.
             (Exact name of Registrant as specified in its charter)


             Nevada                                     87-0448843
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)


           9441 Sam Houston Parkway
           Suite 110
           Houston, Texas                                         77099
 (Address of principal executive offices)                       (Zip code)


                                  713-981-6114
               (Registrant's telephone number including area code)

                           ---------------------------

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

                                      None

           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, Par Value $.001 Per Share

                           ---------------------------

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
   1934 during the preceding 12 months (or for such shorter period that the
  registrant was required to file such reports), and (2) has been subject to
                such filing requirements for the past 90 days.

                                 Yes _X_ No ___

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
 of Regulation S-K is not contained herein, and will no be contained, to
    the best of registrant's knowledge, is definitive proxy or information
 statements incorporated by reference in Part III of this Form 10-K or in any
                       amendment of this Form 10-K. [ ]

 The aggregate market value of the voting stock held by non-affiliates of the
Registrant at October 14, 2002, was $1,989,541 (based on a value of $0.03 per
    share, the closing price of the Common stock as quoted on the NASD OTC
 market on such date). 66,318,037 shares of Common Stock, par value $.001 per
                 share, were outstanding on October 14, 2002.

<Page>
                         THE AMERICAN ENERGY GROUP, LTD.
                               INDEX TO FORM 10-K

PART 1

Items 1 and 2. Business and Properties........................................

Item 3.        Legal Proceedings..............................................

Item 4.        Submission of Matters to a Vote of  Security Holders...........

PART II

Item 5.        Market of Our Common Stock and Related Stockholder Matters.....

Item 6.        Selected Consolidated Financial Data...........................

Item 7.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................

Item 7A.       Quantitative and Qualitative Disclosures About Market Risk.....

Item 8.        Financial Statements and Supplementary Data....................

Item 9.        Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure.......................................

PART III

Item 10.       Directors and Executive Officers of the Registrant.............

Item 11.       Executive Compensation.........................................

Item 12.       Security Ownership of Certain Beneficial Owners and Management.

Item 13.       Certain Relationships and Related Transactions.................

PART IV

Item 14.       Exhibits, Financial Statement Schedules, and Reports on
               Form 8-K.......................................................

SIGNATURES....................................................................


In this report, the "Company", "we", "us" and "our" collectively refers to The
American Energy Group, Ltd. and its wholly-owned subsidiaries.

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------------------------------------------------------------------------------

                  SPECIAL NOTE ON 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 future results of drilling individual wells and other exploration and
   development activities;

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

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

..  Fluctuations in prices for oil and gas;

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

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

..  Our future ability to raise working capital through equity placement, loans
   or strategic ventures to spread the costs of exploration, development and
   acquisition activities; and

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.

<Page>

                                     PART I

ITEMS 1.  AND 2.  BUSINESS AND PROPERTIES

GENERAL AND HISTORICAL INFORMATION

      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"). At the time of
organization, we issued 1,366,250 shares of voting Common Stock to Dimension,
which was the sole stockholder. On April 28, 1989, our form S-18 filed with the
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 our
issuing 1,547,872 shares of voting Common Stock.

      In 1987, we engaged in marketing an automobile carburetor modification
kit. The efforts were not successful and were abandoned. From 1987 to 1990, we
were inactive. In October, 1990, the shareholders approved a one for ten (1:10)
reverse split of the voting Common Stock. In June, 1991, we 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, we attempted various means to attract sufficient capital
investment to develop the oil prospect in Belize, but was not successful. The
license expired due to our lack of performance. From 1992 until 1994, our
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, we entered into an agreement with Simmons Oil Company, Inc., a Texas
corporation (hereinafter "Simmons") whereby we 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, we acquired
additional oil and gas properties in the same general area through its
subsidiaries.

      In April 1995, we acquired all of the outstanding shares of Hycarbex,
Inc., a Texas corporation (hereinafter "Hycarbex") which that month had been
awarded an oil and gas Concession comprised of approximately one million acres
located in the Middle Indus Basis near Jacobabad, Pakistan,for 120,000 shares of
our voting Common Stock, 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

<Page>

conditioned upon the success of that development. For accounting purposes,
this acquisition was treated as a pooling of interests. We changed the name
of Hycarbex, Inc. to Hycarbex-American Energy, Inc. and it is operating as
our wholly owned subsidiary. In addition to the above acquisition
consideration, we provided a $551,000 Financial Guarantee Bond to the
Government of Pakistan to assure performance of Concession requirements.
Under the terms of the Concession, the Pakistan Government retained a 5%
interest in the Concession which could be increased to 25% W.I. as to each
well in which there was a commercial discovery. We performed subsequent
seismic surveys and commenced the drilling of our first well, the Kharnak # 1
in calendar 1997. The initial well, while generating valuable geologic data,
was unsuccessful. In early 1999, we commenced our second well, the David # 1,
and abandoned the well prior to reaching target depth because of mechanical
difficulties. A new well, the David # 1A was commenced in the vicinity within
weeks of abandonment and this well was plugged and abandoned when dangerous
levels of hydrogen sulfide gas were encountered. We performed additional
seismic on the Concession in calendar 2000, after a drilling extension from
the Pakistan Government, and commenced the third full well, the Jacobabad #3
in the latter part of calendar 2000. This well was plugged and abandoned as a
noncommercial well in January, 2001. We further refined our geologic models
using this additional seismic and the data obtained from the Jacobabad #3.
Immediately prior to the end of the previous fiscal year, the Jacobabad
Concession was relinquished to the Pakistan Government in favor of a new
concession, the Yasin Concession, which was officially awarded in the current
year. The Yasin Concession contains approximately 1,200 Square Kilometers and
provides for the same drilling and financial terms as the Jacobabad
Concession. The Company has also bid on and won two additional blocks this
year. The Bahadurpur Block covers 211.625 Square Kilometers and the Miro Khan
Block is 4764.87 Square Kilometers. Additional evaluations of both new blocks
is currently in progress and signing could occur soon. Both blocks are either
on or in close proximity to the old Jacobabad concession. An additional
979.58 Square Kilometers has been added making the Yasin Concession area
2179.58 Square Kilometers. The Yasin Concession contains acreage originally
covered by the Jacobabad Concession which we viewed as desirable for its
exploration potential.

We began producing commercial quantities of oil on our Texas-based properties
and emerged from the development stage during the year ended June 30, 1997. At
that time, we were engaged in a program of drilling and reworking active and
inactive developmental wells situated on the properties at the time of our
acquisition. In June, 1997, we purchased oil and gas properties totaling
approximately 1,400 acres in Texas. During the year ended June 30, 1999, we
drilled eight developmental wells on these properties, of which seven wells are
currently producing. One additional commercial well was completed in Texas in
the year ending June 30, 2000, while the reactivation and reworking program
continued at a very modest rate due to working capital considerations.
Subsequent to the end of the current fiscal year, two additional producing wells
have been drilled. The Blakely B-72 well completed in September 2002 encounter
five oil sands of which the lowest sand is currently being produced. The Blakely
C-55 well completed in April 2002 also encountered five oil sands of which the
lowest sand is producing. These two wells encountered new oil reserves which
increased our proved


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reserves as noted in this years reserve report just completed.

OIL AND GAS DISCLOSURES

RESERVES REPORTED TO OTHER AGENCIES

No reserve estimates of proven net oil and gas reserves were filed with any
other regulatory agency.

PRODUCTION

As of June 30, 2002, 2001 and 2000, the Company received oil revenues from 32,
32 and 22 wells, respectively. All of these wells produced oil only. There were
no sales of natural gas during these periods.

<Table>
<Caption>
                                                   2002            2001          2000
                                                   ----            ----          ----
<S>                                              <C>            <C>            <C>
Gross revenue from oil sales                     1,051,358      1,806,335      1,823,276
Net barrels produced during the period              48,160         62,060         73,195
Average price received for sales oil, $/bbl          21.83          29.11          24.91
Average lifting costs, $bbl                           6.69           7.88           4.76
</Table>

PRODUCTIVE WELLS AND ACREAGE

Set forth below is a tabulation of productive oil wells owned by the Company as
of June 30, 2002, 2001 and 2000. This summary includes oil wells which may
currently be shut in and awaiting recompletion in order to restore commercial
productivity. The Company has not had a commercially productive gas well since
1996. All of these wells are located on the Company's Texas properties.

<Table>
<Caption>
                                                        2002                  2001                 2000
                                                        ----                  ----                 ----
<S>                                                     <C>                   <C>                  <C>
Productive wells - gross                                108                   108                  108
Productive wells - net                                  108                   108                  108


DEVELOPED ACREAGE
                                                        2002                  2001                 2000
                                                        ----                  ----                 ----

Texas (United States cost center) - gross               160                   152                  152
Texas (United States cost center) - net                 160                   152                  152

Pakistan - gross                                        0                     0                    0
Pakistan - net                                          0                     0                    0

</Table>

<Page>

<Table>
<Caption>

UNDEVELOPED ACREAGE
                                                        2002                  2001                 2000
                                                        ----                  ----                 ----
<S>                                                     <C>                   <C>                  <C>
Texas (United States cost center) - gross               2,372                 2,372                2,372
Texas (United States cost center) - net                 2,372                 2,372                2,372

Pakistan - gross                                        541,482               1,000,000            1,000,000
Pakistan - net                                          511,656               950,000              950,000

</Table>

DRILLING ACTIVITY

Set forth below is a tabulation of wells (gross and net wells reflecting the
ratio of working interest ownership owned by the Company vs. 100% working
interest in each well) completed during the years ended June 30, 2002, 2001 and
2000 in which the Company has participated and the results thereof for each of
the three years.

<Table>
<Caption>
                  2002                     2001                    2000
                  ----                     ----                    ----

            GROSS         NET       GROSS           NET     GROSS          NET
<S>         <C>            <C>      <C>              <C>    <C>             <C>
Dry         0              0        1                1      0               0

Oil         2              2        0                0      8               8

Gas         0              0        0                0      0               0
            ----------------        ------------------      -----------------


Totals      2              2        1                1      8               8
            ================        ==================      =================
</Table>

OIL AND GAS RESERVES

The Company did not report reserves to any other agency of the U. S. government.
The Company's proved reserves and PV-10 Value from its U.S. proved developed and
undeveloped oil and gas properties have been estimated by Carl F. Pomeroy and
Richard Alexander, Registered Professional Engineers. The Company's Pakistan
Probable Recoverable Reserves and PV-10 Value from its Pakistan undeveloped gas
properties have been estimated by Martin Petroleum and Associates in Calgary,
Alberta, Canada. The estimates of these independent petroleum engineering firms
were based upon review of production histories and other geologic economic,
ownership and engineering data provided by the Company. In accordance with SEC
guidelines, the Company's estimates of future net revenue from the Company's
proved and probable reserves and the present value thereof are made on the basis
of oil and gas sales prices in effect as of the dates of such estimates and are
held constant throughout the life of the properties, except where such
guidelines permit alternate treatment. Future net revenues at June 30, 2002 on
the Company's U.S. properties reflect a weighted average price of $21.83 per BOE
vs. $29.11 in its June 30, 2001 estimates.

The proved developed and undeveloped oil and gas reserve figures presented in
this report are estimates based on reserve reports prepared by independent
petroleum engineers. The estimation of reserves requires substantial judgment on
the part of the petroleum engineers, resulting in imprecise determinations
particularly with respect to new discoveries. Estimates of reserves and of
future net revenues prepared by different petroleum engineers may vary

<Page>

substantially, depending, in part, on the assumptions made and may be subject to
material adjustment. Estimates of proved undeveloped reserves, which comprise a
substantial portion of the Company's reserves, are, by their nature, much less
certain than proved developed reserves. The accuracy of any reserve estimate
depends on the quality of available data as well as engineering and geological
interpretation and judgment. Results of drilling, testing and production or
price changes for produced hydrocarbons subsequent to the date of the estimate
may result in changes to such estimates. The estimates of future net revenues in
this report reflect oil and gas prices and production costs as of the date of
estimation, without escalation, except where changes in prices were escalated
under the terms of existing contracts. There can be no assurance that such
prices will be real or that the estimated production volumes will be produced
during the period specified in such reports. The estimated reserves and future
net revenues may be subject to material downward or upward revision based upon
production history, results of future development, prevailing oil and gas prices
and other factors. A material change in estimated proved reserves or future net
revenues could have a material effect on the Company.

UNITED STATES RESERVE ESTIMATES

The following tables present total proved developed, proved undeveloped and
probable reserve volumes as of June 30, 2002, and June 30, 2001, and estimates
of the future net revenues and PV-10 Value there from. There can be no assurance
that the estimates are accurate predictions of future net revenues from oil
reserves or their present value.

ESTIMATED NET PROVED OIL RESERVES - UNITED STATES PROPERTIES:


                                             As of June 30       As of June 30
                                                 2002                2001

Proved Developed, Bbls                           291,599             301,480

Proved Shut In, Bbls                             197,168             181,766

Proved Undeveloped, Bbls                       1,849,332           2,132,331



Total Estimated Proved Oil Reserves, Bbls      2,338,099           2,615,577

Probable Reserves                                228,449             217,365
Total Estimated Oil Reserves, BBLS             2,566,548           2,832,942



ESTIMATED FUTURE NET REVENUES - UNITED STATES PROPERTIES:

The present value of future net revenues (using discount factor of 10 percent
per annum) before income taxes for the Company's proved developed and proved
undeveloped oil reserves as of June 30, 2002 and 2001 are as follows:

<Page>


                                       As of June 30          As of June 30
                                            2002                  2001

Proved Developed PV-10, $                 2,802,712              3,271,165

Proved Shut In PV-10, $                   2,468,660              2,913,577

Proved Undeveloped PV-10, $              15,719,353            18,261,372

Total                                    20,990,725            24,446,114


The decrease in the average price per barrel of oil significantly reduced the
Companies oil revenues for 2002. The oil price for September 2002 was $26.42 per
BBL. indicating probable higher future revenues.

"Proved developed" oil and gas reserves are reserves that can be expected to be
recovered from existing wells with existing equipment and operating methods.
"Proved undeveloped" oil and gas reserves are reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing, wells where
relatively major expenditures are required for recompletion. In recent years,
the market for oil and gas has experienced substantial fluctuations, which have
resulted in significant swings in the prices for oil and gas. The Company cannot
predict the future of oil and gas prices or whether a future decline in prices
will occur. Any such decline would have an adverse effect on the Company.

PAKISTAN RESERVE ESTIMATES

As previously reported and filed in a Form 8-K dated September 22, 1998, the
Company retained Martin Petroleum and Associates of Calgary, Alberta Canada, to
perform a preliminary reserve study on its Jacobabad Concession in the Middle
Indus basin in central Pakistan. These reserves are not categorized as proven.
Further, these reserves remain categorized by the company as unproven. However,
management has determined that the independent estimates of Probable Recoverable
Reserves in the preliminary reserve study represent material information which
merited disclosure to the shareholders. These independent estimates also served
as justification to management to continue further exploratory drilling on its
Pakistan Concession and justification to management to bid for and obtain
subsequent to year-end the Yasin Block Concession which is comprised of portions
of the Jacobabad Concession acreage.

CAUTIONARY NOTE REGARDING RESERVE ESTIMATES

The estimation of reserves requires substantial judgment on the part of the
petroleum engineers, resulting in imprecise determinations particularly with
respect to new discoveries. Estimates of reserves and of future net revenues
prepared by different petroleum engineers may vary substantially, depending, in
part, on the assumptions made, and may be subject to material adjustment.
Estimates of probable undeveloped reserves, which are a substantial portion of
the Company's reserves, are, by their nature, much less certain than proved
developed reserves. The accuracy of any reserve estimate depends on the quality
of available data as well as engineering and geological interpretation and
judgment. Results of drilling, testing and production or price changes
subsequent to the date of the estimate may result in changes to such estimates.


<Page>

MARKET FACTORS AND EFFECTS OF COMPETITION AND REGULATION

COMPETITION

The oil and gas business is highly competitive in every phase. We compete with
numerous companies and individuals in our exploration and production activities.
Many on these competitors have far greater financial and technical resources
with established multi-national operations. As a result, unless we obtain
additional capital investment and /or join in partnerships and joint ventures,
we may be prevented from participating in large drilling and acquisition
programs. Since we are smaller and have limited resources in comparison to many
of our competitors, our ability to compete for oil and gas properties is also
limited.

STATE AND LOCAL REGULATIONS:

The various states have established statutes and regulations requiring permits
for drilling, drilling bonds to cover plugging contingencies, and reporting
requirements on drilling and production activities. Activities such as well
location, method of drilling and casing wells, surface use and restoration,
plugging and abandonment, well density, and other matters are all regulated by a
governing body. Texas, the state in which we operate, has rules and regulations
covering all of these matters. It also has regulations addressing a number of
environmental and conservation matters, including the unitization and pooling of
oil and gas properties.

ENVIRONMENTAL REGULATIONS:

Our activities are subject to numerous state and federal statutes and
regulations concerning the storage, use and discharge of materials into the
environment, and many other matters relating to environmental protection. These
regulations may adversely affect our operations and cost of doing business. It
is likely that these laws will become more stringent in the future.

SAFETY AND HEALTH REGULATIONS:

We must also conduct our operations in accordance with laws governing
occupational safety and health. Currently, we do not foresee expending
substantial amounts in order to comply with these regulations.

FOREIGN LAWS AND REGULATIONS:

We intend to commit a significant amount of our resources to develop our oil and
gas Concession in Pakistan. There are inherent risks in operating a business in
a foreign country, where unfamiliar laws and business practices may exist. The
Company intends to minimize this risk by engaging appropriate professional and
support personnel as the operations develop.

<Page>

MARKETING

The availability of a ready market for our oil and gas production depends on
numerous factors over which we have no control, including the cost and
availability of alternative fuels, the extent of other production, costs and
proximity of pipelines, regulations of governmental authorities and cost of
compliance with environmental concerns. Our business is not seasonal, but
increased consumer demand in certain months of the year can influence the price
of our produced hydrocarbons upward, depending on the circumstances. Future
prices are virtually impossible to predict. We do not have a significant share
of any market segment and cannot set or influence the price of our products.
While virtually 100% of our produced oil is sold to one purchaser, the
availability of several other purchasers in the same market under comparable
terms limits any risk associated with reliance upon a single purchaser.

TITLE TO DOMESTIC PROPERTIES

      Our 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 our leases also require
development of the covered acreage according to a specified schedule. The
consequences of our non-compliance with these operational and 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. During the current
fiscal year we elected to forego continuous drilling on one of our Texas-based
leases containing 37.5 acres for geologic reasons. The cessation of activity
resulted in the applicability of a lease provision which permits the Company to
retain 2.5 acres around each producing well and provides for forfeiture of the
undeveloped acreage. We have identified five (5) producing wells for purposes of
calculating the retained acreage which are currently being reviewed by the oil
and gas lessor for verification.

TITLE TO PAKISTAN LICENSE

The exploration license in the Republic of Pakistan held by our subsidiary,
Hycarbex- American Energy, Inc., 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 our stated reserves in our financial statements contained within
this report, loss of the Pakistan concession as a result of our non-compliance
would likely have a substantial adverse impact upon the market for the Company's
securities.

AVAILABILITY OF DOMESTIC MARKETS AND VOLATILE PRICING

      There is an existing and available market for the oil produced from our
Texas-based properties. However, the prices which we obtain for our production
are subject to market


<Page>

fluctuations which are affected by many factors, including supply and demand. We
rely upon favorable pricing to meet our operational expenses. Extended periods
of depressed oil prices could result in the inability to meet these operational
expenses and could expose us to the risk of loss of our properties because of
the financial inability to meet ongoing maintenance and development
requirements. Numerous factors beyond our control which could affect pricing
include:

      o     the level of consumer product demand,

      o     weather conditions,

      o     domestic and foreign governmental regulations,

      o     the price and availability of alternative fuels,

      o     political conditions,

      o     the foreign supply of oil and natural gas,

      o     the price of foreign imports, and

      o     overall economic conditions.


AVAILABILITY OF INTERNATIONAL MARKETS AND VOLATILE PRICING

      We have not established production on our concession in the Republic of
Pakistan. Should our further development result in a well or wells capable of
producing hydrocarbons, sales of those hydrocarbons could not be made without
connections to existing pipeline facilities. Our ability to generate a favorable
return on our investment in Pakistan will be dependent upon market prices and
conditions present at the time we achieve commercial production, if at all.

ADVERSE OPERATING CONDITIONS

      The oil and gas business involves a variety of operating risks. We are
faced with the risk that we will not find oil and natural gas at all or that we
will not find oil and natural gas in reservoirs from which we can economically
produce the oil and natural gas. The cost of drilling, completing and operating
wells is substantial and uncertain. Numerous factors beyond our control may
cause the curtailment, delay or cancellation of drilling operations, including:

      o     unexpected drilling conditions,

      o     pressure or irregularities in formations,

      o     equipment failures or accidents,

<Page>

      o     adverse weather conditions,

      o     compliance with governmental requirements, and

      o     shortages or delays in the availability of drilling rigs or delivery
            crews and the delivery of equipment.

In accordance with customary industry practice, we have maintained insurance
against some, but not all, of the risks described above. We cannot assure you
that any insurance will be adequate to cover the potential losses or
liabilities. We also cannot predict the continued availability of insurance or
the availability of insurance at premium levels that justify its purchase.

NEED FOR ADDITIONAL FUNDS

      Since the production derived from our Texas-based properties is
insufficient to meet our future capital requirements for both Texas and Pakistan
operations, we will need additional financing to meet our projected operating
capital requirements. We do not currently have a line of credit or other credit
facility available to us to meet these cash requirements. Additional financing
will be pursued, as needed, by seeking credit facilities, sales of our
securities, sales of our assets and joint ventures. We cannot be certain that we
will be successful in obtaining additional financing on favorable terms, if at
all.

FACILITIES AND PERSONNEL RESOURCES
OFFICES

We currently lease approximately 3,800 square feet of office space for use as
corporate offices at 9441 Sam Houston Parkway, Houston, Texas, at a monthly
rental of $3,395. The lease expires on August 31, 2004. We likewise maintain two
office trailers of approximately 200 square feet each and one storage facility
of approximately 400 square feet for our domestic field operations on certain of
our oil and gas leases. Our right to install and maintain these trailers and
storage buildings is included with the easements granted under the oil and gas
leases and they do not incur a rental obligation. We likewise maintain an office
in Islamabad Pakistan of approximately 2,400 square feet.

EMPLOYEES

We have 3 employees in our Houston, Texas corporate offices, all three are
management. We have 7 employees, including 2 management employees, working in
our field operations and 11 employees in our Islamabad Pakistan office. None of
our employees are represented by a union or collective bargaining organization.
We consider our relationship with our employees to be satisfactory.

<Page>

ITEM 3.     LEGAL PROCEEDINGS.

During the first quarter, the Company settled the litigation initiated by the
Company in October 2000, against Northern Lights Energy, Ltd. seeking a
cancellation of Northern Lights right to purchase the Texas Oil and Gas Leases
under a May 9, 2000 contract. Under the terms of the settlement, Northern Lights
relinquished its purchase rights, accepted a discounted cash sum in full
repayment of its $750,000.00 loan, and returned operational control of the
Texas-based oil and gas leases to the Company.

During the third quarter, Georg von Canal filed suit against the Company and
William M. Aber, Jr. in Cause No. 2002-11247, 270th Judicial District Court of
Harris County, Texas, seeking damages and an injunction from preventing his
ouster as President and as a member of the Board of Directors based upon a
shareholder vote in which a majority of shareholders voted for the removal of
Mr. von Canal as a director under an existing bylaw provision. The bylaw
provision, which requires a simple majority vote to remove a director, is in
conflict with a Nevada statute which requires the vote of two-thirds of the
shareholders in order to remove a director. The matter was pending and the
outcome not yet determined by the Court as of the date of this report.

During the third quarter, Charles Valceschini, former President and a former
member of the Board of Directors, filed suit against the Company in Cause No.
CV/02-01352, Second Judicial District Court, Washoe County, Nevada, to recover a
stock certificate issued to him by the Company which was in the Company's
possession and to recover $222,000.00, representing a $30,000.00 loan to the
Company and back salary and unreimbursed expenses. The matter was pending and
the outcome not yet determined by the Court as of the date of this report.

During the fourth quarter William L. Locklear, Inc. filed suit against
American Energy Operating, Corp. in Cause No. 2002-CI-09050, 285th Judicial
District Court, Bexar County, Texas, seeking $59,504.50 for alleged, unpaid
services as an engineering consultant.  The matter was pending and the
outcome not yet determined by the Court as of the date of this report.

During the third quarter, the outstanding $1,500,000.00 loan secured by a first
lien on the Texas oil and gas leases matured. Negotiations to restructure the
debt were conducted by management with the note holder, Zubair Kazi, during the
fourth quarter, but the negotiations were unsuccessful in obtaining a long term
extension and renewal of the note. Mr. Kazi initiated legal procedures to obtain
a foreclosure of the Texas-based oil and gas leases but the foreclosure did not
go forward because on June 28, 2002, three other alleged creditors of the
Company filed an Involuntary Petition for Bankruptcy. While the original claims
totaled only $49,981.13, the bankruptcy proceedings had the effect of
automatically preventing a foreclosure unless and until the Bankruptcy Court
issues an order permitting the creditor to pursue its remedies under state law.
The Company entered into an agreement with Mr. Kazi after the end of the fiscal
year which provides for forbearance by Mr. Kazi of pursuit by him of his
available remedies until ninety (90) days after August 12, 2002.

<Page>

During the fourth quarter, three alleged creditors of the Company, whose claims
totaled $49,981.13, filed an Involuntary Petition for Bankruptcy against the
Company in Cause No. 02/37125-H1-7, United States District Court, Southern
District of Texas, Houston Division. One of the petitioning creditors, Peter
Barben, who claimed a debt of $9,114.00 subsequently withdrew as a petitioning
creditor but was replaced in the litigation by Georg von Canal, who joined the
group of petitioning creditors with a claim that the Company separately owes him
$172,689.14. The matter was pending and the outcome not yet determined as of the
date of this report.

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

During the year, the Company did not submit any matters to a vote of security
holders.


PART II

ITEM 5.  MARKET OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The price of the Common Stock of the Company is quoted in the "pink sheets"
published by the National Quotation Bureau and the Bulletin Board, an
inter-dealer quotation system operated by the National Association of Securities
Dealers, Inc. under the symbol "AMEL". These over the counter market quotations
may reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily reflect actual transaction prices.


                                        High Bid       Low Bid
        Fiscal years ended
        June 30,

        2002
        First Quarter                    $0.29          $.016
        Second Quarter                   $0.19          $0.09
        Third Quarter                    $0.22          $0.07
        Fourth Quarter                   $0.28          $0.07

        2001
        First Quarter                    $0.66          $0.25
        Second Quarter                   $1.28          $0.44
        Third Quarter                    $0.72          $0.16
        Fourth Quarter                   $0.29          $0.15


DIVIDENDS

We have not declared, distributed or paid any cash dividends in the past. We do
not expect that we will have sufficient net profit and cash flow in amounts that
would allow a cash dividend to be paid to our shareholders in the foreseeable
near term.

<Page>

RECENT SALES OF UNREGISTERED SECURITIES

During the first two quarters, the Company issued 1,200,000 shares of Common
Stock, $.001 par value, to officers and third party creditors for services
rendered valued at $281,000. During the same period, we issued 40,750 shares as
replacement shares for shares which were erroneously canceled in a previous year
in connection with broad-based, multiparty litigation initiated by the Company
in order to achieve cancellation of shares. We also issued in December 2001 and
May 2002, 4,085,622 shares as penalty shares pursuant to a Company obligation to
register shares issued in a September 1999 placement. The penalty shares were
issued in satisfaction of monetary penalties aggregating $450,000 and $225,000,
respectively. During the third quarter, the Company issued 1,000,000 shares in
satisfaction of interest and commissions payable in connection with an
outstanding loan to the Company and 2,544,768 shares and 6,400,000 shares of
Common Stock to two different creditors in satisfaction of outstanding notes in
the amount of $1,094,290 and $640,000, respectively. In April 2002, these two
blocks of stock were reacquired from the creditors by reversing the transactions
in order to make available a significant number of authorized shares needed for
an investment transaction with Vivus Beteiligungs Aktiengesellschaft, a German
concern, which was proposed to be consummated in that month. The reversal of the
2,544,768 share block issuance was accomplished by canceling that transaction
and reinstating the $1,094,290 debt. The reversal of the 6,400,000 share block
issuance required that the $640,000 debt be reinstated with an additional
reacquisition fee of $160,000 payable to the holder under the original agreement
with the holder.

In connection with the above transactions, we relied upon Section 4(2) of the
Securities Act in claiming exemption from registration. All of the persons had
full information concerning our business affairs and acquired the securities for
investment purposes. The certificates representing the shares issued contain a
restrictive legend prohibiting transfer without registration or the availability
of an exemption from registration.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The following Selected Consolidated Financial Data presented under the captions
"Statements of Earnings Data" and "Balance Sheet Data' for, and as of the end
of, each of the years in the five year period ended June 30, 2002, are derived
from the consolidated financial statements of The American Energy Group, Ltd,
and Subsidiaries. The financial data for the four years ended June 30, 1996
through 1999 have been audited by Jones, Jensen & Company, Independent Public
Accountants. The financial data for the years ended June 30, 2000 and 2001 have
been audited by HJ & Associates, Inc. (previously Jones Jensen & Company). This
financial data for the year ended June 30, 2002 was audited by Chisholm and
Associates. The selected consolidated financial data should be read in
conjunction with the Consolidated Financial statements as of June 30, 2001 &
2000, and for each of the three years ended June 30, 2001, 2000 and 1999, the
accompanying notes and the report thereon, which are included elsewhere in the
respective Forms 10-K.

<Page>

<Table>
<Caption>
                                                                   FOR THE YEARS ENDED JUNE 30,
                                       ----------------------------------------------------------------------------------------
                                            2002              2001               2000                1999              1998
<S>                                   <C>                <C>                   <C>                  <C>                <C>
STATEMENT OF
EARNINGS DATA ($)
Oil & Gas sales .................     $  1,051,358       $  1,806,335          1,823,276            417,136            641,203

Lease Operating
& Production Costs ..............          507,382            811,757            592,502            163,838            258,032

Penalties .......................          636,500            540,000            270,002

Legal & Professional ............          321,909            336,597            414,308            393,877            541,031

Administrative Labor ............          141,100            111,300            135,529             88,475            122,089

Depreciation and
Amortization Expense ............          645,582          6,389,705          1,249,879          5,245,671          2,823,019

Warrant settlements .............                           1,758,000

Other G & A .....................        1,076,880          4,853,820            555,227            560,668            144,172
                                      ============       ============       ============       ============       ============

Total Expenses ..................        3,329,353         14,801,179          3,217,447          6,452,529          3,888,343

Other Income & Expenses .........         (260,253)          (279,248)          (967,004)            64,212             48,851

Extraordinary Item ..............                                                                       -0-            123,082
                                                                                               ============       ============
Net Loss ........................       (2,538,248)       (13,274,092)        (2,361,175)        (5,971,181)        (3,075,207)
                                      ============       ============       ============       ============       ============

Basic Loss per Common Share .....             (.04)             (0.25)             (0.07)             (0.19)             (0.12)
                                      ============       ============       ============       ============       ============

Weighted Ave. Shares
Outstanding .....................       65,006,780         52,566,109         33,653,953         31,133,813         26,252,631
                                      ============       ============       ============       ============       ============




BALANCE SHEET DATA

Cash & Cash Equivalents .........     $  1,318,588            923,831          1,344,513          1,196,566          3,214,205

Working Capital (deficit) .......       (4,443,590)        (3,267,255)        (1,939,587)          (592,850)           650,004
Total Assets ....................       16,493,866         16,434,452         17,649,578         15,814,790         20,864,635
                                      ============       ============       ============       ============       ============

Long Term Debt ..................        1,094,290          1,095,919          1,226,243            216,126            698,677

Stockholders Equity .............     $  9,535,016       $ 11,027,264       $ 12,955,628       $ 13,720,854       $ 14,929,139
                                      ============       ============       ============       ============       ============

</Table>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion of the historical financial condition and results of
operations should be read in conjunction with the "Summary Consolidated
Financial Data", the consolidated financial statements and related notes
contained in this report.

GENERAL STATEMENT OF ACTIVITIES AND METHOD OF ACCOUNTING

As of June 30, 2002, we were engaged in our principal activity of developmental
drilling of new wells and reworking operations on existing wells situated on our
Texas-based oil and gas leases situated in Fort Bend County, Texas. Our wholly
owned subsidiary, Hycarbex-American Energy, Inc., likewise held an oil and gas
exploration license on Yasin Concession

<Page>

near Jacobabad, Pakistan during the year on which we made preparations for
upcoming drilling activities, but performed no drilling.

The Company utilizes the full cost method of accounting for its oil and gas
properties. Under this method, all costs associated with the acquisition,
exploration and development of oil and gas properties are capitalized in a "full
cost pool". Costs included in the full cost pool are charged to operations as
depreciation, depletion and amortization using the units of production method
based on the ratio of current production to estimated proven reserves as defined
by regulations promulgated by the U.S. Securities and Exchange Commission. Gain
or loss on disposition of oil and gas properties is not recognized unless it
would materially alter the relationship between the capitalized costs and
estimated proved reserves. Disposition of properties are reflected in the full
cost pool. The full cost method of accounting limits the costs the Company may
capitalize by requiring the Company to recognize a valuation allowance to the
extent that capitalized costs of its oil and gas properties in its full cost
pool, net of accumulated depreciation, depletion and amortization and any
related deferred income taxes, exceed the future net revenues of proved oil and
gas reserves plus the lower of cost or estimated fair market value of
non-evaluation properties, net of federal income tax.

ADJUSTMENT TO FINANCIAL STATEMENTS FOR PRIOR PERIODS

In our financial statements for the periods ending June 30, 1999 and June 30,
2000, we capitalized the dry hole costs associated with the unsuccessful
drilling activities in Pakistan, rather than deducting them as an expense in the
year incurred, on the belief that the results of our domestic and international
activities could be viewed as a whole. Based upon applicable accounting
principles, the lack of proven reserves in Pakistan requires that Pakistan be
treated as a separate cost center and that the dry hole costs be expensed in the
year incurred. This adjustment affects the previously reported losses for the
period ending June 30, 1999 by increasing those losses by $5,216,832 from
$754,349 to the corrected figure $5,971,181, and affects the previously reported
losses for the period ending June 30, 2000 by decreasing those losses by
$9,922,073 from $12,283,248 to the corrected figure $2,361,175.

The large decrease in Other General and Administrative Expenses from $4,965,120
in the previous year to $1,217,980 for the current year is based largely upon
the 6,050,000 shares of Common Stock issued to members of management and
directors in November, 2000. The values attributed to these shares in the
Financial Statements for purposes of calculating this expense line items were
determined based upon the market value of the shares on the date of issue.

TEXAS GULF COAST OPERATIONS

As stated elsewhere in this report, we currently own and operate a total of 108
existing wellbores in two producing oil fields, the Blue Ridge Field and the
Boling Dome Field, each of which are within fifty (50) miles of the Houston,
Texas metropolitan area. Most of these existing wells were drilled by other oil
companies prior to the Company's acquisition of the properties and were inactive
at the time of such acquisition. During the fiscal year ended

<Page>

June 30, 2002, an average of thirty-three (33) of the Company's 108 wells were
producing daily with varying production ranging from 2 barrels per day to 55
barrels per day. A small number of these producing wells flow without mechanical
pumping but the majority require mechanical pumping assistance.

Once we regained control of the Texas-based oil and gas leases and equipment, we
elected to withdraw them from the sales market The Company's intent was to
workover, re-complete and drill new wells in these fields to generate funds for
future oil and gas exploration in the domestic U.S. We designed a program to
increase productivity but the targeted goals were not achieved because of a 25%
decline in the average per barrel price of oil from the previous year and
because of our failure to secure the necessary working capital to jump start the
designed program and make them self sufficient within the first six (6) months
of this current fiscal year. Since July 1, 2001, the Company has drilled only
two (2) new wells which were completed as producing wells.

The Company has not solved our working capital shortage as of the date of this
report which will substantially impair our ability to enhance domestic
production. We have implemented several cost saving measures including
decreasing total hours of field labor and activating our two saltwater disposal
wells to save costs associated with hauling and disposing of saltwater from
operations. Our most substantial cost saving measures have been the deferral of
salary by the three current management members, William Aber, Dean Smith and
Michael Zabransky. During the current fiscal year, Mr. Aber and Mr. Smith
received only one of twelve monthly salary checks and Mr. Zabransky received
only two of twelve monthly salary checks. Additionally, Zaber Investments,
L.L.C., which owns ten percent (10%) of the domestic production, did not receive
its share of production for the fiscal year totaling $64,000 and permitted the
Company to utilize these funds as working capital.

Despite these cost saving and cost deferral measures, we are likely to continue
to experience a decrease in production revenues unless and until substantial
working capital is secured for field development. Our domestic operating budget
for the coming fiscal year includes the drilling of 4 new wells, 20
recompletions and 24 workovers but we are not likely to achieve these budgetary
targets without a working capital infusion.

We believe that the we must continue to raise additional capital through outside
sources for this fiscal year for the reactivation and development programs to
progress, even if oil prices remain stable at a favorable level. As of the date
of this report, we do not have any commitments from third party sources for the
needed funding.

PAKISTAN OPERATIONS

In the fiscal year ended June 30, 2001 we shot an additional 40km of seismic
line in the vicinity of proposed drilling locations. Our technical team
evaluated this newly acquired seismic data, along with geological and
geophysical data derived from previously drilled wells to optimize the selection
of future drill sites on the approximate one million acres (fifteen hundred
square miles) comprising the Jacobabad concession. Based upon the preliminary
testing of the initial well drilled Kharnhak #1, in 1998, the geological

<Page>

information obtained while drilling the David #1 and 1A wells and the newly
acquired seismic data we selected the drill site for the Jacobabad #3 well.

The Jacobabad #3 well was drilled in Nov/Dec 2000 and plugged and abandoned as a
dry hole. Although Jacobabad 3 did not result in a commercial success, we have
demonstrated improved drilling and testing performance in this technically
challenging environment, and have acquired important additional data that was
used to further develop our geologic model of this portion of the Middle Indus
Basin. Soon after plugging the Jacobabad #3 well the concession was completely
reevaluated to determine areas on our Jacobabad Concession that had good
hydrocarbon potential.

For strategic reasons, we elected to release the Jacobabad Concession back to
the Pakistan government and nominate specific highly potential hydrocarbon areas
for bidding with the expectation of being awarded the desired acreage areas.
Subsequently we applied and bid for three (3) concessions closely associated
with the released Jacobabad Concession. In August 2001 we were officially
awarded the Yasin Concession (1211.68 sq. km) in the Sindh Province of Pakistan.
The Company applied for and was granted an additional 979.58 Square Kilometers
which was added to the Yasin Concession making it 2,191.26 Square Kilometers.
Our subsidiary Hycarbex American Energy, Inc., has committed USD $2,400,000.00
over the course of the next three years to explore and test this concession. At
least 100 km of new 2-D seismic will be shot, 150 km of older vintage 2-D data
will be evaluated, and one exploration well will be drilled to test the Sui Main
Limestone formation for potential gas. Hycarbex has $1.1 million on deposit in
Pakistan but must obtain additional funding from third party sources in order to
meet these commitments. The concession agreement contains deposit and funding
requirements, geophysical requirements, social program requirements and drilling
requirements which are all considered material requirements by the Government of
Pakistan and must be met in a timely fashion in order to maintain the
concession. In the event that we are unable to secure additional funding for
Hycarbex's proposed activities in Pakistan under the Concession agreement, the
Government of Pakistan may resort to its remedies for non-compliance, including
possible forfeiture of the concession and possible forfeiture of all funds on
deposit.

Hycarbex-American Energy Inc. has also bid and applied for two additional
Pakistan concessions in the area. The Bahadurpur Concession 211.62 sq. Km is
east of the Yasin Concession and north of Pakistan Petroleum Ltd. Block 22
Concession. The Miro Khan Concession (4764.87 sq. km.) is immediately to the
west of the Yasin Concession on the west flank of Hycarbex's prior Jacobabad
Concession.  We are currently reevaluating the concessions for these two (2)
blocks prior to finalizing contractual obligations.


<Page>

NEED FOR ADDITIONAL FUNDS

      The production derived from our Texas-based properties is insufficient to
meet our future capital requirements for both Texas and Pakistan operations. We
will need substantial near-term financing to meet our projected operating
capital requirements in both Texas and Pakistan. We do not currently have a line
of credit or other credit facility available to us to meet these cash
requirements. Our cash position is critical given the Concession requirements in
Pakistan and given future development requirements under certain of our Texas
oil and gas leases. The lack of sufficient capital to meet these requirement and
the recurring negative cash flows from operations have been considered by our
auditors in their opinion that there is doubt as to our ability to continue as
going concerns. We intend 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. 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 unsuccessful, the likely effects would be an ultimate
forfeiture of the Pakistan concession and a foreclosure of our Texas-based
leases by the first lien lender whose $1,500,000 note matured just prior to the
end of the third quarter. Even if this debt is addressed or action on it
delayed, the lack of substantial working capital will result in a slowdown or
postponement of scheduled reactivation and development activities on those Texas
properties.

RESULTS OF OPERATIONS

GLOSSARY

Bbl or Barrel: Forty-two (42) United States gallons liquid volume, usually used
herein in reference to crude oil or other liquid hydrocarbons.

BOE or Barrel of Oil Equivalent: Generally, the conversion of gas to oil at a
ratio of 6,000 cubic feet of gas to one Bbl of oil. Oil and gas are added
together for total BOE.

BOPD: Barrels of oil per day.

Developmental Well: A well which is drilled to and completed in a known
producing formation adjacent to a producing well in a previously discovered
field and in a stratigraphic horizon known to be productive.

Exploration: The search for economic deposits of minerals, petroleum and other
natural earth resources by any geological, geophysical, or geochemical
technique.

Exploratory Well: A well drilled either in search of a new, as-yet undiscovered
oil or gas reservoir or to greatly extend the known limits of a previously
discovered reservoir, as indicated by reasonable interpretation of available
data, with the objective of completing in that reservoir.

Field: A geographic area in which a number of oil or gas wells produce from a
continuous reservoir.

<Page>

Mcf: One thousand cubic feet of natural gas.

Net Acres or Net Wells: The sum of fractional working interests owned in gross
acres or gross wells. By way of example, a 50% working interest in 100 gross
acres is equivalent to 50 net acres.

Operator: The person or company actually operating an oil or gas well.

PV-10 Value: The present value, employing a 10% discount factor, of the future
net revenues computed using current prices from the production of proven
reserves.

REVENUES AND EXPENSES

In the fiscal year ended June 30, 2002, the Company incurred a net operating
loss of $2,538,248, with oil sales of $1,051,358 as compared to a net operating
loss of $13,274,092 on oil sales of $1,806,335 in the prior fiscal year ended
June 30, 2001, and as compared to a net operating loss of $2,361,175 on oil
sales of $1,823,276 in the fiscal year ended June 30, 2000.

This reflects a decrease in revenues for the year ended June 30, 2002 over the
year ended June 30, 2001 and 2000 of approximately forty-one percent (41%).

The decreases noted above resulted from the decreases in barrels of oil sold and
the sale of those barrels at prices which were significantly lower than those
received during fiscal 2001. The average price per barrel of oil sold by the
Company in the fiscal years ending June 30, 2001 and 2000 was $29.11 and 24.91,
respectively, as compared to $21.83 per barrel in the fiscal year ending June
30, 2002. The drop in average prices by twenty-five percent (25%) and the
reduction in available working capital resources for drilling of new wells and
reworking of existing wells are, taken together, directly responsible for the
forty one percent (41%) decrease in production revenues for the current year.

 Lease operating costs incurred during the years ended June 30, 2002, 2001, and
2000 were $507,382, $811,757, and $592,502 respectively.

Depreciation and amortization expense incurred during the years ended June 30,
2002, 2001, and 2000 was $645,582, $6,389,705, and $1,249,879 respectively. The
fluctuation in these accounts is a direct result of the drilling of dry holes
incurred in the Pakistan cost center which, upon dry hole determination, are
included in the amortization base of that cost center. As there are currently no
proven reserves in this cost center, the cost of these dry holes are immediately
written off.

<Page>

OTHER INCOME AND EXPENSES

Interest income earned during the years ended June 30, 2002, 2001, and 2000 was
$15,738, $15,466, and $5,850 respectively.

Interest expense incurred during the years ended June 30, 2002, 2001, and 2000
was $488,432, $229,887, and $123,800, respectively. The significant increase in
interest expense which began during the year ended June 30, 2001 is a direct
result of $1,500,000 note payable financing agreement entered into by the
Company during the year ended June 30, 2000.

During the year ended June 30, 2000 the Company incurred debt issue costs in the
amount of $846,992 of which $798,372 was related to the cost of warrants to the
Debtor.

NET INCOME

The Company, with the inclusion of other income, foreign and domestic
administrative expenses, asset impairment loss, and including interest, reported
a net loss of $2,538,248 in the fiscal year ended June 30, 2002, versus a net
loss of $13,274,092 in the prior fiscal year ended June 30, 2001 and a net loss
of $2,361,175 for the year ended June 30, 2000.

Total Assets/Shareholder's Equity

In the fiscal year ended June 30, 2002, Total Assets of the Company increased to
$16,493,866, In the year ended June 30, 2001, Total Assets were $16,434,452.

Net Shareholders Equity decreased to $9,535,016 as of June 30, 2002, from
$11,027,264 as of June 30, 2002.


The Company incurred certain long term convertible debt in the amount of
$1,500,000 in the quarter ended September 30, 1999, which debt is convertible at
the option of the holder at the rate of one Common share for each one dollar of
principal converted. A contractual provision within the lending documents
required the Company to initiate a registration with the Securities & Exchange
Commission of the underlying Common shares by December 16, 1999. The Company has
not complied with this registration requirement, triggering a financial penalty
of $45,000 per month beginning January 20, 2000, and continuing until such time
that the registration is accomplished. The Company has elected to pay the
penalty sum in common stock as permitted in the lending documents and will
continue to incur this monthly penalty until the registration is completed. Late
registration penalties equal to three percent (3%) per month of the stock
purchased, payable in cash or stock at our election, are also applicable to
certain private placement investors from the current fiscal year commencing 120
days after their respective acquisition dates.


<Page>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not have to trade in derivative financial instruments and we do not have
firmly committed sales transactions. We have not entered into hedging
arrangements and do not have any delivery commitments. While hedging
arrangements reduce exposure to losses as a result of unfavorable price changes,
they also limit the ability to benefit from favorable market price changes.

Our major market risk exposure is in the pricing applicable to our oil and
natural gas production. The prices realized are primarily driven by prevailing
domestic prices for crude oil. Historically, these prices have been volatile and
unpredictable. Pricing volatility is expected to continue. Oil prices we
received during the fiscal year ranged from a monthly low of $17.22 per barrel
to a monthly high of $25.40 per barrel. A significant decline in the price of
oil could have a material adverse effect on our financial condition and results
of operations.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements and supplementary financial data, which begins on page
F-1, are included elsewhere in this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.


PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Name                     Age      Position


        William M. Aber, Jr.     58       President, CEO and Chairman of the
                                          Board of Directors

        Dean C. Smith            55       Chief Financial Officer and
                                          Secretary

        George Sagredos          46       Director

        Iftikar Zahid                     Director


WILLIAM M. ABER, JR.
PRESIDENT, CEO AND CHAIRMAN OF THE BOARD OF DIRECTORS

William M. Aber, Jr. was appointed to the Board and as Vice President and Chief
Executive Officer on June 27, 2001. In January 2002, Mr. Aber was appointed
President and Chairman of the Board.  Mr. Aber is co-founder, President and
Chairman of the Board of several oil

<Page>

and gas related companies in Houston, Texas. He holds a Masters Degree in
physics from Sam Houston State University. He has previously worked for Getty
Oil Company and Strata Energy where he gained valuable domestic exploration
experience. Since 1987, Mr. Aber has been involved in oil and gas exploration
worldwide. Mr. Aber has served as an exploration advisor and consultant to
Hycarbex-American Energy, Inc. since 1997.

DEAN C. SMITH
CHIEF FINANCIAL OFFICER AND SECRETARY

Dean C. Smith was appointed Chief Financial Officer on June 27, 2001. In May
2002, Mr. Smith was appointed Secretary of the Company.  Mr. Smith is Treasurer
and sits on the Board of an oil and gas consulting firm and an oil and gas
investment group in Houston, Texas.  He completed his education at Centenary
College of Louisiana and Northwestern University of Louisiana.  He has been
actively involved in the oil and gas industry for 14 years.

SECTION 16(A) COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
officers to file periodic reports with the SEC reporting their direct and
indirect ownership and changes in ownership of our securities. To the best of
our knowledge, all Section 16(a) requirements have been complied with during the
year ending June 30, 2002.

ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation Table:

<Table>
<Caption>

ANNUAL COMPENSATION                          LONG TERM COMPENSATION
-------------------                          ----------------------
                                                        AWARDS                PAYOUTS
                                                        OTHER                 --------
NAMEE AND                                               ANNUAL                           SECURITIES
PRINCIPAL                                               COMPEN-       RESTRICTED          UNDERLYING       LTIP
POSITION           YEAR        SALARY(L)     BONUS      SATION          STOCK               AWARDS
----------        -------     -----------   -------   -----------    -------------      --------------    --------
               OPTIONS/SARS     PAYOUTS
               ------------    ---------
<S>                <C>       <C>              <C>         <C>             <C>                 <C>            <C>
W.M. Aber, Jr.     2002      $ 60,000.00     -0-         -0-             -0-                 -0-            -0-
CEO

Dean Smith         2002      $48,000.00      -0-         -0-             -0-                 -0-            -0-
CFO

Linda              2002      $33,100.00      -0-         -0-             -0-                 -0-            -0-
Gann*
Secretary

</Table>

Ms. Gann left the Company on April 30, 2002.


<Page>

NOTE:  The composition of management is currently the subject of litigation
in proceedings titled No. 2002-11247; Georg von Canal vs. The American
Energy Group, Ltd. and William Aber, 270th Judicial District Court, Harris
County, Texas. See Item 3-Legal Proceedings.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company has two classes of voting equity securities, Common and Convertible
Preferred, which are combined to accumulate the total voting shares of the
Company.

The following table sets forth certain information as of October 15, 2002, with
respect to the beneficial ownership of shares of common stock by (i) each person
who is known to the Company to beneficially own more than 5% of the outstanding
shares of common stock, (ii) each director of the Company, (iii) each executive
officer of the Company and (iv) all executive officers and directors of the
Company as a group. Unless otherwise indicated, each stockholder has sole voting
and investment power with respect to the shares shown.

                                             NUMBER       PERCENT
NAME                            TYPE       OF SHARES      OF CLASS

CURRENT OFFICERS AND DIRECTORS

William M. Aber               Common        908,910         1.5%

Dean C. Smith                 Common        401,250         0.7%

George Sagredos               Common        600,000         0.9%

Iftikar Zahid                 Common        255,000         0.3%

All current officers and
Directors as a group
(four persons)                Common      2,165,160         3.3%


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the year, we entered into a Purchase and Sale Agreement with Zaber
Investments, L.L.C. under which we sold a ten percent (10%) interest in the
Texas-based oil and gas leases and wells for $300,000. The proceeds of this sale
were utilized to pay the discounted loan settlement to Northern Lights Energy,
Ltd., so that we could regain control of operations from Northern Lights Energy,
Ltd. Zaber Investments, L.L.C. is controlled by William Aber and Michael
Zabransky. During the fiscal year, Zaber Investments, L.L.C. did not receive its
ten percent (10%) share of production aggregating $64,000 and permitted the
Company to use these proceeds for operating capital.

In January, 2002, we entered into an agreement with the WVZC Partnership, which
is comprised of Georg von Canal, Manfield Welser, Charles Valceschini and Hooman
Zadeh, to convert the partnership's note in the amount of $1,094,290 to
2,544,768 shares of stock, or a conversion rate of $0.43 per share. This
transaction was reversed and the note balance reinstated in April, 2002, in
order to make the 2,544,768 shares available for a proposed investment by Vivus
Beteilgungs Aktiengesellschaft which was scheduled to


<Page>

close in April. The Vivus investment transaction was not consummated by Vivus
and was subsequently cancelled.

PART IV

14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (A)   EXHIBITS
            The Financial Statement Schedules required herein are included as
            set forth as Exhibit A and beginning on page F-1

      (B)   (99) 99.1 WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF
            FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
            ACT OF 2002.

  None.


SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on October 14, 2002.


/s/William M. Aber, Jr.
President, Chairman of the Board

/s/Dean C. Smith
Chief Financial Officer



-------------------------------------------------------------------------------


<PAGE>






                        THE AMERICAN ENERGY GROUP, LTD.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001




                                       F-1

<PAGE>

                                 C O N T E N T S



Independent Auditors' Reports............................................... F-3

Consolidated Balance Sheets................................................. F-5

Consolidated Statements of Operations....................................... F-7

Consolidated Statements of Stockholders' Equity............................. F-8

Consolidated Statements of Cash Flows...................................... F-11

Notes to the Consolidated Financial Statements............................. F-13



                                       F-2

<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


To the Board of Directors and Shareholders of
The American Energy Group, Ltd. and Subsidiaries
Houston, Texas

We have audited the accompanying consolidated balance sheet of The American
Energy Group, Ltd. and Subsidiaries as of June 30, 2002 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended June 30, 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of The American Energy Group, Ltd. and
Subsidiaries as of June 30, 2001 and for the years ended June 30, 2001 and 2000
were audited by other auditors whose report, dated October 8, 2001, expressed an
unqualified opinion.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
American Energy Group, Ltd. and Subsidiaries as of June 30, 2002 and the
consolidated results of their operations and their cash flows for the year ended
June 30, 2002 in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Companies will continue as going concerns. As discussed in Note 1 to
the consolidated financial statements, the Companies has suffered recurring
losses to date, has negative cash flows from operations and have been placed
into involuntary bankruptcy. These factors raise substantial doubt about their
ability to continue as going concerns. Management's plans with regard to these
matters are also described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.


Chisholm & Associates
North Salt Lake, Utah
September 6, 2002


                                      F-3

<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


To the Board of Directors and Shareholders of
The American Energy Group, Ltd. and Subsidiaries
Houston, Texas

We have audited the accompanying consolidated balance sheet of The American
Energy Group, Ltd. and Subsidiaries as of June 30, 2001 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 2001 and 2000. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
American Energy Group, Ltd. and Subsidiaries as of June 30, 2001 and the
consolidated results of their operations and their cash flows for the years
ended June 30, 2001 and 2000, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company have suffered recurring losses to
date, have negative cash flows from operations and have been placed into
involuntary bankruptcy. These factors raise substantial doubt about its ability
to continue as a going concern. Management's plans with regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.


HJ & Associates, LLC
Salt Lake City, Utah
October 8, 2001


                                       F-4

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>

                                                                                          JUNE 30,
                                                                           -------------------------------------
                                                                                   2002                2001
                                                                           ------------------  -----------------
<S>                                                                       <C>                 <C>
CURRENT ASSETS
   Cash (Note 1)                                                           $          210,481  $         923,831
   Restricted cash (Note 1)                                                         1,108,107                  -
   Receivables                                                                         87,360            104,108
   Other current assets                                                                15,022             16,075
                                                                           ------------------  -----------------

     Total Current Assets                                                           1,420,970          1,044,014
                                                                           ------------------  -----------------

OIL AND GAS PROPERTIES USING
   FULL COST ACCOUNTING (Notes 1 and 2)

   Properties being amortized                                                      17,088,619         16,687,542
   Properties not subject to amortization                                                   -                  -

   Accumulated amortization                                                        (2,152,881)        (1,515,171)
                                                                           ------------------  -----------------

     Net Oil and Gas Properties                                                    14,935,738         15,172,371
                                                                           ------------------  -----------------

OTHER PROPERTY AND EQUIPMENT (Note 1)

   Drilling and related equipment                                                     405,564            387,267
   Vehicles                                                                           113,590            139,801
   Office equipment                                                                    52,835             52,835
   Accumulated depreciation                                                          (443,330)          (417,456)
                                                                           ------------------  -----------------

     Net Other Property and Equipment                                                 128,659            162,447
                                                                           ------------------  -----------------

OTHER ASSETS

   Debt issuance costs, net (Note 1)                                                        -             48,620

   Investments                                                                              8              1,900
   Deposits                                                                             8,491              5,100
                                                                           ------------------  -----------------

     Total Other Assets                                                                 8,499             55,620
                                                                           ------------------  -----------------

     TOTAL ASSETS                                                          $       16,493,866  $      16,434,452
                                                                           ==================  =================
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-5

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                     Consolidated Balance Sheets (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

<TABLE>
<CAPTION>

                                                                                          JUNE 30,
                                                                           -------------------------------------
                                                                                   2002                2001
                                                                           ------------------  -----------------
<S>                                                                       <C>                 <C>
CURRENT LIABILITIES

   Accounts payable                                                        $        1,065,971  $       1,729,235
   Accrued liabilities                                                                957,184            649,557
   Deposit payable (Note 2)                                                                 -            483,080
   Current portion of capital lease obligations (Note 4)                                1,405              1,280
   Current portion of notes payable and long-term
     debt (Note 3)                                                                  3,840,000          1,448,117
                                                                           ------------------  -----------------

     Total Current Liabilities                                                      5,864,560          4,311,269
                                                                           ------------------  -----------------

LONG-TERM LIABILITIES

   Notes payable and long-term debt (Note 3)                                        4,934,290          2,542,407
   Capital lease obligations (Note 4)                                                       -              1,629
   Less: Current portion of notes payable and long-term
     debt (Note 3)                                                                 (3,840,000)        (1,448,117)
                                                                           ------------------  -----------------

     Total Long-Term Liabilities                                                    1,094,290          1,095,919
                                                                           ------------------  -----------------

     Total Liabilities                                                              6,958,850          5,407,188
                                                                           ------------------  -----------------

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY (Notes 5, 6 and 7)

   Convertible voting preferred stock; par value $0.001 per share; authorized
    15,000,000 shares; 41,499 and 41,499 shares issued and outstanding,
    respectively                                                                           42                 42
   Common stock; par value $0.001 per share;
    authorized 80,000,000 shares; 66,318,037 and
    59,991,665 shares issued and outstanding,
    respectively                                                                       66,318             59,992
   Capital in excess of par value                                                  37,763,777         36,724,103
   Accumulated deficit                                                            (28,295,121)       (25,756,873)
                                                                           ------------------  -----------------

     Total Stockholders' Equity                                                     9,535,016         11,027,264
                                                                           ------------------  -----------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $       16,493,866  $      16,434,452
                                                                           ==================  =================
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-6

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      Consolidated Statements of Operations


<TABLE>
<CAPTION>

For the Years Ended

                                                                               JUNE 30,
                                                   ------------------------------------------------------------
                                                           2002                  2001                 2000
                                                   -------------------   -------------------   ----------------
<S>                                                <C>                   <C>                   <C>
REVENUE

   Oil and gas sales                               $        1,051,358    $       1,806,335     $      1,823,276
                                                   ------------------    -----------------     ----------------

     Total Revenue                                          1,051,358            1,806,335            1,823,276
                                                   ------------------    -----------------     ----------------

EXPENSES

   Lease operating and production costs                       507,382              811,757              592,502
   Penalties                                                  636,500              540,000              270,002
   Legal and professional                                     321,909              336,597              414,308
   Depreciation and amortization expense                      645,582            6,389,705            1,249,879
   Warrant settlements (Note 6)                                     -            1,758,000                    -
   Other general and administrative                         1,217,980            4,965,120              690,756
                                                   ------------------    -----------------     ----------------

     Total Expenses                                         3,329,353           14,801,179            3,217,447
                                                   ------------------    -----------------     ----------------

NET OPERATING LOSS                                         (2,277,995)         (12,994,844)          (1,394,171)
                                                   ------------------    -----------------     ----------------

OTHER INCOME (EXPENSES)

   Gain on settlement of debt (Note 2)                        255,902                    -                    -
   Interest income                                             15,738               15,466                5,850
   Interest expense                                          (488,432)            (229,887)            (123,800)
   Debt issuance costs                                        (48,620)             (64,827)            (846,992)
   Other income                                                     -                    -                1,480
   Gain (loss) on sale of assets                                5,159                    -               (3,542)
                                                   ------------------    -----------------     ----------------

     Total Other Income (Expenses)                           (260,253)            (279,248)            (967,004)
                                                   ------------------    -----------------     ----------------

NET LOSS                                           $       (2,538,248)   $     (13,274,092)    $     (2,361,175)
                                                   ==================    =================     ----------------

BASIC LOSS PER COMMON SHARE                        $            (0.04)   $           (0.25)    $          (0.07)
                                                   ==================    =================     ================

WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING                                        65,006,780           52,566,109            33,653,953
                                                   ==================    =================     ================
</TABLE>

       The accompanying notes are an integral part of these consolidated
                              financial statements.


                                       F-7

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                For the Years Ended June 30, 2002, 2001 and 2000

<TABLE>
<CAPTION>

                                                                            CONVERTIBLE VOTING
                                                 COMMON STOCK                PREFERRED STOCK
                                        -----------------------------  -----------------------------    EXCESS OF     ACCUMULATED
                                            SHARES          AMOUNT         SHARES          AMOUNT       PAR VALUE       DEFICIT
                                        --------------   ------------  --------------   ------------   -----------   -------------

<S>                                     <C>              <C>           <C>              <C>            <C>           <C>
Balance, June 30, 1999                      32,878,388   $     32,878         101,995   $        102   $23,809,480   $ (10,121,606)

Preferred stock issued for cash
   at $1.00 per share                                -              -         400,000            400       399,600               -

Common stock issued for cash
   at $0.75 per share                          133,334            134               -              -        99,866               -

Common stock issued upon
   conversion of preferred shares            1,702,500          1,702        (460,496)          (460)       (1,242)              -

Common stock issued in
   satisfaction of penalty fee at
   an average price of $0.46 per
   share (Note 3)                              583,659            584               -               -      269,418               -

Offering costs related to sale of
   preferred stock                                   -              -               -               -      (58,933)              -

Additional expense recorded upon
   granting of warrants                              -              -               -               -      884,880               -

Net (loss) for the year ended
   June 30, 2000                                     -              -               -               -            -      (2,361,175)
                                        --------------   ------------  --------------   ------------   -----------   -------------

Balance, June 30, 2000                      35,297,881         35,298          41,499              42   25,403,069     (12,482,781)
Common stock issued for cash
   and warrants at $0.30 per share          13,780,083         13,780               -               -    4,120,245               -

Common stock issued in
   satisfaction of penalty fee at
   an average price of $0.51 per
   share (Notes 3 and 6)                       711,740            712               -               -      359,288               -

Common stock issued upon
   retirement of warrants at $0.80
   per share (Note 6)                        2,197,500          2,197               -               -    1,755,803               -

Common stock issued to
   directors for services and
   expenses at an average price
   of $0.43 per share                        6,050,000          6,050               -               -    2,607,948               -

Common stock issued in
   conversion of debt at an
   average price of $0.40 per
   share                                     1,293,661          1,294               -               -      520,392               -

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-8

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                For the Years Ended June 30, 2002, 2001 and 2000
                                   (Continued)

<TABLE>
<CAPTION>

                                                                            CONVERTIBLE VOTING
                                                 COMMON STOCK                PREFERRED STOCK
                                        -----------------------------  -----------------------------    EXCESS OF     ACCUMULATED
                                            SHARES          AMOUNT         SHARES          AMOUNT       PAR VALUE       DEFICIT
                                        --------------   ------------  --------------   ------------   -----------   -------------

<S>                                     <C>              <C>           <C>              <C>            <C>           <C>
Common stock issued for
   services rendered at an average
   price of $0.43 per share                    457,500   $        457               -   $          -   $   198,143   $           -

Common stock issued in conversion
   of debt and services at $0.66
   per share                                 4,692,746          4,693               -              -     3,092,518               -

Common stock canceled pursuant
   to court decree (Note 6)                   (321,146)          (321)              -              -       235,321               -

Common stock repurchased and
   canceled (Note 6)                        (4,168,300)        (4,168)              -              -    (1,090,122)              -

Offering costs related to sale of
   common stock                                      -              -               -              -      (478,502)              -

Net (loss) for the year ended
   June 30, 2001                                     -              -               -              -             -     (13,274,092)
                                        --------------   ------------  --------------   ------------   -----------   -------------

Balance, June 30, 2001                      59,991,665         59,992          41,499             42    36,724,103     (25,756,873)

Common stock issued to officers for
   services rendered at an average price
   of $0.24 per share                          950,000            950               -              -       230,050               -

Common stock issued for services
  rendered at an average price of
  $0.20 per share                              250,000            250               -              -        49,750               -

Common stock re-issued for shares
   previously canceled in error at
   $0.00 per share                              40,750             41               -              -           (41)              -

Common stock issued in satisfaction
   of penalty fee at an average price
   of $0.17 per share (Notes 3 and 6)        4,085,622          4,085               -              -       670,915               -

Common stock issued as additional
   interest on a note payable at
   $0.25 per share                           1,000,000          1,000               -              -       249,000               -

Common stock issued in conversion of
   debt at $0.43 per share (Note 6)          2,544,768          2,545               -              -     1,091,745               -

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-9

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                For the Years Ended June 30, 2002, 2001 and 2000
                                   (Continued)

<TABLE>
<CAPTION>

                                                                            CONVERTIBLE VOTING
                                                 COMMON STOCK                PREFERRED STOCK
                                        -----------------------------  -----------------------------    EXCESS OF     ACCUMULATED
                                            SHARES          AMOUNT         SHARES          AMOUNT       PAR VALUE       DEFICIT
                                        --------------   ------------  --------------   ------------   -----------   -------------

<S>                                     <C>              <C>           <C>              <C>            <C>           <C>
Common stock issued in conversion of
   debt at $0.10 per share (Note 6)          6,400,000   $      6,400               -   $          -   $   633,600   $           -
Repurchase of common stock
   previously issued (Note 6)               (8,944,768)        (8,945)              -              -    (1,885,345)              -

Net (loss) for the year ended
   June 30, 2002                                     -              -               -              -             -      (2,538,248)
                                        --------------   ------------  --------------   ------------   -----------   -------------

Balance, June 30, 2002                      66,318,037   $     66,318          41,499   $         42   $37,763,777    $(28,295,121)
                                        ==============   ============  ==============   ============   ===========    ============
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-10

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                  FOR THE YEARS ENDED
                                                                                       JUNE 30,
                                                            -------------------------------------------------------------
                                                                   2002                  2001                  2000
                                                            -----------------     -----------------     -----------------
<S>                                                         <C>                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES

   Net loss                                                 $      (2,538,248)    $     (13,274,092)    $      (2,361,175)
   Adjustments to reconcile net loss to net cash
    provided (used) by operating activities:
     Depreciation and amortization                                    686,685             6,436,152             1,300,997
     Less amount capitalized to oil and gas properties                (41,103)              (46,447)              (51,118)
     Common stock issued for services rendered                        281,000             5,909,809                     -
     Common stock issued for penalty fee                              540,000                     -                     -
     Common stock issued for retirement of warrants                         -             1,758,000                     -
     Common stock issued for interest                                 250,000                     -                     -
     Amortization of note payable discount                            120,000               174,843                     -
     (Gain) loss on sale of asset                                      (7,051)                    -                 3,542
     Additional expense for warrants                                        -                     -               884,880
     (Gain) loss on investment                                          1,892                     -               (1,480)
     Gain on settlement of debt                                      (255,902)                    -
   Changes in operating assets and liabilities:
     (Increase) decrease in receivables                                16,748                59,839               (90,781)
     (Increase) decrease in receivables-related party                       -                     -                 1,626
     (Increase) decrease in other current assets                        1,053                 3,585                (6,058)
     (Increase) decrease in other assets                               48,620                64,827              (113,447)
     (Increase) decrease in deposits                                   (3,391)                    -                     -
     Increase (decrease) in accounts payable                         (643,559)              963,584               (11,815)
     Increase (decrease) in accrued liabilities and
      other current liabilities                                       157,627              (264,692)            1,567,725
                                                            -----------------     -----------------     -----------------

       Net Cash Provided (Used) by Operating Activities            (1,385,629)            1,785,408             1,122,896
                                                            -----------------     -----------------     -----------------

CASH FLOWS FROM INVESTING ACTIVITIES

   Sale of assets                                                     295,000                     -                10,000
   Expenditures for oil and gas property development                 (644,974)           (5,717,022)           (2,730,795)
   Expenditures for other property and equipment                      (18,136)               (2,589)               (9,327)
                                                            -----------------     -----------------     -----------------

       Net Cash (Used) by Investing Activities                       (368,110)           (5,719,611)           (2,730,122)
                                                            -----------------     -----------------     -----------------

CASH FLOWS FROM FINANCING ACTIVITIES

   Proceeds from notes payable and long-term
    liabilities                                                     2,150,000                   -               1,740,000

   Proceeds from issuance of preferred and
    common stock                                                          -               4,134,025               500,000

   Expenditures for offering costs                                        -                (478,502)              (58,933)

   Payments on notes payable and long-term
    liabilities                                                        (1,504)             (142,002)             (425,894)
                                                            -----------------     -----------------     -----------------

       Net Cash Provided by Financing Activities                    2,148,496             3,513,521             1,755,173
                                                            -----------------     -----------------     -----------------

NET INCREASE (DECREASE) IN CASH                                       394,757              (420,682)              147,947

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR                                                              923,831             1,344,513             1,196,566
                                                            -----------------     -----------------     -----------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                    $       1,318,588     $         923,831     $       1,344,513
                                                            =================     =================     =================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-11

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Continued)

<TABLE>
<CAPTION>

                                                                                  FOR THE YEARS ENDED
                                                                                       JUNE 30,
                                                            -------------------------------------------------------------
                                                                   2002                  2001                  2000
                                                            -----------------     -----------------     -----------------
<S>                                                         <C>                   <C>                   <C>
CASH PAID FOR:

   Interest                                                 $          14,095     $           9,601     $           3,800
   Income taxes                                             $               -     $               -                     -

NON-CASH FINANCING ACTIVITIES:

   Common stock issued to retire notes payable,
     accounts payable and accrued liabilities               $               -     $         756,686     $               -
   Notes payable and capital lease obligations
     for acquisition of other property and equipment        $               -     $           3,901     $               -
   Common stock issued in satisfaction of accrued
     penalty fees                                           $         135,000     $         360,000     $         270,002
   Common stock issued for services rendered                $         260,000     $       5,909,809     $               -
   Common stock repurchased for note payable                $         160,000     $       1,094,290     $               -

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-12

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              a. Organization

              The American Energy Group, Ltd. (the Company) was incorporated in
              the State of Nevada on July 21, 1987 as Dimension Industries, Inc.
              Since incorporation, the Company has had several name changes
              including DIM, Inc. and Belize-American Corp. Internationale with
              the name change to The American Energy Group, Ltd. effective
              November 18, 1994.

              Effective September 30, 1994, the Company entered into an
              agreement to acquire all of the issued and outstanding common
              stock of Simmons Oil Company, Inc. (Simmons), a Texas Corporation,
              in exchange for the issuance of certain convertible voting
              preferred stock (see Note 5). The acquisition included wholly
              owned subsidiaries of Simmons, Sequoia Operating Company, Inc. and
              Simmons Drilling Company, Inc. The acquisition was recorded at the
              net book value of Simmons of $1,044,149 which approximates fair
              value.

              During the year ended June 30, 1995, the Company incorporated
              additional subsidiaries including American Energy-Deckers Prairie,
              Inc., The American Energy Operating Corp., Tomball American
              Energy, Inc., Cypress-American Energy, Inc., Dayton North
              Field-American Energy, Inc. and Nash Dome Field-American Energy,
              Inc. In addition, in May 1995, the Company acquired all of the
              issued and outstanding common stock of Hycarbex, Inc. (Hycarbex),
              a Texas corporation, in exchange for 120,000 shares of common
              stock of the Company, a 1% overriding royalty on the Pakistan
              Project (see Note 2) and a future $200,000 production payment if
              certain conditions are met. The acquisition was accounted for as a
              pooling-of-interests on the date of the acquisition. The fair
              value of the assets and liabilities assumed approximated the fair
              value of the 120,000 shares issued of $60,000 as of the date of
              the acquisition. Accordingly, book value of the assets and
              liabilities assumed was $60,000. In April 1995, the name of that
              company was changed to Hycarbex-American Energy, Inc. All of these
              companies are collectively referred to as "the Companies".

              The American Energy Group, Ltd., The American Energy Operating
              Corp. and Hycarbex-American Energy, Inc. are the only operating
              entities at June 30, 2002. Management is likely going to pursue
              dissolution of the remaining subsidiary companies in the near
              future since most of the existing charters on these subsidiaries
              have now been revoked.

              The Company and its subsidiaries (the Companies) are principally
              in the business of acquisition, exploration, development and
              production of oil and gas properties.

              b.  Going Concern

              The accompanying consolidated financial statements have been
              prepared assuming the Companies will continue as going concerns.
              The Companies have experienced recurring losses and negative cash
              flows from operations. As discussed in Note 8, the Companies have
              been placed into involuntary bankruptcy by three creditors.
              Management of the Companies is vigorously trying to reverse the
              order but the trial has been postponed until February 2003. These
              factors raise substantial doubt about the Companies' ability to
              continue as going concerns.

                                      F-13

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              b.  Going Concern (Continued)

              The recovery of assets and continuation of future operations are
              dependent upon the Companies' ability to obtain additional debt or
              equity financing, and their ability to generate revenues
              sufficient to continue pursuing their business purpose. Management
              is actively pursuing additional equity and debt financing sources
              to finance future operations and anticipates a significant
              increase in production and revenues from oil and gas production
              during the coming year only if significant additional financing
              can be procured in the near term. It is also uncertain as to the
              outcome of the involuntary bankruptcy. Until the involuntary
              bankruptcy is resolved, no adjustment to the consolidated
              financial statements has been recorded.

              c. Accounting Methods

              The Companies' consolidated financial statements are prepared
              using the accrual method of accounting. The Companies' have
              elected a June 30 year-end.

              Oil and Gas Properties-

              The full cost method is used in accounting for oil and gas
              properties. Accordingly, all costs associated with acquisition,
              exploration, and development of oil and gas reserves, including
              directly related overhead costs, are capitalized. In addition,
              depreciation on property and equipment used in oil and gas
              exploration and interest costs incurred with respect to financing
              oil and gas acquisition, exploration and development activities
              are capitalized in accordance with full cost accounting.
              Capitalized interest for the years ended June 30, 2002 and 2001
              was $0 and $10,000, respectively. In addition, depreciation
              capitalized during the years ended June 30, 2002 and 2001 totaled
              $41,103 and $46,447, respectively. All capitalized costs of proved
              oil and gas properties subject to amortization are being amortized
              on the unit-of-production method using estimates of proved
              reserves. Investments in unproved properties and major development
              projects not subject to amortization are not amortized until
              proved reserves associated with the projects can be determined or
              until impairment occurs. If the results of an assessment indicate
              that the properties are impaired, the amount of the impairment is
              added to the capitalized costs to be amortized. As of June 30,
              2002, proved oil and gas reserves had been identified on some of
              the Companies oil and gas properties with revenues generated and
              barrels of oil produced from those properties. Accordingly,
              amortization totaling $637,710 and $6,372,414 has been recognized
              in the accompanying consolidated financial statements for the
              years ended June 30, 2002 and 2001, respectively, on proved and
              impaired or abandoned oil and gas properties.

                                      F-14

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              d. Principles of Consolidation

              The consolidated financial statements include the Company and its
              wholly-owned subsidiaries as detailed previously. All significant
              intercompany accounts and transactions have been eliminated in
              consolidation.

              e. Cash Equivalents

              The Company considers all highly liquid investments with a
              maturity of three months or less when purchased to be cash
              equivalents.

              f. Property and Equipment and Depreciation

              Property and equipment are stated at cost. Depreciation on
              drilling and related equipment, vehicles and office equipment is
              provided using the straight-line method over expected useful lives
              of five to seven years. For the years ended June 30, 2002, 2001
              and 2000, the Companies incurred total depreciation of $48,975,
              $63,738 and $77,831, respectively.

              In accordance with full cost accounting, $41,103, $46,447 and
              $51,118 of depreciation was capitalized as costs of oil and gas
              properties for the years ended June 30, 2002, 2001 and 2000,
              respectively, as previously discussed.

              g. Basic Loss Per Share of Common Stock

<TABLE>
<CAPTION>

                                                   FOR THE YEARS ENDED
                                                         JUNE 30,
                                            -----------------------------------
                                                  2002               2001
                                            ----------------   ----------------

              <S>                           <C>                <C>
              Loss (numerator)              $     (2,538,248)  $    (13,274,092)

              Shares (denominator)                65,006,780         52,566,109
                                            ----------------   ----------------

              Per share amount              $          (0.04)  $          (0.25)
                                            ================   ================

</TABLE>

              The basic loss per share of common stock is based on the weighted
              average number of shares issued and outstanding during the period
              of the consolidated financial statements. Stock warrants and
              preferred shares prior to conversion are not included in the basic
              calculation because their inclusion would be antidilutive, thereby
              reducing the net loss per common share.

                                      F-15

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              h. Concentrations of Risk

              From time to time, the cash balances in the Companies U.S. bank
              accounts exceed Federally insured limits. In addition, the Company
              had balances held in Pakistan banks that are not federally
              insured. The balances of $1,240,282 and $833,098 as of June 30,
              2002 and 2001, respectively, held in Pakistan are subject to
              potential risks based on government intervention.

              i. Foreign Operations

              A significant portion of the operations of the Companies relate to
              an oil and gas concession located in the country of Pakistan (see
              Note 2). Pakistan has experienced recently, or are experiencing
              currently, economic or political instability. Hyperinflation,
              volatile exchange rates and rapid political and legal change,
              often accompanied by military insurrection, have been common in
              these and certain other merging markets in which the Companies are
              conducting operations. The Companies may be materially adversely
              affected by possible political or economic instability in
              Pakistan. The risks include, but are not limited to terrorism,
              military repression, expropriation, changing fiscal regimes,
              extreme fluctuations in currency exchange rates, high rates of
              inflation and the absence of industrial and economic
              infrastructure. Changes in drilling or investment policies or
              shifts in the prevailing political climate in Pakistan could
              adversely affect the Companies business. Operations may be
              affected in varying degrees by government regulations with respect
              to production restrictions, price controls, export controls,
              income and other taxes, expropriation of property, maintenance of
              claims, environmental legislation, labor, welfare benefit
              policies, land use, land claims of local residents, water use and
              well safety. The effect of these factors cannot be accurately
              predicted.

              j. Use of Estimates

              The preparation of financial statements in conformity with
              generally accepted accounting principles requires management to
              make estimates and assumptions that affect the reported amounts of
              assets and liabilities and disclosure of contingent assets and
              liabilities at the date of the financial statements and the
              reported amounts of revenues and expenses during the reporting
              period. Actual results could differ from those estimates.

                                      F-16

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              k.  Debt Issuance Costs

              In connection with the receipt of a $1,100,000 note payable, the
              Company incurred costs of $162,067. The Company capitalized these
              costs and amortized these costs over the term of the note payable
              (2.5 years) as follows:

<TABLE>
<CAPTION>

                                                         JUNE 30,
                                            -----------------------------------
                                                  2002              2001
                                            ----------------   ----------------
              <S>                           <C>                <C>
              Total costs incurred          $        162,067   $        162,067

              Accumulated amortization              (162,067)          (113,447)
                                            ----------------   ----------------

              Net Debt Issuance Costs       $              -   $         48,620
                                            ================   ================

</TABLE>

              l.  Long Lived Assets

              All long lived assets are evaluated for impairment per SFAS 144
              whenever events or changes in circumstances indicate that the
              carrying value of an asset may not be recoverable. Any impairment
              in value is recognized as an expense in the period when the
              impairment occurs.

              In addition, pursuant to the full cost method used in accounting
              for oil and gas properties, the capitalized oil and gas property
              costs are subject to the full cost ceiling test to determine if
              the value of proved reserves and other mineral assets in the
              respective cost center are adequate to recover the unamortized
              costs in the full cost pool. If the Company determines that the
              capitalized costs exceed the full cost ceiling, the excess is
              charged to expense and separately disclosed during the year in
              which the excess occurs.

              m.  Recent Accounting Pronouncements

              In July 2001, the Financial Accounting Standards Board issued
              Statement No. 141 ("SFAS 141"), entitled "Business Combinations"
              and Statement No. 142 ("SFAS 142"), "Goodwill and Other Intangible
              Assets." SFAS 141 is effective as follows: (a) use of the
              pooling-of-interest method is prohibited for business combinations
              initiated after June 30, 2001; and (b) the provisions of SFAS 141
              also apply to all business combinations accounted for by the
              purchase method that are completed after June 30, 2001. There are
              also transition provisions that apply to business combinations
              completed before July 1, 2001 that were accounted for by the
              purchase method. SFAS 142 is effective for fiscal years beginning
              after December 31, 2001 and provides new guidance regarding the
              recognition and measurement of intangible assets, eliminates the
              amortization of certain intangibles and requires annual
              assessments for impairment of intangible assets that are not
              subject to amortization. An initial impairment analysis is
              required as of the date of adoption and any resulting impairment
              loss is recognized as the effect of a change in accounting
              principle.

                                      F-17

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              m.  Recent Accounting Pronouncements (Continued)

              In August 2001, the Financial Accounting Standards Board issued
              Statement No. 143 ("SFAS 143"), "Accounting for Obligations
              Associated with the Retirement of Long-Lived Assets." The
              objectives of SFAS 143 are to establish accounting standards for
              the recognition and measurement of an asset retirement obligation
              and its associated asset retirement cost. SFAS 143 is effective
              for fiscal years beginning after June 15, 2002. In October 2001,
              the Financial Accounting Standards Board issued Statement No. 144
              ("SFAS 144"), "Accounting for the Impairment or Disposal of
              Long-Lived Assets." SFAS 144 addresses financial accounting and
              reporting for the impairment or disposal of long-lived assets.
              SFAS 144 is effective for fiscal years beginning after December
              31, 2001 and generally, is to be applied prospectively.

              In April 2002, the Financial Accounting Standards Board issued
              Statement No. 145 ("SFAS 145"), "Rescission of FASB Statements
              Nos. 4, 44 and 64 and Amendment of FASB Statement No. 13." SFAS
              145 addresses the presentation for losses on early retirements of
              debt in the statement of operations. Adoption of SFAS 145 had no
              impact on the Company's financial condition or cash flow.

              In June 2002, the Financial Accounting Standards Board issued
              Statement No. 146 (SFAS 146"), "Accounting for Cost Associated
              with Exit or Disposal Activities for Certain Employee Termination
              Benefits." The provisions of SFAS 146 became effective for exit or
              disposal activities commenced subsequent to December 31, 2002.

              n.  Equity Securities

              Equity securities issued for services rendered have been accounted
              for at the fair market value of the securities on the date of
              issuance.

              o.  Restricted Cash

              The Company is required under the concession agreement discussed
              in Note 2 to commit $2,400,000 over the next three years to
              explore and test the concession. As of June 30, 2002, $1,108,107
              was on deposit with the bank in Pakistan that is to be used for
              these purposes, which was classified as restricted cash in the
              accompanying consolidated balance sheet as of June 30, 2002.

                                      F-18

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              p.  Income Taxes

              At June 30, 2002, the Companies had net operating loss
              carryforwards of approximately $36,000,000 that may be offset
              against future taxable income from the year 2003 through 2022. No
              tax benefit has been reported in the June 30, 2002 consolidated
              financial statements since the potential tax benefit is offset by
              a valuation allowance of the same amount.

              The income tax benefit differs from the amount computed at federal
              statutory rates of approximately 38% as follows:

<TABLE>
<CAPTION>

                                                                                     FOR THE YEARS ENDED
                                                                                           JUNE 30,
                                                                            --------------------------------------
                                                                                     2002               2001
                                                                            ------------------  ------------------
              <S>                                                           <C>                 <C>
              Income tax benefit at statutory rate                          $          608,000  $        1,925,000
              Change in valuation allowance                                           (608,000)         (1,925,000)
                                                                            ------------------  ------------------

                                                                            $                -  $                -
                                                                            ==================  ==================
</TABLE>


              Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>

                                                                                    FOR THE YEARS ENDED
                                                                                           JUNE 30,
                                                                            --------------------------------------
                                                                                     2002               2001
                                                                            ------------------  ------------------
              <S>                                                           <C>                 <C>
              Income tax benefit at statutory rate                          $       13,680,000  $       13,072,000
              Valuation allowance                                                  (13,680,000)        (13,072,000)
                                                                            ------------------  ------------------

                                                                            $                -  $                -
                                                                            ==================  ==================
</TABLE>

              Due to the change in ownership provisions of the Tax Reform Act of
              1986, net operating loss carryforwards for Federal income tax
              reporting purposes are subject to annual limitations. Should a
              change in ownership occur, net operating loss carryforwards may be
              limited as to use in future years.

                                      F-19

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 2 -      OIL AND GAS PROPERTIES

              At the time the Company acquired Simmons Oil Company, Inc. and its
              subsidiaries, those companies had ownership interests in oil and
              gas prospects located in Texas. These properties contained oil and
              gas leases on which existing wells had been shut-in and abandoned
              and had additional sites available for further exploration and
              development. During the years ended June 30, 2002 and 2001, the
              Companies expended funds in exploration and development activities
              and work over of existing wells on those properties and other oil
              and gas properties acquired during those years.

              On March 10, 1995, American Energy - Deckers Prairie, Inc., a
              wholly-owned subsidiary of the Company, entered into an agreement
              with an unrelated entity to accept the transfer of all rights,
              title and interest to certain oil and gas leases located in the
              State of Texas along with all personal property and equipment
              located on and used in connection with those leases. In exchange,
              American Energy - Deckers Prairie, Inc. assumed all contractual
              covenants related to those oil and gas leases. The selling entity
              had previously sold working interests in these oil and gas leases
              totaling from 33% to 48% depending on the property.

              As part of the acquisition agreement, American Energy - Deckers
              Prairie, Inc. agreed to purchase the working interests from the
              individual holders for the amount of their original investment
              plus interest at 7% from the date of their investment, evidenced
              by a "Drilling Investor Note" to each investor, due and payable on
              September 15, 1995. Each working interest holder has the option to
              retain his working interest or sell it to American Energy -
              Deckers Prairie, Inc.

              At June 30, 1997, the Companies had been unable to satisfy this
              obligation and the financial guaranty bond securing the payment of
              the Drilling Investor Notes had not been enforced, although the
              Companies intended to satisfy this obligation. Most of the
              obligation was settled during the year ended June 30, 1998 by
              issuing 140,383 shares of common stock valued at $325,278.
              Accordingly, the value of the acquisition of these working
              interest has been included in the accompanying consolidated
              financial statements as part of the cost of oil and gas
              properties. The remaining liability of $38,117 was written off
              during the year ended June 30, 2002 and recorded as a gain on
              settlement of debt.

              On April 6, 1995, Hycarbex entered into a concession agreement
              with and was issued an exploration license by the President and
              the Federal Government of the Islamic Republic of Pakistan. This
              agreement and license related to an oil and gas property known as
              the "Jacobabad Block" (Block 2768-4) or the Pakistan concession
              and entitled Hycarbex to a 95% working interest in the property.
              The exploration license was originally issued for a period of
              three years which was subsequently extended for an additional
              year. During the first year Hycarbex expended the minimum required
              $26,000 for processing and interpreting data already available. In
              the second year which was included in the year ended June 30,
              1997, Hycarbex performed the minimum seismic work, evaluating and
              interpreting the data from the work performed. As part of the
              agreement, Hycarbex was to drill one exploratory well prior to
              April 1998 to an agreed upon depth. During May 1998, the Company
              obtained preliminary results of its

                                      F-20

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 2 -      OIL AND GAS PROPERTIES (Continued)

              first Middle Indus Basin exploratory well in Pakistan. The well
              was spudded during March 1998 and was drilled to total depth
              during May 1998. A second exploratory well was drilled during the
              year ended June 30, 1999. This well was subsequently plugged
              because of encountered downhole and mechanical conditions short of
              the target depth. As a result, the well bore was plugged and the
              drill site moved. A replacement well was spudded on April 5, 1999
              which also was plugged due to encountering a combination of
              dangerous levels of hydrogen sulfide gas and loss of circulation
              while drilling and testing the well. The well was plugged to
              prevent possible further release of dangerous gas. The Company
              intended to pursue further plans for the drilling of another
              exploratory well upon completion of geological and geophysical
              analysis of the test results. Having completed its three years of
              work requirements and initial license term, the Company, per the
              provisions of the original exploration license, relinquished 20%
              of the acreage originally held under the concession, thereby
              retaining approximately one million acres for further exploration
              and development.

              The concession agreement also required Hycarbex to provide a bank
              guaranty for $551,000 which was done by an unrelated surety
              company. That surety company received common stock of the Company
              as compensation for providing the bond.

              Effective May 29, 1999, the Government of Pakistan granted an
              additional six-month extension in the existing terms of the
              Jacobabad Exploration License so as to enable the Company to drill
              a substitute well for the previously abandoned wells with a
              commitment and obligation to expend an additional $1,100,000. The
              Company was granted a second renewal of the license to November
              28, 2000 to drill an exploration well. This second renewal period
              was dependent on the Company fulfilling its obligations of
              drilling the replacement well. The Companies were unable to comply
              with the requirements of the extension for the replacement well.
              Accordingly, the Jacobabad Concession was relinquished during the
              year ended June 30, 2001. All costs related to the relinquished
              Jacobabad Concession were fully amortized as of June 30, 2001 and
              written off.

              On August 11, 2001, the Companies were awarded a new Concession
              Agreement and Exploratory License in Pakistan known as the Yasin
              Concession, in the Sindh Providence of Pakistan. The Company has
              committed $2,400,000 over the next three years to explore and test
              the concession. The Jacobabad Concession was released to the
              Pakistan government in favor of the newly awarded concession.

              In May 1997, the Companies entered into an agreement to acquire
              certain oil and gas properties and equipment in the state of Texas
              for a total of $1,000,000 from an unrelated party. $75,000 cash
              was paid with the balance of $925,000 to be paid over a maximum of
              four years with a minimum of $175,000 the first year and $250,000
              per year thereafter until paid in full (see Note 3). This
              liability may be paid during each year in the form of $10,000 per
              drill site and certain royalty payments.

                                      F-21

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 2 -      OIL AND GAS PROPERTIES (Continued)

              During the year ended June 30, 1997, the Companies received
              $800,000 as a joint venture investment in certain of the Companies
              oil and gas properties. In June 1997, the Companies entered into
              agreements representing $500,000 of the joint venture investors to
              repurchase their interests for a total of 250,000 shares of common
              stock and notes payable totaling $389,000 (see Notes 6 and 3,
              respectively). During the year ended June 30, 1998, the Companies
              acquired the remaining $300,000 joint venture interest for 150,000
              shares of common stock (valued at $1.50 per share) and a note
              payable of $121,564 with additional payments made to that
              individual prior to the consummation of that transaction.

              On May 9, 2000, the Companies entered into an Asset and Stock
              Purchase and Sale Agreement with Northern Lights Energy, Ltd.
              (Northern Lights) to sell the U.S. oil, gas and mineral leases,
              all related equipment to operate such leases, and 100% of the
              outstanding stock of the operating subsidiary, The American Energy
              Operating Corp., for a total of $4,000,000. As of June 30, 2000, a
              total of $750,000 of the $4,000,000 had been received by the
              Company which was originally recorded in the accompanying
              consolidated balance sheet as a deposit on the sale of assets.
              Northern Lights was unable to pay the remaining $3,250,000
              pursuant to the agreement. Effective July 1, 2001, Northern Lights
              relinquished its purchase rights in the U.S. operations. During
              the year ended June 30, 2001, the Companies had repaid a portion
              of the $750,000 advance through royalty payments to Northern
              Lights, leaving a balance outstanding at June 30, 2001 of
              $483,080. On July 1, 2001, the Company finalized its settlement
              with Northern Lights Energy, Ltd. and Northern Lights relinquished
              its purchase rights in the U.S. operations. Northern Lights also
              accepted a negotiated sum of $285,000 as full payment of the
              remaining deposit owed resulting in a gain on settlement of debt
              of $198,080 for the year ended June 30, 2002.

              During the year ended June 30, 2002, the Company entered into a
              Purchase and Sale Agreement with Zaber Investments, LLC, a company
              controlled by an officer of the Company, to sell a 10% interest in
              certain operating wells and assets in the United States for
              $300,000. The proceeds of this agreement were used to make the
              settlement payment to Northern Lights, as mentioned above.

                                      F-22

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 3 -      NOTES PAYABLE AND LONG-TERM DEBT

              The following is a summary of notes payable and long-term debt as
              of June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                    2002              2001
                                                                                -------------    -------------

<S>                                                                             <C>              <C>
              10% note payable, due on demand, unsecured                        $      50,000    $           -

              Note payable to Company's former President,
               non-interest bearing, due on demand, unsecured.                         30,000           30,000

              Original issue discount note payable with a face value of
               $1,500,000 bearing no interest, originally due March 17, 2002,
               past due, secured by certain
               oil and gas properties (see note below)                              1,500,000        1,500,000

              Note payable to a partner in a related company, non-
               interest bearing, due January 2003, unsecured                        1,360,000                -

              7% note payable to a Director of the Company, due
               January 2003, unsecured                                                775,000                -

              10% note payable to an officer of the Company, due
               on demand, unsecured                                                    75,000                -

              10% note payable to an officer of the Company, due
               on demand, unsecured                                                    50,000                -

              Convertible subordinated promissory note due to a related company,
               interest at 6% per annum due annually on January 1, principal due
               April 30, 2011, convertible into shares of common stock at $0.43
               per share, prepayment premiums of 1) 8% of principal balance if
               paid between 2nd and 5th anniversary date, 2) 5% of principal
               balance if paid between 6th and 8th anniversary date and 3) 2% of
               principal balance if paid after the 8th
               anniversary date.                                                    1,094,290        1,094,290

              7% notes payable, due September 15, 1995,
               secured by working interest in oil and gas properties                        -           38,117
                                                                                -------------    -------------

              Total notes payable and long-term debt                                4,934,290        2,662,407

              Less: unamortized discount                                                    -         (120,000)
                                                                                -------------    -------------

              Net notes payable and long-term debt                                  4,934,290        2,542,407
              Less: current portion                                                (3,840,000)      (1,448,117)
                                                                                -------------    -------------
              Long-Term Debt                                                    $   1,094,290    $   1,094,290
                                                                                =============    =============

</TABLE>

                                      F-23

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 3 -      NOTES PAYABLE AND LONG-TERM DEBT (Continued)

              In connection with the $1,500,000 note payable, the Company
              originally agreed to arrange third party escrow of 2,000,000
              free-trading shares of common stock to secure the Company's
              covenant to register the stock. If the shares were not registered
              within 90 days, the Company further agreed to pay a penalty of 3%
              of the face value of the note, in either common stock or cash for
              each full month the Registration Statement is not declared
              effective. Accordingly, the Company issued 4,085,622 and 711,740
              shares of common stock valued at $675,000 and $360,000 as a result
              of this penalty fee for the years ended June 30, 2002 and 2001,
              respectively.

              On March 17, 2002, the outstanding $1,500,000 loan secured by a
              first lien on the Texas oil and gas leases matured. Negotiations
              to restructure the debt were conducted by management with the note
              holder, but the negotiations were unsuccessful in obtaining a
              long-term extension and renewal of the note. The note holder
              initiated legal proceedings to obtain foreclosure of the
              Texas-based oil and gas leases but the foreclosure did not go
              forward because on June 28, 2002, three other alleged creditors of
              the Company filed an Involuntary Petition for Bankruptcy. The
              bankruptcy proceedings had the effect of automatically preventing
              a foreclosure unless and until the Bankruptcy Court issues an
              order permitting the creditor to pursue its remedies under State
              law.

              On August 12, 2002, the Companies and the note holder entered into
              an agreement to forego foreclosure proceeding on the properties,
              conditional upon the note holder receiving certain prescribed
              payments thru October 2002. If the $1,500,000 is not paid by
              November 10, 2002, the note holder has the right to pursue all of
              his legal remedies with respect to the property in order to
              receive the full $1,500,000. The outcome of this proceeding is
              currently unknown.

              The following are the scheduled annual repayments of notes payable
              and long-term debt:

<TABLE>
<CAPTION>

                       YEAR ENDING JUNE 30,
                       --------------------

<S>                                                         <C>
                               2003                         $     3,840,000
                               2004                                       -
                               2005                                       -
                               2006                                       -
                               2007                                      -
                               2008 and thereafter                1,094,290
                                                            ---------------
                                                            $     4,934,290
                                                            ===============
=======================================================================================

</TABLE>


                                      F-24

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 4 -      CAPITAL LEASE OBLIGATIONS

              The Company entered into a lease agreement during the year ended
              June 30, 2001 relating to office equipment which has been
              accounted for as a capital lease. The lease has a term of 36
              months with a total monthly lease payment of $122.

              The following are the scheduled annual payments on the capital
              lease:

<TABLE>
<CAPTION>

                       YEAR ENDING JUNE 30,
                       -------------------

<S>                                                          <C>
                               2003                          $         1,464
                               2004                                        -
                               2005 and thereafter                         -
                                                             ---------------
              Total minimum lease commitments                          1,464
              Less: amount representing interest                         (59)
                                                             ---------------
              Total capital lease obligations                          1,405
              Less: current portion                                   (1,405)
                                                             ---------------
              Total Long-Term Capital Lease Obligations      $             -
                                                             ===============

</TABLE>

NOTE 5 -      CONVERTIBLE VOTING PREFERRED STOCK

              On September 22, 1994, the board of directors of the Company
              approved the issuance of 2,074,521 shares of the authorized
              preferred stock of the Company, to be issued in a series, to be
              known as the "Convertible Voting Preferred Stock, $.025
              Non-Cumulative Dividend". A corresponding certificate of issuance
              was filed with the State of Nevada. Holders of these shares are
              entitled to a noncumulative, preferential dividend of $.025 per
              share per annum, when declared by the board of directors, payable
              from the surplus, net profits or assets of the Company. At any
              time after September 30, 1999, the board of directors of the
              Company may elect to redeem this Convertible Voting Preferred
              Stock at a redemption price of $0.50 per share. Each share of this
              Convertible Voting Preferred Stock shall be convertible into five
              shares of the common stock of the Company.

              Under the conversion privileges of these shares, the holder may
              elect to convert 20% of the Convertible Voting Preferred Stock
              prior to September 30, 1995 and an additional 20% every year
              thereafter until September 30, 1999. The right to convert shall
              terminate if not exercised before September 30, 1999. At June 30,
              2002, the remaining 41,499 preferred shares are no longer
              convertible. The Company has the right to redeem these shares for
              $0.50 per share. Each share of this Convertible Voting Preferred
              Stock shall be entitled to one shareholder vote. These 2,074,521,
              shares were issued pursuant to the acquisition by the Company of
              Simmons Oil Company, Inc. and its subsidiaries. One share of
              Convertible Voting Preferred Stock was issued for every four
              shares of common stock of Simmons Oil Company, Inc.

              During the year ended June 30, 2000, holders of shares of the
              Convertible Voting Preferred Stock elected to convert their shares
              into common stock of the Company in accordance with the conversion
              provisions. Accordingly, 60,496 shares of convertible voting
              preferred stock were converted into 302,500 shares of the
              Company's common stock in 2000. (Note 6).

              During the year ended June 30, 2000, the Company issued
              400,000 Series F Convertible Preferred Shares for total proceeds
              of $400,000. These 400,000 preferred shares were later converted
              into 1,400,000 shares of common stock at a conversion ratio of
              3.5 common shares.

                                      F-25

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 6 -      COMMON STOCK

              During the year ended June 30, 2000, 60,496 shares of convertible
              voting preferred stock were converted into 302,500 shares of
              common stock, and 400,000 shares of Series F convertible preferred
              stock were converted into 1,400,000 shares of common stock (see
              Note 5).

              During the year ended June 30, 2000, the Company issued 133,334
              shares of common stock at $0.75 per share for a total of $100,000.
              As discussed in Note 3, the Company issued 583,659 shares of
              common stock valued at $270,002 as a result of a penalty fee
              related to a late Registration filing for certain shares of stock.

              During the year ended June 30, 2001, the Company issued 13,780,083
              shares of common stock and 946,929 warrants for $0.30 per share
              for a total of $4,134,025. Offering costs of $478,502 were paid or
              accrued related to the 13,780,083 shares issued. As discussed in
              Note 3, the Company issued 4,085,622 and 711,740 shares of common
              stock valued at $675,000 and $360,000 as a result of a penalty fee
              related to a late registration filing for certain shares of stock.

              During the year ended June 30, 2001, the Company entered into
              certain Warrant Exchange Agreements. Pursuant to the agreements,
              the Company issued 2,197,500 shares of common stock valued at
              $1,758,000 in exchange for the cancellation of 6,680,000 warrants.
              The shares issued were valued at $0.80 per share based upon the
              trading price of the shares on the date they were issued. The
              Company also issued a total of 6,050,000 shares of common stock
              valued at $2,613,998 to certain directors of the Company in lieu
              of services rendered and expenses paid on behalf of the Company.
              In addition, the Company issued 1,293,661 shares of common stock
              in conversion of outstanding debt totaling $521,686, 457,500
              shares of common stock for services rendered totaling $198,600 and
              4,692,746 shares of common stock in conversion of debt and
              services rendered totaling $3,097,211.

              Pursuant to a court decree and settlement agreement signed during
              the year ended June 30, 2001, the Company canceled a total of
              321,146 shares of common stock. As part of the settlement
              agreement, outstanding debt of $235,000 was also released.
              Accordingly, the transaction and cancellation of shares was
              recorded as contributed capital of $235,000.

              During the year ended June 30, 2001, the Company also converted
              4,168,300 shares of common stock owned by certain officers of the
              Company to a convertible subordinated promissory note in the
              amount of $1,094,290 (Note 3), bearing interest at 6% per annum.
              The promissory note is convertible into common shares of the
              Company at a conversion rate of $0.43 per share, adjusted
              accordingly for any stock splits or dividends effected by the
              Company subsequent to the original issued date of the note.

              During July 2001, the Company issued 200,000 and 250,000 shares of
              previously authorized but unissued common stock for services
              rendered to officers valued at $46,000 and $60,000, respectively.

                                      F-26

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000

NOTE 6 - COMMON STOCK (Continued)

              During August 2001, the Company issued 100,000 shares of
              previously authorized but unissued common stock for services
              rendered, valued at $29,000.

              During August 2001, the Company reissued 40,750 shares of common
              stock for shares previously canceled in error in a previous year.
              The original cancellation was recorded at a zero value, thus the
              reissuance is being recorded at the same value.

              During August 2001, the Company issued 500,000 shares of
              previously authorized but unissued common stock for services
              rendered to officers, valued at $125,000.

              During October 2001, the Company issued 150,000 shares of
              previously authorized but unissued common stock for services
              rendered, valued at $21,000.

              During December 2001 and May 2002, the Company issued 2,607,299
              and 1,478,323 shares of previously authorized but unissued common
              stock for conversion of penalties payable, valued at $450,000 and
              $225,000, respectively.

              During January 2002, the Company issued 1,000,000 shares of
              previously authorized but unissued common stock for interest
              payable, valued at $250,000.

              During January 2002, pursuant to two separate agreements, the
              Company issued 2,544,768 and 6,400,000 shares of previously
              authorized but unissued common stock to two separate creditors for
              notes payable, valued at $1,094,290 and $640,000 (or $0.43 and
              $0.10 per share), respectively. During April 2002, the Company
              canceled 2,544,768 of those previously issued shares in exchange
              for the original debt in order to make available a significant
              number of additional authorized shares of common stock for an
              investment transaction contracted with a German company which was
              originally scheduled to close in that month. Simultaneously with
              this cancellation, the Company also repurchased 6,400,000 shares
              of common stock for $800,000, which were previously issued for
              $640,000.

NOTE 7 -      COMMON STOCK WARRANTS

              The Company applies Accounting Principles Board ("APB") 25,
              "Accounting for Stock Issued to Employees," and related
              interpretations in accounting for all stock option plans. Under
              APB 25, compensation cost is recognized for stock options and
              warrants granted to employees when the option/warrant price is
              less than the market price of the underlying common stock on the
              date of grant.

              FASB Statement 123, "Accounting for Stock-Based Compensation"
              ("SFAS No. 123") requires the Company to provide proforma
              information regarding net income and net income per share as if
              compensation costs for the Company's stock option plans and other
              stock awards had been determined in accordance with the fair value
              based method prescribed in SFAS No. 123. The Company estimates the
              fair value of each stock award at the grant date by using the
              Black-Scholes option pricing model.

              Under the provisions of SFAS No. 123 for warrants granted to
              employees, the Company's net loss for the years ended June 30,
              2002, 2001 and 2000 would have been unchanged from the reported
              net loss.

                                      F-27

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 7 -      COMMON STOCK WARRANTS (Continued)

              However, under the provisions of SFAS No. 123 for non-employees,
              the Company recorded additional expense of $-0-, $-0- and $884,880
              the years ended June 30, 2002, 2001 and 2000 as a result of
              warrants granted to non-employees based upon the Black-Scholes
              pricing model. Under the Black-Scholes method, the U.S. treasury
              rate was used as the risk-free interest rate, the expected life of
              the warrants was 2 months to seven years, the volatility used was
              based upon the historical price per share of shares sold, and
              there were no expected dividends.

              A summary of the status of the Company's stock warrants as of
              June 30, 2002 and changes during the year ended June 30, 2002 are
              presented below:

<TABLE>
<CAPTION>

                                                                                 WEIGHTED            WEIGHTED
                                                                                 AVERAGE             AVERAGE
                                                               STOCK             EXERCISE           GRANT DATE
                                                             WARRANTS             PRICE             FAIR VALUE
                                                        ------------------  ------------------  ------------------

<S>                                                     <C>                 <C>                 <C>
              Outstanding, June 30, 2001                         3,876,929   $            1.31  $             0.16
                 Granted                                                 -                0.00                0.00
                 Expired/Canceled                                 (525,000)               0.92                0.00
                 Exercised                                               -                   -                   -
                                                        ------------------  ------------------  ------------------

              Outstanding, June 30, 2002                         3,351,929                1.37                0.17
                                                        ------------------  ------------------  ------------------

              Exercisable, June 30, 2002                         3,351,929  $             1.37  $             0.17
                                                        ==================  ==================  ==================
</TABLE>

              The following summarizes the exercise price per share and
              expiration date of the Company's outstanding warrants to purchase
              common stock at June 30, 2002;

<TABLE>
<CAPTION>

                                         NUMBER OF SHARES             EXPIRATION DATE                EXERCISE PRICE
                                         ----------------             ---------------                --------------
 <S>                                     <C>                          <C>                            <C>
                                                  150,000                 9/17/04                    $        0.360
                                                   50,000                 11/4/04                             2.310
                                                   80,000                 5/1/05                              1.250
                                                   80,000                 6/18/05                             3.970
                                                  168,530                 7/24/05                             0.360
                                                   28,166                 7/29/05                             0.360
                                                   25,000                 8/4/05                              4.000
                                                  187,333                 9/29/05                             0.360
                                                   22,500                 10/1/05                             0.360
                                                  135,000                 12/9/05                             4.030
                                                  390,400                 1/5/06                              0.360
                                                  450,000                 1/6/06                              3.000
                                                  185,000                 5/4/06                              1.560
                                                  125,000                 5/17/06                             1.500
                                                1,200,000                 12/27/06                            1.000
                                                   75,000                 2/14/07                             0.750
                                         ----------------
              Balance outstanding,
              June 30, 2002                    3,351,929
                                         =================

</TABLE>

                                      F-28

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 7 -      COMMON STOCK WARRANTS (Continued)

              During the year ended June 30, 2000, the Company issued
              225,000 warrants ranging in exercise prices from $0.75 to
              $1.00 per share. These warrants were issued to various
              consultants for services rendered. In addition, the Company issued
              1,500,000 warrants exercisable at $1.00 per share which expired
              unexercised after 60 days. The Company also issued an additional
              1,600,000 warrants exercisable at $1.00 per share. 400,000 expire
              on September 15, 2001, 400,000 expire on September 15, 2002,
              400,000 expire on September 15, 2003 and 400,000 expire on
              September 15, 2004.

              During the year ended June 30, 2001, the Company granted a total
              of 796,929 warrants to purchase common stock at an exercise price
              of $0.36 per share to the placement agent pursuant to the
              issuance of common shares for cash. As discussed in Note 6, the
              Company issued 2,197,500 shares of common stock during the year
              ended June 30, 2001 in exchange for the cancellation of 6,680,000
              warrants. An additional 1,275,000 warrants were canceled during
              the year, bringing the total outstanding warrants at June 30,
              2001 at 3,876,929.

              During the year ended June 30, 2002, 525,000 warrants expired.
              The total outstanding warrants at June 30, 2002 is 3,351,929.

NOTE 8 -      COMMITMENTS AND CONTINGENCIES

              As discussed in Note 2, the Companies defaulted on the payment of
              the Drilling Investor Notes due and payable September 15, 1995
              related to the acquisition of oil and gas leases in Harris
              County, Texas. These notes were secured by a financial guarantee
              bond, but there is no assurance that the bond can be enforced.
              During the year ended June 30, 2002, the balance payable of
              $38,117 was written off.

              The Company leases office space at a monthly cost of $3,391. The
              lease expires in August 2004. The future minimum lease payments
              are $40,692 and $6,782 for the years 2003 and 2004, respectively.

              The Companies have minimum lease and royalty obligations
              associated with their oil and gas properties of $77,300 annually,
              see also Note 2.

              During the year ended June 30, 1997, the Board of Directors
              authorized the establishment of a Management Royalty Pool equal
              to 1% of the revenues from domestic oil and gas production. The
              beneficiaries and their ownership in this pool are subject to
              variance based upon certain performance criterion.

              On June 8, 2002, three alleged creditors placed the Company into
              involuntary bankruptcy under Chapter 7 of title II of the
              bankruptcy code. If an order for relief were to be entered into
              (ie, the Company failed to demonstrate that it had been placed
              into bankruptcy improperly), a Chapter 7 trustee would be
              appointed to liquidate the assets of the Company. The trial of
              the proprietary of the involuntary bankruptcy is scheduled for
              February 12, 2003. Additionally, the Company is seeking both
              actual and punitive damages as a counterclaim against the
              petitioning creditors for placing the Company into an involuntary
              bankruptcy. As of the audit report, the outcome of the
              involuntary bankruptcy is uncertain. No adjustments have been
              made to the financial statements for this uncertainty.

                                      F-29

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                          June 30, 2002, 2001 and 2000


NOTE 8 -      COMMITMENTS AND CONTINGENCIES (Continued)

              The Companies are party to certain litigation and claims. The most
              significant are as follows:

              A Company former President filed suit against the Company and its
              current President seeking damages and an injunction from
              preventing his ouster as President and as a member of the Board of
              Directors based upon a shareholder vote in which a majority of
              shareholders voted for the removal of the former President as a
              director under an existing bylaw provision. The bylaw provision,
              which requires a simple majority vote to remove a director, is in
              conflict with the Nevada statute which requires the vote of
              two-thirds of the shareholders in order to remove a director. The
              matter was pending and the outcome not yet determined by the Court
              as of the date of this report.

              A separate former President and a former member of the Board of
              Directors filed suit against the Company to recover a stock
              certificate issued to him by the Company which was in the
              Company's possession and to recover a $30,000 loan to the Company
              and back salary and unreimbursed expenses. The matter is still
              pending and the outcome not yet determined by the Court as of the
              date of this report.

              A former employee filed suit against American Energy Operating
              Corp. seeking approximately $60,000 for alleged, unpaid services
              as an engineering consultant. Management of the Company is
              disputing the claim and intends on vigorously contesting the
              claim. The matter is pending and the outcome not yet determined
              by the Court as of the date of this report.

                                      F-30

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                                   (Unaudited)
                             June 30, 2002 and 2001


S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES


            (1)           Capitalized Costs Relating to
                         Oil and Gas Producing Activities

<TABLE>
<CAPTION>

                                                                                                JUNE 30,
                                                                                  -------------------------------------
                                                                                         2002                2001
                                                                                  ----------------    -----------------

<S>                                                                               <C>                 <C>
              Proved oil and gas producing properties and related
                lease and well equipment                                          $        704,333    $         439,785
              Accumulated depreciation and depletion                                      (637,710)            (690,864)
                                                                                  ----------------    -----------------

              Net Capitalized Costs                                               $         66,623    $        (251,079)
                                                                                  ================    =================

</TABLE>

              (2)           Costs Incurred in Oil and Gas Property
                     Acquisition, Exploration, and Development Activities

<TABLE>
<CAPTION>

                                                                                          FOR THE YEARS ENDED
                                                                                                JUNE 30,
                                                                                  -------------------------------------
                                                                                       2002                 2001
                                                                                  ----------------    -----------------
<S>                                                                               <C>                 <C>
              Acquisition of Properties
                 Proved                                                           $              -    $               -
                 Unproved                                                                        -                    -
              Exploration Costs                                                                  -            3,549,675
              Development Costs                                                            704,333              439,785

</TABLE>

              The Company does not have any investments accounted for by the
              equity method.

              (3)                Results of Operations for
                                   Producing Activities

<TABLE>
<CAPTION>

                                                                                          FOR THE YEARS ENDED
                                                                                                JUNE 30,
                                                                                  -------------------------------------
                                                                                       2002                 2001
                                                                                  ----------------    -----------------
<S>                                                                               <C>                 <C>
              Sales                                                               $      1,051,358    $       1,806,335
              Production costs                                                            (507,382)            (811,757)
              Depreciation and depletion                                                  (637,710)            (690,864)
                                                                                  ----------------    -----------------

              Results of operations for producing activities
              (excluding corporate overhead and interest costs)                   $        (93,734)   $         303,714
                                                                                  ================    =================
</TABLE>


                                      F-31

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                                   (Unaudited)
                             June 30, 2002 and 2001



S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)

            (4)                  Reserve Quantity Information

<TABLE>
<CAPTION>

                                                                       OIL               GAS
                                                                       BBL               MCF
                                                                  --------------    --------------
<S>                                                               <C>               <C>
              Proved developed and undeveloped reserves:

              Balance, June 30, 2001                                   2,615,577                 -

                10% of reserves sold during year                        (261,558)                -

                Change in estimates                                       32,240                 -

                Production                                               (48,160)                -
                                                                  --------------    --------------

              Balance, June 30, 2002                                   2,338,099                 -
                                                                  ==============    ==============

</TABLE>

<TABLE>
<CAPTION>

                                                                       OIL               GAS
                                                                       BBL               MCF
                                                                  --------------    --------------
<S>                                                               <C>               <C>
              Proved developed reserves:

                Beginning of the year ended June 30, 2002                483,247                 -
                End of the year ended June 30, 2002                      439,845                 -

</TABLE>

              During the year ended June 30, 2002, the Company had reserve
              studies and estimates prepared on the various properties acquired
              and developed. The difficulties and uncertainties involved in
              estimating proved oil and gas reserves makes comparisons between
              companies difficult. Estimation of reserve quantities is subject
              to wide fluctuations because it is dependent on judgmental
              interpretation of geological and geophysical data.

              (5)           Standardized Measure of Discounted
                             Future Net Cash Flows Relating to
                                Proved Oil and Gas Reserves

              The standardized measure of discounted future net cash flows is
              computed by applying year-end prices of oil and gas (with
              consideration of price changes only to the extent provided by
              contractual arrangements) to the estimated future production of
              proved oil and gas reserves, less estimated future expenditures
              (based on year-end costs) to be incurred in developing and
              producing the proved reserves, less estimated future income tax
              expenses (based on year-end statutory tax rates, with
              consideration of future tax rates already legislated) to be
              incurred on pretax net cash flows less tax basis of the properties
              and available credits, and assuming continuation of existing
              economic conditions. The estimated future net cash flows are then
              discounted using a rate of 10 percent a year to reflect the
              estimated timing of the future cash flows.

                                      F-32

<PAGE>

                THE AMERICAN ENERGY GROUP, LTD. AND SUBSIDIARIES
                      S.F.A.S. 69 Supplemental Disclosures
                                   (Unaudited)
                             June 30, 2002 and 2001

S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (CONTINUED)

              (5)            Standardized Measure of Discounted
                              Future Net Cash Flows Relating to
                                 Proved Oil and Gas Reserves
                                         (Continued)

                                      At June 30, 2002

<TABLE>
<CAPTION>

                                                                                          THE AMERICAN
                                                                                          ENERGY GROUP
                                                                                            LTD. AND
                                                                                          SUBSIDIARIES
                                                                                       ------------------
<S>                                                                                    <C>
              Future cash inflows                                                      $       60,998,411
              Future production and development costs                                         (21,532,151)
                                                                                       ------------------
              Future net inflows before income taxes                                           39,466,260
              Future income tax expense                                                        (3,966,477)
                                                                                       ------------------
              Future net cash flows                                                            35,499,783
              10% interest held by related company                                             (2,099,072)
              10% annual discount for estimated timing of cash flows                          (14,509,059)
                                                                                       ------------------

              Standardized measure of discounted future net cash flows                 $       18,891,652
                                                                                       ==================

</TABLE>

              The above schedules relating to proved oil and gas reserves,
              standardized measure of discounted future net cash flows and
              changes in the standardized measure of discounted future net cash
              flows have their foundation in engineering estimates of future net
              revenues that are derived from proved reserves and with the
              assumption of current pricing and current costs of production for
              oil and gas produces in future periods. These reserve estimates
              are made from evaluations conducted by Carl F. Pomeroy and Richard
              Alexander, registered professional engineers, of such properties
              and will be periodically reviewed based upon updated geological
              and production data. Estimates of proved reserves are inherently
              imprecise. The above standardized measure does not include any
              restoration costs due to the fact the Company does not own the
              land.

              Subsequent development and production of the Company's reserves
              will necessitate revising the present estimates. In addition,
              information provided in the above schedules does not provide
              definitive information as the results of any particular year but,
              rather, helps explain and demonstrate the impact of major factors
              affecting the Company's oil and gas producing activities.
              Therefore, the Company suggests that all of the aforementioned
              factors concerning assumptions and concepts should be taken into
              consideration when reviewing and analyzing this information.

                                      F-33




