<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________
FORM 10SB
General Form for Registration of Securities of Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of
1934 __________
IMPERIAL PETROLEUM RECOVERY CORPORATION
(Exact name of Small Business Issuer in its charter)
NEVADA 94-6615349
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4900 Seminary Rd., Suite 1100 22311
Alexandria, VA (Zip Code)
(Address of principal executive offices)
Registrant's Telephone number, including area code:
(703) 578-9700
__________
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act: Common
Stock, par value $0.001 per share
<PAGE> 3
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development.
Imperial Petroleum Recovery Corporation, (The "Company") was
incorporated in the State of Utah on March 23, 1982 under the name Est
Academic Schools, Inc. The name of the Company was changed to Zia's
Italian Foods, Corp on March 30, 1990. The domicile of the Company was
changed to Nevada on April 4, 1990 and the name was changed to Est Zia's
Italian Foods, Inc. The name of the Company was changed to Academic
Schools, Inc., on November 1, 1990. The name of the Company was
changed to Rebound Pain Reduction & Rehabilitation, Inc., on December 6,
1990. The Company was reinstated in the state of Nevada on January
23, 1996 and the name of the Company was changed to Imperial Petroleum
Recovery Corporation.
The Company is authorized to issue 100,000,000 shares of common stock
("Common Shares") at $.001 par value and 10,000,000 shares of preferred
stock ("Preferred Shares"). As of April 30, 1996, there were 8,810,213
Common Shares outstanding (including 750,000 Common Shares allocated for
the acquisition of NSA Inc) and no Preferred Shares outstanding.
B. Business of Company.
General.
The Company is in the development stage for a proprietary crude oil
sludge remediation process which uses high energy microwaves to separate
water, oil and solids. Up to 80% of the volume of sludge is recovered as
oil and sold. The process recovers usable hydrocarbon compounds from
material which otherwise would be toxic, hazardous or unusable. These
units will be sold through geographically-specific marketing partnerships
worldwide.
Employees.
As of April 30, 1996 the Company has 58 full time employees and 5 part
time employees. The Company shall employ additional individuals as
required.
Acquisition.
Effective January 1, 1996, the Company acquired NSA Inc. (NSA), a
management and consulting firm located in Alexandria Virginia. NSA, a
government contractor providing project management services, fleet
management, facility operations, and accounting and financial management.
NSA maintains offices in Alexandria VA, Palatka FL, Fargo ND,
Bellingham WA, Tucson AZ, and Warner Robins GA. The Company acquired
100% of the outstanding common stock of NSA in exchange for the issuance
of 750,000 shares of common stock valued at $3,000,000 based upon the
value associated with other stock transactions.
<PAGE> 4
Proposed Acquisition.
In June 1996, the Company agreed to acquire 100% of the outstanding
common stock of Phonon Technologies, Inc. (PTI) a Houston, Texas, based
research and development company, engaged in the development of
microwave chemistry technologies. The purchase price is currently being
negotiated and the acquisition is scheduled to close in the third quarter
of 1996. The purchase price of PTI shall be in the form of $10,000 in
cash for the stock of PTI and cash payments totaling approximately $700,000
to retire preexisting loans to PTI stockholders to be made between closing
and October 31, 1996. The acquired shares of PTI shall remain in escrow
as security until all payments due under the acquisition agreement are
made.
Products.
The Company manufactures and markets a proprietary crude oil sludge
remediation system. Based on in-house testing, the Company's
remediation process provides an effective and ecologically-sound solution
to one of the world's critical environmental problems: the vast amounts of
crude oil sludge held in temporary storage pits with no means of safe and
effective disposal.
The Company's remediation process uses high-energy microwaves to
separate the water, oil, and solids that comprise crude oil sludge and
permits the recovery of salable crude oil.
In-house testing has shown that, controlled by satellite hook-up, each MST
4000 sludge remediation system will process up to 4000 bbl of sludge per
day safely and efficiently. Depending on the quality of the sludge, it
will yield up to 80% of the original sludge volume in salable hydrocarbon
product, 15% in irrigation-quality water, and 5% in inorganic solids. The
equipment is leased to franchisees licensed by the Company to operate the
MST-4000 system in specific territories in the US and around the world.
The technology used by the Company in the MST-4000 is proprietary. The
Company does not presently hold patents or have trademarked products.
Target Market.
When oil stops moving from the well-head to the refinery, foreign matter,
such as sand and water that are heavier than oil, gravitate to the
bottom. Over time, this material becomes thicker and becomes a 'sludge.'
There has not yet been an effective way to treat oil sludge until the
development ofthe MST-4000 and, as a result, millions of barrels of oil
sludge have accumulated in hundreds of thousands of storage tanks and pits
around the world. Until now, treatment of oil sludge has been limited to
removal to landfills or to storage pits and tanks.
The Company's MST-4000 treats oil sludge by separating the oil, water,
and solids. The target market is two-fold: old sludge which has accumulated
over decades and is held in hundreds of thousands of sludge tanks and pits
worldwide and new sludge, which the Oil & Gas Journal estimates
accumulates at a rate of approximately 1.4 million barrels every day. Old
<PAGE> 5
sludge is generally highly viscous and difficult to handle. New sludge
accumulates at refineries and in holding tanks and ships during transit
where the flow slows or comes to a stop. New sludge can be treated as it
sediments out and before it becomes a storage problem.
Refineries are the final stop for sludge in the flow of oil from the well-
head to the end-user. Therefore, the target market includes all the pits and
tanks holding old sludge as well as 708 oil refineries worldwide handling new
sludge. In addition, the MST-4000 can be deployed in shipping lanes and ports
to clean holding tanks of oil tankers as they off-load product. The estimated
1.4 million barrels of oil sludge accumulating daily would require
approximately 350 MST-4000s to be processed.
Under a teaming agreement signed in April of 1995, Battelle North West
Laboratories will actively market the MST-4000 within the Arabian Gulf
and provide technical support worldwide. Based on representations of
Battelle management, Battelle currently holds more than 100 technology
licenses, employs more than 8,500 scientists, engineers and support staff
in 45 international offices, and has annual revenues in excess of $950
million.
Manufacturing.
The heart of the Company's technology is the MST-4000, a computercontrolled
microwave-generating system capable of processing 4000 bbl of crude oil
sludge every 24 hours.
The Company procures components from subcontractors and vendors and
assembles final systems. On July 1, 1996, the Company leased a 72,000
square foot manufacturing and research and development facility in Las
Vegas, Nevada. In this facility, the Company plans to install proprietary
components and complete assembly of its systems for testing and shipping.
Imperial systems are protected by interlocking security measures. The
complete system consists of four proprietary microwave applicators,
computer controls, security apparatus, and equipment necessary for the
support and maintenance of the system on-site.
Competition.
Currently, oil sludge is held in pits and tanks, incinerated, or separated
by centrifuges. Incineration costs can exceed $750 per ton which, at 5
barrels per ton, equates to $150 per barrel, which is not economical. In
addition, incineration destroys the product. Centrifuges are not very
effective because oil and water are bound tightly in most oil sludge. The
Company's process costs less than $10 a barrel, separates oil, water, and
solids, and recovers salable oil.
There are a handful of small businesses treating oil sludges. Mostly, these
companies remove sludge to landfills or to incinerators. Alfa LaVal is a
centrifuge manufacturer and does some separation of oil sludge. DuraTherm
treats oil sludge solids.
<PAGE> 6
Federal and/or State Regulation.
The Company is not subject to any federal or state regulations regarding
its services.
Seasonal Nature of Business Activities.
The Company's business activities are not seasonal.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
Trends and Uncertainties.
The Company intends to operate on revenues from its products and does not
intend to seek debt financing. The Company has tried to limit general
and administrative expenses now that its operations have increased and
costs relating to its products and services have been more accurately
determined. The Company evaluates its operating expense on a project by
project basis depending on the amount and type of services to be provided.
However, as the Company has little or no control on demand for its
services, inflation and changing prices could have a material effect
on the future profitability of the Company.
Capital Resources and Source of Liquidity.
Until the Company began trading its securities on April 17, 1996,
operations were funded by the principals and by funds received as the result
of a private placement sale.
On May 8, 1996, the Company announced the sale of its first territorial
license to Saudi Imperial. According to the terms of the sale, Saudi
Imperial has exclusive rights to market and operate the Company's
microwave remediation technology within Saudi Arabia. Two initial
payments of $125,000 each have been received. A payment of $2.5 million
is due when the first MST-4000 unit is ordered with a second payment of
$2.5 million due before the unit is shipped. An additional $5 million will
be paid by Saudi Imperial in annual installments of $1 million.
At April 30, 1996, the Company had outstanding borrowings of $319,570
under a line-of-credit agreement. The agreement expired April 30, 1996
and has been extended on a short-term basis, subject to issuance of
December 31, 1995 audited financial statements. The line of credit
bears interest at the bank's prime rate plus 1 percent (9.25% at April 30,
1996). Borrowings may not exceed $750,000 and are limited to 90% of
government accounts received aged less than 90 days (limited to a maximum of
$375,000). The Company's accounts receivable are pledged, and
related contracts assigned as collateral for the agreement. Borrowings
are personally guaranteed by the majority stockholder.
Effective October 1, 1995, the Company acquired the rights to the
technology on which the Company's oil sludge remediation process is
based from a company owned by certain stockholders of the Company. In
<PAGE> 7
exchange for those rights, the Company issued a note for $4,000,000 at an
interest rate of 10%, payable in annual installments of $1,000,000, plus
accrued interest, beginning October 1, 1997.
Other notes payable consist of a note payable to a bank for an
automobile, payable in month installments of $433 at an interest rate
of 9.4% through May 2000, collaterilized by the automobile and a note
due to a shareholder for $103,000, due on demand.
As a result of the purchase of NSA, the Company received cash of $95,174.
The Company received proceeds of $100,261 from the sale of investments
for the six months ended April 30, 1996.
The Company leases office space under noncancelable operating leases
which expire at various dates through 1998. The offices leases provide
for future rental increases based on the Company's pro rata share of
increases in building operating expenses, real estate taxes and for
inflation adjustments based on increases in the Consumer Price Index.
Rent expense for the six months ended April 30, 1996 was approximately
$80,000.
Results of Operations.
For the fiscal year ended October 31, 1996, the Company did not have any
revenue generating activities.
The Company had a net loss of $1,457,858 for the six months ended April
30, 1996. For the six months ended April 30, 1996, the Company received
contract services revenue of $1,144,381 and had contract costs of
$588,988. Gross profit was $555,393 for the six months ended April 30,
1996. General and administrative expenses for the six months ended
April 30, 1996 were $1,721,516. These expenses were related to the
commencement of operations.
Plan of Operation. The Company renewed its largest contract in March
1996. The contract represented approximately 65% of the Company's
revenues in the calendar year 1995. The Company did not recompete for a
contract which represented approximately 18% of the Company's revenue
in calendar year 1995 because of the lack of profitability associated with
the contract. The contract expired in January 1996.
The Company is presently negotiating with other potential territorial
licensees. Fee structure for each licensee will follow the format established
in the agreement reached with Saudi Imperial: a licensing fee determined by
the Company's evaluation of each territory's potential, $2.5 million per
machine in lease fees, and a $3 per barrel royalty on recovered oil.
The Company believes that over the next five years Saudi Imperial's
demand for microwave remediation technology will require the shipment of
at least seven additional MST-4000 units. At $2.5 million per system, this
would produce an additional $17.5 million in lease fees. In addition to its
lease price, each system operating in the field is expected to generate
another $2 million in royalties for Imperial each year. At the end of the
<PAGE> 8
first full year of operations, The Company expects to have a total of eight
machines in the field; at the end of the second year, a total of 24 machines;
at the end of the third year, 50 machines.
Going Concern. The Company is not currently delinquent on any of its
obligations and the Company has begun to generate revenue from its
products and services. Based upon the increased number of the Company's
agreements to provide the services described in "Business Activities", the
Company believes that it will begin to generate a positive cash flow
before the end of its fiscal year 1997.
ITEM 3. DESCRIPTION OF PROPERTY
On May 1, 1996, the Company leased 16,000 square feet at 4900 Seminary
Road, Alexandria, Virginia with a monthly lease payment of $24,911 through
April 1998.
The Company also occupies facilities at 33 Omni Circle, Auburn, Maine,
with a month to month lease term and a monthly lease payment of $1,939
and an office in Tucson, Arizona, leased on a month to month basis with
a payment of $1,984.
On July 1, 1996, the Company leased a 72,000 square foot manufacturing
and research and development facility in Las Vegas, Nevada.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tabulates holdings of shares of the Company by each person
who, subject to the above, at the date of this prospectus, holds of record
or is known by management to own beneficially more than 5.0% of the
Common Shares and, in addition, by all directors and officers of the
Company individually and as a group. Each named beneficial owner has
sole voting and investment power with respect to the shares set
forth opposite his name.
Current Shareholdings
<TABLE>
Percentage
of
Name and Address1- Number & Outstanding
Class of Shares Common Shares
<S> <C> <C>
Brent Kartchner
57 Quail Run Road
Henderson, Nevada 89014 1,045,854 12.91%
Barry M. Meuse
1501 Belle View Blvd., A-1
Alexandria, Virginia 22307 821,667 10.15%
Joseph Meuse
1630C 19th St. NW
Washington, DC 20009 70,000 .86%
<PAGE> 9
William Ardern
8470 E. Crestridge Dr.
Tucson, AZ 85715 100,000 1.23%
Larry Taylor
4401 Columbine Court
Charlotte, NC 28226 1,066,666 13.17%
Michael Weppner
4714 King Carter Ct.
Annandale, VA 22003 100,000 1.23%
Richard Wiewiorka
1340 Taylor, #8
San Francisco, CA 94108 333,666 4.12%
All Directors & Officers as a group
(8 persons) 4,583,707 52.03%
1Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or sole
or shared investment power (including the power to dispose or direct the
disposition) with respect to a security whether through a contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, each person indicated above has sole power to vote, or dispose
ordirect the disposition of all shares beneficially owned, subject to
applicable community property laws.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Board of Directors.
The following persons listed below have been retained to provide services
as director until the qualification and election of his successor. All
holders of Common Stock will have the right to vote for Directors of the
Company. The Board of Directors has primary responsibility for adopting the
reviewing implementation of the business plan of the Company, supervising
the development business plan, and review of the officers' performance of
specific business functions. The Board is responsible to monitor
management, and from time to time, to revise the strategic and
operational plans of the Company. Directors receive no compensation or
fees for their services rendered in such capacity.
The Executive Officers and Directors are:
</TABLE>
<TABLE>
Name Age Position Term(s) of Office
<S> <C> <C> <C>
Henry Kartchner 72 Chairman of the December, 1995
Board of Directors to present
<PAGE> 10
Barry M. Meuse 54 Chief Executive Officer, July, 1995
President, and Director to present
William E. Ardern 54 Director May, 1996
to present
Brent Kartchner 49 Executive Vice President September, 1995
Director to present
Larry Taylor 54 Executive Vice President July, 1995
Director to present
Michael Weppner 51 Director May, 1996
to present
Richard Wiewiorka 39 Executive Vice President May, 1996
Director to present
</TABLE>
Henry Kartchner has been the chairman of the board of directors of the
Company since December, 1995. Mr. Kartchner has extensive international
business experience, particularly in the Middle East. Since 1975, he is
the founder and has been chief executive officer of Food Development
Corporation (FDC), an international agro-business. Under his leadership, FDC
grew to become an international concern with annual revenues in
excess of $50 million.
Barry M. Meuse became chief executive officer of the Company in July,
1995. Mr. Meuse founded NSA, Inc in 1986 to provide a private sector
perspective on national security issues involving the Department of
Defense, the National Guard Bureau, and the Air Force Reserve. He has more
than 30 years' experience in national security issues including development
of defense policy and strategy, long-range planning, joint and combined air
operations, operational plans, force structure analysis, test and
evaluation, and air crew training. Mr. Meuse received a Bachelor of
Science from the Air Force Academy in engineering in 1963 and a Master of
Arts Degree in International Relations from the University of Arkansas-
European division in 1974.
William E. Ardern is a vice president of NSA and has worked for NSA
since 1988. As chief of the Air Force's F-16 Management Office and
chairman of the F-16 Multinational Operations Subcommittee, Mr. Ardern
managed the introduction of a major weapons system into the US arsenal
and into the air forces of four European nations. At NSA, Mr. Ardern
directed the Air National Guard Operations Desert Shield/Desert Storm
Lessons learned project and is the project director for Air National Guard
acquisitions support. He currently heads NSA's Tucson office and is the
Company's chief analytical services provider for its contract with the city
of Tucson. Mr. Ardern received a Bachelor of Science in engineering from
the Air Force Academy in 1963 and a Masters of Science in
business/systems analysis in 1971 from the University of Rochester.
<PAGE> 11
Brent Kartchner has been a vice president and director of the Company
since September, 1995. With his father Henry, he has managed and
directed the activities of Food Development Corporation from its
headquarters in Pasco, Washington. Mr. Kartchner's hands on supervision
provided the direction to complete several desert lands reclamation projects
in the Middle East. Mr. Kartchner received a Bachelor of Science degree in
Agronomy and Business Management from Brigham Young University in 1971.
Larry Taylor has been vice president of marketing and a director of the
Company since September, 1995. He has broad experience in international
business and marketing. Mr. Taylor was vice present of marketing for
JA Jones Construction, an international construction company from 1990 to
1993. From 1993 to present, Mr. Taylor has been self employed as an
international business consultant. Mr. Taylor received a Bachelor of
Science degree in engineering from the University of North Carolina in 1970.
Michael Weppner is executive vice president of NSA and has been with
NSA since 1986. He has 28 years of military and defense program
experience including fighter operations and command, F-100 combat
experience, interceptor pilot training, operational test and evaluation, and
an Air Staff tour. While at the pentagon, Mr. Weppner served as the Air Force
Plans and Operations focal point for development of several $100 billion
budgets. In addition, he has managed congressional issues, operational
requirements assessments, and Air Force Wide Mission Area Analysis.
Since 1986, Mr. Weppner has worked for NSA as program director for the
National Guard Bureau contract. He developed the highly successful
airspace long-range planning system used by the Air National Guard to
address operational and environmental airspace issues, a process which is
evolving into the mechanism by which all US military services coordinate
airspace and range planning. Mr. Weppner received a Bachelor of Science
degree in aeronautical engineer from Notre Dame in 1965 and a Master of
Science degree in aeronautical engineering in 1975 from the Air Force
Institute of Technology.
Richard F. Wiewiorka has been president and chief operating officer of
the Presidio Companies, a Nevada limited liability company with offices
in San Francisco, California, and Alexandria, Virginia, since January,
1995. The Presidio Companies specialize in management and operation of
plant facilities including mining, biomass, and wastewater treatment
operations. Presidio is also involved in the development of projects in the
hospitality, waste handling, and power generation industries. From March
1994 to January 1995, Mr. Wiewiorka was managing director of Juntos
Corporation, a mining management and exploration company. From
November 1992 to February 1994, Mr. Wiewiorka was employed by BCS
Financial, an investment banking company. From 1991 to November
1992, Mr. Wiewiorka was executive vice president of Canyon
Corporation, a mining management company. Mr. Wiewiorka attended
Temple University from 1975 to 1977.
Joseph Meuse. Mr. Meuse worked part time as an accounting and
finance and business development specialist for NSA since 1988. Mr.
Meuse received his Bachelor of Science degree from William and May in
1993.
<PAGE> 12
Conflicts of Interest Policy. The Corporation has adopted a policy that any
transactions with directors, officers or entities of which there are also
officers or directors or in which they have a financial interest, will only
be on terms consistent with industry standards and approved by a majority of
the disinterested directors of the Corporation's Board of Directors. No such
transactions by the Corporation shall be either void or voidable solely
because of such relationship or interest of directors or officers or solely
because such directors are present at the meeting of the Board of Directors
of the Corporation or a committee thereof which approves such
transactions, or solely because their votes are counted for such purpose if:
(i) the fact of such common directorship or financial interest is disclosed
or known by the Board of Directors or committee and noted in the minutes,
and the Board or committee authorized, approves or ratifies the contract or
transaction in good faith by a vote for that purpose without counting the
vote or votes of such interested directors; or (ii) the fact of such common
directorship or financial interest is disclosed to or known by the
shareholders entitled to vote and they approve or ratify the contract or
transaction in good faith by a majority vote or written consent of
shareholders holding a majority of the Common Shares entitled to vote (the
votes of the common or interested directors or officers shall be counted in
any such vote of shareholders), or (iii) the contract or transaction is fair
and reasonable to the Corporation based on the material similarity of terms
to recent consulting agreements not involving interested parties, or in all
other agreements by competitive bids, at the time it is authorized or
approved. In addition, interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors of the
Corporation or a committee thereof which approves such transactions.
Non-Qualified and Incentive Stock Option Plans. The Company does not
have any non-qualified or incentive stock option plans. NSA maintains
a defined contribution profit-sharing plan under the provisions of
Section 401(k) of the Internal Revenue Code. The plan covers
substantially all employees who elect to participate and are over the
age of 21 with six months of service. The plan provides for
elective salary deferrals by employees up to 15% of their annual salary
and annual discretionary Company contributions. For the six months ended
April 30, 1996, no contributions were made by the Company.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
the total remuneration paid or accrued by the Company, to or on behalf
of the Company's Chief Executive Officer and the Company's executive
officers determined as of the end of each of the last three years.
<PAGE> 13
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual
Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs Outs sation
Position Year ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barry M. Meuse
CEO/President
1995 - - - - - - -
1994 - - - - - - - -
1993 - - - - - - - -
Brent Kartchner
Vice President
1995 - - - - - - -
1994 - - - - - - -
1993 - - - - - - -
Richard F. Wiewiorka
Vice President
1995 - - - - - - -
1994 - - - - - - -
1993 - - - - - - -
Larry Taylor
Vice President
1995 - - - - - - -
1994 - - - - - - -
1993 - - - - - - -
Joseph J. Meuse
Secretary
1995 - - - - - - -
1994 - - - - - - -
1993 - - - - - - -
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Family Relationship.
Brent Kartchner is the son of Henry Kartchner. Joseph Meuse is the son of
Barry Meuse.
<PAGE> 14
Related Party Notes Payable.
The Company has a note payable to a shareholder for $103,000 due on
demand. Due to the fact that the note is due on demand, it is management's
opinion that the terms of the loan are believed to be less favorable,
though not materially so, to the Company as those that would have been
entered into with unrelated parties. Management has adopted the policy that
future loans from any related parties shall be made at terms at least as
favorable to the Company as those that would have been entered into with
unrelated parties and will not be made if such loans will negatively effect
the Company's cash flow and hamper continued operations.
Related Party Notes Receivable.
The Company has notes receivables of $336,962 from various related
parties as of April 30, 1996. Due to the fact that the notes do not have any
specific payback terms, it is management's opinion that the terms of the
loan are believed to be less favorable, though not materially so, to the
Company as those that would have been entered into with unrelated parties.
Management has adopted the policy that future loans to any related parties
shall be made at terms at least as favorable to the Company as those that
would have been entered into with unrelated parties and will not be made if
such loans will negatively effect the Company's cash flow and hamper
continued operations.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock. The aggregate number of shares of common stock which
the Company has the authority to issue is 100,000,000 shares at par value
of one-tenth of one cent ($.001) per share.
Holders of Common Shares of the Company are entitled to cast one vote for
each share held at all shareholders meetings for all purposes, including
the election of directors, and to share equally on a per share basis in
such dividends as may be declared by the Board of Directors out of funds
legally available therefore. Upon liquidation or dissolution, each
outstanding Common Share will be entitled to share equally in the assets of
the Company legally available for distribution to shareholders after the
payment of all debts and other liabilities. Common shares are not
redeemable, have no conversion rights and carry no preemptive or other
rights to subscribe to or purchase additional Common Shares in the event of
a subsequent offering. All outstanding Common Shares are, and the shares
offered hereby will be when issued, fully paid and non-assessable.
Cumulative Voting. The Common Shares do not have cumulative voting
rights.
Dividends. There are no limitations or restrictions in the Articles of
Incorporation by Bylaws upon the rights of the Board of Directors to
declare dividends out of any funds legally available therefore. The
amount of dividends that the Company may distribute is limited by the
laws of the State of Nevada to an amount not in excess of the Company's
net assets. The Company has not paid cash dividends to date and it is not
<PAGE> 15
anticipated that any cash dividends will be paid in the foreseeable future.
The Board of Directors initially may follow a policy of retaining earnings,
if any, to finance the future growth of the Company. Accordingly, future cash
dividends, if any, will depend upon, among other considerations, the
Company's need for working capital and its financial conditions at the
time.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and
listed on the OTC Bulletin Board under the symbol "IREC."
The following table sets forth the range of high and low bid quotations
for the Company's common stock for each quarter of the last two fiscal
years, as reported by the OTC Bulletin Board. As of June 30, 1996, the
Company's market makers are: Empire State Securities, Paragon Securities,
and Knight Securities. The quotations represent inter-dealer prices
without retail markup, markdown or commission, and may not necessarily
represent actual transactions.
<TABLE>
<S> <C> <C>
Quarter Ended High Bid Low Bid
6/30/96 $8.375 $.87
</TABLE>
The Company's common stock commenced trading on the over-the-counter
market on April 18, 1996. Prior to that time, there was no market for the
securities of the Company.
The Company has never paid any cash dividends nor does it intend, at this
time, to make any cash distributions to the Company's shareholders as
dividends in the near future.
As of the start of trading on May 8, 1996, the Company had 147
beneficial (5%) owners of the Company's stock.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings nor is the Company
aware of any disputes which may result in legal proceedings.
<PAGE>16
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
During the Company's two most recent fiscal years or any later interim
period, there have been no changes in or disagreements with the Company's
principal independent accountant or a significant subsidiary's
independent accountant.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
<TABLE>
Date Name Amount Paid # of Shares
<S> <C> <C> <C>
9/18/95 Stephen Green $20,000 5,000
9/18/95 Philip Mach $6,000 1,500
9/18/95 Leland Mach $6,000 1,500
9/18/95 Florence K. Seymour $8,000 2,000
9/25/95 Jim Plaisted $40,000 10,000
9/25/95 Max Jensen $100,000 25,000
9/25/95 Lynn S. Webb $5,000 1,250
9/25/95 Karl D. Kuhlers $8,000 2,000
9/25/95 M.O. Van Damme $24,000 6,000
9/25/95 Ron Van Damme $32,000 8,000
9/25/95 Betty J. Bell $100 25
9/25/95 Adriana Benavides $1,000 250
9/25/95 Dale Kartchner $5,000 1,250
9/25/95 K.H. McLean $1,000 250
9/26/95 James B. Carey $5,000 1,250
9/27/95 Carl Baird $2,500 625
9/27/95 Jim Plaisted $16,000 8,000
9/29/95 Mark C. McLean $2,000 500
9/29/95 Mike Steinlight $9,500 2,375
10/2/95 Grant Kitamuran $10,000 2,500
10/2/95 Barry W. Wilson $5,000 1,250
10/2/95 George M. Alexander $5,000 1,250
10/2/95 James E. Poteat $400 100
10/5/95 Robert C. Cronkhite $5,000 1,250
10/5/95 Davidson Wood $10,000 2,500
10/7/95 Rudy W. Nelson $20,000 5,000
10/7/95 Gail Dawson $2,000 500
10/7/95 Robert G. Kellner $20,000 5,000
10/25/95 Victoria Love $5,000 1,250
10/25/95 Brian W. Nelson $5,000 1,250
10/30/95 Paul R. Savage $8,000 2,000
10/31/95 David H. Taylor $4,000 1,000
11/1/95 Jasper Vaughn $8,000 2,000
11/15/95 Steinlight $2,000 500
12/13/95 Florence Seymour $4,000 1,000
12/13/95 Leland Mach $2,000 500
12/13/95 Philip L. Mach $4,000 1,000
12/13/95 Helen Thornton $10,000 2,500
12/13/95 Lori Thornton $500 125
<PAGE> 17
12/13/95 Stephanie Wheeler $500 125
12/13/95 James Meuse $12,000 3,000
12/13/95 Betty Bell $400 100
12/13/95 Lisa Thornton $800 200
12/13/95 Christopher Swistock $2,000 500
12/13/95 Barbara Gangi $5,000 1,250
12/13/95 Stephen Meuse $10,000 2,500
12/13/95 Jasper Vaughn $2,000 500
12/23/95 Ronald Van Damme $12,000 3,000
1/7/96 Clyde H. Redding $1,000 250
1/7/96 J. Earl Klutts $10,000 2,500
1/7/96 Mike Hatten $1,000 250
1/7/96 R. Alan Hargett $1,000 250
1/7/96 Arthur F. Briggs III $1,000 250
1/7/96 Charles A. Eakins, Jr. $400 100
1/7/96 Barbara Taylor $500 125
1/7/96 Richard L. Smith $2,000 500
1/7/96 Kenneth McLean $1,500 250
1/7/96 Craig Christian $4,000 1,000
1/7/96 Todd Sarratt $1,000 250
1/11/96 Rob Bellevue $5,000 1,250
1/11/96 Max Jensen $60,000 15,000
1/23/96 Kimberlee J. Erwin $2,000 500
1/23/96 David B. Dame $24,000 6,000
1/23/96 Celia Ranson-Jameson $1,400 350
1/23/96 K. Richard Jameson $12,000 3,000
1/23/96 Alecia S. Dame $20,000 5,000
1/23/96 Richard L. Dame Family $60,000 15,000
1/23/96 Sean M. Dame Trust $24,000 6,000
1/23/96 Matthew R. Dame $20,000 5,000
1/23/96 Steven L. Vogel $1,000 500
1/23/96 Matthew R. Dame $5,000 1,000
1/23/96 Richard L. Dame $33,505 8,375.25
1/24/96 Donald Tenconi $4,000 1,000
1/24/96 Rae Kellner $4,000 1,000
1/24/96 Jasper Vaughn $4,000 1,000
1/24/96 Robert and Teresa Kellner $6,000 1,500
1/24/96 Rick Dame $10,000 2,500
1/26/96 Richard E. Matthews $50,000 12,500
1/31/96 James R. Meuse $15,000 3,000
1/31/96 Doreen E. Smith $500 100
1/31/96 Paul R. Savage $8,000 2,000
1/31/96 Stephanie Wheeler $500 100
1/31/96 Lori Thornton $500 100
1/31/96 Beth Anderson $2,500 500
1/31/96 W.B. Galbraith $2,200 440
2/5/96 Mark G. McDaniel $1,500 250
2/5/96 Terry P. McDaniel $1,500 250
2/14//96 Ronald W. Obermeyer $3,000 500
2/14/96 Mike Hatten $6,000 1,000
2/16/96 Todd Sarratt $3,000 500
</TABLE>
<PAGE> 18
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that it will indemnify its officers and
directors for liabilities arising from actions performed on behalf of
the Company to the extent allowed by Section 78.751 (as amended by Ch.
28,
L. 1987) of the Nevada Revised Statutes, as amended. Section 78.751 of
the Nevada Revised Statutes contains provisions entitling directors,
officers and employees of the Company to indemnification for their expenses
(including reasonable costs, disbursements and counsel fees) and liabilities
(including amounts paid or received in satisfaction of settlements,
judgments, fines and penalties), as the result of an action or proceeding in
which they may be involved by reason of being or having been a director,
officer or employee of a corporation provided said officers, directors or
employees acted in good faith and in a manner they reasonable believed to be
in or not opposed to the best interests of the corporation. INDEMNIFICATION
OF OFFICERS OR PERSONS CONTROLLING
THE CORPORATION FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT OF 1933, IS HELD TO BE AGAINST
PUBLIC POLICY BY THE SECURITIES AND EXCHANGE
COMMISSION AND IS THEREFORE UNENFORCEABLE.
<PAGE> 19
PART F/S
Robert G. Tschida
Certified Public Accountant
301 North Main
P.O. Box 5507
Pueblo, CO
81002 (719) 548-
9700
Independent Auditor's
Report
Board of Directors
4900 Seminary Road
Alexandria, VA 22311
I have audited the accompanying balance sheet of Imperial as of October 31,
1995. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion based on my
audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit of the financial
statements provides a reasonable basis for my opinion.
In my opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Imperial as of October 31, 1995
in conformity with generally accounting principles.
/s/ Robert G. Tschida, CPA
- --------------------------------------
Robert G. Tschida, CPA
December 31, 1994
- ---------------------------------------------------------------------------
- -Member of the American and Colorado Societies of Certified Public
Accountants
<PAGE> 20
<TABLE>
IMPERIAL PETROLEUM RECOVERY CORPORATION
(A Development State
Company) October 31,
1995
<CAPTION>
Assets
Current Assets
<S> <C>
Cash $ 51,608
Investment 100,261
------------
Total Current Assets $151,869
===========
Stockholders' Equity
Common Stock, Par Value $0.001;
Shares Authorized: 7,201,000 shares outstanding 7,201
Additional paid-in-Capital 144,668
---------
- --
Total Stockholders' Equity $151,869
==========
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE> 21
Imperial Petroleum Recovery Corporation and Subsidiary
Income Statement
For the period ending October 31,
1995
NO ACTIVITIES
The accompanying notes are an integral part of these financial statements
<PAGE> 22
<TABLE>
Imperial Petroleum Recovery Corporation and
Subsidiary Statement of Cash Flows
October 31, 1995
<CAPTION>
<S>
<C>
Cash Flows from Operating Activities $0
Net Cash Used in Operating Activities
0
Cash Flows from Financing Activities 151,869
Net Cash Provided by Financing Activities 151,869
Net Increase in Cash
151,869
Cash and Cash Equivalents, Beginning of Period 0
Cash and Cash Equivalents, End of Period $151,869
</TABLE>
<PAGE> 23
IMPERIAL PETROLEUM RECOVERY
CORPORATION (A Development
State Company)
Notes to the Financial
Statements October 31,
1995
Note 1: The company was incorporated in Nevada. The company is in
the development stage for a proprietary crude oil sludge remediation
process which uses high energy microwaves to separate water, oil and
solids. Up to 80% of the volume of sludge is recovered as oil and
sold. The process recovers usable hydrocarbon compounds from material
which otherwise would be toxic, hazardous or unusable. These units
will be sold through geographically specific marketing partnerships
worldwide. Imperial products solve serious environmental problems
associated with the production, transportation, and use of petroleum
products, which, until now, have defied solutions.
Note 2: The company has authorized 100,000,000 shares of Common
Stock with a par value of $0.001 and 10,000,000 shares of Preferred
Stock with a par value of $0.001.
Note 3: The transfer company is pacific Stock Transfer.
Note 4: The company is a development stage company and does not have
any significant operations.
<PAGE> 24
<TABLE>
Imperial Petroleum Recovery Corporation and Subsidiary
Consolidated Balance Sheet
(unaudited)
<CAPTION>
April 30, 1995 April 30, 1996
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $0 $150,127
Investment in common stock 0 62,500
Accounts receivable 0 788,285
Current portion of notes receivable 0 55,125
Inventory 0 869,841
Prepaid expenses 0 53,110
Total Current Assets 0 1,978,988
Fixed Assets, net 0 323,512
Goodwill 0 1,113,167
Accumulated Amortization 0 (70,438)
-------- ---------------
0 2,042,729
Technology Rights 0 4,000,000
Accumulated Amortization 0 (466,667)
0 3,533,333
Notes Receivable, net of current portion 0 316,543
Deposits 0 16,331
$0 $8,211,436
Liabilities and Stockholders' Equity
Current Liabilities
Line of credit $0 $319,570
Notes payable 0 17,998
Notes payable - shareholder 0 103,000
Accounts payable 0 263,280
Income taxes payable 0 22,950
Accrued expenses 0 150,716
Customer deposits 0 125,000
Deferred Taxes 0 278,442
Total Current Liabilities 0 1,280,956
<PAGE> 25
Note Payable - shareholder 0 4,000,000
Accrued Interest 0 233,333
Commitments and Contingencies 0 0
Stockholders' Equity
Common stock, $.001 par value;
100,000,000 shares authorized
8,810,213 shares outstanding 7,000 8,810
Additional paid-in-capital 0 4,146,195
Accumulated deficit (7,000) (1,457,858)
Total Stockholders' Equity 0 2,697,147
$0 $2,211,436
</TABLE>
<PAGE> 26
<TABLE>
Imperial Petroleum Recovery Corporation and
Subsidiary Consolidated Statement of
Operations
(unaudited)
<CAPTION>
Six months ended Six Months
ended April 30, 1995 April
30, 1996
<S> <C> <C>
Contract Services Revenue $0 $1,144,381
Contract Costs 0
Gross Profit 0 555,393
General and Administrative
Expenses 0 1,721,516
Loss from Operations 0 (1,166,123)
Other Income (Expense)
Interest income 0 ,197
Interest expense 0 (249,932)
------------ -----------0
(244,735)
Loss Before Income Taxes 0 (1,410,858)
Provision for Income Taxes 0 47,000
------------ ----------
Net Loss $0 $(1,457,858)
Loss per Share $0 $(.164)
</TABLE>
<PAGE> 27
<TABLE>
Imperial Petroleum Recovery Corporation and
Subsidiary Consolidated Statement of
Cash Flows
(unaudited)
<CAPTION>
Six months
ended April
30, 1996
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
Net loss $(1,457,858)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 574,918
Changes in assets and liabilities
net of effects from purchase of NSA, Inc.
Decrease in accounts receivable 465,174
Increase in inventory (869,841)
Increase in prepaid expenses and deposits (2,008)
Decrease in accrued expenses (64,587)
Increase in accrued interest 233,333
Decrease in deferred income taxes (26,000)
Increase in accounts payable 192,705
Increase in customer deposits 125,000
Total Adjustments 628,694
Net Cash Used in Operating Activities (829,164)
Cash Flows from Financing Activities
Paid-in capital 1,003,136
Proceed from sale of investments 100,261
Net payments on line of credit (270,430)
Net receipts from notes payable 100,123
Net disbursements for notes receivable (100,581)
Cash acquired from purchase of NSA, Inc. 95,174
Net Cash Provided by Financing Activities 927,683
Net Increase in Cash 98,519
Cash and Cash Equivalents, Beginning of Period 51,608
Cash and Cash Equivalents, End of Period $150,127
</TABLE>
<PAGE> 28
Imperial Petroleum Recovery Corporation and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements as of April 30, 1996, and for the six months ended
April 30, 1996, are unaudited; however, in the opinion of management, all
adjustments necessary for a fair presentation of the financial position,
results of operations, and cash flows for these interim periods have been
included. The results for the interim periods ended April 30, 1996, are not
necessarily indicative of the results to be obtained for the full fiscal year.
The significant accounting policies used in the preparation of the
accompanying financial statements are as follows:
Organization and Principles of Consolidation
The accompanying financial statements include the accounts of Imperial
Petroleum Recovery Corporation (Imperial) and its wholly-owned
subsidiary, National Security Analysts, Inc. (NSA) (collectively referred to
as the Company) for the period ending April 30, 1996. The subsidiary was
acquired effective January 1, 1996, in a purchase business combination.
All material intercompany transactions have been eliminated in
consolidation.
Imperial is a publicly held, Nevada corporation engaged in the
manufacture and marketing of a proprietary crude oil sludge remediation
system. Imperial is currently in the final testing stage of the first
production unit of its MST-4000 crude oil sludge on-site remediation system,
which is intended to be marketed worldwide for application in separating
crude oil sludge into hydrocarbons, water, and solids. Imperial's headquarters
is in the Washington, D.C., area.
NSA is a Virginia corporation which was incorporated April 28, 1986.
NSA provides analytical studies to agencies of the U.S. Government and
commercial clients, fleet management services to county governments, and
various business consulting services.
NSA maintains its corporate headquarters in Alexandria, Virginia, and
field offices in Tucson, Arizona; Seattle, Washington; and Warner Robins,
Georgia, and performs work on-site in Virginia, Arizona, and Florida.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenue and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE> 29
Accounting for NSA Contracts
Revenue is derived principally from fixed-price and time-and-materials
contracts. Revenue on fixed-price contracts is recognized on the
percentage-of-completion method based on costs incurred in relation to
total estimated costs. Revenue on time-and-materials contracts is
recognized to the extent of billable rates times hours delivered plus
materials expense incurred. Provision for estimated losses on uncompleted
contracts is recognized within the period in which such losses become
known.
Customer deposits at April 30, 1996, consist of a deposit for the purchase
of an MST-4000 unit, subject to refund, pending acceptance and delivery of
the unit.
Because of inherent uncertainties in estimating costs, it is at least
reasonably possible that the estimates used will change within the near
term.
Inventory
Inventory consists of components and assembly costs associated with an MST-
4000 unit scheduled for delivery in July 1996.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided for using the straight-line method. Property and equipment are
depreciated over the estimated economic lives of five to ten years.
Maintenance, repairs and minor renewals are expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash in checking and money
market accounts, and short-term investments with original maturity dates of
three months or less.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. Management believes the Company is not
exposed to any significant credit risk on cash and cash equivalents.
Investment in Common Stock
The Company received 166,667 shares of stock in a publicly held company
in 1995 for payment of a note receivable. Investments in stock are recorded
at fair market value as of 12/31/95.
Income Taxes
The Company provides for deferred taxes on temporary differences arising
from assets and liabilities whose basis are different for financial
reporting and state and federal income tax purposes. The differences relate
primarily to accounts receivable, accounts payable, and accrued expenses
arising from the use of the cash method of accounting for income tax
purposes.
<PAGE> 30
Intangibles
Goodwill associated with the acquisition of NSA is being amortized over
ten years on a straight-line basis. Costs associated with the purchase of
certain technology rights are being amortized over five years on a
straightline basis.
NOTE B-ACQUISITION
Effective January 1, 1996, the Company acquired 100% of the outstanding
common stock of National Security Analysts, Inc. (NSA), a Washington,
D.C., based management consulting firm, in exchange for the issuance of
750,000 shares of common stock valued at $3,000,000, based upon the
value associated with other stock transactions.
The acquisition has been accounted for as a purchase, giving rise to
goodwill of approximately $2,100,000, representing the value of the
purchase price over the fair value of the assets and liabilities of NSA. The
accompanying financial statements reflect the operations of NSA since the
effective date of the acquisition. A summary of the purchase price
allocation is as follows:
<TABLE>
<S> <C>
Cash $95,000
Accounts receivable 1,239,000
Other current assets 212,000
Property and equipment 361,000
Other assets 203,000
Notes payable (596,000)
Accounts payable and
other current liabilities (324,000)
Deferred taxes (304,000)
Goodwill 2,114,000
$3,000,000
</TABLE>
NOTE C-PROPERTY AND EQUIPMENT
Property and equipment at April 30, 1996, consist of the following:
<TABLE>
<S> <C>
Furniture and fixtures $234,096
Computer equipment 212,332
Office equipment 106,044
Vehicles 84,573
Software 45,322
Tool and test equipment 28,595
Leasehold improvements 38,009
748,971
Less accumulated depreciation
and amortization (425,459)
Net property and equipment $323,512
</TABLE>
<PAGE> 31
NOTE D-ACCOUNTS RECEIVABLE
Accounts receivable as of April 30, 1996, consist of the following:
<TABLE>
<S> <C>
Billed $657,961
Unbilled 48,451
Unbilled-contract claim 81,873
$788,285
</TABLE>
NOTE E-NOTES RECEIVABLE AND ADVANCES
Notes receivable and advances as of April 30, 1996, consist of the
following:
<TABLE>
<S> <C>
Note receivable from related parties $336,962
Note receivable, interest at 10%, due on demand 52,500
Note receivable, interest at 9%,
payments of $500 per month 2,625
Total notes receivable and advances 392,087
Allowance for doubtful amounts (20,419)
371,668
Current portion (55,125)
$316,543
</TABLE>
NOTE F-LINE OF CREDIT
At April 30, 1996, the Company had outstanding borrowings of $319,570
under a line-of-credit agreement. The agreement expired April 30, 1996,
and has been extended on a short-term basis, subject to issuance of
December 31, 1995, audited financial statements. The line of credit
bears interest at the bank's prime rate plus 1 percent (9.25% at April 30,
1996). Borrowings may not exceed $750,000, and are limited to 90% of
government accounts receivable aged less than 90 days, and 75% of
government subcontract and commercial accounts receivable aged less than
90 days (limited to a maximum of $375,000). The Company's accounts
receivable are pledged, and related contracts assigned as collateral for
the agreement. Borrowings are personally guaranteed by the majority
stockholder.
<PAGE> 32
NOTE G-NOTES PAYABLE
Effective October 1, 1995, the company acquired the rights to the
technology on which the Company's oil sludge remediation process is
based, from a company owned by certain stockholders of the Company. In
exchange for those rights, the Company issued a note for $4,000,000 at an
interest rate of 10%, payable in annual installments of $1,000,000, plus
accrued interest, beginning October 1, 1997.
Other notes payable consist of a note payable to a bank for an automobile,
payable in monthly installments of $433 at an interest rate of 9.4% through
May 2000, collateralized by the auto, and a note due to a shareholder for
$103,000, due on demand.
NOTE H-PENSION PLAN
NSA maintains a defined contribution profit-sharing plan under provisions
of Section 401(k) of the Internal Revenue Code. The plan covers
substantially all employees who elect to participate and are over the age
of 21 with six months of service. The plan provides for elective salary
deferrals by employees up to 15% of their annual salary and annual
discretionary Company contributions. For the six months ended April 30,
1996, no contributions were made by the Company.
NOTE I-COMMITMENTS AND CONTINGENCIES
The Company leases office space under noncancelable operating leases
which expire at various dates through 1998. The offices leases provide for
future rental increases based on the Company's pro rata share of increases
in building operating expenses, real estate taxes, and for inflation
adjustments based on increases in the Consumer Price Index. Rent expense
for the six months ended April 30, 1996, was approximately $80,000.
Future minimum lease commitments under noncancelable operating leases
are as follows:
<TABLE>
Year ending December 31,
<CAPTION>
<S> <C>
1996 $115,434
1997 170,052
1998 56,684
342,170
Noncancelable sublease rentals (19,125)
$323,045
The Company renewed its largest contract in March 1996. The contract
represented approximately 65% of the Company's revenue in 1995.
<PAGE> 33
The Company did not recompete for a contract which represented
approximately 18% of the Company's revenue in 1995, because of the lack
of profitability associated with the contract. The contract expired in
January 1996.
NOTE J-SUBSEQUENT EVENTS
In June 1996, the Company agreed to acquire 100% of the outstanding
common stock of Phonon Technologies, Inc. (PTI), a Houston, Texas, based
research and development company, engaged in the development of
microwave chemistry technologies. The purchase price is currently being
negotiated and assumed to be $710,000. The acquisition is scheduled to
close in July 1996.
The purchase price for PTI will be in the form of $10,000 in cash for
the stock of PTI, and cash payments totaling approximately $700,000 to
retire preexisting loans to PTI stockholders to be made between closing
and October 31, 1996. The acquired shares of PTI will remain in escrow
as security until all payments due under the acquisition agreement are
made.
The accompanying pro forma balance sheet reflects the Company's
financial position on a pro forma basis as if the acquisition of PTI had
occurred April 30, 1996.
</TABLE>
<TABLE>
Assets
<CAPTION>
<S> <C>
Current assets
Cash and cash equivalents $160,127
Investment in common stock 62,500
Accounts receivable 788,285
Current portion of notes receivable 55,125
Inventory 869,841
Prepaid expenses 53,110
Total current assets 1,988,988
Fixed assets, net 339,512
Goodwill 2,113,167
Accumulated amortization (70,438)
2,042,729
Technology Rights 4,000,000
Accumulated amortization (466,667)
5,533,333
<PAGE> 34
Patent 724,000
Notes receivable, net of current portion 316,543
Deposits 16,331
$8,961,436
Liabilities and Stockholders' Equity
Current liabilities
Line of credit $319,570
Notes payable 697,998
Notes payable-shareholder 103,000
Accounts payable 323,280
Income taxes payable 22,950
Accrued expenses 150,716
Customer deposits 125,000
Deferred taxes 278,442
Total current liabilities 2,020,956
Notes Payable - stockholder 4,000,000
Accrued Interest 233,333
Commitments and contingencies -
Stockholders' equity
Common stock 8,810
Additional paid-in capital 4,156,195
Accumulated deficit (1,457,858)
Total stockholders' equity 2,707,147
$8,961,436
</TABLE>
<PAGE> 35
PART III
ITEM 1. INDEX TO EXHIBITS
(2) Charter and By-Laws
(3) Instruments defining the rights of security holders
(5) Voting Trust Agreement - Not Applicable
(6) Material Contracts
(7) Material Foreign Patents - Not Applicable
(12) Additional Exhibits
ITEM 2. DESCRIPTION OF EXHIBITS
(2) Articles of Incorporation
(2.1) Amendments
(2.2) Articles of Merger
(2.3) Bylaws - to be filed by Amendment
(3) Common Stock Certificate - to be filed by amendment
(6) Acquisition Agreement with NSA, Inc. - to be filed by amendment
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
IMPERIAL PETROLEUM RECOVERY CORPORATION
Date: August 5, 1996
-----------------------
By: /s/ Barry Meuse
----------------
President
<PAGE>1
Articles of Incorporation
of
ZIA'S ITALIAN FOODS, INC.
FIRST: The name of the corporation is:
ZIA'S ITALIAN FOODS, INC.
SECOND: The principal place of business of the corporation within the
State of Nevada shall be:
c/o Marquis, Haney & Aurback, P.C.
228 South Fourth Street, First Floor Las Vegas, Nevada
89101
THIRD: The purposes and the objects for which this corporation is
formed are: To engage in any lawful activity allowed by the laws of
the State of Nevada.
FOURTH: The total authorized stock of the corporation is FIFTY
MILLION (50,000,000) shares of common stock having a par value of one
cent ($.01) per share.
FIFTH: The governing body of the corporation shall be known as
directors, and the number, names and post office addresses of the first
board of directors, which may not be less than three unless the articles set
forth that the initial number of stockholders shall be less than three,
together with any desired provisions relative to the rights to change the
number of directors as provided in NRS 78.330.
SIXTH: The capital stock, after the amount of the subscription price, or par
value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH: The name and post office addresses of each of the
incorporators signing the Articles of Incorporation are as
follows:
Owen K. Stephenson
650 Sacramento Street
San Francisco, California 94111
G. Alfred Roensch
650 Sacramento Street
San Francisco, California 94111
<PAGE> 2
Meshell R. Breshears
650 Sacramento Street
San Francisco, California 94111
EIGHTH: The corporation is to have perpetual existence.
NINTH: The number of directors constituting the Board of Directors
shall be three (3). The names are:
Owen K. Stephenson
650 Sacramento Street
San Francisco, California 94111
G. Alfred Roensch
650 Sacramento Street
San Francisco, California 94111
Meshell R. Breshears
650 Sacramento Street
San Francisco, California 94111
TENTH: No director or officer of the corporation shall be personally liable
to the corporation, or its stockholders for breach of duty as a director or
officer; except that such limitation shall in no eliminate or limit the
liability of a director or officer for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (b) the
payment of dividends in violation of NRS 78.300.
WE, the undersigned, being each of the incorporators hereinbefore named
for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Nevada, do take and file these Articles of
Incorporation, hereby declaring and certifying that the facts herein stated
are
true and accordingly have hereunto set our hands this 6th day of
February, 1990.
/s/ Owen K.Stephenson
-------------------------
Owen K. Stephenson
/s/ G. Alfred Roensch
------------------------
G. Alfred Roensch
/s/ Meshell R. Breshears
------------------------
Meshell R. Breshears
State of California )
)ss
City and County of San Francisco)
<PAGE> 3
On February 6, 1990, before me, the undersigned, a Notary Public in and
for the City and County of San Francisco, California, personally appeared
Owen K. Stephenson, G. Alfred Roensch, Meshell R. Breshears, known to
me to be the persons whose names are subscribed to the foregoing Articles
of Incorporation, and acknowledged to me that they executed the same.
/s/ Lisa M. Bush
----------------------
Notary Public
My commission expires March 22, 1993
<PAGE>1
AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
ZIA'S ITALIAN FOODS, INC.
We, Steven W. Ricketts, and Dennis G. Kelly, President and Secretary,
respectively, hereby state:
First; Pursuant to the provisions of Sec. 78.385 and 78.390 of the
Nevada Business Corporation Act, the undersigned hereby adopt the following
amendment to its Articles, as follows:
ARTICLE I: The name of the corporation is:
ZIA'S ITALIAN FOODS, INC.
NEW ARTICLE I: The name of the corporation is:
ACADEMIC SCHOOLS, INC.
SECOND: The foregoing amendment to the Articles of Incorporation of the
corporation were authorized and approved by a majority of the Board of
Directors on November 1, 1990 by unanimous consent of the Board of
Directors, and where pursuant to Section 78.230 of the Nevada Business
Corporation Act, a majority of the shareholders have consented to said
amendment.
/s/ Steven W. Ricketts /s/ Dennis G. Kelly
- -------------------------------- --------------------------
Steven W. Ricketts, Present Dennis G. Kelly, Secretary
State of California )
)ss
County of Nevada )
On November 1, 1990, before me, the undersigned, a Notary Public
personally appeared Steven W. Ricketts and Dennis G. Kelly known to me
to be the persons whose names are subscribed to the foregoing Amendment
to Articles of Incorporation and acknowledged that they executed the
same.
/s/ C. Mondae Hott
----------------------------
Notary Public
My commission expires: July 25, 1994
<PAGE> 2
AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
ACADEMIC SCHOOLS, INC.
We, Owen K. Stephenson and G. Alfred Roensch, President and Secretary,
respectively, hereby state:
First; Pursuant to the provisions of Sec. 78.385 and 78.390 of the
Nevada Business Corporation Act, the undersigned hereby adopt the following
amendment to its Articles, as follows:
ARTICLE I: The name of the corporation is:
ACADEMIC SCHOOLS, INC.
NEW ARTICLE I: The name of the corporation is:
REBOUND PAIN REDUCTION & REHABILITATION, INC.
SECOND: The foregoing amendment to the Articles of Incorporation of the
corporation were authorized and approved by a majority of the Board of
Directors on December 6, 1990 by unanimous consent of the Board of
Directors, and where pursuant to Section 78.230 of the Nevada Business
Corporation Act, a majority of the shareholders have consented to said
amendment.
/s/ Owen K. Stephenson /s/ G, Alfred Roensch
- ---------------------------------- --------------------------------
Owen K. Stephenson, President G, Alfred Roensch, Secretary
State of California )
)ss
County of San Francisco )
On December 6, 1990, before me, the undersigned, a Notary Public
personally appeared Owen K. Stephenson and G, Alfred Roensch
known to me to be the persons whose names are subscribed to the
foregoing Amendment to Articles of Incorporation and acknowledged that
they executed the same.
/s/ Lisa M. Bush
-------------------------
Notary Public
My commission expires: March 22, 1993
<PAGE> 3
AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
REBOUND PAIN & REDUCTION & REHABILITATION, INC.
I, Gary Luttrell, Secretary, hereby state:
First; Pursuant to the provisions of Sec. 78.385 and 78.390 of the Nevada
Business Corporation Act, the undersigned hereby adopt the following amendment
to its Articles, as follows:
ARTICLE I: The name of the corporation is:
REBOUND PAIN & REDUCTION & REHABILITATION, INC.
NEW ARTICLE I: The name of the corporation is:
IMPERIAL PETROLEUM RECOVERY CORPORATION
SECOND: The foregoing amendment to the Articles of Incorporation of the
corporation were authorized and approved by a majority of the Board of
Directors on January 15, 1996 by unanimous consent of the Board of
Directors, and where pursuant to Section 78.230 of the Nevada Business
Corporation Act, a majority of the shareholders have consented to said
amendment.
/s/ Gary Luttrell
-------------------------
Gary Luttrell, Secretary
State of California )
)ss
County of Marin )
On January 16, 1990, before me, SUSAN DUPUIS, a Notary Public
personally appeared Gary Luttrell personally known to me (OR -------
proven to me on the basis of satisfactory evidence) to be the persons
whose name (S) is/are subscribed to the within instrument, and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Susan Dupuis
-------------------------
SUSAN DUPUIS, Notary Public
My commission expires: FEB. 25, 1997
<PAGE>1
CERTIFICATE AND AGREEMENT OF MERGER
OF
ZIA'S ITALIAN FOODS, CORP., A Utah Corporation
pursuant to the
General Corporation
laws of the State
of Utah
INTO
ZIA'S ITALIAN FOODS, INC. a Nevada Corporation
as the surviving corporation, pursuant to Section 450 et
seq. Nevada Revised Statutes
AGREEMENT OF MERGER, dated this 4th day of April, 1990, between
ZIA'S ITALIAN FOODS, CORP. (ZIF), a Utah Corporation, and all of the
Directors thereof, and ZIA'S ITALIAN FOODS, INC. (ZIA'S), a
Nevada corporation, and all of the Directors thereof, the two corporation
being hereinafter sometimes called the Constituent Corporations.
WHEREAS the Board of Directors of each of the Constituent Corporations deem
it advisable for the welfare of the Constituent Corporations that these
corporations merge under the terms and conditions hereinafter set forth,
such merger to be effected pursuant to the statutes of the State of Utah
and the statutes of the State of Nevada, and they have duly approved and
authorized the terms of agreement of merger.
WHEREAS ZIF is a corporation duly organized under the laws of the State
of Utah, having been incorporated on March 23, 1992 with authorized
capital stock consisting of 100,000,000 shares all of which are of one
class with a par value of $.0001 per share of which 40,000 shares are
issued and outstanding;
AND WHEREAS, ZIA'S is a corporation duly organized under the laws of
the State of Nevada having been incorporated on February 8, 1990 with
authorized capital stock consisting of 50,000,000 shares of $.01 par
value of which 100 are issued and outstanding.
AND WHEREAS, the laws of the States of Utah and Nevada permit such a
merger, and the Constituent Corporations desire to merge under and
pursuant to the provisions of the laws of their respective states;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, it is agreed that ZIF of Utah
shall be merged into ZIA'S of Nevada, which shall be the Surviving
Corporation, and the terms and conditions of such merger and the mode of
carrying it into effect are and shall be as follows:
1. NAME OF SURVIVING CORPORATION: The name of the
corporation, which is sometimes hereinafter referred to as the Surviving
Corporation, shall, and, from and after the effective date of the merger,
be ZIA'S. The separate existence of ZIF of Utah shall cease at the
<PAGE> 2
effective time of the merger, except insofar as it may be continued by law
or in order to carry out the purposes of this Agreement of Merger and except
as continued in the Surviving Corporation.
2. ARTICLES OF INCORPORATION OF SURVIVING
CORPORATION: The Articles of Incorporation of the Surviving
Corporation shall be the Articles of Incorporation of ZIA'S of Nevada, a
copy of which is annexed as Exhibit 1, hereto.
3. BYLAWS: The bylaws of ZIA'S of Nevada at the effective time of
the merger shall be the bylaws of the Surviving Corporation until altered
or replaced as provided therein.
4. BOARD OF DIRECTORS AND OFFICERS: The members of the
Board of Directors and the officers of the Surviving Corporation
immediately after the effective time of the merger shall be those persons
who were the members of the Board of Directors and the officers,
respectively of ZIA'S of Nevada immediately prior to the effective time of
the merger, and such persons shall serve in such offices, respectively,
for the terms provided by laws or in the Bylaws, or until their respective
successors are elected and qualified.
5. AUTHORITY TO CONDUCT BUSINESS: ZIA'S of Nevada
represents that the corporation has not filed an application for authority
to do business in Utah. The Surviving Corporation will conduct no such
business in Utah without first filing and having such application
approved.
6. CONVERSION OF SHARES: The manner of converting the
shares of the Constituent Corporations into the shares of the Surviving
Corporation shall be set forth in this paragraph, as follows:
immediately upon the effective date of the merger, each shares of stock of
ZIF of Utah outstanding in the hands of the public being all of the shares of
ZIF of Utah outstanding without any action on the part of the holder thereof,
shall automatically become and be converted into common stock of the Surviving
Corporation at the rate of twenty five (25) shares of stock of the Surviving
Corporation for one share of the common stock of ZIF of Utah and each
outstanding certificate representing shares of common stock of ZIF of Utah
shall thereupon be deemed for all corporate purposes (other than the
payment of dividends) to evidence the ownership of the number of fully
paid, nonassessable shares of common stock of the Surviving Corporation
into which such shares of common stock of ZIF of Utah shall have been
so converted.
7. RIGHTS OF SHAREHOLDERS: After the effective time of the
merger, each holder of a certificate which theretofore represented shares
of common stock of ZIF of Utah shall cease to have any rights as a
shareholder of ZIF of Utah, except such as are expressly reserved to such
stockholders by statute. After the effective time of the merger, any
holder of a certificate or certificates which theretofore represented shares
of the common stock of ZIF of Utah may, but shall not be required to,
surrender the same to the Transfer Agent of the Surviving Corporation,
Montgomery Transfer, 654 Sacramento Street, First Floor, San Francisco,
California 94111, and shall thereupon be entitled to receive in exchange
<PAGE>3
therefore a certificate or certificates representing the number of shares of
common stock of ZIF of Utah theretofore represented by each certificate or
certificates shall have been converted.
8. EFFECTIVE DATE OF MERGER:
(a) For all purposes of the laws of the State of Utah, this Agreement of
Merger and the merger herein provided for shall become effective and the
separate existence of ZIF, a Utah corporation, except insofar as it may be
continued by statute, shall cease as soon as this Agreement of Merger shall
have been adopted, approved, signed and acknowledged in accordance with
the laws of the State of Utah and certificates of its adoption and approval
shall have been executed in accordance with such laws; and this
Certificate and Agreement of Merger shall have been filed in the office of
the Department of State of the State of Utah.
(b) For all purposes of the laws of the State of Nevada, this Agreement
of Merger and the merger herein provided for shall become effective and the
separate existence of ZIF of Utah, except insofar as it may continued by
statute, shall cease as soon as this Agreement shall have been adopted,
approved, signed and acknowledged in accordance with the laws of the
State of Nevada and certificates of its adoption and approval shall have
been executed in accordance with such laws; and this Certificate of Merger
shall have been filed in the Secretary of State of the State of Nevada.
(c) The corporate identity, existence, purposes, powers, objects,
franchises, rights and immunities of ZIA'S of Nevada shall continue
unaffected and unimpaired by the merger hereby provided for, and the
corporate identities, existences, purposes, powers, objects, franchises,
rights and immunities of ZIF of Utah shall be continued in and merged into
ZIA'S of Nevada and ZIA'S of Nevada shall be fully vested therewith.
(d) The date upon which this Agreement is filed in the offices mentioned
above and upon which the Constituent Corporations shall so become a
single corporation is the effective date of the merger.
9. AUTHORIZATION: The parties hereto acknowledge and
respectively represent that this Merger Agreement is authorized by the laws
of the respective jurisdictions of the Constituent Corporations and that the
matter was approved at a special shareholders meeting of the respective
corporations at which the shareholders voted as follows:
<TABLE>
SHARES VOTED
VOTED CORPORATION OUTSTANDING FOR
AGAINST
=========================================================
<S> <C> <C>
ZIA'S ITALIAN FOODS, INC., 100 100
0
a Nevada Corporation
ZIA'S ITALIAN FOODS, CORP. 40,000 40,000
0 a Utah Corporation
</TABLE>
<PAGE> 4
10. FURTHER ASSURANCES OF TITLE: As and when requested
by the Surviving Corporation or by its successors or assigns, IF of Utah will
execute and deliver or cause to be executed and delivered all such deeds and
instruments and will take or cause to be taken all such further action as the
Surviving Corporation may deem necessary or desirable in order to vest in and
confirm to the Surviving Corporation title to and possession of any property
of any of the Constituent Corporations acquired by the Surviving Corporation
by reason or as a result of the merger herein provided for and otherwise to
carry out the intent and purposes hereof, and the officers and directors of
ZIF of Utah and the officers and directors of the Surviving Corporation are
fully authorized in the name of the respective Constituent Corporations or
otherwise to take any and all such action.
11. SERVICE OF PROCESS OF SURVIVING CORPORATION:
The Surviving Corporation agrees that it may be served with process in the
State of Utah in any proceedings for enforcement of any obligation of ZIF
of Utah as well as for the enforcement of any obligation of the Surviving
Corporation arising from the merger, including any suit or other
proceedings to enforce the right of any shareholder as determined in
appraisal proceedings to enforce the right of any shareholder as
determined in appraisal proceedings pursuant to the provisions of the
General Corporation Law of Utah and hereby irrevocable appoints the
Secretary of State of Utah as its agent to accept service of process in any
suit or other proceedings. Copies of such process shall be mailed to ZIA'S c/o
G. Alfred Roensch, Esq., 650 Sacramento Street, San Francisco, California
94111, until further notice.
12. SHAREHOLDERS RIGHT TO PAYMENT: The Surviving Corporation agrees that
subject to the provisions of the General Corporation Law of the State of Utah,
it will pay to the shareholders of ZIF of Utah the amounts, if any, to which
such shareholders may be entitled under the provisions of the above statutes of
the laws of Utah as the case may be.
13. ABANDONMENT: This Agreement of Merger may be abandoned
(a) by either Constituent Corporation, acting by its Board of Directors, at
any time prior to its adoption by the shareholders of both of the
Constituent Corporations as provided by law, or (b) by the mutual consent of
the Constituent Corporation, acting each by its Board of Directors, at any
time after such adoption by such shareholders and prior to the effective
time of the merger. In the event of the abandonment of this Agreement of
Merger pursuant to (a) above, notice thereof shall be given by the Board of
Directors of the Constituent Corporation and thereupon, or abandonment
pursuant to (b) above, this Agreement of Merger shall become wholly void and
of no effect and there shall be no further liability or obligation hereunder
on the part of either of the Constituent Corporations or of its Board of
Directors or shareholders.
IN WITNESS WHEREOF each of the Constituent Corporations, pursuant
to authority granted by its Board of Directors, has caused this Agreement
of merger to be executed by a majority of its Board of Directors and by its
President and Secretary.
<PAGE 5>
The respective Directors and Officers of the Constituent Corporations do
hereby certify that the above Merger Agreement was adopted as set forth in
the above Agreement and that said resolutions have not been revoked or
rescinded.
ZIA'S ITALIAN FOODS, CORP.
A Utah Corporation
/s/ G. Alfred Roensch
-------------------------------
G. Alfred Roensch
President & Director
/s/ Meshell R. Breshears
-------------------------------
Meshell R. Breshears
Secretary & Director
State of California )
)ss
City and County of San Francisco)
This instrument was acknowledged before me this 4th day of April, 1990,
by G. Alfred Roensch and Meshell R. Breshears, known to me to be the
officers and directors of ZIA'S ITALIAN FOODS, CORP., a Utah
Corporation, as set forth under their respective signatures.
/s/ Lisa M. Bush
-----------------------------
Notary Public
My commission expires March 22, 1993
ZIA'S ITALIAN FOODS,
INC. A Nevada
Corporation
/s/ G. Alfred Roensch
-----------------------
G. Alfred Roensch
President & Director
/s/ Meshell R. Breshears
-------------------------
Meshell R. Breshears
Secretary & Director
<PAGE> 6
State of California )
)ss
City and County of San Francisco)
This instrument was acknowledged before me this 4th day of April, 1990,
by G. Alfred Roensch and Meshell R. Breshears, known to me to be the
officers and directors of ZIA'S ITALIAN FOODS, INC., a Nevada
Corporation, as set forth under their respective signatures.
/s/ Lisa M. Bush
----------------------
Notary Public
My commission expires March 22, 1993
