<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Quarterly Period Ended April 30, 2000
Commission File Number: 0-21169
IMPERIAL PETROLEUM RECOVERY CORPORATION
--------------------------------------------------
(Exact Name of Issuer as Specified in its Charter)
NEVADA 76-0529110
------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
2325-A Renaissance Drive, Las Vegas, Nevada 89119
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(Address of Principal Executive Offices)
(702) 798-6800
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
There were 16,444,463 shares of the Registrant's $0.001 par value common stock
outstanding as of June 12, 2000.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of April 30, 2000
and October 31, 1999 . . . . . . . . . . . . . . . . . . 3-4
Consolidated Statements of Operations for the
Three and Six Months Ended April 30, 2000 and 1999 . . . 5
Consolidated Statements of Cash Flows for the
Six Months Ended April 30, 2000 and 1999 . . . . . . . . 6-7
Notes to Consolidated Financial Statements . . . . . . . 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 12-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 16
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . 16-17
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders. . . 17
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 17
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2
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PART I. FINANCIAL INFORMATION
ITEM I. CONSOLIDATED FINANCIAL STATEMENTS
IMPERIAL PETROLEUM RECOVERY CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEETS
April 30, October 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 229,134 $ 17,774
Accounts Receivable 29,322 -
Inventory - net of reserve of $260,000 at
April 30, 2000 and October 31, 1999 56,017 -
Prepaid Expenses 34,053 7,506
----------- -----------
Total Current Assets 348,526 25,280
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $146,243 at
April 30, 2000 and $93,963 at October 31,
1999, respectively 699,726 527,099
OTHER ASSETS, net of accumulated amortization
of $2,792 at April 30, 2000 and $1,540 at
October 31, 1999, respectively 66,177 41,262
----------- -----------
$ 1,114,429 $ 593,641
=========== ===========
(Continued)
3
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IMPERIAL PETROLEUM RECOVERY CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEETS (Continued)
April 30, October 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Trade Accounts Payable $ 135,337 $ 270,745
Payables to Related Parties - 5,829
Accrued Liabilities 89,744 115,959
Deferred Revenue 54,464 15,764
Note Payable Related Party 60,000 -
Current Maturities of Long-Term Obligations 50,033 50,033
------------ -----------
Total Current Liabilities 389,578 458,330
LONG-TERM OBLIGATIONS - less current
maturities 221,500 221,500
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, par value $0.001; authorized
100,000,000 shares; reserved 12,709,946
shares; issued and outstanding 16,415,675
at April 30, 2000 and 15,901,597 at
October 31, 1999, respectively 16,416 15,902
Additional Paid-in Capital 10,838,969 9,910,983
Common Stock Subscriptions receivable (6,509) (6,509)
Deficit Accumulated During the Development
Stage (10,345,525) (10,006,565)
----------- -----------
Total Stockholders' Equity (Deficit) 503,351 (86,189)
----------- -----------
$ 1,114,429 $ 593,641
============ ===========
The accompanying notes are an integral part of these financial statements.
4
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IMPERIAL PETROLEUM RECOVERY CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Cumulative
Amounts For the three For the six
Since months ended April 30, months ended
Inception 2000 1999 2000 1999
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 282,892 $ 52,678 $ 14,000 $ 146,855 $ 36,512
Cost of goods sold 221,120 67,548 33,817 109,197 80,954
------------ --------- --------- --------- ---------
Gross profit (loss) 61,772 (14,870) (19,817) 37,658 (44,442)
Operating expenses
General and adminis-
trative 6,792,122 234,974 185,588 384,176 350,075
Research and develop-
ment-prototype 3,371,341 - 22,518 - 41,153
Acquired research and
development-prototype 349,500 - - - -
Loss on abandonment of
leased facility 161,918 - - - -
------------ --------- --------- --------- ---------
10,674,881 234,974 208,106 384,176 391,228
------------ --------- --------- --------- ---------
Loss from
operations (10,613,109) (249,844) (227,923) (346,518) (435,670)
Other expense includ-
ing interest-net (90,667) (11,603) (2,439) (18,576) (10,153)
------------ --------- --------- --------- ---------
Loss before extra-
ordinary item (10,703,776) (261,447) (230,362) (365,094) (445,823)
Extraordinary item-
gain on extinguish-
ment of debt 358,251 26,134 2,067 26,134 2,067
------------ --------- --------- --------- ---------
Net loss $(10,345,525) $(235,313) $(228,295) $(338,960) $(443,756)
============ ========= ========= ========= =========
Net loss per common
share-basic and
diluted
Loss before extra-
ordinary item $ (.96) $ (.02) $ (.02) $ (.02) $ (.03)
Extraordinary item .03 - - - -
------------ --------- --------- --------- ---------
Net loss $ (.93) $ (.02) $ (.02) $ (.02) $ (.03)
============ ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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IMPERIAL PETROLEUM RECOVERY CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Cumulative
amounts Six months ended
since April 30
inception 2000 1999
------------ --------- ---------
Increase (decrease) in cash and cash
equivalents
Cash flows from operating activities
Net loss $(10,345,525) $(338,960) $(443,756)
Adjustments to reconcile net loss
to net cash used in operating
activities
Contributed capital for services
rendered and liabilities paid 56,023 30,000 -
Gain on extinguishment of debt (358,251) (26,134) (2,067)
Depreciation and amortization 149,367 53,533 12,538
Non-cash charge associated with
acquisition 349,500 - -
Accrued loss on abandonment of
leased facility 161,918 - -
Charges associated with stock
issuances to employees, vendors,
related parties 775,107 - -
Non-cash expenses incurred by
affiliate 661,677 - -
Loss on disposal of property
and equipment 13,177 - -
Changes in assets and liabilities
Accounts receivable (29,322) (29,322) (14,000)
Inventory (56,017) (56,017) -
Prepaid expenses (3,547) (3,547) 7,221
Other assets (74,935) (26,167) (5,591)
Trade accounts payable 1,051,729 (109,274) 73,942
Payable to related parties (5,829) (5,829) -
Accrued liabilities 218,086 (26,215) 18,272
Accrued lease obligations (2,618) - -
Deferred revenue 54,464 38,700 -
------------ --------- ---------
Total adjustments 2,960,529 (160,272) 90,315
Net cash used in operating
activities (7,384,996) (499,232) (353,441)
------------ --------- ---------
Cash flows from investing activities
Cash paid for acquisition (94,000) - -
Purchases of property and equipment (861,020) (224,908) (1,636)
------------ --------- ---------
Net cash used in investing
activities (955,020) (224,908) (1,636)
------------ --------- ---------
(Continued)
6
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IMPERIAL PETROLEUM RECOVERY CORPORATION AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued (Unaudited)
Cumulative
amounts Six months ended
since April 30
inception 2000 1999
------------ --------- ---------
Cash flows from financing activities
Proceeds from issuance of common
stock and warrants 6,478,500 875,500 300,000
Proceeds from issuance of long-term
obligations 2,681,569 60,000 50,000
Principal payments on long-term
obligations (590,919) - (1,907)
------------ --------- ---------
Net cash provided by financing
activities 8,569,150 935,500 348,093
------------ --------- ---------
Net increase (decrease) in cash
and cash equivalents 229,134 211,360 (6,984)
Cash and cash equivalents at beginning
of period - 17,774 49,342
------------ --------- ---------
Cash and cash equivalents at end of
period $ 229,134 $ 229,134 $ 42,358
============ ========= =========
Supplemental disclosure of cash
flow information:
Cash paid during the period
for interest $ 5,000 $ 5,000
============ =========
Noncash investing and financing activities:
In February 2000, an extraordinary gain was recognized on the forgiveness of
an obligation to a vendor in the amount of $26,134.
On March 2, 2000, the Company issued 10,000 shares of Common Stock valued at
$23,000 to a vendor as a deposit for future services to be rendered.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Presentation
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles for interim financial information and
pursuant to the regulations of the Securities and Exchange Commission;
accordingly they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation (consisting of normal recurring accruals) have been included.
The results of operations for the six month period ended April 30, 2000 are
not necessarily indicative of the results for the fiscal year ending October
31, 2000. The accompanying unaudited consolidated financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended October 31, 1999.
2. Organization and business activity
Imperial Petroleum Recovery Corporation and Subsidiary (a development stage
company incorporated in Nevada) ("the Company") has been in the development
stage since commencement of operations in fiscal year 1995 and is committed to
developing and marketing a proprietary oil sludge remediation process and
equipment (MST units) that uses high energy microwaves to separate water, oil
and solids. Company operations take place in Texas. The Company's corporate
offices are in Nevada.
3. Principles of consolidation and financial statement presentation
During 1999, the Company created a wholly-owned subsidiary, Petrowave
Corporation, into which it transferred certain assets.
The consolidated financial statements include the accounts and operations of
the Company and its wholly-owned subsidiary. Significant intercompany
transactions and balances have been eliminated in the consolidation.
4. 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.
8
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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
5. Cash and cash equivalents
The Company considers all highly liquid investments with original maturity
dates of three months or less when purchased to be cash equivalents.
6. Inventories
Inventory is valued at lower of cost or market. Cost is determined using the
first-in, first-out method.
Inventory consists of the following:
April 30, 2000 October 31, 1999
-------------- ----------------
Raw materials $260,000 $260,000
Work in process 56,017 -
-------- --------
316,017 260,000
Less reserve for net
realizable value (260,000) (260,000)
-------- --------
Total $ 56,017 $ -
======== ========
The recoverability of inventory is dependent upon the Company entering into
agreements to lease the completed MST units.
7. Other assets
Included in other assets are long-term deposits and patents. The cost of
patents is capitalized and amortized to operations over their estimated useful
lives or statutory lives whichever is shorter. Amortization is computed on
the straight-line method.
8. Property and equipment
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated useful lives. The
straight-line method of depreciation is followed for furniture and fixtures,
machinery and equipment, and automobiles for financial reporting purposes.
Rental equipment is depreciated over ten years using the straight-line method.
9. Research and development expenses
Costs incurred in connection with developing a prototype and a demonstration
model of a crude oil sludge recovery system have been expensed as incurred.
10. Advertising costs
Advertising costs are expensed in the period incurred.
9
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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
11. Revenue recognition
Revenue on contracts from crude oil sludge recovery services is accounted for
principally by the percentage-of-completion method whereby revenue is
recognized based on the estimated stage of completion of individual contracts.
Revenue on contracts from leased equipment is recognized according to contract
terms.
12. Fair value of financial instruments
Cash and cash equivalents, accounts payable and accrued liabilities are
reflected in the financial statements at fair value because of the short-term
maturity of these instruments. Notes payable to third parties and related
parties as reflected in the financial statements approximate their fair value.
13. Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based of the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect during the years in
which the differences are expected to reverse. An allowance against deferred
tax assets is recorded in whole or in part when it is more likely than not
that such tax benefits will not be realized.
14. Warrants
In accordance with Statement of Financial Accounting Standards No. 123 (SFAS
123) "Accounting for Stock-Based Compensation", expense is recognized in
connection with the grant of warrants when issued using the fair-market-value
method. Pro forma adjusted net income calculated by applying the fair value
requirement for warrants issued for recognition of expense is not included
because there is no significant impact in application of the standard.
15. Loss per common share
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS 128). SFAS 128 requires the disclosure of Basic
and Diluted Earning per Share (EPS). Basic EPS is calculated using income
available to common stockholders divided by the weighted-average number of
common shares outstanding during the year. Diluted EPS is similar to Basic
EPS except that the weighted-average of common shares outstanding is increased
to include the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been issued. Such
potentially dilutive common shares include stock warrants granted or sold and
convertible debt. Shares having an antidilutive effect on periods presented
are not included in the computation of dilutive EPS.
16. Segment reporting
Statement of Financial Accounting Standards No. 131 (SFAS 131) "Disclosure
about Segments of an Enterprise and Related Information", requires that a
public business enterprise report a measure of segment profit and loss,
certain specific revenue and expense items, and segment assets. Since the
Company is still considered a development stage company, no segments have been
identified by management.
10
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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
17. Certain reclassifications
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles for interim financial information,
which contemplates continuation of the Company as a going concern. However,
the Company is a development stage company, has generated limited revenue
through April 30 2000 and has sustained substantial losses from operations
since inception. In addition, as of April 30 2000, its current liabilities
exceeded its current assets by $41,052. In addition, the Company has used
cash in, rather than provided cash from, it operations.
In view of the matters described in the preceding paragraph, recoverability of
a major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon continued operations of the
Company which in turn is dependent upon the Company's ability to meet its
financing requirements on a continuing basis, to maintain present financing
and to succeed in its future operations. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue in existence.
The Company has taken the following steps to revise its operating and
financial requirements which it believes are sufficient to provide the Company
with the ability to continue in existence:
* As of April 30, 2000, the Company had leased certain equipment
expiring through 2002.
* During fiscal year 1999, the Company entered into a 24-month
Worldwide Marketing Agreement with an oil company to provide the
Company with marketing and sales assistance. The two companies have
agreed to share certain of the revenue related to this agreement.
* During fiscal year 2000, the Company issued 514,078 shares of Common
Stock and 218,875 warrants for cash in the amount of $875,500.
* During fiscal year 2000, a stockholder and director of the Company
loaned $60,000 to the Company in exchange for a 12% note payable,
which matures at an undetermined date.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This portion of the Form 10-QSB contains "forward-looking statements" within
the meaning of the federal securities laws, including statements concerning
anticipated revenues, future marketing plans for the MST-1000, and similar
statements concerning anticipated future events and expectations that are not
historical facts. The forward-looking statements in this portion of the Form
10-QSB are subject to numerous risks and uncertainties, including the effects
of economic conditions; the availability of capital; the dependence on key
customers; competitive conditions; and the various risks associated with
developing and marketing a new process/technology which could cause actual
results to differ materially from those expressed in or implied by such
forward-looking statements, which speak only as of the date hereof. Readers
should also refer to the Company's Annual Report on Form 10-KSB for the fiscal
year ended October 31, 1999.
Overview
During the fourth quarter 1999, worldwide oil prices rebounded from a
twenty-year low to reach high levels not seen since the 1990 Gulf War Period.
Oil prices continued to increase during the first half of 2000. This dramatic
rise in crude oil prices has prompted expanded interest in Imperial Petroleum
Recovery Corporation's (IPRC) Microwave Separation Technology (MST) System
which provides a low cost method to recover oil from refinery waste streams.
Because of this heightened interest, IPRC gained momentum toward becoming a
viable manufacturing entity during the first quarter of 2000. The second
quarter of 2000 saw continued expansion of IPRC and enthusiasm over the
Company's long term potential.
During 1999, the Company executed a three-year lease of a MST-1000 with the
Torrance California facility of Mobil Oil Corporation. This MST-1000 was
successfully installed and continues to operate smoothly. Both its
introduction last quarter and operational set-up at the beginning of the
second quarter were very timely. The refinery was attempting to maximize the
throughput of oil during a period of high energy prices and difficult crude
raw material feed stock. The availability of the MST unit during this time
provided the refinery with an additional tool to achieve operational success.
The Torrance unit is now operating daily and is processing some of the most
difficult crude streams Torrance has received.
During 1999, the Company signed a worldwide marketing agreement with Mobil
Technology Company (MTC). As part of the agreement, MTC agreed to utilize its
expertise and extensive experience to market the MST System to the global oil
industry. Since signing the agreement, Management within both companies has
been busy developing and implementing detailed plans for the joint effort.
During March 2000, the American Institute of Chemical Engineers (AIChE) held
its Spring National Meeting in Atlanta Georgia. A representative from
ExxonMobil Research and Engineering was one of the discussion group speakers
at this meeting. The ExxonMobil representative presented a paper entitled,
"The MST Microwave Separation Technology for Breaking Crude Oil Emulsions:
Overview and Case Study" which specifically dealt with ExxonMobil's experience
with the MST-1000 Unit. This presentation was a significant marketing event
for IPRC because meeting attendees included international representatives who
12
<PAGE>
were specifically looking for solutions to desalter problems within the
refinery environment. This paper was distributed to conference attendees and
is currently included in the Company's marketing information distributed to
potential customers and investors.
As part of the on-going aggressive joint marketing effort, IPRC was a guest of
ExxonMobil's Technology Sales and Licensing Department at the 2000 Annual
National Petroleum Refiners Association meeting in San Antonio, Texas held on
March 26 28, 2000. ExxonMobil displayed the MST technology with the other
technologies they were marketing throughout the three-day conference.
Additionally, the collaborative marketing efforts of IPRC and ExxonMobil have
identified over 30 sites with an immediate need or interest in the MST system.
Communications between potential customers and the Company's marketing team
have identified several additional areas for the introduction of MST
technology to solve unique operational problems.
When a potential customer requests a demonstration of the MST System, IPRC has
the capability to transport a MST-1000 unit to the customer's place of
operations. Currently, the Company has one MST-1000 available to use in
demonstrations in the field. During the second quarter, this unit returned to
Houston to be updated with the latest technological advancements. The
installation of this new technology should be completed in early June, making
it available for demonstrations at production sites and refineries in the
United States and Canada that ExxonMobil has identified.
Currently, a second commercial MST unit is under construction. At the end of
the second quarter, the Company had not determined the use for this particular
unit. It may be deployed as a demonstration unit or it may be leased directly
to a customer as part of a long-term contract depending upon the results of
certain on-going negotiations.
During the second quarter, the Company leased a stand-alone administration and
manufacturing complex. This new location has been built out to provide an
OSHA approved laboratory, administrative space and a state of the art
manufacturing facility. The construction was completed early in May 2000.
The Company moved into the facility at the end of May. Management feels this
move will result in lower cost, better operational control, and enhanced
visibility to visitors.
The Company is continuing to improve its laboratory capabilities to provide
customers adequate and accurate responses to their requests for sample
testing. A laboratory technician was hired to assist with this effort.
During the second quarter, IPRC's President, C. Brent Kartchner, directed the
marketing, manufacturing and relocation efforts while working very closely
with ExxonMobil's Torrance, California management personnel and the team of
managers assigned to IPRC by ExxonMobil Technology Sales & Licensing
Department. He is very positive about the future of the Company, and only has
to look back at where it was less than a year ago to see the major
accomplishments already made in transitioning IPRC from a research and
development company to an operating and manufacturing company.
13
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Results of Operations
Three and Six Months Ended April 30, 2000 Compared to Three and Six Months
Ended April 30, 1999
Revenue
During the six month period ended April 30, 2000, the Company recognized
$146,855 in revenue compared to $36,512 in 1999. The second quarter 2000
revenue was comprised of lease revenue earned from leases of the MST-1000.
During the second quarter 1999, the revenue represented fees charged to
reimburse set-up costs incurred by the Company to demonstrate the MST-1000 at
various locations.
During the three month period ended April 30, 2000, the Company recognized
$52,678 in revenue compared to $14,000 in 1999. The second quarter 2000
revenue was comprised of lease revenue earned from leases of the MST-1000.
During the second quarter 1999, the revenue represented fees charged to
reimburse set-up costs incurred by the Company to demonstrate the MST-1000 at
various locations.
Cost of Goods Sold and Gross Profit
During the six month period ended April 30, 2000, the Company identified
$109,197 in costs that were specifically identified to contract revenue. The
costs were primarily comprised of $44,026 for payroll and related costs and
$36,426 for costs incurred to set-up and support equipment leases.
Additionally, the Company recorded a charge of $28,745 against income for
depreciation of the leased equipment. For the six month period ended April 30,
1999, the Company incurred costs of $80,954 to transport and set-up the MST
Demonstration Unit at prospective customers' locations. The Company
underestimated its demonstration costs, which resulted in a negative gross
profit for the second quarter 1999. With this in mind, the Company revised
the demonstration fee schedule during the second quarter 1999.
During the three month period ended April 30, 2000, the Company identified
$67,548 in costs that were specifically identified to contract revenue. The
costs were primarily comprised of approximately $18,000 for payroll and
related costs and $33,300 for costs incurred to set-up and support equipment
leases. Additionally, the Company recorded a charge of $16,250 against
income for depreciation of the leased equipment. For the three month period
ended April 30, 1999, the Company incurred costs of $33,817 to transport and
set-up the MST Demonstration Unit at prospective customers' locations.
General and Administrative & Research and Development Expenses
General and administrative expenses for the six month period ended April 30,
2000 totaled $384,176 compared to $350,075 for same period in 1999. A net
increase of $34,101 in general and administrative costs was primarily
comprised of decreases of $20,550 in travel and lodging expense and $16,137 in
legal fees and increases of $8,300 in insurance, $30,000 in consulting fees,
$9,400 in lab fees and $6,600 in advertising costs. The Company incurred no
research and development costs for the period ended April 30, 2000 compared to
$41,153 for the six month period ended April 30, 1999. This was due to the
Company beginning to make the transition from primarily a research and
development company to a manufacturing and marketing entity.
14
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General and administrative expenses for the three month period ended April 30,
2000 totaled $234,974 compared to $185,588 for same period in 1999. A net
increase of $49,386 in general and administrative costs was primarily
comprised of declines of $6,652 in travel and lodging expense and $11,561 in
legal fees and increases of $5,373 in insurance, $15,000 in consulting fees,
$7,107 in lab fees and $5,067 in advertising costs. The Company incurred no
research and development costs for the three month period ended April 30, 2000
compared to $22,518 for the same period in 1999 which was comprised of $15,227
in salary expense and $7,291 in parts and supplies
Liquidity and Capital Resources
IPRC's operations have been capital intensive. The Company has funded
operations principally from the private placement of equity securities,
primarily common stock, and warrants exercisable for common stock. As of
April 30, 2000, IPRC's aggregate current liabilities were approximately
$389,578 compared to $458,330 at October 31, 1999. At second quarter ended
April 30, 2000, the Company had negative working capital of $41,052 compared
to negative working capital of $433,050 at October 31, 1999.
At April 30, 2000, the Company has a new MST Unit in production and has plans
to manufacture an additional unit during the latter part of fiscal year 2000.
To fund production of the additional MST Unit, Management has earmarked a
forthcoming refundable advance of $1,000,000. The Company expects to receive
this advance during the third quarter 2000. In addition, the Company plans to
continue raising capital through the sale of its common stock and warrants
exercisable for common stock and to use revenues received from existing
equipment leases to fund on-going operations.
15
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 12 1999, the Company issued 14,394 shares of Common Stock plus
6,250 warrants at $0.20 per warrant to an investor for $25,000 in cash. The
warrants bear a strike price of $3.00 and expire on November 12, 2002.
On November 12, 1999, the Company issued 28,788 shares of Common Stock plus
12,500 warrants at $0.20 per warrant to an investor for $50,000 in cash. The
warrants bear a strike price of $3.00 and expire on November 12, 2002.
On November 12, 1999, the Company issued 28,788 shares of Common Stock plus
12,500 warrants at $0.20 per warrant to an investor for $50,000 in cash. The
warrants bear a strike price of $3.00 and expire on November 12, 2002.
On November 30, 1999, the Company issued 14,394 shares of Common Stock plus
6,250 warrants at $0.20 per warrant to an investor for $25,000 in cash. The
warrants bear a strike price of $3.00 and expire on November 30, 2002.
On February 2, 2000, the Company issued 14,394 shares of Common Stock plus
6,250 warrants at $0.20 per warrant to an investor for $25,000 in cash. The
warrants bear a strike price of $3.00 and expire on February 2, 2003.
On February 7, 2000, the Company issued 14,394 shares of Common Stock plus
6,250 warrants at $0.20 per warrant to an investor for $25,000 in cash. The
warrants bear a strike price of $3.00 and expire on February 7, 2003.
On February 10, 2000, the Company issued 48,939 shares of Common Stock plus
21,250 warrants at $0.20 per warrant to an investor for $85,000 in cash. The
warrants bear a strike price of $3.00 and expire on February 10, 2003.
On February 16, 2000, the Company issued 17,274 shares of Common Stock plus
7,500 warrants at $0.20 per warrant to three investors for $30,000 in cash.
The warrants bear a strike price of $3.00 and expire on February 16, 2003.
On February 22, 2000, the Company issued 5,758 shares of Common Stock plus
2,500 warrants at $0.20 per warrant to an investor for $10,000 in cash. The
warrants bear a strike price of $3.00 and expire on February 22, 2003.
On February 25, 2000, the Company issued 5,758 shares of Common Stock plus
2,500 warrants at $0.20 per warrant to an investor for $10,000 in cash. The
warrants bear a strike price of $3.00 and expire on February 25, 2003.
On March 2, 2000, the Company issued 10,000 shares of Common Stock valued at
$23,000 to a vendor as a deposit for future services to be rendered.
On March 7, 2000, the Company issued 20,439 shares of Common Stock plus 8,875
warrants at $0.20 per warrant to two investors for $35,500 in cash. The
warrants bear a strike price of $3.00 and expire on March 7, 2003.
On March 8, 2000, the Company issued 11,515 shares of Common Stock plus 5,000
warrants at $0.20 per warrant to an investor for $20,000 in cash. The
warrants bear a strike price of $3.00 and expire on March 8, 2003.
16
<PAGE>
On March 10, 2000, the Company issued 11,515 shares of Common Stock plus 5,000
warrants at $0.20 per warrant to an investor for $20,000 in cash. The
warrants bear a strike price of $3.00 and expire on March 10, 2003.
On March 13, 2000, the Company issued 34,546 shares of Common Stock plus
15,000 warrants at $0.20 per warrant to two investors for $60,000 in cash.
The warrants bear a strike price of $3.00 and expire on March 13, 2003.
On March 15, 2000, the Company issued 5,758 shares of Common Stock plus 2,500
warrants at $0.20 per warrant to an investor for $10,000 in cash. The
warrants bear a strike price of $3.00 and expire on March 15, 2003.
On March 21, 2000, the Company issued 11,515 shares of Common Stock plus 5,000
warrants at $0.20 per warrant to an investor for $20,000 in cash. The
warrants bear a strike price of $3.00 and expire on March 21, 2003.
On April 10, 2000, the Company issued 215,909 shares of Common Stock plus
93,750 warrants at $0.20 per warrant to four investors for $375,000 in cash.
The warrants bear a strike price of $3.00 and expire on April 10, 2003.
The Company relied upon the exemption provided in Section 4(2) of the
Securities Act of 1933, which covers "transactions by an issuer not involving
any public offering," to issue the securities discussed in the previous
paragraph without registration under that Act. The Company made a
determination that the investors to whom the securities were issued did not
need the protections that registration would afford. The certificates
representing the shares of Common Stock issued and the Warrants were marked
with legends indicating that transfer of the securities is restricted because
they were not sold in a registered offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description Location
------- ----------- --------
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
April 30, 2000.
17
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on June
14, 2000.
IMPERIAL PETROLEUM RECOVERY CORPORATION
By:/s/ Henry H. Kartchner
Date: June 12, 2000 Henry H. Kartchner
Chairman and Chief Executive Officer
(Duly Authorized Officer and Principal
Executive Officer)
By:/s/ C. Brent Kartchner
Date: June 12, 2000 C. Brent Kartchner
President and Director
(Duly Authorized Officer and Principal
Financial Officer)
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