<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
- --- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934
- ---
For the quarterly period ended October 31,1995
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
- ---
For the transition period from __________ to __________.
Commission file number: 0-9923
------
Imperial Petroleum, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 95-3386019
- ------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
100 Second Street, N.W. Suite 312, Evansville, Indiana 47708
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
812-424-7948
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of October 31, 1995, there were 23,326,841 shares of the Registrant's
single class of common stock issued and outstanding.
Page 1 of 19 consecutively numbered pages
<PAGE>
IMPERIAL PETROLEUM, INC.
Index to Form 10Q for the Quarterly Period
Ended October 31, 1995
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. Page
--------------------- -----
Consolidated Balance Sheets as of July 31, 1995 4
and October 31, 1995
Consolidated Statements of Operations for the 6
three months ended October 31, 1995 and 1994
Consolidated Statements of Cash Flows for the 7
three months ended October 31, 1995 and 1994
Consolidated Statements of Stockholders' Equity 8
for the three months ended October 31, 1995 and
the year ended July 31, 1995
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations.
----------------------------------------------
PART II - OTHER INFORMATION 17
The information called for by Item 1. Legal Proceedings,
Item 2. Changes in Securities, Item 3. Default Upon Senior
Securities, Item 4. Submission of Matters to a Vote of
Security Holders, Item 5. Other Information and
Item 6. Exhibits and Reports on Form 8-K have been omitted
as either inapplicable or because the answer thereto is negative.
SIGNATURES 19
-2-
<PAGE>
PART I
FINANCIAL INFORMATION
-3-
<PAGE>
Item 1. Financial Statements
- -----------------------------
IMPERIAL PETROLEUM, INC.
Consolidated Balance Sheets
Unaudited
<TABLE>
<CAPTION>
October 31, 1995 July 31, 1995
================ =============
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 2,799 $ 3,279
Refundable Income Taxes - -
Accounts Receivable - Trade 11,744 11,744
Accounts Receivable - Other - -
Accounts Receivable - Related Party 35,000 -
Other Current Assets 432 432
---------- ----------
Total Current Assets 49,975 15,455
---------- ----------
Plant, Property & Equipment:
Oil & Gas Equipment - -
Producing Leasehold Costs 433,441 433,441
Intangible Development Costs - -
Other Equipment 10,679 10,679
---------- ----------
444,120 444,120
Less Accumulated Depreciation, 289,692 278,103
---------- ----------
Amortization & Depletion
Net Oil & Gas Properties 154,428 166,017
---------- ----------
Mining properties under development:
Mining Claims, Options & Development Costs 2,481,250 3,347,918
Mining & Milling Equipment 855,614 1,298,689
---------- ----------
Net Mining Properties 3,336,864 4,646,607
---------- ----------
Net Plant, Property & Equipment 3,491,292 4,812,624
---------- ----------
Other Assets:
Deferred Organization Costs 24,688 24,688
Investments - Other - -
Investment in Securities 35,000 35,000
Deposits and Other Assets 75 75
---------- ----------
Total Other Assets 59,763 59,763
---------- ----------
TOTAL ASSETS $3,601,030 $4,887,842
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
IMPERIAL PETROLEUM, INC.
Consolidated Balance Sheets
Unaudited
<TABLE>
<CAPTION>
October 31,1995 July 31, 1995
=============== =============
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - Trade $ 57,370 $ 67,370
Accounts Payable - Related Party 10,951 10,951
Accounts Payable - Other 16,918 16,918
Accrued Expenses 201,535 174,435
Income Taxes Payable - -
Notes Payable 1,152,410 2,302,473
Notes Payable - Related Party 821,938 853,660
Long-Term Debt - Current Portion - -
---------- ----------
Total Current Liabilities 2,261,122 3,425,807
---------- ----------
Noncurrent Liabilities:
Deferred Income Taxes - -
Long-Term Debt - Less Current Portion - -
Notes Payable - Less Current Portion - -
---------- ----------
Total Noncurrent Liabilities - -
---------- ----------
Stockholders' Equity:
Common Stock 24,027 24,027
Additional Paid-In Capital 2,366,171 2,366,171
Treasury Stock -120,313 -
Retained Earnings -929,977 -928,163
---------- ----------
Total Stockholders' Equity 1,339,908 1,462,035
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,601,030 $4,887,842
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
IMPERIAL PETROLEUM, INC.
Consolidated Statements of Operations
Three Months Ended October 31, 1995 and 1994
Unaudited
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
October 31, 1995 October 31, 1994
================ ================
<S> <C> <C>
Operating Income:
Crude oil & natural gas sales $ 18,268 $ 25,169
Crude oil & natural marketing fees 765 900
Mining income 0 0
Other Income 96,289 0
----------- -----------
Total operating income 115,322 26,069
----------- -----------
Operating Expenses:
Oil & gas production costs 9,830 11,728
Mining lease operating expense 2,800 0
Gross production taxes 1,347 1,790
General & administrative expenses 42,421 67,270
Depreciation & depletion 11,589 11,589
Interest expense 49,149 37,331
----------- -----------
Total operating expenses 117,136 129,708
----------- -----------
Income (loss) from operations -1,814 103,639
Other income:
Other income (expense) 0 0
Interest income 0 0
Gain or loss on sale of assets 0 0
Gain or loss on asset write down 0 -214,670
----------- -----------
Net income before income taxes -1,814 -318,309
----------- -----------
Provision (credit) for income taxes:
Current 0 0
Deferred 0 0
----------- -----------
Total provision for income taxes 0 0
----------- -----------
Net income or (loss) $ -1,814 $ -318,309
=========== ===========
Net income or (loss) per share $0.000 $-0.013
=========== ===========
Weighted average shares outstanding 23,326,841 24,026,841
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
IMPERIAL PETROLEUM, INC.
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
October 31,1995 October 31, 1994
=============== ================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Historical Net Income (Loss) $ -1,814 $ -318,309
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, Depletion & Amortization 11,589 11,589
Deferred organization costs 0 0
Refundable income tax 0 0
Gain on exchange of investment for mining properties 0 0
Expenses paid by issuance of stock 0 0
Accounts Receivable - Trade 0 -5,460
Accounts Receivable - Other 0 43
Accounts Receivable - Related Party -35,000 0
Notes Receivable 0 0
Prepaid Expenses 0 1,216
Accounts Payable - Trade -10,000 -4,997
Accounts Payable - Related Party 0 -28,474
Accounts Payable - Other 0 -25,624
Accrued Liabilities 27,100 -29,351
Accrued Interest Payable 0 0
Income Taxes Payable 0 -19,500
Deferred Income Taxes 0 0
----------- -----------
Net cash provided (used) by operating activities -8,125 -303,217
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Mining options, claims and equipment 1,309,743 -1,471,842
Purchase of oil and gas properties and equipment 0 0
Basis of oil and gas assets sold or retired 0 800
Cash received with purchase of Premier 0 0
Accounts receivable from sale of property 0 0
Investment in restricted stock through acquisition 0 241,670
Treasury Stock -120,313 0
----------- -----------
Net cash provided (used) for investing activities 1,189,430 -1,256,312
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Notes Payable -1,150,063 845,156
Notes Payable - Related Party -31,722 164,800
Long term debt 0 292,737
Dividend Distributions 0 0
Deferred stock offering costs 0 -17,187
Issuance of stock 0 274,999
----------- -----------
Net cash provided (used) from financing activities -1,181,785 1,560,505
Net increase (decrease) in cash and cash equivalents -480 916
Cash and cash equivalents at beginning of period 3,279 4,670
Cash and cash equivalents at end of period $ 2,799 $ 5,586
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- --------------------------------------------------
Cash paid during the period for:
Interest $ 0 $ 14,461
Income Taxes 0 19,500
----------- -----------
$ 0 $ 33,961
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIES:
- ------------------------------------------------------------------
Stock issued in reverse acquisition of Imperial $ 0 $ 0
Stock issued in acquisition of Premier 0 0
Stock issued for mining equipment and mining claim options 0 257,812
Stock issued for deferred stock offering costs 0 17,187
Write down of investment stock 0 214,670
Assumption of note payable for mining property 0 742,793
----------- -----------
Total $ 0 $ 1,232,462
=========== ===========
DISCLOSURE OF ACCOUNTING POLICY:
- --------------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
IMPERIAL PETROLEUM, INC.
Consolidated Statements of Stockholders' Equity
For the Year Ended July 31, 1995 and the
Three Months Ended October 31, 1995
Unaudited
<TABLE>
<CAPTION>
Common Stock
------------ Additional
Par Paid-In Retained Treasury
Shares Value Capital Earnings Stock
------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balances @ July 31, 1994 22,426,841 $ 22,427 $ 2,092,771 $ -225,268 -
Stock issued for mining claims 1,500,000 1,500 256,312 - -
Stock issued for offering costs 100,000 100 17,087 - -
Net Income (Loss) for the Period - - - -318,309 -
---------- ----------- ----------- ---------- ----------
Balances @ October 31, 1994 24,026,841 24,027 2,366,170 -543,577 -
Net Income (Loss) for the Period - - - -384,586 -
----------- ----------- ---------- ---------- ---------
Balances @ July 31, 1995 24,026,841 24,027 2,366,170 -928,163 -
Stock retired to Treasury - - - - -120,313
---------
Net Income (Loss) for the Period - - - -1,814 -
---------- ----------- ---------- ---------- ---------
Balances @ October 31, 1995 24,026,841 $ 24,027 $ 2,366,170 $ 927,977 -120,313
========== ========== =========== ========== =========
Less Treasury Shares 700,000
Total Outstanding 23,326,841
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
IMPERIAL PETROLEUM, INC.
Notes to Consolidated Financial Statements
Unaudited
October 31, 1995
(1) SUMMARY OF ACQUISITION TRANSACTIONS
Ridgepointe Mining Company Acquisition
--------------------------------------
On August 27, 1993 Ridgepointe Mining Company ("Ridgepointe") purchased
Imperial Petroleum, Inc. ("Imperial") pursuant to an agreement to exchange
stock and transfer control of Imperial to Ridgepointe. All previous
operations of Imperial were transferred from Imperial and Ridgepointe became
a wholly owned subsidiary of Imperial. The transaction was accounted for as
a reverse purchase acquisition whereby the financial statements of
Ridgepointe ("the Company") became those of the registrant. The
consolidated financial statements of the Company for periods prior to August
27, 1993 are those of Ridgepointe and not the previously reported
consolidated financial statements of Imperial.
Premier Operating Company Acquisition
-------------------------------------
On October 4, 1993 Imperial Petroleum, Inc. ("the Company") purchased
Premier Operating Company ("Premier") pursuant to an agreement to exchange
stock. Premier became a wholly owned subsidiary of the Company. The
transaction was accounted for as a purchase acquisition.
Sale of Oil and Gas Assets
--------------------------
In January 1994, I.B. Energy, Inc. sold substantially all of its oil and gas
assets to Diverse Investments for $404,218 in cash. The proceeds from the
sale were used to retire all of I.B. Energy Inc.'s bank debt of $276,234 and
the balance used for working capital for the parent company's mining
operations.
Acquisition of UFO Limited Partnership Mining Claims
----------------------------------------------------
On January 31, 1994 Ridgepointe Mining Company completed the acquisition of
certain mining claims covering its Lone Star copper mine in Yavapai County,
Arizona. As a condition to the closing, UFO Limited Partnership was issued
1,000,000 shares of restricted common stock of Imperial Petroleum, Inc.,
Ridgepointe's parent company and Ridgepointe signed a note payable to UFO
Limited Partnership (which has subsequently been extended by the parties
until March 31, 1996) for $1,000,000 in cash. The note is secured by the
mining claims.
Acquisition of Gold Nugget Mine and Mining Claims
-------------------------------------------------
On August 31, 1994 Ridgepointe Mining Company completed the acquisition of
certain mining claims and equipment covering its Gold Nugget mine in La Paz
County, Arizona. As a condition to the closing, Kenneth R. Shepherd and Bob
G. Bolles were issued 1,385,000 and 115,000, respectively, shares of
restricted common stock of Imperial Petroleum, Inc., Ridgepointe's parent
company, and Ridgepointe signed a note payable to the owners totally
$750,000 with a six month
-9-
<PAGE>
maturity. The note is secured by a first mortgage interest in the mining
claims and a second mortgage interest in certain mining and processing
equipment. Ridgepointe also assumed the existing obligations of Shepherd to
Darr Equipment Company for the equipment subject to the mortgage interest
totaling $441,500. A 5.5% gross in-kind royalty interest in the operation of
the Gold Nugget Mine was granted to Shepherd, Bolles and David L. Simmons.
In August 1995, the Company entered into an agreement to rescind the
original August 1994 agreement. The Company received 700,000 shares of the
1,500,000 shares originally issued, obtained releases from the $750,000
promissory note and the $441,500 equipment note. In return the Company
assigned its interest in the mining claims and equipment back to the
original seller.
(2) ACCOUNTING POLICIES
-------------------
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of only normal recurring items) considered
necessary for a fair presentation have been included. These statements
should be read in conjunction with the Ridgepointe Mining Company financial
statements and notes thereto as of July 31, 1995 which are included in the
Company's Form 8-K disclosure statement for the reverse acquisition by
Ridgepointe of Imperial and included herein by this reference.
(3) NOTE PAYABLE
------------
Subsequent to the acquisition of Premier Operating Company, Premier executed
a promissory note and mortgage with a bank dated October 18, 1993 in the
amount of $216,000. As of October 31, 1995 $159,565 has been advanced on
the note. Accrued interest is due and payable monthly at the bank's prime
rate which was 10.75% on October 31, 1995. Commencing June 1, 1994 a
monthly principal payment of $4,500 plus interest was due. All unpaid
principal and interest is due upon maturity at October 31, 1995. The note
is secured by a mortgage on certain major oil and gas properties owned by
Premier.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-------------------------------------------------
GENERAL
- -------
Pursuant to an Agreement to Exchange Stock and Plan of Reorganization dated
August 27, 1993 (the "Stock Exchange Agreement"), as amended by that certain
First Amendment to Agreement to Exchange Stock and Plan of Reorganization dated
August 27, 1993 (the "First Amendment"), between Imperial Petroleum, Inc.
(the"Issuer"), Glauber Management Company, a Texas corporation ("Glauber
Management"), Glauber Valve Co., Inc. a Nebraska corporation ("Glauber Valve"),
Jeffrey T. Wilson ("Wilson"), James G. Borem ("Borem"), and those persons listed
on Exhibit A attached to the Stock Exchange Agreement and First Amendment (the
"Ridgepointe Stockholders"), the Ridgepointe Stockholders agreed to exchange
("the Ridgepointe Exchange Transaction") a total of 12,560,730 shares of common
stock of Ridgepointe Mining Company, a Delaware corporation, ("Ridgepointe")
representing 100% of the issued and outstanding shares of the common stock of
Ridgepointe, for an aggregate of 12,560,730 shares of newly issued shares of the
Issuer's common stock representing 59.59% of the Issuer's resulting issued and
outstanding common stock. Under the terms of the Stock Exchange Agreement, (i)
Wilson exchanged 5,200,000 shares of Ridgepointe common stock for 5,200,000
shares of the Issuer's common stock representing 24.67% of the Issuer's issued
and outstanding common stock, (ii) Borem exchanged 1,500,000 shares of
Ridgepointe common stock for 1,500,000 shares of the Issuer's common stock
representing 7.12% of the Issuer's issued and outstanding common stock, and
(iii) the remaining Ridgepointe Stockholders in the aggregate exchanged
5,860,730 shares of Ridgepointe common stock for 5,860,730 shares of the
Issuer's issued and outstanding common stock, representing, in the aggregate,
27.81% of the Issuer's issued and outstanding common stock. As a condition to
closing the Ridgepointe Exchange Transaction, the Issuer received and canceled
7,232,500 shares of the Issuer's common stock held by Glauber Management.
The Ridgepointe Exchange Transaction was closed on August 27, 1993. As a
result, Ridgepointe is now a wholly owned subsidiary of the Issuer. Ridgepointe
is engaged in the development of a copper ore mining operation in Yavapai
County, Arizona and, through its wholly owned subsidiary, I.B. Energy, Inc., an
Oklahoma corporation, in the exploration for and production of oil and gas in
the Mid-Continent and Gulf Coast Regions of the United States.
As a condition to closing the Ridgepointe Exchange Transaction, the Company
received and canceled 7,232,500 shares of the Company's common stock from the
Company's former partner, Glauber Management, and 100,000 shares of the common
stock of Tech-Electro Technologies, Inc. from an affiliate of Glauber Management
and Glauber Valve. In addition, pursuant to the terms of the First Amendment,
Glauber Management or Glauber Valve, or their affiliates, were to transfer to
the Company 75,000 shares of common stock of Wexford Technology, Inc. (formerly
Chelsea Street Financial Holding Corp.) no later than October 31, 1993. As of
the date of this Quarterly Report on Form 10-Q, neither Glauber Management nor
Glauber Valve had met its obligation in this regard.
-11-
<PAGE>
In connection with the closing of the Ridgepointe Exchange Transaction, each
member of the Board of Directors of the Company resigned and Wilson, Borem and
Dewitt C. Shreve ("Shreve") were elected Directors of the Company. In addition,
each officer of the Company resigned and the Company's new Board of Directors
elected Wilson as Chairman of the Board, President and Chief Executive Officer,
Borem as Vice President and Cynthia A. Helms as Secretary of the Company. Ms.
Helms subsequently resigned and Kathryn H. Shepherd was elected Secretary. The
Board of Directors further authorized the move of the Company's principal
executive offices from Dallas, Texas to its current offices in Evansville,
Indiana.
Pursuant to a Stock Exchange Agreement dated October 4, 1993 (the "Premier
Stock Exchange Agreement") between the Company and the holders of the issued and
outstanding common stock of Premier Operating Company, a Texas corporation
("Premier") (such persons are sometimes referred to herein as the "Premier
Stockholder"), the Premier Stockholders agreed to exchange (the "Premier
Exchange Transaction") an aggregate of 749,000 shares of the common stock of
Premier, consisting of 252,000 shares of Class A voting common stock and 497,000
shares of non-voting Class B common stock, representing 100% of the issued and
outstanding common stock of Premier, for a total of 749,000 shares of newly
issued shares of the Company's common stock representing 3.62% of the Company's
resulting issued and outstanding common stock. The one-for-one ratio of the
number of shares of the Company's common stock exchanged for each share of
Premier common stock was determined through arms length negotiations between the
Company and the Premier Stockholders.
The Premier Exchange Transaction was closed on October 4, 1993. As a result,
Premier is now a wholly owned subsidiary of the Company. Premier is an oil and
gas company whose principal assets consist of oil and gas properties located in
the Mid-Continent and Gulf Coast regions of the United States.
In connection with the closing of the Premier Exchange Transaction, each
member of the Board of Directors of Premier resigned and Wilson and Borem were
elected Directors of Premier. In addition, each officer of Premier resigned and
Premier's new Board of Directors elected Wilson as Chairman of the Board,
President and Chief Executive Officer, Borem as Vice President and Kathryn H.
Shepherd as Secretary of the Company.
On August 31, 1994 the Company completed the acquisition of the Gold Nugget
Mine, Mining Claims and associated equipment. In connection with that
transaction, the Company issued a total of 1,500,000 shares of restricted common
stock to two individuals, issued a note payable of $750,000 to the owners and
assumed obligations totaling $441,500 associated with equipment leases. During
the period from September 1994 through April 1995 the Company constructed
additional processing equipment and completed a water well on the property to
initiate placer mining operations. After initiating operations in several areas
of the property, the Company determined that the quantity of gold varied too
greatly to establish permanent facilities commensurate with its long range
corporated objections. As a result the Company unwound the acquisition during
August 1995.
In February 1995 the Company began participating in a program with
-12-
<PAGE>
Financial Surety International, LTD. ("FSI") and Merrion Reinsurance Corp.
("Merrion") of London, England to provide a financial instrument to be utilized
for collateral enhancement in certain financial transactions. The basis for the
collateral enhancement is the Company's in-ground gold reserves and a promissory
note for delivery of specified volumes of refined gold at the end of five years
subject to payment of the then current price of gold. The note is insured
against default by Merrion and is subject to annual renewal during the term by
the payment of transaction fees in advance on an annual basis. During the
quarter ending October 31, 1995 the Company received approximately $96,000 in
non-refundable fees as a result of its participation.
RESULTS OF OPERATIONS
- ---------------------
The following is a discussion of the results of operations of the Company
for the three months ended October 31, 1995. This discussion should be read in
conjunction with the Company's unaudited Consolidated Financial Statements and
the notes thereto included in Part I of this Quarterly Report.
The factors which most significantly affect the Company's results of
operations are (i) the sale prices of crude oil, natural gas, copper and gold,
(ii) the level of total sales volumes, (iii) the level of lease operating
expenses, and (iv) the level of and interest rates on borrowings. Total sales
volumes for oil and natural gas are significantly impacted by the degree of
success the Company experiences in its efforts to maintain or increase
production from its existing oil and gas properties through its development
activities. The sales volumes from the Company's copper and gold mining
operations are as yet insignificant, however, future results of operations are
expected to be significantly affected by these factors.
Average sales prices received by the Company for oil and gas have
historically fluctuated significantly from period to period. Fluctuations in oil
prices during these periods reflect market uncertainty as well as concerns
related to the global supply and demand for crude oil. Average gas prices
received by the Company fluctuate generally with changes in the spot market
price for gas. Spot market gas prices have generally declined in recent years
because of lower worldwide energy prices as well as excess deliverability of
natural gas in the United States. Relatively modest changes in either oil or gas
prices significantly impact the Company's results of operations and cash flow
and could significantly impact the Company's borrowing capacity. Management
presently believes that the level of crude prices worldwide are too low to be
sustained for any extended period and that prices will rebound to previous
levels. Commodity prices for copper and gold continue to fluctuate, although
current spot prices for both remain at or near 12 month high levels. Until
sustained sales are achieved in each commodity, price fluctuations will remain
immaterial.
Quarter ended October 31, 1995 compared to Quarter ended October 31, 1994.
--------------------------------------------------------------------------
Revenues for the three months ending October 31, 1995 were $115,322 compared to
$26,069 for the comparable quarter ended October 31, 1994 and reflect revenues
received by the Company in connection with its financial program with FSI.
-13-
<PAGE>
Production and mining operating expenses were $13,998 for the quarter ended
October 31, 1994 compared to $13,977 for the quarter ended October 31, 1995 or
about the same.
General and administrative costs decreased to $42,421 for the three months
ending October 31, 1995 from $67,270 for the same period a year earlier and
primarily reflects the reduced level of the Company's activity.
The Company had an after-tax net loss of $1,814 ($0.000 per share) for the
quarter ended October 31, 1995 compared to a net loss of $318,309 ($0.013 per
share) for the comparable quarter a year earlier. The reduced loss is
attributable primarily to a revenues generated as a result of the Company's
financial program with FSI.
The Company's capital requirements relate primarily to its mining activities
and the development of its oil and gas properties. Prior to the change in
control, the Company funded its very limited activities from cash flow. The
Company, through its subsidiaries, has established credit facilities with a bank
to facilitate the funding of its operations.
Presently the Company is engaged in two mining activities which require
capital expenditures. A description of the nature of the activity and its
projected capital requirements follows:
COPPER MINING
The Company operates the UFO mine and Rumico millsite located in Yavapai
County, Arizona through its wholly owned subsidiary Ridgepointe Mining Company.
Strip mining operations were initiated in July 1992 to verify the quality of the
ore body and evaluate the economics of the mine. The Company has recently begun
permitting the millsite facility to allow start-up operations to commence. The
Company anticipates spending approximately $100,000 to initiate operations at 50
tons per day. Based on a limited core drilling program completed in March 1993
and actual recoveries during the pilot operation last year, the Company
estimates its copper ore reserves at 200,000 tons with recovery of copper at
approximately 10%. Recently the Company has begun operation of the millsite by
processing gold ore for third parties for a fee utilizing a portion of the
millsite facilities. The Company is presently negotiating with a third party to
secure a lease of certain of its millsite facilities at Congress, Arizona.
Permitting to initiate copper mining has been postponed until the Company
completes its capital raising efforts.
GOLD MINING
The Company has agreed to acquire a 55% interest in two gold mining
operations located in the Sierra Madre mountains of Mexico. Under the terms of
the acquisition, the Company will (i) pay $50,000 in cash at closing; (ii) issue
500,000 shares of the Company's common stock, and (iii) provide up to $200,000
in working capital loans to complete the infrastructure and facilities necessary
to develop continuous mining operations at both mines. Analyses conducted by
Company engineers and consultants indicate head ore containing approximately 4.0
oz. per ton from the Lance mine and approximately 2.0 oz. per ton from the Trega
mine. Preliminary reserve estimates by the Company indicate recoverable gold
reserves
-14-
<PAGE>
of at least 80,000 ounces at the Lance and 40,000 ounces at the Trega mines,
respectively. Initial production from the Trega mine began in March 1994 at 10
tons per day but has not been sustained due to problems obtaining a permit for
blasting and due to capital limitations. Current activity at the Mexican mines
is suspended due to the lack of available capital. The Company currently
estimates it will require approximately $150,000 of new capital to complete the
necessary roads and infrastructure to initiate continuous mining operations at a
meaningful level.
The level of the Company's capital expenditures will vary in the future
depending on energy and commodity market conditions and upon the level of mining
activity achieved by the Company. The Company anticipates that its cash flow
will not be sufficient to fund its operations and debt service at their current
levels for the next year and that additional capital will be required.
The Company's bank credit facility consists of a revolving credit facility
under which the Company has available to it a revolving line of credit in the
principal amount of $216,000.
The Company is required to make interest payments monthly with interest
accruing at a varying rate based on the sum of the bank's prime lending rate
(10.75% at October 31, 1995). The revolving line of credit is secured by
substantially all of Premier's oil and gas properties. Principal payments of
$4,500 plus accrued monthly interest began on June 1, 1994 with a final payment
of all unpaid principal and interest due at October 31, 1995.
At October 31, 1995 the outstanding balance under the Company's credit
facilities with its Bank totaled $161,410. The Company expects to utilize its
maximum available credit facilities in the initiation of its mining activities.
Presently, the Company is in default under its existing loan agreement and its
oil and gas properties are subject to foreclosure.
The Company's existing debt agreements with the bank contain covenants which
limit the amount of additional indebtedness the Company may incur, restrict
certain acquisitions and sales of oil and gas properties, and prohibit
dividends. The Company has obtained certain unsecured loans, in compliance with
its bank covenants, from Jeffrey T. Wilson, which totals $215,288 as of
October 31, 1995. These funds are being used to initiate the Company's mining
activities. Management believes that the Company has insufficient borrowing
capacity to fund its anticipated needs, and will need to access outside capital.
At October 31, 1995 the Company had current assets of $49,975 and current
liabilities of $2,261,122 which resulted in negative working capital of
$2,211,147 which is comprised of senior bank debt and notes payable to
shareholders and acquisition notes payable. As discussed previously, if the
Company is unsuccessful in obtaining extensions or modifications of certain of
its acquisition notes, certain of its mining ventures may be terminated. The
Company believes that its cash flow from operations will not be sufficient to
meet its anticipated capital requirements. As a result the Company believes it
will require additional financing in order to carry on its operations. Because
future cash flows and the availability of financing are subject to a number of
variables, such as the level of production, the prices of oil and gas, and the
-15-
<PAGE>
Company's ability to successfully initiate operations on its mining properties,
there can be no assurance that the Company's capital resources or ability to
attract financing will be sufficient to maintain currently planned levels of
capital expenditures. If the Company is unable to maintain its current level of
operations, management believes the Company may be compelled to sell certain
assets to meet its obligations.
SEASONALITY
- -----------
The results of operations of the Company are somewhat seasonal due to
seasonal fluctuations in the price for crude oil and natural gas. Due to these
seasonal fluctuations, results of operations for individual quarterly periods
may not be indicative of results which may be realized on an annual basis.
INFLATION AND PRICES
- --------------------
The Company's revenues and the value of its oil and gas properties have been
and will be affected by changes in oil and gas prices. The Company's ability to
maintain current borrowing capacity and to obtain additional capital on
attractive terms is also substantially dependent on oil and gas prices. Oil and
gas prices are subject to significant fluctuations that are beyond the Company's
ability to control or predict.
-16-
<PAGE>
PART II
OTHER INFORMATION
-17-
<PAGE>
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission to Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Not applicable.
(b) Current Report on Form 8-K
Not applicable.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Imperial Petroleum, Inc.
By: /s/ JEFFREY T. WILSON
--------------------------------------
Jeffrey T. Wilson
President
Date: January 8, 1996
-19-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHEDULE
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 2,799
<SECURITIES> 0
<RECEIVABLES> 36,744
<ALLOWANCES> 0
<INVENTORY> 432
<CURRENT-ASSETS> 49,975
<PP&E> 3,491,292
<DEPRECIATION> 289,692
<TOTAL-ASSETS> 3,601,030
<CURRENT-LIABILITIES> 2,261,122
<BONDS> 0
24,027
0
<COMMON> 0
<OTHER-SE> 1,376,517
<TOTAL-LIABILITY-AND-EQUITY> 3,601,030
<SALES> 18,268
<TOTAL-REVENUES> 115,322
<CGS> 0
<TOTAL-COSTS> 117,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,149
<INCOME-PRETAX> (1,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,814)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
