<PAGE>
SECURITIES EXCHANGE COMMISSION
Washington D.C 20549
(Mark One)
FORM 10-Q
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 31, 1996
[ ] 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 (IRS Employer
incorporation or organization) identification No.)
100 NW Second Street
Suite 312
Evansville, Indiana 47708
(Zip Code)
Registrants telephone number,
including area code (812) 424-7948
Not Applicable
(Former name, former address and former fiscal year, 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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No
---- ----
On October 3l, l996, there were 31,426,841 shares of the Registrants common
stock issued and outstanding.
<PAGE>
IMPERIAL PETROLEUM, INC.
Index to Form 10-Q for the Quarterly Period
Ended October 3l, 1996
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements.
- ---------------------
Page
----
Consolidated Balance Sheets as of July 31, 1996
and October 3l, 1996 4-5
Consolidated Statements of Operations for the
three months ended October 31, 1996 and 1995 6
Consolidated Statements of Cash Flows for the
three months ended October 31, 1996 and 1995 7
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
PART II - OTHER INFORMATION
The information called for by Item 1. Legal 16
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 17
2
<PAGE>
PART I
FINANCIAL INFORMATION
3
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
31-OCT-96 31-JUL-96
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ (3,222) $ 9,041
Accounts Receivable-oil & gas 8,672 15,673
Other current assets 672 1,150
---------- ----------
Total 6,122 25,864
---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Equipment and leasehold costs 393,878 393,878
Other depreciable assets 2,335 2,335
---------- ----------
396,213 396,213
----------
Less accumulated depreciation
and depletion 283,348 276,491
---------- ----------
Net oil and gas properties 112,885 119,722
---------- ----------
Mining properties under development
Mining claims, options and
development costs 2,566,998 2,570,171
Mining and milling equipment 735,236 735,236
Acquisition in progress 64,000 28,000
---------- ----------
Net mining properties 3,366,234 3,333,407
---------- ----------
Net property, plant and equipment 3,479,098 3,453,129
---------- ----------
OTHER ASSETS
Accounts receivable-related party 33,376 9,876
Deferred organization cost 0 0
Investments-other 13,445 2,445
Investments-securities 60,980 60,980
Investment in subsidiaries 971,114 0
Deposits and other assets 75 75
----------
Total other assets 1,078,990 73,376
---------- ----------
TOTAL ASSETS $4,564,210 $3,552,369
--------- ----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED
31-OCT-96 31-JUL-96
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 53,655 $ 49,262
Accounts payable-related 0 0
Accounts payable-other 18,718 18,718
Accrued expenses 247,738 252,235
Unearned revenue 3,550 3,550
Notes payable 1,138,518 1,139,817
Notes payable-related party 949,089 925,509
----------- -----------
Total current liabilities 2,411,268 2,389,091
----------- -----------
NON-CURRENT LIABILITIES
Deferred income taxes 0 0
Notes payable, less current portion 0 0
----------- -----------
Total non-current liabilities 0 0
----------- -----------
STOCKHOLDER'S EQUITY
Common stock 198,388 31,427
Additional paid-in capital 3,896,285 2,472,959
Treasury stock -297,284 -120,313
Retained earnings -1,628,238 -1,204,587
Unrealized loss on marketable
securities -16,208 -16,208
----------- -----------
Total stockholder's equity 2,152,944 1,163,278
equity ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,564,210 $ 3,552,369
----------- -----------
</TABLE>
5
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDING
31-OCT-96 31-OCT-95
------------------- ----------------
<S> <C> <C>
OPERATING INCOME:
Oil and gas revenue $ 15,955 $ 18,268
Oil and gas lease operations 0 765
----------- -----------
Total operating income 15,955 19,033
OPERATING EXPENSES:
Oil and gas lease operations 7,389 11,177
Dry Hole costs 0 0
Mining operating expense 16,569 2,800
General and administrative expense 30,517 42,421
Depreciation and depletion 6,857 11,589
----------- -----------
Total operating expense 61,332 67,987
----------- -----------
INCOME/LOSS FROM OPERATIONS -45,377 -48,954
OTHER INCOME/EXPENSE
Interest expense -3,499 -49,149
Interest income 0 0
Gold certificate income-net 67,425 96,289
Loss on marketable securities 0 0
Provision for loss 0 0
Loss on write-down of mining
equipment 0 0
Gain/loss on sale of assets 0 0
----------- -----------
Total other 63,926 47,140
----------- -----------
NET LOSS BEFORE INCOME TAXES 18,549 -1,814
----------- -----------
PROVISION FOR INCOME TAXES
Current 0 0
Deferred 0 0
----------- -----------
Total 0 0
----------- -----------
NET INCOME/LOSS $ 18,549 $ (1,814)
----------- -----------
INCOME/LOSS PER SHARE $ - $ -
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 31,426,841 23,326,841
----------- -----------
</TABLE>
6
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDING
1-OCT-96 31-OCT-95
--------- -----------
<S> <C> <C>
Net cash provided by (used in) operations 34,944 -8,125
Net cash provided by (used in) investing
activities:
Capital additions and property 97,473 0
acquisitions
Dispositions 0 1,309,743
Other 0 -120,313
--------- -----------
Total 97,473 1,189,430
Net cash provide by (used in) financing
activities:
Repurchase of common stock 0 0
Issuance of common stock -166,961 0
Notes payable -1,299 -1,150,063
Notes payable-related party 23,580 -31,722
--------- -----------
Total -144,680 -1,181,785
Decrease in cash and equivalents -12,263 -480
Cash and cash equivalents at beginning of 9,041 3,279
year
Cash and cash equivalents at end of period -3,222 2,799
Supplemental disclosures of Cash Flow
Information: Cash paid during period for:
Interest 3,499 0
Income taxes 0 0
</TABLE>
For the purposes of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
7
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
IMPERIAL PETROLEUM, INC.
Notes to Consolidated Financial Statements
Unaudited
October 31, 1996
(1) GENERAL
The accompanying interim condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair statement of the results for the interim periods
presented have been included. Operating results for the periods presented are
not necessarily indicative of the results which may be expected for the year
ending July 31, 1997. These condensed interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Companys Form 10-K for the year ended July 31,
1996.
THE COMPANY
Imperial Petroleum, Inc., a Nevada corporation ("the Company"), is a diversified
energy, and mineral mining company headquartered in Evansville, Indiana. The
Company has historically been engaged in the production and exploration of crude
oil and natural gas in Oklahoma and Texas and has diversified its business
activities to include mineral mining, with a particular emphasis on gold mining.
The Company intends to utilize its oil and natural gas assets to support and
enhance its mining activities. The Company expects that its mining activities
will ultimately become its primary business
HISTORICAL BACKGROUND
The Company was incorporated on January 16,1981 and is the surviving member of a
merger between itself, Imperial Petroleum, Inc., a Utah corporation incorporated
on June 4, 1979 ("Imperial-Utah"), and Calico Exploration Corp., a Utah
corporation incorporated on September 27, 1979 ("Calico"). On August 11, 1982,
Petro Minerals Technology, Inc. ("Petro"), a 94% -owned subsidiary of Commercial
Technology Inc. ("Comtec") acquired 58% of the Companys common stock. Petro
assigned to the Company its interests in two producing oil and gas properties in
consideration for 5,000,000 shares of previously authorized but unissued shares
of common stock of the Company and for a $500,000 line of credit to develop
these properties. Petro has since undergone a corporate reorganization and is
now known as Petro Imperial Corporation. On August 1,1988 in an assumption of
assets and liabilities agreement, 58% of the Company's common stock was acquired
from Petro by Glauber Management Co., a 100% owned subsidiary of Glauber Valve
Co., Inc.
8
<PAGE>
Change of Control. 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 as of August 27, 1993, (the "First Amendment"), between
Imperial Petroleum, Inc. (the "Company"), 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 the common stock of Ridgepointe Mining Company, a
Delaware corporation ("Ridgepointe"), representing 100% of the issued and
outstanding common stock of Ridgepointe, for a total of 12,560,730 newly issued
shares of the Company's common stock, representing 59.59% of the Company'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 Company's common stock representing 24.67% of
the Company's issued and outstanding common stock, (ii) Borem exchanged
1,500,000 shares of Ridgepointe common stock for 1,500,000 shares of the
Company's common stock representing 7.12% of the Company'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 of the Company's issued and outstanding common stock, representing, in
the aggregate, 27.81% of the Company's 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 Ridgepointe common stock was determined through arms
length negotiations between the Company, Wilson and Borem.
The Ridgepointe Exchange Transaction was closed on August 27, 1993. As a result,
Ridgepointe is now a wholly, owned subsidiary of the Company. At the time of
acquisition, Ridgepointe was 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 ("I.B Energy"), in the exploration
for and production of oil and gas in the Mid-continent and Gulf Coast regions of
the United States.
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. Mr.
Borem, Mr. Shreve and Ms. Shepherd subsequently resigned and Mr. Malcolm W.
Henley and Mrs. Stacey D. Smethers were elected to the Board. 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.
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.
9
<PAGE>
(formerly Chelsea Street Financial Holding Corp.) no later than October 31,
1993, such transfer subsequently occurred.
Acquisition of Premier. 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 Stockholders") 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
Companys resulting issued and outstanding common stock. The one-for-one ratio of
the number of shares of the Companys 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 became 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. Mr. Borem and Ms. Shepherd subsequently
resigned.
In December 1993, Ridgepointe had agreed to acquire a 50% interest in two gold
mining claims located in the Sierra Madre mountains of Mexico.. Under the terms
of the transaction, at closing Ridgepointe agreed to pay $50,000 and the Company
agreed to issue 500,000 shares of newly-issued shares of the Company's
restricted common stock and agreed to provide $200,000 in working capital to
develop these mining claims. The Company has funded the working capital
requirements under the terms of the letter agreement to construct roads and
install equipment to develop the claims. As a result of its efforts, the
Company is entitled to acquire an additional 5% interest in the project.
Testing of the mining claims has been completed with very favorable results, and
significant expenditures have been made to construct roads and a test facility
for the mining project. Due to the magnitude of the remaining capital
requirements, the Company has delayed any further efforts in developing the
mining properties until such time as sufficient capital is available to allow
continuous operations.
In August 1994 the Company acquired certain gold mining claims "Gold Nugget
Mine" in the Quartzite area of Arizona comprising some 1200 acres from Kenneth
Shephard et al. In connection with the transaction the Company issued to Mr.
Shephard et al. shares of its restricted common stock, a one year note payable
of $750,000 and assumed an equipment leasing agreement with Darr Equipment Co.
concerning the associated mining equipment for approximately $440,000. 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
10
<PAGE>
property, the Company determined the quantity of gold varied too greatly
across the property to establish permanent facilities commensurate with its long
range corporate objections. As a result the Company unwound the acquisition in
August 1995.
In February 1995 the Company agreed to participate with Financial Surety
International Ltd. ("FSI") and Merrion Reinsurance Corp. ("Merrion") of London,
England in a program 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 (certificate of deposit) for the delivery by the Company of specified
volumes of refined gold at the end of five years subject to payment to the
Company (by the holder) for the gold to be delivered based upon the then current
price of gold. The note is delivered into escrow to be held during its term and
is insured against default by Merrion. The note is subject to annual renewal
during the term by the payment of rental fees in advance on an annual basis to
the insurance carrier and to the Company. The fees paid are non-refundable to
the holder. Under its agreement with FSI, the Company has the right to terminate
its participation at any time by providing written notice to FSI. Furthermore,
the Company has the right to reject any requests for the issuance of
certificates.
In June 1996, Ridgepointe acquired five separate mining projects, four of which
were located in Arizona and one in Montana, comprising some 4,400 acres of
claims. In connection with the acquisition of these projects, the Company paid
a total of $10,000 in cash and issued a total of 1,800,000 shares of the
Company's restricted common stock. None of the mining projects are presently
active, although significant sampling and testing has been conducted by the
prior owners. Reserve reports have been prepared by third party engineers and
geologists on each of the properties and indicate significant reserve potential.
In July 1996, Ridgepointe acquired mining claims comprising 900 acres and
referred to as the Duke Mine, in San Juan county, Utah from Paradox Basins Inc.
for payment of $100,000 and the issuance of 600,000 shares of the Companys
restricted common stock as well as the reservation of a 4.5% net smelter royalty
in favor of the sellers. The Company conducted an extensive sampling and testing
program in connection with the acquisition to quantify the economic viability of
the placer mining project and to determine the optimal recovery process to be
employed. Because of the nature of the placer gold, i.e. microscopic, the
determination of the recovery process is paramount to a successful mining
operation. The Company has conducted its tests utilizing the Cosmos Concentrator
which is designed to improve recoveries over conventional equipment in
operations where the recovery of microscopic free gold is important, such as the
Duke Mine. A third party reserve report has confirmed the significant gold
values associated with the Duke Mine claims. The Company expects to initiate
mining operations of a pilot plant during April and May, 1997.
The Company has signed a letter of intent to sell the stock of Premier Operating
Company for $175,000. Closing is expected in November 1996. The proceeds of the
sale will be used to retire the Bank of Oklahoma debt.
The Company entered into an agreement to purchase certain assets and liabilities
from LaTex Resources, Inc. dated September 30, 1996 in connection with its
merger with Alliance Resources Plc. Included in the assets to be purchased are
5,000,000 shares of common stock of Wexford
11
<PAGE>
Technology, Inc. representing 32.3% of the issued and outstanding shares and a
note payable to LaTex totaling $1,372,799; 3,798,730 shares (pre-split) of
common stock of Imperial Petroleum, Inc. and a note payable to LaTex totaling
$677,705; 5,000 shares of LaTex Resources International, Inc. common stock
representing 100% of the issued and outstanding stock and a note payable to
LaTex totaling $3,363,000; and 30,000 shares of Phoenix Metals, Inc. common
stock representing 100 % of the issued and outstanding stock. The consideration
to be paid to LaTex is 100,000 shares of LaTex stock and an option under certain
conditions to reacquire the sold assets and liabilities during an 18 month
period. Closing is scheduled to occur upon the consummation of the LaTex and
Alliance merger.
Subsequent to the end of the quarter, on November 21, 1996 the Companys
shareholders approved a one for six reverse split of the companys common stock.
As a result the Companys issued and outstanding common shares were reduced to
5,237,807 as of that date.
(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 January 31, 1996 $156,220 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, 1996. Commencing June 1, 1994 a monthly principal payment of $4,500
plus interest was due. All unpaid principal and interest was due upon maturity
at October 31, 1995. The note is secured by a mortgage on certain major oil and
gas properties owned by Premier. The Company is presently in default on this
loan and no assurance can be made that the sale of Premier will be completed as
planned to allow the payoff of this debt.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
------------------------------------
GENERAL
-------
RESULTS OF OPERATIONS
- ---------------------
The following is a discussion of the results of operations of the Company for
the three months ended October 31, 1996. 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. Until sustained
sales are achieved in each commodity, price fluctuations will remain immaterial.
Quarter ended October 31, 1996 compared to Quarter ended October 31, 1995.
- --------------------------------------------------------------------------
Revenues for the three months ending October 31, 1996 were $15,955 compared to
$19,033 for the comparable quarter ended October 31, 1995 and reflects a reduced
level of operating revenue from the Companys oil and gas operations.
Production and mining operating expenses were $23,958 for the quarter ended
October 31, 1996 compared to $13,977 for the quarter ended October 31, 1995 and
represent an increase due to mining activity and testing of the Duke mining
claims. Oil and gas mining expenses decreased due to reduced production for the
period. The Company expects its operating expenses for mining operations to
increase significantly upon installation of its pilot operations on the Duke
claims.
General and administrative costs decreased to $30,515 for the three months
ending October 31,
13
<PAGE>
1996 from $42,441 for the same period a year earlier and primarily reflects the
decreased level of the Company's activity in its oil and gas production and is
offset by increased activity in its efforts to establish its mining operations
and reserves. G & A should increase significantly as the Company begins mining
operations and initiates a corporate public relations campaign.
The Company had an after-tax net gain of $18,549 ($0.000 per share) for the
quarter ended October 31, 1996 compared to a net loss of $1,814 ($0.000 per
share) for the comparable quarter a year earlier. The gain in income is
attributable primarily to a reduction in interest expense for the period of
$45,650 and is offset by a reduction in the income generated during the period
ending October 31, 1995 of $96,289 as a result of the Company's financial
program with FSI compared to income of $ 67,425 for the comparable period
ending October 31, 1996.
CAPITAL RESOURCES AND LIOUIDITY
- -------------------------------
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, has sold oil and gas properties to
provide working capital and has from time to time received unsecured loans from
its President and principal shareholder.
Presently the Company is engaged in mining activities on its property in Utah
which require capital expenditures. Due to winter weather conditions, the
Company has continued testing its claims and has initiated the design of a pilot
facility to commence gold recovery operations in April or May 1997. Upon startup
of operations, the Company expects to operate year-round. The total cost of the
pilot plant is estimated at $185,000.
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.
Presently, the Company is utilizing funds obtained in its program with FSI to
retire its obligations and to fund its mining ventures. There is no assurance
that FSI will continue to be successful in its efforts and that the Company will
have sufficient funds to meet its obligations.
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, 1996). 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, 1996 the outstanding balance under the Company's credit
facilities with its Bank totaled $142,220. Presently, the Company is in default
under its existing loan agreement and its oil and gas properties are subject to
foreclosure. The Company signed a letter of intent to sell the stock of Premier
for a total consideration of $175,000. Closing is expected in November 1997 and
the proceeds of the sale will be used to retire the bank debt.
14
<PAGE>
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 $278,980 as of October
31, 1996. 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, 1996 the Company had current assets of $6,122 and current
liabilities of $2,411,268 which resulted in negative working capital of
$2,405,146 which is primarily 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 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
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.
15
<PAGE>
PART II
OTHER INFORMATION
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.
16
<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 and Chief Executive
Officer
Dated: August 25 , 1997
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) FOR THE QUARTER ENDING 10/31/96 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> (3,222)
<SECURITIES> 60,980
<RECEIVABLES> 42,048
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,122
<PP&E> 3,762,447
<DEPRECIATION> 283,348
<TOTAL-ASSETS> 4,564,210
<CURRENT-LIABILITIES> 2,411,268
<BONDS> 0
0
0
<COMMON> 198,388
<OTHER-SE> 1,954,658
<TOTAL-LIABILITY-AND-EQUITY> 4,564,210
<SALES> 15,955
<TOTAL-REVENUES> 15,955
<CGS> 0
<TOTAL-COSTS> 23,958
<OTHER-EXPENSES> 37,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,499
<INCOME-PRETAX> 18,549
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,549
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
