<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 January 31, 1997
[ ] 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)
Registrant's 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 January 3l, l997, there were 5,237,807 shares of the Registrant's common
stock issued and outstanding.
<PAGE>
IMPERIAL PETROLEUM, INC.
Index to Form 10-Q for the Quarterly Period
Ended January 3l, 1997
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements.
- ---------------------
Page
------
Consolidated Balance Sheets as of July 31, 1996
and January 3l, 1997 4-5
Consolidated Statements of Operations for the
three and six months ended January 31,1997 and 1996. 6
Consolidated Statements of Cash Flows for the
three and six months ended January 31, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13
PART II - OTHER INFORMATION
The information called for by Item 1. Legal Proceedings, 17
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 18
2
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PART I
FINANCIAL INFORMATION
3
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
31-JAN-97 31-JUL-96
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ (3,988) $ 9,041
Accounts Receivable -oil & gas 0 15,673
Other current assets 0 1,150
---------- ----------
Total (3,988) 25,864
---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Equipment and leasehold costs 0 393,878
Other depreciable assets 0 2,335
---------- ----------
0 396,213
----------
Less accumulated depreciation
and depletion 0 276,491
---------- ----------
Net oil and gas properties 0 119,722
---------- ----------
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 74,800 28,000
---------- ----------
Net mining properties 3,377,033 3,333,407
---------- ----------
Net property, plant and equipment 3,377,033 3,453,129
---------- ----------
OTHER ASSETS
Accounts receivable-related party 47,876 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 0 75
Total other assets 1,093,415 73,376
---------- ----------
TOTAL ASSETS $4,466,471 $3,552,369
---------- ----------
</TABLE>
4
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
31-JAN-97 31-JUL-96
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 60,755 $ 49,262
Accounts payable-related party 0 0
Accounts payable-other 18,718 18,718
Accrued expenses 247,508 252,235
Unearned revenue 3,550 3,550
Notes payable 1,872,955 1,139,817
Notes payable-related party 75,743 925,509
----------- -----------
Total current liabilities 2,279,229 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 -1,593,941 -1,204,587
Unrealized loss on marketable securities -16,208 -16,208
----------- -----------
Total stockholder's equity 2,187,241 1,163,278
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,466,471 $ 3,552,369
----------- -----------
</TABLE>
5
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDING SIX MONTHS ENDING
31-JAN-97 31-JAN-96 31-JAN-97 31-JAN-96
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Oil and gas revenue $ - $ 25,164 $ 15,955 $ 43,432
Oil and gas lease operations 0 0 0 765
---------- ----------- ----------- -----------
Total operating income 0 25,164 15,955 44,197
Oil and gas lease operations 0 12,634 7,389 23,811
Dry Hole costs 0 0 0 0
Mining operating expense 500 3,695 17,069 6,495
General and administrative
expense 20,409 63,959 50,927 106,380
Depreciation and depletion 0 11,589 6,857 23,178
---------- ----------- ----------- -----------
Total operating expense 20,409 91,877 82,242 159,864
---------- ----------- ----------- -----------
Income (loss) from opns. -20,409 -66,713 -66,286 -115,667
Interest expense -4,834 -23,950 -8,333 -73,099
Interest income 0 0 0 0
Gold certificate income-net 0 78,458 67,425 174,747
Loss on marketable securities 0 0 0 0
Provision for loss 0 0 0 0
Loss on write-down of
mining equipment 0 0 0 0
Gain/ loss on sale of assets 60,040 0 60,040 0
---------- ----------- ----------- -----------
Total other income/expense 55,206 54,508 119,132 101,648
---------- ----------- ----------- -----------
Net Income(loss)before tax 34,206 -12,205 52,846 -14,019
---------- ----------- ----------- -----------
Current 0 0 0 0
Deferred 0 0 0 0
---------- ----------- ----------- -----------
Total benefit from income
taxes 0 0 0 0
---------- ----------- ----------- -----------
Net Income (loss) $ 34,206 $ (12,205) $ 52,846 $ (14,019)
---------- ----------- ----------- -----------
Net Income(loss) per share $ 0.006 $ (0.001) $ 0.003 $ (0.001)
---------- ----------- ----------- -----------
Weighted Avg. Shares 5,237,807 23,326,841 17,297,163 23,326,841
---------- ----------- ----------- -----------
</TABLE>
6
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDING
31-JAN-97 31-JAN-96
----------- ----------
<S> <C> <C>
Net cash provided by (used in) operations 82,967 128,079
Net cash provided by (used in) investing
activities:
Capital additions and property
acquisitions 97,473 0
Dispositions 60,040 -866,668
Other 0 0
----------- ----------
Total 157,513 -866,668
Net cash provide by (used in) financing
activities:
Long term debt 0 156,220
Issuance of common stock -166,961 0
Notes payable 733,139 -1,302,473
Notes payable-related party -849,766 71,361
----------- ----------
Total -283,588 -1,074,892
Inc/decrease in cash equivalents -13,019 3,763
Cash and cash equivalents at beginning of
year 9,041 3,279
Cash and cash equivalents at end of period -3,978 7,042
Supplemental disclosures of Cash Flow
Information
Interest 8,333 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.
7
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
IMPERIAL PETROLEUM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
JANUARY 31, 1997
(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 Company's 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 has sold its oil and gas operations
and intends to focus on its mining activities.
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 Company's 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.
Change of Control. Pursuant to an Agreement to Exchange Stock and Plan of
- ------------------
Reorganization
8
<PAGE>
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. (formerly
Chelsea Street Financial Holding Corp.) no later than October 31, 1993, such
transfer subsequently occurred.
9
<PAGE>
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
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 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 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.
10
<PAGE>
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 Company's
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 May or June, 1997, subject to final
receipt of mining permits.
The Company sold the stock of Premier Operating Company for $175,000 on November
1, 1996 and retired its entire outstanding bank balance at Bank of Oklahoma with
the proceeds. As a result of the sale, the company has substantially sold its
oil and gas operations and properties.
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 Technology, Inc. representing 32.3%
of the issued and outstanding shares and a note payable to
11
<PAGE>
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.
During the quarter ending January 31, 1997, on November 21, 1996 the Company's
shareholders approved a one for six reverse split of the company's common stock.
As a result the Company's 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, 1997 $144,220 has been advanced on the note. Accrued
interest is due and payable monthly at the bank's prime rate which was 10.75% on
January 31, 1997. 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 has paid the note in full.
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 and six months ended January 31, 1997. 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. In subsequent quarters as a result of the sale of Premier
Operating Company, the Company will not be reporting any revenues from oil and
gas sales.
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.
THREE MONTHS COMPARISON
- -----------------------
Quarter ended January 31, 1997 compared to Quarter ended January 31, 1996.
- --------------------------------------------------------------------------
Revenues for the three months ending January 31, 1997 were $0 compared to
$25,164 for the comparable quarter ended January 31, 1996 and reflects the loss
of operating revenue from the Company's oil and gas operations as a result of
the sale of Premier. Any future revenues will result from the start-up of mining
operations.
Production and mining operating expenses were $500 for the quarter ended January
31, 1997 compared to $16,329 for the quarter ended January 31, 1996 and
represent an decrease due to the sale of Premier. Mining expenses decreased due
to winter weather considerations the period. The Company expects its operating
expenses for mining operations to increase significantly upon installation of
its pilot operations on the Duke claims.
13
<PAGE>
General and administrative costs decreased to $20,409 for the three months
ending January 31, 1997 from $63,959 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 income gain of $34,206 ($0.006 per share) for
the quarter ended January 31, 1997 compared to a net loss of $12,205 ($0.001 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
$19,116 and a gain from the sale of Premier of $60,040 and is offset by a
reduction in the income generated during the period ending January 31, 1997 of
$0 as a result of the Company's financial program with FSI compared to income of
$78,458 for the comparable period ending January 31, 1996.
SIX MONTH COMPARISON
Six Months Ending January 31, 1997 Compared To Six Months Ending January 31,
- ----------------------------------------------------------------------------
1996.
- -----
Revenues for the six months ending January 31, 1997 were $15,955 compared to
$44,197 for the same period a year earlier and reflect the a reduction in the
production levels of Premier and the subsequent sale of the oil and gas
subsidiary.
Operating expenses for oil and gas operations were $7,389 for the period ending
January 31, 1997 compared to $23,811 for the six months ended January 31, 1996
as a result of the sale of Premier. Mining expenses increased for the same
period from $6,495 a year ago to $17,069 and reflects increased activity on the
Company's mining properties.
General and administrative expenses decrease from $106,380 during the six months
ended January 31, 1996 to $50,927 for the period ending January 31, 1997 as a
result of the sale of Premier and as a result of cost cutting measures
implemented by the Company. DD&A also decreased from $23,178 a year ago to
$6,857 during the current period. The Company expects both its G&A and its DD&A
to increase once continuous mining activities are initiated.
The Company had an after tax net income gain of $52,846 ($0.006 per share) for
the six months ending January 31, 1997 compared to a net loss of $14,019 ($0.001
per share) for the six months ending January 31, 1996. The increase in income is
attributable to a net gain on the sale of Premier of $60,040 and is offset by a
reduction in income from the Company's program with FSI of $107,322 for the
period.
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
14
<PAGE>
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 May or June 1997 subject to completion of
permitting. 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 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 was paid off with proceeds from the sale of
Premier. As a result the Company presently has no credit facility available to
it from a bank or other lending institution.
The Company has obtained certain unsecured loans, in compliance with its bank
covenants, from Jeffrey T. Wilson, which totals $280,840 as of January 31, 1997.
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 January 31, 1997 the Company had current assets of $(3,978) and current
liabilities of $2,279,230 which resulted in negative working capital of
$2,283,208. The working capital deficit is primarily comprised notes payable to
shareholders $280,840; notes payable to an affiliate $677,705 and an acquisition
note payable of $1,000,000 secured by the UFO mine. Upon the completion of the
purchase of certain assets and liabilities from its affiliate, as discussed
above, the note payable to the affiliate will be extinguished. Also discussed
previously, if the Company is unsuccessful in obtaining extensions or
modifications of its acquisition note, the UFO mining venture 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 gold and
copper 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 and due to weather
factors which affect mining activity and expenditures. 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
15
<PAGE>
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
ITEM 1. LEGAL PROCEEDINGS. NOT APPLICABLE.
-----------------
ITEM 2. CHANGES IN SECURITIES. NOT APPLICABLE.
---------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. NOT APPLICABLE.
-------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. REFERENCE IS MADE
----------------------------------------------------
TO THE PROXY SOLICITATION MATERIALS REGARDING THE ANNUAL MEETING
OF SHAREHOLDERS DATED NOVEMBER 21, 1996.
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.
17
<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
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) FOR THE QUARTER ENDED 1/31/97 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> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> (3,988)
<SECURITIES> 60,980
<RECEIVABLES> 47,876
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> (3,988)
<PP&E> 3,377,033
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,466,471
<CURRENT-LIABILITIES> 2,279,229
<BONDS> 0
0
0
<COMMON> 198,388
<OTHER-SE> 1,988,852
<TOTAL-LIABILITY-AND-EQUITY> 4,466,471
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 500
<OTHER-EXPENSES> 20,409
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,834
<INCOME-PRETAX> 34,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,206
<EPS-PRIMARY> 0.006
<EPS-DILUTED> 0.006
</TABLE>
