SECURITIES EXCHANGE COMMISSION
Washington D.C 20549
FORM 10-Q
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE
ACT OF
1934
For the Quarterly
Period Ended April 30, 2000
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
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(State or other jurisdiction (IRS Employer
of incorporation or organization) identification No.)
100 NW Second Street (47708)
Suite 312 Zip Code
Evansville, Indiana
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__X__ No ____
On April 30, 2000, there were 13,504,165 shares of the
Registrant's common stock issued and outstanding.
<PAGE>
IMPERIAL PETROLEUM, INC.
Index to Form 10-Q for the Quarterly Period
Ended April 30, 2000
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements.
Page
Consolidated Balance Sheets as of
July 31, 1999 and April 30, 2000 5-6
Consolidated Statements of Operations for the
three months and the nine Months
ended April 30,2000 and 1999. 7
Consolidated Statements of Cash Flows for the
three and nine months ended April 30, 2000 and 1999. 8
Notes to Consolidated Financial Statements 9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 16
PART II - OTHER INFORMATION
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. 21
SIGNATURES 22
<PAGE>
Cautionary Statement Regarding Forward Looking Statements
In the interest of providing the Company's stockholders and potential investors
with certain information regarding the Company's future plans and operations,
certain statements set forth in this Form 10-Q relate to management's future
plans and objectives. Such statements are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. Although any forward
looking statements contained in this Form 10-Q or otherwise expressed on behalf
of the Company are, to the knowledge and in the judgement of the officers and
directors of the Company, expected to prove to come true and to come to pass,
management is not able to predict the future with absolute certainty. Forward
looking statements involve known and unknown risks and uncertainties which may
cause the Company's actual performance and financial results in future periods
to differ materially from any projection, estimate or forecasted result. These
risks and uncertainties include, among other things, volatility of commodity
prices, changes in interest rates and capital market conditions, competition,
risks inherent in the Company's operations, the inexact nature of interpretation
of seismic and other geological, geophysical, petrophysical and geochemical
data, the imprecise nature of estimating reserves and such other risks and
uncertainties as described from time to time in the Company's periodic reprots
and filings with the Securities and Exchange Commission. Accordingly
stockholders and potential investors are cautioned that certain events or
circumstances could cause actual results to differ materially from those
projected, estimated or predicted.
<PAGE>
PART I
FINANCIAL INFORMATION
<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED - April 30, 2000
30-Apr-00 31-Jul-99
ASSETS
Current Assets
Cash $ (34) $ 1,415
Accounts Receivable -other 319,803 3,000
Other current assets 60,964 60,964
Total 380,733 65,379
Property, Plant and Equipment
Other depreciable equipment 5,166 5,166
Mining claims, options and
costs 41,760 41,760
Accumulated depreciation (369) (369)
Net property, plant and 46,557 46,557
equip.
Other Assets
Investment in subsidiary 1,754,209 1,754,209
Accounts receivable-related party 152,498 0
Other assets 63,694 81,764
Total other assets 1,970,401 1,836,003
TOTAL ASSETS $ 2,397,691 $ 1,947,939
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<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED - April 30, 2000
30-Apr-00 31-Jul-99
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $114,625 $41,051
Accounts payable-other 0 0
Accrued expenses 715,872 558,487
Notes payable 90,902 187,500
Notes payable-related party 742,747 696,997
Total current liabilities 1,664,146 1,484,035
Non-current Liabilities
Unearned revenue 597,441 297,441
Notes payable, less current portion 0 0
Total non-current liabilities 597,441 297,441
Stockholder's Equity
Common stock 84,926 69,170
Additional paid-in capital 4,583,073 4,350,475
Treasury stock -1,468,677 -1,468,677
Retained earnings -3,063,216 -2,784,508
Unrealized loss on marketable 0 0
- -
securities
Total stockholder's equity 136,104 166,463
Total Liabilities and Stockholder's Equity $ 2,397,691 $ 1,947,939
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<PAGE>
IMPERIAL PETROLEUM,INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
Three Months Nine Months
Ending Ending
30-Apr-00 30-Apr-99 30-Apr-00 30-Apr-99
Operating Income:
Oil and gas revenue $ - $ - $0 $0
Management and fee income 8,622 35,120 38,721 103,970
Total operating income 8,622 35,120 38,721 103,970
Operating Expenses:
Oil and gas lease operations 0 0 0 0
Dry Hole costs 0 0 0 0
Mining operating expense 0 0 0 0
General and administrative expense 57,057 61,775 182,468 185,293
Depreciation and depletion 0 0 0 0
Total operating expense 57,057 61,775 182,468 185,293
Income/Loss from operatio -48,435 -26,655 -143,747 -81,323
Other Income/expense
Interest expense 20,815 21,088 63,635 53,609
Gold certificate income-net 0 0 0 0
Loss on marketable 0 0 0 0
Loss on write-down of mining equipment 0 0 0 0
Gain/ loss on sale of assets 0 0 0 0
Total other income/expense 20,815 21,088 63,635 53,609
Net Loss Before Income Taxes -69,250 -47,743 -207,382 -134,933
Provision for Income Taxes
Current 0 0 0 0
Deferred 0 0 0 0
Total benefit from income taxes 0 0 0 0
Net Income/Loss $ (69,250) $(47,743) ($207,382) $(134,933)
Income/Loss per share ($0.005) ($0.005) ($0.015) ($0.015)
Weighted average shares outstanding 13,504,165 9,780,250 13,504,165 8,930,250
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<PAGE>
IMPERIAL PETROLEUM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
Nine Months Ending
30-Apr-00 30-Apr-99
Net cash provided by (used in) -$496,060 -$150,714
operations
Net cash provided by (used in) investing activities:
Capital additions and property 0 0
acquisitions
Dispositions 0 0
Other -142,092 -155,000
Total -142,092 -155,000
Net cash provide by (used in) financing activities:
Repurchase of common stock 0 0
Issuance of common stock 15,755 20,000
Deferred Revenue 300,000 0
Notes payable 0 22,000
Notes payable-related party 49,250 0
Paid-In Capital 232,598 110,000
Total 597,603 302,000
Increase (Decrease) in cash and equivalents -1,449 -3,714
Cash and cash equivalents at beginning of period -1,415 -7,839
Cash and cash equivalents at end of -34 4,124
period
Supplemental disclosures of Cash Flow Information
Interest 0 0
Cash paid during the
period for: Income Taxes 0 0
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.
<PAGE>
PART I - FINANCIAL INFORMATION
IMPERIAL PETROLEUM, INC.
Notes to Consolidated Financial Statements
Unaudited
April 30, 2000
(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, 2000. 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,
1999.
Unless the context requires otherwise, all references herein to the Company
include Imperial Petroleum, Inc., and its consolidated subsidiaries. Ridgepointe
Mining Company, a Delaware corporation ("Ridgepointe"), I.B. Energy, Inc., an
Oklahoma corporation ("I.B. Energy"), Premier Operating Company, a Texas
corporation ("Premier"), LaTex Resources International, a Delaware corporation
("LRI"), Phoenix Metals, Inc., a Texas corporation ("Phoenix"), SilaQuartz
Mining Company Ltd. ("SilaQuartz"), an Ohio Limited Liability Company. , and Oil
City Petroleum, Inc. ("Oil City"), an Oklahoma corporation. Premier was sold
effective July 31, 1996. LRI and Phoenix were acquired effective April 30, 1997.
Eighty- percent control of SilaQuartz was acquired effective November 23, 1998.
The Company acquired 90% control of Oil City effective August 31, 1998. The
Company formed Global/Imperial Joint Venture, Inc. on March 3, 2000 and
presently owns 50% of the capital stock.
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 to focus its future growth in
both energy and mining ventures.
At July 31,1999, the Company had completed the acquisition of 90% control of Oil
City Petroleum, Inc. a Tulsa, Oklahoma based energy producer and Oil City had
subsequently sold its primary oil and gas assets to Comanche Energy, Inc.
("Comanche"). As a result, the Company became a significant shareholder in
Comanche. The Company does not presently operate any oil and natural gas
properties directly.
<PAGE>
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"). The Company was
reorganized under a Reorganization Agreement and Plan and Article of Merger
dated August 31, 1981 resulting in the Company being domiciled in Nevada.
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 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.
<PAGE>
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.
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.
<PAGE>
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.
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 the term of the note 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.
<PAGE>
In July 1996, Ridgepointe acquired mining claims comprising 320 acres and
referred to as the Duke Mine, in San Juan county, Utah from Paradox Basins Inc.
for payment of $45,000 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
that 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 acquired an additional 1,900
acres of claims contiguous to the original claim area and operated a pilot plant
from September 1997 to November 1997. Since that time the Company has been
seeking financing to install a full-scale operating facility.
The Company sold the stock of Premier Operating Company for $175,000 on November
1, 1996 (effective July 31, 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. ("LaTex") dated September 30, 1996 in connection with
LaTex's merger with Alliance Resources Plc.. Included in the assets purchased
were 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 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 paid to LaTex was 100,000 shares of LaTex
stock, the assumption of liabilities associated with the various entities and an
option under certain conditions for Alliance to reacquire the 50% of the sold
assets and liabilities during an 18-month period. Closing occurred at the time
of the LaTex/Alliance merger, on April 30, 1997. Alliance failed to exercise its
option to re-purchase any of the assets.
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.
On November 23, 1997, the Company completed the acquisition of an 80% interest
in SilaQuartz Mining Company Ltd., a company owning mining rights to high-grade
silica claims in Idaho. As one of a limited number of commercial deposits of
high grade silica in the United States, the Company believes SilaQuartz will be
able to secure a significant portion of the market for this material very
rapidly. Under the terms of the SilaQuartz transaction, the Company issued
750,000 shares of its restricted common stock and 750,000 shares of the stock it
owns in Wexford Technology, Inc. in exchange for the 80% interest. In addition
the Company is obligated to provide $250,000 in loans to SilaQuartz to begin
mining operations. To date the Company has funded approximately $62,500 of its
commitment and has suspended further efforts in regards to SilaQuartz until
marketing and financing arrangements are completed.
<PAGE>
The Company unwound its acquisition of the UFO Mining Limited Partnership
interest in the Lone Star Mine in November 1997 and retired a note payable to
UFO Mining Limited Partnership of $1,000,000 and secured the return of 1,000,000
shares (pre-split) of its common stock from UFO Mining Limited Partnership in
exchange for the Company's contribution of its Congress Mill Site Facility
interests and equipment and its interests in the Lone Star Mine to a Mining
Partnership managed by Zane Pasma. The Company retained a 5% carried interest in
the partnership through the expenditure by the Partnership of the first $6.0
million towards the development of the Lone Star Mine. The Partnership began
test mining on the Lone Star claims during 1998 and received disappointing
results from recovery tests aimed at recovering platinum group metals from the
ore. Future operations are presently suspended while the operator re-evaluates
the results and seeks industry participation or other financing for the project.
On June 28, 1998, the Company entered into a series of Agreements to sell
unprocessed silica ore to Merrion Reinsurance Company Ltd. Under the terms of
the Agreements, Imperial will deliver up to a total of 1 million tons of silica
ore at $50.00 per ton to a processing site in the St. Louis, Missouri area
beginning in April 1999, subject to the construction of a processing plant.
Merrion is required to pre-pay $50,000 per month of the silica purchase until
delivery commences, at which time it is expected Imperial will process and sell
silica products on behalf of Merrion and retain a certain portion of the
proceeds against the purchase price. Imperial has the right to hold 55% of the
equity of Merrion against the future payment for the silica as planned. Imperial
has the right to delay delivery under the agreement until such time as a
processing plant is constructed and operational and to designate the delivery
location for the Merrion ore at the mine site. Merrion is delinquent in its
payments to the Company, although revised terms are under negotiation.
On August 31, 1998, the Company entered into an agreement to acquire Oil City
Petroleum, Inc., Tulsa-based oil and gas producer with energy reserves valued at
about $6.5 million. Under the terms of the Agreement, the Company issued 1.95
million shares of its restricted common stock to the major shareholders of Oil
City for a 90% ownership position. In addition, the Company issued a corporate
guarantee to Bank One NA guaranteeing the repayment of the Oil City senior debt
of approximately $1.1 million and the Company agreed to provide a subordinate
loan of $975,000 to Oil City over a thirty six month period to assist in the
payment of its senior debt. Upon closing the Oil City Acquisition, the Company
assisted Oil City management in the acquisition of additional oil and natural
gas producing property interests and in the subsequent sale of Oil city's
primary asset, Double Eagle Petroleum Corporation to Comanche Energy, Inc. of
Dallas, Texas. As a result of these transactions, the Company received 5,481,901
shares of restricted common stock of Comanche, (representing about 12.5% of
Comanche) valued at the time of closing at $0.52 per share. The management of
Oil City has assumed the management of Comanche.
On September 8, 1998 the Company entered into an Agreement to hypothecate for a
period of 3.5 years a substantial amount of its in-ground gold reserves to Asset
Capital LLC, a Colorado corporation, in exchange for the payment of a total of
$65 million. Under the terms of the Agreement, the Company has the right to
mine, extract and sell the gold recovered from the claims hypothecated during
the period. In addition, Asset Capital, has the right to request the
hypothecation of additional gold reserves through the payment of an additional
$75 million. Asset Capital is delinquent under the terms of the Agreement in
paying the Company. Under the terms of the Agreement the Company had the right
to cancel the Agreement at any time for non-payment. The Company has cancelled
the Asset Capital agreement.
<PAGE>
On October 22, 1998 the Company entered into a Joint Venture arrangement with
Natural Resources Group Inc., a US corporation and Continental Resources Party
Ltd., a South African company, to mine, extract and sell diamonds from claims
and association claims controlled by Continental. Under the terms of the
Agreement, Imperial applied for financing from the Export-Import Bank to buy
earth moving and other mining equipment to be exported to Continental and
employed on behalf of the Joint Venture. Continental controls some 1200 acres of
alluvial diamond claims and has operations in the Barkley West area, just
northwest of Kimberly in the Republic of South Africa. The Joint Venture Manager
began the permit application process, however the parties were unable to locate
an acceptable guarantor to obtain the project financing. The Company has
withdrawn from the project.
In April 1999, the Company entered into an agreement to acquire the contract
from Consulta Solutions to treat effluent materials to control odor and bacteria
associated with the rendering of poultry products at the American Protein plant
in Georgia. The Company issued 650,000 shares of its restricted common stock and
three-year warrants to issue an additional 600,000 shares of common stock
exercisable at $0.25 per to a management group consisting of three individuals.
The Company utilized its dormant subsidiary, Phoenix Metals, Inc. as the
business entity and began operations at the American Protein plant in Georgia
under the name Imperial Environmental Company. At year-end, the Company had only
received approximately $55,000 in revenue from the contract and had encountered
problems with the implementation of its business plan due to internal management
problems, lack of adequate working capital to fund expansion of the subsidiary
and unanticipated competition from other vendors in this business. As a result,
the Company has temporarily suspended its operations until sufficient working
capital is available. In connection with the temporary suspension of its
environmental activities, the management group resigned and the shares and
options issued to them in connection with their employ have been returned to the
Company.
The Company entered into negotiations with Asia Pacific Capital Corporation, a
merchant banking firm located in Sydney, Australia, to provide project financing
for its mining and energy projects in connection with an equity infusion. If
completed under the present structure, Asia Pacific would acquire 20 million
shares of the Company's restricted common stock in exchange for $12 million and
a commitment to project finance up to $47 million of the Company's mining and
energy projects. Based upon the most recent information provided by Asia
Pacific, the equity infusion should complete during the fourth quarter. Asia
Pacific has provided the Company with a loan commitment of $50 million to
finance an oil and natural gas acquisition that is under review by the Company.
The Company has signed the loan commitment from Asia Pacific, however, final
documentation is not expected until after completion of the equity infusion.
On March 3, 2000 the Company formed a new corporation domiciled in Nevada named
Global/Imperial Joint Venture, Inc. The new company is owned 50% by Imperial and
50% by Lamont Harvey Stanley Global Enterprises LLC. and was formed for the
purpose of completing a private placement of debt to fund the facilities
required for the expansion of its Duke Gold Mine and to allow the Company to
acquire and develop oil and natural gas drilling projects in the United States.
The new company will own a 50% interest in the Duke Gold Mine, subject to
completion of the funding and subsequent additional mining acreage acquired
under an Area of Mutual Interest. The private placement ahs been approved by the
lender and the Company is awaiting the final terms and conditions of the debt
instrument to arrange a closing. In the event that the terms are unacceptable to
the Company and the transaction is not closed, the Company expects to have the
balance of the stock re-assigned from Lamont Harvey Stanley Global Enterprises
LLC and will use reserve the Company for future use.
<PAGE>
(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) NOTES PAYABLE
The Company enters into private notes primarily from its major shareholders from
time-to-time in the course of funding its mining and other activities. As of
April 30, 2000, the Company had a total of 6 notes payable to individuals and
private companies totaling $982,569, including principal and accrued interest
thereon, of which $868,987 was with its Chairman and President.
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 the nine months ended April 30, 2000. 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.
Historically, 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. 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. Commodity prices for copper and gold
continue to fluctuate. Until sustained sales are achieved in each commodity,
price fluctuations will remain immaterial.
<PAGE>
While the acquisition of a controlling interest of SilaQuartz Mining Company
Ltd. and the subsequent sale of unprocessed silica ore to Merrion results in the
monthly receipt of advance revenue of $50,000, delivery of the silica ore is not
anticipated until construction of a processing plant is completed and as such
any payments received by Merrion are presently considered as deferred revenue
for accounting purposes. Upon completion of the silica processing facility and
the initiation of continuous mining activity, the value of various processed
silica products will significantly influence the Company's quarterly results of
operations.
As discussed previously, the company acquired 90% control of Oil City Petroleum,
Inc. effective August 31,1998 and sold substantially all of the assets of Oil
City to Comanche Energy effective in June 1999. As a result of the sale and
because the Company is a minor shareholder, the Company does not report its
share of the revenues and expenses of Comanche.
Three Months Comparison
Quarter ended April 30, 2000 compared to Quarter ended April 30, 1999. Revenues
for the three months ending April 30, 2000 were $8,622 compared to $35,120 for
the comparable quarter ended April 30, 1999 and reflects revenue from the
Company's sublease of office space and interest income on notes receivable from
affiliates. The decrease in revenues is the result of the termination of
sublease agreements with Wexford Technology, Inc. and RealAmerica Co. and the
write-off of certain debts owed the Company by Wexford. Any future revenues will
result from the start-up of mining operations or from new oil and gas
acquisitions.
Production and mining operating expenses were $0 for the quarter ended April 30,
2000 compared to $0 for the quarter ended April 30, 1999. The Company expects
its operating expenses for mining operations to increase significantly upon the
continuous operations on the Duke Gold Mine.
General and administrative costs were $57,057 for the three months ending April
30, 2000 and $61,775 for the same period a year earlier and primarily reflects
the level of normal G&A expenses. G &A should continue to increase as the
Company begins continuous mining operations and initiates a corporate public
relations campaign. Interest expense for the quarter decreased from $21,088 in
1999 to $20,815 for the same period in 2000 and reflects the exchange of debt
for common stock and is offset additional borrowings during the quarter by the
Company from private debt sources.
The Company had an after-tax net income loss of $69,250 ($0.005 per share) for
the quarter ended April 30, 2000 compared to a net loss of $47,743 ($0.005 per
share) for the comparable quarter a year earlier. The Company does not expect to
generate significant income until its mining operations are in production.
<PAGE>
Nine Months Comparison
Nine months ended April 30, 2000 compared to Nine months ended April 30, 1999.
Revenues for the nine months ending April 30, 2000 were $38,721 compared to
$103,970 for the comparable period ended April 30, 1999. The decrease in
revenues reflect the loss of management fee income and the sublease income for
certain of the Company's office space. Any significant future revenues will
result from the start-up of mining operations on the Duke Gold Mine.
Production and mining operating expenses were $0 for the period ended April 30,
2000 compared to $0 for the period ended April 30, 1999. No significant
operations were conducted during the period. The Company expects its operating
expenses for mining operations to increase significantly upon the continuous
operations of its various mining projects.
General and administrative costs were $182,468 for the six months ending April
30, 2000 and $185,293 for the same period a year earlier and reflects the
anticipated level of the Company's activity until operations are commenced. G &
A should increase significantly as the Company begins continuous mining
operations and initiates a corporate public relations campaign. Interest expense
for the period increased from $53,609 in 1999 to $63,635 in 2000 due to
increased borrowings.
The Company had an after-tax net income loss of $207,382 ($0.015 per share) for
the nine months ended April 30, 2000 compared to a net loss of $134,933 ($0.015
per share) for the comparable period a year earlier. The increase in the net
loss reflects primarily a decrease in revenues as a result of the loss of
certain sublease revenues. The Company does not expect to generate significant
income until mining operations are commenced.
CAPITAL RESOURCES AND LIOUIDITY
The Company's capital requirements relate primarily to its mining activities and
the expansion of those activities. Prior to the change in control, the Company
funded its very limited activities from cash flow. The Company, through its
subsidiaries, had established credit facilities with a bank to facilitate the
funding of its operations. As a result of the sale of its Premier Operating
subsidiary in October, 1996, the Company retired its principal bank debt and no
longer has access to financing from that source.
Presently the Company is active in several mining activities, which will require
significant capital expenditures. The Company has a wide degree of discretion in
the level of capital expenditures it must devote to each project on an annual
basis and the timing of the development of each project. The Company has
primarily been engaged, in its recent past, in the acquisition and testing of
mineral properties to be inventoried for future development. Because of the
relative magnitude of the capital expenditures that may ultimately be required
for any single mining venture as operations are achieved, management has pursued
a strategy of acquiring properties with significant mineral potential in an
effort to create a mineral property base sufficient to allow the Company to
access capital from external sources, either through debt or equity placements.
In order to develop its properties in a continuous manner in the future,
management believes the Company will need to raise capital from outside sources
during fiscal 2000. The Company has entered into negotiations with Asia Pacific
<PAGE>
Capital Corporation, a merchant banking firm headquartered in Sydney, Australia,
to provide an equity infusion of $12 million in connection with project
financing of up to $47 million. Asia Pacific has provided a firm loan commitment
to the Company of $50 million to finance an oil and natural gas acquisition that
the Company is attempting to negotiate. The principals of Asia Pacific have
indicated funding of the equity infusion should occur in May 2000. No agreements
have been signed between the Company and Asia Pacific yet. If the transaction
completes, Asia Pacific would become the Company's principal shareholder. There
can be no assurance that Asia Pacific will complete the equity purchase and,
absent the equity purchase, would remain interested in providing the financing
under the terms of its financing commitment.
As a result of the acquisition of control of Oil City and the subsequent sale of
Oil City's assets to Comanche, the Company owns 5,481,901 shares of the
restricted common stock of Comanche. At current market prices those shares are
valued at approximately $2.5 million. The Company expects to use the Comanche
shares as collateral in seeking a working capital loan to initiate operations at
the Duke Gold Mine or in the pursuit of oil and gas acquisitions. The shares
owned by the Company in Comanche are restricted from sale under Rule 144 of the
Securities Act, and as such there can be no assurance that a bank will accept
the shares as collateral or that sufficient borrowing capacity can be obtained
to allow operations to begin. In the event that bank financing cannot be
obtained using the Comanche shares, the Company may seek to sell all or a part
of those shares to raise capital.
The Company intends to continue to pursue each of the above transactions in an
effort to finance its operations, however, in the event that the funds from Asia
Pacific are not received or are not received timely or in the event that
additional capital is not obtained from other sources, it may become necessary
to alter development plans or otherwise abandon certain ventures.
Although the timing of expenditures for the Company's mining activities are
distributed over several months, the Company anticipates its current working
capital will be insufficient to meet its capital expenditures. Furthermore,
since the fees generated from the Company's participation in the program with
FSI/Merrion are unpredictable in both timing and magnitude and because there can
be no assurance that FSI/Merrion will continue to be able to market its product,
the Company believes it will be required to access outside capital either
through debt or equity placements or through joint venture operations with other
mining companies. While the Company has sold, subject to certain conditions,
unprocessed silica ore in an effort to provide working capital funds to complete
the various engineering and marketing studies required prior to the construction
of a processing plant, Merrion is currently delinquent in its payments. The
Company believes it will need to access outside capital in order to construct
the facilities necessary to begin profitable operations. There can be no
assurance that the Company will be successful in its efforts to locate outside
capital or that the funds to be provided by Asia Pacific will be received
timely, if at all, and as a result the level of the Company's planned mining
activities may need to be curtailed, deferred or abandoned entirely. The level
of the Company's capital expenditures will vary in the future depending on
commodity market conditions and upon the level of and mining activity achieved
by the Company. The Company anticipates that its cash flow will be insufficient
to fund its operations at their current levels and that additional funds will be
required.
<PAGE>
The Company sold its oil and gas properties in October 1996 and its Premier
Operating subsidiary and paid off its then existing credit facility with Bank of
Oklahoma. As a result the Company presently has no credit facility available to
fund its mining activities and will be required to rely on private debt
placements or equity sales to fund any remaining capital expenditures. The
Company has obtained certain unsecured loans from its Chairman and President,
Jeffrey T. Wilson, which total in principal and accrued interest $868,988 as of
April 30, 2000. These funds have been used to initiate the Company's mining
activities. Management believes that the Company will not have sufficient
borrowing capacity to fund its anticipated needs and will need to access outside
capital.
At April 30, 2000, the Company had current assets of $380,733 and current
liabilities of $1,664,146, which resulted in negative working capital of
$1,283,413. The negative working capital position is comprised primarily of
notes payable to shareholders and related parties totaling $833,649, accrued
salaries and expenses totaling $715,872. As discussed earlier, if the Company is
unsuccessful in obtaining outside capital certain mining activities of the
Company may be curtailed, postponed or abandoned. The Company believes that its
cash flow from operations will continue to be insufficient to meet its ongoing
capital requirements and short-term operating needs. As a result the Company
plans to seek additional capital from outside sources through the placement of
additional debt or equity during fiscal 2000. The previously discussed
transactions with Asia Pacific, if successful, will provide the Company with
sufficient funds to pursue its mining and other ventures on the timely basis as
discussed herein. Because the availability of debt and equity financing are
subject to a number of variables, there can be no assurance that the Company
will be successful in attracting adequate financing and as a result may be
required to curtail, postpone or abandon certain of its planned capital
expenditures. If the Company is unable to attract adequate financing, management
believes the Company may be compelled to sell certain of its assets to meet its
obligations.
SEASONALITY
The results of operations of the Company are somewhat seasonal due to seasonal
fluctuations in the ability to conduct mining operations in certain areas,
resulting in lower production volumes. 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 mining properties have been and will
be affected by changes in copper and gold prices. The Company's ability to
maintain current borrowing capacity and to obtain additional capital on
attractive terms is also substantially dependent on copper and gold prices.
Prices for these commodities are subject to significant fluctuations that are
beyond the Company's ability to control or predict.
<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
Reference is made to that certain Form 8-K filing
dated April 20,1999 concerning the acquisition of
Oil City Petroleum, Inc.
<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: May 11, 2000
