- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA 13-3130236
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
444 MADISON AVE, SUITE 3203
NEW YORK, NEW YORK 10022
(212) 688-3333
(Address, including zip code, and telephone number
including area code, of registrant's principal executive offices)
DR. GEORGE N. FARIS, CHIEF EXECUTIVE OFFICER
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
444 MADISON AVENUE, SUITE 3203
NEW YORK, NEW YORK 10022
(212) 688-3333
(Name , address, including zip code, and telephone
number, including area code, of agent for service)
A copy of all communications, including communications sent to the agent
for service, should be sent to:
CHARLES SNOW, ESQ.
SNOW BECKER KRAUSS P.C.
605 THIRD AVENUE
NEW YORK, NEW YORK 10158-0125
TELEPHONE (212) 687-3860
FAX (212) 949-7052
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practical after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-i-
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Shares Amount to be Maximum Maximum Amount of
to be Registered Registered Offering Price Aggregate Registration
Per Share Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock, par value $.08 per share 1,478,347 shares(1) $3.64 (2) $ 5,381,183 $ 1,776
======================================== ===================== ==================== ===================== ===================
Common Stock, par value $.08 per share 5,500,000 shares(3) $4.00 $22,000,000 $ 6,667* **
======================================== ===================== ==================== ===================== ===================
Common Stock, par value $.08 per share 457,347 shares(3) $4.00 $ 1,829,388 $ 555**
======================================== ===================== ==================== ===================== ===================
Common Stock, par value $.08 per share 386,800 shares(4) $ 2.475 $ 957,330 $ 291* **
======================================== ===================== ==================== ===================== ===================
Class A Warrants to Purchase Common
Stock, par value $.08 per share 193,400 wts. (4) - (5) - -
======================================== ===================== ==================== ===================== ===================
Common Stock, par value $.08, per share 193,400 shares(4)(6) $4.00 $ 773,600 $ 239* **
======================================== ===================== ==================== ===================== ===================
TOTAL REGISTRATION FEE $ 9,528
NET FEES DUE $ 2,331
===========
</TABLE>
(1) Consists of 1,078,347 shares issuable upon exercise of warrants (at
exercise prices from $.41 to $2.71 per share) and 400,000 shares being
offered by selling stockholders.
(2) Pursuant to Rule 457(c), calculated upon the basis of the average of
the high and low prices of the Company's Common Stock on the Nasdaq
National Market on September 22, 1997.
(3) Issuable upon exercise of outstanding Class A Warrants originally
covered by Registration Statement No. 33-70676 on Form S-2 effective
on January 13, 1994. A fee of $9,667.97 was paid at the time of
filing on October 22, 1994 to cover the fee for the sale of the
5,500,000 shares of Common Stock.
(4) Issuable upon exercise of 193,400 outstanding Underwriters Warrants
originally covered by Registration Statement No. 33-70676 on Form
S-2 effective on January 13, 1994. A fee of $928.13 was paid at the
time of filing on October 22, 1994, covering the underwriters warrants
(not included in this Registration Statement), 386,800 shares of
Common Stock issuable pursuant to such underwriter's warrant (covered
by this Registration Statement); and the Class A Warrants and the
Common Stock issuable upon exercise of such Class A Warrants issuable
pursuant to the underwriters warrant (covered by this Registration
Statement).Each warrant entitles the holder to purchase a unit
consisting of two shares of Common Stock and one Class A Warrant
for $4.95.
(5) Issuable in units for a price of $4.95 per unit, together with two
shares of Common Stock pursuant to the underwriter's warrants described
in note 3.
(6) Issuable upon exercise of Class A Warrants included in the units
issuable upon exercise of the warrants issued to the underwriter
referred to in note (3) above.
* Not payable because such amounts are offset by the previously paid
fees described in Notes (2) and (3) pursuant to Rule 429.
This Registration Statement relates to securities previously registered on Form
S-2 (33-70676) filed October 22, 1993 and effective January 13, 1994.
(Indicated by **.)
--------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-ii-
<PAGE>
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
CROSS REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 13, PART I OF FORM S-3
<TABLE>
<CAPTION>
ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------------- ----------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside
Cover Pages of Prospectus Back Cover Pages of Prospectus;
Description of Securities -- Reports to
Stockholders
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk Factors
Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Securities
10. Interest of Named Experts and Counsel Legal Matters; Experts
11. Material Changes Not Applicable
12. Incorporation of Certain Information by Reference Documents Incorporated By Reference
13. Disclosure of Commission Position on Commission Position on Indemnification for
Indemnification for Securities Act Liabilities Securities Act Liability
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 1997
PROSPECTUS
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
7,629,094 SHARES COMMON STOCK, PAR VALUE $.08
193,400 COMMON STOCK PURCHASE WARRANTS
This Prospectus has been prepared by American International
Petroleum Corporation, a Nevada corporation (the "Company"), to cover the sale
of 5,957,347 shares of Common Stock (the "Shares"), issuable upon exercise of
5,957,347 outstanding redeemable Common Stock Purchase Warrants ("Class A
Warrants"). Each Class A Warrant is exercisable to purchase one Share until
March 1, 1998 at $4.00 per Share. As of July 24, 1997, there were 5,957,347
Class A Warrants issued and outstanding. The Board of Directors has the right to
extend the exercise periods and/or reduce the exercise prices. Each Class A
Warrant is subject to redemption on 30 days prior written notice, for $.01 per
Share in the event the market for the Shares is at least $8.00 per share for 20
consecutive trading days. The Company has the right to designate standby
purchasers of all unexercised Class A Warrants at the close of business on
redemption. This Prospectus also covers 400,000 outstanding Shares; 1,078,347
Shares issuable upon exercise of outstanding warrants exercisable at prices
between $.41 and $2.71 a Share; 193,400 Class A Warrants issuable upon exercise
of certain warrants; and the 193,400 shares of Common Stock issuable upon
exercise of such Class A Warrants. See "Description of Securities - Warrants"
and "Selling Shareholders" for a description of the outstanding Shares being
offered hereby. The maximum number of Shares which may be offered or sold
hereunder is subject to adjustment in the event of stock splits or dividends,
recapitalization and other similar changes affecting the Shares. The Shares are
listed on the Nasdaq National Market, and it is anticipated that the Selling
Shareholders will offer the Shares for sale at prevailing prices on the Nasdaq
National Market (or other market, if the Shares are then trading thereon) on the
date of sale. See "Plan of Distribution."
The Company will receive only the exercise price of the Class A
Warrants and other Warrants, if exercised, but will not receive the proceeds of
the sale of the Class A Warrants or the Shares issued upon such exercise
thereof. The Company will not receive any proceeds from the sale of the
outstanding Shares offered hereby. All selling and other expenses incurred by
individual Selling Shareholders will be borne by such Selling Shareholders.
The Shares are traded on the Nasdaq National Market under the
symbol "AIPN" and the Class A Warrants under the symbol "AIPNW". On September
22, 1997, the closing price of the Shares and the Class A Warrants as reported
on the Nasdaq National Market were $3.69 per share and $1.66 per warrant,
respectively.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
RISKS OF AN INVESTMENT IN THE COMMON STOCK.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION; NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
any offer to sell or sale of the securities to which this Prospectus relates
and, if given or made, such information or representations must not be relied
upon as having been authorized. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, imply that there has been no
change in the facts herein set forth since the date hereof. This Prospectus does
not constitute an offer to sell to or a solicitation of any offer to buy from
any person in any state in which any such offer or solicitation would be
unlawful.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at
Seven World Trade Center, New York, New York 10048 and at 500 West Madison
Street, Chicago, Illinois 60611. Copies can be obtained from the Commission at
prescribed rates by writing to the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549. The Commission maintains an internet site on the
Worldwide Web at www.sec.gov. that contains reports, proxy and information
statements and other information regarding the Company and other registrants
that file electronically with the Commission.
DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference the
documents listed below:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 ("Form 10-K");
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997 and June 30, 1997 ("Form 10-Q");
(c) The Company's Current Reports on Form 8-K for January 10, 1997,
January 28, 1997, and February 25, 1997.
(d) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A (File No. 0-14905) filed pursuant to Section
12(g) of the Exchange Act, including any amendment or report filed for the
purpose of updating such information.
(e) A Registration Statement and Post-Effective Amendments thereto
covering the Class A Warrants and the Shares issuable upon exercise thereof
effective on January 13, 1994 (File No. 33- 70676).
All documents subsequently filed by the Company after the date of
this Prospectus pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange
Act shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such documents. Any statement contained in a
previously filed document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement herein modifies or supersedes such statement; and any statement
contained herein shall be deemed to be modified or superseded to the extent that
a statement in any document subsequently filed, which is incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
2
<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of any or all of the information that has
been incorporated by reference in this Prospectus (not including exhibits to
such information, unless such exhibits are specifically incorporated by
reference into the information which this Prospectus incorporates). Requests for
copies of such information should be directed to the Company at 444 Madison
Avenue, Suite 3203, New York, New York 10022; Attention: Corporate Secretary.
SUMMARY INFORMATION
American International Petroleum Corporation (the "Company"), was
organized on April 1, 1929 under the laws of the State of Nevada under the name
Pioneer Mines Operating Company. The Company's name was changed to its current
name in 1982. The Company plans to implement the production of asphalt, vacuum
gas oil and other products from its Lake Charles, Louisiana refinery in late
1997 by using low-cost, low gravity, high sulphur crudes from Venezuela or
Mexico and has recently entered into an agreement to purchase a 70% working
interest in a 20,000 square kilometer exploration block in Kazakstan.
RECENT DEVELOPMENTS
OIL AND GAS EXPLORATION AND PRODUCTION
KAZAKSTAN AGREEMENT
On May 12, 1997, the Company, through its newly organized
subsidiary, American International Petroleum Kazakstan ("AIPK"), entered into an
agreement with MED Shipping and Trading S.A. ("MED"), a Liberian corporation
with offices in Frankfurt, Germany, to buy from MED in exchange for a
combination of cash and stock a 70% working interest in a Kazakstan Concession.
The Concession is located in about 125 miles from Chevron's multi-billion-barrel
Tengiz Oil field near the Caspian Sea, and is bordered to the west by both
Oryx/Exxon and Amoco licenses and to the south by an ELF Acquitane license.
Preliminary, independent, evaluation indicates potential recoverable reserves
from 7 structures in the Concession area could be as much as 1.1 billion barrels
from Jurassic Age sandstones, and 9 additional structures have been identified
but have not been evaluated.
The cost of the transaction to the Company was approximately
$400,000 in cash, 1.5 million shares of common stock to be held in trust until
the market value of the stock reaches $5.00 per share for 5 consecutive trading
days, 500,000 shares to be held in trust until the market value of the stock
reaches $2.00 per share for 5 consecutive trading days, and 1.2 million shares
of common stock.
The five-year minimum work program required by the License calls
for the Company to acquire and process 3,000 kilometers of new seismic data,
reprocess 500 kilometers of existing seismic data, and drill 6,000 linear
meters. In addition, the Company assumed an obligation to pay the Kazakstan
Government three annual payments of $200,000 each beginning July 1998 for the
purchase of existing seismic and geological data on the License Area.
3
<PAGE>
SALE OF SOUTH AMERICAN OIL AND GAS OPERATIONS
On February 25, 1997, the Company sold all of the issued and
outstanding shares of common stock of its wholly-owned oil exploration and
production subsidiaries, American International Petroleum Corporation of
Colombia and Pan American International Petroleum Corporation, in an arms length
transaction (the "MIP Transaction") to Mercantile International Petroleum Inc.
("MIP").
REFINERY OPERATIONS
The Company's wholly-owned subsidiary, American International
Refinery, Inc. ("AIRI") is the owner of a refinery in Lake Charles, Louisiana
(the "Refinery"). A certain portion of the Refinery, a 30,000 barrel-per-day
crude distillation tower (the "Crude Unit") was leased by AIRI to Gold Line
Refining Ltd. ("Gold Line"), an independent refiner, from 1990 to March 20, 1997
under a lease agreement (the "Lease Agreement") between AIRI and Gold Line.
However, the Lease Agreement has recently been terminated because the Lessee was
in default under the terms of the Lease Agreement. The Company filed suit for
damages and received a judgment in its favor of $1.5 million, the collectability
of which is uncertain.
With the recent termination of the Lease Agreement on March 20,
1997, the Company now intends to staff and operate the Refinery with its own
employees and all operations are to be under the direct control of its
management to produce conventional and polymerized asphalt, vacuum gal oil
("VGO"), diesel, and other products. Although the Company's primary focus at the
Refinery will be the production of asphalt and VGO, it will also produce smaller
quantities of light-end products such as naphtha, diesel and jet kerosene.
In addition to the manufacturing and sale of asphalt, VGO, diesel,
and other products, the Company anticipates utilizing its facility as a toll
processing terminal to provide a service to blend and polymerize asphalt for
other companies. The Company's VGO would be sold to other refiners nearby as a
feedstock for their catalytic cracking units. There is a strong demand for VGO,
and the Company recently has had numerous inquiries from local and out-of-state
refiners interested in purchasing VGO from the Refinery.
The Company expects to implement its blending operations in the
third quarter 1997 when the first phase of its expansion program is expected to
be completed. The production and sale of its own asphalt is expected to be
implemented sometime in March or April of 1998.
The term "Company" or "AIPC" includes AIPC, AIRI and AIPK, unless
the context otherwise requires.
4
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C> <C>
Securities Offered: - 5,957,347 Shares issuable upon exercise of outstanding Class A Warrants.
The Class A Warrants are exercisable through March 1, 1998 at $4.00 a
Share.
- 1,078,347 Shares issuable upon exercise of other
warrants at various prices between $.41 and
$2.71 a Share.
- 400,000 outstanding Shares to be sold by the Selling Shareholders.
- 193,400 Class A Warrants.
Offering Price: The outstanding Class A Warrants are
exercisable at $4.00 per share. The Shares to be
sold by Selling Shareholders are expected to be
sold from time to time on the Nasdaq National
Market at then prevailing prices.
Use of Proceeds: The proceeds of the Offering estimated at approximately $26,000,000 will be
added to working capital and used for general corporate purposes.*
Common Stock
Outstanding:
Prior to Offering: 43,335,320
After the Offering:* 50,851,214
Class A Warrants
Outstanding:
Prior to Offering: 5,957,347
After the Offering:* -0-
</TABLE>
* Assuming all of the Warrants are exercised.
5
<PAGE>
RISK FACTORS
In addition to considering the other information set forth in, or
incorporated by reference into, this Prospectus, prospective investors should
carefully consider the following factors in evaluating an investment in the
Company. Statements in this Prospectus include forward looking statements that
involve a number of risks and uncertainties. These include the Company's lack of
profitability, lack of liquidity, need for additional financing, large amount of
outstanding debt, the speculative nature of the oil and gas industry and the
other risks detailed from time to time in the Company's SEC Reports.
GENERAL RISKS ASSOCIATED WITH THE OFFERING:
POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price for the
Company's securities following the date hereof may be highly volatile. Factors
such as the Company's financial results, financing efforts and various factors
affecting the oil and gas industry generally may have a significant impact on
the market price of the Company's securities. Additionally, in the last several
years, the stock market has experienced a high level of price and volume
volatility, and market prices for many companies, particularly small and
emerging growth companies, the common stock of which trade in the
over-the-counter market, have experienced wide price fluctuations and volatility
which have not necessarily been related to the operating performance of such
companies themselves. Any such fluctuations, or general economic and market
trends, could adversely affect the price of the Company's securities. Due to all
of the foregoing factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts and
investors. In that event, the price of the Company's securities would likely be
materially adversely affected.
INABILITY TO SELL STOCK OR EXERCISE OPTIONS. The Company intends to
qualify the sale of the shares offered hereby under the securities ("blue sky")
laws of a limited number of states. The Company may decide not to seek or may
not be able to obtain qualifications of the sale of such shares of Common Stock
in all of the states in which the ultimate purchasers of the Options and
underlying Common Stock. Further, a current prospectus covering the shares of
Common Stock issuable upon exercise of the Options must be in effect at all
times that the Company may accept exercises and before Selling Shareholders may
sell any Common Stock. There can be no assurance that the Company will be able
to have a prospectus in effect when these holders desire to exercise or sell
their securities.
RISKS ASSOCIATED WITH THE COMPANY:
HISTORICAL CONTINUING LOSSES AND LACK OF LIQUIDITY; GOING CONCERN
OPINION. The Company has not generated a net profit during its last five fiscal
years, and no assurance can be given that the Company will generate a profit for
any subsequent fiscal year. No assurance can be given that the Company will
generate sufficient net profits, if any, to repay outstanding indebtedness. In
connection with the audit of the Company's financial statements as of December
31, 1995, the Company received a report from Price Waterhouse LLP, certified
public accountants, which included a "going concern" comment in its opinion,
however, no such comment was included in the opinion of Hein + Associates,
Certified Public Accountants, for the financial statements as of December 31,
1996.
6
<PAGE>
POLITICAL RISKS IN KAZAKSTAN. Although the current political situation
in Kazakstan appears to be stable, the Company's operations could be adversely
affected by political instability and civil unrest there. Political instability
could also change the current operating environment for the Company in Kazakstan
through the imposition of restriction of funds, adverse environmental laws and
regulations, adverse labor laws, and the like. Any such changes could adversely
impact the ability of the Company to conduct business in Kazakstan.
OUTSTANDING SENIOR DEBT. The Company's senior debt outstanding as of
July 18, 1997, is set forth in the following table:
<TABLE>
<CAPTION>
Amount No. of Shares
Oustanding Interest Due Conversion Issuable Upon
Debentures at July 18, 1997 Rate Date Price Conversion
- ---------- ---------------- --------- -------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Series G
Debentures $75,000 8% May 1999 75% of the Market Price (1)
at conversion date.
8% Convertible $6,400,000 8% August 1999 50% convertible after (1)
Debentures October 6, 1997 and 50%
after November 6, 1997
at 85% of market price
on date of conversion.
Series T $292,000 8% October N/A N/A
Debentures 1997
Total Debentures: $6,767,000
Notes payable to MGTF
pursuant to loan
agreement dated
December 4, 1990 $2,108,000 Prime + 1%
----------
--
Total: $8,875,000
</TABLE>
(1) Depends upon market price of the Common Stock at date of
conversion. At August 15, 1997, the number of shares of Common Stock that
holders would have obtained upon the conversion of all convertible Debentures
was approximately 3,273,657.
As part of certain negotiations related to the MIP Transaction, the
Company agreed to change the due date of the unpaid balance of a loan agreement
with MG Trade finance ("MGTF") (the "Loan Agreement") of $2,108,000 to September
30, 1997 from March 31, 1998. In addition, the Company pledged 1,000,000 shares
of MIP common stock (partial consideration the Company received in the MIP
Transaction) as additional collateral for the Loan Agreement. The Company
expects to pay the balance due on the Loan Agreement on or before the revised
due date by margining or selling some of its MIP shares, or with other
conventional financing.
CONTROL BY PRESENT MANAGEMENT; MGTF's Right to Designate Nominees to
Board of Directors and Executive Committee. As of September 17, 1997, Officers
and Directors of the Company beneficially owned in the aggregate approximately
10.3% of the total number of shares of Common Stock outstanding. The Company has
entered into an agreement with MGTF pursuant to which such company has the right
to designate two nominees to the Company's Board of Directors and one of such
nominees to the Executive Committee of the Board of Directors. The current
members of the Company's Board of Directors have agreed, provided MGTF's
nominees are reasonably acceptable, to vote for the election
7
<PAGE>
of such nominees. MGTF has not designated any nominees to the Board of Directors
as of the date hereof. If MGTF designated such directors to the Board of
Directors, it would currently control approximately 33% of the Company's Board
of Directors. The maximum number of members of the Board of Directors provided
by the By-Laws of the Company is ten. The Board of Directors can at any time
appoint additional Directors up to the maximum authorized without shareholder
approval to serve until the next meeting of shareholders.
BLANK CHECK PREFERRED STOCK AND CONTROL OF THE COMPANY. The
Company's Certificate of Incorporation authorizes the issuance of Preferred
Stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without shareholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Common Stock. Although there
are no present plans, agreements, commitments or undertakings with respect to
the Company's issuance of any shares of Preferred Stock, any such issuances may
be deemed to be an anti-takeover device which could be utilized as a method of
discouraging, delaying or preventing a change in control of the Company or to
dilute the public ownership of the Company and give clear control of the Company
to current Management, and there can be no assurance that the Company will not
issue such shares.
ADVERSE EFFECT OF POTENTIAL FUTURE SALES OF COMMON STOCK UNDER RULE
144 OR THIS REGISTRATION STATEMENT. Of the Company's 43,335,320 issued and
outstanding shares of Common Stock as of September 17, 1997, approximately
4,067,602 shares are "restricted securities" (not including the shares being
registered hereby) as that term is defined under Rule 144 under the Securities
Act. In addition, 7,515,844 are being registered hereby for resale under the
Securities Act. The Company is unable to predict the effect that sales made
pursuant to this Registration Statement, Rule 144 or otherwise may have on the
then existing market price of the Company's securities. The possibility exists
that the sale of any of these Securities, or even the potential of such sales,
may have a depressive effect on the price of the Company's securities in any
public trading market. This could impair the Company's ability to raise
additional equity capital. See "Voting Securities" in the Company's 1996 Proxy
Statement.
SHARES OUTSTANDING; SHARES ELIGIBLE FOR FUTURE SALE. The Company has
100,000,000 authorized shares of Common Stock, of which 43,335,320 were issued
and outstanding as of September 17, 1997. In the event all of the issued and
outstanding options and warrants are exercised and all outstanding convertible
debentures are converted pursuant to their terms, approximately 54,328,714
shares of Common Stock would be outstanding as of the date of this filing.
Management will have broad discretion with respect to the issuance of the
remaining authorized but unissued shares, including discretion to issue such
shares in compensatory and acquisition transactions. In the event that the
Company seeks to procure additional financing through the sale and issuance of
its securities, or in the event that current warrantholders, optionholders or
debentureholders exercise or convert their securities into shares of Common
Stock, the then current shareholders of the Company may suffer immediate and
substantial dilution in their percentage ownership of shares of the Common
Stock. In addition, the future issuance of shares below the then current market
price of the Common Stock may have a depressive effect in the future market
price of the Common Stock, although such market price is subject to numerous
factors, many of which are beyond the Company's control, including general
economic business conditions and the then current economic condition of the oil
and gas industry.
8
<PAGE>
PROCUREMENT AND RETENTION OF KEY PERSONNEL; DEPENDENCE ON KEY
PERSONNEL. The success of the Company is dependent upon the efforts, abilities
and expertise of its Chief Executive Officer, George N. Faris, as well the
Company's Chief Financial Officer, Denis J. Fitzpatrick. The Company has entered
into an employment agreement with Dr. Faris. Each of these officers intends to
devote substantially all of his business time to the Company's affairs. The
Company's future success is also dependent, in part, on the ability of the
Company to attract and retain qualified personnel. No assurance can be given,
however, that the Company will be able to attract qualified individuals, and if
hired, that the Company would be able to retain such persons in its employ. As
compared to other publicly traded oil and gas companies, the Company has fewer
resources to attract and/or retain key personnel, and the Company does not have
the depth of managerial employees to rely upon in the event of the loss of any
single employee. Accordingly, the loss of any key employee could have a material
adverse affect on the operation of the Company's business and may have greater
adverse consequences to the Company than to other publicly traded oil and gas
companies. The Company maintains a $2,000,000 key man life insurance policy on
the life of its Chief Executive Officer, Dr. George N. Faris.
CONTINUED LISTING REQUIREMENTS FOR NASDAQ SECURITIES. The Company's
securities are traded on the Nasdaq National Market System ("Nasdaq-NMS"), but
there can be no assurance that the Company will meet the maintenance criteria
for the continued listing of its securities on Nasdaq-NMS. Continued listing on
Nasdaq-NMS requires, among other criteria, a company to have tangible assets of
at least $4,000,000 and that the listed security(s) (other than those owned by
directors, officers, and other beneficial owners of more than 10% of such
securities) have a market value of at least $5,000,000 and a minimum bid price
of $1.00. Although the Company currently satisfies Nasdaq-NMS maintenance
criteria, there can be no assurance that it will continue to do so. If in the
future the Company is unable to satisfy Nasdaq-NMS criteria for continued
listing of its securities, they may be delisted therefrom. In that event, the
Company would seek to have its securities listed on The Nasdaq Small Cap Market
or other securities exchange, subject to the Company's ability to satisfy the
eligibility criteria for listing. If the Company were unable to obtain any such
listing, trading, if any, in the Company's securities would thereafter have to
be conducted in the OTC "Bulletin Board." As a result, an investor might find it
more difficult to dispose of the Common Stock due to the reduced visibility of
the Company on the market.
DISCLOSURE RELATING TO LOW-PRICED STOCKS; Restrictions on Resales of
Low-Priced Stocks and Restrictions on Broker-Dealer Sales. The Commission has
adopted rules that regulate broker-dealer practices in connection with
transactions in "penny stocks." Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on Nasdaq, provided that current price
and volume information with respect to transactions in that security is provided
by the exchange or system). The penny stock rules, particularly Rule 15g-9,
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prepared by the Commission that provides information about penny stocks and the
nature and level of risks in the penny stock market. Bid and offer quotations,
and the broker dealer and salesperson compensation information, must be given to
the customer orally or in writing prior to effecting the transaction and must be
given to the customer in writing before or with the customer's confirmation. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's
9
<PAGE>
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules.
If the Common Stock were no longer traded on Nasdaq, the Common
Stock, depending on its market price, would be subject to the penny stock rules.
If the Company's securities become subject to the penny stock rules, investors
in this offering may find it more difficult to sell the Company's securities. At
present, the Company's securities do not come within the definitional scope of
these regulations.
SPECULATIVE NATURE OF OPTIONS AND WARRANTS. As of September 17,
1997, the Company had outstanding an aggregate of 9,252,786 Warrants, of which
5,957,347 are exercisable until March 1, 1998 at $4.00 per share, and 3,295,439
are exercisable from March 31, 1998 to June 6, 2002 at various prices between
$.41 to $2.71 per share. The Company also had outstanding options to purchase an
aggregate of 3,477,500 shares of Common Stock exercisable for up to four years
ending in December 31, 1999, 1,902,500 and 1,525,000 at an exercise price of
$.50 and $1.05 per share respectively. Options and warrants are generally more
speculative than Common Stock issuable on the exercise thereof. During the term
of the options and warrants, the holders thereof are given the opportunity to
profit from a rise in the market price of the Company's Common Stock, subject,
in certain cases, to the Company's right of redemption. Historically, the
percentage increase or decrease in the market price of an option or warrant has
tended to be greater than the percentage increase or decrease in the market
price of the underlying common shares. The holders of options and warrants would
be most likely to exercise them and purchase the Company's Common Stock at a
time when the Company could obtain capital by a new offering of securities on
terms more favorable than those provided by the options and warrants.
Consequently, the terms on which the Company could obtain additional capital
during such period may be adversely affected.
IRS EXCISE TAX CLAIM. In May 1992, AIRI was advised by the Internal
Revenue Service ("IRS") that the IRS was considering an assessment of excise
taxes, penalties and interest of approximately $3,500,000 related to the sale of
fuel products during 1989. The IRS claims that AIRI failed to comply with an
administrative procedure that required sellers and buyers in tax-free
transactions to obtain certification from the IRS. The Company believes that
AIRI complied with the substance of the existing requirements and that such
sales were either tax-free or such excise taxes were paid by the end-users of
such products. AIRI has offered to negotiate a settlement of this matter with
IRS Appeals since early 1993. Such negotiations included face-to-face meetings,
numerous phone calls and written transmittals and several offers of settlement
by both the Company and the IRS. During these negotiations, the IRS Appeals
officers offered to waive all of the penalties and 75% of the amount of the
proposed tax liability. However, AIRI rejected this offer and requested the IRS'
National Office to provide technical advice to its Appeals officers. After
numerous conferences and discussions with the National Office in 1995, the
National Office issued an adverse Technical Advice Memorandum ("TAM") to its
Appeals Office in Dallas, Texas, to the effect that AIRI should be liable for
the tax on the sale of diesel fuel for the first three quarters of 1989.
However, even in light of the findings of the TAM, the IRS Appeals officer has
indicated to AIRI that the IRS still wants to negotiate a settlement. As a
result, AIRI is having ongoing discussions with the IRS regarding the situation.
Depending upon the results of these discussions, the Company will decide whether
to litigate or settle this situation. Regardless of whether the Company decides
to litigate or settle, it believes it will incur some form of liability, either
in legal expenses or payments to the IRS, or some combination of both.
Consequently, it has provided an
10
<PAGE>
allowance of $1,100,000 for this potential incurrence of expenditures, although
at this time, the Company is unable to determine exactly what liability may
arise from this assessment.
RISKS ASSOCIATED WITH THE OIL AND GAS INDUSTRY:
RISK OF CAPITAL LOSSES DUE TO SPECULATIVE NATURE OF OIL AND GAS
INDUSTRY. Oil and gas exploration is extremely speculative, involving a high
degree of risk. Even if reserves are found as a result of drilling, profitable
production from reserves cannot be assured. No assurance can be given that any
wells the Company may drill will recover oil or gas reserves, or in the event
reserves are found, that favorable market conditions would exist to recover the
costs of drilling or to realize profits. There is also no assurance that the
Company's current financial condition and available cash resources will enable
the Company to drill offset wells. There can be no assurance that the drilling
of any new prospects actually will occur or will be profitable. There is also no
assurance that wells will produce oil or gas in sufficient amounts to yield
profits or even to return the Company's drilling costs.
EXPOSURE TO LOSSES FROM DRILLING AND OTHER HAZARDS. Unusual or
unexpected formation pressures, down-hole fires or other hazardous conditions
may be encountered in drilling oil and gas wells and in the refining of oil. If
such hazards are encountered, completion of wells may be substantially delayed
and the costs significantly increased. Even though a well is completed and is
found to be productive, water or other deleterious substances may be
encountered, which may impair or prevent production of oil or gas, and which may
adversely affect the Company's operations. In addition, floods and adverse
weather conditions hinder or delay feedstock and product movements at the
Refinery and drilling and production operations, as can labor disputes, work
stoppages, shortages of equipment and materials or the unavailability of oil
barges and drilling rigs.
ENVIRONMENTAL HAZARDS. The Company's operations are subject to all
of the environmental risks normally incident to oil and gas exploratory,
drilling, and refining activities, including, but not limited to, blowouts,
pollution and fires. Any of these occurrences could result in environmental
damage or destruction, including the discharge of hazardous materials into the
environment. Although the Company maintains comprehensive and general liability
coverage as is customary in the oil and gas industry, and coverage against
certain risks, the Company is not fully covered for damages incurred as a
consequence of environmental mishaps. Furthermore, to the extent covered, no
assurance can be given that any such coverage would be adequate protection in
the event of an environmental problem. Accordingly, no assurance can be given
that the Company's operations would not be severely impeded in the event of an
environmental mishap or problem.
POTENTIAL COST INCREASES AND DELAYS DUE TO POSSIBLE SHORTAGES OF
PERSONNEL AND DRILLING EQUIPMENT. It is possible that field personnel, drilling
rigs, pipes, casing, or other tubular goods will not be available when needed
for the drilling, completion or operation of the Company's prospects and wells.
This possibility could result in drilling or completion delays and, in some
instances, result in additional costs beyond normal drilling and completion
costs, which could have a material adverse effect on the Company.
INTENSE COMPETITION AND UNCERTAIN MARKETS. The oil and gas industry,
including petroleum refining and asphalt manufacturing, is highly competitive.
Many companies, most of which have greater experience and financial resources
than the Company, are likely to compete with the Company for
11
<PAGE>
producing properties and with the Refinery for needed oil supplies. There can be
no assurance that a market will be available for all the oil and gas produced by
wells in which the Company owns an interest, for oil refined by the Company at
the Refinery or asphalt and other products produced from the VDU. The Company's
success is dependent not only on the productivity of the producing properties
and the ultimate sale of said production, but also on (i) the market prices for
oil and gas, which are highly unstable, (ii) operating costs incurred in
producing the oil and/or gas, (iii) transportation costs, (iv) the cost of crude
oil feedstocks, (v) the market demand for asphalt and vacuum gas oil, and (iv)
other factors which may be beyond the control of the Company.
ENERGY MARKET SUBJECT TO FLUCTUATION. Revenues generated by the
Company's oil and gas operations and the carrying value of its oil and gas
properties are highly dependent on the prices for oil and natural gas. The price
which the Company receives for its oil is dependent upon numerous factors beyond
the control of the Company's Management, the exact effect of which cannot be
predicted. These factors include, but are not limited to, (i) the quantity and
quality of the oil or gas produced, (ii) the overall supply of domestic and
foreign oil or gas from currently producing and subsequently discovered fields,
(iii) the extent of importation of foreign oil or gas, (iv) the marketing and
competitive position of other fuels, including alternative fuels, as well as
other sources of energy, (v) the proximity, capacity and cost of oil or gas
pipelines and other facilities for the transportation of oil or gas, (vi) the
regulation of allowable production by governmental authorities, (vii) the
regulations of the Federal Energy Regulatory Commission governing the
transportation and marketing of oil and gas, and (viii) international political
developments, including nationalization of oil wells and political unrest or
upheaval the various areas of the world in which the Company has an interest or
plans to conduct operations. All of the aforementioned factors, coupled with the
Company's ability or inability to engage in effective marketing strategies, may
affect the supply or demand for the Company's oil or gas and, thus, the price
attainable therefor. During the fourth quarter 1994, the Company recorded a
$6,904,000 provision for reduction of oil and gas assets primarily as a result
of the decrease in oil prices.
In addition, the foregoing factors may affect the price of refined
products that the Company's Refinery may produce, and accordingly, may affect
the profitability of the Refinery.
FEDERAL AND STATE LEGISLATION MAY LIMIT REVENUES OR INCREASE COSTS.
The oil and gas industry is subject to Federal, state, and local governmental
regulations. These jurisdictions are empowered to enact legislation or
regulations to limit the rates at which oil and gas are produced and to impose
taxes on oil and gas when sold. Since energy policies are uncertain, no
prediction can be made as to the ultimate effect of any such governmental
policies and controls upon the Company.
INABILITY OF THE COMPANY TO FULLY INSURE POTENTIAL CASUALTY LOSSES
OR POSSIBLE LIABILITIES TO OTHERS. The Company has general liability insurance,
property insurance, and workmen's compensation insurance. Under the terms of
such policies, the Company is insured against covered casualty damages to its
property and liabilities to others for negligence and other matters. There is a
risk, however, that the Company may not be insured against all losses or
liabilities which arise from the hazards inherent in the oil and gas industry,
either because insurance protecting against such losses or liabilities is
unavailable or because damages may exceed the amount of coverage obtained, or
because the Company has elected not to purchase such coverage. In the event the
Company incurs uninsured losses or liabilities, the Company will have to bear
fully such losses directly, and its properties and assets may be exposed to
forfeiture.
12
<PAGE>
USE OF PROCEEDS
The Company will receive only the proceeds from the exercise of the
Class A Warrants and other Warrants. Such proceeds, which could amount to
approximately $26 million if all of the Class A Warrants and other Warrants were
exercised, will be added to working capital to be used for general corporate
purposes.
SELLING SHAREHOLDERS
The table below sets forth with respect to each Selling Shareholder,
based upon information available to the Company as of September 17, 1997, the
number of shares of Common Stock and Class A Warrants beneficially owned before
and after the sale of the shares and Class A Warrants offered hereby; the number
of shares and/or Class A Warrants to be sold; and the percent of the outstanding
shares of Common Stock owned before and after the sale of the Common Stock and
Class A Warrants offered hereby. The Selling Shareholders named below may resell
all, a portion or none of such shares or Class A Warrants from time to time.
Each Selling Shareholder's relationship to the Company, if any, is set forth in
a footnote to the table.
13
<PAGE>
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percentage
Number of Common Stock Owned
Shares of Number of Number of ------------------------
Common Stock Warrants Shares Before After
NAME Owned(1) Owned(2) to be Sold Offering(4) Offering
Gloria L. Bauman -0- 10,000 10,000 * -
Global Funding Group -0- 60,000 60,000 * -
Richard W. Cohen -0- 58,020(3) 174,060 * -
Jessy Dirks -0- 38,680(3) 116,040 * -
Walter P. Fitzgerald -0- 58,020(3) 174,060 * -
Dan and Estelle Jacobson 280,000 10,000 10,000 * *
Michael J. Knight 20,000 10,000 10,000 * *
LKB Financial LLC -0- 260,000 260,000 * *
MG Trade Finance Corp. 130,000 150,000 150,000 * -
Millenium Holdings Group, Inc. 250,000 -0- 250,000 * -
Portfolio Investment Strategies Corp. -0- 30,000 30,000 * -
Robert A. Schneider -0- 38,680(3) 116,040 * -
Snow Becker Krauss P.C. 589,205(5) -0- 150,000 1.1% *
Wall Street Consultants, Inc. -0- 161,547 161,547 * -
--------------- ------------------ ------------------ ------------ ---
TOTAL 1,269,205 884,947 1,671,747
========= ========= =========
</TABLE>
* Less than 1% of the outstanding Common Stock of the Company.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole investment power with respect to all Shares beneficially
owned by them. A person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants.
(2) Issuable under the terms of outstanding options exercisable between $.41
and $2.71 per share of Common Stock.
(3) Issuable pursuant to underwriter's warrants issued in March 1994 covering,
in the aggregate, 193,400 units each exercisable to purchase for 4.95 per
unit, two shares of Common Stock and one Class A Warrant exercisable to
purchase one share of Common Stock at $4.00 a share.
(4) Based on 54,328,714 shares of Common Stock outstanding (assuming full
exercise of Class A Warrants and other warrants).
(5) Includes 439,205 shares of Common Stock owned by an investment partnership
affiliated with Snow Becker Krauss P.C.
14
<PAGE>
PLAN OF DISTRIBUTION
The Class A Warrants and/or other Warrants (together, the "Securities")
are being sold by the Selling Shareholders for their own accounts. The Selling
Shareholders may, in one or more transactions on Nasdaq (or any successor stock
exchange), in negotiated transactions or in a combination of such methods of
sale, sell Class A Warrants or the Shares, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at prices
otherwise negotiated. The Selling Shareholders may effect such transactions by
selling the Securities to or through brokers-dealers, and such broker-dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the
Securities for whom such broker-dealers may act as agent (which compensation may
be less than or in excess of customary commissions). The Selling Shareholders
and any broker-dealers that participate in the distribution of the Securities
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Securities sold by them may be deemed to be underwriting discounts
and commissions under the Securities Act. All selling and other expenses
incurred by individual Selling Shareholders will be borne by such Selling
Shareholders.
There can be no assurance that any of the Selling Shareholders will sell
any or all of the Shares of Common Stock offered by them hereunder or that any
of the holders of the Class A Warrants or other Warrants will exercise them. At
present, the exercise price of the Class A Warrants exceeds the market price for
the Common Stock on the Nasdaq National Market.
DESCRIPTION OF SECURITIES
AUTHORIZED STOCK
The authorized capital stock of the Company consists of 7,000,000 shares
of Preferred Stock, $3.00 par value per share, and 100,000,000 shares of Common
Stock, $.08 par value per share.
Each share of Common Stock is entitled to one vote per outstanding share
held on each matter submitted to a vote at a meeting of shareholders. Each
shareholder may exercise such vote either in person or by proxy. Shareholders
are not entitled to cumulate their votes for the election of Directors. There
are no preemptive or other preferential rights to purchase additional shares of
Common Stock. Upon liquidation, dissolution or winding-up of the Company, the
holders of Common Stock are entitled to receive, pro rata, the assets of the
Company which are legally available for distribution to shareholders subject to
the prior rights on liquidation of creditors and the holders of shares of
Preferred Stock, if any. All of the issued and outstanding shares of Common
Stock are fully paid and non-assessable.
The Company's Articles of Incorporation, as amended, provide in accordance
with Nevada law that the officers and Directors of the Company shall not be
personally liable to the Company or its shareholders for damages for breach of a
fiduciary duty as a Director or Officer. It is the position of the staff of the
Securities and Exchange Commission that the limitation on personal liability
does not apply to violations of Federal securities laws. Moreover, such
limitation is unapplicable to acts or omissions which involve intentional
misconduct, fraud, knowing violations of the law, or unlawful payment of
dividends prohibited
15
<PAGE>
by the Nevada Revised Statutes. In addition, the Company's Articles of
Incorporation, as amended, do not limit the availability of non-monetary relief.
CLASS A WARRANT
Each Class A Warrant entitles the holder thereof to purchase one share of
the Company's Common Stock through March 1, 1998 at an exercise price of $4.00.
The Class A Warrants may be redeemed by the Company at any time prior to
March 1, 1998 upon 15 days prior written notice, at a price of $.01 per Class A
Warrant, provided that the average clsoing price of the Company's Common Stock
shall have been at least $8.00 per share (200% of the exercise price of the
Class A Warrants) for the 20 consecutive trading days prior to the notice of
redemption and the Company has a current prospectus to permit exercise of the
Class A Warrants.
The Class A Warrants contain certain provisions that protect the holders
thereof against dilution. The exercise price and the number of shares of Common
Stock or other securities issuable upon exercise of the Class A Warrants are
subject to, dividends (excluding cash dividends), splits, reclassifications,
recapitalizations, reorganizations, mergers or consolidations of the Company.
The Class A Warrants may be exercised upon surrender of the Class A
Warrant certificate on or prior to the expiration form on the reverse side of
the Class A Warrant certificate completed and executed as indicated, accompanied
by full payment of the exercise price (by check payable to the Company) for the
number of Class A Warrants being exercised. The Warrantholders do not have the
right or privileges of holders of Common Stock.
TRANSFER AGENT
The Company's transfer agent for its shares of Common Stock is Oxford
Registrar & Transfer Agency Inc. ("Oxford"), 317 S.W. Alder, Suite 1120,
Portland, Oregon 97204.
DIVIDENDS
The Company has not paid any cash dividends on its Common Stock. The
present policy of the Board of Directors is to retain earnings to finance the
operations and development of the Company's business. Accordingly, it is
anticipated that no cash dividends will be paid in the foreseeable future.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Snow Becker Krauss P.C., 605 Third Avenue, New York, New
York 10158. Snow Becker Krauss P.C., a selling stockholder covered by this
Prospectus, and an affiliated investment partnership, hold 589,205 shares of
Common Stock, all of which was issued to it in exchange for legal fees and
disbursements.
16
<PAGE>
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of American International Petroleum Corporation
for the year ended December 31, 1996, have been so incorporated in reliance upon
the report of Hein & Associates LLP, independent certified public accountants,
given upon the authority of said firm as experts in accounting and auditing for
the year. The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K of American International Petroleum
Corporation for the two years ending December 31, 1995, have been so
incorporated in reliance upon the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern as
described in Notes 2 and 11 to the financial statements) of Price Waterhouse
LLP, independent certified public accountants, given upon the authority of said
firm as experts in accounting and auditing for the year.
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of
the securities being registered hereunder are set forth below* and will be borne
by the Registrant:
Securities and Exchange Commission registration fee .................. $2,331
Blue sky fees and expenses ........................................... 1,500
Legal fees and expenses (other than Blue Sky fees and expenses) ...... 15,000
Accounting fees....................................................... 7,500
Miscellaneous......................................................... $3,669
------
Total................................................... $30,000
======
- ----------------
*All amounts except the registration fees are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 78.751 of the Nevada Corporation Law ("NCL"),
directors and officers may be indemnified against judgments, fines and amounts
paid in settlement and reasonable expenses (including attorneys' fees), actually
and reasonably incurred as a result of specified actions or proceedings
(including appeals), whether civil or criminal (other than an action by or in
the right of the corporation--a "derivative action") if they acted in good faith
and for a purpose which they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to amounts paid in settlement and reasonable
expenses (including attorneys' fees) actually and reasonably incurred by them in
connection with the defense or settlement of such an action (including appeals),
except in respect of a claim, issue or matter as to which such person shall have
been finally adjudged to be liable to the corporation, unless and only to the
extent a court of competent jurisdiction deems proper.
In accordance with Section 78.037(1) of the NCL, Article VIII of
the Company's Certificate of Incorporation, as amended, eliminates the personal
liability of the Company's directors to the Company or its shareholders for
monetary damages for breach of their fiduciary duties as directors, with certain
limited exceptions set forth in said Article VIII and Section 78.037(1).
Article VII of the Company's Bylaws provides for indemnification of
directors, officers and others as follows:
"On the terms, to the extent, and subject to the condition
prescribed by statute and by such rules and regulations, not
inconsistent with statute, as the Board of Directors may in its
discretion impose in general or particular cases or classes of
cases, (a) the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding, civil or
criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any
II-1
<PAGE>
partnership, joint venture, trust, employee benefit plan or other
enterprise which any director or officer of the Corporation served
in any capacity at the request of the Corporation, by reason of the
fact that he, his testator or intestate, was a director or officer
of the joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, amounts paid
in settlement and reasonable expenses, including attorneys' fees of
any such action or proceeding, or any appeal therein, and (b) the
Corporation may pay, in advance of final disposition of any such
action or proceeding, expenses incurred by such person in defending
such action or proceeding.
On the terms, to the extent, and subject to the conditions
prescribed by statute and by such rules and regulations, not
inconsistent with statute, as the Board of Directors may in its
discretion impose in general or particular cases or classes of
cases, (a) the Corporation shall indemnify any person made a party
to an action by or in the right of the Corporation to procure a
judgment in its favor, by reason of the fact that he, his testator
or intestate, is or was a director or officer of the Corporation,
against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him in connection with the
defense of such action, or in connection with an appeal therein,
and (b) the Corporation may pay, in advance of final disposition of
any such action, expenses incurred by such person in defending such
action or proceeding."
The Company maintains insurance, at its expense, to reimburse
itself and directors and officers of the Company and of its direct and indirect
subsidiaries against any expense, liability or loss arising out of
indemnification claims against directors and officers and to the extent
otherwise permitted under the NCL.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
II-2
<PAGE>
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
4.1 Class A Warrant Agreement
5.1 Opinion of Snow Becker Krauss P.C.
23.1 Consent of Snow Becker Krauss P.C. (contained in Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Hein & Associates LLP.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement)
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a)(l) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represents a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(a)(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(a)(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-3
<PAGE>
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
or controlling persons of the Registrant pursuant to any
arrangement, provision or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on September 25, 1997.
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
By: /s/ Dr. George N. Faris
Dr. George N. Faris
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned hereby authorizes George N. Faris and/or Denis J.
Fitzpatrick as his attorneys-in-fact to execute in the names of each such person
and to file such amendments (including post-effective amendments) to this
registration statement as the Registrant deems appropriate and appoints such
persons as attorneys-in-fact to sign on his behalf individually and in each
capacity stated below and to file all amendments, exhibits, supplements and
post-effective amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons on September 25, 1997 in the
capacities stated.
<TABLE>
<CAPTION>
<S> <C>
Signature Title
/s/ George N. Faris
George N. Faris Chief Executive Officer and Chairman of the Board of Directors
(principal executive officer)
/s/ Denis J. Fitzpatrick
Denis J. Fitzpatrick Vice President, Chief Financial Officer and Secretary
(principal financial and accounting officer)
/s/ Donald G. Rynne
Donald G. Rynne Director
/s/ Daniel Y. Kim Director
Daniel Y. Kim
/s/ William R. Smart Director
William R. Smart
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on September 25, 1997.
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
By:
Dr. George N. Faris
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints George
N. Faris and/or Denis J. Fitzpatrick, his true and lawful attorney-in-fact and
agent, with power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying all
that said attorney-in-fact and agent or his substitute or substitutes, or any of
them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on September 25, 1997.
<TABLE>
<CAPTION>
<S> <C>
Signature Title
George N. Faris Chief Executive Officer and Chairman of the Board of Directors
(principal executive officer)
Denis J. Fitzpatrick Vice President, Chief Financial Officer and Secretary
(principal financial and accounting officer)
Donald G. Rynne Director
Director
Daniel Y. Kim
Director
William R. Smart
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.1 Class A Warrant Agreement*
5.1 Opinion of Snow Becker Krauss P.C.
5.2 Consent of Snow Becker Krauss P.C. (contained in Exhibit 5.1)
23.1 Consent of Snow Becker Krauss P.C. (contained in Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Hein + Associates LLP.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement)
* Incorporated by reference to a Registration Statement effective on
January 13, 1994 (File No. 33-70676).
<PAGE>
EXHIBIT 5.1
September 25, 1997
Board of Directors
American International Petroleum Corporation
444 Madison Avenue, Suite 3203
New York, New York 10022
Re: Registration Statement on Form S-3 Relating to:
(1) 5,957,347 Shares of Common Stock issuable upon exercise of
5,957,347 outstanding Class A Warrants;
(2) 1,478,347 Shares of Common Stock outstanding and issuable
upon the exercise of certain warrants;
(3) 193,400 Class A Warrants issuable upon the exercise
of certain warrants and the 193,400 Common Stock
issuable upon exercise of such Common Stock.
The outstanding Common Stock is referred to as the Shares; the
Common Stock issuable pursuant to outstanding, and to be
issued, Class A Warrants and other warrants is referred to as
the Issuable Shares; and the 193,400 Class A Warrants issuable
pursuant to a certain underwriters warrant are referred to as
the Issuable Warrants.
Ladies and Gentlemen:
We are acting as counsel to American International Petroleum
Corporation, a Nevada corporation (the "Company"), in connection with the filing
by the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), of a registration
statement on Form S-3 (the "Registration Statement") relating to the Shares, the
Issuable Shares and the Issuable Warrants.
We have examined and are familiar with originals or copies, certified
or otherwise identified to our satisfaction, of the Certificate of Incorporation
and By-Laws of the Company, as each is currently in effect, the Registration
Statement, the related Prospectus, the corporate proceedings in
<PAGE>
connection with the issuance and registration of the Shares and such other
corporate proceedings, documents and records and other certificates, and we have
made such investigations of law, as we have deemed necessary or appropriate in
order to render the opinions hereinafter set forth.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all of the
originals of such latter documents. As to any facts material to the opinions
expressed herein which were not independently established or verified, we have
relied upon statements and representations of officers and other representatives
of the Company and others.
Based upon and subject to the foregoing, we are of the opinion that all
of the Shares have been duly and validly authorized, issued and are fully paid
and non-assessable; the Issuable Shares, when delivered and upon payment of the
exercise price provided for in the warrants relative to such Issuable Shares,
will be duly and validly authorized, issued, fully paid and non-assessable and
that the Issuable Warrants are duly and validly authorized, issued and when
delivered and upon payment of the exercise price provided for in the warrants
relative to such Issuable Warrants, will be enforceable in accordance with the
terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus accompanying the Registration Statement for
resale of the Shares by certain selling shareholders. In giving this consent, we
do not hereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
SNOW BECKER KRAUSS P.C.
By: /s/Charles Snow
Charles Snow
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
April 9, 1996 appearing on page F-1 of American International Petroleum
Corporation's Annual Report on Form 10-K for the year ended December 31, 1995.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Price Waterhouse LLP
Houston, Texas
September 23, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF HEIN + ASSOCIATES LLP
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
American International Petroleum Corporation:
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3, and the accompanying Prospectus, of our
report dated April 9, 1997, appearing on page F-1 of American International
Petroleum Corporation's Annual Report on Form 10-K for the year ended December
31, 1996. We also consent to the reference to us under the heading "Experts" in
the Prospectus filed herewith.
/s/HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Houston, Texas
September 24, 1997
<PAGE>
