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SECURITIES
AND
EXCHANGE COMMISSION FORM 10-Q QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) For the quarterly period ended June 30, 2000 Commission File number No. 0-14905 AMERICAN
INTERNATIONAL PETROLEUM CORPORATION |
Nevada | 13-3130236 | ||
(State or other jurisdiction of | (I.R.S. Employer | ||
incorporation or organization) | Identification No.) |
2950 North Loop West,
Houston, Texas 77092 (713) 802-0087 (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 [_] The number of shares outstanding of the registrants Common Stock, $.08 par value, as of August 10, 2000 is 108,229,711 shares. |
Part 1. Financial
Information
|
June 30, 2000 (Unaudited) |
December 31, 1999 | ||||
---|---|---|---|---|---|
Assets | |||||
Current assets: | |||||
Cash and cash equivalents | $613,145 | $1,753,707 | |||
Accounts and notes receivable, net | 791,275 | 497,553 | |||
Inventory | 311,624 | 723,088 | |||
Deferred financing costs | 27,357 | 130,727 | |||
Prepaid expenses | 496,147 | 793,956 | |||
Total current assets | 2,239,548 | 3,899,031 | |||
Property, plant and equipment: | |||||
Unevaluated oil and gas property | 32,459,006 | 31,556,376 | |||
Refinery property and equipment | 38,026,999 | 37,999,682 | |||
Other | 1,026,314 | 1,005,886 | |||
71,512,319 | 70,561,944 | ||||
Less - accumulated depreciation, depletion, | |||||
and amortization | (7,507,003 | ) | (6,470,672 | ) | |
Net property, plant and equipment | 64,005,316 | 64,091,272 | |||
Notes receiviable, less current portion | 995,112 | 1,252,696 | |||
Other long-term assets, net | 119,802 | 415,270 | |||
Total assets | $67,359,778 | $69,658,269 | |||
Liabilities and Stockholders Equity | |||||
Current liabilities: | |||||
Short-term debentures | $6,762,218 | $2,223,500 | |||
Notes payable - trade | 1,772,132 | 1,736,831 | |||
Accounts payable | 1,079,223 | 3,641,886 | |||
Accrued liabilities | 1,060,366 | 1,301,472 | |||
Total current liabilities | 10,673,939 | 8,903,689 | |||
Long-term debt | 6,411,108 | 11,984,592 | |||
Total liabilities | 17,085,047 | 20,888,281 | |||
Commitments and contingent liabilities | | | |||
Minority Interest Liability | 305,956 | 305,956 | |||
Stockholders equity: | |||||
Preferred stock, par value $0.01, 7,000,000 shares | |||||
authorized, none issued | |||||
Common stock, par value $.08, 200,000,000 shares | |||||
authorized, 107,719,805 and 91,282,773 shares issued | |||||
outstanding at June 30, 2000 and December 31, 1999, | |||||
respectively | 8,617,584 | 7,302,621 | |||
Additional paid-in capital | 152,207,697 | 145,605,966 | |||
Common stock issued as collateral, held in escrow | (731,250 | ) | (1,065,938 | ) | |
Accumulated deficit | (110,125,256 | ) | (103,378,617 | ) | |
Total stockholders equity | 49,968,775 | 48,464,032 | |||
Total liabilities and stockholders equity | $67,359,778 | $69,658,269 | |||
The accompanying notes are an integral part of these consolidated fnancial statements. |
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION AND SUBSIDIARIES
|
2000 |
1999 | ||||
---|---|---|---|---|---|
Revenues: | |||||
Refinery operating revenues | $ 1,224,344 | $ 2,156,652 | |||
Other | 47,158 | 36,669 | |||
Total revenues | 1,271,502 | 2,193,321 | |||
Expenses: | |||||
Costs of goods sold - refinery | 1,562,260 | 2,508,173 | |||
General and administrative | 1,637,564 | 1,644,867 | |||
Depreciation, depletion and | |||||
amortization | 518,166 | 462,916 | |||
Interest | 817,096 | 1,607,403 | |||
Total expenses | 4,535,086 | 6,223,359 | |||
Net loss | $ (3,263,584 | ) | $(4,030,038 | ) | |
Net loss per share of common stock - basic and diluted | $ (0.03 | ) | $ (0.06 | ) | |
Weighted-average number of shares | |||||
of common stock outstanding | 107,044,470 | 69,611,930 | |||
The accompanying notes are an integral part of these consolidated fnancial statements. |
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION AND SUBSIDIARIES
|
2000 |
1999 | ||||
---|---|---|---|---|---|
Revenues: | |||||
Refinery operating revenues | $ 2,407,301 | $ 4,020,158 | |||
Other | 75,031 | 78,051 | |||
Total revenues | 2,482,332 | 4,098,209 | |||
Expenses: | |||||
Costs of goods sold - refinery | 2,954,189 | 4,141,664 | |||
General and administrative | 3,528,919 | 3,229,030 | |||
Depreciation, depletion and | |||||
amortization | 1,036,330 | 795,126 | |||
Interest | 1,709,533 | 2,999,572 | |||
Total expenses | 9,228,971 | 11,165,392 | |||
Net loss | $ (6,746,639 | ) | $(7,067,183 | ) | |
Net loss per share of common stock - basic and diluted | $ (0.07 | ) | $ (0.10 | ) | |
Weighted-average number of shares | |||||
of common stock outstanding | 102,357,311 | 67,479,328 | |||
The accompanying notes are an integral part of these consolidated fnancial statements. |
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION AND SUBSIDIARIES
|
Common stock |
Additional paid-in |
Common Stock Held In |
Accumulated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares |
Amount |
capital |
Escrow |
deficit |
Total | ||||||||
Balance, January 1, 2000 | 91,282,773 | $7,302,621 | $145,605,966 | $(1,065,938 | ) | $(103,378,617 | ) | $48,464,032 | |||||
Conversions of debentures | 12,329,556 | 986,365 | 4,938,749 | | | 5,925,114 | |||||||
Issuance of stock in lieu of current | |||||||||||||
liabilities | 2,077,451 | 166,196 | 1,209,568 | | | 1,375,764 | |||||||
Issuance of stock for compensation | 171,684 | 13,735 | 97,055 | | | 110,790 | |||||||
Issuance of stock options and warrants | | | 210,746 | | | 210,746 | |||||||
Options and warrants exercised | 1,558,341 | 124,667 | 66,771 | | | 191,438 | |||||||
Stock issued and adjustment to value of stock | |||||||||||||
previously issued for collateral on debt | 300,000 | 24,000 | 78,842 | 334,688 | | 437,530 | |||||||
Net loss for the period | | | | (6,746,639 | ) | (6,746,639 | ) | ||||||
Balance, June 30, 2000 | 107,719,805 | $8,617,584 | $152,207,697 | $ (731,250 | ) | $(110,125,256 | ) | $49,968,775 | |||||
The accompanying notes are an integral part of these consolidated fnancial statements. |
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION AND SUBSIDIARIES
|
2000 |
1999 | ||||
---|---|---|---|---|---|
Cash flows from operating activities: | |||||
Net loss | $(6,746,639 | ) | $(7,067,183 | ) | |
Adjustments to reconcile net loss to net | |||||
cash provided (used) by operating activities: | |||||
Depreciation, depletion, amortization and accretion of | |||||
discount on debt | 1,761,400 | 2,205,939 | |||
Accretion of premium on notes receivable | (22,416 | ) | (25,302 | ) | |
Non-cash provision for services | 10,000 | 421,238 | |||
Issuance of stock for compensation expense | 110,790 | | |||
Changes in assets and liabilities: | |||||
Accounts and notes receivable | (293,722 | ) | (544,370 | ) | |
Inventory | 411,464 | 400,672 | |||
Prepaid and other | 341,271 | (281,896 | ) | ||
Accounts payable and accrued liabilities | (1,428,004 | ) | (1,628,380 | ) | |
Net cash provided by (used in) operating activities | (5,855,856 | ) | (6,519,282 | ) | |
Cash flows from investing activities: | |||||
Additions to oil and gas properties | (902,630 | ) | (1,365,996 | ) | |
Additions to refinery property and equipment | (27,317 | ) | (757,222 | ) | |
(Increase) decrease to other long term assets | 818,568 | (183,226 | ) | ||
Net cash used in investing activities | (111,379 | ) | (2,306,444 | ) | |
Cash flows from financing activities: | |||||
Net increase in short-term debt | 4,599,934 | 1,686,604 | |||
Net increase in notes payable | 35,301 | 42,252 | |||
Net increase in notes payable - officers | | 223,150 | |||
Repayments of long-term debt | | (3,500,000 | ) | ||
Proceeds from exercise of stock warrants | |||||
and options | 191,438 | 231,000 | |||
Proceeds from issuance of debentures, net | | 10,000,000 | |||
Net cash provided by financing activities | 4,826,673 | 8,683,006 | |||
Net increase (decrease) in cash and | |||||
cash equivalents | (1,140,562 | ) | (142,720 | ) | |
Cash and cash equivalents at beginning of year | 1,753,707 | 376,745 | |||
Cash and cash equivalents at end of year | $ 613,145 | $ 234,025 | |||
The accompanying notes are an integral part of these consolidated fnancial statements. |
Refinery Operations:During the first six months of 2000, refinery asphalt revenues decreased approximately $1,613,000 to $2,407,000 compared to $3,586,000 during the first six months of 1999. During the first six months of the current period, the refinery had no light-end product sales compared to approximately $434,000 during the same period last year. Costs of sales associated with these revenues were approximately $2,954,000 and $4,142,000 for the first six months of 2000 and 1999, respectively. The percentage of increase in the operating and inventory costs during the current period compared to the same period in 1999 is due primarily to the Company having to fulfill contracts entered into during 1999 when asphalt is at a higher cost currently than it was in 1999, as previously discussed in the three-month discussion. The Refinerys terminal operations in St. Marks Florida, which commenced in June 1998, were not operational during the first six months of 2000 or 1999. As previously discussed, the Company has directed its sales efforts into the Texas and Louisiana asphalt markets during 2000. Other Revenue:Other revenues decreased approximately $3,000, to $75,000 during the first six months of 2000 compared to the same period in 1999. The decrease is due primarily to the Company having fewer funds on deposit during the current quarter compared to the same period last year. General and administrative:General and Administrative, (G&A) expenses increased approximately $300,000 during the current period compared to the same six month period in 1999. General and administrative expenses have increased due to the increased activity of the Company in its refinery operations and oil and gas activity. Certain G&A expense have increased and decreased during the first six months of 2000 compared to the same period during 1999 as follows: Payroll and related employee expenses increased by approximately $95,000 which includes approximately $98,000 of non-cash stock bonuses issued to employees, general insurance costs increased by approximately $35,000 due to increased coverage of new asset additions placed in service during 1999, rent expenses increased approximately $52,000, investor relations costs decreased by approximately $137,000, bond costs increased approximately $354,000 due to the Companys financing activities, professional fees and telephone expenses decreased approximately $37,000 and $21,000, respectively. Depreciation, Depletion and Amortization:Depreciation, Depletion, and Amortization increased approximately $241,000 during the current period compared to the same period last year, and is primarily attributable to new additions at the Companys refinery during 1998. |
(i) | during the year 2000, at the greater of $.25 per share or the weighted average trading price for the first 10 days after MIPs shares resume trading (MIP was delisted from the Toronto Exchange in 1999), to a maximum if $.50; |
(ii) | during the year 2001, at $1.00 per share; and |
(iii) | during the year 2002, at $1.50 per share |
A dedicated bank account has been set up in Bogota, Colombia for deposit of oil sales proceeds and disbursement of payments due to the Company pursuant to the MIP Agreement. The Company began receiving the scheduled monthly payments in March of this year and expects no interruption in the future. In July 2000, the Company entered into a $10 million convertible preferred line of credit (the Equity Line) with an option for an additional $8 million, with GCA Strategic Investment Fund Limited (GCA). Also in July, GCA agreed to extend an aggregate principal amount of $4.35 million of previously completed bridge financings until November 28, 2000, bringing the total amount of outstanding bridge notes due on that date to $7.35 million. The Company plans to begin its Shagryly-Shomyshty gas field (Shagryly or License 1551) development in Kazakhstan in 2000. The initial phase of the development will cost approximately $4.5 million and is expected to be funded from the proceeds derived from the sale of a portion of Shagryly, financing to be provided by the purchaser, which financing is expected to also be provided to fund the Companys remaining interest in the project subsequent to the sale, or by the Equity Line. The total development cost for the project is estimated at approximately $160 million to $180 million. The Company is also having discussions with other financing entities, suppliers and export credit agencies regarding project financing for the development of Shagryly. However, the Companys strategy is to sell a minimum of 50% of Shagryly prior to commencing the main phase of development. The proceeds from the Equity Line will be used primarily to supplement, if necessary, any proceeds that may be derived from the possible sale or farm-out of a portion of the Companys oil and gas concessions in Kazakhstan. Such proceeds will be utilized to fund the development drilling in the Companys License 1551 gas field and the reentry and drilling work at its License 953, both discussed below, and for general corporate uses. The Company plans to utilize any proceeds it may receive from the sale of a portion of its Kazakhstan concessions to repay its outstanding bridge notes. If such a sale is not consummated by the due date of these bridge notes, the Company may be required to utilize funds available from the Equity Line, refinance the balances due, or obtain additional financing to make these payments. The Company met its minimum work and monetary obligations on its License 953 in Kazakhstan during 1999. Its year 2000 obligation amounts to approximately $1.7 million, which it expects to fund with proceeds derived from the partial sale of Shagryly and/or from the Equity Line. Due to recent interpretations of electric well logs from the Begesh #1 oil well, the Company has decided to re-enter the Begesh #1 to test a key upper Jurassic interval known to be productive in the general locale of the well. The anticipated reentry, which is estimated to cost between $750,000 to $1 million, is expected to satisfy the Companys minimum work requirement at 953 for the year 2000, which is currently being renegotiated with the Kazakhstan government. Two more wells are expected to be drilled at 953, at least one at the Begesh location, before the end of next year, which, if these negotiations are successful, will complete the minimum work required under License 953. |
The Company is currently engaged in negotiations with Gazprom, the Russian gas transport company, for the transportation and sale of its anticipated Shagryly gas production. In the event that the contract is consummated, the Company expects to have a significant amount of proved gas reserves, which it could utilize as a borrowing base for various Company capital requirements, including the development of the Shagryly gas field. Alternatively, the Kazakhstan government is negotiating an agreement with Gazprom in connection with the export of Kazakhstan gas to western markets through Gazproms pipelines. The Kazakhstan government has informed the Company that it will furnish all necessary support to the Company for participation in the governments access into these pipelines. Such access would allow the Company to market its gas directly to the western end-users, significantly enhancing the value of its gas reserves in Shagryly. The Company has also been having discussions with the drilling subsidiary of Gazprom and other drilling companies regarding a drilling contract to develop the Shagryly field. In February 2000, AIRI entered into lease and service agreements (the Maretech Agreements) with Maretech Corporation (Maretech), an independent refiner, whereby Maretech would lease AIRIS ADU and process condensate crude oil utilizing AIRIs personnel to operate the daily processing functions. Maretech planned to produce naphtha and gas oil to be sold as feedstocks and diesel and JP8 to be marketed as finished products. However, Maretech did not commence operations as planned because of financing difficulties and, as a result, the Company initiated negotiations with another company to process its crude oils. These negotiations are continuing and the Company expects to complete a processing agreement in the near future. In addition to the processing agreement, the Company signed a letter of intent for a joint venture to (1) service the Companys existing asphalt supply obligations and (2) expand the Companys asphalt business. A definitive agreement is expected to be finalized in August 2000, however, operation of the joint venture commenced in early July 2000. The joint venture agreement provides for the Companys partner in the joint venture to provide the feedstocks required, with the Company receiving reimbursement of its direct operating costs and 50% of the profits generated from the joint venture operations. The combination of both of these agreements is expected to provide positive cash flow for the Companys refining subsidiary, AIRI, and provide excess cash flow to support a significant amount of corporate overhead as well. As long as crude oil prices continue at current high levels, the joint venture plans to purchase wholesale asphalt to utilize as feedstock for blending and polymer enhancement. Its strategy is to sell only higher-margin polymerized asphalt products, which asphalts are expected approximate 75-95% of its asphalt sales during 2000. |
PART II OTHER INFORMATIONItem 2. Changes in Securities |
On May 8, 2000, the Company issued a six month $3 million bridge note, (the Bridge Note), in a private placement to a single accredited investor, (the Investor), within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the Securities Act). In connection with the issuance of this note, the Company issued a five year warrant to purchase 350,000 shares of the Companys common stock at an exercise price of $.69 per share (the Bridge Warrant) and 250,000 of its common stock (Bridge Shares). The Bridge Note, Bridge Warrant and the Bridge Shares were issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D. |
Item 6. Exhibits and Reports on Form 8-K |
a. | Exhibits |
27.1 Financial Data Schedule |
b. | Reports on Form 8-K |
None |
AMERICAN INTERNATIONAL PETROLEUM CORPORATION By: /s/ Denis J. Fitzpatrick Denis J. Fitzpatrick Chief Financial Officer |
EXHIBIT INDEX |
EXHIBIT NUMBER |
DESCRIPTION | ||
---|---|---|---|
27.1 | Financial Data Schedule. |
|