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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECURITIES
AND EXCHANGE COMMISSION</FONT></H1>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WASHINGTON, D.C. 20449</FONT></H1>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORM 10-Q</FONT></H1>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) <BR>OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></H1>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the quarterly
period ended September 30, 2000 </FONT></H1>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Commission File number No.
0-14905 </FONT></P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><B>AMERICAN INTERNATIONAL PETROLEUM CORPORATION</B><BR> (Exact name of registrant as specified in its charter)</FONT></FONT> </P>
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<TD ALIGN=CENTER WIDTH=50%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Nevada</B><BR>(State or other jurisdiction of<BR>incorporation or organization)<BR></FONT></FONT></TD>
<TD ALIGN=CENTER WIDTH=50%><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>13-3130236</B><BR>(I.R.S. Employer<BR>Identification No.)</FONT></FONT></TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><B>2950 North Loop West, Houston, Texas 77092</B> <BR>
(Address of principal executive offices) (Zip Code)</FONT></FONT> </P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><B>(713) 802-0087</B><BR>
(Registrant's telephone number, including area code)</FONT></FONT> </P>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>(Former name, former
address and former fiscal year, if changed since last report) </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Yes [X] No [_] </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The number of shares
outstanding of the registrant’s Common Stock, $.08 par value, as of
November 3, 2000 is 118,902,713 shares. </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES <BR>CONDENSED CONSOLIDATED BALANCE SHEETS</FONT></H1>
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<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"> </FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">September 30,<BR>2000</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">December 31,<BR>1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Assets </FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">(Unaudited)</FONT></TH></TR>
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<TD WIDTH="65%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Current assets:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$748,158</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$1,753,707</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accounts and notes receivable, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">524,692</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">497,553</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accounts receivable, joint venture</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">153,002</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Inventory</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">161,787</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">723,088</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
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<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Deferred financing costs</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">92,567</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">130,727</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">694,885</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">793,956</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
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<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
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<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,375,091</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,899,031</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
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<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
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<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Property, plant and equipment:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Unevaluated oil and gas property</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">33,176,504</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">31,556,376</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Refinery property and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">38,026,963</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">37,999,682</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
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<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,038,335</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,005,886</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">72,241,802</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">70,561,944</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Less - accumulated depreciation, depletion,</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(8,025,168</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(6,470,672</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net property, plant and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">64,216,634</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">64,091,272</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Notes receiviable, less current portion</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">785,112</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,252,696</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Other long-term assets, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">280,449</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">415,270</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$67,657,286</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$69,658,269</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <B>Liabilities and Stockholders' Equity</B></FONT></FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Current liabilities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Short-term debentures</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$6,581,447</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$2,223,500</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Notes payable - officers and directors</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">450,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Notes payable - trade</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,262,035</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,736,831</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,331,840</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,641,886</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accrued liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,396,061</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,301,472</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11,021,383</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8,903,689</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Long-term debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,503,765</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11,984,592</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16,525,148</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">20,888,281</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Minority Interest Liability</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">305,956</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">305,956</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stockholders' equity:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Preferred stock, par value $0.01, 7,000,000 shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> authorized, 1,250 and 0 shares issue and outstanding at</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> September 30, 2000 and December 31, 1999, respectively</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">13</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Common stock, par value $.08, 200,000,000 shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> authorized, 114,192,964 and 91,282,773 shares issued and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> outstanding at September 30, 2000 and December 31, 1999,</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> respectively</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9,135,436</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,302,621</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Additional paid-in capital </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">155,654,218</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">145,605,966</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Common stock issued as collateral, held in escrow</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(731,250</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,065,938</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accumulated deficit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(113,232,235</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(103,378,617</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total stockholders' equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">50,826,182</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">48,464,032</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Total liabilities and stockholders' equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$67,657,286</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$69,658,269</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para Center 10" -->
<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>The accompanying notes
are an integral part of these consolidated fnancial statements. </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMERICAN INTERNATIONAL
PETROLEUM CORPORATION AND SUBSIDIARIES<BR>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<BR>FOR
THE THREE MONTHS ENDED SEPTEMBER 30,<BR>(Unaudited) </FONT></H1>
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</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="63%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Revenues:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Refinery operating revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$301,073</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$2,928,695</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">44,355</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">93,224</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">345,428</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,021,919</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expenses:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Costs of goods sold - refinery</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">429,455</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,851,942</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> General and administrative</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,465,449</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,580,233</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Depreciation, depletion and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">518,164</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">455,647</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,039,339</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,788,338</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,452,407</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,676,160</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(3,106,979</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(4,654,241</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss per share of common stock - basic and diluted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(0.03</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(0.06</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Weighted-average number of shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> of common stock outstanding</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">109,854,813</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">73,997,705</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD>
<!-- MARKER FORMAT-SHEET="Para 10" -->
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The
accompanying notes are an integral part of these consolidated financial
statements. </FONT></P>
<!-- MARKER FORMAT-SHEET="Page Width End" -->
</TD>
</TR>
</TABLE>
<BR>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMERICAN INTERNATIONAL
PETROLEUM CORPORATION AND SUBSIDIARIES<BR>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<BR>FOR
THE NINE MONTHS ENDED SEPTEMBER 30,<BR>(Unaudited)</FONT></H1>
<!-- MARKER FORMAT-SHEET="Page Width End" -->
</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="63%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Revenues:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Refinery operating revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$2,708,374</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$6,948,853</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">119,386</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">171,275</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,827,760</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,120,128</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expenses:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Costs of goods sold - refinery</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,383,644</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,993,606</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> General and administrative</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,994,368</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,809,263</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Depreciation, depletion and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,554,494</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,250,773</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,748,872</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,787,910</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Total expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,681,378</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">18,841,552</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(9,853,618</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(11,721,424</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss per share of common stock - basic and diluted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(0.09</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(0.17</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Weighted-average number of shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> of common stock outstanding</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">105,258,877</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">69,675,997</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
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<TR VALIGN=TOP>
<TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The
accompanying notes are an integral part of these consolidated financial
statements. </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<BR>
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<TD><HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY <BR>(Unaudited)</FONT></H1>
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</TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="800">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Preferred stock</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><BR>Common stock</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Shares </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Amount </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Shares </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Amount </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Additional<BR>paid-in<BR>capital </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Common Stock<BR>Held In Escrow </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Accumulated<BR>deficit </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Total </FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="33%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Balance, January 1, 2000</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ —</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">91,282,773</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$7,302,621</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$145,605,966</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(1,065,938</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(103,378,617</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$48,464,032</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="18"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Conversions of debentures</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14,941,073</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,195,286</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,656,829</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,852,115</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Issuance of stock in lieu of current</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,595,349</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">207,628</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,346,518</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,554,146</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Issuance of stock for compensation</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">262,762</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">21,021</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">126,769</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">147,790</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Issuance of stock options and warrants</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">385,746</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">385,746</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Options and warrants exercised</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,558,340</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">124,667</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">64,471</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">189,138</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stock issued and adjustment to value of stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> previously issued for collateral on debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">300,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">24,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">144,752</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">334,688</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">503,440</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Sale of Convertible Preferred Stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,250</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$13</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,186,738</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,186,751</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Preferred stock converted into common stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,252,667</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">260,213</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">919,037</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,179,250</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Imputed interest convertiible preferred stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">217,392</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">217,392</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net loss for the period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(9,853,618</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(9,853,618</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="18"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Balance, September 30, 2000</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,250</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$13</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">114,192,964</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$9,135,436</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$155,654,218</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(731,250</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(113,232,235</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$50,826,182</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="18"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>FOR THE NINE MONTHS ENDED SEPTEMBER 30,<BR>(Unaudited)</FONT></H1>
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<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2000 </FONT><HR WIDTH=65% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1999 </FONT><HR WIDTH=75% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="67%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash flows from operating activities:</FONT></TD>
<TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(9,853,618</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$(11,721,424</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Adjustments to reconcile net loss to net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> cash provided (used) by operating activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Depreciation, depletion, amortization and accretion of</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> discount on debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,725,413</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,886,549</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accretion of premium on notes receivable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(22,416</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(37,953</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Non-cash provision for services</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">20,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">742,488</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Issuance of stock for compensation expense</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">147,790</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Changes in assets and liabilities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accounts and notes receivable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(180,141</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(593,971</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Inventory</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">561,301</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">708,887</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Prepaid and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,633</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(906,222</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Accounts payable and accrued liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT>
</TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(344,171</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(726,160</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net cash provided by (used in) operating activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman,
Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(6,850,209</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(7,647,806</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash flows from investing activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Additions to oil and gas properties</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,620,128</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(3,827,413</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Additions to refinery property and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(27,281</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(793,506</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> (Increase) decrease to other long term assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">540,263</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(224,507</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net cash used in investing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times,
Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,107,146</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(4,845,426</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash flows from financing activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net increase in short-term debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,419,163</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,075,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net decrease in notes payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(474,796</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(45,955</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net increase in notes payable - officers</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">450,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">240,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Repayments of long-term debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(3,500,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Proceeds from exercise of stock warrants</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> and options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">191,438</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">773,032</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Proceeds from sale of preferred stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,366,001</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Proceeds from issuance of debentures, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14,750,000</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> Net cash provided by financing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman,
Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,951,806</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">13,292,077</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net increase (decrease) in cash and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,005,549</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">798,845</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash and cash equivalents at beginning of year</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,753,707</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">376,745</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="1"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Cash and cash equivalents at end of year</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 748,158</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 1,175,590</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Supplemental cash flow information:<BR>Preferred stock converted in common stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ 1,179,250</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">—</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR>
<TD COLSPAN="6"><HR NOSHADE SIZE="2"></TD></TR>
</TABLE>
<BR><BR>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2> The
accompanying notes are an integral part of these consolidated financial statements. </FONT></P>
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</TR>
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<A NAME="A004"></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMERICAN
INTERNATIONAL PETROLEUM CORPORATION<BR>AND
SUBSIDIARIES</FONT></H1>
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<A NAME="A006"></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>September
30, 2000</FONT></H1>
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<A NAME="A008"></A>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>1. </B></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Statement
of Information Furnished </B></FONT></TD>
</TR>
</TABLE>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying unaudited
condensed consolidated financial statements of American International Petroleum
Corporation and Subsidiaries (the “Company”) have been prepared in
accordance with Form 10-Q instructions and in the opinion of management contain
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of September 30, 2000, the results of
operations and cash flows for the three and nine month periods ended September
30, 2000 and 1999. These results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with those
used in the preparation of the Company’s 1999 Annual Report on Form 10-K. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain information and
footnote disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been condensed or
omitted. It is suggested that the accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company’s 1999
Annual Report on Form 10-K. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company utilizes the
Equity Method to account for its asphalt joint venture operations. The profits
from the joint venture, after all costs have been recovered, are to be split on
a fifty fifty basis. Because the Company is an equal share participant in the
joint venture, the sales of asphalt for the joint venture are not reported in
the Company’s consolidated financials: its investment in the joint venture
is initially recorded at cost, then is reduced by dividends and increased or
decreased by the Company’s proportionate share in the net earnings or loss
of the joint venture. </FONT></P>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations</FONT></H2>
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<A NAME="A009"></A>
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Results of
Operations</FONT></H2>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has two major
segments of its business, refining and oil and gas exploration and development,
although the Company has had no oil and gas production operations since the
first quarter of 1997 when it sold its South American wholly-owned oil and gas
subsidiaries. Since this sale, the Company’s oil and gas activities have
included, but were not limited to, geological and geophysical acquisition,
reprocessing and/or analysis of data, acquisition of additional licenses or
projects, drilling, and market analysis and negotiation in Kazakhstan. The
Company has yet to implement oil and/or gas production operations in Kazakhstan,
where it has two gas and oil concessions, or elsewhere.
The Company's refinery segment is composed of its refineries located in St. Marks,
Florida, Lake Charles, Louisiana, and its barge operations. The Lake Charles Refinery
has three major components: an atmosperhic distillation unit, a vacuum distillation unit,
and its asphalt facility. The atmospheric and vacuum units have not been in operation since January 1999.
Beginning in July of
this year the Company entered into a joint venture agreement with Sargeant
Bulktainers Inc, (“SBI”) (the “Joint Venture”), whereby SBI
would provide and finance certain wholesale asphalt feedstocks to the
refinery’s asphalt division and the Company would be responsible for
processing/blending and the marketing of the asphalt. For the three months
ending September 30, 2000, the Company’s refining segment, located in the
United States, had sales of $301,000 and costs of goods sold of $429,000. Interest income and other corporate
revenues totaled $44,000 with general corporate expense, interest expense and
depreciation being $1,465,000, $518,000, and $1,039,000, respectively. For the
six months ending September 30, 2000, the Company’s refining segment had
sales of $2,708,000, net of the joint venture income of $16,000 and costs of
goods sold operating expenses of $3,384,000. Interest income and other corporate
revenues totaled $119,000 with general corporate expense, interest expense and
depreciation being $4,994,000, $1,554,000 and $2,748,000, respectively. Income
reported from the joint venture was $16,000. The
Company’s identifiable assets at September 30, 2000 total $31,888,000 of
operating assets in the United States, $33,503,000 in Kazakhstan, and $2,266,000
of corporate assets. </FONT></P>
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<A NAME="A010"></A>
<P ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>For the Three
Months Ended September 30, 2000 as compared to <BR>the Three Months Ended
September June 30, 1999</I></FONT></FONT> </P>
<!-- MARKER FORMAT-SHEET="Head Sub 1" -->
<P ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><I>
Oil
and Gas Operations:</I></FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has not had any
oil and gas operating or producing fields since it sold its South American
operations in Colombia and Peru in February 1997 and, therefore no revenues or
expenses related to oil and gas operations were recorded during the third
quarters of 2000 or 1999. </FONT></P>
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<P ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><I>
Refinery
Operations:</I></FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the three months
ended September 30, 2000, the Company had asphalt revenues of approximately $160,000,
exclusive of any joint venture revenues, compared to revenues of approximately
$2,929,000 for the same period during 1999. Cost of goods sold attributed to the
related revenues for the three months ended September 30, 2000 were
approximately $305,000 compared to approximately $2,811,000 for the same period
in 1999. Cost of goods sold costs have remained higher during the three months
ended, both in 2000 and 1999, because of several factors, those being
non-availability of certain types of asphalt feedstocks and the increase in
asphalt feed stock prices the Company has incurred, and the operating cost to
maintain the refinery. A contributing factor to the Company’s increase in
its cost of sales, is the fact that the Company is having to currently and
continually fulfill certain of its asphalt contracts which were entered into
last year at a time when the price of asphalt feedstocks were much lower than
the prices incurred during the third quarter of 2000. The Company had been
purchasing general grade asphalt on a spot basis to blend and supply various
grades of asphalt to its customers. Though the Company has not operated its atmospheric
and vacuum units since January of 1999, it has had to maintain these units in a state
of readiness during this period and thus it has experienced additional operating
overhead costs attributed to maintaining the refinery unit. The Company has
entered into a processing agreement with Sargeant Bulktainers, Inc to process
approximately 10,000 to 15,000 barrels of feedstock per through the refinery unit at
fee rate of $1.50 a barrel. The refinery has commenced operating in November
this year. The agreements with Sargeant are expected to provide aggregate revenues to
the Company in excess of $150 million per year, which in turn should provide positive cash
flow for the Company's refining subsidiaries, and provide excess cash flow to support a
significant amount of corporate overhead as well. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The refinery produced
approximately $2,786,000 in asphalt revenues in the joint venture with SBI
during the three months ended September 30, 2000, with related operating cost of
approximately $2,636,000. The Company realized net income of approximately
$16,000, after taking into effect the losses on asphalt shipments on contracts
held prior to the joint venture. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company’s costs,
and likewise, revenues and asphalt margins, will vary depending upon a number of
factors, including but not limited, to feedstock type and prices, and from the
Company’s product mix, which are determined over time as the Company’s
markets are developed and redefined in the different areas it services.
Currently, though the asphalt volumes are down 37% compared to the quarter last
year, the related revenues are up 2%. The Company’s continuing effort over
the last year to target the high margin polymerized asphalt market has resulted
in a 5% increase from 77% of sales volumes attributed to polymerized asphalt in
the same quarter in 1999 compared to 82% during the current quarter. The Company
is continuing to direct its sales efforts to the high margin polymerized asphalt
markets. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company had revenues
from its barge operations of approximately $125,000 during the current quarter
compared to no revenues in the same quarter last year. Operating costs related
to the barge during the quarter approximated $109,000. The Company began
operating its barge during the third quarter for third parties, which it has not
previously done in the past. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company’s St.
Marks, Florida refinery facility has not been in operation since the last
quarter of 1998. Because of the high cost of asphalt products due to the
shortage of petroleum products since early 1999, the higher demand for the
higher margin, PG-grade polymerized products in the Louisiana and Texas markets,
the lack thereof in the St. Marks markets, and the additional cost which would
be incurred to transport products to St. Marks from Lake Charles, the Company
has not operated in the St. Marks market during that time. These conditions have
continued and, thus, St Marks was not operated during the third quarter of 2000.
Operating the St. Marks facility will depend on the future price and
availability of petroleum feedstocks and products and demand for the
Company’s products in the areas serviced by St. Marks. At the present time,
the Company does not believe its investment in the St. Mark's facility is impaired. </FONT></P>
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<A NAME="A013"></A>
<P><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Other
Revenue:</I></FONT> </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other revenues decreased
approximately $49,000 during the third quarter of 2000 compared to the same
period in 1999. The decrease is due primarily to a decrease in interest income
of approximately $35,000 due to the Company having fewer funds on deposit during
the current quarter compared to the same period last year. During the third
quarter of 1999 the Company recognized income of approximately $56,000 from the
forgiveness of debt and it did not recognize any in the third quarter of 2000.
The Company is currently recognizing sub-leasing income of approximately $38,000
for the period three months ended September 30, 2000 and it had none for the
same period last year. This rental income is a result of the Company’s
efforts to reduce its general and administrative costs by entering into a 5-year
sub-lease of approximately 66% of its office space in its New York office. </FONT></P>
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<BR>
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<A NAME="A014"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>General
and Administrative:</I></FONT></FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overall General and
Administrative expenses, (“G&A”) decreased approximately $115,000
during the current quarter compared to the same period last year. Although
G&A expenses increased in certain areas such as property taxes, corporate
franchise and property taxes and insurance, which are all related to the
refinery asset additions and value, the Company’s efforts to reduce
it’s overhead have resulted in offsetting those increases by decreasing
such costs as travel related expenses, professional and consulting expenses and
telephone expenses. </FONT></P>
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<A NAME="A015"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Depreciation,
Depletion, and Amortization:</I></FONT></FONT> </P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation, Depletion,
and Amortization increased approximately $63,000 during the current quarter
compared to the same quarter last year and is primarily attributable to new
additions at the Company’s refinery placed into service during 1999. </FONT></P>
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<A NAME="A016"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Interest
Expense:</I></FONT> </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense decreased
by approximately $1,749,000 during the third quarter of 2000 compared to the
same period last year. Interest expense for the quarter ended September 30, 2000
represented non-cash interest of $446,000 related to the Company’s
borrowings outstanding at December 31, 1999 and its long and short-term debt
incurred during the first nine months of 2000 compared to approximately
$2,225,000 on non-cash interest incurred during the same period last year. </FONT></P>
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<A NAME="A017"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>For
the Nine Months Ended September 30, 2000 as comparedto the Nine Months Ended September
30, 1999</I></FONT></FONT> </P>
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<A NAME="A018"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Oil
and Gas Operations:</I></FONT></FONT> </P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the first nine
months of 2000 and 1999, the Company had no operating or producing oil fields
and consequently had no revenues or related cost attributable to oil and gas
operations during this period as discussed previously. </FONT></P>
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<A NAME="A019"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Refinery
Operations:</I></FONT></FONT> </P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the first nine
months of 2000, refinery asphalt revenues decreased approximately $3,900,000 to
$2,577,000, compared to $6,478,000 during the first nine months of 1999. The
decrease in refinery asphalt revenues is due to the Company’s accounting
for its joint venture on the equity method as previously discussed above. Joint
venture revenues accounted for under the equity method included asphalt revenues
to the joint venture of approximately $2,786,000, with related costs of
approximately $2,636,000. Costs of sales associated with these revenues were
approximately $3,200,000 and $6,905,000 for the first nine months of 2000 and
1999, respectively. The 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. During the
first nine months of the current period, the refinery had no light-end product
sales compared to approximately $486,000 during the same period last year. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company’s
continuing effort over the last year to target the high margin polymerized
asphalt market has resulted in a 11% increase from 70% of sales volumes
attributed to polymerized asphalt for the same period in 1999 compared to 81%
during the current year. The Company is continuing to direct its sales efforts
to the high margin polymerized asphalt markets. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company began operating
its barge for outside third parties during current year, which it has not done
in the past, as previously discussed. Revenues generated from the barge
operations for the nine months ended September 30, 2000 were approximately
$125,000 with operating costs of approximately $109,000. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Refinery’s
terminal operations in St. Marks Florida, which commenced in June 1998, were not
operational during the first nine months of 2000 or in 1999. As previously
discussed, the Company has directed its sales efforts into the Texas and
Louisiana asphalt markets during 2000. </FONT></P>
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<A NAME="A020"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Other
Revenue:</I></FONT></FONT> </P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other revenues decreased
approximately $52,000, to $119,000 during the first nine months of 2000 compared
to the same period in 1999. The decrease is due primarily to a decrease in
interest income of approximately $73,000 due to the Company having fewer funds
on deposit during the current period compared to the same period last year.
During the first nine months of 1999 the Company recognized income of
approximately $56,000 from the forgiveness of debt. The Company is currently
recognizing sub-leasing income of approximately $76,000 for the period nine
months ended September 30, 2000 and it did not have any rental income during the
same period last year. The rental income is a result of the Company’s
efforts to reduce its general and administrative costs by entering into a 5-year
partial sub-lease of office space in its New York office as previously
discussed. </FONT></P>
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<A NAME="A021"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>General
and administrative:</I></FONT></FONT> </P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>G&A increased
approximately $185,000 during the current period compared to the same period in
1999. G&A increased due to increased activity of the Company in its refinery
operations and oil and gas activity. Certain G&A expenses have increased and
decreased during the first nine months of 2000 compared to the same period
during 1999 as follows: General insurance costs increased by approximately
$45,000 due to increased coverage of new asset additions placed in service
during 1999, rent expenses increased approximately $61,000 due to built in
escalation clauses, investor relations costs decreased by approximately
$160,000, bond costs increased approximately $422,000 due to the Company’s
financing activities, professional fees and telephone and utility expenses
decreased approximately $71,000 and $23,000, respectively; corporate, property
and other taxes increased approximately $27,000; dues and commissions decreased
approximately $23,000 and $79,000 respectively. </FONT></P>
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<A NAME="A022"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Depreciation,
Depletion and Amortization:</I></FONT></FONT> </P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation, Depletion,
and Amortization increased approximately $304,000 during the current period
compared to the same period last year, and is primarily attributable to new
additions at the Company’s refinery during 1999. </FONT></P>
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<BR>
<BR>
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<A NAME="A023"></A>
<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF"><FONT SIZE="2"><I>Interest
Expense:</I></FONT></FONT> </P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense decreased
during the first nine months of 2000 compared to the first nine months of 1999
by approximately $3,039,000 to approximately $2,749,000, which reflects a
$3,013,000 reduction in the Company’s non-cash expenses related to costs
associated with its financing activities. The Company incurred $1,171,000 of
non-cash interest during the first nine months of the current year compared to
$4,184,000 incurred during the same period in 1999. The Company capitalized
approximately $547,000 of non-cash interest expense during the first nine months
of 1999 relating to costs associated with its financing activities, the proceeds
from which were utilized by the Company for its oil and gas and Refinery
projects. The Company did not capitalize any non-cash interest during the
current period. </FONT></P>
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<A NAME="A024"></A>
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Liquidity and
Capital Resources</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the nine months
ended September 30, 2000, the Company used a net amount of approximately
$6,850,000 for operations, which reflects approximately $2,893,000 in non-cash
provisions, including issuance of stock in lieu of cash payments of $168,000 and
depreciation and amortization of $2,725,000. Approximately $561,000 was provided
during the period to decrease product and feedstock inventory and $429,000 was
used to decrease accounts payable and accrued liabilities and to increase
current assets other than cash. Additional uses of funds during the quarter
included additions to oil and gas properties and Refinery property equipment of
$1,647,000. Cash for operations was provided, in part, by proceeds from
short-term debt and bridge notes of an aggregate of $4,519,000 and proceeds from
notes issued to the Company’s officers and directors of $350,000, and cash
used to decrease notes payable of approximately $475,000. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In February 1999,
Mercantile International Petroleum, Inc. (“MIP”) failed to pay the
$1.6 million outstanding balance due to the Company of the 5% convertible
debenture (the “Debenture”) it issued to the Company as partial
payment for the purchase of the Company’s oil and gas properties in
Columbia and Peru, South America in February 1997. In January 2000, the parties
reached an agreement (the “MIP Agreement”), whereby MIP acknowledged
its indebtedness to the Company in the amount of $1,581,000 for the outstanding
balance of the Debenture and an additional amount of $1,306,000 in connection
with the “earnout provision” of the original purchase agreement. MIP
agreed to repay this aggregate debt of $2,888,000 by issuing a new 11.5%
convertible debenture to the Company. Beginning in February 2000, MIP began to
make the scheduled monthly payments to the Company amounting to the greater of
$70,000 or 80% of its Colombian subsidiary’s net income during the calendar
year 2000. To date, each payment has been in the amount of $70,000 and has
generally been paid in a timely manner. Beginning in January 2001, MIP will pay
monthly the greater of $80,000 or 80% of the subsidiary’s net income until
the debt is retired. The unpaid portion of the debt is convertible into MIP
common stock at the option of the Company, at any time at $1.50 per share. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIP also agreed to issue to
the Company warrants entitling it, at any time prior to December 31, 2002, to
purchase an aggregate of 2,347,000 common shares of MIP: </FONT></P>
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</TD>
</TR>
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<BR>
<BR>
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</TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
during the year 2000, at the greater of $.25 per share or the weighted average
trading price for the first 10 days after MIP’s shares resume trading (MIP
was delisted from the Toronto Exchange in 1999), to a maximum if $.50;</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>during
the year 2001, at $1.00 per share; and</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>during
the year 2002, at $1.50 per share</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
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<TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All of the sales proceeds
from MIP’s Colombian oil sales and disbursement of payments due to the
Company pursuant to the MIP Agreement are being administered by MIP’s
independent accountants, PriceWaterhouseCoopers, LLP. The Company expects no
future interruption of the scheduled payments. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since December 1999, the
Company has sold an aggregate of $7.35 million worth of bridge notes (the
“Bridge Notes”) to GCA Strategic Investment Fund Limited
(“GCA”). Since then, it has repaid $1.25 million of the Bridge Notes,
leaving an outstanding principal balance of approximately $6.1 million due as of
November 13, 2000. The Bridge Notes are due and payable on November 28, 2000;
however, the Company and GCA have verbally agreed to an extension of this due
date and expect a formal agreement to extend the due date will be executed
either just before or soon after the filing date of this Form 10-Q. 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 (see Part II, Other Information “Item 2 Changes in
Securities”). </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In August 2000, one of the
Company’s wholly-owned subsidiary, American International Petroleum
Kazakhstan (“AIPK”), sold an aggregate of $450,000 worth of six month,
non-recourse, 12% promissory notes (the “Notes”) to certain Officers
and Directors of the Company and to an individual investor. Each investor was
given a warrant to purchase one share of the Company’s Common Stock for
each dollar invested, with an average exercise price of $0.43 per share (105% of the closing market price
of the Common Stock on the date preceding the closing of each Note transaction).
The proceeds were used by AIPK to initiate the reentry work, discussed below, at
the Company’s Begesh oil well in Kazakhstan. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company met its minimum
work and monetary obligations on its License 953 in Kazakhstan during 1999 and
has recently negotiated a revision of the minimum work program with the
Kazakhstan government. 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 reentry, which is estimated to begin in November 2000, is estimated
to cost between $750,000 to $1 million and will satisfy the Company’s
minimum work requirement at 953 for the year 2000. The reentry is being funded
from proceeds from the Promissory Notes and the Equity Line. Two more wells are
expected to be drilled at 953, at least one at the Begesh location, before the
end of next year, which will complete the total minimum work required under the
License. Because of the proximity of oil pipelines, rail lines, and highways to
the Begesh location, if the reentry is successful, the Company could begin
production and sale of oil shortly after the completion of the reentry work at
Begesh. </FONT></P>
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<BR>
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company had originally
planned to begin its Shagryly-Shomyshty gas field (“Shagryly” or
“License 1551”) development in Kazakhstan in November 2000. However,
because of the uncertainty of weather conditions in western Kazakhstan at that
time of year, the Company believes it will be more prudent to begin drilling at
Shagryly in the Spring of 2001. The initial phase of the development has been
reestimated to cost approximately $3.8 million which includes preliminary engineering
and the drilling of four wells, two vertical and two horizontal, and is expected to be funded from
(i) the proceeds derived from the sale of a portion of Shagryly, (ii) financing
to be provided by the purchaser (which financing is expected to also be provided
to fund the Company’s remaining interest in the project subsequent to the
sale) or (iii) 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 Company’s strategy is to sell a minimum of 50% of Shagryly prior to
commencing the main phase of development (see discussion below). </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In October 2000, the
Company signed a framework agreement with Zao Kaztransgaz, a Kazakhstan
government company involved in the transportation and marketing of natural gas
within Kazakhstan, whereby Kaztransgaz will purchase up to 200 million cubic
feet of natural gas per day from the Company’s 100 percent owned License
1551 in western Kazakhstan, for an initial period of 15 years. The total revenue
anticipated from the agreement is expected to approximate $1 billion over the
life of the contract. The parties have agreed to appoint key representatives to
a joint committee charged to prepare the definitive document for the sale and
purchase of the Company’s gas at 1551, however there can be no assurance at
this time, that such a document will be consummated. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is also
currently engaged in negotiations with Gazprom, the Russian gas transport
company, for the transportation and sale of its anticipated Shagryly gas
production, as well as third party gas which the Company may decide to purchase
and sell. Alternatively, the Kazakhstan government is negotiating an agreement
with Gazprom in connection with the export of Kazakhstan gas to western markets.
The Kazakhstan government has informed the Company that it will furnish all
necessary support to the Company to have access to these gas markets. 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. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Upon the completion and
execution of either of these gas sales agreements, the Company expects to book a
significant amount of proved gas reserves, which will create a borrowing base
for project and other financing for the Company to utilize. The Company has also
been verbally informed by a potential joint venture partner that, upon the execution of a
gas sales contract for Shagryly, that company would purchase a portion of
the Company’s working interest in Shagryly. However, the terms of such a
sale have not been agreed to by the parties and there is no assurance such a sale
would take place. The Company plans to utilize the proceeds from such a sale to
pay off all of its outstanding debt and to supplement the Company’s various
cash requirements. </FONT></P>
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<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has entered
into a processing agreement with a division of Sargeant Marine, Inc., Sargeant
Bulktainers, Inc. (“SBI”), whereby AIRI will process SBI’s
condensate or other crude oils at its Lake Charles, Louisiana refinery for a
fee. Also, another Company subsidiary, Gulf Coast Petroleum Trading, Inc.
(“GCPT”), entered into an agreement with SBI whereby SBI will finance
GCPT’s purchase of SBI’s jet fuel, naphtha, kerosene, diesel oil, and
vacuum gas oil. GCPT will then market these products throughout the country. A
successful processing test was recently completed and normal processing is expected to commence. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As mentioned above, the
Company also entered into a joint venture with SBI (the “Joint
Venture”) to (1) service the Company’s existing asphalt supply
obligations and (2) expand the Company’s asphalt business. The joint
venture agreement provides for Sargeant 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’s asphalt operations. 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. The Joint Venture’s strategy is to sell only higher-margin
polymerized asphalt products, which asphalts are expected approximate 75-95% of
its asphalt sales during 2000. The Joint Venture has been profitable since its
inception in July this year, and the Company expects this trend to continue. As
of November 12, 2000, the Joint Venture had a backlog of approximately $6
million. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The agreements with
Sargeant are expected to provide aggregate revenues to the Company in excess of
$150 million per year, which in turn should provide positive cash flow for the
Company’s refining subsidiaries, and provide excess cash flow to support a
significant amount of corporate overhead as well. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The proceeds from the
Equity Line are being used primarily to supplement, as necessary, any proceeds
that may be derived from the possible sale or farm-out of a portion of the
Company’s oil and gas concessions in Kazakhstan. Such proceeds will be
utilized to fund the development drilling in the Company’s License 1551 gas
field and the reentry and drilling work at its License 953, 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 and its outstanding convertible debt. If such a sale is not
consummated by the due date of the Bridge Notes, the Company may be required to
extend their due dates, to utilize funds available from the Equity Line,
refinance the balances due, or obtain additional financing to make these
payments. </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<BR>
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<TD><HR SIZE=5 NOSHADE>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A025"></A>
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>PART II OTHER
INFORMATION</FONT></H2>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A026"></A>
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 2.
Changes in Securities</FONT></H2>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As mentioned above, in July
2000, the Company entered into the Equity Line whereby the Company may sell up
to an aggregate of $10 million of convertible preferred stock (the
“Preferred Shares”) in traunches of up to $1.25 million following the
sooner of (i) the 20<SUP>th</SUP> trading day after the effective date of the
related registration of the Equity Line or after a subsequent takedown of same,
or (ii) conversion by GCA of the Preferred Shares issued in an immediately
preceding takedown. The Preferred Shares are convertible into the Company’s
common stock at 92% of the average of the three lowest volume weighted average
sales prices for the 20 days immediately preceding the date of the related
notice of conversion. Upon closing of the Equity Line, GCA was also awarded
warrants to purchase at any time 200,000 shares of the Company’s common
stock at $0.53 per share. The agent for the transaction, LBK Financial LLC, was
paid a fee of (i) 5% of the proceeds received by the Company at each takedown
and (ii) a warrant to purchase 75,000 shares of its Common Stock at an exercise
price of 105% of the closing price of the Company’s common stock on the day
preceding a drawdown. In the three months ended September 30, 2000, the Company
drew down an aggregate of $1,250,000 from the Equity Line and issued 3,252,667
shares of its common stock to GCA pursuant to conversions of the Preferred
Shares. The issuance and sale of the Preferred Shares and Warrants was exempt
from the registration requirements of The Securities Act under Section 4(2)
thereof and Rule 506 of Regulation D. The issuance of the shares of Common Stock
upon conversion of the Preferred Shares was exempt from the registration
requirements of the Securities Act under Section 3(a)(9) thereof. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Flush 10" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Also, during the three
months ended September 30, 2000, the Company issued an aggregate of 2,811,701
shares of its Common Stock to the Halifax Fund pursuant to conversion of
$927,000 of the outstanding principal balance of its 5% Secured Convertible
Debentures (the “Debentures”) and in payment of related interest
totaling $71,154. As of September 30, 2000, the outstanding principal balance of
the Debentures was $5,769,135. The issuance of the shares of Common Stock upon
conversion of the Debentures was exempt from the registration requirements of
the Securities Act under Section 3(a)(9) thereof. </FONT></P>
<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 4. Submission of
Matters to a Vote of Security Holders</FONT></H2>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company’s Annual
Meeting of Stockholders was held on July 11, 2000. The following Directors,
constituting all of the Directors of the Company, were elected at the meeting to
serve as Directors until their successors are duly elected and qualified. The
Directors elected at the Annual Meeting received the number of votes set forth
opposite their respective names: </FONT></P>
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</TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="6"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Votes Cast</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">For<BR>Election</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Against<BR>Election</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Withheld Authority/<BR>Abstained</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="12%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">George N. Faris</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,739,269</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">74,327</FONT></TD>
<TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,277,539</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Daniel Y. Kim</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,739,209</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">74,327</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,277,599</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Donald G. Rynne</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,739,709</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">73,827</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,277,599</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">William R. Smart</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,738,409</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">75,127</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,277,599</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">John H. Kelly</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,781,709</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">31,827</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,277,599</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At the annual meeting, the
stockholders also approved the following proposals by the number of votes indicated below: </FONT></P>
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</TD>
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<TD WIDTH=5%> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Ratification
of the appointment of Hein + Associates LLP as independent accountants of the Company for
the year 2000:</FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">For</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Against</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Abstain</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Broker Non-Votes</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">95,551,426</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,900,002</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">631,707</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">-0-</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Ratification of the Company's 2000 Stock Options Plan:
</FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">For</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Against</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Abstain</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Broker Non-Votes</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">18,617,788</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,328,350</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">646,820</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">-0-</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=5%> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Ratification
of the Company's 2000 Stock Options Plan:</FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">For</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Against</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Abstain</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Broker Non-Votes</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">18,328,752</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,618,814</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">645,392</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">-0-</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
</TABLE>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>Item 6. Exhibits and
Reports on Form 8-K</FONT></H2>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits</FONT></TD>
</TR>
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<BR>
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<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1 </FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Form of Promissory Note</FONT></TD>
</TR>
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<BR>
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<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2</FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Form of Warrant issued in connection with Exhibit 4.1 </FONT></TD>
</TR>
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<BR>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=91%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reports
on Form 8-K</FONT></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=5%> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
None</FONT></TD>
</TR>
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<BR>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>SIGNATURE</FONT></H2>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Securities and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated: November 14, 2000 </FONT></P>
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</TD>
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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>
AMERICAN INTERNATIONAL<BR>
PETROLEUM CORPORATION </B><BR><BR>
<BR>By: /s/ Denis J. Fitzpatrick<BR>——————————————<BR>
Denis J. Fitzpatrick<BR>
Chief Financial Officer
</FONT></TD>
</TR>
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<BR>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>EXHIBIT INDEX</FONT></H2>
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</TD>
</TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
<TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">EXHIBIT<BR>NUMBER</FONT><HR WIDTH=95% SIZE=1 NOSHADE></TH>
<TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"> </FONT></TH>
<TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">DESCRIPTION</FONT><HR WIDTH=15% SIZE=1 NOSHADE></TH></TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.1</FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form of Promissory Note</FONT></TD>
<TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.2</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form of Warrant issued in connection with Exhibit 4.1</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">27.1</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Financial Data Schedule.</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> </FONT></TD></TR>
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