As filed with the Securities and Exchange Commission on August 4, 2000
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
(Exact name of Registrant as specified in its charter)
Nevada 13-3130236
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2950 North Loop West, Suite 1000
Houston, Texas 77092
(713) 802-0087
(Address and telephone number of
registrant's principal executive offices)
-------------------------------------
DENIS J. FITZPATRICK
Chief Financial Officer
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
2950 North Loop West, Suite 1000
Houston, Texas 77092
Telephone: (713)802-0087
Telecopier: (713)681-5987
(Name, address and
telephone number of agent for service)
----------------------------
Copies to:
CHARLES SNOW, ESQ.
SNOW BECKER KRAUSS P.C.
605 Third Avenue
New York, New York 10158-0125
Telephone: (212) 687-3860
Fax: (212) 949-7052
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed
of Securities Amount Maximum Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered Per Security(1) Offering Price Fee
------------- ---------- --------------- -------------- ------------
Common Stock, 30,800,000(2) $0.44(3) $13,552,000 $3,577.73
$.08 par
value
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
(2) Represents shares to be sold by the selling securityholders named in this
registration statement.
Also includes an indeterminate number of shares that the selling securityholders
may acquire as a result of a stock split, stock dividend or similar transaction
involving the common stock pursuant to the antidilution provisions of our series
A convertible preferred stock and warrants. Does not include additional shares
that may be acquired by the selling securityholders upon conversion of the
series A convertible preferred stock attributable to the operation of the
conversion price formula set forth in the certificate of designations for that
series of convertible preferred stock due to a decline in the market price of
our common stock.
(3) Calculated solely for the purpose of determining the registration fee
pursuant to Rule 457(c)based upon the closing price of the common stock on
The Nasdaq National Market on August 3, 2000.
-------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
(8), may determine.
<PAGE>
INFORMATION CONTAINED IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
Preliminary Prospectus Dated August 4, 2000, Subject To Completion
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
Common Stock
GCA Strategic Investment Fund Limited and LKB Financial LLC are offering and
selling up to 30,800,000 shares of our common stock, including 30,000,000 shares
that GCA Strategic Investment Fund Limited may acquire upon conversion of our
series A convertible preferred stock. We have entered into a securities purchase
agreement with GCA Strategic Investment Fund Limited under which we may sell up
to $10,000,000 of our series A convertible preferred stock to GCA during a
period of twelve months commencing on the date of this prospectus.
GCA Strategic Investment Fund Limited is an "underwriter" within the meaning of
the Securities Act of the shares of common stock it offers and sells under this
prospectus.
Our common stock is quoted on the Nasdaq National Market under the symbol
"AIPN".
THE COMMON STOCK IS A SPECULATIVE INVESTMENT AND INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD READ THE DESCRIPTION OF CERTAIN RISKS UNDER THE CAPTION "RISK
FACTORS" COMMENCING ON PAGE 6 BEFORE PURCHASING THE COMMON STOCK.
Our executive offices are at 2950 North Loop West, Suite 1000, Houston, Texas
77092 and our telephone number is 713-802-0087.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 2000
1
<PAGE>
Table of Contents
Page
Information About American International Petroleum ....................... 3
Preferred Stock Financing ................................................ 3
Risk Factors ............................................................. 5
Forward Looking Statements ............................................... 14
Selling Securityholders .................................................. 14
Plan of Distribution ..................................................... 16
Where You Can Find More Information ...................................... 17
Information Incorporated By Reference ....................... ............ 17
Legal Matters ............................................................ 18
Experts .................................................................. 18
----------------------
This prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
prospectus. We have not authorized anyone to provide you with different
information. The common stock will not be offered in any state where an offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the cover of this prospectus.
2
<PAGE>
Information about American International Petroleum Corporation
Through our wholly owned subsidiaries, we:
o Produce, process and market conventional and technologically advanced
polymer asphalt, vacuum gas, oil and other products at our refinery in
Lake Charles, Louisiana utilizing low-cost, low-gravity, high sulphur
crudes.
o Blend and market asphalt to the Florida and Georgia asphalt markets
utilizing our refinery in St. Marks, Florida as a distribution
facility.
o Engage in oil and gas exploration and development in western
Kazakstan, where we own a 70% working interest in a 20,000 square
kilometer exploration block and a 100% working interest in a 200,000
acre gas field.
We also are seeking other oil and gas projects in the United States, Russia and
Central Asia.
Recent Development
Resignation of Our Chief Executive Officer
On July 10, 2000, Joe Michael McKinney, resigned as our Chief Executive
Officer and President and as a member of our Board of Directors.
Preferred Stock Financing
We have entered into a securities purchase agreement with GCA Strategic
Investment Fund Limited for the sale of $10,000,000 of our series A convertible
preferred stock. Under the terms of the agreement, we may sell shares of series
A convertible preferred stock to GCA for a period of twelve months after the
date of this prospectus. The purchase price of shares of series A convertible
preferred stock under the purchase agreement is $1,000 per share. We must give
GCA at least 20 business days prior written notice of our intention to sell
shares of series A convertible preferred stock under the purchase agreement. The
maximum amount of series A convertible preferred stock that we may sell to GCA
on any date is $1,250,000, or 1,250 shares. The minimum amount of series A
convertible preferred stock that we may sell to GCA on any date is equal to 2.5%
of the weighted average trading volume of our common stock for the number of
trading days elapsed since the last sale of shares of series A convertible
preferred stock under the purchase agreement times the weighted average sales
price of our common stock for that period. We have the right to extend the term
of the purchase agreement for twelve months and to increase the amount of series
A convertible preferred stock we can sell under the agreement by $8,000,000 upon
notice to GCA not less than 60 days prior to the expiration of the initial term.
Each share of our series A convertible preferred stock has a stated value of
$1,000 and is convertible into shares of our common stock at a conversion price
equal to 92% of the average of the lowest three daily weighted average sales
prices of our common stock during the 20 trading days prior to the date of
conversion. The number of shares of common stock that may be acquired upon
conversion is determined by dividing the stated value of the number of shares of
series A convertible preferred stock to be converted by the conversion price.
Since there is no minimum conversion price, there is no limitation on the number
of shares of common stock that holders of series A convertible preferred stock
may acquire upon conversion.
We may not sell shares of series A convertible preferred stock to GCA under the
purchase agreement until the registration statement of which this prospectus is
a part is declared effective by the SEC. We may not sell shares of series A
convertible preferred stock to GCA under the purchase agreement
o if the number of shares of common stock acquired and to be acquired
upon conversion of series A convertible preferred stock exceeds an
aggregate of 21,478,012 shares, representing 19.9% of the number of
shares of common stock outstanding on the date
3
<PAGE>
of the agreement, without stockholder approval. This limitation is
required under the corporate governance rules of The Nasdaq Stock
Market, Inc.
o to the extent the issuance of shares of series A convertible preferred
stock would render GCA the beneficial owner of more than 4.99% of the
then outstanding common stock.
The certificate of designations creating the series A convertible preferred
stock also limits the number of shares of common stock that may be acquired upon
conversion of the series A convertible preferred stock to the extent the
issuance of such shares of common stock would cause the holder requesting
conversion to become the beneficial owner of more than 9.99% of the then total
outstanding shares of common stock.
We also have agreed to issue to GCA warrants to purchase 200,00 shares of common
stock in connection with the purchase agreement. These warrants will be issued
to GCA at the first closing for the sale of shares of series A convertible
preferred stock under the purchase agreement. These warrants will have a term of
five years and an exercise price equal to 105% of the closing bid price of our
common stock on the date of issue.
If we do not sell shares of series A convertible preferred stock under the
purchase agreement within 33 days after the last sale under the purchase
agreement, we must pay GCA a fee equal to 2% of the maximum dollar amount of
shares we are allowed to sell under the purchase agreement, or $1,250,000. For
each additional 30 days we fail to sell shares of series A convertible preferred
stock under the purchase agreement, we must pay GCA an additional $30,000.
We have the right to terminate the purchase agreement at any time. If we
terminate the purchase agreement, we must issue to GCA warrants to purchase that
number of shares of common stock that could be acquired with 1-1/2% of the
unused portion of the commitment at a purchase price of $1.00 per share. These
warrants will have a term of five years and an exercise price equal to 105% of
the bid price on the date of termination.
We must redeem the outstanding shares of series A convertible preferred stock
for cash within 10 business days after the occurrence of one or more of the
following events:
o The second anniversary of the date upon which shares of series A
convertible preferred stock are first sold under the purchase
agreement.
o A "change in control" of our company.
o A consolidation, merger or amalgamation of our company.
o Our failure to have the registration statement for the resale of the
shares of common stock that may be acquired upon conversion of the
series A convertible preferred stock declared effective, or our
failure to maintain the effectiveness of that registration statement,
after specified periods of time, or our failure to register a
sufficient number of shares for conversion of the series A convertible
preferred stock.
o Our failure to obtain stockholder approval for the issuance upon
conversion of shares of series A convertible preferred stock and
exercise of warrants issued under the purchase agreement of more than
19.99% of the outstanding shares of common stock on the date of the
purchase agreement within 40 days after the date upon which we have
issued the maximum number of shares that may be issued without
obtaining such stockholder approval.
o Our failure to pay, when due, the principal amount or accrued interest
on our
4
<PAGE>
outstanding bridge notes held by GCA.
o The suspension or delisting of trading in our common stock, unless
within 10 trading days of such suspension or delisting the common
stock is listed and approved for trading on the New York Stock
Exchange, the American Stock Exchange, the Nasdaq SmallCap Market or
the OTC Bulletin Board.
The redemption price is an amount equal to the number of shares of common stock
that could be acquired upon conversion of the outstanding shares of series A
convertible preferred stock times the average closing bid price of our common
stock for the five trading days preceding the event causing the redemption.
We must pay GCA 25% of the gross proceeds from the sale of shares of series A
convertible preferred stock under the purchase agreement, which payments will be
applied to amounts outstanding under our 7% bridge note due November 28, 2000 in
the principal amount of $3,000,000 until the principal and accrued interest on
that bridge note have been paid in full.
In connection with this credit facility, GCA extended the maturity date of our
outstanding bridges note in the principal amounts of $2,500,000 and $1,850,000
from August 28, 2000 to November 28, 2000.
For financial advisory services performed in connection with the purchase
agreement, we will pay LKB Financial, LLC 5% of the aggregate proceeds from the
sale of shares of series A convertible preferred stock under the purchase
agreement. We also will issue to LKB warrants to purchase 75,000 shares of
common stock on each date upon which GCA purchases shares of series A
convertible preferred stock under the purchase agreement. The warrants issued to
LKB will have a term of five years and an exercise price equal to 105% of the
closing bid price of our common stock on the date of issue.
Risk Factors
WE HAVE A HISTORY OF OPERATING LOSSES AND THESE LOSSES MAY CONTINUE.
We have experienced significant losses since we began operations. We incurred
net losses of approximately $3.5 million for the three months ended March 31,
2000, compared to $3 million for the three months ended March 31, 1999,
approximately $14.9 million for the year ended December 31, 1999, approximately
$9.1 million for the year ended December 31, 1998 and approximately $18 million
for the year ended December 31, 1997. As a result of these losses, as of March
31, 2000, we had an accumulated deficit of approximately $107 million. We will
continue to incur losses until our asphalt and/or refining operations or
Kazakstan projects generate substantial revenues. We expect our expenses to
increase as we expand our business. We cannot assure you that our revenues will
increase as a result of our increased spending. If revenues grow more slowly
than we anticipate, or if operating expenses exceed our expectations, we may not
become profitable. Even if we become profitable, we may be unable to sustain our
profitability.
OUR AUDITORS HAVE ISSUED A GOING CONCERN COMMENT ON OUR FINANCIAL
STATEMENTS.
In connection with the audit of our financial statements for the year ended
December 31, 1999, Hein + Associates, LLP, our independent auditors, included an
explanatory paragraph in its report on our financial statements as to our
ability to continue as a "going concern" as a result of
o a net loss of approximately $14.9 million during 1999, of which
approximately $6.3 million represented non-operating or non-cash items
5
<PAGE>
o lack of resources to fulfill our operating and capital commitments as
of December 1, 1999
o a working capital deficit of approximately $6.3 million at December
31, 1999
o the suspension of our refinery operations until at least the second
quarter of 2000
WE HAVE $7.35 MILLION OF DEBT DUE NOVEMBER 28, 2000 AND OUR AVAILABLE CASH
RESOURCES, TOGETHER WITH ANTICIPATED CASH FLOWS FROM OPERATIONS, MAY NOT BE
SUFFICIENT TO CONTINUE OUR OPERATIONS AT CURRENT LEVELS AND SATISFY THESE AND
OTHER FUNDING OBLIGATIONS, WITHOUT ADDITIONAL FINANCING OR THE SALE OF CERTAIN
ASSETS.
We may require additional financing in the next 12 months to supplement
anticipated cash flows from our asphalt and refining operations in Lake Charles,
Louisiana in order to meet our debt payments, operating and other funding
obligations. We have $7.35 million of debt due November 28, 2000, which we may
not be able to repay without selling certain assets or obtaining additional
financing. Payment of this debt is secured by our St. Marks refinery. If we are
not able to pay or refinance this debt, the lender has the right to foreclose on
this collateral. In the event we are unable to obtain the necessary financing to
meet these obligations, our ability to continue operations at current levels
will be materially and adversely effected. We cannot give you any assurance that
we will be able to raise additional funds if our capital resources are
exhausted, or that funds will be available on terms acceptable to us or at all.
Although we have entered into securities purchase agreement for the sale of up
to $10,000,000 of our series A convertible preferred stock, we may not sell
shares of series A convertible preferred stock under that agreement until the
registration statement of which this prospectus is a part is declared effective
by the SEC. The maximum amount of series A convertible preferred stock that we
may sell under the agreement during any twenty business day period is limited to
$1,250,000. We are required to use 25% of the gross proceeds from the sale of
shares of series A convertible preferred stock to pay the principal amount and
accrued interest on our 7% secured bridge note in the principal amount of
$3,000,000 due November 28, 2000. Furthermore, if we fail to pay, when due, the
principal amount or accrued interest on our bridge notes, we must redeem the
then outstanding shares of series A convertible preferred stock for cash within
10 days. The redemption price is an amount equal to the number of shares of
common stock that could be acquired upon conversion of the then outstanding
shares of series A convertible preferred stock times the average closing bid
price of our common stock for the five trading days preceding the date of the
payment default.
WE DO NOT HAVE ANY PROVEN RESERVES OF GAS OR OIL.
Although we have identified structures within both our concessions in Kazakhstan
which could contain proven oil and gas reserves, we do not currently have oil or
gas reserves which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions. We have recently completed an extensive
review of the Eocene and Jurassic potential on one of the concessions, Block
953, including a reassessment of the technical data and an examination of the
commercial feasibility of the block. Although certain areas of this block may
have oil and gas potential, the significant expense and risk involved in
pursuing the plays on this block put any further exploration by us of Block 953
outside of our strategic niche. Consequently, although we intend to honor our
minimum work obligations established by the government, our immediate objective
is to reduce our financial exposure at Block 953 by deferring, reducing, or
eliminating our minimum obligations there. We are also considering a range of
other business options, including moving Block 953 to another venture with
strategic goals more in keeping with the technical and commercial risk profile
of the block. Our other concession in Kazakhstan, Block 1551, does have gas
reserves which, upon the execution of a gas sales agreement currently being
negotiated, would be classified as "proved", however, at this time there is no
assurance we will sign such an agreement.
WE MAY SUFFER CAPITAL LOSSES BECAUSE OF THE SPECULATIVE NATURE OF THE OIL
AND GAS BUSINESS.
We have experienced capital losses as a result of the speculative nature of the
oil and
6
<PAGE>
gas industry, and we may experience such capital losses in the future. Even if
reserves are found as a result of drilling, profitable production from reserves
cannot be assured. We may not recover any oil or gas from drilling and if we do
recover oil or gas, market conditions may be unfavorable and we may not be able
to recover the costs of the drilling or receive any profits. In addition, our
current financial condition and available cash resources may prevent our ability
to drill offset wells.
WE ARE SUBJECT TO LOSSES FROM DRILLING AND OTHER HAZARDS.
Unusual or unexpected formation pressures, down-hole fires or other hazardous
conditions may be encountered in drilling oil and gas wells and in the refining
of oil. If we encounter such hazards, completion of wells or production of
asphalt products may be substantially delayed and the costs significantly
increased, and in the case of asphalt products, may result in the cancellation
of customer contracts and adversely affect our ability to attract future
business. Even though a well is completed and is found to be productive, water
or other deleterious substances may be encountered, which may impair or prevent
production of oil or gas, and which may adversely affect our operations. Since
our refineries are located on inland waterways, floods and adverse weather
conditions can hinder or delay feedstock and transportation of products at our
refineries in Lake Charles, Louisiana and St. Marks, Florida. Labor disputes,
work stoppages, shortages of equipment and materials or the unavailability of
oil or asphalt barges and drilling rigs can also disrupt drilling and production
operations.
OUR BUSINESS IS SUBJECT TO ENVIRONMENTAL RISKS.
Extensive national and/or local environmental laws and regulations in both the
United States and Kazakstan affect nearly all of our operations. These laws and
regulations set various standards regulating certain aspects of health and
environmental quality, provide for penalties and other liabilities for the
violation of such standards and establish in certain circumstances obligations
to remediate current and former facilities and off-site locations. We may incur
substantial financial obligations in connection with environmental compliance.
We are occasionally subject to non-recurring environmental costs. The annual
cost incurred in connection with these assessments varies from year to year,
depending upon our activities in that year. The costs of such environmental
impact assessments were not material in 1999, but may be in the future. We are
not aware of any other anticipated nonrecurring environmental costs.
Kazakstan has comprehensive environmental laws and regulations and has adopted
the environmental standards set out by the World Bank organizations. Enforcement
is administered through the Kazakstan Ministry of Environment and related local
state agencies. Our operations require a comprehensive environmental permit for
all drilling and exploration activities.
We have no currently outstanding or anticipated reclamation issues in the United
States or abroad.
Our operations are subject to all of the environmental risks normally incident
to oil and gas exploration, drilling, and refining activities, which include,
but are not limited to, blowouts, pollution and fires. Any of these occurrences
could result in environmental damage or destruction, including the discharge of
hazardous materials into the environment. Although we maintain comprehensive and
general liability coverage as is customary in the oil and gas industry, and
coverage against certain risks, we are not fully covered for damages incurred as
a consequence of environmental mishaps. To the extent we are covered, the
coverage may not be adequate protection in the event of an environmental
problem.
WE MAY EXPERIENCE DIFFICULTIES IN MARKETING SOME OF OUR PRODUCTS.
Our ability to market some of our products depends upon
7
<PAGE>
o the proximity, capacity and cost of oil or gas pipelines and other
facilities for the transportation of oil or gas
o the quantity and quality of the oil or gas produced
o our ability to provide asphalt products which satisfy state and
federal highway quality specifications
o the availability and cost of asphalt barges to transport asphalt
products
GOVERNMENT LEGISLATION IN KAZAKSTAN AND OTHER FOREIGN COUNTRIES THROUGH
WHICH OUR PRODUCTS MAY BE TRANSPORTED MAY AFFECT OUR BUSINESS.
Our exploration in western Kazakhstan is subject to regulations imposed by the
Kazakhstan government. The Kazakhstan government may limit oil and gas
production and impose taxes on oil and gas when sold. We cannot predict whether
such governmental actions may occur, nor anticipate the ultimate effect of
governmental policies and contracts upon us. We also will be subject to the laws
of jurisdictions through which oil and gas pipelines traverse. We cannot predict
what policies these jurisdictions may follow, nor the impact of local
regulations on our business.
OUR BUSINESS IS SUBJECT TO POLITICAL AND ECONOMIC CONDITIONS IN KAZAKSTAN.
A favorable political climate in Kazakhstan and the openness of its markets to
United States trade is essential to our success in Kazakhstan. Kazakhstan is a
former constituent republic of the Soviet Union which declared its independence
from the Soviet Union in December 1991. At the time of its independence, it
became a member of the Commonwealth of Independent States, or CIS, the
association of former Soviet states which have entered into agreements of
cooperation and support for trade, border protection, immigration controls,
environmental matters and overall cooperation for the economic and political
stability and development of the member states. The Confederation of Independent
States have embraced political and economic reforms, but, there remains
political and economic instability the result of which could be detrimental to
our operations there.
Because the CIS countries are in the early stages of development of a market
economy, the commercial framework in still developing along with commercial
laws, their applications and the enforcement of these laws. Although
Kazakhstan's laws regarding foreign investment provide for protection against
nationalization and confiscation, there is little or no judicial precedent in
this area. Foreign firms operating in this region may be subject to numerous
other risks that are not present in domestic operations, including political
strife, the possibility of expropriation, inadequate distribution facilities,
inflation, fluctuations of foreign currencies, high and unpredictable levels of
taxation, requirements for governmental approvals for new ventures, local
participation in operations, and restrictions on royalties, dividends and
currency remittances. Currently, there are no restrictions on royalties,
dividends or currency remittances.
OUR BUSINESS IS SUBJECT TO FOREIGN CURRENCY RISKS.
Since we have oil and gas operations outside the United States, our business is
subject to foreign currency risks. These risks include
o The value of the local currency in Kazakhstan relative to the U.S.
dollar may continue to decline and is subject to continued volatility.
o We may encounter difficulties in converting local currencies to U.S.
dollars. Although Kazakhstan laws permit the conversion of local
currency into foreign currency, the local currency generally is not
convertible outside CIS countries. If we discover oil or gas in our
licensed area in Kazakhstan and sell the oil and gas
8
<PAGE>
in a CIS country, currency liquidity and restrictions may adversely
affect us.
o The market for conversion of local currency into other currencies may
deteriorate or cease to exist. Although a market exists within CIS
countries for the conversion of CIS currencies into other currencies,
it is limited in size and subject to rules limiting the purposes for
which conversion may be effected. In addition, the availability of
other currencies may inflate their values relative to CIS currencies.
WE MAY ENCOUNTER DELAYS IN TRANSFER OF FUNDS IN AND OUT OF KAZAKSTAN SINCE
ITS BANKING SYSTEM IS NOT WELL DEVELOPED.
Since the banking system in Kazakhstan is not yet as developed as its Western
counterparts, we may encounter considerable delays in the transfer of funds
within, and the remittance of funds out of Kazakhstan. Any delay in converting
Kazakhstan currency into a foreign currency in order to make a payment, or delay
in the transfer of such currency could have a material adverse effect on our
business.
WE MAY EXPERIENCE DIFFICULTIES IN REPATRIATING PROFITS AND CAPITAL
While applicable legislation in the CIS currently permits the repatriation of
profits and capital and the making of other payments in hard currency, our
ability to repatriate such profits and capital and to make such other payments
is dependent upon the continuation of the existing legal regimes for currency
control and foreign investment, administrative policies and practices in the
enforcement of such legal regimes and the availability of foreign exchange in
sufficient quantities in those countries.
OUR ASPHALT OPERATIONS HAVE BEEN LIMITED.
Since the first quarter of 1998, we have been engaged in the production and sale
of asphalt products at our refinery in Lake Charles, Louisiana. Our refinery
operation is subject to all of the risks and hazards associated with the
establishment of a new business. To date, we have encountered mechanical
problems with equipment, delays caused by unavailability of asphalt barges,
shortages of economically-priced feedstocks, and unanticipated expenses for
refinery repairs and transportation fees. Since we were blending asphalt and not
processing crude oil, our crude unit was idle for most of 1999. Consequently, we
have had minimal revenues from light-end products. In addition, because of the
resultant lower throughput volumes, increased costs for feedstock, and the fact
that expected increases in product prices resulting from high crude oil prices
did not occur, cash flows derived from our asphalt sales were lower during 1999
compared to 1998. Because of the dramatic reduction in crude oil feedstock
supplies, unless we agree to operate our refining unit for other companies,
which we are currently considering, we do not expect to operate the unit during
2000.
OUR SUCCESS IS DEPENDENT ON OUR KEY PERSONNEL WHO WE MAY NOT BE ABLE TO
RETAIN AND WE MAY NOT BE ABLE TO HIRE ADDITIONAL QUALIFIED PERSONNEL TO SATISFY
OUR PERSONNEL NEEDS.
Our success is dependent upon the efforts, abilities and expertise of our
Chairman of the Board, Dr. George N. Faris, as well as other key management
personnel. Our future success also is dependent, in part, on our ability to
attract and retain qualified personnel. We cannot give you any assurance that we
will be able to attract and retain qualified individuals. As compared to other
publicly traded oil and gas companies, we have fewer resources to attract and/or
retain key personnel, and we do not have the depth of managerial employees to
rely upon in the event of the loss of any single employee. Accordingly, the loss
of any key employee could have a material adverse affect on the operations of
our business.
OUR COMMON STOCK MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET FOR
FAILURE TO SATISFY NASDAQ REQUIREMENTS FOR CONTINUED LISTING
9
<PAGE>
Our common stock is traded on the NASDAQ National Market System. To continue our
listing, we are required to maintain net tangible assets of at least $4,000,000
and the bid price of our common stock must be at least $1.00 per share. By
letter dated June 5, 2000, NASDAQ notified us that our common stock failed to
satisfy its minimum bid price standard for continued listing and we would be
delisted if the price of our common stock was not at least $1.00 per share for
ten (10) consecutive days by August 14, 2000. As of July 24, 2000, we still did
not meet the requirement. If we are delisted and we do not then qualify for a
listing on a stock exchange, our common stock would be traded in the over-the
counter market and quoted on the NASDAQ Electronic Bulletin board or the "pink
sheets". Consequently, it may be more difficult for an investor to obtain price
quotations for our common stock or to sell it.
IF OUR COMMON STOCK IS DELISTED, IT MAY BECOME SUBJECT TO THE SEC'S "PENNY
STOCK" RULES AND MORE DIFFICULT TO SELL.
SEC rules require brokers to provide information to purchasers of securities
traded at less than $5.00 and not traded on a national securities exchange or
quoted on the NASDAQ Stock Market. If our common stock becomes a "penny stock"
that is not exempt from the SEC rules, these disclosure requirements may have
the effect of reducing trading activity in our common stock and make it more
difficult for investors to sell. The rules require a broker-dealer to deliver a
standardized risk disclosure document prepared by the SEC that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker must also give bid and offer quotations and broker and
salesperson compensation information to the customer orally or in writing before
or with his confirmation. The SEC rules also require a broker to make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction
before a transaction in a penny stock.
CONVERSION OF OUR CONVERTIBLE DEBENTURE AND SUBSEQUENT PUBLIC SALE OF OUR
COMMON STOCK WHILE ITS MARKET PRICE IS DECLINING MAY RESULT IN FURTHER DECREASES
IN THE PRICE.
As of July 25, 2000, $6,696,135 principal amount of our 5% convertible
debenture due February 18, 2004 was outstanding. The debenture is convertible
into shares of our common stock at a conversion price equal to 85% of the
average of the lowest 3 daily weighted average sale prices of a share of our
common stock for 20 trading days prior to the date of conversion, subject to a
maximum conversion price of $1.214 per share. Since there is no minimum
conversion price, there is no limit on the number of shares of common stock that
the holder of the debenture may acquire upon conversion.
The holder of our debenture may sell at market price the shares of common
stock it has acquired upon conversion at a 15% discount to prevailing market
prices concurrently with, or shortly after, conversion, realizing a profit equal
to the difference between the market price and the discounted conversion price.
The holder of the debenture also could engage in short sales of our common
stock, which could contribute to a decline in the market price of the common
stock and give it the opportunity to profit from that decrease by covering a
short position with shares acquired upon conversion at a 15% discount to the
prevailing market price. The conversion of the debenture and subsequent sale of
a large number of shares of common stock acquired upon conversion during periods
when the market price of the common stock declines, or the possibility of such
conversions and sales, may exacerbate the decline or impede increases in the
market price of the common stock.
CONVERSION OF OUR SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK AND
SUBSEQUENT PUBLIC SALE OF OUR COMMON STOCK WHILE ITS MARKET PRICE IS DECLINING
MAY RESULT IN FURTHER DECREASES IN THE PRICE.
10
<PAGE>
We have entered into a securities purchase by agreement for the sale of
$10,000,000 of our series A convertible preferred stock with GCA Strategic
Investment Fund Limited. We have the right to increase the amount of series A
convertible preferred stock we may sell under the purchase agreement up to
$8,000,000. We may not sell shares of series A convertible preferred stock under
the agreement until the registration statement of which this prospectus is a
part is declared effective by the SEC.
Each share of our series A convertible preferred stock has a stated value
of $1,000 and is convertible into shares of our common stock at a conversion
price equal to 92% of the average of the lowest three daily weighted average
sales prices of our common stock during the 20 trading days prior to the date of
conversion. The number of shares of common stock that may be acquired upon
conversion is determined by dividing the stated value of the number of shares of
series A convertible preferred stock to be converted by the conversion price.
Since there is no minimum conversion price, there is no limit on the number of
shares of common stock that holders of the series A convertible preferred stock
may acquire upon conversion.
Holders of our series A convertible preferred stock may sell at market
price the shares of common stock they have acquired upon conversion at an 8%
discount to prevailing market prices concurrently with, or shortly after,
conversion, realizing a profit equal to the difference between the market price
and the discounted conversion price. The holders of the series A convertible
preferred stock could engage in short sales of our common stock, which could
contribute to a decline in the market price of the common stock and give them
the opportunity to profit from that decrease by covering their short position
with shares acquired upon conversion at an 8% discount to the prevailing market
price. The conversion of the series A convertible preferred stock and subsequent
sale of a large number of shares of common stock acquired upon conversion during
periods when the market price of the common stock declines, or the possibility
of such conversions and sales, may exacerbate the decline or impede increases in
the market price of the common stock.
CONVERSION OF OUR OUTSTANDING DEBENTURE AND SERIES A CONVERTIBLE PREFERRED
STOCK, AND THE EXERCISE OF OUR OUTSTANDING WARRANTS AND STOCK OPTIONS AND
SUBSEQUENT PUBLIC SALE OF OUR COMMON STOCK, WILL RESULT IN SUBSTANTIAL DILUTION
TO EXISTING STOCKHOLDERS.
As of July 24, 2000, we had outstanding 107,929,711 shares of common stock.
In addition,
o An indeterminate number of shares may be acquired upon conversion of
the outstanding $6,696,135 principal amount of our 5% convertible
debenture due February 18, 2004 since there is no minimum conversion
price. At an assumed conversion price of $0.45 per share, the holder
of the debenture could acquire 15,996,323 shares of common stock upon
conversion of, and payment of 18 months accrued interest on, the
debenture, representing approximately 15% of the shares outstanding as
of July 24, 2000.
o An indeterminate number of shares may be acquired upon conversion of
our series A convertible preferred stock when purchased by GCA
Investment Strategic Fund under our $10,000,000 credit facility since
there is no minimum conversion price. Assuming we sell $10,000,000 of
series A convertible preferred stock to GCA and GCA converts all of
the series A convertible preferred shares it purchases at an assumed
conversion price of $0.50 per share, we will issue 20,000,000 shares
of common stock, representing approximately 19% of the shares
outstanding on July 24, 2000. We will also issue warrants to purchase
200,000 shares of common stock to GCA at the time of the first sale of
shares of series A convertible preferred stock under the purchase
agreement and warrants to purchase 75,000 shares of common stock to
LKB Financial on each date shares of series A convertible preferred
stock are sold to GCA under the purchase agreement.
o 9,738,565 shares may be acquired upon exercise of outstanding
warrants,
11
<PAGE>
representing approximately 9% of the shares outstanding as of July 24,
2000.
o 4,080,058 shares may be acquired upon exercise of outstanding options,
representing approximately 4% of the shares outstanding as of July 24,
2000.
Existing stockholders will experience substantial dilution in their percentage
ownership of our common stock if the debenture and shares of Series A
convertible preferred stock purchased by GCA are converted. If the entire
outstanding $6,696,135 principal amount of our debenture is converted at an
assumed conversion price of $0.45 per share, $10,000,000 of series A convertible
preferred stock is purchased by GCA and converted at an assumed conversion price
of $0.50 per share, and all outstanding warrants and stock options are
exercised, the number of outstanding shares of common stock will increase by
49,784,946, representing approximately 46% of the outstanding common stock as of
July 24, 2000.
POSSIBLE ADVERSE EFFECT OF FUTURE SALES OF COMMON STOCK ON THE MARKET PRICE
OF THE COMMON STOCK.
As of July 24 ,2000, we had outstanding 107,929,711 shares of common stock, of
which 104,239,607 shares are transferable without restriction under the
Securities Act. The remaining 3,437,213 shares are restricted securities which
may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as Rule 144. In
addition,
12
<PAGE>
o An indeterminate number of shares may be acquired upon conversion of
the outstanding $6,696,135 principal amount of our 5% convertible
debenture due February 18, 2004 since there is no minimum conversion
price. At an assumed conversion price of $0.45 per share, the holder
of the debenture could acquire 15,966,323 shares of common stock upon
conversion of, and in payment of 18 months accrued interest on, the
debenture. The actual conversion price is 85% of the average of the
lowest 3 daily weighted average sale prices for the 20 trading days
prior to the date of conversion. The maximum conversion price is
$1.214 per share. Since there is no minimum conversion price, if the
market price of the common stock declines below the assumed conversion
price, the number of shares that may be acquired upon conversion will
increase.
o An indeterminate number of shares may be acquired upon conversion of
shares of our series A convertible preferred stock when purchased by
GCA Strategic Investment Fund under our $10,000,000 credit facility
since there is no minimum conversion price. Assuming we sell
$10,000,000 of series A convertible preferred stock to GCA and GCA
converts all of the series A convertible preferred shares it purchases
at an assumed conversion price of $0.50 per share, we will issue
20,000,000 shares of common stock. The number of shares that GCA may
acquire upon conversion of the series A convertible preferred stock
will increase if the market price of the common stock declines below
the assumed conversion price. We will also issue warrants to purchase
200,000 shares of common stock to GCA at the time of the first sale of
shares of series A convertible preferred stock under the purchase
agreement and warrants to purchase 75,000 shares of common stock to
LKB Financial on each date shares of series A convertible preferred
stock are sold to GCA under the purchase agreement. The exercise price
of the warrants issued to GCA and LKB will be 105% of the closing bid
price of our common stock on the date of issue.
o 9,738,565 shares may be acquired upon exercise of warrants having
exercise prices ranging from $.41 to $3.00 per share.
o 4,080,058 shares may be acquired upon exercise of stock options
granted pursuant to our employee stock option plans at exercise prices
ranging from $.50 to $2.00 per share.
Substantially all of such shares, when issued, may be immediately resold in the
public market pursuant to effective registration statements under the Securities
Act. We cannot give you any assurance as to the effect, if any, that future
sales of common stock, or the availability of shares of common stock for future
sales, will have on the market price of the common stock from time to time.
Sales of substantial amounts of common stock, or the possibility of such sales,
could adversely affect the market price of the common stock and also impair our
ability to raise capital through an offering of equity securities in the future.
OTHER ISSUANCES OF PREFERRED STOCK COULD ADVERSELY AFFECT EXISTING HOLDERS
OF OUR COMMON STOCK.
Under our articles of incorporation, our Board of Directors may, without further
stockholder approval, issue up to 7,000,000 shares of preferred stock with
dividend, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of the holders of common stock. Our
board of directors has authorized the issuance of up to 18,000 shares of Series
A convertible preferred stock in connection with our purchase agreement with GCA
Strategic Investment Fund. We could use new classes of preferred stock as a
method of discouraging, delaying or preventing a change in persons that control
us. In particular, the terms of the preferred stock could effectively restrict
our ability to consummate a merger, reorganization, sale of all or substantially
all of our assets, liquidation or other extraordinary corporate transaction
13
<PAGE>
without the approval of the holders of the common stock. We could also create a
class of preferred stock with rights and preferences similar to those of our
series A convertible preferred stock, which could result in substantial dilution
to holders of our common stock or adversely affect its market price.
Forward Looking Statements
Some of the information in this prospectus and the documents we incorporate by
reference may contain forward-looking statements. Such statements can be
identified by the use of forward-looking terminology such as may, "will,"
"expect," "believe," "intend," "anticipate," "estimate," "continue" or similar
words. These statements discuss future expectations, estimate the happening of
future events or our financial condition or state other "forward-looking"
information. When considering such forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in this prospectus and
the documents that we incorporate by reference. The risk factors noted in this
section and other factors noted throughout this prospectus, including certain
risks and uncertainties, could cause our actual results to differ materially
from those contained in any forward-looking statement.
Selling Securityholders
The following table sets forth the names of the selling securityholders, the
number of shares of common stock beneficially owned by each selling
securityholder as of July 24, 2000, the number of shares that each selling
securityholder may offer, and the number of shares of common stock beneficially
owned by each selling securityholder upon completion of the offering, assuming
all of the shares are sold. None of the selling securityholders has, or within
the past three years has had, any position, office or other material
relationship with American International Petroleum Corporation or any of its
predecessors or affiliates.
The selling securityholders are offering up to 30,800,000 shares of common stock
by this prospectus, including
o 30,000,000 shares that GCA Strategic Investment Fund may acquire upon
conversion of shares of our series A preferred stock purchased under
the securities purchase agreement.
o 800,000 shares that they may acquire upon exercise of warrants issued
in connection with our securities purchase agreement with GCA
Strategic Investment Fund Limited.
The series A convertible preferred stock and warrants will be issued under the
securities purchase agreement in a transaction exempt from the registration
requirements of the Securities Act under Section 4(2) of the Securities Act and
Rule 506 of Regulation D. The number of shares listed below as beneficially
owned before the offering by GCA has been computed without giving effect to the
terms of the purchase agreement, which provides that the number of shares of
series A convertible preferred stock that the holder may acquire under the
purchase agreement may not exceed that number which would cause it to become the
beneficial owner of more than 4.99% of the then issued and outstanding shares of
common stock, or result in the issuance of more than an aggregate of 21,478,012
shares upon conversion of the series A convertible preferred stock, representing
19.9% of the shares outstanding on the date of the purchase agreement, until
stockholders approve the issuance of shares in excess of that number. The
certificate of designations creating the series A convertible preferred stock
also limits the number of shares of common stock that the holder may acquire
upon conversion of the series A convertible preferred stock to the extent the
issuance of such shares of common stock would cause the holder to become the
beneficial owner of more than 9.99% of the then total outstanding shares of
common stock..
As of July 24, 2000, we had 107,929,711 shares of common stock outstanding. For
purposes of computing the number and percentage of shares beneficially owned by
each selling securityholder as of July 24, 2000, any shares which such person
has the right to acquire within 60 days after such date are deemed to be
outstanding, but are not deemed to be outstanding for the purpose of computing
the percentage ownership of any other selling securityholder.
14
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Of Common Stock Before Shares of Common of Common Stock
Offering Stock Offered After Offering
Number Percent Number Percent
---------------------- ------- ---------------- ------ -------
<S> <C> <C> <C> <C> <C>
GCA Strategic Investment
Fund Limited (1) 32,142,631 23.0% 30,200,000(2) 1,942,631 1.8%
c/o Prime Management Ltd.
12 Church Street
Hamilton, Bermuda HM11
LKB Financial LLC (3) 1,405,050 1.3% 600,000(4) 805,050 *
106 Colony Park Drive
Suite 900
Cumming, Ga. 30040
</TABLE>
----------
* Less than one percent (1%).
(1) GCA is the ultimate beneficial owner of the shares owned by GCA and,
through its board of directors, has the sole voting power to vote the
shares. Prime Management Limited, a Bermuda corporation located in Bermuda
has sole voting power with respect to the shares owned by GCA. Joe Kelly, a
Bermuda resident, has the sole voting power over Prime Management. Global
Capital Advisors Ltd., GCA's investment advisor located in Georgia,
together with GCA's board of directors, has the sole investment decision
authority over the shares owned by GCA. GCA is an affiliate of LKB
Financial.
(2) Represents the number of shares that GCA may acquire upon exercise of
warrants to purchase common stock and conversion of shares of $15,000,000
of series A convertible preferred stock that it may purchase under the
purchase agreement, at an assumed conversion price of $0.50 per share. The
actual conversion price is 92% of the average of the lowest three daily
weighted average sales prices of a share of common stock for the 20 trading
days prior to the date of conversion. The number of shares of common stock
that GCA may acquire upon conversion is equal to the number of shares of
series A convertible preferred stock to be converted times $1,000, the
stated value of each share of series A convertible preferred stock, divided
by the conversion price. Since there is no minimum conversion price, if the
market price of the common stock declines below the assumed conversion
price, the number of shares that GCA may acquire upon conversion will
increase. If following a sustained increase in the market price of the
common stock sufficient to offset the 8% discount used in computing the
conversion price the conversion price is higher than the assumed conversion
price, the number of shares that GCA may acquire will decrease.
(3) Lewis Lester and Michael Brown have shared voting and depository powers
with respect to the shares owned by LKB Financial. LKB Financial is an
affiliate of GCA.
(4) Represents shares that may be acquired upon exercise of warrants received
in connection with the securities purchase agreement. LKB will receive
warrants to purchase 75,000 shares of common stock on each date that GCA
purchases shares of series A convertible preferred stock under the
securities purchase agreement.
The shares of common stock offered by this prospectus have been registered in
accordance with registration rights that we have granted to the selling
securityholders. We have agreed to pay all registration and filing fees,
printing expenses, blue sky fees, if any, and fees and disbursements of our
counsel. These selling securityholders have agreed to pay any underwriting
discounts and selling commissions. In addition, we have agreed to indemnify
these selling securityholders and underwriters who may be selected by them and
certain affiliated parties, against certain liabilities, including liabilities
under the Securities Act, in connection with the offering. Although those
selling securityholders also have agreed to indemnify our officers and directors
and persons controlling us against such liabilities, we have been informed that
in the opinion of the SEC indemnification of those persons of liabilities under
Securities Act is against public policy as expressed in the Securities Act and
is therefore not enforceable.
15
<PAGE>
Plan of Distribution
The selling securityholders may sell shares from time to time in public
transactions, on or off the NASDAQ National Market, or private transactions, at
prevailing market prices or at privately negotiated prices. They may sell their
shares in the following types of transactions:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account under this prospectus
o face-to-face transactions between sellers and purchasers without a
broker-dealer
The selling securityholders also may sell shares that qualify under Section 4(1)
of the Securities Act or Rule 144. As used in this prospectus, selling
securityholder includes donees, pledges, distributees, transferees and other
successors in interest of the selling securityholders named in this prospectus.
In effecting sales, brokers or dealers engaged by the selling securityholders
may arrange for other brokers or dealers to participate in the resales. The
selling securityholders may enter into hedging transactions with broker-dealers,
and in connection with those transactions, broker-dealers may engage in short
sales of the shares. The selling securityholders also may sell shares short and
deliver the shares to close out such short positions. The selling
securityholders also may enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares,
which the broker-dealer may resell under this prospectus. The selling
securityholders also may pledge the shares to a broker or dealer and upon a
default, the broker or dealer may effect sales of the pledged shares under this
prospectus.
Brokers, dealers or agents may receive compensation in the form of commissions,
discounts or concessions from selling securityholders in amounts to be
negotiated in connection with the sale. Any broker-dealer that acts as an agent
for the purchaser may receive compensation from the purchaser.
Broker-dealers may agree with a selling securityholder to sell a specified
number of shares of common stock at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for such selling
securityholder, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer commitment to the selling securityholder.
Broker-dealers who acquire shares of common stock as principal may then resell
such shares from time to time in transactions in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of sale, at prices
then related to the then current market price or in negotiated transactions and,
in connection with such resales, may pay or receive from the purchasers of such
shares commissions as described above.
GCA Strategic Investment Fund Limited is an "underwriter" within the meaning of
the Securities Act of shares of common stock it offers and sells under this
prospectus, and any commissions, discounts or concessions it receives in
connection with the sale of shares under this prospectus will be underwriting
compensation. LKB Financial LLC and any brokers or dealers participating in the
distribution of shares under this prospectus may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales and any
commissions, discounts or concessions they receive may be deemed to be
underwriting compensation.
16
<PAGE>
Information as to whether underwriters who may be selected by the selling
securityholders, or any other broker-dealer, is acting as principal or agent for
the selling securityholders, the compensation to be received by them, and the
compensation to be received by other broker-dealers, in the event such
compensation is in excess of usual and customary commissions, will, to the
extent required, be set forth in a supplement to this prospectus. Any dealer or
broker participating in any distribution of the shares may be required to
deliver a copy of this prospectus, including a prospectus supplement, if any, to
any person who purchases any of the shares from or through such dealer or
broker.
We have advised the selling securityholders that during such time as they may be
engaged in a distribution of the shares they are required to comply with
Regulation M under the Securities Exchange Act. With certain exceptions,
Regulation M precludes any selling securityholders, any affiliated purchasers
and any broker-dealer or other person who participates in such distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase any security which is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or Purchases made
in order to stabilize the price of a security in connection with the
distribution of that security.
Where You Can Find More Information
We file reports, proxy statements and other information with the SEC. You may
read and copy any document we file at the Public Reference Room of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the SEC at Seven World Trade Center, Suite 1300, New York,
New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Please call 1-800-SEC-0330 for further information concerning the
Public Reference Room. Our filings also are available to the public from the
SEC's website at www.sec.gov. We distribute to our stockholders annual reports
containing audited financial statements.
Information Incorporated By Reference
The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is considered to be
part of this prospectus, and information we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act until the
offering is completed:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1999, including any amendment to that report.
2. Proxy Statement dated June 15, 1999.
3. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000,
including any amendment to that report.
4. The description of the common stock contained in our Registration
Statement on Form 8-A (File No. 0-14905) under Section 12 of the
Securities Exchange Act, including any amendment or report updating
that description.
You may request a copy of these filings, at no cost, by writing or calling us
at:
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
2950 North Loop West, Suite 1000
Houston, Texas 77092
Attention: Corporate Secretary
Telephone: (713) 802-0087
17
<PAGE>
Legal Matters
The validity of the shares of common stock offered by the prospectus has been
passed upon by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York
10158. Members of Snow Becker Krauss P.C. own 144,518 shares of common stock,
all of which were issued for legal fees and disbursements.
Experts
The financial statements incorporated in this prospectus by reference to our
Annual Report on Form 10-K for the year ended December 31, 1999 have been so
incorporated in reliance upon the report (which contains an explanatory
paragraph relating to our ability to continue as a going concern as described in
Note 2 to the financial statements) of Hein + Associates LLP, independent
certified public accountants, given upon the authority of said firm as experts
in accounting and auditing for the years ended December 31, 1997, 1998 and 1999.
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses which will be paid by
the Registrant in connection with the issuance and distribution of the shares of
Common Stock being registered hereby:
Securities and Exchange Commission registration fee ........... $ 3,577.73
Legal fees and expenses ....................................... 15,000.00
Listing fees .................................................. 17,500.00
Accounting fees ............................................... 1,000.00
Miscellaneous ................................................. 922.27
----------
Total ....................................... $38,000.00
==========
Item 15. Indemnification of Directors and Officers
Under Section 78.751 of the Nevada Corporation Law ("NCL"), directors and
officers may be indemnified against judgments, fines and amounts paid in
settlement and reasonable expenses (including attorneys' fees), actually and
reasonably incurred as a result of specified actions or proceedings (including
appeals), whether civil or criminal (other than an action by or in the right of
the corporation - a "derivative action") if they acted in good faith and for a
purpose which they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to amounts paid in settlement and reasonable
expenses (including attorneys' fees) actually and reasonably incurred by them in
connection with the defense or settlement of such an action (including appeals),
except in respect of a claim, issue or matter as to which such person shall have
been finally adjudged to be liable to the corporation, unless and only to the
extent a court of competent jurisdiction deems proper.
In accordance with Section 78.037(1) of the NCL, Article VIII of the
Registrant's Certificate of Incorporation, as amended, eliminates the personal
liability of the Registrant's directors to the Registrant or its shareholders
for monetary damages for breach of their fiduciary duties as directors, with
certain limited exceptions set forth in said Article VIII and Section 78.037(1).
Article VII of the Registrant's Bylaws provides for indemnification of
directors, officers and others as follows:
"On the terms, to the extent, and subject to the condition prescribed by statute
and by such rules and regulations, not inconsistent with statute, as the Board
of Directors may in its discretion impose in general or particular cases or
classes of cases, (a) the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding, civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
joint venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees of any such action or proceeding, or any appeal
therein, and (b) the Corporation may pay, in advance of final disposition of any
such action or proceeding, expenses incurred by such person in defending such
action or proceeding. On the terms, to the extent, and subject to the conditions
prescribed by statute and by such rules and regulations, not inconsistent with
statute, as the Board of Directors may in its
II-1
<PAGE>
discretion impose in general or particular cases or classes of cases, (a) the
Corporation shall indemnify any person made a party to an action by or in the
right of the Corporation to procure a judgment in its favor, by reason of the
fact that he, his testator or intestate, is or was a director or officer of the
Corporation, against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him in connection with the defense of such
action, or in connection with an appeal therein, and (b) the Corporation may
pay, in advance of final disposition of any such action, expenses incurred by
such person in defending such action or proceeding."
The Registrant maintains insurance, at its expense, to reimburse itself and
directors and officers of the Registrant and of its direct and indirect
subsidiaries against any expense, liability or loss arising out of
indemnification claims against directors and officers and to the extent
otherwise permitted under the NCL.
The Registration Rights Agreement among the Registrant and the selling
securityholders provides for indemnification by the Registrant of the Selling
Securityholders, any underwriters who participate in the distribution of the
shares of common stock offered hereby on behalf of the selling securityholders,
the directors, officers and any persons who control the selling securityholders
against certain liabilities under the Securities Act. In addition, the
Registration Rights Agreement provides that, at the request of the Registrant,
the selling securityholders will indemnify the Registrant and its directors,
officers and any persons who control the Registrant against certain liabilities
under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 16. Exhibits
-------- --------
4.1 Form of Securities Purchase Agreement dated as of July 18, 2000.
4.2 Form of Certificate of Designations
4.3 Form of Registration Rights Agreement
4.4 Form of Common Stock Purchase Warrant
5.1 Opinion of Snow Becker Krauss P.C.
23.1 Consent of Snow Becker Krauss P.C. (contained in Exhibit 5.1).
23.2 Consent of Hein + Associated LLP.
24.1 Power of Attorney (included on the signature page of this Registration
Statement)
II-2
<PAGE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that it will:
(a) (l) File, during any period in which it offers or sells the
securities offered hereby, a post-effective amendment to this
registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represents a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii)Include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) For determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
controlling persons of the Registrant pursuant to any arrangement,
provision or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate
II-3
<PAGE>
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on August 3, 2000.
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
By: /s/ George N. Faris By: /s/ Denis J. Fitzpatrick
------------------- --------------------------
George N. Faris Denis J. Fitzpatrick
Chairman of the Board Vice President, Chief Financial Officer
(principal executive and Secretary (principal financial
officer) and accounting officer)
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints George
N. Faris and/or Denis J. Fitzpatrick, his true and lawful attorney-in-fact and
agent, with power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying all
that said attorney-in-fact and agent or his substitute or substitutes, or any of
them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on August 3, 2000.
Signature Title
--------- -----
/s/ George N. Faris
------------------------
George N. Faris Chairman of the Board (principal
executive officer)
/s/ Denis J. Fitzpatrick
------------------------
Denis J. Fitzpatrick Vice President, Chief Financial
Officer and Secretary(principal
financial and accounting officer)
/s/ William R. Smart
------------------------
William R. Smart Director
/s/ Donald G. Rynne
------------------------
Donald G. Rynne Director
------------------------
Daniel Y. Kim Director
/s/ John H. Kelly
------------------------
John H. Kelly Director
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 Form of Securities Purchase Agreement dated as of July 18, 2000.
4.2 Form of Certificate of Designations
4.3 Form of Registration Rights Agreement
4.4 Form of Common Stock Purchase Warrant
5.1 Opinion of Snow Becker Krauss P.C.
23.1 Consent of Snow Becker Krauss P.C. (contained in Exhibit 5.1).
23.2 Consent of Hein + Associates LLP.
24.1 Power of Attorney (included on the signature
page of this Registration Statement)
