1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20449
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File number No. 0-14905
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
incorporated or organization) Identification No.)
444 MADISON AVENUE, SUITE 3203, NEW YORK, NEW YORK 10022
(Address of principal executive offices)
(Zip Code)
(212) 688-3333
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No________
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the registrants classes of common
stock, $.08 par value, as of May 13, 1996, the latest practicable date is
26,767,464 shares.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN INTERNATIONAL PETROLEUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 430,725 $ 162,218
Cash - restricted -- 226,223
Accounts receivable 826,597 1,073,553
Inventory 489,503 504,953
Prepaid expenses 691,352 547,509
------------ ------------
Total current assets 2,438,177 2,514,456
------------ ------------
Property, plant and equipment:
Unevaluated property not subject
to amortization 5,244,664 4,998,824
Oil and gas properties pursuant
to the full cost method 32,069,711 31,566,297
Refinery property and equipment 15,521,995 15,521,995
Other 506,329 506,445
------------ ------------
53,342,699 52,593,561
Less: Accumulated depreciation,
depletion and amortization (22,826,973) (22,502,472)
------------ ------------
Total property, plant and equipment 30,515,726 30,091,089
------------ ------------
Other long-term assets, net 280,930 34,817
------------ ------------
Total Assets $ 33,234,833 $ 32,640,362
============ ============
See notes to consolidated financial statements
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
------------ ------------
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 43,248 $ 66,759
Current installments of long-term debt 1,232,500 1,870,000
Accounts payable 2,005,196 2,363,562
Accrued expenses and other liabilities 1,166,721 1,616,678
------------ ------------
Total current liabilities 4,447,665 5,916,999
Long term debt 6,829,564 5,432,671
------------ ------------
Total Liabilities 11,277,229 11,349,670
Stockholders' equity:
Preferred stock, par value $3.00,
authorized 7,000,000 shares, none issued -- --
Common stock, par value $.08, 50,000,000 shares authorized,
26,767,464 shares issued and outstanding at March 31, 1995 and
24,705,926 shares issued and outstanding at
December 31, 1995 2,139,141 1,976,474
Additional paid-in capital 75,584,694 74,768,272
Stock purchase warrants 1,297,754 1,297,754
Accumulated Deficit (57,063,985) (56,751,808)
------------ ------------
Total Stockholders' Equity 21,957,604 21,290,692
------------ ------------
Commitments and Contingencies (Note 3) -- --
------------ ------------
Total Liabilities and
Stockholders' Equity $ 33,234,833 $ 32,640,362
============ ============
See notes to consolidated financial statements
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
1996 1995
------------ ------------
Revenues:
Oil and gas sales $ 304,192 $ 305,285
Refinery lease fees 568,596 19,064
Interest Income 2,674 12,941
Other 48,144 10,411
------------ ------------
Total revenues 923,606 347,701
------------ ------------
Expenses:
Operating 112,098 90,789
GeneraGeneralmandsAdministrative 598,505 900,472
Depreciation, depletion and amortization 324,545 353,690
Interest 200,635 276,686
------------ ------------
Total expenses 1,235,783 1,621,637
------------ ------------
Net Loss $ (312,177) $ (1,273,936)
============ ============
Loss per share of common stock $ (0.01) $ (0.06)
============ ============
Weighted average number of shares
outstanding 25,961,481 20,896,521
============ ============
See notes to consolidated financial statements
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
1996 1995
----------- -----------
Cash flows from operating activities:
Net loss $ (312,177) $(1,273,936)
----------- -----------
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and depletion 324,545 353,690
Amortization of bond/loan costs 17,606 34,404
Changes in current assets & liabilities:
(Increase) decrease in accounts receivable 246,956 184,849
Decrease in inventory 15,450 142,911
(Increase) decrease in prepaid expenses 6,157 (211,073)
Increase (decrease) in accounts payable
and accrued expense (708,323) 61,583
----------- -----------
Total adjustments (97,609) 566,364
----------- -----------
Net cash used by operating activities (409,786) (707,572)
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (649,254) (905,116)
Additions to refinery property and equipment -- --
(Additions) retirements to other assets (263,647) 4,353
----------- -----------
Net cash used in investing activities (912,901) (900,763)
----------- -----------
Cash flows from financing activities:
Cash - restricted 226,223 (3,286)
Increase (decrease) in notes payable (23,511) --
Payments on long-term debt (740,607) (467,500)
Proceeds from issuance of debentures, net 1,350,000 --
Proceeds from issuance of common stock, net of
offering expenses 779,089 2,233,668
Proceeds from exercise of stock warrants -- 32
----------- -----------
Net cash provided by financing activities 1,591,194 1,762,914
----------- -----------
Net (decrease) increase in cash
and cash equivalents 268,507 154,579
Cash and cash equivalents at beginning of period 162,218 943,371
----------- -----------
Cash and cash equivalents at end of period $ 430,725 $ 1,097,950
=========== ===========
See notes to consolidated financial statements
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
Additional Stock
Common Stock paid-in purchase
Shares Amount capital warrants Deficit Total
------ ------ ------- -------- ------- -----
Balance, December 31, 1995 24,705,926 $ 1,976,474 $ 74,768,272 $ 1,297,754 ($56,751,808) $ 21,290,692
Stock issued in lieu of accounts payable 128,205 8,000 92,000 -- -- 100,000
Stock issued for services 100,000 8,000 92,000 -- -- 100,000
Sale of common stock - net 1,833,333 146,667 632,422 -- -- 779,089
Net loss for the period -- -- -- -- (312,177) (312,177)
---------- ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1996 26,767,464 $ 2,139,141 $ 75,584,694 $ 1,297,754 ($57,063,985) $ 21,957,604
========== ============ ============ ============ ============ ============
See notes to consolidated financial statements
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. Statement of Information Furnished
The accompanying unaudited 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 March 31,
1996 and the results of operations and the cash flows for the three months ended
March 31, 1996 and 1995. 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 1995 Annual Report on Form 10-K.
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
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
1995 Annual Report on Form 10-K.
2. Regulation S Offerings
During the first quarter of 1996, the Company received cash and settled certain
liabilities totaling approximately $991,000 from the sale and issuance of shares
of its common stock in accordance with the safe harbor provided by Regulation S
as promulgated by the Securities and Exchange Commission. Also, on March 21,
1996, the Company received net proceeds of $1,350,000 from the sale of 10%
Convertible Redeemable Subordinated Debentures, issued in accordance with
Regulation S. (See Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations".) The proceeds are being utilized to repay
debt and for working capital purposes. (See Note 4 below.)
3. Contingencies
IRS Excise Tax Claim
In May 1992, AIRI was notified by the Internal Revenue Service ("IRS") that the
IRS was considering an assessment of excise taxes, penalties and interest of
approximately $3,500,000 related to the sale of fuel products during 1989. The
IRS claims that AIRI failed to comply with an administrative procedure that
required sellers, and buyers in tax-free transactions, to obtain certification
from the IRS. The company believes that AIRI complied with the substance of the
existing requirements, and such sales were either
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tax-free or such excise taxes were paid by the end-users of such products.
AIRI has offered to negotiate a settlement of this matter with IRS Appeals since
early 1993. Such negotiations included face-to-face meetings, numerous phone
calls and written transmittals and several offers of settlement by both the
Company and the IRS. During these negotiations, the IRS Appeals officers offered
to waive all of the penalties and 75% of the amount of the proposed tax
liability. However, AIRI rejected this offer and requested the IRS' National
Office provide technical advice to its Appeals officers. After numerous
conferences and discussions with the National Office in 1995, the national
Office issued an adverse Technical Advice Memorandum ("TAM") to the effect that
AIRI should be liable for the tax on the sale of diesel fuel for the first three
quarters of 1989. Subsequent to the issuance of the TAM, the IRS Appeals officer
indicated to AIRI that the IRS still wants to negotiate a settlement. As a
result, AIRI had a meeting with the IRS Appeals Office on April 30, 1996 to
discuss the situation. During the meeting, the Company, at the request of the
IRS, made a settlement offer to the IRS, which is now under their consideration.
The Company accrues an estimated loss from a loss contingency when a liability
has been incurred and the amount of such loss can be reasonably estimated. Such
accruals are based on developments to date and the Company's estimate of the
liability. In this instance, the Company provided an allowance in accrued
expenses during 1995 of $250,000 for estimated costs, whether in the form of
legal expenses or payments to the IRS, or some combination of both.
Legal Proceedings
The Company and its subsidiaries are party to various legal proceedings,
including environmental matters. Although the ultimate disposition of these
proceedings is not presently determinable, in the opinion of the Company, any
liability that might ensue would not be material in relation to the consolidated
financial position or results of operations of the Company.
In October 1995, Rio Bravo S.A., the operator of the Company's Lot IV Block in
Peru, locked-out PAIPC personnel from access thereto and filed a legal action in
Peru against PAIPC claiming damages of $11,695,000 and alleging that PAIPC's
License Contract with the government to explore Block IV (the "License
Contract") was cancelled by the government due to the fact PAIPC did not
complete the minimum work program required under the License Contract. However,
because the minimum work program was completed and was certified as complete by
the government (the performance bond placed by PAIPC to assure its compliance
with the minimum work program has, in fact, been released by the government)
and, since the License Contract with the government is still in effect and has
not been cancelled, the Company expects the legal action by Rio Bravo will be
decided in PAIPC's favor. PAIPC has also filed
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counterclaims and is in the process of filing liens against Rio Bravo to defend
its interests in the Block and License Contract and continues to participate in
meetings with the government related to the activities in the Block and in all
matters of administration and execution of the obligations in the License
Contract. At this time, the Company is unable to determine what liability may
arise from this action.
4. Subsequent Events
9% Debentures
On April 16, 1996, the Company received net proceeds of $460,000 from the sale
of 9% Convertible Subordinated Redeemable Debentures (the "9% Debentures") in a
private placement to a foreign buyer under Regulation S. At its option, the
Company may redeem any or all of the 9% Debentures prior to conversion by paying
to the holder in cash 125% of the then outstanding principal balance of the 9%
Debenture plus accrued interest to date. Such payment may also be made by the
Company within 15 days of receipt of a conversion notice by the Company from the
holder(s). In addition, the Company, at its sole option, may force conversion at
any time on and after 120 days from the date of issuance of the 9% Debentures if
the average closing bid price for the Company's common stock for five
consecutive trading days shall be in excess of $1.40. The holders of the 9%
Debentures may convert all or any amount over $25,000 of the original principal
amount, commencing May 31, 1996, into shares of the Company's common stock at a
conversion price per share equal to the lower of (i) 75% of the average closing
bid price of the Common Stock for the five business days immediately preceding
the date of receipt by the Company of notice of conversion or (ii) 75% of the
average of the closing bid price of the Common Stock for the five business days
immediately preceding the date of Subscription by the holders. The Company is
utilizing the proceeds from the 9% Debentures to repay debts and for working
capital purposes.
Indonesian Agreement
On April 18, 1996, the Company announced that due to continued delays by Far
Eastern Hydrocarbons, Ltd. ("FEH"), in reaching a final decision regarding the
merger discussions between the Company and FEH, it is unable to determine if, or
when, the previously announced Share Exchange Agreement will be consummated on
terms acceptable to the Company. Consequently, the Company has temporarily
tabled its active pursuit of the negotiations. FEH management continues to
express a commitment to proceed with the negotiations, therefore, the Company
will consider resuming negotiations with FEH upon receipt of a definitive
response from the FEH Board to the outstanding merger proposal, based on the
amended letter of intent dated January 24, 1996.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the quarter ended March 31, 1996, the Company utilized approximately
$410,000 for operations. Net loss for the period totalled $312,000, including
non-cash provisions for depreciation, depletion, and amortization of $342,000.
Approximately $269,000 was provided during the quarter by the reduction of
current assets other than cash and approximately $708,000 was used to decrease
accounts payable.
The Company's 12% Secured Debentures (the "12% Debentures") require certain
principal payments and contain certain restrictive covenants and conditions with
which the Company must comply. During the next twelve months approximately
$1,229,000 and $421,000 in principal and interest, respectively, are due for
payment, of which all of the principal is payable in December 1996 and one-half
of the interest is payable in each of June and December 1996. In the event that
the Company is unable to meet its obligations pursuant to the 12% Debentures in
a timely manner, the Company's oil and gas reserves and its operations may be
adversely affected.
The Company has an outstanding Loan Agreement (the "MGTF Note") with MG Trade
Finance Corp. ("MGTF"), which is secured by its Lake Charles, Louisiana refinery
(the "Refinery"). As of May 1, 1996, the outstanding principal balance of the
MGTF Note was approximately $2.5 million, which is due in full on March 31,
1998. 50% of the lease fee proceeds the Company receives from the lessee of the
Refinery, Gold Line Refining Ltd. ("Gold Line"), is utilized to pay interest and
amortize the principal on the MGTF Note. If lease fees are not sufficient to
satisfy all accrued interest when due, the Company is obligated to satisfy any
shortfall. The Company may be required to fund future working capital
requirements that arise from Refinery operations, including any liability that
may arise from any claims or settlements related to the Refinery.
During 1995, Gold Line incurred various financial and purchasing problems which
resulted in diminished throughput volumes and lower lease fees to the Company
and also prevented Gold Line from making its note payments to the Company as
scheduled in September and December 1995 and in March 1996. These problems
resulted in lower cash flow to the Company of up to $1.6 million, which required
it to utilize other methods to acquire funds necessary to satisfy its monetary
and contractual obligations, including the issuance of equity. During the first
quarter of 1996, the Company issued shares of its common stock in exchange for
cash and services rendered to the Company totalling an aggregate of
approximately $991,000 placed in accordance with the safe harbor provided by
Regulation S as promulgated by the SEC.
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In March 1996, Gold Line was successful in solving its financial and purchasing
problems, and secured a new one-year $45 million fuel supply contract with the
United States Defense Fuel Supply Center ("DFSC"). As a result, Gold Line
expects to process higher volumes of feedstock through the Refinery, which
should enable it to make its scheduled quarterly principal and interest note
payments to the Company beginning in June 1996. In addition, Gold Line's lease
fees increased to $.50 per barrel of feedstock in 1996 from $.40 per barrel in
1995. During March 1996, Gold Line processed a high of approximately 18,000
daily barrels of feedstock and was processing an average of 15,500 barrels of
feedstock per day. It expects to average 15,000 barrels per day during the
remainder of the lease, a level it needs to maintain in order to meet its
obligations under its DFSC contracts. The combination of Gold Line's note
payments and increased lease fees could provide the Company with approximately
$1.7 million more cash flow during the next twelve months than during the last.
Also in March 1996, the Company received net proceeds of $1,350,000 from the
sale of 10% Convertible Subordinated Redeemable Debentures (the "10%
Debentures") in a private placement to various foreign buyers under Regulation
S. At its option, the Company may redeem any or all of the 10% Debentures after
issue and prior to conversion by paying to the holder in cash 135% of the then
outstanding principal balance of the 10% Debentures plus accrued interest to
date. Such payment may also be made at the Company's option within 15 days of
receipt of a conversion notice by the Company from the holder(s). In addition,
the Company, at its sole option, may force conversion at any time on and after
120 days from the date of issuance of the 10% Debentures if the average closing
bid price for the Company's common stock for five consecutive trading days shall
be in excess of $1.50. The holders of the 10% Debentures may convert all or any
amount over $25,000 of the original principal amount commencing May 11, 1996
into shares of the Company's common stock at a conversion price per share equal
to the lower of (i) 65% of the average closing bid price of the Common Stock for
the five business days immediately preceding the date of receipt by the Company
of notice of conversion or (ii) 65% of the average of the closing bid price of
the Common Stock for the five business days immediately preceding the date of
Subscription by the holders. The Company is utilizing the proceeds from the 10%
Debenture to repay debts and for working capital purposes. In April 1996, the
Company received net proceeds of $460,000 from the sale of 9% Debentures. (See
Note 4 to "Notes to Consolidated Financial Statements March 31, 1996 -
Subsequent Events, 9% Debentures".)
The Company has received inquiries from various oil companies regarding a
possible farmout of its new Chicoral discovery and its other Colombian
properties in return for cash and drilling obligations in the Company's
Toqui-Toqui field. Such a transaction, if timely consummated, could provide the
Company with
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capital to repay a portion of its recently-issued Debentures, while ensuring
that its Chicoral discovery would be fully exploited in the shortest time
practicable with little or no cost to the Company. Although a farmout would
result in a lower overall Company ownership interest of its Colombian reserves,
the net result to the Company could be an increase in its oil and gas reserve
base, a stronger balance sheet and greater potential for earnings and cash-flow
growth.
The Company has no remaining drilling or work obligations in Colombia or Peru.
Depending upon available funds, or whether the Company is successful with its
farmout plans, the Company estimates it could utilize up to $4,000,000 for
exploration and development of its properties and prospects in South America
during the next twelve months.
In December 1995, the Company entered into a Farmout Agreement with P.T. Pelangi
Niaga Mitra Internasional, an Indonesian company ("PNMI"), wherein the Company
would earn a 49% working interest in a Technical Assistance Contract ("TAC")
with Pertamina for the Pamanukan Selatan area of West Java Province, Indonesia.
The Farmout Agreement is subject to PNMI receiving governmental certification
and Pertamina's approval to conduct operations under this TAC. However, recent
changes now required by the government in the language and structure of these
types of agreements have caused the Company to reconsider its involvement in
this project and, at this time, it is likely the Company could decide not to
proceed with the project.
The Company recently performed an analysis to determine the viability of
operating its 16,500 barrel per day Vacuum Distillation Unit to produce vacuum
gas oil and asphalt in addition to, but separate from, the operations currently
being performed by Gold Line. Preliminary studies utilizing actual pricing
scenarios from 1994 and 1995 indicate that such a project could provide the
Company with significant amounts of revenues and profits, if appropriate
feedstock and end-product contracts, and adequate financing, could be secured.
Should the Company decide to pursue its VDU operation, it estimates
approximately $3.5 to $4 million of capital would be required for additional
tankage and equipment. Additional capital would also be requried for working
capial purposes, which amounts are dependent upon the daily processing rate of
the VDU. The Company is currently considering the pursuit of a program of this
nature in order to maximize the capability of its Refinery assets, however, the
timing for the implementation of such an operation, if any, is indeterminable at
this time.
The Company is currently having discussions with various entities which have
expressed an interest in providing the Company with financing to implement its
VDU operations, repay certain current and long term liabilities, and for other
working capital needs; however, at this time there is no certainty the Company
will be successful in obtaining this financing.
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The Company intends to meet its capital and operating funds requirements in the
near term from revenues generated from operations, and from additional financing
as necessary. However, there is no assurance of success of any farmout or
financing efforts the Company may pursue or the timing or success of the
exploitation of its discoveries in Colombia and Peru, its potential projects in
Indonesia, and/or its VDU project.
Results of Operations
For the Three Months Ended March 31, 1996 as compared
to the Three Months Ended March 31, 1995
The following table highlights the Company's results of operations for the three
months ended March 31, 1996 and 1995.
For The Three Months
Ended March 31,
1996 1995
---- ----
Exploration and Production Activity:
Colombia Properties:
Revenues - Oil Sales (000's) $ 304 $ 259
Lease Operating Expenses (000's) $ 111 $ 66
Production Volume - Bbls 36,766 31,918
Average Price per Bbl $ 8.27 $ 8.12
Production Cost per Bbl $ 3.01 $ 2.06
DD&A per Bbl $ 3.77 $ 3.86
Peru Properties:
Revenues - Oil Sales (000's) (1) $ 46
Lease Operating Expenses (000's) (1) $ 24
Production Volume - Bbls (1) 6,431
Average Price per Bbl (1) $ 7.16
Production Cost per Bbl (1) $ 3.75
DD&A per Bbl (2) -- --
Refinery Operations:
Refinery Lease Fees (000's) $ 569 $ 19
Average Daily Throughput(Bbls) 12,635 11,900
Average Throughput Fee $ 0.50 $ 0.40
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(1) Information for 1996 is not available. See discussion below.
(2) Excludes Peruvian activity since all related properties are currently
considered "unevaluated".
Oil and Gas Operations:
Colombian oil and gas sales increased 17% compared to the same period in the
prior year. The increase is attributable to new production from two wells put in
service during the third quarter of 1995.
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As mentioned above (See Note 3 to "Notes to Consolidated Financial Statements
March 31, 1996 - Contingencies, Legal Proceedings"), in October 1995, Rio Bravo
S.A., the operator of the Company's Lot IV Block in Peru, locked-out the
Company's personnel from access to the Block and to any records and books
related thereto. Consequently, the Company has not recorded any income or
expense from the Block since the lock-out began. The last recordings of revenue
and expense on the block occurred during the third quarter of 1995 and are
reflected in the Company's financial statements for that period. While the
Company believes the third quarter 1995 production rates (approximately 47
barrels of oil per day) have been maintained by Rio Bravo, there can be no
assurance of this fact until the Company can gain access to the Block. When, or
if, this will occur is also in question at this time.
Production costs increased approximately $45,000 or 68% compared to the same
period in the prior year, primarily due to a $28,000 increase in the Company's
allocation of certain general and administrative expenses to the operating
properties. These costs are all reimbursed to the Company by its joint venture
partners. Additionally, an increase in well maintenance projects during the
current period compared to the same period in 1995 accounted for $8,000 of the
increase.
Refinery Operations:
Refinery lease fees increased by 158% in the current quarter compared to the
first quarter 1995, primarily due to Gold Line being fully operational during
the current quarter compared to operating only a few days during the same period
of 1995. On January 1, 1996, the throughput fees increased 25%, from $0.40 a
barrel to $0.50 a barrel over the same period last year. During March 1996, Gold
Line processed a daily high of approximately 18,000 barrels of throughput and
was processing an average of 15,500 barrels per day before shutting down the
Refinery for its annual two-week refurbishing in April 1996. The Company expects
Gold Line to process around 15,000 barrels per day during the remainder of the
lease, a level it needs to maintain in order to meet its obligation under its
DFSC contracts.
Other Revenue:
Other revenues increased approximately $38,000 during the current quarter due
primarily to the decrease in foreign exchange gains in this period compared to
the first quarter 1995.
General and Administrative:
General and Administrative expenses decreased approximately $302,000, or 34%
compared to the same period during 1995. An increase in capitalized and
reimbursed general and administrative expenses of $54,000 for the three months
ended March 31, 1996, compared to the to the same period last year, was due
primarily to an increase of $28,000 in recoverable overhead expenses from joint
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venture partners. Actual decreases totalling $248,000 realized in this period
compared to the same period last year were in the following areas: payroll &
payroll related expenses decreased approximately $78,000 and certain other
employee costs decreased approximately $34,000, rent expense decreased $12,000
and legal fees decreased in the current period compared to the first quarter
1995 by approximately $35,000. Travel expenses and investor/public relations
costs decreased during the current quarter compared to same quarter last year by
approximately $14,000 and $20,000, respectively. Corporate franchise tax
decreased by $20,000 over the same period last year. Interest expense decreased
$76,000, or 27%, for the three months ended March 31, 1996 compared to the same
period in 1995 due to a principal decrease of $467,500 in the 12% Secured
Debentures outstanding as of March 31, 1995 compared to March 31, 1994. Also,
during the first quarter of 1995, the interest rate on the MGTF Note was at
prime plus 2%, and as of March 22, 1995, under the revised MGTF Note, the
interest rate was reduced to prime plus 1%.
Depreciation, Depletion, and Amortization decreased approximately $28,000, or
8%, compared to the same period last year. Depletion expense increased 12%
during the current period due to increased production levels compared to the
same period last year. The net decrease for the current period compared to the
same period last year is due primarily to an adjustment to depreciation expense
related to idle equipment taken in the first quarter of 1995.
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PART II: OTHER INFORMATION
Item 2. Changes in Securities
Sale of Debentures
In March and April 1996, the Company sold $2 million principal amount
of convertible subordinated redeemable debentures in private
placements to foreign buyers (See Notes 2 and 3 to "Notes to
Consolidated Financial Statements March 31, 1996"). The Company has
the right to redeem these debentures in part or in full prior to
conversion, although there can be no assurance that the Company will
do so. Upon conversion, the number of shares to be issued varies
inversely with the market price of the Company's Common Stock. (See
Part I. Item 2 "Managements Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources"). Although there is also no assurance that all of these
debentures will be converted, at the current market price of the
Common Stock, if all the debentures were converted the Company would
issue approximately 5.3 million shares, or just under 20% of its
currently issued and outstanding shares. Depending upon the
circumstances, issuance of additional shares of Common Stock could
affect the existing holders of shares by diluting the voting power of
the outstanding shares.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Form of Debenture and Subscription Agreement
dated April 16, 1996 between the Registrant and
Universal Finanz Holding AG.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. None
------------------------------------
16
17
SIGNATURE
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.
Dated: May 14, 1996
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION
By: /s/ Denis J. Fitzpatrick
------------------------
Denis J. Fitzpatrick
Chief Financial Officer
By: /s/ William L. Tracy
------------------------
William L. Tracy
Treasurer/Controller
17
18
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.1 Form of Debenture and Subscription
Agreement dated April 16, 1996 between
the Registrant and Universal Finanz
Holding AG.
27.1 Financial Data Schedule