1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20449
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
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)
640 FIFTH AVENUE, NEW YORK, NEW YORK 10019
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the registrant's Common Stock,$.08 par
value, as of May 10, 1995 was 22,137,266.
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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,
1995 1994
------------- -------------
Assets
Current Assets:
Cash and cash equivalents, $ 1,097,950 $ 943,371
Cash - restricted 217,916 214,630
Accounts receivable 1,044,805 1,031,206
Inventory 808,561 951,472
Prepaid expenses 682,998 484,525
------------- -------------
Total current assets 3,852,230 3,625,204
------------- -------------
Property, plant and equipment:
Unevaluated property not subject
to amortization 5,304,946 4,467,147
Oil and gas properties pursuant
to the full cost method 28,970,837 28,903,520
Refinery property and equipment 15,536,279 15,536,279
Other 536,400 540,753
------------- -------------
50,348,462 49,447,699
Less: Accumulated depreciation,
depletion and amortization (21,520,803) (21,167,110)
------------- -------------
Total property, plant and equipment 28,827,659 28,280,589
------------- -------------
Other long-term assets, net 103,669 323,920
Total Assets $ 32,783,558 $ 32,229,713
============= =============
See notes to consolidated financial statements
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1995 1994
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt 701,250 1,168,750
Accounts payable 1,631,522 1,383,082
Accrued expenses &
other liabilities 914,975 1,101,834
------------- -------------
Total current liabilities 3,247,747 3,653,666
Long term debt 6,601,421 6,601,421
------------- -------------
Total Liabilities 9,849,168 10,255,087
Commitments and Contingencies (Note 2)
Stockholders' equity:
Preferred stock, par value $3.00,
authorized 7,000,000 shares, none issued -- --
Common stock, par value $.08-authorized
50,000,000 shares, issued and outstanding
22,137,266 shares in 1995 and 19,099,048
in 1994 1,770,981 1,527,924
Additional paid-in-capital-common stock 73,553,077 71,562,434
Stock purchase warrants 1,297,754 1,297,754
Accumulated Deficit (53,687,422) (52,413,486)
------------- -------------
Total Stockholders' Equity 22,934,390 21,974,626
------------- -------------
Total Liabilities and
Stockholders' Equity $ 32,783,558 $ 32,229,713
============= =============
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)
1995 1994 *
------------- -------------
REVENUES:
Oil and gas sales $ 305,285 $ 341,814
Refinery lease fees 19,064 379,299
Interest Income 12,941 19,973
Other 10,411 23,431
------------- -------------
Total revenues 347,701 764,517
------------- -------------
EXPENSES:
Operating 90,789 272,937
General and Aministrative 900,472 1,172,821
Depreciation, depletion and
amortization 353,690 289,947
Interest 276,686 362,211
------------- -------------
Total expenses $ 1,621,637 $ 2,097,916
------------- -------------
NET LOSS $ (1,273,936) $ (1,333,399)
============= =============
Loss per share of common stock $ (0.06) $ (0.10)
============= =============
Weighted average number of shares
outstanding 20,896,521 13,838,073
============= =============
* Restated for comparative purposes
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)
1995 1994
------------ ------------
Cash flows from operating activities:
Net loss $ (1,273,936) $ (1,333,399)
------------ ------------
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and depletion 353,690 289,947
Amortization of bond/loan costs 34,404 91,502
Provision for issuance of warrants -- 210,588
Changes in current assets & liabilities:
Decrease in accounts receivable 184,849 425,462
Decrease in inventory 142,911 167,240
Decrease (increase) in prepaid expenses (211,073) 106,788
(Decrease) increase in accounts payable
and accrued expense 61,583 (4,223,672)
------------ ------------
Total adjustments 566,364 (2,932,145)
------------ ------------
Net cash provided (used) used by operating activities (707,572) (4,265,544)
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (905,116) (815,596)
Additions to refinery property and equpipment -- (1,176)
(Additions) retirements to other fixed assets 4,353 (6,607)
------------ ------------
Net cash used in investing activities (900,763) (823,379)
------------ ------------
Cash flows from financing activities:
Cash - restricted (3,286) (325,000)
Decrease in notes payable -- (511,064)
Payments on long-term debt (467,500) (1,303,940)
Proceeds from sale of marketable securities -- 288,702
Proceeds from issuance of common stock, net of
stock registration costs, subscriptions
receivable and commissions 2,233,668 15,182,339
Proceeds from exercise of stock warrants 32 --
------------ ------------
Net cash provided by financing activities 1,762,914 13,331,037
------------ ------------
Net increase in cash
and cash equivalents 154,579 8,242,114
Cash and cash equivalents at beginning of period 943,371 53,137
------------ ------------
Cash and cash equivalents at end of period $ 1,097,950 $ 8,295,251
============ ============
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, 1995
(Unaudited)
Notes
Additional Stock receivable
Common Stock paid-in purchase for issuance
Shares Amount capital warrants of stock Deficit Total
----------- ----------- ----------- ----------- ------------ ------------- ------------
Balance, December 31, 1994 19,099,048 $1,527,924 $71,595,370 $1,297,754 ($32,936) ($52,413,486) $21,974,626
Warrants Exercised 8 1 31 -- -- -- 32
Sale of common stock - net 3,038,210 243,056 1,990,612 -- -- -- 2,233,668
Net loss for the period -- -- -- -- -- (1,273,936) (1,273,936)
----------- ----------- ----------- ----------- ----------- ------------ ------------
Balance, March 31, 1995 22,137,266 $1,770,981 $73,586,013 $1,297,754 ($32,936) ($53,687,422) $22,934,390
=========== =========== =========== =========== =========== ============ ============
See notes to consolidated financial statements.
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AMERICAN INTERNATIONAL PETROLEUM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
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,
1995 and the results of operations and the cash flows for the three months
ended March 31, 1995 and 1994. 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 1994 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 1994 Annual Report on Form 10-K.
2. REGULATION S OFFERING
During February and March 1995, the Company sold 3,038,210 shares of its common
stock for net proceeds of $2,310,350 in an offshore placement in accordance
with the transaction exemption offered by Regulation S as promulgated by the
Securities and Exchange Commission and, accordingly, these shares were not
permitted to be sold within the United States or to U.S. persons during the
period of 40 days from March 2, 1995, the closing date of the offering.
Proceeds from the Regulation S offering were primarily used to pay current
portions of debt and related interest, and for oil and gas exploration and
development in Peru of approximately $750,000 and $905,000, respectively.
3. GOLD LINE LEASE RENEWAL
In March 1995, the Company amended its lease agreement with the lessee of its
Lake Charles Refinery (the "Refinery"), Gold Line Refining, Ltd., ("Gold
Line"). The lease term was extended through March 31, 1998. In consideration
for extending the lease, the related lease fees were increased effective
January 1, 1996, from $.40 to $.50 per barrel of throughput. In addition, Gold
Line issued a note to the Company for past-due lease fees in the amount of
$1,801,464, which is to be repaid on a quarterly basis by Gold Line beginning
September 1, 1995, with interest at prime plus 1%.
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4. MGTF LOAN AGREEMENT
In March 1995, MG Trade Finance ("MGTF") agreed to modify its loan agreement
and extend the maturity of the entire unpaid portion of the principal
originally due from the Company on May 31, 1995. Under the modified agreement,
the balance of the principal is now due March 31, 1998. In addition, the
required monthly payment amount was reduced from 100% to 50% of the monthly
lease fee proceeds the Company receives from its Lessee, and the related
interest rate was reduced to prime plus 1%.
5. CONTINGENCIES
IRS Excise Tax Claim
In May 1992 an AIPC subsidiary, AIRI, was notified by the Internal Revenue
Service ("IRS") that excise taxes, penalties and interest of approximately
$3,500,000 were owed from 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 tax-free or such excise
taxes were paid by the end-users of such products. The Company has submitted a
formal response and discussions with the IRS appeals office are continuing. At
this time the Company is unable to determine what liability may arise from this
assessment, although the IRS has informed the Company that they are nullifying
approximately $650,000 in penalties, which amounts were included in the $3.5
million mentioned above.
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 have a material adverse effect on the
consolidated financial position or results of operations of the Company.
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ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 1995, the Company sold 3,038,210 shares of
its common stock in an overseas offering under the transaction exemption
offered by Regulation S as promulgated by the Securities and Exchange
Commission, for net cash proceeds of $2,259,168. As a result, the Company's
working capital as of March 31, 1995 was approximately $604,000 compared to a
deficit of approximately $28,000 at December 31, 1994. During the first
quarter, proceeds from the Regulation S offering were primarily used to pay
current portions of debt and related interest, and for oil and gas exploration
and development in Peru of approximately $750,000 and $905,000, respectively.
During the quarter ended March 31, 1995 the Company expended approximately
$708,000 for operations. Net loss for the period totaled $1,273,936, including
non-cash provisions for depreciation, depletion, and amortization of $388,000.
Approximately $130,000 was provided during the quarter by the reduction of
current assets other than cash and $62,000 was provided by an increase in
accounts payable.
The Company's work obligations in Peru and Colombia during the next twelve
months totals approximately $1,000,000. The number of wells the Company may
drill in these areas, in addition to its obligations, will depend upon the
level of success of its drilling efforts, and available capital.
The Company's 12% Secured Debentures require certain principal payments
beginning December 31, 1994 and contain certain restrictive covenants and
conditions with which the Company must comply. In January 1995, the Company
made principal and interest payments on its 12% Secured Debentures of $468,000
and $281,000, respectively. During the next twelve months approximately
$701,000 and $505,000 in principal and interest, respectively, are due for
payment, of which all of the principal is payable in December 1995 and one-half
of the interest is payable in each of June and December 1995. The Company is
currently in compliance with all covenants and conditions related to the 12%
Secured Debentures. In the event the Company is unable to meet its obligations
pursuant to the 12% Secured Debentures in a timely manner and is unsuccessful
in negotiating new payment terms satisfactory to the lenders, the Company's oil
and gas reserves and its operations could be adversely affected.
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As of March 22, 1995, the balance of the loan from MG Trade Finance Corp.
("MGTF") on the Refinery was approximately $2,845,000. On this date, the
Company amended certain terms of its loan agreement with MGTF ("Loan
Agreement"), extending the due date for the unpaid balance from May 31, 1995 to
March 31, 1998. In addition, payments on the loan have been reduced from 100%
to 50% of the monthly lease fee proceeds the Company receives from Gold Line,
which is expected to provide, approximately, up to an additional $1.5 million
of annual working capital to the Company. In addition, approximately $756,000
in annual cash flow is expected to be received from Gold Line until their note
payable to the Company of $1.8 million is repaid. See "Notes to Consolidated
Financial Statements - Gold Line Lease Renewal". If lease fees are not
sufficient to satisfy all accrued interest and principal 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. The Loan Agreement contains certain restrictive covenants and
requirements. The Company and MGTF have from time to time amended the Loan
Agreement or waived certain events of technical default.
The Company intends to meet its capital and operating funds requirements in the
near term from revenues generated from operations, from additional debt and/or
equity financing as necessary and/or from proceeds from the sale of the
Refinery. However, there is no assurance of the success of any financing
effort the Company may pursue or the timing or success of the sale of the
Refinery. In the event the Company is not able to meet its future exploration
commitments in Colombia and Peru in a timely manner, Management alternatively
believes it will be able to extend certain commitments or be able to obtain
financial partners for certain of its commitments. However, in the event the
Company cannot meet its exploration obligations by any of the means described
above, certain prospects in Colombia and Peru may be relinquished.
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RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1995 as compared
to the Three Months Ended March 31, 1994
The following table highlights the Company's results of operations for the
three months ended March 31, 1995 and 1994.
For The Three Months
Ended March 31,
1994 1993
---- ----
Exploration and Production Activity:
Colombia Properties:
--------------------
Revenues - Oil Sales (000's) $270 $343
Lease Operating Expenses (000's) $66 $272
Production Volume - Bbls 31,918 30,874
Average Price per Bbl $8.45 $11.07
Production Cost per Bbl $2.06 $8.82
DD&A per Bbl $3.86 $4.28
Peru Properties:
----------------
Revenues - Oil Sales (000's) $46 --
Lease Operating Expenses (000's) $24 --
Production Volume - Bbls 6,431 --
Average Price per Bbl $7.16 --
Production Cost per Bbl $3.75 --
DD&A per Bbl (1) --
Refinery Operations:
Refinery Lease Fees (000's) $19 $379
Average Daily Throughput(Bbls) 11,900 12,041
Average Throughput Fee $0.40 $0.35
__________________________________________________________________
(1) Excludes Depreciation, Depletion and Amortization ("DD&A") for Peruvian
activity, since all related properties are currently considered "unevaluated".
Oil and Gas Operations:
Colombian oil and gas sales decreased 21% compared to the same period in the
prior year. The decrease was due primarily to the Company selling its oil
under a new crude sales contract whereby the crude oil was sold directly to an
end user at the well head and thereby receiving a price for the oil that
excluded transportation costs which were include in the sales price during the
first quarter of last year. The new crude oil contract was effective May 1,
1994. Oil production increased by 3% during the first quarter of 1995 over the
same period last year.
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Production costs during the first quarter of 1995 decreased approximately
$206,000, or 76%, compared to the same period in the prior year. Elimination
of transportation costs in this current period as discussed on the previous
page, accounted for approximately $194,000 of this decrease.
Refinery Operations:
Since the Company's Refinery was not operating until the last few days of the
first quarter of 1995, while its Lessee was in the process of obtaining
financing, Refinery lease fees decreased by 95% in the current quarter compared
to the first quarter 1994. The throughput fees increased 15%, from $0.35 a
barrel to $0.40 per barrel over the same period last year. The fees will
increase to $0.50 per barrel starting Janurary 1, 1996.
Other Revenue:
Other revenues decreased approximately $13,000 during the first quarter of 1995
as compared to the first quarter of 1994, due primarily to the decrease in
foreign exchange gains in 1995.
General and Administrative:
General and Administrative expenses decreased approximately $272,000, or 23%
during the first quarter of 1995 as compared to the same period during 1994.
The non-cash charge adjusting the exercise price of certain outstanding
warrants in the first quarter 1994 of approximately $210,000 accounts for 18%
of this decrease. Other decreases in areas realized in this period compared to
the same period last year were: payroll & payroll-related expenses decreased
approximately $58,000, rents decreased $12,000. Legal fees increased in the
current period compared to the first quarter 1994 by approximately $32,000,
primarily due to increased activity related to the excise tax dispute
previously discussed. Interest expense decreased $86,000, or 24%, for the
three months ended March 31, 1995 compared to the same period in 1994, due to
the decrease in 12% Secured Debentures outstanding during the first quarter of
1995 as compared to the same period last year and the reduction of debt payable
to MGTF from $4,196,000 as of March 31, 1994 to $2,845,000 on March 31, 1995.
The interest rate of the MGTF loan was prime plus 2% during both periods. As
of March 22, 1995, the interest rate was reduced to prime plus 1% under the
terms of the new agreement with MGTF.
Depreciation, Depletion and Amortization increased approximately 22% during the
first quarter of 1995, as compared to the same period last year, due primarily
to an increase in the depreciation expense on refinery assets not previously
placed into service and not depreciated during the first quarter of 1994. It
was subsequently determined that these assets should be depreciated; therefore,
depreciation expense was charged beginning in the second quarter of 1994 on the
idle equipment.
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PART II: OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
1. Exhibit 27 FINANCIAL DATA SCHEDULES
(b) Reports on Form 8-K. None
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SIGNATURES
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 11, 1995
AMERICAN INTERNATIONAL
PETROLEUM CORPORATION
By: /s/ Denis J. Fitzpatrick
Denis J. Fitzpatrick
Principal Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
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EX-27 Financial Data Schedule