-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A47NFrE+b/VacUxCijnsxg0oAbAhhSftA8IQXpCZZVP+UU2wq14v70jAnuemRTVw +WGAym9iw8+u4PwBIMpkrQ== 0000950168-97-003494.txt : 19971125 0000950168-97-003494.hdr.sgml : 19971125 ACCESSION NUMBER: 0000950168-97-003494 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971124 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INTERNATIONAL PETROLEUM CORP /NV/ CENTRAL INDEX KEY: 0000799119 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 133130236 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-14905 FILM NUMBER: 97727319 BUSINESS ADDRESS: STREET 1: 444 MADISON AVE STE 3203 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2129563333 MAIL ADDRESS: STREET 1: 444 MADISON AVE STE 3203 CITY: NEW YORK STATE: NY ZIP: 10022 10-Q/A 1 AMERICAN INTERNATIONAL PETROLEUM CORP. 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20449 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 -------------------------------------- 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 incorporation 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 ------------------ ------------------------ The number of shares outstanding of the registrant's Common Stock, $.08 par value, as of August 11, 1997 is 42,991,892 shares. AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) June 30, December 31, 1997 1996 ---------------- ----------------- Assets Current assets: Cash and cash equivalents $ 19,196 $ 11,058 Cash - restricted -- 161,022 Marketable securities 3,617,954 -- Accounts and notes receivable, net 1,660,651 1,073,140 Inventory -- 459,961 Prepaid expenses 321,163 838,104 ------------ ------------ Total current assets 5,618,964 2,543,285 ------------ ------------ Property, plant and equipment: Unevaluated property 871,754 5,648,630 Oil and gas properties -- 32,506,656 Refinery property and equipment 18,912,633 17,235,183 Other 212,970 499,971 ------------ ------------ 19,997,357 55,890,440 Less - accumulated depreciation, depletion, amortization and impairments (3,966,595) (23,959,191) ------------ ------------ Total property, plant and equipment 16,030,762 31,931,249 ------------ ------------ Other long-term assets, net 2,154,612 17,897 ------------ ------------ Total assets $ 23,804,338 $ 34,492,431 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Notes payable $ -- $ 237,162 Current portion of long-term debt 2,390,793 5,968,393 Accounts payable 1,422,703 3,636,765 Accrued liabilities 2,077,782 2,524,194 ------------ ------------ Total current liabilities 5,891,278 12,366,514 Long-term debt 2,961,109 798,199 ------------ ------------ Total liabilities 8,852,387 13,164,713 ------------ ------------ Stockholders' equity: Preferred stock, par value $0.01, 7,000,000 shares authorized, none issued -- -- Common stock, par value $.08, 100,000,000 shares authorized, 39,559,188 shares issued and outstanding at June 30, 1997 and 34,458,921 shares at December 31, 1996 3,164,735 2,756,714 Additional paid-in capital 80,112,841 78,677,265 Stock purchase warrants 1,297,754 1,297,754 Accumulated deficit (69,623,379) (61,404,015) ------------ ------------ Total stockholders' equity 14,951,951 21,327,718 ------------ ------------ Commitments and contingent liabilities (Note 10) -- -- ------------ ------------ Total liabilities and stockholders' equity $ 23,804,338 $ 34,492,431 ============ ============
The accompanying notes are an integral part of these statements. 2 AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, (Unaudited)
1997 1996 ------------ ----------------- (RESTATED) Revenues: Oil and gas production and pipeline fees $ -- $ 337,054 Refinery lease fees -- 548,722 Other 53,092 80,557 ------------ ------------ Total revenues 53,092 966,333 ------------ ------------ Expenses: Operating -- 104,567 General and administrative 1,060,693 688,523 Depreciation, depletion and amortization 131,623 322,908 Interest 842,370 1,073,607 Unrealized loss on marketable securities 1,639,977 -- Provision for bad debts -- -- Loss on sale of subsidiaries -- -- ------------ ------------ Total expenses 3,674,663 2,189,605 ------------ ------------ Net loss $ (3,621,571) $ (1,223,272) ============ ============ Net loss per share of common stock $ (0.09) $ (0.05) ============ ============ Weighted-average number of shares of common stock outstanding 39,034,729 26,767,464 ============ ============
The accompanying notes are an integral part of these statements. 3 AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, (Unaudited)
1997 1996 ------------ ----------------- (RESTATED) Revenues: Oil and gas production and pipeline fees $ 260,579 $ 641,246 Refinery lease fees 442,714 1,117,318 Other 88,342 131,375 ------------ ------------ Total revenues 791,635 1,889,939 ------------ ------------ Expenses: Operating 98,765 216,665 General and administrative 2,709,231 1,287,028 Depreciation, depletion and amortization 382,366 647,453 Interest 1,415,411 1,495,538 Unrealized loss on marketable securities 3,393,727 -- Provision for bad debts 447,832 -- Loss on sale of subsidiaries 563,667 -- ------------ ------------ Total expenses 9,010,999 3,646,684 ------------ ------------ Net loss $ (8,219,364) $ (1,756,745) ============ ============ Net loss per share of common stock $ (0.22) $ (0.07) ============ ============ Weighted-average number of shares of common stock outstanding 37,558,266 25,961,481 ============ ============
The accompanying notes are an integral part of these statements. 4 AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, (Unaudited)
1997 1996 ---------------- ----------------- Cash flows from operating activities: Net loss $(8,219,364) $(1,756,745) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation, depletion and amortization 831,599 1,657,024 Unrealized loss on marketable securities 3,393,727 -- Provision for bad debts 447,832 -- Loss on sale of subsidiaries 563,667 -- ISSUANCE OF STOCK FOR SERVICES 134,219 Changes in assets and liabilities: Accounts and notes receivable (219,640) (27,537) Marketable securities -- -- Inventory 56,974 52,525 Prepaid and other 47,070 22,699 Accounts payable and accrued liabilities 98,681 (718,652) ----------- ----------- Net cash provided by (used in) operating activities (2,865,235) (770,686) ----------- ----------- Cash flows from investing activities: Additions to oil and gas properties (451,181) (779,664) Additions to refinery property and equipment (1,677,450) (20,431) Other (212,547) (169,661) ----------- ----------- Net cash used in investing activities (2,341,178) (969,756) ----------- ----------- Cash flows from financing activities: Cash - restricted, loan collateral 35,261 201,223 Net increase (decrease) in notes payable (237,162) (45,533) Proceeds from long-term debt 3,405,000 1,810,000 Repayments of long-term debt (1,915,234) (1,035,178) Proceeds from sale of marketable securities 1,757,069 -- Proceeds from issuance of common stock and warrants, net 439,770 762,803 Proceeds from exercise of stock warrants and options 560 -- Proceeds from sale of subsidiaries 1,729,287 -- ----------- ----------- Net cash provided by financing activities 5,214,551 1,693,315 ----------- ----------- Net increase (decrease) in cash and cash equivalents 8,138 (47,127) Cash and cash equivalents at beginning of year 11,058 162,218 ----------- ----------- Cash and cash equivalents at end of year $ 19,196 $ 115,091 =========== ===========
The accompanying notes are an integral part of these statements. 5 AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
Additional Stock Common stock paid-in purchase Accumulated Shares Amount capital warrants deficit Total ------------ ------------- -------------- ------------ --------------- -------- Balance, December 31, 1996 34,458,921 $ 2,756,714 $ 78,677,265 $ 1,297,754 $(61,404,015) 21,327,718 Conversions of Debentures-REGULATION S 2,590,488 207,239 667,761 -- -- 875,000 Issuance of stock for interest in oil & gas properties-REGULATION S 300,000 24,000 126,000 -- -- 150,000 Issuance of stock for services 250,000 20,000 114,219 -- -- 134,219 Issuance of stock for compensation 100,000 8,000 32,000 -- -- 40,000 Issuance of stock in lieu of accounts payable 224,046 17,924 97,909 -- -- 115,833 Exercise of warrants 140 11 549 -- -- 560 Issuance of common stock-REGULATION S 1,635,593 130,847 311,423 -- -- 442,270 Imputed interest on debentures convertible at a discount to market -- -- 85,715 -- -- 85,715 Net loss for the period -- -- -- -- (8,219,364) (8,219,364) ----------- ------------ ------------ ------------ ------------ ------------ Balance, June 30, 1997 39,559,188 $ 3,164,735 $ 80,112,841 $ 1,297,754 $(69,623,379) $ 14,951,951 =========== ============ ============ ============ ============ ============
6 AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 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 June 30, 1997, the results of operations for the three month periods ended June 30, 1997 and 1996 and cash flows for the six months ended June 30, 1997 and 1996. 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 1996 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 1996 Annual Report on Form 10-K. 2. MARKETABLE SECURITIES Marketable Securities held by the Company are "available-for-sale-securities" and were valued by the Company in the MIP Transaction (see discussion below) at a basis of $2.00 pershare. They had a market value of $1.60 and $1.10 per share at March 31, 1997 and June 30, 1997, respectively, resulting in an unrealized loss of $1,754,000 and $1,640,000, for the two periods, respectively. Because these securities were acquired with the intent to trade for short-term profit (trading securities), unrealized gains or losses are charged to earnings as incurred. 3. OTHER LONG TERM ASSETS Notes totaling $4,400,000 acquired by the Company have been discounted and recorded as $3,600,000, less current portion of $1,500,000. 4. LONG-TERM DEBT 7 The effective interest rate as stated for each of the debt instruments below does not necessarily reflect the actual cash cost to the Company for that specific debt instrument. The effective interest rate reflects presumed incremental yield the holder of the debt instrument my derive from the discounted conversion rate of such instrument issued by the Company. The convertible debentures are convertible into the Company's stock based on calculations ranging from the average closing bid price of the Company's Common Stock for the five (5) business days immediately preceding the conversion dates, to discounts of 35%. The presumed incremental yield (imputed interest) for the six months ended June 30, 1997 amounted to approximately $221,000.
JUNE 30, ----------------- 10% - $391,629 CONVERTIBLE DEBENTURES - DUE APRIL 1, 1998, EFFECTIVE INTEREST RATE - 34.7% $210,468 12.5% - 426,000 CONVERTIBLE DEBENTURES - DUE JANUARY 2, 1998, EFFECTIVE INTEREST RATE - 49.2% TO 51.7% $126,000 8% - $1,645,000 REDEEMABLE CONVERTIBLE DEBENTURES - DUE APRIL 1, 1999 TO JUNE 6, 1999, EFFECTIVE INTEREST RATE 14.4% TO 63.6% $1,485,910 7% - $2,000,000 CONVERTIBLE DEBENTURE - DUE FEBRUARY 1, 1999, EFFECTIVE INTEREST RATE - 29.74% $962,498 10% - $291,600 SUBORDINATED DEBENTURE - DUE SEPTEMBER 24, 1997, EFFECTIVE INTEREST RATE - 17.4% $258,633 SENIOR CONVERTIBLE SUBORDINATED DEBENTURES - DUE FEBRUARY 1, 1997, INTEREST RANGES FROM 8.5%-10.5% PER ANNUM, PAYABLE QUARTERLY, CONVERTIBLE INTO COMMON SHARES AT $50.00 PER SHARE. $200,000 NOTE PAYABLE TO MG TRADE FINANCE CORPORATION $2,108,393 ----------------- $5,351,902 LESS - CURRENT PORTION $2,390,793 ----------------- LONG-TERM DEBT $2,961,109 =================
During the first six months of 1997, the Company received aggregate net proceeds of $3,405,000 from the sale of Convertible Redeemable Subordinated Debentures, , of which approximately $235,000 in principal remains outstanding as of August 12, 1997. In addition, on August 8, 1997, the Company issued an aggregate $6.4 million in 8% Convertible Subordinated Debentures pursuant to Regulation S. (See Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.) Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources 8 During the last three years, the Company has had difficulty generating sufficient cash flow to fund its operations, capital expenditures and required principal payments. As a result, the Company has from time to time operated with limited liquidity or negative working capital. In order to continue operations under such circumstances, the Company has historically relied on outside sources of capital. On February 25, 1997, the Company sold all of the issued and outstanding shares of Common Stock of two of its wholly-owned subsidiaries, American International Petroleum Corporation of Colombia ("AIPCC") and Pan American International Petroleum Corporation ("PAIPC") (the "Purchased Shares") in an arms length transaction (the "MIP Transaction") to Mercantile International Petroleum, Inc. ("MIP") in exchange for cash, shares of MIP Common Stock (the "MIP Shares"), debt in the form of a $3 million exchangeable debenture (the "Exchangeable Debenture), and deferred compensation, improving its working capital position from a net working capital deficit of $9.8 million at December 31, 1996, to a positive working capital of $2.9 million at March 31, 1997. However, the market value of the MIP Shares has declined since the closing of the MIP Transaction to a low of $1.10 on June 30, 1997. Since the Company must record the MIP Shares at lower of cost or market, the resultant cumulative unrealized loss of $3,394,000 recorded by the Company was the primary cause of the decline in the Company's working capital position to a negative $272,000 as of June 30, 1997. (Since June 30, 1997 MIP Common Stock has traded as high as $1.49 per share.) In order to repay the MGTF Note (discussed below) in full, redeem certain outstanding convertible debentures prior to their conversion by the holders thereof into the Company's Common Stock, and to continue the expansion of the Company's refinery to enable the implementation of asphalt blending operations, on August 6, 1997, the Company issued an aggregate $6.4 million of two-year 8% Convertible Subordinated Debentures pursuant to Regulation S (the "Debentures") for net proceeds of $6,016,000. As a result, the Company's working capital improved to approximately $6 million as of August 11, 1997. One half of the principal amount of the Debentures is convertible into shares of the Company's Common Stock on or after October 6, 1997, the remainder 30 days thereafter, all at a conversion price based on 85% of the average closing bid price of the Company's Common Stock for the five trading days prior to the date of conversion. The Company may redeem all or a portion of the Debentures at any time prior to conversion by paying 110% of the redemption amount to the holder on or before November 5, 1997, or 115% thereafter. Like the majority of its recent convertible debenture issuances, the Company intends, to the extent possible, to redeem the Debentures prior to their conversion into Common Stock. During the past four months, the Company has redeemed certain convertible debentures which would have otherwise 9 been converted into approximately 7 million shares of the Company's Common Stock. During the six months ended June 30, 1997, the Company utilized $8,085,000 for operations, which reflects approximately $5,237,000 in non-cash provisions, including depreciation, depletion an amortization of $832,000, loss on write-down of marketable securities acquired in the MIP Transaction of $3,394,000, provision for bad debts of $448,000, and loss on sale of subsidiaries of $564,000. Approximately $116,000 was used during the period to increase current assets other than cash, and $99,000 was provided by an increase in accounts payable and accrued liabilities. Cash for operations was provided, in part, by the sale and distribution of marketable securities of $1,757,000 and the issuance of Common Stock and net increase in long-term debt in an aggregate amount of $1,930,000, and from the sale of subsidiaries of $1,729,000. The Company has borrowed funds from MG Trade Finance Corp. ("MGTF"). As part of the MIP Transaction, the Company agreed to change the maturity date for payment of the unpaid balance due to MGTF (currently $2,108,000) to September 30, 1997 from March 31, 1998. In addition, the Company pledged 1,000,000 shares of the MIP Shares to further secure the Loan Agreement with MGTF. The Company expects to pay the balance due on the Loan Agreement by the revised due date with some of the proceeds it received from the Debentures. Because of non-payment of lease fees and other items of default under the terms of its lease agreement with the Company, Gold Line was evicted from the Refinery premises on March 20, 1997. The Company filed suit against Gold Line to recover unpaid lease fees and other items totaling approximately $1.8 million and received a judgment related thereto of approximately $1.5 million. All past amounts due from Gold Line have been previously reserved, including a charge to the reserve for bad debts during the first quarter of 1997 for $443,000 representing the unpaid processing fees for that period. On August 8, 1997, Gold Line filed for protection under Chapter 11 of the U.S. Bankruptcy Code; therefore no assurance can be given that the Company will be able to collect on this judgment. The Company has sufficient capital, or access thereto, to complete the expansion of the Refinery to enable the implementation of its asphalt operations and to make any preliminary oil and gas related expenditures in Kazakstan (See discussion below). The asphalt and other operations at the Refinery are expected to provide the Company with the future capital necessary to fund its oil and gas operations, or place the Company in a position where it is able to access conventional financing for such projects. During the next twelve months, the Company plans to spend up to $2 million for the Refinery expansion, which it expects to fund in part by proceeds from the Debentures, internally-generated cash flow from 10 refinery operations, and/or with the principal ($1.5 million is callable by the Company in February 1998) and interest payments it receives from the Exchangeable Debenture. The Company is also having discussions with other financing entities who have expressed interest in financing further expansion and future operations at the Refinery. The phase one construction of the Refinery expansion, necessary to implement operations, should be completed this month. By the fourth quarter of this year, the Company plans to commence asphalt processing. The Company recently signed an agreement with a German-based company, MED Shipping & Trading S.A. ("MED") for the purchase of a 70% working interest in a 4.7 million acre oil and gas concession (the "License") in the Usturt Basin of Western Kazakstan. The License has been transferred by the Kazakstan government to MED Shipping Usturt Petroleum Company Limited ("MSUP"), a joint venture limited liability company, which has been formed to manage the License operations. The Company owns 70% of MSUP through its newly-formed and wholly-owned subsidiary American International Petroleum Kazakstan ("AIPK"), which will handle all of the Company's operations in Kazakstan. The License area is located in western Kazakstan approximately 125 kilometers southeast of Chevron's multi-billion barrel Tengiz Oil Field and the Caspian Sea. The area is bordered to the south by Elf Acquitain's license and to the west by both Oryx/Exxon and Amoco licenses. Evaluation by the Company's independent petroleum engineers indicates the presence of potential recoverable reserves on seven structures, located in the western half of the License near major pipeline systems. Additional structures have been identified in the License area, but have not been evaluated. Regional seismic data on the eastern half of the License area indicates additional structures, the largest of which, the "Chikuduk", measures approximately 50 kilometers in length. This structure, whose reserves are not yet estimated, could provide the largest potential deposits in the License area. The Company plans to continue its evaluation of the area and expects to expand its evaluation program as additional data is released to the Company by the government. The License area provides various commercial options for oil or gas production, since there are several oil and gas pipelines which cross the area. The existing infrastructure permits rapid development and marketing of production and flexibility in securing acceptable markets for same. Production can be sold north to Russia, Finland and the Atyrau Refinery, and/or south through the Caspian Sea at Aktau for export abroad. The Company paid $100,000 in cash and 300,000 shares of its Common Stock, issued pursuant to Regulation S, to MED in return for the option to acquire a 40% working interest in the License. Further 11 negotiations resulted in an increase in the working interest to 70%. As consideration for its 70% interest in MSUP, the Company issued an additional 2,950,000 shares of its Common Stock, and warrants to purchase an aggregate of 500,000 shares of its Common stock, at an exercise price of $2.00 per share, pursuant to Regulation S. The Company will be responsible for operating the License operations and funding all obligations therefor. The License requires aggregate minimum capital expenditures of $14.75 million during the initial five year exploration period, of which approximately $6.3 million must be expended during the first three years for seismic and drilling. The Company is currently having discussions with various oil companies who have expressed a preliminary interest in the License area. The Company is having discussions with various financing entities regarding non-equity financing arrangements to provide funding for upcoming operations, the repayment of the Debenture, and other capital it may require. However, there is no assurance of success of any financing efforts the Company may pursue or the timing or success of its Refinery projects and/or its other potential projects. In the event that the Company is not able to fund its projects on its own in a timely manner, management believes it will be able to obtain partners for certain projects, however, such projects could be delayed or curtailed. As a result of the sale of two of its subsidiaries and the eviction of Gold Line, the Company has no current operating cash flows. Therefore, until the implementation of new operations at its Refinery, or elsewhere, and absent any new financing it may obtain, the Company will rely on its existing working capital and principal and interest payments from the Exchangeable Debenture to sustain its business operations. 12 RESULTS OF OPERATIONS For the Six Months Ended June 30, 1997 as compared to the Six Months Ended June 30, 1996 The following table highlights the Company's results of operations for the six months ended June 30, 1997 and 1996. For The Six Months Ended June 30, 1997 1996 -------- ---------- Exploration and Production Activity: Colombia Properties: (1) Revenues - Oil Sales (000's) $ 261 $ 641 Lease Operating Expenses (000's) $ 99 $ 212 Production Volume - Bbls 18,625 73,098 Average Price per Bbl $ 14.01 $ 8.77 Production Cost per Bbl $ 5.31 $ 2.90 DD&A per Bbl $ 3.77 $ 3.77 Peru Properties: (2) (2) -------- --------- Refinery Operations: (3) Refinery Lease Fees (000') $ 443 $ 1,047 Average Daily Throughput 9,838 11,574 Average Throughput Fee $ 0.50 $ 0.50 -------- -------- - --------------------------------------------------------------------------- (1) Reflects activity through February 25, 1997 (2) Information for 1997 and 1996 is not available due to a dispute with the Company's partner. (3) Reflects refinery activities through March 20, 1997. Oil and Gas Operations: The results of operations for Colombia and Peru for 1997 reflect results for the period through February 25, 1997, the date of the sale of the Colombia and Peru subsidiaries, compared to six full months of operations reflected in 1996. Refinery Operations: The results of operations for the Refinery for 1997 reflect results for the period through March 20, 1997, the date the Company evicted 13 it's tenant, compared to six full months of operations reflected in 1996. Other Revenue: Other revenues decreased approximately $42,000, or 33%, during the current period compared to the same period in 1996. The decrease is primarily due to a decrease in other revenues previously attributable to the Colombia operations prior to the sale as previously discussed. General and Administrative: General and Administrative ("G&A") expenses increased approximately $1,422,000 compared to the same period during 1996 primarily due to approximately $230,000 in non-recurring expenses related to the legal proceedings against Gold Line, a non-cash charge for stock issued for services of approximately $134,000, a loss of approximately $234,000 on the sale and disposition of portion of the MIP Shares, and a non-recurring $695,000 adjustment to partially compensate key employees whose salaries have remained unchanged for the past five years and additionally as an incentive to ensure that the Company maintains a competitive position in the industry regarding the continuity of the employment of its employees. Depreciation, Depletion and Amortization Depreciation, Depletion, and Amortization decreased approximately $265,000 during the current period compared to the same period last year due primarily to the decrease in oil production from Colombia during the current period as compared to the same period last year. Interest Expense Interest expense increased approximately $80,000 during the first six months of 1997, primarily due to a $189,000 increase in accrued interest expense related to certain excise taxes payable, which charge was partially offset by a $100,000 decrease resulting from a reduction in long-term debt of approximately $2.3 million during the period. Unrealized Loss on Marketable Securities Marketable securities of MIP, 4,384,375 shares, held by the Company were valued at $2.00 per share when acquired. At March 31, 1997 the current market price was $1.60 per share, resulting in a net unrealized loss of $1,754,000. At June 30, 1997 the market price was $1.10 per share, resulting in a net unrealized loss of $1,640,000 on shares held at June 30, 1997. Total unrealized loss for the period ended June 30, 1997 was $3,393,727. Loss on Sale of Assets 14 The Company recorded an aggregate $564,000 to reflect the current discounted fair value of the Exchangeable Debenture and the $1.4 million performance earn-out received in the MIP Transaction. RESULTS OF OPERATIONS For the Three Months Ended June 30, 1997 as compared to the Three Months Ended June 30, 1996 The following table highlights the Company's results of operations for the three months ended June 30, 1997 and 1996. For The Three Months Ended June 30, 1997 1996 ---- ---- Exploration and Production Activity: Colombia Properties: Revenues - Oil Sales (000's) (1) $337 Lease Operating Expenses (000's) (1) $101 Production Volume - Bbls (1) 36,332 Average Price per Bbl (1) $9.28 Production Cost per Bbl (1) $2.78 DD&A per Bbl (1) $3.77 Peru Properties: (1) (2) ---------------- Refinery Operations: Refinery Lease Fees (000') (3) $479 Average Daily Throughput (3) 10,641 Average Throughput Fee (3) $0.50 - ----------------------------------------------------------------- (1) Colombia and Peru properties were sold as of February 25, 1997 (2) Information for 1996 is not available due to a dispute with the Company's partner. (3) The refinery's tenant was evicted as of March 20, 1997. Oil and Gas Operations: 15 The date of the sale of the Colombia and Peru subsidiaries was February 25, 1997, therefore there were no operations for the three months ended June 30, 1997. Refinery Operations: The Company evicted it's lessee on March 20, 1997, therefore there were no operations for the three months ended June 30, 1997. Other Revenue: Other revenues decreased approximately $27,000, or 34%, during the current quarter compared to the same quarter of 1996. The decrease is primarily due to a decrease in other revenue as a result of the sale of the Colombia operations. General and Administrative: G&A expenses increased approximately $372,000 compared to the same period during 1996, primarily due to the following reasons: a non-cash charge during the current period for issuance of stock for $134,000 for services rendered; non-recurring legal fees of approximately $31,000 incurred during the current period, which were attributable to the Company's legal proceedings against Gold Line, as discussed above; during the current period the Company recognized a loss of approximately $234,000 on the sale and disposition of certain marketable securities it held; and property taxes and insurance cost have increased approximately $85,000 during the current quarter compared to the same period in 1996, due to the Company having to absorb additional costs as a result of the eviction of the refinery lessee, as previously discussed. Depreciation, Depletion, and Amortization Depreciation, Depletion, and Amortization decreased approximately $191,000 during the current period compared to the same period last year due to the lack of any oil production from Colombia during the current quarter as a result of the sale of this subsidiary as previously discussed. Interest Expense Interest expense decreased approximately $231,000 during the first quarter of 1997, compared to the first quarter of 1996. A decrease of approximately $737,000 was attributed to the decrease in imputed interest during the current period, compared to the same period last year. Approximately $37,500 additional interest expense was incurred during the current period to redeem approximately $150,000 of the Company's outstanding convertible debentures , which would have otherwise been converted into the Company's stock. 16 Approximately $138,000 of amortized bond costs was charged as interest expense during the current period, compared to $38,000 charged in the same period last year, attributable to the Company's outstanding and retired debentures during the current period. Unrealized Loss on Marketable Securities Marketable securities held by the Company at June 30, 1997, and carried at a lower of cost or market value of $1.60 since March 31, 1997, had a market price at June 30, 1997 of $1.10 per share, resulting in a net unrealized loss of $1,640,000 during the current quarter. Loss on Sale of Assets The Company recorded an aggregate of $564,000 to reflect the current discounted fair value of the Exchangeable Debenture and the $1.4 million performance earn-out received in the MIP Transaction. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION See Part I, Item 2, above. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.1 Form of 8% Convertible Subordinated Debentures due August 1, 1999.* 4.2 Form of Subscription Agreement used in connection with the offering of the Registrants' debentures, the form of which is attached hereto as Exhibit 4.1.* 4.3 Form of Warrant to purchase shares of the Registrants' Common Stock issued in connection with the offering of the Registrants' debentures, the form of which is attached hereto as Exhibit 4.1.* 4.4 Form of Registration Agreement used in connection with the offering of the Registrants' debentures, the form of which is attached hereto as Exhibit 4.1.* 27.1 Financial Data Schedule.
* Submitted with original Form 10Q filed on August 15,1997. (b) Reports on Form 8-K. 17 None. 18 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: November 19, 1997 AMERICAN INTERNATIONAL PETROLEUM CORPORATION By/s/ Denis J. Fitzpatrick Denis J. Fitzpatrick Chief Financial Officer EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 4.1 Form of 8% Convertible Subordinated Debentures due August 1, 1999. 4.2 Form of Subscription Agreement used in connection with the offering of the Registrants' debentures, the form of which is attached hereto as Exhibit 4.1. 4.3 Form of Warrant to purchase shares of the Registrants' Common Stock issued in connection with the offering of the Registrants' debentures, the form of which is attached hereto as Exhibit 4.1. 4.4 Form of Registration Agreement used in connection with the offering of the Registrants' debentures, the form of which is attached hereto as Exhibit 4.1. 27.1 Financial Data Schedule. 19 -----END PRIVACY-ENHANCED MESSAGE-----