10-Q 1 0001.txt QUARTERLY REPORT SECURITIES EXCHANGE COMMISSION Washington D.C 20549 (Mark One) FORM 10-Q ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly X Period Ended January 31, 2001 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 0-9923 IMPERIAL PETROLEUM, INC. (Exact name of registrant as specified in its charter) Nevada 95-3386019 (State or other jurisdiction (IRS Employer identification No.) of incorporation or organization) 100 NW Second Street Suite 312 Evansville, Indiana 47708 Registrant's telephone number, including area code (812) 424-7948 Not Applicable (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 ____ On January 31, 2001, there were 12,504,165 shares of the Registrant's common stock issued and outstanding. IMPERIAL PETROLEUM, INC. Index to Form 10-Q for the Quarterly Period Ended January 31, 2001 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Page Consolidated Balance Sheets as of July 31, 2000 and January 31, 2001 4-5 Consolidated Statements of Operations for the three months ended January 31,2001 and 2000. 6 Consolidated Statements of Cash Flows for the three months ended January 31, 2001 and 2000 7 Notes to Consolidated Financia lStatements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 13 PART II - OTHER INFORMATION The information called for by Item 1. Legal Proceedings, Item 2.Changes in Securities, Item 3. Default Upon Senior Securities, Item 4. Submission of Matters to a Vote of Security Holders, Item 18 5. Other Information and Item 6. Exhibits and Reports on Form 8- K have been omitted as either inapplicable or because the answer thereto is negative, except as discussed. SIGNATURES 19 Part I Financial Information IMPERIAL PETROLEUM, INC. CONSOLIDATED BALANCE SHEET UNAUDITED (January 31, 2001) 31-Jan-01 31-Jul-00 ASSETS Current Assets Cash $ 12,960 $ 180 Accounts Receivable -other 12,317 0 Other current assets 4,925 0 Total 30,202 180 Property, Plant and Equipment Other depreciable equipment 5,166 5,166 Mining claims, options and 41,760 41,760 Acquisition in 4,000 4,000 Prog Less Accumulated Depr (1,107) (1,107) Net property, plant and equipment 49,817 49,819 Other Assets Investment in subsidiary 1,191,928 1,216,982 Accounts receivable-related party 174,955 138,713 Other non-current assets 0 21,119 Total other assets 1,366,883 1,376,814 TOTAL ASSETS $ 1,446,904 $ 1,426,813 IMPERIAL PETROLEUM, INC. CONSOLIDATED BALANCE SHEET UNAUDITED - January 31, 2001 31-Jan-01 31-Jul-00 LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $176,541 $176,541 Accounts payable-other 0 0 Accrued expenses 864,405 755,460 Unearned revenue 0 0 Notes payable 157,500 119,500 Notes payable-related party 744,547 744,547 Total current 1,942,993 1,796,048 liabilities Non-current Liabilities Unearned revenue 304,359 304,359 Notes payable, less current portion 0 0 Total non-current liabilities 304,359 304,359 Stockholder's Equity Common stock 75,025 75,025 Additional paid-in capital 3,791,520 3,791,520 Treasury stock -579,804 -579,804 Retained earnings -3,479,794 -3,352,940 Other Comprehensive Income -607,395 -607,395 Total stockholder's equity -800,448 -673,594 Total Liabilities and Stockholder's Equity $ 1,446,904 $ 1,426,813 IMPERIAL PETROLEUM,INC. CONSOLIDATED STATEMENT OF OPERATIONS UNAUDITED Three Months Six Months Ending Ending 31-Jan-01 31-Jan-00 31-Jan-01 31-Jan-00 Operating Income: Oil and gas revenue $ - $ - $0 $0 Management and fee income 18,224 23,064 24,316 30,099 Total operating income 18,224 23,064 24,316 30,099 Operating Expenses: Oil and gas lease operations 0 0 0 0 Dry Hole costs 0 0 0 0 Mining operating expense 0 0 0 0 General and administrative expense 58,517 55,431 108,526 125,415 Depreciation and depletion 0 0 0 0 Total operating expense 58,517 55,431 108,526 125,415 Income/Loss from operations -40,293 -32,367 --84,210 -95,316 Other Income/expense Interest expense 23,745 20,362 42,645 42,820 Gold certificate income-net 0 0 0 0 Loss on marketable 0 0 0 0 Loss on write-down of mining equipment 0 0 0 0 Gain/ loss on sale of assets 0 0 0 0 Total other income/expense 23,745 20,362 42,645 42,820 Net Loss Before Income Taxes -64,038 -52,729 -126,855 -138,136 Provision for Income Taxes Current 0 0 0 0 Deferred 0 0 0 0 Total benefit from incoe taxes 0 0 0 0 Net Income/Loss $ (64,038) (52,729) (126,855) (138,136) Income/Loss per share ($0.005) ($0.004) ($0.009) ($0.010) Weighted average shares outstanding 13,504,165 13,504,165 13,504,165 13,504,165 IMPERIAL PETROLEUM, INC. CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED Three Months Ending 31-Jan-01 31-Jan-00 Net cash provided by (used in) $2,849 -$282,629 operations Net cash provided by (used in) investing activities: Capital additions and property 0 0 acquisitions Dispositions 0 0 Other -15,123 -7,334 Total -15,123 -7,334 Net cash provide by (used in) financing activities: Repurchase of common stock 0 0 Issuance of common stock 0 6,000 Deferred Revenue 0 150,000 Notes payable 0 0 Notes payable-related party 0 24,000 Paid-in 0 109,398 Capital Total 0 289,398 Decrease in cash and equivalents 12,780 434 Cash and cash equivalents at beginning of period -180 -596 Cash and cash equivalents at end of 12,960 1,030 period Supplemental disclosures of Cash Flow 42,645 Information Interest 22,458 Cash paid Income taxes 0 0 during the period for: For the purposes of cash flows, the Company considers all highly liquid debt instruments Purchased with a maturity of three months or less to be cash equivalents. PART I - FINANCIAL INFORMATION IMPERIAL PETROLEUM, INC. Notes to Consolidated Financial Statements Unaudited January 31, 2001 (1) General The accompanying interim condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the periods presented are not necessarily indicative of the results which may be expected for the year ending July 31, 2001. These condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended July 31, 2000. Unless the context requires otherwise, all references herein to the Company include Imperial Petroleum, Inc., and its consolidated subsidiaries. Ridgepointe Mining Company, a Delaware corporation ("Ridgepointe"), I.B. Energy, Inc., an Oklahoma corporation ("I.B. Energy"), Premier Operating Company, a Texas corporation ("Premier"), LaTex Resources International, a Delaware corporation ("LRI"), Phoenix Metals, Inc., a Texas corporation ("Phoenix"). Premier was sold effective July 31, 1996. LRI and Phoenix were acquired effective April 30, 1997. Eighty- percent control of SilaQuartz was acquired effective November 23, 1998 as an investment. The Company acquired 90% control of Oil City effective August 31, 1998 as an investment. The Company Imperial Petroleum, Inc., a Nevada corporation ("the Company"), is a diversified energy, and mineral mining company headquartered in Evansville, Indiana. The Company has historically been engaged in the production and exploration of crude oil and natural gas in Oklahoma and Texas and has diversified its business activities to include mineral mining, with a particular emphasis on gold mining. The Company intends to utilize its oil and natural gas assets to support and enhance its mining activities. The Company expects to focus its future growth in both energy and mining ventures. At July 31,2000, the Company had completed the acquisition of 90% control of Oil City Petroleum, Inc. a Tulsa, Oklahoma based energy producer and Oil City had subsequently sold its primary oil and gas assets to Comanche Energy, Inc. ("Comanche"). As a result, the Company became a significant shareholder in Comanche. The Company does not presently operate any oil and natural gas properties directly. Historical Background The Company was incorporated on January 16, 1981 and is the surviving member of a merger between itself, Imperial Petroleum, Inc., a Utah corporation incorporated on June 4, 1979 ("Imperial-Utah"), and Calico Exploration Corp., a Utah corporation incorporated on September 27, 1979 ("Calico"). The Company was reorganized under a Reorganization Agreement and Plan and Article of Merger dated August 31, 1981 resulting in the Company being domiciled in Nevada. On August 11, 1982, Petro Minerals Technology, Inc. ("Petro"), a 94% -owned subsidiary of Commercial Technology Inc. ("Comte") acquired 58% of the Company's common stock. Petro assigned to the Company its interests in two producing oil and gas properties in consideration for 5,000,000 shares of previously authorized but unissued shares of common stock of the Company and for a $500,000 line of credit to develop these properties. Petro has since undergone a corporate reorganization and is now known as Petro Imperial Corporation. On August 1,1988 in an assumption of assets and liabilities agreement, 58% of the Company's common stock was acquired from Petro by Glauber Management Co., a 100% owned subsidiary of Glauber Valve Co., Inc. Change of Control. Pursuant to an Agreement to Exchange Stock and Plan of Reorganization dated August 27, 1993 (the "Stock Exchange Agreement"), as amended by that certain First Amendment to Agreement to Exchange Stock and Plan of Reorganization dated as of August 27, 1993, (the "First Amendment"), between Imperial Petroleum, Inc. (the "Company"), Glauber Management Company, a Texas corporation, ("Glauber Management"), Glauber Valve Co Inc., a Nebraska corporation, ("Glauber Valve"), Jeffrey T. Wilson ("Wilson"), James G. Borem ("Borem") and those persons listed on Exhibit A attached to the Stock Exchange Agreement and First Amendment (the "Ridgepointe Stockholders"); the Ridgepointe Stockholders agreed to exchange (the "Ridgepointe Exchange Transaction") a total of 12,560,730 shares of the common stock of Ridgepointe Mining Company, a Delaware corporation ("Ridgepointe"), representing 100% of the issued and outstanding common stock of Ridgepointe, for a total of 12,560,730 newly issued shares of the Company's common stock, representing 59.59% of the Company's resulting issued and outstanding common stock. Under the terms of the Stock Exchange Agreement, (i) Wilson exchanged 5,200,000 shares of Ridgepointe common stock for 5,200,000 shares of the Company's common stock representing 24.67% of the Company's issued and outstanding common stock, (ii) Borem exchanged 1,500,000 shares of Ridgepointe common stock for 1,500,000 shares of the Company's common stock representing 7.12% of the Company's issued and outstanding common stock, and (iii) the remaining Ridgepointe Stockholders in the aggregate exchanged 5,860,730 shares of Ridgepointe common stock for 5,860,730 of the Company's issued and outstanding common stock, representing, in the aggregate, 27.81% of the Company's issued and outstanding common stock. The one for-one ratio of the number of shares of the Company's common stock exchanged for each share of Ridgepointe common stock was determined through arms length negotiations between the Company, Wilson and Borem. The Ridgepointe Exchange Transaction was closed on August 27, 1993. As a result, Ridgepointe is now a wholly, owned subsidiary of the Company. At the time of acquisition, Ridgepointe was engaged in the development of a copper ore mining operation in Yavapai County, Arizona and, through its wholly owned subsidiary, I.B. Energy, Inc., an Oklahoma corporation ("I.B Energy"), in the exploration for and production of oil and gas in the Mid-continent and Gulf Coast regions of the United States. In connection with the closing of the Ridgepointe Exchange Transaction, each member of the Board of Directors of the Company resigned and Wilson, Borem and Dewitt C. Shreve ("Shreve") were elected Directors of the Company. In addition, each officer of the Company resigned and the Company's new Board of Directors elected Wilson as Chairman of the Board, President and Chief Executive Officer, Borem as Vice President and Cynthia A. Helms as Secretary of the Company. Ms. Helms subsequently resigned and Kathryn H. Shepherd was elected Secretary. Mr. Borem, Mr. Shreve and Ms. Shepherd subsequently resigned and Mr. Malcolm W. Henley and Mrs. Stacey D. Smethers were elected to the Board. The Board of Directors further authorized the move of the Company's principal executive offices from Dallas, Texas to its current offices in Evansville, Indiana. As a condition to closing the Ridgepointe Exchange Transaction, the Company received and canceled 7,232,500 shares of the Company's common stock from the Company's former partner, Glauber Management, and 100,000 shares of the common stock of Tech-Electro Technologies, Inc from an affiliate of Glauber Management and Glauber Valve. In addition, pursuant to the terms of the First Amendment, Glauber Management or Glauber Valve, or their affiliates, were to transfer to the Company 75,000 shares of common stock of Wexford Technology, Inc. (formerly Chelsea Street Financial Holding Corp.) no later than October 31, 1993, such transfer subsequently occurred. The Company entered into negotiations during fiscal 1999 with Asia Pacific Capital Corporation, a merchant banking firm located in Sydney, Australia, to provide project financing for its mining and energy projects in connection with an equity infusion. If completed under the present structure, Asia Pacific would acquire 20 million shares of the Company's restricted common stock in exchange for $12 million and a commitment to project finance up to $47 million of the Company's mining and energy projects. Asia Pacific has encountered difficulties in securing its funds to complete the proposed transaction, however, the Company continues to work with Asia Pacific in furtherance of the original proposed structure. No assurances can be given that Asia Pacific will complete its funding and if completed will elect to finalize its plans to purchase shares of stock from the Company. Subsequent to year end and as a result of capital constraints, the Company decided not to renew its mineral leases on any of its mineral claims except the Duke Gold Mine in Utah. Management believes that the Company should focus all of its resources and efforts into operations of the Duke Gold Mine and into the development of its oil and natural gas business. On October 19, 2000 the Company entered into an agreement to sell 5,231,901 shares of the common stock of Comanche Energy, Inc. to Ravello Capital, LLC for $523,190 in cash. Ravello was to pay a total $74,800 in cash to a judgement creditor of the Company and the balance was to be paid to Imperial. Under the transaction, Ravello paid a total of $74,800 to the judgement creditor to satisfy its claims and received delivery of the share certificates inot escrow against delivery of the balance of the funds as agreed. Ravello did not complete the payment to the Company as agreed. The Company filed suit in Federal Court in Tulsa County to terminate the balance of the transaction and retrieve its certificates. (See "Litigation"). On October 12, 2000 the Company entered into a no-cost option to purchase 42,300 acres of leases in southeastern Indiana from Deka Exploration, Inc. The leases are located in the New Albany Shale Gas Play near Seymore, Indiana. Under the terms of the Agreement, The Company, at its election, can participate in the completion of the initial two wells that have been drilled on the acreage and the drilling of a total of five additional wells prior to making its election to purchase the acreage. During the option phase, the Company would pay 100% of the costs of the completion and drilling operations. Upon its election to continue with the project, the Company would own an 85% working interest in the acreage and would be required to pay acreage costs of $10.00 per acre. The project is scheduled to commence April 2001. (2) ACCOUNTING POLICIES The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring items) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Ridgepointe Mining Company financial statements and notes thereto as of July 31, 1995 which are included in the Company's Form 8-K disclosure statement for the reverse acquisition by Ridgepointe of Imperial and included herein by this reference. (3) NOTES PAYABLE The Company enters into private notes primarily from its major shareholders from time-to-time in the course of funding its mining and other activities. As of January 31, 2001, the Company had a total of 6 notes payable to individuals and private companies totaling $902,047, in principal, of which $744,547 was with its Chairman and President. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. GENERAL RESULTS OF OPERATIONS The factors which most significantly affect the Company's results of operations are (i) the sale prices of crude oil and natural gas, (ii) the level of oil and gas sales., (iii) the level of lease operating expenses and (iv) the level of and interest rates on borrowings. The Company will need to rely on the initiation operations on its mining ventures and its oil and natural gas operations to generate cash flow and future profits. The same factors listed above will apply to the sale of minerals and metals mined by the Company as well as oil and natural gas produced by the Company. As the Company initiates production on its mining properties, results of operations will be affected by: (i) commodity prices for copper and gold. (ii) the quantity and quality of the ores recovered and processed and (iii) the level of operating expenses associated with the mining operations. Prices for gold had remained relatively stable during the past several years and had generally reflected the relatively low inflation rates predominate in the economies of the industrialized nations. Recently, gold prices began a significant downward price adjustment, which may reflect a shift from the traditional dependence upon gold as a financial hedge against inflation. Current spot prices for gold are $265.00 per ounce and are expected to continue to remain at or near those levels. The Company does not expect to realize any substantial increase in the price of gold in the future. Copper prices have fluctuated dramatically since the Company's acquisition of its copper property with prices ranging from a low of about $0.65 per pound in August 1993 to a high of $1.20 per pound in 1995 to current levels of about $0.80 per pound. Wide variations in copper prices have resulted from the increased demand for electrical wire and copper related products as a result of the continued high growth rate of the economies of the industrialized nations and as a result of periodic reductions in the availability of scrap copper for recycling. Continued fluctuations in the spot price for copper are expected to result from variations in the availability of scrap copper and the continued strong demand from emerging nations. Concerns regarding the economies of the Pacific Rim nations, and in particular Japan, have recently dampened demand for copper and will likely impact its price until such time as stability is achieved in those economies. With the initiation of production from the Duke Gold Mine in Utah, the Company's principal source of cash flow will be the production and sale of gold. Cash flow from gold sales depends upon the quantity of production and the price obtained for such production. An increase in prices permits the Company to finance its operations to a greater extent with internally generated funds. A decline in gold prices reduces the cash flow generated by the Company's operations, which in turn reduces the funds available for servicing debt, acquiring additional mining properties and for developing and expanding its mining operations. Development of its oil and natural gas leases will subject the Company's revenues to the fluctuations inherent in the energy business for the last several years. Crude oil and natural gas prices have reached record highs during the last several months and expectations are that prices for these commodities will remain above prior levels in the future. Current crude oil prices as posted on the New York Mercantile Exchange (NYMEX) are in the $23.00 to $25.00 per barrel range while natural gas prices have reached highs of $9.00 per MMBTU during the winter months of 2000. The Company expects energy prices to continue to be volatile in the future. Three Months Comparison Quarter ended January 31, 2001 compared to Quarter ended January 31, 2000. Revenues for the three months ending January 31, 2001 were $18,224 compared to $23,064 for the comparable quarter ended January 31, 2000 and reflects revenue from the Company's sublease of office space and interest income on notes receivable from affiliates. The decrease in revenues is the result of the termination of sublease agreements with Wexford Technology, Inc. and RealAmerica Co. and the write-off of certain debts owed the Company by Wexford. Any future revenues will result from the start-up of mining operations or from new oil and gas acquisitions. Production and mining operating expenses were $0 for the quarter ended January 31, 2001 compared to $0 for the quarter ended January 31, 2000. No significant operations were conducted during the quarter. The Company expects its operating expenses for mining operations to increase significantly upon installation of its permanent plant at the Duke Mine. General and administrative costs remained about the same with costs of $58,517 for the three months ending January 31, 2001 compared to $55,431 for the same period a year earlier and primarily reflects the level of normal G&A expenses. G &A should continue to increase as the Company begins continuous mining operations and initiates a corporate public relations campaign. Interest expense for the quarter increased from $20,362 in 2000 to $23,745 for the same period in 2001 and reflects the higher borrowings by the Company from private debt sources. The Company had an after-tax net loss of $64,038 ($0.005 per share) for the quarter ended January 31, 2001 compared to a net loss of $52,729 ($0.004 per share) for the comparable quarter a year earlier. The increase in net loss in income is attributable primarily to increased interest costs and less revenue generated from the sublease of office space. The Company does not expect to generate significant income until its mining operations are in production. Six Months Comparison Six Months ended January 31, 2001 compared to Six Months ended January 31, 2000. Revenues for the six months ending January 31, 2001 were $24,316 compared to $30,099 for the comparable period ended January 31, 2000 and reflects revenue from the Company's sublease of office space and interest income on notes receivable from affiliates. The decrease in revenues is the result of the termination of sublease agreements with Wexford Technology, Inc. and RealAmerica Co. and the write-off of certain debts owed the Company by Wexford. Any future revenues will result from the start-up of mining operations or from new oil and gas acquisitions. Production and mining operating expenses were $0 for the six months ended January 31, 2001 compared to $0 for the period ended January 31, 2000. No significant operations were conducted during the period. The Company expects its operating expenses for mining operations to increase significantly upon installation of its permanent plant at the Duke Mine. General and administrative costs remained about the same with costs of $108,526 for the six months ending January 31, 2001 compared to $125,415 for the same period a year earlier and primarily reflects the level of normal G&A expenses. G &A should continue to increase as the Company begins continuous mining operations and initiates a corporate public relations campaign. Interest expense for the period remained about the same also from $42,820 in 2000 to $42,645 for the same period in 2001. The Company had an after-tax net loss of $126,855 ($0.009 per share) for the six months ended January 31, 2001 compared to a net loss of $138,136 ($0.010 per share) for the comparable period a year earlier. The increase in net loss in income is attributable primarily to increased interest costs and less revenue generated from the sublease of office space. The Company does not expect to generate significant income until its mining operations are in production. CAPITAL RESOURCES AND LIOUIDITY The Company's capital requirements relate primarily to its mining activities and the expansion of those activities and the development of its oil and natural gas business. Prior to the change in control, the Company funded its very limited activities from cash flow. The Company, through its subsidiaries, had established credit facilities with a bank to facilitate the funding of its operations. As a result of the sale of its Premier Operating subsidiary in October, 1996, the Company retired its principal bank debt and no longer has access to financing from that source. As a result of the inability of the Company to raise capital, Management decided to terminate all of the Company's mining lease commitments except the Duke Gold Mine in Utah. As a result, the Company is active in only one mine that will require significant capital expenditures. In addition, Management determined that the Company should position itself in a high-profile natural gas project in an effort to attract capital, and as a result, the Company was able to negotiate a no-cost option on 42,300 acres of leases in the New Albany Shale Gas Play at a time prior to the most recent run-up in natural gas prices. The Company has a wide degree of discretion in the level of capital expenditures it must devote to the mining project on an annual basis and the timing of its development. In the case of the New Albany Shale Project, the Company will be required to be in a position to commit to the development of Phase I of the project by April 2001 or the project will be forfeited. The Company has primarily been engaged, in its recent past, in the acquisition and testing of mineral properties to be inventoried for future development. Because of the relative magnitude of the capital expenditures that may ultimately be required for any single mining venture as operations are achieved, Management has pursued a strategy of acquiring properties with significant mineral potential in an effort to create a mineral property base sufficient to allow the Company to access capital from external sources, either through debt or equity placements. In order to develop its properties in a continuous manner in the future, Management believes the Company will need to raise capital from outside sources during fiscal 2001. The Company entered into negotiations in 2000 with Asia Pacific Capital Corporation, a merchant banking firm headquartered in Sydney, Australia, to provide an equity infusion of $12 million for the purchase of 20 million shares of the Company's restricted common stock and would provide project financing of up to $47 million. The principals of Asia Pacific have indicated funding of the equity infusion should occur in February 2001. No agreements have been signed between the Company and Asia Pacific yet. If the transaction completes, Asia Pacific would become the Company's principal shareholder. There can be no assurance that Asia Pacific will complete the equity purchase. As a result of the acquisition of control of Oil City and the subsequent sale of Oil City's assets to Comanche, the Company owned 5,481,901 shares of the restricted common stock of Comanche. The Company entered into a transaction with Ravello Capital LLC in order to raise cash to pay off a judgement creditor, its private, non-affiliate noteholders and to raise capital for its New Albany Shale Project. As discussed previously, Ravello paid the judgement creditor, however, has failed to complete the balance of the transaction and the Company has filed suit against Ravello for breach of contract, among other things. As a result, Management does not believe the block sale of the Comanche shares to Ravello will complete and the Company is considering seeking a new buyer. Subsequent to the end of the quarter, the Company signed an agreement with Kilpatrick & Hart Ltd. of New Jersey to act as agents for the Company in attempting to complete a financing for the Company's capital projects. The initial project under consideration by finance sources arranged by K&H is a $20 million equity credit line for the funding of the New Albany Shale Natural Gas Project. The Company has signed the Authorization to Secure Financing Agreement and has paid a retainer fee to K&H for its efforts in securing the financing. Due diligence is expected to require 30-60 days. There can be no assurance that the terms included in the proposal from K&H will be acceptable or will not be modified, upon the completion of due diligence, and as a result there is no assurance that the K&H transaction will complete as planned. The Company intends to continue to pursue each of the above transactions in an effort to finance its operations as well as other sources, however, in the event that the funds from Asia Pacific or the K&H transaction are not received or are not received timely or in the event that additional capital is not obtained from other sources, it may become necessary to alter development plans or otherwise abandon certain ventures. Although the timing of expenditures for the Company's mining and oil and natural gas activities are distributed over several months, the Company anticipates its current working capital will be insufficient to meet its capital expenditures. The Company believes it will be required to access outside capital either through debt or equity placements or through joint venture operations with other mining or oil and natural gas companies. There can be no assurance that the Company will be successful in its efforts to locate outside capital or that the funds to be provided by Asia Pacific or K&H will be received timely, if at all, and as a result the level of the Company's planned mining and oil and natural gas activities may need to be curtailed, deferred or abandoned entirely. The level of the Company's capital expenditures will vary in the future depending on commodity market conditions and upon the level of and mining activity achieved by the Company. The Company anticipates that its cash flow will be insufficient to fund its operations at their current levels and that additional funds will be required. The Company sold its oil and gas properties in October 1996 and its Premier Operating subsidiary and paid off its then existing credit facility with Bank of Oklahoma. As a result the Company presently has no credit facility available to fund its mining or oil and natural gas activities and will be required to rely on private debt placements or equity sales to fund any remaining capital expenditures. The Company has obtained certain unsecured loans from its Chairman and President, Jeffrey T. Wilson, which total in principal and accrued interest $744,547 as of January 31, 2001. These funds have been used to initiate the Company's mining activities. Management believes that the Company will not have sufficient borrowing capacity to fund its anticipated needs and will need to access outside capital. At January 31, 2001, the Company had current assets of $30,201 and current liabilities of $1,942,993, which resulted in negative working capital of $1,912,792. The negative working capital position is comprised primarily of notes payable to shareholders and related parties totaling $744,547, accrued salaries and expenses totaling $864,405 and third party notes payable of $157,500. As discussed earlier, if the Company is unsuccessful in obtaining outside capital certain mining or oil and natural gas activities of the Company may be curtailed, postponed or abandoned. The Company believes that its cash flow from operations will continue to be insufficient to meet its ongoing capital requirements and short-term operating needs. As a result the Company plans to seek additional capital from outside sources through the placement of additional debt or equity during fiscal 2001. The previously discussed transactions with Asia Pacific or K&H, if successful, will provide the Company with sufficient funds to pursue its mining and oil and natural gas ventures on the timely basis as discussed herein. Because the availability of debt and equity financing are subject to a number of variables, there can be no assurance that the Company will be successful in attracting adequate financing and as a result may be required to curtail, postpone or abandon certain of its planned capital expenditures. If the Company is unable to attract adequate financing, management believes the Company may be compelled to sell or abandon certain of its assets to meet its obligations. SEASONALITY The results of operations of the Company are somewhat seasonal due to seasonal fluctuations in the ability to conduct mining operations in certain areas, resulting in lower production volumes and due to fluctuations in energy prices due to seasonal variations. To date these variations have been minimal. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of results, which may be realized on an annual basis. As operations commence and production is realized on its mining and oil and natural gas properties, these influences will become more significant. INFLATION AND PRICES The Company's revenues and the value of its mining and oil and natural gas properties have been and will be affected by changes in copper and gold prices. And the prices for crude oil and natural gas. The Company's ability to obtain additional capital on attractive terms is also substantially dependent on the price of these commodities. Prices for these commodities are subject to significant fluctuations that are beyond the Company's ability to control or predict. PART II OTHER INFORMATION Item 1. Legal Proceedings. The Company filed suit in Federal District Court in Tulsa County, Oklahoma against Ravello Capital LLC on November 20, 2000. The suit alleges breach of contract and seeks to have the contract declared partially performed in the amount of $74,800 and seeks relief in the amount of $488,390 for the unpaid consideration and punitive damages and attorneys fees. Item 2. Changes in Securities .Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Not applicable. (b) Current Report on Form 8-K Not applicable. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. Imperial Petroleum, Inc. By: /s/ Jeffrey T. Wilson Jeffrey T. Wilson, President and Chief Executive Officer Dated: February 26, 2001