SECURITIES EXCHANGE COMMISSION
Washington D.C 20549
(Mark One)
FORM 10-K
XX ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE
ACT OF
1934
For the fiscal year
ended July 31, 2002
-------------
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
of incorporation or organization) identification No.)
11600 German Pines 47725
Evansville, IN (Zip Code)
Registrant's telephone number,
including area code (812) 867-1433
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 13(g) of the Act:
Common Stock. $0.006 par value per share
------ ----------------- ----- ---------
(Title of class)
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of the Regulation K is not contained herein, and will not be contained to the
best of the Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _____.
On July 3l, 2002, there were 19,363,946 shares of the Registrant's common stock
issued and outstanding.
The aggregate market value of the Registrant's voting stock held by
non-affiliates is $1,729,568. See Item5. Market for Registrant's Common Stock
and Related Stockholder Matters.
Documents Incorporated by Reference
NONE
IMPERIAL PETROLEUM, INC.
FORM 10-K
FISCAL YEAR ENDED JULY 3l, 2002
TABLE OF CONTENTS
PART I
Page
Item 1. Business 1.
Item 2. Properties 1.
Item 3. Legal Proceedings 13.
Item 4. Submission of Matters to a Vote of Security Holders 13.
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters 14.
Item 6. Selected Financial Data 14.
Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations 14.
Item 8. Financial Statements and Supplementary Data Auditor's Report
(F-1 thru F-22)
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 18.
PART III
Item 10. Directors and Executive Officers of the Registrant 19.
Item 11. Executive Compensation 20.
Item 12. Security Ownership of Certain Beneficial Owners and Management 21.
..
Item 13. Certain Relationships and Related Transactions 21.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
On Form 8-K 25.
Signature 26.
Cautionary Statement Regarding Forward Looking Statements
In the interest of providing the Company's stockholders and potential investors
with certain information regarding the Company's future plans and operations,
certain statements set forth in this Business Plan relate to management's future
plans and objectives. Such statements are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. Although any forward
looking statements contained in this Business Plan or otherwise expressed on
behalf of the Company are, to the knowledge and in the judgement of the officers
and directors of the Company, expected to prove to come true and to come to
pass, management is not able to predict the future with absolute certainty.
Forward looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual performance and financial results in future
periods to differ materially from any projection, estimate or forecasted result.
These risks and uncertainties include, among other things, volatility of
commodity prices, changes in interest rates and capital market conditions,
competition, risks inherent in the Company's operations, the inexact nature of
interpretation of seismic and other geological, geophysical, petro-physical and
geo-chemical data, the imprecise nature of estimating reserves and such other
risks and uncertainties as described from time to time in the Company's periodic
reports and filings with the Securities and Exchange Commission. Accordingly
stockholders and potential investors are cautioned that certain events or
circumstances could cause actual results to differ materially from those
projected, estimated or predicted.
This Business Plan or its dissemination to prospective investors does not
constitute an offer to sell to, or a solicitation of an offer to buy from, nor
shall any of the securities be offered or sold to, any person in any state or
other jurisdiction in which such offer, purchase or sale is unlawful or
unauthorized under the laws of such jurisdiction. The information contained
herein has been prepared to assist interested parties in making their own
evaluation of the Company and does not contain all of the information that a
prospective investor may desire. The Company encourages any prospective investor
to obtain copies of its reports as filed with the Securities & Exchange
Commission through its EDGAR database. The Company does not make any
representation or warranty as to the accuracy or completeness of the information
in this Business Plan and shall have no liability for any representations
(express or implied) contained herein, or for any omissions from this Business
Plan, or any other written or oral communication transmitted to the recipient in
the course of the recipient's evaluation of the Company.
PART I
Item 1. Business and Item 2. Properties
Definitions
As used in this Form 10-K
"Mcf" means thousand cubic feet, "MMcf' means million cubic feet and "Bcf"'
means billion cubic feet "Mcfe" means thousand cubic feet equivalent, "Mmcfe"
means million cubic feet equivalent and "Bcfe" means billion cubic feet
equivalent. "Bbl" means barrel, "MBbls" means thousand barrels and "MMBbls"
means million barrels. "BOE" means equivalent barrels of oil and "MBOE" means
thousands equivalent barrels of oil. Unless otherwise indicated herein. natural
gas volumes are stated at the legal pressure base of the state or area in which
the reserves are located and at 60 degrees Fahrenheit. Natural gas equivalents
are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil
The term "gross" refers to the total leasehold acres or wells in which the
Company has a working interest. The term "net" refers to gross leasehold acres
or wells multiplied by the percentage working interest owned by the Company.
"Net production" means production that is owned by the Company less royalties
and production due others.
"Proved reserves" are estimated quantities of crude oil, natural gas and natural
gas liquids, which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions "Proved developed reserves" are those reserves
which are expected to be recovered through existing wells with existing
equipment and operating methods. "Proved undeveloped reserves" are those
reserves which are expected to be recovered from new wells on undrilled acreage
or from existing wells where a relatively major expenditure is required for
recompletion.
The term "oil" includes crude oil, condensate and natural gas liquids.
"Base Metals" refers to a family of metallic elements, including copper, lead
and zinc.
"Grade" refers to the metal or mineral content of rock, ore or drill or other
samples. With respect to precious metals, grade is generally expressed as troy
ounces per ton of rock.
"Mineable" refers to that portion of a mineral deposit from which it is
economically feasible to extract ore.
"Net Smelter Royalty" is a royalty based on the actual sale price received for
the subject metal less the cost of smelting and/or refining the material at an
offsite refinery or smelter along with off-site transportation costs.
"Patented Mining Claim" is a mining claim, usually comprising about 20 acres, to
which the US Government has conveyed title to the owner.
"Unpatented Mining Claim" is a mining claim which has been staked or marked out
in accordance with federal and state mining laws to acquire the exclusive rights
to explore for and exploit the minerals which may occur on such lands. The title
to the property has not been conveyed to the holder of an unpatented mining
claim.
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") , and Oil City
Petroleum, Inc. ("Oil City"), an Oklahoma corporation and Warrior Resources,
Inc., an Oklahoma corporation. Premier and IB Energy, Inc. were 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 and sold its interest effective November 28, 2000. The
Company owns approximately 365 of the commons stock of Warrior and carries its
ownership under the equity method.
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. In addition to its activities in the energy and
mining businesses, the Company has obtained certain rights to allow it to market
certain environmental products.
At July 31,2002, the Company does not operate any active oil and natural gas
properties directly, although it owns 36% control of manages the operations of
Warrior Resources Inc. (formerly Comanche Energy Inc.) which does operate in the
oil and natural gas business. Warrior Resources, Inc. through its wholly-owned
subsidiary, Double Eagle Petroleum Corporation , owns crude oil and natural gas
properties located in the states of Texas and Mississippi. The Warrior presently
owns an interest in approximately 63 producing natural gas wells and 4 producing
oil wells with daily net production to Warrior's interest of 1,010 MMCFPD and 10
BOPD. Warrior estimates its net proven oil and natural gas reserves as of July
31, 2002 to be approximately 43,600 MMCF of gas and 274 MBBL of oil.
The Company is the operator of the Duke Gold Mine in Utah, although no
significant operations occurred during the prior fiscal year.
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. ("Comtec") 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.
On August 15, 2001, Mr. Malcolm W. Henley and Mrs. Stacey D. Smethers resigned
their positions as directors of the Company to pursue other interests. Their
vacancies have been filled with Mrs. Annalee C. Wilson and Mr. Aaron M. Wilson,
both family members of the Company's President and Chairman, until new directors
are elected at the next shareholder's meeting.
On October 31, 2001, Imperial and Rx Power, a California corporation signed a
non-binding letter of intent wherein the two companies would form a Special
Purpose Vehicle ("SPV") for the purpose of obtaining financing for the
installation of Rx Power's proprietary electric generator units. Imperial will
contribute stock, cash or financing up to the amount of $2,000,000 in five
phases for a 45% interest in the cash flow from the SPV and Rx Power will
contribute its existing contracts and future marketing efforts to the SPV for a
45% interest in the SPV. The project will be managed by a third party, subject
to certain limitations imposed by both companies. The parties are signed a
binding definitive agreement in February 2002 for the consummation of the
transaction. The electricity generator units being developed by Rx Power offer
cost savings to customers up to 25% from their present electricity source based
upon the use of proprietary electronic components and technological advances in
the generation of electricity using natural gas. The primary target market for
these units, initially, is California. Rx Power is still completing the testing
and development of its initial commercial unit. As a result no activity occurred
in the SPV during this fiscal year.
The Company entered into and closed the acquisition of 29,484,572 shares of the
common stock of Warrior Resources, Inc. (formerly Comanche Energy, Inc.),
representing approximately 30.8% of the issued and outstanding shares of Warrior
on February 13, 2002 in connection with an Exchange Agreement (See "Exchange
Agreement" included herein) between the Company and the management of Warrior,
Messers. Luther Henderson and John Bailey. In connection with the Exchange
Agreement, the Company issued 2,266,457 shares of its restricted common stock to
Mr. Henderson, representing 12.9 % of the issued and outstanding shares of
Registrant in exchange for 22,664,572 shares of the common stock of Warrior and
682,000 shares of its restricted common stock to Mr. John Bailey, representing
3.9 % of the issued and outstanding shares of the Company in exchange for
6,820,000 shares of the common stock of Warrior. Mr. Bailey and Mr. Henderson
resigned as officers and directors of Warrior and Mr. Jeffrey Wilson, president
of the Company, was appointed president and sole director of Warrior.
Simultaneously with the closing of the Exchange Agreement with Messrs. Henderson
and Bailey and the change of control of Warrior, the Company entered into an
Agreement and Plan of Merger (See "Agreement and Plan of Merger" included
herein), subject to certain conditions, to offer to acquire the remaining issued
and outstanding capital stock of Warrior through a subsequent offering to be
registered with the Securities & Exchange Commission. The terms of the proposed
exchange of shares with the remaining shareholders of Warrior was on the basis
of one share of Imperial common stock in exchange for ten shares of Warrior
common stock. Completion of the Agreement and Plan of Merger was subject to a
number of conditions, including the completion of audited financials for
Warrior, approval of the Warrior stockholders, the filing and effectiveness of a
registration statement by Registrant for the shares to be offered, the
satisfactory completion of due diligence and other customary closing conditions.
Due to breaches of the agreements by the former management of Warrior, the
Company terminated the proposed merger in August 2002. As a result of the
termination of the merger agreement, the Company has the right to receive
$200,000 or an equivalent value in shares of Warrior valued at $0.02 per share.
Subsequent Events:
The Company assisted Warrior in completing a refinancing of its principal bank
debt and in retiring certain of its trade, notes and accounts payable in
November 2002 and as a result, the note payable to the Company from Warrior has
increased by approximately $1.0 million. As a result of the refinancing of its
principal debt with the bank, Warrior has begun a work program on its wells,
with the direction of the Company, to increase cash flow. The Company ahs been
in negotiations with a third party to sell control of Warrior for an equity
infusion sufficient to allow retirement of the principal bank debt, trade and
accounts payables, including the note with the Company. There is no assurance
that the potential sale will complete.
Business Strategy
The Company's business strategy changed with the acquisition of Ridgepointe in
August 1993 and the change of management to its current management. The Company
had used its limited oil and gas assets to provide the working capital necessary
to expand and develop its mineral mining activities. The Company's initial
emphasis on mining ventures reflected its belief that quality opportunities
still exist in many areas of mineral mining for small mining companies. As a
result, the Company acquired and tested a significant mineral property
sufficient in size to provide a significant development opportunity for the
Company's future growth, when fully operational. With the acquisition of control
of Warrior Resources, Inc., management has renewed its focus on oil and natural
gas opportunities and in particular the acquisition of small public energy
companies that are having difficulty achieving liquidity for their investors in
today's markets. The Company believes that significant opportunities are
available through strategic mergers and acquisitions in the energy industry in
the small capitalization sector. The Company intends to seek out opportunities
in other commodities that the Company believes may have the opportunity for a
cyclical improvement in demand and price.
Mining
The availability of a market for the Company's mineral and metal production will
be influenced by the proximity of the Company's operations to refiners and
smelting plants. In general the Company will sell its mined product to local
refineries and smelters. The price received for such products will be dependent
upon the Company's ability to provide primary separation to ensure fineness or
quality. The price of gold has been relatively stable in recent years reflecting
a period of relatively low inflation. Copper prices have generally been more
volatile, in part due to increased demand of developing economies for electrical
wire and other copper related products.
Changes in the price of gold and copper will significantly affect the Company's
future cash flows and the value of its mineral properties. The Company is unable
to predict whether prices for these commodities will increase, decrease or
remain constant in future periods.
Reserves
Mining
The following table sets forth estimates as of July 31, 2002 of the mineral
reserves net to the Company's interest in each of the Company's claim groups as
prepared by independent engineers and geologists and by the Company. These
estimates are based upon extensive sampling and testing on the Company's
properties and are based on assumptions the Company believes are reasonable
regarding production costs, metallurgical recoveries and mineral prices. There
are numerous uncertainties inherent in the preparation of estimates of reserves,
including many factors beyond the Company's control. The accuracy of any such
estimates is a function of the quality of available data and of engineering and
geological interpretation and judgement. It can be expected as the Company
conducts additional evaluation, drilling and testing with respect to its
properties that these estimates will be adjusted and that plans for mining could
be revised.
Based on its analysis of the mineral deposits detailed in the table below, it is
the Company's present determination that these properties can be mined on an
economic basis by the Company and that these estimates constitute reserves as
that term is typically used in the mining industry. Although permitting required
to initiate mining operations in the United States has become extremely complex
and cannot be considered a certainty, the company believes that, in the normal
course of property development, it should be able to obtain the necessary
permits to commence or expand mining operations on these properties.
The estimates provided in the table below utilize in place grades and do not
reflect losses that will be incurred in the recovery process. The mineral grades
utilized in the preparation of reserves for each property are generally based
upon results of sampling and testing programs conducted on each property and
analyzed by qualified assayers or engineers.
As of July 31,2002
Net Mineable Reserves
Claim Group Location Acres Gold Grade (oz/ton) Gold(oz) Silver(oz) Copper(lbs)
- ----------- -------- ----- ------------------- -------- ---------- -----------
UFO Mine (l)Arizona 400 0 0 0 600,000
Duke Mine Utah 2,240 0.10 4,883,750 0 0
----- ---- --------- - -
Total 2,640 0.10 4,883,750 0 600,000
(1) Copper reserves are based upon 400 million pounds at an average grade of 3%
and adjusted for the Company's interest in the Joint Venture.
Principal Exploration and Development Projects: Mining ventures:
United States
UFO Mine - Until the formation of the Joint Venture, subsequent to year end
1998, the Company operated the UFO Mine and Rumico Millsite located in Yavapai
County, Arizona comprising some 400 acres of unpatented mining claims. The
principal resource discovered to date is copper. Strip mining operations were
initiated under a small miner's exemption July 1992 to verity the quality of the
ore body and evaluate the economics of the mine. A limited core-drilling program
was completed in March 1993 and a pilot operation was conducted using the
millsite facilities to determine actual recoveries of copper As a result the
Company has estimated the property's copper reserves at 12,000, 000 lbs. based
upon an average grade of 3%. Working capital limitations had limited the
Company's development of the mining property, in favor of other projects. And as
a result, the Company entered into a Mining Joint Venture in November 1997,
subsequent to year end. The property, was subject to an acquisition note with
the former owners requiring the payment of $1,000,000. The note had been
extended several times by the holder and the mining claims served as collateral
for the note The Company negotiated a Mining Joint Venture with Mr. Zane Pasma
in November 1997 that retired the note payable and secured the return of
1,000,000 shares of the Company's common stock (pre-split) for the assignment of
the Company's interest in the Lone Star claims and a contribution of the
Company's interest in the Congress Mill Site facility. The Company retained a 5%
carried interest in the Mining Joint Venture through the initial $6.0 million
spent by the Joint Venture to develop the property. Mr. Pasma manages the Mining
Joint Venture and began initial operations in 1998. The results of initial
recovery tests for platinum group metals was disappointing and the Joint Venture
Manager suspended operations to seek an industry partner or other financing for
the development of the copper and gold reserves known to exist on the claims.
The Company does not expect any activity during the current fiscal year.
Duke Mine - The primary focus of the Company during fiscal 2000 has been the
financing of operations on the Duke Mine located in San Juan County, Utah. The
property comprises some 2,240 acres of unpatented mining claims in the Dry
Valley Gold Claim area. Access to the property is excellent via blacktop roads
adjacent to the claims. The property is located some 20 miles south of Moab,
Utah. The primary mineralization at the Duke Mine occurs as microscopic g6ld
located in very fine grain placer material. Sieve analysis of the sand indicates
that about 71 % of the material are larger than 200 mesh. Recovery tests have
been conducted on a grid sampling pattern throughout the claim area utilizing
the Cosmos Concentrator and indicate an average recovery of 0.10 ounces/ton of
free gold. Because of the nature of the placer material and in particular its
size, mining and process recovery operations will be significantly simplified,
thereby reducing costs. The company has, subsequent to its initial reserve
report, conducted additional recovery tests utilizing other equipment in
addition to the Cosmos Concentrator with similar results. Water is readily
available, however, drilling is required.
The Company began production at the Duke Mine during the first quarter of fiscal
1998 on a pilot operation. A portable Cosmos Concentrator was purchased and was
moved on site. The facility should be capable of processing about 100 tons of
placer material per day, however initial operations have been conducted at rates
of 20 tons per day. The Company spent approximately $185,000 to begin operations
at this level and is operating under a small miner's permit exemption. Pilot
plant results have been encouraging despite mechanical start-up problems. Upon
completion of its pilot tests, the Company suspended any further operations
until construction of a full-scale modular facility can be completed. The
facility is planned during the third and fourth quarters of fiscal 2003, subject
to capital availability, permitting and construction schedules, at a cost of
$8.0 million and with a capacity of 10,000 tons per day. The present claims
owned by the Company contain approximately 48,837,500 tons of placer material.
Presently there are 5 other companies active in the development of claims in the
vicinity of the Duke Mine
Competition
The acquisition of mining claims prospective for precious metals or other
minerals or oil and natural gas leases is subject to intense competition from a
large number of companies and individuals the ability of Company to acquire
additional leases or additional mining claims could be curtailed severely as a
result of this competition.
The principal methods of competition in the industry for the acquisition of
mineral leases is the payment of bonus payments at the time of acquisition of
leases, delay rentals, advance royalties, the use of differential royalty rates,
the amount of annual rental payments and stipulations requiring exploration and
production commitments by the lessee. Companies with far greater financial
resources, existing staff and labor forces, equipment for exploration and
mining, and vast experience will be in a better position than the Company to
compete for such leases.
Government Contracts
No portion of the Company's business is subject to re-negotiation of profits or
termination of contracts or subcontracts at the election of the Government.
Regulation
Federal, state and local authorities extensively regulate the oil and natural
gas and mining industry. Legislation affecting these industries is under
constant review for amendment or expansion. Numerous departments and agencies,
both federal and state, have issued rules and regulations binding on the oil and
natural gas and mining industry and their individual members some of which carry
substantial penalties for the failure to comply. The regulatory burden on these
industries increases their cost of doing business and consequently, affects
their profitability. Inasmuch as such laws and regulations are frequently
amended or reinterpreted, the Company is unable to predict the future cost or
impact of complying with such regulations.
The Company's operations are subject to extensive federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Permits are
required for various of the Company operations, and these permits are subject to
revocation, modification and renewal by issuing authorities. Governmental
authorities have the power to enforce compliance with their regulations and
violations are subject to fines, injunctions or both. It is possible that
increasingly strict requirements will be imposed by environmental laws and
enforcement policies thereunder. The Company is also subject to laws and
regulations concerning occupational safety and health. It is not anticipated
that the Company will be required in the near future to expend amounts that are
material in the aggregate to the Company's overall operations by reason of
environmental or occupational safety and health laws and regulations but
inasmuch as such laws and regulations are frequently changed, the Company is
unable to predict the ultimate cost of compliance.
Title to Properties
Mining. The Company does not have title opinions on its mining claims or leases
and, therefore, has not identified potential adverse claimants nor has it
quantified the risk that any adverse claims may successfully contest all or a
portion of its title to the claims. Furthermore, the validity of all unpatented
mining claims is dependent upon inherent uncertainties such as the sufficiency
of the discovery of minerals, proper posting and marking of boundaries, and
possible conflicts with other claims not determinable from descriptions of
record. In the absence of a discovery of valuable minerals, a mining claim is
open to location by others unless the claimant is in actual possession of and
diligently working the claim (pedis possessio) No assurance can be given with
respect to unpatented mining claims in the exploratory stage that a discovery of
a valuable mineral deposit will be made.
To maintain ownership of the possessory title created by an unpatented mining
claim against subsequent locators, the locator or his successor in interest must
pay an annual fee of $200 per claim.
Oil & Natural Gas. The Company at present owns 36% of the common stock and
provides management for Warrior Resources. In general, limited or only old title
opinions exist on the leases, however, title surveys have been conducted in the
normal course of the Company's financing efforts. The Company has reviewed the
validity and recording of the leases at the county courthouses in which the
properties are located and believes that it holds valid title to its properties.
Operational Hazards and Insurance
The operations of the Company are subject to all risks inherent in the
exploration for and operation of oil and natural gas properties, wells and
facilities and mines and mining equipment, including such natural hazards as
blowouts, cratering and fires, which could result in damage or injury to, or
destruction of, drilling rigs and equipment, mines, producing facilities or
other property or could result in personal injury, loss of life or pollution of
the environment. Any such event could result in substantial expense to the
Company which could have a material adverse effect upon the financial condition
of the Company to the extent it is not fully insured against such risk. The
Company carries insurance against certain of these risks but, in accordance with
standard industry practices, the Company is not fully insured for all risks
either because such insurance is unavailable or because the Company elects not
to obtain insurance coverage because of cost Although such operational risks and
hazards may to some extent be minimized. no combination of experience, knowledge
and scientific evaluation can eliminate the risk of investment or assure a
profit to any company engaged in mining operations.
Employees
The Company employs one person in its Evansville, Indiana office whose functions
are associated with management, operations and accounting. The Company uses
independent contractors to supervise its mining business.
Item 3. Legal Proceedings.
Imperial Petroleum, Inc. versus Ravello Capital LLC: The Company filed suit in
Federal District Court in Tulsa County, Oklahoma against Ravello Capital LLC on
November 20, 2000. The suit alleged breach of contract and sought to have the
contract declared partially performed in the amount of $74,800 and sought relief
in the amount of $488,390 for the unpaid consideration and punitive damages and
attorneys fees. The Company received a judgement award against Ravello in the
amount of $488,390 and subsequently collected and credited the judgement in the
amount of $85,638.02 as a result of the re-issuance of certain of its shares in
Warrior, held by Ravello in escrow and not released. The Company is pursuing the
balance of the judgement against Ravello.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market For Registrant's Common Stock; and Related Stockholder Matters.
The Company's common stock is traded in the over-the-counter market. From 1984
to 1997 trading had been so limited and sporadic that it was not possible to
obtain a continuing quarterly history of high and low bid quotations. Stock
information is received from registered securities dealers and reflects
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions. The Company was advised that trading
in its shares resumed in September 1997 and the Company's stock was quoted at
approximately $0.25 per share in sporadic trading. The approximate present bid
price for the Company's common stock is $0. 40 per share and the approximate
asked price is $0.45 per share.
No dividends have ever been paid by the Company on its common stock and it is
not anticipated that dividends will be paid in the foreseeable future.
There are approximately 602 holders of record of the Company's common stock.
Item 6. Selected Financial Data
2002 2001 2000 1999 1998 1997
Operating Revenue 0 0 0 53,744 60,000 15,955
Income (loss)from
continuing operations (855,719) (1,282,523) (952,854) (1,006,421) (496,604) (6,726)
Net Income (loss) (820,242) (1,373,443) (1,013,299) (1,006,421) (496,604) (6,726)
Net Income (loss) per share (0.05) (0.10) (0.08) (0.10) (0.08) (0.0)
Total Assets 495,090 644,323 1,426,813 1,947,939 1,948,979 722, 530
Stockholder's Equity (1,830,357) (1,677,054) (673,594) 166,463 572,644 91,666
Cash Dividends Paid
per Common Share
Number of Outstanding
Shares (weighted) 16,598,593 13,144,969 12,560,958 9,627,006 6,138,819 13,357,111
Item 7. Management's Discussion and Analysis of the Financial Condition and
Results of Operations.
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 $310.00 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 $21.00 to $25.00 per
barrel range while natural gas prices reached highs of $9.00 per MMBTU during
the winter months of 2000, but have settled into the $3.00-$3.50 range. The
Company expects energy prices to continue to be volatile in the future.
Year ended July 31, 2002 compared to year ended July 31, 2001. The Company
generated no revenues during the year ended July 31, 2002 or the year ended July
2001. The Company expects its revenues to remain marginal until it begins
continuous operations on the Duke Mine planned for 2003.
Operating expenses for the year ended July 31, 2002 and for the year ended July
31, 2001 were both $0 the lack of any significant operations during the most
recent fiscal year. The Company does not expect to incur substantial operating
expenses until its mining or oil and natural gas operations are in continuous
operation. General and administrative expenses increased to $466,875 for the
year ended July 31, 2002 from $285,281 for the year ended July 31, 2001 and
reflects the expenses associated with the purchase of control of Warrior, the
development of the Rx Power business, the environmental business and funding of
engineering and other overhead costs from the prior year. The Company expects
the level of its general and administrative expenses to remain high during the
period of high acquisition activity and until the Duke mine is in continuous
operation.
The Company incurred an after tax net loss of $820,242 ($0.05 per share) for the
year ended July 31, 2001 compared to an after tax net loss of $1,373,443 ($0.10
per share) for the prior year. The net loss is comprised of impairment losses as
a result of the Warrior acquisition of $388,844 and $997,242 as of July 31, 2002
and July 31, 2001 respectively. The balance of the net loss is a result of
general and administrative costs incurred. The Company does not expect to
generate a profit until its mining operations are in continuous production or
until it develops significant oil and gas operations.
Year ended July 31, 2001 compared to year ended July 31, 2000. The Company
generated no revenues during the year ended July 31, 2001 or the year ended July
2000. The Company expects its revenues to remain marginal until it begins
continuous operations on the Duke Mine planned for 2002.
Operating expenses for the year ended July 31, 2001 were $0 compared to $7,407
for the same period a year earlier and reflect the startup of operations in the
environmental business during the prior year in contrast to the lack of any
operations during the most recent fiscal year. The Company does not expect to
incur substantial operating expenses until its mining or oil and natural gas
operations are in continuous operation. General and administrative expenses
decreased to $285,281 for the year ended July 31, 2001 from $570,012 for the
year ended July 31, 2001 and reflects the reduced expenses associated with the
environmental business, the Duke Gold Mine pilot plant operation and funding of
engineering and other overhead costs from the prior year. The Company expects
the level of its general and administrative expenses to remain high until
advance studies and other planning is completed and the mine is in continuous
operation.
The Company incurred an after tax net loss of $376,201 ($0.03 per share) for the
year ended July 31, 2001 compared to an after tax net loss of $638,602 ($0.05
per share) for the prior year. The decrease in the loss is a result of the
decrease in general and administrative expenses from the prior year. The Company
does not expect to generate a profit until its mining operations are in
continuous production.
Year ended July 31, 2000 compared to year ended July 31, 1999. Total revenues
for the Company for the year ended July 31, 2000 were $0 compared to $53,744 for
the year ended July 31, 1999 and reflects management fees as a result of the
Company's subleases on its office space and revenues from the Company's
environmental business. The Company expects its revenues to remain marginal
until it begins continuous operations on the Duke Mine.
Operating expenses for the year ended July 31, 2000 were $7,407 compared to
$119,649 for the same period a year earlier and reflect the operation of the
company's environmental business in 1999. The Company does not expect to incur
substantial operating expenses until one of its mining operations is in
continuous operation. General and administrative expenses decreased dramatically
from $839,393 for the year ended July 31, 1999 to $570,012 for the year ended
July 31, 2000 and reflects the reduced level of the Company's operations during
2000. The Company expects the level of its general and administrative expenses
to remain high until advance studies and other planning is completed and the
Duke mine in continuous operation.
The Company incurred an after tax net loss of $638,602 ($0.05 per share) for the
year ended July 31, 2000 compared to an after tax net loss of $1,006,421 ($0.10
per share) for the prior year. The decrease in the loss is a result of the lower
level of general and administrative expenses for 2000 and the fact that the loss
in 1997 was increased by impairment losses attributable to the Company's mining
properties and equipment during 1999 of $1,329,474. The Company does not expect
to generate a profit until its mining operations are in continuous operations.
Capital Resources and Liquidity.
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 during fiscal 2000. As a result, the Company is active in only one
mine that will require significant capital expenditures. Management determined
that the Company should position itself in a high-profile natural gas projects
in an effort to attract capital and due to increasing natural gas prices. The
Company completed the acquisition of control of Warrior Resources, Inc. on
February 13, 2002. Warrior had experienced a considerable degree of decline in
its operations and financial condition as a result of management and director
disagreements that had led to lawsuits and disrupted the continuity of
management of Warrior. The Company acquired approximately a 36% overall stock
position in Warrior and assumed management control. In assuming management
control and consolidating Warrior's operations, the Company eliminated
approximately $65,000 per month in Warrior's overhead and was able to complete a
refinancing of Warrior's principal bank debt. In addition, the Company assisted
Warrior in eliminating approximately $1.0 million in third party trade and note
payables. Warrior has begun a work program on its properties to increase cash
flow which, if successful, should allow it to re-pay its new bank facility,
eliminate over time its remaining trade accounts payable and repay the Company.
Due to the termination of the merger agreement with Warrior, the Company is
entitled to receive compensation in the amount of $200,000 or an equivalent
value of Warrior common stock issued at $0.02 per share. As a result of the
refinancing of Warrior's debt, the Company ahs begun to invoice Warrior for use
of its facilities and office space and for management time spent on Warrior at
the rate of $10,000 per month.
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. 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 2002. The Company has received
two offers for equity lines, subject to the filing of a Regulation D private
placement in the approximate amount of $5 million each. The Company has not
accepted either offer at the present time, although management expects to
complete one of the transactions during fiscal 2003.
The Company entered into negotiations in fiscal 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. Asia Pacific has been unable to complete the transaction and
the Company has terminated the negotiations.
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,
it failed to complete the balance of the transaction and the Company filed suit
against Ravello for breach of contract, among other things. The Company was
awarded a monetary judgement in the amount of $448,390 against Ravello and
subsequently received the reissued shares of common stock in Comanche (now
Warrior) and credited the judgement in the amount of $85,638.02. The balance of
the judgement remains unsatisfied.
The Company intends to continue to pursue each of the above transactions in an
effort to finance its operations, however, 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 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
$641,094 as of July 31, 2002. These funds have been used to initiate the
Company's mining activities and fund its overhead requirements. Management
believes that the Company will not have sufficient borrowing capacity to fund
its anticipated needs and will need to access outside capital.
At July 31, 2002, the Company had current assets of $48,624 and current
liabilities of $2,021,088, which resulted in negative working capital of
$1,972,464. The negative working capital position is comprised of accounts
payable of $92,263, notes payable to shareholders and related parties totaling
$765,817, accrued salaries and expenses totaling $1,083,008 and third party
notes payable of $80,000. 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 2002. The previously
discussed transactions regarding equity infusions, 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.
Item 8. Financial Statements and Supplementary Data.
Audited Financial Statements of Imperial Petroleum, Inc.
Independent Auditor's Report.................................................F-1
Consolidated Balance Sheets as of July 31, 2002 and 2001.....................F-2
Consolidated Statements of Operations for the years
ended July 31, 2002, 2001 and 2000.........................................F-3
Consolidated Statements of Stockholder's Equity for the
years Ended July 31, 2002, 2001 and 2000.....................................F-4
Consolidated Statements of Cash flows for the years
ended July 31, 2002, 2001 and 2000...........................................F-5
Notes to Consolidated Financial Statements......................F-7 through F-22
Item9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure.
Not applicable.
Consolidated Financial Statements
IMPERIAL PETROLEUM, INC. and SUBSIDIARIES
July 31, 2002, 2001 and 2000
IMPERIAL PETROLEUM, INC.
and
SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JULY 31, 2002 and 2001
and
FOR THE YEARS ENDED
JULY 31, 2002, 2001 and 2000
and
INDEPENDENT AUDITOR'S REPORT
IMPERIAL PETROLEUM, INC.
July 31, 2002, 2001, and 2000
T A B L E O F C O N T E N T S
-----------------------------
Page
Independent Auditor's Report
Consolidated Financial Statements:
Consolidated Balance Sheets 2&2A
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5-6
Notes to Consolidated Financial Statements 7-27
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Imperial Petroleum, Inc.
Evansville, Indiana
We have audited the accompanying consolidated balance sheets of Imperial
Petroleum, Inc. (A Development Stage Company) as of July 31, 2002 and 2001 and
the consolidated statements of operations, stockholders' equity, and cash flows
for the years ended July 31, 2002, 2001 and 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Imperial Petroleum, Inc. (A
Development Stage Company) as of July 31, 2002 and 2001 and the results of its
operations and its cash flows for the years ended July 31, 2002, 2001 and 2000,
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and substantial
working capital deficiencies. These factors raise substantial doubt about its
ability to continue as a going concern. Further, there can be no assurance,
assuming the Company successfully raises additional funds, that it will be able
to economically recover the value of its mining claims or achieve profitability.
Management's plans in regard to these matters are also described in Note 1 to
the financial statements.
BRISCOE, BURKE & GRIGSBY LLP
Certified Public Accountants
December 11, 2002
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Consolidated Balance Sheets
July 31, 2001 and 2000
ASSETS 2002 2001
--------- ---------
Current assets:
Cash $ 2,869 $ 1,074
Accounts receivable - other - -
Accrued interest receivable 45,755 47,488
------- ----
Total current assets 48,624 48,562
Property, plant and equipment
(Notes 1, 2, and 4):
Mining claims, options and
development costs less impairment 41,760 41,760
Equipment 1,107 1,107
Acquisition in progress (Note 13) 4,000 4,000
------ ---------
46,867 46,867
Less: accumulated depreciation 1,107 1,107
Net property, plant and equipment 45,760 45,760
Other assets:
Notes receivable - related parties
(Note 3) 192,408 330,261
Investments- Warrior Resources
(Notes 2 and 11) 208,298 219,740
------- ---------
Total other assets 400,706 550,001
---------- ----------
TOTAL ASSETS $ 495,090 $ 644,323
======= =========
2
LIABILITIES and STOCKHOLDERS' EQUITY 2002 2001
--------- ------
Current liabilities:
Accounts payable $ 92,263 $ 188,399
Accrued expenses (Note 17) 1,083,008 958,806
Notes payable (Note 6) 80,000 80,000
Notes payable - related parties
(Note 7) 765,817 789,813
------- -------
Total current liabilities 2,021,088 2,017,018
Noncurrent liabilities:
Unearned revenue - noncurrent
(Note 16) 304,359 304,359
Deferred income taxes (Note 5) - -
------------- ----------
Total noncurrent liabilities 304,359 304,359
Stockholders' equity:
Common stock of $0.006 par value,
authorized 50,000,000 shares;
39,363,946 issued in 2002 and
13,925,276 shares in 2001 236,184 83,552
Paid-in capital 6,247,583 4,069,776
Accumulated deficit (6,070,820) (5,250,578)
Treasury stock, at cost
(21,368,957 shares in 2002 and
652,290 shares in 2001) (2,243,304) (579,804)
----------- -----------
Total stockholders' equity (deficit) (1,830,357) (1,677,054)
Commitments and contingencies
(Note 9) - -
-------------- -------------
TOTAL LIABILITIES and
STOCKHOLDERS'
EQUITY (DEFICIT) $ 495,090 $ 644,323
======= ============
The accompanying notes are an integral part of these consolidated financial
statements
2A
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Consolidated Statements of Operations
For the Years Ended July 31, 2002, 2001 and 2000
2002 2001 2000
------------ ------------ ------------
Operating income:
Management fees $ - $ - $ -
Environmental service revenues - - -
------------ ------------ -----------
Total operating income - - -
------------ ------------ -----------
Operating expenses:
Cost of goods sold - - -
Mining lease operating expense -
Research and development - - 7,407
Impairment loss (Note 11) 388,844 997,242 374,697
General and administrative expenses 466,875 285,281 570,012
Depreciation, depletion and
amortization (Note 2) - -
738
------------ ------------ ----------
Total operating expenses 855,719 1,282,523
952,854
Loss from operations (855,719) (1,282,523) (952,854)
Other income and (expense):
Interest expense (78,788) (74,548) (101,758)
Interest income 25,433 25,172 11,213
Other income 88,832 12,000 30,100
Gain (loss) on sale of assets
(Note 15) - (53,544)
- -
----------- ------------ -----------
Net loss before income taxes (820,242) (1,373,443) (1,013,299)
----------- ------------ -----------
Provision for income taxes: (Note 5)
Current - - -
Deferred - - -
------------ ------------ -----------
Total benefit from income taxes - - -
------------ ------------ -----------
Net loss $ (820,242) $(1,373,443) $(1,013,299)
============ =========== ============
Loss per share (Note 2) $ (.05) $ (.10) $ (.08)
============ ============ ============
Weighted average shares
outstanding 16,598,593 13,144,969 12,560,958
The accompanying notes are an integral part of these consolidated financial
statements.
3
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
For the Years Ended July 31, 2002, 2001, and 2000
Common Stock Additional Treasury Other Total
Par Paid-In Stock
Shares Value Capital
--------- -------- ----------- ----------- ----------- ---------
Balances at July 31,1999 11,528,230 $ 69,170 $4,350,476 $(2,863,836) $(1,468,677) $ 87,133
Treasury stock issued
in contemplation - - (721,527) - 888,873 117,346
Stock cancelled (650,000) (3,900) 3,900 - - -
Stock issued to pay off
Interest and debt (Note 6) 990,269 5,455 85,471 - - 90,929
Net loss for the period - - - (1,013,299) - (1,013,299)
---------- -------- ---------- ----------- ----------- ------------
Balances, restated,
at July 31,2000 12,504,165 75,025 3,791,520 (3,877,135) (579,804) (590,394)
Investments in Warrior Resources - - 172,499 - - 172,499
Stock issued for payment of fees 500,000 3,000 37,000 - - 40,000
Stock issued to pay off
Interest and debt (Note 6) 921,111 5,527 68,757 - - 74,284
Net loss for the period - - - (1,373,443) - (1,373,443)
---------- ------ --------- ----------- --------- -----------
Balances, restated,
at July 31,2001 13,925,276 83,552 4,069,776 (5,250,578) (579,804) (1,677,054)
Investments in
Warrior Resources 2,948,457 17,691 359,712 - - 377,403
Stock issued for
payment of fees 1,436,722 8,620 233,933 - - 242,533
Stock issued to pay off interest
and debt (Note 6) 1,053,491 6,321 97,157 - - 103,496
Stock held pending financing 20,000,000 120,000 1,416,000 - (1,536,000) -
Default on unsubscribed stock - - 70,987 - (127,000) (56,513)
Net loss for the period - - - (820,242) - (820,242)
---------- -------- ----------- ----------- ----------- ---------
Balances at July 31,2002 39,363,946 $236,184 $6,247,583 $(6,070,820) $(2,243,304) $(1,830,357)
The accompanying notes are an integral part of these consolidated financial
statements.
4
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended July 31, 2002, 2001 and 2000
2002 2001 2000
---- ---- ----
Cash flows from operating activities:
Historical net loss $(820,242) $(1,373,443) $(1,013,299)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation, depletion and amortization - -
738
Expenses paid with common stock 242,554 40,000
- -
Loss(Gain) on sale and disposal
of assets - 4,060
- -
Write-offs 59,427 - 49,484
Realized loss on marketable securities - 49,484 -
Impairment 388,844 997,242 374,697
(Increase) Decrease in accounts
receivable - other - - 3,000
(Increase) Decrease in notes
receivable - related party - 11,213 (11,213)
(Increase) Decrease in notes
receivable - other 10,353 (37,115) (21,120)
(Increase) Decrease in inventories - - -
(Increase) Decrease in other
current assets - - -
Increase (Decrease) in accounts payable (9,542) 11,858 135,490
Increase (Decrease) in accrued expenses 195,190 203,346 297,746
Increase (Decrease) in unearned revenue - -
6,918
------- ------- ---------
Net cash used for operating activities (77,705) (112,872)
(84,285)
Cash flows from investing activities:
Acquisition in progress - - (4,000)
Purchases of equipment - - -
Sale of securities - 33,716 -
------- ------- --------
Net cash used for investing activities - 33,716
(4,000)
The accompanying notes are an integral part of these consolidated financial
statements.
5
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended July 31, 2002, 2001 and 2000
2002 2001 2000
Cash flows from financing activities:
Increase (Decrease) in notes payable - 62,526 39,500
Increase (Decrease) in notes payable
related parties 79,500 17,524 47,550
------ ------ ------
Net cash provided by financing activities 79,500 80,050 87,050
Net increase (decrease) in cash and
cash equivalents 1,795 894 (1,235)
Cash and cash equivalents at beginning of year 1,074 180
1,415
----- ----- ------
Cash and cash equivalents at end of year 2,869 1,074 180
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest - - -
Income taxes - - -
Supplemental schedule of noncash investing and financing activities:
Stock issued for mining equipment and
mining claim options - -
- -
Stock issued for services 242,554 40,000 -
Stock issued for investment 377,403 - -
Stock subscribed - - 127,500
Stock cancelled - - 3,900
Notes receivable - (172,498) -
Impairments (388,844) (997,242) (374,697)
Write-down of mining claims - - -
Write-offs 59,427 (4,060) 142,758
Stock issued to extinguish debt 103,496 74,284 208,273
--------- -------- ----------
Total 394,036 (1,059,516) 107,734
========= ======== ==========
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION
Organization
The Company is attempting to obtain capital, through its wholly owned
subsidiary, Ridgepointe Mining Company, to continue testing, defining and
developing mineral reserves on mining claims it owns or operates in the
southwestern and western United States.
The Company is engaged, through its wholly owned subsidiary Imperial
Environmental Company, in developing and marketing water filtration systems to
municipalities.
Financial Condition
The Company's financial statements for the year ended July 31, 2002 have been
prepared on a going concern basis which contemplates the realization of assets
and the settlement of liabilities in the normal course of business. The Company
incurred a net loss of $820,242 and $1,373,443 for the years ended July 31, 2002
and 2001, respectively, and as of July 31, 2002 has an accumulated deficit of
$6,070,820 and a deficit working capital of $1,972,464.
Management Plans to Continue As A Going Concern
The Company believes that it will require outside capital to continue as a going
concern. The Company has offers in hand from two independent groups, Cornell
Capital and Joseph Stevens & Company, providing equity lines of credit of up to
$5,000,000 each. The terms of each are similar and provide for the Company,
subject to filing a Regulation D private placement memorandum, to sell
registered shares of its common stock at or near the average "bid" price of the
stock as quoted on the Bulletin Board. The Company will have the discretion and
control over how much stock and when the shares are placed. The Company has not
yet executed either of the offers, pending completion of their current filings.
The Company controls the efforts of Warrior Resources, Inc. as a result of the
acquisition of control of Warrior during fiscal 2002. As a result of the
refinancing of Warrior's senior debt, the Company has begun invoicing Warrior
for management fees beginning in October 2002 at the rate of $10,000 per month
to cover use of the Company's facilities and management time spent on Warrior's
behalf. These fees, as paid by Warrior, will adequately cover overhead charges
incurred by the Company. A potential sale of control of Warrior, as currently
contemplated, will result in the infusion of approximately $1,200,000 in capital
into the Company.
Management is currently in negotiations with other companies to acquire their
operations and assets for stock of the Company.
-7-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
Acquisition of Imperial Petroleum, Inc.
Pursuant to an Agreement to Exchange Stock and Plan of Reorganization dated
August 27, 1993 (the "Stock Exchange Agreement"), between Imperial Petroleum,
Inc. ("Imperial"), Glauber Management Company, ("Glauber Management"), Glauber
Valve Co., Inc., ("Glauber Valve"), and 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, representing 100% of the issued and outstanding common stock of
Ridgepointe, for a total of 12,560,730 shares of newly issued shares of
Imperial's common stock representing 59.59% of Imperial's resulting issued and
outstanding common stock. The one-for-one ratio of the number of shares of
Imperial's common stock exchanged for each share of Ridgepointe common stock was
determined through arms length negotiations between Imperial and the majority
stockholders of Ridgepointe. As a result, Ridgepointe became a wholly owned
subsidiary of Imperial.
As a condition to the Ridgepointe Exchange Transaction, Imperial received and
canceled 7,232,500 shares of its Common Stock from Glauber Management and
received 100,000 shares of the common stock of Tech-Electro Technologies, Inc.
from an affiliate of Glauber Management and Glauber Valve. In addition, Glauber
Management or Glauber Valve, or their affiliates, transferred to Imperial 75,000
shares of common stock of Chelsea Street Holding Company, Inc.
Acquisition of Premier Operating Company
Pursuant to a Stock Exchange Agreement dated October 4, 1993 (the "Stock
Exchange Agreement") between Imperial Petroleum, Inc. and the Premier
Stockholders, the Premier Stockholders agreed to exchange (the "Premier Exchange
Transaction") an aggregate of 749,000 shares of the common stock of Premier
Operating Company ("Premier"), consisting of 252,000 shares of Class A voting
common stock and 497,000 shares of non-voting Class B common stock, representing
100% of the issued and outstanding common stock of Premier, for a total of
749,000 shares of newly issued shares of the Company's common stock representing
3.62% of the Company's resulting 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 Premier common stock was determined through arms
length negotiations between the Company and a major shareholder of Premier, on
behalf of the Premier Stockholders. The business combination was accounted for
using the purchase method of accounting. As a result, Premier became a wholly
owned subsidiary of the Company.
8
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
Development Stage Companies
A summary of the financial information of Ridgepointe Mining Company (A
Development Stage Company), excluding its wholly owned subsidiary I. B.
Energy, Inc., is as follows:
2002 2001 2000
Current assets $ - $ - $ -
Net claims and equipment 41,760 41,760 41,760
Other assets - - -
Total assets 41,760 41,760 41,760
====== ====== ======
2002 2001 2000
Current liabilities $ 663,512 $ 654,973 $ 646,694
Long-term liabilities - - -
Common stock 125,107 125,107 125,107
Paid-in capital 1,343,886 1,343,886 1,343,886
Deficit accumulated
before development stage (121,953) (121,953) (121,953)
Deficit accumulated during
development stage (1,968,792) (1,960,253) (1,951,974)
----------- ----------- -----------
Total liabilities and
stockholders' deficit $ 41,760 $ 41,760 $ 41,760
9
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
Cumulative
2002 2001 2000 From Inception
---- ---- ---- --------------
Operating
Revenues - - - -
Miscellaneous
income - - - 96,579
Total income - - - 96,579
Lease operating
expenses - - - 162,922
Impairment loss - - - 578,674
General and
administrative 1,923 2,124 56,263 407,376
----- ------ -------- --------
Total expenses 1,923 2,124 56,263 1,148,972
Net operating loss (1,923) (2,124) (56,263) (1,052,393)
Interest expense (6,616) (6,155) ( 6,479) (300,076)
Gain (Loss) on
sale/write-down
of assets - - - (786,093)
------- -------- -------- -----------
Net income (loss)
before income
taxes (8,539) (8,279) (62,742) (2,138,562)
Income tax
Benefit - - - -
------- -------- --------- -----------
Net loss (8,539) (8,279) (62,742) (2,138,562)
-10-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
Cumulative
From Inception
Cash flows from operating activities:
Historical net loss $ (2,138,562)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and depletion -
Non-cash impairment (578,674)
Increase in current liabilities 749,762
---------
Net cash used for operating activities (1,967,474)
--------------
Cash flows from investing activities:
Mining options, properties and
equipment purchased - net 620,434
-------------
Net cash used for investing activities 620,434
-----------
Cash flows from financing activities:
Stock issued for funding 1,347,040
------------
Net cash provided by financing activities 1,347,040
-------------
Net increase in cash and cash equivalents -
Cash and cash equivalents at inception -
-------------
Cash and cash equivalents at July 31, 2002 $ -
========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest $ -
Income taxes
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
-11-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
A summary of the financial information of Imperial Environmental Company
(formerly Phoenix Metals, Inc.) (A Development Stage Company) is as
follows:
2002 2001 2000
---- ---- ----
Current assets
Inventories - - -
Fixed assets - - 4,060
Other assets - - -
---- ------ -------
Total assets - - 4,060
Current liabilities 228,607 228,607 221,200
Long-term liabilities
Common stock
Paid-in capital
Deficit accumulated during
development stage (228,607) (224,547) (224,547)
--------- --------- --------
Total liabilities and
stockholders' deficit - - 4,060
-12-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
Cumulative
2002 2001 2000 From Inception
---- ---- ---- --------------
Operating
revenues - - - 53,744
Miscellaneous
Income - - - -
---- ---- ------ ------
Total income - 53,744
Operating
expenses - - - 110,529
Research and
development - - 7,407 7,407
General and
administrative - - 142,757 149,842
Depreciation and
amortization - - 738 10,513
Total expenses - - 150,902 278,291
---- --------- -------- ---------
Net operating loss - - (150,902) (224,547)
Gain(Loss) on
sale of assets - (4,060) - (4,060)
Interest expense
Net income (loss)
before income taxes - (4,060) (150,902) (228,607)
Income tax
benefit
------- --------- -------- ---------
Net loss - (4,060) (150,902) (228,607)
13
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND BUSINESS COMBINATION (continued)
Cumulative
From Inception
Cash flows from operating activities:
Historical net loss (228,607)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,513
Increase in other assets
Increase in current liabilities 228,607
(Gain)Loss on sale of assets 4,060
---------
Net cash used for operating activities 14,573
Cash flows from investing activities:
Equipment purchased - net (14,573)
--------
Net cash used for investing activities (14,573)
-------------
Cash flows from financing activities:
Debt -
Net cash provided by financing activities -
Net increase in cash and cash equivalents -
Cash and cash equivalents at inception -
Cash and cash equivalents at July 31, 2002 -
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest -
Income taxes -
Disclosure of accounting policy: For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
14
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The July 31, 2002, 2001 and 2000 financial statements include the accounts of
the Company and its wholly owned subsidiaries, Ridgepointe Mining Company,
Premier Operating Company, I. B. Energy, Inc., LaTex Resources International,
Inc., and Imperial Environmental Company(formerly Phoenix Metals, Inc.). All
significant intercompany accounts have been eliminated.
Accounting Estimates
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Financial Instruments
The fair value of current assets and current liabilities are assumed to be equal
to their reported carrying amounts due to the short maturities of these
financial instruments.
The carrying value of all other financial instruments approximates fair value.
Investments
The equity method of accounting is used for all investments in associated
companies in which the Company's interest is 20% or more. Under the equity
method, the Company recognizes its share in the net earnings or losses of these
associated companies as they occur rather than as dividends are received.
Dividends received are accounted for as a reduction of the investment rather
than as dividend income.
The investments are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of the investment may not be
recoverable.
15
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and accounts
receivable. The Company places its cash with high quality financial
institutions and limits the amount of exposure to any one institution. In the
case of default of any one financial institution, no cash exists that is not
covered by the FDIC. The Company currently operates in the mining and
environmental technologies industries. The concentration of credit risk in a
single industry affects the Company's overall exposure to credit risk because
customers may be similarly affected by changes in economic and other
conditions. The Company is dependent on the continued financial support of its
Chief Executive Officer through loans to the Company and salary deferral.
Development Stage Subsidiaries
Ridgepointe Mining Company, a wholly owned subsidiary, is in the process of
defining mineral reserves and raising capital for operations. As such,
Ridgepointe Mining Company is considered a development stage enterprise.
Imperial Environmental Company, a wholly owned subsidiary, is in the process of
raising capital to continue developing its water filtration technology. As
such, Imperial Environmental Company is considered a development stage
enterprise.
Revenue Recognition
Mining and environmental technology revenues will be recognized in the month of
sale.
16
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
2. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, Equipment, Depreciation and Depletion
Property and equipment are stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of assets. Expenditures
which significantly increase values or extend useful lives are capitalized.
Expenditures for maintenance and repairs are charged to expenses as incurred.
Upon sale or retirement of property and equipment, the cost and related
accumulated depreciation and depletion are eliminated from the respective
accounts and the resulting gain or loss is included in current earnings.
Mining exploration costs are expensed as incurred. Development costs are
capitalized. Depletion of capitalized mining costs will be calculated on the
units of production method based upon current production and reserve estimates
when placed in service.
Intangibles
The Company has capitalized the costs related to the organization of its
development stage subsidiary Imperial Environmental Company. Amortization is
computed by the straight-line method over 5 years.
The Company has implemented SOP 98-5, as required, for fiscal year July 31,
2001. SOP 98-5 requires that the intangible asset be charged against income
rather than carried as an asset and amortized.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of
change in tax rates is recognized in income in the period that includes the
enactment date.
Loss Per Common Share
Loss per common share is computed based upon the weighted average common shares
outstanding. Outstanding warrants are excluded from the weighted average shares
outstanding since their effect on the earnings per share calculation is
antidilutive.
17
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
2. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
FASB Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. This Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the undiscounted future cash flows is less than the
carrying amount of the asset, an impairment loss is recognized.
Reclassification
Certain amounts in the 2001 and 2000 consolidated financial statements have been
reclassified to conform with the 2002 presentation.
3. NOTES RECEIVABLE - RELATED PARTIES
Notes receivable from related parties was comprised of the following:
2002 2001
Common stock subscribed - officers -
6% demand note $ - $ 127,500
Warrior Resources (formerly
Comanche Energy) - 9% demand note 110,795 151,396
AQ Technologies - 9% demand note 81,613 51,365
Total $ 192,408 $ 330,261
Notes for subscribed stock are from officers of the Company, Malcolm Henley and
Stacey Smethers. The Company owns 36% of Warrior Resources and has control with
Jeffrey Wilson as its CEO. The Company's CEO has guaranteed the note receivable
from AQ Technologies (See Note 9).
18
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
4. PROPERTY, PLANT and EQUIPMENT
The Company's mining fixed assets consist of the following:
2002 2001
Mining claims $ 74,800 $ 74,800
Equipment 1,107 1,107
Mine development costs 32,634 32,634
Acquisition in progress 4,000 4,000
Impairment reserve (65,674) (65,674)
Total $ 46,867 $ 46,867
The Company has not completed or updated the necessary reserve studies to
determine the metal content of the reserves and the related future production
costs which affect the recoverability of the capitalized costs. In addition,
the Company's going concern problem, lack of capital and other factors led
management to recognize an impairment reserve to reduce the carrying value to
management's estimate of the amount recoverable upon ultimate disposition. The
Company intends to continue to hold and use the impaired assets.
5. INCOME TAXES
Provisions for income taxes are as follows:
2002 2001 2000
(in thousands)
Current:
Federal $ - $ - $ -
State - - -
$ - $ - $ -
Deferred:
Federal $ - $ - $ -
State - - -
$ - $ - $ -
19
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
5. INCOME TAXES (continued)
Income taxes differed from the amounts computed by applying the U.S. federal tax
rate as a result of the following:
2002 2001 2000
(in thousands)
Computed "expected" tax expense
(benefit) $ (279) $ (467) $ (344)
State income taxes net of federal
benefit - - -
Increase(Decrease) in valuation
allowance for deferred tax assets 279 467 478
Other - - (134)
Actual income tax expense $ - $ - $ -
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below:
2002 2001
(in thousands)
Deferred tax liabilities:
Property, plant and equipment $ - $ -
Other - -
Total deferred tax liabilities - -
Deferred tax assets:
Unrealized loss on securities - -
Net operating losses 2,064 1,785
Other - -
Total deferred tax assets 2,064 1,785
Valuation allowance (2,064) (1,785)
Net deferred tax assets - -
Net deferred tax asset (liability) $ - $ -
-20-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
5. INCOME TAXES (continued)
A valuation allowance is required when it is more likely than not that all or a
portion of the deferred tax assets will not be realized. The ultimate
realization of the deferred tax assets is dependent upon future profitability.
Accordingly, a valuation allowance has been established to reduce the deferred
tax assets to a level which, more likely than not, will be realized.
The Company has net operating loss (NOL) carryforwards to offset its earnings of
approximately $3,000,000. If not previously utilized, the net operating losses
will expire in varying amounts from 2013 to 2022.
Due to recurring losses and a lack of funding the Company has not been filing
its tax returns. Provisions for current and deferred taxes are estimated using
known facts. Any differences from actual are outside of the scope of our
examination.
6. NOTES PAYABLE
2002 2001
Gary S. Williky, promissory note,
dated November 24, 1997, principal
due on demand plus interest
at 9.0% $ 40,000 $ 40,000
Thomas J. Patrick, promissory note,
dated December 18, 1997, principal
due on demand plus interest
at 9.0% 40,000 40,000
Total 80,000 80,000
Less: current portion 80,000 80,000
Long-term notes payable $ - $ -
During the year, the Company issued its restricted common stock to extend due
dates and partially satisfy principal and accrued interest. However, the notes
payable are currently in default. The Company is currently negotiating with the
parties to extend or renew notes payable.
-21-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTES PAYABLE - RELATED PARTY
2002 2001
H. N. Corporation - 9.0% demand note $ 124,723 $ 102,026
Officer - 10.0% demand note 111,845 111,845
Officer - 7.5% demand note 82,900 129,593
Officer - 9.0% demand note 446,349 446,349
$ 765,817 $ 789,813
8. RELATED PARTY TRANSACTIONS
The Company has entered into transactions with its chief executive officer,
Jeffrey T. Wilson. For 2002 and 2001 the Company has accrued an annual salary
of $118,500 and $125,000, respectively, for Mr.Wilson. The Company, from time
to time, has also entered into loans with its directors, stockholders and
related companies (See Notes 3 and 7).
These transactions were consummated on terms equivalent to those that prevail in
arm's length transactions.
9. LITIGATION, COMMITMENTS AND CONTINGENCIES
Contingencies
The Company is a named defendant in lawsuits, is a party in governmental
proceedings, and is subject to claims of third parties from time to time arising
in the ordinary course of business. While the outcome of lawsuits or other
proceedings and claims against the Company cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect on
the financial position of the Company.
Commitments (See Note 16)
The Company's Chief Executive Officer is a guarantor of a note payable of AQ
Technologies. The approximate amount of this guarantee is $90,000. The Company
has been servicing the note due to AQ Technoligies' inability to do so. These
payments have been recorded as a note receivable (See Note 3).
-22-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
10. BUSINESS SEGMENTS
The Company's operations involve mining and environmental operations. The
following table sets forth information with respect to the industry segments of
the Company.
2002 2001 2000
Revenues: (in thousands)
Mining $ - $ - $ -
Environmental - - -
Other - - -
Total revenues $ - $ - $ -
2002 2001 2000
Identifiable assets: (in thousands)
Mining $ 42 $ 42 $ 46
Environmental 1 1 4
Other 452 601 1,377
$ 495 $ 644 $ 1,427
Depreciation and depletion:
Mining $ - $ - $ -
Environmental - - 1
$ - $ - $ 1
-23-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
INVESTMENTS IN WARRIOR RESOURCES, INC.
During 1999 the Company acquired a stake in Warrior Resources, Inc. which was
recorded as an investment under the cost method. Through an exchange
transaction in 2002 the Company now has a 36% interest (34,716,471 shares with
an undiscounted trading value of $347,165), exceeded the 20% ownership threshold
and has the ability to significantly influence the investee, requiring a change
to the equity method of accounting.
A change to the equity method of accounting from the cost method of accounting
for an investment requires a retroactive adjustment by the investor to its
investment, results of operations, and retained earnings in a manner consistent
with the step-by-step acquisition of a subsidiary.
Warrior Resources common stock is traded publicly on over-the-counter markets.
Recurring losses and management representations of the investee provide evidence
of impairment of this equity investment. Therefore, the impairment allowance
required for equity investments under APB Opinion 18 yields a result which
reduces the carrying amount of the equity investment to the lower market value
as per quoted market prices (currently $.01) discounted for large block and lack
of marketability discounts as applicable. Thus the carrying value is unchanged
from that when carried using the cost method of accounting for the investment
but the results of operations are restated to reflect the change in the carrying
value of the investment. The investment presentation has been changed to
reflect the change from the cost method to the equity method. An impairment
loss of $388,844, $997,242 and $374,697 were recognized in 2002, 2001, and 2000,
respectively. The carrying amount of the investment is as follows:
July 31, July 31,
2002 2001
Equity in investee net assets $ 10,560,869 $ 862,530
Impairment allowance 10,352,571 642,790
Net carrying amount $ 208,298 $ 219,740
Condensed selected financial data of Warrior Resources is as follows:
July 31, July 31,
2002 2001
Assets $ 34,404,629 $ 9,562,773
Liabilities 5,258,950 6,232,409
Net assets $ 29,145,679 $ 3,330,364
Net income (loss) $ (5,048,842) $ (1,072,628)
-24-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
12. WARRANTS
The Company has the following warrants outstanding:
200,000 @ $.25, expiring 11/03/02
750,000 @ $.25, expiring 1/30/03
200,000 @ $.50, expiring 1/30/03
150,000 @ $.75, expiring 1/30/03
13. ACQUISITION IN PROGRESS
The Company is currently negotiating to acquire mining claims in New Mexico.
14. LEASE OBLIGATIONS
The Company has a noncancelable operating lease agreement for office space.
Total rental expense was $7,953, $24,128, and $24,128 in 2002, 2001 and 2000,
respectively. The Company currently offices in Mr. Wilson's home.
15. GAIN ON SALE OF ASSETS
During the year ended July 31, 2001, the Company sold 250,000 shares of its
Warrior Resources, Inc. (formerly Comanche Energy) common stock. This
transaction resulted in a loss of $49,484. The Company's subsidiary, Imperial
Environmental, also wrote off equipment which resulted in a loss of $4,060.
25
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
16. UNEARNED REVENUE
The Company has received advances for future delivery of silica ore. Total
advances as of July 31, 2002 and 2001 were $0 and $0, respectively. The
Company's commitments under these agreements mature as follows for the years
ended July 31:
2003 $ 166,567
2004 107,079
2005 30,713
2006 -
Thereafter -
$ 304,359
The Company has allowed its silica ore mining claims to lapse, resulting in the
default of these agreements.
17. ACCRUED EXPENSES
The Company has accrued expenses as of July 31 as follows:
2002 2001
Accrued officer salary - CEO $ 808,508 $ 690,008
Accrued interest on notes 274,500 195,710
Accrued damage award (Note 19) - 70,988
Accrued rent - 2,100
$ 1,083,008 $ 958,806
During the year ended July 31, 2002 and 2001 the Company issued 1,053,491 and
1,421,111 shares, respectively, of its restricted common stock to pay accrued
interest, pay for services, and extend maturities of notes payable.
-26-
IMPERIAL PETROLEUM, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
27
PART III
Item 10. Directors and Executive Officers of Registrant.
Directors and Executive Officers
The following table sets forth certain information regarding the directors,
executive officers and key employees of the Company. (Mr. Malcolm W. Henley and
Mrs. Stacey D. Smethers, former directors of the Company resigned their director
positions effective August 15, 2001 to pursue other interests. As a result,
Annalee C. Wilson and Aaron M. Wilson were appointed as directors of the Company
until independent directors are elected at the next shareholder's meeting.)
Name Age Position
---- --- --------
Jeffrey T. Wilson 49 Director, Chairman of the Board,
President and Chief Executive Officer
Annalee C. Wilson 45 Director
Aaron M. Wilson 23 Director, Secretary
Jeffrey T. Wilson has been Director, Chairman of the Board, President and Chief
Executive Officer of the Company since August 1993. Mr. Wilson was a Director,
Chairman and President of LaTex Resources, Inc., an affiliate of the Company,
and was the founder of its principal operating subsidiary, LaTex Petroleum
Corporation. Prior to his efforts with LaTex, Mr. Wilson was Director and
Executive Vice President of Vintage Petroleum, Inc. and was employed by Vintage
in various engineering and acquisition assignments from 1983 to 1991. From
August 1980 to May 1983 Mr. Wilson was employed by Netherland, Sewell &
Associates Inc., a petroleum consulting firm. Mr. Wilson began his career in the
oil and gas business in June 1975 with Exxon Company USA in various assignments
in the Louisiana and South Texas areas. Mr. Wilson holds a Bachelor of Science
Degree in Mechanical Engineering from Rose-Hulman Institute of Technology.
Annalee C. Wilson has been a Director of the Company since August 2001. Mrs.
Wilson is the President of HN Corporation, an affiliate of the Company engaged
in the operation of retail franchise outlets in malls selling motivation and
inspiration material developed by Successories, Inc. and others and in the
operation of a Christian restaurant and gift shop. Mrs. Wilson has an Associate
Degree in Nursing from the University of Evansville.
Aaron M. Wilson has been a Director of the Company since August 2001. Mr. Wilson
is a Vice president of HN Corporation and is the Manager of the Successories
franchise store located at Castleton Square Mall owned by HN Corporation. Mr.
Wilson received a dual degree in Business Economics and Political Science
from the University of Kentucky in 2002.
Section 16(a) Reporting Deficiencies
Section 16(a) of the Securities and Exchange Act of 1934 ("Exchange Act")
requires the Company's directors and officers and persons who own more than 10%
of a registered class of the Company's equity securities, to file initial
reports of ownership on Form 3 and reports of changes in ownership on Forms 4
and 5 with the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers ("NASD"). Such persons are required by SEC
regulation to furnish the company with copies of all Section 16(a) forms they
file.
Based upon a review of From 3, 4 and 5 filings made by the Company's officers
and directors during the past fiscal year ended July 31, 2002 under Section
16(a) of the Exchange Act, the Company believes that all requisite filings have
been made timely.
Item 11. Executive Compensation.
The table below sets forth, in summary form, (1) compensation paid to Jeffrey T.
Wilson, the Company's Chairman of the Board, President and Chief Executive
Officer and (2) other compensation paid to officers and directors of the
Company. Except as provided in the table below, during the three fiscal years
ended July 31, 2002, 2001 and 2000 (I) no restricted stock awards were granted,
(ii) no stock appreciation or stock options were granted, (iii) no options,
stock appreciation rights or restricted stock awards were exercised, and (iv)
except as provided below, no awards under any long term incentive plan were made
to any officer or director of the Company.
The Company began accruing salary due to Jeffrey T. Wilson in January 1994. To
date no actual salary payments have been made to Mr. Wilson.
SUMMARY COMPENSATION TABLE
Long Term Awards
Annual Compensation Warrants
------------------- --------
Name and Principal
Position Year Salary Bonus # shares
Jeffrey T. Wilson 2002 $ 125,000 ----- --------
2001 $ 125,000 ----- 200,000
2000 $ 125,000 ----- --------
Annalee C. Wilson 2002 ------- ----- --------
2001 ------- ----- --------
2000 ------- ----- --------
Aaron M. Wilson 2002 ------- ----- --------
2001 ------- ----- --------
2000 ------- ----- --------
None of the executive officers listed received perquisites or other personal
benefits that exceeded the lesser of $50,000 or 10% of the salary and bonus for
such officers. Annalee C. Wilson Aaron M. Wilson were not directors of the
Company during fiscal 2002, and neither received any compensation from the
Company during that period.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of July 31, 2002, the Company has 19,363,946 issued and outstanding shares of
common stock. (Excluding 20,000,000 shares issued but held pending the
completion of the Asia Pacific transaction. These shares were subsequently
cancelled) The following table sets forth, as of July 31, 2002, the number and
percentage of shares of common stock of the Company owned beneficially by (I)
each director of the Company, (ii) each executive officer of the Company, (iii)
all directors and officers as a group, and (iv) each person known to the Company
to own of record or beneficially own more than 5% of the Company's common stock.
Except as otherwise listed, the stockholders listed in the table have sole
voting and investment power with respect to the shares listed. As of July
31,2002, the Company had approximately 602 holders of common stock of record.
Number of Shares
Name of Beneficial Owner Beneficially Owned Percent of Class
Jeffrey T. Wilson (1) 4,451,377 23.0%
Annalee C. Wilson(2) 1,341,792 6.9%
Aaron M. Wilson (3) 119,834 0.6%
All officers and directors as a
Group (3 people) at 7/31/2002 5,913,003 30.5%
HN Corporation(4) 1,127,747 5.8%
Gene Moser(5) 1,148,521 5.9%
Estate of Luther Henderson(6) 2,266,457 11.7%
Total officers, directors and
5% shareholders 6,241,237 42.2%
(1) The mailing address of Mr. Wilson is 11600 German Pines, Evansville, IN
47725. Includes 589,584 shares held jointly with Mrs. Wilson; includes 375,540
shares owned by HN Corporation in which Mr. Wilson owns 33.3%. Does not include
50,000 shares held in Trust by Old National Bank for Mr. Wilson's children.
(2) The mailing address of Mrs. Wilson is 800 N. Green River Road, Evansville,
IN 47715. Includes 589,584 shares held jointly with Mr. Wilson; includes 752,208
shares owned by HN Corporation in which Mrs. Wilson owns 66.7%. Does not include
50,000 shares held in Trust by Old national Bank for Mrs. Wilson's children.
(3) The mailing address for Mr. Wilson is 11600 German Pines Drive, Evansville,
IN 47725. Includes 16,500 shares held in Trust by Old National Bank.
(4) The mailing address of HN Corporation is 800 N. Green River Rd., Evansville,
IN 47715. Mrs. Annalee Wilson is the President of HN Corporation, Jeffrey T.
Wilson is the Vice President of HN Corporation and Aaron M. Wilson is a Vice
President of HN Corporation.
(5) Mr. Moser's mailing address is PO Box 476, Bluffton, IN 47614.
(6) The Executor of Mr. Henderson's Estate is Mr. Ajit Jhangiani. The address is
5608 Malvey, Suite 104, Fort Worth, TX 76107.
Item 13. Certain Relationships and Related Transactions.
Jeffrey T. Wilson, Chairman, President and Chief Executive Officer of the
Company has made unsecured loans to the Company which total $644,094 in
principal as of July 31, 2002.
HN Corporation, a private retail company owned by Mr. Wilson and his wife, has
made unsecured loans to the Company which total $124,723 in principal as of July
31, 2002. Annalee Wilson serves as the President of HN Corporation and owns
66.7% of its common stock, Jeffrey T. Wilson serves as the Vice President and
Secretary of HN Corporation and owns 33.3% of its stock and Aaron M. Wilson
serves as a Vice President of HN Corporation.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
---------------------------------------------------------------
(a) Financial Statements
(See Item 8. Financial Statements and Supplementary Data)
Financial Statements of Imperial Petroleum, Inc.
Reports of Independent Public Accountants;
Consolidated Balance Sheets as of July 31, 2000 and 1999;
Consolidated Statements of Operations for the years ended
July 31, 2000, 1999, and 1998;
Consolidated Statements of Stockholder Equity for the
years ended July 31, 2000, 1999, and 1998;
Consolidated Statements of Cash Flows for the years
ended July 31, 2000, 1999, and 1998;
Notes to Consolidated Financial Statements.
Supplemental Financial Information
Schedule II - Amounts Receivable from Related Parties.
Other Schedules are omitted as they are not required.
(b) Reports on Form 8-K.
Report on Form 8-K filed February 13, 2002 with the Securities and Exchange
Commission.
(c) Exhibits. None.
3.1 Certificate of Incorporation of the Registrant incorporated herein
by reference to Exhibit -~ of the Form 10.
3.2 Bylaws of the Registrant incorporated herein by reference to
Exhibit B of the Form 10.
4. Instruments defining the rights of security holders, including
indentures. Not applicable.
9. Voting Trust Agreement. Not applicable.
11 Statement re: computation of per share earnings. Not applicable.
12 Statement re: computation of ratios. Not applicable.
13 Annual Report to security holders, Form 10-Q, or quarterly report
to security holders. Not applicable.
16 Letter re change in certifying accountant. Not applicable.
18 Letter re: change in accounting principles. Not applicable.
21 Subsidiaries of the Registrant.
22 Published report regarding matters submitted to vote of security
holders. Included by reference.
23 Consents of experts and counsel. Not applicable.
24 Power of Attorney. Not applicable.
27 Financial Data Schedule. Not applicable.
28 Information from reports furnished to state insurance regulatory
authorities. Not applicable;
99 Additional Exhibits; Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Imperial Petroleum, Inc.
Date: December 17, 2002 /s/ Jeffrey T. Wilson
----------------------
Jeffrey T. Wilson, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Signature Title Date
/s/ Jeffrey T. Wilson President and Chief Executive
- ---------------------- Officer (Principal Executive
Jeffrey T. Wilson Officer) and Director December 17, 2002
CERTIFICATION
I, Jeffrey T. Wilson (President) certify that:
1. I have reviewed this annual report on Form l0-K of Imperial Petroleum, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Securities Act of 1934 Rules 13a-l4 and 15d-l4)
for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to me by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report are my conclusions about the
effectiveness of the disclosure controls and procedures based on my evaluation
as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. I have indicated in this annual report whether there were significant changes
in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: 12/17/02 By: /s/ Jeffrey T. Wilson, President & CEO
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002
In connection with the annual report of Imperial Petroleum, Inc. (the "Company")
on Form l0-K for the year ended July 31, 2002, Jeffrey T. Wilson hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the SARBANES - OXLEY Act of 2002, that to the best of his knowledge:
1. The annual report fully complies with the requirements of Section 13(a) of
the Securities Act of 1934; and
2. The information contained in the annual report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: 12/17/02 By: /s/ Jeffrey T. Wilson, President & CEO