As filed with the Securities and Exchange Commission on ~~August 3~~____________, ~~2001Registration~~2002Registration No. __________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 American International Petroleum Corporation (Exact name of Registrant as specified in its charter)

Nevada
(State or other jurisdiction of
incorporation or organization)

6719
(Primary Standard Industrial
Classification Number)

13-3130236
(I.R.S. Employer
Identification Number)

2950 North Loop West, Suite 1000 Houston, Texas 77092 (713) 802-0087 (Address, including zip code and telephone number, including area code, of registrant’s principal executive offices) DENIS J. FITZPATRICK Chief Financial Officer AMERICAN INTERNATIONAL PETROLEUM CORPORATION 2950 North Loop West, Suite 1000 Houston, Texas 77092 Telephone: (713) 802-0087 Telecopier: (713) 681-5987 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: CHARLES SNOW, ESQ. SNOW BECKER KRAUSS P.C. 605 Third Avenue New York, New York 10158-0125Telephone: (212) 687-3860Fax: (212) 949-7052 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities toBe Registered		Amountto beRegistered		Proposed MaximumOffering PricePer Security (1)		Proposed MaximumOffering Price (1)		Amount ofRegistration Fee
Title of Each Class of Securities to Be Registered		Amount to be Registered		Proposed Maximum Offering Price Per Security (1)		Proposed Maximum Offering Price (1)		Amount of Registration Fee (2)
Common Stock, $.08 par value		8963,~~500~~862,~~000~~384(3)	~~(2)~~	$0.~~107~~07		$94,~~576~~470,~~500~~366.88	~~(3)~~	$~~2,872~~411.9527

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 promulgated under the Securities Act of 1933.

(2) ~~Represents~~Calculated ~~shares~~solely tofor ~~be sold by~~ the ~~selling~~purpose ~~securityholders~~of ~~named~~determining inthe ~~this~~ registration ~~statement.~~fee ~~Also~~pursuant ~~includes~~to anRule ~~indeterminate~~457(c) ~~number~~based ofupon ~~shares that~~ the ~~selling~~closing ~~securityholders~~sale ~~may~~price ~~acquire as a result~~ of ~~a stock split, stock dividend or similar transaction involving~~ the common stock ~~pursuant~~on toJune ~~the~~27, ~~antidilution~~2002 ~~provisions~~as ofreported ~~our 3% convertible debentures and warrants. Does not include additional shares that may be acquired~~ by ~~the~~Bloomberg ~~selling securityholders upon conversion of our 3% convertible debentures as a result of a decline in the market price of our common stock~~LP.

(3) ~~Calculated~~Represents ~~solely~~shares ~~for~~to be sold by the ~~purpose~~selling ofsecurityholders ~~determining~~named ~~the~~in this registration ~~fee~~statement. ~~pursuant~~Also toincludes ~~Rule~~an ~~457(c)~~indeterminate ~~based~~number ~~upon~~of shares that the ~~closing~~selling ~~sale~~securityholders ~~price~~may acquire as a result of a stock split, stock dividend or similar transaction involving the common stock onpursuant ~~July~~to ~~23,~~the ~~2001~~antidilution asprovisions ~~reported~~of our 3% convertible debentures and warrants. Does not include additional shares that may be acquired by ~~Bloomberg~~the LPselling securityholders upon conversion of our 3% convertible debentures as a result of a decline in the market price of our common stock.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Explanatory Note In accordance with Rule 429, the prospectus included in this Registration Statement relates to the offer and sale by the selling securityholders named in the prospectus of 134,204,426 shares of common stock, of which

~~Preliminary~~• ~~Prospectus dated August 3~~63, ~~2001~~862,384 ~~subject~~are tobeing ~~completion~~registered ~~Information~~for ~~contained~~resale in this ~~Prospectus~~Registration is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state. AMERICAN INTERNATIONAL PETROLEUM CORPORATION Common Stock GCA Strategic Investment Fund Limited and the other selling securityholders named in this prospectus are offering and selling up to 89,500,000 shares of our common stock, including an aggregate of 88,500,000 shares that GCA Strategic Investment Fund Limited may acquire upon conversion of our 3% convertible debentures and upon exercise of warrants. We will not receive any proceeds from these sales. Our common stock is quoted on the OTC Bulletin Board under the symbol “AIPN”. The common stock is a speculative investment and involves a high degree of risk. You should read the description of certain risks under the caption “Risk Factors” commencing on page 5 before purchasing the common stock. Our executive offices are at 2950 North Loop West, Suite 1000, Houston, Texas 77092 and our telephone number is 713-802-0087. These securities have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. The date of this Prospectus is _____, 2001Statement

•

70,342,042 were included in the 89,500,000 shares registered for resale in our registration statement on Form S-1 (Registration No. 333-666-74) declared effective by the SEC on August 13, 2001, of which 19,157,958 shares have been sold.

Preliminary Prospectus dated ____________, 2002, subject to completion

Information contained in this Prospectus is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state.

AMERICAN INTERNATIONAL PETROLEUM CORPORATION

Common Stock

GCA Strategic Investment Fund Limited is offering and selling up to 133,154,426 shares of our common stock, including 122,531,745 shares they may acquire upon conversion of our 3% convertible debentures and in payment of twelve months accrued interest and 10,622,681 shares it may acquire upon exercise of warrants.

Colony Park Financial, LLC is offering and selling 1,050,000 shares of our common stock it may acquire upon exercise of a warrant.

GCA Strategic Investment Fund Limited, and any broker or dealer participating in the sale of shares of common stock by GCA under this prospectus, is an “underwriter” within the meaning of the Securities Act of those shares, and any commissions, discounts or concessions which GCA, or any participating broker or dealer, receives in connection with such sales will be underwriting compensation. We will not receive any proceeds from these sales.

Colony Park Financial LLP may be deemed an “underwriter” within the meaning of the Securities Act in connection with such sales and any commissions, discounts, or concessions it, or any participating broker or dealer, receives may be deemed to be underwriting compensation.

Our common stock is quoted on the OTC Bulletin Board under the symbol “AIPN”.

The common stock is a speculative investment and involves a high degree of risk. You should read the description of certain risks under the caption “Risk Factors” commencing on page 6 before purchasing the common stock.

Our executive offices are at 2950 North Loop West, Suite 1000, Houston, Texas 77092 and our telephone number is 713-802-0087.

These securities have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

The date of this Prospectus is _____, 2002

		Page
Prospectus Summary		35
Risk Factors		47
Forward Looking Statements		912
Market for Our Common Stock		912
Dividend Policy		1013
Selected Financial Data		1013
Management’s Discussion and Analysis of Financial Condition
Management’s Discussion and Analysis of Financial Condition And Results of Operations		14
And Results of Operations		11
Business		23
Business		15
Management		31
Management		28
Security Ownership of Certain Beneficial Owners and Management		35
Security Ownership of Certain Beneficial Owners and Management		33
Certain Transactions		35
Certain Transactions		35
Selling Securityholders		37
Selling Securityholders		35
Plan of Distribution		38
Plan of Distribution		37
Description of Securities		39
Description of Securities		38
Where You Can Find More Information		42
Where You Can Find More Information		42
Legal Matters		42
Legal Matters		42
Experts		42
Experts		42
Index to Consolidated Financial Statements		42
Index to Consolidated Financial Statements		43

This prospectus is part of a registration statement we filed with the SEC. You should rely only on the information or representations provided in this prospectus. We have not authorized anyone to provide you with different information. The common stock will not be offered in any state where an offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the cover of this prospectus. 24

Prospectus Summary Our Business We are a holding company that ~~through~~operates two major business divisions, a Refining Division and an Oil and Gas Exploration and Production, or E&P Division. Through our wholly owned subsidiaries we:

• ~~Refine~~refine crude oil feedstocks to produce jet fuel, diesel, naphtha, gas oils and fuel oil.

• ~~Produce~~produce, process, and market conventional and technologically advanced polymerized asphalt, vacuum gas, oil and other products at our refinery in Lake Charles, Louisiana utilizing low-cost, low-gravity, high sulfur crudes.

• ~~Engage~~engage in oil and gas exploration and development in western Kazakhstan, where we own a 70% working interest in a ~~20,000~~4.7 ~~square~~million ~~kilometer~~acre exploration ~~block~~lease and a 100% working interest in a ~~200~~license comprising a 264,000 acre gas field.

We also are seeking other domestic and international oil and gas projects. inWe ~~the~~were ~~United~~organized ~~States~~on April 1, ~~Russia~~1929 ~~and~~under ~~Central~~the ~~Asia~~laws of the State of Nevada under the name Pioneer Mines Operating Company. ~~Shares~~Our ~~Offered~~name ~~The~~was ~~selling~~changed ~~securityholders~~to ~~named~~American International Petroleum Corporation in 1982. Recent Developments During the ~~section~~first half of 2002, there has been a marked decline in the ~~Prospectus~~availability ~~captioned~~of ~~“Selling~~asphaltic ~~Securityholders”~~crude ~~are~~oil ~~offering~~feedstocks caused by a number of factors, including OPEC reductions in crude oil exports and ~~selling~~political upand economic turmoil in Venezuela, a principal supplier of heavy crude oils. We and other asphalt suppliers were unable to 89purchase the quantities and/or qualities of asphalt crude oils and/or asphalt blendstock necessary to satisfy 100% of our contract backlog. On May 23,~~500~~ 2002,~~000~~ ~~shares~~we provided Force Majeure notices to our asphalt customers informing them of ~~common~~this ~~stock,~~fact ~~including~~and annotifying ~~aggregate~~them that due to the unavailability of 88wholesale asphalt and/or asphalt feedstocks,~~500~~ which is beyond our reasonable control,~~000~~ ~~shares~~we ~~that~~were ~~GCA~~forced ~~Strategic~~to ~~Investment~~suspend ~~Fund~~all ~~Limited~~shipments ~~may~~until ~~acquire~~further ~~upon~~notice. ~~conversion~~Although we expect to be able to resume asphalt shipments in the third quarter this year, there can be no certainty this will occur. In June 2002, we sold $1.9 million principal amount of our 312% ~~convertible~~bridge ~~debentures~~notes due March 18, 2003 to GCA for a purchase price of $1.9 million and ~~upon~~a warrant to purchase 3.6 million shares of our common stock at an exercise price of ~~warrants~~$0.04 ~~Summary~~per share. We will use the net proceeds of ~~Consolidated~~approximately ~~Financial~~$1.6 ~~Data~~million ~~The~~to ~~summary~~support ~~consolidated~~our ~~financial~~working ~~data~~capital ~~presented~~needs. ~~below~~Shares isOffered ~~qualified~~GCA inStrategic ~~its~~Investment ~~entirety~~Fund byLimited is offering up to 133,154,426 ~~and~~shares ~~should~~of becommon ~~read~~stock, ~~together~~including ~~with~~an aggregate of 122,531,745 shares that it may acquire upon conversion of our ~~consolidated~~3% ~~financial~~convertible ~~statements~~debentures and ~~related~~in ~~notes~~payment ~~included~~of intwelve ~~this~~months ~~prospectus~~accrued ~~under~~interest ~~the~~and ~~heading~~10,622,681 ~~“Consolidated~~upon exercise of warrants. Colony Park Financial, ~~Statements”~~LLC ~~and~~is ~~“Management’s~~offering ~~Discussion~~up ~~and~~to ~~Analysis~~1,050,000 shares of ~~Financial~~common ~~Condition~~stock ~~and~~that ~~Results~~it may acquire upon the exercise of ~~Operations”~~a warrant that it received in connection with the GCA 12% bridge note financing. 5

	($000)For the three months endedMarch 31, 2001				($000)For the Years EndedDecember 31,
	2001		2000		2000		1999		1998		1997		1996
Statement of operations data:		(unaudited)
Revenues	$ 2,264		$ 1,211		$ 3,274		$ 8,352		$ 11,855		$ 828		$ 4,003
Net loss applicable to
common shareholders (1)(2)	(2,526	)	(3,483	)	(25,428	)	(14,918	)	(9,103	)	(17,954	)	(4,652	)
Net loss per share -
basic and diluted	(0.02	)	(0.04	)	(0.23	)	(0.20	)	(0.17	)	(0.43	)	(0.16	)

Summary of Consolidated Financial Data

The summary consolidated financial data presented below is qualified in its entirety by, and should be read together with, our consolidated financial statements and related notes included in this prospectus under the heading “Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

(1) Net loss in 2000 and 1996 included a provision for the impairment of the costs of oil and gas properties of $12,546,000 and $200,000, respectfully.

	($000’s) For the Three Months Ended March 31, (Unaudited)						($000’s) December 31

		2002			2001			2001			2000			1999			1998			1997

Statement of operations data
Revenues	$	1,301		$	2,264		$	18,637		$	3,274		$	8,352		$	11,855		$	828
Net loss applicable to common shareholders (1)(2)		(2,607	)		(2,526	)		(27,670	)		(25,428	)		(14,918	)		(9,103	)		(7,954	)
Net loss per share - basic and diluted		(0.01	)		(0.02	)		(0.17	)		(0.23	)		(0.20	)		(0.17	)		(0.43	)

(21) Net loss ~~applicable~~included toa ~~common~~provision ~~shareholders~~for inthe ~~2000~~impairment ~~reflects~~of ~~imputed~~carrying ~~dividend~~costs onof ~~preferred~~oil ~~stock~~and gas properties and plant assets of $~~543~~10,671,000 and $9,236,000, respectively, in 2001 and oil and gas properties of $12,546,000 in 2000.

	($000)At March 312001		($000)At December 31,
	2000		2000		1999		1998		1997		1996
Balance sheet data:	(unaudited)
Working capital (deficit)	$ (8,199	)	$ (8,222	)	$ (5,005	)	$(4,596	)	$ (694	)	$(9,823	)
Total assets	56,279		54,998		69,658		60,861		41,840		34,492
Total current liabilities	11,226		10,073		8,904		7,914		9,335		13,165
Long-term debt	5,263		5,565		11,985		6,111		-0-		6,767
Accumulated deficit	(131,332	)	(128,806	)	(103,379	)	(88,461	)	(79,358	)	(61,404	)
Stockholder’s equity	37,112		37,868		48,464		46,530		32,504		21,328
Cash dividends declared	-0-		-0-		-0-		-0-		-0-		-0-

(2)

Net loss applicable to common shareholders in 2001 and 2000 reflects imputed dividends on preferred stock of $217,000 and $543,000, respectively.

3 **********

	($000’s) At Three Months Ended March 31 (unaudited)						($000’s) At December 31

		2002			2001			2001			2000			1999			1998			1997

Balance sheet data:
Working capital (deficit)	$	(4,839	)	$	(8,199	)	$	(3,144	)	$	(8,222	)	$	(5,005	)	$	(4,596	)	$	(694	)
Total assets		35,251			56,279			37,054			54,998			69,658			60,861			41,840
Total current liabilities		6,798			11,226			6,566			10,073			8,904			7,914			9,335
Long-term debt		13,306			5,263			13,920			5,565			11,985			6,111			-0	-

Accumulated deficit		159,083			(131,332	)		(156,476	)		(128,806	)		(103,379	)		(88,461	)		(79,358	)
Stockholder’s equity		14,841			37,112			16,262			37,868			48,464			46,530			32,504
Cash dividends declared		-0	-		-0	-		-0	-		-0	-		-0	-		-0	-		-0	-

Risk Factors Risks Related to Our Financial Condition We have a history of operating losses which may continue and we may never become profitable. We have experienced significant losses since we began operations. We incurred a net loss of approximately $2.5 million for the three months ended March 31, 2001 compared to a net loss of approximately $3.5 million for the three months ended March 31, 2000 and a net loss of approximately $24.9 million for the year ended December 31, 2000, compared to a net loss of approximately $14.9 million for the year ended December 31, 1999, and a net loss of approximately $9.1 million for the year ended December 31, 1998. As a result of these losses, as of March 31, 2001, we had an accumulated deficit of approximately $131.1 million. We will continue to incur losses until our asphalt and/or refining operations or Kazakhstan projects generate substantial revenues. We expect our expenses to increase as we expand our business. If revenues grow more slowly than we anticipate, or if operating expenses exceed our expectations, we may not become profitable. Even if we become profitable, we may be unable to sustain our profitability. Our auditors have included an explanatory paragraph in their report on our financial statements concerning our ability to continue in business. In connection with the audit of our financial statements for the year ended December 31, 2000, Hein + Associates, LLP, our independent auditors, included an explanatory paragraph in its report on our financial statements as to our ability to continue in business as a result of6

•Risk Factors Risks Related to Our Financial Condition We have a history of operating losses that may continue and we may never become profitable. We have experienced significant losses since we began operations. We incurred a net loss applicable to common shareholders of approximately $242.96 million ~~during~~for the first quarter ended March 31, 2002 compared to a net loss of approximately $2.5 million for the first quarter ended March 31, 2001, a net loss of approximately $27.7 million for the year ended December 31, 2001, compared to a net loss of approximately $25.4 million for the year ended December 31, 2000, and a net loss of approximately $14.9 million infor the year ended December 31, 1999. As a result of these losses, as of March 31, 2002, we had an accumulated deficit of approximately $159.1 million. We will continue to incur losses until our asphalt and/or refining operations or Kazakhstan projects generate substantial revenues. We expect our expenses to increase as we expand our business. If revenues grow more slowly than we anticipate, or if operating expenses exceed our expectations, we may not become profitable. Even if we become profitable, we may be unable to sustain our profitability. Our auditors have included an explanatory paragraph in their report on our financial statements concerning our ability to continue in business. In connection with the audit of our financial statements for the year ended December 31, 2001, Hein + Associates, LLP, our independent auditors, included an explanatory paragraph in its report on our financial statements as to our ability to continue in business as a result of

• ~~lack~~a net loss of ~~resources~~approximately to$27.7 ~~fulfill~~million ~~our~~during ~~operating~~2001, and ~~capital~~$24.9 ~~commitments~~million asin ~~of December 31,~~ 2000

• alack ~~working~~of ~~capital~~resources ~~deficit~~to offulfill ~~approximately~~our ~~$8.2~~operating ~~million~~and atcapital commitments as of December 31, ~~2000~~2001

We• do not have sufficient cash flows from operations or available credit lines necessary to fund all of our financial obligations. We do not currently have sufficient credit facilities to supplement our cash flows or to replace them as a ~~source~~working ofcapital ~~funding~~deficit ~~to satisfy our needs. Although we are currently having discussions with certain entities regarding (1) entering into agreements at our Lake Charles, Louisiana refinery, and (2) obtaining line(s)~~ of ~~credit~~approximately to provide the necessary capital to support our operations, there can be no assurance at this time that we will be successful with these efforts. If we are not, we may need to sell assets to meet our obligations and our ability to continue operations will be materially and adversely affected. We owe GCA $~~9,276,128 million under~~ 3% convertible secured debentures due in April 2002 which we will not be able to pay unless GCA converts the associated indebtedness into common stock, or we refinance or extend the due date of this debt, or we receive funds from a financing or the sale of assets.1 ~~We have $9,276,128~~ million of debt due to GCA in April 2002, which we may not be able to pay. Payment of this debt is secured by our St. Marks refinery. GCA has the right to convert these debentures into shares of our common stock at anDecember ~~approximate 8% discount to the prevailing market price of our common stock. If GCA does not convert all of these debentures prior to maturity~~31, and we are not able to pay or extend the due date, or refinance this debt, GCA has the right to foreclose on this collateral. If we are not able to obtain the necessary financing or sell certain assets to meet these obligations, our ability to continue operations will be materially and adversely effected. Risks Related to Our Business We do not have any proved reserves of gas or oil. Although we have identified structures within both our concessions in Kazakhstan which geological and engineering data demonstrate with reasonable certainty may contain oil and gas reserves to be recoverable in future years from known reservoirs under existing economic and operating conditions, we do not have a contract in place to sell the resultant oil and/or gas that may be produced from these structures. Under SEC accounting rules, we may not classify these reserves as proven until we have entered into such a contract. We are subject to losses from drilling and other hazards. Unusual or unexpected formation pressures, down-hole fires or other hazardous conditions may be encountered in drilling oil and gas wells and in the refining of oil. If we encounter such hazards, completion of wells or production of asphalt products may be substantially delayed and the costs significantly increased, and in the case of asphalt products, may result in the cancellation of customer contracts and adversely affect our ability to attract future business. Even though a well is completed and is found to be productive, water or other deleterious substances may be encountered, which may impair or prevent production of oil or gas, and which may adversely affect our operations. Since our refineries are located on inland waterways, floods and adverse weather conditions can hinder or delay feedstock and transportation of products at our refineries in Lake Charles, Louisiana and St. Marks, Florida. Labor disputes, work stoppages, shortages of equipment and materials or the unavailability of oil or asphalt barges and drilling rigs can also disrupt drilling and production operations. 42001

~~Our~~We ~~business~~do isnot ~~subject~~have tosufficient ~~environmental~~cash ~~risks.~~flows ~~Extensive~~from ~~national~~operations ~~and/~~or ~~local~~available ~~environmental~~credit ~~laws~~lines ~~and~~necessary ~~regulations~~to infund ~~both~~all ~~the~~of ~~United~~our ~~States~~financial ~~and~~obligations. ~~Kazakhstan~~During ~~affect~~the ~~nearly~~first ~~all~~half of ~~our~~2002, ~~operations.~~there ~~These~~has ~~laws~~been ~~and~~a ~~regulations~~marked ~~set~~decline ~~various~~in ~~standards~~the ~~regulating~~availability ~~certain~~of ~~aspects~~asphaltic crude oil feedstocks caused by a number of ~~health~~factors, including OPEC reductions in crude oil exports and ~~environmental~~political ~~quality~~and economic turmoil in Venezuela, ~~provide~~a ~~for~~principal ~~penalties~~supplier of heavy crude oils. We and other ~~liabilities~~asphalt ~~for~~suppliers were unable to purchase the ~~violation~~quantities and/or qualities of ~~such~~asphalt ~~standards~~crude oils and/or ~~establish~~asphalt inblendstock ~~certain~~necessary ~~circumstances~~to ~~obligations~~satisfy 100% of our contract backlog. On May 23, 2002, we provided Force Majeure notices to ~~remediate~~our ~~current~~asphalt customers informing them of this fact and ~~former~~notifying ~~facilities~~them that due to the unavailability of wholesale asphalt and/or ~~off-site~~asphalt ~~locations~~feedstocks, which is beyond our reasonable control, we were forced to suspend all shipments until further notice. WeConsequently, ~~may~~other ~~incur~~than ~~substantial~~a ~~financial~~relatively ~~obligations~~small inamount ~~connection~~of ~~with~~storage ~~environmental~~fees, ~~compliance~~we have had no operating cash flow since then to support our business. We ~~are~~also ~~occasionally~~do ~~subject~~not currently have sufficient credit facilities to ~~non-recurring~~supplement ~~environmental~~our ~~costs~~cash flows or to replace them as a source of funding to satisfy our needs. ~~The~~Although ~~annual~~we ~~cost~~are ~~incurred~~currently inhaving ~~connection~~discussions with ~~these~~certain ~~assessments~~entities ~~varies~~regarding ~~from~~(1) ~~year~~entering tointo ~~year,~~agreements ~~depending~~at ~~upon~~ our ~~activities~~Lake inCharles, ~~that~~Louisiana ~~year.~~refinery, ~~The~~and ~~costs~~(2) obtaining line(s) of ~~such~~credit ~~environmental~~to ~~impact~~provide ~~assessments~~the ~~were~~necessary ~~not~~capital ~~material~~to insupport ~~2000~~our operations, ~~but~~we ~~may~~cannot assure you that we will be insuccessful ~~the~~with ~~future~~these efforts. WeIf we are not, ~~aware~~it ofis ~~any~~very ~~other~~likely ~~anticipated~~we ~~nonrecurring~~will ~~environmental~~be ~~costs~~required to suspend our operations and may need to seek court protection. ~~Kazakhstan~~Our ~~has~~ability ~~comprehensive~~to ~~environmental~~obtain ~~laws~~additional ~~and~~financing ~~regulations~~is ~~and~~limited ~~has~~because ~~adopted~~substantially ~~the~~all ~~environmental~~of ~~standards~~our ~~set~~assets ~~out~~have bybeen ~~the~~pledged ~~World~~to ~~Bank~~secure ~~organizations~~payment of our indebtedness. ~~Enforcement~~Since isthe ~~administered~~market price of our common stock has been low in recent years, we only have been able to obtain financing through the ~~Kazakhstan~~sale ~~Ministry~~ of ~~Environment~~our ~~and~~secured ~~related~~debt ~~local~~securities, ~~state~~using ~~agencies~~our assets as collateral to secure payment of the debt obligations. Our ~~operations~~ability ~~require~~to aobtain ~~comprehensive~~financing ~~environmental~~may ~~permit~~be ~~for~~limited since substantially all ~~drilling~~of ~~and~~our ~~exploration~~operating ~~activities~~assets have been pledged to secure payment or our indebtedness. ~~Our~~If ~~operations~~we are ~~subject~~unable to ~~all~~obtain offinancing ~~the~~for ~~environmental~~our ~~risks~~operations, ~~normally~~we ~~incident~~may have to ~~oil~~curtail or cease our operations and seek court protection. Risks Related to Our Business We do not have any proved reserves of gas ~~exploration,~~or ~~drilling,~~oil. ~~and~~Although ~~refining~~we ~~activities,~~have ~~including~~identified ~~blowouts,~~structures ~~pollution~~within our License 1551 in Kazakhstan which geological and ~~fires.~~engineering ~~Any~~data ofdemonstrate ~~these~~with ~~occurrences~~reasonable ~~could~~certainty ~~result~~may contain gas reserves to be recoverable in ~~environmental~~future ~~damage~~years orfrom ~~destruction~~known reservoirs under existing economic and operating conditions, ~~including~~we ~~the~~do ~~discharge~~not ofhave ~~hazardous~~a ~~materials~~contract ~~into~~in place to sell the ~~environment~~resultant gas that may be produced from these structures. ~~Although~~Under SEC accounting rules, we ~~maintain~~may ~~comprehensive~~not classify these reserves as proven until we have entered into such a contract. We are subject to losses from drilling and ~~general~~other ~~liability~~hazards. ~~coverage~~Unusual asor isunexpected ~~customary~~formation pressures, down-hole fires or other hazardous conditions may be encountered in ~~the~~drilling oil and gas ~~industry,~~wells and ~~coverage~~in ~~against~~the ~~certain~~refining ~~risks,~~of weoil. ~~are~~If ~~not~~we ~~fully~~encounter ~~covered~~such ~~for~~hazards, ~~damages~~completion ~~incurred~~of aswells aor ~~consequence~~production of ~~environmental~~asphalt ~~mishaps.~~products Tomay ~~the~~be ~~extent~~substantially wedelayed ~~are~~and ~~covered~~the costs significantly increased, and in the ~~coverage~~case ~~may~~of ~~not~~asphalt beproducts, ~~adequate~~may ~~protection~~result in the ~~event~~cancellation of ancustomer ~~environmental~~contracts ~~problem~~and adversely affect our ability to attract future business. WeEven ~~are~~though ~~not~~a ~~aware~~well ofis ~~any~~completed ~~pending~~and is found to be productive, water or ~~threatened~~other ~~reclamation~~deleterious ~~issues~~substances inmay ~~the~~be ~~United~~encountered, ~~States~~which may impair or ~~abroad.~~prevent Weproduction of oil or gas, and which may ~~experience~~adversely ~~difficulties~~affect inour ~~marketing~~operations. ~~some~~Since our refineries are located on inland waterways, floods and adverse weather conditions can hinder or delay feedstock and transportation of products at our ~~products~~refineries in Lake Charles, Louisiana and St. ~~Our~~Marks, ~~ability~~Florida. toLabor ~~market~~disputes, ~~some~~work stoppages, shortages of ~~our~~equipment ~~products~~and ~~depends~~materials ~~upon:~~or the unavailability of oil or asphalt barges and drilling rigs can also disrupt drilling and production operations. 7

Our business is subject to environmental risks.

Extensive national and/or local environmental laws and regulations in both the United States and Kazakhstan affect nearly all of our operations. These laws and regulations set various standards regulating certain aspects of health and environmental quality, provide for penalties and other liabilities for the violation of such standards and establish in certain circumstances obligations to remediate current and former facilities and off-site locations. We may incur substantial financial obligations in connection with environmental compliance.

We are occasionally subject to non-recurring environmental costs. The annual cost incurred in connection with these assessments varies from year to year, depending upon our activities in that year. The costs of such environmental impact assessments were not material in 2001, but may be in the future. The State of Florida Department of Environmental Protection is in the process of investigating the St. Marks, Florida facility for possible site contamination that we believe occurred prior to our purchase of the facility. At this time, we do not believe any material liability will result from the investigation and, consequently, have made no provision for same in our financial statements. However, there can be no assurance material liability will not result and the investigation may restrict our ability to reopen the facility during 2002 or thereafter. St. Marks recently reached an agreement with the DEP regarding the disposition of petroleum product tankage at the facility.

The facility is undergoing the first steps of remediation by the DEP for the clean up of petroleum contamination at the site. We have been presented with documentation recently made available by the DEP that the site contains levels of dioxin contamination heretofore unknown by either the DEP or us. We have relinquished our rights to storage tanks and equipment in the area identified by the DEP as containing dioxin above regulatory levels. This decision will allow the DEP to continue remediation activities unimpeded.

We have maintained our commitment to act in good faith to assist the DEP in the clean up of the site. We have no knowledge of activities at the facility that could have caused dioxin contamination, and believe that such conditions predated St. Marks’ acquisition of the facility in late 1992. St. Marks received a specific waiver of liability from the DEP for preexisting conditions prior to its acquisition, and is currently seeking confirmation of the validity of that waiver in Wakullah Count, Florida circuit court.

Although we believe it is unlikely, there is a possibility that the Courts could rule that this waiver is invalid, in which case St. Marks could be jointly and severally liable for all cleanup costs at the site and for any damages incurred by individuals exposed to the contaminants there. We are insured for such occurrences, however, our policies are limited as to the amounts of certain coverages and may be insufficient to fully reimburse our losses. If the difference is material, our ability to continue operations may be materially and adversely affected.

We are awaiting notification from the DEP as to when thorough contamination testing of the asphalt distribution area will commence. A final determination regarding the status for asphalt distribution activities at the facility shall be made upon receipt of DEP documentation by St. Marks of the test results of that area.

We continue to work with the DEP in order to maintain the portion of the facility to be utilized for asphalt distribution. The storage tankage associated with the asphalt distribution area is exempt from state regulation, and is in compliance with applicable United States Coast Guard regulations. However, the presence of dioxins on the facility, regardless of the source and liability, is likely to prevent our ability to utilize the site for our future asphalt operations in Florida. Consequently, unless we can locate a site on the facility property that is free of dioxins and the DEP authorizes our use of such a site, we will be forced to locate another site for our asphalt distribution in Florida and the neighboring states. This could result in substantial capital requirements that we may not be able to provide and, consequently, we may not be able to conduct our business there as originally planned. We are not currently aware of any other anticipated nonrecurring environmental costs.

Kazakhstan has comprehensive environmental laws and regulations and has adopted the environmental standards set out by the World Bank organizations. Enforcement is administered through the Kazakhstan Ministry of Environment and related local state agencies. Our operations require a comprehensive environmental permit for all drilling and exploration activities.

Our operations are subject to all of the environmental risks normally incident to oil and gas exploration, drilling, and refining activities, including blowouts, pollution and fires. Any of these occurrences could result in environmental damage or destruction, including the discharge of hazardous materials into the environment. Although we maintain comprehensive and general liability coverage as is customary in the oil and gas industry, and coverage against certain risks, we are not fully covered for damages incurred as a consequence of environmental mishaps. To the extent we are covered, the coverage may not be adequate protection in the event of an environmental problem. We are not aware of any pending or threatened reclamation issues in the United States or abroad.

We have experienced difficulties in obtaining asphalt to service our asphalt contracts.

During the first half of 2002, there has been a marked decline in the availability of asphaltic crude oil feedstocks caused by a number of factors, including OPEC reductions in crude oil exports and political and economic turmoil in Venezuela, a principal supplier of heavy crude oils. We and other asphalt suppliers were unable to purchase the quantities and/or qualities of asphalt crude oils and/or asphalt blendstock necessary to satisfy 100% of our contract backlog. On May 23, 2002, we provided Force Majeure notices to our asphalt customers informing them of this fact and notifying them that due to the unavailability of wholesale asphalt and/or asphalt feedstocks, which is beyond our reasonable control, we were forced to suspend all shipments until further notice. Consequently, other than storage fees, we have had no operating cash flow since then to support our business. If we are not able to resume shipments or are unsuccessful in consummating a transaction to process crude oil through our refinery, it is very unlikely we will be able to continue operations and therefore, we may have to seek court protection.

We may experience difficulties in marketing some of our products.

Our ability to market some of our products depends upon:

•

our ability to obtain the financing necessary to develop our oil and gas properties to the point where production is available for sale

•

the proximity, capacity and cost of oil or gas pipelines and other facilities for the transportation of oil or gas

•

the quantity and quality of the oil or gas produced

•

the availability of viable purchasers willing to buy our oil and gas production

•

our ability to provide asphalt products which satisfy state and federal highway quality specifications

•

the availability and cost of asphalt barges to transport asphalt products

Government legislation in Kazakhstan and other foreign countries through which our products may be transported may adversely affect our business. Our exploration in western Kazakhstan is subject to regulations imposed by the Kazakhstan government. The Kazakhstan government may limit oil and gas production and impose taxes on oil and gas when sold. We cannot predict whether such governmental actions may occur, or anticipate the ultimate effect of governmental policies and contracts upon us. We also will be subject to the laws of jurisdictions through which oil and gas pipelines traverse. We cannot predict what policies these jurisdictions may follow, or the impact of local regulations on our business. Our business is subject to possible adverse political and economic conditions in Kazakhstan. A favorable political climate in Kazakhstan and the openness of its markets to United States trade is essential to our success in Kazakhstan. Kazakhstan is a former constituent republic of the Soviet Union, which declared its independence from the Soviet Union in December 1991. At the time of its independence, it became a member of the Commonwealth of Independent States, or CIS, the association of former Soviet states which have entered into agreements of cooperation and support for trade, border protection, immigration controls, environmental matters and overall cooperation for the economic and political stability and development of the member states. The CIS have embraced political and economic reforms, but there remains political and economic instability the result of which could be detrimental to our operations there. 5Because the CIS countries are in the early stages of development of a market economy, the commercial framework in still developing along with commercial laws, their applications and the enforcement of these laws. Although Kazakhstan’s laws regarding foreign investment provide for protection against nationalization and confiscation, there is little or no judicial precedent in this area. Foreign firms operating in this region may be subject to numerous other risks that are not present in domestic operations, including political strife, the possibility of expropriation, inadequate distribution facilities, inflation, fluctuations of foreign currencies, high and unpredictable levels of taxation, requirements for governmental approvals for new ventures, local participation in operations, and restrictions on royalties, dividends and currency remittances. Currently, there are no restrictions on royalties, dividends or currency remittances. Our business is subject to foreign currency risks. Since we have oil and gas operations outside the United States, our business is subject to foreign currency risks. These risks include

Because the CIS countries are in the early stages of development of a market economy, the commercial framework in still developing along with commercial laws, their applications and the enforcement of these laws. Although Kazakhstan’s laws regarding foreign investment provide for protection against nationalization and confiscation, there is little or no judicial precedent in this area. Foreign firms operating in this region may be subject to numerous other risks that are not present in domestic operations, including political strife, the possibility of expropriation, inadequate distribution facilities, inflation, fluctuations of foreign currencies, high and unpredictable levels of taxation, requirements for governmental approvals for new ventures, local participation in operations, and restrictions on royalties, dividends and currency remittances. Currently, there are no restrictions on royalties, dividends or currency remittances. Our business is subject to foreign currency risks. Since we have oil and gas operations outside the United States, our business is subject to foreign currency risks. These risks include

•

The value of the local currency in Kazakhstan relative to the U.S. dollar may continue to decline and is subject to continued volatility

•

We may encounter difficulties in converting local currencies to U.S. dollars. Although Kazakhstan laws permit the conversion of local currency into foreign currency, the local currency generally is not convertible outside CIS countries. If we discover oil or gas in our licensed area in Kazakhstan and sell the oil and gas in a CIS country, currency liquidity and restrictions may adversely affect us.

•

The market for conversion of local currency into other currencies may deteriorate or cease to exist. Although a market exists within CIS countries for the conversion of CIS currencies into other currencies, it is limited in size and subject to rules limiting the purposes for which conversion may be effected. In addition, the availability of other currencies may inflate their values relative to CIS currencies.

We may encounter delays in transfer of funds in and out of Kazakhstan since its banking system is not well developed. Since the banking system in Kazakhstan is not yet as developed as its Western counterparts, we may encounter considerable delays in the transfer of funds within, and the remittance of funds out of Kazakhstan. Any delay in converting Kazakhstan currency into a foreign currency in order to make a payment, or delay in the transfer of such currency could have a material adverse effect on our business. We may experience difficulties in repatriating profits and capital. While applicable legislation in the CIS currently permits the repatriation of profits and capital and the making of other payments in hard currency, our ability to repatriate such profits and capital and to make such other payments is dependent upon the continuation of the existing legal regimes for currency control and foreign investment, administrative policies and practices in the enforcement of such legal regimes and the availability of foreign exchange in sufficient quantities in those countries. Our success is dependent on our key personnel who we may not be able to retain and we may not be able to hire additional qualified personnel to satisfy our personnel needs. Our success is dependent upon the efforts, abilities and expertise of certain key management personnel. Our future success also is dependent, in part, on our ability to attract and retain qualified personnel. We cannot give you any assurance that we will be able to attract and retain qualified individuals. As compared to other publicly traded oil and gas companies, we have fewer resources to attract and/or retain key personnel, and we do not have the depth of managerial employees to rely upon in the event of the loss of any single employee. The loss of any key employee could have a material adverse affect on the operations of our business. Risks Related to Our Common Stock Since our common stock is subject to the SEC’s “penny stock” rules, investors may find it more difficult to sell our common stock as compared to securities traded on a national securities exchange or quoted on the Nasdaq stock market. SEC rules require brokers to provide information to purchasers of securities traded at less than $5.00 and not traded on a national securities exchange or quoted on the NASDAQ Stock Market. The rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker must also give bid and offer quotations and broker and salesperson compensation information to the customer orally or in writing before or with his confirmation. The SEC rules also require a broker to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction before a transaction in a penny stock. These disclosure requirements may have the effect of reducing trading activity in our common stock and make it more difficult for investors to sell. 6Conversion of our convertible debentures and subsequent public sale of our common stock while our market price is declining may result in further decreases in the market price. As of June 27, 2002, $13,383,138 principal amount of our convertible debentures were outstanding. The debentures are convertible into shares of our common stock at a conversion price equal to 85% of the average of the lowest 3 daily weighted average sale prices of a share of our common stock for 20 trading days prior to the date of conversion. Since there is no minimum conversion price, there is no limit on the number of shares of common stock that the holders of the debentures may acquire upon conversion. The holders of these debentures may sell at market price the shares of common stock it has acquired upon conversion at a 15% discount to prevailing market prices concurrently with, or shortly after, conversion, realizing a profit equal to the difference between the market price and the discounted conversion price. The holders of these debentures also could engage in short sales of our common stock, which could contribute to a decline in the market price of the common stock and give it the opportunity to profit from that decrease by covering a short position with shares acquired upon conversion at 15% discount to the prevailing market price. The conversion of the debenture and subsequent sale of a large number of shares of common stock acquired upon conversion during periods when the market price of the common stock declines, or the possibility of such conversions and sales, may exacerbate the decline or impede increases in the market price of the common stock. 10

Conversion of our convertible debentures and subsequent public sale of our common stock while our market price is declining may result in further decreases in the market price. As of June 21, 2001, $14,574,500 principal amount of our convertible debentures were outstanding. ~~The~~ debentures are convertible into shares of our common stock at a conversion price equal to 85% to 92% of the average of the lowest 3 daily weighted average sale prices of a share of our common stock for 20 trading days prior to the date of conversion. Since there is no minimum conversion price, there is no limit on the number of shares of common stock that the holders of the debentures may acquire upon conversion. The holders of these debentures may sell at market price the shares of common stock it has acquired upon conversion at an 8% to 15% discount to prevailing market prices concurrently with, or shortly after, conversion, realizing a profit equal to the difference between the market price and the discounted conversion price. The holders of these debentures also could engage in short sales of our common stock, which could contribute to a decline in the market price of the common stock and give it the opportunity to profit from that decrease by covering a short position with shares acquired upon conversion at an 8% to 15% discount to the prevailing market price. The conversion of the debenture and subsequent sale of a large number of shares of common stock acquired upon conversion during periods when the market price of the common stock declines, or the possibility of such conversions and sales, may exacerbate the decline or impede increases in the market price of the common stock. Conversion of our shares of series A convertible preferred stock and subsequent public sale of our common stock while its market price is declining may result in further decreases in the market price. Each share of our series A convertible preferred stock has a stated value of $1,000 and is convertible into shares of our common stock at a conversion price equal to 92% of the average of the lowest three daily weighted average sales prices of our common stock during the 20 trading days prior to the date of conversion. The number of shares of common stock that may be acquired upon conversion is determined by dividing the stated value of the number of shares of series A convertible preferred stock to be converted by the conversion price. Since there is no minimum conversion price, there is no limit on the number of shares of common stock that holders of the series A convertible preferred stock may acquire upon conversion. Holders of our series A convertible preferred stock may sell at market price the shares of common stock they have acquired upon conversion at an 8% discount to prevailing market prices concurrently with, or shortly after, conversion, realizing a profit equal to the difference between the market price and the discounted conversion price. The holders of the series A convertible preferred stock could engage in short sales of our common stock, which could contribute to a decline in the market price of the common stock and give them the opportunity to profit from that decrease by covering their short position with shares acquired upon conversion at an 8% discount to the prevailing market price. The conversion of the series A convertible preferred stock and subsequent sale of a large number of shares of common stock acquired upon conversion during periods when the market price of the common stock declines, or the possibility of such conversions and sales, may exacerbate the decline or impede increases in the market price of the common stock. Conversion of our outstanding debentures and series A convertible preferred stock, and the exercise of our outstanding warrants and stock options and subsequent public sale of our common stock, will result in substantial dilution to existing stockholders. ~~As of July 21, 2001, we had outstanding 162,530,577 shares of common stock. In addition,~~

•As ~~An indeterminate number~~ of ~~shares~~June ~~may be acquired upon conversion of the outstanding $5~~27,~~447,000~~ ~~principal amount of our 5% convertible debenture due February 18~~2002, ~~2004,~~we ~~since~~had ~~there~~outstanding ~~is no minimum conversion price. At an assumed conversion price of $0.11 per share~~199, ~~the holder of the debenture could acquire 55~~358,~~295,303~~348 shares of common stock ~~upon conversion of, and payment of 28 months accrued interest on, the debenture, representing approximately 34~~.0% ofIn ~~the shares outstanding as of June 21~~addition, ~~2001.~~

• Anan indeterminate number of shares may be acquired ~~by GCA Strategic Investment Fund Limited~~ upon conversion of the outstanding ~~750~~$5,447,000 ~~shares~~principal amount of ~~series~~our A5% convertible ~~preferred~~debenture ~~stock~~due February 18, 2004, since there is no minimum conversion price. IfAt ~~GCA converts all 750 shares of series A convertible preferred stock at~~ an assumed conversion price of $0.1107 per share, wethe ~~will~~holder ~~issue~~of 6the debenture could acquire 90,~~818~~783,~~182~~329 shares of common stock upon conversion of, and payment of 40 months accrued interest on, the debenture, representing approximately ~~4.1~~45% of the shares outstanding onas ~~July~~of 21June 27, ~~2001.~~2002

• Anan indeterminate number of shares may be acquired upon conversion of the outstanding $97,~~276~~936,~~128~~138 million principal amount of our 3% convertible secured debentures due ~~April~~February 282007, ~~2002,~~ since there is no minimum conversion price. At an assumed conversion price of $0.1107 per share, the holder of the debentures could acquire 86122,~~858~~531,~~289~~745 shares of common stock upon conversion of, and payment of 12 months interest on, the debentures and twelve months interest on our bridge notes, together representing ~~53.4~~61% of the shares outstanding as of ~~July~~June 2127, ~~2001.~~2002

7• 15,830,976 shares may be acquired upon exercise of outstanding warrants, representing approximately 8% of the shares outstanding as of June 27, 2002

• 135,~~830~~803,~~926~~483 shares may be acquired upon exercise of outstanding ~~warrants~~options, representing approximately ~~9.1~~3% of the shares outstanding as of ~~July~~June 2127, ~~2001.~~2002

•Existing 6stockholders will experience substantial dilution in their percentage ownership of our common stock if the debentures are converted. We do not have sufficient authorized shares available to satisfy all of our commitments pursuant to our convertible debentures. If the entire outstanding $13,~~821~~383,~~933~~138 principal amount of our convertible debentures is converted at an assumed conversion price of $0.07 per share, the number of outstanding shares of common stock will increase by 234,949,533 shares to a total outstanding of 434,307,881 shares. Since we have only 300,000,000 shares authorized, we would need to increase the number of authorized shares available. If we are unable to do so, our lenders may declare the debentures to be ~~acquired~~immediately ~~upon~~due ~~exercise~~and payable and may proceed to enforce their rights in the collateral securing the payment of the debentures. Future sales of our common stock may have an adverse effect on its market price. As of June 27, 2002, we had outstanding ~~options~~199,358,348 ~~representing~~shares ~~approximately~~of ~~4.5%~~common stock, of which 196,471,135 shares are transferable without restriction under the Securities Act. The remaining 2,887,213 shares ~~outstanding~~are asrestricted ofsecurities ~~July~~that 21may be publicly sold only if registered under the Securities Act or sold in accordance with an applicable exemption from registration, ~~2001~~such as Rule 144. In addition,

~~Existing~~• ~~stockholders~~an ~~will~~indeterminate ~~experience~~number ~~substantial dilution in their percentage ownership~~ of ~~our~~shares ~~common~~may ~~stock~~be ifacquired ~~the~~upon ~~debentures~~conversion ~~and shares~~ of ~~series A convertible preferred stock are converted. If~~ the ~~entire~~ outstanding $145,~~574~~447,~~500~~000 principal amount of our 5% convertible ~~debentures~~debenture isdue ~~converted~~February ~~at an assumed conversion price of $0.11 per share~~18, ~~the~~2004 ~~750~~since ~~shares~~there ofis ~~series~~no Aminimum ~~convertible~~conversion ~~preferred~~price. ~~stock~~At ~~owned by GCA are converted at~~ an assumed conversion price of $0.1107 per share, ~~and~~the ~~all~~holder ~~outstanding~~of ~~warrants~~the ~~and~~debenture ~~stock~~could ~~options~~acquire ~~are exercised~~90,783,329 ~~the number of outstanding~~ shares of common stock ~~will~~upon ~~increase~~conversion ~~by 169~~of,~~624,633,~~ ~~representing~~and ~~approximately~~in ~~double~~payment ~~the amount~~ of ~~the~~40 ~~outstanding~~months ~~common~~accrued ~~stock~~interest ason, ofthe ~~July 21~~debenture, ~~2001.~~representing ~~Future~~approximately ~~sales~~46% of ~~our~~the ~~common~~shares ~~stock~~outstanding. ~~may~~The ~~have~~actual anconversion ~~adverse~~price ~~effect~~is on85% ~~its~~of ~~market~~the ~~price.~~average As of ~~July~~the ~~21,~~lowest ~~2001,~~3 wedaily ~~had~~weighted ~~outstanding~~average ~~162,530,577~~sale ~~shares~~prices offor ~~common~~the ~~stock,~~20 oftrading ~~which~~days ~~159,343,364~~prior ~~shares~~to ~~are~~the ~~transferable~~date ~~without~~of ~~restriction~~conversion. ~~under~~The ~~the~~maximum ~~Securities~~conversion ~~Act.~~price ~~The~~is ~~remaining~~$1.214 ~~3,187,213~~per ~~shares~~share. ~~are~~Since ~~restricted~~there ~~securities~~is ~~which~~no ~~may~~minimum beconversion ~~publicly~~price, ~~sold~~if ~~only~~the ifmarket ~~registered~~price ~~under~~of the ~~Securities~~common ~~Act~~stock ordeclines ~~sold~~below inthe ~~accordance~~assumed ~~with~~conversion anprice, ~~applicable~~the ~~exemption~~number ~~from~~of ~~registration,~~shares ~~such~~that asmay ~~Rule~~be ~~144.~~acquired Inupon ~~addition,~~conversion will increase.

• Anan indeterminate number of shares may be acquired upon conversion of the outstanding $57,~~447~~936,~~000~~138 principal amount of our 53% convertible ~~debenture~~secured debentures due February 182007, ~~2004~~ since there is no minimum conversion price. At an assumed conversion price of $0.1107 per share, the holder of the ~~debenture~~debentures could acquire 55122,~~245~~531,~~303~~745 shares of common stock upon conversion of, and in payment of 2812 months ~~accrued~~ interest on, the ~~debenture~~debentures and our bridge notes, together representing 61% of the shares outstanding as of June 27, 2002. The actual conversion price is 85% of the ~~average~~three ~~of the~~ lowest 3closing ~~daily~~bid ~~weighted average sale~~ prices for the 20 ~~trading~~ days ~~prior~~immediately topreceding but not including the date of the related notice of conversion. There is no maximum conversion price. The maximum conversion price is $1.214 per share. Since there is no minimum conversion price, if the market price of the common stock declines below the assumed conversion price, the number of shares that may be acquired upon conversion will increase.

• An indeterminate number of shares may be acquired upon conversion of the outstanding 750 shares of our series A convertible preferred stock held by GCA since there is no minimum conversion price. If GCA converts these remaining shares of series A convertible preferred stock at an assumed conversion price of $0.11 ~~per share, we will issue 6,818,182 shares of common stock, representing 4.1% of the shares outstanding as of June 21, 2001.~~

• An15,830,976 ~~indeterminate number of~~ shares may be acquired upon ~~conversion~~exercise of ~~the~~warrants ~~outstanding~~having ~~$9,276,128~~exercise ~~million~~prices ~~principal~~ranging ~~amount~~from ~~of our 3% convertible secured debentures due April 28, 2002, since there is no minimum conversion price~~$0.05 Atto ~~an assumed conversion price of~~ $03.1100 per share, the holder of the debentures could acquire 86,858,289 shares of common stock upon conversion of, and payment of 12 months interest on, the debentures, representing 53.4% of the shares outstanding as of June 21, 2001.

• 135,~~830~~803,~~926~~483 shares may be acquired upon exercise of ~~warrants~~stock ~~having~~options granted pursuant to our stock option plans at exercise prices ranging from $0.1309 to $32.00 per share.

•Substantially 6all of such shares,~~821~~ when issued,~~933~~ may be immediately resold in the public market pursuant to effective registration statements under the Securities Act. We cannot give you any assurance as to the effect, if any, that future sales of common stock, or the availability of shares of common stock for future sales, will have on the market price of the common stock from time to time. Sales of substantial amounts of common stock, or the possibility of such sales, could adversely affect the market price of the common stock and also impair our ability to raise capital through an offering of equity securities in the future. Other issuances of preferred stock could adversely affect existing holders of our common stock. Under our articles of incorporation, our Board of Directors may, bewithout ~~acquired~~further ~~upon~~stockholder ~~exercise~~approval, issue up to 7,000,000 shares of preferred stock ~~options~~with ~~granted~~dividend, ~~pursuant~~liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of common stock. Our Board of Directors has authorized the issuance of up to 18,000 shares of series A convertible preferred stock. As of June 27, 2002, we had issued an aggregate of 8,750 shares of series A convertible preferred stock, all of which have been converted. We have no current intention of issuing additional shares of series A convertible preferred stock. We could use new classes of preferred stock as a method of discouraging, delaying or preventing a change in persons that control us. In particular, the terms of the preferred stock could effectively restrict our ability to consummate a merger, reorganization, sale of all or substantially all of our assets, liquidation or other extraordinary corporate transaction without the approval of the holders of the common stock. ~~option~~We ~~plans~~could atalso ~~exercise~~create ~~prices~~a ~~ranging~~class ~~from~~of $0preferred stock with rights and preferences similar to those of our series A convertible preferred stock, which could result in substantial dilution to holders of our common stock or adversely affect its market price.13 Forward Looking Statements Some of the information in this prospectus may contain forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Such statements can be identified by the use of forward-looking terminology such as may, “will,” “expect,” “believe,” “intend,” “anticipate,” “estimate,” “continue” or similar words. These statements discuss future expectations, estimate the happening of future events or our financial condition or state other “forward-looking” information. When considering such forward-looking statements, you should keep in mind the risks and uncertainties discussed under the captions “Risk Factors”, “Management Discussion and Analysis of Financial Condition and Results of Operations – Liquidity”, and “Business”, which could cause our actual results to $2differ materially from those contained in any forward-looking statement.00 ~~per~~Market ~~share~~For Our Common Stock Our common stock is traded in the over-the-counter market and quoted on the OTC Bulletin Board under the symbol “AIPN”. The following table sets forth, for the periods indicated, the range of high and low sale prices of the common stock as reported by Bloomberg LLP.

Substantially all of such shares, when issued, may be immediately resold in the public market pursuant to effective registration statements under the Securities Act. We cannot give you any assurance as to the effect, if any, that future sales of common stock, or the availability of shares of common stock for future sales, will have on the market price of the common stock from time to time. Sales of substantial amounts of common stock, or the possibility of such sales, could adversely affect the market price of the common stock and also impair our ability to raise capital through an offering of equity securities in the future. Other issuances of preferred stock could adversely affect existing holders of our common stock. Under our articles of incorporation, our Board of Directors may, without further stockholder approval, issue up to 7,000,000 shares of preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of common stock. Our Board of Directors has authorized the issuance of up to 18,000 shares of series A convertible preferred stock. As of June 21, 2001, we have issued an aggregate of 8,750 shares of series A convertible preferred stock. We have no intention of issuing additional shares of series A convertible preferred stock. We could use new classes of preferred stock as a method of discouraging, delaying or preventing a change in persons that control us. In particular, the terms of the preferred stock could effectively restrict our ability to consummate a merger, reorganization, sale of all or substantially all of our assets, liquidation or other extraordinary corporate transaction without the approval of the holders of the common stock. We could also create a class of preferred stock with rights and preferences similar to those of our series A convertible preferred stock, which could result in substantial dilution to holders of our common stock or adversely affect its market price. 8

		Common Stock

		High Price	Low Price

2000	First Quarter	$2.063	$0.500
	Second Quarter	1.000	0.500
	Third Quarter	0.656	0.406
	Fourth Quarter	0.500	0.100


2001	First Quarter	$0.484	$0.109
	Second Quarter	0.214	0.109
	Third Quarter	0.137	0.703
	Fourth Quarter	0.121	0.085


2002	First Quarter	$0.118	$0.077
	Second Quarter	0.099	0.031
	Third Quarter through July 25, 2002	0.085	0.035

~~Forward~~At ~~Looking~~February Statements Some of the information in this prospectus may contain forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Such statements can be identified by the use of forward-looking terminology such as may15, ~~“will~~2002,” ~~“expect,” “believe,” “intend,” “anticipate,” “estimate,” “continue” or similar words. These statements discuss future expectations, estimate the happening of future events or~~ our financial condition or state other “forward-looking” information. When considering such forward-looking statements, you should keep in mind the risks and uncertainties discussed under the captions “Risk Factors”, “Management Discussion and Analysis of Financial Condition and Results of Operations – Liquidity”, and “Business”, which could cause our actual results to differ materially from those contained in any forward-looking statement. Market For Our Common Stock Our common stock iswas ~~traded~~owned inby ~~the~~approximately ~~over-the-counter market and quoted on the OTC Bulletin Board under the symbol “AIPN”. Prior to November 7~~1,890 ~~2000,~~shareholders ~~our common stock was included in the Nasdaq National Market. Our common stock was delisted from Nasdaq for failure to maintain a bid price~~ of ~~$1.00~~record ~~per~~and ~~share~~we asestimate ~~required~~there ~~under~~were ~~Nasdaq’s~~approximately ~~rules for continued listing. The following table sets forth~~26,800 ~~for~~beneficial ~~the~~owners ~~periods indicated, the range~~ of ~~high~~our ~~and low sale prices of the~~ common stock ~~as reported by Bloomberg LLP~~. 12

		High	Low
1999	First Quarter	$1.50	$0.5625
	Second Quarter	1.375	0.71875
	Third Quarter	1.34375	0.65625
	Fourth Quarter	1.25625	0.375
2000	First Quarter	$2.063	$.500
	Second Quarter	1.000	.500
	Third Quarter	.656	.406
	Fourth Quarter	.500	.100
2001	First Quarter	.484	.109
	Second Quarter	.480	.110
	Third Quarter (through July 16, 2001)	.137	.085

Dividend Policy

We have never paid cash dividends on our common stock, and do not contemplate paying any cash dividends in the foreseeable future. In addition, our ability to pay cash dividends is restricted by our loan agreements. Our Board of Directors intends to retain earnings to finance the operations and development of our business.

Selected Financial Data

The following table sets forth selected consolidated financial data for the three months ended March 31, 2002 and March 31, 2001 and for each of the five years ended December 31, 2001. The selected consolidated financial information for and as of the years ended December 31, 2001, 2000, 1999, 1998, and 1997 were derived from our audited consolidated financial statements, which were audited by Hein + Associates, LLP. Our consolidated balance sheets as of December 31, 2001 and 2000 and our consolidated statements of operations for the years ended December 31, 2001, 2000, and 1999 and the accountants’ report thereon are included in this report under the heading “Consolidated Financial Statements”. The selected data for each of the three-month periods ended March 31, 2002 and March 31, 2001 are derived from our unaudited interim consolidated financial statements. Our interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for the fair presentation of our financial position and results of operations for these periods. The interim operating results for the three-month period ended March 31, 2002 are not necessarily indicative of results that we will experience for the entire year. Historical results are not necessarily indicative of the results to be expected in the future. The selected consolidated financial data presented below is qualified in its entirety by, and should be read together with, our consolidated financial statements and related notes included in this report under the heading “Consolidated Financial Statements”.

At June 21, 2001, our common stock was owned by approximately 1,800 shareholders of record and we estimate there were approximately 27,600 beneficial owners of our common stock. Dividend Policy We have never paid cash dividends on our common stock, and do not contemplate paying any cash dividends in the foreseeable future. Our Board of Directors intends to retain earnings to finance the operations and development of our business. Selected Financial Data The following table sets forth selected consolidated financial data for each of the five years ended December 31, 2000 and for the three month periods ended March 31, 2001 and 2000. The selected consolidated financial information for and as of the years ended December 31, 1996 is derived from our consolidated financial statements which have been audited by PricewaterhouseCoopers, independent certified public accountants. The selected financial information and as of the years ended December 31, 2000, 1999, 1998 and 1997 are derived from our consolidated financial statements, which financial statements have been audited by Hein + Associates, LLC, independent certified public accountants. Our consolidated balance sheets as of December 31, 2000, 1999 and our consolidated statements of operations for the years ended December 31, 2000, 1999 and 1998 and the accountants’ report thereon are included in this prospectus under the heading “Consolidated Financial Statements”. The selected data for each of the three-month periods ended March 31, 2001 and 2000 are derived from our unaudited interim consolidated financial statements. Our interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for the fair presentation of our financial position and results of operations for those periods. The interim operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that we will experience for the entire year. Historical results are not necessarily indicative of the results to be expected in the future. The selected consolidated financial data presented below is qualified in its entirety by, and should be read together with, our consolidated financial statements and related notes included in this prospectus under the heading “Consolidated Financial Statements”. 9

	($000’s) For the Three Months Ended March 31, (Unaudited)						($000’s) December 31

		2002			2001			2001			2000			1999			1998			1997

Statement of operations data
Revenues	$	1,301		$	2,264		$	18,637		$	3,274		$	8,352		$	11,855		$	828
Net loss applicable to common shareholders (1)(2)		(2,607	)		(2,526	)		(27,670	)		(25,428	)		(14,918	)		(9,103	)		(17,954	)
Net loss per share - basic and diluted		(0.01	)		(0.02	)		(0.17	)		(0.23	)		(0.20	)		(0.17	)		(0.43	)

	($000)For the three months endedMarch 31,				($000)For the Years EndedAt December 31,
	2001		2000		2000		1999		1998		1997		1996
Statement of operations data:		(unaudited)
Revenues	$2,264		$1,211		$3,274		$8,352		$11,855		$828		$4,003
Net loss applicable to
common shareholders (1)(2)	(2,526	)	(3,483	)	(25,428	)	(14,918	)	(9,103	)	(17,954	)	(4,652	)
Net loss per share -
basic and diluted	(0.02	)	(0.04	)	(0.23	)	(0.20	)	(0.17	)	(0.43	)	(0.16	)

(1)

Net loss included a provision for the impairment of carrying costs of oil and gas properties and plant assets of $10,671,000 and $9,236,000, respectively, in 2001 and oil and gas properties of $12,546,000 in 2000.

(12) Net loss inapplicable ~~2000~~to ~~and~~common ~~1996~~shareholders ~~included~~in a2001 ~~provision~~and ~~for~~2000 ~~the~~reflects ~~impairment~~imputed ofdividends ~~the~~on ~~costs~~preferred ofstock ~~oil and gas properties~~ of $12217,~~546,~~000 and $~~200~~543,000, ~~respectfully~~respectively.

(2) Net loss applicable to common shareholders in 2000 reflects imputed dividend on preferred stock of $543,000.

	($000’s) At Three Months Ended March 31, (Unaudited)						($000’s) December 31

		2002			2001			2001			2000			1999			1998			1997

Balance sheet data:
Working capital (deficit)	$	(4,839	)	$	(8,199	)	$	(3,144	)	$	(8,222	)	$	(5,005	)	$	(4,596	)	$	(694	)
Total assets		35,251			56,279			37,054			54,998			69,658			60,861			41,840
Total current liabilities		6,798			11,226			6,566			10,073			8,904			7,914			9,335
Long-term debt		13,306			5,263			13,920			5,565			11,985			6,111			-0	-
Accumulated deficit		159,083			(131,332	)		(156,476	)		(128,806	)		(103,379	)		(88,461	)		(79,358	)
Stockholder's equity		14,841			37,112			16,262			37,868			48,464			46,530			32,504
Cash dividends declared		-0	-		-0	-		-0	-		-0	-		-0	-		-0	-		-0	-

	($000)At March 31,		($000)At December 31,
	2001		2000		1999		1998		1997		1996
Balance sheet data:	(unaudited)
Working capital (deficit)	$(8,199	)	$(8,222	)	$(5,005	)	$(4,596	)	$(694	)	$(9,823	)
Total assets	56,279		54,998		69,658		60,861		41,840		34,492
Total current liabilities	11,226		10,073		8,904		7,914		9,335		13,165
Long-term debt	5,263		5,565		11,985		6,111		-0-		6,767
Accumulated deficit	(131,332	)	(128,806	)	(103,379	)	(88,461	)	(79,358	)	(61,404	)
Stockholder’s equity	37,112		37,868		48,464		46,530		32,504		21,328
Cash dividends declared	-0-		-0-		-0-		-0-		-0-		-0-

Management’s Discussion And Analysis Of Financial ~~ConditionAnd~~Condition And Results Of Operations Results of Operations We have two ~~major~~reportable geographical segments ofthat are primarily in the business —of exploration, development, production of oil and natural gas, and the refining, petroleum product trading and asphalt products and services area. In mid-February of 2001, the refinery commenced processing crude oil for Sargeant Bulktainers, Inc., a division of Sargeant Marine, Inc., an asphalt transportation and ~~gas~~storage ~~exploration~~company, on a fixed throughput fee basis plus adjustments for fluctuating energy costs associated with the processing. The refinery also derived revenues by leasing out some of its storage tank facility to third parties. Also during the current year our products trading segment commenced buying and ~~development~~selling the petroleum products derived from the processing agreement with Sargeant. On July 1, 2001, we commenced operating our asphalt segment for our own account after having operated this segment within a joint venture structure that was accounted for on the equity method from July 1, 2000 through June 30, 2001. We have had no oil and gas production operations since the first quarter of 1997 when we sold our South American wholly-owned oil and gas subsidiaries. Since this sale, our oil and gas activities have ~~been~~included, but were not limited to, geological and geophysical acquisition, reprocessing and/or analysis of data, acquisition of additional licenses or projects, drilling, and ~~market~~marketing analysis and negotiation ~~in Kazakhstan where we have two gas and oil concessions~~. We have yet to implement oil and/or gas production operations in Kazakhstan. InFor ~~July~~the ~~2000~~three wemonths ~~entered~~ending ~~into~~March a31, ~~joint~~2002, ~~venture~~the ~~agreement~~asphalt ~~with~~operations ~~Sargeant~~had ~~Bulktainers~~revenues ~~Inc~~of $1,152,000 and costs of 1,218,000. ~~under~~Our ~~which~~refining ~~Sargeant~~operations ~~agreed~~had torevenues ~~provide~~of $106,000 and ~~finance~~costs ~~certain~~and ~~wholesale~~operating ~~asphalt~~expenses ~~feedstocks~~of to$236,000. ~~our~~The ~~Lake~~petroleum ~~Charles~~product ~~refinery’s~~trading ~~asphalt~~operations ~~division~~had no revenues or related costs for ~~processing~~the three months ended March 31, ~~blending~~2002. Interest income and ~~the~~other ~~marketing~~corporate ofrevenues ~~the~~totaled ~~these~~$43,000 ~~feedstocks.~~with Ingeneral ~~September~~corporate ~~2000~~expense, weinterest ~~entered~~expense ~~into~~and adepreciation, ~~processing~~depletion, ~~agreement~~and ~~with~~amortization ~~Sargeant~~being to$1,820,000, ~~process~~$247,000, ~~certain~~and ~~crude~~$387,000, ~~oils~~respectively. ~~through~~Our identifiable assets at March 31, 2002 totaled $25,566,000 operating assets in the ~~refinery~~United States, $8,961,000 for aKazakhstan, ~~fee~~and $724,000 of corporate assets. For the year ended December 31, ~~2000~~2001, our refining segment had sales of $3,~~109~~009,000 and costs of goods sold and operating expenses of $3,501,000. The petroleum product trading segment had sales of $9,337,000 for the year 2001 with costs of goods sold and operating expenses of $9,084,000. The asphalt products segment had sales of $5,435,000, excluding ~~our~~income from joint venture operations of $529,000, and costs of goods sold and operating ~~expenses~~costs of $4,~~243~~852,000 ~~and~~for the year 2001. The oil and gas segment had an impairment of oil and gas properties of $1210,~~546~~671,000 and the refinery property and equipment had an impairment of $9,236,000. Interest income and other corporate revenues totaled $~~165~~327,000 with general corporate expense, interest expense and depreciation, depletion and amortization being $64,~~777~~825,000, $31,~~290~~956,000, and $1,~~845~~965,000, respectively. Our identifiable assets at December 31, ~~2000~~2001 total $3121,~~106~~655,000 of operating assets in the United States, $2112,~~138~~445,000 in Kazakhstan, and $2,~~754~~954,000 of corporate assets. 10The following table highlights the results of operations for the three months ended March 31, 2002 and the years ended December 31, 2001, 2000, and 1999.

The following table highlights the results of operations for the three months ended March 31, 2001 and March 31, 2000 and the years ended December 31, 2000, 1999 and 1998.

	($000’s) Three Months Ended March 31 (unaudited)				($000’s) Years Ended December 31

			2002			2001		2000			1999

Trading Operations:
Trading revenues		$	-0	-	$	9,337	$	-0	-	$	-0	-
Product and operating costs		$	-0	-	$	9,084	$	-0	-	$	-0	-
Asphalt Operations:
Asphalt revenues		$	1,152		$	5,435	$	2,764		$	7,624
Product and operating costs		$	1,218		$	4,852	$	2,319		$	6,859
Refinery Operations:
Refinery revenues		$	106		$	3,009	$	170		$	513
Product and operating costs		$	236		$	3,501	$	1,924		$	1,811

	Three Months Ended March 31,		Years Ended December 31,
	2001	2000	2000	1999	1998
Refinery Processing Operations:
Refinery operating revenues (000‘s)	$2,217	$1,183	$3,109	$8,138	$11,394
Cost of goods sold (000’s)	$1,302	$ -0-	$2,319	$5,944	$ 8,194
Operating Costs (000’s)	$1,174	$1,392	$1,924	$2,727	$ 3,087

Three Months Ended March 31, 2002 as compared to the Three Months Ended March 31, 2001

~~Refinery~~Trading Operations: For the Three Months Ended March 31, 2001 as compared to the Three Months Ended March 31, 2000 During the first quarter of 2001, our refinery segment recorded revenues of approximately $885,000 of which $780,000 was derived from processing activities. We did not commence processing until the last week of February, but incurred the costs until then to maintain the refining unit with no offsetting revenues. These costs approximated $375,000 of the total $1,174,000 of operating costs for the first quarter of 2001. During the first quarter of 2000, we recorded revenues of approximately $1,183,000, related totally to its asphalt sales with costs of approximately $1,184,000. Since the third quarter of 2000, we have been operating an asphalt business within a joint venture structure and accounting for our interest using the equity method. We had approximately $105,000 of net income from the joint venture asphalt operations for the first quarter of 2001. Actual asphalt sales volumes decreased slightly, 3%, from 7,600 tons in the first quarter of 2000 compared to 7,356 tons in the current quarter. The decrease and the lack of additional sales during that period is primarily attributable to thirty-eight days of rain we experienced during the first quarter of 2001. However, at June 1, 2001, we had a backlog of asphalt sales orders valued at approximately $11,000,000, of which two-thirds is expected to be delivered this year. The remainder should be delivered in the first half of 2001. This backlog represents an approximate 30% increase over the backlog existing at June 1, 2000. Our St. Marks, Florida refinery facility has not been in operation since the last quarter of 1998. Because of the high cost of asphalt products since early 1999, the higher demand for the higher margin, PG-grade polymerized products in the Louisiana and Texas markets, the lack thereof in the St. Marks markets, and the additional cost which would be incurred to transport products to St. Marks from Lake Charles, we have not operated in the St. Marks market during that time. Since these conditions have continued, St Marks was not operated during the first half of 2001. Our Gulf Coast Petroleum Trading subsidiary had revenues of approximately $1,332,000 with costs of products of approximately $1,302,000. This subsidiary buys and sells refined crude oil products from and to third parties. It commenced operations during the last few days of March 2001 and had sales of over 55,000 barrels of various products during that period. Year Ended December 31, 2000 compared to the Year Ended December 30, 1999 During 2000, the refinery had asphalt revenues of $2,586,000, exclusive of any joint venture revenues, compared to revenues of approximately $7,621,000 during 1999. Costs of sales related to these revenues were approximately $3,000,000 and $8,486,000, respectively. The decrease in refinery asphalt revenues is due to our accounting for the joint venture on the equity method Joint venture asphalt revenues were approximately $3,972,000 with related costs of $3,857,000. The joint venture provided us with the financing and reliable source of feedstocks to fulfill our backlog contractual obligations with a reasonably priced product. During the first two quarters of 2000 we had been fulfilling certain of our 1999 asphalt contracts, with asphalt inventory that had been purchased at higher 2000 asphalt spot market prices than what asphalt market prices had been at the time the contracts were entered into. As a result, we were committed to selling low-priced conventional asphalt at a loss or at break-even throughout most of 1999 and early 2000. With the joint venture partner supplying asphalt through its long term contracts we have been able to supply these 1999 contracts with lower cost asphalt and mitigate some of the effects of the market variances. We also mitigated some of the effects of market variances by use of escalation provisions in our asphalt sales contracts, which enable us to increase our contracted sales price by 5% per quarter if our feedstock prices rise to certain levels. The refinery had only $21,000 of light end sales in 2000 compared to approximately $513,000 in 1999. Except for a 50,000 barrel test run in November related to our processing agreement with Sargeant, the refinery did not process any crude oil in 2000 due to the shortage of crude oil and our capital constraints during the year. As a result of the processing agreement entered into with Sargeant, the refinery processed a test batch of product for Sargeant and recorded revenues of $149,500 related to the processing. Initial processing was to commence in November but was delayed by Sargeant in procuring its feedstock until February of 2001 at which time the refinery began processing at initial rates of 10,500 to 12,000 barrels per day. 11

WeThe have not operated our terminal in St. Marks Florida since 1998, but incurred approximately $65,000 of maintenance and security costs during the year 2000 compared to $96,000 in 1999. Due to the increased costs and the subsequent decrease in supply of product ~~brought~~trading ~~on by the increase in world oil prices, we determined that it would be more economically feasible to direct our sales efforts~~ and ~~strategy~~marketing tooperations ~~the~~includes ~~high~~purchase ~~demand, high quality~~ and high margin asphalt in the Louisiana and Texas markets rather than shipping lower margin conventional asphalt for sale into the St. Marks, Florida market. Year Ended December 31, 1999 compared to the Year Ended December 31, 1998 During 1999, we generated revenues of approximately $7,621,000 in asphalt sales ~~from our Lake Charles facility and approximately $513,000 from sales~~ of ~~certain~~various ~~light-end~~petroleum ~~and other~~ products, ~~compared~~that ~~to approximately $5,965,000 and $3,357,000, respectively, generated in 1998. Although our asphalt volumes~~ were uppreviously ~~only~~derived ~~approximately~~from ~~10% over 1998, revenues were up approximately 28%, primarily due to a greater demand for~~ the ~~higher~~processing ~~priced,~~agreement ~~higher~~with ~~grades~~Sargeant ~~of polymer asphalt. However~~Bulktainers, ~~polymerized asphalts only accounted for approximately 60% of our asphalt sales volumes in 1999~~Inc. ~~Most~~The ofprocessing ~~our~~agreement ~~sales~~with ~~backlog~~Sargeant was ~~incurred~~terminated ~~late~~as inof ~~1998~~July ~~and in early 1999 when crude oil and asphalt sales prices were much lower. As a result~~31, we2001 ~~were committed to selling low-priced conventional asphalts at a loss or at break-even throughout most of 1999~~ and ~~early 2000. In 1999 we implemented~~ the ~~use~~refinery ofhas escalation provisions in our asphalt sales contracts, which enable us to increase our contracted sales price by 5% per quarter if our feedstock prices rise to certain levels. This mitigates the problem we incurred in 1999 by committing to long-term supply contracts at fixed prices. Our sales prices on our retail asphalt ranged from approximately $78 to $162 a ton. Due to the significant increases in world oil prices that occurred throughout 1999, it was not ~~economically~~processed ~~feasible~~any ~~for us to purchase and process~~ crude oil ~~through~~since ~~our~~that ~~crude unit to manufacture asphalt as we had done in 1998~~time. AsConsequently athere ~~result, light-ends and other products provided though this process~~ were ~~significantly~~no ~~decreased~~trading in 1999 and were the primary reason for the decrease in light-end and other product sales in 1999 compared to 1998. We purchased general grade asphalt on the spot market to blend and supply various grades of asphalt to our Louisiana and Texas customers. Operating and inventory costs attributed to the related revenues ~~for~~or ~~1999~~expenses ~~were approximately $8,486,000, compared to approximately $9,500,000 of operating and inventory costs in 1998. The relatively high operating and inventory costs~~ during ~~1999 were partially attributable to~~ the ~~increase~~first inquarter ~~the world oil prices and the non-availability~~ of ~~certain~~2002 ~~types~~compared ~~of crude oil during the year, the related increase in asphalt feed stock prices that we had~~ to ~~incur~~product for our asphalt, and to an increase in operating costs to maintain the refinery during this period. Even though we have not operated the crude unit since January of 1999, we had to maintain the unit in a state of readiness and thus incurred additional operating overhead costs attributed to maintaining the unit. We did not operate our terminal in St. Marks Florida during 1999, but incurred approximately $96,000 of maintenance and security costs during the year. We had revenues of approximately $21,~~000~~332,000 with ~~related~~ costs of ~~approximately~~products approximating $1,~~800~~244,000 in 1998. Due to the increased costs and the subsequent decrease in supply of product brought on by the increase in world oil prices, we determined that it would be more economically feasible to direct our sales efforts and strategy to the high demand, high quality and high margin asphalt in the Louisiana and Texas markets rather than shipping lower margin conventional asphalt for sale into the St. Marks, Florida market. Oil and Gas Production Activity We have had no oil and gas production activity since February 1997. The oil and gas production revenues reflected in 1997 are the results of operations for Colombia and Peru through February 25, 1997, the date of the sale of our Colombia and Peru subsidiaries. Other Revenues For the Three Months Ended March 31, 2001 compared to the Three Months Ended March 31, 2000 Other revenues increased approximately $19,000 during the ~~current~~first quarter ~~compared to the same period last year. We had income from the sublease~~ of ~~available space in our New York office of approximately $38,000 during the three months ended March 31,~~ 2001 ~~that we did not have during the three months ended March 31, 2000~~. Interest income decreased $20,000 during the three months ended March 31, 2001 compared to the three months ended March 31, 2000, primarily due to a lower amount of funds on deposit during the three months ended March 31, 2001 compared to the three months ended March 31, 2000. 12

Year Ended December 31, 2000 compared to the Year Ended December 30, 1999 Other revenues decreased in 2000 by approximately $49,000 compared to 1999. The decrease is a result of less interest income derived from a lower amount of funds on deposit during 2000 compared to 1999. During 2000 we entered into a partial sub-lease of space at our New York office and recognized rental income of $114,000 during the year which we did not have in 1999. A decrease in 2000 of approximately $56,000 is attributable to our recognition of a forgiveness of debt recorded in 1999 and none for 2000. Year Ended December 31, 1999 compared to the Year Ended December 31, 1998. Other revenues decreased during 1999 by approximately $246,000 to $215,000 compared to 1998, primarily from a $251,000 decrease in interest income due to a decrease in funds on deposit in 1999 compared to those on deposit in 1998. General and Administrative For the Three Months Ended March 31, 2001 compared to the Three Months Ended March 31, 2000 General and administrative expenses, decreased approximately $416,000 compared to the three months ended March 31, 2000. Financing costs, included in general and administrative expenses, decreased approximately $392,000 primarily because our prepaid bond costs related to outstanding debt over the past year had been materially written off during 2000. Certain other expenses fluctuated during the three months ended March 31, 2001 compared to the three months ended March 31, 2000 as follows: payroll and employee related costs decreased approximately $38,000; travel and public relations expenses decreased approximately $10,000 and $82,000, respectively; professional fees and corporate and property taxes increased approximately $39,000 and $31,000, respectively; and insurance costs increased approximately $18,000. Year Ended December 31, 2000 compared to the Year Ended December 30, 1999 Total general and administrative expenses increased by approximately $409,000 or 6%, in 2000 compared to 1999. During 2000 we made a significant effort to decrease our general and administrative expenses. Payroll and certain other employee related expenses during 2000 have been reduced by $129,000 compared to 1999. Public relations costs, dues and subscriptions, sales commissions were reduced, compared to 1999, by $234,000, $21,000, and $102,000, respectively. Certain expenses have increased during 2000 compared to 1999 because of our increased activities, such as travel expenses, and professional fees, having increased $139,000 and $26,000, respectively. Certain other costs, which we have limited control over have increased, such as corporate franchise and property taxes, having increased $346,000 over the same costs in 1999. Year Ended December 31, 1999 compared to the Year Ended December 31, 1998 Total general and administrative expenses increased by approximately $693,000, or 12%, in 1999 compared to 1998. The acquisition of the St. Marks refinery at the end of 1998 accounted for an increase of approximately $180,000 of general and administrative expenses related to payroll and insurance costs. Other payroll and employee related costs increased approximately $285,000. Insurance cost increased approximately $183,000 in 1999 compared to 1998 due to additional coverage on new additions to the Lake Charles refinery at the end of 1998. Rents increased approximately $281,000 in 1999 compared to 1998. We have entered into a agreement to sublease out part of our available office space which was effective during the second quarter 2000, which effectively reduces our current rent expense by approximately $161,000 a year. Depreciation, Depletion, Amortization and Provision for Impairment For the Three Months Ended March 31, 2001 compared to the Three Months Ended March 31, 2000 Depreciation, depletion and amortization expense decreased approximately $57,000 during the three months ended March 31, 2001 compared to the three months ended March 31, 2000 due to an adjustment in depreciation expense. Year Ended December 31, 2000 compared to the Year Ended December 30, 1999 Depreciation, depletion, amortization and provision for impairment increased approximately $12,661,000 in 2000 compared to the three months ended March 31, 1998. Depreciation in 2000 reflects the increased depreciation of our $18.6 million dollar asphalt and related equipment construction project at the Lake Charles refinery that commenced in 1996 and was completed in December of 1998. This new addition doubled the carrying value of the Lake Charles refinery and accounted for the 100% increase in these expenditures. An impairment provision of $12,546,000 was recognized on our Kazakhstan oil and gas properties held on License # 953. We evaluated the costs recorded on this License and calculated that approximately 60% of the costs of the project had been impaired. 1314

~~Year~~Asphalt ~~Ended~~Operations: ~~December~~During ~~31,~~the ~~1999~~first ~~compared~~quarter toof ~~the~~2002, ~~Year~~we ~~Ended~~recognized ~~December 31~~$1,152,000 ~~1998~~of ~~Depreciation,~~revenue ~~depletion,~~from ~~amortization~~the ~~and~~asphalt ~~provision~~operations ~~for~~with ~~impairment~~related ~~increased~~costs ~~approximately~~of $~~918~~1,218,000. inThese ~~1999~~revenues ~~compared~~were togenerated ~~1998.~~through ~~Depreciation,~~the ~~depletion,~~sale ~~amortization~~of asphalt products and ~~provision~~to ~~for~~a ~~impairment~~lesser indegree, ~~1999~~asphalt ~~reflects~~related ~~the~~service ~~increased~~fees. ~~depreciation~~There ofwere ~~our~~no ~~$18.6~~asphalt ~~million~~revenues ~~dollar~~for ~~asphalt~~the ~~and~~first ~~related~~quarter ~~equipment~~of ~~construction~~2001 ~~project~~due atto ~~the~~our ~~Lake~~reporting ~~Charles~~income ~~refinery~~under ~~that~~the ~~commenced~~equity inmethod ~~1996~~of ~~and~~accounting ~~was~~for ~~completed~~partnerships inas ~~December~~previously ofdiscussed ~~1998~~above. ~~This~~There ~~new~~was ~~addition~~$7,900 ~~doubled~~of ~~the~~other ~~carrying~~asphalt-related ~~value~~services ofin the ~~Lake~~first ~~Charles~~quarter ~~refinery~~of ~~and~~2001. ~~accounted~~Actual ~~for~~asphalt ~~the~~sales ~~100%~~volumes ~~increase~~decreased in15%, ~~this~~from ~~expense.~~approximately ~~In addition~~7,356 wetons ~~commenced~~in ~~depreciating~~ the Stfirst ~~Marks~~quarter ~~facility~~of ~~and~~2001 ~~our~~to ~~marine~~6,252 ~~equipment~~for ~~during~~ the ~~first~~current quarter of ~~1999~~2002. ~~Interest~~The ~~Imputed~~asphalt ~~interest~~sales offor ~~approximately~~the ~~$705,000~~first ~~and~~quarter ~~$3,044,000~~of ~~was~~2001 ~~incurred~~occurred inwithin the ~~years~~joint ~~ended~~venture ~~December~~with ~~31,~~Sargeant. ~~2000~~The ~~and~~decline ~~1999~~in ~~and~~sales ~~relates~~volume towas ~~the~~attributable ~~presumed~~to ~~incremental~~inclement ~~yield~~winter ~~the~~weather, ~~investor~~reduced ~~may~~asphalt ~~derive~~supply ~~from~~availability ~~the~~and ~~discounted~~our ~~conversion~~occasional ~~rate~~shortage of ~~debt~~available ~~instruments~~capital ~~issued~~to bypurchase usadequate ~~during~~quantities ~~these~~of ~~years~~asphalt feedstock. ~~Management~~We ~~believes~~are ~~that~~in the ~~related~~latter ~~amount~~stages of ~~interest~~discussions ~~recorded~~with bya usmajor isoil ~~not~~company ~~necessarily~~to ~~the~~finalize ~~true~~an ~~cost~~agreement tounder uswhich we would be provided unlimited amounts of ~~the~~asphalt ~~instruments~~to wefulfill ~~issued~~our outstanding contracts and ~~that~~backlog. itWe ~~may~~also behave ~~reasonable~~recently obtained a credit facility to ~~conclude~~provide ~~that~~us with the ~~fair~~necessary ~~value~~capital ofto purchase the ~~common~~asphalt ~~stock~~feedstocks ~~into~~necessary ~~which~~to ~~these~~service ~~securities~~the ~~may~~backlog. beAt ~~converted~~the end of March 2002, there was ~~less~~a ~~than~~backlog ~~such~~of ~~stock’s~~asphalt ~~quoted~~sales ~~market~~orders ~~price~~of at40,000 ~~the~~tons ~~date~~valued ~~the~~at ~~convertible~~$6,000,000 ~~securities~~compared ~~were~~to ~~issued~~70,000 ~~(considering~~tons ~~factors~~valued ~~such~~at as$11 million at the ~~period~~end ~~for~~of ~~which~~March ~~sale~~last ofyear. ~~the~~As ~~stock~~discussed isbelow, ~~restricted~~on May 23, ~~which~~2002 inwe ~~some~~provided ~~cases~~Force ~~was~~Majeure asnotices ~~long~~to asour ~~six~~asphalt ~~months,~~customers ~~large~~informing ~~block~~them ~~factors,~~that ~~lack~~due to the unavailability of awholesale ~~sufficiently~~asphalt ~~active~~and/or ~~market~~asphalt ~~into~~feedstocks, which ~~the~~is ~~stock~~beyond ~~can~~our bereasonable ~~quickly sold~~control, ~~and~~we ~~time~~were ~~value)~~forced to suspend all shipments until further notice. ~~However~~Consequently, ~~generally~~asphalt ~~accepted~~sales ~~accounting~~to ~~principles~~our ~~require~~customers ~~that~~have ~~the~~been ~~“intrinsic~~curtailed ~~value”~~and ofother ~~the~~than ~~conversion~~a ~~feature~~relatively atsmall ~~the~~amount ~~date~~ of ~~issuance~~storage ~~should~~fees, bewe ~~accounted~~have ~~for~~had ~~and~~no ~~that~~operating ~~such~~cash ~~incremental~~flow ~~yield~~since ~~should~~then beto ~~measured~~support ~~based~~our onbusiness. ~~the~~Our ~~stock’s~~St. ~~quoted~~Marks, ~~market~~Florida ~~price~~facility athas not been in operation since the ~~date~~last quarter of ~~issuance,~~1998 ~~regardless~~due ifto ~~such~~the ~~yield~~high iscost ~~assured.~~of Weasphalt ~~expense~~products ~~and~~since ~~also~~early ~~capitalize~~1999, ~~certain~~the ~~other~~higher ~~costs~~demand ~~associated~~for ~~with~~ the ~~offering~~higher ~~and~~margin ~~sale~~PG-grade ofpolymerized ~~debentures.~~products ~~Capitalized~~in ~~costs~~the ~~are~~Louisiana ~~amortized~~and asTexas ~~interest~~markets, ~~expense~~the ~~over~~lack thereof in the ~~life~~Florida ofmarkets, and the ~~related~~additional ~~debt~~cost ~~instrument.~~to ~~These~~transport ~~costs~~products ~~include~~to ~~the~~St. ~~accounting~~Marks ~~for~~from ~~common~~Lake ~~stock~~Charles. ~~warrants~~We ~~issued~~currently ~~with~~plan to re-open and ~~related~~supply toSt. ~~certain~~Marks ~~convertible~~with ~~debentures,~~asphalt ~~commissions~~to ~~paid,~~be stored and ~~certain~~sold ~~legal~~into ~~expenses~~the ~~For~~Florida market. However, the ~~Three~~State ~~Months~~of ~~Ended~~Florida ~~March~~Department ~~31,~~of ~~2001~~Environmental ~~compared~~Protection tois in the ~~Three~~process ~~Months~~of ~~Ended~~investigating ~~March~~the ~~31,~~St. ~~2000~~Marks ~~Interest~~facility ~~expense~~for ~~decreased~~site ~~approximately~~contamination ~~$733,000~~that ~~during~~occurred ~~the~~prior ~~three~~to ~~months~~our ~~ended~~purchase ~~March~~of ~~31,~~the ~~2001~~facility ~~compared~~which towas ~~three~~established ~~months~~in ~~ended~~a ~~March~~1992 ~~31,~~DEP ~~2000~~Consent Order. ~~Outstanding~~We ~~interest~~have ~~bearing~~applied ~~debt~~for ~~instruments~~declaratory ~~decreased~~relief to ~~$7,000,000~~have in the ~~three~~court ~~months~~declare ~~ended~~and ~~March~~determine ~~31,~~that ~~2001~~St. ~~from~~Marks ~~$16,000,000~~is ~~during~~not ~~the~~legally ~~three~~liable ~~months~~for ~~ended~~preexisting ~~March~~contamination ~~31,~~and ~~2000~~to ~~and~~allow ~~accounts~~us to utilize the facility for ~~approximately~~our ~~$391~~asphalt and other business. However,~~000~~ ofat ~~the~~this ~~decrease~~time inthere ~~interest~~can ~~expense~~be ~~during~~no ~~the~~assurance ~~three~~we ~~months~~will ~~ended~~prevail ~~March~~with ~~31,~~this ~~2001~~action. ~~compared~~Refinery toOperations: During the ~~three~~first ~~months~~quarter ~~ended~~of ~~March 31~~2002, ~~2000~~our refining operation has not been operational. ~~Non-cash~~Recorded ~~charges~~revenues were primarily from storage fees of approximately $~~257~~106,000, ~~were~~compared ~~recorded~~to $773,000 of revenues from refinery operations during the ~~three~~first ~~months~~quarter ~~ended~~of ~~March~~2001. ~~31,~~Processing ~~2001~~fees ~~for~~derived ~~financing~~from ~~costs~~processing ~~related~~feedstocks tofor ~~our~~Sargeant ~~outstanding~~commenced ~~convertible~~in ~~debentures~~February of 2001 and ~~preferred~~terminated ~~stock~~on ~~sales~~July ~~compared~~31, to2001. ~~$382~~Our Lake Charles,~~000~~ ofLouisiana ~~non-cash~~refinery ~~charges~~was ~~recorded~~idle induring the ~~three~~first ~~months~~quarter ~~ended~~of ~~March~~this ~~31,~~year ~~2000,~~but has been maintained in a ~~decrease~~state of ~~$125~~readiness,~~000.~~ ~~Year~~pending ~~Ended~~a ~~December~~new 31agreement, ~~2000~~which ~~compared~~is tocurrently ~~the~~under ~~Year~~discussion. ~~Ended~~We ~~December~~incurred 30approximately $236,000 ~~1999~~of ~~Interest~~operating ~~expense~~costs ~~for~~during ~~2000~~the ~~decreased~~current byquarter ~~$3,211,000~~compared to approximately $31,~~290~~174,000, ~~compared~~for tothe ~~$6,501,000~~same inperiod ~~1999~~last year. ~~During~~Other ~~2000~~Revenues: weOther ~~incurred~~revenues remained approximately ~~$1,872,000~~the ofsame ~~interest~~for onthe ~~debentures~~first ~~and~~quarter ~~short-term~~of ~~and~~2002 ~~trade~~as ~~notes~~compared ~~outstanding~~to ~~during~~the ~~2000~~first quarter of 2001. We ~~incurred~~recognized approximately $~~705~~38,000 of ~~non-cash~~sublease ~~imputed~~income ~~interest,~~in ~~and~~the ~~approximately~~first ~~$713,000~~quarters of ~~non-cash interest,~~ both ~~related~~2001 toand ~~warrants~~2002. General and ~~stock~~administrative: ~~issued~~General inand ~~connection~~administrative ~~with~~expenses, ~~debentures.~~(“G&A”) ~~Year~~increased ~~Ended~~approximately ~~December 31~~$345,000 ~~1999~~during the current quarter compared to the ~~Year~~same ~~Ended~~period ~~December~~of ~~31,~~2001. ~~1998~~Financing ~~Interest~~costs ~~expense~~included ~~for~~in ~~1999~~G&A ~~was~~during ~~$6,500,579,~~the ~~net~~first quarter of ~~capitalized~~2002 ~~interest~~increased ofapproximately $~~547~~121,~~786,~~000 ~~compared~~primarily due to ~~interest~~the ~~expense~~amortization of ~~$1,912,949,~~prepaid ~~net~~bond ofcosts ~~capitalized~~related ~~interest~~to ofoutstanding ~~$7,055,340~~debt that was issued in ~~1998~~the second quarter of 2001. ~~During~~Payroll ~~1999~~and weemployee ~~incurred~~related costs increased approximately $1327,~~898,~~000. ofCertain ~~interest~~other onexpenses ~~debentures~~fluctuated ~~and~~during ~~short-term~~the ~~notes~~current ~~outstanding~~quarter ~~and~~of ~~expensed~~2002 ~~non-cash~~compared ~~imputed~~to ~~interest,~~the same period in 2001 as ~~discussed~~follows: ~~above~~professional fees, oftelephone, and corporate and property taxes decreased approximately $224,~~882~~000, $20,000. Weand ~~also~~$42,000 ~~incurred~~respectively; ~~interest~~and oninsurance ~~trade~~costs ~~notes~~increased of approximately $~~638~~4,000. Depreciation, depletion and amortization: Depreciation, depletion and amortization expense decreased approximately $174,~~619,~~000 ofduring ~~non-cash~~the ~~interest~~current ~~related~~period compared to ~~warrants~~the ~~issued~~same inperiod ~~connection~~last ~~with~~year ~~those~~primarily ~~agreements.~~due ~~Realized~~to ~~and~~the ~~Unrealized~~impairment ~~Loss~~of onplant ~~Marketable~~assets ~~Securities~~at WeDecember ~~neither~~31, ~~held~~2001 ~~nor~~which ~~sold~~reduced ~~any~~our ~~marketable~~depreciable ~~securities~~base ~~during~~for the first quarter of ~~2001~~2002. orInterest ~~during~~expense: ~~2000~~Interest orexpense, ~~1999.~~including Asyield ~~partial~~on ~~proceeds~~preferred ~~from~~stock, ~~the~~decreased ~~sale~~approximately of$130,000 ~~our~~during ~~South~~the ~~American~~current ~~assets~~quarter incompared ~~February~~to ~~1997,~~the wesame ~~received~~quarter ~~approximately~~in 42001.4 ~~million~~Outstanding ~~shares~~interest- ofbearing ~~Mercantile~~debt ~~International~~instruments ~~Petroleum~~totaled ~~common~~$14,560,000 ~~stock~~at ~~valued~~March at31, 2002 compared to $~~2.00~~11,050,000 ~~per~~at ~~share.~~March ~~However~~31, ~~during~~2001 ~~1997~~accounted ~~and~~for ~~1998~~approximately $105,000 of an increase in interest expense during the ~~market~~current ~~value~~quarter ofcompared ~~Mercantile’s~~to ~~shares~~the ~~declined~~same ~~significantly~~quarter last year. ~~During~~Non-cash ~~1998~~charges weof ~~sold~~approximately ~~all~~$46,000 ofwere ~~our~~recorded ~~remaining~~during ~~Mercantile~~the ~~shares~~first quarter of 2002 for ~~proceeds~~financing ofcosts ~~approximately~~related to our outstanding convertible debentures compared to $~~377~~259,000 of non-cash charges for convertible debentures and ~~recorded~~Preferred anstock ~~aggregate~~sales ~~net~~recorded ~~realized~~in ~~loss~~2001, ofa ~~approximately~~decrease of $~~359~~213,000. 1415

~~Liquidity~~Year ~~and~~Ended ~~Capital~~December ~~Resources~~31, ~~During~~2001 ~~the~~compared ~~three~~to ~~months~~the ~~ended~~Year ~~March~~Ended December 31, ~~2001,~~2000 weTrading ~~used~~Operations: aThe ~~net~~product ~~amount~~trading ofand ~~approximately~~marketing ~~$1,721,000~~segment ~~for~~includes ~~operations,~~the ~~which~~purchasing ~~reflects~~and ~~approximately~~sales ~~$718,000~~of invarious ~~non-cash~~petroleum ~~provisions,~~products ~~including~~derived ~~$257,000~~from inthe ~~loan~~processing ~~costs,~~agreement ~~and~~with ~~depreciation~~Sargeant. ~~and~~The ~~amortization~~petroleum ofproduct ~~$461,000.~~revenues ~~Approximately~~approximated $599,337,000 ~~was provided~~ during the ~~period~~first tonine ~~decrease~~months ~~product~~of ~~and~~2001 ~~feedstock~~with ~~inventory~~costs ~~and~~of aproducts ~~net~~approximating $289,084,000. ~~was~~This ~~used~~segment tosells ~~increase accounts payable~~ and ~~accrued~~buys ~~liabilities~~crude ~~and~~oil ~~prepaid~~products ~~and~~to ~~other assets~~ and tofrom ~~increase~~third ~~current assets other than cash~~parties. ~~Additional~~It ~~uses~~commenced ofoperations ~~funds~~ during the ~~quarter~~latter ~~included~~part ~~additions~~of tothe ~~oil~~first ~~and~~quarter ~~gas properties~~ of ~~$1,194,000.~~2002 ~~Cash~~and ~~for~~had ~~operations~~sales ~~was~~of ~~provided,~~over ~~in part~~390,000 bybarrels ~~net~~of ~~proceeds~~various ~~from~~products during the ~~sale~~quarter ofending ~~preferred~~March ~~stock of approximately $2~~31,~~372,000~~ 2002. InWe ~~February~~did ~~1999,~~not ~~Mercantile~~have ~~International~~any ~~Petroleum,~~petroleum ~~Inc.~~product ~~failed~~sales toduring ~~pay us~~ the ~~$1.6~~first ~~million~~nine ~~outstanding~~months ~~balance~~ of ~~the~~2000 5%and ~~convertible~~the ~~debenture~~last itsix ~~issued~~months toof us2001. asAsphalt ~~partial~~Operations: ~~payment~~Since 1998, for the ~~purchase~~most ofpart, ~~our~~we ~~oil~~have ~~and~~operated ~~gas~~our ~~properties~~asphalt inbusiness ~~Columbia~~for ~~and~~our ~~Peru,~~own ~~South America in February 1997~~account. ~~In January 2000~~However, during the ~~parties~~period ~~reached~~July ~~an agreement~~1, ~~under~~2000 ~~which~~through ~~Mercantile~~June ~~acknowledged~~30, ~~its~~2001, ~~indebtedness to us in~~ the ~~amount~~asphalt ofsegment ~~$1,581,000~~operated ~~for~~under ~~the~~a ~~outstanding~~joint ~~balance~~venture ofstructure ~~the~~with ~~debenture~~Sargeant and anwe ~~additional~~accounted ~~amount~~for ~~of $1,306,000 in connection with~~ our ~~earnout~~interest ~~provision~~on of the ~~original~~equity ~~purchase agreement~~method. ~~Mercantile~~Consequently, ~~agreed~~only toprofits ~~repay~~from ~~this~~the ~~aggregate~~joint ~~debt~~venture ofare ~~$2,887,000~~reflected byon ~~issuing~~our afinancial ~~new~~statements ~~11.5%~~for ~~convertible~~that ~~debenture~~period, tonot ~~us.~~the ~~Beginning~~related inrevenues ~~February~~and ~~2000~~expenses. Consequently, ~~Mercantile began to make~~ the ~~scheduled~~year ~~monthly~~ended ~~payments~~December to31, us2001 ~~amounting~~reflects toonly the ~~greater~~revenue ofand ~~$70,000~~expense orfrom ~~80%~~July of1, ~~its~~2001 ~~Colombian~~through ~~subsidiary’s~~the ~~net~~end ~~income~~of ~~during~~ the ~~calendar~~ year ~~2000~~. During ~~2000~~this period, ~~each~~our ~~payment~~asphalt ~~was~~and inrelated ~~the~~revenues ~~amount~~approximated of $705,435,000 ~~and~~with ~~was~~related ~~generally~~costs ~~paid~~of in$4,852,000 acompared ~~timely~~to ~~manner.~~revenues ~~Beginning~~of ~~in January 2001~~$2,764, ~~Mercantile~~000 ~~began~~and torelated ~~pay~~costs ~~monthly the greater~~ of $802,319,000 orfor ~~80% of~~ the ~~subsidiary’s~~period ~~net~~ended ~~income~~December ~~until~~31, ~~the~~2000, ~~debt~~which isreflected ~~retired.~~only Inthe ~~March~~six ~~2001~~months weof ~~received~~operation ~~notice~~ from ~~Mercantile~~January ~~that Ecopetrol~~1, ~~the~~2000 ~~Columbian~~through ~~government~~June ~~oil~~30, ~~company~~2000, ~~that purchases~~ the ~~majority~~period ofpreceding ~~Mercantile’s~~the ~~oil~~joint ~~production~~venture. inAsphalt ~~Columbia,~~volumes ~~was~~were ~~withholding~~greater ~~payment~~for of the ~~proceeds~~six ~~from~~month ~~the~~period ~~purchase~~this ofyear ~~Mercantile’s~~compared ~~oil~~to ~~sales~~the tosame ~~Ecopetrol~~period inlast ~~Columbia,~~year ~~pending~~by ~~resolution~~38% ofdue aprimarily ~~legal~~to ~~dispute~~the ~~between~~exceptionally ~~Mercantile~~good ~~and~~weather ~~another~~our ~~entity~~market inarea ~~Columbia.~~experienced ~~Mercantile~~during ~~informed~~the uslatter ~~they~~part ~~expect~~of ~~the~~2001 ~~payments~~compared to ~~resume~~the ~~upon~~rainy ~~resolution~~winter/spring ofweather ~~this~~experienced ~~dispute,~~during ~~which~~the ~~they~~same ~~estimate~~period ~~will~~in ~~occur this September~~2000. ~~The~~At ~~unpaid~~December ~~portion~~31, of2001, ~~the~~we ~~debt~~had isa ~~convertible~~backlog ~~into~~of ~~Mercantile~~asphalt ~~common~~sales ~~stock~~orders atof ~~our~~approximately ~~option~~43,000 attons ~~any~~valued ~~time~~ at approximately $16.507 ~~per share~~million. ~~Mercantile~~Our ~~also~~St. ~~agreed to issue warrants~~Marks, ~~upon~~Florida ~~the~~refinery ~~signing~~facility ofhas ~~the~~not ~~definitive~~been ~~agreement,~~in ~~entitling~~operation ussince tothe ~~purchase~~last anquarter ~~aggregate~~ of ~~2,347,000~~1998 ~~Mercantile~~due ~~common~~to ~~shares~~the athigh ~~any~~cost ~~time~~of ~~prior~~asphalt toproducts ~~December~~since 31early 1999, ~~2002.~~the ~~The~~higher ~~exercise~~demand ~~price~~for of the ~~warrants~~higher ismargin, ~~$1.00~~PG-grade ~~per~~polymerized ~~share~~products ~~during~~in ~~2001~~the Louisiana and ~~$1.50~~Texas ~~during~~markets, ~~2002.~~the Onlack ~~April~~of ~~28,~~such ~~2001,~~products wein ~~exchanged~~the $5St.9 ~~million~~Marks ~~worth~~markets, ofand ~~outstanding~~the ~~bridge~~additional ~~notes~~cost ~~due~~which onwould ~~that~~be ~~date~~incurred ~~for~~to 3%transport ~~convertible~~products ~~debentures~~to ~~due April 28, 2002~~St. ~~The~~Marks ~~debentures~~from ~~are~~Lake ~~convertible~~Charles. atOperating ~~any~~the ~~time~~St. ~~into~~Marks ~~shares~~facility ofwill ~~our~~depend ~~common~~on ~~stock~~the atfuture ~~a conversion~~ price ~~equal~~and toavailability ~~90%~~ of ~~the~~petroleum ~~average~~products. ofThe ~~the~~State ~~lowest~~of ~~three~~Florida ~~weighted~~Department ~~average sales prices~~ of ~~our~~Environmental ~~common~~Protection ~~stock~~is ~~during~~in the 20process ~~trading~~of ~~days~~investigating ~~prior to~~ the ~~date of conversion~~St. ~~Since~~Marks ~~there~~facility isfor nopossible ~~minimum~~site ~~conversion~~contamination ~~price,~~that ~~there~~we isbelieve nooccurred ~~limitation~~prior onto ~~the~~our ~~number~~purchase of ~~shares of common stock that~~ the ~~holder may acquire upon conversion of the debentures~~facility. ~~Since~~At ~~August~~this ~~2000~~time, we ~~have~~do ~~sold~~not abelieve ~~total~~any ofmaterial ~~8,750~~liability ~~shares~~will ofresult ~~our~~from ~~series~~the Ainvestigation ~~convertible~~and, ~~preferred~~consequently, ~~stock~~have tomade ~~GCA~~no provision for asame ~~total~~in ~~purchase~~our ~~price~~financial ofstatements. $8However,~~750,000.~~ ~~These~~there ~~proceeds~~can ~~were~~be ~~used~~no ~~primarily~~assurance ~~for~~material ~~our~~liability ~~operations~~will innot ~~Kazakhstan~~result and ~~to supplement cash flows provided by~~ the ~~refining~~investigation ~~and~~may ~~asphalt~~hinder ~~operations. We are attempting to sell a portion of~~ our ~~assets~~ability ~~in Kazakhstan~~ to ~~raise~~reopen ~~capital and reduce~~ the ~~level~~facility ofduring ~~risk associated with these projects~~2002. ~~Any~~Refinery ~~proceeds~~Operations: ~~that~~During ~~may~~2001, ~~be derived from~~ the ~~possible~~refinery ~~sale~~had orrevenues ~~farm-out~~ of aapproximately ~~portion~~$3,009,000 offrom ~~our~~processing ~~oil~~ and ~~gas~~rental ~~concessions~~fees inwith ~~Kazakhstan~~related ~~will~~operating becosts ~~utilized to repay debt, fund the development~~ of ~~our License 1551 gas field~~$3, ~~the minimum work program at our License 953~~501,000 ~~and~~compared ~~for~~to ~~general~~approximately ~~corporate uses. In August 2000~~$170,000 ~~our~~of ~~American~~revenues ~~International~~and ~~Petroleum~~related ~~Kazakhstan~~costs ~~subsidiary sold an aggregate~~ of $~~450~~1,924,000 ~~principal~~for ~~amount~~the ofyear ~~its~~2000. ~~12%~~The ~~promissory~~refinery ~~notes,~~was ~~payable~~inactive ~~upon~~during ~~demand,~~2000 compared to ~~certain~~having ofbeen ~~our~~operational ~~officers~~for ~~and~~approximately ~~directors~~five ~~and~~months toduring ~~an individual investor~~2001. ~~Each~~During ~~investor~~2001 ~~was~~we ~~given~~processed aapproximately ~~warrant~~1,113,000 orbarrels ~~option to purchase one share~~ of ~~our~~crude ~~common~~oil ~~stock~~feedstock for ~~each~~third ~~dollar~~parties ~~invested,~~compared ~~with~~to anapproximately ~~exercise~~100,000 ~~price~~barrels ofduring ~~105%~~2000. ofDuring the ~~closing~~third ~~market~~quarter ~~price~~ of ~~the~~2000 ~~common~~we ~~stock~~entered oninto ~~the~~a ~~date~~processing ~~preceding~~agreement ~~the~~with ~~closing~~Sargeant ~~of each transaction. We used these proceeds~~ to ~~initiate~~process ~~the~~their ~~reentry~~crude ~~work at our Begesh~~ oil ~~well~~for ina ~~Kazakhstan.~~processing Asfee ofplus ~~June~~any ~~21,~~incremental ~~2001,~~increases wein ~~had~~energy ancosts. ~~aggregate~~Sargeant ~~outstanding~~did ~~principal~~not ~~balance~~provide ~~remaining~~the onnecessary ~~these~~feedstocks ~~notes~~to ofstart ~~$300,000.~~processing Inuntil the ~~fourth~~first quarter of ~~2000,~~2001 weand ~~initiated~~processed ~~the~~much ~~reentry~~less ofcrude ~~the Begesh #1~~ oil ~~well~~than onthey ~~License~~agreed ~~953~~to ~~in Kazakhstan~~process, ~~which~~so ~~was drilled by~~ the ~~Russians~~processing inagreement ~~the~~was ~~1960‘s,~~mutually toterminated ~~test~~in aJuly ~~key~~2001. ~~upper~~We ~~Jurassic~~have ~~interval~~not ~~known~~operated ~~to be productive in~~ the ~~general~~refining ~~locale~~unit ofsince ~~the~~that ~~well~~date. The ~~reentry,~~high ~~which~~costs ~~was~~to ~~started~~maintain inthe ~~November~~refining ~~2000,~~unit ~~cost~~while ~~approximately~~it $1is ~~million~~not ~~and~~being ~~was~~100% ~~funded~~utilized ~~from~~significantly ~~proceeds~~contributed ~~from~~to the ~~promissory~~high ~~notes~~operating ~~and~~costs ~~the~~we ~~sale~~experienced ~~of our series A preferred stock. Although the reentry was completed~~ in 2001, itand ~~satisfied our minimum work requirement at License 953 for the year~~ 2000. ~~During~~We ~~our~~are ~~initial~~currently ~~testing,~~negotiating noa ~~economical~~new ~~quantities~~agreement ofwith ~~recoverable~~a ~~oil~~different ~~was~~party, ~~discovered~~under atwhich ~~the~~we ~~Begesh,~~would ~~but~~utilize ~~one~~100% of ~~our~~the ~~partners~~refining ~~has~~and ~~indicated~~asphalt afacilities ~~desire~~in toLake ~~test~~Charles ~~deeper~~during ~~zones at~~ the ~~Begesh~~second ~~well~~quarter onof ~~an exclusive operations basis~~2002. However, we ~~have~~cannot noassure ~~assurance~~you ~~at this time~~ that ~~this~~we ~~partner~~ will ~~proceed~~enter ~~with~~into ~~this~~an ~~operation.~~agreement Wewith ~~have~~that ~~satisfied~~or ~~our~~any ~~minimum~~other ~~work~~party. ~~and~~Year ~~monetary~~Ended ~~obligations~~December on31, ~~License 953 in Kazakhstan through~~ 2000 ~~and~~compared ~~are planning~~ to ~~negotiate~~the anYear ~~extension~~Ended ofDecember ~~the~~31, ~~exploration~~1999 ~~contract~~Trading ~~and~~Operations: ~~the~~We ~~remaining~~had $4no ~~million~~trading ~~minimum~~operations ~~work~~prior ~~program~~to ~~with~~February ~~the Kazakhstan government~~2001. 1516

WeAsphalt ~~had~~Operations: ~~originally~~During ~~planned to begin our Shagyrly-Shomyshty gas field development in Kazakhstan in November~~ 2000~~. However~~, ~~because~~we ofhad ~~the~~asphalt ~~uncertainty~~revenues of ~~weather~~$2,586,000, ~~conditions~~exclusive inof ~~western~~any ~~Kazakhstan~~joint atventure ~~that time of year~~revenues, wecompared ~~believed it was more prudent~~ to ~~delay~~revenues ~~drilling~~of atapproximately ~~Shagyrly~~$7,621,000 ~~until~~during ~~2001~~1999. ~~The~~Costs ~~initial phase~~ of ~~the~~sales ~~development~~related ~~has~~to ~~been~~these ~~reestimated~~revenues towere ~~cost~~ approximately $3.8,000,000 ~~million~~ and is$8,486,000, ~~expected~~respectively. toOther beasphalt ~~funded~~related ~~from~~revenues ~~(i)~~in ~~the~~2000 ~~proceeds~~were ~~derived~~$179,000 ~~from~~with ~~the~~related ~~sale~~costs of ~~a portion of Shagryly~~$206,000 ~~(ii)~~compared ~~financing~~ to be$4,000 ~~provided~~of byother ~~the~~asphalt ~~purchaser~~revenues ~~(which~~and ~~financing~~costs isof ~~expected~~$59,000 tofor ~~also~~1999. beThese ~~provided~~revenues toand ~~fund~~costs ~~our~~are ~~remaining~~primarily ~~interest~~related ~~in the project subsequent~~ to ~~the~~providing ~~sale)~~asphalt ortransportation ~~(iii)~~and byservices ~~the~~for ~~GCA~~third ~~equity line~~parties. The ~~total~~decrease ~~development~~in ~~cost~~asphalt ~~for~~revenues ~~the project~~ is ~~estimated~~due ~~at approximately $160 million~~ to ~~$180~~our ~~million.~~accounting Wefor ~~are~~the ~~also~~joint ~~having~~venture ~~discussions~~on ~~with~~the ~~other~~equity ~~financing~~method. ~~entities,~~Joint ~~suppliers~~venture ~~and~~asphalt ~~export~~revenues ~~credit~~were ~~agencies~~approximately ~~regarding~~$3,972,000 ~~project~~with ~~financing~~related ~~for~~costs ~~the development~~ of ~~Shagryly~~$3,857,000. ~~However,~~The ~~our~~joint ~~strategy~~venture isprovided tous ~~sell~~with athe ~~minimum~~financing ofand ~~50%~~reliable source of ~~Shagryly~~feedstocks ~~prior~~ to ~~commencing~~fulfill ~~the~~our ~~main~~backlog ~~phase~~contractual ofobligations ~~development. In October 2000, we signed a framework agreement~~ with ~~Zao Kaztransgaz,~~ a ~~Kazakhstan~~reasonably ~~government~~priced ~~company~~product. ~~involved~~During in the ~~transportation~~first ~~and~~two ~~marketing~~quarters of ~~natural~~2000 ~~gas~~we ~~within~~had ~~Kazakhstan,~~been ~~whereby~~fulfilling ~~Kaztransgaz~~certain ~~will~~of ~~purchase~~our up1999 toasphalt ~~200~~contracts ~~million~~with ~~cubic~~asphalt ~~feet~~inventory ofthat ~~natural~~had ~~gas~~been ~~per~~purchased ~~day~~at ~~from~~higher ~~our~~2000 ~~100~~asphalt ~~percent~~spot ~~owned~~market ~~License~~prices ~~1551~~than inasphalt ~~western~~market ~~Kazakhstan,~~prices ~~for~~had anbeen ~~initial~~at ~~period~~the oftime 15the ~~years.~~contracts Wewere ~~are~~entered ~~also~~into. ~~currently~~As ~~engaged~~a inresult, ~~negotiations~~we ~~with~~were ~~Gazprom,~~committed ~~the~~to ~~Russian~~selling ~~gas~~low-priced ~~transport~~conventional ~~company~~asphalt ~~and~~at ~~with~~a ~~other~~loss ~~potential~~or ~~purchasers~~at ~~and~~break-even ~~transporters,~~throughout ~~for~~most ~~the~~of ~~transportation~~1999 and ~~sale~~early of2000. ~~our~~With ~~anticipated~~Sargeant ~~Shagryly~~supplying ~~gas production~~asphalt, aswe ~~well~~were asable ~~third~~to ~~party~~supply ~~gas~~these ~~which~~1999 wecontracts ~~may~~with ~~decide~~lower tocost ~~purchase~~asphalt and ~~sell.~~mitigate ~~However,~~some ~~there~~of ~~can~~the beeffects noof ~~assurance~~the atmarket ~~this~~variances. ~~time~~We ~~that~~mitigated ~~such~~some aof ~~gas~~the ~~contract~~effects ~~will~~of bethese ~~signed.~~market ~~Alternatively,~~variances ~~the~~by ~~Kazakhstan~~use ~~government~~of isescalation ~~negotiating~~provisions ~~an agreement with Gazprom~~ in ~~connection~~our ~~with~~asphalt ~~the~~sales ~~export~~contracts, ofwhich ~~Kazakhstan~~now ~~gas~~enable us to ~~western~~increase ~~markets.~~our ~~The~~contracted ~~Kazakhstan~~sales ~~government~~price ~~has~~by ~~informed~~5% usper ~~that~~quarter itif ~~will~~our ~~furnish~~feedstock ~~all~~prices ~~necessary~~rise ~~support~~ to uscertain tolevels. ~~have~~Refinery ~~access~~Operations toThe ~~these~~refinery ~~gas~~had ~~markets.~~only ~~Such~~$21,000 ~~access~~of ~~would~~light ~~allow~~end ussales toin ~~market~~2000 ~~our~~compared ~~gas directly~~ to ~~the~~approximately ~~western end-users~~$513,000 ~~significantly~~in ~~enhancing~~1999. ~~the~~Except ~~value~~for ofa ~~our~~50,000-barrel ~~gas~~test ~~reserves~~run in ~~Shagryly.~~November Inrelated ~~September~~to ~~2000,~~our ~~we entered into a~~ processing agreement with Sargeant, ~~Bulktainers~~the ~~Inc.,~~refinery adid ~~division~~not ofprocess ~~Sargeant~~any ~~Marine,~~crude ~~Inc.,~~oil ~~wherein~~in ~~Sargeant~~2000 ~~agreed~~due to ~~process~~the ashortage ~~minimum~~ of ~~300,000 barrels of~~ crude oil ~~per~~and ~~month through~~ our ~~Lake~~capital ~~Charles,~~constraints ~~Louisiana~~during ~~refinery’s~~the ~~atmospheric distillation unit~~year. ~~Our~~In ~~Gulf~~connection ~~Coast Petroleum Trading, Inc. subsidiary simultaneously entered into a separate agreement, which runs concurrently~~ with the processing agreement, towith ~~purchase~~Sargeant, the ~~resultant~~refinery ~~jet~~processed ~~fuel,~~a ~~naphtha,~~test ~~kerosene,~~batch ~~diesel~~of ~~oil,~~product ~~and~~for ~~vacuum gas oil from~~ Sargeant, ~~which~~and werecorded ~~then~~revenues ~~market~~of ~~for~~$149,500 ~~our~~related ~~own~~to ~~account throughout~~ the ~~country~~processing. ~~When~~Initial ~~combined~~processing ~~with~~was ~~the~~to ~~fees~~commence ~~derived~~in ~~from~~November ~~processing~~but ~~through~~was ~~the~~delayed ~~facility’s~~by ~~vacuum~~Sargeant ~~distillation~~in ~~unit,~~procuring atits ~~these~~feedstock ~~levels,~~until ~~the~~February ~~resultant~~of ~~cash~~2001, ~~flows~~at ~~derived~~which ~~from~~time the ~~atmospheric~~refinery ~~distillation~~began ~~unit~~ processing, ~~coupled~~at ~~with~~initial ~~the~~rates ~~asphalt~~of ~~operation~~10,500 ~~and our marketing and trading business mentioned below, would be sufficient~~ to ~~adequately support our domestic operations. However~~12,000 ~~Sargeant~~barrels ~~has~~per ~~notified us that they are terminating the agreement effective July 31, 2001~~day. We ~~are~~have ~~therefore~~not ~~currently~~operated ~~having~~our ~~discussions~~terminal ~~with~~in ~~other~~St. ~~entities~~Marks ~~who~~Florida ~~have~~since ~~expressed~~1998, anbut ~~interest~~incurred inapproximately ~~processing through our facility~~$65,000 ~~either~~of bymaintenance ~~paying~~and ussecurity acosts ~~fee~~during ~~to process their crude or providing us with~~ the ~~necessary~~year ~~capital~~2000 tocompared ~~enable us~~ to ~~purchase and process our own crude oils~~$96,000 ~~either~~in ~~jointly or alone~~1999. IfDue ~~we are unable~~ to ~~find~~the ~~another~~increased ~~party~~costs ~~willing~~ and ~~able~~the tosubsequent ~~enter~~decrease ~~into~~in ~~similar~~supply orof ~~other~~product ~~agreements~~brought toon ~~process~~by ~~crude~~the ~~oil~~increase atin ~~our~~world ~~refinery~~oil prices, we ~~will~~determined ~~require~~that ~~additional~~it ~~financing~~would orbe ~~may~~more ~~need~~economically tofeasible ~~sell assets in order~~ to ~~supplement~~direct our ~~cash~~sales ~~requirements.~~efforts Weand ~~also~~strategy ~~may be required~~ to ~~terminate~~ the ~~processing~~high ~~segment~~demand, ofhigh ~~our~~quality ~~business.~~and Inhigh ~~July~~margin ~~2000,~~asphalt wein ~~entered~~the ~~into~~Louisiana anand ~~annually~~Texas ~~renewable~~markets ~~one-year~~rather ~~joint~~than ~~venture~~shipping ~~with~~lower ~~Sargeant~~margin toconventional ~~service our existing~~ asphalt ~~supply~~for ~~obligations~~sale ~~and~~into ~~expand~~the ~~our asphalt business~~St. ~~The~~Marks, ~~joint~~Florida ~~venture~~market. ~~agreement~~Oil ~~provides~~and ~~for~~Gas ~~Sargeant~~Production toActivity ~~provide~~We ~~and~~have ~~finance~~had ~~the~~no ~~feedstocks~~oil ~~required.~~and ~~Sargeant~~gas ~~has~~production ~~been~~activity ~~complying~~since ~~with~~February ~~this obligation~~1997. WeOther ~~generally~~Income ~~receive~~Year ~~50%~~Ended ofDecember ~~the~~31, ~~profits~~2001 ~~generated~~compared ~~from~~to the ~~joint~~Year ~~venture’s~~Ended ~~asphalt~~December ~~operations~~31, ~~and~~2000 ~~Sargeant~~Other ~~will~~income ~~reimburse~~increased usin ~~for~~2001 ~~our~~compare ~~direct~~to ~~operating~~2000 ~~costs~~by upapproximately to $13162,000. ~~per~~The ~~ton~~increase ~~sold.~~was Weprimarily ~~plan~~attributable to ~~purchase~~an ~~asphaltic~~increase ~~by-products~~in ~~produced~~interest ~~from~~income for the ~~processing~~year ~~agreement,~~of ~~mentioned above~~$125,000 ordue ~~purchase wholesale asphalt~~ to ~~utilize~~having asmore ~~feedstock~~funds ~~for~~on ~~blending~~deposit ~~and~~during ~~polymer~~2001 ~~enhancement.~~compared ~~Our strategy is~~ to ~~sell~~2000. ~~primarily higher~~Sub-~~margin~~lease ~~polymerized~~income ~~asphalt~~increase ~~products~~by $39,000 ~~which~~in ~~asphalts~~2001 ~~are~~compared ~~expected~~ to ~~approximate~~2000. atSub-lease ~~least~~income ~~75%~~in ~~of its asphalt sales during~~ 2001. ~~Other~~reflected ~~than~~revenues ~~providing the direct operating labor and other direct expenditures,~~ for ~~which~~twelve wemonths ~~are~~compared ~~reimbursed,~~to wenine domonths ~~not anticipate any material capital requirements~~ for the ~~joint~~year ~~venture asphalt operations in 2001~~2000. ~~The~~Year ~~joint~~Ended ~~venture~~December ~~has~~31, ~~been~~2000 ~~profitable~~compared ~~since~~to ~~its~~the ~~inception~~Year ~~and,~~Ended asDecember ~~of April 30~~31, ~~2001,~~1999 itOther ~~had~~income adecreased ~~backlog~~in of2000 by approximately 70$49,000 ~~tons~~compared ofto ~~asphalt~~1999. ~~totaling~~The ~~approximately~~decrease ~~$11~~is ~~million~~a ~~worth~~result of ~~contracts.~~less Weinterest ~~have~~income ~~been~~derived ~~negotiating~~from afewer ~~renewal~~funds ofon ~~the~~deposit ~~joint~~during ~~venture~~2000 ~~with~~compared ~~Sargeant~~to on1999. ~~terms~~During ~~more~~2000 ~~favorable~~we toentered ~~us,~~into ~~however~~ a ~~renewal~~partial issub-lease ~~not~~of ~~likely~~space at ~~this~~our ~~time.~~New IfYork weoffice ~~are~~and ~~unable~~recognized torental ~~reach~~income ~~such~~of ~~an agreement~~$114,000 weduring ~~intend~~the toyear ~~continue~~that ~~with~~we ~~our~~did ~~asphalt~~not ~~business~~have onin ~~our own~~1999. ~~Doing~~The sosub-lease ~~will~~is ~~require~~a usresult ~~to bear the entire risk~~ of ~~the~~our ~~resultant~~continued ~~profit~~efforts orto ~~loss~~reduce ~~and~~its togeneral ~~purchase~~ and ~~self-finance~~administrative ~~our~~costs ~~feedstock~~during ~~supplies~~the ~~which~~year ~~may~~2000. ~~result~~A decrease in ~~higher~~2000 ~~cost~~ of ~~goods~~approximately ~~sold than we experienced in the joint venture. However~~$56,000 ~~if we do not renew, Sargeant~~ is ~~required~~attributable to ~~provide~~recognition ~~the~~of ~~feedstock~~a ~~supplies~~forgiveness ~~necessary to supply the backlog existing on the termination date~~ of ~~the~~debt ~~joint~~recorded ~~venture~~in at1999 ~~the~~and ~~lowest~~none ~~cost~~for ~~available~~2000. ~~Market~~General ~~Risk~~and WeAdministrative ~~are~~Year ~~exposed~~Ended toDecember ~~various~~31, ~~types~~2001 ofcompared ~~market~~to ~~risk in~~ the ~~normal~~Year ~~course~~Ended ofDecember ~~business~~31, ~~including~~2000 ~~the~~Total ~~impact~~general ~~of interest rate changes~~ and ~~foreign~~administrative ~~currency~~expenses ~~exchange~~decreased ~~rate~~by ~~fluctuations.~~approximately ~~We do not employ risk management strategies~~$1,953,000, ~~such as derivatives~~ or ~~various~~29%, ~~interest~~in ~~rate~~2001 ~~and~~compared ~~currency swaps,~~ to ~~mitigate these risks~~2000. ~~Foreign~~Several ~~Exchange~~items ~~Risk~~contributed Weto ~~are~~this ~~subject~~years tosignificant ~~risk~~decrease. ~~from~~During ~~changes~~2001 inwe ~~foreign~~were ~~exchange~~able ~~rates~~to ~~for~~negotiate ~~our~~an ~~international~~adjustment ~~operations~~related ~~which~~to ~~use~~property ataxes ~~foreign~~assessed ~~currency~~on asthe ~~their~~refinery ~~functional~~plant ~~currency~~ and ~~are~~equipment ~~translated~~for tothe ~~U.S.~~year ~~dollars.~~2001 Weand ~~have~~2000, ~~not~~which ~~experienced~~amounted ~~any~~to ~~significant~~a ~~gains~~$682,000 ordecrease ~~losses~~in ~~from~~the ~~such~~total ~~events~~tax assessment. 17

~~Interest~~Also, ~~Rate~~in ~~Risk~~1998 Wewe ~~are~~reserved ~~exposed~~and recorded a provision for bad debt expense of approximately $1,500,000 related to ~~interest~~the ~~rate~~default ~~risk~~of ~~from~~MIP ~~our~~on ~~various~~the note related to the sale of the Colombian and Peru oil and gas properties, as previously discussed. Due to subsequent payments made by MIP, the reserve was reduced by approximately $708,000 at the end of this year. The majority of the bond cost related to financing ~~activities~~during 2000 were written off in the year 2000 and bond costs related to financing in 2001 decreased $245,000 compared to 2000. Another area contributing to the large decrease in 2001 was the decrease in public relations and trading costs of approximately $223,000 under 2000 costs. Certain other expenses decreased during 2001 compared to 2000: travel expenses, professional fees and sales commissions decreased approximately $131,000, $77,000, and $58,000, respectively. Certain other expenses increased during 2001 compared to 2000: General insurance expenses, general office expenses, and environmental cleanup and assessments increased approximately $40,000, $19,000, and $117,000, respectively. The ~~following~~Company ~~table~~continually ~~provides~~strives ~~information~~to reduce its general and administrative expenses. Year Ended December 31, 2000 compared to the Year Ended December 31, 1999 Total general and administrative expenses increased by ~~maturity~~approximately ~~date~~$409,000 ~~about~~or 6%, in 2000 compared to 1999. We have made a significant effort to decrease our ~~interest~~general ~~rate~~and ~~sensitive~~administrative ~~financial~~expenses. ~~instruments~~Payroll and certain other employee related expenses during 2000 have been reduced by $129,000 compared to 1999. Public relations costs, dues and subscriptions, sales commissions were reduced, compared to 1999, by $234,000, $21,000, and $102,000, respectively. Certain expenses have increased during 2000 compared to 1999 because of our increased activities, such as travel expenses, and professional fees, having increased $139,000 and $26,000, respectively. Certain other costs, which ~~are~~we ~~fixed~~have ~~rate~~limited ~~debt~~control ~~obligations~~over have increased, such as corporate franchise and property taxes, having increased $346,000 over the same costs in 1999. Depreciation, Depletion and Amortization Year Ended December 31, 2001 compared to the Year Ended December 31, 2000 Depreciation, depletion and amortization increased approximately $120,000 in 2001 compared to 2000 due to adjustments in depreciation rates and values throughout the year. Year Ended December 31, 2000 compared to the Year Ended December 31, 1999 Depreciation, depletion, amortization and provision for impairment increased approximately $12,661,000 in 2000 compared to the same period in 1999. Depreciation in 2000 reflects the increased depreciation of our $18.6 million dollar asphalt and related equipment construction project at the Lake Charles refinery that commenced in 1996 and was completed in December of 1998. This new addition doubled the carrying value of the Lake Charles refinery and accounted for the 100% increase in these expenditures. Provision for Impairment of Oil and Gas Properties Year Ended December 31, 2001 compared to the Year Ended December 31, 2000 The ~~fair~~net total costs recorded for License 953 equal $14.7 million before impairment, through the end of 2001, including approximately $6 million in identifiable seismic costs, which we believe has a market value which could exceed its cost. However, since we have utilized a portion of ~~financial~~this ~~instruments~~seismic ~~closely~~data ~~approximates~~to evaluate certain acreage within the ~~carrying~~License ~~values~~and have completed the evaluation of a majority of the ~~instruments~~License acreage without identifying any related proven oil and/or gas reserves, we believe it is appropriate to impair the related seismic data costs and the non-seismic property costs associated with these unsuccessful evaluations. Therefore, we have recorded an impairment to the net total costs recorded for License 953 of $10.7 million for the year ended 2001. At December 31, 2000 we recorded an impairment of $12.5 million for License 953. Year Ended December 31, 2000 compared to the Year Ended December 31, 1999 In March 2001, we completed the re-entry and testing of the Begesh No. 1 oil well on License 953 in Kazakhstan and concluded that the well’s upper Jurassic zones were not capable of producing economic quantities of crude oil. At this time, we believe we have sufficiently tested the Jurassic and Eocene structures present in License 953, which were the most likely candidates for recoverable oil reserves from reasonably shallow levels. After extensive testing and geological and geophysical research and study, we believe that any significant volumes of economically recoverable oil and gas may be found in the deep, untested, carboniferous structures, which are estimated to equate to approximately 40% of the total unevaluated acreage remaining on License 953. Therefore an impairment provision of $12,546,000 was recognized on our Kazakhstan oil and gas properties held on License # 953. We evaluated the costs recorded on this License and calculated that approximately 60% of the costs of the project had been impaired. There was no impairment recorded against License 953 for the year ended 1999 or any year prior to that. 18

	2001		2004		TotalRecordedAmount	FairValue
Debt:
Carrying Value	$ 1,010,473		$ 5,262,882		$6,273,325	$6,273,325
Effective Interest Rate	11.3	%	28.0	%

Provision for Impairment of Plant Assets

Year Ended December 31, 2001 compared to the Year Ended December 31, 2000

Because of the inconsistent pattern in which we have utilized the Lake Charles facilities since the termination of the lease with Gold Line, primarily caused by the short-term nature of the contracts we have entered into during that period, it is difficult to determine with any certainty if we can fully recover the existing carrying value of the facilities. Although we are currently having discussions that could result in longer-term contracts for the full utilization of these assets, which could result in sufficient undiscounted future cash flows to fully recover these carrying costs, at this time, we cannot assure you that we will consummate agreements that will achieve that result. In addition, although the continuation and growth of our asphalt business may justify retaining a good portion of the existing carrying value of approximately $19 million, at this time, we cannot assure the full recovery of these costs. Consequently, we have decided to record an impairment of approximately $9.2 million of the plant assets at the Lake Charles facilities for the year ended 2001. There was no impairment recorded for the year ended 2000.

Year Ended December 31, 2000 compared to the Year Ended December 31, 1999

There was no provision for impairment of plant assets in the years prior to 2001.

Interest

Imputed interest of approximately $1,248,000, $705,000 and $3,044,000 was incurred in the years ended December 31, 2001, 2000 and 1999, respectively, and was related to the presumed incremental yield our investors may derive from the discounted conversion rate of debt instruments issued by us during these years. Management believes that the related amount of interest recorded by us is not necessarily the true cost to us of the instruments we issued and that it may be reasonable to conclude that the fair value of the common stock into which these securities may be converted was less than such stock’s quoted market price at the date the convertible securities were issued (considering factors such as the period for which sale of the stock is restricted, which in some cases was as long as six months, large block factors, lack of a sufficiently active market into which the stock can be quickly sold, and time value). However, generally accepted accounting principles require that the “intrinsic value” of the conversion feature at the date of issuance should be accounted for and that such incremental yield should be measured based on the stock’s quoted market price at the date of issuance, regardless if such yield is assured.

We expense and also capitalize certain other costs associated with the offering and sale of debentures. Capitalized costs are amortized as interest expense over the life of the related debt instrument. These costs include the accounting for common stock warrants issued with and related to certain convertible debentures, commissions paid, and certain legal expenses

Year Ended December 31, 2001 compared to the Year Ended December 31, 2000

Interest expense decreased approximately $1,116,000 for the year 2001 compared to 2000. During 2001 we incurred approximately $747,000 of interest on debentures and short-term and trade notes outstanding during 2001 compared to $1,872,000 of interest incurred in 2000. We incurred approximately $1,248,000 of non-cash imputed interest and approximately $179,000 of non-cash interest related to warrants and stock issued in connection with debentures.

Year Ended December 31, 2000 compared to the Year Ended December 31, 1999

Interest expense for 2000 decreased by $3,211,000 to $3,290,000, compared to $6,501,000 in 1999. During 2000 we incurred approximately $1,872,000 of interest on debentures and short-term and trade notes outstanding during 2000. We incurred $705,000 of non-cash imputed interest, and approximately $713,000 of non-cash interest, both related to warrants and stock issued in connection with debentures.

Liquidity and Capital Resources

During the three months ended March 31, 2002, we used a net amount of approximately $72,000 for operations, which reflects approximately $832,000 of non-cash provisions. Approximately $1,282,000 was provided by decreases in accounts receivable and prepayments, $28,000 was used to increase asphalt blendstock inventory and $450,000 was provided from an increase in accounts payable and accrued liabilities. Additional uses of cash during the period included additions to oil and gas properties and refinery property and equipment of $195,000. Cash for operations was provided by proceeds from the increase in short-term and long-term debt of approximately $43,000 and cash was offset by cash used to decrease notes payable and notes payable-officers by approximately $123,000 and a decrease in other long-term assets of $138,000.

AIn 10February 1999, Mercantile International Petroleum, Inc. failed to pay us the $1.6 million outstanding balance of the 5% ~~increase~~convertible debenture it issued to us as partial payment for the purchase of our oil and gas properties in ~~interest~~Columbia ~~rates~~and ~~would~~Peru, ~~decrease~~South America in February 1997. In January 2000, we reached an agreement with Mercantile, under which Mercantile acknowledged its indebtedness to us in the amount of $1,581,000 for the outstanding balance of the debenture and an additional amount of $1,306,000 in connection with our ~~cash~~earnout ~~flow~~provision of the original purchase agreement. Mercantile agreed to repay this aggregate debt of $2,887,000 by issuing a new 11.5% convertible debenture to us. Beginning in February 2000, Mercantile began to make the scheduled monthly payments to us amounting to the greatest of $70,000 or 80% of its Colombian subsidiary’s net income during the calendar year 2000. During 2000, each of the payments was made in the amount of $70,000 and was generally paid in a timely manner. Beginning in January 2001, Mercantile began to pay monthly the greatest of $80,000 or 80% of the subsidiary’s net income until the debt is retired. In March 2001 we received notice from Mercantile that Ecopetrol, the Columbian government oil company that purchases the majority of Mercantile’s oil production in Columbia, was withholding payment of the proceeds from the purchase of Mercantile’s oil sales to Ecopetrol in Columbia, pending resolution of a legal dispute between Mercantile and another entity in Columbia. Mercantile originally informed us they expected the payments to resume upon resolution of this dispute in July 2001. In November 2001, Mercantile indicated they expected an imminent settlement of this dispute, which would allow them to release the accrued, unpaid portion of the amounts due through mid-November of $640,000. However, shortly thereafter, Mercantile was informed they had lost the dispute and were not able to release these funds in lump sum, but would need to begin paying again at $80,000 per month until all amounts due were fully paid. In an effort to minimize our exposure to the potential future risks of receiving full payment of the debenture from Mercantile, we agreed to reduce the principal and interest balances due on the debenture of approximately $2.6 million to $1.5 million,~~249~~ if Mercantile would pay us $1.1 million immediately, $100,000 on or before March 15, 2002, and $300,000 on or before December 31, 2003. Mercantile agreed and paid the first two installments of $1.2 million during the first quarter this year. In the event the third payment is not made on or before the respective due date, the required payment will double. Interest accrues monthly on the $300,000 final payment at an 11.5% annual rate and is to be paid to us in cash each month beginning March 15, 2002. In addition to reducing the principal and interest balances due, we also gave up any rights we had in connection to any net operating loss benefits which would ~~decrease~~accrue to Mercantile, which benefits, we believe, were not likely to accrue in any event. We utilized the ~~fair~~proceeds ~~value~~primarily to service our asphalt contract backlog, which at December 31, 2001 amounted to approximately $6 million. The unpaid portion of the debt is convertible into Mercantile common stock at our option, at any time, at $1.50 per share. Mercantile also agreed to issue warrants, upon the signing of the definitive agreement, entitling us to purchase an aggregate of 2,347,000 Mercantile common shares at any time prior to December 31, 2002. The exercise price of the warrants was $1.00 per share during 2001 and is $1.50 during 2002. These provisions of the debenture remain unchanged. We continue to have discussions with potential partners regarding a farm out of some of our 100% working interest in License 1551 Shagyrly gas field in Kazakhstan. Any proceeds that may be derived from the possible sale or farm-out of a portion of our oil and gas concessions in Kazakhstan will be utilized to repay debt, ~~instruments~~fund the development of our License 1551 gas field, the minimum work program at our License 953, and for general corporate uses. ~~Business~~The majority of the development funding for License 1551 is expected to be derived from project financing. In August 2000, our American International Petroleum Kazakhstan subsidiary sold an aggregate of $450,000 principal amount of its 12% promissory notes, payable upon demand, to certain of our officers and directors and to an individual investor. Each lender was given a warrant or option to purchase one share of our common stock for each dollar invested, with an exercise price of 105% of the closing market price of the common stock on the date preceding the closing of each transaction. We used these proceeds to initiate the preliminary reentry work at our Begesh oil well in License 953 in Kazakhstan, which reentry was completed in the first quarter of 2001 and resulted in no economically recoverable oil. As of March 31, 2002, we had an aggregate outstanding principal balance remaining on these notes of $100,000. our request for an extension of the exploration contract from the Kazakhstan Government for an additional year through November 2002, however, at this time, we plan to apply for a three year extension of the License which would be directed at evaluating the gas potential in the eastern portion of the License near Shagyrly Shomyshty. However, there can be no assurance that such an extension will be granted. If it is not, this license will be terminated. We have decided to delay the initial phase of development drilling at Shagyrly Shomyshty, estimated to cost approximately $3.8 million, until a gas sales contract is obtained to sell the related natural gas production. We continue to have discussions with potential purchasers and marketers regarding the purchase of our gas, however, political and organizational changes within Kazakhstan and Russia have resulted in substantial delays and uncertainty relative to our ability to consummate such a contract. We cannot assure that a gas contract will be signed or that we will be successful with the initial phase of the drilling program, both of which are prerequisites to the initiation of full field development of Shagyrly Shomyshty. We have had discussions with various financing entities, suppliers and export credit agencies regarding project financing to complete the full development of this project. 20

In September 2000, we entered into a one-year processing agreement with Sargeant Bulktainers Inc., a division of Sargeant Marine, Inc., in which Sargeant agreed to process a minimum of 300,000 barrels of crude oil per month through our Lake Charles, Louisiana refinery’s atmospheric distillation unit. However, through July 2001 Sargeant had only processed an aggregate of approximately one-third of the total volumes of crude oil they agreed to process through our facility. Since both Sargeant and we desired early termination, by mutual agreement, the processing agreement and the related agreement to purchase Sargeant’s refined products were both terminated on July 31, 2001. The original term of these agreements was scheduled to end on September 21, 2001. In July 2000, we entered into an annually renewable one-year joint venture with Sargeant to service our then-existing asphalt supply obligations and expand our asphalt business. The joint venture agreement provided for Sargeant to supply and finance the feedstocks required and Sargeant reimbursed us for the majority of our direct operating costs. Each party generally received 50% of the profits generated from the joint venture’s asphalt operations. The joint venture purchased asphaltic by-products produced from the processing agreement, mentioned above, and also purchased wholesale asphalt from third parties to utilize as feedstock for blending and polymer enhancement. It sold primarily higher-margin polymerized asphalt products, which asphalts approximated 61% of its asphalt sales. We had various discussions with Sargeant in an attempt to negotiate an extension of the joint venture under more favorable terms. However, the parties could not agree on new terms and mutually agreed not to renew the joint venture beyond its original term of June 30, 2001. The parties also agreed that, except for approximately 3,600 tons, all deliveries of asphalt from the asphalt backlog existing on June 30, 2001 of 69,000 tons would be our responsibility to service and that we would bear the entire risk of profit and loss on these contracts. Between July 1, 2000 and June 30, 2001, the Joint Venture sold approximately $8 million worth of asphalt at an estimated profit of approximately $1.3 million. In June 2002, the parties reached an agreement on the final accounting for the Joint Venture. All outstanding issues were resolved and no further obligations or benefits will accrue to either party. We have operated our asphalt business on our own since June 30, 2001 and will continue to do so in the foreseeable future. However, this requires us to bear the entire risk of the resultant profit or loss and to purchase and self-finance our feedstock supplies, which may result in higher cost of goods sold than we experienced in the joint venture. We have maintained our Lake Charles refinery in a state of readiness since the termination of the Sargeant processing agreement because we have been having discussions with a number of companies regarding the full utilization of the processing and asphalt facilities. However, in order to conserve cash, we have reduced our refining staff to a minimum pending a new processing agreement or the attainment of sufficient financing to support our own refining operations. We hope to have such agreements in place in the near future; however, at this time we cannot assure you that they will be consummated. In order to provide additional working capital to supplement the cash flow derived from our asphalt operations, on December 19, 2001, we sold a one-year, $1.25 million principal amount, 14% note to GCA Strategic Investment Fund Limited, secured by a mortgage on our St. Marks, Florida refinery. In addition, we reached an agreement with GCA to extend the outstanding aggregate principal balance of all our outstanding convertible debentures to GCA, totaling $8.6 million, due in full in April 2002, to February 1, 2007. This agreement enabled us to approach sources of capital to fund our operations without the immediate burden of having to repay these debentures in the near future. Also, during the first quarter this year, we sold an aggregate of $240,000 of 14% notes to our Chairman George Faris, which are payable upon demand. We believe the terms of the loans were as favorable to us as we could have obtained from an unaffiliated party. The proceeds were used primarily to service our asphalt contract backlog. We have been in discussions with various financial entities regarding a ~~holding~~line ~~company~~of credit to support our refining and asphalt businesses. In March this year, we obtained a $1.8 million credit facility that ~~through~~is primarily being utilized to support our ~~wholly~~asphalt ~~owned~~contract ~~subsidiaries:~~backlog. This facility is collateralized by and limited to the aggregate value of the accounts receivable and inventory of our asphalt subsidiary, American International Asphalt, Inc. However, this credit facility is not sufficient to support both our asphalt operations and our corporate cash requirements. Ideally, approximately $7 million would be required to support an aggressive asphalt operation during 2002, which would provide sufficient capital to support all of these cash requirements during the next year. Since March 2002, all of our executives and certain management personnel have deferred up to six payrolls each providing an aggregate of approximately $344,000 in additional cash flow to support our operations during this period. These amounts are expected to be paid over time as cash flows permit. In June 2002, we sold $1.9 million principal amount of our 12% bridge notes due March 18, 2003 to GCA for a purchase price of $1.9 million and a warrant to purchase 3.6 million shares of our common stock at $0.04 per share. We will use the net proceeds of approximately $1.6 million to support our working capital needs. We are engaged in negotiations for a transaction that would put our entire refining and asphalt facility in Lake Charles to work on a long-term basis. The terms of this transaction have been agreed to and implementation is contingent upon securitization of crude oil purchase contracts and financing to support our purchase of crude oil and asphalt feedstocks. Our management believes the anticipated cash flows from this transaction are sufficient to support all of our overhead and domestic operations during the transaction’s five-year term. It should also enhance our ability to refinance our existing debt, although there is no certainty this will be the case. If we are unable to secure adequate financing to consummate this transaction, we may need to curtail our operations. 21

•We ~~Refine~~plan ~~crude~~to ~~oil~~utilize ~~feedstocks~~any proceeds we may receive from the sale, if any, of a portion of our Kazakhstan concessions to ~~produce~~repay ~~jet~~our ~~fuel~~outstanding convertible debt and/or to supplement any cash flow shortfall from our operations. If such a sale is not consummated or, ~~diesel~~if we are unable to secure contracts to fully utilize our refining and asphalt facilities, ~~naphtha~~we will need to obtain additional financing. Market Risk We are exposed to various types of market risk in the normal course of business, ~~gas~~including ~~oils~~the impact of interest rate changes and ~~fuel~~foreign ~~oil~~currency exchange rate fluctuations. We do not employ risk management strategies, such as derivatives or various interest rate and currency swaps, to mitigate these risks. Foreign Exchange Risk We are subject to risk from changes in foreign exchange rates for our international operations that use a foreign currency as their functional currency and are translated to U.S. dollars. We have not experienced any significant gains or losses from such events. Interest Rate Risk We are exposed to interest rate risk from our various financing activities. The following table provides information, by maturity date, about our interest rate sensitive financial instruments, which are fixed rate debt obligations. The fair value of financial instruments closely approximates the carrying values of the instruments.

• Produce, process, and market conventional and technologically advanced polymerized asphalt, vacuum gas oil and other products at our refinery in Lake Charles, Louisiana utilizing low-cost, low-gravity, high sulfur crudes.

	2002			2007			Total Recorded Amount		Fair Value
Debt:
Carrying Value	$	1,226,562		$	13,277,609		$	14,504,171	$	14,504,171
Effective Interest Rate		11.3	%		27.5	%

•A ~~Engage~~10% increase in ~~oil~~interest rates would decrease our cash flow by approximately $378,994 and ~~gas~~would ~~exploration~~decrease the fair value of our debt instruments. Recent Accounting Pronouncements – In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statements of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS 141”) and ~~development~~No. in142 ~~western~~“Goodwill ~~Kazakhstan~~and Other Intangible Assets” (“SFAS 142”). SFAS 141 requires all business combinations initiated after June 30, ~~where~~2001 weto ~~own~~be aaccounted ~~70%~~for ~~working~~under ~~interest~~the inpurchase method. For all business combinations for which the date of acquisition is after June 30, 2001, SFAS 141 also establishes specific criteria for the recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as extraordinary gain, rather than deferred and amortized. SFAS 142 changes the accounting for goodwill and other intangible assets after an acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and intangible assets with indefinite lives will no longer be amortized; 2) goodwill and intangible assets with indefinite lives must be tested for impairment at least annually; and 3) the amortization period for intangible assets with finite lives will no longer be limited to forty years. We do not believe that the adoption of these statements had a material effect on our financial position, results of operation, or cash flows. In June 2001, the FASB also approved for issuance SFAS 143 “Asset Retirement Obligations”. SFAS 143 establishes accounting requirements for retirement obligations associated with tangible long-lived assets, including: 1) the timing of the liability recognition, 2) initial measurement of the liability, 3) allocation of asset retirement cost to expense, 4) subsequent measurement of the liability and 5) financial statement disclosures.7 ~~million~~SFAS ~~acre~~143 ~~exploration~~requires ~~block~~that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a ~~100%~~systematic ~~working~~and ~~interest~~rational method. We will adopt the statement effective no later than January 1, 2003, as required. The transition adjustment resulting from the adoption of SFAS 143 will be reported as a cumulative effect of a change in accounting principle. At this time, we cannot reasonably estimate the effect of the adoption of this statement on our financial position, results of operations, or cash flows. In October 2001, the FASB also approved SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 replaces SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The new accounting model for long-lived assets to be disposed of by sale applies to all long-lived assets, including discontinued operations, and replaces the provisions of APB Opinion No. 30, Reporting Results of Operations –Reporting the Effects of Disposal of a ~~264~~Segment of a Business,~~000~~ ~~acre~~for ~~gas~~the ~~field~~Disposal of a Segment of a Business, for the disposal of segments of a business. Statement 144 requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. Statement 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of Statement 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 22

WeDuring ~~also~~the ~~are~~year ~~seeking~~ended ~~other~~December ~~domestic~~31, ~~and international oil and gas projects. We were organized on April 1~~2001, ~~1929~~we ~~under~~used ~~the~~a ~~laws~~net ofamount ~~the State~~ of ~~Nevada~~approximately ~~under the name Pioneer Mines Operating Company. Our name was changed to American International Petroleum Corporation in 1982. American International Refinery~~$4,121,000 ~~Inc.~~for ~~We own 100% of our American International Refinery Inc. subsidiary~~operations, which ~~owns~~reflects aapproximately 30$22,315,000 ~~barrel~~of ~~per~~non-cash ~~day refinery in Lake Charles~~provisions, ~~Louisiana~~including itimpairment ~~acquired in July 1988, 25 acres~~ of ~~vacant~~oil ~~waterfront property adjacent to the refinery~~ and ~~another~~gas 45properties ~~acres~~in ofKazakhstan ~~vacant land across the highway from the refinery. Most~~ of ~~the~~$10,671,000 ~~refinery’s feedstock~~ and ~~refined~~plant ~~products~~assets ~~are~~in ~~handled~~Louisiana ~~through the refinery’s barge dock at the river. The refinery is located on 30 acres~~ of ~~land bordering the Calcasieu River~~$9, ~~which connects with the Port of Lake Charles~~236, ~~the Lake Charles Ship Channel and the Intercoastal Waterway~~000. ~~The~~Approximately ~~main unit of the refinery is the crude distillation tower~~$589,000 orwas ~~crude~~used ~~unit,~~to ~~which~~increase isasphalt ~~capable~~blendstock ofinventory ~~producing light~~ and ~~heavy~~current ~~naphtha,~~assets ~~kerosene~~other ~~for~~than ~~jet~~cash ~~fuel, #2 diesel, vacuum gas oil~~ and ~~reduced crude oil sold as special #5 fuel oil. The crude unit also is suitable for adaptation to process sour crude oil. Total petroleum storage capacity at the refinery is 750~~$1,~~000 barrels~~605, ~~which includes 275,~~000 ~~barrels~~was ofprovided ~~crude~~from ~~storage,~~an ~~395,000~~increase ~~barrels~~in ofaccounts ~~storage~~payable ~~for finished product sales~~ and ~~80,000~~accrued ~~barrels of product rundown storage~~liabilities. InAdditional ~~1989,~~uses ~~we recommissioned and tested the operations~~ of ~~the~~cash ~~refinery, which~~ during ~~that~~the period ~~processed~~included upadditions to ~~24,000 barrels of~~ oil ~~per day. Numerous modifications intended to achieve compliance with environmental regulations~~ and togas ~~facilitate~~properties ~~production of higher value products were then initiated. Most environmental compliance projects~~ and ~~a military specification jet fuel upgrade project at the~~ refinery ~~were~~property ~~completed~~and inequipment ~~1990.~~of ~~In 1989~~$2, ~~we also purchased a 16~~226,~~500-barrel per day vacuum distillation unit that was dismantled and moved to the refinery~~000. ~~Construction~~Cash offor ~~the~~operations ~~vacuum distillation unit on the refinery site~~ was ~~completed~~provided inby ~~1993.~~proceeds ~~The~~from ~~vacuum distillation unit was idle until mid-1998 when~~ the ~~expansion~~sale of, ~~and~~preferred ~~certain enhancements to~~stock, ~~the crude unit~~debentures, ~~vacuum distillation unit,~~ and ~~other~~notes ~~components~~payable of ~~the refinery were completed to enable the refinery to produce conventional and polymerized asphalt~~$5, ~~vacuum gas oil~~893,000 ~~diesel,~~ and ~~other~~from ~~products.~~an Weincrease ~~leased~~in ~~our~~short-term ~~crude~~debt ~~unit~~of ~~to Gold Line Refining Ltd.~~$1, ~~an independent refiner~~278,000. ~~from~~This ~~1990~~cash towas ~~March~~offset ~~20,~~by ~~1997~~cash ~~and~~used ~~terminated~~to ~~the~~decrease ~~lease~~notes inpayable ~~March 1997 as a result~~ of ~~default by Gold Line. Since the termination of the lease~~$586,000 ~~our employees have staffed the refinery~~ and ~~all~~to ~~operations~~increase ~~have~~other ~~been~~long-term ~~conducted~~assets ~~under the direct control~~ of ~~our management~~$466,000. InBusiness ~~February~~General ~~2001~~We weare ~~implemented~~ a ~~processing~~holding ~~agreement~~company ~~with~~that ~~Sargeant~~operates ~~Bulktainers~~two ~~Inc.~~major tobusiness ~~process~~divisions, ~~various~~a ~~types~~Refining ofDivision ~~crude~~and ~~oil~~an ~~feedstocks~~Oil ~~through~~and ~~the~~Gas ~~Lake~~Exploration ~~Charles~~and ~~refinery~~Production, ~~facilities~~or ~~for~~E&P ~~a fee~~Division. WeThrough ~~also~~our ~~have~~wholly anowned ~~asphalt~~subsidiaries ~~operation, which~~ we ~~operate in a joint venture with Sargeant. 17~~:

~~Gulf~~• ~~Coast~~refine ~~Petroleum Trading Inc. We own 100% of our Gulf Coast Petroleum Trading Inc. subsidiary, which we formed in 2000 to purchase and market refined~~ crude oil ~~products~~feedstocks ~~throughout the U.S. In September 2000, we signed an agreement with Sargeant~~ to ~~purchase~~produce ~~and~~jet ~~market products derived from their processing agreement with our American International Petroleum subsidiary. St. Marks Refinery We own 100% of our St. Marks Refinery subsidiary~~fuel, ~~which owns a refinery in St. Marks~~diesel, ~~Florida that we acquired in November 1998 for 1~~naphtha,~~500,000~~ ~~shares~~gas ofoils ~~our common stock. The refinery is located on the St. Marks River near Tallahassee, Florida~~ and ~~has~~fuel an operating capacity of 20,000 barrels per day. We have utilized the refinery only as a distribution center for asphalt products, but did not conduct operations at the refinery in 1999 and 2000 due to the high cost of crude oil ~~feedstock~~. However, we are considering reopening and utilizing St. Marks in 2001 and beyond. American International Marine, Inc. We own 100% of our American International Marine, Inc. subsidiary, which was formed in July 1998 to acquire a 1,750-ton asphalt barge. The barge has a capacity of 27,000 barrels and has been used to transport asphalt between the Lake Charles refinery and the asphalt terminal at St. Marks and to transport refined products for third parties. American International Petroleum Kazakhstan We own 100% of our American International Petroleum Kazakhstan subsidiary, which owns a 100% working interest in a 264,000 acre gas concession in Kazakhstan called Shagryly-Shomyshty, also known as License 1551, and a 70% working interest in a 4.7 million acre exploration block in western Kazakhstan, known as License 953.

~~License~~• ~~1551~~produce, process, and market conventional and technologically advanced polymerized asphalt, vacuum gas oil and other products at our refinery in Lake Charles, Louisiana utilizing low-cost, low-gravity, high sulfur crudes.

In• ~~February~~engage ~~1999, we were officially notified by the Kazakhstan government’s State Investment Committee that we had won the tender for the Shagyrly-Shomyshty gas field~~ in ~~western~~oil ~~Kazakhstan~~ and ~~entered into a license agreement with the Kazakhstan government for 100% ownership of the Shagyrly, a 30-year agreement with effect from August 31, 1999. Fifty-eight of the sixty-nine~~ gas ~~wells~~exploration ~~drilled by the Soviet Union in the 1960s to delineate the 264,000-acre gas field were tested~~ and ~~found to have commercial gas by the regional~~ development ~~authorities.~~in Inwestern ~~1994, the field was declared to have commercial gas reserves by the~~ Kazakhstan ~~Ministry of Oil and Gas Industry~~, ~~who~~where ~~recommended~~we ~~the~~own ~~field~~a ~~for~~70% ~~development.~~working ~~Our~~interest ~~drilling~~in and production development plan involves developing and maintaining daily gas production at 200 to 250 million cubic feet per day from the most productive part of the field. The development plan provides for the initial drilling of approximately 100 horizontal wells, each with a ~~horizontal extension of 1500 feet~~4.7 ~~Analysis of wells tested to date indicates that individual horizontally drilled wells could achieve an average production rate exceeding 6~~ million cubic feet per day. The ultimate field development proposal involves use of modular, movable production process/compression centers designed to filter, dehydrate, compress, and deliver a total of up to approximately 250 million cubic feet of gas per day. Ryder Scott Company, L.P., a Houston-based petroleum consulting firm, reviewed our horizontal drilling and reservoir development studies demonstrating significant recoverable gas reserves at Shagyrly and issued an opinion letter stating that they are in general agreement with the estimates and that the reserves were prepared in accordance with standard industry procedures. The studies included horizontal well recovery analyses for drainage of reservoir areas in the 640-1280 acre ~~range,~~exploration ~~revised~~block ~~operational plans for horizontal drilling,~~ and detailed analyses of prior gas well completions in the License 1551 area. A pilot development drilling program, originally scheduled for the second half of 2000, is tentatively scheduled for the second half of 2001 to verify the horizontal drilling application pending the consummation of a ~~related~~100% ~~gas~~working ~~sales~~interest contract. We expected to conclude a gas sales contract with Gazprom and/or other gas purchasers before the end of the first half of 2001 for the sale of Shagyrly gas, as well as the sale or transport of other gas we may want to market, however political and corporate reorganizations related to Gazprom have delayed completion of a contract. There can be no assurances we will be successful in ~~this endeavor. Upon execution of this contract and successful completion of the pilot program, we would expect to have~~ a ~~significant amount of proved gas reserves. Our strategy includes developing shallow gas reserves in Shagyrly~~264,000 ~~purchasing~~acre ~~and transporting third party natural~~ gas ~~pursuant to our gas sales contracts, and diversified pursuit of~~ field ~~development opportunities in other selected countries and basins where perceived geological and political risks are acceptable~~. 18

~~License~~We ~~953~~also are seeking other domestic and international oil and gas projects. We were organized on April 1, 1929 under the laws of the State of Nevada under the name Pioneer Mines Operating Company. Our name was changed to American International Petroleum Corporation in 1982. American International Refinery, Inc. Our American International Refinery Inc. subsidiary, owns a 30,000 barrel per day refinery in Lake Charles, Louisiana it acquired in July 1988, 25 acres of vacant waterfront property adjacent to the refinery and another 45 acres of vacant land across the highway from the refinery. Most of the refinery’s feedstock and refined products are handled through the refinery’s barge dock at the river. The refinery is located on 30 acres of land bordering the Calcasieu River, which connects with the Port of Lake Charles, the Lake Charles Ship Channel and the Intercoastal Waterway. The main unit of the refinery is the crude distillation tower, or crude unit, which is capable of producing light and heavy naphtha, kerosene for jet fuel, #2 diesel, vacuum gas oil and reduced crude oil sold as special #5 fuel oil. The crude unit also is suitable for adaptation to process sour crude oil. Total petroleum storage capacity at the refinery is 750,000 barrels, which includes 275,000 barrels of crude storage, 395,000 barrels of storage for finished product sales and 80,000 barrels of product rundown storage. We leased our crude unit to Gold Line Refining Ltd., an independent refiner, from 1990 to March 20, 1997 and terminated the lease in March 1997 as a result of default by Gold Line. Since the termination of the lease, our employees have staffed the refinery and all operations have been conducted under the direct control of our management. On occasion, we have operated the crude unit and the vacuum unit to process crude oil for our own account and for the account of others; however, both units have been idle since July 2001. American International Asphalt, Inc. Our American International Asphalt, Inc. subsidiary is engaged in the production and retail marketing of conventional and polymer-modified asphalt for highway paving and roofing applications in the United States, primarily in the Gulf Coast. Its asphalt facilities are located in Lake Charles, Louisiana and St. Marks, Florida and includes an aggregate of 342,000 barrels (approximately 62,000 tons) of asphalt storage tank capacity. AIA has been in the asphalt business since 1998 (all asphalt operations prior to 2002 were provided by AIA’s refining affiliate American International Refinery, Inc.). Gulf Coast Petroleum Trading Inc. Our Gulf Coast Petroleum Trading Inc. subsidiary was organized in 2000 to purchase and market refined crude oil products throughout the U.S. 23

InSt. ~~May~~Marks ~~1997,~~Refinery ~~our~~Our ~~American~~St. ~~International~~Marks ~~Petroleum~~Refinery ~~Kazakhstan~~ subsidiary ~~entered~~owns ~~into~~a anrefinery ~~agreement~~in ~~with~~St. ~~MED~~Marks, ~~Shipping and Trading S.A.~~Florida, alocated ~~Liberian~~on ~~corporation~~the ~~with~~St. ~~offices~~Marks inRiver ~~Frankfurt,~~near ~~Germany~~Tallahassee, toFlorida. ~~acquire~~We ~~70%~~acquired of the ~~stock~~refinery ofin ~~MED~~November ~~Shipping~~1998 ~~Usturt~~for ~~Petroleum Ltd.~~1,500,000 ashares ~~Kazakhstan~~of ~~corporation~~our ~~which~~common ~~owns~~stock. ~~100%~~We ofhave utilized the ~~working~~refinery ~~interest~~only inas a ~~Kazakhstan~~distribution ~~oil~~center ~~and~~for ~~gas~~asphalt ~~concession~~products, ~~called~~but ~~License~~have ~~953.~~not ~~The~~conducted ~~concession~~operations isat ~~located~~the ~~approximately~~refinery ~~125~~since ~~kilometers~~1998 ~~from~~due to the ~~Chevron~~high ~~Corporation’s~~cost ~~multi-billion-barrel~~of ~~Tengiz~~crude ~~Oil~~oil ~~field~~feedstock ~~near~~and ~~the~~lack ~~Caspian~~of ~~Sea~~capital inresources. ~~the~~American ~~North~~International ~~Usturt~~Marine, ~~Basin~~Inc. ~~The~~Our ~~definitive~~American ~~agreement~~International ~~under~~Marine, ~~which~~Inc. wesubsidiary, ~~explore~~which ~~and~~was ~~evaluate~~organized ~~hydrocarbon reserves~~ in ~~the~~July ~~license~~1998 ~~area~~to ~~provides~~acquire ~~for the payment of~~ a ~~commercial~~1,750-ton ~~bonus~~asphalt ~~of 0~~barge.5% ofThe ~~reserve~~barge ~~value,~~has a ~~subscription~~capacity ~~bonus~~ of ~~$975~~27,000, barrels and ~~grants~~has usbeen ~~the~~used ~~exclusive right~~ to atransport ~~production~~our ~~license~~own ~~upon~~asphalt ~~commercial discovery. The term of the license is five years~~ and ~~may~~to betransport ~~extended~~refined products for anthird ~~additional 4 years~~parties. ~~The~~American ~~five-year~~International ~~minimum~~Petroleum ~~work~~Kazakhstan ~~program~~Our ~~required~~American byInternational ~~the~~Petroleum ~~license~~Kazakhstan subsidiary, which ~~was~~owns ~~subsequently~~a ~~amended,~~100% ~~called~~working ~~for~~interest usin toa ~~acquire and process 3~~264,000 ~~kilometers~~acre ofgas ~~new~~concession ~~seismic~~in ~~data,~~Kazakhstan ~~reprocess~~called ~~500~~Shagyrly-Shomyshty, ~~kilometers~~also ofknown ~~existing~~as ~~seismic~~License ~~data~~1551, and a ~~minimum~~70% ofworking ~~6,000~~interest ~~linear~~in ~~meters~~a of4.7 ~~exploratory~~million ~~drilling.~~acre ~~Initial~~exploration ~~production~~block upin towestern ~~650~~Kazakhstan,~~000~~ ~~barrels~~known isas ~~exempt~~License ~~from~~953. ~~royalty,~~License ~~which~~1551 ~~otherwise~~In ~~ranges~~February ~~between~~1999, 6%we ~~and~~were ~~26%,~~officially tonotified beby ~~negotiated~~the inKazakhstan ~~conjunction~~government’s ~~with~~State aInvestment ~~production~~Committee ~~agreement~~that ~~with~~we had won the ~~government.~~tender ~~Income~~for ~~tax~~the ~~has~~Shagyrly-Shomyshty ~~been~~gas ~~set~~field atin ~~30%~~western Kazakhstan and ~~social~~entered ~~program~~into ~~payments~~a atlicense ~~$200,000~~agreement ~~annually~~with ~~during~~the ~~exploration.~~Kazakhstan ~~The~~government ~~social~~for ~~program~~100% ~~contribution~~ownership ~~required~~of in the ~~Kazakhstan~~Shagyrly, ~~Agreement~~a is30-year ~~not~~agreement ~~specific~~with aseffect tofrom ~~any~~August ~~one~~31, ~~program~~1999. ~~This~~Fifty-eight ~~contribution~~of ~~concept~~the issixty-nine ~~common~~gas towells ~~most~~drilled ~~contracts~~by ~~and~~ the ~~amount~~Soviet isUnion ~~determined~~in at the ~~time~~1960s ofto ~~negotiating~~delineate the ~~respective~~264,000-acre ~~contracts~~gas onfield awere ~~case~~tested byand ~~case~~found ~~basis.~~to We have ~~completed~~commercial ~~the~~gas ~~acquisition~~by ofthe ~~13,500~~regional ~~kilometers~~development ofauthorities. ~~new~~In 2D1994, ~~seismic~~the ~~data~~field ~~and~~was ~~reprocessed~~declared ~~about~~to ~~1,200~~have ~~kilometers~~commercial ofgas ~~vintage~~reserves 2Dby ~~seismic~~the ~~data~~Kazakhstan ~~over~~Ministry ~~the~~of ~~license~~Oil ~~area.~~and WeGas ~~drilled~~Industry, ~~one~~who ofrecommended the ~~gas~~field ~~bearing~~for ~~Eocene~~development. ~~structures~~Our indrilling ~~December~~and ~~1998~~production ~~and~~development aplan ~~second~~involves ~~Eocene~~developing ~~prospect~~and inmaintaining ~~October~~daily ~~1999.~~gas ~~Additional~~production ~~flow~~at ~~testing~~200 onto ~~the~~250 ~~1998~~million ~~well~~cubic ~~was~~feet ~~conducted~~per inday ~~1999,~~from ~~but~~the ~~only~~most ~~non-commercial~~productive ~~rates~~part of ~~gas~~the ~~were measured~~field. The ~~1999~~development ~~well~~plan ~~was~~provides ~~evaluated~~for ~~using~~the ~~electric~~initial ~~logging~~drilling ~~techniques~~of ~~and~~approximately ~~determined~~100 ~~non-commercial.~~horizontal Atwells, ~~the~~each ~~time~~with ~~the~~a ~~concession~~horizontal ~~was~~extension ~~acquired,~~of a1500 ~~preliminary~~feet. ~~evaluation~~Analysis ~~indicated~~of ~~potential~~wells ~~recoverable~~tested ~~reserves~~to ~~from~~date 12indicates ~~structures~~that ofindividual ~~possible~~horizontally ~~oil~~drilled ~~bearing~~wells ~~Jurassic~~could ~~Age~~achieve ~~sandstones~~an ~~and~~average 8production ~~structures~~rate ofexceeding ~~gas~~6 ~~bearing~~million ~~Eocene~~cubic ~~Age~~feet ~~sandstones~~per day. AsThe aultimate ~~result~~field ofdevelopment ~~further~~proposal ~~study~~involves use of ~~data~~modular, ~~acquired~~movable ~~over~~production ~~the~~process/compression ~~course~~centers ofdesigned ~~the~~to ~~last~~filter, ~~two~~dehydrate, ~~years~~compress, and ~~the~~deliver ~~drilling~~a ~~results~~total ~~stated~~of ~~above,~~up ~~the~~to ~~prior~~approximately ~~assessment~~250 ofmillion ~~reserve~~cubic ~~potential~~feet of ~~the~~gas ~~evaluated~~per ~~structures~~day. ~~was~~Ryder ~~significantly~~Scott ~~reduced.~~Company, ~~However~~L.P., ~~we believe it continues to be~~ a ~~viable~~Houston-based ~~prospect~~petroleum ~~because~~consulting ~~License~~firm, ~~953~~reviewed isour ~~known~~horizontal todrilling ~~contain~~and ~~other~~reservoir ~~geological~~development ~~structures~~studies ~~with~~demonstrating ~~unevaluated~~significant ~~geological~~recoverable ~~potential,~~gas wereserves ~~currently~~at ~~intend~~Shagyrly toand ~~have~~issued ~~the~~an ~~required~~opinion ~~minimum~~letter ~~work~~stating ~~program~~that ~~completed~~they are in ~~accordance~~general agreement with the ~~contract.~~estimates ~~In March 2001, we completed the re-entry~~ and ~~testing~~that of the ~~Begesh~~reserves ~~No.~~were 1prepared ~~oil~~in ~~well~~accordance onwith ~~License~~standard ~~953~~industry inprocedures. ~~Kazakhstan~~The ~~and~~studies ~~concluded~~included ~~that~~horizontal ~~the~~ well’s ~~upper~~recovery ~~Jurassic~~analyses ~~zones~~for ~~were~~drainage ~~not capable~~ of ~~producing~~reservoir ~~economic~~areas ~~quantities~~in ofthe ~~crude~~640-1280 ~~oil.~~acre ~~At this time~~range, werevised ~~believe~~operational weplans ~~have~~for ~~sufficiently~~horizontal ~~tested~~drilling, ~~the Jurassic~~ and ~~Eocene~~detailed ~~structures~~analyses ~~present~~of inprior ~~License~~gas ~~953,~~well ~~which~~completions ~~were~~in the ~~most~~License ~~likely~~1551 ~~candidates~~area. ~~for~~A ~~recoverable~~pilot ~~oil~~development ~~reserves~~drilling ~~from~~program ~~reasonably~~is ~~shallow~~scheduled ~~levels.~~to ~~After~~be ~~extensive~~implemented ~~testing~~to ~~and~~verify ~~geological~~the ~~and~~horizontal ~~geophysical~~drilling ~~research~~application ~~and~~pending ~~study,~~the weconsummation ~~believe that any significant volumes~~ of ~~economically~~a ~~recoverable~~related ~~oil and~~ gas ~~will~~sales becontract. ~~found~~We ~~in the deep, untested, carboniferous structures, which~~ are ~~estimated~~working to ~~equate~~conclude toa ~~approximately~~gas ~~40%~~sales ofcontract ~~the~~with ~~total~~one ~~unevaluated~~or ~~acreage~~more ~~remaining~~gas onpurchasers ~~License~~for ~~953.~~the ~~The~~sale ~~total~~of ~~costs~~Shagyrly ~~recorded~~gas, ~~for~~as ~~License~~well ~~953~~as ~~equal~~the ~~$26.9~~sale ~~million,~~or ~~including~~transport ~~identifiable~~of ~~seismic~~other ~~costs~~gas ofwe ~~approximately~~may $6want ~~million~~to market, ~~which~~although we ~~believe~~cannot ~~has~~assume athat ~~market~~we ~~value~~will ~~which~~be ~~exceeds~~successful ~~its~~in ~~cost~~this endeavor. ~~Since~~Our westrategy ~~have~~includes ~~evaluated~~developing ~~60%~~shallow ofgas ~~the~~reserves ~~License~~in ~~acreage~~Shagyrly, ~~without~~purchasing ~~identifying~~and ~~any~~transporting ~~related~~third ~~proven~~party ~~oil~~natural ~~and/or~~ gas ~~reserves,~~pursuant weto ~~believe~~our itgas issales ~~appropriate~~contracts, toand ~~impair~~diversified ~~60%~~pursuit of ~~the~~field ~~non-seismic~~development ~~property~~opportunities ~~costs,~~in orother ~~$12,546,000,~~selected ~~which~~countries ~~impairment~~and isbasins ~~reflected~~where inperceived ~~our~~geological ~~financial~~and ~~statements~~political ~~for~~risks ~~the~~are ~~year~~acceptable. ~~ended~~License ~~December~~953 31In May 1997, ~~2000.~~our American International Petroleum ~~Corporation~~Kazakhstan ~~Holding,~~subsidiary ~~Inc.~~entered ~~Our~~into ~~American~~an ~~International~~agreement ~~Petroleum~~with ~~Corporation~~MED ~~Holding,~~Shipping ~~Inc~~and Trading S.A., ~~subsidiary~~a ~~was~~Liberian ~~formed~~corporation with offices in ~~August~~Frankfurt, ~~1998~~Germany, to ~~hold~~acquire 2570% of the ~~outstanding~~stock ~~shares~~ of ~~Zao~~MED ~~Nafta,~~Shipping aUsturt ~~Russian~~Petroleum ~~closed-stock company~~Ltd., ~~which we received as~~ a ~~default~~Kazakhstan ~~payment~~corporation inwhich ~~1999.~~owns A100% ~~“closed~~of ~~stock~~the ~~company”~~working isinterest in a ~~company~~Kazakhstan ~~which~~oil ~~has~~and ~~its~~gas ~~equity~~concession ~~ownership~~called ~~measured~~License ~~in registered shares~~953. The ~~shares~~concession ~~are~~is ~~not~~located ~~publicly~~approximately ~~traded~~125 orkilometers ~~readily~~from ~~available~~the ~~for~~Chevron ~~sale~~Corporation’s tomulti-billion-barrel ~~another~~Tengiz ~~party~~Oil ~~without~~field ~~first~~near ~~offering~~the ~~other~~Caspian ~~shareholders~~Sea ~~proportional participation~~ in the ~~purchase~~North ofUsturt ~~the shares to be sold~~Basin. InThe ~~March~~definitive ~~1998, we signed an~~ agreement ~~with~~under ~~Zao~~which ~~Nafta~~we ~~that~~explore ~~granted~~and usevaluate ahydrocarbon ~~90-day~~reserves ~~option to acquire a 75% working interest~~ in athe ~~joint~~license ~~venture~~area provides for the ~~development~~payment of 17a ~~oil~~commercial ~~and~~bonus ~~gas~~of ~~licenses~~0.5% inof ~~the~~reserve ~~Samara~~value, ~~and~~a ~~Saratov~~subscription ~~regions~~bonus of ~~European Russia~~$975, ~~covering approximately 877,~~000, ~~acres.~~and ~~During~~grants us the ~~course~~exclusive ofright ~~our~~to ~~due~~a ~~diligence~~production ~~investigation,~~license weupon ~~were~~commercial ~~unable~~discovery. toThe ~~reach~~term anof ~~agreement with~~ the ~~owner~~license ofis ~~Zao~~five ~~Nafta~~years ~~over~~and ~~who~~may ~~would~~be ~~control~~extended ~~and~~for ~~manage~~an ~~development~~additional of4 ~~the acquired fields~~years. AsThe afive-year ~~result,~~minimum wework ~~informed~~program ~~the~~required ~~owner~~by ~~that we would not pursue~~ the ~~purchase~~license, ~~and~~which ~~requested~~was asubsequently ~~refund of the $300~~amended,~~000~~ ~~deposit~~ called for inus ~~the~~to ~~option.~~acquire ~~When~~and ~~the~~process ~~owner~~3,000 ~~did~~kilometers ~~not~~of ~~pay~~new ~~the~~seismic ~~refund~~data, wereprocess ~~exercised~~500 ~~our~~kilometers ~~right~~of ~~under~~existing ~~the~~seismic ~~option~~data, toand ~~demand~~a ~~25%~~minimum of ~~the~~6,000 ~~outstanding~~linear ~~shares~~meters of ~~Zao~~exploratory ~~Nafta from the owner~~drilling. ~~The~~Initial ~~Zao~~production ~~Nafta~~up ~~shares~~to ~~may~~650,000 bebarrels ~~sold~~is orexempt ~~traded~~from ~~in private commercial transactions~~royalty, aswhich ~~they~~otherwise ~~are~~ranges ~~not~~between ~~listed~~6% orand ~~traded~~26%, ~~on any organized exchange. The shares have been delivered~~ to usbe ~~and~~negotiated wein ~~will~~conjunction ~~hold~~with ~~them until~~ a ~~decision~~production isagreement ~~made~~with onthe ~~how or if to proceed~~government. WeIncome ~~continue~~tax tohas ~~consider~~been ~~various~~set ~~alternatives~~at ~~including~~30% ~~the~~and ~~sale~~social orprogram ~~barter~~payments ofat ~~the~~$200,000 ~~Zao~~annually ~~Nafta~~during ~~shares to acquire petroleum interests in the Samara region of Russia~~exploration. 1924

~~Competition~~The ~~Refining~~social ~~and~~program ~~Asphalt~~contribution ~~The~~required ~~extensive~~in ~~development~~the ofKazakhstan ~~the~~Agreement ~~United~~is ~~States~~not ~~Gulf~~specific ~~Coast~~as ~~Offshore~~to ~~deep-water~~any ~~drilling~~one program. ~~has~~This ~~created~~contribution anconcept ~~abundance of natural gas liquids. Condensate~~ is ancommon ~~ideal~~to ~~feedstock~~most ~~for~~contracts ~~our~~and ~~atmospheric~~the ~~distillation~~amount ~~unit.~~is Itdetermined isat ~~transported~~the bytime ~~barge,~~of ~~thereby~~negotiating ~~placing~~the usrespective incontracts on a ~~competitive~~case ~~position~~by ~~with~~case ~~all~~basis. ~~refineries,~~We ~~including~~have ~~major~~completed ~~integrated~~the ~~oil~~acquisition ~~companies.~~of ~~Condensate,~~805 ~~with~~kilometers ~~very~~of ~~minor~~new ~~amounts~~2D ofseismic ~~indigenous~~data ~~contaminates~~and ~~such~~reprocessed asabout ~~sulfur~~1,300 ~~produces~~kilometers ~~finished~~of ~~products~~vintage ~~because~~2D ~~downstream~~seismic ~~de-sulfurization~~data isover ~~not~~the ~~required~~license area. ~~The~~We ~~condensate~~drilled ~~refining~~one ~~and~~of the ~~asphalt~~gas ~~refining~~bearing ~~facilities,~~Eocene ~~the~~structures ~~atmospheric~~in ~~distillation~~December ~~unit~~1998 and ~~vacuum~~a ~~distillation~~second ~~unit,~~Eocene ~~respectively,~~prospect ~~are~~in ~~currently~~October ~~being~~1999. ~~split~~Additional ~~into~~flow ~~two~~testing ~~separate~~on ~~and~~the ~~distinct~~1998 ~~refining~~well ~~operations~~was ~~that~~conducted ~~will~~in ~~allow~~1999, usbut toonly ~~develop~~non-commercial ~~divergent~~rates ~~profitable~~of ~~businesses~~gas were measured. The ~~resultant~~1999 ~~product~~well ~~line~~was ~~will~~evaluated ~~include~~using ~~high~~electric ~~and~~logging ~~low~~techniques ~~sulfur naphtha, kerosene, diesel~~ and ~~gas~~determined ~~oil~~non-commercial. InAt ~~addition,~~ the ~~refinery~~time ~~will~~the ~~produce~~concession ~~finished~~was ~~jet fuel~~acquired, ~~pipeline~~a ~~grade~~preliminary #2seismic ~~diesel~~evaluation ~~fuel~~indicated ~~and~~potential ~~multi-grades~~recoverable ofreserves ~~finished~~from ~~polymer~~12 ~~modified,~~structures ~~performance~~of ~~grade~~possible ~~asphalts.~~oil ~~During~~bearing ~~1999~~Jurassic ~~and~~Age ~~continuing~~sandstones ~~into~~and ~~2000,~~8 ~~most~~structures ~~State Departments~~ of ~~Transportation~~gas ~~converted~~bearing toEocene ~~Strategic~~Age ~~Highway Research Program performance grade asphalt specifications~~sandstones. As a result, ~~the number~~ of ~~asphalt~~further ~~competitors~~study ~~continues~~of todata ~~decline.~~acquired Inover the ~~past~~course ~~year,~~of ~~several~~the ~~major~~last ~~oil~~two ~~companies~~years, ~~have announced mergers~~ and ~~formed~~the ~~joint~~drilling ~~operation~~results ~~spin-off~~stated ~~companies~~above, inthe aprior ~~move~~assessment toof ~~consolidate~~reserve ~~resources,~~potential ~~reduce~~of ~~redundant~~the ~~operation,~~evaluated ~~and~~structures ~~increase~~was ~~efficiency~~significantly reduced. ~~This~~However, ~~has~~we ~~resulted~~believe init acontinues ~~supply/demand shift that is favorable~~ to ~~our~~be ~~business. As~~ a ~~result~~viable ofprospect ~~these~~because ~~consolidations,~~License ~~the~~953 ~~number~~is ofknown ~~major~~to ~~oil~~contain ~~company~~other ~~asphalt~~geological ~~refiner/suppliers~~structures ~~has~~with ~~been~~unevaluated ~~reduced~~geological ~~by almost 70% over the past three years~~potential. ~~Last~~In ~~year~~March 2001, ~~Exxon~~we ~~made~~completed the ~~strategic~~re-entry ~~decision~~and totesting ~~withdraw~~of ~~from~~ the ~~Texas~~Begesh ~~asphalt market based in Baytown (Houston), Texas~~No. It1 ~~has~~oil ~~built~~well aon ~~coker~~License ~~unit~~953 toin ~~convert~~Kazakhstan ~~asphalt to gasoline~~ and ~~heating~~concluded ~~oil.~~that ~~Exxon~~the ~~has~~well’s ~~been~~upper ~~one~~Jurassic ofzones ~~our~~were ~~major~~not ~~competitors~~capable inof ~~eastern~~producing ~~Texas~~economic ~~over~~quantities ~~the~~of ~~past~~crude ~~several years~~oil. AAt ~~major~~this ~~consolidation~~time, ~~involving~~we ~~Marathon~~believe ~~Petroleum~~we ~~and~~have ~~Ashland~~sufficiently ~~Oil~~tested ~~during~~the ~~1999~~Jurassic ~~has~~and ~~created~~Eocene ~~the~~structures ~~largest~~present ~~downstream~~in ~~asphalt~~License ~~marketing~~953, ~~company~~which inwere the ~~United~~most ~~States.~~likely ~~Marathon~~candidates ~~Ashland~~for ~~Petroleum~~recoverable ~~recently~~oil ~~upgraded~~reserves ~~their~~from ~~Garyville,~~reasonably ~~Louisiana~~shallow ~~asphalt~~levels. ~~rack~~After atextensive ~~great~~testing ~~expense~~ and ~~has~~geological ~~subsequently~~and ~~become~~geophysical ~~very~~research ~~competitive in eastern Louisiana~~ and ~~western Mississippi. However~~study, ~~the~~we ~~geographic~~believe ~~location~~that ofany ~~our~~significant ~~refinery~~volumes inof ~~Lake~~economically ~~Charles,~~recoverable ~~Louisiana~~oil ~~gives~~and usgas amay ~~distinct~~be ~~freight~~found ~~advantage over other asphalt suppliers~~ in the ~~area.~~deep, ~~Most~~untested, ofcarboniferous ~~our~~age ~~competition~~rocks. inThe ~~its~~carboniferous ~~planned~~is ~~asphalt~~present ~~manufacturing~~over ~~business~~approximately ~~will~~40% ~~come~~of ~~from~~the ~~those~~total ~~refiners~~unevaluated ~~who~~acreage doremaining ~~not~~on ~~have~~License ~~downstream~~953. ~~processing~~We ~~options~~received ~~such~~a asone-year ~~residual~~extension ~~coking~~on ~~capacity.~~the ~~The~~block ~~major~~to ~~competitor~~further inevaluate the ~~local~~carboniferous ~~truck~~prospectively ~~rack~~and ~~market~~to isidentify a ~~blending~~drillable ~~plant~~prospect ~~operation~~and ~~over~~plan 75to ~~miles~~soon ~~away.~~apply ~~The~~for ~~average~~a ~~distance~~three-year ~~from~~extension ~~our~~however, ~~refinery~~there tocan ~~the~~be ~~nearest~~no ~~competing~~assurance ~~truck~~that ~~rack~~such ~~asphalt-producing~~an ~~refinery~~extension iswill ~~over~~be ~~150 miles away~~granted. ~~One~~If ~~major~~it ~~market~~is ~~currently~~not, ~~under~~this ~~development~~license bywill ~~our~~be terminated. American International ~~Refinery~~Petroleum Corporation Holding, Inc. ~~subsidiary~~Our isAmerican ~~the~~International ~~greater~~Petroleum ~~East~~Corporation ~~Texas~~Holding, ~~asphalt area~~Inc. Wesubsidiary ~~have~~was ~~transportation~~formed ~~advantages over all competitors~~ in ~~the~~August ~~gulf~~1998 ~~coast~~to ~~area~~hold ~~except~~25% ~~one~~of ~~whose~~the ~~overall~~outstanding ~~cost~~shares ~~basis~~of isZao ~~higher~~Nafta, ~~than~~a ~~ours.~~Russian ~~Oil~~closed-stock ~~and Gas The oil and gas industry~~company, ~~including~~which ~~oil~~we ~~refining,~~received isas ~~highly~~a ~~competitive.~~default Wepayment ~~are~~ in ~~competition~~1999. ~~with~~A ~~numerous~~“closed ~~major~~stock ~~oil~~company” ~~and~~is ~~gas~~a ~~companies~~company ~~and~~which ~~large~~has ~~independent~~its ~~companies~~equity ~~for~~ownership ~~prospects,~~measured ~~skilled~~in ~~labor,~~registered ~~drilling~~shares. ~~contracts,~~The ~~equipment~~shares ~~and~~are ~~product~~not ~~sales~~publicly ~~contracts.~~traded ~~Many~~or ofreadily ~~these~~available ~~competitors~~for ~~have~~sale ~~greater~~to ~~resources~~another ~~than~~party dowithout ~~we.~~first ~~Revenues~~offering ~~generated~~other byshareholders ~~our~~proportional ~~oil~~participation ~~and~~in ~~gas operations and~~ the ~~carrying~~purchase ~~value~~ of ~~our~~the ~~oil~~shares ~~and~~to ~~gas~~be ~~properties~~sold. ~~are~~In ~~highly~~March ~~dependent~~1998, onwe ~~the~~signed ~~prices~~an ofagreement ~~oil~~with ~~and~~Zao ~~natural~~Nafta ~~gas. The price~~ that wegranted ~~receive~~us ~~for~~a ~~the~~90-day ~~oil~~option orto ~~natural~~acquire ~~gas~~a we75% ~~may~~working ~~produce~~interest isin ~~dependent~~a ~~upon~~joint ~~numerous~~venture ~~factors~~for ~~beyond our control,~~ the ~~exact~~development ~~effect~~ of ~~which~~17 ~~cannot~~oil beand ~~predicted.~~gas ~~These~~licenses ~~factors~~in ~~include (i)~~ the ~~quantity~~Samara and ~~quality~~Saratov regions of ~~the~~European ~~oil~~Russia, orcovering ~~gas~~approximately ~~produced~~877,000 ~~(ii)~~acres. During the ~~overall~~course ~~supply~~ of ~~domestic~~our ~~and~~due ~~foreign~~diligence ~~oil~~investigation, orwe ~~gas~~were ~~from~~unable ~~currently~~to ~~producing~~reach ~~and~~an ~~subsequently~~agreement ~~discovered~~with ~~fields, (iii)~~ the ~~extent~~owner of ~~importation~~Zao ofNafta ~~foreign~~over ~~oil~~who orwould ~~gas,~~control ~~(iv) the marketing~~ and ~~competitive~~manage ~~position~~development of ~~other~~the ~~fuels,~~acquired ~~including~~fields. ~~alternative~~As ~~fuels~~a result, aswe ~~well~~informed asthe ~~other~~owner ~~sources~~that ofwe ~~energy,~~would ~~(v)~~not pursue the ~~proximity,~~purchase ~~capacity~~ and ~~cost~~requested ofa ~~oil~~refund orof ~~gas~~the ~~pipelines~~$300,000 ~~and~~deposit ~~other~~called ~~facilities~~ for in the ~~transportation~~option. ofWhen ~~oil~~the orowner ~~gas,~~did ~~(vi)~~not pay the ~~regulation~~refund, ofwe ~~allowable~~exercised ~~production~~our byright ~~governmental~~under ~~authorities,~~the ~~(vii)~~option ~~the~~to ~~regulations~~demand 25% of the ~~Federal~~outstanding ~~Energy~~shares ~~Regulatory~~of ~~Commission~~Zao ~~governing~~Nafta from the ~~transportation~~owner. ~~and~~The ~~marketing~~Zao ofNafta ~~oil~~shares ~~and~~may ~~gas,~~be ~~and~~sold ~~(viii)~~or ~~international~~traded ~~political~~in ~~developments,~~private ~~including~~commercial ~~nationalization~~transactions, ofas ~~oil~~they ~~wells~~are ~~and~~not ~~political~~listed ~~unrest~~ or ~~upheaval.~~traded ~~All~~on ofany ~~the~~organized ~~aforementioned~~exchange. ~~factors,~~The ~~coupled~~shares ~~with~~have ~~our~~been ~~ability~~delivered ~~or inability~~ to ~~engage~~us inand ~~effective~~we ~~marketing~~will ~~strategies,~~hold ~~may~~them ~~affect~~until ~~the~~a ~~supply~~decision oris ~~demand~~made ~~for~~on ~~our~~how ~~oil,~~or ~~gas~~if ~~and~~to ~~other~~proceed. ~~products~~We ~~and,~~continue ~~thus,~~to ~~the~~consider ~~price~~various ~~attainable~~alternatives ~~for~~including ~~those~~the ~~products.~~sale ~~The~~or ~~Shagyrly~~barter ~~development~~of ~~has~~ the ~~usual~~Zao ~~geological,~~Nafta ~~mechanical~~shares ~~and~~to ~~competitive~~acquire ~~risks~~petroleum ~~associated~~interests ~~with~~in ~~development~~the ofSamara ~~oil~~region ~~and~~of ~~gas reservoirs~~Russia, ~~and~~although inwe ~~addition,~~have ~~bears~~no ~~additional~~assurance ~~risk~~that ~~unique~~we tocan ~~its~~be ~~location~~successful in aeither ~~former Soviet Union republic~~case. ~~The~~Competition ~~gas~~Refining ~~production~~and ~~from~~Asphalt ~~Shagyrly~~Divisions ~~will~~The ~~have~~State toDepartments beof ~~transferred~~Transportation tothroughout ~~markets~~the insoutheastern ~~Western~~part ~~Europe~~of ~~via~~the ~~Kaztransgaz~~United ~~and~~States, ~~Gazprom~~including ~~pipelines.~~all ~~Therefore~~ the ~~project~~states ~~bears~~that ~~political~~we ~~risks~~consider ofour ~~both Kazakhstan and Russia~~marketplace, ascontinue ~~well~~to asexpand ~~market~~the ~~risks~~percentage asof ~~Europe~~polymer ~~enters~~modified aasphalts ~~deregulated~~in ~~environment.~~the ~~Cost~~total mix of ~~transportation~~road asgrade ~~well~~asphalts aslaid ~~cost~~on oftheir ~~equipment~~various ~~and~~highways. ~~drilling~~This ~~and~~continuing ~~completion~~development ~~services,~~has ~~are~~been ~~subject~~very togood ~~escalation~~for ifus ~~oil~~as ~~and~~the ~~gas~~major ~~development~~oil ~~activities~~companies ~~escalate.~~continue ~~Employees~~their Aswithdrawal offrom ~~June~~his ~~21,~~complex ~~2001,~~business. ~~we,~~Our ~~together~~Lake ~~with~~Charles ~~our~~asphalt ~~subsidiaries,~~blending ~~employed~~facility 51currently ~~persons~~has onthe acapability ~~full-time~~to ~~basis,~~furnish ~~including~~the 13majority ~~persons~~of ~~who~~these ~~are~~polymer-modified ~~engaged~~products. inThe ~~management,~~facility ~~accounting~~is ~~and~~now ~~administrative~~gearing ~~functions~~up ~~for~~to ~~American~~produce ~~International~~several ~~Petroleum~~new ~~Corporation~~specialty ~~and~~products 33that ~~who~~ are ~~employed~~high bymargin ~~American~~with ~~International~~potential ~~Refinery,~~significant ~~Inc~~growth possibilities. onIn aaddition ~~full-time~~to ~~basis,~~the ~~including~~construction 14of ~~persons~~the ~~who~~Exxon ~~are~~coker ~~engaged~~ in ~~management and administrative functions~~Houston, ~~and~~which 5eliminated ~~persons~~Exxon ~~who~~Mobil ~~are~~from ~~employed~~the byasphalt ~~American~~business, ~~International~~Marathon Ashland Petroleum ~~Kazakhstan~~has inrecently ~~management~~commissioned ~~and~~a ~~administrative~~large ~~positions.~~coker ~~Two~~in ~~persons~~New ~~are~~Orleans ~~employed~~that bywe ~~St.~~expect ~~Marks~~will ~~Refinery,~~bring ~~Inc.,~~drastic ~~none~~supply ofchanges ~~which~~to ~~are~~the inentire ~~management and administration~~marketplace. WeMarathon ~~frequently~~will ~~engage~~move ~~the~~from ~~services~~a ofnet ~~consultants~~seller ~~who are experts~~ in ~~various~~the ~~phases~~wholesale ofasphalt ~~the~~market ~~oil~~to ~~and~~a ~~gas~~net ~~industry,~~buyer ~~such~~to assupply ~~petroleum~~their ~~engineers,~~vast ~~refinery~~downstream ~~engineers,~~retail ~~geologists~~rack ~~and geophysicists~~business. We ~~have~~plan noto ~~collective~~fill ~~bargaining~~a ~~agreements~~portion ~~and~~of ~~believe~~this ~~that~~void ~~relations~~upon ~~with~~resumption ~~our~~of ~~employees~~crude ~~are satisfactory~~processing. 2025

~~Financial~~Most ~~Information~~of ~~Relating~~our competition in our planned asphalt manufacturing business will come from those refiners who do not have downstream processing options such as residual coking capacity. The major competitor in the local truck rack market is a blending plant operation over 75 miles away. The average distance from our refinery to ~~Foreign~~the nearest competing truck rack asphalt-producing refinery is over 150 miles away. We have been successful over the past year developing the East Texas market. Our current volume in East Texas approaches fifty percent of our business. We have transportation advantages over all competitors in the gulf coast area except one whose overall cost basis is higher than ours. E &P Division The oil and ~~Domestic~~gas ~~Operations~~industry, including oil refining, is highly competitive. We are in competition with numerous major oil and ~~Export~~gas ~~Sales~~companies and large independent companies for prospects, skilled labor, drilling contracts, equipment and product sales contracts. Many of these competitors have greater resources than do we. Revenues generated by our oil and gas operations and the carrying value of our oil and gas properties are highly dependent on the prices of oil and natural gas. The ~~table~~price ~~below~~that ~~sets~~we ~~forth~~receive for the oil or natural gas we may produce is dependent upon numerous factors beyond our control, the exact effect of which cannot be predicted. These factors include (i) the quantity and quality of the oil or gas produced, (ii) the overall supply of domestic and foreign oil or gas from currently producing and subsequently discovered fields, (iii) the extent of importation of foreign oil or gas, (iv) the marketing and competitive position of other fuels, including alternative fuels, as well as other sources of energy, (v) the proximity, capacity and cost of oil or gas pipelines and other facilities for the ~~three~~transportation ~~months~~of ~~ended~~oil ~~March~~or gas, (vi) the regulation of allowable production by governmental authorities, (vii) the regulations of the Federal Energy Regulatory Commission governing the transportation and marketing of oil and gas, and (viii) international political developments, including nationalization of oil wells and political unrest or upheaval. All of the aforementioned factors, coupled with our ability or inability to engage in effective marketing strategies, may affect the supply or demand for our oil, gas and other products and, thus, the price attainable for those products. The Shagyrly development has the usual geological, mechanical and competitive risks associated with development of oil and gas reservoirs, and in addition, bears additional risk unique to its location in a former Soviet Union republic. The gas production from Shagyrly will have to be transferred to markets in Western Europe via Kaztransgaz and Gazprom pipelines. Therefore the project bears political risks of both Kazakhstan and Russia, as well as market risks as Europe enters a deregulated environment. Cost of transportation as well as cost of equipment and drilling and completion services, are subject to escalation if oil and gas development activities escalate. Employees As of December 31, 2001, we, together with our subsidiaries, employed 61 persons on a full-time basis, including 13 persons who are engaged in management, accounting and administrative functions for American International Petroleum Corporation and 41 who are employed by American International Refinery, Inc. on a full-time basis, including 16 persons who are engaged in management and administrative functions, and 4 persons who are employed by American International Petroleum Kazakhstan in management and administrative positions. Three persons are employed by St. Marks Refinery, Inc., one of which is in management and administration. We frequently engage the services of consultants who are experts in various phases of the oil and gas industry, such as petroleum engineers, refinery engineers, geologists and geophysicists. We have no collective bargaining agreements and believe that relations with our employees are satisfactory. Financial Information Relating to Foreign and Domestic Operations and Export Sales The table below sets forth, for each of the previous three fiscal years, the amounts of revenue, operating profit or loss and assets attributable to each of our geographical areas, and the amount of our export sales.

Sales to unaffiliated customers:	2001		2000		1999		1998
		2001			2000			1999
United States	$ 2,217,000		$ 3,108,670		$ 8,137,867		$ 11,394,009
Sales to unaffiliated customers:
Kazakhstan	—		—		—		—
United States		$	18,312,000		$	3,109,000		$	8,138,000
Sales or transfers between geographic areas:
Kazakhstan			—			—			—
United States	$ —		$ —		$ —		$ —
Sales or transfers between geographic areas:
Kazakhstan	—		—		—		—
United States			—			—			—
Operating profit or (loss):
Kazakhstan			—			—			—
United States	$ (259,000	)	$(5,694,253	)	$(4,978,963	)	$(2,820,758	)
Operating profit or (loss):
Kazakhstan	—		—		—		—
United States		$	(12,391,000	)	$	(5,694,000	)	$	4,979,000
Identifiable assets:
Kazakhstan			(10,671,000	)		—			—
United States	$ 32,149,000		$ 31,105,826		$ 33,877,437		$ 35,234,530
Identifiable assets:
Kazakhstan	$ 23,008,000		$ 21,138,161		$ 32,162,385		$ 22,677,073
United States		$	21,655,000		$	31,106,000		$	33,877,000
Export sales:
Kazakhstan		$	12,445,000		$	21,138,000		$	32,162,000
None
Export sales:
None

Insurance; Environmental Regulations Our operations are subject to all risks normally incident to (i) the refining and manufacturing of petroleum products; and (ii) oil and gas exploratory and drilling activities, including, but not limited to, blowouts, extreme weather conditions, pollution and fires. Any of these occurrences could result in damage to or destruction of oil and gas wells, related equipment and production facilities and may otherwise inflict damage to persons and property. We maintain comprehensive and general liability coverage, as is customary in the oil and gas industry and coverage against customary risks, although no assurance can be given that such coverage will be sufficient to cover all risks, be adequate in amount, or that any damages suffered will not be governed by exclusionary clauses, thereby rendering such coverage incomplete or non-existent to protect our interest in specific property. We are not fully covered for damages incurred as a consequence of environmental mishaps. We believe it is presently in compliance with government regulations and follows safety procedures that meet or exceed industry standards. Extensive national and/or local environmental laws and regulations in both the United States and Kazakhstan affect nearly all of our operations. These laws and regulations set various standards regulating certain aspects of health and environmental quality, provide for penalties and other liabilities for the violation of such standards and establish in certain circumstances obligations to remediate current and former facilities and off-site locations. There can be no assurance that we will not incur substantial financial obligations in connection with environmental compliance. We are occasionally subject to nonrecurring environmental costs. The annual cost incurred in connection with these assessments varies from year to year, depending upon our activities in that year. The costs of such environmental impact assessments were not material in 2000, and are not expected to be material in future years, however, there can be no assurance these costs will not be material. We are not aware of any other anticipated nonrecurring environmental costs. Kazakhstan has comprehensive environmental laws and regulations and has adopted the environmental standards set out by the World Bank organizations. Enforcement is administered through the Kazakhstan Ministry of Environment and related local state agencies. Our operations require a comprehensive environmental permit for all drilling and exploration activities. We have no currently outstanding or anticipated reclamation issues in the United State or abroad. 21

Marketing After satisfactorily completing the qualification requirements and asphalt facility inspection in 1999, our American International Refinery, Inc. subsidiary received approval from the Louisiana Department of Transportation Materials Inspection Division to have its paving asphalt products placed on the Division’s list of eligible suppliers. This enabled us to bid on state and federal highway projects in the State of Louisiana and provided an asphalt quality assurance endorsement for non-state and federal projects as well. We have maintained an aggressive posture in our efforts to secure asphalt sales agreements with Louisiana and Texas highway construction companies, both at highway bid lettings and through private conventional paving projects. In July of 1999, our Lake Charles refinery received full accreditation certification for its asphalt quality control and testing program from the American Association of State Highway and Transportation officials. This was followed in November 1999, by the awarding of the Louisiana approved supplier certification by the Louisiana Department of Transportation and Development, for us to self-certify our own asphalt products. The rapid escalation of crude oil prices, combined with a very slow reacting asphalt retail rack market across the country during 2000, created an unprofitable economic scenario for sales in 2000. As a result, we temporarily suspended operations at our St. Marks refinery to control overhead and manufacturing costs. We have mitigated this problem in the future by including escalation clauses in all of the new asphalt sales agreements, which allows the us to increase our contract sales price by 5% per quarter if feedstock prices increase to certain levels. We continually monitor the market conditions in the region and should general industry conditions change in future months, we will reconsider asphalt operations at St. Marks. In addition, we continue to investigate the possibility of establishing more truck rack retail locations outside the immediate area of its current facility. These market opportunities have the potential to increase our expansion into new profitable retail sales outlets at greater netback margins than can be achieved in the wholesale barge markets. The Transportation and Equity Act for the 21st Century authorizes $173 billion over six years (1998-2003) for construction and maintenance of federal highways. The six-state Gulf Coast market where we sell our conventional and polymerized asphalt products has been allocated more than $32 billion in federal funding under this Act, a 61% increase over the previous highway spending program. This Act is expected to provide a significant increase in the overall demand for asphalt in our markets. In addition, matching state Department of Transportation highway funds could increase the total spending for highway construction by another 10% — 50%. We are committed to continue an aggressive, expanding, retail market growth program across the Gulf Coast and into other various profitable geographic areas. R. E. Heidt Construction, Diamond B Construction, Davison Petroleum, and Gilchrist Construction accounted for 25%, 16%, 16% and 13% of our sales during 2000, respectively, and James Corporation, Davison Petroleum, R. E. Heidt Construction and O.S. Johnson accounted for 16%, 15%, 13% and 10% of our sales during 1999, respectively. Oil and Gas We have had no oil and gas sales since we sold our South American assets in February 1997. Prior to the sale, we had an agreement with Carbopetrol S.A. to sell all of its crude oil produced in Colombia. Payments were made in Colombian Pesos adjusted for expected exchange fluctuation. Prices were based on the price of local fuel oil and had an average price, net of transportation costs, of approximately $11.81 per barrel of oil in 1997. In Peru, our contract with PetroPeru provided for a flexible royalty rate based on the amount of production and world basket price for this contract area providing a net sales price to us of approximately 65% of the world basket price for the field, which, based on an average gross price of $16.53 per barrel of oil in 1997, which provided a net price to us of approximately $10.75 per barrel of oil. Sales of our crude oil to Carbopetrol S.A. in Colombia accounted for 29% of our 1997 revenues. Sales to Ecopetrol accounted for approximately 11% of our 1997 revenues. We are currently engaged in negotiations and discussions with Gazprom, the Russian gas transport company, and with other potential purchasers and transporters, respectively, for the transportation and/or purchase of our anticipated Shagryly gas production and other gas we may have available for sale. We expected that a U.S. Dollar or Eurodollar backed contract would be concluded before the end of the first half of 2001. However, political and corporate reorganizations related to Gazprom have delayed the completion of a contract. Sources and Availability of Raw Materials In July 2000, we formed a joint venture with Sargeant Bulktainers Inc., a division of Sargeant Marine Inc., which owns and operates one of the largest fleet of asphalt ships in the world today. Their role in the joint venture is to provide it with asphaltic crude oil feedstocks and bulk asphalt supply. Our role in the joint venture is to provide asphalt storage, blending and retail rack facilities, and marketing services to the joint venture. Sargeant has term contracts to ship asphalt products for Pemex (Mexico) and P.D.V.S.A. (Venezuela). Sargeant processes asphaltic crude oil in various locations in the U.S. gulf coast, including our Lake Charles refinery, and transports and trades asphalt around the world. Sargeant also has crude oil purchase agreements with Pemex to supply it with heavy crude oil feedstocks for processing through our refinery, which will produce the asphalts necessary to service the joint venture’s current backlog of asphalt orders and its future requirements as well, although this is not a certainty at this time. 22

Our Lake Charles refinery requires sour asphaltic crudes as a feedstock for its vacuum distillation unit to produce performance grade asphalts, which are generally in available supply within the western hemisphere. Primary sources of feedstock include Mexico, Venezuela, Colombia, Ecuador, Canada, and the wholesale asphalt markets in the U.S. Crude oil feedstocks for roofing asphalt can be obtained from Saudi Arabia, Oman, U.S. Gulf offshore, Texas and Louisiana sweet lights. Many crudes can be blended into the primary base crudes. However, it is most likely that we will process crude oils for third parties and, consequently, will not need to provide our own raw materials for processing. Oil and Gas Acreage and Wells Gross acreage presented below represents the total acreage in which we owned a working interest on March 31, 2001 and net acreage represents the sum of the fractional working interests we owned in such acreage.

	GrossDevelopedAcreage	GrossUndevelopedAcreage	NetDevelopedAcreage	NetUndevelopedAcreage
Kazakhstan
License 953	—	4,734,097	—	3,313,868
License 1551	263,853	4,997,950	263,853	3,577,721

The table below indicates our gross and net oil and gas wells as of December 31, 2000. Gross wells represents the total wells in which we owned a working interest, and net wells represents the sum of the fractional working interests we own in such wells.

	Productive Wells
		Total			Oil			Gas
	Gross		Net	Gross		Net	Gross		Net
Kazakhstan	—		—	—		—	—		—

Oil and Gas Production We have had no oil and gas production or oil and gas sales since February 1997 when we sold our South American subsidiaries. Reserves We have had no proved reserves and future net revenues from oil and gas interests we owned since February 1997, when we sold these assets. Consequently, we have not filed any reports of estimated total proved net oil or gas reserves since the beginning of our last fiscal year. Drilling Activity We sold all of our oil and gas producing properties in February 1997 and have not yet implemented production operations in Kazakhstan. The following table sets forth the gross and net exploratory and development wells that were completed, capped or abandoned in which we participated during the quarter and years indicated. 23

	Three months endedMarch 31, 2001		2000			1999			1998
	Gross	Net	Gross	Net		Gross	Net		Gross	Net
Exploratory Wells:
Kazakhstan
Oil	—	—	1		.7	—	—		—	—
Gas	—	—	—	—		—	—		—	—
Dry	—	—	—	—		2	1	.4	—	—
Total	—	—	1		.7	2	1	.4	—	—
Development Wells:
Kazakhstan	—	—	—	—		—	—		—	—
South America	—	—	—	—		—	—		—	—
Total	—	—	—	—		—	—		—	—
Total	—	—	1		.7	2	1	.4	—	—

Facilities We have leased approximately 10,500 square feet of office space in Houston, Texas at a monthly rental of $17,929, which lease expires on December 12, 2003. This space comprises our principal executive office. We also have a lease for approximately 4,800 square feet of office space at 444 Madison Avenue, New York, N.Y. 10022. The space was leased for a period of seven years at a monthly rental rate of $19,600 and expires on December 31, 2005. Two-thirds of this space is sublet for $152,472 per year through the end of our lease in New York. In addition, we own 100 acres of land in Lake Charles, Louisiana where our refinery is located. In addition to the structures and equipment comprising our refining facility, our refinery assets include an approximately a 4,400 square foot office building, a new 2,200 square foot asphalt plant office, a laboratory, and two metal building structures serving as work shops, maintenance and storage facilities with an aggregate square footage of approximately 4,300 square feet. We also own approximately 68 acres of vacant land adjacent to the St. Marks Refinery in Florida. Legal Proceedings In 1998, Neste Trifinery filed suit in a Harris County District Court against us and our wholly owned subsidiary, American International Refinery, Inc. (Neste Trifinery v. American International Refinery, Inc., et al, Case No. 98-11453; in the 269th Judicial District; in and For Harris County, Texas). Neste has asserted claims for recovery of compensatory and punitive damages based on the following theories of recovery; (1) breach of contract, (2) disclosure of confidential information; and (3) tortuous interference with existing contractual relations. Generally, Neste has alleged that in connection with the due diligence we conducted of the business of Neste, we had access to confidential or trade secret information and that we have exploited that information, in breach of an executed confidentiality agreement, to the detriment of Neste. Neste seeks the recovery of $20,000,000 in compensatory damages and an undisclosed sum in connection with its claim for the recovery of punitive damages. In addition to seeking the recovery of compensatory and punitive damages, Neste sought injunctive relief. Specifically, Neste sought to enjoin us from: (1) offering employment positions to the key employees of Neste; (2) contacting the suppliers, joint venture partners and customers of Neste in the pursuit of business opportunities; (3) interfering with the contractual relationship existing between Neste and St. Marks Refinery, Inc.; and (4) disclosing or using any confidential information obtained during the due diligence process to the detriment of Neste. We have asserted to a general denial to the allegations asserted by Neste. We also moved the district court to refer the matter to arbitration, as provided for in the confidentiality agreement, and to stay the pending litigation. On March 27, 1999, the district court referred the matter to arbitration, as requested by us, and stayed litigation. However, the parties have recently agreed to submit this matter to trial, which is now set for November 26, 2001. We are vigorously defending this matter. 24

Management The following table sets forth information concerning the Company’s executive officers and directors.

Name	Age	Position(s)	Year FirstBecame a Director or Officer
George N. Faris	60	Chairman of the Board and Acting Chief Executive Officer	1981
William R. Smart	80	Director	1987
Daniel Y. Kim	76	Director	1987
Donald G. Rynne	78	Director	1992
John H. Kelly	61	Director	1999
Denis J. Fitzpatrick	56	Director, Acting President, Secretary and Chief Financial Officer	1994
William L. Tracy	53	Treasurer and Controller	1992

Dr. George N. Faris has served as Chairman of our Board of Directors 1981. He has served as Acting Chief Executive Officer since July 7, 2000. He served as Chief Executive Officer from 1981 to December 1999. Dr. Faris was the founder of ICAT, an international engineering and construction company, and served as its President from ICAT’s inception in 1972 until October 1985. Prior to 1972, Dr. Faris was the President and Chairman of the Board of Directors of Donbar Development Corporation, a company engaged in the patent development of rotary heat exchangers, devices which exchange heat from medium to medium and on which Dr. Faris was granted a number of patents. Dr. Faris received a Ph.D. in Mechanical Engineering from Purdue University in 1968. William R. Smart has served as a member of our Board of Directors since June 1987. Since November 1, 1983, Mr. Smart has been Senior Vice President of Cambridge Strategic Management Group, a management consulting firm. Mr. Smart was Chairman of the Board of Directors of Electronic Associates, Inc., a manufacturer of electronic equipment, from May 1984 until May 1992. He has served on the Board of Directors of Apollo Computer Company and Executone Information Systems, Inc. Mr. Smart is presently a director of National Datacomputer Company and Hollingsworth and Voss Company. Mr. Smart received a B.S. degree in Electrical Engineering from Princeton University in 1941. Dr. Daniel Y. Kim has served as a member of our Board of Directors since July 1987. Dr. Kim is a Registered Professional Geophysicist in California and Colorado. From 1981 until 1984, Dr. Kim was President and Chief Executive Officer of Kim Tech, Inc., a research and development company. In 1984, Kim Tech, Inc. was merged into Bolt Industries, a public company engaged in the manufacture of air guns and auxiliary equipment used to generate shock waves in seismic exploration for oil, gas and minerals. Dr. Kim has been a director of Bolt Industries since 1984. From 1977 to 1980, Dr. Kim was Chief Consulting Geophysicist for Standard Oil Company of Indiana. Dr. Kim received a B.S. degree in Geophysics and a Ph.D. degree in Geophysics from the University of Utah in 1951 and 1955, respectively. Donald G. Rynne has served as a member of our Board of Directors since September 1992. Mr. Rynne has been Chairman of the Board of Directors of Donald G. Rynne & Co., Inc., a privately owned company engaged in international consulting and trading, since founding that company in 1956. Mr. Rynne is involved in international maritime trading and consulting, dealing primarily in the Middle East in hydrocarbon products and capital equipment. Mr. Rynne received a B.A. degree from Columbia University in 1949. Ambassador John H. Kelly has served as a member of our Board of Directors since December 1999. Ambassador Kelly was Assistant Secretary of State for South Asian and Near Eastern affairs from 1989 to 1991 and is currently Ambassador in Residence at the Center for International Strategy, Technology, and Policy at the Sam Nunn School of International Affairs at Georgia Tech in Atlanta. Ambassador Kelly is a career diplomat and was four times Deputy Assistant Secretary of State as well as Ambassador to Finland and Lebanon. He attended Emory University and the Armed Forces Staff College. He has been a frequent commentator for “Meet the Press”, the “Today Show”, and on CNN, C-Span BBC, and other media. Denis J. Fitzpatrick has served as Vice President, Secretary and Chief Financial Officer since August 1994 and as a member of our Board of Directors since July 2001. He has also served as Acting President since July 7, 2000. Mr. Fitzpatrick has held various accounting and financial management positions during his 24 years in the oil and gas industry. He has also served as a Director or Officer of the Council of Petroleum Accountants Society; served on the Tax Committee of the American Petroleum Institute and as a member of the American Management Association. Mr. Fitzpatrick received a B.S. degree in Accounting from the University of Southern California in 1974. 25

William L. Tracy has served as our Treasurer and Controller since August 1993. From May 1989 until February 1992, Mr. Tracy was self-employed as an energy consultant with the Commonwealth of Kentucky. From June 1985 until May 1989, Mr. Tracy served as President of City Gas and Transmission Corp., a public oil and gas production and refining company. He received his BBA degree in Accounting from Bellarmine College in Louisville, Kentucky in 1974. Our executive officers are appointed annually by the Board to serve until their successors are duly elected and qualified. Committees of the Board of Directors Our Board of Directors has three standing committees: an Executive Committee, a Compensation Committee, and an Audit Committee. The Executive committee is composed Dr. Faris (Chairman), Messrs. Rynne and Smart. The Compensation committee is composed of Dr.. Kim (Chairman), Dr. Faris, Messrs. Rynne and Kelly. The Audit Committee is composed of Messrs. Smart (Chairman), Rynne and Dr. Kim. Compensation Committee Interlocks No member of the Compensation Committee was an officer or employee of our company or of any of our subsidiaries during the prior year or was formerly an officer of our company or any of our subsidiaries. During the last fiscal year, none of our executive officers has served on our Board of Directors or Compensation Committee of any other entity whose officers served either on our Board of Directors or on our Compensation Committee. Director Compensation During 2000, we reimbursed outside Directors for their actual company-related expenses, including the costs of attending Directors’ meetings. We accrued, for each outside Director, $1,000 per month for serving in such capacity; $500 for participation in each Committee meeting, if such Director served on a Standing Committee of the Board of Directors; and $500 for each Board meeting attended. Summary Compensation Table The following table discloses compensation for services rendered by our Chief Executive Officer and all of our other executive officers whose compensation exceeded $100,000 in 2000, 1999, and 1998.

Annual Compensation						Long Term Compensation
Name and PrincipalPosition	Year	Salary	Bonus			Other AnnualCompensation			Options(#)			All OtherCompensation
George N. Faris	2000	$ 298,077	$ 17,757	(1	)	$ —			250,000			$ —
Chairman of the	1999	335,769	41,250			—			500,000			—
Board and ActingChief ExecutiveOfficer	1998	330,000	120,000			—			1,000,000	(2	)	—
Denis J. Fitzpatrick	2000	$ 175,500	$ 7,103	(1	)	$ 16,976	(3	)	50,000			$ —
Secretary, Acting	1999	135,769	15,000			—			100,000			—
President, and ChiefFinancial Officer	1998	140,000	31,250			—			170,000	(4	)	—
Joe M. McKinney (6)	2000	$ 187,019	$ 18,860	(1	)	$ 5,500	(5	)	200,000			$ —
Chief Executive	1999	118,461	$ 5,625			2,500	(5	)	700,000			—
Officer and ChiefOperating Officer	1998	—	—			—			—			—
William L. Tracy	2000	$ 100,000	$ 5,000			$ —			—			$ —
Treasurer and	1999	100,000	10,006			—			75,000			—
Controller	1998	100,000	13,500			—			106,000	(7	)	—

Insurance; Environmental Regulations

Our operations are subject to all risks normally incident to (i) the refining and manufacturing of petroleum products; and (ii) oil and gas exploratory and drilling activities, including, but not limited to, blowouts, extreme weather conditions, pollution and fires. Any of these occurrences could result in damage to or destruction of oil and gas wells, related equipment and production facilities and may otherwise inflict damage to persons and property. We maintain comprehensive and general liability coverage, as is customary in the oil and gas industry and coverage against customary risks, although no assurance can be given that such coverage will be sufficient to cover all risks, be adequate in amount, or that any damages suffered will not be governed by exclusionary clauses, thereby rendering such coverage incomplete or non-existent to protect our interest in specific property. We are not fully covered for damages incurred as a consequence of environmental mishaps. We believe it is presently in compliance with government regulations and follows safety procedures that meet or exceed industry standards.

Extensive national and/or local environmental laws and regulations in both the United States and Kazakhstan affect nearly all of our operations. These laws and regulations set various standards regulating certain aspects of health and environmental quality, provide for penalties and other liabilities for the violation of such standards and establish in certain circumstances obligations to remediate current and former facilities and off-site locations. We cannot assure you that we will not incur substantial financial obligations in connection with environmental compliance.

Marketing

Refining Division

We have received full accreditation in the State of Louisiana and the State of Texas Departments of Transportation. Both states have certified us as a self-certifying asphalt provider, which gives us a great advantage over some of our competitors. This has enabled us to bid on state and federal highway projects in Louisiana and Texas and has provided us with an asphalt quality assurance endorsement for non-state and federal projects as well. We continued to maintain an aggressive marketing posture throughout 2001. We have secured a substantial number of asphalt sales agreements with Louisiana and Texas highway construction companies, both at highway bid lettings and through private conventional paving projects.

Our St. Marks facility remained closed during the year 2001 because of a lack of capital. We continually monitor the market conditions in the region and should general industry conditions change in future months, we will reconsider asphalt operations at St. Marks and/or other locations in and around that marketing area. In addition, we continue to investigate the possibility of establishing more truck rack retail locations outside the immediate area of its current facility. These market opportunities have the potential to increase our expansion into new profitable retail sales outlets at greater netback margins than can be achieved in the wholesale barge markets.

The Transportation and Equity Act for the 21st Century authorizes $173 billion over six years (1998-2003) for construction and maintenance of federal highways. The six-state Gulf Coast market where we sell our conventional and polymerized asphalt products has been allocated more than $32 billion in federal funding under this Act, a 61% increase over the previous highway spending program. This Act provides a significant increase in the overall demand for asphalt in our markets. In addition, matching state Department of Transportation highway funds could increase the total spending for highway construction by another 10% — 50%. We are committed to continue to expand retail markets across the Gulf Coast and into other various profitable geographic areas.

Trigeant LTD and Sargeant Bulktainers, Inc. accounted for 13% and 12% of our sales during 2001, respectively, and R. E. Heidt Construction, Diamond B Construction, Davison Petroleum and Gilchrist Construction accounted for 25%, 16%, 16%, and 13% of our sales during 2000, respectively.

E &P Division

We have had no oil and gas sales since we sold our South American assets in February 1997. We are currently attempting to obtain a gas sales contract for our License 1551 gas field in Kazakhstan. We have been negotiating a sales contract with Gazprom, the Russian gas monopoly, although we have contacted other parties who could purchase our gas under certain circumstances. However, export of our gas from Kazakhstan through Russia is the most likely alternative and therefore we would need to have either a sales or transportation contract with Gazprom to achieve our goal.

We are currently engaged in negotiations and discussions with various potential purchasers and transporters for the transportation and/or purchase of our anticipated Shagyrly gas production and other gas we may have available for sale under a U.S. Dollar or Eurodollar backed contract.

Sources and Availability of Raw Materials

Our Lake Charles refinery requires sour asphaltic crudes as a feedstock to produce performance grade asphalts, which are generally in available supply within the western hemisphere. Primary sources of asphaltic crude oil feedstock include Mexico, Venezuela, Colombia, Ecuador, and Canada. Crude oil feedstocks for roofing asphalt can be obtained from Saudi Arabia, Oman, U.S. Gulf offshore, Texas and Louisiana sweet lights. Many crudes can be blended into the primary base crudes. As an alternative to purchasing and processing crude oil, we purchase wholesale asphalt as a blendstock to process and service our asphalt customers in the Gulf Coast. These blendstocks may be purchased from numerous sources; however, their availability varies at certain times of the year when demand is at its peak, principally during the warmer months when shortages can occur. However, usually availability is dependent, to a large extent, on the price a buyer is willing to pay.

Oil and Gas Acreage and Wells

Gross acreage presented below represents the total acreage in which we owned a working interest on December 31, 2001 and net acreage represents the sum of the fractional working interests we owned in such acreage.

		Gross Undeveloped Acreage	Net Developed Acreage	Net Undeveloped Acreage

Kazakhstan
License 953	—	4,734,097	—	3,313,868
License 1551	—	263,853	—	263,853

Total	—	4,997,950	—	3,577,721

The table below indicates our gross and net oil and gas wells as of December 31, 2001. Gross wells represents the total wells in which we owned a working interest, and net wells represents the sum of the fractional working interests we own in such wells.

Productive Wells



	Gross	Net	Gross	Net	Gross	Net

Kazakhstan	—	—	—	—	—	—

Oil and Gas Production

We have had no oil and gas production or oil and gas sales since February 1997 when we sold our South American subsidiaries.

Reserves

We have had no proved reserves and future net revenues from oil and gas interests we owned since February 1997, when we sold these assets. Consequently, we have not filed any reports of estimated total proved net oil or gas reserves since that date.

Drilling Activity

We sold all of our oil and gas producing properties in February 1997 and have not yet implemented production operations in Kazakhstan. The following table sets forth the gross and net exploratory and development wells that were completed, capped or abandoned in which we participated during the years indicated.



	Gross	Net	Gross	Net	Gross	Net

Exploratory Wells:
Kazakhstan
Oil	—	—	—	—	—	—
Gas	—	—	—	—	—	—
Dry	—	—	1	.7	2	1.4

Total	—	—	1	.7	2	1.4
Development Wells:
Kazakhstan	—	—	—	—	—	—
South America	—	—	—	—	—	—


Total	—	—	—	—	—	—

Total	—	—	1	.7	2	1.4

Facilities

We have leased approximately 10,500 square feet of office space in Houston, Texas at a monthly rental of $17,929, which lease expires on December 12, 2003. This space comprises our principal executive office. We also have a lease for approximately 4,800 square feet of office space at 444 Madison Avenue, New York, N.Y. 10022. The space was leased for a period of seven years at a monthly rental rate of $19,600 and expires on December 31, 2005. Two-thirds of this space is sublet for $152,448 per year through the end of our lease in New York.

In addition, we own 100 acres of land in Lake Charles, Louisiana where our refinery is located. In addition to the structures and equipment comprising our refining facility, our refinery assets include an approximately a 4,400 square foot office building, a new 2,200 square foot asphalt plant office, a laboratory, and two metal building structures serving as work shops, maintenance and storage facilities with an aggregate square footage of approximately 4,300 square feet. We also own approximately 68 acres of vacant land adjacent to the St. Marks Refinery in Florida.

Legal Proceedings

Neste Trifinery

In 1998, Neste Trifinery filed suit in a Harris County District Court against us and our wholly owned subsidiary, American International Refinery, Inc. (Neste Trifinery v. American International Refinery, Inc., et al, Case No. 98-11453; in the 269th Judicial District; in and For Harris County, Texas). Neste asserted claims for recovery of compensatory and punitive damages based on the following theories of recovery; (1) breach of contract, (2) disclosure of confidential information; and (3) tortuous interference with existing contractual relations. Generally, Neste alleged that in connection with the due diligence we conducted of the business of Neste, we had access to confidential or trade secret information and that we have exploited that information, in breach of an executed confidentiality agreement, to the detriment of Neste. Neste sought the recovery of $20,000,000 in compensatory damages and an undisclosed sum in connection with its claim for the recovery of punitive damages.

In addition to seeking the recovery of compensatory and punitive damages, Neste sought injunctive relief. Specifically, Neste sought to enjoin us from: (1) offering employment positions to the key employees of Neste; (2) contacting the suppliers, joint venture partners and customers of Neste in the pursuit of business opportunities; (3) interfering with the contractual relationship existing between Neste and St. Marks Refinery, Inc.; and (4) disclosing or using any confidential information obtained during the due diligence process to the detriment of Neste. We asserted to a general denial to the allegations asserted by Neste and also moved the district court to refer the matter to arbitration, as provided for in the confidentiality agreement between the parties, and to stay the pending litigation. On March 27, 1999, the district court referred the matter to arbitration and stayed litigation. In January 2002, we received notification from the Court that Neste had withdrawn the lawsuit.

St. Marks

On June 29, 1992, prior to the August 10, 1992 acquisition of the St. Marks, Florida facility by St. Marks Refinery, Inc., or SMR, the Florida Department of Environmental Protection and Seminole Refining Corporation, prior owner of the facility, entered into Consent Order Addendum No. 2. Through the Consent Order, Seminole acknowledged its continuing liability for the assessment and cleanup of the St. Marks facility. As it pertained to St. Marks, the Consent Order defined SMR as the “Buyer”of the facility, and provided that in consideration of the acknowledgement of the continuing liability of Seminole for the site assessment and cleanup of the conveyed Property, the financial guarantees provided for and the representations contained in this Consent Order addendum No. 2, the DEP agreed to waive any claim of liability against SMR for the assessment or cleanup of preexisting conditions of the Property conveyed to SMR by Seminole. Preexisting conditions are those that existed on the property on or before the date of closing.

On June 29, 1992, the DEP and Seminole entered a Settlement Agreement and Stipulation for Entry of a Consent Judgment, which explicitly adopted the Consent Order. Upon entry of the Consent Order and the Settlement Agreement, SMR purchased the facility from Seminole. On September 16, 1992, a circuit judge entered a Consent Judgment, which adopted the Consent Order as the Final Judgment of the Court.

In 1998, we entered into discussions to purchase the stock of SMR. In October 1998, we met at the facility with representatives of the DEP who were most familiar with the facility history and that had negotiated the terms of the Consent Order on behalf of the DEP. The purpose of the meeting was to inspect the facility and identify and differentiate areas of contamination that were attributable to SMR from areas that were preexisting and thus remained attributable to Seminole. Upon completion of the site inspection, our counsel wrote to counsel for the DEP to memorialize the agreement as to preexisting conditions. The letter provided that with the exception of three specified areas, “all existing contamination at the facility is attributable to SRC [Seminole].” The letter advised the DEP that the purpose of the inspection and inquiry into the scope of preexisting contamination was to allow us “to understand the full extent of the liability that we would have as the sole shareholder of SMR for the assessment and remediation of any contamination at the facility.” On November 23, 1998, prior to the closing of the stock purchase agreement, the DEP provided a written response to the October 26, 1998 letter which stated that “we are in general agreement with your letter with the following caveats:…” which was followed by four specific items, none of which served to diminish the effect of the Consent Order. On November 23, 1998, we acquired the stock of SMR.

On October 10, 2001, counsel for the DEP advised us that Seminole’s failure to cleanup the facility constituted a failure of consideration for the Consent Order and rendered invalid any waiver of liability, whether derived from Consent Order, Consent Judgment, or written agreement. As such, the DEP advised us that SMR was jointly and severally liable, with Seminole, for all conditions and contaminations at the facility.

On March 29, 2002, the DEP, acting on behalf of the Board of Trustees of the Internal Improvement Trust Fund, entered an order denying the renewal of SMR’s submerged land lease at the St. Marks facility. The lease allows SMR to operate and maintain the loading dock on state-owned river bottom. The denial, if ultimately upheld, would eliminate the ability of SMR to bring asphalt into the facility by barge, unless arrangements could be made to have river access through a different riverfront location. On April 24, 2002, SMR filed a Petition for Formal Administrative Hearing that challenged the denial. A hearing was set for September 23-27, but at the request of the parties, the hearing has been postponed until other issues have been resolved. These, and other ongoing environmental factors have brought into question if, and when, we will be able to utilize the facility for our asphalt business. Consequently, in a future period, we may need to record an impairment of a portion of all of the net total costs recorded for St. Marks.

In order to establish our rights, we filed a Complaint for Declaratory Judgment on May 3, 2002 in the Circuit Court for Wakulla County, Florida. On May 24, 2002, the DEP filed a Motion to Dismiss, arguing that the Consent Order was entered between the DEP and Seminole, and that as a nonparty to the Consent Order, SMR had failed to state a cause of action. On June 4, 2002, we filed a response and memorandum citing Florida case law that a third party beneficiary has standing to bring an action to enforce its rights in a contract, even though the third party beneficiary is not in privity with the parties to the contract. On July 24, 2002, the DEP’s Motion to Dismiss was denied by the Court. We are now awaiting a decision on our Complaint for Declaratory Judgment from the Court.

Management

Our executive officers and directors are:

Name	Age	Position(s)	Year First Became a Director or Officer

George N. Faris	61	Chairman of the Board and Acting Chief Executive Officer	1981
William R. Smart	81	Director	1987
Daniel Y. Kim	77	Director	1987
Donald G. Rynne	79	Director	1992
John H. Kelly	62	Director	1999
J. E. Knight	56	Director, President, Chief Operating Officer	2001
Denis J. Fitzpatrick	57	Chairman of the Board and Acting Chief Executive Officer	1994
William L. Tracy	54	Treasurer and Controller	1992

William R. Smart has served as a member of our Board of Directors since June 1987. Since November 1, 1983, Mr. Smart has been Senior Vice President of Cambridge Strategic Management Group, a management consulting firm. Mr. Smart was Chairman of the Board of Directors of Electronic Associates, Inc., a manufacturer of electronic equipment, from May 1984 until May 1992. He has served on the Board of Directors of Apollo Computer Company and Executone Information Systems, Inc. Mr. Smart is presently a director of National Datacomputer Company and Hollingsworth and Voss Company. Mr. Smart received a B.S. degree in Electrical Engineering from Princeton University in 1941.

Dr. Daniel Y. Kim has served as a member of our Board of Directors since July 1987. Dr. Kim is a Registered Professional Geophysicist in California and Colorado. From 1981 until 1984, Dr. Kim was President and Chief Executive Officer of Kim Tech, Inc., a research and development company. In 1984, Kim Tech, Inc. was merged into Bolt Industries, a public company engaged in the manufacture of air guns and auxiliary equipment used to generate shock waves in seismic exploration for oil, gas and minerals. Dr. Kim has been a director of Bolt Industries since 1984. From 1977 to 1980, Dr. Kim was Chief Consulting Geophysicist for Standard Oil Company of Indiana. Dr. Kim received a B.S. degree in Geophysics and a Ph.D. degree in Geophysics from the University of Utah in 1951 and 1955, respectively.

Donald G. Rynne has served as a member of our Board of Directors since September 1992. Mr. Rynne has been Chairman of the Board of Directors of Donald G. Rynne &Co., Inc., a privately owned company engaged in international consulting and trading, since founding that company in 1956. Mr. Rynne is involved in international maritime trading and consulting, dealing primarily in the Middle East in hydrocarbon products and capital equipment. Mr. Rynne received a B.A. degree from Columbia University in 1949.

Ambassador John H. Kelly has served as a member of our Board of Directors since December 1999. Ambassador Kelly was Assistant Secretary of State for South Asian and Near Eastern affairs from 1989 to 1991 and is currently Ambassador in Residence at the Center for International Strategy, Technology, and Policy at the Sam Nunn School of International Affairs at Georgia Tech in Atlanta. Ambassador Kelly is a career diplomat and was four times Deputy Assistant Secretary of State as well as Ambassador to Finland and Lebanon. He attended Emory University and the Armed Forces Staff College.

J. E. Knight has served as a member of our Board of Directors and as President and Chief Operating Officer since September 2001. Mr. Knight was a Director, President and CEO of First International Oil Corporation; a privately-held company involved in exploration &production activities internationally, primarily in Kazakhstan, for two years prior to joining our company . He was Regional Vice President of Union Texas Petroleum Holdings Corporation (“UTP”), acquired by ARCO in 1998, and President of one of the three business areas, EMAC, where he directed all of UTP’s business activities in Europe, the Middle East, Africa, Russia and Central Asia. During his 18 years with UTP he served in numerous international assignments including, Vice President of International Operations, Vice President Technical Services and Vice President, Drilling. Prior to joining UTP, he worked for twelve years in various management and technical positions with Arabian American Oil Company (ARAMCO) and Ingersoll Rand Co. (now Dresser-Rand). He is a member of the Society of Petroleum Engineers and the Association of International Petroleum Negotiators. Mr. Knight received a B.S. Degree in Mechanical Engineering in 1968 from the University of Kentucky and an MBA from the University of Houston in 1988.

Denis J. Fitzpatrick has served as Vice President, Secretary and Chief Financial Officer since August 1994 and as a Director since July 2001. He served as our Acting President from July 2000 through September 2001. Mr. Fitzpatrick has held various accounting and financial management positions during his 25 years in the oil and gas industry. He has also served as a Director or Officer of the Council of Petroleum Accountants Society; Director of the Kern County California Economic Development Corporation; Director of Junior Achievement; served on the Tax Committee of the American Petroleum Institute and as a member of the American Management Association. Mr. Fitzpatrick received a B.S. degree in Accounting from the University of Southern California in 1974.

William L. Tracy has served as our Treasurer and Controller since August 1993. He served as our Assistant Controller from February 1992 through July 1993. From May 1989 until February 1992, Mr. Tracy was self-employed as an energy consultant with the Commonwealth of Kentucky. From June 1985 until May 1989, Mr. Tracy served as President of City Gas and Transmission Corp., a public oil and gas production and refining company. He received his BBA degree in Accounting from Bellarmine College in Louisville, Kentucky in 1974.

Our executive officers are appointed annually by the Board to serve until their successors are duly elected and qualified.

Committees of the Board of Directors

Our Board of Directors has three standing committees: an Executive Committee, a Compensation Committee, and an Audit Committee.

The Executive committee is composed Dr. Faris (Chairman), Messrs. Rynne and Smart.

The Compensation committee is composed of Dr. Kim (Chairman), Messrs. Rynne and Kelly.

The Audit Committee is composed of Messrs. Smart (Chairman), Rynne and Dr. Kim.

Compensation Committee Interlocks

No member of the Compensation Committee was an officer or employee of our company or of any of our subsidiaries during the prior year or was formerly an officer of our company or any of our subsidiaries. During the last fiscal year, none of our executive officers has served on our Board of Directors or Compensation Committee of any other entity whose officers served either on our Board of Directors or on our Compensation Committee.

Director Compensation

During 2001, we reimbursed outside Directors for their actual company-related expenses, including the costs of attending Directors’ meetings. We accrued, for each outside Director, $1,000 per month for serving in such capacity; $500 for participation in each Committee meeting, if such Director served on a Standing Committee of the Board of Directors; and $500 for each Board meeting attended.

Summary Compensation Table

The following table discloses compensation for services rendered by our Chief Executive Officer and all of our other executive officers whose compensation exceeded $100,000 in 2001, 2000, and 1999.

	Annual Compensation						Long Term Compensation

Name and Principal Position	Year		Salary		Bonus		Other Annual Compensation	Options(#)	Long Term Compensation

George N. Faris	2001	$	367,500	$	—		$ —	798,750		$	—
Chairman of the Board	2000		298,077		90,632	(1)	—	250,000			—
Chief Executive Officer	1999		335,769		41,250		—	500,000			—

J. E. Knight	2001	$	98,750	$	—		—	400,000		$	2,000	(3)

President and Chief	2000		—		—		—	—
Operating Officer(2)	1999		—		—		—	—
Denis J. Fitzpatrick	2001	$	215,000	$	—		$ —	101,500		$	6,000	(3)
Executive Vice	2000		175,500		42,212	(1)	—	50,000			16,976	(4)
President, Secretary,	1999		135,769		15,000		—	100,000			—

Chief Financial Officer
William L. Tracy	2001	$	125,000	$	—		$ —	40,500		$	—
Treasurer and	2000		100,000		24,483		—	—			—
Controller	1999		100,000		10,006		—	75,000			—

(1)

Incentive bonus paid in shares of our common stock.

(2) ~~Includes~~Mr. ~~580,000~~Knight ~~contingent~~was ~~options~~hired ~~that~~in ~~were~~September ~~terminated~~2000. ~~since~~He ~~our~~was ~~common~~granted ~~stock~~400,000 ~~did~~options ~~not~~as ~~trade~~a atsigning ~~$5.00~~bonus, ~~per~~which ~~share~~fully ~~for~~vest 15during ~~consecutive~~his ~~days~~first atthree ~~any~~years ~~time~~with ~~before~~our ~~December 31, 1999~~company.

(3) ~~Includes~~Car ~~$11,976 moving~~ allowance ~~and $5,000 car allowance.~~

(4) Includes ~~100~~$11,~~000~~976 ~~contingent~~moving ~~options~~allowance ~~that~~and ~~were terminated since our common stock did not trade at~~ $5~~.00 per share for 15 consecutive days at any time before December 31~~,000 ~~1999~~car allowance.

(Stock Plans 2001 Long Term Performance Plan We may issue up to 5),000,000 ~~Vehicle~~shares ~~allowance~~of our common stock to employees or any individual or entity providing services on our behalf. This plan is administered by a committee designated by our Board of Directors. The designated committee determines the type or types of awards to be made to each participant and the related terms. Awards include but are not limited to stock options, stock appreciation rights, stock, or cash. The performance criteria for such awards consist of objective tests based on various criteria, which may be measured solely on a corporate, subsidiary, or business unit basis. Payment of awards may be deferred, either in the form of installments or as a future lump sum payment, in accordance with such procedures as may be established from time to time by the designated committee. As of December 31, 2001, an aggregate of 955,000 shares of our common stock has been issued under the Plan. No stock options or stock appreciation rights have been granted under this plan. We also have a 2000 Stock Option Plan, which has been approved by our Board of Directors and by our shareholders. The plan is administered by our Board of Directors or a committee designated by them. Under the plan employees, including officers and managerial or supervising personnel, are eligible to receive incentive stock options in tandem with stock appreciation rights and employees, Directors, contractors and consultants are eligible to receive non-qualified stock options in tandem with stock appreciation rights. Options may be granted to purchase an aggregate of 5,000,000 shares of our common stock under the plan. If an option granted under the plan terminates or expires without having been exercised in full, the unexercised shares subject to the option will be available for a further grant of options under the plan. Options may not be transferred other than by will or the laws of descent and distribution and, during the lifetime of the optionee, may be exercised only by the optionee. Options may not be granted under the plan after July 10, 2010. The exercise price of the options granted under the plan cannot be less than the fair market value of the shares of common stock on the date the option is granted. Incentive stock options granted to shareholders owning 10% or more of the outstanding voting power of our company must be exercised at a price equal to at least 110% of the fair market value of the shares of common stock on the date of grant. The aggregate fair market value of common stock, as determined at the time of the grant with respect to which incentive stock options are exercisable for the first time by any employee during any calendar year, may not exceed $100,000. Any additional common stock as to which options become exercisable for the first time during any such year are treated as non qualified stock options. As of December 31, 2001, 525,000 options had been granted under this plan. 33

~~(6)~~Option ~~Mr.~~Grants ~~McKinney~~In ~~resigned~~Last ~~July~~Fiscal 7Year The table below includes the number of stock options granted to the executive officers named in the Summary Compensation Table as of December 31, ~~2000~~2001, exercise information and potential realizable value.

(7) Includes 50,000 contingent options that were terminated since our common stock did not trade at $5.00 per share for 15 consecutive days at any time before December 31, 1999.

		Individual Grants
	Number of Securities Underlying Options		Percent of Total Options Granted to Employees in		Exercise	Expiration	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
Name	Granted(#)		Fiscal Year		Price($/sh)	Date	5%($)	10%($)
George Faris		798,750	33	%	$ 0.13	01-12-11	$-0-	$-0-
J. E. Knight		200,000	8	%	$ 0.10	09-03-06	$-0-	$-0-
		100,000	4	%	$0.25	09-03-06	$-0-	$-0-
		100,000	4	%	$0.50	09-03-06	$-0-	$-0-
Denis Fitzpatrick		101,500	4	%	$0.13	01-12-11	$-0-	$-0-
William L. Tracy		40,500	2	%	$0.13	01-12-11	$-0-	$-0-

~~2001~~Aggregate ~~Long~~Option ~~Term~~Exercises ~~Performance~~in ~~Plan We have adopted the~~ 2001 ~~Long~~And ~~Term~~Option ~~Performance~~Values ~~Plan,~~at ~~which~~December ~~provides for the grant of various forms of awards~~31, ~~including~~2001 ~~stock~~The ~~options,~~table ~~stock~~below ~~appreciation~~includes ~~rights, and stock or cash awards. Awards under~~ the ~~2001~~number ~~Long Term Performance Plan may be in stock or denominated in units~~ of ~~stock, which may be subject to restrictions on transfer and include forfeiture provisions. An aggregate amount of 5,000,000~~ shares ofcovered our common stock has been authorized for issuance under this plan. As of June 21, 2001, no awards had been made under this plan. Stock Option Plans We have a 2000 Stock Option Plan and a 1998 Stock Option Plan. Both plans have been approved by ~~our~~both ~~Board~~exercisable ~~of Directors~~ and by our shareholders. Each plan is administered by our Board of Directors or a committee designated by them. Under each plan employees, including officers and managerial or supervising personnel, are eligible to receive incentive stock options in tandem with stock appreciation rights and employees, Directors, contractors and consultants are eligible to receive non-~~qualified~~exercisable stock options inowned ~~tandem~~by ~~with~~the ~~stock~~executive ~~appreciation~~officers ~~rights.~~named ~~Options may be granted to purchase an aggregate of 5,000,000 shares of our common stock under each plan. If an option granted under either plan terminates or expires without having been exercised~~ in ~~full,~~ the ~~unexercised~~Summary ~~shares~~Compensation ~~subject~~Table toas ~~that option will be available for a further grant~~ of ~~options~~December ~~under the applicable plan. Options may not be transferred other than by will or the laws of descent and distribution and~~31, ~~during the lifetime of the optionee, may be exercised only by the optionee~~2001. ~~Options~~Also ~~may~~reported ~~not~~are ~~be granted under~~ the ~~2000~~values ~~Stock~~for ~~Option Plan after July 10, 2010 or under~~ “in-the-money” ~~1998 Stock Option Plan after May 29, 2008. The exercise price of the~~ options ~~granted~~that ~~under~~represent ~~either plan cannot be less than~~ the ~~fair~~positive ~~market~~spread ~~value~~between ofexercise ~~the shares of common stock on the date the option is granted. Incentive stock options granted to shareholders owning 10% or more of the outstanding voting power of our company must be exercised at a~~ price ~~equal to at least 110%~~ of the fair market value of the shares of common stock on the date of grant. The aggregate fair market value of common stock, as determined at the time of the grant with respect to which incentive stock options are exercisable for the first time by any ~~employee during any calendar year, may not exceed $100,000. Any additional common stock as to which options become exercisable for the first time during any~~ such ~~year~~existing ~~are treated as non qualified~~ stock options. As of June 21, 2001 an aggregate of 1,500,000 contingent options had been granted under the 2000 Stock Option Plan. Stock Award Plan The American International Petroleum Corporation 2000 Stock Award Plan provides for the granting of stock awards not to exceed an aggregate of 500,000 shares of our common stock. The plan was approved by our Board of Directors and ~~Shareholders. Employees, officers, and consultants are eligible for awards under~~ the ~~plan.~~year-end ~~Awards may be made under the plan until May 15, 2010~~price. ~~No recipient shall be entitled to more than an aggregate of 50,000 shares of common stock under the plan. The plan is administered our Board of Directors. 27~~

Option Grants In Last Fiscal Year The table below includes the number of stock options granted to the executive officers named in the Summary Compensation Table as of December 31, 2000, exercise information and potential realizable value.

	Shares				Number of
Name	Acquired on Exercise		Value Realized		Unexercised Options at December 31, 2001				Value of Unexercised In-the-money Options
					Exercisable		Unexercisable		Exercisable			Unexercisable
George N. Faris		—		$ —		2,646,250		-0-		$	-0-		$	—
J. E. Knight		—		$ —		-0-		400,000		$	—		$	-0-
Denis J. Fitzpatrick		—		$ —		334,500		-0-		$	-0-		$	—
William L. Tracy		—		$ —		121,500		-0-		$	-0-		$	—

		Individual Grants
	Number ofSecuritiesUnderlyingOptions			Percent ofTotal OptionsGranted toEmployees in		Exercise	Expiration	Potential RealizableValue at AssumedAnnual Rates of StockPrice Appreciationfor Option Term
Name	Granted(#)			Fiscal Year		Price($/sh)	Date	5%($)	10%($)
George Faris		200,000		40	%	$0.58	04/26/10	$-0-	$-0-
		50,000		10	%	0.55	07/10/10	$-0-	$-0-
Joe Michael McKinney		200,000	(1)	40	%	$0.58	07/07/00	$-0-	$-0-
Denis Fitzpatrick		50,000		10	%	$0.55	07/10/10	$-0-	$-0-
William L. Tracy		—		—		—	—	$-0-	$-0-

Employment Agreements

Dr. George N. Faris is employed as Chairman of the Board and Chief Executive Officer until July 31, 2002 at an annual salary of $367,500. After that date, he will function only as the Chairman of the Board at $275,000 per year until July 31, 2003, with duties limited to primary responsibility for coordinating activities of the Board of Directors and presiding over related meetings, and supervising investor relations, corporate communications, regulatory compliance and other legal matters. These duties are not expected to occupy his full time and effort. The agreement provides that if the term of this agreement is not extended beyond July 31, 2003, we will retain Dr. Faris, at his discretion, as a consultant for a period of two calendar years ending July 31, 2005 at an annual salary equal to 50% of his annual base salary at December 31, 2002. The agreement also provides for, a) a severance payment equal to one month’s salary for each full year of employment beginning January 1, 1995, based on base salary at December 31, 1999 and b) a change in control payment equal to 2.99 times the greater of (i) $350,000 or (ii) his base salary in effect on date of termination as a result of a change in control.

~~(1)~~Mr. ~~These~~James ~~options~~E. Knight was hired as President and Chief Operating Officer on September 4, 2001 at an annual salary of $325,000 for a period of eighteen months. The term shall be automatically renewed and extended for successive periods of one year commencing on his eighteen month anniversary date and on each successive one year anniversary thereafter unless either Mr. Knight or we give the other notice of termination at least ninety days prior to the end of the initial term or any renewal term. In such event, his employment will terminate at the end of the initial term on the end of the renewal term during which such notice was given. If, after the initial eighteen month term, his employment is terminated ~~following~~without cause, he will be entitled to one month of severance pay for each full year of employment, prorated for each full month of employment. The agreement also provides for a change of control payment equal to 2.99 times his annual base salary that is in effect immediately prior to his termination as a result of a change in control. Certain Transactions During February 2002, we borrowed an aggregate of $240,000 from George N. Faris, our Chairman of the ~~resignation~~Board. The loans are payable on demand and bear interest at 14% per annum. On August 24, 2000, we borrowed $100,000 from Mr. Donald Rynne, one of our directors. This loan is repayable on demand and bears interest at 12% per annum. In connection with this loan, we issued an option to Mr. ~~McKinney~~Rynne to purchase one share of common stock for each dollar borrowed. The option may be exercised prior to August 23, 2010 and has an exercise price of $0.43 per share, representing 105% of the market price of a share of our common stock on ~~July~~the 7date immediately preceding the loan. We also issue him an additional 20,000 shares for each month the loan remains outstanding beyond December 2000 at exercise prices based on the average closing market price of our common stock during each particular month. As of February 28, 2002, the entire amount of these loans remained outstanding. We believe that the terms of these loans were as favorable to us as we could have obtained from an unaffiliated party. Securities Ownership of Management and Principal Shareholders The following table sets forth certain information, as of June 27, 2002, regarding the beneficial ownership of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the common stock; (ii) each Director; (iii) each executive officer named in the Summary Compensation Table; and (iv) all Directors and executive officers as a group. As of June 27, 2002, we had outstanding 199,358,348 shares of common stock.

Aggregate Option Exercises in 2000 And Option Values at December 31, 2000 The table below includes the number of shares covered by both exercisable and non-exercisable stock options owned by the executive officers named in the Summary Compensation Table as of December 31, 2000. Also reported are the values for “in-the-money” options that represent the positive spread between exercise price of any such existing stock options and the year-end price.

Name and Address of Beneficial Holder(1)
The Palladin Group, L.P.	19,736,476	(2)	9.9	%(2)
195 Maplewood Avenue
Maplewood, NJ 07040
GCA Strategic Investment Fund Limited	9,768,599	(3)	4.9	%(3)
106 Colony Drive, Suite 900
Cumming, GA 30040
George N. Faris	6,235,052	(4)	3.0	%
Daniel Y. Kim	501,179	(5)	*
Donald G. Rynne	1,425,521	(6)	*
William R. Smart	683,941	(7)	*
John Kelly	227,000	(8)	*
J. E. Knight	1,097,597	(9)	*
Denis J. Fitzpatrick	853,891	(10)	*
William L. Tracy	555,903	(11)	*
All officers and Directors as a group
(consisting of 8 persons)	11,400,084	(12)	5.4	%

	Shares		Number of
Name	Acquired onExercise	ValueRealized	Unexercised Optionsat December 31, 2000		Value of UnexercisedIn-the-money Options
			Exercisable	Unexercisable	Exercisable	Unexercisable
George N. Faris	1,537,500	$2,005,185	1,089,169	695,833	$ —	$ —
Joe Mike McKinney	62,500	$ 85,935	—	—	$ —	$ —
Denis J. Fitzpatrick	192,000	$ 173,438	135,000	68,000	$ —	$ —
William L. Tracy	125,000	$ 114,375	28,000	53,000	$ —	$ —

* Less than 1% of class

Employment Contracts Dr. George N. Faris is employed as Chairman of the Board until July 31, 2003 and as Chief Executive Officer through July 31, 2002 at an annual salary of $367,500 through July 31, 2002 and $275,000 from August 1, 2002 through July 31, 2003. The agreement provides that if the initial term is not extended, we will retain Dr. Faris, at his discretion, as a consultant for a period of two calendar years ending July 31, 2005 at an annual salary equal to 50% of his annual base salary at December 31, 2002. The agreement also provides for, a) a severance payment equal to one month’s salary for each full year of employment beginning January 1, 1995, based on base salary at July 31, 2001 and b) a change in control payment equal to 2.99 times the greater of (i) $367,500 or (ii) his base salary in effect on date of termination as a result of a change in control. Securities Ownership Of Management And Principal Shareholders The following table sets forth certain information, at June 21, 2001, regarding the beneficial ownership of the Company’s common stock by (i) each person known by us to be the beneficial owner of more than 5% of the common stock; (ii) each Director; (iii) each executive officer named in the Summary Compensation Table; and (iv) all Directors and executive officers as a group. 2835

Name and Addressof Beneficial Holder (1)	Amount and Nature ofBeneficial Ownership		Percentof Class
The Palladin Group, L.P. (2)	16,090,527	(3)	9.9	%
195 Maplewood Avenue
Maplewood, NJ 07040
GCA Strategic Investment Fund Limited (4)	16,090,527	(5)	9.9	%
106 Colony Drive, Suite 900
Cumming, GA 30040
George N. Faris	4,276,120	(6)	2.6	%
Daniel Y. Kim	372,997	(7)	*
Donald G. Rynne	926,711	(8)	*
William R. Smart	472,631	(9)	*
John Kelly	152,000	(10)	*
Denis J. Fitzpatrick	169,731	(11)	*
William L. Tracy	67,000	(12)	*
All officers and Directors
as a group (consisting of
8 persons)	6,437,190	(13)	3.8	%
Joe Michael McKinney(14)	0		—

*Less than 1% of class

(1)

All officers and Directors have an address c/o American International Petroleum Corporation at 2950 North Loop West, Houston, Texas, 77092.

(3) (2) The Palladin Group, L.P. serves as investment advisor to Halifax Fund, L.P., the registered owners of our 5% convertible secured debenture and warrants to purchase common stock, and has been granted investment discretion over our securities owned by this fund. In this capacity, The Palladin Group, L.P. may be deemed to have voting and dispositive power over such securities. Mr. Jeffrey Devers is the principal officer of The Palladin Group. The terms of the 5% debenture ~~and related warrants~~ provide that the number of shares that the registered owners may acquire upon conversion ~~or exercise~~ may not exceed that number that would render Halifax Fund, L.P. the beneficial owner of more than 9.99% of the then outstanding shares of our common stock.

(3) ~~Represents~~GCA is the ultimate beneficial owner of the shares ~~which~~owned ~~may~~by beGCA ~~acquired~~and, ~~upon~~through ~~conversion~~its board of ~~our~~directors, 5%has ~~convertible~~the ~~secured~~sole ~~debenture~~voting ~~and~~power ~~related~~to ~~warrants~~vote ~~held~~the shares. Prime Management Limited, a Bermuda corporation located in Bermuda has sole voting power with respect to the shares owned by ~~The~~GCA. ~~Palladin~~Joe ~~Group~~Kelly, La Bermuda resident, has the sole voting power over Prime Management.P Global Capital Advisors Ltd., ~~limited~~GCA’s byinvestment advisor located in Georgia, together with GCA’s board of directors, has the sole investment decision authority over the shares owned by GCA. The terms of the ~~debenture~~convertible ~~and~~debentures ~~warrants~~held ~~referred~~by toGCA inprovide ~~Note~~that 2the ~~above~~number of shares that GCA may acquire upon conversion may not exceed that number that would render GCA the beneficial owner of more than 4.99% of the then outstanding shares of our common stock.

(4) ~~GCA~~Includes ~~is the ultimate beneficial owner of the shares owned by GCA and~~2, ~~through its Board of Directors~~646,250 ~~has the sole voting power to vote the~~ shares. Prime Management Limited, a Bermuda corporation located in Bermuda has sole voting power with respect to the shares owned by GCA. Joe Kelly, a Bermuda resident, has the sole voting power over Prime Management. Global Capital Advisors Ltd., GCA’s investment advisor located in Georgia, together with GCA’s Board of Directors, has the sole investment decision authority over the shares owned by GCA. The terms of the series A convertible preferred stock, the related warrants, and our 3% convertible debentures provide that ~~the~~he ~~number of shares that GCA~~ may acquire upon ~~conversions~~the or exercise ~~may not exceed that number that would render GCA the beneficial owner~~ of ~~more~~stock ~~than 9~~options.~~99% of the then outstanding shares of common stock.~~

(5) ~~Represents~~Includes 449,179 shares ~~which~~that he may beacquire ~~acquired~~ upon ~~conversion of our outstanding series A convertible preferred stock, 3% convertible debentures and various warrants held by GCA, limited by~~ the ~~terms~~exercise of ~~these~~stock ~~instruments referred to in Note 4 above~~options.

29(6) Includes 796,429 shares that he may acquire upon the exercise of stock options.

(67) Includes 1433,~~680,000~~929 shares that he may acquire upon the exercise of stock options ~~exercisable within 60 days~~. ~~Excludes 105,000 shares that he may acquire upon exercise of options commencing January 1, 2002.~~

(78) Includes ~~303~~325,~~119~~000 shares that he may acquire upon the exercise of stock options ~~exercisable within 60 days~~.

(89) Includes ~~197~~100,~~619~~000 shares that he may acquire upon the exercise of stock options. ~~exercisable~~Excludes ~~within~~100,000 60shares ~~days~~that he may acquire upon the exercise of stock options commencing March 4, 2003, and 200,000 shares that he may acquire upon the exercise of stock options commencing March 4, 2004.

(910) Includes ~~222~~334,~~619~~500 shares that he may acquire upon the exercise of stock options ~~exercisable within 60 days~~.

(1011) Includes ~~150~~121,~~000~~500 shares that he may acquire upon the exercise of stock options ~~exercisable within 60 days~~. ~~Excludes 25,000 shares that he may acquire upon exercise of options commencing July 22, 2001.~~

(1112) Includes ~~152,500~~all of the shares that he may ~~acquire~~be acquired upon the exercise of stock options ~~exercisable~~included ~~within~~in 60the ~~days.~~table ~~Excludes~~for ~~17,500~~the ~~shares~~named ~~that~~individuals hedescribed ~~may~~in ~~acquire~~Notes ~~upon~~(4) ~~exercise~~through of(11) ~~options commencing January 1, 2002~~above.

(12) Includes 67,000 shares that he may acquire upon the exercise of stock options exercisable within 60 days. Excludes 14,000 shares that he may acquire upon exercise of options commencing January 1, 2002.36

~~(13)~~Selling ~~Includes~~Securityholders ~~all~~GCA ofStrategic ~~the~~Investment ~~shares~~Fund ~~that~~is ~~may~~offering beup ~~acquired~~to ~~upon~~133,154,426 ~~the~~shares ~~exercise~~ of common stock, ~~options included in the table for the named individuals described in Notes (4) through (10) above.~~including

~~(14)~~• Mr122,531,745 shares GCA may acquire upon conversion of and payment of twelve months interest on $7.9 ~~McKinney~~million ~~resigned~~principal amount of our 3% convertible debentures due February 2007, all at an assumed conversion price of $0.07 per share, and payment of twelve months interest on ~~July~~our 7$1.25 million bridge note due December 18, ~~2000~~2002 and $1.9 million bridge note due March 18, 2003 . The number of shares that GCA acquires and may resell under this prospectus depends upon the actual conversion price at the time of conversion. The actual conversion price is 85% of the average of the lowest three daily weighted average sales prices of a share of common stock for the 20 trading days prior to the date of conversion. Since there is no minimum conversion price, if the market price of the common stock declines below the assumed conversion price, the number of shares that GCA may acquire upon conversion will increase.

~~Certain~~• Transactions During 2000, we borrowed $200,000, $100,000, and $50,000 from George N. Faris, our Chairman of the Board, Donald Rynne, one of our directors, and Denis J. Fitzpatrick, our Chief Financial Officer, respectively. These loans are repayable on demand and bear interest at 12% per annum. We issued to each of these individuals options to purchase one share of common stock for each dollar borrowed. The options may be exercised prior to August 23, 2010 and have an exercise price of $0.43 per share, representing 105% of the market price of a share of our common stock on the date immediately preceding the loan. We believe that the terms of these loans were as favorable to us as we could have obtained from an unaffiliated party. As of December 31, 2000, all of the original principal amount of these notes was outstanding. As of July 21, 2001, $200,000 and $100,000 principal amount of the loans to Messrs. Faris and Rynne, respectively, remained outstanding. During 1999 and 1998, the Company’s Chairman and CEO, Dr. George N. Faris, loaned the company an aggregate of $500,000 and $365,000, respectively, at an interest rate of 10~~% per annum. These loans were repaid in full within one year. Selling Securityholders The following table sets forth the names of the selling securityholders~~, ~~the number of shares of common stock beneficially owned by each selling securityholder as of July 21~~622,681 ~~2001, the number of~~ shares ~~that~~GCA ~~each selling securityholder~~ may ~~offer,~~acquire ~~and the number of shares of common stock beneficially owned by each selling securityholder~~ upon ~~completion~~exercise of ~~the~~warrants ~~offering,~~received ~~assuming~~in ~~all~~connection ~~of the shares are sold. None of the selling securityholders has, or within the past three years has had, any position, office or other material relationship~~ with ~~American~~various ~~International Petroleum Corporation or any of its predecessors or affiliates~~financings. ~~The selling securityholders are offering up to 89,500,000 shares of common stock by this prospectus. GCA Strategic Investment Fund is offering:~~

•On 87April 24,~~000,000~~ ~~shares~~2001 GCA ~~may~~acquired ~~acquire~~$3.34 ~~upon~~million ~~conversion~~principal ofamount ~~and payment~~ of ~~twelve months interest on our~~ 3% convertible debentures ~~due~~and ~~April~~warrants ~~2002~~to atpurchase an1,500,000 ~~assumed~~shares ~~conversion~~of ~~price~~our ofcommon stock at $0.1119 per share. ~~The number of shares that GCA acquires~~ and ~~may~~on ~~resell~~April ~~under~~28, ~~this~~2001 ~~prospectus~~exchanged ~~depends~~$5,936,128 ~~upon the actual conversion price at the time~~ of ~~conversion.~~principal ~~The~~and ~~actual~~interest ~~conversion~~due ~~price~~on iscertain ~~90%~~bridge ofnotes ~~the~~due ~~average~~April of28, ~~the~~2001 ~~lowest three daily weighted average sales prices of a share of common stock~~ for ~~the~~$5,936,128 20principal ~~trading~~amount ~~days prior to the date~~ of ~~conversion.~~3% ~~Since~~convertible ~~there~~debentures isin noa ~~minimum~~transaction ~~conversion~~not ~~price,~~requiring ifregistration ~~the~~under ~~market~~Section ~~price~~3(a)(9) of the ~~common~~Securities ~~stock declines below the assumed conversion price, the number of shares that GCA may acquire upon conversion will increase~~Act.

•As 1of June 27,~~500~~ 2002,~~000~~ GCA beneficially owned 130,154,426 shares, or approximately 67% of our 199,358,348 outstanding shares, of common stock. The number of shares beneficially owned by GCA, as computed in accordance with applicable SEC rules, represents the number of shares GCA may acquire upon conversion of $7,936,138 principal amount of, and payment of 12 months accrued interest on, our 3% convertible debentures at an assumed conversion price of $0.07 per share, twelve months accrued interest on our bridge notes, and upon exercise of warrants to purchase 10,622,681 shares issued in connection with ~~its~~previous ~~purchase~~financings. However the terms of ~~our~~the 3% convertible ~~debentures~~debenture and the bridge notes limit the number of shares of common stock that GCA may acquire upon conversion to the extent the issuance of such shares would cause the holder to become the beneficial owner of more than 4.99% of the then total outstanding shares of common stock. Assuming GCA sells all 133,154,426 shares offered by this prospectus, upon completion of this offering, it will no longer own any shares of our common stock.

30GCA, through its board of directors, has the sole voting power to vote the shares. Prime Management Limited, a Bermuda corporation located in Bermuda has sole voting power with respect to the shares owned by GCA. Joe Kelly, a Bermuda resident, has the sole voting power over Prime Management. Global Capital Advisors Ltd., GCA's investment advisor located in Georgia, together with GCA's board of directors, has the sole investment decision authority over the shares owned by GCA. Neither GCA nor any of its directors or officers holds, or within the past three years has held, any position, office or other material relationship with American International Petroleum Corporation or any of its predecessors or affiliates.

~~LKB~~Colony Park Financial, LLC is offering: up to 1,050,000 shares of common stock that they may acquire upon exercise of a warrant. These shares were acquired in connection with GCA’s purchase of bridge notes. The shares of common stock offered by GCA and Colony Park under this prospectus have been registered in accordance with registration rights that we have granted. We have agreed to pay all registration and filing fees, printing expenses, blue sky fees, and fees and disbursements of their counsel. GCA and Colony Park have agreed to pay any underwriting discounts and selling commissions. In addition, we have agreed to indemnify GCA, and underwriters who may be selected by it and certain affiliated parties, against certain liabilities, including liabilities under the Securities Act, in connection with the offering. Although GCA has agreed to indemnify our officers and directors and persons controlling us against such liabilities, we have been informed that in the opinion of the SEC indemnification of those persons of liabilities under Securities Act is against public policy as expressed in the Securities Act and is therefore not enforceable. 37

• 1,000,000 shares it may acquire upon exercise of warrants issued in connection with our 3% convertible debentures.

The selling securityholders acquired $3.34 million principal amount of 3% convertible debentures and warrants to purchase shares of our common stock in a transaction exempt from the registration requirement of the Securities Act under Section 4(2) and exchanged $5,936,128 of principal and interest due on certain bridge notes due April 28, 2001for $5,936,128 principal amount of 3% convertible debentures in a transaction not requiring registration under Section 3(a)(9) of the Securities Act. All of the selling securityholders are “accredited investors”, as defined in Rule 501(a) of Regulation D. The number of shares listed below as beneficially owned before the offering by GCA has been computed without giving effect to the terms of the 3% convertible debentures, which limits the number of shares of common stock that GCA may acquire upon conversion, to the extent the issuance of such shares of common stock would cause the holder to become the beneficial owner of more than 9.99% of the then total outstanding shares of common stock. As of July 21, 2001, we had 162,530,577 shares of common stock outstanding. For purposes of computing the number and percentage of shares beneficially owned by each selling securityholder as of July 21, 2001, any shares which such person has the right to acquire within 60 days after such date are deemed to be outstanding, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other selling securityholder.

	Beneficial OwnershipOf Common Stock Before					Beneficial Ownershipof Common Stock
	Offering				Shares of Common	After Offering
	Number		Percent		Stock Offered	Number	Percent
GCA Strategic Investment
Fund Limited (1)	103,082,631	(2)	38.8	%	88,500,000	14,582,631	8.2	%
c/o Prime Management Ltd.
12 Church Street
Hamilton, Bermuda HM11
LKB Financial LLC (3)	2,330,050		*		1,000,000	1,330,050	*
106 Colony Park Drive
Suite 900
Cumming, Ga. 30040

* Less than one percent (1%).

(1) GCA is the ultimate beneficial owner of the shares owned by GCA and, through its board of directors, has the sole voting power to vote the shares. Prime Management Limited, a Bermuda corporation located in Bermuda has sole voting power with respect to the shares owned by GCA. Joe Kelly, a Bermuda resident, has the sole voting power over Prime Management. Global Capital Advisors Ltd., GCA’s investment advisor located in Georgia, together with GCA’s board of directors, has the sole investment decision authority over the shares owned by GCA. GCA is an affiliate of LKB Financial.

(2) Includes the approximate amount of shares which GCA may acquire upon conversion of 750 shares of series A preferred stock, conversion of $9,226,128 principal amount and payment of 12 months interest on 3% convertible debentures at an assumed conversion price of $0.11 per share, and from exercise of 3,392,631 warrants it currently holds.

(3) Lewis Lester and Michael Brown have shared voting and dispositive power with respect to the shares owned by LKB Financial. LKB Financial is an affiliate of GCA.

The shares of common stock offered by GCA and LKB under this prospectus have been registered in accordance with registration rights that we have granted to them. We have agreed to pay all registration and filing fees, printing expenses, blue sky fees, if any, and fees and disbursements of our counsel. The selling securityholders have agreed to pay any underwriting discounts and selling commissions. In addition, we have agreed to indemnify GCA and LKB Financial and underwriters who may be selected by them and certain affiliated parties, against certain liabilities, including liabilities under the Securities Act, in connection with the offering. Although GCA and LKB Financial also have agreed to indemnify our officers and directors and persons controlling us against such liabilities, we have been informed that in the opinion of the SEC indemnification of those persons of liabilities under Securities Act is against public policy as expressed in the Securities Act and is therefore not enforceable. 31

Plan of Distribution

The selling securityholders may sell shares from time to time in public transactions, in the over-the-counter market, or private transactions, at prevailing market prices or at privately negotiated prices. They may sell their shares in the following types of transactions:

•

ordinary brokerage transactions and transactions in which the broker solicits purchasers

•

a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction

•

purchases by a broker or dealer as principal and resale by such broker or dealer for its account under this prospectus

•

face-to-face transactions between sellers and purchasers without a broker-dealer

The selling securityholders also may sell shares that qualify under Section 4(1) of the Securities Act or Rule 144. As used in this prospectus, selling securityholder includes donees, pledges, distributees, transferees and other successors in interest of the selling securityholders named in this prospectus. In effecting sales, brokers or dealers engaged by ~~the~~GCA ~~selling securityholders~~ may arrange for other brokers or dealers to participate in the ~~resales~~resale. ~~The~~GCA ~~selling securityholders~~ may enter into hedging transactions with broker-dealers, and in connection with those transactions, broker-dealers may engage in short sales of the shares. ~~The~~GCA ~~selling securityholders~~ also may sell shares short and deliver the shares to close out such short positions. ~~The~~and ~~selling~~GCA ~~securityholders~~ also may enter into option or other transactions with broker-dealers that require the delivery to the broker-dealer of the shares, which the broker-dealer may resell under this prospectus. ~~The~~GCA ~~selling securityholders~~ also may pledge the shares to a broker or dealer and upon a default, the broker or dealer may ~~effect~~affect sales of the pledged shares under this prospectus. Brokers, dealers or agents may receive compensation in the form of commissions, discounts or concessions ~~from selling securityholders~~ in amounts to be negotiated in connection with the sale. Any broker-dealer that acts as an agent for the purchaser may receive compensation from the purchaser. Broker-dealers may agree with a selling securityholder to sell a specified number of shares of common stock at a stipulated price per share, and, to the extent such broker-dealer is unable to do so acting as agent for such selling securityholder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the selling securityholder. Broker-dealers who acquire shares of common stock as principal may then resell such shares from time to time in transactions in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then current market price or in negotiated transactions and, in connection with such resales, may pay or receive from the purchasers of such shares commissions as described above. GCA Strategic Investment Fund Limited, and any broker or dealer participating in the sale of shares of common stock by GCA under this prospectus, is an “underwriter” within the meaning of the Securities Act of those shares, and any commissions, discounts or concessions which GCA, or any participating broker or dealer, receives in connection with such sales will be underwriting compensation. Colony Park Financial LLP may be deemed an “underwriter” within the meaning of the Securities Act in connection with such sales and any commissions, discounts, or concessions it, or any participating broker or dealer, receives may be deemed to be underwriting compensation. Information as to whether underwriters who may be selected by ~~the~~ selling securityholders, or any other broker-dealer, is acting as principal or agent for ~~the selling securityholders~~GCA, the compensation to be received by them, and the compensation to be received by other broker-dealers, in the event such compensation is in excess of usual and customary commissions, will, to the extent required, be set forth in a supplement to this prospectus. Any dealer or broker participating in any distribution of the shares may be required to deliver a copy of this prospectus, including a prospectus supplement, if any, to any person who purchases any of the shares from or through such dealer or broker. We have advised ~~the~~GCA ~~selling~~and ~~securityholders~~Colony Park that during such time as they may be engaged in a distribution of the shares they are required to comply with Regulation M under the Securities Exchange Act. With certain exceptions, Regulation M precludes any selling securityholders, any affiliated purchasers and any broker-dealer or other person who participates in such distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. Description Of Securities Our authorized capital stock consists of 300,000,000 shares of common stock, $0.08 par value per share, and 7,000,000 shares of “blank check” preferred stock, par value $0.01 per share. As of June 21, 2001, 162,530,577 shares of common stock were outstanding and 2,500 shares of series A preferred stock were outstanding. 3238

Description Of Securities Our authorized capital stock consists of 300,000,000 shares of common stock, $0.08 par value per share, and 7,000,000 shares of “blank check” preferred stock, par value $0.01 per share. As of June 27, 2002, 199,358,348 shares of common stock were outstanding. The following are brief descriptions of our securities as of June 2127, ~~2001~~2002. The rights of the holders of shares of capital stock are established by our articles of incorporation, as amended, our by-laws and Nevada law. The rights of holders of our debt securities are established by the security or the agreement under which they were sold. The following statements do not purport to be complete or give full effect to statutory or common law, and are subject in all respects to the applicable provisions of the articles of incorporation, by-laws and state law, and in the case of our debt securities, the terms of those securities and the agreements under which they were sold. Common Stock Holders of our common stock are entitled to one vote per share, and subject to the rights of holders of preferred stock, to receive dividends when, as and if declared by our Board of Directors and to share ratably in our assets legally available for distribution to holders of common stock in the event of the liquidation, dissolution or winding up of our company. Holders of the common stock do not have subscription, redemption, conversion or preemptive rights. Each share of common stock is entitled to one vote on any matter submitted to shareholders, including the election of directors. The Board is empowered to fill any vacancies on the Board created by the resignation of Directors. Except as otherwise required by the Nevada law, all shareholder action (other than the election of the Directors, who are elected by a plurality vote) is subject to approval by a majority of the shares of common stock present at a shareholders’ meeting at which a quorum (a majority of the issued and outstanding shares of the common stock) is present in person or by proxy, or by written consent pursuant to Nevada law. All shares of common stock outstanding are fully paid and non-assessable. Options and Warrants Options. We have outstanding options to purchase an aggregate of 65,~~821~~803,~~933~~483 shares of common stock, at exercise prices ranging from $0.1309 to $2.00, which expire at various dates from ~~2005~~December 2002 to ~~2010~~January 2011. Warrants. We have outstanding warrants to purchase an aggregate of 1315,830,~~926~~976 shares of common stock, at exercise prices ranging from $0.1305 to $3.00, which expire at various dates through August 2005. Preferred Stock We are authorized to issue up to 7,000,000 shares of preferred stock with such designation, rights and preferences as may be determined from time to time by our Board of Directors. Accordingly, the Board of Directors is empowered, without further shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could decrease the amount of earnings and assets available for distribution to holders of common stock or adversely affect the voting power or other rights of the holders of our common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Our Board of Directors has authorized the issuance of up to 18,000 shares of series A convertible preferred stock. Each share of ~~our~~ series A convertible preferred stock has a stated value of $1,000 and is convertible into shares of our common stock at a conversion price equal to 92% of the average of the lowest three daily weighted average sales prices of our common stock during the 20 trading days prior to the date of conversion. The number of shares of common stock that may be acquired upon conversion is determined by dividing the stated value of the number of shares of series A convertible preferred stock to be converted by the conversion price. Since there is no minimum conversion price, there is no limitation on the number of shares of common stock that holders of series A convertible preferred stock may acquire upon conversion. As of July 21, 2001, we had sold a total of 8,750 shares of our series A convertible preferred stock to GCA for a total purchase price of $8,250,000. As of July 21, 2001 GCA had converted 8,000 shares of series A convertible preferred stock into an aggregate of 48,367,933 shares of common stock. GCA has sold all of those shares of common stock. The certificate of designations creating the series A convertible preferred stock limits the number of shares of common stock that may be acquired upon conversion of the series A convertible preferred stock to the extent the issuance of such shares of common stock would cause the holder requesting conversion to become the beneficial owner of more than 9.99% of the then total outstanding shares of common stock. We ~~must~~have ~~redeem~~sold ~~the~~a ~~outstanding~~total of 8,750 shares of our series A convertible preferred stock to GCA Strategic Investment Fund Limited, an accredited investor, for ~~cash~~a ~~within~~total 10purchase ~~business~~price ~~days~~of ~~after~~$8,250,000. ~~the~~GCA ~~occurrence~~has converted these shares into an aggregate of ~~one~~58,047,418 orshares of common stock, which have been sold. We do not intend to issue more shares of ~~the~~series ~~following~~A ~~events:~~convertible preferred stock. 39

•Convertible ~~August~~Debentures 215% Convertible Debentures On June 27, ~~2003~~2002 we had outstanding $5.4 million principal amount of our 5% convertible secured debentures due February 18, 2004. The debentures bear interest at the ~~second~~rate ~~anniversary~~of 5% per annum, payable on the last day of each calendar quarter, commencing March 31, 1999, and are payable on February 18, 2004, or earlier upon acceleration following the occurrence of an event of default. Payment of the debentures is secured by a mortgage and first priority security interest on specified fixed assets located at the Lake Charles, Louisiana refinery of our wholly owned subsidiary, American International Refinery, Inc. The mortgage and security interest will be released at such time as the outstanding principal amount of the debentures is less than $3,000,000. The debentures are senior in right of payment to all of our indebtedness, except for indebtedness secured by our accounts receivable, inventory and other assets, subject to a mortgage and security interest. The debentures are convertible into shares of our common stock, at the option of the holder. The number of shares of common stock that the holder may acquire upon conversion of the debentures, together with shares beneficially owned by the holder and its affiliates may not exceed 9.9% of the total outstanding shares of common stock. The holder may change this limitation upon 61 days prior notice or immediately following a change in control of our company. The conversion price is equal to the lesser of $1.288 and 85% of the average of the lowest three daily weighted average sales prices of the common stock for the 20 trading days prior to the date upon which the holder gives notice of conversion. We may redeem up to $5,000,000 principal amount of the debentures for the greater of (x) 115% of the principal amount, plus accrued but unpaid interest and default payments and (y) the product of the conversion rate and the closing bid price of the common stock on the first trading day after the date a holder notifies us that the redemption will be effective. The holder has the right to require redemption of the debentures, in whole or in part, following a change in control at a redemption price equal to 130% of the principal amount, plus accrued but unpaid interest and penalties, to sell the debentures to us at a purchase price equal to 125% of the principal amount, plus accrued but unpaid interest and penalties. 3% Convertible Debentures On June 27, 2002 we had outstanding $2,000,000 principal amount of our 3% convertible debenture. The debenture is convertible into shares of ~~series~~our Acommon stock at any time at a conversion price of 90% of the average of the three lowest closing bid process, as reported by Bloomberg LP during the twenty trading days immediately preceding, but not including, the date of the related conversion notice. In January 2002, the maturity date of the debenture, which was originally April 24, 2002, was extended to February 1, 2007. In consideration for this extension, the conversion price discount was increased to 15% from 10%. The debenture is redeemable at any time before the maturity date at 120% of the outstanding principal amount of the debenture. The terms of the debenture provide that the number of shares that the holder may acquire upon conversion or exercise may not exceed that number that would render the holder the beneficial owner of more than 4.99% of the then outstanding shares of common stock. The debenture is secured by our asphalt barge, all the shares of American International Refinery, Inc., and St. Marks Refinery, Inc., and 85% of the shares of American International Petroleum Kazakhstan. The debenture is junior in right of payment (but not with respect to the rights to the collateral) to our 5% secured convertible ~~preferred~~debentures due February 18, 2004, but will rank senior in respect to any of our other debt, except debt to GCA and its affiliates, which has equal ranking with the note. We also agreed not to consummate a sale of material assets without notification to the holder, except for a sale of a portion of our License 1551. Upon the occurrence of a change in control of our company or registration default, we may have to redeem the debenture in cash. Also, upon consummation of certain financings in excess of $250,000, we must use 25% of the related proceeds to redeem the debenture. In the event we default, the holder of the debenture may declare it to be immediately due and payable and could proceed to enforce its rights under the debenture. Interest on the debenture is payable quarterly in cash or, at our option, in shares of our common stock. ~~were~~On ~~first~~June ~~sold~~27, 2002 we had outstanding $5,936,128 principal amount of another 3% convertible debenture to GCA, which we issued in exchange for the total aggregate outstanding indebtedness due under certain bridge notes we previously issued to that investor. The debenture was issued under the ~~purchase~~same ~~agreement~~terms as the debenture issued on April 24, 2001, described above. The maturity date of this debenture was also extended to February 1, 2007 for like consideration. The terms of the debenture provide that the number of shares that the holder may acquire upon conversion or exercise may not exceed that number that would render the holder the beneficial owner of more than 4.9% of the then outstanding shares of common stock. Bridge Notes On June 27, 2002 we had outstanding $1.25 million principal amount of our 14% bridge note due December 19, 2002. The note is secured by our St. Marks refinery, but the collateral was recently amended to include the items listed below in the description of our $1.9 million bridge note. We also agreed not to consummate a sale of material assets without notification to the holder. If we default, the holder may declare the note to be immediately due and payable and may proceed to enforce its rights under the note. Interest on the note of 14% per annum is payable quarterly in cash or, at our option, in shares of our common stock. Upon a change of control, upon the request of the holder, we may need to redeem the note in cash. Also, upon consummation of certain financings in excess of $250,000, we must use 25% of the related proceeds to redeem the note. 40

33On June 27, 2002 we also had outstanding a $1.9 million nine-month term 12% bridge note due March 18, 2003. Interest on the note of 12% per annum is payable at maturity in cash or, at our option, in shares of our common stock. The note is secured by our asphalt barge, all the shares of American International Refinery, Inc., and St. Marks Refinery, Inc., and 85% of the shares of American International Petroleum Kazakhstan. This collateral was also provided to secure all other outstanding obligations we have to GCA or any of GCA’s affiliates by our company. The note is junior in right of payment (but not with respect to the rights to the collateral) to our 5% secured convertible debentures due February 18, 2004, but will rank senior in respect to any of our other debt, except debt to GCA and its affiliates, which has equal ranking with the note. We also agreed not to consummate a sale of material assets without notification to the holder, except for a sale of a portion of our License 1551. Upon the occurrence of a change in control of our company or registration default, we may have to redeem the note in cash. Also, upon consummation of certain financings in excess of $250,000, we must use 25% of the related proceeds to redeem the note. In the event we default, the holder of the note may declare it to be immediately due and payable and could proceed to enforce its rights under the note. Shares Eligible for Future Sale As of June 27, 2002, we had 199,358,348 shares of common stock outstanding, of which only 196,471,135 shares of common stock are transferable without restriction under the Securities Act. The remaining 2,887,213 shares, issued in private transactions, are “restricted securities”, as that term is defined in Rule 144 promulgated under the Securities Act, which may be publicly sold only if registered under the Securities Act or if sold in accordance with an applicable exemption from registration, such as Rule 144. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of our company, who has beneficially owned restricted securities for at least one year, is entitled to sell (together with any person with whom such individual is required to aggregate sales), within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class, or, if the common stock is quoted on Nasdaq or a national securities exchange, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of our company for at least three months, and who has beneficially owned restricted securities for at least two years is entitled to sell such restricted securities under Rule 144 without regard to any of the limitations described above. In addition,

• AAn ~~“change~~indeterminate innumber ~~control”~~of shares may be acquired upon conversion of the outstanding $5,447,000 principal amount of our ~~company~~5% convertible debenture due February 18, 2004, since there is no minimum conversion price. At an assumed conversion price of $0.07 per share, the holder of the 5% debenture could acquire 90,783,329 shares of common stock upon conversion of, and payment of 40 months accrued interest on, the 5% debenture, representing approximately 46% of the shares outstanding as of June 27, 2002.

• AAn ~~consolidation~~indeterminate number of shares may be acquired upon conversion of the outstanding $7,936,138 ~~merger~~principal oramount ~~amalgamation~~of our 3% convertible secured debentures due February 2007, since there is no minimum conversion price. At an assumed conversion price of $0.07 per share, the holder of the debentures could acquire 122,531,745 shares of common stock upon conversion of, and payment of 12 months interest on, the debentures and our ~~company~~bridge notes due December 18, 2002 and March 18, 2003, together representing 61% of the shares outstanding as of June 27, 2002.

• ~~Our~~15,830,976 ~~failure to have the registration statement for the resale of the~~ shares ~~of common stock that~~ may be acquired upon ~~conversion~~exercise of ~~the~~outstanding ~~series A convertible preferred stock declared effective~~warrants, orrepresenting ~~our~~approximately ~~failure~~8% toof ~~maintain~~ the ~~effectiveness~~shares ofoutstanding ~~that~~as ~~registration~~June ~~statement~~27, ~~after specified periods of time, or our failure to register a sufficient number of shares for conversion of the series A convertible preferred stock~~2002.

• ~~Our~~5,803,483 ~~failure~~shares tomay ~~obtain~~be ~~stockholder~~acquired ~~approval in accordance with the corporate governance rules of the Nasdaq Stock Market for the issuance~~ upon ~~conversion of shares of series A convertible preferred stock and~~ exercise of ~~warrants~~outstanding ~~issued~~options, ~~under~~representing ~~the~~approximately ~~purchase agreement of more than 19.99~~3% of the ~~outstanding~~ shares ofoutstanding ~~common~~as ~~stock on the date~~ of ~~the~~June purchase agreement within 40 days after the date upon which we have issued the maximum number of shares that may be issued without obtaining such stockholder approval. Since our common stock does not qualify for inclusion on the Nasdaq Stock Market27, ~~this limitation no longer applies~~2002.

~~• Our failure to pay, when due, the principal amount or accrued interest on our outstanding bridge notes held by GCA. In April 2001 all of these notes were exchanged for 3% convertible debentures.~~41

•Dividend ~~The~~Policy ~~suspension~~Since orwe ~~delisting~~have ofnever ~~trading~~paid inany dividends on our common stock and we do not anticipate paying such dividends in the foreseeable future. We intend to retain earnings, ~~unless~~if ~~within~~any, 10to ~~trading~~finance ~~days~~our operations. Reports to Shareholders We distribute to our shareholders annual reports containing financial statements audited and reported upon by our independent certified public accountants after the end of each fiscal year, and makes available such ~~suspension~~other periodic reports as we deem to be appropriate or ~~delisting~~as may be required by law or by the rules or regulations of any stock exchange on which our common stock is listed. Our fiscal year end is December 31. Transfer Agent and ~~approved~~Warrant Agent — Transfer Online, Portland, Oregon, is the transfer agent for ~~trading~~our common stock. Where You Can Find More Information We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock to be sold under this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement. For further information about us and the common stock to be sold in this offering, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document we have filed. You may inspect the registration statement, including exhibits, without charge at the principal office of the SEC in Washington, D.C. You may inspect and copy the registration statement at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, or at the SEC’s regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 233 Broadway, New York, ~~Stock~~New ~~Exchange~~York 10279. You can also obtain copies of this material at prescribed rates by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the ~~American~~SEC ~~Stock~~maintains ~~Exchange~~a website at that contains reports, proxy and information statements and other information regarding companies that file electronically with the ~~Nasdaq~~SEC. ~~SmallCap~~Legal ~~Market~~Matters orThe validity of the ~~OTC~~shares ~~Bulletin~~of ~~Board~~common stock offered by the prospectus has been passed upon by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York 10158. Members of Snow Becker Krauss P.C. own 149,861 shares of common stock, all of which were issued for legal fees and disbursements. Experts The consolidated financial statements as of December 31, 2000 and 2001 and for each of the three years in the period ended December 31, 2001 included in this prospectus have been so included in reliance on the report of Hein + Associates LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The report of Hein + Associates LLP contains an explanatory paragraph describing conditions that raise substantial doubt about our ability to continue as a going concern as set forth in Note 2 to our consolidated financial statements. 42

The redemption price is an amount equal to the number of shares of common stock that could be acquired upon conversion of the outstanding shares of series A convertible preferred stock times the average closing bid price of our common stock for the five trading days preceding the event causing the redemption. Shares Eligible for Future Sale As of July 21, 2001, we had 162,530,577 shares of common stock outstanding, of which only 159,343,364 shares of common stock are transferable without restriction under the Securities Act. The remaining 3,187,213 shares, issued in private transactions, are “restricted securities”, as that term is defined in Rule 144 promulgated under the Securities Act, which may be publicly sold only if registered under the Securities Act or if sold in accordance with an applicable exemption from registration, such as Rule 144. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of our company, who has beneficially owned restricted securities for at least one year, is entitled to sell (together with any person with whom such individual is required to aggregate sales), within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class, or, if the common stock is quoted on Nasdaq or a national securities exchange, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of our company for at least three months, and who has beneficially owned restricted securities for at least two years is entitled to sell such restricted securities under Rule 144 without regard to any of the limitations described above. In addition,

• An indeterminate number of shares may be acquired upon conversion of the outstanding $5,447,000 principal amount of our 5% convertible debenture due February 18, 2004, since there is no minimum conversion price. At an assumed conversion price of $0.11 per share, the holder of the 5% debenture could acquire 55,295,303 shares of common stock upon conversion of, and payment of 28 months accrued interest on, the 5% debenture, representing approximately 34.0% of the shares outstanding as of July 21, 2001.

• An indeterminate number of shares may be acquired by GCA Strategic Investment Fund Limited upon conversion of the 750 shares of series A convertible preferred stock it currently holds, since there is no minimum conversion price. If GCA converts all 750 shares of series A convertible preferred stock at an assumed conversion price of $0.11 per share, we will issue 6,818,182 shares of common stock, representing approximately 4.1% of the shares outstanding on July 21, 2001.

• An indeterminate number of shares may be acquired upon conversion of the outstanding $9,276,128 principal amount of our 3% convertible secured debentures due April 2002, since there is no minimum conversion price. At an assumed conversion price of $0.11 per share, the holder of the debentures could acquire 86,858,289 shares of common stock upon conversion of, and payment of 12 months interest on, the debentures, representing 53.4% of the shares outstanding as of July 21, 2001.

• 13,830,926 shares may be acquired upon exercise of outstanding warrants, representing approximately 9.1% of the shares outstanding as of July 21, 2001.

• 6,821,933 shares may be acquired upon exercise of outstanding options, representing approximately 4.5% of the shares outstanding as of July 21, 2001.

Dividend Policy Since we have never paid any dividends on our common stock and we do not anticipate paying such dividends in the foreseeable future. We intend to retain earnings, if any, to finance our operations. Reports to Shareholders We distribute to our shareholders annual reports containing financial statements audited and reported upon by our independent certified public accountants after the end of each fiscal year, and makes available such other periodic reports as we deem to be appropriate or as may be required by law or by the rules or regulations of any stock exchange on which our common stock is listed. Our fiscal year end is December 31. Transfer Agent and Warrant Agent Transfer Online, Portland, Oregon, is the transfer agent for our common stock. Where You Can Find More Information We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock to be sold under this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement. For further information about us and the common stock to be sold in this offering, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document we have filed. You may inspect the registration statement, including exhibits, without charge at the principal office of the SEC in Washington, D.C. You may inspect and copy the registration statement at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, or at the SEC’s regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048. You can also obtain copies of this material at prescribed rates by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the SEC maintains a website at that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC. Legal Matters The validity of the shares of common stock offered by the prospectus has been passed upon by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York 10158. Members of Snow Becker Krauss P.C. own 144,518 shares of common stock, all of which were issued for legal fees and disbursements. Experts The consolidated financial statements as of December 31, 1999 and 2000 and for each of the three years in the period ended December 31, 2000 included in this prospectus have been so included in reliance on the report of Hein + Associates LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The report of Hein + Associates LLP contains an explanatory paragraph describing conditions that raise substantial doubt about our ability to continue as a going concern as set forth in Note 2 to our consolidated financial statements. 35

Index to Consolidated Financial Statements

(a)		Documents Filed as Part of the Report
(1)		Financial Statements	Page No.
		Audited Financial Statements:
		Reports of Independent Accountants	F-1
		Consolidated Balance Sheet
		December 31, 2000 and 1999	F-2
		Consolidated Statement of Operations
		Years Ended December 31, 2000, 1999, and 1998	F-3
		Consolidated Statement of Cash Flows
		Years Ended December 31, 2000, 1999, and 1998	F-4
		Consolidated Statement of Changes in Stockholder’s Equity
		Year Ended December 31, 2000	F-5
		Year Ended December 31, 1999	F-6
		Year Ended December 31, 1998	F-7
		Notes to Consolidated Financial Statements	F-8
		Supplementary Oil and Gas Information	F-25
		Unaudited Consolidated Financial Statements:
		Consolidated Balance Sheet
		at March 31, 2001 and March 31, 2000	F-27
		Consolidated Statements of Operations
		Three Months Ended March 31, 2001 and March 31, 2000	F-28
		Consolidated Statements of Cash Flow
		Three Months Ended March 31, 2001 and March 31, 2000	F-29
		Consolidated Statements of Changes in Stockholder’s Equity
		Three Months Ended March 31, 2001	F-30
		Three Months Ended March 31, 2000	F-31
		Notes to Condensed Consolidated Financial Statements
		March 31, 2001	F-32
(7)	Financial Statement Schedules
		Independent Auditor’s Report on Schedule	F-33
		Valuation and Qualifying Accounts	F-34

(a)

Documents Filed as Part of the Report

36(1) Financial Statements Page No.

~~INDEPENDENT~~Audited ~~AUDITOR’S~~Financial REPORT To the Board of Directors and Stockholders American International Petroleum Corporation We have audited the accompanying consolidated balance sheets of American International Petroleum Corporation and Subsidiaries as of December 31, 2000 and 1999, and related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American International Petroleum Corporation and Subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with generally accepted accounting principles. The Company reported a net loss of approximately $24.9 million in 2000 and $14.9 million during 1999, has commitments to fund the operations of its Kazakhstan subsidiary (see Note 10) and has a working capital deficit of approximately $8.2 million at December 31, 2000. These matters raise a substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are discussed in Note 2 to the financial statements. As of December 31, 2000, the Company has costs capitalized in the accompanying balance sheet of approximately $21,700,000 relating to unevaluated oil and properties in Kazakhstan and approximately $31,000,000 relating to its refineries. At the present time, the Company has no commercially feasible means of transporting any oil and gas production it may produce from the Kazakhstan properties and does not have the financial resources to develop these properties. Should the Company be unable to obtain the capital necessary to develop the Kazakhstan properties or be unable to develop a commercially feasible means of transporting the oil and gas production the Company may develop, the carrying value of these properties will likely become impaired. Should the Company be unable to initiate profitable operations at the refinery, the carrying value of the refinery properties will also likely become impaired. HEIN + ASSOCIATES, LLP Houston, TexasMarch 23, 2001 F-1Statements:

Reports of Independent Accountants

F-1

Consolidated Balance Sheet
December 31, 2001 and 2000

F-2

Consolidated Statement of Operations
Years Ended December 31, 2001, 2000, and 1999

F-3

Consolidated Statement of Cash Flows
Years Ended December 31, 2001, 2000, and 1999

F-4

Consolidated Statement of Changes in Stockholder’s Equity
Year Ended December 31, 2001

F-5

Year Ended December 31, 2000

F-6

Year Ended December 31, 1999

F-7

Notes to Consolidated Financial Statements

F-8

Supplementary Oil and Gas Information

F-28

Unaudited Financial Statements:

Condensed Consolidated Balance Sheet
March 31, 2002 and December 31, 2001

F-29

Condensed Consolidated Statement of Operations
Three Months Ended March 31, 2002 and 2001

F-30

Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 2002 and 2001

F-31

Condensed Consolidated Statement of Changes in Stockholders’ Equity
Three Months Ended March 31, 2002

F-32

Notes to Condensed Consolidated Financial Statements

F-33

(5)

Financial Statement Schedules

Independent Auditor’s Report on Schedule

F-34

Valuation and Qualifying Accounts

F-35

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Stockholders
American International Petroleum Corporation

We have audited the accompanying consolidated balance sheets of American International Petroleum Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American International Petroleum Corporation and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

The Company reported a net loss of approximately $27.5 million in 2001 and $24.9 million during 2000, has commitments to fund the operations of its Kazakhstan subsidiary (see Note 10) and has a working capital deficit of approximately $3.1 million at December 31, 2001. These matters raise a substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are discussed in Note 2 to the financial statements.

As of December 31, 2001, the Company has costs capitalized in the accompanying balance sheet of approximately $13,100,000 relating to unevaluated oil and properties in Kazakhstan and approximately $19,000,000 relating to its refineries. At the present time, the Company has no commercially feasible means of transporting any oil and gas production it may produce from the Kazakhstan properties and does not have the financial resources to develop these properties. Should the Company be unable to obtain the capital necessary to develop the Kazakhstan properties or be unable to develop a commercially feasible means of transporting the oil and gas production the Company may develop, the carrying value of these properties will likely become further impaired. Should the Company be unable to initiate profitable operations at the refinery, the carrying value of the refinery properties will also likely become further impaired.

HEIN + ASSOCIATES LLP

Houston, Texas
March 1, 2002

F-1

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31,2000		December 31,1999
	December 31,2001		December 31,2000
Assets
Current assets:
Cash and cash equivalents	$ ~~684~~456,~~603~~343		$ 1684,~~753,707~~603
Accounts and notes receivable, net	~~392~~2,~~741~~097,126		~~497~~392,~~553~~741
Inventory	~~156~~199,~~110~~811		~~723~~156,~~088~~110
Deferred financing costs	~~2,211~~—		~~130~~2,~~727~~211
Prepaid expenses	~~614~~668,~~958~~923		~~793~~614,~~956~~958
Total current assets	13,~~850~~422,~~623~~203		31,~~899~~850,~~031~~623
Property, plant and equipment:
Unevaluated oil and gas properties	2113,~~681~~168,~~343~~200		3121,~~556~~681,~~376~~343
Evaluated oil and gas properties	1223,~~546~~216,~~295~~970		—12,546,295
Refinery property and equipment	3828,~~001~~877,~~917~~932		3738,~~999~~001,~~682~~917
Other	1,~~081~~079,~~974~~502		1,~~005~~081,~~886~~974
	73,311,529		70,561,944
	66,342,604		73,311,529
Less - accumulated depreciation, depletion,
amortization and provision for impairment	(2033,~~906~~586,~~133~~034	)	(620,~~470~~906,~~672~~133	)
Net property, plant and equipment	5232,~~405~~756,~~396~~570		6452,~~091~~405,~~272~~396
Notes receivable, less current portion	~~575,112~~—		1575,~~252,696~~112
Other long-term assets, net	~~167~~875,~~291~~467		~~415~~167,~~270~~291
Total assets	$ 5437,~~998~~054,~~422~~240		$ 6954,~~658~~998,~~269~~422
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term debentures	$ 51,~~787~~246,~~500~~492		$ 25,~~223~~787,500
Notes payable - officers and directors	~~350~~420,000		—350,000
Notes payable - trade	~~940~~319,~~673~~873		1940,~~736,831~~673
Accounts payable	12,~~469~~904,~~498~~188		31,~~641~~469,~~886~~498
Accrued liabilities	1,~~525~~675,~~098~~543		1,~~301~~525,~~472~~098
Total current liabilities	106,~~072~~566,~~769~~096		810,~~903~~072,~~689~~769
Long-term debt	513,~~565~~919,~~395~~968		115,~~984~~565,~~592~~395
Total liabilities	1520,~~638~~486,~~164~~064		2015,~~888~~638,~~281~~164
Commitments and contingent liabilities (Notes 10 and 16)	—		—
Commitments and contingent liabilities (Note 10)	—		—
Minority Interest Liability	305,956		305,956
Redeemable preferred stock, par value $0.01, 7,000,000
shares authorized, 1,250 and 0 shares issue and outstanding
shares authorized, 0 and 1,250 shares issued and outstanding
at December 31, 2000 and December 31, 1999, respectively	1,186,751		—
at December 31, 2001 and December 31, 2000, respectively	—		1,186,751
Stockholders’ Equity:
Common stock, par value $.08, 200,000,000 shares
Common stock, par value $.08, 300,000,000 shares
authorized, 132,524,318 and 91,282,773 shares issued and
authorized, 181,602,484 and 132,524,318 shares issued and
outstanding at December 31, 2000 and December 31, 1999,
outstanding at December 31, 2001 and December 31, 2000,
respectively	1014,~~601~~528,~~945~~199		710,~~302~~601,~~621~~945
Additional paid-in capital, common stock	~~156~~158,~~234~~352,~~428~~018		~~145~~156,~~605~~234,~~966~~428
Common stock issued as collateral, held in escrow	(~~162~~141,~~500~~700	)	(1162,~~065,938~~500	)
Accumulated deficit	(~~128~~156,~~806~~476,~~322~~297	)	(~~103~~128,~~378~~806,~~617~~322	)
Total stockholders’ equity	3716,~~867~~262,~~551~~220		4837,~~464~~867,~~032~~551
Total liabilities and stockholders’ equity	$ 5437,~~998~~054,~~422~~240		$ 6954,~~658~~998,~~269~~422

The accompanying notes are an integral part of these consolidated financial statements.

F-2

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	For the years ended December 31,
	2000		1999		1998
	2001		2000		1999
Revenues:
Refinery operating revenues	$ 3,108,670		$ 8,137,867		$ 11,394,009
Trading revenues	$ 9,336,588		$ —		$ —
Other	165,350		214,171		460,597
Asphalt revenues	5,435,061		2,764,448		7,624,477
Total revenues	3,274,020		8,352,038		11,854,606
Refinery revenues	3,009,251		170,341		513,390
Joint Venture income	529,035		173,881		—
Other	327,087		165,350		214,171
Total revenues	18,637,022		3,274,020		8,352,038
Expenses:
Costs of goods sold - refinery	4,243,468		8,670,760		11,281,139
Trading costs	9,083,716		—		—
General and administrative	6,777,249		6,367,857		5,097,468
Asphalt costs	4,852,130		2,319,020		6,859,265
Depreciation, depletion and
Refinery costs	3,500,804		1,924,448		1,811,495
amortization	1,844,942		1,730,710		813,088
General and administrative	4,824,633		6,777,249		6,367,857
Interest	2,746,293		6,500,579		1,912,949
Depreciation, depletion and amortization	1,965,213		1,844,942		1,730,710
Realized and unrealized loss on marketable securities	—		—		359,325
Interest	1,956,155		2,746,293		6,500,579
Provision for impairment of oil and gas properties	1210,~~546~~670,~~295~~675		—12,546,295		~~1,493,750~~—
Total expenses	28,158,247		23,269,906		20,957,719
Provision for impairment of plant assets	9,236,280		—		—
Net loss	(24,884,227	)	(14,917,868	)	(9,103,113	)
Total expenses	46,089,606		28,158,247		23,269,906
Incremental yield on preferred stock	543,478		—		—
Net loss	(27,452,584	)	(24,884,227	)	(14,917,868	)
Net loss applicable to common stockholders	$(25,427,705	)	$(14,917,868	)	$(9,103,113	)
Incremental yield on preferred stock	217,391		543,478		—
Net loss applicable to common stockholders	$(27,669,975	)	$(25,427,705	)	$(14,917,868	)
Net loss per share applicable to common stockholders
basic and diluted	$ (0.23	)	$ (0.20	)	$ (0.17	)
- basic and diluted	$ (0.17	)	$ (0.23	)	$ (0.20	)
Weighted-average number of shares
of common stock outstanding	~~109~~160,~~386~~340,~~878~~133		72109,~~855~~386,~~230~~878		5372,~~741~~855,~~498~~230

The accompanying notes are an integral part of these consolidated financial statements.

F-3

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND ~~SUBSIDIARIES~~SUBSIDIARIESCONSOLIDATED ~~CONSOLIDATED~~ STATEMENTS OF CASH FLOWS

	For the years ended December 31,
	2000		1999		1998
	2001		2000		1999
Cash flows from operating activities:
Net loss	$(2427,~~884~~452,~~227~~584	)	$(1424,~~917~~884,~~868~~227	)	$(914,~~103~~917,~~113~~868	)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Incremental yield on preferred stock	(~~543~~217,~~478~~391	)	(543,478	)	—
Depreciation, depletion, amortization, accretion of
discount on debt and provision for impairment	1623,~~225~~298,~~969~~915		516,~~716~~225,~~550~~969		25,~~472~~716,~~751~~550
Accretion of premium on notes receivable	~~(22,416~~—	)	(5022,~~604~~416	)	(~~208~~50,~~886~~604	)
Provision for bad debts	—		—		1,493,750
Revaluation of provision for bad debts	(864,888	)	—		—
Realized and unrealized loss on marketable securities	—		—		359,325
Non-cash provision for services	—		20,000		468,220
Non-cash provision for services	20,000		468,220		255,814
Issuance of stock for compensation expense	98,461		306,790		186,233
Issuance of stock for compensation expense	306,790		186,233		196,900
Changes in assets and liabilities:
Accounts and notes receivable	~~104~~(504,~~812~~385	)	50104,~~889~~812		150,~~313,816~~889
Inventory	~~566~~(43,~~978~~701	)	~~831~~566,~~606~~978		~~(798~~831,~~974~~606	)
Prepaid and other	~~178~~(41,~~998~~081	)	~~(86~~178,~~466~~998	)	~~426~~(86,~~060~~466	)
Accounts payable and accrued liabilities	~~(22~~1,~~638~~605,489	)	~~495~~(22,~~021~~638	)	2495,~~968,458~~021
Net cash used in operating activities	(84,~~069~~121,~~212~~165	)	(78,~~306~~069,~~419~~212	)	(~~624~~7,~~099~~306,419	)
Cash flows from investing activities:
Additions to oil and gas properties	(2,~~627~~113,~~038~~519	)	(52,~~980~~627,~~341~~038	)	(85,~~512~~980,~~328~~341	)
Additions to refinery property and equipment	(2112,~~235~~295	)	(~~800~~2,~~974~~235	)	(8800,~~578,049~~974	)
Proceeds from sales of marketable securities	—		—		376,633
(Increase) decrease to other long term assets	(465,704	)	557,914		(752,988	)
(Increase) decrease to other long term assets	557,914		(752,988	)	(592,444	)
Net cash used in investing activities	(2,691,518	)	(2,071,359	)	(7,534,303	)
Net cash used in investing activities	(2,071,359	)	(7,534,303	)	(17,306,188	)
Cash flows from financing activities:
Net increase in short-term debt	31,~~402~~277,~~236~~751		23,~~500~~402,~~000~~236		—2,500,000
Net increase (decrease) in notes payable	(~~796~~586,~~158~~024	)	11(796,~~481~~158	)	111,~~725,350~~481
Net increase (decrease) in notes payable - officers	~~350~~70,000		~~(266~~350,~~850~~000	)	(266,850	)
Repayments of long-term debt	—		~~(3,500,000~~—	)	(3,500,000	)
Proceeds from exercise of stock options and warrants, net	~~189~~3,~~138~~819		~~768~~189,~~877~~138		~~738~~768,~~482~~877
Proceeds from sale of preferred stock	52,~~926~~371,~~251~~999		—5,926,251		—
Proceeds from sale of common stock	—
Proceeds from issuance of debentures, net	3,446,878		—		16,704,176
Proceeds from issuance of debentures, net	—		16,704,176		11,855,000
Net cash provided by financing activities	6,584,423		9,071,467		16,217,684
Net cash provided by financing activities	9,071,467		16,217,684		14,585,682
Net increase (decrease) in cash and cash equivalents	(228,260	)	(1,069,104	)	1,376,962
Net increase (decrease) in cash and cash equivalents	(1,069,104	)	1,376,962		(3,344,605	)
Cash and cash equivalents at beginning of year	684,603		1,753,707		376,745
Cash and cash equivalents at beginning of year	1,753,707		376,745		3,721,350
Cash and cash equivalents at end of year	$ 456,343		$ 684,603		$ 1,753,707
Cash and cash equivalents at end of year	$ 684,603		$ 1,753,707		$ 376,745

The accompanying notes are an integral part of these consolidated financial statements.

F-4

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common stock		~~Additionalpaid~~Additional paid-in		~~CommonStockHeld~~Common Stock Held In		Accumulated		Total
	Shares	Amount	capital		Escrow		deficit		~~Total~~
Balance, January 1, 2000	91,282,773	$ 7,302,621	$ 145,605,966		$(1,065,938	)	$(103,378,617	)	$ 48,464,032
Balance, January 1, 2001	132,524,318	$10,601,945	$ 156,234,428		$(162,500	)	$(128,806,322	)	$ 37,867,551
Conversions of debentures	1411,~~941~~137,~~073~~575	1891,~~195,286~~006	586,~~656,829~~194		—		—		6977,~~852,115~~200
Issuance of stock in lieu of current liabilities	2,402,253	192,180	1,225,663		508,282		—		1,926,125
Issuance of stock for compensation and services	960,000	76,800	21,661		—		—		98,461
Issuance of stock for compensation and services	536,013	42,881	283,909		—		—		326,790
Issuance of stock in lieu of current liabilities	407,664	32,613	9,909		—		—		42,522
Issuance of stock options and warrants	—	—	254,077		—		—		254,077
Options and warrants exercised	29,375	2,350	1,469		—		—		3,819
Options and warrants exercised	1,558,340	124,667	64,471		—		—		189,138
Stock issued and adjustment to value of stock previously issued for collateral on debt	—	—	(20,800	)	20,800		—		—
Stock issued and adjustment to value of stock
Preferred stock converted into common stock	36,543,552	2,923,485	852,657		—		—		3,776,142
previously issued for collateral on debt	300,000	24,000	(419,156	)	395,156		—		—
Imputed interest on convertible debentures	—	—	1,030,681		—		—		1,030,681
Preferred stock converted into common stock	21,503,866	1,720,310	3,562,669		—		—		5,282,979
Stock warrants on convertible debentures	—	—	84,568		—		—		84,568
Imputed dividend on convertible preferred stock	—	—	—		—		(543,478	)	(543,478	)
Stock warrants on non- convertible debentures	—	—	51,251		—		—		51,251
Net loss for the period	—	—	—		—		(24,884,227	)	(24,884,227	)
Imputed dividend on convertible preferred stock	—	—	—		—		(217,391	)	(217 391
Balance, December 31, 2000	132,524,318	$10,601,945	$ 156,234,428		$ (162,500	)	$(128,806,322	)	$ 37,867,551
Net loss for the period	—	—	—		—		(27,452,584	)	(27,452,584	)
Balance, December 31, 2001	181,602,484	$14,528,199	$ 158,352,018		$(141,700	)	$(156,476,297	)	$ 16,262,220

The accompanying notes are an integral part of these consolidated financial statements.

F-5

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common stock		~~Additionalpaid~~Additional paid-in		Common Stock		Accumulated		Total
	Shares	Amount	capital		Held In Escrow		deficit		~~Total~~
Balance, January 1, 1999	65,992,328	$5,279,385	$129,711,531		—		$(88,460,749	)	$ 46,530,167
Balance, January 1, 2000	91,282,773	$ 7,302,621	$ 145,605,966		$(1,065,938	)	$(103,378,617	)	$ 48,464,032
Conversions of debentures	1714,~~574~~941,~~305~~073	1,~~405~~195,~~944~~286	65,~~196~~656,~~429~~829		—		—		76,~~602~~852,~~373~~115
Issuance of stock in lieu of current
Issuance of stock in lieu of current liabilities	2,402,253	192,180	1,225,663		508,282		—		1,926,125
liabilities	1,798,968	143,917	1,329,796		—		—		1,473,713
Issuance of stock for compensation and services	536,013	42,881	283,909		—		—		326,790
Issuance of stock for compensation	223,919	17,914	168,319		—		—		186,233
Issuance of stock options and warrants	—	—	254,077		—		—		254,077
Issuance of stock and options for services	425,000	34,000	434,220		—		—		468,220
Options and warrants exercised	1,558,340	124,667	64,471		—		—		189,138
Issuance of stock for property and
Stock issued and adjustment to value of stock previously issued for collateral on debt	300,000	24,000	(419,156	)	395,156		—		—
equipment	2,090,000	167,200	1,685,166		—		—		1,852,366
Preferred stock converted into common stock	21,503,866	1,720,310	3,562,669		—		—		5,282,979
Issuance of stock options and warrants	—	—	1,455,835		—		—		1,455,835
Imputed dividend on convertible preferred stock	—	—	—		—		(543,478	)	(543,478	)
Options and warrants exercised	1,283,253	102,661	666,216		—		—		768,877
Net loss for the period	—	—	—		—		(24,884,227	)	(24,884,227	)
Imputed interest on debentures
Balance, December 31, 2000	132,524,318	$10,601,945	$ 156,234,428		$ (162,500	)	$(128,806,322	)	$ 37,867,551
convertible at a discount to market	—	—	3,044,116		—		—		3,044,116
Issuance of stock for collateral on debt	1,895,000	151,600	914,338		(1,065,938	)	—		—
Net loss for the year	—	—	—		—		(14,917,868	)	(14,917,868	)
Balance, December 31, 1999	91,282,773	$7,302,621	$145,605,966		(1,065,938	)	$(103,378,617	)	$ 48,464,032

The accompanying notes are an integral part of these consolidated financial statements. F-6

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’EQUITY

	Common stock		~~Additionalpaid~~Additional paid-in	~~Accumulated~~Common Stock		Accumulated		Total
	Shares	Amount	capital	~~deficit~~Held In Escrow		~~Total~~deficit
Balance, January 1, 1998	48,436,576	$3,874,926	$107,987,091	$(79,357,636	)	$ 32,504,381
Balance, January 1, 1999	65,992,328	$5,279,385	$129,711,531	$ —		$(88,460,749	)	$ 46,530,167
Conversions of Debentures	13,794,032	1,103,521	14,422,859	—		15,526,380
Conversions of debentures	17,574,305	1,405,944	6,196,429	—		—		7,602,373
Issuance of stock in lieu of current
Issuance of stock in lieu of current liabilities	1,798,968	143,917	1,329,796	—		—		1,473,713
liabilities	1,506,347	120,508	1,549,209	—		1,669,717
Issuance of stock for compensation	223,919	17,914	168,319	—		—		186,233
Issuance of stock for compensation	50,000	4,000	192,900	—		196,900
Issuance of stock and options for services	425,000	34,000	434,220	—		—		468,220
Issuance of stock and options for services	100,000	8,000	247,814	—		255,814
Issuance of stock for property and equipment	2,090,000	167,200	1,685,166	—		—		1,852,366
Issuance of stock for refinery property and
Issuance of stock options and warrants	—	—	1,455,835	—		—		1,455,835
equipment - Regulation S Offering	1,500,000	120,000	1,567,500	—		1,687,500
Options and warrants exercised	1,283,253	102,661	666,216	—		—		768,877
Issuance of stock options and warrants	—	—	936,459	—		936,459
Options and warrants exercised	605,373	48,430	690,052	—		738,482
Imputed interest on debentures
convertible at a discount to market	—	—	23,~~117~~044,~~647~~116	—		~~2,117,647~~—		3,044,116
Net loss for the year	—	—	—	(9,103,113	)	(9,103,113	)
Issuance of stock for collateral on debt	1,895,000	151,600	914,338	(1,065,938	)	—		—
Balance, December 31, 1998	65,992,328	$5,279,385	$129,711,531	$(88,460,749	)	$ 46,530,167
Net loss for the year	—	—	—	—		(14,917,868	)	(14,917,868	)
Balance, December 31, 1999	91,282,773	$7,302,621	$145,605,966	$(1,065,938	)	$(103,378,617	)	$ 48,464,032

The accompanying notes are an integral part of these consolidated financial statements

F-7

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 — GENERAL, ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: American International Petroleum Corporation (the “Company”) was incorporated in the State of Nevada and, through its wholly-owned subsidiaries, is the owner of a refinery in Lake Charles, Louisiana, which processes and sells asphalt into the Gulf Coast asphalt market and has capability to refine other crude oil products, such as vacuum gas oil, naphtha and diesel, a refinery and terminal in St. Marks, Florida, which it utilizes as a distribution facility to market some of its asphalt, a 26,000 barrel asphalt transport barge, a 100% working interest in a gas concession, and a 70% working interest in an oil and gas concession in Kazakhstan, respectively. The Company is also seeking domestic and international oil and gas properties and projects. Sale of Subsidiaries On February 25, 1997, the Company sold all of the issued and outstanding common stock of two of its wholly-owned subsidiaries, American International Petroleum Corporation of Colombia (“AIPCC”) and Pan American Petroleum Corporation (“PAIPC”) to Mercantile International Petroleum Inc. (“MIP”). ~~Consequently, all references to these subsidiaries herein are presented in the past tense.~~ The assets of AIPCC and PAIPC consisted of oil and gas properties and equipment in South America with an aggregate net book value of approximately $17.9 million. The total aggregate purchase price payable by MIP for the Purchased Shares was valued at up to approximately $20.2 million, determined as follows: (a) Cash payments of approximately $3.9 million, of which approximately $2.2 million was paid simultaneously with the closing to retire the Company’s 12% Secured Debentures due December 31, 1997, which were secured by the Company’s shares of AIPCC, (b) assumption of AIPCC and PAIPC debt of an aggregate amount of $634,000, (c) 4,384,375 shares of MIP Common Stock (the “MIP Shares”) with a trading price of approximately $2.00 per share on the date the parties agreed in principle to the sale, (d) a two-year $3 million 5% exchangeable subordinated debenture of AIPCC (the “Exchangeable Debenture”), exchangeable into shares of common stock of MIP on the basis of $3 principal amount of such debenture for one share of MIP on or after February 25, 1998; or Registrant may demand payment on that date of $1.5 million of the principal balance thereof, (e) a $1.4 million “performance earn-out” from future production in Colombia, plus interest at 8% per annum, (f) up to $2.5 million (reduced proportionately to the extent the Net Operating Loss and Deferred Cost Deductions accrued by AIPCC through December 31, 1996 (“Accrued Tax benefit Deductions”) is less than $50 million but more than $20 million (payable from 25% of ~~AIPCC~~AIPC’s future tax savings related to Accrued Tax Benefit Deductions, if any, available to AIPCC on future tax filings in Colombia). In January 1998, the Company demanded payment of $1.5 million in principal, which was received by the Company in February 1998. The purchase price included an aggregate of approximately $2.5 million in payments from MIP in connection with MIP’s future potential tax savings in Colombia and $3 million of long and short-term notes at face value (not discounted to present value). Taking into consideration the $2.5 million tax payments, which were not recorded because of their contingent nature, and the discounted portion of the notes of approximately $452,000, the Company recorded an aggregate loss of approximately $564,000 on the sale of the subsidiaries. (See Note 15 – Subsequent Events). Joint Venture In July 2000, the refinery formed a joint venture with Sargeant Bulktainers, Inc. Their role in the joint venture iswas to provide it with asphaltic crude oil feedstocks and bulk asphalt supply. The refinery’s role iswas to provide asphalt blending, storage, marketing services and retail rack facilities. After product and operating costs the joint venture partners generally share profits on a 50-50 basis. The joint venture terminated on June 30, 2001. The refinery ~~accounts~~accounted for the joint venture on the equity method of accounting. Principles of consolidation The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries, American International Refinery, Inc. (“AIRI”), American International Marine, Inc. (“AIM”), St. Marks Refinery, Inc. (“SMR”) American International Petroleum Kazakhstan (“AIPK”), American Eurasia Petroleum Corporation (“AEPC”), American International Petroleum Corporation Holding, Inc. (“AIPC Holdings), AIPCC, PAIPC, and Gulf Coast Petroleum Trading, Inc. (“GCPT”). American International Petroleum Kazakhstan owns 70% of the stock of MED Shipping Usturt Petroleum Ltd. (“MSUP”), a Kazakhstan corporation and includes MSUP in its consolidated financial statements. ~~Intercompany balances and transactions are eliminated in consolidation.~~ F-8

Intercompany balances and transactions are eliminated in consolidation. Cash and cash equivalents All liquid short-term instruments purchased with original maturities of three months or less are considered cash equivalents Inventory Inventory consists of crude oil and asphalt feedstock. Crude oil and asphalt feedstocks are stated at the lower of cost or market value by using the first-in, first-out method. Property, plant and equipment Oil and gas properties The Company follows the full cost method of accounting for exploration and development of oil and gas properties, whereby all costs incurred in acquiring, exploring and developing properties are capitalized, including estimates of abandonment costs, net of estimated equipment salvage costs. No costs related to production, general corporate overhead, or similar activities have been capitalized. Individual countries are designated as separate cost centers. All capitalized costs plus the undiscounted future development costs of proved reserves are depleted using the unit-of-production method based on total proved reserves applicable to each country. Under the full cost method of accounting, unevaluated property costs are not amortized. A gain or loss is recognized on sales of oil and gas properties only when the sale involves significant reserves. Costs related to acquisition, holding and initial exploration of concessions in countries with no proved reserves are initially capitalized and periodically evaluated for impairment. We identified an impairment of oil and gas properties of $10,670,675 and $12,546,295 during 2001 and 2000, respectively. Costs not subject to amortization: The following table summarizes the categories of cost, which comprise the amount of unproved properties not subject to amortization.

		December 31,
			December 31
		2000		1999		1998
			2001		2000		1999
~~Kazakhstan:~~	Kazakhstan:
~~Acquisition Cost~~	Acquisition Cost	~~$ 11,724,477~~	$ 11,724,477	~~$11,724,477~~	$ 11,724,477	~~$11,724,477~~	$11,724,477
~~Exploration Cost~~	Exploration Cost	~~21,722,622~~	23,880,154	~~19,072,440~~	21,722,622	~~10,748,427~~	19,072,440
Less impairment		(12,546,295	)	—		—
	Less Impairment		(23,216,970	)	(12,546,295	)	—
Other
	Other:
~~Acquisition cost~~	Acquisition cost	~~780,539~~	780,539	~~759,459~~	780,539	~~965,982~~	759,459
		$ 21,681,343		$31,556,376		$23,438,886
			$ 13,168,200		$ 21,681,343		$31,556,376

Acquisition costs of unproved properties not subject to amortization at December 31, 2001, 2000, ~~1999~~ and ~~1998~~1999, respectively, consists mainly of lease acquisition costs related to unproved areas. The period in which the amortization cost of the Kazakhstan properties will commence is subject to the results of the Company’s exploration program, which began in 1999. Certain geological and general and administrative costs are capitalized into the cost pools of the country cost centers. Such costs include certain salaries and benefits, office facilities, equipment and insurance. Capitalized geological and general and administrative costs for Kazakhstan and the other category totaled $2,~~671~~157,~~262~~532, $82,~~117~~671,~~490~~262, and $118,~~164~~117,~~180~~490, for 2001, 2000, ~~1999~~ and ~~1998~~1999, respectively. The net capitalized costs of oil and gas properties for each cost center, less related deferred income taxes, are expensed to the extent they exceed the sum of (i) the estimated future net revenues from the properties, discounted at 10%, (ii) unevaluated costs not being amortized; and (iii) the lower of cost or estimated fair value of unproved properties being amortized; less (iv) income tax effects related to differences between the financial statement basis and tax basis of oil and gas properties. Property and equipment —other than oil and gas properties Property and equipment are carried at cost and include interest on funds borrowed to finance construction. Capitalized interest was $547,786 and $7,055,340 in 1999 and 1998, respectively. No interest was capitalized in 2000. Depreciation and amortization are calculated under the straight-line method over the anticipated useful lives of the assets, which range from 5 to 25 years. Major additions are capitalized. Expenditures for repairs and maintenance are charged against earnings. Depreciation, depletion and amortization expense on property and equipment were $1,844,942, $1,730,710, and $813,088 for the years ended December 31, 2000, 1999 and 1998, respectively. F-9

Property and equipment —other than oil and gas properties Property and equipment are carried at cost and include interest on funds borrowed to finance construction. Capitalized interest was $547,786 in 1999. No interest was capitalized in 2001 or 2000. Depreciation and amortization are calculated under the straight-line method over the anticipated useful lives of the assets, which range from 5 to 25 years. Major additions are capitalized. Expenditures for repairs and maintenance are charged against earnings. Depreciation, depletion and amortization expense on property and equipment were $1,965,213, $1,844,942, and $1,730,710 for the years ended December 31, 2001, 2000, and 1999, respectively. We identified and recorded an impairment of property and equipment of $9,236,280 during 2001. Revenue recognition Oil and gas production revenues are recognized at the time and point of sale after the product has been extracted from the ground. Pipeline fees are recognized at the time and point of expulsion of the product from the pipeline. Refinery revenues are recognized upon delivery. Discounts and premiums Discounts and premiums on accounts and notes receivables and notes payable are amortized as interest expense or income over the life of the instrument on the interest method. Earnings per share Earnings per share of common stock are based on the weighted-average number of shares outstanding. Basic and diluted earnings per share were the same for all years presented. Options and warrants to purchase 1420,~~541~~315,~~161~~142, 1314,~~202~~616,~~753~~161, and 714,~~100~~885,~~681~~840 shares of common stock at various prices were outstanding at December 31, 2001, 2000, ~~1999~~ and ~~1998~~1999, respectively, but were not included in the computation of diluted EPS because the options’ and warrants’ exercise ~~price~~prices ~~was~~were greater than the average grant date market price of the common shares.

	For the Year Ended December 31, 2000
	For the Year Ended December 31, 2001
	Net Income (Loss)(Numerator)		Weighted AverageShares	Per ShareAmount
	Net Income(Loss)(Numerator)		Weighted AverageShares	Per ShareAmount
Basic EPS:
Loss available to	$(2527,~~427~~669,~~705~~975	)	~~109~~160,~~386~~340,~~878~~133	$(0.21	37)
Common Shareholders
Effect of Dilutive Securities
Warrants and Options (1)(2)	—		—	—
Diluted EPS:
Loss available to
Common Shareholders	$(2527,~~427~~669,~~705~~975	)	~~109~~160,~~386~~340,~~878~~133	$(0.21	37)

(1)

The effect of these shares in the Dilutive EPS were not reflected on the face of the Statement of Operations as they were anti-dilutive in accordance with paragraph 13, of SFAS 128.

(82) Options and warrants to purchase 1420,~~541~~315,~~161~~142 shares of common stock at various prices were outstanding at December 31, ~~2000~~2001, but were not included in the computation of diluted EPS because the exercise price was greater than the average grant date market price of the common shares.

Foreign currency Foreign currency transaction gains and losses are included in the consolidated statement of operations. The Company does not engage in hedging transactions to reduce the risk of foreign currency exchange rate fluctuations and has not experienced significant gains or losses related to such events. The functional currency of the AIPK subsidiary is U.S. dollars, as the Company negotiates all transactions based upon U.S. dollar-equivalents and the Company is providing all of the funding requirements of AIPK. The Company anticipates little, if any, currency and exchange risks during the initial three to five years of its operations in Kazakhstan due to the Company negotiating all transactions in U.S. dollars. Any revenues generated from Kazakhstan during this period are planned to be reinvested in the Company’s projects in Kazakhstan. Subsequently, the Company will be exposed to the currency and exchange risks, which typically present themselves in the Confederate of Independent States (“CIS”) countries. New Accounting Pronouncements The FASB issued Statement of Financial Accounting Standards (SFAS) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The statement provides guidance for determining whether a transfer of financial assets should be accounted for as a sale or a secured borrowing, and whether a liability has been extinguished. The Statement is effective for recognition and reclassification of collateral and for disclosures which relate to securitization transactions and collateral for fiscal years ending December 15, 2000. The Statement will be come effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The initial application of SFAS No. 140 will not have a material impact to the Company’s results of operations and financial position. F-10

~~The~~New ~~FASB~~Accounting ~~issued~~Pronouncement ~~Interpretation~~In ~~No.~~June 442001, ~~“Accounting~~the ~~for~~Financial ~~Certain~~Accounting ~~Transactions~~Standards ~~Involving~~Board ~~Stock Compensation.~~(“FASB”) ~~This~~issued ~~interpretation~~Statements ~~modified~~of ~~the~~Financial ~~practice~~Accounting ofStandards ~~accounting~~No. ~~for~~141, ~~certain~~Business ~~stock~~Combinations ~~award~~(“SFAS ~~agreements~~141”) and ~~was~~No. ~~generally effective beginning July 1~~142, ~~2000.~~Goodwill ~~The~~and ~~initial~~Other ~~impact~~Intangible ofAssets ~~this~~(“SFAS ~~interpretation~~142”). onSFAS ~~the~~141 ~~Company’s~~requires ~~results~~all ofbusiness ~~operations~~combinations ~~and~~initiated ~~financial~~after ~~position~~June ~~was~~30, ~~not~~2001 ~~material.~~to ~~The~~be ~~FASB~~accounted ~~issued SFAS No. 133, “Accounting~~ for ~~Derivative~~under ~~Instruments~~the ~~and~~purchase ~~Hedging Activities~~method.” ~~This~~For ~~was~~all ~~followed~~business incombinations ~~June~~for ~~2000~~which by the ~~issuance~~date of ~~SFAS~~acquisition ~~No.~~is ~~138,~~after ~~“Accounting~~June ~~for~~30, ~~Certain Derivative Instruments and Certain Hedging Activities~~2001,” ~~which amends~~ SFAS ~~No.~~141 ~~133.~~also ~~SFAS~~establishes ~~No.~~specific ~~133~~criteria ~~and~~for ~~138~~the ~~establish~~recognition ~~accounting~~of ~~and~~intangible ~~reporting~~assets ~~standards~~separately ~~for~~from ~~derivative~~goodwill ~~financial~~and ~~instruments.~~requires ~~The~~unallocated ~~standards~~negative ~~will~~goodwill to be ~~recorded~~written ~~each~~off ~~period~~immediately inas ~~earnings~~an ifextraordinary ~~the~~gain, ~~derivative~~rather isthan ~~not~~deferred aand ~~hedge~~amortized. IfSFAS a142 ~~derivative is a hedge,~~ changes in the ~~fair~~accounting ~~value~~for ofgoodwill ~~the~~and ~~derivative~~other ~~will~~intangible ~~either~~assets beafter ~~recognized~~an inacquisition. ~~earnings~~The ~~along~~most ~~with~~significant ~~the~~changes ~~change~~made inby ~~the~~SFAS ~~fair~~142 ~~value~~are: of1) ~~the~~goodwill ~~hedged~~and ~~asset,~~intangible ~~liability~~assets orwith ~~firm~~indefinite ~~commitment~~lives ~~also~~will ~~recognized~~no inlonger ~~earnings,~~be oramortized; ~~recognized~~2) ingoodwill ~~other~~and ~~comprehensive~~intangible ~~income~~assets ~~until~~with ~~the~~indefinite ~~hedged~~lives ~~item~~must isbe ~~recognized~~tested infor ~~earnings.~~impairment ~~For~~at aleast ~~derivative~~annually; ~~recognized~~and in3) ~~other comprehensive income,~~ the ~~ineffective~~amortization ~~portion~~period offor ~~the~~intangible ~~derivative’s~~assets ~~change~~with infinite ~~fair~~lives ~~value~~ will no longer be ~~recognized~~limited ~~immediately~~to in40 ~~earnings~~years. ~~The initial application of~~ SFAS ~~No.~~142 ~~133~~is ~~and~~effective ~~138~~for ~~will~~fiscal ~~not~~years ~~have~~beginning aafter ~~material~~December ~~impact~~15, ~~on the Company~~2001. ~~The~~In ~~Securities~~June ~~and~~2001, ~~Exchange~~the ~~Commission~~FASB ~~(SEC)~~also ~~issued~~approved ~~Staff~~for ~~Accounting~~issuance ~~Bulletin~~SFAS ~~(SAB) No. 101~~143, ~~“Revenue~~Asset ~~Recognition~~Retirement inObligations. ~~Financial~~SFAS ~~Statements”,~~143 toestablishes ~~provide~~accounting ~~guidance~~requirements for ~~revenue~~retirement ~~recognition~~obligations ~~issues~~associated ~~and~~with ~~disclosure~~tangible ~~requirements.~~long-lived ~~Subsequently~~assets, including (1) the ~~SEC~~timing ~~issued~~of ~~SAB~~the ~~No.~~liability ~~101A~~recognition, ~~“Amendment:~~(2) ~~Revenue~~initial ~~Recognition~~measurement inof ~~Financial~~the ~~Statements:~~liability, ~~SAB~~(3) ~~No.~~allocation ~~101B,~~of ~~“Second~~asset ~~Amendment:~~retirement ~~Revenue~~cost ~~Recognition~~to inexpense, ~~Financial~~(4) ~~Statements;~~subsequent ~~which~~measurement ~~ultimately~~of ~~delayed~~the ~~implementation~~liability toand ~~the~~(5) ~~fourth~~financial ~~quarter~~statement ofdisclosures. ~~fiscal~~SFAS ~~years~~143 ~~beginning~~requires ~~after~~that ~~December~~an ~~15,~~asset ~~1999.~~retirement ~~SAB~~cost ~~No.~~should ~~101~~be ~~covers~~capitalized aas ~~wide~~part ~~range~~ of ~~revenue~~the ~~recognition~~cost ~~topics~~of ~~and summarizes~~ the ~~staff’s~~related ~~interpretations~~long-lived onasset ~~the~~and ~~application~~subsequently ofallocated ~~generally~~to ~~accepted~~expense ~~accounting~~using ~~principles~~a tosystematic ~~revenue~~and ~~recognition~~rational method. The Company ~~does not believe this standard~~ will ~~have~~adopt athe ~~material~~statement ~~impact~~effective onno ~~the~~later ~~company’s~~than ~~consolidated~~January ~~financial~~1, ~~position~~2003, ~~results~~as ofrequired. ~~operations~~The ortransition ~~cash~~adjustment ~~flows.~~resulting ~~Deferred~~from ~~charges~~the ~~The~~adoption ~~Company~~of ~~capitalizes~~SFAS ~~certain~~143 ~~costs,~~will ~~primarily~~be ~~commissions~~reported ~~and~~as ~~legal~~a ~~fees,~~cumulative ~~associated~~effect ~~with~~of ~~the~~a ~~offering~~change ~~and~~in ~~sale~~accounting ~~of debentures~~principle. ~~Such~~At ~~costs~~this ~~are~~time, ~~amortized~~the asCompany ~~interest~~cannot ~~expense~~reasonably ~~over~~estimate the ~~life~~effect of the ~~related~~adoption ~~debt~~of ~~instrument.~~this ~~Debenture~~statement ~~costs~~on ofits ~~$1,998,732,~~financial $1position,~~618,415,~~ ~~and~~results ~~$1,126,930~~of ~~were amortized in the years 2000~~operations, ~~1999,~~or ~~and~~cash ~~1998, respectively~~flows. ~~Stock-based~~In ~~compensation~~October ~~Statement~~2001, ofthe ~~Financial~~FASB ~~Accounting~~also ~~Standards~~approved (“SFAS”) ~~No. 123~~144, “Accounting for ~~Stock-Based~~the ~~Compensation”~~Impairment ~~defines~~or aDisposal ~~fair value based method~~ of ~~accounting~~Long-Lived ~~for~~Assets. anSFAS ~~employee~~144 ~~stock~~replaces ~~option~~SFAS or121, ~~similar~~Accounting ~~equity~~for ~~instrument~~the orImpairment ~~plan.~~of ~~However,~~Long-Lived ~~SFAS~~Assets ~~No.~~and ~~123~~for ~~allows~~Long-Lived anAssets ~~entity~~ to ~~continue~~Be toDisposed ~~measure~~Of. ~~compensation~~The ~~costs~~new accounting model for ~~these~~long-lived ~~plans~~assets ~~under~~to ~~APB~~be ~~25.~~disposed ~~The~~of ~~Company~~by ~~has~~sale ~~elected~~applies to ~~account~~all ~~for~~long-lived ~~employee~~assets, ~~stock~~including ~~compensation~~discontinued ~~plans~~operations, ~~as provided under APB 25~~ and toreplaces ~~adopt~~ the ~~disclosure~~ provisions of ~~SFAS~~APB ~~123~~Opinion No. ~~Fair~~30, ~~Value~~Reporting Results of ~~Financial~~Operations-Reporting ~~Instruments~~the ~~The~~Effects ~~fair~~of ~~value~~Disposal of ~~financial~~a ~~instruments,~~Segment ~~primarily~~of ~~accounts~~a ~~receivable~~Business, ~~accounts~~for ~~payable~~the ~~and~~disposal ~~notes~~of ~~payable,~~segments ~~debentures,~~of ~~and~~a ~~preferred~~business. ~~stock,~~Statement ~~closely~~144 ~~approximate~~requires ~~the~~that ~~carrying~~those ~~values~~long-lived ofassets ~~the~~be ~~instruments~~measured ~~due~~at to the ~~short-term~~lower ~~maturities or recent issuance~~ of ~~such~~carrying ~~instruments.~~amount ~~Comprehensive~~or ~~Income~~fair ~~(Loss)~~value ~~Comprehensive~~less ~~income~~cost isto ~~defined~~sell, aswhether ~~all~~reported ~~changes~~ in ~~stockholders’~~continuing ~~equity,~~operations ~~exclusive~~or ofin ~~transactions~~discontinued ~~with~~operations. ~~owners~~Therefore, ~~such~~discontinued asoperations ~~capital~~will ~~investments.~~no ~~Comprehensive~~longer ~~income~~be ~~includes~~measured at net ~~income~~realizable value or ~~loss,~~include ~~changes~~amounts infor ~~certain~~operating ~~assets~~losses ~~and liabilities~~ that ~~are~~have ~~reported~~not ~~directly~~yet inoccurred. ~~equity~~Statement ~~such~~144 asalso ~~translation~~broadens ~~adjustments~~the onreporting ~~investments~~of indiscontinued ~~foreign~~operations ~~subsidiaries,~~to ~~and~~include ~~certain~~all ~~changes~~components inof ~~minimum~~an ~~pension~~entity ~~liabilities.~~with ~~The~~operations ~~Company’s~~that ~~comprehensive~~can ~~income~~be ~~(loss)~~distinguished ~~was~~from ~~equal~~the torest ~~its~~of ~~net~~the ~~income~~entity ~~(loss)~~and ~~for~~that ~~all~~will ~~periods~~be ~~presented~~eliminated infrom ~~these~~the ~~financial~~ongoing ~~statements.~~operations ~~Long~~of ~~Lived~~the ~~Assets~~entity ~~The~~in ~~Company~~a ~~reviews~~disposal ~~for~~transaction. ~~the~~The ~~impairment~~provisions of ~~long-lived~~Statement ~~assets~~144 ~~and~~are ~~certain~~effective ~~identifiable~~for ~~intangibles~~financial ~~whenever~~statements ~~events~~issued orfor ~~changes~~fiscal inyears ~~circumstances~~beginning ~~indicate~~after ~~that~~December ~~the~~15, ~~carrying~~2001 ~~amount~~and, ofgenerally, anare ~~asset~~to ~~may not~~ be ~~recoverable~~applied prospectively. AnAt ~~impairment~~this ~~loss~~time, ~~would~~the beCompany ~~recognized~~cannot ~~when~~estimate ~~estimated future cash flows expected to result from~~ the ~~use~~effect of ~~the~~this ~~asset~~statement ~~and~~on its ~~eventual~~financial ~~disposition~~position, isresults ~~less~~of ~~than~~operations, ~~its~~or ~~carrying~~cash ~~amount~~flows. ~~Estimates~~Deferred charges The ~~preparation~~Company ofcapitalizes ~~financial~~certain ~~statements~~costs, inprimarily ~~conformity~~commissions ~~with~~and ~~generally~~legal ~~accepted~~fees, ~~accounting~~associated ~~principles~~with ~~requires~~the ~~management~~offering ~~to make estimates~~ and ~~assumptions~~sale ~~that~~of ~~affect~~debentures. ~~the~~Such ~~reported~~costs ~~amounts~~are ofamortized ~~certain~~as ~~assets~~interest ~~and~~expense ~~liabilities~~over ~~and~~the ~~disclosure~~life of ~~contingent~~the ~~assets~~related ~~and~~debt ~~liabilities~~instrument. atDebenture ~~the~~costs ~~date~~ of ~~the~~$594,171, ~~financial~~$1,998,732, ~~statements~~ and ~~the~~$1,618,415 ~~related~~were ~~reported~~amortized ~~amounts~~in ofthe ~~revenues~~years ~~and~~2001, ~~expenses~~2000, ~~during~~and ~~the~~1999, ~~reporting period~~respectively. ~~Actual~~Stock-based ~~results~~compensation ~~could~~Statement ~~differ~~of ~~from~~Financial ~~those~~Accounting ~~estimates.~~Standards ~~Management~~(“SFAS”) ~~believes~~No. ~~that~~123, ~~the~~“Accounting ~~estimates~~for ~~are~~Stock-Based ~~reasonable.~~Compensation” ~~The~~defines ~~Company’s~~a ~~financial~~fair ~~statements~~value ~~are~~ based onmethod aof ~~number~~accounting offor ~~significant~~an ~~estimates~~employee ~~including~~stock ~~the~~option ~~valuation~~or ofsimilar ~~unevaluated~~equity ~~oil~~instrument ~~and~~or ~~gas~~plan. ~~properties~~However, ~~which~~SFAS ~~are~~No. ~~the~~123 ~~basis~~allows ~~for~~an ~~the~~entity ~~calculation~~to ofcontinue ~~impairment~~to ofmeasure ~~oil~~compensation ~~and~~costs ~~gas~~for ~~properties.~~these ~~Because~~plans ~~estimates~~under ofAPB ~~fair~~25. ~~value~~The ofCompany ~~unproven~~has ~~reserves~~elected ~~are~~to ~~inherently~~account ~~imprecise,~~for itemployee isstock ~~reasonably~~compensation ~~probable~~plans ~~that~~as ~~the~~provided ~~estimates~~under ofAPB ~~fair~~25 ~~value~~and ~~associated~~to ~~with~~adopt the ~~concessions~~disclosure inprovisions ~~Kazakhstan~~of ~~will~~SFAS ~~materially change during the next year~~123. F-11

Fair Value of Financial Instruments The fair value of financial instruments, primarily accounts receivable, accounts payable and notes payable, debentures, and preferred stock, closely approximate the carrying values of the instruments due to the short-term maturities or recent issuance of such instruments. Comprehensive Income (Loss) Comprehensive income is defined as all changes in stockholders’ equity, exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries, and certain changes in minimum pension liabilities. The Company’s comprehensive income (loss) was equal to its net income (loss) for all periods presented in these financial statements. Long Lived Assets The Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the related reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the estimates are reasonable. The Company’s financial statements are based on a number of significant estimates including the valuation of unevaluated oil and gas properties which are the basis for the calculation of impairment of oil and gas properties. Because estimates of fair value of unproven reserves are inherently imprecise, it is reasonably probable that the estimates of fair value associated with the concessions in Kazakhstan will materially change during the next year. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Accounting for Income Taxes The Company uses the asset and liability approach for financial accounting and reporting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. NOTE 2 — MANAGEMENT PLANS The Company reported a net loss of approximately $2427.94 million during ~~2000~~2001, of which approximately $1622.62 million represented non-cash items,. ~~and~~It has commitments to fund the operations of its Kazakhstan subsidiary ~~(see~~of ~~Note 10),~~ $72.18 million by November of ~~non-convertible~~this ~~secured~~year ~~debt,~~(see ~~and~~Note ~~has~~10), convertible debentures totaling an aggregate of approximately $~~6.7~~14 million (see Note ~~6 and~~ 7), which may or may not be converted to common stock, $5.4 million that mature in 2004 and $8.6 million that mature in February 2007. As of December 31, ~~2000~~2001, the Company had $83.21 million of negative working capital including, as of March 2315, ~~2001~~2002, approximately $51.82 million in bridge notes due on ~~April~~December 2819, ~~2001~~2002. ~~However, the lender has offered to renegotiate these notes if the Company is unable to repay them when due.~~ The Company intends to be very conservative with its spending overseas during ~~2001~~2002. As of March ~~2001~~2002, the Company’s existing working capital was insufficient to provide all the funds it requires to complete its minimum work program in Kazakhstan during ~~2001~~2002. However, in the past, the Company has negotiated reductions and deferrals of its minimum requirements in Kazakhstan and believes that, if necessary, it can do so again. The Company plans to negotiate a ~~two~~three-year extension of the Exploration Contract which is due to expire in November ~~2001~~2002. The Company’s reservoir development studies, which have been verified by Ryder Scott Company L.P., a Houston-based petroleum consulting firm, indicate the presence of a significant amount of recoverable gas reserves at the Company’s License 1551. The Company has been negotiating with several foreign and domestic oil and gas companies regarding a sale of up to 75% of its ownership interest in License 1551. ~~All~~Most have indicated an interest in pursuing a purchase if the Company can conclude a gas sales agreement. The Company hopes to sign a gas sales and/or transportation agreement in ~~2001~~2002, which will enhance ~~the Company~~it’s ability to classify its gas reserves as “proved” ~~reserves~~, thereby providing it with a borrowing base for development, which includes the construction of a gas transportation pipeline system, and working capital. The proceeds derived from the sale of a portion of License 1551 and/or the Borrowing Base should provide the Company with the necessary capital to fund its existing obligations during ~~2001~~2002 and beyond in Kazakhstan. During 2001 the Company initiated an agreement with Sargeant Bulktainers to process crude oil through the Company’s crude unit at Lake Charles. The agreement is expected to provide the Company with sufficient working capital to fund most of its domestic operations overhead during the year 2001 and beyond. This operation will also enable the Company to continue its asphalt operations. Management has also been seeking sources of capital to enable the Company to supplement its operating activities and to fulfill commitments which may arise in 2001 and beyond. If the processing agreement with Sargeant continues to be implemented at the rate levels anticipated by the Parties, the resultant cash flows, when combined with those derived from the asphalt joint venture, would be sufficient to provide the Company with the necessary capital to support all of its domestic and foreign overhead. In addition, management believes the Company has several alternatives for its processing/refining operations in the event Sargeant does not continue beyond the initial one-year term of the agreement, however, there can be no assurance at this time that a replacement or alternative to Sargeant can be obtained. As operations at the Refinery expand during 2001, the Company plans, to the extent possible, to prudently obtain bank or other conventional, non-equity financing to replace its existing convertible debt and provide the supplemental funds necessary to support its operations and minimum work program in Kazakhstan. If the Company is unable to derive the necessary working capital from the Refinery, St. Marks, AIM, the sale of a portion of its License 1551 properties, a joint venture partner in Kazakhstan to support its operations during 2001, or if it is unable to renegotiate the due dates of its bridge notes, or obtain the necessary financing to adequately supplement or provide all of its funding needs, its ability to continue operations could be materially and adversely effected. As a result, there would be substantial doubt about the Company’s ability to continue as a going concern. F-12

The Company is currently negotiating a long-term transaction with a large oil company which would fully utilize the entire Lake Charles refining and asphalt facilities and provide it with the working capital necessary to support all of its domestic overhead and operations. If this transaction is not consummated, the Company has other companies interested in doing business with its refining and asphalt subsidiaries, however, these agreements may not provide the Company with sufficient cash flow to support its needs. As operations at the Refinery expand during 2002, the Company plans, to the extent possible, to prudently obtain bank or other conventional, non-equity financing to replace its existing convertible debt and provide the supplemental funds necessary to support its operations and minimum work program in Kazakhstan. If the Company is unable to derive the necessary working capital from its refining and asphalt business, the sale of a portion of its License 1551 properties, a joint venture partner in Kazakhstan to support its operations during 2002, or obtain the necessary financing to adequately supplement or provide all of its funding needs, its ability to continue operations could be materially and adversely effected and there would be substantial doubt about the ability of the Company to continue as a going concern. NOTE 3 — ACCOUNTS AND SHORT-TERM NOTES RECEIVABLE: Accounts and notes receivable are shown below:

	December 31,
	2000		1999
	2001		2000
Accounts receivable - trade and joint venture	$ ~~392~~897,~~741~~125		$ ~~377~~392,~~125~~741
Current portion - Note receivable	1,~~493~~828,~~750~~863		1,493,750
Other	—		120,428
	2,725,988		1,886,491
	1,886,491		1,991,303
Less - allowance for doubtful accounts	(628,862	)	(1,493,750	)
Less - allowance for doubtful accounts	(1,493,750	)	(1,493,750	)
	$ 2,097,126		$ 392,741
	$ 392,741		$ 497,553

NOTE 4 — OTHER LONG-TERM ASSETS:

Other long-term assets consist of the following:

	December 31,
	2000	1999
	2001	2000
Note receivable - MIP (See Note 1), net of
discount of $18,651 and $69,255, respectively	$575,112	$1,252,696
discount of $-0- and $18,651, respectively	$ —	$575,112

NOTE 5 — ACCRUED LIABILITIES: Accrued liabilities consist of the following:

	December 31,
	2000	1999
Accrued payroll	$ —	$ 15,935
Accrued interest	623,435	499,666
Corporate taxes	104,000	116,608
Property taxes	300,000	176,591
Sales Taxes	178,266	56,913
Other	319,397	435,759
	$1,525,098	$1,301,472

Accrued liabilities consist of the following:

NOTE 6 — SHORT TERM DEBT

	December 31,
	2001	2000
Accrued payroll	$ 228,229	$ —
Accrued interest	1,032,614	623,435
Corporate taxes	133,739	104,000
Property taxes	—	300,000
Sales Taxes	27,740	178,266
Other	253,221	319,397

	$1,675,543	$1,525,098

	December 31,
	2000	1999
13% - $2,500,000 secured Bridge Note - due April 28, 2001,
collateralized by the shares of the St. Marks subsidiary and certain
St. Marks real estate, effective interest rate - 13%	$2,500,000	$2,223,500
12% - $350,000 unsecured demand notes due to officers	350,000	—
Tradenotes payable —various notes due from one
month to twelve months —interest ranges from 6.5%
to 14.5%, includes $150,059 and $106,851 of interest at
December 31, 2000 and 1999, respectively —collateralized
by accounts receivable, inventory, and certain fixed assets	940,673	1,736,831
10% - $3,000,000 secured Bridge Note, due April 28, 2001,
collateralized by shares of the St. Marks subsidiary and certain
St. Marks real estate, effective interest rate 13%	1,437,500	—
13% - $1,850,000 secured Bridge Note, due April 28, 2001,
collateralized by shares of the St. Marks subsidiary and certain
St. Marks real estate, effective interest rate 13%	1,850,000	—
	$7,078,173	$3,960,331

F-13

~~F-13~~NOTE 6 — SHORT TERM DEBT

NOTE 7 — LONG-TERM DEBT:

	December 31,
	2001	2000
13% - $2,500,000 secured Bridge Note - due April 28, 2001,
collateralized by the shares of the St. Marks subsidiary and certain
St. Marks real estate, effective interest rate - 13%	$ —	$2,500,000

12% - $350,000 unsecured demand notes due to officers	420,000	350,000

Trade notes payable - various notes due from one
month to twelve months - interest ranges from 6.5%
to 14.5%, includes $42,857 and $150,059 of interest at
December 31, 2001 and 2000, respectively - collateralized
by accounts receivable, inventory, and certain fixed assets	319,873	940,673

Trade notes - current portion of long term debt	27,743	—

10% - $3,000,000 secured Bridge Note, due April 28, 2001,
collateralized by shares of the St. Marks subsidiary and certain
St. Marks real estate, effective interest rate 13%	—	1,437,500

13% - $1,850,000 secured Bridge Note, due April 28, 2001,
collateralized by shares of the St. Marks subsidiary and certain
St. Marks real estate, effective interest rate 13%	—	1,850,000

14% - $1,250,000 secured Bridge Note, due December 19, 2002,
net of unamortized financing cost of $31,251, collateralized by shares of
the St. Marks subsidiary and certain St. Marks real estate	1,218,749	—

	$1,986,365	$7,078,173

	December 31,
	2000	1999
6%—$7,250,000 secured convertible debenture, due
August 18, 2004, net of unamortized financing cost
Of $199,608, collateralized by the fixed assets at the
St. Marks facility, effective interest rate – 2% (2)	$ 3,250,392
5%—$10,000,000 secured convertible debenture, due
February 18, 2004, net of unamortized financing cost
of $437,050 at December 31, 2000, collateralized by the
Lake Charles facility, effective interest rate – 28% (2)	5,565,395	8,734,200
	$ 5,565,395	$11,984,592

NOTE 7 — LONG-TERM DEBT:

(1) Convertible into the Company’s common stock at the average of the lowest three (3) consecutive daily weighted average sales prices of the common stock as reported by Bloomberg, LP for the twenty (20) trading days ending on the day prior to the date of conversion. The effective interest rate as stated for debt instruments does not necessarily reflect the actual cash cost to the Company for that specific debt instrument. The effective interest rate reflects presumed incremental yield the holder of the debt instrument may derive from the discounted conversion rate of such instrument and the fair value of warrants issued to debt holders. NOTE 8 – REDEEMABLE PREFERRED STOCK

	December 31,
	2001	2000
3% - $5,936,128 secured convertible debenture, due
February 1, 2007, collateralized by the fixed assets at the
St. Marks facility, effective interest rate - 14.11% (1)(2)	$ 5,936,128	$ —

3% - $3,340,000 secured convertible debenture, due
February 1, 2007, net of unamortized financing cost
of $57,750, collateralized by the fixed assets at the
St. Marks facility and a 10% ownership interest in AIPK,
effective interest rate - 27.3% (1)(2)	2,627,241	—

Trade notes, unsecured, due through August 4, 2004, effective
Interest rate - 5%	34,775	—

5% - $10,000,000 secured convertible debenture, due
February 18, 2004, net of unamortized financing cost
of $125,108 at December 31, 2001, collateralized by the
Lake Charles facility, effective interest rate - 28% (2)	5,321,824	5,565,395

	$13,919,968	$5,565,395

	December 31,
	2000	1999
$1,250,000 of the Company’s preferred stock redeemable
into shares of the Company’s common stock, upon notice of
redemption, at 92% of the average of the three lowest weighted
average sales price of the common stock for the twenty (20)
trading days immediately preceding the date of the related
notice of redemption, net of costs	$1,186,751	$ —

F-14

~~NOTE~~(1) 9Convertible —into ~~STOCK~~the ~~OPTIONS~~Company’s ~~AND~~common ~~WARRANTS:~~stock ~~Outstanding~~at ~~warrants~~the ~~and~~average ~~options~~of Atthe ~~December~~lowest ~~31,~~three ~~2000,~~(3) ~~1999,~~consecutive ~~and~~daily ~~1998,~~weighted average sales prices of the ~~following~~common ~~warrants~~stock ~~and~~as ~~options~~reported by Bloomberg, LP for the ~~purchase~~twenty of(20) ~~common~~trading ~~stock~~days ending on the day prior to the date of conversion. (2) The effective interest rate as stated for debt instruments does not necessarily reflect the actual cash cost to the Company ~~were~~for ~~outstanding,~~that ~~which~~specific ~~are~~debt ~~exercisable~~instrument. ~~upon~~The ~~demand~~effective ~~any~~interest ~~time~~rate ~~prior~~reflects topresumed incremental yield the ~~expiration~~holder ~~date~~of the debt instrument may derive from the discounted conversion rate of such instrument and the fair value of warrants issued to debt holders. NOTE 8 – REDEEMABLE PREFERRED STOCK

Number of Shares UnderlyingOptions and Warrantsat December 31,
	December 31,
			Exercise		Expiration
	2001	2000
2000	1999	1998	Price		Date
$1,250,000 of the Company’s preferred stock redeemable
—	—	22,681	$2	.131	July 22, 1999(3)(2)
into shares of the Company’s common stock, upon notice of
—	—	864,000	$2	.713	August 6, 1999(3)(2)
redemption, at 92% of the average of the three lowest weighted
—	—	200,000	$2	.000	August 24, 1999(3)(2)
average sales price of the common stock for the twenty (20)
—	—	1,500,000	$2	.000	October 9, 1999(1)(2)
trading days immediately preceding the date of the related
—	—	1,781,000	$0	.500	December 31, 1999(1)(2)
notice of redemption, net of costs	$ —	$1,186,751
—	—	1,210,000	$2	.000	December 31, 1999(1)(2)
—	1,358,000	—	$0	.500	July 31, 2000(1)
105,500	—	—	$0	.500	July 31, 2005(1)
50,000	50,000	50,000	$0	.500	November 1, 2005(1)
16,667	16,667	16,667	$0	.413	August 20, 2001(3)
8,420	8,420	8,420	$0	.406	October 31, 2001(3)
—	—	60,000	$0	.398	June 6, 2002(3)
200,000	200,000	200,000	$2	.000	July 30, 2002(3)
—	64,000	—	$1	.200	October 6, 2002(3)
1,500,000	1,500,000	—	$2	.000	October 9, 2002(3)
—	—	197,500	$3	.000	October 14, 2002(3)(2)
100,000	100,000	100,000	$2	.000	December 1, 2007(1)
862,500	1,400,000	1,500,000	$1	.050	December 31, 2007(1)
1,400,000	1,400,000	1,400,000	$2	.000	April 21, 2003(3)
—	—	118,500	$2	.000	April 21, 2003(3)(2)
—	—	100,000	$2	.600	April 21, 2003(3)(2)
—	—	25,000	$3	.000	April 21, 2003(3)(2)
1,595,978	1,595,978	—	$2	.000	April 22, 2003(3)
—	15,000	15,000	$1	.375	June 29, 2003(1)(2)
684,000	782,000	782,000	$2	.000	June 29, 2008(1)
—	197,500	—	$1	.200	October 14, 2003(3)
2,000,000	2,000,000	—	$2	.562	February 18, 2004 (3)
540,058	1,342,275	—	$0	.825	March 30, 2009(1)
—	118,500	—	$1	.200	April 21, 2004(3)
—	200,000	—	$1	.238	July 21, 2004 (1)
712,500	712,500	—	$1	.450	August 18, 2004(3)
100,000	100,000	—	$1	.000	September 30, 2004(3)
50,000	50,000	—	$1	.500	September 30, 2004(3)
50,000	50,000	—	$0	.750	October 19, 2004(3)
375,000	375,000	—	$0	.800	November 2, 2004(3)
—	400,000	—	$0	.900	December 1, 2004(3)
—	250,000	—	$0	.500	December 31, 2004(1)
—	250,000	—	$1	.000	December 31, 2004(1)
—	50,000	—	$0	.800	July 14, 2005(3)
—	300,000	—	$0	.800	August 18, 2005(3)
2,997,681	—	—	$0	.230	November 9, 2005 (3)
75,000	—	—	$0	.123	December 27, 2005 (3)
100,000	—	—	$0	.430	August 27, 2003 (3)
100,000	—	—	$0	.906	December 14, 2010 (1)
350,000	—	—	$0	.430	August 24, 2010 (1)
300,000	—	—	$0	.550	July 10, 2010 (1)
200,000	—	—	$0	.690	April 27, 2010 (1)
142,857	—	—	$1	.200	July 11, 2010 (1)
14,616,161	14,885,840	10,150,768

~~(1)~~NOTE ~~Represents~~9 ~~options~~— ~~held~~STOCK byOPTIONS ~~employees~~AND ~~and~~WARRANTS: ~~directors~~Outstanding ofwarrants ~~the~~and ~~Company.~~options ~~The~~At ~~exercise~~December ~~price~~31, 2001, 2000, and ~~expiration~~1999, ~~date~~the offollowing ~~such~~warrants and options ~~reflects~~for the ~~adjustments~~purchase ~~approved~~of bycommon stock of the Company’s ~~Board~~were ofoutstanding, ~~Directors~~which are exercisable upon demand any time prior to the expiration date.

(2) These options and warrants were canceled or expired, as applicable, in 1998, 1999 or 2000 as indicated in the table.

Number of Shares Underlying Options and Warrants at December 31,
			Exercise	Expiration
2001	2000	1999	Price	Date
—	—	1,358,000	$0.500	July 31, 2000(1)(2)
105,500	105,500	—	$0.500	July 31, 2005(1)
50,000	50,000	50,000	$0.500	November 1, 2005(1)
—	16,667	16,667	$0.413	August 20, 2001(3)(2)
—	8,420	8,420	$0.406	October 31, 2001(3)(2)
200,000	200,000	200,000	$2.000	July 30, 2002(3)
—	—	64,000	$1.200	October 6, 2002(3)(2)
1,500,000	1,500,000	1,500,000	$2.000	October 9, 2002(3)
100,000	100,000	100,000	$2.000	December 1, 2007(1)
862,500	862,500	1,400,000	$1.050	December 31, 2007(1)
1,400,000	1,400,000	1,400,000	$2.000	April 21, 2003(3)
1,595,978	1,595,978	1,595,978	$2.000	April 22, 2003(3)
—	—	15,000	$1.375	June 29, 2003(1)(2)
669,000	684,000	782,000	$2.000	June 29, 2008(1)
—	—	197,500	$1.200	October 14, 2003(3)(2)
2,000,000	2,000,000	2,000,000	$2.562	February 18, 2004 (3)
520,058	540,058	1,342,275	$0.825	March 30, 2009(1)
—	—	118,500	$1.200	April 21, 2004(3)
—	—	200,000	$1.238	July 21, 2004 (1)(2)
712,500	712,500	712,500	$1.450	August 18, 2004(3)
100,000	100,000	100,000	$1.000	September 30, 2004(3)
50,000	50,000	50,000	$1.500	September 30, 2004(3)
50,000	50,000	50,000	$0.750	October 19, 2004(3)
375,000	375,000	375,000	$0.800	November 2, 2004(3)

~~(3) Other non~~F-~~employee warrants.~~15

Stock option plans 1995 Plan The Company established a 1995 Stock Option Plan (the “1995 Plan”). The 1995 Plan was approved by the Board of Directors on November 8, 1995 and by the Company’s shareholders on July 11, 1996. The 1995 Plan is administered by the Board of Directors of the Company or a Committee designated by them. Under the 1995 Plan employees, including officers and managerial or supervising personnel, are eligible to receive Incentive Stock Options (“ISO’s”) or ISO’s in tandem with stock appreciation rights (“SAR’s”), and employees, Directors, contractors and consultants are eligible to receive non-qualified stock options (“NQSO’s”) or NQSO’s in tandem with SAR’s. Options may be granted under the 1995 Plan to purchase an aggregate of 3,500,000 shares of Common Stock. If an option granted under the 1995 Plan terminates or expires without having been exercised in full, the unexercised shares subject to that option will be available for a further grant of options under the 1995 Plan. Options may not be transferred other than by will or the laws of descent and distribution and, during the lifetime of the optionee, may be exercised only by the optionee. Options may not be granted under the 1995 Plan after November 7, 2005. The exercise price of the options granted under the 1995 Plan cannot be less than the fair market value of the shares of Common Stock on the date the option is granted. ISO’s granted to shareholders owning 10% or more of the outstanding voting power of the Company must be exercised at a price equal to at least 110% of the fair market value of the shares of Common Stock on the date of grant. The aggregate fair market value of Common Stock, as determined at the time of the grant with respect to which ISO’s are exercisable for the first time by any employee during any calendar year, shall not exceed $100,000. Any additional Common Stock as to which options become exercisable for the first time during any such year are treated as NQSO’s. The total number of options granted under the 1995 Plan, as of December 31, 2000 was 3,190,000. F-15

—	—	400,000	$0.900	December 1, 2004(3)(2)
—	—	250,000	$0.500	December 31, 2004(1)(2)
—	—	250,000	$1.000	December 31, 2004(1)(2)
—	—	50,000	$0.800	July 14, 2005(3)(2)
—	—	300,000	$0.800	August 18, 2005(3)(2)
—	2,997,681	—	$0.230	November 9, 2005 (3)(2)
—	75,000	—	$0.123	December 27, 2005 (3)(2)
100,000	100,000	—	$0.430	August 27, 2003 (3)
100,000	100,000	—	$0.906	December 14, 2010 (1)
350,000	350,000	—	$0.430	August 24, 2010 (1)
300,000	300,000	—	$0.550	July 19, 2010 (1)
200,000	200,000	—	$0.690	April 27, 2010 (1)
142,857	142,857	—	$1.200	July 11, 2010 (1)
1,579,068	—	—	$0.130	January 12, 2011 (1)
10,000	—	—	$0.125	December 26, 2010 (1)
10,000	—	—	$0.453	January 25, 2011 (1)
10,000	—	—	$0.437	February 25, 2011 (1)
400,000	—	—	$0.150	June 20, 2011 (1)
200,000	—	—	$0.100	September 3, 2011 (1)
100,000	—	—	$0.250	September 3, 2011 (1)
100,000	—	—	$0.500	September 3, 2011 (1)
1,255,050	—	—	$0.190	April 24, 2006 (3)
1,892,631	—	—	$0.190	April 24, 2006 (3)
1,500,000	—	—	$0.190	April 24, 2006 (3)
1,000,000	—	—	$0.190	April 24, 2006 (3)
75,000	—	—	$0.164	March 22, 2004 (3)
700,000	—	—	$0.100	December 19, 2006 (3)

20,315,142	14,616,161	14,885,840

~~1998 Plan Under the Company’s 1998 Stock Option Plan~~ (~~the “1998 Plan”~~1), ~~the~~Represents ~~Company’s employees, Directors, independent contractors, and consultants are eligible to receive~~ options toheld purchase shares of the Company’s common stock. The Plan allows the Company to grant incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), and ISOs and NQSOs in tandem with stock appreciation rights(“SARs”, collectively “Options”). A maximum of 5,000,000 shares may be issued and no options may be granted after ten years from the date the 1998 Plan is adopted, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. The exercise price of the Options cannot be less than the fair market value of the shares of common stock on the date the Option is granted. Options granted to individuals owning 10% or more of the outstanding voting power of the Company must be exercisable at a price equal to 110% of the fair market value on the date of the grant. The 1998 Plan was submitted to and approved by the Company’s stockholders at its annual meeting in 1998. The total number of shares granted under the 1998 Plan, as of December 31, 2000, was 3,056,965. 2000 Plan Under the Company’s 2000 Stock Option Plan (the “2000 Plan”), the Company’s employees, ~~Directors, independent contractors,~~ and ~~consultants~~directors ~~are eligible to receive options to purchase shares~~ of the Company~~’s common stock~~. The Plan allows the Company to grant incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), and ISOs and NQSOs in tandem with stock appreciation rights(“SARs”, collectively “Options”). A maximum of 5,000,000 shares may be issued and no options may be granted after ten years from the date the 2000 Plan is adopted, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. The exercise price of the Options cannot be less than the fair market value of the shares of common stock on the date the Option is granted. Options granted to individuals owning 10% or more of the outstanding voting power of the Company must be exercisable at a price equal to 110% of the fair market value on the date of the grant. The 2000 Plan was submitted to and approved by the Company’s stockholders at its annual meeting in 2000. There were no shares granted under the 2000 Plan, as of December 31, 2000. Activity in the 1995 and 1998 Stock Option Plans for the years ended December 31, 1998, 1999 and 2000 was as follows:

	Number ofShares		Weighted AverageExercise PricePer Share
Outstanding, December 31, 1997	3,521,250		$ 0.83
Granted	2,007,000		$ 2.00
Exercised	(21,500	)	$ .050
Expired	(68,750	)	$ .074
Outstanding December 31, 1998	5,438,000		$ 1.23
Granted	2,242,275		$ 0.95
Exercised	(523,000	)	$ 0.61
Expired	(1,410,000	)	$ 2.00
Outstanding December 31, 1999	5,747,275		$ 0.99
Granted	1,092,857		$ 0.65
Exercised	(2,267,550	)	$ 0.64
Expired	(1,137,667	)	$ 1.04
Outstanding December 31, 2000	3,434,915		$ 1.08

(2)

These options and warrants were canceled or expired, as applicable, in 1999, 2000, or 2001 as indicated in the table.

~~As of December 31, 2000, options to acquire~~ (3~~,194,249~~) ~~shares~~Other ofnon-employee ~~the Company’s common stock with exercise prices ranging from $0~~warrants.43 to $2.00, were fully vested and exercisable at a weighted average exercise price of $1.05 per share. The remaining 240,666 options, with exercise prices ranging from $0.69 to $2.00, having a weighted average exercise price of $0.66 per share, will vest through 2010. If not previously exercised, options outstanding at December 31, 2000, will expire as follows: 105,500 options expire on July 31,2005; 50,000 options expire on November 1, 2005; 100,000 expire on December 1, 2007; 862,000 options expire on December 31, 2007; 684,000 options expire on June 29, 2008; 540,058 options expire on March 30, 2009; 200,000 options expire on April 27, 2010; 300,000 options expire on July 10, 2010; 142,857 options expire on July 11, 2010; 350,000 options expire on August 24, 2010; and 100,000 options expire on December 14, 2010. The weighted average grant date fair value of the options issued during 1998 and the weighted average exercise price of those options amounted to $0.68 and $2.00, respectively. The weighted average grant date fair value of the options issued during 1999 and the weighted averaged exercise price of those options amounted to $0.75 and $0.95 respectively. The weighted average grant date fair value of the options issued during 2000 and the weighted averaged exercise price of those options amounted to $0.22 and $0.62 respectively. F-16

InStock ~~October~~option plans 1995 Plan The Company established a 1995 Stock Option Plan (the “1995 Plan”). The 1995 Plan was approved by the Board of Directors on November 8, 1995 and by the ~~Financial~~Company’s ~~Accounting~~shareholders ~~Standards~~on July 11, 1996. The 1995 Plan is administered by the Board ~~issued~~of aDirectors ~~new~~of ~~statement~~the ~~titled~~Company ~~“Accounting~~or ~~for~~a ~~Stock-Based~~Committee ~~Compensation”~~designated ~~(SFAS~~by ~~123)~~them. ~~SFAS~~Under ~~123~~the ~~encourages~~1995 Plan employees, ~~but~~including ~~does~~officers ~~not~~and ~~require~~managerial or supervising personnel, ~~companies~~are eligible to ~~recognize~~receive ~~compensation~~Incentive ~~expense~~Stock ~~for~~Options ~~grants~~(“ISO’s”) ofor ISO’s in tandem with stock appreciation rights (“SAR’s”), ~~stock~~and ~~options~~employees, Directors, contractors and ~~other~~consultants ~~equity~~are ~~instruments~~eligible to ~~employees~~receive ~~based~~non-qualified onstock ~~fair~~options ~~value.~~(“NQSO’s”) ~~Fair~~or ~~value~~NQSO’s isin ~~generally~~tandem ~~determined~~with SAR’s. Options may be granted under the 1995 Plan to purchase an ~~option~~aggregate ~~pricing~~of ~~model~~3,500,000 ~~using~~shares of Common Stock. If an option granted under the ~~criteria~~1995 ~~set~~Plan ~~forth~~terminates or expires without having been exercised in ~~SFAS~~full, ~~123~~the unexercised shares subject to that option will be available for a further grant of options under the 1995 Plan. ~~The~~Options ~~Company~~may ~~applies~~not ~~APB~~be ~~Opinion~~transferred ~~25,~~other ~~Accounting~~than by will or the laws of ~~Stock~~descent ~~Issued~~and todistribution ~~Employees~~and, ~~and~~during ~~related~~the ~~Interpretations~~lifetime inof ~~accounting~~the ~~for~~optionee, ~~its~~may ~~plans~~be exercised only by the optionee. ~~Accordingly,~~Options nomay ~~compensation~~not ~~cost~~be ~~has~~granted ~~been~~under ~~recognized~~the ~~for~~1995 ~~its~~Plan ~~fixed~~after November 7, 2005. The exercise price ~~stock~~of the options granted under the 1995 Plan cannot be less than the fair market value of the shares of Common Stock on the date the option ~~plans~~is granted. ~~Had~~ISO’s ~~compensation~~granted ~~expense~~to ~~for~~shareholders owning 10% or more of the outstanding voting power of the Company’s ~~stock~~must ~~based~~be ~~compensation~~exercised ~~plans~~at ~~been~~a ~~determined~~price ~~based~~equal to at least 110% of the fair market value of the shares of Common Stock on the date of grant. The aggregate fair market value of Common Stock, as determined at the time of the grant ~~dates~~with ~~for~~respect ~~awards~~to ~~under~~which ~~those~~ISO’s ~~plans~~are ~~consistent~~exercisable ~~with~~for the ~~method~~first oftime ~~SFAS~~by ~~123~~any employee during any calendar year, shall not exceed $100,000. Any additional Common Stock as to which options become exercisable for the ~~Company~~first time during any such year are treated as NQSO’s. ~~net~~The ~~loss~~total ~~and~~number ~~loss~~of ~~per~~options ~~common~~granted ~~share~~under ~~would~~the ~~have~~1995 ~~been~~Plan, ~~increased~~as toof ~~the~~December ~~pro~~31, ~~forma~~2001 ~~amounts~~was ~~indicated~~3,190,000. ~~below:~~F-16

		2000		1999		1998
Net loss applicable to	As reported	$ (25,427,705	)	$ (14,917,868	)	$ (9,103,113	)
common stockholders	Pro forma	(25,797,194	)	(16,314,519	)	(10,545,636	)
Net loss per common share	As reported	$ (0.23	)	$ (0.20	)	$ (0.17	)
	Pro forma	$ (0.24	)	(0.22	)	(0.20	)

1998 Plan

Under the Company’s 1998 Stock Option Plan (the “1998 Plan”), the Company’s employees, Directors, independent contractors, and consultants are eligible to receive options to purchase shares of the Company’s common stock. The Plan allows the Company to grant incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), and ISOs and NQSOs in tandem with stock appreciation rights (“SARs”, collectively “Options”). A maximum of 5,000,000 shares may be issued and no options may be granted after ten years from the date the 1998 Plan is adopted, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. The exercise price of the Options cannot be less than the fair market value of the shares of common stock on the date the Option is granted. Options granted to individuals owning 10% or more of the outstanding voting power of the Company must be exercisable at a price equal to 110% of the fair market value on the date of the grant. The 1998 Plan was submitted to and approved by the Company’s stockholders at its annual meeting in 1998. The total number of shares granted under the 1998 Plan, as of December 31, 2001, was 4,992,908.

2000 Plan

Under the Company’s 2000 Stock Option Plan (the “2000 Plan”), the Company’s employees, Directors, independent contractors, and consultants are eligible to receive options to purchase shares of the Company’s common stock. The Plan allows the Company to grant incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), and ISOs and NQSOs in tandem with stock appreciation rights (“SARs”, collectively “Options”). A maximum of 5,000,000 shares may be issued and no options may be granted after ten years from the date the 2000 Plan is adopted, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. The exercise price of the Options cannot be less than the fair market value of the shares of common stock on the date the Option is granted. Options granted to individuals owning 10% or more of the outstanding voting power of the Company must be exercisable at a price equal to 110% of the fair market value on the date of the grant. The 2000 Plan was submitted to and approved by the Company’s stockholders at its annual meeting in 2000. There were 525,000 shares granted under the 2000 Plan, as of December 31, 2001.

2001 Plan

We have reserved and registered 5,000,000 shares of our common stock for awards under our 2001 Long Term Performance Plan. This plan has been approved by our Board of Directors and is administered by a committee designated by our Board of Directors. Under the plan, employees or any individual or entity providing services on our behalf are eligible to receive awards. The designated committee determines the type or types of awards to be made to each participant and the related terms. Awards include but are not limited to stock options, stock appreciation rights, stock, or cash. The performance criteria for such awards consist of objective tests based on various criteria, which may be measured solely on a corporate, subsidiary, or business unit basis. Payment of awards may be deferred, either in the form of installments or as a future lump sum payment, in accordance with such procedures as may be established from time to time by the designated committee. As of December 31, 2001, an aggregate of 955,000 shares of our common stock was issued and no stock options or stock appreciation rights had been granted under this plan.

F-17

~~The~~Activity fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk- free rates of 4.5% to 6.1%; volatility ranging from 96.01% to 105.51%, no assumed dividend yield; and expected lives of 1.5 months to 3 years. NOTE 10 — COMMITMENTS AND CONTINGENT LIABILITIES: Environmental Lawsuit In January 1994, a lawsuit captioned Paul R. Thibodeaux, et al. (the “Plaintiffs”) v. Gold Line Refinery Ltd. (a limited partnership), Earl Thomas, individually and d/b/a Gold Line Refinery Ltd., American International Refinery, Inc., Joseph Chamberlain individually (collectively, the “Defendants”) (Docket No. 94-396), was filed in the ~~14th~~1995 Judicial District Court for the Parish of Calcasieu, State of Louisiana. Subsequently, several parties were joined as plaintiffs or defendants in the lawsuit. The lawsuit alleged, among other things, that the defendants, including AIRI, caused or permitted the discharge of hazardous and toxic substances from the Lake Charles Refinery into the Calcasieu River. The plaintiffs sought an unspecified amount of damages, including special and exemplary damages. In October 1997, the Plaintiffs and Defendants agreed upon a cash settlement, of which the Company’s share of $45,000 was placed into escrow in October 1997 and paid in 1998. ~~This~~Stock ~~matter~~Option ~~was~~Plans ~~fully~~for ~~and finally settled during~~ the first quarter of 1998 and all claims were dismissed with prejudice as to all defendants, which included the Company and AIRI. Employment Contracts Dr. George N. Faris is employed as Chairman of the Board until December 31, 2002 at an annual salary of $250,000. The agreement provides that if the initial term is not extended, we will retain Dr. Faris, at his discretion, as a consultant for a period of two calendar years ~~ending~~ended December 31, 2004 at an annual salary equal to 50% of his annual base salary at December 31, 2002. The agreement also provides for, a) a severance payment equal to one month’s salary for each full year of employment beginning January 1, 1995, based on base salary at December 31, 1999 ~~and b) a change in control payment equal to 2.99 times the greater of (i) $350~~,~~000~~ ~~or (ii) his base salary in effect on date of termination as a result of a change in control. Following the resignation of Joe Michael McKinney on July 7,~~ 2000, ~~Dr. Faris assumed the title~~ and ~~responsibilities~~2001 ~~of Acting Chief Executive Officer and his salary~~ was ~~increased to $350,000 per year until such time~~ as a permanent Chief Executive Officer is hired. Transfer of Funds —U.S. and Foreign The Company currently operates in the Republic of Kazakhstan and there are no restrictions on the transfer of funds into and out of the country between the Company’s U.S. and foreign branch of its subsidiary, AIPK. F-17follows:

Lease commitments The Company leases office space under two operating leases which expire in 2003 and 2006. Future minimum annual payments under these operating leases are $464,000, $474,000, $479,000, $268,800 and $268,800 for 2001, 2002, 2003, 2004, and 2005, respectively, and $268,800 thereafter. Non-cancellable subleases total $152,400, $152,448, $158,500, $161,728, and $165,000 for 2001, 2002, 2003, 2004, and 2005, respectively. Minimum lease payments have not been reduced by minimum sublease rentals due in the future under non-cancelable subleases. The composition of total rental expense for all operating leases was as follows:

	Number of Shares		Weighted Average Exercise Price Per Share
Outstanding December 31, 1998	5,438,000		$1.23
Granted	2,242,275		$0.95
Exercised	(523,000	)	$0.61
Expired	(1,410,000	)	$2.00

Outstanding December 31, 1999	5,747,275		$0.99
Granted	1,092,857		$0.65
Exercised	(2,267,550	)	$0.64
Expired	(1,137,667	)	$1.04

Outstanding December 31, 2000	3,434,915		$1.08
Granted	2,455,943		$0.15
Exercised	(29,375	)	$0.13
Expired	(52,500	)	$0.92

Outstanding December 31, 2001	5,808,983		$0.69

	2000		1999	1998
	Number of Shares		Weighted Average Exercise Price
Minimum rentals	$ 496,870		$431,242	$150,530
Price range $0.10 - $0.25
Less — sublease rentals	(113,879	)	—	—
(weighted-average contractual
Total rent expense	$ 382,991		$431,242	$150,530
life of 9 years)	2,298,068		$0.14
Price range $0.43 - $0.91
(weighted-average contractual
life of 7.3 years)	1,745,558		$0.64
Price range $1.05 - $2.00
(weighted-average contractual
life of 5.6 years)	1,774,357		$1.47

~~Other~~As ~~Contingencies~~of InDecember ~~addition~~31, to2001, ~~certain~~options ~~matters~~to ~~described~~acquire ~~above~~5,408,983 shares of the Company’s ~~and~~common ~~its~~stock ~~subsidiaries~~with ~~are~~exercise ~~party~~prices toranging ~~various~~from ~~legal proceedings~~$0.13 ~~Although~~to ~~the~~$2.00, ~~ultimate~~were ~~disposition~~fully ofvested ~~these~~and ~~proceedings~~exercisable isat ~~not~~a ~~presently~~weighted ~~determinable,~~average inexercise ~~the~~price ~~opinion~~ of ~~the~~$0.73 ~~Company,~~per ~~any~~share. ~~liability~~The ~~that~~remaining ~~might~~400,000 ~~ensue~~options, ~~would~~with ~~not~~exercise beprices ~~material~~ranging infrom ~~relation~~$0.10 to ~~the~~$0.50, ~~consolidated~~having ~~financial~~a ~~position~~weighted oraverage ~~results~~exercise ofprice ~~operations~~ of ~~the Company~~$0.24 ~~Trifinery~~per ~~V. American International Refinery~~share, ~~Inc.~~will ~~Etc.~~vest ~~Cause~~through No2004. ~~98-11453;~~If innot ~~the~~previously ~~269th~~exercised, ~~Judicial~~options ~~District;~~outstanding inat ~~and~~December ~~For Harris County~~31, ~~Texas Plaintiff~~2001, ~~Trifinery,~~will ~~has~~expire ~~filed~~as ~~suit~~follows: in105,500 aoptions ~~Harris~~expire ~~County~~on ~~District~~July ~~Court~~31,2005; ~~against~~50,000 ~~the~~options ~~Company~~expire ~~and~~on ~~its~~November ~~wholly-owned subsidiary~~1, ~~American~~2005; ~~International Refinery~~100,000 ~~Inc.~~expire ~~(“AIRI”). Trifinery has asserted claims for recovery of compensatory and punitive damages based~~ on ~~the~~December ~~following theories of recovery; (~~1~~) breach of contract~~, ~~(2) disclosure of confidential information~~2007; ~~and~~862,500 ~~(3)~~options ~~tortuous~~expire ~~interference~~on ~~with~~December ~~existing~~31, ~~contractual~~2007; ~~relations. Generally~~669,000 ~~Trifinery~~options ~~has~~expire ~~alleged~~on ~~that~~June in29, ~~connection~~2008; ~~with~~520,058 ~~the~~options ~~due~~expire ~~diligence~~on ~~conducted~~March by30, ~~the~~2009; ~~Company~~200,000 ~~and~~options ~~AIRI~~expire ofon ~~the~~April ~~business~~27, of2010; ~~Trifinery~~300,000 ~~the~~options ~~Company~~expire ~~and~~on ~~AIRI~~July ~~had~~10, ~~access~~2010; ~~to confidential or trade secret information and that the Company and AIRI have exploited that information~~142,857 inoptions ~~breach~~expire ofon anJuly ~~executed Confidentiality Agreement~~11, to2010; ~~the detriment of Trifinery. Trifinery seeks the recovery of $20~~350,000~~,000~~ inoptions ~~compensatory~~expire ~~damages~~on ~~and~~August an24, ~~undisclosed~~2010; ~~sum in connection with its claim for the recovery of punitive damages. In addition to seeking the recovery of compensatory and punitive damages~~100,000 ~~Trifinery~~options ~~sought~~expire ~~injunctive~~on ~~relief.~~December ~~Specifically~~14, ~~Trifinery~~2010; ~~sought to enjoin the Company and AIRI from: (~~1),579,068 ~~offering~~options ~~employment~~expire ~~positions~~on toJanuary ~~the~~12, ~~key employees of Trifinery~~2011; ~~(2) contacting the suppliers~~10,000 ~~joint~~options ~~venture~~expire ~~partners~~on ~~and~~December ~~customers~~26, of2010; ~~Trifinery~~10,000 inoptions ~~the~~expire ~~pursuit~~on ofJanuary ~~business~~25, ~~opportunities~~2011; ~~(3)~~10,000 ~~interfering~~options ~~with~~expire ~~the~~on ~~contractual~~February ~~relationship~~25, ~~existing~~2011; ~~between~~400,000 ~~Trifinery~~options ~~and~~expire ~~St.~~on ~~Marks~~June ~~Refinery~~20, ~~Inc.~~2011; and ~~(4)~~400,000 ~~disclosing~~options orexpire ~~using~~on ~~any~~September ~~confidential~~2, ~~information obtained during the due diligence process to the detriment of Trifinery~~2011. The ~~Company~~weighted ~~and~~average ~~AIRI~~grant ~~have~~date ~~asserted~~fair tovalue aof ~~general denial to~~ the ~~allegations~~options ~~asserted~~issued byduring ~~Trifinery.~~1999 ~~The Company~~ and ~~AIRI~~the ~~also~~weighted ~~moved~~averaged ~~the~~exercise ~~district~~price ~~court~~of tothose ~~refer~~options ~~the~~amounted ~~matter~~ to ~~arbitration,~~$0.75 ~~as provided for in the Confidentiality Agreement,~~ and to$0.95 ~~stay the pending litigation~~respectively. OnThe ~~March~~weighted ~~27,~~average ~~1998,~~grant ~~the~~date ~~district~~fair ~~court~~value ~~referred~~of the ~~matter~~options toissued ~~arbitration,~~during as2000 ~~requested by the Company~~ and ~~AIRI, and stayed litigation. At present,~~ the ~~dispute~~weighted ~~existing~~averaged ~~between~~exercise ~~the~~price ~~Company, AIRI and Trifinery in Texas will be decided by a panel~~ of ~~three~~those ~~arbitration~~options ~~judges~~amounted ~~under~~to ~~the American Arbitration Association rules for commercial disputes~~$0.22 ~~Two arbitrators have been identified by the parties~~ and ~~the~~$0.65 ~~third is in the process of being chosen~~respectively. The ~~Company~~weighted ~~and~~average ~~AIRI~~grant ~~are~~date ~~vigorously~~fair ~~defending~~value ~~this~~of ~~matter and~~ the ~~Company~~options ~~anticipates~~issued aduring ~~favorable~~2001 ~~outcome,~~and ~~although a definitive outcome is not yet determinable. On February 26, 1998,~~ the ~~Company~~weighted ~~entered~~average ~~into~~exercise aprice ~~Letter Agreement with DSE, Inc., the parent corporation~~ of ~~St.~~those ~~Marks~~options ~~Refinery,~~amounted ~~Inc., whereby the Company agreed~~ to ~~purchase~~$0.12 ~~or lease the refinery~~ and ~~terminals facility located at St~~$0. ~~Marks~~15, ~~Florida~~respectively. ~~Thereafter,~~In ~~St.~~October ~~Marks Refinery~~1995, ~~Inc.~~the ~~elected~~Financial toAccounting ~~terminate~~Standards ~~its~~Board ~~storage~~issued ~~agreement~~a ~~with~~new ~~Trifinery.~~statement Ontitled ~~March~~“Accounting ~~10, 1998, Trifinery sued St. Marks Refinery, Inc. in the United states District Court~~ for ~~the Northern District of Florida, Case No. 4:98cv86~~Stock-~~WS,~~Based ~~and~~Compensation” ~~sought~~(SFAS ~~an injunction to prevent immediate termination of its storage agreement~~123). ~~Following~~SFAS an123 ~~evidentiary hearing~~encourages, ~~the~~but ~~District~~does ~~Judge~~not ~~denied Trifinery’s application for injunctive relief and adopted the recommendations of the Magistrate~~require, ~~who~~companies ~~found in part that Trifinery had failed~~ to ~~prove~~recognize acompensation ~~substantial~~expense ~~likelihood~~for ofgrants ~~success on the merits. The District Court’s order was appealed by Trifinery to the United States Court~~ of ~~Appeals for the Eleventh Circuit~~stock, ~~but~~stock ~~the Appellate Court denied Trifinery’s motion for injunction pending appeal. On appeal~~options, ~~the federal court found in favor of Trifinery~~ and ~~issued~~other aequity ~~judgement~~instruments ~~related~~to ~~thereto~~employees ~~for~~based ~~$175,000, which was paid by the Company~~ on ~~behalf~~fair ~~of St~~value. ~~Marks~~Fair invalue ~~March~~is ~~1999.~~generally ~~However,~~determined ~~DSE,~~under ~~Inc.~~an ~~has~~option ~~agreed~~pricing tomodel ~~reimburse~~using the ~~Company~~criteria ~~$75,000~~set offorth ~~the $175,000, pursuant to DSE, Inc.’s indemnification of the Company included~~ in ~~the~~SFAS ~~Stock Purchase Agreement under which the Company purchased St~~123. ~~Marks. The remaining $100,000 was capitalized as acquisition cost of the St. Marks Refinery.~~ F-18

~~Kazakhstan~~The ~~On May 12, 1997, the~~ Company, ~~through~~applies ~~its~~APB ~~wholly-owned~~Opinion ~~subsidiary~~25, ~~American~~Accounting ~~International~~of ~~Petroleum~~Stock ~~Kazakhstan~~Issued ~~(“AIPK”)~~to Employees, ~~entered~~and ~~into~~related anInterpretations ~~agreement~~in ~~with~~accounting ~~Med~~for ~~Shipping~~its ~~and Trading S~~plans.A. ~~(“MED”)~~Accordingly, ano ~~Liberian~~compensation ~~corporation~~cost tohas ~~buy~~been ~~from~~recognized ~~MED, in exchange~~ for aits ~~combination~~fixed ofprice ~~cash and~~ stock, aoption ~~70% working interest in a Kazakhstan concession~~plans. AsHad ~~part~~compensation ofexpense ~~the~~for ~~acquisition,~~ the Company’s isstock ~~required~~based tocompensation ~~perform~~plans ~~certain~~been ~~minimum~~determined ~~work~~based ~~programs~~on ~~over~~ the ~~next~~fair ~~five~~value ~~years~~at ~~which consists of~~ the ~~acquisition~~grant ~~and~~dates ~~processing~~for ofawards ~~3,000~~under ~~kilometers~~those ofplans ~~new~~consistent ~~seismic~~with ~~data,~~the ~~reprocessing~~method ~~500 kilometers~~ of ~~existing~~SFAS ~~seismic data~~123, ~~and a minimum of 6,000 linear meters of exploratory drilling. In addition,~~ the Company assumed an obligation to pay the Kazakhstan Government three annual payments of $200,000 each beginning July 1998 for the purchase of existing seismic and geological data on the Kazakhstan concession. NOTE 11 — INCOME TAXES: The Company reported a loss from operations during 1998, 1999, and 2000 and has a net operating loss carryforward from prior years’s ~~operations. Accordingly, no income tax provision has been provided in the accompanying statement of operations. The Company has available unused tax~~ net ~~operating~~ loss carryforwards of approximately $67,500,000 which expire in years 2001 through 2019. Due to a change in control, as defined in Section 382 of the Internal Revenue Code (“382”), which occurred in 1994 and ~~1998, the Company’s utilizable tax operating~~ loss ~~carryforwards~~per tocommon ~~offset~~share ~~future~~would ~~income~~ have been ~~restricted.~~increased ~~These~~to ~~restrictions will limit~~ the ~~Company’s~~pro ~~future~~forma ~~use~~amounts ofindicated ~~its loss carryforwards. The components of the Company’s deferred tax assets and liabilities are as follows~~below:

	December 31,
			2001		2000		1999
	2000		1999
Net loss applicable to	As reported		$ (27,669,975	)	$ (25,427,705	)	$ (14,917,868	)
Deferred taxes:
common stockholders	Pro forma		(27,878,975	)	(25,797,194	)	(16,314,519	)
Net operating loss carryforwards	$ 24,415,000		$ 19,745,000
Net loss per common share	As reported		$ (0.17	)	$ (0.23	)	$ (0.20	)
Allowance for doubtful accounts	1,300,000		1,300,000
	Pro forma		$ (0.17	)	$ (0.24	)	(0.22	)
Depreciation, depletion, amortization and impairment	2,796,000		(1,951,000	)
Net deferred tax asset	28,511,000		19,094,000
Valuation allowance	$(28,511,000	)	$(19,094,000	)

The ~~valuation~~fair ~~allowance~~value ~~relates~~of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk- free rate of 5.75% to 6.1%; volatility ranging from 119.32% to 122.23%, no assumed dividend yield; and expected life of one year. NOTE 10 — COMMITMENTS AND CONTINGENT LIABILITIES: Employment Contracts Dr. George N. Faris is employed as Chairman of the ~~uncertainty~~Board and Chief Executive Officer until July 31, 2002 at an annual salary of $367,500 and as tothe Chairman of the ~~future~~Board ~~utilization~~until July 31, 2003. The agreement provides that if the initial term is not extended, we will retain Dr. Faris, at his discretion, as a consultant for a period of ~~net~~two ~~operating~~calendar ~~loss~~years ~~carryforwards~~ending July 31, 2005 at an annual salary equal to 50% of his annual base salary at December 31, 2002. The ~~increase~~agreement also provides for, a) a severance payment equal to one month’s salary for each full year of employment beginning January 1, 1995, based on base salary at December 31, 1999 and b) a change in ~~the~~control ~~valuation~~payment ~~allowance~~equal ~~during~~to ~~2000~~2.99 times the greater of ~~approximately~~(i) $9350,~~417~~000 or (ii) his base salary in effect on date of termination as a result of a change in control. Mr. James E. Knight was hired as President and Chief Operating Officer on September 4, 2002 at an annual salary of $325,000 ~~primarily~~for ~~reflects~~a period of eighteen months. The term shall be automatically renewed and extended for successive periods of one year commencing on his eighteen month anniversary date and on each successive one year anniversary thereafter unless either Mr. Knight or we give the ~~increase~~other innotice of termination at least ninety days prior to the ~~Company’s~~end ~~net~~of ~~operating~~the ~~loss~~initial ~~carryforwards~~term or any renewal term. In such event, his employment will terminate at the end of the initial term or the end of the renewal term during which such notice was given. If, after the initial eighteen-month term, his employment is terminated without cause, he will be entitled to one month of severance pay for each full year. Aof ~~reconciliation~~employment, prorated for each full month of ~~the~~employment. ~~provision~~The agreement also provides for ~~income~~a ~~taxes~~change of control payment equal to ~~the~~2.99 ~~statutory~~times ~~United~~his ~~States~~annual ~~tax~~base ~~rate~~salary that is in effect immediately prior to his termination as ~~follows~~a (result of a change in ~~thousands):~~control. Contingencies The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company is defendant in several actions related to employee matters. The Company does not believe at this time that plaintiffs will prevail, or if they do, that the results would have a material adverse effect on the Company’s financial condition or results of operations. In the opinion of management, the ultimate disposition of matters, other than those discussed above, will not have a material adverse effect on the Company’s financial condition or results of operations. Transfer of Funds —U.S. and Foreign The Company currently operates in the Republic of Kazakhstan and there are no restrictions on the transfer of funds into and out of the country between the Company’s U.S. and foreign branch of its subsidiary, AIPK. F-19

	For the Year Ended December 31,
	2000		1999		1998
Federal tax benefit computed at statutory rate	$(8,645,000	)	$(5,072,000	)	$(3,095,000	)
Other, net	(772,000	)	435,000		(212,000	)
Increase in valuation allowance	(9,417,000	)	$(4,637,000	)	$(3,307,000	)
Actual provision	$ —		$ —		$ —

Lease commitments

The Company leases office space under two operating leases which expire in 2003 and 2006. Future minimum annual payments under these operating leases are $474,000, $474,000, $244,000, $244,000 and $244,000 for 2002, 2003, 2004, 2005, and 2006, respectively. Non-cancelable subleases total $152,448, $158,500, $161,728, $165,000 and $168,300 for 2002, 2003, 2004, 2005, and 2006, respectively.

Minimum lease payments have not been reduced by minimum sublease rentals due in the future under non-cancelable subleases. The composition of total rental expense for all operating leases was as follows:

F-19

	2001		2000		1999
Minimum rentals	$ 496,723		$ 496,870		$431,242
Less - sublease rentals	(153,035	)	(113,879	)	—

Total rent expense	$ 343,688		$ 382,991		$431,242

~~NOTE~~Kazakhstan 12 — CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS: Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of trade accounts receivable and notes receivable. Trade accounts receivable outstanding at December 31, 2000 have been collected in the normal course of business. A note receivable of $1,493,750 received in the sale of the Colombia and Peru properties, was due during 1998 and in default and has been fully reserved at December 31, 2000. An additional MIP note receivable of $1,252,696 also received in the sale mentioned above and due in 2000 is payable out of production from the Colombia properties. This note is carried at full value at December 31, 2000 and the Company has been receiving monthly payments on this note and has no reason to believe that it will not collect this receivable (See Note 15). At December 31, 2000, the note had been reduced to $575,112 (see Note 4). Fair value of fixed-rate long-term debt and notes receivable are determined by reference to rates currently available for debt with similar terms and remaining maturities. As of December 31, 2000, 100% of the Company’s long-term debt which was issued during 1999, matures during 2004. As a result, the Company believes the carrying value of its receivables and long-term debt approximates fair value. The reported amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable, short-term debt, and accrued liabilities approximate fair value because of their short-term maturities. The MIP notes receivable were recorded at a discount to yield a fair market interest rate. The Company believes the effective interest rate on the MIP notes approximates market rates at December 31, 2000. The estimated fair value of the Company’s financial instruments is as follows:

	2000		1999
	Carryingvalue	Fairvalue	Carryingvalue	Fairvalue
MIP Notes Receivable	$ 575,112	$ 575,112	$ 1,252,696	$ 1,252,696
Short-term debt	$ 7,078,173	$ 7,078,173	$ 3,960,331	$ 3,960,331
Long-term debt	$ 5,565,395	$ 5,565,395	$ 11,984,592	$ 11,984,592
Redeemable preferred stock	$ 1,186,751	$ 1,186,751	$ —	$ —

On May 12, 1997, the Company, through its wholly-owned subsidiary, American International Petroleum Kazakhstan (“AIPK”), entered into an agreement with Med Shipping and Trading S.A. (“MED”), a Liberian corporation to buy from MED, in exchange for a combination of cash and stock, a 70% working interest in a Kazakhstan concession. As part of the acquisition, the Company is required to perform certain minimum work programs over the next five years which consists of the acquisition and processing of 3,000 kilometers of new seismic data, reprocessing 500 kilometers of existing seismic data, and a minimum of 6,000 linear meters of exploratory drilling.

Four of the Company’s asphalt customers account for an aggregate of 71% of the Company’s sales in 2000. The Company has the ability to draw on it’s customer’s posted performance bonds and personal guarantees to collect any past due accounts. NOTE 1311 — GEOGRAPHICALINCOME SEGMENT INFORMATIONTAXES: The Company has two reportable segments which are primarily in the business of exploration, development and production of oil and natural gas and the refining and marketing of petroleum products. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performances based on profit and loss before income and expenses items incidental to their respective operations. The Company’s reportable statements are managed separately because of their geographic locations. Financial information by operating segment is presented below: F-20

	Geographic Segment
2000	United States		Kazakhstan		ConsolidatedTotal
Sales and other operating revenue	$ 3,108,670		$ —		$ 3,108,670
Interest income and other corporate revenues	$ —		$ —		165,350
Total revenue
	$ 3,108,670		—		3,274,020
Costs and operating expense	8,802,976		12,546,295		21,349,271
Operating profit (loss)	$(5,694,253	)	$(12,546,295	)	$(18,075,251	)
General corporate expense					4,062,683
Interest expense and incremental yield on
preferred stock					3,289,771
Net loss applicable to common stockholders					$(25,427,705	)
Identifiable assets at December 31, 2000	$ 31,105,826		$ 21,138,161		$ 52,243,987
Corporate assets					2,754,435
Total assets at December 31, 2000					$ 54,998,422
Depreciation, depletion, amortization
and provision for impairment	$ 1,844,942		$ 12,546,295		$ 14,391,237
Capital Expenditures, net of cost recoveries	$ 71,728		$ 2,677,857		$ 2,749,585

The Company reported a loss from operations during 1999, 2000, and 2001 and has a net operating loss carryforward from prior years’ operations. Accordingly, no income tax provision has been provided in the accompanying statement of operations. The Company has available unused tax net operating loss carryforwards of approximately $73,400,000 which expire in years 2002 through 2020. Due to a change in control, as defined in Section 382 of the Internal Revenue Code (“382”), from 1994 through the current year, the Company’s utilizable tax operating loss carryforwards to offset future income have been restricted. These restrictions will limit the Company’s future use of its net operating loss carryforwards.

~~F-21~~The components of the Company’s deferred tax assets and liabilities are as follows:

	Geographic Segment
	December 31
1999	United States		Kazakhstan		ConsolidatedTotal
	2001		2000
Sales and other operating revenue	$ 8,137,867		$ —		$ 8,137,867
Deferred taxes:
Interest income and other corporate revenues	—		—		214,171
Net operating loss carryforwards	$ 25,650,000		$ 24,415,000
Total revenue	$ 8,137,867		—		8,352,038
Allowance for doubtful accounts	969,000		1,300,000
Costs and operating expense	13,116,830		—		13,116,830
Accrued expenses	419,000		—
Operating profit (loss)	$(4,978,963	)	$ —		$(4,764,792	)
Depreciation, depletion, amortization and impairment	14,542,000		2,796,000
General corporate expense					3,652,497
Net deferred tax asset	41,580,000		28,511,000
Interest expense					6,500,579
Valuation allowance	(41,580,000	)	(28,511,000	)
Net loss					$(14,917,868	)
Net deferral tax assessment	$ —		$ —
Identifiable assets at December 31, 1999	$ 33,877,437		$32,162,385		$ 66,039,822
Corporate assets					3,618,447
Total assets at December 31, 1999					$ 69,658,269
Depreciation, depletion and amortization	$ 1,730,710		$ —		$ 1,730,710
Capital Expenditures, net of cost recoveries	$ 1,062,053		$ 8,498,390		$ 9,560,443

The valuation allowance relates to the uncertainty as to the future utilization of net operating loss carryforwards. The increase in the valuation allowance during 2001 of approximately $13,069,000 primarily reflects the increase in the Company’s net operating loss carryforwards during the year. F-2220

	Geographic Segment
1998	United States		Kazakhstan	ConsolidatedTotal
Sales and other Refinery operating revenue (1)	$ 11,394,009		$ —	$ 11,394,009
Interest income and other corporate revenues	—		—	460,597
Total revenue	$ 11,394,009		—	11,854,606
Costs and operating expense	14,214,767		—	14,214,767
Operating profit (loss)	$(2,820,758	)	$ —	$(2,360,061	)
General corporate expense
				4,830,003
Interest expense				(1,912,949	)
Net loss				$(9,103,113	)
Identifiable assets at December 31, 1998	$ 35,234,530		$22,677,073	$ 57,911,603
Corporate assets				2,949,731
Total assets at December 31, 1998				$ 60,861,334
Depreciation, depletion and amortization	$ 813,088		$ —	$ 813,088
Capital Expenditures, net of cost recoveries	$ 15,494,897		$10,748,427	$ 26,243,324

A reconciliation of the provision for income taxes to the statutory United States tax rate is as follows (in thousands):

(1) Refinery sales to Conoco accounted for 19% of the Company’s sales during the year.

	For the Year Ended December 31,
	2001		2000		1999
Federal tax benefit computed at statutory rate	$(10,432,000	)	$(8,645,000	)	$(5,072,000	)
Other, net	(2,637,000	)	(772,000	)	435,000
Increase in valuation allowance	13,069,000		9,417,000		4,637,000

Actual provision	$ —		$ —		$ —

FNOTE 12 — CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS: Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of trade accounts receivable and notes receivable. Trade accounts receivable outstanding at December 31, 2001 have been collected in the normal course of business. A note receivable of $1,493,750 received in the sale of the Colombia and Peru properties, was due during 1998 and in default and was fully reserved at December 31, 2000. At the end of 2001 the reserve was reduced by approximately $865,000 based on payments made against that amount. An additional MIP note receivable of $1,252,696 also received in the sale mentioned above and due in 2000 is payable out of production from the Colombia properties. This note is carried at full value at December 31, 2001 and the Company has been receiving monthly payments on this note and has no reason to believe that it will not collect this receivable (See Note 15). At December 31, 2001, the note had been reduced to $335,113. This amount, along with the reserve mentioned above are reflected in Note 3. Fair value of fixed-23rate long-term debt and notes receivable are determined by reference to rates currently available for debt with similar terms and remaining maturities. As of December 31, 2001, $35,000 of long-term debt is due in 2003 and 2004, $5,322,000 of long-term debt is due in 2004, and $8,563,000 of the Company’s long-term debt is due in 2007. As a result, the Company believes the carrying value of its receivables and long-term debt approximates fair value. The reported amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable, short-term debt, and accrued liabilities approximate fair value because of their short-term maturities. The MIP notes receivable were recorded at a discount to yield a fair market interest rate. The Company believes the effective interest rate on the MIP note approximates market rates at December 31, 2001. The estimated fair value of the Company’s financial instruments is as follows:

NOTE 14 — SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES AND DISCLOSURES OF CASH FLOW INFORMATION: The Company has issued shares of common stock and common stock warrants in the acquisitions and conversions of the following non-cash transactions:

	2001		2000
	Carrying value	Fair value	Carrying value	Fair value
MIP Notes Receivable net of
allowance for doubtful accounts	$ 1,200,000	$ 1,200,000	$ 575,112	$ 575,112

Short-term debt	$ 1,986,365	$ 1,986,365	$7,078,173	$7,078,173

Long-term debt	$13,919,968	$13,919,968	$5,565,395	$5,565,395

Redeemable preferred stock	$ —	$ —	$1,186,751	$1,186,751

	2000	1999	1998
Conversion of debentures	$6,852,115	$7,602,373	$15,526,380
Stock issued in lieu of current liabilities	1,926,125	1,473,713	1,669,717
Issuance of warrants related to convertible debentures	254,077	1,584,106	936,459
Issuance of stock - unearned compensation	—	—	196,900
Issuance of stock - compensation	20,000	—	—
Issuance of stock - services	306,790	654,453	128,125
Issuance of stock and warrants - for oil and gas properties	—	1,852,366	—
Issuance of stock- for refinery and equipment	—	—	1,687,500
Issuance of stock for collateral on debt	24,000	1,065,938	—
Preferred stock converted into common stock	$5,282,978	$ —	$ —

Four of the Company’s asphalt customers account for an aggregate of 71% of the Company’s sales in 2001. The Company has the ability to draw on it’s customer’s posted performance bonds and personal guarantees to collect any past due accounts.

NOTE 13 — GEOGRAPHICAL SEGMENT INFORMATION:

The Company has two reportable geographical segments which are primarily in the business of exploration, development, production of oil and natural gas and the refining and marketing of petroleum products. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performances based on profit and loss before income and expense items incidental to their respective operations. The Company’s reportable statements are managed separately because of their geographic locations. Financial information by operating segment is presented below:

Financial information, summarized by geographic area, is as follows:

F-21

Cash paid for interest, net of amounts capitalized, was $799,051, $1,943,124, and $62,532, during 2000, 1999, and 1998, respectively. Cash paid for corporate franchise taxes was $111,577, $94,506, and $60,078, during 2000, 1999, and 1998, respectively. Interest capitalized was $547,786 and $7,055,340 during the years 1999 and 1998, respectively. No interest was capitalized during 2000. NOTE 15 — SUBSEQUENT EVENTS: Mercantile International Petroleum Notes In February 1999, Mercantile International Petroleum, Inc. failed to pay the Company the $1.6 million outstanding balance of the 5% convertible debenture it issued to us as partial payment for the purchase of its oil and gas properties in Columbia and Peru, South America in February 1997. In January 2000, the parties signed a letter agreement, under which Mercantile acknowledged its indebtedness to the Company in the amount of $1,581,000 for the outstanding balance of the debenture and an additional amount of $1,306,000 in connection with the earnout provision of the original purchase agreement. Mercantile agreed to repay this aggregate debt of $2,888,000 by issuing a new 11.5% convertible debenture to the Company. Beginning in February 2000, Mercantile began to make the scheduled monthly payments to the Company amounting to the greater of $70,000 or 80% of its Colombian subsidiary’s net income during the calendar year 2000. During 2000, each payment was in the amount of $70,000 and was generally paid in a timely manner. Beginning in January 2001, Mercantile began to pay monthly the greater of $80,000 or 80% of the subsidiary’s net income until the debt is retired. The unpaid portion of the debt is convertible into Mercantile common stock at the option of the Company, at any time at $1.50 per share. MIP issued to AIPC (i) a Corporate Continuing Guaranty whereby MIP guarantees the obligations of MCOG under the Exchangeable Subordinated Debenture in favor of AIPC, (ii) an Exchange Rights Agreement pursuant to which MIP agrees to issue up to 1,933,160 common shares of the MIP on conversion of the Debenture and (iii) a Warrant Certificate evidencing warranty for the purchase of up to $2,347,000 common shares of MIP. During 2000, MIP made monthly payments totaling $700,000 toward the note. All formal documents related to the January 2000 agreement, including the 11.5% convertible debenture, were finalized on February 5, 2001. NOTE 16 — EMPLOYEE BENEFITS: During the fourth quarter of 1997 the Company established a defined contribution 401(k) Plan for its employees. The plan provides participants a mechanism for making contributions for retirement savings. Each employee may contribute certain amounts of eligible compensation. In July 1998, the Company amended the plan to include a Company matching contribution provision. The plan allows for the Company to match employee contributions into the plan at the rate of $0.50 for each $1.00 contributed by the employee, with a Company matching contribution limited to a maximum of 5% of the employee salary. To be eligible for the Company matching program, employees must be employed by the Company for 90 days. Employer contributions vest evenly over three years from the employee’s anniversary date. The Company had contributions for the year ended December 31, 2000, 1999 and 1998 totaling approximately $43,300, $61,500, and $48,600, respectively. F-24

	Geographic Segment
2001	United States		Kazakhstan		Consolidated Total
Sales and other operating revenue	$ 18,312,039		$ —		$ 18,312,039
Interest income and other corporate revenues	—		—		324,983

Total revenue	18,312,039		—		18,637,022
Costs and operating expense	30,702,894		10,670,675		41,373,569

Operating loss	$(12,390,855	)	$(10,670,675	)	$(22,736,547	)

General corporate expense					2,759,882
Interest expense and incremental yield on
preferred stock					2,173,546

Net loss applicable to common stockholders					$(27,669,975	)

Identifiable assets at December 31, 2001	$ 21,655,213		$ 12,445,488		$ 34,100,701

Corporate assets					2,953,539

Total assets at December 31, 2001					$ 37,054,240

Depreciation, depletion, amortization
and provision for impairment	$ 11,201,493		$ 10,670,675		$ 21,872,168

Capital Expenditures, net of cost recoveries	$ 135,735		$ 2,131,620		$ 2,267,355

CALCULATION OF REGISTRATION FEE

Preliminary Prospectus dated ____________, 2002, subject to completion

AMERICAN INTERNATIONAL PETROLEUM CORPORATION

Common Stock

Table of Contents

Summary of Consolidated Financial Data

Dividend Policy

Selected Financial Data

Provision for Impairment of Plant Assets

Interest

Liquidity and Capital Resources

Insurance; Environmental Regulations

Marketing

Sources and Availability of Raw Materials

Oil and Gas Acreage and Wells

Productive Wells

Oil and Gas Production

Reserves

Drilling Activity

Facilities

Legal Proceedings

Management

Committees of the Board of Directors

Compensation Committee Interlocks

Director Compensation

Summary Compensation Table

Employment Agreements

Plan of Distribution

Index to Consolidated Financial Statements

INDEPENDENT AUDITOR’S REPORT

HEIN + ASSOCIATES LLP

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’EQUITY

NOTE 4 — OTHER LONG-TERM ASSETS:

NOTE 5 — ACCRUED LIABILITIES: Accrued liabilities consist of the following:

NOTE 7 — LONG-TERM DEBT:

NOTE 13 — GEOGRAPHICAL SEGMENT INFORMATION:

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

AMERICAN INTERNATIONAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’EQUITY

Filing Compare · AMERICAN INTERNATIONAL PETROLEUM CORP /NV/