IMPERIAL PETROLEUM INC - FORM 10-K

IMPERIAL PETROLEUM INC - FORM 10-K - October 29, 2009

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SECURITIES EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-09923

IMPERIAL PETROLEUM, INC.

(Exact name of registrant as specified in its charter)

Nevada

95-3386019

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

identification No.)

329 Main Street, Mezzanine Level

Evansville, IN 47708

Registrant’s telephone number, including area code (812) 867-1433

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 13(g) of the Act:

Common Stock. $0.006 par value per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulation K is not contained herein, and will not be contained to the best of the Registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-Accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No x

On July 31, 2009, there were 16,964,441 shares of the Registrant’s common stock issued and outstanding. The aggregate market value of the Registrant’s voting stock held by non-affiliates is $1,064,618. See Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters.

Documents Incorporated by Reference: NONE

IMPERIAL PETROLEUM, INC

FORM 10-K

FISCAL YEAR ENDED JULY 31, 2009

TABLE OF CONTENTS


		Page
PART I		1

ITEM 1.	Business.	1

	Definitions	1

	The Company	2

	Historical Background	2

	Change of Control	3

	Business Strategy	7

ITEM 1A.	Risk Factors.	9

ITEM 2.	Description of Properties	16

	Oil and Natural Gas Development, Major Properties	16

	Principal Exploration and Development Projects: Mining Ventures	17

	United States Mines	17

	Competition	18

	Government Contracts	18

	Regulation	19

	Title to Properties	19

	Operational Hazards and Insurance	19

	Employees	20

ITEM 3.	Legal Proceedings.	20

ITEM 4.	Submission of Matters to a Vote of Security Holders.	21

PART II		21

ITEM 5.	Market For Registrant’s Common Stock; and Related Stockholder Matters.	21

ITEM 6.	Selected Financial Data.	21

ITEM 7.	Management’s Discussion and Analysis of the Financial Condition and Results of Operations.	21

	Results of Operations	21

	Capital Resources and Liquidity	23

	Seasonality	25

	Inflation and Prices	26

	Off Balance Sheet Arrangements	26

	Contractual Obligations	26

	Long-Term Debt	26


ITEM 7A.	Quantitative and Qualitative Disclosure about Market Risk.	27

	Commodity Risk	27

	Interest Rate Risk	27

ITEM 8.	Financial Statements and Supplementary Data.	27

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	27

ITEM 9A.	Controls and Procedures.	27

	Changes in Internal Controls	28

ITEM 9B.	Other Information.	28

PART III		29

ITEM 10.	Directors and Executive Officers of Registrant.	29

	Directors and Executive Officers	29

	Biographical Information	29

	Section 16(a) Reporting Deficiencies	30

ITEM 11.	Executive Compensation.	30

ITEM 12.	Security Ownership of Certain Beneficial Owners and Management.	31

ITEM 13.	Certain Relationships and Related Transactions.	32

ITEM 14.	Principal Accountant Fees and Services.	32

PART IV		33

ITEM 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K.	33

SIGNATURES		35

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

In the interest of providing the Company’s stockholders and potential investors with certain information regarding the Company’s future plans and operations, certain statements set forth in this Form 10-K relate to management’s future plans and objectives. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. Although any forward looking statements contained in this Form 10-K or otherwise expressed on behalf of the Company are, to the knowledge and in the judgment of the officers and directors of the Company, expected to prove to come true and to come to pass, management is not able to predict the future with absolute certainty. Forward looking statements involve known and unknown risks and uncertainties which may cause the Company’s actual performance and financial results in future periods to differ materially from any projection, estimate or forecasted result. These risks and uncertainties include, among other things, volatility of commodity prices, changes in interest rates and capital market conditions, competition, risks inherent in the Company’s operations, the inexact nature of interpretation of seismic and other geological, geophysical, petro-physical and geo-chemical data, the imprecise nature of estimating reserves, events that deprive the Company of the services of its Chairman of the Board, Chief Executive Officer and largest shareholder, and such other risks and uncertainties as described from time to time in the Company’s periodic reports and filings with the Securities and Exchange Commission. Accordingly stockholders and potential investors are cautioned that certain events or circumstances could cause actual results to differ materially from those projected, estimated or predicted. The Company does not intend to update forward-looking statements. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

PART I

ITEM 1.

Business.

Definitions

As used in this Form 10-K, the following terms shall have the following meanings.

“Base Metals” refers to a family of metallic elements, including copper, lead and zinc.

“Bbl” means barrel.

“Bcf” means billion cubic feet.

“Bcfe” means billion cubic feet equivalent.

“BOE” means equivalent barrels of oil.

“Company,” unless the context requires otherwise, means Imperial Petroleum, Inc., a Nevada corporation (“Imperial”) and its consolidated subsidiaries. Ridgepointe Mining Company, a Delaware corporation (“Ridgepointe”), I.B. Energy, Inc., an Oklahoma corporation (“I.B. Energy”), Premier Operating Company, a Texas corporation (“Premier”), LaTex Resources International, a Delaware corporation (“LRI”), Phoenix Metals, Inc., dba The Rig Company a Texas corporation (“Phoenix”) and Hoosier Biodiesel Company (formerly Global/Imperial Joint Venture Inc.) a Nevada corporation. LRI and Phoenix were acquired effective April 30, 1997. The operations of LRI ceased in 1997 with the expiration of its remaining foreign activities. Phoenix has conducted limited activities since 1997 as Imperial Environmental Company and subsequently as The Rig Company although it has not officially changed its name. Eighty-percent control of SilaQuartz was acquired effective November 23, 1998 as an investment. The Company acquired 90% control of Oil City Petroleum, Inc. (“Oil City”), an Oklahoma corporation effective August 31, 1998 as an investment and sold its interest effective November 28, 2000. The Company owns approximately 7.6 % of the common stock of Warrior Resources, Inc., (“Warrior”) an Oklahoma corporation which is now called Roadhouse Foods, Inc., and carries its ownership as an asset acquisition. Hoosier Biodiesel Company was incorporated in Nevada in 2000.

“Grade” refers to the metal or mineral content of rock, ore or drill or other samples. With respect to precious metals, grade is generally expressed as troy ounces per ton of rock.

“Gross” refers to the total leasehold acres or wells in which the Company has a working interest.

“MBbls” means thousand barrels.

“MBOE” means thousands equivalent barrels of oil.

“Mcf” means thousand cubic feet.

“Mcfe” means thousand cubic feet equivalent.

“Mineable” refers to that portion of a mineral deposit from which it is economically feasible to extract ore.

“MMBbls” means million barrels.

“MMcf” means million cubic feet.

“Mmcfe” means million cubic feet equivalent.

“Net” refers to gross leasehold acres or wells multiplied by the percentage working interest owned by the Company.

“Net production” means production that is owned by the Company less royalties and production due others.

“Net Smelter Royalty” is a royalty based on the actual sale price received for the subject metal less the cost of smelting and/or refining the material at an offsite refinery or smelter along with off-site transportation costs.

“Oil” includes crude oil, condensate and natural gas liquids.

“Patented Mining Claim” is a mining claim, usually comprising about 20 acres, to which the US Government has conveyed title to the owner.

“Proved developed reserves” are those reserves which are expected to be recovered through existing wells with existing equipment and operating methods.

“Proved reserves” are estimated quantities of crude oil, natural gas and natural gas liquids, which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

“Proved undeveloped reserves” are those reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

“Unpatented Mining Claim” is a mining claim which has been staked or marked out in accordance with federal and state mining laws to acquire the exclusive rights to explore for and exploit the minerals which may occur on such lands. The title to the property has not been conveyed to the holder of an unpatented mining claim.

Unless otherwise indicated herein, natural gas volumes are stated at the legal pressure base of the state or area in which the reserves are located and at 60 degrees Fahrenheit. Natural gas equivalents are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil

The Company

Imperial Petroleum, Inc., a Nevada corporation (“the Company”), is a diversified energy, and mineral mining company headquartered in Evansville, Indiana. The Company is engaged in the production and exploration of crude oil and natural gas primarily in Louisiana and Texas and has diversified its business activities to include the development of a biofuels subsidiary.

At July 31, 2009, the Company operated 18 oil and gas wells in Louisiana. In addition, the Company owns an overriding royalty interest in Kentucky as well as the rights to several inactive gas wells as part of its New Albany Shale play. Net daily production from the Company’s oil and gas properties was approximately 44 Bopd and 66 Mmcfpd for the year ended July 31, 2009. The Company’s estimated net proven oil and gas reserves as of July 31, 2009 were 243 MBO and 2,501 Mmcfg, respectively. The Company is the operator and owner of the Duke Gold Mine in Utah, although no significant operations occurred during the fiscal year.

Historical Background

The Company was incorporated on January 16, 1981 and is the surviving member of a merger between itself, Imperial Petroleum, Inc., a Utah corporation incorporated on June 4, 1979 (“Imperial-Utah”), and Calico Exploration Corp., a Utah corporation incorporated on September 27, 1979 (“Calico”). The Company was reorganized under a Reorganization Agreement and Plan and Article of Merger dated August 31, 1981 resulting in the Company being domiciled in Nevada.

On August 11, 1982, Petro Minerals Technology, Inc. (“Petro”), a 94% -owned subsidiary of Commercial Technology Inc. (“Comtec”) acquired 58% of the Company’s common stock. Petro assigned to the Company its interests in two producing oil and gas properties in consideration for 5,000,000 shares of previously authorized but unissued shares of common stock of the Company and for a $500,000 line of credit to develop these properties. Petro has since undergone a corporate reorganization and is now known as Petro Imperial Corporation. On August 1, 1988 in an assumption of assets and liabilities agreement, the same 58% of the Company’s common stock was acquired from Petro by Glauber Management Co., a Texas corporation, (“Glauber Management”), a 100% owned subsidiary of Glauber Valve Co., Inc., a Nebraska corporation (“Glauber Valve”).

Change of Control

Pursuant to an Agreement to Exchange Stock and Plan of Reorganization dated August 27, 1993 (the “Stock Exchange Agreement”), as amended by that certain First Amendment to Agreement to Exchange Stock and Plan of Reorganization dated as of August 27, 1993, (the “First Amendment”), between the Company, Glauber Management, Glauber Valve, Jeffrey T. Wilson (“Wilson”), James G. Borem (“Borem”) and those persons listed on Exhibit A attached to the Stock Exchange Agreement and First Amendment (the “Ridgepointe Stockholders”). The Ridgepointe Stockholders agreed to exchange (the “Ridgepointe Exchange Transaction”) a total of 12,560,730 shares of the common stock of Ridgepointe, representing 100% of the issued and outstanding common stock of Ridgepointe, for a total of 12,560,730 newly issued shares of the Company’s common stock, representing 59.59% of the Company’s resulting issued and outstanding common stock. Under the terms of the Stock Exchange Agreement, (i) Wilson exchanged 5,200,000 shares of Ridgepointe common stock for 5,200,000 shares of the Company’s common stock representing 24.67% of the Company’s issued and outstanding common stock, (ii) Borem exchanged 1,500,000 shares of Ridgepointe common stock for 1,500,000 shares of the Company’s common stock representing 7.12% of the Company’s issued and outstanding common stock, and (iii) the remaining Ridgepointe Stockholders in the aggregate exchanged 5,860,730 shares of Ridgepointe common stock for 5,860,730 shares of the Company’s issued and outstanding common stock, representing, in the aggregate, 27.81% of the Company’s issued and outstanding common stock. The one-for-one ratio of the number of shares of the Company’s common stock exchanged for each share of Ridgepointe common stock was determined through arms length negotiations between the Company, Wilson and Borem.

The Ridgepointe Exchange Transaction was closed on August 27, 1993. As a result, Ridgepointe is now a wholly, owned subsidiary of the Company. At the time of acquisition, Ridgepointe was engaged in the development of a copper ore mining operation in Yavapai County, Arizona and, through its wholly owned subsidiary, I.B. Energy, in the exploration for and production of oil and gas in the Mid-continent and Gulf Coast regions of the United States.

In connection with the closing of the Ridgepointe Exchange Transaction, each member of the Board of Directors of the Company resigned and Wilson, Borem and Dewitt C. Shreve (“Shreve”) were elected Directors of the Company. In addition, each officer of the Company resigned and the Company’s new Board of Directors elected Wilson as Chairman of the Board, President and Chief Executive Officer, Borem as Vice President and Cynthia A. Helms as Secretary of the Company. Ms. Helms subsequently resigned and Kathryn H. Shepherd was elected Secretary. Mr. Borem, Mr. Shreve and Ms. Shepherd subsequently resigned and Mr. Malcolm W. Henley and Mrs. Stacey D. Smethers were elected to the Board. The Board of Directors further authorized the move of the Company’s principal executive offices from Dallas, Texas to its current offices in Evansville, Indiana.

As a condition to closing the Ridgepointe Exchange Transaction, the Company received and canceled 7,232,500 shares of the Company’s common stock from the Company’s former partner, Glauber Management, and 100,000 shares of the common stock of Tech-Electro Technologies, Inc from an affiliate of Glauber Management and Glauber Valve. In addition, pursuant to the terms of the First Amendment, Glauber Management or Glauber Valve, or their affiliates, were to transfer to the Company 75,000 shares of common stock of Wexford Technology, Inc. (formerly Chelsea Street Financial Holding Corp.) no later than October 31, 1993, which such transfer subsequently occurred.

On August 15, 2001, Mr. Malcolm W. Henley and Mrs. Stacey D. Smethers resigned their positions as directors of the Company to pursue other interests. Their vacancies have been filled, for each year thereafter, with Mrs. Annalee C. Wilson and Mr. Aaron M. Wilson, both family members of the Company’s President and Chairman. The directors serve normal terms until the next annual meeting require them to be renominated for their respective directorships.

The Company entered into and closed the acquisition of 29,484,572 shares of the common stock of Warrior Resources, Inc. (formerly Comanche Energy, Inc.), representing approximately 30.8% of the issued and outstanding shares of Warrior on February 13, 2002 in connection with an Exchange Agreement (see “Exchange Agreement” included herein) between the Company and the management of Warrior, Messrs. Luther Henderson and John Bailey. In connection with the Exchange Agreement, the Company issued 2,266,457 shares of its restricted common stock to Mr. Henderson, representing 12.9 % of the issued and outstanding shares of Registrant in exchange for 22,664,572 shares of the common stock of Warrior and 682,000 shares of its restricted common stock to Mr. John Bailey, representing 3.9 % of the issued and outstanding shares of the Company in exchange for 6,820,000 shares of the common stock of Warrior. Mr. Bailey and Mr. Henderson resigned as officers and directors of Warrior and Mr. Jeffrey Wilson, president of the Company, was appointed president and sole director of Warrior. Simultaneously with the closing of the Exchange Agreement with Messrs. Henderson and Bailey and the change of control of Warrior, the Company entered into an Agreement and Plan of Merger, subject to certain conditions, to offer to acquire the remaining issued and outstanding capital stock of Warrior through a subsequent offering to be registered with the Securities & Exchange Commission. The terms of the proposed exchange of shares with the remaining shareholders of Warrior was on the basis of one share of Imperial common stock in exchange for ten shares of Warrior common stock. Completion of the Agreement and Plan of Merger was subject to a number of conditions, including the completion of audited financials for Warrior, approval of the Warrior stockholders, the filing and effectiveness of a registration statement by Registrant for the shares to be offered, the satisfactory completion of due diligence and other customary closing conditions. Due to breaches of the agreements by the former management of Warrior, the Company terminated the proposed merger in August 2002. As a result of the termination of the merger agreement, the Company had the right to receive $200,000 or an equivalent value in shares of Warrior valued at $0.02 per share.

On July 15, 2003, the Company and Warrior signed an Agreement wherein the Company would acquire the assets and certain liabilities of Warrior and its subsidiaries in exchange for payment or assumption of the Warrior senior bank debt in the approximate amount of $3.65 million; (2) extinguishment of the note payable from Warrior to the Company in the amount of $1.7 million; (3) assumption of certain trade vendor liabilities in the approximate amount of $0.58 million and the issuance to Warrior of 2 million shares of the Company’s common stock. Closing of the transaction was subject to, among other things, approval of Warrior’s shareholders, which was received on August 29, 2003. The Company closed the Warrior asset acquisition in January 2004. (See Form 8-K filed January 29, 2004.)

In April 2003, the Company agreed to acquire certain oil and natural gas interests owned by Renovared Resources, Inc. (“Renovared”) located in Kentucky for $30,000. The properties comprise interests in approximately 44 wells and a pipeline and gathering system located in the New Albany Shale Gas play. The Company completed the Renovared acquisition in December 2004.

In May 2003, the Company acquired approximately 54% control of the stock of Powder River in an Exchange Agreement with the former management and control shareholders of Powder River. (See Form 8-K dated May 2003.) The Company issued a total of 2.65 million shares of its restricted common stock and a note payable in the amount of $200,000 in the transaction. As a result of the Exchange Transaction, Powder River became a consolidated subsidiary of the Company. Powder River owns some 7,000 net acres of leases in the Powder River Basin coalbed methane gas play in Wyoming. In October 2003, the Company entered into a letter of understanding and a subsequent stock sale agreement to sell 23,885,000 shares of the common stock of Powder River of the 25,385,000 shares it presently owns. Under the terms of the sale, the Company received $175,000 in cash (less broker’s fees of 10%); a secured note in the amount of $47,884.47; and a 12.5% carried working interest in the development of the leases owned by Powder River. The purchaser is required to purchase the convertible notes of Powder River in the approximate amount of $315,000 and to commit a minimum of $750,000 to the development of the leases owned by Powder River. The Powder River sale was closed December 17, 2003. (See Form 8-K filed December 29, 2003 and amended Form 8-K filed February 23, 2004 with financial information.)

On July 7, 2003 the Company agreed to acquire the assets of Hillside. The transaction was closed on January 16, 2004. Under the terms of the agreement and amendments thereto, the Company acquired the oil and gas properties of Hillside for (1) the payment of its senior debt of approximately $4.6 million; (2) the assumption of an equipment note payable of $0.3 million; (3) the payment of certain obligations of Hillside at closing of $168,000; (4) the assumption of approximately $348,000 in accounts payable of Hillside and (5) issuance of a note payable to

Hillside in the amount of $324,000 and secured by 1 million shares of the Company’s common stock. Hillside operated some 113 wells in Texas, New Mexico and Louisiana and as a result of the transaction, operations were assumed by the Company. (See Form 8-K filed January 29, 2004.)

In October 2003 the Company sold 2,000,000 shares of restricted common stock to RAB Special Situations LP for $200,000 and a common stock purchase warrant in the amount of 2,000,000 shares exercisable at $0.12 per share. Demand rights were granted in connection with the issuance. The term of the warrant was one year. The warrant was subsequently exercised in October 2004. The proceeds of the sale were used to fund the ongoing expense of the acquisition effort of the Company and for working capital purposes.

In October 2003 the Company retired the note payable of $200,000 which had resulted from the acquisition of Powder River with the issuance of 2,000,000 shares of restricted common stock and a common stock purchase warrant in the amount of 2,000,000 shares at an exercise price of $0.14 per share. Demand rights were granted with the issuance. The term of the warrant was one year and expired without being exercised.

On January 16, 2004 the Company completed the above-mentioned acquisitions of the assets of Hillside and Warrior for a total consideration of approximately $12.6 million including broker and financing fees. As a result of the closing, the Company incurred long term debt in the amount of approximately $11.0 million, including approximately $0.25 million in working capital and $0.6 million in capital available for workovers. The total debt facility was an $18.0 million revolving loan and was based upon a periodic evaluation of the Company’s reserves by the lender. (See Form 8-K dated January 29, 2004.)

The Company completed the acquisition of a 16% non-operated working interest in the Coquille Bay Field of south Louisiana in May 2004 from Royal-T Oil Company (“Royal-T”) for $800,000 which was funded out of additional borrowings from the Company’s revolving line of credit. The properties are located in Plaquemines Parish, Louisiana. Subsequent to year end July 31, 2004, the Company acquired the remaining interests owned by Royal-T and became the operator of the project. The Company’s interest in the project increased to a 22% working interest, however as a result of certain non-consenting partners, the Company presently carries 49.5% of the capital investment. Natural gas production from the project began on one well in February 2005. The Company established a total of six producing completions prior to extensive damage caused by hurricane Katrina. Production rates were approximately 75 Bopd and 800 mcfpd immediately prior to the storm. Coquille Bay was shut in after hurricane Katrina awaiting repairs to the Company’s platform and facilities as well as the platform operated by Martin Marks that delivers the Company’s gas to market. The Company’s production was restored in April 2007 on a continuous basis from three completions and is limited by the capacity of the saltwater disposal system to handle produced water volumes. As of July 31, 2009, the Coquille Bay field was capable of producing approximately 70-80 Bopd and 100 mcfpd,. Additional workover operations are planned in the future to repair the saltwater disposal system and rework or recomplete other wells to increase production.

The Company completed the purchase of the rights to 31 wells and associated leases in Guadalupe County, Texas for the development of proved behind pipe reserves of approximately 300,000 bbls from Caltex Operating Company and Apache Energy in June 2004. The proposed formation is the Pecan Gap at 1900 feet and has been logged and cored in most of the wells on the leases. The Company issued a total of 1.375 million shares of its restricted common stock in connection with the acquisition and closing fees and paid $300,000 in cash. The Company sold its rights to these properties in connection with the settlement of its debt in April 2009.

On October 14, 2004 the Company signed a Merger Agreement with United Heritage Corporation (“UHCP”) wherein the Company would merge with and become a wholly-owned subsidiary of UHPC on the basis of 1 share of UHCP common stock for each 3 shares of IPTM common stock. The Company and UHPC extended the original time to complete the merger through May 2005. The Merger Agreement was subsequently terminated by the Company in August 2005.

In November 2004, the Company completed the change of control of Warrior to Universal Wireline Equipment LLC, a company based in Tulsa, OK. The Company retained 5 million shares of its previously owned Warrior common stock in connection with the change of control and received 720,000 shares of Imperial common stock which was previously held by Warrior. With the change of control, the Company sold certain rights to its Duke Gold Mine and received an additional 5 million shares of Warrior common stock and retained a 5% net

smelter royalty in any proceeds from mining and processing of the Duke Mine claims in the future. Subsequent to closing, Warrior advised the Company that it would be unable to fulfill the obligations relating to the Duke Mine acquisition and the Company received a re-assignment of the mining claims and retained the shares of Warrior stock as liquidated damages. The result of the failed transaction was that the Company reduced its ownership of Warrior to 7.6% of its common stock. The Company subsequently completed a new joint venture arrangement of its Duke Gold Mine in April 2006 with ATLCC, however ATLCC failed to begin capital improvements and the Company terminated the proposed joint venture. A second joint venture partner for the Duke Mine also failed to complete its financing and conduct operations. No operations have been conducted on the Duke Mine in the current fiscal year.

The Company engaged Macquarie Securities in November 2005 to assist the Company in completing a sale of assets or otherwise to re-structure its senior debt. In connection with that effort, the Company signed a definitive agreement with Whittier Energy Company (“Whittier”) and Premier Natural Resources, LLC (“Premier Natural”) to sell certain oil and gas assets comprising of 69% of the Company’s total assets for $15.4 million. The sale was subject to normal and customary due diligence and title verification by Whittier and Premier Natural and also subject to the approval of the Company’s shareholders, which was obtained on August 1, 2006 at the Annual Meeting of Shareholders. Phase I closing of the sale was completed on August 9, 2006 and as a result the Company retired approximately $11.3 million in senior debt and paid an additional $0.7 million in payables from the proceeds. Phase II closing of the sale was completed on November 9, 2006, and as a result retired approximately $1.7 million in senior debt with an additional $0.15 million in proceeds used to pay trade payables.

The Company signed a Forbearance Agreement (and several amendments thereto) with its senior lender in connection with its plan to re-structure its senior debt. The Company incurred additional fees as a result of these amendments in the amount of $750,000 due to its senior lender as a result of these agreements. In April 2007, the Company re-structured its senior debt under a new debt facility with its lender in the form of a $15.0 million line of credit and $0.4 million in subordinated debt. The new facility provided the Company with additional workover capital to begin workover operations on its properties as well as the completion of the Caltex acquisition. (See Capital Resources and Liquidity: Long Term Debt).

The Company completed a reverse split of its common stock in the ratio of four for one effective September 11, 2006 in connection with obtaining shareholder approval of the sale of assets discussed earlier. As a result of the reverse split the Company’s issued and outstanding common stock was reduced to 11,115,807 shares and the authorized capital was increased to 150,000,000 shares of common stock. (See Submission of Matters to Security Holders).

The Company signed a Purchase and Sales Agreement with Apollo Resources International, Inc. and subsidiaries (“Apollo”) on June 19, 2007 to acquire certain oil and gas assets located in New Mexico, Arizona and Utah for a total consideration of approximately $6.8 million, including 5 million shares of the Company’s restricted common stock. The Agreement was terminated by the Company after considerable due diligence due to Apollo’s inability to provide clear title to its assets.

In March 2008 the Company signed a Forbearance Agreement with its senior lender in connection with its failure to make certain payments due under its credit facility. Under the terms of the Agreement, the Company agreed to engage a broker or investment banker on or before April 15, 2008 to explore the sale of its assets to retire its debt. After several conversations with potential investment bankers, the Company and its Senior Lender agreed to postpone the retention of an investment banker and to allow management to pursue the sale of individual assets or a re-structuring of the Company’s senior debt with other parties. On October 10, 2008, the Company received notice that it is in default under the terms of the Forbearance Agreement and that its senior lender intends to pursue foreclosure beginning October 24, 2008. The Company reached a Settlement Agreement with its lenders effective April 30, 2009 that resulted in the sale of its North Louisiana and southeast Texas properties with the proceeds paid to its lenders in exchange for the retirement of its senior and subordinated debt facility. The Settlement Agreement closed effective April 30, 2009. (See Capital Resources and Liquidity: Long Term Debt).

Subsequent Events

None

Business Strategy

The Company’s management has focused its efforts on the acquisition and exploitation of oil and gas assets. With over 35 years experience in evaluating, acquiring and exploiting oil and gas reserves, the Company’s senior management believes that quality acquisition and exploitation opportunities continue to exist today.

Oil and Natural Gas Reserves

The following table is a summary, as of July 31, 2009, of the proved reserves of oil and natural gas net to the Company’s interest based upon estimates prepared by or for the Company. These estimates are based on assumptions the Company believes are reasonable regarding production costs, future production rates and declines. These estimates are based upon constant prices and costs as of July 31, 2009, of $65.35/Bbl and $2.65/Mmbtu adjusted for differentials. There are numerous uncertainties inherent in the preparation of estimates of reserves, including many factors beyond the Company’s control. The accuracy of any such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. It can be expected as the Company conducts additional evaluation, drilling and testing with respect to its properties that these estimates will be adjusted and could be revised. Estimates have been filed with the Energy Information Agency as part of its annual survey of oil and gas operators for 2008 based on the Company’s reserves as of July 31, 2008 in addition to reports filed with the Securities and Exchange Commission (“SEC”). The Company has no reserves outside the United States.

As of July 31, 2009


Category	Oil (MBO)	Natural Gas (MMCF)	Future Net Revenue (M$)	Present Value Discounted @10%(M$)
Producing	25	67	413	392
Non-Producing	218	2,099	14,280	6,240
Undeveloped	0	335	33	(68	)
Total Proved	243	2,501	14,726	6,654

Reserves by State

The following table illustrates the Company’s reserve summaries by State as of July 31, 2009:

As of July 31, 2009


	Oil (MBO)	Natural Gas (MMCF)
Texas	0	0
Louisiana	243	2,501
Other	0	0

Total	243	2,501

Note: Other reserves included in this table reflect estimated reserves attributable to approximately 280 properties as noted above.

Acreage - The following table shows the developed and undeveloped leasehold acreage held by the Company as of July 31, 2009:


	Developed Acreage		Undeveloped Acreage
	(1) Gross	(2) Net	(1) Gross	(2) Net
Texas	0	00	0	0
Louisiana	763	676	0	0
Kentucky	0	0	0	0

Various	0	0	0	0

Total	763	470	0	0

Productive Wells - The following table summarizes the productive oil and gas wells in which the Company had an interest at July 31, 2009:


	Oil Wells		Gas Wells		Total
	(1) Gross	(2) Net	(1) Gross	(2) Net	(1) Gross	(2) Net
Texas	0	0	0	0	0	0
Louisiana	17	16.75	1	0.75	18	17.50
Other	0	0	0	0	0	0

Total	17	16.75	1	0.75	18	17.50

(1)	A “gross acre” or a “gross well” is an acre or well in which a working interest is owned by the Company and the number of gross acres or gross wells is the total number of acres or wells in which a working interest is owned by the Company.

(2)

A “net acre” or a “net well” exists when the sum of the Company’s fractional ownership interests in gross acres or gross wells equals one. The number of net acres or net wells is the sum of the fractional interests owned in gross acres or gross wells, and does not include any royalty, overriding royalty or reversionary interests.

Production, Price and Cost Data - The following table summarizes certain information relating to the production, price and cost data for the Company for the fiscal years ended, July 31, 2009, 2008, 2007.

Year Ended July 31,


	2009		2008		2007
Oil:
Production (Bbls)		16,190		14,862		10,220
Revenue	$	960,407	$	1,422,433	$	619,074
Average barrels per day		44		40		28
Average sales price per barrel	$	59.32	$	95.71	$	60.57
Natural Gas:
Production (Mcf)		24,099		66,787		69,157
Revenue	$	108,953	$	432,949	$	418,975
Average Mcf per day		66		183		189
Average sales price per Mcf	$	4.52	$	6.48	$	6.06
Production costs (1)	$	985,753	$	1,487,460	$	834,438
Equivalent (Bbls) (2)		20,206		25,993		21,746
Production costs per equivalent bbl (3)	$	48.79	$	57.22	$	52.57

Total oil and gas revenues	$	1,069,361	$	1,855,381	$	1,143,194

(1)	Includes expense workovers.

(2)	Gas production is converted to barrel equivalents at the rate of six Mcf per barrel representing the estimated relative energy content of natural gas to oil.

(3)

Historical costs and expenses differ from projections included in the reserve estimates presented above as a result of remedial costs associated with repairs of the Hillside acquisition properties and repairs to the Coquille Bay platform included in historical costs and considered to be non-recurring expenses. To the extent that continued remedial costs are incurred in the future, the economic limit of the producing properties will be affected and will reduce our reserve estimates substantially.

Drilling Activity

The following table illustrates the results of the drilling activity during each of the three most recent fiscal years as reflected by number of wells drilled.:


	July 31, 2009		July 31, 2008		July 31, 2007
	Gross	Net	Gross	Net	Gross	Net
Texas	0	0	0	0	4.0	0.1
New Mexico	0	0	0	0	0	0
Louisiana	0	0	0	0	0	0
Mississippi	0	0	0	0	0	0
Other	0	0	0	0	0	0

Total	0	0	0	0	4.0	0.1

Mining

The availability of a market for the Company’s mineral and metal production will be influenced by the proximity of the Company’s operations to refiners and smelting plants. In general the Company intends to sell its mined product to local refineries and smelters. The price received for such products will be dependent upon the Company’s ability to provide primary separation to ensure fineness or quality. The price of gold has increased in recent years due to volatility in global financial markets. Copper prices have generally been volatile, in part due to increased demand of developing economies for electrical wire and other copper related products, however as a result of recent economic turmoil, copper prices have begun to drop.

Changes in the price of gold and copper will significantly affect the Company’s future cash flows and the value of its mineral properties. The Company is unable to predict whether prices for these commodities will increase, decrease or remain constant in future periods.

The Company does not currently classify any of its mineral properties as having reserves as that term is defined by the SEC.

ITEM 1A.

Risk Factors.

In addition to the other information set forth elsewhere in this Form 10-K, you should carefully consider the following factors when evaluating the Company. An investment in the Company is subject to risks inherent in our business. The trading price of the shares of the Company is affected by the performance of our business relative to, among other things, competition, market conditions and general economic and industry conditions. The value of an investment in the Company may decrease, resulting in a loss. The risk factors listed below are not all inclusive.

We have a history of losses.

We have had a history of net losses for at least the past three years

Natural gas and oil prices fluctuate widely, and low prices would have a material adverse effect on our revenues, profitability and growth.

The market price of all energy products remains enormously volatile and recent high prices have been replaced with relatively low prices and all within a few months. Our revenues, profitability and future growth will depend significantly on natural gas and crude oil prices. Prices received also will affect the amount of future cash flow available for capital expenditures and repayment of indebtedness and will affect our ability to raise additional capital. Lower prices may also affect the amount of natural gas and oil that we can economically produce. Factors that can cause price fluctuations include:

•

The domestic and foreign supply of natural gas and oil.

•

Overall economic conditions.

•

The level of consumer product demand.

•

Adverse weather conditions and natural disasters.

•

The price and availability of competitive fuels such as heating oil and coal.

•

Political conditions in the Middle East and other natural gas and oil producing regions.

•

The level of LNG imports.

•

Domestic and foreign governmental regulations.

•

Potential price controls and special taxes.

We depend on the services of our chairman, chief executive officer and chief financial officer, and implementation of our business plan could be seriously harmed if we lost his services.

We depend heavily on the services of Jeffrey T. Wilson, our chairman, chief executive officer, and chief financial officer. We do not have an employment agreement with Mr. Wilson, and we do not presently have a “key person” life insurance policy on Mr. Wilson to offset our losses in the event of Mr. Wilson’s death.

Our ability to successfully execute our business plan is dependent on our ability to obtain adequate financing.

Our business plan, which includes participation in 3-D seismic shoots, lease acquisitions, the drilling of exploration prospects and producing property acquisitions, has required and will require substantial capital expenditures. We also require additional financing to fund our planned growth. Our ability to raise additional capital will depend on the results of our operations and the status of various capital and industry markets at the time we seek such capital. The current marketplace is subject to severe economic downturns and capital raising for activities of the type conducted by the Company is of a speculative type and very difficult to obtain. Accordingly, we cannot be certain that additional financing will be available to us on acceptable terms, if at all. In particular, our credit facility imposes limits on our ability to borrow under the facility based on adjustments to the value of our hydrocarbon reserves, and our credit facility limits our ability to incur additional indebtedness. In the event additional capital resources are unavailable, we may be required to curtail our exploration and development activities or be forced to sell some of our assets in an untimely fashion or on less than favorable terms.

Natural gas and oil reserves are depleting assets and the failure to replace our reserves would adversely affect our production and cash flows.

Our future natural gas and oil production depends on continuing to make our current properties productive and our success in finding or acquiring new reserves. If we fail to replace reserves, our level of production and cash flows would be adversely impacted. Production from natural gas and oil properties decline as reserves are depleted,

with the rate of decline depending on reservoir characteristics. Our total proved reserves will decline as reserves are produced unless we conduct other successful exploration and development activities or acquire properties containing proved reserves, or both. Further, the majority of our reserves are proved developed producing. Accordingly, we do not have significant opportunities to increase our production from our existing proved reserves. Our ability to make the necessary capital investment to maintain or expand our asset base of natural gas and oil reserves would be impaired to the extent cash flow from operations is reduced and external sources of capital become limited or unavailable. We may not be successful in exploring for, developing or acquiring additional reserves. If we are not successful, our future production and revenues will be adversely affected.

Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions could materially affect the quantities and present values of our reserves.

The process of estimating natural gas and oil reserves is complex and involves a degree of subjective interpretation of technical data and information. It requires analysis of available technical data and the application of various assumptions, including assumptions relating to economic factors. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this report.

In order to prepare these estimates, our independent third party petroleum engineer must project production rates and timing of development expenditures as well as analyze available geological, geophysical, production and engineering data, and the extent, quality and reliability of this data can vary. The process also requires economic assumptions relating to matters such as natural gas and oil prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. Therefore, estimates of natural gas and oil reserves are inherently imprecise.

Actual future production, natural gas and oil prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable natural gas and oil reserves most likely will vary from our estimates. Any significant variance could materially affect the estimated quantities and pre-tax net present value of reserves shown in this report. In addition, estimates of our proved reserves may be adjusted to reflect production history, results of exploration and development, prevailing natural gas and oil prices and other factors, many of which are beyond our control. Some of the producing wells included in our reserve report have produced for a relatively short period of time. Because some of our reserve estimates are not based on a lengthy production history and are calculated using volumetric analysis, these estimates are less reliable than estimates based on a more lengthy production history.

You should not assume that the pre-tax net present value of our proved reserves prepared in accordance with SEC guidelines referred to in this report is the current market value of our estimated natural gas and oil reserves. We base the pre-tax net present value of future net cash flows from our proved reserves on prices and costs on the date of the estimate. Actual future prices, costs, taxes and the volume of produced reserves may differ materially from those used in the pre-tax net present value estimate.

Exploration is a high risk activity, and our participation in drilling activities may not be successful.

Our future success will largely depend on the success of our exploration drilling program. Participation in exploration drilling activities involves numerous risks, including the risk that no commercially productive natural gas or oil reservoirs will be discovered. The cost of drilling, completing and operating wells is often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including:

•

Unexpected drilling conditions.

•

Blowouts, fires or explosions with resultant injury, death or environmental damage.

•

Pressure or irregularities in formations.

•

Equipment failures or accidents.

•

Tropical storms, hurricanes and other adverse weather conditions.

•

Compliance with governmental requirements and laws, present and future.

•

Shortages or delays in the availability of drilling rigs and the delivery of equipment.

Even when properly used and interpreted, 3-D seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators. They do not allow the interpreter to know conclusively if hydrocarbons are present or economically producible. Poor results from our drilling activities would materially and adversely affect our future cash flows and results of operations.

In addition, as a “successful efforts” company, we choose to account for unsuccessful exploration efforts (the drilling of “dry holes”) and seismic costs as a current expense of operations, which immediately impacts our earnings. Significant expensed exploration charges in any period would materially adversely affect our earnings for that period and cause our earnings to be volatile from period to period.

The natural gas and oil business involves many operating risks that can cause substantial losses.

The natural gas and oil business involves a variety of operating risks, including:

•

Blowouts, fires and explosions.

•

Surface cratering.

•

Uncontrollable flows of underground natural gas, oil or formation water.

•

Natural disasters.

•

Pipe and cement failures.

•

Casing collapses.

•

Stuck drilling and service tools.

•

Abnormal pressure formations.

•

Environmental hazards such as natural gas leaks, oil spills, pipeline ruptures or discharges of toxic gases.

If any of these events occur, we could incur substantial losses as a result of:

•

Injury or loss of life.

•

Severe damage to and destruction of property, natural resources or equipment.

•

Pollution and other environmental damage.

•

Clean-up responsibilities.

•

Regulatory investigations and penalties.

•

Suspension of our operations or repairs necessary to resume operations.

Offshore operations are subject to a variety of operating risks peculiar to the marine environment, such as capsizing and collisions. In addition, offshore operations, and in some instances, operations along the Gulf Coast, are subject to damage or loss from hurricanes or other adverse weather conditions. These conditions can cause substantial damage to facilities and interrupt production. As a result, we could incur substantial liabilities that could reduce the funds available for exploration, development or leasehold acquisitions, or result in loss of properties.

If we were to experience any of these problems, it could affect well bores, platforms, gathering systems and processing facilities, any one of which could adversely affect our ability to conduct operations. In accordance with customary industry practices, we maintain insurance against some, but not all, of these risks. Losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. We may not be able to maintain adequate insurance in the future at rates we consider reasonable, and particular types of coverage may not be available. An event that is not fully covered by insurance could have a material adverse effect on our financial position and results of operations.

Not hedging our production may result in losses.

Due to the significant volatility in natural gas prices and the potential risk of significant hedging losses if NYMEX natural gas prices spike on the date options settle, our production is not currently hedged. By not hedging our production, we may be more adversely affected by declines in natural gas and oil prices than our competitors who engage in hedging arrangements.

Our ability to market our natural gas and oil may be impaired by capacity constraints on the gathering systems and pipelines that transport our natural gas and oil.

All of our natural gas and oil is transported through gathering systems and pipelines, which we do not own. Transportation capacity on gathering systems and pipelines is occasionally limited and at times unavailable due to repairs or improvements being made to these facilities or due to capacity being utilized by other natural gas or oil shippers that may have priority transportation agreements. If the gathering systems or our transportation capacity is materially restricted or is unavailable in the future, our ability to market our natural gas or oil could be impaired and cash flow from the affected properties could be reduced, which could have a material adverse effect on our financial condition and results of operations.

We have no conclusive assurance of title to our leased interests.

Our practice in acquiring exploration leases or undivided interests in natural gas and oil leases is to not incur the expense of retaining title lawyers to examine the title to the mineral interest prior to executing the lease. Instead, we rely upon the judgment of third party landmen to perform the field work in examining records in the appropriate governmental, county or parish clerk’s office before leasing a specific mineral interest. This practice is widely followed in the industry. Prior to the drilling of an exploration well the operator of the well will typically obtain a preliminary title review of the drillsite lease and/or spacing unit within which the proposed well is to be drilled to identify any obvious deficiencies in title to the well and, if there are deficiencies, to identify measures necessary to cure those defects to the extent reasonably possible. We have no assurance, however, that any such deficiencies have been cured by the operator of any such wells. It does happen, from time to time, that the examination made by title lawyers reveals that the lease or leases are invalid, having been purchased in error from a person who is not the rightful owner of the mineral interest desired. In these circumstances, we may not be able to proceed with our exploration and development of the lease site or may incur costs to remedy a defect. It may also happen, from time to time, that the operator may elect to proceed with a well despite defects to the title identified in the preliminary title opinion.

Competition in the natural gas and oil industry is intense, and we are smaller and have a more limited operating history than most of our competitors.

We compete with a broad range of natural gas and oil companies in our exploration and property acquisition activities. We also compete for the equipment and labor required to operate and to develop these properties. Most of our competitors have substantially greater financial resources than we do. These competitors

may be able to pay more for exploratory prospects and productive natural gas and oil properties. Further, they may be able to evaluate, bid for and purchase a greater number of properties and prospects than we can. Our ability to explore for natural gas and oil and to acquire additional properties in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in this highly competitive environment. In addition, most of our competitors have been operating for a much longer time than we have and have substantially larger staffs. We may not be able to compete effectively with these companies or in such a highly competitive environment.

We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.

Our operations are subject to numerous laws and regulations governing the operation and maintenance of our facilities and the discharge of materials into the environment. Failure to comply with such rules and regulations could result in substantial penalties and have an adverse effect on us. These laws and regulations may:

•

Require that we obtain permits before commencing drilling.

•

Restrict the substances that can be released into the environment in connection with drilling and production activities.

•

Limit or prohibit drilling activities on protected areas, such as wetlands or wilderness areas.

•

Require remedial measures to mitigate pollution from former operations, such as plugging abandoned wells.

Under these laws and regulations, we could be liable for personal injury and clean-up costs and other environmental and property damages, as well as administrative, civil and criminal penalties. We maintain only limited insurance coverage for sudden and accidental environmental damages. Accordingly, we may be subject to liability, or we may be required to cease production from properties in the event of environmental damages. These laws and regulations have been changed frequently in the past. In general, these changes have imposed more stringent requirements that increase operating costs or require capital expenditures in order to remain in compliance. It is also possible that unanticipated factual developments could cause us to make environmental expenditures that are significantly different from those we currently expect. Existing laws and regulations could be changed and any such changes could have an adverse effect on our business and results of operations.

We cannot control the activities on properties we do not operate.

Other companies currently operate properties in which we have an interest. As a result, we have a limited ability to exercise influence over operations for these properties or their associated costs. Our dependence on the operator and other working interest owners for these projects and our limited ability to influence operations and associated costs could materially adversely affect the realization of our targeted returns on capital in drilling or acquisition activities. The success and timing of our drilling and development activities on properties operated by others therefore depend upon a number of factors that are outside of our control, including:

•

Timing and amount of capital expenditures.

•

The operator’s expertise and financial resources.

•

Approval of other participants in drilling wells.

•

Selection of technology.

Acquisition prospects are difficult to assess and may pose additional risks to our operations.

We expect to evaluate and, where appropriate, pursue acquisition opportunities on terms our management considers favorable. In particular, we expect to pursue acquisitions that have the potential to increase our domestic natural gas and oil reserves. The successful acquisition of natural gas and oil properties requires an assessment of:

•

Recoverable reserves.

•

Exploration potential.

•

Future natural gas and oil prices.

•

Operating costs.

•

Potential environmental and other liabilities and other factors.

•

Permitting and other environmental authorizations required for our operations.

In connection with such an assessment, we would expect to perform a review of the subject properties that we believe to be generally consistent with industry practices. Nonetheless, the resulting conclusions are necessarily inexact and their accuracy inherently uncertain, and such an assessment may not reveal all existing or potential problems, nor will it necessarily permit a buyer to become sufficiently familiar with the properties to fully assess their merits and deficiencies. Inspections may not always be performed on every platform or well, and structural and environmental problems are not necessarily observable even when an inspection is undertaken.

Future acquisitions could pose additional risks to our operations and financial results, including:

•

Problems integrating the purchased operations, personnel or technologies.

•

Unanticipated costs.

•

Diversion of resources and management attention from our exploration business.

•

Entry into regions or markets in which we have limited or no prior experience.

•

Potential loss of key employees, particularly those of the acquired organizations.

We do not currently intend to pay dividends on our common stock.

We have never declared or paid a dividend on our common stock and do not expect to do so in the foreseeable future. Our current plan is to retain any future earnings for funding growth, and, therefore, holders of our common stock will not be able to receive a return on their investment unless they sell their shares.

Anti-takeover provisions of our certificate of incorporation, bylaws and Nevada law could adversely effect a potential acquisition by third parties that may ultimately be in the financial interests of our stockholders.

Our certificate of incorporation, bylaws and the Nevada General Corporation Law contain provisions that may discourage unsolicited takeover proposals. These provisions could have the effect of inhibiting fluctuations in the market price of our common stock that could result from actual or rumored takeover attempts, preventing changes in our management or limiting the price that investors may be willing to pay for shares of common stock. These provisions, among other things, authorize the board of directors to:

•

Designate the terms of and issue new series of preferred stock.

•

Limit the personal liability of directors.

•

Limit the persons who may call special meetings of stockholders.

•

Prohibit stockholder action by written consent.

•

Establish advance notice requirements for nominations for election of the board of directors and for proposing matters to be acted on by stockholders at stockholder meetings.

•

Require us to indemnify directors and officers to the fullest extent permitted by applicable law.

•

Impose restrictions on business combinations with some interested parties.

Our common stock is thinly traded.

Imperial has approximately 16.9 million shares of common stock outstanding, held by approximately 603 holders of record. Directors and officers own or have voting control over approximately 3.8 million shares. Since our common stock is thinly traded, the purchase or sale of relatively small common stock positions may result in disproportionately large increases or decreases in the price of our common stock.

ITEM 2.

Description of Properties

Oil and Natural Gas Development, Major Properties

Coquille Bay Field

The Company assumed operations of the Coquille Bay field in January 2005 from Royal-T. The field is located in Plaquemines Parish, Louisiana in approximately 4-6 feet of water. Seventeen wells have produced oil and natural gas at depths ranging from 8,000 ft. to 11,000 feet. The Company manages the field under an Operating Agreement with the State of Louisiana and owns a record title 22% working interest and a 21.4% net revenue interest. Through non-consent provisions of the Operating Agreement, the Company currently has a 49.5 % working interest and a 41.2% net revenue interest. Prior to hurricane Katrina, the Company had the field producing at approximately 75 Bopd and 800 mcfpd from six completions, however production has been plagued by continuous repair and maintenance problems and over-sized equipment at the central facility and by the lack of sufficient gas for gas lifting of the oil wells. The Company had completed work on two additional wells that had sufficient gas flow rates to supply the necessary gas lift gas immediately prior to shutting down for the hurricane. The Company completed a majority of the repairs caused by the hurricane Katrina and began producing on a limited basis in September 2006, however continuous operations were not maintained until replacement of the over-sized rental compressor in April 2007. The field is capable of producing at approximately 70-80 Bopd and 450 mcfpd (net sales 100 mcfpd) but is currently limited by its ability to dispose of salt water produced in the field and by gas available for gas lift. The Coquille Bay field has numerous workover opportunities available to increase production and reserves.

Bastian Bay Field

The Company has assumed the operations of the Bastian Bay State Lease 16152 #1 well located in Plaquemines parish, Louisiana and owns an 82.62 % working interest and a 62.95% net revenue interest before 150% payout of all costs and a 44.115% and a 33.611% net revenue interest after payout. The well was originally drilled by Weaver Exploration in 1982 and discovered gas in a new fault block on the southeast side of the Bastian Bay field. The well tested 2.5 million cubic feet of gas per day from a reservoir at 15,300 feet with 4,500 # flowing tubing pressure on 12/64ths choke. The well was shut in pending installation of the pipeline. Unfortunately the proposed line was scheduled to be laid through existing oyster leases and a lawsuit arose that delayed the laying of the line for several years. During this time, Weaver Exploration filed for bankruptcy and the leases were returned to the Louisiana Resource Development Corporation.

Royal-T Oil Co., Inc. acquired the rights from the LRDC in 1999 and settled the lawsuit with the oyster farmer and laid the flowline to a nearby Hilcorp platform. Royal-T opened the well for production and tested the well at 2.5 mmcfpd with 4,500# flowing tubing pressure on a 12/64ths choke when a wellhead leak forced Royal-T to kill the well in order to repair the leak. Royal-T perforated the well at 4,000 feet and circulated and pumped bay water into the well and eventually killed the well. After repairing the wellhead, royal-T was unable to swab the well on for production. Subsequently Royal-T re-perforated the well but ran out of funds before it could swab the well online. The well presently builds up surface pressure to 2,500# and the produces gas for several hours before loading up. The Company jetted the well with a coiled tugging unit in March 2006 after a failed attempt to run a TDT-P log due to being unable to reach bottom as a result of the tite spots in the tubing. The well did not sustain flow after the coiled tubing work and appears to have formation damage as the most recent tests indicate. Currently the gas sales line from Hilcorp’s platform which handles our gas prior to sales has been discontinued and there is no present outlet for gas sales from the field. The Company believes that its leases on this property are in jeopardy due to non-production

Principal Exploration and Development Projects: Mining Ventures

The Company considers its mining activities to be in the exploration stage at this time.

United States Mines

UFO Mine

Until the formation of the Joint Venture, subsequent to year-end 1998, the Company owned the UFO Mine and Rumico Millsite located in Yavapai County, Arizona comprising some 400 acres of unpatented mining claims. The principal resource discovered to date is copper. Working capital limitations had limited the Company’s exploration of the mining property, in favor of other projects. As a result, the Company entered into a Mining Joint Venture in November 1997. The property, was subject to an acquisition note with the former owners requiring the payment of $1,000,000. The note had been extended several times by the holder and the mining claims served as collateral for the note. The Company negotiated a Mining Joint Venture with Mr. Zane Pasma in November 1997 that retired the note payable and secured the return of 1,000,000 shares of the Company’s common stock (pre-split) for the assignment of the Company’s interest in the Lone Star claims and a contribution of the Company’s interest in the Congress Mill Site facility. The Company retained a 5% carried interest in the Mining Joint Venture through the initial $6.0 million spent by the Joint Venture to develop the property. Mr. Pasma manages the Mining Joint Venture and began initial exploration activities in 1998. The results of initial recovery tests for platinum group metals were disappointing and the Joint Venture Manager suspended exploration activities to seek an industry partner or other financing for the development of the copper and gold. The Company does not expect any activity during the current fiscal year.

Duke Mine

The focus of the Company’s exploration activity related to the Duke Mine during fiscal 2004 has been to seek a partner to finance or joint venture the operations on the Duke Mine located in San Juan County, Utah. The property comprises some 2,240 acres of unpatented mining claims in the Dry Valley Gold Claim area. Access to the property is excellent via blacktop roads adjacent to the claims. The property is located some 20 miles south of Moab, Utah. The primary mineralization at the Duke Mine occurs as microscopic gold located in very fine grain placer material. Sieve analysis of the sand indicates that about 71% of the material are larger than 200 mesh. Recovery tests have been conducted on a grid sampling pattern throughout the claim area utilizing the Cosmos Concentrator. Because of the nature of the placer material and in particular its size, mining and process recovery activities will be significantly simplified, thereby reducing costs. The Company has conducted additional recovery tests utilizing other equipment in addition to the Cosmos Concentrator. Water is readily available, however, drilling is required.

The Company constructed a pilot plant in 1998 at the Duke Mine and moved a portable Cosmos Concentrator on to the site. The Company spent approximately $185,000 to conduct pilot recovery tests under a small miner’s permit exemption. Pilot plant results were encouraging despite mechanical start-up problems. Upon

completion of its pilot tests, the Company suspended any further exploration until construction of a full-scale modular facility can be completed. Subject to capital availability, permitting and construction schedules, the cost to construct a full scale facility is approximately $8.0 million to achieve a capacity of 10,000 tons per day. Presently there are 5 other companies active in the development of claims in the vicinity of the Duke Mine. The Company entered into discussions with a mining company to provide the capital and manage the development of the mine and completed an agreement in connection with the change of control of Warrior in which the Company would retain a 5% net smelter royalty. The mining company was unable to complete its capital efforts in relation to the Duke Mine and as a result the Company re-assumed control of the Duke Mine and entered into a similar arrangement with a new venture partner.

Competition

There are many companies and individuals engaged in the oil and gas business. Some are very large and well established with substantial capabilities and long earnings records. The Company is at a competitive disadvantage with some other firms and individuals in acquiring and disposing of oil and gas properties, since they have greater financial resources and larger technical staffs than the Company. In addition, in recent years a number of new small companies have been formed which have objectives similar to those of the Company and which present substantial competition to the Company.

A number of factors, beyond the Company’s control and the effect of which cannot be accurately predicted, affect the production and marketing of oil and gas and the profitability of the Company. These factors include crude oil imports, actions by foreign oil producing nations, the availability of adequate pipeline and other transportation facilities, the marketing of competitive fuels and other matters affecting the availability of ready market, such as fluctuating supply and demand.

The Company currently sells a substantial portion of its oil and gas production on “spot” market or short term contracts. During the year ended July 31, 2009, the Company sold approximately 87% and 13% of its oil and gas, respectively, to Plains Marketing and Professional Oil & Gas respectively. The Company does not believe that the loss of any of these purchasers would significantly impair its operation.

The acquisition of mining claims prospective for precious metals or other minerals or oil and natural gas leases is subject to intense competition from a large number of companies and individuals. The ability of the Company to acquire additional leases or additional mining claims could be curtailed severely as a result of this competition.

The principal methods of competition in the industry for the acquisition of mineral leases is the payment of bonus payments at the time of acquisition of leases, delay rentals, advance royalties, the use of differential royalty rates, the amount of annual rental payments and stipulations requiring exploration and production commitments by the lessee. Companies with far greater financial resources, existing staff and labor forces, equipment for exploration and mining, and vast experience will be in a better position than the Company to compete for such leases.

Government Contracts

No portion of the Company’s business is subject to re-negotiation of profits or termination of contracts or subcontracts at the election of the Government. The Company has assumed operations of the Coquille Bay facility which is subject to an Operating Agreement negotiated by the Company’s predecessor with the State of Louisiana.

Regulation

Federal, state and local authorities extensively regulate the oil and natural gas and mining industry. Legislation affecting these industries is under constant review for amendment or expansion. Numerous departments and agencies, both federal and state, have issued rules and regulations binding on the oil and natural gas and mining industry and their individual members some of which carry substantial penalties for the failure to comply. The regulatory burden on these industries increases their cost of doing business and consequently, affects their profitability. Inasmuch as such laws and regulations are frequently amended or reinterpreted, the Company is unable to predict the future cost or impact of complying with such regulations.

The Company’s operations are subject to extensive federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Permits are required for various of the Company operations, and these permits are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their regulations and violations are subject to fines, injunctions or both. It is possible that increasingly strict requirements will be imposed by environmental laws and enforcement policies hereunder. The Company is also subject to laws and regulations concerning occupational safety and health. It is not anticipated that the Company will be required in the near future to expend amounts that are material in the aggregate to the Company’s overall operations by reason of environmental or occupational safety and health laws and regulations but inasmuch as such laws and regulations are frequently changed, the Company is unable to predict the ultimate cost of compliance.

Title to Properties

Oil and Natural Gas

The Company has not obtained conclusive title surveys of its properties. In general, limited or dated and conditional title opinions exist on the leases, however, title surveys have been conducted by land men and title lawyers in the normal course of the Company’s acquisition and financing efforts and are not specifically assurances to the Company of absolute title. The Company has reviewed the validity and recording of the leases at the county courthouses in which the properties are located and believes that it holds valid title to its properties.

Mining

The Company does not have conclusive title opinions on its mining claims or leases and, therefore, has not identified potential adverse claimants nor has it quantified the risk that any adverse claims may successfully contest all or a portion of its title to the claims. Furthermore, the validity of all unpatented mining claims is dependent upon inherent uncertainties such as the sufficiency of the discovery of minerals, proper posting and marking of boundaries, and possible conflicts with other claims not determinable from descriptions of record. In the absence of a discovery of valuable minerals, a mining claim is open to location by others unless the claimant is in actual possession of and diligently working the claim (pedis possessio) No assurance can be given with respect to unpatented mining claims in the exploratory stage that a discovery of a valuable mineral deposit will be made.

To maintain ownership of the possessory title created by an unpatented mining claim against subsequent locators, the locator or his successor in interest must pay an annual fee of $200 per claim.

Operational Hazards and Insurance

The operations of the Company are subject to all risks inherent in the exploration for and operation of oil and natural gas properties, wells and facilities and mines and mining equipment, including such natural hazards as blowouts, cratering and fires, which could result in damage or injury to, or destruction of, drilling rigs and equipment, mines, producing facilities or other property or could result in personal injury, loss of life or pollution of the environment. In addition, weather related hazards, such as tornados and hurricanes may pose a threat to certain of the Company’s wells and facilities from time-to-time. Any such event could result in substantial expense to the Company which could have a material adverse effect upon the financial condition of the Company to the extent it is not fully insured against such risk. The Company carries insurance against certain of these risks but, in accordance

with standard industry practices, the Company is not fully insured for all risks either because such insurance is unavailable or because the Company elects not to obtain insurance coverage because of cost, although such operational risks and hazards may to some extent be minimized. No combination of experience, knowledge and scientific evaluation can eliminate the risk of investment or assure a profit to any company engaged in oil and gas or mining operations.

Employees

The Company employs one person in its Evansville, Indiana office whose functions are associated with management, operations and accounting. The Company uses independent contractors to assist in its land and accounting functions and to supervise its oil, gas and mining business.

ITEM 3.

Legal Proceedings.

Imperial Petroleum, Inc. versus Ravello Capital LLC

The Company filed suit in Federal District Court in Tulsa County, Oklahoma against Ravello Capital LLC (“Ravello”) on November 20, 2000. The suit alleged breach of contract and sought to have the contract declared partially performed in the amount of $74,800 and sought relief in the amount of $488,390 for the unpaid consideration and punitive damages and attorneys fees. The Company received a judgment award against Ravello in the amount of $488,390 and subsequently collected and credited the judgment in the amount of $85,638.02 as a result of the re-issuance of certain of its shares in Warrior, held by Ravello in escrow and not released. The Company does not believe it will be successful in collecting the balance of the judgment against Ravello.

The Company, through its predecessor in interest, was named with others in a breach of its duties to act as a reasonably prudent operator in the development of the Crump Gas Unit in Panola County, Texas . The Crump Unit encompasses the Company’s Mittie Horton well. The Plaintiff is seeking a cancellation of the lease for failure to produce hydrocarbons in paying quantities or alternatively to establish a lien against the leasehold to secure payment of plaintiff’s damages resulting from the Company’s failure to develop the property. The Company executed a farmout agreement with Burke Royalty (“Burke”), a co-defendant in the suit, regarding the acreage in question. Burke negotiated a settlement under which the Plaintiffs would arrange to drill additional wells. The Company has a 12.5% carried working interest in the first well drilled in the unit and the right to participate for a 12.5% working interest in subsequent wells. Chesapeake is the operator of the exploration agreement and has not recognized the Company’s interest in these wells to date. The Company has contacted Chesapeake and has provided documentation to Chesapeake which the Company believes demonstrates its ownership. No response from Chesapeake has been received to date.

Gary Bolen, et al vs. Imperial Petroleum, Inc.: Wrongful Garnishment:

The case filed in Midland County, Texas No. CV 45671 on July 24, 2008 stems from a dispute in 2005 in which Pharoh Oil & Gas, a company owned by Mr. Bolen ceased accepting saltwater from the University BX lease despite a valid saltwater disposal agreement in place, owned by Imperial at the time, and resulted Imperial obtaining a monetary judgment against Pharoh and Bolen and executing garnishment procedures to allow the money to be escrowed pending final outcome of that trial. Imperial prevailed in that trial, through the Supreme Court of Texas, and received the judgment proceeds. Bolen contends that the procedures used by Imperial in garnishing the funds to be escrowed were improper and seeks unspecified damages. The Company is vigorously defending itself in this case.

Pearl River Navigation vs. Imperial Petroleum, Inc.

Company refused to pay the disputed invoices and Pearl River filed a lien in the amount of approximately $789,000 despite approximately $225,000 in payments by the Company. Pearl River filed a lawsuit dated August 1, 2007 in the 25^th Judicial District Court for the Parish of Plaquemines, State of Louisiana. the case was moved to the United States District Court for the Eastern District of Louisiana, Civil Action No. 07-9619, Section “I”(4). The Company and Pearl River have been in negotiations over a settlement of the lien and Pearl River has agreed to accept a one-time cash payment of $100,000 and an overriding royalty interest in the field. The Company does not currently have the funds to tender a lump sum payment to Pearl River to settle the matter and has requested payment terms. The Company intends to continue to negotiate with Pearl River in an attempt to resolve this matter.

ITEM 4.

Submission of Matters to a Vote of Security Holders.

None.

PART II

ITEM 5.

Market For Registrant’s Common Stock; and Related Stockholder Matters.

The Company’s common stock is traded in the over-the-counter market. From 1984 to 1997 trading had been so limited and sporadic that it was not possible to obtain a continuing quarterly history of high and low bid quotations. Stock information is received from registered securities dealers and reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The Company was advised that trading in its shares resumed in September 1997 and the Company’s stock was quoted at approximately $0.25 per share in sporadic trading. At July 31, 2009, the approximate bid price for the Company’s common stock was $0.10 per share and the approximate asked price was $0.11 per share with a closing price of $0.11 per share.

No dividends have ever been paid by the Company on its common stock and it is not anticipated that dividends will be paid in the foreseeable future.

There are approximately 602 holders of record of the Company’s common stock.

ITEM 6.

Selected Financial Data.


	2009		2008		2007		2006		2005
Operating Revenue	1,069,361		1,855,381		1,143,194		3,435,006		2,963,651
Income (loss) from continuing opns	(2,199,020	)	(668,891	)	(1,655,802	)	372,878		73,783
Net Income (loss)	10,785,443		(2,588,859	)	(3,243,996	)	(3,426,724	)	(2,695,812	)
Net Income (loss) per share	0.636		(0.16	)	(0.28	)	(0.31	)	(0.26	)
Total Assets	3,138,809		6,273,704		6,101,286		18,085,079		17,082,279
Stockholder’s Equity	892,560		(9,882,882	)	(7,354,022	)	(5,428,118	)	(2,198,762	)
Cash Dividends Paid per Common Share	0		0		0		0		0
Number of Outstanding Shares (weighted)	16,694,441		16,289,523		11,487,701		10,946,960		10,465,050

ITEM 7.

Management’s Discussion and Analysis of the Financial Condition and Results of Operations.

Results of Operations

The factors which most significantly affect the Company’s results of operations are (i) the sale prices of crude oil and natural gas, (ii) the level of oil and gas sales, (iii) the level of lease operating expenses, and (iv) the level of and interest rates on borrowings. The Company will need to rely on the initiation operations on its mining ventures and its oil and natural gas operations to generate cash flow and future profits. The same factors listed above will apply to the sale of minerals and metals mined by the Company as well as oil and natural gas produced by the Company. As the Company initiates production on its mining properties, results of operations will be affected by: (i) commodity prices for copper and gold, (ii) the quantity and quality of the ores recovered and processed, and (iii) the level of operating expenses associated with the mining operations.

As a result of the collapse of the world economies into recession, crude oil and natural gas prices decreased significantly during fiscal 2009 from 2008 with New York Mercantile Exchange (“NYMEX”) prices quoted at approximately $65.35/Bbl for oil and $2.58 per Mmbtu for natural gas at July 31, 2009. Since that time prices have first rebounded somewhat. The impact of high prices turning to lowered prices is uncertain and much volatility exists in world oil and gas pricing as oil producing countries are threatening an imposed drop in production to compensate for lower prices. If pricing remains high, by demand or artificial methods employed by the oil producing countries, the impact will be positive on cash flow and the exploitation of existing properties owned by the Company, however, continued high prices will reduce the availability of quality acquisitions and could change the Company’s future growth strategy. At the present time the Company believes it has a substantial inventory of quality development opportunities to sustain its growth strategy without additional acquisitions. The Company expects oil and gas prices to continue to widely fluctuate and to be influenced by global economic turmoil, Asian economies and potential disruptions in supplies, in particular events in the Middle East and North Korea.

Prices for gold had remained relatively stable and has edged significantly higher during the past several years and had generally reflected the relatively low inflation rates predominate in the economies of the industrialized nations. Recently, gold prices began a significant upward price adjustment, which may reflect a shift from the traditional dependence upon gold as a financial hedge against inflation and most likely reflects a “flight to gold” in the face of global economic turmoil. Current spot prices for gold are approximately $1,000.00 per ounce and are expected to continue to remain at or near those levels. The Company does not expect to realize any substantial increase in the price of gold in the future.

Copper prices have fluctuated dramatically since the Company’s acquisition of its copper property with prices ranging from a low of about $0.65 per pound in August 1993 to about $2.78 per pound today. Currently, copper prices have edged significantly downward. Wide variations in copper prices have resulted from the increased demand for electrical wire and copper related products as a result of the continued high growth rate of the economies of the industrialized nations and as a result of periodic reductions in the availability of scrap copper for recycling. Continued fluctuations in the spot price for copper are expected to result from variations in the availability of scrap copper and the continued strong demand from emerging nations.

Year ended July 31, 2009 compared to year ended July 31, 2008

Total revenues for the Company for the year ended July 31, 2009 were $1,069,361 compared to $1,855,381 for the prior year and represent a 42% decrease. Approximately half of the decrease in total revenues is a result of a decrease in commodity prices during the year from an average receiving price in 2008 on an equivalent barrel basis of $71.38/Bbl to $52.93/Bbl in 2009 and the other half is due to an decrease in production, primarily natural gas production from Coquille Bay. Coquille Bay continues to suffer from a lack of available gas for gas lift and as a result the Company continues to conserve natural gas and limits sales. With continued softness in commodity prices and problems maintaining continued production at Coquille Bay due to limited gas, the Company expects its revenues to decline in the coming quarters.

Total operating expenses for the year ended July 31, 2009 were $1,505,897 compared to $2,524,272 for the year earlier. Direct operating expenses have decreased despite increased activity at Coquille Bay and are expected to remain stable. General and administrative costs (“G&A”) for the year ended July 31, 2009 were $383,101 compared to $758,269 for the year ended July 31, 2008 and reflect lower expenses due to the fact that the Company operated most of 2009 under a forbearance agreement with its lenders that limited its activities. G&A costs are expected to continue to remain at the current levels. Interest costs decreased to $1,600,431 for the year ended July 31, 2009 compared to $1,923,838 for the prior year as a result of the settlement of the Company’s debt with its lenders in the fourth quarter of fiscal 2009. Interest costs will be substantially reduced in the coming quarters as the Company retired its primary debt.

The Company incurred a net after tax. gain of $10,785,443 ($0.636 per share) for the fiscal year ended July 31, 2009 compared to an after tax loss of $2,588,859 ($0.159 per share) for the prior year. The largest component of the net gain is the gain on the settlement of the Company’s debt of $12,984,463. The Company

experienced a net loss during the year of $436,536 from continuing operations Depreciation, depletion and amortization costs decreased from a total of $624,120 last year to $383,189 in the current year as a result of the retirement of the credit agreements and the sale of certain assets in connection with the settlement of debt. The Company expects to continue to incur losses until such time as its oil and gas production is significantly increased.

Year ended July 31, 2008 compared to year ended July 31, 2007

Total revenues for the Company for the year ended July 31, 2008 were $1,855,381 compared to $1,143,194 for the prior year and represent a 62.3% increase. The increase in total revenues is a result of increased commodity (primarily crude oil) prices during the year from an average receiving price in 2007 of $60.57/Bbl to $95.71/Bbl in 2008 and due to an increase in production. Production volumes increased by 19.5% primarily due to Coquille Bay production. With continued softness in commodity prices, the Company expects its revenues to remain flat or decline slightly in the coming quarters, despite increased production from Coquille Bay and North Louisiana.

Total operating expenses for the year ended July 31, 2008 were $2,524,272 compared to $2,798,996 for the year earlier. Operating expenses have decreased despite increased activity at Coquille Bay and are expected to remain stable. General and administrative costs (“G&A”) for the year ended July 31, 2008 were $758,269 compared to $1,905,298 for the year ended July 31, 2007 and reflect lower expenses due to the elimination of non-cash charges for the issuance of warrants. G&A costs are expected to continue to remain at the current levels. Interest costs increased to $1,923,838 for the year ended July 31, 2008 compared to $1,716,183 for the prior year as a result of the increase in rates associated with the Company credit facility and increased borrowings.

The Company incurred a net, or so–called after tax. loss of $2,588,859 ($0.159 per share) for the fiscal year ended July 31, 2008 compared to an after tax loss of $3,243,996 ($0.28 per share) for the prior year. The largest component of the net loss is interest expense, representing 73%. Depreciation, depletion and amortization costs decreased from a total of $914,878 last year to $624,120 in the current year as a result of no additional fees in the current year for credit agreement amendments. The Company expects to continue to incur losses until such time as its production is significantly increased.

Capital Resources and Liquidity

Because of the closing of the Hillside, Warrior and Coquille Bay asset acquisitions in 2004, the Company’s capital requirements relate primarily to the remedial efforts to return wells to production and to workover and repair operations on various wells to increase production, including the repairs required at Coquille Bay after hurricane Katrina. Now that the repairs at Coquille Bay are completed and production has been re-established, the Company has a great deal of flexibility in the timing and amount of these expenditures. The Company did not make any capital expenditures for workovers in the most recent quarter due to limited production at Coquille Bay and due to a lack of capital.

As a result of the inability of the Company to raise capital for its mining operations, Management decided to terminate all of the Company’s mining lease commitments except the Duke Gold Mine in Utah during fiscal 2000. As a result, the Company is active in only one mine that will require significant capital expenditures and subsequently sold its interest in the operations of the Duke Mine and retained a net smelter royalty. The Company has a wide degree of discretion in the level of capital expenditures it must devote to the mining project on an annual basis and the timing of its development. The Company has primarily been engaged, in its recent past, in the acquisition and testing of mineral properties to be inventoried for future development. Because of the relative magnitude of the capital expenditures that may ultimately be required for any single mining venture as operations are achieved, management has pursued a strategy of acquiring properties with significant mineral potential in an effort to create a mineral property base sufficient to allow the Company to access capital from external sources, either through debt or equity placements. Management decided to seek a partner for the Duke Mine during 2005 and focus its management resources and limited capital on the oil and natural gas properties acquired from Hillside

and Warrior and to focus on additional acquisitions in the oil and gas sector. The Company completed a joint venture arrangement with ATLCC during the year ended July 31, 2007, however ATLCC failed to provide the development capital and the Company re-assumed operations of the property. The Company reached an agreement with a new partner and has assigned the mine claims to a new party contingent upon renewed operations. Under the new arrangement the Company retained a small net profits interest in the operations, however, the latest party ahs been unable to complete its financing and as a result the Company is again seeking a joint venture mining partner.

As a result of the impact of Hurricane Katrina to the Company’s south Louisiana operations and facilities, the Company became non-compliant with the terms of its original credit agreements that had been put in place in early 2004. The Company decided to pursue the sale of assets to reduce bank debt and negotiated a Forbearance Agreement with its senior lenders in February 2006 to allow it sufficient time to complete a sale of assets The Company signed a Definitive Purchase and Sales Agreement with Whittier Energy Company and Premier Natural Resources LLC that was closed on August 9, 2006. The proceeds of the initial closing (also referred to as Phase I) of approximately $12.0 million were used to reduce senior debt by $11.3 million and to pay vendor payables. A second closing (also referred to as Post-Closing or Phase II Closing) of the asset sale to Whittier and Premier occurred on November 9, 2006 and resulted in approximately $1.85 million in additional proceeds to the Company that were used to further retire senior debt ($1.7 million) and to reduce vendor payables ($0.15 million).

In April 2007, the Company completed a re-financing of its senior and subordinated debt facility with its then current lenders consisting of a $15.0 million Revolving Loan facility and a $0.35 million subordinated debt facility. The total amount borrowed under the re-financing was approximately $10.2 million under the combined credit facility and included approximately $0.3 million for the acquisition of the Caltex properties and $0.85 million for workovers and working capital. The availability under the Revolving Loan was subject to semi-annual evaluations of the Company’s oil and gas reserve base as determined by the Lender and was reduced monthly based upon re-determinations by the Company after taking into effect price changes and net production. As of the closing date of April 2007, the Company had available borrowing capacity of approximately $10.5 million based upon the then current oil and gas properties evaluation. The Revolving Loan had a term of 2 years (April 14, 2009) and an interest rate of LIBOR plus 1,100 basis points and subject to a LIBOR floor of 5%. (The LIBOR Rate for July 2007 was 5.37%). The Revolving Loan was subject to the normal and customary financial covenants and was secured by a first mortgage and lien right to all of the Company’s operations and assets. In addition the Lender was granted a 2.5 % over-riding royalty interest payable from the monthly production of the Company. In connection with the Revolving Loan, the Company also completed a subordinated financing of approximately $350,000 with a Bank of Oklahoma. The terms of the Subordinated Financing were a term of 2 years from the closing date (April 14, 2009) and an interest rate of 8% per annum paid in kind and accrued to the loan balance due at maturity.

On March 26, 2008 as a result of a cash flow shortage created by the temporary loss of production at Coquille Bay, the Company negotiated a Forbearance Agreement and Amendment Number One to Credit Agreement with its senior lender in order to access additional borrowings under its credit facility. The Company had previously been out of compliance with its original credit agreement due to its delinquency in the payment of certain amounts due its senior lender and due to certain reporting deficiencies. In connection with the amended credit agreement, the Company was required to engage an investment advisor acceptable to its senior lender to assist the Company in either liquidating assets to retire the debt or otherwise re-financing the senior debt.

The Company received a notice from its senior lender on October 10, 2008, that it was in default of the Forbearance Agreement and that the lender intended to begin foreclosure proceedings after October 24, 2008. (see Form 8-K filed October 15, 2008, incorporated herein by reference) On November 13, 2008 the Company and its Lender executed a new Forbearance Agreement that deferred any further action by its Lender until December 29, 2008 and anticipated the Company and its Lender entering into a Settlement Agreement on or before December 15, 2008. The November Forbearance Agreement was amended on December 19, 2008 to provide for an extension of time until January 15, 2009 to enter into a settlement agreement and January 31, 2009 for the expiration of the amended Forbearance Agreement.

Effective April 30, 2009, the Company completed the sale of certain of its oil and gas assets located in north Louisiana and southeast Texas to Valley Falls Company and assigned the proceeds of the sale to its lender group. In addition, as part of the agreement to retire its senior and subordinated debt, the lender group received an assignment of a 5% overriding royalty interest in Coquille Bay, proportionately reduced to the Company’s record title interest in the field. The Settlement Agreement resulted in the retirement of approximately $14.6 million in principal, accrued interest and fees. (See Form 8-K dated May 19, 2009 incorporated herein by reference)

The timing of expenditures for the Company’s oil and natural gas and mining activities are generally distributed over several months, however, any cessation of production or catastrophe type expenditures create significant cash flow shortages for the Company. The Company anticipates its current working capital will not be sufficient to meet its required capital expenditures and that the Company will be required to either access additional borrowings from its lender or access outside capital. Currently the Company projects it will require non-discretionary capital expenditures of approximately $260,000 in the next fiscal year to maintain its current levels of production. Without access to such capital for non-discretionary projects, the Company’s production may be significantly curtailed or shut in and jeopardize its leases.

The level of the Company’s capital expenditures will vary in the future depending on commodity market conditions, upon the level of oil and gas activity achieved by the Company, the success of its remedial workover operations and upon the availability of capital for discretionary and non-discretionary projects. The Company anticipates that its cash flow will not be sufficient to fund its operations at their current levels due to certain known non-discretionary capital requirements and that additional funds or borrowings will be required for expansion. Because the timing of acquisitions of additional oil and gas properties is uncertain, additional borrowings will be required to fund new acquisitions and the timing of those borrowings is uncertain.

The Company has also has obtained certain unsecured loans from its Chairman and President, Jeffrey T. Wilson, which total in principal approximately $515,618 as of July 31, 2009. These loans bear market rates of interest and flexible terms. These funds have been used to maintain the Company’s oil and gas and mining activities and fund its overhead requirements. In addition, as of July 31, 2009 the Company has accrued salaries due its Chairman and President of $120,001. Management believes that the Company may need to borrow additional funds from these sources in the future, however there is no assurance such funding sources will continue to make advances to the Company.

At July 31, 2009, the Company had current assets of $130,304, including $17,153 in cash and cash equivalents, $52,500 in certificates of deposit, and $60,651 in trade and oil and gas accounts receivable and current liabilities of $1,839,687, which resulted in negative working capital of $1,709,383. The negative working capital position is comprised of trade accounts payable of $471,948; of accrued expenses payable of $718,444 consisting primarily of interest and accrued salaries payable to the Company’s President and oil and gas suspense accounts; notes payable to the Company’s President of $515,618; and third party notes payable of $12,858. As of July 31, 2009 the Company had cash and cash equivalents of $17,153.

Oil and Gas Hedging

The Company’s production is currently not hedged.

Seasonality

The results of operations of the Company are seasonal due to seasonal fluctuations in the market prices for crude oil and natural gas. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of results, which may be realized on an annual basis.

Inflation and Prices

The Company’s revenues and the value of its oil and natural gas and mining properties have been and will be affected by changes in the prices for crude oil, natural gas and gold prices. The Company’s ability to obtain additional capital on attractive terms is also substantially dependent on the price of these commodities. Prices for these commodities are subject to significant fluctuations that are beyond the Company’s ability to control or predict.

Off Balance Sheet Arrangements

None.

Contractual Obligations

See above, Capital Resources and Liquidity.

Debt

(See above, Capital Resources and Liquidity.) The Company had two credit facilities in place in connection with its oil and gas operations: (a.) an $15,000,000 Revolving Loan that expires on April 14, 2009 and (b.) a $350,000 subordinated note payable to Bank of Oklahoma that expires on Apri114, 2009 each of which were retired effective April 30, 2009.

Revolving Loan

The Company completed the Revolving Loan, an $15 million revolving financing of which approximately $9.6 million was required at closing, including approximately $0.25 million in working capital, $0.3 million for the Caltex acquisition and $0.6 million in development capital for workovers. The availability under the Revolving Loan is subject to semi-annual evaluations of the Company’s oil and gas reserve base as determined by the Lender and is reduced monthly based upon re-determinations by the Company after taking into effect price changes and net production. As of the closing date of April 2007, the Company had available borrowing capacity of approximately $10.5 million based upon the current oil and gas properties evaluation. The Revolving Loan had a term of 2 years (April 14, 2009) and an interest rate of LIBOR plus 1,100 basis points and subject to a LIBOR floor of 5%. (The LIBOR Rate for July 2007 was 5.37%). The Revolving Loan was subject to the normal and customary financial covenants and is secured by a first mortgage and lien right to all of the Company’s operations and assets. In addition the Lender was granted a 2.5 % over-riding royalty interest payable from the monthly production of the Company. The Company completed a Forbearance Agreement and Amendment Number One to Credit Agreement dated March 26, 2008 providing the Company with access to additional borrowings under the credit facility in the approximate amount of $365,000. As of January 31, 2009 the Company believed it was in compliance with the covenants of credit agreements as amended. However, the Company received a subsequent notice dated October 10, 2008 indicating the Company was in default of the terms of the Forbearance Agreement and that the lender intended to begin foreclosure proceedings on or after October 24, 2008. (see Form 8-K filing dated October 15, 2008 incorporated herein by reference) On November 13, 2008 the Company and its Lender executed a new Forbearance Agreement that deferred any further action by its Lender until December 29, 2008 and anticipated the company and its Lender entering into a Settlement Agreement on or before December 15, 2008. The Company and the Lender entered into an amendment to that Forbearance Agreement extending the dates for a settlement agreement to January 15, 2009 and an expiration date for the new amended agreement on January 31, 2009. Effective April 30, 2009, the Company completed the sale of certain assets and retired and repaid its Revolving Loan

Subordinated Debt

In connection with the Revolving Loan, the Company also completed a subordinated financing of approximately $350,000 with a Bank of Oklahoma. The terms of the Subordinated Financing are a term of 2 years from the closing date (April 14, 2009) and an interest rate of 8% per annum paid in kind and accrued to the loan

balance due at maturity. The Company can retire the Subordinated debt only after payment of the Revolving Loan. As a result of the above–referenced notice of default on its senior debt, the Company was also in default with respect to its subordinated debt facility. The Forbearance Agreement signed on November 13, 2008 and amended on December 19, 2008, also applies to the subordinated debt. The Settlement Agreement negotiated with the agent for the Lender group included the retirement and repayment of the Subordinated Debt.

ITEM 7A.

Quantitative and Qualitative Disclosure about Market Risk.

Commodity Risk

Our major commodity price risk exposure is to the prices received for our natural gas and oil production. Realized prices for our production are the spot prices applicable to natural gas and crude oil. Prices received for natural gas and oil are volatile and unpredictable and are beyond our control.

Interest Rate Risk

We have long-term debt subject to risk of loss associated with movements in interest rates.

ITEM 8.

Financial Statements and Supplementary Data.

Our consolidated financial statements are included in this report beginning of page F-1.

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

ITEM 9A.

Controls and Procedures.

In connection with the preparation of this annual report on Form 10-K/A, our President and Chief Executive Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2009, pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our President and Chief Executive Officer concluded that as of July 31, 2009 our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the Security and Exchange Commission’s rules and forms; and to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to management, including our certifying officers, as appropriate, to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting.

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(c) and (d) of the Exchange Act. Our internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, financial disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable and in accordance with generally accepted accounting principles of the United States of America (GAAP).

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.

A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. An internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

As part of our compliance efforts relative to Section 404 of the Sarbanes-Oxley Act of 2002, our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2009. In making this assessment, management used the criteria set forth in the Internal Control – Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). We evaluated control deficiencies identified through our test of the design and operating effectiveness of controls over financial reporting to determine whether the deficiencies, individually or in combination, are significant deficiencies or material weaknesses. In performing the assessment, our management has identified one material weakness in internal control over financial reporting existing as of July 31, 2009. Our evaluation of the significance of each deficiency included both quantitative and qualitative factors. Based on that evaluation, the Company’s management concluded that as of July 31, 2009, and as of the date that the evaluation of the effectiveness of our internal controls and procedures was completed, the Company’s internal controls are not effective, for the reason discussed below:

Segregation of Duties

As a result of lack of employees, we were unable to meet certain segregation of duties criteria and did not have existing resources for creating a compensating control mechanism. In June 2008, during our evaluation of our internal controls, Mr. Wilson, our combined Chief Executive Officer and Chief Financial Officer, identified the inability to include proper segregation of transaction authorization, transaction processing and custody within our accounting department, resulting in a material weakness in our internal controls over financial reporting.. Despite our material weakness regarding our segregation of duties, we believe that our financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Remediation Initiative

We will not be able to rectify the segregation of duties weakness until we have more employees. We have continued to engage an outside consulting firm to assist us in implementing additional controls to improve our overall control processes and provide checks and balances. In addition, it is our intention to hire a minimum of one qualified accounting individual as soon as the necessary financial resources become available.

Other than the weakness identified above and our remediation of the weakness, there were no other changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits the company to provide only management’s report in this annual report.

Changes in Internal Controls

No additional changes in internal controls were made during the year ended July 31, 2009.

ITEM 9B.

Other Information.

None.

PART III

ITEM 10.

Directors and Executive Officers of Registrant.

Directors and Executive Officers

The following table sets forth certain information regarding the directors, executive officers and key employees of the Company.


Name	Age	Position
Jeffrey T. Wilson	56	Director, Chairman of the Board, President and Chief Executive Officer
Annalee C. Wilson	53	Director
Aaron M. Wilson	30	Director
Malcolm W. Henley	57	Director
J. Gregory Thagard	46	Director

Biographical Information

Jeffrey T. Wilson has been Director, Chairman of the Board, President and Chief Executive Officer of the Company since August 1993. Mr. Wilson was a Director, Chairman and President of LaTex Resources, Inc., an affiliate of the Company, and was the founder of its principal operating subsidiary, LaTex Petroleum Corporation. Prior to his efforts with LaTex, Mr. Wilson was Director and Executive Vice President of Vintage Petroleum, Inc. and was employed by Vintage in various engineering and acquisition assignments from 1983 to 1991. From August 1980 to May 1983 Mr. Wilson was employed by Netherland, Sewell & Associates Inc., a petroleum consulting firm. Mr. Wilson began his career in the oil and gas business in June 1975 with Exxon Company USA in various assignments in the Louisiana and South Texas areas. Mr. Wilson holds a Bachelor of Science Degree in Mechanical Engineering from Rose-Hulman Institute of Technology.

Annalee C. Wilson has been a Director of the Company since August 2001. Mrs. Wilson is the President of HN Corporation, an affiliate of the Company engaged in the operation of retail franchise outlets in malls selling motivation and inspiration material developed by Successories, Inc. and others and in the operation of a Christian restaurant and gift shop. Mrs. Wilson has an Associate Degree in Nursing from the University of Evansville.

Aaron M. Wilson has been a Director of the Company since August 2001. Mr. Wilson is a Vice President of HN Corporation and is the Manager of the Successories franchise store located at Castleton Square Mall owned by HN Corporation. Mr. Wilson received a dual degree in Business Economics and Political Science from the University of Kentucky in 2002. Mr. Wilson is currently active with the Company’s biofuels efforts for the Hoosier Biodiesel subsidiary.

Malcolm W. Henley has been a Director of the Company since August, 2006. Mr. Henley was a former officer of the Company and previously served as a Director from 1996 through 1999. Mr. Henley has over 25 years of experience in the petroleum industry and has been involved in many varied aspects of the industry. He holds a Bachelor of Arts Degree in Business Administration from Oklahoma State University and an Associate Degree in Petroleum Land Technology from Tulsa Junior College.

J. Gregory Thagard became a Director of the Company upon the resignation of Mr. Clements in August 2007. Mr. Thagard has extensive oil and gas experience as a landman and has recently been the managing partner of Hillside Oil and Gas LLC. Mr. Thagard is a 1978 graduate of the University of Texas and holds a Bachelor of Science degree.

Section 16(a) Reporting Deficiencies

Section 16(a) of the Exchange Act requires the Company’s directors and officers and persons who own more than 10% of a registered class of the Company’s equity securities, to file initial reports of ownership on Form 3 and reports of changes in ownership on Forms 4 and 5 with the SEC and the National Association of Securities Dealers (“NASD”). Such persons are required by SEC regulation to furnish the company with copies of all Section 16(a) forms they file.

Based upon a review of From 3, 4 and 5 filings made by the Company’s officers and directors during the past fiscal year ended July 31, 2009 under Section 16(a) of the Exchange Act, the Company believes that all requisite filings have been made timely.

ITEM 11.

Executive Compensation.

The table below sets forth, in summary form, (1) compensation paid to Jeffrey T. Wilson, the Company’s Chairman of the Board, President and Chief Executive Officer and (2) other compensation paid to officers and directors of the Company. Except as provided in the table below, during the three fiscal years ended July 31, 2009, 2008 and 2007 (i) no restricted stock awards were granted, (ii) no stock appreciation or stock options were granted, (iii) no options, stock appreciation rights or restricted stock awards were exercised, and (iv) except as provided below, no awards under any long term incentive plan were made to any officer or director of the Company.

SUMMARY COMPENSATION TABLE


	Annual Compensation			Long Term Awards Warrants
Name and Principal Position	Year	Salary		Bonus	# shares
Jeffrey T. Wilson	2009	$	140,000		—
	2008	$	140,000		—
	2007	$	140,000		200,000	*
Annalee C. Wilson	2009				—
	2008				—
	2007				200,000	*
Aaron M. Wilson	2009				—
	2008				—
	2007				200,000	*
Malcolm W. Henley	2009				—
	2008				—
	2007				200,000	*

Expired;

None of the executive officers listed received prerequisites or other personal benefits that exceeded the greater of $50,000 or 10% of the salary and bonus for such officers. Directors are currently not paid for their service to the Company. Mr. Thagard , Mr. Malcolm Henley and Mr. Aaron Wilson have received compensation as consultants and contractors to the Company and its subsidiaries in the current fiscal year ending July 31, 2009 in the amounts of $84,000, $12,500 and $75,600 respectively.

The Board of Directors, from both publicly disclosed sources and from private discussions, periodically determines the level of executive compensation and any increases thereto based on comparable salaries for executives of similar sized companies within our industry in setting the compensation for Mr. Wilson. The Board believes that the compensation of Mr. Wilson, in light of his many duties typically performed by more than one person, is well within the compensation levels for executives of a similar type and functioning in companies of a similar size.

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management.

As of July 31, 2009, the Company has 16,964,441 issued and outstanding shares of common stock. The following table sets forth, as of July 31, 2009, the number and percentage of shares of common stock of the Company owned beneficially by (i) each director of the Company, (ii) each executive officer of the Company, (iii) all directors and officers as a group, and (iv) each person known to the Company to own of record or beneficially own more than 5% of the Company’s common stock. Except as otherwise listed, the stockholders listed in the table have sole voting and investment power with respect to the shares listed. As of July 31,2009, the Company had approximately 602 holders of common stock of record.


Name of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Class
Jeffrey T. Wilson (1)(4)	2,608,834	15.4	%
Annalee C. Wilson (2)(4)	981,030	5.8	%
Aaron M. Wilson (3)(4)	31,635	0.2	%
All officers and directors as a Group (3 people) at 7/31/2008	3,621,499	21.3	%
Taghmen Ventures Ltd (5)	1,000,000	5.9	%
RAB Special Situations LP (6)	1,000,000	5.9	%
James M. Clements (7)	620,000	3.7	%
Wakabayashi Fund	900,000	5.3	%
Total officers, directors and 5% shareholders	7,141,499	42.1	%

(1)

The mailing address of Mr. Jeffrey Wilson is PO Box 1006, Evansville, IN 47706. Includes 147,395 shares held jointly with Mrs. Wilson; includes 416,753 shares owned by HN Corporation in which Mr. Wilson owns 33.3%. Does not include 75,000 shares held in Trust by Old National Bank for Mr. Wilson’s children

(2)

The mailing address of Mrs. Annalee Wilson is PO Box 1006, Evansville, IN 47706. Includes 147,396 shares held jointly with Mr. Wilson; includes 833,634 shares owned by HN Corporation in which Mrs. Wilson owns 66.7%. Does not include 75,000 shares held in Trust by Old National Bank for Mrs. Wilson’s children.

(3)	The mailing address for Mr. Aaron Wilson is PO Box 1006, Evansville, IN 47706. Includes 31,635 shares held in Trust by Old National Bank.

(4)	The mailing address of HN Corporation is 3117 N First Ave., Evansville, IN 47710. Mrs. Annalee Wilson is the President of HN Corporation, Jeffrey T. Wilson is the Vice President of HN Corporation and Aaron M. Wilson is a Vice President of HN Corporation.

(5)	The address of Taghmen Ventures Ltd. is EFG House, St Julian’s Avenue, St Peter Port Guernsey.

(6)	The mailing address of RAB Special Situations LP is C/O Morgan Stanley 25 Cabot Square, 3rd Floor, Canary Wharf, London, E144QA.

(7)	The mailing address of Mr. Clements is 3643 Baker Street, San Diego, CA 92117

ITEM 13.

Certain Relationships and Related Transactions.

Jeffrey T. Wilson, Chairman, President and Chief Executive Officer of the Company has made unsecured loans to the Company which total $515,618 in principal as of July 31, 2009 and has accrued salaries due from the Company of $120,000.01.

HN Corporation, a private retail company owned by Mr. Wilson and his wife, has made unsecured loans to the Company from time-to-time which total $0 in principal as of July 31, 2009. Annalee Wilson serves as the President of HN Corporation and owns 66.7% of its common stock, Jeffrey T. Wilson serves as the Vice President and Secretary of HN Corporation and owns 33.3% of its stock and Aaron M. Wilson serves as a Vice President of HN Corporation.

Mr. Thagard , Mr. Malcolm Henley and Mr. Aaron Wilson, each directors of the Company, have received compensation as consultants and contractors to the Company and its subsidiaries in the current fiscal year ending July 31, 2009 in the amounts of $84,000, $12,500 and $75,600, respectively.

ITEM 14.

Principal Accountant Fees and Services.

The following table presents the fees for professional audit services rendered by the accountancy firm of Weaver & Martin, LLC for the audit of the Company’s annual consolidated financial statements for the fiscal year ended July 31, 2009 and for the fiscal year ended July 31, 2008, and fees for other services rendered by each during those periods:


Fee Category	Fiscal 2009		Fiscal 2008
Audit Fees	$	39,750	$	39,750
Audit-Related Fees	$	0	$	0
Tax Fees	$	0	$	0
All Other Fees	$	0	$	0

Total Fees	$	39,750	$	39,750

Audit fees include fees related to the services rendered in connection with the annual audit of the Company’s consolidated financial statements, the quarterly reviews of the Company’s quarterly reports on Form 10-Q and the reviews of and other services related to registration statements and other offering memoranda. The audit fees in 2009 were comparable to those incurred in 2008.

Audit-related fees are for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements.

Tax Fees include (i) tax compliance, (ii) tax advice, (iii) tax planning, and (iv) tax reporting.

All Other Fees includes fees for all other services provided by the principal accountants not covered in the other categories such as litigation support, etc.

All of the services for 2009 and 2008 were performed by the full-time, permanent employees of Weaver and Martin, LLC

All of the 2009 services described above were approved by the Audit Committee pursuant to the SEC rule that requires audit committee pre-approval of audit and non-audit services provided by the Company’s independent auditors to the extent that rule was applicable during fiscal year 2009. Weaver & Martin, LLC has not provided any services unrelated to the audit during 2009.

PART IV

ITEM 15.

Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)

Financial Statements and Schedules

Financial Statements of Imperial Petroleum, Inc.

Reports of Independent Public Accountants;

Consolidated Balance Sheets as of July 31, 2009 and 2008;

Consolidated Statements of Operations for the years ended July 31, 2009, 2008, and 2076;

Consolidated Statements of Stockholder Equity for the years ended July 31, 2009, 2008, and 2007;

Consolidated Statements of Cash Flows for the years ended July 31, 2009, 2008, and 2007;

Notes to Consolidated Financial Statements.

Supplemental Financial Information

Schedule II – Amounts Receivable from Related Parties. Other Schedules are omitted as they are not required.

(b)

Reports on Form 8-K

The following reports were filed with the SEC on the dates shown and are included herein by reference:

8/15/05 8-K: Change of Auditors to Briscoe, Burke & Grigsby LLP

8/31/05 8-K: Termination of Merger Agreement with United Heritage Corporation.

12/7/05 8-K: Amendment #3 to Credit Facility and Forbearance Agreement.

2/24/06 8-K: Waiver Agreement with Senior Lender

5/9/06 8-K: Purchase and Sale Agreement with Whittier Energy Company and Premier Natural Resources LLC

7/6/06 DEF 14A: Definitive Proxy

8/4/06: 8-K: Notice of results of Annual Meeting

8/22/06: 8-K: Closing of sale of assets to Whittier & Premier

10/16/06 Change of auditors to Weaver & Martin LLC.

4/18/07: 8-K: Refinance of Senior and Subordinated Debt.

6/22/07: 8-K: Definitive Agreement to acquire assets from Apollo Resources International Inc.

8/07/07: 8-K: Termination of Apollo acquisition.

4/15/08: 8-K: Forbearance Agreement and Amendment Number 1 to Credit Agreement.

10/15/08: 8-K: Notice of Default on Forbearance Agreement.

(c)

Exhibits


Exhibit Number		Description

3.1		Certificate of Incorporation of the Registrant incorporated herein by reference to exhibit B of the Form 10.

3.2		Bylaws of the Registrant incorporated herein by reference to Exhibit B of the Form 10.

16.1		Letter re: change in certifying accountant. Included by reference to exhibit of Form 8-K, as filed with the SEC on August 16, 2006.

31.1		Certification of Chief Executive Officers as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1		Certification of president and Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

99		Additional Exhibits: Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Imperial Petroleum, Inc.

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


Signature	Title	Date

/s/ JEFFREY T. WILSON Jeffrey T. Wilson	President and Chief Executive Officer (Principal Executive Officer) and Director	October 29, 2009

IMPERIAL PETROLEUM, INC.

Index to Consolidated Financial Statements

Audited Financial Statements of Imperial Petroleum, Inc.

(See Item 15: Exhibits, Financial Statements and Reports on Form 8-K)


		Page
Independent Auditors’ Reports		F-2

Consolidated Financial Statements:

Consolidated Balance Sheet		F-3

Consolidated Statement of Operations		F-5

Consolidated Statements of Stockholders’ Equity		F-6

Consolidated Statements of Cash Flows		F-7

Notes to Consolidated Financial Statements		F-8

F - 1

IMPERIAL PETROLEUM, INC.

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Imperial Petroleum, Inc. and Subsidiaries

Evansville, Indiana

We have audited the accompanying consolidated balance sheet of Imperial Petroleum, Inc. and Subsidiaries as of July 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the three years ended July 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no opinion. 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 audit provides 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 Imperial Petroleum, Inc. and Subsidiaries as of July 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for the three years ended July 31, 2009, in conformity with U. S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and is dependent upon obtaining debt financing for funds to meet its cash requirements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 2. The financial statements do no include any adjustments that might result from the outcome of this uncertainty.

/s/

Weaver & Martin, LLC

Kansas City Missouri

October 29, 2009

F - 2

IMPERIAL PETROLEUM, INC.

Consolidated Balance Sheet

July 31, 2009 and 2008


	2009			2008
ASSETS

Current Assets:
Cash	$	17,153		$	185,872
Certificates of Deposit		52,500			75,906
Accounts Receivable		60,651			883,955

Total current assets		130,304			1,145,733
Property, plant and equipment:
Mining claims, options, and development costs		—			40,620
Oil and gas properties (full cost method)		3,509,514			5,739,795

		3,509,514			5,780,415
Less: accumulated depreciation, depletion and amortization		(501,009	)		(898,591	)

Net property, plant and equipment		3,008,505			4,881,824
Other assets:

Deferred financing expense – net of accumulated amortization of $3,212,333 and $2,966,186, respectively		—			246,147

Total assets	$	3,138,809		$	6,273,704

F - 3

IMPERIAL PETROLEUM, INC.

Consolidated Balance Sheet

July 31, 2009 and 2008


	2009			2008
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	471,948		$	1,181,963
Accrued expenses		718,444			676,954
Notes payable – current portion		12,858			432,426
Notes payable – related parties		515,618			529,367
Line of Credit		—			12,528,775
Other Current Liabilities		120,819			467,815

Total current liabilities		1,839,687			15,817,300
Long-term liabilities:
Asset retirement obligation		406,562			349,286

Total long-term liabilities		406,562			349,286

STOCKHOLDERS’ EQUITY:
Common stock of $.006 par value; authorized 150,000,000 shares; 16,964,441 and 16,941,441 issued, respectively		101,788			101,788
Paid-in capital		11,511,265			11,511,265
Retained deficit		(10,013,189	)		(20,798,631	)
Treasury stock, at cost (241,637 shares)		(707,304	)		(707,304	)

Total stockholders’ equity		892,560			(9,892,882	)

Total liabilities and stockholders’ equity	$	3,138,809		$	6,273,704

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

F - 4

IMPERIAL PETROLEUM, INC.

Consolidated Statements of Operations

For the Years Ended July 31, 2009, 2008 and 2007


	2009			2008			2007
Revenues and other income:

Oil and gas	$	1,069,361		$	1,855,381		$	1,143,194

Total operating income		1,069,361			1,855,381			1,143,194

Costs and expenses:

Production costs and taxes		985,753			1,487,460			729,293
Mining lease expense		—			1,923			14,768
General and administrative		383,101			758,269			1,905,298
Depreciation, depletion and amortization		137,043			276,620			149,607

Total costs and expenses		1,505,897			2,524,272			2,798,996

Net Income (Loss) from operations		(436,536	)		(668,891	)		(1,655,802	)

Other income and (expense):
Interest expense		(1,600,431	)		(1,923,838	)		(1,716,183	)
Interest income		2,594			31,849			28,040
Amortization of loan fees		(246,146	)		(347,500	)		(765,271	)
Other income (expense)		(14,615	)		190,000			—
Gain (loss) on sale of assets		13,080,577			129,521			865,190

Total other income and (expense)		11,221,979			(1,919,968	)		(1,588,224	)

Net income (loss) before income tax		10,785,443			(2,588,859	)		(3,243,996	)

Provision for income taxes		—			—			—

Net Income (Loss)	$	10,785,443		$	(2,588,859	)	$	(3,243,996	)

NET INCOME/(LOSS) PER SHARE	$	0.64		$	(0.16	)	$	(0.28	)

WEIGHTED AVERAGE SHARES OUTSTANDING		16,694,441			16,289,523			11,487,701

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

F - 5

IMPERIAL PETROLEUM, INC.

Consolidated Statements of Stockholders’ Equity

For the Years Ended July 31, 2009, 2008 and 2007


	Common Stock					Additional Paid-In Capital		Unamortized Cost of Stock Issued			Retained Deficit			Treasury Stock			Total Stockholder’s Equity
	Shares		Par Value			Additional Paid-In Capital		Unamortized Cost of Stock Issued			Retained Deficit			Treasury Stock			Total Stockholder’s Equity
BALANCE, July 31, 2006	11,241,126		$	67,447			10,247,264		(69,750	)	$	(14,965,775	)	$	(707,304	)	$	(5,428,118	)
Options issued for services	—			—			1,042,852		—			—			—			1,042,852
Stock cancelled	(125,000	)		(750	)		750		—			—			—			—
Stock issued for services	468,616			2,812			34,988		—			—			—			37,800
Stock issued for assets	220,000			1,320			24,860		—			—			—			26,180
Options exercised	4,160,000			24,960			115,040		—			—			—			140,000
Amortization of prior	—			—			—		69,750			—			—			69,750
Capital contributed	—			—			500		—			—			—			500
Net loss for the period	—			—			—		—			(3,243,996	)		—			(3,243,996	)
Rounding	(301	)		(1	)		1,011		—			—			—			1,010

BALANCE, July 31, 2007	15,964,441		$	95,788		$	11,467,265	$	—		$	(18,209,771	)	$	(707,304	)		(7,354,022	)

Stock Issued for services	1,000,000		$	6,000		$	44,000		—			—			—		$	50,000
Net loss for the period	—			—			—		—			(2,588,859	)		—			(2,588,859	)

BALANCE, July 31, 2008	16,964,441		$	101,788		$	11,511,265		—		$	(20,798,631	)	$	(707,304	)	$	(9,892,882	)

Net Income for the period	—			—			—		—			10,785,443			—			10,785,443

Balance as of July 31, 2009	16,964,441		$	101,788		$	11,511,265		—		$	(10,013,188	)	$	(707,304	)	$	892,650

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

F - 6

IMPERIAL PETROLEUM, INC.

Consolidated Statements of Cash Flows

For the Years Ended July 31, 2009, 2008 and 2007


	2009			2008			2007
Operating activities:

Net gain/loss	$	10,785,443		$	(2,588,859	)	$	(3,243,996	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization		383,189			624,120			914,878
Expenses paid with common stock and warrants		—			50,000			1,107,842
Amortization of stock issued for services		—			—			69,750
Gain on sale and disposal of assets		(13,080,577	)		(129,521	)		(865,190	)
Change in accounts receivable		823,304			(460,997	)		75,941
Change in accounts payable		(710,015	)		72,986			(1,044,554	)
Change in other liabilities		(289,720	)		198,604			392,113
Change in accrued expenses		41,490			245,992			107,350

Net cash provided by (used in) operating activities		(2,046,886	)		(1,987,675	)		(2,485,866	)

Investing activities:
Purchase of oil and gas		(434,407	)		(872,806	)		(652,306	)
Purchase of mining claims		—			—			(8,860	)
Reinvestment in certificates of deposit		—			—			(28,040	)
Proceeds from certificates of deposit		23,406			124,480			—
Proceeds of sale of assets		15,251,261			139,520			13,696,102

Net cash provided by (used in) investing activities	$	14,840,260		$	(608,806	)		13,006,896

Financing activities:
Advances on notes payable		10,000			2,185,557			10,347,000
Payments on notes payable		(429,568	)		(29,312	)		(19,588,261	)
Proceeds from notes payable-related party		5,000			37,450			—
Payments on Line of credit		(12,528,775	)		—			—
Payments to notes payable-related party		(18,750	)		—			(136,611	)
Payment of financing cost		—			—			(695,000	)
Contributed capital		—			—			500
Proceeds from stock warrants exercised		—			—			140,000

Net cash provided by (used in) financing activities		(12,962,093	)		2,193,695			(9,932,372	)

Net change in cash and cash equivalents		(168,719	)		(402,786	)		588,658
Cash and cash equivalents, beginning of year		185,872			588,658			—

Cash and cash equivalents, end of year		17,153			185,872		$	588,658

Supplemental disclosures for cash flow information:
Cash paid during the period for

Interest	$	4,057,763		$	14,182		$	6,380,786
Income taxes		—			—			—

Supplemental schedule of non-cash investing and financing:
Stock issued for fixed assets	$	—		$	—		$	26,180
Stock issued for services and interest		—			50,000			37,800
Options issued for services		—			—			1,042,852

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

F - 7

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements

For the Years Ended July 31, 2009, 2008 and 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Imperial Petroleum, Inc. (the “Company”), a publicly held corporation, was organized under the laws of the state of Nevada.

The Company’s principal business consists of oil and gas exploration and production in the United States. The Company, through its wholly owned subsidiary, Ridgepointe Mining Company is attempting to obtain capital, continue testing, defining and developing mineral reserves on mining claims it owns or operates in the southwestern and western United States. At July 31, 2009, the Company had not begun mining activities.

Reverse Split

On August 1, 2006 stockholders approved a 1 for 4 reverse stock split. All share numbers in these financial statements and footnotes have been retroactively adjusted to account for the reverse split.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Ridgepointe Mining Company, Premier Operating Company, I. B. Energy, Inc., LaTex Resources International, Inc., Imperial Environmental Company (formerly Phoenix Metals, Inc.) and Hoosier Biodiesel Company (formerly Global-Imperial Joint Venture, Inc.). All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The presentation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

Bad debts on receivables are evaluated periodically and charged to expense in the year the receivable is determined uncollectible, therefore, no allowance for doubtful accounts is included in the financial statements. During 2009, 2008 and 2007 the Company charged off $0.

Fair Value of Financial Instruments

Fair values of cash and cash equivalents, investments and short-term debt approximate their carrying values due to the short period of time to maturity. Fair values of long-term debt are based on quoted market prices or pricing models using current market rates, which approximate carrying values.

F - 8

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable.

The Company’s cash is deposited in two financial institutions. Cash and certificates of deposit at banks are insured by the FDIC up to $250,000. At times, the balances in these accounts may be in excess of federally insured limits. The Company currently operates in the oil and gas industry. The concentration of credit risk in a single industry affects the Company’s overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. The Company’s major purchasers of its oil and gas during 2009 were Plains Marketing and Professional Oil & Gas. accounting for 87% and 13% revenues respectively. The Company’s major purchasers of its oil and gas during 2008 were Plains Marketing and Mideast Gas Systems, Inc., accounting for 42.9% and 21.0% revenues, respectively.

Revenue Recognition

The Company’s consolidated financial statements are prepared using the accrual method of accounting. The Company recognizes revenues based on actual volumes of oil and gas sold based on the month of production.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs, are capitalized. All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

In addition, the capitalized costs are subject to a “ceiling test,” which basically limits such costs to the aggregate of the “estimated present value,” discounted at a 10-percent interest rate of future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.

Other Property and Equipment

Property and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of assets. Expenditures that significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation and depletion are eliminated from the respective accounts and the resulting gain or loss is included in current earnings.

Mining exploration costs are expensed as incurred. Development costs are capitalized. Depletion of capitalized mining costs will be calculated on the units of production method based upon current production and reserve estimates when placed in service.

F - 9

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

Long-Lived Assets

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount of fair value less cost to sell.

Amortization of Financing Fees

Deferred financing fees are amortized ratably over the term of the related debt. Amortization expense for the years ended July 31, 2009, 2008 and 2007 was $ 246,146, $347,500, and $ 765,271 respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of change in tax rates is recognized in income in the period that includes the enactment date.

Earnings and Loss Per Common Share

Earnings (Loss) per common share is computed based upon the weighted average common shares outstanding.

Reclassification

Certain reclassifications have been made to prior periods to conform to the current presentation.

2. GOING CONCERN

Financial Condition

The Company’s financial statements for the year ended July 31, 2009 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company had a net income of $10,785,443 for the year ended July 31, 2009 and net losses of $2,588,859, and $3,243,996 for the years ended July 31, 2008 and 2007, respectively, and as of July 31, 2009 has an accumulated deficit of $10,013,189.

Management Plans to Continue as a Going Concern

The Company retired its senior and subordinated debt, and except for debt owed to its principal, is debt free. The Company is currently seeking development and acquisition capital to expand its operations.

F - 10

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

3. PROPERTY, PLANT and EQUIPMENT

The Company’s property, plant and equipment consist of the following:


	2009		2008
Oil and gas properties	$	3,254,664	$	5,484,945
Mining claims		0		40,620
Oil and gas equipment		254,850		254,850

Total	$	3,509,514	$	5,780,415

4. INCOME TAXES

Provisions for income taxes are as follows:


	2009		2008		2007
	(in thousands)
Current:
Federal	$	—	$	—	$	—
State		—		—		—

		—		—		—

Deferred:
Federal		—		—		—
State		—		—		—

	$	—	$	—	$	—

The following are the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities:


	2009			2008			2007
	(in thousands)
Deferred tax liabilities:
Property, plant and equipment	$	(8	)	$	—		$	—

Total deferred tax liabilities		(8	)	$	—		$	—
Valuation allowance		8			—			—

Net deferred tax liability		—			—			—

Deferred tax assets:
Unrealized loss on securities		707		$	707		$	707
Property, plant and equipment		—			120			88
Net operating losses		1,921			6,336			5,296
Other		129			75			40

Total deferred tax assets		2,757			7,238			6,131

Valuation allowance		(2,757	)		(7,238	)		(6,131	)

Net deferred tax assets		—			—			—

Net deferred tax asset (liability)	$	—		$	—		$	—

A valuation allowance is required when it is more likely than not that all or a portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon future profitability. Accordingly, a valuation allowance has been established to reduce the deferred tax assets to a level which, more likely than not, will be realized. The Company has net operating loss (NOL) carry forwards to offset its earnings of approximately $5,643,000. If not utilized, the net operating losses will expire in varying amounts from 2009 to 2028.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (FIN 48). This Interpretation provides guidance on recognition, classification and disclosure concerning uncertain tax liabilities. The evaluation of a tax position requires recognition of a tax benefit if it is more likely than not it will be sustained upon examination. We adopted FIN 48 effective August 1, 2008. The adoption did not have a material impact on our financial statements.

F - 11

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

The following table shows a reconciliation of the beginning and ending unrecognized tax benefits (liabilities) for 2009, 2008 and 2007.


	2009		2008		2007
Balance at August 1	$	—	$	—	$	—
Additions based on tax positions related to the current year		—		—		—
Additions for tax positions of prior years		—		—		—
Reductions for tax positions of prior years		—		—		—
Settlements		—		—		—
Lapse of statute		—		—		—

Balance at July 31	$	—	$	—	$	—

Allowable tax credits are applied currently as reductions of the provision for income taxes. Interest related to unrecognized tax benefits is reflected in interest expense, and penalties in operating expenses, if applicable.

At July 31, 2009, 2008 and 2007, accrued liabilities for interest and penalties totaled $0, $0 and $0, respectively, net of accrued income taxes. Interest and penalties affecting earnings in 2009, 2008 and 2007 were $0, $0 and $0, respectively.

The Company has filed tax returns in the U.S. federal jurisdiction, Texas, Louisiana, Mississippi, and Kentucky. All tax years since 2003 remain subject to examination. The Company does not believe it has a material unrecognized tax benefit or liability, therefore, none is provided.

The amounts of U. S. and foreign income (loss) before income taxes, with a reconciliation of tax at the federal statutory rate with the provision for income taxes were:


	Dollars								Percent of Pretax Income
	2009		2008			2007			2009		2008		2007
Income (loss) before income taxes	$	10,648	$	(2,488	)	$	(3,922	)	100.00	%	100.00	%	100.00	%
Federal statutory income tax		—		—			—		0.00	%	0.00	%	0.00	%
State income taxes		—		—			—		0.00	%	0.00	%	0.00	%
Nondeductible expense and other		—		—			—		0.00	%	0.00	%	0.00	%

Income tax (provision) benefit	$	—	$	—		$	—		0.00	%	0.00	%	0.00	%

F - 12

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

5. NOTES PAYABLE AND LINE OF CREDIT


	2009		2008
Gary S. Williky, unsecured promissory note, dated November 24, 1997, principal due on demand plus interest at 9.0%	$	5,858	$	5,858

Greg Thagard, unsecured demand note	$	7,000		—
Equipment note due a Bank, dated 03/01/01, payments assumed 1/16/04, principal due on demand plus interest at a variable rate at 5.5% as of 7/31/04. Collateralized by a workover rig and certain vehicles.		—		76,568
Note Payable to a Bank, subordinated debt due 1/16/08, monthly. Interest due in-kind at 8.5%. Collateralized by the oil and gas properties and certain assets of the Company on a 2^nd mortgage.		—		350,000

Total		12,858		432,426

Less: current portion		12,858		432,426

Long-term notes payable		—		—

Current maturities of notes payable are as follows:


7/31/10		12,858
7/31/11		—
7/31/12		—
7/31/13		—
Thereafter		—

Total	$	12,858

Notes Payable – Related Party


	2009		2008
Officer – 7.5% demand note	$	27,758	$	15,664
Officer – 9.0% demand note		487,860		513,703

	$	515,618	$	529,367

LINE OF CREDIT

The Company maintained a revolving line of credit agreement with a lending institution totaling $15 million. The Company had $10,200,511 and $2,328,264 in outstanding advances and accrued interest as of July 31, 2008. The line of credit provides for interest at the rate of LIBOR plus 11% in April of 2009, secured by the oil and gas properties and certain assets of the Company. The Company retired its line of credit facility as of April 30, 2009 (See Note 13). As of July 31, 2009, the Company currently has no debt facilities in place other than as noted in the tables above.

6. RELATED PARTY TRANSACTIONS

The Company has entered into transactions with its chief executive officer, Jeffrey T. Wilson and a Company owned and controlled by Mr. Wilson, H.N. Corporation. There are no outstanding amounts owed to HN Corporation as of July 31, 2009. The Company had accrued salaries payable to Mr. Wilson of $120,000 and $23,333 as of July 31, 2009 and 2008 respectively.

The Company owes its Chairman and Chief Executive Officer, Jeffrey T. Wilson, as a result of loans to the Company, a total of $515,618 in principal as of July 31, 2009. Interest rates on the loans are fixed at 7.5% and 9% as shown in Note 5. All of the loans are secured by a first mortgage granted by the Company to Wilson on the oil and gas assets. Accrued interest as of July 31, 2009 is $29,255.

F - 13

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

Mr. Thagard, Mr. Malcolm Henley and Mr. Aaron Wilson, each directors of the Company, have received compensation as consultants and contractors to the Company and its subsidiaries in the current fiscal year ending July 31, 2009 in the amounts of $84,000, $12,500 and $75,600 respectively.

In June of 2007, the Company issued a total of 300,000 shares and $10,000 to a director of the Company for public relation services provided on behalf of the Company.

In July of 2007, the Company issued 1,000,000 warrants to purchase 1,000,000 shares of common stock to its directors (200,000 each) for compensation for their services. The warrants had a term of one year and a strike price of $0.18. The warrants were valued at $309,193 using the Black Scholes valuation method using the following factors; risk free interest rate of 5.00%, strike price of $0.18, market price of $0.40, volatility of 180.72%, and no yield. The value of the warrants was expensed as compensation expense in the year ended July 31, 2007. As of July 31, 2009, all of these warrants had expired and none of these warrants were still outstanding.

7. ASSET RETIREMENT OBLIGATION

Effective January 1, 2003, the Company implemented the requirements of SFAS 143. Among other things, SFAS 143 requires entities to record a liability and corresponding increase in long-lived assets for the present value of material obligations associated with the retirement of tangible long-lived assets. Over the passage of time, accretion of the liability is recognized as an operation expense and the capitalized cost is depleted over the estimated useful life of the related asset. Additionally, SFAS No. 143 requires that upon initial application of these standards, the Company must recognize a cumulative effect of a change in accounting principle corresponding to the accumulated accretion and depletion expense that would have been recognized had this standard been applied at the time the long-lived assets were acquired or constructed. The Company’s asset retirement obligations relate primarily to the plugging, dismantling and removal of wells drilled to date.

Using a credit-adjusted risk free rate of 8%, and estimated useful life of wells ranging from 30-40 years, and estimated plugging and abandonment cost ranging from $9,000 per well to $125,000 per well, the Company has recorded a non-cash fixed asset addition and associated liability related to its property acquisitions of $458,7873. Oil and gas properties were increased by $458,787, which represents the present value of all future obligations to retire the wells at July 31, 2009. At July 31, 2009 the obligation was $406,562 as a result of increases in plugging costs and related services. For the periods ended July 31, 2009 and 2008, respectively, the Company recorded accretion expenses of $30,116 and $25,873 associated with this liability. These expenses are included in interest expense in the consolidated statements of operations.

8. LITIGATION, COMMITMENTS AND CONTINGENCIES

The Company is a named defendant in lawsuits, is a party in governmental proceedings, and is subject to claims of third parties from time to time arising in the ordinary course of business. While the outcome of lawsuits or other proceedings and claims against the Company cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the financial position of the Company.

The Company has accrued revenue payable, legal and petty suspense accounts in the amount of $173,907, $323,213 and $6,422, respectively, as of July 31, 2009. The Company has continued to research owner account information in order to properly distribute legal suspense accounts in the normal course of business. Suspense accounts are cleared out annually and paid to the owners. The Company has a plugging liability for oil and gas operations in the various states in the amount of $406,562. The Company has plugging bonds posted with the state regulatory agencies in the amount of $1,208,500 to offset the cost of plugging wells in the future.

Imperial Petroleum, Inc. versus Ravello Capital LLC

The Company filed suit in Federal District Court in Tulsa County, Oklahoma against Ravello Capital LLC (“Ravello”) on November 20, 2000. The suit alleged branch of contract and sought to have the contract declared partially performed in the amount of 474,900 and sought relief in the amount of $488,390 for the unpaid consideration and punitive damages and attorney fees. The Company received a judgment award against Ravello in

F - 14

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

the amount of $488,390 and subsequently collected and credited the judgment award against Ravello in the amount of $85,638 as a result of the re-issuance of certain of its shares in Warrior, held by Ravello in escrow and not released. The Company does not believe it will be successful in collecting the balance of the judgment against Ravello.

The Company, through its predecessor in interest, was named with others in a breach of its duties to act as a reasonably prudent operator in the development of the Crump Gas Unit in Panola county, Texas. The Crump Unit encompasses the Company’s Mittie Horton well. The Plaintiff is seeking a cancellation of the lease for failure to produce hydrocarbons in paying quantities or alternatively to establish a lien against the leasehold to secure payment of plaintiff’s damages resulting from the Company’s failure to develop the property. The damages are unspecified. The Company executed a farmout agreement with Burke Royalty, a co-defendant in the suit, regarding the acreage in question. Burke negotiated a settlement under which the Plaintiffs would arrange to drill additional wells. The Company has a 12.5% carried working interest in the first well drilled in the unit and the right to participate for a 12.5% working interest in subsequent wells. The Company’s interests in the new wells drilled under the farmout are currently not in pay and have not been recognized by the Farmee. The Company is seeking a resolution of the matter with the Farmee.

Gary Bolen, et al vs. Imperial Petroleum, Inc.: Wrongful Garnishment:

Pearl River Navigation vs. Imperial Petroleum, Inc.

Pearl River conducted barge and crane operations after hurricane Katrina on the Coquille Bay field in Louisiana on behalf of the working interest owners. A dispute arose between the parties regarding the availability of Pearl River’s crane operator on weekends, despite the fact that Pearl River continued to bill for such operations. The Company refused to pay the disputed invoices and Pearl River filed a lien in the amount of approximately $789,000 despite approximately $225,000 in payments by the Company. . Pearl River filed a lawsuit dated August 1, 2007 in the 25^th Judicial District Court for the Parish of Plaquemines, State of Louisiana. the case was moved to the United States District Court for the Eastern District of Louisiana, civil Action No. 07-9619, Section “I”(4). The Company and Pearl River have been in negotiations over a settlement of the lien and Pearl River has agreed to accept a one-time cash payment of $100,000 and an overriding royalty interest in the Coquille Bay field. The Company does not currently have the funds to tender a lump sum payment to Pearl River to settle the matter and has requested payment terms. The Company intends to continue to negotiate with Pearl River in an attempt to complete settlement of this matter.

F - 15

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

9. STOCK WARRANTS

During the year ended July 31, 2007, the Company issued 7,000,000 warrants for common stock as detailed in Note 10 below. The following schedule summarizes pertinent information with regard to the stock warrants for the years ended July 31, 2008, 2007 and 2006:


	2009			2008			2007
	Weighted Average Shares-Exercise Outstanding-Price			Weighted Average Shares-Exercise Outstanding-Price			Weighted Average Shares-Exercise Outstanding-Price
Beginning of year	1,348,662	$	0.01	3,348,662	$	0.078	1,348,662		$	0.01
Granted	—		—	—		—	7,000,000			0.085
Exercised	—		—	—		—	(5,000,000	)		0.070
Forfeited	—		—	—		—	—			—
Expired	1,348,662		0.01	2,000,000		0.125	—			—

End of year	—		—	1,348,662	$	0.01	3,348,662		$	0.078

Exercisable	—		—	1,348,662	$	0.01	3,348,662		$	0.078

As of July 31, 2009, the Company has no warrants outstanding or exercisable.

10. SHAREHOLDER EQUITY TRANSACTIONS

In August of 2006, the Company issued 6,000,000 warrants to purchase 6,000,000 shares of common stock for services. The warrants have a term of one year and a strike price of $0.07. The warrants were valued at $733,659 using the Black Scholes valuation method using the following factors; risk free interest rate of 5.11%, strike price of $0.07, market price of $0.16, volatility of 191.35%, and no yield. The value of the warrants was expensed as consulting expense in the year ended July 31, 2007. As of July 31, 2007, 2,000,000 warrants were exercised for 2,000,000 shares of common stock for a total of $140,000; 3,000,000 warrants were exercised in a cashless exercise for 2,160,000 shares of common stock; and 1,000,000 warrants were still outstanding. Those 1,000,000 warrants expired on August 2, 2007. Of the 6,000,000 warrants, 1,000,000 were issued to the president of the Company, 1,000,000 were issued to a director in the Company, and 1,000,000 were issued to an entity owned by the president and a director in the Company.

In August of 2006, 125,000 shares issued in a previous period were cancelled.

In October of 2006, 168,616 shares were issued for services. The services were never performed and the shares are currently in the process of being cancelled.

In March of 2007, 220,000 shares were issued as part of an asset purchase agreement. The shares were valued at $26,180, which was their market value on that date.

In June of 2007, the Company issued a total of 300,000 shares and $10,000 to a director of the Company for public relation services provided on behalf of the Company.

In July of 2007, the Company issued 1,000,000 warrants to purchase 1,000,000 shares of common stock to its directors (200,000 each) for compensation for their services. The warrants have a term of one year and a strike price of $0.18. The warrants were valued at $309,193 using the Black Scholes valuation method using the following factors; risk free interest rate of 5.00%, strike price of $0.18, market price of $0.40, volatility of 180.72%, and no yield. The value of the warrants was expensed as compensation expense in the year ended July 31, 2007. As of July 31, 2009, no warrants were still outstanding. See Note 9.

F - 16

IMPERIAL PETROLEUM, INC.

Notes to Consolidated Financial Statements (continued)

In April of 2008, the Company issued 1,000,000 shares of common stock to an investor relations firm and its agent as compensation for their services. The common stock was valued at $0.05 per share on the date of issuance.

11. LEASE OBLIGATIONS

The Company maintains office space at its headquarters at 329 Main Street, Mezzanine Level, Evansville, IN. The Company maintains its current office space on a month-to-month basis with monthly rent of $941. Total rental expense was $11,294 for each of the years ended July 31, 2009, 2008 and 2007.

12. ACCRUED EXPENSES

The Company has accrued expenses as of July 31 as follows:


	2009		2008
Revenue in suspense	$	503,521	$	438,496
Accrued officer salary – CEO		121,001		23,333
Accrued interest on notes		29,255		153,940
Other		64,667		61,185

		718,444		676,954

13. GAIN ON SALE OF ASSETS AND EXTINGUISHMENT OF DEBT

Effective April 30, 2009 the Company sold certain assets located in North Louisiana and Southeast Texas in connection with a Settlement Agreement entered into between the Company and the Agent representing its Senior and Subordinated Debt holders. All of the proceeds of the sale were paid to the lenders in exchange for extinguishment for the debt resulting in a gain to the Company of $12,984,463.

14. SUBSEQUENT EVENTS

None

F - 17

IMPERIAL PETROLEUM, INC.

Supplemental Information

(Unaudited)

For the Years Ended July 31, 2009, 2008 and 2007


Capitalized Costs Relating to Oil and Gas	2009			2008			2007
Property acquisitions		0			0			300,000
Proved		166,372			960,432			652,306
Unproved		—			—			—
Less – proceeds from sales of properties		—			(129,521	)		(13,696,102	)
Support equipment and facilities		—			—			—

Oil and gas related costs		166,372			830,911			(12,743,796	)


Results of Operations for Oil and Gas Producing Activities	2009			2008			2007
Revenues	$	1,069,361		$	1,855,381		$	1,143,194
Production costs and taxes		(985,753	)		(1,487,460	)		(729,293	)
Depreciation, depletion and amortization		(419,189	)		(276,620	)		(149,607	)

Income from oil and gas producing activities	$	(335,581	)	$	91,301		$	264,294

The following table sets forth the Company’s net proved oil and gas reserves at July 31, 2009 and the changes in net proved oil and gas reserves for the years then ended. Proved reserves represent the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in the future years from known reservoirs under existing economic and operating conditions. The reserve information indicated below requires substantial judgment on the part of the reserve engineers, resulting in estimates which are not subject to precise determination. Accordingly, it is expected that the estimates of estimates of reserves will change as future production and development information becomes available and that revisions in these estimates could be significant. Reserves are measured in barrels (bbls) in the case of oil, and units of one thousand cubic feet (MCF) in the case of gas.


	Oil (bbls)		Gas (MCF)
Proved reserves:
Balance at July 31, 2007	423,630		3,582,710
Discoveries and extensions	—		—
Acquisitions	—		—
Sales and dispositions	—		—
Revisions of previous estimates	35,301		(1,633,805	)
Production	(14,862	)	(66,787	)

Proved reserves:
Balance at July 31, 2008	444,069		1,882,118
Discoveries and extensions	—		—
Acquisitions	—		—
Sales and dispositions	(361,939	)	(346,001	)
Revisions of previous estimates	177,465		988,718
Production	(16,190	)	(24,099	)
Proved reserves at July 31, 2009	243,405		2,500,736

Proved developed July 31, 2007	380,930		2,620,060

Proved developed July 31, 2008	401,000		1,114,000
Proved developed July 31, 2009	243,405		2,165,901

All of the Company’s reserves are located in the continental United States. In 2006, the Company acquired an interest in the Bastian Bay field in Louisiana, however due to failed workover attempts the reserves for that well were downgraded to probable reserves as of July 31, 2009 and resulted in a substantial revision to prior estimates of proven reserves.

F - 18

Standardized Measure of Discounted Future Net Cash Flows


	July 31, 2009			July 31, 2008			July 31, 2007
Future Cash Inflows	$	16,379,730		$	55,034,629		$	40,126,710
Future production costs and taxes		5,806,846			12,382,927			10,758,460
Future development costs		1,496,282			3,222,896			2,729,500
Future income tax expenses		3,176,810			13,800,082			9,323,563
Net future cash flows		5,899,792			25,628,724			17,315,187
Discount at 10%		(2,419,789	)		(12,481,171	)		(8,432,484	)
Discounted future net cash flows from proved reserves		3,480,003			13,147,553			8,882,703
Balance, beginning of year	$	13,147,533		$	8,882,703		$	51,563,000
Acquisitions		—			—			—
Sales of oil and gas net of production costs		(83,608	)		(889,057	)		(308,756	)
Discoveries and extensions		—			—			—
Changes in prices and production costs		(21,556,972	)		20,203,471			(674,882	)
Extensions, additions and discoveries		—			—			—
Revision of quantity estimates		16,979,230			(12,039,040	)		—
Sales and dispositions		(12,089,985	)		—			(79,696,715	)
Development costs incurred		(166,372	)		452,468			652,306
Interest factor accretion of discount		769,860			520,131			1,083,313
Net change in income taxes		1,218,001			(4,476,519	)		28,264,437
Changes in future development costs		(1,697,690	)		493,396			(13,343,500	)
Changes in production rates and other		—			—			—

Balance, end of year	$	3,480,003		$	13,147,553		$	8,882,703

Estimated future net cash flows represent an estimate of the net revenues from the production of proved reserves using current sales prices, along with estimates of the operating costs, production taxes and future development and abandonment costs (less salvage value) necessary to produce such reserves. The average prices used at July 31, 2009 were $65.35 per barrel of oil and $2.58 per MMBTU of gas respectively. No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest expense.

Operating costs and production taxes are estimated based on current costs with respect to producing gas properties. Future development costs are based on the best estimate of such costs assuming current economic and operating conditions. The estimates of reserve values include estimated future development costs that the Company does not currently have the ability to fund. If the Company is unable to obtain additional funds, it may not be able to develop its oil and natural gas properties as estimated in its July 31, 2009 reserve report.

The future net revenue information assumes no escalation of costs or prices. Future costs and prices could significantly vary from current amounts and, accordingly, revisions in the future could be significant.

F - 19

IMPERIAL PETROLEUM, INC.

Date: October 29, 2009

/s/ JEFFREY T. WILSON

Jeffrey T. Wilson, President

and Chief Executive Officer