SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarterly period ended June 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-33029
F10 OIL & GAS PROPERTIES, INC.
Incorporated pursuant to the Laws of the State of Nevada
Internal Revenue Service - Employer Identification No. 87-0382438
903 West Montgomery
Suite 4311
Willis, TX 77378
(936) 449-5130
Address of principal executive offices and Issuer's Telephone Number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X_ No __ _
The total number of shares of the registrant's Common Stock, $.001 par value,
outstanding on August 12, 2003, was 17,949,470.
1
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2003 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED JUNE 30, 2002 AND JUNE 30, 2003 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED JUNE 30, 2002 AND JUNE 30, 2003 5
STATEMENT OF SHAREHOLDERS' DEFICIT FROM JULY 15, 2001
(INCEPTION) THROUGH JUNE 30, 2003 6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. CONTROLS & PROCEDURES 11
PART II - OTHER INFORMATION 11
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE 14
Exhibit 31.1 15
Exhibit 31.2 16
Exhibit 32.1 17
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements for Period Ending June 30, 2003.
F10 OIL & GAS PROPERTIES, INC.
CONSOLIDATED BALANCE SHEET
As of June 30, 2003
(Unaudited)
Assets June 30, 2003
------------------
(Unaudited)
Current assets:
Cash $ 9,047
Oil Revenues Receivable 840
Prepaid Expenses 169,204
------------------
Total current assets 179,091
------------------
Property and equipment, net 1,854
Long-term Portion of Prepaids 80,111
Oil and Gas Investments 60,000
------------------
$ 321,056
==================
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable $ 109,511
Payable on Acquisition 40,000
Accrued Interest 42,448
Notes payable, net of discounts of $50,206 387,450
Payable to Shareholders 24,619
------------------
Total current liabilities 604,028
------------------
Long-term portion of notes payable 43,295
------------------
Total liabilities 647,323
------------------
Shareholders' deficit:
Preferred stock, no par value;
50,000,000 shares authorized and
no shares outstanding -0-
Common stock, par value $0.001 per share;
75,000,000 shares authorized;
17,934,470 shares outstanding as of
June 30, 2003 17,934
Stock Subscription Receivable (7,115)
Additional paid-in capital 2,457,377
Accumulated deficit (2,794,463)
------------------
Total Shareholders' deficit (326,267)
------------------
Total liabilities and shareholders' deficit $ 321,056
==================
The accompanying notes are an integral part of these consolidated financial
statements.
3
F10 OIL & GAS PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months
ended ended
June 30, 2003 June 30, 2002
--------------------- ---------------------
Net Revenues $ 1,593 $ -
Cost of Sales 331 -
--------------------- ---------------------
Gross Profit 1,262 -
General and administrative expenses 180,448 -
--------------------- ---------------------
Loss from operations (179,186) -
Gain (Loss) on Securities Sales - (4,706)
Interest Expense (71,274) (45,754)
Loss incurred in discontinued business - (378,646)
--------------------- ---------------------
Loss before provision for income taxes (250,460) (429,106)
--------------------- ---------------------
Provision for income taxes 0 0
--------------------- ---------------------
Net Loss $ (250,460) $ (429,106)
===================== =====================
Basic net loss per weighted share $ (0.02) $ (12.79)
Basic Weighted Average Shares Outstanding 14,936,693 33,539
The accompanying notes are an integral part of these consolidated financial
statements.
4
F10 OIL & GAS PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months Three months
ended ended
June 30, 2003 June 30, 2002
------------------ -----------------
Cash flows from Operating Activities:
Net loss $ (250,460) $ (429,106)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and Amortization 26,506 33,404
Expenses paid with stock 17,500 249,460
Changes in operating assets and liabilities:
Prepaid Expenses 45,101 11,761
Accounts payable (37,670) (27,362)
Accounts receivable (475) (38,005)
Inventory 0 (39,638)
Deferred Expenses 5,411 15,852
Accrued Expenses 6,206 12,536
------------------ -----------------
Net cash used in operating activities (187,881) (211,098)
------------------ -----------------
Cash flows from investing activities:
Acquisition of property and equipment (557) (5,131)
Capitalized Website development 0 (2,798)
Investment, net of balance due (10,000) (100,000)
------------------ -----------------
Net cash provided by investing activities (10,557) (107,929)
Cash flows from financing activities:
Sale of common stock 152,297 4,250
Stock Subscription Receivable 0 43,486
Proceeds from notes payable, net of issuance costs 0 299,750
Repayment of loans (10,835) (14,150)
Payments on capital lease 0 (1,054)
Change in amounts owed to Officer 12,727 33,430
------------------ -----------------
Net cash provided by financing activities 154,189 365,712
------------------ -----------------
Net increase (decrease) in cash (44,249) 46,685
Cash, at beginning of period 53,296 (14,274)
------------------ -----------------
Cash, at end of period $ 9,047 $ 32,411
================== =================
Supplemental Disclosure of Cash Flow Information:
Cash Paid for: Interest $ 8,026 2,450
Taxes 0 0
A total of 1,385,000 shares of restricted common stock were issued to settle
notes payable, accrued interest and some accounts payable in the quarter ended
June 30, 2003. The total amount settled was $427,813.
The accompanying notes are an integral part of these consolidated financial
statements.
5
F10 OIL & GAS PROPERTIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
(Unaudited)
Common Preferred
Stock Stock Additional
Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
---------- --------- ---------- ---------- ------------ ----------- ----------
Stock issued to founder on 7/15/01 6,090,000 $ 6,090 $ - $ (6,090) $ - $ -
Stock issued in Sept and October
2001 for notes payable 310,000 310 69,337 - 69,647
Value of Warrants issued in
conjunction with notes payable 111,080 111,080
Shares issued in Petrex merger 445,854 446 (446) -
Officers compensation deemed contribution
to capital 25,990 25,990
Value of warrants issued to consultant 10,000 10,000
Stock Issued for Services in year ended
March 31, 2002 3,006,056 3,006 741,110 744,116
Net loss for year ended March 31, 2002 - - - (813,640) (813,640)
Value of Warrants issued in
conjunction with notes payable 86,559 86,559
Stock Issued in Private Placement 14,286 14 4,236 4,250
Stock sold under option agreements
in quarter ended September 30, 2002 600,000 600 (600) -
Stock Issued for Services from
April 1, 2002 through December 2, 2002 2,841,000 2,841 277,571 280,412
Preferred Stock issued in rescinded
acquisition 4,200,000 4,200,000 (4,200,000) -
Preferred Stock cancelled upon rescission (3,800,000) (3,800,000) 3,800,000 -
Adjustment for 300 to 1 reverse
stock split (13,262,839) (13,263) 13,263 -
Rounding for reverse stock split 713 1 (1) -
Stock subscription receivable 10,000,000 10,000 -
Stock issued for services from
December 2002 through March 31, 2003 1,369,400 1,369 159,406 160,775
Stock issued to officer in exchange
for debt 2,000,000 2,000 18,000 20,000
Stock issued in exchange for debt 360,000 360 62,640 63,000
Conversion of Preferred stock into common 600,000 600 (400,000) (400,000) 399,400
Proceeds of Stock Subscription received (2,110,000) 268,371 268,371
2,110,000 (2,110)
Net loss for period ended March 31, 2003 - - - - - (1,730,364) (1,730,364)
Stock issued to retire options 500,000 500 (500) -
Stock issued in exchange for debt 1,385,000 1,385 302,814 304,199
Stock issued for services from
April - June 2003 175,000 175 17,325 17,500
Stock issued to officer in exchange
for debt 1,500,000 1,500 148,500 150,000
Proceeds of Stock Subscription received (775,367) 152,297 152,297
775,367 (775)
Net loss for three months
ended June 30, 2003 - - - - - (250,459) (250,459)
---------- --------- ---------- ---------- ------------ ----------- ----------
Balance at June 30, 2003 17,934,470 $ 17,934 - $ - $ 2,457,377 $(2,794,463) $ (326,267)
========== ========= ========== ========== ============ =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
6
F10 OIL & GAS PROPERTIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
NOTE 1 - OVERVIEW AND BASIS OF PRESENTATION
Overview
F10 Oil & Gas Properties, Inc, formerly Force 10 Trading, Inc., (hereinafter
referred to as "F10" or the "Company"), is a company that invests in oil and
natural gas exploration and oil and natural gas producing properties. F10 is
currently focusing its acquisition efforts on producing oil and natural gas
wells with a net positive cash flow.
From July 15, 2001 through November 1, 2002 F10, through its subsidiary Capital
Market Mentors, Inc., had offered stock-trading tutorials designed to educate
students in a comprehensive course in stock trading that combined professionally
written manuals and lesson plans with one-on-one training with professional
trading mentors. F10 had signed exclusive licensing agreements with authors of
high quality trading manuals. As of November 1, 2002, F10 closed its operations
in the stock training education field. F10 had also operated a stock trading
office in Draper, Utah. This office was closed in October of 2002.
On November 1, 2002, F10 reentered the development stage until it completed its
first oil and gas investment on March 1, 2003. This investment was made in a
joint venture with six producing wells and F10 began reporting oil and gas
revenues and was no longer in the development stage.
The operations of the Company in its stock-trading and tutorials business is
shown as discontinued business operations in the consolidated financial
statements.
Interim Financial Information
The financial statements presented in this report have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission for interim
reporting and include all adjustments which are, in the opinion of management,
necessary for fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted pursuant to
such rules and regulations for interim reporting. These financial statements for
the three-month period ended June 30, 2003 are not necessarily indicative of the
results which may be expected for an entire fiscal year.
NOTE 2 - PER SHARE INFORMATION
Basic loss per common share for the three months ended June 30, 2003 and June
30, 2002 have been computed based on net income (loss) divided by the weighted
average number of common shares outstanding during the period. Dilutive net loss
per share is not reported since the effects are anti-dilutive and the Company is
in a net loss position. For the three months ended June 30, 2003 and June 30,
2002, the weighted average number of shares outstanding totaled 14,936,693 and
33,539, respectively.
7
NOTE 3 - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net
loss of $250,460 for the three months ended June 30, 2003. The Company has
incurred total losses of $2,794,463 since its inception. Therefore, the ability
of the Company to continue as a going concern is dependent on obtaining
additional capital and financing. The accompanying financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of June 30, 2003:
Furniture $ 1,056
Equipment 1,500
---------
2,556
Less accumulated depreciation ( 702)
---------
$ 1,854
=========
NOTE 5 - NOTES PAYABLE
During the period from inception through June 2003, the Company has issued
promissory notes to third parties totaling $766,500 under various private
placements. The notes have interest rates from 10-12% per annum and have terms
varying from 120 days to 12 months from the date of issuance. Some of these
notes contained a detachable stock purchase warrant. All warrants have either
expired or been written off due to a one for three hundred reverse stock split
effectuated by the Company in December of 2002. The principal balance on the
remaining notes totals $477,150 as of June 30, 2003.
The Company has been in active negotiations to settle the notes by issuing its
restricted common stock and, in some cases, entering into new note agreements.
In the quarter ended June 30, 2003, the Company issued 1,185,000 shares of its
restricted common stock and entered into new note agreements totaling $55,000 to
settle total debts of $332,156, including accrued interest.
As of June 30, 2003, the Company was in default on notes with a principal
balance totaling $280,000. The Company is actively involved in negotiating
settlements on these notes and contemplates paying a portion of the note
balances with cash and the remainder through the issuance of restricted common
stock. The majority of these notes have been settled subsequent to the end of
the quarter.
NOTE 6 - SUBSEQUENT EVENTS
After June 30, 2003, the Company made settlement agreements with the holders of
notes with a total principal balance of $165,000 and accrued interest of $17,786
as of June 30, 2003. Through the settlement agreements, the Company has agreed
to issue 300,000 shares of its restricted common stock to settle the complete
balances of the notes. As part of these settlements, directors of the company
contributed personal assets valued at $80,000 to assist the Company in securing
the settlements.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Period Ending June 30, 2003)
Unaudited Financial Data
The discussion and analysis contained herein should be read in conjunction with
the preceding financial statements, the information contained in the Company's
Form 10-KSB and other filings with the SEC. Except for the historical
information contained herein, the matters discussed in this 10-QSB contain
forward looking statements that are based on management's beliefs and
assumptions, current expectations, estimates, and projections. Statements that
are not historical facts, including without limitation statements which are
preceded by, followed by or include the words "believes," "anticipates,"
"plans," "expects," "may," "should," or similar expressions are forward-looking
statements. Many of the factors that will determine the company's future results
are beyond the ability of the Company to control or predict. These statements
are subject to risks and uncertainties and, therefore, actual results may differ
materially. All subsequent written and oral forward-looking statements
attributable to the Company, or persons acting on its behalf, are expressed
qualified in their entirety by these cautionary statements. The Company
disclaims any obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
Results of Operations -
Revenues
F10 reported total revenues of $1,593 from its oil investments in the
quarter ended June 30, 2003. This revenue was entirely generated by the Cowboy
Baker joint venture in which F10 holds an ownership interest.
F10 was not involved in the oil and gas industry in the same quarter of
2002. However, the Company reported total revenue for the quarter ended June 30,
2002 of $103,117. These revenues were made up from commission revenues from
trading of $60,463 or 58.6% of total revenues and from the sale of the
educational materials offered by Capital Market Mentors, Inc., a wholly owned
subsidiary, of $42,654. All of the revenues are included as part of the loss
incurred in discontinued business line of the financial statements herein.
Cost of Sales
The cost of oil sales for the quarter ended June 30, 2003 was equal to
$331. These cost of sales were incurred by the Cowboy Baker joint venture in
which F10 holds an ownership interest. F10's gross profit for the quarter was
$1,262.
The costs of sales for the quarter ended June 30, 2002 were generated
from the Company's previous line of business. These costs totaled $39,415,
producing gross profit of $63,702 for the quarter. The cost of sales and gross
profit for the quarter ended June 30, 2002 are included as part of the loss
incurred in discontinued business line of the financial statements herein.
9
General and Administrative Expenses
General and administrative expenses in the three-month period ended
June 30, 2003 totaled $180,448. Of the expenses in the current quarter, amounts
paid for professional fees and consultants represented the largest portion of
expenses. The Company incurred professional fees of $81,702 in the current
quarter. This amount was primarily paid in stock and represented 45.2% of total
general and administrative expenses. The Company also accrued and paid $60,000
in salaries to officers. This amount represented 33.3% of total general and
administrative costs.
The total general and administrative costs for the quarter ended June
30, 2003 decreased by 59.2% from the general and administrative expenses of
$442,348 incurred in the three-month period ended June 30, 2002. These expenses
in the quarter ended June 30, 2002 were incurred in the Company's discontinued
line of business. Of the expenses in the quarter ended June 30, 2002, amounts
paid for professional fees and consultants represented the largest portion of
expenses. The Company incurred professional fees of $207,311 in the quarter.
This amount was primarily paid in stock and represented 46.9% of total general
and administrative expenses. The general and administrative expenses for the
quarter ended June 30, 2002 are included as part of the loss incurred in
discontinued business line of the financial statements herein.
Interest Expense
The Company incurred interest expense of $71,274 in the quarter ended
June 30, 2003. The Company has settled with a number of note holders since the
beginning of the current quarter and expects its interest expense to be
substantially reduced in future quarters. The current quarter's interest expense
represents an increase of 55.8% from the interest expense incurred in the same
quarter of 2002. This increase represents the higher average debt balance of the
Company.
The Company incurred interest expense of $45,754 in the quarter ended
June 30, 2002. This interest expense was incurred as a result of various notes
into which the Company entered into from its inception through June 30, 2002.
Net Loss
The Company's net loss for the quarter was $250,460. This represents
a net loss per share of $(0.02) per share. The net loss is 41.6% less than the
loss from the quarter ended June 30, 2002.
The Company's net loss for the quarter ended June 30, 2002 was
$429,106. This represented a net loss per share of $(12.79). The Company's net
loss in the current quarter compared with the loss in the quarter ended June 30,
2002 is a result of decreased general and administrative costs. The Company's
previous line of business required a higher level of staffing and thus a higher
salary expense.
Liquidity and Capital Resources
During the quarter ended June 30, 2003 net cash used by operating
activities was a negative $247,036. The Company supported this operating loss
through the issuance of restricted stock issued under an offering under
Regulation S of the Securities Exchange Act.
The Company's current assets as of June 30, 2003 were $179,091 and its
current liabilities equaled $604,028, generating a net working capital deficit
of $424,937. The Company anticipates being able to fund
10
future operations through additional private placements of notes and common
stock, although no assurances can be made that additional funds will be received
through these contemplated private placement offerings.
During the quarter ended June 30, 2002 the Company used net cash of
$127,974 in its operating activities. These operating activities have been
discontinued. The Company supported this operating loss through the issuance of
notes under private placements. The Company's current assets as of June 30, 2002
were $670,418 and current liabilities equaled $925,122, resulting in a working
capital deficit of $254,704.
The Company's material financial commitments include the employment
contracts of Jon H. Marple and Mary E. Blake. Both officers have a base salary
of $10,000 per month with contracts running through December 31, 2007. The
Company has also restructured some of its notes payable and has agreed to
payments totaling $84,200 over the next twelve months and payments of
approximately $70,000 thereafter. The Company also is contractually obligated to
make payments to consultants of $90,000 over the next twelve months.
ITEM 3. CONTROLS & PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of June 30, 2003, we carried out an evaluation, under the
supervision and with the participation of company management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures are effective.
(b) Changes in Internal Controls
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
F10 is not a party to any legal proceedings.
Two note holders who each loaned F10 $50,000 on February 1, 2002 have
retained an attorney to negotiate a settlement with F10. The aggregate amount
owed to these individuals as of June 30, 2003 was $119,750, including accrued
interest. F10 is in current negotiations with the note holders' attorney and is
using its best efforts to reach a settlement and payment plan with these
individuals.
The Company also owes a former director approximately $28,000. A plan
of payment has been agreed upon with the Company making the first payment in
August of 2003.
11
Item 2 - Changes in Securities
Recent Sales of Unregistered Securities
F10 made the following sales of unregistered securities during the quarter ended
June 30, 2003:
Common Stock
(a) In May 2003, F10 issued 500,000 shares of its restricted common stock
to one individual to retire stock options held by the individual. The
stock options held by the individual were not subject to the
one-for-three hundred reverse stock split effectuated by the Company
in December of 2002. The individual held options to purchase 350,000
shares of free-trading common stock at prices between $.25 and $.82.
The Company relied on the exemption under Section 4(2) of the
Securities Act of 1933, as amended.
(b) In June 2003, F10 issued 1,185,000 shares of its restricted common
stock to six individuals to settle debt balances in the amount of
$284,200, including prepaid interest, or at an average price of $.24
per share. The Company relied on the exemption under Section 4(2) of
the Securities Act of 1933, as amended.
(c) In June 2003, F10 issued 1,500,000 shares of its restricted common
stock to Mary E. Blake, an officer and director, to retire $150,000
owed to her. The stock was issued at a price of $.10 per share. The
Company relied on the exemption under Section 4(2) of the Securities
Act of 1933, as amended.
(d) In June 2003, F10 issued 200,000 shares of its restricted common stock
to Jon Richard Marple, the son of a director, in retirement of $20,000
owed to him by the Company. The stock was issued at a price of $.10
per share. The Company relied on the exemption under Section 4(2) of
the Securities Act of 1933, as amended.
(e) In June 2003, F10 issued 150,000 shares of its restricted common stock
to Jon Richard Marple, the son of a director, for services rendered to
the Company. The stock was issued at a price of $.10 per share. The
Company relied on the exemption under Section 4(2) of the Securities
Act of 1933, as amended.
(f) In June 2003, F10 issued 25,000 shares of its restricted common stock
to one individual for services rendered on behalf of the Company at a
value equal to $2,500. The stock was issued at a price of $.10 per
share. The Company relied on the exemption under Section 4(2) of the
Securities Act of 1933, as amended.
Exemption from registration under the Securities Act of 1933 ("Act") is claimed
for the sale of these securities in reliance upon the exemption offered by
Section 4(2) of the Act, which exempts transactions by issuers not involving a
public offering. Use of this exemption is based on the following facts:
- Neither F10 or any person acting on behalf of F10 solicited any offer
to buy or sell the securities by any form of general solicitation or
advertising;
- The purchasers represented that they were acquiring the securities as
a principal for their own account for investment purposes only and
without a view towards distribution or reselling these securities
unless pursuant to an effective registration statement or exemption
from registration in compliance with federal or state securities laws;
and
- The securities were issued with the understanding that they may only
be disposed of pursuant to an effective registration statement or
exemption from registration in compliance with federal or state
securities laws.
12
In December 2002, F10 issued 10,000,000 shares of its restricted common stock to
the Sukumo Group. The stock was delivered to an escrow agent to be disbursed at
the request of the Sukumo Group and F10 under the terms of an Offshore Stock
Purchase Agreement and subject to a Finders Fee Agreement with Feng Shui
Consulting (later amended to change the Finders Fee Agreement to be between F10
and Nu Way Consulting). During the quarter ended June 30, 2003, 775,367 shares
were distributed under the terms of the agreements. As of June 30, 2003, a total
of 2,885,367 shares of the stock have been distributed and the remaining shares
(7,114,633) remain held in escrow. During the quarter ended June 30, 2003, F10
received net proceeds of $152,297, or $0.196 per share. Since the beginning of
the offering, F10 has received net proceeds of $420,668, or $0.146 per share.
The terms of the Offshore Stock Purchase Agreement call for Sukumo to pay a
price of 12.5% of the bid price of the F10 common stock on the date that Sukumo
notifies the escrow agent of its intent to purchase the stock. Under the terms
of the Finders Fee Agreement, NuWay receives 17.5% of the current bid price on
the F10 stock. F10 is also required to pay a finders fee of 10% of the net
amount that it receives to Jon Richard Marple, under the terms of his consulting
agreement with F10 dated February 1, 2002. Jon Richard Marple is the son of a
director of F10 and provided F10 with an introduction to the parties who
arranged this financing. During the quarter ended June 30, 2003, F10 received
net proceeds of $152,297. A total of $237,027 has been paid to NuWay under the
terms of the Finders Fee Agreement. F10 has also paid $16,529 to Jon Richard
Marple under the terms of his consulting agreement. The total amount of finders
fees paid in the quarter ended June 30, 2003, was equal to $253,556, or 62% of
the total amount raised under this offering.
The Offshore Stock Purchase Agreement qualified for exemption under Regulation S
as Sukumo represented to F10 that: (i) Sukumo is not a "U.S. Person" as that
term is defined in Rule 902 of Regulation S; (ii) Sukumo is not an affiliate of
F10; (iii) At the time of the transaction, Sukumo was outside the United States
and no offer to purchase the shares was made in the United States; (iv) All
offers and subsequent sales of the shares shall not be made to U.S. persons
unless the shares are registered or a valid exemption from registration can be
relied on under applicable U.S. state and federal securities laws; (v) Sukumo is
not a distributor or dealer; (vi) the shares were not acquired by Sukumo for any
U.S. Person nor were they subject to any pre-arranged agreement with Sukumo and
a purchaser located in the United States or a purchaser which is a U.S. person,
and that the shares are not and will not be part of a plan or scheme to evade
the registration provisions of the Act; (vii) all offering documents received by
Sukumo include statements to the effect that the shares have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States or to U.S. Persons (other than distributors as defined in Regulation S)
during the Restricted Period unless the shares are registered under the
Securities Act of 1933 or an exemption from registration is available.
Item 3 - Defaults Upon Senior Securities
As of June 30, 2003, the Company was in default on notes with a
principal balance totaling $280,000. The Company is actively involved in
negotiating settlements on these notes and contemplates paying a portion of the
note balances with cash and the remainder through the issuance of restricted
common stock.
After June 30, 2003, the Company made settlement agreements with the
holders of notes with a total principal balance of $165,000 and accrued interest
of $17,786 as of June 30, 2003. Through the settlement agreements, the Company
has agreed to issue 300,000 shares of its restricted common stock to settle the
13
complete balances of the notes. As part of the settlements, directors of the
Company contributed $80,000 in personal assets to assist the Company in making
the settlements.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
On July 23, 2003, Jon H. Marple resigned as the Company's Chief
Executive Officer due to his personal health concerns. Also, Mary E. Blake
also resigned in her capacity as President of the Company. On this same date,
the Board of Directors appointed Charles H. Blake, Jr. to the position of
President of the Company. Charles H. Blake, Jr. is the brother of Mary E. Blake.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1 Certification of the Chief Executive Officer of F10 Oil &
Gas Properties, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of the Chief Financial Officer of F10 Oil &
Gas Properties, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of the Chief Executive Officer and Chief
Financial Officer of F10 Oil & Gas Properties, Inc. pursuant to
Section 906 of the Sarbanes Oxley Act of 2002
(b) Reports on Form 8-K
None.
Documents Incorporated by Reference
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
F10 Oil & Gas Properties, Inc.
Dated: August 14, 2003 /s/ Charles H. Blake, Jr.
-------------------------
President
14
Exhibit 31.1
CEO Certification
I, Charles H. Blake, Jr., certify that:
1. I have reviewed this Form 10-QSB of F10 Oil & Gas Properties, Inc.;
2. Based on my knowledge, 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;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter (the
small business issuer's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the small business issuer's internal control
over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: August 14, 2003
/s/ Charles H. Blake, Jr.
Charles H. Blake, Jr.
Chief Executive Officer
15
Exhibit 31.2
CFO Certification
I, Mary E. Blake, certify that:
1. I have reviewed this Form 10-QSB of F10 Oil & Gas Properties, Inc.;
2. Based on my knowledge, 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;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter (the
small business issuer's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the small business issuer's internal control
over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: August 14, 2003
/s/ Mary E. Blake
Mary E. Blake
Chief Financial Officer
16
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-QSB of F10 Oil & Gas
Properties, Inc. (the "Company") for the quarter ended June 30, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
the undersigned Charles H. Blake, Jr., Chief Executive Officer of F10 Oil & Gas
Properties, Inc., and Mary E. Blake, Chief Financial Officer of F10 Oil & Gas
Properties, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: August 14, 2003
/s/Charles H. Blake, Jr.
Charles H. Blake, Jr.
Chief Executive Officer
/s/ Mary E. Blake
Mary E. Blake,
Chief Financial Officer
17