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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 2008
OR
[ ] 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 000-51403
BLACKWATER MIDSTREAM CORP.
(Name of Small Business Issuer in Its Charter)
26-2590455
NEVADA (Small Business Issuer
(State of Incorporation) I.R.S. Employer I.D. Number)
4006 HIGHWAY 44
GARYVILLE, LOUISIANA 70051
(Address of principal executive offices) (zip code)
(985) 535-8500
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer, "accelerated filer,"
"non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
LARGE ACCELERATED FILER [ ] ACCELERATED FILER [ ]
NON-ACCELERATED FILER [ ] SMALLER REPORTING COMPANY [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]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 14, 2008, there were
27,031,736 shares of Common Stock, $.001 par value per share, outstanding.
EXPLANATORY NOTE
Blackwater Midstream Corp. (the "Company") is amending its Quarterly Report on
Form 10-Q ("Form 10-Q" or "Original Filing") for the quarter ended June 30, 2008
to restate its financial statements for the quarters ended June 30, 2008 and
2007 to correct errors related to the accounting for stock-based compensation.
This amendment to Form 10-Q/A (the "Amendment") amends the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008 as filed on August 19, 2008.
The Company's decision to restate the aforementioned financial information was
made on November 14, 2008 as a result of management's identification of errors
related to the accounting for certain stock options and restricted shares issued
to employees, directors, and other third-parties. As more fully described in
Note 7 of the financial statements (see Item 1 of Part I, "Financial Statements
(Unaudited) (Restated)" - Note 7 - "Restatement of Financial Statements")
management, including its CEO (principal executive officer) and Chief Financial
Officer (principal financial officer), concluded, and the Board of Directors
agreed with management's conclusions that the Company's controls were not
designed or operating effectively to ensure all stock-based compensation was
completely and accurately recorded in the financial statements. These control
failures impacted stockholders' equity (deficit) in the balance sheet as well as
general and administrative expenses in the statement of operations. As a result,
general and administrative expenses were misstated in the statement of
operations and stockholders' (deficit) equity was misstated in the balance sheet
as of and for the three-month period ended June 30, 2008. The amount of these
errors was determined to be material to the financial statements.
The Company also recorded other miscellaneous adjustments as part of this
restatement that were previously identified but determined to be immaterial.
In addition, the control failures described above constitute a material weakness
in the Company's internal control over financial reporting as of June 30, 2008.
(See Item 4 of Part I, "Controls and Procedures (Restated)").
Except as required to reflect the effects of the restatement for the items
above, no additional modifications or updates in this Amendment have been made
to the Original Filing on Form 10-Q. Information not affected by the restatement
remains unchanged and reflects the disclosures made at the time of the Original
Filing. This amendment does not describe other events occurring after the
original filing, including exhibits, or modify or update those disclosures
affected by subsequent events. This Amendment should be read in conjunction with
the Company's filings made with the SEC subsequent to the filing of the Original
Filing, as information in such reports and documents may update or supersede
certain information contained in this Amendment. Additionally, pursuant to the
rules of the SEC, Item 6 of Part II of the Original Filing has been amended to
contain currently dated certifications of the Chief Executive Officer and Chief
Financial Officer. As required by Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002, the certifications of our Chief Executive Officer and Chief Financial
Officer, are attached to this Amendment as Exhibits 31.1, 31.2, 32.1 and 32.2.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page
----
Balance Sheets (Unaudited) (Restated) 4
Statements of Operations (Unaudited) (Restated) 5
Statements of Cash Flows (Unaudited) (Restated) 6-7
NOTES TO FINANCIAL STATEMENTS 8
3
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (Unaudited)
(STATED IN U.S. DOLLARS)
JUNE 30 MARCH 31
2008 2008
(Restated)
----------- -----------
ASSETS
CURRENT
Cash and cash equivalents $ 345,986 $ 3,574
Prepaid expenses and other current assets 5,531 1,898
----------- -----------
$ 351,517 $ 5,472
Investment in Safeland Storage, LLC 1,500,000 --
Other Equipment
Office Equipment 1,626 --
Less: Accumulated Depreciation (136) --
Construction in Progress 91,247 --
----------- -----------
92,737 --
----------- -----------
1,944,254 5,472
=========== ===========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 288,305 $ 7,942
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
SHARE CAPITAL
Authorized:
200,000,000 common shares with a par value
of $0.001 per share
20,000,000 "blank check" preferred shares, issuable in
one or more series.
Issued:
25,908,036 and 24,034,500 common shares at June
30 and March 31, respectively 25,908 24,035
ADDITIONAL PAID-IN CAPITAL 4,149,781 131,540
STOCK SUBSCRIPTIONS RECEIVABLE (1,705,000)
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (814,740) (158,045)
----------- -----------
1,655,949 (2,470)
----------- -----------
$ 1,944,254 $ 5,472
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
(STATED IN U.S. DOLLARS)
CUMULATIVE
PERIOD FROM
INCEPTION
MARCH 23
QUARTER ENDED 2004 TO
JUNE 30 JUNE 30
2008 2007 2008
(Restated) (Restated)
------------ ------------ ------------
REVENUE $ -- $ -- $ --
------------ ------------ ------------
EXPENSES
Advertising 211 -- 211
Consulting 30,000 -- 35,500
Filing fees 7,562 -- 11,562
Management salaries 370,977 -- 370,977
General and administrative 2,467 35 4,066
Interest and bank charges 500 43 995
Mineral property acquisition and exploration -- --
44,503
Office expenses 2,100 -- 2,165
Professional fees 232,621 1,706 333,016
Promotion and entertainment -- -- 954
Depreciation 136 -- 136
Travel 10,394 -- 15,559
------------ ------------ ------------
656,968 1,784 819,644
------------ ------------ ------------
LOSS BEFORE OTHER INCOME (656,968) (1,784) (819,644)
OTHER INCOME 273 294 4,904
------------ ------------ ------------
NET LOSS FOR THE PERIOD $ (656,695) $ (1,490) $ (814,740)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.03) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,543,282 8,011,500
============ ============
The accompanying notes are an integral part of these financial statements.
5
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Unaudited)
(STATED IN U.S. DOLLARS)
CUMULATIVE
PERIOD FROM
INCEPTION
MARCH 23
QUARTER ENDED 2004 TO
JUNE 30 JUNE 30
2008 2007 2008
(Restated) (Restated)
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (656,695) (1,490) $ (814,740)
Adjustments to reconcile net (loss) to net cash
generated (used) in operating activities:
Depreciation 136 -- 136
Stock Based Compensation 450,670 -- 450,670
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (3,633) -- (5,531)
Accounts payable and accrued liabilities 280,363 (1,741) 288,305
----------- ----------- -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVTIES 70,841 (251) (81,160)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Safeland Storage LLC (1,500,000) -- (1,500,000)
Purchase of office equipment & construction in progress (92,873) -- (92,873)
----------- ----------- -----------
CASH USED IN INVESTING ACTIVITIES (1,592,873) -- (1,592,873)
----------- ----------- -----------
6
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(STATED IN U.S. DOLLARS)
(Continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of capital stock, net of issuance costs of
$240,556 in cash 1,864,444 -- 2,020,019
----------- ----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 1,864,444 -- 2,020,019
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE PERIOD 342,412 (251) 345,986
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
3,574 32,045 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 345,986 $ 32,296 $ 345,986
=========== =========== ===========
CASH AND CASH EQUIVALENTS ARE COMPRISED OF:
Cash $ 345,986 $ 1,871
Short term deposit -- 30,425
----------- -----------
$ 345,986 $ 32,296
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
=========== =========== ===========
NON-CASH FINANCING ACTIVITY:
Stock dividend $ -- $ -- $ 16,023
=========== =========== ===========
Stock Subscription Receivable $ 1,705,000 $ -- $ --
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
7
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(STATED IN U.S. DOLLARS)
1. BASIS OF PRESENTATION
The unaudited financial statements as of June 30, 2008 included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with United States
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, all adjustment
(consisting of normal recurring accruals as well as restatement adjustments)
considered necessary for a fair presentation have been included. It is suggested
that these financial statements be read in conjunction with the March 31, 2008
audited financial statements and notes thereto. The results of the operations
for the three months ended June 30, 2008 are not indicative of the results that
may be expected for the year.
1. OPERATIONS AND GOING CONCERN
ORGANIZATION
The Company was incorporated in the State of Nevada, U.S.A., on March 23, 2004.
The year end of the Company is March 31. On March 18, 2008, the Company changed
its name to Blackwater Midstream Corp. from Laycor Ventures Corp.
DEVELOPMENT (EXPLORATION) STAGE ACTIVITIES
The Company has changed its business objective to become an independent
developer of fuel and chemical storage facilities. The Company has been in the
development stage since its formation and was primarily engaged in the
acquisition and exploration of mining claims. The Company has not yet realized
any revenues from its planned operations
GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.
As shown in the accompanying financial statements, the Company has incurred a
net loss of $814,740 for the period from March 23, 2004 (inception) to June 30,
2008, and has no revenue. The future of the Company is dependent upon its
ability to obtain financing and upon future profitable operations from the
development of its mineral properties. These factors raise substantial doubt
regarding the Company's ability to continue as a going concern. Management has
plans to seek additional capital through a private placement and public offering
of its common stock. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts of and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
8
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(STATED IN U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with maturity
of three months or less to be cash equivalents. Cash consists of cash on deposit
with a bank. The Company places its cash with a high quality financial
institution and, to date, has not experienced losses on any of its balances.
b) Construction in Progress.
Construction in progress is stated at cost, which includes the cost of
construction and other direct costs attributable to the construction. No
provision for depreciation is made on construction in progress until such time
as the relevant assets are completed and put into use. Construction in progress
at June 30, 2008, represents machinery under installation.
c) Development Stage
The Company's financial statements are prepared according to the provisions of
Statement of Financial Accounting Standards No. 7 ("SFAS 7"), "Accounting and
Reporting for Development Stage Enterprises," as the Company's principal
operations have not commenced. The Company's financial statements include
certain disclosures, including cumulative amounts of revenues, expenses, and
cash flows from inception.
d) Mineral Rights
The Company capitalizes acquisition and option costs of mineral property rights.
The amount capitalized represents fair value at the time the mineral rights were
acquired. The accumulated costs of acquisition for properties that are developed
to the stage of commercial production will be amortized using the
unit-of-production method.
e) Exploration Costs
Mineral exploration costs are expensed as incurred.
f) Investments
The cost method is used to account for the Company's investments in limited
liability companies where the Company holds an interest of 10% or less and does
not have control of the limited liability company.
9
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(Stated in U.S. Dollars)
g) Property and Equipment
Property and equipment, comprised of office furniture and computer software, are
recorded at cost and amortized using the straight balance method over the
estimated useful life of five years.
h) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of 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 for the reporting period. Actual
results could differ from these estimates.
i) Income Taxes
The Company has adopted guidance established in Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 109 -
"Accounting for Income Taxes" ("SFAS 109"). This standard requires the use of an
asset and liability approach for financial accounting, and reporting on income
taxes. If it is more likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is recognized.
j) Asset Impairment
Long-lived assets are tested for recoverability whenever events or changes in
circumstances indicate the carrying amount may not be recoverable, pursuant to
guidance established in Statement of Financial Accounting Standards No. 144
("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived Assets".
The Company determines impairment by comparing the undiscounted future cash
flows estimated to be generated by its assets to their respective carrying
amounts. If impairment is deemed to exist, the assets will be written down to
fair value.
10
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(Stated in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k) Asset Retirement Obligations
The Company has adopted Statement of Financial Accounting Standards No.143
("SFAS 143"), "Accounting for Asset Retirement Obligations", which requires that
an asset retirement obligation ("ARO") associated with the retirement of a
tangible long-lived asset be recognized as a liability in the period in which it
is incurred and becomes determinable, with an offsetting increase in the
carrying amount of the associated asset. The cost of the tangible asset,
including the initially recognized ARO, is depleted, such that the cost of the
ARO is recognized over the useful life of the asset. The ARO is recorded at fair
value, and accretion expense is recognized over time as the discounted liability
is accreted to its expected settlement value. The fair value of the ARO is
measured using expected future cash flow, discounted at the Company's
credit-adjusted risk-free interest rate. To date, no significant asset
retirement obligation exists. Accordingly, no liability has been recorded.
l) Basic and Diluted Loss Per Share
In accordance with SFAS No. 128 - "Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding. Diluted loss per
common share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. At June 30, 2008, the Company has
no stock equivalents that were anti-dilutive and excluded in the earnings per
share computation.
m) Stock-Based Compensation
The Company records stock-based compensation in accordance with SFAS No. 123R,
"Share- Based Payments", using the fair value method. The Company also complies
with the provisions of FASB Emerging Issues Task Force ("EITF") Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services ("EITF 96-18"). All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. Equity instruments issued to employees
and the cost of the services received as consideration are measured and
recognized based on the fair value of the equity instruments issued.
11
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(Stated in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
n) Environmental Protection and Reclamation Costs
The operations of the Company have been, and may in the future be affected from
time to time in varying degrees by changes in environmental regulations,
including those for future removal and site restorations costs. Both the
likelihood of new regulations and their overall effect upon the Company may vary
from region to region and are not predictable.
Environmental expenditures that relate to ongoing environmental and reclamation
programs are charged against Statements of Operations as incurred or capitalized
and amortized depending upon their future economic benefits. The Company does
not currently anticipate any material capital expenditures for environmental
control facilities because its property holding is at an early stage of
exploration.
o) Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, and
accounts payable and accrued liabilities.
It is management's opinion that the Company is not exposed to significant
interest or credit risks arising from these financial instruments. The fair
value of these financial instruments approximates their carrying values.
3. INVESTMENT
On June 26, 2008, the Company purchased a 7% membership interest (comprising
70,000 class A units) in Safeland Storage L.L.C., a Louisiana limited liability
company for a purchase consideration of $1,500,000. Concurrently, on June 26,
2008, the Company entered into a Property Purchase Agreement with Safeland
Storage L.L.C. and it's wholly owned subsidiary company, Future Energy
Investments LLC, for the purchase of 435 acres of land in St. John the Baptist
Parish, Louisiana, for a purchase price of $20,500,000. The closing of this
agreement is 120 days from June 26, 2008. The Company and Safeland Storage L.L.C
are currently discussing an extension to the closing date.
12
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(Stated in U.S. Dollars)
4. MINERAL CLAIM INTEREST
On June 27, 2008, the Company made the decision to abandon its mining claim in
British Columbia, Canada, effective in July 2008, with no further costs or
obligations to the Company. The decision to abandon the claim was based upon an
independent geologist's report indicating that it is unlikely that the claim
contains enough volume of mineralized materials to form an economic body of
mineralization. The former President held, on behalf of the Company, 100%
interest in two mineral claims located in the Rock Creek area of the Greenwood
Mining Division, British Columbia, Canada. Exploration activity of one of the
mineral claims was suspended due to government regulation. In fiscal year 2005,
the Company spent $40,000 on the exploration of the Rock Creek, BC Project.
5. SHARE CAPITAL
AUTHORIZED:
In January 2008, the Company increased the number of authorized capital stock of
the corporation from 200,000,000 shares to 220,000,000 shares consisting of
200,000,000 shares of common stock, par value $0.001 and 20,000,000 shares of
preferred stock, par value $0.001.
ISSUED:
In March 2004, the Company issued 5,000,000 common shares at $0.001 per share,
for cash proceeds of $5,000.
In April 2005, the Company issued 3,011,500 common shares at $0.05 per share,
for cash proceeds of $150,575.
In February 2008, the Company issued 16,023,000 common shares as a result of a
common stock dividend. This was recorded at par value of $0.001 per share.
In May and June 2008, the Company issued 821,036 shares of common stock as per
employment agreements with directors and officers of the company for management
services and legal services with a value of $1,726,160 and $200,000,
respectively.
In June 2008, the Company issued 1,052,500 shares of common stock as part of a
private capital raise at $2.00 per share. The issuance of the Shares was exempt
from registration under Regulation S and/or Regulation D and Section 4(2) of the
Securities Act of 1933, as amended. In connection with the Offering, the Company
engaged falcon International Consulting Limited to act as placement agent .
Falcon International received a fee of 10% of the gross proceeds of the
Offering, in additional to 83,700 shares of restricted common stock.
6. COMMITMENTS AND CONTRACTUAL OBLIGATIONS
In May 2008, the Company entered into employment agreements with the directors
and officers of the Company for management services. The terms of these
agreements range from one to five years with minimum cumulative cash
remuneration of $792,500 per annum. The Company also agreed to issue options to
purchase 2,303,278 shares of common stock with exercise prices ranging from
$2.20 to $3.77, which vest in accordance with the terms of the employment
agreements; however, as of June 30, 2008 the employment agreements did not
define the vesting conditions. As a result, since the vesting of the options
were contingent on performance conditions to be established at a future date a
grant date did not occur and compensation cost will not be measured until the
vesting conditions are established and mutually understood by the Company and
the employees.
13
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 AND 2007
(Stated in U.S. Dollars)
6. COMMITMENTS AND CONTRACTUAL OBLIGATIONS (Continued)
On June 9, 2008, the Company entered into a consulting agreement (the
"Agreement") with Lotus Fund Inc. for operational, financial and management
services. Per the Agreement, the Company is required to pay $30,000 per month,
commencing June 9, 2008 and terminating on June 9, 2009, unless terminated by
either party in the event of a material breach by providing 15 days notice. The
Agreement is renewable for a further period of one year at the option of the
Company.
7. RESTATEMENT OF FINANCIAL STATEMENTS
The Company is restating its financial statements for the quarter ended June 30,
2008 to correct errors related to the Company's accounting for stock-based
compensation.
The Company's decision to restate the aforementioned financial information was
made as a result of management's identification of errors related to the
accounting for certain stock options and restricted shares issued to employees,
directors, and other third-parties. The Company concluded, that certain stock
options and restricted shares were not completely and accurately recorded in the
financial statements.
These errors impacted stockholders' equity (deficit) in the balance sheet as
well as expenses in the statement of operations. The amount of these errors was
determined to be material to the financial statements. The effect of these error
corrections on the results of operations for the quarter ended June 30, 2008 is
to increase the net loss by $442,246, primarily due to an increase in management
compensation and other general administrative expenses.
14
RESTATEMENT
STATEMENT OF OPERATIONS, BALANCE SHEET, STATEMENT OF CASH FLOWS
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (Unaudited)
(STATED IN U.S. DOLLARS)
JUNE 30 JUNE 30 JUNE 30
2008 2008 2008
As Previously Adjustments As Restated
Reported
----------- ----------- -----------
ASSETS
CURRENT
Cash and cash equivalents $ 345,986 $ -- $ 345,986
Prepaid expenses and other current assets 4,710 821 5,531
----------- ----------- -----------
$ 350,696 $ 821 $ 351,517
Investment 1,500,000 -- 1,500,000
Other Equipment
Office Equipment 92,873 (91,247) 1,626
Less: Accumulated Depreciation (7,739) 7,603 (136)
Construction in Progress -- 91,247 91,247
----------- ----------- -----------
85,134 7,603 92,737
----------- ----------- -----------
1,935,830 8,424 1,944,254
=========== =========== ===========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 288,305 $ -- $ 288,305
----------- ----------- -----------
STOCKHOLDERS' EQUITY
SHARE CAPITAL
Authorized:
200,000,000 common shares with a par value
of $0.001 per share
20,000,000 "blank check" preferred shares,
issuable in one or more series.
Issued:
24,034,500(previous); 1,873,536(adjustments),
25,908,036 (restated) common shares 24,035 1,873 25,908
ADDITIONAL PAID-IN CAPITAL 131,540 4,018,241 4,149,781
SHARE SUBSCRIPTION RECEIVED 1,864,444 (1,864,444) 0
STOCK SUBSCRIPTION RECEIVABLE (1,705,000) (1,705,000)
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (372,494) (442,246) (814,740)
----------- ----------- -----------
$ 1,647,525 $ 8,424 $ 1,655,949
----------- ----------- -----------
$ 1,935,830 $ 8,424 $ 1,944,254
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
15
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
(STATED IN U.S. DOLLARS)
JUNE 30 JUNE 30 JUNE 30
2008 2008 2008
As Previously Adjustments As Restated
Reported
------------ ------------ ------------
REVENUE $ -- $ -- $ --
------------ ------------ ------------
EXPENSES
Advertising 211 -- 211
Consulting 30,000 -- 30,000
Filing fees 7,562 -- 7,562
Management salaries 121,027 249,950 370,977
General and administrative 2,467 -- 2,467
Interest and bank charges 500 -- 500
Mineral property acquisition and exploration -- -- --
Office expenses 2,346 (246) 2,100
Professional fees 32,476 200,145 232,621
Promotion and entertainment -- -- --
Depreciation 7,739 (7,603) 136
Travel 10,394 -- 10,394
------------ ------------ ------------
214,722 442,246 656,968
------------ ------------ ------------
LOSS BEFORE OTHER INCOME (214,722) (442,246) (656,968)
OTHER INCOME 273 -- 273
------------ ------------ ------------
NET LOSS FOR THE PERIOD $ (214,449) $ (442,246) $ (656,695)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00) $ (0.03) $ (0.03)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,034,500 508,782 24,543,282
============ ============ ============
The accompanying notes are an integral part of these financial statements.
16
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Unaudited)
(STATED IN U.S. DOLLARS)
JUNE 30 JUNE 30 JUNE 30
2008 2008 2008
As Previously Adjustments As Restated
Reported
----------- ----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the period $ (214,449) $ (442,246) $ (656,695)
Adjustments to reconcile net (loss) to net cash
generated (used) in operating activities:
Depreciation 7,739 (7,603) 136
Stock Based Compensation -- 450,670 450,670
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (2,812) (821) (3,633)
Accounts payable and accrued liabilities 280,363 -- 280,363
----------- ----------- -----------
70,841 -- 70,841
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment (1,500,000) -- (1,500,000)
Purchase of office equipment & software (92,873) -- (92,873)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,592,873) -- (1,592,873)
----------- ----------- -----------
17
BLACKWATER MIDSTREAM CORP.
(FORMERLY LAYCOR VENTURES CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(STATED IN U.S. DOLLARS)
(Continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of capital stock, net 1,864,444 -- 1,864,444
---------- --------- ----------
1,864,444 -- 1,864,444
---------- --------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE PERIOD 342,412 -- 342,412
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
3,574 -- 3,574
---------- --------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 345,986 -- $ 345,986
========== ========= ==========
CASH AND CASH EQUIVALENTS ARE COMPRISED OF:
Cash $ 345,986 $ -- $ 345,986
Short term deposit -- -- --
---------- --------- ----------
$ 345,986 $ -- $ 345,986
========== ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
========== ========= ==========
NON-CASH FINANCING ACTIVITY:
Stock dividend $ -- $ -- $ --
Stock Subscription Receivable $1,705,000 $ -- $ --
========== ========= ==========
The accompanying notes are an integral part of these financial statements.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL
CONDITION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
This section of this report includes a number of forward-looking statements that
reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like:
believe, expect, estimate, anticipate, intend, project and similar expressions,
or words which, by their nature, refer to future events. You should not place
undue certainty on these forward-looking statements, which apply only as of the
date of this report. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions.
There is no historical financial information about us upon which to base an
evaluation of our performance. We are a development stage corporation and have
not generated or realized any revenues from our business operations. We cannot
guarantee we will be successful in our business operations. Our business is
subject to risks inherent in the establishment of a new business enterprise,
including limited capital resources, possible delays in the exploration of the
property, and possible cost overruns due to the price and cost increases in
services.
We have no assurance that future financing will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. Equity financing could result in
additional dilution to existing shareholders. We may seek equity financing to
provide capital for further exploration.
RESTATEMENT
We are amending our Quarterly Report on Form 10-Q ("Form 10-Q" or "Original
Filing") for the quarter ended June 30, 2008, to restate our financial
statements for the quarter ended June 30, 2008 to correct errors related to the
accounting for the Company's stock-based compensation programs. This amendment
to Form 10-Q (the "Amendment") amends the Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008, as filed on August 19, 2008.
The effect of the error corrections on the Results of Operations (Restated) for
the quarter ended June 30, 2008 is to increase net loss by $442,246. All amounts
in Management's Discussion and Analysis of Financial Condition and Results of
Operations (Restated) have been corrected, as appropriate, for the effects of
the restatement.
OVERVIEW
Until we changed our business plan in May 2008, we were exploring one property
containing two claims relating to mineral rights in British Columbia, Canada.
The claims were initially purchased in March 2004 by our former president,
Robert Wayne Morgan, for $1,118. However, we suspended exploration pending a
resolution of the Ministry of Environment's condemnation plan. No resolution was
ever received, and the board of directors abandoned the claims in June 2008.
Commencing in May 2008 we hired new management and changed our business plan to
become an independent developer of bulk liquid fuel and chemical storage
facilities. On June 26, 2008, we purchased a seven percent (7%) interest in
Safeland Storage, L.L.C. a Louisiana limited liability company ("Safeland"),
represented by 70,000 Class A units for a purchase price of $1.5 million,
pursuant to a Membership Interest Purchase Agreement with Safeland. Safeland is
an unrelated party. Contemporaneously therewith, on June 26, 2008, we entered
into a Purchase and Sale Agreement (the "Purchase and Sale Agreement") for the
purchase of 435 acres of land in St. John the Baptist Parish, Louisiana, from
Safeland, for a purchase price of $20,500,000.00. The closing of the Purchase
and Sale Agreement is to take place within 120 days from June 26, 2008. The
Company and Safeland Storage L.L.L. are discussing extending the closing date.
We are exploring several options to raise money to close the acquisition, but as
of the date of the filing of this Quarterly Report on form 10-Q we have not
entered into any definitive agreements to raise any such funds.
19
Safeland has completed preliminary engineering and design and obtained
state-regulated environmental permits for the facility. We intend to develop the
facility in three phases with a resulting total of approximately 10 million
barrels of capacity. Phase I is anticipated to be approximately 3.5 million
barrels of storage with an expected completion date of the first quarter of
2010. Phase II is expected to add 3.4 million barrels coming on line in the
first quarter of 2011, followed by phase III with 3.0 million barrels in the
first quarter of 2012. Our proposed site is located in the heart of South
Louisiana's petroleum refining and chemical manufacturing corridor that has a
refining capacity of approximately 2 million barrels per day. This represents
approximately ten percent of the total U.S. refining capacity, including
existing world-scale crude oil refineries such as Marathon Garyville (adjacent
to the Company's property), Valero St. Charles and Shell Norco (the first two of
which are undergoing major capacity expansions). The site is located within 15
miles of the U.S. Strategic Petroleum Reserves at St. James and the LOOP
(Louisiana Offshore Oil Production). It is strategically located for
connectivity to the Colonial and Plantation pipelines via the Bengal pipeline.
The Colonial and Plantation pipelines serve the U.S. as major refined product
arteries from the Gulf Coast to the Eastern Seaboard of the U.S., providing
approximately 42% of the East Coast refined product demand. The site offers
complete intermodal logistics capabilities including deep water access on the
Mississippi River for ships and barges and access to major highways (U.S.
Highway 61 to the north and the Mississippi River and East Jefferson highways to
the south). Two railroads, Kansas City Southern and Canadian National, currently
have infrastructure on the property, which is expected to enable the Company to
attract rail-served storage positions.
In order to effectuate our business plan and build the facilities described
above, we will need to raise up to approximately $500 million. As of this date,
we have not entered into any definitive agreements to raise any portion of such
amount, although we are exploring alternatives to do so.
Bulk liquid terminals store a range of products including crude oil, bunker
fuel, gasoline, distillate, diesel, jet fuel, chemicals, agricultural products
and biodiesel. For example, on the refined product segment of oil, in the United
States, approximately 300 million barrels of refined products, blendstock and
intermediate products are stored within the refined product value chain in
facilities located between refinery processing units and product tank trucks
(out of an estimated 700 million total barrels of storage including crude oil
and other liquid products). Refiner storage accounts for about 40 percent of
total product inventory while refined product pipelines typically containing
less than 20 percent. The remainder, accounting for approximately 100 million
barrels of inventory, is stored in bulk storage terminals that provide
facilities for aggregation, distribution, finished produce blending, imports
offloading and pipeline staging.
The importance of bulk terminal facilities in the refined product segment supply
chain has grown significantly over the past decade as the nation's product
supply patterns have become increasingly more complex. The number of operating
refineries in the U.S. has declined in the period, resulting in fewer refinery
sites that produce higher volumes of more grades of finished and unfinished
products. Bulk storage facilities have expanded to accommodate the growth in
output from the surviving refineries, the increase in the complexity of finished
product blending, and the staging flexibility required by refined product
pipelines. In addition, the change in supply patterns, including the increase of
Brazilian crude and the decreases in the availability of Venezuelan crude, have
driven the need for more storage and blending capacity. These services are
essential in order to effect timely and efficient operation of the U.S.'s fuel
distribution system.
Third-party terminalling businesses are generally independent operations that
support many different commercial customers including refiners, blenders,
traders and marketers. Income is derived from tank leasing, operational charges
associated with blending services and throughput charges for receipt and
delivery options. The primary strategic drivers of the business include location
and connectivity to logistics infrastructure. Capital investment in terminalling
assets is generally supported by long-term (five years or more) contracts with
major oil and gas, chemical and agricultural companies.
Investments resulting in incremental expansion of existing capacity through tank
additions and increased utilization of existing infrastructure such as docks,
pipeline origin pumps, truck racks, etc. have been the focus of the industry
over the past two decades. Over the past few years, the underlying
infrastructure and in some cases the real estate associated with many bulk
terminals has been exhausted. As such, industry fee structures have evolved with
costs for additional capacity today increasing over historical levels to recoup
the total cost for real estate, new tanks and the addition of related terminal
infrastructure as well.
20
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2008
THE FOLLOWING TABLE SETS FORTH, FOR THE PERIODS INDICATED, CERTAIN OPERATING
INFORMATION EXPRESSED AS A PERCENTAGE OF REVENUE:
THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THREE MONTHS ENDED JUNE 30, 2007
--------------------------
Three months ended June 30,
--------------------------
2008 2007
(Restated)
--------- ---------
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues $ 0 $ 0
--------- ---------
Costs and Expenses:
Costs of revenues 0 0
Research and development 0 0
Selling, general and
administrative 656,968 1,784
--------- ---------
Total costs and expenses 656,968 1,784
--------- ---------
Operating loss (656,968) (1,784)
Interest expense 0 0
Interest and dividend income 273 294
Other income, net 0
Equity in loss of affiliates 0
--------- ---------
Net Loss $(656,695) $ (1,490)
========= =========
REVENUES. We had no revenues for the three months ended June 30, 2008 or the
three months ended June 30, 2007. We had no operational activity during the
first quarter of fiscal years 2007 or 2008. We currently expect to begin
generating revenues in the 1st quarter of 2010.
OTHER INCOME. Other income was $273 in the three months ended June 30, 2008
compared to $294 in the three months ended June 30, 2007. Other income for both
periods is from interest generated from bank accounts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $656,968 in the three months ended June 30, 2008
compared to $1,784 in the three months ended June 30, 2007. This increase of
over $655,184 was primarily attributable to Blackwater Midstream hiring members
of its management team during May and June 2008 for which their compensation
(cash-based compensation and stock-based compensation) accounts for
approximately 56% of total SG&A Expenses. Other significant expenses during this
period were professional fees of over $270,000, accounting for approximately 41%
of total SG&A expenses and travel related expenses of over $10,000, accounting
for about 2% of total SG&A expenses.
NET LOSS
Net loss was $656,695 in the three months ended June 30, 2008 compared to $1,490
in the three months ended June 30, 2007. This increase in the period's loss was
attributable to start up expenses related to the new line of business and
management terms.
LIQUIDITY AND CAPITAL RESOURCES
We issued 5,000,000 shares of common stock through a Section 4(2) offering in
March 2004. This was accounted for as a purchase of shares of common stock.
We issued 3,011,500 shares of common stock through our public offering declared
effective on February 11, 2005 and raised $150,575. This was accounted for as a
purchase of shares of common stock.
21
Beginning on June 4, 2008, the Company entered into certain subscription
agreements (collectively, the "Purchase Agreement") with certain investors (the
"Investors") for the sale of an aggregate of 2,500,000 shares of its common
stock, par value $.001 per share (the "Shares"), at a purchase price of $2.00
per share (the "Offering"). Each Purchase Agreement sets forth certain rights
and obligations of the parties, as well as customary representations and
warranties by the Company and the Investors. On August 13, 2008, the Company
consummated transactions resulting in the aggregate sale of 2,092,500 Shares for
gross proceeds of $4,185,000. In connection with the Offering, the Company
engaged Falcon International Consulting Limited to act as placement agent.
Falcon International received a fee of $418,500, or 10% of the gross proceeds of
the Offering, in addition to 83,700 Shares.
As of June 30, 2008, our total assets were $1,944,254 and our total liabilities
were $288,305. We had cash and cash equivalents of $345,986.
At June 30, 2008, we had working capital of $63,212 compared to a working
capital of $23,055 at June 30, 2007. Operating expenses for the quarter ended
June 30, 2008 were $656,968. Our operating expenses consisted primarily of
management salaries, professional fees and other administrative expenses.
We are currently exploring options to raise additional capital, although as of
the date of the filing of this Quarterly Report we have not entered into any
definitive agreements for such capital. We can make no assurances that the
Company will find additional financing on favorable terms, or at all.
We have no long-term debt.
OFF BALANCE-SHEET ARRANGEMENTS
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
As of the end of the period covered by this Quarterly Report on Form 10-Q, we
conducted an evaluation, under the supervision and with the participation of our
management, including our chief executive officer ("CEO") and chief financial
officer ("CFO") of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the
CEO and CFO concluded that, because of the material weaknesses in our internal
control over financial reporting described below, our disclosure controls and
procedures were not effective as of June 30, 2008. The Company has taken the
steps described below to remediate such material weaknesses.
(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
As of June 30, 2008, our assessment of the effectiveness of our internal control
over financial reporting identified several material weaknesses in our internal
control over financial reporting. A "material weakness", as defined in standards
established by the Public Company Accounting Oversight Board, or the PCAOB, 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. The PCAOB
defines "significant deficiency" as a deficiency that results in more than a
remote likelihood that a misstatement of the financial statements that is more
than inconsequential will not be prevented or detected.
The material weaknesses related to the design and operating effectiveness of
controls over the way we accounted for (i) depreciation of certain equipment;
(ii) grants of restricted common stock issued to members of our board of
directors and management team; (iii) grants of certain non-statutory stock
options; and (iv) the time which passed between the Company's receipt of certain
subscription agreements and the receipt of funds delivered to the Company
pursuant to those subscription agreements.
22
o DEPRECIATION OF EQUIPMENT. The Company reported purchases for computer
network, office & warehouse remodeling, and accounting software as
Construction in Progress as they were not fully in use as of June 30,
2008. The Company classified them as in use and therein began
depreciating these items.
o GRANTS OF RESTRICTED COMMON STOCK. In May and June 2008, management did
not understand that it should have accounted for these shares as a
compensation expense during the months of vesting. Nor did it
understand that it should likewise account for the related deferred tax
asset and deferred tax benefit. The Company included a footnote to the
first quarter financial statements about these and referenced that the
shares were issued in July 2008.
o GRANTS OF NON-STATUTORY STOCK OPTIONS. In May 2008, management did not
understand that it should have accounted for these shares as a legal
expense during the month of vesting. Nor did it understand that it
should likewise account for the related deferred tax asset and deferred
tax benefit. The Company did not make a footnote or an accounting entry
to the June 30, 2008 financial statements.
o FUNDS DELIVERED PURSUANT TO SUBSCRIPTIONS FOR COMPANY SECURITIES.
Management did not account for the timing differences between
subscription agreements made in June 2008 and the receipt of funds
during June 2008. The amount of the shares subscribed but not received
should have been reported as Stock Subscribed Receivable.
Since the close of the fiscal quarter ended June 30, 2008, we have implemented
the following remediation steps to address the material weakness discussed
above:
o The engagement of a professional accounting and internal control
consulting firm
o Increased training and coaching for management personal concerning
internal controls for small publicly traded companies
o Increasing the Company's accounting staff to increase the segregation
of duties
o The documentation and implementation of Company procedures and internal
controls
We believe these remediation steps will correct the material weakness discussed
above. We will assess the effectiveness of our remediation efforts in connection
with our management's tests of internal control over financial reporting in
conjunction with our fiscal year 2009 testing procedures. Except as discussed
above, we have not identified any changes in our internal control over financial
reporting during the first quarter of 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no changes to our risk factors from those disclosed in our
Annual Report on Form 10-KSB filed on June 15, 2008, for the year ended March
31, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
UNREGISTERED SALES OF EQUITY SECURITIES
23
Beginning on June 4, 2008, the Company entered into certain subscription
agreements (collectively, the "Purchase Agreement") with certain investors (the
"Investors") for the sale of an aggregate of 2,500,000 restricted shares of its
common stock, par value $.001 per share (the "Shares"), at a purchase price of
$2.00 per share (the "Offering"). Each Purchase Agreement sets forth certain
rights and obligations of the parties, as well as customary representations and
warranties by the Company and the Investors. On August 13, 2008, the Company
consummated transactions resulting in the aggregate sale of 2,092,500 Shares for
gross proceeds of $4,185,000. The issuance of the Shares was exempt from
registration under Regulation S and/or Regulation D and Section 4(2) of the
Securities Act of 1933, as amended. In connection with the Offering, the Company
engaged Falcon International Consulting Limited to act as placement agent.
Falcon International received a fee of $418,500, or 10% of the gross proceeds of
the Offering, in addition to 83,700 shares of restricted common stock.
USE OF PROCEEDS
On February 11, 2005, the Securities and Exchange Commission declared our Form
SB-2 registration statement effective (SEC file no. 333-116229). Under the terms
of our Form SB-2 registration statement, we offered, without the assistance of
an underwriter, up to a total of 4,000,000 shares of common stock on a
self-underwritten basis, 2,000,000 shares minimum, 4,000,000 shares maximum. The
offering price was $0.05 per share. On April 5, 2005, we completed our public
offering by raising $150,575 and sold 3,011,500 shares of our common stock at an
offering price of $0.05 per share. From the period February 11, 2005 to June 30,
2008, we spent the following:
Consulting Services $ 31,750
Core Drilling $ 5,400
Analyzing Samples $ 5,350
Accounting $ 34,818
Legal $ 24,217
Services $ none
------------------------------------
TOTAL $101,535
====================================
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION.
(a) On August 12, 2008, by unanimous written consent, the Company's Board of
Directors appointed Mr. Mathijs van Houweninge to the position of director of
the Company to fill a vacancy. The acceptance by Mr. Mathijs van Howeninge as a
director of the Company is effective as of August 12, 2008.
Mr. van Houweninge has served as the managing partner of Falcon Capital, LLP
("Falcon"), a Venture Capital firm based in London, since February 2008. In
1990, Mr. Houweninge started iEffective, a Netherlands-based software company
specializing in consultancy and software development for the financial industry
which was sold in 2000. He also serves on the board of directors of SkyPostal,
Inc., Cybercity, Inc. IonIP bv, and a school in Utrecht in the Netherlands. Mr.
van Houweninge studied at Utrecht University in the Netherlands during the
1990's in Computer Science, specializing in artificial intelligence.
Falcon Capital is an affiliate of Falcon International Consulting Limited, the
Company's financial advisor, and holder of 83,700 shares of the Company's common
stock. During 2008, the Company paid Falcon International Consulting Limited
approximately $418,000 and 83,700 shares of common stock as commissions earned
during the Company's $5 million private placement of common stock. As managing
partner of Falcon Capital, Mr. van Houweninge can influence how Falcon votes and
disposes of its stock in the Company and is considered a Company affiliate.
Additionally, as managing partner of Falcon, Mr. van Houweninge has a direct
financial interest in Falcon's past and future financial arrangements with the
Company.
24
ITEM 6. OTHER INFORMATION
EXHIBIT NO. DOCUMENT DESCRIPTION
----------------------------------------------------------------------
4.1 Form of private placement common stock purchase
agreement *
10.1 Services Agreement with Christopher Wilson dated May 5,
2008 (1)
10.2 Employment Agreement with Michael Suder, dated May 7,
2008 (2)
10.3 Employment Agreement with Dale T. Chatagnier, dated May
14, 2008 (3)
10.4 Placement agent's agreement with Falcon International
Consulting Limited, dated May 28, 2008 *
10.5 Membership Interest Purchase Agreement with Safeland
Storage, LLC (4)
10.6 Purchase and Sale Agreement between Safeland Storage
LLC, Future Energy Investments and Blackwater Midstream
Corp., dated June 25, 2008 (5)
31.1 Certification of Principal Executive Officer pursuant
to Rule 13a-15(e) and 15d-15(e), promulgated under the
Securities and Exchange Act of 1934, as amended.
31.2 Certification of Principal Financial Officer pursuant
to Rule 13a-15(e) and 15d-15(e), promulgated under the
Securities and Exchange Act of 1934, as amended.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Chief Executive Officer).
32.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Chief Financial Officer).
99.1 Press release announcing private placement*
-------------------------
* Previously filed as an exhibit to the Company's Quarterly Report
on Form 10- Q filed August 19, 2008.
(1) Previously filed as an exhibit to the Company's Current Report
on Form 8-K filed May 6, 2008
(2) Previously filed as an exhibit to the Company's Current Report
on Form 8-K filed May 9, 2008
(3) Previously filed as an exhibit to the Company's Current Report
on Form 8-K filed May 16, 2008
(4) Previously filed herewith as exhibit 10.6 to the Company's
Annual Report on Form 10-KSB filed July 15, 2008.
(5) Previously filed herewith as exhibit 10.7 to the Company's
Annual Report on Form 10-KSB filed July 15, 2008.
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this 14th day of November, 2008.
BLACKWATER MIDSTREAM CORP.
(REGISTRANT)
BY: /s/ MICHAEL D. SUDER
----------------------
Michael D. Suder
Chief Executive Officer
BY: /s/ DONALD ST. PIERRE
---------------------
Donald St. Pierre
Chief Financial Officer
26
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION
----------------------------------------------------------------------
4.1 Form of private placement common stock purchase
agreement *
10.1 Services Agreement with Christopher Wilson dated May 5,
2008 (1)
10.2 Employment Agreement with Michael Suder, dated May 7,
2008 (2)
10.3 Employment Agreement with Dale T. Chatagnier, dated May
14, 2008 (3)
10.4 Placement agent's agreement with Falcon International
Consulting Limited, dated May 28, 2008 *
10.5 Membership Interest Purchase Agreement with Safeland
Storage, LLC (4)
10.6 Purchase and Sale Agreement between Safeland Storage
LLC, Future Energy Investments and Blackwater Midstream
Corp., dated June 25, 2008 (5)
31.1 Certification of Principal Executive Officer pursuant
to Rule 13a-15(e) and 15d-15(e), promulgated under the
Securities and Exchange Act of 1934, as amended.
31.2 Certification of Principal Financial Officer pursuant
to Rule 13a-15(e) and 15d-15(e), promulgated under the
Securities and Exchange Act of 1934, as amended.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Chief Executive Officer).
32.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Chief Financial Officer).
99.1 Press release announcing private placement *
--------------
* Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q
filed August 19, 2008.
(1) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed May 6, 2008
(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed May 9, 2008
(3) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed May 16, 2008
(4) Previously filed herewith as exhibit 10.6 to the Company's Annual Report on
Form 10-KSB filed July 15, 2008.
(5) Previously filed herewith as exhibit 10.7 to the Company's Annual Report on
Form 10-KSB filed July 15, 2008.
27