SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
|X| Quarterly report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 2003
|_| Transition report under Section 13 or 15(d)
of the Exchange Act of 1934
For the transition period from ___________ to ______________
Commission file no. 000-27339
BPK RESOURCES, INC.
---------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in
Its Charter)
NEVADA 88-0426887
- ------------------------------ -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
5858 WESTHEIMER STREET, SUITE 709
HOUSTON, TX 77057
------------------------------------------------------
(Address of Principal Executive Offices)
(713) 978-7991
------------------------------------------------------
(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 past 90 days.
Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: There were 42,459,503 issued
and outstanding shares of the registrant's common stock, par value $.001 per
share, as of April 12, 2004.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
BPK RESOURCES, INC.
(A Development Stage Entity)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) 1
Condensed Statements of Operations - (unaudited) 2
Condensed Statements of Cash Flows - (unaudited) 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis 18
Item 3. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
EXPLANATORY NOTE
BPK Resources, Inc. (the "Company") is filing this Amendment No. 1 (the
"Amendment") to its Quarterly Report on Form 10-QSB for the three month period
ended September 30, 2003 filed with the Securities and Exchange Commission
("SEC") on November 17, 2003 (the "Original Report").
The Company recently discovered an error in its 2002 consolidated
financial statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2002. The Company has corrected its 2002 annual
consolidated financial statements to conform them to generally accepted
accounting principles. This correction has impacted the Company's condensed
consolidated financial statements for the period ended September 30, 2003 to
reduce depletion expense and partnership investment loss as more fully explained
in Note 17-Correction Of An Error appearing in Item 1 of this Amendment. The
restated condensed consolidated financial statements for the period ended
September 30, 2003 do not reflect any changes in the Company's accounting
principles, practices or procedures.
This Amendment does not reflect events that have occurred after
November 17, 2003, the date the Original Report was filed with the SEC, nor does
it modify or update the disclosures set forth in the Original Report, except to
reflect the effects of the restatement of the condensed consolidated financial
statements for the period ended September 30, 2003, or as deemed necessary in
connection with the completion of such financial statements. Information with
respect to any such events has been or will be set forth, as appropriate, in the
Company's filings with the SEC subsequent to November 17, 2003. The remaining
information contained in this Amendment, which consists of all other information
originally contained in the Original Report, is not amended hereby, but is
included for the convenience of the reader.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BPK RESOURCES, INC.
(A Development Stage Entity)
Condensed Consolidated Balance Sheet
ASSETS
---------
September 30, December 31,
2003 2002
------------------ ------------------
(Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 137,220 $ 26,980
Accounts receivable 154,689 52,840
Notes and interest receivable 63,310 53,340
Prepaid expenses 128,018 119,524
------------------ ------------------
Total current assets 483,237 252,684
------------------ ------------------
Developed oil and gas interests net, using successful efforts 1,807,000 154,665
Oil and gas properties, cost not being amortized 771,082 -
Investment in limited partnerships 1,123,999 520,195
Marketable securities 3,357 51,761
------------------ ------------------
$ 4,188,675 $ 979,305
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
-----------------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 507,791 $ 241,030
Payables for oil and gas interests 528,813 25,010
Dividends payable on Series A preferred 211,462 -
Notes Payable 1,000 1,000
Notes payable - related party 723,178 305,000
Convertible notes 2,243,681 281,082
------------------ ------------------
Total current liabilities 4,215,925 853,122
------------------ ------------------
Series A Preferred Shares subject to mandatory redemption 4,247,764 -
------------------ ------------------
Total liabilities 8,463,689 853,122
------------------ ------------------
Minority interest 1,513 -
------------------ ------------------
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, $.001 par value authorized - 100,000,000 shares; 14,617,198 and
13,817,198 shares issued and outstanding as of
September 30, 2003 and December 31, 2002 14,617 13,817
Additional paid-in capital 3,755,008 3,076,661
Deferred compensation (11,111) (44,000)
Less stock subscription receivable - (305,000)
Accumulated other comprehensive loss 2,395 (78,677)
Deficit accumulated during development stage (8,037,436) (2,536,618)
------------------ ------------------
Total stockholders' equity (deficit) (4,276,527) 126,183
------------------ ------------------
$ 4,188,675 $ 979,305
================== ==================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-1-
BPK RESOURCES, INC.
(A Development Stage Entity)
Condensed Consolidated Statements of Operations
(Unaudited)
April 2, 1997
Three Months Ended Nine Months Ended (Inception) to
September 30, September 30, September 30,
2003 2002 2003 2002 2003
---------------- --------------------------------- -------------- ------------------
Revenues $ 15,348 $ 75,358 $ 239,863 $ 86,074 $ 400,830
---------------- --------------- --------------- -------------- ------------------
Operating expenses
Production expenses 4,693 61,280 113,685 61,280 195,327
Depletion and amortization 29,084 - 113,707 - 459,465
Dry hole and impaired properties - - - - 350,354
Bad Debt expense (recovery) - (2,279) - 12,121 -
General and administrative 151,144 121,159 861,456 225,408 1,539,528
---------------- --------------- --------------- -------------- ------------------
Total operating expenses 184,921 180,160 1,088,848 298,809 2,544,674
---------------- --------------- --------------- -------------- ------------------
Loss from operations (169,573) (104,802) (848,985) (212,735) (2,143,844)
---------------- --------------- --------------- -------------- ------------------
Other (income) expense
Interest income (2,000) (35,459) (4,321) (35,459) (40,819)
Interest expense 560,385 64,101 1,412,161 120,083 2,209,949
Interest expense - Series A
Preferred 90,731 - 90,731 - 90,731
Loss on sale of stock 2,665,918 - 2,665,918 - 2,665,918
Partnership investment loss 338,136 - 368,800 - 849,269
---------------- --------------- --------------- -------------- ------------------
Total other expenses, net 3,653,170 28,642 4,533,289 84,624 5,775,048
---------------- --------------- --------------- -------------- ------------------
Loss before minority interest (3,822,743) (133,444) (5,382,274) (297,359) (7,918,892)
---------------- --------------- --------------- -------------- ------------------
Minority interest 1,885 30 2,187 30 2,187
---------------- --------------- --------------- -------------- ------------------
Net loss (3,820,858) (133,414) (5,380,087) (297,329) (7,916,705)
Preferred dividend on series A
preferred stock - - 120,731 - 120,731
---------------- --------------- --------------- -------------- ------------------
Net loss to common shareholders $ (3,820,858) $ (133,414) $ (5,500,818) $(297,329) $ (8,037,436)
================ =============== =============== ============== ==================
Basic and diluted loss per common
share $ (0.26) $ (0.02) $ (0.38) $ (0.05)
================ =============== =============== ==============
Basic and diluted weighted average
common
shares outstanding 14,617,198 5,750,000 14,488,260 5,750,000
================ =============== =============== ==============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-2-
BPK RESOURCES, INC.
(A Development Stage Entity)
Condensed Consolidated Statement of Cash Flows
(Unaudited)
April 2, 1997
Nine Months Ended (inception) to
September 30, September 30,
-------------------------------------------------------------
2003 2002 2003
-------------------- ----------------- -------------------
Net cash used in operating activities $ (779,635) $ (195,312) $ (1,607,487)
-------------------- ----------------- -------------------
Cash flows from investing activities
Advances - - (242,700)
Repayment from related party 26,000 26,000
Repayment from unrelated party 69,562 140,600
Loan to unrelated party - - (50,000)
Loan to related party (21,650) - (21,650)
Proceeds from sale of marketable securities 1,711,322 - 1,711,322
Investment in oil and gas interests - (845,010) (850,627)
Investment in limited partnerships (1,030,095) (598,194) (1,815,868)
Distribution from limited partnerships 37,232 - 37,232
-------------------- ----------------- -------------------
Net cash provided by (used in) investing activities 722,809 (1,373,642) (1,065,691)
-------------------- ----------------- -------------------
Cash flows from financing activities
Issuance of debt 1,517,053 1,890,354 3,265,907
Issuance of debt - related party 140,000 - 785,000
Repayment of debt (470,687) (318,000) (788,687)
Repayment of debt - related party (1,230,000) - (1,580,000)
Issuance of common stock, net costs - - 917,478
Collection of subscription receivable 207,500 - 207,500
Collection of subscription receivable - related party 3,200 - 3,200
-------------------- ----------------- -------------------
Net cash provided by financing activities 167,066 1,572,354 2,810,398
-------------------- ----------------- -------------------
Net increase in cash and cash equivalents 110,240 3,400 137,220
Cash and cash equivalents, beginning of period 26,980 47 -
-------------------- ----------------- -------------------
Cash and cash equivalents, end of period $ 137,220 $ 3,447 $ 137,220
==================== ================= ===================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed financial statements included herein have been prepared
by BPK Resources, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management, necessary to
fairly present such information. All such adjustments are of a normal recurring
nature. Although the Company believes that the disclosures are adequate to make
the information presented not misleading, certain information and footnote
disclosures, including a description of significant accounting policies normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, have been
condensed or omitted pursuant to such rules and regulations.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's 2002 Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission. The results of
operations for interim periods are not necessarily indicative of the results for
any subsequent quarter or the entire fiscal year ending December 31, 2003.
The Company is a Development Stage Enterprise, as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting for
Development Stage Enterprises." Under SFAS No. 7, certain additional financial
information is required to be included in the financial statements for the
period from inception of the Company to the current balance sheet date.
The Company follows the provisions of SFAS No. 123. As permitted under SFAS No.
123, the Company continues to utilize Accounting Principles Board ("APB") No. 25
in accounting for its stock-based compensation to employees. Had compensation
expense for the nine months ended September 30, 2003 and 2002 had been
determined under the fair value provisions of SFAS No. 123, as amended by SFAS
148, the Company's net loss and net loss per share would have been the
following:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- --------------------------------
2003 2002 2003 2002
--------------- -------------- -------------- ---------------
Net loss, to common stockholders as
reported $(3,820,858) $ (133,414) $(5,500,818) $ (297,329)
Add: Stock-based employee compensation
expense included in reported
net income determined under APB
No. 25, net of related tax effects - - - -
Deduct: Total stock-based employee
compensation expense determined
under fair-value-based method for all
awards, net of related tax effects - - (99,500) -
--------------- -------------- -------------- --------------
Pro forma net income to common
stockholders $(3,820,858) $ (133,414) $(5,600,318) $ (297,329)
--------------- -------------- -------------- --------------
Earnings per share:
Basic - as reported $ (0.26) $ (0.02) $ (0.38) $ (0.05)
Basic - pro forma $ (0.26) $ (0.02) $ (0.39) $ (0.05)
-4-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION - (Continued)
Recent Accounting Pronouncement
- ------------------------------
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liability and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liability and equity. It also
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. SFAS No. 150 is effective for financial
instruments entered into or modified after May 15, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003, except for mandatorily redeemable financial instruments of nonpublic
entities. It is to be implemented by reporting a cumulative effect of a change
in an accounting principle of financial instruments created before the issuance
date of the Statement and still existing at the beginning of the interim period
of adoption. Restatement is not permitted. The adoption of SFAS No. 150 required
that the mandatorily redeemable preferred stock be presented in the balance
sheet as a long term liability as opposed to its previous placement between
liabilities and stockholders equity. It did not have any effect on the statement
of operations.
NOTE 2 - DESCRIPTION OF BUSINESS
Nature of Operations
The Company is generally not involved as the operator of the projects in which
it participates. Instead, the Company relies on third parties for drilling,
delivering any gas or oil reserves that are discovered, and assisting in the
negotiation of all sales contracts with such purchasing parties. With the
assistance of such third parties, the Company plans to explore and develop these
prospects and sell on the open market any gas or oil that is discovered. The
Company relies on Touchstone Resources USA, Inc., a related party, to assist and
advise the Company regarding the identification and leasing of properties on
favorable terms. The company also relies on Touchstone Resources USA, Inc. to
provide additional reserve assessment analysis and engineering services in
connection with the exploration and development of the prospects. Touchstone
Resources USA, Inc. has a significant level of experience in exploring and
developing gas and oil properties in the regions where the prospects are
located. This strategy is intended to reduce the level of overhead and capital
expenditures required to maintain drilling and production operations. The
Company does not own any drilling rigs, and all of the drilling activities are
conducted by independent drilling contractors. The Company's properties are
primarily located in Texas, specifically, Jefferson County. The Company also has
investments in Louisiana and Thailand.
NOTE 3 - NOTES RECEIVABLE - RELATED PARTY
During April and May 2003, the Company had loaned Touchstone Resources, Inc., a
related party, a total of $90,000. The loans bear interest at 10% per annum. On
May 30, 2003, the Company forgave these loans in return for a 2% interest in LS
Gas, LLC. Only the interest receivable of $1,357 remained outstanding as of
September 30, 2003.
As of September 30, 2003, an affiliate, CSR Waha Partners, L.P. had an unsecured
demand loan, which it had made to Louisiana Shelf Partners, L.P., in the amount
of $2,000. This loan bears interest at 10% per annum.
-5-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 4 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS
Developed Oil and Gas Interests Net, Using Successful Efforts:
September 30, 2003
--------------------------------------------------------
Hackberry
Prospects -
Melton and
Hooks Wells CSR - Waha Total
----------------- --------------- ---------------
Leasehold Acquisition and Mineral Interests $ 825,010 $ 942,545 $ 1,767,555
Capitalized Costs 25,617 115,537 141,154
Drilling in Progress Intangible - 631,843 631,843
Drilling in Progress Tangible - 76,116 76,116
Depletion (447,626) (11,688) (459,314)
Well impairment charge (350,354) - (350,354)
----------------- --------------- ---------------
Total $ 52,647 $ 1,754,353 $ (1,807,000)
================= =============== ===============
December 31, 2002
--------------------------------------------------------
Hackberry
Prospects -
Melton and
Hooks Wells CSR - Waha Total
----------------- --------------- ---------------
Leasehold Acquisition and Mineral Interests $ 825,010 $ - $ 825,010
Capitalized Costs 25,617 - 25,617
Depletion (345,608) -
(345,608)
----------------- --------------- ---------------
Total $ 154,665 $ - $ 154,665
================= =============== ===============
-6-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 4 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS (Continued)
September 30, December 31,
2003 2002
----------------- ----------------
Oil and Gas Properties, Cost Not Being Amortized - CSR - Waha
Leasehold Acquisition and Mineral Interests $ 663,074 $ -
Capitalized Costs 77,025 -
Drilling in Progress Intangible 30,065 -
Drilling in Progress Tangible 918 -
----------------- ----------------
Total $ 771,082 $ -
================= ================
The following table represents the Investment in Limited Partnership at
September 30, 2003 (unaudited):
Touchstone
Resources
2001 -
Hackberry Louisiana
Drilling Shelf PHT
PH Gas, LP Fund, LP Partners, LP Partners, LP
------------ -------------- ------------ ------------
Ownership Percentage 30.27% 10.26% 9.9% 4.23%
Original Cost Basis $ 256,100 $ 400,000 $ 913,500 $ 74,493
Pro-rata share of loss (21,481) (330,508) (246,699) -
Cash Distributions (10,000) (39,906) (13,500) -
------------ -------------- ------------ ------------
Total $ 224,619 $ 29,586 $ 653,301 $ 74,493
============ ============== ============ ============
South
Valentine
LS Gas, LLC LP Total
------------ ---------- ------------
Ownership Percentage 2.0% 16.66%
Original Cost Basis $ 142,000 $ 250,581 $ 2,036,674
Pro-rata share of loss - (250,581) (849,269)
Cash Distributions - -- (63,406)
------------ ---------- ------------
Total $ 142,000 $ -- $ 1,123,999
============ ========== ============
The following table represents the Investment in Limited Partnership at December
31, 2002:
Touchstone
Resources
2001 -
Hackberry Louisiana South
Drilling Shelf PHT Valentine
PH Gas, LP Fund, LP Partners, LP Partners, LP LP Total
-------------- -------------- --------------- ---------------- ---------- ------------
Ownership Percentage 32.5% 10.26% 9.405% 4.1% 16.66%
Original Cost Basis $ 150,000 $ 400,000 $ 270,000 $ 50,000 $ 146,838 $1,016,838
Pro-rata share of loss (1,806) (331,825) - - (146,838) (480,469)
Cash Distributions - (16,174) - - -- (16,174)
-------------- -------------- --------------- ---------------- ---------- ------------
Total $ 148,194 $ 52,001 $ 270,000 $ 50,000 $ -- $ 520,195
============== ============== =============== ================ ========== ============
-7-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 4 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS (Continued)
CSR-Waha Partners, L.P.
- -----------------------
On January 15, 2003, the Company purchased a 99% Limited Partnership Interest in
CSR-Waha Partners, LP ("CSR-Waha"), a Delaware Limited Partnership from
Continental Southern Resources, Inc. ("CSOR"), a related party. The purchase
price of $2,000,000 consisted of $150,000 which was payable upon execution of
the agreement, a $1,500,000 promissory note due on April 30, 2003, and 600,000
shares of the common stock of BPK Resources, Inc. The note term was subsequently
extended to June 30, 2004 in consideration of 100,000 shares of the Company's
common stock. CSR-Waha owns a working interest of 12-1/2% in the Waha/Lockridge
oil and gas prospect located in Reeves County, Texas. The Company and CSOR have
one common director who is the President of the Company.
At the discretion of CSR, LLC, the general partner, available cash will be
distributed 99% to the limited partner to the extent of its unreturned capital
balance and 1% to CSR, LLC until all unreturned capital balances have been
returned and then 80% to the limited partner in proportion to their percentage
interest and 20% to CSR, LLC. Distributions in liquidation of the partnership
will be made in accordance with the capital accounts subject to the above
distributions. In general, profits will be allocated after giving effect to
certain regulatory allocations and cumulative prior allocations 75% to the
limited partner and 25% to CSR, LLC. Losses in general will be allocated after
giving effect to regulatory allocations and certain proportionate allocations to
all partners with a positive capital account in proportion to the extent of
their balances and then entirely to CSR, LLC.
The Company accounts for its investment in CSR Waha Partners, L.P. using the
consolidation method.
PH Gas, L.P. - selected information
- -----------------------------------
On April 26, 2003, the limited partnership agreement of PH Gas, L.P. was amended
to allow two additional partners which reduced the Company's interest from 32.5%
to approximately 30.9%.
On May 19, 2003, the limited partnership agreement of PH Gas, L.P. was amended
to remove two partners and allow one additional partner. The Company's interest
remained at approximately 30.9%.
On June 23, 2003, the limited partnership agreement of PH Gas, L.P. was amended
to remove one partner and reallocate ownership percentages, which reduced the
Company's interest from 30.9% to approximately 28.7%.
On July 1, 2003, the limited partnership agreement of PH Gas, L.P. was amended
to reflect additional partner's capital contributions and reallocation of
partners' ownership interests, which increased the Company's interest from 28.7%
to approximately 29.1%.
On July 22, 2003, the limited partnership agreement of PH Gas, L.P. was amended
to reflect additional partner's capital contributions and reallocation of
partners' ownership interests, which increased the Company's interest from 29.1%
to approximately 30.2%.
On August 27, 2003, the limited partnership agreement of PH Gas, L.P. was
amended to reflect additional partner's capital contributions, admission of one
additional partner and reallocation of partners' ownership interests, which
increased the Company's interest from 30.2 % to approximately 30.3%.
-8-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 4 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS (Continued)
The Company is not subject to capital calls in connection with its limited
partnership interest in PH Gas, L.P. However, PH Gas, L. P. is subject to cash
calls from its investment in APICO, LLC ("APICO") as explained below. If PH Gas,
L. P. does not meet its cash calls, then the Company's investment in PH Gas,
L.P. may become impaired. The APICO membership agreement provides that PH Gas,
L.P. and the other APICO members will be called upon from time to time for
additional contributions so as to meet the reasonable capital requirements of
APICO. If PH Gas, L.P., or any other member, fails to make required capital
contributions or meet the required cash calls in the amounts and at the times
specified in the membership agreement, then they would be in default. If the
default is not cured within 45 days, then APICO has the right to repurchase the
defaulting members' interests for 1% of their original purchase price.
During July through September 2003, APICO issued capital calls of $425,000 to
its members for exploration costs in the PhuHorm prospect. PH Gas, L.P.'s
portion of this call was $41,480, which was paid prior to September 30, 2003.
The Company accounts for this interest using the equity method.
Louisiana Shelf Partners, L.P. - selected information
- ------------------------------------------------------
Pursuant to the partnership agreement, the Company and the other partners of
Louisiana Shelf Partners, L.P. ("LSP") will be called upon from time to time for
additional contributions to meet the reasonable capital requirements of LSP. The
Company has contributed $900,000 to LSP.
On August 4, 2003, the limited partnership agreement of Louisiana Shelf
Partners, L.P. was amended to reflect the reallocation of partnership interest
and admission of additional partners, which increased the Company's interest
from 9.4 % to approximately 9.9%.
On September 29, 2003, the limited partnership agreement of Louisiana Shelf
Partners, L.P. was amended to reflect the withdrawal of one partner and the
admission of additional partners. The Company's interest remained at
approximately 9.9%.
On August 1, 2003, LSP signed a drilling contract with Parker Drilling,
utilizing a jack-up rig, to commence drilling on the exploration project located
on Louisiana State Lease No. 17742, 17743, 17744, and 17666 in Cameron Parish
offshore Louisiana. The initial test well on Lease No. 17743 and 17742 was
determined to be a dry hole. As a result, all the drilling costs incurred on
this well were written off during the third quarter of 2003.
The Company accounts for this interest using the equity method.
LS Gas, LLC
- -----------
On May 30, 2003, the Company purchased a 2% interest in LS Gas, LLC from
Touchstone Resources, Ltd. The purchase price consisted of $100,000 in cash and
100,000 shares of the common stock of BPK Resources, Inc. The Company used a
$90,000 receivable to offset a portion of the $100,000 cash payment. The
remaining balance was paid in July.
The Company accounts for this interest using the cost method.
-9-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 5 - MARKETABLE SECURITIES
On February 21, 2003, the Company entered into an investment agreement with
Ocean Resources Capital Holding PLC ("ORCH"). In accordance with the agreement,
the Company issued 5,538,461 shares of its Series A 10% Convertible Preferred
Stock in exchange for 4,390,000 ordinary shares of ORCH, along with warrants to
purchase an additional 1,463,333 shares. ORCH trades on the London Stock
Exchange in the Alternative Investment Market ("AIM"). The Company also entered
into a loan facility agreement with ORCH whereby the Company could borrow
$600,000 which was to be secured by the Company's shares of ORCH. The loan
matured on May 31, 2003 and bears interest at LIBOR plus 2%. As of September 30,
2003, the Company borrowed $456,365 and accrued a 4% arrangement fee of $23,482
in relation to the borrowings along with $14,168 in interest.
According to the agreement, the Company was not entitled to dispose of any of
the ORCH shares prior to or during a period of at least 2 months from their
admission to AIM without the prior consent of ORCH. The Company was supposed to
place $720,000 of the net proceeds from the sale of the ORCH shares in an escrow
account until the second anniversary of the original agreement, on terms
satisfactory to ORCH, which represented an amount equal to two years' dividends
in respect of the Company's Series A shares held by ORCH and was to be used
solely for payment of dividends in respect of the Company's shares. The Company
agreed that except for trade creditors and the proposed $600,000 margin account,
the Company will not incur more than $1,000,000 further indebtedness, without
the prior written permission of ORCH. The Company agreed that ORCH is entitled
to nominate a director to the Company's board of directors and shall take all
such steps that may be required to appoint such person to serve on the board of
directors of the Company until the next meeting of the stockholders of the
Company held for the purpose of electing directors.
On July 24, 2003, the Company sold 4,390,000 shares of ORCH with warrants to
purchase 1,463,333 shares attached for $1,408,136, and incurred $77,449 in
commission expenses and $130,687 was applied to the principal balance of the
loan from ORCH. The Company did not fund the escrow account. The Company
recorded a loss of $2,917,077 on this transaction.
During July and August the Company sold 205,518 shares of Cytrx Corporation for
$380,635. The Company recorded a gain of $251,158 on this transaction. As of
September 30, 2003, the Company's total realized loss amounted to $2,665,919.
Available-for-sale securities consist of the following at September 30, 2003
(unaudited):
Gross
Unrealized
Cost Gain Fair Value
----------------- --------------- ----------------
Stock - CYTR $ 962 $ 2,395 $ 3,357
----------------- --------------- ----------------
Available-for-sale securities consisted of the following at December 31, 2002:
Gross
Unrealized
Cost (Loss) Fair Value
----------------- --------------- ----------------
Stock - CYTR $ 130,438 $ (78,677) $ 51,761
----------------- --------------- ----------------
-10-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 6 - NOTES PAYABLE
Notes payable and convertible notes consisted of the following at:
September 30, December 31,
2003 2002
----------------- ----------------
12% Secured convertible note $ 2,100,000 $ 1,500,000
Promissory note - related party 723,178 305,000
10% Promissory note 1,000 1,000
Approx. 6% Loan Facility 456,365 -
----------------- ----------------
3,280,543 1,806,000
Less unamortized discount 312,684 1,218,918
----------------- ----------------
$ 2,967,859 $ 587,082
================= ================
12% Secured Convertible Note
In April 2002, the Company entered into a loan agreement pursuant to which it
borrowed $1,500,000 from Gemini Growth Fund, LP ("Gemini"), a Delaware limited
partnership. Gemini subsequently changed their name to Trident Growth Fund, L.P.
("Trident"). The Company's obligation to repay the loan is evidenced by a 12%
secured convertible promissory note and is secured by a security interest
granted to the lender covering substantially all of the assets of the Company
including a collateral mortgage and assignment of lease and working interests.
The loan was subsequently amended on July 29, 2003 to extend the maturity date
from October 31, 2003 to June 30, 2004. On July 29, 2003 Trident also amended
the loan to increase the principal to $2,100,000. The first amendment to the
loan agreement requires the Company to maintain an interest average ratio
(earnings before interest, taxes, depreciation and amortization divided by
interest expense) of 2.0 or greater as of December 14, 2003. The $600,000 note
matures on July 31, 2004; however, the Company has the option to repay the note
at 100% of face value prior to the maturity date. Trident was issued warrants to
purchase 420,000 shares of the Company's common stock as additional incentive to
make the original and subsequent incremental loan. The warrants expire on the
earlier of April 30, 2012 or the date on which the entire principal amount of
the convertible notes is converted to common stock.
The conversion rate of the note and exercise price of the warrants is $0.38
which is subject to antidilution and price adjustments per the agreements. The
Company paid loan commitment and origination fees of 1% and 4%, respectively,
which were recorded as loan costs. These costs will be amortized over the term
of the loan. Interest is payable in cash unless Trident elects to have the
interest paid in common stock of the Company. As described in the loan
covenants, the Company is required to comply with various financial covenants.
Any failure to comply with such covenants may be deemed a default on the loan by
Trident. As of September 30, 2003, the Company failed to comply with three
financial covenants but received a waiver from the lender.
Under the terms of the loan agreement, the Company was required to register all
shares of its common stock issuable upon conversion of the note or exercise of
the warrants by October 2002. The Company would have been subject to a monthly
penalty of 0.1% shares of its common stock then outstanding computed on a fully
diluted basis per day until the shares are registered; however, Trident waived
the specific covenants.
-11-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 6 - NOTES PAYABLE (Continued)
As of September 30, 2003, the Company granted warrants to purchase 25,000 shares
of common stock at an initial exercise price of $0.38, subject to periodic
adjustments based on market trading price, which expire on April 30, 2012 to
Trident in consideration for the granting of a waiver due to the Company's
failure to meet their loan covenants. These warrants were valued at $15,000 and
expensed. In July 2003, Trident was issued additional warrants to purchase
100,000 shares of the Company's common stock with an exercise price of $0.38
expiring on April 30, 2012, for the extension of the note waiver of loan
covenants. These warrants were valued at $38,200 and will be amortized to
expense over the life of the extended note.
Under Emerging Issues Task Force ("EITF") 00-27: "Application of Issue No. 98-5
to Certain Convertible Instruments," the Company has allocated the proceeds from
issuance of the original and incremental convertible promissory notes and
warrants based on a fair value basis. The fair value of the warrants were
determined to be $264,600 using the Black-Scholes model. In addition, the
Company recorded beneficial conversion features for the notes amounting to
$1,393,547. Under EITF 00-27 a discount was recorded against the note payable
for the amount of the warrant and the beneficial conversion feature which is
being amortized over the remaining term of the note. As of September 30, 2003,
the Company amortized $1,345,463 of the discount as interest expense.
Promissory Notes - Related Party
- ----------------------------------
On January 15, 2003, the Company financed part of the purchase price of CSR-Waha
with a $1,500,000 note issued to CSOR. The note bears interest at 10%,
originally matured on April 30, 2003 and was subsequently extended until June
30, 2004. In consideration for the extension, the Company issued 100,000 shares
of its common stock to CSOR. As of September 30, 2003, $670,000 of principal and
$88,781 of accrued interest is outstanding. The Company's wholly owned
subsidiary, CSR-Hackberry Partners, LP has issued a unsecured demand note with
an interest rate of 2.5% to CSOR of which $25,000 of principal and $2,056 of
accrued interest is outstanding as of September 30, 2003. The Company has other
unsecured demand loans totaling $28,178 due to several related parties as of
September 30, 2003.
As of September 30, 2003, the Company had borrowed $164,000 with interest
payable at 10% per annum from 1025 Investments, Inc. The notes plus accrued
interest are payable on demand. As of September 30, 2003 the Company has accrued
$4,367 of interest related to the notes and total principal of $1,000 remained
outstanding.
As of September 30, 2003, the Company had borrowed $20,000 with interest payable
at 10% per annum from FEQ Investments. The notes plus accrued interest are
payable on demand. As of September 30, 2003 the Company has accrued $718 of
interest related to the notes.
6% Loan Facility
- ------------------
As of September 30, 2003, the Company had borrowed $587,053 from ORCH with
interest payable at LIBOR plus 2% per annum on the last business day of each
calendar month. The notes and accrued interest were payable upon the sale of the
Ocean Resources shares the Company owned or May 31, 2003, whichever was earlier.
As of September 30, 2003, $456,365 of principal and accrued interest of $14,168
remained outstanding. The loan is currently in default.
-12-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 7 - MANDATORILY REDEEMABLE PREFERRED STOCK
In March 2003, the Company's Board of Directors designated 5,538,461 of the
10,000,000 shares of its preferred stock as mandatorily redeemable preferred
stock to be non-voting Series A 10% Convertible Preferred Stock, all of which
are outstanding. The holders of shares of this stock will be entitled to receive
dividends at a rate of 10% per annum which accrue from the date of issuance of
each share payable semi-annually in arrears on June 30 and December 31 of each
year. These dividends have preference over common stock cash dividends. The
total amount of dividends and interests accrued at September 30, 2003 was
$211,462.
Each Series A Share is immediately convertible, at the option of the holder,
into one share of common stock, subject to a cap which prohibits conversion to
the extent that conversion would result in the holder beneficially owning in
excess of 4.99% of the Company's common stock. In the event of a liquidation,
dissolution or winding up of the Company, or a merger or consolidation in which
the Company is not the surviving entity, all Series A Shares automatically
convert into shares of common stock. The Company has the option to redeem all
Series A Shares at any time by payment of an amount per share equal to $.65 plus
all accrued and unpaid dividends and is required to redeem all such shares by
payment of such amount no later than February 28, 2006. The Series A Shares
contain anti-dilution and conversion price adjustment provisions if certain
events occur. Other than as provided by applicable law, holders of the Series A
Shares have no voting rights.
The shares were issued in consideration for 4,390,000 ordinary shares and
warrants to acquire additional ordinary shares of ORCH.
NOTE 8 - STOCKHOLDER'S EQUITY
On January 15, 2003, the Company purchased a 99% Limited Partnership Interest in
CSR-WAHA Partners, LP, a Delaware Limited Partnership from Continental Southern
Resources, Inc. The Company issued 600,000 shares of its common stock as part of
the purchase price. These shares were valued at the fair market value of $0.78
per share.
On January 30, 2003, the Company issued options to purchase 200,000 shares of
common stock at an exercise price of $0.65 per share to the Chief Executive
Officer, also a Director of the Company. The options are immediately exercisable
and terminate on the earlier of three years from the date of grant or three
months after cessation of service to the Company. The Company recorded these
options at the fair market value of $0.66. As a result, deferred compensation of
$2,000 was recorded and will be amortized over three years.
On January 31, 2003, the Company issued options to purchase 100,000 shares of
common stock at an exercise price of $0.65 per share to each of two directors of
the Company in connection with their appointments to serve as director. The
options are fully vested and terminate on the earlier of three years from the
date of grant or three months after cessation of service to the Company. The
Company recorded these options at the fair market value of $0.66. Deferred
compensation of $2,000 was recorded and will be amortized over a three-year
period.
In connection with the ORCH transaction, the Company is obligated to issue
400,000 options to Rhodes Ventures, S.A. at the closing of an equity
transaction.
On April 30, 2003, the Company exercised its option to extend the due date of
its $1,500,000 promissory note to Continental Southern Resources, Inc., a
related party, from April 30, 2003 to June 30, 2004. The company issued
Continental Southern Resources, Inc. 100,000 shares of common stock of the
Company for extending the note. These shares were recorded as a prepaid item at
the fair market value of $0.47 and will be expensed over the extension period of
the note.
-13-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 8 - STOCKHOLDER'S EQUITY (Continued)
On May 30, 2003, the Company purchased a 2% interest in LS Gas, LLC from
Touchstone Resources, Ltd. The Company issued 100,000 shares of its common stock
as part of the purchase price.
On July 1, 2003, the Company entered into an investor relations consulting
agreement with EchoTech Financial, Inc. The agreement is for a three month
period ending on September, 30, 2003 and will automatically renew for another
term of three months unless two weeks notice to terminate is given by either
party, at a fee of $3,000 per month as well as options to purchase 25,000 common
shares of the Company at an exercise price of $.040 per common share. The
options are fully vested and expire in two years.
On July 29, 2003 the Company granted Trident two warrants to purchase 120,000
and 100,000 shares of common stock with an exercise price of $0.38 expiring on
July 29, 2008 and April 30, 2012, respectively. The warrant to purchase 120,000
shares of common stock was issued as additional consideration for issuing the
$600,000 note and the warrant to purchase 100,000 shares of common stock was
issued in consideration of the renegotiation to extend the maturity date of the
original note and for granting an additional waiver due to the Company's failure
to meet their loan covenants.
Stock Warrants
The Company had the following warrants to purchase its common stock at September
30, 2003:
Expiration Date Exercise Price Shares
------------------- ---------------- -------------------
April 2004 $ 0.38 310,000
July 2008 $ 0.38 120,000
April 2012 $ 0.38 425,000
November 2005 $ 0.60 702,666
-------------------
Common Stock 1,557,666
===================
Stock Options
The Company had the following outstanding common stock options to purchase its
securities as of:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------- ----------------------------------
Number of Weighted Weighted Number Weighted
Range of Outstanding Shares Average Average Exercisable at Average
Exercise at September 30, Remaining Exercise September 30, Exercise
Prices 2003 Contract Life Price 2003 Price
- ------------------- --------------------- --------------- -------------- ------------------ ------------
$ 0.40 25,000 1.75 $ 0.40 25,000 $ 0.40
$ 0.60 200,000 0.17 $ 0.60 200,000 $ 0.60
$ 0.65 400,000 2.33 $ 0.65 400,000 $ 0.65
-14-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 9 - NET LOSS PER SHARE
Loss per common share is calculated in accordance with SFAS No. 128, "Earnings
Per Share". Basic loss per common share is computed based upon the weighted
average number of shares of common stock outstanding for the period and excludes
any potential dilution. Shares associated with stock options, warrants and
convertible debt are not included because their inclusion would be antidilutive
(i.e., reduce the net loss per share). For the three and nine months ending
September 30, 2003 and September 30, 2002, the total number of potentially
dilutive shares excluded from diluted net loss per common share were 9,687,929
and 305,000, respectively.
NOTE 10 - COMPREHENSIVE LOSS
Excluding net loss, the Company's source of comprehensive loss is from the net
unrealized loss on its marketable debt securities, which are classified as
available-for-sale. The following summarizes the components of comprehensive
loss:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
2003 2002 2003 2002
--------------- ---------------- ---------------- ----------------
Net loss $ (3,820,858) $ (133,414) $ (5,500,818) $ (297,329)
--------------- ---------------- ---------------- ----------------
Unrealized gain/(loss) (1,508,081) (60,043) 159,169 (60,043)
Reclassification adjustment for
(gain) loss realized in net loss
above 256,898 - (78,097) -
--------------- ---------------- ---------------- ----------------
Unrealized gain/(loss), net (1,251,183) (60,043) 81,072 (60,043)
--------------- ---------------- ---------------- ----------------
Comprehensive loss $ (5,072,041) $ (193,457) $ (5,419,746) $ (357,372)
=============== ================ ================ ================
NOTE 11 - RELATED PARTY TRANSACTIONS - NOT DECSRIBED ELSEWHERE / CONCENTRATIONS
In April 2003, Mark Bush, president of Touchstone Resources USA, Inc., resigned
as director of the Company. Mr. Bush is also the managing member of LS Gas, LLC,
which is the general partner of Louisiana Shelf Partners, L.P. In addition, he
owns a 25% membership interest in PHT Gas, LLC which is the general partner of
PHT Partners, L.P., PH Gas, L.P., BPK South Valentine Partners, L.P. and
CSR-Hackberry Partners, L.P.
-15-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 12 - LIQUIDITY AND CAPITAL RESOURCES
The accompanying financial statements have been prepared in accordance with U.S.
GAAP, which contemplates continuation of the Company as a going concern. In
2002, the Company hired new management and has implemented its business plan.
The Company is in its development stage and has significant debt obligations to
repay in future years. Additionally, the Company will need significant funds to
meet its cash calls on its various interests in oil and gas prospects to
explore, produce, develop, and eventually sell the underlying natural gas and
oil products under its interests and to acquire additional properties.
The Company will need to raise funds via additional private placement offerings
in order to continue operations. The Company's ability to continue as a going
concern is dependent on raising these additional funds. If the Company is unable
to obtain additional funds when they are required or if the funds cannot be
obtained on terms favorable to the Company, management will be required to
delay, scale back or eliminate its well development program or license third
parties to develop or market products that the Company would otherwise seek to
develop or market itself and may be required to relinquish its interest in the
properties or discontinue operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
General
- -------
The oil and gas industry is regulated by federal, state and local authorities.
In particular, gas and oil production operations and economics are affected by
environmental protection statutes, tax statutes and other laws and regulations
relating to the petroleum industry, as well as changes in such laws, changing
administrative regulations and the interpretations and application of such laws,
rules and regulations. The Company believes it is in compliance with all
federal, state and local laws, regulations, and orders applicable to the Company
and its properties and operations, the violation of which would have a material
adverse effect on the Company or its financial condition.
Operating Hazards and Insurance
- -------------------------------
The gas and oil business involves a variety of operating risks, including the
risk of fire, explosions, blow-outs, pipe failure, abnormally pressured
formation, and environmental hazards such as oil spills, gas leaks, ruptures or
discharges of toxic gases, the occurrence of any of which could result in
substantial losses to the Company due to injury or loss of life, severe damage
to or destruction of property, natural resources and equipment, pollution or
other environmental damage, cleanup responsibilities, regulatory investigation
and penalties and suspension of operations.
There can be no assurance that insurance, if any, will be adequate to cover any
losses or exposure to liability. Although the Company believes certain policies
obtained by operators provide coverage in scope and in amounts customary in the
industry, they do not provide complete coverage against all operating risks. An
uninsured or partially insured claim, if successful and of significant
magnitude, could have a material adverse effect on the Company and its financial
condition via its contractual liability to the Prospect.
Potential Loss of Oil and Gas Interests/ Cash Calls
- ---------------------------------------------------
The Company is subject to cash calls related to its various investments in oil
and gas prospects.
-16-
BPK RESOURCES, INC.
(A Development Stage Entity)
Notes to Condensed Consolidated Financial Statements
NOTE 14 - CONCENTRATIONS
The Company has five investments in Oil and Gas Interests and operates in a
single industry. If these interests prove to be unsuccessful, the concentration
of five investments could have a material adverse effect on the Company.
NOTE 15 - SUPPLEMENTAL EQUITY INVESTMENT DISCLOSURES - UNAUDITED
The following schedule lists the total assets, liabilities and results of
operations of the limited partnerships which the Company is invested in at
September 30, 2003:
Touchstone
Resources-2001
Hackberry Louisiana Shelf
PH Gas, LP Drilling Fund, LP Partners, LP
------------------ -------------------- --------------------
Total Assets $ 742,328 $ 214,653 $ 6,398,152
================== ==================== ====================
Total Liabilities $ 3,438 $ 190,133 $ 70,648
================== ==================== ====================
Results of Operations
Sales - - -
Gross profit - - -
Net income (loss) $ (65,770) $ 12,835 $ (2,483,792)
NOTE 16 - SUBSEQUENT EVENTS
During October 2003, the Company invested an additional $3,997 in 2001 Hackberry
Drilling Fund, L.P.
During October 2003, the Company invested an additional $7,800 in PH Gas.
During October 2003, the Company invested an additional $2,000 in PHT.
On October 28, 2003, PH Gas invested an additional $26,059 in APICO, LLC.
During October 2003, PH Gas borrowed $2,000 from PHT and issued a 10% promissory
note.
NOTE 17 - CORRECTION OF AN ERROR
The original financial statements issued for these periods have been corrected
as a result of the Company's 2002 annual financial statements being corrected to
conform them to generally accepted accounting principles.
The correction of the 2002 annual financial statements involved applying FAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which
required the Company to (a) recognize an impairment loss if the carrying amount
of a long-lived asset is not recoverable from its undiscounted cash flows and
(b) measure the impairment loss as the difference between the carrying amount
and fair value of the asset.
The Company has now recorded in the 2002 annual financial statements an
impairment loss of $350,354 and additional partnership investment loss of
$265,578 which reduced the amount of oil and gas interests to be depleted and
amortized in subsequent periods. Consequently, depletion expense and loss from
investment in partnership for this quarter have been reduced by $257,655 and
$195,812, respectively and the originally reported net loss has been reduced by
$453,467.
-17-
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
The information contained in this Report on Form 10-QSB and in other
public statements by the Company and Company officers include or may contain
certain forward-looking statements. The words "may", "intend", "will", "expect",
"anticipate", "believe", "estimate", "project", and similar expressions used in
this Report are intended to identify forward-looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933 and Sections 21E of
the U.S. Securities Exchange of 1934. You should not place undue reliance on
these forward-looking statements, which speak only as of the date made. We
undertake no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events. You should
also know that such statements are not guarantees of future performance and are
subject to risks, uncertainties and assumptions. These factors include, but are
not limited to, those risks described in detail in the Company's Annual Report
on Form 10-KSB under the caption "Risk Factors" and other filings with the
Securities and Exchange Commission. Should any of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results
may differ materially from those included within the forward-looking statement.
ITEM 2. Management's Discussion and Analysis
OVERVIEW
Unless the context otherwise requires, references to the "Company", "BPK",
"we", "us" or "our", mean BPK Resources, Inc. or any of our consolidated
subsidiaries or partnership interests. The following discussion should be read
in conjunction with our Condensed Consolidated Financial Statements and related
Notes thereto included elsewhere in this Report.
We are in the oil and gas exploration and development business. We target
high-potential oil and gas assets primarily in the Texas, Louisiana, other
traditional oil producing states in the southwestern United States and Thailand.
Our operations are focused on exploration activities to find and evaluate
prospective oil and gas properties and providing capital to participate in these
projects. We participate in projects directly, through our consolidated
subsidiaries, and as equity participants in limited partnerships.
We are generally not involved as the operator of the projects in which we
participate. Instead, we rely on third parties for drilling, delivering any gas
or oil reserves that are discovered, and assisting in the negotiation of all
sales contracts with any purchasing parties. With the assistance of such third
parties, we plan to explore and develop these prospects and sell on the open
market any gas or oil that we discover. We rely on Touchstone Resources USA,
Inc., the Executive Vice President of which sits on our board of directors, to
assist and advise us regarding the identification and leasing of properties on
favorable terms. We also rely upon Touchstone Resources USA, Inc. to provide us
with additional reserve assessment analysis and engineering services in
connection with the exploration and development of our prospects. Touchstone
Resources USA, Inc. has a significant level of experience in exploring and
developing gas and oil properties in the regions where our prospects are
located.
We play an active role in evaluating prospects and providing financial and
other management functions with respect to the operations at each of our
properties and rely on third
-18-
parties for most operational activities. This strategy is intended to reduce the
level of overhead and capital expenditures required to maintain drilling and
production operations. As we subcontract the performance of substantially all of
the physical operations at our properties, we do not anticipate incurring a
substantial amount of expenses related to the purchase of plant, machinery or
equipment in connection with the exploration and development of our properties.
Similarly, we do not anticipate any substantial increase in the number of
persons that we employ.
In April 1997, we were granted worldwide patent rights, pursuant to an
Exclusive Worldwide Licensing Agreement, covering an electronic multiple
fingerprint recognition system. Since the date of the Exclusive Worldwide
Licensing Agreement, we have unsuccessfully attempted to exploit these patent
rights. While we still hold these patent rights, we are no longer devoting
substantial efforts to the exploitation of these patent rights and are currently
soliciting offers to sell or assign these rights. We plan to use any proceeds
received from the sale or assignment of these rights for working capital
purposes and to purchase additional leasehold interests in natural gas and oil
properties.
Business Strategy
Our strategy is to develop reserves and generate revenue through the
exploration and development of our existing prospects in Louisiana, Texas and
Thailand and the selective acquisition of additional properties both offshore
and onshore in Texas, Louisiana and other traditional oil producing states in
the southwestern United States. Our strategy also includes selling all or part
of our interests in certain of our partnerships or all or part of leasehold
interests we own to realize immediate proceeds and limit or eliminate future
risk associated with such projects. As of the date of this Report, we have not
sold any such interests and all of our revenues have been derived from our share
of sales of oil and gas reserves in our various projects.
We intend to execute our strategy by focusing on the following:
o High potential exploratory drilling
o Opportunistic acquisitions with additional exploratory and/or
development potential
High Potential Exploratory Drilling in Louisiana, Texas and Thailand.
During 2002, operators at our prospects in Jefferson County, Texas completed
drilling two exploratory wells, both of which are currently in production and
generating revenue. Operators at our Jefferson and Reeves County, Texas,
Thailand, and Louisiana prospects currently plan to drill an aggregate of one
additional exploratory well during the remainder of 2003. We believe we have
assembled a ten year inventory of exploration and development drilling
opportunities in Texas and Louisiana.
Opportunistic Acquisitions. Although our primary strategy is to grow our
reserves through drilling, in the next twelve months we anticipate making
opportunistic acquisitions in Texas, Louisiana and other southwestern states
with exploratory potential and in core areas of operation with exploitation and
development potential.
We may increase or decrease our planned activities for 2003, depending
upon drilling results, product prices, the availability of capital resources,
and other factors affecting the
-19-
economic viability of such activities. We do not attempt to forecast our
potential success rate on exploratory drilling.
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2003 As Compared To Three and
Nine Months Ended September 30, 2002.
Revenues
We generated $15,348 and $239,863 of revenue during the three and nine
months ended September 30, 2003, respectively, consisting of oil and gas
generated from our net revenue interest in the Hackberry Prospect located in
Jefferson County, Texas ("Hackberry Prospect") and to a much lesser extent, from
our net revenue interest in the West Texas-Waha Project located in Reeves
County, Texas ("Waha Project"). We generated $75,358 and $86,074 of revenue
during the corresponding periods in 2002 which consisted of oil and gas revenue
generated from the Hackberry Prospect. We expect to continue to generate revenue
from these interests during the remainder of 2003.
Production Expenses
Production expenses were $4,693 and $113,685 during the three and nine
months ended September 30, 2003, respectively, and consisted of expenses
incurred from our working interest in the Hackberry Prospect and the Waha
Project. We incurred production expenses of $61,280 during the three and nine
months ended September 30, 2002 which consisted of expenses incurred from our
working interest in the Hackberry Prospect.
Depletion and amortization expenses were $29,084 and $113,707 during the
three and nine months ended September 30, 2003, respectively, and were due to
the depletion of the Hackberry Prospect and West Texas - Waha Project based on
the units produced. We did not incur any depletion and amortization expenses
during the corresponding periods in 2002.
General and Administrative Expenses
General and administrative expenses increased $29,985 to $151,144 during
the three months ended September 30, 2003 as compared to $121,159 for the
corresponding period in 2002. These expenses consisted primarily of consulting
expenses and professional fees. General and administrative expenses increased
$636,048 to $861,456 during the nine months ended September 30, 2003 as compared
to $225,408 for the corresponding period in 2002. These expenses consisted
primarily of professional and consulting fees.
Other (income) and expense
Other (income) and expense increased $3,624,528 to $3,653,170 during the
three months ended September 30, 2003 as compared to $28,642 for the
corresponding period in 2002. The increase was primarily due to an increase of
$3,004,054 in losses from the Company's equity investments, which resulted
primarily from the loss realized on the Company's sale of 4,390,000 shares of
Ocean Resources Capital Holdings Plc ("ORCH"), a London, England based company
whose shares are traded on the Alternative Investment Market of the London Stock
Exchange, and warrants to acquire 1,463,000 shares of ORCH, and an increase in
interest expense of $560,385, which resulted primarily from interest paid on the
$2.1
-20-
million principal amount convertible promissory note and the $1.5 million note
issued in connection with our purchase of a 99% limited partnership interest in
CSR-Waha Partners, L.P., and dividends paid on the 5,538,461 shares of Series A
10% Convertible Preferred Stock that we issued to ORCH in connection with our
purchase of 4,390,000 shares of ORCH and warrants to purchase an additional
1,463,000 ordinary shares of ORCH, which dividends were required to be
classified as interest expense pursuant to SFAS No 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liability and Equity".
Other (income) and expense increased $4,448,665 to $4,533,289 during the nine
months ended September 30, 2003 as compared to $84,624 for the corresponding
period in 2002. The increase was primarily due to an increase in interest
expense of $1,292,078, which resulted primarily from interest paid on the $2.1
million principal amount convertible promissory note and the $1.5 million note
issued in connection with our purchase of a 99% limited partnership interest in
CSR-Waha Partners, L.P., and dividends paid on the 5,538,461 shares of Series A
10% Convertible Preferred Stock that we issued to ORCH in connection with our
purchase of 4,390,000 shares of ORCH and warrants to purchase an additional
1,463,000 ordinary shares of ORCH, which dividends were required to be
classified as interest expense pursuant to SFAS No 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liability and Equity", and an
increase of $3,230,530 in losses from the Company's equity investments, which
resulted primarily from the loss realized on the Company's sale of 4,390,000
shares of ORCH and warrants to acquire 1,463,000 shares of ORCH.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the nine months ended
September 30, 2003 was $779,635 compared to $195,312 during the nine months
ended September 30, 2002. The primary use of cash during both periods was to
fund the net loss. Net cash provided by investing activities during the nine
months ended September 30, 2003 was $722,809, which consisted primarily of
proceeds received from the sale of marketable securities, as compared to
$1,373,642 of net cash used in investing activities during the nine months ended
September 30, 2002. Net cash provided by financing activities during the nine
months ended September 30, 2003 was $167,066 compared to $1,572,354 during the
nine months ended September 30, 2002 and consisted primarily of the collection
of $210,700 of subscription receivables and proceeds from issuances of unsecured
promissory notes, which were partially offset by costs relating to such
financings, including commitment and origination fees, and the repayment of
unsecured promissory notes.
Working capital decreased $3,132,250 during the nine months ended
September 30, 2003 to a deficit of $3,732,688 as compared to a deficit of
$600,438 at December 31, 2002. This decrease was due primarily to an increase in
notes payable to $2,967,859 from $587,082 at December 31, 2002 resulting from
the issuance of a $1,500,000 note to purchase a 99% limited partnership interest
in CSR-Waha Partners, L.P., a $600,000 credit facility from ORCH and a $600,000
incremental convertible note.
In April 2002, we issued a $1,500,000 convertible promissory note (the
"Convertible Note") to Trident Growth Fund ("Trident"). The Convertible Note was
initially due October 31, 2003, accrues interest at 12% per annum payable
monthly in arrears, is secured by substantially all of our assets, is
convertible at the option of Trident into shares of our common stock at an
initial conversion price of $2.00 per share (currently $.38 per share as a
result of adjustment pursuant to anti dilution provisions of the Convertible
Note), and is redeemable at our option at 100% of par prior to maturity.
Interest is payable in cash unless Trident elects to have it paid in shares of
common stock. The Convertible Note contains various financial covenants with
which we are required to comply. We failed to comply with three financial
covenants and received a waiver from Trident until June 30, 2004.
On or about July 29, 2003, we extended the maturity date of the
Convertible Note until June 30, 2004 and in consideration of the note extension
and waiver of loan covenants, we issued warrants to Trident to purchase 100,000
shares of common stock at an exercise price of $.38 per
-21-
share. We also entered into an amendment to our loan agreement with Trident to
obtain an additional $600,000 from Trident pursuant to a second convertible note
(the "July Convertible Note"). The terms of the July Convertible Note are
substantially similar to those set forth in the Convertible Note, except that
the July Convertible Note is due July 31, 2004. In connection with the
amendment, we issued warrants to Trident to purchase 120,000 shares of common
stock at an exercise price of $.38 per share. We are required to file a
registration statement with the Securities and Exchange Commission to cover the
public resale of all shares issuable upon conversion of the Convertible Note,
but have received a waiver of this requirement from Trident until June 30, 2004.
In August 2002, we issued $470,000 principal amount of 10% demand
promissory notes. On October 18, 2002 we issued a $175,000 12% promissory note.
We used approximately $1,445,000 of these funds to acquire our leasehold
interests in the Jefferson County Prospects, our limited partnership interests
in PH Gas, L.P., and our units in Touchstone Resources - 2001 Hackberry Drilling
Fund, L.P. We used approximately $310,000 to repay Series 1 Promissory Notes in
the aggregate principal amount of $310,000.
During the fourth quarter of 2002, we raised gross cash proceeds of
$1,309,600 through the issuance and sale of our equity securities. We used the
proceeds of these offerings to purchase our interests in Louisiana Shelf
Partners, L.P. and CSR-WAHA Partners, L.P. In connection with our purchase of an
interest in CSR-WAHA, we issued a $1,500,000 note which is due June 30, 2004.
On March 4, 2003, we issued 5,538,461 shares of our Series A 10%
Convertible Preferred Stock (the "Series A Preferred Shares") to ORCH. The
shares were issued in consideration of our receipt of 4,390,000 ordinary shares
of ORCH together with warrants to purchase up to an additional 1,463,000
ordinary shares of ORCH at an exercise price of 75p per share and the right to
exercise warrants to purchase additional shares of ORCH at an exercise price of
100p per share. The Series A Preferred Shares are immediately convertible at the
option of the holder into one share of common stock, subject to a cap that
prohibits conversion to the extent that conversion would result in the holder
beneficially owning in excess of 4.99% of our outstanding shares. We have the
option to redeem all Series A Preferred Shares at any time by payment of an
amount per share equal to $.65 plus all accrued and unpaid dividends due thereon
and are required to redeem all such shares by payment of such amount no later
than February 28, 2006. The agreement under which these shares were purchased
precludes us from incurring in excess of $1,000,000 of additional indebtedness
without the consent of ORCH. The ordinary shares of ORCH are eligible for public
resale on the Alternative Investment Market of the London Stock Exchange. On
March 14, 2003, we entered into a loan agreement with ORCH in which ORCH agreed
to advance $600,000 against the sale of the ORCH shares. As of September 30,
2003, we owed $456,365 of principal to ORCH. The loan matured on May 31, 2003
and hasn't been extended. The loan is currently in default. During July 2003, we
sold all 4,390,000 ordinary shares of ORCH and warrants to purchase 1,463,000
shares of ORCH stock for gross proceeds of $1,408,136.
The forgoing constitutes our principal sources of financing during the
past twelve months. We do not currently maintain a line of credit or term loan
with any commercial bank or other financial institution. Our capital needs have
been principally met through proceeds from the sale of our equity and debt
securities.
-22-
We are in the development stage, have significant debt obligations to
repay in 2004, and our current liabilities substantially exceed our current
assets. As of the date of this Report, we have limited cash resources. We will
need significant funds to meet cash calls on our various interests in oil and
gas prospects to explore, produce, develop, and eventually sell the underlying
natural gas and oil products. Specifically, PH Gas, L.P. and PHT Partners, L.P.,
limited partnerships in which we have an interest, are subject to capital calls.
In addition, we expect to receive capital calls during the next twelve months
from Louisiana Shelf Partners, L.P., another limited partnership in which we
have an interest. If one or more of the other owners of the leasehold interests
in the projects fails to pay their equitable portion of development costs, we
may need to pay additional funds to protect our ownership interests. In
addition, the $1,500,000 Convertible Note and the remaining $670,000 note
payable to Continental Southern Resources, Inc. are due and payable June 30,
2004 and the $600,000 July Convertible Note is due and payable July 31, 2004.
We believe we will need approximately $2,200,000 to sustain operations at
current levels and satisfy any capital calls and other related expenses during
the next twelve months. Based on available cash resources and projected revenue
from our various oil and gas projects, we believe we will have sufficient funds
to continue to meet such capital calls and operate at current levels through
December 2003. However, if we locate additional prospects for acquisition,
experience cost overruns at our existing prospects or fail to generate projected
revenues, we will be required to raise additional funds through sales of our
securities or otherwise. We also have $3.6 million principal amount of debt
which is due and payable within the next 12 months. If we are unable to obtain
additional funds on terms favorable to us, if at all, we may be required to
delay, scale back or eliminate some or all of our exploration and well
development programs, and may be required to relinquish our interest in certain
prospects.
ITEM 3. Controls and Procedures
An evaluation of the effectiveness of our "disclosure controls and
procedures" (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried
out by us under the supervision and with the participation of our Chief
Executive Officer ("CEO") and Treasurer ("Treasurer"). Based upon that
evaluation, our CEO and Treasurer concluded that, as of the end of the period
covered by this quarterly report, our disclosure controls and procedures were
effective to provide reasonable assurance that information we are required to
disclose in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms. There has been no change in
our internal control over financial reporting identified in connection with that
evaluation that occurred during the period covered by this report that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
-23-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
- -----------------------------------------------------------------------------------------------------------------
Exhibit No. Exhibit Method of Filing
- -----------------------------------------------------------------------------------------------------------------
3.1 Articles of Incorporation Incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form
SB-2, Registration Number 333-86435
- -----------------------------------------------------------------------------------------------------------------
3.2 Bylaws Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form
SB-2 Registration Number 333-86435
- -----------------------------------------------------------------------------------------------------------------
3.3 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3.3 to
Incorporation the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 2002
- -----------------------------------------------------------------------------------------------------------------
3.4 Certificate of Designation of Series A 10% Incorporated by reference to Exhibit 3.4 to
Convertible Preferred Stock the Company's Annual Report
on Form 10-KSB for the year ended December
31, 2002.
- -----------------------------------------------------------------------------------------------------------------
10.1 Partial Assignment of Oil, Gas and Mineral Incorporated by reference to Exhibit 10.2 to
Lease by and between Touchstone Resources, the Company's Current Report on Form 8-K
Inc. and the Company dated April 25, 2002 dated May 13, 2002
- -----------------------------------------------------------------------------------------------------------------
10.2 Agreement of Limited Partnership of Incorporated by reference to Exhibit 10.3 to
Touchstone Resources - 2001 Hackberry the Company's Current Report on Form 8-K
Drilling Fund, L.P. dated May 13, 2002
- -----------------------------------------------------------------------------------------------------------------
10.3 Loan Agreement dated April 25, 2002 by and Incorporated by reference to Exhibit 10.6 to
between the Company and Gemini Growth the Company's Quarterly Report on Form 10-QSB
Fund, LP dated November 21, 2001 for the quarter ended June 30, 2002
- -----------------------------------------------------------------------------------------------------------------
10.4 12% Secured Convertible Note dated April Incorporated by reference to Exhibit 4.2 to
25, 2002, issued to Gemini Growth Fund, the Company's Quarterly Report on Form 10-QSB
L.P. for the quarter ended June 30, 2002
- -----------------------------------------------------------------------------------------------------------------
10.5 Warrant to purchase 150,000 shares of Incorporated by reference to Exhibit 4.3 to
Common Stock dated April 25, 2002,issued the Company's Quarterly Report on Form 10-QSB
to Gemini Growth Fund, L.P. for the quarter ended June 30, 2002
- -----------------------------------------------------------------------------------------------------------------
-24-
- -----------------------------------------------------------------------------------------------------------------
10.6 Security Agreement dated April 25, 2002, Incorporated by reference to Exhibit 10.7 to
by and between the Company and Gemini the Company's Quarterly Report on Form 10-QSB
Growth Fund, L.P. for the quarter ended June 30, 2002.
- -----------------------------------------------------------------------------------------------------------------
10.7 Option to Purchase 100,000 Shares of Incorporated by reference to Exhibit 10.6 to
Common Stock issued to Mark A. Bush the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2002.
- -----------------------------------------------------------------------------------------------------------------
10.8 Option to Purchase 100,000 Shares of Incorporated by reference to Exhibit 10.7 to
Common Stock issued to Wes Franklin the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2002.
- -----------------------------------------------------------------------------------------------------------------
10.9 Option to Purchase 200,000 Shares of Incorporated by reference to Exhibit 10.8 to
Common Stock issued to John B. Connally, the Company's Annual Report on Form 10-KSB
III for the year ended December 31, 2002.
- -----------------------------------------------------------------------------------------------------------------
10.10 Form of Investment Agreement by and Incorporated by reference to Exhibit 10.10 to
between the Company and Ocean the Company's Annual Report on Form 10-KSB
Resources Capital Holdings, PLC dated for the year ended December 31, 2002.
February 21, 2002
- -----------------------------------------------------------------------------------------------------------------
10.11 Limited Partnership Agreement of PH GAS, Incorporated by reference to Exhibit 10.11 to
LP dated July 16, 2002 the Company's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
10.12 Amendment to the Limited Partnership Incorporated by reference to Exhibit 10.12 to
Agreement of PH GAS, LP dated the Company's Quarterly Report on Form 10-QSB
April 26, 2003 for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
10.13 Limited Partnership Agreement of Incorporated by reference to Exhibit 10.13 to
CSR-Hackbery Partners, L.P. dated July 31, the Company's Quarterly Report on Form 10-QSB
2002 for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
10.14 Limited Partnership Agreement of PHT Incorporated by reference to Exhibit 10.14 to
Partners, L.P. dated August 14, 2002 the Company's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
10.15 Limited Partnership Agreement of CSR-WAHA Incorporated by reference to Exhibit 10.15 to
Partners, LP dated June 27, 2002 the Company's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
-25-
- -----------------------------------------------------------------------------------------------------------------
10.16 Amendment to The Limited Partnership Incorporated by reference to Exhibit 10.16 to
Agreement of CSR-WAHA Partners, L.P. dated the Company's Quarterly Report on Form 10-QSB
January 15, 2003 for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
10.17 Limited Partnership Agreement of Louisiana Incorporated by reference to Exhibit 10.17 to
Shelf Partners, L.P. dated December 31, the Company's Quarterly Report on Form 10-QSB
2002 for the quarter ended March 31, 2003
- -----------------------------------------------------------------------------------------------------------------
10.18 10% Promissory Note dated January 15, Incorporated by reference to Exhibit 4.3 to
2003, issued to Continental Southern the Company's Annual Report on Form 10-KSB
Resources, Inc. for the year ended December 31, 2002.
- -----------------------------------------------------------------------------------------------------------------
10.19 First Amendment to Loan Agreement dated Incorporated by reference to Exhibit 10.19 to
July 29, 2003, by and between the Company the Company's Quarterly Report on Form 10-QSB
and Trident Growth Fund, L.P. for the quarter ended June 30, 2003
- -----------------------------------------------------------------------------------------------------------------
10.20 12% Secured Convertible Note dated July Incorporated by reference to Exhibit 10.20 to
29, 2003, issued to Trident Growth Fund, the Company's Quarterly Report on Form 10-QSB
L.P. for the quarter ended June 30, 2003
- -----------------------------------------------------------------------------------------------------------------
10.21 First Amended Security Agreement dated Incorporated by reference to Exhibit 10.21 to
July 29, 2003, by and between the Company the Company's Quarterly Report on Form 10-QSB
and Trident Growth Fund, L.P. for the quarter ended June 30, 2003
- -----------------------------------------------------------------------------------------------------------------
10.22 First Amendment to 12% Secured Convertible Incorporated by reference to Exhibit 10.22 to
Note (such original note dated April 25, the Company's Quarterly Report on Form 10-QSB
2002), dated July 29, 2003, issued to for the quarter ended June 30, 2003
Trident Growth Fund, L.P.
- -----------------------------------------------------------------------------------------------------------------
10.23 Warrants to purchase 120,000 shares of Incorporated by reference to Exhibit 10.23 to
Common Stock, dated July 29, 2003, issued the Company's Quarterly Report on Form 10-QSB
to Trident Growth Fund, L.P. for the quarter ended June 30, 2003
- -----------------------------------------------------------------------------------------------------------------
10.24 Warrants to purchase 100,000 shares of Incorporated by reference to Exhibit 10.24 to
Common Stock, dated July 29, 2003, issued the Company's Quarterly Report on Form 10-QSB
to Trident Growth Fund, L.P. for the quarter ended June 30, 2003
- -----------------------------------------------------------------------------------------------------------------
10.25 First Amendment to Warrants to purchase Incorporated by reference to Exhibit 10.25 to
150,000 shares of Common Stock, dated July the Company's Quarterly Report on Form 10-QSB
29, 2003, issued to Trident Growth Fund, for the quarter ended June 30, 2003
L.P.
- -----------------------------------------------------------------------------------------------------------------
-26-
- -----------------------------------------------------------------------------------------------------------------
31.1 Certification of CEO of the Company Filed herewith
required by Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended
- -----------------------------------------------------------------------------------------------------------------
31.2 Certification of Treasurer of the Company Filed herewith
required by Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended
- -----------------------------------------------------------------------------------------------------------------
32.1 Certification of CEO of the Company Filed herewith
Pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- -----------------------------------------------------------------------------------------------------------------
32.2 Certification of Treasurer of the Company Filed herewith
Pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- -----------------------------------------------------------------------------------------------------------------
(b) Current Reports on Form 8-K filed during the three month period ended
September 30, 2003:
None.
-27-
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BPK RESOURCES, INC.
Date: April 12, 2004 /s/ John B. Connally, III
-------------------------
John B. Connally, III
Chief Executive Officer
Date: April 12, 2004 /s/ Cecile T. Coady
-------------------
Cecile T. Coady
Treasurer
-28-
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
31.1 Certification of CEO of the Company required by Rule 13a-14(a) under
the Securities Exchange Act of 1934, as amended
31.2 Certification of Treasurer of the Company required by Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended
32.1 Certification of CEO of the Company Pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Treasurer of the Company Pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
-29-