SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: MARCH 31, 2004
[_] Transition report under Section 13 or 15(d) of the Securities 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.)
111 PRESIDENTIAL BOULEVARD,
SUITE 158
BALA CYNWYD, PA 19004
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(Address of Principal Executive Offices)
(610) 771-0234
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(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 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 47,459,503 issued
and outstanding shares of the registrant's common stock, par value $.001 per
share, as of May 20, 2004.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) 3
Condensed Consolidated Statements of Operations - (unaudited) 4
Condensed Consolidated Statements of Cash Flows - (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 18
Item 3. Controls and Procedures 24
PART II. OTHER INFORMATION
Item 2. Changes In Securities and Small Business Issuer
Purchases of Equity Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 27
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Condensed Consolidated Balance Sheets
ASSETS
March 31, December 31,
2004 2003
------------ ------------
(Unaudited) (Audited)
Current assets
Cash and cash equivalents $ 87,173 $ 15,832
Accounts receivable 14,000 15,050
Accounts receivable - related party 154,926 154,926
Notes and interest receivable 65,310 64,309
Prepaid expenses 48,266 87,421
------------ ------------
Total current assets 369,675 337,538
Developed oil and gas interests net, using successful efforts 46,617 46,617
Oil and gas properties, cost not being amortized 312,537 310,991
Investment in limited partnerships 927,149 940,667
------------ ------------
$ 1,655,978 $ 1,635,813
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 713,883 $ 735,126
Accounts payable and accrued expenses - related party 382,109 392,707
Payables for oil and gas interests - related party 25,010 25,010
Notes Payable 8,178 8,178
Notes payable - related party 763,000 1,178,365
Dividends payable on Series A preferred 399,708 309,708
Convertible debentures, net of discounts 1,611,276 1,998,768
------------ ------------
Total current liabilities 3,903,164 4,647,862
Series A Preferred Stock, Subject to Mandatory Redemption 3,600,000 3,600,000
------------ ------------
Total Liabilities 7,503,164 8,247,862
------------ ------------
Commitments and contingencies
Minority interest -- --
Stockholders' Deficit
Preferred stock, Series A, $.001 par value authorized 10,000,000 shares;
5,538,461 shares issued and outstanding as of March 31, 2004 and
December 31, 2003 -- --
Preferred stock, Series B, $.001 par value authorized 15,000,000 shares;
829,755 shares issued and outstanding as of March 31, 2004 and 0 at
December 31, 2003 830 --
Common stock, $.001 par value authorized 100,000,000 shares;
16,067,198 shares issued, issuable and outstanding as of March 31, 2004
and 14,617,198 at December 31, 2003 16,067 14,617
Additional paid in capital 9,364,568 3,755,008
Deferred compensation (1,833) (2,083)
Less stock subscription receivable (30,000) --
Deficit accumulated during development stage (15,196,818) (10,379,591)
------------ ------------
Total stockholders' equity (deficit) (5,847,186) (6,612,049)
------------ ------------
$ 1,655,978 $ 1,635,813
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Condensed Consolidated Statements of Operations
(Unaudited)
April 2, 1997
Three Months Ended (Inception)
March 31, to
-------------------------------- March 31,
2004 2003 2004
------------ ------------ ------------
Revenues $ 5,905 $ 82,879 $ 424,648
------------ ------------ ------------
Operating expenses
Production expenses 2,171 24,118 205,682
Depletion and amortization -- 53,423 448,271
Impaired properties -- -- 2,535,979
General and administrative- related party 22,500 22,500 212,130
General and administrative 140,025 289,554 1,779,964
------------ ------------ ------------
Total operating expenses 164,696 389,595 5,182,026
------------ ------------ ------------
Loss from operations (158,791) (306,716) (4,757,378)
------------ ------------ ------------
Other (income) expense
Interest income (1,001) (1,315) (42,822)
Interest expense 212,111 394,240 2,665,721
Interest expense - Series A Preferred 90,000 -- 271,489
Gain on extinguishment debt (316,499) -- (316,499)
Loss on sale of stock -- -- 2,664,573
Partnership investment loss 21,518 7,324 1,067,916
------------ ------------ ------------
Total other expenses, net 6,129 400,249 6,310,378
------------ ------------ ------------
Loss before minority interest (164,920) (706,965) (11,067,756)
Minority interest -- 1,600 3,700
------------ ------------ ------------
Net loss after minority interest (164,920) (705,365) (11,064,056)
Cumulative effect of change in Accounting Principle -- -- 647,764
------------ ------------ ------------
Net Loss (164,920) (705,365) (10,416,292)
Preferred dividend on series A preferred stock 4,652,307 30,000 4,780,526
------------ ------------ ------------
Net loss to common shareholders $ (4,817,227) $ (735,365) $(15,196,818)
============ ============ ============
Basic and diluted loss per common share $ (0.31) $ (0.05) $ (1.89)
============ ============ ============
Basic and diluted weighted average common
shares outstanding 15,301,981 14,318,297 8,041,084
============ ============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-4-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
April 2, 1997
Three Months Ended (inception)
March 31, to
------------------------------ March 31,
2004 2003 2004
----------- ----------- -----------
Net cash used in operating activities $ (190,113) $ (336,416) $(1,671,613)
----------- ----------- -----------
Cash flows from investing activities
Advances -- (30,000) (242,700)
Repayment from unrelated party -- -- 166,600
Loan to unrelated party -- -- (50,000)
Loan to related party -- -- (13,650)
Proceeds from sale of marketable securities -- -- 1,735,897
Purchases of marketable securities -- -- (22,268)
Purchase of limited partnership, net of cash -- (146,821) (146,821)
Purchase of oil and gas interests (1,546) -- (852,173)
Investment in limited partnerships (8,000) -- (1,942,728)
Distribution from limited partnerships -- 37,232 37,232
----------- ----------- -----------
Net cash used in investing activities (9,546) (139,589) (1,330,611)
----------- ----------- -----------
Cash flows from financing activities
Issuance of debt -- 207,000 2,252,854
Issuance of debt - related party 41,000 -- 1,873,053
Repayment of debt -- -- (788,000)
Repayment of debt - related party -- (20,000) (1,606,688)
Offering costs -- -- (97,500)
Issuance of common stock, net of offering costs 230,000 305,000 1,452,478
Collection of minority subscription receivable -- -- 3,200
----------- ----------- -----------
Net cash provided by financing activities 271,000 492,000 3,089,397
----------- ----------- -----------
Net increase in cash and cash equivalents 71,341 15,995 87,173
Cash and cash equivalents, beginning of period 15,832 26,980 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 87,173 $ 42,975 $ 87,173
=========== =========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-5-
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 2003 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, 2004.
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 three months ended March 31, 2004 and 2003 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 as follows:
Three Months Ended
September 30,
------------------------------
2004 2003
----------- -----------
Net loss, to common stockholders as
Reported $(4,817,227) $ (735,365)
Add: Stock-based employee compensation
expense included in reported
net income determined under APB
No. 25, net of related tax effects 250 223
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 $(4,816,977) $ (834,642)
----------- -----------
Earnings per share:
Basic - as reported $ (0.31) $ (0.05)
Basic - pro forma $ (0.31) $ (0.06)
-6-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
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 Texas corporation and 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.
During the first quarter 2004, the Company's and CSR-Hackberry Partners, LP main
producing well, the Hooks State well #1, was offline for maintenance. The well
was brought back online in April 2004.
NOTE 3 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS
Included below is the Company's investments and activity in oil and gas
activities which consisted of the following at March 31, 2004:
Accumulated
Total Cost of Depletion and Net
Oil and Gas Impairment Capital
Properties Allowance Assets
---------- ---------- ----------
Unproved properties acquisition costs $1,716,341 $1,403,804 $ 312,537
Proved properties acquisition costs 1,626,912 1,580,295 46,617
Well and development costs -- -- --
Drilling in progress -- -- --
---------- ---------- ----------
Net $3,343,253 $2,984,099 $ 359,154
========== ========== ==========
Included below is the Company's investments and activity in oil and gas
activities which consisted of the following at December 31, 2003:
Accumulated
Total Cost of Depletion and Net
Oil and Gas Impairment Capital
Properties Allowance Assets
---------- ---------- ----------
Unproved properties acquisition costs $1,714,795 $1,403,804 $ 310,991
Proved properties acquisition costs 1,626,912 1,580,295 46,617
Well and development costs -- -- --
Drilling in progress -- -- --
---------- ---------- ----------
Net $3,341,707 $2,984,099 $ 357,608
========== ========== ==========
-7-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 3 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS (Continued)
Touchstone
Resources
2001 -
Hackberry Louisiana
Drilling Shelf PHT
PH Gas, LP Fund, LP Partners, LP Partners, LP LS Gas, LLC Total
----------- ----------- ----------- ----------- ----------- -----------
Ownership Percentage 29.95% 10.26% 9.9% 4.25% 2.0%
Original Cost Basis $ 269,700 $ 403,997 $ 913,500 $ 78,693 $ 142,000 $ 1,807,890
Pro-rata share of gain (loss)
(35,546) (333,396) (448,393) -- -- (817,335)
Cash Distributions (10,000) (39,906) (13,500) -- -- (63,406)
----------- ----------- ----------- ----------- ----------- -----------
Total $ 224,154 $ 30,695 $ 451,607 $ 78,693 $ 142,000 $ 927,149
=========== =========== =========== =========== =========== ===========
The following table represents the Investment in Limited Partnership at December
31, 2003:
Touchstone
Resources
2001 -
Hackberry Louisiana
Drilling Shelf PHT
PH Gas, LP Fund, LP Partners, LP Partners, LP LS Gas, LLC Total
----------- ----------- ----------- ----------- ----------- -----------
Ownership Percentage 30.12% 10.26% 9.90% 4.23% 2.0%
Original Cost Basis $ 263,900 $ 403,997 $ 913,500 $ 76,493 $ 142,000 $ 1,799,890
Pro-rata share of loss (27,972) (320,210) (447,635) -- -- (795,817)
Cash Distributions (10,000) (39,906) (13,500) -- -- (63,406)
----------- ----------- ----------- ----------- ----------- -----------
Total $ 225,928 $ 43,881 $ 452,365 $ 76,493 $ 142,000 $ 940,667
=========== =========== =========== =========== =========== ===========
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
Endeavour International Corporation, formerly known as 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 Company's common stock. 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 had one common
director who was the President of the Company at the time the transaction was
completed.
-8-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 3 - OIL AND GAS INTERESTS AND LIMITED PARTNERSHIP INTERESTS (continued)
As of March 31, 2004, CSR-WAHA owed the operator of the wells approximately
$384,000 and had not made a payment to the operator since 2002. As a result of
not paying the operator, CSR-WAHA did not receive any royalty checks from the
operator, nor did it receive any production data or reserve estimates and was,
therefore, unable to determine the amounts of proved reserves available as of
March 31, 2004 or December 31, 2003. CSR-WAHA has recorded an impairment charge
of $938,592 during 2003 as a result of certain wells going offline by the end of
2003. In addition, the Company has recorded an impairment charge of $1,235,248
on its investment in CSR-WAHA during 2003. Because of these factors, CSR-WAHA
has reflected its remaining capitalized costs as unproved property acquisition
costs in the amount of $312,537 and $310,910 as of March 31, 2004 and December
31, 2003, respectively.
The Company accounts for its investment in CSR Waha Partners, L.P. using the
consolidation method.
PH GAS, L.P. - SELECTED INFORMATION
On February 29, 2004 the limited partnership agreement of PH Gas, L.P. was
amended to reflect additional partner's capital contributions of which the
Company contributed $5,800 during the first quarter of 2004. The Company's
interest decreased from 30.1 % to approximately 30.0% as other partners
contributions were greater than the Company's.
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 February 2004, APICO issued capital calls of $200,000 to its members for
exploration costs in the PhuHorm prospect. PH Gas, L.P.'s portion of this call
was $19,520. As of March 31, 2004, PH Gas paid $19,520 related to its portion of
the capital call.
The Company accounts for this interest using the equity method.
PHT PARTNERS, L.P. - SELECTED INFORMATION
On August 14, 2002, the Company entered into a limited partnership agreement
with PHT Gas, LLC the general partner. The limited partnership formed was PHT
Partners, L.P. ("PHT") of which the Company received a limited partnership
interest of 4.1% in exchange for a $50,000 capital contribution in 2002 and
additional contributions of $2,200 and $26,493 in the first quarter of 2004 and
during 2003, respectively. On August 27, 2003, the limited partnership agreement
of PHT Partners, L.P. was amended to reflect additional partners' capital
contributions, which increased the Company's interest to 4.2%. PHT invested a
total of $1,786,823 in APICO as of December 31, 2003, in return for 883 units,
which represented a 21.54% interest.
-9-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 3 - 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 PHT Partners, L.P. However, PHT Partners, L. P. is
subject to cash calls from its investment in APICO as explained below. If PHT
Partners, L. P. does not meet its cash calls, then the Company's investment in
PHT Partners, L.P. may become impaired. The APICO membership agreement provides
that PHT Partners, 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 PHT Partners, 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' shares for 1% of their original purchase
price.
The Company accounts for this interest using the cost method.
NOTE 4 - NOTES PAYABLE
Notes payable and convertible notes consisted of the following at:
March 31, December 31,
2004 2003
----------- -----------
12% Secured convertible note $ 2,070,000 $ 2,100,000
10% Promissory note 8,178 8,178
10% Promissory note - related party 763,000 722,000
Approx. 6% Loan Facility - related party -- 456,365
----------- -----------
2,841,178 3,285,543
Less unamortized discount (458,724) (101,232)
----------- -----------
$ 2,382,454 $ 3,185,311
=========== ===========
12% SECURED CONVERTIBLE NOTE
In April 2002 and subsequently in July 2003, the Company entered into two loan
agreements pursuant to which it borrowed a total of $2,100,000 from Trident
Growth Fund, L.P. ("Trident"). The Company's obligation to repay the loans are
evidenced by 12% convertible promissory notes and are secured by substantially
all of the assets of the Company including a collateral mortgage and assignment
of lease and working interests in the Company's oil and gas wells. The loans
bear interest at 12%, payable monthly and originally matured on October 31,
2003, and were subsequently amended to extend the maturity dates June 30, 2004
and July 31, 2004. Trident, in its sole discretion has the right to convert any
or all of the outstanding loan principal balance plus accrued interest into
shares of the Company's common stock at an original conversion rate of $1.00 per
share. As an inducement to make the loans and extend their maturity dates, the
Company issued Trident warrants to purchase a total of 520,000 shares of the
Company's common stock, with initial exercise prices ranging from $1.00 to $0.38
per share and a term of 10 years. Included in the loan agreement were certain
financial covenants which the Company was required to comply with.
The conversion rate of the note and exercise price of the warrants 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 were amortized over the term of the original loan.
In January 2003 the conversion price of the loan and warrants were reset to
$0.55 per share.
-10-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 4 - NOTES PAYABLE (continued)
In March 2003, the Company issued Trident warrants to purchase 25,000 shares of
the Company's common stock as an inducement to waive the financial covenants
until December 2003. The warrants had an original exercise price of $0.55 per
share and were to originally expire in April 2002.
In July 2003, the conversion price of the loan and warrants were reset to $0.38
per share.
Based on the warrant price reset in July 2003, the Company recorded $15,000 and
$38,200 in financing costs for the March 2003 covenant waiver and July 2003
original loan extension to June 30, 2004, which are being amortized over the
life of the respective extensions.
In November 2003, Trident granted the Company a waiver of time to meet the
financial covenants within the loan agreements until their maturity in July
2004.
In February and March 2004, the conversion price of the loan and warrants were
reset to $0.20 and $0.13 per share, respectively.
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
the original issuances of the convertible promissory notes and warrants based on
a fair value basis of each item. The fair value of the warrants was determined
to be $225,000 for the 300,000 warrants issued with the original convertible
loan from April 2002 and $39,600 for the 120,000 warrants issued for the
additional loan in July 2003. A beneficial conversion discount of $1,275,000 for
the original convertible note was recorded in 2002. In 2003 the Company recorded
a beneficial conversion feature of 118,547 as the second loan from Trident. The
Company recorded an additional $481,684 beneficial conversion feature in 2004
related to the reset of the conversion price. The Trident promissory notes were
convertible into common shares of stock at a rate of $0.55 and $0.38 and $0.20
per share while the prevailing stock share price was $1.00, $0.43 and $0.27,
respectively. As of March 31, 2004, December 31, 2003 and March 31, 2003, the
Company amortized $124,192, $1,275,833 and $280,824, respectively of the
discount related to the value of the warrant and beneficial conversion feature
as interest expense.
In February 2004, Trident exercised its rights under the loan agreements and
converted $30,000 of principal into 150,000 shares of common stock of the
Company. As of March 31, 2004, $2,070,000 of principal remained outstanding
under the notes.
10% PROMISSORY NOTES - RELATED PARTY
As of March 31, 2004, CSR-Hackberry Partners, LP had borrowed $25,000 from
CSOR with interest payable at 10% per annum and
is due on demand. As of March 31, 2004, the Company had accrued $2,375 of
interest under the promissory note. The Company and CSOR
had one common director on their Board of Directors who also
served as president of the Company.
In January 2003, the Company financed $1.5 million of the purchase price of
CSR-Waha Partners, LP with a promissory note issued to CSOR. The note bears
interest at the rate of 10% per annum and initially matured on April 30, 2003,
with an option provision to extend the maturity date. On April 30, 2003, the
Company exercised its extension rights and extended the maturity date of the
note to June 30, 2004. In consideration for the extension, the Company issued
CSOR 100,000 shares of the Company's commons stock. The Company recorded
financing costs of $47,000 in connection with the extension and is amortizing
the costs over the life of the extension. As of March 31, 2004, the remaining
outstanding principal balance of the loan was $670,000.
OTHER NOTES PAYABLE
During January 2004, the Company borrowed an additional $41,000 from 1025
Investments and issued various 3% demand promissory notes for a total
outstanding principal balance of $47,000 as of March 31, 2004.
As of March 31, 2004, the Company had other demand notes totaling $29,178.
-11-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 4 - NOTES PAYABLE (continued)
LIBOR LOAN FACILITY
In connection with the investment transaction in April 2003 with Ocean Resource
Capital Holdings, Ltd ("ORCH"), the Company borrowed $587,053 under a loan
facility with a maturity date of May 31, 2003. The loan facility bears interest
at the rate of the London Inter-Bank Offering Rate ("LIBOR") at the end of each
month the loan is outstanding plus two percent. The loan facility was secured by
the shares issued to the Company by ORCH. The Company also incurred an
arrangement fee of 4% on the amount of each draw on the facility. In August
2003, the Company repaid $130,687 of principal. On February 27, 2004, the
Company satisfied all its outstanding indebtedness to ORCH, including the loan
facility, all accrued and unpaid interest and the arrangement fee totaling
$504,348 through the issuance of 829,755 shares of Series B Convertible
Preferred Stock plus warrants to acquire 150,000 shares of common stock of the
Company (see Note 6).
NOTE 5 - 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 accrued at March 31, 2004 was $399,708.
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 1,450,000 ordinary shares of ORCH.
On February 27, 2004, BP Investments, LP ("BP") entered into an agreement to
purchase 5,538,461 shares of the Company's Series A Convertible Preferred Stock
from ORCH. Subsequent to the sale, on March 23, 2004, the Company authorized
certain amendments to the certificate of the designation of the Series A
Convertible Preferred Stock. The restriction limiting the number of shares
convertible by the holder of the Series A Convertible Preferred stock to an
amount that would result in the holder beneficially owning less than 4.99% of
the issued and outstanding common stock was eliminated. The conversion rate was
also increased from one share of Series A Convertible Preferred convertible into
one share of common stock to one share of Series A Convertible Preferred Stock
convertible into five shares of common stock. On the date of change in the
conversion rate of the Series A Shares, the closing price of the common stock of
the Company was $0.21 per share. As of March 31, 2004 the Company has recorded a
preferred dividend which amounted to $4,652,307 based on the value of the
additional shares of common stock issuable on conversion at the new conversion
rate.
-12-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY
In January 2004, the Company commenced raising capital through a private
offering of up to 7,500,000 shares of common stock, $.001 par value per share,
and warrants ("Warrants") to acquire up to 3,750,000 shares of common stock. The
shares and warrants were sold in units comprised of two shares of common stock
and one warrant ("units"). The units were sold at a purchase price of $0.40 per
unit. Each warrant is initially exercisable into one share of common stock at an
exercise price of $0.30 per share, subject to adjustment, for a period of three
years from the date of issuance. In February 2004, the Company sold a total of
650,000 units for $260,000 of which all but a $30,000 subscription receivable
had been received.
In January 2004, Trident exercised its conversion rights and converted $30,000
of principal from its convertible notes payable into 150,000 shares of the
Company's common stock.
On February 27, 2004 the Company entered into a securities purchase agreement
with ORCH, whereby ORCH purchased 829,755 shares of the Company's Series B
Convertible Preferred Stock and warrants to purchase 150,000 shares of the
Company's common stock at an exercise price of $0.55 per share which expire on
February 27, 2007. On the date of issuance, the closing price of the common
stock of the Company was $0.21 cents per share. Based on this closing price, the
Company valued the Series B Convertible Preferred Stock in the amount of
$174,249 and using the Black-Scholes model, valued the warrants at $13,600 for
total consideration of $187,849. In consideration for the Series B Convertible
Preferred Stock and warrants, ORCH agreed to cancel the total outstanding
principal balance on the Libor Loan Facility and to waive the interest payable
and the arrangement fee on the facility, the total of which amounted to $504,348
as of February 27, 2004. Under the guidance of Financial Accounting Standard 15
"Accounting by Debtors and Creditors for Troubled Debt Restructurings", the
Company recorded a gain in the amount of the difference between the value of the
loans, interest and fees extinguished in excess of the value of the securities
issued to satisfy those liabilities, which amounted to $316,499 as of March 31,
2004.
The Series B Convertible Preferred Shares are non-voting and automatically
convert to common stock of the Company upon the bankruptcy or dissolution of the
Company. The holder of the Series B Convertible Preferred Stock may convert one
preferred share into one share of common stock at any time, subject to
adjustment. The Company may redeem the Series B Convertible Preferred Shares for
$0.01 per share upon 30 days written notice provided that (i) the average of the
closing bid price of the Company's common stock is in excess of $1.00 per share
for twenty (20) trading days preceding the date of the redemption notice and
(ii) the shares of common stock issuable upon conversion of the Series B
Convertible Preferred Stock are either subject to an effective registration
statement or transferable pursuant to rule 144(k) promulgated under the
Securities Act of 1933. The redemption notice shall call upon each holder of
Series B Convertible Preferred Stock to either surrender the Series B
Convertible Preferred Stock held or convert it to common stock prior to the date
of redemption.
STOCK WARRANTS
The Company had the following warrants outstanding to purchase its common stock
at March 31, 2004:
Expiration Date Exercise Price Shares
--------------- -------------------- -----------------
April 2004 $ 1.25 310,000
July 2008 $ 0.13 120,000
April 2012 $ 0.13 425,000
November 2005 $ 0.60 702,666
February 2007 $ 0.55 150,000
February 2007 $ 0.30 650,000
-----------------
Common Stock 2,357,666
=================
-13-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY (continued)
The Company had the following outstanding common stock options to purchase its
securities as of March 31, 2004:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------- ---------------------------------------
Number of Weighted Weighted Number Weighted
Range of Outstanding Shares Average Average Exercisable at Average
Exercise at March 31, Remaining Exercise March 31, Exercise
Prices 2004 Contract Life Price 2004 Price
- ------------------ ---------------------- ------------------ ---------------- ------------------ -----------------
$ 0.40 25,000 1.50 $ 0.40 25,000 $ 0.40
$ 0.65 700,000 2.08 $ 0.65 700,000 $ 0.60
NOTE 7 - 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 months ending March 31,
2004 and March 31, 2003, the total number of potentially dilutive shares
excluded from diluted net loss per common share were 41,954,726 and 10,603,400,
respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS - NOT DECSRIBED ELSEWHERE / CONCENTRATIONS
The Company entered into a consulting agreement with ESC Consulting Services
Corp. on May 31, 2002. This agreement is for 36 months with a total compensation
of $216,000, to be paid $6,000 on the first day of each month. The Company
incurred $18,000 of consulting expense as of March 31, 2004 and March 31, 2003.
The president of ESC Consulting is a director and sole officer of the Company.
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 until March 2004, was the
general partner of PHT Partners, L.P., PH Gas, L.P., BPK South Valentine
Partners, L.P. and CSR-Hackberry Partners, L.P.
NOTE 9 - GOING CONCERN
The accompanying financial statements have been prepared in accordance with U.S.
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. The Company incurred net losses to common
stockholders of $4,817,227 for the quarter ended March 31, 2004 and $15,196,818
for the period April 2, 1997 (date of inception) to March 31, 2004. These net
losses included non-cash charges related to services provided, amortization of
debt discount and loan cost and preferred dividends of $7,137,024 since
inception. Consequently, the aforementioned items raise substantial doubt about
the Company's ability to continue as a going concern.
The Company is in its development state and has significant debt obligations to
repay and its current liabilities exceed its current assets. 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 interest and to
acquire additional properties.
-14-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 9 - GOING CONCERN (continued)
The Company believes that its projected revenues from oil and gas operations,
the conversion of the Series A Convertible Preferred Stock to common stock, the
conversion of the LIBOR loan facility to Series B Convertible Preferred Stock
and sales of equity and debt securities in private placements in 2004 will
provide sufficient funds to fund its operations through December 2004. The
Company will be required to raise funds through additional offerings of its
securities in order to have the funds necessary to meet its working capital
requirements, and cash calls related to various interest in oil and gas
prospects, complete other acquisitions and continue its operations.
The Company's ability to continue as a going concern is dependent upon raising
capital through debt and equity financing on terms desirable to the Company. 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 may
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, or even be required to relinquish
its interest in the properties or in the extreme situation, cease operations.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE 10 - 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.
-15-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 11 - 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 March
31, 2004:
Touchstone
Resources-2001 Louisiana
Hackberry Shelf
PH Gas, LP Drilling Fund, LP Partners, LP
------------ ------------ ------------
Total Assets $ 748,879 $ 153,458 $ 5,188,028
============ ============ ============
Total Liabilities $ -- $ 140,867 $ 290,822
============ ============ ============
Results of Operations
Sales -- 2,768 --
Gross profit -- (128,514) --
Net income (loss) $ (25,290) $ (128,525) $ (7,663)
The following schedule lists the total assets, liabilities and results of
operations of the limited partnerships which the Company is invested in at March
31, 2003:
Touchstone
Resources-2001 Louisiana
Hackberry Shelf
PH Gas, LP Drilling Fund, LP Partners, LP
------------ ------------ ------------
Total Assets $ 498,493 $ 214,905 $ 5,724,756
=========== =========== ===========
Total Liabilities 50,000 193,063 6,912
=========== =========== ===========
Results of Operations
Sales -- 98,991 --
Gross profit -- 66,030 --
Net income (loss) $ (7,666) $ (47,097) $ (9,972)
NOTE 12 - SUBSEQUENT EVENTS
On April 12, 2004, BP Investments exercised its rights and converted 100% of the
outstanding shares of Series A Convertible Preferred Stock into 27,692,305
shares of common stock of the Company, which had the effect of a change in
control of the Company, since this represented approximately 65% of the issued
and outstanding common stock of the Company on that date.
In April 2004, the Company entered into an Assignment and Assumption Agreement
with Montex Exploration, Inc. ("Montex") (the "Agreement"), whereby BPK has
assumed all of the rights and responsibilities of Montex pursuant to a letter of
Intent entered into by Montex with Bell Coast Capital Corp. ("Bell Coast") with
respect to exploration of the Shadow Mountain Project in Mongolia ("the
Property"). Under the terms of the Agreement, BPK can earn up to a 50% interest
in the Property by contributing $CDN 2.4 Million in exploration costs within 18
months of the signing of the Agreement. BPK paid total consideration of $184,000
and 5,000,000 shares of BPK common stock to Montex in consideration for the
assignment and for reimbursement of funds advanced pursuant to the Agreement.
-16-
BPK RESOURCES, INC.
(A DEVELOPMENT STAGE ENTITY)
Notes to Condensed Consolidated Financial Statements
NOTE 12 - SUBSEQUENT EVENTS (continued)
The Shadow Mountain Property is a copper and gold mining prospect, which is
composed of two licenses totaling 55,219 ha (approximately 138,000 acres) in the
South Gobi Province of Mongolia. The Company has entered the mining industry
with this acquisition
In April 2004, the Company entered into a Securities Purchase Agreement with
Ritchie Long/Short Trading, Ltd., a Cayman Islands exempted company ("Ritchie
Trading"). Under the Securities Purchase Agreement, Ritchie Trading purchased
from the Company 1,250,000 Units, resulting in gross proceeds to the Company of
$500,000. Each unit consists of two shares of common stock of the Company and
one warrant to acquire one share of common stock of the Company with an exercise
price of $0.30 cents per share and an expiration date three years from the date
of grant.
In April 2004, the Company's President and Chairman of the Board resigned and
was replaced by the existing secretary and treasurer of the Company.
-17-
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included or incorporated by reference in this
report, including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected revenues, projected costs and
plans and objectives of management for future operations, are forward-looking
statements. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"project," "estimate," "anticipate," or "believe" or the negative thereof or any
variation thereon or similar terminology. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially
from our expectations include, but are not limited to, our assumptions about
energy and mineral markets, production levels, reserve levels, operating
results, competitive conditions, technology, the availability of capital
resources, capital expenditure obligations, the supply and demand for oil,
natural gas, minerals and other products or services, the price of oil, natural
gas, minerals and other products or services, currency exchange rates, the
weather, inflation, the availability of goods and services, successful
exploration, drilling and extraction, drilling and extraction risks, future
processing volumes and pipeline throughput, general economic conditions, either
nationally or internationally or in the jurisdictions in which we or any of our
subsidiaries are doing business, legislative or regulatory changes, including
changes in environmental regulation, environmental risks and liability under
federal, state and foreign environmental laws and regulations, the securities or
capital markets and other factors disclosed in our Annual Report on Form 10-KSB
under the caption "Risk Factors" and other filings with the Securities and
Exchange Commission. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in
their entirety by these cautionary statements. We assume no duty to update or
revise its forward-looking statements based on changes in internal estimates or
expectations or otherwise.
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 primarily in the business of acquiring, exploring and developing
natural gas and oil properties. We have directly, through our consolidated
subsidiaries, and through equity interests in limited partnerships and limited
liability companies, acquired leasehold interests in prospects in Texas,
Louisiana and Thailand. We recently diversified our holdings by purchasing
mineral exploration rights in the South Gobi Province of Mongolia. During the
next twelve (12) months, we will continue to evaluate additional property
interests in Texas, Louisiana and other traditional oil and gas producing states
in the southwestern United States, and in oil, gas or mining projects throughout
the world. With the assistance of various third parties, we plan to explore and
develop these prospects and sell on the open market any gas, oil or minerals
discovered.
-18-
In furtherance of this plan, we intend to continue to subcontract the
performance of substantially all of the physical operations at our properties.
As a result, 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 which we employ. We intend to
play an active role in evaluating prospects, and providing financial and other
management functions with respect to each of our properties.
BUSINESS STRATEGY
We seek to create shareholder value by building oil, gas and mineral
reserves, production revenues and operating cash flow. This strategy consists of
three distinct components. First, developing reserves and generating revenue
through the exploration and development of our existing oil and gas prospects in
Louisiana, Texas and Thailand, and our mining project in Mongolia. Second,
completing selective acquisitions of additional oil and gas properties both
offshore and onshore in Texas, Louisiana and other traditional oil and gas
producing states in the southwestern United States, and additional mining
projects in traditional mineral producing properties throughout the world.
Third, selling all or part of our interests in certain of our partnerships or
limited liability companies or all or part of leasehold interests we own to
realize immediate capital 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 none of our projects have any wells producing oil or gas in
commercial quantities.
Successful execution of this strategy depends on our ability to identify
and acquire oil, gas and mineral reserves on a cost-effective basis and
thereafter, to either develop or sell properties in which we have an interest.
We believe that effective reserve assessment analysis, engineering and surveying
of potential prospects in a timely and cost-efficient basis and the ability to
generate capital, either from operations or sales of our debt or equity
securities, to exploit available opportunities, are the most important factors
to successfully execute our plan.
We will continue to rely on third parties for substantially all
operational activities. We rely on Touchstone Resources USA, Inc., a Texas
corporation, the executive vice president of which sits on our board of
directors, to assist and advise us regarding the identification and leasing of
oil and gas 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 will also rely upon various third parties to
drill wells, deliver any gas or oil that is discovered to the ultimate
purchasers and assist us in the negotiation of all sales contracts with
purchasing parties.
-19-
We currently rely on Bell Coast Capital Corp ("Bell Coast") to oversee
operations at the Mongolian mining property. Bell Coast, in turn, relies on
various surveyors experienced in Mongolian logistics and operations.
Our ability to generate future revenues and operating cash flow will be
dependent on the successful development of our inventory of capital projects,
the volume and timing of any production, our ability to acquire and dispose of
our prospects, as well as commodity prices for oil, gas and minerals. Such
pricing factors are largely beyond our control, and may result in fluctuations
in our earnings. We may increase or decrease our planned activities for 2004,
depending upon drilling results, product prices, the availability of capital
resources, and other factors affecting the economic viability of such
activities. We do not attempt to forecast our potential success rate on
exploratory drilling.
In order to strengthen our balance sheet and put us in a better position
to raise the capital necessary to continue to execute our business plan, since
January 1, 2004, we negotiated the conversion of approximately $460,000 of our
outstanding term indebtedness and $40,000 of accrued interest and loan
arrangement fees into preferred equity and $3,600,000 face amount of outstanding
preferred stock subject to mandatory redemption into common stock. In addition,
we recently announced our intention to divest certain of our oil and gas
interests in exchange for the conversion of approximately $3,000,000 of our
outstanding indebtedness. Although this will require us to divest prospects
which may have substantial potential, we intend to retain some portion of our
interest in such projects. We believe this action is necessary to provide us
with the ability to fund capital calls and continue to acquire additional
property interests.
We are in the development stage, have significant debt obligations to
repay, have current liabilities that exceed our current assets and have incurred
substantial losses since inception. We will need significant funds during the
next twelve months to meet cash calls on our various interests in oil, gas and
mineral prospects and to acquire additional properties. Due to these and other
factors, our independent auditors have included an explanatory paragraph in
their opinion for the year ended December 31, 2003 as to the substantial doubt
about our ability to continue as a going concern. In order to continue
operations, we must continue to raise the capital necessary to fund existing and
new opportunities and our long-term viability and growth will ultimately depend
upon acquiring interests in successful projects, as to which there can be no
assurances.
-20-
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
2003.
REVENUES
We generated $5,905 of revenue during the three months ended March 31,
2004 as compared to $82,879 during the corresponding period in 2003. The revenue
consisted of oil and gas sales from our net revenue interest in the Hackberry
Prospect located in Jefferson County, Texas ("Hackberry Prospect"). The sole
operating well on the Hackberry Prospect was taken offline for maintenance
during the three months ended March 31, 2004 and was brought back online in
April 2004. We expect to continue to generate revenue from these and other
interests during the remainder of 2004.
PRODUCTION EXPENSES
Production expenses were $2,171 during the three months ended March 31,
2004, as compared to $24,118 during the three months ended March 31, 2003. The
decrease was due to the production well in the Hackberry Prospect being taken
offline.
We did not incur any depletion and amortization expenses during the three
months ended March 31, 2004 as compared to $53,423 of such expenses during the
corresponding period in 2003.
Likewise, we did not incur any impaired properties expense during the
three months ended March 31, 2004 or during the corresponding period in 2003.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, including those from related parties,
decreased $149,529 to $162,525 during the three months ended March 31, 2004 as
compared to $312,054 for the corresponding period in 2003. The decrease was
primarily due to a decrease in consulting expenses, professional fees and
marketing expenses related to the development stage nature of our company. We
expect general and administrative expenses to remain at current levels during
the remainder of 2004.
OTHER (INCOME) AND EXPENSE
Other expense decreased $394,120 to $6,129 during the three months ended
March 31, 2004 as compared to $400,249 for the three months ended March 31,
2003. The decrease was primarily due to a $316,499 gain on extinguishment of
debt resulting from our issuance of 829,755 shares of Series B Preferred Stock
and warrants to acquire 150,000 shares of common stock issued in satisfaction of
$504,348 of outstanding indebtedness and a $182,129 decrease in interest expense
resulting from lower amortization of debt discounts in connection with loans
from Trident Growth Fund, LP. The forgoing amounts were partially offset by
$90,000 of interest expense representing accrued dividends on our Series A 10%
Convertible Preferred Stock which contains a mandatory redemption feature.
-21-
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the three months ended March
31, 2004 was $190,113 compared to $336,416 during the three months ended March
31, 2003. The primary use of cash in operating activities was to fund the net
loss. Net cash used in investing activities for three months ended March 31,
2004 was $9,546 compared to $139,589 for three months ended March 31, 2003. The
use of cash consisted of the purchase of oil and gas interests and investment in
limited partnerships interests.
Net cash provided by financing activities during three months ended March
31, 2004 was $271,000 compared to $492,000 during three months ended March 31,
2003 and consisted primarily of the issuance of common stock and warrants and
the issuance of $41,000 of indebtedness to a related party.
Working capital increased $688,835 during the three month period ended
December 31, 2004 to a deficit of $3,533,489 as compared to a deficit of
$4,310,324 as of December 31, 2003. This increase is primarily due to an
increase in cash to $87,173 as compared to $15,832 at December 31, 2003 and an
increase in debt discounts of approximately $458,000 at March 31, 2004 over
December 31, 2003 and our satisfaction of the Ocean Resource Capital Holdings,
Plc ("ORCH") indebtedness of approximately $504,000 through the issuance of our
Series B Preferred Stock and warrants. These amounts were offset by a decrease
in prepaid expenses from $87,421 to $48,266 at December 31, 2003 and an increase
in dividends payable on our series A preferred stock to $399,708 from $309,708
at December 31, 2003.
In April 2002, we issued a $1,500,000 convertible promissory note (the
"Convertible Note") to Trident Growth Fund f/k/a Gemini Growth Fund, LP
("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 $1.00 per share
(currently $.13 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. In November 2003,
Trident waived compliance with these covenants until maturity. During the first
quarter of 2004, Trident converted $30,000 principal amount of the Convertible
Note into 150,000 shares of common stock.
On or about July 29, 2003, we extended the maturity date of the
Convertible Note until June 30, 2004 and issued warrants to Trident to purchase
100,000 shares of common stock at an exercise price of $.38 per share (currently
$.13 per share as a result of adjustment pursuant to anti dilution provisions of
the warrant). 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") on terms substantially similar to
those set forth in the Convertible Note. 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 (currently $.13 per share as a result of
adjustment pursuant to anti dilution provisions of the warrant). 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, July Convertible Note and exercise of warrants issued to
Trident.
-22-
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 was initially due April
30, 2003 and subsequently extended to June 30, 2004 in consideration for which
we issued 100,000 shares of common stock. The current outstanding principal
balance of the note is $670,000.
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 ordinary share and the
right to exercise warrants to purchase additional ordinary shares of ORCH at an
exercise price of 100p per share. During July 2003, we sold all 4,390,000
ordinary shares of ORCH and warrants to purchase 1,463,000 ordinary shares of
ORCH stock for gross proceeds of $1,408,136.
On March 14, 2003, we entered into a loan agreement with ORCH in which
ORCH agreed to advance $600,000 against the contemplated sale of the ORCH
shares. As of February 27, 2004, we owed $456,365 of principal to ORCH. On
February 27, 2004, we issued 829,755 shares of our newly designated Series B
Convertible Preferred Stock (the "Series B Shares") and warrants to purchase
150,000 shares of common stock to ORCH in consideration of the cancellation of
all indebtedness due and owing ORCH. Each Series B Share is immediately
convertible at the option of the holder into one share of common stock at an
effective conversion price of $.55 per share.
During the first quarter and April 2004, we raised gross cash proceeds of
$700,000 through the issuance and sale of units at a purchase price of $.40 per
unit. Each unit consisted of two shares of common stock and warrants to purchase
an additional share of common stock at an exercise price of $.30 per share.
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.
-23-
We are in the development stage, have significant debt obligations to
repay in 2004, and our current liabilities exceed our current assets. As of the
date of this report, we have minimal 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
connection with their investments in APICO, LLC in the approximate amount of
$1,800,000 during the first half of 2004 of which $200,000 has been paid.
Failure to pay amounts due within 45 days after the due date, could result in
such partnerships being forced to sell their interest for 1% of the total
purchase price. Louisiana Shelf Partners, L.P., another limited partnership in
which we have an interest, is subject to capital calls in the approximate amount
of $1,500,000 over the next twelve months of which $486,000 has been funded to
date. We also owe approximately $400,000 of drilling costs associated with our
interest in CSR-Waha Partners, L.P. 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. Under the terms of our recent assignment and assumption agreement, we
can earn up to a 50% interest in the property rights of Bell Coast Capital Corp.
in approximately 138,000 acres in the South Gobi Province of Mongolia. To earn
this interest, we will be required to contribute up to CDN$2,400,000 over the
next eighteen (18) months.
In addition, the $2,070,000 outstanding principal amount of convertible
notes payable to Trident and $670,000 note payable to CSOR Preferred
Liquidation, LLC are due and payable June 30, 2004 and July 31, 2004,
respectively. We intend to divest certain of our oil and gas interests in
exchange for the conversion of these notes and other payables. As of the date
this report, no such sales have been completed.
We believe we will need approximately $6,000,000 to sustain operations at
current levels, satisfy any capital calls and other expenses during the next
twelve months. This amount does not include approximately an additional
$3,000,000 to repay outstanding indebtedness due in 2004. Based on available
cash resources, the cancellation of approximately $3,000,000 of indebtedness in
exchange for certain of our oil and gas interests, proceeds from private
offerings of our equity securities and projected revenue from our various oil,
gas and mineral projects, we believe we will have sufficient funds to continue
to meet such capital calls and operate at current levels for the next twelve
months. 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. 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, to relinquish our interest in
certain prospects or potentially liquidate all of our assets.
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.
-24-
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES
SALES OF UNREGISTERED SECURITIES
1. On April 2, 2004, we issued 1,250,000 units to Ritchie Long/Short
Trading Ltd. at a purchase price of $.40 per unit in consideration of gross cash
proceeds of $500,000. Each unit consisted of two (2) shares of common stock and
one (1) common stock purchase warrant. The warrants are immediately exercisable
at an exercise price of $.30 per share and terminate three years from the date
of grant. The shares were issued in a private placement transaction to one
accredited investor exempt from the registration requirements of the Securities
Act of 1933, as amended, pursuant to Section 4(2) thereof without payment of
underwriting discounts or commissions to any person.
2. On April 12, 2004, we issued 27,692,605 shares of common stock to BP
Investment Group, LLC. upon conversion of 5,538,461 shares of our Series A 10%
Convertible Preferred Stock. The shares were issued in a private placement
transaction to one accredited investor exempt from the registration requirements
of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof
without payment of Underwriting discounts or Commissions to any person
3. On April 19, 2004, we issued 5,000,000 shares of common stock to Montex
Exploration, Inc. in partial consideration for the purchase of certain rights
transferred under an Assignment and Assumption Agreement. The shares were issued
in a private placement transaction to one accredited investor exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof without payment of underwriting discounts or commissions to
any person.
CHANGES IN SECURITIES
SERIES B PREFERRED STOCK. By resolution dated on or about March 5, 2004,
our Board of Directors designated 829,775 of our authorized but unissued shares
of preferred stock as Series B Convertible Preferred Stock (the "Series B
Shares"). All Series B Shares were issued at .55 per share and are immediately
convertible at the option of the holder into one share of common stock. In the
event of a liquidation or dissolution of the Company, the Series B Shares
automatically convert into shares of common stock at an effective conversion
price of $.55 per share. Except as provided in the Nevada General Corporation
Law, holders of Series B Shares have no voting rights. We can redeem the Series
B Shares at any time at our option at a redemption price of $.01 per share so
long as (i) the average of the closing bid prices of our common stock during the
twenty trading days preceding the redemption notice date equals or exceeds $1.00
per share; and (ii) the shares of common stock issuable upon conversion are
either subject to an effective registration statement under the Securities Act
of 1933, or transferable pursuant to Rule 144(k) promulgated thereunder.
SERIES A PREFERRED STOCK. On March 24, 2004, we amended the certificate of
designation of our Series A 10% Convertible Preferred Stock to (i) change the
conversion price from one (1) share of common stock for each share of Series A
Preferred stock to five (5) shares of common stock for each share of Series A
Preferred Stock; and (ii) delete the prohibition against a holder converting
such shares into more than 4.99% of our then outstanding shares of common stock.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
By written consent dated March 24, 2004, the sole holder of all 5,538,461
then outstanding shares of our Series A 10% Preferred Stock approved amendments
to the Certificate of Designation of Series A Preferred Stock. The amendments
consisted of increasing the number of shares of common stock each Series A share
was convertible into from one (1) share to five (5) shares and deleting the
prohibition against a holder converting such shares into more than 4.99% of our
then outstanding shares of common stock.
-25-
ITEM 5. OTHER INFORMATION.
On April 30, 2004, John P. Connally, III resigned from our Board of
Directors and from the offices of President and Chief Executive Officer of the
Company. Concurrent with his resignation, our Board of Directors appointed
Cecile T. Coady to serve as the President and Chief Executive Officer of the
Company.
-26-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
- -------------------- -------------------------------------------- -----------------------------------------------
Exhibit No. Exhibit Method of Filing
- -------------------- -------------------------------------------- -----------------------------------------------
3.1 Articles of Incorporation Incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on
Form 10-SB dated December 20, 1999
- -------------------- -------------------------------------------- -----------------------------------------------
3.2 Bylaws Incorporated by reference to Exhibit 3.2 to
the Registrant's Registration Statement on
Form 10-SB dated December 20, 1999
- -------------------- -------------------------------------------- -----------------------------------------------
3.3 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3.3 to
Incorporation filed October 21, 2002 the Registrant'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 Registrants Annual Report on Form 10-KSB
for the Year Ended December 31, 2002
- -------------------- -------------------------------------------- -----------------------------------------------
3.5 Certificate of Designation of Series B Incorporated by reference to Exhibit 3.5 to
Convertible Preferred Stock the Registrant's Annual Report on Form 10-KSB
for the Year Ended December 31, 2003
- -------------------- -------------------------------------------- -----------------------------------------------
3.6 Amended and Restated Certificate of Incorporated by reference to Exhibit 3.6 to
Designation of Series A 10% Convertible the Registrant's Annual Report on Form 10-KSB
Preferred Stock for the Year Ended December 31, 2003
- -------------------- -------------------------------------------- -----------------------------------------------
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
- -------------------- -------------------------------------------- -----------------------------------------------
-27-
- -------------------- -------------------------------------------- -----------------------------------------------
Exhibit No. Exhibit Method of Filing
- -------------------- -------------------------------------------- -----------------------------------------------
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
- -------------------- -------------------------------------------- -----------------------------------------------
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 Resources the Company's Annual Report on Form 10-KSB
Capital Holdings, PLC dated February 21, for the year ended December 31, 2002
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 April 26, the Company's Quarterly Report on Form 10-QSB
2003 for the quarter ended March 31, 2003
- -------------------- -------------------------------------------- -----------------------------------------------
-28-
- -------------------- -------------------------------------------- -----------------------------------------------
Exhibit No. Exhibit Method of Filing
- -------------------- -------------------------------------------- -----------------------------------------------
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
- -------------------- -------------------------------------------- -----------------------------------------------
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
- -------------------- -------------------------------------------- -----------------------------------------------
-29-
- -------------------- -------------------------------------------- -----------------------------------------------
Exhibit No. Exhibit Method of Filing
- -------------------- -------------------------------------------- -----------------------------------------------
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.
- -------------------- -------------------------------------------- -----------------------------------------------
10.26 Assignment and Assumption dated April 19, Incorporated by reference to Exhibit 10.1 to
2004 by and between the Company and Mantex the Company's Current Report on Form 8-K dated
Exploration, Inc. April 19, 2004
- -------------------- -------------------------------------------- -----------------------------------------------
31.1 Certification by Principal Executive Filed herewith
Officer and Principal Financial Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
- -------------------- -------------------------------------------- -----------------------------------------------
31.2 Certification by Principal Financial Filed herewith
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
- -------------------- -------------------------------------------- -----------------------------------------------
32.1 Certification by the Principal Executive Filed herewith
Officer and Principal Financial Officer
Pursuant to 18 U.S.C. 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
March 31, 2004:
None
-30-
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: May 24, 2004 /S/ CECILE T. COADY
----------------------------------
Cecile T. Coady
Chief Executive Officer, President
and Treasurer
-31-
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
31.1 Certificate of CEO of Registrant required by Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended
31.2 Certificate of Treasurer of Registrant required by Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended
32.1 Certificate of CEO and Treasurer of Registrant required
by Rule 13a-14(b) under the Securities Exchange Act of
1934, as amended
-32-