UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF BPK RESOURCES, INC.
On July 20, 2004, BPK Resources, Inc., (the "Company" or "BPK") entered into a
Purchase and Sale Agreement with BP Preferred Acquisition, LLC (the
"Transactions"), a Delaware limited liability company ("BP Acquisition"),
pursuant to which the Company disposed of 100% of its interests in the following
limited partnerships:
1. CSR-Hackberry Partners, L.P. ("CSR-Hackberry");
2. BPK South Valentine Partners, L.P. ("BPK South");
3. PH Gas, L.P. ("PH Gas");
4. Touchstone Resources 2001-Hackberry Drilling Fund, L.P.
("2001-Hackberry Drilling Fund");
5. Louisiana Shelf Partners, L.P. ("LSP");
6. PHT Partners, L.P. ("PHT Partners"); and
7. LS Gas, LLC. ("LS Gas")
In addition to the disposal of 100% of its interests in the above limited
partnerships, the Company also disposed of 100% of its interest in the
promissory note due from CSR-Hackberry in the amount of $224,000, which was
eliminated in the Company's historical consolidated balance sheet as of June 30,
2004.
In consideration for BPK's disposal of the above assets, BP Acquisition assumed
the following liabilities which the Company has been released from by the
promissory noteholders:
1. The Loan Agreement, dated April 25, 2002, by and between the
Company and Trident Growth Fund, L.P. ("Trident"), the
Security Agreement, dated April 25, 2002, by and between the
Company and Trident, and the 12% Secured Convertible Note,
dated April 25, 2002, in the principal amount of $1,500,000,
issued to Trident ("Original Trident Note");
2. The First Amended Loan Agreement, dated July 29, 2003, between
the Company and Trident, the First Amended Security Agreement,
dated July 29, 2003, by and between the Company and Trident
and the 12% Secured Convertible Note, dated July 29, 2003, in
the principal amount of $600,000, issued to Trident
("Additional Trident Note");
3. The 10% Promissory Note, dated January 15, 2003, in the
original principal amount $1,500,000 originally issued to
Endeavour International Corporation (f/k/a Continental
Southern Resources, Inc.) and currently held by CSOR Preferred
Liquidation, LLC, a Delaware limited liability company, with
an outstanding principal balance of $670,000 as of June 30,
2004 ("CSOR Note") and any and all other agreements and
documents related to the CSOR Note.
The recorded historical value of the assets disposed of was less than the notes
payable assumed.
Since certain common ownership and control exist between the Company and BP
Acquisition, the unaudited pro forma condensed consolidated balance sheet
reflects the Transaction as if the Transaction took place on June 30, 2004. In
accordance with Staff Accounting Bulletin 79, Topic 5T "Accounting for Expenses
or Liabilities Paid by Principal Stockholder", the Company accounted for the
disposal of the abovementioned assets and releases from its liabilities under
the original and additional Trident Note and the CSOR Note as a contribution of
additional paid in capital.
The unaudited pro forma condensed consolidated statements of operations reflect
the Transaction as if the Transaction took place on January 1, 2003.
PROFORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are presented in
accordance of paragraph (d) of Item 310 of Regulation SB and are presented for
illustrative purposes only and are not necessarily indicative of the financial
position and results of operations that would have been achieved if the proposed
transactions had been consummated on the above dates. This unaudited pro forma
information should be read in conjunction with the Company's historical
financial statements for the year ended December 31, 2003 and the quarter ended
June 30, 2004, and the 2003 Annual Report on Form 10-KSB and the Quarterly
Report on Form 10-QSB for the period ended June 30, 2004, and Form 8-K filed on
July 20, 2004. A copy of the Forms 10-KSB and 10-QSB and 8-K, as well as other
documents filed by BPK with the Securities and Exchange Commission, are
available to the public at www.sec.gov.
P-1
BPK RESOURCES, INC.
(A Development Stage Entity)
Pro Forma Condensed Consolidated Balance Sheet
June 30, 2004
(Unaudited)
ASSETS
Historical BPK Pro Forma Pro Forma
Resources, Inc. Adjustments Balance
--------------- ------------ ------------
Current assets
Cash and cash equivalents $ 29,546 $ (2,755) (A)(B) $ 26,791
Accounts receivable 15,544 15,544
Accounts receivable - related party 16,701 (10,022) (A) 6,679
Notes and interest receivable 17,439 -- 17,439
Prepaid expenses 110,581 -- 110,581
------------ ------------ ------------
Total current assets 189,811 (12,777) 177,034
------------ ------------ ------------
Oil and gas properties using successful efforts
Developed oil and gas interests, net 38,761 (23,490) (A) 15,271
Undeveloped 100,000 -- 100,000
Mineral interests option 1,111,000 -- 1,111,000
Investment in limited partnerships 1,040,858 (1,040,858) (C) --
------------ ------------ ------------
$ 2,480,430 $ (1,077,125) $ 1,403,305
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses $ 946,032 $ (111,106) (A)(B)(D) $ 834,926
Accounts payable and accrued expenses - related party 173,232 (148,858) (A)(E) 24,374
Notes payable 48,000 (1,000) (A)(B) 47,000
Notes payable - related party 723,178 (695,000) (A)(E) 28,178
Convertible debentures, net of discounts 1,948,571 (1,948,571) (D) --
------------ ------------ ------------
Total current liabilities 3,839,013 (2,904,535) 934,478
------------ ------------ ------------
Commitments and contingencies
Stockholders' Equity (Deficit)
Preferred stock 830 -- 830
Common stock 51,259 -- 51,259
Additional paid in capital 14,739,252 1,827,410 (F) 16,566,662
Deferred compensation (1,583) -- (1,583)
Deficit accumulated during development stage (16,148,341) -- (16,148,341)
------------ ------------ ------------
Total stockholders' equity (deficit) (1,358,583) 1,827,410 468,827
------------ ------------ ------------
$ 2,480,430 $ (1,077,125) $ 1,403,305
============ ============ ============
P-2
BPK RESOURCES, INC.
(A Development Stage Entity)
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2003
(Unaudited)
Historical
BPK Pro Forma Pro Forma
Resources, Inc. Adjustments Balance
--------------- ------------- -------------
Revenue: $ 257,776 $ (143,470) (G) $ 114,306
Operating expenses
Production expenses 121,869 (64,223) (G) 57,646
Depletion and amortization 102,513 (67,760) (G) 34,753
Impairment of oil and gas properties 2,185,625 (7,114) (G) 2,178,511
General and administrative - related party 135,630 (34,689) (G) 100,941
General and administrative 1,015,867 (500) (G)(H) 1,015,367
------------- ------------- -------------
Total operating expenses 3,561,504 (174,286) 3,387,218
------------- ------------- -------------
Loss from operations (3,303,728) 30,816 (3,272,912)
------------- ------------- -------------
Other (income) expense
Interest income (5,323) -- (5,323)
Interest expense 1,655,822 (1,620,549) (G)(H)(J)(K) 35,273
Interest expense - Series A Preferred 181,489 -- 181,489
Loss on sale of stock 2,664,573 -- 2,664,573
Partnership investment loss 565,929 (565,929) (H)(I) --
------------- ------------- -------------
Total other expenses, net 5,062,490 (2,186,478) 2,876,012
------------- ------------- -------------
Loss before minority interest (8,366,218) 2,217,294 (6,148,924)
Minority interest 3,700 -- 3,700
------------- ------------- -------------
Net loss after minority interest from
continuing operations $ (8,362,518) $ 2,217,294 $ (6,145,224)
============= ============= =============
Basic and diluted net loss after minority
interest from continuing operations per
common share $ (0.58) $ -- $ (0.42)
============= ============= =============
Basic and diluted weighted average common
shares outstanding 14,520,760 -- 14,520,760
============= ============= =============
P-3
BPK RESOURCES, INC.
(A Development Stage Entity)
Pro Forma Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 2004
(Unaudited)
Historical
BPK Pro Forma Pro Forma
Resources, Inc. Adjustments Balance
--------------- ------------ ------------
Revenues $ 25,657 $ (9,527) (G) $ 16,130
Operating Expenses
Production expenses 51,221 (8,781) (G) 42,440
Depletion and amortization 7,856 (4,760) (G) 3,096
Impairment of oil and gas properties 212,725 -- 212,725
General and administrative - related party 41,000 -- 41,000
General and administrative 396,201 (400) (G)(H) 395,801
------------ ------------ ------------
Total Operating Expenses 709,003 (13,941) 695,062
------------ ------------ ------------
Loss From Operations (683,346) 4,414 (678,932)
------------ ------------ ------------
Other (Income) Expense
Interest income (1,631) -- (1,631)
Interest expense 593,469 (587,792) (G)(H)(J)(K) 5,677
Interest expense - Series A Preferred 90,000 -- 90,000
Gain on extinguishment of debt (316,499) -- (316,499)
Partnership investment loss 67,758 (67,758) (I) --
------------ ------------ ------------
Total other (income) expenses, net 433,097 (655,550) (222,453)
------------ ------------ ------------
Net loss from continuing operations $ (1,116,443) $ 659,964 $ (456,479)
============ ============ ============
Basic and diluted net loss from continuing
operations per common share $ (0.03) $ -- $ (0.01)
============ ============ ============
Basic and diluted weighted average common shares
outstanding 32,320,729 -- 32,320,729
============ ============ ============
P-4
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
COMBINING STATEMENTS
A. To record the disposition of 100% of the Company's limited partnership
interest in CSR-Hackberry. The assets and liabilities sold included the
following:
o Cash of $424;
o Accounts receivable - related party of $10,022;
o Developed oil and gas interests, net, of $23,490;
o Accounts payable and accrued expenses of $5,658;
o Accounts payable and accrued expenses - related party of
$8,781;
o Notes payable of $500; and
o Notes payable - related party of $25,000.
B. To record the disposition of 100% of the Company's limited partnership
interest in BPK South. The assets and liabilities sold included the
following:
o Cash of $2,331;
o Payable for oil and gas interests of $83,149; and
o Notes payable of $500.
C. To record the disposition of 100% of the Company's limited partnership
interests in PH Gas, 2001-Hackberry Drilling Fund, LSP, PHT Partners and
LS Gas as follows:
o Investment in PH Gas of $335,949;
o Investment in 2001 Hackberry Drilling Fund of $30,695;
o Investment in LSP of $415,672;
o Investment of PHT Partners of $116,542; and
o Investment in LS Gas of $142,000.
D. To record the assumption and discharge of the Company's liability due to
Trident in the total principal amount of $1,948,571 ($1,470,000 under the
Original Trident Note and $478,571, net of unamortized discount of
$121,429, under the Additional Trident Note) along with accrued interest
of $22,299.
E. To record the discharge of the Company's liabilities due to CSOR Preferred
Liquidation, LLC in the principal amount of $670,000 along with accrued
interest of $140,077.
F. To record increase in the Company's additional paid in capital of
$1,827,410 as a result of the Transaction.
G. To reverse the revenues and expenses of CSR-Hackberry.
H. To reverse the expenses of BPK South.
I. To reverse the Company's equity losses in PH Gas, 2001-Hackberry Drilling
Fund, LSP, PHT Partners, and LS Gas in the total amount of $462,186 and
$67,758 for the year ended December 31, 2003 and six months ended June 30,
2004, respectively.
J. To reverse interest expenses and amortized discount related to the
Original and Additional Trident Notes in the total amount of $1,500,217
and $547,656 for the year ended December 31, 2003 and six months ended
June 30, 2004, respectively.
K. To reverse interest expense related to the CSOR Note in the amount of
$106,669 and $33,408 for the year ended December 31, 2003 and six months
ended June 20, 2004, respectively.
P-5