SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2006
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to ________________
Commission file number 333-116890
BASELINE OIL & GAS CORP.
(Exact name of small business as specified in its charter)
Nevada 30-0226902
(State or other jurisdiction of (IRS Employer
incorporation ororganization) Identification Number)
20022 Creek Farm, San Antonio, Texas 78259
(Address of principal executive offices)
(210) 481-5177
(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No|_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 30,271,818 shares of Common
Stock, $.001 per share, as of August 7, 2006.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
BASELINE OIL & GAS CORP.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
June 30, December 31,
2006 2005
------------ ------------
ASSETS
Cash $ 2,918,018 $ 206,489
Prepaid and other current assets 37,500 --
------------ ------------
Total current assets 2,955,518 206,489
Deferred debt issuance costs, net of amortization of
$59,298 and $0, respectively 207,543 326,139
Property acquisition-deposit -- 1,750,000
Unproven leasehold acquisition costs 6,414,723 --
------------ ------------
Total assets $ 9,577,784 $ 2,282,628
============ ============
LIABILITIES & STOCKHOLDERS'
EQUITY
Accounts payable $ 71,240 $ 98,726
Accrued liabilities 444,063 56,492
Derivative liability 171,994 --
Short term debt and current portion long
term debt, net of discount -- 298,384
------------ ------------
Total current liabilities 687,297 453,602
Long term debt, net of discount 1,378,667 809,333
------------ ------------
Total liabilities 2,065,964 1,262,935
Commitments and contingencies -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
10,000,000 shares authorized,
none issued and outstanding -- --
Common stock, $.001 par value,
140,000,000 shares authorized,
30,271,818 and 20,270,000 shares
issued and outstanding, respectively 30,272 20,270
Additional paid-in-capital 26,909,615 18,791,179
Deficit accumulated in the development Stage (19,428,067) (17,791,756)
------------ ------------
Total stockholders' equity 7,511,820 1,019,693
------------ ------------
Total liabilities & stockholders' equity $ 9,577,784 $ 2,282,628
============ ============
See accompanying summary of accounting policies
and notes to financial statements.
BASELINE OIL & GAS CORP.
(A Development Stage Company)
STATEMENTS OF EXPENSES
Three and Six Month Periods Ended June 30, 2006 and 2005 and the Period
from June 29, 2004 (Inception) through June 30, 2006
(Unaudited)
Three Months Three Months Six Months Six Months Inception
Ended Ended Ended Ended Through
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 June 30, 2006
----------------------------------------------------------------------------------------------------
Selling, general and
administrative expenses $ 839,019 $ 10,784,475 $ 1,265,274 $ 16,745,120 $ 18,693,270
Interest income (37,513) -- (59,543) -- (59,543)
Interest expense 354,418 56,059 764,257 56,257
1,128,017
(Gain) loss on
derivative liability (433,650) -- (333,677) -- (333,677)
------------ ------------ ------------ ------------ ------------
Total expenses 722,274 10,840,534 1,636,311 16,801,377 19,428,067
------------ ------------ ------------ ------------ ------------
Net loss $ (722,274) $(10,840,534) $ (1,636,311) $(16,801,377) $(19,428,067)
============ ============ ============ ============ ============
Basic and diluted net
loss per common share $ (0.02) $ (0.57) $ (0.04) $ (1.68)
============ ============ ============ ============
Weighted average
common shares outstanding 39,303,227 19,180,615 37,440,583 10,024,608
See accompanying summary of accounting policies
and notes to financial statements.
BASELINE OIL & GAS CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Six Month Periods Ended June 30, 2006 and 2005 and the Period from June
29, 2004 (Inception) through June 30, 2006
(Unaudited)
Six Months Ended Inception Through
June 30, 2006 June 30, 2005 June 30, 2006
----------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,636,311) $(16,801,377) $(19,428,067)
Adjustments to reconcile net loss to
cash used in operating activities:
Share based compensation -- 16,462,694 16,499,670
Amortization of debt discount 118,596 47,792 943,068
Amortization of debt issuance costs 637,243 -- 148,245
Unrealized (gain) loss on derivative liability (333,677) -- (333,677)
Changes in:
Prepaid assets and other assets (37,500) -- (37,500)
Accounts payable and accrued liabilities 360,288 42,759 515,153
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (891,361) (248,132) (1,693,108)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property acquisition costs (4,664,723) (749) (6,414,723)
------------ ------------ ------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,664,723) (749) (6,414,723)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable (16,496) -- --
Proceeds from note payable -- -- --
Proceeds from common stock sales, net 8,284,109 16,764 8,650,849
Proceeds from convertible notes -- 350,000 2,375,000
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,267,613 366,764 11,025,849
------------ ------------ ------------
NET CHANGE IN CASH 2,711,529 117,883 2,918,018
Cash balance, beginning of period 206,489 -- --
------------ ------------ ------------
Cash balance, end of period $ 2,918,018 $ 117,883 $ 2,918,018
============ ============ ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ -- $ -- $ --
Cash paid for income taxes $ -- $ -- $ --
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued in connection with issuance of stock $ 505,671 $ -- $ 505,671
Stock issued on conversion of debt $ 350,000 -- $ 350,000
See accompanying summary of accounting policies
and notes to financial statements.
BASELINE OIL & GAS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations and organization
Baseline Oil & Gas Corp. is an independent exploration and production company,
with operations presently focused in the Illinois Basin New Albany Shale play.
Basis of Presentation
The accompanying unaudited interim financial statements of Baseline have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with Baseline's audited 2005
annual financial statements and notes thereto. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements, which would substantially
duplicate the disclosure required in Baseline's 2005 annual financial statements
have been omitted.
Use of estimates
The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2 - ISSUANCE OF COMMON STOCK
On March 28, 2005, Baseline issued 17,006,000 shares as follows:
o 100,000 shares of common stock for services valued at $35,000 and is
included in share based compensation; and
o 16,906,000 shares of common stock valued at $5,917,100 for cash
proceeds of $16,906. The $5,900,194 of value in excess of the cash
proceeds received has been charged to expense as share based
compensation;
The services were provided by the founders in connection with non-specific
research into oil and gas business opportunities. The value of the shares issued
was determined by reference to the closing price of Baseline's stock on the date
of issuance.
On January 16, 2006, Baseline entered into a definitive Purchase Agreement
("Purchase Agreement") to purchase certain assets from Rex Energy Operating
Corp. ("Rex Energy") and its affiliates (collectively the "Rex Parties"), and,
the 50% membership in the New Albany -Indiana, LLC ("New Albany") that we do not
already own. Concurrently with the execution of the Purchase Agreement, we
entered into a Stock Agreement with certain individuals designated by Rex
Energy, pursuant to which we issued a total of 12,069,250 shares of our Common
Stock valued at $13,276,175. The issuance of such shares is subject to our right
of first refusal to repurchase all such shares at a price $ 1.00 below any bona
fide purchase offer for such shares made by a third party. We have accounted for
the aforementioned shares as Deferred Acquisition Costs.
On June 8th, 2006, Baseline entered into a Mutual Termination Agreement
("Termination Agreement") and Mutual Release Agreement ("Release Agreement")
with the Rex Parties pursuant to which we and the Rex Parties mutually
terminated (i) that certain purchase agreement between us dated January 16, 2006
and (ii) that certain stock agreement dated January 16, 2006 (as amended on
March 10, 2006).
Pursuant to the termination agreement, the Rex Parties surrendered for
cancellation of the aforementioned, 12,069,250 shares of our common stock,
previously issued to them pursuant to the Stock Agreement. After giving effect
to the cancellation of such shares, we have 30,271,818 shares of common stock
outstanding as of the date hereof and options, warrants and convertible
promissory notes to purchase up to an additional 19,871,590 shares of our common
stock. Pursuant to the Release Agreement, we and the Rex Parties have agreed to
release and hold each other harmless from all Claims stemming from Controversies
(each as defined in the Release Agreement) arising out of our dealings with one
another.
On February 1, 2006 Baseline completed a private placement of $ 9,000,000 by
selling an aggregate of 8,181,819 shares of newly-issued Common Stock at $ 1.10
per share. As part of the transaction, Baseline issued warrants to the placement
agents ("Placement Warrants") to purchase an aggregate of 204,546 shares of
Common Stock at an exercise price of $1.32 per share. These warrants have a
three year term. The Company agreed to register the resale of the shares of
common stock issuable upon exercise of the Placement Warrants. If the Company
fails to timely register or if the registration does not become effective within
a certain time frame, the Company will be subject to certain financial
penalties. Based on the guidance in SFAS 133 "Accounting for Derivative
Instruments and Hedging Activities" and EITF 00-19 "Accounting for Derivative
Financial Instruments Indexed to and Potentially Settled in a Company's Own
Stock", Baseline concluded the Placement Warrants qualified for derivative
accounting. Baseline determined the Placement Warrants had the attributes of a
liability and therefore recorded the fair value of the Placement Warrants on day
one as a current liability and a reduction of additional paid in capital as a
cost of equity issuance. Baseline is required to record the unrealized changes
in fair value in subsequent periods of the Placement Warrants as an adjustment
to the current liability with unrealized changes in the fair value of the
derivative reflected in the statement of expenses as "(Gain)/loss on derivative
liability." The fair value of the Placement Warrants was $505,671 at February 1,
2006. The fair value of the Placement Warrants was determined utilizing the
Black-Scholes stock option valuation model. The significant assumptions used in
the valuation were: the exercise price as noted above; the market value of
Baseline's common stock on February 1, 2006, $2.50; expected volatility of 268%;
risk free interest rate of approximately 4.54%; and a term of three years. The
fair value of the Placement Warrants was $605,644 at March 31, 2006. The fair
value of the Placement Warrants was determined utilizing the Black-Scholes stock
option valuation model. The significant assumptions used in the valuation were:
the exercise price as noted above; the market value of Baseline's common stock
on March 31, 2006, $3.02; expected volatility of 248%; risk free interest rate
of approximately 4.83%; and a term of two years and ten months. The resulting
unrealized change in fair value of $99,973 from February 1, 2006 was recorded in
the statement of expenses as a loss on derivative liability. The fair value of
the Placement Warrants was $171,994 at June 30, 2006. The fair value of the
Placement Warrants was determined utilizing the Black-Scholes stock option
valuation model. The significant assumptions used in the valuation were: the
exercise price as noted above; the market value of Baseline's common stock on
June 30, 2006, $1.20; expected volatility of 127%; risk free interest rate of
approximately 5.13%; and a term of two years and seven months. The resulting
unrealized change in fair value of $605,644 from March 31, 2006 was recorded in
the statement of expenses as a gain on derivative liability.
On April 6, 2006, holders of Baseline's convertible promissory notes issued in
April of 2005, In the aggregate principal amount of $350,000, converted all of
such notes into 1,820,000 shares of Baseline's common stock.
NOTE 3 - INVESTMENT IN JOINT VENTURE
On November 25, 2005, Baseline entered into a joint venture with Rex Energy, a
privately held company, for the purpose of acquiring a working interest in
certain leasehold interests located in the Illinois Basin, Indiana. The joint
venture will be conducted through New Albany, a Delaware limited liability
company. Pursuant to a Limited Liability Company Agreement, Baseline has a 50%
economic/voting interest in New Albany and Rex Energy and its affiliates has a
50% economic/voting interest in New Albany. Rex Energy Wabash, LLC, an affiliate
of Rex, is the Managing Member of New Albany and manages the day to day
operations of New Albany.
On November 15, 2005, New Albany entered into a Purchase and Sale Agreement with
Aurora Energy Ltd ("Aurora"), pursuant to which New Albany has agreed to
purchase from Aurora an undivided 48.75% working interest (40.7% net revenue
interest) in (i) certain oil, gas and mineral leases covering acreage in several
counties in Indiana and (ii) all of Aurora's rights under a certain Farmout and
Participation Agreement with a third party ("Farmout Agreement"). In addition,
at the closing of the transaction, New Albany was granted an option from Aurora,
exercisable by New Albany for a period of eighteen (18) months thereafter, to
acquire a fifty percent (50%) working interest in any and all acreage leased or
acquired by Aurora or its affiliates within certain other counties located in
Indiana, at a fixed price per acre.
On February 1, 2006, New Albany completed its acquisition of certain oil and gas
leases and other rights from Aurora pursuant to the November 15, 2005 Purchase
and Sale Agreement mentioned above.The total purchase price under the Aurora
Purchase Agreement and the grant of the Aurora Option was $ 10,500,000 of which
Baseline paid $5,250,000.
On February 28, 2006, New Albany acquired a 45% working interest (37.125% net
revenue interest) in certain oil, gas and mineral leases covering approximately
21,000 acres of prospective New Albany Shale acreage in Knox and Sullivan
Counties, Indiana. New Albany acquired its 45% working interest from Source Rock
Resources, Inc., for a total consideration of $ 735,000 (of which Baseline paid
half).
NOTE 4 REGISTRATION STATEMENT-PENALTY INTEREST SHARES
As part of its Common Stock Offering in February 2006 (see Note 2) the Company
was subject to a Registration Rights Agreement requiring it to file a
registration statement under the Securities Act by April 2, 2006. The company
did not file by April 2, but did so on June 13, 2006. As a result the company
has incurred a $270,000 penalty for the second quarter ($90,000 for each month)
payable at its option in either cash or shares of stock. To date the company's
registration statement has not been declared effective, as such a $90,000
penalty was incurred for the month of July and a pro-rata penalty has been
incurred so far for the month of August to date.
NOTE 5 - SUBSEQUENT EVENTS
On July 21, 2006 Baseline transferred $88,714 to New Albany to fund its share of
the purchase working interests in acreage controlled by Source Rock Resources,
Inc.
On July 31, 2006 Baseline transferred $200 ,938 to New Albany to fund its share
of the purchase price for acreage in the Aurora AMI.
Item 2. Management's Plan of Operation.
Introduction.
We were incorporated as a Nevada corporation in February 2004 under the
name of College Oak Investments, Inc., and changed our name to Baseline Oil &
Gas Corp. on January 17, 2006. We are a "shell company" as that term is defined
in Rule 405 promulgated under the Securities Act of 1933 (the "Securities Act")
and Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), and as such, are subject to rules of the Securities Exchange
Commission (SEC) applicable to shell companies.
On November 25, 2005, we entered into a joint venture with Rex Energy
Operating Corp. ("Rex Energy"), a privately held Delaware corporation, for the
purpose of acquiring working interests in leasehold interests in leasehold
acreage in the Illinois Basin located in Southern Indiana known to contain New
Albany Shale formations. Under this joint venture, we and Rex Energy formed New
Albany-Indiana, LLC ("New Albany"), a Delaware limited liability company.
Pursuant to a Limited Liability Company Agreement (the "LLC Agreement"), we have
a 50% economic/voting interest in New Albany and certain affiliates of Rex
Energy have a 50% economic/voting interest in New Albany. Rex Energy had
originally been a member of New Albany but, on January 30, 2006, Rex Energy
withdrew as a member and assigned its membership interests to several of its
affiliates, namely Lance T. Shaner, Shaner Limited Partnership & Hulburt Capital
Partners Limited Partnership, Rex Energy II Limited Partnership, Douglas Oil &
Gas and Rex Energy Wabash, LLC (collectively, the "LLC Assignees").
On February 1, 2006, New Albany completed its acquisition of certain oil
and gas leases and other rights from Aurora, pursuant to a Purchase and Sale
Agreement dated November 15, 2005 (the "Aurora Agreement"). Pursuant to the
Aurora Agreement, New Albany initially purchased from Aurora an undivided 48.75%
working interest (40.7% net revenue interest) in (i) certain oil, gas and
mineral leases initially covering approximately 80,000 acres in several counties
in Indiana (the "Leases") and (ii) all of Aurora's rights under a certain
Farmout and Participation Agreement with a third party ("Farmout Agreement"). In
addition, New Albany was granted an option from Aurora (the "Option"),
exercisable by New Albany until August 1, 2007, to acquire a 50% working
interest in any and all acreage leased or acquired by Aurora or its affiliates
within certain other counties located in Indiana (currently estimated to be
50,000 acres), at a fixed price of $25 per net acre. The total purchase price
for the acquisition of the working interests in the Leases and the Farmout
Agreement, together with the grant of the Option, was $10,500,000. Of the total
purchase price, we paid an aggregate of $5,250,000. We obtained funding to pay
our share of New Albany's purchase price for this acquisition through private
placements of (i) the convertible notes and stock in November 2005 and (ii)
shares of our Common Stock in February 2006. As described above, on January 30,
2006, Rex Energy withdrew as a member from New Albany and assigned its
membership interests to New Albany Assignees. Since February, New Albany has
acquired a working interest in leases covering an additional 27,500 acres.
On March 6, 2006, New Albany purchased from Source Rock Resources, Inc.
("Source Rock") a 45% working interest in certain oil, gas and mineral leases
initially covering approximately 21,000 acres in Knox and Sullivan Counties in
Indiana, which the Company believes contain New Albany Shale formation stratum.
The purchase price paid by New Albany was $735,000 (of which we paid half). Rex
Energy will be the operator for wells drilled on the acreage. Since March, New
Albany has acquired a working interest in leases covering an additional 10,000
acres.
Recent Developments
In June 2006, New Albany entered into a Joint Operating Agreement (the
"JOA") with El Paso Exploration & Development Corp., Pogo Producing Company and
Aurora Energy Ltd., pursuant to which New Albany contributed certain of its
acreage in exchange for a 17% working interest in a new area of mutual interest,
targeting the New Albany Shale formation in Greene County, Indiana. Under the
JOA, El Paso will serve as operator.
On June 8, 2006, we entered into a Mutual Termination Agreement (the
"Termination Agreement") with Rex Energy and certain of its affiliates pursuant
to which we and the Rex Parties mutually terminated (i) that certain purchase
agreement between us dated January 16, 2006 (the "Purchase Agreement") and (ii)
that certain stock agreement dated January 16, 2006 (as amended on March 10,
2006, the "Stock Agreement"). We and the Rex Parties terminated the Purchase
Agreement and the Stock Agreement when it became apparent that the Company could
not obtain financing for the proposed acquisition on terms satisfactory to the
Rex Parties. We also entered into a Mutual Release Agreement (the "Release
Agreement") and a Mutual Non-Disparagement Agreement (the "Non-Disparagement
Agreement") with the Rex Parties.
Pursuant to the Termination Agreement, the Rex Parties surrendered for
cancellation, 12,069,250 shares of our Common Stock, previously issued to them
pursuant to the Stock Agreement. Pursuant to the Release Agreement, we and the
Rex Parties have agreed to release and hold each other harmless from certain
claims arising out of our dealings with one another. Nothing in the Termination
Agreement, the Release Agreement or the Non-Disparagement Agreement affects our
rights with respect to New Albany, of which we own a 50% non-managed membership
interest.
During the second quarter, New Albany participated in the drilling of a
well on the acreage it acquired from Aurora, and which is operated by Aurora.
Such well is the first of an initial 10-well pilot program. Initially, the well
was temporarily abandoned while the operator contemplated reentry. Recently, the
decision was made to reenter the original wellbore and to complete drilling. The
anticipated cost to New Albany of the pilot program is estimated to be $4.6
million (of which we are responsible for half).
In connection with our recent JOA with El Paso, Pogo Producing and Aurora
Energy, a well was successfully drilled during the second quarter. The well is
presently on extended flow test awaiting pipeline hook-up.
With respect to the properties acquired from Source Rock, we anticipate
that New Albany will commence drilling these properties by December 2006.
We are actively seeking an operating company with which to enter into a
merger or acquisition transaction. We are also exploring various strategic joint
ventures which may include the acquisition of producing properties. There can be
no assurance that we will be able to enter into any such transaction. We believe
that we have sufficient capital to satisfy our existing cash requirements over
the next twelve months. However, we will likely need to raise additional capital
in order to complete any such acquisition. There can be no assurances that we
will be able to raise such capital.
FORWARD LOOKING STATEMENTS
With the exception of historical information, certain matters discussed in
this Form 10-QSB are forward looking statements that involve risks and
uncertainties. Certain statements contained in this Form 10-QSB, including
statements which may contain words such as "could", "should", "expect",
"believe", "will", and similar expressions and statements relating to matters
that are not historical facts are forward-looking statements. Such statements
involve known and unknown risks and uncertainties which may cause our actual
results, performances or achievements to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Although we believe that our expectations are based
on reasonable assumptions, we can give no assurance that our goals will be
achieved. Important factors that could cause actual results to differ materially
from those in the forward-looking statements herein include, but are not limited
to, our ability to raise capital as and when required, the timing and extent of
changes in prices for oil and gas, the availability of drilling rigs,
competition, environmental risks, drilling and operating risks, uncertainties
about the estimates of reserves, the prices of goods and services, legislative
and government regulations, political and economic factors in countries in which
we operate and implementation of our capital investment program.
Item 3. Controls and Procedures.
We carried out an evaluation, under the supervision and with the
participation of our management, including our CEO and CFO, of the effectiveness
of the design and operation of our disclosure controls and procedures pursuant
to the Securities Exchange Act of 1934. Based upon that evaluation, the CEO and
CFO concluded that, as of June 30, 2006, our disclosure controls and procedures
are effective in timely alerting them to material information required to be
included in our periodic SEC filings relating to us (including its consolidated
subsidiaries). There were no significant changes in our internal control over
financial reporting or in other factors that could significantly affect our
internal control over financial reporting during the period ended June 30, 2006,
nor any significant deficiencies or material weaknesses in such internal control
over financial reporting requiring corrective actions.
Item 5. Other Information.
In February 2006, we raised an aggregate gross amount of $9,000,000 by
issuing to investors 8,181,818 shares of our Common Stock at the price of $1.10
per share. Pursuant to a Registration Rights Agreement between us and such
investors, as a result of our not filing a registration statement under the
Securities Act with respect to such investor's shares by April 2, 2006 (we filed
it on June 13, 2006) and not attaining effectiveness of such registration
statement by June 1, 2006, we have incurred a penalty. Under the Registration
Rights Agreement, for every 30-day period beyond June 1, 2006 during which our
registration statement is not declared effective, we are required to issue to
the investors, at our election, either (i) an aggregate number of additional
shares equal to $90,000 divided by the market price of our Common Stock on the
date as of which we become obligated to issue such additional shares or (ii)
$90,000 cash. To date, we have elected to pay the registration penalty in shares
of additional Common Stock. Through July 31, 2006, investors in our February
offering are entitled to 172,311 additional shares of our Common Stock. All such
additional shares have been included in the registration statement filed on June
13, 2006.
PART II
OTHER INFORMATION
Item 6. Exhibits, List and Reports on Form 8-K.
(a) Exhibits
Exhibit Number Description
- --------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Executive Officer
32.2 Certification pursuant to 18 U.S.C. 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Financial Officer
(b) Reports on Form 8-K
During the period covered by this Report, we filed Reports on Form 8-K on
each of the following dates: (i) June 8, 2006 (announcing the termination of the
transaction with Rex Energy) and (ii) June 13, 2006 (announcing entry into the
June JOA).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BASELINE OIL & GAS CORP.
Date: August 14, 2006 By: /s/ Barrie M. Damson
----------------------------------------
Name: Barrie M. Damson
Title: Chairman, Chief Executive Officer
Date: August 14, 2006 By: /s/ Richard M. Cohen
----------------------------------------
Name: Richard M. Cohen
Title: Chief Financial Officer
INDEX TO EXHIBITS
Exhibit Number Description
- --------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Executive Officer
32.2 Certification pursuant to 18 U.S.C. 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Financial Officer