<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-21179
QUEEN SAND RESOURCES, INC.
(Exact Name of Small Business Issuer as specified in its charter)
DELAWARE 75-2615565
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3500 OAK LAWN, SUITE 380,
L.B. #31, DALLAS, TEXAS, 75219-4398
ISSUER'S TELEPHONE NUMBER: (214) 521-9959
NO CHANGE
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 [ ]
20,625,502 shares of the registrant's Common Stock were outstanding as of May
14, 1997.
Transitional Small Business Disclosure Format: Yes [ ] NO [ X ]
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUEEN SAND RESOURCES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------ ------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash $ 312,325 $ 599,621
Accounts receivable and other current assets 1,126,697 933,192
------------ ------------
Total current assets 1,439,022 1,532,813
Net property and equipment 15,824,779 9,662,251
Other assets 0 87,749
------------ ------------
$ 17,263,801 $ 11,282,813
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other $ 934,698 $ 639,717
Revolving credit agreement 4,857,993 0
Current portion of notes payable 842,671 750,000
Current portion of capitalized lease obligation 66,317 60,010
------------ ------------
Total current liabilities 6,701,679 1,449,727
Long-term obligations, net of current portion 3,854,464 6,671,441
------------ ------------
Total liabilities 10,556,143 8,121,168
------------ ------------
Stockholders' equity:
Common shares stock, $.0015 par value 45,335 40,530
(30,225,502 shares outstanding at March 31, 1997
27,020,002 shares outstanding at June 30, 1996)
Additional paid-in capital 9,165,063 4,997,841
Accumulated deficit (2,502,740) (1,875,726)
------------ ------------
Total stockholders' equity 6,707,658 3,162,645
------------ ------------
$ 17,263,801 $ 11,282,813
============ ============
Commitments
</TABLE>
See accompanying notes to unaudited interim period consolidated condensed
financial statements.
2
<PAGE> 3
QUEEN SAND RESOURCES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months Nine months
ended ended
March 31, March 31,
-------------------------- --------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Oil and Gas Revenues $ 1,338,179 $ 498,125 $ 3,118,022 $ 1,401,102
Expenses:
Oil and gas production expenses 648,318 297,249 1,632,129 880,010
Depreciation, depletion and amortization 290,000 145,000 747,000 390,000
General and administrative expenses 362,130 368,519 911,148 946,625
Interest and financing costs 230,149 91,837 655,677 152,721
Foreign currency exchange (gains) (178,899) (8,571) (200,917) (12,004)
----------- ----------- ----------- -----------
Net Loss $ (13,519) $ (395,909) $ (627,015) $ (956,250)
=========== =========== =========== ===========
Net Loss per Common Share $ (0.00) $ (0.02) $ (0.02) $ (0.02)
</TABLE>
See accompanying notes to unaudited interim period consolidated condensed
financial statements.
3
<PAGE> 4
QUEEN SAND RESOURCES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
AS AT MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended March 31
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (627,015) $ (956,250)
Depletion, depreciation and amortization 747,000 390,000
Issuance of common stock for services rendered 0 63,000
Unrealized gains on foreign currency exchange (176,230) 0
Net changes in operating assets and liabilities 101,476 514,086
----------- -----------
Net cash generated by operating activities 45,231 10,836
----------- -----------
Cash flows from investing activities - additions to property (3,727,469) (771,803)
and equipment
Cash flows from financing activities:
Payments on capital lease obligations (44,379) (42,443)
Payments on short-term notes (850,000) 0
Proceeds from long-term obligations 779,134 1,690,440
Proceeds from the sale of common stock 3,485,500 0
----------- -----------
Net cash provided by financing activities 3,370,255 1,647,997
----------- -----------
Effect of foreign currency exchange rate changes on cash 24,687 0
----------- -----------
Net increase (decrease) in cash (287,296) 887,030
Cash at beginning of period 599,621 99,447
----------- -----------
Cash at end of period $ 312,325 $ 986,477
=========== ===========
</TABLE>
See accompanying notes to unaudited interim period consolidated condensed
financial statements.
4
<PAGE> 5
QUEEN SAND RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 1997
(unaudited)
(1) General
The information furnished reflects all adjustments which are, in the
opinion of management, necessary to a fair presentation of the results
of the interim periods presented. The results of operations for the
three and nine months ended March 31, 1997 are not necessarily
indicative of the operating results for the full fiscal year ending
June 30, 1997. Moreover, these financial statements do not purport to
contain complete disclosure in conformity with generally accepted
accounting principles and should be read in conjunction with the
Company's audited consolidated financial statements at, and for the
fiscal year ended June 30, 1996.
(2) Common Stock
Loss per common share is based on the weighted average number of
common shares outstanding (29,007,546 and 27,796,918 for the three and
nine months ended March 31, 1997, respectively, and 25,803,889 and
25,801,277 for the three and nine months ended March 31, 1996,
respectively).
During the nine months ended March 31, 1997 the Company issued an
aggregate of 1,560,000 shares of common stock pursuant to Regulation
S for $3,900,000 ($2.50 per share), less $430,000 related to the
issuance costs. The Company issued 292,000 shares of common stock
valued at $52,560 ($0.18 per share) as partial consideration for the
acquisition of oil and natural gas producing properties in Texas, New
Mexico, and Colorado. The Company issued 1,237,500 shares of common
stock valued at $618,750 ($0.50 per share) as partial consideration
for the acquisition of oil and natural gas producing properties in
Texas, Louisiana and Mississippi. The Company issued 116,000 shares
of common stock valued at $20,880 ($0.18 per share) for services
rendered.
(3) Acquisitions
On November 6, 1996 the Company acquired from an unaffiliated vendor,
eight gross productive wells (three net productive wells), all located
in various counties in Texas (the "Frymire Purchase"). In
consideration for these properties the Company paid, subject to
standard industry adjustments at closing, approximately $650,000 in
cash, issued two notes bearing interest at 9%, each in the amount of
$100,000, due in 90 and 180 days, respectively, and a third note in
the amount of $227,500 bearing interest at 10% payable in equal
monthly installments of approximately $10,500 over a 24 month period.
In addition the Company issued 100,000 restricted shares of its common
stock which it valued, for purposes of this transaction, at $18,000
($0.18) per share. The interests in the acquired properties plus
associated production equipment range from 21.9% to 75%.
On December 16, 1996, the Company acquired from an unaffiliated
vendor, 15 gross productive wells, (15 net productive wells), all
located in New Mexico (the "Trigg Federal Purchase"). In
consideration for these properties the Company paid $100,000 in cash
and issued 92,000 restricted shares of the Company's common stock
which it valued at $16,560 ($0.18) per share. The Company acquired a
100% working interest in the acquired properties and associated
production equipment.
On January 16, 1997 the Company acquired from an unaffiliated vendor 3
gross producing wells (1.25 net productive wells) and 1 prospect
located in Texas and Colorado. The purchase price consisted of cash
of $25,000 and 100,000 restricted shares of common stock which it
valued at $18,000 ($0.18 per share).
5
<PAGE> 6
On February 5, 1997 the Company acquired from unaffiliated vendors 60
gross productive wells (48.4 net productive wells) and two
developmental properties located in Mississippi, Louisiana and Texas.
The purchase price consisted of cash of $1,900,000, four non-interest
bearing notes totaling $2,400,000, secured by a first charge on the
properties, and 659,000 restricted shares of common stock which it
valued at $329,500 ($0.50 per share).
On March 13, 1997 the Company acquired from unaffiliated Vendors 1
gross productive well (0.24 net productive well) located in Louisiana.
The purchase price consisted of cash of $562,500 and 578,500
restricted shares of common stock which it valued at $289,250 ($0.50
per share).
(4) Subsequent Events
During the quarter ended March 31, 1997, the Company determined to
amend the Company's Certificate of Incorporation, effective May 5,
1997, to (i) authorize the increase of authorized common stock from
40,000,000 to 100,000,000 and (ii) authorize 50,000,000 shares of
preferred stock, par value $0.01 per share, which shares of preferred
stock may be issued in one or more series at the discretion of the
Board of Directors.
On May 6, 1997, the Company issued to Joint Energy Development
Investments Limited Partnership ("JEDI") 9,600,000 shares of Series A
Participating Convertible Preferred Stock, par value $0.01 per share,
of the Company (the "Series A Preferred Stock"), certain warrants to
purchase the Company's common stock and warrants to purchase 409,839
shares of the Company's common stock (collectively, the "JEDI
Warrants"). The aggregate consideration (excluding the exercise price
in respect of the JEDI Warrants) cannot exceed $14,400,000 and
consisted of (I) $5,000,000 ($0.521 per share) cash plus (ii)
contingent cash payment obligations (up to an aggregate of $9,400,000)
to the Company under the Earn Up Agreement dated as of May 6, 1997
between the Company and JEDI (the "JEDI Earn Up Agreement").
On May 6, 1997, the Company repurchased 9,600,000 shares of the
Company's common stock owned by Forseti Investments Ltd. ("Forseti")
in exchange for (I) $5,000,000 ($0.521 per share) cash, (ii) the
issuance by the Company of Class A Common Stock Purchase Warrants to
purchase 1,000,000 shares of the Company's common stock at an initial
exercise price of $2.50 per share (the "Class A Warrants") and Class B
Common Stock Purchase Warrants to purchase 2,000,000 shares of the
Company's common stock at an initial exercise price of $2.50 per share
(the "Class B Warrants," and together with the Class A Warrants, the
"Forseti Warrants"), and (iii) contingent obligations (up to an
aggregate of $9,400,000) to Forseti under the Earn Up Agreement dated
as of May 6, 1997 between the Company and Forseti (the "Forseti Earn
Up Agreement"). However, pursuant to the terms of the Forseti Earn Up
Agreement Forseti cannot both sell or exercise the Forseti Warrants
and receive full payment under the Forseti Earn Up Agreement.
Instead, Forseti has the option of either selling or exercising the
Forseti Warrants or receiving any payments due under the Forseti Earn
Up Agreement. The aggregate consideration paid or payable by the
Company to Forseti in respect of the repurchase of the Common Stock
owned by Forseti cannot exceed $14,400,000. This consideration will
be funded only through the JEDI Earn Up Agreement. In addition,
pursuant to the Forseti Earn Up Agreement, the Company granted to
Forseti an option to purchase from the Company a number of shares of
the Company's common stock equal to the quotient of (x) the amount by
which the Earn Up Amount (as defined under the Forseti Earn Up
Agreement) exceeds $7,000,000 and (y) $2.50, at a price equal to
$2.50. The option is exercisable in full or in part only from the
date that the Earn Up Amount is paid by the Company to Forseti through
the fifth business day after the date of payment of the Earn Up
Amount.
For a discussion of the relative rights and preferences of the Series
A Preferred Stock and their effects on the rights of the holders of
the Company's common stock see "Certain Effects of the Charter
Amendment and the Proposed Transactions" in the Company's Information
Statement filed with the Securities and Exchange Commission on April
15, 1997 and incorporated herein by this reference.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1997 AND
1996
The following table reflects certain information with respect to the Company's
oil and gas operations.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SALES VOLUME
Oil (MBbls) 42,145 25,919 100,611 70,847
Gas (MMcf) 163,261 5,883 366,182 19,228
Oil and Gas (MBOE) 69,355 26,900 161,641 74,052
REVENUES
Total Oil revenues $ 897,148 $ 479,549 $2,204,404 $1,250,905
Total Gas revenues 441,138 18,576 913,617 39,311
---------- ---------- ---------- ----------
$1,338,286 $ 498,125 $3,118,021 $1,290,216
========== ========== ========== ==========
AVERAGE SALES PRICE
Oil (per Bbl) $ 21.29 $ 18.50 $ 21.91 $ 17.66
Gas (per Mcf) $ 2.70 $ 3.16 $ 2.49 $ 2.04
Per BOE $ 19.30 $ 18.52 $ 19.29 $ 17.42
Severance taxes $ 83,576 $ 39,195 $ 216,621 $ 101,518
Lease Operating Expenses $ 564,740 $ 258,054 $1,415,506 $ 667,919
Depletion, Depreciation and Amortization $ 290,000 $ 145,000 $ 747,000 $ 390,000
Lease Operating Expenses per BOE $ 8.14 $$9.59 $ 8.76 $ 9.02
Depletion, Depreciation and Amortization
per BOE $ 4.18 $ 5.39 $ 4.62 $ 5.27
</TABLE>
FORWARD-LOOKING STATEMENTS
All statements in this document concerning the Company other than purely
historical information (collectively "Forward-Looking Statements") reflect the
current expectation of management and are based on the Company's historical
operating trends, estimates of proved reserves and other information currently
available to management. These statements assume, among other things, (i) that
no significant changes will occur in the operating environment for the
Company's oil and gas properties, gas plants and gathering systems and (ii)
that there will be no material acquisitions or divestitures. The Company
cautions that the Forward-Looking Statements are subject to all the risks and
uncertainties incident to the acquisition, development and marketing of, and
exploration for, oil and gas reserves. These risks include, but are not
limited to, commodity price risk, environmental risk, drilling risk, reserve,
operations and production risks, regulatory risks and counterparty risk. Many
of these risks are described elsewhere herein. The Company may make material
acquisitions or dispositions, enter into new or terminate existing oil and gas
sales or hedging contracts, or enter into financing transactions. None of
these can be predicted with any certainty and, accordingly, are not taken into
consideration in the Forward-Looking Statements made herein. For all of the
foregoing reasons, actual results may vary materially from the Forward-Looking
Statements and there is no assurance that the assumptions used are necessarily
the most likely.
7
<PAGE> 8
THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1996
REVENUES The Company's total revenues rose by $840,000 (169%) to
$1,338,000 for the three months ended March 31, 1997, from $498,000 for the
comparable period in 1996. This increase is a result of increases in both the
barrels of oil equivalent (BOE) produced and in selling prices.
The Company produced 42,145 bbls of oil in the three months ended March 31,
1997 , representing an increase of 16,226 bbls (63%) over the 25,919 bbls
produced in the comparable period in 1996. The Company produced 163,261 Mcf of
natural gas in the three months ended March 31, 1997, representing an increase
of 157,378 (2,675%) over the 5,883 Mcf produced in the comparable period in
1996. On a BOE basis, production for the three months ended March 31, 1997 was
69,355 BOE, an increase of 42,455 BOE (158%) over the 26,900 BOE produced
during the comparable period in 1996.
The Company acquired four oil and gas producing properties during the
intervening period. All of these properties added substantially to the natural
gas production capacity of the Company and changed the production ratio between
oil and gas. During the three months ended March 31, 1997 the Company's
production, on a BOE basis, was weighted at 61% for oil and 39% for natural
gas. This is compared to a weighting of 96% for oil and 4% for natural gas
during the three months ended March 31, 1996.
The increase in production of both oil and natural gas is related to properties
acquired in April and November of 1996 and February and March of 1997.
Properties owned during both the three months ended March 31, 1997 and 1996
produced 16,084 bbls of oil for the three months ended March 31, 1997, compared
to 24,170 bbls for the comparable period in 1996. This decrease of 8,086 bbls
(33%) is a combination of the normal depletion of the oil reservoirs and
reduced production from certain properties under-going work-over programs
during the period. Properties owned during the three months ended March
31,1997 and 1996 produced 12,013 Mcf of natural gas for the three months ended
March 31, 1997, compared to 5,883 Mcf for the comparable period in 1996. This
increase of 6,130 Mcf (104%) is a reflection of improved production arising
from an on-going work-over program. During the three months ended March 31,
1997 the Company produced 8,468 bbls of oil and 88,153 Mcf of natural gas from
properties it acquired in April 1996. During the three months ended March 31,
1997 the Company produced 6,091 bbls of oil and 1,616 Mcf of natural gas from
properties it acquired in November 1996. During the period from acquisition to
March 31, 1997 the Company produced 11,502 bbls of oil and 61,479 Mcf of
natural gas from properties it acquired in February and March, 1997.
The average selling price of oil was $21.29 per bbl for the three months ended
March 31, 1997, compared to $18.50 per bbl in the comparable period in 1996.
This increase of $2.79 per bbl (15%) is a result of general increases in oil
prices. The average selling price of natural gas was $2.70 per Mcf for the
three months ended March 31, 1997, compared to $3.16 per Mcf in the comparable
period in 1996. This decrease of $0.46 per Mcf (15%) relates to a general
decrease in natural gas prices.
PRODUCTION EXPENSES The Company's lease operating expenses rose to
$565,000 for the three months ended March 31, 1997, an increase of $307,000
(119%) from the comparable period in 1996. The increase is a combination of
the 158% (based on BOE produced) increase in production and a decrease in the
LOE per BOE. The average LOE per BOE was $8.14 per BOE during the three months
ended March 31, 1997, a decrease of $1.45 (15%) over the average LOE per BOE of
$9.59 for the comparable period in 1996. This decrease in the average LOE per
BOE is related to an ongoing rework program, the objective of which is to
increase production and reduce the LOE per BOE. The early indications are that
this program will have the desired effect of increased production and decreased
LOE's per BOE over the long term.
Severance and production related taxes were $84,000 for the three months ended
March 31, 1997, compared to $39,000 incurred in the comparable period in 1996.
This increase of $45,000 (113%) is a function of the increase in production and
the increase in oil and natural gas prices (4% based on BOE produced).
8
<PAGE> 9
Depreciation, depletion, and amortization (DDA) costs were $290,000 for the
three months ended March 31, 1997, an increase of $145,000 (100%) over the
$145,000 recognized during the comparable period in 1996. This increase
relates primarily to the 158% increase in BOE produced. The DDA cost per BOE
was $4.18 during the three months ended March 31, 1997, a decrease of $1.21 per
BOE (22%) over the $5.39 per BOE for the comparable period in 1996. This
decrease in DDA per BOE is primarily a reflection of the lower acquisition cost
per BOE of reserves of the properties acquired during the intervening period,
than those acquired previously.
GENERAL AND ADMINISTRATIVE COSTS The general and administrative costs of
the Company were $382,000 during the three months ended March 31, 1997, as
compared to $369,000 for the comparable period in 1996. This increase of
$13,000 (4%) is a reflection of the higher level of activity arising from the
Company's acquisitions. It is also consistent with the expectation of
management that general and administrative expenses would not increase
significantly as additional properties were acquired.
INTEREST EXPENSE The Company incurred interest and financing
costs of $51,000 during the three months ended March 31, 1997, compared to
$83,000 for the comparable period in 1996. This decrease of $32,000 is a
reflection of the increase in interest bearing debt of the Company, from $7.5
million at March 31, 1996 to $9.6 million at March 31, 1997 offset by $176,000
of unrealized gains on foreign exchange arising from the DM 3.65 million of
bonds. The increase of $2.1 million in debt was used primarily to finance the
acquisition of more than $7 million of oil and gas producing properties. The
interest and financing costs were reduced by $22,000 of gains arising from
foreign exchange rate changes.
THE NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE NINE MONTHS ENDED MARCH
31, 1996
REVENUES The Company's total revenues rose by $1,717,000 (123%) to
$3,118,000 for the nine months ended March 31, 1997, from $1,401,000 for the
comparable period in 1996. This increase is a result of increases in both the
BOE produced and in selling prices.
The Company produced 100,611 bbls of oil in the nine months ended March 31,
1997, representing an increase of 29,764 bbls (42%) over the 70,847 bbls
produced in the comparable period in 1996. The Company produced 366,182 Mcf of
natural gas in the nine months ended March 31, 1997, representing an increase
of 347,053 (1,804%) over the 19,228 Mcf produced in the comparable period in
1996. On a BOE basis, production for the nine months ended March 31, 1997 was
161,641 BOE, an increase of 87,589 BOE (118%) over the 74,052 BOE produced
during the comparable period in 1996.
The Company acquired four oil and gas producing properties during the
intervening period. All of these properties added substantially to the natural
gas production capacity of the Company and changed the production ratio between
oil and gas. During the nine months ended March 31, 1997 the Company's
production, on a BOE basis, was weighted at 62% for oil and 38% for natural
gas. This is compared to a weighting of 96% for oil and 4% for natural gas
during the nine months ended March 31, 1996.
The increase in production of both oil and natural gas is related to properties
acquired in April and November 1996 and February and March 1997. Properties
owned during both the nine months ended March 31, 1996 and 1996 produced 60,018
bbls of oil for the nine months ended March 31, 1997, compared to 70,847 bbls
for the comparable period in 1996. This decrease of 10,829 bbls (15%) is a
combination of the normal depletion of the oil reservoirs and reduced
production from certain properties under-going work-over programs during the
period. Properties owned during the nine months ended March 31, 1997 and 1996
produced 25,045 Mcf of natural gas for the nine months ended March 31, 1997,
compared to 19,228 Mcf for the comparable period in 1996. This increase of
5,817 Mcf (30%) is a reflection of improved production arising from an on-going
work-over program. During the nine months ended March 31, 1997 the Company
produced 19,186 bbls of oil and 277,624 Mcf of natural gas from properties it
acquired in April, 1996, and, during the period from acquisition to March 31,
1997, 9,905 bbls
9
<PAGE> 10
of oil and 2,034 Mcf of natural gas from properties it acquired in November,
1996, and 11,502 bbls of oil and 61,479 Mcf of natural gas from the properties
that it acquired in February and March, 1997.
The average selling price of oil was $21.91 per bbl for the nine months ended
March 31, 1997, compared to $17.66 per bbl in the comparable period in 1996.
This increase of $4.25 per bbl (24%) is a result of general increases in oil
prices. The average selling price of natural gas was $2.49 per Mcf for the
nine months ended March 31, 1997, compared to $2.04 per Mcf in the comparable
period in 1996. This increase of $0.45 per Mcf (22%) relates to a general
increase in natural gas prices.
PRODUCTION EXPENSES The Company's lease operating expenses rose to
$1,416,000 for the nine months ended March 31, 1997, an increase of $748,000
(112%) from the comparable period in 1996. The increase is a combination of
the 118% (based on BOE produced) increase in production and an decrease in the
LOE per BOE. The average LOE per BOE was $8.76 per BOE during the nine months
ended March 31, 1997, an decrease of $0.26 (3%) over the average LOE per BOE of
$9.02 for the comparable period in 1996. This decrease in the average LOE per
BOE is related to an ongoing rework program, the objective of which is to
increase production and reduce the LOE per BOE. The early indications are that
this program will have the desired effect of increased production and reduced
LOE's per BOE over the long term.
Severance and production related taxes were $217,000 for the nine months ended
March 31, 1997, compared to $102,000 incurred in the comparable period in 1996.
This increase of $115,000 (113%) is a function of the increase in production
and the increase in oil and natural gas prices (22% based on BOE produced).
Depreciation, depletion, and amortization (DDA) costs were $747,000 for the
nine months ended March 31, 1997, an increase of $357,000 (92%) over the
$390,000 recognized during the comparable period in 1996. This increase
relates primarily to the 118% increase in BOE produced. The DDA cost per BOE
was $4.62 during the nine months ended March 31, 1997, an decrease of $0.65 per
BOE (12%) over the $5.27 per BOE for the comparable period in 1996. This
decrease in DDA per BOE is primarily a reflection of the marginally lower
acquisition cost per BOE of reserves of the properties acquired during the
intervening period, than those acquired previously.
GENERAL AND ADMINISTRATIVE COSTS The general and administrative costs of
the Company were $931,000 during the nine months ended March 31, 1997, as
compared to $946,000 for the comparable period in 1996. This decrease of
$15,000 (2%) is consistent with management's expectation that general and
administrative expenses would not increase significantly as additional
properties were acquired.
INTEREST EXPENSE The Company incurred interest and financing
costs of $455,000 during the nine months ended March 31, 1997, compared to
$141,000 for the comparable period in 1996. This increase of $314,000 (223%)
is a reflection of the increase in interest bearing debt of the Company, from
$7.5 million at March 31, 1996 to $9.6 million at March 31, 1997. This
increase of $2.1 million in debt was used primarily to finance the acquisition
of more than $7 million of oil and gas producing properties. The interest and
financing costs were reduced by $24,000 of realized gains arising from foreign
exchange rate changes and $176,000 of unrealized gains arising from foreign
exchange rate changes.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
GENERAL The Company's general financial strategy is to use cash from
operations to service interest on the Company's indebtedness, to pay ongoing
operating expenses, and to contribute limited amounts toward further
development of the Company's existing proved reserves as well as additional
acquisitions. There can be no assurance that cash from operations will be
sufficient in the future to cover all of those purposes.
The Company will continue to be dependent on external funding sources to carry
out its planned redevelopment and acquisition program. If such additional
funds are not available, the Company will be required to delay or reduce
substantially both of such activities.
CASH FLOWS During the nine months ended March 31, 1997 the Company used
$287,000 of cash in its activities, as compared to generating $887,000 during
the nine months ended March 31, 1996.
During the nine months ended March 31, 1997 the Company generated cash flows of
$45,000 from operations, as compared to $11,000 during the nine months ended
March 31, 1996. However, of the $45,000 generated from operations during the
nine months ended March 31, 1997, the Company used only $56,000 in operations
before the $101,000 generated by net changes in operating assets and
liabilities. In contrast, the Company used $503,000 in operations in cash from
operations prior to generating $514,000 of cash from net changes in operating
assets and liabilities.
During the nine months ended March 31, 1997 the Company invested $3,727,000 in
oil and natural gas producing properties and related equipment, as compared to
$772,000 during the nine months ended March 31, 1996.
During the nine months ended March 31, 1997 the Company generated $3,370,000 in
cash from financing activities. This consisted of $3,485,000 from the private
placement of common stock, and $779,000 from incremental long-term debt while
repaying $850,000 of short-term notes that were issued pursuant to the
acquisition of certain oil and natural gas producing properties and $44,000 of
the principal outstanding on a capital lease. During the nine months ended
March 31, 1996 the Company raised $1,690,000 of additional long-term debt while
repaying $42,000 of the principal outstanding on a capital lease, for a net
increase of $1,648,000 from financing activities.
The Company realized a gain of $24,000 on changes in the foreign currency
exchange rate between the DEM and the US dollar. This realized gain related to
the interest payments made on July 15, 1996 and January 15, 1997.
INDEBTEDNESS The Company has secured a revolving loan facility of $15
million with Comerica Bank in Dallas, Texas ("Comerica Bank") to, among other
things, fund working capital and make additional acquisitions as and if
appropriate opportunities are identified. On November 14, 1996 the Company
received approval from Comerica Bank to borrow up to $5,325,000 under this
revolving loan facility of which approximately $4.9 million was outstanding as
of May 12, 1997. A condition of the loan facility is that $390,000 be utilized
by the Company on improvements to existing producing properties. In addition,
Comerica Bank issued a letter of credit on behalf of the Company in the amount
of $49,000 that is secured under this revolving loan facility. The loan under
this revolving credit facility is due for renewal by Comerica Bank on December
1, 1997. If Comerica Bank does not renew the loan or if the Comerica Bank
indebtedness is not repaid when due, Comerica Bank would have the right to
obtain possession of and sell the pledged properties, including any equipment,
new wells, or other improvements placed on the property by the Company. The
Company believes it will obtain renewal of the loan from Comerica on or before
the due date for one additional year. In the event of a default on the bank
indebtedness, not subsequently waived by the bank, it is unlikely that the
Company would be able to continue its business. In addition, the Company is
subject to certain financial and operating covenants that are usual and
customary for transactions of this nature, including, but not limited to,
requirements to provide annual audited and unaudited interim financial
information, prohibitions on additional debt, restrictions on certain payments
and distributions to affiliates and others, restrictions on changes in the
nature of the business, and maintenance of minimum net worth, cash flow, and
operating ratios. The loan agreement also contains usual and customary events
of default and provides remedies to Comerica Bank in the event of default.
Although the Company believes that its cash flows
11
<PAGE> 12
and available sources of financing will be sufficient to satisfy the interest
payments on its debt at currently prevailing interest rates and oil and gas
prices, the Company's level of debt may adversely affect the Company's ability:
(i) to obtain additional financing for working capital, capital expenditures or
other purposes, should it need to so do; or (ii) to acquire additional oil and
gas properties or to make acquisitions utilizing new borrowings. There can be
no assurances that the Company will be able to obtain additional financing, if
required, or that such financing, if obtained, will be on terms favorable to
the Company.
On March 31, 1997 and on April 30, 1997 the Company was not in compliance with
its working capital covenant. The Company has not corrected these defaults.
However, Comerica Bank has provided the Company with a letter waiving these
covenant violations solely with respect to these specific defaults. The
Company believes but cannot assure that it will be able to correct the current
covenant violation and be able to comply with all restrictive covenants in the
future or obtain waivers from the bank with respect to noncompliance.
From time to time in the future, the Company may submit information to Comerica
Bank in accordance with the procedures provided in the loan agreement to
support the Company's request to increase the maximum borrowing base as the
Company believes appropriate. All such applications will be subject to bank
approval. If available, these funds would be allocated toward the 1997
development and acquisition program.
On February 5, 1997 the Company acquired from unaffiliated vendors 60 gross
productive wells (48.4 net productive wells) and two developmental properties
located in Mississippi, Louisiana and Texas. The purchase price consisted of
cash of $1,900,000, four notes payable totaling $2,400,000, secured by a first
charge on the properties, and 659,000 shares of restricted common stock. Two
of these notes, totaling $400,000, bear no interest and are due not earlier
that June 5, 1997 and not later than August 4, 1997. The remaining two notes
are payable not later than February 4, 2000. Such notes bear no interest for
the first two years and 9% for the final year payable in stock of the Company
to be calculated at a value equivalent to 75% of the average closing bid price
of the Company's common stock over the 30 days preceding the maturity date.
These remaining two notes are repayable commencing on the first anniversary of
the notes and semi-annually thereafter, at the option of the holder and on 60
days written notice, in the amount of $400,000. In the event that the holder
exercises his right to defer payment of the semi-annual installment, he may, on
120 days written notice, demand payment of not more than two such installments.
These notes are convertible to shares of common stock of the Company, at the
option of the holder, for an amount not less than that required to convert to
not less than 100,000 common shares and on 15 days notice, at a value
equivalent to 75% of the average closing bid price of the Company's common
stock over the 30 days preceding the notice to convert.
REGULATION S BOND The Company is in the process of selling 5.0 million
Deutschemark denominated (DEM) 12% Bonds due July 15, 2000. Under Regulation S
of the Act, the Company is prohibited from selling these Bonds to U.S. persons
(as defined in Regulation S). As of May 12, 1997 the Company had issued bonds
totaling DEM 3.65 million ($2.2 million). The Company is continuing its
efforts to sell the remaining portion of the issue. Proceeds from such sales
will be available to fund further development and acquisitions of oil and gas
properties.
The Company is obligated to make periodic interest payments (January 15 and
July 15 of each year) and to repay the principal when it comes due on July 15,
2000 in DEM. The interest payments due on July 15, 1996 and January 15, 1997
were paid in full at the time they came due. The funds generated by the
Company from operations, which form the primary source of funds to pay the
interest, are denominated in $US. The source of funds required to repay the
principal outstanding on these bonds has not yet been identified, since the
bonds do not mature until July 15, 2000. The Company is exposed to the risk
that, upon repayment, the exchange rate between DEM and $US may be less
favorable than that which existed at the time that the bonds were issued. This
would result in the Company having to repay a larger number of $US than it
received initially. Changes in the $US equivalent of the DEM bonds arising
from changes to the DEM:$US exchange rate are recognized monthly. At March 31,
1997 the Company had recorded unrealized exchange rate gains of approximately
$238,000 (At June 30, 1996 $62,000). However, there are no assurances that the
Company will continue to realize gains related to favorable changes in the
DEM:$US exchange rates in the future. Unfavorable changes to the DEM:$US
exchange rate will result in the Company recording unrealized exchange rate
losses related to the changes as they occur. The
12
<PAGE> 13
Company believes it has the opportunity to enter into arrangements to manage
its DEM:$US exchange rate risk. At this time, the Company has not entered into
any such arrangements.
SUBORDINATED NOTES Pursuant to the purchase of certain oil and natural
gas producing properties in east Texas in April 1996, the Company issued three
notes, each bearing interest at 9% per annum and in the amount of $250,000,
payable 90, 180 and 270 days after closing. These notes are fully subordinated
to the Comerica indebtedness. The Company retired all three notes plus accrued
interest on July 10, October 7, 1996, and January 5, 1997 in accordance with
its obligations under those notes. The funds to retire the first two notes
were raised from a portion of the proceeds of Regulation S Bonds issued by the
Company and from a portion of the proceeds of the Regulation D Shares issued by
the Company. The Company used a portion of the proceeds from the Regulation S
Shares issued by the Company on March 26, 1996 to retire the third note and
related interest.
Pursuant to the purchase of certain oil and natural gas producing properties in
Texas in November 1996, the Company issued three notes to the vendor. The first
note, in the amount of $100,000, plus accrued interest was retired on its due
date of February 4, 1997 as was the second note, in the amount of $100,000 on
its due date of May 4, 1997. The third note is in the amount of $227,500,
payable monthly with principal and interest amortized over two years, bearing
interest at ten percent (10%). All payments relating to the third note have
been made as they came due. These notes are fully subordinated to the Comerica
indebtedness. The Company intends to continue to use cash generated from
operations to retire the third note.
ISSUANCE OF EQUITY SECURITIES The Company issued 16,000 shares of common
stock pursuant to Regulation D in July 1996 as partial consideration for
services rendered, which it valued at $0.18 per share ($2,880) for purposes of
this transaction. The Company issued 100,000 shares of common stock pursuant
to Regulation D in July 1996 as partial consideration for services rendered,
which it valued at $0.18 per share ($18,000) for purposes of this transaction.
The Company issued 100,000 shares of common stock pursuant to Regulation D in
November 1996, as partial consideration for the acquisition of certain oil and
gas producing properties and undeveloped properties in Texas, which it valued
at $0.18 per share ($18,000) for purposes of this transaction. The Company
also issued 92,000 common shares pursuant to Regulation D in December 1996,
which it valued at $0.18 per share ($16,560) for purposes of this transaction,
as partial consideration for some oil producing properties in New Mexico. On
February 5, 1997 the Company issued 659,000 shares of common stock, pursuant to
Regulation D, which it valued at $0.50 per share ($329,500) as partial
consideration for oil and natural gas producing properties in Mississippi,
Louisiana and Texas. On March 13, 1997 the Company issued 578,500 shares of
common stock, pursuant to Regulation D, which it valued at $0.50 per share
($289,250) as partial consideration for an oil and natural gas producing
property in Louisiana. On May 6, 1997 the Company issued 9,600,000 shares of
preferred stock and 409,839 warrants exercisable at $1.85 per warrant for one
common share of the Company, and other rights for $5,000,000. Additional cash
consideration of up to $9,400,000 could be received by the Company under
certain circumstances. In a related transaction, the Company acquired for
treasury 9,600,000 shares of common stock for $5,000,000 plus three million
warrants, exercisable at $2.50 per warrant for one common share of the Company.
Additional consideration of an amount equal to the amount receivable under the
related preferred stock issuance, may be payable by the Company, under certain
circumstances.
The Company issued 100,000 shares of common stock pursuant to Regulation S in
November, 1996 for $2.50 per share ($250,000). The Company issued 400,000
shares of common stock pursuant to Regulation S in December 1996 for $2.50 per
share ($1,000,000). In January 1997, the Company issued 660,000 shares of
common stock pursuant to Regulation S for $2.50 per share ($1,650,000). A
portion of these funds were used to acquire certain oil and gas producing
properties in Louisiana, Mississippi and Texas. In March 1997 the Company
issued 400,000 shares of common stock pursuant to Regulation S for $2.50 per
share ($1,000,000). The Company issued 100,000 shares of common stock pursuant
to Regulation S in January, 1997, which it valued at $0.18 per share ($18,000)
as partial consideration for the acquisition of two oil and gas producing
properties and an undeveloped property in Texas and one gas producing property
in Colorado.
OTHER SOURCES The Company does not have sufficient liquidity or capital to
fund fully future acquisitions or the development of its undeveloped
properties. Therefore, the Company will continue to be dependent on raising
substantial amounts of additional capital through any one or a combination of
institutional or bank debt financing,
13
<PAGE> 14
equity offerings, debt offerings and internally generated cash flow, or by
forming sharing arrangements with industry participants. Although the Company
has been able to obtain such financings and to enter into such sharing
arrangements in certain of its projects to date, there can be no assurance that
it will continue to be able to do so. Alternatively, the Company may consider
issuing additional securities in exchange for producing properties. There can
be no assurance that any such financings or sharing arrangement can be obtained.
Therefore, notwithstanding the Company's need for substantial amounts of
additional capital, there can be no assurance that it can be obtained.
Further acquisitions and development activities in addition to those for which
the Company is contractually obligated are discretionary and depend exclusively
on cash availability from outside sources such as bank debt and the sale of
securities or properties.
A majority of the Company's proved oil and gas reserves are undeveloped, which
are expected to require approximately $13.5 million of development costs over
the next ten years.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On July 8, 1996, the Company issued 16,000 shares of common stock to
Mr. Robert Donato as partial consideration of services rendered during
the period March 6, 1995 to June 30, 1996. The sale of the securities
were exempt from registration by reason of the exemption provided by
Section 4(2) of the Act.
On July 10, 1996, the Company issued 100,000 shares of common stock to
Mr. Mitch C. Green as partial consideration of the severance payment
to him upon his resignation as an officer of the Company as of July
10, 1996. The sale of the securities were exempt from registration by
reason of the exemption provided by Section 4(2) of the Act.
On November 6, 1996, the Company issued 100,000 shares of common stock
to Ms. Jane Rather as partial consideration for certain oil and gas
interests which the Company acquired from Janex Oil Company, Inc. and
affiliates. The issuance of the securities was exempt from
registration by reason of the exemption provided by Section 4(2) of
the Act.
On November 12, 1996, the Company issued 100,000 shares of common
stock to a third party investor for $250,000. The sale of the
securities was exempt from registration by reason of the exemption
provided by Regulation S promulgated under the Act.
On December 16, 1996, the Company issued 92,000 shares of common stock
to Mrs. Betty Lowe as partial consideration for certain oil and gas
interests which the Company acquired from the Maljamar #1 Joint
Venture. The issuance of the securities was exempt from registration
by reason of the exemption provided by Section 4(2) of the Act.
On December 26, 1996 the Company issued 400,000 shares of common stock
to third party investors for $1,000,000. The sale of the securities
was exempt from registration by reason of the exemption provided by
Regulation S promulgated under the Act.
On January 16, 1997 the Company issued 100,000 shares of common stock
to Volute Ltd. as partial consideration for certain oil and gas
interests which the Company acquired. The issuance of the securities
was exempt from registration by reason of the exemption provided by
Regulation S promulgated under the act.
On January 29, 1997 the Company issued 660,000 shares of common stock
to third party investors for $1,650,000. The sale of the securities
was exempt from registration by reason of the exemption provided by
Regulation S promulgated under the Act.
On February 5, 1997 the Company issued 394,280 and 264,720 shares of
common stock to Mr. David Robertson and Mr. Keith Robertson
respectively, as partial consideration for certain oil and gas
interests which the Company acquired. The issuance of the securities
was exempt from registration by reason of the exemption provided by
Section 4(2) of the Act.
On February 5, 1997, the Company's subsidiary, Corrida Resources,
Inc., issued two promissory notes (one in the original principal
amount of $375,000 payable to Robertson's Oil and Gas, Inc., Pelican
Resources, Inc., and Allen K. Robertson and the other in the original
principal amount of $1,625,000
15
<PAGE> 16
payable to D&R Petroleum, Inc., Black Gold Production Services, Inc.
and David Robertson) in consideration for the acquisitions of certain
oil and gas interests. Each of these promissory notes is convertible
by the holder thereof into shares of the Company's common stock. The
notes are convertible in whole or in part after February 5, 1998;
provided, that a partial conversion must be for a minimum of 100,000
shares of common stock. The notes are convertible based upon the
price of the Company's common stock determined by multiplying
seventy-five percent times the average closing bid price, reported by
NASDAQ, for the thirty days immediately preceding the fifteenth day
following the Company's receipt of a conversion notice.
On March 5, 1997 the Company issued 400,000 shares of common stock to
third party investors for $1,000,000. The sale of the securities was
exempt from registration by reason of the exemption provided by
Regulation S promulgated under the Act.
On March 13, 1997 the Company issued 578,500 shares of common stock to
Mr. David Robertson as partial consideration for certain oil and gas
interests which the Company acquired. The issuance of the securities
was exempt from registration by reason of the exemption provided by
Section 4(2) of the Act.
On May 6, 1997, the Company issued to Joint Energy Development
Investments Limited Partnership ("JEDI") 9,600,000 shares of Series A
Participating Convertible Preferred Stock, par value $0.01 per share,
of the Company (the "Series A Preferred Stock"), certain warrants to
purchase the Company's common stock (the "JEDI Warrants") and warrants
to purchase 409,839 shares of the Company's common stock (the
"Robertson Warrants"). The aggregate consideration (excluding the
exercise price in respect of the JEDI Warrants and the Robertson
Warrants) cannot exceed $14,400,000 and consisted of (i) $5,000,000
($0.521 per share) cash plus (ii) contingent cash payment obligations
(up to an aggregate of $9,400,000) to the Company under the Earn Up
Agreement dated as of May 6, 1997 between the Company and JEDI (the
"JEDI Earn Up Agreement"). The JEDI Warrants are exercisable
commencing on October 1, 1998 and ending on December 31, 1998. At the
time of exercisability, the JEDI Warrants will be exercisable for the
number of shares of common stock (or amount of other property) equal
to the number of shares of the Company's common stock (or amount of
other property), as adjusted from time to time pursuant to the JEDI
Warrants, which would have been received upon the exercise on the
Election Date (as defined in the Forseti Earn Up Agreement described
below) of the Forseti Warrants (defined below) that are deliverable by
Forseti (defined below) to the Company pursuant to the Forseti Earn Up
Agreement. The JEDI Warrants may be exercised in full or in part by
means of payment of the exercise price (initially $2.50 per share of
common stock in cash). The Robertson Warrants are exercisable for a
period of one year, commencing on May 6, 1997. The Robertson Warrants
may be exercised in full or in part by means of payment of the
exercise price (initially $1.85 per share of common stock in cash).
The sale of these securities was exempt from registration by reason of
the exemption provided by Regulation D promulgated under the Act.
On May 6, 1997, the Company repurchased 9,600,000 shares of the
Company's common stock owned by Forseti Investments Ltd. ("Forseti")
in exchange for (i) $5,000,000 ($0.521 per share) cash, (ii) the
issuance by the Company of Class A Common Stock Purchase Warrants to
purchase 1,000,000 shares of the Company's common stock at an initial
exercise price of $2.50 per share (the "Class A Warrants") and Class B
Common Stock Purchase Warrants to purchase 2,000,000 shares of the
Company's common stock at an initial exercise price of $25.0 per share
(the "Class B Warrants", and together with the Class A Warrants, the
"Forseti Warrants"), and (iii) contingent obligations (up to an
aggregate of $9,400,000) to Forseti under the Earn Up Agreement dated
as of May 6, 1997 between the Company and Forseti (the "Forseti Earn
Up Agreement"). However, pursuant to the terms of the Forseti Earn Up
Agreement, Forseti can not both sell or exercise the Forseti Warrants
and receive full payment under the Forseti Earn up Agreement.
Instead, Forseti has the option of either selling or exercising the
Forseti Warrants or receiving any payments due under the Forseti Earn
Up Agreement. The aggregate consideration paid or payable by the
Company to Forseti in respect of the repurchase of the Common Stock
owned by Forseti can not exceed $14,400,000. This consideration will
be funded only through the JEDI Earn Up Agreement. The Forseti
Warrants are exercisable from their date of issuance (subject to
Regulation S and
16
<PAGE> 17
the Securities Purchase Agreement dated as of March 27, 1997 between
the Company and Forseti) and will expire December 31, 1998; provided,
that any of the Forseti Warrants held by Forseti on the Election Date
(as defined in the Forseti Earn Up Agreement) will expire on the
Election Date unless Forseti elects to retain the Forseti Warrants
under the Forseti Earn Up Agreement. The Forseti Warrants may be
exercised in full or in part of by means of payment of the exercise
price (initially $2.50 per share of common stock) in cash. If the
Forseti Warrants are exercised only in part, they must be exercised
for the purchase of at least 100,000 shares of common stock. In
addition, pursuant to the Forseti Earn Up Agreement, the Company
granted to Forseti an option to purchase from the Company a number of
shares of the Company's common stock equal to the quotient of (x) the
amount by which the Earn Up Amount (as defined under the Forseti Earn
Up Agreement) exceeds $7,000,000 and (y) $2.50, at a price equal to
$2.50. The option is exercisable in full or in part only from the
date that the Earn Up Amount is paid by the Company to Forseti through
the fifth business day after the date of payment of the Earn Up
Amount. The issuance of the Forseti Warrants and the option was
exempt from registration by reason of the exemption provided by
Regulation S promulgated under the Act.
During the quarter ended March 31, 1997, the Company determined to
amend the Company's Certificate of Incorporation, effective May 5,
1997, to (i) authorize the increase of authorized common stock from
40,000,000 to 100,000,000 and (ii) authorize 50,000,000 shares of
preferred stock, par value $0.01 per share, which shares of preferred
stock may be issued in one or more series at the discretion of the
Board of Directors. In addition, in connection with the Securities
Purchase Agreement dated as of March 27, 1997 between the Company and
JEDI, (i) the Company agreed to authorize the issuance of Series A
Participating Convertible Preferred Stock and Series B Participating
Convertible Preferred Stock pursuant to two Certificates of
Designation effective May 5, 1997 and (ii) the Company granted to JEDI
certain maintenance rights to purchase its proportionate share of
capital stock of the Company at the same price and on the same terms
as capital stock to be sold by the Company.
For a discussion of the relative rights and preferences of the Series
A Preferred Stock and their effects on the rights of the holders of
the Company's common stock see "Certain Effects of the Charter
Amendment and the Proposed Transactions" in the Company's Information
Statement filed with the Securities and Exchange Commission on April
15, 1997 and incorporated herein by this reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Forseti and EIBOC Investments Ltd., as the collective holders of
approximately 54% of the issued and outstanding shares of the
Company's common stock as of March 27, 1997, approved and adopted,
effective as of May 5, 1997, by written consent in lieu of a meeting
of stockholders, a proposal to amend the Company's Certificate of
Incorporation to (i) authorize the increase of authorized common stock
from 40,000,000 to 100,000,000 and (ii) authorize 50,000,000 shares of
preferred stock, par value $0.01 per share, which shares of preferred
stock may be issued in one or more series at the discretion of the
Board of Directors.
ITEM 5. OTHER INFORMATION
On May 6, 1997, the Company issued 9,600,000 shares of preferred stock
and other rights to Joint Energy Development Inc. ("JEDI") for
$5,000,000. Additional cash consideration of up to $9,400,000 may be
receivable by the Company under certain circumstances. On May 6,
1997, the Company acquired 9,600,000 shares of common stock from
Forseti Investments Ltd. for $5,000,000 plus three million
17
<PAGE> 18
warrants. Under certain circumstances, Forseti could receive and
amount equal to the additional proceeds payable by JEDI. (See Part
II, Item 2, "Changes in Securities").
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
[A] Exhibits
10.1 Securities Purchase Agreement dated as of March 27,
1997 between Queen Sand Resources, Inc. and Joint Energy
Development Investments Limited Partnership (incorporated by
reference to Exhibit 1.1 to the Company's Current Report on
Form 8-K dated March 27, 1997).
10.2 Securities Purchase Agreement dated as of March 27,
1997 between Queen Sand Resources, Inc. and Forseti
Investments Ltd. (incorporated by reference to Exhibit 1.2 to
the Company's Current Report on Form 8-K dated March 27,
1997).
[B] Reports on Form 8-K
1. Current Report on Form 8-K dated January 8, 1997 disclosing
certain matters under Item 9.
2. Current Report on Form 8-K dated February 12, 1997
disclosing certain matters under Item 9.
3. Current Report on Form 8-K dated February 20, 1997
disclosing certain matters under Items 2 and 7.
4. Current Report on Form 8-K dated March 19, 1997 disclosing
certain matters under Items 4 and 7.
5. Current Report on Form 8-K dated March 26, 1997 disclosing
certain matters under Items 2 and 7.
6. Current Report on Form 8-K/A-1 dated March 26, 1997
disclosing certain matters under Item 7 and including pro
forma combined condensed financial statements as of
December 31, 1996 prepared in connection with an
acquisition report therein.
7. Current Report on Form 8-K dated March 27, 1997 disclosing
certain matters under Item 5.
18
<PAGE> 19
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.
QUEEN SAND RESOURCES, INC.
By: /s/ Edward J. Munden
---------------------------------------
Edward J. Munden
President and Chief Executive Officer
By: /s/ Ronald I. Benn
---------------------------------------
Ronald I. Benn
Chief Financial Officer
Date: May 14, 1997
19
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