UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period ended June 30, 2004
[ ] 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 000-27563
SARATOGA RESOURCES, INC.
__________________________________________________
(Exact name of registrant as specified in charter)
Texas 76-0314489
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2304 Hancock Drive, Suite 5, Austin, Texas 78756
__________________________________________ __________
(Address of principal executive offices) (Zip Code)
(512) 478-5717
____________________________________________________
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of June 10, 2005, the Company had
outstanding 3,465,292 shares of its common stock, par value $0.001.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) ........................ 3
Balance Sheet as of June 30, 2004 ....................... 3
Statements of Operations for the quarter and six
months ended June 30, 2004 and June 30, 2003 .......... 4
Statements of Cash Flows for the six months
ended June 30, 2004 and June 30, 2003 ................. 5
Notes to Financial Statements ........................... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 7
ITEM 3 Controls and Procedures ................................. 10
PART II OTHER INFORMATION
ITEM 6. Exhibits ................................................ 11
2
PART I
ITEM 1. FINANCIAL STATEMENTS
Saratoga Resources, Inc. and Subsidiaries
BALANCE SHEET
June 30, 2004
ASSETS
In Thousands
Current assets:
Cash & equivalents $ 1
Marketable Securities 61
------------
62
Equipment, net of accumulated depreciation 1
Total assets $ 63
============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued liabilities $ 54
Due to related parties 247
Stockholders' equity:
Common stock 3
Additional paid-in capital 2,490
Accumulated deficit (2,792)
Other comprehensive income (loss) 61
------------
(238)
------------
Total liabilities & stockholders equity $ 63
============
3
Saratoga Resources, Inc. and Subsidiaries
STATEMENTS OF OPERATIONS
For the Quarters and Six Month Ended June 30, 2004 & 2003
Six Month Six Month
Quarter Ended Quarter Ended Ended Ended
June 30, 2004 June 30, 2003 2004 2003
In Thousands In Thousands In Thousands In Thousands
------------- ------------- ------------- -------------
Revenues:
Gain from Participation Agreement $ -- $ -- $ 2 $ 7
------------- ------------- ------------- -------------
-- -- 2 7
Expenses:
General & administrative 8 17 16 24
------------- ------------- ------------- -------------
8 17 16 24
Loss before income taxes (8) (17) (14) (17)
------------- ------------- ------------- -------------
Net loss (8) (17) (14) (17)
------------- ------------- ------------- -------------
Unrealized holding gains (losses) (42) (31) 38 (25)
------------- ------------- ------------- -------------
Comprehensive income $ (50) $ (48) $ 24 $ (42)
============= ============= ============= =============
Basic & Diluted Loss Per Share $ (0.002) $ (0.005) $ (0.004) $ (0.004)
Wtd Average number of common shares
outstanding 3,465,292 3,465,292 3,465,292 3,465,292
4
Saratoga Resources, Inc. and Subsidiaries
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2004 & 2003
Six Month Ended Six Month Ended
June 30, 2004 June 30, 2003
In Thousands In Thousands
--------------- ---------------
Cash provided (used) from operating activities:
Net loss $ (14) $ (17)
Depreciation 1 --
(Increase) decrease in accounts receivable -- --
Increase (decrease) in accrued liabilities (73) (51)
--------------- ---------------
(86) (68)
Cash provided (used) by financing activities:
Principal payments long term debt -- --
Due from related parties 87 70
--------------- ---------------
87 70
--------------- ---------------
Net (decrease) increase in cash 1 2
Beginning cash -- --
--------------- ---------------
Ending Cash $ 1 $ 2
=============== ===============
5
SARATOGA RESOURCES, INC.
Notes to Financial Statements
June 30, 2004
(Unaudited)
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Saratoga Resources, Inc., a
Texas corporation (the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. They do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for a complete financial presentation. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation, have been included in the
accompanying unaudited financial statements. Operating results for the periods
presented are not necessarily indicative of the results that may be expected for
the full year.
These financial statements should be read in conjunction with the financial
statements and footnotes, which are included as part of the Company's Form
10-KSB for the year ended December 31, 2003.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Information
This Form 10-QSB quarterly report of Saratoga Resources, Inc. (the
"Company") for the six months ended June 30, 2004, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which are intended to be covered by the safe harbors created
thereby. To the extent that there are statements that are not recitations of
historical fact, such statements constitute forward-looking statements that, by
definition, involve risks and uncertainties. In any forward-looking statement,
where the Company expresses an expectation or belief as to future results or
events, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will be achieved or accomplished.
The following are factors that could cause actual results or events to
differ materially from those anticipated, and include, but are not limited to:
general economic, financial and business conditions; the Company's ability to
minimize expenses; the Company's current dependency on its sole director and
executive officer, to continue funding the Company's operations and, to the
extent he should ever become unwilling to do so, the Company's ability to obtain
additional necessary financing from outside investors and/or bank and mezzanine
lenders; and the ability of the Company to generate sufficient revenues to cover
operating losses and position it to achieve positive cash flow.
Readers are cautioned not to place undue reliance on the
forward-looking statements contained herein, which speak only as of the date
hereof. The Company believes the information contained in this Form 10-QSB to be
accurate as of the date hereof. Changes may occur after that date, and the
Company will not update that information except as required by law in the normal
course of its public disclosure practices.
Additionally, the following discussion regarding the Company's
financial condition and results of operations should be read in conjunction with
the financial statements and related notes contained in Item 1 of Part 1 of this
Form 10-QSB, as well as the financial statements in Item 7 of Part II of the
Company's Form 10-KSB for the fiscal year ended December 31, 2003.
Critical Accounting Policies
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The Company believes certain critical
accounting policies affect its more significant judgments and estimates used in
the preparation of its financial statements. A description of the Company's
critical accounting policies is set forth in the Company's Form 10-KSB for the
year ended December 31, 2003. As of, and for the six months ended, June 30,
2004, there have been no material changes or updates to the Company's critical
accounting policies.
7
Current Year Operations and Developments
During the six months ended June 30, 2004, the Company continued to
operate on a very limited scale with operations consisting solely of the
Company's investment in a single oil and gas property. Management continued to
undertake efforts to minimize costs during the period.
The financial information included in the following discussion has been
rounded to thousands.
Results of Operations
Revenues. Revenues during the six months ended June 30, 2004 totaled
$2,000 consisting of a gain from the participation agreement. Revenues from this
agreement during 2003 period totaled $7,000.
General and Administrative Expenses. General and administrative expense
declined from $24,000 during the six months ended June 30, 2003 to $16,000
during the same period in 2004. The company has been incurring accounting and
legal expenses during the current period in order to bring its filings current
with the Securities and Exchange Commission.
Financial Condition
Liquidity and Capital Resources.
The Company had a cash balance of $1,000 and a working capital balance
of $8,000 at June 30, 2004 as compared to a cash balance of $Nil and a working
capital deficit of $105,000 at December 31, 2003.
The change in cash and working capital balances was attributable to the
operating loss incurred during 2004, partially offset by proceeds from
borrowings from related parties.
The Company, at and for the period ended June 30, 2004, had limited
capital resources and limited operating revenues to support its overhead. The
Company is, and was, dependent upon its principal shareholder to provide
financing to support operations and ongoing cost control measures to minimize
negative cash flow. Unless that shareholder continues to provide financing the
Company will be required to substantially limit its activities and may be unable
to sustain its operations.
8
Long-Term Debt
At June 30, 2004, the Company had long-term debt of $247,000 owed to
the Company's principal shareholder. Loans from the Company's principal
shareholder bear interest at 12.5% and are payable on demand.
Capital Expenditures and Commitments
During the six months ended June 30, 2004, the Company made no capital
expenditures and, at June 30, 2004, the Company had no capital commitment
obligations.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements or guarantees of
third party obligations at June 30, 2004.
Inflation
The Company believes that inflation has not had a significant impact on
its operations since inception.
9
ITEM 3. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in company
reports filed or submitted under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
company reports filed under the Exchange Act is accumulated and communicated to
management, including the Company's Chief Executive Officer and Chief Financial
Officer (the "Certifying Officers"), as appropriate to allow timely decisions
regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, the
Certifying Officers carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of June 30,
2004. Their evaluation was carried out with the participation of other members
of the Company's management. Based upon their evaluation, the Certifying
Officers concluded that the Company's disclosure controls and procedures were
effective.
The Company's internal control over financial reporting is a process
designed by, or under the supervision of, the Certifying Officers and effected
by the Company's Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and the preparation of the Company's financial statements for external
purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes policies and procedures that pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the Company's assets; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the Company's financial statements in accordance with generally
accepted accounting principles, and that the Company's receipts and expenditures
are being made only in accordance with the authorization of the Company's Board
of Directors and management; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on its financial
statements. There has been no change in the Company's internal control over
financial reporting that occurred in the quarter ended June 30, 2004, that has
materially affected, or is reasonably likely to affect, the Company's internal
control over financial reporting.
10
PART II OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit
Number Description
_______ ____________________________________________________________
31.1 Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of
the Sarbanes-Oxley Act of 2002. (1)
31.2 Certification of Chief Financial Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of
the Sarbanes-Oxley Act of 2002. (1)
32.1 Certification of Chief Executive Officer and Chief Financial
Officer, pursuant to 18 United States Code Section 1350, as
enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
(1)
(1) Filed herewith.
11
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
(Registrant) SARATOGA RESOURCES, INC.
By: /s/ Thomas Cooke
________________________
Thomas Cooke
CEO and President
Date: July 8, 2005
12