AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 2005MAY 15, 2006
REGISTRATION NO. 333-124908333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Amendment
No. 2
to----------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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BLUE DOLPHIN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 73-1268729
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
(713) 227-7660
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MICHAEL J. JACOBSON
BLUE DOLPHIN ENERGY COMPANY
801 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
(713) 227-7660
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
-------------------------
Copies to:
NICK D. NICHOLAS
BRYAN K. BROWN
NICK D. NICHOLAS
PORTER & HEDGES, L.L.P.LLP
1000 MAIN STREET, 36TH FLOOR
HOUSTON, TXTEXAS 77002-6336
TELEPHONE: (713) 226-6000
FAX: (713) 226-6237
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery ofthis Form is a registration statement to General Instructions I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the prospectus is expected to be madeCommission pursuant to Rule 434,
please462(e) under the Securities Act, check the
following box. [ ]
-----------If this Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register additional
securities or additional classes of securities pursuant to Rule 413(b) under the
Securities Act, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED
PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO PRICE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE (2) PRICE (3) FEE
- -------------------- ------------- ---------------- ---------- ------------
Common Stock, par
value $.01 per share 1,694,327(1) $5.63 $9,539,062 $1,021
(1) Includes 32,572 shares of common stock issuable upon exercise of
outstanding warrants. Pursuant to Rule 416 of the Securities Act, there is
also being registered hereunder such indeterminate number of additional
shares of common stock as may become issuable upon exercise of the warrants
to prevent dilution resulting from stock splits, stock dividend or similar
transactions.
(2) Pursuant to Rule 457(c) of the Securities Act, the registration fee is
calculated on the basis of the average of the high and low sale prices for
our common stock on May 9, 2006, as reported in the consolidated reporting
system of the Nasdaq SmallCap Market.
(3) Estimated solely for the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED AUGUST 19, 2005
PROSPECTUS
BLUE DOLPHIN ENERGY COMPANY
[BLUE DOLPHIN LOGO]
3,494,009 SHARES
OF
COMMON STOCK
This prospectus covers the offer and sale by the selling stockholders
listed under the heading "Selling Stockholders" of up to 3,494,009 shares of our
common stock which are currently issued and outstanding or which the selling
stockholders may acquire upon exercise of outstanding options and warrants.
The selling stockholders may offer and sell the shares of our common stock
in their discretion from time to time at prevailing market prices, at negotiated
prices or at fixed prices. We will not receive any of the proceeds from the sale
of shares of our common stock by the selling stockholders in this offering. We
will bear all of the expenses incurred in connection with the registration of
these shares. The selling stockholders will pay any brokerage commissions and/or
similar charges incurred for the sale of their shares of our common stock.
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"BDCO." On August 17, 2005, the closing sale price of our common stock was
$2.67.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2005
- ----------
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED MAY 15, 2006
PROSPECTUS
BLUE DOLPHIN ENERGY COMPANY
(BLUE DOLPHIN ENERGY COMPANY LOGO)
1,694,327 SHARES OF COMMON STOCK
This prospectus relates to the resale of 1,694,327 shares of our common
stock by the selling stockholders identified in this prospectus on page 11. Of
the shares offered, 1,661,899 shares are issued and outstanding and 32,438
shares are reserved for issuance upon the exercise of outstanding warrants. The
selling stockholders may sell the shares of common stock described in this
prospectus in public or private transactions, at prevailing market prices or at
privately negotiated prices. The selling stockholders may sell shares directly
to purchasers or through brokers or dealers. Brokers or dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders.
We will not receive any of the proceeds from the sale of the shares by the
selling stockholders. The selling stockholders will receive all of the proceeds
from the sale of the shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. We will, in the
ordinary course of business, receive proceeds from the issuance of shares upon
exercise of the warrants described in this prospectus, unless such warrants are
exercised on a cashless basis.
We will pay the expenses of registration of the sale of shares. It is not
possible at the present time to determine the price to the public in any sale of
the shares by the selling stockholders and each selling stockholder reserves the
right to accept or reject, in whole or in part, any proposed purchase of shares.
Accordingly, the public offering price, the amount of any applicable
underwriting discounts and commissions and the net proceeds to the selling
stockholders will be determined at the time of such sale by the selling
stockholders.
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"BDCO." On May 12, 2006, the closing sale price of our common stock was $5.57.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is __________, 2006
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY...............................................SUMMARY....................................................... 1
RISK FACTORS..................................................... 3FACTORS............................................................. 2
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS............STATEMENTS.................... 9
WHERE YOU CAN FIND MORE INFORMATION..............................INFORMATION...................................... 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................REFERENCE.......................... 10
USE OF PROCEEDS..................................................PROCEEDS.......................................................... 10
PRIVATE PLACEMENT OF COMMON STOCK AND WARRANTS........................... 10
SELLING STOCKHOLDERS.............................................STOCKHOLDERS..................................................... 11
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS............. 13
PLAN OF DISTRIBUTION.............................................DISTRIBUTION..................................................... 13
LEGAL MATTERS............................................................ 15
LEGAL MATTERS.................................................... 17
EXPERTS.......................................................... 17EXPERTS.................................................................. 15
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different.
The selling stockholders are offering to sell and seeking offers to buy shares
of our common stocksecurities only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any
sale of our common stock.securities.
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PROSPECTUS SUMMARY
This summary highlights selected information described more fully elsewhere
or incorporated by reference in this prospectus. This summary may not contain
all the information that is important to you. We urge you to read the entire
prospectus, including the documents incorporated by reference, before making an
investment decision with respect to our common stock.securities. References in this
prospectus to the terms "we," "us," "our" or other similar terms mean Blue
Dolphin Energy Company and its subsidiaries.
THE COMPANY
Blue Dolphin Energy Company, a Delaware corporation formed in 1986, is engageda
holding company and conducts substantially all of its operations through its
subsidiaries. We conduct our business activities in two lines of business:primary business
segments: (i) pipeline transportation and related services tofor
producer/shippers, and (ii) oil and gas exploration and production.
We conduct our operations through our subsidiaries
andSubstantially all of our assets are located offshore and onshore in the Texas Gulf coast area. In
addition to satisfying our liquidity and capital needs, our focus in 2005 is to
increase utilizationconsist of our pipelines, pursue strategic acquisitions and
continue cost management. Our long-term goal is to create greater value for our
stockholders through the addition of assets. Although we continue to haveequity interests in oil and gas properties and will consider acquiring interests in
producing oil and gas properties, asour subsidiaries.
Our operating subsidiaries are:
- Blue Dolphin Pipe Line Company, a result cost savings measures implemented
in 2004, we are primarily focused on our pipeline business.
In September 2004, we completedDelaware corporation;
- Blue Dolphin Petroleum Company, a private offering with certain accredited
investors and certain of our directors of promissory notes in an aggregate
principal amount of $750,000 (the "Promissory Notes") and 2,800,000 warrants
(the "Warrants") to purchase shares of our common stock. We also issuedDelaware corporation;
- Blue Dolphin Exploration Company, a total
of 300,000 Warrants to the two directors nominated by the investors in the
private offering and one of our existing directors.
In April 2005, we entered into Note Modification Agreements and Waiver
Agreements with holders of $450,000 aggregate principal amount of Promissory
Notes. Pursuant to the terms of the Note Modification Agreements and Waiver
Agreements, we agreed with each holder, among other things, to:
- amend the terms of their Promissory Note to (i) extend the maturity
date from September 8, 2005 to June 30, 2006 and (ii) defer the
payment of all interest on the Promissory Note until maturity;Delaware corporation; and
- waive their compliance with the lock-up provisions of the Purchase
Agreement and allow the sale of shares of common stock received upon
exercise of the Warrants.
Although we were able to implement certain cost savings measures and
restructure the terms of some of our indebtedness in 2004 and 2005, we have
limited revenues and have not been able to generate sufficient cash from
operations to cover operating and general and administrative expenses. Because
of our recurring losses and negative cash flows from operations, our independent
registered public accounting firm includedBlue Dolphin Services Co., a "going concern" exception in their
audit reports on our audited financial statements for the years ended December
31, 2004 and 2003. The "going concern" qualification signifies that substantial
doubt exists about our ability to continue our business. See "Risk Factors - The
current poor performance of our existing assets combined with the capital
requirements inherent in our business raise substantial doubt about our ability
to continue as a going concern."Texas corporation.
Our principal executive office is located at 801 Travis, Suite 2100,
Houston, Texas 77002, and our telephone number is (713) 227-7660.
THE OFFERING
Common stock offered by the Up to 1,694,327(1) shares of our common stock
selling stockholders......... up to 3,494,009 shares
Nasdaq SmallCap Market symbol.............................................. BDCOstockholders
Use of proceeds.......................................Proceeds We will not receive any
of the proceeds from the sale
of shares of our common stock covered by this
prospectus. We will receive proceeds from the
selling stockholders.
Relationships and Transactions........................ There are material
with Selling Stockholders relationships between us
and certainexercise of the selling stockholders.
Additionally, we and
certain of the selling
stockholders have been
parties to certain
transactions. See
"Certain Relationships
and Related Party
Transactions" beginning
on page 13 ofwarrants described in this
prospectus for more
information on these
relationships and
transactions.prospectus.
Risk Factors.......................................... InvestingFactors In analyzing an investment in our common stock
involves a high
degree of risk. Seeoffered by this prospectus, you should
carefully consider the information set forth
under "Risk Factors" beginning on
page 3Factors."
(1) Includes 32,438 shares of common stock issuable upon exercise of
outstanding warrants. The number of shares of common stock that may be
issued upon exercise of the warrants is subject to adjustment to prevent
dilution resulting from stock splits, stock dividends, the issuance of
common stock or securities convertible into or exercisable for common stock
at prices below certain thresholds or similar events.
We have reserved for issuance the shares of our common stock identified in this
prospectus.
2Each of the above listed securities which are being sold by the
selling stockholders were "restricted securities" under the Securities Act of
1933, as amended, or the "Securities Act," prior to this registration. The
selling stockholders will determine if and when they will sell their shares and
if they will sell their shares at the current market price or at negotiated
prices at the time of the sale. Although we have agreed to pay the expenses
related to the registration of the shares being offered, we will not receive any
proceeds from the sale of the shares by the selling stockholders.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider each of the following risks and all of the information
set forth or incorporated by reference in this prospectus before deciding to
invest in our common stock. If any of the following risks and uncertainties
develop into actual events, our business, financial condition or results of
operations and the trading price of our common stock could be materially
adversely affected and you may lose all or part of your investment.
RISK RELATED TO THE CURRENT POOR PERFORMANCE OF OUR EXISTING ASSETS COMBINED WITH THE CAPITAL
REQUIREMENTS INHERENT IN OUR BUSINESS RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY
TO CONTINUE AS A GOING CONCERN.
Although we were able to implement certain cost savings measures and
restructure the terms of some of our indebtedness, we were not able to generate
sufficient cash from operations to cover operating and general and
administrative expenses in each of the three most recently completed fiscal
years. Furthermore, our financial condition has been significantly and
negatively affected by the poor performance of our businesses and our
significant indebtedness. For the six months ended June 30, 2005, we generated
revenues of approximately $.47 million while operating costs and general and
administrative costs totaled approximately $1.7 million. For the year ended
December 31, 2004, we generated total revenues of approximately $1.4 million
while operating costs and general administrative costs, excluding certain
non-cash compensation expense, totaled approximately $2.8 million. Because of
our recurring losses and negative cash flows from operations, our independent
registered public accounting firm included a "going concern" exception in their
audit reports on our audited financial statements for the years ended December
31, 2004 and 2003. This raises substantial doubt about our ability to continue
our business as a going concern. We currently believe that we have sufficient
resources to satisfy our working capital and capital expenditure requirements
until June 30, 2006. Our long-term viability as a going concern is dependent
upon the following factors:
- our ability to raise capital to meet current commitments and
obligations, and fund the continuation of our operations; and
- our ability to ultimately achieve profitability and cash flows from
operations in amounts that will sustain our current operations.
Historically, we have primarily raised capital and financed our operations
through the sale of assets and from the issuance of debt and equity securities
to individuals or affiliates. There can be no assurance that we will become
profitable, that our cash flows from operations will be sufficient to allow us
to meet our commitments and obligations as they become due and fund the
continuation of our business, or that we will be able to raise capital or sell
assets on commercially acceptable terms. If we are not able to meet our
commitments and obligations as they become due, we may have to seek protection
under U.S. bankruptcy laws.
WE HAVE HAD ONLY ONE PROFITABLE YEAR SINCE 1997.
We have a history of losses with only one profitable year since 1997,
which was 2002 when we had net income of approximately $482,000. As of June 30,
2005 and December 31, 2004, we had an accumulated deficit of approximately $24.5
million and $23.8 million, respectively. We do not expect to be profitable in
2005. Our ability to achieve profitability in the future will depend on many
factors, but primarily on the level of use of our pipeline systems. The level of
use of our pipeline systems is beyond our control.COMPANY AND ITS OPERATIONS
WE ARE PRIMARILY DEPENDENT ON REVENUES FROM OUR PIPELINE SYSTEMS.
AsSYSTEMS AND OUR WORKING
INTERESTS IN TWO OIL AND GAS PRODUCING PROPERTIES.
Although revenues from oil and gas sales accounted for approximately 69.5%
of our total revenues in 2005, as a result of our sale of substantially all of
our proved oil and gas reserves in 2002 and the limited remainingamount of reserves that were addedon
properties we own interests in, 2003,we expect that our future revenues arewill be
primarily dependent on the level of use of our pipeline systems. TheVarious factors
will influence the level of use of our pipeline systems including the success of
drilling programs in the areas near our pipelines and our ability to attract new
producer/shippers. There are various pipelines in and around our pipeline
systems that we vigorously compete with to attract new producer/shippers to our
pipeline systems. There can be no assurance that we will be successful in
attracting new producer/shippers to our pipeline systems.
Furthermore, the rate of production from oil and gas properties generally
declines as reserves are depleted. Our working interests are in properties in
the Gulf of Mexico where, generally, the rate of production declines more
rapidly than in many other producing areas of the world. As the level of
production from these properties declines our revenue from these interests will
decrease. Unless we transportare able to replace this revenue, with revenue from
interests in other oil and gas properties, increase the level of utilization of
our pipelines or acquire other revenue generating assets at an acceptable cost,
our revenues and cash flow from operations will decrease.
THE GEOGRAPHIC CONCENTRATION OF OUR ASSETS MAY HAVE A GREATER EFFECT ON US AS
COMPARED TO OTHER COMPANIES.
All of our assets are located in the Gulf of Mexico and the onshore gulf
coast of Texas. Because our assets are not as diversified geographically as many
of our competitors, our business is owned by third parties. As a result,subject to local conditions more than other,
more geographically diversified companies. Any regional events, including price
fluctuations, natural disasters, and restrictive regulations, that increase
costs, impacts the volumeexploration and development of oil and gas involved in these activities dependsthe Gulf of
Mexico, reduce availability of equipment or supplies, reduce demand for oil and
gas production may impact our business more than if our assets were
geographically diversified.
IF WE ARE NOT ABLE TO GENERATE SUFFICIENT FUNDS FROM OUR OPERATIONS AND OTHER
FINANCING SOURCES, WE MAY NOT BE ABLE TO FINANCE OUR OPERATIONS.
We have historically needed substantial amounts of cash to fund our working
capital requirements. Because we have experienced a negative working capital
position in past years, we have been dependent on the actions of
those third parties,debt and is beyondequity financing to
meet our control. Further, the followingworking capital requirements that were not funded from operations.
Low commodity prices, production problems, declines in production,
disappointing drilling results and other factors
most of which are beyond our control could reduce
our funds from operations. As a result we may unfavorably impacthave to seek debt and equity
financing to meet our working capital requirements. Furthermore, we have
incurred losses in the past that may affect our ability to maintainobtain financing. In
addition, financing may not be available to us in the future on acceptable terms
or increase current throughputat all. In the event additional capital is not available, we may be forced to
sell some of our assets on unfavorable terms or to renegotiate existing contracts on
our pipeline systems:
- service area competition;
- expiration and/or turn back of significant contracts;
3an untimely basis.
2
- changes in regulation and action of regulatory bodies;
- future weather conditions;
- price competition;
- drilling activity and availability of oil and gas supplies;
- adverse general economic conditions; and
- unfavorable movements in commodity prices.
WE FACE STRONG COMPETITION FROM LARGER COMPANIES THAT MAY NEGATIVELY AFFECT OUR
ABILITY TO CARRY ON OPERATIONS.
We operate in a highly competitive industry. Our competitors include major
integrated oil companies, substantial independent energy companies, affiliates
of major interstate and intrastate pipelines and national and local gas
gatherers, major integrated oil companies, and substantial independent
energy companies, many of which possess greater financial and other resources than we
do. We cannot be sure thatOur ability to successfully compete in the marketplace is affected by many
factors including:
- most of our competitors have greater financial resources than we will obtain, or be abledo,
which gives them better access to access, the
financialcapital to acquire assets; and
other resources to compete successfully. Additionally,- we often establish a higher standard for the minimum projected rate of
return on an
investmentinvested capital than some of our competitors since we
cannot afford to absorb certain risks. Werisks, which we believe this puts us at a
competitive disadvantage in acquiring pipelines and oil and gas
properties.
OIL AND GAS PRICES ARE VOLATILE AND A SUBSTANTIAL AND EXTENDED DECLINE IN THE
PRICE OF OIL AND GAS WOULD HAVE A MATERIAL ADVERSE EFFECT ON US.
The tightening of natural gas supply and demand fundamentals has resulted
in higher, but extremely volatile, natural gas prices, and thethis volatility in
natural gas prices is expected to continue. Our revenues, profitability,
operating cash flow and our potential for growth are largely dependent on
prevailing oil and gas prices. Prices for oil and gas are subject to large
fluctuations in response to relatively minor changes in the supply and demand
for oil and gas, uncertainties within the market and a variety of other factors
beyond our control. These factors include:
- weather conditions in the United States;
- the condition of the United States economy;
- the actions of the Organization of Petroleum Exporting Countries;
- governmental regulation;
- political stability in the Middle East, South America and elsewhere;
- the foreign supply of oil and gas;
- the price of foreign imports; and
- the availability of alternate fuel sources.
In addition, low or declining oil and gas prices could have collateral
effects that could adversely affect us, including the following:
- reducing the exploration for and development of oil and gas reserves
held by third party companies around our pipeline systems;
- increasing our dependence on external sources of capital to meet our
cash needs; and
- generally making it more difficult for usimpairing our ability to obtain needed capital.
3
RESERVE ESTIMATES DEPEND ON MANY ASSUMPTIONS THAT MAY PROVE TO BE INACCURATE.
ANY MATERIAL INACCURACIES IN OUR RESERVE ESTIMATES OR UNDERLYING ASSUMPTIONS
COULD CAUSE THE QUANTITIES AND NET PRESENT VALUE OF OUR RESERVES TO BE
OVERSTATED.
Estimating reserves of oil and gas is complex. The process relies on
interpretations of available geologic, geophysics, engineering and production
data. The extent, quality and reliability of this data can vary. The process
also required certain economic assumptions, some of which are mandated by the
Securities and Exchange Commission, or the SEC, such as oil and gas prices,
drilling and operating expenses, capital expenditures, taxes and availability of
funds. The accuracy of a reserve estimate is a function of:
- the quality and quantity of available data;
- the interpretation of that data;
- the accuracy of various mandated economic assumptions; and
- the judgment of the persons preparing the estimate.
Actual quantities of recoverable oil and gas reserves, future production,
oil and gas prices, taxes, development expenditures and operating expenses most
likely will vary from our estimates. Any significant variance could materially
affect the quantities and net present value of our reserves. In addition, we may
adjust estimates of proved reserves to reflect production history, results of
exploration and development and prevailing oil and gas prices. Our reserves also
may be susceptible to drainage by operators on adjacent properties.
The present value of future net cash flows will most likely not equate to
the current market value of our estimated proved oil and gas reserves. In
accordance with SEC requirements, we base the estimated discounted future net
cash flows from proved reserves on prices and costs in effect at December 31.
Actual future prices and costs may be materially higher or lower than the prices
and costs we used.
WE CANNOT CONTROL THE ACTIVITIES ON PROPERTIES WE DO NOT OPERATE.
Currently, other companies operate or control allthe development of the oil
and gas properties in which we have an interest. As a result, we depend on the
operator of the wells or leases to properly conduct lease acquisition, drilling,
completion and production operations. The failure of an operator, or the
drilling contractors and other service providers selected by the operator to
properly perform services, or an operator's failure to act in ways that are in
our best interest, could adversely affect us, including the amount and timing of
revenues, if any, we receive from our interests.
We haveown and generally anticipate that we will typically continue to own
substantially less than a 50% working interest in our prospects and will
therefore engage in joint operations with other working interest owners. Since
we own or control less than a majority of the working interest in a prospect,
decisions affecting the prospect could be made by the owners of more than a majority of
the working interest. For instance, if we are unwilling or unable to participate
in
4
the costs of operations approved by a majority of the working interests in a
well, our working interest in the well (and possibly other wells on the
prospect) will likely be subject to contractual "non-consent penalties." These
penalties may include, for example, full or partial forfeiture of our interest
in the well or a relinquishment of our interest in production from the well in
favor of the participating working interest owners until the participating
working interest owners have recovered a multiple of the costs which would have
been borne by us if we had elected to participate, which often ranges from 400%
to 600% of such costs.
WE HAVE PURSUED, AND INTEND TO CONTINUE TO PURSUE, ACQUISITIONS. OUR BUSINESS
MAY BE ADVERSELY AFFECTED IF WE CANNOT EFFECTIVELY INTEGRATE ACQUIRED
OPERATIONS.
One of our business strategies has been to acquire operations and assets
that are complementary to our existing businesses. Acquiring operations and
assets involves financial, operational and legal risks. These risks include:
4
- inadvertently becoming subject to liabilities of the acquired company
that were unknown to us at the time of the acquisition, such as later
asserted litigation matters or tax liabilities;
- the difficulty of assimilating operations, systems and personnel of
the acquired businesses; and
- maintaining uniform standards, controls, procedures and policies.
Competition from other potential buyers could cause us to pay a higher
price than we otherwise might have to pay and reduce our acquisition
opportunities. We are often out-bid by larger, better capitalized companies for
acquisition opportunities we pursue. Moreover, our past success in making
acquisitions and in integrating acquired businesses does not necessarily mean we
will be successful in making acquisitions and integrating businesses in the
future.
OPERATING HAZARDS, INCLUDING THOSE PECULIAR TO THE MARINE ENVIRONMENT, MAY
ADVERSELY AFFECT OUR ABILITY TO CONDUCT BUSINESS.
Our operations are subject to the inherent risks normally associated with those
operations, includingsuch as:
- pipeline ruptures, explosions, pollution, releaseruptures;
- sudden violent expulsions of toxic substances, firesoil, gas and adverse weather conditions,mud while drilling a well,
commonly referred to as a blowout;
- a cave in and collapse of the earth's structure surrounding a well,
commonly referred to as cratering;
- explosions;
- fires;
- pollution; and
- other hazards, eachenvironmental risks.
If any of whichthese events were to occur, we could result in damage to or destruction of our facilities or damages
to persons and property. In addition, our operations face possible risks
associated with acts of aggression on our pipeline assets. These risks could
result insuffer substantial losses to us
from injury and loss of life, damage to and destruction of property and
equipment, pollution and other environmental damage and suspension of
operations. Our offshore operations are also subject to a variety of operating
risks peculiar to the marine environment, such as hurricanes or other adverse
weather conditions and more extensive governmental regulation. These regulations
may, in certain circumstances, impose strict liability for pollution damage or
result in the interruption or termination of operations.
LOSSES AND LIABILITIES FROM UNINSURED OR UNDERINSURED DRILLING AND OPERATING
ACTIVITIES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
We maintain several types of insurance to cover our operations, including
maritime employer's liability and comprehensive general liability. Amounts over
base coverages are provided by primary and excess umbrella liability policies
with maximum limits of $50$25 million. We also maintain operator's extra expense
coverage, which covers the control of drilled or producing wells as well as
redrillingre-drilling expenses and pollution coverage for wells out of control.
We may not be able to maintain adequate insurance in the future at rates we
consider reasonable or losses may exceed the maximum limits under our insurance
policies. In 2004, in connection with ourthe implementation of certain cost savings program,saving
measures, we cancelled the property insurance coverage on our pipelines, howeverpipelines. In
2005, we do
continue to carrydid not obtain property insurance
5
coverage on our shore facilities and our offshore platforms.pipelines since we
were not able to acquire the coverage at what we believed to be reasonable
terms. If a significant event that is not fully insured or indemnified occurs,
it could materially and adversely affect our financial condition and results of
operations.
WE WILL BE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY ACT.
IF WE ARE UNABLE TO TIMELY COMPLY WITH SECTION 404 OR IF the COSTS RELATED TO
COMPLIANCE ARE SIGNIFICANT, OUR PROFITABILITY, STOCK PRICE AND RESULTS OF
OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.
We will be required to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002 as of December 31, 2006. Section 404 requires that we
document and test our internal control over financial reporting and issue
management's assessment of our internal control over financial reporting. Our
principal financial and accounting officer resigned effective as of July 15,
2005. Although we have been able to fill the vacancy created by his resignation,
we are a small company with limited financial resources and our finance and
accounting staff is very limited. We have not started our review of our existing
internal control structure and may need to hire additional personnel or
consultants in connection with our review.
We believe that the out-of-pocket and other additional costs, the
diversion of management's attention from running the day-to-day operations and
operational changes caused by the need to comply with the requirements of
Section 404 of the Sarbanes-Oxley Act could be significant. If the time and
costs associated with such compliance exceed our current expectations, our
profitability could be affected.
We cannot be certain at this time that we will be able to successfully
complete the procedures, certification and attestation requirements of Section
404 or that we or our auditors will not identify material weaknesses in internal
control over financial reporting. If we fail to satisfy the requirements of
Section 404 on a timely basis investors could lose confidence in our financial
statements, which in turn could harm our business and negatively impact the
trading price of our common stock.5
COMPLIANCE WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS COULD BE COSTLY
AND COULD NEGATIVELY IMPACT PIPELINE AND PRODUCTIONOUR OPERATIONS.
Our operations are subject to numerous laws and regulations governing the
discharge of materials into the environment or otherwise relating to
environmental protection. These laws and regulations may:
- require the acquisition of a permit before operations can be
commenced;
- restrict the types, quantities and concentration of various substances
that can be released into the environment from drilling and production
activities;
- limit or prohibit drilling and pipeline activities on certain lands
lying within wilderness, wetlands and other protected areas;
- require remedial measures to mitigate pollution from former
operations, such as plugging abandoned wells and abandoning pipelines;
and
- impose substantial liabilities for pollution resulting from our
operations.
The recent trend toward stricter standards in environmental legislation and
regulation is likely to continue. The enactment of stricter legislation or the
adoption of stricter regulations could have a significant impact on our
operating costs, as well as on the oil and gas industry in general.
Our operations could result in liability for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages. We could also be liable for environmental
damages caused by previous property owners. As a result, substantial liabilities
to third parties or governmental entities may be incurred which could have a
material adverse effect on our financial condition and results of operations. We
maintain insurance coverage for our operations, including limited coverage for
sudden and accidental environmental damages, but we do not believe that
insurance coverage for all environmental damages that occur over time or
complete coverage for sudden and accidental environmental damages is available
at a reasonable cost. Accordingly, we may be subject to liability or may lose
the privilege to continue exploration or production activities upon substantial
portions of our properties if certain environmental damages occur.
The Oil and Pollution Act, of 1990 ("OPA")or OPA, imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills. The
implementation of new, or the modification of existing, environmental laws or
regulations, including regulations promulgated pursuant to the OPA, could have a
material adverse impact on us.
WE WILL BE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY ACT.
IF WE ARE UNABLE TO TIMELY COMPLY WITH SECTION 404 OR IF THE COSTS RELATED TO
COMPLIANCE ARE SIGNIFICANT, OUR PROFITABILITY, STOCK PRICE AND RESULTS OF
OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.
We will be required to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002 for the fiscal year ending December 31, 2007. Section
404 requires that we document and test our internal control over financial
reporting and issue management's assessment of our internal control over
financial reporting. Our principal financial and accounting officer resigned
effective as of July 15, 2005. Although we have been able to fill the vacancy
created by his resignation, we are a small company with limited financial
resources and our finance and accounting staff is very limited. We have not
started our review of our existing internal control structure and may need to
hire additional personnel or consultants in connection with our review.
We believe that the out-of-pocket and other additional costs, the diversion
of management's attention from running the day-to-day operations and operational
changes caused by the need to comply with the requirements of Section 404 of the
Sarbanes-Oxley Act could be significant. If the time and costs associated with
such compliance exceed our current expectations, our profitability could be
affected.
6
We cannot be certain at this time that we will be able to successfully
complete the procedures, certification and attestation requirements of Section
404 or that we or our auditors will not identify material weaknesses in internal
control over financial reporting. If we fail to satisfy the requirements of
Section 404 on a timely basis investors could lose confidence in our financial
statements, which in turn could harm our business and negatively impact the
trading price of our common stock.
RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCKSECURITIES
OUR COMMON STOCK HAS BEEN SUBJECT TO DELISTING FROM NASDAQ IN THE PAST, AND MAY
BE SUBJECT TO DELISTING FROM NASDAQ IN THE FUTURE.
On February 16, 2005, we received a notice from Nasdaq indicating that our
common stock did not meet the continued listing requirement for the Nasdaq
SmallCap Market set forth in Nasdaq Marketplace Rule 4310(c)(4) because our
common stock traded below the minimum bid price requirement of $1.00 for a
period of 30 consecutive business days. On March 17, 2005, we received notice
from Nasdaq confirming that we are in compliance with the $1.00 SmallCap minimum
bid price requirement.
Although we were able to regain compliance, because of the volatility in
our common stock price, there can be no assurance that we will be able to
maintain compliance in the future. During the past twelve months, the trading
price of our common stock on the Nasdaq SmallCap Market ranged from $0.57$1.31 per
share to $4.92$8.00 per share. While there are steps we can take to attempt to
address this situation, including a reverse stock split or share repurchase, we
cannot assure you that our stock will maintain such minimum bid price
requirement or that we will be able to meet or maintain all of the Nasdaq
SmallCap Market continued listing requirements in the future. If, in the future,
our minimum bid price is again below $1.00 for 30 consecutive trading days,
under the current Nasdaq
6
Marketplace Rule 4310(c)(8)(D), we will have a period
of 180 days to attain compliance by meeting the minimum bid price requirement
for 10 consecutive days during the compliance period. There can be no assurance
that we will be able to regain compliance in the future. If we are not able to
regain compliance our common stock could be delisted or the market value of our
common stock could fall and holders of our common stock will find it more
difficult to sell their shares of our common stock.
THERE ARE NO ASSURANCES THAT WE CAN MAINTAIN OUR LISTING ON THE NASDAQ SMALLCAP
MARKET AND THE FAILURE TO MAINTAIN LISTING COULD ADVERSELY AFFECT THE LIQUIDITY
OF OUR COMMON STOCK.
If we are unable to sustain compliance with all requirements for continued
listing on the Nasdaq SmallCap Market, including Nasdaq's corporate governance
requirements, our common stock will be delisted from the Nasdaq SmallCap Market.
If our common stock is delisted from the Nasdaq SmallCap Market, the trading of
our common stock is likely to be conducted on the OTC Bulletin Board. The
delisting of our common stock from the Nasdaq SmallCap Market will result in
decreased liquidity of our outstanding shares of common stock and a resulting
inability of our stockholders to sell our common stock or obtain accurate
quotations as to their market value, which would reduce the price at which our
shares trade. The delisting of our common stock could also deter broker-dealers
from making a market in or otherwise generating interest in our common stock and
would adversely affect our ability to attract investors in our common stock.
Furthermore, our ability to raise capital would be severely impaired. As a
result of these factors, the value of the common stock would decline
significantly, and our stockholders could lose some or all of their investment.
SUBSTANTIAL SALES OF OUR COMMON STOCK BY THE SELLING STOCKHOLDERS OR US COULD
CAUSE OUR STOCK PRICE TO DECLINE AND ISSUANCES BY US MAY DILUTE YOUR OWNERSHIP
INTEREST IN OUR COMPANY.
The 3,494,0091,694,327 shares covered by this prospectus represents approximately
34%14.5% of our outstanding common stock on a fully diluted basis. We are unable to
predict the amount or timing of sales by the selling stockholders of our common
stock. Any sales of substantial amounts of our common stock in the public market
by the selling stockholders or us, or the perception that these sales might
occur, could lower the market price of our common stock. Further, if we issue
additional equity securities to raise additional capital, your ownership
interest in our company may be diluted and the value of your investment may be
reduced.
7
THERE IS A LIMITED TRADING MARKET FOR OUR COMMON STOCK.
Our common stock is traded on the Nasdaq SmallCap Market. Despite an
unusually high volume recently, the trading volume for our common stock has
historically been low. Daily trading volume for our common stock, as reported by
the Nasdaq SmallCap Market for fiscal year 2004,2005, ranged from a low of zero18,700
shares to a high of 229,6009,064,481 shares, with an average daily volume of
approximately 6,500 shares and a median daily volume of approximately 3,000
shares. In the first six months of 2005, our daily trading volume ranged from a
low of zero shares to a high of 4,201,700 shares, with an average daily volume
of approximately 392,700 shares and a median daily volume of approximately
87,400487,500 shares. Despite the increase in the number of shares of
common stock to be publicly held as a result of this offering,the exercise of outstanding
warrants, or should additional equity be issued, we cannot assure you that the
current level of activity will be sustained or that a more active trading market
will develop.
THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE.
The market price of our common stock could be subject to significant
fluctuations after this offering and may decline below the price paid. During
the past twelve months, the trading price of our common stock on the Nasdaq
SmallCap Market ranged from $0.57$1.31 per share to $4.92$8.00 per share. You may not be
able to resell your shares at or above the price paid to acquire our common
stock. Among the factors that could affect our stock price are:
- our operating and financial performance and prospects;
- quarterly variations in the rate of growth of our financial
indicators, such as earnings per share, net income and revenues;
- changes in revenue or earnings estimates;
- speculation in the press or investment community;
7
- sales of our common stock by stockholders, including the selling
stockholders;
- fluctuations in oil and gas prices;
- general market conditions; and
- U.S. and international economic, legal and regulatory factors
unrelated to our performance.
The stock markets in general have experienced extreme volatility that has
at times been unrelated to the operating performance of particular companies.
These broad market fluctuations may adversely affect the trading price of our
common stock. Because there is a small public float in our common stock and it
is, and historically has been, thinly traded, sales of small amounts of common
stock in the public market could materially adversely affect the market price
for our common stock.
WE HAVE NO PLANS TO PAY REGULAR DIVIDENDS ON OUR COMMON STOCK, SO STOCKHOLDERS MAY NOT
RECEIVE FUNDS WITHOUT SELLING THEIR COMMON STOCK.
We have no plans to pay regular dividends on our common stock. We generally intend
to invest our future earnings, if any, to fund our growth.for general corporate purposes and
working capital needs. Any payment of future dividends will be at the discretion
of our board of directors and will depend on, among other things, our earnings,
financial condition, capital requirements, level of indebtedness, statutory and
contractual restrictions applying to the payment of dividends, and other
considerations that our board of directors deems relevant. Accordingly,
investors may have to sell some or all of their common stock in order to generate cash flowrealize
any return from their investment. Investors may not receive a gainrealize any return on their
investment when they sell our common stock and may lose the entire amount of the
investment.
8
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Certain of the statements included in this prospectus, including those
regarding future financial performance or results or that are not historical
facts, are "forward-looking" statements as that term is defined in Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
Section 27A of the Securities Act of 1933, as amended (the "Securities Act").
The words "expect," "plan," "believe," "anticipate," "project," "estimate," and
similar expressions are intended to identify forward-looking statements. We
caution readers that these statements are not guarantees of future performance
or events and such statements involve risks and uncertainties that may cause
actual results and outcomes to differ materially from those indicated in
forward-looking statements. Some of the important factors, risks and
uncertainties that could cause actual results to vary from forward-looking
statements include:
- the level of utilization of our pipelines;
- availability and cost of capital;
- actions or inactions of third party operators for properties where we
have an interest;
- the risks associated with exploration;
- the level of production from oil and gas properties;
- gas and oil price volatility;
- uncertainties in the estimation of proved reserves and in the
projection of future rates of production and timing of development
expenditures;
- regulatory developments; and
- general economic conditions.
Additional factors that could cause actual results to differ materially
from those indicated in the forward-looking statements are discussed under the
caption "Risk Factors." Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. We
undertake no duty to update these forward-looking statements. Readers are urged
to carefully review and consider the various disclosures made by us, which
attempt to advise interested parties of the additional factors, which may affect
our business.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 and related exhibits
with the Securities and Exchange Commission (the "SEC") aSEC under the Securities Act with respect to the securities offered by
this prospectus. In this prospectus, we refer to that registration statement,
together with all amendments, exhibits and schedules to that registration
statement, as "the registration statement."
As is permitted by the rules and regulations of the SEC, this prospectus,
which is part of the registration statement, omits some information, exhibits,
schedules and undertakings set forth in the registration statement. For further
information with respect to us, and the securities offered by this prospectus,
please refer to the registration statement. You may inspect the registration
statement and exhibits without charge and obtain copies from the SEC at the
location below.
We file current reports, quarterly reports, annual reports, proxy
statements and other documents with the SEC. You may read and copy those
reports, proxy statements and other documents we file at the SEC's Public
Reference Room at 100 F Street N.E., Room 1580, Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-732-0330. You may also obtain copies of
9
these reports, proxy statements and other documents at the SEC's website, the
address of which is http://www.sec.gov.
9
YouAlternatively, you may request a copy of our filings, which we will provide
at no cost, by writing to our Corporate Secretary at the following address:
Blue Dolphin Energy Company
801 Travis, Suite 2100
Houston, Texas 77002
Attn: Corporate Secretary
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have previously been filed by us with the
SEC under the Exchange Act are incorporated herein by reference:
(1) Our annual report on Form 10-KSB as amended by the Form 10-KSB/A
(Amendment No. 1) filed with the SEC on July 6, 2005 and Form
10-KSB/A (Amendment No. 2) filed with the SEC on August 19, 2005,March 30, 2006
for the fiscal year ended December 31, 2004;2005;
(2) Our quarterly report on Form 10-QSB, as amended by the Form 10-QSB/A
(Amendment No. 1) filed with the SEC on July 6, 2005, for the fiscal
quarter ended March 31, 2005;
(3) Our quarterly report on Form 10-QSB filed with the SEC on AugustMay 15, 2005,2006
for the fiscal quarter ended June 30, 2005;
(4)March 31, 2006;
(3) Our current reports on Form 8-K filed on February 22, 2005, March 13, 2006, April 3, 2005, April2006
and May 1, 2005, April 14, 2005, April 21, 2005, May 2, 2005,
July 6, 2005, July 18, 20052006; and
July 22, 2005; and
(5)(4) The description of our common stock contained in our Form 8-K, filed
June 5, 2000, including any amendments or reports filed to update the
description.
In addition, we incorporate by reference any future filings we make
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding
any information in those documents that is deemed by the rules of the SEC to be
furnished not filed) after the date of the registration statement of which this
prospectus is a part and prior to the termination of this offering shall be
deemed to be incorporated in this prospectus by reference and to be a part
hereof from the date of filing of such documents. Any statement contained
herein, or in a document incorporated or deemed to be incorporated by reference
herein, shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
This prospectus incorporates documents by reference that are not delivered
herewith. Copies of these documents, other than the exhibits thereto (unless
such exhibits are specifically incorporated by reference in such documents), are
available upon written or oral request, at no charge, from us. Requests for such
copies should be directed to the Corporate Secretary of Blue Dolphin Energy
Company at 801 Travis, Suite 2100, Houston, Texas 77002, or at (713) 227-7660.
PRIVATE PLACEMENT OF COMMON STOCK AND WARRANTS
On March 8, 2006, we entered into a Stock Purchase Agreement with certain
investors named therein for the private placement of 1,171,432 shares of our
common stock, at a purchase price of $1.75 per share for an aggregate offering
price of $2,050,000. In connection with this offering, we issued warrants to
purchase 8,572 shares of our common stock pursuant to the terms and conditions
of the Placement Agency Agreement between us and Starlight Investments, LLC
dated May 27, 2005 (the "Placement Agency Agreement"). In addition, on April 28,
2006, we entered into another Stock Purchase Agreement with an institutional
investor for the private placement of 400,000 shares of our common stock at a
purchase price of $4.90 per share for an aggregate offering price of $1,960,000.
In connection with this offering, we issued warrants to purchase 24,000 shares
of our common stock pursuant to the terms and conditions of the Placement Agency
Agreement.
USE OF PROCEEDS
We will not receive any of the proceeds from the saleresale of ourthe shares of
common stock, byincluding the selling stockholders in this offering. We have agreed to bear allresale of shares of common stock issuable upon
exercise of the expenses incurred in connection with the registration of these shares.warrants.
10
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the selling
stockholders' ownership of our common stock as of August 17, 2005,May 8, 2006, and as adjusted
to reflect the assumed sale by the selling stockholders of all of our common
stock owned by the selling stockholders in this offering.
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
COMMON STOCKBENEFICIALLY OWNED BENEFICIALLY OWNED
BEFORE THE BENEFICIALLY OWNED OFFERING AFTER THE OFFERING (1)
------------------------ ----------------------
PERCENTAGE NUMBER PERCENTAGE
OF TOTAL OF SHARES OF TOTAL
NUMBER VOTING BEING NUMBER VOTING
SELLING STOCKHOLDER OF SHARES POWER (2) OFFERED OF SHARES POWER (2)
- -------------------------------------------------------------------------- --------- ---------- --------- --------- ----------
F. Gardner ParkerHudson Bay Fund, LP (3)............ 483,328 (4) 5.0% 483,328 (4) ................. 542,848 4.7% 542,858 -- *
Steven A. Webster................ 366,666 4.0% 366,666Spencer Energy AS (4) ................... 286,858 2.5% 286,858 -- *
Spencer Finance Corporation (4) ......... 555,885 4.8% 256,000 299,885 2.5%
Gilbo Invest AS (5) ..................... 207,038 1.8% 171,429 35,609 *
Osler Holding Limited (6) ............... 406,758 3.5% 142,858 263,900 2.2%
Don Fogel ............................... 114,286 1.0% 114,286 -- *
SIBEX Capital Fund Inc. (7) ............. 57,143 * 57,143 -- *
Blue Dolphin Services 401K .............. 30,000 * 30,000 -- *
Lane Capital Markets, LLC (8) ........... 32,673 * 19,886 12,787 *
Michael J. Jacobson ..................... 92,742 * 12,968(9) 79,774 *
Andrew J. Martin (10) ................... 7,560 * 7,560 -- *
Gregory W. Starks ....................... 36,247 * 7,124(11) 29,123 *
Laurence N. Benz (12) ................... 50,473 * 6,033(13) 44,440 *
Michael S. Chadwick (3).......... 144,188 (5) 1.6% 144,188 (5) --(12) ................ 6,033 * Sanders Opportunity Fund
(Institutional), LP........... 237,357 (6) 2.6% 237,357 (6) -- *
Kestrel Capital, LLC............. 217,776 2.4% 217,776 -- *
Laurence N. Benz (3)............. 183,334 (7) 2.0% 183,334 (7) -- *
Don A. Sanders................... 156,625 (6) 1.7% 156,625 (6) -- *
Sanders 1998 Children's Trust
dated December 1, 1997........ 156,625 (6) 1.7% 156,625 (6) -- *
William R. Zeigler............... 147,682 1.6% 147,682 -- *
Ramsay H. Gillman ............... 142,720 1.6% 142,7206,033(13) -- *
Harris A. Kaffie (3).............(12) ................... 813,040 * 6,033(13) 807,007 (8) 9.0% 108,344 (8) 698,663 7.8%
Lee Moore ....................... 77,718 (17)6.5%
F. Gardner Parker (12) .................. 147,846 * 77,718 -- *
Michael J. Jacobson.............. 79,779 (9) * 79,779 (9) 155,295 1.7%
Sanders Opportunity Fund, LP..... 75,894 (6) * 75,894 (6) -- *
Macille G. Moore................. 74,314 * 74,314 -- *
W. Tyler Moore, Jr. ............. 74,314 * 74,314 -- *
David R. Bolton.................. 74,074 * 74,074 -- *
William A. Lang.................. 73,842 * 73,842 -- *
Schmid Family Trust U/D/T
09-05-97...................... 72,812 * 72,812 -- *
Gordon Brian Lloyd............... 69,932 (10) * 69,932 (10) -- *6,033(13) 141,813 1.2%
James M. Trimble (3)............. 59,663(12) ................... 6,033 * 59,663 -- *
Ivar Siem (3).................... 622,618 (11) 6.9% 57,128 (11) 565,490 10.3%
Blue Dolphin Services Co. 401K... 50,000 * 50,000 -- *
Ben T. Morris ................... 39,156 (6) * 39,156 (6) -- *
Don Weir and Julie Ellen Weir ... 39,156 (6) * 39,156 (6) -- *
Katherine U. Sanders ............ 39,156 (6) * 39,156 (6) -- *
Roland B. Keller ................ 66,981 (12) * 66,981 (12)6,033(13) -- *
Alvin Childs .................... 52,964 (13)............................ 57,266 5,386(14) 51,880 *
52,074 890Ivar Siem (12) .......................... 635,145 * Greg Starks ..................... 29,123 (14)4,819(15) 630,326 5.2%
Amerifund Capital Groups, LLC (16) ...... 11,417 * 29,1233,857 7,560 *
Bryan Emerson (17) ...................... 1,135 * 1,135 -- *
Haavard Strommen ................ 10,964 * 10,964 -- *
John Atwood ..................... 53,818 * 18,273 35,545 *
11
SHARES OF
SHARES OF COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BEFORE THE BENEFICIALLY OWNED
OFFERING AFTER THE OFFERING (1)
PERCENTAGE NUMBER PERCENTAGE
OF TOTAL OF SHARES OF TOTAL
NUMBER VOTING BEING NUMBER VOTING
SELLING STOCKHOLDER OF SHARES POWER (2) OFFERED OF SHARES POWER (2)
- --------------------------------- --------- ---------- --------- --------- ----------
Peregrine Management, LLC........ 8,147 * 8,147 -- *
Christine Anderson .............. 4,534 (15) * 2,707 2,707 *
Mickie Musgrave ................. 9,743 (16) * 4,157 18,793 *
TOTAL: 3,494,009.................................. 1,694,327
- ----------
* Represents less than 1%.
(1) Assumes the sale of all shares that may be sold by that individual selling
stockholder under this prospectus.
(2) Based upon 9,157,91711,547,849 shares of common stock issued and outstanding as of
August 17, 2005.May 8, 2006.
(3) MemberYoav Roth and John Doscas, Principal and Portfolio Manager and President,
respectively, of ourHudson Bay Fund, LP exercise voting and investment
authority over the shares held by this selling stockholder.
(4) Arne Blystad and Viggo Leisner, control persons of both Spencer Energy AS
and Spence Finance Corporation, exercise voting and investment authority
over the shares held by these selling stockholders.
(5) Dr. Bjorn Gilbo, Chairman of the Board of Directors.
(4) ConsistsGilbo Invest AS, exercises voting
and investment authority over the shares held by this selling stockholder.
(6) Michael J. Delouche, as attorney-in-fact for Osler Holdings Limited,
exercises voting and investment authority over the shares held by this
selling stockholder.
11
(7) Viacheslav I. Chebotarevich and Oleg S. Krasnoshchek, President and Vice
President, respectively, of 483,328SIBEX Capital Fund Inc. exercise voting and
investment authority over the shares held by this selling stockholder.
(8) Ryan M. Lane and John D. Lane, Partner and Managing Partner, respectively,
of commons stockLane Capital Markets, LLC, exercises voting and investment authority
over the shares held by this selling stockholder. Includes 19,866 shares
issuable upon exercise of warrants purchased and granted pursuant to the Purchase Agreement, which
are subject to the lock-up provisions of the Purchase Agreement and may
not be sold, transferred or assigned without our prior written consent
until August 30, 2005.
(5) Consists of 141,667 shares of commons stock issuable upon exercise of
warrants purchased and granted pursuant to the Purchase Agreement and
2,521 shares of common stock. The 141,667 shares issuable upon exercise of
the warrants are subject to the lock-up provisions of the Purchase
Agreement and may not be sold, transferred or assigned without our prior
written consent until August 30, 2005.
(6) These shares are subject to the lock-up provisions of the Purchase
Agreement and may not be sold, transferred or assigned without our prior
written consent until August 30, 2005.
(7) Consists of 183,334 shares of commons stock issuable upon exercise of
warrants purchased and granted pursuant to the Purchase Agreement, which
are subject to the lock-up provisions of the Purchase Agreement and may
not be sold, transferred or assigned without our prior written consent
until August 30, 2005.
(8) Consists of 83,571 shares of common stock issuable upon exercise of
options and 24,773 shares of common stock.Placement Agency
Agreement.
(9) Mr. Jacobson is our President. Consists of 33,938 shares of common stock
issuable upon exercise of options, 33,156 shares of common stock, and
12,68512,968 shares of common stock in
the Blue Dolphin Services Co. 401K Plan.
(10) Mr. Lloyd is our Vice President and Treasurer. Consists of 25,500Includes 7,580 shares
of common stock issuable upon exercise of options, 33,156 shareswarrants granted pursuant
to the Placement Agency Agreement.
(11) Mr. Starks is our Treasurer. Consists of common
stock, and 11,2767,124 shares of common stock in
the Blue Dolphin Services Co. 401K Plan.
(11)(12) Member of our Board of Directors.
(13) Consists of 6,033 shares of common stock.
(14) Consists of 5,386 shares of common stock in the Blue Dolphin Services Co.
401K Plan.
(15) Mr. Siem is our Chairman of the Board and Chief Executive Officer. Consists
of 8,000 shares of common stock issuable upon exercise of
options, 42,237292 shares of common stock and 6,891 shares of common stock
in the Blue Dolphin Services Co. 401K Plan.
(12) Consists of 30,000 shares of common stock issuable upon exercise of
options.
(13) Consists of 14,488 shares of common stock issuable upon exercise of
options, 7,300 shares of common stock, and 29,838 shares of common stock
in the Blue Dolphin Services Co. 401K Plan.
(14) Includes 1,000 shares of common stock issuable upon exercise of options,
17,016 shares of common stock, and 11,107 shares of common stock in the
Blue Dolphin Services Co. 401K Plan.
(15) Includes 2,7074,527 shares of common stock in the Blue
Dolphin Services Co. 401K Plan.
(16) Andrew J. Martin, Managing Partner of Amerifund Capital Groups, LLC,
exercises voting and investment authority over the shares held by this
selling stockholder. Includes 4,1573,857 shares of common stock in the Blue Dolphin Services Co.
401K Plan.
(17) Includes 83,334 shares of common stock issuable upon exercise of
warrants purchasedgranted pursuant to the PurchasePlacement Agency Agreement.
12
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In September 2004, we entered into the Note and Warrant Purchase Agreement
dated September 8, 2004 (the "Purchase Agreement") with certain accredited
investors and certain directors(17) Includes 1,135 shares issuable upon exercise of the Company for the purchase and sale of the
Promissory Notes in an aggregate principal amount of $750,000 and the Warrants
to purchase shares of common stock at a purchase price of $0.003 per warrant.
The sale of the Promissory Notes and the Initial Warrants closed on September 8,
2004, and the closing of the sale of the Additional Warrants closed on November
30, 2004, after we received stockholder approval at our November 11, 2004
special stockholders' meeting. We received net proceeds of $758,400 from the
sale of the Promissory Notes and the Warrants. The Promissory Notes mature on
September 8, 2005, and accrue interest at a rate of 12.0% per annum, of which 4%
is payable monthly and 8% is payable at maturity. The Promissory Notes are
secured by a second lien on our 83% interest in the Blue Dolphin Pipeline
system. All Warrants are immediately exercisable and will expire five years
after their date of issuance. Each Warrant is exercisable for one share of
common stock at an exercise price of $0.25 per share. The Warrants contain
standard antidilution provisions, as well as provisions that will result in
adjustments to the exercise price of the Warrants if we issue common stock at a
price below $0.25 per share, subject to certain exceptions.
Pursuant to the terms of the Purchase Agreement, we appointed Messrs. Benz
and Parker to our Board of Directors. Messrs. Benz and Parker each purchased a
Promissory Note in the principal amount of $25,000. Messrs. Benz and Parker
purchased 83,334 and 383,328 Warrants, respectively. Mr. Chadwick, an existing
director, purchased a Promissory Note in the principal amount of $12,500 and
41,667 Warrants. In addition Messrs. Benz, Chadwick and Parker were eachwarrants granted
100,000 warrants to purchase shares of our common stock on the same terms as the
Warrants.
In April 2005, we entered into Note Modification Agreements and Waiver
Agreements with the holders of $450,000 principal amount of Promissory Notes.
These note holders were originally issued Warrants exercisable to acquire
1,500,005 shares of common stock pursuant
to the PurchasePlacement Agency Agreement.
Pursuant to
the terms of the Note Modification Agreements and Waiver Agreements, we agreed
to the following:
- To amend the terms of the Promissory Notes to (i) extend the
maturity date from September 8, 2005 to June 30, 2006 and (ii) defer
the payment of all interest on the Promissory Note until maturity;
- To waive the note holders' compliance with the lock-up provisions of
the Purchase Agreement and allow it to sell shares of our common
stock that it may receive upon exercise of the Warrants; and
- To accelerate the date we are required to file a registration
statement registering the resale of the shares of our common stock
that the note holders may acquire upon exercise of Warrants to May
15, 2005.
In addition to serving on our Board of Directors, Mr. Chadwick is also a
Senior Vice President and Managing Director of Sanders Morris Harris Group, Inc.
("SMH"), a financial services holding company headquartered in Houston, Texas.
We paid SMH a $25,000 fee in connection with the Purchase Agreement and agreed
to retain SMH to provide a fairness opinion, if required.
We also entered into a consulting agreement with Mr. Parker. Mr. Parker's
consulting agreement has a term of up to eighteen months. We are obligated to
pay Mr. Parker a monthly fee of $2,000 and a bonus that will accrue at the rate
of $3,000 per month and be payable upon consummation of a merger or acquisition
by us.
We own 12.8% of the common stock of Drillmar, Inc. Our Chairman, Mr. Siem,
and one of our directors, Mr. Kaffie, own or control 33.9%, and 30.3%,
respectively, of Drillmar's common stock. Messrs. Siem and Kaffie are both
directors, and Mr. Siem is Chairman and President of Drillmar.
In September 2001, Drillmar, Inc. entered into a merger agreement and
merged with Zephyr Drilling Ltd. ("Zephyr"). Prior to the merger, Zephyr was a
limited partnership in which Drillmar was the general partner and Messrs. Siem
and Kaffie were limited partners. Zephyr owned a semi-submersible drilling rig
that was prepared for reconfiguration into a semi-tender. Prior to the merger,
we owned approximately 64% of Drillmar's outstanding common stock. As a result
of the merger between Drillmar and Zephyr, our interest in Drillmar decreased to
12.8% and Messrs. Siem and Kaffie became owners of 30.3% and 30.6%,
respectively, of Drillmar's common stock.
13
Messrs. Siem and Kaffie provided funding to Drillmar in 2002 of $116,000
and $100,000, respectively, and in 2001 of $300,000 and $425,000, respectively,
and were issued unsecured promissory notes from Drillmar. The promissory notes
were due June 30, 2002 and bore interest at the rate of 10% per annum. Along
with the promissory notes, Drillmar issued detachable warrants to Messrs. Siem
and Kaffie of 41,500 and 42,500, respectively. Each warrant provides for the
purchase of one share of Drillmar common stock at $5 per share and are
exercisable through June 2005. The promissory notes issued by Drillmar are
nonrecourse to the Company.
In 2002, we recorded a full impairment of our investment in Drillmar and a
full reserve for the accounts receivable amount owed to us from Drillmar of
approximately $200,000 due to Drillmar's working capital deficiency and delays
in securing capital funding. During 2004, we collected $165,000 of the accounts
receivable from Drillmar and we have collected the remaining balance of
approximately $45,000 in 2005.
In January 2003, Drillmar stockholders approved a restructuring plan
whereby Drillmar was able to issue up to $3.0 million of convertible notes that
will convert into common stock representing over 99% of Drillmar's outstanding
shares. As a result, our ownership in Drillmar can be reduced to less than 1%.
However, in November 2003, we converted a contingent obligation due from
Drillmar for providing office space, accounting and administrative services from
May 2002 through January 2003 totaling $162,000 (9 months at $18,000 per month)
into a convertible note, which if converted along with all of Drillmar's
outstanding convertible notes would represent 5.5% of Drillmar's common stock.
Messrs. Siem, Kaffie and Trimble (each one of our directors) hold or control
Drillmar convertible notes which if converted along with all of Drillmar's
outstanding convertible notes would represent 30.2%, 28.7% and 1.5%,
respectively, of Drillmar's common stock.
In May 2002, we entered into a new agreement with Drillmar effective as of
May 1, 2002, whereby we provided office space and minimal accounting and
administrative services to Drillmar for $2,000 per month. The agreement can be
terminated upon 30 days notice or by the mutual agreement of the parties. This
agreement was replaced by a new agreement effective as of February 1, 2003,
whereby we provide and charge for office space which is currently $4,750 per
month. We had provided professional, accounting and administrative services to
Drillmar based on hourly rates based on its cost. However, since our
implementation of staff reductions in mid 2004, no such services have been
provided. The agreement can be terminated upon 30 days notice or by the mutual
agreement of the parties.
In March 2003, we entered into a sublease agreement expiring December 31,
2006 for certain of our office space with TexCal Energy (GP) LLC, formerly
Tri-Union Development Corporation. Our annual receipts from this sublease are
approximately $78,000. One of our directors, Mr. Trimble, was the Chairman and
Chief Executive Officer of TexCal Energy (GP) LLC until November 2004.
On September 8, 2004, we sold the common stock of our wholly owned
subsidiary American Resources Offshore, Inc. ("ARO") to Ivar Siem on behalf of
those stockholders who hold a number of shares of our common stock above a
threshold determined by Mr. Siem, which included 30 of our largest shareholders
on a proportionate basis. Messrs. Siem and Kaffie, Mr. Jacobson, our President,
and Mr. Lloyd, our Vice President and Treasurer received stock representing
approximately 12%, 14%, 3% and 3%, respectively, of ARO. ARO had no revenue and
no assets, except for federal net operating loss carryforwards. The
consideration paid to us consisted of $1,000 cash, the assumption of the
transaction costs, including incremental costs associated with the reporting and
disclosure of this transaction incurred by us in our filings with the SEC and
any other required filings or announcements, and the assumption of any and all
liabilities of ARO.
1412
PLAN OF DISTRIBUTION
The selling stockholders, including some of their transferees who may later
hold their interest in the shares of our common stock covered by this prospectus
and who are otherwise entitled to resell their shares using this prospectus, may
sell the shares of common stocksecurities covered by this prospectus from time to time in any legal
manner selected by the selling stockholders, including directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
or the purchasers. These discounts, concessions or commissions as to any
particular underwriter, broker-dealer or agent may be in excess of those
customary in the types of transactions involved. The selling stockholders may
act independently of us in making decisions with respect to the pricing, timing,
manner and size of each sale of common stocksecurities covered by this prospectus.
The selling stockholders have advised us that the shares may be sold in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, at prices related to the prevailing market prices, at varying prices
determined at the time of sale and/or at negotiated prices. These sales may be
effected at various times in one or more transactions, which may include:
- ordinary brokers' transactions and transactions in which the
broker-dealer solicits purchasers;
- transactions involving cross or block trades or otherwise on the
Nasdaq SmallCap Market or in the over-the-counter market or any other
stock exchange, market or trading facility on which the shares are
traded;
- transactions otherwise than on the NASDAQ SmallCap Market or in the
over-the-counter market or any other stock exchange, market or trading
facility on which the shares are traded;
- transactions in which brokers, dealers or underwriters purchase the
shares for resale;
- transactions "at the market" to or through market makers of our
common stocksecurities or into an existing market for our common stock;securities;
- transactions not involving market makers or established trading
markets, including direct sales of the sharessecurities to purchasers or
sales through agents;
- privately negotiated transactions;
- block trades in which the broker-dealer will attempt to sell the
sharessecurities as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- short sales;
- a combination of any such methods of sale; or
- any other method permitted pursuant to applicable law.
In addition, the selling stockholders may also enter into hedging and/or
other monetization transactions. For example, the selling stockholders may:
- enter into transactions with a broker-dealer or affiliate of a
broker-dealer or other third party in connection with which that other
party will become a selling stockholder and engage in short sales of
our common stocksecurities under this prospectus, in which case the other party
may use shares of our common stocksecurities received from the selling stockholders to close
out any short positions;
13
- itself sell short our common stocksecurities under this prospectus and use shares of our
common stocksecurities held by it to close out any short positions;
- engage in short sales against the box (i.e. when the seller owns
securities that are the same as, or substantially identical to,
securities borrowed and sold short), puts and calls and other
transactions in our securities or derivatives of our securities and
may sell or deliver shares in connection with these trades;
- enter into options, forward contracts or other transactions that
require the selling stockholder to deliver, in a transaction exempt
from registration under the Securities Act, our common stocksecurities to a
broker-dealer or an affiliate of a broker-dealer or other third party
who may then become a selling stockholder and publicly resell or
otherwise transfer our common stocksecurities under this prospectus; or
- loan or pledge our common stocksecurities to a broker-dealer or client of a
broker-dealer or other third party who may then become a selling
stockholder and sell the loaned shares or, in an event of default in
the case of a pledge, become a selling stockholder and sell the
pledged shares, under this prospectus.
15
To our knowledge, there are currently no plans, arrangements or
understandings between the selling stockholders and any broker-dealer or agent
regarding the sale of common stocksecurities by the selling stockholders. To the extent
required, the sharessecurities to be sold, the name of the selling stockholders, the
respective purchase prices and public offering prices, the names of any agent,
dealer or underwriter, and any applicable commissions or discounts with respect
to a particular offer will be set forth in an accompanying prospectus supplement
filed with the SEC under Rule 424(b) under the Securities Act or, if
appropriate, a post-effective amendment to the registration statement of which
this prospectus is a part. The selling stockholders may sell any or all of the
shares of our
common stocksecurities offered by it pursuant to this prospectus. In addition, there can be
no assurance that the selling stockholders will not transfer the shares of common stocksecurities by
other means not described in this prospectus.
The selling stockholders also may transfer the shares of common stocksecurities as a gift, pledge
or other non-sale related transfer, in which case the donees, pledgees,
transferees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus and may sell the shares of
common stocksecurities from time to
time under this prospectus after we have filed a supplement or an amendment to
this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling stockholders to include the donee,
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.
There can be no assurance that the selling stockholders will sell all or
any of the shares of common stocksecurities pursuant to this prospectus. In addition, any common stocksecurities
covered by this prospectus that qualifies for sale pursuant to an exemption from
the registration requirements of the Securities Act may be sold pursuant to that
exemption, including sales under Rule 144 (subject to the terms of the
registration rights agreement), rather than under this prospectus. The
common stocksecurities may be sold in some states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stocksecurities may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification is available and complied with.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders have acknowledged that they understand their
obligations to comply with the provisions of the Exchange Act and the rules and
regulations thereunder relating to stock manipulation, including without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the common stocksecurities by the selling stockholders and any other such person. In
addition, Regulation M may restrict the ability of any person engaged in the
distribution of the common stocksecurities to engage in market making activities with
respect to the common stocksecurities being distributed. This may affect the marketability
of the common stocksecurities and the ability of any person or entity to engage in
market-making activities with respect to the common stock.securities.
14
The selling stockholders and any broker-dealers who act in connection with
the sale of common stocksecurities hereunder may be deemed to be "underwriters" as that term
is defined in the Securities Act, and any commissions received by them and any
profit on the resale of the common stocksecurities as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. If any selling
stockholder is deemed to be an "underwriter" within the meaning of the
Securities Act, it will be subject to the prospectus delivery requirements of
the Securities Act, which may include delivery through the facilities of the
Nasdaq SmallCap Market pursuant to Rule 153 under the Securities Act.
We will pay all of the costs, fees and expenses incurred by us incident to
our registration of the resale of the selling stockholders' common stock. We
will not pay any commissions, fees and discounts of underwriters, brokers,
dealers and agents.
16
LEGAL MATTERS
Certain legal matters in connection with the common stocksecurities offered hereby by
us will be passed on for us by Porter & Hedges, L.L.P.,LLP, Houston, Texas. Any underwriters
will be advised by their own legal counsel.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-KSB of Blue Dolphin Energy Company for the year
ended December 31, 20042005 have been so incorporated in reliance on the report
(which contains an explanatory paragraph relating to Blue Dolphin Energy
Company's ability to continue as a going concern as described in note 2 to the
financial statements) of
UHY Mann Frankfort Stein & Lipp CPAs, LLP, an independent registered public
accounting firm, given on the authority of said firm as experts in accounting
and auditing.
1715
================================================================================
BLUE DOLPHIN ENERGY COMPANY
3,494,0091,694,327 SHARES OF COMMON STOCK
----------
PROSPECTUS
----------
_____________, 2006
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses, all of which will be
borne by us, in connection with the sale and distribution of the securities
being registered, other than the underwriting discounts and commissions. All
amounts shown are estimates except for the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission registration fee.............fee....... $ 6391,021
Accounting fees and expenses....................................expenses.............................. $ 5,000
Legal fees and expenses......................................... $ 20,000expenses................................... $20,000
Printing and engraving expenses.................................expenses........................... $ 2,000
Miscellaneous...................................................Miscellaneous............................................. $ 1,361
--------3,270
-------
Total.................................................. $ 29,000
========$31,291
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Blue Dolphin is incorporated under the laws of the State of Delaware.
Section 145 ("Section 145") of Title 8 of the Delaware General Corporation Law
gives a corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful.
Section 145 also gives a corporation power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. Section 145
further provides that, to the extent that a present or former director or
officer of a corporation has been successful on the merits or otherwise in
defense of any such action, suit or proceeding, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
II-1
Section 145 also authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, arising out of his status as such,
whether or not the corporation would otherwise have the power to indemnify him
under Section 145.
II-1
Blue Dolphin's amended and restated certificate of incorporation and bylaws
provide for the indemnification of officers and directors to the fullest extent
permitted by the Delaware General Corporation Law. If we enter into an
underwriting agreement, it shall also provide for the indemnification of the
directors and officers in certain circumstances.
All of Blue Dolphin's directors and officers are covered by insurance
policies maintained by Blue Dolphin against certain liabilities for actions
taken in their capacities as such, including liabilities under the Securities
Act.
ITEM 16. EXHIBITS.
Exhibit No. Description of ExhibitEXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of the Company
(Incorporated herein by reference from Exhibit A to the Definitive
Proxy Statement of the Company as filed with the SEC on October
13, 2004 (Commission File No. 000-15905)).
3.2 Amended and Restated Bylaws of the Company (Incorporated herein by
reference from Exhibit 3.1 to the Quarterly Report on Form 10Q-SB
of the Company as filed with the SEC on August 23, 2004
(Commission File No. 000-15905)).
4.1 (1) Specimen Certificate of common stock.
4.2 (2)Common Stock (Incorporated herein by
reference from Exhibits filed in connection with the Form 10-K of
Warrant issued pursuant toBlue Dolphin Energy Company for the Note and Warrant Purchase
Agreement Dated September 8, 2004.
**5.1year ended December 31, 1989,
filed with the SEC on March 30, 1990 (Commission File No.
000-15905)).
*5.1 Opinion of Porter & Hedges, L.L.P.LLP
10.1 Form of Stock Purchase Agreement between Blue Dolphin Energy
Company and Osler Holdings Limited, Gilbo Invest AS, Spencer
Energy AS, Spencer Finance Corp., Hudson Bay Fund, LP, Don Fogel
and SIBEX Capital Fund, Inc., dated March 8, 2006 (Incorporated
herein by reference from Exhibit 10.10 to the Form 10-K of Blue
Dolphin Energy Company for the year ended December 31, 2005, filed
with the SEC on March 30, 2006 (Commission File No. 000-15905)).
10.2 Placement Agency Agreement between Blue Dolphin Energy Company and
Starlight Investment, LLC, dated May 27, 2005 (Incorporated herein
by reference from Exhibit 10.9 to the Form 10-K of Blue Dolphin
Energy Company for the year ended December 31, 2005, filed with
the SEC on March 30, 2006 (Commission File No. 000-15905)).
*10.3 Stock Purchase Agreement between Blue Dolphin Energy Company and
Hudson Bay Fund, LP, dated April 28, 2006.
*23.1 Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP.
**23.2*23.2 Consent of Porter & Hedges, L.L.P.LLP (included in Exhibit 5.1).
**24.1*24.1 Power of Attorney.
99.1(2) Voting Agreement between certain stockholders of Blue Dolphin
Energy Company and certain investors of Blue Dolphin Energy
Company, dated September 8, 2004.Attorney (included on the signature page hereto).
- ------------------------------
* Filed herewith.
** Previous filed.
(1) Incorporated herein by reference to Exhibits filed in connection with Form
10-K of Blue Dolphin Energy Company for the year ended December 31, 1989
under the Securities and Exchange Act of 1934, dated March 30, 1990
(Commission File No. 000-15905).
(2) Incorporated herein by reference to Exhibits filed in connection with Form
8-K of Blue Dolphin Energy Company under the Securities and Exchange Act
of 1934, dated September 14, 2004 (Commission File No. 000-15905).
II-2
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant will:hereby undertakes:
(1) File,To file, during any period in which it offers or sells
securities,sales are being
made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effect amendment thereof) which, individually or together,in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; andstatement.
(iii) Include any additional or changed material information onwith respect to the plan
of distribution.distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
provided, however, that paragraphs (1)(i), (1)(ii) and (i)(iii) above do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a form of
prospectus filed pursuant to Rule 424(b) of this chapter) that is part of
the registration statement;
(2) ForThat, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purpose of determining liability under the
Securities Act treat each
post-effective amendmentof 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) Each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement as
of the date the filed prospectus was deemed part of and included in
the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the
information required by section 10(a) of the Securities Act of 1933
shall be deemed to be part of and included in the registration
II-3
statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed
to be a new effective date of the registration statement ofrelating to
the securities offered,in the registration statement to which that prospectus
relates, and the offering of thesuch securities at that time shall be
deemed to be the initial bona fide offering.
(3) Fileoffering thereof. Provided,
however, that no statement made in a post-effective amendmentregistration statement or
prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to remove froma purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that
was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately
prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus
filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was
made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior
to such date of first use.
(5) That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to
offer or sell such securities that remain unsold at the endto such purchaser:
(i) Any preliminary prospectus or prospectus of the offering.
(b)undersigned
registrant relating to the offering required to be filed pursuant to
Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or
referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating
to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
(iv) Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
small business issuerregistrant pursuant to the foregoing provisions, or otherwise, the small business issuerregistrant
has been advised that in the opinion of the SECSecurities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business issuerregistrant of expenses incurred
or paid by a director, officer or controlling person of the small business issuerregistrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuerregistrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(c) The undersigned registrant will:hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
treatof 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer underregistrant pursuant to Rule 424(b)(1), or (4) or
497(h) under the Securities Act asshall be deemed to be part of this registration
statement as of the time the Commissionit was declared it effective.
(2) For the purpose of determining any liability under the Securities
Act treatof 1933, each post-effective amendment that contains a form of prospectus
asshall be deemed to be a new registration statement forrelating to the securities
offered intherein, and the registration
statement, and that offering of thesuch securities at that time asshall be
deemed to be the initial bona fide offering of those securities.
II-3thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Houston, state of Texas, on the 18th15th day of August, 2005.May,
2006.
BLUE DOLPHIN ENERGY COMPANY
By: /s/ Ivar Siem
---------------------------------------------------------------
Ivar Siem
Chairman of the Board and
Chief Executive Officer
Know all men by these presents, that each person whose signature appears
below, constitutes and appoints Michael J. Jacobson and Gregory W. Starks and
each of them, our true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, to do any and all acts and things and
execute, in the name of the undersigned, any and all instruments which said
attorneys-in-fact and agents may deem necessary or advisable in order to enable
Blue Dolphin Energy Company to comply with the Securities Act of 1933, as
amended (the "Securities Act") and any requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing with the
Securities and Exchange Commission of the Registration Statement on FormS-3
under the Securities Act, including specifically but without limitation, power
and authority to sign the name of the undersigned to such Registration
Statement, and any amendments to such Registration Statement (including
post-effective amendments), and to file the same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, to sign any and all applications, Registration Statements, notices
or other documents necessary or advisable to comply with applicable state
securities laws, and to file the same, together with other documents in
connection therewith with the appropriate state securities authorities, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and to perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
II-6
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ivar Siem Chairman August 18, 2005May 15, 2006
- ------------------------------------------------------------------- (Principal Executive Officer)
Ivar Siem
/s/ Michael J. Jacobson President August 18, 2005May 15, 2006
- -------------------------------------------------------------------
Michael J. Jacobson
/s/ Gregory W. Starks Treasurer August 18, 2005May 15, 2006
- ------------------------------------------------------------------- (Principal Accounting and Financial Officer)
Gregory W. Starks
* Director August 18, 2005
- --------------------------------/s/ Laurence N. Benz * Director August 18, 2005May 15, 2006
- -------------------------------------------------------------------
Laurence N. Benz
/s/ Harris A. Kaffie * Director August 18, 2005May 15, 2006
- -------------------------------------------------------------------
Harris A. Kaffie
/s/ Michael S. Chadwick
II-4
SIGNATURE TITLE DATE
--------- ----- ----
* Director August 18, 2005May 15, 2006
- -------------------------------------------------------------------
Michael S. Chadwick
/s/ James M. Trimble * Director August 18, 2005May 15, 2006
- -------------------------------------------------------------------
James M. Trimble
/s/ F. Gardner Parker * By: /s/ Michael J. Jacobson
---------------------------
Michael J. Jacobson
(Attorney-in-Fact)Director May 15, 2006
- -----------------------------------
F. Gardner Parker
II-5II-7
EXHIBIT INDEX
Exhibit No. Description of ExhibitEXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of the Company
(Incorporated herein by reference from Exhibit A to the Definitive
Proxy Statement of the Company as filed with the SEC on October
13, 2004 (Commission File No. 000-15905)).
3.2 Amended and Restated Bylaws of the Company (Incorporated herein by
reference from Exhibit 3.1 to the Quarterly Report on Form 10Q-SB
of the Company as filed with the SEC on August 23, 2004
(Commission File No. 000-15905)).
4.1 (1) Specimen Certificate of common stock.
4.2 (2)Common Stock (Incorporated herein by
reference from Exhibits filed in connection with the Form 10-K of
Warrant issued pursuant toBlue Dolphin Energy Company for the Note and Warrant Purchase
Agreement Dated September 8, 2004.
**5.1year ended December 31, 1989,
filed with the SEC on March 30, 1990 (Commission File No.
000-15905)).
*5.1 Opinion of Porter & Hedges, L.L.P.LLP
10.1 Form of Stock Purchase Agreement between Blue Dolphin Energy
Company and Osler Holdings Limited, Gilbo Invest AS, Spencer
Energy AS, Spencer Finance Corp., Hudson Bay Fund, LP, Don Fogel
and SIBEX Capital Fund, Inc., dated March 8, 2006 (Incorporated
herein by reference from Exhibit 10.10 to the Form 10-K of Blue
Dolphin Energy Company for the year ended December 31, 2005, filed
with the SEC on March 30, 2006 (Commission File No. 000-15905)).
10.2 Placement Agency Agreement between Blue Dolphin Energy Company and
Starlight Investment, LLC, dated May 27, 2005 (Incorporated herein
by reference from Exhibit 10.9 to the Form 10-K of Blue Dolphin
Energy Company for the year ended December 31, 2005, filed with
the SEC on March 30, 2006 (Commission File No. 000-15905)).
*10.3 Stock Purchase Agreement between Blue Dolphin Energy Company and
Hudson Bay Fund, LP, dated April 28, 2006.
*23.1 Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP.
**23.2*23.2 Consent of Porter & Hedges, L.L.P.LLP (included in Exhibit 5.1).
**24.1*24.1 Power of Attorney.
99.1(2) Voting Agreement between certain stockholders of Blue Dolphin
Energy Company and certain investors of Blue Dolphin Energy
Company, dated September 8, 2004.Attorney (included on the signature page hereto).
- ------------------------------
* Filed herewith.
** Previously filed.
(1) Incorporated herein by reference to Exhibits filed in connection with Form
10-K of Blue Dolphin Energy Company for the year ended December 31, 1989
under the Securities and Exchange Act of 1934, dated March 30, 1990
(Commission File No. 000-15905).
(2) Incorporated herein by reference to Exhibits filed in connection with Form
8-K of Blue Dolphin Energy Company under the Securities and Exchange Act
of 1934, dated September 14, 2004 (Commission File No. 000-15905).
II-8