AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 2005
REGISTRATION NO. 333-124908
================================================================================
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
---------------
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:
BRYAN K. BROWN
NICK D. NICHOLAS
PORTER & HEDGES, L.L.P.
1000 MAIN, 36TH FLOOR
HOUSTON, TX 77002-6336
TELEPHONE: (713) 226-6000
FAX: (713) 226-6237
---------------
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 of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-----------
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) 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),
MAY DETERMINE.
================================================================================
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.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY............................................... 1
RISK FACTORS..................................................... 3
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS............ 9
WHERE YOU CAN FIND MORE INFORMATION.............................. 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................. 10
USE OF PROCEEDS.................................................. 10
SELLING STOCKHOLDERS............................................. 11
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS............. 13
PLAN OF DISTRIBUTION............................................. 15
LEGAL MATTERS.................................................... 17
EXPERTS.......................................................... 17
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 stock 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.
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. 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 is engaged in two lines of business: (i)
pipeline transportation services to producer/shippers, and (ii) oil and gas
exploration and production. We conduct our operations through our subsidiaries
and 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 utilization 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 have
interests in oil and gas properties and will consider acquiring interests in
producing oil and gas properties, as a result cost savings measures implemented
in 2004, we are primarily focused on our pipeline business.
In September 2004, we completed 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 issued 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; 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 included 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."
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 selling stockholders......... up to 3,494,009 shares
Nasdaq SmallCap Market symbol.............................................. BDCO
Use of proceeds....................................... We will not receive any
of the proceeds from the
sale of shares by the
selling stockholders.
Relationships and Transactions........................ There are material
with Selling Stockholders relationships between us
and certain 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 of this
prospectus for more
information on these
relationships and
transactions.
Risk Factors.......................................... Investing in our common
stock involves a high
degree of risk. See "Risk
Factors" beginning on
page 3 of this
prospectus.
2
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.
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.
WE ARE PRIMARILY DEPENDENT ON REVENUES FROM OUR PIPELINE SYSTEMS.
As a result of our sale of substantially all of our proved oil and gas
reserves in 2002 and the limited remaining reserves that were added in 2003, our
future revenues are primarily dependent on the level of use of our pipeline
systems. The oil and gas we transport is owned by third parties. As a result,
the volume of oil and gas involved in these activities depends on the actions of
those third parties, and is beyond our control. Further, the following factors,
most of which are beyond our control, may unfavorably impact our ability to
maintain or increase current throughput or to renegotiate existing contracts on
our pipeline systems:
- service area competition;
- expiration and/or turn back of significant contracts;
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- 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
affiliates of major interstate and intrastate pipelines, 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 that we will obtain, or be able to access, the
financial and other resources to compete successfully. Additionally, we often
establish a higher standard for the minimum projected rate of return on an
investment than some of our competitors since we cannot afford to absorb certain
risks. 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 the 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; and
- generally making it more difficult for us to obtain needed capital.
WE CANNOT CONTROL THE ACTIVITIES ON PROPERTIES WE DO NOT OPERATE.
Currently, other companies operate or control all 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, could adversely affect us, including the amount and
timing of revenues, if any, we receive from our interests.
We have and anticipate that we will typically 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:
- 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, including pipeline ruptures, explosions, pollution, release of
toxic substances, fires and adverse weather conditions, and other hazards, each
of which 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 in 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 million. We also maintain operator's extra expense
coverage, which covers the control of drilled or producing wells as well as
redrilling 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 our cost savings program, we
cancelled the property insurance coverage on our pipelines, however we do
continue to carry property insurance
5
coverage on our shore facilities and our offshore platforms. 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.
COMPLIANCE WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS COULD BE COSTLY
AND COULD NEGATIVELY IMPACT PIPELINE AND PRODUCTION 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 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") 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.
RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK
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 per
share to $4.92 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 3,494,009 shares covered by this prospectus represents approximately
34% 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.
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, ranged from a low of zero
shares to a high of 229,600 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
87,400 shares. Despite the increase in the number of shares of common stock to
be publicly held as a result of this offering, 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 per share to $4.92 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;
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- 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. 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 flow from their
investment. Investors may not receive a gain 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") a 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., 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 these reports, proxy statements
and other documents at the SEC's website, the address of which is
http://www.sec.gov.
9
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,
for the fiscal year ended December 31, 2004;
(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 August
15, 2005, for the fiscal quarter ended June 30, 2005;
(4) Our current reports on Form 8-K filed on February 22, 2005, March 3,
2005, April 1, 2005, April 14, 2005, April 21, 2005, May 2, 2005,
July 6, 2005, July 18, 2005 and July 22, 2005; and
(5) 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.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the
selling stockholders in this offering. We have agreed to bear all of the
expenses incurred in connection with the registration of these shares.
10
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the selling
stockholders' ownership of our common stock as of August 17, 2005, 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
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)
- --------------------------------- --------- ---------- --------- --------- ----------
F. Gardner Parker (3)............ 483,328 (4) 5.0% 483,328 (4) -- *
Steven A. Webster................ 366,666 4.0% 366,666 -- *
Michael S. Chadwick (3).......... 144,188 (5) 1.6% 144,188 (5) -- *
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% 142,720 -- *
Harris A. Kaffie (3)............. 807,007 (8) 9.0% 108,344 (8) 698,663 7.8%
Lee Moore ....................... 77,718 (17) * 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) -- *
James M. Trimble (3)............. 59,663 * 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) -- *
Alvin Childs .................... 52,964 (13) * 52,074 890 *
Greg Starks ..................... 29,123 (14) * 29,123 -- *
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
- ----------
* 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 9,157,917 shares of common stock issued and outstanding as of
August 17, 2005.
(3) Member of our Board of Directors.
(4) Consists of 483,328 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.
(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.
(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
12,685 shares of common stock in the Blue Dolphin Services Co. 401K Plan.
(10) Mr. Lloyd is our Vice President and Treasurer. Consists of 25,500 shares
of common stock issuable upon exercise of options, 33,156 shares of common
stock, and 11,276 shares of common stock in the Blue Dolphin Services Co.
401K Plan.
(11) 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, 42,237 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 2,707 shares of common stock in the Blue Dolphin Services Co.
401K Plan.
(16) Includes 4,157 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
purchased pursuant to the Purchase 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 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 each 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 Purchase 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.
14
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 stock 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 stock 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 stock or into an existing market for our common stock;
- transactions not involving market makers or established trading
markets, including direct sales of the shares to purchasers or sales
through agents;
- privately negotiated transactions;
- block trades in which the broker-dealer will attempt to sell the
shares 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 stock under this prospectus, in which case the
other party may use shares of our common stock received from the
selling stockholders to close out any short positions;
- itself sell short our common stock under this prospectus and use
shares of our common stock 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 stock 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 stock under this prospectus; or
- loan or pledge our common stock 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 stock by the selling stockholders. To the extent
required, the shares 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 stock 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 stock by other means not described in this
prospectus.
The selling stockholders also may transfer the shares of common stock 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 stock 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 stock pursuant to this prospectus. In addition, any
common stock 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 stock may be sold in some states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stock 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 stock 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 stock to engage in market making activities with
respect to the common stock being distributed. This may affect the marketability
of the common stock and the ability of any person or entity to engage in
market-making activities with respect to the common stock.
The selling stockholders and any broker-dealers who act in connection with
the sale of common stock 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 stock 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 stock offered hereby
will be passed on for us by Porter & Hedges, L.L.P., 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, 2004 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.
17
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BLUE DOLPHIN ENERGY COMPANY
3,494,009 SHARES
OF
COMMON STOCK
PROSPECTUS
================================================================================
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............. $ 639
Accounting fees and expenses.................................... $ 5,000
Legal fees and expenses......................................... $ 20,000
Printing and engraving expenses................................. $ 2,000
Miscellaneous................................................... $ 1,361
--------
Total.................................................. $ 29,000
========
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.
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 Exhibit
- ----------- ----------------------
4.1 (1) Specimen Certificate of common stock.
4.2 (2) Form of Warrant issued pursuant to the Note and Warrant Purchase
Agreement Dated September 8, 2004.
**5.1 Opinion of Porter & Hedges, L.L.P.
*23.1 Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP.
**23.2 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
**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.
- --------------------
* 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:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information 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) 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; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the SEC 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 issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 issuer 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 and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant will:
(1) For determining any liability under the Securities Act, treat
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 under Rule 424(b)(1), or
(4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-3
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 18th day of
August, 2005.
BLUE DOLPHIN ENERGY COMPANY
By: /s/ Ivar Siem
---------------------------
Ivar Siem
Chairman of the Board and
Chief Executive Officer
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, 2005
- -------------------------------- (Principal Executive Officer)
Ivar Siem
/s/ Michael J. Jacobson President August 18, 2005
- --------------------------------
Michael J. Jacobson
/s/ Gregory W. Starks Treasurer August 18, 2005
- -------------------------------- (Principal Accounting and Financial Officer)
Gregory W. Starks
* Director August 18, 2005
- --------------------------------
Laurence N. Benz
* Director August 18, 2005
- --------------------------------
Harris A. Kaffie
* Director August 18, 2005
- --------------------------------
Michael S. Chadwick
II-4
SIGNATURE TITLE DATE
--------- ----- ----
* Director August 18, 2005
- --------------------------------
James M. Trimble
* Director August 18, 2005
- --------------------------------
F. Gardner Parker
* By: /s/ Michael J. Jacobson
---------------------------
Michael J. Jacobson
(Attorney-in-Fact)
II-5
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
4.1 (1) Specimen Certificate of common stock.
4.2 (2) Form of Warrant issued pursuant to the Note and Warrant Purchase
Agreement Dated September 8, 2004.
**5.1 Opinion of Porter & Hedges, L.L.P.
*23.1 Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP.
**23.2 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
**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.
- --------------------
* 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).