More than 27,111,000 new shares were issued, mostly to the controlling stockholder, Sir Emeka Offor, and the company fell slightly more than $7 million deeper into debt.
The 10Q gave no hint of any date for possible awards in the bidding for oil concessions in the Nigeria-Sao Tome and Principe Joint Development Zone which were promised at the end of December, and then at the end of January.
As has become customary with ERHC, there was little good news in the filing, and shares of the company opened $0.0150 lower at $0.47, continuing a slide that began on Monday as investors learned block awards were again delayed. Volume at 9:38am EST was 114,518 shares. As the day wore on, the stock enjoyed a modest recovery, trading as high as $0.505 befiore closing at $0.49, up half a cent for the day, on an above-average volume of 625,087.
Here is the entirety of the 10Q:
10-Q: ENVIRONMENTAL REMEDIATION HOLDING CORP
2/10/2005 6:04:47 AM
(EDGAR Online via COMTEX) -- Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
You must read the following discussion of the results of the operations and financial condition of the Company in conjunction with its financial statements, including the notes included in this Form 10-K filing. The Companys historical results are not necessarily an indication of trends in operating results for any future period.
Overview
The Companys current focus is to exploit its only assets, which are rights to working interests in exploration acreage in the JDZ and the EEZ. The Company has entered into Participation Agreements with Pioneer Natural Resources with respect to Blocks 2 and 3 and Noble Energy with respect to Block 4 to jointly evaluate and apply for interests in production sharing contracts in these JDZ Blocks. The technical and operational expertise in conducting exploration operations will be provided by the Companys co-ventures. On December 15, 2004, pursuant to these Participation Agreements, ERHC and its respective co-ventures submitted bids on Blocks 2, 3 and 4 in the JDZ.
Results of Operations
Three Months Ended December 31, 2004 Compared with Three Months Ended December 31, 2003
During the three months ended December 31, 2004, the Company incurred a net loss of $7,091,068, compared to a net loss of $986,596 for the three months ended December 31, 2003. A significant portion of the increase in net loss for the three months ended December 31, 2004 was attributable to a $5,749,575 non-cash loss on extinguishment of debt during the three months ended December 31, 2004 as the result of the issuance of shares in conjunction with the Chrome debt restructuring. Interest expense increased by $276,364 due to a $261,001 increase in the amortization of the debt discount during the three months ended December 31, 2004 as compared to the three months ended December 31, 2003. This increase in amortization is recorded due to the beneficial conversion feature attributable to borrowings on the Chrome line of credit during the three months ended December 31, 2004. General and administrative expenses increased by $78,533 for the three months ended December 31, 2004 as compared to the three months ended December 31, 2003 primarily due to $63,750 in amortization of deferred compensation charges in the period.
Through December 31, 2004, the Company was a party to a management services agreement with COS. Pursuant to that agreement, COS provides the Company with management and business development services. COS provides these services to the Company for a management fee of $68,000 per month. The Chief Financial Officer and Secretary are employees of COS that provided services to the Company and these persons receive salaries and overhead expense reimbursement from COS, not from the Company. Expenses not covered under the management services agreement are paid by the Company which includes primarily general office supplies. During each of the three months ended December 31, 2004 and 2003, total expenses incurred under this management services agreement were $204,000. On December 23, 2004, the Company and COS cancelled, effective December 31, 2004, the management services agreement. The Companys executive officers incurred significant travel expenses of approximately $96,000 and $103,000 for the quarters ended December 31, 2004 and 2003, respectively, as they continued negotiations with officials of the FRN and DRSTP as well as numerous trips to the United States from Nigeria by several Chrome executives while managing the ongoing affairs of the Company. The Company anticipates travel related expenses to continue to be significant as the Company further develops its business interests. The net loss per common share was $0.01, basic and diluted, for the three months ended December 31, 2004 compared to a net loss per common share of $0.00, basic and diluted, for the three months ended December 31, 2003.
During the three months ended December 31, 2004 and 2003, the Company had no revenues from which cash flows could be generated to support operations and thus relied on borrowings funded from its line of credit provided by Chrome as well as the sale of common stock.
Liquidity and Capital Resources
As of December 31, 2004, the Company had $915,330 in cash and cash equivalents and negative working capital of $552,400. Of this negative working capital amount, $723,035 relates to accrued officers salaries will which most likely be settled in stock. The company also has a $2,500,000 line of credit with Chrome. As of December 31, 2004, the Company had drawn $1,000,000 of the $2,500,000 line of credit from Chrome.
Historically, the Company has financed its operations from the sale of debt and equity securities (including the issuance of its securities in exchange for goods and services) and from advances from bank and other debt agreements. There have been no cash flows generated from operations in the past two years. In the three months ending December 31, 2004, the Company drew $1,000,000 from the Chrome line of credit.
Should it be required, management will raise additional capital through the sale of common stock and from various debt financing arrangements, and will attempt to continue raising capital resources until such time as the Company generates revenues sufficient from operations. However, there is no assurance that such financing will be obtained.
The Company presently intends to utilize any available sources of funds to provide for general corporate overhead and to continue to pursue its interests in Sao Tome and the JDZ/EEZ.
Debt Financing Arrangements
As of December 31, 2004, $10,134,084 of long term debt of the Company is outstanding under a 12% note maturing on January 31, 2007 and $1,000,000 is outstanding under a 10% working capital line of credit of up to $2,500,000 with a maturity of January 31, 2007. Both notes are issued to Chrome and may be settled with common stock of the Company, at the Companys option, at $0.175 per share.
During the three months ended December 31, 2004 the company agreed to issue Chrome 14,023,352 shares of common stock, 12,465,202 issued immediately, 623,260 shares issued on the advance of $1,000,000 and the remainder issued throughout the term of the working capital loan. In addition the Company issued 12,308,359 share of common stock to satisfy current interest accrued but not paid of $2,461,712. The shares of common stock to Chrome for entering into the debt restructuring had a fair value of $5,749,575 and has been recorded as a charge to expense.
During the three months ended December 31, 2004 non-affiliated noteholders agreed to convert $1,592,521 of convertible debt and $84,853 of accrued interest into 8,386,853 shares of common stock. The conversion price was $0.20 per share. As of December 31, 2004, the Company has $33,512 of nonaffiliated convertible debt and $1,807 accrued but unpaid interest outstanding. As of December 31, 2004, if the outstanding convertible debt was converted using the conversion price of $0.20 per share, the Company would be required to issue 176,599 shares of common stock.
As of February 6, 2005, a total of $1,750,000 has been funded under the line of credit and there is $750,000 available for further borrowings.
Feb 10, 2005
4 comments:
Good post Joe. Some may complain about you posting this with that title but I wont. I like it when you post both the good and the bad. That is what seperates you from a character like Mongo who clearly has a negative agenda and never posts anything positive.
I think it is always important to look at the positives but it is also important to hold the company and its officers accountable. I like the way you criticize the JDA for its lack of accountability over timelines. If more people did that maybe we would be getting somewhere. Likewise it is important to always question corporate management as well. By the way I am long ERHC but like to see both sides.
One other thing. To those who keep buying all the info about possible awards soon I would take all of that with a grain of salt. Follow what the companies themselves say, not obscure sources. Pioneer stated they are hopeful to hear something in the next 2 or 3 weeks. That is all we can go on at this point. None of the other rumours matter and anone have been accurate up until this point.
By the way, I think Pioneer also said they were hopeful to hear something soon and that was back in December. So the bottom line is, no one really knows whats going on. It is a process that constantly evolves and changes and unfortunately that results in constant delays.
But that is what happens when you have a ruling body that doesn't know the meaning of sticking to a timeline.
You might point out that they did settle one lawsuit.
Would you rather pin your hopes for partnerships with major oil companies and acreage awards in a very sought-after area on people who travel in the back on Air Togo (which does not believe in seat belts and don't care if they have more passengers than seats - you can stand) with people (and their live animals they brought along) who are trying to cook their own food on open flame gas stoves erected in the aisles?
There is only one place to stay in Abuja, the Nikko Hilton. As a result lots of business, and surveilance, is done there.
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