FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission file number 1-12108
GULFWEST ENERGY INC.
--------------------
(Exact name of Registrant as specified in its charter)
Texas 87-0444770
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
480 North Sam Houston Parkway East
Suite 300
Houston, Texas 77060
(Address of principal executive offices) (zip code)
(281) 820-1919
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(D) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date, November 10, 2004, was 18,593,969
shares of Class A Common Stock, $.001 par value.
GULFWEST ENERGY INC.
FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 2004
Page of
Form 10-Q
---------
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, September 30, 2004
and December 31, 2003 3
Consolidated Statements of Operations for the three months
and nine months ended September 30, 2004 and 2003 5
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2004 and 2003 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Item 4. Procedures and Controls 13
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on 8-K 15
Signatures 16
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
------- ---------------------
GULFWEST ENERGY INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
ASSETS
September 30, December 31,
2004 2003
(Unaudited) (Audited)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $991,555 $483,618
Accounts Receivable - trade, net of allowance for
doubtful accounts of -0- in 2004 and 2003 1,445,879 1,099,802
Prepaid expenses 244,684 159,269
------------ ------------
Total current assets 2,682,118 1,742,689
------------ ------------
OIL AND GAS PROPERTIES
Using the successful efforts method of accounting 55,960,490 58,472,886
OTHER PROPERTY AND EQUIPMENT 1,828,769 2,132,220
Less accumulated depreciation, depletion
and amortization (9,452,293) (10,017,931)
------------ ------------
Net oil and gas properties, and
other property and equipment 48,336,966 50,587,175
------------ ------------
OTHER ASSETS:
Deposits 20,142 20,142
Debt issue cost, net 2,124,289 78,768
------------ ------------
Total other assets 2,144,431 98,910
------------ ------------
TOTAL ASSETS $53,163,515 $52,428,774
============ ============
The Notes to Consolidated Financial Statements are an integral part of these statements.
3
GULFWEST ENERGY INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2004 2003
------------ ------------
(Unaudited) (Audited)
------------ ------------
CURRENT LIABILITIES
Notes payable $5,106,568 $8,182,165
Notes payable - related parties 2,140,000 1,465,000
Current portion of long-term debt 686,147 29,396,092
Current portion of long-term debt - related parties 115,284 130,152
Accounts payable - trade 4,077,890 5,002,675
Accrued expenses 521,987 443,568
------------ ------------
Total current liabilities 12,647,876 44,619,652
------------ ------------
NONCURRENT LIABILITIES
Long-term debt, net of current portion 21,374,396 35,801
Asset retirement obligations 1,083,036 1,357,206
------------ ------------
Total noncurrent liabilities 22,457,432 1,393,007
------------ ------------
OTHER LIABILITIES
Derivative instruments 3,013,131 591,467
------------ ------------
Total liabilities 38,118,439 46,604,126
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock 270 190
Common stock 18,493 18,493
Additional paid-in capital 34,063,386 29,283,692
Retained deficit (19,037,073) (23,477,727)
------------ ------------
Total stockholders' equity 15,045,076 5,824,648
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $53,163,515 $52,428,774
============ ============
The Notes to Consolidated Financial Statements are an integral part of these statements.
4
GULFWEST ENERGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
------------ ----------- ----------- ------------
OPERATING REVENUES
Oil and gas sales $2,816,386 $2,400,967 $7,811,373 $8,375,986
Operating overhead and other income (13,440) 35,096 65,568 100,804
------------ ----------- ----------- ------------
Total Operating Revenues 2,802,946 2,436,063 7,876,941 8,476,790
------------ ----------- ----------- ------------
OPERATING EXPENSES
Lease operating expenses 1,149,771 1,434,002 3,749,027 4,196,377
Depreciation, depletion and amortization 526,277 540,312 1,402,522 1,714,921
Accretion expense 16,287 57,003
General and administrative 498,189 380,176 1,371,822 1,214,660
------------ ----------- ----------- ------------
Total Operating Expenses 2,190,524 2,354,490 6,580,374 7,125,958
------------ ----------- ----------- ------------
INCOME FROM OPERATIONS 612,422 81,573 1,296,567 1,350,832
------------ ----------- ----------- ------------
OTHER INCOME AND EXPENSE
Interest expense (1,036,591) (756,212) (2,971,368) (2,328,862)
Other financing costs (532,728) (901,998) (1,000,000)
Loss on sale of assets (1,891,707) (19,848) (2,118,516) (19,848)
Unrealized gain (loss) on derivative Instruments (1,862,729) 295,030 (2,421,664) 487,197
Abandoned property (326,512)
Forgiveness of debt 11,884,145
------------ ----------- ----------- ------------
Total Other Income and Expense (5,323,755) (481,030) 3,144,087 (2,861,513)
------------ ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES (4,711,333) (399,457) 4,440,654 (1,510,681)
INCOME TAXES
------------ ----------- ----------- ------------
NET INCOME (LOSS) (4,711,333) (399,457) 4,440,654 (1,510,681)
DIVIDENDS ON PREFERRED STOCK (Paid 2004 - 0; 2003 - 0) 124,375 256,084
------------ ----------- ----------- ------------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $(4,835,708) $(399,457) $4,184,570 $(1,510,681)
============ =========== ========================
NET INCOME (LOSS) PER SHARE,
BASIC $(.26) $(.02) $.23 $(.08)
============ =========== =========== ============
DILUTED $(.26) $(.02) $.14 $(.08)
============ =========== =========== ============
The Notes to Consolidated Financial Statements are an integral part of these statements.
5
GULFWEST ENERGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $4,440,654 $(1,510,681)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 1,402,522 1,714,921
Accretion expense 57,003
Debt issue cost expense 859,498
Discount on note payable 261,238
Common stock warrants issued and charged to operations 25,500
Other financing costs 1,000,000
Notes payable issued and charged to earnings 61,046
Loss on sale of assets 2,118,516 19,848
Abandoned property 326,512
Unrealized (gain) loss on derivate instruments 2,421,664 (487,197)
Forgiveness of debt (11,884,145)
(Increase) decrease in accounts receivable - trade, net (46,077) 97,612
(Increase) decrease in prepaid expenses (85,415) (70,230)
Increase (decrease) in accounts payable and accrued expenses (667,412) 346,230
------------ ------------
Net cash provided by (used in) operating activities (734,396) 1,136,003
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of property and equipment 1,200,350 561
Purchase of property and equipment (3,272,059) (911,201)
------------ ------------
Net cash used in investing activities (2,071,709) (910,640)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on sale of preferred stock, net 3,363,745
Payments on debt (17,806,173) (1,441,235)
Proceeds from debt issuance 19,880,258 823,164
Debt issue cost (2,123,788)
------------ ------------
Net cash provided by (used in) financing activities 3,314,042 (618,071)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 507,937 (392,708)
CASH AND CASH EQUIVALENTS, beginning of period 483,618 687,694
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $991,555 $294,986
============ ============
CASH PAID FOR INTEREST $2,821,404 $2,183,842
============ ============
The Notes to Consolidated Financial Statements are an integral part of these statements.
6
GULFWEST ENERGY INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
1. During interim periods, we follow the accounting policies set forth in our
Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Users of financial information produced for interim periods are
encouraged to refer to the footnotes contained in the Annual Report when
reviewing interim financial results.
2. The accompanying financial statements include the Company and its
wholly-owned subsidiaries: RigWest Well Service, Inc. formed September 5,
1996; GulfWest Texas Company formed September 23, 1996; DutchWest Oil
Company formed July 28, 1997; Southeast Texas Oil and Gas Company, L.L.C.
acquired September 1, 1998; SETEX Oil and Gas Company formed August 11,
1998; GulfWest Oil & Gas Company formed February 8, 1999; LTW Pipeline Co.
formed April 19, 1999; GulfWest Development Company formed November 9,
2000; and, GulfWest Oil & Gas Company (Louisiana) LLC formed July 31, 2001.
All material intercompany transactions and balances are eliminated upon
consolidation.
3. In management's opinion, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, the
results of operations, and the statements of cash flows of GulfWest Energy
Inc. for the interim periods.
4. Non-cash Investing and Financing
During the nine month period ended September 30, 2004, we issued a note
payable for $600,000 in exchange for an account payable for $538,954
and $61,046 of interest expense was recorded. Also, as a result of
refinancing debt we issued common stock warrants valued at $916,029
which were recorded as a note discount, issued $500,000 of preferred
stock of a wholly owned subsidiary as a commission to a financial
advisor, recorded a $360,000 payable for a loan termination fee and
had $11,884,145 in debt forgiven by the prior lender. We also financed
field trucks for $78,036,
During the nine month period ended September 30, 2003, we decreased the
current portion of long term debt - related parties by applying
$17,300 in deposits and reclassified $176,324 from accrued expenses to
current portion of long term debt. Also during the period, $1 million
in preferred stock was issued to an energy lender as required by an
agreement that expired on May 29,2003.
5. As a result of a financing agreement with an energy lender, we were
required to enter into an oil and gas hedging agreement with the lender. It
has been determined this agreement meets the definition of SFAS 133
"Accounting for Derivative Instruments and Hedging Activities" and is
accounted for as a derivative instrument.
We entered into an agreement, commencing in May 2000, to hedge a portion
of our oil and gas sales for the period of May 2000 through April
2004. The agreement calls for initial volumes of 7,900 barrels of oil
and 52,400 Mcf of gas per month, declining monthly thereafter. We
entered into an additional agreement with the energy lender,
commencing September 2001, to hedge an additional portion of our oil
and gas sales for the periods of September 2001 through July 2004 and
September 2001 through December 2003, respectively. The agreement
calls for the initial volumes of 15,000 barrels of oil and 50,000
Mmbtu of gas per month, declining monthly thereafter. These agreements
were terminated in April 2004 with the refinancing of the related
debt. We entered into a second agreement, as a result of refinancing
the debt, commencing May 2004, to hedge a portion of our oil and gas
sales for the period of May 2004 through October 2005. The agreement
calls for 10,000 barrels of oil and 60,000 Mmbtu of gas per month. As
a result of these agreements, we realized a decrease in revenues of
$1,154,349 for the nine month period ended September 30, 2004 and a
decrease in revenues of $1,209,982 for the nine month period ended
September 30, 2003, which is included in oil and gas sales.
7
The estimated change in fair value of the derivatives is reported in Other
Income and Expense as unrealized (gain) loss on derivative
instruments. The estimated fair value of the derivatives is reported
in Other Assets (or Other Liabilities) as derivative instruments.
6. Stock Based Compensation
In October 1995, SFAS No. 123, "Stock Based Compensation," (SFAS 123) was
issued. This statement requires that we choose between two different
methods of accounting for stock options and warrants. The statement
defines a fair-value-based method of accounting for stock options and
warrants but allows an entity to continue to measure compensation cost
for stock options and warrants using the accounting prescribed by APB
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees."
Use of the APB 25 accounting method results in no compensation cost
being recognized if options are granted at an exercise price at the
current market value of the stock or higher. We will continue to use
the intrinsic value method under APB 25 but are required by SFAS 123
to make pro forma disclosures of net income (loss) and earnings (loss)
per share as if the fair value method had been applied in its 2004 and
2003 financial statements.
If we had used the fair value method required by SFAS 123, our net loss
and per share information would approximate the following amounts:
Three months 2004 2003
--------------------------- ------------------------------------- -------------------------------------
As Reported Proforma As Reported Proforma
SFAS 123 compensation cost $ $ 420,250 $ $
APB 25
compensation cost $ $ $ $
Net income (loss) $ (4,835,708) $ (5,255,958) $ (399,457) $ (399,457)
Income (loss) per
common share,
Basic $ (.26) $ (.28) $ (.04) $ (.04)
Diluted $ (.26) $ (.28) $ (.04) $ (.04)
8
Nine months 2004 2003
--------------------------- ------------------------------------ -------------------------------------
As Reported Proforma As Reported Proforma
SFAS 123
compensation cost $ $ 425,500 $ $ 7,350
APB 25
compensation cost $ $ $ $
Net income (loss) $ 4,184,570 $ 3,759,070 $ (1,510,681) $ (1,518,031)
Income (loss) per
common share,
Basic $ .23 $ .20 $ (.08) $ (.08)
Diluted $ .14 $ .12 $ (.08) $ (.08)
7. As shown in the financial statements, we had a working capital deficiency
of $9,965,758 at September 30, 2004 and $42,876,963 for the year ended
December 31, 2003. This and other conditions raise substantial doubt about
our ability to continue as a going concern.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Overview
--------
We are engaged primarily in the acquisition, development, exploitation,
exploration and production of crude oil and natural gas. Our focus is on
increasing production from our existing crude oil and natural gas properties
through the further exploitation, development and optimization of those
properties, and on acquiring additional crude oil and natural gas properties.
Our gross revenues are derived from the following sources:
1. Oil and gas sales that are proceeds from the sale of crude oil and
natural gas production to midstream purchasers;
2. Operating overhead and other income that consists of earnings from
operating crude oil and natural gas properties for other working
interest owners, and marketing and transporting natural gas. This also
includes earnings from other miscellaneous activities.
Results of Operations
---------------------
The factors which most significantly affect our results of operations are
(1) the sales price of crude oil and natural gas, (2) the level of total sales
volumes of crude oil and natural gas, (3) the level of and interest rates on
borrowings and, (4) the level and success of new acquisitions and development of
existing properties.
Comparative results of operations for the periods indicated are discussed below.
Three-Month Period Ended September 30, 2004 compared to Three Month Period Ended
September 30, 2003.
Revenues
Oil and Gas Sales. Revenues from the sale of crude oil and natural gas for
the quarter increased 17% from $2,401,000 in 2003 to $2,816,400 in 2004 due to
higher commodity prices offset by lower production volumes and the sale of two
properties in West Texas and one property in Oklahoma. The lower production
volumes were due to the natural decline in production from our Gulf Coast
fields. We have implemented a development plan which should result in increased
production in future quarters.
Operating Overhead and Other Income. Revenues from these activities
decreased from $35,100 in 2003 to $(13,400) in 2004. This was due to
fluctuations in prices of natural gas in our imbalance accounts.
Costs and Expenses
Lease Operating Expenses. Lease operating expenses decreased 20% from
$1,434,000 in 2003 to $1,149,800 in 2004 due to lower production volumes and the
sale of two properties in West Texas and one property in Oklahoma.
10
Depreciation, Depletion and Amortization (DD&A). DD&A decreased 3% from
$540,300 in 2003 to $526,300 in 2004, due to lower commodity sales volumes.
General and Administrative (G&A) Expenses. G&A expenses increased 31% for
the period from $380,200 in 2003 to $498,200 in 2004, due to increased costs
related to our financing activities.
Interest Expense. Interest expense increased 37% from $756,200 in 2003 to
$1,036,600 in 2004, primarily due to a significant increase in our interest rate
following our refinancing.
Nine-Month Period Ended September 30, 2004 compared to Nine-Month Period Ended
September 30, 2003.
Revenues
Oil and Gas Sales. Revenues from the sale of crude oil and natural gas for
the period decreased 7% from $8,376,000 in 2003 to $7,811,400 in 2004 due to
lower production volumes and the sale of two properties in West Texas and one
property in Oklahoma. Our development plan to increase production did not start
until May 2004.
Operating Overhead and Other Income. Revenues from these activities
decreased 35% from $100,800 in 2003 to $65,600 in 2004. This was due to
fluctuations in prices of natural gas in our imbalance accounts.
Costs and Expenses
Lease Operating Expenses. Lease operating expenses decreased 11% from
$4,196,400 in 2003 to $3,749,000 in 2004 due to lower production volumes and the
sale of two properties in West Texas and one property in Oklahoma.
Depreciation, Depletion and Amortization (DD&A). DD&A decreased 18% from
$1,714,900 in 2003 to $1,402,500 in 2004, due to lower commodity sales volumes.
General and Administrative (G&A) Expenses. G&A expenses increased 13% for
the period from $1,214,700 in 2003 to $1,371,800 in 2004, due to increased costs
related to our financing activities.
Interest Expense. Interest expense increased 28% from $2,328,900 in 2003 to
$2,971,400 in 2004, due to a significant increase in our interest rate following
our refinancing.
11
Financial Condition and Capital Resources
-----------------------------------------
At September 30, 2004, our current liabilities exceeded our current assets
by $9,965,758. We had a loss of $4,835,708 for the quarter compared to a loss of
$399,457 for the period in 2003. The loss for 2004 included a non-cash loss of
approximately $1.9 million associated with the change in our estimate of the
fair value of our hedge, approximately $1.9 million loss on the sale of assets
and approximately $500,000 of amortization of expenses associated with our
refinancing.
During the third quarter of 2004, our sales volumes were 40,733 barrels of
crude oil and 272,611 Mcf of natural gas compared to 49,330 barrels of crude oil
and 263,561 Mcf of natural gas in the third quarter of 2003. Revenue for crude
oil sales for the period was $1,332,744 in 2004 compared to $1,176,604 in 2003
and for natural gas sales was $1,483,642 in 2004 compared to $1,224,363 in 2003.
During the nine-month period ended September 30, 2004 our sales volumes
were 127,530 barrels of oil and 756,614 Mcf of natural gas compared to 169,953
barrels of oil and 908,346 Mcf of natural gas for the period in 2003. Revenue
for crude oil sales for the period was $3,861,893 in 2004 compared to $4,076,097
in 2003 and for natural gas sales was $3,949,480 in 2004 compared to $4,299,889
in 2003.
On April 27, 2004, in our wholly-owned subsidiary, GulfWest Oil and Gas
Company, we completed an $18,000,000 financing package with a new energy lender.
We used $15,700,000 to retire existing debt of $27,584,145, resulting in
forgiveness of debt of $11,884,145. This taxable gain will be completely offset
by available net operating loss carryforwards. The term of the note is eighteen
months and it bears interest at the prime rate plus 11%. This rate increases by
.75% per month beginning in month ten. We paid the new lender $1,180,000 in cash
fees and also issued the new lender warrants to purchase 2,035,621 shares of our
common stock at an exercise price of $.01 per share, expiring in five years. The
warrants are subject to demand registration and anti-dilution provisions.
Simultaneously, our wholly-owned subsidiary, GulfWest Oil & Gas Company,
completed the initial phase of a private offering of its Series A Preferred
Stock for $4,000,000. The Series A Preferred Stock is exchangeable for our
Common Stock based on a liquidation value of $500 per share of Series A
Preferred Stock divided by $.35 per share of our Common Stock. As part of a fee
and commission, we issued $500,000 of the Series A Preferred Stock to a
financial advisor. One of our directors acquired $1,500,000 of the Series A
Preferred Stock.
Of the $21,500,000 total cash raised, we used $15,700,000 to pay existing
debt and $1,580,000 to pay fees and commissions, leaving $4,220,000 available
for capital expenditures and working capital.
As of September 30, 2004 we have incurred $2,983,787 in loan fees. This
includes lender fees of $1,540,000 ($1,180,000 paid in cash and a $360,000 fee
due at the termination of the loan), financial advisor fees of $1,150,000, which
includes the $500,000 of Series A Preferred Stock, and $293,787 for other
professional fees. Also, the lender charges a quarterly administrative fee of
$25,000. These costs are being amortized over the term of the loan and are
included in other financing costs.
In addition we issued the lender warrants valued at $916,029. The value of
the warrants is recorded as a note discount and is being expensed over the term
of the loan and included in interest expense.
12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------- ----------------------------------------------------------
The following market rate disclosures should be read in conjunction with
the quantitative disclosures about market risk contained in the Company's 2003
annual report on Form 10-K, as well as with the consolidated financial
statements and notes thereto included in this quarterly report on Form 10-Q.
All of the Company's financial instruments are for purposes other than
trading. The Company only enters derivative financial instruments in conjunction
with its oil and gas hedging activities.
Hypothetical changes in interest rates and prices chosen for the following
stimulated sensitivity effects are considered to be reasonably possible
near-term changes generally based on consideration of past fluctuations for each
risk category. It is not possible to accurately predict future changes in
interest rates and product prices. Accordingly, these hypothetical changes may
not be an indicator of probable future fluctuations.
Interest Rate Risk
The Company is exposed to interest rate risk on debt with variable interest
rates. At September 30, 2004, the Company carried variable rate debt of
$28,885,455. Assuming a one percentage point change at September 30, 2004 on the
Company's variable rate debt, the annual pretax income would change by $288,855.
Commodity Price Risk
The Company hedges a portion of its price risks associated with its oil and
natural gas sales which are classified as derivative instruments. As of
September 30, 2004, these derivative instruments' liabilities had a fair value
of $3,013,131. A hypothetical change in oil and gas prices could have an effect
on oil and gas futures prices, which are used to estimate the fair value of our
derivative instrument. However, it is not practicable to estimate the resultant
change, in any, in the fair value of our derivative instrument.
ITEM 4. PROCEDURES AND CONTROLS
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As of September 30, 2003, an evaluation was performed under the supervision
and with the participation of the Company's management, including the CEO and
Vice President of Finance, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based on that evaluation, the
Company's management, including the CEO and Vice President of Finance, concluded
that the Company's disclosure controls and procedures were effective as of
September 30, 2004. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to September 30, 2004.
13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------- ----------------------------------------------------
The annual meeting of shareholders was held on July 8, 2004 to consider:
Proposal 1 which was the election of five persons to the board of directors of
the Company (the "Board"); Proposal 2 which was the approval of the amendment of
the Company's Articles of Incorporation to increase the number of shares of
Class A Common Stock, par value $.001 per share ("Common Stock") that the
Company will have authority to issue from 40,000,000 to 80,000,000 shares; and,
to transact such other business as might properly come before the meeting. Of
the 18,492,541 outstanding shares of Common Stock, there were present, in person
or by proxy, shareholders holding a total of 15,651,898 (84.6%) of the shares.
Five candidates for director were presented by the Board: J. Virgil
Waggoner, Marshall A. Smith III, Thomas R. Kaetzer, John E. Loehr and M. Scott
Manolis. Of the 15,651,898 shares of Common Stock present in person or by proxy
and entitled to be voted at the meeting, 15,651,650 votes were cast for each of
the nominees for director of the Corporation (except for 2,000 votes withheld
for Mr. Waggoner, 2,900 votes withheld for Mr. Kaetzer, 2,900 votes withheld for
Mr. Loehr and 29,300 votes withheld for Mr. Smith). No votes were cast against
the nominees. All five candidates were declared duly and validly elected members
of the Board, each to serve until the next annual meeting of shareholders or
until his respective successor has been elected and qualified. Following the
shareholders' meeting, the Board elected Mr. J. Virgil Waggoner as Chairman of
the Board.
Of the 15,651,898 shares of Common Stock present in person or by proxy and
entitled to be voted at the meeting, 15,574,033 votes (99.5%) were cast for
Proposal 2, 11,365 votes were cast against and 66,500 votes were cast as
abstentions. Proposal 2 passed and was approved.
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
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(a) Exhibits -
Number Description
------ -----------
*3.1 Articles of Incorporation of the Registrant and Amendments thereto.
&3.3 Amendment to the Company's Articles of Incorporation to increase the number of shares of Class A
Common Stock that the Company will have authority to issue from 20,000,000 to 40,000,000 shares,
approved by the Shareholders on November 19, 1999and filed with the Secretary of State of Texas on
December 3, 1999.
#3.2 Amendment to the Articles of Incorporation of the Registrant changing the name of the Registrant
to "GulfWest Energy Inc.", approved by the Shareholders on May 18, 2001 and filed with the
Secretary of Texas on May 21, 2001.
*3.4 Bylaws of the Registrant.
#10.1 GulfWest Oil Company 1994 Stock Option and Compensation Plan, amended and restated as of April 1,
2001, and approved by the shareholders on May 18, 2001.
31.1 Certification of Chief Executive Officer pursuant to Exchange rule 13a-14(a) as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002; filed herewith.
31.2 Certification of Chief Financial Officer pursuant to Exchange rule 13a-14(a) as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002; filed herewith.
32 Certification pursuant to 18. U.S.C Section 1350 pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002; filed herewith.
-----------------------------------
* Previously filed with the Registrant's Registration Statement (on Form S-1, Reg. No. 33-53526),
filed with the Commission on October 21, 1992.
& Previously filed with the Registrant's Definitive Proxy Statement, filed with the Commission on
October 18, 1999.
# Previously filed with the Registrant's Definitive Proxy Statement, filed with the Commission on
April 16, 2001.
(b) Form 8-K - None.
15
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULFWEST ENERGY INC.
(Registrant)
Date: November 10, 2004 by: /s/ Thomas R. Kaetzer
------------------------------
Thomas R. Kaetzer
President
Date: November 10, 2004 by: /s/ Jim C. Bigham
-------------------------------
Jim C. Bigham
Executive Vice President and Secretary
Date: November 10, 2004 By: /s/ Richard L. Creel
-------------------------------
Richard L. Creel
Vice President of Finance
16