UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported):
October 31, 2005 (October 27, 2005)
Blue Dolphin Energy Company
(Exact name of registrant as specified in its charter)
Delaware 0-15905 73-1268729
(State of Incorporation) (Commission file Number) (IRS Employer
Identification No.)
801 Travis, Suite 2100
Houston, Texas 77002
(Address of Registrant's principal executive offices)
(713) 227-7660
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.
On October 31, 2005, Blue Dolphin Energy Company, Inc. a Delaware corporation
(the "Company") issued a press release announcing that on October 27, 2005, the
management of the Company, in consultation with members of its Audit Committee
and UHY Mann Frankfort Stein & Lipp CPAs, LLP ("UHY"), the Company's independent
registered public accounting firm, concluded that the Company's previously
issued financial statements for the quarterly periods ended March 31, 2005 and
June 30, 2005 should no longer be relied upon because of errors in such
financial statements. The underlying errors relate to the Company's treatment of
the "cashless" exercise of compensatory stock options by certain directors and
employees of the Company. The Company expects to file an amended Form 10-QSB for
each of the first and second quarters of 2005 by November 15, 2005.
During the first and second quarters of 2005, pursuant to the terms of the
Company's 2000 Stock Incentive Plan, certain option holders were permitted to
make "cashless" exercises of stock options. Upon a "cashless" exercise of an
option, shares of common stock having a fair market value, at the time of
exercise, equal to the exercise price are withheld to pay the exercise price of
the options exercised.
The Company accounts for stock-based compensation as fixed awards under the
Intrinsic Value Method as prescribed by Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" ("APB No. 25"). The Company has
concluded, after consultation with UHY, that options exercised in the first and
second quarters of 2005 using the "cashless" exercise method require variable
accounting treatment under Financial Accounting Standards Board Interpretation
No. 44 "Accounting for Certain Transactions involving Stock Compensation - An
Interpretation of APB Opinion No. 25" ("FIN 44"). Under APB No. 25 the
compensation expense associated with option grants that receive fixed accounting
treatment is measured at the grant date. When variable accounting treatment is
applied, compensation expense is measured again and recognized at periods after
the initial measurement date.
Accordingly, the Company will be amending its Forms 10-QSB for the first and
second quarters of 2005 to recognize non-cash compensation expense related to
the exercise of stock options using the "cashless" method. For the six months
ended June 30, 2005, the Company will recognize additional compensation expense
of approximately $686,000, or $0.09 per share. Recognition of this expense will
increase Additional Paid in Capital by an equivalent amount. The Company expects
the additional compensation expense to increase the net loss for the first
quarter by approximately $533,000, or $0.07 per share. Additional compensation
expense recognized in the second quarter of 2005 will be approximately $153,000,
or $0.02 per share. There will be no liability to the Company recognized as a
result of this additional expense. The Company believes it has identified all
the adjustments necessary, however, the accounting analysis is ongoing.
Therefore, the final financial results may be different from that indicated in
this report.
The full text of the press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
ITEM 8.01 OTHER EVENTS.
In the October 31, 2005 press release, the Company also announced that it had
received cash payments totaling $1,383,247 for production from July 1, 2004
through June 2005 for its after-payout working interest in High Island Block 37.
There are two wells that are currently producing in this block at a combined
rate of approximately 25 MMcf per day. The Company has a working interest of
approximately 2.7% in the wells.
Additionally, production from the Company's working interest in High Island
Block A-7 has increased significantly following the successful re-completion of
two wells in August 2005. However, the wells in High Island Block A-7 are
currently shut-in awaiting the resumption of 3rd party transportation services
following Hurricane Rita.
A copy of the press release is filed as Exhibit 99.1 hereto and is incorporated
herein by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
99.1 Press Release issued October 31, 2005.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: October 31, 2005.
BLUE DOLPHIN ENERGY COMPANY
/s/ Gregory W. Starks
---------------------------
By: Gregory W. Starks
Treasurer
INDEX TO EXHIBITS
Exhibit Description of Exhibit
99.1 Press Release issued October 31, 2005.