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31-Mar-2004 Annual Report ITEM 6. MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report, including Management`s Discussion and Analysis of Financial Condition and Results of Operations, includes certain forward-looking statements. The forward-looking statements reflect the Company`s expectations, objectives and goals with respect to future events and financial performance. They are based on assumptions and estimates, which the Company believes are reasonable. However, actual results could differ materially from anticipated results. Important factors that may impact actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. The notes to Consolidated Financial Statements sections contain information that is pertinent to the following analysis. GENERAL COMMENTS ON BUSINESS PLAN The Board of Directors has passed a unaminous resolution to change the name of the Corporation to EnDevCo, Inc. The shareholders approved the name change at the Annual Meeting held on September 12, 2003. The new ticker symbol is " ENDE" . EnDevCo, Inc., a shortened version of the Energy Development Company, establishes an identity that is consistent with the business development activities currently underway to revitalize the Corporation. The Company is involved in several energy related development projects that transcend the traditional business scope of oil and gas exploration and production. These activities include the possible development of an industrial free trade zone in the Republic of Congo that includes aspects of traditional offshore natural gas drilling and production, natural gas storage, oil and condensate production for export, LPG production and bottling, large scale electrical power generation and development and administration of an industrial park that includes a wide variety of possible industrial plants and services. Additionally, the Company is investigating investment in the development of new technologies for the enhancement of oil and gas production, utilizing that technology to gain leverage in the purchase of domestic natural gas production. The Company intends to pursue the development of natural gas fired power plants both in domestic and international venues. This new corporate identity and our wide variety of activities are better described to new investors as the Energy Development Company, EnDevCo, Inc. POWER DEVELOPMENT The Company intends to pursue the development of power projects in both domestic and international venues. As a result of the downturn in the world economy following September 11, 2001 and in the wake of severe financial results in most sectors of the power industry in the United States since that time, the business model for this industry is currently undergoing a transformation. The Company is currently monitoring several new opportunities and has identified qualified individuals that will be hired at an appropriate time to identify and pursue power development projects. The Company continues to believe that the long-term need for new power plants will be significant, particularly as the national economy recovers and older, less efficient generating assets need to be replaced. Currently, the Company does not anticipate any near term positive economic impact from this sector of our business. Power Plant Development - Pointe Noire Industrial Free Trade Zone, Republic of Congo - The Company and the Republic of Congo government signed an agreement to conduct a Feasibility Study for the development of an Industrial Free Trade Zone (" IFTZ" ) at Pointe Noire (Republic of Congo). The Company currently holds no interest in properties in the Republic of Congo, but in the event that the Pointe Noire project is deemed to be commercially feasible, and at the time that necessary project financing can be secured, the Company anticipates that it would enter into definitive agreements with the Republic of Congo to manage the development of the IFTZ at Pointe Noire. A significant aspect of this development would entail construction and operation of a 600 megawatt, thermal power plant, fueled by natural gas produced from fields located nearby in offshore waters. Successful development of this project will require the Company to secure a definitive Power Purchase Agreement with an as yet unidentified end user for the power generated by this project. The Company has identifed several possible end users for the power, but is still in the process of documenting the overall economic feasibility of the project. The Company has engaged a consulting engineering company to assist in the development of the requisite work program, cost estimates and economic sensitivity studies to determine the overall economic feasibility of this project. OIL AND GAS EXPLORATION AND DEVELOPMENT The Company is pursuing oil and gas exploration and development opportunities in both domestic and international venues. The Company has identified four blocks in the Gulf of Mexico that will provide it with the opportunity to participate in the drilling of low risk, development wells. The blocks are currently in production and as a result of recently acquired 3D seismic data integrated with previously known geological and engineering data, additional low risk development drilling opportunities have been identified. Participation in these types of relatively low risk and low cost wells will provide near term cash flow to support the activities of the Company. Additionally, the Company has identified several other exploration projects that carry significant upside potential (although at higher risk). The Company currently holds agreements to farmin to these projects which are located on the western coast of Newfoundland and in the Rio Magdelena Valley of Colombia. Our exploration teams are also evaluating other opportunities located in South America and West Africa. Gulf of Mexico Option - On December 28, 2003, the Company entered into an agreement with Pine Curtain Production Company, LLC wherein the Company has the option to participate in an undivided interest of 50% of the seller`s undivided interest in lease holding rights to include seller`s proprietary geological, geophysical and engineering data relating to the following Gulf of Mexico Blocks: East Cameron Blocks 71 & 72, Eugene Island Block 294, and Chandeleur Block 14. The purchase price was $1,000,000 paid in 500,000 preferred shares valued at $1.00 per share and with a note payable for $500,000. Rio Magdelena Option, Colombia - On September 25, 2003, the Company purchased from Harvest Production Company, LLC an option to participate with Argosy Energy International, in the acquisition and processing of 101 kilometers of 2D seismic, and a continuing option to participate on a joint venture basis in wells to be drilled after the interpretation of that seismic on their Rio Magdelena Association Contract comprising 58,546 hectares (144,600 acres) situated in the Upper Magdelena River region of Colombia. The purchase price was $1,000,000 paid in preferred shares. Pointe Noire Gas Feasibility Study, Republic of Congo - The Company and the Republic of Congo government signed an agreement to conduct a Feasibility Study for the development of an Industrial Free Trade Zone (" IFTZ" ) at Pointe Noire (Republic of Congo). The Company has engaged a consulting engineering company to assist in the development of the requisite work program, cost estimates and economic sensitivity studies to determine the overall economic feasibility of this project. The Company currently holds no interest in properties in the Republic of Congo, but in the event that the Pointe Noire project is deemed to be commercially feasible, and at the time that necessary project financing can be secured, the Company may enter into a Production Sharing Agreement with the Republic Congo for rights to drill and produce gas from certain offshore fields currently the subject of the feasibility study. Additionally, the Company anticipates that it would enter into definitive agreements with the Republic of Congo to manage the development of the IFTZ at Pointe Noire. Energy Technology Development Development and implementation of new energy technologies will become a key area of new business focus for the Company. The identification of and early participation in the implementation of these types of technologies opens several avenues for potential revenue generation and profits. In some instances, the technology can be manufactured and sold to end users once the market accepts the technology. In other instances, the technology might provide a unique competitive advantage which can be succesfully leveraged by the Company in the acquisition and development of existing energy projects. Initially, the Company will limit its scope of investigation to those technologies that directly compliment the oil and gas, and power industries. RESULTS OF OPERATIONS This report, including Management`s Discussion and Analysis of Financial Condition and Results of Operations, includes certain forward-looking statements. The forward-looking statements reflect the Company`s expectations, objectives and goals with respect to future events and financial performance. They are based on assumptions and estimates, which the Company believes are reasonable. However, actual results could differ materially from anticipated results. Important factors that may impact actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. The notes to Consolidated Financial Statements sections contain information that is pertinent to the following analysis. YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002 Revenues -During the period reported, Revenues increased from $2,286 to $1,513,419. This increase of $1,511,133 is due to consulting fees and the proper accounting treatment of royalty income. Cost of Revenues - During the period reported, Cost of Revenues increased from zero to $1,496,500. This increase is due to recognition of payments to the Congo subcontractor. Costs and Expenses -During the period reported, Expenses decreased from $10,580,410 to $2,189,744, a decrease of $8,390,666. º " General and Administrative Expense" decreased from $2,454,944 in 2002 to $67,575 in 2003. This decrease of $2,387,369 is primarily the result of the Company`s efforts to keep overhead as low as possible. º " Salaries and wages paid in stock" increased from $187,667 for 2002 to $1,031,500 in 2003. This increase of $843,833 is due to the payment of officer and director compensation due for both 2002 and 2003 in preferred stock. º " Other Expenses Paid in Stock" increased from $27,923 in 2002 to $168,368 in 2003. This increase of $140,445 is the result of payments for expenses to keep the Company in compliance with SEC regulations, payments for legal expenses and operational activities. º " Impairment Loss on Assets" decreased from $7,325,716 in 2002 to zero in 2003. This decrease is due to impairment loss recognized in 2002. º " Shares Issued for Reduced Value" decreased from $382,478 in 2002 to zero in 2003. This decrease is due to the good corporate governance adhered to by new management. º " Interest expense" decreased from $101,276 in 2002 to $25,332 in 2003. This decrease of $75,944 is due to the negotiated settlement to zero in 2003 of the interest on unpaid cash calls for Yemen Block 20. º " Other expenses" increased from $100,406 in 2002 to $896,969 in 2003. This increase of $796,563 resulted from the payment of proxy contest expenses incurred to remove previous management.. Other Income and Expenses - During the period reported, Other Income and Expenses increased from $717,526 in 2002 to $2,157,623 in 2003, an increase of $1,440,097. º " Interest Income" decreased from $11,308 in 2002 to $5,346 in 2003. This decrease of $5,962 is due to a reduced interest rate earned on the " Investment - Letter of Credit on Deposit" . º " Loss on Abandonment of Assets" increased from $728,834 in 2002 to $2,162,969 in 2003. This increase of $1,434,135 is due to abandonment of assets in 2003. LIQUIDITY AND CAPITAL RESOURCES Directors and Officers Compensation The Company currently has nominal cash reserves and no cash flow from operations. Until such time as the financial condition of the Company improves, the Company`s Directors and Officers have agreed to manage the Company by receiving payment in " Series A" Preferred stock in lieu of cash consideration. Project Development Guidelines In recognition of the status of current financial resources available to the Company, executive management is committed to identifying and implementing projects that can be primarily project financed. This strategy reduces financial risk to the Company, but necessarily adds additional lead time before projects can be secured and announced to the shareholders. There are no assurances, however, that the Company will be able to identify and implement financing to develop its projects or that it will be able to generate sufficient revenue growth and improvements in working capital. As no revenue is currently generated from operations, the Company will have to raise additional working capital through the sale of its Common stock. No assurance can be given that funds will be available from any source when needed by the Company or, if available upon terms and conditions reasonably acceptable to the Company. |
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| aus der Diskussion: | endevco da kommt nen hype! |
| Autor (Datum des Eintrages): | chiptrader (05.04.04 12:17:43) |
| Beitrag: | 2 von 565 (ID:12654852) |
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