U.S. SECURITIES AND EXCHANGE
COMMISSION Washington,
D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO _______________
Commission file number: 001-31679
TETON PETROLEUM COMPANY
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 84-1482290
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
(303)-542-1878
(Issuer's Telephone Number)
1600 Broadway, Suite 2400
Denver, Colorado 80202-4921
(Address of Principal Executive Office)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Applicable only to corporate issuers:
As of November 12, 2003, 6,807,360 shares of the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format: Yes No X
--- ---
TETON PETROLEUM COMPANY
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION
Page
Unaudited Consolidated Financial Statements ------
Consolidated Balance Sheets
September 30, 2003 (Unaudited) and December 31, 2002.........................................................F - 1
Unaudited Consolidated Statements of Operations and Comprehensive Loss
Three months ended September 30, 2003 and 2002...............................................................F - 2
Unaudited Consolidated Statements of Operations and Comprehensive Loss
Nine months ended September 30, 2003 and 2002................................................................F - 3
Unaudited Consolidated Statements of Cash Flows
Nine months ended September 30, 2003 and 2002................................................................F - 4
Notes to Unaudited Consolidated Financial Statements................................................................F - 6
Item 2. Management's Discussion and Analysis or Plan of Operation.............................................F - 9
Item 3. Controls and Procedures...............................................................................F - 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................................................................15
Item 2. Changes in Securities.....................................................................................15
Item 3. Defaults Upon Senior Securities...........................................................................15
Item 4. Submission of Matters to a Vote of Security Holders.......................................................15
Item 5. Other Information.........................................................................................15
Item 6. Exhibits and Reports on Form 8-K..........................................................................15
SIGNATURES..............................................................................................................17
2
TETON PETROLEUM COMPANY
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
September 30, December 31,
2003 2002
(Unaudited)
Assets ------------ ------------
Current assets
Cash ....................................................................... $ 1,955,253 $ 712,013
Proportionate share of Goloil accounts receivable .......................... 19,121 642,525
Proportionate share of Goloil VAT and other accounts receivable ............ 1,857,283 913,583
Stock subscriptions receivable ............................................. -- 1,939,610
Proportionate share of Goloil inventory .................................... 979,360 502,989
Prepaid expenses and other assets .......................................... 90,992 91,446
------------ ------------
Total current assets .................................................. 4,902,009 4,802,166
------------ ------------
Non-current assets
Oil and gas properties, net (successful efforts) ........................... 10,488,152 4,896,308
Fixed assets, net .......................................................... 419,256 313,921
------------ ------------
Total non-current assets ............................................. 10,907,408 5,210,229
------------ ------------
Total assets .................................................................. $15,809,417 $10,012,395
============ ============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable and accrued liabilities ................................... $ 233,104 $ 650,356
Proportionate share of Goloil accounts payable and accrued liabilities (Note
2) 3,745,121 1,534,344
Current portion of proportionate share of notes payable owed to affiliate
(Note 2) ................................................................ 5,107,805 2,441,424
Notes payable, net of discount of $47,907 .................................. 580,843 --
------------ ------------
Total current liabilities ............................................ 9,666,873 4,626,124
------------ ------------
Non-current liabilities
Proportionate share of notes payable advances owed to affiliate ............ -- 507,001
------------ ------------
Total non-current liabilities ........................................ -- 507,001
------------ ------------
Total liabilities .................................................... 9,666,873 5,133,125
------------ ------------
Commitments and contingencies
Stockholders' equity
Common stock, $0.001 par value, 250,000,000 and 100,000,000 shares
authorized, 6,807,360 and 6,289,520 shares issued and outstanding at
September 30, 2003 and December 31, 2002 ................................ 6,807 6,290
Preferred stock, $0.001 par value, 25,000,000 shares authorized, 606,335
shares issued and outstanding ........................................... 606 --
Additional paid-in capital ................................................. 30,193,042 26,165,214
Accumulated deficit ........................................................ (25,163,412) (22,022,734)
Foreign currency translation adjustment .................................... 1,105,500 730,500
------------ ------------
Total stockholders' equity ........................................... 6,142,545 4,879,270
------------ ------------
Total liabilities and stockholders' equity .................................... $15,809,417 $10,012,395
============ ============
See notes to unaudited consolidated financial statements
3
TETON PETROLEUM COMPANY
Unaudited Consolidated Statements of Operations and Comprehensive Loss
For the Three Months Ended
September 30,
--------------------------
2003 2002
----------- -----------
Sales ...................................................... $ 2,718,066 $ 2,204,613
Cost of sales and expenses
Oil and gas production .................................. 618,141 664,241
Transportation and marketing ............................ 199,446 189,115
Taxes other than income taxes ........................... 1,486,250 1,172,574
Export duties ............................................ 334,789 295,356
General and administrative - Goloil ..................... 261,420 149,091
General and administrative - Teton Petroleum ............ 921,761 439,061
Depreciation, depletion and amortization ................ 274,538 68,419
------------ ------------
Total cost of sales and expenses .................. 4,096,346 2,977,856
------------ ------------
(Loss) income from operations .............................. (1,378,279) (773,243)
------------ ------------
Other income (expense)
Other income ............................................. (1,522) 700
Financing charges ....................................... (61,569) (1,390,951)
Interest expense ........................................ (55,034) (52,675)
------------ ------------
Total other income (expense) ...................... (118,125) (1,442,926)
------------ ------------
Net loss before taxes ...................................... (1,496,404) (2,216,169)
------------ ------------
Foreign income tax ......................................... 18,870 --
Net loss ................................................... (1,477,534) (2,216,169)
------------ ------------
Preferred stock dividend ................................... (18,556) --
Net loss applicable to common stock ........................ (1,496,090) (2,216,169)
Other comprehensive (loss) income, net of tax
Effect of exchange rates ................................ (80,590) 20,000
------------ ------------
Other comprehensive (loss) income ................. (80,590) 20,000
------------ ------------
Comprehensive loss ......................................... $(1,576,590) $(2,196,169)
============ ============
Basic and diluted weighted average common shares outstanding 6,807,360 2,803,934
============ ============
Basic and diluted (loss) income per common share ........... $ (0.22) $ (0.78)
============ ============
See notes to unaudited consolidated financial statements.
4
TETON PETROLEUM COMPANY
Unaudited Consolidated Statements of Operations and Comprehensive Loss
For the Nine Months Ended
September 30,
----------------------------
2003 2002
------------- -------------
Sales ...................................................... $ 9,105,338 $ 4,305,274
Cost of sales and expenses
Oil and gas production .................................. 1,456,857 882,202
Transportation and marketing ............................ 801,245 398,389
Taxes other than income taxes ........................... 4,163,956 2,249,313
Export Duties ........................................... 1,492,999 448,338
General and administrative - Goloil ..................... 648,905 383,419
General and administrative - Teton Petroleum ............ 2,675,683 1,950,258
Depreciation, depletion and amortization ................ 662,769 149,806
------------- -------------
Total cost of sales and expenses .................. 11,902,415 6,461,725
------------- -------------
Loss from operations ....................................... (2,797,076) (2,156,451)
------------- -------------
Other income (expense)
Other income ............................................ 0 2,508
Financing charges ....................................... (61,916) (5,444,901)
Interest expense ........................................ (178,139) (328,938)
------------- -------------
Total other income (expense) ...................... (240,055) (5,771,331)
------------- -------------
Net loss before taxes ...................................... (3,037,131) (7,927,782)
Foreign income tax ......................................... (103,548) --
Net loss ................................................... (3,140,679) (7,927,782)
------------- -------------
Preferred stock dividend ................................... (18,556) --
Net loss applicable to common stock ........................ (3,159,235) (7,927,782)
Other comprehensive (loss) income, net of tax
Effect of exchange rates ................................ 375,000 (112,000)
------------- -------------
Other comprehensive (loss) income ................. 375,000 (112,000)
------------- -------------
Comprehensive loss ......................................... $ (2,784,235) $(8,039,782)
============= =============
Basic and diluted weighted average common shares outstanding 6,614,638 2,500,058
============= =============
Basic and diluted (loss) income per common share ........... $ (0.48) $ (3.17)
============= =============
See notes to unaudited consolidated financial statements.
5
TETON PETROLEUM COMPANY
Unaudited Consolidated Statements of Cash Flows
For the Nine Months Ended
September 30,
---------------------------
2003 2002
------------ ------------
Cash flows from operating activities
Net loss ................................................................. $(3,140,679) $(7,927,782)
------------ ------------
Adjustments to reconcile net (loss) income to net cash used in operating
activities
Depreciation, depletion, and amortization .............................. 628,458 149,806
Stock and stock options issued for services and interest ............... 97,901 14,227
Debentures issued for services ......................................... -- 211,313
Amortization of note payable discount .................................. 62,257 5,327,989
Changes in assets and liabilities
Accounts receivable .................................................. (320,296) (787,856)
Prepaid expenses and other assets .................................... 454 (259,001)
Inventory ............................................................ (476,371) (187,846)
Accounts payable and accrued liabilities ............................. 106,968 121,328
------------ ------------
99,371 4,589,960
------------ ------------
Net cash used in operating activities .............................. (3,041,307) (3,337,822)
------------ ------------
Cash flows from investing activities
Oil and gas properties and equipment expenditures ........................ (4,437,637) (2,593,207)
------------ ------------
Net cash used in investing activities ............ (4,437,637) (2,593,207)
------------ ------------
Cash flows from financing activities
Net (repayments) proceeds from advances under notes payable from affiliate 2,159,380 1,740,155
Proceeds from stock subscriptions ......................................... 1,939,610 --
Proceeds from deposits on convertible debentures ......................... -- --
Proceeds from convertible debentures ..................................... -- 4,143,643
Proceeds from issuance of stock, net of issue costs of $208,100 (2003).... 3,619,444 692,505
Proceeds from notes payable ............................................... 628,750 300,000
Payments on notes payable ................................................ -- (594,210)
------------ ------------
Net cash provided by financing activities .......................... 8,347,184 6,282,093
------------ ------------
Effect of exchange rates .................................................... 375,000 (112,000)
------------ ------------
Net (decrease) increase in cash ............................................. 1,243,240 239,064
Cash - beginning of year .................................................... 712,013 182,502
------------ ------------
Cash - end of period ........................................................ $ 1,955,253 $ 421,566
============ ============
See notes to unaudited consolidated financial statements.
6
TETON PETROLEUM COMPANY
Unaudited Consolidated Statements of Cash Flows
Supplemental disclosure of non-cash activity:
During the nine months ended September 30, 2003, the Company had the following
transactions:
o 7,408 shares of stock were issued to a consultant for services valued
at $20,000 provided in 2001 and accrued in accounts payable.
o 73,422 shares of stock and 66,667 warrants exercisable at $6.00 were
issued to a consultant for services provided in 2002 valued at
$200,000 and accrued in accounts payable.
o 3,700 warrants issued with debt and valued at $10,592 were initially
recorded as a discount on the note payable. At September 30, 2003,
$5,672 of the discount had been amortized and recorded as financing
costs.
o 87,500 warrants issued with debt and valued at $69,072 were initially
recorded as a discount on the debentures. At September 30, 2003,
$39,254 of the discount had been amortized and recorded as financing
costs.
o 37,500 warrants issued with debt and valued at $30,500 were initially
recorded as a discount on the debentures. At September 30, 2003,
$17,337 of the discount had been amortized and recorded as financing
costs
o Approximately $1,888,000 of capital expenditures for oil and gas
properties was included in accounts payable at September 30, 2003.
o Dividends of $18,556 were accrued on preferred stock.
During the nine months ended September 30, 2002, the Company had the following
transactions:
o In exchange for the extension of principal payments on four notes
payable, the Company modified expiration dates of certain warrants
previously held by the note holders and issued an additional 10,417
such warrants. The fair value of the modification of the warrants
totaled $46,582 and has been recorded as financing costs.
o A note payable of $250,000 was converted into a convertible debenture
with 83,333 warrants also being issued under the same terms of the
Company's private placement offering of convertible debentures.
o 1,647,881 of warrants issued with convertible debentures valued at
$811,559 were initially recorded as a discount on the debentures. At
September 30, 2002, the full amount of the discount had been amortized
and recorded as financing costs.
o In-the money conversion features on convertible debt valued at
$3,880,035 were recognized as financing costs ($3,746,285) and
consulting expenses ($133,750).
o The Company issued warrants in connection with related party notes
payable of $450,000 and $50,000. The warrants were valued at $156,781
and recorded as financing costs.
o The Company issued $267,500 of convertible debentures with
89,167warrants valued at $14,250 for a total amount of $281,750.
Prepaid consulting services of $70,437 remained at September 30, 2002.
o 33,333 warrants were issued to a consultant for services valued at
$84,532. Prepaid consulting of $80,305 related to future quarters in
2003 and 2004.
o 20,000 shares of stock were issued to a consultant for services valued
at $10,000.
o 41,667 warrants issued with a note payable valued at $150,616 were
initially recorded as a discount on the
See notes to unaudited consolidated financial statements
7
TETON PETROLEUM COMPANY
debentures. At September 30,
2002, $100,011 of the discount had been amortized and recorded as
financing costs.
o $4,661,143 of debentures and accrued interest of $227,075 were
converted into 21,101,929 shares of stock with $466,771 being paid as
a premium at conversion and recorded as financing costs.
o Approximately $515,000 of capital expenditures for oil and gas
properties was included in accounts payable at September 30, 2002.
See notes to unaudited consolidated financial statements
8
Notes to Unaudited Consolidated Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
The September 30, 2003 financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments), which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The unaudited financial
statements as of September 30, 2003, as is customary in the oil and gas
industry, reflect a pro-rata consolidation of the Company's 50% interest in ZAO
Goloil, a Russian closed joint-stock company. The unaudited financial statements
contained herein should be read in conjunction with the financial statements and
notes thereto contained in the Company's financial statements for the year ended
December 31, 2002, as reported in the Company's Form 10-KSB filed March 31,
2003. The results of operations for the period ended September 30, 2003 are not
necessarily indicative of the results for the entire fiscal year.
Foreign Currency Exchange Rates
The conversion of the functional currency of Goloil (a Russian Company) in
rubles to the reporting currency of U.S. dollars is based upon the exchange
rates in effect. The exchange rates in effect at September 30, 2003 and 2002
were 30.61 and 31.64 rubles to the U.S. dollar, respectively. The average rates
in effect during the three and nine-month periods ended September 30, 2003 and
2002, were 30.44 and 31.00, and 31.60 and 31.25 rubles to the U.S. dollar,
respectively.
Earnings Per Share
At the March 19, 2003 meeting, the Company's shareholders approved a reverse 1
for 12 stock split. All share amounts and earnings per share have been adjusted
to reflect the split.
All potential dilutive securities have an antidilutive effect on earnings (loss)
per share and accordingly, basic and dilutive weighted average shares are the
same.
Note 2 - Proportionate Share of Liabilities
The proportionate share of accounts payable and accrued liabilities of
$3,745,121 at September 30, 2003 are obligations of Goloil and not Teton
Petroleum nor have they been guaranteed by Teton Petroleum.
The following notes reflect the Company's 50% pro-rata share of notes payable
advances made of Goloil owed to an affiliate. These advances are also
obligations of Goloil at September 30, 2003 and not Teton Petroleum nor have
they been guaranteed by Teton Petroleum.
Pro-rata share of Goloil notes payable owed to an affiliate. The proceeds were
used to pay certain operating expenses and capital expenditures of Goloil.
These notes provide for interest rates of 8%, with quarterly interest
payments, maturing through April 2004. These notes are secured by
substantially all Goloil assets. The notes payable will be repaid from cash
flow from ZAO Goloil as available, or extended to future periods.
$5,107,805
-----------
Less current portion (5,107,805)
-----------
$ -
===========
Note 3 - Notes Payable
During the second quarter, the Company received proceeds of $478,750 from notes
payable to stockholders. In connection with the notes, 91,200 warrants valued at
$79,664 were issued. At September 30, 2003, $44,920 of the discount had been
amortized and recorded as financing costs. The Company has recorded the value of
these warrants using the Black-Scholes option-pricing model using the following
assumptions: volatility of 73%, a risk-free rate of 3.5%, zero dividend
payments, and a life of one year.
In July 2003, the Company received proceeds of $150,000 from a stockholder. In
connection with the notes, 37,500 warrants valued at $30,506 were issued . At
September 30, 2003, $17,337 of the discount had been amortized and recorded
9
as financing costs. The Company valued the warrants using the Black-Scholes
option-pricing model using the following assumptions: volatility of $73%, a
risk-free rate of 3.5%, zero dividend payments, and a life of one year.
Note 4 - Stockholder's Equity
In March 2003, the stockholder's approved an increase in the amount of
authorized common shares from 100,000,000 to 250,000,000 and also approved
25,000,000 of preferred stock authorized for future issuances.
During the nine months ended September 30, 2003, the Company received $1,091,900
of proceeds (net of costs of $98,100) from the issuance of 437,010 shares of
common stock plus $2,527,538 of proceeds (net of costs of$110,000 from the
issuance of 606,335 shares of convertible preferred stock. The Company received
$1,939,610 during the nine months related to outstanding stock subscriptions
receivable at December 31, 2002.
The Company issued 1,043,204 warrants during the nine months ended September 30,
2003 in connection with the private placements to investors. The Company also
issued 346,165 warrants to entities for their services directly related to
raising capital under private placements during the quarter.
10
Note 5 - Stock Options
At the annual meeting on March 19, 2003, the Company's shareholders approved an
employee stock option plan and authorized 2,083,333 shares of Common Stock for
issuance thereunder. Under the plan, incentive and non-qualified options may be
granted. During the second quarter of 2003, the Company issued 30,000
non-qualified options to outside advisory board members which has been recorded
as compensation expense during the three-months ended June 30, 2003 valued at
$94,701, using the Black-Scholes option-pricing model with the following
assumptions: volatility of $100%, a risk-free rate of 4%, zero dividend
payments, and a life of ten years. The Company also issued 1,448,037 incentive
options to employees, officers and directors valued at $4,571,026 using the
Black-Scholes option-pricing model under the same assumptions described above.
In the third quarter, additional options valued at $308,414 were issued to a
director under the Company Plan.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for stock options issued
to employees, officers and directors under the stock option plan. Had
compensation cost for the Company's options issued to employees, officers and
directors been determined based on the fair value at the grant date for awards
consistent with the provisions of SFAS No. 123, as amended by SFAS No. 148, the
Company's net loss and basic loss per common share would have been changed to
the pro forma amounts indicated below:
For the nine Months Ended
September 30,
-------------------------
2003 2002
------------ ------------
Net loss - as reported ($3,140,679) $ 7,927,782
Less previously recorded compensation expense -- --
Add fair value of employee compensation expense (4,879,440) --
------------ ------------
Net loss per common share - pro forma ($8,020,119) $ 7,927,782
============ ============
Basic loss per common share - as reported $ (0.48) $ (3.17)
============ ============
Basic loss per common share - pro forma $ (1.21) $ (3.17)
============ ============
For the Three Months Ended
September 30,
-------------------------
2003 2002
------------ ------------
Net loss - as reported ($1,477,534) ($2,216,169)
Less previously recorded compensation expense -- --
Add fair value of employee compensation expense (308,414) --
------------ ------------
Net loss per common share - pro forma ($1,785,948) ($2,216,169)
============ ============
Basic loss per common share - as reported ($___.22) ($0.78_)
============ ============
Basic loss per common share - pro forma ($___.26) ($0.78_)
============ ============
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD LOOKING STATEMENTS
With the exception of historical matters, the matters discussed herein are
forward looking statements that involve risks and uncertainties. Forward looking
statements include, but are not limited to statements concerning anticipated
trends in revenues. Our actual results could differ materially from the results
discussed in such forward-looking statements. There is absolutely no assurance
that we will achieve the results expressed or implied in forward-looking
statements.
To the extent that financial information and management's discussion and
analysis or plan of operation contain forward looking statements, such
statements involve risks and uncertainties which could cause Teton's actual
result to differ materially from the anticipated results discussed herein.
Factors that might cause such a difference are set forth in the "Significant
Factors in Company Operations" section of Teton's Registration Statement on Form
10-SB/A filed with the Securities and Exchange Commission ("SEC") on July 11,
2001 (SEC File Number: 000-31170), in Teton's Annual Report on Form 10-KSB filed
with the SEC on March 31, 2003, and in Teton's Registration Statement on form
SB-2 filed, as amended, on July 25, 2003. You are cautioned not to place undue
reliance on the forward-looking statements made herein.
Critical Accounting Policies
We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected
financial results.
In the ordinary course of business, we have made a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of our financial statements in conformity with
accounting principles generally accepted in the United States. Actual results
could differ significantly from those estimates under different assumptions and
conditions. We believe that the following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of
our financial condition and results of operations and require our most
difficult, subjective, and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
Pro-Rata Consolidation.
The financial statements as is customary in the oil and gas industry, reflect a
pro-rata consolidation of the Company's interest in ZAO Goloil (a Russian
Company) through its wholly owned subsidiary Goltech. Management believes this
to be the most meaningful presentation as the Company's only significant asset
is its investment in ZAO Goloil.
Teton's agreement with its partners in Goloil is that together they will receive
all of their investment back plus interest from the profits of Goloil before a
third non-investing shareholder, InvestPetrol, can receive any distributions.
Teton is required to provide 50% of the capital expenditure requirements and is
entitled to a 50% operating interest until repayment of its investment occurs.
Under the pro-rata consolidation method the Company includes its pro-rata share
of the assets (50%), liabilities (50%), revenues (50%) and expenses (50%) of the
accounts of Goloil until repayment (payout) of our current and any future loans
to Goloil occurs. Under the pro-rata consolidation method we include our share
of the assets, liabilities, revenues and expenses of the consolidated accounts
of Goltech. The intercompany balances of Goloil, Goltech and Teton do not fully
eliminate under the pro-rata consolidation method, and the remaining receivable
on Teton's accounts has been included as a component of oil and gas properties,
as this balance will only be repaid through net cash flow generated from oil and
gas properties.
Recoverability of Oil and Gas Properties
The recoverability of our investment in oil and gas properties is reviewed
quarterly and based on the net discounted cash flows to be obtained from our
share of the production of oil and gas by Goloil using assumptions similar to
those in the reserve study prepared by an independent petroleum engineer. The
reserve study is subject to inherent limitations and uncertainties and is
prepared using economics for the Company's 100% interest in Goltech, LLC, which
includes the Company's share of a 35.295% interest in Goloil. If the average
cost of oil production sold, the costs to produce and transport the oil for sale
or further development capital expenditures change adversely to the Company,
such changes could cause a material write down of our investment in such
properties or abandonment altogether of our continued efforts to
12
develop and produce those oil and gas reserves. Management believes that the
economic conditions will remain favorable to the Company for the oil and gas
prices it receives from production and the costs we incur for producing,
transporting and continued license development capital expenditures, and we will
recover all such investments in our oil and gas properties.
Asset Retirement Obligations
Effective January 1, 2003, the Company adopted the provisions of Financial
Accounting Standard No. 143 (SFAS 143) "Accounting for Asset Retirement
Obligations". SFAS 143 requires record the fair value of a liability for an
asset retirement obligation to be recorded in the period in which it is
incurred. Over time this liability is accreted to its expected future value with
accretion being recorded as a charge to operations. The majority of the
Company's asset retirement obligations relate to the projected costs to plug and
abandon oil and gas wells, and closure of access roads on the license area in
Russia.
The Company currently cannot make an assessment of the fair value for it's
proportionate share of asset retirement obligations, and accordingly no
liability for the fair value of these costs has been recorded in the
accompanying financial statements. Currently the fair value of these costs is
not able to be determined as a final plan of abandonment and closure for these
future obligations has not been finalized with the applicable governmental
bodies of the Russian government, and therefore the specific actions required to
satisfy the obligations under the license are not known with a degree of
certainty to enable reasonable estimation, although management believes that any
ultimate liability to plug and abandon wells and close access roads will not be
material to the financial condition or results of operations of the Company.
Oil and Gas Reserves and Supplemental Information.
The information regarding the Company's share of oil and gas reserves, the
changes thereto and the resulting net cash flows are all dependent upon
assumptions used in preparing the Company's annual reserve study. A qualified
independent petroleum engineer in accordance with standards of applicable
regulatory agencies and the Securities and Exchange Commission definitions,
prepares the Company's reserve study. That reserve study is prepared using
economics for the Company's 100% interest in Goltech, LLC, which includes the
Company's 35.295% interest in Goloil. Such reserves and resultant net cash flows
are subject to the inherent limitations in those estimates that include the cost
of oil and gas production, costs related to future capital expenditures, the
price per barrel of oil sales, the Company's share of those reserves, the taxing
structure of the Russian Federation and other factors. Changes in one or all of
these items could cause a material change in the reserve estimates and the net
cash flows from the sale of production generated from those reserves. Management
believes that the current assumptions used in preparation of the reserve study
are reasonable.
Recent Events
During 2003, Teton's Goloil affiliate drilled seven new wells, bringing the
total number of wells that are capable of producing to 21 and completing its
drilling program for the year. Of the 21 wells, one is awaiting completion, one
is awaiting electrification, and two are off-line pending upgrades to the
gathering system. Consequently, as of the end of October, there were 17
producing wells. During the month of October, the Goloil license produced an
average of 6,313 barrels of oil per day, of which 1,578 was net to Teton. Goloil
management expects to complete the above-mentioned pipeline upgrade during
January at which time it also expects to commence the operation of its
co-generation plant, which has been delayed by permitting issues.
In September, OAO NK RussNeft, a Russian independent oil producer became Teton's
partner in Goloil. Russneft succeeds Mediterranean Overseas Trust as operator of
the Goloil license but as before, Teton and Russneft jointly develop the capital
budget for the license and share other key decision-making. The 50% production
payment made by Goloil continues as before, with all production for the payment
being sold into the domestic markets allowing about 90% of the remainder to be
sold into export markets. Teton and Russneft have held extensive discussions
since September and signed, as described below in "Subsequent Events" a
Memorandum of Understanding addressing issues including financing, loan
repayment obligations, the budget process, dividend policy and board
representation.
Results of Operations
Below is a brief analysis of the most important components of our revenues,
operating costs and net income (loss). Please note that since Teton absorbs its
share of the cost of producing the oil paid under the production payment
(included in the cost amounts), per barrel costs are effectively doubled.
13
Three Months Ended September 30, 2003 compared to September 30, 2002
Teton lost $1,477,534 or $0.22 per share during the third quarter, as compared
to $2,216,169 or $0.78 per share in the same period a year ago.
Operating Highlights for the Quarter ended September
30 (in U.S. Dollars, unless otherwise noted)
2003 2002 Change %Change
Sales, Barrels 165,111 137,500 27,611 20.1%
Average Daily Sales, Barrels 1,814 1,511 303 20.1%
Average Selling Price, $/barrel 16.46 16.03 0.43 2.7%
Revenues 2,718,066 2,204,613 513,453 23.3%
Costs of Sales and Expenses, excl. DD&A
Production Costs 618,141 664,241 (46,100) -6.9%
Transportation & Marketing 199,446 189,115 10,332 5.5%
Taxes other than Income taxes 1,486,250 1,172,574 313,677 26.8%
Export Duties 334,789 295,356 39,434 13.4%
------------ ------------ ------------ -----
2,638,626 2,321,285 317,342 13.7%
Results from Goloil Operations, before DD&A ... 79,440 (116,672) 196,112 --
Less General & Administrative Expense, Goloil 261,420 149,091 112,329 75.3%
------------ ------------ ------------ -----
(181,980) (265,763) 83,782 --
Depreciation, Depletion & Amortization, Goloil 274,538 68,419 206,119 301.3%
Operating Income, Goloil (456,518) (334,182) (122,337) --
General & Administrative Expense, Teton 921,761 439,061 482,700 109.9%
Operating Income, Teton (1,378,279) (773,243) (605,037) --
Costs and Expenses during the Quarter ended September 30
(in U.S. $ per barrel)
Controllable Costs 2003 2002 Change %Change
Production Costs 3.74 4.83 (1.09) -22.5%
G&A - Goloil 1.58 1.08 0.50 46.0%
G&A - Teton 5.58 3.19 2.39 74.8%
------ ------ ------ ------
10.91 9.11 1.80 19.8%
Non-Controllable Costs
Transportation & Marketing 1.21 1.38 (0.17) -12.2%
Taxes other than Income Taxes 9.00 8.53 0.47 5.6%
Export Duties 2.03 2.15 (0.12) -5.6%
------ ------ ------ ------
12.24 12.05 0.19 1.5%
The Company had revenues from oil and gas production of $2,718,066 for the three
months ended September 30, 2003 as compared to $2,204,613 for the three months
ended September 30, 2002, a 23% increase. The change in revenues is related to
the increase in sales from 137,500 barrels to 165,111 barrels net to Teton after
a 50% production payment, along with an increase in the average price per barrel
received from $16.03 to $16.46 from 2002 to 2003. The increase in average price
per barrel would have been greater had its Goloil affiliate sold its usual quota
of export oil in September. Because of transportation bottlenecks in the Russian
oil market, prices for crude oil sold domestically are normally much lower than
those for export sales.
14
Oil production costs declined to $618,141 for the three months ended September
30, 2003 from $664,241 for the three months ended September 30, 2002, and the
average cost per barrel of production, excluding taxes, decreased from $4.83 to
$3.74. The decline in production costs reflected a $190,375 decrease in
insurance charges, partly offset by increases of $50,307 in field employee
wages, $38,346 in workover and maintenance expenses, and $33,978 in natural
resource development fees.
Export duties rose from $295,356 to $334,789 due to an increase in the export
tariff rate from $3.68 to $4.69 per exported barrel. The export tariff rate is
based on a complex formula that results in progressively high tariff rates as
the price of exported crude rises. Transportation and marketing expenses rose
modestly year over year, falling slightly on a per barrel basis.
Taxes other than income, which include the Unified Natural Resources & Petroleum
Tax (UNPRT), value added tax (VAT), and property and other miscellaneous taxes
rose from $1,172,574 in the quarter ended September 30, 2002 to $1,486,250
during quarter ended September 30, 2003. The increase reflected both increased
sales volumes and, to a lesser extent, an increase in the average tax paid per
barrel of Russian taxes other than income increased from $8.53 per barrel to
$9.00 per barrel.
Teton's pro-rata share of Goloil's general and administrative expense ("G&A")
rose year over year, rising from $149,091 in the quarter ended September 30,
2002 to $261,420 in the quarter just ended. Factors accounting for the increase
included a $55,000 environmental fee, $35,329 in increased wages, and $38,832
for marketing expenses.
General and administrative (G&A) expenses for Teton itself of $921,761 were
incurred for the three months ended September 30, 2003 as compared to $439,061
for the three months ended September 30, 2002. The increase in G&A is in general
a reflection of Teton's increased employment and activity level, since the
Company's new management team was put in place early this year. Going forward,
Management anticipates a level of G&A consistent with recent quarters in 2003 as
the Company executes its plans to build its oil business in Russia. Major
factors accounting for the year-over-year increase in G&A included the
following: an increase in legal and accounting fees from $38,247 to $191,840; an
increase in marketing expenses (mainly associated with raising investor
awareness and Teton's Series A Convertible Preferred Stock issue, discussed
below) from $73,626 to $199,982; and an increase in payroll from $63,667 to
$172,638. Other factors included increases in insurance (mainly the Directors &
Officers policy), $32,880; office expense (including rent); $47,928, and
engineering, $40,837. Partly offsetting these increases was a decrease in fees
paid to financial consultants from $113,294 to $37,313.
Interest expense for the three months ended September 30, 2003 was $55,034 as
compared to $52,675 for the three months ended September 30, 2002. This interest
expense is principally from the pro-rata consolidation of Teton's ownership
portion of Goloil's loans in which the interest rate declined from 15% to 8%.
Financing charges in 2002 of $1,390,951 arose from the issuance of Convertible
Debt and warrants, with in the money conversion features associated with
convertible debt in 2002. During the quarter just ended the Company incurred
just $61,659 in financing costs associated with three small promissory notes.
15
Nine Months Ended September 30, 2003 compared to September 30, 2002
Teton's loss during the nine months ended September 30, 2003 was $3,140,679 or
$0.46 per share. During the same period last year, the Company net loss was
$7,927,782 or $0.26 per share.
Operating Highlights for the Nine Months ended
September 30 (in U.S. Dollars, unless otherwise noted)
2003 2002 Change %Change
Sales, Barrels 480,688 290,725 189,963 65.3%
Average Daily Sales, Barrels 1,767 1,069 698 65.3%
Average Selling Price, $/barrel 18.94 14.81 4.13 27.9%
Revenues 9,105,338 4,305,274 4,800,064 111.5%
Costs of Sales and Expenses, excl. DD&A
Production Costs 1,456,857 882,202 574,655 65.1%
Transportation & Marketing 801,245 398,389 402,856 101.1%
Taxes other than Income taxes 4,163,956 2,249,313 1,914,644 85.1%
Export Duties 1,492,999 448,338 1,044,661 233.0%
------------ ------------- ------------ ------
7,915,057 3,978,242 3,936,816 99.0%
Results from Goloil Operations, before DD&A 1,190,281 327,033 863,249 264.0%
Less General & Administrative Expense, Goloil 648,725 383,419 265,306 69.2%
------------ ------------- ------------ ------
541,556 (56,387) 597,943 -
Depreciation, Depletion & Amortization, Goloil 662,769 149,806 512,963 342.4%
Operating Income, Goloil (121,213) (206,193) 84,980 -
General & Administrative Expense, Teton 2,675,683 1,950,258 725,425 37.2%
Operating Income, Teton (2,796,896) (2,156,451) (640,445) -
Costs and Expenses during the Nine Months ended September 30
(in U.S. $ per barrel)
Controllable Costs 2003 2002 Change %Change
Production Costs 3.03 3.03 (0.00) -0.1%
G&A - Goloil 1.35 1.32 0.03 2.3%
G&A - Teton 5.57 6.71 (1.14) -17.0%
------ ------ ------ ------
9.95 11.06 (1.11) -10.1%
Non-Controllable Costs
Transportation & Marketing 1.67 1.37 0.30 21.6%
Taxes other than Income Taxes 8.66 7.74 0.93 12.0%
Export Duties 3.11 1.54 1.56 101.4%
------ ------ ------ ------
13.44 10.65 2.79 26.2%
The Company had revenues from oil and gas production of $9,105,338 for the nine
months ended September 30, 2003 as compared to $4,305,274 for the nine months
ended September 30, 2002, an increase of 111%. The change in revenues is related
to the increase in sales from 290,725 barrels to 480,688 barrels, net to Teton
after a 50% production payment and an increase in the average price per barrel
received from $14.81 to $18.94 from 2002 to 2003.
The cost of oil production increased to $1,456,857 for the nine months ended
September 30, 2003 from $882,202, for the nine months ended September 30, 2002
due to the Company's increased production. The average cost per barrel of
production, excluding taxes, remains unchanged at $3.03.
16
Export duties rose sharply, from $448,338 to $1,492,999 as a consequence of both
the increased volumes sold for export and increases in the export tariff rate,
which more than doubled from $2.62 per barrel to $5.22 per exported barrel, year
over year. As discussed above the export tariff increases sharply when export
prices exceed $20 per barrel as they did most of this period.
Transportation and marketing expenses rose from $398,389 for the nine months
ended September 30, 2002 to $801,245 in the current nine months. The increase
was due mainly to the increased sales volume as well as increased transportation
rates, which rose on a per barrel basis from $1.37 per barrel to $1.67 per
barrel, year over year.
Taxes other than income, which include the Unified Natural Resources & Petroleum
Tax (UNPRT), value added tax (VAT), and property and other miscellaneous taxes
rose from $2,249,313 in the nine months ended September 30, 2002 to $4,163,956
during nine months ended September 30, 2003. The increase reflected both
increased sales volumes and an increase in the average tax paid per barrel of
Russian taxes other than income increased from $7.74 per barrel to $8.66 per
barrel This higher average was due principally to an increase in the UNPRT,
which is indexed to the world price of Urals Blend crude and applied to all
production, regardless of where sold.
Teton's pro-rata share of Goloil's general and administrative expense ("G&A")
rose from $383,419 in the nine months ended September 30, 2002 to $ 648,725 in
the nine months just ended. The increase was mainly attributable to increases in
three areas: marketing expenses which rose by $80,179, wages which increased by
$65,674, and environmental fees which increased by $54,063. On a per barrel
basis, Goloil G&A increased from $1.32 to $1.35.
General and administrative expenses for Teton itself of $2,675,683 were incurred
for the nine months ended September 30, 2003 as compared to $1,950,258 for the
nine months ended September 30, 2002. Most of the increase was due to the second
quarter expenses for the Company's AMEX listing, due diligence activities, and
registration application along with the Company's increased staffing and
activity level as described above. Specific factors leading to the increase
included: an increase in accounting and legal expenses from $298,403 to $504,561
(mainly in association with work on Teton's share registration and its offering
of convertible preferred shares); marketing expenses rose $266,630 to $412,539;
payroll rose from $195,661 to $485,110; and travel and entertainment rose from
$195,228 to $349,153.
As discussed in Teton's 10-Q filing for the previous quarter, it is now
anticipated Teton's General and Administrative expenses will exceed the
$2,000,000 budget disclosed in our previously filed 10-KSB for the year ended
December 31, 2002. The Company currently estimates that its 2003 G&A expense
will be $3,400,000.
Interest expense for the nine months ended September 30, 2003 was $178,139 as
compared to $328,938 for the nine months ended September 30, 2002. This interest
expense is principally from the pro-rata consolidation of Teton's ownership
portion of Goloil's loans, in which the interest rate declined from 15% to 8%,
and also included approximately $100,000 of interest on convertible debentures
of Teton that were outstanding in 2002. Financing charges of $5,444,901 in 2002
arose from the issuance of Convertible Debt and warrants, which were recorded at
"fair value" which did not take place in 2003.
Liquidity and Capital Resources
The Company had cash balances of $1,955,253 at September 30, 2003, and a working
capital deficit of $4,764,864. Net of the pro rata consolidation with Goloil,
Teton has a working capital surplus of $1,188,461. Teton is not liable for
Goloil's debts. Cash flow used from operations totaled $3,041,307, with non-cash
adjustments to cash flow from operations for depreciation, depletion and
amortization of $628,458.
The Company used $4,437,637 in investing activities, all of which was all
associated with oil and gas property and equipment expenditures. In particular,
the Company financed its half of a new gas-powered electrical generating plant
in the amount of $1,500,000 which will be operational in the first quarter of
next year. The plant will provide substantial increases in electricity
production at lower cost than the diesel generators that will be replaced. The
plant will be fueled by natural gas from our wells, reducing or eliminating the
need to "flare" the gas. The Company financed the expenditures with existing
cash and sale of Common Stock. The Company continues to expect significant
additional investments to be made in the future to drill and develop additional
producing wells.
The Company had cash provided by financing activities of $8,347,184, which
consisted of $1,939,610 from stock subscriptions received, $3,619,444 from the
sale of Common Stock, net $2,159,380 from advances under notes payable from an
affiliate, and $628,750 in proceeds from promissory notes.
17
The Company anticipates future operations and significant oil and gas property
expenditures will be able to be funded through a combination of note payable
advances from an affiliate, cash raised from raising debt and equity financing
and production of oil and gas reserves.
Although the Company has a $4,746,307 working capital deficit, $5,107,805 of
that deficit relates to our proportionate share of notes payable from
affiliates, which are expected to be extended if current cash flow does not
permit repayment. Additionally, as discussed below in Subsequent Events, we
successfully raised approximately $9.8 million through the placement of
convertible preferred stock in a transaction that closed on November 11. The
Company anticipates it share of capital expenditures through the end of the year
will be approximately $4.4 million, which will be also be funded through the
private placement proceeds along with expected cash flow from Goloil's
operations.
Other Matters:
The Company is currently exploring possibilities to acquire additional petroleum
licenses in Russia. On May 28, the company signed a purchase and sale agreement
to acquire the Anderman/Smith Overseas, Inc. interests in the LLC Chernogorskoye
located in Western Siberia, near its existing operations. The selling price was
not disclosed and the company is pursuing its due diligence for the acquisition.
If consummated this acquisition could potentially increase average daily
production by approximately 4,000 barrels. The company continues to pursue
additional equity and debt financing to fund the acquisition.
Subsequent Events:
On October 7, 2003, Teton announced the signing a binding and broad Memorandum
of Understanding ("MOU") with OAO NK RussNeft ("RussNeft"), its partner in
Goloil. The agreement covers all aspects of the two companies' joint operations
in their Goloil operations in Western Siberia and provides a framework for
future development of additional oil projects in Russia. The agreement confirms
the controlling documents of the joint stock company Goloil, including, but not
limited to, financing, loan repayment obligations, the budget process, dividend
policy and board representation.
On October 23, 2003, Teton announced it had completed the placement of
approximately $7.548 million of its series A convertible preferred stock. Teton
sold approximately 1.735 million unregistered series A convertible preferred
shares at a price of $4.35 per share. The private placement was priced on July
11, 2003, when Teton's common shares were trading at $4.30 per share and was
approximately 51% oversubscribed. The preferred shares carry an 8% dividend,
payable quarterly and are convertible into common stock at a price of $4.35 per
share. If converted within 60 days of the closing, the investors will be
entitled to receive (i) dividends payable in common stock for one year; and (ii)
100,000 Class B Warrants for each $500,000, exercisable at $6.00 per share. A
registration statement, covering the underlying common shares, will be filed
within 90 days of the close of the private placement.
On November 10, 2003, Teton announced that it closed an extended second round of
its privately placed series A convertible preferred stock. The initial offering
of convertible preferred shares, which closed on October 23, 2003, was extended
due to continued high investor demand. In the second round Teton raised
approximately $2.3 million and Teton sold approximately 526,000 restricted
series A convertible preferred shares at a price of $4.35 per share. Including
the second round the total funds raised in the convertible preferred private
placement equal approximately $9.8 million, a 96% oversubscription. The
preferred shares issued in the second round require shareholder approval in
order to be converted into common shares.
ITEM 3. CONTROLS AND PROCEDURES
As of September 30, 2003, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and the Chief Accounting Officer, 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 Chief Executive
Officer and the Chief Accounting Officer, concluded that the Company's
disclosure controls and procedures were effective as of September 30, 2003.
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, 2003.
18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The securities described below represent our securities sold by us for the
period starting July 1, 2003 and ending September 30, 2003 that were not
registered under the Securities Act of 1933, as amended, all of which were
issued by us pursuant to exemptions under the Securities Act. Underwriters were
involved in none of these transactions.
PRIVATE PLACEMENTS OF STOCK AND WARRANTS FOR CASH
During the three month period ending September 30, 2003, Teton issued to eight
accredited investors an aggregate of 606,335 shares of series A convertible
preferred stock for an aggregate purchase price of $2,637,550. This offering and
sale was deemed to be exempt under Rule 506 of Regulation D and Section 4(2) of
the Securities Act. No advertising or general solicitation was employed in
offering the securities. The offerings and sales were made to accredited
investors and transfer was restricted in accordance with the requirements of the
Securities Act of 1933. See Item 5. for more information on the series A
convertible preferred stock and this private placement.
SALES OF DEBT AND WARRANTS FOR CASH
None.
OPTION GRANTS
On August 4, 2003, Teton issued 100,000 options to an outside director pursuant
to the 2003 Stock Option Plan. The options have an exercise price of $3.40 per
share and expire on August 4, 2013. This offering and sale was deemed to be
exempt under Rule 701 and Section 4(2) of the Securities Act of 1933. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to an accredited investor and transfer was
restricted in accordance with the requirements of the Securities Act of 1933.
ISSUANCES OF STOCK FOR SERVICES OR IN SATISFACTION OF OBLIGATIONS
On August 11, 2003, Teton issued 9,656 shares of series A convertible preferred
stock in exchange for investor relation services valued at $42,000. This
offering and sale was deemed to be exempt under Rule 506 of Regulation D and
Section 4(2) of the Securities Act. No advertising or general solicitation was
employed in offering the securities. The offerings and sales were made to an
accredited investor and transfer was restricted in accordance with the
requirements of the Securities Act of 1933.
On August 25, 2003, Teton issued 22,989 warrants exerciseable at $6.00 per share
expiring August 25, 2005. The warrants were issued in connection with a finder's
fee. This offering and sale was deemed to be exempt under Rule 506 of Regulation
D and Section 4(2) of the Securities Act. No advertising or general solicitation
was employed in offering the securities. The offerings and sales were made to an
accredited investor and transfer was restricted in accordance with the
requirements of the Securities Act of 1933.
On August 29, 2003 and September 30, 2003, Teton issued 1,250 shares of common
stock to a consultant in return for various financial advisory activities valued
at $5,062 and $4,875, respectively. This offering and sale was deemed to be
exempt under Rule 506 of Regulation D and Section 4(2) of the Securities Act. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to an accredited investor and transfer was
restricted in accordance with the requirements of the Securities Act of 1933.
On September 5, 2003, Teton issued 2,414 warrants exerciseable at $6.00 per
share expiring September 5, 2005. The warrants were issued in connection with a
finder's fee. This offering and sale was deemed to be exempt under Rule 506 of
Regulation D and Section 4(2) of the Securities Act. No advertising or general
solicitation was employed in offering the securities. The offerings and sales
were made to an accredited investor and transfer was restricted in accordance
with the requirements of the Securities Act of 1933.
19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
On October 23, 2003, Teton announced it had completed the placement of
approximately $7.548 million of its series A convertible preferred stock. Teton
sold approximately 1.735 million unregistered series A convertible preferred
shares at a price of $4.35 per share. The private placement was priced on July
11, 2003, when Teton's common shares were trading at $4.30 per share and was
approximately 51% oversubscribed. The preferred shares carry an 8% dividend,
payable quarterly and are convertible into common stock at a price of $4.35 per
share. If converted within 60 days of the closing, the investors will be
entitled to receive (i) dividends payable in common stock for one year; and (ii)
100,000 Class B Warrants for each $500,000, exercisable at $6.00 per share. A
registration statement, covering the underlying common shares, will be filed
within 90 days of the close of the private placement.
On November 10, 2003, Teton announced that it closed an extended second round of
its privately placed series A convertible preferred stock. The initial offering
of convertible preferred shares, which closed on October 23, 2003, was extended
due to continued high investor demand. In the second round Teton raised
approximately $2.3 million and Teton sold approximately 526,000 restricted
series A convertible preferred shares at a price of $4.35 per share. Including
the second round the total funds raised in the convertible preferred private
placement equal approximately $9.8 million, a 96% over subscription. The
preferred shares issued in the second round require shareholder approval in
order to be converted into common shares.
ITEM 6. EXHIBITS AND REPORTS ON 8-K:
Exhibits
31.1 Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.1 Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
Reports on From 8-K
N/A
20
SIGNATURES
In accordance with the requirements of the Exchange Act of 1933, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TETON PETROLEUM COMPANY
Date: November 14, 2003 By: /s/ Karl F. Arleth
-----------------------------
Karl F. Arleth,
President and CEO
Date: November 14, 2003 By: /s/ John Mahar
-----------------------------
John Mahar,
CFO
21