ENERJEX
RESOURCES, INC.
|
(Exact
name of registrant as specified in its
charter)
|
Nevada
|
88-0422242
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification
No.)
|
27
Corporate Woods, Suite 350
|
||
10975
Grandview Drive
|
||
Overland
Park, Kansas
|
66210
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(913)
754-7754
|
(Registrant’s
telephone number, including area
code)
|
Large
accelerated filer
¨
|
Accelerated
filer
¨
|
Non-accelerated
filer
¨
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
þ
|
Page
|
||
PART
I
|
FINANCIAL
STATEMENTS
|
|
Item
1.
|
Financial
Statements
|
1
|
Condensed
Consolidated Balance Sheets
|
1
|
|
Condensed
Consolidated Statements of Operations
|
2
|
|
Condensed
Consolidated Statements of Cash Flows
|
3
|
|
Notes
to Condensed Consolidated Financial Statements
|
4
|
|
Forward-Looking
Statements
|
11
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
12
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
24
|
Item
4T.
|
Controls
and Procedures
|
25
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
25
|
Item
1A.
|
Risk
Factors
|
25
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
27
|
Item
3.
|
Defaults
Upon Senior Securities
|
28
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
29
|
Item
5.
|
Other
Information
|
29
|
Item
6.
|
Exhibits
|
30
|
SIGNATURES
|
32
|
December 31,
2009
|
March 31,
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 412,370 | $ | 127,585 | ||||
Accounts
receivable
|
363,247 | 462,044 | ||||||
Prepaid
debt issue costs
|
11,325 | 45,929 | ||||||
Deferred
and prepaid expenses
|
190,619 | 263,383 | ||||||
Total
current assets
|
977,561 | 898,941 | ||||||
Fixed
assets
|
382,747 | 365,019 | ||||||
Less:
Accumulated depreciation
|
106,795 | 63,988 | ||||||
Total
fixed assets
|
275,952 | 301,031 | ||||||
Other
assets:
|
||||||||
Oil
and gas properties using full cost accounting:
|
||||||||
Properties
not subject to amortization
|
6,351 | 31,183 | ||||||
Properties
subject to amortization
|
6,077,103 | 6,449,023 | ||||||
Total
other assets
|
6,083,454 | 6,480,206 | ||||||
Total
assets
|
$ | 7,336,967 | $ | 7,680,178 | ||||
Liabilities
and Stockholders' Equity (Deficit)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 865,874 | $ | 1,016,168 | ||||
Accrued
liabilities
|
28,892 | 87,811 | ||||||
Deferred
payments - development
|
337,451 | - | ||||||
Long-term
debt, current
|
353,634 | 1,723,036 | ||||||
Convertible
note payable
|
25,000 | - | ||||||
Derivative
liability
|
647,480 | - | ||||||
Total
current liabilities
|
2,258,331 | 2,827,015 | ||||||
Asset
retirement obligation
|
864,659 | 803,624 | ||||||
Convertible
note payable
|
- | 25,000 | ||||||
Long-term
debt, net of discount of $163,244 and $596,108
|
8,697,368 | 7,818,163 | ||||||
Derivative
liability
|
1,838,226 | - | ||||||
Total
liabilities
|
13,658,584 | 11,473,802 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
Equity (Deficit):
|
||||||||
Preferred
stock, $0.001 par value, 10,000,000
|
||||||||
shares
authorized, no shares issued and outstanding
|
- | - | ||||||
Common
stock, $0.001 par value, 100,000,000 shares authorized
|
||||||||
shares
issued and outstanding – 4,910,660 at December 31, 2009
and
4,443,512 at March 31, 2009
|
4,911 | 4,444 | ||||||
Common
stock owed but not issued
|
186 | - | ||||||
Paid-in
capital
|
9,543,360 | 8,932,906 | ||||||
Retained
(deficit)
|
(15,870,074 | ) | (12,730,974 | ) | ||||
Total
stockholders’ equity (deficit)
|
(6,321,617 | ) | (3,793,624 | ) | ||||
Total
liabilities and stockholders’ equity
|
$ | 7,336,967 | $ | 7,680,178 |
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue
|
||||||||||||||||
Oil
and gas activities
|
$ | 914,545 | $ | 1,184,547 | $ | 3,703,724 | $ | 4,652,289 | ||||||||
Expenses:
|
||||||||||||||||
Direct
operating costs
|
448,684 | 562,693 | 1,313,518 | 2,093,994 | ||||||||||||
Depreciation,
depletion and amortization
|
131,394 | 277,020 | 577,288 | 995,069 | ||||||||||||
Impairment
of oil and gas properties
|
- | 4,777,723 | - | 4,777,723 | ||||||||||||
Professional
fees
|
60,571 | 106,032 | 479,710 | 400,816 | ||||||||||||
Salaries
|
153,022 | 200,547 | 706,011 | 694,973 | ||||||||||||
Administrative
expense
|
334,512 | 238,726 | 789,827 | 1,065,308 | ||||||||||||
Total
expenses
|
1,128,183 | 6,162,741 | 3,866,354 | 10,027,883 | ||||||||||||
Income
(loss) from operations
|
(213,638 | ) | (4,978,194 | ) | (162,630 | ) | (5,375,594 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
expense
|
(189,374 | ) | (205,327 | ) | (542,939 | ) | (743,372 | ) | ||||||||
Loan
interest accretion
|
(153,374 | ) | (119,512 | ) | (432,864 | ) | (2,686,892 | ) | ||||||||
Gain
on liquidation of hedging instrument
|
- | 3,879,050 | - | 3,879,050 | ||||||||||||
Unrealized
gain (loss) on derivative instruments
|
(2,485,706 | ) | - | (2,485,706 | ) | - | ||||||||||
Gain
on repurchase of debentures
|
- | - | 406,500 | - | ||||||||||||
Management
fee revenue
|
23,944 | - | 99,234 | - | ||||||||||||
Loss
on disposal of vehicles
|
(20,695 | ) | - | (20,695 | ) | (4,421 | ) | |||||||||
Total
other income (expense)
|
(2,825,205 | ) | 3,554,211 | (2,976,470 | ) | 444,365 | ||||||||||
Net
income (loss)
|
$ | (3,038,843 | ) | $ | (1,423,983 | ) | $ | (3,139,100 | ) | $ | (4,931,229 | ) | ||||
Weighted
average shares outstanding
|
||||||||||||||||
Common
shares outstanding basic and diluted
|
4,827,137 | 4,443,483 | 4,647,879 | 4,442,467 | ||||||||||||
Net
income (loss) per share - basic
|
$ | (0.63 | ) | $ | (0.32 | ) | $ | (0.68 | ) | $ | (1.11 | ) |
For the Nine Months Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows (used in) / provided from operating activities
|
||||||||
Net
income (loss)
|
$ | (3,139,100 | ) | $ | (4,931,229 | ) | ||
Impairment
of oil and gas properties
|
- | 4,777,723 | ||||||
Depreciation
and depletion
|
599,908 | 1,034,013 | ||||||
Accretion
of asset retirement obligation
|
56,754 | 46,928 | ||||||
Principal
increase on debentures
|
294,250 | - | ||||||
Shares
issued for interest on debentures
|
7,355 | - | ||||||
Share-based
payments issued for compensation and services
|
603,750 | 79,455 | ||||||
Loan
costs and accretion of interest
|
432,864 | 2,832,758 | ||||||
Unrealized
(gain) loss on derivative instruments
|
2,485,706 | - | ||||||
Adjustments
to reconcile net income (loss) to cash
|
||||||||
used
in operating activities:
|
||||||||
Accounts receivable
|
98,797 | (144,860 | ) | |||||
Prepaid
expenses
|
107,368 | (926,058 | ) | |||||
Accounts
payable
|
(150,294 | ) | 623,761 | |||||
Accrued
liabilities
|
(58,919 | ) | (9,821 | ) | ||||
Deferred
payment - development
|
337,451 | (251,951 | ) | |||||
Net
cash (used in) / provided from operating
activities
|
1,675,890 | 3,130,719 | ||||||
Cash
flows (used in) / provided from investing activities
|
||||||||
Purchase
of fixed assets
|
(14,738 | ) | (171,200 | ) | ||||
Loss
on disposal of vehicles
|
(20,695 | ) | - | |||||
Additions
to oil and gas properties
|
(138,360 | ) | (2,346,041 | ) | ||||
Net
cash (used in) / provided from investing
activities
|
(173,793 | ) | (2,517,241 | ) | ||||
Cash
flows (used in) / provided from financing activities
|
||||||||
Notes
payable, net
|
- | (965,000 | ) | |||||
Borrowings
on long-term debt
|
38,480 | 11,274,842 | ||||||
Notes
payable, net
|
(1,255,792 | ) | (11,685,978 | ) | ||||
Net
cash (used in) / provided from financing activities
|
(1,217,312 | ) | (1,376,136 | ) | ||||
Net
increase (decrease) in cash
|
284,785 | (762,658 | ) | |||||
Cash
- beginning
|
127,585 | 951,004 | ||||||
Cash
- ending
|
$ | 412,370 | $ | 188,346 | ||||
Supplemental
disclosures:
|
||||||||
Interest
paid
|
$ | 209,681 | $ | 688,602 | ||||
Income
taxes paid
|
- | - | ||||||
Non-cash
transactions
|
||||||||
Shares
issued for interest on debentures
|
$ | 7,355 | $ | - | ||||
Share-based
payments issued for compensation and services
|
603,750 | 79,455 | ||||||
Asset
retirement obligation
|
4,281 | 776,906 | ||||||
Unrealized
(gain) loss on derivative instruments
|
2,485,706 | - | ||||||
Impairment
of oil and gas properties
|
$ | - | $ | 4,777,723 |
Options
|
Weighted
Ave.
Exercise
Price
|
Warrants
|
Weighted
Ave.
Exercise
Price
|
|||||||||||||
Outstanding
March 31, 2009
|
438,500 | $ | 6.30 | 75,000 | $ | 3.00 | ||||||||||
Cancelled
|
(438,500 | ) | $ | (6.30 | ) | - | - | |||||||||
Exercised
|
- | - | - | - | ||||||||||||
Outstanding
December 31, 2009
|
- | - | 75,000 | $ | 3.00 |
Fair Value Measurement
|
||||||||||||||||
Total Amount
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Crude
oil swaps
|
$ | (2,485,706 | ) | $ | - | $ | (2,485,706 | ) | $ | - |
Asset
retirement obligation, April 1, 2009
|
$ | 803,624 | ||
Liabilities
incurred during the period
|
4,281 | |||
Liabilities
settled during the period
|
- | |||
Accretion
|
56,754 | |||
Asset
retirement obligations, December 31, 2009
|
$ | 864,659 |
Term
|
Contract Volumes
|
Price per Bbl
|
Fair Value
|
||||||||
Crude
oil swap
|
Oct.
2009 – Dec. 2013
|
120,000
Bbls
|
$ | 57.30 | $ | (2,497,608 | ) | ||||
Crude
oil swap
|
Oct.
2009 – Mar. 2011
|
20,250
Bbls
|
$ | 77.05 | $ | 11,902 | |||||
$ | (2,485,706 | ) |
Credit
Facility
|
$ | 6,746,000 | ||
Debentures
|
2,394,250 | |||
Unaccreted
discount
|
(163,244 | ) | ||
Debentures,
net of unaccreted discount
|
2,231,006 | |||
Convertible
note payable
|
25,000 | |||
Vehicle
notes payable
|
73,996 | |||
Total
long-term debt
|
9,076,002 | |||
Less
current portion, long-term debt
|
353,634 | |||
Less
current portion, convertible note payable
|
25,000 | |||
Long-term
debt
|
$ | 8,697,368 |
|
·
|
inability
to attract and obtain additional development
capital;
|
|
·
|
inability
to achieve sufficient future sales levels or other operating
results;
|
|
·
|
inability
to efficiently manage our
operations;
|
|
·
|
potential
default under our secured obligations or material debt
agreements;
|
|
·
|
estimated
quantities and quality of oil and natural gas
reserves;
|
|
·
|
declining
local, national and worldwide economic
conditions;
|
|
·
|
fluctuations
in the price of oil and natural
gas;
|
|
·
|
the
inability of management to effectively implement our strategies and
business plans;
|
|
·
|
approval
of certain parts of our operations by state
regulators;
|
|
·
|
inability
to hire or retain sufficient qualified operating field
personnel;
|
|
·
|
increases
in interest rates or our cost of
borrowing;
|
|
·
|
deterioration
in general or regional (especially Eastern Kansas) economic
conditions;
|
|
·
|
adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations;
|
|
·
|
the
occurrence of natural disasters, unforeseen weather conditions, or other
events or circumstances that could impact our operations or could impact
the operations of companies or contractors we depend upon in our
operations;
|
|
·
|
inability
to acquire mineral leases at a favorable economic value that will allow us
to expand our development efforts;
|
|
·
|
adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations; and
|
|
·
|
changes
in U.S. GAAP or in the legal, regulatory and legislative environments in
the markets in which we operate.
|
Three Months Ended
|
Increase /
|
Nine Months Ended
|
Increase /
|
|||||||||||||||||||||
December 31,
|
(Decrease)
|
December 31,
|
(Decrease)
|
|||||||||||||||||||||
2009
|
2008
|
$
|
2009
|
2008
|
$
|
|||||||||||||||||||
Oil
and natural gas revenues
|
$ | 914,545 | $ | 1,184,547 | $ | (270,002 | ) | $ | 3,703,724 | $ | 4,652,289 | $ | (948,565 | ) |
Three Months Ended
|
Increase /
|
Nine Months Ended
|
Increase /
|
|||||||||||||||||||||
December 31,
|
(Decrease)
|
December 31,
|
(Decrease)
|
|||||||||||||||||||||
2009
|
2008
|
$
|
2009
|
2008
|
$
|
|||||||||||||||||||
Production
expenses:
|
||||||||||||||||||||||||
Direct
operating costs
|
$ | 448,684 | $ | 562,693 | $ | (114,009 | ) | $ | 1,313,518 | $ | 2,093,994 | $ | (780,476 | ) | ||||||||||
Depreciation,
depletion and amortization
|
131,394 | 277,020 | (145,626 | ) | 577,288 | 995,069 | (417,781 | ) | ||||||||||||||||
Impairment
of oil and gas properties
|
- | 4,777,723 | (4,777,723 | ) | - | 4,777,723 | (4,777,723 | ) | ||||||||||||||||
Total
production expenses
|
580,078 | 5,617,436 | (5,037,358 | ) | 1,890,806 | 7,866,786 | (5,975,980 | ) | ||||||||||||||||
General
expenses:
|
||||||||||||||||||||||||
Professional
fees
|
60,571 | 106,032 | (45,461 | ) | 479,710 | 400,816 | 78,894 | |||||||||||||||||
Salaries
|
153,022 | 200,547 | (47,525 | ) | 706,011 | 694,973 | 11,038 | |||||||||||||||||
Administrative
expense
|
334,512 | 238,726 | 95,786 | 789,827 | 1,065,308 | (275,481 | ) | |||||||||||||||||
Total
general expenses
|
548,105 | 545,305 | 2,800 | 1,975,548 | 2,161,097 | (185,549 | ) | |||||||||||||||||
Total
production and general expenses
|
1,128,183 | 6,162,741 | (5,034,558 | ) | 3,866,354 | 10,027,883 | (6,161,529 | ) | ||||||||||||||||
Other
income (expense)
|
||||||||||||||||||||||||
Interest
expense
|
(189,374 | ) | (205,327 | ) | 15,953 | (542,939 | ) | (743,372 | ) | 200,433 | ||||||||||||||
Loan
interest accretion
|
(153,374 | ) | (119,512 | ) | (33,862 | ) | (432,864 | ) | (2,686,892 | ) | 2,254,028 | |||||||||||||
Gain
on liquidation of hedging instrument
|
- | 3,879,050 | (3,879,050 | ) | - | 3,879,050 | (3,879,050 | ) | ||||||||||||||||
Unrealized
gain (loss) on derivative instruments
|
(2,485,706 | ) | - | (2,485,706 | ) | (2,485,706 | ) | - | (2,485,706 | ) | ||||||||||||||
Loan
fee expense
|
||||||||||||||||||||||||
Gain
on repurchase of debentures
|
- | - | 406,500 | - | 406,500 | |||||||||||||||||||
Management
fee revenue
|
23,944 | - | 23,944 | 99,234 | - | 99,234 | ||||||||||||||||||
Loss
on disposal of vehicle
|
(20,695 | ) | - | (20,695 | ) | (20,695 | ) | (4,421 | ) | (16,274 | ) | |||||||||||||
Total
other income (expense)
|
(2,825,205 | ) | 3,554,211 | (6,379,416 | ) | (2,976,470 | ) | 444,365 | 3,420,835 | |||||||||||||||
Net
income (loss)
|
$ | (3,038,843 | ) | $ | (1,423,983 | ) | $ | 1,614,860 | $ | (3,139,100 | ) | (4,931,229 | ) | $ | 1,792,129 |
December
31,
2009
|
March
31,
2009
|
Increase
/ (Decrease)
$
|
||||||||||
Current
Assets
|
$ | 977,561 | $ | 898,941 | 78,620 | |||||||
Current
Liabilities
|
$ | 2,258,331 | $ | 2,827,015 | 568,684 | |||||||
Working
Capital (deficit)
|
$ | (1,280,770 | ) | $ | (1,928,074 | ) | 647,304 |
|
·
|
limiting
our ability to borrow additional amounts for working capital, capital
expenditures, debt service requirements, execution of our business
strategy, or other general corporate
purposes;
|
|
·
|
being
forced to use cash flow to reduce our outstanding balance as a result of
an unfavorable borrowing base
redetermination;
|
|
·
|
limiting
our ability to use operating cash flow in other areas of our business
because we must dedicate a substantial portion of these funds to service
our indebtedness;
|
|
·
|
increasing
our vulnerability to general adverse economic and industry
conditions;
|
|
·
|
placing
us at a competitive disadvantage as compared to our competitors that have
less leverage;
|
|
·
|
limiting
our ability to capitalize on business opportunities and to react to
competitive pressures and changes in government
regulation;
|
|
·
|
limiting
our ability to, or increasing the cost of, refinancing our
indebtedness; and
|
|
·
|
limiting
our ability to enter into marketing, hedging, optimization and trading
transactions by reducing the number of counterparties with whom we can
enter into such transactions as well as the volume of those
transactions.
|
|
·
|
incur
additional indebtedness and provide additional
guarantees;
|
|
·
|
pay
dividends and make other restricted
payments;
|
|
·
|
create
or permit certain liens;
|
|
·
|
use
the proceeds from the sales of our oil and natural gas
properties;
|
|
·
|
use
the proceeds from the unwinding of certain financial
hedges;
|
|
·
|
engage
in certain transactions with affiliates;
and
|
|
·
|
consolidate,
merge, sell or transfer all or substantially all of our assets or the
assets of our subsidiaries.
|
Exhibit No.
|
Description
|
|
2.1
|
Agreement
and Plan of Merger between Millennium Plastics Corporation and Midwest
Energy, Inc. effective August 15, 2006 (incorporated by reference to
Exhibit 2.3 to the Form 8-K filed on August 16, 2006)
|
|
3.1
|
Amended
and Restated Articles of Incorporation, as currently in effect
(incorporated by reference to Exhibit 3.1 to the Form 10-Q filed on August
14, 2008)
|
|
3.2
|
Amended
and Restated Bylaws, as currently in effect (incorporated by reference to
Exhibit 3.3 to the Form SB-2 filed on February 23,
2001)
|
|
4.1
|
Article
VI of Amended and Restated Articles of Incorporation of Millennium
Plastics Corporation (incorporated by reference to Exhibit 1.3 to the Form
8-K filed on December 6, 1999)
|
|
4.2
|
Article
II and Article VIII, Sections 3 & 6 of Amended and Restated Bylaws of
Millennium Plastics Corporation (incorporated by reference to Exhibit 4.1
to the Form SB-2 filed on February 23, 2001)
|
|
4.3
|
Specimen
common stock certificate (incorporated by reference to Exhibit 4.3 to the
Form S-1/A filed on May 27, 2008)
|
|
10.1
|
Credit
Agreement with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated
by reference to Exhibit 10.33 to the Form 10-K filed on July 10,
2008)
|
|
10.2
|
Promissory
Note to Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by
reference to Exhibit 10.34 to the Form 10-K filed on July 10,
2008)
|
|
10.3
|
Amended
and Restated Mortgage, Security Agreement, Financing Statement and
Assignment of Production and Revenues with Texas Capital Bank, N.A. dated
July 3, 2008 (incorporated by reference to Exhibit 10.35 to the Form 10-K
filed on July 10, 2008)
|
|
10.4
|
Security
Agreement with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated
by reference to Exhibit 10.36 to the Form 10-K filed on July 10,
2008)
|
|
10.5
|
Letter
Agreement with Debenture Holders dated July 3, 2008 (incorporated by
reference to Exhibit 10.37 to the Form 10-K filed on July 10,
2008)
|
|
10.6†
|
C.
Stephen Cochennet Employment Agreement dated August 1, 2008 (incorporated
by reference to Exhibit 10.1 to the Form 8-K filed on August 1,
2008)
|
|
10.7†
|
Dierdre
P. Jones Employment Agreement dated August 1, 2008 (incorporated by
reference to Exhibit 10.2 to the Form 8-K filed on August 1,
2008)
|
10.8
|
Letter
Agreement with Debenture Holders dated June 11, 2009 (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed on June 16,
2009)
|
|
10.9
|
Joint
Operating Agreement with Pharyn Resources to explore and develop the
Brownrigg Lease Press Release dated June 1, 2009 (incorporated by
reference to Exhibit 99.1 to the Form 8-K filed on June 5,
2009)
|
|
10.10
|
Amendment
4 to Joint Exploration Agreement effective as of November 6,
2008 between MorMeg, LLC and EnerJex Resources, Inc (incorporated by
reference to Exhibit 10.15 to the Form 10-K filed July 14,
2009)
|
|
10.11
|
Waiver
from Texas Capital Bank, N.A. dated July 14, 2009 (incorporated
by reference to the Exhibit 10.16 to the Form 10-K filed July 14,
2009)
|
|
10.12
|
First
Amendment to Credit Agreement dated August 18, 2009 (incorporated by
reference to the Exhibit 10.12 to the Form 10-Q filed August 18,
2009)
|
|
10.13
|
Debenture
Holder Amendment Letter dated November 16, 2009 (incorporated by reference
to the Exhibit 10.13 to the Form 10-Q filed November 20,
2009)
|
|
10.14
|
Standby
Equity Distribution Agreement with Paladin Capital Management, S.A. dated
December 3, 2009 (incorporated by reference to Exhibit 10.52 to the Form
S-1 filed on December 9, 2009)
|
|
10.15
|
Amendment
5 to Joint Exploration Agreement effective as of December 31, 2009 between
MorMeg LLC and EnerJex Resources, Inc.
|
|
10.16
|
Second
Amendment to Credit Agreement dated January 13, 2010
|
|
10.17
|
Debenture
Holder Amendment Letter dated January 27, 2010
|
|
10.18
|
Waiver
from Texas Capital Bank, N.A. dated February 10,
2009
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
By:
|
/s/ Dierdre P. Jones
|
Dierdre
P. Jones, Chief Financial Officer
|
|
(Principal
Financial Officer)
|
1.
|
Section
D5 of the JEA is hereby amended and restated in its entirety as
follows:
|
A.
|
The
project revenues from whatever source will be used to repay all debt
associated with the project, including without limitation any loan or debt
incurred by EnerJex to obtain funding for the Black Oaks
Project.
|
B.
|
When
the project debt is paid, the working interest of the individual leases
within the Black Oaks block will be assigned to EnerJex in the undivided
interest that the total EnerJex investment bears to the total of that
investment plus the pre-project commencement value stated in paragraph 2
of the Recitals, with the remaining undivided interest (which shall not be
a carried interest) being assigned to MorMeg. The parties agree to
reassign working interest if necessary to redistribute the working
interest according to the above
formula.
|
1.
|
In
the event of a conflict between this Fifth Amendment and the JEA and any
amendments thereto, this Fifth Amendment shall prevail to the extent of
such conflict.
|
2.
|
This
Fifth Amendment shall be of no force and effect upon a material default by
EnerJex under the Credit
Facility.
|
3.
|
Other
than as specifically provided in this Fifth Amendment, all other
provisions of the JEA shall remain in full force and
effect. This Fifth Amendment constituting the sole and entire
agreement between the parties as to the matters contained herein, and
supersedes any and all conversations, letters and other communications
which may have been disseminated by the parties relating to the subject
matter hereof, all of which are void and of no
effect.
|
4.
|
Any
capitalized terms not defined herein have the meaning set forth in the
JEA.
|
5.
|
This
Fifth Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and the
parties hereto may execute this Fifth Amendment by signing any such
counterpart.
|
6.
|
The
parties hereby agree to take or cause to be taken such action, and to do
and perform all such other acts and things as are necessary, advisable or
appropriate to carry out the intent and terms of this Fifth
Amendment
|
MORMEG,
LLC, a Kansas limited liability company
|
||
By:
|
/s/ Mark Haas
|
|
Name:
Mark Haas
|
||
Title:
Managing Member
|
EnerJex
Resources, Inc., a Nevada corporation
|
||
By:
|
|
|
Name:
Steve Cochennet
|
||
Title:
Chief Executive Officer
|
BORROWERS:
|
||
ENERJEX
RESOURCES, INC.
|
||
By:
|
|
|
Steve
Cochennet
|
||
Chief
Executive Officer
|
||
ENERJEX
KANSAS, INC.
|
||
By:
|
|
|
Steve
Cochennet
|
||
Chief
Executive Officer
|
||
–
and –
|
||
DD
ENERGY, INC.
|
||
By:
|
|
|
Steve
Cochennet
|
||
Chief
Executive
Officer
|
ADMINISTATIVE
AGENT, L/C ISSUER
AND
BANKS:
|
||
TEXAS
CAPITAL BANK, N.A.,
|
||
as
Administrative Agent, L/C Issuer and
|
||
a
Bank
|
||
By:
|
/s/ Jonathan Gregory
|
|
Jonathan
Gregory,
|
||
Executive
Vice President
|
West
Coast Opportunity Fund, LLC
|
Frey
Living Trust
|
1202
Coast Village Road
|
5005
SE Williams Way
|
Montecito,
CA 93108
|
Stuart,
FL 34997
|
Enable
Growth Partners LP
|
Enable
Opportunity Partners LP
|
C/o
Enable Capital Management
|
C/o
Enable Capital Management
|
One
Ferry Building, Suite 225
|
One
Ferry Building, Suite 225
|
San
Francisco, CA 94111
|
San
Francisco, CA 94111
|
|
RE:
|
Amendment to
Debentures and Transaction Documents (this “Letter
Agreement”)
|
|
a.
|
The
Buyers hereby waive any existing Event of Default under the Transaction
Documents that does not, directly or indirectly, have a material negative
impact on the Buyers’ security interest in the collateral or other
properties of the Company in which it has a security interest, or have a
material negative impact in the Buyers’ priority of payment under the
Debentures.
|
|
b.
|
The
Company hereby represents and warrants to the Buyers that it has no
knowledge of any material Defaults or Events of Default under the
Transaction Documents.
|
|
c.
|
The
waivers granted by the Buyers in favor of the Company that are contained
in this Agreement shall be null and void in the event the Company has
breached its representation in
Section 4(b).
|
Very
Truly Yours,
|
||
Company:
|
||
ENERJEX
KANSAS, INC.
|
||
By:
|
/s/ Steve Cochennet
|
|
Name:
Steve Cochennet
|
||
Title:
Chief Executive Officer
|
||
Parent:
|
||
ENERJEX
RESOURCES, INC.
|
||
By:
|
/s/ Steve Cochennet
|
|
Name:
Steve Cochennet
|
||
Title:
Chief Executive Officer
|
By:
|
/s/ Atticus Lowe
|
|
Name:
Atticus Lowe
|
||
Title:
Chief Investment Officer
|
By:
|
/s/ Mitch Levine
|
|
Name: Mitch
Levine
|
||
Title:
CEO
|
By:
|
/s/ Mitch Levine
|
|
Name: Mitch
Levine
|
||
Title:
CEO
|
By:
|
/s/ Philip Frey Jr.
|
|
Name:
Philip Frey Jr.
|
||
Title:
Trustee
|
RE:
|
Waiver
Letter (“
Waiver
Letter
”) regarding Credit Agreement dated July 3, 2008 (as amended,
“
Credit
Agreement
”) between Texas Capital Bank, N.A., as a Bank, L/C Issuer
and Administrative Agent (in such latter capacity and together with its
successors and permitted assigns in such capacity, the “
Administrative
Agent
”), the financial institutions from time to time parties
thereto, and EnerJex Resources, Inc., EnerJex Kansas, Inc. and DD Energy,
Inc. (collectively, “
Borrowers
”)
(collectively, the “
Parties
”)
|
Sincerely,
|
||
TEXAS
CAPITAL BANK, N.A.
|
||
By:
|
/s/ Moni Collins
|
|
Moni
Collins
|
||
Assistant
Vice President
|
EnerJex
Resources, Inc.
|
EnerJex
Kansas, Inc.
|
|||
By:
|
/s/ Steve Cochennet
|
By:
|
/s/ Steve Cochennet
|
|
Steve
Cochennet,
|
Steve
Cochennet,
|
|||
Chief
Executive Officer
|
Chief
Executive Officer
|
|||
DD
Energy, Inc.
|
||||
By:
|
/s/ Steve Cochennet
|
|||
Steve
Cochennet,
|
||||
Chief
Executive Officer
|
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of EnerJex Resources,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b.
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c.
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d.
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/ C. Stephen Cochennet
|
|
C.
Stephen Cochennet,
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of EnerJex Resources,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b.
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c.
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d.
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/ Dierdre P. Jones
|
|
Dierdre
P. Jones,
|
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|
1.
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
2.
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/ C. Stephen Cochennet
|
|
C.
Stephen Cochennet,
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
1.
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
2.
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/ Dierdre P. Jones
|
|
Dierdre
P. Jones
|
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|