10-Q 1 blackwater_10q-063008.txt FORM 10-Q =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2008 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ COMMISSION FILE NUMBER 000-51403 BLACKWATER MIDSTREAM CORP. (Name of Small Business Issuer in Its Charter) 26-2590455 NEVADA (Small Business Issuer (State of Incorporation) I.R.S. Employer I.D. Number) 4006 HIGHWAY 44 GARYVILLE, LOUISIANA 70051 (Address of principal executive offices) (zip code) (985) 535-8500 (Issuer's Telephone Number, Including Area Code) 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 reports), and (2) has been subject to such filing requirements for the last 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. LARGE ACCELERATED FILER [ ] ACCELERATED FILER [ ] NON-ACCELERATED FILER [ ] SMALLER REPORTING COMPANY [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 14, 2008, there were 26,948,036 shares of Common Stock, $.001 par value per share, outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Balance Sheets 1 Statements of Operations 2 Statements of Cash Flows 3 NOTES TO FINANCIAL STATEMENTS 5

BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS (STATED IN U.S. DOLLARS) JUNE 30 MARCH 31 2008 2007 UNAUDITED Audited ----------- ----------- ASSETS CURRENT Cash and cash equivalents $ 345,986 $ 3,574 Prepaid expenses and deposits 4,710 1,898 ----------- ----------- $ 350,696 $ 5,472 Investment 1,500,000 -- Other Equipment Office Equipment 92,873 -- Less: Accumulated Depreciation (7,739) -- ----------- ----------- 85,134 -- ----------- ----------- 1,935,830 5,472 =========== =========== LIABILITIES CURRENT Accounts payable and accrued liabilities $ 288,305 $ 7,942 ----------- ----------- STOCKHOLDERS' (DEFICIENCY) EQUITY SHARE CAPITAL Authorized: 200,000,000 common shares with a par value of $0.001 per share 20,000,000 "blank check" preferred shares, issuable in one or more series. Issued: 24,034,500 common shares 24,035 24,035 ADDITIONAL PAID-IN CAPITAL 131,540 131,540 SHARE SUBSCRIPTION RECEIVED 1,864,444 -- DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (372,494) (158,045) ----------- ----------- 1,647,525 (2,470) ----------- ----------- $ 1,935,830 $ 5,472 =========== =========== The accompanying notes are an integral part of these financial statements. 1 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS (STATED IN U.S. DOLLARS) CUMULATIVE PERIOD FROM INCEPTION MARCH 23 QUARTER ENDED 2004 TO JUNE 30 JUNE 30 2008 2007 2008 ------------ ------------ ------------ REVENUE $ -- $ -- $ -- ------------ ------------ ------------ EXPENSES Advertising 211 -- 253 Consulting 30,000 -- 35,500 Filing fees 7,562 -- 11,562 Management salaries 121,027 -- 121,027 General and administrative 2,467 35 4,024 Interest and bank charges 500 43 995 Mineral property acquisition and exploration -- -- 44,503 Office expenses 2,346 -- 2,411 Professional fees 32,476 1,706 132,871 Promotion and entertainment -- -- 954 Depreciation 7,739 -- 7,739 Travel 10,394 -- 15,559 ------------ ------------ ------------ 214,722 1,784 377,398 ------------ ------------ ------------ LOSS BEFORE OTHER INCOME (214,722) (1,784) (377,398) OTHER INCOME 273 294 4,904 ------------ ------------ ------------ NET LOSS FOR THE PERIOD $ (214,449) $ (1,490) $ (372,494) ============ ============ ============ BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00) $ (0.00) ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,034,500 8,011,500 ============ ============ The accompanying notes are an integral part of these financial statements. 2 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (STATED IN U.S. DOLLARS) CUMULATIVE PERIOD FROM INCEPTION MARCH 23 QUARTER ENDED 2004 TO JUNE 30 JUNE 30 2008 2007 2008 ----------- ----------- ----------- CASH FLOW PROVIDED BY (USED IN): OPERATING ACTIVITIES Net loss for the period $ (214,449) (1,490) $ (372,494) Adjustments to reconcile net (loss) to net cash generated (used) in operating activities: Depreciation 7,739 -- 7,739 Changes in operating assets and liabilities: Prepaid expenses (2,812) -- (4,710) Accounts payable and accrued liabilities 280,363 (1,741) 288,305 ----------- ----------- ----------- 70,841 (251) (81,160) ----------- ----------- ----------- CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES Investment (1,500,000) -- (1,500,000) Purchase of office equipment & software (92,873) -- (92,873) ----------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,592,873) -- (1,592,873) ----------- ----------- ----------- 3 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (STATED IN U.S. DOLLARS) (Continued) CASH FLOWS FROM FINANCING ACTIVITIES Issue of capital stock -- -- 155,575 Share subscription received 1,864,444 -- 1,864,444 ----------- ----------- ----------- 1,864,444 2,020,019 ----------- ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE PERIOD 342,412 (251) 345,986 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,574 32,045 -- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 345,986 $ 32,296 $ 345,986 =========== =========== =========== CASH AND CASH EQUIVALENTS ARE COMPRISED OF: Cash $ 349,560 $ 1,871 Short term deposit -- 30,425 ----------- ----------- $ 349,560 $ 32,296 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ -- $ -- $ -- Income taxes paid $ -- $ -- $ -- =========== =========== =========== NON-CASH FINANCING ACTIVITY: Stock dividend $ -- $ -- $ 16,023 =========== =========== =========== The accompanying notes are an integral part of these financial statements.

4 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007 (STATED IN U.S. DOLLARS) 1. BASIS OF PRESENTATION The unaudited financial statements as of June 30, 2008 included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustment (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. It is suggested that these financial statements be read in conjunction with the March 31, 2008 audited financial statements and notes thereto. The results of the operations for the three months ended June 30, 2008 are not indicative of the results that may be expected for the year. 1. OPERATIONS AND GOING CONCERN Organization The Company was incorporated in the State of Nevada, U.S.A., on March 23, 2004. The year end of the Company is March 31. On March 18, 2008, the Company changed its name to Blackwater Midstream Corp. from Laycor Ventures Corp. Development (Exploration) Stage Activities The Company has changed its business objective to become an independent developer of fuel and chemical storage facilities. The Company has been in the exploration stage since its formation and was primarily engaged in the acquisition and exploration of mining claims. Upon location of a commercial minable reserve, the Company expects to actively prepare the site for its extraction and enter a development stage. The company has not yet realized any revenues from its planned operations Going Concern The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net loss of $372,494 for the period from March 23, 2004 (inception) to June 30, 2008, and has no revenue. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its mineral properties. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. 5 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007 (STATED IN U.S. DOLLARS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement. The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below: a) Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents. Cash consists of cash on deposit with a bank. The Company places its cash with a high quality financial institution and, to date, has not experienced losses on any of its balances. b) Exploration Stage Enterprise The Company's financial statements are prepared using the accrual method of accounting and according to the provisions of Statement of Financial Accounting Standards No. 7 ("SFAS 7"), "Accounting and Reporting for Development Stage Enterprises," as it devotes substantially all of its efforts to acquiring and exploring mineral properties. Until such properties are acquired and developed, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the exploration stage c) Mineral Rights The Company capitalizes acquisition and option costs of mineral property rights. The amount capitalized represents fair value at the time the mineral rights were acquired. The accumulated costs of acquisition for properties that are developed to the stage of commercial production will be amortized using the unit-of-production method. d) Exploration Costs Mineral exploration costs are expensed as incurred. d) Investments The cost method is used to account for the Company's investments in limited liability companies where the Company holds an interest of 10% or less and does not have control of the limited liability company 6 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007 (Stated in U.S. Dollars) d) Property and Equipment Property and equipment, comprised of office furniture and computer software, are recorded at cost and amortized using the straight balance method at 33.33% per annum. e) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates. f) Foreign Currency Translation The Company's functional and reporting currency is the U.S. dollar. Transactions in foreign currency are translated into U.S. dollars as follows: i) monetary items at the rate prevailing at the balance sheet date; ii) non-monetary items at the historical exchange rate; iii) revenue and expense at the average rate in effect during the applicable accounting period. g) Income Taxes The Company has adopted guidance established in Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 109 - "Accounting for Income taxes" ("SFAS 109"). This standard requires the use of an asset and liability approach for financial accounting, and reporting on income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. h) Asset Impairment Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate the carrying amount may not be recoverable, pursuant to guidance established in Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived Assets". The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts. If impairment is deemed to exist, the assets will be written down to fair value. 7 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007 (STATED IN U.S. DOLLARS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) i) Asset Retirement Obligations The Company has adopted Statement of Financial Accounting Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations", which requires that an asset retirement obligation ("ARO") associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company's credit-adjusted risk-free interest rate. To date, no significant asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded. j) Basic and Diluted Loss Per Share In accordance with SFAS No. 128 - "Earnings Per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At March 31, 2008, the Company has no stock equivalents that were anti-dilutive and excluded in the earnings per share computation. j) Stock-Based Compensation The Company records stock-based compensation in accordance with SFAS No. 123R, "Share- Based Payments", using the fair value method. The Company also complies with the provisions of FASB Emerging Issues Task Force ("EITF") Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services ("EITF 96-18"). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. 8 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007 (STATED IN U.S. DOLLARS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) l) Environmental Protection and Reclamation Costs The operations of the Company have been, and may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restorations costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not predictable. Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against Statements of Operations as incurred or capitalized and amortized depending upon their future economic benefits. The Company does not currently anticipate any material capital expenditures for environmental control facilities because its property holding is at an early stage of exploration m) Financial Instruments The Company's financial instruments consist of cash and cash equivalents, and accounts payable and accrued liabilities. It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values. n) Comprehensive Income The Company has adopted SFAS No. 130 ("SFAS 130"), "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders' Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. 4. INVESTMENT On June 26, 2008, the Company purchased a 7% membership interest (comprising 70,000 class A units) in Safeland Storage L.L.C., a Louisiana limited liability company for a purchase consideration of $1.500, 000. Concurrently, on June 26, 2008, the Company entered into a Property Purchase Agreement with Safeland Storage L.L.C. and it's wholly owned subsidiary company, Future Energy Investments LLC for the purchase of 435 acres of land in St. John the Baptist Parish, Louisiana, for a purchase price of $20,500,000. The closing of this agreement is 120 days from June 26, 2008. 9 BLACKWATER MIDSTREAM CORP. (FORMERLY LAYCOR VENTURES CORP.) (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007 (STATED IN U.S. DOLLARS) 4. MINERAL CLAIM INTEREST On June 27, 2008, the Company abandoned its mining claim in British Columbia, Canada, with no further costs or obligations to the Company. The decision to abandon the claim was based upon an independent geologist's report indicating that it is unlikely that the claim contains enough volume of mineralized materials to form an economic body of mineralization. The former President held, on behalf of the Company, 100% interest in two mineral claims located in the Rock Creek area of the Greenwood Mining Division, British Columbia, Canada. Exploration activity of one of the mineral claims was suspended due to government regulation. In fiscal year 2005, the Company spent $40,000 on the exploration of the Rock Creek, BC Project. 5. SHARE CAPITAL Authorized: In January 2008, the Company increased the number of authorized capital stock of the corporation from 200,000,000 shares to 220,000,000 shares consisting of 200,000,000 shares of common stock, par value $0.001 and 20,000,000 shares of preferred stock, par value $0.001 Issued: In March 2004, the Company issued 5,000,000 common shares at $0.001 per share, for cash proceeds of $5,000. In April 2005, the Company issued 3,011,500 common shares at $0.05 per share, for cash proceeds of $150,575. In February 2008, the Company issued 16,023,000 common shares as a result of a common stock dividend. This was recorded at par value of $0.001 per share. 6. COMMITMENTS AND CONTRACTUAL OBLIGATIONS In May 2008, the Company entered into employment agreements with the directors and officers of the company for management services. The terms of these agreements range from one to five years with minimum cumulative cash remuneration of $792,500 per annum. Non-cash remuneration includes the granting of 821,036 shares of common stock at $0.01, which vest at the end of six months of employment (issued July 7, 2008) and 2,303,278 common stock options with exercise prices ranging from $2.20 to $3.77, which options shall vest over the term of the employment agreement. On June 9, 2008 the Company entered into a consulting Agreement (the "Agreement") with Lotus Fund Inc. for operational, financial and management services. Per the Agreement, the Company is required to pay $30,000 per month, commencing June 9, 2008 and terminating on June 9, 2009 unless terminated by either party in the event of a material breach by providing 15 days notice. The Agreement is renewable for a further period of one year at the option of the Company. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL CONDITION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. There is no historical financial information about us upon which to base an evaluation of our performance. We are a development stage corporation and have not generated or realized any revenues from our business operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of the property, and possible cost overruns due to the price and cost increases in services. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders. We may seek equity financing to provide capital for further exploration. OVERVIEW Until we changed our business plan in May 2008, we were exploring one property containing two claims relating to mineral rights in British Columbia, Canada. The claims were initially purchased in March 2004 by our former president, Robert Wayne Morgan, for $1,118. However, we suspended exploration pending a resolution of the Ministry of Environment's condemnation plan. No resolution was ever received, and the board of directors abandoned the claims in June 2008. Commencing in May 2008 we hired new management and changed our business plan to become an independent developer of bulk liquid fuel and chemical storage facilities. On June 26, 2008, we purchased a seven percent (7%) interest in Safeland Storage, L.L.C. a Louisiana limited liability company ("Safeland"), represented by 70,000 Class A units for a purchase price of $1.5 million, pursuant to a Membership Interest Purchase Agreement with Safeland. Safeland is an unrelated party. Contemporaneously therewith, on June 26, 2008, we entered into a Purchase and Sale Agreement (the "Purchase and Sale Agreement") for the purchase of 435 acres of land in St. John the Baptist Parish, Louisiana, from Safeland, for a purchase price of $20,500,000.00. The closing of the Purchase and Sale Agreement is to take place within 120 days from June 26, 2008. We are exploring several options to raise money to close the acquisition, but as of the date of the filing of this Quarterly Report on form 10-Q we have not entered into any definitive agreements to raise any such funds. Safeland has completed preliminary engineering and design and obtained state-regulated environmental permits for the facility. We intend to develop the facility in three phases with a resulting total of approximately 10 million barrels of capacity. Phase I is anticipated to be approximately 3.5 million barrels of storage with an expected completion date of the first quarter of 2010. Phase II is expected to add 3.4 million barrels coming on line in the first quarter of 2011, followed by phase III with 3.0 million barrels in the first quarter of 2012. Our proposed site is located in the heart of South Louisiana's petroleum refining and chemical manufacturing corridor that has a refining capacity of approximately 2 million barrels per day. This represents approximately ten percent of the total U.S. refining capacity, including existing world-scale crude oil refineries such as Marathon Garyville (adjacent to the Company's property), Valero St. Charles and Shell Norco (the first two of which are undergoing major capacity expansions). The site is located within 15 miles of the U.S. Strategic Petroleum Reserves at St. James and the LOOP (Louisiana Offshore Oil Production). It is strategically located for connectivity to the Colonial and Plantation pipelines via the Bengal pipeline. The Colonial and Plantation pipelines serve the U.S. as major refined product arteries from the Gulf Coast to the Eastern Seaboard of the U.S., providing approximately 42% of the East Coast refined product demand. The site offers complete intermodal logistics capabilities including deep water access on the 11 Mississippi River for ships and barges and access to major highways (U.S. Highway 61 to the north and the Mississippi River and East Jefferson highways to the south). Two railroads, Kansas City Southern and Canadian National, currently have infrastructure on the property, which is expected to enable the Company to attract rail-served storage positions. In order to effectuate our business plan and build the facilities described above, we will need to raise up to approximately $500 Million. As of August 15, 2008, we have not entered into any definitive agreements to raise any portion of such amount, although we are exploring alternatives to do so. Bulk liquid terminals store a range of products including crude oil, bunker fuel, gasoline, distillate, diesel, jet fuel, chemicals, agricultural products and biodiesel. For example, on the refined product segment of oil, in the United States, approximately 300 million barrels of refined products, blendstock and intermediate products are stored within the refined product value chain in facilities located between refinery processing units and product tank trucks (out of an estimated 700 million total barrels of storage including crude oil and other liquid products). Refiner storage accounts for about 40 percent of total product inventory while refined product pipelines typically containing less than 20 percent. The remainder, accounting for approximately 100 million barrels of inventory, is stored in bulk storage terminals that provide facilities for aggregation, distribution, finished produce blending, imports offloading and pipeline staging. The importance of bulk terminal facilities in the refined product segment supply chain has grown significantly over the past decade as the nation's product supply patterns have become increasingly more complex. The number of operating refineries in the U.S. has declined in the period, resulting in fewer refinery sites that produce higher volumes of more grades of finished and unfinished products. Bulk storage facilities have expanded to accommodate the growth in output from the surviving refineries, the increase in the complexity of finished product blending, and the staging flexibility required by refined product pipelines. In addition, the change in supply patterns, including the increase of Brazilian crude and the decreases in the availability of Venezuelan crude, have driven the need for more storage and blending capacity. These services are essential in order to effect timely and efficient operation of the U.S.'s fuel distribution system. Third-party terminalling businesses are generally independent operations that support many different commercial customers including refiners, blenders, traders and marketers. Income is derived from tank leasing, operational charges associated with blending services and throughput charges for receipt and delivery options. The primary strategic drivers of the business include location and connectivity to logistics infrastructure. Capital investment in terminalling assets is generally supported by long-term (five years or more) contracts with major oil and gas, chemical and agricultural companies. Investments resulting in incremental expansion of existing capacity through tank additions and increased utilization of existing infrastructure such as docks, pipeline origin pumps, truck racks, etc. have been the focus of the industry over the past two decades. Over the past few years, the underlying infrastructure and in some cases the real estate associated with many bulk terminals has been exhausted. As such, industry fee structures have evolved with costs for additional capacity today increasing over historical levels to recoup the total cost for real estate, new tanks and the addition of related terminal infrastructure as well. RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2008 THE FOLLOWING TABLE SETS FORTH, FOR THE PERIODS INDICATED, CERTAIN OPERATING INFORMATION EXPRESSED AS A PERCENTAGE OF REVENUE: 12 THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THREE MONTHS ENDED JUNE 30, 2007 --------------------------- Three months ended June 30, -------------------------- 2008 2007 --------- --------- CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues $ 0 $ 0 --------- --------- Costs and Expenses: Costs of revenues 0 0 Research and development 0 0 Selling, general and administrative 214,722 1,784 --------- --------- Total costs and expenses 214,722 1,784 --------- --------- Operating loss (214,722) (1,784) Interest expense 0 0 Interest and dividend income 273 294 Other income, net 0 Equity in loss of affiliates 0 --------- --------- Net Loss/Gain $(214,449) $ (1,490) ========= ========= REVENUES. We had no revenues for the three months ended June 30, 2008 or the three months ended June 30, 2007. We had no operational activity during the first quarter of fiscal years 2007 or 2008. We currently expect to begin generating revenues in the 1st quarter of 2010. OTHER INCOME. Other income was $273 in the three months ended June 30, 2008 compared to $294 in the three months ended June 30, 2007. Other income for both periods is from interest generated from bank accounts. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were $214,722 in the three months ended June 30, 2008 compared to $1,784 in the three months ended June 30, 2007. This increase of over $212,000 was primarily attributable to Blackwater Midstream hiring members of its management team during May and June 2008 which accounts for approximately 56% of total SG&A Expenses. Other significant expenses during this period were professional fees of over $60,000, accounting for approximately 29% of total SG&A expenses and travel related expenses of over $10,000, accounting for about 5% of total SG&A expenses. 13 NET LOSS Net loss was $214,449 in the three months ended June 30, 2008 compared to $1,490 in the three months ended June 30, 2007. This increase in the period's loss was attributable to start up expenses related to the new line of business and management terms. LIQUIDITY AND CAPITAL RESOURCES We issued 5,000,000 shares of common stock through a Section 4(2) offering in March 2004. This was accounted for as a purchase of shares of common stock. We issued 3,011,500 shares of common stock through our public offering declared effective on February 11, 2005 and raised $150,575. This was accounted for as a purchase of shares of common stock. Beginning on June 4, 2008, the Company entered into certain subscription agreements (collectively, the "Purchase Agreement") with certain investors (the "Investors") for the sale of an aggregate of 2,500,000 shares of its common stock, par value $.001 per share (the "Shares"), at a purchase price of $2.00 per share (the "Offering"). Each Purchase Agreement sets forth certain rights and obligations of the parties, as well as customary representations and warranties by the Company and the Investors. As of August 13, 2008, the Company had consummated transactions resulting in the aggregate sale of 2,092,500 Shares for gross proceeds of $4,185,000. In connection with the Offering, the Company engaged Falcon International Consulting Limited to act as placement agent. Falcon International received a fee of $418,500, or 10% of the gross proceeds of the Offering, in addition to 83,700 Shares. As of June 30, 2008, our total assets were $1,935,830 and our total liabilities were $288,305. We had cash and cash equivalents of $345,986. At June 30, 2008, we had working capital of $362,391 compared to a working capital of $23,055 June 30, 2007. Operating Expenses for the quarter ended June 30, 2008 were $214,722. Our operating expenses consisted primarily of management salaries, professional fees and other administrative expenses. We are currently exploring options to raise additional capital, although as of the date of the filing of this Quarterly Report we have not entered into any definitive agreements for such capital. We can make no assurances that the Company will find additional financing on favorable terms, or at all. We have no long-term debt. OFF BALANCE-SHEET ARRANGEMENTS None. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for smaller reporting companies. ITEM 4. CONTROLS AND PROCEDURES. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES - Our Principal Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report, have concluded that, based on the evaluation of these controls and procedures, that our disclosure controls and procedures were effective. 14 There have been no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 1A. RISK FACTORS There have been no changes to our risk factors from those disclosed in our Annual Report on Form 10-KSB filed on June 15, 2008, for the year ended March 31, 2008. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Unregistered sales of Equity Securities Beginning on June 4, 2008, the Company entered into certain subscription agreements (collectively, the "Purchase Agreement") with certain investors (the "Investors") for the sale of an aggregate of 2,500,000 restricted shares of its common stock, par value $.001 per share (the "Shares"), at a purchase price of $2.00 per share (the "Offering"). Each Purchase Agreement sets forth certain rights and obligations of the parties, as well as customary representations and warranties by the Company and the Investors. As of August 13, 2008, the Company had consummated transactions resulting in the aggregate sale of 2,092,500 Shares for gross proceeds of $4,185,000. The issuance of the Shares was exempt from registration under Regulation S and/or Regulation D and Section 4(2) of the Securities Act of 1933, as amended. In connection with the Offering, the Company engaged Falcon International Consulting Limited to act as placement agent. Falcon International received a fee of $418,500, or 10% of the gross proceeds of the Offering, in addition to 83,700 shares of restricted common stock. Use of Proceeds On February 11, 2005, the Securities and Exchange Commission declared our Form SB-2 registration statement effective (SEC file no. 333-116229). Under the terms of our Form SB-2 registration statement, we offered, without the assistance of an underwriter, up to a total of 4,000,000 shares of common stock on a self-underwritten basis, 2,000,000 shares minimum, 4,000,000 shares maximum. The offering price was $0.05 per share. On April 5, 2005, we completed our public offering by raising $150,575 and sold 3,011,500 shares of our common stock at an offering price of $0.05 per share. From the period February 11, 2005 to June 30, 2008, we spent the following: Consulting Services $ 31,750 Core Drilling $ 5,400 Analyzing Samples $ 5,350 Accounting $ 34,818 Legal $ 24,217 Services $ none -------------------------------------------------------- TOTAL $ 101,535 ======================================================== ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION. (a) On August 12, 2008, by unanimous written consent, the Company's Board of Directors appointed Mr. Mathijs van Houweninge to the position of director of the Company to fill a vacancy. The acceptance by Mr. Mathijs van Howeninge as a director of the Company is effective as of August 12, 2008. Mr. van Houweninge has served as the managing partner of Falcon Capital, LLP ("Falcon"), a Venture Capital firm based in London, since February 2008. In 1990, Mr. Houweninge started iEffective, a Netherlands-based software company specializing in consultancy and software development for the financial industry which was sold in 2000. He also serves on the board of directors of SkyPostal, Inc., Cybercity, Inc. IonIP bv, and a school in Utrecht in the Netherlands. Mr. van Houweninge studied at Utrecht University in the Netherlands during the 1990's in Computer Science, specializing in artificial intelligence. Falcon Capital is an affiliate of Falcon International Consulting Limited, the Company's financial advisor, and holder of 83,700 shares of the Company's common stock. During 2008, the Company paid Falcon International Consulting Limited approximately $418,000 and 83,700 shares of common stock as commissions earned during the Company's $5 million private placement of common stock. As managing partner of Falcon Capital, Mr. van Houweninge can influence how Falcon votes and disposes of its stock in the Company and is considered a Company affiliate. Additionally, as managing partner of Falcon, Mr. van Houweninge has a direct financial interest in Falcon's past and future financial arrangements with the Company. ITEM 6. EXHIBITS. The following documents are included herein: EXHIBIT NO. DOCUMENT DESCRIPTION -------------------------------------------------------------------------------- 4.1 Form of private placement common stock purchase agreement 10.1 Services Agreement with Christopher Wilson dated May 5, 2008 (1) 10.2 Employment Agreement with Michael Suder, dated May 7, 2008 (2) 10.3 Employment Agreement with Dale T. Chatagnier, dated May 14, 2008 (3) 10.4 Placement agent's agreement with Falcon International Consulting Limited, dated May 28, 2008 10.5 Membership Interest Purchase Agreement with Safeland Storage, LLC (4) 10.6 Purchase and Sale Agreement between Safeland Storage LLC, Future Energy Investments and Blackwater Midstream Corp., dated June 25, 2008 (5) 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended. 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended. 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer). 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer). 16 99.1 Press release announcing private placement ------------------------- (1) Previously filed as an exhibit to the Company's Current Report on Form 8-K filed May 6, 2008 (2) Previously filed as an exhibit to the Company's Current Report on Form 8-K filed May 9, 2008 (3) Previously filed as an exhibit to the Company's Current Report on Form 8-K filed May 16, 2008 (4) Previously filed herewith as exhibit 10.6 to the Company's Annual Report on Form 10-KSB filed July 15, 2008. (5) Previously filed herewith as exhibit 10.7 to the Company's Annual Report on Form 10-KSB filed July 15, 2008. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 14th day of August, 2008. BLACKWATER MIDSTREAM CORP. (REGISTRANT) BY: /s/ MICHAEL D. SUDER ---------------------- Michael D. Suder Chief Executive Officer BY: /s/ DONALD ST. PIERRE --------------------- Donald St. Pierre Chief Financial Officer EXHIBIT INDEX EXHIBIT NO. DOCUMENT DESCRIPTION -------------------------------------------------------------------------------- 4.1 Form of private placement common stock purchase agreement 10.1 Services Agreement with Christopher Wilson dated May 5, 2008 (1) 10.2 Employment Agreement with Michael Suder, dated May 7, 2008 (2) 10.3 Employment Agreement with Dale T. Chatagnier, dated May 14, 2008 (3) 10.4 Placement agent's agreement with Falcon International Consulting Limited, dated May 28, 2008 10.5 Membership Interest Purchase Agreement with Safeland Storage, LLC (4) 10.6 Purchase and Sale Agreement between Safeland Storage LLC, Future Energy Investments and Blackwater Midstream Corp., dated June 25, 2008 (5) 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended. 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended. 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer). 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer). 99.1 Press release announcing private placement -------------- (1) Previously filed as an exhibit to the Company's Current Report on Form 8-K filed May 6, 2008 (2) Previously filed as an exhibit to the Company's Current Report on Form 8-K filed May 9, 2008 (3) Previously filed as an exhibit to the Company's Current Report on Form 8-K filed May 16, 2008 (4) Previously filed herewith as exhibit 10.6 to the Company's Annual Report on Form 10-KSB filed July 15, 2008. (5) Previously filed herewith as exhibit 10.7 to the Company's Annual Report on Form 10-KSB filed July 15, 2008.