UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 March 31, 2004 [ ] 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 000-27563 SARATOGA RESOURCES, INC. __________________________________________________ (Exact name of registrant as specified in charter) Texas 76-0314489 _______________________________ ___________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2304 Hancock Drive, Suite 5, Austin, Texas 78756 __________________________________________ __________ (Address of principal executive offices) (Zip Code) (512) 478-5717 ____________________________________________________ (Registrant'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 past 90 days. 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 June 10, 2005, the Company had outstanding 3,465,292 shares of its common stock, par value $0.001. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] TABLE OF CONTENTS PAGE PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) ....................... 3 Balance Sheet as of March 31, 2004 ..................... 3 Statements of Operations for the quarter ended March 31, 2004 and March 31, 2003 .............. 4 Statements of Cash Flows for the quarter ended March 31, 2004 and March 31, 2003 .............. 5 Notes to Financial Statements .......................... 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 7 ITEM 3 Controls and Procedures ................................ 10 PART II OTHER INFORMATION ITEM 6. Exhibits ............................................... 11 2 PART I ITEM 1. FINANCIAL STATEMENTS Saratoga Resources, Inc. and Subsidiaries BALANCE SHEET March 31, 2004 ASSETS In Thousands Current assets: Cash & equivalents $ 1 Marketable Securities 103 ------------ 104 Equipment, net of accumulated depreciation 1 Total assets $ 105 ============ LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable & accrued liabilities $ 53 Long-term debt, net of current portion -- Due to related parties 240 Stockholders' equity: Common stock 3 Additional paid-in capital 2,490 Accumulated deficit (2,784) Other comprehensive income (loss) 103 ------------ (188) ------------ Total liabilities & stockholders equity $ 105 ============ 3 Saratoga Resources, Inc. and Subsidiaries STATEMENTS OF OPERATIONS For the Quarters Ended March 31, 2004 & 2003 Quarter Ended Quarter Ended March 31, 2004 March 31, 2003 In Thousands In Thousands -------------- -------------- Revenues: Gain from Participation Agreement $ 2 $ 7 -------------- -------------- 2 7 Expenses: General & administrative 8 7 -------------- -------------- 8 7 -------------- -------------- Loss before income taxes (6) -- Net loss (6) -- -------------- -------------- Unrealized holding gains 80 6 -------------- -------------- Comprehensive income $ 74 $ 6 ============== ============== Basic & Diluted Loss Per Share $ (0.002) $ -- Wtd Average number of common shares outstanding 3,465,292 3,465,292 4 Saratoga Resources, Inc. and Subsidiaries STATEMENTS OF CASH FLOWS For the Quarters Ended March 31, 2004 & 2003 Quarter Ended Quarter Ended March 31, 2004 March 31, 2003 In Thousands In Thousands -------------- -------------- Cash provided (used) from operating activities: Net loss $ (6) $ -- Depreciation 1 (3) Increase (decrease) in accrued liabilities 74 (52) -------------- -------------- 69 (55) Cash provided (used) by financing activities: Principal payments long term debt -- -- Due from related parties 80 58 -------------- -------------- 80 58 -------------- -------------- Net (decrease) increase in cash 1 3 Beginning cash -- -- -------------- -------------- Ending Cash $ 1 $ 3 ============== ============== 5 SARATOGA RESOURCES, INC. Notes to Financial Statements March 31, 2004 (Unaudited) NOTE 1. - BASIS OF PRESENTATION The accompanying unaudited financial statements of Saratoga Resources, Inc., a Texas corporation (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for a complete financial presentation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the financial statements and footnotes, which are included as part of the Company's Form 10-KSB for the year ended December 31, 2003. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward-Looking Information This Form 10-QSB quarterly report of Saratoga Resources, Inc. (the "Company") for the three months ended March 31, 2004, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that there are statements that are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement, where the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished. The following are factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to: general economic, financial and business conditions; the Company's ability to minimize expenses; the Company's current dependency on its sole director and executive officer, to continue funding the Company's operations and, to the extent he should ever become unwilling to do so, the Company's ability to obtain additional necessary financing from outside investors and/or bank and mezzanine lenders; and the ability of the Company to generate sufficient revenues to cover operating losses and position it to achieve positive cash flow. Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company believes the information contained in this Form 10-QSB to be accurate as of the date hereof. Changes may occur after that date, and the Company will not update that information except as required by law in the normal course of its public disclosure practices. Additionally, the following discussion regarding the Company's financial condition and results of operations should be read in conjunction with the financial statements and related notes contained in Item 1 of Part 1 of this Form 10-QSB, as well as the financial statements in Item 7 of Part II of the Company's Form 10-KSB for the fiscal year ended December 31, 2003. Critical Accounting Policies The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company believes certain critical accounting policies affect its more significant judgments and estimates used in the preparation of its financial statements. A description of the Company's critical accounting policies is set forth in the Company's Form 10-KSB for the year ended December 31, 2003. As of, and for the quarter ended, March 31, 2004, there have been no material changes or updates to the Company's critical accounting policies. 7 Current Year Operations and Developments During the quarter ended March 31, 2004, the Company continued to operate on a very limited scale with operations consisting solely of the Company's investment in a single oil and gas property. Management continued to undertake efforts to minimize costs during the period. The financial information included in the following discussion has been rounded to thousands. Results of Operations Revenues. Revenues during the three months ended March 31, 2004 totaled $2,000 consisting of a gain from the participation agreement. Revenues from the agreement during 2003 period totaled $7,000. General and Administrative Expenses. General and administrative expense increased from $7,000 during the three months ended March 31, 2003 to $8,000 during the same period in 2004. The company has been incurring accounting and legal expenses during the current period in order to bring its filings current with the Securities and Exchange Commission. Financial Condition Liquidity and Capital Resources. The Company had a cash balance of $1,000 and a working capital balance of $51,000 at March 31, 2004 as compared to a cash balance of $Nil and a working capital deficit of $105,000 at December 31, 2003. The change in cash and working capital balances was attributable to the operating loss incurred during 2004, partially offset by proceeds from borrowings from related parties. The Company, at and for the period ended March 31, 2004, had limited capital resources and limited operating revenues to support its overhead. The Company is, and was, dependent upon its principal shareholder to provide financing to support operations and ongoing cost control measures to minimize negative cash flow. Unless that shareholder continues to provide financing the Company will be required to substantially limit its activities and may be unable to sustain its operations. 8 Long-Term Debt At March 31, 2004, the Company had long-term debt of $240,000 owed to the Company's principal shareholder. Loans from the Company's principal shareholder bear interest at 12.5% and are payable on demand. Capital Expenditures and Commitments During the three months ended March 31, 2004, the Company made no capital expenditures and, at March 31, 2004, the Company had no capital commitment obligations. Off-Balance Sheet Arrangements The Company had no off-balance sheet arrangements or guarantees of third party obligations at March 31, 2004. Inflation The Company believes that inflation has not had a significant impact on its operations since inception. 9 ITEM 3. CONTROLS AND PROCEDURES Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer (the "Certifying Officers"), as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying Officers carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2004. Their evaluation was carried out with the participation of other members of the Company's management. Based upon their evaluation, the Certifying Officers concluded that the Company's disclosure controls and procedures were effective. The Company's internal control over financial reporting is a process designed by, or under the supervision of, the Certifying Officers and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of the Company's financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Company's financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with the authorization of the Company's Board of Directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its financial statements. There has been no change in the Company's internal control over financial reporting that occurred in the quarter ended March 31, 2004, that has materially affected, or is reasonably likely to affect, the Company's internal control over financial reporting. 10 PART II OTHER INFORMATION ITEM 6. EXHIBITS Exhibit Number Description _______ ____________________________________________________________ 31.1 Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1) 31.2 Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1) 32.1 Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1) (1) Filed herewith. 11 Signatures In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) SARATOGA RESOURCES, INC. By: /s/ Thomas Cooke ________________________ Thomas Cooke CEO and President Date: July 8, 2005 12