tidelands8k011108.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report: January 9, 2008
(Date of earliest event reported)

TIDELANDS OIL & GAS CORPORATION
(Exact Name of Registrant as Specified in Charter)

Nevada
0-29613
66-0549380
(State of Other Jurisdiction Incorporation)
(Commission File No.)
(IRS Employer Identification No.)

1862 West Bitters Rd. San Antonio, TX 78248
 (Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number:  (210) 764 - 8642


________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CAR 230.425)
   
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CAR 240.14a-12)
   
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CAR 240.14d-2(b))
   
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CAR 240.13e-4(c))

 
Item 1.01    Entry into a Material Definitive Agreement

Sale of Sonterra Energy Corporation; Repayment of Convertible Debentures

On January 9, 2008, Tidelands Oil & Gas Corporation (the “Company”) entered into and consummated a Stock Purchase Agreement for the sale of all the issued and outstanding stock of the Company’s wholly-owned subsidiary, Sonterra Energy Corporation (“Sonterra”) to Bentley Energy Corporation (“Bentley”).  Bentley’s primary stockholder is Michael Ward, the Company’s former CEO and director, who had a right of first refusal to purchase Sonterra in the event of any sale of Sonterra by the Company.

The total purchase price for the shares of Sonterra is $3 million, with $2,925,000 paid on the January 9, 2008 closing date and the remaining $75,000 due on the earlier of 12 months following the closing, or after all existing litigation involving Sonterra is settled or otherwise resolved.  Pursuant to the terms of the Stock Purchase Agreement, immediately prior to the sale, Sonterra terminated its consulting agreement with Jason Jones and paid Mr. Jones the fee owed thereunder equivalent to 2% of the purchase price of Sonterra.

The foregoing summary of the terms of the Stock Purchase Agreement is qualified in its entirety by reference to the full and complete terms of such agreement, which is attached hereto as Exhibit 10.1.

$2,374,291 of the proceeds from the sale of Sonterra was immediately used to repay all of the outstanding principal under the Company’s convertible debentures, which had a maturity date of January 20, 2008.  In addition, $20,714 will be used to repurchase certain Series A Warrants to purchase 2,071,407 shares of the Company’s common stock.  The Series A Warrants had originally been issued in connection with the convertible debentures.  Series A Warrants to purchase 474,521 shares of Company common stock at $0.935 per share remain outstanding, as the holders of those Series A Warrants did not accept the Company’s offer to purchase such warrants for $0.01 per share.


Item 2.01    Completion of Acquisition of Disposition of Assets

See disclosure above in Item 1.01 regarding the Company’s sale of all of the issued and outstanding stock of its wholly owned subsidiary, Sonterra Energy Corporation.

Item 9.01    Financial Statements and Exhibits
 
(b)            Unaudited Pro Forma Financial Information

Tidelands Oil & Gas Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2006

Tidelands Oil & Gas Corporation Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2007

Tidelands Oil & Gas Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ending September 30, 2007
 
 
TIDELANDS OIL & GAS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANICAL INFORMATION

The Unaudited Pro forma Condensed Consolidated Financial Information have been prepared by management of Tidelands Oil & Gas Corporation in order to present consolidated statements of operations for the year ended December 31, 2006 and the nine months ended September 30, 2007 as if the disposition occurred on the first day of the period presented.  The Unaudited Pro forma Condensed Consolidated Balance Sheet at September 30, 2007 has been prepared as if the disposition occurred on September 30, 2007.

The Unaudited Pro forma Condensed Consolidated Financial Information is not necessarily indicative of the actual results of operations which would have been attained had the disposition been consummated at either of the foregoing dates or which may be attained in the future.  The Unaudited Pro forma Condensed Consolidated Financial Information should be read in conjunction with Tidelands’ Current Report of Form 8-K, in which this presentation is included, dated January 15, 2008, the previously filed Annual Report on Form 10-K filed with the SEC on April 17, 2007 and the Quarterly Report on Form 10-Q filed with SEC on November 19, 2007.
 
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Tidelands Oil & Gas Corporation
  
Unaudited Proforma Condensed Consolidated Statement of Operations
  
For the Year Ended December 31, 2006
  
                     
         
Pro-Forma
          
   
As Presented
    
Adjustments
      
Pro-Forma
  
Revenues
                    
Gas Sales and Pipeline Fees
   $ 2,041,705     $ (1,740,870 ) (1)   $ 300,835  
Construction Services
     180,893       (180,893 ) (1)     -  
Total Revenues
     2,222,598       (1,921,763 )       300,835  
Costs and Expenses
                          
Cost of Sales
     1,173,561       (1,167,602 ) (1)     5,959  
Operating Expenses
     420,200       (343,090 ) (1)     77,110  
Depreciation
     466,241       (126,844 ) (1)     339,397  
Selling, General and Administrative
     6,446,652       (546,133 ) (1)     5,900,519  
Reserve for Litigation
     2,250,000       -         2,250,000  
Total Costs and Expenses
     10,756,654       (2,183,669 )       8,572,985  
Loss from Operations
     (8,534,056 )     261,906         (8,272,150 )
Other Income (Expenses)
                          
Loss on Sales of Assets
     (5,907 )     4,500   (1)     (1,407 )
Miscellaneous Income (Expenses)
     (6,605 )     (258 ) (1)     (6,863 )
Interest Expense
     115,421       (8,366 ) (1)     107,055  
Interest and Dividend Income
     (3,405,778 )     1,629   (1)     (3,404,149 )
Total Other Income (Expenses)
     (3,302,869 )     (2,495 )       (3,305,364 )
                           
Net (Loss)
   $ (11,836,925 )   $ 259,411       $ (11,577,514 )
                           
Net (Loss) per Common Share,
                          
Basic and Diluted
   $ (0.15 )   $ 0.01   (1)   $ (0.14 )
                           
Weighted Average Number of Common Shares Outstanding,
                          
Basic and Diluted
     80,475,359                 80,475,359  
 
Pro-Forma Adjustments for the Year Ended December 31, 2006 presented above include:
    
(1)
To reverse all income and expense items incurred by Sonterra Energy Corporation for the period.
 
 
 
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Tidelands Oil & Gas Corporation
Unaudited Proforma Condensed Consolidated Balance Sheet
September 30, 2007
 
 
 
 
 
 
         
Pro-Forma
          
   
As Presented
    
Adjustments
      
Pro-Forma
  
                     
Assets
Current Assets:
                    
Cash
   $ 818,173     $ 336,852   (2)   $ 1,137,547  
              (17,478 ) (1)        
Accounts and Other Receivables
     422,462       (123,566 ) (1)     298,896  
Inventory
     102,315       (102,315 ) (1)     -  
Prepaid Expenses
     329,608       (23,513 ) (1)     306,095  
Total Current Assets
     1,672,558       69,980         1,742,358  
                           
Property and Equipment, Net
     9,718,681       (1,847,887 ) (1)     7,870,794  
                           
Investment in Affiliate
     210,980       -         210,980  
                           
Other Assets:
                          
Deposits
     252,762       (2,550 ) (1)     325,212  
              75,000   (2)        
Cash - Restricted
     54,120       -         54,120  
Goodwill
     1,158,937       (126,437 ) (3)     673,991  
      -       (358,509 ) (1)     -  
Total Other Assets
     1,465,819       (412,496 )       1,053,323  
Total Assets
   $ 13,068,038     $ (2,190,403 )     $ 10,877,635  
                           
Liabilities and Stockholder's Equity
                           
Current Liabilities:
                          
Current Maturities - Note Payable
   $ 7,410,514     $ (2,374,291 ) (4)   $ 5,036,223  
Accounts Payable and Accrued Expenses
     2,554,299       (211,498 ) (1)     2,342,801  
Customer Deposits
     10,350       (10,350 ) (1)     -  
Reserve for Litigation
     2,250,000       -         2,250,000  
Total Current Liabilities
     12,225,163       (2,596,139 )       9,629,024  
                           
Long-Term Debt
     -       -         -  
                           
Total Liabilities
     12,225,163       (2,596,139 )       9,629,024  
                           
Stockholders' Equity
     842,875       2,522,398   (3)     1,248,611  
              158,022   (3)        
              (20,714 ) (5)        
      -       (2,253,970 ) (1)     -  
Total Stockholders’ Equity
    
842,875
      
405,736
        
1,248,611
  
                           
Total Liabilities and Stockholders' Equity
   $ 13,068,038     $ (2,190,403 )     $ 10,877,635  
 
Pro-forma adjustments for the Balance Sheet at September 30, 2007 presented above include:
(1)
To eliminate all asset, liability and stockholder equity accounts of Sonterra Energy Corporation includedin the September 30, 2007 Balance Sheet presented above.
(2)
To record net cash proceeds of the sale including $336,852 added to current cash available and $75,000 added to deposits for possible utilization regarding ongoing litigation of Sonterra Energy Corporation.
(3)
To record $158,022 gain on sale of Sonterra Energy Corporation; to record elimination of Sonterra Energy Corporation's basis of $2,522,398 on the Consolidated Balance Sheets; to record elimination of goodwill in the amount of $126,437.
(4)
To record payment of $2,374,291 to holders of convertible debentures due January 20, 2008.
(5)
To record purchase of 2,107,215 Series A Warrants with a January 20, 2009 expiration date for $20,714.
 
 
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Tidelands Oil & Gas Corporation
  
Unaudited Proforma Condensed Consolidated Statement of Operations
  
For the Nine Months Ended September 30, 2007
  
                     
         
Pro-Forma
          
   
As Presented
    
Adjustments
      
Pro-Forma
  
Revenues
                    
Gas Sales and Pipeline Fees
   $ 1,739,947     $ (1,598,229 ) (1)   $ 141,718  
Construction Services
     240,619       (240,619 ) (1)     -  
Total Revenues
     1,980,566       (1,838,848 )       141,718  
Costs and Expenses
                          
Cost of Sales
     1,237,620       (1,024,260 ) (1)     213,360  
Operating Expenses
     261,247       (213,706 ) (1)     47,541  
Depreciation
     79,368       (38,204 ) (1)     41,164  
Impairment Loss
     2,605,061       -         2,605,061  
Share-based Compensation - Related Parties
     5,011,763       -         5,011,763  
Selling, General and Administrative
     2,757,058       (306,361 ) (1)     2,450,697  
Total Costs and Expenses
     11,952,117       (1,582,531 )       10,369,586  
Loss from Operations
     (9,971,551 )     (256,317 )       (10,227,868 )
Other Income (Expenses)
                          
Loss on Sales of Assets
     (179,443 )     (113 ) (1)     (179,556 )
Interest Expense
     (774,175 )     1,871   (1)     (772,304 )
Interest and Dividend Income
     10,951       (9,462 ) (1)     1,489  
Gain on Sale of Subsidiary
     156,480       -         156,480  
Miscellaneous Income (Expenses)
     95,523       (2,133 ) (1)     93,390  
Total Other Income (Expenses)
     (690,664 )     (9,837 )       (700,501 )
                           
Net (Loss)
   $ (10,662,215 )   $ (266,154 )     $ (10,928,369 )
                           
Net (Loss) per Common Share,
                          
Basic and Diluted
   $ (0.11 )   $ (0.00 )     $ (0.11 )
                           
Weighted Average Number of Common Shares Outstanding,
                    
Basic and Diluted
     97,199,835                 97,199,835  
 
Pro-forma adjustment for the Nine Months Ended September 30, 2007 include:
    
(1)
To reverse all income and expense items incurred by Sonterra Energy Corporation for the period.
 
 
 
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(d)            Exhibits
 
Exhibit No. Description of Exhibit
10.1  
Stock Purchase Agreement dated as of January 9, 2008
 
 
 
 
 

 
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, hereunto duly authorized.
 
 
TIDELANDS OIL & GAS CORPORATION
  
       
Date: January 15, 2008
By:
/s/ James B. Smith
  
    James B. Smith  
   
President and Chief Executive Officer
  
       
 
 
 
 
 
 
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