SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Schedule
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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[x]
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Filed
by the Registrant
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[ ]
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
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[ ]
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only
(as
permitted by Rule 14a - 6(e)(2))
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[x]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Under Rule 14a-12
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Blast
Energy Services, Inc.
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(Name
of Registrant as Specified in its Charter)
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N/A
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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[x]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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[ ]
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the form or schedule and the date of its filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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14550
Torrey Chase Blvd., Suite 330
Houston,
Texas 77014
___________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON May 11, 2006
___________________________
TO
OUR SHAREHOLDERS:
Notice
is
hereby given that the 2006 Annual Meeting of Shareholders of Blast Energy
Services, Inc. (“Blast” or the “Company”) will be held at the Company’s office
location, 14550 Torrey Chase Blvd., Suite 330, Houston, Texas 77014, on
Thursday, May 11, 2006 at 10:00 a.m., local time (the “Meeting”), for the
purposes set forth in this Notice. Proxy Card and a Proxy Statement for the
meeting are enclosed.
The
Meeting is for the purpose of considering and voting upon the following
proposals:
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1.
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The
election of seven (7) directors to our Board of Directors
(“Board”);
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2.
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The
ratification of Malone and Bailey, PC being appointed as the
Independent
Public Accountant;
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3.
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Consideration
of any matters which may properly come before the Meeting, or
any
adjournment thereof.
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Any
action may be taken on any one of the foregoing proposals at the Meeting
on the
date specified above or on any date or dates to which the Meeting may be
adjourned. Only shareholders of record as of the close of business on March
31,
2006 are entitled to notice of and to vote at the Meeting. Our stock transfer
books will remain open. There is printed on the following pages a Proxy
Statement to which your attention is invited. Please read it
carefully.
You
are
requested to complete and sign the enclosed form of Proxy which is solicited
by
the Board and to mail it promptly in the enclosed envelope whether or not
you
plan to attend the meeting.
By
Order
of the Board of Directors
/s/
John A. MacDonald
John
A.
MacDonald
Secretary
Houston,
Texas
April
6,
2006
YOU
ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR
SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN
TO BE
PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. YOUR PROXY MAY BE REVOKED BY YOU IN WRITING
OR IN
PERSON AT ANY TIME PRIOR TO EXERCISE.
Page
1
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON May 11, 2006
INTRODUCTORY
STATEMENT
This
Proxy Statement and accompanying Proxy Card are furnished in connection with
a
solicitation of Proxies by the Board of Blast Energy Services, Inc. for use
at
the 2006 Annual Meeting of Shareholders of the Company, to be held
at:
Blast
Energy Services, Inc.
14550
Torrey Chase Blvd., Suite 330
Houston,
Texas 77014
May
11,
2006, at 10:00 a.m., local time,
for
the
purpose set forth in the accompanying Notice of Annual Meeting of Shareholders.
Shareholders
of record at the close of business on March 31, 2006 will be entitled to
receive
notice of and to vote at the meeting. Each share of common stock is entitled
to
one vote for each matter submitted to a vote at the meeting. Shares represented
by executed and unrevoked Proxies will be voted in accordance with the
specifications made thereon. If the enclosed form of Proxy is executed and
returned, it nevertheless may be revoked by giving another Proxy or by letter
or
fax directed to the Company. Any such revocation must show the shareholder's
name and must be received prior to the commencement of the meeting in order
to
be effective. Additionally, any shareholder attending the meeting in person,
who
wishes to do so, may vote by ballot at the meeting, thereby canceling any
Proxy
previously given. Proxy materials will be mailed to shareholders of record
on or
about April 11, 2006.
Shareholder
of Record: Shares Registered in Your Name
If
on
March 31, 2006 your shares were registered in your name with Blast’s transfer
agent, then you are a shareholder of record. As such, you may vote in person
at
the meeting or by proxy. Whether or not you plan to attend the meeting, you
are
encouraged to fill out and return the enclosed proxy card to ensure your
vote is
counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If
on
March 31, 2006 your shares were held in an account at a brokerage firm, bank,
dealer, or other similar organization, then you are the beneficial owner
of
shares held in “street name” and these proxy materials are required to be
forwarded to you by that organization. The organization holding your account
is
considered the shareholder of record for purposes of voting at the annual
meeting. As a beneficial owner, you have the right to direct your broker
or
other agent on how to vote the shares in your account. You are also invited
to
attend the annual meeting. However, since you are not the shareholder of
record,
you may not vote your shares in person at the meeting unless you request
and
obtain a valid proxy from your broker or other agent.
Multiple
Shareholders Sharing the Same Address
The
SEC
has adopted rules that permit companies and intermediaries e.g., brokers
to
satisfy delivery requirements for proxy statements and annual reports with
respect to two or more shareholders sharing the same address by delivering
a
single proxy statement addressed to those shareholders. This process potentially
means extra convenience for shareholders and cost savings for companies.
Shareholders sharing a same address may either contact the Company, or contact
their broker, as applicable to request single or multiple proxy statement
and
annual report delivery, as desired.
Cost
of Proxy Solicitation
The
cost
of solicitation will be borne by Blast. We will reimburse brokerage firms
and
other custodians, nominees, and fiduciaries for reasonable expenses incurred
by
them in sending proxy material to the beneficial owners of common stock.
In
addition to solicitation by mail, our directors and officers may solicit
Proxies
personally, without additional compensation.
Page
2
VOTING
AND RELATED MATTERS
Quorum
Requirement
A
quorum
of shareholders is necessary to hold a valid meeting. A quorum will be present
if shares representing a majority of the voting power of the outstanding
shares
are represented by shareholders present at the meeting or by proxy. On the
record date, there were approximately 41,804,507 shares of common stock
outstanding and entitled to vote. Your shares will be counted towards the
quorum
only if a valid proxy vote is submitted or you vote at the meeting. Abstentions
and broker non-votes will be counted in determining a quorum.
Proposal
Approval Requirements
Shareholders
may vote “For” each nominee for director or withhold authority from voting for
any nominee. For each of the other matters, shareholders may vote “For”,
“Against” or “Abstain”. Each Proposal must be approved by an affirmative vote of
a majority of the shares present and entitled to vote at the
meeting.
Vote
Counting
Votes
will be counted by the inspector appointed for the meeting, who will separately
count “For”, “Against”, abstentions and broker non-votes. Abstentions and
non-votes will not be counted in favor of any proposal.
Voting
Results
Preliminary
voting results will be announced at the annual meeting. Final voting results
will be published in the Company’s quarterly report on Form 10-QSB subsequent to
the meeting.
ACTION
TO BE TAKEN UNDER THE PROXY
Proxies
in the accompanying form that are properly executed and returned will be
voted
at the Annual Meeting in accordance with the instructions thereon. Any proxy
upon which no instructions have been indicated by the shareholder with respect
to a specific matter will be voted as follows with respect to such matter:
(1)
“FOR” the election of the slate of seven persons named as Management's nominees
for election to our Board of Directors; (2) "FOR" the ratification of
appointment of Malone and Bailey, PC as the Independent Public Accountant;
and
(3) "FOR" the transaction of any other business to come before the Meeting,
in
the discretion of the holders of such Proxies.
SHAREHOLDER
PROPOSALS
According
to Rule l4a-8 under the Securities Exchange Act of 1934, a shareholder may
require that certain proposals suggested by shareholders be voted on at a
shareholders meeting. Information concerning such proposals must be submitted
to
us for inclusion in our proxy statement. Such proposals for inclusion in
our
proxy materials relating to our Annual Meeting planned for 2007 must be received
by us not later than January 31, 2007.
OTHER
BUSINESS
As
of the
date of this Proxy Statement, we have no knowledge of any business, other
than
previously described herein, which should be presented for consideration
at the
meeting. In the event that any other business is presented at the meeting,
we
intend that the persons named in the enclosed Proxy will have authority to
vote
such Proxy in accordance with their best judgment on such business.
NOTICE
TO BANKS, BROKERS/DEALERS, VOTING TRUSTEES, AND THEIR
NOMINEES
Please
advise us, in care of our corporate address, whether any other persons are
the
beneficial owners of the shares of common stock for which Proxies are being
solicited from you, and, if so, the number of copies of the Proxy Statement,
and
other soliciting materials, you wish to receive in order to supply copies
to the
beneficial owners of shares.
RELATED
MATERIALS
The
Company’s Annual Report on Form 10-KSB for the fiscal year ending December 31,
2005 is being mailed to each shareholder receiving this Proxy Statement and
is
also available online at www.sec.gov through the EDGAR database. Any shareholder
who is unable to retrieve a copy of such Annual Report may obtain a copy
from
our website at www.blastenergyservices.com or by request. The Annual Report
is
not to be treated as part of the proxy solicitation material, or as having
been
incorporated by reference.
Page
3
PROPOSAL
ONE
ELECTION
OF DIRECTORS
Our
bylaws currently have set a minimum board of six directors and a maximum
of
eleven. We propose seven nominees for director this year - five nominees
who are
currently serving as directors of the Company and two nominees, Jeffrey
Pendergraft and Scott Johnson who do not currently serve on our Board. Each
director to be elected will hold office until the next annual meeting of
shareholders and until his successor is elected, or until the director’s death,
resignation or removal.
Nominees
for the Board of Directors:
John
R. Block,
71,
has
served as a director for our Company since May 2000. He is currently serving
as
Senior Legislative Advisor for the Washington D.C. based law firm of Olsson,
Frank and Weeda, P.C., a firm that represents the food industry. Prior to
that
he served as President of the Food Distributors International, an organization
that represents the wholesale grocery and foodservice distribution industry.
Also, Mr. Block served as Secretary of Agriculture for the U.S. Department
of
Agriculture from 1981 to 1986. He currently serves as a director of John
Deere
and Co. and Hormel Foods Corp.
Scott
W. Johnson,
54,
has
over twenty five years of investment banking experience in the Energy industry
-
spanning public and private financings; debt, equity, hybrid and structured
securities; corporate restructurings; and acquisitions, divestitures and
stock
mergers. He is currently co-founder and managing director of Houston-based
GasRock Capital, LLC., an energy industry investment firm. He co-founded
and
became a Managing Director of Weisser, Johnson & Co in 1991 and prior to
that he served as Vice President for Goldman, Sachs & Co. Johnson received
his M.B.A. from Stanford University and his AB from Harvard College.
Roger
P. (Pat) Herbert,
59,
has
served as a Blast director since June 2005. He has worked in the energy services
business for nearly 30 years. He is currently serving as a director and CEO
for
JDR Cable Systems (Holdings) Ltd - a position he has held since 2002. Prior
to
that, he served as COO of Petris Technology for a year and before that he
was
the Chairman & CEO of GeoNet Energy Services, a company he founded in
2000. Prior to 2000 Mr. Herbert had worked with International Energy
Services, Baker Hughes and Smith International. Herbert received his M.B.A.
from
Pepperdine University, his B.S.E. from California State University-Northridge
and is a registered professional engineer in the State of Texas.
Joseph
J. Penbera, Ph.D.,
58,
co-founded our Company and has served as a director since its inception in
April
1999. Since 1985, he has been a Professor of Business at California State
University, Fresno, where he previously served as Dean of the Craig School
of
Business, and was appointed a Senior Fulbright Scholar in 2005. Dr. Penbera
was
Senior Economist at Westamerica Bank, Regency Bancorp and California Bank
from
1999 to 2002. Dr. Penbera is on the Board of Gottschalks, Inc., a publicly
traded regional department store and Rug Doctor, Inc. Dr. Penbera received
his
Ph.D. from American University, his M.P.A. from Bernard Baruch School and
his
B.A. from Rutgers University.
Jeffrey
R. Pendergraft,
57,
currently serves as Chairman and CEO of HNNG Development, a company focused
on
commercialization of low BTU natural gas. In addition, he is the founder
and
principal of the Wind Rose Group, an energy investment and advisory firm.
His
broad background includes private investments, financings, mergers and
acquisitions. He has been recognized for achievements in change management,
corporate governance, finance, and legal affairs. Prior to forming Wind Rose
in
2001, he was EVP and Chief Administrative Officer at Lyondell Chemical and
prior
to that he served as staff counsel for ARCO. Mr. Pendergraft received his
Bachelor of Arts from Stanford University, and his Juris Doctor from Stanford
University School of Law.
Frederick
R. Ruiz,
62, has
served as a Blast director since its inception in April 1999. He co-founded
Ruiz
Food Products, Inc., a privately held frozen food company in 1964 and has
served
as Chairman of the Board since 1998. Mr. Ruiz currently serves as a
director of McClatchy Newspapers, Inc. and Gottschalks, Inc., each of which
are
publicly traded, the California Chamber of Commerce and the Hispanic College
Fund. During 2004, Mr. Ruiz was named to the California University System
Board of Regents.
O.
James Woodward III,
70, has
served as a director of Blast since its inception in April 1999 and was elected
Chairman of the Board in May 2004. From 1992 to 1999, Mr. Woodward was an
attorney in private practice in Fresno, California. From 1995 to 2000, he
was
Chairman of MJ Construction Co., a Fresno, California based
Page
4
construction
company, and from 2001 to 2003, he served as a consultant in Fresno, California.
Mr. Woodward has been in private practice as an attorney since 2003 and is
currently Of Counsel with Baker, Manock and Jensen. He currently serves on
the
board of directors of Gottschalks, Inc. Mr. Woodward received his M.B.A.
from
Stanford Graduate School of Business and his J.D. from the University of
California, Berkeley Law School.
Recommendation
and Vote
It
is the
intention of the persons named in the accompanying form of Proxy to vote
such
Proxy “FOR” the election of each person listed above, unless shareholders
specifically indicate in their Proxies that they desire to withhold from
voting
for the electing of such certain Directors to office. Our Board does not
contemplate that any nominee will be unable to serve as a Director for any
reason, but if that should occur prior to the meeting, the Board reserves
the
right to substitute another person(s) of their choice as nominee(s). Each
nominee must be approved by a plurality of votes cast at the Annual Meeting.
A
vote to “withhold authority” for a particular nominee shall have no legal
effect. Our Management recommends that shareholders vote “FOR” the election of
the nominees.
PROPOSAL
TWO
RATIFICATION
OF THE APPOINTMENT OF THE INDEPENDENT PUBLIC ACCOUNTANT
The
Audit
Committee and the Board have appointed and request you to vote “FOR” the
ratification of the appointment by the Board of Malone and Bailey, PC as
the
Independent Public Accountant for the Company.
Representatives
from Malone and Bailey, PC are not required to be present at the shareholders
meeting, but have been invited and are encouraged to attend. They will have
an
opportunity to make statements if they attend and are encouraged to respond
to
any appropriate questions from shareholders attending the meeting.
We
do not
anticipate having, nor have had during the two most recent fiscal years or
any
subsequent interim period any disagreements with accountants on matters of
accounting, financial disclosure, matter of accounting principles or practices,
or auditing scope or procedure; nor has any independent public accountant,
currently or in past recent years, resigned or declined to stand for
re-election.
The
financial statements audited by the independent public accountant for the
past
two years do not contain an adverse opinion or disclaimer of opinion and
they
were not modified as to uncertainty, audit scope or accounting
principles.
Independent
Public Accountant Fees and Services
Audit
Fees: The
aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of annual financial
statements and review of financial statements or services normally provided
in
connection with statutory and regulatory filings for the fiscal years ending
December 31, 2005 and 2004 were: $53,535 and $95,970, respectively.
Audit-Related
Fees, Tax Fees, and All Other Fees: No fees
were
billed in each of the last two fiscal years for non-audit professional services
provided by the independent public accountant.
Audit
Committee: The
registrant's Audit Committee, or officers performing such functions, has
approved the independent public accountant's performance of services for
the
audit of annual financial statements and review of financial statements or
services normally provided by the accountant in connection with statutory
and
regulatory filings or engagements for the fiscal year ending December 31,
2005.
Recommendation
and Vote
It
is the
intention of the persons named in the accompanying form of Proxy to vote
such
Proxy “FOR” ratification of Malone and Bailey, PC being appointed as the
Independent Public Accountant for the Company, unless shareholders specifically
indicate in their Proxies that they desire to vote against the proposal or
abstain from voting. Approval requires an affirmative vote of a majority
of the
shares present and entitled to vote at the Annual Meeting. Our Management
recommends that shareholders vote “FOR” this proposal.
Page
5
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents certain information regarding the beneficial ownership
of our common stock as of February 28, 2006 by (i) each person who is known
by us to own beneficially more than 5% of the outstanding shares of our common
stock, (ii) each of our directors or nominees for director, (iii) our
Named Executive Officers, and (iv) all directors and executive officers as
a group. Each of the persons listed in the table has sole voting and investment
power with respect to the shares listed.
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Name
and Address of Beneficial Owner
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Amount
and Nature of Beneficial Owner
|
Percentage
of Class (1)
|
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Berg McAfee Companies
(2)
<?xml:namespace
prefix =
st1 ns = "urn:schemas-microsoft-com:office:smarttags" />100600 N. De
Anza Blvd., #250
Cupertino,
California
95014
|
9,882,659(3)
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23.0%
|
|
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Alberta Energy
Partners
(15)
43
Brookgreen Circle
North
Montgomery,
Texas
77356
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4,000,000(14)
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9.3%
|
|
|
|
|
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Eric McAfee
100600
N. De Anza Blvd.,
#250
Cupertino,
California
95014
|
1,142,307(4)(5)
|
2.7%
|
|
|
|
|
|
David M. Adams
President
&
Co-CEO
|
762,099(6)
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1.8%
|
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John O’Keefe
Co-CEO
&
CFO
|
778,334(7)
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1.8%
|
|
|
|
|
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John R. Block
Director
|
234,000(8)
|
*
|
|
|
|
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Roger P. (Pat)
Herbert
Director
|
10,000(9)
|
*
|
|
|
|
|
|
Scott W.
Johnson
Director
(Nominee)
|
0
|
*
|
|
|
|
|
|
Joseph J.
Penbera
Director
|
1,088,452(10)
|
2.5%
|
|
|
|
|
|
Jeffrey R.
Pendergraft
Director
(Nominee)
|
5,000
|
*
|
|
|
|
|
|
Frederick R.
Ruiz
Director
|
493,382(11)
|
1.1%
|
|
|
|
|
|
O. James Woodward
III
Director
|
234,000(12)
|
*
|
|
|
|
|
|
Total Shares of
5% or more
Beneficial Ownership
|
18,630,234(13)
|
43.4%
|
|
|
|
|
|
Total Shares of
Officers and
Directors as a group
|
3,605,267
|
8.4%
|
Page
6
Notes:
* Less
than
1%
|
(1)
|
Each
beneficial owner’s percentage ownership is based upon 42,954,507 shares of
common stock outstanding as of February 28, 2006 and assumes the
exercise
or conversion of all
options, warrants and other convertible securities held by such
person and
that are exercisable or convertible within 60 days after February
28,
2006.
|
|
(2)
|
Berg
McAfee Companies is controlled by Clyde Berg and Eric McAfee.
Mr. McAfee is our former
Vice-Chairman.
|
|
(3)
|
Includes
520,014 shares issuable upon exercise of warrants and 50,000 shares
issuable upon conversion of convertible debt.
|
|
(4)
|
Includes
50,000 shares issuable upon exercise of warrants and 50,000 shares
issuable upon conversion of convertible debt.
|
|
(5)
|
Does
not include shares beneficially owned by Berg McAfee.
|
|
(6)
|
Includes
463,333 shares issuable upon exercise of options.
|
|
(7)
|
Includes
440,000 shares issuable upon exercise of options.
|
|
(8)
|
Includes
92,000 shares issuable upon exercise of options.
|
|
(9)
|
10,000
shares issuable upon exercise of options.
|
|
(10)
|
Includes
92,000 shares issuable upon exercise of options.
|
|
(11)
|
Includes
92,000 shares issuable upon exercise of options.
|
|
(12)
|
Includes
114,000 shares issuable upon exercise of options.
|
|
(13)
|
Includes
shares beneficially owned by Berg McAfee and Eric McAfee.
|
|
(14)
|
Includes
1,000,000 shares issuable upon exercise of
warrants
|
|
(15)
|
Alberta
Energy Partners is controlled by Mark McAfee and Mark Alley, who
have
investment decision and voting powes. Neither Mark McAfee nor Alberta
Energy Partners are related to or affiliated with Eric McAfee or
the Berg
McAfee Companies.
|
HOLDERS
As
of
February 28, 2006, we had 42,954,507 shares of common stock issued and
outstanding held by approximately 420 shareholders of record, including
1,150,000 shares allocated but not yet issued from our approved class action
settlement.
Page
7
EXECUTIVE
OFFICERS
The
Executive Officers of the Company are elected by the Board of Directors.
The
names of our executive officers and certain additional information with respect
to each of them are set forth below.
|
Name
|
Age
|
Current
Position
|
|
David
M. Adams
|
54
|
President
& Co-CEO
|
|
John
O’Keefe
|
57
|
CFO
& Co-CEO
|
David
M. Adams
has
served as our President and COO since January 2004, and became Co-Chief
Executive Officer in May 2004. From 1989 to 2000, Mr. Adams served as General
Manager of Baker Hughes, E&P Solutions, and from 2001 to 2004 he served as
President and General Manager of Subsea Mudlift Drilling Co., LLC, a
subsidiary of
Hydril
Co., LP. Mr. Adams has a degree in petroleum engineering from the University
of
Texas and is a registered Professional Engineer.
John
O’Keefe
has
served as our Executive Vice President and CFO since January 2004 and became
Co-Chief Executive Officer in May 2004. From 1999 to 2000, Mr. O’Keefe served as
Vice President of Investor Relations of Santa Fe Snyder, and from 2000 to
2003,
he served as Executive Vice President and CFO of Ivanhoe Energy. Mr. O’Keefe has
a B.A. in Business from the University of Portsmouth, is a Chartered Accountant
and graduated from the Program for Management Development (PMD) from the
Harvard
Graduate School of Business in 1985 under sponsorship of Sun Oil
Company.
INFORMATION
ABOUT THE BOARD AND ITS COMMITTEES
The
business of the Company is managed under the direction of the Board. The
directors will serve in such capacity until the next annual meeting of our
shareholders and until their successors have been elected and qualified.
The
directors frequently discuss and informally review significant developments
affecting the Company and act on matters requiring Board approval. The Board
also holds special meetings and acts by written consent. The Board held seven
formal meetings during 2005. Each incumbent director attended at least 75%
of
the aggregate total Board meetings held during the period for which he was
a
director and the total number of Board committee meetings held on which the
director served.
The
officers serve at the discretion of our directors. There are no familial
relationships among our officers and directors, nor are there any arrangements
or understanding between any of our directors or officers or any other person
pursuant to which any officer or director was or is to be selected as an
officer
or director.
No
non-compete or non-disclosure agreements exist between our management and
any
prior or current employer.
Our
directors are aware of no petitions or receivership actions having been filed
or
court appointed as to our business activities, officers, directors, or key
personnel.
We
have
not, nor anticipate, making loans to any of our officers, directors, key
personnel, 10% shareholders, relatives thereof, or controllable entities.
None
of our officers, directors, key personnel, or 10% shareholders has guaranteed
or
co-signed any bank debt, obligation, or any other indebtedness pertaining
to us.
Audit
Committee
Our
Board
has established an Audit Committee. It consists of Dr. Penbera, who serves
as
Chairman, Messrs Block and Woodward. The Committee meets with management
and our
independent public accountants to determine the adequacy of internal controls
and other financial reporting matters. In addition, the committee provides
an
avenue for communication between the independent auditors, financial management
and the Board. The Board has determined that for the purpose of and pursuant
to
the instructions of item 401(e) of regulation S-B titled “Audit Committee
Financial Expert”, Joseph
J.
Penbera, PhD possesses the attributes of an audit committee financial expert.
He
was also approved as a financial expert for Gottschalks, Inc., a New York
Stock
Exchange company where he serves on the Board. All members of the Audit
Committee are independent as defined by item 401(e)(ii) of regulation S-B.
The
committee receives compensation for Board service only and are not otherwise
an
affiliated person. This committee met six times in 2005 and has met three
times
thus far in 2006. The charter for the Audit Committee is attached hereto
as
Exhibit A and is also available at www.blastenergyservices.com.
Page
8
Compensation
Committee
Our
Board
has established a Compensation Committee. It consists of Mr. Herbert who
serves
as Chairman, Messrs Block and Ruiz. The purpose of the Committee is to carry
out
the Boards’ overall responsibility relating to the compensation of the Company’s
senior executives. This committee met three times in 2005 and has met once
thus
far in 2006. The charter for the Compensation Committee is available at
www.blastenergyservices.com.
Nominating
Committee
Our
Board
has also established a Nominating and Corporate Governance Committee. It
consists of Mr. Woodward, who serves as Chairman, Dr. Penbera and Mr. Ruiz.
Each
of these members is independent under SEC rules. The Nominating and Corporate
Governance Committee assists the Board in identifying qualified individuals
to
become Board members, including a review of any candidates recommended by
shareholders, in determining the composition of the Board and its committees,
in
monitoring a process to assess Board effectiveness, in developing and
implementing the Company’s corporate governance guidelines, and in otherwise
taking a leadership role in shaping the corporate governance of the Company.
This committee met twice in 2005 and has met once thus far in 2006. The charter
for the Nominating Committee is available at www.blastenergyservices.com.
EXECUTIVE
COMPENSATION
Other
than Mr. Adams, and Mr. O’Keefe, we have no other person that is a
named executive officer as of December 31, 2005.
Compensation
Summary
The
following table provides certain summary information concerning compensation
for
the last three fiscal years earned by or paid to our CEOs and each of our
other
executive officers who had compensation in excess of $100,000 during the
last
fiscal year (collectively the “Named Executive Officers”).
SUMMARY
COMPENSATION TABLE
|
Annual
Compensation
|
Award(s)
|
Payouts
|
||||||
|
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation
($)
|
Restricted
Stock Award(s)
($)
|
Securities
Underlying Options/SARs
(#)
|
LTIP
Payouts
($)
|
All
Other Compensation
($)
|
|
David
M. Adams
|
2005
|
200,000(1)
|
70,000(3)
|
0
|
0
|
400,000
|
0
|
0
|
|
President,
Co-CEO
|
2004
|
181,146(2)
|
50,000
|
0
|
0
|
500,000
|
0
|
0
|
|
2003
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
John
O’Keefe
|
2005
|
200,000(1)
|
70,000(3)
|
0
|
0
|
400,000
|
0
|
0
|
|
EVP,
Co-CEO, CFO
|
2004
|
172,500(2)
|
40,000
|
0
|
0
|
500,000
|
0
|
0
|
|
2003
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
During
the periods indicated, perquisites for each individual named in the Summary
Compensation Table aggregated less than 10% of the total annual salary and
bonus
reported for such individual in the Summary Compensation Table. Accordingly,
no
such amounts are included in the Summary Compensation Table.
|
1)
|
Includes
$15,000 deferred by each officer into
2006.
|
|
2)
|
Includes
$30,833 and $29,167 for Mr. Adams and Mr. O’Keefe, respectively, deferred
from 2004 and paid in 2005 in shares of common stock with a value
of $0.50
per share.
|
|
3)
|
Paid
in 200,000 shares of common stock valued at $0.35 per
share.
|
Page
9
Option
Grants
The
following table provides certain information with respect to options granted
to
our Named Executive Officers named in the Summary Compensation Table during
the
fiscal year ended December 31, 2005 under our stock option
plan:
OPTION
GRANTS IN 2005
|
Name
|
Number
of Securities Underlying Options Granted
|
Percent
of Total Granted to Employees in Fiscal Year
|
Exercise
Price
|
Market
Price on Date of Grant
|
Expiration
Date
|
|
David
M Adams
|
400,000
|
17%
|
$
0.80
|
$
0.79
|
12/31/2015
|
|
John
O’Keefe
|
400,000
|
17%
|
$
0.80
|
$
0.79
|
12/31/2015
|
Option
Exercises and Values
The
following table sets forth the information concerning option exercises and
the
value of unexercised options held by our Named Executive Officers named in
the
Summary Compensation Table as of the end of the last fiscal year.
AGGREGATED
OPTION EXERCISES IN 2005
AND
OPTION VALUES AT DECEMBER 31, 2005
|
Name
|
Shares
Acquired on Exercise
|
Value
Realized
|
Number
of Securities Underlying Unexercised Options Held at December 31,
2005
|
Value
of Unexercised In The Money Options Held at December 31,
2005
|
||
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||
|
David
M. Adams
|
None
|
-
|
365,000
|
535,000
|
$
0
|
$
0
|
|
John
O’Keefe
|
None
|
-
|
330,000
|
570,000
|
$
0
|
$
0
|
Note:
Value of Unexercised In-The-Money Options Held at December 31, 2005
computed based on the difference between aggregate fair market value and
aggregate exercise price. The fair market value of our common stock on
December 31, 2005 was $0.79, based on the closing price on the OTC Bulletin
Board.
Compensation
of Directors
We
pay
our directors fees for attendance at board and other committee meetings in
the
form of cash compensation or similar remuneration, and reimburse them for
any
out-of-pocket expenses incurred by them in connection with our
business.
Currently,
each independent director earns compensation of $1,000 per month with an
additional $1,000 per month for chairing a committee with the exception of
the
audit committee chair who earns an additional $2,000 per month and the chairman
of the board who earns an additional $3,000 per month. Meeting fees are earned
at a rate of $1,000 per day for regularly scheduled Board meetings and $500
per
day for committee meetings. Currently, only the Chairman of the Board is
receiving cash payments toward fees earned. Additionally, the Chairman receives
options to purchase 24,000 shares of our common stock per year and all other
independent directors receive options to purchase 12,000 shares per year.
Employment
Agreements
David
M. Adams
In
January 2004, we entered into an employment agreement with David Adams. The
term
of the agreement is for one year, and it may be renewed at the pleasure of
both
parties. Pursuant to the agreement, Mr. Adams serves as our President and
COO in exchange for a base salary of $185,000 per year, which has since been
amended to $200,000. Mr. Adams also received an option to purchase 150,000
shares of common stock to vest quarterly over the initial term of the employment
agreement. Mr. Adams also received a signing bonus in the amount of $50,000
on the effective date of the employment agreement, and is entitled to
participate in our annual incentive compensation program with a potential
bonus
being up to fifty percent of his base salary.
Page
10
John
O’Keefe
In
January 2004, we entered into an employment agreement with John O’Keefe. The
term of the agreement is for one year, and it may be renewed at the pleasure
of
both parties. Pursuant to the agreement, Mr. O’Keefe serves in the position
of Executive Vice President and CFO in exchange for a base annual salary
of
$175,000 for the first twelve months of his employment, $195,000 for the
second
year of employment and $215,000 for the third year of employment, which has
since been amended to $200,000 per year. Mr. O’Keefe also received an
option to purchase 80,000 shares of common stock to vest quarterly over the
initial term of the employment agreement. Mr., O’Keefe received a one time
payment of $40,000 as a sign-on bonus entitled to participate in our annual
compensation program with a potential bonus being up to fifty percent of
his
base salary.
RELATED
PARTY TRANSACTIONS
Berg
McAfee Companies
In
December 2005, a 5% commission fee was earned for a private placement brokered
by Chadbourn Securities, which is controlled by Eric McAfee, partner in Berg
McAfee Companies. LLC (“BMC”) the beneficial owner of approximately 23.0% of the
common stock of the Company.
On
July 15, 2005, Blast Energy entered into an agreement to develop its’
initial abrasive jetting rig with BMC. The arrangement involves two loans
for a
total of $1 million to fund the completion of the initial rig and sharing
in the
expected rig revenues for a ten-year period. Under the terms of the loan
agreement with BMC, cash revenues will be shared on the basis of allocating
90
percent to Blast Energy and 10 percent to BMC for a ten-year period following
repayment. After ten years, Blast Energy will receive all of the revenue
from
the rig. The loan, which has a senior and subordinated structure, carries
an
average interest rate of 7.4 percent, and matures on March 31, 2007. BMC
also
has the option to fund an additional three rigs under these commercial
terms.
In
December 2004, BMC purchased 400,000 shares of our common stock at a price
of
$0.50 per share in a private transaction valued at $200,000 with two year
warrants attached to purchase 400,000 shares of our common stock at a price
of
$1.00 per share. The proceeds from that transaction were used for general
corporate purposes.
In
October 2004, BMC loaned us $100,000 under the terms of a convertible promissory
note bearing interest at 8% and maturing May 31, 2006. In connection with
the note, we issued warrants to purchase 50,000 shares of common stock at
$2.00
per share during the term of the note.
Eric
McAfee
In
addition to the transactions involving Energy 2000, NGS and Berg McAfee,
we had
the following transactions with Eric McAfee.
On
January 19, 2005, we entered into a settlement agreement and mutual release
with Eric McAfee, Edge Capital Group, Inc. (“Edge”) and certain entities
affiliated with Robert Frazier, Sr. As part of the settlement, Mr. McAfee
paid us $625,000 and gave us 300,000 shares of NGS common stock in exchange
for
500,000 shares of our common stock. The 300,000 shares of NGS common stock
was
collateral for a $375,000 required payment to us. That payment was made in
April
2005, and the NGS shares were released. The $625,000 in cash was then
distributed to Edge along with 750,000 shares of our common stock. At the
closing of the settlement agreement, the parties executed a mutual release
and
dismissed all pending claims and litigation between them.
In
October 2004, Mr. McAfee loaned us $100,000 under the terms of a
convertible promissory note bearing interest at 8% and maturing May 31,
2006. In connection with the note, we issued warrants to purchase 50,000
shares
of common stock at $2.00 per share during the term of the note.
We
had a
consulting agreement with Mr. McAfee for $10,000 per month through
April 30, 2005, with $120,000 due during 2004 and $40,000 in 2005. This
agreement was cancelled upon his resignation as a director effective
March 2, 2004.
Page
11
Alberta
Energy Partners
In
March
2006, Alberta Energy Partners (“Alberta”) accelerated the revenue sharing
provisions of the Technology Purchase Agreement and assigned the full 50%
ownership of the AFJ technology to Blast effective immediately. Blast had
previously owned only 20% and the remaining 30% balance had been contingent
upon
the sharing of future revenues. Alberta is the beneficial owner of 9.3% of
the
Company’s common stock.
On
August
25, 2005, Blast entered into a purchase agreement with Alberta to purchase
a
one-half interest in Alberta’s Abrasive Fluid Jet (“AFJ”) cutting technology.
The purchase agreement replaces in its entirety an October 2004 licensing
agreement between Blast and Alberta. Blast issued to Alberta 3,000,000
restricted shares of its common stock and 750,000 warrants exercisable at
$.45
per share for the purchase of Blast common shares. The warrants are exercisable
at such time as a minimum of $225,000 in revenue has been received by operation
of Blast Rig # 1, and expire three years from date of issuance. The fair
value
of the award will be measured and recognized at which time Blast achieves
the
$225,000 revenue mark. Royalties are payable to Alberta at the rate of $2,000
per well or 2% of gross revenues received, whichever is greater, for each
well
bore in which Blast uses the technology. The agreement shall remain in effect
for the commercial life of the technology. Alberta also has agreed to continue
the provision of consulting services to Blast at the rate of $10,000 per
month
through December 31, 2005.
Page
12
Exhibit
A
CHARTER
OF AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF THE BOARD OF DIRECTORS
I.
SCOPE OF RESPONSIBILITY
A.
General
Subject to the limitations noted in Section VI, the primary function of the
Audit Committee is to assist the Board of Directors (the “Board”) in fulfilling
its oversight responsibilities by (1) overseeing the Company’s system of
accounting and financial reporting, auditing, controls and legal compliance,
(2)
monitoring the operation of such system and the integrity of the Company’s
financial statements, (3) monitoring the qualifications, independence and
performance of the outside auditors and any internal audit function, and
(4)
reporting to the Board periodically concerning activities of the Audit
Committee.
B.
Relationship to Other Groups
The management of the Company is responsible primarily for developing the
Company’s accounting practices, preparing the Company’s financial statements,
maintaining internal controls, maintaining disclosure controls and procedures,
and preparing the Company’s disclosure documents in compliance with applicable
law. Any persons performing the Company’s internal audit function are
responsible primarily for objectively assessing the Company’s internal
controls. The outside auditors are responsible primarily for auditing and
attesting to the Company’s financial statements and evaluating the Company’s
internal controls. Subject to the limitations noted in Section VI, the
Audit Committee, as the delegate of the Board, is responsible for overseeing
this process and discharging such other functions as are assigned by law,
the
Company’s organizational documents, or the Board. The functions of the
Audit Committee are not intended to duplicate, certify or guaranty the
activities of management or the internal or outside auditors.
The Audit Committee will strive to maintain an open and free avenue of
communication among management, the outside auditors, the internal auditors,
and
the Board. The outside auditors and any persons performing an internal
audit function will report directly to the Audit Committee.
II.
COMPOSITION
The
Audit Committee will be comprised of three or more directors selected
by the Board in accordance with the Company’s bylaws, each of whom will meet the
standards of independence or other qualifications required from time to time
by
the American Stock Exchange, Section 10A(m)(3) of the Securities Exchange
Act of
1934 (the “Exchange Act”) and the rules and regulations of the Securities and
Exchange Commission (the “SEC”). The members of the Audit Committee shall
possess such degree of financial or accounting expertise as may be required
by
law or by the regulations of the SEC or any self-regulatory organization
having
jurisdiction over the affairs of the Company, as the Board of Directors
interprets such qualification in its business judgment. At least one
member of the Audit Committee shall be an “audit committee financial expert” as
defined by the Securities and Exchange Commission.
The
Audit Committee’s chairperson shall be designated by the Board.
The Audit Committee may form and delegate authority to subcommittees consisting
of one or more members when appropriate, including the authority to grant
preapprovals of audit and permitted non-audit services, subject to any
limitations or reporting requirements established by law or the Company’s
procedures.
III.
MEETINGS
The Audit Committee will meet at least quarterly, or more frequently if the
Committee determines it to be necessary. To foster open communications,
the Audit Committee may invite to its meetings other directors or
representatives of management, the outside auditors, the internal auditors,
counsel or other persons whose pertinent advice or counsel is sought by the
Committee. The agenda for meetings will be prepared in consultation among
the Committee chair (with input from Committee members), management, the
outside
auditors, the internal auditors and counsel. The Audit Committee will
maintain written minutes of all its meetings and provide a copy of all such
minutes to every member of the Board.
IV.
POWERS
& RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
outside auditors. The Audit Committee shall be directly responsible for
the compensation and oversight of the work of the outside auditors (including
resolution of disagreements between management and the outside auditors
regarding financial reporting) for the purpose of preparing or issuing an
audit
report or related work. The Audit Committee shall be responsible for (a)
ensuring receipt from outside auditors of a formal written statement delineating
all relationships between the auditor and the Company, (b) engaging in a
dialogue with the auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the auditor,
and
(c) taking, or recommending that the Board take, appropriate action to oversee
the independence of the outside auditor. The Audit Committee shall also
have the sole authority to (a) appoint or replace any senior internal auditing
executive, and (b) appoint or replace any firm engaged to provide internal
auditing services.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors.
The Company shall provide appropriate funding, as determined by the Audit
Committee, for payment of compensation to the outside auditor for the purpose
of
rendering or issuing an audit report, to any advisors employed by the Audit
Committee, and for any administrative expenses that are necessary or appropriate
in carrying out the Audit Committee’s duties.
The Audit Committee shall have the power to (a) obtain and review any
information that the Audit Committee deems necessary to perform its oversight
functions and (b) conduct or authorize investigations into any matters within
the Audit Committee's scope of responsibilities. The Audit Committee will
be responsible for establishing procedures for (a) the receipt, retention,
and
treatment of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and (b) the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.
The Audit Committee shall have the power to issue any reports or perform
any
other duties required by (a) the Company's articles of incorporation or bylaws,
(b) applicable law, or (c) rules or regulations of the SEC or any other
self-regulatory organization having jurisdiction over the affairs of the
Audit
Committee.
The Audit Committee shall have the power to consider and act upon any other
matters concerning the financial affairs of the Company as the Audit Committee,
in its discretion, may determine to be advisable in connection with its
oversight functions.
V.
PERIODIC OVERSIGHT TASKS
The Audit Committee, to the extent it deems necessary or appropriate or to
the
extent required by applicable laws or regulations, will perform the oversight
tasks delineated in the Audit Committee Checklist. The checklist will be
updated annually to reflect changes in regulatory requirements, authoritative
guidance, and evolving oversight practices. The most recently updated
checklist will be considered to be an addendum to this charter. In
addition, the Audit Committee will review and reassess the adequacy of this
Charter on an annual basis.
VI.
LIMITATIONS
The Committee’s failure to investigate any matter, to resolve any dispute or to
take any other actions or exercise any of its powers in connection with the
good
faith exercise of its oversight functions shall in no way be construed as
a
breach of its duties or responsibilities to the Company, its directors or
its
shareholders.
The Audit Committee is not responsible for preparing the Company’s financial
statements, planning or conducting the audit of such financial statements,
determining that such financial statements are complete and accurate or prepared
in accordance with generally accepted accounting standards, or assuring
compliance with applicable laws or the Company’s policies, procedures and
controls, all of which are the responsibility of management or the outside
auditors. The Audit Committee’s oversight functions involve substantially
lesser responsibilities than those associated with the audit performed by
the
outside auditors. In connection with the Audit Committee’s oversight
functions, the Committee may rely on management’s representations that the
financial statements have been prepared with integrity and objectivity and
in
conformity with accounting principles generally accepted in the United States,
and on the representations of the outside auditors. In carrying out its
oversight functions, the Audit Committee believes its policies and procedures
should remain flexible in order to best react to a changing
environment.