-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LbewEJ6yQe8eJit+LymZo5lsPBEew94Zy/eCFuIXlMQPlIKG4hl0RgofPSbY38Ls zg/f334gbNQMV28Z7lZSnA== 0001144204-06-034998.txt : 20060821 0001144204-06-034998.hdr.sgml : 20060821 20060821160147 ACCESSION NUMBER: 0001144204-06-034998 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060821 DATE AS OF CHANGE: 20060821 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL PROPERTY DEVELOPMENT & ACQUISITION CORP CENTRAL INDEX KEY: 0000923771 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 330563989 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-25416 FILM NUMBER: 061046273 BUSINESS ADDRESS: STREET 1: 14255 US HIGHWAY 1 STREET 2: SUITE 209 CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 5616302977 MAIL ADDRESS: STREET 1: 14255 US HIGHWAY 1 STREET 2: SUITE 209 CITY: JUNO BEACH STATE: FL ZIP: 33408 FORMER COMPANY: FORMER CONFORMED NAME: PROCOREGROUP INC DATE OF NAME CHANGE: 20031215 FORMER COMPANY: FORMER CONFORMED NAME: CALL-SOLUTIONS INC DATE OF NAME CHANGE: 20010110 FORMER COMPANY: FORMER CONFORMED NAME: BAOA INC DATE OF NAME CHANGE: 19940525 10QSB 1 v051097_10qsb.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2006 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ____________ to ____________ Commission file number 0-25416 UNIVERSAL PROPERTY DEVELOPMENT AND ACQUISITION CORPORATION (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) NEVADA 20-3014499 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 14255 U.S. HIGHWAY #1, SUITE 209, JUNO BEACH, FL 33408 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 561-630-2977 (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE) Securities registered under Section 12(b) of the Exchange Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - --------------------------------- ----------------------------------------- Common stock - par value $0.001 OTC: Bulletin Board Securities registered under Section 12(g) of the Exchange Act: None - -------------------------------------------------------------------------------- (TITLE OF CLASS) - -------------------------------------------------------------------------------- (TITLE OF CLASS) ================================================================================ Indicate by check mark whether the registrant (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 |X| No |_| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes |_| No |X| The number of shares outstanding of the Issuer's common stock, as of August 4, 2006. CLASS OUTSTANDING AT AUGUST 4, 2006 - -------------------------------------- --------------------------------- Common stock - par value $0.001 195,063,108 UNIVERSAL PROPERTY DEVELOPMENT AND ACQUISITION CORPORATION (FORMERLY KNOWN AS PROCORE GROUP, INC.) FORM 10-QSB TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements: Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005 1 Consolidated Statements of Operations - For the Three and Six Months Ended June 30, 2006 and June 30, 2005 2 Consolidated Statement of Changes in Stockholders' Equity as of June 30, 2006 3 Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2006 and June 30, 2005 4 Notes to the Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 23 Item 4. Controls and Procedures 23 PART II - OTHER INFORMATION Item 1. Legal Proceedings 23 Item 1A. Risk Factors Item 2. Change in Securities 23 Item 3. Defaults upon Senior Securities 24 Item 4. Submission of Matters to a Vote of Security Holders 24 Item 5. Other Information 25 Item 6. Exhibits & Reports on Form 8-K 27 Signatures Certification Exhibits
UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Consolidated Balance Sheets
June 30, December 31, 2006 2005 ------------ ------------ ASSETS Current Assets: Cash $ 380,241 $ 132,935 Marketable securities 750,000 1,000,000 Accounts receivable - oil and gas sales 82,451 13,137 Other current assets 225,548 672 ------------ ------------ Total current assets 1,438,240 1,146,744 ------------ ------------ Property and Equipment: Oil and gas properties, using full cost accounting Subject to amortization 3,333,725 1,311,546 Not subject to amortization 357,784 623,860 ------------ ------------ Gross oil and gas properties 3,691,509 1,935,406 Accumulated depletion (225,204) (13,311) ------------ ------------ Net oil and gas properties 3,466,305 1,922,095 Office equipment, at cost, net of accumulated depreciation of 7,475 and 104, respectively 142,892 2,391 ------------ ------------ Property and equipment, net 3,609,197 1,924,486 ------------ ------------ Acquisition of Catlin 2,301,000 -- ------------ ------------ TOTAL ASSETS $ 7,348,437 $ 3,071,230 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 1,071,860 $ 485,544 Notes payable 116,350 161,413 Notes payable - related party 150,696 -- Due to USPX 6,054 2,041 Due to Sundial 1,577 -- Due to royalty holders 11,659 -- Income taxes payable 3,647 2,219 Other current liabilities 2,921 -- ------------ ------------ Total current liabilities 1,364,764 651,217 ------------ ------------ 35% minority interest in Canyon Creek Oil & Gas, Inc. subsidiary 623,625 609,691 25% minority interest in Texas Energy, Inc. subsidiary 138,393 -- 30% minority interest in West Oil & Gas, Inc. subsidiary 14,064 -- ------------ ------------ Minority Interest 776,082 609,691 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, 2,000,000,000 shares .001 par value authorized, 177,428,108 and 32,964,256 shares issued/"to be issued" and outstanding, respectively 177,428 32,964 Convertible preferred stock, 500,000,000 shares .001 par value authorized, 236,825 and 237,106 shares issued and outstanding, respectively 237 237 Class A convertible preferred stock, 100,000 shares 10.00 par value authorized, 100,000 and 100,000 shares issued and outstanding, respectively 1,000,000 1,000,000 Class B convertible preferred stock, 5,113 shares 1,000.00 par value authorized, 5,113 and 1,473 shares issued and outstanding, respectively 5,113,000 1,473,000 Additional paid-in capital 31,725,698 27,654,212 Accumulated deficit (32,808,772) (28,350,091) ------------ ------------ Total stockholders' equity 5,207,591 1,810,322 ------------ ------------ Total liabilities and stockholder's equity $ 7,348,437 $ 3,071,230 ============ ============
See accompanying notes to financial statements. 1 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Consolidated Statements of Operations
For the Three For the Three For the Six For the Six Months Ended Months Ended Months Ended Months Ended June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 ------------- ------------- ------------- ------------- Revenue from oil and gas $ 112,039 $ -- $ 218,469 $ -- Sale of lease 1,050,000 -- 1,050,000 -- Management fee income 14,256 -- 14,256 -- ------------- ------------- ------------- ------------- Total Revenue 1,176,295 -- 1,282,725 -- Cost of goods sold 67,264 -- 99,731 -- Cost of lease sold 47,000 -- 47,000 -- Depletion expense 41,888 -- 211,893 -- ------------- ------------- ------------- ------------- Gross Income 1,020,143 -- 924,101 -- ------------- ------------- ------------- ------------- Operating expenses: Consulting fees and services, including 605,950 and 5,740,349 for the six months ended June 30, 2006 and June 30, 2005, respectively, incurred through issuance of common shares or options to acquire such shares 563,957 179,159 811,949 6,071,579 General and administrative 352,711 21,288 551,143 75,177 Depreciation 7,260 -- 7,521 -- ------------- ------------- ------------- ------------- Total operating expenses 923,928 200,447 1,370,613 6,146,756 ------------- ------------- ------------- ------------- Income (loss) from operations 96,215 (200,447) (446,512) (6,146,756) ------------- ------------- ------------- ------------- Other income (expenses): Gain on write off of liabilities no longer due and payable, related to liability settled -- -- 30,000 -- Interest expense, net (670) (12,957) (1,340) (25,687) Loss on impairment of investment acquisition costs -- (21,355) -- (21,355) Loan conversion costs -- (149,195) -- (149,195) Loss on marketable securities (225,000) -- (225,000) -- Other expense (6,117) -- (6,117) -- ------------- ------------- ------------- ------------- Total other expenses (231,787) (183,507) (202,457) (196,237) ------------- ------------- ------------- ------------- Loss before provision for income taxes (135,572) (383,954) (648,969) (6,342,993) Provision for income taxes (current) 200 200 400 400 ------------- ------------- ------------- ------------- Net loss before minority interest (135,772) (384,154) (649,369) (6,343,393) Add, 35% minority interest in net loss of Canyon Creek Oil & Gas, Inc. subsidiary (223,360) -- (188,855) -- Add, 25% minority interest in net income of Texas Energy Inc. subsidiary 12,607 -- 12,607 Add, 30% minority interest in net income of West Oil & Gas, Inc. subsidiary 3,007 -- 6,936 -- ------------- ------------- ------------- ------------- (207,746) -- (169,312) -- ------------- ------------- ------------- ------------- Net loss after minority interest (343,518) (384,154) (818,681) (6,343,393) ============= ============= ============= ============= Computation of loss applicable to common shareholders Net loss before benficial conversion and preferred dividends (343,518) (384,154) (818,681) (6,343,393) Beneficial conversion (1,850,000) -- (3,640,000) -- ------------- ------------- ------------- ------------- Loss attributable to common stockholders $ (2,193,518) $ (384,154) $ (4,458,681) $ (6,343,393) ============= ============= ============= ============= Basic and diluted net loss per weighted-average shares common stock outstanding $ (0.00) $ (0.14) $ (0.01) $ (3.52) ============= ============= ============= ============= Basic and diluted net loss per share attributable to common stockholders $ (0.02) $ (0.14) $ (0.05) $ (3.52) ============= ============= ============= ============= Weighted-average number of shares of common stock outstanding 133,327,883 2,844,793 98,606,436 1,801,375 ============= ============= ============= =============
See accompanying notes to financial statements. 2 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Consolidated Statements of Changes in Shareholders' Equity For the six months ended June 30, 2006
(shares) (shares) Common Preferred Common Preferred Accumulated Stock Stock Stock Stock APIC Deficit Total ---------------------------------------------------------------------------------------------------- Balance December 31, 2005 32,964,256 338,579 $ 32,964 $ 2,473,237 $ 27,654,212 $(28,350,091) $ 1,810,322 Preferred shares converted to common 140,810,002 (282) 140,810 (0) (140,810) -- (0) Preferred Shares sold for cash -- 3,640 -- 3,640,000 -- -- 3,640,000 Beneficial Conversion 3,640,000 (3,640,000) -- Common stock issued for services 3,153,850 -- 3,154 -- 477,796 -- 480,950 Common stock issued to retire debt 500,000 -- 500 -- 94,500 -- 95,000 Net Loss (818,681) (818,681) ---------------------------------------------------------------------------------------------------- Balance at June 30, 2006 177,428,108 341,937 177,428 6,113,237 31,725,698 (32,808,772) 5,207,591 ----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 3 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Consolidated Statements of Cash Flows
For the For the Six Months Six Months Ended 6/30/06 Ended 6/30/05 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss (818,681) (6,343,393) Adjustments to reconcile net loss to cash used in operating activities: Minority interest loss 166,391 -- Non-cash interest income -- -- Depreciation and depletion expense 219,264 -- Consulting fee and services incurred through issuance of company equity shares or options to acquire such shares 575,950 5,740,349 Loan conversion costs -- 149,195 Changes in operating assets and liabilites: Increase in accrued interest on unsecured bridge loan receivable (46,339) (12,000) Increase in deferred revenue -- 80,000 Increase in accounts receivable (69,314) -- Increase in prepaid expenses (17,060) -- Increase in security deposits (161,477) (672) Increase in accounts payable & accrued expenses 586,316 158,015 Decrease in income taxes payable 1,428 (4,944) Increase in due to USPX 4,013 -- Increase in due to Sundial Resources 1,577 -- Increase in due to royalty holders 11,659 -- Increase in other current liabilities 2,921 -- ------------- ------------- NET CASH USED IN OPERATING ACTIVITIES 456,648 (233,450) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Decrease in marketable securities 250,000 -- Payment of capitalized oil and gas properties work-over costs (1,756,103) -- Payments for assignment of rights to oil and gas leases to the Company (2,301,000) -- Purchases of office equipment (147,872) -- ------------- ------------- NET CASH USED IN INVESTING ACTIVITIES (3,954,975) -- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in notes payable 105,633 42,347 Proceeds from sale of common stock -- 200,000 Proceeds from sale of preferred stock 3,640,000 -- ------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 3,745,633 242,347 ------------- ------------- NET INCREASE IN CASH 247,306 8,897 Cash, beginning of period 132,935 3,650 ------------- ------------- Cash, END OF PERIOD 380,241 12,547 ============= ============= Cash paid during the period for: ------------- ------------- Income taxes (1,428) 5,344 ============= ============= ------------- ------------- Interest expense -- -- ============= =============
See accompanying notes to financial statements. 4 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 1 - BASIS OF PRESENTATION The Company's auditors have not yet completed their SAS 100 review for the six months ended June 30, 2006. The auditors were unable to complete the review on time because the Company has grown significantly since the last quarter and the review time for the auditors has significantly increased because of new business relationships and alteration of existing business relationships. We expect the auditors to complete their review by August 28, 2006. The Company has incurred recurring operating losses since its inception, and as of June 30, 2006, had an accumulated deficit of approximately $32,809,000. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effect of the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty. The Company's continuation as a going concern is dependant upon receiving additional financing. The Company anticipates that during its 2006 fiscal year it will need to raise substantial funds to support its working capital needs and to continue to execute the requirements of its business plan. Management of the Company is currently in a process of trying to secure additional capital. There can be no assurance that the Company will be successful in this capital raise or with other attempts to raise sufficient capital. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Universal Property Development and Acquisition Corporation ("UPDA" or "the Company") investments in ventures relating to exploration and development of domestic energy, particularly oil and gas. In June 2005, the Company changed its name from Procore Group, Inc. to Universal Property Development and Acquisition Corporation. Prior to November 2003, the Company was known as Call Solutions, Inc. and was inactive. In November of 2003, the Company increased the number of its authorized shares of common stock from 90,000,000 to 750,000,000. In addition, the Company effectuated a 76:1 reverse split of the Company's common stock. In June 2005, the Company increased the number of its authorized shares of common stock from 750,000,000 to 2,000,000,000 and effectuated a 100:1 reverse split of the Company's common stock. The company is authorized to issue an aggregate of 2,500,000,000 shares, of which 2,000,000,000 are to be common shares. During the first quarter of 2005, the Company moved its head office from Ohio to Florida. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the financial position and operating activities of UPDA and its 100% owned subsidiary UPDA-Operators, 65% owned subsidiary, Canyon Creek Oil and Gas, Inc., its 70% owned subsidiary, West Oil & Gas, Inc. and its 75% owned subsidiary Texas Energy, Inc. The Company has additional joint ventures, Winrock Energy, Inc. and UPDA Petroleum Trading/Texas Trading, Inc., which were inactive as of June 30, 2006. All inter-company balances have been eliminated in consolidation. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are carried at cost, which approximates market value. 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. SEGMENT INFORMATION The Company operates in one segment. 5 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS For financial statement instruments including cash, accounts receivable, accounts and accrued expenses payable, the carrying amounts approximated fair value because of their short maturity. DEPRECIATION Depreciation of furniture and equipment is provided for by the straight-line method over the estimated useful lives ranging from three to five years. LOSS PER SHARE Basic and diluted net loss per share information for all periods is presented under the requirements of SFAS No. 128, Earnings Per Share. Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding. The dilutive effect of preferred stock, warrants and options convertible into an aggregate of approximately 310,246,000 and 413,745,000 of common shares as of June 30, 2006, and December 31, 2005 respectively, are not included because the inclusion of such would be anti-dilutive for all periods presented. MAJOR CUSTOMERS During the six months ended June 30, 2006, sales to three customers represented 99% of total sales. ASSET RETIREMENT OBLIGATIONS The Company follows SFAS No. 143, Accounting for Asset Retirement Obligations. In accordance with the provisions of SFAS No. 143, the Company records asset retirement costs and liabilities at the time of property acquisition as a reduction in earnings. OIL AND GAS PROPERTIES The Company uses the full cost method of accounting for oil and gas properties. Under this method, all costs associated with acquisition and development of oil and gas properties are capitalized. The Company does not engage in exploration activities. Costs capitalized include acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling and equipping productive and non-productive wells. Drilling costs include directly related overhead costs. Capitalized costs are categorized either as being subject to amortization or not subject to amortization. All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves and estimated future costs to plug and abandon wells and costs of site restoration, are amortized on the unit-of-production method using estimates of proved reserves as determined by independent engineers. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Depletion expense for the three and six months ended June 30, 2006, was $41,888 and $211,893, respectively, based on depletion at the rate of $5.42 and $11.16 per barrel-of-oil-equivalent, respectively. REVENUE RECOGNITION The Company recognizes net operating revenues from oil and natural gas at the time of delivery, that is, once the oil and gas purchasers have taken delivery. 6 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) INCOME TAXES The Company accounts for income taxes using the asset and liability method as required by Statement of Financial Accounting Standards No. 109, under which deferred tax assets and liabilities are determined based upon the differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. RECENT ACCOUNTING PRONOUNCEMENTS In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections," that applies to all voluntary changes in accounting principle. This Statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS 154 will be effective for the Company for fiscal year ended December 31, 2007. The Company does not anticipate that the adoption of SFAS No. 154 will have an impact on the Company's overall results of operations or financial position. In February 2006, the FASB issued SFAS 155, "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140," that allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement (new basis) event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. It also eliminates the exemption from applying Statement 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS No. 155 will have an impact on the Company's overall results of operations or financial position. In March 2006, the FASB issued SFAS 156, "Accounting for Servicing of Financial Assets--an amendment of FASB Statement No. 140," that applies to the accounting for separately recognized servicing assets and servicing liabilities. This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS No. 156 will have an impact on the Company's overall results of operations or financial position. 7 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 3 - INVESTMENT IN OIL & GAS DEVELOPMENT JOINT VENTURE During July 2005 the Company formed a joint venture with US Production & Exploration, LLC ("USPX") and Triple Crown Consulting ("TCC") named Canyon Creek Oil & Gas, Inc. ("Canyon Creek" or "Canyon"). Canyon was formed for the purpose of acquiring oil and gas producing properties, low risk drilling prospects, and prospects in need of state-of-the-art technology to make them viable. USPX is an independent production and exploration company located in Sugar Land, Texas, engaged in the acquisition of oil and gas producing properties with multiple enhancement opportunities. TCC is engaged in the merchant and investment banking and commercial finance broker services and is located in Miami Beach, Florida. In a memorandum of understanding dated July 4, 2005, the ownership percentages were to be as follows: the Company - 25%, USPX -70%, and TCC - 5%. According to the memorandum of understanding, the Company was required to deliver $300,000 of funding in cash to Canyon within thirty days of the execution of the agreement. In addition, that agreement required the Company to deliver another $200,000 in cash ninety days thereafter. On November 17, 2005 the joint venture agreement was amended and the parties agreed, among other things, to change the ownership proportions to the following: the Company - 65%, USPX-30%, and TCC - 5%. In addition, the Company was required to make a minimum investment of $1,200,000 in cash and stock in Canyon on or before January 31, 2006. USPX has the right to pursue other oil and gas ventures as it deems necessary to carry out its own business plan, provided it offers Canyon the right of first refusal to participate in such ventures. Other terms of note in the joint venture agreement provide for payment of management fees of 7.5% of defined net operating revenue to USPX, and for the Company to issue 500,000 of its restricted common shares to USPX ten days after the execution of this agreement. To date the Company has not issued the common shares to USPX. As of May 31, 2006, the Company advanced financing to Canyon Creek of $2,418,000 in cash. On June 1, 2006, the Company converted the cash into a note payable due to UPDA that is payable over 10 years in monthly installments beginning January 1, 2007, bearing interest at 12%. On March 24, 2006, Donald Orr resigned from all of his positions as an officer and member of the Board of Directors of Canyon Creek Oil & Gas, Inc. Donald Orr is a member of USPX. USPX was the sole operator of Canyon Creek Oil & Gas, Inc's oil fields. In the second quarter of 2006, Don Orr commenced a lawsuit against Canyon Creek. As of June 30, 2006 UPDA did not accrue any costs related to this matter because the Company believes the suit is without merit. As a result of the litigation, USPX is no longer the operator, leaving Canyon Creek without an operator in the second quarter. On May 3, 2006, the Company filed articles of incorporation for its new company UPDA Operators, Inc. ("UPDA-O") to manage all of its well operations. Upon filing its P-5 Organization Report, UPDA Operators, Inc. will be authorized to operate over 150 wells that the Company owns through its subsidiaries. UPDA Operators, Inc. will assume all responsibility for the maintenance and pumping of the wells, manage the reporting and sales of the expanding production, post the necessary bonds with the Texas Railroad Commission and provide adequate insurance for the fields which it will operate. On August 9, 2006, the Railroad Commission of Texas approved the P - 5 Organization Report to make UPDA-O operator of all UPDA and subsidiaries leases. NOTE 4 - JOINT VENTURE MEMORANDUM OF UNDERSTANDING - UTAH In October 2005, the Company executed a memorandum of understanding with Dark Horse Exploration, Inc. (DHE), a Wyoming corporation, and Masaood Group, Ltd. for the development and production of a natural gas and oil field consisting of 4,000 acres in Northern Utah. UPDA would own sixty percent (60%) of the joint venture, DHE will own thirty percent (30%) and Masaood would own ten percent (10%). Pursuant to the memorandum of understanding, DHE will operate the field which presently has five (5) wells and which will be expanded to eighty (80) wells. Masaood has agreed to invest $1,000,000 and has provided initial funding of $150,000 for leasehold acquisitions and the revitalization of the existing wells. UPDA has agreed to re-invest its portion of the initial profits, up to $1,000,000, for the drilling of additional wells. In January, 2006, West Oil & Gas, Inc. ("West") terminated its relationship with Dark Horse Exploration and Byron T. Woodard. With the expanding involvement of and opportunities being generated by Landmark 4, West is negotiating to undertake projects that are significantly more lucrative than those presented by Dark Horse. In conjunction with this termination, UPDA increased its stake in West to 70% and Masaood Group, LTD. and Mr. Kronvold now owns 20% of the outstanding shares. NOTE 5 - JOINT VENTURE MEMORANDUM OF UNDERSTANDING - OKLAHOMA In November 2005, the Company executed a memorandum of understanding with the Lion Partners Hedge Fund to acquire certain oil and gas leases in Osage County, Oklahoma for 3,840 acres including of 69 producing wells and 27 injection wells. There has been no activity within the venture, known as Win Rock Energy, Inc., to date. 8 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 6 - JOINT VENTURE MEMORANDUM OF UNDERSTANDING - TEXAS ENERGY In March 2006, UPDA and Sundial Resources, Inc. of Graham, Texas executed a Memorandum of Understanding (MOU) for the development of 382.95 acres on four leases in Young County, Texas. Pursuant to the MOU, UPDA will provide funding for the workover of the 17 wells on the property. As set forth in the MOU, UPDA will establish and own 75% of a joint venture corporation, tentatively known as Texas Energy, Inc. According to the memorandum of understanding, the Company is required to provide $400,000 of funding in cash to Texas Energy, Inc. over an unspecified period of time, the amount estimated by Sundial for the completion of the work to make the wells productive. The above-described MOU also required the Company to pay cash consideration of $100,000 directly to Sundial for its assignment of its 100% working interest in the leases and wells on property commonly known as the Thresher, Medlen, Nantz, and Wiechman fields to the Texas Energy, Inc. joint venture corporation. Sundial will manage the workover procedures and will operate the wells upon completion, for which Sundial will be paid an annual managerial fees equal to 5% of the net operating revenue of Texas Energy, Inc. The Company has made an advance payment of $50,000 in March 2006 to Andrew McDermett to be used for the workovers, coincident to remitting the $100,000 to be paid for the leases. In the three months ended June 30, 2006, the Company paid approximately $318,900 to Andrew McDermett for workovers and $47,000 for a lease. The venture has a term of five years. NOTE 7- ACQUISITION OF CATLIN ASSET BY TEXAS ENERGY On June 2, 2006 (the "Closing Date"), Texas Energy, Inc. ("Texas Energy"), a seventy-five percent (75%) owned joint venture subsidiary of Universal Property Development and Acquisition Corporation completed the acquisition of certain leases and equipment pursuant to the terms and conditions of a Purchase Agreement dated April 12, 2006 (the "PA") by and between Texas Energy as the purchaser and the Catlin Oil Company ("COC"),Virginia Catlin, Randy Catlin and the Estate of Carl Catlin (collectively the "Catlins") as the seller. The purchase price for this acquisition was $2.3 million and consisted of more than 30 leases and 64 wells, covering approximately 2,700 acres and various equipment and pipeline infrastructure. The Company is in the process of having an appraisal done by an independent third party to finalize the allocation of the purchase price. NOTE 8 - SALE OF CANYON CREEK STARR COUNTY LEASE On May 1, 2006, Canyon Creek, a Nevada corporation, and a sixty-five percent (65%) owned joint venture subsidiary of UPDA, sold to Avalon Oil and Gas, Inc. ("Avalon") fifty percent (50%) of Canyon Creek's working interest in the oil and gas leaseholds of Canyon Creek located in Starr County, Texas for an aggregate purchase price of $75,000.00 cash and 7,500,000 shares of Avalon's common stock. The shares of Avalon were valued at fair market value of $975,000 at the issuance date. Canyon Creek recognized a profit of $1,050,000 on this transaction. At June 30, 2006, due to a decrease in share price, Canyon recognized a loss of $225,000 on the Avalon shares, bringing the fair market of the shares to $750,000. NOTE 9 - ACQUISITION OF US PETROLEUM DEPOT On April 20, 2006, the Company made a deposit of $50,000 on the deal to purchase US Petroleum Depot, a storage facility in Brownsville, Texas. NOTE 10 - ACQUISITION OF OIL AND GAS PROPERTIES Upon formation of Canyon, USPX contributed leasehold rights to certain oil and gas properties in North Texas valued at cost of $607,031 consisting of a total of 2,489 acres and 61 wells in Archer, Coleman, and Palo Pinto Counties. These wells were classified as proved reserves at June 30, 2006, and accordingly, acquisition costs are subject to amortization. In August 2005, Canyon purchased a 243-acre oil and gas lease in Victoria County, Texas. The lease is located in the Inez Gas Field about one mile west of Inez, Texas. The leasehold was acquired in exchange for 100,000 shares of UPDA stock under Regulation 144R valued at $55,000, the fair market value on the date of issue. These wells were classified as proved reserves at June 30, and accordingly, acquisition costs are subject to amortization. In September 2005, Canyon acquired an 80-acre lease in Fayette County, Texas for $16,000 in cash. The lease is located in the Giddings Gas Field, one of the largest producing gas fields in Texas. These reserves are classified as unproved reserves at June 30, 2006 since advanced technology is yet to be employed during the workover process and no pilot test has yet been performed. Accordingly, acquisition costs are not subject to amortization until reserves may be classified proven. In October 2005, Canyon completed the acquisition of a 266.73-acre oil and gas lease in Starr County, Texas for $94,000 in cash. The lease is located in the Boyle Field. These reserves are classified as unproved reserves at June 30, 2006 since advanced technology will be employed during the workover process and no pilot test has yet been performed. Accordingly, acquisition costs are not subject to amortization until reserves may be classified proven. In October 2005, Canyon completed the acquisition of an 40-acre oil and gas lease in Young County, Texas for a cash purchase price of $18,000. The lease is located in the Prideaux Field. These wells were classified as proved reserves at June 30, 2006, and accordingly, acquisition costs are subject to amortization. In the second quarter 2006, Texas Energy completed the acquisition of a lease in Texas for $47,000 in cash. These reserves are classified as unproved reserves at June 30, 2006 since advanced technology is yet to be employed during the workover process and no pilot test has yet been performed. Accordingly, acquisition costs are not subject to amortization until reserves may be classified proven. In June 2006, Texas Energy completed the acquisition of Catlin Common/Gifford oil and gas leases in Jack County, Texas for a purchase price of $2.3 million. The acquisition consisted of more than 30 leases and 64 wells, covering approximately 2,700 acres. These reserves are classified as unproved reserves at June 30, 2006 since advanced technology is yet to be employed during the workover process and no pilot test has yet been performed. Accordingly, acquisition costs are not subject to amortization until reserves may be classified proven. 9 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 Oil and gas properties subject to amortization $ 3,333,725 Oil and gas properties not subject to amortization 357,784 Asset retirement obligation -- ------------ Net Assets Acquired $ 3,691,509 ============ NOTE 11 - ASSET RETIREMENT OBLIGATIONS The Company follows SFAS No. 143, Accounting for Asset Retirement Obligations, which requires entities to record the fair value of a liability for an asset retirement obligation when it is incurred which, for the Company, is typically when an oil or gas well is drilled or purchased. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal use of the asset. The Company's asset retirement obligations relate primarily to the obligation to plug and abandon oil and gas wells and support wells at the conclusion of their useful lives. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. When the liability is initially recorded, the related cost is capitalized by increasing the carrying amount of the related oil and gas property. Over time, the liability is accreted upward for the change in its present value each period until the obligation is settled. The initial capitalized cost is amortized as a component of oil and gas properties. NOTE 11 - SUPPLIER AGREEMENTS Sunoco Oil On November 4, 2005, Canyon entered into month-to-month agreement with Sunoco to gather and purchase the oil produced from Canyon Creek's wells in the Fort Worth basin in North Central Texas. Sunoco has agreed to pay a one dollar bonus over the posted price for West Texas Intermediate crude. In its agreement with Sunoco, Canyon Creek has specifically listed all of its properties located in Coleman, Palo Pinto, and Archer Counties. Accordingly, Canyon Creek has also reserved the right and option to renegotiate the price or change the purchaser every 30 days as it deems necessary. West Texas Gas (WTG) On October 1, 2005, Canyon Creek entered a three year natural gas purchase contract with WTG Jameson, LP to market casing head gas at its Hagler leases in Coleman County. Under the agreement, CCOG must pay certain fees and commissions on natural gas sales to WTG Jameson, LP. NOTE 12 - OFFICE EQUIPMENT Fixed assets are stated at cost, less accumulated depreciation and are summarized below together with estimated useful lives used in computing depreciation and amortization:
June December Estimated Useful 30, 2006 31, 2005 Lives --------- ---------- ---------------- Office equipment and furniture $ 150,367 $ 2,495 3-5 years Less accumulated depreciation and amortization (7,475) (104) --------- ---------- $ 142,892 $ 2,391 ========= ==========
Depreciation expense for property and equipment for the three and six months ended June 30, 2006 was $7,260 and $7,521, respectively. 10 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 13 - NOTES PAYABLE At June 30, 2006, and December 31, 2005 notes payable are broken down as follows:
June 30, 2006 December 31, 2005 ----------------- ----------------- Unsecured notes payable due on demand by Company to Katherine Betts, a minor Company shareholder, of which $20,000 bears interest at 11% per annum $ 80,000 $ 80,000 Unsecured non-interest bearing notes payable due on demand by Company to Kamal Abdallah, Company Chief Executive Officer and President and significant Company 64,696 64,696 shareholder Unsecured 8% note payable on 6,000 6,000 demand Unsecured note payable on mobile office 105,633 0 Other unsecured non-interest notes payable on demand 10,717 10,717 -------- -------- Total notes payable, excluding interest $267,046 $161,413 ======== ========
At June 30, 2006, and December 31, 2005, accrued interest payable on the above notes payable included within accounts payable and accrued expenses totaled $28,067 and $26,727, respectively. Accrued interest payable at June 30, 2006 and December 31, 2005 includes several years of interest from years prior to December 31, 2005. 11 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 14 - INCOME TAXES Temporary differences between the recognition of certain expense items for income tax purposes and financial reporting purposes are as follows: June December 30, 2006 31, 2005 ---------- ---------- Deferred tax asset: Net operating loss carryforward $6,923,943 $6,473,670 Valuation allowance (6,923,943) (6,473,670) ---------- ---------- Net deferred tax asset $ -- $ -- ========== ========== The Company incurred no federal income tax expense for the six months ended June 30, 2006 and for the year ended December 31, 2005, and utilized no tax carryforward losses. The Company incurred $400 and $400 of state income tax expense for the six months periods ended June 30, 2006, and June 30, 2005, respectively. The Company has a net operating loss carryover of approximately $27,695,772 to offset future income tax. The net operating losses expire as follows: December 31, 2009 $ 1,431,255 2010 947,760 2011 1,269,670 2017 885,291 2019 2,289,386 2020 2,671,128 2021 3,736,141 2022 850,127 2023 1,001,233 2024 1,760,656 2025 10,034,444 2026 818,681 -------------- Total $ 27,695,772 --------------- The net operating loss carryforward may be subject to further limitation pursuant to Section 382 of the Internal Revenue Code due to events including changes of control and change in business activities. 12 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 15 - INVESTMENT IN PREFERRED SERIES B RULE 144 RESTRICTED STOCK OF SITEWORKS BUILDING AND DEVELOPMENT CO., A PUBLICLY-TRADED ENTITY Pursuant to the rescission of a real estate acquisition transaction with Kamal Abdallah, the current Chairman, President and CEO of the Company on July 27, 2005, the Company received 1,000,000 $1 face value convertible preferred series B Rule 144 restricted stock of Siteworks Building and Development Co. ("Siteworks"), a publicly-traded entity, for which Kamal Abdallah transferred his ownership to the Company. These transferred marketable securities had an aggregate fair value of approximately $1,000,000 on the date of the transfer, based on the publicly traded share price of the underlying common stock of Siteworks into which the preferred stock is convertible. Kamal Abdallah received 1,100,000 of convertible preferred series B Rule 144 Stock of Siteworks on June 17, 2005 as a result of his transferring certain property (comprised of a former Wal-Mart store, vacant land, and parking lot) with an aggregate appraised value of $2,800,000 on that date. In addition to receiving convertible preferred B shares, Kamal Abdallah also received 35,000,000 common shares in Siteworks with an estimated fair value of $1,000,000, based on the publicly traded share price of that common stock. Kamal Abdallah transferred 1,000,000 of Siteworks convertible series B stock to the Company, while retaining ownership of 100,000 of those convertible preferred B stock, and 35,000,000 shares of common stock of Siteworks. Consequently, he and the Company controlled approximately 44% of Siteworks assuming that both the Company's and his Siteworks convertible preferred series B shares are likely to be converted to that entity's common stock. Subsequently, Kamal Abdallah exchanged the 35,000,000 shares of Siteworks in exchange for the assumption of a $1,000,000 note. Consequently, he and the Company then controlled approximately 17% of Siteworks assuming that both the Company's and his Siteworks convertible preferred series B shares are likely to be converted to that entity's common stock. Kamal Abdallah security holdings of common and preferred stock are unchanged at December 31, 2005, and he controls approximately 2% of Siteworks assuming conversion of the preferred series B shares. In June 2006, Kamal Abdallah replaced the Preferred Stock from Siteworks valued at $1 million with $1 million of cash. NOTE 16 - EQUITY TRANSACTIONS On January 19, 2005, after Company encountered collection difficulties with an unsecured bridge loan receivable and a related note payable in a similar amount, the Company issued 1,000 shares of its free trading common stock to Beresheis Investment Group, LLC, and the Company recorded a non-cash expense of $11,000 for this issuance, based on the trading price of Company shares on the date of issuance. On March 10, 2005, the Company entered into an agreement with Ten and Ten Marketing Entertainment Company ("Ten and Ten") to form a strategic alliance to develop real estate solutions. In consideration of this transaction, on March 10, 2005, the Company issued 400,000 shares of common stock to Ten and Ten. The Company recorded a non-cash expense of $3,600,000 for this issuance, based on the trading price of Company shares on the contract signing date, which is earlier than the date of issuance of the stock to Ten and Ten. 13 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 16 - EQUITY TRANSACTIONS (CONTINUED) The Ten and Ten agreement also requires the Company to set aside an additional 200,000 of restricted common shares for sub-consultants, certain of which are identified in the agreements text. On March 10, 2005, the Company issued 117,500 of these shares for services rendered; 60,000 shares to NUCNStep and 57,500 shares to Digital Freedom. The Company recorded a non-cash charge of $817,500 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. The Company had already executed agreements for 379,500 shares besides the 1,933,333 total ascribed to Kamal Abdallah and Ten and Ten. In June 2005, the Company terminated the Ten and Ten agreement contract. The Company also issued 68,500 free trading shares under the 379,500 share allotment between March 17 and March 31, 2005, and recorded a non-cash expense of $362,500, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. 20,000 of the free trading shares each were issued to Payment Solutions Group, Inc. and Theresa Hodges, while 500 shares each were issued to the principals of Profit Planners, Inc., Maurice Carmey and Vincent Kenyon, 3,500 shares were issued to Richard Britt and a further 10,000 shares were issued to LL Capital. On March 24, 2005, Payment Solutions Group, Inc. was issued 100,000 shares of stock subject to Rule 144. The Company recorded a non-cash expense of $500,000 related to this issuance, based on the trading price of Company shares on the issuance date. The Ten and Ten agreement gave that entity an option to purchase $2,000,000 of the Company's common stock through June 30, 2006 at a 50% discount from the 30 day trading of its shares. Finally, the Company agreed to have Curtis L. Pree, a Vice President of Ten and Ten, on its Board. 20,000 of the shares were restricted and 10,000 of the shares were free trading. In June 2005 the Company terminated the Ten and Ten agreement contract. On March 24, 2005, the Company issued to Curtis L. Pree 27,500 shares of stock, 2,500 free-trading shares and 25,000 shares subject to Rule 144 restrictions, as part of his employment agreement. The Company recorded a non-cash charge of $87,500 related to this stock issuance, based on the trading price of Company shares on the date of issuance. Coincident to the March 10, 2005 agreement in the preceding paragraph, the Board of Directors of the Company authorized entry in new or amended consulting or employment agreements in which the Company could issue restricted and free trading common shares aggregating 3,229,333 On March 17, 2005, the Company issued 1,533,333 shares of its common stock (subject to Rule 144) to Kamal Abdallah, in exchange for a)$100,000 of cash and for b)real estate--with an appraised valuation of $4,000,000--which was to be transferred to the Company by June 2005. Accordingly $4,000,000 had been recorded as a subscription receivable and offset against shareholders' deficit. During the quarter ended September 30, 2005, this agreement was cancelled. On March 31, 2005, the Company issued 30,000 shares its common stock to George Csatary, its Chief Financial Officer, for consulting services. The Company recorded a non-cash expense of $150,000 related to this stock issuance, based on the trading price of Company shares on the date of issuance. On March 17 and March 31, 2005, the Company issued 10,000 and 32,370 of freely trading common stock to Jack Wolf for consulting services. The Company recorded a non-cash expense of $211,849 related to these stock issuances, based on the trading price of Company shares on the date of issuances. On July 1, 2005, the Company entered into a consulting agreement with Donald Williams for strategic advisory services for which he received 75,000 free-trading shares of Common Stock. Accordingly, the Company recorded a non-cash charge of $45,750 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On July 1, 2005, the Company entered into a consulting agreement with Executive Payment Solutions, Inc. for strategic advisory services. The term of the contract is three months, for which they received 100,000 free-trading shares of Common Stock. Accordingly, the Company recorded a non-cash charge of $61,000 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On August 1, 2005, the Company entered into a consulting agreement with Suffian Abdallah for strategic advisory services. The term of the contract is three months, for which the consultant received 25,000 free-trading shares of Common Stock. Accordingly, the Company recorded a non-cash charge of $15,250 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. 14 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 16 - EQUITY TRANSACTIONS RESTATED (CONTINUED) On July 15, 2005, the Company issued 71,429 free-trading shares of common stock to Steve Berrera for consulting services. Accordingly, the Company recorded a non-cash charge of $43,572 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On July 17, 2005, the Company issued 128,572 shares of free-trading common stock to Christopher McCauley, Secretary of the Company, for consulting services. Accordingly, the Company recorded a non-cash charge of $78,429 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On July 17, 2005, the Company issued 53,571 shares of free-trading common stock to Ben Kaplan for consulting services. Accordingly, the Company recorded a non-cash charge of $32,678 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On August 4, 2005, as further discussed in Note 15 the Company's board of directors authorized the cancellation of Kamal Abdallah "Stock subscription receivable" of $4,000,000 in exchange for his return of the 1,533,333 shares for Company cancellation. In addition, Kamal Abdallah was released from assigning title to the real estate with an appraised value of $4,000,000 to the Company. In consideration for the aforementioned rescission transactions, the Company was required to and did issue 100,000 Class A convertible preferred shares and Kamal Abdallah was required to transfer marketable securities having an aggregate fair value of $1,000,000 to the Company. See Note 15 above entitled "Investment in Preferred Series B Rule 144 restricted stock of Siteworks Building and Development Co, publicly-traded entity" for a description of the securities furnished by Kamal Abdallah to the Company. On August 4, 2005, the Company issued 80,000 shares of the company's Series A Convertible Preferred Stock to Kamal Abdallah for an aggregate purchase price of $800,000. Each share of the Preferred Stock is convertible into 1,000 shares of UPDA common stock. 53,334 shares of Mr. Abdallah's Preferred Stock are currently convertible, or are convertible within the next sixty (60) days, into 53,334,000 shares of UPDA common stock. Mr. Abdallah paid for the shares of Preferred Stock by transferring securities owned by him with an aggregate market value of $800,000 to UPDA. On August 4, 2005, the Company issued 20,000 shares of the company's Series A Convertible Preferred Stock to Christopher McCauley for an aggregate purchase price of $200,000. Each share of the Preferred Stock is convertible into 1,000 shares of UPDA common stock. 13,334 shares of Mr. McCauley's Preferred Stock are currently convertible, or are convertible within the next sixty (60) days, into 13,334,000 shares of UPDA common stock. Mr. McCauley paid for the shares of Preferred Stock by transferring securities owned by him with an aggregate market value of $200,000 to UPDA. On August 17, 2005, the Company advised its stock transfer agent that the certificates for 70,000 of previously Rule 144 restricted shares of common stock in the hands of holders for a period in excess of one year from the date the shares were issued by the Company qualified to be released from that share trading restriction and on now freely trading shares. The Company had previously recorded a non-cash charge for consulting services in conjunction with the issuance of the shares. On August 18, 2005, the Company issued 71,429 shares of free-trading common stock to Dr. Bashiruddin Usama in settlement of a preexisting liability of $31,500 for past consulting services accrued at December 31, 2004. The Company has recorded an additional non-cash charge of $19,929 for difference between the trading price of the shares on the date of their issuance in excess of the trading price on the date the past consulting services accrued liability was measured. On August 18, 2005, the Company issued 8,500 shares of free-trading common stock to Dr. Bashiruddin Usama for current year consulting services. Accordingly, the Company recorded a non-cash charge of $6,120 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On August 18, 2005, the Company issued 150,000 shares of free-trading common stock to Christopher McCauley for current year consulting services. Accordingly, the Company recorded a non-cash charge of $108,000 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On August 18, 2005, the Company issued 440,000 shares of free-trading common stock to Kamal Abdallah for current year consulting services. Accordingly, the Company recorded a non-cash charge of $316,800 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. 15 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 16 - EQUITY TRANSACTIONS (CONTINUED) On August 18, 2005, the Company issued 27,105 shares of free-trading common stock to Dr. Robert Gilmore in settlement of notes payable totaling $5,421. Accordingly, the Company recorded a non-cash debt conversion charge of $14,095, based on the difference between the prices of the shares on the date of their issuance in excess of face value of the debt obligation. On September 15, 2005, the Company issued 120,000 shares of free-trading common stock to the principals of Profit Planners, Inc. in settlement of a portion of a preexisting liability of $18,000 for past consulting services accrued at December 31, 2004. The Company has recorded an additional non-cash charge of $24,000 for the difference between the trading prices of the shares on the date of their issuance in excess of the trading price on the date the portion of past consulting services accrued liability was measured. On September 16, 2005, the Company issued 53,571 shares of free-trading common stock to Triple Crown Consulting for current year consulting services. Accordingly, the Company recorded a non-cash charge of $18,750 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On September 28, 2005, the Company issued 200,000 shares of free-trading common stock to the principals of Profit Planners, Inc. in settlement of the remainder of preexisting liability of $9,477 for past year consulting services accrued at December 31, 2004. The Company has recorded an additional non-cash charge for difference between the trading price of the shares on the date of their issuance in excess of the trading price on the date the portion of past consulting services accrued liability was measured. It has also recorded a non-cash charge for the current year consulting services based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On September 30, 2005, the Company issued 69,085 shares of free-trading common stock to Dr. Bashiruddin Usama in settlement of notes payable totaling $11,468. Accordingly, the Company recorded a non-cash debt conversion charge of $6,494, based on the difference between the prices of the shares on the date of their issuance in excess of face value of the debt obligation. On September 30, 2005, the Company issued 143,810 shares of free-trading common stock to Dr. Charles Harper in settlement of notes payable totaling $37,391. Accordingly, the Company recorded a non-cash debt conversion charge of $8,629, based on the difference between the prices of the shares on the date of their issuance in excess of face value of the debt obligation. On September 30, 2005, the Company issued 500,000 shares of free-trading common stock to Christopher McCauley, Secretary of the Company, for current year consulting services. Accordingly, the Company recorded a non-cash charge of $130,000 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On September 30, 2005, the Company issued 1,500,000 shares of free-trading common stock to Kamal Abdallah, Chairman and CEO of the Company, in settlement of current year accrued unpaid compensation totaling $145,548. Accordingly, the Company recorded a non-cash charge of $244,452, related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. In September 2005, the Company agreed to issue 255 shares of Class B convertible preferred stock ("Class B Preferred") with a $1,000 face value to Bratenahl Estates Development, LLC in consideration of $255,000 in cash. One share of Class B Preferred is convertible into 2000 shares of Common Stock. The Company received the entire $255,000 in cash during the third quarter of 2005 and the actual Class B Preferred Stock certificates were issued to Bratenahl during the first quarter of 2006. In December 2005 the Company agreed to issue Six Hundred Eighteen (698) shares Class B preferred stock in exchange for an investment of Six Hundred Ninety-Eight Thousand Dollars ($698,000) from Miramar Investments, Inc. pursuant to a previously executed investment agreement. The stock certificates were issued during the first quarter of 2006. During the fourth quarter of 2005, the Company issued 867,809 shares of common stock for past services rendered to the Company by various consultants. The Company recorded non-cash compensation charges for $529,433 related to the issuances, reflecting the fair market value of the shares when granted. 16 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 16 - EQUITY TRANSACTIONS (CONTINUED) During the fourth quarter of 2005, the Company issued 711,923 shares of common stock in settlement of $146,731 debts owed by the Company to Dr. Harris and Hunter Covington for $106,731 and $40,000, respectively. The Company recorded non-cash debt conversion charges of $351,996 related to the issuances, reflecting the fair market value of the shares when granted less the debts settled. On January 11, 2006, the Company issued 375,000 shares of free-trading common stock to the principals of Profit Planners, Inc. for current and prior year consulting services. Accordingly, the Company recorded a non-cash charge of $67,501 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. In addition, on March 8, 2006 the Company issued another 300,000 shares of free-trading common stock to the principals of Profit Planners, Inc. for current year consulting services. Accordingly, the Company recorded another non-cash charge of $63,000 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On April 25, 2006, the Company issued 300,000 shares of free-trading common stock to the principals of Profit Planners, Inc. for current year consulting services. Accordingly, the company recorded a non-cash charge of $54,000 related to these issuances, based on the trading price of Company shares on or the date on which the shares were issued. On June 5, 2006, the Company issued 800,000 shares of free-trading common stock to the principals of Profit Planners, Inc. for current year consulting services. Accordingly, the company recorded a non-cash charge of $80,000 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On March 29, 2006, the Company approved the settlement agreement with Peter Nasca Associates, Inc. and issued 15,000 shares of free-trading common stock to Peter Nasca for current and prior year consulting services. Accordingly, the Company recorded a non-cash charge of $3,000 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On January 30, 2006, the Company issued 50,000 shares of free-trading common stock to Brad Moore for current year consulting services. Accordingly, the Company recorded a non-cash charge of $19,500 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On March 1, 2006, the Company issued 30,000 shares of free-trading common stock to Brad Moore for current year consulting services. Accordingly, the Company recorded a non-cash charge of $7,500 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. In addition, on March 27, 2006 Company issued another 47,250 shares of free-trading common stock to Brad Moore for current year consulting services. Accordingly, the Company recorded another non-cash charge of $8,033 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On April 25, 2006, the Company issued 42,000 shares of free-trading common stock to Bradford Moore for current year consulting services. Accordingly, the company recorded a non-cash charge of $7,560 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On May 22, 2006, the Company issued 72,500 shares of free-trading common stock to Bradford Moore for current year consulting services. Accordingly, the company recorded a non-cash charge of $7,975 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On June 22, 2006, the Company issued 185,000 shares of free-trading common stock to Bradford Moore for current year consulting services. Accordingly, the company recorded a non-cash charge of $14,800 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On February 1, 2006, the Company issued 25,000 shares of free-trading common stock to Stephen Britt for current year consulting services. Accordingly, the Company recorded a non-cash charge of $11,250 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On March 6, 2006, the Company issued 13,350 shares of free-trading common stock to Stephen Britt for current year consulting services. Accordingly, the Company recorded a non-cash charge of $3,338 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. In addition, on March 31, 2006 Company issued another 22,250 shares of free-trading common stock to Stephen Britt for current year consulting services. Accordingly, the Company recorded another non-cash charge of $4,005 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On April 25, 2006, the Company issued 22,500 shares of free-trading common stock to Stephen Britt for current year consulting services. Accordingly, the company recorded a non-cash charge of $4,050 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On May 22, 2006, the Company issued 29,000 shares of free-trading common stock to Stephen Britt for current year consulting services. Accordingly, the company recorded a non-cash charge of $3,190 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On June 30, 2006, the Company issued 75,000 shares of free-trading common stock to Stephen Britt for current year consulting services. Accordingly, the company recorded a non-cash charge of $5,250 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On February 13, 2006, the Company issued 50,000 shares of free-trading common stock to Ziv Damary for current year Web-site consulting services. Accordingly, the Company recorded a non-cash charge of $15,000 related to these issuances, based on the trading price of Company shares on the contract signing date or the date on which the shares were issued, whichever was earlier. On April 7, 2006, the Company issued 200,000 shares of free-trading common stock to Landmark 4, LLC for current year consulting services. Accordingly, the company recorded a non-cash charge of $38,000 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On May 23, 2006, the Company issued 200,000 shares of free-trading common stock to Landmark 4, LLC for current year consulting services. Accordingly, the company recorded a non-cash charge of $20,000 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On May 1, 2006, the Company issued 200,000 shares of free-trading common stock to Hiyam Ahmad for current year consulting services. Accordingly, the company recorded a non-cash charge of $34,000 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. On May 23, 2006, the Company issued 100,000 shares of free-trading common stock to Tim Brink for current year consulting services. Accordingly, the company recorded a non-cash charge of $10,000 related to these issuances, based on the trading price of Company shares on the date on which the shares were issued. During the three months ended June 30, 2006, the Company agreed to issue 1,850 shares of its Class B Preferred Stock to Miramar Investments, Inc. pursuant to the terms of an investment agreement between the registrant and Miramar. The shares of Class B preferred stock issued to Miramar are restricted shares, pursuant SEC Rule 144R, and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended or such sale is pursuant to a valid exemption from such registration. The securities issued to Miramar Investments, Inc., were in exchange for $1,850,000 in cash. The Company recorded approximately $1,850,000 as a beneficial conversion relating to the conversion of the old Procore preferred stock and Class B preferred stock because the fair market value of the common stock was greater than the face value of the preferred stock. During the six months ended June 30, 2006, the Company agreed to issue 3,640 shares of its Class B Preferred Stock to Miramar Investments, Inc. pursuant to the terms of an investment agreement between the registrant and Miramar. The shares of Class B preferred stock issued to Miramar are restricted shares, pursuant SEC Rule 144R, and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended or such sale is pursuant to a valid exemption from such registration. The securities issued to Miramar Investments, Inc., were in exchange for $3,640,000 in cash. The Company recorded approximately $3,640,000 as a beneficial conversion relating to the conversion of the old Procore preferred stock and Class B preferred stock because the fair market value of the common stock was greater than the face value of the preferred stock. 17 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 16 - EQUITY TRANSACTIONS (CONTINUED) In March 2006 the Company issued 500,000 shares of free trading shares in an agreement of settlement and release of claims for past consulting services in settlement of accounts payable and accrued expenses payable of $125,000, resulting in $30,000 of the gain on conversion costs being incurred from their liabilities. NOTE 17- RELATED PARTY TRANSACTIONS On March 24, 2005 the Company issued to Curtis L. Pree 25,000 shares of stock subjected to rule 144 restrictions as part of his employment agreement. The Company recorded a non cash charge of $125,000 related to this stock issuance. In March 2005 the Company issued to four consultants 25,000 shares for professional services. The Company recorded a non-cash expense of $150,000 based on the fair market price of the Company's stock. In March 2005 the Company issued to Payment Solutions, Inc 70,000 shares of stock for consulting services. The Company recorded a non cash charge of $350,000 related to this stock issuance. In March 2005 the Company issued to George Csatary 30,000 shares of stock for consulting services. The Company recorded a non cash charge of $150,000 related to this stock issuance. In March 2005 the Company issued to LL Capital, Inc. 10,000 shares of stock for consulting services. The Company recorded a non cash charge of $50,000 related to this stock issuance. During the three and six months ended June 30, 2006, the Company incurred none and $25,000, respectively, of consulting fees and services to Dr. Bashirudden Usama, the former Chief Executive Officer and President of the Company. Consulting fees and services incurred by the Company to Dr. Bashirudden Usama, including options granted and paid or payable in cash aggregated $0 and $25,000, respectively during the three and six months ended June 30, 2006. In March 2005, Kamal Abdallah was appointed by the Company as Chief Executive Officer, President and Chairman of its Board of Directors for a term of five (5) years, expiring March 11, 2010, with first year annual compensation of Three Hundred Thousand Dollars and issuance of Five Hundred Thousand free-trading shares each quarter and an additional two million shares each year. The agreement also entitles him to certain fringe benefits, such as vacation and health insurance, and guarantees payment of his compensation in the event of termination. The Board has also authorized a further issuance of 2,000,000 shares per annum for every one million dollars in Company net income as well as a bonus of no less than ten thousand dollars per quarter. Effective October 1, 2005, the employment agreement was amended to reduce annual compensation to $150,000 per year. During the six months ended June 30, 2006 and June 30, 2005 the Company incurred $75,000, and $95,548, respectively of payroll expenses to Kamal Abdallah, the Chairman, President and Chief Executive Officer of the Company, of which $75,500 is included in accrued liabilities at June 30, 2006. Accordingly, consulting fees and services incurred by the Company to Kamal Abdallah, including share issuances and amounts paid or payable in cash, aggregated $25,000 and none during the six months ended June 30, 2006, and June 30, 2005, respectively. During the three and six months ended June 30, 2006, the Company incurred $30,000 and $60,000, respectively, of payroll expenses to Chris McCauley, the Company's in-house counsel, of which none is included in accrued liabilities at June 30, 2006. Accordingly, consulting fees and services incurred by the Company to Chris McCauley, including share issuances and amounts paid or payable in cash, aggregated $30,000 and none during the six months ended June 30, 2006 and June 30, 2005, respectively. During the three and six months ended June 30, 2006, the Company incurred none and $25,000, respectively, of consulting fees and services to Dr. Bashirudden Usama, the former Chief Executive Officer and President. On May 1, 2006, the Company entered into an agreement with Tevy Kaplan for consulting services including acting liaison to UPDA Operators, Inc and Texas Energy Pipeline and Gathering Systems, Inc. for the period of one month with payment of $7,000. Tevy Kaplan is also a Director in Avalon Oil and Gas. On May 1, 2006, UPDA received 7,500,000 shares of Avalon's common stock due to the sale of our Starr County lease. The shares of Avalon were valued at fair market value of $975,000 at the issuance date. Canyon Creek recognized a profit of $1,050,000 on this transaction. At June 30, 2006, due to a decrease in share price, Canyon recognized a loss of $225,000 on the Avalon shares, bringing the fair market value of the shares to $750,000. 18 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 18 - COMMITMENTS AND CONTINGENCIES EMPLOYMENT AGREEMENTS Effective, October 1, 2005, the Company entered into an Employment Agreement with a four year term with Kamal Abdallah, the Chairman, President and CEO of the Company, with automatic annual one year renewals, at a $150,000 annual compensation. It provides for a thirty-day notice period for non-renewal. It also provides for a performance bonus of up to $600,000 at the discretion of the Board of Directors, plus fringe benefits such as health and life insurance. In the event of termination without cause Mr. Abdallah is to receive a lump-sum payment from the Company of $1,000,000. Effective October 1, 2005, the Company entered into an Employment Agreement with a four year term with Christopher McCauley, the Vice President and Secretary of the Company, with automatic annual one year renewals, at a $120,000 annual compensation. It provides for a thirty-day notice period for non-renewal. It also provides for a performance bonus of up to $600,000 at the discretion of the Board of Directors, plus fringe benefits such as health and life insurance. Mr. McCauley is to receive a lump-sum payment from the Company of $1,000,000. Effective January 1, 2006, the Company entered into an Employment Agreement with one year term with Steven Barrera, the Texas Regional Manager of the Company with automatic annual one year renewals, at a $60,000 annual compensation. It provides for a thirty-day notice period for non-renewal. Effective July 1, 2006, the company entered into an Employment Agreement with a two year term with Steven A. Fall, the Chief Geologist of the Company and its subsidiaries at a $84,000 annual compensation. It also provides for a minimum bonus of $16,000 and other benefits and incentive bonus. Under the above agreements, at June 30, 2006 the Company's future commitments are as follows: Years ending June 30: ---------------------- 2007 $ 400,000 2008 370,000 2009 270,000 2010 135,000 ------------ Total $ 1,175,000 ============ LEASE AGREEMENTS In January 2006, the Company entered into a lease for office space in Florida. The lease expires February 28, 2009, and provides an option to renew for one additional term of three years. Annual rent under the lease is $20,398, subject to annual escalations. In December 2005, West Oil & Gas, Inc. assumed a twelve-month lease for office space in Utah. The lease expires November 30, 2006, and the minimum monthly payment under the lease is $1,147. On July 31, 2006, UPDA-O signed a Rental Lease Agreement for leased space in Jacksboro, Texas . The lease expires July 31, 2009, and the minimum monthly rent is $500. Rent expense was $16,824 and $26,651 and $735 and $2,251 for the three and six months ended June 30, 2006, and June 30, 2005, respectively. Under the above lease agreements, at June 30, 2006 the Company's future commitments are as follows: Years ending June 30: ---------------------- 2007 $ 32,133 2008 26,398 2009 24,698 ------------ Total $ 83,229 ============ 19 UNIVERSAL PROPERTY DEVELOPMENT ACQUISITION CORP. AND SUBSIDIARIES (FORMERLY KNOWN AS PROCORE GROUP, INC.) Notes to the Consolidated Unaudited Financial Statements June 30, 2006 NOTE 19 - STOCK OPTIONS The Company granted an option to purchase 8,500 common shares in June 2004 with an exercise price of $.001 to Dr. Bashirudden Usama. The option has a five year life and vested immediately. The fair value for option was estimated on the date of grant using the share price on the date of the grant. The board of directors adopted a stock option plan effective October 18, 2004. This Plan shall expire on October 17, 2014. The Company has reserved 65,000,000 shares of common stock under this plan to be issued to employees, directors and consultants. As of December 31, 2004, the Company has issued 8,500 shares under this plan, consisting of an 8,500 option that replaced the option issued to Dr. Bashirudden Usama in June of 2004. NOTE 20 - PREFERRED STOCK During the fourth quarter of 2005 the Company advised its stock transfer agent that it should convert certificates surrendered representing 500 shares of $.001 par value convertible preferred stock into common stock of the Company at a conversion rate of 0.002, a rate equivalent to the conversion value of the preferred shares prior to stock splits for future investments in the Company by the holders. These previously restricted preferred shares have been in the hands of holders for a period in excess of two years from the date the convertible preferred shares were issued by the Company. Accordingly, these convertible preferred shares qualified to be released from that share trading restriction and the underlying common stock from the conversion can now be freely trading shares. During the six months ended June 30, 2006, 282 shares of preferred were converted into 140,810,002 shares of common stock under this arrangement. NOTE 21 - SUBSEQUENT EVENTS On July 1, 2006, the company entered into an employment agreement with Steven A. Fall, for the period of two years in which Steven A. Fall will be Chief Geologist of the Company and its subsidiaries with compensation for said services at a base salary of $84,000 per year plus a $16,000 minimum bonus and other benefits and incentive bonus. On July 1, 2006, UPDA entered into an agreement with Copper Beech Equity Partners (Copper Beech) granting them the right to act as the Company's Financial and Strategic Advisors for a term of 12 months with 12 month renewals for a fee of $5,000 per month, $2,500 per month in registered UPDA shares. In addition, for capital raised or acquisitions facilitated by Copper Beech, they would transaction fees based on the value of the deal. On July 17, 2006, the Company issued 35,000 free trading shares of common stock to Copper Beech in connection with the agreement. In addition, on August 2, 2006, the Company issued 50,000 free trading shares of common stock to Copper Beach Equity for services rendered as a consultant to the Company. On July 1,2006, the Company entered into an agreement with Ernst Communication Group for Investor Relations Services in order to increase the Company's financial community awareness and prospects, for a period of one year with payment of $8,000 cash and $4,000 in stock, monthly. On July 20, 2006, the Company issued 50,000 free trading shares of common stock to Ernst Communications for services rendered as a consultant to the Company. On July 20, 2006, the Company issued 200,000 free trading shares of common stock to Landmark for services rendered as a consultant to the Company. On July 31, 2006, UPDA-O signed a Rental Lease Agreement for leased space in Jacksboro, Texas . The lease expires July 31, 2009, and the minimum monthly rent is $500. 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - For the Three and Six Months Ended June 30, 2006 Oil and natural gas sales. For the three and six months ended June 30, 2006, oil and natural gas sales revenue was $112,039 and $218,469 compared to none and none for the same periods during 2005, respectively. The revenues were the result of our producing wells in the Canyon Creek and Texas Energy subsidiaries Sale of lease. The profit on the sale of the Canyon Creek lease was $1,050,000 for both the three and six months ended June 30, 2006 compared to none for both the three and six months ended June 30, 2005, respectively. Management fee income. For the both the three and six months ended June 30, 2006, management fee income was $14,256 compared to none for both of the same periods during 2005, respectively. Oil and gas production costs. Our lease operating expenses (LOE) were $11, 287 for both the three and six months ended June 30, 2006, respectively. Our LOE were none for both the three and six months ended June 30, 2005, respectively. Our production costs were $30,943 and $35,807 for the three and six months ended June 30, 2006 compared to none for both the three and six months ended June 30, 2005, respectively. Cost of lease sold. The cost of lease sold by Canyon Creek was $47,000 for both the three and six months ended June 30, 2006 compared to none for both the three and six months ended June 30, 2005, respectively. Depreciation and depletion. Our depreciation and depletion expense was $49,148 and $219,414 for the three and six months ended June 30, 2006, compared to none for both the three and six months ended June 30, 2005. The increase was a result of our entry into the energy business, and our recent purchases of office equipment. General and administrative expenses. General and administrative expenses increased by $331,423 and $475,966 to $352,711 and $551,143 for the three and six months ended June 30, 2006, compared to the same periods in 2005. The increase was primarily related to increases in compensation expense associated with an increase in personnel required to administer our growth and entry into the energy business. Interest expense, net. Interest expense, net decreased by $12,287 and $24,347 to $670 and $1,340 for the three and six months ended June 30, 2006 when compared to the same periods in 2005. The decrease was due to lower outstanding debt over the quarter. Loss on marketable securities. The loss on marketable securities received from Avalon was due to a decrease in share price. Canyon Creek recognized a loss of $225,000 in both the three and six months ended June 30, 2006 compared to none for both the three and six months ended June 30, 2005. Income tax expense. Our effective tax rate was 25% during the six months ended June 30, 2005 and remained steady at 25% for the six months ended June 30, 2006. Net loss after minority interest. Net loss decreased by $40,636 for the three months ended June 30, 2006 to $343,518 when compared to the same period in 2005. Net loss decreased by $5,524,712 to $818,681 for the six months ended June 30, 2006 when compared to the same period in 2005. The reasons for this decrease include the large decrease in stock issued for consulting fees and services due to the new management team, our exit from the real estate business, and our entry into the energy business. Revenues Year to Date by Geographic Section All revenue from sales of crude oil and gas during the six months ended June 30, 2006 were in the State of Texas. Capital Resources and Liquidity As shown in the consolidated financial statements, as of June 20, 2006, the Company had cash on hand of $380,241, compared to $132,935 at December 31, 2005. The Company had positive net cash flows from operations for the six months ended June 30, 2006 of $456,648 compared to negative net cash flows of $233,450 for the same period in 2005 due principally to the efforts of the management team to settle or reduce older payables. The Company had negative cash flows from investing activities for the six months ended June 30, 2006 of $3,954,975 compared to none in the same period in 2005 mainly due to investments in oil and gas leaseholds including expenditures for revitalization of the wells. 21 Cash inflows from financing activities during the six months ended June 30, 2006 of $3,745,633 consisted of $3,640,000 of cash raised through the sales of Class B Convertible Preferred Stock and $105,633 in notes payable, compared to inflows of $242,347 from sales of common stock and notes payable during the same period in 2005. The Company had losses $816,681 for the six months ended June 30, 2006. In order for the Company to continue during the next twelve months we will need to secure approximately $1.5 million of debt or equity financing. While we expect to raise the additional financing in the future, there can be no guarantee that we will be successful. Disclosures About Market Risks Like other natural resource producers, we face certain unique market risks. The two most salient risk factors are the volatile prices of oil and gas and certain environmental concerns and obligations. Oil and Gas Prices Current competitive factors in the domestic oil and gas industry are unique. The actual price range of crude oil is largely established by major international producers. Pricing for natural gas is more regional. Because domestic demand for oil and gas exceeds supply, there is little risk that all current production will not be sold at relatively fixed prices. To this extent we do not see the Company as directly competitive with other producers, nor is there any significant risk that the Company could not sell all production at current prices with a reasonable profit margin. The risk of domestic overproduction at current prices is not deemed significant. The primary competitive risks would come from falling international prices which could render current production uneconomical. It is also significant that more favorable prices can usually be negotiated for larger quantities of oil and/or gas product, such that the Company views itself as having a price disadvantage to larger producers. Large producers also have a competitive advantage to the extent they can devote substantially more resources to acquiring prime leases and resources to better find and develop prospects. Environmental Oil and gas production is a highly regulated activity which is subject to significant environmental and conservation regulations both on a federal and state level. Historically, most of the environmental regulation of oil and gas production has been left to state regulatory boards or agencies in those jurisdictions where there is significant gas and oil production, with limited direct regulation by such federal agencies as the Environmental Protection Agency. However, while the Company believes this generally to be the case for its production activities in Texas, Oklahoma, Kansas and New Mexico, it should be noticed that there are various Environmental Protection Agency regulations which would govern significant spills, blow-outs, or uncontrolled emissions. In Oklahoma, Texas, Kansas and New Mexico specific oil and gas regulations exist related to the drilling, completion and operations of wells, as well as disposal of waste oil. There are also procedures incident to the plugging and abandonment of dry holes or other non-operational wells, all as governed by the Oklahoma Corporation Commission, Oil and Gas Division, the Texas Railroad Commission, Oil and Gas Division, the Kansas Corporation Commission, Oil and Gas Division or the New Mexico Oil Conservation Division. Compliance with these regulations may constitute a significant cost and effort for UPDA. No specific accounting for environmental compliance has been maintained or projected by UPDA to date. UPDA does not presently know of any environmental demands, claims, or adverse actions, litigation or administrative proceedings in which it or the acquired properties are involved or subject to or arising out of its predecessor operations. In the event of a breach of environmental regulations, these environmental regulatory agencies have a broad range of alternative or cumulative remedies to include: ordering a clean up of any spills or waste material and restoration of the soil or water to conditions existing prior to the environmental violation; fines; or enjoining further drilling, completion or production activities. In certain egregious situations the agencies may also pursue criminal remedies against the Company or its principals. Forward-Looking Information Certain statements in this Section and elsewhere in this report are forward-looking in nature and relate to trends and events that may affect the Company's future financial position and operating results. Such statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The terms "expect," "anticipate," "intend," and "project" and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this report. The statements are based on current expectations, are inherently uncertain, are subject to risks, and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including changes in economic conditions in the markets served by the company, increasing competition, fluctuations in raw materials and energy prices, and other unanticipated events and conditions. It is not possible to foresee or identify all such factors. The company makes no commitment to update any forward-looking statement or to disclose any facts, events, or circumstances after the date hereof that may affect the accuracy of any forward-looking statement. 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company maintains controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. At the end of the period covered by this Quarterly Report on Form 10-QSB the Company's management, under the supervision and with the participation of the Company's Chief Executive Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's Chief Executive Officer concluded that as of the end of such period the Company's disclosure control and procedures are effective in alerting them to material information that is required to be included in the reports the Company files or submits under the Securities Exchange Act of 1934. Changes in Internal Controls Over Financial Reporting There have been no changes in the Company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in litigation in Fort Bend County, Texas regarding certain disputes that have arisen relating to Mr. Don Orr's previous involvement with Canyon Creek Oil and Gas, Inc. The Company believes this litigation is without merit and intends to file a Counterclaim against Mr. Orr if it is unable to resolve the litigation in the near future. ITEM 1A. RISK FACTORS There have been no material changes in the risk factors previously described in Item 1A to Part I of our Form 10-KSB/A filed on August 21, 2006. ITEM 2. CHANGE IN SECURITIES On February 13, 2006, we issued Eight Hundred and Ten (810) shares of our Class B Preferred Stock to Miramar Investments, Inc. pursuant to the terms of an investment agreement. The shares of Class B preferred stock issued to Miramar are restricted shares and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. Each share of Class B Preferred Stock is convertible into 20,000 restricted shares of our common stock and is so convertible immediately upon issuance. The transaction referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. Miramar Investments, Inc. is an accredited investor, as defined by Rule 501 of Regulation D, and has the business and financial knowledge to analyze the risks associated with an investment in our Class B Preferred Stock. The securities issued to Miramar Investments, Inc., were in exchange for the sum of Eight Hundred and Ten Thousand Dollars ($810,000.00) in cash. The transaction referred to above was an exempt transaction in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transaction. 23 During the first quarter of 2006, we issued Nine Hundred and Eighty (980) shares of our Class B Preferred Stock to Miramar Investments, Inc. pursuant to the terms of an investment agreement. The shares of Class B preferred stock issued to Miramar are restricted shares and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. Each share of Class B Preferred Stock is convertible into 20,000 restricted shares of our common stock and is so convertible immediately upon issuance. The transaction referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. Miramar Investments, Inc. is an accredited investor, as defined by Rule 501 of Regulation D, and has the business and financial knowledge to analyze the risks associated with an investment in our Class B Preferred Stock. The securities issued to Miramar Investments, Inc., were in exchange for the sum of Nine Hundred and Eighty Thousand Dollars ($980,000.00) in cash. The transaction referred to above was an exempt transaction in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transaction. During the second quarter of 2006, we issued One Thousand Eight Hundred Fifty (1,850) shares of our Class B Preferred Stock to Miramar Investments, Inc. pursuant to the terms of an investment agreement. The shares of Class B preferred stock issued to Miramar are restricted shares and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. Each share of Class B Preferred Stock is convertible into 20,000 restricted shares of our common stock and is so convertible immediately upon issuance. The transaction referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. Miramar Investments, Inc. is an accredited investor, as defined by Rule 501 of Regulation D, and has the business and financial knowledge to analyze the risks associated with an investment in our Class B Preferred Stock. The securities issued to Miramar Investments, Inc., were in exchange for the sum of One Million Eight Hundred Fifty Thousand Dollars ($1,850,000.00) in cash. The transaction referred to above was an exempt transaction in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transaction. During the first quarter of 2006, we issued 375,000 shares of our common stock to various consultants as payment for past accounting services rendered to the Company by such consultants. The Company recorded non-cash compensation charges for $67,125 related to the issuances. The transactions referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. Each of the consultants who received shares of our common stock in the above referenced transaction are accredited investors, as defined by Rule 501 of Regulation D, and have the business and financial knowledge to analyze the risks associated with ownership of our common stock. The transactions referred to above were exempt transactions in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transaction. During the first quarter of 2006, we issued 1,052,850 shares of our common stock to various consultants as payment for services rendered to the Company by such consultants. The Company recorded non-cash compensation charges for $228,572 related to the issuances. The transactions referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. Each of the consultants who received shares of our common stock in the above referenced transaction are accredited investors, as defined by Rule 501 of Regulation D, and have the business and financial knowledge to analyze the risks associated with ownership of our common stock. The transactions referred to above were exempt transactions in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transaction. During the second quarter of 2006, we issued 2,226,000 shares of our common stock to various consultants as payment for services rendered to the Company by such consultants. The Company recorded non-cash compensation charges for $276,599 related to the issuances. The transactions referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. Each of the consultants who received shares of our common stock in the above referenced transaction are accredited investors, as defined by Rule 501 of Regulation D, and have the business and financial knowledge to analyze the risks associated with ownership of our common stock. The transactions referred to above were exempt transactions in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering. We did not engage in any public solicitations in connection with the above transaction. Preferred Stock Conversions During the first quarter of 2006 we advised our stock transfer agent that any certificates representing shares of the 500 outstanding shares of our $.001 par value convertible preferred stock issued and dated prior to October 2003 (the "2003" Preferred Stock") that were surrendered by the holders thereof for conversion to shares of our common stock should be converted at a rate of 500,000 shares of common stock for each share of the 2003 Preferred Stock surrendered (a rate equivalent to the conversion rate of the preferred shares prior to any stock splits of our common stock). The outstanding shares of 2003 Preferred Stock are restricted shares, but they have been fully paid and outstanding for a period in excess of two years from the date of their issuance. No additional consideration is payable upon the conversion of the 2003 Preferred Stock to shares of our common stock. Accordingly, the holders of the shares of underlying common stock issued upon conversion of shares of the 2003 Preferred Stock shall be entitled to request the removal of any restrictive legends that would be attached to the common shares so issued in accordance with the provisions of Rule 144(k) under the Securities Act of 1933, as amended. During the six months ended June 30, 2006, approximately two hundred eighty-two (282) shares of the 2003 Preferred Stock were converted into approximately 140,810,000 shares of our common stock in the manner described above. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 24 ITEM 5. OTHER INFORMATION None Texas Energy Inc. Joint Venture On March 7, 2006, the Company, Ty McDermett and Andrew McDermett, Jr. (collectively the "McDermetts") and Sundial Resources, Inc. ("SRI"), a private Texas corporation, entered into a Memorandum of Understanding (the "MOU") pursuant to which they agreed to the terms for the formation and operation of a joint venture. The McDermetts are the principals of SRI. Pursuant to the terms of the MOU, on March 9, 2006, the Company, the McDermetts and SRI formed Texas Energy, Inc. ("Texas Energy"), a Nevada corporation, as the joint venture entity to carry out the proposed operations of the joint venture. The Company owns seventy-five (75) percent of the capital stock of Texas Energy and the McDermetts collectively own twenty-five (25) percent of the capital stock of Texas Energy. Under the terms of the MOU, and as consideration for their respective shares of the capital stock of Texas Energy, we have agreed to provide a minimum of four hundred thousand ($400,000) dollars to Texas Energy to finance the operations of the joint venture and the McDermetts and SRI have assigned four (4) oil and gas leases (the "Leases") to Texas Energy. The Leases were assigned to Texas Energy by the McDermetts and SRI on March 9, 2006 and they cover approximately 382.95 acres in the oil and gas fields known as Thresher, Medlen, Nantz and Wiechman, in Young County, Texas, and the wells and equipment thereon. As additional consideration for the McDermetts and SRI to enter into the joint venture and to assign the above Leases thereto, we have agreed to pay one hundred thousand dollars ($100,000) directly to SRI. . In the three months ended June 30, 2006, the Company paid approximately $318,900 to Andrew McDermett for workovers and $47,000 for a lease. Under the terms of the MOU, Texas Energy will have a three-member board of directors. Two members of the board will be chosen by the Company and one member will be chosen by SRI. Further, under the MOU, any additional funding required by Texas Energy for its operations will be provided by the Company and the McDermetts or SRI on a pro-rata basis based on their percentage ownership of Texas Energy's capital stock. SRI will be responsible for the day-to-day operations of Texas Energy, but Texas Energy shall employ the Registrant's accountants for all financial record-keeping and bookkeeping services and we will have control over any disbursements in excess of five thousand dollars ($5,000). SRI will be paid an annual managerial fee equal to five (5) percent of the net operating revenue of Texas Energy. Unless sooner terminated by the mutual agreement of the parties thereto, or replaced by a definitive Joint Venture Agreement, the MOU shall have a term of five (5) years. The Company and SRI intend to operate Texas Energy under the terms of the MOU pending the completion of a definitive Joint Venture Agreement. While we intend for this new joint venture to operate at a net profit, to date Texas Energy has no operating history prior to second quarter and, therefore, we cannot predict what its results of operation will be, or how those operations will impact our operating results in the future. The foregoing description of the MOU and the transactions contemplated thereby is a summary of terms, is not intended to be complete and is qualified in its entirety by the complete text of that agreement, a copy of which is attached as Exhibit 10.4 to this Report. Furthermore, the foregoing description of the Leases is a summary, is not intended to be complete and is qualified in its entirety by the complete text of those agreements, copies of which are attached as exhibits to Exhibits 10.4. Disposition of Assets by Canyon Creek Oil & Gas, Inc. 25 On April 6, 2006, Canyon Creek Oil & Gas, Inc. ("CCOG"), a Nevada corporation and a sixty-five percent (65%) owned joint venture subsidiary of the Company, and Avalon Oil and Gas, Inc. ("Avalon") entered into a Letter of Intent (the "LOI") pursuant to which Avalon agreed to acquire fifty percent (50%) of CCOG's working interest in the oil and gas leaseholds of CCOG described on Exhibit "A" to the LOI (the "Leaseholds"), for an aggregate purchase price of $75,000.00 in cash and 7,500,000 shares of Avalon's common stock. The LOI was intended to indicate Avalon's intention to proceed with a due diligence investigation of the Leaseholds and to negotiate with CCOG in good faith the complete final terms and conditions of a definitive asset purchase agreement. However, Avalon has subsequently completed its due diligence review of the Leaseholds to its satisfaction. As a result, the parties have effectively agreed to close the transaction under the terms of the LOI, and are proceeding to draft an operating agreement, pursuant to which CCOG will manage the Leaseholds. In furtherance of the completion of the transaction outlined in the LOI, on April 24, 2006, Avalon issued and delivered 7,500,000 shares of its common stock to CCOG. On the date of issuance, the closing price of Avalon's common stock was $0.13 per share, giving the 7,500,000 shares issued to CCOG an aggregate market value of $975,000. Furthermore, on April 27, 2006, CCOG received the $75,000.00 cash portion of the purchase price from Avalon. As a result, the total value received by CCOG in connection with the sale of fifty percent (50%) of its working interest in the Leaseholds was $1,050,000. On May 1, 2006, CCOG transferred and assigned to Avalon fifty percent (50%) of CCOG's working interest in the Leaseholds, which it had originally purchased for the total sum of $94,000.00. The foregoing description of the LOI and the transactions contemplated thereby is a summary of terms, is not intended to be complete and is qualified in its entirety by the complete text of that document, including the exhibits thereto, a copy of which is attached as Exhibit 10.8 to this Report. The reader is advised to reference Exhibit 10.8 for the complete terms of the LOI, and for the full description of the Leaseholds contained in the Exhibit A thereto. General On May 3, 2006, the Company filed articles of incorporation for its new company UPDA Operators, Inc. ("UPDA-O") to manage all of its well operations. Upon filing its P-5 Organization Report, UPDA Operators, Inc. will be authorized to operate over 150 wells that the Company owns through its subsidiaries. UPDA Operators, Inc. will assume all responsibility for the maintenance and pumping of the wells, manage the reporting and sales of the expanding production, post the necessary bonds with the Texas Railroad Commission and provide adequate insurance for the fields which it will operate. On August 9, 2006, the Railroad Commission of Texas approved the P - 5 Organization Report to make UPDA-O operator of all UPDA and subsidiaries leases. On June 2, 2006 (the "Closing Date"), Texas Energy, Inc. ("Texas Energy"), a seventy-five percent (75%) owned joint venture subsidiary of Universal Property Development and Acquisition Corporation completed the acquisition of certain leases and equipment pursuant to the terms and conditions of a Purchase Agreement dated April 12, 2006 (the "PA") by and between Texas Energy as the purchaser and the Catlin Oil Company ("COC"),Virginia Catlin, Randy Catlin and the Estate of Carl Catlin (collectively the "Catlins") as the seller. The purchase price for this acquisition was $2.3 million and consisted of more than 30 leases and 64 wells, covering approximately 2,700 acres and various equipment and pipeline infrastructure. The Company is in the process of having an appraisal done by an independent third party to finalize the allocation of the purchase price. 26 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (A) EXHIBITS: The following documents filed by the Company with the Securities and Exchange Commission are hereby incorporated by reference: Exhibit Number Description Of Document - ------ ----------------------- 2.1# Agreement and Plan of Merger dated June 17, 2005, among Pro Core Group, Inc., now known as Universal Property Development and Acquisition Corporation, and Universal Property Development and Acquisition Corporation, a Nevada corporation, which was a wholly-owned subsidiary of Procore Group, Inc. Incorporate by reference to Exhibit 1 to the Current Report on Form 8-K filed by the Company on July 15, 2005. 2.2# Articles of Merger by and between Universal Property Development and Acquisition Corporation and Pro Core Group, Inc. dated June 17, 2005. Incorporate by reference to Exhibit 2 to the Current Report on Form 8-K filed by the Company on July 15, 2005. 2.3# Purchase Agreement by and between Texas Energy, Inc., Catlin Oil Company, Virginia Catlin, Randy Catlin and Virginia Catlin as Independent Executor of the Estate of Carl Catlin, Deceased, dated April 12, 2006. Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on June 7, 2006. 3.1* Articles of Incorporation of Universal Property Development and Acquisition Corporation. 3.2* By-Laws of Universal Property Development and Acquisition Corporation 4.1* Certificate of Designation of Powers, Preferences and Rights of the Class A Convertible Preferred Stock of Universal Property Development and Acquisition Corporation. 4.2* Certificate of Designation of Powers, Preferences and Rights of the Class B Convertible Preferred Stock of Universal Property Development and Acquisition Corporation. 4.3#@ Universal Property Development and Acquisition Corporation 2004 Stock Incentive Plan. Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-8 filed by the Company on November 12, 2004. 10.1# Joint Venture Agreement dated November 17, 2005 by and between by and between USProduction & Exploration, LLC, Universal Property Development and Acquisition Corp, and Triple Crown Consulting governing the formation and management of the joint venture entity Canyon Creek Oil & Gas, Inc. Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on November 22, 2005. 10.2# Joint Venture Agreement dated October 2005 by and between by and between Universal Property Development and Acquisition Corp, Triple Crown Consulting, Inc., RAKJ, Rene Kronvold and Masaood Group governing the formation and management of the joint venture entity West Oil & Gas, Inc. 10.3# Joint Venture Agreement dated December 2005 by and between by and between Universal Property Development and Acquisition Corp and Lion Partners Hedge Fund governing the formation and management of the joint venture entity Winrock Energy, Inc. 10.4# Memorandum of Understanding dated March 2006 by and between by and between Sundial Resources, Inc, Ty McDermett and Andrew McDermett, Jr. and Universal Property Development and Acquisition Corporation governing the formation and management of the joint venture entity Texas Energy, Inc. Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on March 14, 2006. 10.5#@ Employment Agreement between Universal Property Development and Acquisition Corporation and Mr. Kamal Abdallah dated October 1, 2005. Incorporate by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by the Company on October 12, 2005. 27 10.6#@ Employment Agreement between Universal Property Development and Acquisition Corporation and Mr. Christopher McCauley dated October 1, 2005. Incorporate by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by the Company on October 12, 2005. 10.7#@ Employment Agreement between Universal Property Development and Acquisition Corporation and Mr. Steven Barrera dated January 1, 2006. Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on January 23, 2006. 10.8# Letter of Intent by and between Canyon Creek Oil & Gas, Inc. a Nevada corporation and a sixty-five percent (65%) owned joint venture subsidiary of Universal Property Development and Acquisition Corporation, and Avalon Oil and Gas, Inc. dated April 6, 2006. Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on May 6, 2006. 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2* Certification of Principle Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 32.2* Certification of Principle Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. ----------------------------- # Incorporated herein by reference. * Filed herewith. @ Management compensation agreement, plan or arrangement. (b) Reports on Form 8-K: The following reports on Form 8-K have been filed during the quarter covered by this report: On May 3, 2006, we filed a Current Report on Form 8-K, which disclosed that Canyon Creek Oil & Gas, Inc. ("CCOG"), a Nevada corporation and a sixty-five percent (65%) owned joint venture subsidiary of Universal Property Development and Acquisition Corporation (the "Registrant"), and Avalon Oil and Gas, Inc. ("Avalon") had entered into a Letter of Intent (the "LOI") pursuant to which Avalon agreed to acquire fifty percent (50%) of CCOG's working interest in the oil and gas leaseholds of CCOG described on Exhibit "A" to the LOI (the "Leaseholds"), for an aggregate purchase price of $75,000.00 in cash and 7,500,000 shares of Avalon's common stock. On June 7, 2006, we filed a Current Report on Form 8-K which disclosed that Texas Energy, Inc. ("TEI"), a Nevada corporation and a seventy-five percent (75%) owned joint venture subsidiary of Universal Property Development and Acquisition Corporation, completed the acquisition of certain assets from Catlin Oil Company ("COC"), Virginia Catlin, Randy Catlin and the Estate of Carl Catlin (collectively the "Catlins"). The aggregate purchase price of the assets purchased by TEI was $2.3 million. 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 21, 2006 UNIVERSAL PROPERTY DEVELOPMENT AND ACQUISITION CORPORATION By: /s/ Kamal Abdallah ------------------------------------ Kamal Abdallah President, Chief Executive Officer Dated: August 21, 2006 By: /s/ Christopher McCauley ------------------------------------ Christopher McCauley Vice-President, Secretary 29 EXHIBIT INDEX The following documents are filed as exhibits to this Report: Exhibit Number Description Of Document - ------ ----------------------- 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. 30 EX-31.1 2 v051097_ex31-1.txt EXHIBIT 31.1 CERTIFICATION I, Kamal Abdallah., certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Universal Property Development and Acquisition Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or cause such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. August 21, 2006 /s/ Kamal Abdallah ------------------------ Chief Executive Officer EX-31.2 3 v051097_ex31-2.txt EXHIBIT 31.2 CERTIFICATION I, Kamal Abdallah, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Universal Property Development and Acquisition Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or cause such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. August 21, 2006 /s/ Kamal Abdallah -------------------------- Principal Financial Officer EX-32.1 4 v051097_ex32-1.txt EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-QSB of Universal Property Development and Acquisition Corporation (the "Company") for the fiscal quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kamal Abdallah, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Kamal Abdallah -------------------------- Kamal Abdallah August 21, 2006 The foregoing certification is made solely for the purpose of 18 U. S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. EX-32.2 5 v051097_ex32-2.txt EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-QSB of Universal Property Development and Acquisition Corporation (the "Company") for the fiscal quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kamal Abdallah, principal financial officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Kamal Abdallah -------------------------- Kamal Abdallah August 21, 2006 The foregoing certification is made solely for the purpose of 18 U. S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. -----END PRIVACY-ENHANCED MESSAGE-----