• in specified circumstances, the "as-converted" liquidation distribution, if any, payable in such liquidation with respect to each share of common stock.

Upon the occurrence of certain events constituting a "Change of Control" (as defined in the Statement of Resolutions), we are required to make an offer to each holder of Series B Preferred Stock to repurchase all of such holder's Series B Preferred Stock at an offer price per share of Series B Preferred Stock in cash equal to 105% of the Change of Control Purchase Price, which is generally defined to mean $100 plus all cumulative and accrued dividends.

The 2002 Warrants have a five-year term and entitle the holders to purchase up to 252,632 shares of our common stock at a price of $5.94 per share, subject to adjustment, and are exercisable at any time after issuance. For accounting purposes, the 2002 Warrants are valued at $0.06 per 2002 Warrant.

Each of our series of warrants may be exercised on a cashless basis at the option of the holder.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires that an asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which a legal obligation is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense will be recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash outflows discounted at our credit-adjusted risk-free interest rate.

We adopted SFAS No. 143 on January 1, 2003, which resulted in an increase to net oil and gas properties of $0.4 million and additional liabilities related to asset retirement obligations of $0.6 million. These amounts reflect our ARO had the provisions of SFAS No. 143 been applied since inception and resulted in a non-cash cumulative effect decrease to earnings of $0.1 million ($0.2 million pretax). In accordance with the provisions of SFAS No. 143, we record an abandonment liability associated with our oil and gas wells when those assets are placed in service, rather than our past practice of accruing the expected undiscounted abandonment costs on a unit-of-production basis over the productive life of the associated full cost pool. Under SFAS No. 143, depletion expense is reduced since a discounted ARO is depleted in the property balance rather than the undiscounted value previously depleted under the old rules. The lower depletion expense under SFAS No. 143 is offset, however, by accretion expense, which is recognized over time as the discounted liability is accreted to our expected settlement value.

Inherent in the fair value calculation of ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance.

The following table is a reconciliation of the asset retirement obligation liability since adoption (in thousands):

The pro forma asset retirement obligation would have been approximately $0.3 million at January 1, 2001 had we adopted the provisions of SFAS 143 on January 1, 2001. The following table shows the pro forma effect of the implementation on our Income Attributable to Common Stock and Net Income per Common Share had SFAS No. 143 been adopted by us on January 1, 2001.

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