UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 000-31945
---------
POWDER RIVER BASIN GAS CORP.
-----------------------------
(Name of small business issuer as specified in its charter)
104, 3208 8th Avenue NE
Calgary, Alberta T2A 7V8
(403) 263-4145
(Address of principal executive office & telephone number)
Colorado 84-1521645
(State of incorporation) (IRS Employer Identification #)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
[x] Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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.
[X] Yes [ ] No
[x] Check if disclosure of delinquent filers in response to Item 405 of
Regulation SB is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge,in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB
State issuer's revenues for the most recent fiscal year: $0
The aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the average bid and
asked price of such common equity, as of December 31, 2003 was
$1,298,859.
The current number of shares outstanding of Powder River Basin Gas
Corporation common stock is 46,387,833 as of December 31, 2003.
Documents Incorporated by Reference
Powder River Basin Gas Corporation incorporates by reference in Part
III of this Form 10-KSB, the registrant's Report on Form 8-K, as
amended, with exhibits thereto, filed December 29, 2003 under the
Securities Act of 1933.
Transitional Small Business Disclosure Format (check one):
[ ] Yes [X] No
POWDER RIVER BASIN GAS CORPORATION ANNUAL REPORT
---------------------------------------------------------------------------
Table of Contents
-----------------
Part I
Description of Business . . . . . . . . . . . . . . . . . . . . . 3
Description of Properties . . . . . . . . . . . . . . . . . . . . 6
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 7
Submission of Matters to a Vote of Security Holders . . . . . . . 7
Part II
Market for Common Equity and Related Stockholder Matters. . . . . 7
Management's Discussion and Analysis or Plan of Operation . . . . 8
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 9
Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . .
Part III
Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act . . . . . . . . .
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and
Management
Certain Relationships and Related Transactions. . . . . . . . . . .
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Business
Powder River Basin Gas Corporation ("PRVB" or the "Company") was
incorporated as Celebrity Sports Network in the State of Colorado on August
27, 1999. On September 5, 2001; Celebrity Sports Network acquired Powder
River Basin Gas Corporation, a private corporation incorporated in the
State of Colorado on June 13, 2001. Subsequently, Celebrity Sports Network
changed the name of the corporation from Celebrity Sports Network to Powder
River Basin Gas Corporation.
Celebrity Sports Network was formed in an effort to broaden the scope of
appearances available to current and former professional athletes. The
company intended to assist athletes in refining their speaking and
presentation skills to increase marketability, gain a market for the
athletes, and market the athletes for speaking engagements. From inception,
Celebrity Sports Network has remained a development stage company, with
primary focus on organizational matters, acquiring candidate athletes as
clients, and developing its marketing and business plans. Due to
disappointing results; operational losses, lack of working capital, and
less than acceptable results from initial business plan implementations;
Celebrity Sports Network decided to explore other business opportunities,
both within and outside the sports management industry. Ultimately,
Celebrity Sports Network has acquired and become Powder River Basin Gas
Corporation.
Business
--------
Powder River Basin Gas Corporation is an oil and gas exploration company
that is engaged in the evaluation and development of coalbed methane (CBM)
reserves as well as shallow oil reserves within the Powder River Basin in
the State of Wyoming.
Powder River Basin Gas Corporation's focus has been in obtaining leasehold
interests in acreage within the Powder River Basin, currently a most
prolific coalbed methane gas exploration play in the domestic United
States. Its attributes include low cost, shallow depth drilling and
completion; a proven play with major operators and an existing and
expanding infrastructure; greater and longer production yields when
comparing cost/benefit analyses to other basins and, a very low exploration
risk.
As of December 31, 2003, Powder River Basin Gas Corporation owns a total of
11,878 acres in thirteen different leases within Converse, Crook, Johnson,
and Sheridan counties. The company has a 100 percent working interest in
all of their leases to date. Powder River Basin Gas Corporation's leases
are adjacent to larger CBM developers and operators such as Western Gas
Resources, Williams Companies, Phillips Petroleum, J.M. Huber and others.
This close proximity to other operators allows PRVB to benefit from the
established infrastructure of gathering systems, pipelines, electricity
sources, roads, etc.
As of January 2002, Powder River Basin Gas Corporation has drilled and
completed two CBM wells in their Zullig Lease, located just west of
Clearmont, Wyoming in Sheridan County. Both wells are reported completed
in the Monarch coal seam, which is located at a depth of approximately 800
feet. One of the two wells was tested and produced at an initial rate of
702 Mcf (thousand cubic) per day. The company expects to produce 300 Mcf
per day from these wells, which will extend yields and maintain production
consistency. In addition, Powder River Basin Gas Corporation drilled
eleven other wells on the lease to a minimal depth of ten percent of their
total depth in order to meet certain state requirements in reducing the
well spacing from eighty acres to forty acres.
4
As of December 31, 2003, the Company completed a purchase of 960 acres in
Arcadia Parish, Louisiana. The property has minimal production and is
scheduled for development in 2004.
Pricing
-------
Powder River Basin Gas Corporation's average cost to drill, complete and
tie-in a CBM well to existing infrastructure is estimated to be $75,000 per
well.
Plan of Operation
-----------------
PRVB's short-term focus will continue to be on developing and monetizing
its CBM and shallow oil assets within the Powder River Basin and to seek
additional opportunities to expand its current asset base as well as pursue
other acquisitions that will enhance shareholder equity.
PRVB plans to recomplete an additional six wells on Arcadia Parish property
as well as pursue acquisitions of small production properties.
Marketing
---------
Powder River Basin Gas Corporation will review and analyze their available
options to sell at the wellhead or transport their production to the
highest value markets and will implement those options that generate the
highest overall value for the Company. The available natural gas pipelines
near the Company's acreage include: Bitter Creek Pipeline, Williston Basin
Interstate Pipeline, Fort Union, MIGC, and Northern Pipeline. It is
anticipated that no additional processing or treating will be necessary to
meet pipeline specifications.
Description of Properties
Powder River Basin Gas Corporation's offices are located in Calgary,
Alberta and Tulsa, Oklahoma.
As of November 2001, Powder River Basin Gas Corporation had 80 to 100
percent working interest in the following CBM and shallow oil leases:
Lease County Net Acres Gross Acres
------------- --------- ----------- -------------
Cranston Crook 1,934 1,934
Franklin Crook 620 1,944
Griffith(1) Crook 320 640
Griffith (2) Crook 160 320
Griffith (3) Crook 440 600
Kanode Crook 920 1,000
Olds (D-Road) Crook 200 640
Olds (Keyhole) Crook 120 480
Karmon Johnston 320 320
Noteboom Johnston 800 800
Legerski Sheridan 340 360
Robb Sheridan 1,486 2,520
Zullig Sheridan 256 320
7,916 11,878
5
Legal Proceedings
The company has an uncontested judgment which was filed in the state of
Colorado on December 31, 2003 in the amount of $111,500. The company
management was not served notice and was unaware of this action. Management
is pursuing a negotiated resolution to this action.
Submission of Matters to a Vote of Security Holders
None during the year ended December 31, 2003.
Market for Common Equity and Related Stockholder Matters
Market Information
------------------
The common stock of Powder River Basin Gas Corporation is traded on the OTC
Bulletin Board under the symbol PRVB.
Holders
Powder River Basin Gas Corporation has 19,560,000 46,387,333 shares of
common stock outstanding as of December 31, 2003.
Powder River Basin Gas Corporation has approximately 250 350 shareholders.
Dividend Policy
Powder River Basin Gas Corporation has never paid dividends on its common
stock and does not anticipate paying any dividends in the foreseeable
future. Management anticipates that earnings will be retained to fund the
company's working capital needs and expansion of the business.
Management's Discussion and Analysis
The Company's operations consist primarily of exploration and development
of oil and gas properties. While oil and natural gas are the principal
products currently produced by the Company, the Company does not refine or
process the oil and natural gas that it produces. The Company sells the gas
it produces under short-term contracts at market prices in the areas in
which the producing properties are located, generally at F.O.B. field
prices posted by the principal purchaser of oil in such areas.
Results of Operations
Revenues
The Company has not yet generated any revenue from the sale of natural gas.
This is primarily due to the fact the infrastructure required to realize
these sales has not yet been extended to the Company's properties. The
Company has drilled two gas wells that will produce commercially viable gas
resources once the appropriate infrastructure (i.e., pipeline) is in place.
The Company will begin recognizing revenues during the fiscal year 2004.
Costs and Expenses
The Company's general and administrative expenses for the fiscal year ended
December 31, 2003 were $411,928.00.
And $414,568.for the year ended December 31 2002.
The Company went through a change of control in May of 2003 and again went
through a complete change of control and management in December of 2003.
Operational Management
The Company was taken over by new management at the end of December 2003
and during the first quarter of 2004 a new team will be put in place who
will be qualified to maximize the potential of the companies assets.
Need for Additional Financing for Growth
The Company will be pursauing additional capital by way of private funding
and possible joint ventures to complete development of existing properties
as well as further acquisitions during 2004.
Acquisition Risks
The Company's business strategy includes focused acquisitions of producing
oil and natural gas properties. Any such future acquisitions will require
an assessment of the recoverable reserves, future oil and natural gas
prices, operating costs, potential environmental and other liabilities and
other similar factors. It generally is not feasible to review in detail
every individual property involved in an acquisition. Ordinarily, review
efforts are focused on the higher-valued properties. However, even a
detailed review of all properties and records may not reveal existing or
potential problems; nor will it permit the Company to become sufficiently
familiar with the properties to assess fully their deficiencies and
capabilities. Inspections are not always performed on every well, and
potential problems, such as mechanical integrity of equipment and
environmental conditions that may require significant remedial
expenditures, are not necessarily observable even when an inspection is
undertaken. Even if problems are identified, the seller may be unwilling or
unable to provide effective contractual protection against all or part of
such problems. There can be no assurance that oil and natural gas
properties acquired by the Company will be successfully integrated into the
Company's operations or will achieve desired profitability objectives.
Inability to Develop Additional Reserves
The Company's future success as an oil and natural gas producer, as is
generally the case in the industry, depends upon its ability to find,
develop and acquire additional oil and natural gas reserves that are
economically recoverable. Except to the extent that the Company conducts
successful development activities or acquires properties containing proved
reserves, the Company's proved reserves will generally decline as reserves
are produced. There can be no assurance that the Company will be able to
locate additional reserves or that the Company will drill economically
productive wells or acquire properties containing proved reserves.
Certain Industry and Marketing Risks
------------------------------------
The Company's operations are subject to the risks and uncertainties
associated with drilling for, producing and transporting of oil and natural
gas. The Company's future ability to market its natural gas and oil
production will depend upon the availability and capacity of natural gas
gathering systems and pipelines and other transportation facilities.
Federal and state regulation of oil and natural gas production and
transportation, general economic conditions, changes in supply and in
demand all could materially affect the Company's ability to market its oil
and natural gas production.
7
Effects of Changing Prices
--------------------------
The future financial condition and results of operations of the Company
depend upon the prices it receives for its oil and natural gas and the
costs of acquiring, developing and producing oil and natural gas. Oil and
natural gas prices have historically been volatile and are subject to
fluctuations in response to changes in supply, market uncertainty and a
variety of additional factors that are also beyond the Company's control.
These factors include, without limitation, the level of domestic
production, the availability of imported oil and natural gas, actions taken
by foreign oil and natural gas producing nations, the availability of
transportation systems with adequate capacity, the availability of
competitive fuels, fluctuating and seasonal demand for natural gas,
conservation and the extent of governmental regulation of production,
weather, foreign and domestic government relations, the price of domestic
and imported oil and natural gas, and the overall economic environment. A
substantial or extended decline in oil and/or natural gas prices could have
a material adverse effect on the Company's estimated value of its natural
gas and oil reserves, and on its financial position, results of operations
and access to capital. The Company's ability to maintain or increase its
borrowing capacity, to repay current or future indebtedness and to obtain
additional capital on attractive terms is substantially dependent upon oil
and natural gas prices.
The Company uses the full cost method of accounting for its investment in
oil and gas properties. Under the full cost method of accounting, all costs
of acquisition, exploration and development of oil and gas reserves are
capitalized into a "full cost pool" as incurred, and properties in the pool
are depleted and charged to operations using the unit-of-production method
based on the ratio of current production to total proved oil and gas
reserves. To the extent that such capitalized costs (net of accumulated
depreciation, depletion and amortization) less deferred taxes exceed the
SEC PV-10 (present value discounted at 10% as dictated by the SEC) of
estimated future net cash flow from proved reserves of oil and gas, and the
lower of cost or fair value of unproved properties after income tax
effects, such excess costs are charged against earnings. Once incurred, a
write-down of oil and gas properties is not reversible at a later date even
if oil or gas prices increase.
8
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations. . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity. . . . . . . . . . . 6
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . 9
Notes to the Consolidated Financial statements . . . . . . . . . . 11
/Letterhead/
INDEPENDENT AUDITORS' REPORT
-----------------------------
To the Stockholders and Board of Directors
Powder River Basin Gas Corp.
We have audited the accompanying consolidated balance sheets of Powder
River Basin Gas Corp. (a development stage company) as of December 31, 2003
and 2002 and the related consolidated statement of operations,
stockholders' equity and cash flows for the periods then ended from
inception on June 13, 2001 through December 31, 2003. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Powder River Basin Gas Corp. as of December 31, 2003 and 2002
and the consolidated results of their operations and their cash flows for
the periods then ended and from inception on June 13, 2001 through December
31, 2003, in conformity with accounting principles generally accepted in
the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Companies will continue as going concerns. As discussed
in Note 2 to the consolidated financial statements, the Company has
suffered a loss to date, which raises substantial doubt about its ability
to continue as a going concern. Management's plans with regard to these
matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
/S/ Chisholm, Bierwolf & Nilson, LLC
Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah
March 29, 2004
3
POWDER RIVER BASIN GAS CORP
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
------
December 31, December 31,
2003 2002
------------ ------------
CURRENT ASSETS
Cash $ - $ 12,556
------------ ------------
Total Current Assets $ - $ 12,556
------------ ------------
OIL AND GAS PROPERTIES USING
FULL COST ACCOUNTING (Note 1)
Properties not subject to amortization 2,330,265 1,853,469
Accumulated amortization - -
------------ ------------
Net Oil and Gas Properties 2,330,265 1,853,469
------------ ------------
TOTAL ASSETS $ 2,330,265 $ 1,866,025
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 8,778 $ 114,020
Accrued expenses 48,193 48,953
Related party payable (Note 3) - 317,700
Notes payable (Note 3) 611,400 626,400
------------ ------------
Total Current Liabilities 668,371 1,107,073
------------ ------------
Total Liabilities 668,371 1,107,073
------------ ------------
STOCKHOLDERS' EQUITY
Common stock; par value $0.001 per share;
authorized 50,000,000 shares; 84,387,833
and 20,437,833 shares issued outstanding,
respectively 84,387 20,437
Capital in excess of par value 5,316,524 3,870,467
Deficit accumulated during development stage (3,739,017) (3,131,032)
Treasury stock; zero and 920,000 shares,
respectively - (920)
------------ ------------
Total Stockholders' Equity 1,661,894 658,952
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,330,265 $ 1,866,025
============ ============
The accompanying notes are an integral part of these financial statements.
4
POWDER RIVER BASIN GAS CORP
(A Development Stage Company)
Consolidated Statement of Operations
From
Inception on
June 13,
December 31, 2001 Through
-------------------------- December 31,
2003 2002 2003
------------ ------------ ------------
REVENUE
Oil and gas sales $ - $ 15,000 $ 15,000
------------ ------------ ------------
Total Revenue $ - 15,000 15,000
------------ ------------ ------------
EXPENSES
General and administrative 204,528 514,568 745,023
Lease operating costs - 231,517 326,968
Legal and professional - 673,293 2,270,856
Travel - 21,835 88,490
Loss on abandonment of lease 354,217 - 354,217
------------ ------------ ------------
Total Expenses 558,745 1,441,213 3,785,554
NET OPERATING LOSS (558,745) (1,426,213) (3,770,554)
OTHER INCOME (EXPENSES)
Interest expense (49,240) (18,583) (68,463)
------------ ------------ ------------
Total Other Income (Expenses) (49,240) (18,583) (68,463)
------------ ------------ ------------
NET LOSS $ (607,985) $(1,444,796) $(3,839,017)
============ ============ ============
BASIC LOSS PER COMMON SHARE $ (0.02) $ (0.07) $ (0.18)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 27,017,148 20,161,422 21,079,123
============ ============ ============
The accompanying notes are an integral part of these financial statements.
5
POWDER RIVER BASIN GAS CORP
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From Inception on June 13, 2001 through December 31, 2003
Common Stock Treasury Stock
-------------------- Paid In Retained --------------------
Shares Amount Capital Deficit Shares Amount
----------- -------- ---------- ----------- ---------- ---------
Balance at
inception on
June 13, 2001 - $ - $ - $ - - $ -
Common stock issued
for organization
costs, $0.001
per share 3,350,000 3,350 - - - -
Common stock issued
for services at
$0.001 per share 5,650,000 5,650 - - - -
Common stock
returned due to
noncompletion of
services at
$0.001 per share - - - - (5,040,000) (5,040)
Reverse
acquisition
adjustment 9,960,000 9,960 (9,960) - - -
Common stock
issued for related
party payable at
$0.81 per share 100,000 100 80,090 - - -
Common stock
issued for
services at $0.81
per share - - 453,040 - 560,000 560
Common stock
issued for cash
at $1.10 per share 600,000 600 664,390 - - -
Common stock issued
for services at
$1.11 per share - - 1,023,730 - 920,000 920
Common stock issued
in lieu of accounts
payable at $1.00
per share 247,833 247 247,587 - - -
Net loss for the
year ended
December 31, 2001 - - - (1,786,236) - -
Balance, December
31, 2001 19,907,833 19,907 2,459,687 (1,786,236) (3,560,000) $( 3,560)
The accompanying notes are an integral part of these financial statements.
6
POWDER RIVER BASIN GAS CORP
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From Inception on June 13, 2001 through December 31, 2003
Common Stock Treasury Stock
-------------------- Paid In Retained --------------------
Shares Amount Capital Deficit Shares Amount
----------- -------- ---------- ----------- ---------- ---------
Common stock issued
for payables at $0.61
per share - - 152,250 - 250,000 250
Common stock issued
for services valued
at $0.61 per share - - 407,420 - 630,000 630
Common stock issued
for cash at $1.00
per share 30,000 30 29,970 - - -
Common stock issued
for services at
$0.59 per share - - 665,570 - 1,130,000 1,130
Common stock
issued for services
at $0.09 per share - - 56,070 - 630,000 630
Common stock issued
for related party
payables at $0.20
per share 500,000 500 99,500 - - -
Net loss for the
year ended
December 31, 2002 - - - (1,344,796) - -
Balance, December
31, 2002 20,437,833 20,437 3,870,467 (3,131,032) (920,000) (920)
Shares issued to a
related party for
debt reduction
valued at $0.07
per share 4,700,000 4,700 343,000 - - -
Shares issued for
settlement of
accounts payable
and accrued
wages at $0.009
per share 16,000,000 16,000 131,317 - - -
Shares issued for
services rendered
at $0.023 per
share 5,250,000 5,250 115,500 - - -
The accompanying notes are an integral part of these financial statements.
7
POWDER RIVER BASIN GAS CORP
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From Inception on June 13, 2001 through December 31, 2003
Common Stock Treasury Stock
-------------------- Paid In Retained --------------------
Shares Amount Capital Deficit Shares Amount
----------- -------- ---------- ----------- ---------- ---------
Shares issued for
the acquisition
of Arcadia Project
at $0.023 per share 38,000,000 38,000 836,000 - - -
Shares issued for
services at $0.023
per share - - 20,240 - 920,000 920
Net loss for the
year ended
December 31, 2003 - - - (607,985) - -
----------- -------- ---------- ----------- ---------- ---------
Balance, December
31, 2003 84,387,833 $84,387 $5,316,524 $(3,739,017) - $ -
=========== =============================== ========== =========
The accompanying notes are an integral part of these financial statements.
-8-
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Consolidated Statement of Cash Flows
From
Inception on
June 13,
December 31, 2001 through
-------------------------- December 31,
2003 2002 2003
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (607,985) $(1,344,796) $(3,739,017)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Common stock issued for services rendered 141,910 1,131,450 2,755,570
Common stock issued for retirement of
accounts payable 177,318 152,500 410,818
Loss on abandonment of leases 354,217 - 354,217
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable (106,002) (280,874) (340,817)
------------ ------------ ------------
Net Cash Provided (Used) by
Operating Activities (40,542) (341,720) (559,229)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for oil and gas property
development (172,014) (283,400) (1,298,814)
------------ ------------ ------------
Net Cash (Used) by
Investing Activities (172,014) (283,400) (1,298,814)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Notes Payable and
Long-term liabilities - (69,147) (69,147)
Proceeds from notes payable and
long-term liabilities 200,000 674,500 1,232,200
Proceeds from issuance of common stock - 30,000 694,990
------------ ------------ ------------
Net Cash Provided by
Financing Activities 200,000 635,353 1,858,043
NET INCREASE (DECREASE) IN CASH (12,556) 10,233 -
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 12,556 2,323 -
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ - $ 12,556 $ -
============ ============ ============
The accompanying notes are an integral part of these financial statements.
-8-
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Consolidated Statement of Cash Flows
From
Inception on
June 13,
December 31, 2001 through
-------------------------- December 31,
2003 2002 2003
------------ ------------ ------------
CASH PAID FOR:
Interest $ - $ 18,583 $ 19,223
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for payment of
accounts payable pertaining to
acquisition of oil and gas properties $ - $ 152,500 $ 400,334
Common stock issued to retire accounts
payable $ 177,318 $ 100,000 $ 181,000
Common stock issued for services rendered $ 141,910 $ 1,131,450 $ 2,755,570
Common stock issued for satisfaction
of long-term debt $ 317,699 $ - $ 317,699
The accompanying notes are an integral part of these financial statements.
10
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was incorporated under the laws of Colorado on August 27, 1999
as Celebrity Sports Network, Inc. The principal activities since inception
have been organizational matters and obtaining financing. The Company was
formed in an effort to broaden the scope of public appearances available to
current and former professional athletes. The Company, however, changed
their operations in 2001 through a reverse acquisition with Powder River
Basin Gas Corp., an oil and gas company.
Power River Basin Gas Corp. (PRBG) was incorporated in the state of
Colorado on June 13, 2001. The Company is engaged in the business of
assembling and managing a portfolio of undeveloped acreage in the Powder
River basin coal bed methane (CBM) play in Sheridan County, Wyoming. This
acreage is located in a proven geological setting and near operators such
as Western Gas Resources, Barrett Resources, Phillips Petroleum, J.M. Huber
and others. The Company has leasehold interests in 8,096.83 net acres.
Two wells have been drilled on one lease and eleven additional wells have
been spudded.
Pursuant to a reverse acquisition and reorganization agreement, PRBG was
acquired by Celebrity Sports on September 5, 2001. At the time of the
acquisition, the Company changed its name to Power River Basin Gas Corp.
The Company issued 9,000,000 shares of common stock for all the issued and
outstanding stock of PRBG; thus, making PRBG a wholly-owned subsidiary of
the Company.
Because PRBG is the accounting acquirer in the reverse acquisition, all
financial history in these financial statements are that of PRBG.
The Company issued 9,000,000 shares of common stock for the receipt of
9,000,000 shares of PRBG, therefore, an adjustment to the shares
outstanding was necessary to reflect the other shareholders of the Company
at the time of acquisition. No goodwill was recorded in the acquisition,
and the purchase method of accounting was issued in recording the business
combination.
b. Revenue and Cost Recognition
The Company's consolidated financial statements are prepared using the
accrual method of accounting. The Company has elected a December 31, year
end.
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
Oil and Gas Properties
The full cost method is used in accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and
development of oil and gas reserves, including directly related overhead
costs, are capitalized. In addition, depreciation on property and
equipment used in oil and gas exploration and interest costs incurred with
respect to financing oil and gas acquisition, exploration and development
activities are capitalized in accordance with full cost accounting.
Capitalized interest for the year ended December 31, 2003 was $0. All
capitalized costs of proved oil and gas properties subject to amortization
are being amortized on the unit-of-production method using estimates of
proved reserves. Investments in unproved properties and major development
projects not subject to amortization 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. As of December 31, 2003 and 2002, proved oil and gas
reserves had been identified on one of the Companies oil and gas
properties, however, no extraction has begun; therefore, no amortization
has been recorded for the year ending December 31, 2003 and 2002. All
other wells are incomplete as of December 31, 2003 and 2002.
c. Bad Debts
Bad debts on receivables are charged to expense in the year the receivable
is determined uncollectible, therefore, no allowance for doubtful accounts
in included in the financial statements. Amounts determined as
uncollectible are not significant to the overall presentation of the
financial statements.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Basis of Consolidation
The consolidated financial statements include the accounts of Celebrity
Sports Network, Inc. and PRBG. All significant inter-company accounts and
transactions have been eliminated in the consolidation.
e. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
12
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
------------- ------------- -------------
For the year ended December 31, 2003:
Basic EPS
Income (loss) to common
stockholders $ (607,985) 27,017,148 $ (0.02)
============= ============= =============
For the year ended December 31, 2002:
Basic EPS
Income (loss) to common
stockholders $ (1,444,796) 20,161,422 $ ( 0.07)
============= ============= =============
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
g. Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss, tax credit carry-forwards, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities and
their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
December 31, December 31,
2003 2002
------------ ------------
Deferred tax assets:
Net operation loss carry-forwards $ 1,383,436 $ 1,158,482
------------ ------------
Total Deferred Tax Assets 1,383,436 1,158,482
Valuation allowance for deferred tax assets (1,383,436) (1,158,482)
------------ ------------
$ - $ -
============ ============
13
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
At December 31, 2003, the Company has net operating losses of $3,739,017
which expire beginning in 2021.
h. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
In these financial statements assets and liabilities involve extensive
reliance on management's estimates. Actual results could differ from those
estimates.
i. Property and Equipment
In accordance with Financial Accounting Standards Board Statement No. 121,
the Company records impairment of long-lived assets to be held and used or
to be disposed of when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the carrying amount. At December 31, 2003 and 2002, no impairments
were recognized.
j. Financial Instruments
The recorded amounts of financial instruments, including cash equivalents,
accounts payable and accrued expenses, and long-term debt approximate their
market values as of December 31, 2003. The Company has no investments in
derivative financial instruments.
k. Newly adopted pronouncements
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure an amendment of FAS 123. SFAS No.
148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for an entity that voluntarily
changes to the fair value based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of SFAS
No. 123 to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-
based employee compensation. This Statement also amends APB Opinion No.
28, Interim Financial Reporting, to require disclosure about those effects
in interim financial information. SFAS No. 148 is effective for annual and
interim periods beginning after December 15, 2002. The adoption of the
interim disclosure provisions of SFAS No. 148 did not have an impact on the
Company's financial position, results of operations or cash flows. The
Company is currently evaluating whether to adopt the fair value based
method of accounting for stock-based employee compensation in accordance
with SFAS No. 148 and its resulting impact on the Company's consolidated
financial statements.
14
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Newly adopted pronouncements Issued (continued)
In January 2003, the Emerging Issues Task Force ("EITF") issued EITF Issue
No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
This consensus addresses certain aspects of accounting by a vendor for
arrangements under which it will perform multiple revenue-generating
activities, specifically, how to determine whether an arrangement involving
multiple deliverables contains more than one unit of accounting. EITF
Issue No. 00-21 is effective for revenue arrangements entered into in
fiscal periods beginning after June 15, 2003, or entities may elect to
report the change in accounting as a cumulative-effect adjustment. The
adoption of EITF Issue No. 00-21 did not have a material impact on the
Company's consolidated financial statements.
In January 2003, the FASB issued Interpretation ("FIN") No. 46,
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN
No. 46 requires a variable interest entity, as defined, to be consolidated
by a company if that company is subject to a majority of the risk of loss
from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns. FIN No. 46 is effective for
reporting periods ending after December 15, 2003. The adoption of FIN No.
46 did not have an impact on the Company's consolidated financial
statements.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
SFAS No. 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of SFAS No. 149 will not have an impact on the
Company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No.
150 changes the accounting guidance for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine"
equity by now requiring those instruments to be reported as liabilities.
SFAS No. 150 also requires disclosure relating to the terms of those
instruments and settlement alternatives. SFAS No. 150 is generally
effective for all financial instruments entered into or modified after May
31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS No. 150 did not
have an impact on the Company's consolidated financial statements.
In December 2003, the SEC issued SAB No. 104. SAB No. 104 revises or
rescinds portions of the interpretative guidance included in Topic 13 of
the codification of staff accounting bulletins in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. It also rescinds the
Revenue Recognition in Financial Statements Frequently Asked Questions and
Answers document issued in conjunction with Topic 13. Selected portions of
that document have been incorporated into Topic 13. The adoption of SAB
No. 104 in December 2003 did not have an impact on the Company's financial
position, results of operations or cash flows.
15
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is dependent upon
raising capital to continue operations. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. It is management's plan to raise additional funds to continue
the exploration of the leases, and then to begin extracting methane to sell
and generate the necessary funds to continue operations.
NOTE 3 - LONG-TERM LIABILITIES
Long-term liabilities are detailed in the following schedules:
Notes payable: December 31, December 31,
2003 2002
------------ ------------
Note payable to a company, due in total in January 2002,
including interest at 10%. $ 86,400 $ 86,400
Note payable to an individual, due in total in January
2003, including interest at 12% 25,000 25,000
Note payable to an individual, due in total in May 2003 40,000 40,000
------------ ------------
Total continued on the next page 151,400 151,400
16
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 3 - LONG-TERM LIABILITIES (continued)
Total continued from previous page $151,400 $151,400
Convertible debenture to a Company, due in total by
conversion of stock, including interest at 6% 260,000 260,000
Note payable to a Company, due in total on March 2003,
including interest at 7.10% - 215,000
Note payable to a company, due in total on demand,
including interest at 12%. 200,000 -
------------ ------------
Total Notes Payable $ 611,400 $ 626,400
------------ ------------
Notes payable - related party
Note payable to Taghmen Ventures, LLC a company owned
partially by Greg Smith, the Company's president,
unsecured and bears no interest. $ - $ 317,700
------------ ------------
Total notes payable - related party - 317,700
------------ ------------
Total long-term liabilities 611,400 944,100
------------ ------------
Less: current portion 611,400 626,400
------------ ------------
Less: current portion-related party - 317,700
------------ ------------
Total current portion 611,400 944,100
------------ ------------
Total Long-Term Liabilities $ - $ -
------------ ------------
Future minimum principal payments on notes payable are as follows:
Year
------------
2004 $ 611,400
------------
Total $ 611,400
============
NOTE 4 - RELATED PARTY TRANSACTIONS
During 2001, Taghmen Ventures Ltd advanced funds to the Company. The
Company's president, is the general partner of Taghmen. The president
advanced a total of $350,000 to the Company of which $15,000 and $17,300
were paid back during 2002 and 2001, respectively. At December 31, 2002,
the Company had an outstanding balance due of $317,000. The note is non-
interest bearing and due in February 2002. In 2003, the Company issued
4,550,000 shares of common stock to satisfy the remaining portion of debt
outstanding.
In 2002, 500,000 shares were issued to the president to reduce accrued
wages by $100,000.
17
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company has entered into various oil and gas leases from several land
owners. Associated with the agreements, the Company is committed to
various royalty agreements ranging from 15% to 25% of gross revenue
production. Some of the leases also provide for a minimum royalty. As of
December 31, 2003 and 2002, no royalties were due.
NOTE 6 - STOCK TRANSACTIONS
On June 13, 2001, the Company issued 3,350,000 shares of common stock for
organization expenses at $0.001 per share.
In September 2001, the Company issued 5,650,000 shares for services
provided in connection with the acquisition of Powder River Basin Gas Corp.
at $0.001 per share.
In September 2001, 5,040,000 shares of the Company's common stock was
returned due to non-completion of services in connection with the
acquisition of Powder River Basin Gas Corp. at $.001 per share.
In September 2001, the Company issued 100,000 shares to a vendor for
satisfaction of accounts payable at $0.81 per share.
In October 2001, the Company issued 560,000 shares of treasury stock for
services at $0.81 per share.
In October 2001, the Company authorized the issuance of 600,000 shares for
cash of $664,990 at $1.10 per share, pursuant to a Reg D 506 exempt
offering,
In November 2001, the Company issued 920,000 shares of treasury stock for
services at $1.11 per share.
In December 2001, the Company issued 247,833 shares to satisfy debt
associated with the acquisition of oil and gas leases at $1.00 per share.
In January 2002, the Company issued 250,000 shares of treasury stock to a
vendor to satisfy accounts payable at $0.61 per share.
In January 2002, the Company issued 630,000 shares of treasury stock for
services at $0.61 per share.
In March 2002, the Company issued 30,000 shares of common stock at $1.00
per share.
In March 2002, the Company issued 1,130,000 shares of treasury stock for
services at $0.59 per share.
In July 2002, the Company issued 630,000 shares of treasury stock for
services at $0.09 per share.
In July 2002, the Company issued 500,000 shares of common stock to a
related party for reduction of wages at $0.20 per share.
18
POWDER RIVER BASIN GAS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and 2002
NOTE 6 - STOCK TRANSACTIONS (Continued)
During the year, the Company issued a total of 20,700,000 shares of common
stock in settlement of $347,700 of related party debt and $147,317 of
accounts payable and accrued wages. Accordingly, $474,317 has been charged
to additional paid in capital.
In September 2003, the Company issued 5,250,000 shares of common stock for
services rendered on behalf of the Company. The services were valued at a
total amount of $126,000.
On December 16, 2003, the Company issued 38,000,000 shares of common stock
to acquire an oil and gas property. The property was valued using the
average fair market value of the Company's common stock during the month of
December multiplied by the number of shares issued. Therefore, the
property was valued at a total price of $874,000.
During the year, the Company issued 920,000 shares of treasury stock for
services rendered. Total value of the services was $21,160.
NOTE 7 - SUBSEQUENT EVENTS
Subsequent to year end, the Company issued 3,440,856 shares of common stock
in satisfaction of $260,000 in convertible debentures.
19
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant): Powder River Basin Gas Corporation
/s/ Brian D. Fox Date: March 30, 2004
Brian D. Fox, President