As filed with the Securities and Exchange Commission on March __, 2002
Securities Act File No. 333-65708; Exchange Act File No. 27321
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VISTA EXPLORATION CORPORATION
formerly known as Bail Corporation
(Exact name of registrant as specified in its charter)
Colorado
(State or other jurisdiction of
incorporation or organization)
1311 84-1493152
(Primary Standard Industrial (IRS Employer Identification No.)
Classification Code Number)
11952 Farley
Shawnee Mission, KS 66213
(913) 814-8313
(Address and telephone number of principal executive offices
and principal place of business)
Charles A. Ross, Sr.
11952 Farley, Shawnee Mission, KS 66213
(913) 814-8313
(Name, address and telephone number of agent for service)
Copies of Communications to:
Roger V. Davidson
Ballard, Spahr, Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300, Denver, Colorado 80202
(303) 292-2400
Approximate date of commencement of proposed sale to public: as soon as
practicable after the registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
----------------------- ---------------- ------------------ -------------------- ------------
Proposed Maximum Proposed Maximum Amount of
Title of Securities to Amount to be Offering Price per Aggregate Offering Registration
Be Registered Registered(1) Share(2) Price Fee(3)
----------------------- ---------------- ------------------ -------------------- ------------
Common stock, no par 1,440,000 shares $0.10 $144,000 $36(4)
value
----------------------- ---------------- ------------------ -------------------- ------------
(1) This registration statement covers an additional indeterminate number of
shares of the Registrant's common stock which may be issued in accordance
with Rule 416.
(2) For purpose of computing the registration fee in accordance with Rule
457(c), the price shown is based upon the price of $0.10 per share, which
is the price at which the selling shareholders will sell their shares until
the Registrant's shares are quoted on the OTC Bulletin Board. The
Registrant's common stock is not currently listed or quoted on any
quotation medium.
(3) Calculated under Section 6(b) of the Securities Act as $.000250 of the
aggregate offering price.
(4) $90 was previously paid upon the initial filing of this Registration
Statement, calculated using an estimated offering price of $0.25 per share
which was based on the then-most-recent sale price received by the
Registrant for shares of its common stock.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Subject to Completion - - Dated March __, 2002
----------------------------------------------------------------
PROSPECTUS
Vista Exploration Corporation
1,440,000 Shares of Common Stock
This is our initial public offering. We are registering 1,440,000 shares of
our common stock, all of which are being offered by the shareholders listed
under the heading "Selling Security Holders." We will not receive any of the
proceeds from the sales of the shares of common stock by the selling
shareholders. The selling shareholders will sell at a price of $0.10 per share
until our shares are quoted on the OTC Bulletin Board, and thereafter at
prevailing market prices or privately negotiated prices.
There is no established public market for our common stock and we have
arbitrarily determined the offering price. Although we hope to have our common
stock quoted on the OTC Bulletin Board, our common stock is not currently listed
or quoted on any quotation service.
Our proposed trading symbol on the OTC Bulletin Board is "____."
There are certain risks involved with the ownership of our common stock,
including risks related to our new business and the market for our common stock.
(See "Risk Factors" beginning on page 2.)
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the SEC is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
The date of this prospectus is _________, 2002
Table of Contents
Page
Vista Exploration Corporation ............................................. 1
PROSPECTUS SUMMARY ........................................................ 1
RISK FACTORS .............................................................. 2
USE OF PROCEEDS ........................................................... 6
DETERMINATION OF OFFERING PRICE ........................................... 6
FORWARD - LOOKING STATEMENTS .............................................. 6
ABOUT US AND OUR CURRENT PLAN OF OPERATION ................................ 7
MANAGEMENT ................................................................ 18
EXECUTIVE COMPENSATION .................................................... 20
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT ....................... 21
CERTAIN TRANSACTIONS ...................................................... 22
PLAN OF DISTRIBUTION ...................................................... 22
SELLING SECURITY HOLDERS .................................................. 24
DESCRIPTION OF OUR STOCK .................................................. 26
SHARES ELIGIBLE FOR FUTURE SALE ........................................... 27
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS ................... 28
LEGAL MATTERS ............................................................. 28
EXPERTS ................................................................... 28
SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION .... 28
WHERE YOU CAN FIND MORE INFORMATION ....................................... 29
FINANCIAL STATEMENTS....................................................... F-1
i
PROSPECTUS SUMMARY
This is only a summary and does not contain all the information that may be
important to you. You should read the more detailed information contained in
this prospectus, including but not limited to, the risk factors beginning on
page 2.
About Us
We were formed as a development stage (blank check) company on April 9,
1998, with the purpose of acquiring or merging with a privately owned company.
In March 2001 we began preparations to engage in the oil and gas business. We
have leased oil and gas properties in southeast Kansas to drill for coalbed
methane gas. Our principal business office is located at 11952 Farley, Shawnee
Mission, Kansas 66213, and our telephone number at that address is (913)
814-8313. We have generated no revenues since our inception.
Capital Structure
Shares of common stock authorized: 20,000,000
Shares of common stock outstanding prior to this offering: 6,090,000
Shares of preferred stock authorized: 5,000,000
Shares of preferred stock outstanding prior to this offering: 0
The Offering
1,440,000 shares of common stock outstanding prior to this offering are
being offered for resale by the selling shareholders. The selling shareholders
will sell at a price of $0.10 per share until our shares are quoted on the
over-the-counter bulletin board, or OTC Bulletin Board, established by the
National Association of Securities Dealers, Inc., and thereafter at prevailing
market prices or privately negotiated prices. Although we hope to have our
common stock quoted on the OTC Bulletin Board, our common stock is not currently
listed or quoted on any quotation service.
Summary Financial Information
The following tables set forth summary financial information and other
equity information about us. You should read this summary information in
conjunction with "About Us and Our Current Plan of Operation" which includes a
discussion of factors materially affecting the comparability of the information
presented, and in conjunction with our financial statements included elsewhere
in this prospectus.
Fiscal Year Ended Fiscal Year Ended Nine Months Ended
April 30, 2000(1) March 31, 2001(1) December 31, 2001
----------------- ----------------- -----------------
Statement of Operations Data
----------------------------
Income (from interest) $57 $8 $0
Net Loss (5,269) (6,438) (155,625)
Loss per Share -- (2) -- (2) (0.03)
Weighted Average Shares Outstanding 1,230,000 1,230,000 5,072,582
(1) On April 18, 2001, we changed our fiscal year-end from April 30 to March 31.
(2) Less than $0.01 per share.
Balance Sheet Data
------------------
Cash $161 $73 $2,450
Total Assets $267 $10,073 $5,422
Total Liabilities $3,471 $18,615 $26,983
Stockholders' Equity (Deficit) (3,204) (8,542) $28,271
1
RISK FACTORS
The purchase of our common stock is a substantial transaction involving a
high degree of risk. Prior to making an investment decision, you should
carefully consider, together with the other information contained in this
prospectus, the following risk factors. The order in which these risk factors
are presented is not necessarily indicative of the magnitude of the risk
described.
Investors should assume that, even if not specifically stated within this
prospectus, if any of the following risks actually materialize, our business,
financial condition or results of future operations could be materially and
adversely affected. In that case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
Our limited operating history makes it difficult for investors to evaluate our
business.
Although we have been in business since April 1998, we have been
essentially dormant since then and only recently have developed a new plan of
operation to acquire and develop coalbed methane gas properties, production
and/or related assets. Thus, we have a very limited operating history upon which
an evaluation of our business and prospects can be based.
If our plan of operation is not successful in addressing our auditor's doubt
regarding our ability to continue as a going concern, our shareholders may lose
their entire investment in us.
Our auditors have included an explanatory paragraph in their opinion on our
financial statements for the year ended March 31, 2001, to state that our losses
since inception and our net capital deficit at March 31, 2001 raise substantial
doubt about our ability to continue as a going concern. Our ability to continue
as a going concern is dependent upon raising additional capital and achieving
profitable operations through the development of our leased mineral properties.
We cannot assure you that our plan of operation will be successful in addressing
this issue. If we cannot successfully continue as a going concern, our
shareholders may lose their entire investment in us.
Without the services of third parties, we will not be able to commence our
drilling operations and thus we will not have any revenue generating operations.
Mr. Ross, our President and sole officer, does not have direct experience
in the oil and gas industry and thus is relying on the oil and gas expertise of
various consultants. Furthermore, we will rely on third party contractors to act
as the operators and drillers of our wells. If we are unable to secure the
services of contract operators, drillers, geologists and others needed to drill
and complete our wells, we will not be able to implement phase 2 of our
operation and thus we will have no revenue generating operations.
If we do not obtain additional financing needed to implement phase 2 of our
business plan, we may be forced to cease our operations.
At December 31, 2001, we had cash of $2,450 and current liabilities of
$26,983. In January 2002, we received approximately $25,000 from the sale of our
common stock to overseas investors.
We need to obtain additional funds to finance our planned operations during
the next 12 months, including implementing phase 2 of our plan of operation and
making our mineral lease payments as they come due. We anticipate that we will
need a minimum of $100,000 to begin drilling operations and a total of $750,000
to complete phase 2 of our plan, which entails drilling and completing ten
coalbed methane gas wells.
2
We currently do not have any binding commitments for, or readily available
sources of, additional financing. We cannot assure you that additional financing
will be available to us when needed or, if available, that it can be obtained on
commercially reasonably terms. If we do not obtain additional financing, we may
not be able to implement our planned drilling and exploration activities and may
not be able to retain our mineral leases. Under such circumstances, we could be
forced to cease our operations and liquidate our assets.
Additional infusions of capital may have a dilutive effect on your investment.
To finance our operations we may sell additional shares of our stock. Any
additional equity financing that we receive may involve substantial dilution to
our then-existing shareholders. Furthermore, we may issue stock to acquire
properties, assets, or businesses. In the event that any such shares are issued,
the proportionate ownership and voting power of other shareholders will be
reduced.
If we are not successful in profitably developing our leased mineral properties,
our drilling operations may be curtailed or ceased.
Our ability to operate profitably will depend, in part, on our success in
leasing appropriate properties and drilling and completing wells that produce
commercial quantities of gas. The successful development of oil and gas
properties requires an assessment of recoverable reserves, future oil and gas
prices, operating costs, potential environmental and other liabilities and other
factors. Such assessments are necessarily inexact. As a result, we may not
discover any recoverable reserves, or we may not be able to make a profit from
the reserves that we discover.
Even if we are able to secure additional financing in the amount of
$750,000, we cannot fully implement phase 2 of our plan of operation unless we
are producing and selling sufficient gas to meet our lease payments and to cover
the costs of additional wells. Failure to complete enough wells to generate
income sufficient to pay the $154,000 lease payments that we will be required to
make from August 2002 to October 2002, could result in the loss of our rights to
some or all of the property currently under lease. Consequently, we could be
forced to curtail our operations and forego further development. Additionally,
if we fail to complete enough wells to generate income sufficient to cover the
costs of such wells plus any unproducable wells drilled by us, we could be
forced to cap a producing well or plug a non-producing well, and cease our
drilling operations.
A substantial or extended decline in the price of oil or natural gas could cause
us to curtail or suspend our operations.
Our ability to operate profitably also will depend on the prices that we
receive for any gas that we produce. Historically, oil and gas prices and
markets have been volatile and are likely to continue to be volatile in the
future. Prices for oil and gas are subject to wide fluctuations in response to
relatively minor changes in supply of and demand for oil and gas, market
uncertainty, and a variety of additional factors that are beyond our control.
These factors include:
o international political conditions (including wars and civil unrest),
o the domestic and foreign supply of oil and gas,
o the level of consumer demand,
o weather conditions,
o domestic and foreign governmental regulations and other actions,
o actions taken by the Organization of Petroleum Exporting Countries
(OPEC),
o the price and availability of alternative fuels, and
o overall economic conditions.
Any substantial or extended decline in the price of oil and/or natural gas could
negatively affect our revenues and profits. If the decrease in revenues causes
or contributes to our operations being unprofitable, we may curtail or suspend
our drilling operations. If we suspend our drilling operations, we may not have
any revenue generating operations and thus may cease our operations altogether.
3
Volatility in oil and gas prices could cause volatility in the market price for
our common stock.
We expect that our quarterly operating results may fluctuate significantly
due to the fluctuation of oil and gas prices. It is likely that if a market
develops for our common stock, the market value of our stock will fluctuate with
our quarterly results which, in turn, may be driven by the prices we receive for
any gas that we produce.
We are subject to complex environmental laws and regulations which can adversely
affect the cost, manner or feasibility of our planned operations.
The development, production and sale of oil and gas in the United States
are subject to extensive environmental laws and regulations. We may be required
to make large expenditures to comply with federal, state and local environmental
regulations. Matters subject to environmental regulation include:
o permits for drilling operations,
o the location and density of wells,
o the handling of drilling fluids and obtaining discharge permits for
drilling and production operations,
o bonds for ownership, development and production of natural gas and oil
properties,
o transportation of natural gas and oil by pipeline,
o operation of wells and reports concerning operations,
o limitations or prohibitions on drilling activities on protected areas
such as wetlands or wilderness areas,
o remedial measures to mitigate pollution from former operations, such
as plugging abandoned wells, and
o the conservation of oil and natural gas.
Under these laws and regulations, we could be liable for personal injuries,
property damage, oil spills, discharge of hazardous materials, remediation and
clean-up costs, and other environmental damages. Failure to comply with these
laws and regulations also may result in the suspension or termination of our
planned drilling operations and subject us to administrative, civil and criminal
penalties. We do not believe that insurance coverage for the full potential
liability that could be caused by sudden and accidental environmental damages is
available at a reasonable cost. Accordingly, we may be subject to significant
uninsured liabilities or we may be required to cease production in the event of
environmental damages.
Moreover, these laws and regulations could change in ways that
substantially increase our costs. These laws and regulations have been changed
frequently in the past. In general, these changes have imposed more stringent
requirements that increase operating costs or require capital expenditures in
order to remain in compliance. It is also possible that unanticipated
developments could cause us to make environmental expenditures that are
significantly different from those we currently expect.
Accordingly, any of these liabilities, penalties, suspensions, terminations
or regulatory changes could materially adversely affect our financial condition
and our ability to implement phases two and three of our plan of operation.
The occurrence of drilling risks associated with oil and gas operations could
result in significant losses to us.
The drilling of oil and gas wells involves a high degree of risk,
especially the risk of dry holes or of wells that are not sufficiently
productive to provide an economic return on the capital expended to drill the
wells. In addition, our drilling operations may be curtailed, delayed or
cancelled as a result of numerous factors, including the following:
o fires, explosions, cratering, or blow-outs,
o unexpected formations or pressures that could cause environmental
damage, personal injury or damage to equipment,
o title problems,
o weather conditions,
o equipment failure or shortages in the delivery of equipment, and
o unavailability of third parties to conduct our drilling operations.
If any of theses risks occur, and our resulting losses are significant, we
may have to curtail or suspend our drilling operations.
4
If we incur uninsured losses, we may have to curtail or suspend our drilling
operations.
Even if we are able to secure additional financing in the amount of
$750,000, we will not have sufficient capital to establish any reserves for
contingent liabilities. Although we intend to maintain insurance coverage
against some risks associated with our oil and gas operations in amounts that we
believe to be reasonable and in accordance with customary industry practices,
the occurrence of an event that is not fully insured could result in losses to
us. If any uninsured losses are significant, we may have to curtail or suspend
our drilling operations.
Investor profits, if any, will likely be limited for the near future.
Because we do not anticipate paying any dividends in the near future,
investors in our common stock probably will not derive any profits from their
investment in us for the foreseeable future, other than through price
appreciation of our common stock. Given current market conditions, it is
unlikely that the price of our common stock will appreciate as long as we
continue to have operating losses. We have not been profitable since our
inception and we incurred a net loss of $155,625 through the nine months ended
December 31, 2001. To date we have not had any revenue or earnings from
operations and we will continue, in all likelihood, to sustain operating
expenses without corresponding revenues until we are able to successfully
implement our new plan of operation, if ever. Thus, it is likely that investor
profits, if any, will be limited for the near future.
If no market for our common stock develops, our shareholders may have difficulty
reselling their shares.
While our common stock is held by approximately 61 shareholders, there has
been no public trading market for our common stock and our common stock has no
trading symbol. Although our management intends to establish trading of our
common stock through the OTC Bulletin Board (established by the NASD) by
applying for a trading symbol and pre-clearing our shares for trading, we do not
intend to undertake any other efforts to cause a market to develop in our
securities. There can be no assurance that a public trading market for our
common stock will develop or, if developed, that it can be sustained. If no
market for our common stock develops, our shareholders may have difficulty
liquidating their investment in us.
Trading on the OTC Bulletin Board may not increase shareholder liquidity.
To the extent that there will be trading in our common stock, of which
there is no assurance, our common stock will trade in the over-the-counter
market and will be quoted on the OTC Bulletin Board. Our common stock will not
be quoted on the Nasdaq system or any exchange for the foreseeable future. It
should be assumed that even with the OTC Bulletin Board quote of our common
stock, there will be an extremely limited trading market and very little
liquidity for our common stock.
Because our common stock will be subject to the "penny stock" regulations for
the foreseeable future, its liquidity will be reduced.
Generally, penny stocks are equity securities with a price of less than
$5.00 which are not quoted on the national exchange or the Nasdaq system. Our
common stock currently does not qualify for any exemption to the penny stock
regulations because it will be quoted on the OTC Bulletin Board, if it is quoted
at all. The penny stock rules require a broker/dealer to deliver, prior to a
transaction in a penny stock, a standardized risk disclosure document prescribed
by the SEC and to provide the potential purchaser of penny stock with the
following information:
5
o information about penny stocks,
o the nature and level of risk in the penny stock market,
o the bid and offer quotations for the stock, and
o other burdensome and detailed information.
Those delivery and disclosure requirements tend to reduce the level of interest
of broker/dealers in dealing with penny stocks, which could have the effect of
reducing the level of trading activity in the secondary market for our common
stock during the time that the price of our common stock remains below $5.00. If
the price of our common stock remains below $5.00, the penny stock regulations
could reduce the liquidity of our common stock and make it more difficult for
investors to sell our common stock.
Shares eligible for future sale by our current shareholders may impair our
ability to raise capital through the sale of our stock.
We currently have 6,090,000 shares of common stock outstanding, of which
1,440,000 shares are being registered for resale under this prospectus. All of
the 4,650,000 outstanding shares of common stock not registered for resale
hereunder are "restricted securities" as that term is defined under Rule 144 of
the Securities Act of 1933. Those restricted securities may only be sold by a
registration statement under the Securities Act or under another exemption under
the Securities Act. See "Shares Eligible for Future Sale." The possibility that
substantial amounts of shares of our common stock may be sold in the public
market may cause prevailing market prices for our common stock to decrease and
thus could impair our ability to raise capital through the sale of our equity
securities.
The loss of our President's services could prevent us from fully implementing
our new plan of operation.
Mr. Ross, our President and sole officer, has not entered into a written
employment agreement with us and he is not expected to do so in the foreseeable
future. We have not obtained key man life insurance on Mr. Ross. The loss of Mr.
Ross' services could adversely affect our ability to implement our plan of
operation and commence our drilling operations.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock by the selling security holders.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for our common
stock. The offering price of $0.10 per share was arbitrarily determined and
bears no relationship to assets, book value, net worth, earnings, actual results
of operations, or any other established investment criteria. Among the factors
considered in determining the price were prices at which we privately sold
shares and current conditions of the securities markets.
FORWARD - LOOKING STATEMENTS
This prospectus contains forward-looking statements that concern our
business. Such statements are not guarantees of future performance and actual
results could differ materially from those expressed or implied in such
statements as a result of certain factors, including those set forth in "About
Us and Our Current Plan of Operation," "Risk Factors" and elsewhere in this
prospectus. All statements, other than statements of historical facts, included
in this prospectus that address activities, events or developments that we
expect, believe, intend or anticipate will or may occur in the future, including
the following matters, are forward looking statements:
o our ability to obtain sufficient financing to commence drilling
operations,
o our ability to discover producable gas on our leased properties,
o capital costs of drilling and completing wells,
o capital costs of building other related production or gathering
facilities,
o the availability of contract operators and drillers,
o the continued demand for natural gas, and
o the expansion and growth of our operations.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our product research. Such statements are subject to
a number of assumptions including the following:
o risks and uncertainties, including the risk factors in this
prospectus,
o general economic and business conditions,
o the business opportunities that may be presented to and pursued by us,
o changes in laws or regulations and other factors, many of which are
beyond our control, and
o ability to obtain financing on favorable conditions.
The cautionary statements contained or referred to in this prospectus
should be considered in connection with any subsequent written or oral
forward-looking statements that may be issued by us or persons acting on our
behalf. We undertake no obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
ABOUT US AND OUR CURRENT PLAN OF OPERATION
Our History
We were incorporated in Colorado on April 9, 1998, as a "blank check"
company for the purpose of evaluating, structuring, and completing a merger
with, or acquisition of, a privately owned corporation. Our purpose was to
provide a method for a foreign or domestic private company to become a reporting
(or public) company whose securities would be qualified for trading in the
United States secondary market. In furtherance of these goals, on September 13,
1999, our management voluntarily filed a registration statement on Form 10-SB
with the Securities and Exchange Commission and we became a reporting company.
Our management also actively sought a suitable acquisition or merger candidate
but did not find one.
On or about March 3, 2001, we and our largest shareholder, Corporate
Management Services, Inc. or CMS, entered into an Agreement for the Purchase of
Common Stock whereby CMS sold a controlling interest to Mr. Charles A. Ross, Sr.
for the purpose of changing us from an inactive company to an oil and gas
company. Prior to entering into the stock purchase agreement, Mr. Ross was not
affiliated with us and did not own any of our common stock.
In connection with Mr. Ross' acquisition of a controlling interest, our
then sole officer and director, Mr. George Andrews, resigned and Mr. Ross became
our President and sole director. We moved our principal place of business from
Littleton, Colorado, to Shawnee Mission, Kansas, and we changed our fiscal year
end from April 30 to March 31.
In furtherance of our plan to become active in the oil and gas business, in
March 2001 we attempted to acquire interests in 125,000 acres in the northeast
region of Alabama for the purpose of conducting pre-drilling activities to
determine the prospects for drilling or farming out our interest. However, these
negotiations failed because we could not obtain adequate guarantees of good
title and because we felt there was insufficient historical engineering and
geological information regarding prior drilling activities on the property.
Subsequently we attempted to acquire drilling interests on approximately
3,500 acres in Unitah County, Utah, from a Denver-based oil and gas exploration
company. Our management determined that the available seismic data was not
adequate to determine appropriate drilling locations and therefore a seismic 3-D
analysis would be appropriate. However, our management estimated that the cost
of such analysis, together with other appropriate pre-drilling activities, would
have been approximately $250,000. Based on our financial situation, we
determined that we did not have adequate financial resources to pursue these
interests.
7
As a result of the foregoing, we have not had a source of income, and we
have not generated any revenues, since our inception.
Our Current Plan of Operation
We intend to acquire and develop coalbed methane gas producing properties
in the United States, with our initial efforts focused on southeast Kansas. We
may do this by leasing oil and gas interests and drilling the leased property to
prove reserves or by acquiring working interests in production or reserves. In
August 2001 we changed our name from "Bail Corporation" to "Vista Exploration
Corporation" to reflect our new plan of operation.
Our current plan of operation has three separate phases. Phase one
consisted of identifying the most promising areas to drill for methane gas and
acquiring mineral rights for as many properties within the identified area as
practicable. Phase two will involve drilling and testing wells on the leased
acres to prove reserves, completing promising test wells, extracting the oil,
gas and other hydrocarbons that we find, and delivering them to market. In phase
three we plan to expand our drilling operations to maximize our production.
Phase 1 - Our Area of Interest
In June 2001 we retained consultants TCC Royalty Corp. and Austin
Exploration, L.L.C. to identify areas in southeast Kansas suitable for coalbed
methane exploration and development, to provide us with customary geological and
land maps, and to assist us with leasing mineral rights. TCC Royalty Corp.'s
geological services have been provided by Steven Tedesco, a geologist who is
also the President of Atoka Geochemical Services Corporation in Englewood,
Colorado. Austin Exploration, L.L.C.'s leasing services have been provided by
John Wilson, who is also the President of Western Land Services in Ludington,
Michigan. We have paid our consultants an initial fee of $25,000 and we are
obligated to pay them a 3% royalty fee on all oil and gas produced from property
leased or purchased by us, or oil and gas purchased by us from properties,
within the prospective area identified by the consultants. Additional geological
services are available to us at the rate of $500 per day.
The targeted area identified by our management and our consultants is the
southwestern quarter of Coffey County, Kansas. This area was targeted for
several reasons, including its being situated above a known coal formation
called the Cherokee Basin, its proximity to active leasing efforts of other oil
and gas companies in southeastern Kansas in general and southern Coffey County
in particular, known oil and gas drilling and production in the region, the
availability of mineral rights for lease, and other geological information
provided by TCC Royalty Corp.
The Western Interior Coal Region includes three basins in the central
United States that contain gas bearing coal deposits of similar age and rank.
They are the Arkoma, Forest City and Cherokee Basins. Together these three
basins stretch from western Arkansas and central Oklahoma northward through
eastern Kansas and western Missouri into central Iowa. Our targeted area is
within the Cherokee Basin which is defined geographically as the area bounded to
the north by the Bourbon Arch, to the east and southeast by the Ozark Dome, and
to the west by the Nemaha uplift, encompassing northern Oklahoma, southeastern
Kansas, and southwestern Missouri.
The Cherokee Basin formation contains Pennsylvanian age coalbeds which are
believed to be contiguous throughout the entire basin. Coal found throughout the
basin is generally of the same age and type and therefore theoretically should
contain similar quantities and quality of gas. Historically, the majority of
coalbed methane gas production in Kansas has been south of our targeted area,
including production in Labette, Wilson, Neosho and Cherokee Counties, Kansas,
where coal seams and black shale averaging four feet in thickness have been
reported and initial water production generally has been less than 50 barrels
per day, eventually dropping to below 10 barrels per day. Although currently
there are no coalbed methane wells producing in our targeted area, drilling logs
from oil exploration in and surrounding our targeted area typically confirm the
uniformity of the coalbeds, indicating coal seams similar to those found to the
south of our targeted area. Additionally, a small number of coalbed methane gas
wells are producing in Woodson County, Kansas (approximately 10 miles south of
our targeted area) and Anderson County, Kansas (approximately 20 miles east of
our targeted area).
8
Phase 1 - Our Leasing Activities
In July 2001 we rented an office in Burlington, Kansas for $350.00 per
month and began leasing land in the south half of Coffey County, Kansas, and the
southeast portion of Lyon County, Kansas, in order to drill for coalbed methane
gas. Lyon County is adjacent to, and west of, Coffey County and both counties
are within the Cherokee Basin.
As of February 1, 2002, we had acquired 115 separate leases covering
approximately 15,388 acres, of which approximately 13,902 acres are in Coffey
County and approximately 1,486 acres are in Lyon County. We have paid
approximately $50,000 to date to obtain our leases. In the event that we are
successful in phase two of our plan and we find commercially producable gas or
oil, we intend to lease additional available land to the extent that we believe
such land will further our exploration and development activities. Because we
believe that we can continue to successfully lease land without having our
office in Burlington, Kansas, we closed that office in November 2001.
Each of our southeast Kansas mineral leases grants us the exclusive right
to explore for and produce oil, gas, coalbed methane, and other hydrocarbons and
minerals from wells located on the leased property. Each lease also grants us
rights-of-way and easements for laying pipelines and servicing other wells in
the vicinity of the leased property. Under the terms of each lease, the lessor
will receive a royalty equal to 12.5% of all oil, gas or other minerals produced
from the leased property or the proceeds of the sale thereof, and we will be
entitled to 87.5% of such production or proceeds. The lessor's royalty will be
free of costs and expenses and we will be responsible for all expenses incurred
in our operations including drilling, testing, completing and equipping.
Each lease has an initial or primary term of 5 years which is automatically
extended during such period thereafter as we continue to produce oil or gas from
the leased property or acres pooled with the leased property or we continue our
drilling operations. After the primary term, in the event oil and gas is not
being produced or shall have ceased on the leased property, the lease will not
terminate if we commence additional drilling or reworking operations within 120
days. If a lease is not extended beyond its primary term by production or
operations, we have the option to extend the primary term for an additional 3
years by paying the lessor $10 per net mineral acre.
We paid each lessor an initial payment of $10 upon the execution of our
lease. Regardless of whether or not we are producing oil and gas from a leased
property or acres pooled therewith, on the one-year anniversary of each lease we
will be required to pay the lessor $10 per net mineral acre leased. If we fail
to make such payment, the lease will terminate 30 days thereafter. We have
agreed to pay each lessor a royalty equal to 12.5% of any oil, gas or other
minerals that may be produced from wells drilled on the leased property. In the
event of a shut-in well capable of producing oil or gas, we have agreed to pay
the lessor a royalty equal to $1 per year per net mineral acre.
Pursuant to the lease payment terms described above, we will be obligated
to make the following one-year anniversary payments beginning in August 2002:
Month No. of Leases No. of Net Mineral Acres Payment
----- ------------- ------------------------ -------
August 69 9,491.35 94,913.50
September 42 5,397.10 53,971.00
October 4 500.00 5,000.00
--- ------ --------
TOTAL: 115 15,388.45 $153,884.50
Under our leases we have the right to pool or unitize the leased property
with other land owned or leased by us in the immediate vicinity for the
production of oil or gas. With respect to shallow gas and associated
hydrocarbons produced in conjunction therewith, we have the right to pool or
unitize the leased properties into a development pool of a maximum of 3,000
acres if we have drilled at least 2 wells within the pooled unit no later than 1
year after the expiration of the primary term of the lease.
9
We have agreed to indemnify each lessor against any and all liabilities
arising out of our operations on the leased property, including environmental
liabilities. We also have agreed to pay each lessor the amount of $500 per acre
as liquidated damages for any leased property that is damaged as a result of our
operations on such leased property. Additionally, we have agreed to pay each
lessor for any damages caused by us to any crops growing on the leased property.
Following the completion of our operations on a leased property, we are
obligated to restore the well site to its original condition and land contour,
to the extent possible.
All of the oil and gas property that we have leased to date is considered
"undeveloped acreage" which the Securities and Exchange Commission defines as
"lease acreage on which wells have not been drilled or completed to a point that
would permit the production of commercial quantities of oil and gas regardless
of whether such acreage contains proved reserves." We own a working interest in
15,388.45 gross undeveloped acres (100% of each leased acre) and 13,143.30 net
undeveloped acres (84.5% of 10,717.99 leased acres and 87.5% of 4,670.46 leased
acres) in southern Kansas. A "working interest" is the operating interest that
gives us, as the operator, the right to drill, produce and conduct operating
activities on the property and a share of production. A "net acre" (or net well)
is deemed to exist when the sum of the fractional working interest owned in
gross acres or gross wells equals one. The number of net acres or net wells is
then expressed as a whole number and fractions thereof. A "gross acre" (or gross
well) is the total acres or wells, as the case may be, in which a working
interest is owned.
Before committing substantial resources, including obtaining necessary
permits and preparing for drilling on any particular leased property, we plan to
complete our due diligence on our leased property, including obtaining a title
opinion or title insurance to confirm our rights to any oil, gas and other
minerals produced pursuant to our lease. It is difficult to determine what our
final interest in any oil, gas or other mineral that we produce will be until we
have negotiated all agreements with the third parties that we will hire to
perform our drilling activities and operate our wells.
In addition to our leasing activities in Kansas, in June 2001 we acquired a
one-year option for a lease on 4,560 acres in Island Township, Blaine County,
Montana from Geominerals Corp. for $1,400. Geominerals Corp. is controlled by
George Andrews, our former president and director. If we exercise the option, we
will pay $2.50 per acre for a total purchase price of $10,000 (after credit of
the amount paid for the option). Currently we do not intent to exercise this
option.
Phase 2 - Our Anticipated Drilling Activities
Phase two of our current plan of operation will involve identifying the
most promising and cost-effective drill sites on our leased acres, drilling and
testing wells to prove reserves, completing promising test wells, extracting the
oil, gas and other hydrocarbons that we find, and delivering them to market.
Although we believe that we have leased enough land to move forward with phase
two of our plan, we will have to obtain additional financing before we can
implement this next phase. We anticipate that we will need approximately
$750,000 to achieve our initial goal of drilling, testing and completing ten
coalbed methane gas producing wells.
We have just begun phase two of our plan of operation. To date we have not
commenced any drilling or other exploration activities on the properties that we
have leased and thus we do not have any estimates of oil and gas reserves on
such properties. Consequently we have not reported our reserve estimates to any
state or federal authority.
Furthermore, we have not yet identified any specific drill sites. Drill
sites will be selected based on a variety of factors, including information
gathered from historic records and drill logs (depth and thickness of coal seams
and the results of electric gamma ray readings), proximity to existing
pipelines, ease of access for drilling equipment, the presence of oil and
natural gas in the immediate vicinity, and consultations with our operator and
driller. Because a majority of this research information was obtained during
phase one of our plan, we believe that the cost of identifying drill sites will
be insubstantial. With the exception of the evaluation of the geological
structures that we encounter during the drilling process, the cost of which has
been factored into our estimated drilling costs, we do not anticipate needing
any further product research.
10
If phase two of our plan of operation is fully implemented, we will drill,
test and complete ten coalbed methane gas producing wells. Our drilling efforts
also will determine whether there are other forms of commercially producable
hydrocarbons present, such as oil or other types of natural gas. Each well will
be drilled and tested individually. If commercially producable amounts of gas
are present, the well will be completed and facilities installed to connect to
gathering or pipeline facilities. Completed wells that are producing and
connected to distribution pipelines will begin generating revenues as soon as
they begin pumping although these revenues may be realized on a quarterly basis.
We anticipate that each well in our targeted area will cost approximately
$25,000 to drill and test, an additional $15,000 to complete, plus an additional
$350 per month per well to pay for electricity, pulling and repairs, pumping and
other miscellaneous charges. We intend to hire third parties to operate our
wells and perform our drilling activities.
Once we have identified a proposed drilling site, we will engage the
services of an operator licensed to operate oil and gas wells in the State of
Kansas. The operator will be responsible for permitting the well, which will
include obtaining permission from the Kansas Corporation Commission relative to
spacing requirements and any other state and federal environmental clearances
required at the time that the permitting process commences. Additionally, the
operator will formulate and deliver to all interest owners an operating
agreement establishing each participants' rights and obligations in that
particular well based on the location of the well and the ownership. In addition
to the permitting process, the operator will be responsible for hiring the
driller, geologist and land men to make final decisions relative to the zones to
be targeted, confirming that we have good title to each leased parcel covered by
the spacing permit and to actually drill the well to the target zone. Should the
well be successful, the operator would thereafter be responsible for completing
the well and connecting it to the most appropriate transmission facility for the
hydrocarbons produced. It is likely that we will pay the operator by issuing it
a net revenue interest, which we expect would be equal to the 12.5% interest
that we have granted to the mineral owners from whom we have leased our
property.
The operator will be the caretaker of the well once production has
commenced. As such, the operator will be responsible for paying bills related to
the well, billing working interest owners for their proportionate expenses in
drilling and completing the well, and selling the production from the well. We
anticipate that once the production has been sold, the purchaser thereof will
carry out its own research with respect to ownership of that production and will
send out a division order to confirm the nature and amount of each interest
owned by each interest owner. Once a division order has been established and
confirmed by the interest owners, the production purchaser will issue the checks
to each interest owner in accordance with its appropriate interest. From that
point forward, the operator also will be responsible for maintaining the well
and the wellhead site during the entire term of the production or until such
time as the operator has been replaced.
Although we presently do not intend to seek status as a licensed operator,
if in the future we believe that seeking licensed operator status is appropriate
and we have adequate staff available to us, we may decide to operate our own
wells.
We have had preliminary discussions with Becker Drilling of Bucyrus,
Kansas, to act as both the operator and driller of our wells. Becker Drilling
was established in 1977 and is owned and operated by Mike Becker, who has
drilled and completed over 1,000 oil and gas wells in Kansas, Oklahoma, Texas,
New Mexico, Illinois, Wyoming, and Missouri, including over 20 coalbed methane
wells.
The driller will be responsible for performing, or contracting with third
parties and supervising their efforts, all aspects of the drilling operation
except for geological services. We currently anticipate getting additional
geological services from TCC Royalty Corp.
11
The success of phase two of our plan of operation is dependent upon our
ability to obtain additional capital to drill our wells and also upon our
successfully finding commercially producable amounts of coalbed methane gas or
other hydrocarbons in the wells that we drill. We cannot assure you that we will
obtain the necessary capital or that we will find commercially producable
amounts of gas if our drilling operations commence.
Phase 2 - Getting Our Products To Market
If any of our wells proves to hold commercially producable gas, we will
need to install a distribution infrastructure to transport our gas from the
wellhead to a major pipeline. We have identified several major distribution
pipelines currently installed in our general vicinity, including lines owned by
Phillips Petroleum, Williams Energy, CMS Panhandle Eastern, and Kansas Gas. We
have initiated contact with these companies to ascertain the specific locations
of their pipelines, their requirements to purchase gas from us (including volume
of gas and quality of gas), and costs to connect to their pipelines.
Traditionally, the major distributors and marketers of gas in the United States
have purchased production from anyone who can deliver sufficient quantities of
quality gas. Because some of these companies have purchased coalbed methane from
producing wells in the southern part of Kansas, we believe that if the gas
produced from wells drilled in our targeted area meets their criteria in both
quantity and quality, they will purchase our gas from us at market prices. To
date, we have not entered into any purchase agreements nor have we received
assurances from anyone that they will enter into such agreements with us in the
future.
We cannot accurately predict the costs of transporting our gas products to
existing pipelines until we locate our first successful well. The cost of
installing an infrastructure to deliver our gas to a pipeline or gatherer will
vary depending upon the distance the gas must travel from our wellhead to the
tap, and whether the gas first must be treated to meet the purchasing company's
quality standards. However, based on the close proximity of several major
distribution pipelines to our leased properties, plus our intent to drill as
close to these pipelines as practicable, we anticipate that the total cost of
installing such a infrastructure for ten producing wells will be approximately
$150,000 or $10,000 each plus a one-time expense of $50,000 to tap into the main
distribution pipeline, which will payable for the first distribution line.
The prices obtained for oil and gas are dependent on numerous factors
beyond our control, including domestic and foreign production rates of oil and
gas, market demand and the effect of governmental regulations and incentives. We
do not have any delivery commitments with respect to any oil or gas produced
from any properties that we acquire. However, due to the U.S. government's
recent push toward increased domestic production of energy sources, and the high
demand for natural gas, we do not anticipate any difficulties in selling any oil
and gas that we produce.
Phase 3 - Expanding Our Operations
The expansion phase of our plan of operation can commence only after the
successful completion of phase two, which means that we will have operating
wells that are producing gas and generating revenues for us. Our expansion
efforts will be constrained by state and local laws as well as by the number of
mineral acres that we have leased. For example, because State of Kansas
regulations require that coalbed methane wells be spaced no closer than eighty
acres, we could expand to a maximum of 187 wells based on the property that we
have leased to date. We intend to lease additional available land to the extent
that we believe such land will further our exploration and development
activities.
Liquidity and Capital Resources
Our auditors included an explanatory paragraph in their opinion on our
financial statements for the year ended March 31, 2001, to state that our losses
since inception and our net capital deficit at March 31, 2001 raise substantial
doubt about our ability to continue as a going concern. Our ability to continue
as a going concern is dependent upon raising additional capital and achieving
profitable operations. We cannot assure you that our business plans will be
successful in addressing this issue.
12
During March 2001, we spent approximately $6,000 pursuing potential oil and
gas properties and approximately $10,000 in legal fees in connection with
negotiating potential acquisitions and preparing investment documents in
connection with our capital raising efforts. These funds were advanced to us by
Mr. Charles Ross, currently our sole officer and director. At March 31, 2001, we
had cash of $73, a decrease of $740 from March 31, 2000.
During the nine months ended December 31, 2001, we spent approximately
$205,000 pursuing potential oil and gas leases in southeast Kansas, including
$25,000 in compensation paid to our president, and $71,000 in legal and
accounting fees. These fees were incurred in connection with negotiating
potential acquisitions, preparing investment documents in connection with our
capital raising efforts, and preparing and filing the registration statement of
which this prospectus is a part. These expenses were substantially funded by
$223,000 received as proceeds from the sale of our common stock in April, June
and December 2001. At December 31, 2001, we had cash of $2,450, an increase of
$2,377 from March 31, 2001, and current liabilities of $26,983. In January 2002,
we received approximately $25,000 from the sale of our common stock to overseas
investors.
Our Capital Requirements
We will need to raise additional funds to finance our planned operations
during the next 12 months, including implementing phase two of our plan of
operation and making our mineral lease payments as they come due. We anticipate
that we will need a minimum of $100,000 to begin drilling operations ($50,000
for drilling expenses and $50,000 for operating expenses) and a total of
$750,000 to complete phase two of our plan, which entails drilling and
completing ten coalbed methane gas wells. We intend to raise these funds through
one or more equity or debt offerings, either private or public, commencing in
the first quarter of 2002.
We currently do not have any binding commitments for, or readily available
sources of, additional financing. We cannot assure you that additional financing
will be available to us when needed or, if available, that it can be obtained on
commercially reasonably terms. If we do not obtain additional financing we will
not be able to implement our planned drilling and exploration activities and may
not be able to maintain our mineral leases. Furthermore, we could be forced to
cease our operations and liquidate our assets.
Assuming that we are able to obtain a minimum of $100,000 in additional
financing, we will begin drilling our first well. We will drill and test the
well for gas and, if producable amounts of gas are found, complete the well.
However, unless we receive an additional $60,000 in financing above the $100,000
minimum, we will not be able to install a gathering system and a well tap, and
therefore would not be able to generate any revenues from the well. Nonetheless,
a proven gas reserve would increase the value of our leased mineral rights
considerably and may increase our ability to receive additional financing to
proceed with our phase two drilling activities. In the event that our first test
well does not prove to hold producable reserves, we would have enough capital to
drill and test a second well, but we would need approximately $15,000 in
additional financing to complete it. If the second well did not prove to hold
producable reserves, we would be forced to cease our drilling operations until
such time as further financing became available, if ever. If no further
financing became available, we would be forced to cap a producing well or plug a
non-producing well, and cease our operations.
Assuming that we are able to obtain $750,000 in additional financing, we
will be able to drill, test and complete up to ten producing coalbed methane
wells and install the necessary infrastructure to transport our gas from the
wellhead to a gatherer or pipeline. If each well proved to hold producable
amounts of gas, we believe that we could generate revenues relatively quickly.
Completed wells that are producing and connected to pipelines will begin
generating revenues as soon as they begin pumping although these revenues may be
realized on a quarterly basis. In the event that one or more drill sites proves
unproducable, we will complete as many producable wells as possible with the
funds available to us.
13
In the event that we are able to obtain more than $100,000 but less than
$750,000 in additional financing, we will drill, test, complete and distribute
gas from as many well sites as possible with the amount of capital available to
us.
We estimate that it will take approximately two weeks to drill, test and
complete each well, and an additional two weeks to four weeks per well to
install the facilities to connect to gathering or pipeline facilities, depending
on the distance from the well to the pipeline. With full funding, we expect
phase two to take approximately ten months from start to finish. However, the
timeline for completion of phase two of our plan of operation is completely
dependent upon our ability to secure additional financing. We cannot implement
any of our drilling and exploration plans until we obtain additional financing.
In addition to the capital necessary to commence our drilling activities,
we will need additional financing to make our mineral lease payments as they
come due. From August 2002 to October 2002, we will need approximately $154,000
to make our one-year anniversary payments on our leased properties in southeast
Kansas. Although we have budgeted $75,000 of the $750,000 that we need to
implement phase two to pay some of these lease payments, our plan assumes that
we have begun production prior to this point and thus are producing and selling
sufficient gas to meet our lease payments. Failure to complete enough wells to
generate sufficient income to pay the $154,000 lease payments would require us
to obtain additional financing to retain our mineral leasehold rights. If we
fail to make these payments, we could lose our rights to some or all of the
property currently under lease, which could make further development impossible.
Under these circumstances, we could be forced to cease our operations and
liquidate our assets.
Furthermore, if we decide to exercise our option to lease 4,560 acres in
Blaine County, Montana, we will need an additional $8,600 in June 2002.
If we do not obtain additional financing through an equity or debt
offering, we may attempt to sell our leasehold interests in some or all of the
properties that we have leased in southeast Kansas together with any proprietary
information that we have developed concerning such properties, such as title
searches, title policies, engineering reports and records, core information,
drilling reports, and production records, if any. However, we cannot assure you
that we will be able to find interested buyers or that the funds received from
any such sale would be adequate to fund our activities.
Employees
We currently have no full time employees except our president who is
devoting his full-time to our activities. In July 2001 we retained two
independent leasing consultants to help us lease land for our oil and gas
operations. We terminated our agreements with the independent leasing
consultants in October 2001 and December 2001.
Competition
Gas is transported and distributed from our targeted area by several large
energy companies, including Williams Energy, CMS Panhandle Eastern, and Kansas
Gas. Generally speaking, these companies will allow producers to access their
pipelines and will buy gas from producers so long as the gas meets their volume
and quality criteria. There is no substantive competition to access these lines
as they can be tapped in many different locations.
There is intense competition in the oil and gas industry with respect to
the acquisition of producing properties, proved undeveloped acreage, and leases
for these properties. Many major and independent oil and gas companies actively
pursue and bid for the mineral rights of desirable properties, and many
companies have been actively leasing minerals in and around Coffey County,
Kansas, where our targeted area is centered. To date, the majority of the
leasing activity in southeast Kansas has been to the south and east of our
leased properties. However, there has been recent leasing activity as far north
as Leavenworth County, Kansas, which is approximately 50 miles north of our
targeted area.
14
We believe that our early leasing efforts in our targeted area have given
us a competitive advantage in southwestern Coffey County, as well as eastern
Lyon County. Although there are unleased tracts within our targeted area, we
believe that these properties will be unattractive to other companies because it
will be difficult for them to obtain a significant amount of contiguous mineral
acres, due to the fact that we hold the rights to a majority of land surrounding
these unleased tracts. However, increased demand for mineral rights in
surrounding areas may impact our ability to expand and grow in the future,
particularly because many of our competitors have substantially greater market
share in the industry, as well as greater financial and other resources, better
name recognition and longer operating histories. As a result, we may not be able
to acquire additional oil and gas properties in desirable locations.
There is also intense competition in the oil and gas industry for access to
contract drillers, geologists, and others needed to drill and complete wells.
Current demand for drilling and contract services in our targeted area appears
to be stable, and we believe our early entry will allow us to build the
relationships necessary to our success. We do not anticipate that competition in
this area will dramatically affect our plan of operation. However, increased
future demand for drillers and contractors may limit our ability to expand in a
timely manner and may negatively impact our ability to grow.
Government Regulation
Our oil and gas business will be subject to various federal, state and
local laws and governmental regulations which may be changed from time to time
in response to economic or political conditions.
Federal Regulation of First Sales and Transportation of Natural Gas
Historically, natural gas producers sold gas at the wellhead to interstate
pipelines, which in turn delivered gas to local distribution companies, or LDCs.
The transportation and sale of natural gas in U.S. interstate commerce has been
regulated pursuant to several laws enacted by Congress and the regulations
promulgated under these laws by the Federal Energy Regulatory Commission, or
FERC. The FERC regulates the transportation and sale for resale of natural gas
in interstate commerce pursuant to the Natural Gas Act of 1938, or NGA, and the
Natural Gas Policy Act of 1978, or NGPA. In the past, the federal government has
regulated the prices at which oil and gas could be sold. While "first sales" by
producers of natural gas and all sales of crude oil, condensate and natural gas
liquids can currently be made at uncontrolled market prices, Congress could
reenact price controls in the future. Deregulation of wellhead sales in the
natural gas industry began with the enactment of the NGPA in 1978. In 1989,
Congress enacted the Natural Gas Wellhead Decontrol Act, which removed all NGA
and NGPA price and non-price controls affecting wellhead sales of natural gas
effective January 1, 1993. FERC jurisdiction over transportation and sales other
than "first sales" has continued.
Commencing in the mid-1980s, FERC promulgated a series of orders designed
to correct market distortions and to make gas markets more competitive by
removing the transportation barriers to market access. These orders have had a
profound influence upon natural gas markets in the United States and have, among
other things, fostered the development of new wholesale markets, including a
large spot market for gas. The following is a brief description of the most
significant of those orders and is not intended to constitute a complete
description of those orders or their impact.
In April 1992, FERC issued Order No. 636, which restructured both the sales
and transportation services provided by interstate natural gas pipelines. The
purpose of Order No. 636 is to improve the competitive structure of the pipeline
industry and maximize consumer benefits from the competitive wellhead gas
market. The major function of Order No. 636 is to assure that the services
non-pipeline companies can obtain from pipelines are comparable to the services
pipeline companies offer to their gas sales customers. One of the key features
of the Order is the "unbundling" of services that pipelines offer their
customers. This means that pipelines must offer transportation and other
services separately from the sale of gas. The courts have largely affirmed the
significant features of Order No. 636 and numerous related orders pertaining to
individual pipelines, although certain appeals remain pending and FERC continues
to review and modify their open access regulations. These initiatives may affect
the intrastate transportation of gas under certain circumstances.
15
FERC continues to review its regulatory policies and regulations related to
the natural gas market and transportation. In February 2000, FERC issued Order
No. 637 amending certain regulations governing interstate natural gas pipeline
companies in response to the development of more competitive markets for natural
gas and natural gas transportation. The goal of Order No. 637 is to "fine tune"
the open access regulations promulgated by Order No. 636 to accommodate
subsequent changes in the market. Key provisions of Order No. 637 include: (1)
waiving the price ceiling for short-term capacity release transactions until
September 30, 2002, subject to review and possible extension of the program at
that time; (2) permitting value-oriented peak/off peak rates to better allocate
revenue responsibility between short-term and long-term markets; (3) permitting
term-differentiated rates, in order to better allocate risks between shippers
and the pipeline; (4) revising the regulations related to scheduling procedures,
capacity, segmentation, imbalance management, and penalties; (5) retaining the
right of first refusal, or ROFR, and the 5 year matching cap for long-term
shippers at maximum rates, but significantly narrowing the ROFR for customers
that FERC does not deem to be captive; and (6) adopting new web site reporting
requirements that include daily transactional data on all firm and interruptible
contracts and daily reporting of scheduled quantities at market points or
segments. The new reporting requirements became effective September 1, 2000.
As a result of the restructuring of the natural gas industry, active
wholesale markets have developed in production areas and downstream in order for
producers and gas marketers to serve LDCs and other customers. We cannot predict
what action FERC will take on all these matters in the future as it continues to
review its regulatory policies, nor can we accurately predict whether FERC's
actions will, over the long term, achieve the goal of increasing competition in
markets in which our natural gas may be sold. We do not believe that we will be
affected by any action taken materially differently than other natural gas
producers, gatherers and marketers with which we will compete.
FERC regulates the rates and services of "natural-gas companies," which the
NGA defines as persons engaged in the transportation of gas in interstate
commerce for resale. As previously discussed, the regulation of producers under
the NGA has been phased out. Interstate pipelines, however, continue to be
regulated by FERC under the NGA. Various state commissions also regulate the
rates and services of pipelines whose operations are purely intrastate in
nature, although generally sales to and transportation on behalf of other
pipelines or industrial end-users are not subject to material state regulation.
There are many legislative proposals pending in Congress and in the
legislatures of various states that, if enacted, might significantly affect the
petroleum industry. It is impossible to predict what proposals will be enacted
and what effect, if any, such proposals would have on us and our proposed
operations.
State and Local Regulation of Drilling and Production
State and local statutory and regulatory schemes govern various aspects of
oil and gas drilling, exploration and production, including regulatory approvals
required prior to drilling and associated construction activities, oversight of
drilling operations and abandonment of wells, regulation of production levels,
operator licensing and reporting, and environmental and conservation issues
associated with drilling and production activities. More specifically, such
schemes may include restrictions on the number and location of wells
("well-spacing" regulations), limitations on the production volume per set time
period ("proration" regulations), requirements that oil/gas be purchased from
common supply sources to prevent discrimination against select producers
("ratable-take orders"), and oil/gas production ratios designed to conserve
naturally occurring reservoir of energy and prolong the life of pools. Further,
to consolidate oil and gas rights in the interest of cooperative development and
sharing of production among members of the oil and gas drilling and production
industry, states also may require unitization (integration or consolidation of
oil and gas interests into an area for the production of hydrocarbons from an
entire unit and the regulation of costs and operation of the unit) and
compulsory pooling (consolidation of oil and gas rights in multiple tracts to a
defined unit for drilling of, and production from, a single well or a limited
number of single well units in a reservoir).
Initially, our gas production activities will be focused in the State of
Kansas. Our drilling and production operations will be subject to, and governed
by, the rules and regulations of the Kansas Corporation Commission. At the
present time, there are no specific regulations which apply only to coalbed
methane gas wells and production, and therefore we must comply with regulations
16
governing all wells drilled in Kansas. Exceptions to such statewide rules can be
and are frequently granted by the Kansas Corporation Commission in order to
prevent waste and protect correlative rights. Consistent with prior commission
orders, we anticipate requesting certain exceptions in order to facilitate our
project. The Kansas Corporation Commission is presently considering the adoption
of special regulations specifically covering the production of coalbed methane
gas, which would recognize and promote the unique characteristics of such
production. We will be required to obtain prior regulatory approval before
commencing the drilling of any wells in Kansas and we will require special
approval in order to drill any well which deviates more than 7 degrees from the
vertical, including horizontally drilled wells. In addition, our wells will be
subject to regulations prescribing the location of wells and limiting the
production therefrom. All wells which we drill and later plug and abandon will
be subject to inspection by and compliance with the rules of the Kansas
Corporation Commission. Violation of any rule or regulation of the commission
could result in monetary penalties and sanctions.
Environmental Regulations
Our gas exploration activities will be subject to numerous environmental
and conservation laws and regulations governing almost all facets of these
activities. For example, the states in which we operate may define the scope of
permissible drilling and exploration activities to prevent pollution by the
migration of extracted materials into the environment, the depletion of
reservoirs, the drilling of unnecessary wells, and damage to neighboring
property caused by blowouts.
Because our initial operations are focused in the State of Kansas, they
will be subject to various Kansas laws and regulations which protect the
environment. We will be liable for all costs associated with the escape of salt
water, oil or refuse resulting from our operations, and we may incur additional
costs associated with protecting fresh water from contamination caused by our
activities. We will be required to properly plug all wells in accordance with
specific rules and regulations and, upon termination of any lease, we will be
required at our expense to remove all equipment and structures and to return the
land to its original contour.
Our operations also may be subject to federal laws and regulations, such as
those of the Environmental Protection Agency, or EPA. For example, the
Endangered Species Act may require us to investigate whether our operations will
result in the taking of any endangered species of fish or wildlife or adversely
affect the habitat of such species, and whether our operations will result in
the removal, damage, or destruction of any endangered species of plant. The
costs of complying with the Act likely would be incurred in investigating and
reporting our activities although additional costs would be incurred if we had
to limit our operations such that no such takings or removals occur.
Other EPA laws and regulations to which our operations may be subject
restrict the emission of air, water, or other pollution, and provide substantial
liability for the remediation of contamination resulting from those omissions.
The Federal Water Pollution Control Act (commonly known as the "Clean Water
Act") prohibits the discharge of pollutants into waters of the United States
unless such discharges are in accordance with a Clean Water Act permit. One or
more of our operations may result in such discharges. The costs of compliance
with the Clean Water Act for any operations that do result in such discharges
would include the costs to obtain and comply with a Clean Water Act permit.
The Clean Air Act regulates air emissions from any area, stationery, or
mobile source. One or more pieces of equipment used in our operations may
require a Clean Air Act permit. The cost of compliance with the Clean Air Act
would include the cost of obtaining the permit and the cost of pollution control
devices, if any, required by the permit.
Additionally, our operations may make us subject to the Resource
Conservation and Recovery Act of 1976, or RCRA, which regulates the generation,
transportation, treatment, storage, or disposal of hazardous substances. The
cost of compliance with RCRA would include the cost of obtaining a RCRA permit
and the cost of properly storing and disposing of hazardous substances generated
by our activities. Should any of our operations result in the unpermitted
discharge of a hazardous substance into the air, onto the land, or into the
water, then we may be subject to the Comprehensive Environmental Response,
Compensation, and Liability Act (commonly known as "Superfund"). We then would
be potentially liable for the costs of cleaning up any such discharges. It is
impossible to quantify such contingent costs.
17
None of the mineral properties that we have leased to date are federally
owned or controlled. If, in the future, we lease or otherwise utilize federal
resources or functions, then we may be subject to other federal environmental
and conservation laws, including the National Environmental Policy Act of 1969
(commonly known as "NEPA"), the National Historic Preservation Act, and the
Archeological and Historic Preservation Act.
Environmental laws and regulations, both federal and state, are subject to
periodic revisions, which in many instances may lead to even more stringent
regulation of the oil and gas drilling and production industry.
Operational Hazards and Insurance
Our operations will be subject to the usual hazards incident to the
drilling and production of oil and gas, such as blowouts, cratering, explosions,
uncontrollable flows of oil, gas or well fluids, fires, pollution, releases of
toxic gas and other environmental hazards and risks. These hazards can cause
personal injury and loss of life, severe damage to and destruction of property
and equipment, pollution or environmental damage and suspension of operations.
We will obtain and maintain general liability insurance in amounts and on
terms that we consider to be reasonable for our operations and in accordance
with customary industry practices. Such insurance will not cover every potential
risk associated with the drilling, production and processing of oil and gas. In
particular, coverage is not obtainable for all types of environmental hazards.
The occurrence of a significant adverse event, the risks of which are not fully
covered by insurance, could have a material adverse effect on our financial
condition and results of operations. Moreover, no assurance can be given that we
will be able to obtain or maintain adequate insurance at rates we consider
reasonable.
Our Headquarters
Prior to April 2001, we occupied offices in the home of our former
president in Littleton, Colorado. During that period we incurred a rent expense
of $100 per month to Corporate Management Services, Inc. which also occupies
offices in the same location.
In April 2001, we moved our headquarters to 11952 Farley, Shawnee Mission,
Kansas 66213, where we occupy offices in the home of our sole officer and
director at no cost to us. Mr. Ross has agreed to continue this arrangement
until we make other arrangements.
In July 2001 we rented an approximately 200 square foot office on a
month-to-month basis for $350.00 per month in Burlington, Kansas, near our
leased oil and gas properties. Because we believe that we can continue to
successfully lease land without having our office in Burlington, Kansas, we
closed that office in November 2001.
Litigation
We do not know of any pending or threatened legal proceedings to which we
are a party. We also are not aware of any proceedings being contemplated by
governmental authorities against us.
MANAGEMENT
Directors and Officers
The following table sets forth the name, age and position of each of our
officers and directors as of the date of this prospectus.
18
Name Age Position Term
---- --- -------- ----
Charles A. Ross, Sr. 61 President and Director April 2001 to August 2004
Charles A. Ross, Sr. has been our President and a Director since April 10,
2001. Mr. Ross has agreed to devote as much time to our activities as is
required to implement our new plan of operation.
From January 2001 through March 2001, Mr. Ross was exploring opportunities
in the oil and gas business, which led to his investment in us. From July 1999
until December 2000, he owned and operated a business that supplied recruiting
and business cards to a number of multi-level marketing companies. From June
1998 through July 1999, Mr. Ross was self-employed designing musical instrument
amplifiers, an industry in which he has been involved since the 1960's.
From August 1995 until May 1998, he was the President and CEO and a
director of Edgerton Technology, Inc. and from July 1996 until May 1998 he was
the Chairman of the Board, President, CEO and Treasurer of Edgerton Musical
Amplifiers, Inc. From August 1992 to August 1995, Mr. Ross was a self-employed
consultant and investor.
Other public companies in which Mr. Ross served as an officer or director
include Copilot Electronic Products, Inc. from 1989 to 1992, Birdview Satellite
Communications, Inc. from 1981 to 1986, and Kustom Electronics, Inc. from 1965
to 1973. In 1968 he was named Kansas Small Businessman of the Year by the Small
Business Administration.
Our board of directors consists of three directors and we currently have
two vacancies. Mr. Ross is actively seeking additional qualified individuals to
serve as directors on our board.
At our annual shareholders meeting on August 10, 2001, our shareholders
voted to amend our Articles of Incorporation to provide for a staggered board of
directors. Under our Articles of Incorporation, as amended, our board is evenly
divided into three classes, Class A, Class B and Class C. The initial Class A
director is elected for 3 years, the initial Class B director for 2 years, and
the initial Class C director for 1 year. Upon the expiration of the initial
staggered terms, directors will be elected for terms of three years, to succeed
those whose terms have expired. At the annual shareholders meeting our
shareholders elected Mr. Ross as the Class A director, to serve a three-year
term.
Staggered terms tend to protect against sudden changes in management and
may have the effect of delaying, deferring or preventing a change in our control
without further action by our shareholders, such as removing directors from our
board as provided under Colorado law. Having a staggered board may have other
anti-takeover effects as well, both favorable and unfavorable to our
shareholders.
Our officers are elected by the board of directors at the first board of
directors meeting after each annual meeting of our shareholders and hold office
until their successors are duly elected and qualified in accordance with our
Bylaws. Our next annual meeting of shareholders is scheduled for July 19, 2002.
There are no agreements or understandings for our sole officer and director
to resign at the request of another person nor is he acting on behalf of or at
the direction of any other person.
Promoters
Corporate Management Services, Inc. and its President, George Andrews,
founded us on April 9, 1998, and continued to promote us until April 10, 2001,
when Mr. Andrews resigned as a director and officer. See discussion below in
"Certain Transactions."
19
EXECUTIVE COMPENSATION
The following table sets out the annual compensation paid to our sole
officer for the last three completed fiscal years. No executive officer of ours
received annual compensation in excess of $100,000 during the last three
completed fiscal years.
Summary Compensation Table
Long-Term Compensation
----------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ---------------------------- -----------------------
Securities
Fiscal Other Restricted Underlying
Name and Year Annual Stock Options/ LTIP All Other
Principal Position Ending Salary ($) Bonus ($) Comp. Awards ($) SARs (#) Payouts ($) Comp.($)
------------------ ------ ---------- --------- ----- ---------- -------- ----------- --------
George Andrews, 3/31/01 0 0 0 0 0 0 0
former President 4/30/00 0 0 0 0 0 0 0
4/30/99 0 0 0 0 0 0 0
Officer Compensation
During the nine month period ended December 31, 2001, we paid our president
$25,000 in compensation for his efforts in implementing our plan to acquire
coalbed methane producing properties in southeast Kansas. As of the date hereof,
no other compensation has been paid to any executive officer for services
rendered to us nor has any executive officer accrued any compensation pursuant
to any agreement with us.
Option Exercises and Values
None of our executive officers holds any stock options to purchase our
common stock.
Long-Term Incentive Plans
We do not have any long-term incentive plans. No retirement, pension,
profit sharing, stock option, insurance programs or other similar programs have
been adopted by us for the benefit of our employees.
Employment Contracts and Termination of Employment Arrangements
There are no other compensatory plans or arrangements, including payments
to be received from us, with respect to the resignation, retirement or other
termination of the employment of any executive officer or related to a change in
control in us.
Director Compensation
None of our directors received any compensation during our most recent
fiscal year for serving in their position as directors. If we do have funds
available in the future, we likely will reimburse our directors for expenses
incurred by them in their duties as a director.
Limitation of Liability and Indemnification
Our Articles of Incorporation contain a provision eliminating our
directors' liability to us or our shareholders for monetary damages for a breach
of their fiduciary duty. However, a director's liability is not eliminated in
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. Our Articles of Incorporation also
obligate us to indemnify our directors and officers to the fullest extent
permitted under Colorado law. While we believe that these provisions are very
standard and necessary to assist us in attracting and retaining qualified
individuals to serve as directors, they could also serve to insulate our
directors against liability for actions which damage us or our shareholders.
Furthermore our assets could be used or attached to satisfy any liabilities
subject to such indemnification.
20
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 1, 2002, and as adjusted to reflect
the sale of all 1,440,000 shares which potentially may be sold in connection
with this prospectus, by (i) each of our executive officers, directors and
director nominees, (ii) all executive officers, directors and director nominees
as a group, and (iii) each person who beneficially owns more than 5% of our
common stock (each a "Principal Stockholder").
Shares of Common Percent of Class Percent of Class
Name and Address of Stock Beneficially Beneficially Owned Beneficially Owned
Beneficial Owner Owned Before Offering After Offering
---------------- ----- --------------- --------------
Charles A. Ross, Sr., Director and President 900,000 14.78 % 14.78 %
11952 Farley
Shawnee Mission, KS 66213
All directors and executive officers as a 900,000 14.78 % 14.78 %
group (1 person):
Jeffrey P. Frazier, Principal Stockholder 1,000,000 16.42 % 16.42 %
2956 Nova Road
Pine, CO 80470
Gary J. Grieco, Principal Stockholder 1,250,000 20.53 % 16.42 %
2856 La Casita Avenue
Las Vegas, NV 89120
Terrie L. Pham, Principal Stockholder 1,000,000 16.42 % 16.42 %
16511 E. 27 Terrace
Independence, MO 64055
The Hedge Fund, LLC, Principal Stockholder 360,000 5.91 % 0%
Brad Beveri, Managing Member
9312 W. 150th Terrace
Overland Park, KS 66223
Rule 13d-3 under the Securities Exchange Act of 1934 provides the
determination of beneficial owners of securities. That rule includes as
beneficial owners of securities, any person who directly or indirectly has, or
shares, voting power and/or investment power with respect to such securities.
Rule 13d-3 also includes as a beneficial owner of a security any person who has
the right to acquire beneficial ownership of such security within sixty days
through any means, including the exercise of any option, warrant or conversion
of a security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
21
CERTAIN TRANSACTIONS
On April 11, 1998, we issued a total of 1,000,000 shares of our common
stock to Corporate Management Services, Inc., or CMS, in exchange for services
related to management and organization costs of $500. Mr. George Andrews, our
sole officer and director until April 2001, is the sole director and a 50%
shareholder of CMS. From April 11, 1998, to April 10, 2001, CMS provided us with
administrative and marketing services on an as-needed basis without additional
charge.
Additionally, from our inception to March 31, 2001, we incurred an expense
of $100 per month for rent and other administrative services which were
performed by CMS on our behalf. As of March 31, 2001, we had incurred rent and
administrative service expenses totaling $3,600, which amount has been credited
to additional paid-in capital on our financial statements.
From April 11, 1998, to April 10, 2001, CMS advanced to us any additional
funds which we needed for operating capital and for costs in connection with
searching for or completing an acquisition or merger. Such advances were made
without expectation of repayment (other than offsets of earned interest) unless
the owners of a business which we acquired or merged with agreed to repay all or
a portion of such advances. As of March 31, 2001, CMS had advanced a total of
$5,155 to us for legal, accounting, general and administrative expenses, which
amount was treated as an accrued liability on our financial statements but which
was forgiven by CMS as of April 30, 2001.
On or about March 3, 2001, we and CMS entered into an Agreement for the
Purchase of Common Stock with Charles A. Ross, Sr. pursuant to which CMS sold
900,000 shares of our common stock to Mr. Ross for $1,000. Pursuant to that
agreement, on April 10, 2001, Mr. Andrews resigned as our sole officer and
director and Mr. Ross became our sole officer and director.
On June 17, 2001, we acquired a one-year option for a lease on 4,560 acres
in Island Township, Blaine County, Montana from Geominerals Corp. for $1,400.
Geominerals Corp. is controlled by George Andrews, our former president and
director. If we exercise the option, we will pay $2.50 per acre for a total
purchase price of $10,000 (after credit of the amount paid for the option).
In anticipation of Mr. Charles Ross' acquisition of shares from CMS, he
advanced to us $10,500 for working capital on February 28, 2001. The advance
carried no interest rate and was payable on demand. We repaid the advance in
April 2001 from the proceeds of our private placement in April 2001. Mr. Ross
also paid travel and administrative expenses totaling $6,115 on our behalf prior
to March 31, 2001, and $24,118 during the nine months ended December 31, 2001.
Mr. Ross received reimbursements and advances from us totaling $33,205 during
the nine months ended December 31, 2001. The net advance of $2,972 is included
in our financial statements as expenses advanced to an officer at December 31,
2001.
PLAN OF DISTRIBUTION
As used in this prospectus, selling security holder includes any donees,
pledgees, transferees or other successors in interest who will hold the selling
security holders' shares after the date of this prospectus. We are paying the
costs, expenses and fees of registering the common stock, but the selling
security holders will pay any underwriting or brokerage commissions and similar
selling expenses relating to the sale of the shares of common stock.
The selling security holders may sell, from time to time, any or all of
their shares of our common stock on any stock exchange, market or trading
facility on which our shares are then traded or in private transactions, at a
price of $0.10 per share until our shares are quoted on the OTC Bulletin Board
and thereafter at prevailing market prices or privately negotiated prices. The
selling security holders may sell some or all of their common stock through:
22
o ordinary brokers' transactions which may include long or short sales;
o transactions involving cross or block trades or otherwise;
o purchases by brokers, dealers or underwriters as principal and resale
by those purchasers for their own accounts under this prospectus;
o market makers or into an existing market for our common stock;
o other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
o transactions in options, swaps or other derivatives; or
o any combination of the selling options described in this prospectus,
or by any other legally available means.
The selling security holders may enter into hedging transactions with
broker-dealers who may engage in short sales of our common stock in the course
of hedging the positions they assume. The selling security holders also may
enter into option or other transactions with broker-dealers that require the
delivery by those broker-dealers of the common stock. Thereafter, the shares may
be resold under this prospectus.
The selling security holders and any broker-dealers involved in the sale or
resale of our common stock may qualify as "underwriters" within the meaning of
Section 2(a)(11) of the Securities Act of 1933. In addition, the broker-dealers'
commissions, discounts or concessions may qualify as underwriters' compensation
under the Securities Act. If any selling security holders or any broker-dealer
qualifies as an "underwriter," they will be subject to the prospectus delivery
requirements of Section 153 of the Securities Act, which may include delivery
through the facilities of the NASD.
In the event that any selling security holder sells any of his common stock
to a broker, dealer or underwriter as principal, such shares may be resold by
the broker, dealer or underwriter only under an amended prospectus that
discloses the selling security holder's arrangements with the broker/ dealer/
underwriter participating in the offering and identifies the participating
broker/ dealer/ underwriter. Any participating brokers/ dealers will be
considered as an "underwriter" and will be identified in the amended prospectus
as such.
In conjunction with sales to or through brokers, dealers or agents, the
selling security holders may agree to indemnify them against liabilities arising
under the Securities Act. We know of no existing arrangements between the
selling security holders, any other shareholder, broker, dealer, underwriter or
agent relating to the sale or distribution of our common stock.
In addition to selling their shares of common stock under this prospectus,
the selling security holders may:
o transfer their common stock in other ways not involving market makers
or established trading markets, including by gift, distribution, or
other transfer; or
o sell their common stock under Rule 144 of the Securities Act, if the
transaction meets the requirements of Rule 144.
We have advised the selling security holders that during the time each is
engaged in a distribution of the shares covered by this prospectus, each is
required to comply with Regulation M promulgated under the Securities Exchange
Act of 1934, as amended. With certain exceptions, Regulation M precludes the
selling security holders, any affiliated purchasers, and any broker-dealer or
other person who participates in such distribution from bidding for or
purchasing, or attempting to induce any person to bid for or purchase, any
shares which are the subject of the distribution until the entire distribution
is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of our shares in connection with the distribution of our
shares. We have further advised selling security holders who may be "affiliated
purchasers" of ours that they must coordinate their sales under this prospectus
with each other and us for purposes of Regulation M. All of the foregoing may
affect the marketability of the shares offered in this prospectus.
We will amend or supplement this prospectus as required by the Securities
Act.
23
SELLING SECURITY HOLDERS
The following table shows for each selling security holder:
o the number of shares of common stock beneficially owned by him or her
as of March 1, 2002,
o the number of shares of common stock covered by this prospectus,
o the number of shares of common stock to be retained after this
offering, if any, assuming the selling security holder sells the
maximum number of shares (and percentage of outstanding shares of
common stock owned after this offering, if more than 1%), and
o the number of shares of common stock offered by him or her at $0.10
per share until our shares are quoted on the OTC Bulletin Board.
The selling security holders are not required, and may choose not, to sell any
of their shares of common stock.
Shares of Common
Shares of Common Stock Shares of Common Shares of Common Stock Initially
Beneficially Owned Stock to Be Sold Stock Beneficially Offered at $0.10 Per
Name Before Offering in Offering Owned After Offering Share*
---- --------------- ----------- -------------------- ------
Corporate Management 100,000 100,000 0 10,000
Services, Inc. (1), (2)
George Andrews (1) 5,000 5,000 0 1,000
Joan Andrews (1) 5,000 5,000 0 1,000
Barbara Davidson (1) 5,000 5,000 0 1,000
Karla M. Alvarez 5,000 5,000 0 ---
Charles A. Baird 5,000 5,000 0 ---
Boxer Capital Ltd. (3) 5,000 5,000 0 ---
Bruce C. Carey 5,000 5,000 0 ---
Kathleen Cavanaugh 5,000 5,000 0 1,000
Donald A. Christensen 5,000 5,000 0 ---
George A. Christy 5,000 5,000 0 1,000
Anthony Clanton 5,000 5,000 0 ---
Britt Clanton 5,000 5,000 0 ---
Leigh Sholley Clanton 5,000 5,000 0 ---
Stephen Co & Daphne Co 5,000 5,000 0 ---
Colorado Resorts, Inc. (4) 5,000 5,000 0 ---
Carol L. Curtiss 5,000 5,000 0 ---
Dacono Park, LLC (5) 5,000 5,000 0 ---
Emprise, Inc. (6) 5,000 5,000 0 1,000
Devon Golding 5,000 5,000 0 ---
William N. Gunderson 5,000 5,000 0 1,000
Jim Hesselgrave 5,000 5,000 0 ---
24
Shares of Common
Shares of Common Stock Shares of Common Shares of Common Stock Initially
Beneficially Owned Stock to Be Sold Stock Beneficially Offered at $0.10 Per
Name Before Offering in Offering Owned After Offering Share*
---- --------------- ----------- -------------------- ------
Robert C. & Jane B. Hooper 5,000 5,000 0 ---
Thomas G. Ispas 5,000 5,000 0 ---
Randolph S. Julian 5,000 5,000 0 ---
Paul B. Knight 5,000 5,000 0 ---
Don Kramer 5,000 5,000 0 1,000
Betty McCloud 5,000 5,000 0 ---
Paul & Margaret McManigal 5,000 5,000 0 ---
Dennis E. & Katherine J. Nattress 5,000 5,000 0 ---
Bradford & Nancy Oesch 5,000 5,000 0 ---
Andrew L. & Gigi R. Pidcock 5,000 5,000 0 1,000
Robert B. Reed 5,000 5,000 0 ---
Raymond A. Ritter Revocable Trust (7) 5,000 5,000 0 ---
Jolaine Roth 5,000 5,000 0 ---
Barbara & Michael Sauter 5,000 5,000 0 1,000
Jeffrey R. Sauter 2,500 2,500 0 ---
Christa K. Stratton 2,500 2,500 0 ---
Ronald Sauter 5,000 5,000 0 ---
Natalie R. Shields 5,000 5,000 0 ---
Gary N. TenEyck 5,000 5,000 0 1,000
Transwestern Mortgages, Inc. (8) 5,000 5,000 0 ---
Arnold L. Weyand and V. Marie 5,000 5,000 0 ---
Weyand Revocable Trust (9)
Douglas H. Willson 5,000 5,000 0 1,000
William & Joanna Woodward 5,000 5,000 0 ---
Alan J. Woydziak 5,000 5,000 0 1,000
L. A. Wuischpard 5,000 5,000 0 1,000
John K. Zerwick 5,000 5,000 0 ---
Gary J. Grieco 1,250,000 250,000 1,000,000 (16.42%) ---
Harvey M. Burstein 250,000 250,000 0 10,000
Mallard Management Inc.(10) 250,000 250,000 0 10,000
The Hedge Fund, LLC (11) 360,000 360,000 0 ---
25
* Included in the number of shares being sold in the offering.
(1) From April 11, 1998, to April 10, 2001, Corporate Management Services, Inc.
or CMS owned approximately 81% of our issued and outstanding common stock.
See "Certain Transactions" below regarding transactions between us and CMS
during this period. George Andrews is the sole director and a 50%
shareholder of CMS and was our sole officer and director until April 10,
2001. Barbara Davidson is a 50% shareholder of CMS.
(2) As part of the sale of a controlling interest to Mr. Ross, CMS agreed not
to sell 50% of its shares for a period of 180 days after the effective date
of the resale registration statement of which this prospectus is a part.
(3) The principal of Boxer Capital Ltd. is Neil Liebman, Managing General
Partner.
(4) The principal of Colorado Resorts, Inc. is Paul Knight, President.
(5) The principal of Dacono Park, LLC is Paul Knight, President.
(6) The principal of Emprise, Inc. is Don Kramer, President.
(7) The principal of the Raymond A. Ritter Revocable Trust is Raymond Ritter,
Trustee.
(8) The principal of Transwestern Mortgages, Inc. is Paul Knight, President.
(9) The principal of the Arnold L. Weyand and V. Marie Weyand Revocable Trust
is Arnold Weyand, Trustee.
(10) The principal of Mallard Management Inc. is James Loeffelbein, President.
(11) The principal of The Hedge Fund LLC is Brad Berveri, Manager.
DESCRIPTION OF OUR STOCK
We are authorized to issue 20,000,000 shares of common stock, no par value,
and 5,000,000 shares of non-voting preferred stock, no par value. There are
6,090,000 shares of common stock currently outstanding and no shares of
preferred stock outstanding.
Common Stock
Holders of common stock are entitled to dividends when declared by our
board of directors. Dividends on our common stock will be subject to any
priority as to dividends for any preferred stock that may be outstanding.
Holders of our common stock are entitled to cast one vote for each share held at
all shareholder meetings for all purposes, including the election of directors.
Cumulative voting for the election of directors is not permitted. The holders of
a majority of our common stock entitled to vote constitute a quorum at meetings
of shareholders. The vote of the holders of a majority of common stock present
at such a meeting will decide any question brought before such meeting.
Upon our liquidation or dissolution, the holder of each outstanding share
of common stock will be entitled to share ratably in our net assets after the
payment of all debts and other liabilities. No holder of common stock has any
preemptive or preferential rights to purchase or subscribe for any part of any
unissued or any additional authorized stock or any of our securities convertible
into shares of our stock. No holder of common stock has redemption or conversion
rights.
Preferred Stock
Our board of directors is authorized by our Articles of Incorporation to
provide for the issuance of shares of preferred stock in series and, by filing a
certificate pursuant to Colorado law, to establish from time to time the number
of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof without any further vote or
action by our shareholders. Any shares of preferred stock so issued would have
priority over our common stock with respect to dividend or liquidation rights.
Any future issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in our control without further action by our
shareholders and may adversely affect the voting and other rights of the holders
of our common stock. At present we have no plans to issue any preferred stock
nor to adopt any series, preferences or other classification of preferred stock.
26
The issuance of shares of preferred stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of preferred stock might impede
a business combination by including class voting rights that would enable a
holder to block such a transaction. In addition, under certain circumstances,
the issuance of preferred stock could adversely affect the voting power of
holders of our common stock. Although our board of directors is required to make
any determination to issue preferred stock based on its judgment as to the best
interests of our stockholders, our board could act in a manner that would
discourage an acquisition attempt or other transaction that some, or a majority,
of our stockholders might believe to be in their best interests or in which such
stockholders might receive a premium for their stock over the then market price
of such stock. Our board presently does not intend to seek stockholder approval
prior to the issuance of currently authorized stock, unless otherwise required
by law or applicable stock exchange rules.
Transfer Agent and Registrar
The transfer agent for our common stock is Computer Share Investor
Services, 12039 West Alameda Parkway, Suite Z-2, Lakewood, Colorado 80228.
SHARES ELIGIBLE FOR FUTURE SALE
We currently have 6,090,000 shares of common stock outstanding, of which
1,440,000 shares are being registered for resale pursuant to the registration
statement of which this prospectus is a part. The 1,440,000 shares of common
stock registered for resale hereunder will be freely tradable without
restriction or further registration under the Securities Act to the extent that
a market develops for our securities. All of the 4,650,000 outstanding shares of
common stock not registered for resale hereunder are "restricted securities."
Any shares purchased by an affiliate of ours will be subject to the resale
limitations of Rule 144 under the Securities Act. An affiliate of ours is a
person who has a control relationship with us, which generally includes our
executive officers, directors and 10% or more stockholders.
"Restricted securities" may only be sold as follows:
o pursuant to a registration statement under the Securities Act,
o in compliance with the exemption provisions of Rule 144, or
o pursuant to another exemption under the Securities Act.
In general, Rule 144 requires that affiliates and persons owning restricted
securities hold their securities for a minimum of one year, limits the number of
securities that may be sold within any 3 month period, requires that sales must
be made through unsolicited brokers' transactions or in transactions directly
with a market maker, and requires the filing of a Form 144 if the securities to
be sold during any three-month period exceeds 500 shares or has a total sales
price over $10,000. Rule 144 limits the number of shares of our common stock
that may be sold within any 3 month period to the greater of:
o one percent of the outstanding shares of our common stock, and
o the average weekly trading volume of our common stock during the four
calendar weeks prior to such sale.
Sales under Rule 144 are also subject to the availability of current public
information about us. However, persons who are not affiliated with us and who
have held their restricted securities for at least two years may resell their
shares without regard to the foregoing requirements of Rule 144.
A sale of shares by our current shareholders, whether pursuant to Rule 144
or otherwise, may have a depressing effect upon the market price of our common
stock. To the extent that these shares enter the market, the value of our common
stock in the over-the-counter market may be reduced.
27
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Market Information
There is no established public market for our common stock and we have
arbitrarily determined the offering price of $0.10 per share. Our common stock
does not have a trading symbol and is not currently listed or quoted on any
quotation medium. Once we have applied for a trading symbol and pre-cleared our
shares for trading, our common stock may be traded in the over-the-counter
market. However, there can be no assurance of whether, when or at what price
trading in our stock will occur.
Holders
As of March 1, 2002, we had approximately 61 beneficial owners of our
common stock. We do not have outstanding any options or warrants to acquire, or
any securities convertible into, any shares of our common stock.
Dividends
Holders of our common stock are entitled to receive such dividends as may
be declared by our board of directors. We have not declared any cash dividends
on our common shares for the last two fiscal years and we do not anticipate
paying any cash dividends in the foreseeable future. We currently intend to use
all available funds for the development of our business. We are not currently a
party to any agreement restricting the payment of dividends.
LEGAL MATTERS
Ballard Spahr Andrews & Ingersoll, LLP will pass upon the validity of the
common stock offered by this prospectus. Barbara Davidson, the wife of a partner
in the Denver office of Ballard Spahr Andrews & Ingersoll, LLP is a selling
security holder and is a 50% shareholder of Corporate Management Services, Inc.
EXPERTS
Our financial statements for the year ended April 30, 2000, and the eleven
months ended March 31, 2001, in this prospectus have been audited by Cordovano &
Harvey, P.C., independent certified public accountants, to the extent and for
the periods set forth in their report, and are set forth in this prospectus in
reliance upon such report given upon the authority of them as experts in
auditing and accounting.
SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION
The Colorado Business Corporation Act provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in connection
with an action, suit, or proceeding brought by reason of their position as a
director, employee, or agent. The person being indemnified must have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation.
Our Articles of Incorporation obligate us to indemnify our directors and
officers to the fullest extent permitted under Colorado law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, we have been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
28
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a Registration Statement on Form SB-2 that we
filed with the Securities and Exchange Commission. Certain information in the
Registration Statement has been omitted from this prospectus in accordance with
the rules of the SEC.
We file annual reports, quarterly reports and current reports, proxy
statements and other information with the SEC. Our file number is 27321. We are
required to file electronic versions of these documents with the SEC. Those
documents may be accessed through the SEC's Internet site at http://www.sec.gov.
You may read and copy materials that we have filed with the SEC, including
the Registration Statement, at the SEC public reference room located at 450
Fifth Street, N.W., Room 1024, Washington, DC 20549. You can call the SEC at
1-800-732-0330 for further information about the public reference room.
29
VISTA EXPLORATION CORPORATION
(Formerly Bail Corporation)
(A Development Stage Company)
Index to Financial Statements
Page
----
Independent auditors' report............................................... F-2
Balance sheet, March 31, 2001 and December 31, 2001 (unaudited)............ F-3
Statements of operations, for the eleven months ended March 31, 2001
and 2000 (unaudited), for the year ended April 30, 2000, from April
9, 1998 (inception) through March 31, 2001, for the nine months
ended December 31, 2001 (unaudited) and 2000 (unaudited), and from
April 9, 1998 (inception) through December 31, 2001 (unaudited).......... F-4
Statement of shareholders' equity (deficit), from April 9, 1998
(inception) through March 31, 2001 and April 1, 2001 through
December 31, 2001 (unaudited)............................................ F-5
Statements of cash flows, for the eleven months ended March 31, 2001
and 2000 (unaudited), for the year ended April 30, 2000, from April
9, 1998 (inception) through March 31, 2001, for the nine months
ended December 31, 2001 (unaudited) and 2000 (unaudited), and from
April 9, 1998 (inception) through December 31, 2001 (unaudited).......... F-6
Notes to financial statements.............................................. F-7
F-1
Independent Auditors' Report
To the Board of Directors and Shareholders
Vista Exploration Corporation (formerly Bail Corporation)
We have audited the balance sheet of Vista Exploration Corporation (formerly
Bail Corporation) (a development stage company) as of March 31, 2001 and the
related statements of operations, shareholders' equity (deficit) and cash flows
for the eleven months ended March 31, 2001, for the year ended April 30, 2000,
and for the period from April 9, 1998 (inception) through March 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vista Exploration Corporation
as of March 31, 2001, and the related statements of operations and cash flows
for the eleven months ended March 31, 2001, for the year ended April 30, 2000,
and for the period from April 9, 1998 (inception) through March 31, 2001 in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has incurred losses since inception and has a net
capital deficit at March 31, 2001. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note A. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
July 3, 2001
F-2
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Balance Sheets
March 31, December 31,
2001 2001
---------- ---------
(Unaudited)
ASSETS
Current assets:
Cash ........................................................................... $ 73 $ 2,450
Advance to officer (Note B) .................................................... -- 2,972
--------- ---------
Total current assets 73 5,422
Oil and gas properties, at cost (Note A) ............................................. -- 49,832
Deferred offering costs .............................................................. 10,000 --
--------- ---------
$ 10,073 $ 55,254
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accrued liabilities ............................................................ $ 2,000 $ 26,983
Accounts payable, related party (Note B) ....................................... 6,115 --
Due to officer (Note B) ........................................................ 10,500 --
--------- ---------
Total current liabilities 18,615 26,983
--------- ---------
Shareholders' equity (Note D):
Preferred Stock, no par value, 5,000,000 shares authorized,
-0- and -0- (unaudited) shares issued and outstanding, respectively .......... -- --
Common stock, no par value, 20,000,000 shares authorized,
1,230,000 and 5,890,000 (unaudited) shares issued and
outstanding, respectively ................................................... 2,673 195,111
Additional paid-in capital ..................................................... 3,600 3,600
Deficit accumulated during the development stage ............................... (14,815) (170,440)
--------- ---------
Total shareholders' equity (deficit) (8,542) 28,271
--------- ---------
$ 10,073 $ 55,254
========= =========
See accompanying notes to financial statements
F-3
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Statements of Operations
April 9, 1998 April 9, 1998
Eleven Months Ended (Inception) Nine Months Ended (Inception)
March 31, Year Ended Through December 31, Through
---------------------- April 30, March 31, ---------------------- December 31,
2001 2000 2000 2001 2001 2000 2001
--------- --------- ---------- --------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Costs and expenses:
Legal fees .......................... $ 1,492 $ 2,097 $ 2,097 $ 3,895 $ 65,730 $ 778 $ 69,625
Accounting fees ..................... 2,750 751 2,001 5,751 5,100 1,500 10,851
Travel .............................. 5,339 -- -- 5,339 19,337 -- 24,676
General and administrative .......... 920 21 28 999 11,556 63 12,555
Compensation ........................ -- -- -- -- 25,000 -- 25,000
Project evaluation costs ............ -- -- -- -- 28,902 -- 28,902
Rent, related party (Note B) ........ 1,100 1,100 1,200 3,600 -- 900 3,600
Organizational costs ................ -- -- -- 500 -- -- 500
--------- --------- --------- --------- --------- --------- ---------
Operating loss ................... (11,601) (3,969) (5,326) (20,084) (155,625) (3,241) (175,709)
Interest income ......................... 8 49 57 114 -- 8 114
-------- --------- ---------- --------- --------- --------- ---------
Loss before income taxes
and extraordinary item ....... (11,593) (3,920) (5,269) (19,970) (155,625) (3,233) (175,595)
Provision for income taxes (Note C) ..... -- -- -- -- -- -- --
-------- --------- --------- --------- --------- -------- ---------
Loss before extraordinary item .... (11,593) (3,920) (5,269) (19,970) (155,625) (3,233) (175,595)
Extraordinary gain on extinguishment
of debt, net of income taxes
of $-0- (Note A) .................... 5,155 -- -- 5,155 -- -- 5,155
-------- --------- --------- --------- --------- -------- ---------
Net loss ....................... $ (6,438) $ (3,920) $ (5,269) $ (14,815) $(155,625) $ (3,233) $(170,440)
======== ========= ========= ========= ========= ======== =========
Basic and diluted loss per common share:
Before extraordinary item .......... $ (0.00) $ (0.00) $ (0.00) (0.03) $ (0.00)
======== ========= ========== ========= ========
Gain on extinguishment of debt ..... $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00)
======== ========= ========== ========= ========
Net loss ........................... $ (0.00) $ (0.00) $ (0.00) $ (0.03) $ (0.00)
======== ========= ========== ========= ========
Basic and diluted weighted average
common shares outstanding .......... 1,230,000 1,230,000 1,230,000 5,072,582 1,230,000
========= ========= ========= ========= =========
See accompanying notes to financial statements
F-4
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Statement of Shareholders' Equity (Deficit)
April 9, 1998 (inception) through March 31, 2001 and April 1, 2001
through December 31, 2001 (Unaudited)
Deficit
Accumulated
Preferred Stock Common Stock Additional During
-------------------- ------------------------ Paid-In Development
Shares Amount Shares Amount Capital Stage Total
-----------------------------------------------------------------------------------------------
Beginning balance,
April 9, 1998 ............... -- $ -- -- $ -- $ -- $ -- $ --
April 1998, common stock
issued in
exchange for services
and organizational
costs (Note B) .............. -- -- 1,000,000 500 -- -- 500
Contributed rent (Note B) ....... -- -- -- -- 100 -- 100
Net loss for the period ended
April 30, 1998 ................. -- -- -- -- -- (688) (688)
--------- --------- ----------- ----------- ----------- ----------- -----------
BALANCE,
APRIL 30, 1998 ........ -- -- 1,000,000 500 100 (688) (88)
May 1998, sale of common
stock, net of
$127 of offering costs
(Note B) ....................... -- -- 230,000 2,173 -- -- 2,173
Contributed rent (Note B) ....... -- -- -- -- 1,200 -- 1,200
Net loss for year ended
April 30, 1999 ................. -- -- -- -- -- (2,420) (2,420)
--------- --------- ----------- ----------- ----------- ----------- -----------
BALANCE,
APRIL 30, 1999 ........ -- -- 1,230,000 2,673 1,300 (3,108) 865
Contributed rent (Note B) ....... -- -- -- -- 1,200 -- 1,200
Net loss for year ended
April 30, 2000 ................. -- -- -- -- -- (5,269) (5,269)
--------- --------- ----------- ----------- ----------- ----------- -----------
BALANCE,
APRIL 30, 2000 ........ -- -- 1,230,000 2,673 2,500 (8,377) (3,204)
Contributed rent (Note B) ....... -- -- -- -- 1,100 -- 1,100
Net loss for eleven months
ended March 31, 2001 ........... -- -- -- -- -- (6,438) (6,438)
--------- --------- ----------- ----------- ----------- ----------- -----------
BALANCE,
MARCH 31, 2001 ........ -- -- 1,230,000 2,673 3,600 (14,815) (8,542)
April 2001, sale of common stock,
$.01 per share (Note D)
(unaudited) .................... -- -- 3,300,000 33,000 -- -- 33,000
June 2001, sale of common stock,
$.10 per share (Note D)
(unaudited) .................... -- -- 750,000 75,000 -- -- 75,000
June 2001, sale of common stock,
$.25 per share (Note D)
(unaudited) .................... -- -- 360,000 90,000 -- -- 90,000
December 2001, sale of common
stock, $.10 per share (Note D)
(unaudited) .................... -- -- 250,000 25,000 -- -- 25,000
Offering costs incurred (Note D)
(unaudited) .................... -- -- -- (30,562) -- -- (30,562)
Net loss for the nine months ended
December 31, 2001 (unaudited) -- -- -- -- -- (155,625) (155,625)
--------- --------- ----------- ----------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 2001
(Unaudited) ........... -- $ -- 5,890,000 $ 195,111 $ 3,600 $ (170,440) $ 28,271
========= ========= =========== =========== =========== =========== ===========
See accompanying notes to financial statements
F-5
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Statements of Cash Flows
April 9, 1998 April 9, 1998
Eleven Months Ended (Inception) Nine Months Ended (Inception)
March 31, Year Ended Through December 31, Through
---------------------- April 30, March 31, ----------------------- December 31,
2001 2000 2000 2001 2001 2000 2001
----------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss ........................... $ (6,438) $ (3,920) $ (5,269) $ (14,815) $(155,625) $ (3,233) $(170,440)
Transactions not requiring cash:
Common stock issued
for services ................... -- -- -- 500 -- -- 500
Contributed rent (Note B) ....... 1,100 1,100 1,200 3,600 -- 900 3,600
Gain on extinguishment of
debt (Note A) .................. (5,155) -- -- (5,155) -- -- (5,155)
Changes in operating
assets and liabilities:
Receivables and advances ...... 106 (49) (57) -- ( 2,972) (8) ( 2,972)
Accounts payable and
accrued liabilities .......... 9,799 1,598 2,203 13,270 18,867 1,633 32,137
--------- --------- --------- --------- --------- --------- ---------
Net cash used in
operating activities ......... (588) (1,271) (1,923) (2,600) (139,730) (708) (142,330)
--------- --------- --------- --------- --------- --------- ---------
Cash flows from investing activities:
Investment in oil and
gas properties .................... -- -- -- -- (49,832) -- (49,832)
--------- --------- --------- --------- --------- --------- ---------
Net cash used in
financing activities ......... -- -- -- -- (49,832) -- (49,832)
--------- --------- --------- --------- --------- --------- ---------
Cash flows from financing activities:
Advances from officer (Note B) ..... 10,500 -- -- 10,500 (10,500) -- --
Sale of common stock ............... -- -- -- 2,300 223,000 -- 225,300
Offering costs incurred ............ (10,000) -- -- (10,127) (20,561) -- (30,688)
--------- --------- --------- --------- --------- --------- ---------
Net cash provided by
financing activities ......... 500 -- -- 2,673 191,939 -- 194,612
--------- --------- --------- --------- --------- --------- ---------
Net change in cash ...................... (88) (1,271) (1,923) 73 2,377 (708) 2,450
Cash, beginning of period ............... 161 2,084 2,084 -- 73 813 --
--------- --------- --------- --------- --------- --------- ---------
Cash, end of period ........... $ 73 $ 813 $ 161 $ 73 $ 2,450 $ 105 $ 2,450
========= ========= ========= ========= ========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ........................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ========= =========
Income taxes .................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements
F-6
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Notes to Financial Statements
-----------------------------
Note A: Organization and summary of significant accounting policies
Organization
Vista Exploration Corporation (the "Company") (formerly Bail Corporation) was
incorporated under the laws of Colorado on April 9, 1998 to engage in any lawful
corporate undertaking. The Company is a development stage enterprise in
accordance with Statement of Financial Accounting Standard (SFAS) No. 7. The
Company was originally formed as a "blank check" company with the purpose to
evaluate, structure and complete a merger with, or acquisition of, a privately
owned corporation. Effective March 3, 2001, 900,000 shares (approximately 73
percent) of the Company's issued and outstanding common stock was sold,
resulting in a change in control of the Company. The Company's new business plan
is to engage in the oil and gas business by acquiring oil and gas properties and
developing those properties and/or purchasing producing properties principally
located in the mid-western and western United States.
The Company's management is currently seeking to acquire oil and gas leases in
portions of southeast Kansas to drill for coal bed methane gas. The Company
opened an office in Burlington, Kansas and plans to lease land in the south half
of Coffey County, Kansas with the help of its geological consultant. If the
Company is successful at leasing enough land to move forward with drilling
activities, the Company will need additional capital to develop the properties.
It is the Company's intent to complete drilled wells; however, the Company may
have to acquire a partner or out-source certain properties to rapidly develop
leases.
Following the change in control, the Company sold 4,660,000 shares of its no par
value common stock through three private offerings for net proceeds of $192,438
(unaudited) after deducting offering costs of $30,562 (unaudited). The Company
intends to use the net proceeds from those offerings for administrative and
professional fees required to transition the business and to acquire oil and gas
properties and develop a drilling program. The Company will require additional
funds to commence drilling operations and there are no commitments in place for
any additional funds.
During August 2001, the Company changed its name from Bail Corporation to Vista
Exploration Corporation.
During the period from April 9, 1998 (inception) through February 28, 2001,
Corporate Management Services, Inc. ("CMS"), an affiliate and previous majority
shareholder, paid professional fees and administrative expenses on behalf of the
Company totaling $5,155, which were unpaid as of February 28, 2001. As part of
the stock purchase agreement that resulted in the change in control, CMS
released the Company from its obligation to repay the $5,155. The $5,155 is
included in the accompanying statements of operations as extraordinary gain on
extinguishment of debt.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company is in the development
stage. It has incurred losses since inception and has a net capital deficit at
March 31, 2001. These factors, among others, may indicate that the Company will
be unable to continue as a going concern for reasonable period of time.
F-7
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Notes to Financial Statements
-----------------------------
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company raised gross proceeds of $223,000 (unaudited) through
private stock offerings subsequent to March 31, 2001 (see Note E), to fund its
operations. However, the Company believes it will need additional capital to
develop the property leases discussed above. There is no assurance that the
Company will obtain the additional capital or that it will attain profitability.
Summary of significant accounting policies
Basis of presentation
On April 18, 2001, the Company changed its year-end from April 30 to March 31.
The accompanying statements of operations, shareholders' equity (deficit) and
cash flows reflect the eleven-month transition period ended March 31, 2001 and
the historical fiscal year results for April 30, 2000. The comparative figures
for the eleven months ended March 31, 2000 have been included in the
accompanying statements of operations and cash flows on an unaudited basis.
Cash equivalents
For financial accounting purposes and the statement of cash flows, cash
equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less. The Company had no cash equivalents
at March 31, 2001.
Fair value of financial instruments
The Company has determined, based on available market information and
appropriate valuation methodologies, the fair values of its financial
instruments approximate carrying values. The carrying amounts of cash, accounts
payable, and other current liabilities approximate fair value due to the
short-term maturity of the instruments.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Organization costs
Costs related to the organization of the Company have been expensed as incurred.
Deferred offering costs
Costs related to common stock offerings are recorded initially as a deferred
asset until the offering is successfully completed, at which time they are
recorded as a reduction of gross proceeds in shareholders' deficit. If an
offering is not successful, the costs are charged to operations at that time.
F-8
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Notes to Financial Statements
-----------------------------
Oil and gas properties
The Company follows the full cost method of 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. No internal overhead costs have been capitalized to date.
All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production method
using estimates of proved reserves. 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.
The capitalized costs are subject to a "ceiling test," which limits capitalized
costs to the aggregate of the "estimated present value," discounted at a
10-percent interest rate, of future net revenues from proved reserves (based on
current economic and operating conditions), plus the lower of cost or fair
market value of unproved properties.
Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in income.
Abandonments of properties are accounted for as adjustments of capitalized costs
with no loss recognized.
Loss per common share
The Company reports loss per share using a dual presentation of basic and
diluted loss per share. Basic loss per share excludes the impact of common stock
equivalents. Diluted loss per share uses the average market price per share when
applying the treasury stock method in determining common stock equivalents.
However, the Company has a simple capital structure for the period presented
and, therefore, there is no variance between the basic and diluted loss per
share.
Income taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Stock based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" permits the use of
either a "fair value based method" or the "intrinsic value method" defined in
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" (APB 25) to account for stock-based compensation arrangements.
F-9
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Notes to Financial Statements
-----------------------------
Companies that elect to use the method provided in APB 25 are required to
disclose pro forma net income and pro forma earnings per share information that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements with employees under the provisions of APB 25. No pro forma
disclosures have been included with the accompanying financial statements as
there was no pro forma effect on the Company's net loss or loss per share.
Unaudited financial statements
The financial statements presented as of December 31, 2001, for the eleven
months ended March 31, 2000, for the nine months ended December 31, 2001 and
2000, and for the period from April 9, 1998 (inception) through December 31,
2001 are unaudited.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments), which are necessary to provide a fair presentation of
financial position as of December 31, 2001 and the operating results for the
eleven months ended March 31, 2000, for the nine months ended December 31, 2001
and 2000, and for the period from April 9, 1998 (inception) through December 31,
2001, have been made.
Note B: Related party transactions
During the nine months ended December 31, 2001, an officer paid travel and
administrative expenses totaling $24,118 (unaudited) on behalf of the Company,
in addition to the $6,115 paid prior to March 31, 2001. The Company repaid the
$30,233 (unaudited) and advanced the officer an additional $ 2,972 (unaudited).
The advance is expected to be offset against future travel expenses. The $ 2,972
(unaudited) is included in the accompanying financial statements as expense
advance to officer.
The Company incurred an expense of $100 per month through March 31, 2001 for
office space contributed by Corporate Management Services, Inc. ("CMS"), an
affiliate of the Company. The Company reported rent expense of $1,100, $1,100
(unaudited), $1,200, and $3,600, respectively, for the eleven months ended March
31, 2001 and 2000, the year ended April 30, 2000, and the period from April 9,
1998 (inception) through March 31, 2001. The rent expense has been offset by
charges to additional paid-in capital. In July 2001, the Company leased office
space in Burlington, Kansas for $350 per month.
On February 28, 2001, an officer advanced the Company $10,500 for working
capital. The advance carries no interest rate and is payable on demand. The
$10,500 is included in the accompanying financial statements as due to officer.
The Company repaid the advance subsequent to March 31, 2001.
The officer also paid travel and administrative expenses totaling $6,115 on
behalf of the Company during the eleven months ended March 31, 2001. The $6,115
is included in the accompanying financial statements as accounts payable,
related party. The Company repaid the expenses subsequent to March 31, 2001.
On April 11, 1998, the Company issued an affiliate 1,000,000 shares of common
stock in exchange for services related to management and organization costs of
$500. The affiliate will provide administrative and marketing services as
needed. The affiliate may, from time to time, advance to the Company any
additional funds that the Company needs for operating capital and for costs in
connection with searching for or completing an acquisition or merger.
F-10
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Notes to Financial Statements
-----------------------------
During 1998, the Company sold 230,000 shares of common stock in a private
placement for $2,300. The private placement also included the offering of common
shares in nineteen other corporations. The costs related to the offering and
certain legal fees and general and administrative fees were allocated to each of
the twenty companies participating in the offering. The Company's pro rate one
twentieth share of the costs and expenses were deducted from the gross proceeds
from the sale of the Company's common shares. The gross proceeds of $2,300 were
transferred to the Company net of offering costs of $127 and certain general and
administrative costs incurred by the affiliate of $89.
Note C: Income taxes
Following are reconciliations of U.S. statutory federal income tax rate to the
effective rate:
Eleven Nine
Months ended Year Ended Months ended
March 31, April 30, December 31,
2001 2000 2001
(Unaudited)
-------- --------- ---------
U.S. statutory federal rate ............ 15.00% 15.00% 15.00%
State income tax rate,
net of federal benefit ............... 4.04% 4.04% 4.04%
Net operating loss (NOL) for
which no tax benefit is
benefit is currently available ....... -19.04% -19.04% -19.04%
----- ----- -----
0.00% 0.00% 0.00%
===== ===== =====
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the eleven
months ended March 31, 2001, the year ended April 30, 2000, and for the period
from April 9, 1998 (inception) through March 31, 2001 were $1,226, $657, and
$2,483, respectively. NOL carryforwards at March 31, 2001 will expire through
2021.
The change in the valuation allowance for the nine months ended December 31,
2001 was $43,575 (unaudited).
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Shareholders' equity (deficit)
The preferred stock may be issued in series as determined by the Board of
Directors. As required by law, each series must designate the number of share in
the series and each share of a series must have identical rights of (1)
dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions
for the redemption of the share, (5) terms of conversion and (6) voting rights.
F-11
VISTA EXPLORATION CORPORATION
-----------------------------
(Formerly Bail Corporation)
(A Development Stage Company)
Notes to Financial Statements
-----------------------------
During April of 2001, the Company conducted a private placement offering of
5,000,000 shares of its no par value common stock for $.01 per share pursuant to
an exemption from registration claimed under Rule 506 of Regulation D of the
Securities Act of 1933, as amended (the "Act"). The Company closed the offering
after selling 3,300,000 (unaudited) shares. The Company received net proceeds of
$22,813 (unaudited) after deducting offering costs totaling $10,187 (unaudited).
During June of 2001, the Company conducted a private placement offering of
800,000 shares of its no par value common stock for $.10 per share pursuant to
an exemption from registration claimed under Rule 506 of Regulation D of the
Act. The Company closed the offering after selling 750,000 (unaudited) shares.
The Company received net proceeds of $64,813 (unaudited) after deducting
offering costs totaling $10,187 (unaudited).
During June of 2001, the Company conducted a private placement offering of
1,000,000 shares of its no par value common stock for $.25 per share pursuant to
an exemption from registration claimed under Rule 506 of Regulation D of the
Act. The Company closed the offering after selling 360,000 (unaudited) shares.
The Company received net proceeds of $79,812 (unaudited) after deducting
offering costs totaling $10,188 (unaudited).
During December of 2001, the Company sold 250,000 shares of its no par value
common stock for $.10 per share to one accredited investor without registering
the shares under the Securities Act of 1933. This sale was made pursuant to
Section 4(2) and Rule 506 of Regulation D adopted under the Securities Act of
1933. The Company received net proceeds of $25,000 (unaudited).
F-12
VISTA EXPLORATION CORPORATION
1,440,000 Shares of Common Stock
----------------
PROSPECTUS
----------------
______, 2002
You should only rely on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holders are offering to sell,
and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock.
Until ________, 2002 (25 days after the commencement of the offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be requested to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
PART II - Information Not Required In Prospectus
Item 24. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation eliminate the personal liability
of its directors to the Registrant or its shareholders for monetary damages for
breach of fiduciary duty to the extent permitted by Colorado law. The Colorado
Business Corporation Act does not eliminate personal liability for monetary
damages for (i) any breach of the director's duty of loyalty to the Registrant
or its shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) voting for or
assenting to a distribution in violation of Colorado law or the Registrant's
Articles of Incorporation, or (iv) any transaction from which the director
directly or indirectly derived an improper personal benefit.
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify its officers and directors to the extent permitted by
Colorado law, which authorizes a corporation to indemnify directors, officers,
employees or agents of the corporation in non-derivative suits if such party
acted in good faith and in a manner such party reasonably believed to be in or
not opposed to the best interest of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The Colorado Business Corporation Act further provides
that indemnification shall be provided if the party in question is wholly
successful, on the merits or otherwise.
There is no litigation pending, and neither the Registrant nor any of its
directors know of any threatened litigation, which might result in a claim for
indemnification by any director or officer.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to be borne by the
Registrant, are as follows:
Total Registration Fee under Securities Act of 1933 $90.00
Printing and Engraving $10,000*
Accounting Fees and Expenses $10,000*
Legal Fees and Expenses $50,000*
Blue Sky Fees and Expenses (including related legal fees) $3,000*
Transfer Agent Fees $1,000*
Miscellaneous $6,000*
Total $80,100*
* Estimated
Item 26. Recent Sales of Unregistered Securities.
Since its inception, the Registrant has sold securities which were not
registered as follows:
Date Name No. of Shares Consideration
---- ---- ------------- -------------
(1) April 11, 1998 Corporate Management Services, Inc.* 1,000,000 Management services and
organization costs of $500
(2) April 22, 1998 to 46 shareholders (listed under "Selling 5,000 each/ $50.00 each/
August 26, 1998 Security Holders") 230,000 total $2,300 total
(3) April 23, 2001 Jeffery P. Frazier 1,000,000 $10,000
(4) April 23, 2001 Terrie L. Pham 1,000,000 $10,000
(5) April 25, 2001 Gary J. Grieco 1,000,000 $10,000
(6) April 30, 2001 3 shareholders 100,000 each/ $1,000 each/
II-1
Date Name No. of Shares Consideration
---- ---- ------------- -------------
300,000 total $3,000 total
(7) June 7, 2001 Gary J. Grieco 250,000 $25,000
(8) June 7, 2001 Mallard Management Inc. 250,000 $25,000
(9) June 7, 2001 Harvey M. Burstein 250,000 $25,000
(10) June 28, 2001 The Hedge Fund, LLC 360,000 $90,000
(11) Dec. 1, 2001 U. S. Capital Growth Fund, L.L.C. 250,000 $25,000
(12) Jan. 14, 2002 2 shareholders in Verona, Italy 100,000 each/ $15,000 each/
200,000 total $30,000 total
* Mr. George Andrews, the sole officer and director of the Registrant until
April of 2001, is the sole director and a 50% shareholder of Corporate
Management Services, Inc. Mr. Andrews is also a selling security holder.
The sales by the Registrant listed in lines (1) and (2) were made pursuant
to Section 4(2) of the Securities Act of 1933. 23 of the purchasers listed in
lines (1) and (2) were "accredited investors" as defined in Rule 501 of
Regulation D and represented their status as such to the Registrant in writing.
The sales by the Registrant listed in lines (3) through (12) were made pursuant
to Section 4(2) and Rule 506 of Regulation D adopted under the Securities Act of
1933. All of the purchasers listed in lines (3) through (12) are "accredited
investors" as defined in Rule 501 of Regulation D and represented their status
as such to the Registrant in writing.
No underwriter or selling or placement agent was involved in any of the
transactions described in lines (1) through (11) above. A finders fee of
approximately $1,500 was paid to a non-U.S. finder with respect to the overseas
sales listed in line (12).
All of the individuals and/or entities listed above that purchased the
unregistered securities were all known to the Registrant and its management
through pre-existing business or personal relationships, as long standing
business associates, friends, employees, relatives or members of the immediate
family of management or other shareholders. All purchasers were provided access
to the material information which they requested and all information necessary
to verify such information, and were afforded access to management of the
Registrant in connection with their purchases. All purchasers of the
unregistered securities acquired such securities for investment and not with a
view toward distribution, acknowledging such intent to the Registrant.
Item 27. Exhibits.
Reference is made to the Exhibit Index appearing on Page 29.
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereto) which, individually or the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Shawnee Mission, State of Kansas, on March 7, 2002.
VISTA EXPLORATION CORPORATION
By: /s/ Charles A. Ross, Sr.
----------------------------------------------
Charles A. Ross, Sr., chief executive officer
and principal financial and accounting officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Charles A. Ross, Sr. Director March 7, 2002
---------------------------
Charles A. Ross, Sr.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
------------------
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
VISTA EXPLORATION CORPORATION
-----------------------------
(Name of Company as specified in its charter)
VISTA EXPLORATION CORPORATION
FORM SB-2 REGISTRATION STATEMENT
EXHIBIT INDEX
The following exhibits are filed as part of Registrant's Registration
Statement on Form SB-2:
Exhibit
No. Description
--- -----------
3.1 Articles of Incorporation (incorporated by reference to Exhibit 2.1
to Registrant's Registration Statement on Form 10-SB filed with the
Commission on September 13, 1999).
3.2 First Articles of Amendment to Articles of Incorporation
(incorporated by reference to Exhibit 3.1 of the Form 8-K filed
August 16, 2001).
3.3 Bylaws (incorporated by reference to Exhibit 2.2 to Registrant's
Registration Statement on Form 10-SB filed with the Commission on
September 13, 1999).
3.4 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.1 of the Form 8-K filed August 16, 2001).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP*
10.1 Agreement for the Purchase of Common Stock dated as of February 27,
2001, and effective as of March 3, 2001, by and between Corporate
Management Services, Inc., Bail Corporation and Charles A. Ross, Sr.
(incorporated by reference herein to Exhibit 7.1 of the Form 8-K
filed March 9, 2001).
10.2 Mutual Release dated as of April 30, 2001, between Bail Corporation
and Corporate Management Services, Inc. (incorporated by reference
herein to Exhibit 10.2 of the Registrant's 10-KSB for the period
ended March 31, 2001).
10.3 Agreement dated June 22, 2001, between Bail Corporation, TCC Royalty
Corp. and Austin Exploration L.L.C. regarding Shiloh Project /
Cherokee Basin Coalbed Methane (incorporated by reference herein to
Exhibit 10.3 of the Registrant's 10-KSB for the period ended March
31, 2001).
10.4 Form of Oil and Gas Lease**
23.1 Consent of Cordovano & Harvey, P.C.**
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1)*
------------------------
* Previously filed.
** Filed herewith.