Registration Number 333-69847
U.S. Securities And Exchange Commission
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 1)
PYR ENERGY CORPORATION
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(Name of small business issuer in its charter)
Delaware 1330 95-4580642
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1675 Broadway, Suite 1150, Denver, CO 80202; (303) 825-3748
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(Address and telephone number of principal executive offices)
1675 Broadway, Suite 1150, Denver, CO 80202; (303) 825-3748
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(Address of principal place of business or intended principal place of business)
With a copy to:
Alan L. Talesnick, Esq.
Francis B. Barron, Esq.
Patton Boggs LLP
1660 Lincoln Street
Suite 1900
Denver, Colorado 80264
(303) 830-1776
D. Scott Singdahlsen, 1675 Broadway, Suite 1150, Denver, CO 80202;
(303) 825-3748
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(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement
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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. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit (1) price (1) registration fee (1)
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<S> <C> <C> <C> <C>
Common Stock 266,666 $3.2495 $ 866,531 $ 241
Common Stock,
issuable upon
conversion of
convertible notes
and/or Series A
Preferred 4,166,668 $3.2495 $13,539,587 $3,764
Common Stock that may
be issued as payment
of interest or
dividends (2) 500,000 $3.2495 $ 1,624,750 $ 452
Common Stock that may
be issued upon exercise
of warrants to purchase
Common Stock 175,000 $ .75 $ 131,250 $ 37
TOTAL 5,108,334 $3.2495 $16,030,869 $4,494 (3)
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</TABLE>
(1) The price and filing fee were determined at the time of filing the
Registrant's initial Registration Statement on Form SB-2 on December 29,
1998. This Amendment No. 1 includes an additional 175,000 shares of Common
Stock that may be issued upon the exercise of warrants to purchase Common
Stock. Payment of an additional filing fee of $37 is being made with the
filing of this Amendment No. 1. The additional filing fee was calculated
using the exercise price of the Warrants of $.75 per share.
(2) The Company is registering the transfer of up to 500,000 of a not yet
determined number of shares of Common Stock that may be issued as payment
of accrued interest on the convertible notes or as dividends on the Series
A Preferred Stock. The number of shares to be issued will not be determined
until the time, if any, that the Company elects to make payments using
Common Stock.
(3) Of this amount, $4,457 previously was paid at the time of filing the
initial Registration Statement and an additional $37 is being paid with the
filing of this Amendment No. 1. See footnote (1) above.
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 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission 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.
PROSPECTUS DATED APRIL _____, 1999
SUBJECT TO COMPLETION
SELLING STOCKHOLDER
PROSPECTUS
PYR ENERGY CORPORATION
5,108,334 Shares Of Common Stock
This Prospectus relates to the transfer of up to 5,108,334 shares of Common
Stock of PYR Energy Corporation by the selling stockholders identified in this
Prospectus. The Company will not receive any of the proceeds from the sale of
these shares. These shares consist of the following:
* Up to 4,166,668 shares of Common Stock that may be issued to certain
selling stockholders when they convert convertible notes purchased
from the Company or when they convert preferred stock that is to be
issued upon conversion of the notes.
* Up to 500,000 shares that may be issued to pay interest on the
convertible notes or to pay dividends on the preferred stock that is
to be issued upon the conversion of the notes.
* 266,666 shares issued in exchange for interests in oil and gas leases
and seismic data.
* Up to 175,000 shares that may be issued to two of the selling
stockholders when they exercise warrants to purchase Common Stock.
The selling stockholders have not entered into any underwriting
arrangements. The prices for the Common Stock may be the market prices
prevailing at the time of transfer, prices related to the prevailing market
prices, or negotiated prices. Brokerage fees or commissions may be paid by the
selling stockholders in connection with sales of the Common Stock.
The Company's Common Stock is quoted on the OTC Bulletin Board under the
symbol "PYRX". On April 9, 1999, the closing price of the Common Stock was $2.25
per share.
Investing in the Common Stock involves certain risks. See the "RISK
FACTORS" section beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is April __, 1999
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PROSPECTUS SUMMARY
The following summary highlights information contained in this prospectus.
It may not be complete and may not contain all the information that you should
consider before investing in the Common Stock. You should read this entire
prospectus carefully, including the "RISK FACTORS" section, the financial
statements and the notes to the financial statements.
The Company The Company is an independent exploration company that
applies advanced three-dimensional ("3-D") seismic and
computer aided exploration ("CAEX") technology to
systematically explore for and exploit onshore domestic
natural gas and oil accumulations in the western United
States. The Company's exploration activities are primarily
focused on the southern San Joaquin Basin of California. The
Company does not own any producing or proved oil and gas
properties, and no oil recorded by the Company. See below,
"BUSINESS AND PROPERTIES".
Recent
Developments During fiscal 1998, the Company and other working interest
owners commenced drilling on the Company's first two test
wells - the Bellevue #1-17 on the Company's East Lost Hills
prospect, which commenced drilling in May 1998, and the
Federal #67X-30, which commenced drilling in July 1998 on
the Company's School Road prospect. The School Road test
well was plugged and abandoned on September 18, 1998
although the Company is evaluating the results in order to
determine any possibilities at its School Road acreage.
On November 23, 1998, the East Lost Hills prospect well
suffered a blowout after reaching a depth of approximately
17,600 feet out of targeted total depth of 19,000 feet.
Bellevue Resources, Inc., a subsidiary of Elk Point
Resources, Ltd., is the operator of the well and worked with
well control experts to contain the well blowout. Surface
containment facilities have been installed and all liquid
and gas production from the well are contained and are being
transported to processing and disposal facilities. In
addition, a relief well began drilling on December 18, 1998.
The relief well is being drilled to intersect with the
original well bore so that the original bore may then be
plugged. See "BUSINESS AND PROPERTIES-Southern San Joaquin
Basin, California".
In April 1999, the Company signed an agreement to
participate in three additional deep exploration projects in
the San Joaquin Basin of California. These three projects
are an addition to the deep Temblor exploration program
initiated by the recent drilling at East Lost Hills, and all
lay outside the East Lost Hills joint venture area. It is
expected that the agreement will close on or before May 1,
1999. The first exploration well in the program is expected
to begin drilling in May 1999. See "BUSINESS AND
PROPERTIES-Southern San Joaquin Basin, California".
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In October and November 1998, the Company issued $2.5
million of convertible promissory notes in a private
placement to some of the selling stockholders. These notes
are convertible into the Company's Series A convertible
preferred stock (subject to authorization of the preferred
stock by the Company's stockholders), which would then be
convertible into Common Stock. If the Company's stockholders
do not approve the preferred stock by April 23, 1999, the
Notes may be converted directly into Common Stock at a
conversion price of $.30 per share. Also in October 1998,
the Company issued 266,666 shares of Common Stock in
exchange for oil and gas leases and seismic data that three
of the selling stockholders transferred to the Company. This
prospectus will be used by the selling stockholders to sell
the Common Stock that they received or may receive after
they convert their Notes or Series A Preferred Stock into
Common Stock.
The Company was introduced to investors who purchased a
majority of the Notes by William Forster. In connection with
that introduction, the Company paid Mr. Forster a finder's
fee of $45,000 and issued to entities designated by Mr.
Forster warrants to purchase 175,000 shares of Common Stock
at an exercise price of $.75 per share. For a description of
the warrants, the Notes and the Series A Preferred, see
below, "DESCRIPTION OF SECURITIES".
The Offering The selling stockholders may sell a total of 4,933,334
shares of Common Stock. These shares consist of the
following:
* Up to 4,166,668 shares of Common Stock that may be
issued to the selling stockholders when they convert
convertible notes purchased from the Company or when
they convert preferred stock that is to be issued upon
converison of the notes.
* Up to 500,000 shares of a number of shares that may be
issued to pay interest on the convertible notes or to
pay dividends on the preferred stock that is to be
issued upon the conversion of the notes.
* 266,666 shares issued in exchange for interests in oil
and gas leases and seismic data that three of the
selling stockholders transferred to the Company.
* Up to 175,000 shares that may be issued to two of the
selling stockholders when they exercise warrants to
purchase common stock.
Additional shares may be issued to the selling stockholders
to comply with anti-dilution provisions of the Notes and
Series A Preferred. These additional shares also may be sold
by the selling stockholders under this prospectus. The
Common Stock may be sold at market prices or other
negotiated prices. The selling stockholders have not entered
into any underwriting arrangements for the sale of the
shares. See, "SELLING STOCKHOLDERS AND PLAN OF
DISTRIBUTION".
The Company will not receive any proceeds from the sale of
Common Stock by the selling stockholders.
Company Offices The Company's offices are located at 1675 Broadway, Suite
1150, Denver, Colorado 80202, telephone number (303)
825-3748.
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RISK FACTORS
THE PURCHASE OF SHARES OF COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
BEFORE PURCHASING COMMON STOCK, YOU SHOULD READ THIS ENTIRE PROSPECTUS AND
CONSIDER THE FOLLOWING FACTORS CONCERNING THE COMPANY IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS.
Start-Up Nature Of The Company's Oil And Gas Business; No Profits
The Company was formed in 1996 and has not had any profit from operations.
The development of the Company's business will require substantial expenditures.
The Company's future financial results will depend primarily on its ability to
locate oil and gas and other hydrocarbons economically in commercial quantities,
on its ability to provide drilling site and target depth recommendations
resulting in profitable productive wells, and on the market prices for oil and
natural gas. There can be no assurance that the Company will achieve or sustain
profitability or positive cash flows from its operating activities.
Oil And Gas Prices
Even if the Company is able to discover or acquire oil and gas production,
of which there is no assurance, the Company's revenues, profitability and
liquidity will be highly dependent upon prevailing prices for oil and natural
gas. Oil and gas prices can be extremely volatile and in recent years have been
depressed by excess total domestic and imported supplies. There can be no
assurance that current price levels can be sustained. Prices also are affected
by actions of state and local agencies, the United States and foreign
governments, and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate future prices of oil
and natural gas. Any substantial or extended decline in the price of oil and/or
natural gas would have a material adverse effect on the Company's financial
condition and results of operations, including as a result of reduced cash flow
and borrowing capacity. All of these factors are beyond the control of the
Company.
Marketability of Production
Sales of oil and natural gas are seasonal in nature, leading to substantial
differences in cash flow at various times throughout the year. The marketability
of the Company's gas production, if any, will depend in part upon the
availability, proximity and capacity of gas gathering systems, pipelines and
processing facilities. Federal and state regulation of oil and gas production
and transportation, general economic conditions, changes in supply and changes
in demand all could negatively affect the Company's ability to produce and
market oil and natural gas. If market factors were to change dramatically, the
financial impact on the Company could be substantial because the Company would
incur expenses without receiving revenues from sales of production. The
availability of markets and the volatility of product prices are beyond the
control of the Company and represent a significant risk to the Company.
Reliance On Industry Participants
The Company attempts to limit financial exposure on a project-by-project
basis by forming industry alliances where the Company's technical expertise can
be complemented with the financial resources and operating expertise of
established companies. If the Company were not able to form these industry
alliances, the Company's ability to fully implement its business plan could be
limited. This will have a material, negative effect on the Company's business,
financial condition and results of operations.
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Non-Operator Status
The Company focuses primarily on providing 3-D imaging and analysis and
relies upon other project participants to provide and complete all other project
operations and responsibilities including operating, drilling, marketing and
project administration. As a result, the Company has only a limited ability to
exercise control over a significant portion of a project?s operations or the
associated costs of those operations. The success of a project is dependent upon
a number of factors that are outside of the Company's area of expertise and
project responsibilities. These factors include: (1) the availability of
favorable term leases and required permitting for projects, (2) the availability
of future capital resources by the Company and the other participants for the
purchasing of leases and the drilling of wells, (3) the approval of other
participants to the purchasing of leases and the drilling of wells on the
projects, and (4) the economic conditions at the time of drilling, including the
prevailing and anticipated prices for oil and gas. The Company's reliance on
other project participants and its limited ability to directly control certain
project costs could have a material negative effect on the Company's receipt of
expected rates of return on the Company's investment in certain projects.
Ability To Discover Reserves
The Company's future success is dependent upon its ability to economically
locate oil and gas reserves in commercial quantities. Except to the extent that
the Company acquires properties containing proved reserves or conducts
successful exploration and development activities, or both, the proved reserves
of the Company, if any, will decline as reserves are produced. The Company's
ability to locate reserves is dependent upon a number of factors, including its
participation in multiple exploration projects and its technological capability
to locate oil and gas in commercial quantities. No assurances can be given that
the Company will have the opportunity to participate in projects that
economically produce commercial quantities of hydrocarbons in amounts necessary
to meet its business plan or that the projects in which it elects to participate
will be successful. There can be no assurance that the Company's planned
projects will result in significant reserves or that the Company will have
future success in drilling productive wells at low reserve replacement costs.
The Company has not yet established any oil and gas production, and has not
booked any proved reserves.
Substantial Capital Requirements; Lack of Operating Revenue
In order to continue its oil and gas exploration plans fully, the Company
anticipates that it will need additional funding. In October and November 1998,
the Company closed a private placement resulting in a capital infusion of
$2,500,000 from some of the selling stockholders. See "TRANSACTIONS BETWEEN THE
COMPANY AND RELATED PARTIES-Private Placement Of Notes". After paying existing
outstanding commitments, the Company anticipates having approximately $1,000,000
of the funds to cover future business expenditures. The Company does not have a
steady source of revenue to provide funding to sustain operations. There is no
assurance that the Company will be able to obtain a reliable source of revenue
to sustain its operations.
Risk Of Exploratory Drilling Activities
Exploration for oil and natural gas is a speculative business involving a
high degree of risk, including the risk that no commercially productive oil and
gas reservoirs will be encountered. The cost of drilling, completing and
operating wells is often uncertain and drilling operations may be curtailed,
delayed or canceled as a result of a variety of factors. These include
unexpected formation and drilling conditions, pressure or other irregularities
in formations, equipment failures or accidents, as well as weather conditions,
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compliance with governmental requirements and shortages or delays in the
delivery of equipment. There is no assurance that the expenditures made by the
Company on its oil and natural gas properties will result in discoveries of oil
or natural gas in commercial quantities. Some or all of its test wells, as a
consequence, may not ultimately be developed into producing wells and may be
abandoned. If this is the case, the Company will have incurred expenses for the
abandoned well without receiving any revenues from that well.
General Risks Of Oil And Gas Operations
The nature of the oil and gas business involves a variety of risks. These
include the risks of operating hazards such as fires, explosions, cratering,
blowouts, such as the blowout at the exploratory well in which the Company has
an interest in East Lost Hills, and encountering formations with abnormal
pressures. The occurrence of any of these risks could result in losses to the
Company. The Company expects to maintain insurance against some, but not all, of
these risks in amounts that management believes to be reasonable in accordance
with customary industry practices. The occurrence of a significant event,
however, that is not fully insured could have a material adverse effect on the
Company's financial position. See "BUSINESS AND PROPERTIES-Significant
Properties-Southern San Joaquin Basin, California" for information concerning
the blowout at the East Lost Hills exploratory well.
Competition
The Company competes in the areas of oil and gas exploration with other
companies. Many of these competitors may have substantially larger financial and
other resources than the Company. From time to time, there may be competition
for, and shortage of, exploration, drilling and production equipment. These
shortages could lead to an increase in costs and to delays in operations that
could have a material adverse effect on the Company. The Company may therefore
not be able to acquire desirable properties or equipment required to develop its
properties. Problems of this nature also could prevent the Company from
producing any oil and natural gas it discovers at the rate it desires to do so.
Technology Changes
The oil and gas industry is characterized by rapid and significant
technological advancements and introductions of new products and services using
new technologies. As new technologies develop, the Company may be placed at a
competitive disadvantage, and competitive pressures may force the Company to
implement those new technologies at a substantial cost to the Company. If other
oil and gas finding companies implement new technologies before the Company,
those companies may be able to provide enhanced capabilities and superior
quality compared with what the Company is able to provide. There can be no
assurance that the Company will be able to respond to these competitive
pressures and implement new technologies on a timely basis or at an acceptable
cost. One or more of the technologies currently utilized by the Company or
implemented in the future may become obsolete. If this occurs, the Company's
business, financial condition and results of operations could be materially
adversely affected. If the Company is unable to utilize the most advanced
commercially available technology, the Company's business, financial condition
and results of operations could be materially and adversely affected.
Government Regulations And Environmental Risks
The production and sale of oil and gas are subject to a variety of federal,
state and local government regulations, including regulations concerning the
prevention of waste, the discharge of materials into the environment, the
conservation of oil and natural gas, pollution, permits for drilling operations,
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drilling bonds, reports concerning operations, the spacing of wells, the
unitization and pooling of properties, and various other matters including
taxes. Many jurisdictions have at various times imposed limitations on the
production of oil and gas by restricting the rate of flow for oil and gas wells
below their actual capacity to produce. Although the Company intends to be in
compliance with applicable environmental and other government laws and
regulations, there can be no assurance that significant costs for compliance
will not be incurred in the future. The recent blowout of the East Lost Hills
exploratory well in which the Company has an interest raises a number of these
risks. Although the Company currently believes that costs related to the blowout
and the release of potential pollutants into the atmosphere are covered by
insurance, there is no assurance that this is the case. See "BUSINESS AND
PROPERTIES-Significant Properties-Southern San Joaquin Basin, California".
Variability Of Operating Results
The Company's operating results, as a start up company in the oil and gas
industry, may vary significantly during any financial period. These variations
may be caused by significant periods of time between each of the Company's
discoveries and developments, if any, of oil or natural gas properties in
commercial quantities. These variations may also be caused by the volatility
associated with oil and gas prices. See "-Oil And Gas Prices" and
"-Marketability Of Production".
Risks Associated With Management Of Growth
Because of its small size, the Company desires to grow rapidly in order to
achieve certain economies of scale. Although there is no assurance that this
rapid growth will occur, to the extent that it does occur it will place a
significant strain on the Company's financial, technical, operational and
administrative resources. As the Company increases its services and enlarges the
number of projects it is evaluating or in which it is participating, there will
be additional demands on the Company's financial, technical and administrative
resources. The failure to continue to upgrade the Company's technical,
administrative, operating and financial control systems or the occurrence of
unexpected expansion difficulties, including the recruitment and retention of
geoscientists and engineers, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence On Key Personnel
The Company will be highly dependent on the services of D. Scott
Singdahlsen and its other geological and geophysical staff members. The loss of
the services of any of them could have a material adverse effect on the Company.
The Company does not have an employment contract with Mr. Singdahlsen or any
other employee.
Concentration Of Risks; Lack Of Diverse Business Operations
The Company currently is pursuing only the oil and gas exploration
business. Although the Company is involved in other oil and gas projects, it is
concentrating the majority of its initial oil and gas exploration efforts on
approximately 60,000 gross and 31,000 net exploratory acres in the San Joaquin
basin. Although the Company is involved in three separate and distinct projects
in the San Joaquin basin, the Company's exploration efforts are concentrated in
this same general area and this lack of diverse business operations subjects the
Company to a certain degree of concentration of risks. The future success of the
Company may be dependent upon its success in discovering and developing oil and
gas in commercial quantities on its San Joaquin properties and upon the general
economic success of the oil and gas industry.
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Inactive Trading Of The Common Stock; Possible Volatility Of Stock Price
There may be no ready market for the Common Stock and an investor cannot
expect to liquidate his investment regardless of the necessity of doing so.
Investors should recognize the illiquidity of an investment in this Offering.
Historically, there has been an extremely limited public market for the Common
Stock. There is no assurance that the market will be sustained or will expand.
See "INACTIVE TRADING OF THE COMMON STOCK". The prices of the Company's
securities are highly volatile. Due to the low price of the securities, many
brokerage firms may not effect transactions and may not deal with low priced
securities as it may not be economical for them to do so. This could have an
adverse effect on developing and sustaining the market for the Company's
securities. In addition, there is no assurance that an investor will be in a
position to borrow funds using the Company's securities as collateral.
For the foreseeable future, trading in the Company's securities, if any,
will occur in the over-the-counter market and the securities will be quoted on
the OTC Bulletin Board. The closing price for the Common Stock on April 9, 1999
was $2.25. The Company does not anticipate that its Common Stock will qualify
for listing on the NASDAQ Stock market in the near future. A holder of the
Company's securities may be unable to sell its securities when it wishes to do
so, if at all. In addition, the free transferability of these securities will be
dependent on the securities laws of the various states in which it is proposed
these securities be traded.
Penny Stock Regulation
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks". Generally, penny stocks are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system). If the Company's shares are traded for less than $5 per share as they
currently are, the shares will be subject to the SEC's penny stock rules unless
(1) the Company's net tangible assets exceed $5,000,000 during the Company's
first three years of continuous operations or $2,000,000 after the Company's
first three years of continuous operations; or (2) the Company has had average
revenue of at least $6,000,000 for the last three years. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prescribed by the SEC that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. As long as the Company's Common Stock is
subject to the penny stock rules, the holders of the Common Stock may find it
difficult to sell the Common Stock of the Company.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and has
been quoted on the OTC Bulletin Board since November 1996. Effective as of
November 12, 1997, the Company's trading symbol was changed from "MRVI" to
"PYRX".
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The table below presents the range of high and low sales prices for the
Company's Common Stock during each of the quarters indicated. These quotations
were obtained from brokers who make a market in the Company's Common Stock and
reflect interdealer prices, without retail mark up, mark down or commission, and
may not represent actual transactions.
Sales Prices
------------
Quarter Ended High Low
------------- ---- ---
November 30, 1996 .125 .12
February 28, 1997 .0625 .0625
May 31, 1997 .1875 .1875
August 31, 1997 1.6875 .25
November 30, 1997 2.00 1.4375
February 28, 1998 1.875 .6875
May 31, 1998 1.4375 .70
August 31, 1998 1.1875 .41
November 30, 1998 3.5625 .4375
February 28, 1999 5.00 1.375
On April 9, 1999, the closing sale price for the Company's Common Stock was
$2.25 per share.
Number Of Stockholders Of Record
On April 9, 1999, the number of stockholders of record of the Company was
approximately 1,200.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock
since its formation and does not presently anticipate paying any cash dividends
on its Common Stock in the foreseeable future. The Company is obligated to pay
dividends at the rate of 10 percent per year on the $2,500,000 face amount of
Series A Preferred to be issued in exchange for the Notes. These dividends are
required to be paid on January 1 and July 1 of each year. See, "DESCRIPTION OF
SECURITIES-Series A Preferred Stock".
BUSINESS AND PROPERTIES
Overview
The Company is an independent oil and gas exploration company whose
strategic focus is the application of advanced three-dimensional ("3-D") seismic
imaging and computer aided exploration technologies in the systematic search for
commercial hydrocarbon reserves, primarily in the onshore western United States.
The Company attempts to use its technical experience and expertise with 3-D
seismic technology to identify exploration and exploitation projects with
significant potential economic return. The Company intends to participate in
selected exploration projects as a non-operating, working interest owner,
sharing both risk and rewards with its project participants. The Company has
pursued, and will continue to pursue, exploration opportunities in regions where
the Company believes significant opportunity for discovery of oil and gas
exists. By attempting to reduce drilling risk through 3-D seismic technology,
the Company seeks to improve the expected return on investment in its oil and
gas exploration projects.
During fiscal 1998, the Company incurred approximately $439,000 for costs
related to continued leasing and optioning of acreage predominately in
California, $2,046,000 for costs relating to 3-D seismic acquisition over its
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Southeast Maricopa acreage, and $118,000 in drilling costs associated with
drilling the deep exploration well at East Lost Hills. The Company had no
revenues from oil and gas production during 1998.
During fiscal 1997, the Company incurred approximately $311,000 for
acquisition of acreage and exclusive rights to undertake exploration activities
with respect to its projects. The Company undertook no drilling and had no
revenues from oil and gas production during 1997. To finance its operations and
obtain funds for additional capital expenditures relating to its exploration
projects, the Company sold equity securities through private placement offerings
raising approximately $1,743,000 net to the Company.
The Company currently anticipates that it will participate in the drilling
of at least two exploratory wells during its fiscal year ending August 31, 1999
("1999"), although the number of wells may increase as additional projects are
added to the Company's portfolio. However, there can be no assurance that any
such wells will be drilled, and if drilled, that any of these wells will be
successful. See "RISK FACTORS - Start-Up Nature Of The Company's Oil And Gas
Business; No Profits".
The Company's future financial results continue to depend primarily on (1)
the Company's ability to discover commercial quantities of hydrocarbons; (2) the
market price for oil and gas; (3) the Company's ability to continue to obtain
and screen potential projects; and (4) the Company's ability to fully implement
its exploration and development program. There can be no assurance that the
Company will be successful in any of these respects or that the prices of oil
and gas prevailing at the time of production will be at a level allowing for
profitable production. See "RISK FACTORS -Start-Up Nature of The Company's Oil
And Gas Business; No Profits,- "- Substantial Capital Requirements; Lack Of
Operating Revenue" and "- Risks Of Exploratory Drilling Activities".
Strategy
The Company's business strategy is to continue to enhance shareholder value
by using its technical experience and expertise with 3-D seismic technology to
identify exploration and exploitation projects with significant potential
reserves and economic results based on the application of appropriate technology
and suitable project risk management. The Company's ongoing goal is to increase
its reserve base through a focus on mature hydrocarbon basins where it believes
that the historical under- utilization of seismic technology creates tremendous
opportunities. It is the Company's viewpoint that the systematic application of
advanced seismic imaging and visualization to exploration can significantly
reduce drilling risk and enhance financial results. The Company's strategy is to
focus on applying 3-D seismic technology to explore properties that lie within
these mature basins and that offer oil and gas reserves that would be materially
significant to the Company.
The Company has a three-pronged corporate approach for the application of
exploration technology in these mature basins. The three components of this
strategy are set forth below:
* Internal generation of exploration and exploitation prospects with
special emphasis on 3-D seismic application to stratigraphic play
concepts.
* Identification and exploitation of non-performing and under-utilized
existing 3-D seismic surveys and acreage positions in which the
application of technical expertise and advanced interpretation and
visualization methodologies could significantly impact drilling
results.
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* Development of alliances with exploration and production companies
that lack advanced technical resources and expertise.
Exploration and Operating Approach
The Company focuses its technical resources on obtaining the highest
quality subsurface image through advanced geological and geophysical methods,
which it believes are more likely to result in the cost effective identification
of oil and gas reserves that are materially significant. The Company is
committed to providing its technical team with access to the required tools and
support necessary to retain a competitive advantage in today's exploration
environment. The Company strives to provide its geoscientists with the most
advanced imaging and analytical technology available and provides employee
incentives for the recruitment and motivation of these technical experts.
The Company adheres to a disciplined approach to selective project
participation. The Company participates only in those projects that it believes
are likely to maximize the return on its capital investment, have significant
reserve growth potential, and benefit from the application of advanced seismic
technology. The Company believes that these factors result in a positive impact
to the finding-cost and production economics. The Company actively and
continually manages its portfolio of exploration and exploitation projects. The
aggressive portfolio management enables the Company to maximize the investment
of available capital in a limited number of high impact geologic plays and
projects.
The Company generates many of its exploration and exploitation projects
internally, and therefore is not dependent on outside parties for project flow.
The Company strives to control all the exploration phases prior to drilling,
including the acreage position and the application of seismic technology. With
the resulting project control, the Company is in the position to fully manage
the exploration process and determine, subject to its financial resources, the
appropriate level of working interest that it retains in the drilling of any
associated wells. The Company aggressively leverages its project control and
technical expertise to potential industry partners in an attempt to maximize
return on investment while controlling capital exposure. The Company does not
intend to operate the drilling of project wells, but intends to retain the
flexibility to maintain a sufficient working interest in projects to enhance
leverage of its technical resources and influence operator actions.
Significant Projects
The Company's exploration activities are primarily focused on the southern
San Joaquin basin of California. The Company also has projects identified in
selective Rocky Mountain basins. Advanced seismic imaging of the structural and
stratigraphic complexities, common to these regions, provides the Company with
enhanced ability to identify significant hydrocarbon potential. A number of
these projects, especially in the San Joaquin basin, offer multiple drilling
opportunities with individual wells having the potential capability of
encountering multiple reservoirs.
The following provides a summary and status of the Company's exploration
areas and significant projects. While actively pursuing specific exploration
activities in each of the following areas, the Company is continually reviewing
additional opportunities in these core areas and in other areas that meet
certain exploration and exploitation criteria. There is no assurance that
drilling opportunities will continue to be identified in the current project
portfolio or will be successful if drilled.
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Southern San Joaquin Basin, California
The San Joaquin basin of California has proven to be one of the most
productive hydrocarbon producing basins in the continental United States. To
date, the approximately 14,000 square mile basin has produced in excess of 12.7
billion barrels of oil equivalent, and contains 25 fields classified as giant,
with cumulative production of more than 100 million barrels of oil equivalent
("MMBoe"). In calculating barrels of oil equivalent, the Company uses the ratio
of 6 thousand cubic feet ("Mcf") of gas for one barrel of oil.
The San Joaquin contains six of the 25 largest oil fields in the U.S. All
six of these fields were discovered between 1890 and 1911, a full decade prior
to the discovery of the first giant Texas oil field. The basin accounts for 34
percent of California's actively producing fields, yet produces more than 75
percent of the state's total oil and gas production. Most of the production
within the basin is located along the western and southern end of Kern County.
San Joaquin basin production totals for 1997 reported by the California
Department of Oil and Gas for all producers in the aggregate indicate total
production of 246.9 MMBoe. Of this figure, Kern County accounts for over 90
percent of the oil production from the San Joaquin basin.
Exploration Opportunity. For the 100 plus years of its productive life, the
San Joaquin basin has been dominated by major oil companies and large fee
acreage holdings. As a result of these conditions, the basin has generally been
under-explored by independent exploration and production companies, groups that
usually bring advanced technologies to their exploration efforts. The large
fields in the basin were all discovered on surface anticlines and produce mostly
heavy oil from depths of less than 5,000 feet. As a consequence, basin operators
have employed only those advanced engineering technologies related to enhanced
production practices including steam floods and, most recently, horizontal
drilling.
The basin as a whole has suffered from a lack of applied exploration
technology and deep drilling. Approximately one percent of the total basin wells
have been drilled to a depth greater than 12,000 feet, and none of the 2,000
wells drilled during 1996 was drilled to a depth greater than 12,000 feet.
Additional 1996 statistics indicate that the average well depth drilled during
the year was just slightly more than 1,800 feet. Three-dimensional seismic has
been employed only in limited quantity and in certain areas of the basin.
Tenneco and ARCO shot a limited number of 3-D surveys in the mid- to
late-1980s on the Bakersfield Arch and to the south in the Yowlumne area. With
the ongoing retrenchment of majors in the basin, independents such as Torch,
Nuevo Energy, Vintage Petroleum, HarCor Energy and Enron Oil & Gas have moved
into prominent positions within the basin and are bringing applied geoscience
technologies with them. More 3-D surveys have been acquired in the last two
years than in all the previous years combined. This trend is expected to
accelerate in the upcoming years as a renewed emphasis is placed on 3-D seismic
exploitation and exploration.
With limited exploration in the San Joaquin basin since the "boom" days of
the early 1980s, the Company believes that multiple exploration opportunities
are available. Deep basin targets, both structural and stratigraphic in nature,
remain largely untested with modern seismic technology and the drill bit. In
addition, retrenchment of the majors in the basin has caused many of them to
rethink their policies regarding their large fee acreage positions. For the
first time in history, many of these companies are opening up these fee acreage
positions to outside exploration by aggressive independent companies. The
Company has identified and negotiated exclusive access to three high-potential
exploration plays in the southern San Joaquin basin.
East Lost Hills. The Company has identified and has undertaken technical
analysis of a deep, large untested structure in the footwall of the Lost Hills
thrust. This prospect lies directly east of and structurally below the existing
Lost Hills field, which has produced in excess of 350 MMBoe from shallow pay
zones in a large thrusted anticlinal feature.
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This unconventional deep prospect has significant structural and reservoir
risk, but the potential for large reserves makes it an attractive play. In a
joint effort with Denver based Armstrong Resources LLC ("Armstrong"), the
Company has analyzed and interpreted over 350 miles of high-resolution 2-D
seismic data to help refine the structural mapping of the prospect. Advanced
pre-stack depth migration and interpretation clearly defines a deep sub-thrust
structure. Two wells drilled to the east of the prospect, in the mid-1970s,
proved the productivity potential of free oil (42 degree API) and gas at depths
below 17,000 feet. Ongoing source rock and maturation modeling suggests that the
oil generation window exists at depths between 15,000 and 17,000 feet, and that
early migration of hydrocarbons should preserve reservoir quality at East Lost
Hills.
In early 1998, the Company and Armstrong entered into an exploration
agreement with a number of established Canadian partners to participate in the
drilling of an initial exploratory well to fully evaluate the feature. Bellevue
Resources, Inc., a subsidiary of Elk Point Resources, Ltd., is operator of the
well. Currently, other participants in the well are: Berkley Petroleum
Corporation, Ceniarth Inc., Paramount Resources, Ltd., Richland Petroleum
Corporation, Westminister Resources, Ltd., Kookaburra Resources, and Hilton
Petroleum Company. PYR received cash consideration for its share of acreage in
this play and a carried 6.475% working interest through the tanks in the initial
exploration well. PYR owns an additional 4.1% working interest for a total
before payout working interest of 10.575%, which reduces to 9.253% after payout
in the initial exploration well. The Company owns a total working interest of
10.575% in the six township area of mutual interest, subject to a back-in
interest after payout on 900 acres that would reduce the Company's working
interest on those 900 acres to 9.255%. The Company and its joint working
interest owners control approximately 30,000 gross acres of leasehold over the
prospect.
The Bellevue Resources et al. #1-17 East Lost Hills well, located in SE1/4.
Sec 17, T26S, R21E, Kern County, California, commenced drilling on May 15, 1998.
The well is designed to test prospective Miocene sandstone reservoirs in the
Temblor Formation. During September 1998, the well was sidetracked in an attempt
to gain better structural position and delineate potential uphole pay. On
November 23, 1998, the well was drilling at 17,600 feet toward a total depth of
19,000 feet when it blew out and ignited. No personal injuries resulted, and an
expert well control team was engaged to contain the fire. Significant progress
has been made on well control operations at the Bellevue #1-17. Surface
containment facilities have been installed and all liquid and gas production
from that well are contained and are being transported to processing and
disposal facilities. A snubbing unit was deployed to attempt a surface control
kill of the Bellevue #1-17, but was not successful. A relief well, the Bellevue
#1-17R, began drilling on December 18, 1998. It was initially expected to
intersect the wellbore of the Bellevue #1-17 at a depth of about 13,500 feet.
However, as drilling continued and the characteristics of the blowout were
examined, it was determined to attempt to intersect the wellbore below 16,000
feet, which is expected to occur in late April or early May 1999.
At the time that the #1-17 East Lost Hill well was sidetracked, one of the
participants (the "Declining Participant") claimed that it had the right to
decline to participate in the sidetracking operations and still maintain its
interest in the well, subject to a ?non-consent? penalty. The operator and the
other participants dispute the right of the Declining Participant to maintain
its interest in the well on this basis, and proceeded with the sidetracking
operation while denying the Declining Participant?s right to maintain its
interest. Although the Company believes its position on this matter is correct,
if it loses this dispute, the after-payout working interest of the Company in
the well and in the other acreage subject to the related exploration agreement
could be reduced to approximately 9.085% in the initial exploration well and to
approximately 9.2625% in the other acreage.
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Deep Temblor Exploration Program. In April 1999, the Company signed an
agreement with Armstrong to participate in three additional deep exploration
projects in the San Joaquin Basin of California. These three projects are in
addition to the deep Temblor exploration program initiated by the recent
drilling at East Lost Hills, and all lay outside the East Lost Hills joint
venture area. The agreement calls for the Company to pay Armstrong a combination
of cash and common stock in exchange for a working interest, ranging from 3.00%
to 3.75%, in each of the three exploration prospect areas. The Company's
interest will be carried in the initial test well in each of the three separate
exploration prospects. It is expected that the agreement will close on or before
May 1, 1999.
The first exploration well in the program is expected to begin drilling in
May and will be operated by Berkley Petroleum Corporation ("Berkley"). The three
exploration prospects, targeting the Temblor Formation at depths ranging from
15,000 to 18,000 feet, are expected to be drilled in sequence with the same rig.
Berkley will operate the other exploration projects in the Armstrong program as
well as assume operations at East Lost Hills, effective July 1, 1999.
School Road/Southeast Maricopa. The Company has signed a lease and seismic
option with Chevron Production, USA covering exclusive exploration rights on
approximately 22,000 acres of fee land in the Maricopa sub-basin at the southern
end of the San Joaquin valley. The Maricopa sub-basin represents a rapidly
subsiding fore-arc basin containing more than 30,000 feet of post-Jurassic
sediments. The Maricopa area is the location of the major depo-center for
deep-water turbidite deposition in the San Joaquin. The majority of oil produced
in the Maricopa sub-basin and on the Bakersfield arch to the north has come from
the Upper Miocene Stevens and older (Eocene) turbidite sands.
During 1998, the Company completed acquisition of approximately 52 square
miles of 3-D seismic data over its Southeast Maricopa exploration project.
Western Geophysical Company acted as the Company's seismic contractor for the
data acquisition. The processed data was delivered to the Company on October 29,
1998 and the Company is currently in the process of interpreting the data in
order to identify drillable prospects. It is anticipated that the interpretation
will take as long as three months to complete before taking this project to
potential industry partners for participation. The Company intends to sell an
appropriate portion of its interest in this project in order to receive a cash
consideration and/or a carried interest in the drilling of one or more
exploration wells. The Company intends to drill at least one exploration well on
this prospect during calendar year 1999. No drilling commitments have been made
or received.
Basin wide, the Stevens sands have produced in excess of 1,350 MMBbl, with
mean field size being in excess of 70 MMBbl. Stevens sand production is
primarily from stratigraphic traps, and ranges in depth from 7,500 feet to over
14,000 feet. Reservoir quality is good with porosites ranging up to the mid 20
percent range. Oil gravities range from 28 to 55 degree API with the lighter oil
occurring in deeper production to the south. With the superior reservoir quality
and light hydrocarbons, the Stevens' reservoirs make an attractive exploration
target with significant potential reserves.
Directly surrounding the Chevron acreage position, five fields produce from
Stevens equivalent sands. These fields include Landslide (14.9 MMBoe), Paloma
(132.9 MMBoe), Rio Viejo (7.9 MMBoe), San Emidio Nose (21.1 MMBoe), and Yowlumne
(117.2 MMBoe). These fields all show stratigraphic trapping mechanisms including
updip sand pinch-outs, lateral facies variation, and differential compaction.
These five fields produced over 1.77 MMBbls of light oil and associated natural
gas in 1997 (1997 Production Statistics, California Department of Oil and Gas),
and have cumulative aggregate historical production in excess of 300 MMBoe. Per
well cumulative production ranges from a low of 690 MBbl to 2.1 MMBbl, with a
mean value of 1.3 MMBbl.
The objective of the School Road/Southeast Maricopa exploration program is
to apply advanced 3-D seismic technology and advanced interpretation methods,
within a detailed sequence stratigraphic framework, to identify stratigraphic
relationships and potential traps. Exploration for Stevens stratigraphic traps
with 2-D seismic data has proven to be largely unsuccessful due to the lack of
sufficient line density to resolve the stratigraphic complexity necessary to
delineate trapping mechanisms. The discovery of the Landslide field in 1985
resulted from the application of 3-D seismic exploration. By today?s standard,
that data suffered from low fold, low frequency, short offset, and generally
poor imaging of detailed stratigraphic relationships. Advances in field
acquisition, data processing, and visualization methods since the mid-1980s
should allow much more detailed seismic analysis of complex stratigraphic
geometries and trapping mechanisms.
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The School Road/Southeast Maricopa exploration agreement with Chevron
involves a drill-to-earn option on more than 22,000 fee acres, a seismic license
to an existing (1992) 42-square-mile 3-D seismic survey (School Road), more than
200 miles of proprietary 2-D seismic data, a proprietary regional sequence
stratigraphic framework based on extensive, detailed palynology analysis, and
all available well file data. This unique database is anticipated to allow the
complete integration of geology and modern 3-D seismic data to identify
potential trapping opportunities within the stratigraphically complex turbidite
systems present in the sub-basin. The drill-to-earn option entitles the Company,
for each well it drills, to earn a 100 percent working interest and a 75 percent
net revenue interest in 1,280 acres in the vicinity of the well drilled.
On June 1, 1998, the Company executed a participation agreement with
Houston based Seneca Resources for the Company's School Road acreage. The drill
to earn agreement provided PYR with a prospect fee and a carried
through-the-tanks working interest in an initial exploration well. PYR would
ultimately retain a 40% working interest in the School Road acreage. Drilling
operations on the Federal #67X-30 located in SE1/4, SEC 30, T32S, R25E were
commenced on July 28, 1998. The well was drilled to a total depth of 12,508 feet
and although hydrocarbons were encountered, detailed log analysis of the well
indicated that the reservoir was tight and incapable of sustaining commercial
production. The well was plugged and abandoned on September 18, 1998. PYR is
currently evaluating the results of the well and incorporating the new well
control into the seismic model in order to determine any potential future
exploration opportunities at its School Road acreage.
San Emidio. In November 1998, the Company exchanged 266,666 shares of its
common stock for 39 square miles of 3-D seismic data and oil and gas leases
covering approximately 5,400 acres adjacent to the Company's Southeast Maricopa
exploration project. The Company intends to incorporate this 3-D seismic data
with the newly acquired data at its Southeast Maricopa acreage in order to
further understand the complex stratigraphic geometries and trapping mechanisms.
After interpretation and evaluation, there have been two prospective areas
identified within the acreage position. The Company may present this project to
potential industry partners in conjunction with its Southeast Maricopa project
or may create an independent project for presentation. The Company's approach
will be to attempt to obtain industry partner participation in order to receive
a carried interest in the drilling of one or more exploration wells. The Company
expects to drill an exploration well here in calendar year 1999. No drilling
commitments have been made or received.
Denver Basin, Colorado and Nebraska
The Denver Basin covers approximately 60,000 square miles in parts of
Colorado, Nebraska and Wyoming. The basin was the second area in the United
States to produce oil from drilled wells, and has produced more than one billion
barrels of oil equivalent to date. Published statistical studies indicate that
an additional 150 MMBoe to 200 MMBoe of reserves remain to be discovered in this
mature basin from Cretaceous reservoirs in stratigraphic traps.
During the past 10 years, the Denver basin has been one of the most
actively drilled areas in the U.S. due to low drilling costs and low reserve
base risk. Most of the activity has centered on down-spaced drilling for
Codell/Niobrara and Sussex/Shannon/Parkman targets in the Wattenburg area, a
basin-center gas accumulation.
As continued drilling activity has resulted in decreasing availability of
additional well locations, major Wattenburg operators (HS Resources, Patina Oil
& Gas, Prima, NARCO) are experiencing significant retreat, retrenchment and
consolidation of their operations. Decreased activity drilling for shallow gas
offers the Company an opportunity to acquire land and/or seismic options to
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explore and exploit the deeper oil prone 'D' and 'J' sandstone reservoirs.
Production from these Cretaceous reservoirs results from stratigraphic trapping
in an incised valley-fill depositional system. Cretaceous D-Sand and J-Sand
reservoirs have been the traditional exploration targets within the Denver
basin. These reservoirs account for the majority of production to date in the
basin, with cumulative production from the D-Sand totaling 386.6 MMBoe and
J-Sand production totaling 743.4 MMBoe. Modern sequence stratigraphic models and
strong structural control on deposition indicate that these traps are
predictable both in geometry and orientation.
While seismic data has been employed in the basin since the mid-1950s, the
success of 2-D seismic exploration has been limited by stratigraphic trapping
and the complex nature of the reservoir systems. The emergence of 3-D seismic
technology has created exciting new exploration opportunities in the basin.
While the handful of 3-D surveys acquired to date in the basin have proven to be
economic successes, the downturn in basin-wide activity has resulted in
significant underutilization of this exploration application. The Company
proposes to capitalize on 3-D seismic exploration opportunities generated
internally, and through opportunities arising from the recent, ongoing
consolidation and retrenchment of major basin operators.
Exploration Opportunity. Historically, exploration in the Denver basin has
been dominated by small, low-cost operators employing subsurface and
"trend-ology" geological mapping methods. The lack of applied technology and the
stratigraphic reservoir complexity in the basin has resulted in low drilling
success rates and overall poor economic results. Expanded use of 3-D seismic
technology to image D-Sand and J-Sand reservoir should enhance the economic
results and expedite the discovery process. To date, less than 20 3-D seismic
surveys have been acquired within the Denver basin. Geoscientists employed by
the Company have been directly involved in eight of these projects. These
projects have proven the economic viability of 3-D seismic in unraveling the
stratigraphic complexity and productivity of Cretaceous incised valley-fill
reservoirs and have resulted in the identification and production of significant
incremental reserves.
Geological and geophysical methodologies developed internally by the
Company allow for the identification and differentiation of significant economic
reserves from the background of marginal producers common in the Denver basin.
The application of these methodologies result in the potential for discovery of
significant reserves with high success rates and low finding costs. The Company
proposes to undertake a systematic exploration/exploitation effort in the Denver
basin. A regional stratigraphic framework for Cretaceous reservoirs has been
constructed leading to the identification of numerous D-Sand and J-Sand leads
and prospects. Detailed geologic work is underway to refine these leads and
prospects with regard to prospectivity, reserve potential and applicability of
3-D seismic imaging. The centerpiece of the proposed exploration/exploitation
effort will be the application of 3-D seismic to delineate and resolve
stratigraphic traps. Previous experience with 3-D seismic technology in the
Denver basin has provided a competitive advantage in risk reduction and
identification of prospective drilling locations. The Company is continuing
efforts to develop and define opportunities in this area.
Big Horn Basin, Wyoming and Montana
The Big Horn basin of Wyoming and Montana is an asymmetric intermountain
basin of the Rocky Mountain foreland. Initial production was established in the
basin in 1906 with the discovery of Garland field. Cumulative production from
the basin is in excess of 2.4 BBO and 1.8 TCF of gas. The vast majority of this
production has come from Paleozoic reservoirs trapped in basin-margin anticlinal
structures. The majority of major field discoveries (greater than 90 percent of
field total and cumulative production) were made prior to 1950.
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Exploration Opportunity. While most of the early exploration in the basin
was the result of mapping of surface structures, recent exploration efforts have
focused on the application of detailed subsurface mapping to delineate
structural complexities not previously observed. Because most of the producing
anticlines are structurally uncomplicated at their surface expression, little
exploration effort has historically been applied to defining structural
compartmentalization and secondary culminations at depth. The advent of modern
geophysical technology, including the application of 3-D seismic, has increased
the ability to resolve the structural complexity of producing intervals. Recent
exploration and exploitation success at fields such as Gooseberry, Manderson,
Golden Eagle, and Enigma have resulted from this increased effort to understand
and delineate smaller-scaled secondary structural features.
The Company sees multiple exploration and exploitation opportunities in the
basin to identify unrecognized and untested structural culminations along
producing trends. Multiple potentially productive horizons exist on many of
these structural features creating attractive project economics and exploration
finding costs. The Company has identified a number of individual project focus
areas, and has secured a lease position, covering approximately 2,080 gross and
2,080 net acres, on its first exploration project in the basin. There are no
immediate plans to begin drilling on this prospect.
North Zimmerman Butte. The Company has developed an exploration lead, based
on subsurface geological analysis, north and west of the Zimmerman Butte field.
Zimmerman Butte field was discovered in 1945 and has produced over 1.3 MMBO from
several reservoirs. The productive area of the field covers less than 350 acres
on a surface structural feature that extends along trend for approximately five
miles. Subsurface analysis has indicated the possible presence of multiple
subsidiary structural features along this structural trend. Based on the
production potential of these structural leads, the Company renewed a BLM lease
covering 2080 acres. The leasehold position covers some but not all of the
prospective acreage along the trend. The Company intends to undertake additional
geological and geophysical analysis before drilling a test well. There are no
immediate plans to commence drilling on this project.
Geological and Geophysical Expertise
The Company's oil and gas finding capabilities are dependent upon the
effective application of 3-D seismic imaging technologies. The Company has
assembled a technically experienced staff of two in-house geologists in addition
to Mr. Singdahlsen, who is both a geologist and geophysicist. All these persons
have extensive experience involving the utilization of advanced seismic data
imaging and analysis, and have collectively participated in more than 100 3-D
seismic projects in diverse geological trends.
The Company also has access, both in-house and through consultants, to
state-of-the-art exploration hardware and software applications. The Company
owns one computer aided exploration workstation running the full suite of
GeoGraphix geologic mapping and analysis software. Additionally, the Company
owns one geophysical workstation employing SeisX 2-D and 3-D seismic
interpretation and analysis software. Through a strategic alliance with a
Denver-based 3-D seismic consulting firm (Interactive Earth Sciences
Corporation), the Company has full access to multiple UNIX-based seismic
interpretation workstations running the complete Schlumberger/GeoQuest seismic
analysis software package. Through this relationship, the Company also has full
access to GMA seismic modeling software as well as Paradigm Geophysical?s
GeoDepth pre-stack depth migration software package.
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Drilling Activities
During 1998, the Company commenced the drilling of an initial exploration
well at its East Lost Hills Prospect. On November 23, 1998, a blowout occurred
on this well. See above " - Significant Projects - Southern San Joaquin Basin,
California". The Company also drilled one unsuccessful exploratory well at its
School Road project. The Company anticipates the drilling of at least two
additional exploratory wells during 1999, depending on ongoing exploration
efforts in California and Colorado.
Production
The Company currently does not own any oil or gas production. The Company
has no immediate plans to acquire or purchase any production. The Company also
has no booked reserves at the current time and any near-term reserve additions
would result from successful exploration efforts.
Acreage
The Company currently controls, through lease, farmout, and option, the
following acreage position as detailed below:
State Gross Acres Net Acres
----- ----------- ---------
California 59,914 30,754
Colorado 80 80
Wyoming 2,080 2,080
------- ------- -------
TOTAL 62,074 32,914
Farmout agreements require the Company to drill one or more wells in a
specific time-period in order for the Company to earn its interest in acreage.
Option agreements require the Company to enter into a lease agreement and to
make lease payments within a specific time-period, usually six to 12 months, in
order to obtain a leasehold interest in acreage.
Competitive Advantage
The Company believes that the cumulative experience of its technical and
management team, with past exposure to more than 100 3-D seismic projects
covering approximately 1,500 square miles in diverse geologic trends throughout
the world results in a strong competitive advantage relative to current
competition in these focus areas. The Company currently has three full-time
geoscientists and a landman who are specialists in a variety of technical
aspects and have extensive experience and expertise in numerous geologic
regions.
The Company's expertise in the application of advanced seismic
interpretation methods includes many of the "cutting-edge" technologies
necessary in today?s competitive exploration environment. These advanced
techniques include 3-D seismic visualization, attribute analysis, geostatistical
modeling, pre-stack depth migration, and the integration of geological and
engineering data in support of reservoir characterization. These advanced
seismic interpretation methods allow the Company to leverage its 3-D seismic
experience and expertise with significant exploration and exploitation
opportunities.
The Company generates the majority of its exploration and exploitation
projects internally, and therefore is not dependent on third parties for project
flow. This results in full control of all pre-drill exploration phases including
the acreage position and application of seismic technology.
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Available Information
In accordance with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company files reports, proxy statements and
other information with the SEC. These reports, proxy statements and other
information can be read and copied at the Public Reference Room maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024 and at the
following Regional Offices of the SEC: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and 7 World Trade Center, New York, New York
10048. Copies of these materials also can be obtained at prescribed rates by
writing to the SEC, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information concerning the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition,
materials filed electronically by the Company with the SEC are available at the
SEC?s Internet web site at http://www.sec.gov.
This prospectus is part of the Registration Statement on Form SB-2
(together with all amendments and exhibits, referred to as "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
that the Company filed with the SEC. The Registration Statement contains
information that is not included in this prospectus.
Statements contained in this prospectus as to the contents of any contract
or other document are not necessarily complete, and, in each instance, reference
is made to the copy of the particular contract or document filed as an exhibit
to the Registration Statement. Each statement concerning a document that is
filed as an exhibit is qualified in all respects by reference to the copy of the
document filed as an exhibit. For further information with respect to the
Company, reference is made to the Registration Statement.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion and comparison of the financial condition and
results of operations of the Company as of and for the twelve months ended
August 31, 1998 ("1998"), and as of and for the eight months ended August 31,
1997 ("1997"). Also included is a similar discussion and comparison as of and
for the three month periods ended November 30, 1997 and November 30, 1998. These
discussions should be read in conjunction with the Company's Financial
Statements, the notes related thereto, and the other financial data included
elsewhere in this prospectus.
Results of Operations
The twelve months ended August 31, 1998 ("1998") compared with the eight
months ended August 31, 1997 ("1997")
Oil and Gas Revenues and Expenses. At August 31, 1998 (and at December 2,
1998), the Company did not own any producing or proved oil and gas properties.
No oil and gas production revenues or expenses have been recorded by the
Company. The Company recorded a dry hole impairment of $15,000 associated with
its unsuccessful exploration well drilled in 1998 on its "School Road" acreage.
Consulting Fee Revenue. The Company generated $10,000 and $80,000 from
consulting fees in 1998 and 1997, respectively. These revenues are considered to
be ancillary to the Company's focus of generating revenues from oil and gas
production. These revenues have ceased completely and are not expected to occur
at any time in the future.
Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas properties in 1998 or 1997. At August 31, 1998 (and at
December 2,1998), the Company did not own any proved reserves and has no oil or
18
<PAGE>
gas production. The Company recorded $22,000 and $1,000 in depreciation expense
associated with capitalized office furniture and equipment during 1998 and 1997,
respectively. The Company also recorded nominal amortization expense associated
with organization costs during 1998 and 1997.
General and Administrative Expense. The Company incurred $675,000 and
$125,000 in general and administrative expenses during 1998 and 1997,
respectively. The increase results from incurring costs associated with the
hiring of technical personnel, leasing of office space, and legal and accounting
and other costs associated with administering and pursuing the development of
the Company's exploration and exploitation plan. In addition, there is a natural
disparity occurring from comparing a twelve month period (1998) to an eight
month period (1997).
Gain On Sale of Oil and Gas Properties. During 1998, the Company sold down
a portion of its East Lost Hills project to industry partners for a total of
$850,000, resulting in a net gain to the Company of $556,000. The Company has
retained a working interest in this property.
During the fiscal year ended August 31, 1998, the Company's carrying costs
for undeveloped oil and gas properties increased by a net amount of
approximately $2,180,000. This net increase is comprised of expenditures on
undeveloped oil and gas prospects of approximately $2,689,000, a reduction in
carrying costs in the prospects charged to the full cost pool of approximately
$494,000 from the sale of partial interests in two of the Company's exploration
projects and dry hole impairment of $15,000.
During 1998, the Company incurred $1,936,000 for the 3D seismic acquisition
project at the Company's Southeast Maricopa project, $549,000 for additional
leasing and outside seismic consulting, $118,000 for the Company's share of
drilling costs at the East Lost Hills project, $54,000 in seismic reprocessing
costs associated with the Company's School Road project and $32,000 for outside
geological expenses.
During 1998, the Company sold interests in two of its prospects, School
Road and East Lost Hills, Proceeds of $200,000 from the sale of a partial
interest in the School Road prospect were charged against the full cost pool as
this sale did not materially alter the Company's full cost pool as of the date
of sale. Proceeds of $850,000 were received from the sale of part of the
Company's interest in its East Lost Hills project. As the sale of this interest
in East Lost Hills was greater than 25% of the Company's undeveloped oil and gas
prospects as of the date of sale, gain was recognized in the finanicial
statements for the year ended August 31, 1998 in the amount of $556,000 and the
Company's carrying cost of undeveloped oil and gas prospects was reduced by the
basis in the interest sold of $294,000.
The quarter ended November 30, 1998 compared with the quarter ended
November 30, 1997
Operations during the quarter ended November 30, 1998 resulted in a net
loss of ($169,468) compared to a net loss of ($165,511) for the quarter ended
November 30, 1997.
Oil and Gas Revenues and Expenses. The Company has not owned any producing
or proved oil and gas properties. Accordingly, no oil and gas revenues or
expenses have been recorded by the Company.
Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas properties for the quarters ended November 30, 1998 or
1997. The Company has not owned any proved reserves and had no oil or gas
production. The Company recorded $6,386 and $3,333 in depreciation expense
associated with capitalized office furniture and equipment during the quarters
ended November 30, 1998 and 1997, respectively.
Generally and Administrative Expense. The Company incurred $137,775 and
$187,917 in general and administrative expenses during the quarters ended
November 30, 1998 and 1997, respectively. The decrease results from lower
amounts incurred for legal fees, accounting fees, employee salaries and
promotional expenses.
Interest Expense. The Company recorded $29,832 in interest expense for the
quarter ended November 30, 1998 associated with the Company's convertible
debentures.
Consulting Fee Revenue. The Company generated $10,000 from consulting fees
during the quarter ended November 30, 1997. These revenues have cased and are
not expected to occur in the future.
19
<PAGE>
Liquidity and Capital Resources
At November 30, 1998, the Company had a negative working capital amount of
($1,422,000). During the quarter ended November 30, 1998, the Company completed
a private placement which provided a total of $2,500,000 to the Company. The
private placement securities issued are 10% convertible notes that will
automatically convert to 10% convertible preferred stock at the time, if any,
that PYR has obtained stockholder approval for, and issued, the convertible
preferred shares. The preferred stock is ultimately convertible into common
stock at a conversion price of $.60 per common share. The Company incurred costs
of approximately $75,000 in connection with this issuance of the notes. To date,
the Company has funded its oil and gas exploration activities principally
through cash provided by the sale of its securities.
Cash used in investing activities during 1998 totaled $400,000. Of this
amount, $1,407,000 was used in conjunction with the Company's oil and gas
exploration and exploitation plan and $43,000 was used for office furniture and
equipment. The Company offset these expenditures by generating $1,050,000 in
proceeds from the sale of oil and gas properties.
The Company had no outstanding long-term debt at November 30, 1998 other
than a capital lease obligation and has not entered into any commodity swap
arrangements or hedging transactions. Although it has no current plans to do so,
it may enter into commodity swap and/or hedging transactions in the future in
conjunction with oil and gas production. Nevertheless, there can be no assurance
that the Company will ever have oil and gas production.
It is anticipated that the future development of the Company's business
will require additional capital expenditures. The Company is currently in the
process of interpreting and evaluating 3-D seismic data on two of its California
exploration projects and is in the process of drilling and evaluating an
exploration well at East Lost Hills. Depending upon the extent of industry
participation in the two seismic generated exploration projects and the ultimate
results at East Lost Hills, the Company may require as much as $4,800,000 for
capital expenditures during the next 12 months. The Company intends to limit
capital expenditures by forming industry alliances and exchanging an appropriate
portion of its interest for cash and/or a carried interest in its exploration
projects. Although currently there are no commitments for additional funding,
the Company may need to raise additional funds to cover capital expenditures. In
addition, the exploratory well at East Lost Hills experienced a blowout on
November 23, 1998. Although the Company currently believes that costs related to
the blowout and the release of potential pollutants into the atmosphere are
covered by insurance, there is no assurance that all of the costs will be
covered. See "BUSINESS AND PROPERTIES-Disclosure Regarding Forward-Looking
Statements And Cautionary Statements - Cautionary Statements" and " -
Significant Properties - Southern San Joaquin Basin, California".
Year 2000 Compliance
Year 2000 compliance is the ability of computer hardware and software to
respond to the problems posed by the fact that computer programs traditionally
have used two digits rather than four digits to define an applicable year. As a
consequence, any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
interruption of operations, including temporary inability to perform 3-D seismic
analysis and to perform accounting functions and delays in the receipt of
payments from purchasers of oil and gas production, if any. The Company
currently is reviewing the Company's computers and software as well as other
equipment that utilizes imbedded computer chips, such as facsimile machines and
telephone systems. The Company believes that its review will be completed prior
to June 30, 1999. The Company has confirmed with the maker of its accounting
software that it is Year 2000 compliant.
Until the Company's Year 2000 review has been completed, the Company has no
estimate of the cost to correct any potential deficiency in Year 2000 compliance
for its computers and equipment. Upon the completion of the Company's Year 2000
review, the Company intends to develop a contingency plan to address potential
Year 2000 problems.
20
<PAGE>
MANAGEMENT
The directors and executive officers of the Company, their respective
positions and ages, and the year in which each director was first elected, are
set forth in the following table. Each director has been elected to hold office
until the next annual meeting of stockholders and thereafter until his successor
is elected and has qualified. Additional information concerning each of these
individuals follows the table.
<TABLE>
<CAPTION>
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
<S> <C> <C> <C>
D. Scott Singdahlsen 40 Chief Executive Officer, 1997
President, and Chairman
of the Board
Robert B. Suydam 60 Vice President-Geology and Director 1998
Andrew P. Calerich 34 Chief Financial Officer and Secretary ---
Keith F. Carney 42 Director 1997
</TABLE>
D. Scott Singdahlsen has served as President, Chief Executive Officer, and
Chairman of the Board of the Company since August 1997. Mr. Singdahlsen
co-founded PYR Energy, LLC in 1996, and served as General Manager and
Exploration Coordinator. In 1992, Mr. Singdahlsen co-founded Interactive Earth
Sciences Corporation, a 3-D seismic management and interpretation consulting
firm in Denver, where he served as vice president and president and lead seismic
interpretation specialist from 1992 to 1996. Prior to forming Interactive Earth
Sciences Corporation, Mr. Singdahlsen was employed as a Development Geologist
for Chevron USA in the Rocky Mountain region. At Chevron, Mr. Singdahlsen was
involved in 3-D seismic reservoir characterization projects and geostatistical
analysis. Mr. Singdahlsen started his career at UNOCAL as an Exploration
Geologist in Midland, Texas. Mr. Singdahlsen earned a B.A. in Geology from
Hamilton College and a M.S. in Structural Geology from Montana State University.
Robert B. Suydam has served as a Director of the Company since October
1998. Mr. Suydam has served as Vice-President - Geology of the Company since
August 1997 and was Secretary of the Company from August 1997 until May 1998.
Mr. Suydam co-founded PYR Energy, LLC in 1996 and served as Chief Geologist.
From 1985 until 1996, Mr. Suydam served as exploration coordinator for Snyder
Oil, Gerrity Oil, and Energy Minerals in Denver. Prior to this employment, Mr.
Suydam served as Vice President of Exploration for National Oil Company, and as
Exploration Manager for Hamilton Brothers Oil Company in Denver and Calgary. Mr.
Suydam started his career as an exploration geologist at Texaco in Denver,
Calgary, and New Orleans. Mr. Suydam earned a B.S. and M.S. in Geology from the
University of Wyoming.
Andrew P. Calerich has served as Chief Financial Officer of the Company
since August 1997 and as Secretary of the Company since May 1998. From 1993 to
1997, Mr. Calerich was a business consultant specializing in accounting for
private oil and gas producers in Denver. From 1990 to 1993, Mr. Calerich was
employed as corporate Controller at Tipperary Corporation, a public oil and gas
company in Denver. Mr. Calerich began his professional career in public
accounting in the tax department at Arthur Andersen & Company. Mr. Calerich is a
Certified Public Accountant and earned B.S. degrees in both Accounting and
Business Administration at Regis College.
Keith F. Carney has served as a Director of the Company since August 1997.
Since October 1997, Mr. Carney has been Executive Vice-President of Cheniere
Energy, Inc., a Houston based public oil and gas exploration company. From July
1997 until October 1997, Mr. Carney served as Chief Financial Officer of
Cheniere Energy. After earning his M.B.A. degree from the University of Denver
in 1992, Mr. Carney was employed as a Securities Analyst in the oil and gas
exploration/production sector with Smith Barney, Inc. Mr. Carney began his
career as an exploration Geologist at Shell Oil after earning B.S. and M.S.
degrees in Geology from Lehigh University.
Other Key Employees - Other key employees of the Company include the
following:
Kenneth R. Berry, Jr. has served as land manager for the Company since
October 1997. Mr. Berry is responsible for the management of all land issues
including leasing and permitting. Mr. Berry has 23 years of experience as an
independent landman. Prior to joining the Company, Mr. Berry served as the
managing land consultant for Swift Energy Company in the Rocky Mountain region.
Mr. Berry began his career in the land department with Tenneco Oil Company after
earning a B.A. degree in Petroleum Land Management at the University of Texas -
Austin.
21
<PAGE>
Lisa A. Mallin has served as Geologist-CAEX for the Company since August
1997. Ms. Mallin is responsible for all aspects of computer aided exploration
including mapping and geophysical workstation system administration. Prior to
joining the Company, Ms. Mallin served in various exploration and production
capacities with Amoco, Snyder Oil, Intera Information Technologies, NICOR Oil
and Gas, Louisiana Land and Exploration, and Amerada Hess. Ms. Mallin earned a
B.A. degree in Geology from the University of Northern Colorado.
Board And Committee Meetings
The Board of Directors met seven times during the fiscal year ended August
31, 1998 and all directors were present at each of those meetings.
The Board of Directors has a Compensation Committee, which met one time
during the fiscal year ended August 31, 1998 and both members of the
Compensation Committee participated in that meeting. The Compensation Committee
has the authority to establish policies concerning compensation and employee
benefits for employees of the Company. The Compensation Committee reviews and
makes recommendations concerning the Company's compensation policies and the
implementation of those policies and determines compensation and benefits for
executive officers. The Compensation Committee currently consists of the entire
Board. It is anticipated that after the election of additional outside directors
to the Board that the Compensation Committee will be reelected to consist of at
least two outside directors and not the entire Board of Directors.
In connection with the private placement of the Notes, the Company
nominated S.L. Hutchinson and Bryce W. Rhodes for election as directors at the
Annual Meeting of Stockholders to be held in the second quarter of calendar year
1999. See, "TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES - Private
Placement Of Notes".
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's common stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
The Company believes that during the year ended August 31, 1998, its officers,
directors and holders of more than 10% of the Company's common stock complied
with all Section 16(a) filing requirements. In making these statements, the
Company has relied upon the written representations of its directors and
officers and the Company's review of the monthly statements of changes filed
with the Company by its officers and directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the Company's last three successive completed fiscal years by D.
Scott Singdahlsen, the Chief Executive Officer, President and Chairman Of The
Board of the Company. No executive officer of the Company, including the Chief
Executive Officer and the Chairman Of The Board, received total salary and bonus
exceeding $100,000 during any of the last three fiscal years.
22
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
------------------- -----------------------------------
Restricted
Other Annual Stock LTIP All other
Name and Principal Fiscal Salary Bonus Compensation Awards Options Payouts Compensation
Position Year ($)(1) ($)(2) ($)(3) ($) (#) ($)(4) ($)(5)
- -------- ---- ------ ------ ------------ ------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. Scott Singdahlsen 1998 $75,000 $-0- -0- -0- -0- -0- -0-
Chief Executive Officer,
President and Chairman 1997 $10,250 -0- -0- -0- -0- -0- -0-
Of the Board
1996 -- -- -- -- -- -- --
</TABLE>
- ------------
(1) The dollar value of base salary (cash and non-cash) received during the
year indicated. Includes $4,000 paid as consulting fees to Mr. Singdahlsen
by PYR Energy, LLC during the period from January 1, 1997 through August 6,
1997.
(2) The dollar value of bonus (cash and non-cash) received during the year
indicated.
(3) During the period covered by the Summary Compensation Table, the Company
did not pay any other annual compensation not properly categorized as
salary or bonus, including perquisites and other personal benefits,
securities or property.
(4) The Company does not have in effect any plan that is intended to serve as
incentive for performance to occur over a period longer than one fiscal
year except for the Company's 1997 Stock Option Plan.
(5) All other compensation received that the Company could not properly report
in any other column of the Summary Compensation Table including annual
Company contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by,
or on behalf of, the Company with respect to term life insurance for the
benefit of the named executive officer, and, the full dollar value of the
remainder of the premiums paid by, or on behalf of, the Company.
1997 Stock Option Plan
In August 1997, the Company's 1997 Stock Option Plan (the "1997 Plan") was
adopted by the Board of Directors of the Company and subsequently approved by
the Company's stockholders. Pursuant to the 1997 Plan, the Company may grant
options to purchase an aggregate of 1,000,000 shares of the Company's Common
Stock to key employees, directors, and other persons who have contributed or are
contributing to the success of the Company. The options granted pursuant to the
1997 Plan may be either incentive options qualifying for beneficial tax
treatment for the recipient or nonqualified options. The 1997 Plan may be
administered by the Board of Directors or by an option committee. Administration
of the 1997 Plan includes determination of the terms of options granted under
the 1997 Plan. At August 31, 1998, options to purchase 246,000 shares were
outstanding under the 1997 Plan. Options to purchase 435,000 additional shares
subsequently were granted and options to purchase 7,500 shares subsequently
terminated. As of April 9, 1999, options to purchase 326,500 shares were
available to be granted pursuant to the 1997 Plan.
Compensation Of Outside Directors
On May 26, 1998, each Director of the Company who is not also an employee
of the Company ("Outside Director") was granted options to purchase 10,000
shares of Common Stock. The Options are exercisable for $1.28 per share, which
was the average of closing bid and ask price of the Common Stock on the date of
23
<PAGE>
grant. Options to purchase 2,500 shares became exercisable on each of September
1, 1998 and December 1, 1998, and options to purchase 2,500 shares become
exercisable on each of March 1, 1999 and June 1, 1999 if the person continues to
be an Outside Director through each of those dates. All the options expire on
May 26, 2001. Directors also are reimbursed for expenses incurred in attending
meetings and for other expenses incurred on behalf of the Company.
Employment Contracts And Termination Of Employment And Change-In-Control
Arrangements
The Company does not have any written employment contracts with respect to
any of its officers or other employees. The Company has no compensatory plan or
arrangement that results or will result from the resignation, retirement, or any
other termination of an executive officer?s employment with the Company or from
a change-in-control of the Company or a change in an executive officer?s
responsibilities following a change-in-control, except that the 1997 Plan
provides for vesting of all outstanding options in the event of the occurrence
of a change-in-control.
BENEFICIAL OWNERS OF SECURITIES
As of April 9, 1999, there were 9,421,470 shares of the Company's Common
Stock outstanding. The following table sets forth certain information as of
April 9, 1999, with respect to the beneficial ownership of the Company's Common
Stock by each director and nominee for director, by all executive officers and
directors as a group, and by each other person known by the Company to be the
beneficial owner of more than five percent of the Company's Common Stock:
24
<PAGE>
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
- ---------------- ---------------------- ------------------
D. Scott Singdahlsen 2,000,000 21.2%
1675 Broadway, Suite 1150
Denver, Colorado 80202
Robert B. Suydam 1,300,000(2) 13.8%
1675 Broadway, Suite 1150
Denver, Colorado 80202
Keith F. Carney 110,000(3) 1.2%
915 Bay Oaks Road
Houston, Texas 77008
All Executive Officers and
Directors as a group (four persons) 3,452,500(2)(3)(4) 36.6%
PinOak, Inc. 1,300,000(2) 13.8%
5037 South Oak Court
Littleton, Colorado 80127
Victory Oil Company 1,873,333(5) 16.9%
222 West Sixth Street, Suite 1010
San Pedro, California 90731
Whittier Trust Company 556,734(6) 5.6%
1600 Huntington Drive
South Pasadena, California 91030
- ------------
(1) "Beneficial ownership" is defined in the regulations promulgated by the
U.S. Securities and Exchange Commission as having or sharing, directly or
indirectly (i) voting power, which includes the power to vote or to direct
the voting, or (ii) investment power, which includes the power to dispose
or to direct the disposition, of shares of the common stock of an issuer.
Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(2) The shares shown for Mr. Suydam are owned of record by PinOak Inc.
("PinOak"). These shares are included twice in the table. They are listed
as being held beneficially by both PinOak and by Mr. Suydam. PinOak is
owned by Mr. Suydam?s wife and Mr. Suydam is the President of PinOak.
(3) Includes options to purchase 5,000 shares at $1.28 per share until May 26,
2001 that currently are excercisable or that will become exercisable within
the next 60 days.
(4) Includes 2,500 shares of Common Stock and options to purchase 25,000 shares
of Common Stock that currently are excercisable or that will become
exercisable within the next 60 days that are held by Andrew P. Calerich,
the Chief Financial Officer and Secretary of the Company, and 15,000 shares
held by Mr. Calerich's wife's individual retirement account.
25
<PAGE>
(5) Includes 1,666,667 shares of Common Stock that may be issued upon the
conversion of Notes held by Victory Oil Company. Also includes 100,000
shares owned by Crail Fund, a partnership that is owned by the shareholders
of Victory Oil Company. See "TRANSACTIONS BETWEEN THE COMPANY AND RELATED
PARTIES - Private Placement Of Notes".
(6) This beneficial ownership was reported in the Schedule 13D filed by Victory
Oil Company, Whittier Trust Company and other filing parties on November 5,
1998. These shares consist of shares of Common Stock that may be issued
upon the conversion of convertible promissory notes held by various holders
for whom Whittier Trust Company serves as trustee and/or agent. See
"TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES - Private Placement
Of Notes".
TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES
Acquisition Of PYR Energy, LLC
- ------------------------------
The Company acquired all the ownership interest in PYR Energy, LLC on
August 6, 1997 in exchange for 4,000,000 shares of the Company's Common Stock.
Mr. Singdahlsen received 2,000,000 shares of the Company's Common Stock in that
transaction in exchange for the 50 percent of PYR Energy, LLC that he owned
immediately prior to the transaction. PinOak, a company of which Mr. Suydam is
the President and whose sole shareholder is Mr. Suydam's wife, received
1,300,000 shares of the Company's Common Stock in that transaction in exchange
for PinOak's ownership of 32.5 percent of the ownership interests in PYR Energy,
LLC immediately prior to the transaction. In connection with that transaction,
the Company agreed to appoint each of Messrs. Singdahlsen, Carney and Gregory B.
Barnett to constitute all the members of the Company's Board Of Directors.
Loan To PYR Energy, LLC
- -----------------------
In June 1997, PYR Energy, LLC borrowed $275,000 from the Company in order
to fund certain of PYR Energy, LLC's obligations pursuant to PYR Energy, LLC?s
lease and seismic option in the San Joaquin basin. PYR Energy, LLC secured that
loan with a pledge of PYR Energy, LLC's interest in the lease and seismic
option. The loan accrued interest at a rate of eight percent per annum, with
interest payable at the end of each calendar quarter. The loan was effectively
eliminated upon consummation of the Company's acquisition of PYR Energy, LLC.
Sale Of Assets To Former Director And Officer
- ---------------------------------------------
Effective as of August 6, 1997, the Company sold all the assets not related
to the Company's business of oil and gas exploration, development and
consulting, and not related to the Company's principal office in Denver,
Colorado, to Buddy Young, a stockholder and a former director and officer of the
Company. The purchase price for the assets was $32,000, which was paid in the
form of a release from Mr. Young to the Company of the Company's obligation to
repay the $32,000 it owed to Mr. Young. The Company's approximate $32,000
obligation to Mr. Young had been incurred through advances from Mr. Young to the
Company for working capital purposes. At August 6, 1997, there were outstanding
$17,852 of accounts receivable related to the assets that Mr. Young obtained the
right to receive. Mr. Young also assumed all liabilities related to the assets.
The Company also assigned to Mr. Young the lease for the Company's office in
Encino, California, and Mr. Young assumed the Company's obligations under the
lease. The Company obtained a release from the landlord for additional
obligations under the lease.
26
<PAGE>
In addition to the accounts receivable described above, the assets sold to
Mr. Young consisted primarily of the Company's interests in three television
programs, "Heartstoppers . . . At The Movies", a two-hour television program
hosted by George Hamilton, "Christmas At The Movies", a one-hour television
program hosted by Gene Kelly, and "It's A Wonderful Life - A Personal
Remembrance", an approximately 15-minute television program hosted by Frank
Capra, Jr., and the office furniture and supplies in the Company's former office
in Encino, California. The television programs previously had been held by the
Company for licensing to various television and cable television operators.
During the year ended August 31, 1997, the Company received licensing fees of
$15,216 for the television programming assets sold to Mr. Young. The low revenue
amount was mainly due to the programs? previously having been licensed in most
major territories. Because, as a result of the Company's acquisition of PYR
Energy, LLC, the Company determined to focus its activities on oil and gas
exploration, development and consulting and to locate its principal office in
Denver, Colorado, the Company determined that it was in its best interests to
sell the assets of the Company that were not related to this business and to
assign its office lease in Encino, California.
Private Placement Of Notes
- --------------------------
In November 1998, the Company completed the sale of convertible promissory
notes (the "Notes") in the total amount of $2,500,000 in a private placement
transaction pursuant to exemptions from federal and state registration
requirements. Victory Oil Company ("Victory") purchased $1.0 million of Notes,
and parties related to Whittier Energy Company ("WEC") purchased $500,000 of
Notes. The remaining $1.0 million of Notes were sold to other investors. For a
description of the Notes and the Series A Preferred stock into which the Notes
may be converted, see below, "DESCRIPTION OF SECURITIES".
In connection with the sale of the Notes, the Company agreed to add S.L.
Hutchison and Bryce W. Rhodes to the Board of Directors. Messrs. Hutchison and
Rhodes have been nominated for election as directors at the Annual Meeting of
Stockholders pursuant to this agreement. Mr. Hutchison is the Chief Financial
Officer of Victory and Mr. Rhodes is a Vice President of WEC.
As a condition to the sale of the Notes, D. Scott Singdahlsen and Robert B.
Suydam, who are directors and officers of the Company, entered into a voting
agreement (the "Voting Agreement") with the purchasers of the Notes. Pursuant to
the Voting Agreement, Mr. Singdahlsen and Mr. Suydam each agreed, respectively,
that he will vote all the shares of Common Stock of the Company owned by him in
favor of the election of two nominees of the investors to serve on the Board of
Directors of the Company and for the re-election of those nominees or other
nominees at any time that the aggregate percentage ownership of common equity of
the Company underlying the Notes or Series A Preferred owned by the investors is
20 percent or more of the outstanding Common Stock. Mr. Singdahlsen and Mr.
Suydam are required to vote for only one nominee at any time after the aggregate
percentage ownership of common equity of the Company owned by the investors is
less than 20 percent and greater than or equal to 10 percent of the outstanding
Common Stock. The obligation of Mr. Singdahlsen and Mr. Suydam to vote for any
nominees of the investors terminates at any time after the percentage ownership
of common equity of the Company owned by the investors is less than 10 percent
of the outstanding Common Stock. Mr. Singdahlsen and Mr. Suydam are not required
to vote for the designated board members at any time that the holders of the
Series A Preferred have the right voting separately as a class to elect those
designated board members.
27
<PAGE>
Also as a condition to the investors' purchase of the Notes, the Company
entered into an agreement with Victory, WEC, and Catalina Properties Corporation
("Catalina") pursuant to which Victory, WEC and Catalina contributed their
interests in approximately 5,400 gross acres of leasehold as well as access to
39 square miles of existing of 3-D seismic data adjoining the Company's
Southeast Maricopa "Stevens" Exploration Project in California. As consideration
for these interests, the Company issued 106,666 shares to Victory, 80,000 to
WEC, and 80,000 to Catalina, for an aggregate of 266,666 shares.
The Company was introduced to Victory and WEC by William Forster. In
connection with Mr. Forster's introduction, the Company paid Mr. Forster a
finder's fee of $45,000 and issued to two of the selling stockholders, as
designated by Mr. Forster, warrants to purchase up to 175,000 shares of the
Company's Common Stock at an exercise price of $75.00 per share. This prospectus
may be used in connection with the transfer of the shares that will be issued if
the warrants are exercised. For a description of these warrants, see below.
"DESCRIPTION OF SECURITIES".
Except as described above, during the fiscal year ended August 31, 1998,
there were no transactions between the Company and its directors, executive
officers or known holders of greater than five percent of the Company's Common
Stock in which the amount involved exceeded $60,000 and in which any of the
foregoing persons had or will have a material interest.
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 30,000,000 shares of $.001 par
value Common Stock. The Company had 9,421,470 shares of Common Stock issued and
outstanding as of April 9, 1999, and these outstanding shares were held by
approximately 1,200 stockholders. The Company also had outstanding $2,500,000 of
convertible promissory notes (the "Notes") held by 56 Note holders. The Notes
are automatically convertible into Series A Preferred Stock at such time, if
any, that the Company's stockholders approve an amendment to the Company's
Certificate of Incorporation to provide for preferred stock. There also are
outstanding warrants to purchase 175,000 shares of Common Stock that are held by
two holders. The following is a description of the Company's securities.
Common Stock
Each share of the Common Stock is entitled to share equally with each other
shares of Common Stock in dividends from sources legally available therefore,
when, as, and if declared by the Board of Directors and, upon liquidation or
dissolution of the Company, whether voluntary or involuntary, to share equally
in the assets of the Company that are available for distribution to the holders
of the Common Stock. Each holder of Common Stock of the Company is entitled to
one vote per share for all purposes, except that in the election of directors,
each holder shall have the right to vote such number of shares for as many
persons as there are directors to be elected. Cumulative voting shall not be
allowed in the election of directors or for any other purpose, and the holders
of Common Stock have no preemptive rights, redemption rights or rights of
conversion with respect to the Common Stock. All outstanding shares of Common
Stock and all shares underlying the Warrants when issued will be fully paid and
nonassessable by the Company. The Board of Directors is authorized to issue
additional shares of Common Stock within the limits authorized by the Company's
Certificate Of Incorporation and without stockholder action.
All shares of Common Stock have equal voting rights and voting rights are
not cumulative. The holders of more than 50 percent of the shares of Common
Stock of the Company could, therefore, if they chose to do so and unless subject
to a voting agreement to the contrary, elect all the directors of the Company.
The Company has not paid any cash dividends since its inception.
The Company has reserved a sufficient number of shares of Common Stock for
issuance upon the exercise of options under the Company's 1997 Stock Option
Plan.
28
<PAGE>
Notes
In November 1998, the Company completed the sale of convertible promissory
notes (the "Notes") in the total amount of $2,500,000 in a private placement
transaction pursuant to exemptions from federal and state registration
requirements.
The Notes will automatically convert into shares of Series A Preferred
Stock (the "Series A Preferred") at the rate of one share for each $100
principal amount of Notes if the Series A Preferred is approved by stockholders
prior to April 26, 1999. The Series A Preferred is convertible into Common Stock
at the rate of one share of Common Stock for each $.60 of the amount of the
Series A Preferred. If the Series A Preferred is not issued by April 26, 1999
(which requires stockholder approval to authorize a class of preferred stock),
the Note holders have the right to require that Notes and accrued interest be
paid on demand or to convert the Notes into Common Stock at the rate of one
share of Common Stock for each $.30 of principal amount of Notes rather than the
conversion rate of one share of Common Stock for each $.60 of face amount of the
Series A Preferred. The full principal amount of the Notes and accrued interest
at the rate of 10 percent per year is due on October 26, 1999 if the Notes have
not been converted into Series A Preferred or Common Stock prior to that time.
The Company is required to make semi-annual interest payments on the Notes
beginning on the date that is six months from the date of each Note until the
Notes are repaid. The Company has the right in its discretion to pay the
interest portion of the Notes with Common Stock at a rate based on the weighted
average trading price of the Common Stock for 45 days prior to the interest
payment date.
Series A Preferred Stock
If the Company's stockholders approve the amendment of the Company's
Certificate of Incorporation to authorize preferred stock, the Company will
issue 25,000 shares of Preferred Stock designated as the "Series A Preferred
Stock" (the "Series A Preferred") to holders of the Notes. The following is a
summary of the rights of the Series A Preferred:
* Each share of Series A Preferred will have a face value of $100 per
share.
* An annual dividend of 10 percent will be payable on the Series A
Preferred semi-annually. The payment will be made either in cash or in
Common Stock, at the option of the Company. If paid with Common Stock,
the Common Stock will be issued at a rate based on the weighted
average trading price of the Common Stock.
* The Series A Preferred shall be convertible, in whole or in part, into
Common Stock at the rate of one share of Common Stock for each $.60 of
face value of Series A Preferred (or 166.67 shares of Common Stock for
each $100 face amount share of Series A Preferred). The conversion
right may be exercised at any time and from time to time.
* The Company has the right to require holders to convert their Series A
Preferred into Common Stock in the following circumstances:
* The Company has the right to require that one-third of the
outstanding Series A Preferred be converted at any time after one
year from issuance provided that the market value of the
Company's Common Stock is $2.40 per share, based on a 45 day
weighted average trading price.
29
<PAGE>
* The Company has the right to require that two-thirds of the
outstanding Series A Preferred be converted two years from
issuance provided that the market value of the Common Stock is
$3.60 per share.
* The Company has the right to require all of the outstanding
Series A Preferred be converted beginning at any time after two
years from issuance provided that the market value of the Common
Stock is $4.80 per share.
* The Company shall have the right, beginning two years from the
issuance, to require that all the outstanding Series A Preferred
be converted if the Corporation has accumulated retained earnings
equal to or greater than $3,750,000.
* The holders of the Series A Preferred, as a separate class, have the
right to elect two members of the Board of Directors of the Company
when 10,000 or more shares of Series A Preferred are outstanding. If
the Board of Directors is increased to a number greater than six, the
holders of the Series A Preferred may elect one-third of the total
number of directors when 10,000 or more shares are outstanding. When
more than 5,000 shares but less than 10,000 shares of Series A
Preferred are outstanding, the holders of Series A Preferred have the
right to elect one member of the Board of Directors. If the Board of
Directors is increased to a number greater than six, the holders of
the Series A Preferred may elect one-sixth of the total number of
directors when more than 5,000 shares but less an 10,000 shares are
outstanding.
Warrants
In connection with the sale of the Notes, the Company issued warrants to
purchase up to 175,000 shares of the Company's Common Stock at an exercise price
of $.75 per share. All of the warrants currently are exercisable and all of them
expire on October 26, 2003. The Company has the right to repurchase some or all
of the warrants before that time, depending on whether the trading price of the
Company's Common Stock meets or exceeds certain goals. See also, "TRANSACTIONS
BETWEEN THE COMPANY AND RELATED PARTIES-Private Placement Of Notes".
Delaware Anti-Takeover Law
Generally, Section 203 of the Delaware General Corporation Law ("GCL"), to
which the Company is subject, prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to the date of the business
combination, the transaction is approved by the board of directors of the
corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85 percent of the outstanding voting stock, or (iii) on or after such
date the business combination is approved by the board and by the affirmative
vote of at least 66 2/3 percent of the outstanding voting stock which is not
owned by the interested stockholder. A "business combination" includes a merger,
asset sale and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15 percent or
more of the corporation's voting stock.
Transfer Agent And Registrar
The transfer agent and registrar of the Company is U.S. Stock Transfer
Corporation.
30
<PAGE>
INACTIVE TRADING OF THE COMMON STOCK
Although the Company's Common Stock is publicly held, there historically
has not been an active trading market for the Common Stock. See "RISK FACTORS -
Inactive Trading Of The Common Stock; Possible Volatility Of Stock Price".
To the extent that there is trading in the Company's Common Stock, of which
there is no assurance, the Common Stock trades in the over-the-counter market
and is quoted on the OTC Bulletin Board. It is not quoted on the NASDAQ system
or any exchange. The closing sale price for the Common Stock on April 9, 1999,
was $2.25. It should be assumed that even with this OTC Bulletin Board price
quote, there is an extremely limited trading market - and very little liquidity
- - for the Company's Common Stock.
SELLING SECURITY HOLDERS AND PLAN OF DISTRIBUTION
This prospectus concerns the transfer by the selling stockholders of up to
5,108,334 shares of Common Stock. These shares consist of the following:
* Up to 4,166,668 shares of Common Stock that may be issued to certain
selling stockholders when they convert Notes purchased from the
Company.
* Up to 500,000 shares that may be issued to pay interest on the Notes
or to pay dividends on the Series A Preferred that is to be issued
upon the conversion of the notes.
* 266,666 shares issued in exchange for interests in oil and gas leases
and seismic data to the Company.
* Up to 175,000 shares that may be issued to two of the selling
stockholders when they exercise warrants to purchase Common Stock.
Additional shares may be issued to the selling stockholders to comply with
anti-dilution provisions of the Notes and the Series A Preferred. These
additional shares also may be sold by the selling stockholders under this
prospectus. The selling stockholders may transfer their Common Stock at the
prices that they are able to obtain in the market or in negotiated transactions.
The Company will not receive any proceeds form the transfer of the Common Stock
by the selling stockholders.
It is anticipated that the selling stockholders will offer the Common Stock
in direct sales to private persons and in open market transactions. The selling
stockholders may offer the shares to or through registered broker-dealers who
will be paid standard commissions or discounts or other compensation by the
selling stockholders. The selling stockholders also may pledge as collateral for
loans the Notes and/or Series A Preferred and/or Common Stock to be issued upon
conversion of those securities. This prospectus may be used by the lender to
receives the pledge of those securities to sell shares of Common Stock if a loan
is not repaid. The selling stockholders have informed the Company that they have
not entered into any underwriting arrangement or other agreements with brokers
to transfer any or all of the Common Stock offered under this prospectus.
The following table sets forth the name of each selling stockholder,
the number of shares of Common Stock held by the selling stockholders before
this offering (including shares issuable upon the conversion of the Notes), the
number of shares of Common Stock to be sold by the selling stockholders, and the
number of shares owned by the selling stockholders after this offering. None of
the selling stockholders has held any position or office, or had any material
relationship with the Company or its affiliates in the past three years, except
as disclosed in "TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES". For
additional information concerning the beneficial ownership of shares by certain
of the selling stockholders, see "BENEFICIAL OWNERS OF SECURITIES".
31
<PAGE>
<TABLE>
<CAPTION>
Number Of
Shares Of Number Of Number Of
Common Stock Shares To Be Shares Owned
Name Owned Before Offered After Offering
Offering (1) (1)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Victory Oil Company 1,873,333 1,773,333 100,000
- -------------------------------------------------------------------------------------------
Whittier Energy Company 80,000 80,000 0
- -------------------------------------------------------------------------------------------
Catalina Properties Corporation 80,000 80,000 0
- -------------------------------------------------------------------------------------------
Adventure Seekers Travel, Inc. 66,667 66,667 0
- -------------------------------------------------------------------------------------------
S.L. Hutchison 100,000 100,000 0
- -------------------------------------------------------------------------------------------
Dan T. Reiner 416,667 416,667 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company, 145,000 145,000 0
Trustee, Laura-Lee Woods
UDT 2/15/66
- -------------------------------------------------------------------------------------------
Crown Hill Trust 416,667 416,667 0
- -------------------------------------------------------------------------------------------
Rubar Colorado, Inc. 166,667 166,667 0
- -------------------------------------------------------------------------------------------
Victor Frandsen 166,667 166,667 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company, 28,000 28,000 0
Trustee, Laura-Lee Whittier
Woods UDT 12/30/82
- -------------------------------------------------------------------------------------------
Whittier Trust Company, 48,000 48,000 0
Trustee, Leland Whittier
Woods UDT 12/30/82
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Laure Louise Woods
UDT 9/30/66 5,500 5,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Laure Louise Woods
UDT 12/30/82 48,000 48,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Kimberly Ann Osborn
UDT 12/30/82 7,000 7,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Marcia Woodward
Hodge UDT 2/15/66 50,000 50,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Brett Edward Hodges
UDT 12/30/82 18,500 18,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Sharon Whittier
Hodges UDT 12/30/82 18,000 18,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Winifred Woodward
Rhodes 2/15/66 60,000 60,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Bryce Rhodes
UDT 12/30/82 14,500 14,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Joanne W. Blokker
UDT 2/15/66 9,000 9,000 0
- -------------------------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Joanne W. Blokker
UDT 12/22/66 10,400 10,400 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Johan Frederick
Blokker UTD 12/30/82 3,000 3,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Deborah Ann Solaini
UDT 12/30/82 3,500 3,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Joan Ellen Solaini
UDT 12/30/82 4,000 4,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Diane K. Solaini
UDT 12/30/82 4,000 4,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Anne E. Wright
UDT 2/16/66 5,000 5,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Anne E. Wright
UDT 12/22/66 7,000 7,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Mary E. Hook
UDT 2/15/66 5,000 5,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Trustee, Mary K. Hook
UDT 12/22/66 7,700 7,700 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Lucy Whittier
UDT 12/30/82 22,000 22,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Peter Paul
Whittier UDT 2/15/66 45,500 45,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Peter Paul
Whittier UDT 12/30/82 7,500 7,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Cheyenna
Lynn Whittier UDT 12/30/82 4,200 4,200 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Amanda W.
Duff UDT 12/30/82 8,100 8,100 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Paul Whittier
Duff UDT 12/30/82 7,500 7,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Brian M.
Hodges Trust 82 89,000 89,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Brian Mellor
Hodges UDT 12/30/82 10,000 10,000 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Emery Wood
Rhodes UDT 12/30/82 9,500 9,500 0
- -------------------------------------------------------------------------------------------
33
<PAGE>
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Adam Jess
Rhodes UDT 12/30/82 9,500 9,500 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Dominique
Blokker UDT 12/30/82 3,600 3,600 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Donna Wynne
Solaini 12/30/82 3,700 3,700 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Donald
Andrews Whittier UDT 12/30/82 3,700 3,700 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Brian Edwin
Whittier UDT 12/30/82 3,700 3,700 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Gale Roberts
Whittier UDT 12/30/82 3,700 3,700 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Trustee, Donja
Blokker UDT 12/30/82 3,700 3,700 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Agent, MHW Corp Bryce
Rhodes 13,935 13,935 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Agent, MHW Corp
Terry Joyner 13,900 13,900 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Agent, MHW Corp Adam
Rhodes 13,900 13,900 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Agent, MHW Corp.
Emery Rhodes 13,900 13,900 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Agent, MHW Corp Brett
Hodges 13,900 13,900 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company,
Agent, MHW Corp Sharon
Bradford 13,900 13,900 0
- -------------------------------------------------------------------------------------------
Whittier Trust Company of
Nevada, Agent, MHW Corp
Brian Hodges 13,900 13,900 0
- -------------------------------------------------------------------------------------------
Exploration Capital Partners
Limited Partnership 166,667 166,667 0
- -------------------------------------------------------------------------------------------
Alan C. Johnson and Craig C.
Johnson, Trustees of ECJ Gift
Trust dated Decemember 20, 1994 41,667 41,667 0
- -------------------------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------------------------------
Eric C. Johnson and Craig C.
Johnson, Trustees of the CCJ
Gift Trust dated December 20, 1994 41,667 41,667 0
- -------------------------------------------------------------------------------------------
Eric C. Johnson and Craig C.
Johnson, Trustees of the ALJ
Gift Trust dated December 20, 1994 41,667 41,667 0
- -------------------------------------------------------------------------------------------
Eric C. Johnson and Craig C.
Johnson, Trustees of the ACJ
Gift Trust dated December 20, 1994 41,667 41,667 0
- -------------------------------------------------------------------------------------------
Kerlin Capital Group, LLC (2) 25,000 25,000 0
- -------------------------------------------------------------------------------------------
Greyledge Mojave LLC (2) 150,000 150,000 0
- ------------------------------------------------------------------------------------------
Shares that may be issued to
pay interest or dividends (3) 500,000 500,000 0
- -------------------------------------------------------------------------------------------
TOTALS 5,208,334 5,108,334 100,000
- -------------------------------------------------------------------------------------------
</TABLE>
- -------------
(1) The number of shares of Common Stock to be sold assumes that all of the
Notes are converted into Series A Preferred Stock and that all of the
Series A Preferred Stock is then converted into Common Stock, and that the
selling stockholders sell all the shares of Common Stock received from the
conversion.
(2) The number of shares to be sold by these two selling stockholders assumes
that they exercise all of their warrants to purchase common stock, and that
they sell all of the Common Stock received from the exercise of the
warrants.
(3) The Company is registering the transfer of up to 500,000 shares of Common
Stock that may be issued to the selling stockholders as payment of accrued
interest on the Notes or as dividends on the Series A Preferred Stock. The
number of shares to be issued will not be determined until the time, if
any, that the Company elects to make payments using Common Stock.
SECURITIES AND EXCHANGE COMMISSION POSITION
ON CERTAIN INDEMNIFICATION
Pursuant to Delaware law, the Company's Board of Directors has the power to
indemnify officers and directors, present and former, for expenses incurred by
them in connection with any proceeding they are involved in by reason of their
being or having been an officer or director of the Company. The person being
indemnified must have acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company. The
Company's Bylaws grant this indemnification to the Company's officers and
directors.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
Patton Boggs LLP, Denver, Colorado, acted as counsel for the Company in
connection with this offering, including the validity of the issuance of the
securities offered hereby.
35
<PAGE>
EXPERTS
The audited financial statements of the Company appearing in this
Prospectus have been examined by Wheeler Wasoff, P.C., independent certified
public accountants, as set forth in their report appearing elsewhere herein, and
are included in reliance upon such report and upon the authority of said firm as
experts in accounting and auditing.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS AND
CAUTIONARY STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act Of 1933, as amended (the "Securities Act"),
and Section 21E of the Exchange Act. All statements other than statements of
historical fact included in this Prospectus, including without limitation the
statements under "PROSPECTUS SUMMARY", "RISK FACTORS", "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", and "BUSINESS
AND PROPERTIES" regarding the Company's financial position, business strategy,
plans and objectives of management of the Company for future operations and
capital expenditures, are forward-looking statements. Although the Company
believes that the expectations reflected in the forward-looking statements and
the assumptions upon which the forward-looking statements are based are
reasonable, it can give no assurance that such expectations will prove to have
been correct.
Additional statements concerning important factors that could cause actual
results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed in the "RISK FACTORS" section and elsewhere in this
Prospectus. All written and oral forward-looking statements attributable to the
Company or persons acting on its behalf subsequent to the date of this
Prospectus are expressly qualified in their entirety by the Cautionary
Statements.
FINANCIAL INFORMATION
36
<PAGE>
Index To Financial Statements
Independent Auditor's Report F-2
Balance Sheets
August 31, 1997 and 1998 F-3
Statements of Operations
Period from Inception (May 31, 1996) to
December 31, 1996, Eight Months Ended
August 31, 1997 and Year Ended August 31, 1998 F-4
Statements of Members'/Stockholders' Equity
Period from Inception (May 31, 1996) to
December 31, 1996, Eight Months Ended
August 31, 1997 and Year Ended August 31, 1998 F-5
Statements of Cash Flows
Period from Inception (May 31, 1996) to
December 31, 1996, Eight Months Ended
August 31, 1997 and Year Ended August 31, 1998 F-6 - F-7
Notes to Financial Statements F-8 - F-17
Quarterly Financial Statements
- ------------------------------
Balance Sheets as of November 30, 1998
and August 31, 1998 (Unaudited) FQ-1
Statements of Operations for the Quarters Ended
November 30, 1998 and November 30, 1997 (Unaudited) FQ-2
Statements of Cash Flows for the Quarters Ended
November 30, 1998 and November 30, 1997 (Unaudited) FQ-3
Notes to Financial Statements FQ-4
Summary of Significant Accounting Policies FQ-4
F - 1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
PYR ENERGY CORPORATION
We have audited the accompanying balance sheets of PYR Energy Corporation (a
development stage company) as of August 31, 1997 and 1998 and the related
statements of operations, members'/stockholders' equity and cash flows for the
period from inception (May 31, 1996) to December 31, 1996, for the eight months
ended August 31, 1997 and for the year ended August 31, 1998. 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 generally accepted auditing
standards. 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 PYR Energy Corporation as of
August 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from inception (May 31, 1996) to December 31, 1996, for the eight
months ended August 31, 1997 and for the year ended August 31, 1998 in
conformity with generally accepted accounting principles.
WHEELER WASOFF, P.C.
Denver, Colorado
October 26, 1998, except for Note 10(c)
as to which the date is November 23, 1998.
F - 2
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
August 31, August 31,
1997 1998
---- ----
CURRENT ASSETS
Cash $ 1,432,281 $ 373,100
Accounts receivable 10,000 --
Prepaid expenses 4,196 16,897
----------- -----------
Total Current Assets 1,446,477 389,997
----------- -----------
PROPERTY AND EQUIPMENT, at cost 339,547 2,546,059
----------- -----------
OTHER ASSETS 3,642 3,546
----------- -----------
$ 1,789,666 $ 2,939,602
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 60,064 $ 44,389
Accrued property exploration and
seismic costs 10,184 1,282,500
Current portion of capital lease obligation -- 1,441
----------- -----------
Total Current Liabilities 70,248 1,328,330
----------- -----------
CAPITAL LEASE OBLIGATION -- 2,661
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized 30,000,000 shares
Issued and outstanding 9,154,804 shares 9,155 9,155
Capital in excess of par value 1,768,088 1,768,088
Deficit accumulated during the development stage (57,825) (168,632)
----------- -----------
1,719,418 1,608,611
----------- -----------
$ 1,789,666 $ 2,939,602
=========== ===========
The accompanying notes are an integral part of the financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
Inception Eight Months Year from
(May 31, 1996) Ended Ended Inception to
to December 31, August 31, August 31, August 31,
1996 1997 1998 1998
---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C>
Consulting fees $ 37,528 $ 80,000 $ 10,000 $ 127,528
Interest -- 5,596 36,145 41,741
----------- ----------- ----------- -----------
37,528 85,596 46,145 169,269
----------- ----------- ----------- -----------
OPERATING EXPENSES
General and administrative 18,518 125,161 675,245 818,924
Dry hole impairment -- -- 15,000 15,000
Interest -- 351 488 839
Depreciation and amortization 47 1,004 22,416 23,467
----------- ----------- ----------- -----------
18,565 126,516 713,149 858,230
----------- ----------- ----------- -----------
OTHER INCOME
Gain on sale of oil and gas prospects -- -- 556,197 556,197
----------- ----------- ----------- -----------
18,963 (40,920) (110,807) (132,764)
INCOME APPLICABLE TO
PREDECESSOR LLC (Note 1) (18,963) (16,905) -- (35,868)
----------- ----------- ----------- -----------
NET (LOSS) $ -- $ (57,825) $ (110,807) $ (168,632)
=========== =========== =========== ===========
NET INCOME (LOSS) PER
COMMON SHARE - BASIC AND DILUTED (Note 2) $ .005 $ (.009) $ (.012) $ (.026)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (Note 2) 4,000,000 4,644,351 9,154,804 6,481,943
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F - 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF MEMBERS'/STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEAR ENDED AUGUST 31, 1998
Deficit
Accumulated
Common Stock Capital in During the
Members' ------------------------- Excess of Developmental
Equity Shares Amount Par Value Stage
------ ------ ------ --------- -----
<S> <C> <C> <C> <C> <C>
Inception, May 31, 1996 $ -- -- $ -- $ -- $ --
Initial member contributions - cash 5,000 -- -- -- --
Member contribution- services 12,000 -- -- -- --
Distributions to members (24,000) -- -- -- --
Net income 18,963 -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 11,963 -- -- -- --
Member contributions - cash 23,000 -- -- -- --
Member contribution - services 24,000 -- -- -- --
Distributions to members (42,000) -- -- -- --
Net income - January 1, 1997 to August 5, 1997 16,905 -- -- -- --
Issuance of common stock to members of PYR Energy, --
LLC upon merger ($.008 per share) (33,868) 4,000,000 4,000 29,868 --
Recapitalization of shares issued by Mar prior to merger -- 1,059,804 1,060 (724) --
Sales of common stock pursuant to private placement at
$.25 per share -- 2,095,000 2,095 521,655 --
Sale of common stock pursuant to private placement at
$.75 per share -- 2,000,000 2,000 1,498,000 --
Costs of private placements offerings -- -- -- (280,711) --
Net (loss) August 6, 1997 to August 31, 1997 -- -- -- -- (57,825)
----------- ----------- ----------- ----------- -----------
Balance, August 31, 1997 -- 9,154,804 9,155 1,768,088 (57,825)
Net (loss) -- -- -- -- (110,807)
----------- ----------- ----------- ----------- -----------
Balance, August 31, 1998 $ -- 9,154,804 $ 9,155 $ 1,768,088 $ (168,632)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F - 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Inception Eight Months Year
(May 31, 1996) Ended Ended Cumulative
to December 31, August 31, August 31, Amounts from
1996 1997 1998 Inception
---- ---- ---- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ 18,963 $ (40,920) $ (110,807) $ (132,764)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization 47 1,004 22,416 23,467
Contributed services 12,000 24,000 -- 36,000
Gain on sale of oil and gas prospects -- -- (556,197) (556,197)
Dry hole impairment -- -- 15,000 15,000
Changes in assets and liabilities
(Increase) decrease in accounts receivable (527) (9,473) 10,000 --
(Increase) in prepaids -- (2,591) (12,700) (15,291)
Increase (decrease) in accounts payable 527 45,103 (15,675) 29,955
Increase (decrease) in accrued expenses -- 10,183 (10,183) --
Other (474) (3,277) -- (3,751)
----------- ----------- ----------- -----------
Net cash provided (used) by operating activities 30,536 24,029 (658,146) (603,581)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for furniture and equipment -- (29,481) (43,407) (72,888)
Cash paid for undeveloped oil and gas properties -- (298,178) (1,406,613) (1,704,791)
Proceeds from sale of oil and gas properties -- -- 1,050,078 1,050,078
----------- ----------- ----------- -----------
Net cash (used) in investing activities -- (327,659) (399,942) (727,601)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Members capital contributions 5,000 23,000 -- 28,000
Distributions to members (24,000) (42,000) -- (66,000)
Cash from short-term borrowings -- 285,000 -- 285,000
Repayment of short-term borrowings -- (285,000) -- (285,000)
Proceeds from sale of common stock -- 2,023,750 -- 2,023,750
Cash paid for offering costs -- (280,711) -- (280,711)
Cash received upon recapitalization and merger -- 336 -- 336
Payments on capital lease -- -- (1,093) (1,093)
----------- ----------- ----------- -----------
Net cash (used) provided by financing activities (19,000) 1,724,375 (1,093) 1,704,282
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 11,536 1,420,745 (1,059,181) 373,100
CASH, BEGINNING OF PERIODS -- 11,536 1,432,281 --
----------- ----------- ----------- -----------
CASH, END OF PERIODS $ 11,536 $ 1,432,281 $ 373,100 $ 373,100
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements
F - 6
</TABLE>
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUED)
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEAR ENDED AUGUST 31, 1998
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the eight months ended August 31, 1997 the Company paid cash for
interest on short term borrowings of $351.
During the year ended August 31, 1998 the Company paid cash for interest of
$488 on a capital lease.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In August 1997, 4,000,000 shares of common stock were issued to the members
of PYR Energy, LLC ("PYR LLC") in exchange for 100 percent of the ownership
interests in PYR LLC, for which the net members' equity in PYR LLC was
$33,868. These shares were issued pursuant to a plan of reorganization and
merger effective August 6, 1997 (Notes 1 and 3).
During 1996 and 1997 the President of the Company performed services for
PYR LLC valued at $12,000 and $24,000, respectively. The value of these
services was charged to members' equity as a non-cash capital contribution.
During the year ended August 31, 1998, the Company entered into a capital
lease obligation of $5,195 for office equipment.
The accompanying notes are an integral part of the financial statements.
F - 7
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND BUSINESS COMBINATION
PYR Energy Corporation (the "Company"), is an independent energy company
engaged in the exploration and acquisition of crude oil and natural gas
reserves in the Western United States, including California, and is
considered a development stage company as defined by Statement of Financial
Accounting Standards (SFAS) No. 7. The Company's predecessor, Mar Ventures
Inc. ("Mar"), was incorporated under the laws of the State of Delaware on
March 27, 1996 for the purpose of producing and marketing traditional
television programming and marketing its film library. Mar was a public
company which had no significant operations as of July 31, 1997. On August
6, 1997 Mar acquired all the interests in PYR Energy LLC ("PYR LLC") (a
Colorado Limited Liability Company organized on May 31, 1996), a
development stage company as defined by SFAS No. 7. PYR LLC, an independent
exploration company, was engaged in the acquisition of oil and gas
properties for exploration and exploitation in the Rocky Mountain region
and California. As of August 31, 1997 PYR LLC had acquired only
non-producing leases and acreage and no exploration had been commenced on
the properties. Effective August 6, 1997, Mar transferred to its former
president substantially all its assets and liabilities that were related to
its film library operations. The net assets of Mar exchanged pursuant to
the transaction with PYR LLC are as follows:
Cash $ 336
Assets 1,605
Liabilities (1,605)
-------
$ 336
=======
Upon completion of the acquisition of PYR LLC by Mar, PYR LLC ceased to
exist as a separate entity. Mar remained as the legal surviving entity and,
effective November 12, 1997, Mar changed its name to PYR Energy
Corporation. For financial reporting purposes, the business combination was
accounted for as an additional capitalization of Mar (a reverse acquisition
with PYR LLC as the acquirer). The accompanying financial statements as of
December 31, 1996 and August 31, 1997 and for the periods then ended are
those of PYR LLC. The operations of PYR LLC will be the only continuing
operations of the Company.
Prior to the business combination, Mar loaned $275,000 to PYR LLC for
amounts owed by PYR LLC with respect to its oil and gas operations. The
loan was eliminated in conjunction with the successful completion of the
combination of PYR LLC and Mar.
The Company is an exploration stage oil and gas company and as of August
31, 1998, has not earned any production revenue nor found proved reserves
on any of its properties. The Company's efforts, since August 1997, have
been in financing activities and the acquisition of unproven properties and
related seismic data. The Company has entered into participation and
farm-in agreements with industry partners on certain of its properties
pursuant to which these partners have acquired, for cash, interests in the
Company's properties. During the year ended August 31, 1998, drilling of
two test wells was commenced, with one well being plugged and abandoned and
the other suffering a blowout. (See Note 10 (c)).
F - 8
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND BUSINESS COMBINATION (CONTINUED)
The Company's ability to continue operations is dependent on finding proved
reserves, achieving positive cash flow from production revenue, conversion
of notes to Series A Preferred Stock (See Note 10 (a)) and/or obtaining
additional financing and the continuation of entering into agreements with
industry partners for the exploration and ultimate development of the
Company's oil and gas prospects. Although cash received from the sale of
convertible debt in October 1998 (See Note 10 (a)) may be sufficient to
sustain operations for the fiscal year ended August 31, 1999, management
intends to obtain additional funding for corporate operations and
exploration of properties by entering into agreements with industry
partners for sale and purchase of interests in the Company's oil and gas
prospects and participation in the exploration of these prospects.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Furniture and equipment is recorded at cost. Depreciation and amortization
of assets under capital lease is provided by use of the straight-line
method over the estimated useful lives of the related assets of three to
five years.
Expenditures for replacements, renewals, and betterments are capitalized.
Maintenance and repairs are charged to operations as incurred.
OIL AND GAS PROPERTIES
The Company follows the full cost method to account for its oil and gas
exploration and development activities. Under the full cost method, all
costs incurred which are directly related to oil and gas exploration and
development are capitalized and subjected to depreciation and depletion.
Depletable costs also include estimates of future development costs of
proved reserves. Costs related to undeveloped oil and gas properties may be
excluded from depletable costs until such properties are evaluated as
either proved or unproved. The net capitalized costs are subject to a
ceiling limitation. Gains or losses upon disposition of oil and gas
properties are treated as adjustments to capitalized costs, unless the
disposition represents a significant portion of the Company's proved
reserves. A separate cost center is maintained for expenditures applicable
to each country in which the Company conducts exploration and/ or
production activities.
Undeveloped oil and gas prospects consist of leases and acreage acquired by
the Company for its' exploration and development activities, including the
cost of seismic data acquisition and evaluation, and drilling costs for
exploration wells. The cost of these non-producing leases is recorded at
the lower of cost or fair market value.
F - 9
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has adopted SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of" which
requires that long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of SFAS
121 has not had an impact on the Company's financial statements, as the
Company has determined that no impairment loss for 1998 needs to be
recognized for applicable assets of continuing operations.
ORGANIZATION COSTS
Costs related to the organization of the Company have been capitalized and
are being amortized over a period of five years.
INCOME TAXES
The Company has adopted the provisions of SFAS No. 109, "Accounting for
Income Taxes". SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
PYR LLC was taxed as a Limited Liability Company until August 6, 1997, and
as such was not subject to federal and state income tax. Earnings and
losses through that date were included in the personal tax returns of its
members, and PYR LLC did not record an income tax provision.
At August 31, 1998, the Company had a net operating loss carryforward of
approximately $85,000 that may be offset against future taxable income
through 2013.
The Company has fully reserved the $21,000 tax benefit of operating loss
carryforwards, by a valuation allowance of the same amount, because the
likelihood of realization of the tax benefit cannot be determined. The
total tax benefit is attributable to 1997.
Temporary differences between the time of reporting certain items for
financial and tax reporting purposes consist primarily of exploration costs
on oil and gas properties.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F - 10
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME (LOSS) PER SHARE
(Loss) per common share at August 31, 1998 is computed based on the
weighted average number of common shares outstanding during the period then
ended. Common shares issued to the members of PYR LLC upon completion of
Mar's merger with PYR LLC (Note 1) are considered outstanding for all
periods presented. Convertible equity instruments, such as stock options
and warrants, are not considered in the calculation of net loss per share
as their inclusion would be antidilutive.
Income (loss) per share has been computed on a pro forma basis based on the
income (loss) of PYR LLC for the period from inception to December 31, 1996
and the eight months ended August 31, 1997 as if PYR LLC was a corporation
and not a limited liability company, which distributes its earnings and
losses to its members.
SHARE BASED COMPENSATION
In October 1995, SFAS No. 123 "Accounting for Stock-Based Compensation" was
issued. This new standard defines a fair value based method of accounting
for an employee stock option or similar equity instrument. This statement
gives entities a choice of recognizing related compensation expense by
adopting the new fair value method or to continue to measure compensation
using the intrinsic value approach under Accounting Principles Board (APB)
Opinion No. 25. The Company has elected to utilize APB No. 25 for
measurement; and will, pursuant to SFAS No. 123, disclose supplementally
the pro forma effects on net income and earnings per share of using the new
measurement criteria. During the eight months ended August 31, 1997, the
Company issued options to purchase shares of its common stock (Note 4). The
effect of this issuance on pro forma net income and earnings per share is
not material.
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers as cash
equivalents all highly liquid investments with a maturity of three months
or less at the time of purchase. On occasion, the Company has cash in banks
in excess of federally insured amounts. At August 31, 1997 and 1998, there
were no cash equivalents.
NEW TECHNICAL PRONOUNCEMENTS
In February 1997 SFAS No. 128, "Earnings Per Share" was issued effective
for periods ending after December 15, 1997. There is no impact on the
Company's financial statements from adoption of SFAS No. 128.
In February 1997 SFAS No. 129, "Disclosure of Information about Capital
Structure" was issued effective for periods ending after December 15, 1997.
The Company has adopted the disclosure provisions of SFAS No. 129 effective
with the fiscal year ended August 31, 1998.
In June 1997 SFAS No. 130, "Reporting Comprehensive Income", was issued for
fiscal years beginning after December 31, 1997, with earlier application
permitted. The Company has elected to adopt SFAS No. 130 effective with the
fiscal year ending August 31, 1999. Adoption of SFAS No. 130 is not
expected to have a material impact on the Company's financial statements.
F - 11
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1997 SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" was issued effective for fiscal years beginning after
December 31, 1997, with earlier application permitted. The Company has
elected to adopt SFAS No. 131 effective with the fiscal year ending August
31, 1999. Adoption of SFAS No. 131 is not expected to have a material
impact on the Company's financial statements.
In February 1998 SFAS No. 132, "Employers' Disclosure about Pensions and
Other Postretirement Benefits", was issued effective for fiscal years
beginning after December 15, 1997, with earlier application encouraged. The
Company has elected to adopt SFAS No. 132 effective with the fiscal year
ending August 31, 1999. Adoption of SFAS No. 132 is not expected to have a
material impact on the Company's financial statements.
In June 1998 SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued for fiscal years beginning after June 15,
1999. Adoption of SFAS No. 133 is not expected to have a material impact on
the Company's financial statements.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
August 31, August 31,
1997 1998
---- ----
Furniture and equipment $ 29,481 $ 72,888
Asset under capital lease -- 5,195
----------- -----------
29,481 78,083
Less accumulated depreciation
and amortization (941) (23,262)
----------- -----------
28,540 54,821
Undeveloped oil and gas prospects 311,007 2,491,238
----------- -----------
$ 339,547 $ 2,546,059
=========== ===========
During the year ended August 31, 1998, the Company charged to operations
$15,000 as an allocation of its cost basis in a dry hole in which it had a
carried working interest. This allocation was based on the Company's
estimate that this drill location had no future value. The Company reviews
and determines the cost basis of drilling prospects on a drilling location
basis.
Depreciation expense for the years ended August 31, 1997 and August 31,
1998 was $941 and $22,321, respectively.
F - 12
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 4 - CAPITAL LEASE OBLIGATION
Capitalized lease obligation at August 31, 1998 consists of a lease for
office equipment, repayable in monthly installments of $150 with interest
at 10.5%.
Maturity of this obligation is as follows:
Year ending August 31,
1999 $1,441
2000 1,616
2001 1,045
Future minimum payments on capitalized leases are as follows:
Year ending August 31,
1999 $1,803
2000 1,803
2001 1,062
------
4,668
Less amount representing interest 566
------
Present value of net minimum lease payments 4,102
Less current maturity 1,441
------
Long-term portion $2,661
======
NOTE 5 - COMMON STOCK
Effective August 6, 1997 Mar completed a merger with PYR LLC (Note 1). In
conjunction with the merger, the members of PYR LLC received 4,000,000
shares of common stock of Mar. These shares were recorded at the net member
equity of PYR LLC as of that date of $33,868. The 1,059,804 Mar shares
outstanding as of the date of merger were recapitalized to the net assets
of Mar of $336. For financial statement reporting purposes, this was
treated as a reverse acquisition whereby PYR LLC was considered the
surviving and reporting entity. For legal purposes, however, Mar remained
as the surviving entity, therefore the capital structure of the Company was
accordingly restated.
In July 1997, the Company completed the sale of common stock and warrants
pursuant to a private placement as follows:
* 2,095,000 units, at a price of $.25 per unit, consisting of 2,095,000
shares of common stock, warrants to purchase 1,047,500 shares of
common stock at an exercise price of $1.25 per share before October
31, 1997, and warrants to purchase 1,047,500 shares of common stock at
an exercise price of $1.75 per share before January 31, 1998.
Subsequent to the offering, each of the warrant expiration dates was
extended one or more times, and all the warrants ultimately expired
without having been exercised.
F - 13
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 5 - COMMON STOCK (CONTINUED)
In August 1997, the Company completed the sale of common stock and warrants
pursuant to a private placement as follows:
* 2,000,000 units, at a price of $.75 per unit, consisting of 2,000,000
shares of common stock, warrants to purchase 1,000,000 shares of
common stock at an exercise price of $1.25 per share before October
31, 1997, and warrants to purchase 1,000,000 shares of common stock at
an exercise price of $1.75 per share before January 31, 1998.
Subsequent to the offering, each of the warrant expiration dates was
extended one or more times, and all the warrants ultimately expired
without having been exercised.
Proceeds from these offerings were $523,750 and $1,500,000, respectively,
before costs of the offerings of $280,711.
NOTE 6 - STOCK OPTION PLAN
In August 1997, the Board of Directors approved the 1997 Stock Option Plan
(the "1997 Plan"). Pursuant to the 1997 Plan, the Company may grant options
to purchase 1,000,000 shares of the Company's common stock to key employees
and other persons who have or are contributing to the success of the
Company. The options granted pursuant to the 1997 Plan may be either
incentive options qualifying for beneficial tax treatment for the recipient
or non-qualified options. The 1997 Plan will be administered by the Option
Committee, which may consist of either (i) the Company's Board of
Directors, or (ii) a Committee, appointed by the Board of Directors, of two
or more non-employee directors. No option may be exercisable more than ten
years after the granting of the option, and no options may be granted under
the 1997 Plan after August 13, 2007. The exercise price of incentive
options granted can not be less than the fair market value of the
underlying common stock on the date the options are granted.
The status of outstanding options granted pursuant to the 1997 Plan was as
follows:
Number Weighted Weighted
of Average Average
Shares Exercise Price Fair Value
------ -------------- ----------
Options Outstanding - Inception -- -- --
Granted 171,000 $1.50 --
-------
Options Outstanding - August 31, 1997 171,000 $1.50 --
(None exercisable)
Expired (60,000)
Granted 135,000 $1.40 $ .31
-------
Options Outstanding - August 31, 1998 246,000 $1.46 $ .26
(37,000 exercisable) =======
F - 14
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 - STOCK OPTION PLAN (CONTINUED)
The Company has adopted the disclosure-only provisions of SFAS No. 123. Had
compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date consistent with the provisions of SFAS
No. 123, the Company's net loss and loss per share for 1998 would have been
increased to the pro forma amounts indicated below:
Net (loss) applicable to common stockholders - as reported $ (110,807)
===========
Net (loss) applicable to common stockholders - pro forma $ (124,555)
===========
(Loss) per share - as reported $ (.01)
===========
(Loss) per share - pro forma $ (.01)
===========
Weighted average fair value of options granted in 1998 $ .31
===========
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: dividend yield of 0%; expected volatility of
25% to 75%; discount rate of 5.50%; and expected lives of 3 to 5 years.
At August 31, 1998 the number of options exercisable was 37,000, the
weighted average exercise price of these options was $1.50, the weighted
average contractual life of the options was 5 years and the exercise price
was $1.50 per share.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has entered into a non-cancelable lease, as amended, for office
facilities. Minimum payments due under this lease are as follows:
Years ending August 31,
1999 $39,768
2000 39,768
2001 39,768
Rent expense was $0, $8,694 and $35,539 for the period from inception to
December 31, 1996, for the eight months ended August 31, 1997 and for the
year ended August 31, 1998, respectively.
The Company has acquired leases covering 2,080 acres in Wyoming from the
Bureau of Land Management ("BLM"). In order to maintain its rights to
explore these properties, the Company is obligated to pay the BLM a maximum
aggregate $3,120 annually for the undeveloped acres under lease. The amount
due has been paid for the lease period October 1, 1998 to September 30,
1999.
The Company entered into an agreement with Chevron U.S.A. Production
Company ("Chevron") for the Company to farm-in oil and gas prospects
located in the San Joaquin basin of California. The Company paid $275,000
upon execution of the agreement for certain rights including access to
certain proprietary 2D and 3D seismic data. The agreement provides for
exclusive rights to undertake oil and gas drilling and development
operations on lands owned in fee by Chevron. As part of the agreement, the
F - 15
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Company has an option to undertake the acquisition of additional 3D seismic
data and has agreed to drill a test well on a portion of the prospect
areas. In addition, as part of the agreement, the Company has agreed to
drill an additional test well on another portion of the prospect areas.
The Company may be subject to various possible contingencies which are
primarily from interpretations of federal and state laws and regulations
affecting the oil and gas industry. Although management believes it has
complied with the various laws and regulations, new rulings and
interpretations may require the Company to make adjustments.
NOTE 8 - RELATED PARTY TRANSACTIONS
In 1996 and 1997 the President of the Company performed services for PYR
LLC valued at $12,000 and $24,000, respectively. The value ascribed to
these services was charged to members' equity during each of the periods
ended December 31, 1996 and August 6, 1997 as a capital contribution.
In 1997 the Company paid an aggregate $14,000 in consulting fees to its
President and an entity owned by an officer of the Company; and borrowed an
aggregate $8,000 from two officers of the Company. The amount borrowed was
repaid with interest, at 8%, of $280 by August 31, 1997.
In 1998 the Company paid $43,530 for services provided to the Company by an
entity controlled by a former director of the Company.
NOTE 9 - FINANCIAL INSTRUMENTS
FAIR VALUE
The carrying amount reported in the balance sheet for cash, prepaid
expenses, accounts payable and accrued liabilities approximates fair value
because of the immediate or short-term maturity of these financial
instruments.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash. The Company maintains cash
accounts at one financial institution. At August 31, 1998, cash on deposit
at this financial institution exceeded federally insured amounts by
approximately $270,000. The Company periodically evaluates the credit
worthiness of financial institutions, and maintains cash accounts only in
large high quality financial institutions, thereby minimizing exposure for
deposits in excess of federally insured amounts.
NOTE 10 - SUBSEQUENT EVENTS
(a) In October 1998 the Company completed the sale of $2,300,000, of a
maximum $2,500,000, 10% convertible notes, due October 1999. The notes
are convertible into an aggregate 23,000 shares of a newly designed
Series A Preferred Stock of the Company. The Company must obtain
F - 16
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 10 - SUBSEQUENT EVENTS (CONTINUED)
shareholder approval for authorization of the Series A Preferred
Stock. If authorization is not obtained by April 1999, the note
holders may demand payment of principal and interest of the note, or
elect to convert the principal balance of the notes into shares of the
Company's common stock, at the rate of $.30 per share. In conjunction
with the sale of $1,500,000 of the notes, the Company agreed to pay a
finders fee consisting of $45,000 and warrants to purchase 175,000
shares of the Company's common stock at an exercise price of $.75 per
share for a period of five years.
(b) In October 1998 the Company issued an aggregate of 266,666 shares of
its common stock for assignment to the Company of certain undeveloped
oil and gas prospects in California, including oil and gas leases,
seismic data and intellectual property.
(c) On November 23, 1998, the Company's test well being drilled on its
East Lost Hills prospect suffered a blowout. The operator of the well
is attempting to get the blowout under control. If and when this is
achieved, the Company and the other working interest owners will
evaluate the situation and determine the manner for proceeding. The
financial accounting impact of this blowout, and any potential
environmental implications, will be reflected, pursuant to the
Company's accounting policies for oil and gas properties, during the
fiscal year ended August 31, 1999.
F - 17
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
11/30/98 8/31/98
(UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash $ 1,140,326 $ 373,100
Deposits and prepaid expenses 42,516 16,897
----------- -----------
Total Current Assets 1,182,842 389,997
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment, net 50,169 54,821
Undeveloped oil and gas prospects 2,935,023 2,491,238
----------- -----------
2,985,192 2,546,059
OTHER ASSETS, net 77,893 3,546
----------- -----------
$ 4,245,927 $ 2,939,602
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 80,070 $ 44,389
Accrued property exploration and seismic costs -- 1,282,500
Interest payable 22,959 --
Current portion of capital lease obligation 1,492 1,441
Convertible debentures 2,500,000 --
----------- -----------
Total Current Liabilities 2,604,521 1,328,330
----------- -----------
Capital lease obligation 2,265 2,661
----------- -----------
Total Liabilities 2,606,786 1,330,991
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized 30,000,000 shares
Issued and outstanding - 9,421,470 shares at
11/30/98 and 9,154,804 shares at 8/31/98 9,421 9,155
Capital in excess of par value 1,967,821 1,768,088
Deficit accumulated during the development stage (338,101) (168,632)
----------- -----------
1,639,141 1,608,611
----------- -----------
$ 4,245,927 $ 2,939,602
=========== ===========
FQ - 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative from
Inception -
Three Months Three Months 5/31/96 to
Ended 11/30/98 Ended 11/30/97 11/30/98
-------------- -------------- --------
REVENUES
<S> <C> <C> <C>
Consulting fees $ -- $ 10,000 $ 127,528
Interest 4,525 15,739 46,266
----------- ----------- -----------
4,525 25,739 173,794
----------- ----------- -----------
OPERATING EXPENSES
General and administrative 137,775 187,917 956,699
Dry hole impairment -- -- 15,000
Interest 29,832 -- 30,671
Depreciation and amortization 6,386 3,333 29,853
----------- ----------- -----------
173,993 191,250 1,032,223
----------- ----------- -----------
OTHER INCOME
Gain on sale of oil and gas properties -- -- 556,197
----------- ----------- -----------
(169,468) (165,511) (302,232)
INCOME APPLICABLE TO PREDECESSOR LLC -- -- (35,868)
----------- ----------- -----------
NET (LOSS) $ (169,468) $ (165,511) $ (338,100)
=========== =========== ===========
NET INCOME (LOSS) PER
COMMON SHARE - BASIC AND DILUTED $ (.018) $ (.018) $ (.050)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,243,693 9,154,804 6,718,846
=========== =========== ===========
FQ - 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
Three Months Three Months from Inception
Ended 11/30/98 Ended 11/30/97 to 11/30/98
-------------- -------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (169,468) $ (165,511) $ (302,232)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Gain on sale of assets -- -- (556,197)
Depreciation and amortization 6,386 3,333 29,853
Contributed services -- -- 36,000
Dry hole impairment -- -- 15,000
Changes in assets and liabilities
(Increase)/decrease in receivables -- 10,000 --
(Increase)/decrease in deposits and prepaids (25,619) (12,432) (40,910)
Increase/(decrease) in accounts payable 35,681 (8,232) 65,636
Increase/(decrease) in accrued and other liabilities 22,959 (5,684) 22,959
Other (91) -- (3,842)
----------- ----------- -----------
Net cash provided/(used) by operating activities (130,152) (178,526) (733,733)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of oil and gas interests -- -- 1,050,078
Cash paid for furniture and equipment (1,734) (11,935) (74,622)
Cash paid for undeveloped oil and gas assets (1,526,197) (139,024) (3,230,988)
----------- ----------- -----------
Net cash provided/(used) in investing activities (1,527,931) (150,959) (2,255,532)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Members capital contributions -- -- 28,000
Distributions to members -- -- (66,000)
Cash from short-term borrowings -- -- 285,000
Repayments of short-term borrowings -- -- (285,000)
Proceeds from sale of common stock -- -- 2,023,750
Cash paid for offering costs -- -- (280,711)
Cash received upon recapitalization and merger -- -- 336
Increase/(decrease) in convertible debentures 2,500,000 -- 2,500,000
Cash paid for deferred financing costs (74,346) -- (74,346)
Payments on capital lease (345) -- (1,438)
----------- ----------- -----------
Net cash (used) provided by financing activities 2,425,309 -- 4,129,591
----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH 767,226 (329,485) 1,140,326
CASH, BEGINNING OF PERIODS 373,100 1,432,281 --
----------- ----------- -----------
CASH, END OF PERIODS $ 1,140,326 $ 1,102,796 $ 1,140,326
=========== =========== ===========
FQ - 3
</TABLE>
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
November 30, 1998
The accompanying interim financial statements of PYR Energy Corporation (the
"Company") are unaudited. In the opinion of management, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for the interim period.
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Management believes the disclosures made are adequate to make the information
not misleading and recommends that these condensed financial statements be read
in conjunction with the financial statements and notes included in the Company's
Form 10-KSB as of August 31, 1998.
PYR Energy Corporation (formerly known as Mar Ventures Inc. ("Mar")) was
incorporated under the laws of the State of Delaware on March 27, 1996. Mar had
been a public company which had no significant operations as of July 31, 1997.
On August 6, 1997 Mar acquired all the interests in PYR Energy LLC ("PYR LLC")
(a Colorado Limited Liability Company organized on May 31, 1996), a development
stage company as defined by Statement of Financial Accounting Standards (SFAS)
No. 7. PYR LLC, an independent oil and gas exploration company, had been engaged
in the acquisition of oil and gas properties for exploration and exploitation in
the Rocky Mountain region and California. As of August 6, 1997 PYR LLC had
acquired only non-producing leases and acreage and no exploration had been
commenced on the properties. Upon completion of the acquisition of PYR LLC by
Mar, PYR LLC ceased to exist as a separate entity. Mar remained as the legal
surviving entity and, effective November 12, 1997, Mar changed its name to PYR
Energy Corporation.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS - For purposes of reporting cash flows, the Company
considers as cash equivalents all highly liquid investments with a maturity
of three months or less at the time of purchase. At November 30, 1998,
there were no cash equivalents.
FQ - 4
<PAGE>
PROPERTY AND EQUIPMENT - Furniture and equipment is recorded at cost.
Depreciation is provided by use of the straight-line method over the
estimated useful lives of the related assets of three to five years.
Expenditures for replacements, renewals, and betterments are capitalized.
Maintenance and repairs are charged to operations as incurred.
OIL AND GAS PROPERTIES - The Company follows the full cost method to
account for its oil and gas exploration and development activities. Under
the full cost method, all costs incurred which are directly related to oil
and gas exploration and development are capitalized and subjected to
depreciation and depletion. Depletable costs also include estimates of
future development costs of proved reserves. Costs related to undeveloped
oil and gas properties may be excluded from depletable costs until such
properties are evaluated as either proved or unproved. The net capitalized
costs are subject to a ceiling limitation. Gains or losses upon disposition
of oil and gas properties are treated as adjustments to capitalized costs,
unless the disposition represents a significant portion of the Company's
proved reserves. A separate cost center is maintained for expenditures
applicable to each country in which the Company conducts exploration and/or
production activities. Undeveloped oil and gas properties consists
primarily of leases and acreage acquired by the Company for its exploration
and development activities. The cost of these non-producing leases is
recorded at the lower of cost or fair market value. The Company has adopted
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of" which requires that long-lived assets
to be held and used be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS 121 has not had an impact on the
Company's financial statements, as the Company has determined that no
impairment loss through November 30, 1998 need to be recognized for
applicable assets of continuing operations.
ORGANIZATION COSTS - Costs related to the organization of the Company have
been capitalized and are being amortized over a period of five years.
INCOME TAXES - The Company has adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS 109 requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based
on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
FQ - 5
<PAGE>
------------------------------
Dealer Prospectus Delivery Obligation
Until (insert date), all dealers that
effect transactions in these securities,
whether or not participating in this
offering, may be required 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.
PYR ENERGY CORPORATION
5,108,334 Shares of Common Stock
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY ............... 1
RISK FACTORS ..................... 3
PRICE RANGE OF COMMON STOCK ...... 7
DIVIDEND POLICY .................. 8
BUSINESS AND PROPERTIES .......... 8
MANAGEMENT'S DISCUSSION AND ________________________
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ...... 18 SELLING STOCKHOLDER
MANAGEMENT ....................... 20 PROSPECTUS
EXECUTIVE COMPENSATION ........... 22 ________________________
BENEFICIAL OWNERS OF SECURITIES .. 24
TRANSACTIONS BETWEEN THE
COMPANY AND RELATED PARTIES .... 26
DESCRIPTION OF SECURITIES ........ 28
INACTIVE TRADING OF THE
COMMON STOCK ................... 31
SELLING SECURITY HOLDERS AND PLAN
OF DISTRIBUTION ................ 31
SECURITIES AND EXCHANGE
COMMISSION POSITION ON
CERTAIN INDEMNIFICATION ......... 35 April __, 1998
LEGAL MATTERS ..................... 35
EXPERTS ........................... 35
FINANCIAL INFORMATION ............. F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification Of Directors And Officers.
The Delaware General Corporation Law 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 that the person reasonably believed to be in or not
opposed to the best interests of the corporation.
In addition to the general indemnification section, Delaware law provides
further protection for directors under Section 102(b)(7) of the General
Corporation Law of Delaware. This section was enacted in June 1986 and allows a
Delaware corporation to include in its Certificate Of Incorporation a provision
that eliminates and limits certain personal liability of a director for monetary
damages for certain breaches of the director?s fiduciary duty of care, provided
that any such provision does not (in the words of the statute) do any of the
following:
"eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
section 174 of this Title [dealing with willful or negligent violation
of the statutory provision concerning dividends, stock purchases and
redemptions], or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate
or limit the liability of a director for any act or omission occurring
prior to the date when such provision becomes effective. . ."
The Board Of Directors is empowered to make other indemnification as
authorized by the Certificate Of Incorporation, Bylaws or corporate resolution
so long as the indemnification is consistent with the Delaware General
Corporation Law. Under the Company's Bylaws, the Company is required to
indemnify its directors, officers, and other representatives of the Company for
costs incurred by each of them in connection with any action, suit, or
proceeding brought by reason of their position as a director, officer, or
representative.
Item 25. Other Expenses Of Issuance And Distribution.
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection with
the registration of the securities being offered. The Selling Security Holders
will not pay any of the following expenses.
Registration and filing fee.......................... $4,494
Printing (1)......................................... $5,000
Accounting fees and expenses (1)..................... $2,500
Legal fees and expenses (1).......................... $10,000
Miscellaneous (1).................................... $ 3,006
Total(1) $25,000
- ------------
(1) Estimated
II-1
<PAGE>
Item 26. Recent Sales Of Unregistered Securities.
The Company was organized as a wholly owned subsidiary of Bexy
Communications, Inc., a Delaware corporation ("Bexy"). The Company issued
452,000 shares of Common Stock to Bexy in April 1996 in exchange for certain
assets of Bexy valued at approximately $110,000. The Company also assumed
certain liabilities of Bexy valued at approximately $84,000 in that transaction.
Those shares were issued in reliance on an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").
The Company issued 28,000 shares of Common Stock in August, 1996 to a
limited number of persons for services rendered to the Company valued at $2,800.
These shares were issued in reliance on an exemption from registration under
Section 4(2) of the Securities Act.
The Company issued 358,654 shares of Common Stock in December 1996 to a
former president and principal stockholder in satisfaction of a $46,625
liability owed by the Company to that former president. These shares were issued
in reliance on an exemption from registration under Section 4(2) of the
Securities Act.
The Company completed an offering to a limited number of offerees in July
1997 pursuant to an exemption from registration in accordance with Rule 506 of
Regulation D under the Securities Act. The Company sold in that offering an
aggregate of 2,095,000 units at $.25 per unit, with each unit consisting of one
share of Common Stock, a Class A Warrant, and a Class B Warrant.
The Company completed an offering to a limited number of offerees in August
1997 pursuant to an exemption from registration in accordance with Rule 506 of
Regulation D under the Securities Act. The Company sold in that offering an
aggregate of 2,000,000 units at $.75 per unit, with each unit consisting of one
share of Common Stock, a Class A Warrant, and a Class B Warrant.
The Company completed an offering to a limited number of offerees in
November 1998 pursuant to an exemption from registration in accordance with Rule
506 of Regulation D under the Securities Act. The Company sold in that offering
an aggregate of $2,500,000 of convertible promissory notes which are convertible
into shares of Series A Preferred Stock, which in turn are convertible into
shares of Common Stock.
Item 27. Exhibits.
The following is a complete list of Exhibits filed as part of this
Registration Statement, which Exhibits are incorporated herein.
Number Description
- ------ -----------
3.1 Certificate Of Incorporation filed with the Delaware Secretary Of
State on March 27, 1996 (1)
3.2 Certificate Of Amendment to the Certificate of Incorporation effective
as of November 12, 1997 filed with the Delaware Secretary Of State (5)
3.3 Bylaws (1)
4.1 Specimen Common Stock Certificate (4)
5.1 Opinion of Patton Boggs LLP concerning the legality of the securities
being registered
II-2
<PAGE>
10.1 Asset Transfer, Assignment and Assumption Agreement dated April 16,
1996 between the Registrant and Bexy Communications, Inc. (2)
10.2 Form of Purchase And Sale Agreement dated as of July 31, 1997 between
the Registrant and a member of PYR Energy, LLC(4)
10.3 Purchase And Sale Agreement effective as of August 6, 1997 between the
Registrant and Buddy Young (4)
10.4 1997 Stock Option Plan (3)
10.5 Convertible Note Purchase Agreement dated October 26, 1998 between the
Registrant and various investors(6)
23.1 Consent of Patton Boggs LLP (included in Opinion in Exhibit 5.1)
23.2 Consent of Wheeler Wasoff, P.C.
24.1 Power of Attorney (included in Part II of Registration Statement)
- -----------
(1) Incorporated by reference from the Company's Registration Statement on
Form 10-SB filed with the Securities And Exchange Commission ("SEC")
on June 18, 1996, File No. 0-20879.
(2) Incorporated by reference from the Company's Amendment No. 1 to
Registration Statement and Form 10-SB filed with the SEC on July 3,
1996, File No. 0-20879.
(3) Incorporated by reference from the Company's Preliminary Information
Statement filed with the SEC on October 8, 1997.
(4) Incorporated by reference from the Registrant's Registration Statement
on Form SB-2 filed with the SEC on October 24, 1997, File No.
333-38665.
(5) Incorporated by reference from the Registrant's Form 10KSB/A1 for the
year ended August 31, 1997.
(6) Incorporated by reference from Exhibit 2 to the Schedule 13D filed by
Victory Oil Company and other filing parties on November 5, 1998.
Item 28. Undertakings.
1. The Company hereby undertakes:
(a) to file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement:
II-3
<PAGE>
(1) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
Registration Statement (or the most recent post-effective amendment thereof);
and
(3) to include any additional or changed material information on
the plan of distribution.
(b) That for determining liability under the Securities Act of 1933,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering thereof;
(c) To file a post-effective amendment to remove from registration any
of the securities being registered which remain unsold at the end of the
offering.
3. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the option of the Securities And Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or a controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or a controlling person in connection with the securities
being registered, the Company 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 and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
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 of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Denver,
State of Colorado, on April 12, 1999.
PYR ENERGY CORPORATION
By: /s/ D. Scott Singdahlsen
---------------------------------
D. Scott Singdahlsen, Chief
Executive Officer
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, the
Registration Statement was signed by the following persons in the capacities and
on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ D. Scott Singdahlsen Chief Executive Officer; April 12, 1999
- ---------------------------- President and Chairman
D. Scott Singdahlsen Of the Board
/s/ Keith F. Carney
- ---------------------------- Director April 12, 1999
Keith F. Carney
/s/ D. Scott Singdahlsen* April 12, 1999
- ---------------------------- Director
Robert B. Suydam
/s/ Andrew P. Calerich Chief Financial Officer April 12, 1999
- ---------------------------- and Secretary
Andrew P. Calerich
- -------------
* As attorney-in-fact.
II-5
<PAGE>
EXHIBIT INDEX
The following is a complete list of Exhibits filed as part of this
Registration Statement, which Exhibits are incorporated herein.
Number Description
- ------ -----------
3.1 Certificate Of Incorporation filed with the Delaware Secretary Of
State on March 27, 1996 (1)
3.2 Certificate Of Amendment to the Certificate Of Incorporation effective
as of November 12, 1997 filed with the Delaware Secretary Of State (5)
3.3 Bylaws (1)
4.1 Specimen Common Stock Certificate (4)
5.1 Opinion of Patton Boggs LLP concerning the legality of the securities
being registered
10.1 Asset Transfer, Assignment and Assumption Agreement dated April 16,
1996 between the Registrant and Bexy Communications, Inc. (2)
10.2 Form of Purchase And Sale Agreement dated as of July 31, 1997 between
the Registrant and a member of PYR Energy, LLC (4)
10.3 Purchase And Sale Agreement effective as of August 6, 1997 between the
Registrant and Buddy Young (4)
10.4 1997 Stock Option Plan (3)
10.5 Convertible Note Purchase Agreement dated October 26, 1998 between the
Registrant and various investors (6)
23.1 Consent of Patton Boggs LLP (included in Opinion in Exhibit 5.1)
23.2 Consent of Wheeler Wasoff, P.C.
24.1 Power of Attorney (included in Part II of Registration Statement)
- --------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
10-SB filed with the Securities And Exchange Commission ("SEC") on June 18,
1996, File No. 0-20879.
(2) Incorporated by reference from the Company's Amendment No. 1 to
Registration Statement and Form 10-SB filed with the SEC on July 3, 1996,
File No. 0-20879.
(3) Incorporated by reference from the Company's Preliminary Information
Statement filed with the SEC on October 8, 1997.
II-6
<PAGE>
(4) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 filed with the SEC on October 24, 1997, File No. 333-38665.
(5) Incorporated by reference from the Registrant's Form 10KSB/A1 for the year
ended August 31, 1997.
(6) Incorporated by reference from Exhibit 2 to the Schedule 13D filed by
Victory Oil Company and other filing parties on November 5, 1998.
II-7
Patton Boggs LLP
1660 Lincoln Street
Suite 1900
Denver, Colorado 80264
(303) 830-1776
April 12, 1999
PYR Energy Corporation
1675 Broadway, Suite 1150
Denver, Colorado 80202
Gentlemen and Ladies:
We have acted as counsel for PYR Energy Corporation, a Delaware corporation
(the "Company"), in connection with preparation of the Company's Post-Effective
Amendment No. 1 to Form SB-2 (the "Registration Statement") under the Securities
Act of 1933, as amended, concerning registration of 5,108,334 shares of the
Company's $.001 par value common stock (the "Common Stock") by certain
stockholders of the Company (the "Selling Security Holders").
We have examined the Certificate Of Incorporation and the Bylaws of the
Company and the record of the Company's corporate proceedings concerning the
registration described above. In addition, we have examined such other
certificates, agreements, documents and papers, and we have made such other
inquiries and investigations of law as we have deemed appropriate and necessary
in order to express the opinion set forth in this letter. In our examinations,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, photostatic, or conformed copies and the
authenticity of the originals of all such latter documents. In addition, as to
certain matters we have relied upon certificates and advice from various state
authorities and public officials, and we have assumed the accuracy of the
material and the factual matters contained herein.
Subject to the foregoing and on the basis of the aforementioned
examinations and investigations, it is our opinion that the shares of Common
Stock being transferred by the Selling Security Holders as described in the
Registration Statement have been legally issued and are fully paid and
non-assessable.
We hereby consent (a) to be named in the Registration Statement and in the
prospectus that constitutes a part of the Registration Statement as acting as
counsel in connection with the offering, including with respect to the issuance
of securities offered in the offering; and (b) to the filing of this opinion as
an exhibit to the Registration Statement.
This opinion is to be used solely for the purpose of the registration of
the Common Stock and may not be used for any other purpose.
Very truly yours,
/s/ Patton Boggs LLP
PATTON BOGGS LLP
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Post Effective Amendment No. 1 to Registration
Statement No. 333-69847 of PYR Energy Corporation on Form SB-2 of our report
dated October 26, 1998, except for Note 10(c) as to which the date is November
23, 1998, relating to the financial statements of PYR Energy Corporation
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Wheeler Wasoff, P.C.
WHEELER WASOFF, P.C.
Denver, Colorado
April 12, 1999
