U.S. Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended August 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from to
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Commission File No. 0-20879
PYR ENERGY CORPORATION
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(Name of small business issuer in its charter)
Delaware 95-4580642
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1675 Broadway, Suite 1150, Denver, CO 80202
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (303) 825-3748
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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$.001 Par Value Common Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for the fiscal year ended August 31, 2000 were $165,411
The aggregate market value of the voting stock held by non-affiliates
computed based on the last sale price of such stock as of November 28, 2000, was
approximately $90,370,000.*
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of each of the issuer's classes of common
equity as of November 28, 2000 is as follows:
$.001 Par Value Common Stock 19,204,069
* Without asserting that any of the issuer's directors or executive officers, or
the entity that owns 1,732,599 shares of common stock and convertible preferred
stock that may be converted into 1,111,112 shares of common stock is an
affiliate, the shares of which they are beneficial owners have been deemed to be
owned by affiliates solely for this calculation.
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PART I
ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES
Overview
PYR Energy Corporation (the "Company" and "PYR") is a development stage
independent oil and gas exploration company whose strategic focus is the
application of advanced 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 leverage
its technical experience and expertise with seismic data to identify exploration
and exploitation projects with significant potential economic return. The
Company currently intends to participate in exploration projects as a
non-operating, working interest owner, sharing both risk and rewards with its
joint venture partners. The Company has and will continue to pursue exploration
opportunities in regions where the Company believes significant opportunity for
discovery of oil and gas exists. By reducing drilling risk through seismic
technology, the Company seeks to improve the expected return on investment in
its oil and gas exploration projects.
The Company's predecessor was founded in 1996 by two geoscientists with
extensive seismic and geological experience in the western United States. The
Company's employees have extensive experience in exploration, exploitation and
the application of advanced geophysical technologies. The Company's business
plan involves the following strategy:
Focus on high impact exploration plays in the western United States
o Under-exploited or under-explored mature basins
o Gain access to large, non or under-performing acreage positions
o Focus on play concepts that are expandable within a basin or region.
Use advanced seismic imaging, processing and visualization to reduce
drilling risk
o Seismic captures resolution of trapping geometry
Leverage technical expertise with outside capital resources
o Retain control of the pre-drill exploration process
o Retain sizable working interest in each prospect
o Use industry partners for local operating expertise
The Company was incorporated in March 1996 in the state of Delaware under
the name Mar Ventures Inc. Effective as of August 6, 1997, the Company purchased
all the ownership interests of PYR Energy, LLC, an oil and gas exploration
company. Also on that date, the Company issued units of its common stock and
common stock purchase warrants for approximately $1,700,000 net of fees and
commissions. The warrants subsequently expired without exercise. Effective as of
November 12, 1997, the Company changed its name to PYR Energy Corporation.
The Company's offices are located at 1675 Broadway, Suite 1150, Denver,
Colorado 80202. The telephone number is (303) 825-3748, telefax number is (303)
825-3768 and the Company's web site is www.pyrenergy.com.
Developments During Fiscal 2000
During the fiscal year ending August 31, 2000, the Company announced a
major natural gas discovery at its East Lost Hills exploration project. This
project dates back to May of 1997, when the Company and other working interest
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owners commenced drilling the Company's first exploration well - the Bellevue
#1-17. On November 23, 1998, the Bellevue #1-17 prospect well blew out and
ignited after having reached a depth of approximately 17,600 feet out of
targeted total depth of 19,000 feet. A relief well, the Bellevue #1-17R, began
drilling on December 18, 1998. On May 29, 1999 the relief well successfully
killed, and the operator plugged and abandoned, the original 1-17 well bore. The
Bellevue #1-17R was then used to successfully sidetrack a replacement well back
into the target reservoir. Concurrent with commencing completion operations on
the 1-17R well, Berkley Petroleum, Inc. (a wholly owned subsidiary of Berkley
Petroleum Corporation (TSE-"BKP") ("Berkley") of Calgary, Alberta, Canada had
taken over as operator.
In August of 1999, the Company and other working interest owners commenced
drilling the Berkley ELH #1 well, approximately two miles northwest of the
#1-17R well. On April 12, 2000, this well had drilled to a total depth of 19,724
feet. Production testing commenced on May 28, 2000. On July 6, 2000, based on
the results of the production testing and other analysis, the Company announced
a natural gas discovery at the East Lost Hills Field. Currently, processing
facilities and a connection pipeline are under construction in order to begin
selling natural gas and liquid hydrocarbons in the first quarter of calendar
2001.
On July 11, 2000, the participants commenced drilling the Berkley ELH #2
well. This well targets the same structure encountered by the Bellevue 1-17,
1-17R and the BKP #1 wells and is located approximately 1.5 miles northwest of
the Berkley ELH #1. Currently, this well has been drilled and cased to a
measured depth of 17,650 feet. The participants intend to drill as much as 250
feet more before commencing completion operations to test this well as a
potential natural gas producer.
On June 19, 2000, the participants at East Lost Hills commenced drilling
the Berkley ELH #3 well. This well is located approximately one mile southwest
of the Bellevue 1-17R location and is designed to test a geologically separate
structure than the structure encountered by the Bellevue 1-17, 1-17R, ELH #1 and
#2 wells. Currently, this well is drilling ahead at a measured depth of
approximately 17,800 feet.
On November 26, 2000, the participants commenced drilling the Berkley ELH
#4 well. This well is projected to drill to a total depth of 20,000 feet and
targets the same structure encountered by the Bellevue 1-17, 1-17R and the ELH
#1 and #2 wells. See "--San Joaquin Basin, California".
Subsequent to August 31, 2000, the Company acquired an additional 1.544%
working interest at East Lost Hills. This interest was purchased from a
non-related private entity. As a result of this acquisition, PYR's total working
interest in the approximately 30,000 gross and net acres at East Lost Hills
increases to 12.1193%.
During January of 2000, the Company announced that the Berkley Cal Canal #1
well had penetrated 1,230 feet of Temblor formation with 775 feet of net sand,
and was drilled to a total depth of 18,100 feet. During production testing,
non-commercial hydrocarbon flow rates were obtained from the initial perforated
10 foot zone in the lower McDonald. The participants had decided to defer
further completion or deepening of the existing well bore until information
regarding reservoir quality and performance is obtained from on-going drilling
efforts in the San Joaquin Basin.
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In May 2000, the Company completed the sale of 22,000 units of common stock
and warrants pursuant to a private placement at a price of $32.50 per unit. Each
unit consisted of ten shares of common stock and one immediately exercisable
warrant to purchase one share of common stock at an exercise price of $4.25 per
share for a period of three years. Proceeds from the offering were $715,000,
before costs of the offering of $11,857.
In August 2000, the Company completed the sale of 540,000 units of common
stock and warrants pursuant to a private placement at a price of $17.50 per
unit. Each unit consisted of five shares of common stock and one immediately
exercisable warrant to purchase one share of common stock at an exercise price
of $4.80 per share for a period of three years. Proceeds from the offering were
$9,450,000, before costs of the offering of $567,436 (including warrants valued
at $110,606).
Disclosure Regarding Forward-Looking Statements And Cautionary Statements
Forward-Looking Statements
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This Annual Report on Form 10-KSB includes "forward-looking" statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"). All statements other than statements of
historical facts included in this Annual Report, including without limitation
statements under "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES" and
"ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION", regarding the Company's financial position, business strategy,
and 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 and assumptions will
prove to have been correct. Additional statements concerning important factors
that could cause actual results to differ materially from the Company's
expectation ("Cautionary Statements") are disclosed below in the "-Cautionary
Statements" section and elsewhere in this Annual Report. All written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf subsequent to the date of this Annual Report are expressly qualified in
their entirety by the Cautionary Statements.
Cautionary Statements
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In addition to the other information contained in this Annual Report, the
following Cautionary Statements should be considered when evaluating the
forward-looking statements contained in this Annual Report.
The Company has a limited operating history.
The Company has a limited operating history since it started in the oil and
gas business in 1996. 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, provide drilling site and target depth
recommendations resulting in profitable productive wells, and on the market
prices for oil and natural gas. The Company cannot predict that its future
operations will be profitable.
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Oil and gas prices are highly volatile.
Even if the Company is able to discover or acquire oil and gas production,
of which there is no assurance, its 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. Current price levels may not 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 business.
The oil and gas business is speculative in nature.
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 Company depends on industry alliances.
The Company attempts to limit financial exposure on a project-by-project
basis by forming industry alliances where its technical expertise can be
complemented with the financial resources and operating expertise of established
companies. If the Company is not able to form these industry alliances, its
ability to fully implement its business plan could be limited. This could have a
material, negative effect on the Company's business.
The Company's non-operator status limits its control over our oil and gas
related projects.
The Company focuses primarily on providing seismic imaging and analysis and
rely 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 its receipt of expected
rates of return on its investment in certain projects.
The Company may not 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
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successful exploration and development activities, or both, its proved reserves,
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 technological capability to locate oil and gas
in commercial quantities. The Company cannot predict that it 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 the Company 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.
The Company needs additional funding to sustain its operations.
The Company anticipates that it will need additional funding to sustain its
operations for its oil and gas exploration plans. In October and November 1998,
the Company closed a private placement resulting in a gross capital infusion of
$2,500,000 from various investors. In May 1999, the Company completed an
additional private placement resulting in a gross capital infusion of
$7,000,000. In May 2000, the Company completed an additional private placement
resulting in gross proceeds of $715,000. In August 2000, the Company completed
an additional private offering resulting in gross proceeds of $9,450,000. The
Company does not have a steady source of revenue to provide funding to sustain
operations. The availability of a reliable source of revenue to sustain the
Company's operations is beyond its control.
The Company's exploratory drilling activities are costly and may not be
profitable.
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,
compliance with governmental requirements and shortages or delays in the
delivery of equipment. The Company's expenditures on oil and natural gas
properties could 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.
The Company's insurance may not be sufficient to cover all its 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. The
Company expects to maintain insurance against some, but not all, of these risks
in amounts that it 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.
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Many of the Company's competitors have more resources than the Company.
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's business. 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 the Company discovers at the rate it
desires to do so.
Technology changes could put the Company at a competitive disadvantage.
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 us to implement
those new technologies at a substantial cost. If other oil and gas finding
companies implement new technologies before the Company does, those companies
may be able to provide enhanced capabilities and superior quality compared with
what the Company is able to provide. The Company may not 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 that the Company
currently utilizes or implements may become obsolete in the future. If this
occurs, the Company's business could be materially adversely affected. If the
Company is unable to utilize the most advanced commercially available
technology, the Company's business could be materially and adversely affected.
Government regulations could hurt the Company's business.
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,
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, it cannot guarantee that significant costs for compliance will not
be incurred in the future. The November 1998 blow out of the East Lost Hills
exploratory well in which the Company has an interest raises a number of these
risks. Although a majority of the costs associated with the blow out have been
covered by insurance policies in effect when the blow out occurred, a portion of
the claims have not yet been reimbursed through one of the insurance policies.
In November of 2000, the participants (including the Company) filed a claim
against the insurance carriers for reimbursement of these costs. The Company has
advanced approximately $430,500 for its proportionate share of the claims in
order that these claims be paid directly to the claimants.
The Company's operating results may vary significantly.
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
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commercial quantities. These variations may also be caused by the volatility
associated with oil and gas prices.
A possible growth in management could have an adverse effect on the Company's
business.
Because of the Company's small size, it 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.
The Company depends on key employees.
The Company is highly dependent on the services of D. Scott Singdahlsen,
its Chief Executive Officer and President, Andrew P. Calerich, its Chief
Financial Officer, and its other geological and geophysical staff members. The
loss of the services of any of them could hurt the Company's business. The
Company does not have an employment contract with Mr. Singdahlsen, Mr. Calerich
or any other employee.
The Company's business may be limited.
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 in the
San Joaquin Basin. The Company is involved in eight separate and distinct
projects in the San Joaquin Basin, but its exploration efforts are concentrated
in this same general area and this lack of diverse business operations subjects
the Company to a high degree of concentration of risks. The Company's future
success may depend 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.
Certain Definitions
Unless otherwise indicated in this Annual Report, natural gas volumes are
stated at the legal pressure base of the state or area in which the reserves are
located at 60(degree) Fahrenheit. Oil equivalents are determined using the ratio
of 6 Mcf of natural gas to one barrel of crude oil, condensate or natural gas
liquids so that 6 Mcf of natural gas are referred to as one barrel of oil
equivalent or "BOE".
As used in this Annual Report, the following terms have the following
specific meanings: "Mcf" means thousand cubic feet, "Bcf" means billion cubic
feet, "Bbl" means barrel, "MBbl" means thousand barrels, "MMBoe" means million
barrels of oil equivalent, "MMBbl" means million barrels, "MMBO" means million
barrels of oil, "BBO" means billion barrels of oil and "Tcf" means trillion
cubic feet.
With respect to information concerning the Company's working interests in
wells or drilling locations, "gross" gas and oil wells or "gross" acres is the
number of wells or acres in which the Company has an interest, and "net" gas and
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oil wells or "net" acres are determined by multiplying "gross" wells or acres by
the Company's working interest in those wells or acres. A "working interest" in
an oil and gas lease is an interest that gives the owner the right to drill,
produce, and conduct operating activities on the property and to receive a share
of production of any hydrocarbons covered by the lease. A working interest in an
oil and gas lease also entitles its owner to a proportionate interest in any
well located on the lands covered by the lease, subject to all royalties,
overriding royalties and other burdens, to all costs and expenses of
exploration, development and operation of any well located on the lease, and to
all risks in connection therewith.
A "development well" is a well drilled as an additional well to the same
horizon or horizons as other producing wells on a prospect, or a well drilled on
a spacing unit adjacent to a spacing unit with an existing well capable of
commercial production and which is intended to extend the proven limits of a
prospect. The latter type of development well drilling is known as "step-out
drilling". An "exploratory well" is a well drilled to find commercially
productive hydrocarbons in an unproved area, or to extend significantly a known
prospect.
"Reserves" means natural gas and crude oil, condensate and natural gas
liquids on a net revenue interest basis, found to be commercially recoverable.
"Proved developed reserves" includes proved developed producing reserves and
proved developed behind-pipe reserves. "Proved developed producing reserves"
includes only those reserves expected to be recovered from existing completion
intervals in casing of existing wells when the cost of making such reserves
available for production is relatively small compared to the cost of a new well.
"Proved undeveloped reserves" includes those reserves expected to be recovered
from new wells on proved undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
"Infill drilling" means drilling of an additional well or additional wells
in order to more adequately drain a reservoir.
"Stratigraphic trap" means a barrier that impedes the migration of
hydrocarbons caused by either a nonporous formation sealing off the top edge of
a reservoir bed or by a change of porosity and permeability within the reservoir
bed itself. "Strategraphic play" means a prospect targeted to test a
strategraphic trap.
"API" means a measure of gravity based on standards set by the American
Petroleum Institute.
"Carried through the tanks" means the Company will not bear any capital
cost for this portion of its working interest until commercial quantities of
hydrocarbons are being produced and are generating revenues. At this point, the
Company will become responsible for paying any additional capital costs and
lease operating expenses as well as receiving its share of revenues from sales.
"Down-spaced drilling" means a method of development drilling whereby well
density in a given area is increased by drilling between existing wells.
"Palynology analysis" means an analysis of a rock sequence through
examination of contained spores and/or pollen. A method of age dating strata.
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"Reserve capture" means the quantification of hydrocarbon reserves as a
result of drilling and testing a reservoir.
"Steam floods" means a secondary recovery technique whereby steam is
injected into a hydrocarbon reservoir in an effort to mobilize heavy (tarry)
oil.
"Subthrust structure" means a fold of strata which is found beneath a
thrust fault.
"Swept reservoir pods" means distinct sandstone units that have been
depleted of hydrocarbons through the secondary recovery method of waterflooding.
"Thrusted anticlinal feature" means a fold of geologic strata that is
bounded by a thrust fault, which is a fault that results in older strata
overlying younger strata.
"Turbidite" means a stratigraphic sequence deposited by turbidity currents,
commonly associated with submarine canyons.
(Intentionally Left Blank)
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Strategy
The Company's business strategy is to continue to enhance shareholder value
by leveraging its technical experience and expertise with 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 view point 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 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:
o Internal generation of exploration and exploitation prospects with
special emphasis on seismic application to structural and
stratigraphic play concepts.
o Identification and exploitation of non-performing and under-utilized
existing seismic surveys and acreage positions in which the
application of technical expertise and advanced interpretation and
visualization methodologies could significantly impact drilling
results.
o 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 to utilize 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 pre-drill exploration phases, including
the acreage position and the application of seismic technology. With the
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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 thereby maximizing 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 San
Joaquin Basin of California. The Company also has projects in selective Rocky
Mountain areas. 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 that they will be successful if drilled.
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 13
billion barrels of oil equivalent, and contains 25 fields classified as giant,
with cumulative production of more than 100 MMBoe.
The San Joaquin Basin 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
81 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 1999 reported by the California
Department of Oil and Gas for all producers in the aggregate indicate total
production of 255.82 MMBoe. Of this figure, Kern County accounts for over 96
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. 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.
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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. Additional 1999
statistics indicate that the average well depth drilled during the year was
approximately 2020 feet.
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 have opened up these fee acreage
positions to outside exploration by aggressive independent companies.
East Lost Hills. During 1997, the Company identified and undertook
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.
This unconventional deep prospect had significant structural and reservoir
risk, but the potential for large reserves made it an attractive play. In a
joint effort with Denver based Armstrong Resources LLC ("Armstrong"), the
Company had 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 defined 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. Source rock and maturation modeling suggested 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 joint interest partners to
participate in the drilling of an initial exploratory well to fully evaluate the
feature. 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 owned an additional 4.1% working interest for a total
working interest of 10.575%. During November 2000, the Company purchased an
additional working interest of 1.5443% at East Lost Hills to bring the total
working interest to 12.1193%.
On May 15, 1998, an initial exploration well, the Bellevue Resources et al.
#1-17 East Lost Hills well, located in SE1/4. Sec 17, T26S, R21E, Kern County,
California, commenced drilling. The well was designed to test prospective
Miocene sandstone reservoirs in the Temblor Formation below 17,000 feet. 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. Surface containment facilities were installed and
liquid and gas production were contained and were transported to processing and
disposal facilities. A snubbing unit was deployed to attempt a surface control
kill of the Bellevue #1-17, but, after eight kill attempts, was not successful.
A majority of the costs associated with the blow out have been covered by
insurance policies in effect when the blow out occurred. A portion of the claims
have not yet been reimbursed through one of the insurance policies. The
participants in the project have filed a claim against the insurance carriers
for reimbursement of these costs. The Company has advanced approximately
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$430,500 for its proportionate share of the claims in order that these claims be
paid directly to the claimants. These costs are reflected as part of the
property costs for the East Lost Hills exploration project on its August 31,
2000 Balance Sheet.
On December 18, 1998, a relief well, the Bellevue #1-17R, began drilling.
This well 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 that it would be
necessary to intersect the wellbore below 16,000 feet. The relief well was
drilled to 16,668 feet, where it intersected the original well bore. On May 29,
1999, the Bellevue #1-17 well was killed by pumping heavy mud and cement into
the well bore. The 1-17 well bore has been plugged and abandoned and the 1-17R
well has been sidetracked as a replacement well into the targeted Temblor Zone.
In August of 1999, the Company and other working interest owners commenced
drilling the Berkley ELH #1 well, approximately two miles northwest of the
#1-17R well. On April 12, 2000, this well had drilled to a total depth of 19,724
feet. Production testing commenced on May 28, 2000. On July 6, 2000, based on
the results of the production testing and other analysis, the Company announced
a natural gas discovery at the East Lost Hills Field. Currently, processing
facilities and a connection pipeline are under construction in order to begin
selling natural gas and liquid hydrocarbons in the first quarter of calendar
2001.
On July 11, 2000, the participants commenced drilling the Berkley ELH #2
well. This well targets the same structure encountered by the Bellevue 1-17,
1-17R and the ELH #1 wells and is located approximately 1.5 miles northwest of
the Berkley ELH #1. Currently, this well has been drilled and cased to a
measured depth of 17,650 feet. The participants intend to drill as much as 250
feet more before commencing completion operations to test this well as a
potential natural gas producer.
On June 19, 2000, the participants at East Lost Hills commenced drilling
the Berkley ELH #3 well. This well is located approximately one mile southwest
of the Bellevue 1-17R location and is designed to test a geologically separate
feature than the structure encountered by the Bellevue 1-17, 1-17R, ELH #1 and
#2 wells. Currently, this well is drilling ahead at a measured depth of
approximately 17,800 feet.
On November 26, 2000, the participants commenced drilling the Berkley ELH
#4 well. This well is projected to drill to a total depth of 20,000 feet and
targets the same structure encountered by the Bellevue 1-17, 1-17R and the ELH
#1 and #2 wells.
The participants may drill from one to as many as six more additional wells
in this prospect during calendar year 2001.
Wedge Prospect and Bull Dog Prospect. These projects lie northwest of the
East Lost Hills exploration acreage. The Company currently controls
approximately 28,000 gross and net acres in these projects. These are deep
natural gas exploration projects, similar to East Lost Hills. The Company's
personnel have done extensive technical (geological and geophysical) analysis in
this area and have generated 2-3 compelling leads/prospects. The Company
continues the process of showing these projects to a limited number of potential
participants. The Company's approach is to generate an up front cash
consideration and a carried working interest in at least one exploration well.
PYR will be acquiring additional 2D seismic data over this acreage in December
2000. After the acquisition, processing and interpretation of the new seismic
data, the Company expects to be able to sell down a portion of this project and
secure drilling participant(s) during calendar 2001.
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Deep Temblor Exploration Program - Cal Canal, Lucky Dog and Pyramid Power.
In April 1999, the Company purchased a working interest in three additional deep
exploration projects in the San Joaquin Basin of California. These three
projects are in addition to the exploration program initiated by the recent deep
drilling at East Lost Hills, and all three are outside the East Lost Hills joint
venture area. Pursuant to the agreement, the Company purchased working
interests, ranging from 3.00% to 3.75%, in each of the three exploration
prospect areas. PYR's interest will be carried (non-cost bearing) "through the
tanks" in the initial test well in each of the three separate exploration
prospects.
The three exploration prospects in this program, target the Temblor
Formation at depths ranging from 15,000 to 19,000 feet. Berkley will also
operate these exploration projects in the Deep Temblor Exploration Program.
The first exploration well in the program (Cal Canal) began drilling on
June 15, 1999. This well was drilled to a total depth of 18,100 feet. Non
commercial hydrocarbon flow rates were obtained from a perforated 10 foot zone
in the lower McDonald. Operations on this well have been temporarily suspended.
The well has not been plugged and/or abandoned. Part of the technical analysis
at Cal Canal is to attempt to determine the potential of success if the well is
deepened. Additional technical work is warranted before the ultimate decision is
made. Because of the uncertainty regarding the future of this well, the Company
has recorded an impairment against this property of $200,000. PYR owns a carried
3.75% working interest in this well.
Pyramid Power and Lucky Dog remain in the pre-drill exploration phase. The
participants expect to commence drilling operations at Pyramid Power during
calendar year 2001, subject to rig availability. The Lucky Dog prospect remains
in the pre-drill analysis phase and no timeline has been identified for
drilling.
Rectange Force Prospect. PYR owns 30% of approximately 5,500 gross acres in
this San Joaquin Basin prospect. This is another prospect that targets the
Temblor Formation. PYR may elect to participate in the drilling of an initial
exploration well here at the current 30% ownership, or may elect to sell down
its interest for cash and/or a carried working interest in the initial well.
This prospect is still in the development stage and no drilling plans are
currently in place.
Southeast Maricopa. This is a moderately deep (approximately 12,000') oil
exploration prospect. During 1998, we acquired new 3-D seismic data over
approximately 52 square miles at Southeast Maricopa. Actual field acquisition of
the data was completed during March of 1998. The processed seismic data was
delivered to PYR in January of 1999. Interpretation of the data took
approximately 6 additional months. Interpretation of the seismic data has
resulted in the identification of a light oil exploration prospect.
PYR is presenting this prospect to potential industry participants and
intends to generate an up front cash consideration and a carried working
interest in an initial exploration well. Through lease and option, PYR has a
100% working interest in approximately 3,800 gross acres in this project.
Rocky Mountain Exploration - Foothills Project, Montana. This is a
moderately deep natural gas exploration play with multiple prospect targets.
Extensive geological and geophysical work has been completed. Currently, PYR
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controls, through lease, option or farmout, approximately 250,000 gross and
220,000 net acres over a number of identified prospects. Again, PYR's approach
is to complete the technical analysis and control the land, then take the
project to potential industry participants and sell down the working interest to
generate an up front cash consideration and a carried working interest in at
least one initial exploration well. PYR intends to retain a working interest in
this project, and has begun to present this project to a select number of
potential industry participants. This project is still in the pre-drill phase of
the exploration process.
Rocky Mountain Exploration - Wyoming. PYR has two separate exploration
projects in Wyoming, both of which are in the early stages of development. PYR
is currently interpreting seismic data in order to determine necessary
components of a potential exploration project. PYR has acquired an initial land
position, and continues to build additional land holding as opportunities arise.
Geological and Geophysical Expertise
The Company's oil and gas finding capabilities are dependent upon the
effective application of seismic imaging technologies. The Company has assembled
a technically experienced staff of in-house geologists and geophysicists with
extensive experience involving the utilization of advanced seismic data imaging
and analysis.
The Company also has access, both in-house and through consultants, to
state-of-the-art exploration hardware and software applications. The Company
owns a 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 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.
Drilling Activities
During 2000, the Company participated in the drilling of the Berkley ELH #1
discovery well, and is participating in the drilling of two additional wells at
East Lost Hills. Although there is no assurance that any additional exploration
wells will be drilled, the Company anticipates the drilling of from one to six
additional wells during 2001, depending on ongoing exploration efforts in
California and in the Rocky Mountains.
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 solely from successful exploration efforts and any successful
development thereof.
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Acreage
The Company currently controls, through lease, farmout, and option, the
following approximate acreage position as detailed below:
State Gross Acres Net Acres
----- ----------- ---------
California 99,000 39,000
Rocky Mountain Areas 267,000 238,000
-------------------- ----------- ---------
TOTAL 366,000 277,000
Competitive Advantage
The Company believes that the cumulative experience of its technical and
management team, results in a strong competitive advantage relative to current
competition in these focus areas.
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 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 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.
ITEM 3. LEGAL PROCEEDINGS
In November 2000, the participants (including the Company) in the East Lost
Hills exploration project filed a lawsuit in Los Angeles County (California)
Court against insurance carriers for reimbursement of damage amounts of
$10,500,000 paid by the participants directly to claimants resulting from the
blow out of the East Lost Hills #1-17 well. The Company has advanced $430,500
for its proportionate share of the claims (see "ITEMS 1 AND 2. DESCRIPTION OF
BUSINESS AND PROPERTIES -- San Joaquin Basin, California - East Lost Hills").
The Company is not a party to any other current or pending legal proceeding
(nor are any of the Company's properties subject to a pending legal proceeding).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since December 8, 1999, the Company's Common Stock has been traded on the
American Stock Exchange under the symbol "PYR." From November 1997 until
December 7, 1999, the stock was traded on the over-the-counter market and was
quoted on the OTC Bulletin Board under the ticker symbol "PYRX." Prior to
November 1997, the Company's trading symbol was "MRVI."
The table below presents the range of high and low sales prices for the
Company's Common Stock during each of the quarters in the past two fiscal years
as reported by the American Stock Exchange and the OTC Bulletin Board.
Sales Prices
------------
Quarter Ended High Low
------------- ---- ---
November 30, 1998 3.5625 .4375
February 28, 1999 5.00 1.375
May 31, 1999 3.00 1.75
August 31, 1999 5.125 2.125
November 30, 1999 5.312 3.625
February 29, 2000 4.625 2.875
May 31, 2000 5.938 2.75
August 31, 2000 7.125 3.50
On November 28, 2000, the closing sales price for the Company's Common
Stock was $6.00 per share.
Number Of Stockholders Of Record
On November 28, 2000, the number of stockholders of record of the Company
was approximately 2,250.
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 currently intends to
retain any future earnings to finance the expansion and continued development of
its business.
Recent Sales of Unregistered Securities
In May 2000, the Company completed the sale of 22,000 units of common stock
and warrants to purchase common stock pursuant to a private placement at a price
of $32.50 per unit. The units were sold to a total of ten investors who were all
accredited investors pursuant to one or more exemptions from registration in
accordance with Rules 505 and/or 506 and/or Sections 3(b) and/or 4(2) of the
Securities Act. Each unit consisted of ten shares of common stock and one
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immediately exercisable warrant to purchase one share of common stock at an
exercise price of $4.25. The warrants expire on May 19, 2003. The Company may
repurchase the warrants at a repurchase price of $.001 per warrant if the
weighted average trading price of the Company's common stock for 30 calendar
days exceeds $7.50 per share. Proceeds from the offering were $715,000, before
costs of the offering of $11,857. There were no fees or commissions paid to
brokers or underwriters or placement agents in conjunction with this placement.
In August 2000, the Company completed the sale of 540,000 units of common
stock and common stock warrants to purchase common stock pursuant to a private
placement at a price of $17.50 per unit. The units were sold to a total of 22
investors who were all accredited investors pursuant to one or more exemptions
from registration in accordance with Rules 505 and/or 506 and/or Sections 3(b)
and/or 4(2) of the Securities Act. Each unit consisted of five shares of common
stock and one immediately exercisable warrant to purchase one share of common
stock at an exercise price of $4.80. The warrants expire on July 31, 2003. The
Company may repurchase the warrants at a repurchase price of $.001 per warrant
if the weighted average trading price of the Company's common stock for 30
trading days exceeds $10.00 per share. Proceeds from the offering were
$9,450,000, before costs of the offering of $567,436. The Company paid a
commission in conjunction with this placement to one placement agent of $378,000
in cash and warrants to purchase 70,875 shares of common stock at an exercise
price of $5.50 per share (total value of the warrants was $110,606 and is
included in the $567,436 reflected above).
ITEM 6. 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, 2000 ("2000"), and as of and for the twelve months ended August 31,
1999 ("1999"). This discussion should be read in conjunction with the Company's
Financial Statements, the notes related thereto, and the other financial data
included elsewhere in this Annual Report on Form 10-KSB.
Overview
The Company is a development stage independent oil and gas exploration
company whose strategic focus is the application of advanced 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 leverage its technical experience and expertise with seismic
data 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 partners. 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 seismic technology, the Company seeks to improve
the expected return on investment in its oil and gas exploration projects.
During 2000, the Company incurred approximately $1,319,000 for costs
related to continued leasing and optioning of acreage and approximately
$4,038,000 for drilling and seismic costs associated with deep exploratory
drilling at the Company's East Lost Hills project. The Company had no revenues
from oil and gas production during 2000.
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During 1999, the Company incurred approximately $876,000 for costs related
to continued leasing and optioning of acreage, $1,094,000 for positions in
additional exploration projects in California, $313,000 for costs relating to
seismic and $480,000 in drilling costs associated with deep exploratory drilling
at the Company's East Lost Hills project.
The Company currently anticipates that it will participate in the drilling
of at from one to six wells during its fiscal year ending August 31, 2001
("2001"), 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 "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND
PROPERTIES-Disclosure Regarding Forward-Looking Statements And Cautionary
Statements- The Company has a limited operating history."
The Company's future financial results continue to depend primarily on (i)
the Company's ability to discover commercial quantities of hydrocarbons; (ii)
the market price for oil and gas; (iii) the Company's ability to continue to
source and screen potential projects; and (iv) 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 "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND
PROPERTIES- "- The Company needs additional funding to sustain its operations",
and "- The Company's exploratory drilling activities are costly and may not be
profitable."
Results of Operations
The twelve months ended August 31, 2000 ("2000") compared with the twelve
months ended August 31, 1999 ("1999")
Operations during the fiscal year ended August 31, 2000 resulted in a net
loss of ($982,547) compared to a net loss ($1,140,407) for the fiscal year ended
August 31, 1999.
Oil and Gas Revenues and Expenses. At August 31, 2000, the Company did not
own any producing or proved oil and gas properties, and no oil and gas
production revenues or expenses had been recorded by the Company.
General and Administrative Expense. The Company incurred $929,000 and
$743,000 in general and administrative expenses during 2000 and 1999,
respectively. The increase results from increases in shareholder and business
promotion costs resulting from our listing on the American Stock Exchange and
from our expanding investor and shareholder base, and from additional increases
in personnel and salaries associated with the hiring of additional technical and
administrative personnel in pursuit of the development of the Company's
exploration and exploitation plan.
Dry Hole, Impairment and Abandonments. In 2000, the Company recorded an
impairment of $200,000 against its Cal Canal project. In 1999, the Company
re-evaluated its School Road project and recorded an impairment of approximately
$285,000 against its basis in this project. Also in 1999, the Company had
abandoned projects and recorded an abandonment cost of approximately $21,000
associated with these projects.
Interest Expense. The Company recorded nominal interest expense in 2000.
The Company recorded $183,000 in interest expense during 1999, predominately
associated with the 10% Convertible Debentures that were outstanding from
October 26, 1998 through April 16, 1999. Per the Convertible Debenture
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agreement, the Company elected to pay this interest by issuing 53,326 shares of
the Company's common stock. These Debentures were converted into Series A
Convertible Preferred Stock on April 16, 1999. The Company is obligated to pay a
10 percent dividend on the outstanding preferred stock. During 2000, the Company
paid dividends to the holders of preferred stock of approximately $178,600 by
issuing a total of 38,531 shares of common stock.
Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas properties in 2000 or 1999. At August 31, 2000 and
1999, the Company did not own any proved reserves and had no oil or gas
production. The Company recorded $18,327 and $24,111 in depreciation expense
associated with capitalized office furniture and equipment during 2000 and 1999,
respectively.
During the fiscal year ended August 31, 2000, the Company's carrying costs
for undeveloped oil and gas properties increased by approximately $5,729,000.
This net increase is comprised of drilling costs, costs associated with
acquiring/retaining exploration acreage and seismic costs associated with
undeveloped oil and gas projects of $5,929,000 and a property impairment of
$200,000.
During the fiscal year ended August 31, 1999, the Company's carrying costs
for undeveloped oil and gas properties increased by a net amount of
approximately $2,560,000. This net increase is comprised of expenditures on
undeveloped oil and gas prospects of approximately $2,889,000, and property
abandonments and impairments of approximately $330,000.
Liquidity and Capital Resources
At August 31, 2000, the Company had a working capital amount of $8,452,642.
In May 2000, the Company completed the sale of 22,000 units of common stock and
warrants pursuant to a private placement at a price of $32.50 per unit. Each
unit consist of 10 shares of common stock and one warrant to purchase one share
of common stock at an exercise price of $4.25 per share for a period of three
years. Proceeds from the offering were $715,000, before costs of the offering of
$11,857. In August 2000, the Company completed the sale of 540,000 units of
common stock and warrants pursuant to a private placement at a price of $17.50
per unit. Each unit consisted of 5 shares of common stock and one immediately
exercisable warrant to purchase one share of common stock at an exercise price
of $4.80 per share for a period of three years. Proceeds from the offering were
$9,450,000, before costs of the offering of $567,436 (including warrants valued
at $110,606).
Cash used in investing activities during 2000 totaled $822,405. Of this
amount, $5,929,267 was used in conjunction with the Company's oil and gas
exploration and exploitation plan, $5,111,062 was generated through the sale of
government backed securities and $4,200 was used for office furniture and
equipment.
The Company had no outstanding long-term debt at August 31, 2000. The
Company 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 (and possibly substantial) capital expenditures.
Depending upon the extent of success of the Company's ability to sell additional
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prospects for cash, the level of industry participation in the Company's
exploration projects, the continuing results at East Lost Hills and the Deep
Temblor exploration program, the Company may require from $6,000,000 to over
$12,000,000 for capital expenditures relating to exploration and potential
development of its projects during the 12 month period ending August 31, 2001.
See "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES-Disclosure Regarding
Forward-Looking Statements And Cautionary Statements - Cautionary Statements -
The Company needs additional funding to sustain its operations." The Company
intends to attempt 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. See "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS
AND PROPERTIES-- Disclosure Regarding Forward-Looking Statements And Cautionary
Statements--Cautionary Statements" and "--Significant Properties--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. The
Company has not encountered any adverse effects as the result of Year 2000
compliance. The Company continues to monitor its internal systems and has
contingency plans in place in the event that a Year 2000 failure should occur.
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ITEM 7. FINANCIAL STATEMENTS
The Financial Statements that constitute Item 7 are attached at the end
of this Annual Report on Form 10-KSB. An index to these Financial Statements is
set forth below:
Page
----
Independent Auditor's Report F-2
Balance Sheet
August 31, 2000 F-3
Statements of Operations
Years ended August 31, 1999 and 2000
And cumulative amounts from Inception
To August 31, 2000. F-4
Statements of Members'/Stockholders' Equity
Period from Inception (May 31, 1996) to
December 31, 1996, Eight Months Ended
August 31, 1997 and Years Ended August
31, 1998, 1999 and 2000. F-5, F-7
Statements of Cash Flows
Years ended August 31, 1999 and 2000
And cumulative amounts from Inception
To August 31, 2000. F-8 - F-9
Notes To Financial Statements F-10 - F-20
All other schedules are omitted because they are inapplicable, not required, or
the information is included in the financial statements or notes thereto.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
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.
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
D. Scott Singdahlsen 42 Chief Executive Officer, 1997
President, and Chairman
Of the Board
Andrew P. Calerich 36 Chief Financial Officer,
Vice President and
Secretary ---
Keith F. Carney 44 Director 1997
S. L. Hutchison 67 Director 1999
Bryce W. Rhodes 47 Director 1999
Kenneth R. Berry, Jr. 48 Vice President-Land ---
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.
Andrew P. Calerich has served as Chief Financial Officer of the Company
since August 1997, as Secretary of the Company since May 1998 and as Vice
President since August of 1999. From 1993 to 1997, Mr. Calerich was a business
consultant specializing in accounting for public and private oil and gas
producers in Denver. From 1990 to 1993, Mr. Calerich was employed as corporate
Controller at 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
23
<PAGE>
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.
S. L. Hutchison has been a Director of the Company since April 1999, when
he was nominated and elected to the Board in connection with the sale by the
Company of convertible promissory notes issued in a private placement
transaction in October and November 1998. Since 1979, Mr. Hutchison has served
as Vice President and Chief Financial Officer of Victory Oil Company, an oil and
gas production company based in California, and other companies in the Victory
Group of Companies. Also during that period, Mr. Hutchison has served as
Vice-President and Chief Financial Officer and a Director of Crail Capital, a
real estate investment company that is owned by Victory Oil Company, and Victex,
Inc., a real estate and oil and gas company. Mr. Hutchison also serves as Chief
Financial Officer and a director of each of the Crail Johnson Foundation and the
Independent Oil Producers Agency, and is the Treasurer and a director of the Los
Angeles Maritime Institute. Mr. Hutchison received a Bachelor's degree in
accounting from the University of Washington in 1954.
Bryce W. Rhodes has been a Director of the Company since April 1999, when
he was nominated and elected to the Board in connection with the sale by the
Company of convertible promissory notes issued in a private placement
transaction in October and November 1998. Since 1996, Mr. Rhodes has served as
Vice President of Whittier Energy Company ("WEC"), an oil and gas investment
company. Mr. Rhodes served as Investment Manager of WEC from 1990 until 1996.
Mr. Rhodes received B.A. degrees in Geology and Biology from the University of
California, Santa Cruz, in 1976 and an MBA degree from Stanford University in
1979.
Kenneth R. Berry, Jr. has served as Vice President of land since August,
1999 and 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.
Board And Committee Meetings
The Board of Directors met six times during the fiscal year ended August
31, 2000 and all directors were present at each of those meetings.
The Board of Directors currently has a Compensation Committee which met
once during the fiscal year ended August 31, 2000 and all members of the
Compensation Committee participated in those meetings. 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 Messrs. Carney, (Chairman), Hutchison and Rhodes, each of whom is an outside
director.
24
<PAGE>
<TABLE>
<CAPTION>
The Board of Directors currently has an audit committee consisting of
Messrs. Hutchison (Chairman), Carney and Rhodes. The audit committee did not
meet formally during the fiscal year ending August 31, 2000.
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, 2000, 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.
ITEM 10. 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, other than the Chief
Executive Officer and the Chairman Of The Board, received total salary and bonus
exceeding $100,000 during any of the last three fiscal years.
Summary Compensation Table
--------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ----------------------------
Restricted
Other Annual Stock LTIP All other
Name and Principal Position Fiscal Salary Bonus Compensation Awards ($) Options Payouts Compensation
Year ($)(1) ($)(2) ($)(3) (#) ($)(4) ($)(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. Scott Singdahlsen 2000 $110,000 -0- -0- -0- -0- -0- -0-
Chief Executive Officer,
President and Chairman 1999 $77,917 -0- -0- -0- -0- -0- -0-
Of the Board
1998 $75,000 -0- -0- -0- -0- -0- -0-
----------------------
(1) The dollar value of base salary (cash and non-cash) received during the year
indicated.
(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 and 2000 Stock Option Plans.
25
</TABLE>
<PAGE>
(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, 1999, options to purchase 821,000 shares were
outstanding under the 1997 Plan. During fiscal year ended August 31, 2000,
options to purchase 179,000 additional shares were granted and options to
purchase 27,500 shares were exercised so that, as of August 31, 2000, options to
purchase 972,500 shares were outstanding and there are no remaining shares that
may be granted pursuant to the 1997 Plan.
2000 Stock Option Plan
In March 1999, the Company's 2000 Stock Option Plan (the "2000 Plan") was
adopted by the Board of Directors of the Company and subsequently approved by
the Company's stockholders. Pursuant to the 2000 Plan, the Company may grant
options to purchase an aggregate of 500,000 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
2000 Plan may be either incentive options qualifying for beneficial tax
treatment for the recipient or nonqualified options. The 2000 Plan may be
administered by the Board of Directors or by an option committee. Administration
of the 2000 Plan includes determination of the terms of options granted under
the 2000 Plan. During the fiscal year ended August 31, 2000, options to purchase
200,000 shares were so that, as of August 31, 2000, options to purchase 200,000
shares were outstanding and 300,000 shares may be granted pursuant to the 2000
Plan.
Compensation Of Outside Directors
Currently, outside directors are compensated for serving as a director by
vesting options to purchase 2,500 shares of the Company's common stock for every
complete fiscal quarter served as a director. Directors are also reimbursed for
direct 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
26
<PAGE>
a change-in-control of the Company or a change in an executive officer's
responsibilities following a change-in-control, except that both the 1997 Plan
and the 2000 Plan provides for vesting of all outstanding options in the event
of the occurrence of a change-in-control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of November 28, 2000, there were 19,204,069 shares of the Company's
$.001 par value common stock (the "Common Stock") outstanding. The following
table sets forth certain information as of November 28, 2000, with respect to
the beneficial ownership of the Company's Common Stock by each 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:
Percentage of
Name and Address of Number of Shares Shares
Beneficial Owner Beneficially Owned (1) Outstanding
---------------- ---------------------- -----------
D. Scott Singdahlsen 1,935,000 (2) 10.0%
1675 Broadway, Suite 1150
Denver, Colorado 80202
Keith F. Carney 119,289 (3) 1.0%
915 Bay Oaks Road
Houston, Texas 77008
S.L. Hutchison 3,061,059 (4) 16.0%
c/o Victory Oil Company
222 West Sixth Street, Suite 1010
San Pedro, California 90731
Bryce W. Rhodes 267,825 (5) 1.4%
c/o Whittier Energy Company
1600 Huntington Drive
South Pasadena, California 91030
All Executive Officers and Directors as a 5,906,038 30.8%
group (six persons) (2)(3)(4)(5)(6)(7)
Victory Oil Company 2,943,711 (8) 15.3%
222 West Sixth Street, Suite 1010
San Pedro, California 90731
------------------------
(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.
27
<PAGE>
(2) The shares shown for Mr. Singdahlsen include 200,000 shares owned by Mr.
Singdahlsen's two minor children.
(3) Includes options to purchase 10,000 shares at $4.125 per share until
December 20, 2001 that currently are exercisable or that will become exercisable
within the next 60 days. Also includes common stock purchase warrants enabling
this shareholder/director to purchase an additional 2,400 shares at $2.50 per
share until May 14, 2004.
(4) Includes 66,667 shares of Common Stock that may be issued upon the
conversion of Series A Preferred Stock held by Mr. Hutchison. Also includes
options to purchase 10,000 shares at $4.125 per share until December 20, 2001
that currently are exercisable or that will become exercisable within the next
60 days. Also includes currently exercisable warrants to purchase 2,500 shares
at $2.50 per share until May 14, 2004. Also includes the shares shown as
beneficially owned by Victory Oil Company as described in note (8) below. Mr.
Hutchison is the Vice President and Chief Financial Officer of Victory Oil
Company. Mr. Hutchison disclaims beneficial ownership of the shares beneficially
owned by Victory Oil Company.
(5) Includes 44,444 shares of Common Stock that may be issued upon the
conversion of Series A Preferred Stock held by a company owned by Mr. Rhodes.
Also includes options to purchase 10,000 shares at $4.125 per share until
December 20, 2001 that currently are exercisable or that will become exercisable
within the next 60 days. Also includes 183,750 shares and currently exercisable
warrants to purchase 7,845 shares for $2.50 per share until May 14, 2004 and
currently exercisable warrants to purchase 2,000 shares for $4.25 per share
until May 24, 2003 that are held by Whittier Energy Company. Mr. Rhodes is a
Vice President of Whittier Energy Company.
(6) Includes 15,000 shares of Common Stock and options to purchase 190,000
shares of Common Stock that currently are exercisable or that will become
exercisable within the next 60 days that are held by Andrew P. Calerich,
Vice-President, Chief Financial Officer and Secretary of the Company, and 31,000
shares and currently exercisable warrants to purchase 1,600 shares for $2.50 per
share until May 14, 2004 held by Mr. Calerich's wife's individual retirement
account.
(7) Includes the following securities held directly or indirectly by Kenneth R.
Berry, Jr., who is Vice President of Land: an aggregate of 65,640 shares owned
by various entities, IRAs, and trusts with which Mr. Berry, or his spouse or
minor daughter, is associated; currently exercisable warrants to purchase up to
3,125 shares at $2.50 per share until May 14, 2004 that are held by an entity
which is owned by Mr. Berry; currently exercisable warrants to purchase up to
1,500 shares for $2.50 per share until May 14, 2004 that are beneficially owned
by Mr. Berry's minor daughter; currently exercisable options to purchase up to
75,000 shares for $1.50 per share until November 10, 2002; currently exercisable
options to purchase up to 20,000 shares for $1.28 per share until May 26, 2001;
and currently exercisable options to purchase up to 120,000 shares for $.6875
per share until September 11, 2003.
(8) Includes 1,111,112 shares of Common Stock that may be issued upon the
conversion of Series A Preferred Stock 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 "ITEM 12 - CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS -- 1998 Private Placement Of Notes".
28
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1998 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. The
Notes were automatically converted into shares of Series A Preferred Stock (the
"Series A Preferred") at the rate of one share for each $100 principal amount of
Notes upon approval by the stockholders of the Series A Preferred on April 16,
1999. As a result, no Notes currently are outstanding.
The following is a summary of the rights of the Series A Preferred:
o Each share of Series A Preferred has a face value of $100 per share.
o An annual dividend of 10% is 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 a 45 day weighted
average trading price of the common stock.
o The Series A Preferred is 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.
o The Company has the right to require holders to convert their Series A
Preferred into common stock in the following circumstances:
o The Company had the right to require that one-third of the
outstanding Series A Preferred be redeemed or converted at any
time after October 26, 1999, provided that the market value of
the Company's common stock is at least $2.40 per share, based on
a 45-day weighted average trading price. At October 26, 1999 the
Company had exceeded the $2.40 per share requirement and
subsequently gave notice of redemption of one-third of the
outstanding Series A Preferred to the holders of the Series A
Preferred. All these shares were converted into common stock.
o The Company has the right to require that two-thirds of the
outstanding Series A Preferred be redeemed or converted at any
time after October 26, 2000, provided that the market value of
the common stock is at least $3.60 per share.
o The Company has the right to require all of the outstanding
Series A Preferred be redeemed or converted beginning at any time
after October 26, 2000, provided that the market value of the
common stock is at least $4.80 per share. At October 26, 2000,
the Company had exceeded the $4.80 per share weighted trading
29
<PAGE>
average requirement. In November 2000, the Company informed the
holders of the Series A Preferred Stock that the outstanding
shares would be redeemed at 5:00 p.m. on December 8, 2000 if they
were not converted into common stock prior to that time.
o The Company has the right, beginning October 26, 2000, to require
that all the outstanding Series A Preferred be redeemed or
converted if the Corporation has accumulated retained earnings
equal to or greater than $3,750,000.
o In a vote of stockholders, other than for the election of directors of
the Company, the holders of the Series A Preferred are entitled to
vote the number of votes equal to the number of shares into which the
Series A Preferred may be converted, or 167 votes for each share of
Series A Preferred.
o 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.
In connection with the sale of the Notes, the Company agreed to add, and
the stockholders of the Company subsequently approved the election of, S.L.
Hutchison and Bryce W. Rhodes to the Board of Directors. 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 who is
President, CEO and a director of the Company, entered into a voting agreement
(the "Voting Agreement") with the purchasers of the Notes. Pursuant to the
Voting Agreement, Mr. Singdahlsen agreed 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. At the annual meeting of stockholders held on April
16, 1999, all of Mr. Singdahlsen's shares were voted in favor of the two
nominees. Mr. Singdahlsen is 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 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 is 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.
30
<PAGE>
May 1999 Private Placement Of Units
-----------------------------------
In May 1999, the Company completed a private placement of $7,000,000 of
units at $16 per unit, with each unit consisting of 10 shares of common stock
and a warrant to purchase one share of common stock at an exercise price of
$2.50 per share until May 14, 2004. The private placement was made pursuant to
exemptions from federal and state registration requirements. 93,750 units for
$1,500,000 and 7,875 units for $126,000 were purchased by Victory and WEC,
respectively.
May 2000 Private Placement Of units
-----------------------------------
In May 2000, the Company completed a private placement of $715,000 of units
at $32.50 per unit, with each unit consisting of 10 shares of common stock and a
warrant to purchase one share of common stock at an exercise price of $4.25 per
share until May 19, 2003. The private placement was made pursuant to exemptions
from federal and state registration requirements. A total of 2,000 units for
$65,000 were purchased by Whittier Energy Company.
Except as described above, during the fiscal year ended August 31, 2000,
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.
31
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) and (a)(2) Financial Statements And Financial Statement Schedules
See "ITEM 7. FINANCIAL STATEMENTS".
(a)(3) Exhibits.
--------
Exhibit Index
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. (2)
3.3 Amended and Restated Bylaws (3)
27.1 Financial Data Schedule
--------------------
(1) Incorporated by reference from the Registrant'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 Registrant's Form 10-KSB/A1 for the year
ended August 31, 1997.
(3) Incorporated by reference from Registrant's form 10-KSB for the year ended
August 31, 1999.
(b) Reports On Form 8-K.
-------------------
During the fourth quarter of the fiscal year ended August 31, 2000, the
Company filed three Current Reports on Form 8-K dated July 6, 2000, July 18,
2000 and August 7, 2000. These events consisted of the dissemination of press
releases by the Company and were reported under "ITEM 5. OTHER EVENTS".
Subsequent to August 31, 2000 and prior to filing this Annual Report on Form
10-KSB, the Company has filed one Current Report on Form 8-K dated November 28,
2000.
32
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
INDEX
Independent Auditor's Report F-2
Balance Sheet
August 31, 2000 F-3
Statements of Operations
Years Ended August 31, 1999 and 2000 and
Cumulative Amounts from Inception to August 31,
2000 F-4
Statements of Members'/Stockholders' Equity
Period from Inception (May 31, 1996) to
December 31, 1996, Eight Months Ended
August 31, 1997 and Years Ended August 31, 1998,
1999, and 2000 F-5 - F-7
Statements of Cash Flows
Years Ended August 31, 1999 and 2000 and
Cumulative Amounts from Inception to August 31,
2000 F-8 - F-9
Notes to Financial Statements F-10 - F-20
F - 1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
PYR ENERGY CORPORATION
We have audited the accompanying balance sheet of PYR Energy Corporation (a
development stage company) as of August 31, 2000, the related statements of
operations, members'/stockholders' equity and cash flows for the two years then
ended, and cumulative amounts from inception to August 31, 2000. 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, 2000, and the results of its operations and its cash flows for the
two years then ended and cumulative amounts from inception to August 31, 2000 in
conformity with generally accepted accounting principles.
Wheeler Wasoff, P.C.
Denver, Colorado
November 13, 2000
F - 2
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEET
AUGUST 31, 2000
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 8,598,016
Prepaid expenses 20,835
------------
Total Current Assets
PROPERTY AND EQUIPMENT 11,323,239
------------
$ 19,942,090
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 165,289
Current portion of capital lease obligation 920
------------
Total Current Liabilities 166,209
------------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 9)
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; Authorized 1,000,000 shares
Series A - Authorized 25,000 shares; Issued and outstanding 14,263 shares 14
Common stock, $.001 par value; Authorized 50,000,000 shares
Issued and outstanding 19,069,019 shares 19,069
Capital in excess of par value 22,048,384
Deficit accumulated during the development stage (2,291,586)
------------
19,775,881
------------
$ 19,942,090
============
The accompanying notes are an integral part of the financial statements
F - 3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
from
Years Ended Inception to
August 31, August 31,
1999 2000 2000
REVENUES
<S> <C> <C> <C>
Consulting fees $ -- $ -- $ 127,528
Interest 116,713 165,411 323,865
------------ ------------ ------------
116,713 165,411 451,393
------------ ------------ ------------
OPERATING EXPENSES
General and administrative 743,115 929,420 2,491,460
Dry hole, impairment and abandonments 306,369 200,000 521,369
Interest 183,256 211 184,306
Depreciation and amortization 24,380 18,327 66,173
------------ ------------ ------------
1,257,120 1,147,958 3,263,308
------------ ------------ ------------
OTHER INCOME
Gain on sale of oil and gas prospects -- -- 556,197
------------ ------------ ------------
(1,140,407) (982,547) (2,255,718)
INCOME APPLICABLE TO
PREDECESSOR LLC (Note 1) -- -- (35,868)
------------ ------------ ------------
NET (LOSS) (1,140,407) (982,547) (2,291,586)
Less dividends on preferred stock (50,910) (178,621) (229,531)
------------ ------------ ------------
NET (LOSS) TO COMMON STOCKHOLDERS $ (1,191,317) $ (1,161,168) $ (2,521,117)
============ ============ ============
NET (LOSS) PER COMMON SHARE
BASIC AND DILUTED (Note 2) $ (.11) $ (.07) $ (.27)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED (Note 2) 10,823,645 16,069,869 9,368,620
============ ============ ============
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 YEARS ENDED AUGUST 31, 1998, 1999 & 2000
Preferred Stock
---------------
Members'
Equity Shares Amount
<S> <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) -- --
Recapitalization of shares issued by Mar prior to merger -- -- --
Sales of common stock pursuant to private placement at --
$.25 per share -- -- --
Sale of common stock pursuant to private placement at --
$.75 per share -- -- --
Costs of private placements offerings -- -- --
Net (loss) August 6, 1997 to August 31, 1997 -- -- --
----------- ------ ------
Balance, August 31, 1997 -- -- --
Net (loss) -- -- --
----------- ------ ------
Balance, August 31, 1998 -- -- --
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 MEMBERS'/STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEARS ENDED AUGUST 31, 1998, 1999 & 2000
Deficit
Common Stock Accumulated
---------------- Capital in During the
Excess of Developmental
Shares Amount Par Value Stage
<S> <C> <C> <C> <C>
Inception, May 31, 1996 -- $ -- $ -- $ --
Initial member contributions - cash -- -- -- --
Member contribution- services -- -- -- --
Distributions to members -- -- -- --
Net income -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 1996 -- -- -- --
Member contributions - cash -- -- -- --
Member contribution - services -- -- -- --
Distributions to members -- -- -- --
Net income - January 1, 1997 to August 5, 1997 -- -- -- --
Issuance of common stock to members of PYR Energy, -- -- --
LLC upon merger ($.008 per share) 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(Cont'd)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF MEMBERS'/STOCKHOLDERS' EQUITY (continued)
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEARS ENDED AUGUST 31, 1998, 1999, & 2000
Preferred Stock
---------------
Members'
Equity Shares Amount
<S> <C> <C> <C>
Balance Forward $ -- -- $ --
Issuance of preferred stock for convertible notes -- 25,000 25
Unamortized convertible note financing costs -- -- --
Issuance of common stock for interest on convertible
debt, at $2.19 per share -- -- --
Issuance of common stock warrants for financing costs -- -- --
Conversion of preferred stock to common stock
at $.60 per share -- (2,021) (2)
Sale of common stock pursuant to private placement for
cash of $1.60 per share -- -- --
Costs of private placement -- -- --
Exercise of private placement warrants for cash of $2.50
per share -- -- --
Issuance of common stock for property, valued at $.75
per share -- -- --
Issuance of common stock for property, valued at $2.00
per share -- -- --
Preferred dividends paid -- -- --
Net (loss) -- -- --
------------ ------------
Balance August 31, 1999 $ -- 22,979 $ 23
The accompanying notes are an integral part of the financial statements
F - 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF MEMBERS'/STOCKHOLDERS' EQUITY (continued)
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEARS ENDED AUGUST 31, 1998, 1999, & 2000
Deficit
Common Stock Accumulated
---------------- Capital in During the
Excess of Developmental
Shares Amount Par Value Stage
<S> <C> <C> <C> <C>
Balance Forward 9,154,804 $ 9,155 $ 1,768,088 $ (168,632)
Issuance of preferred stock for convertible notes -- -- 2,499,976 --
Unamortized convertible note financing costs -- -- (73,319) --
Issuance of common stock for interest on convertible
debt, at $2.19 per share 53,326 53 116,769 --
Issuance of common stock warrants for financing costs -- -- 56,833 --
Conversion of preferred stock to common stock
at $.60 per share (336,833) 337 (335) --
Sale of common stock pursuant to private placement for
cash of $1.60 per share 4,375,000 4,375 6,995,625 --
Costs of private placement -- -- (83,155) --
Exercise of private placement warrants for cash of $2.50
per share 3,125 3 7,809 --
Issuance of common stock for property, valued at $.75
per share 266,666 267 199,733 --
Issuance of common stock for property, valued at $2.00
per share 218,866 219 437,513 --
Preferred dividends paid (50,910) -- -- --
Net (loss) -- -- -- (1,140,407)
------------ ------------ ------------ ------------
Balance August 31, 1999 14,408,620 $ 14,409 $ 11,874,627 $ (1,309,039)
The accompanying notes are an integral part of the financial statements
F - 6(Cont'd)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF MEMBERS'/STOCKHOLDERS' EQUITY (continued)
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEARS ENDED AUGUST 31, 1998, 1999, & 2000
Preferred Stock
---------------
Members'
Equity Shares Amount
<S> <C> <C> <C>
Balance Forward $ -- 22,979 $ 23
Issuance of common stock for services
(valued at $4.00 per share) -- -- --
Conversion of preferred stock to common stock
at $.60 per share -- (8,716) (9)
Exercise of warrants for cash of $.75 per share -- --
Exercise of private placement warrants for
cash of $2.50 per share -- -- --
Issuance of common stock for payment of
preferred dividends (valued at $4.30 per share) -- -- --
Issuance of common stock for payment of
preferred dividends (valued at $5.24 per share) -- -- --
Sale of common stock pursuant to private placement
for cash of $3.25 per share -- -- --
Costs of private placement -- -- --
Exercise of common stock options -- --
Retirement of common stock received for option exercise -- --
Sale of common stock pursuant to private placement
for cash of $3.50 per share -- -- --
Issuance of common stock warrants for offering costs -- -- --
Costs of private placement -- -- --
Net (loss) -- -- --
------- ------------ ------------
Balance August 31, 2000 $ -- 14,263 $ 14
======= ============ ============
The accompanying notes are an integral part of the financial statements
F - 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF MEMBERS'/STOCKHOLDERS' EQUITY (continued)
PERIOD FROM INCEPTION (MAY 31, 1996) TO DECEMBER 31, 1996,
EIGHT MONTHS ENDED AUGUST 31, 1997 AND YEARS ENDED AUGUST 31, 1998, 1999, & 2000
Deficit
Common Stock Accumulated
---------------- Capital in During the
Excess of Developmental
Shares Amount Par Value Stage
<S> <C> <C> <C> <C>
Balance Forward 14,408,620 $ 14,409 $ 11,874,627 $ (1,309,039)
Issuance of common stock for services
(valued at $4.00 per share) 5,000 5 19,995 --
Conversion of preferred stock to common stock
at $.60 per share 1,452,597 1,452 (1,443) --
Exercise of warrants for cash of $.75 per share 58,333 58 43,692 --
Exercise of private placement warrants for
cash of $2.50 per share 160,938 161 402,184 --
Issuance of common stock for payment of
preferred dividends (valued at $4.30 per share) 24,914 25 (25) --
Issuance of common stock for payment of
preferred dividends (valued at $5.24 per share) 13,617 14 (14) --
Sale of common stock pursuant to private placement
for cash of $3.25 per share 220,000 220 714,780 --
Costs of private placement -- -- (11,857) --
Exercise of common stock options 27,500 28 26,285 --
Retirement of common stock received for option exercise (2,500) (3) (10,310) --
Sale of common stock pursuant to private placement
for cash of $3.50 per share 2,700,000 2,700 9,447,300 --
Issuance of common stock warrants for offering costs -- -- 110,606 --
Costs of private placement -- -- (567,436) --
Net (loss) -- -- -- (982,547)
------------ ------------ ------------ ------------
Balance August 31, 2000 19,069,019 $ 19,069 $ 22,048,384 $ (2,291,586)
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
F - 7 (Cont'd)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Years Ended Cumulative
August 31 Amounts from
Inception
1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (1,140,407) $ (982,547) $ (2,255,718)
Adjustments to reconcile net (loss) to
net cash provided by operating activities
Depreciation and amortization 24,380 18,327 66,174
Contributed services -- -- 36,000
Gain on sale of oil and gas prospects -- -- (556,197)
Dry hole, impairment and abandonments 306,369 200,000 521,369
Common stock issued for interest on debt 116,822 -- 116,822
Common stock issued for services -- 20,000 20,000
Amortization of financing costs 26,939 -- 26,939
Amortization of marketable securities (20,263) -- (20,263)
Changes in assets and liabilities
Decrease (increase) in accounts receivable (3,082) 2,516 (566)
(Increase) in prepaids (3,451) (6,644) (25,386)
(Decrease) increase in accounts payable 135,450 (105,802) 59,603
Other 10,000 -- 6,249
------------ ------------ ------------
Net cash (used) by operating activities (547,243) (854,150) (2,004,974)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for furniture and equipment (13,067) (4,200) (90,155)
Cash paid for undeveloped oil and gas properties (3,522,969) (5,929,267) (11,157,027)
Proceeds from sale of oil and gas properties -- -- 1,050,078
Cash paid for marketable securities (5,090,799) -- (5,090,799)
Proceed from sale of marketable securities -- 5,111,062 5,111,062
Cash paid for reimbursable property costs (410,000) -- (410,000)
------------ ------------ ------------
Net cash (used) in investing activities (9,036,835) (822,405) (10,586,841)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Members capital contributions -- -- 28,000
Distributions to members -- -- (66,000)
Cash from short-term borrowings -- -- 285,000
Repayment of short-term borrowings -- -- (285,000)
Proceeds from sale of common stock 7,000,000 10,165,000 19,188,750
Proceeds from sale of convertible debt 2,500,001 -- 2,500,001
Proceeds from exercise of warrants 7,812 446,095 453,907
Proceeds from exercise of options -- 16,000 16,000
Cash paid for offering costs (126,580) (468,687) (875,978)
Cash received upon recapitalization and merger -- -- 336
Payments on capital lease (1,440) (1,742) (4,275)
Preferred dividends paid (50,910) -- (50,910)
------------ ------------ ------------
Net cash (used) provided by financing activities 9,328,883 10,156,666 21,189,831
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH (255,195) 8,480,111 8,598,016
CASH, BEGINNING OF PERIODS 373,100 117,905 --
------------ ------------ ------------
CASH, END OF PERIODS $ 117,905 $ 8,598,016 $ 8,598,016
============ ============ ============
The accompanying notes are an integral part of the financial statements
F-8
</TABLE>
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED AUGUST 31, 1999 AND 2000
AND PERIOD FROM INCEPTION TO AUGUST 31, 2000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended August 31, 1999 and 2000, the Company paid cash for
interest of $371 and $211, respectively, 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.
During the year ended August 31, 1999, the Company issued common stock,
valued at $637,732, as partial consideration for oil and gas properties;
issued common stock, valued at $116,822 for interest on convertible debt;
and issued warrants, valued at $56,833, as partial consideration for
commission on the sale of convertible debt.
During the year ended August 31, 2000 the Company issued common stock,
valued at $20,000, for services; issued warrants, valued at $110,606, as
partial consideration for commission on a private placement sale of common
stock; and issued 38,531 shares of common stock for dividends on preferred
stock.
The accompanying notes are an integral part of the financial statements
F - 9
<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, primarily 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. 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 operations of PYR LLC are 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, 2000, has not earned any production revenue nor recognized reserves on
any of its properties. The Company's efforts, since August 1997, have
consisted of 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. During the years ended
August 31, 1999 and 2000 the Company continued its acquisition of unproven
properties and related seismic data with industry partners, and is
participating in exploration of the properties, including the drilling of
exploratory wells.
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.
F -10
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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. Oil and gas properties
accounted for using the full cost method of accounting, a method utilized
by the Company, are excluded from this requirement, but will continue to be
subject to the ceiling test limitations.
At August 31, 1999 and 2000 the Company has determined that an impairment
loss of $285,229 and $200,000, respectively, on unproved oil and gas
properties be recognized.
MARKETABLE SECURITIES
All investments are accounted for under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Company determines
the appropriate classification at the time of purchase. Securities are
classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at cost, adjusted for amortization of premiums and discounts to
maturity. Marketable securities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities are carried
at fair value, which is based on quoted prices. Unrealized gains and
losses, net of tax, are reported as a separate component of shareholders'
equity. The cost of securities available-for-sale is adjusted for
amortization of premiums and discounts to maturity. Interest and
amortization of premiums and discounts for all securities are included in
interest income. Realized gains and losses are included in other income.
Cost of securities sold is determined on a specific identification basis.
F-11
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
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, 2000, the Company had a net operating loss carryforward of
approximately $6,300,000 that may be offset against future taxable income
through 2020.
The Company has fully reserved the $1,350,000 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. Of the
total tax benefit, $975,000 is attributable to 2000.
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, and impairment pursuant to SFAS No. 121.
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.
The oil and gas industry is subject, by its nature, to environmental
hazards and clean-up costs. At this time, management knows of no
substantial costs from environmental accidents or events for which it may
be currently liable; except for the Company's liabilities related to the
blowout of November 23, 1998. The Company has advanced what management
believes to be the total remaining costs to claimants. (See Note 3) In
addition, the Company's oil and gas business makes it vulnerable to changes
in wellhead prices of crude oil and natural gas. Such prices have been
volatile in the past and can be expected to be volatile in the future. By
definition, proved reserves are based on current oil and gas prices and
estimated reserves. Price declines reduce the estimated quantity of proved
reserves and increase annual amortization expense (which is based on proved
reserves).
F - 12
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(LOSS) PER SHARE
(Loss) per common share is computed based on the weighted average number of
common shares outstanding during each period. 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.
SHARE BASED COMPENSATION
In October 1995, SFAS No. 123 "Accounting for Stock-Based Compensation" was
issued. This 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.
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.
NEW TECHNICAL PRONOUNCEMENTS
In June 1999 SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities- Deferral of the Effective Date of FASB Statements No.
133" was issued. Adoption of SFAS No. 137 is not expected to have an impact
on the Company's financial statements.
F - 13
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at August 31, 2000 consists of the following:
Furniture and equipment $ 90,155
Asset under capital lease 5,195
-----------
95,350
Less accumulated depreciation and amortization (65,700)
-----------
29,650
-----------
Undeveloped oil and gas prospects 11,778,818
Less impairment (485,229)
-----------
11,293,589
-----------
$11,323,239
===========
Information relating to the Company's costs incurred in its oil and gas
operations during the year ended August 31, 2000 is summarized as follows:
Property acquisition - unproved properties $ 1,318,813
Exploration costs 4,037,591
Yard inventory 572,863
-----------
$ 5,929,267
===========
Property acquisition costs include costs incurred to purchase, lease, or
otherwise acquire a property. Exploration costs include the costs of
geological and geophysical activity, and drilling and equipping exploratory
wells.
The Company reviews and determines the cost basis of drilling prospects on
a drilling location basis. During the year ended August 31, 1999 the
Company abandoned properties with a carrying cost of $21,140 and, in
addition, recorded an impairment loss on undeveloped oil and gas properties
in the amount of $285,229 and $200,000 for the years ended August 31, 1999
and 2000, respectively.
Depreciation expense for the years ended August 31, 1999 and 2000 was
$24,111 and $18,327, respectively.
On November 23, 1998, the Company's test well being drilled on its East
Lost Hills prospect suffered a blowout. A majority of the costs associated
with the blowout have been covered by insurance policies in effect when the
blowout occurred. A portion of the claims has not yet been received from
one of the insurance policies. The participants in the project, including
the Company, have filed a claim against the insurance carrier for the
reimbursement of these costs. The Company has paid $430,500 for its
proportionate share of the claims. The advanced costs at August 31, 2000
are included in oil and gas property costs. All recoveries, if any, will be
credited to oil and gas property costs.
F - 14
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 4 - CAPITAL LEASE OBLIGATION
Capitalized lease obligation at August 31, 2000 consists of a lease for
office equipment, repayable in monthly installments of $150 with interest
at 10.5%.
Future minimum payments on capitalized leases are as follows:
Year ending August 31, 2001 $ 937
Less amount representing interest 17
---------
Present value of net minimum lease payments, current maturity $ 920
=========
NOTE 5 - CONVERTIBLE NOTES PAYABLE
In November 1998 the Company completed the sale of $2,500,000, 10%
convertible notes, due October 1999. The notes were convertible into an
aggregate 25,000 shares of a newly designated Series A Preferred Stock of
the Company. The Company obtained shareholder approval for authorization of
the Series A Preferred Stock and, in April 1999, all notes were converted
to Series A Preferred Stock. Accrued interest due as of the date of
conversion of $116,822 was paid by the issuance of 53,326 shares of common
stock, valued at $2.19 per share. In conjunction with the sale of
$1,500,000 of the notes, the Company paid a finder's 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.
The warrants were valued at $56,833.
NOTE 6 - STOCKHOLDERS' EQUITY
PREFERRED STOCK
In April 1999 the shareholders of the Company approved an amendment to the
Certificate of Incorporation wherein the Company was authorized to issue
1,000,000 shares of preferred stock, with a par value of $.001 per share.
The Board of Directors authorized the designation of a "Series A Preferred
Stock," consisting of 25,000 shares, face value of $100 per share, 10%
cumulative dividend payable in cash or shares of common stock on January 1
and July 1 of each year. Holders of Series A Preferred Stock receive
preference in the event of any liquidation, dissolution or winding up of
the Company. The shares of Series A Preferred Stock are convertible into
shares of common stock of the Company at an initial conversion price of
$.60 per share.
In April 1999 the holders of convertible notes (Note 5) converted the notes
to 25,000 shares of Series A Preferred Stock. As of August 31, 2000, 10,737
shares of Series A Preferred Stock were converted to 1,789,430 shares of
common stock at a conversion price of $.60 per share.
At August 31, 2000 accrued, undeclared dividends on Series A Preferred
Stock was $23,789.
F - 15
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
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
members' 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
transaction 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:
o 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.
In August 1997, the Company completed the sale of common stock and warrants
pursuant to a private placement as follows:
o 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.
In May 1999 the Company completed the sale of 437,500 units of common stock
and warrants pursuant to a private placement at a price of $16 per unit.
Each unit consisted of 10 shares of common stock and one warrant to
purchase one share of common stock at an exercise price of $2.50 per share
for a period of five years. The Company may repurchase the warrants for
$.001 per warrant at any time after the weighted average trading price of
the Company's common stock has been at least $6.00 per share for a 45-day
period. Proceeds from the offering were $7,000,000, before costs of the
offering of $83,155. As of August 31, 2000 warrant holders had exercised
164,063 warrants.
During the year ended August 31, 1999 the Company issued shares of common
stock, valued at non-discounted trading market price as of the date of the
transaction, in conjunction with the assignment to the Company of certain
undeveloped oil and gas prospects located in California as follows:
o 266,666 shares, valued at $.75 per share, as full consideration for
property received.
o 218,866 shares, valued at $2.00 per share, as partial consideration
for property received.
F - 16
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
In May 2000 the Company completed the sale of 22,000 units of common stock
and warrants pursuant to a private placement at a price of $32.50 per unit.
Each unit consisted of 10 shares of common stock and one warrant to
purchase one share of common stock at an exercise price of $4.25 per share
for a period of three years. The Company may repurchase the warrants for
$.001 per warrant at any time after the weighted average trading price of
the Company's common stock has been at least $7.50 per share for a 30 day
period. Proceeds from the offering were $715,000, before costs of the
offering of $11,857. As of August 31, 2000 warrant holders had not
exercised any warrants.
In August 2000 the Company completed the sale of 540,000 units of common
stock and warrants pursuant to a private placement at a price of $17.50 per
unit. Each unit consisted of 5 shares of common stock and one warrant to
purchase one share of common stock at an exercise price of $4.80 per share
for a period of three years. The Company may repurchase the warrants for
$.001 per warrant at any time after the weighted average trading price of
the Company's common stock has been at least $10.00 per share for a 30 day
period. Proceeds from the offering were $9,450,000, before costs of the
offering of $567,436 which included warrants valued at $110,606. As of
August 31, 2000 warrant holders had not exercised any warrants.
During the year ended August 31, 2000 the Company issued 5,000 shares of
common stock for services, valued at the non-discounted trading market
price as of the date of the transaction of $20,000 ($4.00 per share).
WARRANTS
In 1999, the Company issued warrants to purchase 175,000 shares of common
stock at an exercise price of $.75 per share through October 26, 2003 as
partial consideration for a commission in conjunction with the private
placement of convertible notes. The warrants are valued at $56,833, using
the Black-Scholes option pricing model. In May 1999, in conjunction with
the sale of 437,500 units of common stock and warrants as described above,
the Company issued warrants to purchase 437,500 shares of common stock at
an exercise price of $2.50 through May 14, 2004.
In 2000, the Company issued warrants to purchase 70,875 shares of common
stock at an exercise price of $5.50 per share through July 31, 2003 as
partial consideration for a commission in conjunction with the private
placement of common stock. The warrants are valued at $110,606, using the
Black-Scholes option pricing model. In May 2000, in conjunction with the
sale of units of common stock and warrants as described above, the Company
issued warrants to purchase 22,000 shares of common stock at an exercise
price of $4.25 through May 19, 2003. In August 2000, in conjunction with
the sale of units and common stock, the Company issued warrants to purchase
540,000 shares of common stock at an exercise price of $4.80 through July
31, 2003.
F - 17
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
At August 31, 2000 the status of outstanding warrants is as follows:
Issue Shares Exercise Expiration
Date Exercisable Price Date
October 26, 1998 116,667 $ .75 October 26, 2003
May 14, 1999 273,437 $2.50 May 14, 2004
May 19, 2000 22,000 $4.25 May 19, 2003
July 31, 2000 540,000 $4.80 July 31, 2003
August 1, 2000 70,875 $5.50 July 31, 2003
At August 31, 2000 the per share weighted average exercise price of
outstanding warrants was $3.76 per share.
Under two stock option plans, options to purchase common stock may be
granted until 2010. Stock options are granted to employees at exercise
prices equal to the fair market value of the Company's stock at the dates
of grants. Generally, options vest 1/3 each year for a period of three
years from grant date and can have a maximum term of up to 10 years.
Options are issued to key employees and other persons who contribute to the
success of the Company. The Company has reserved 1,500,000 shares of common
stock for these plans. At August 31, 1999 and 2000, options to purchase
179,000 and 300,000 shares, respectively, were available to be granted
pursuant to the stock option plans.
The status of outstanding options granted pursuant to the plans are as
follows:
Number Weighted Avg. Weighted Avg.
of Shares Exercise Price Fair Value
Options Outstanding- July 1, 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)
Expired (10,000)
Granted 585,000 $1.10 $ .92
-------
Options Outstanding- August 31, 1999 821,000 $1.20 $ .74
(149,000 exercisable)
Granted 379,000 $3.06 $2.37
Exercised (27,500)
-------
Options Outstanding- August 31, 2000
(447,500 exercisable) 1,172,500 $2.12 $1.26
=========
F - 18
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 7 - STOCK OPTION PLAN
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 2000 would have been
increased to the pro forma amounts indicated below:
Net (loss) applicable to common stockholders - as reported $ (1,161,168)
============
Net (loss) applicable to common stockholders - pro forma $ (1,483,622)
============
(Loss) per share - as reported $ (.07)
============
(Loss) per share - pro forma $ (.09)
============
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
71% to 81%; discount rate of 5.50%; and expected lives of 2 to 5 years.
At August 31, 2000 the number of options exercisable was 447,500, the
weighted average exercise price of these options was $1.73, the weighted
average contractual life of the options was 4 years and the exercise price
was $.69 to $4.13 per share.
NOTE 8 - 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:
Year ending August 31, 2001 $ 37,036
Rent expense was $40,816 and $41,036 for the years ended August 31, 1999
and 2000, respectively.
In conjunction with the Company's working interests in undeveloped oil and
gas prospects, the Company must pay approximately $1,298,000 in delay
rentals and other costs during fiscal year ended August 31, 2001 to
maintain the right to explore these prospects.
The Company may be subject to various possible contingencies which are
derived 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 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.
F - 19
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
NOTE 9 - FINANCIAL INSTRUMENTS (CONTINUED)
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. 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.
The Company believes that credit risk associated cash is remote.
NOTE 10 - SEGMENT REPORTING
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" was issued, which amends the requirements for a public
enterprise to report financial and descriptive information about its
reportable operating segments. Operating segments, as defined in the
pronouncement, are components of an enterprise about which separate
financial information is available and that are evaluated regularly by the
Company in deciding how to allocate resources and in assessing performance.
The financial information is required to be reported on the basis that is
used internally for evaluating segment performance and deciding how to
allocate resources to segments.
The Company has one reportable segment, oil and gas producing activities.
The Company has concentrated its oil and gas acquisition and exploration
activities in the western United States, primarily in California and the
Rocky Mountain region. All significant activities in this segment have been
with industry partners.
The Company has not earned any revenue from its oil and gas activities nor
recorded proved reserves at August 31, 2000.
NOTE 11 - COMPREHENSIVE INCOME
There are no adjustments necessary to net (loss) as presented in the
accompanying statements of operations to derive comprehensive income in
accordance with SFAS No. 130, "Reporting Comprehensive Income."
NOTE 12 - RECLASSIFICATIONS
The accompanying financial statements for the year ended August 31, 1999
have been reclassified to reflect the reclassification of preferred
dividends paid in 1999 as a charge to capital in excess of par value
instead of a charge to accumulated deficit.
NOTE 13 - SUBSEQUENT EVENT
In November 2000 the Company entered into an agreement with a privately
held non-related entity to purchase an additional 1.544% interest in the
East Lost Hills project. At August 31, 2000 the Company has a 10.575%
interest in East Lost Hills.
F - 20
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PYR ENERGY CORPORATION
Date: November 29, 2000 By: /s/ D. Scott Singdahlsen
-------------------------
D. Scott Singdahlsen, Chief
Executive Officer
In accordance with the requirements of the Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
By: /s/ D. Scott Singdahlsen Chief Executive Officer, November 29, 2000
----------------------------- President and Chairman Of
D. Scott Singdahlsen The Board
By: /s/ Keith F. Carney Director November 29, 2000
-----------------------------
Keith F. Carney
By: /s/ S. L. Hutchison Director November 29, 2000
------------------------------
S. L. Hutchison
By: /s/ Bryce W. Rhodes Director November 29, 2000
------------------------------
Bryce W. Rhodes
By: /s/ Andrew P. Calerich Vice-President, November 29, 2000
------------------------------ Chief Financial
Andrew P. Calerich Officer and Secretary
