FORM 10-SB
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12 (b) or (g) of the Securities Exchange Act of 1934
SW Ventures, Inc
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(Name of Small Business Issuer in its charter)
Nevada 87-0559453
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
455 East 400 South, Ste. 100, Salt Lake City, Utah 84111
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (801) 355-6524
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered Each class is to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common
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(Title of class)
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Inception and Purchase of Working Interest in Oil and Gas Properties
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SW Ventures, Inc. (the "Company") was organized as a Nevada corporation
on May 7, 1996. The Company's business purpose is that of seeking out and
investing in various oil and gas opportunities in the Western United States.
At inception, the Company issued "unregistered", "restricted" shares to its
founders in connection with the initial funding of the Company. In June of
1997, the Company commenced an offering of its common stock pursuant to an
exemption from the registration requirements of Section 5 of the Securities
Act of 1933, as amended (the "Act"), under Section 3(b), Regulation D, Rule
504, whereby it offered for sale up to 1,000,000 of its unregistered common
shares at an offering price of $.10 per share. The purpose of the offering was
to raise funds for the purchase of a 21.25% working interest in the Montana
Prospect, a 320 acre oil lease in Crook County, Wyoming. The Offering
commenced on June 19, 1997 and closed on September 30, 1997 with all shares
offered sold for gross proceeds of $100,000.
In August of 1997, the Company purchased a 21.25% working interest in
the Montana Prospect, a 320 acre oil lease in Crook County, Wyoming (the
"Prospect"), which purchase included the cost of drilling and completion to
the Company, based on its 21.25% working interest, of the Montana Berger Well
#1. The total acreage acquisition costs were $11,330 and drilling and
completion of the first well totaled $62,995. The Company's share of revenues
from the well is 17.85% after a landowners royalty is paid. The Company
elected to participate in a second well on the Montana Prospect, the Montana
Berger Well #2, in late March 1998, which well has been drilled and
completed. The Company's share of the cost of drilling and completing the
second well, based on its 21.25% working interest, was $69,874. The Company's
interest in oil revenues on the second well after landowner royalties are paid
is equal to 17.35%. The Company funded the drilling and completion of the
second well partially through funds raised in a second offering conducted
pursuant to the exemption provided for under Section 3(b), Regulation D, Rule
504, of the Act which commenced on March 16, 1998, and closed on September 13,
1998 with 326,066 shares sold at $0.15 per share for gross proceeds of
$48,910. The funds raised were insufficient to pay the Company's share of the
drilling and completion of the second well. Additional funding was provided
by an officer and director who loaned the Company $11,200 of the required
completion and drilling costs, and approximately $9,764 came from revenues
from operations. The funds advanced by the officer and director are interest
free and payable at such time as the director and the Company may mutually
determine. As of this date, approximately $2,300 has been repaid.
The Company intends to participate in other wells drilled on the
Prospect; it also intends to investigate other business opportunities in the
oil and gas industry such as purchasing overriding and/or working interest in
other wells, the purchase of interest in producing wells, and/or an
investment in other oil and gas related businesses. As of the date hereof,
the Company has invested in only one drilling program, the Montana Prospect
Drilling Program, and has participated in the drilling of two wells on that
Prospect.
Forward Looking Information
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This registration statement contains certain forward-looking statements
information relating to the Company that are based upon beliefs of the
Company's Management as well as assumptions made by and information currently
available to the Management. When used in this registration statement, the
words anticipate, believe, estimate, expect, and similar expressions, as they
related to the Company and the Company's Management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company with respect to the future events and are subject to certain risks,
uncertainties, and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward looking statements.
Risk Factors Which Could Affect Future Profitability
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* Price of Oil Revenues generated from oil production are highly
dependent on the price of crude oil. Fluctuations in type and usage of energy
make it difficult to estimate future prices of crude oil which has taken a
dramatic fall in the past 6 months. Such fluctuations of prices are caused by
a number of factors beyond control, including regional and international
demand, energy legislation, and the abundance of alternative fuels.
International political and economic conditions have significant impact on the
price of crude oil.
* Imprecise Nature of Reserve Estimates The estimate of possible and
probable reserves of oil and gas are imprecise. While such estimations are
based on engineering and other data, the process is a subjective one
consisting of estimating underground accumulations of oil and/or gas that
cannot be measured in an exact way. Accuracy of estimates is based on the
quality of the available data and on engineering and geological interpretative
judgement. The accuracy of such estimates often changes as more data becomes
available. There is no assurance that information regarding reserves set
forth herein will be ultimately produced.
* Reliance on Others The Company is highly dependent on the operator
of its wells and must rely on such entity's expertise and competence in the
operation of the wells and sale of crude oil to distributors.
* Lack of Diversification The Company currently has only one business
that of oil and gas exploration and development. In that area, the Company
only has one material investment and no diversification into other areas of
oil and gas exploration or any other type of business. Failure of the Company
to continue seeing revenues from its current operations could have a material
adverse effect on the Company.
* Environmental Regulation The oil and gas industry is subject to
substantial regulation with respect to discharge of materials into the
environment or otherwise relating to the protection of the environment.
Exploration, development and production of oil and gas are regulated by
various government agencies with respect to storage and transportation of
hydrocarbons and clean-up of sites of wells. Many of these activities require
government approval before underwriting the costs associated with compliance
with applicable laws and regulations which have increased the costs associated
with planning, designing, drilling, installing, operating, and plugging and
abandoning a well. To the extent the Company owns an interest in a well, it
may be responsible for costs of environmental regulation compliance even well
after the plugging and abandoning of that well.
* Operating Hazards/Uninsured Risks. Operation of an oil and gas
well is subject to risks such as blowouts, cratering, pollution, and fires,
any one of which could result in damage or destruction of the well or
production faults or persons working. The operator of the well may be unable
to purchase adequate insurance against all of the risks. Occurrence of a
significant event could have a material adverse effect on the Company's
business.
* Additional Problems Encountered with Water Pressurized Well The
Montana Prospect is located adjacent to a water flood which has increased
water pressure in the Minnelusa Upper "B" Sand where the Program will be
drilling. A previous successfully drilled well on the Montana Prospect
failed because the increased water pressure made capturing oil economically
unfeasible although efforts were made to overcome the problem. The same
water pressure will be encountered in each of the new holes the program
drills.. Although the Operator and the Sponsor were successfully able to
initiate certain steps to ensure that the increased water pressure did not
adversely affect the recovery of oil on the Montana Berger Well #1, there is
no assurance that even if oil is discovered on the new well, that the Operator
will be able to solve any water flood problems and economically recover the
oil.
* Competition The Company must compete with many other oil and gas
companies which are better capitalized and have more experience in the
industry than the Company does. The Company's lack of experience could
adversely affect its chances to compete in an industry dominated by larger
more experienced firms.
* High Degree of Risk for Oil and Gas Exploration for oil and gas by
nature involves a high degree of risk. There is no guarantee that the Company
will be successful in discovering oil and/or gas on any new wells; the
Company's entire investment could be at risk. Even if oil and gas are reached
on any new wells, and despite the fact the Company is receiving limited
revenues from the Montana Berger Well #1 and #2, there is no assurance that
oil and gas reserves will be obtained in sufficient quantities for the Company
to recover its investment in full or in part. Oil and gas exploration is
marked by unprofitable efforts, not only from dry holes, but from wells which,
although productive, do not return a profit on the amount expended. There are
a multitude of problems which can be encountered when drilling for oil/gas any
one of which could cause a total failure of the enterprise thus resulting in a
total loss on the part of the Company as a working interest partner especially
if the Company fails to diversify its business.
* Sources and Availability of Equipment/Raw Materials - In the past,
increased drilling activities from time to time have created certain shortages
of equipment necessary in the drilling and or completion of wells. Due to
shortage of such equipment and to generally inflationary trends, and the age
and condition of much of the existing equipment, prices at which equipment is
available have escalated. Although the Company has suffered no problems to
date as to equipment shortages, or unsatisfactory equipment, there is always
the possibility that current equipment in use due to age and/or lack of
proper maintenance could fail to perform properly forcing expensive repairs
and/or costly delays to the working interest participants, one of which will
be the Company, or the purchase of additional new or used equipment which
could be delayed if shortages of equipment exist. In addition, there is no
guarantee that equipment will be available at such times as the Program begins
developing other properties.
* Limited Operating History -- The Company is newly organized, and has
only seen limited revenues from operations and has only limited assets
approximating $146,000. The Company has also incurred certain liabilities
approximating $23,000. Accordingly, there can be no assurance that the
Company will operate at a profitable level.
* Limited Experience in the Oil and Gas Business The officers and
directors have very limited experience in the oil and gas industry and this
lack of experience could adversely affect the Company's chances of success.
(See "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS", Part I,
Item 5, of this Registration Statement.)
* Management Devotes Only Part Time to Company's Affairs - Each of the
officers and directors of the Company have other business interests to which
they will devote much of their time. Management, therefore, will devote only
part of their time to the affairs of the Company.
* No Public Market for Company's Securities - At the present time
there is no public market for the Company's common stock, and there can be no
assurance that a public market will develop. Although the Company intends to
apply for a listing on the NASD OTC Bulletin Board, there is no guarantee that
such will be the case, or that if the Company succeeds in listing its common
stock on the NASD OTC Bulletin Board that a market for the Company's common
stock will develop.
* Penny Stock Regulation - If the Company succeeds in developing a
market for its common shares, it will be subject to the penny stock rules. The
Securities and Exchange Commission has adopted rules that regulate broker
dealer practices in connection with penny stocks. Penny stock are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided current price and volume information with respect to
transactions in such securities is provided by the exchange system.) The
penny stock rule requires that a broker/dealer, prior to a transaction in a
penny stock not otherwise exempt under the rules, to deliver a standardized
risk disclosure document prepared by the SEC that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker dealer must also provide the customer with bid and offer quotations for
the penny stock, the compensation to the broker dealer and its salesperson in
the transaction, and monthly account statements showing the market value of
each penny stock held in the customer account. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise
exempt from such rules, the broker dealer must make a special written
determination that a penny stock is a suitable investment for the purchase and
receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. The Company's common stock is currently subject to the penny
stock rules, and, accordingly, investors may find it difficult to sell their
shares if at all when and if a public market develops.
* Voting Control - As of this date, officers and directors maintain
voting control of the Company currently owning 58.43% of the Company's common
stock and are able, among other things, to direct the affairs of the Company.
Because the holders of shares of Common Stock of the Company do not have
cumulative voting rights, holders of more than fifty percent (50%) of such
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose, and, in such event, the holders of
the remaining shares will not be able to elect any of the Company's directors.
(See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT", Part I,
Item 4, of this Registration Statement.)
* Sales of Shares by "Insiders" - Of the 3,416,066 common shares of the
Company's common stock currently issued and outstanding, 1,000,000 are owned
by public investors in the Company's prior offering, 326,066 are owned by
public investors in the Company's current offering and 2,090,000 are held by
officers, directors and other initial shareholders have been issued in
reliance on the "private placement" exemption of Section 4(2) of the
Securities Act of 1933, as amended. If a market for the Company's common
shares were to develop, such "restricted" shares will not be available for
sale in the open market without registration, except in reliance upon Rule 144
under the Act or some other applicable exemption. In general, under Rule 144,
a person or persons whose shares are aggregated, who beneficially owned shares
acquired in a non-public transaction for at least one year, including persons
who may be deemed "affiliates" of the Company as that term is defined under
the 1933 Act, would be entitled to sell within any three-month period, a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly reported trading
volume on all national securities exchanges and through NASDAQ during the four
calendar weeks preceding such sale provided current public information is then
available. If a substantial number of the shares owned by the initial
Shareholders were sold in the market, the market price of the Common Stock
could be adversely affected. As of the date hereof, 2,000,000 of the
2,090,000 shares issued in reliance upon Section 4(2)and therefore considered
"restricted", have been beneficially owned for more than one year, which
would make them eligible for resale under Rule 144 provided all of the
applicable terms and conditions were met, and provided a public market existed
for the Company's common shares. The additional 90,000 shares will have
been owned for a year on January 27, 1999. In addition, of the 1,000,000
shares offered and sold in the Company's first offering, 365,500 shares were
purchased by directors of the Company, one current director and one a former
director. Such shares are also "restricted" although not subject to a holding
period, and are subject to the provisions of Rule 144 that apply to affiliate
transactions. Of the shares sold in the second offering, 6,000 shares were
purchased by Terri Jackson, an officer and director of the Company. The 6,000
shares are also "restricted" although not subject to a holding period. The
majority of the outstanding shares of the Company which are eligible for
resale under Rule 144, when and if a market exists, are owned by one director
of the Company, Mr. Guido Cloetens. Mr. Cloetens owns 1,810,000 of the
Company's outstanding shares which would limit the amount of shares which
could be sold under Rule 144 in any 90 day period considerably, if a market
develops. (See SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
Item 4 of this Registration Statement.)
BUSINESS OF THE REGISTRANT
Principal Products of the Company - the Montana Prospect Drilling Program
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* The Montana Prospect Drilling Program * The Company's principal
product is oil and gas. As of the date hereof, the Company has invested in
only project, the Montana Prospect Drilling Program (the "Program"), which has
drilled and completed two wells: the Montana Berger Well #1 and the Montana
Berger Well #2. The Montana Prospect is in the northeastern Powder River
Basin in T. 53 N, R. 67 W, Section 17-18 and is part of an oil field known
as the Sidner Draw Field. The Program was formed for the purpose of engaging
in the acquisition of 320 acres of oil and gas lease located in Crook County,
Wyoming, and the drilling of a well or wells thereon; completing such well(s);
and, if warranted, operating of the same and distributing the revenues to the
Participants in the Program.
*Working Interest* In August/September 1997, the Company purchased its
21.25% working interest in the Program. The Company's initial investment in
the Program included the purchase of the leases and its estimated costs and
expenses for completion of the first well in the Program known as the Montana
Berger Well #1. Additional participants purchased 53.750% of the Program to
equal 75% of the Program. The working interest participants, including the
Company, who own an aggregate of 75% of the Program were responsible for
100% of the total land acquisition and drilling costs of the project up
through the drilling of the first well, the Montana Berger Well #1; the
Carried Working Interest Owners, which include the Sponsor (Triple B Energy -
9.375%), the geologist (Twiford International, Inc. - 6.250%), the Operator
(L& J Operating, Inc.- 3.125%), and Mr. Robert Haigh (who negotiated the
lease acquisition - 6.25%), have an aggregate 25% Carried Working Interest
(the Working Interest Participants and the Carried Working Interest
Participants are hereinafter sometimes collectively referred to as the
"Participants"). The Carried Working Interest Participants did not bear lease
acquisition costs which includes 25 separate leases on the Prospect, or
drilling costs of the first well, the Montana Berger Well #1. All of the
Participants, however, paid their proportionate share of completion costs once
casing point was set on the first well; each Participant will pay its
percentage share of all drilling and completion on any subsequent well they
elect to participate in. Each Participant has first right of refusal on
participation in each well the Program elects to drill, with a 300% penalty on
revenues to be received by a non-participating party on any well such party
chooses not to participate in. (Participating parties would receive a three
times the return of their investment before a non-participating party is
entitled to revenues on a well such party has not participated in.)
The following sets forth a breakdown of the working interest
participants on the Prospect before casing point was set on the first well,
("Promoted Gross Working Interest Owners" and after casing point was set on
the first well and on all subsequent wells ("Net Working Interest Owners").
<TABLE>
<CAPTION>
Promoted Gross Working Interest Owners Net Working Interest Owners
(cost bearing interest before (cost bearing interest after
casing point) for the Casing point) for the
Montana Berger Well #1 Montana Berger Well #1 and the
(Basis of 1/3 purchased 1/4) Remainder of the Montana Prospect
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<S> <C> <C>
Silver Petroleum Corporation 33.333% 25.000%
Sun Cementing of Wyoming, Inc. 16.667% 12.500%
James A. Nies 4.167% 3.125%
SW Ventures, Inc. 28.333% 21.250%
Triple B. Energy, Inc.(1) 17.500% 13.125%
Robert S. Haigh 0.000% 6.250%
Twiford International, Inc. 0.000% 6.250%
Triple B. Energy, Inc.(1) 0.000% 9.375%
L & J Operating 0.000% 3.125%
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100.000% 100.000%
(1) Triple B Energy owns both a 9.375% carried working interest and a 13.125% working interest
which equaled 17.50% of the costs until casing point was set on first well
</TABLE>
*Landowner Royalties * The leases on the Montana Prospect are three
year leases from private landowners (a total of 25 separate leases) at an
aggregate cost to the Program of $40,000. Each lease becomes perpetual
when and if a well is completed on the lease and during the life of the well.
The Montana Prospect is presently burdened by landowners royalties which vary
from landowner to landowner. The acreage on which the Montana Berger Well #1
was drilled is burdened by a landowners' royalty of 16% giving the Montana
Prospect Drilling Program a net interest of 84% . The Montana Berger Well #2
involves 15 separate landowners with varying royalties which equal 18.36%
leaving the Program a net interest of 81.64%.The Participants are entitled to
100% of the revenues after paying the landowners. Net revenues means the
percentage of oil and gas left to the Working Interest Participants after Land
Owners Royalty and any additional overriding royalties have been deducted from
the total oil or gas produced (approximately 17.85% to the Company on the
Montana Berger Well #1 and 17.35% to the Company on the Montana Berger Well
#2).
*Operating Agreement * The Company is a party to an operating agreement
(the "Operating Agreement") as is each Working Interest Participant, whereby
the Company appointed the Operator as the operator of the Montana Prospect
Drilling Program, its Montana Berger Wells #1 and #2, and any subsequent
wells the Program drills on the Montana Prospect, in all matters related to
the drilling and completion of the wells, and in the subsequent sale and
delivery of oil and gas therefrom, if any, into the marketplace. Each time
the Company elects to participate in the drilling and completion of a well, it
is given an itemized "Approval for Expenditures", which outlines the itemized
costs of drilling and completion as well as other costs anticipated to be
expended on the proposed well.
*Assignment of Lease * Subsequent to the execution of the Operating
Agreement, all of the subject leases comprising the Montana Prospect,
consisting of 25 separate leases, were held in the record name of Robert S.
and Marjorie Fern Haigh. The subject oil and gas leases were then assigned to
the Company (in its proportionate interest equal to 21.25%) on November 6,
1997 by the Haighs. Mr. Haigh was the negotiator on behalf of the Program
with the landowners and each of the 25 leases was originally assigned to him
prior to and during the sale of the working interest in the Program. The
leases were then assigned to the Participants in the Program subsequent to the
execution of the Operating Agreement between L & J Operating and the various
Participants in the Program, and recorded with the Crook County Recorder,
Connie D. Tschetter, on Nov. 6, 1997, Book 356, page 116. The leases are
three year leases, dated from the execution of the Operating Agreement,
unless a productive well is drilled and completed; at such time the lease
becomes perpetual for the life of the well. The Program must complete its
proposed drilling by as early as August 20, 1999 and as late as June 20,
2000, or renew those leases on undrilled acreage. The Company receives 21.25%
of the net revenues after payment of the landowner's royalty .
*The Producing Wells on the Prospect: Montana Berger Wells #1 and #2 *
The Montana Berger Well #1 is located in Township 53 North, Range 67 West, 6th
P.M. Section 17: SW/4SW/4 on 40 acres. Total acquisition, drilling and
completion costs up through the completion of the Montana Berger Well #1, were
$285,725. The working interest participants who own an aggregate of 75% of
the Program were responsible for all costs of land acquisition and drilling at
approximately $190,825; all of the Participants, however, paid their
proportionate share of completion costs once casing point was set equal to
$94,000 and will participate in any additional wells in accordance with their
working interest. The Company's initial payment of $ 74,233.66 to the
Program included the Company's purchase of the leases and drilling costs (on a
basis of 1/3 for 1/4), estimated at $54,067, and the Company's share of
completion costs estimated at $20,166. L & J Operating Company, the Operator
of the Program, began drilling of the Montana Berger Well #1 on September 9,
1997. The Operator began running casing at a depth of approximately 6,075
feet on September 15, 1997, and on October 4, 1997, it began the completion
of the Montana Berger Well #1. On October 6, 1997 a small amount of oil
surfaced and by the end of the day approximately 7 barrels of oil had flowed
and well was choked and shut down for the night. On October 7, 1997, oil
flowed at an estimated 2.7 barrels per hour at an 8/64ths choke. On October
8, 1997, the well flowed 49 barrels at no choke. Over the next few weeks the
Operator made certain adjustments on the Montana Berger Well #1 which
included, adjusting the choke, swabbing out sand, and drilling an additional
few feet. The well, during its first few months, flowed at a rate of
approximately 130 barrels per day or 4,000 barrels per month; since May of
1998 the Montana Berger # 1 has been producing approximately 110 barrels of
oil per day. The well was considered completed as of October 10, 1997 and the
Company received the following gross revenues (17.85% of the total production
after landowners royalty of 16%) from production: from October 10 through
April 30, 1998 - $47,000 . Expenses (taxes, administration and well expenses)
equaled approximately $15,000. Between May, 1998 and July 31, 1998, the
Company has received additional revenues from the Montana Berger Well of
$11,291 with additional taxes of $1,215 and well administration costs of $511.
The Montana Berger Well #2 is located in Township 53 North 67 West,
Crook County Wyoming, Section 17, SW NE SW. In late March, 1998, the
Company paid an additional $62,000 to the Program, its estimated share of the
drilling and completion costs on the Montana Berger Well #2, the second well
to be drilled by the Program. Total drilling and completion costs for the
Montana Berger Well #2 were estimated at $163,000 for drilling and $129,000
for completion, of which the Company paid 21.25% or $62,000. L & J Operating
Company began the drilling of the Montana Berger Well #2 on March 28, 1998.
They began running the casing on April 4, 1998,after reaching a depth of
approximately 6,110 feet. The completion unit was moved onto the property on
April 6, 1998. The well is currently flowing at approximately 100 barrels per
day. Since the well started flowing in mid April 1998, through July 31,
1998, the Company has received revenues of $13,174; expenses for well
administration costs for that period equaled $1,394 and taxes were
approximately $1,095.
*Well Completion * Both of the currently producing wells on the
Prospect, the Montana Berger Well #1 and #2 and the next proposed well to be
drilled on the Prospect, were or will be completed by the Operator in the
same fashion, without the necessity of using a heavy mud system by setting
casing prior to reaching the Minnelusa formation. A cased whole log is run
before the hole is drilled into the Upper "B" sand and this sand is not
penetrated more than a few feet. Installation of a secondary water flood is
not necessary because the Upper "B" sand in the producing wells is being
pressurized due to the adjacent water flood at the Deadman Creek Field.
Distribution Method of the Company's Product
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The Company is dependent on the Operator to market any oil production
from the Montana Berger Wells #1 and #2 and any subsequent production which
may be received from other wells which may be successfully drilled on the
Prospect. The Company must rely on the Operator's ability and expertise in
the industry to successfully market the same. Prices at which the Operator
sells gas/oil both in intrastate and interstate commerce, will be subject to
the availability of pipe lines, demand and other factors beyond the control of
the Operator. The Operator believes any oil produced can be readily sold to a
number of local buyers; however, no assurance can be given that the current
price of oil, which has decreased since the Company started realizing revenues
from operations from $16.49 per barrel @ 40 gravity to approximately $10.78
per barrel @ 40 gravity, will stabilize.
Competitive Position in the Industry
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There are a large number of companies and individuals engaged in the
exploration for and development of oil and gas properties. Competition is
intense for the acquisition of oil and gas leases suitable for exploration,
the purchase or sale of producing properties and the raising of capital.
Capital available for the investment in the oil and gas industry has declined
significantly as a result of decreases in oil prices and changes in federal
tax laws and adverse economic conditions generally affecting the oil and gas
industry. The Company is a small, inexperienced company and must compete
with much larger companies which are better capitalized and have considerably
more experience in the oil and gas industry and are better able to fund
drilling enterprises than the Company is.
Sources and Availability of Equipment/Raw Materials
- ---------------------------------------------------
In the past, increased drilling activities from time to time have created
certain shortages of equipment necessary in the drilling and or completion of
wells. Due to shortage of such equipment and to generally inflationary
trends, and the age and condition of much of the existing equipment, prices at
which equipment is available have escalated. Although the Company has
suffered no problems to date as to equipment shortages, or unsatisfactory
equipment, there is always the possibility that current equipment in use due
to age and/or lack of proper maintenance could fail to perform properly
forcing expensive repairs and/or costly delays to the working interest
participants, one of which will be the Company, or the purchase of additional
new or used equipment which could be delayed if shortages of equipment exist.
In addition, there is no guarantee that equipment will be available at such
times as the Program begins developing other properties.
Dependence on a Few Major Customers
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The Company is not dependent on a few major customers, but rather is dependent
on the Operator's ability to market crude oil to various purchasers.
Effect of Probable Government Regulations on the Company's Business
- -------------------------------------------------------------------
The areas of oil and gas exploration have become highly regulated by the
State and Federal governmental agencies Although the Operator is experienced
in the area of oil and gas operations and has not encountered any unknown,
unanticipated or additional expenses or problems due to government
regulations there is no guarantee that new rules and regulations may not be
adopted either at a State or Federal level which would adversely affect the
Company's oil and gas operations. Recent changes in Wyoming statutes
affecting taxes on oil and gas have had certain effects on taxation of the
Company's oil revenues. During late 1997, the State of Wyoming eliminated its
2% severance tax rate on wells which were designated as "wild cat" wells.
Although newly discovered crude continues to receive a tax break of 2%, such
rate is applicable to the first 60 barrels of production per day, which
increases to 6% on any production over 60 barrels on a daily basis. Such tax
break is only for the first two years of production. This change has resulted
in increased taxation for the Company on production from oil and less
profitability from operations.
Costs and Effects of Compliance with Environmental Laws
- -------------------------------------------------------
In the conduct of its drilling operations, the Operator may encounter
natural hazards, such as unusual or unexpected rock formations or pressures,
or other conditions not anticipated which could result in substantial cost
overruns or the inability of the Operator to drill and complete the well which
otherwise might be productive. The insurance against these hazards that the
Operator may carry may be insufficient to offset all such contingencies. The
Montana Project may also be subject to liabilities for pollution or other
damages, both environmental or otherwise, against which it cannot insure or
the Operator chooses not to insure, due to premium costs or other reasons.
Accordingly, it is possible that the Company could incur substantial
liabilities to third parties including liabilities for environmental clean-up
which could reduce funds available for exploration and development or reduce
revenues to the Company. The Company's current involvement with a drilling
program which is being drilled in the Minnelusa area, is burdened with is own
problems which involve potential water from the well. Although typically a
well that has excess water in production becomes economically unfeasible for
production and is subsequently capped, there are strict laws regarding
disposal of water from oil wells which can be extremely expensive to comply
with. As of the date hereof, the Operator of the wells has experience in
Minnelusa wells and operates the same in a manner which minimizes the risks
inherent in such a well.
Status of Publicly Announced New Products
- -----------------------------------------
The Company has made no public announcements on any new products or services
nor does it have any new products or services .
Patents/Trademarks/Licenses/Concessions/Franchises/Labor Contracts/Royalties.
- -----------------------------------------------------------------------------
The Company has no patents, trademarks or trade names nor does it
anticipate applying for the same. The Company does not have any licenses,
concessions, franchises, or labor contracts. The Company does not have any
royalty contracts other than those discussed under "Business of the
Registrant, Principal Products of the Company - the Montana Prospect Drilling
Program, *Landowner Royalties*."
Research and Development
- ------------------------
Other than the development of the various wells on the Montana Prospect,
the Company is conducting no research and development nor has it since its
inception. The Company's participation in the development of oil wells in the
Sidner Draw Field is further discussed elsewhere in this "Business" section
and under Item 3, Properties.
Number of Employees
- -------------------
The Company has no employees as of the date hereof other than one of its
officers. The Company compensates its Secretary/Treasurer for her services
rendered in her capacity as secretary and treasurer at a rate of $1,000 per
month. (See "Executive Compensation")
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company has received revenues from operations since December of 1997
when it received its first revenues from oil production from the Montana
Berger Well #1 which began oil production in October of 1997. From October
10, 1997 until July 31, 1998, the Company has received average gross monthly
revenues of $7,973 which includes production from the Montana Berger #2 which
began production in mid-April, 1998. After taking into consideration lifting
costs, taxes, and well/administration expenses, the Company received net
monthly revenues averaging approximately $ 5,676 per month for that same seven
month period. Presuming the Montana Berger Well #1 continues to average 110
barrels per day, the Company expects to continue to receive minimum gross
revenues from production from that well of approximately $4,200 per month
depending on the price of oil in the marketplace. In addition, if the Montana
Berger Well #2 continues to flow at 100 barrels per day, the Company can
expect an additional approximate $ 3,600 in revenues per month from that well.
Although the Company received $2,500 in revenues for April for production from
the second well, the Company owed the Operator for its share of overages in
drilling and completion costs equaling approximately $ 7,500. All revenues
from April production on both wells went to offset these costs. The Company
expects to realize revenues in the next twelve months from the two producing
wells that are more than sufficient to meet the Company's operating capital
requirements but insufficient for any immediate business expansion and
insufficient for the Company to elect to participate in additional wells in
the Program.
PLAN OF OPERATION
During the next 12 months the Company plans to participate in additional
wells on the Montana Prospect at an average cost for drilling and completion
of approximately $65,000 to the Company. In order to fund its share of the
Montana Berger #2, drilled and completed in April of 1998, as well as the
third well scheduled to be spudded in September/October 1998, the Company
commenced an offering on March 16, 1998, of 1,200,000 shares of its common
stock at $.15 per share, which offering is believed to be exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "1933 Act"), under Section 3(b) of the 1933 Act, and Rule 504 of
Regulation D, promulgated thereunder. The offering closed on September 13,
1998 with 326,066 shares sold for gross proceeds of $48,910. Part of the use
of proceeds of such offering, in addition to the funding of the second well,
was intended to be the drilling and completion of the Company's third well
which is scheduled to commence in September/October of 1998. The Company
failed to raise sufficient funds to finance its share of the third well. With
the price of crude oil at an all time ten year low, it was difficult to
attract investors. The funding of the Montana Berger Well #2 required the use
of approximately $10,000 of the Company's operating capital and cash advances
from an officer and director of $11,200 in addition to the funds raised in the
second offering. The Company will need to raise a minimum of $65,000 in
order to fund the third well although the Company does expect it will have a
certain amount of cash available from revenues from operations which can be
utilized for the third well.
In the next twelve months, the Company is considering the purchase of
additional working interest in the Montana Prospect Drilling Program or some
other similar drilling program, or acquiring an interest in other
oil/gas/mineral related entities in order to expand and diversify its
operations If the Company elects to participate in any one of the
opportunities it is investigating, or some other opportunity should it become
available, the Company will require additional funding. Such funding will be
obtained from operating revenues, private placements of the Company's stock,
or loans from officers and directors. In the alternative, especially if
larger amounts of capital are required to fund a transaction, the Company is
contemplating registering for sale shares of its common stock. There is no
guarantee, however, that the Company would be successful in such endeavor or
successful in attracting an underwriter.
The Company does not expect to hire any additional employees in the next
twelve months although the Company does have an understanding with Mr. Guido
Cloetens, an officer and director of the Company, that it will, in the near
future, enter into a consulting agreement with Mr. Cloetens or an entity to be
formed by Mr. Cloetens for such purpose, whereby the Company would pay Mr.
Cloetens, or the to-be-formed entity, $2,000 per month for consulting
services. Such agreement will not be consummated until the Company believes
that its cash flow from operations is sufficient.
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns a 21.25% working interest in a drilling program on the
320 acre Montana Prospect, located on an oil field known as the Sidner Draw
Field.
DESCRIPTION OF FIELDS THE SIDNER DRAW FIELD
Geology
- -------
In contemplating its initial investment in the Montana Prospect
Drilling Program, the Company reviewed information contained in a geology
report by Twiford International Inc. The Prospect, located in the Sidner Draw
Filed in Township 53 North, Range 67 West, 6th P.M. of Section 17: W/2W/2,
SE/4NW/4, NE/4SW/4 and Section 18: E/2NE/4 (2- 40 acre parcels are in the NE
part of Section 18 and 6- 40 acre parcels are in Section 17), Crook County,
Wyoming is comprised of 320 acres located on two adjacent southwest plunging
anticlinal paleogeomorphic features. The productive formation is the Minnelusa
Upper "B" sand and is the primary target of this prospect area. The sand on
the Montana Berger Well #1 was anticipated and subsequently encountered at
depth of 6100 feet at the well location. The same Minnelusa Upper "B" sand
which is common to the Montana Prospect will be encountered on any wells
drilled. This particular sand was charged with a bottom hole pressure
approximately 800 lbs. above normal, or about 3200 pounds. The excessive
pressure is believed to be caused from water loss in the adjacent Deadman
Creek Field which is undergoing a water flood in the lower "B" Minnelusa sand.
The field is currently named the Sidner Draw Field.
The Minnelusa Upper "B" Sand is an eolian dunal complex which pinches
out in an easterly or up-dig direction. This pinch-out is due in part to
erosion or non-deposition of the Upper "B" sand. The impermeable Opeche shale
is the up-dig trapping mechanism for oil in the Upper "B" sand while the
underlying Middle "B" dolomite provides the bottom seal for the Upper "B"
sand. The lateral trapping mechanism may be a pinch out of the sand itself
which will become dolomitic approaching the barrier. This could be a
subsystem boundary trap for the Upper "B" sand thus allowing a large
accumulation of oil.
Analogy to Sidner Draw Field - the Edsel Field
- ----------------------------------------------
The Montana Prospect area which is located on the Sidner Draw FieLd is
adjacent to sections of similar geology such as the Edsel Field which is
located in sections 25,26, 27, 24, 36 of T.54N, R.68W, Crook County Wyoming
and contains wells which produce oil from Minesula Upper "B" sand.
According to the Wyoming Oil and Gas commission, as of May, 1996, the field
had produced 4,849,196 barrels of oil. Average porosity in the Edsel Field is
19.6% with net pay averaging 21.5 feet. The average water saturation is 47%.
The original oil in place was estimated at 6.25 million barrels and was
expected to produce 12.4% of this figure on a primary production increasing to
or 2.49 million barrels under a polymer augmented water flood. Since the
report to the Wyoming Oil and Gas Commission (1996- 4,849,196 barrels), there
have been six additional producing wells drilled in the field.
Stratigraphically, the Edsel Field is similar to the Montana Prospect. This
comparison is based, in part, on values taken from the Wyoming Geological
Association Guidebook 1984.
DRILLING ACTIVITY
Exploration, Site Testing and Conclusions
- -----------------------------------------
Five test holes were previously drilled by other programs on the Montana
Prospect. Of the five test holes, four were dry holes and one is currently a
shut-in well. The shut-in well is on the southern feature and was drilled by
EMC Energies, Inc. in the SW SW of Section 17 and had an initial production of
700 barrels of oil per day, flowing. Such well was shut-in due to too much
water. Subsequent to the Company's involvement in the Program, the Montana
Berger Well #1 was drilled and completed about 800 feet northeast of the
initial shut-in well, in NE SW SW of Section 17 and the Montana Berger Well #2
was drilled approximately 650 feet from the Montana Berger Well #1 in SW NE SW
of Section 17 (See "The Producing Wells on the Prospect: Montana Berger Well
#1 and #2" under BUSINESS").
The four dry holes drilled on the Montana Prospect had varying results.
Common to each of the test sites however was the presence of water in
sufficient quantities to prevent the recovery of any material amount of oil
in an economic fashion. The hole drilled in SE NE of section 18, appears to
be on the down dip edge of an oil accumulation, while the well drilled in the
SW SW of section 17 penetrated oil in a pool as evidenced from the production
from the well (shut-in because of too much water.) The hole drilled in the NE
NE of section 18 penetrated a tight Upper "B" and is therefore a barrier hole.
The hole drilled in the SE NW of section 17 penetrated a thin tight section of
Upper "B" interval is on the up-dip edge of the dunal complex . The hole
drilled in the SE SW of section 17 penetrated a Minnelusa section that is
dolomitic with the Upper "B" zone completely absent. This hole penetrated the
southern lateral barrier of the Prospect area.
A dunal complex is present in this area with the necessary parameters
present to form an accumulation of oil, i.e. sand with good oil shows as well
as production down dip, sand gone and/or tight up-dig and laterally. The
first producing well on the Prospect, the Montana Berger Well #1, was drilled
in the NE SW SW of section 17 and was high structurally to the original well
on the SW SW of section 17 (the shut in well).
Exploration and test drilling, has resulted in an estimated productive
area of 130 acres with an estimated average thickness of productive pay in
feet of 25 and an estimated porosity of 23.9%. The conclusion of an initial
report on the Montana Prospect performed by Twiford International, Inc.,
indicated that on the estimated 130 productive acreage, there was potentially
5,739,072 barrels of oil in place with estimated primary recovery under normal
conditions of 12.4%. A waterflood could increase that recovery. The high
pressure of the Upper "B" sand may be a waterflood in itself precluding the
necessity of the installation. Gravity of the oil is approximately 20
degrees.
Drilling Activity
- -----------------
The following tables sets forth the results of drilling activity by
the Company, net to its interest, for since its inception in 1996.
Year Ended December 31,
1996 1997 As of Date Hereof
______________________ __________________
Development Wells Gross:
Productive 0 1 2
Dry Holes 0 0 0
Total 0 1 2
Development Wells Net:
Productive 0 0.2125 0.425
Dry Holes 0 0 0
Exploratory Wells 0 0 0
PRODUCTION
The following table summarizes net volumes of oil produced and sold,
and the average prices received for such sales from all properties in which
the Company held an interest since its inception in 1996.
Year Ended December 31, Seven months ended
1996 1997 July 31, 1998
_______________________ _________________
Average Sales Price ($/Bbl) 0 $ 13.15 $ 7.66
Production Data No. of Barrels(1) 0 1,531.19 6,495.00
Lifting Costs per barrel(2) 0 $ 2.31 $ .97
Taxes per barrel (3) 0 $ 1.46 $ .89
_____________________________________________________________________________
(1) Company's share of production of 8,578 bbls. total in 1997 and 36,691
bbls. total for the seven months ended July 31, 1998.
(2) Lifting costs includes monthly recurring costs of producing and marketing
oil and gas, including costs incurred for labor, fuel, repairs, hauling,
materials, supplies, utilities, and other costs incident thereto, insurance
and casualty loss expense, and compensation to well operators for other
services rendered in conducting such operations.
(3) Average taxes per barrel paid by the Company which include production
taxes, severance taxes and ad valorem taxes
PRODUCTIVE WELLS AND ACREAGE
As of the date hereof, the Company has two net productive wells each on 40
acres, only one of which was producing as of the last fiscal year, in which it
owns a 21.25% working interest net of landowners' royalty.
The following table sets forth information regarding the number of
productive wells in which the Company had a working interest as of the current
date (at December 31, 1997, the Company only had one well). Productive wells
are either producing wells or wells capable of production although currently
shut-in. One or more completions in the same bore hole are counted as one
well.
Gross Productive Wells Net Productive Wells
Total No. of Wells in which Sum of Total Amount of
Type Working Interest is Owned Working Interest in Gross Wells
- ---------- ---------------------------- --------------------------------
Oil 2 .425
The following table sets forth the approximate developed and undeveloped
acreage in which the Company held a leasehold, mineral or other interest as of
the current date. Undeveloped acreage includes leased acres on which wells
have not been drilled or completed to a point that would permit the production
of commercial quantities of gas of oil, regardless of whether or nut such
acreage contains proved reserves. A gross acre is an acre in which interest is
owned. A net acre is deemed to exist when the sum of fractional ownership
interests in gross acres equals one. The number of net acres is the sum of
fractional interests owned in gross acres expressed in whole numbers and
fractions thereof.
Developed Developed Undeveloped Undeveloped
Location Gross Net Gross Net
- -------- --------- --------- ----------- -----------
Wyoming 80 17 240 51
RESERVES
Reserve Estimates
- -----------------
Although the Company has had reports prepared for it on estimated oil
reserves, no estimate of total proved net oil reserves of the Company has been
filed with or included in reports to any federal authority or agency.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting rates of production and future net cash
flows. The quantities of oil that are ultimately recovered, production and
operating costs, the amount and timing of future development expenditures, and
future oil sales prices may all differ from those assumed in these estimates.
Reserve assessment is a subjective process of estimating recovery from
underground accumulations of oil that cannot be measured precisely, and
estimates of other persons might differ from those of the Company.
Accordingly, reserve estimates are often different from the quantities of oil
that are ultimately recovered. Moreover, the discounted present value shown
below should not be construed as the current market value of the estimated oil
reserves attributed to the Company's properties. A market value determination
would take into account, among other things, the recovery of reserves not
presently classified as proved, anticipated future changes in prices and costs
and a discount factor more representative of the time value of money and the
risk s inherent in reserve estimates. The information included in this section
should be read in conjunction with the Company's Financial Statements
including the Notes thereto.
The Company's estimated proved oil reserves as of the date hereof are as
follows:
Proved Developed 89,975 barrels
Proved Undeveloped 0 barrels
The Company's estimated future net cash flows from proved developed oil
reserves as of the date hereof, and the discounted present value of such cash
flows before income taxes are as follows:
At(10%)
Proved Proved Discounted
Undeveloped(1) Developed(2) Present Value
--------- ----------- -------------
December 31, 1998 0 $ 70,666(3) $ 67,133
December 31, 1999 0 $ 74,674 63,847
December 31, 2000 0 $ 63,592 48,933
(1) The Company, as of the date hereof, has no proved undeveloped properties
and considers only those developed properties currently producing revenues
from oil production as proved.
(2) Based on the average price per barrel received by the Company over the 7
months ended July 31, 1998
(3) Includes only 8.5 months production on the Company's second well which
started producing in mid-April of 1998.
Reserve Report on Montana Prospect
- ----------------------------------
The Working Interest Participants in the Program, subsequent to the
completion of the Company's audit of its year ended December 31, 1997, but
prior to the commencement of this Form 10SB Registration Statement, engaged a
petroleum engineer, Tony C. Stone, dba Jadasat Enterprises, to complete a
report on the probable oil reserves on the Montana Prospect. The report was
completed as a supplement to the Twiford International, Inc. Prospect Study
(see DESCRIPTION OF FIELDS THE SIDNER DRAW FIELD, Geology), and concluded
that recoverable reserves on the Montana Prospect less production to date is
estimated at 1,508,400 barrels. Mr. Stone's conclusions were based on the
Twiford International Report isopatch and structure maps, and the completion
and restricted production procedure used by the Operator on the Montana Berger
Well #1. Mr. Stone stated that the Upper "B" productive interval in the
Sidner Draw Field which was discovered with the currently shut in well, is
confirmed by the Montana Berger Well #1. The confirmation well has produced
approximately 14,000+ barrels as of January 31, 1998, water free, and is
currently flowing at 130 BOPD with 900 psi surface pressure on 6/64" choke.
It is produced on a restricted flow to limit wellborn draw down to 100 psi
maximum to avoid water "coming" or the fracturing of the semi-unconsolidated
sands coming through naturally fractured dolomite separating sands. Because
of oil price volatility at the time of the report, no economic analysis was
performed by Mr. Stone. Mr. Stone also indicated that one or more delineation
wells were required to totally validate the prospect structure
DELIVERY COMMITMENTS
The Operator has no delivery commitments on any of the production on either of
the Company's two producing wells.
PRESENT ACTIVITIES
The Company currently has no activities except sale of production on its two
producing wells. The Company intends to begin drilling a third development
well on the Prospect in October of 1998.
INVESTMENT POLICIES
The Company has no investment in any real estate interests or real
estate other than its working interest in the Montana Prospect. It has no
investment in any real estate mortgages, or securities or interests in persons
primarily engaged in real estate activities, nor, as of the date, hereof does
the Company intend to invest in any of the foregoing. The Company will,
however, continue to invest in oil and gas leases, when and if Management
deems it in the Company's best interests to do so. It may also invest in
production interest or other leases. In addition, the Company may elect to
invest in other oil and gas related enterprises which could consist of
acquiring companies which have business purposes or interests related to oil
and gas, and purchasing additional interest if available in the Montana
Prospect Drilling Program or other drilling programs.
OFFICES
The Company rents office space in Salt Lake City, Utah, on a month to
month basis at a monthly rate of $260 per month including telephone,
sufficient to conduct the day to day operations of its business.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the amount and nature of beneficial
ownership of each of the executive officers and directors of the Company. The
information below is based on 3,416,066 shares issued and outstanding as of
the date hereof.
<TABLE>
<CAPTION>
Amount and
Title Nature of Percent(1)
of Principal Shareholders Beneficial of Class as
Class Name, Address & Position Ownership Current Date
- ----------- ------------------------- ------------ -------------
<S> <C> <C> <C>
Common Guido Cloetens(2) 1,810,000
Kampenhoutsebaan 100A Sole Voting
1982 Zemst, Belgium Power 53.98%
President & Director
Common Terri Jackson 186,000
3483 South 3170 East Sole Voting
Salt Lake City, UT 84109 Power 5.45%
Secretary/Treasurer &
Director
Common Keith Biesinger(3) 0 0
3200 South Cottonwood Canyon
Salt Lake City, Utah 84121
_______________________________________________
Officers and
Directors (3 Persons)(4) 1,996,000 58.43%
(1) Based on 3,416,066 shares issued and outstanding as of the date hereof
(2) Mr. Cloetens has made certain loans to the Company. In the past, he has elected
to convert similar loans into equity of the Company. If Mr. Cloetens wishes to
convert such current loans into stock of the Company, it is likely the Company will do
so. As of the date hereof, the Company owes Mr. Cloetens $8,889, which, if converted
at a rate of $.15 per share (the per share price in a recent offering which closed on
September 13, 1998), would result in 59,260 additional shares issued to Mr. Cloetens
for a total of 1,869,260 shares beneficially owned by Mr. Cloetens or 54.72% of the
then outstanding shares.
(3) Mr. Keith Biesinger currently holds no shares in the Company and, as of the date
hereof, there are no arrangements and/or agreements for Mr. Biesinger to receive any
shares of the Company's stock. Ms. Lise-Lotte Newell, a former director of the
Company, holds 15,500 shares of the Company's stock or 0.5%.
(4) Each of the officers and directors was entitled to purchase shares offered in the
Company's recent offering at a purchase price of $.15 per share; only Ms. Jackson
elected to purchase shares in the recent offering by converting $900 due and owing to
her into 6,000 shares of the Company's stock.
</TABLE>
SECURITY OWNERSHIP OF PERSONS OWNING 5% PERCENT OR MORE OF THE COMPANY'S
OUTSTANDING SHARES
The following table sets forth the amount and nature of beneficial
ownership of each person known to a beneficial owner of more than five
percent of the issued and outstanding shares of the Company. The following
information is based on 3,416,066 shares issued and outstanding as of the date
hereof.
<TABLE>
<CAPTION>
Amount and
Title Nature of Percent(1)
of Principal Shareholders Beneficial of Class as
Class Name, Address & Position Ownership Current Date
- ----------- ------------------------- ------------ -------------
<S> <C> <C> <C>
Common Guido Cloetens 1,810,000
Kampenhoutsebaan 100A Sole Voting
1982 Zemst, Belgium Power 53.98%
President & Director
Common Terri Jackson 186,000
3483 South 3170 East Sole Voting
Salt Lake City, UT 84109 Power 5.44%
Secretary/Treasurer &
Director
Common Trends, Inc. 190,000 5.56%
P.O. Box 156
Pond Street, Hibiscus Square
Grand Turk
Turks and Caicos Islands
British West Indies
(1) Based on 3,416,066 shares issued and outstanding as of the date hereof.
</TABLE>
CHANGES IN CONTROL
The Company has no arrangements which might result in a change in control.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
OFFICERS AND DIRECTORS
The names, addresses, ages and respective positions of the current
directors and officers of SW Ventures, Inc. are as follows:
Name Age Position Held & Since
- -------------------------------- ------ --------------------------
Guido Cloetens 33 President, Chairman of the
Kampenhoutsebaan 100A Board of Directors, Chief
1982 Elewijt Zemst, Belgium Executive Officer
Since May 1996
Terri Jackson 45 Secretary/Treasurer and a
3483 S. 3170 E. Director
Salt Lake City, UT 84109 Since May 1996
Keith Biesinger, Esq. 53 Director
3200 Big Cottonwood Rd. Since March 13, 1998
Salt Lake City, Utah 94121
BIOGRAPHICAL INFORMATION ON OFFICERS AND DIRECTORS
Guido Cloetens, age 33, is the President, Chief Executive Officer and
Chairman of the Board of Directors of the Company. From 1988 to 1989 Mr.
Cloetens was a representative of DAIWA Securities, Inc., in Brussels, Belgium,
engaged in selling Japanese equities. In 1990, Mr. Cloetens worked as an
investment advisor for PBI Securities, Inc. in Amsterdam, Holland. From 1991
to 1994, Mr. Cloetens was a manager of client accounts for institutional
investors with Kredietbank in Brussels. From May 1994 to November 1995, Mr.
Cloetens was the owner/manager of Pyros Consulting, a Belgium corporation
engaged in the financial consulting business. Pyros Consulting was sold in
1995. Since then, Mr. Cloetens has been self-employed as a businessman with an
interest in several private companies. The Company intends to employ Mr.
Cloetens, or an entity to be formed by Mr. Cloetens, as a consultant and/or
management/consulting firm in the immediate future. (See "Transactions
Between the Company and Management.") Mr. Cloetens successfully completed a
post university program as investment advisor at the EHSAL Management School
in Brussels in 1992. He also attended courses in economics and accounting at
the Catholic University of Leuven in Belgium followed with a post university
program "Corporate Finance and Investment and Financial Statements Analysis at
the University of Brussels in 1984 - 1986.
Terri Jackson, age 45, is the Secretary/Treasurer and a director of the
Company. Ms. Jackson is the author of "Glide's Garden", published in 1977 in
England by Oreal Press, London, England as well as a contributing writer to
the Hudson-Mohawk SIDS Alliance Newsletter. From 1977 to 1987, Ms. Jackson
worked as an employee of Intermountain Plant Works, and was promoted to
operations manager from 1984-1987. Ms. Jackson was a founding member and on
the Board of Trustees of the Broadway Stage from 1989-1991, a live theater in
Salt Lake City, Utah. From 1989 to the 1996, Ms. Jackson worked as a legal
assistant to an attorney in Salt Lake City, Utah specializing in corporate and
securities law. In late 1996, Ms. Jackson co-founded Data Electronic Filing
Service, LC, a company established to assist lawyers, accountants and public
companies with S.E.C. mandatory electronic filing requirements. Data
Electronic Filing Service LC is a registered S.E.C. EDGAR filing agent.
Currently, Ms. Jackson also works as an independent paralegal providing
services to various attorneys in the area of securities and corporate law.
Keith Biesinger, Esq., age 53, was appointed an interim Director by the
Company's Board of Directors on March 13, 1998, to serve the unexpired portion
of a term held by Ms. Lise-Lotte Ruzicka Newell who resigned on March 13,
1998. Mr. Biesinger is a member of the Utah State Bar Association and has
practiced law in Salt Lake City, Utah for numerous years. He is also a member
of Safari Club International, Sierra Club, Ducks Unlimited, and the World
Wildlife Fund. Currently, in addition to his position with the Company, he
serves as a trustee of The Gun Club, a Utah non-profit corporation. His
interests are shooting sporting clays, fly fishing, hiking and traveling.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Except as indicated below and or hereinbefore, to the knowledge of
Management, during the past five years, no present or former director,
executive officer, or person nominated to become a director or executive
officer of the Company:
(1) Filed a petition under federal bankruptcy laws or any state
insolvency law, now had a receiver, fiscal agent or similar officer appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offences);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him or her from or
otherwise limiting his involvement in any type of business, securities or
banking activities;
(4) Was found by a court of competent jurisdiction in a civil
action, by the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Securities and Exchange
Commission has not been subsequently reversed, suspended , or vacated.
FAMILIAL RELATIONSHIPS.
There are no family relationships among the Company's directors and/or
executive officers.
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information as to the Company's
Chief Executive Officer and each of the Company's officers and directors who
have received compensation for the years ended December 31, 1996 and December
31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------------------------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compensa- Stock Underlying LTIP Compensa-
Principal sation Award Options/ Payouts tion
Position Year Salary($) Bonus($) ($) ($) SAR's(#) ($) ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Guido Cloetens(1) 1996 -0- -0- -0- -0- -0- -0- -0-
Kampenhoutsebaan 100A 1997 -0- -0- -0- -0- -0- -0- -0-
1982 Elewijt-Zemst
Belgium
President, Chairman
of the Board, CEO
Terri Jackson(2) 1996 -0- -0- -0- -0- -0- -0- -0-
3483 South 3170 East 1997 -0- -0- -0- $2,750(3) -0- -0- -0-
Salt Lake City, UT
84109
Secretary/Treasurer
Director
Keith Biesinger 1996 -0- -0- -0- -0- -0- -0- -0-
3200 Big Cottonwood 1997 -0- -0- -0- -0- -0- -0- -0-
Salt Lake City, UT
84121
Director
Lise-Lotte (Ruzicka) 1996 -0- -0- -0- -0- -0- -0- $ 1000(5)
Newell(4) 1997 -0- -0- -0- -0- -0- -0- -0-
Director
(1) The Company has agreed to pay Mr. Cloetens or an entity yet to formed by Mr. Cloetnes,
$2000 per month for consulting services. As of the date hereof, the agreement between the
Company and Mr. Cloetens has not been finalized. (See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
(2) Terri Jackson has been receiving a salary of $1,000 per month starting in February 1998
for her services of Secretary/Treasurer of the Company. There is no employment agreement
in place with Ms. Jackson
(3) Ms. Jackson received 55,000 shares of the Company's unregistered common stock for
services rendered to the Company in her capacity of Secretary Treasurer for the period
from inception in May of 1996 through May of 1997. The shares were given a deemed value
of $0.05 per share based on the following: that the par value of the stock was $0.001,
that there was no trading market for the Company's common shares, and that the Company
was preparing to commence an offering of its common stock at $.10 per share. The price
of $.05 was the price utilized by Mr. Cloetens to convert various loans made to the
Company into stock as of that same date. Ms. Jackson currently owns 186,000 shares of
the Company.
(4) Lise-Lotte Ruzicka Newell resigned in early 1997.
(5) Lise-Lotte Ruzicka Newell received $1,000 for her assistance in organizing the Company.
The $1,000 was not paid until September of 1997.
</TABLE>
COMPENSATION OF DIRECTORS IN PERFORMANCE OF DUTIES
The Company pays no fees to members of the Company's Board of Directors
for the performance of their duties as directors. The Company has not
established committees of the Board of Directors.
EMPLOYMENT CONTRACTS/TERMINATION OF EMPLOYMENT/CHANGE-IN-CONTROL ARRANGEMENTS
The Company has no employment contracts in effect with any of the members
of its Board of Directors or its executive officers nor are there any
agreements or understandings with such persons regarding termination of
employment or change-in control arrangements. The Company has agreed to
compensate Ms. Jackson $1,000 per month for services rendered in her capacity
as Secretary/Treasurer of the Company. The Company has also agreed to enter
into a Consulting Agreement with Mr. Guido Cloetens, President, Chief
Executive Officer and a director of the Company, or an entity to be formed by
Mr. Cloetens for such purposes. The Company will compensate Mr. Cloetens or
such entity $2,000 per month when the agreement is consummated. (See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS".)
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no material transactions in the past two years or
proposed transactions to which the Company has been or proposed to be a party
in which any officer, director, nominee for officer or director, or security
holder of more than 5% of the Company's outstanding securities is involved.
Although the Company has intends to enter into an consulting agreement with
Mr. Cloetens or an entity to be formed by him in which he retains a
controlling interest, the amount involved in the transaction will not be more
than $24,000 per year. Mr. Cloetens is currently serving as President of
the Company, Chief Executive Officer and Chairman of the Board. Mr. Cloetens,
or an entity to be formed by Mr. Cloetens, will provide management and
consulting services to the Company, including, but not limited to, shareholder
relations for non-US shareholders, financial advice, investigating and
analyzing various business opportunities, etc. The Company has agreed to
pay Mr. Cloetens, or the to be formed entity, $2,000 a month for its
services. Although an agreement has not been consummated, the Company expects
to begin utilizing the services of Mr. Cloetens in such capacity at such time
as it believes revenues from operations are sufficient to do so.
The Company has no promoters other than its President and a director, Mr.
Guido Cloetens. Other than the consulting agreement discussed above which the
Company intends to enter into with Mr. Cloetens (or his yet to be formed
entity), there have been no transactions which have benefitted or will benefit
Mr. Cloetens either directly or indirectly.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, $.001 par value per share. The holders of Common Stock (i)
have equal ratable rights to dividends from funds legally available therefore,
when, as and if declared by the Board of Directors of the Company; (ii) are
entitled to share ratably in all of the assets of the Company available for
distribution or winding up of the affairs of the Company; (iii) do not have
preemptive subscription or conversion rights and there are no redemption or
sinking fund applicable thereto; and (iv) are entitled to one non-cumulative
vote per share, on all matters which shareholders may vote on at all meetings
of shareholders. The Company, however, does not anticipate paying dividends
on its Common Stock in the foreseeable future but plans to retain earnings, if
any, for the operation and expansion of its business.
NON-CUMULATIVE VOTING
The holders of shares of Common Stock of the Company do not have
cumulative voting rights which means that the holders of more than fifty
percent (50%) of such outstanding shares, voting for the election of
directors, can elect all of the directors to be elected, if they so choose,
and, in such event, the holders of the remaining shares will not be able to
elect any of the Company's directors. Management currently owns 58.65% of the
outstanding shares of the Company. At the completion of the current offering
on or before the effective date of this registration statement, Management's
position could be reduced to 46.4% provided no member of Management elects to
purchase shares in the offering and further provided all shares offered are
sold, of which no assurance can be given. It is likely that Management will
retain control of the Company once the current offering is closed.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
MARKET INFORMATION
The Company has no public trading market for its common stock. Although
the Company intends to seek a quotation for its common shares on the NASD
Over-the-Counter Bulletin Board in the future, there is no assurance the
Company will do so, nor is there any assurance that should the Company
succeed in obtaining a listing for its securities on the NASD OTC Bulletin
Board or on some other exchange, that a trading market for the Company's stock
will develop. There are no outstanding options, warrants to purchase, or
securities convertible into common equity of the Company outstanding. The
Company has not agreed to register any shares of its common stock for any
shareholder.
The Company recently closed an offering of 1,200,000 of its common
shares, at an offering price of $0.15 per share which offering was conducted
pursuant to an exemption from registration as promulgated under Section 3(b),
Regulation D, Rule 504 of the 1933 Act. The offering commenced on March 16,
1998, and closed on September 13, 1998 with 326,066 of its common shares sold
for gross proceeds of $48,910. Such shares offered and sold in the recent
offering are not restricted in accordance with the provisions of Rule 504.
Of the 3,416,066 common shares of the Company's common stock currently
issued and outstanding, 1,000,000 are owned by public investors in the
Company's prior offering, 326,066 are owned by public investors in the
Company's current offering and 2,090,000 are held by officers, directors and
other initial shareholders have been issued in reliance on the "private
placement" exemption of Section 4(2) of the Securities Act of 1933, as
amended. If a market for the Company's common shares were to develop, such
"restricted" shares would not be available for sale in the open market without
registration, except in reliance upon Rule 144 under the Act or some other
applicable exemption. In general, under Rule 144, a person or persons whose
shares are aggregated, who beneficially owned shares acquired in a non-public
transaction for at least one year, including persons who may be deemed
"affiliates" of the Company as that term is defined under the 1933 Act, would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of 1% of the then outstanding shares of Common Stock or
the average weekly reported trading volume on all national securities
exchanges and through NASDAQ during the four calendar weeks preceding such
sale provided current public information is then available. As of the date
hereof, 2,000,000 of the 2,090,000 shares issued in reliance upon Section
4(2)and therefore considered "restricted", have been beneficially owned for
more than one year, which would make them eligible for resale under Rule 144
provided all of the applicable terms and conditions were met, and provided a
public market existed for the Company's common shares. The additional 90,000
shares will have been owned for a year on January 27, 1999. In addition, of
the 1,000,000 shares offered and sold in the Company's first offering, 365,500
shares were purchased by directors of the Company, one current director and
one a former director. Such shares are also "restricted" although not subject
to a holding period, and are subject to the provisions of Rule 144 that apply
to affiliate transactions. The majority of the outstanding shares of the
Company which are eligible for resale under Rule 144, when and if a market
exists, are owned by one director of the Company, Mr. Guido Cloetens. Mr.
Cloetens owns 1,810,000 of the Company's outstanding shares which would limit
the amount of shares which could be sold under Rule 144 in any 90 day period
considerably, if a market develops. In the Company's second offering which
closed on September 13, 1998, 6,000 shares were purchased by an officer and
director, Ms. Terri Jackson; such shares are "restricted" but not subject to a
holding period, and are subject to the provisions of Rule 144 which apply to
affiliate transactions.
DIVIDENDS
The payment by the Company of dividends, if any, in the future, rests
within the discretion of its Board of Directors and will depend among other
things, upon the Company's earnings, its capital requirements and its
financial condition, as well as other relevant factors. The Company has not
paid or declared any dividends to date due to its present financial status.
The Company does not anticipate paying dividends on its Common Stock in the
foreseeable future but plans to retain earnings, if any, for the operation and
expansion of its business. There are no restrictions that limit the ability to
pay dividends on common equity or that are likely to limit the same in the
near future.
HOLDERS
There are approximately 48 shareholders of record of the Company's common
stock.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, no such action by or against the Company has
been threatened. None of the Company's officers, directors, or beneficial
owners of 5% or more of the Company's outstanding securities is a party to
adverse to the Company nor do any of the foregoing individuals have a material
interest adverse to the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountant,
Randy Simpson C.P.A.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has issued the following unregistered common shares in the
past three years.
(1) At inception the Company issued 1,590,000 unregistered common shares:
1,475,000 shares were issued for $11,000 in capital contributions from
founding shareholders and 115,000 shares were issued to legal counsel for the
Company for services rendered in the Company's organization. The shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended , to 5 individuals, as a "transaction not
involving a public offering."
(2) In May 1997, an additional 410,000 unregistered common shares were issued
pursuant to the exemption provided under Section 4(2) of the Act to three
individuals: Terri Jackson, an officer and director of the Company received
55,000 shares; Max Tanner, the Company's counsel received 35,000 shares; and
Guido Cloetens, an officer and director of the Company received 320,000
shares. Each of the transactions was given a deemed value of $0.05 per share.
Ms. Jackson received her shares for services rendered to the Company from
inception through May of 1997; Mr. Tanner received his shares for additional
services rendered to the Company during 1997, and Mr. Cloetens received his
shares upon conversion of loans made by him to the Company from November 1996
through May of 1997, aggregating $13,000.
(3) In June of 1997, the Company conducted an offering of 1,000,000 of its
unregistered common shares at an offering price of $.10 per share for gross
proceeds of $100,000. The offering was conducted pursuant to an exemption
from the registration requirements of the Section 5 of the Act as promulgated
under Section 3(b), Regulation D, Rule 504 with offers and sales made to
residents of the State of Nevada and non-United States residents, mainly
individuals resident of Belgium. The offering closed on September 30, 1997
with all 1,000,000 shares sold and gross proceeds of $100,000.
(4) In January of 1998, Mr. Guido Cloetens, an officer and director of the
Company, was issued an additional 90,000 unregistered common shares of the
Company, upon conversion of a loan he made to the Company during the Company's
fiscal year ended December 31, 1997. The loan was for $9,000 and was
converted at a rate of $0.10 per share. Mr. Cloetens 90,000 shares were
issued in reliance on the exemption provided under Section 4(2) of the Act.
(5) On March 16, 1998, he Company commenced a second offering of its common
stock under Regulation D, Rule 504. The Company offered up to 1,200,000
shares of its unregistered common stock at $.15 per share. The offering
closed on September 13, 1998 with 326,066 common shares sold for gross
proceeds of $48,910. Of the 326,066 shares sold, 29,660 shares were issued to
satisfy an outstanding balance due to the Company's attorney of $4,449. In
addition, an officer and director of the Company, Ms. Terri Jackson purchased
6,000 shares of stock for $900; the $900 had been due and owing Ms. Jackson
since April of 1998. All of the remaining shares in the offering were
purchased for cash.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The only statutes, charter provisions, by-laws, contracts or other
arrangements under which any controlling person, director or officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such, are as follows:
Sections 78.037, 78.751 and 78.752 of the Nevada Revised Statutes offer
limitation of liability protection for officers and directors and/or
indemnification protection of officers, directors, employees and agents of the
Company, and provide as follows:
78.037. Articles of incorporation: Optional provisions.
The articles of incorporation may also contain:
1. A provision eliminating or limiting the personal liability of a
director officer to the corporation or its stockholders for damages for breach
of fiduciary duty as a director or officer, but such a provision must not
eliminate or limit the liability of a director or officer for:
(a) Acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or
(b) The payment of distributions in violation of NRS 78.300.
2. Any provision, not contrary to the laws of this state, for the
management of the business and for the conduct of the affairs of the
corporation, and any provision creating, defining, limiting or regulating the
powers of the corporation or the rights, powers or duties of the directors,
and the stockholders, or any class of the stockholders, or the holders of
bonds or other obligations of the corporation, or governing the distribution
or division of the profits of the corporation.
78.751. Indemnification of officers, directors, employees and agents;
advancement of expenses.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with the action, suit or proceeding if he acted in good faith
and in a manner which is reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement of
the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense
of any claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
a. By the stockholders;
b. By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
c. If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
d. If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by independent legal counsel
in a written opinion.
5. The articles of incorporation, the bylaws or an agreement made
by the corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than directors or officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
a. Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles
of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to subsection 2 or
for the advancement of expenses made pursuant to subsection 5, may not be made
to or on behalf of any director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
b. Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors
and administrators of such a person.
78.752. Insurance and other financial arrangements against liability of
directors, officers, employees and agents.
1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him and liability and expenses incurred by him
in his capacity as a director, officer, employee or agent, or arising out his
status as such, whether or not the corporation has the authority to indemnify
him against such liability and expenses.
2. The other financial arrangements made by the corporation pursuant
to subsection 1 may include the following:
a. The creation of a trust fund.
b. The establishment of a program of self-insurance.
c. The securing of its obligation of indemnification by
granting a security interest or other lien on any assets of the corporation.
d. The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any
other person approved by the board of directors, even if all or part of the
other person's stock or other securities is owned by the corporation.
4. In the absence of fraud:
a. The decision of the board of directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement made
pursuant to this section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
b. The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to
personal liability for his action, even if a director approving the insurance
or other financial arrangement is a beneficiary of the insurance or other
financial arrangement.
5. A corporation or its subsidiary which provides self-insurance for
itself or for another affiliated corporation pursuant to this section is not
subject to the provisions of Title 57 of NRS.
B. The TENTH article of the Company's Articles of Incorporation
limits the liability exposure of officers and directors of the Company for
damages. It provides as follows:
Each officer and director of the Company is indemnified pursuant to
Article X of the Company's Articles of Incorporation as follows:
(1) the Company may indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether criminal, civil, administrative, or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suite or
proceeding, if he acted in good faith and in a manner which he reasonably
believed to be in and not opposed to the best interests of the Company and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding, by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, does not of itself create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and
that, with respect to any criminal action or proceeding, he had reasonable
cause to believe that his conduct was unlawful.
(2) the Company may indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action or suite by or in the right of the Company, to procure judgment in its
favor by reason of the fact that he is or was a director, officer, employee of
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses including the
amounts paid in settlement of attorneys' fees actually and reasonably incurred
by him in connection with the defense or settlement of the action or suit, if
he acted in good faith and in a manner which he reasonably believed to be in
and not opposed to the best interests if the Company. Indemnification may not
be made for any claim, issue or matter as to which such person has been
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the Company or for amounts paid in settlement to
the Company, unless and only to the extent that the court in which the action
or suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court
deems proper.
(3) to the extent that a director, officer, employee or agent of
the Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above , or in defense of any claim,
issue or matter therein, he must be indemnified by the Company against
expenses, including attorney's fees actually and reasonably incurred by him in
connection with the defense.
(4) any indemnification under (a) or (b) above unless ordered by a
court or advanced pursuant to (e) below, must be made by the Company only as
authorized in the specific case upon a determination that the indemnification
of the director, officer, employee or agent is proper in the circumstances.
The determination must be made (i) by the stockholders; (ii) by the board of
directors by majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding; (iii) if a majority of a quorum
consisting of directors who were not parties to the act suit or proceeding so
orders, by independent legal counsel in a written opinion; or (iv) if a quorum
consisting of directors who were not parties to the act, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion.
(5) Expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the Company as
they are incurred and in advance of final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
Company. The provisions of this paragraph (e) do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
(6) the indemnification and advancement of expenses authorized in
or ordered by a court of competent jurisdiction pursuant to the Company's
Articles of Incorporation, Article X, section (f): (i) does not exclude any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under the Articles of Incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, for
either an action in his official capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to paragraph (b)
above, or for the advancement of expenses made pursuant to paragrpah (e)
above, may not be made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or knowing violation of the law and was material to the
cause of action; and (ii) continues for a person who has ceased to be a
director, officer, employee, or agent and inures to the benefit of the heirs,
executors, and administrators of such a person.
C. Section 7.01 of the Company's By-Laws provides for the following
indemnification protections:
Section 7.01 of the Company's bylaws provides that the Company, unless
prohibited by Nevada law, shall indemnify any person who is or was involved in
any manner or is threatened to be involved in any threatened, pending, ir
completed action suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, including, without limitation, any action, suit,
proceeding brought by or in the right of the Company to procure a judgment in
its favor (collectively, "a Proceeding") by reason of the fact that he is a
director, officer, employee, or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan,
or other entity or enterprise, against all expenses and liabilities actually
and reasonably incurred by him in the Proceeding. The right to indemnification
conferred under Section 7.01 of the Company's bylaws is presumed to have been
relied upon by the directors, officers, employees, and agents of the Company
and shall be enforceable as a contract right and inure to the benefit of
heirs, executors, and administrators of such individuals.
As of the date hereof, the Company has no contracts in effect providing
any indemnitee with any specific rights of indemnification although the
Company's bylaws authorize its Board of Directors to enter into and deliver
such contracts to provide an indemnitee with specific rights of
indemnification in addition to the rights provided in the Articles and Bylaws
to the fullest extent provided under Nevada law. The Company has no special
insurance against liability although the Company's bylaws provide that the
Company may, unless prohibited by Nevada law, maintain such insurance.
PART F/S
The following financial statements are included herewith. The
Company's audited Financial Statements for its years ended December 31, 1997
and 1996 and the Company's unaudited financial statements for the four month
period ended April 30, 1998.
SW Ventures, Inc.
Audited Financial Statements
December 31, 1997 and December 31, 1996
Independent Auditor's Report
Balance Sheet at December 31, 1997 and December 31, 1996
Statement of Operations and Accumulated Deficit for the year ended December
31, 1997 and the period from inception on May 7, 1996 though December 31, 1996
Statement of Cash Flows for the year ended December 31, 1997 and the period
from inception on May 7, 1996 though December 31, 1996
Statement of Changes in Stockholder's Equity from May 7, 1996 to December 31,
1997
Notes to Financial Statements
Randy Simpson C.P.A. P.C.
11775 South Nicklaus Road
Sandy Utah 84092
Fax & Phone (801)572-3009
Independent Auditor's Report
- ----------------------------
The Board of Directors and Stockholders of SW Ventures, Inc.:
We have audited the accompanying balance sheets of SW Ventures, Inc. (the
Company) as pf December 31, 1997 and December 31, 1996 and the related
statements of operations, stockholders' equity, and cash flows for the year
ended December 31, 1997 and the period from May 7, 1996 (inception) through
December 31, 1996. 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 audit to
obtain reasonable assurance about wether the financial statements are free of
material misstatements. 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 above mentioned financial statements fairly present, in
all material respects, the financial position of SW Ventures, Inc. as of
December 31, 1997 and December 31, 1996 and the results of its operations and
its cash flows for the year ended December 31, 1997 and the period from
inception (May 7, 1996) through December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Randy Simpson CPA PC
RANDY SIMPSON, CPA
A Professional Corporation
March 5, 1998
Salt Lake City, Utah
<PAGE>
SW Ventures, Inc.
Balance Sheets
December 31, 1997 and December 31, 1996
December 31 December 31
1997 1996
------------- --------------
ASSETS
Current Assets:
Cash $ 8,424 $ 9,175
Accounts receivable 5,878 -
Inventory 1,870 -
------------- --------------
Total Current Assets 16,172 9,175
Mineral Property & Equipment:
Mineral property 74,325 -
Less cost depletion (1,705) -
Office equipment 1,953 -
Less accumulated depreciation (228) -
------------- --------------
Net Mineral Property &
Equipment 74,345 0
Other assets:
Deferred offering costs - 11,850
------------- ---------------
Total Assets $ 90,517 $ 21,025
============= ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 12,648 $ 10,903
Advances from officer 9,000 -
------------- --------------
Total Current Liabilities 21,648 10,903
Stockholders' Equity:
Common Stock, $.001 par value; authorized
50,000,000 shares, issued and outstanding
3,000,000 shares on December 31, 1997
and 1,850,000 on December 31, 1996 3,000 1,850
Paid-in capital 111,750 23,000
Accumulated deficit (45,881) (14,728)
------------- --------------
Total Stockholders' Equity 68,869 10,122
------------- --------------
Total Liabilities &
Stockholders' Equity $ 90,517 $ 21,025
============= =============
See accompanying notes to financial statements
<PAGE>
SW Ventures, Inc.
Statement of Operations and Accumulated Deficit
Year Ended December 31, 1997, and
the period from inception (May 7, 1996) though December 31, 1996
1997 1996
----------------- ---------------
Oil revenue $ 22,007 $ -
Oil production costs & taxes 7,409 -
General & administrative expenses 13,478 14,728
Legal & professional fees 30,340 -
Depreciation expense 228 -
Cost depletion 1,705 -
----------------- ---------------
Total expenses 53,160 14,728
----------------- ---------------
Net loss (31,153) (14,728)
Accumulated deficit -beginning of year (14,728)
----------------- ----------------
Accumulated deficit - end of year $ (45,881) $ (14,728)
================= ================
Net loss per common share $ (0.02) $ (0.01)
================= ================
Weighted average shares outstanding 2,202,083 1,615,232
See accompanying notes to financial statements
<PAGE>
SW Ventures, Inc.
Statement of Cash Flows
For the From May 7, 1996
Year (Inception)
Ended to
December 31, December 31,
1997 1996
-------------- ----------------
Cash flows used in operating activities:
Net loss $ (31,153) $ (14,728)
Adjustments to reconcile net loss
to net cash used in operating activities:
Common stock issued for services 4,500 850
Depreciation expense & cost depletion 1,933 -
Changes to operating assets & liabilities:
Increase in accounts receivable (5,878) -
Increase in inventory (1,870) -
Increase in accounts payable 1,745) 10,903
-------------- ---------------
Net cash used in operating activities (30,723) (2,975)
Cash flows used in investing activities:
Purchase of equipment & properties 76,278 -
-------------- ---------------
Net cash used in investing activities 76,278 -
Cash flows from financing activities:
Offering costs for common stock issuance (5,750) (11,850)
Common stock issued for cash 103,000 24,000
Advances from officers 9,000 -
-------------- ---------------
Cash provided by financing activities 106,250 12,150
Net increase in cash (751) 9,175
Cash, beginning period 9,175 -
-------------- ---------------
Cash, end of period $ 8,424 $ 9,175
============== ===============
No cash paid for income taxes or interest.
See accompanying notes to financial statements.
SW Ventures, Inc.
Statements of Changes in Stockholders' Equity
From May 7, 1996 (Inception) to December 31, 1996
and the year ending December 31, 1997
<TABLE>
<CAPTION>
$.001
Par value
Common Common Accumu-
Stock Stock Paid-in lated Total
Shares Amount Capital Deficit Equity
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shares issued to founders
on May 7, 1996 1,475,000 $ 1,475 $ 9,525 $ - $ 11,000
Shares issued for legal fees
(securities registration)
on May 7, 1996 115,000 115 735 - 850
Shares issued for cash on
December 6, 1996 260,000 260 12,740 - 13,000
Net loss for the period from
May 7, 1996 (inception)
through December 31, 1996 (14,728) (14,728)
----------- ---------- ---------- --------- ----------
Balances, December 31, 1996 1,850,000 1,850 23,000 (14,728) 10,122
Shares issued for cash
May 16, 1997 60,000 60 2,940 - 3,000
Shares issued for compensation
May 16, 1997 55,000 55 2,695 - 2,750
Shares issued for legal fees
(securities registration)
on May 16, 1997 35,000 35 1,715 - 1,750
Shares issued for cash (private
placement offering) on
September 26, 1997 net of
offering costs of $17,600 1,000,000 1,000 81,400 - 82,400
Net loss for the year ended
December 31, 1997 (31,153) (31,153)
----------- --------- ---------- --------- ---------
Balances, December 31, 1997 3,000,000 $ 3,000 $111,750 $(45,881) $ 68,869
=========== ========= ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
SW Ventures, Inc.
Notes to Financial Statements
A. Origination and Accounting Policies
-----------------------------------
SW Ventures, Inc. (the "Company") was incorporated May 7, 1996 as a
Nevada corporation. The Company reviewed certain business opportunities
during 1996 and on June 19, 1997 conducted a stock offering under Rule 504 of
Regulation D, Section 3(b) under the Securities Act of 1933, as amended. The
offering closed on September 26, 1997 with proceeds of $100,000 being received
by the Company.
The Company invested as a working interest partner in an oil drilling
program in Crook County, Wyoming. The Company invested $74,325 in the
drilling and completion of an oil well located in Crook County, Wyoming. The
Company owns a 21.25% working interest in the well. The well has produced
approximately 14,000 barrels of crude oil from its successful completion in
October, 1997 through January 1998. The well is currently producing
approximately 130 barrels of oil per day. The prospect includes a 320 acre
lease on which additional wells may be drilled.
B. Mineral Properties, Equipment, Accounts Receivable and Inventory
----------------------------------------------------------------
Mineral property and equipment are stated at cost. The Company
accounts for its oil and gas exploration activities utilizing the full cost
method of accounting. Exploration costs, including geological and
geophysical costs, costs for drilling and completing wells (both geophysical
costs, costs for drilling and completing wells (both successful and dry holes)
are capitalized and depleted to expense over the total recoverable oil and gas
reserves of the Company's properties.
Mineral properties include the acquisition costs of a 320 acre mineral
lease and an oil well which was drilled and completed on October 7, 1997. The
Company invested $74,325 for the drilling and completion of this well. The
total acreage acquisition costs were $11,330 and $62,995 was invested in the
drilling and completion of the oil well. The Company is depleting its
investment in oil an gas properties based on the yearly oil production (in
barrels) divided by the estimated recoverable reserves (in barrels) of the
well or more commonly referred to as the units of production method. The
Company recorded cost depletion of $1,705 based upon total production of 5,730
barrels through December 31, 1997. The total estimated reserves of the well
are 250,000 barrels.
Accounts receivable represent the net oil production received in January
1998 for December 1997 oil production and inventory represents the value of
the oil on site which was unsold on December 31, 1997.
C. Related Party Transactions.
---------------------------
The Company issued 1,475,000 shares to its founders in consideration of
$11,000 in cash at the inception of the Company. An additional 60,000 and
260,000 shares were issued for cash advances totaling $16,000 from the
president of the Company during 1996 and early 1997. Legal counsel was issued
150,000 shares for services in 1996 and 1997 and 55,000 shares to its
Secretary/Treasurer for services in 1997. Subsequent to year end, 90,000
shares were issued to an officer and director in satisfaction of a loan for
$9,000.
D. Operating Leases and Contingent Liabilities
-------------------------------------------
The Company rents its office space on a month to month basis at $240 per
month. This agreement is cancelable at any time without notice. The Company
is currently conducting a private placement to fund a second well on its
mineral acreage in Crook County, Wyoming. The Company's portion of expenses
for the drilling and completion of the second well on the prospect are
estimated at $62,000. The well is to commence drilling by April, 1998.
E. Supplemental Information on Oil Producing Activities
---------------------------------------------------
The Company drilled and completed the Montana Berger Well #1 in October
of 1997. The following financial and reserve data reflect only the activities
of the Montana Berger Well #1. The Company drilled and completed the Montana
Berger Well #2 in early 1998, which activities will be reflected in the 1998
reserve data. The Company has future drill sites for approximately 4 more
wells on the Montana Prospect. However, it does not consider these drill
sites to be proved reserves at this point in time.
The following disclosures provide unaudited information required by SFAS
No. 69, "Disclosures About Oil and Gas Producing Activities."
RESULTS OF OPERATIONS FOR OIL PRODUCING ACTIVITIES
Year Ended December 31, 1997
- ----------------------------
Revenues............................................$ 22,007
Production Costs ................................... (5,583)
Depreciation, depletion & amortization.............. (1,705)
Taxes other than income............................. (1,823)
Income tax expense.................................. 0
---------
Results of operations for producing activities......$ 12,896
=========
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
Well Costs (Drilling and Completion)............... $ 62,995
Mineral Property Acquisition Costs (Proved)........ 11,330
---------
Total Capitalized Costs............................ $ 74,325
=========
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO PROVED OIL
RESERVES.
The standardized measure of discounted future net cash flows relating to
the Company's ownership interest in oil reserves at year end, December 31,
1997, is as follows:
Future cash inflows................................$ 484,930
Future oil operating and tax expenses.............. (103,800)
Future income tax expenses........................ (25,854)
----------
Future net cash flows.............................. 355,276
10% annual discount for estimating timing of
cash flows...................................... (54,293)
----------
Standardized measure of discounted future
net cash flows................................. $ 300,983
==========
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
Changes in standardized measure of future net cash flows relating to
proved oil reserves are summarized below:
Balance at Dec. 31, 1996............................$ 0
Sales and transfers of oil produced,
net of production costs............................ (16,424)
Extensions, discoveries and improved recoveries
net of future production and development
costs.............................................. 317,470
---------
Balance, December 31, 1997..........................$300,983
=========
RESERVE QUANTITY INFORMATION
The following summarized the policies used by the Company in preparing the
accompanying oil reserve disclosures.
The Company has only has only proved developed reserves. Proved developed
reserves are proved reserves that can reasonably be expected to be recovered
through existing wells with existing equipment and operating methods.
Proved Reserves Oil - (BBls)
- --------------- -----------
Balance at Dec. 31, 1996 0
Extensions discoveries and other additions........... 50,471
Production........................................... (1,531)
-------
Balance, December 31, 1997........................... 48,940
=======
The Company has no natural gas reserves.
<PAGE>
SW Ventures Inc.
Unaudited Balance Sheets
For the Four Months Ended April 30, 1998
Balance Sheet at April 30, 1998 and December 31, 1997
Statement of Operations for the four month period ended April 30, 1998 and
April 30, 1997
Statement of Cash Flows for the four month period ended April 30, 1998 and
April 30, 1997
Statement of Changes in Stockholder's Equity from May 7, 1996 to April 30,
1998
<PAGE>
SW Ventures Inc.
Balance Sheet
For the Four Months Ended April 30, 1998
and the Year Ended December 31, 1997
April 30 December 31
1998 1997
----------- ----------------
(Unaudited)
Assets
Current Assets:
Cash $ 357 $ 8,424
Accounts Receivable 10,059 5,878
Inventory 1,870 1,870
----------- ----------------
Total Current Assets 12,286 16,172
Mineral Property & Equipment:
Mineral property 136,325 74,435
Less cost depletion (6,180) (1,705)
Office equipment 4,292 1,953
Less accumulated depreciation (398) (228)
------------- --------------
Net Mineral Property &
Equipment 134,039 74,345
------------- ---------------
Total Assets $ 146,325 $ 90,517
============= ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 12,081 $ 12,648
Advances from officer 11,200 9,000
------------- --------------
Total Current Liabilities 23,281 21,648
Stockholders' Equity:
Common Stock, $.001 par value; authorized
50,000,000 shares, issued and outstanding
3,365,000 shares on April 30, 1998
and 3,000,000 on December 31, 1997 3,365 3,000
Paid-in capital 159,779 111,750
Accumulated deficit (40,100) (45,881)
------------- --------------
Total Stockholders' Equity 123,044 68,869
------------- --------------
Total Liabilities & Stockholders' Equity $ 146,325 $ 90,517
============= =============
<PAGE>
SW Ventures, Inc.
Statement of Operations
For the four month period Ended April 30, 1998 and 1997
Four Months Ended
April 30, 1998 April 30, 1997
(Unaudited) (Unaudited)
----------------- ---------------
Oil revenue $ 27,603 $ 0
Oil production costs & taxes 8,494 -
Cost depletion 4,475 -
General & administrative expenses 8,683 1,267
Depreciation expense 170 -
----------------- ---------------
Total expenses 21,822 1,267
----------------- ---------------
Income (Loss) Before Income taxes 5,781 (1,267)
Income tax provision - -
----------------- ----------------
Net Income (Loss) $ 5,781 $ (1,267)
================= ===============
Basic and diluted net
income (loss) per common share $ 0.00 $ 0.00
================= ===============
Weighted average shares outstanding 3,086,458 1,850,000
================= ===============
<PAGE>
SW Ventures, Inc.
Statement of Cash Flows
For the For the
Four Month Four Month
Period Ended Period Ended
April 30, 1998 April 30, 1997
(Unaudited) (Unaudited)
-------------- ----------------
Cash flows used in operating activities:
Net loss/gain $ 5,781 $ (1,267)
Adjustments to reconcile income(loss)
to net cash used in operating activities:
Depreciation expense & cost depletion 4,645 -
Changes to operating assets & liabilities:
Increase in accounts receivable (4,181) -
Decrease in accounts payable (567) (6,349)
-------------- ---------------
Net cash used in operating activities 5,678 (7,616)
Cash flows used in investing activities:
Purchase of equipment & mineral properties (64,339) -
-------------- ---------------
Net cash used in investing activities (64,339) -
Cash flows from financing activities:
Common stock issued for cash 39,394
Advances from officers 11,200 -
-------------- ---------------
Cash provided by financing activities 50,594
Net decrease in cash (8,067) (7,616)
Cash, beginning period 8,424 9,175
-------------- ---------------
Cash, end of period $ 357 $ 1,559
============== ===============
No cash paid for income taxes or interest.
Supplemental non cash activities:
Issuance of common stock for loan
From affiliate $ 9,000 $ -
============== ===============
<PAGE>
SW Ventures, Inc.
Statements of Changes in Stockholders' Equity
From May 7, 1996 (Inception) to the year ended December 31, 1997
and the four month period ended April 30, 1998
<TABLE>
<CAPTION>
$.001
Par value
Common Common Accumu-
Stock Stock Paid-in lated Total
Shares Amount Capital Deficit Equity
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shares issued to founders
on May 7, 1996 1,475,000 $ 1,475 $ 9,525 $ - $ 11,000
Shares issued for legal fees
(securities registration)
On May 7, 1996 115,000 115 735 - 850
Shares issued for cash on
December 7, 1996 260,000 260 12,740 - 13,000
Net loss for the period from
May 7, 1996 (inception)
through December 31, 1996 (14,728) (14,728)
----------- ---------- ---------- --------- ----------
Balances, December 31, 1996 1,850,000 1,850 23,000 (14,728) 10,122
Shares issued for cash
May 16, 1997 60,000 60 2,940 - 3,000
Shares issued for compensation
May 16, 1997 55,000 55 2,695 - 2,750
Shares issued for legal fees
(securities registration)
on May 16, 1997 35,000 35 1,715 - 1,750
Shares issued for cash (private
placement offering) on
September 26, 1997 net of
offering costs of $17,600 1,000,000 1,000 81,400 - 82,400
Net loss for the year ended
December 31, 1997 (31,153) (31,153)
----------- --------- ---------- --------- ---------
Balances, December 31, 1997 3,000,000 $ 3,000 $111,750 $(45,881) $ 68,869
Shares issued to officer upon
conversion of loan 90,000 90 8,910 9,000
Shares issued for cash (in
private placement offering) net
of offering costs of $1856 275,000 275 39,119 39,394
Net gain for four months ended
April 30, 1998 5,781 5,781
---------- --------- --------- --------- ---------
Balance at April 30, 1998 3,365,000 $ 3,365 $159,779 $( 40,100) $123,044
========== ========== ========= ========= ===========
</TABLE>
PART III
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed as part of this Amended Registration
Statement.
No. Description
- ---- -----------
3.1.1* Articles of Incorporation*
3.2.1* Bylaws and Amendments thereto*
10.1* Operating Agreement with L & J Operating Inc.*
27* Financial Data Schedule*
* Previously filed as part of the Company's initial 10-SB Registration
Statement filed on July 14, 1998.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
SW VENTURES, INC.
Date: September 28, 1998 By: /s/ Terri Jackson
--------------------- ----------------------------
Terri Jackson
Secretary/Treasurer and Director
Date: September 28, 1998 By: /s/ Guido Cloetens
-------------------- ----------------------------------
Guido Cloetens
Chief Executive Officer, President
Chairman of the Board of Directors
Date: September 28, 1998 By: /s/ Keith Biesinger
------------------- -------------------------------------
Keith Biesinger
Director
