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File No. 333-68381
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 6 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
BETA OIL & GAS, INC.
(Exact Name of Registrant in its Charter)
Nevada 1311 86-0876964
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or Organization) Classification Number)
Code Number)
Steve Antry, President
901 Dove Street, Suite 230
Newport Beach, California 92660
(949) 752-5212
(949) 752-5757-Fax
(Address and telephone number of principal executive officer and principal place of business)
-----------
Copies to: Lawrence W. Horwitz, Esq.
Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, California 92618
(949) 453-0300
(949) 453-9416-Fax
----------
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
----------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /x/
- ------------------------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- ------------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Proposed Proposed
Title of each class of securities Number of Shares to Maximum Offering Maximum Aggregate Amount of
to be registered be Registered Price Per Share(1) Offering Price Registration fee
- ------------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Common Stock, par value $0.001 per
share on behalf of Selling Security
Holders 7,029,492 $6.00 $42,176,952 $12,442.20
- ------------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Common Stock, par value $0.001 per
share offered by the Company 1,650,000 (5) $6.00 $9,900,000 $2,920.50
- ------------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Common Stock issuable upon exercise
of Selected Dealer Warrants(3) (4)
165,000 (5) $7.50 $1,237,500 $365.06
- ------------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Common Stock issuable upon Exercise
of Warrants Held by Selling
Security Holders(2)(3) 2,460,367 $5.19 $12,767,749 $3,766.49
===================================== ====================== ======================= ======================= =======================
11,304,859 $66,082,201 $19,494.25
===================================== ====================== ======================= ======================= =======================
(1) Estimated solely for the purpose of calculating the amount of the
registration fee.
(2) Underlying shares of common stock issuable upon exercise of warrants
held by the selling security holders at various exercise prices. This
Registration Statement also covers such additional number of shares as
may become issuable upon exercise of the warrants held by the selling
security holders by reason of anti-dilution provisions pursuant to Rule
416.
(3) Registration fee calculated pursuant to Rule 457(g)(1).
(4) Beta will issue up to 150,000 common stock purchase warrants to the
underwriter as compensation for services rendered in connection with the
Company's initial public offering. See "Underwriting."
(5) Includes 150,000 shares of common stock and 15,000 shares of common
stock underlying selected dealer warrants that the underwriter has the
option to sell to cover over-allotments, if any.
The Registrant amends this Registrant Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
This Registration Statement contains two forms of prospectus: One
prospectus that will be used in connection with the sale by the Registrant of up
to 1,500,000 shares of its common stock in a best efforts underwritten public
offering (the "IPO prospectus"); and the other prospectus which will be used by
existing shareholders of the Registrant in effectuating sales from time to time,
for their own account, of their shares of common stock, principally in
over-the-counter transactions (the "resale prospectus"). The two prospectuses
will be identical in all respects except for the front and back cover pages, the
section entitled "Summary of the Offering," the "Use of Proceeds" section and
the section of the resale prospectus entitled "Plan of Distribution" which will
be substituted for the Underwriting section of the IPO prospectus. Each page to
be included in the resale prospectus and not in the IPO prospectus is marked as
an "Alternate Page" and the Alternate Pages follow immediately after the IPO
prospectus.
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BETA OIL & GAS, INC.
Cross-Reference Sheet
Pursuant to Item 501(b) of Regulation S-K and Rule 404
Showing Location in Prospectus of Information
Required by Items of Form S-1
Registration Statement Item Caption In Prospectus
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1. Front of Registration Statement and Outside Front Cover Cross-Reference Sheet;
Prospectus Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages Prospectus Cover Page;
Of Prospectus Prospectus Back Cover Page
3. Summary Information and Risk Factors Prospectus Summary; The Company;
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Determination of Offering Price;
Risk Factors
6. Dilution Risk Factors; Dilution
7. Selling Security Holders Description of Securities;
Resale by Selling Security Holders
8. Plan of Distribution Prospectus Cover Page; Plan of Distribution;
Underwriting
9. Description of Securities to be Registered Capitalization; Description of Securities
10. Interest of Named Experts and Counsel Legal Matters; Experts
11. Information about the Registrant Outside Front Cover Page of Prospectus; Additional
Information; Prospectus Summary; Risk Factors; Use
of Proceeds; Dilution; Capitalization; Dividends;
Selected Consolidated Financial Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management;
Principal Shareholders; Resale by Selling Security
Holders; Description of Securities; Legal Matters;
Experts; Consolidated Financial Statements
12. Disclosure of Commission Position on Indemnification for Description of Securities
Securities Act Liabilities
13. Other Expenses of Issuance and Distribution Other Expenses of Issuance and Distribution
14. Indemnification of Directors and Officers Legal Matters; Experts
15. Recent Sales of Unregistered Securities Recent Sales of Unregistered Securities
16. Exhibits and Financial Statement Schedules Exhibits and Financial Statement Schedules
17. Undertakings Undertakings
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<PAGE>
Initial Public Offering
Prospectus
Beta Oil & Gas, Inc.
A Minimum of 800,000 shares
up to a Maximum of 1,500,000 shares
of Common Stock @ $6.00 per share
$.001 Par Value
The Offering: Beta is offering these shares
through the underwriter. The underwriter
must sell the minimum number of shares
offered of 800,000 within ten business
days of the date of this prospectus if
any are sold. The underwriter is not
required to sell any specific number or
dollar amount of shares but will use its
best efforts to sell the maximum number
of shares offered of 1,500,000. See
"Underwriting" which explains in detail
the terms and conditions of this
offering.
Offering Period: If the minimum number of 800,000
shares are not sold within ten business
days of the date of this prospectus,
this offering will be terminated. We are
offering the maximum number of shares of
1,500,000 for ninety days after the date
of this prospectus. We may extend this
offering period to one hundred and
twenty days from the date of this
prospectus at our option.
Escrow Account: Your funds will be deposited
into an escrow account at Southern
California Bank, Newport Beach,
California until we have sold the
minimum 800,000 shares. If we do not
sell the minimum 800,000 shares within
ten business days of the date of this
prospectus, your funds will be returned
to you with interest and without any
deduction
Proposed Trading Symbol: This is our initial
public offering, and no public market
currently exists for our shares. We
intend to apply for quotation on The
Nasdaq Small Cap Market under the symbol
"BETA." The offering price may not
reflect the market price of our shares
after the offering.
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Total Minimum Total Maximum
Per Share
---------------- ---------------- ----------------
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Public Offering Price.......................... $ 6.00 $ 4,800,000 $ 9,000,000
Selected Dealer Commissions............... $ 0.60 $ 480,000 $ 900,000
Proceeds to Beta................................ $ 5.40 $ 4,320,000 $ 8,100,000
</TABLE>
================================================================================
This investment involves a high degree of risk. You will experience substantial
dilution. You should purchase shares only if you can afford a complete loss of
your entire investment. See "Risk Factors" beginning on page __.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
================================================================================
Beta is offering the shares subject to various conditions and may reject all or
part of any order.
Brookstreet Securities Corporation
The date of this prospectus is ___________, 1999
<PAGE>
INSIDE FRONT COVER PAGE OF PROSPECTUS
A map of the gulf coast areas of Texas and Louisiana which shows the location of
Beta's properties in those areas.
<PAGE>
RECENT DEVELOPMENTS
Beta previously circulated a preliminary prospectus to prospective investors.
You should be aware that this prospectus contains information which is updated
to the date of this prospectus and thus contains material differences from the
preliminary prospectus you may have received. The following is a list of some of
the important differences from the preliminary prospectus and material changes
which have taken place since the preliminary prospectus:
|_| Beta needs to receive the minimum proceeds of this offering by July 15,
1999 to avoid being required to sell assets to maintain its operations. See
"Plan of Operations" which is contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page for a
detailed discussion.
|_| Beta now has production and revenues. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page and
"Financial Statements" on page for a detailed discussion of this fact.
|_| If Beta does not complete the minimum offering within ten business days of
the date of this prospectus, your funds will be returned to you with
interest and without deduction and the initial public offering will be
terminated. See the prospectus cover page and "Prospectus Summary" on page
.
|_| This prospectus includes unaudited financial statements as of March 31,
1999. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page and "Financial Statements" on page .
|_| There will be significant interest expense incurred in connection with
certain bridge notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page and "Financial
Statements" on page .
|_| The minimum offering has been increased from 600,000 shares to 800,000
shares, an approximately 33% increase. See the prospectus cover page and
"Prospectus Summary" on page .
|_| The use of proceeds of this offering has been amended to state that the
minimum proceeds of this offering will be applied to repay all of Beta's
bridge note indebtedness totaling $3,000,000. See "Use of Proceeds" on page
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page .
|_| Beta's working capital deficit increased from ($96,457) at December 31,
1998 to ($447,755) at March 31, 1999. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page and
"Financial Statements" on page .
|_| The Cobra and Shark Prospects in Louisiana were determined to be dry-holes.
See "Properties" on page .
|_| The Redfish Prospect in Louisiana was drilled and is being completed for
production. See the "Properties" on page .
|_| Beta opted to participate in the drilling of the Stingray Prospect in
Louisiana. This well was drilled and is being completed for production. See
"Properties" on page .
|_| Beta has participated in the drilling of two exploratory wells in the
Ganado prospect one of which was a dry hole and one which is being
completed for production. See "Properties" on page .
|_| The selling security holders shall not have the right to sell any of the
shares in the selling security holder prospectus until Beta either
completes its initial public offering or fails to complete the minimum
offering within 10 business days and therefore fails to complete its
initial public offering. See "Shares Eligible for Future Sale" on page .
|_| Beta has issued 30,000 shares of common stock pursuant to the terms of its
bridge note. All of the 459,000 shares issued per the bridge note are
subject to a one year restriction upon sales or transfers commencing upon
the date the minimum offering is sold, after which those shares will become
freely tradeable. See "Shares Eligible for Future Sale" on page .
|_| As of June 21, 1999, certain warrant holders agreed to cancel 87,296
warrants to purchase common. See "Underwriting" on page .
|_| Holders of 115,000 shares of common stock and 574,208 warrants to purchase
common stock have agreed to lock-up provisions whereby they may not sell or
transfer their shares for a ninety day period commencing upon completion of
the minimum offering. See "Shares Eligible for Future Sale" on page .
|_| Investors will now experience increased dilution in this offering. See
"Dilution" on page .
|_| A discussion of historical sources and uses of cash and long term liquidity
has been added to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page .
|_| NASD members participating in Beta's initial public offering or the selling
security holder offering, shall not receive compensation arising from the
exercise of Beta warrants during the twelve month period following the
completion of the initial public offering. See "Shares Eligible for Future
Sale" on page .
This is not a complete list of all of the recent developments of Beta and
material changes from the preliminary prospectus. You should read the entire
prospectus carefully, including the risk factors and financial statements.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. You should also read the entire prospectus carefully, including the
risk factors and financial statements. There is no assurance that Beta will ever
generate a profit from oil and gas operations.
Beta Oil & Gas, Inc.
Offices: Beta's corporate headquarters are located at
901 Dove Street, Suite 230, Newport Beach, CA
92660. Our telephone number is (949)752-5212.
Our Business: Beta is an oil and gas company organized in
June 1997 to participate in the exploration
and production of natural gas and crude oil.
Our operations are currently focused in proven
oil and gas producing trends primarily in
South Texas, Louisiana and Central California.
Beta's wholly owned subsidiary, BETAustralia,
LLC, participates in the exploration for
oil and gas in Australia.
Operations Philosophy: Beta intends to rely on joint
ventures with qualified operating oil and gas
companies to operate its projects through the
exploratory and production phases. This will
reduce general and administrative costs
necessary to conduct operations. As of the
date of this prospectus, Beta was not
operating any of its projects.
3-D Seismic: Beta believes that 3-D seismic surveys have
reduced the risk of oil and gas exploration in
certain areas. Recognizing this change, we
have acquired prospective acreage blocks for
targeted, proprietary, 3-D seismic surveys.
Briefly, a seismic survey sends pulses of
sound from the surface down into the earth,
and records the echoes reflected back to the
surface. By calculating the speed at which
sound travels through the various layers of
rock, it is possible to estimate the depth to
the reflecting surface. We use computers to
perform these calculations and "process" the
seismic data. It then becomes possible to
create a picture of the rock structures deep
below the earth's surface. A 3-D seismic
survey provides us a three dimensional picture
of these rock structures. These three
dimensional "pictures" show us the potential
size of a potential oil or gas reservoir and
the best location to drill for it.
Current Status: As of the date of this prospectus, we have
participated in projects which total about
76,000 gross acres under lease or option.
This is 13,000 acres net to Beta's average 17%
interest. Beta has participated with other oil
and gas companies to conduct seismic surveys
over approximately 94% of the acreage. From
the data generated by its initial proprietary
seismic surveys, covering 313 square miles,
in excess of 100 potential drillsites have
been identified.
South Texas Exploration: Approximately $10,000,000, about 60% of the
total funds raised so far by Beta, have been
utilized to acquire interests in lands and
seismic data in the onshore Texas Gulf Coast
region. Beta's interests in the onshore
Texas properties are operated by Parallel
Petroleum Corporation. Drilling commenced in
these projects during the first quarter of
1999 and has resulted in three discoveries of
oil and gas to date. Representatives of
Parallel have informed Beta that drilling will
continue in these projects throughout the
year. Beta anticipates that participation in
exploratory and drilling projects in South
Texas will constitute its primary activity
during 1999.
Louisiana Exploration: Approximately $3,300,000, representing 20% of
the funds raised so far by Beta, have been
invested in leases, seismic data acquisition
and drilling in Louisiana. Drilling commenced
in these prospects in 1998 and has resulted in
four oil and gas discoveries so far. It is
expected that Beta will participate in the
drilling of a minimum of six wells in
Louisiana during 1999.
Other Exploration: The balance of the funds raised to date have
been utilized primarily to fund other domestic
and international exploratory activities.
Beta's exploratory activities in areas outside
of Texas and Louisiana have resulted in one
gas discovery located in Central California.
We anticipate that Beta will expend additional
funds to explore these areas during 1999 and
future periods.
1999 Budget Plans: Beta's capital budget for 1999 of
approximately $8,300,000, subject to
available funds, includes amounts for the
acquisition of additional 3-D seismic data and
for the drilling of 38 gross wells or 8.39
wells net to Beta in 1999. Beta will own
interests in the wells ranging from 12.5% to
75% and averaging 22%. A majority of the
budgeted wells will be drilled in Texas and
Louisiana. Beta has substantial discretion in
reducing this budget, if necessary. In
addition, Beta anticipates that as its
existing 3-D seismic data is further
evaluated, and 3-D seismic data is acquired
over the balance of its acreage, additional
prospects will be identified for drilling
beyond 1999.
The Offering
Common stock offered by Beta: 800,000 shares minimum
1,500,000 shares maximum
Common Stock to be
outstanding after the offering:(1) 8,288,492 shares if the minimum
shares are sold 8,988,492 shares if
the maximum shares are sold (2)
Use of proceeds: (3) Beta will receive net proceeds of
$4,320,000 if the minimum shares are
sold and up to $8,100,000 if the
maximum shares are sold. The
proceeds will be used to fund the
repayment of debt and the drilling
of wells in Beta's Louisiana,
California and Texas prospects.
Funds held in escrow shall receive
an interest rate of at least 4%.
Upon an investor providing funds,
the investor shall not have the
right to revoke his/her
subscription. If Beta does not
complete the minimum offering within
ten days of the date of this
prospectus, your funds will be
returned to you with interest and
without deduction.
Risk factors: An investment in our shares is very
risky, and you should be able
to bear a complete loss of your
investment. See "Risk Factors"
which contains a detailed discussion
of these risks.
Proposed Nasdaq SmallCap Market Symbol:(4) BETA
(1) Excludes 2,610,367 shares reserved for issuance upon exercise of the
warrants.
(2) Does not include 150,000 shares reserved for issuance upon
exercise of the Over-allotment Option.
(3) Net proceeds before deducting estimated offering expenses of $90,000.
(4) There is no assurance that the common stock will be approved for quotation
in the Nasdaq SmallCap Market or that a trading public market will develop,
or, if developed, will be sustained. See "There has been no prior trading
market for Beta's common stock; potential volatility of Beta's stock
price" which contains a discussion of this potential risk in "Risk Factors."
Summary Financial Information
The following table presents selected historical financial data for Beta
derived from Beta's Financial Statements. The following data should be read with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of Beta and the notes to the financial
statements included elsewhere in this prospectus.
<TABLE>
Cumulative
For the from
period from The year The three The three inception
inception ended months months ended (June 6,
(June 6, December 31, ended March 31, 1997) to
1997) to 1998 March 31, 1999 March 31,
December 1998 1999
31, 1997
--------------- ---------------- ---------------- -------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
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Revenues
Oil and gas sales $ - $ - $ - $ 29,664 $ 29,664
---------------- -------------- --------------- ---------------- ----------------
Costs and expenses:
Lease operating expense - - - 9,035 9,035
General and administrative 245,452 746,769 204,052 258,245 1,250,466
Impairment expense - 1,670,691 1,297,342 - 1,670,691
Depreciation and depletion 1,530 11,883 2,835 12,415 25,828
expense
---------------- -------------- --------------- ---------------- ----------------
Total costs and expenses 246,982 2,429,343 1,504,229 279,695 2,956,020
---------------- -------------- --------------- ---------------- ----------------
Loss from operations (246,982) (2,429,343) (1,504,229) (250,031) (2,926,356)
Other income and (expense):
Interest expense - - - (466,348) (466,348)
Interest income 45,409 44,843 21,702 2,275 92,527
---------------- -------------- --------------- ---------------- ----------------
Net loss $ (201,573) $ (2,384,500) $ (1,482,527) $ (714,104) $ (3,300,177)
================ ============== =============== ================ ================
Basic and diluted loss
per common share ($.05) ($.37) ($.26) ($.10)
================ ============== =============== ================
Weighted average number of
Common shares outstanding 4,172,662 6,366,923 5,630,426 7,303,481
================ ============== =============== ================
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December 31, December 31, March 31,
1997 1998 1999
------------- -------------- ---------------
(Unaudited)
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Working capital ........... $ 3,117,351 $ (96,457) (447,755)
Oil and gas properties, net $ 5,900,794 $ 13,183,304 15,367,440
Total assets .............. $ 9,921,057 $ 13,618,471 16,335,650
Total liabilities ......... $ 870,847 $ 319,129 1,194,092
Stockholder's equity ...... $ 9,050,210 $ 13,299,342 15,141,558
</TABLE>
<PAGE>
RISK FACTORS
The securities offered in this prospectus are very speculative and
involve a high degree of risk. They should be purchased only by people who can
afford to lose their entire investment. Therefore, you should, before
purchase, consider very carefully the following risk factors, as well as all
other information presented in this prospectus.
Beta is a development stage company; Beta was formed in June 1997 and
Beta has a limited operating is considered to be a
history and has incurred losses development stage or start up
from operations. company. Beta is subject to
risks associated with new
companies. To date, Beta has had
a minimal operating history
since June of 1997 and has
generated minimal revenues from
oil and gas operations. Beta has
incurred operating losses since
inception and as of March 31,
1999 has an accumulated deficit
of approximately $3.3 million.
Until Beta is able to establish
positive cash flow from oil and
gas operations, of which there
is no assurance, Beta will
continue to incur losses. There
is no assurance that Beta will
achieve or sustain profitability
in the future. See "Management's
Discussion and Analysis of
Financial Condition and Results
of Operations" for additional
detail concerning this risk
factor.
If Beta only secures the minimum In our opinion, the existing
offering in this prospectus, Beta working capital of Beta will be
will need additional financing sufficient to fund our
in six months. projected capital requirements
until July 15,1999. At that time
it will be necessary for Beta to
raise additional funds. There is
no guarantee that additional
funding will be available, or if
available, on terms acceptable
to Beta. If additional funding
is not available, Beta will have
to reduce its business
activities. If Beta were unable
to fund planned expenditures,
Beta may have to:
1. Forfeit our interest in
wells that are proposed
to be drilled;
2. Farm-out our interest in
proposed wells; and,
3. Sell a portion of our
interest in proposed wells
and use the sale proceeds
to fund our participation
for a lesser interest.
As you will read in this
prospectus, Beta's business plan
includes an aggressive program
to identify, acquire and develop
exploration projects that meet
certain criteria. Project
acquisitions and exploration
activities are planned in 1999
and future years which will
require large amounts of
capital. These activities,
together with others that may be
entered into, may impose
financial requirements which
will exceed the existing working
capital of Beta and the net
proceeds of this offering.
It is important to remember:
----------------------------
|_| The oil and gas
industry requires
substantial capital.
|_| We may need to raise
additional funds
through public or
private financings or
borrowings.
|_| We may not be able to
raise such funds.
|_| If we cannot obtain
additional funds, our
operations and
financial condition
will suffer.
|_| If funds are available
to us, they may not be
available on terms that
are advantageous to us.
<PAGE>
|_| If we issue additional
equity securities to
raise funds, the
percentage you own in
Beta at that time will
be diluted.
|_| Those additional equity
securities may have
better rights,
preferences or
privileges than your
common stock.
Beta may not have the proceeds of this As stated above, Beta believes
offering until after July 15, 1999; it has sufficient working
As a result Beta may forfeit its interest capital to fund its capital
in certain wells which may be proposed. expenditure requirements until
July 15, 1999. It is possible
that Beta will not have the
minimum proceeds of this
offering by July 15, 1999. In
the event that Beta does not
have the minimum proceeds by
this date, it may be necessary
for Beta to substantially
curtail its business activities
until the proceeds are
available. The inability to
fund planned expenditures after
July 15 could negatively impact
Beta in several ways:
|_| This will prevent Beta from
carrying out its entire
proposed business plan and
prevent Beta from
participating in wells
proposed to be drilled
until the proceeds are
available.
|_| If Beta is unable to
participate in proposed
wells, it will be excluded
from any potential economic
benefit that the wells
might generate.
|_| Beta has previously
advanced over $11,000,000
to acquire leases and
seismic data in projects
associated with these
proposed wells.
|_| Beta's participation
agreements in those
projects preclude Beta from
receiving any reimbursement
of seismic and lease funds
previously advanced in the
event Beta does not
participate in the drilling
of wells on those projects.
|_| If Beta cannot participate
in the drilling in these
projects, it will be forced
to write down all or a
portion of the over
$11,000,000 in costs which
have been capitalized as
unevaluated properties.
|_| These writedowns will
result in substantial
financial losses to Beta
and negatively impact
shareholder's equity.
Beta may have to seek
alternative forms of financing
to "bridge" its capital needs
until the proceeds of this
offering are available. The
terms of the bridge financing
are likely to be onerous:
|_| The interest rate for
bridge financing would
likely be much higher than
interest on a conventional
bank loan.
|_| Bridge financing terms may
require Beta to issue
common shares which would
be highly dilutive to
existing shareholders.
|_| Bridge financing terms
could likely contain
restrictive covenants on
Beta.
During the three months ended
March 31, 1999, Beta completed
the private placement of
$3,000,000 in bridge financing.
For a detailed discussion of the
terms of the bridge financing
see the caption "Bridge Note"
in the section entitled
"Management's Discussion and
Analysis of Financial Condition
and Results of Operations."
Beta's operations subject it to a number of The operations of Beta are
risks associated with the drilling and subject to the many risks and
exploration for oil and hazards incident to exploring
gas. and drilling for, producing and
transporting oil and gas,
including:
|_| Blowouts, fires, pollution
and equipment failures that
may result in damage to or
destruction of wells,
producing formations,
production facilities and
equipment.
|_| Personal injuries.
|_| Engineering and
construction delays.
|_| Hazards resulting from
unusual or unexpected
geological or environmental
conditions.
|_| Human error.
|_| Accidental leakage of toxic
or hazardous materials,
such as petroleum liquids
or drilling fluids into the
environment.
|_| There is no assurance that
any oil and gas in
commercial quantities will
be discovered or acquired
by Beta.
The marketability of Beta's oil
and gas reserves or of reserves
which may be acquired or
discovered by Beta may be
affected by numerous factors
beyond the control of Beta.
These factors include
fluctuations in product markets
and prices, the proximity and
capacity of pipelines to Beta's
oil and gas reserves, the
ability of Beta to finance
exploration and development
costs and the availability of
processing equipment. Beta's
ability to manage and mitigate
these risks is limited since
Beta relies on third parties to
operate all of its projects.
Beta's title to its properties may be As is customary in the oil and
impaired by defects in the title. gas industry, only a perfunctory
title examination is conducted
at the time properties believed
to be suitable for drilling
operations are first acquired.
Before starting drilling
operations, a more thorough
title examination is usually
conducted and curative work is
performed on
known significant title defects.
Beta typically depends upon
title opinions prepared at the
request of the operator of the
property to be drilled; and,
therefore, there can be no
assurance that losses will not
result from title defects or
from defects in the assignment
of leasehold rights. Industry
standard forms of operating
agreements usually provide that
the operator of an oil and gas
property is not to be monetarily
liable for loss or impairment of
title. Beta's operating
agreements provide that in the
event of a monetary loss arising
from title failure, that the
loss shall be borne by all
parties in proportion to their
interest owned. Beta will suffer
a financial loss in the event of
a title defect on one or more of
its properties.
Beta's insurance coverage may be inadequate. We will not insure
fully against all business risks
either because such insurance is
not available or because premium
costs are too prohibitive. This
is a common practice in the oil
and gas industry. However, a
loss not fully covered by
insurance could have a
materially adverse effect on the
financial position and results
of operations of Beta.
All of Beta's joint exploration
agreements require the operator
to purchase and maintain
insurance on behalf of Beta and
other joint participants. The
policies cover general liability
and workers
<PAGE>
compensation insurance and cover
a wide range of potential
claims. The policies have
limits ranging
from $10,000 to $20,000,000
depending on the type of
occurrence. In addition to the
insurance maintained by the
operators, Beta has purchased a
general liability policy with a
total limit on claims of
$2,000,000 and a workers
compensation policy as required
by California law. Beta
purchased the general liability
policy as an added measure if
coverage provided by an
operators policy was inadequate
to cover Beta's losses.
Generally, these policies cover
losses arising from, but not
limited to:
|_| Personal injury
|_| Bodily injury
|_| Third party property
damage
|_| Aircraft and watercraft
liability
|_| Medical expenses
|_| Legal defense costs
|_| Pollution in some cases
|_| Well blowouts in some
cases
The price that Beta receives for its oil and Beta's revenues, cash flows and
gas production is subject to a great deal of profitability are substantially
volatility. dependent on prevailing prices
for both oil and gas.
Historically, oil and gas prices
and markets have been volatile,
and they are likely to continue
to be volatile in the future.
Prices for oil and gas are
subject to wide fluctuations in
response to relatively minor
changes in the supply of and
demand for oil and gas, market
uncertainty and a variety of
additional factors that are
beyond the control of Beta.
These factors include, among
others:
|_| Political conditions in
the Middle East and
other regions
|_| The domestic and
foreign supply of oil
and gas
|_| The level of consumer
demand
|_| Weather conditions
|_| Domestic and foreign
government regulations
|_| The price and
availability of
alternative fuels
|_| Overall economic
conditions
As an example of this
volatility, the quoted "spot
market" price for a barrel of
"West Texas Intermediate" crude
oil was $18.13 on Wednesday,
April 21, 1999. The quoted price
for the same grade of oil
exactly one year ago was $12.98
per barrel. This $5.15 increase
in the price of oil represents a
40% increase from one year ago.
Natural gas prices have been
very volatile during the past
year as well. During the past 12
months ended April 21, 1999, the
Henry-Hub natural gas price as
quoted on the New York
Mercantile Exchange has
fluctuated between approximately
$1.70 and $2.70 per Mcf. This
represents a price swing of 60%
during the past year. The
Henry-Hub price as of April 21,
1999 is approximately $2.20.
Beta depends on its key personnel for Beta is very dependent upon the
critical management decisions and industry continued services of Steve
contacts. Antry, President, Founder and
Chairman of the Board of
Directors and Mr. R.Thomas
Fetters, a director of Beta and
Managing Director of
Exploration. Mr. Antry has
entered into an employment
agreement with Beta and
Mr. Fetters has a consulting
agreement with Beta. The loss
of the services of Mr. Antry
or Mr. Fetters through
incapacity or otherwise would
have a material adverse effect
upon Beta's business and
prospects. If the services of
Mr. Antry or Mr. Fetters became
unavailable, Beta would be
required to retain other
qualified personnel, and there
can be no assurance that Beta
will be able to recruit and
hire qualified persons on
acceptable terms. Beta is
currently named as beneficiary
on a key person life insurance
policy on the life of Mr. Antry
in the amount of $2,500,000.
Beta utilizes third party operators in each Beta is a non-operating interest
of its projects. owner in all of its properties.
Accordingly, Beta enters into
joint operating agreements with
third party operators for the
conductand supervision of
drilling, completion and
production operations on its
wells. The success of the
oil and gas operations on
a property, whether drilling
operations or production
operations, depends in large
measure on whether the
operator of the property
properly performs its
obligations. The failure of such
operators and their contractors
to perform their services in a
proper manner could result in
materially adverse consequences
to the owners of interests in
that particular property,
including Beta. Beta is relying
on the following companies to
operate its current projects:
(1) Parallel Petroleum,Inc.
(2) Spinnaker Exploration
Company LLC
(3) IP Petroleum, Inc.
(4) Source Energy LLC
(5) Cheniere Energy, Inc.
Beta's projects are subject to numerous Domestic exploration for, and
regulations; Beta doesn't operate its production and sale of, oil and
projects or directly control compliance with gas are extensively regulated at
these regulations; Beta could be subject to both the federal and state
substantial liabilities for non-compliance. levels. Legislation affecting
the oil and gas industry is
under constant review for
amendment or expansion,
frequently increasing the
regulatory burden. The
regulatory burdens are often
costly to comply with and carry
substantial penalties for
failure to comply.
Beta may be required in the
future to make substantial
outlays of money to comply with
environmental laws and
regulations. The additional
changes in operating procedures
and expenditures required to
comply with future laws dealing
with the protection of the
environment cannot be predicted.
Since Beta does not operate the
oil and gas properties in which
it is involved, it does not
directly control compliance with
most of the rules and
regulations discussed above.
Beta is substantially dependent
on the operators of its oil and
gas properties to maintain such
compliance. The failure of the
operator to comply with such
rules and regulations could
result in substantial
liabilities to Beta which could
negatively affect its results of
operations.
Up to 8,469,859 shares of Beta's common stock Up to 8,469,859 of the Beta
could be sold in the open market immediately common shares being registered
upon completion of this offering which could will be eligible for immediate
have a depressive effect on the market price resale without further
for the common stock. restriction after completion of
this offering. In addition, an
additional 459,000 shares of
common stock could be sold
in the market approximately one
year from the date of this
prospectus. If a significant
number of shares are offered for
sale simultaneously, it would
have a depressive effect on the
trading price of the common
stock.
The requirement that Beta secure the minimum Beta is offering the shares
offering within ten business days may result through selected broker dealers
in an investor providing funds, but not on a "best efforts"
receiving securities until the closing of the minimum/maximum basis. No
minimum offering. broker dealer has made a
commitment to purchase any
shares offered in this
prospectus. Consequently, there
can be no assurance that the
shares offered in this
prospectus will be sold. If the
minimum number of shares
offered in this prospectus is
not sold within 10 business days
of the date of this prospectus,
all proceeds received will be
refunded in full to investors
with interest and without
deduction. Therefore, investors
subscribing to purchase the
shares offered in this
prospectus may lose the use of
their funds and will not be able
to sell their shares for the ten
business day escrow period
applicable to the minimum
offering. See "Underwriting" for
additional discussion concerning
the handling of funds invested
in this offering.
There has been no prior trading market for Before this offering, there was
Beta's common stock; potential volatility of no public market for the common
Beta's Stock price. stock. Although Beta intends
to apply for listing of the
common stock for quotation on
the Nasdaq SmallCap Market,
there can be no assurance that
an active trading market will
develop for the
common stock or, if one does
develop, that it will be
maintained. If Beta is unable to
obtain a public quotation for
its shares or if the common
stock were to be delisted
because of inability to meet
maintenance requirements of
NASDAQ, it would have a material
adverse effect on the ability of
investors to resell their stock
in the secondary market as well
as on Beta's ability to obtain
future financing or make
acquisitions utilizing its
shares. The public offering
price of the common stock was
determined based on several
criteria The market price of the
shares of common stock, like
that of the common stock of many
other speculative businesses, is
likely to be highly volatile.
Factors such as fluctuation in
Beta's operating results or the
announcement of any discoveries
of any meaningful oil or gas
reserves, developments in Beta's
strategic relationships and
general market conditions may
have a significant effect on the
market price of the common
stock. See "Underwriting" for
additional details regarding the
potential volatility of Beta's
stock.
If Beta's stock is classified as a penny The initial public offering
stock investors may experience delays and price of the common stock is
other difficulties in trading shares in $6.00. However, the market
the stock market. price of the shares of common
stock is likely to the be highly
volatile and could drop below
$5.00 per share. If price of the
common stock drops lower than
$5.00 per share, the
common stock would be subject to
the "penny stock" rules. The
penny stock rules are contained
in The Securities Enforcement
and Penny Stock Reform Act of
1990. Unless an exception is
available, these rules require
the delivery, before any
transaction involving a penny
stock, of a disclosure schedule
explaining the penny stock
market and the risks associated
with investing in penny stocks.
Brokers must also provide
potential investors with current
bid and offer quotations for
penny stocks, the compensation
of the broker and its
salesperson in connection with
the sale of penny stocks, and
monthly accounts statements
showing the market value of each
penny stock in the investor's
account. As a consequence, an
investor could find it difficult
to dispose of, or to obtain
accurate quotations as to the
price of, the common stock.
Investors in this offering will experience The initial public offering
immediate and substantial dilution. price is substantially higher
than the book value per share of
common stock. Investors
purchasing sharesof common stock
in this offering will incur
immediate and substantial
dilution equal to $3.94 per
share if the minimum number
of shares offered in this
prospectus is sold. In addition,
the investors purchasing shares
of common stock in this offering
will incur additional dilution
as a result of 2,610,367 shares
of Beta's common stock
underlying outstanding common
stock purchase warrants which
are being registered on behalf
of selling security holders.
Exercise of the warrants will
reduce the interest you own in
Beta. See "Dilution" for
additional discussion concerning
the level of dilution to be
experienced by investors in this
offering.
Investors in this offering may experience Beta executed an employment
dilution resulting from the employment contract with the President
contract of Steve Antry. and Chairman of the Board of
Directors, Mr. Steve Antry,
dated June 23,1997. The contract
may be terminated by Beta
without cause upon the payment
of, among other items, options
containing a five year term to
acquire the common stock of Beta
in an amount equal to 10% of the
then issued and outstanding
shares, piggyback registration
rights and an exercise price
equal to 60% of the fair market
value of the shares during the
sixty day period of time
preceding the termination
notice, such amount not to
exceed $3.00 per share.
If Beta were to terminate Mr.
Antry without cause, the common
shareholders would experience
immediate and substantial
dilution resulting from the
issuance of a large number of
options to Mr. Antry with an
exercise price substantially
lower than the market price. See
"Employment Contracts" under
"Executive Compensation" for
additional discussion concerning
this employment contract.
Investors in this offering will experience In connection with a January
dilution resulting from a bridge note and March 1999 bridge financing
financing. with three qualified investors,
Beta issued a total of 459,000
shares of common stock to date.
These shares are subject to a
one year restriction on sales or
transfers commencing upon the
date the minimum offering is
sold. In addition, the terms of
the financing obligate Beta to
issue additional shares of
common stock as long as any
principal balance remains
outstanding on the promissory
notes.
It is the intention of Beta to
immediately repay the $3,000,000
of bridge financing notes upon
completion of the minimum
offering. If the minimum
offering is not completed, Beta
may have to issue up to 390,000
additional shares of common
stock per the terms of the
bridge financing if the notes
are not repaid until maturity.
If Beta is unable to repay all
or a portion of the promissory
notes in a timely manner, the
common shareholders will
experience immediate and
substantial dilution resulting
from the issuance of these
additional common shares. See
"Management's Discussion and
Analysis of Financial Condition
and Results of Operations" for
additional discussion concerning
the bridge note financing.
Beta has paid no dividends nor does it intend Beta has not paid any cash
to pay dividends in the foreseeable future. dividends on its common stock
and does not expect to declare
or pay any cash or other
dividends in the foreseeable
future. Additionally, state
corporate laws prohibit Beta
from paying dividends until such
time as Beta has retained
earnings.
The Year 2000 issue; Beta could experience a Beta utilizes a number of
computer system failure. computer programs across its
entire operation. There can be
no assurances that Year 2000
problems will not occur with
respect to Beta's computer
systems or business
affiliations. The Year
2000 problem may impact other
entities with which Beta
transacts business, and Beta
cannot predict the effect of the
Year 2000 problem on such
entities or Beta. A major system
failure could have a material
adverse effect on Beta's
operations and results of
operations. See "Management's
Discussion and Analysis of
Financial Condition and Results
of Operations" for details
concerning Beta's Year 2000
ongoing assessment and the
current contingency plan.
Beta's statements about future events may In this prospectus, we have made
prove to be inaccurate; there is statements about future events
uncertainty about estimates used in this based upon reasonable
prospectus. assumptions of management.
Included are statements
concerning Beta's estimated oil
and gas reserves and reserve
values, and estimated capital
expenditures. However, the
actual results of these future
events may differ greatly from
the statements we have made.
Some of the specific material
uncertainties include:
|_| This prospectus contains
estimates of future net
cash flows from oil and gas
reserves. These estimates
are prepared based on
engineering estimates of
oil and gas that may be
recovered from Beta's
wells. Engineering
estimates are inherently
imprecise and may be
revised downward in the
future. Subsequent downward
revisions of estimated
future net cash flows could
result in substantial
additional losses to Beta
due to write-downs of the
carrying value of Beta's
assets.
|_| Our anticipated expenses
could be higher than we
expect resulting in a
possible need to raise more
funds and/or a reduction in
our working capital which
could curtail our
participation in other
projects.
|_| We may be unable to obtain
financing in the future
which could cause a
reduction in our
participation in future
projects.
You should be aware that actual
results will differ from the
expectations expressed in this
prospectus.
Beta has substantial discretion over Beta has projected its use of
how the proceeds from this offering are used; proceeds from this offering
the actual use of proceeds could differ based on management's best
materially from what is disclosed in the "Use estimate of wells that may be
of Proceeds" section. proposed for drilling. However,
Beta's board of directors has
retained the sole discretion to
change the use of proceeds. The
proceeds of this offering could
be allocated to projects or
purposes other than those
shown in the use of proceeds.
Beta's management may make the
wrong decision regarding the
allocation of its capital which
may adversely affect the Beta's
results of operations, financial
condition and liquidity.
<PAGE>
USE OF PROCEEDS
The net proceeds from this offering, after deducting broker commissions and
other expenses of this offering estimated to be approximately $90,000, will be
approximately $4,230,000 if 800,000 shares are sold in this offering and
$8,010,000 if all 1,500,000 shares are sold in this offering. In either the
minimum offering or the maximum offering case Beta plans to use $3,000,000 of
such proceeds to repay the bridge financing debt. In either case Beta will use
the remainder to fund its participatory share of the cost of drilling wells in
its Texas, California and Louisiana prospects. This is Beta's best estimate of
its use of proceeds generated from the sale of shares by Beta based on the
current state of its business operations, its current plans and current economic
and industry conditions. Any changes in the projected use of proceeds will be
made at the sole discretion of Beta's Board of Directors. See "Business" and
"Properties" for a more detailed description of the four project areas where the
proceeds will be utilized.
<TABLE>
Description of Uses Minimum Offering Maximum Offering
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Repayment of Bridge Debt $ 3,000,000 71% $ 3,000,000 37%
Drilling and completion of wells:
Parallel Joint Venture, South Texas 630,000 15% 1,750,000 22%
Cheniere Joint Venture, South Louisiana 400,000 9% 1,180,000 15%
West Cameron Block 39, South Louisiana 200,000 5% 1,200,000 15%
Lapeyrouse Prospect, South Louisiana 0 0% 545,000 7%
Norcal Joint Venture, Central California 0 0% 335,000 4%
============= ============= ============= =============
Total net proceeds of offering $ 4,230,000 100% $ 8,010,000 100%
============= ============= ============= =============
</TABLE>
This table does not reflect the possible proceeds from exercise of the
over-allotment option. If the over-allotment option is exercised in full, the
additional net proceeds of $810,000 will be applied to drilling and completion
of wells in the Parallel Joint Venture in South Texas.
Beta's capital budget for 1999 is $8,300,000, most of which will be spent in the
drilling and completion of wells. The net proceeds of the offering will not be
enough to meet all of Beta's budgeted expenditures for 1999. If Beta sells the
minimum offering, Beta will need to raise additional funds of $5,270,000 over a
six month period between July 15 and December 31, 1999 if it elects to
participate in all of its budgeted wells. In the event Beta is unable to raise
the additional capital, Beta will have to substantially curtail its activities.
If Beta sells the maximum offering, Beta will need to raise $1,500,000 of
additional funds in order to complete its 1999 budgeted business plan. See
"Management's Discussion and Analysis" in this prospectus for a detailed
discussion of what sources of additional capital Beta will seek to fund this
capital shortfall.
It is Beta's intention to repay the $3,000,000 bridge note financing if and when
the minimum offering is completed. Upon completion of the minimum offering, the
payment of commissions and other offering costs and the repayment of the
$3,000,000 bridge note financing, Beta's management estimates that Beta will
have approximately $1,200,000 in working capital. See "Management's Discussion
and Analysis" in this prospectus for a detailed discussion about the terms of
the bridge note.
The $3,000,000 gross proceeds from the bridge note financing have been applied
to the following uses:
<TABLE>
Approximate
------------
<S> <C>
Drilling and completion of wells in Louisiana and Texas $1,800,000
Acquisition of seismic and leasehold 550,000
General and administrative expense 250,000
Working capital 200,000
Interest expense 35,000
Offering costs 165,000
==========
Total $3,000,000
</TABLE>
==========
<PAGE>
DILUTION
"Dilution" represents the difference between the initial public offering
price per share of common stock and the adjusted pro forma net tangible book
value per share of common stock immediately after the completion of this
offering. Dilution arises mainly from an arbitrary decision by Beta about the
offering price per share of common stock. In this offering, the level of
dilution will be increased as a result of Beta's low net tangible book value
before this offering.
Tangible assets are items of property in physical form and not intangible
items such as goodwill or intellectual property.
The net tangible book value of Beta before this offering, based on the
March 31, 1999 financial statements, was $12,767,205 or $1.71 per share of
common stock based on 7,458,492 shares outstanding. Before selling any shares in
this offering, Beta has 7,488,492 shares of common stock outstanding with a net
tangible book value of $1.70 per share.
If the minimum shares offered in this prospectus are sold, Beta will have
8,288,492 shares issued and outstanding upon completion of the offering. After
giving effect to the sale of the shares of common stock offered in this
prospectus by Beta, net of estimated commissions and offering expenses of the
offering, the post offering pro forma net tangible book value of Beta will be
$17,062,063 or $2.06 per share, approximately. This would result in dilution to
investors in this offering of $3.94 per share or 66% from the offering price of
$6.00 per share. Net tangible book value per share would increase to the benefit
of present shareholders from $1.70 before the offering to $2.06 after the
offering, or an increase of $0.36 per share attributable to the purchase of the
shares by investors in this offering.
If the maximum shares offered in this prospectus are sold, Beta will have
8,988,492 shares issued and outstanding upon completion of the offering. After
giving effect to the sale of the shares of common stock offered in this
prospectus by Beta, net of estimated commissions and offering expenses of the
offering, the post offering pro forma net tangible book value of Beta will be
$20,842,063 or $2.32 per share, approximately. This would result in dilution to
investors in this offering of $3.68 per share or 61% from the offering price of
$6.00 per share. Net tangible book value per share would increase to the benefit
of present shareholders from $1.70 before the offering to $2.32 after the
offering, or an increase of $0.62 per share attributable to the purchase of the
shares by investors in this offering.
The following table illustrates the estimated net tangible book
value per share after the offering and the dilution to persons purchasing shares
based on the maximum offering assumption. The table does not include exercise of
the over-allotment option.
<TABLE>
MINIMUM MAXIMUM
OFFERING OFFERING
-------------------------------
<S> <C> <C>
Offering price of common stock (per share) $ 6.00 $ 6.00
Net tangible book value per share before the offering $ 1.70 $ 1.70
Increase per share attributable to payments by new investors $ 0.36 $ 0.62
Pro forma net tangible book value per share after the offering $ 2.06 $ 2.32
Dilution per share to new investors $ 3.94 (66%) $ 3.68 (61%)
</TABLE>
<PAGE>
The following tables sets forth as of March 31, 1999, after giving effect
to the offering, the number of shares of common stock purchased from Beta, the
total consideration paid and the average price per share paid by existing
shareholders and by new investors on an as adjusted basis:
<TABLE>
====================================================================================================================
MINIMUM OFFERING SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders 7,488,492 90% $ 17,423,430 78% $2.33
New investors 800,000 10% 4,800,000 22% $6.00
================= =================
Total 8,288,492 100% $ 22,223,430 100% $2.68
====================================================================================================================
</TABLE>
<TABLE>
====================================================================================================================
MAXIMUM OFFERING SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders 7,488,492 83% $ 17,423,430 66% $2.33
New investors 1,500,000 17% 9,000,000 34% $6.00
================ =================
Total 8,988,492 100% $ 26,423,430 100% $2.94
====================================================================================================================
</TABLE>
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1999:
(1) the actual capitalization of Beta;
(2) the pro forma capitalization of Beta that gives effect to the issuance of
30,000 shares of common stock per the terms of the bridge note after March
31, 1999; and
(3) the capitalization of Beta on a pro forma basis as adjusted to give effect
to the proposed sale by Beta of a minimum of 800,000 shares and a maximum
of 1,500,000 shares of common stock being offered in this prospectus and
the application of the net proceeds of the offering toward repayment of the
bridge note.
This table excludes 2,610,367 shares reserved for issuance on exercise of
outstanding warrants to purchase common stock of Beta assuming maximum offering.
<TABLE>
As of March 31, 1999 (Unaudited)
--------------------------------------------------------------------------
Adjusted for Adjusted for
the Sale of the Sale of
Actual Pro Forma Minimum Offering Maximum Offering
-------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Shareholders' Equity
Common shares, $.001 par value;
50,000,000 shares authorized;
7,458,492 shares issued and outstanding actual;
7,488,492 shares pro forma; 8,288,492 shares
(minimum offering) and 8,988,492 (maximum
offering) pro forma as adjusted at $ 7,458 $ 7,488 $ 8,288 $ 8,988
March 31, 1999
Additional paid-in capital 18,434,277 18,614,247 22,843,447 26,622,747
Accumulated deficit (3,300,177) (3,300,177) (5,729,672) (5,729,672)
============== ============== ================= =================
Total shareholders' equity $ 15,141,558 $ 15,321,558 $ 17,122,063 $ 20,902,063
============== ============== ================= =================
</TABLE>
DIVIDENDS
Beta has never paid any dividends, whether cash or property, on its
securities. For the foreseeable future it is anticipated that any earnings which
may be generated from operations of Beta will be used to finance the growth of
Beta and that dividends will not be paid to stockholders. Additionally, state
corporate laws prohibit Beta from paying dividends until such time as Beta has
retained earnings.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected historical consolidated financial
data for Beta derived from Beta's financial statements. The historical financial
data should be read in conjunction with the financial statements and notes to
the financial statements of Beta which are contained in this prospectus. The
financial data for the period from inception, June 6, 1997, to December 31,
1997, the year ended December 31, 1998 and as of December 31, 1997 and 1998 were
derived from the financial statements of Beta which have been audited by Hein +
Associates LLP, independent accountants. The following data should also be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
Cumulative
For the from
period from The year The three The three inception
inception ended months months ended (June 6,
(June 6, December 31, ended March 31, 1997) to
1997) to 1998 March 31, 1999 March 31,
December 1998 1999
31, 1997
--------------- ---------------- ---------------- -------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales $ - $ - $ - $ 29,664 $ 29,664
---------------- -------------- --------------- ---------------- ----------------
Costs and expenses:
Lease operating expense - - - 9,035 9,035
General and administrative 245,452 746,769 204,052 258,245 1,250,466
Impairment expense - 1,670,691 1,297,342 - 1,670,691
Depreciation and depletion 1,530 11,883 2,835 12,415 25,828
expense
---------------- -------------- --------------- ---------------- ----------------
Total costs and expenses 246,982 2,429,343 1,504,229 279,695 2,956,020
---------------- -------------- --------------- ---------------- ----------------
Loss from operations (246,982) (2,429,343) (1,504,229) (250,031) (2,926,356)
Other income and (expense):
Interest expense - - - (466,348) (466,348)
Interest income 45,409 44,843 21,702 2,275 92,527
---------------- ------------ -------------- --------------- --------------
Net loss $ (201,573) $ (2,384,500) $ (1,482,527) $ (714,104) $ (3,300,177)
================ ============== =============== ================ ================
Basic and diluted loss
per common share ($.05) ($.37) ($.26) ($.10)
================ ============== =============== ================
Weighted average number of
Common shares outstanding 4,172,662 6,366,923 5,630,426 7,303,481
================ ============== =============== ================
</TABLE>
<TABLE>
December 31, December 31, March 31,
1997 1998 1999
------------- -------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Working capital............................... $ 3,117,351 $ (96,457) (447,755)
Oil and gas properties, net................... $ 5,900,794 $ 13,183,304 15,367,440
Total assets.................................. $ 9,921,057 $ 13,618,471 16,335,650
Total liabilities............................. $ 870,847 $ 319,129 1,194,092
Stockholder's equity.......................... $ 9,050,210 $ 13,299,342 15,141,558
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Beta's
consolidated financial statements and related notes to the financial statements
appearing elsewhere in this prospectus. The following discussion is to inform
you about the financial position, liquidity and capital resources of Beta as of
December 31, 1997 and 1998 and March 31, 1999 as well as for the results of
operations for the period from inception (June 6, 1997) through December 31,
1997, the year ended December 31, 1998, and the three months ended March 31,
1999.
Beta is a Development Stage (Start-Up) Company
Beta has a limited operating history upon which an evaluation of Beta and
its prospects can be based. The risks, expense, and difficulties encountered by
early-stage companies must be considered when evaluating Beta's prospects. There
are numerous significant risks inherent in a development stage company which is
engaged in high risk oil and gas exploration. See "Risk Factors."
Financial Condition, Liquidity and Capital Resources
Beta's working capital was a deficit of ($447,755) at March 31, 1999 and
($96,457) at December 31, 1998 compared to surplus of $3,117,351 at December 31,
1997. Beta's working capital decreased due primarily to investments in oil and
gas properties. In order to address this working capital deficit and projected
expenditures which are expected to occur in the first six months of 1999, Beta
obtained short term financing in the form of $3,000,000 in bridge note
financing.
Historical Cash Used In and Provided by Operating, Investing and Financing
Activities
Beta financed all of its business activities through December 31, 1998
through issuances of its common stock in private placements. Beta raised net
proceeds of $9,221,783 during 1997 and $6,548,632 during 1998 in these private
placements. During the three months ended March 31, 1999 Beta realized net
proceeds of $2,835,000 from a bridge note financing which is discussed below.
The net proceeds of the private placements and the bridge note financing
have been primarily invested in oil and gas properties of $5,900,794 in 1997,
$8,928,201 in 1998, and $2,193,467 for the three months ended March 31, 1999.
Cash used in Beta's operatons from inception, June 6, 1997 through March
31, 1999 totals ($748,000). Cash used by operations consists, for the most part,
of general and administrative expenses of $245,452 in 1997, $746,769 in 1998,
and $258,245 for the three months ended March 31, 1999.
<PAGE>
The general and administrative expenses incurred since inception of
approximately $1,250,000 are comprised of the following:
<TABLE>
Description $Amount Percent of total
<S> <C> <C> <C>
Salaries $ 554,000 44%
Consulting & professional 247,000 20%
Rent expense 48,000 4%
Insurance 43,000 3%
Travel 139,000 11%
Other 219,000 18%
===============
$ 1,250,000 100%
===============
</TABLE>
The $1,250,000 of general and administrative expenses include non-cash
expenses and expenses which have been accrued but not yet paid for. The non-cash
expenses include $100,000 of salary contributed to Beta in lieu of cash
compensation. Expenses which have been accrued but not yet paid for include a
$363,000 increase in current trade payables, accrued payroll and accrued
interest since inception.
Long Term Liquidity and Capital Resources
The timing of most of Beta's capital expenditures is discretionary. Beta has
no material long-term commitments associated with its capital expenditure plans
or operating agreements. Consequently, Beta has a significant degree of
flexibility to adjust the level of such expenditures as circumstances warrant.
The level of capital expenditures will vary in future periods depending on the
success it experiences on planned exploratory drilling activities in 1999, gas
and oil price conditions and other related economic factors. Accordingly, Beta
has not yet prepared an estimate of capital expenditures for the year 2000 or
future periods.
Bridge Note
During the three months ended March 31, 1999, Beta completed the private
placement of a $3,000,000 bridge financing to three institutional investors
referred to as the "1999 bridge financing." In connection with the 1999 bridge
financing, Beta has granted the investors a security interest in all of Beta's
assets.
The first portion of the 1999 bridge financing was funded on January 20,
1999 for $2,000,000. The investors are St. Cloud Investments, Ltd. and Dandelion
Investments, Ltd., both of which are qualified institutional investors. The
promissory notes issued by Beta have a maturity date of January 2000. The notes
bear interest, payable monthly in arrears, at a rate of 10%. The securities
purchase agreements which govern the bridge financing specify that, during the
term of the notes, $1,000,000 of the proceeds of a public offering of common
stock by Beta must be directed to repayment of the notes. It is the intention of
Beta to repay the $2,000,000 January bridge financing upon completion of the
minimum offering.
In connection with the January 20, 1999 bridge financing, Beta issued
300,000 shares of common stock to the note holders and issued an additional
29,000 shares as commissions in connection with the January bridge financing. In
addition, if any portion of the principal of the notes remains unpaid on the
180th, 210th, 240th, 270th, 300th, and/or the 330th day following the closing
date of the securities purchase agreements, then on the day following any of
such dates, Beta shall issue additional common stock to each holder of the
notes. The additional common shares issued shall be determined by multiplying
the unpaid principal balance by 2.5%. For example, if $1,000,000 of principal
remains unpaid on the 180th day following the closing date, then on the
following day the note holders would be issued an additional 25,000 common
shares calculated by multiplying $1,000,000 times 2.5%. All shares issued
pursuant to this bridge note are subject to a one year restriction against sales
or transfers commencing upon the date the minimum offering is sold.
The second portion of the 1999 bridge financing was funded on March 19, 1999
for $1,000,000. The investor is Aztore Holdings, Inc., an accredited
institutional investor. The promissory note issued by Beta has a maturity date
of March 2000. The promissory note bears interest, payable monthly in arrears,
at a rate of 10%. The securities purchase agreement which governs this bridge
financing specifies that, during the term of the promissory note, $1,000,000 of
the proceeds of a public offering of common stock by Beta must be directed to
repayment of the note. Therefore, $1,000,000 of the proceeds from this offering
will be used to repay the March bridge financing upon completion of the minimum
offering.
In connection with the March 19, 1999 bridge financing, Beta issued 100,000
shares of common stock to the promissory note holder investor. In addition, if
any portion of the principal of the note remains unpaid on the 30th, 60th, 90th,
120th, 160th, 180th, 210th, 240th, 270th, 300th, 330th and/or the 360th day
following the March 19, 1999 closing date of the securities purchase agreement,
then on the day following any of such dates, Beta shall issue additional common
stock to the holder of the note. The additional common shares issued shall be
determined by multiplying the unpaid principal balance by 1%. For example, if
$1,000,000 of principal remains unpaid on the 180th day following the March 19,
1999 closing date, then on the following day the investor would be issued an
additional 10,000 common shares calculated by multiplying $1,000,000 times 1%.
If $250,000 of principal remains unpaid on the 180th day following the closing
date, then on the following day the investor would be issued an additional 2,500
common shares calculated by multiplying $250,000 times 1%. As of the date of
this prospectus, Beta is obligated to issue an additional 30,000 shares per the
terms of this bridge financing. All shares issued pursuant to this bridge note
are subject to a one year restriction on sales or transfers commencing upon the
date the minimum offering is sold.
Beta received net cash proceeds of $2,835,000 from the bridge notes. The net
effect of this transaction will require Beta to record the $3,000,000 bridge
notes as a current liability since they have a maturity of one year. Interest
will be payable monthly in arrears at a rate of 10%. The estimated fair market
value of the 429,000 shares of common stock issued in connection with the bridge
note of $2,574,000, is treated as a discount and will be amortized over the term
of the promissory notes using the interest method. Accordingly, Beta will incur
additional interest expense of $2,574,000 over the term of the promissory notes
most of which will be expensed in 1999 and which will represent a significant
charge in the year ending December 31, 1999. As of March 31, 1999 Beta has
amortized $405, 354 of the note discount. The deferred loan costs of $165,000
were capitalized and will be amortized over the life of the bridge note. As with
the discount, this will represent a significant charge in 1999. As of March 31,
1999 Beta has amortized $24,151 of the deferred loan costs. In addition, Beta is
obligated to issue up to 420,000 additional shares over the term of the notes
which could represent an additional charge to earnings of up to $2,520,000 based
on the market value of the stock, most of which will occur in 1999. This will
increase Beta's accumulated deficit by an equivalent amount and could affect
Beta's liquidity to the extent that it prohibits Beta from seeking additional
equity financing on favorable terms.
Per the terms of the bridge notes, Beta has granted a security interest in
all of the assets of Beta. This will prohibit Beta from selling assets to raise
cash for other purposes until the bridge notes are repaid. It further prohibits
Beta from using any assets to secure additional loans. This will make it very
difficult to obtain any additional loans until the bridge notes are repaid. It
may also pose difficulty in securing additional equity financing.
The bridge notes will require significant dedications of future cash flow
to service debt. Specifically, over the one year term of the bridge notes, Beta
will have to make debt service payments of $3,000,000 of principal and up to
$300,000 of interest. The effective annualized rate of interest on these bridge
notes will range from approximately 185% to 284% depending on whether the notes
are repaid at maturity or upon completion of the minimum offering. The effective
annualized rate of interest includes the cash paid for interest, amortization of
the debt issuance costs, and the value of common stock issued to the bridge note
investors.
Beta will repay the entire $3,000,000 of the bridge notes upon completion of
the minimum offering. If Beta is unsuccessful in completing the minimum
offering, then it will be obligated to issue up to 420,000 shares of additional
common stock as long as the principal balance of the bridge loans remains
outstanding. Assuming the minimum offering is completed by Ju1y 15, 1999, an
additional 30,000 shares shall be issuable on the following dates per the terms
of the bridge loans:
<TABLE>
Shares
Date Stock is Issuable Issuable
<S> <C>
April 19, 1999 10,000
May 19, 1999 10,000
June 19, 1999 10,000
--------------
Total 30,000
==============
</TABLE>
<PAGE>
If the offering is delayed past July 20, 1999, then an additional 10,000
shares will become issuable on July 19, 1999 and 50,000 shares will become
issuable on July 20, 1999 under the terms of the bridge notes. In the event that
the offering is not completed and the bridge notes are not repaid until
maturity, additional shares will become issuable under the terms of the bridge
notes as follows:
<TABLE>
Shares
Date Stock is Issuable Issuable
---------------------- --------
<S> <C>
July 19, 1999 10,000
July 20, 1999 50,000
August 19, 1999 10,000
August 20, 1999 50,000
September 19, 1999 10,000
September 20, 1999 50,000
October 19, 1999 10,000
October 20, 1999 50,000
November 19, 1999 10,000
November 20, 1999 50,000
December 19, 1999 10,000
Decenber 20, 1999 50,000
January 19, 2000 10,000
February 19, 2000 10,000
March 19, 1999 10,000
==============
Total 390,000
==============
</TABLE>
Plan of Operation for 1999
In the opinion of Beta's management, the existing working capital
of Beta will be sufficient to fund the operations and projected capital
requirements of Beta until July 15, 1999. Beta plans to allocate its cash
resources from all sources, including the net proceeds of this offering, to the
following categories of expenditures:
1) Repayment of $3,000,000 of bridge debt. It is Beta's intention to repay the
entire $3,000,000 if and when the minimum offering is completed;
2) Drilling and completion costs for wells on Beta's prospects which are
estimated to be $6,500,000 for the period July 15 to December 31, 1999. It
is anticipated that as many as 38 test wells will be drilled in 1999 in
which Beta will have an interest participation ranging from 12.5% to 75%
and averaging 22%. While it is difficult to predict the exact timing of
when these wells will be proposed for drilling, Beta's operating agreements
generally provide a thirty day period in which to elect participation in a
proposed well. Generally funds must be advanced within thirty days or less
after the thirty day election period;
3) Leasehold acquisition costs estimated to be $350,000 for the period July 15
to December 31, 1999;
4) 3-D seismic acquisition costs only if funds are available; and
5) General and administrative overhead estimated to be $500,000 for the period
July 15 to December 31, 1999.
At such time as Beta has fully utilized the proceeds of the offering and
Beta's existing working capital, it will be necessary for Beta to raise
additional funds. It is anticipated that additional funds will be raised from
one or more of the following sources:
<PAGE>
1) Beta has approximately 797,000 callable common stock purchase warrants
outstanding exercisable at a price of $5.00 per share. Beta is able to
call these warrants at any time on and after the date that its common
stock is traded on any exchange, including the Over-the-Counter
Bulletin Board, at a market price equal to or exceeding $7.00 per share
for 10 consecutive days, of which there can be no assurance that such a
price level will occur. It is Beta's intent to call all or a portion of
these warrants at such time, if and when, the market price of the stock
is at a sufficient level to fund capital requirements. Beta will
receive proceeds equal to the exercise price times the number of shares
which are issued from the exercise of warrants net of commission to the
broker of record, if any. Beta could realize net proceeds of
approximately $3,800,000 from the exercise of these warrants. There is
no assurance that Beta will realize any proceeds from the warrant
calls.
2) Beta may seek bank or other debt financing at such time that cash flow
from operations is established. Beta is not able to predict when, if
ever, such financing will be available. When Beta has cash flow from
producing wells to cover Beta's general and administrative expenses and
service debt, Beta will seek bank financing of $2,000,000 to $5,000,000
in the fourth quarter of 1999.
3) Beta may seek mezzanine financing, if available, on terms acceptable to
Beta. Mezzanine financing usually involves debt with a higher cost of
capital as compared to conventional bank financing. As with bank
financing, Beta will seek mezzanine financing in the range of
$2,000,000 to $5,000,000 if sufficient cash flow is available from
wells to cover Beta's general and administrative expenses and service
debt.
4) Beta may realize cash flow from oil and gas wells, if found to be
productive. Beta owns a working interest in one well that is currently
producing and in 6 wells which are presently being completed and
equipped for production. It is anticipated that cash flow from these
wells will commence in the first six months of 1999 and continue
throughout the year and generate net cash flow of approximately
$750,000 net to Beta's interest. It is also anticipated that additional
wells will be drilled in 1999 which may contribute cash flow if
completed for production. The additional wells will require capital
expenditures by Beta. In the event Beta does not complete the minimum
offering or is unable to raise funds from other sources, Beta will not
be able to participate in the additional wells.
The net proceeds of this offering combined with Beta's existing working
capital may not be sufficient to fund Beta's $8.3 million of capital
expenditures that are projected for 1999. If the above additional sources of
cash are unavailable on terms acceptable to Beta, Beta will be compelled to
reduce the scope of its business activities. If Beta is unable to fund planned
expenditures within a thirty to sixty day period after a well is proposed for
drilling, it may be necessary to:
1) Forfeit its interest in wells that are proposed to be drilled;
2) Farm-out its interest in proposed wells;
3) Sell a portion of its interest in proposed wells and use the sale proceeds
to fund its participation for a lesser interest; and
4) Reduce general and administrative expenses.
As stated above, Beta believes it has sufficient working capital to fund
its capital expenditure requirements until July 15, 1999. In the event that Beta
does not have the minimum offering proceeds by this date or is unable to
complete the minimum offering at all, it may be necessary for Beta to
substantially curtail its business activities until other financing is
available. The inability to fund planned expenditures after July 15 could
negatively impact Beta in several ways:
|_| This will prevent Beta from carrying out its business plan and prevent Beta
from participating in wells proposed to be drilled after that date.
|_| If Beta is unable to participate in proposed wells, it will be excluded
from any potential economic benefit that the wells might generate.
|_| Beta has previously advanced over $11,000,000 to acquire leases and seismic
data in projects associated with these proposed wells.
|_| Beta's participation agreements in those projects preclude Beta from
receiving any reimbursement of seismic and lease funds previously advanced
in the event Beta does not participate in the drilling of wells on those
projects.
|_| If Beta cannot participate in the drilling in these projects, it will be
forced to write down all or a portion of the over $11,000,000 in costs
which have been capitalized as unevaluated properties.
|_| These writedowns will result in substantial financial losses to Beta and
negatively impact shareholder's equity.
|_| Substantially all of Beta's business plan will go unfulfilled if this
offering is not completed and Beta is unable to raise additional funds.
Approximately $6,500,000 or 80% of Beta's projected capital expenditures
for 1999 will go unfunded.
|_| If only the minimum proceeds are raised in this offering, and if Beta is
unable to raise funds from other sources, then Beta will be unable to fund
approximately $5,300,000 or 64% of its $8,300,000 planned expenditures for
1999.
Beta may have to seek alternative forms of financing to "bridge" its
capital needs until the proceeds of this offering are available. The terms of
the bridge financing are likely to be onerous:
|_| The interest rate for bridge financing would likely be much higher than
interest on a conventional bank loan.
|_| Bridge financing terms may require Beta to issue common shares which would
be highly dilutive to existing shareholders.
|_| The bridge financing may require Beta to pledge its assets as collateral.
|_| Bridge financing terms could likely contain restrictive covenants on Beta.
Plan of Operation if Beta Does Not Achieve the Minimum Offering
As of the date of this prospectus, Beta has three producing gas wells and
three wells which will commence production by about July 1, 1999. Beta has fully
funded its obligations under all six of these wells constituting an aggregate
capital expenditure in excess of $2,000,000. Beta believes that the cash flow
from these six wells will be more than sufficient to pay for the general and
administrative expenses of Beta which are projected to be approximately $77,000
per month during calendar 1999. Beta has the ability to reduce this amount to as
little as $20,000 per month and still retain three of its key employees and meet
its rental obligations. Once it has covered its general and administrative
expenses, Beta will still have non-producing assets, comprised primarily of oil
and gas leaseholds with related 3-D seismic data for which the Company paid
approximately $11.5 million. Beta believes sufficient amounts could be raised
from the sale of these assets to ensure that Beta continues as a going concern
during calendar 1999. Specifically, Beta would need to sell seismic and
leasehold assets for at least $3,000,000 in proceeds to repay existing bridge
debt. Beta's estimate of resale value exceeds $11,500,000 based on the value of
its 3-D seismic and leasehold assets and the expected future value to be derived
from these assets discounted to present value using a 10% discount and
discounted for risk. In the event Beta is compelled to sell seismic and
leasehold assets to repay indebtedness, these asset sales will involve one or
more of the following projects which are described in more detail in the
"Properties" section of this prospectus:
1. Formorsa Grande Prospect, Texas
2. Texana Prospect, Texas
3. Ganado Prospect, Texas
4. BWC Prospect, Texas
5. Lapyerouse Prospect, Louisiana
6. Rozel Joint Venture, Louisiana
7. Norcal Project, California
Beta believes the combination of Beta's projected cash flow covering its
administrative overhead, coupled with asset sales of its leasehold/3-D seismic
portfolio will allow Beta to repay its bridge notes and continue as a going
concern in the event Beta does not raise the minimum offering. However, Beta's
inability to raise the minimum offering will adversely affect results of
operations, financial position and liquidity for Beta. As noted above, Beta's
inability to fund planned drilling activities will result in significant
impairments of Beta's oil and gas properties. This will result in significant
losses to Beta's results of operations.
These are forward looking statements that are based on assumptions which in
the future may not prove to be accurate. Although Beta's management believes
that the expectations reflected in such forward looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Certain risks and uncertainties inherent in Beta's business are set
forth in the "Risk Factors" section of this prospectus.
Comparison of Results of Operations for the Period from Inception, June 6, 1997,
through December 31, 1997 and the year ended December 31, 1998
During the period from inception, June 6, 1997, through December 31, 1997
and the year ended December 31, 1998 Beta generated no revenues.
General and administrative expenses for the period from inception, June 6,
1997, through December 31, 1997 were $245,452 compared to $746,769 for the year
ended December 31, 1998. This represents a $501,317 or a 204% increase. The
primary reasons for the increase were due to:
(1) A full year of operations in 1998 as compared to a partial year in 1997 .
(2) An increase in the number of employees from three in 1997 to five in 1998.
(3) Costs related to filing this registration statement.
Loss from operations totaled $(246,982) for the period from inception, June
6, 1997, through December 31, 1997 compared to $(2,429,343) for the year ended
1998. The primary reason for the increase in the loss was due to an impairment
expense of $1,670,691 recorded in 1998. During 1998 Beta participated in the
drilling of two offshore test wells in Australia. The drilling resulted in two
dry holes. All of the property acquisition and exploration costs associated with
the Australian full cost pool totaling $1,624,218 have been transferred to
evaluated properties and charged to impairment expense during 1998. In addition,
it was determined that the capitalized costs associated with the U.S. full cost
pool exceeded their net realizable value by $46,473. Accordingly, an impairment
write-down of $46,473 was recorded as of December 31, 1998.
Other income for the period from inception, June 6, 1997, through December
31, 1997 consisted of interest income in the amount of $45,409. Beta realized
$44,843 of interest income for 1998.
Net loss for the period from inception, June 6, 1997, through December 31,
1997 was $(201,573) compared to $(2,384,500) for the year ended December 31,
1998. The increase in net loss was primarily due to the impairment writedown of
oil and gas properties.
Comparison of Results of Operations for the Three Months ended March 31, 1998
and 1999 (unaudited)
During the three months ended March 31, 1998 Beta generated no revenues.
During the three months ended March 31, 1999 Beta had gas revenues of $29,664.
Beta's net production was 18,455 mcf at an average price of $1.61 per mcf.
During the three months ended March 31, 1998 Beta incurred no lease
operating expense. During the three months ended March 31, 1999 Beta incurred
lease operating expenses of $9,035. Beta's average lifting cost for this period
was $.49 per mcf equivalent.
General and administrative expenses for the three months ended March 31,
1998 were $204,052 compared to $258,245 for the three months ended March 31,
1999. This represents a $54,000 or a 27% increase. The primary reasons for the
increase were due to:
(1) An increase in operational activities in 1999 versus1998;
(2) An increase in the number of employees from four in 1998 to seven in 1999;
and
(3) Costs related to Beta's initial public offering and filing this
registration statement.
Loss from operations totaled $(1,504,229) for the three months ended March
31, 1998 compared to $(250,031) for the three months ended March 31, 1999. The
primary reason for the decrease in the loss was due to an impairment expense of
$1,297,342 recorded in March 1998 associated with the unsuccessful drilling of
two wells in Australia compared to no impairment expense in the same period in
1999.
Other income for the three months ended March 31, 1998 consisted of
interest income in the amount of $21,702. Beta realized $2,275 of interest
income for three month period in 1999. The reason for the decrease was lower
average cash and cash equivalents balances for the 1999 period as compared to
the 1998 period.
During the three months ended March 31, 1998, Beta incurred no interest
expense. During the three months ended March 31, 1999, Beta incurred interest
expense of $466,448 relating to the bridge notes. The interest expense consisted
of the following:
<TABLE>
<S> <C>
Cash interest expense $ 36, 843
Amortization of discount 405,354
Amortization of debt issuance cost 24,151
Total interest expense $ 466,348
</TABLE>
Net loss for the three months ended March 31, 1998 was $(1,482,527)
compared to $(714,104) for the three months ended March 31, 1999. The decrease
in net loss was primarily due to the impairment writedown of oil and gas
properties in the prior year period.
Subsequent Events
After March 31, 1999, Beta issued 30,000 additional shares of common stock
per the terms of the bridge notes. See section under "bridge notes."
As of June 21, 1999, certain warrant holders agreed to cancel 87,296
warrants to purchase common stock consisting of 20,000 warrants exercisable at
$5.00 per share and 67,296 warrants exercisable at $7.00 per share. All of the
cancelled warrants were non-callable with expiration dates on March 12, 2003.
The warrants were cancelled for no consideration pursuant to a request by the
National Association of Securities Dealers, the "NASD". The warrant holders were
certain NASD member firms and their employees who participated in Beta's 1998
private placement, as well as Beta's legal counsel. The cancellation request was
made and complied with because the NASD determined that these warrants could be
deemed "underwriter's compensation" and the continued existence of these
warrants could result in the compensation for this offering exceeding the NASD
guidelines. Therefore, all such warrants which could be deemed "underwriter's
compensation" in excess of NASD guidelines have been cancelled for no
consideration.
Inflation
In recent years inflation has not had a significant impact on Beta's
operations or financial condition. However, in the past several years,
competition from other oil and gas companies to acquire, explore and develop
acreage, particularly in the Gulf Coast region of Texas and Louisiana, has
intensified. Competition from other companies has also increased utilization
rates and the costs of contracting with seismic acquisition and drilling
contractors. Although it is not possible to accurately predict whether such
competition will continue in future periods, it could put upward pressure on
costs incurred to explore for, acquire, drill, complete and operate oil and gas
properties.
Income Taxes
As of December 31, 1998, Beta had available, to reduce future taxable
income, a tax net operating loss carryforward of approximately $4,003,000 which
expires in the years 2012 through 2018. As of December 31, 1998, Beta has a
deferred tax asset of approximately $1,110,000 which is fully reserved for with
a valuation allowance. The deferred tax asset consists entirely of the net
operating loss carryforward. Utilization of the tax net operating loss
carryforward may be limited in the event a 50% or more change of ownership
occurs within a three year period. The tax net operating loss carryforward may
be limited by other factors as well.
Disclosure Regarding Forward-Looking Statements
All forward looking statements contained in this prospectus are based on
assumptions believed to be reasonable. These statements are included in the
following sections of this prospectus:
|_| Business
|_| Properties
|_| Management's Discussion and Analysis of Financial Condition and Results of
Operations
|_| Risk Factors
These forward looking statements include statements regarding:
|_| Beta's financial position
|_| Proved or possible reserve quantities and net present values of those
reserves
|_| Business strategy
|_| Plans and objectives of management of Beta for future operations and
capital expenditures
|_| Revenue and cash flow projections
Beta can give no assurance that such expectations and assumptions will
prove to be correct. Reserve estimates of oil and gas properties are generally
different from the quantities of oil and natural gas that are ultimately
recovered or found. This is particularly true for estimates applied to
exploratory prospects. Additionally, any statements contained in this report
regarding forward-looking statements are subject to various known and unknown
risks, uncertainties and contingencies, many of which are beyond the control of
Beta. Such things may cause actual results, performance, achievements or
expectations to differ materially from the anticipated results, performance,
achievements or expectations.
Factors that may affect such forward-looking statements include, but are
not limited to:
|_| Beta's ability to generate additional capital to complete its planned
drilling and exploration activities
|_| Risks inherent in oil and gas acquisitions, exploration, drilling,
development and production; price volatility of oil and gas
|_| Competition from other oil and gas companies
|_| Shortages of equipment, services and supplies
|_| Government regulation
|_| Environmental matters
|_| Financial condition and operating performance of the other companies
participating in the exploration, development and production of oil and gas
ventures that Beta is involved in
In addition, since all of Beta's prospects are currently operated by third
parties, Beta may not be in a position to control costs, safety and timeliness
of work as well as other critical factors affecting a producing well or
exploration and development activities. See "Risk Factors."
Year 2000 "Y2K" Problem
Beta has begun to address possible remedial efforts in connection with
computer software that could be affected by the Year 2000 "Y2K" problem. The Y2K
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations.
The Y2K problem can affect any modern technology used by a business in the
course of its day. Any machine that uses embedded computer technology is
susceptible to this problem, including for example, telephone systems, postage
meters and scales, and of course, computers. The impact on a company is
determined to a large extent by the company's dependence on these technologies
to perform their day to day operations.
Internally, Beta has begun reviewing all such equipment and has determined
that many of our systems are Y2K compliant. This includes our telephone systems,
postage equipment and some of our software. We anticipate that all systems and
software will be fully reviewed and brought into compliance by November 1999. If
certain systems are not brought up to Y2K compliance by the end of November
1999, then the non-compliant technology will be disabled so as not to have an
impact on the systems that are compliant. Any such events would not have a
serious impact on our day to day operations, nor would any valuable information
be lost. Our company backs up all computer systems daily to protect us against
data loss and we have a system that utilizes 10 rotating back-up tapes as a
safeguard against having a tape that is unreadable.
The costs of bringing our company technology up to Y2K compliance is
expected to be less than $5,000. This is because the majority of the "patches"
or programs designed to make software Y2K compliant can be obtained over the
internet from manufacturers for little or no cost and we do not expect to rely
heavily on outside consultants to upgrade our systems as most of the work can be
performed in-house.
Externally, the Year 2000 problem may impact other entities with which Beta
transacts business, and Beta cannot predict the effect of the Year 2000 problem
on such entities or Beta. With regard to those companies that we do business
with on a daily basis, we cannot guarantee that they will be vigilant about
their Y2K plan of action. We have, however, started mailing out a simple
questionnaire to these companies, requesting that they advise us of their Y2K
readiness. Should any of our oil and gas well operators experience a disruption
due to the Year 2000 problem, the most significant impact may be a delay in the
progress of drilling operations and/or interruption of production and revenue on
a producing well. In a worst case scenario, the former may ultimately cause Beta
to incur drilling cost overruns, while the latter may cause us to have an
interruption in revenues for several months.
We have also assessed the possibility of personal injury, loss of life,
property damage and accidental pollution resulting from equipment malfunctions.
Although we believe these to be a remote possibility, we have undertaken
investigations to determine possible problem areas and will communicate our
findings, if any, to the project operators.
In these unlikely events, Beta's plan of action is to have on hand a cash
reserve at December 31, 1999 to cover both the additional well costs and the
Company's overhead expenses until production resumes. We have not yet determined
the amount or source of such funds. We are contacting our insurance carriers to
determine the extent of insurance coverage, if any, in the event Y2K problems
affect any of Beta's project areas.
In the event that Beta does experience Y2K problems, it could result in a
suspension of Beta's revenues. A suspension of revenues could result in material
losses from operations and a reduction in Beta's working capital. Management is
unable at this time to quantify the impact that the Y2K problem could have on
Beta's results of operations and financial condition.
<PAGE>
GLOSSARY
As used in this prospectus:
"Acquisition of properties" are the costs incurred to obtain rights to
production of oil and gas. These costs include the costs of acquiring oil and
gas leases and other interests. These costs include lease costs, finder's fees,
brokerage fees, title costs, legal costs, recording costs, options to purchase
or lease interests and any other costs associated with the acquisitions of an
interest in current or possible production.
"Area of mutual interest" means, generally, an agreed upon area of land,
varying in size, included and described in an oil and gas exploration agreement
which participants agree will be subject to rights of first refusal as among
themselves, such that any participant acquiring any minerals, royalty,
overriding royalty, oil and gas leasehold estates or similar interests in the
designated area, is obligated to offer the other participants the opportunity to
purchase their agreed upon percentage share of the interest so acquired on the
same basis and cost as purchased by the acquiring participant. If the other
participants, after a specific time period, elect not to acquire their pro-rata
share, the acquiring participant is typically then free to retain or sell such
interests.
"Back-in interests" also referred to as a carried interest, involve the
transfer of interest in a property, with provision to the transferor to receive
a reversionary interest in the property after the occurrence of certain events.
"Bbl" means barrel, 42 U.S. gallons liquid volume, used in this prospectus
in reference to crude oil or other liquid hydrocarbons.
"Bcf" means billion cubic feet, used in this prospectus in reference to
gaseous hydrocarbons.
"BCFEQ" means billions of cubic feet of gas equivalent, determined using
the ratio of six thousand cubic feet of gas to one barrel of oil, condensate or
gas liquids.
"Casing Point" means the point in time at which an election is made by
participants in a well whether to proceed with an attempt to complete the well
as a producer or to plug and abandon the well as a non-commercial dry hole. The
election is generally made after a well has been drilled to its objective depth
and an evaluation has been made from drill cutting samples, well logs, cores,
drill stem tests and other methods. If an affirmative election is made to
complete the well for production, production casing is then generally cemented
in the hole and completion operations are then commenced.
"Development costs" are costs incurred to drill, equip, or obtain access
to proved reserves. They include costs of drilling and equipment necessary to
get products to the point of sale and may entail on-site processing.
"Exploration costs" are costs incurred, either before or after the
acquisition of a property, to identify areas that may have potential reserves,
to examine specific areas considered to have potential reserves, to drill test
wells, and drill exploratory wells. Exploratory wells are wells drilled in
unproven areas. The identification of properties and examination of specific
areas will typically include geological and geophysical costs, also referred to
as G&G, which include topological studies, geographical and geophysical studies,
and costs to obtain access to properties under study. Depreciation of support
equipment, and the costs of carrying unproved acreage, delay rentals, ad valorem
property taxes, title defense costs, and lease or land record maintenance are
also classified as exploratory costs.
"Farmout" involves an entity's assignment of all or a part of its interest
in a property in exchange for the assignee's obligation to expend all or part of
the funds to drill and equip the property.
"Future net revenues, before income taxes" means an estimate of future net
revenues from a property at a specified date, after deducting production and ad
valorem taxes, future capital costs and operating expenses, before deducting
income taxes. Future net revenues, before income taxes, should not be construed
as being the fair market value of the property.
"Future net revenues, net of income taxes" means an estimate of future net
revenues from a property at a specified date, after deducting production and ad
valorem taxes, future capital costs and operating expenses, net of income taxes.
Future net revenues, net of income taxes, should not be construed as being the
fair market value of the property.
"Mcf" means thousand cubic feet, used in this prospectus to refer to
gaseous hydrocarbons.
"MMcf" means million cubic feet, used in this prospectus to refer to
gaseous hydrocarbons.
"MBbl" means thousand barrels, used in this prospectus to refer to crude
oil or other liquid hydrocarbons.
"Gross" oil and gas wells or "gross" acres is the total number of wells or
acres in which Beta has an interest.
"Net" oil and gas wells or "net" acres are determined by multiplying
"gross" wells or acres by Beta's interest in such wells or acres.
"Oil and gas lease" or "Lease" means an agreement between a mineral owner,
the lessor, and a lessee which conveys the right to the lessee to explore for
and produce oil and gas from the leased lands. Oil and gas leases usually have a
primary term during which the lessee must establish production of oil and or
gas. If production is established within the primary term, the term of the lease
generally continues in effect so long as production occurs on the lease. Leases
generally provide for a royalty to be paid to the lessor from the gross proceeds
from the sale of production.
"Overpressured reservoir" are reservoirs subject to abnormally high
pressure as a result of certain types of subsurface conditions.
"Present value of future net revenues, before income taxes" means future
net revenues, before income taxes, discounted at an annual rate of 10% to
determine their "present value." The present value is shown to indicate the
effect of time on the value of the revenue stream and should not be construed as
being the fair market value of the properties.
"Present value of future net revenues, net of income taxes" means future
net revenues, net of income taxes discounted at an annual rate of 10% to
determine their "present value." The present value is shown to indicate the
effect of time on the value of the revenue stream and should not be construed as
being the fair market value of the properties.
"Production costs" means operating expenses and severance and ad valorem
taxes on oil and gas production.
"Prospect" means a geologic anomaly which may contain hydrocarbons that has
been identified through the use of 3-D and/or 2-D seismic surveys and/or other
methods.
"Proved oil and gas reserves" are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions, i.e. prices
and costs as of the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual arrangements, but not on
escalations based upon future conditions. Reservoirs are considered proved if
economic producibility is supported by either actual production or conclusive
formation test. The area of a reservoir considered proved includes (A) that
portion delineated by drilling and defined by gas-oil and/or oil-water contacts,
if any, and (B) the immediately adjoining portions not yet drilled, but which
can reasonably be judged as economically productive on the basis of available
geological and engineering data. In the absence of information on fluid contacts
the lowest known structural occurrence of hydrocarbons controls the lower proved
limit of the reservoir.
"Proved developed oil and gas reserves" are reserves that can be expected
to be recovered through existing wells with existing equipment and operating
methods. Additional oil and gas reserves expected to be obtained through the
application of fluid injection or other improved recovery techniques for
supplementing the natural forces and mechanisms of primary recovery should be
included as "proved developed reserves" only after testing by a pilot project or
after the operation of an installed program has confirmed through production
response that increased recovery will be achieved.
"Proved undeveloped oil and gas reserves" are reserves that are expected to
be recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion. Reserves on undrilled
acreage shall be limited to those drilling units offsetting productive units
that are reasonably certain of production when drilled. Proved reserves for
other undrilled units can be claimed only where it can be demonstrated with
certainty that there is continuity of production from the existing productive
formation. Under no circumstances should estimates for proved undeveloped
reserves be attributable to any acreage for which an application of fluid
injection or other improved recovery technique is contemplated, unless such
techniques have been proved effective by actual tests in the area and in the
same reservoir.
"Reserve target" means a geologic anomaly which may contain hydrocarbons
that has been identified through the use of 3-D and 2-D seismic surveys and
other methods.
"Royalty interest" is a right to oil, gas, or other minerals that is not
burdened by the costs to develop or operate the related property. The basic
royalty interest is retained by the owner of mineral rights when his property is
leased for purposes of development.
"Trend" means a geographical area where similar geological, geophysical, or
oil and gas reservoir and production characteristics may exist.
"Seismic Option" generally means an agreement in which the mineral owner
grants the right to acquire seismic data on the subject lands and grants an
option to acquire an oil and gas lease on the lands at a predetermined price.
"Working interest" is an interest in an oil and gas property that is
burdened with the costs of development and operation of the property.
<PAGE>
BUSINESS
General
Beta Oil & Gas, Inc. is an oil and gas company organized in June 1997 to
engage in the exploration, development, exploitation and production of natural
gas and crude oil. Beta's operations are currently focused in proven oil and gas
producing trends primarily in South Texas, Louisiana and Central California.
Beta believes that the availability of economic 3-D seismic surveys has
fundamentally changed the risk profile of oil and gas exploration in these
regions. Recognizing this change, Beta has aggressively sought to acquire
significant prospective acreage blocks for targeted, proprietary, 3-D seismic
surveys. As of the date of this prospectus, Beta had assembled approximately
76,000 gross acres under lease or option.
Approximately 94% of Beta's current acreage position is evaluated by
proprietary 3-D seismic data that Beta has acquired, or is in the process of
acquiring, through joint participation with operating oil and gas companies.
From the data generated by its initial 5 proprietary seismic surveys, covering
313 square miles, in excess of 100 potential drillsites have been identified.
Approximately $10,000,000, representing 60% of the total funds raised to
date by Beta, have been utilized to acquire working interests in lands and
seismic data in the onshore Texas Gulf Coast region. Beta's interests in the
onshore Texas properties are operated by Parallel Petroleum Corporation.
Drilling has commenced in these projects during the first quarter of 1999 and
has resulted in three discoveries of oil and gas to date. Representatives of
Parallel have informed Beta that drilling will continue in these projects
throughout the year. Beta anticipates that participation in exploratory and
drilling projects in South Texas will constitute its primary activity during
1999.
Approximately $3,300,000, representing 20% of the funds raised so far by
Beta have been invested in leases, seismic and drilling in Louisiana. Drilling
commenced in these prospects in 1998 and has resulted in four oil and gas
discoveries so far. It is expected that Beta will participate in the drilling of
a minimum of six wells in Louisiana during 1999.
The balance of the funds raised to date have been utilized primarily to
fund various domestic and international exploratory activities. Beta's
exploratory activities in areas outside of Texas have resulted in a natural gas
discovery located in Central California. It is anticipated that Beta will expend
additional funds to explore these areas during 1999 and future periods.
Beta's capital budget for 1999 of approximately $8,300,000, subject to
available funds, includes amounts for the acquisition of additional 3-D seismic
data and for the drilling of 38 gross wells or 8.39 net wells in 1999 with
working interests ranging from 12.5% to 75% and averaging 22%. A majority of the
budgeted wells will be drilled in Jackson County, Texas. In addition, Beta
anticipates that as its existing 3-D seismic data is further evaluated, and 3-D
seismic data is acquired over the balance of its acreage, additional prospects
will be identified for drilling beyond 1999.
Beta intends to rely on joint ventures with qualified operating oil and gas
companies to operate its projects through the exploratory and production phases.
This will reduce general and administrative costs necessary to conduct
operations. As of the date of this prospectus, Beta is not operating any of the
oil and gas wells or prospects in which it owns an interest but instead relies
on third party companies to operate the wells and properties.
Technology
Beta participates in projects utilizing economically feasible advanced
technology in their exploration and development activities to reduce risks,
lower costs, and more efficiently produce oil and gas. Beta believes that the
availability of cost effective 3-D seismic surveys makes its use in exploration
and development activities attractive from a risk management perspective in
certain areas. In certain instances, 3-D seismic surveys more accurately inform
Beta in evaluating drilling prospects than do conventional 2-D seismic and
traditional evaluation methods.
Briefly, a seismic survey sends pulses of sound from the surface, down into
the earth, and records the echoes reflected back to the surface. By calculating
the speed at which sound travels through the various layers of rock, it is
possible to estimate the depth to the reflecting surface. It then becomes
possible to infer the structure of rock deep below the earth's surface. Beta has
focused its exploration activity in the Gulf of Mexico region due to affordable
and available seismic data, and the affordability of the software and computer
hardware necessary to peer through the layers of rock and salt to locate
heretofore undiscovered hydrocarbons. Beta evaluates substantially all of its
exploratory prospects using 3-D or enhanced 2-D seismic surveys.
In evaluating certain of its exploratory prospects, Beta also uses
amplitude versus offset "AVO" technology. AVO analysis can show the high
contrast between the sand and shales and provides for better interpretation of
the reservoir sands to determine the presence of gas.
Beta retains experienced third-party consultants and participates with
experienced joint working interest owners to acquire, process and interpret 3-D
seismic surveys. Beta attempts to ensure the integrity of the 3-D seismic
analysis in each of its projects by emphasizing quality control throughout the
data acquisition, processing and interpretation. Whenever possible, Beta also
attempts to correlate or "model" the interpretations of 3-D seismic surveys with
wells previously drilled on or near the prospect being evaluated.
Beta may supplement its exploration efforts with acquisitions of producing
oil and gas properties. Beta would seek to acquire producing properties that
either are underperforming relative to their potential or are candidates for 3-D
seismic analysis.
Summary of Oil and Gas Operations
Capitalized costs at December 31, 1997, December 31 1998, and March 31, 1999
(unaudited) relating to Beta's oil and gas activities are summarized as follows:
<TABLE>
December 31, 1997 December 31, 1998 March 31, 1999
----------------- ----------------- --------------
(Unaudited)
United States Foreign United States Foreign United Foreign
States
<S> <C> <C> <C> <C> <C> <C>
Capitalized costs-
Evaluated properties $ - $ - $ 1,763,082 $ 1,624,218 $ 3,706,636 $ 1,624,218
Unevaluated properties 5,870,794 30,000 11,426,732 39,963 11,568,689 147,919
Less- Accumulated
depreciation,
depletion,amortization - - (46,473) (1,624,218) (55,804) (1,624,218)
and impairment
============= ========= ============= =========== ============ ===========
$ 5,870,794 $ 30,000 $ 13,143,341 $ 39,963 $15,219,521 $ 147,919
============= ========= ============= =========== ============ ===========
</TABLE>
Costs incurred in oil and gas producing activities are as follows:
<TABLE>
Inception (June 6, 1997) Year ended
through December 31, 1997 December 31, 1998
------------------------------- -------------------------------
United States United States
Foreign Foreign
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Property acquisition $ 3,835,540 $ - $ 2,808,123 $ 323,463
============= ============== ============== ==============
Exploration $ 2,035,254 $ 30,000 $ 4,510,897 $ 1,310,718
============= ============== ============== ==============
Development $ - $ - $ - $ -
============= ============== ============== ==============
</TABLE>
<TABLE>
Cumulative from inception
Three months ended (June 6, 1997) through
March 31, 1999 March 31, 1999
--------------------------------- -------------------------------
(Unaudited) (Unaudited)
United States United States
Foreign Foreign
------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Property acquisition $ 723,344 $ 107,956 $ 7,367,007 $ 431,419
============= ================ ============= =============
Exploration $ 1,362,167 $ - $ 7,908,318 $ 1,340,718
============= ================ ============= =============
Development $ - $ - $ - $ -
============= ================ ============= =============
</TABLE>
Unevaluated oil and gas properties - United States
As Beta's properties are evaluated through exploration, they will be included in
the amortization base. Costs of unevaluated properties in the United States at
December 31, 1997 and 1998, and March 31, 1999 represent property acquisition
and exploration costs in connection with Beta's Louisiana, Texas and California
prospects. The prospects and their related costs in unevaluated properties have
been assessed individually and no impairment charges were considered necessary
for the United States properties for any of the periods presented. The current
status of these prospects is that seismic has been acquired, processed and is
currently being interpreted on the subject lands within the prospects. Drilling
commenced on the prospects in the first quarter of 1999 and will continue in
future periods. As the prospects are evaluated through drilling in future
periods, the property acquisition and exploration costs associated with the
wells drilled will be transferred to evaluated properties where they will be
subject to amortization.
Unevaluated oil and gas properties - Foreign
Unevaluated costs incurred outside the United States represent costs in
connection with the evaluation and proposed acquisition of one or more
exploration blocks in Brazil. In addition, during the three months ended March
31, 1999, Beta incurred acquisition costs of approximately $108,000 in
Australia.
At December 31, 1997 and 1998, and March 31, 1999 , capitalized unevaluated
properties consist of the following:
<TABLE>
December 31,1997 December 31,1998 March 31, 1999
(Unaudited)
<S> <C> <C> <C>
Unproved property acquisition cost $ 3,835,540 $ 6,476,043 $ 6,747,743
Exploration costs 2,065,254 4,990,652 4,968,865
--------------- --------------- ---------------
$ 5,900,794 $ 11,466,695 $ 11,716,608
=============== =============== ===============
</TABLE>
Management expects that planned activities for the remainder of 1999 will enable
the evaluation for approximately 30% of the costs as of March 31, 1999.
Evaluation of 40% of the remaining costs is expected to occur in 2000 with the
remaining 30% in 2001.
Evaluated Properties - United States
During the year ended December 31, 1998 Beta participated in the drilling of 6
wells within the United States. The property acquisition and exploration costs
associated with the wells totaling $1,763,082 were transferred to evaluated
properties and were evaluated for impairment. It was determined that the
capitalized costs associated with the drilling of these properties exceed their
net realizable value by $46,473. Accordingly, an impairment write-down of
$46,473 was recorded for the year ended December 31, 1998. Since all of the
proved reserves associated with the wells were non-producing or behind pipe and
no production had occurred as of December 31, 1998, no depletion expense was
recorded during the year ended December 31, 1998.
During the three months ended March 31, 1999, Beta participated in the drilling
of 6 wells within the United States. The property acquisition and exploration
costs associated with the wells totaling $1,943,554 were transferred to
evaluated properties. It was determined that the total costs in evaluated
properties of $3,706,636 as of March 31, 1999 did not exceed their net
realizable value. Accordingly, no impairment charge was considered necessary for
the three months ended March 31, 1999. Production commenced during the period
and depletion expense of $9,331 was recorded.
Evaluated Properties - Foreign
During 1998, Beta, through its wholly owned subsidiary, BETAustralia, LLC
secured an option to participate for a 5% working interest in two petroleum
licenses covering 2,798,000 acres (approximately 4,372 square miles). Per the
terms of the option agreement, Beta exercised its option to earn a 5% working
interest by participating in the drilling of two offshore test wells in the
license areas. The wells were completed as dry holes. The property acquisition
and exploration costs associated therewith totaling $1,624,218 were transferred
to evaluated properties and charged to impairment expense during the year ended
December 31, 1998. The exploration licenses expired in December 1998.
<PAGE>
PROPERTIES
Beta's current oil and gas exploration activities are focused in four
distinct project areas as follows:
1. Yegua and Frio Trend 3-D Seismic Joint Venture - Onshore Gulf Coast Region,
Jackson County, Texas;
2. Louisiana Transition Zone Project - Offshore and Onshore Gulf Coast Region,
Louisiana;
3. Norcal Project - Onshore San Joaquin and Sacramento Basins, California; and
4. International - Onshore Australia and Brazil.
In each of its project areas, Beta has entered into joint ventures with
operators who have extensive experience and expertise in those areas. This has
allowed Beta to obtain working interests in a number of prospects with minimal
associated overhead.
The following discussion contains forward looking statements. The projects
discussed in this section may never yield any commercial discoveries of
hydrocarbons and, even if they do, they could result in a loss to Beta. See
"Risk Factors" for a discussion of the risk factors associated with the
projects.
YEGUA/FRIO/WILCOX TREND 3-D SEISMIC JOINT VENTURE, JACKSON COUNTY, TEXAS
Beta presently owns working interests in four Onshore Gulf Coast
exploration projects located in Jackson County, Texas. The projects are operated
by Parallel Petroleum Corporation, a publicly traded company. Approximately
60,000 gross acres, approximately 11,000 acres net to Beta's working interest,
of oil and gas leases or seismic options have been acquired in these four
projects as of December 31, 1998. As of December 31, 1998, Parallel had
completed 3-D seismic surveys over an area totaling 286 square miles within
which these projects are located and was evaluating seismic data to select
drilling locations. Drilling commenced on Beta's project areas in the first
quarter of 1999.
The following projects in which Beta is participating will use the same
seismic techniques that Parallel has previously used to identify potential drill
sites. The status of the projects is as follows:
1) Texana Project. Approximately 25,000 gross acres under seismic coverage;
2,293 gross acres under seismic option; 164 gross acres under lease; 614 acres
under seismic lease option or lease net to Beta's 25% working interest as of
December 31, 1998:
Approximately 40 square miles of 3-D seismic data has been
acquired and processed. "Amplitude Versus Offset" analysis and data
interpretation is currently being completed. Drilling of exploratory wells is
expected to commence in the second half of 1999.
2) Formosa Grande Project. Approximately 92,000 gross acres under seismic
coverage; 7,064 gross acres under seismic lease options and 9,194 gross acres
under lease; 4,064 acres under seismic lease options or lease net to Beta's 25%
working interest at December 31, 1998:
Approximately 140 square miles of 3-D seismic data has been
acquired. The seismic data is currently in the interpretive stages with drilling
of exploratory wells expected to commence in the second half of 1999.
3) Ganado Project. Approximately 25,000 gross acres under seismic coverage,
4,581 gross acres under seismic lease options and 9,439 gross acres under lease;
2,804 acres under option or lease net to Beta's 20% working interest at December
31, 1998:
Approximately 40 square miles of 3-D seismic data has been
acquired and is in the interpretive stages. An exploratory well was drilled in
this project in March of this year. The well was completed as a dry hole. A
second exploratory well was drilled in June of this year. Production casing
has been set on this well and completion operations are expected to take place
on this well in July or August of this year. Beta has already advanced its
share of estimated costs of drilling this well totaling $32,000.
4) BWC Project. Approximately 42,440 gross acres under seismic coverage, 23,015
gross acres under seismic lease options and 833 gross acres under lease; 2,981
acres under option net to Beta's 12.5% working interest at December 31, 1998:
Approximately 66 square miles of 3-D seismic data has been
acquired and is in the interpretive stages. Drilling of exploratory wells
commenced in the first quarter of 1999 and has resulted in two oil and gas
discoveries to date. Additional
drilling is scheduled for the second half of 1999.
Terms of Participation
All of the lands covered by the exploration agreements are subject to "area
of mutual interest" provisions described in the glossary preceding the
"Business" section. The exploration agreements generally provide, among other
things, for participation by Beta and other participants on the following terms
and conditions:
|_| Participants are required to pay 133% of actual cost of initial land costs,
consisting mainly of seismic options, and the costs of acquiring,
processing and interpreting seismic data. All costs incurred after the
interpretation phase are billed to the participants at actual cost. The
post interpretation costs include the cost of drilling, completing and
equipping wells and the costs of acquiring leases.
|_| Once the seismic data has been acquired and interpreted, prospects will be
designated within the seismic survey areas. The parties to the agreement
then have the option to participate in the prospect according to their
pro-rata working interest. Those parties who elect not to participate
forfeit their rights of participation in the specific prospect but retain
the right to participate in other prospects proposed in the seismic survey
area which are outside of the specific prospect.
|_| Those parties who elect to participate in a specific prospect then proceed
to acquire oil and gas leases within the prospect by exercising seismic
options. The seismic options were acquired in advance of seismic
acquisition and convey the right to conduct seismic operations as well as
the option to enter into an oil and gas lease on the subject lands at a
pre-determined price per acre. The seismic option allows Beta and its
partners to acquire and evaluate seismic data before actually acquiring
leases. After the seismic data has been evaluated, Beta and its partners
can then selectively acquire leases by exercising on acreage which is
determined to be prospective from seismic evaluation. Seismic options
covering lands which are determined not to have oil and gas potential are
allowed to expire at no further cost to the participants. The cost of a
seismic option is usually much lower than the cost of acquiring a lease and
it also prevents the mineral owner lessor from leasing the oil and gas
rights to another party during the term of the option.
Geological and Economic Overview of the Yegua/Frio/Wilcox Trend 3-D Joint
Venture
The subject lands lie in close proximity to productive oil and gas fields
which produce from the Yegua/Frio/Wilcox intervals. Beta wishes to emphasize
that the historical production results in the area are not necessarily
indicative of the results that Beta may obtain from its oil and gas prospects.
Within Beta's project areas, there are high potential exploration
opportunities that are being defined with the use of 3-D seismic. The Jackson
County, LA area has proven to be suitable for 3-D seismic as faulting and
structures are easily identified and many stratigraphic reservoirs exhibit
hydrocarbon indicators from the shallowest Miocene sands, throughout the Frio,
and into the Vicksburg, Yegua, and Wilcox intervals. The Formosa Grande Prospect
Area has numerous regional down-to-the-coast faults that are easily identified
at the top of the Frio, but also has deep seated faulting that does not exhibit
displacement at the shallower horizons. Very often, these deep faults do create
hydrocarbon traps. Most fields in this trend area exhibit multiple stacked
reservoirs.
A Frio level structure map exhibits numerous large four-way closures,
primarily down-thrown to regional growth faulting. These large structures have,
for the most part, been exploited, some as early as the 1930s and 1940s.
Although it is not readily apparent in regional mapping, much of the Frio
production is stratigraphic in nature, that is, trapped in channel sands that
traverse structures, or in sands that "pinch out" up onto the flanks of these
large structures. Significant reserves may remain in similar traps which have
not been developed to date. Such traps should be readily defined with 3-D
seismic data.
Beta's project areas appear to be located in a suitable "trend" area to
apply 3-D seismic technology to identify reserves that have been passed over in
existing fields as well as to discover new reserves in deeper pools and
undrained fault segments in compartmentalized fields.
LOUISIANA TRANSITION ZONE PROJECT
Beta has entered into several joint exploration agreements in southern
Louisiana in an area which is generally described as the Transition Zone.
The Transition Zone
The Transition Zone of Southern Louisiana covers the shoreline and
near shore environments in the Gulf of Mexico region. This region has been
under-explored because acquisition of seismic data in the area was very
expensive and has historically been of less than ideal quality due to the
problems inherent in gathering data in the wide variety of environments
encountered between land and deeper water offshore. Innovative techniques have
been utilized to acquire and process 3-D seismic data and quality data that
provides the opportunity to accurately interpret the structural and
stratigraphic framework of the area.
All of the reserve targets will lie in the shallow waters or
onshore. Depths of the reserve targets will typically range from 3,000 to 15,000
feet. The average dry hole costs for these wells are expected to be $1,500,000
for a straight hole and $2,000,000 for a directional hole to the 100% working
interest. The completion cost per well is estimated at $1,000,000 to $1,500,000
to the 100% working interest. Beta's prospects in the Transition Zone are
located within or adjacent to existing pipeline infrastructure. This will enable
wells drilled in the prospects to be connected to existing pipelines to
transport oil and gas to markets.
The Cheniere Exploration Agreements
In January 1999, Beta entered into joint exploration agreements with
Cheniere Energy, Inc. on four natural gas prospects located in Louisiana. Beta
paid $658,000 to Cheniere as consideration for land and seismic costs and
committed to participate in the drilling of a test on three of the four
prospects. The agreements provide that Beta will pay 20% of the costs of
drilling each of the test wells to total depth to earn a 15% working interest in
each prospect. All costs incurred thereafter shall be borne by Beta at its 15%
working interest. Total estimated costs of drilling the three test wells to
total depth are $876,000 net to Beta.
The following prospects in which Beta is participating have been identified from
a proprietary 3-D seismic survey acquired by Cheniere. The status of the
prospects is as follows:
1) Cobra Prospect. Approximately 1,404 gross acres under lease; 211 acres net
to Beta's 15% working interest:
This prospect is located onshore in Cameron Parish, Louisiana. A well
commenced drilling on this prospect to a projected depth of 12,500 feet in
February 1999 and was determined to be non-commercial. The estimated cost of
drilling and testing this well to casing point is $380,000 net to Beta which
Beta has advanced as a prepayment. While Beta has not received a final
accounting of costs actually incurred as of the date of this prospectus, Beta
believes its share of actual costs will approximate the amount of the
prepayment.
2) Shark Prospect. Approximately 752 gross acres under lease; 113 acres net to
Beta's 15% working interest:
This prospect is located offshore in West Cameron Block 49, Louisiana. A
9,900 foot test well commenced drilling on this prospect in April 1999 and was
completed as a dry hole. The estimated cost of drilling this well to casing
point is $245,000 net to Beta which Beta has advanced as a prepayment. While
Beta has not received a final accounting of costs actually incurred as of the
date of this prospectus, Beta believes its share of actual costs will
approximate the amount of the prepayment. A separate deeper 11,000 foot test is
planned for this prospect later in the year.
3) Redfish Prospect. Approximately 404 gross acres under lease; 61 acres net
to Beta's 15% working interest:
This prospect is located offshore in West Cameron Block 49,
Louisiana. A 10,000 foot test well was drilled on this prospect in March 1999
and is currently being completed for production testing. The estimated cost of
drilling this well to casing point is $233,000 net to Beta which Beta has
advanced as a prepayment. While Beta has not received a final accounting of
costs actually incurred as of the date of this prospectus, Beta believes its
share actual costs will approximate the amount of the prepayment.
4) Stingray Prospect. Approximately 691 gross acres under lease; 104 acres net
to Beta's 15% working interest:
This prospect is located offshore in West Cameron Block 49,
Louisiana. A test well commenced drilling on this prospect in May of 1999. The
estimated cost of drilling this well to casing point is $245,000 net to Beta
and Beta has elected to participate. Beta has not yet advanced any funds toward
the drilling of this well. Beta intends to allocate a minimum of $400,000 of
the proceeds of this offering toward its share of drilling and completion costs
on this well. The status of the well is that intermediate casing has been set
to 10,400 feet measured depth. Beta and its working interest partners believe
that, based on log and core data analysis, there are several commercial zones
above 10,400 feet measured depth. Based on the favorable indications in the
zones above 10,400 feet as well as seismic data, Beta and its partners have
elected to deepen the well an additional 1,500 feet. Based on preliminary log
analysis, the operator of the well believes the deeper section of the
well contains commercial hydrocarbons. Beta and its plan to set production
casing through the deep section and production test the deep section. The
additional cost for deepening the well net to Beta is estimated at $45,000
and will be paid for from the proceeds of the initial public offering.
The Rozel Exploration Agreement
Beta entered into a joint exploration agreement with Rozel Energy in 1998
to explore for oil and gas in the Transition Zone of South Louisiana. Under this
agreement, which expired on February 23, 1999, Rozel identified prospects on the
basis of a 3-D seismic survey completed by Fairfield Industries, one of the
leading providers of 3-D seismic data for the Gulf of Mexico. The survey is the
largest shallow water survey that has ever been conducted in the United States,
covering an area in excess of 2,000 square miles. Although the agreement with
Rozel has expired, Beta continues to have participation rights in acreage
acquired and wells drilled before the expiration of the agreement.
Under the terms of the Rozel agreement, Beta provided a total of $480,000
of lease acquisition funding for prospects before expiration of the agreement.
Rozel identified the prospects utilizing the 3-D seismic data from the Fairfield
survey. In consideration for providing the lease acquisition funds, Beta is
entitled, but not obligated, to participate on a prospect by prospect basis in
leases that were acquired by Rozel Energy during the term of the agreement.
There are currently three remaining undrilled prospects in which Beta has
rights of participation. Beta's terms of participation shall require it to pay
approximately 12.5% of the costs of drilling and completing the first well in
each prospect to earn approximately a 9.375% working interest in the initial
well and prospect acreage, a "third for a quarter" basis. Beta's 9.375% working
interest shall be further reduced to 8.8% after the costs of the prospect have
been recouped. Beta is obligated to pay a $50,000 fee on those prospects in
which it elects to participate. Beta shall be entitled to reimbursement of lease
funds advanced for prospects in which it elects not to participate. Beta shall
be entitled to such reimbursement if and when Rozel either sells or otherwise
conveys, i.e. farmouts, its interest in, or drills, the Prospect.
In addition to the three undrilled prospects, Beta owns a 9.375% working
interest in a producing well and 5,000 acres surrounding it. The OCS-G-13825
Minkfish #1, West Cameron Blk. 39, was drilled to a depth of approximately
10,500 feet. The well commenced production in January 1999. Drilling on a second
well, the Minkfish #2, commenced in March of 1999 and the well is being
completed for production. The estimated cost of drilling this well to casing
point is $215,000 net to Beta's 9.38% working interest which Beta has advanced.
Estimated completion cost net to Beta is $172,000 which will be paid for from
the proceeds of this offering.
The Lapeyrouse 3-D Prospect
This prospect is in Terrebone Parish, South Louisiana, an area specifically
targeted by Beta for its high reserve potential based on historical production
results that have been published for this area. Although the main objective, the
Duval, will be reached with a 14,800' test well, a total of twenty-one
objectives will be tested with one well bore. These consist of fourteen smaller
objectives from 10,000' to 14,000' to pressure point and seven larger objectives
in abnormal pressure, over-pressured reservoir, through 16,000'.
Beta's working interest was purchased after detailed 3-D seismic was
completed and interpreted. A total of 7,000 mineral acres have been leased to
drill the multiple objectives stated above. Beta's working interest varies
between 2.5% and 6.25% in the project leases. An initial exploratory well is
anticipated to be drilled in the second or third quarter of 1999. Beta has
acquired an additional 6.25% working interest from a participant who has
declined to participate, which has increased Beta's working interest in the
initial exploratory well to 12.5%. Estimated drilling costs to casing point for
a proposed 14,800 foot test are $3,304,302 of which Beta shall pay $413,000 for
its proportionate 12.5% working interest. Estimated completion costs are
$1,051,683 of which Beta shall pay $131,000 for its proportionate 12.5% working
interest, provided Beta elects to participate in the completion. Beta has not
yet advanced any funds toward the drilling of this well.
NORCAL PROJECT, ONSHORE SAN JOAQUIN AND SACRAMENTO BASINS
Beta has entered into an exclusive eighteen month contract, expiring in
April of 1999, to utilize 3-D and 2-D seismic technology in a 500 square mile
area of mutual interest with a prospect generator, Jim Frimodig. A prospect
generator is someone who generates an oil and gas prospect idea using geologic
and/or seismic data. Beta will maintain a 75% working interest in certain
prospects generated by Mr. Frimodig in the San Joaquin and Sacramento Basins in
Central and Northern California. As of December 31, 1998, Beta has participated
in the drilling of two wells in the Norcal Project. The N.W. Buttonwillow #1 was
completed in July 1998 flowing at a rate of 415,000 cubic feet of natural gas
per day from a perforated interval at a depth of approximately 4,500 feet.
Additional pay zones remain behind pipe in this well. The South Shafter #1 was
completed as a dry hole in December of 1998. See "Drilling Activity"
Three additional wells are planned for this project in the third quarter.
The wells will target pay sands between 3,500 and 5,000 feet in depth. Beta has
reduced its working interest in these wells to 30% and anticipates that its
proportionate share of drilling these wells will be $40,000 per well for a total
of $120,000 for the three wells. Beta has already advanced approximately
$40,000 toward these well costs.
INTERNATIONAL
Although the majority of Beta's exploration efforts are focused in the
United States, management believes that international exposure can reduce the
business risks commonly associated with having operational activities confined
to one country.
Australian Projects
Beta has reviewed a number of exploration projects in the Asia Pacific
Region and elected to participate in two exploration areas covering four
separate exploration permits in Eastern Australia. A description of the areas is
as follows:
1) Toko Syncline Project
Beta's wholly owned subsidiary BETAustralia LLC has signed an agreement
with Dyad Australia, Inc. of Midland, Texas to participate for a 20% working
interest, 16.4% net revenue interest, in Dyad's rights to the Toko Syncline
Project. Dyad is the holder of exploration permits covering approximately
918,000 contiguous acres, 1,434 square miles, in the Georgina and Eromanga
Basins of Western Queensland. Since the acquisition of the permits, Dyad has
acquired, analyzed, and reprocessed 400 miles of existing 2-D seismic data and
identified four potentially significant geological structures encompassing
approximately 55,000 acres or 86 square miles. During the period from 1964 to
1980, there were six wells drilled in the Toko Syncline that went deep enough to
provide meaningful subsurface control. Four were exploratory and two were full
core tests by the Geological Survey of Queensland. Of these six, only one well
failed to identify oil or gas shows. At the time the wells were drilled, there
were no gas pipelines in the prospect areas available to transport natural gas,
if commercial amounts of gas could be discovered. The lack of pipelines in the
area discouraged further exploration in the area until now.
One of the structures is of particular interest due to a well, the Ethabuka
#1 drilled on the structure in 1973 by Alliance Oil Development. The well
encountered a persistent gas flow of 200 MCF of gas per day while drilling. The
well was abandoned 3,500 feet short of the initial target depth after twisting
off the drill pipe and making several unsuccessful efforts to reclaim the hole.
This very significant show of gas was documented by the Queensland Department of
Minerals and Energy. At the time, there was no gas pipeline in the area.
The market for natural gas has increased significantly since then in the
area. Western Queensland has a large mining industry centered in the city of Mt.
Isa. This area holds some of the world's largest deposits of copper, lead, zinc,
and phosphate. Previously, the mines and the associated processing and smelting
plants were fueled entirely by coal, which was shipped approximately 750 miles
by rail. The Queensland government is encouraging the introduction of natural
gas as an energy source. Construction of a 14 inch gas transmission line from
southwest Queensland to Mt. Isa is now complete and transporting gas. The
pipeline crosses the Toko Syncline project area, exposing the project to a
viable market for natural gas.
Dyad has entered into an agreement with a major U.S. concern for the
funding of additional seismic data acquisition and the drilling of an
exploration well. Under the terms of the agreement, Dyad will have the
opportunity to buy into the exploratory well by reimbursing its proportionate
share of actual costs after the well has been drilled and evaluated. Dyad also
has the option of postponing its buy-in until later stages in the development
program. Per the terms of the Beta-Dyad agreement, Beta has paid $100,000 to
acquire 20% of Dyad's working interest buy-in rights in the project area. If
Dyad buys into the program after the initial exploratory well has been drilled
and evaluated, Beta will at that point, have the option of acquiring a net 10%
working interest at cost. If Dyad postpones its buy-in option until the later
stages of the project, then its option to purchase an interest will be
incrementally reduced. Beta's working and net revenue interest in the Toko
Syncline project area will depend on if and when Dyad and its partners elect to
buy-in to the project and will be reduced in the later stages of the project if
the buy-in option is not exercised and additional expenditures are incurred by
the funding partner. The funding partner will have exclusive marketing rights to
hydrocarbons in the project area, subject to an agreed minimum floor price to be
received for hydrocarbons produced and sold.
Beta anticipates that the initial exploratory well could be drilled as
early as the third quarter of 1999.
2) Stansbury Basin Project
In March 1998, Beta formed a wholly owned subsidiary called BETAustralia,
LLC, a limited liability company organized under the laws of California, for the
purposes of participating in the Stansbury Basin Project and other Australian
projects. Beta made an initial cash advance of $320,000 to secure an option to
participate for a 5% working interest in two petroleum licenses covering
2,798,000 acres or approximately 4,372 square miles. Per the terms of the option
agreement, Beta exercised its option to earn a 5% working interest by
participating in the drilling of two offshore test wells in the license areas.
Beta incurred costs of $1,304,218 in the drilling of the two wells. The wells
were completed as dry holes. The costs associated therewith totaling $1,624,218
have been transferred to evaluated properties and charged to impairment expense
during the year ended December 31, 1998. Beta has no current plans to conduct
additional exploration activities in the Australian, Stansbury Basin, license
areas. The exploration licenses expired in December of 1998.
Additional Projects Under Review
Although Beta's initial international focus is Australia, management is
currently reviewing several other opportunities including exploration licenses
in Brazil. However, there is no guarantee that any of these projects will ever
reach fruition.
These are forward looking statements. The projects discussed in this
section may never materialize and, even if they do materialize, they could
result in a loss to Beta. No formal agreements have been reached and there can
be no assurance that such a purchase will ever be completed and this potential
acquisition should not be relied upon in making an investment decision.
General
Beta holds interests in producing properties and undeveloped acreage in
three states within the United States.
Company Reserves
Beta had no proved reserves as of December 31, 1997. Beta's total net
ownership in oil and gas reserves as of December 31, 1998 is based on an
independent engineering report. The reserve quantities and valuations for fiscal
1998 are based upon estimates by Veazey & Associates, Inc.
Proved developed reserves are those that can be recovered through existing
wells with existing equipment and existing operating or tested recovery
techniques. All of Beta's reserves are classified as proved developed reserves.
<PAGE>
These reserves are located entirely within the United States.
<TABLE>
Beta Oil & Gas, Inc.
Historical Reserve Information
as of December 31, 1998 and 1997
------------------------------------------------------------------------------
DESCRIPTION 1998 1997
------------------------------------------------------------------------------
<S> <C> <C>
Proved Developed Reserves
Oil (bbls) 1,461 0
Gas (mcf) 1,596,740 0
------------------------------------------------------------------------------
Proved Reserves
Oil (bbls) 1,461 0
Gas (mcf) 1,596,740 0
-----------------------------------------------------------------------------
Future Net Cash Flows
Before Income Tax $2,553,762 $0
-----------------------------------------------------------------------------
Standardized Measure of
Discounted Future Net Cash Flows $1,716,608 $0
-----------------------------------------------------------------------------
</TABLE>
Well Statistics
As of December 31, 1997, Beta did not own working interest in any
productive wells. As of December 31, 1998 Beta owned working interests in two,
.84 net, wells which have been completed for production but which have not yet
commenced production.
Acreage Statistics
The following tables set forth the undeveloped and developed acreage of
Beta as of December 31, 1998:
<TABLE>
Beta Oil & Gas, Inc. Acreage Holdings
As of December 31, 1998
------------------------------------------------------------------------------------------------
UNDEVELOPED ACREAGE GROSS ACRES NET ACRES
------------------------------------------------------------------------------------------------
<S> <C> <C>
California 200 150
Louisiana 7,502 485
Texas 59,038 10,955
------------------------------------------------------------------------------------------------
UNDEVELOPED ACREAGE 66,740 11,590
================================================================================================
------------------------------------------------------------------------------------------------
DEVELOPED ACREAGE GROSS ACRES NET ACRES
------------------------------------------------------------------------------------------------
California 600 450
Louisiana 5,000 470
Texas 0 00
------------------------------------------------------------------------------------------------
DEVELOPED ACREAGE 5,600 920
================================================================================================
</TABLE>
Drilling Activity
The following table sets forth the results of Beta's drilling activities in
the fiscal years ended December 31, 1998 and 1997:
<TABLE>
Beta Oil & Gas, Inc.
Summary of Drilling Activity
For Fiscal Years Ending December 31, 1998 and 1997
---------------------------------------------------------------
EXPLORATORY WELLS 1998 1997
---------------------------------------------------------------
<S> <C> <C>
GROSS
Productive 2 0
Dry 6 0
===============================================================
TOTAL 8 0
===============================================================
NET
Productive .84 0
1.13 0
Dry
===============================================================
TOTAL 1.97 0
===============================================================
---------------------------------------------------------------
DEVELOPMENT WELLS 1998 1997
---------------------------------------------------------------
GROSS
0 0
Productive
0 0
Dry
===============================================================
TOTAL 0 0
===============================================================
NET
0 0
Productive
0 0
Dry
===============================================================
TOTAL 0 0
===============================================================
</TABLE>
Drilling activity for 1998 is summarized as follows:
1. During March 1998, Beta participated in the drilling of two dry holes on
one of its Australian exploration licenses. Estimated costs net to Beta's
interest are $1,624,000 which have been charged to impairment expense
during the nine months ended September 30, 1998.
2. In May 1998, Beta participated in the drilling of the first test well in
its Louisiana Transition Zone Prospect. The well, the Whiskey Pass #1, Ship
Shoal Blk. 43, was drilled to a depth of 2,500 feet and was completed as a
dry hole at a net cost to Beta of $320,000 for its 12.5% working interest.
3. In July 1998, Beta participated in the drilling of the Sea Serpent #1, Ship
Shoal Blk. 67, to a depth of 11,000 feet and was completed as a dry hole at
a net cost of $244,000 for Beta's 12.5% working interest.
4. In July 1998, Beta participated in the drilling of the Minkfish #1, West
Cameron Blk. 39, to a depth of 11,000 feet and has been completed as a
producer. Beta has expended $328,000 in connection with this well.
5. In October of 1998, Beta participated in the drilling of the Whiskey Pass
#2, SL15743 #1, which was drilled to a depth of approximately 4,700 feet
and completed as a dry hole. Beta's estimated share of the dry hole costs
is 236,000 net to its 9.375% working interest.
6. In July 1998, Beta commenced the drilling of the first test well in its
Norcal Project. The well has been completed for production and is currently
awaiting a pipeline hook-up. All of the permits have been acquired to
commence construction of a one mile pipeline. Completion of the pipeline
and commencement of production from the well is expected by the end of
March 1999. The estimated cost net to Beta for the pipeline is $80,000. The
estimated cost net to Beta's 75% working interest in the well is $313,000.
In December of 1998, Beta participated in the drilling of a second test
well in its Norcal Project which was completed as a dry hole at an
estimated cost net to Beta of $128,000.
Competition
The oil and gas industry is highly competitive in many respects,
including identification of attractive oil and gas properties for acquisition,
drilling and development, securing financing for such activities and obtaining
the necessary equipment and personnel to conduct such operations and activities.
In seeking suitable opportunities, Beta competes with a number of other
companies, including large oil and gas companies and other independent operators
with greater financial resources and, in some cases, with more experience. Many
other oil and gas companies in the industry have financial resources, personnel,
and facilities substantially greater than those of Beta and there can be no
assurance that Beta will be able to compete effectively with these larger
entities. Companies that are active in the same geographic areas as Beta
include, but are not limited to, Basin Exploration Inc., Unocal Corp., Fina
Inc., Kerr-McGee Corp., St. Mary Land & Exploration, Esenjay Exploration and
Cheniere Energy Inc.
Employees
As of the date of this prospectus, Beta employs four full-time
employees and two part-time employees. Beta also has two consultants with
long-term contracts. Beta hires independent contractors on an "as needed" basis
only. Beta has no collective bargaining agreements with its employees. Beta
believes that its employee relationships are satisfactory. Due to its current
level of growth, Beta anticipates increasing its number of full-time employees
to six by the end of 1999. See also, "Management, Executive Compensation, and
Employment Contracts."
Premises
Beta leases slightly over 1,800 square feet in Newport Beach,
California, which includes offices and storage space. All of Beta's operations
are conducted from this site. The lease expires September 1999, and requires
monthly payments of $2,645 per month.
Litigation
There is no litigation currently pending or threatened against Beta.
Additional Information
Concerning the securities offered by this prospectus, Beta has filed with the
principal office of the Securities and Exchange Commission in Washington, DC, a
registration statement on Form S-1, the "registration statement," under the
Securities Act of 1933, as amended. For purposes hereof, the term "registration
statement" means the original registration statement and any and all amendments
to the registration statement. This prospectus does not contain all of the
information presented in the registration statement and the exhibits to the
registration statement. Each statement made in this prospectus concerning a
document filed as an exhibit to the registration statement is not necessarily
complete and is qualified in its entirety by reference to such exhibit for a
complete statement of its provisions. Any interested party may inspect the
registration statement and its exhibits without charge, or obtain a copy of all
or any portion thereof, at prescribed rates, at the public reference facilities
of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. Such material may also be accessed
electronically by means of the Commission's home page on the Internet or http://
www.sec.gov for no charge.
Beta will furnish its stockholders with annual reports containing financial
statements audited by independent certified public accountants and will file
with the Commission quarterly reports containing unaudited financial information
for each of the first three quarters of each fiscal year within 45 days
following the end of each such quarter. These periodic reports will also be
available electronically on the Commission's website.
<PAGE>
MANAGEMENT
The following table sets forth the names and ages of all current directors
and officers of Beta and the positions in Beta held by them:
Name Age Position
Steve Antry 43 President, Chairman
R. Thomas Fetters 59 Managing Director of Exploration, Director
J. Chris Steinhauser 39 Chief Financial Officer, Director
Joe C. Richardson, Jr 70 Director
Stephen L. Fischer 40 Vice President of Capital Markets
Lisa Antry 36 Secretary, Treasurer
Lawrence W. Horwitz 39 Director
John P. Tatum 64 Director
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified. The
Bylaws permit the board itself to fill vacancies and appoint additional
directors pending shareholder approval at the next annual meeting. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been elected
and qualified. Beta's Bylaws currently authorize six directors to serve on the
Board of Directors. The last annual meeting was held on February 12, 1998.
Steve Antry and Lisa Antry are married.
The business experience of each director, executive officer and key
employee is summarized below.
Mr. Steve Antry, President and Chairman of the Board of Directors, is Beta's
founder. In addition, Mr. Antry founded Beta Capital Group, Inc., a financial
consulting firm in November 1992, and was its President through June 1997. Beta
Capital Group, Inc. specializes in selecting and working with emerging oil and
gas exploration companies which have production and drilling prospects strategic
for rapid growth yet also need capital and market support to achieve that
growth. Most recently, Mr. Antry orchestrated and implemented the restructuring
of Pease Oil and Gas Company, NASDAQ: WPOG, and remains a Director. Mr. Antry
remains Chairman of the Board of Directors of Beta Capital Group, Inc., but
resigned as its President to devote his full attention to Beta. Before forming
Beta Capital Group, Inc., Mr. Antry was an early officer of Benton Oil & Gas
Company, NYSE: BNO, from 1989 through 1992, ultimately becoming President of a
wholly owned subsidiary. Before Benton, Mr. Antry was a Marketing Director for
Swift Energy, NYSE: SFY, from 1987 through 1989. Mr. Antry began working in the
oil fields in Oklahoma in 1974. He has served in various exploration management
capacities with different companies, including Warren Drilling Company, as Vice
President of Exploration and Nerco Oil and Gas, a division of Pacific Power and
Light, where he served as Western Regional Land Manager. Mr. Antry is a member
of the International Petroleum Association of America "IPAA", serving on the
Capital Markets Committee and has B.B.A. and M.B.A. degrees from Texas Christian
University.
Mr. R. Thomas Fetters, Managing Director of Exploration, and Director, spent 17
years with Exxon ultimately achieving the position of Exploration Planning
Manager, Exxon U.S.A. Other notable positions held include Exploration Manager
for Exxon Australia "ESSO" and Division Manager of Research in Houston and Chief
Geologist, Exxon Production Malaysia. Mr. Fetters was President and Chief
Executive Officer of CNG Producing Co. in New Orleans from 1983 through 1989 and
President of XCL-China, Ltd. from 1989 through 1995. From 1995 through 1997, he
served as Senior Vice President of National Energy Group and also currently sits
on the Board of XCL, Ltd.. He earned his B.S./M.S. in Geology from the
University of Tennessee in 1966.
Mr. J. Chris Steinhauser, Chief Financial Officer and Director, joined Beta in
January 1998. He is a Certified Public Accountant in the State of Colorado, who
began his career with Peat, Marwick, Mitchell & Co. from 1981 through 1984.
Since that time, Mr. Steinhauser was primarily, September 1987 through January,
1998, with Sharon Energy Ltd. and Sharon Resources, Inc., their operating
subsidiary, ultimately serving as Executive Vice President and Chief Financial
Officer of the parent and President, COO and Director of the subsidiary. He is
experienced in financial and SEC reporting, shareholder communications, tax
filings, and all other aspects of a public oil and gas exploration and
production company. He received his BBA from University of Southern California
in 1981 and conducted graduate studies at the University of Denver Graduate Tax
Program in 1985.
Mr. Joe C. Richardson, Jr., Director, graduated from Texas A&M with B.S. degrees
in Petroleum Engineering and Mechanical Engineering in 1950 when he started his
career with Shamrock Oil and Gas in Amarillo, Texas. In 1961, Mr. Richardson
formed an oil, gas, refining, and compressor equipment fabrication company and,
in 1968, co-founded a public oil and gas company that was later merged with
Worldwide Energy, Inc. Mr. Richardson has been an officer and/or director of
several successful public and private companies including Pyro Energy, Inc.
(NYSE), Consolidated Oil & Gas (AMEX), Texoil, Inc. (NASDAQ), and Corporate
Systems Corporation. He is a Regent Emeritus of the Texas A&M University System,
past President of the Texas A&M Twelfth Man Association, and was honored in 1989
with the University's Distinguished Alumni Award. He currently serves on the
University Presidents' Advisory Board and the Engineering Advisory Council. Mr.
Richardson is a registered engineer in the state of Texas and a member of the
IPAA. The Petroleum Engineering Building on the campus of Texas A&M University,
completed in 1990, was named in his honor.
Mr. Stephen L Fischer, Vice President of Capital Markets, has been Vice
President of Beta Capital Group, Inc. since March 1996 and from April 1996
through March 1998 he was also a registered representative of Signal Securities,
Inc., a registered broker-dealer. Between 1991 and before joining Beta Capital
Group, Inc. in 1996, Mr. Fischer was a Registered Representative of Peacock,
Hislop, Staley & Given, an Arizona based investment banking firm. Since 1983,
Mr. Fischer has held various positions in the financial services industry in
investment banking, retail, and institutional sales, with a special emphasis on
the oil and gas exploration sector.
Ms. Lisa Antry, Secretary and Treasurer, was Executive Vice President of Beta
Capital Group, Inc. from July 1994 through June 1997. In June 1997, she was
appointed President of Beta Capital Group, Inc. upon the resignation of Mr.
Antry. Ms. Antry has in excess of 15 years of finance, accounting, and tax
experience. Before Beta Capital Group, Inc., she served as Corporate Planning
Manager for United California Savings Bank from 1988 to July 1994. Ms. Antry
also served United California for several years as its Finance and Tax Manager
and worked at Priority Records, a recording and distribution company, as its
Controller. Ms. Antry received her B.B.A. from Stephen F. Austin University in
1984 and her M.B.A. from Pepperdine University in 1991.
Mr. Lawrence W. Horwitz, Director, is a founding partner of Horwitz & Beam, an
Irvine, California law firm primarily representing Orange County business
concerns in high technology industries. His experience includes virtually all
legal issues associated with mergers, acquisitions and the raising of private
and public capital. Within the last three years, Mr. Horwitz's practice has
increasingly focused upon the legal and business issues associated with
utilizing mergers and acquisitions to achieve NASDAQ listing status. Mr. Horwitz
is a graduate of the University of California at Berkeley (B.S. 1981) and of
Boalt Hall School of Law, University of California at Berkeley (J.D. 1984). Mr.
Horwitz was admitted to the bar in both Texas and California in 1984. Lawrence
Horwitz commenced his career in Dallas, Texas where he was involved in a number
of private and public offerings involving oil and gas companies and related
limited partnerships. He has represented public oil and gas concerns in both
hostile takeovers, as well as mutually negotiated acquisitions. Before forming
Horwitz & Beam, Mr. Horwitz practiced in the corporate and securities group of
the Newport Beach law firm of Stradling, Yocca, Carlson & Rauth and was elected
a partner at Hart, King & Coldren, also located in Orange County. Mr. Horwitz
has been admitted to the U.S. Federal District Court, Central District of
California and the U.S. Court of Appeals, Ninth Circuit.
Mr. John P. Tatum, Director, joined Beta as a director in March 1999. Mr. Tatum
has worked in the oil and gas industry since 1962, holding successive positions
with Skelly Oil Company, Placid Oil Company, Hunt International Company and Hunt
Energy Company. From 1980 to 1996, Mr. Tatum was employed with Triton Energy
Corporation as Vice President (1980-82), Senior Vice President (1982-1991) and
Executive Vice President (1991-96). As Senior Vice President for Triton Energy
Corporation, Mr. Tatum was responsible for directing Triton's operations in
Colombia, Thailand, New Zealand, Nepal, Gabor, Cote D'Ivoire and Argentina.
Since 1996, Mr. Tatum has worked as an international oil & gas consultant. Mr.
Tatum received his B.B.A. from the University of Texas in 1956 and conducted
graduate studies at the Louisiana State University Graduate Business School.
Board Committees
In September 1997, Beta initiated several steps to improve the corporate
governance and direction of Beta.
First, the Board of Directors established an executive committee whose
purpose is to formulate and implement recommendations, strategies and actions
which are intended to support and protect shareholder value. The executive
committee is comprised of three voting members: Steve Antry, Beta's President
and Chairman, Tom Fetters, a Director and consultant to Beta and Joe C.
Richardson, Jr., an independent Director. The Board of Directors implemented
these changes to enhance the decision making processes in all aspects of Beta's
business.
Second, the Board of Directors established an audit committee whose purpose
is to oversee Beta's financial reporting and controls and to recommend the
appointment of an independent auditor to the board each year. The audit
committee is comprised of three voting members: Tom Fetters, a Director and
consultant to Beta, Joe C. Richardson, Jr., an independent Director and John
Tatum, an independent Director.
In October 1998, the Board of Directors of Beta established a compensation
committee of the Board of Directors. The compensation committee of the Board of
Directors is responsible for formulating and recommending to the full Board of
Directors the compensation paid to Beta's executive officers. The committee
presently consists of two outside Directors, Joe C. Richardson, Jr. and John P.
Tatum. The compensation committee is discussed in more detail in the section
entitled "Executive Compensation."
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table will inform you about the compensation earned by Beta's
Chief Executive Officer for services rendered to Beta during the fiscal years
ended December 31, 1997 and 1998. No other executive officer's cash compensation
exceeded $100,000 for the fiscal years ended December 31, 1997 and 1998.
<TABLE>
Long-Term
Compensation
Other Awards- All Other
Annual Restricted Compen-
Name and Principal Position Year Salary Bonus Compen- Stock Awards Sation
($) ($) Sation # ($)
($)
<S> <C> <C> <C> <C> <C> <C>
Steve Antry
Chief Executive Officer 1998 $ 150,000 $ 0 $ 2,600(4) 0 $ 9,343(3)
============= =========== ============= =============== =============
and Chairman of the
Board of Directors (2) 1997 $ 34,522(1) $ 0 $ 0 0 $ 2,294(3)
------------- ----------- ------------- --------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Mr. Antry's annual salary is $150,000. Mr. Antry's salary commenced in
October of 1997. Therefore his salary for 1997 was as presented above.
(2) Mr. Antry directly owns, jointly with his wife, who is also an officer of
Beta, 1,500,000 shares of common stock which are being registered along
with the shares offered by this prospectus. Mr. Antry subscribed to the
common stock on June 23, 1997 at a price of $0.05 per share.
(3) Represents payments toward annual car allowance per the terms of Mr.
Antry's contract of employment with Beta. (4) Represents Beta's matching
contributions toward Mr. Antry's Simple IRA retirement plan.
</FN>
</TABLE>
Beta's Bylaws state that non-employee Directors of Beta shall not receive
any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board of Directors. Beta
has paid a total of $2,000 in attendance fees to its non-employee directors
since inception. Beta maintains directors and officers liability insurance.
Employment Contracts
Beta has executed an employment contract dated June 23, 1997 with its
President and Chairman of the Board, Mr. Steve Antry. The contract provides for
an indefinite term of employment at an annual salary of $150,000 commencing in
October of 1997 and an annual car allowance of up to $12,000. The contract may
be terminated by Beta without cause upon the payment to Mr. Antry of the
following:
(a) Options to acquire the common stock of Beta in an amount equal to 10% of
the then issued and outstanding shares containing a five year term,
piggyback registration rights and an exercise price equal to 60% of the
fair market value of the shares during the sixty day period of time
preceding the termination notice, such amount not to exceed $3.00 per
share.
(b) A cash payment equal to two times the aggregate annual compensation.
(c) In the event of termination without cause, all unvested securities issued
by Beta to Mr. Antry shall immediately vest and Beta shall not have the
right to terminate or otherwise cancel any securities issued by Beta to Mr.
Antry.
During the period from inception, June 6, 1997 through December 31, 1997,
and for the year ended December 31, 1998, R. Thomas Fetters, a director of Beta
was paid $20,000 and $60,000, respectively, pursuant to a consulting contract
for exploration related services. Beta has a consulting agreement with Mr.
Fetters which provides that he will provide part time geologic services to Beta
for $5,000 per month. The agreement provides that Mr. Fetters will serve as a
director during the term of the agreement. It further provides that if Mr.
Fetters is offered a full time position with Beta, his compensation will be
increased to a salary of $125,000 per year. The agreement terminates June 6,
2000.
On June 23, 1997, Beta entered into an employment agreement with Steve
Fischer, a shareholder. The agreement provides for a two year term at an annual
salary of $60,000 for services as Vice President of Capital Markets. Under
separate agreement, Mr. Fischer subscribed to 350,000 shares of Founders Shares
at price of $0.05 per share. The subscription agreement provides that the shares
shall vest over a three year period.
All other employees of Beta are terminable at will.
On January 27, 1998, Beta issued 100,000 common stock purchase warrants
exercisable at a price of $3.75 per share to J. Chris Steinhauser, the Chief
Financial Officer of Beta. The warrants vest as follows:
(a) 25,000 warrants vested immediately
(b) 25,000 shall vest upon the first anniversary of the employee's employment.
(c) 25,000 shall vest upon the second anniversary of employment
(d) 25,000 shall vest upon the third anniversary of employment
If the officer ceases employment during the vesting period, all nonvested
warrants shall be forfeited. The warrants shall expire on January 23, 2003.
Compensation Committee
On October 17, 1998 the Board of Directors of Beta established a
compensation committee of the Board of Directors. The compensation committee of
the Board of Directors is responsible for formulating and recommending to the
full Board of Directors the compensation paid to Beta's executive officers. In
reviewing the overall compensation of Beta's executive officers, the committee
will review and consider the following components of executive compensation:
base salaries, stock option/warrant grants, cash bonuses, insurance plans, and
company contributions to company sponsored retirement plans. There are, however,
no stock option, retirement or other long term compensation plans, except what
is set forth in this prospectus, currently in place or under discussion or
consideration by the Board of Directors at the present time. The committee
presently consists of two outside Directors, Joe C.
Richardson Jr. and John P. Tatum.
In establishing the compensation paid to Beta's executives, the committee
emphasizes:
(1) Providing compensation that will motivate and retain Beta's executives and
reward performance,
(2) Encouraging the long-term success of Beta, and
(3) Encouraging prudent decision making processes in an industry marked by
volatility and high risk.
The committee will evaluate compensation paid to Beta's executive officers
based upon a variety of factors, including Beta's growth in oil and gas
reserves, the market value of Beta's common stock, cash flow, the extent to
which Beta's executive officers are able to find and create opportunities for
Beta to participate in drilling or acquisition ventures having quality
prospects, their ability to formulate and maintain sound budgets for Beta's
drilling ventures and other business activities, the overall financial condition
of Beta, and the extent to which proposed business plans are met. The committee
does not assign relative weights or rankings to these factors but instead
subjectively determines compensation based on all such factors.
In establishing base salaries for Beta's executive officers, the committee
does not rely on formal surveys or comparisons with other companies, but instead
relies on their general knowledge and experience, focusing on a subjective
analysis of each executive's contributions to Beta's overall performance.
Independent consultants have not been utilized by the committee for the purposes
of determining compensation. While specific performance levels or "benchmarks"
are not used to establish salaries, the committee will take into account
historic comparisons of company performance. Concerning future awards of stock
warrants or options, the committee will try to provide Beta's executives with an
incentive compensation vehicle that could result in future additional
compensation to the executives, but only if the value of Beta increases for all
stockholders.
<PAGE>
PRINCIPAL SHAREHOLDERS
Security Ownership Of Certain Beneficial Owners And Management
The following table will inform you, as of the date of this prospectus,
about the beneficial ownership of shares of Beta's common stock held by each
person who beneficially owns more than 5% of the outstanding shares of the
common stock, each person who is a director or officer of Beta and all persons
as a group who are officers and directors of Beta, and as to the percentage of
outstanding shares held.
<TABLE>
Approximate Percent Approximate Percent
Shares of Class Before the of Class After the
Name of Beneficial Owner Beneficially Owned(1) Offering Offering(2)
- --------------------------------------------- -------------------- --------------------- ---------------------
<S> <C> <C> <C>
Mr. Steve Antry
Mrs. Lisa Antry, Jointly
901 Dove Street, #230
Newport Beach, CA 92660 1,525,000(3) 19.9% 16.5%
Mr. R. Thomas Fetters
901 Dove Street, #230
Newport Beach, CA 92660 350,000(4) 4.6% 3.8%
Mr. Lawrence W. Horwitz
2 Venture Plaza,
Suite 350
Irvine, CA 92618 70,000(5) 1.1% .9%
Mr. Joe C. Richardson Jr.
901 Dove Street, #230
Newport Beach, CA 92660 400,000(6) 5.2% 4.3%
Mr. Stephen L. Fischer
901 Dove St., #230
Newport Beach, CA 92660 375,000(7) 4.9% 4.1%
Mr. J. Chris Steinhauser
901 Dove Street, #230
Newport Beach, CA 92660 125,000(8) 1.6% 1.4%
Mr. John P. Tatum
901 Dove Street, #230
Newport Beach, CA 92660 70,000(9) 1% 0.8%
-------------------- --------------------- ---------------------
All officers, key persons and directors as
a group (7 persons) 2,915,000(10) 38% 31.8%
==================== ===================== =====================
</TABLE>
All of the securities listed in this table are being registered for resale in
this prospectus. However, certain of the shareholders in this table have agreed
that they will not sell their Founder's Shares representing 2,670,000 of the
2,915,000 of the total beneficial shares held for one year from the date of this
prospectus. See "Underwriting."
(1) Unless otherwise indicated, all shares of common stock are held
directly with sole voting and investment powers. Securities not
outstanding, but included in the beneficial ownership of each such
person are deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such person,
but are not deemed to be outstanding for the purpose of computing
percentage of the class owned by any other person.
(2) Assumes maximum offering.
(3) Mr. Steve Antry and Mrs. Lisa Antry, husband and wife, own 1,500,000
shares as community property. This also includes 25,000 shares of
common stock underlying presently exercisable stock warrants. The
warrants are exercisable at $5.00 per share and expire on March 12,
2003.
(4) Mr. Fetters subscribed to 350,000 shares of Beta's common stock
"founder shares".
(5) Mr. Horwitz subscribed to 50,000 founder shares. In addition, Horwitz &
Beam with whom the director is a shareholder, subscribed to 20,000
founders shares.
(6) Mr. Richardson subscribed to 400,000 founder shares.
(7) Mr. Fischer subscribed to 350,000 founder shares. This also includes
25,000 shares of common stock underlying presently exercisable stock
warrants. The warrants are exercisable at $5.00 per share and expire on
March 12, 2003.
(8) This represents 100,000 shares of common stock underlying stock
warrants which shall expire on January 27, 2003. On January 27, 1998,
Beta issued 100,000 common stock purchase warrants exercisable at a
price of $3.75 per share to J. Chris Steinhauser, the chief financial
officer of Beta. This also includes 25,000 shares underlying presently
exercisable stock warrants which were granted to Mr. Steinhauser. The
warrants are exercisable at $5.00 per share and expire on March 12,
2003.
(9) Mr. Tatum owns 16,000 shares of common stock. This includes 4,000
shares of common stock underlying warrants which are exercisable at a
price of $5.00 per share and which expire September 5, 2002. In
addition, it includes 50,000 shares of warants to purchase common stock
which are exercisable at a price of $5.00 and which expire April 1,
2004.
(10) Includes 244,000 shares of common stock underlying stock warrants.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the period from inception, June 6, 1997, through December 31, 1997,
a director of Beta, Mr. R.T. Fetters, was paid $20,000 per a consulting contract
for management and geologic evaluation services. Mr. Fetters received $60,000 in
consulting fees during the year ended December 31, 1998. In addition, on June
23, 1997, the director subscribed to 350,000 founder shares of Beta's common
stock at a price of $0.05 per share.
A second director of Beta, Mr. Larry Horwitz, subscribed to 50,000 founder
shares at a price of $0.05 per share. In addition, a legal firm with whom the
director is a shareholder, subscribed to 20,000 founder shares at a price of
$0.05 per share. The legal firm represents Beta as general counsel.
A third director of Beta, Mr. Joe C. Richardson, Jr., subscribed to 400,000
founder shares at price of $0.05 per share.
A fourth director of Beta, Mr. John P. Tatum, is a partner with Dyad
Petroleum Company in Midland, Texas. Beta has purchased a 20% interest in a
property owned by an affiliate of Dyad at a cost of $100,000 in January 1999,
prior to the time Mr. Tatum joined Beta as a director.
Beta entered into an expense sharing agreement with Beta Capital Group,
Inc., a company owned by the President and Chairman of the Board, and the
Treasurer of Beta. The agreement provides for the allocation and reimbursement
of certain office expenses such as office rent, secretarial support, office
supplies, marketing materials, telephone charges between Beta and Beta Capital
Group, Inc. During the period from inception through December 31, 1997 Beta made
payments totaling $9,940 to Beta Capital Group, Inc. in connection with this
agreement. During the year ended December 31, 1998 Beta paid $17,000 in
connection with this agreement. As of March 16, 1999, this agreement was
terminated because Beta Capital Group, Inc. became inactive.
Effective October 1, 1997, Beta assumed the lease rights and lease
obligations which were previously the rights and obligations of Beta Capital
Group, Inc. by renewing the lease via an existing Option to Extend. Beta Capital
Group, Inc. is an affiliate of Steve Antry, chairman and president of Beta, and
Lisa Antry, Beta's treasurer. Beta Capital Group, Inc. no longer occupies the
suite. Steve Antry and Lisa Antry are personal guarantors of the lease
agreement. Beta believes that the terms of the lease are as favorable as Beta
could obtain from an unrelated third party. The lessor is an unrelated third
party. The lease obligation is approximately $2,700 per month.
There are no outstanding loans to officers, directors and related persons.
The present policy of Beta does not permit loans to officers, directors and
related persons.
All future transactions with affiliates of Beta are to be on terms no less
favorable than could be approved by a majority of the directors including the
majority of disinterested directors. Management of Beta believes that all past
transactions were as favorable to the Company or its affiliates as those
generally available from unaffiliated third parties. At the time these
transactions were entered into, Beta lacked sufficient disinterested independent
directors to ratify the transactions. However, Beta has now obtained
ratification from its independent, disinterested directors.
<PAGE>
DESCRIPTION OF SECURITIES
Beta is authorized to issue 50,000,000 shares of common stock, $0.001 par
value. As of the date of this prospectus, Beta had 7,488,492 shares of common
stock outstanding.
Common Stock
Each holder of common stock is entitled to one vote per share on all
matters to be voted upon by Beta's stockholders. Stockholders are entitled to as
many votes as equal to the number of shares multiplied by the number of
directors to be elected and may cast all votes for a single director or may
distribute them among the number to be voted for any two or more of them in the
election of directors. These are called cumulative voting rights. The holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. Beta has not paid, and does not presently intend to pay,
dividends on its common stock. In the event of a liquidation, dissolution or
winding up of Beta, the holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior distribution
rights of holders of Preferred Stock, if any, then outstanding. The common stock
has no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions available to the common stock. All
outstanding shares of common stock are validly authorized and issued and are
fully paid and non-assessable, and the shares of common stock to be issued upon
exercise of warrants as described in this prospectus will be validly authorized
and issued, fully paid and non-assessable. As of March 1, 1999 there were
approximately 500 recordholders of Beta's common stock.
During the period from inception, June 6, 1997, through December 31, 1997,
Beta issued 797,245 callable and 730,977 non-callable common stock purchase
warrants entitling the holders to purchase 1,528,222 shares of Beta's common
stock at prices ranging from $2.00 to $5.00 per share. During the year ended
December 31, 1998, Beta issued 415,958 callable and 553,483 non-callable common
stock purchase warrants entitling the holders to purchase 969,441 shares of
Beta's common stock at prices ranging from $3.75 to $7.50 per share. Beta will
be entitled to call 797,245 warrants at any time on and after the date that its
common stock is traded on any exchange, including the Over-the-Counter Bulletin
Board, at a market price equal or exceeding $7.00 per share for 10 consecutive
trading days. In addition, Beta will be entitled to call 415,958 warrants at any
time on and after the date that its common stock is traded on any exchange,
including the Over-the-Counter Bulletin Board, at a market price equal or
exceeding $10.00 per share for 10 consecutive trading days. All common stock
Purchase warrants expire five years from their date of issuance.
Stockholder Action
According to Beta's Bylaws, concerning any act or action required of or by
the holders of the common stock, the affirmative vote of the holders of a
majority of the issued and outstanding common stock entitled to vote thereon is
sufficient to authorize, affirm, ratify or consent to such act or action, except
as otherwise provided by law. Officers, directors and holders of 5% or more of
Beta's outstanding common stock do not constitute a majority and thus do not
control the voting upon all actions required or permitted to be taken by
stockholders of Beta, including the election of directors.
Possible Anti-Takeover Effects of Authorized but Unissued Stock
Beta's authorized but unissued capital stock consists of 42,511,508 shares
of common stock. One of the effects of the existence of authorized but unissued
capital stock may be to enable the Board of Directors to render more difficult
or to discourage an attempt to obtain control of Beta by means of a merger,
tender offer, proxy contest or otherwise, and to protect the continuity of
Beta's management. If in the due exercise of its fiduciary obligations, for
example, the Board of Directors were to determine that a takeover proposal was
not in Beta's best interests, such shares could be issued by the Board of
Directors without stockholder approval in one or more private placements or
other transactions that might prevent or render more difficult or costly the
completion of the takeover transaction by diluting the voting or other rights of
the proposed acquiring or insurgent stockholder or stockholder group, by
creating a substantial voting block in institutional or other hands that might
undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise.
Other Anti-Takeover Provisions
Beta executed a contract of employment with the President and Chairman of
the Board of Directors, dated June 23, 1997. The contract provides for an
indefinite term of employment at an annual salary of $150,000, commencing in
October 1997, and an annual car allowance of up to $12,000. The contract may be
terminated by Beta without cause upon the payment of the following:
(a) Options to acquire the common stock of Beta in an amount equal to 10% of
the then issued and outstanding shares containing a five year term,
piggyback registration rights and an exercise price equal to 60% of the
fair market value of the shares during the sixty day period of time
preceding the termination notice, such amount not to exceed $3.00 per
share.
(b) A cash payment equal to two times the aggregate annual compensation.
(c) In the event of termination without cause, all unvested securities issued
by Beta to the Employee shall immediately vest and Beta shall not have the
right to terminate or otherwise cancel any securities issued by Beta to the
Employee.
The termination provisions of this employment contract were designed, in
part, to impede and discourage a hostile takeover attempt and to protect the
continuity of management.
Certain Charter and Bylaws Provisions
Limitation of Liability
Beta's Articles of Incorporation and its Bylaws limit the liability of
directors and officers to the extent permitted by Nevada law. Specifically, the
Articles of Incorporation provide that the directors and officers of Beta will
not be personally liable to Beta or its shareholders for monetary damages for
breach of their fiduciary duties as directors, including gross negligence,
except liability for acts or omissions "which involve intentional misconduct,
fraud or a knowing violation of law not in good faith, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes."
Beta has obtained a directors and officers liability insurance policy for
the purposes of indemnification which shall cover all elected and appointed
directors and officers of Beta up to $1,000,000 for each claim and $3,000,000 in
the aggregate. Beta believes that the limitation of liability provision in its
Articles of Incorporation, and the directors and officers liability insurance
will facilitate Beta's ability to continue to attract and retain qualified
individuals to serve as directors and officers of Beta.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of Beta, Beta
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable. Except for the payment by Beta of expenses incurred or paid by a
director, officer, or controlling person of Beta in the successful defense of
any action, suitor proceeding, if a claim for indemnification against such
liabilities is asserted by such director, officer or controlling person of Beta
in connection with the securities being registered, Beta will, unless in the
opinion of its counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issues.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under Beta's Articles of Incorporation. Beta is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
Stockholder Meetings and Other Provisions
Under the Bylaws, special meetings of the stockholders of Beta may be
called only by a majority of the members of the Board of Directors, the Chairman
of the Board, the President, or by one or more stockholders holding shares in
the aggregate entitled to cast not less than 10% of the votes at any such
meeting. The annual meeting shall be held each year on May 15 at 10:00 A.M., or
at such other date that is convenient as determined by the Directors, at a place
to be designated by the Board of Directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Oxford Transfer &
Registrar, 317 S.W. Alder, Portland, OR 97204.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, Beta will have between 8,288,492,
assuming completion of the minimum offering, and 8,988,492, assuming completion
of the maximum offering, shares of common stock outstanding assuming no exercise
of the 2,460,367 common stock warrants outstanding. All the shares being
registered under the Registration Statement, of which this prospectus is a part,
will be freely transferable by persons except "affiliates" of Beta, as that term
is defined under the Securities Act of 1933, without restriction or further
registration under the Act. Beta is obligated to register 7,029,492 shares of
common stock and 2,610,367 shares of common stock issuable upon exercise of the
common stock purchase warrants in the current registration statement filed by
Beta with the Commission, so that holders of such common stock shall be entitled
to sell their shares at any time after this offering is completed by means of a
selling security holder prospectus, subject to such lock-up provisions as may be
agreed to by the common stockholders. This is called the "piggyback registration
right." The selling security holders shall not have the right to sell any of the
shares in the selling security holder prospectus until Beta either completes its
initial public offering or fails to complete the minimum offering within 10
business days and therefore fails to complete is initial public offering.
Certain shareholders of Beta, including those shareholders who also are
executive officers and directors of Beta, have agreed that they will not offer,
sell or otherwise dispose of certain founder's shares owned by them totaling
2,670,000 shares of common stock during the 365-day period following the date of
this prospectus. Holders of 115,000 shares of common stock and 574,208 warrants
to purchase common stock have agreed to lock-up provisions whereby they may not
sell or transfer their shares for a ninety day period commencing upon the sale
of the minimum offering. In addition, Beta is obligated to register, in a
subsequent registration statement, 459,000 shares of common stock issued in
connection with note and common stock purchase agreements dated January and
March 1999. Beta is required to file a registration statement registering these
shares 180 days after the close of this offering. All of the 459,000 shares are
subject to a one year restriction against sales or transfers after the date the
minimum offering is sold, after which those shares will become freely tradeable.
Beta will not receive any proceeds from possible resale by the selling
securities holders of their respective shares of Beta's common stock. Beta will
receive gross proceeds of $13,892,749 if all outstanding warrants are exercised
of which an approximately 5% commission will be paid to the brokers of record,
if applicable. NASD members participating in Beta's public offering or the
selling security holder offering, shall not receive compensation arising from
the exercise of warrants during the twelve month period following the
completion of the initial public offering.
Beta is unable to estimate the number of shares that may be sold in the
future by its existing shareholders or the effect, if any, that sales of shares
by such shareholders will have on the market price of the common stock
prevailing from time to time. Sales of substantial amounts of common stock by
existing shareholders could adversely affect prevailing market prices. See "Risk
Factors common stock eligible for future sales" for additional discussion
concerning this risk.
UNDERWRITING
Beta has entered into an underwriting agreement with Brookstreet Securities
Corporation, the "underwriter." Under the agreement, Beta has retained the
underwriter as its exclusive agent to offer, sell and distribute publicly on a
"best efforts" basis a minimum of 800,000 and a maximum of 1,500,000 shares of
the common stock of Beta at an offering price of $6.00 per share, for a gross
minimum offering of $4,800,000 and a gross maximum offering of $9,000,000. All
of the proceeds from the sale of the shares offered in this prospectus will be
deposited into the Beta Oil & Gas escrow account at Southern California Bank,
Newport Beach, California. Investors checks will be made payable to the bank
escrow agent and broker dealers will transmit such checks directly to the escrow
agent by noon of the next business day after receipt. Beta has agreed that in
the event the minimum proceeds of this offering are not raised within ten
business days of the effective date of this prospectus, that it will immediately
terminate this offering.None of the shares offered in this prospectus may be
sold if within ten business days from the effective date of this prospectus, the
minimum offering has not been subscribed. Upon completion of the minimum
offering, the shares may be offered for a 90 day period commencing from the
effective date of this prospectus, which may be extended by Beta for an
additional 30 days upon mutual consent of Beta and the underwriter. In the event
the minimum offering is completed, then the escrowed funds will be released to
Beta to be used for the purposes stated in this prospectus under caption "Use of
Proceeds" and Beta will issue certificates for those shares to the subscribers.
The offering will then continue until the remaining unsold shares are subscribed
to and paid for or the expiration of the offering period, whichever comes first.
No shares will be issued to any of the subscribers until the minimum offering is
satisfied and the subscription funds for the purchase of such shares have been
released from the escrow account to Beta. Upon completion of the minimum
offering, Beta has the discretion to conduct interim closings, requiring the
release of funds from escrow. The Company intends to conduct these closings
every three business days for good funds that have been received and fully
documented by the participating broker.
If the minimum offering is not met within ten business days of the
effective date of this prospectus, all monies will be refunded promptly to the
subscribers, with interest and without deduction for commissions or expenses,
directly from the escrow account.
The underwriter has advised Beta that it intends to offer the shares only
through itself and selected registered securities dealers who are members of the
National Association of Securities Dealers, Inc., the "selected dealers."
Neither the underwriter nor the selected dealers have made a firm commitment to
purchase any of the shares offered . There are no assurances that any or all of
the shares will be sold.
The underwriter has an option, exercisable within 45 days of the effective
date of this prospectus, to sell an additional 150,000 shares of the common
stock at the public offering price, less selected dealer commissions, solely for
the purpose of covering over-allotments, if any, the "over-allotment option."
Subject to the sale of at least 800,000 shares of common stock, Beta has
agreed to pay to the underwriter and Selected Dealers a commission of 8% and a
non-accountable expense allowance of 2% for a total of ten percent of the
initial offering price of $.60 per share. No commission shall be earned or paid
unless the minimum offering is satisfied before the expiration of the offering
period. The underwriter reserves the right to reject all subscriptions, in whole
or in part, to make allotments and to close subscriptions at any time without
notice. The selected dealers agreement may be terminated by the underwriter or
any of the selected dealers by one party giving notice of the termination to the
other at any time. Such termination will not affect the selected dealer's right
to commissions on subscriptions accepted prior to termination, provided the
minimum offering is satisfied.
Subject to the sale of the minimum of 800,000 of the shares of common stock
offered in this prospectus, Beta has agreed to sell to the underwriter and
selected dealers, for $.001 each, warrants to purchase a number of shares of
common stock of Beta equal to 10% of the shares sold by them in this offering,
the "selected dealer warrants" , at an exercise price per share equal to $7.50
per share, which is 125% of the initial public offering price of the shares
offered in this prospectus. The selected dealer warrants are exercisable for a
period of four years beginning one year after the date of this prospectus. The
selected dealer warrants are not transferable except to officers, employees and
partners of the underwriter and selected dealers and their respective
successors, and will contain provisions for appropriate adjustments in the event
of stock splits, stock dividends, combinations, reorganizations,
recapitalizations and certain other events. In addition, Beta is registering the
common stock underlying the selected dealer warrants in the registration
statement of which this prospectus is a part.
Beta has agreed to indemnify the underwriter against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriter may be required to make in respect thereof.
The underwriter has advised Beta that the underwriter does not expect to
make sales to accounts over which it exercises discretionary authority in excess
of 5% of the number of shares of common stock offered.
Certain shareholders of Beta, including those shareholders who also are
executive officers and directors of Beta, have agreed that they will not offer,
sell or otherwise dispose of certain founder's shares owned by them totaling
2,670,000 shares of common stock during the 365-day period following the date of
this prospectus. Certain shareholders of Beta who are members of the National
Association of Securities Dealers and their employees have entered into lock-up
agreements whereby they shall not sell or transfer 115,000 shares of common
stock and 574,208 warrants to purchase shares for a period of ninety days
commencing upon the sale of the minimum offering. In addition, 459,000 shares
which were issued in connection with the bridge note are subject to a one year
restriction against sales or transfers commencing upon the date the minimum
offering is sold.
As of June 21, 1999, certain warrant holders agreed to cancel 87,296
warrants to purchase common stock consisting of 20,000 warrants exercisable at
$5.00 per share and 67,296 warrants exercisable at $7.00 per share. All of the
cancelled warrants were non-callable with expiration dates on March 12, 2003.
The warrants were cancelled for no consideration pursuant to a request by the
National Association of Securities Dealers, the "NASD". The warrant holders were
certain NASD member firms and their employees who participated in Beta's 1998
private placement, as well as Beta's legal counsel. The cancellation request was
made and complied with because the NASD determined that these warrants could be
deemed "underwriter's compensation" and the continued existence of these
warrants could result in the compensation for this offering exceeding the NASD
guidelines. Therefore, all such warrants which could be deemed "underwriter's
compensation" in excess of NASD guidelines have been cancelled.
Before this offering, there was no market for the common stock of Beta.
Accordingly, the initial public offering price has been determined by
negotiation between Beta and the underwriter. Among the factors considered in
determining the initial public offering price were Beta's working interests and
seismic assets, Beta's future prospects, the prices at which Beta sold shares of
common stock in private, arms length transactions during the past six months,
the experience of its management, the general condition of the equity securities
market and the demand for similar securities of companies considered comparable
to Beta.
This is a summary of the material provisions of the underwriting agreement
but is not a complete statement of its terms and conditions. A copy of the
underwriting agreement is on file with the Commission as an exhibit to the
registration statement of which the prospectus forms a part. See "Available
Information" For guidance on how this information can be obtained. The complete
underwriting agreement may be viewed on the Commission's EDGAR database at
http://www.sec.gov.
LEGAL MATTERS
Certain legal matters in connection with this Registration Statement are
being passed upon for Beta by Horwitz & Beam, Two Venture Plaza, Suite 350,
Irvine, CA 92618. Members of that firm own 70,000 shares of Beta's common stock,
which includes 50,000 shares held by Lawrence W. Horwitz, a senior partner of
the firm and a director of Beta. Certain legal matters are also being passed
upon for the underwriter by Horwitz & Beam.
EXPERTS
The audited consolidated financial statements of Beta Oil & Gas, Inc.
included herein have been examined by Hein + Associates LLP, independent
certified public accountants, for the periods and to the extent set forth in
their report and are included herein in reliance upon such report of said firm
given upon their authority as experts in accounting and auditing.
The unaudited supplementary oil and gas reserve information included in
this prospectus has been included in reliance of the report of Veazey &
Associates, Inc. The unaudited supplementary oil and gas reserve information
appears elsewhere in this prospectus on the authority of Veazey & Associates,
Inc.
<PAGE>
<TABLE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
Index to Consolidated Financial Statements
Page
<S> <C>
Independent Auditor's Report.........................................................................................F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)..........................F-3
Consolidated Statements of Operations for the Period from Inception (June 6, 1997) through December 31, 1997, the
Year Ended December 31, 1998, the Three Months Ended March 31, 1999 (unaudited) and Cumulative from Inception
through March 31, 1999 (unaudited)...................................................................................F-5
Consolidated Statement of Shareholders' Equity for the Period from Inception (June 6, 1997) through
December 31, 1998, and the Three Months Ended March 31, 1999 (unaudited)............................................F-6
Consolidated Statements of Cash flows for the Period from Inception through December 31, 1997, the Year
Ended December 31, 1998, the Three Months Ended March 31, 1999 (unaudited) and Cumulative from Inception
through March 31, 1999 (unaudited)...................................................................................F-7
Notes to Consolidated Financial Statements...........................................................................F-8
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Shareholders and Board of Directors
Beta Oil & Gas, Inc. (a Development Stage Enterprise)
Newport Beach, California
We have audited the accompanying consolidated balance sheets of Beta Oil &
Gas, Inc. and subsidiary (a Development Stage Enterprise) as of December 31,
1997 and 1998, and the related statements of operations, shareholders' equity,
and cash flows for the period from inception (June 6, 1997) to December 31,
1997, the year ended December 31, 1998, and the period from inception through
December 31, 1998. These consolidated financial statements are the
responsibility of 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 whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Beta Oil &
Gas, Inc. and subsidiary (a Development Stage Enterprise) as of December 31,
1997 and 1998, and the results of their operations and their cash flows for the
period from inception (June 6, 1997) to December 31, 1997 the year ended
December 31, 1998, and the period from inception (June 6, 1997) through December
31, 1998 in conformity with generally accepted accounting principles.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California
February 9, 1999
<PAGE>
<TABLE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31, March 31
1997 1998 1999
----------------- ----------------- -----------------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,985,599 $ 198,043 $ 569,331
Accounts receivable -
Oil and gas sales - - 19,687
Other - 9,678 9,678
Debt issuance costs, net of
accumulated amortization of $24,151 - - 140,849
Prepaid expenses 2,599 14,951 6,792
----------------- ----------------- -----------------
Total current assets 3,988,198 222,672 746,337
----------------- ----------------- -----------------
Oil and gas properties, at cost (full cost method):
Evaluated properties - 3,387,300 5,330,854
Unevaluated properties 5,900,794 11,466,695 11,716,608
Less--accumulated depletion and impairments - (1,670,691) (1,680,022)
----------------- ----------------- -----------------
Net oil and gas properties 5,900,794 13,183,304 15,367,440
----------------- ----------------- -----------------
Furniture, fixtures and equipment, at cost, less
Accumulated depreciation of $1,530, $13,413 and $16,497 at
December 31, 1997, December 31, 1998, and
March 31, 1999 (unaudited, respectively 32,065 22,943 21,807
Other assets - 166,028 135,208
Deferred offering costs - 23,524 64,858
================= ================= =================
$ 9,921,057 $ 13,618,471 $ 16,335,650
================= ================= =================
</TABLE>
(Continued)
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, December 31, March 31
1997 1998 1999
------------------ ----------------- -----------------
(Unaudited)
<S> <C> <C> <C>
Current Liabilities:
Accounts payable, trade $ 807,474 $ 310,770 $ 345,937
Commissions payable 25,329 - -
Payroll and payroll taxes payable 24,044 7,559 13,239
Accrued interest - - 3,562
Notes payable net of unamortized discount of $2,168,646 - - 831,354
Other accrued expenses 14,000 800 -
----------------- ----------------- -----------------
Total current liabilities 870,847 319,129 1,194,092
------------------ ----------------- -----------------
Commitments and contingencies (Notes 1 and 5)
Shareholders' Equity:
Common stock, $.001 par value; 10,000,000 shares authorized
at December 31, 1997, and 50,000,000 shares authorized at
December 31, 1998 and March 31, 1999 (unaudited);
5,565,648, 7,029,492 and 7,458,492 shares issued and
outstanding at December 31, 1997, December 31, 1998
and March 31, 1999 (unaudited), respectively 5,566 7,029 7,458
Additional paid-in capital 9,246,217 15,878,386 18,434,277
Deficit accumulated during the development stage (201,573) (2,586,073) (3,300,177)
------------------ ----------------- -----------------
Total shareholders' equity $ 9,050,210 $ 13,299,342 $15,141,558
------------------ ----------------- -----------------
------------------ ---------------- -----------------
Total Liabilities and Shareholders' Equity $ 9,921,057 $ 13,618,471 $16,335,650
================== ================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Cumulative
For the from
period from The year The three The three inception
inception ended months months ended (June 6,
(June 6, December ended March 31, 1997) to
1997) to 31, 1998 March 31, 1999 March 31,
December 1998 1999
31, 1997
--------------- ------------ -------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales $ - $ - $ - $ 29,664 $ 29,664
--------------- ------------ -------------- --------------- --------------
Costs and expenses:
Lease operating expense - - - 9,035 9,035
General and administrative 245,452 746,769 204,052 258,245 1,250,466
Impairment expense - 1,670,691 1,297,342 - 1,670,691
Depreciation and depletion 1,530 11,883 2,835 12,415 25,828
expense
---------------- ------------- --------------- ---------------- ---------------
Total costs and expenses 246,982 2,429,343 1,504,229 279,695 2,956,020
---------------- ------------- --------------- ---------------- ---------------
Loss from operations (246,982) (2,429,343) (1,504,229) (250,031) (2,926,356)
Other income and (expense):
Interest expense - - - (466,348) (466,348)
Interest income 45,409 44,843 21,702 2,275 92,527
--------------- ------------ -------------- --------------- --------------
Net loss $ (201,573) $(2,384,500) $ (1,482,527) $ (714,104) $ (3,300,177)
================ ============= =============== ================ ================
Basic and diluted loss
per common share ($.05) ($.37) ($.26) ($.10)
================ ============= =============== ================
Weighted average number of
Common shares outstanding 4,172,662 6,366,923 5,630,426 7,303,481
================ ============= =============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
Deficit
Common Stock Accumulated
-------------------------------------- Additional During the
Paid-in Development
Shares Amount Capital Stage
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
BALANCES, June 6, 1997 - $ - $ - $ -
Issuance of Common Stock at $.05
per share on June 23, 1997 2,910,000 2,910 142,590 -
Issuance of Common Stock at $3.75
per share on Sept. 5, 1997, net of
offering costs 2,655,648 2,656 9,073,627 -
Salary contributed to Beta - - 30,000 -
Net loss - - - (201,573)
----------------- ----------------- ---------------- ----------------
BALANCES, December 31, 1997 5,565,648 5,566 9,246,217 (201,573)
Issuance of Common Stock at $5.00 per
share, February 12 through November
2, 1998, net of offering costs 1,458,844 1,458 6,547,174 -
Issuance of shares for properties at $5.00
per share on March 12, 1998 5,000 5 24,995 -
Salary contributed to Beta - - 60,000 -
Net loss - - - (2,384,500)
----------------- ----------------- ---------------- ----------------
BALANCES, December 31, 1998 7,029,492 7,029 15,878,386 (2, 586,073)
Offering costs relating to previous
offerings (unaudited) - - (27,680)
Issuance of shares for bridge note financing
at $6.00 per share on January 20, 1999 (unaudited) 329,000 329 1,973,671 -
Salary contributed to Beta (unaudited) - - 10,000 -
Issuance of shares for bridge note financing
at $6.00 per share on March 19, 1999 (unaudited) 100,000 100 599,900 -
Net loss (unaudited) - - - (714,104)
---------------- ------------- -------------- --------------
BALANCES, March 31, 1999 (unaudited) 7,458,492 $ 7,458 $ 18,434,277 $ (3,300,177)
================= ================= ================ ================
Total
Shareholders'
Equity
-----------------
BALANCES, June 6, 1997 $ -
Issuance of Common Stock at $.05
per share on June 23, 1997 145,500
Issuance of Common Stock at $3.75
per share on Sept. 5, 1997, net of
offering costs 9,076,283
Salary contributed to Beta 30,000
Net loss (201,573)
------------------
BALANCES, December 31, 1997 9,050,210
Issuance of Common Stock at $5.00 per
share, February 12 through November
2, 1998, net of offering costs 6,548,632
Issuance of shares for properties at $5.00
per share on March 12, 1998 25,000
Salary contributed to Beta 60,000
Net loss (2,384,500)
-----------------
BALANCES, December 31, 1998 13,299,342
Offering costs relating to previous
offerings (unaudited) (27,680)
Issuance of shares for bridge note financing
at $6.00 per share on January 20, 1999 (unaudited) 1,974,000
Salary contributed to Beta (unaudited) 10,000
Issuance of shares for bridge note financing
at $6.00 per share on March 19, 1999 (unaudited) 600,000
Net loss (unaudited) (714,104)
----------------
BALANCES, March 31, 1999 (unaudited) $ 15,141,558
================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<TABLE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the The three The Cumulative
period from For the months three from
inception year ended ended months inception
(June 6, December March 31, ended (June 6,
1997) to 31, 1998 1998 March 1997) to
December 31, 1999 March 31,
31, 1997 1999
---------------- --------------- -------------- ------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (201,573) $ (2,384,500) $(1,482,527) $ (714,104) $ (3,300,177)
Adjustments to reconcile net loss to
net cash provided by (used in)
provided by operating activities:
Depreciation and depletion 1,530 11,883 2,835 12,415 25,828
Amortization of notes payable
discount and - - - 429,505 429,505
debt issuance costs
Impairment expense - 1,670,691 1,297,342 - 1,670,691
Salary contributed to Beta 30,000 60,000 15,000 10,000 100,000
Changes in operating assets and liabilities:
(Increase) in accounts - (9,678) - (19,687) (29,365)
receivable
(Increase) decrease in prepaid (2,599) (12,352) (5,042) 8,159 (6,792)
expenses
Increase (decrease) in accounts
payable, 807,474 (496,703) (369,151) 35,167 345,937
trade
Increase (decrease) in
commissions 25,329 (25,329) 85,671 - -
payable
Increase in accrued interest - - - 3,562 3,562
payable
Increase (decrease) in accrued 24,044 (16,485) (11,619) 5,680 13,239
payroll
Increase (decrease) in other
accrued 14,000 (13,200) (8,272) (800) -
expenses
Net cash provided by (used
in)
---------------- --------------- -------------- ------------- ---------------
Operating activities 698,205 (1,215,673) (475,763) (230,103) (747,572)
---------------- --------------- -------------- ------------- ---------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Oil and gas property expenditures (5,900,794) (8,928,201) (4,488,802) (2,193,467) (17,022,462)
Change in other assets - (166,028) - 30,820 (135,208)
Acquisition of furniture, fixtures & (33,595) (2,762) (1,548) (1,948) (38,304)
equipment
---------------- --------------- -------------- ------------- ---------------
Net cash used in investing activities (5,934,389) (9,096,991) (4,490,350) (2,164,595) (17,195,974)
---------------- --------------- -------------- ------------- ---------------
</TABLE>
(Continued)
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
For the Cumulative
period from For the The three The three from
inception year ended months ended months inception
(June 6, December March 31, ended (June 6,
1997) to 31, 1998 1998 March 31, 1997) to
December 31, 1999 March 31,
1997 1999
----------------- --------------- ---------------- --------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from sale of shares and 9,221,783 6,548,632 1,849,645 - 15,770,415
warrants, net
Offering costs of previous private - - - (27,680) (27,680)
placements
Proceeds from issuance of bridge - - - 2,835,000 2,835,000
notes, net
(Increase) in deferred offering costs - (23,524) - (41,334) (64,858)
----------------- --------------- ---------------- -------------- ------------
Net cash provided by financing activities 9,221,783 6,525,108 1,849,645 2,765,986 18,512,877
----------------- --------------- ---------------- -------------- -------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS:
3,985,599 (3,787,556) (3,116,468) 371,288 569,331
CASH AND CASH EQUIVALENTS:
Beginning of period - 3,985,599 3,985,599 198,043 -
----------- ------------- ------------ ------------- ------------
End of period $ 3,985,599 $ 198,043 $ 869,131 $ 569,331 $ 569,331
================= =============== ================ =============== ================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ - $ - $ - $ 33,281 $ 33,281
================= =============== ================ ================ ==============
Cash paid for income taxes $ - $ - $ - $ - $ -
================= =============== ================ =============== ================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the period Cumulative
from inception For the The three from
(June 6, 1997) year ended The three months ended inception
to December December months ended March 31, (June 6,
31, 1997 31, 1998 March 31, 1999 1997) to
1998 March 31,
1999
------------------- ---------------- ----------------- ---------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
Fair market value of common stock issued for:
Oil and gas properties $ - $ 25,000 $ 25,000 $ - $ 25,000
Discount on notes payable $ - $ - $ - $ 2,574,000 $ 2,574,000
</TABLE>
The accompanying notes are an integral part to these consolidated financial
statements
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
(1) ORGANIZATION AND OPERATIONS
The Company
Beta Oil & Gas, Inc., a development stage enterprise, was incorporated under the
laws of the State of Nevada on June 6, 1997 to participate in the oil and gas
acquisition, exploration, development and production business in the United
States and internationally. Beta's wholly owned subsidiary, BETAustralia, LLC,
was formed on February 20, 1998 as a limited liability company under the laws of
the State of California for the purposes of participating in the acquisition,
evaluation and development of exploration blocks in Australia.
Operations
Since its inception, Beta has participated as a non-operating working
interest owner in the acquisition of undeveloped leases, seismic options, lease
options and foreign concessions and has participated in extensive seismic
surveys and the drilling of test wells on its undeveloped properties. Further
leasehold acquisitions and seismic operations are planned for 1999 and future
periods. In addition, exploratory drilling is scheduled during 1999 and future
periods on Beta's undeveloped properties. It is anticipated that these
exploration activities together with others that may be entered into will impose
financial requirements which will exceed the existing working capital of Beta.
Management plans to raise additional equity and/or debt capital to finance its
continued participation in planned activities. In the opinion of Beta
management, current cash flow projections indicate that Beta can continue as a
going concern even if additional financing is unavailable. However, if
additional financing is not available, Beta will be compelled to reduce the
scope of its business activities. If Beta is unable to fund planned
expenditures, it may be necessary to:
1. Forfeit its interest in wells that are proposed to be drilled;
2. Farm-out its interest in proposed wells;
3. Sell a portion of its interest in prospects and use the sale proceeds to
fund its participation for a lesser interest; and
4. Reduce general and administrative expenses.
Beta is considered to be in the development stage as defined in Statement of
Financial Accounting Standards No. 7 ("SFAS 7") and is subject to risks
associated with its development stage activities. To date, Beta has had a
minimal operating history and has generated minimal revenues from oil and gas
operations. Oil and gas exploration is a speculative business and involves a
high degree of risk.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Beta and its
wholly-owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
Beta's financial statements are based upon a number of significant estimates,
including the impairment of oil and gas properties and the estimated useful
lives selected for furniture, fixtures and equipment. Due to the
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
uncertainties inherent in the estimation process, it is at least reasonably
possible that these estimates will be further revised in the near term and such
revisions could be material.
Oil and Gas Properties
Beta follows the full cost method of accounting for oil and gas producing
activities and, accordingly, capitalizes all costs incurred in the acquisition,
exploration, and development of proved oil and gas properties, including the
costs of abandoned properties, dry holes, geophysical costs, and annual lease
rentals. All general corporate costs are expensed as incurred. In general, sales
or other dispositions of oil and gas properties are accounted for as adjustments
to capitalized costs, with no gain or loss recorded. Amortization of evaluated
oil and gas properties is computed on the units of production method based on
all proved reserves on a country by country basis. Unevaluated oil and gas
properties are assessed for impairment either individually or on an aggregate
basis. The net capitalized costs of evaluated oil and gas properties (full cost
ceiling limitation) are not to exceed their related estimated future net
revenues discounted at 10%, and the lower of cost or estimated fair value of
unproved properties, net of tax considerations.
Joint Ventures
All exploration and production activities are conducted jointly with others and,
accordingly, the accounts reflect only Beta's proportionate interest in such
activities. Beta is a non-operator in all of its oil and gas producing
activities to date.
Revenue Recognition
Revenue will be recognized upon delivery of oil and gas production.
Furniture, Fixtures and Equipment
Furniture, fixtures and equipment is stated at cost. Depreciation is provided on
furniture, fixtures and equipment using the straight-line method over an
estimated service life of three years.
Income Taxes
Beta accounts for income taxes using the asset and liability method wherein
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which the temporary
differences are expected to be recovered or settled.
Concentrations of Credit Risk
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise from
financial instruments exist for groups of customers or counterparties when they
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions described below. In accordance with FASB Statement No. 105,
Disclosure of Information about Financial Instruments with Off-Balance-Sheet
Risk and Financial Instruments with Concentrations of Credit Risk, the credit
risk amounts shown in cash and accounts receivable do not take into
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
account the value of any collateral or security. As of December 31, 1997 and
1998, Beta maintained cash in a bank that was approximately $3,886,000 and
$98,000, respectively, in excess of the federally insured limit. As of March 31,
1999, Beta maintained a cash balance that was $469,331 in excess of the limit.
Fair Value of Financial Instruments
The estimated fair values for financial instruments under FAS No. 107,
Disclosures about Fair Value of Financial Instruments, are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The estimated
fair values of Beta's financial instruments, which includes all cash, accounts
receivable and accounts payable, approximates the carrying value in the
financial statements at December 31, 1997 and 1998 and March 31, 1999.
Stock Based Compensation
Beta has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB25) and related interpretations in
accounting for its employee stock options. In accordance with FASB Statement No.
123 Accounting for Stock-Based Compensation (FASB123), Beta will disclose the
impact of adopting the fair value accounting of employee stock options.
Transactions in equity instruments with non-employees for goods or services have
been accounted for using the fair value method as prescribed by FASB123.
Loss Per Common Share
Basic earnings per share excludes dilution and is calculated by dividing net
loss by the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Potential common shares for all periods presented
were anti-dilutive and excluded in the earnings per share computation.
Cash Equivalents
For purposes of the Statements of Cash Flows, cash and cash equivalents include
cash on hand, amounts held in banks and highly liquid investments purchased with
an original maturity of three months or less.
Comprehensive Income
Beta adopted SFAS 130, "Reporting Comprehensive Income," effective January 1,
1998. However, Beta has no items of other comprehensive income in any period
presented and, as a result, is not required to report comprehensive income.
Impact of Recently Issued Standards
Beta intends to adopt SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," issued in June 1998 effective with its fiscal year
beginning January 1, 2000 as required by the Statement. Due to Beta's current
and anticipated limited use of derivative instruments, management anticipates
that adoption of SFAS 133 will not have any significant impact on Beta's
financial position or results of operations. SFAS 132, "Employees' Disclosures
about Pensions and other Postretirement Benefits," and SFAS 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise" were issued in 1998 and are not
expected to impact Beta regarding future financial statement disclosures,
results of operations and financial position.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
Deferred offering costs
Deferred offering costs of $23,524 and $64,858 as of December 31, 1998 and March
31, 1999, respectively, relate to Beta's proposed initial public offering. Such
costs will be charged against the proceeds of the offering when completed.
Should the offering not be completed, such costs will be charged to expense.
Segment Information
Beta has adopted SFAS 131, "Disclosure about Segments of an Enterprise and
Related Information." As defined in that Standard, Beta operates in only one
segment, oil and gas exploration.
Interim Financial Information - The March 31, 1998 and 1999 financial statements
have been prepared by the Company without audit. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of the Company's financial position as of March 31, 1999 and the results of
their operations and cash flows for three month period ended March 31, 1998 and
1999. The results of operations for the three month periods ended March 31, 1998
and 1999 are not necessarily indicative of those that will be obtained for the
entire fiscal year.
(3) SUMMARY OF OIL AND GAS OPERATIONS
Capitalized costs at December 31, 1997; December 31, 1998, and March 31, 1999
relating to Beta's oil and gas activities are summarized as follows:
<TABLE>
December 31, 1997 December 31, 1998 March 31, 1999
----------------- ----------------- --------------
United States Foreign United States Foreign United States Foreign
<S> <C> <C> <C> <C> <C> <C>
Capitalized costs-
Evaluated properties $ - $ - $ 1,763,082 $ 1,624,218 $ 3,706,636 $ 1,624,218
Unevaluated properties 5,870,794 30,000 11,426,732 39,963 11,568,689 147,919
Less- Accumulated
depreciation,
depletion, amortization - - (46,473) (1,624,218) (55,804) (1,624,218)
and impairment
============= ========= ============= =========== ============ ============
$ 5,870,794 $ 30,000 $ 13,143,341 $ 39,963 $15,219,521 $ 147,919
============= ========= ============= =========== ============ ============
</TABLE>
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
Costs incurred in oil and gas producing activities are as follows:
<TABLE>
Inception (June 6, 1997) Year ended
through December 31, 1997 December 31, 1998
------------------------------ -------------------------------
United States United States
Foreign Foreign
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Property acquisition $ 3,835,540 $ - $ 2,808,123 $ 323,463
============== ============== ============== ==============
Exploration $ 2,035,254 $ 30,000 $ 4,510,897 $ 1,310,718
============== ============== ============== ==============
Development $ - $ - $ - $ -
============== ============== ============== ==============
</TABLE>
<TABLE>
Cumulative from inception
Three months ended (June 6, 1997) through
March 31, 1999 March 31, 1999
--------------------------------- -------------------------------
United States United States
Foreign Foreign
------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Property acquisition $ 723,344 $ 107,956 $ 7,367,007 $ 431,419
============== ================= ============== ===============
Exploration $ 1,362,167 $ - $ 7,908,318 $ 1,340,718
============== ================= ============== ===============
Development $ - $ - $ - $ -
============== ================= ============== ===============
</TABLE>
Unevaluated oil and gas properties - United States
As Beta's properties are evaluated through exploration, they will be included in
the amortization base. Costs of unevaluated properties in the United States at
December 31, 1997 and 1998, and March 31, 1999 represent property acquisition
and exploration costs in connection with Beta's Louisiana, Texas and California
prospects. The prospects and their related costs in unevaluated properties have
been assessed individually and no impairment charges were considered necessary
for the United States properties for any of the periods presented. The current
status of these prospects is that seismic has been acquired, processed and is
currently being interpreted on the subject lands within the prospects. Drilling
commenced on the prospects in the first quarter of 1999 and will continue in
future periods. As the prospects are evaluated through drilling in future
periods, the property acquisition and exploration costs associated with the
wells drilled will be transferred to evaluated properties where they will be
subject to amortization.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
Unevaluated oil and gas properties - Foreign
Unevaluated costs incurred outside the United States represent costs in
connection with the evaluation and proposed acquisition of one or more
exploration blocks in Brazil. In addition, during the three months ended March
31, 1999, Beta incurred acquisition costs of approximately $108,000 in
Australia.
At December 31, 1997 and 1998, and March 31, 1999, capitalized unevaluated
properties consist of the following:
<TABLE>
December 31, 1997 December 31, 1998 March 31, 1999
----------------- ----------------- --------------
<S> <C> <C> <C>
Unproved property acquisition cost $ 3,835,540 $ 6,476,043 $ 6,747,743
Exploration costs 2,065,254 4,990,652 4,968,865
=================== ================= ==================
$ 5,900,794 $ 11,466,695 $ 11,716,608
=================== ================= ==================
</TABLE>
Management expects that planned activities for the remainder of 1999 will enable
the evaluation for approximately 30% of the costs as of March 31, 1999.
Evaluation of 40% of the remaining costs is expected to occur in 2000 with the
remaining 30% in 2001.
Evaluated Properties - United States
During the year ended December 31, 1998 Beta participated in the drilling of 6
wells within the United States. The property acquisition and exploration costs
associated with the wells totaling $1,763,082 were transferred to evaluated
properties and were evaluated for impairment. It was determined that the
capitalized costs associated with the drilling of these properties exceed their
net realizable value by $46,473. Accordingly, an impairment write-down of
$46,473 was recorded for the year ended December 31, 1998. Since all of the
proved reserves associated with the wells were non-producing or behind pipe and
no production had occurred as of December 31, 1998, no depletion expense was
recorded during the year ended December 31, 1998.
During the three months ended March 31, 1999, Beta participated in the drilling
of 6 wells within the United States. The property acquisition and exploration
costs associated with the wells totaling $1,943,554 were transferred to
evaluated properties. It was determined that the total costs in evaluated
properties of $3,706,636 as of March 31, 1999 did not exceed their net
realizable value. Accordingly, no impairment charge was considered necessary for
the three months ended March 31, 1999. Production commenced during the period
and depletion expense of $9,331 was recorded.
Evaluated Properties - Foreign
During 1998, Beta, through its wholly owned subsidiary, BETAustralia, LLC
secured an option to participate for a 5% working interest in two petroleum
licenses covering 2,798,000 acres (approximately 4,372 square miles). Per the
terms of the option agreement, Beta exercised its option to earn a 5% working
interest by participating in the drilling of two offshore test wells in the
license areas. The wells were completed as dry holes. The property acquisition
and exploration costs associated therewith totaling $1,624,218 were transferred
to evaluated properties and charged to impairment expense during the year ended
December 31, 1998. The exploration licenses expired in December 1998.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
(4) PRIVATE PLACEMENTS
During the periods from inception (June 6, 1997) through December 31, 1997 and
the year ended December 31, 1998, Beta issued 5,565,648 and 1,458,844 shares,
respectively, of its common stock and 1,528,222 and 968,191 common stock
purchase warrants, respectively.
Initial start-up funding was raised through the sale, effective June 23, 1997,
of 2,910,000 shares ("founder shares") of Beta's common stock to its founders
and other principals for $0.05 per share. An additional 640,000 common stock
purchase warrants were issued with each warrant entitling the holder thereof to
purchase one share of Beta's common stock at prices ranging from $2.00 to $5.00
per share.
Effective September 5, 1997, Beta issued 663,912 equity units at $15 per unit
through a private placement. Each unit entitled the purchaser to four shares of
common stock and one callable warrant exercisable to purchase one share of
common stock at $5.00 for a term of five years. The offering generated net
proceeds, after offering costs, of $9,076,283. Beta issued 224,310 additional
common stock purchase warrants with an exercise price of $4.50 per share to
brokers in connection with the offering.
The following table summarizes the private placement transactions for the period
from inception (June 6, 1997) through December 31, 1997:
<TABLE>
Common Shares Warrants Issued Exercise
------------------------------- ------------------------------- Price
Shares $ Amount #Warrants Expiration Per Share
<S> <C> <C> <C> <C> <C> <C>
1) Tranch 1 2,910,000 $ 145,500 640,000 6/23/02 to $ $2.00 to
10/1/02 $5.00
2) Tranch 2 2,655,648 9,958,770 663,912 9/5/02 $ 5.00
3) Warrants issued - - 224,310 12/30/02 $ 4.50
4) Direct offering expenses
- Tranch 2 - (882,487) -
Totals 5,565,648 $9,221,783 1,528,222
============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
During the year ended December 31, 1998, Beta completed a private placement
offering of equity units at a subscription price of $20 per unit. Each unit
consisted of four shares of Beta's common stock and one callable warrant to
purchase one share of its common stock at a price of $7.50 per share for a
period of five years from the date of issuance. During the year ended December
31, 1998 Beta issued 1,458,844 common shares and 364,708 common stock purchase
warrants exercisable at $7.50 per share pursuant to this offering. The offering
generated net proceeds, after offering costs, of $6,548,632. In addition, Beta
issued 482,100 common stock purchase warrants exercisable at prices ranging from
$5.00 to $7.50 per share for services rendered.
The following table summarizes the private placement transactions for the year
ended December 31, 1998:
<TABLE>
Common Shares Warrants Issued Exercise
------------------------------ ------------------------------ Price
Shares $ Amount #Warrants Expiration Per Share
<S> <C> <C> <C> <C> <C> <C>
1) Tranch 3 1,458,844 $ 7,294,160 364,708 3/12/03 $ 7.50
2) Warrants issued as
Commission in Tranch 3 - - 121,383 3/12/03 $ 7.00
3) Direct offering expenses -
Tranch 3 - (745,528) -
4) Warrants issued - - 482,100 2/4/03 to $ 5.00 to 7.50
3/21/03
Totals 1,458,844 $ 6,548,632 968,191
============= ============= =============
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, during the year ended December 31, 1998 and the period cumulative
from inception (June 6, 1997) to December 31, 1998, Beta issued 5,000 shares of
common stock and 1,250 common stock purchase warrants for properties costing
$25,000.
(5) BRIDGE NOTES - NOTES PAYABLE
During the three months ended March 31, 1999, Beta completed the private
placement of a $3,000,000 bridge promissory note financing to three
institutional investors (the "1999 bridge financing"). In connection with the
1999 bridge financing, Beta has granted the investors a security interest in all
of Beta's assets.
The first portion of the 1999 Bridge Financing was funded on January 20, 1999
for $2,000,000. The promissory notes issued by Beta have a maturity date of
January 20, 2000. The notes bear interest, payable monthly in arrears, at a rate
of 10%. The securities purchase agreements which govern the January bridge
financing specify that, during the term of the notes, $1,000,000 of the proceeds
of a public offering of common stock by Beta must be directed to repayment of
the notes.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
In connection with the January 1999 bridge financing, Beta issued 300,000 shares
of common stock to the note holders and 29,000 shares of common stock as
commissions. In addition, if any portion of the principal of the notes remains
unpaid on the 180th, 210th, 240th, 270th, 300th, and/or the 330th day following
the closing date of the securities purchase agreements, then on the day
following any of such dates, Beta shall issue additional common stock to each
holder of the notes. The additional common shares issued shall be determined by
multiplying the unpaid principal balance by 2.5%. For example, if $1,000,000 of
principal remains unpaid on the 180th day following the closing date, then on
the following day the purchasers would be issued an additional 25,000 common
shares calculated by multiplying $1,000,000 times 2.5%.
The second portion of the 1999 bridge financing was funded on March 19, 1999 for
$1,000,000. The promissory note issued by Beta has a maturity date of March 19,
2000. The promissory note bears interest, payable monthly in arrears, at a rate
of 10%. The securities purchase agreements which govern the bridge financing
specify that, during the term of the promissory note, $1,000,000 of the proceeds
of a public offering of common stock by Beta must be directed to repayment of
the note.
In connection with the March 1999 bridge financing, Beta issued 100,000 shares
of common stock to the promissory note holder (investor). In addition, if any
portion of the principal of the note remains unpaid on the 30th, 60th, 90th,
120th, 160th, 180th, 210th, 240th, 270th, 300th, 330th and/or the 360th day
following the Closing Date of the securities purchase agreement, then on the day
following any of such dates, Beta shall issue to the holder of the promissory
note, that number of common shares determined by the above formula and a
coverage percentage, in each instance, of 1%. For example, if $1,000,000 of
principal remains unpaid on the 180th day following the closing date, then on
the following day the investor would be issued an additional 10,000 common
shares ($1,000,000 x 1%=10,000); if $250,000 of principal remains unpaid on the
180th day following the closing date, then on the following day the investor
would be issued an additional 2,500 common shares calculated by multiplying
$250,000 times 1%.
Beta received net cash proceeds of $2,835,000 from the bridge notes. Beta
recorded the $3,000,000 bridge notes as a current liability since they have a
maturity of less than one year. Interest is payable monthly in arrears at a rate
of 10%. The estimated fair market value of the 429,000 shares of common stock
issued in connection with the bridge notes of $2,574,000 is treated as a
discount to notes payable and is being amortized over the term of the promissory
notes using the interest method. Current notes payable as of March 31, 1999
consists of the following:
Current notes payable, interest at 10% payable monthly
in
arrears, secured by all of Beta's properties, $2,000,000 $ 3,000,000
due January 20, 2000 and $1,000,000 due March 19, 2000
Less unamortized discount 2,168,646
============
Net carrying value $ 831,354
============
Debt issuance costs of $165,000 were incurred in connection with the bridge
notes. These costs have been recorded as a current asset and are being amortized
over the term of the bridge notes.
Per the terms of the bridge notes, Beta has granted a security interest in all
of the assets of Beta. This will prohibit Beta from selling assets to raise cash
for other purposes until the bridge notes are repaid. It further prohibits Beta
from using any assets to secure additional loans.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
(6) COMMON STOCK WARRANTS
During the period from inception (June 6, 1997) through December 31, 1997, Beta
issued 1,528,222 callable and non-callable common stock purchase warrants
entitling the holders to purchase 1,528,222 shares of Beta's common stock at
prices ranging from $2.00 to $5.00 per share.
The following table summarizes the number of shares reserved for the exercise of
stock warrants as of December 31, 1997:
<TABLE>
Shares Exercise Price Expiration Date Callable/Non-Callable
<S> <C> <C> <C> <C>
230,000 $2.00 June 23, 2002 Non-Callable
133,333 $5.00 September 5, 2002 Callable (a)
266,667 $5.00 September 5, 2002 Non-Callable
10,000 $4.50 October 1, 2002 Non-Callable
224,310 $4.50 December 30, 2002 Non-Callable
663,912 $5.00 September 5, 2002 Callable (a)
--------
1,528,222
<FN>
(a) Beta will be entitled to call these warrants at any time on and after the
date that its common stock is traded on any exchange, including the NASD
Over-the-Counter Bulletin Board, at a market price equal to or exceeding
$7.00 per share for 10 consecutive trading days.
</FN>
</TABLE>
During the year ended December 31, 1998, Beta issued 969,441 callable and
non-callable common stock Purchase warrants entitling the holders to purchase
969,441 shares of Beta's common stock at prices ranging from $3.75 to $7.50 per
share.
The following table summarizes the number of shares reserved for the exercise of
common stock purchase warrants as of December 31, 1998:
<TABLE>
Shares Exercise Price Expiration Date Callable/Non-Callable
<S> <C> <C> <C>
230,000 $2.00 June 23, 2002 Non-Callable
133,333 $5.00 September 5, 2002 Callable (a)
266,667 $5.00 September 5, 2002 Non-Callable
10,000 $4.50 October 1, 2002 Non-Callable
224,310 $4.50 December 30, 2002 Non-Callable
663,912 $5.00 September 5, 2002 Callable (a)
100,000 $3.75 January 23, 2003 Non-Callable (c)
2,000 $5.00 February 4, 2003 Non-Callable
230,100 $5.00 March 12, 2003 Non-Callable
100,000 $7.50 March 12, 2003 Non-Callable
50,000 $7.50 March 12, 2003 Callable (b)
121,383 $7.00 March 12, 2003 Non-Callable
365,958 $7.50 March 12, 2003 Callable (b)
--------
2,497,663
=========
</TABLE>
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
(a) Beta will be entitled to call these warrants at any time on and after the
date that its common stock is traded on any exchange, including the NASD
Over-the-Counter Bulletin Board, at a market price equal to or exceeding
$7.00 per share for 10 consecutive trading days.
(b) Beta will be entitled to call these warrants at any time on and after the
date that its common stock is traded on any exchange, including the NASD
Over-the-Counter Bulletin Board, at a market price equal to or exceeding
$10.00 per share for 10 consecutive trading days.
(c) On January 27, 1998, Beta issued 100,000 common stock purchase warrants
exercisable at a price of $3.75 per share to an officer of Beta. The
exercise price was equal to the market value of the common stock on the
date of grant. The warrants vest as follows: (a) 25,000 warrants vested
immediately; (b) 25,000 shall vest upon the first anniversary of the
employee's employment (January 27,1998) with Beta; (c) 25,000 shall vest
upon the second anniversary of employment; and (d) 25,000 shall vest upon
the third anniversary of employment. If the officer ceases employment
during the vesting period, all nonvested warrants shall be forfeited.
Pro Forma Information
As stated in Note 2, Beta has not adopted the fair value accounting prescribed
by FAS123 for employees. Had compensation cost for stock options issued to
employees been determined based on the fair value at grant date for awards in
the year ended December 31, 1998 consistent with the provisions of FAS123,
Beta's net loss and net loss per share would have been adjusted to the pro forma
amounts indicated below:
<TABLE>
December 31, 1998 March 31, 1998 March 31, 1999
<S> <C> <C> <C>
Net loss $(2,473,000) $ (1,571,027) $ (728,304)
Loss per common share $(.39) $(.28) $(.10)
</TABLE>
During the year ended December 31, 1997, Beta did not grant options to
employees. As a result, there would be no effect on Beta's net loss or net loss
per share.
The fair value of each option is estimated on the date of grant using the
minimum value option-pricing model using the following assumptions: expected
volatility of 0%, an expected life of 2-3 years, no dividends would be declared
during the expected term of the options, a risk free interest rate of
approximately 5.6%.
The weighted average fair value of the options on the grant dates was $4.31 per
share.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
(7) INCOME TAXES
Income tax (expense) for the years ended December 31, 1997 and 1998 is
comprised of the following:
<TABLE>
Cumulative
Inception Year ended From inception (June
(June 6, 1997) to December 31, 6, 1997) to
December 31, 1997 1998 December 31, 1998
--------------------- -------------------- ----------------------
<S> <C> <C> <C>
Current:
Federal $ - $ - $ -
State - (800) (800)
------------------------ ---------------------- --------------------------
$ - $ (800) $ (800)
===================== ==================== ======================
Deferred:
Federal $ - $ - $ -
State - - -
----------------------- ----------------------- -------------------------
$ - $ - $ -
===================== ==================== ======================
</TABLE>
The actual income tax (expense ) benefit differs from the "expected" tax
(expense) benefit (computed by applying the U.S. Federal corporate income tax
rate of 34% for each period) as follows:
<TABLE>
Cumulative
Inception Year ended from inception (June
(June 6, 1997) to December 31, 6, 1997) to
December 31, 1997 1998 December 31, 1998
---------------------- ------------------- ----------------------
<S> <C> <C> <C>
Amount of expected tax
(expense) benefit $ 68,535 $ 810,458 $ 878,993
Non-deductible expenses (713) (23,759) (24,472)
State taxes, net - (800) (800)
Change in valuation allowance
For deferred tax assets (67,822) (786,699) (854,521)
---------------------- ---------------------- --------------------------
Total $ - $ (800) $ (800)
====================== =================== ======================
</TABLE>
The components of the net deferred tax asset recognized as of December 31, 1997
and 1998 are as follows:
<TABLE>
December 31, 1997 December 31, 1998
---------------------- -----------------------
<S> <C> <C>
Long-term deferred tax assets (liabilities)
Net operating loss carryforwards $ 74,801 $ 1,714,694
Exploration and development costs
capitalized for financial purposes,
expensed for tax purposes - (605,173)
---------------------- -----------------------
74,801 1,109,521
Valuation allowance (74,801) (1,109,521)
---------------------- -----------------------
Net long term deferred tax asset $ - $ -
====================== =======================
</TABLE>
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
At December 31, 1998, Beta has net operating loss carryforwards of
approximately $4,003,000 which expire in the years 2012 through 2018. Beta has
California net operating loss carryforwards for the year ended December 31,
1998 of $4,002,000 which expire in 2005.
Utilization of the tax net operating loss carryforward may be limited in the
event a 50% or more change in ownership occurs within a three year period.
(8) OTHER
Related Party Transactions
During the period from inception (June 6, 1997) through December 31, 1997, and
for the year ended December 31, 1998, a director of Beta was paid $20,000 and
$60,000, respectively, pursuant to a consulting contract for management and
geologic evaluation services. In addition, the director subscribed to 350,000
shares of Beta's common stock at a price of $0.05 per share ("founder shares").
A second director of Beta subscribed to 50,000 founder shares at a price of
$0.05 per share. In addition, a legal firm with whom the director is a
shareholder, subscribed to 20,000 founder shares at a price of $0.05 per share.
The legal firm represents Beta as general counsel. The legal firm also received
15,000 common stock purchase warrants presently exercisable at a price of $5.00
per share until expiration on March 12, 2003 in connection with the February 12,
1998 private placement (see Note 4).
A third director of Beta subscribed to 400,000 founder shares at a price of
$0.05 per share.
Beta entered into an expense sharing agreement with Beta Capital Group, Inc., a
company owned by the President and Chairman of the Board, and the Treasurer of
Beta. The agreement provides for the allocation and reimbursement of certain
office expenses such as office rent, secretarial support, office supplies,
marketing materials and telephone charges between Beta and Beta Capital Group,
Inc. During the period from inception through December 31, 1997 Beta made
payments totaling $9,940 to Beta Capital Group, Inc. in connection with this
agreement. During the year ended December 31, 1998 Beta paid $17,000 in
connection with this agreement. During the three months ended March 31, 1999
Beta made no payments in connection with this agreement.
Leases
Effective October 1, 1997, Beta entered into an agreement to lease office space.
The lease agreement provides for a 24-month term expiring in September 1999.
Monthly rent payments under the lease agreement commenced in October 1997. The
lease agreement was previously in the name in Beta Capital Group, Inc. and was
modified and extended by amendment to reflect Beta as tenant. Beta's President
and Chairman, and Treasurer are personal guarantors of the lease agreement. Beta
is recognizing rent expense ratably over the term of the lease. Total minimum
future rental payments under this lease are as follows:
Year ended December 31, 1999 $ 23,804
============
Rent expense for the period ended December 31, 1997 and the year ended December
31, 1998 amounted to approximately $8,000 and $ 31,000 , respectively. Rent
expense for the three months ended March 31, 1998 and 1999 was approximately
$8,000.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
Initial Public Offering; Registration of Common Stock
On December 4, 1998, Beta filed an S-1 Registration Statement as amended with
respect to its common stock. The S-1 Registration Statement contains two forms
of prospectus: One prospectus will be used in connection with the sale by Beta
of up to 1,650,000 shares of its common stock in a best efforts underwritten
public offering and the other prospectus will be used by existing shareholders
of Beta in effectuating sales from time to time, for their own account, of their
shares of common stock, principally in over-the-counter transactions.
Employment Contracts
Beta has executed an employment contract dated June 23, 1997 with its president
who also serves as a director. The contract provides for an indefinite term of
employment at an annual salary of $150,000 commencing in October of 1997 and an
annual car allowance of up to $12,000. The contract may be terminated by Beta
without cause upon the payment of the following:
(a) Options to acquire the common stock of Beta in an amount equal to 10% of
the then issued and outstanding shares containing a five year term,
piggyback registration rights and an exercise price equal to 60% of the
fair market value of the shares during the sixty day period of time
preceding the termination notice, such amount not to exceed $3.00 per
share.
(b) A cash payment equal to two times the aggregate annual compensation.
(c) In the event of termination without cause, all unvested securities issued
by Beta to the Employee shall immediately vest and Beta shall not have the
right to terminate or otherwise cancel any securities issued by Beta to the
Employee.
On June 23, 1997, Beta entered into an employment agreement with a shareholder.
The agreement provides for a two year term at an annual salary of $60,000 for
services as "Vice President of Capital Markets". Under separate agreement, the
Shareholder subscribed to 350,000 shares of Founders Shares at a price of $0.05
per share. The subscription agreement provides that the shares shall vest over a
three year period.
Deferred Compensation
In 1998, the Company began to offer a simple individual retirement account (IRA)
plan for all employees meeting certain eligibility requirements. Employees may
contribute up to 3% of the employees eligible compensation. Beta's contribution
to the plan for the year ended December 31, 1998 was $4,693.
Other Assets
Other assets of approximately $166,000 and $135,000 at December 31, 1998 and
March 31, 1999, respectively, consisted of unapplied well prepayments.
9) SUBSEQUENT EVENT - CANCELLATION OF WARRANTS
As of June 21, 1999, certain warrant holders agreed to cancel 87,296 warrants to
purchase common stock consisting of 20,000 warrants exercisable at $5.00 per
share and 67,296 warrants exercisable at $7.00 per share. All of the cancelled
warrants were non-callable with expiration dates on March 12, 2003.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
10) UNAUDITED SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION
The following supplementary information is presented in compliance with United
States Securities and Exchange Commission) regulations and is not covered by the
report of Beta's independent auditors. The information required to be disclosed
for the year ended 1998 in accordance with FASB Statement No. 69, "Disclosures
About Oil and Gas Producing Activities," is discussed below and is further
detailed in the following tables. There were no oil and gas reserves as of
December 31, 1997.
The reserve quantities and valuations for fiscal 1998 are based upon
estimates by Veazey & Associates, Inc. and Beta's management. Proved reserves
are the estimated quantities of crude oil, natural gas and natural gas liquids
which geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing economic and
operating conditions, i.e. prices and costs as of the date the estimate is made.
Prices include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future conditions.
Reservoirs are considered proved if economic producibility is supported by
either actual production or conclusive formation test. The area of a reservoir
considered proved includes (A) that portion delineated by drilling and defined
by gas-oil and/or oil-water contacts, if any, and (B) the immediately adjoining
portions not yet drilled, but which can reasonably be judged as economically
productive on the basis of available geological and engineering data. In the
absence of information on fluid contacts the lowest known structural occurrence
of hydrocarbons controls the lower proved limit of the reservoir.
Proved developed reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. Additional
oil and gas reserves expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing the natural
forces and mechanisms of primary recovery should be included as "proved
developed reserves" only after testing by a pilot project or after the operation
of an installed program has confirmed through production response that increased
recovery will be achieved.
Beta wishes to emphasize that the estimates included in the following tables are
by their nature inexact and are subject to changing economic, operating and
contractual conditions. At December 31, 1998, all of Beta's reserves are
attributable to recently drilled wells which are being completed and are not yet
producing oil and gas as of that date. Reserve estimates for these wells are
subject to substantial upward or downward revisions after production commences
and a production history is obtained. Accordingly, reserve estimates of future
net revenues from production may be subject to substantial revision from year to
year. Reserve information presented herein is based on reports prepared by
independent petroleum engineers.
The assumptions used to compute the standardized measure are those prescribed by
the Financial Accounting Standards Board and, as such, do not necessarily
reflect Beta's expectations for actual revenues to be derived from those
reserves nor their present worth. The limitations inherent in the reserve
quantity estimation process, as discussed previously, are equally applicable to
the standardized measure computations since these are the basis for the
valuation process.
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
CHANGES IN QUANTITIES OF PROVED PETROLEUM AND NATURAL GAS RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1998 (Unaudited)
<TABLE>
Oil Gas
PROVED RESERVES (Bbls) (Mcf's)
<S> <C> <C> <C>
Balance at December 31, 1997 - -
Extensions and discoveries 1,461 1,596,740
------------ -------------
Balance at December 31, 1998 1,461 1,596,740
============= =============
Oil Gas
PROVED DEVELOPED BEHIND PIPE RESERVES (Bbls) (Mcf's)
December 31, 1997 - -
============= =============
December 31, 1998 1,461 1,596,740
============= =============
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED PETROLEUM AND NATURAL GAS RESERVES (Unaudited)
For purposes of the following disclosures, estimates were made of quantities of
proved reserves and the periods during which they are expected to be produced.
Future cash flows were computed by applying year-end prices to estimated annual
future production from proved oil and gas reserves. The average year-end price
for oil was $13.14 per barrel at December 31, 1998. The average year-end price
for gas was $1.85 per Mcf at December 31, 1998. Future development and
production costs were computed by applying year-end costs to be incurred in
producing and further developing the proved reserves. Future income tax expenses
were computed by applying, generally, year-end statutory tax rates (adjusted for
permanent differences, tax credits and allowances) to the estimated net future
pre-tax cash flows. The discount was computed by application of a 10% discount
factor. The calculations assume the continuation of existing economic, operating
and contractual conditions. However, such arbitrary assumptions have not proven
to be the case in the past. Other assumptions of equal validity could give rise
to substantially different results.
<TABLE>
Year Ended
December 31,
1998
---------------
<S> <C>
Future cash inflows $ 2,978,861
Future costs-
Production (343,478)
Development (81,621)
---------------
Future net cash inflows before income tax 2,553,762
Future income tax -
---------------
Future net cash flows 2,553,762
10% discount factor (837,154)
----------------
Standardized measure of discounted future net cash flows $ 1,716,608
===============
</TABLE>
<PAGE>
BETA OIL & GAS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to December 31, 1998 is unaudited)
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH
FLOWS FROM PROVED PETROLEUM AND NATURAL GAS RESERVE
QUANTITIES (Unaudited)
The following are the principal sources of changes in the standardized measure
of discounted future net cash flows:
<TABLE>
Year Ended
December 31,
1998
---------------
<S> <C>
Standardized measure of discounted future net cash
flows--beginning of year $ -
Extensions and discoveries, net of future costs 1,716,608
-
Standardized measure of discounted future net cash
--------------
flows--end of year $ 1,716,608
==============
</TABLE>
<PAGE>
INSIDE BACK COVER PAGE OF PROSPECTUS
(Three graphic illustrations depicting the following: (i) A three dimensional
cube which illustrates the ground surface and underlying layers of earth from
which oil and gas is produced, (ii) a map of California which shows the location
of Beta's prospects and (iii) a map of Australia which shows the location of
Beta's ongoing Australian prospect.)
<PAGE>
================================================================================
You should rely only on the information contained in this document or that we
have referred to you. We have not authorized anyone to provide you with
information that is different. The delivery of this prospectus and any sale made
by this prospectus does not imply that there has been no change in the affairs
of Beta since the date of this prospectus. This prospectus does not constitute
an offer or solicitation by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
TABLE OF CONTENTS
Recent Developments (See inside front cover)
Prospectus Summary.............................................
Risk Factors.......................................................
Use of Proceeds...................................................
Dilution............................................................
Capitalization......................................................
Dividends..........................................................
Selected Consolidated Financial Data.........................
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............
Glossary............................................................
Business............................................................
Properties..........................................................
Additional Information...........................................
Management......................................................
Executive Compensation........................................
Summary Compensation Table.................................
Principal Shareholders...........................................
Certain Relationships and Related Party Transactions......
Description of Securities........................................
Shares Eligible for Future Sale.................................
Underwriting.......................................................
Legal Matters......................................................
Experts ............................................................
Financial Statements............................................. F-1
For an explanation of industry terms used in this prospectus, see "Glossary."
----------------------
Dealer prospectus delivery obligation. Until ___, 1999 (90 days after the date
of this prospectus), all dealers effecting transactions in the registered
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This delivery requirement is in addition to the obligation
of dealers to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
================================================================================
[BETA OIL & GAS, INC. LOGO]
Beta Oil & Gas, Inc.
800,000 (Minimum)
1,500,000 (Maximum)
Shares Of Common Stock
($.001 Par Value)
--------------------------
PROSPECTUS
--------------------------
Brookstreet Securities
Corporation
_________, 1999
================================================================================
<PAGE>
ALTERNATE PAGE
Prospectus
Beta Oil & Gas, Inc.
9,639,859 shares of Common Stock
($.001 Par Value)
The Offering: This offering relates to the possible sale, from time to time,
by certain shareholders, the "selling security holders" of
Beta of up to 7,029,492 shares of common stock, and 2,610,367
shares of common stock issuable upon exercise of unregistered
common stock purchase warrants, the "warrants." The selling
security holders shall not have the right to sell any of the
shares in the seling security holder prospectus until Beta
either completes its initial public offering or fails to
complete the minimum offering within 10 business days and
therefore fails to complete its initial public offering. Beta
will not receive any proceeds from sales by selling security
holders, except when warrantholders choose to exercise their
warrants, in which case Beta will receive the exercise price
of the warrants net of a 5% commission. See "Plan of
Distribution" for further details concerning the possible sale
of these shares.
Proposed Trading No public market currently exists for our shares. We
Symbol: intend to apply for quotation on The Nasdaq SmallCap Market
under the symbol "BETA." The offering price may not reflect
the market price of our shares after the offering.
---------------- ---------------------------
================================================================================
This Investment Involves a High Degree of Risk. You Should Purchase Shares Only
if You Can Afford a Complete Loss. See "Risk Factors" Beginning on Page __.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
================================================================================
Beta has agreed to bear all the expenses of registering these shares. The
expenses are estimated at $90,000.
The date of this prospectus is ___________, 1999
<PAGE>
ALTERNATE PAGE
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. You should also read the entire prospectus carefully, including the
risk factors and financial statements. There is no assurance that Beta will ever
generate a profit from oil and gas operations.
Beta Oil & Gas, Inc.
Offices: Beta's corporate headquarters are located at 901 Dove Street,
Suite 230, Newport Beach, CA 92660. Our telephone number is (949)
752-5212.
Our Business: Beta is an oil and gas company organized in June 1997 to
participate in the exploration and production of natural gas and
crude oil. Our operations are currently focused in proven oil and
gas producing trends primarily in South Texas, Louisiana and
Central California. Beta's wholly owned subsidiary,
BETAustralia, LLC, participates in the exploration for
oil and gas in Australia.
Operations Philosophy: Beta intends to rely on joint ventures with qualified
operating oil and gas companies to operate its
projects through the exploratory and production
phases. This will reduce general and administrative
costs necessary to conduct operations. As of the date
of this prospectus, Beta was not operating any of its
projects.
3-D Seismic: Beta believes that 3-D seismic surveys have
reduced the risk of oil and gas exploration in certain
areas. Recognizing this change, we have acquired
prospective acreage blocks for targeted, proprietary,
3-D seismic surveys. Briefly, a seismic survey sends
pulses of sound from the surface, down into the earth,
and records the echoes reflected back to the surface.
By calculating the speed at which sound travels through
the various layers of rock, it is possible to estimate
the depth to the reflecting surface. We use computers
to perform these calculations and "process" the seismic
data. It then becomes possible to create a picture of
the rock structures deep below the earth's surface. A
3-D seismic survey provides us a three dimensional
picture of these rock structures. These three
dimensional "pictures" show us the potential size of a
potential oil or gas reservoir and the best location to
drill for it.
Current Status: As of the date of this prospectus, we have
participated in projects which total about 76,000 gross
acres under lease or option. This is 13,000 acres net
to Beta's average 17% interest. Beta has participated
with other oil and gas companies to conduct seismic
surveys over approximately 94% of the acreage. From the
data generated by its initial proprietary seismic
surveys, covering 313 square miles, in excess of 100
potential drillsites have been identified.
South Texas Exploration:Approximately $10,000,000, about 60% of the total funds
raised so far by Beta, have been utilized to acquire
interests in lands and seismic data in the onshore Texas
Gulf Coast region. Beta's interests in the onshore
Texas properties are operated by Parallel Petroleum
Corporation. Drilling commenced in these projects during
the first quarter of 1999 and has resulted in three
discoveries of oil and gas to date. Representatives of
Parallel have informed Beta that drilling will continue
in these projects throughout the year. Beta anticipates
that participation in exploratory and drilling projects
in South Texas will constitute its primary activity
during 1999.
Louisiana Exploration: Approximately $3,300,000, representing 20% of the funds
raised so far by Beta have been invested in leases,
seismic data acquisition and drilling in Louisiana.
Drilling commenced in these prospects in 1998 and has
resulted in four oil and gas discoveries so far. It is
expected that Beta will participate in the drilling
of a minimum of six wells in Louisiana during 1999.
Other Exploration: The balance of the funds raised to date have been
utilized primarily to fund other domestic and
international exploratory activities. Beta's exploratory
activities in areas outside of Texas and Louisiana have
resulted in one gas discovery located in Central
California. We anticipate that Beta will expend
additional funds to explore these areas during 1999 and
future periods.
1999 Budget Plans: Beta's capital budget for 1999 of approximately
$8,300,000, subject to available funds, includes amounts
for the acquisition of additional 3-D seismic data and
for the drilling of 38 gross wells, or 8.39 wells net to
Beta, in 1999. Beta will own interests in the wells
ranging from 12.5% to 75% and averaging 22%. A majority
of the budgeted wells will be drilled in Texas and
Louisiana. In addition, Beta anticipates that as its
existing 3-D seismic data is further evaluated, and 3-D
seismic data is acquired over the balance of its
acreage, additional prospects will be identified for
drilling beyond 1999.
<TABLE>
The Offering
<S> <C>
Common stock offered by the selling security holders: 9,639,859 shares (1)
Common stock warrants: 2,610,367
Common stock to be outstanding after the offering:(2) 7,488,492 shares
Use of proceeds: (3) The Company will not receive any proceeds from the sale
of securities by the selling security holders, although
it could realize as much as $13,892,749 if all warrants
are exercised, less an approximate 5% commission to
brokers of record, if any. NASD members participating in Beta's
initial public offering or the selling security holder offering, shall
not receive compensation arising from the exercise of Beta warrants
during the twelve month period following the completion of the initial
public offering. The proceeds from the exercise of warrants will be
used for general working capital purposes, the repayment of debt and
the drilling of wells in Beta's Louisiana, California and Texas
prospects.
Risk factors: An investment in our shares is very
risky, and you should be able to
bear a complete loss of your
investment. See "Risk Factors" for
a detailed discussion of the
risks and uncertainties concerning Beta's
common stock.
Proposed Nasdaq SmallCap Market Symbol:(4) BETA
<FN>
(1) Includes 2,610,367 shares of common stock reserved for issuance upon
exercise of warrants. The selling security holders shall not have the
right to sell any of the shares in the selling security holders
prospectus until Beta either completes its initial public offering or
fails to complete the minimum offering within 10 business days and
therefore fails to complete its initial public offering.
(2) Does not include common stock issuable upon exercise of outstanding
warrants. In addition, it does not include between 800,000 and
1,500,000 shares being offered concurrently with this offering.
(3) Net proceeds before deducting estimated offering expenses of $90,000.
(4) There is no assurance that the common stock will be approved for
quotation in the Nasdaq SmallCap Market or that a trading public market
will develop, or, if developed, will be sustained. See "Risk Factors -
There has been no prior trading market for Beta's common stock;
potential volatility of Beta's stock price" for a more detailed
discussion of these market risks.
</FN>
</TABLE>
<PAGE>
ALTERNATE PAGE
USE OF PROCEEDS
Beta will not receive any proceeds from the sale of securities by the
selling security holders. The selling security holders shall not have the right
to sell any of the shares in the selling security holder prospectus until Beta
either completes its initial public offering or fails to complete the minimum
offering within 10 business days and therefore fails to complete its initial
public offering. Beta intends to utilize the proceeds received from the exercise
of any warrants, estimated to be $13,892,749 if all warrants are exercised in
full, less a 5% commission to the brokers of record if applicable, for general
corporate and working capital purposes, for the repayment of debt and for
exploratory and development drilling on its various projects. NASD members
participating in Beta's initial public offering or the selling security holder
offering, shall not receive compensation arising from the exercise of Beta's
warrants during the twelve month period following the completion of the initial
public offering. There can be no assurance that any of the warrants will be
exercised. This is Beta's best estimate of its use of proceeds generated from
the sale of shares by Beta and the possible exercise of warrants based on the
current state of its business operations, its current plans and current economic
and industry conditions. Any changes in the projected use of proceeds will be
made at the sole discretion of Beta's board of directors.
<PAGE>
ALTERNATE PAGE
RESALE BY SELLING SECURITY HOLDERS
This prospectus relates to the proposed resale by the selling security
holders of up to 7,029,492 shares of outstanding common stock as well as the
resale of up to 2,610,367 additional shares of common stock issuable upon
exercise of Beta's outstanding common stock purchase warrants. The following
tables set forth as of the date of this prospectus certain information
concerning the persons for whom Beta is registering the shares for resale to the
public. Beta will not receive any of the proceeds from the sale of the shares,
but will receive a maximum of $13,892,749 if the warrants listed below are
exercised.
<TABLE>
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
<S> <C> <C> <C> <C>
15TH STREET PARTNERS A LIMITED PARTNERSHIP 20,000 20,000 -
ALSTROM, JOHN K. & ALSTROM, DOREEN Y. COM PROP 8,000 2,000 -
ALTER, SCOTT C 4,000 1,000 -
ANDERSON, RAYMOND A. & ANDERSON, PATRICIA ANN 1,336 334 -
ANDERSON, SAMUEL THOMAS & ANDERSON, DIANA LEE JTWROS 10,000 2,500 -
ANTRY, JO LAYNE TTEE ANTRY, JO LAYNE REV INT TR U/A DTD 10,000 0 -
5/11/93
ANTRY, SARA ELIZABETH 0 12,500 -
ANTRY, STEVE & ANTRY, LISA 1,500,000 0 21%
ANTRY, W FRED 10,000 0 -
ANTRY, WILLIAM WARREN 5,000 0 -
ARAX, NAVO & ARAX, JOSETTE COM PROP 1,000 250 -
ARKOOSH, JOHN T & ARKOOSH, GAIL A JTWROS 8,000 2,000 -
ARKOOSH, JOHN T 0 23,200 -
ARKOOSH, THOMAS J 8,000 2,000 -
ASSEMI, MASSOUD 2,000 500 -
ASSEMI, SAID IRA 2,000 500 -
AVANT, DON L 0 800 -
BAIRD, RALPH 0 10,000 -
BALAKIAN, LARRY 4,000 1,000 -
BARBOUR, MATT 8,000 2,000 -
BEAR STEARNS SECURITIES CORP CUST FBO MANZ, VIRGINA C IRA #5859520214048 20,000 5,000 -
BEAR STEARNS SECURITIES CORP CUST FBO LACY, FREDERICK SEP IRA 13,120 3,280 -
BENNETT, BILL & BENNETT, JOYCE L COMMUNITY PROPERTY 10,200 2,550 -
BENNETT, JACK K & BENNETT, GLORIA E 10,000 0 -
BENNETT, LAURIE LEA 5,000 0 -
BERBERIAN & GAZARIAN FAMILY FOUNDATION 10,000 2,500 -
BERLINER, WILLIAM P & BERLINER, MARIE E JTWROS 4,000 1,000 -
BERTAINA, LAWRENCE J TTEE BERTAINA, LAWRENCE J REV LIV TR DTD 2,000 500 -
09/18/89
BIPPUS, WANDA JUNE 0 5,000 -
BIRCHTREE FINANCIAL SERVICES INC. 0 1,442 -
BLACK DIAMOND BLADE INC PROFIT SH PL & TR BRENNER, FRANKLIN TTEE 19,000 4,750 -
BLACK, JOHN M & BLACK, JOYCE E. JTWROS 4,000 1,000 -
BLAIR, SUSAN A 6,000 1,500 -
BLOUNT, LAMARUS L. & BLOUNT, MICHELLE T. JTWROS 12,000 3,000 -
BLUM, DEREK E 1,000 250 -
BLUM, GERALD H. 1,348 334 -
BLUM, RYAN H 1,000 250 -
BOGHOSIAN, NICHOLAS P & NANCY TTEES FBO BOGHOSIAN FAMILY TRUST UTD 11-20-90 4,000 1,000 -
BONNER, CHARLES B. 10,668 2,667 -
BONNER JR, S.M. 8,000 2,000 -
BORELLI, DON 8,000 2,000 -
BOSWELL, GEORGE & BOSWELL, NORMA G. JTWROS 4,000 1,000 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
BOVA, MICHAEL F & BOVA, L. MICHELLE TIC 4,000 1,000 -
BOWERS, STEVEN W. & BOWERS, SYBIL A. 2,600 650 -
BOYD, KEN TTEE FBO KENCO INVESTMENT INC PROFIT SHARING PLAN 2,000 500 -
BOYD, KEN 2,000 500 -
BRAGG, ROBERT M TTEE FBO THE BRAGG, ROBERT M SEPARATE PROPERTY TR 17,112 4,278 -
5-30-72
BRENNER, FRANK 19,000 4,750 -
BRENNER, HOBY & BRENNER, ALEXIS 18,332 4,583 -
BRILL JR, WILLIAM B. & BRILL, DOLORES M TIC 8,000 2,000 -
BROOKSHIRE, G. LEE & BROOKSHIRE, JANEL M. 6,000 1,500 -
BRUNY, STEPHEN J. 4,000 1,000 -
BUCKENBERGER, ROBERT A. IRA 4,000 1,000 -
BURKS, STEVE 0 8,464 -
CAMBRIDGE, THOMAS R. TTEE CAMBRIDGE PRODUCTION INC.401K PRF SH PLN 8,000 2,000 -
CANALES, JAMES P. 4,000 1,000 -
CANADA, LEESA NAN HOLLAND 2,000 500 -
CARIB FINANCIAL 0 10,000 -
CARLISLE, FRED H TTEE FBO CARLISLE, FRED H & SUE Z REV TRUST 2,000 500 -
CARLISLE, FRED H. & CARLISLE, SUE Z. REV TRUST 2,000 500 -
CARR, GARY B. 6,000 1,500 -
CASEY FAMILY TRUST UTD 04/18/90 8,000 2,000 -
CASEY, LARRY W & SUANNE BLAIR TTEES FBO CASEY FAMILY TRUST UA DTD 4-18-90 4,000 1,000 -
CASWELL BELL HILLISON BURNSIDE & GREER SHARING TR FBO JAMES M BELL 1,000 250 -
CASWELL, G THOMAS JR & CASWELL, CAROL W COMMUNITY PROPERTY 6,000 1,500 -
CASWELL, THOMAS 4,000 1,000 -
CHANNER, GARY J & PATRICIA J TTEES CHANNER FAMILY TRUST 4,000 1,000 -
CHANNER, GARY J. 8,000 2,000 -
CHAN, JACKY C. 1,000 250 -
CHERRY, ROBERT T & TAY N TTEES CHERRY FAMILY TRUST 2,000 500 -
CHILDS, SPENCER 0 2,000 -
CHIZMAR, LAWRENCE E JR IRA 2,000 500 -
CHOOLJIAN, LEO 8,000 2,000 -
CHOOLJIAN, MEHRAN & MADELINE TTEES FBO CHOOLIJAN, MERHAN & MADELINE FAM TR DT 22,000 5,500 -
08/91
CHOOLJIAN, MEHRAN & CHOOLJIAN, MADELINE 10,000 2,500 -
CHOOLJIAN, MICHAEL 2,700 675 -
CIFELLI, THOMAS A LIVING TRUST 0 231 -
CITY NATIONAL BANK TTEE FBO APPLICATION SOFTWARE INC PROF SH TR 16,000 4,000 -
COFFMAN, SUSAN M & COFFMAN, LEROY B II COMMUNITY PROPERTY 16,000 4,000 -
COHEE, GARY 0 2,500 -
COLBERT ENTERPRISES PRF SHR PLN COLBERT TTEE, FLOYD O. 4,000 1,000 -
COLLETTE, DAVID G. 2,600 650 -
COLLINS, TRUDY G. 3,000 750 -
COLTON INVESTMENTS LLC 8,000 2,000 -
COLTON, RANDALL WAYNE 60,000 15,000 -
CONNOLLY, JOSEPH & BETTY LOU CONNOLLY FAMILY TRUST UTD 1-24-92 16,000 4,000 -
CONSTRUCTION DEVELOPERS INC. 16,000 4,000 -
CONZELMAN, MAX TTEE MAX CONZELMAN TR UTD 06/10/91 1,332 333 -
COPELAND, CARRIE 1,000 0 -
COPELAND, COURTNEY 1,000 0 -
COPELAND, GREGORY 1,000 0 -
COPELAND, KRISTEN 1,000 0 -
COPELAND, LEE R & COPELAND, CAROL S JTWROS 2,000 1,750 -
COPELAND, LEE R 2,000 500 -
COPELAND, NATHAN LEWIS - 1,000 0 -
CORNWELL, KNOWLES 8,000 2,000 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
CORRIN, ALLAN A 8,000 2,000 -
COSTNER-MCIHENNY, KATHY M 2,000 500 -
CULLUM, TIM 0 8,464 -
CUMMINGS, RICHARD & LAURA TTEES CUMMINGS, RICHARD REV TR UTD 01/17/96 6,668 1,667 -
CUNNINGS, ROY W. & CUNNINGS, NORMA D. 2,700 675 -
CURRY, PATRICK GREGG 8,000 2,000 -
CURTIS, CHARLES ELLIOTT & CHARLENE ANN TEES CURTIS, CHARLES & CHARLENE FAM TR 7,336 1,834 -
4-15-94
CUTLER, STANLEY 4,000 1,000 -
DAHLIA FINANCIAL LTD. 0 400,000 -
DANDELION INTERNATIONAL LTD 177,776 44,444 2.5%
DAVIS, CHRISTINE 5,000 0 -
DAVIDIAN, DOUGLAS B & ROBYN D TTEES DAVIDIAN REV TR DTD 07/05/95 8,000 2,000 -
DAVIDIAN, DOUG 2,000 500 -
DAVIDIAN, HAIG 0 10,000 -
DAVIDIAN, HAIG 24,000 6,000 -
DAVIDSON, JANICE A TTEE UA DTD 5-19-81 6,000 1,500 -
DEBOOY, DAVID P & DEBOOY, RUTH E JTWROS 2,000 500 -
DEFONSEKA, MAHENDRA M.D. 1,500 375 -
DELAWARE CHARTER GUARANTEE & TRUST T/F HAGERTY, WILLIAM KELLY 8,000 2,000 -
DESMOND, JOSEPH F TTEE OF THE DESMOND SURVIORS TRUST 14,000 3,500 -
DESMOND, JOSEPH F 8,000 5,500 -
DICKISON-RYSKAMP, JUDITH 0 660 -
DICKISON-RYSKAMP, JUDITH 2,000 500 -
DIR, DALE B TTEE FBO THE DALE B DIR LIVING TRUST DTD 11-3-93 12,000 3,000 -
DIR, RODNEY D 12,000 7,400 -
DIXON, BILL 0 2,000 -
DOMME M.D., SYLVESTER 1,332 333 -
DONALDSON LUFKIN JENRETTE SECURITIES CUST FILEDS, STEPHEN A IRA DLJ AC#6JC105452 3,000 750 -
DOW, ROBERT L JR 5,000 1,250 -
DRAKE, RONALD L. 12,000 3,000 -
DUBOIS, J.SCOTT & DUBOIS, CYNTHIA A. JTWROS 8,000 2,000 -
DUNCAN, LARRY R. 4,000 1,000 -
DUNCAN, ROBERT E. TTEE FBO DUNCAN FAMILY TRUST 1986 10,000 2,500 -
DUNCAN, ROBERT E. & DUNCAN, LINDA L. COMM PROP 50,000 12,500 -
EGAN, RICHARD M 1,000 250 -
ELHAJ, ABED K. 6,000 1,500 -
ELLIOTT, BRUCE 2,000 500 -
ELLIS, JOHN STEVEN SR & ELLIS, REBECCA C JTWROS 6,000 1,500 -
EVANS, MARK A & EVANS, STACEY D JTWROS 1,332 333 -
EVEREN CLEARING CORP CUST FBO COLLETTE, DAVID G. SEP IRA 4,000 1,000 -
EVERS, MARJORIE S 8,000 2,000 -
EVETTS, CURTIS A 8,000 2,000 -
FAMALETTE, JAMES R & FAMALETTE, DWANNA N COMMUNITY PROPERTY 4,000 1,000 -
FASI, RALPH 8,000 2,000 -
FETTERS, R T 350,000 0 5%
FIELDS FAMILY ADMINISTRATIVE TRUST 4,000 1,000 -
FIELDS, KATHRYN R TTEE FIELDS GRANDCHILDREN'S TRUST 4,000 1,000 -
FIELDS, KATHRYN R TTEE FBO FIELDS, KATHRYN R SURVIVORS TR UDT 8,000 2,000 -
03/27/81
FIFTEENTH STREET PARTNERS L.P. 26,668 6,667 -
FINE, HOWARD F & FINE, CAROL M TTEES FINE REV TR DTD 120,000 30,000 2%
12/1/88
FISCHER, STEPHEN L 350,000 25,000 5%
FOERSTER, STEVEN P 16,000 4,000 -
FOSTER, RAYMOND T & LEITA TTEES OF THE FOSTER, RAY T REVOCABLE TRUST 5,668 1,417 -
FOX & COMPANY INVESTMENTS INC. 0 313 -
FRANEY, ROGER C. 4,000 1,000 -
FRAZER, JOE W M.D. & FRAZER, JILL B. JTWROS 4,000 1,000 -
FREDSON, RONALD A & FREDSON, MARGARET A JTWROS 8,000 2,000 -
FRICK, C. WALTER TTEE OF THE FRICK FAMILY TRUST UTD 1-31-92 4,000 1,000 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
FRICK, C. WALTER 4,000 1,000 -
FROGGATTE, THERON L 1,332 4,374 -
FUJINAKA, STEVE HISAO FUJINAKA, BARBIE JTWROS 24,000 6,000 -
GALBRAITH, JACK H TTEE JACK H GALBRAITH TR UTD 05/25/95 5,332 1,333 -
GAMMAGE & BURNHAM PROF SH PL #18 2,000 500 -
GAZARIAN, ARNOLD H & DIANE B TTEES FBO GAZARIAN FAMILY TRUST 16,000 4,000 -
GBS FINANCIAL CORP 0 3,621 -
GESSERT, CHARLES 4,000 1,000 -
GETZ, KAREN A. 1,000 250 -
GIDDINGS, DEBRA & GIDDINGS, RICHARD JTWROS 8,000 2,000 -
GIDDINGS, RICHARD J. & GIDDINGS, CAROL H. 8,000 2,000 -
GLASCO, DALE TTEE GLASCO FAMILY TRUST 8,000 2,000 -
GLASPEY, RODGER C TTEE GLASPEY FAMILY TRUST UTD 05/15/92 20,000 5,000 -
GORDON, CHRIS 56,000 14,000 -
GOULD, PAUL L. 11,000 2,750 -
GRALNICK, MARK AVERY 4,000 1,000 -
GRAY, BETTY CURTIS 8,000 2,000 -
GRIDER, ROBERT E. & GRIDER, JEANETTE COMM PROPERTY 1,000 250 -
GRIDER, ROBERT E & GRIDER, JEANETTE 2,000 500 -
GRIFFIN, JAMES 0 2,000 -
GROSS, RONALD I 0 51 -
GRUS, GEORGE W & GRUS, LIBBY JTWROS 8,000 2,000 -
H. ARNOLD KELA FARMS EMPLOYEE RETIREMENT PLAN & TRUST DTD 12-28-71 14,000 3,500 -
HAFER, EDWARD 8,000 2,000 -
HAGERTY STEWART & ASSOCIATES 0 53,756 -
HAGERTY, WM KELLY & GLADYS W TTEES FBO HAGERTY TRUST DTD 11/24/92 0 8,160 -
HANGEN, DONALD H & PATRICIA C TTEES HANGEN FAMILY TRUST UTD 3-6-96 2,000 500 -
HANOIAN, DARRYL G. 2,700 675 -
HANSON, AMY ANN 1,000 0 -
HANSON, MARY ANN 1,000 0 -
HANSON, PEDER CHRISTIAN 1,000 0 -
HANSON, ROBERT FRANKLIN 1,000 0 -
HARDMAN, GARY D 4,000 1,000 -
HARDIN, JAMES & HARDIN, DIANE COM PROP 2,000 500 -
HARRIES, EUGENE J. & HARRIES, EDEN L. JTWROS 1,000 250 -
HARRIS, PATRICIA 0 5,000 -
HARTOG, B. M. DEN TTEE OF THE HARTOG, DEN 1989 FAMILY TR UA DTD 6-13-89 3,000 750
HARTOG, B. M. DEN 2,000 500 -
HARTMAN, JOHN 2,000 500 -
HASKER, DAN C 8,000 2,000 -
HAWKINS, BRUCE E & HAWKINS, KATHY B 5,000 0 -
HEITKOTTER, JAMES & HARTLEY, JUNE G JTWROS 6,000 1,500 -
HELMER, JAMES D & IRIS C HELMER TTEES FBO HELMER FAMILY TRUST DTD 5-1-97 4,000 1,000 -
HENDRICKS, FRANK IRA #83003228 2,000 500 -
HERNDON, BILL 0 6,421 -
HIBNER, RICHARD W & HIBNER, EILEEN W COM PROP 21,844 5,461 -
HILL, T WILLIAM & HILL, BARBARA C JTWROS 8,000 2,000 -
HILL, T. WILLIAM & HILL, BARBARA C JTWROS 4,000 1,000 -
HIRSCHFELD, DAVID S. 5,368 1,342 -
HLLYWA, JOHN & HLLYWA, CYNTHIA JTWROS 2,500 5,000 -
HOBBS, JERRY C. & HOBBS, SARAH JANE TIC 4,000 1,000 -
HODGES, JOSEPH MICHAEL 17,332 4,333 -
HODGES, MICHAEL S 0 5,000 -
HOFFMAN, DAROL TTEE FOR RICHARD D GORDON INC PROFIT SHARING PLAN 20,000 5,000 -
HOFFMAN, DAROL 10,000 2,500 -
HOLDEN, GREGORY M & HOLDEN, NANCY 1,000 250 -
HOLDER, MARY LYNN 1,000 0 -
HOLLAND, C.T. 24,000 6,000 -
HOLLAND, PAMELA J 2,000 500 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
HOMEN, ROBERT E. & HOMEN, LUCY M. COM PROP 5,000 1,250 -
HOPKINS, ALAN R & KAREN D TTEES UNDER THE DECLARATION OF TRUST DTD 1,000 250 -
1-23-90
HORN, J.P. & JILL B COMMUNITY PROPERTY 2,000 500 -
HORWITZ, FLOYD 5,000 0 -
HORWITZ & BEAM 20,000 0 -
HORWITZ, LAWRENCE 50,000 0 -
HOULIHAN SMITH & CO. INC. (NEVADA) 0 30,800 -
HOWARD, FRED 4,000 1,000 -
HUBER, DAVID S 8,000 2,000 -
HUGHES, BETTY R TTEE EST U/A/T DTD 10/16/97 20,000 5,000 -
HUGHES, BETTY R. TTEE HUGHES, REUBEN P AND BETTY R TR UA 10,000 2,500 -
11/30/71
HUGHES, JOSEPH BERNARD 1,000 250 -
HUNNICUTT, LUTHER C. & HUNNICUTT, CARROL N. COM PROP 6,000 1,500 -
INNIS, ELIZABETH A. LIVING TRUST DTD 6/28/89 6,700 1,675 -
IORIO, GLORIA JEAN IRA 4,000 1,000 -
JACHENS, ALBERT M 1,000 250 -
JACOBS, DAVID A 2,000 500 -
JEFFRIES, JOHN R & JEFFRIES, PAMELA A COMM PROP 1,000 250 -
JENSEN, RODGER B 10,000 2,500 -
JOBE, CHRISTOPHER M. & WUCHENICH-JOBE, MELANIE M. JTWROS 8,000 2,000 -
JOE B FIELDS FAMILY PARTNERSHIP L.P. 4,000 1,000 -
JOHNSON, J. RONALD & JOHNSON, CHRISTINE E JT TEN 1,000 250 -
JONES, CARROLL SHANNON TTEE JONES TRUST, CARROLL SHANNON 10,400 2,600 -
JONES, LEO & MARGARET L TTEES JONES FAMILY TRUST 400 100 -
JONES, STANLEY F & JONES, BOBBE C 4,000 1,000 -
JONES, THOMAS H. & JONES, SHIRLEY 2,668 667 -
JURA, ROY & JURA, BETTY JANE COM PROP 3,352 838 -
K & B DEVELOPMENT INC PROFIT SHARING TR FBO KUNZ, R. KENT 9,000 2,250 -
THE KASHIAN GROUP LTD. 8,000 2,000 -
KECK, HUNTER TTEE KECK FAMILY TR UTD 03/21/78 8,000 2,000 -
KELA, H. ARNOLD & KELA, COLLEEN F. COM PROP 18,668 4,667 -
KELA FARMS CORPORATION 12,000 3,000 -
KELTON, LISA TTEE FBO MICHAEL K KELTON LISA KELTON LIVING TR 2,000 500 -
KEMP, CHARLES 16,000 11,500 -
KEMP, KELLY 20,000 30,000 -
KENCAROL INC. A CORPORATION 18,000 4,500 -
KENFIELD, STEPHEN C. & KENFIELD, ANN E. 4,000 1,000 -
KENNEDY, THOMAS J & EILEEN M TTEES FBO KENNEDY, THOMAS J & EILEEN M REV TR NO.1 8,000 2,000 -
KENT, R TTEE FBO T.T.& K. EDUCATIONAL TRUST II 4,000 1,000 -
KEROLA, GREG 2,500 0 -
KEROLA, RYAN 2,500 0 -
KESZLER, GARY R. & KESZLER, MARLENE JTWROS 6,000 1,500 -
KHASIGIAN, HARRY A. & KHASIGIAN, LYNDA H. 13,332 3,333 -
KHASIGIAN, HARRY A & LYNDA H TTEES THE KHASIGIAN REVOC LIV TR DTD 7-24-91 8,000 2,000 -
KHAYYAM, MANSOUR & KHAYYAM, VICTORIA JTWROS 16,000 4,000 -
KILPATRICK, BYRON & KILPATRICK, MYRIAM JTWROS 24,000 6,000 -
KIMBALL, ROBERT L. & KIMBALL, ELIZABETH S. JTWROS 8,000 2,000 -
KIMURA MARKETS 7,000 1,750 -
KINARD, CRAIG S 6,000 1,500 -
KINARD, JOHN C 4,000 1,000 -
KING, GERALD W & EDITH C TTEES FBO KING FAMILY TRUST UTD 01/22/93 12,000 3,000 -
KINSMAN, ROBERT L & ANNETTE M FAMILY LIMITED PARTNERSHIP (CORP) 8,000 2,000 -
KOBORI, MARVIN S DDS PROF CORP PEN PL 4,000 1,000 -
KOKILA, RICHARD A. & KOKILA, NAN M. JTWROS 4,000 1,000 -
KOONCE, JOHN P 5,000 16,269 -
KOONCE, PETER 0 4,250 -
KOURAFAS, NICK T & ELAINE TTEES FBO KOURAFAS, NICK & ELAINE 1993 TRUST 2,000 500 -
KOURAFAS, TOM 1,500 375 -
KOUTURES, GEROGE C IRA 24,336 6,084 -
KOUTOURES, MARIA IRA 20,176 5,044 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
KRAZAN, THOMAS P. & KRAZAN, DONNA L. 1,000 250 -
KULICK, EDWARD L TTEE FBO THE KULICK TRUST 1984 UA 10-23-84 10,000 2,500 -
KUNZ, MICHAEL J 532 133 -
KUNZ, PAMELA 1,000 250 -
KUNZ, R KENT & KUNZ, BARBARA J JTWROS 8,000 2,000 -
KUNZ, R KENT & SYLVIA LAMAS TTEES FBO K & B DEVELOPMENT PROF SH TR FBO R KENT 13,336 3,334 -
KUNZ
L. C. LOOKABAUGH CO. 26,668 6,667 -
LACY, FREDERICK 8,000 84,160 -
LAINES, DONALD C. & LAINES, ELLEN J. JT TEN 4,000 1,000 -
LANOTTE, FRANK J SEP/IRA FBO LANOTTE, FRANK J 2,800 700 -
LANOTTE, FRANK J. & LANOTTE, LOUISE A. COM PROP 1,000 250 -
LAVERGNE, K O 1,332 333 -
LEFKOWITZ, MICHAEL TTEE FBO LEFKOWITZ, MICHAEL REVOCABLE TRUST 5,000 1,250 -
LESTER, D. KEVIN 20,000 5,000 -
LEVY, BRET & MATHEWS, AUDREY COM PROP 8,000 2,000 -
LEVY, JOSEPH W 16,000 4,000 -
LEWIS, H. WAYNE & JANET A TTEES THE LEWIS FAMILY LIVING TRUST DTD 4-29-92 20,000 5,000 1%
LEWIS, WAYNE H. & LEWIS, JANET A. 64,000 16,000 1%
LEWTER, MERRI G. 8,000 2,000 -
LINDBERG, DANIEL W 3,200 800 -
LINDLEY, JAMES W 2,000 500 -
LINDLEY, LES & LINDLEY, MARGUERITE COMMUNITY PROPERTY 4,000 1,000 -
LO, BETTY 13,332 3,333 -
LO, BETTY IRA R/O BEAR STEARNS SEC CORP CUST 10,000 2,500 -
LONG, WILLIAM E JR & LONG, JANET A JTWROS 6,000 1,500 -
LOONEY, COLEMAN B 2,000 500 -
LOPERENA, JACK & LOPERENA, JOANNE COMMUNITY PROPERTY 13,000 3,250 -
LOPERENA, LARRY J 2,000 500 -
LOPERENA, LAURIE M 2,000 500 -
LOPERENA, LINDA A 2,000 500 -
LOPERENA, LINDSEY J 2,000 500 -
LORD, JOSEPH M. JR. & LORD, JUDITH JTWROS 1,000 250 -
LOW, GARY K & LOW, SUSAN E JTWROS 8,000 2,000 -
LOWRY, JAMES S. & LOWRY, MARY JULIA F. TIC 8,000 2,000 -
LOWTHER-SMITH, JASON 10,000 2,580 -
LOWTHER, MURIEL I TTEE FBO SURVIVORS TRUST LOWER FAMILY TRUST, A DIVISION OF 20,000 5,000 -
LUCCHETTI, FRANK J & LUCCHETTI, CRISTINA M JTWROS 2,000 500 -
LUCHETTI, RALPH P & LUCCHETTI, DENENE J JTWROS 2,000 500 -
LUSSON, JOHN J 4,000 1,000 -
LYLES, VALERA W. IRA LINCOLN TRUST CUST 4,000 1,000 -
LYLES, VALERA W. 15,652 3,913 -
MAGHAN, BILL & MAGHAN, MARY JTWROS 4,000 1,000 -
MAGHAN, WILLIAM J 0 4,000 -
MAJR ASSOCIATES A CALIFORNIA GENERAL PARTNERSHIP 8,000 2,000 -
MALANCA, JAMES E SEP IRA 4,400 1,100 -
MANFREDA, ANTHONY 10,000 2,500 -
MANZ, THOMAS J & MANZ, VIRGINIA C COMMUNITY PROPERTY 30,000 7,500 -
MARKS, EUNICE E 1,000 250 -
MARSHALL, KATHLEEN 5,000 0 -
MARTIN, DANIEL R 1,000 250 -
MARTIN, SUSAN B 2,000 500 -
MASSEY, BRENT I 8,000 2,000 -
MATTER, THOMAS R 8,000 2,000 -
MAWZ, THOMAS J 13,332 3,333 -
MAYER, ALAN M & GREISMAN, CLARA COM PROP 8,000 2,000 -
MAZZU, ANTHONY & MAZZU, SUSAN DAWAN JTWROS 8,500 1,500 -
MC LAUGHLIN, ANDREW J 6,000 1,500 -
MC AHSTER, JAMES H 2,000 500 -
MCCLAREN, JANET 8,000 2,000 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
MCCLAREN, JO ANN 8,000 2,000 -
MCCULLOR, TINA H 2,000 500 -
MCDOUGAL, MARTHA P TTEE OF THE MCGOUGAL, MARTHA P TRUST UA DTD 6-13-94 10,000 2,500 -
MCGILL, D.C. 0 1,000 -
MCGILL, D.C. 4,000 0 -
MCGUINNESS, J. WILLIAM TTEE MCGUINNESS FAMILY TRUST DTD 12/8/92 4,700 1,175 -
MCIC INC 1,000 250 -
MCMAHAN, MARC THOMAS 4,000 1,000 -
MELIKIAN, MARVIN D. & MELIKIAN, NANCY E. 10,000 2,500 -
MEREDITH, JANET L 4,000 1,000 -
MERIDIAN CAPITAL GROUP 0 3,818 -
MEYER, DENNIS C 3,668 917 -
MILLER, CAROLINE M 4,000 1,000 -
MODGLIN, DONALD L & GRACE M TTEES OF THE MODGLIN, DONALD L & GRACE M TRUST 12,000 3,000 -
MONTEREY PENINSULA RADIOLOGICAL HANSON, COURTNEY J. TTEE 8,000 2,000 -
MONTEREY PENINSULA RADIOLOGICAL MED GROUP INC PENSION PL FBO DAVID R HOLLEY C. HANSON 8,000 2,000 -
TTEE
MOORE, CHARLES L. 2,604 651 -
MOORE, JOHN TEMPLE 25,000 25,000 -
MOORE, JOHN TEMPLE TTEE FBO MOORE LIVING TRUST 8,000 2,000 -
MOORE, THOMAS E. & MOORE, MARIE E COM PROP 4,000 1,000 -
MORSE, GLORIA & MORSE, MICHAEL JTWROS 4,000 1,000 -
MORSE, MICHAEL & MORSE, GLORIA 5,000 0 -
MURRAY, EDWIN RENE & MURRAY, PATRICIA RUTH JTWROS 2,000 500 -
MURRAY, JOSEPH R. 2,000 500 -
MUSOLF, BERDYNE TTEE FBO MUSOLF, BERDYNE & LLOYD FAM REV TR DTD 12,000 3,000 -
08/89
MUSSON, GREGORY E. & MUSSON, KAREN A. 2,668 667 -
MYOVICH, DOUG & MYOVICH, CYNTHIA JTWROS 24,000 6,000 -
NALCHAJIAN, RICHARD 8,000 2,000 -
NELSON, ANTHONY 8,000 2,000 -
NELSON, GERALD E. & NELSON, DOROTHY A. 1,336 334 -
NOMINA FINANCE LTD. BVI 200,000 50,000 3%
O'CAOIMH, RONAN 1,000 250 -
OAKLEY, JEFFREY M. & OAKLEY, VALERIE A. JTWROS 8,000 2,000 -
OGILVIE, DEAN 0 10,000 -
OGILVIE, R. DEAN OGILVIE, VICKIE A. COMM PROP 4,000 1,000 -
OKUBO, WARREN T. 4,000 1,000 -
OLIPHANT, LEONARD 50,000 110,000 -
OLSON, JAMES R D.D.S. TTEE OLSON, JAMES R D.D.S. PROFIT SHARING PL 2,000 500 -
OLSON, JAMES R 2,000 500 -
ORR, THOMAS F TTEE ORR FAM REV TR UTD 11/12/93 4,000 1,000 -
OVERSTREET, JOHN J 0 2,050 -
PACINI, DENI J & PACINI, MARJORIE J COM PROP 10,300 2,575 -
PARR, FRANK 4,000 1,000 -
PEARE, DAN C 1,336 334 -
PEERY, JAMES B & JOAN W TTEES PEERY, JAMES B & JOAN W FAM TR U/A DTD 1,336 334 -
02/81
PEERY, JAMES B. M.D. IRA 2,640 660 -
PETERSON, GORDON W & PETERSON, MYRA L JTWROS 1,000 250 -
PINKSTON, ROBERT L. & PINKSTON, LAURIE FARWELL JTWROS 4,000 1,000 -
PINKSTON, ROBERT L. 8,000 2,000 -
PODOLSKY, WILLIAM J & PODOLSKY, KAREN I COMMUNITY PROPERTY 1,000 250 -
POLDER, DICK R. 7,600 1,900 -
POMEROY, CARL F. & POMEROY, DEBORAH D. JTWROS 4,000 1,000 -
PORTMAN, LEO J PORTMAN TRUST 8,000 2,000 -
PORTMAN, LEO J. 8,000 2,000 -
POTOSKY, ROBERT A 1,336 334 -
POWELL, GENE 16,000 4,000 -
PRICKETT, GLEN L & SHIRLEY E TTEES THE GLEN L & SHIRELY PRICKETT LIV TR 2,000 500 -
7-28-93
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
PRICE, ROBERT F & KATHRYN S TTEES PRICE FAMILY TRUST DTD 06/06/94 2,000 500 -
PRIGGER, WILLIAM 0 1,307 -
PROPERTY DEVELOPMENT OF HAWAII INC 0 10,000 -
RAMAKANT, D RAUT & RAUT, MARJORIE S JTWROS 2,000 500 -
RANA, M. CARL & RANA, CARLA S JTWROS 1,000 250 -
RATHBONE, DONALD G & RATHBONE, VICKI A JTWROS 1,000 250 -
RATHBONE, RICHARD N FBO RATHBONE, RICHARD N IRA 1,000 250 -
RATHBONE, RICHARD N. & RATHBONE, SUSAN F. JTWROS 4,500 1,125 -
RATHBONE, ROBERT C & RATHBONE, PATRICIA P JTWROS 1,000 250 -
RATHBONE, SUSAN F FBO RATHBONE, SUSAN F IRA 1,000 250 -
REDMAN, ROBERT TTEE FBO VILLAGE CAPITAL CORP MPP 4,000 1,000 -
REINHARDT, WALTER R. 45,076 11,269 -
RESOURCES TRUST COMPANY CUST FBO BERLINER, WILLIAM P IRA A/C I155285670 4,000 1,000 -
RHODUS, ARIEL 880 0 -
RHODUS, JESSE 880 0 -
RHODUS, NAOMI 880 0 -
RICHARDSON JR., JOE C 400,000 0 6%
RICHARDSON III, JOE C. 1,000 250 6%
RICHARDSON, JOE C. 1,000 0 6%
RICHARDSON, RUBY C. 0 1,750 -
RICKETTS, JAMES M & RICKETTS, VEDA M TTEES RICKETTS FAMILY 8,000 2,000 -
TRUST
RIEDLINGER, WILLIAM A. 4,000 1,000 -
RINEHART, DAYNE T. & RINEHART, RHONDA L. JTWROS 2,000 500 -
RITTER, BARBARA ANN 4,000 1,000 -
ROBERTS, RICHARD 0 298 -
ROBINSON, LAUREN BLAIRE CARLA 0 12,500 -
ROCKY MOUNTAIN ARTIFICIAL LIMB & BRACE INC 3,732 933 -
ROGERS, ERIC & ROGERS, CHERYL JTWROS 1,332 333 -
ROGERS, NEVA R. & ROGERS, COURTNEY G. 1,500 375 -
ROGERS, TRAVIS 0 297 -
ROSSO, HAROLD J & DAVID TTEES OF THE ROSSO, HAROLD J TRUST UTD 5-9-77 6,000 1,500 -
ROSS, LEONARD V. 0 60,250 -
RYSKAMP TAKAYAMA 401K PROFIT SHARING PLAN FBO JAMES J RYSKAMP JR M.D. 5,500 3,875 -
RYSKAMP, TAKAYAMA 8,000 2,000 -
SAN JOSE CARDIAC SURGERY GROUP 8,000 2,000 -
SAN JOSE CARDIAC SURGERY MED GRP MONEY PURCH PEN PL FBO WUERFLEIN DTD 04/01/90 18,076 4,519 -
SANDERS, FAHMIE 568 142 -
SANDERS, JASON A. 636 159 -
SANDERS, JACKIE S. 1,080 270 -
SANDERS, MICHAEL J. 568 142 -
SANDERS, STAN CUST SANDERS, STANLEYJ. 1,080 270 -
SANDERS, STACYJ. 636 159 -
SANDERS, STANLEY J. 8,000 2,000 -
SCHNEIDERS, GERALD S TTEE SCHNEIDERS, GERALD S TRUST 1,332 333 -
SCHOENDUVE, HOWARD W & SCHOENDUVE, MARGUERITE JTWROS 1,000 250 -
SCHOOLEY, JAMES L M.D. INC MONEY PURCHASE PENSION PLAN UAD 2-1-79 4,000 2,606 -
SCHOOLEY, JAMES L M.D. INC MONEY PURCHASE PENSION PLAN UAD 2-1-79 6,424 0 -
SCHROEDER, WALTER W. & SCHROEDER, KAREN JTWROS 12,000 3,000 -
SCHUBERT, STEVE B 8,000 2,000 -
SCHWAB, WAYNE 8,000 2,000 -
SCIARONI, LLOYD G TTEE. SCIARONI FAMILY TRUST DTD 5-22-90 5,200 1,300 -
SCIARONI, LLOYD G. 3,332 833 -
SEITZ, JOHN P. MD 4,000 1,000 -
SENTRA SECURITIES CORPORATION 0 1,673 -
SHAMDANJIAN, ALBERT G. 13,332 3,333 -
SHARP, RITA 1,000 250 -
SHEARER, S.K. M.D. & SHEARER, CATHERINE 9,868 2,467 -
SHEETS, CAROL S & SHEETS, GEORGE K COMMUNITY PROPERTY 2,000 500 -
SHIMIZU, SCOTT E. & SHIMIZU, LORRAINE M. TIC 8,000 2,000 -
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
SHOWS, ALAN & SHOWS, KATHY COMMUNITY PROPERTY 8,000 2,000 -
SIKES, JOHN E. & SIKES, JEAN L. 10,000 2,500 -
SILVER CREEK INVESTMENTS LTD 177,776 44,444 3%
SIMMONS, BILLIE H. TTEE FBO SIMMONS, BILLIE H. TRUST UTD 1/12/88 1,000 250 -
SINGER, ELI & MILLER, DORIN JTWROS 4,000 1,000 -
SLATER & COMPANY 401(K) PEN & PROF SH SLATER, JOHN TTEE 2,700 675 -
SLATER, JOHN H 500 125 -
SLATER, LOUIS C. SLATER, MARIE J. 1,000 250 -
SLATER, LOUIS C. & MARIE J. TTEES SLATER FAMILY LIVING TRUST UTD 5/30/96 500 125 -
SLOCUM, RICHARD C. 4,000 1,000 -
SMALL, SHARON C. TTEE SMALL SEPARATE LIVING TRUST DTD 11/8/96 2,400 600 -
SMART, BARRICK & MICHAEL HEALY CO-TTEES FBO LACY, FREDERICK 401-K DTD 5-14-96 7,600 1,900 -
SMITH, ANDREW D PROFIT SHARING PLAN 8,000 2,800 -
SMITH, JEFF L. 2,668 667 -
SMITH, LEROY W TTEE DOCTORS FINANCAIL MGMT EMPLOYEE BENEFIT TRUST DTD 1-1-84 4,000 1,000 -
SMITH, LEROY W & SMITH, LORENA F COMMUNITY PROPERTY 8,000 2,000 -
SMITH, LEROY W TTEE FBO DR MANAGEMENT BENEFIT TR DTD 01/01/84 8,000 2,000 -
SMITH BARNEY FBO GEORGESON, JAMIE E IRA ROLLOVER CUST 8,000 2,000 -
SMITH BARNEY CUST FBO GEORGESON, JILL T IRA A/C#2136013014091 4,000 1,000 -
SNELL, WILLIAM N 3,600 900 -
SOUTHWORTH, THOMAS G 10,000 0 -
SPENCER, DAN & PAT CARRIVEAU TTEES OF CARRIEAU SPENCER INC 401 K PROFIT SH PL 2,000 500 -
SPROUL, DAVID 5,332 1,333 -
ST. CLOUD INVESTMENTS LTD 0 150,000 -
STAUFFER, CLARENCE & STAUFFER, MILDRED M. 2,400 600 -
STEINHAUSER, J CHRIS 0 125,000 -
STEVENS, MYRON 8,000 2,000 -
STEVENS, SABIN 8,000 2,000 -
STONE, JOHN G STONE, SUSAN M JTWROS 1,332 333 -
STOUT, LANNY R 20,000 35,060 -
SUMMERS, DOUG & SUMMERS, MARY ANN JTWROS 6,000 1,500 -
SUNDERLAND, HOYT & SUNDERLAND, EVELYN JTWROS 1,332 333 -
SUNDERLAND, RICK 1,332 333 -
SURABIAN, GERALD 6,668 1,667 -
SUSKIND, DAVIS A. & SUSKIND, ELIZABETH A. 13,500 3,375 -
SWARTOUT, STERLING 4,000 1,000 -
TAHMAZIAN, BRYAN LUKE TTEE UITIA DTD 2-26-97 5,512 1,378 -
TAKAYAMA, RYSKAMP 401K PROFIT SH PL TR FBO RYSKAMP, JAMES J JR M.D. 24,776 3,694 -
TANNER, NORMAN C. & TANNER, BARBARA L. JT TEN 20,500 5,125 -
TATUM, CONNIE D & TATUM, STEPHEN E JTWORS 2,668 667 -
TATUM, JOHN P 16,000 54,000 -
TELFORD, JOHN T. 6,000 1,500 -
TEMPLE, J MARTIN 9,512 2,378 -
THOMAS, MILES H. & JOAN THOMAS TTEES THOMAS, MILES H FAMILY TRUST UAD 4-22-83 16,000 4,000 -
THOMAS, RICHARD W TTEE THE RANCHO SECURITY TRUST 14,000 3,500 -
THOMAS, RICHARD W. 8,000 2,000 -
THOMPSON, ROBERT J. & THOMPSON, ARLENE M. JTWROS 4,000 1,000 -
THOMAS A KING DDS INC 8,000 2,000 -
TOLFREE, CHARLES & TOLFREE, BETH M. 2,000 500 -
TOLFREE, CHARLES H & BETH M TRUSTEES OF THE TOLFREE FAM TR DTD 1,000 250 -
08/14/96
TORCASO, CHESTER J. & TORCASO, ELAINE G. 4,000 1,000 -
TOTAL BENEFIT SERVICES INC 401 K PLAN FBO AUNE, RICHARD 2,000 500 -
TOTMAN, JAMES W TTEE FBO TOTMAN, JAMES W TRUST UTD 12/18/86 22,000 5,500 -
TRUCK DISPATCH SERVICE INC. PROF SH PL FBO KOURAFAS, JAMES 10,000 2,500 -
TRUCK DISPATCH SERVICE INC. 6,000 1,500 -
TWO GABLES PTY LIMITED 100,000 25,000 1%
ALTERNATE PAGE
Common Percentage
Common Stock Owned
Stock Underlying If More
Security Holder Shares Warrants Than 1%
--------------- ------ -------- -------
VACIN, GARY 1,332 333 -
VATHAYANON, SATHAPORN 2,600 650 -
VAVOULIS, TED 10,000 2,500 -
VILLONE, THOMAS R. 6,000 1,500 -
VISTA MESA LLC 4,000 1,000 -
VOLPE, STEVE 32,000 8,000 -
VOSBURGH, JAY 2,668 667 -
WAGNER, ROLF 0 10,000 -
WALLINGTON INVESTMENTS LTD 177,776 44,444 -
WARPINSKI, JOSEPH G 8,000 2,000 -
WARREN, ELAINE M & WARREN, PHILLIP D TIC 8,000 2,000 -
WEBSTER, GORDON M JR. 2,000 500 -
WEDDON, BRADLEY C 0 1,360 -
WEDDELL, LAURA E 0 661 -
WEIGAND, DALE P. & WEIGAND, TERRI L. JTWROS 3,000 750 -
WEIGAND, PHILIP C TTEE FBO WEIGAND, DOROTHY M TRUST UAD 12-16-87 2,500 625 -
WEYBRIGHT, DENNY 1,500 375 -
WHITEHEAD, ALBERT E LIV TRUST DTD 6-26-97 10,000 2,500 -
WHITE, CHARLES G & WHITE, BRENDA L JTWROS 1,000 250 -
WHITBURN, KAREN B 5,000 0 -
WHITE MARKETING INC A CORPORATION 4,000 1,000 -
WILKES, ELISE R. 1,000 0 -
WILLIAMSON, JOHN F. 2,000 500 -
WILLIAMSON, PATRICIA A IRA 1,000 250 -
WILLIG, W DAVID 1,336 334 -
WILSON, GUY B & WILSON, JEANNETTE FAMILY TRUST UTD 8,000 2,000 -
03/07/90
WINTON, JAMES T. & WINTON, JONOLYN C. COM PROP 8,000 2,000 -
WITWER, JAMES J. M.D. INC. TTEE FBO WITWER, JAMES J. M.D. WITWER EMPL. BEN 8,000 0 -
TR
WITWER, JAMES J. M.D. TTEE FBO EMPLOYEE BENEFIT PLAN 05/31/85 13,336 5,334 -
WOESNER, RANDALL E & JANIS M TTEES FBO WOESNER FAMILY LIVING TRUST 2,000 500 -
WOLF, JOE FAMILY TRUST 4,000 1,000 -
WOOD, JOHN ALAN & AREKNAS WOOD, ARLENE JTWROS 1,000 250 -
WOODS, KERRY B & WOODS, ROBYN COM PROP 1,336 334 -
WOODWARD III, O JAMES 1,336 334 -
WOOLF, JOHN L. II 12,332 3,083 -
WOOLF, JOHN L. 2,668 667 -
YONG, TONY 4,800 1,200 -
YUYAMA, DOUG & YUYAMA, JOHN TENANTS IN COMMON 4,740 1,185 -
ZACHRITZ, LILLIAN A. 1,336 334 -
ZANONI, NATHAN A. JR. 5,000 1,250 -
ZINKIN, HAROLD & BETTY FAMILY LIVING TR 2,000 500 -
BROKER WARRANTS 0 150,000 -
====================
7,029,492 2,610,367
====================
</TABLE>
The selling security holders may effect the sale of their Shares from time
to time in transactions, which may include block transactions, in the open
market, in negotiated transactions, through the writing of options on the common
stock, or a combination of such methods of sale, at fixed prices which may be
changed, at market prices prevailing at the time of sale, or at negotiated
prices.
Beta is not aware of any agreements, undertakings or arrangements with any
underwriters or broker-dealers regarding the resale of its securities. The
selling security holders may effect such transactions by selling the shares, as
applicable, directly to purchasers or to or through broker-dealers who may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling security holders,
and/or the purchasers of their shares, as applicable, for which such
broker-dealers may act as agents or to whom they sell as principal, or both,
which compensation as to a particular broker-dealer might be in excess of
customary commissions. The selling security holders and any broker-dealers that
act in connection with the sale of their shares might be deemed to be
"underwriters" within the meaning of section 2(11) of the Securities Act.
The selling security holders shall not have the right to sell any of the
shares in the selling security holder prospectus until Beta either completes its
initial public offering or fails to complete the minimum offering within 10
business days and therefore fails to complete its initial public offering. Beta
has notified the selling security holders of the prospectus delivery
requirements for sales made by this prospectus and that, if there are material
changes to the stated plan of distribution, a post-effective amendment with
current information would need to be filed before offers are made and no sales
could occur until such amendment is declared effective.
<PAGE>
ALTERNATE PAGE
PLAN OF DISTRIBUTION
7,029,492 shares of common stock and 2,610,367 shares of common stock
underlying warrants will be offered by the selling security holders from time to
time in market transactions at prevailing prices on the Nasdaq Small Cap Market
or a similar market. The selling security holders shall not have the right to
sell any of the shares in the selling security holders prospectus until Beta
either completes its initial public offering or fails to complete the minimum
offering within 10 business days and therefore fails to complete its initial
public offering. Beta will not receive any proceeds from possible resale by the
selling securities holders of their respective shares of Beta's common stock.
Beta will receive gross proceeds of $13,892,749 if all outstanding warrants are
exercised of which an approximately 5% commission will be paid to the brokers of
record, if applicable. NASD members participating in Beta's initial public
offering or the selling security holder offering, shall not receive compensation
arising from the exercise of Beta's warrants during the twelve month period
following the completion of the initial public offering. There can be no
assurance that any warrants will be exercised. The selling security holders may
effect such transactions by selling their shares of common stock to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling security holders and/or
the purchasers of such shares of common stock for whom such broker-dealer may
act as agents or to whom they may sell as principals, or both. Any broker-dealer
selling securities offered by this Prospectus cannot receive compensation
(calculated as the difference between the purchase and resale price of the
securities) in excess of 8% on principal transactions or in e xcess of normal
and ordinary brokerage commissions, which, in any event, may not exceed 5% of
the sale price, for any agency transactions. Beta has agreed to bear all
expenses estimated at approximately $90,000 in connection with the registration
of the shares of common stock to which this prospectus relates.
<PAGE>
ALTERNATE PAGE
================================================================================
You should rely only on the information contained in this document or that we
have referred to you. We have not authorized anyone to provide you with
information that is different. The delivery of this prospectus and any sale made
by this prospectus doesn't imply that there haven't been changes in the affairs
of Beta since the date of this prospectus. This prospectus does not constitute
an offer or solicitation by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
TABLE OF CONTENTS
Prospectus Summary..............................................
Risk Factors.......................................................
Use of Proceeds...................................................
Dilution............................................................
Capitalization......................................................
Dividends.........................................................
Selected Consolidated Financial Data.........................
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............
Glossary............................................................
Business............................................................
Properties..........................................................
Additional Information..........................................
Management.......................................................
Executive Compensation.......................................
Summary Compensation Table.................................
Principal Shareholders..........................................
Resale by Selling Shareholders.................................
Certain Relationships and Related Party Transactions......
Description of Securities........................................
Shares Eligible for Future Sale.................................
Plan of Distribution.............................................
Legal Matters......................................................
Experts............................................................
Financial Statements.............................................
---------------------------
Dealer prospectus delivery obligation. Until September 26, 1999 (90 days after
the date of this prospectus), all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This delivery requirement is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
================================================================================
================================================================================
[BETA OIL & GAS, INC. LOGO]
Beta Oil & Gas, Inc.
7,029,492
SHARES OF
COMMON STOCK AND
2,610,367
SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE
OF WARRANTS
-------------------------
PROSPECTUS
-------------------------
_________, 1999
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
SEC Registration Fee $19,588.65
Nasdaq Listing Fee 10,000.00
NASD Filing Fee 6,000.00
Printing Expenses 10,259.00 *
Legal Fees and Expenses 17,000.00 *
Accounting Fees and Expenses 20,000.00 *
Transfer Agent Fees 3,000.00 *
Miscellaneous 4,152.35 *
Expenses
================
Total
$90,000.00
================
* Estimated
</TABLE>
Item 14. Indemnification of Directors and Officers.
Beta's Articles of Incorporation and its Bylaws limit the liability of
directors and officers to the extent permitted by Nevada law. Specifically, the
Articles of Incorporation provide that the directors and officers of Beta will
not be personally liable to Beta or its shareholders for monetary damages for
breach of their fiduciary duties as directors, including gross negligence,
except liability for acts or omissions "which involve intentional misconduct,
fraud or a knowing violation of law not in good faith, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes."
Beta has obtained a directors and officers liability insurance policy for
the purposes of indemnification which shall cover all elected and appointed
directors and officers of Beta up to $1,000,000 for each claim and $3,000,000 in
the aggregate. Beta believes that the limitation of liability provision in its
Articles of Incorporation, and the directors and officers liability insurance
will facilitate Beta's ability to continue to attract and retain qualified
individuals to serve as directors and officers of Beta.
Insofar as indemnification for liabilities arising under the Securities
Act, as amended, may be permitted to directors, officers, and controlling
persons of Beta, Beta has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore unenforceable. If a claim for indemnification against such
liabilities (other than the payment by Beta of expenses incurred or paid by a
director, officer, or controlling person of Beta in the successful defense of
any action, suitor proceeding) is asserted by such director, officer or
controlling person of Beta in connection with the securities being registered,
Beta will, unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issues.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under Beta's Articles of Incorporation. Beta is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
Item 15. Recent Sales of Unregistered Securities.
Beta issued 5,565,648 shares in 1997 and 1,463,844 shares in 1998 of its
common stock and 1,528,222 and 969,441 common stock purchase warrants in 1997
and 1998 through private placements exempt from registration under Section 4(2)
of Securities Act. An institutional private placement, exempt from registration
under Section 4(2) of the Securities Act, was completed to two qualified
institutional investors in January and one qualified accredited investor in
March of 1999 in which the Company issued a total of 459,000 shares of common
stock.
Initial start-up funding was raised through the sale, effective June 23,
1997, of 2,910,000 shares ("founder shares") of Beta's common stock to its
founders and other principals for $0.05 per share. An additional 640,000 common
stock purchase warrants were issued for various services provided to Beta with
each warrant entitling the holder thereof to purchase one share of Beta's common
stock at prices ranging from $2.00 to $5.00 per share.
During the third and fourth quarters of calendar 1997, Beta issued 663,912
equity units at $15 per unit through a private placement. Each unit entitled the
purchaser to four shares of common stock and one warrant exercisable to purchase
one share of common stock at $5.00 for a term of five years. The offering
generated net proceeds, after offering costs, of $9,076,283. Beta issued 224,310
additional common stock purchase warrants with an exercise price of $4.50 per
share for services in connection with the offering.
Commencing on February 12 and terminating on November 2, 1998, Beta issued
364,708 equity units at $20 per unit through a private placement. Each unit
entitled the purchaser to four shares of common stock and one warrant
exercisable to purchase one share of common stock at $7.50 for a term of five
years. The offering generated net proceeds, after offering costs, of $6,548,632.
Beta issued 121,383 additional common stock purchase warrants with an exercise
price of $7.00 per share for services in connection with the offering. In
addition, Beta issued 5,000 shares of common stock and 1,250 warrants in
exchange for certain oil and gas property interests. Beta also issued 482,100
warrants for various services provided to Beta with each warrant entitling the
holder thereof to purchase on share of Beta' common stock at prices ranging from
$3.75 to $7.50.
<PAGE>
The following table summarizes the private placement transactions and
warrants issued from inception (June 6, 1997) through March 19, 1999:
<TABLE>
Exercise
Common Shares Warrants to Purchase Stock $ Price
Shares $ Amount # Warrants Expiration Per Share
<S> <C> <C> <C> <C> <C> <C>
1) Tranche one 2,910,000 $ 145,500 640,000 6/27/02 to $ 2.00 to 5.00
10/1/02
2) Tranche two 2,655,648 9,958,770 663,912 9/5/02 $ 5.00
3) Warrants issued as
commission in tranche
two N/A N/A 224,310 12/30/02 $ 4.50
4) Direct offering expenses
-tranche two - (882,487) -
5) Tranche three 1,458,844 7,294,160 364,708 3/12/03 $ 7.50
6) Warrants issued as
commission in tranche
three N/A N/A 54,087 3/12/03 $ 7.00
7) Direct offering expenses
-tranche three - (745,528) -
8) Common stock issued for
properties 5,000 $ 25,000 1,250 3/12/98 $ 7.50
9) Warrants issued N/A N/A 477,100 2/4/03 to $ 5.00 to 7.50
3/12/03
10) Tranch four 459,000 2,754,000 - N/A N/A
11) Direct offering expense
tranch four (165,000) - N/A N/A
================= ================= ================
7,488,492 $ 18,384,415 2,425,367
================= ================= ================
</TABLE>
<PAGE>
Item 16. Exhibits
<TABLE>
<S> <C>
1.1 Underwriter Agreement (Form)*
1.2 Selected Dealer Warrant (Form)*
1.3 Selected Dealer Agreement (Form)*
3.1 Original and Amended Articles of Incorporation of Registrant.*
3.2 Amended and Restated Bylaws of the Registrant,Dated January 5, 1999.*
4.1 Form of 90 Day Lock-up Agreement for Brokers*
4.2 Form of One Year Lock-up Agreement for Bridge Note Holders*
5.1 Legal Opinion As To The Legality Of The Securities Being Registered.*
10.1 Formosa Grande Prospect Agreement, Dated August 1, 1997.*
10.2 Texana Prospect Agreement, Dated July 15, 1997. *
10.3 Ganado Prospect Agreement, Dated November 1, 1997. *
10.4 T.A.C. Resources Agreement, Dated January 21, 1998. *
10.5 Lapeyrouse Prospect Agreement, Dated October 13, 1997. *
10.6 Rozel (Transition Zone) Prospect Agreement, Dated February 24,1998. *
10.7 Stansbury Basin (Australia) Prospect Agreement, Dated February 1998.*
10.8 Agreement With Jim Frimodig (Norcal), Dated October 27, 1997.*
10.9 Steve Antry Employment Agreement, Dated June 23,1997. *
10.10 Steve Fischer, Employment Agreement, Dated June 23, 1997.*
10.11 J. Chris Steinhauser Warrant Agreement, Dated January 27, 1998.*
10.12 R.T. Fetters Consulting Agreement, Dated June 23, 1997. *
10.13 Office Lease, Dated October 1997.*
10.14 BWC Prospect Agreement, Dated April 1, 1998. *
10.15 Dahlia Financial Limited Consulting Agreement, Dated September 5, 1997.*
10.16 St. Cloud Investments, Ltd., Dated March 12, 1998. *
10.17 Beta Oil & Gas / Beta Capital Group Reciprocal Agreement. *
10.18 Horwitz & Beam Legal Representation Letter, Dated June 23, 1997 *
10.19 Cobra Prospect Agreement Dated January 6, 1999*
10.20 Redfish Prospect Agreement Dated January 6, 1999*
10.21 Shark Prospect Agreement Dated January 6, 1999*
10.22 Cheniere Energy, Inc. Option Agreement Dated January 6, 1999*
10.23 Dyad-Australia, Inc. Agreement Dated January 25, 1999*
10.24 Note and Common Stock Purchase Agreement Dated January 20, 1999*
10.25 Note and Common Stock Purchase Agreement Dated March 19, 1999*
10.26 Escrow Agreement Dated May 17, 1999*
23.1 Consent of Horwitz & Beam.*
23.2 Consent of Hein + Associates LLP
23.3 Consent of Veazey & Associates, Inc.*
24 Power of Attorney (see signature page) *
27 Financial Data Schedule
* Previously filed.
</TABLE>
Item 17. Undertakings.
(a) Rule 415 Offerings.
The undersigned issuer undertakes that it will:
(1) File, during the period required by Rule 415, a post-effective
amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bonafide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Request for acceleration of effective date.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
If a claim for indemnification against such liabilities (except the payment
by the issuer of expenses incurred or paid by a director, officer or controlling
person of the issuer in the successful defense of any action, suit or
proceedings) is asserted by such director, officer or controlling person in
connection with the securities being registered, the issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such court.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing this Amendment No. 4 on Form S-1 and authorized
this registration statement to be signed on its behalf by the undersigned, in
Newport Beach, California on June 25, 1999.
BETA OIL & GAS, INC.
By: /s/ Steve Antry
-----------------------------------
Steve Antry, President and Chairman
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement was signed by the following persons in
the capacities and on the dates stated.
Signature Title Date
___________*___ Chairman of the June 25, 1999
Steve Antry Board of Directors
and President
___________*___ Chief Financial Officer, June 25, 1999
J. Chris Steinhauser Principal Accounting
Officer and Director
___________* _ Director June 25, 1999
Lawrence W. Horwitz
___________*___ Director June 25, 1999
R.T. Fetters
___________*___ Director June 25, 1999
Joe Richardson Jr.
___________*_____ Director June 25, 1999
John P. Tatum
* By: /s/ Steve Antry___
Steve Antry
Attorney in Fact
ACCOUNTANT'S CONSENT
The Board of Directors
Beta Oil & Gas, Inc.
We consent to the use of our report dated February 9, 1999, included herein and
to the reference to our firm under the heading "Experts" in the Prospectus.
/s/ HEIN + ASSOCIATES LLP
Orange, California
June 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE PERIODS ENDED DECEMBER 31, 1997 AND 1998
AND MARCH 31, 1999 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JUN-06-1997
<PERIOD-END> MAR-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 569,331 198,043 3,985,599
<SECURITIES> 0 0 0
<RECEIVABLES> 29,365 9,678 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 746,337 222,672 3,988,198
<PP&E> 17,047,462 14,853,995 5,900,794
<DEPRECIATION> 1,680,022 1,670,691 0
<TOTAL-ASSETS> 15,367,440 13,618,471 9,921,057
<CURRENT-LIABILITIES> 1,194,092 319,129 870,474
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 7,458 7,029 5,566
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 16,335,650 13,618,471 9,050,210
<SALES> 29,664 0 0
<TOTAL-REVENUES> 29,664 0 0
<CGS> 9,035 0 0
<TOTAL-COSTS> 279,695 2,429,343 246,982
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 466,348 0 0
<INCOME-PRETAX> (714,104) (2,384,500) (201,573)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (714,104) (2,384,500) (201,573)
<EPS-BASIC> (0.10) (0.37) (0.05)
<EPS-DILUTED> (0.10) (0.37) (0.05)
</TABLE>
