U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934.
WOLFSTONE CORPORATION
(Name of Small Business Issuer in its charter)
Nevada 68-0427395
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18826 North Lower Sacramento Road, Suite C, Woodbridge, California 85032
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (209) 334-6717
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
None
(Title of Class)
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development.
Wolfstone Corporation ("Company") was incorporated in the State
of Nevada on November 6, 1998. In February of 1999, the Company
acquired out of Bankruptcy and merged with Integrated Direct,
Inc. ("IDI"), a dormant public company, in a transaction
accounted for as a reverse merger. IDI became public as the
result of an exemption from registration under Regulation A under
the Securities of 1933, as amended (""Act"), in June of 1972.
The offering price of Integrated common stock was $.50 per share.
Subsequently in 1974 the IDI was placed into receivership and all
of its assets were liquidated, As a result of the liquidation of
IDI assets the shareholders were left with a "shell corporation"
without asset or liability.
On about the beginning of 1975, IDI became dormant and remained
that way until 1983 at which time an attempt was made to
reactivate the Company. At that time 150,000 shares were sold
for $5,000 for the purpose of providing capital to reactivate the
Company. The attempt was unsuccessful and no business was
conducted. However, during this period of time 400,000 shares of
stock had been sold to previous directors on a note was canceled
for lack of consideration thereby reducing the total number of
common shares issued and outstanding to 550,400.
In June of 1990 the Directors of IDI took control of the company
and caused the domicile of the firm to be moved from the State of
Minnesota to the State of Delaware. On August 20, 1990 they
purchased 200,000 shares of the company's common stock for
$2,000, while increasing the total number of common shares to
750,000. On November 22, 1991 IDI issued 6,754,000 common shares
as of the result of the merger of RKA Communications, Inc. dba
Marketing Data Systems (California) ("RKA") into IDI.
On February 23, 1999 at a called shareholders meeting of IDI and
the Company, the shareholders of both companies met and approved
the merger of IDI into the Company. The shareholders received 1
share of new common stock for each 20 shares of old common stock
held by the shareholders. On February 24, 1999 the Directors of
the Company approved the spin out of RKA to the original
shareholders of this firm in return for cancellation 6,393,929 of
common stock received by RKA shareholders for the acquisition of
RKA. All of IDI's loss from operation had been incurred by RKA.
The Company's fiscal year ends on March 31. Currently, the
Company does not have any employees. It plans to hire two to
three administrative support personnel over the next 12 months.
Business of the Company.
(a) The Company.
The Company, an independent oil and gas company in the
development stage, is planning to engage in the explorations and
development of domestic oil and gas properties located in Texas.
The Company owns or controls three gas & oil fields in Texas that
are considered PDP properties - (proven, developed, producing).
The Company intends to continue in its efforts to acquire
valuable, producing (PDP) properties with proven reserves and
existing wells. At the present time, there are many undervalued
properties through out Texas with ownership outside the envelope
of the business. These owners are interested in the exchange of
their positions for an equity position in a publicly traded
company. This has presented the Company with several
opportunities for evaluation, and in some cases, potential
acquisition.
During the period November 6, 1998 to the present, the Company
acquired its oil and gas properties through its three
subsidiaries in transactions accounted for as purchases. In
these acquisitions, the purchase price was allocated to the fair
values of the assets acquired with no portion of the purchase
price allocated to goodwill:
(1) On October 29, 1999, the Company acquired 100% of the
authorized and issued common stock of Graham Energy, Inc.("GEI")
from Vance Energy, Inc. ("VEL") in exchange for 1,200,000 shares
of the Company restricted common stock. See Exhibit 10.1 to this
Form 10-SB. In addition, the Company executed a promissory note
to the benefit of VEL or assigns in the amount of $235,000 U.S.
Dollars. This note is to be due and payable six months from the
date of execution, but the note may be rolled over for an
additional period of six months in event payment of the $235,000
note at the initial due date would be detrimental to the business
of the Company and its shareholders. The purchase price of the
GEI stock is $34,000,000, based on the appraisals on the GEI
proven, producing gas and oil reserves that have been performed
by licensed petroleum geological engineers and geophysicists.
GEI's reserve leases cover nearly 1,300 acres with 35 wells and
$245,000 in production' equipment. Details or copies of these
leases will be provided upon reasonable request to the Company.
(2) TIP acquired 100% of the outstanding common stock of
Subsurface Energy Corp., a Texas corporation ("Subsurface"), on
March 29, 1999 whereby Ravendale Finiancial Ltd. obtained
l,604,797 TIP shares of $20.00 par, convertible, class A,
preferred stock, earning a 6% dividend per annum, in exchange for
3,209,594 $10.00 par, common shares of Subsurface, from
Ravendale. See Exhibit 10.2 to this Form 10-SB. The preferred
shares of TIP are convertible any time after issuance, in total
or in part, to common shares of the Company. Restricted common
stock of the Company received through conversion shall bear a 12
month legend. The preferred TIP shares to be converted on a l =
1 ratio with Company common stock.. The purchase price of is
based. upon evaluation of this company's proven producing
reserves at $32,095,940, which is represented by 15 oil and gas
leases in the State of Texas which this company controls (details
or copies of which will be provided upon reasonable to the
Company), and $478,000 for certain oil field equipment.
Other Shares included in this transaction are 5,000 shares of
$40.00 par convertible, cumulative class-B, preferred stock, of
the Company, earning a 5% annual dividend, first payment, April
28, 2000, conversion ratio: 1=3 common shares; conversion at
discretion of holders any time after issuance. These shares to
be issued to persons for their efforts negotiating this
transaction. After conversion, and. at a later date, the Company
will assist by arranging the sale of 50,000 shares of the common
stock, through a stock brokerage firm at market value, but for no
less than $4.25, or, in lieu of being able to arrange this
transaction, or in event the market should fall below $4.25, the
Company will purchase the 50,000 shares at a minimum of $4.25 per
share, at $25,000 per month for five months and $87,500. on the
sixth month. Sale or purchase of the first segment of the 50,000
shares is to be made and payment thereof to Ravendale will be
due within 40 days from conversion date and payments as detailed
above shall continue on the same date, for each of five following
months: 6 monthly payments in total.
(3) The Company acquired 100% of the outstanding common stock of
Texas International Petroleum, Inc., a Texas corporation ("TIP"),
on February 24, 1999 from Southwin Financial Ltd. in exchange for
2,000,000 common stock shares and 2,000 Class B preferred shares
valued at $40 per share. See Exhibit 10.3 to this Form 10-SB. The
class B Preferred Shares are convertible and have voting
privileges, and earning 5% dividend per annum. As further
consideration, the Company executed a note in the amount of
$190,000 for equipment, payable as follows:
May 5, 1999 $20,000
June 15, 1999 $20,000
July 15, 1999 $50,000
Aug.15, 1999 $50,000
Sept. 15, 1999 $50,000
All payments under this note have now been paid. The total
purchase price is the appraised value of the oil and gas
properties: $50,767,401. These properties are located in the
State of Texas, details of which will be provided upon reasonable
request to the Company.
On February 25, 1999, TIP and Pilares Oil & Gas, Inc. entered
into a Consulting and Services Agreement, whereby this firm will
provide certain services for TPI consisting of: Acquiring
geological information on the Company's existing and future
reserves and reserves as potential acquisitions from persons
known to Pilares to be competent, for choosing exact locations
for drilling of the oil and gas wells, for negotiation of reserve
leases, and for advising and consulting to the Board of Directors
of the Company and to the Board of Directors of Guarantor
pertinent to any phase of the oil and gas business. In exchange,
TIP is responsible for payment (reimbursement or cash advance) to
Pilares for out-of-pocket expenses, with no element of profit or
markup added thereto, all such expenses being charged on an
actually incurred or estimated basis. Payment shall be made
within 30 days after receipt of invoices for same unless other
arrangements are agreed upon in given instances. Payments on a
quarterly basis to Pilares in four equal portions of the base One
Hundred and Seventy Five Thousand ($175,000) U.S. Dollars, annual
consulting fee, said fee being a point of this Agreement. Each
quarterly payment is to be in the amount of $43,750. In
connection with this agreement, Pilares assigned to TIP a certain
oil and gas lease in the State of Texas. See Exhibit 10.5 to the
Form 10-SB.
On March 31, 1999, TIP issued 10,102,696 shares of common stock
in exchange for an assignment of oil, gas and mineral leases from
Southwin Financial, Ltd. The leases consist of approximately
1,939 acres and are located in Edwards County and Pecos County,
Texas. See Exhibit 10.6 to this Form 10-SB.
The Company is in negotiations to purchase approximately 1,000
producing gas wells in exchange for stock and cash. Since it
could take 6 to 8 months to complete this transaction, the
Company is negotiating with the owners of several smaller groups
of wells which may be acquires quicker.
The oil and gas properties have been appraised by independent
petroleum geologists. The appraisals classify the petroleum
reserves as proved undeveloped reserves and supports the
following valuation. Proved undeveloped reserves are defined in
the geologists report as reserves that are recoverable from
additional wells yet to be drilled. Undeveloped reserves are
those considered proved for production by reasonable geological
interpretation of adequate subsurface control in reservoirs that
are producing or proved by other wells but are not recoverable
from existing wells. This classification of reserves requires
drilling of additional wells, major deepening of existing wells,
or installation of enhanced recovery or other facilities.
Proved developed reserves are defined in the geologists
report as reserves recoverable from existing wells which include
producing and non producing wells. Estimates of producing
reserves assume recovery by existing wells producing from present
completion intervals with normal operating methods and expenses.
Developed non producing reserves are in reservoirs behind the
casing or at minor depths below the producing zone and are
considered proved by production from other wells in the field, by
successful drill-stem test, or by core analyses from the
particular zones. Non producing reserves require expense to be
brought into production.
Valuations and certification of the gas and oil properties
have been performed accordance to Securities and Exchange
Commission guidelines by licensed petroleum geologists and
geophysicists of Nova Resources, Inc. The properties are
situated near collection systems which will allow sale of product
on an economically sound basis.
(b) Industry Background.
Significant increases in petroleum used for petroleum based
products is very apparent. In 1994 the U.S. consumed over 84
Quadrillion Btus of energy. In 1995, the U.S. consumed nearly 91
Quadrillion Btu; in 1996 nearly 94 Quadrillion Btu; 1997 and 1998
increases are comparable to the past years. World primary energy
consumption increased from 357 Quadrillion Btu in 1994 to 365
Quadrillion Btu in 1995. Increase in US and global energy
consumption continues annually at comparable ratios.
Natural gas will provide cash flow for the Company from
accessible proven undeveloped reserves and to be acquired
production. The markets ability to absorb this increased
production as quickly as it can be brought to the well head
appears strong for the near and long term. In addition to the
obvious products resulting from producing oil wells, (gasoline,
diesel and heating fuels), there are a great many other products
derived from oil the world is not only using, but increasing
it's demand for: Plastic materials and resins include petroleum-
derived manometric and polymeric materials. Thermoplastics and
thermoset are the two broad subsectors of monometric and
polymeric materials. Synthetic rubber is an elastomer, which
is created by using polymerization or copolymerization. Growing
markets in developing regions such as Asia, the Middle East and
South America have increasingly globalized the industry. The
United States, as an example, has been increasing shipments to
Mexico, South America and Asia.
On the domestic scene, the trend is growth in usage of
petroleum products as feed stock for plastics; in key end-use
industries such as packaging; construction; (building materials
that have replaced wood, fabrics for interior finish, pipe,
roofing, electrical outlet panels, floor coverings, coating on
electrical wire, etc.); motor vehicles: (seat covers, carpeting,
dash-panels, even items under the hood); marine vehicles and
finishing items; usage in the consumer durables: i.e.
technological items, toys, a seemingly exhaustive number of
house ware, house hold, and recreation oriented items.
The strong growth factor emerging in the plastics industry
became apparent in 1992, with increasing demand for plastics in
the domestic and international sectors. In 1994 and 1995,
strong domestic demand, and an increased focus on exports,
increased shipments from the U.S. producers nearly 8%.
Globally, world demand for plastic materials and resins is
expected to surpass 150 million metric tons by the year 2002,
with thermoplastics accounting for the major percentage of the
market. International trade has become more important as U.S.
companies seek to benefit from the fast growth of developing
economies in Asia and South America.
The United States should remain a net exporter of
plastic materials to Mexico and Canada, with continued
significant generation of growth resulting from economic
expansion in large global markets of Japan and Western Europe as
well as from the continuing penetration of developing
regions, especially those of Brazil, South Korea, and China.
ITEM 2. PLAN OF OPERATION.
Twelve Month Plan of Operation.
The Company's objectives are:
(1) To focus towards low risk exploitive drilling of its current
proven reserves.
(2) To continue in its efforts to acquire valuable, producing
(PDP) properties with proven reserves and existing wells. With
petroleum prices at or near an all time low, the Company is in an
advantageous position to make acquisitions of proven production
at bargain prices - primarily natural gas (the Company's
management has targeted at least 1,000 producing wells available
for acquisition).. At the present time, there are many
undervalued properties through out Texas with ownership outside
the envelope of the business. These owners are interested in the
exchange of their positions for an equity position in a publicly
traded company. The expertise of the Company, have resulted in
other opportunities being presented to the Company for
evaluation, and in some cases, acquisition.
The Company intends to commence drilling this Spring. Based
on projected drilling schedule, phase 1 - 18 months, new wells
and purchased wells should produce earnings before income tax,
depreciation and amortization (EBITDA) of approximately
$7,500,000. The drilling on Company controlled properties will
be done by contracting with independent drilling firms, such as
Pilares Oil & Gas, Inc., an experienced drilling firm. These
firms will be paid a flat monthly fee, depending on the amount of
drilling done.
The Company also intends to proceed during the next 12 months
with one or more private placement offerings to raise capital a
minimum of $2,000,000 and up to $5,000,000 for the Company.
Should the revenue projection, as well as the proceeds from these
offerings come into the Company over this period, this will be
sufficient to proceed with the Company's operational and
acquisition plans. However, there is no guarantee that these
funds will be available to the Company. See Risk Factors -
Adequacy of Funding.
Risk Factors Connected with Plan of Operation.
Limited Prior Operations.
The Company is in its initial stages of development with only
limited revenues or income and is subject to all the risks
inherent in the creation of a new business. Since the Company's
principal activities to date have been limited to organizational
activities and prospect development, it has no record of any
revenue-producing operations. Consequently, there is no
operating history upon which to base an assumption that the
Company will be able to achieve its business plans. In addition,
the Company has only limited liquid assets. As a result, there
can be no assurance that the Company will generate significant
revenues in the future; and there can be no assurance that the
Company will operate at a profitable level. If the Company is
unable to obtain customers and generate sufficient revenues so
that it can profitably operate, the Company's business will not
succeed.
Adequacy of Funding.
The funds currently available to the Company will not be adequate
for it to be competitive in the areas in which it intends to
operate. Therefore, the Company will need to raise additional
funds in order to fully implement its business plan. The
Company's continued operations therefore will depend upon its
ability to raise additional funds through bank borrowings, equity
or debt financing, or asset sales. There is no assurance that
the Company will be able to obtain additional funding when
needed, or that such funding, if available, can be obtained on
terms acceptable to the Company. If the Company cannot obtain
needed funds, it may be forced to curtail or cease its
activities. If additional shares were issued to obtain
financing, current shareholders may suffer a dilutive effect on
their percentage of stock ownership in the Company.
Competition.
The Company will experience substantial competition in the
sale of its oil and gas products. Many competitors in the
automobile industry have greater experience, resources, and
managerial capabilities than the Company and may be in a better
position than the Company to obtain access to attractive
clientele. There are a number of larger companies which will
directly compete with the Company. Such competition could have a
material adverse effect on the Company' profitability or
viability.
Influence of Other External Factors.
The oil and gas business in general is a speculative venture
necessarily involving some substantial risk. There is no
certainty that the expenditures to be made by the Company will
result in commercially profitable business. Existing oil & gas
wells can decrease in productivity over time. In addition, the
marketability of its products will be affected by numerous
factors beyond the control of the Company. These factors include
market fluctuations, and the general state of the economy
(including the rate of inflation, and local economic conditions),
which can affect peoples' discretionary spending. Factors which
leave less money in the hands of potential customers of the
Company will likely have an adverse effect on the Company. The
exact effect of these factors cannot be accurately predicted, but
the combination of these factors may result in the Company not
receiving an adequate return on invested capital.
Regulatory Factors.
Possible future consumer legislation, regulations and
actions could cause additional expense, capital expenditures,
restrictions and delays in the activities undertaken in
connection with the business of the Company, the extent of which
cannot be predicted. The exact affect of such legislation cannot
be predicted until it is proposed. Regulations are primarily
through the Texas Railroad Commission; there is no evidence of
anticipated changes in those long-standing regulations.
Lack of Diversification.
The size of the Company makes it unlikely that the Company will
be able to commit its funds to diversify the business until it
has a proven track record, and the Company may not be able to
achieve the same level of diversification as larger entities
engaged in this type of business.
Reliance on Management.
The Company's success is dependent upon the hiring of key
administrative personnel. None of the officers or directors, or
any of the other key personnel, has any employment or non-
competition agreement with the Company. Therefore, there can be
no assurance that these personnel will remain employed by the
Company. Should any of these individuals cease to be affiliated
with the Company for any reason before qualified replacements
could be found, there could be material adverse effects on the
Company's business and prospects. In addition, some of the
management team has no experience is managing companies in the
same business as the Company.
In addition, all decisions with respect to the management of
the Company will be made exclusively by the officers and
directors of the Company. Investors will only have rights
associated with minority ownership interest rights to make
decision which effect the Company. The success of the Company,
to a large extent, will depend on the quality of the directors
and officers of the Company. Accordingly, no person should
invest in the Shares unless he is willing to entrust all aspects
of the management of the Company to the officers and directors.
Control of the Company by Officers and Directors.
The Company's officers and directors beneficially own
approximately 13.5% of the outstanding shares of the Company's
common stock. As a result, such persons, acting together, have
the ability to exercise influence over all matters requiring
stockholder approval. Accordingly, it could be difficult for the
investors hereunder to effectuate control over the affairs of the
Company. Therefore, it should be assumed that the officers,
directors, and principal common shareholders who control the
majority of voting rights will be able, by virtue of their stock
holdings, to control the affairs and policies of the Company.
Limitations on Liability, and Indemnification, of Directors and
Officers.
The Company's Articles of Incorporation include
provisions to eliminate, to the fullest extent permitted by the
Nevada Revised Statutes as in effect from time to time, the
personal liability of directors of the Company for monetary
damages arising from a breach of their fiduciary duties as
directors. The By-Laws include provisions to the effect that the
Company may, to the maximum extent permitted from time to time
under applicable law, indemnify any director, officer, or
employee to the extent that such indemnification and advancement
of expense is permitted under such law, as it may from time to
time be in effect. Any limitation on the liability of any
director, or indemnification of directors, officer, or employees,
could result in substantial expenditures being made by the
Company in covering any liability of such persons or in
indemnifying them.
Conflicts of Interest.
The officers and directors have other interests to which they
devote time, either individually or through partnerships and
corporations in which they have an interest, hold an office, or
serve on boards of directors, and each will continue to do so
notwithstanding the fact that management time may be necessary to
the business of the Company. As a result, certain conflicts of
interest may exist between the Company and its officers and/or
directors which may not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of
corporate opportunities which cannot be resolved through arm's
length negotiations. All of the potential conflicts of interest
will be resolved only through exercise by the directors of such
judgment as is consistent with their fiduciary duties to the
Company. It is the intention of management, so as to minimize
any potential conflicts of interest, to present first to the
Board of Directors to the Company, any proposed investments for
its evaluation.
No Assurance of Continued Public Trading Market; Risk of Low
Priced Securities.
Since March 16, 1999, there has been only a limited
public market for the common stock of the Company. The common
stock of the Company is currently quoted on the Over the Counter
Bulletin Board. As a result, an investor may find it difficult
to dispose of, or to obtain accurate quotations as to the market
value of the Company's securities. In addition, the common stock
is subject to the low-priced security or so called "penny stock"
rules that impose additional sales practice requirements on
broker-dealers who sell such securities. The Securities
Enforcement and Penny Stock Reform Act of 1990 ("Reform Act")
requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (generally, according
to recent regulations adopted by the U.S. Securities and Exchange
Commission, any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions), including
the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the
risks associated therewith. The regulations governing low-
priced or penny stocks sometimes limit the ability of broker-
dealers to sell the Company's common stock and thus, ultimately,
the ability of the investors to sell their securities in the
secondary market.
Effects of Failure to Maintain Market Makers.
If the Company is unable to maintain a National
Association of Securities Dealers, Inc. member broker/dealers as
market makers, the liquidity of the common stock could be
impaired, not only in the number of shares of common stock which
could be bought and sold, but also through possible delays in the
timing of transactions, and lower prices for the common stock
than might otherwise prevail. Furthermore, the lack of market
makers could result in persons being unable to buy or sell shares
of the common stock on any secondary market. There can be no
assurance the Company will be able to maintain such market
makers.
Cash Dividends Unlikely.
The Company has never declared or paid dividends on its
common stock and currently does not anticipate or intend to pay
cash dividends on its common stock in the future. The payment of
any such cash dividends in the future will be subject to
available retained earnings and will be at the discretion of the
Board of Directors.
Potential Status as a Pseudo California Corporation.
Section 2115 of the California General Corporation Law
subjects certain foreign corporations doing business in
California to various substantive provisions of the California
General Corporation Law in the event that the average of its
property, payroll and sales is more than 50% in California and
more than one-half of its outstanding voting securities are held
of record by persons residing in the State of California. Some
of the substantive provisions include laws relating to annual
election of directors, removal of directors without cause,
removal of directors by court proceedings, indemnification of
officers and directors, directors standard of care and liability
of directors for unlawful distributions. The aforesaid Section
does not apply to any corporation which, among other things, has
outstanding securities designated as qualified for trading as a
national market security on NASDAQ if such corporation has at
least eight hundred holders of its equity securities as of the
record date of its most recent annual meeting of shareholders.
It is currently anticipated that the Company may be subject to
Section 2115 of the California General Corporation Law which, in
addition to other areas of the law, will subject the Company to
Section 708 of the California General Corporation Law which
mandates that shareholders have the right of cumulative voting at
the election of directors.
Forward-Looking Statements.
This Registration Statement contains "forward looking
statements" within the meaning of Section 27A of the Act, and
Section 21E of the Securities Act of 1934, as amended, including
statements regarding, among other items, the Company's business
strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and
the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control.
The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ
materially from those in the forward looking statements,
including those factors described under "Risk Factors" and
elsewhere herein In light of these risks and uncertainties,
there can be no assurance that the forward-looking information
contained in this Prospectus will in fact transpire or prove to
be accurate. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this section.
Uncertainty Due to Year 2000 Problem.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting
may range from minor errors to significant system failure which
could affect the Company's ability to conduct normal business
operations. This creates potential risk for all companies, even
if their own computer systems are Year 2000 compliant. It is not
possible to be certain that all aspects of the Year 2000 issue
affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully
resolved.
The Company currently believes that its systems are Year 2000
compliant in all material respect. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Company may
experience serious unanticipated negative consequences (such as
significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of consumers may be affected by Year 2000
issues. The Company does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Company's Year 2000 plans are based on management's best
estimates.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company currently owns approximately $400,000 in
drilling equipment located in Taylor County, Texas. In addition,
the Company owns approximately $5,000 in general office equipment
and furniture at its corporate offices.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the
beneficial ownership of shares of the Company's Common Stock as
of October 31, 1999 (6,343,235 issued and outstanding) by (i) all
stockholders known to the Company to be beneficial owners of more
than 5% of the outstanding Common Stock; and (ii) all officers
and directors of the Company (each person has sole voting power
and sole dispositive power as to all of the shares shown as
beneficially owned by them):
Title of Name and Address of Amount of Percent of
Class Beneficial Owner Beneficial Ownership Class
Common
Stock Lichfield Limited, 1,000,000 15.76%
20 Gissing Drive
Southwest,
Calgary,
Alberta T3E 4V7
Common
Stock Southwin Financial, 1,000,000 15.76%
Ltd., 20
Gissing Drive
Southwest,
Calgary,
Alberta T3E 4V7
Common
Stock Garry C. Duncan 400,000 6.30%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Robert E. McMillan 200,000 3.15%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Stephen F. Burg 200,000 3.15%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Dennis J, O'Leary 20,000 0.31%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Thomas Reimer 20,000 0.31%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock William D. Batts 5,000 0.008%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Thomas P. Page 5,000 0.008%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Marie N. Rolfe 0 0%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Billy Bob Williams 5,000 0.008%
18826 North Lower
Sacramento Road
Suite C
Woodbridge, CA
95258
Common
Stock Shares of all 855,000 13.48%
directors and
executive
officers as a
group (9
persons)
ITEM 5. DIRECTORS, OFFICERS, PROMOTERS, AND CONTROL PERSONS.
The names, ages, and respective positions of the directors
and officers of the Company are set forth below. These persons
have held their respective positions since May 20, 1999. There
are no other persons which can be classified as a promoter or
controlling person of the Company.
(a) Garry C. Duncan, CEO/Director.
Mr. Duncan, age 44, holds a B.A from University of California,
Los Angeles. Postgraduate courses include Market Trends and
Perspectives; Law and Finance; Management; Accounting. Mr.
Duncan, a certified California appraiser, is a principle of a
successful real estate and appraisal firm serving Northern
California and Nevada.
(b) Robert E. McMillan, Chief Financial Officer/Director.
Mr. McMillan, age 49, Degrees: MBA; BSBA; (Quantitative
Economics, Finance, Accounting, Master Thesis in Oil & GAS), CPA,
and CFE. Examiner in Charge and Senior Insurance Examiner.
Audited 15 fortune 500 companies & owned and managed computer
hardware & software solutions company.
(c) Stephen F. Burg, Secretary/Director.
Mr. Burg, age 62, holds a business degree from Boston University.
After 20 years of senior. management within a public corporate
environment, he formed a highly specialized corporate consulting
company in 1986. Mr. Burg's company offers corporate growth and
strategies for public and private companies nationally and
internationally. It provides services to clients in
restructuring operating base; guidance in how to prepare for
raising of equity financing through public investment; assisting
in identifying and acquiring additional assets, other companies
or products; and acting as client company director of shareholder
relations. Services include: writing and publishing of business
plans, assisting private companies in becoming public and
creating a market for these client companies; professional
negotiations on behalf of client companies for mergers and
acquisitions; and providing corporate and personnel evaluations.
Contract negotiations and corporate subsidiary structuring for
growing and expanding companies, both nationally and
internationally.
(d) Dennis J. O'Leary, Vice President/Director.
Mr. O'Leary, 74, is a graduate, with a B.S.M.A. degree from
University of Santa Clara, and is a graduate of Heald Engineering
College. He developed and patented products for industrial water
and air pollution treatment.
(e) Thomas Reimer, Vice President/Director.
Mr. Reimer, age 70, is President/Chairman of Reimer Industries,
manufacturing products for the golfing industry. 35 years
experience in real estate, owning and managing his own business;
a past president of the Bay area Real Estate Association.
(f) William D. Batts, Director.
For the last five years, Mr. Batts, age 77, has held a position
with Petroleum Information, Inc., a large oil and gas data
gathering firm in the State of' Texas. During the later part of'
this period he has been and is currently manager of the South
Texas Region of Petroleum Information, Inc.
(g) Thomas P. Page, Director.
For the Iast five years Mr. Page has operated professionally as a
contracted, indpendent petroleum business consultant and
geological engineer to drilling companies in North, North
Central and West Texas.
(h) Marie N. Rolfe, Chairman of the Board.
For over five years, Ms. Rolfe, age 69, has been semi-retired
spending most of her time with her family. She has spent a
minimal amount of time involved as contracted, independent
petroleum business consultant, primarily for companies in the
State of Texas, involved in oil and gas.
(i) Billy Bob Williams.
For the past five years, Mr. Williams, age 77, has been Chairman
and C.E.O. of Stanford Mortgage Company in Dallas, Texas. Mr.
Wi1liams is fonder of this company. He has also been a
contracted business consultant during the past five years.
ITEM 6. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other Securities
Name and annual underlying All other
Principal Year compensa Restricted options/ LTIP compen
Position Salary Bonus tion stock SARs pay sation
($) ($) ($) award(s) (#) outs
($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (I)
Gary C.
Duncan 1999 0 0 0 0 0 0 0
Robert E.
McMillan 1999 0 0 0 0 0 0 0
Stephen F.
Burg 1999 0 0 0 0 0 0 0
Dennis J.
O'Leary 1999 0 0 0 0 0 0 0
Thomas
Reimer 1999 0 0 0 0 0 0 0
OPTION/SAR GRANTS IN LAST FISCAL YEAR
[Individual Grants]
Number of Percent of total
Securities options/SAR/s
Underlying granted to
Options/SARs employees in fiscal Exercise or Expiration
Granted (#) year base price date
Name ($/Sh)
(a) (b) (c) (d) (e)
Gary C.
Duncan 0 - - -
Robert E.
McMillan 0 - - -
Stephen F.
Burg 0 - - -
Dennis J.
O'Leary 0 - - -
Thomas
Reimer 0 - - -
There are no annuity, pension or retirement benefits proposed to
be paid to officers, directors, or employees of the corporation
in the event of retirement at normal retirement date pursuant to
any presently existing plan provided or contributed to by the
corporation or any of its subsidiaries. Finally, no remuneration
is proposed to be in the future directly or indirectly by the
corporation to any officer or director under any plan which is
presently existing.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There are no relationships, transactions, or proposed
transactions to which the Company was or is to be a party, in
which any of the named persons set forth in Item 404 of
Regulation SB had or is to have a direct or indirect material
interest.
ITEM 8. DESCRIPTION OF SECURITIES.
General Description.
(a) Common Stock.
The Articles of Incorporation authorize the issuance of
20,000,000 shares of common stock, with a par value of $0.001. As
of October 31, 1999, the Company had 6,343,235 shares of common
stock issued and outstanding. The holders of the Shares: (a)
have equal ratable rights to dividends from funds legally
available therefore, when, as, and if declared by the Board of
Directors of the Company; (b) are entitled to share ratably in
all of the assets of the Company available for distribution upon
winding up of the affairs of the Company; and (c) are entitled to
one non-cumulative vote per share on all matters on which
shareholders may vote at all meetings of shareholders. These
securities do not have any of the following rights: (a) special
voting rights; (b) preference as to dividends or interest; (c)
preemptive rights to purchase in new issues of Shares; (d)
preference upon liquidation; or (e) any other special rights or
preferences. In addition, the Shares are not convertible into
any other security. There are no restrictions on dividends under
any loan other financing arrangements or otherwise. See a copy
of the Articles of Incorporation, and amendments thereto, and
Bylaws of the Company, attached as Exhibits to this Form 10-SB.
(b) Preferred Stock.
The Articles of Incorporation authorize the issuance of
10,000 shares of Class B 5% convertible preferred stock, $40.00
par value. As of October 31, 1999, the Company had 7,000 shares
of preferred stock issued and outstanding.
Each preferred stock share is convertible into 3 shares of the
Company's common stock shares. In liquidation, the Class B
stockholders are entitled to receive an amount equal to their
purchase price of the shares plus declared but unpaid dividends.
The Class B stockholders have liquidation preference over the
common stockholders. At July 31, 1999, there were no accrued
dividends and the total liquidation value was $280,000.
Non-Cumulative Voting.
The holders of Shares of Common Stock of the Company do not have
cumulative voting rights, which means that the holders of more
than 50% of such outstanding Shares, voting for the election of
directors, can elect all of the directors to be elected, if they
so choose. In such event, the holders of the remaining Shares
will not be able to elect any of the Company's directors.
Dividends.
The Company does not currently intend to pay cash dividends. The
Company's proposed dividend policy is to make distributions of
its revenues to its stockholders when the Company's Board of
Directors deems such distributions appropriate. Because the
Company does not intend to make cash distributions, potential
shareholders would need to sell their shares to realize a return
on their investment. There can be no assurances of the projected
values of the shares, nor can there be any guarantees of the
success of the Company.
A distribution of revenues will be made only when, in the
judgment of the Company's Board of Directors, it is in the best
interest of the Company's stockholders to do so. The Board of
Directors will review, among other things, the investment quality
and marketability of the securities considered for distribution;
the impact of a distribution of the investee's securities on its
customers, joint venture associates, management contracts, other
investors, financial institutions, and the company's internal
management, plus the tax consequences and the market effects of
an initial or broader distribution of such securities.
Possible Anti-Takeover Effects of Authorized but Unissued Stock.
The Company's authorized but unissued common capital stock
consists of 13,656,765 Shares of common stock. One effect 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 the Company by means
of a merger, tender offer, proxy contest, or otherwise, and
thereby to protect the continuity of the Company'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 the Company'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,
completion of the takeover transaction by diluting the voting or
other rights of the proposed acquiror 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.
Transfer Agent.
The Company has engaged the services of Signature Stock Transfer,
Inc., 14675 Midway Road, Suite 221, Dallas, Texas 75244, to act
as transfer agent and registrar for the Company.
PART II.
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information.
From March 16, 1999 to December 15, 1999, the Company's Shares
were traded on the OTC Bulletin Board. They are currently traded
in the "Pink Sheets" (symbol WSCO) and the range of closing bid
prices shown below is reported while trading on the OTC Bulletin
Board. The quotations shown reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on March 31, 2000
High Low
First Quarter 6.625 3.000
Second Quarter 5.250 0.130
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended March 31, 1999
High Low
Fourth Quarter* 5.750 1.125
* The Shares commenced trading on the Bulletin Board on March 16,
1999.
In order to qualify for relisting on the OTC Bulletin Board, the
Company must comply with the new eligibility rules of the OTC
Bulletin Board (that is, all listed companies must be reporting
companies), and accordingly the Company is filing its Form 10-SB
Registration Statement with the SEC. The Company is anticipating
that this Form 10-SB will clear all comments in the near future
and thereafter be promptly relisted on the OTC Bulletin Board.
(b) Holders of Common Equity.
As of October 31, 1999, there were 879 shareholders of record of
the Company's common stock.
(c) Dividend Information.
The Company has not declared or paid a cash dividend to
stockholders since it became a "C" corporation on November 6,
1998. The Board of Directors presently intends to retain any
earnings to finance Company operations and does not expect to
authorize cash dividends in the foreseeable future. Any payment
of cash dividends in the future will depend upon the Company's
earnings, capital requirements and other factors.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
From the incorporation of the Company in Nevada in 1998 and
up to the present time, the principal independent accountant for
the Company has neither resigned (or declined to stand for
reelection) nor been dismissed. The independent accountant for
the Company is Turner, Stone & Company, LLP, 12700 Park Central
Drive, Suite 1610, Dallas, Texas 75251.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
No director of the Company will have personal liability to the
Company or any of its stockholders for monetary damages for
breach of fiduciary duty as a director involving any act or
omission of any such director since provisions have been made in
the Articles of Incorporation limiting such liability. The
foregoing provisions shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or, which involve intentional
misconduct or a knowing violation of law, (iii) under applicable
Sections of the Nevada Revised Statutes, (iv) the payment of
dividends in violation of Section 78.300 of the Nevada Revised
Statutes or, (v) for any transaction from which the director
derived an improper personal benefit.
The By-laws provide for indemnification of the directors,
officers, and employees of the Company in most cases for any
liability suffered by them or arising out of their activities as
directors, officers, and employees of the Company if they were
not engaged in willful misfeasance or malfeasance in the
performance of his or her duties; provided that in the event of a
settlement the indemnification will apply only when the Board of
Directors approves such settlement and reimbursement as being for
the best interests of the Corporation. The Bylaws, therefore,
limit the liability of directors to the maximum extent permitted
by Nevada law (Section 78.751).
The officers and directors of the Company are accountable to the
Company as fiduciaries, which means they are required to exercise
good faith and fairness in all dealings affecting the Company.
In the event that a shareholder believes the officers and/or
directors have violated their fiduciary duties to the Company,
the shareholder may, subject to applicable rules of civil
procedure, be able to bring a class action or derivative suit to
enforce the shareholder's rights, including rights under certain
federal and state securities laws and regulations to recover
damages from and require an accounting by management..
Shareholders who have suffered losses in connection with the
purchase or sale of their interest in the Company in connection
with such sale or purchase, including the misapplication by any
such officer or director of the proceeds from the sale of these
securities, may be able to recover such losses from the Company.
PART F/S.
Independent Auditors' Report
Board of Directors and Stockholders
WolfStone Corporation and subsidiaries
Woodbridge, California
We have audited the accompanying balance sheet of WolfStone
Corporation and subsidiaries (a development stage company), as of
July 31, 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for the period
November 6, 1998 (inception) through July 31, 1999. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of WolfStone Corporation and subsidiaries at
July 31, 1999, and the consolidated results of their operations
and cash flows for the period November 6, 1998 (inception)
through July 31, 1999 in conformity with generally accepted
accounting principles.
/s/ Turner, Stone & Company, LLP
Turner, Stone & Company, LLP
Certified Public Accountants
October 28, 1999
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
JULY 31, 1999
Assets
Current assets:
Cash $ 5,396
Accounts receivable 12,491
Total current assets 17,887
Oil and gas properties, accounted for
using the successful efforts method:
Oil and gas interests, proved properties, net
of $9,145 of accumulated depletion 82,600,342
Support equipment, at cost, net of $21,141
of accumulation depreciation 456,859
83,057,201
$83,075,088
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 7,751
Notes payable 224,000
Total current liabilities 231,751
Commitments and contingencies -
Stockholders' equity:
Preferred stock, $40 par value, 10,000 shares
authorized, 7,000 shares issued and outstanding
of Class B convertible, liquidation value $280,000 280,000
Common stock, $.001 par value, 20,000,000
shares authorized, 6,343,235 shares issued and
outstanding 6,343
Paid in capital in excess of par 82,824,142
Accumulated deficit ( 267,148)
82,843,337
$83,075,088
The accompanying notes are an integral part of the consolidated
financial statements.
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 6, 1998 (INCEPTION)
THROUGH JULY 31, 1999
Revenues $ 25,781
Operating expenses:
Production costs 49,219
General and administrative 213,424
Depreciation and depletion 30,286
292,929
Operating loss ( 267,148)
Interest expense -
Loss before income taxes ( 267,148)
Provisions for income taxes -
Net loss $( 267,148)
Net loss per share:
Basic $( 0.08)
Diluted $( 0.08)
The accompanying notes are an integral part of the consolidated
financial statements.
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 6, 1998 (INCEPTION)
THROUGH JULY 31, 1999
Add'l Accum
Preferred Stock Common Stock Paid in lated
Shares Amount Shares Amount Capital Deficit Total
Balance
at
November
6,1998 - $ - - $ - $ - $- $-
Issuance of
common
stock in
exchange
for
outstanding
common stock
of
IDI (Note 1) 295,408 295 295
Issuance of
common
stock in
exchange for
oil
and gas
properties 6,047,827 6,048 6,048
Issuance of
preferred
and common
stock in
exchange
for oil and
gas
properties 7,000 280,000 82,801,781 83,081,781
Additional
Capital
Contributed 22,361 22,361
Net loss (267,148) (267,148)
Balance
at
July 31
1999 7,000 $280,000 6,343,235 6,343 $82,824,142 $(267,148)$82,843,337
The accompanying notes are an integral part of the consolidated financial
statements.
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD NOVEMBER 6, 1998 (INCEPTION)
THROUGH JULY 31, 1999
Cash flows from operating activities:
Net loss $( 267,148)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion expense 30,286
(Increase) decrease in accounts receivable ( 12,491)
Increase (decrease) in accounts payable 7,751
Increase (decrease) in notes payable for start up costs 190,637
Net cash used in operating activities ( 50,965)
Cash flows from investing activities -
Cash flows from financing activities:
Proceeds from notes payable 34,000
Additional capital contributed 22,361
Net cash provided by financing activities 56,361
Net increase in cash 5,396
Cash at November 6, 1998 -
Cash at July 31, 1999 $ 5,396
Supplemental Schedule of Non-Cash Investing
and Financing Activities
Issuance of common and preferred stock
shares in acquisitions of oil and gas
properties $83,087,829
The accompanying notes are an integral part of the consolidated
financial statements.
WOLFSTONE CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business
Wolfstone Corporation (the Company) was incorporated in the State
of Nevada on November 6, 1998. In February of 1999, the Company
acquired out of bankruptcy and merged with Integrated Direct,
Inc. ("IDI"), a dormant public company, in a transaction
accounted for as a reverse merger. The Company issued 295,408
common stock shares in exchange for all of the 5,905,735 common
stock shares of IDI, effecting a 20 to 1 reverse stock split.
There were no assets or liabilities of IDI prior to this
transaction. The Company, an independent oil and gas company in
the development stage, is planning to engage in the exploration
and development of domestic oil and gas properties located in
Texas.
Business Combinations
During the period November 6, 1998 (inception) through July 31,
1999, the Company acquired its oil and gas properties through its
two subsidiaries in transactions accounted for as purchases (Note
3). In both acquisitions, the purchase price was allocated to
the fair values of the assets acquired with no portion of the
purchase price allocated to goodwill.
The Company acquired 100% of the outstanding common stock of
Texas International Petroleum, Inc., a Texas corporation ("TIP"),
in March of 1999, in exchange for 2,000,000 common stock shares
and 2,000 Class B preferred shares valued at $40 per share. TIP
owns oil and gas properties (Note 3). The accompanying
consolidated statements of income include TIP's results of
operations subsequent to March 31, 1999.
TIP acquired 100% of the outstanding common stock of Subsurface
Energy Corp., a Texas corporation ("Subsurface"), on April 9,
1999 in exchange for 1,600,000 TIP Class A preferred convertible
shares valued at $20 per share and 5,000 Class B preferred shares
of the Company valued at $40 per share. The conversion rate is
1:1 and entitles the stockholder to convert into common stock
shares of Wolfstone Corporation. On June 6, 1999, stockholders
of the TIP Class A preferred stock converted their shares into
Wolfstone common stock. The accompanying consolidated statements
of income include Subsurface's results of operations subsequent
to March 31, 1999.
The oil and gas properties acquired have not had any recent
production prior to acquisition.
Principles of Consolidation
The accompanying consolidated financial statements include the
general accounts of the Company and its wholly owned
subsidiaries, TIP and Subsurface Energy Corp. All intercompany
transactions and accounts have been eliminated in the
consolidation and material intervening transactions have been
accounted for.
Method of Accounting for Oil and Gas Properties
The Company uses the successful efforts method of accounting for
oil and gas producing activities as set forth in the Statement of
Financial Accounting Standards No. 19, as amended. Costs to
acquire mineral interests in oil and gas properties, to drill and
equip exploratory wells that find proved reserves, and to drill
and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves, geological
and geophysical costs, and costs of carrying and retaining
unproved properties are expensed as incurred.
Unproved oil and gas properties that are individually significant
are periodically assessed for impairment of value, and a loss is
recognized at the time of impairment by providing an impairment
allowance. Other unproved properties are amortized based on the
Company's experience of successful drilling and average holding
period. Capitalized costs of producing oil and gas properties,
after considering estimated dismantlement and abandonment costs
and estimated salvage values, are depreciated and depleted by the
unit of production method. Support equipment and other property
and equipment are carried at cost and depreciated over their
estimated useful lives.
On sale or retirement of a complete unit of a proved property,
the cost and related accumulated depreciation, depletion, and
amortization are eliminated from the property accounts, and the
resultant gain or loss is recognized. On retirement or sale of a
partial unit of proved property, the cost is charged to
accumulated depreciation, depletion, and amortization with a
resulting gain or loss recognized in income.
On sale of an entire interest in an unproved property for cash or
cash equivalent, gain or loss on the sale is recognized, taking
into consideration the amount of any recorded impairment if the
property has been assessed individually. If a partial interest
in an unproved property is sold, the amount received is treated
as a reduction of the cost of the interest retained.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment are being
provided by accelerated methods for financial and tax reporting
purposes over estimated useful lives of five to seven years.
Depreciation expense for support equipment was $21,141 for the
period ended July 31, 1999.
Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Significant estimates include the valuation of proved undeveloped
reserves related to the oil and gas properties. The oil and gas
properties constitute 99% of total assets at July 31, 1999. The
ultimate recovery of proved undeveloped reserves is dependent on
the success of future development of the properties and in the
Company's ability to complete the development.
Cash Flow
For purposes of the statement of cash flows, cash includes demand
deposits and time deposits with maturities of less than three
months. None of the Company's cash is restricted.
Net loss per share
Basic loss per share amounts are computed by dividing the net
loss plus preferred stock dividends by the weighted average
number of common stock shares outstanding. Diluted loss per
share amounts reflect the maximum dilution that would have
resulted from the conversion of the preferred stock shares (Note
2). Diluted loss per share amounts are computed by dividing the
net loss by the weighted average number of common stock shares
outstanding plus the assumed conversion of preferred stock shares
into an equivalent of 21,000 common stock shares.
For the period ended July 31, 1999, basic loss per share amounts
are based on 3,375,910 weighted average shares of common stock
outstanding, respectively. Diluted loss per share amounts are
based on 3,396,910 weighted average shares of common stock
outstanding, respectively.
2. PREFERRED STOCK
During the period November 6, 1998 (inception) through July 31,
1999, the Company issued 7,000 shares of Class B 5% cumulative
preferred stock, with a $40 par value. Each preferred stock
share is convertible into 3 shares of the Company's common stock
shares. In liquidation, the Class B stockholders are entitled to
receive an amount equal to their purchase price of the shares
plus declared but unpaid dividends. The Class B stockholders
have liquidation preference over the common stockholders. At
July 31, 1999, there were no accrued dividends and the total
liquidation value was $280,000.
3. OIL AND GAS PROPERTIES
On March 31, 1999, TIP issued 10,102,696 shares of common stock
in exchange for an assignment of oil, gas and mineral leases from
Southwin Financial, Ltd. The leases consist of approximately
1,939 acres and are located in Edwards County and Pecos County,
Texas.
The oil and gas properties have been appraised by independent
petroleum geologists. The appraisals classify the petroleum
reserves as proved undeveloped reserves and supports the
following valuation.
Net Present Value Net Present Value
Net Oil Net Gas @ 0% Discount @ 10% Discount
(Bbls) (MCF) $USD $USD
7,160,238 $43,286,964 $13,276,466
49,904,391 $99,909,363 $37,237,081
On April 9, 1999, Subsurface issued 3,209,594 shares of common
stock in exchange for proven oil and gas reserves and certain oil
field equipment from Ravendale Financial, Inc. The cost of the
assets acquired was based on the acquisition costs recorded by
Ravendale Financial, Inc. in January, 1999, which was $32,095,940
for the oil and gas properties and $478,000 for the oil field
equipment.
A subsequent appraisal of the oil and gas properties by
independent petroleum geologists dated July 31, 1999 supports the
following valuation.
Net Present Value Net Present Value
Net Oil Net Gas @ 0% Discount @ 10% Discount
(Bbls) (MCF) $USD $USD
4,043,863 17,057,623 $116,560,721 $41,787,766
The net present value of the oil and gas reserves is based on
estimates of future cash inflows and cash outflows over 30 years.
The cash outflows include direct and indirect production costs.
In addition, future cash outflows include severance and ad
valorem taxes but not income taxes.
Proved undeveloped reserves are defined in the geologists report
as reserves that are recoverable from additional wells yet to be
drilled. Undeveloped reserves are those considered proved for
production by reasonable geological interpretation of adequate
subsurface control in reservoirs that are producing or proved by
other wells but are not recoverable from existing wells. This
classification of reserves requires drilling of additional wells,
major deepening of existing wells, or installation of enhanced
recovery or other facilities.
Proved developed reserves are defined in the geologists report as
reserves recoverable from existing wells which include producing
and non producing wells. Estimates of producing reserves assume
recovery by existing wells producing from present completion
intervals with normal operating methods and expenses. Developed
non producing reserves are in reservoirs behind the casing or at
minor depths below the producing zone and are considered proved
by production from other wells in the field, by successful drill-
stem test, or by core analyses from the particular zones. Non
producing reserves require expense to be brought into production.
4. COMMITMENTS AND CONTINGENCIES
Leases
The Company's home office facilities are currently being provided
without charge by a corporation owned by the Company's president.
The fair rental value of this space provided is not material.
At July 31, 1999, the Company was not obligated under any
noncancelable operating or capital lease agreements.
Year 2000 Computer Compliance
Management believes the Company's computer hardware and the
software is currently in compliance with the year 2000 dating
issues. Furthermore, management does not believe any additional
significant costs will be incurred in dealing with this issue and
the accompanying consolidated financial statements do not contain
any reserve for this contingency. The Company has charged to
expense when incurred approximately $2,000 related to becoming
year 2000 compliant.
Because of the unprecedented nature of the year 2000 issue, its
effects and the success of related remediation efforts will not
be fully determinable until the year 2000 and thereafter.
Management cannot assure that the Company is or will be year 2000
ready, that the Company's remediation efforts will be successful
in whole or in part, or that parties with whom the Company does
business will be year 2000 ready.
Litigation
The Company is subject to legal proceedings and claims which
arise in the ordinary course of its business. Management does
not believe that the outcome of any of those matters will have a
material adverse effect on the Company's consolidated financial
position, operating results or cash flows.
5. INCOME TAXES
The Company uses the accrual method of accounting for tax
reporting purposes. At July 31, 1999, the Company had a net
operating loss carryforward for financial and tax reporting
purposes of approximately $260,000 which expires through the year
2014.
Deferred income taxes are recognized for the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the tax bases of
those assets and liabilities that will result in taxable or
deductible amounts in future years.
For the period ended July 31, 1999, pursuant to Statement of
Financial Accounting Standards No. 109, the Company has
recognized deferred tax assets and liabilities which have been
offset by valuation allowances in the same amount. Significant
components of the Company's deferred tax assets and liabilities
are summarized below.
Deferred tax assets:
Net operating loss carryforward $ 90,830
Deferred tax liability:
Intangible drilling costs -
Depletion ( 3,109)
( 3,109)
87,721
Valuation allowance ( 87,721)
Net deferred tax asset (liability) $ -
A reconciliation of income tax expense at the statutory federal
rate of 34% to income tax expense at the Company's effective tax
rate for the period ended July 31, 1999 is as follows.
Tax benefit computed at statutory rate $( 90,830)
Valuation allowance increase 90,830
Income tax expense $ -
6. FINANCIAL INSTRUMENTS
The Company's financial instruments, which potentially subject
the Company to credit risks, consist of its cash, accounts
receivable and notes payable.
Cash
The Company maintains its cash in bank deposit and other accounts
which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts, and does
not believe it is subject to any credit risks involving its cash.
Accounts receivable
The Company accounts receivable are unsecured and represent oil
production sales not collected at the end of the year.
Management believes it is not exposed to any significant credit
risks affecting accounts receivable and that these accounts
receivable are fairly stated at estimated net realizable amounts.
Notes payable
Management believes the carrying value of these notes represent
the fair value of these financial instruments because their terms
are similar to those in the lending market for comparable loans
with comparable risks.
7. STOCK OPTIONS AND WARRANTS
As of July 31, 1999, the Company has not adopted any stock option
plans and no stock options or warrants have been granted or
issued.
8. NOTES PAYABLE
The following is a summary of notes payable as of July 31, 1999:
Line of Credit from Ravendale Financial, Inc., a
stockholder of the Company, due on August 9,
2000 with interest accruing at 10.50%. Funds
available from this line of credit are $50,000. $ 34,000
Non-interest bearing note payable to Southwin Financial,
Ltd., a stockholder of the Company, due September 15,
2000, issued in exchange for organizational services. 190,000
$ 224,000
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
Assets
Current assets:
Cash $ 1,302
Accounts receivable 11,778
Total current assets 13,080
Oil and gas properties, accounted for
using the successful efforts method:
Oil and gas interests, proved properties, net
of $9,145 of accu mulated depletion 82,600,342
Support equipment, at cost, net of $21,141
of accumulation depreciation 456,859
83,057,201
$83,070,281
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,416
Notes payable 224,000
Total current liabilities 231,751
Commitments and contingencies -
Stockholders' equity:
Preferred stock, $40 par value, 10,000 shares
authorized, 7,000 shares issued and outstanding
of Class B convertible, liquidation value $280,000 280,000
Common stock, $.001 par value, 20,000,000
shares authorized, 6,343,235 shares issued and
outstanding 6,343
Paid in capital in excess of par 82,824,142
Accumulated deficit ( 268,620)
82,841,865
$83,070,281
The accompanying notes are an integral part of the consolidated
financial statements.
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 6, 1998 (INCEPTION)
THROUGH SEPTEMBER 30, 1999
Revenues $ 37,291
Operating expenses:
Production costs 62,086
General and administrative 213,539
Depreciation and depletion 30,286
305,911
Operating loss ( 268,620)
Interest expense -
Loss before income taxes ( 268,620)
Provisions for income taxes -
Net loss $( 268,620)
Net loss per share:
Basic $( 0.08)
Diluted $( 0.08)
The accompanying notes are an integral part of the consolidated
financial statements
WOLFSTONE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD NOVEMBER 6, 1998 (INCEPTION)
THROUGH SEPTEMBER 30, 1999
Cash flows from operating activities:
Net loss $( 268,620)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion expense 30,286
(Increase) decrease in accounts receivable ( 11,778)
Increase (decrease) in accounts payable 4,416
Increase (decrease) in notes payable for
start up costs 190,637
Net cash used in operating activities ( 55,059)
Cash flows from investing activities -
Cash flows from financing activities:
Proceeds from notes payable 34,000
Additional capital contributed 22,361
Net cash provided by financing activities 56,361
Net increase in cash 1,302
Cash at November 6, 1998 -
Cash at September 30, 1999 $ 1,302
Supplemental Schedule of Non-Cash Investing
and Financing Activities
Issuance of common and preferred stock
shares in acquisitions of oil and gas
properties $ 83,087,829
The accompanying notes are an integral part of the consolidated
financial statements.
WOLFSTONE CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wolfstone Corporation (the Company) was incorporated in the State
of Nevada on November 6, 1998. In February of 1999, the Company
acquired out of bankruptcy and merged with Integrated Direct,
Inc. ("IDI"), a dormant public company, in a transaction
accounted for as a reverse merger. The Company issued 295,408
common stock shares in exchange for all of the 5,905,735 common
stock shares of IDI, effecting a 20 to 1 reverse stock split.
There were no assets or liabilities of IDI prior to this
transaction. The Company, an independent oil and gas company in
the development stage, is planning to engage in the exploration
and development of domestic oil and gas properties located in
Texas.
Business Combinations
During the period November 6, 1998 (inception) through September
30, 1999, the Company acquired its oil and gas properties through
its two subsidiaries in transactions accounted for as purchases
(Note 3). In both acquisitions, the purchase price was allocated
to the fair values of the assets acquired with no portion of the
purchase price allocated to goodwill.
The Company acquired 100% of the outstanding common stock of
Texas International Petroleum, Inc., a Texas corporation ("TIP"),
in March of 1999, in exchange for 2,000,000 common stock shares
and 2,000 Class B preferred shares valued at $40 per share. TIP
owns oil and gas properties (Note 3). The accompanying
consolidated statements of income include TIP's results of
operations subsequent to March 31, 1999.
TIP acquired 100% of the outstanding common stock of Subsurface
Energy Corp., a Texas corporation ("Subsurface"), on April 9,
1999 in exchange for 1,600,000 TIP Class A preferred convertible
shares valued at $20 per share and 5,000 Class B preferred shares
of the Company valued at $40 per share. The conversion rate is
1:1 and entitles the stockholder to convert into common stock
shares of Wolfstone Corporation. On June 6, 1999, stockholders
of the TIP Class A preferred stock converted their shares into
Wolfstone common stock. The accompanying consolidated statements
of income include Subsurface's results of operations subsequent
to March 31, 1999.
The oil and gas properties acquired have not had any recent
production prior to acquisition.
Principles of Consolidation
The accompanying consolidated financial statements include the
general accounts of the Company and its wholly owned
subsidiaries, TIP and Subsurface. All intercompany transactions
and accounts have been eliminated in the consolidation and
material intervening transactions have been accounted for.
Method of Accounting for Oil and Gas Properties
The Company uses the successful efforts method of accounting for
oil and gas producing activities as set forth in the Statement of
Financial Accounting Standards No. 19, as amended. Costs to
acquire mineral interests in oil and gas properties, to drill and
equip exploratory wells that find proved reserves, and to drill
and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves, geological
and geophysical costs, and costs of carrying and retaining
unproved properties are expensed as incurred.
Unproved oil and gas properties that are individually significant
are periodically assessed for impairment of value, and a loss is
recognized at the time of impairment by providing an impairment
allowance. Other unproved properties are amortized based on the
Company's experience of successful drilling and average holding
period. Capitalized costs of producing oil and gas properties,
after considering estimated dismantlement and abandonment costs
and estimated salvage values, are depreciated and depleted by the
unit of production method. Support equipment and other property
and equipment are carried at cost and depreciated over their
estimated useful lives.
On sale or retirement of a complete unit of a proved property,
the cost and related accumulated depreciation, depletion, and
amortization are eliminated from the property accounts, and the
resultant gain or loss is recognized. On retirement or sale of a
partial unit of proved property, the cost is charged to
accumulated depreciation, depletion, and amortization with a
resulting gain or loss recognized in income.
On sale of an entire interest in an unproved property for cash or
cash equivalent, gain or loss on the sale is recognized, taking
into consideration the amount of any recorded impairment if the
property has been assessed individually. If a partial interest
in an unproved property is sold, the amount received is treated
as a reduction of the cost of the interest retained.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment are being
provided by accelerated methods for financial and tax reporting
purposes over estimated useful lives of five to seven years.
Depreciation expense for support equipment was $21,141 for the
period ended September 30, 1999.
Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Significant estimates include the valuation of proved undeveloped
reserves related to the oil and gas properties. The oil and gas
properties constitute 99% of total assets at September 30, 1999.
The ultimate recovery of proved undeveloped reserves is dependent
on the success of future development of the properties and in the
Company's ability to complete the development.
Cash Flow
For purposes of the statement of cash flows, cash includes demand
deposits and time deposits with maturities of less than three
months. None of the Company's cash is restricted.
Net loss per share
Basic loss per share amounts are computed by dividing the net
loss plus preferred stock dividends by the weighted average
number of common stock shares outstanding. Diluted loss per
share amounts reflect the maximum dilution that would have
resulted from the conversion of the preferred stock shares (Note
2). Diluted loss per share amounts are computed by dividing the
net loss by the weighted average number of common stock shares
outstanding plus the assumed conversion of preferred stock shares
into an equivalent of 21,000 common stock shares.
For the period ended September 30, 1999, basic loss per share
amounts are based on 3,375,910 weighted average shares of common
stock outstanding, respectively. Diluted loss per share amounts
are based on 3,396,910 weighted average shares of common stock
outstanding, respectively.
2. PREFERRED STOCK
During the period November 6, 1998 (inception) through September
30, 1999, the Company issued 7,000 shares of Class B 5%
cumulative preferred stock, with a $40 par value. Each preferred
stock share is convertible into 3 shares of the Company's common
stock shares. In liquidation, the Class B stockholders are
entitled to receive an amount equal to their purchase price of
the shares plus declared but unpaid dividends. The Class B
stockholders have liquidation preference over the common
stockholders. At September 30, 1999, there were no accrued
dividends and the total liquidation value was $280,000.
3. OIL AND GAS PROPERTIES
On March 31, 1999, TIP issued 10,102,696 shares of common stock
in exchange for an assignment of oil, gas and mineral leases from
Southwin Financial, Ltd. The leases consist of approximately
1,939 acres and are located in Edwards County and Pecos County,
Texas.
The oil and gas properties have been appraised by independent
petroleum geologists. The appraisals classify the petroleum
reserves as proved undeveloped reserves and supports the
following valuation.
Net Present Value Net Present Value
Net Oil Net Gas @ 0% Discount @ 10% Discount
(Bbls) (MCF) $USD $USD
7,160,238 $ 43,286,964 $ 13,276,466
49,904,391 $ 99,909,363 $ 37,237,081
On April 9, 1999, Subsurface issued 3,209,594 shares of common
stock in exchange for proven oil and gas reserves and certain oil
field equipment from Ravendale Financial, Inc. The cost of the
assets acquired was based on the acquisition costs recorded by
Ravendale Financial, Inc. in January, 1999, which was $32,095,940
for the oil and gas properties and $478,000 for the oil field
equipment.
A subsequent appraisal of the oil and gas properties by
independent petroleum geologists dated September 30, 1999
supports the following valuation.
Net Present Value Net Present Value
Net Oil Net Gas @ 0% Discount @ 10% Discount
(Bbls) (MCF) $USD $USD
4,043,863 17,057,623 $116,560,721 $ 41,787,766
The net present value of the oil and gas reserves is based on
estimates of future cash inflows and cash outflows over 30 years.
The cash outflows include direct and indirect production costs.
In addition, future cash outflows include severance and ad
valorem taxes but not income taxes.
Proved undeveloped reserves are defined in the geologists report
as reserves that are recoverable from additional wells yet to be
drilled. Undeveloped reserves are those considered proved for
production by reasonable geological interpretation of adequate
subsurface control in reservoirs that are producing or proved by
other wells but are not recoverable from existing wells. This
classification of reserves requires drilling of additional wells,
major deepening of existing wells, or installation of enhanced
recovery or other facilities.
Proved developed reserves are defined in the geologists report as
reserves recoverable from existing wells which include producing
and non producing wells. Estimates of producing reserves assume
recovery by existing wells producing from present completion
intervals with normal operating methods and expenses. Developed
non producing reserves are in reservoirs behind the casing or at
minor depths below the producing zone and are considered proved
by production from other wells in the field, by successful drill-
stem test, or by core analyses from the particular zones. Non
producing reserves require expense to be brought into production.
4. COMMITMENTS AND CONTINGENCIES
Leases
The Company's home office facilities are currently being provided
without charge by a corporation owned by the Company's president.
The fair rental value of this space provided is not material.
At September 30, 1999, the Company was not obligated under any
noncancelable operating or capital lease agreements.
Year 2000 Computer Compliance
Management believes the Company's computer hardware and the
software is currently in compliance with the year 2000 dating
issues. Furthermore, management does not believe any additional
significant costs will be incurred in dealing with this issue and
the accompanying consolidated financial statements do not contain
any reserve for this contingency. The Company has charged to
expense when incurred approximately $2,000 related to becoming
year 2000 compliant.
Because of the unprecedented nature of the year 2000 issue, its
effects and the success of related remediation efforts will not
be fully determinable until the year 2000 and thereafter.
Management cannot assure that the Company is or will be year 2000
ready, that the Company's remediation efforts will be successful
in whole or in part, or that parties with whom the Company does
business will be year 2000 ready.
Litigation
The Company is subject to legal proceedings and claims which
arise in the ordinary course of its business. Management does
not believe that the outcome of any of those matters will have a
material adverse effect on the Company's consolidated financial
position, operating results or cash flows.
5. INCOME TAXES
The Company uses the accrual method of accounting for tax
reporting purposes. At September 30, 1999, the Company had a net
operating loss carryforward for financial and tax reporting
purposes of approximately $260,000 which expires through the year
2014.
Deferred income taxes are recognized for the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the tax bases of
those assets and liabilities that will result in taxable or
deductible amounts in future years.
For the period ended September 30, 1999, pursuant to Statement of
Financial Accounting Standards No. 109, the Company has
recognized deferred tax assets and liabilities which have been
offset by valuation allowances in the same amount. Significant
components of the Company's deferred tax assets and liabilities
are summarized below.
Deferred tax assets:
Net operating loss carryforward $ 90,830
Deferred tax liability:
Intangible drilling costs -
Depletion ( 3,109)
( 3,109)
87,721
Valuation allowance ( 87,721)
Net deferred tax asset (liability) $ -
A reconciliation of income tax expense at the statutory federal
rate of 34% to income tax expense at the Company's effective tax
rate for the period ended September 30, 1999 is as follows.
Tax benefit computed at statutory rate $( 90,830)
Valuation allowance increase 90,830
Income tax expense $ -
6. FINANCIAL INSTRUMENTS
The Company's financial instruments, which potentially subject
the Company to credit risks, consist of its cash, accounts
receivable and notes payable.
Cash
The Company maintains its cash in bank deposit and other accounts
which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts, and does
not believe it is subject to any credit risks involving its cash.
Accounts Receivable
The Company accounts receivable are unsecured and represent oil
production sales not collected at the end of the year.
Management believes it is not exposed to any significant credit
risks affecting accounts receivable and that these accounts
receivable are fairly stated at estimated net realizable amounts.
Notes payable
Management believes the carrying value of these notes represent
the fair value of these financial instruments because their terms
are similar to those in the lending market for comparable loans
with comparable risks.
7. STOCK OPTIONS AND WARRANTS
As of September 30, 1999, the Company has not adopted any stock
option plans and no stock options or warrants have been granted
or issued.
8. NOTES PAYABLE
The following is a summary of notes payable as of September 30,
1999:
Line of Credit from Ravendale Financial, Inc., a
stockholder of the Company, due on August 9,
2000 with interest accruing at 10.50%. Funds
available from this line of credit are $50,000. $34,000
Non-interest bearing note payable to Southwin Financial,
Ltd., a stockholder of the Company, due September 15,
2000, issued in exchange for organizational services. 190,000
$224,000
PART III.
ITEMS 1 and 2. INDEX TO EXHIBITS; DESCRIPTION OF EXHIBITS.
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
WOLFSTONE CORPORATION
Date: December 17, 1999. By: /s/ Garry C. Duncan
Garry C. Duncan, President
Special Power of Attorney
The undersigned constitute and appoint Garry C. Duncan their true
and lawful attorney-in-fact and agent with full power of
substitution, for him and in his name, place, and stead, in any
and all capacities, to sign any and all amendments, including
post-effective amendments, to this Form 10-SB Registration
Statement, and to file the same with all exhibits thereto, and
all documents in connection therewith, with the U.S. Securities
and Exchange Commission, granting such attorney-in-fact the full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorney-in-fact may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this registration statement has been signed by the
following persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Garry C. Duncan Chief Executive Officer December 17, 1999
Garry C. Duncan Director
/s/ Robert E. McMillan Chief Financial Officer December 17, 1999
Robert E. McMillan (principal financial
and accounting officer
(Director)
/s/ Dennis J. O'Leary Vice President, Director December 17, 1999
/s/ Thomas Reimer
Thomas Reimer
/s/ Thomas Reimer Vice President, Director December 17, 1999
/s/ Thomas Reimber
/s/ Stephen F. Burg Secretary, Director December 17, 1999
Stephen F. Burg
/s/ William D. Batts Director December 17, 1999
William D. Batts
/s/ Thomas P. Page Director December 17, 1999
Thomas P. Page
/s/ Marie N. Rolfe Director December 17, 1999
Marie N. Rolfe
/s/ Billy Bob Williams Director December 17, 1999
Billy Bob Williams
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
2 Articles of Merger See Below
3.1 Articles of Incorporation See Below
3.2 Bylaws See Below
10.1 Acquisition Agreement See Below
10.2 Acquisition Agreement See Below
10.3 Acquisition Agreement See Below
10.4 Consulting and Service Agreement See Below
10.5 Assignment of Oil & Gas Lease See Below
10.6 Assignment of Oil & Gas Lease See Below
24 Special Power of Attorney See Signature Page
27 Financial Data Schedules See Below
ARTICLES OF MERGER
OF
INTEGRATED DIRECT, INC.,
A DELAWARE CORPORATION
INTO
WOLFSTONE CORPORATION,
A NEVADA CORPORATION
Articles of Merger made this made this 24th day of February, 1999
by Integrated Direct, Inc., a Delaware corporation, hereinafter
called the "Delaware Company", and Wolfstone Corporation, a
Nevada corporation, hereinafter called the "Nevada Company", the
two corporation being herein after sometimes called the
Constituent Companies.
WHEREAS, the Board of Directors of each of the Constituent
Companies deem it advisable and generally to the welfare of the
Constituent Companies that the Delaware Company merge with and
into the Nevada Company under and pursuant to the provisions of
Title 8 Section 258 of the Delaware General Corporation Statutes
and Section 78.475 of the Nevada Revised Statues and in
accordance with Section 368(a)(1)(f) of the Internal Revenue Code
of 1986 as amended in order to change the domicile of the
Delaware Company to the State of Nevada, and
WHEREAS, the Delaware Company is a corporation duly organized
under the laws of the State of Delaware having been incorporated
March 15, 1990, has authorized capital stock consisting of
35,000,000 shares of common stock, $.001 par value per share.
Of which 12,299,664 shares have been duly issued and are now
outstanding, and
WHEREAS, the Nevada Company is a corporation duly organized under
the laws of the State of Nevada having been incorporated November
6, 1998, has authorized capital stock consisting of 20,000,000
shares of which all are voting shares of common stock $.001 par
value per each share, of which 100 shares are issued and
outstanding and are held by the Delaware Company, and
WHEREAS, the laws of the States of Delaware and Nevada permit
such a merger, and the Constituent companies desire to merge
under and pursuant to the provisions of the laws of their
respective states, and
WHEREAS, the Nevada Company and the Delaware Company shareholders
have duly approved a merger of the Delaware Company into the
Nevada Company.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and of the mutual
benefits hereby provided, it is agreed by and between the parties
hereto as follows:
1. MERGER: The Delaware Company shall be and hereby is merged
into the Nevada Company.
2. EFFECTIVE DATE: These Articles of Merger shall become
effective immediately upon filling in the office of the Nevada
Secretary of State's Office, the time of such effectiveness being
herein after called the "Effective Date."
(a) For all purposes of the laws of the State of Delaware, these
Articles of Merger and the merger herein provided for shall
become effective and the separate existence of the Delaware
Company a Delaware corporation, except insofar as it may be
continued by statute, shall cease on the Effective Date.
(b) For all purposes of the laws of the State of Nevada, these
Articles of Merger and the merger herein provided for shall
become effective and the separate existence of the Delaware
Company except insofar as they may be continued by statute, shall
cease as soon as; these Articles of Merger shall have been filed
in the office of the Secretary of State of the State of Nevada.
(c) The corporate identity, existence, purposes, powers,
objects, franchises, rights and immunities of the Delaware
Company shall continue unaffected and unimpaired by the merger
hereby provided for; and the corporate identities, existence,
purposes, powers, objects, franchises, rights and immunities of
the Delaware Company shall be continued in and merged into the
Surviving Company and shall be fully vested therewith.
(d) On the Effective Date the Constituent Companies shall so
become a single corporation.
3. SURVIVING CORPORATION: The Nevada Company shall survive
the merger herein contemplated and shall continue to be governed
by the laws of the State of Nevada and the separate corporation
existence of the Delaware Company shall cease forthwith upon the
Effective Date, provided, however, that the Nevada Company may be
served with process in the State of Delaware in any proceeding
for the enforcement of the rights of a dissenting shareholder of
the Delaware Company against the Nevada Company. The Nevada
Company has irrevocably adopted Delaware Statue (61-1-1 et Seq.)
for the purpose of protecting the rights of dissenting
shareholders, if any, to this Plan of Merger.
4. ARTICLES OF INCORPORATION: The Articles of Incorporation of
the Nevada Company as presently exist shall be the Articles of
Incorporation of the Surviving Company at the effective date.
5. BYLAWS: The bylaws of the Nevada Company as presently
exist shall be the By-Laws of the Surviving Company on the
effective date.
6. BOARD OF DIRECTORS AND OFFICERS: The members of the board
of directors and the officers of the Surviving Company
immediately after the effective date of the merger shall be those
persons who were the members of the board of directors and the
officers, respectively, of the Nevada Company immediately prior
to the effective date of the merger, and such persons shall serve
in such offices, respectively, for the terms provided by law or
in the By-laws, or until their respective successors are elected
and qualified.
7. AUTHORITY TO CONDUCT BUSINESS: The Nevada Company represent
that it has not filed an application for authority to do business
in Delaware. The Surviving Company will conduct no such business
in Delaware without first filing and having such application
approved.
The Surviving Company will file its application for authority to
conduct business in any States it plans to do business in
immediately upon completion of the Merger.
8. CONVERSION OF SHARES: The manner of converting shares of
the Delaware Company into shares of the Surviving Company shall
be as follows:
Immediately upon the Effective Date of Merger, each share of
stock of the Delaware Company outstanding, of which approximately
44 percent of the issued and outstanding shares of the Delaware
Company are in the hands of the public, without any action on the
part of the holder thereof shall automatically become and be
converted into common stock of the Surviving Company at the rate
of 1 share of common stock of the Surviving Company for each 20
shares of the common stock of the Delaware Company. Each
outstanding certificate representing shares of the common stock
of the Delaware Company shall thereupon be deemed, for all
corporate purposes, to evidence the ownership of the number of
fully paid, non-assessable shares of common stock of the
Surviving Company into which such shares of common stock of the
Delaware Company shall be so converted.
9. RIGHTS OF SHAREHOLDERS: After the Effective Date of Merger,
any holder of a certificate or certificates which theretofore
represented shares of Common Stock of the Delaware Company may,
but shall not be required to surrender the same to the Transfer
Agent of the Surviving Corporation, First American Stock
Transfer, Inc., PO Box 47700-155, Phoenix, Arizona 85068-7700 and
shall thereupon be entitled to receive in exchange therefore a
certificate representing the number of shares of Common Stock of
the Surviving Corporation into which the shares of Common Stock
of the Delaware Company theretofore represented by such
certificate or certificates shall have been converted.
10. AUTHORIZATION: The parties hereto acknowledge and
respectively represent that this Merger Agreement is authorized
by the laws of the respective jurisdictions of the Constituent
Companies and that the matter was approved at a special
shareholders meeting of the respective companies at which the
shareholders voted as follows:
TOTAL COMMON SHARES VOTED VOTED
NAME OF CORPORATION ENTITLED TO VOTE FOR AGAINST
The Delaware company 12,299,664 6,893,929 -0-
The Nevada Company 100 100 -0-
11. RTHER ASSURANCES OF TITLE: As and when requested by the
Surviving Corporation or by its successors or assigns, the
Delaware Company will execute and deliver or cause to be executed
and delivered all such deeds and instruments and will take or
cause to be taken all such further action as the Surviving
Corporation may deem necessary or desirable in order to vest in
and confirm to the Surviving Corporation title to and possession
of any property of any of the Constituent Companies acquired by
the Surviving Corporation by reason or as a result of the merger
herein provided for and otherwise to carry out the intent and
purposes hereof, and the officers and directors or the Delaware
Company and the officers and directors of the Surviving
Corporation are fully authorized in the name of the respective
Constituent Companies or otherwise to take any and all such
action.
12. SERVICE OF PROCESS ON SURVIVING CORPORATION: The Surviving
Corporation agrees that it may be served with process in the
State of Delaware in any proceeding for enforcement of any
obligation of the Delaware Company as well as for the enforcement
of any obligation of the Surviving Corporation arising from the
merger, including any suit or other proceeding to enforce the
right of any shareholder as determined in appraisal proceedings
pursuant to the provisions of the General Corporation Law of
Delaware and hereby irrevocably appoints the Secretary of State
of Delaware as its agent to accept service of process in any suit
or other proceeding. Copies of such process shall be mailed to
the Surviving Company's Resident Agent: Swanson Law Offices,
Chtd., 1200 South Eastern Avenue, Las Vegas, Nevada 89701, until
further notice.
13. SHAREHOLDERS RIGHT TO PAYMENT: The Surviving Corporation
agrees that subject to the provisions of the General Business
Corporation Law of the State of Delaware, it will pay to the
shareholders of the Delaware Company the amounts, if any, to
which such shareholders may be entitled under the provisions of
the above statutes of the laws of Delaware as the case may be.
14. ABANDONMENT: This Plan of Reorganization and Merger may be
abandoned (a) by either Constituent Corporation, acting by its
Board of Directors, at any time prior to its adoption by the
shareholders of both of the Constituent Companies as provided by
law, or (b) by the mutual consent of the Constituent Companies,
acting each by its Board of Directors, at any time after such
adoption by such shareholders and prior to the effective date of
the merger. In the event of abandonment of the Plan of
Reorganization and Merger pursuant to (a) above, notice thereof
shall be given by the Board of Directors of the Constituent
Company so terminating to the other Constituent Company, and
thereupon, or abandonment pursuant to (b) above, this Plan of
Reorganization and Merger shall become wholly void and of no
effect and there shall be no further liability or obligation
hereunder on the part of either of the Constituent Companies or
of its Board of Directors or Shareholders.
IN WITNESS WHEREOF, each of the corporate parties hereto pursuant
to authority duly granted by its Board of Directors, has caused
this Plan of Reorganization and Merger to be executed by its
respective officers and its corporate seal to be affixed thereto.
Wolfstone Corporation Integrated Direct, Inc..
By: /s/ Gary C. Duncan By: /s/ Robert L. Cashman
Gary C. Duncan Robert L. Cashman
President & Director President & Director
Attest: Attest:
/s/ M. Nicole Rolfe /s/ Karen J. Fowler
M. Nicole Rolfe Karen J. Fowler
Secretary Secretary
State Of California )
)ss
County Of Orange )
This instrument was acknowledged before me this 24th day of
February, 1999, by Robert L. Cashman and Karen J. Fowler known
to me to be the Officers and Directors of Integrated Direct,
Inc., as set forth under their respective signatures.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in said County and State this 24th day of February, 1999.
By: /s/
Notary Public
State Of California )
)ss
County Of Sacramento )
This instrument was acknowledged before me this 24th day of
February, 1999, by Gary C. Duncan and M. Nicole Rolfe known to me
to be the Officers and Directors of the Wolfstone Corporation, as
set forth under their respective signatures.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in said County and State this 24th day of February, 1999.
By: /s/
Notary Public
ARTICLES OF
INCORPORATION
OF
WOLFSTONE CORPORATION
Pursuant to the provisions 78.400 of the Nevada Revised Statutes,
the undersigned corporation adopts these restated Articles of
Incorporation. All of the Articles of Incorporation as now filed
are stricken in their entirety and the following Articles are
substituted as if they had been a part of the original Articles
of Incorporation:
ARTICLE I
The complete name of the Corporation is to be:
WOLFSTONE CORPORATION
ARTICLE II
Its principal office in the state of Nevada is to be located at
852 North Lamb, in the City of Las Vegas, County of Clark. The
registered agent in charge thereof is Sam C. Sottosanti.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the
general corporation laws of Nevada.
ARTICLE IV
This Corporation shall have the authority to issue an aggregate
of twenty million (20,000,000) shares of common capital stock,
par value one mill ($0.001) per share for a total capitalization
of twenty thousand dollars ($20,000). Each share shall be
entitled to the same dividend, liquidation, and voting rights.
No shareholder shall have cumulative voting rights for the
purpose of electing a director.
ARTICLE V
The members of the governing board of this Corporation shall be
styled directors and the number thereof at the inception of this
Corporation shall be one (1). The number of Directors may from
time to time be increased or decreased in such manner as shall be
provided for by the By-Laws of the Corporation. Director(s) need
not be Shareholders of this Corporation, nor residents of the
State of Nevada. The name and post office address of the first
Board of Directors who shall hold office until his successor is
duly elected, is as follows:
Name Address
Harold D. Blethen 3115 Yuma Court
Stockton, California 95205
ARTICLE VI
The capital stock of this Corporation, after the amount of the
subscription price has been paid in, shall never be assessable,
or assessed to pay debts of this Corporation.
ARTICLE VII
The name and address of the Incorporator signing these Articles
of Incorporation is as follows:
Name Address
Harold D. Blethen 3115 Yuma Court
Stockton, California 95205
ARTICLES VIII
The period of duration of this Corporation shall be perpetual
unless otherwise amended by the Shareholders.
ARTICLE IX
The Directors shall have the power to make and to alter or amend
the By-Laws; to fix the amount to be reserved as working capital
and to authorize and cause to be executed mortgages and liens,
without limit as to amount, upon the property and franchise of
this Corporation.
With the consent in writing, and pursuant to a vote of the
majority of the holders of the capital stock issued and
outstanding, the Directors shall have the authority to dispose
of, in any manner, the whole property of this Corporation.
The By-Laws shall determine whether and to what extent the
accounts and books of this Corporation, or any of them shall be
open to the inspection of the shareholders; and no shareholder
shall have any right of inspection of any account, book, or
document of this Corporation, except as conferred by law or By-
Laws or by resolution of the shareholders.
The shareholders and directors shall have the power to hold
meetings and keep the books, documents and papers of this
Corporation, except as conferred by law or By-Laws or by
resolution of the shareholders.
The shareholders and directors shall have the power to hold
meetings and keep the books, documents and papers of the
Corporation outside of the State of Nevada, at such places as may
be from time to time designated by the By-Laws or by resolution
of the shareholders and directors, except as otherwise required
by the laws of Nevada.
It is the intention that the objects, purposes and powers
specified in Article III hereof shall, except where otherwise
specified in Article III, be nowise limited or restricted by
reference to or inference from the terms of any other clause or
Article on this Certificate of Incorporation, but that the
object, purpose and powers specified in Article III and each of
the clauses or Articles of this Charter shall be regarded as
independent objects, purposes, and powers.
ARTICLE X
After the formation of this Corporation, shareholder(s) and non-
shareholders alike shall be entitled to purchase and/or subscribe
for shares of this Corporation which may thereafter be offered
for sale. No purchaser shall have any rights greater than any
other to purchase stock of this corporation and shall not have
any preemptive rights as that term is defined under NRS 78.265.
IN WITNESS WHEREOF, I, the undersigned constituting the sole
incorporator and intended shareholder, for the purpose of forming
a corporation under the laws of the State of Nevada, do make,
file and record these Articles of Incorporation, and do certify
that the facts herein are true and I have accordingly hereunto
set my hand this 6th day of November, 1998.
/s/ Harold D. Blethen
Harold D. Blethen
County of Sacramento )
) ss
State of California )
On this 6th day of November, 1998 before me, a Notary Public in
and for said County and State, personally appeared Harold D.
Blethen known to me to be the person whose name is subscribed to
the foregoing instrument, who duly acknowledged to me that he
executed the same for the purpose therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in said County and State this 6th day of November, 1999.
By: /s/
Notary Public
BYLAWS
OF
WOLFSTONE CORPORATION
ARTICLE I
Shareholders
Section 1. Place of Meeting.
Meetings of shareholders, including annual, or special may
beheld at the office of the Corporation in the State of Nevada,
or at such other places as may be more timely appropriate, or
at such locations as may be elected by the Board of Directors for
reasons specific to the business
of the Corporation.
Section 2. Annual Meetings.
a) The annual meetings of shareholders shall be held on the
15th day of June in each year, if not a legal holiday. If a legal
holiday, then the meeting shall be held on the next succeeding
business day, at 1:30 PM., time local to the chosen geographical
area (Example: Pacific Time; Mountain Time; or Eastern Time.).
However, the Board of Directors may elect to set the annual
shareholders' meeting on a weekend day, if this is deemed
appropriate in any given instance. The actual date and time of
any respective annual shareholders' meeting maybe adjusted if.
deemed appropriate by the Board of Directors. The adjusted date
should not exceed sixty (60) days prior to, or subsequent to, the
regular date as reflected in these By-Laws.
b) At such day and hour as the shareholders' annual meeting
shall be held, there shall be an election of the members of the
Board. of Directors of the Corporation, by plurality vote.
Reports shall be heard; proposals shall be heard, and voted upon
if appropriate, and general affairs of the Corporation shall be
considered. Such other business as may properly be brought before
the meeting and requiring such, shall be transacted.
Section 3. Special Meetings.
Special meetings of the shareholders, for any purpose or
purposes whatsoever, may be called by the President, or by the
Board of Directors, or by any two or more members thereof, or by
one or more shareholders holding not less than one fifth (1/5) of
the voting power of the Corporation.
Section 4. Shareholder Powers
Shareholders having by ownership or proxy at least fifty one
(51%) percent of the voting power, upon calling and holding a
special meeting, or at an annual meeting, of the shareholders
may, without an open statement of reason, dismiss the entire
Board of Directors, or dismiss certain members of the Board of
Directors, including the Chairman, without an open statement of
reason. A quorum of shareholders undertaking such action, need
only state in the Minutes of the Special Meeting, that the action
was taken in the best interests of the shareholders. Notice of
such action must be given to tile respective members of the
Board, or to all members of the Board or to the Chairman, in
writing. A quorum of shareholders, having substantial management
and working knowledge of the business of the corporation, may
with stated, good and reasonable reason, issue a formal request
to the Board to dismiss any officer, consultant or other
employee, if for the good of the shareholders. A majority vote of
shareholders cannot break a contracted individual serving the
corporation, but can issue instructions to the Board to, not
renew a respective contract, if for the best interests of the
shareholders.
Section 5. Notice of Meetings.
a) Notices of meetings, annual or special, shall be given in
writing to the shareholders entitled to vote. Notice shall be
prepared accompanied by a proxy form, and mailed by the
Corporation's stock transfer agency. In lieu of this procedure,
Notice maybe given, being signed by the corporate secretary; the
assistant secretary; the president; or a vice president.
b) Notices of meetings shall be sent to the shareholder's
address as reflected on the books of' the corporation's stock
transfer agent or registrar, and shall be postmarked not less
than twenty (20) days nor more than sixty (60) days, prior to a
scheduled meeting.
c) Notice of any meeting of shareholders shall specify the
place, the day, and the hour of the meeting, and the general
nature of points to be covered, as well as noting the most
important issues to be covered. In cases of special meetings, the
specific nature of the business to be transacted and voted upon
shall be made clearly evident.
d) In event of the unusual need for an affirmative vote by
shareholders, in order for the corporation to proceed with a
transaction for such as would be voted by the Board of Directors
to be a benefit to the corporation, but wherein the allowable
time factor precludes a formal notification to shareholders in
general, then communication to such a group of shareholders as
hold over fifty percent (50+%) of the control, voting shares of
the corporation, by means of phone or facsimile shall be
acceptable. Signatures expressing an affirmative vote, or veto,
of over fifty percent of the voting shares of the corporation,
received by means of facsimile, directed to the Chief Executive
Officer of the corporation or to the Chairman of the Board, shall
be acceptable, and shall be enforceable as a bonafide vote of the
shareholders, empowering the management of the corporation to
immediately proceed with the respective transaction; and shall be
presented by the Corporate Secretary For automatic ratification
at the next formally scheduled annual or special meeting of the
corporation's shareholders. In a case such as this described,
hard copy with original signatures, of all such facsimiles sent
by shareholders voting in excess of the required 50+%, shall be
immediately mailed by the said shareholders to the Corporate
Secretary, for the corporation's legal records.
e) When a meeting is adjourned (a Recess) for an uncertain
period, of thirty days or more, notice of the adjourned (in
effect, postponed) meeting shall be given as in case of an
original meeting. Otherwise, upon an adjournment for a specific
period of hours or days when at such hour or day, the business of
the meeting is scheduled to be completed, it shall not be
necessary to give any notice of the continuance or of the
business to be transacted, other than by announcement the meeting
at which such adjournment is taken.
Section 6. Consent To Shareholder's Meeting.
The transactions of any meeting of shareholders, however
called and noticed, shall be valid as though had at a meeting
duly held after regular call and notice, if a quorum be present
either in person or by proxy. Before or after such meeting, all
shareholders entitled to vote and not present in person, nor
having executed a proxy for said meeting, shall sign a written
waiver of notice or a consent of the holding of such meeting, or
the minutes of said meeting shall be approved at the next regular
or special meeting of the shareholders, when at such time the
transaction(s) conducted at the subject meeting shall be
ratified. All waivers, consents and approvals by shareholders
shall be maintained by filing a copy of same with the records of
the corporation along with a copy of the minutes of any meeting.
The originals shall be maintained in separate portfolio or
binders, in conjunction with and in close proximity to the Books
of Record of original Minutes of the Shareholder Meetings (Two
sets of these documents need to be maintained for legal purposes,
in event of the destruction of one set.)
Section 7. Voting.
The agent or officer having charge of the stock transfer
books of the corporation shall make, at least twenty days before
each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof;
arranged in alphabetical order, with address of and number of
shares held by each, which list, for a period of twenty days
prior to such meeting shall be kept on file at the principal
office of the corporation and shall be subject to inspection by
any stockholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting. A stock
transfer book comprised of copies of `proof of transfer pages'
received by the corporation from time to time direct from the
transfer and registrar agent, or a transfer book maintained by
the corporation, if corporation acts as its own stock transfer
agent, with said corporate stock records Certified by the
Secretary and President, shall be prima facie evidence as to who
are the stockholders entitled to vote and to examine such stock
transfer books.
Section 8. Quorum.
a) That "majority" of the shares entitled to vote, shall equate
to a quorum, and shall be at least fifty one (51%) percent of the
issued voting shares of the corporation. The holders of a
majority of the shares entitled to vote thereat, present in
person, or represented by proxy, shall be requisite and shall
constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by law, by
the articles of incorporation, or by these By-Laws.
b) If such majority shall not be present or represented by any
meeting of the shareholders, the shareholders entitled to vote
thereat, present in pen on, or by proxy4 shall have power to
adjourn the meeting from time to time, until the requisite amount
of voting shares shall be present. At such adjourned meeting at
which the requisite amount of voting shares shall be represented,
any business may be transacted which might have been transacted
at the meeting as originally notified.
Section 9. Voting Rights.
a) The Company may have one (1) class of common shares, or two
(2) classes of common shares: A-Common Stock and B-Common Stock;
and Preferred Stock, one (1) class or Class A and Class B. If two
classes of Preferred shares, then each share of Class B Preferred
Stock shall represent one thousand (1000) votes, and shall be
non-transferable, except by vote of a majority of duly authorized
and issued Class B Preferred shareholders.
b) Only such persons whose names and shares entitled to vote
stand on the stock records of the corporation on the day of any
meeting of the shareholders, or on such other day prior to any
meeting of the shareholders, as may be determined by the Board of
Directors, as the date for determination of shareholders of
record shall be entitled to vote at such meeting. Each Common
Share shall be entitled to one vote. Each share of Class-B
Preferred Stock shall be entitled to 1,000 votes. Class A-
Preferred has no voting rights Cumulated voting shall not be
allowed.
Section l0. Proxies.
At all meetings of stockholders a stockholder may vote by
proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Proxies must be filed before or at
the time of any shareholders meeting. Proxies are to be filed
with the secretary of the corporation, or another entity, such as
the corporate registrar, if these types of services are provided.
ARTICLE II
Directors
Section 1. Powers.
Subject to the limitation of the Articles of Incorporation;
of the By-laws, and the law of the State of Domicile of the
corporation, all corporate powers shall be exercised by, or under
the authority of the Board of Directors; and the business affairs
of this corporation shall be exercised under authority of the
Board of Directors, subject to all action as authorized or
approved, by the majority vote of the shareholders.
Section 2. Number and Qualification.
The authorized number of directors of the corporation shall
be no less than three (3) but any additional number of directors
may be elected according to the discretion and vote of the
shareholders entitled to exercise the majority of the voting
power of the corporation. The corporation shall have an even
number of directors, and a Chairman. By majority vote of the
shareholders, a Board of Directors may be replaced by a Board of
Trustees.
Section 3. Election and Tenure of Office.
The Directors shall be elected by ballot at the annual
meeting of the shareholders and shall generally serve for one
year or until their successors have been elected and have
qualified. Their term of office shall begin immediately
following an election. Exception: Chairman of The Board, or any
other director being under specific contract with the corporation
creating a circumstance legal but contrary to the general rule,
or in event of an unusual circumstance, whereby the Board or some
member of the Board would be dismissed prior to the end of a
twelve month period..
Section 4. Vacancies
a) Vacancies in the Board of Directors may be fl1~ed by a
majority vote of the remaining directors, even though less than a
quorum, or by a sole remaining director, and each director
elected shall hold office until his successor is elected at an
annual meeting of shareholders or at a special meeting called for
that purpose Exception: Any director elected by the Board of
Directors to fill a vacancy, may be relieved of their
directorship and a replacement elected by the Board of Directors.
b) The shareholders may at any time elect a director to fill
any vacancy not filled by the directors, and may elect additional
directors at a meeting whereby shareholder's voting authorizes an
increase in the number of directors.
c) A vacancy or vacancies shall be deemed to exist in case of
the death, resignation or removal of any director, or if the
shareholders shall increase the authorized number of directors,
but shall fail at said meeting at which such increase is
authorized, or at an adjournment thereof, to elect the additional
director(s) provided for.
d) If the Board of Directors accept the resignation tendered
by a director, to take effect at a future time, the Board or the
shareholders, shall have the power to elect a successor to take
office when the said resignation shall become effective.
e) No affirmative vote for reduction in number of directors
shall have the effect to removal of any director prior to
expiration of his term of office.
Section 5. Place of Meetings.
Meetings of the Board of Directors shall be held at the
Executive Offices of the corporation or elsewhere, or at any
location designated for that purpose from time to time, by
resolution of the Board of Directors or written consent of all
members of the Board given before or after the meeting and filed
with the Secretary of the corporation. A control shareholder or
holder of proxies for at least 51% of the voting shares may
attend any meeting of the Board of Directors, and may express
opinions, but may not vote.
Section 6. Other Regular Meetings.
Regular meetings of the Board of Directors shall be held at
such time as shall be fixed by resolution of' the Board and under
no circumstances less than once a year.
Section 7. Special Meetings - Notices.
a) Special meetings of the Board of Directors for any purpose
or purposes shall be called at any time by the President, or if
he is absent or unable or refuses to act, by the Executive Vice
President, or by any Vice President, or any two directors.
b) Written notice of the time and place of special meetings
shall be delivered personally to the directors or sent to each
director by letter, facsimile or by telegram or other type of
express mail, charges paid, addressed to him at the address as it
is shown upon the records of the corporation, or to another
company office in which any respective director operates, or if
it is not shown on such records as are readily ascertainable,
then at the place in which the meetings of the directors are
regularly held. In event such notice is mailed by any class,
telegraphed, or sent by facsimile, it shall be done so in a time
frame which under normal circumstances would assure delivery of
the notice at least 24 hours prior to such meetings. Such means
of notification as provided above shall be due, legal, and
personal notice to any director.
Section 8. Waiver of Notice.
When all of the directors arc present at any director's
meeting, however called or noticed, and sign a written consent
thereto on the records of such meeting, or if a majority of the
directors are present, and if those present sign a waiver of
notice in writing, whether prior to or after the holding of such
meeting, and thereafter said waiver shall be filed with the
secretary of the corporation, the transactions thereof arc as
valid as if had at a meeting regularly called and noticed. In
event only a majority of the directors are present, but the
majority number of directors present is that which shall be
required to carry a vote, had the total number of directors of
the corporation been present, and those present vote unanimously
for or against any proposition of the corporation's business, the
transactions thereof are as valid as if had at a meeting
regularly called and noticed, and attended by the total of the
corporation's board members, since the attendance of all of the
corporation's board members would not alter the outcome of the
vote as carried.
Section 9. Directors Acting in a Quorum Only
Without a Meeting By Written Consent.
Any action required or permitted to be taken by the Board of
Directors, may be taken without a physical meeting, and shall
carry the same force and effect as if done by the required
majority number of board members, as if had at a meeting
regularly called, noticed and attended by the same majority of
board members or by the total number of board members. Any
document or certificate relating to an action so taken by written
consent, shall state thereon that the carrying vote was taken by
written consent of the required majority of the Board of
Directors of the corporation, in lien of a physical meeting
called and noticed, and that the By-Laws of the corporation
authorize the directors to so act, when deemed necessary for the
best benefit of the corporation.
Section 10. Notice of Adjournment.
Notice of the time and place of holding an adjourned meeting
need not be given to absent directors, if the time and place be fixed at
the meeting adjourned.
Section 11. Quorum.
a) That 'majority' of directors necessary to constitute a
quorum, or to carry a vote, either at a meeting with only a
quorum in attendance, or with the total of the Board of Directors
in attendance, shall be one half of the number of directors, plus
at least one (1). In event all the directors are in attendance
at any meeting of the board, then, one half of the number of
directors plus one additional member shall be required to carry
an affirmative vote or veto on any transaction In event one half
of the directors vote affirmative and one half vote against any
transaction or proposed proposition placed before the board,
then, the Chairman must be the additional one (1) and shall cast
the deciding vote for or against that as was proposed. The
heretofore stated requirements shall also be requirements for
directors acting as a quorum without a meeting.
b) A majority of the number of directors as duly installed,
according to the Articles or By-Laws shall be necessary to
constitute a quorum for the transaction of the corporation's
business, and any action requiring a quorum of the directors to
be present at any meeting.
Section 12. Removal of Directors.
Any and all of the directors may be removed for cause by
vote of the shareholders or by action of the board. Directors may
be removed without cause only by the shareholders.
Section 13. Resignation.
A director may resign at any time by giving written notice
to the board, the president or the secretary of the corporation.
Unless otherwise specified in the notice, the resignation shall
take effect upon receipt thereof by the board or such officer,
and the acceptance of the resignation shall not be required to
render the resignation effective.
Section 14. Compensation
No compensation shall be paid to directors as such, for
their services, except by resolution of the board, a fixed sum
and expenses for actual attendance at each regular or special
meeting of the board may be authorized. Nothing herein contained
shall be construed to preclude any director serving the
corporation in any other capacity and receiving compensation
therefore.
Section 15. Presumption of Assent
A director of the corporation who is present at a meeting of
the directors at which action on any corporate matter is taken
who does not vote shall be presumed to assent to the action
taken unless his dissent shall be entered in the minutes of the
meeting, or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting
before the adjournment or immediately after the adjournment of'
the meeting. Such right of silent dissent' call be ruled against,
at the beginning of any such meeting, arbitrarily by the
Secretary of the corporation, or by the acting secretary of the
meeting, or by the acting secretary of the meeting at the direct
request of any one director or all directors. Such right to
dissent shall not apply to a director who initially voted in
favor of such action or transaction.
ARTICLE III
Officers
Section 1. Officers.
The officers of the corporation shall be a President; a
Secretary; a Treasurer; and at the discretion of the Board, an
Executive Vice President; one or more Executive Vice Presidents
of various corporate divisions or departments; one or more Vice
Presidents; one or more Assistant Secretaries; one or more
Assistant Treasurers; and such other officers as may be appointed
in accordance with provisions of Section 3 of this Article. One
person may hold mote than one office excepting those offices of
President and Secretary.
Section 2. Elections
The officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 3, or
Section 5, of this Article or such officer(s) who may hold a
contract, executed to retain such officer(s) for a designated
period of time, shall be chosen annually by the Board of
Directors, and each shall hold his office until he shall resign
or shall be removed or advanced.
Section 3. Subordinate Offices
The Board of Directors may appoint such other officers as
the business of the corporation may require, each of whom shall
hold office for such period, have such authority and perform such
duties as are provided in the By-Laws or as the Board of
Directors may from time to time determine.
Section 4. Removal and Resignation.
a) Any officer may be removed. Either with or without cause, by
a majority of the directors at the time in office, at any regular
or special meeting of the board. or. except in case of an officer
chosen by the Board of Directors, by any Officer upon whom such
power of removal may be conferred by the Board of' Directors,
according to his or her appropriate executive position.
b) Any officer may resign at any time by giving written notice
to the Board of Directors or to the Secretary of the corporation.
Any such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Vacancies.
A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in
the manner prescribed in the By-Laws for regular appointments to
such office.
Section 6. Chairman of the Board
The Chairman of the Board of Directors shall preside over
and assist the Board of Directors in the formulation of policies
to be pursued by the executive management of the shareholders,
with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the
names of those present or represented at shareholders meeting and
proceedings thereof.
Section 7. President
The President shall be the chief executive and
administrative officer of the corporation. He shall preside at
all meetings of the shareholders. He shall see that all orders
and resolutions of the Board of Directors are carried into effect
and in general shall perform all duties as may from time to time
be assigned to him by the Board of Directors and shall have
general charge of the business of the corporation. He shall from
time to time obtain information concerning the affairs and
business of the corporation and shall promptly lay such
information before the Board of Directors, or he shall
communicate to the Board of Directors as may in his judgment,
affect the performance of their official duties. He may sign,
alone if authorized, or with the Secretary or any other proper
officer of the corporation, any deeds, mortgages, notes bonds,
contracts, powers of attorney or other instruments, including
certificates for shares of capital stock of the corporation,
which the Board of Directors has authorized to be executed. He
may employ all agents and shall perform all other duties as may
from time to time be delegated to him by the Chairman of the
Board of Directors.
Section 8. Vice President
The Vice President shall perform such duties and possess
such powers as from time to time may be assigned to them by the
President. In the absence of the President or in the event of
his inability or refusal to act, the First Executive Vice
President of corporate administration shall perform the duties of
the President and, when so performing, shall have all the powers
of and be subject to all the restrictions upon the President.
Section 9. Secretary
The Secretary shall keep, or cause to be kept, a book of
minutes at the principal office or such other place as the Board
of Directors may order, of all meetings and directors and
Shareholders, with the time and place of holding, whether regular
of special, and if special, how authorized, the notice thereof
given, the names of those present or represented at shareholders
meeting and proceedings thereof.
Section 10. Treasurer.
a) The Treasurer shall keep and maintain, or cause to be kept
and maintained., adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in-surplus
and surplus arising from a reduction of stated capital, shall be
classified according to source and shown in a separate account.
The books of accounts shall at all reasonable times be open to
inspection by any director.
b) The Treasurer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He
shall disburse the funds of the corporation as may be ordered by
the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the
corporation, and shal1 have such other powers and perform such
other duties as may be prescribed by the Board of Directors or
the By-Laws.
ARTICLE IV
Executive and other Committees
and Consultants of Special Authorization
Section 1. Committees.
a) The Board of Directors may appoint an executive committee,
and such other committees as may be necessary from time to time,
consisting of such number of its members and with such powers as
it may designate, consistent with the Articles of Incorporation
and By-Laws. Such committees shall hold office or be eliminated
at the pleasure of the board- The President may appoint such
other committees as he may deem to be required from time to time-
b) The Board of Directors may contract with special consultants
to the board or special assistants to the board or president, or
special business consultants with certain designated powers. A
"Business Consultant Advisor to The Board", may be authorized, in
the best interests of the shareholders, to negotiate and
formalize transactions as an authorized signature", with such
transactions having received an affirmative vote by the Board of
Directors, prior to such formalization.
Article V
Corporate Records, Reports and Documents
Section 1. Records.
The corporation shall maintain adequate and correct
accounts, books and records of its business and properties. All
such books, records and accounts shall be kept at its principal
Executive Offices. In event of various business operations
divisions, all Original books and records shall be maintained in
those Division Offices, with computer, or other transmission to
the corporate headquarters and to the corporate Office of Records
and Accounting, of all appropriate documents and financial
records.
Section 2. Inspection of Books and Records.
All books and records of the corporation shall be open to
inspection of the directors from time to time and during
reasonable working hours.
Section 3. Certification and Inspection of By-Laws.
The original or a copy of these By-Laws, as amended or
otherwise altered to date, certified by the Secretary, shal1 be
open to inspection by the shareholders of the company by
appointment.
Section 4. Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name or
payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as shall be determined from
time to time by resolution of the Board of Directors.
Section 5. Contracts, Etc. How Executed.
The Board of Directors, except as in the By-Laws otherwise
provided, may authorize any officer or officers, agent or agents,
to enter into any contract or execute any instrument in the
name of and on behalf of the corporation. Such authority may be
general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer? agent or employee shall
have any power or authority to bind the corporation by any
contract or engagement, or to pledge it's credit, or to render it
liable for any purpose or to any amount.
Section 6. Annual Report.
The Board of Directors shall cause an annual report or
statement to be sent to the shareholders of this corporation not
later than 120 days after the close of the fiscal or calendar
year.
Article VI
Certificates and Transfer of Shares
Section 1. Certificates of Shares.
a) Certificates for shares shall be of such form and device as
the Board of Directors may designate and shall state the name of
the record holder of the shares represented thereby; its number;
the par value, if any, or a statement that such shares are
without par value; 'a statement of the rights, privileges,
preferences and restrictions, if any; a statement as to the
redemption or conversion, if any; a statement of liens or
restrictions upon transfer or voting4 if any; if the share be
assessable or, if assessments are collectable by personal action,
a plain statement of such facts.
b) Every certificate for shares must be signed by the President
or a Vice President and the Secretary or an Assistant Secretary
or must be authenticated by facsimile of a signature of' the
President and Secretary or by a facsimile of a signature
countersigned by a transfer agent or transfer clerk and must be
registered by an incorporated bank or trust company, or duly
licensed stock transfer and registrar company, either domestic or
foreign, as registrar of transfers.
Section 2. Transfer of the Books.
Upon surrender to the Secretary or transfer agent of the
corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation or
its licensed transfer agent, to issue a new certificate to the
person entitled thereto, cancel the old certificate and to
maintain a record of the transaction in a designated office of
the corporation. Exception: In event the directors of the
corporation or its transfer agent-registrar, should determine
there is reason to suspect any respective certificate of being
invalid or fraudulent, said certificate, along with any other
documentation, pertinent to such certificate, shall be placed
with competent legal counsel for investigation and verification,
prior to giving authorization to "transfer".
Section 3. Lost or Destroyed Certificates.
Any person claiming a certificate of' stock to be lost or
destroyed shall make an affidavit or affirmation of that fact and
as the Board of Directors or stock transfer entity may require,
give the corporation a bond of indemnity, in form and with one or
more sureties satisfactory to the board in at least double the
value of the stock represented by said certificate, whereupon a
new certificate may be issued of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed.
Section 4. Transfer Agent and Registrars.
The Board of Directors may appoint one or more transfer
agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company or a. licensed
stock transfer and registrar company, either domestic or foreign,
who shall be appointed at such times and places as the
requirements of the corporation may necessitate and the Board. of
Directors may designate.
Section 5. Closing Stock Transfer Books.
The Board of Directors shall request of its transfer agent
and registrar according to any law of the state of its domicile,
the close of the transfer books for a period not exceeding thirty
days or such period as being in accordance with any existing law,
preceding any annual meeting, of the shareholders, or the day
appointed for payment of' a dividend.
Article VII
Corporate Seal
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of the corporation, the date of its
incorporation, and the state of its domicile.
Article VIII
Amendments to By-Laws
Section 1. By Shareholder.
New By-Laws may be adopted or these By-Laws may be repealed
or amended at their annual meeting, or any other meeting of the
shareholders called for that purpose, by a vote of shareholders
entitled to exercise a majority of the voting power of the
corporation, or by written assent of such shareholders.
Section 2. Powers of Directors.
Directors may not amend or repeal any of these By -Laws
without assent of the majority vote of the shareholders.
Section 3. Record of Amendments.
The corporation shall keep an accurate succession in bound
form, of all By-laws as repealed, and amended, and accurate to
date.
I, do hereby certify that the foregoing is a complete and
accurate copy of the current By-Laws of the WolfStone
Corporation.
/s/ Marie Nicole Rolfe
Marie Nicole Rolfe, Acting Secretary
Dated November 6, 1998
THE AGREEMENT
This Agreement ("Agreement") is made as of this 29th day of
October 1999 by and between WolfStone Corporation ("WSC") and
Vance Energy, Ltd. ("VEL"). The companies may from time to time
be referred to hereinafter collectively as the "constituents".
WHEREAS, VEL believes it to be in its best interest to sell
certain of its holdings to WSC, said holdings being 100% of the
authorized and issued common stock of Graham Energy, Inc.("GEI"),
and
WHEREAS, WSC believes it will be beneficial to its energy
business to acquire 100% of the authorized and issued shares of
GEI. The Constituents" are in accord to effect this Agreement
with terms and conditions as follows:
NOW THEREFORE, in consideration of the above stated, the
covenants, promises, and representations of each "Constituent" to
this Agreement are as follows:
ARTICLE I
1.1 Organization. GEI is duly organized, validly existing, and
in good standing in the State of TEXAS. USA, has all necessary
powers to own its property and carry on its business as now owned
and operated by it in any geographic area in the United States or
elsewhere, wherein its business requires qualification.
1.2 Capital Stock. GEI has authorized 50,000,000 shares or
common stock, par value $1.00 per share. All outstanding shares
are fully paid and non assessable.
1.3 Subsidiaries. GEI has no subsidiaries nor does it own any
interest in any other enterprise, excepting those known to the
"Constituents" of this Agreement.
1.4 Financial Information. GEI's property descriptions,
lease assignments, and valuation with geological documentation
are all available upon request by any state or federal agency and
for purposes of audit.
1.5 Indemnification. VEL gives no warranty or guarantee,
express or implied, regarding valuations of assets or other
financial reports or documentation which has been provided by any
third party. The "Constituents" hereto hereby indemnify each
other against any and all possible debts liabilities, losses, or
obligations made or incurred in connection with any possible
flaws in financial reports or documentation which is given or
made by any party other than "Constituents" hereto.
1.6 Litigation. GEI is not involved in any litigation, the
nature of which would be considered other than a common hazard of
conducting business. It is not in default with respect to any
order. writ, injunction. or decree of any court of the United
States or any foreign country.
1.7 Authority. VEL has the right to negotiate and execute this
Agreement. VEL is authorized to execute this Agreement and has
power and authority to execute, deliver, and adopt this
Agreement, and this Agreement, upon execution, shall become a
legal valid, and binding obligation of VEL and shall be
enforceable in accordance with its terms and conditions.
ARTICLE II
2.1 Organization. WSC is validly existing and in good standing
in the State of Nevada., USA. WSC is a publicly owned corporation
and its shares are publicly traded.
2.2 Subsidiaries. WSC has two subsidiaries, Texas International
Petroleum and Subsurface Energy, Inc..
2.3 Financial Information. All financial information of WSC is
currently known to VEL.
2.4 Litigation. WSC is not involved in any litigation, the
nature of which would be considered other than a common hazard of
conducting business. WSC is not in default with respect to any
order, writ, injunction or decree of any court of the United
States or any foreign country.
2.5 Authority. WSC is authorized to execute and perform this
Agreement and this Agreement, upon execution, shall become a
legal, valid, and binding obligation of WSC and shall be
enforceable in accordance with its terms and conditions.
ARTICLE III
3.1 Offices. WSC's executive headquarters is located in the
City of Woodbridge, CA. It's operation headquarters is in the
City of Abilene, TX.
3.2 Material Contracts. Neither of the "Constituents" have any
material contracts to which either is a party or by which it is
bound which would effect this transaction in a negative manner.
ARTICLE IV
4.1 Terms and Conditions. This transaction shall be accomplished
primarily by means of a tax free stock for stock exchange. WSC
shall acquire 100% of the authorized and issued stock of GET from
VEL in exchange for 1,200,000 shares of WSC common stock bearing
a 12 month restriction in accordance with SEC Rule 144, WSC shall
also execute a note to the benefit of VEL or assigns in the
amount of $235,000 U.S. Dollars. Said note shall be due and
payable six months from the date of execution hereof. VEL hereby
agrees that said note may be rolled over for an additional period
of six months in event payment of the $235,000 note at the
initial due date would be detrimental to the business of WSC and
its shareholders. WSC, however, hereby agrees to put forth every
effort to pay said note at the initial due date.
4.2 Price. The purchase price of the GEI stock is Thirty Four
Million Dollars US ($34,000,000). The appraisals on the GEI
proven, producing gas and oil reserves have been performed by
licensed petroleum geological engineers and geophysicists.
4.3 Reserve Area. GEI's reserve leases cover nearly 1,300 acres
with 35 wells and $245,000 in production' equipment..
ARTICLE V
5.1 Effective Date. This Agreement shall become effective on
the date of execution of this document by authorized signatures
of each of the "Constituents" and witnessed.
5.2 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
This document may be executed by the "Constituents" utilizing
facsimile transmission to bind this Agreement and it shall be as
legally binding as though executed in hard copy.
5.3 Hard Copy. The "Constituents" may utilize facsimile
transmission to legally bind this Agreement, but the
"Constituents" shall at their convenience execute multiple (4)
hard copies for WSC, the publicly held corporation, for filing
with any agencies in event this should be applicable.
ARTICLE VI
6.1 Non-Waiver. The failure of any "Constituent" to this
Agreement to insist in any one or more cases upon the performance
by another "Constituent", of any of the provisions, terms, or
conditions of this Agreement, or to fail to exercise any option
herein contained, shall not be construed as a waiver or
relinquishment of any other provision, term, or condition of this
Agreement. No waiver by a :Constituent" of a breach by the other
"Constituent" shall be construed as a waiver with respect to any
other subsequent breach.
6.2 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only
and shall not define, limit, or add to the meaning of any
provision of this Agreement.
6.3 Notices. Any formal notices of demands by a "Constituent"
company hereto shall be in writing and of hard copy and shall be
deemed to be duly given on the date of delivery by Courier or
"served" on the tenth day after mailing, if mailed to
"Constituent" to which notice is being given, by first class,
registered or certified, postage prepaid to headquarters office
of the "Constituent" to its address as it may be at a given time.
6.4 Venue. This Agreement and its application shall be governed
by the laws of the State of Texas and be construed by the
appropriate courts of the State or Texas. Venue shall be in
Taylor County, TX.
6.5 Binding Effect. This Agreement in all its terms and
conditions shall inure to and be binding upon the corporate
successors, directors, senior officers, executors, assigns of
each of the "Constituent" companies and major shareholders
thereof.
6.6 Mutual Consideration. The "Constituents" hereof shall
cooperate with each other to achieve the mutually desired purpose
of this Agreement and shall execute such other and further
documents and take such other and further action as may be
necessary or convenient to successfully accomplish the intention
or the transaction described herein for the best interests of
each of the "Constituent" companies..
6.7 Exhibits. Any exhibit referred to in this Agreement, but
not currently available, shall be provided at the earliest
possible date. The representations by the "Constituents" hereto
of this Agreement, and is any Attachments or Addendum hereto,
shall survive the effective date hereof and shall supersede any
and all prior agreements and understandings, if any between the
"constituent" companies and, subsequent to the effective date of
this Agreement, can only be modified by resolutions ratified by
the Board of Directors of each of the "Constituent" companies of
by vote of the shareholders carrying the right to vote a majority
of the controlling shares of the parent corporation.
IN WITNESS WHEREOF, each of the companies being "Constituents"
hereto have expressed their acceptance and agreement of the
terms and conditions of this Agreement by their duly authorized
representatives affixing their respective and witnessed
signatures below.
For WolfStone Corporation (WSC) For Vance Energy, Inc. (VEI)
By: /s/ Marie N. Rolfe By: /s/ C.C. Coleman
Marie N. Rolfe, Acting Secretary C.C. Coleman, Director
THE AGREEMENT
This Agreement ("Agreement") is made as of this 29th day of
March, l999, by and between Ravendale Financial Inc. ("Agent'),
Texas International Petroleum Inc., ("TIP"), and WolfStone
Corporation ("WSC"). The Companies may from time to time be
referred to hereinafter collectively as the "Constituents";
WHEREAS, Agent believes it to be in the best interests of
its clients who own one hundred (100%) percent of the authorized
and issued Common Stock of the closely held Subsurface Energy,
Inc., to sell these shares to TIP; and
HEREAS, TIP believes it will be beneficial to its energy
business and WSC believes it to be in the best interests of its
shareholders, to acquire 100% of the authorized and issued
shares of Subsurface Energy, Inc. ("SEI").
NOW THEREFORE. in consideration of the above stated, the
covenants, promises and representations of each Constituent to
this Agreement are as follows:
ARTICLE I
1.1 Organization. TIP is duly organized, validly existing and
in good standing in the State of Texas, U.S.A.; has all
necessary, powers to own its property and carry on its business
as now owned and operated by it in any geographic area in the
United States or elsewhere, wherein its business requires
qualification.
1.2 Capital Stock. Of the common shares of TIP authorized, and
outstanding, all are fully paid and non-assessable.
1.3 Subsidiaries. TIP has no subsidiaries, nor does it own any
interest in any other enterprise, excepting those known to
Constituents of this Agreement.
1.4 Financial Information. Property descriptions, lease
assignments. and valuations with geological documentation is
available for perusal upon request by any concerned shareholder
or state or federal agency. Neither Agent nor SEI makes nor
gives any warranty or guarantee, express or implied regarding
valuations or other financial reports documentation which is
given or made by any third party. WSC and TIP, hereby discharges
and indemnifies Agent, and SEI, against all debts, liabilities,
losses or obligations made or incurred in connection with any
valuations or other financial reports or documentation which is
given or made by any third party.
1.5 Litigation. SEI is not involved in any litigation, the
nature of which would be considered other than a common hazard of
conducting its business. It is not in default with respect to
any order, writ, injunction or decree of any court of the United
States or any foreign country,
1.6 Authority. Agent has the right to sell and is authorized
to sell it's client's shares of SEI, being the contracted Agent
for all the holders of the closely held, SEI, and is authorized
execute this Agreement and has full power and authority to
execute, deliver and perform this Agreement, and this Agreement
is a. legal, valid and binding obligation of Agent, and is
enforceable in accordance with its terms and conditions.
ARTICLE II
2.1 Organization. TIP, is duly organized validly existing and
in good standing in the State of Texas, U.S.A.. TIP has all
necessary powers to issue its shares, own its property, and
carry on its business as flew owned and operated by it in any
geographic area of the United States or elsewhere wherein its
business requires qualification.
2.2 Exchange of securities The following shares shall be
issued to Agent and/or assigns: l,604,797 TIP shares of $20.00
par, Convertible, Class A, Preferred Stock, earning a 6% dividend
per annum, in exchange for 3,209,594 $10.00 par, Common Shares of
SEI, from Agent, these being all of the issued and outstanding
shares of Subsurface. The Preferred Shares of TIP are convertible
any time after issuance, in total or in part, to Common Shares of
WSC. Restricted Common Stock of WSC received through conversion
shall bear a 12 month legend. The Preferred TIP shares to be
converted on a l = 1 ratio with WSC Common stock. The purchase
price of SEI is based. upon evaluation of this company's proven
producing reserves at $32,095,940.
Other Shares included in this transaction are 5,000 shares
of $40.00 par Convertible, Cumulative Class -B, Preferred Stock,
of' WSC, earning a 5% annual dividend, first payment, April 28,
2000, conversion ratio: 1=3 Common Shares; conversion at
discretion of holders any time after issuance. These shares to
be issued to persons for their efforts negotiating this
transaction. After conversion, and. at a later date, WSC,
according to internal agreement with its subsidiary will assist
by arranging the sale of 50,000 shares of the common stock,
through a stock brokerage firm at market value, but for no less
than $4.25, or, in lieu of being able to arrange this
transaction, or in event the market should fall below $4.25, WSC
shall purchase the 50,000 shares at a minimum of $4.25 per share,
at $25,000 per month for five months and $87,500. on the sixth
month. Sale or purchase of the first segment of the 50,000
shares shall be made and payment thereof to Agent or assigns
shall be due within 40 days from conversion date and payments as
detailed above shall continue on the sane date, for each of five
following months: 6 monthly payments in total.
2.2(a) At the effective date hereto, there shall not, be any
outstanding subscriptions, options., rights, warrants,
debentures, convertible securities, preferred stock or other such
instruments or commitments unknown to TIP or WSC obligating SEI
to issue or transfer from the later firm's treasury, additional
shares of its capital stock of any class.
2.2(b) Agent shall, according to agreement with its clients,
be responsible for distribution of the certificates of $20.00 per
Convertible Preferred Stock an Common Stock, to the shareholders
of SEI. The certificates shall be issued in the names of the
shareholders, and in such denominations per shareholder as shall
be presented to TIP, and all issued certificates shall be
delivered to Agent, by express, certified mail.
2.3 Subsidiaries. TIP currently has no subsidiaries or
divisions. It is the intent that SEI shall become a division of
TIP, responsible for production and coordination with the field
management group.
2.4 Financial Information. All financial information of SEI is
currently known to the Constituents.
2.5 Litigation. SEI is not involved in any litigation, the
nature or which would he considered other than a common hazard of
conducting business. SEI is not in default with respect to any
order, writ, injunction or decree of any court of the United
States or any foreign country.
2.6 Authority Shareholders owning the legally required
percentage of voting stock in SEI, have authorized the execution
of this Agreement and consummation of the transaction
contemplated herein. Agent has full power and authority to
execute. deliver and perform this Agreement and this Agreement is
a lega1, valid and binding obligation of Agent and SEI, and is
enforceable in accordance with its terms and conditions.
ARTICLE III
3.1 Organization. WSC, the common shares of which will
ultimately be those shares received by the shareholders of SEI,
to be distributed at the time of conversion of the. TIP preferred
shares, was organized in the State of Minnesota, USA, November
26, 1971, under the name Minnesota Invaders Inc. WSC made its
initial public offering shortly thereafter. WSC has experienced
several name changes over the years. Prior to changing its name
to WolfStone, the Company name was Integrated Direct, Inc., with
the trading Symbol IDIR.
3.2 Domicile. WSC has experienced changes in domicile, the
most recent past was the State of Delaware. The public Company
domicile is now, the State of Nevada
3.3 Corporate headquarters and Operations Headquarters.
WSC's business headquarters is in the City of Woodbridge,
California; its operational headquarters is in the City of
Abilene, Texas.
3.4 Material Contracts. Neither TIP, nor WSC have any
material contracts to which either is a party, or by which it is
bound which would effect this transaction in a negative manner.
ARTICLE IV
4.1 Terms and Conditions This transaction shall be
accomplished by means of a tax free stock for stock exchange.
TIP shall acquire 100% of the authorized and issued stock, with
all assets and liabilities of SEI (3,209,594 shares, $l0.00
par), in exchange for 1,604,797 shares of $20.00 par,
Convertible, Cumulative class-A. Preferred Shares of TIP. The
purchase price of $32,095,947 was based on professional valuation
of SEI's proven, producing reserves. 5000 shares of WSC's
Convertible, Cumulative Class-B Preferred Stock, with voting
privileges, and earning a 5% annual dividend, shall be issued to
persons assisting the negotiations of this acquisition.
According to agreement between WSC and TIP, TIP's Convertible
Preferred Stock will become convertible to the Common Shares of
the publicly held WSC, instead of the common shares of TIP.
4.2 Breach of Covenant. Should WSC fail to honor its agreement
to arrange for the sale of, or buy-back, of the shares, as
detailed in "2" and "4.1" above, or any part of the terms and
conditions of this Agreement any and all assetts and/or 0i1, gas
and mineral 1eases assigned and/or transferred to WSC and/or
TIP, Inc. by Agent shall be null and void and of no effect. In
such an event, Agent may rescind the assignment or transfer of
the assets and/or oil, gas and mineral leases without need of a
court order, and may Cite same in the Official Public Records of
the appropriate County Clerk's office. Further, should WSC fail
to perform its obligations under this Agreement, in whole or in
part, any and all assets and/or oil gas and mineral leases
assigned and/or transferred to WSC and/or TIP, Inc by Agent sha1l
be null and void and of no effect. In such an event, Agent may
rescind the assignment or transfer of the assets and/or oil, gas
and mineral leases without need of court order, and may file
same in the official public records of the appropriate county
Clerk's Office. In either event described above, Agent shall be
entitled to retain any and all sums tendered to and any arid all
stock issued to Agent by WSC pursuant to this Agreement, and
such retaining of said sums and stock is in addition to any other
rights available to Agent, including the right to sue WSC for
breach of warranty, or breach of covenant under this Agreement.
ARTICLE V
5.1 Effective Date. This Agreement shall become Effective, upon
the execution by authorized, witnessed, signatures of the
Constituents. The exchange of physical shares involved in the
herein detailed transaction shall be accomplished expeditiously.
5.2 Counterparts. This Agreement may be. executed in one or
more counterparts each of which shall be deemed an original but
all which together shall constitute one and the same instrument.
This document may be executed by the Contituents, utilizing
facsimile transmission, to bind this Agreement, and it shall be
as legally binding as though executed in hard copy.
5.3 Hard Copy. The Constituents may utilize facsimile
transmission to legally bind this Agreement but the Constituents
shall at their convenience execute multiple (4) Hard Copies for
WSC. the publicly held corporation, for tiling with any
agencies in event this should be applicable.
ARTICLE VI
6.1 Non-waiver. The failure of any Constituent to this Agreement
to insist in any one or more cases upon the performance by
another Constituent, of any of the provisions terms or conditions
of this Agreement, or to fail to exercise any option herein
contained shall not be construed as a waiver or relinquishment of
any other provision term or condition of this Agreement. No
waiver by a Constituent or a breach by the other Constituent,
shall be construed as a waiver with respect to any other
subsequent breach.
6.2 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only
and shall not define, limit, or add to the meaning of any
provision of this Agreement.
6.3 Notices. Any formal notices, or demands by a constituent
Company hereto, shall be in writing and of hard copy, and shall
be deemed to be duly given on the date of delivery by courier, or
"served" on the tenth day after mailing, if mailed to the
Constituent to which notice is being given, by first class,
registered or certified, postage prepaid to the headquarters
office of the Constituent, to its address as it may be at a given
time.
6.4 Venue. This Agreement and its application shall be
governed by the laws of the State of Texas and be construed by
the appropriate courts of the State of Texas. Venue shall be in
Taylor County, Texas.
6.5 Binding Effect. This Agreement in all its terms and
conditions shall inure to and be binding upon the Corporate
successors, directors, senior officers, executors and assigns, of
each of the Constituent Companies and major shareholders thereof.
6.6 Mutual Consideration. The constituents hereto shall
cooperate with each other to achieve the mutually desired purpose
of this Agreement and shall execute such other and further
documents and take such other and further actions as may be
necessary or convenient to successfully accomplish the intention
of the transaction described herein, for the best interests of
each of the Constituent Companies.
6.7 Exhibits. Any exhibit referred to in this agreement, but
not currently available, shall be provided at the earliest
possible date. The representations by the Constituents hereto, of
this Agreement and in any Attachments or Addendums hereto, shall
survive the Effective Date hereof, and shall supercede any and
all prior agreements and understandings, if any, between the
Constituent Companies. and subsequent to the Effective Date of
this Agreement. can only be modified by resolutions ratified by
the Boards of Directors of each of the Constituent Companies or
by vote of shareholders carrying the right to vote a majority of
the controlling shares of the parent corporation.
IN WITNESS WHEREOF, Each or the Companies being Constituents
hereto have expressed their acceptance and agreement of the terms
and conditions of this Agreement by their duly authorized
representatives affixing their respective and witnessed
signatures below.
For WolfStone Corporation For Texas International Petroleum, Inc.
By: /s/ Marie N. Rolfe By: /s/ C.C. Coleman
Marie N. Rolfe, Acting Secretary CC Coleman, Director
For Ravendale Financial, Inc.
By: /s/ Norma Eltringhan
Norma Eltringham, Vice President
THE AGREEMENT
This Agreement ("Agreement") is made as of this 24th day of'
February, 1999, by and between Southwin Financial, Ltd ("SFL")
and WolfStone Corporation ("WSC"). The companies may from time
to time be referred to hereinafter collectively as the
"Constituents"
WHEREAS, SFL believes it to be in the best interests of its
clients who own one hundred (100%) percent of the authorized and
issued Common Stock of Texas International Petroleum, Inc.
("TIP"), to sell these shares to WSC; and
WHEREAS, WSC believes it to be in the best interests of its
shareholders to acquire from SFL its clients shares of Texas
International Petroleum, Inc. ("TIP"). The Constituents are in
accord, to effect this Agreement, with terms and conditions as
follow:
NOW THEREFORE, in consideration of the above stated, tile
covenants, promises and representations of each Constituent to
this Agreement are as fo1lows:
ARTICLE I
1.1 Organization. TIP is a closely held corporation. It Is
duly organized, validly existing an in good standing in the
State of Texas, U.S.A.; has all necessary powers to own its
properly and carry on its business as now owned and operated by
it in any geographic area in the United States or elsewhere,
wherein its business requires qualification.
1.2 Capital Stock. Of the Common shares of TIP authorized
and outstanding, all are fully paid and non-assessable.
1.3 Subsidiaries. TIP has no subsidiaries, nor does it own
any interest in any other enterprise, excepting those known to
Constituents of this Agreement.
1.4 Financial Information. Property descriptions, lease
assignments. and valuations with geological documentation is
available for perusal upon request by any concerned shareholder
or state or federal agency. Neither SFL nor TIP make nor give
any warranty or guarantee, express or implied, regarding
valuations or other financial reports documentation which is
given or made by any third party. WSC hereby discharges and
indemnifies SFL and TIP against all debts, liabilities, losses or
obligations made or incurred in connection with any valuations or
other financial reports or documentation which is given or made
by any third party.
1.6 Litigation. TIP is not involved in any litigation. The
nature or which would be considered other than a common hazard
of conducting its business. It is not in default with respect
to any order, writ, injunction or decree of any court of the
United States or any foreign country.
1.7 Authority. SFL has the right to sell and is authorized
to sell its clients shares of TIP, being the contracted agent for
all the shareholders of the closely held, Texas corporation and
is authorized to execute this Agreement and has full power and
authority to, execute, deliver and perform this Agreement and
this Agreement is a legal, valid and binding obligation of SFL.
and is enforceable in accordance with its terms and conditions.
ARTICLE II
2.1 Organization. WSC, is a. publicly held and listed
corporation. WSC duly organized, validly existing and in good
standing in the State of Nevada, U.S.A. WSC has all necessary
powers to own its property, and early on its business as now
owned and operated by it in any geographic area of the United
States or elsewhere, wherein its business requires qualification.
2.2 Capital Stock. At the effective date of this
Agreement, there shall be issued, or to be issued, and
outstanding, a total of 4,067,787 fully paid and non-
assessable, Common shares of WSC. The total issued shares shall
include Two Million shares (2,000,000) of' Common Stock, and Two
Thousand Shares (2,000) shares of Class B, Preferred Stock, to be
issued in exchange for one hundred percent (100%) of the
authorized and issued shares of TIP.
2.2(a) Restricted shares of Common stock to be issued as a
result of this transaction shall bear a 12 mouth restriction. The
class B Preferred Shares are convertible and have voting
privileges.
2.2(b) WSC has Class - A - Convertible Preferred Stock, and
Class - B - Convertible Preferred Stock, both with stated par
value of $40. per share. Only the Class B - Convertible
Preferred shares have voting rights and earn specific dividends.
Class B Convertible Preferred with voting rights and earning 5%
dividend per annum, is the Class utilized in this transaction.
SFL shall, according to agreement with its clients be
responsible for distribution of the all stock certificates to the
current shareholders of TIP.
2.2c) At the effective date hereof, there shall not, be any
outstanding subscriptions, options, rights, warrants, debentures,
convertib1e securities, preferred stock or other such instruments
or commitments unknown to SFL, obligating WSC to issue or
transfer from the WSC treasury, additional shares of its capital
stock of any class.
2.2d) In order that SFL may distribute the shares of Common and
Preferred Stock, the share certificates to be issued by WSC shall
be in such denominations, amounts and names as may be requested
by SFL.
2.3 Subsidiaries. WSC currently has no subsidiaries, nor
does it own interests in other enterprises, excepting those known
to the Constituents of this Agreement.
2.4 Financial Information. All financial information of WSC
is currently known to the Constituents. Upon contemplation of the
Consolidated Financial Statements of WSC and TIP, said statements
and balance sheets shall be immediately disseminated to SFL.
2.5 Litigation. WSC is not involved in any litigation, the
nature of which would he considered other than a common hazard of
conducting business. WSC is not in default with respect to any
order, writ, injunction. or decree of any court of the United
States or any foreign country.
2.6 Authority. Shareholders owning the legally required
percentage of voting stock in WSC, have authorized the execution
of this Agreement and consummation of the transaction
contemplated. herein. WSC has full power and authority to
execute, deliver and perform this Agreement, arid this Agreement
is a legal, valid and binding obligation of WSC, and is
enforceable in accordance with its terms and conditions.
ARTICLE III
3.1 Organization. WSC was organized in the State of
Minnesota, USA, November 26 1971 under the name Minnesota
Invaders, Inc. making its initial public offering shortly
thereafter. WSC has experienced several name changes over the
years. Prior to the name change to WolfStone, the name was
Integrated Direct, Inc., with the trading Symbol IDIR.
3.2 Domicile. WSC (Integrated Directed, Inc.) has
experienced changes in domicile. The most recent past domicile
has been the State of Delaware, with determination having been
made by management to move the public Company's domicile from the
State of Delaware to the State of Nevada..
3.3 Current Name. The public Company's name is WolfStone
Corporation, its domicile is the State of Nevada, and its
headquarters is in the City of Woodbridge, CA.
3.4 Material Contracts. WSC has no material contracts to which
it is a party, or by which it is bound which would effect this
transaction in a negative manner
4.1 Terms and Conditions. The Constituents hereto shall
accomplish this transaction by means of a tax free stock for
stock exchange. This transaction shall include One Hundred
Percent (100%) of the authorized and issued shares of TIP: Ten
Million, One Hundred and Two Thousand, Six hundred, and Ninety
Six, Common Shares (10,102,696), said shares equating to
ownership of all assets and liabilities of the Texas Corporation,
in exchange for Two Million shares (2,000,000) of the Common
Stock of WSC, at $25.38 per share; and Two Thousand Shares
(2,000) of the Class-B -Convertible, Preferred stock with voting
privileges, of WSC. The total purchase price is the appraised
value, $50,767,401.
4.2 Further Considerations. As further consideration,
WSC shall execute a note, and shall pay to SFL the amount of one
hundred and ninety thousand dollars ($190,000) for equipment.
Terms:
May 5, 1999 $20,000
June 15, 1999: $20,000
July 15. 1999 $50,000
Aug.15, 1999 $50,000
Sept. 15, 1999 $50,000
WSC may pay the entire $190,000 in total anytime prior to Sept.
15, 1999.
4.2 Breach of Covenant. Should WSC fail to honor its
agreement to arrange for the sale of, or buy-back, of the shares,
as detailed in "2.2" and "4.1" above, or any part of the terms
and conditions of this Agreement, any and all assets and/or oil,
gas and mineral leases assigned and/or transferred to WSC and/or
TIP by Ravendale Financial, Inc. shall be null and void and of no
effect. In such an event, Ravendale may rescind the assignment
or transfer of the assets and/or oil gas and mineral leases
without need of a Court order, and may file same in the Official
Public Records of the appropriate County Clerks office. Further,
should WSC fail to perform its obligations under this Agreement,
in whole or in part, any and all assets and/or oil, gas and
mineral leases assigned and/or transferred to WSC and/or TIP by
Ravendale Financial, Inc. shall be null and void and of no
effect. In such an event, Ravendale Financial, Inc may rescind
the assignment or transfer of the assets and/or oil, gas and
mineral leases without need of Court order, and may file same in
the Official Public Records of the appropriate County Clerk's
Office. In either event described above, Ravendale Financial,
Inc shall be entitled to retain any and all sums tendered to and
any and all stock issued to Ravendale Financial, Inc. by WSC
pursuant to this Agreement, and such retaining of said sums and
stock is in addition to any other right available to SFL,
including the right to sue WSC for breach of warranty, or breach
of covenant under this Agreement.
ARTICLE V
5.1 Effective Date. This Agreement shall become Effective,
upon execution by authorized, witnessed, signatures of both
Constituent Companies. The exchange of physical share
certificates as involved in the herein detailed transaction
shall be placed in an escrow with a mutually agreed upon law
firm, and shall be disbursed there from at the earliest practical
date.
5.2 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
This document may be executed by the Constituents, utilizing
Facsimile transmission, to bind ibis Agreement and it shall be
legally binding as though executed in hard copy.
5.3 Hard Copy. The Constituents may utilize facsimile
Transmission to legally bind this Agreement, but the Constituents
shall at their convenience execute multiple (4) Hard Copies for
WSC, the publicly held corporation, for filing with my agencies,
in event this should be. applicable.
ARTICLE VI
6.1 Non-Waiver. The failure of any Constituent to this
Agreement, to insist in any one or more cases upon the
performance by another Constituent, of any of the provisions,
terms or conditions of this Agreement. or to fail to exercise any
option herein contained, shall not be construed as a waiver or
relinquishment of any other provision, term or condition of this
Agreement. No waiver by a Constituent of a breach by the other
Constituent, shall be construed as a Waiver with respect to any
other subsequent breach.
6.2 Captions and Headings. The Article and paragraph
headings through out this Agreement are for convenience and
reference only and shall not define,. limit. or add to the
meaning of any provision of this Agreement.
6.3 Notices Any formal notices, or demands by a
constituent Company shall lie in writing and of hard copy, and
shall be deemed to be duly given on the date of delivery by
courier, or served on the tenth day after mailing, if mailed to
the Constituent Company to which notice is being given, by first
class registered or certified postage prepaid to the headquarters
office of the Constituent. to its address as it may he at a given
time.
6.3(a) Legal Notices. Legal notices shall also be deemed served
as above detailed, but shall be delivered to the legal
representative of the Constituent Company, that being the
Resident Agent or office or Company legal counsel, or in event
these are not known, then by registered mail to the head
corporate office received and signed for by an officer of the
respective Constituent Company-
6.3b) Venue. This Agreement and its application. shall governed
by the laws of the State of Texas and be construed by the
appropriate courts of the State of Texas. Venue shall he in
Taylor County, Texas.
6.4 Binding Effect. This Agreement in all its terms and
conditions shall inure to and be binding upon the corporate
successors, directors, senior officers, executors and assigns.
of each of the Constituent Companies. and major shareholders
thereof.
6.5 Mutual Consideration. The Constituents hereto shall
cooperate with each other to achieve the mutually desired purpose
of this Agreement and shall execute such other and further
documents and take such other and further actions as may be
necessary or convenient to successfully accomplish the intention
of the transaction described herein, for the best interests of
each of the Constituent Companies.
6.6 Exhibits. As of the execution hereof; the Constituents
may or may not have provided each other with some or all required
exhibits if any, or other documentation. Any required information
as detailed in this Agreement, or by virtue of this transaction
or documents not currently available shall be provided to either
Constituent by the other, at the earliest possible date. The
representations by the Constituents hereto of this Agreement,
and in any Attachments or Addendums herein, shall survive the
Effective Date hereof, and shall supersede any and all prior
agreements and understandings if any, between the Constituent
Companies and subsequent to the Effective Date of this Agreement,
can only be modified by resolutions ratified by the Boards of
Directors of each of the Constituent Companies. or by vote of
shareholders carrying the right to vote a majority of the
controlling shares of the parent corporation.
IN WITNESS WHEREOF, Each of the Companies being Constituents
hereto have expressed their acceptance and agreement of the terms
and conditions of this Agreement by their duly authorized
representatives affixing their respective and witnessed
Signatures below.
For WolfStone Corporation For Southwin Financial Ltd.
By: /s/ Marie N. Rolfe By: /s/ Norma Eltingham
Marie N. Rolfe, Acting Secretary Norma Eltingham, Vice President
ADDENDUM #1
Addendum #1 of Agreement between WolfStone Corporation and
Southwin Financial, Ltd., stock transaction date: February 24,
1999.
In the event that WolfStone Corporation should at any future date
determine to change the status of Texas International Petroluem,
Ltd. from a wholly owned subsidiary to a publicly held
corporation, Southwin Financial, Ltd and Cross Leaf Trust shall
each have the right to purchase up to ten (10%) percent of the
common stock of Texas International Petroleum, Ltd at one ($1.00)
dollar per share. Purchase of shares shall be allowed by option
agreement or subscription agreement, as determined at a later
date by Southwin and Trust.
For WolfStone Corporation For Southwin Financial Ltd.
By: /s/ Marie N. Rolfe By: /s/ Norma Eltringham
Marie N. Rolfe, Acting Secretary Norma Eltringham, Vice President
Date: February 24, 1999 Date: February 24, 1999
GENERAL CONSULTING AND SERVICE AGREEMENT
This Agreement is made and entered into as of February 25, 1999
between Texas International Petroleum, Inc. ("Company"), a Texas
corporation, Pilares Oil & Gas, Inc. ("Pilares") a Texas
corporation, and WolfStone Corporation ("Guarantor") a Nevada
corporation.
WHEREAS, the Company desires to contract for certain consulting
and other services from Pilares and Pilares desires to provide
these services to the Company, and
WHEREAS, the Company is in the oil and gas business and is in
need of seasoned management and operations expertise, and
WHEREAS, Pilares is comprised of individuals who are seasoned and
expert in all phases of management and operations of the oil and
gas business, and
WHEREAS, Guarantor, which owns 100% of the authorized and issued
shares of the Company, is willing to guarantee payment to Pilares
for services performed in behalf of the Company,
NOW THEREFORE, in consideration of the premises and the promises
contained herein, the Company, Pilares, and Guarantor agree as
follows:
Pilares shall be responsible for:
Acquiring geological information on the Company's existing and
future reserves and reserves as potential acquisitions from
persons known to Pilares to be competent, for choosing exact
locations for drilling of the oil and gas wells, for negotiation
of reserve leases, and for advising and consulting to the Board
of Directors of the Company and to the Board of Directors of
Guarantor pertinent to any phase of the oil and gas business.
The Company shall be responsible for:
Payment (reimbursement or cash advance) to Pilares for out-of-
pocket expenses, with no element of profit or markup added
thereto, all such expenses being charged on an actually incurred
or estimated basis. Payment shall be made within 30 days after
receipt of invoices for same unless other arrangements are agreed
upon in given instances. Payments on a quarterly basis to
Pilares in four equal portions of the base One Hundred and
Seventy Five Thousand ($175,000) U.S. Dollars, annual consulting
fee, said fee being a point of this Agreement. Each quarterly
payment shall be in the amount of $43,750.
The Guarantor shall be responsible for:
Payment to Pilares at any fee due date in event the Company for
any reason is not able to make the payment as due. In event the
Company is not able to pay a fee due to Pilares, the Guarantor
shall have the right to pay Pilares in cash (that is, check, bank
draft or wire), or in lieu of cash, with its Common Shares, on a
"for services rendered" basis in order that Pilares may have said
shares rendered salable in the public market.
Subject to approval of the respective Board of Directors of each
of the concerned companies, being a party hereto, this Agreement
shall become effective as of the date first specified above and
shall continue to be in full force for a period of three (3)
years. Pilares may terminate this Agreement at any time by
presenting to the Company, not less than thirty (30) days notice.
Pilares may at its option continue this Agreement for two
additional, three year periods by advising the Company and the
Guarantor, of Pilares' intent, at least 45 days in advance of the
expiration date of the Agreement of the latest renewal. The
Company may terminate this Agreement with no less than thirty
(30) days notice to Pilares, only in event of a change in the
management of Pilares. At the end of each three year interval
the amount of the annual consulting fees shall be open for
renegotiations. However, dependent upon the Company's financial
condition at these intervals, all parties will cooperate by not
forcing undo financial stress on the Company by increasing the
consulting and service fees as stated heretofore.
IN WITNESS WHEREOF, the Company, Guarantor, and Pilares have
caused this Agreement to be executed and attested as of February
25, 1999.
For WolfStone Corporation (WSC) For Texas International Petroleum
By: /s/ Marie N. Rolfe By: /s/ C.C. Coleman
Marie N. Rolfe, Acting Secretary CC Coleman, Director
For Pilares Oil & Gas, Inc.
By: /s/ Charles M. Childers
Charles M. Childers, Director
ASSIGNMENT OF OIL & GAS LEASE
THE STATE OF TEXAS )
)KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF EDWARDS )
WHEREAS, Pilares Oil & Gas, Inc. is the owner of an undivided
interest in certain Oil and Gas leases covering certain property
in Edwards County, Texas.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Pilares Oil and Gas,
Inc., whose address is 3241 South First Street, One Burro Alley,
Abilene, Texas 79605, hereinafter called "Assignor", does hereby
sell, transfer and assign unto Texas International Petroleum,
Inc., whose address is c/o C.C. Coleman, 4112 Village Drive,
Rockwell, Texas 75087, hereinafter called "Assignee", all
Assignor's right, title, and interest in and to the following
described lands:
640+- acres, being all of H.E. & W.T. Survey 109, Abstract 320,
Block "E 1/2," 214+- acres, being the East One-Third (E 1/3rd) of
the H.E. & W.T. Survey 42, Abstract 1218, Block "E", and 106+-
acres, being the North 106 acres out of the East One-Third (E
1/3rd) of the H.E. & W.T. Survey 63, Abstract 349, Block "E", all
in Edwards County, Texas.
NOW FURTHER, it is expressly understood that Assignee assumes all
of Assignor's duties, rights, and obligations in connection with
the Assigned Premises including, but not limited to, plugging and
abandoning of wells, and Assignee further agrees to file or cause
to be filed all necessary documents to effect said assumption.
And for the same consideration, Assignor does covenant with
Assignee that the Assignor is the lawful owner of the Assigned
Premises and rights and interests thereunder, and that Assignor
has good right and authority to sell and assign same.
Dated this 1st date of March 1999.
Assignor: Pilares Oil & Gas, Inc.
By: /s/ Charles M. Childers
Charles M. Childers, President
ASSIGNMENT OF OIL & GAS LEASE
THE STATE OF TEXAS )
)KNOW BY ALL MEN BY THESE PRESENTS
COUNTY OF TAYLOR )
WHEREAS, Southwin Financial, Ltd., whose address is 3241
South 1st Street, Abilene, Texas 79605, and hereinafter referred
to as "Assignor", is the owner and holder of two (2) oil & gas
leases; and
WHEREAS, it is intention that the Assignor assign to Texas
International Petroleum, Inc., whose address is 104 Pine Street,
Suite 408, Abilene. Texas 79601, and hereinafter referred to as
"Assignee", the oil and gas interests that are on the described
property:
Tract One:
960 acres, more or less out of the following described lands: 640
acres being all of H.E. & W.T. Survey 109, Abstract 320, Block "E
1/2"; 214 acres being the East One-Third (E 1/3rd) of the H.E. &
W.T. Survey 42, Abstract 1218, Block "E"; and 106 acres being the
North 106 acres out of the East One Third (E. l/3rd) of the H.E.&
W.T Survey 63, Abstract 349, Block "E", all in Edwards County,
Texas.
Tract Two:
979 acres of land, more or less. Sections 23, T.C.R.R. Co Lands,
Block 170, Pecos County, Texas and the East One-Half (E.1/2) of
SF 14162 J.N. Montgomery Survey, Abstract 9333 (West). Pecos
County, Texas.
WHEREAS. Tracts One and Tract Two will be hereinafter referred to
as the "Assigned Premises".
NOW, THEREFORE, for and in consideration of 10,102,696 shares of
common stock of Texas Intematioaa1 Petroleum, Inc., and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor hereby bargains, sell,
transfers, conveys and assigns unto Assignee the Oil & Gas leases
on the Assigned Premises. This assignment is made with warranty
of title all of assignor's right title and interest in and to the
Assigned Premises.
NOW, FURTHER, it is expressly understood and agreed that the
terms conditions as set out in the Agreement entered into on
February 24, 1999, by and between Southwin Financial Ltd. and
WolfStone Corporation are incorporated into this Assignment of
Oil & Gas and Lease and made a part hereof for all purposes: In
the event that Wolfstone Corporation fails to fully perform the
aforesaid Agreement, this Assignment of Oil & Gas Lease shall
have no effect and be null and void. Upon full performance of the
aforesaid Agreement, this Assignment of Oil & Gas Lease shall
have full effect pursuant to the terms described herein.
NOW, FURTHER, it is expressly understood that Assignee assumes
all of Assignor's duties, rights and obligations in connection
with the Assigned Premises and described we1ls including. but not
limited to, the plugging and abandoning of said wells, and
Assignee further agrees to file or cause to be filed, all
necessary documents to affect said assumption.
TO HAVE AND TO HOLD the Assigned Premises and well together
with all rights and appurtenances, unto Assignee, its successors
and/or assigns according to the terms hereof and of the said
leases
EXECUTED this 3rd day of March, 1999.
ASSIGNOR:
Southwin Financial Ltd.
By: /s/ Norma Eltringham
Norma Eltringham,
Attorney in Fact
STATE OF TEXAS )
)
COUNTY OF TAYLOR )
This instrument was acknowledged before me on this the 3rd
day of March, 1999, by Norma Eltringham, Attorney in Fact for
Southwin Financial Ltd., on its behalf.
/s/
Notary Public, State of Texas
SUBSIDIARIES OF THE REGISTRANT
Graham Energy, Inc., a Texas corporation
Texas International Petroleum, a Texas corporation
Subsurface Energy, Inc., a Texas corporation (a subsidiary of
Texas International Petroleum
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS AND INTERIM
UNAUDITED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 7-MOS 7-MOS
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-2000
<PERIOD-START> NOV-06-1998 NOV-06-1999
<PERIOD-END> JUL-31-1999 SEP-30-1999
<CASH> 5,396 1,302
<SECURITIES> 0 0
<RECEIVABLES> 12,491 11,778
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 17,887 13,080
<PP&E> 478,000 478,000
<DEPRECIATION> 21,141 21,141
<TOTAL-ASSETS> 83,075,088 83,070,281
<CURRENT-LIABILITIES> 231,751 231,751
<BONDS> 0 0
0 0
280,000 280,000
<COMMON> 6,343 6,343
<OTHER-SE> 82,843,337 82,841,865
<TOTAL-LIABILITY-AND-EQUITY> 83,075,088 83,070,281
<SALES> 25,781 37,291
<TOTAL-REVENUES> 25,781 37,291
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 292,929 305,911
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (267,148) (268,620)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (267,148) (268,620)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (267,148) (154,496)
<EPS-BASIC> (.08) (.00)
<EPS-DILUTED> (.08) (.00)
</TABLE>
