As filed with the Securities and Exchange Commission October 19, 2000
File No. 333-37842
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Amendment No. 1
MOUNTAIN OIL, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0639343
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
P.O. Box 1574
Roosevelt, UT 84066
(435) 722-2992
(Address and telephone number of registrant's principal offices)
Daniel S. Sam
319 West 100 South, Suite A
Vernal, UT 84078
(Name, address and telephone number of agent for service)
Copies to:
Mark E. Lehman, Esq.
Cletha A. Walstrand, Esq.
Lehman, Jensen & Donahue, LLC
8 East Broadway, Suite 620
Salt Lake City, UT 84111-2204
(801) 532-7858
(801) 363-1715 fax
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes
effective.
The securities being registered on the Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
[S] CALCULATION OF REGISTRATION FEE
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Title of Each Class Amount to be Proposed Offering Proposed Maximum Amount of
Of Securities to be Registered Price Per Share Aggregate Offering Registration
Registered Price Fee
Common Stock 1,000,000 shares $2.25 per share $2,250,000 $594.00
<C> <C> <C> <C> <C>
</TABLE>
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS
Subject to completion October 19, 2000
$500,000 Minimum / $2,250,000 Maximum
MOUNTAIN OIL, INC.
COMMON STOCK
This is Mountain Oil's initial public offering. We are
offering a minimum of 222,222 shares and a maximum of 1,000,000
shares of common stock. The public offering price is $2.25 per
share.
See "Risk Factors" beginning on page 4 for information you
should consider before you purchase the shares.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The shares are offered on a "minimum/maximum, best efforts"
basis through our officers and directors. No commission or other
compensation related to the sale of the shares will be paid to
our officers or directors. The proceeds of the offering will be
held in an escrow account at Bonneville Bank, 1675 North 200
West, Provo, Utah 84604, until a minimum of $500,000 in cash is
received from the sale of shares. If at least $500,000 is not
received from the sale of the shares within 90 days from the date
of this prospectus, unless extended by Mountain Oil for an
additional 30 days, your investment will be promptly returned to
you with interest and without any deductions. The offering may
be terminated by us at any time.
Price to Public Commissions Proceeds to Company
Per Share $2.25 $-0- $2.25
Minimum $500,000 $-0- $500,000
Maximum $2,250,000 $-0- $2,250,000
The date of this prospectus is _______________, _________.
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PROSPECTUS SUMMARY
Our company
Mountain Oil was formed as a Utah Corporation on July 30,
1999 to acquire and develop oil and gas properties. We
immediately acquired the working interest in 24 oil and gas wells
on 11,989 leased acres, all within 30 miles of Duchesne, Utah.
We currently have 11 wells in production. Our objective is to
bring 11 additional wells into production by mid 2001 and
identify new drill sites to develop on our acreage.
Our executive offices are located at 3954 East 200 North
East Highway 40, Ballard, UT 84066 and our mailing address is
P.O. Box 1574, Roosevelt, Utah 84066. Our telephone number is
435-722-2992.
The offering
Common Stock Offered by Us 222,222 shares minimum
1,000,000 shares maximum
Common Stock to be 2,075,222 shares minimum
Outstanding
After the Offering 2,853,000 shares maximum
Use of Proceeds Proceeds from this offering will be used:
*to rework existing wells
*to purchase equipment for producing wells
*to connect wells to gas gathering system
*to identify new drill sites
*for working capital.
RISK FACTORS
To succeed we must establish more producing wells. We were
formed in July 1999 and since that time our business activities
have been limited to settling outstanding liabilities, operating
11 wells and reworking 11 wells for oil production. We do not
believe Mountain Oil will be successful unless we are able to
make at least a majority of our additional 11 wells produce oil
in commercial amounts.
If we do not raise enough money through this offering,
developing our oil and gas property will be delayed. We have
limited capital and we need the proceeds of this offering to
rework our wells and drill new wells. Should we only raise the
minimum amount of the offering, we may have to seek other sources
of financing or limit our plan of operation as detailed in this
prospectus. If additional sources of financing are not
available, reworking our wells and drilling new wells will take
much longer and our results of operations will be adversely
affected.
Development of proved undeveloped reserves may not be
successful. Based on the oil and gas reserve report for our
property, Proved Undeveloped reserves have been assigned a value
of $1,200,607. The term "proved" means that geological and
engineering data demonstrates with reasonable certainty estimated
quantities of oil may be recovered in future years under existing
economic and operating conditions. However, since these reserves
are undeveloped, there is no assurance Mountain Oil can
successfully drill and complete wells to recover the value
assigned to proved undeveloped reserves.
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Our limited operations means a drop in oil prices will have
a substantial adverse impact on us. Our largest source of
operating income is from the sale of oil. The recent rise in oil
prices to $31.00 per barrel at October 2, 2000 is the reason we
believe it will be profitable to rework existing wells and drill
new wells. Since our revenue now and in the future will depend
on production from a relatively small number of wells, a
significant decrease in oil prices would severely impact our
operations.
We are subject to operating hazards and uninsured risks.
Our operations are subject to all of the risks incident to
exploration for and production of oil and gas, including blow-
outs, cratering, pollution and fires, each of which could result
in damage to or destruction of oil and gas wells or production
facilities or injury to persons and property. We currently have
$1,000,000 policy for public liability and $5,000,000 for claims
or losses. If our insurance does not fully cover certain of
these risks the impact could have a material adverse effect on
our financial position.
We lease the oil and gas rights on the property where our
wells are located. Our oil and gas leases require that we
develop or produce oil and gas to keep the leases. In the event
we fail to continue production from the wells located on leased
land and make royalty payments, we could lose our right to the
mineral rights.
We currently depend on one customer to purchase our oil and
gas. All of our sales have been to one customer and our contract
is renewed on a month-to-month basis. While we believe there are
numerous customers who will purchase our oil and gas, we do not
have additional purchase contracts in place.
We currently have outstanding options and convertible notes
that may dilute the ownership interest in Mountain Oil held by
other stockholders. As of October 2, 2000, we have outstanding
options to purchase a total of 75,000 shares of common stock.
The exercise prices of the outstanding options range from $1.00
to $1.10 per share. Also as of October 2, 2000 there are
$825,000 in outstanding convertible notes. Each $1.50 of note
principal is convertible to one share of common stock, or a total
of 550,000 shares, until March 31, 2002. The holders of the
outstanding options and notes might have the opportunity to
profit from a rise in the market price of which there is no
assurance, of the shares of the common stock underlying the
options at prices lower than the $2.25 you paid, which may keep
the market price for our stock lower and impair your ability to
realize a return on your investment.
We cannot assure the completion of the "minimum-maximum,
best efforts" offering. The shares are being offered on a
"minimum-maximum, best efforts" only basis and no individual or
firm is committed to purchase or take down any of the shares.
There is no assurance that any portion of the shares will be
sold. In the event that at least $500,000 has not been received
within 90 days of the date of this prospectus, which may be
extended for an additional 30 days in our discretion, funds will
be promptly returned to investors with interest and without
deducting expenses of this offering. As such, you could invest
money for as long as 120 days and have your investment returned
with interest. Anytime after the minimum amount is received
prior to termination of the offering, the escrowed funds will be
transmitted to us and shares will then be issued and no refunds
will be made to you.
We arbitrarily determined our offering price. The offering
price of the shares was arbitrarily determined by our management.
The offering price bears no relationship to our assets, book
value, net worth or other economic or recognized criteria of
value. In no event should the offering price be regarded as an
indicator of any future market price of our securities. In
determining the offering price, we considered such factors as the
prospects for our products within the industry, our management's
previous experience, the lack of technological development with
respect to our projects to date, our historical and anticipated
results of operations and our present financial resources.
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FORWARD-LOOKING STATEMENTS
You should carefully consider the risk factors set forth
above, as well as the other information contained in this
prospectus. This prospectus contains forward-looking statements
regarding events, conditions, and financial trends that may
affect our plan of operation, business strategy, operating
results, and financial position. You are cautioned that any
forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual
results may differ materially from those included within the
forward-looking statements as a result of various factors.
Cautionary statements in the "Risk Factors" and "Plan of
Operation" sections and elsewhere in this prospectus identify
important risks and uncertainties affecting our future, which
could cause actual results to differ materially from the forward-
looking statements made in this prospectus.
DILUTION AND COMPARATIVE DATA
As of June 30, 2000, we had an unaudited net tangible book
value of $595,000, or a net tangible book value per share of
approximately $0.32. The following table shows the dilution to
your investment in Mountain Oil without taking into account any
changes in our net tangible book value after June 30, 2000,
except the sale of the minimum and maximum number of shares
offered.
Assuming Minimum Assuming Maximum
Shares Sold Shares Sold
Shares Outstanding 2,075,222 2,853,000
Public offering proceeds at $2.25
per share $500,000 $2,250,000
Net tangible book value before
offering $.032 $0.52 $0.99
Increase attributable to purchase
of shares by new investors $0.20 $0.67
Pro forma net tangible book value
after offering $1,095,000 $2,845,000
Dilution per share to new
investors $1.73 $1.26
Percent dilution 76.88% 56%
The following table summarizes the comparative ownership and
capital contributions of existing common stock shareholders and
investors in this offering as of June 30, 2000:
Shares Owned Total Average Price
Number Consideration $
% Amount
Per Share
Present Shareholders
Minimum Offering 1,853,000 56% $653,000 $0.32
Maximum Offering 1,853,000 22% $653,000 $0.32
New Investors
Minimum Offering 222,222 44% $500,000 $2.25
Maximum Offering 1,000,000 78% $2,250,000 $2.25
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The numbers used for present shareholders assumes that none
of the present shareholders purchase additional shares in this
offering. It also assumes that none of the convertible notes
outstanding are converted by the conclusion of the offering.
USE OF PROCEEDS
The net proceeds to be realized by us from this offering,
after deducting estimated offering related expenses of
approximately $111,319 is $388,681 if the minimum number of
shares is sold and $2,138,681 if the maximum number of shares is
sold.
The following table sets forth our best estimate of the use
of proceeds from the sale of the minimum and maximum amount of
shares offered. Since the dollar amounts shown in the table are
estimates only, actual use of proceeds may vary from the
estimates shown.
Description Assuming Sale of Assuming Sale of
Minimum Offering Maximum Offering
Payoff Liabilities
Payoff Equipment Loan - Backhoe 20,000
Exercise Option to Purchase Ho
Oil Truck 25,000
Oil & Gas Development
Purchase Service Equipment 50,000
Purchase Oil Well Equipment 50,000 250,000
Rework & Re-complete Oil Wells 200,000 1,200,000
Joint Venture Drilling 300,000
Purchase Gas & Oil Leases 25,000
General & Administrative Expenses
Payroll - Administrative 29,000 29,000
Legal & Professional 6,000 6,000
Office Overhead 5,000 5,000
Insurance 6,000 6,000
Mortgage Payments 2,000 2,000
Interest on Indebtedness 20,000 10,000
Working Capital 20,681 160,681
TOTAL NET PROCEEDS $338,681 $2,138,681
The working capital reserve may be used for general corporate purposes
to operate, manage and maintain the current and proposed operations including
wages and salaries,professional fees, expenses, payment of rent, and other
administrative costs.
Before using the proceeds of this offering, we may make temporary
investments in short-term, interest-bearing securities,money market accounts,
insured certificates of deposit and/or in insured banking accounts.
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CAPITALIZATION
The following tables sets forth our capitalization as of
June 30, 2000, on an actual basis. This table should be read in
conjunction with our financial statements and notes.
Stockholders' equity:
Preferred stock, no par value,authorized 10,000,000
Shares: no shares issued or outstanding
Common stock, no par value, authorized 50,000.00
Shares: 1,853,000 shares issued and outstanding 653,000
Additional paid-in capital -0-
Accumulated deficit (58,000)
Total Stockholders equity $595,000
PLAN OF OPERATION
Proposed operations and capital requirements
We currently own 24 wells in seven oil and gas fields on
11,989 acres. A total of 11 of the 24 wells are capable of
producing oil or gas. The 11 wells capable of producing oil or
gas were producing, or being swabbed, as of June 2000. Four of
the 11 wells were producing at economic rates as of December 31,
1999 and were assigned Proved Developed Producing oil and gas
reserves of 40 Mbbls and 34 Mmcf. The remaining 7 wells were
producing at or below economic break even using December 31, 1999
oil and gas prices and were not assigned Proved Developing
Producing reserves.
Mountain Oil purchased the 24 wells in July 1999. Between
July 1999 and June 2000 the ten wells generated $224,514 in gross
oil and gas sales revenues. We have six men in the field each
day working on the wells. The activities currently being
performed by the crew include swabbing, hot oil treatments,
repair, maintenance, pump installation and above ground
preparations for reworking the wells. All of our wells are
drilled and cased, however, various rework is required on a
majority of the wells. Currently, six of the wells are producing
with pump jacks installed. The five wells that do not have pump
jacks are swabbed on a weekly basis. Swabbing brings oil to the
surface without a pump and accounts for about 40% of our current
production.
Thirteen of the 24 wells owned by Mountain Oil are not
currently being pumped or swabbed. No reserves were assigned to
these thirteen wells in the December 31, 1999 reserve report. We
believe all but two of these wells can become economic by
stimulating existing and behind pipe pay zones as well as
installing and repairing surface and subsurface pumping
equipment. Two wells are not economically feasible to stimulate
or repair and are scheduled to be plugged and abandoned before
the end of 2000.
The following table contains a list of each well and estimated cost for
maintenance and reworking expenses.
WELL COST ESTIMATE
Nielsen 1-20B 1 $15,000
Brundage Canyon 1-13 $1,500
Brundage Canyon 24-12 $500
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Brundage Canyon 16-2 $500
Brundage Canyon 13-15 X $15,000
Dye Hall 2-21-b-1 $350,000
Lawson 1-21 $25,000
L.E. Font 3-27-22 $250,000
Ute 116 A-1 $10,000
Fausett 1-26-A1E $60,000
Fausett 1-2B1E $250,000
Myron Ranch 1-280B1 $250,000
Wilkens 1-24 $250,000
Walker 2-24 $40,000
Josie 1-3 B5 $20,000
1-31 C5 $250,000
Coyote Canyon 10-9 $75,000
1-19 B5 $275,000
1-12 B6 $20,000
Black Jack 1-1406 $200,000
11-25 $110,000
11-18 $110,000
7-24 $75,000
We have estimated the total cost at $2,652,500 to refurbish
our existing wells. We have scheduled our operations and well
development into three phases.
Phase I is now in progress and we plan on completing it in
2000. Phase I consists of the reworking of existing wells. Our
goal is two recompletion attempts in new zones. The recompletion
process pulls and tests tubing and rods from the well. Certain
areas of the well will be treated with hydrochloric acid to clean
the well allowing more oil to flow. Some portions of the well
casing will be perforated to allow more oil flow into the well
bore. These projects should boost field production.Simultaneously,
we will install natural gas gathering systems at wells that lack such
development. This line will deliver gas via the Coastal Gas collection
system to existing mainlines owned by Questar Gas.
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We have an agreement with Coastal Gas who in turn negotiates
separately with Questar for use of their collection system.
Coastal has agreed to purchase all of our natural gas at spot
prices as quoted by Bloomberg. In the future we may negotiate
with other natural gas purchasers, depending on the location of
the well.
In Phase II scheduled for 2001, we intend to drill
horizontally to new zones in existing wells and complete new oil
and gas wells at the Brundage Canyon and West Willow Creek
fields. These sites are in existing oil fields. New wells cost
approximately $400,000 each. We may use existing capital, bank
lines of credit and partnerships to drill these shallow off site
wells in proven areas.
Phase III will commence following Phase II and includes the
continued drilling of natural gas wells in shallow areas of our
lease holdings. Partnerships with drilling companies, other oil
companies and joint ventures will be pursued aggressively during
this phase.
We completed our first funding in December 1999 by selling
our common stock to accredited investors in which we raised
$519,000. We completed another round of funding in April 2000,
by selling convertible debentures to accredited investors and
raised $825,000. These debentures are convertible at $1.50 per
share and the notes come due on March 31, 2002. An officer and
director exercised options for $50,000 in April 2000. We believe
these funds along with the funds raised in this offering will
enable us to complete Phase I and commence Phase II.
We currently have a crude oil purchase contract in place
with Enron Trading & Transportation at spot prices. The contract
is a month- to-month contract that may be terminated by either
party upon thirty days written notice. Under the terms of the
contract, Enron will purchase all of the crude oil we can produce
at the daily-posted price for the day of delivery. We receive
our monthly production check on the 20th of the month following
production.
A major cost each month will be royalty payments on gross
revenues to owners of royalty interests in the properties. These
royalties range from 16.6% to 25% of revenues with an average of
20%. We currently have lease agreements with royalty provisions
with the Bureau of Land Management, the state of Utah, the Ute
Indian Tribe and private owners. The leases are in perpetuity as
long as production is maintained.
We anticipate funds from this offering along with our
current revenues will be sufficient to continue operations at our
planned rate of development for the next twelve months. However,
should we be unsuccessful in raising at least the minimum
proceeds, we believe that our current revenues along with
additional financing in the form of a private placement or loans
will enable us to continue operations and expansion efforts. In
the event we do not receive any additional funding, we believe
our current operations will generate adequate revenue to continue
operating for the next twelve months, although we will not be
able to expand at the rate desired.
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RESULTS OF OPERATIONS
From inception to year ended December 31, 1999
Oil and gas sales were $77,000 from July 30, 1999, date of
inception, to December 31, 1999. Cost of sales for that period
was $45,000 with a gross profit of $32,000. General and
administrative expenses were $33,000 with depreciation, depletion
and amortization expenses at $12,000. Interest expense was
$4,000. We recognized a net loss in the amount of $17,000 during
the period from inception to December 31, 1999.
Net cash used in operating activities was $186,000 and we
purchased property and equipment for $10,000. We received
$206,000 as proceeds from short-term debt and paid $7,000 against
the debt. We also received $509,000 in proceeds from the
issuance of our stock. Net cash provided by financing activities
was $708,000. And as of December 31,1999, we had $512,000 cash
on hand.
For the six months ended June 30, 2000
Oil and gas sales were $338,000 for the six months ended
June 30, 2000. Cost of sales for that period was $106,000 with a
gross profit of $232,000. The increase is due to increased
production from our operating wells. General and administrative
expenses were $226,000 with depreciation, depletion and
amortization expenses of $43,000 for the six months ended June
30, 2000. Interest expense was $18,000 and other income was
$14,000. We recognized a net loss of $41,000 for the six months
ended June 30, 2000.
Net cash used in operating activities for the six-month
period ended June 30, 2000 was $66,000. We paid $200,000 on
related party notes during the period and we received $825,000 on
convertible notes we issued. Net cash provided by financing
activities was $676,000. We had a net decrease in cash of
$77,000. As of June 30, 2000, we had $35,000 in cash on hand.
BUSINESS
General
We are a Utah corporation formed on July 30, 1999, engaged
in the oil and gas acquisition, exploration, development and
production business. Our wells and operations are located within
a thirty-mile radius of Duchesne, Utah, and consist of the
following:
*Twenty-four oil and gas wells
*Leased mineral rights on 11,989 acres
*Downhole and surface equipment on all twenty-four wells
*An office building on Highway 40 in Ballard, Utah
The first wells were drilled in 1964 and the last well was
drilled in 1988 and at one time, all wells were producing.
However, due to lack of maintenance over the years, most of the
wells had ceased production at the time we acquired them. Since
July 1999, we have focused our efforts on settling outstanding
liabilities, raising capital, and reworking existing wells.
We currently have 11 wells producing oil and gas. We expect
five additional wells will begin producing by the end of 2000.
Our goal is to rework the remaining six wells to begin production
by mid-2001.
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Total Proved reserves are 929 Mbbls of oil and 1,829 Mmcf of
natural gas with a net present value discounted at 10% of
$2,328,636 as of December 31, 1999. Proved Developed Producing
reserves were assigned to four wells totaling 40 Mbbls of oil and
34 Mmcf of natural gas with a net present value discounted at 10%
of $228,029. Proved Undeveloped reserves were assigned to nine
undrilled locations and in three existing non-producing wells
totaling 889 Mbbls of oil and 1,795 Mmcf of natural gas with a
net present value discounted at 10% of $2,100,607. An oil price
of $21.55/bbl for Black Wax, $25.50/bbl for Yellow Wax, and a gas
price of $2.10/mcf was used in the economic analysis of the
reserves. Oil and gas prices were not escalated.
We produce two grades of oil, black wax crude oil and yellow
wax crude oil, and we also produce natural gas. The production
mix of each type of oil or gas varies according to each well. To
date, the 24 wells have produced 1,759,000 barrels of oil and
2,195,000,000 cubic feet of natural gas.
We do not own the land on which the wells are located, but
we lease the minerals rights subject to royalty interests. The
land and royalty interests are owned by the Bureau of Land
Management, the state of Utah, the Ute Indian Tribe, or by
private individuals. The average annual rental on the lease
agreements is $1.25 per acre per year. Some of the leases do not
require any annual payment and are held by production, which
means we hold the mineral rights lease as long as there is
production or we are developing the lease for production.
A total of 11 of the 24 wells are capable of producing oil
or gas. Four of the 11 wells were producing at economic rates as
of December 31, 1999 and were assigned Proved Developed Producing
oil and gas reserves of 40 Mbbls and 34 Mmcf. Of these 11 wells,
six are currently producing with pump jacks and five are flowing
or are swabbed on a weekly basis. Swabbing brings oil to the
surface without a pump and accounts for about 40% of our current
production. The five wells flowing or being swabbed were not
assigned economic oil and/or gas reserves as of December 31,
1999.
We believe all but two of the remaining shut in wells can
become economic by installing and repairing surface and
subsurface pumping equipment. Two wells cannot be economically
repaired and are scheduled to be plugged and abandoned by the end
of 2000.
Nine drilling locations and three existing wells with behind
pipe oil and gas reserves were assigned Proved Undeveloped
reserves in the December 31, 1999 reserve report on the 11,898
acres leased by Mountain Oil. These nine undrilled well
locations and three wells with behind pipe oil and gas reserves
have Proved Undeveloped reserves of 889 Mbbls of oil and 7,795
Mmcf of natural gas with a net present value discounted at 10% of
$2,100,607 as of December 31, 1999. In the future we may develop
some of these drilling locations either on our own or through
joint drilling agreements where we would drill new wells with a
joint venture partner, sharing costs and profits.
All of our oil production is sold to Enron Corporation and
our natural gas is sold to Coastal Field Services. Natural gas
produced at the wells is also used to run the pump jacks and
other equipment used for production.
Operations
All of our wells are completed in the Green River and
Wasatch formations between 4,000 and 17,000 feet deep and are
located in Duchesne and Uintah Counties in the State of Utah. We
have no interest in oil and gas applicable to long-term supply or
similar agreements with foreign governments or authorities in
which we act as the producer and share revenues from the reserves
of investors accounted for by the equity method, accordingly, no
information pertaining to those categories is presented here.
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As of December 31, 1999, we leased 11,989 gross, 10,900 net,
acres of developed oil and gas property. The property in which
we own an interest is held under oil and gas leases negotiated
directly with private mineral owners, the Bureau of Land
Management, the state of Utah and the Ute Indian Tribe. The
leases are held in perpetuity so long as we continue to produce
oil and gas or make minimum lease payments.
We conduct our own operator services for our oil and gas
wells. If we decide to use any outside operators or partners in
well ventures, we do not intend to pay for operator services in
excess of competitive rates in the same geographical area.
In connection with drilling of any wells, we intend to hire
outside contractors experienced in the area of oil well drilling.
Rates for drilling are either by the day or by the foot. The
nature of the well to be drilled will dictate the rate paid by
us.
Market
We sell all of our oil production to Enron Corporation at
spot prices. The price for Yellow Wax Crude from the Uintah
Basin is consistently the highest of any type of crude oil in the
country based on historical data. The spot price on October 2,
2000 was $31.00 per barrel for Yellow Wax Crude and $26.75 per
barrel for Black Wax Crude based on quotes from "eott.com".
Natural gas is currently at $4.23 per thousand cubic feet per
Bloomberg, October 2, 2000. Emerging from a two-year downturn,
oil prices reached their highest level since the Gulf War, and
have continued to rise. Enron will take all of the oil that we
can produce.
Prices for oil and gas are driven strictly by supply and
demand. We can sell our products to any one of five
distributors, including Enron, Chevron, Flying J, AMACO, and
Phillips. Prices among the five distributors are nearly equal.
We decided to sell to Enron based on quality of service and
relationships between our companies. We currently do not use
commodity futures contracts or price swaps in marketing our crude
oil and natural gas.
The availability of a ready market for our oil and gas
depends on numerous factors beyond our control, including the
demand for and supply of oil and gas, the proximity of our
natural gas reserves to pipelines, the capacity of such
pipelines, fluctuations in production and seasonal demand, the
effects of inclement weather and governmental regulation. New
gas wells may be shut-in for lack of a market until a gas
pipeline or gathering system with available capacity is extended
into the area. New oil wells may have production curtailed until
production facilities and equipment are acquired or developed.
Our business will always be subject to these types of risks.
Regulation
The production and sale of gas and oil are subject to a
variety of federal, state and local government regulations,
including regulations concerning the prevention of waste, the
discharge of materials into the environment, the conservation of
natural gas and oil, pollution, permits for drilling operations,
drilling bonds, reports concerning operations, the spacing of
wells, the unitization and pooling of properties, and various
other matters, including taxes. Many jurisdictions have at
various times imposed limitations on the production of gas and
oil by restricting the rate of flow for gas and oil wells below
their actual capacity to produce. In addition, many states have
raised state taxes on energy sources and additional increase may
occur, although increases in state energy taxes would have no
predictable effect on natural gas and oil prices. We believe we
are in substantial compliance with applicable
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environmental and other government laws and regulations.
However, there can be no assurance that significant costs for
compliance will not be incurred in the future.
All aspects of the oil and gas industry are extensively
regulated by federal, state and local governments. Regulations
govern such things as drilling permits, production rates,
environmental protection and pollution control, royalty rates,
and taxation rates. These regulations may substantially increase
the cost of doing business and sometimes prevent or delay the
start or continuation of any given exploration or development
project. Regulations are subject to future changes by
legislative and administrative action and by judicial decisions,
which may adversely affect the petroleum industry.
We believe our operations comply with all applicable
legislation and regulations in all material respects and that the
existence of such regulations has had no more restrictive effect
on our method of operations than other similar companies in the
industry. Although we do not believe our business operations
presently impair environmental quality, compliance with federal,
state and local regulations that have been enacted or adopted
regulating the discharge of materials into the environment could
have an adverse effect upon our capital expenditures, earnings
and competitive position.
In the areas which we conduct our operations, there are
statutory provisions regulating the production of oil and natural
gas. These rules may restrict the oil and gas production rate to
below the rate our wells can produce. We are also subject to
numerous laws and regulations governing the discharge of
materials into the environment or otherwise relating to
environmental protection. We may be required to obtain permits
before drilling and operating our wells. Also, we may be subject
to liability for pollution that results from our operations. It
is impossible to predict if and to what extent these regulations
may impact our operations.
State regulatory authorities have established rules and
regulations requiring permits for drilling operations, drilling
bonds and/or reports concerning operations. The state regulatory
authorities may also have statutes and regulations concerning the
spacing of wells, environmental matters and conservation.
At present, our compliance efforts consist of filing monthly
production, inventory and sales reports with the state of Utah
and the Mineral Management Services. We are also required to
file notices when there are any changes in the wells such as
relocating tanks and pipes, cleanouts and other activity. We may
incur additional costs for clean up in the event of an oil spill.
We estimate that we currently spend approximately $5,000 per year
to maintain compliance with regulatory requirements. We intend
to comply with all regulations pertaining to our operations.
However, future legislation and regulation may have adverse
impact on our business.
Competition
In seeking suitable opportunities, we compete with a number
of other companies, including large oil and gas companies and
other independent operators with greater financial resources and,
in some cases, with financial resources, personnel and facilities
substantially greater than ours. There can be no assurance we
can compete effectively with these larger entities. The oil and
gas industry is highly competitive in all phases. We will
encounter strong competition from other independent oil companies
in all areas of our business including marketing, production and
obtaining external financing. Most of our competitors have
financial resources, personnel, and facilities substantially
greater than ours. However, unless there is a substantial drop
in the market for oil and natural gas, we can sell our products
at daily spot prices.
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Employees
We presently have one full-time officer and two full time
office staff. In addition, we employ consultants from time-to-
time to assist in evaluating oil and gas properties. We employ
six additional full time production employees who are on call 24
hours a day.
Our success will be largely dependent upon the efforts and
active participation of Craig Phillips, the President of Mountain
Oil, Joe Ollivier, Chief Financial Officer, and Lynn Stratford,
Vice President, Finance. The loss of the services of any the
officers and key consultants may adversely affect our business
decisions. We do not have key man insurance in place for any
personnel and do not anticipate purchasing key man insurance
until such time as revenues from operations allow.
Our directors and officers, are, or may become in their
individual capacity, officers, directors, controlling
shareholders and/or partners of other entities engaged in a
variety of businesses. Thus, there exist potential conflicts of
interest including, among other things, time, effort and
corporate opportunity, involved in participation with such other
business entities. The amount of time, which our officers and
directors will devote to our business, may be limited. It is not
anticipated that any of such other business interests will be
ones that are, or will be, in competition with us.
Legal proceedings
Mountain Oil is not a party to any material pending legal
proceedings, and to the best of its knowledge, no such
proceedings by or against Mountain Oil have been threatened.
Facilities
Our offices are located at 3954 East Highway 40, Ballard,
Uintah County, Utah. Our building consists of a total of 2,400
square feet with 1,200 square feet on each of two floors. All
administrative and managerial functions are performed at our
office location. We have purchased our building for $29,324.55
and are current in our mortgage payments.
OIL AND GAS RESERVE INFORMATION
The following information was provided by Professional
Petroleum/Reservoir Engineering Services, Ralph L. Nelms,
Consulting Petroleum Engineer. Mr. Nelms is an independent
expert who is qualified and is in the business of rendering
opinions regarding the value of oil and gas properties based upon
the evaluation of all pertinent economic, financial, geologic and
engineering information.
The reserve report is based upon oil and gas sales prices,
production history, working interests, net revenue interests,
drilling and completion costs, and operating costs provided by
Mountain Oil, and were not independently verified by Mr. Nelms.
The evaluation is based upon utilization of the oil and gas
prices believed to be in effect on December 31, 1999. A field
examination of the producing wells was not conducted.
Estimates of reserves and of future net revenue may vary
substantially depending, in part, on the assumptions made and may
be subject to adjustment either up or down in the future. The
actual amounts of production, revenue, taxes, development
expenditures, operating expenses, and quantities of recoverable
oil and gas reserves to be encountered may vary substantially
from the engineer's estimates. Oil and gas reserve estimates are
necessarily inexact and involve matters of subjective and
engineering judgment. In addition, any estimates of future net
revenue and the present value are based on price and cost
assumptions made by us which only represent our best estimate.
If these estimates of quantities,
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prices and costs prove inaccurate, we are unsuccessful in
expanding our oil and gas reserves base with our capital
expenditure program, and/or declines in and instability of oil
and gas prices occur, then write downs in the capitalized costs
associated with our oil and gas assets may be required. While we
believe that the estimated proved oil and gas reserves and
estimated future net revenues are reasonable, there is no
assurance that certain revisions will not be made in the future.
Table following presents a summary of the Proved Developed Producing
and Proved Undeveloped net oil and gas reserves.
NET OIL AND GAS RESERVES AND
NET PRESENT VALUE AS OF DECEMBER 31, 1999
Reserve Net Oil Remaining Net Gas Remaining Net Present Value
Classification Mbbls Mmcf At 10% Discount
Proved Developed 40 34 $228,029
Producing
Proved Undeveloped 889 1,795 $2,100,607
Total Proved 929 1,829 $2,328,636
Total Proved reserves are 929 Mbbls of oil and 1,829 Mmcf of natural gas
with a net present value discounted at 10% of $2,328,636 as of December 31,
1999. Proved Developed Producing reserves were assigned to four wells
totaling 40 Mbbls of oil and 34 Mmcf of natural gas with a net present value
discounted at 10% of $228,029. Proved Undeveloped reserves were assigned to
nine undrilled locations and behind pipe reserves in three existing wells
totaling 889 Mbbls of oil and 1,795 Mmcf of natural gas with a net present value
discounted at 10% of $2,100,607.
We have five 40-acre Proved Undeveloped drilling locations in the Green
River formation in the Brundage Canyon and Myton Bench fields, and four 320
-acre Proved Undeveloped drilling locations in the Wasatch and Green River
formations in the Altamont and Bluebell fields.
The largest potential up side for development of our oil and
gas reserves is drilling offset wells to existing producing and
shut in Green River and Wasatch wells and possible behind pipe
Proved reserves in shut in or un-economic Wasatch wells. Behind
pipe Proved oil and gas reserves are reserves assigned to oil or
gas formations in existing wells that have been cased and
cemented and are known to be, or have been, economically
productive in offset wells where a relatively major expenditure
is required for rework.
Our undeveloped properties in the Altamont, Bluebell,
Brundage Canyon, Myton Bench, Duchesne, West Willow Creek North,
and Bridgeland fields, which have not been assigned Proved
Undeveloped reserves in the December 31, 1999 reserve report, may
have significant potential for additional development of oil and
gas Proved Undeveloped reserves.
Potential for upside development exists on our West Willow
Creek North leases. Geological mapping indicates the possibility
of the extension of both Green River and Wasatch oil sand from
the Duck Creek Field in T9S R19E south west of our properties.
Wasatch production and Green River production immediately
surround the properties is un-economic. However, the central
sections of leases containing the Green River and Wasatch
formations have not been drilled. Due to the high uncertainty
associated with this prospect, no Proved Undeveloped reserves
were assigned to any of the leases in West Will Creek North.
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The average expense utilized for the reserve evaluations was
$1,700 per month per well for a Green River and shallow Wasatch
well completion in Brundage Canyon, Myton Bench, West Willow
Creek North, and River Junction fields. Operating expense of
$4,000 per month per well was used for operating expenses for a
deep Wasatch and Green River completion in the Bluebell and
Altamont fields. This figure reflects actual monthly operating
costs, excluding all state of Utah Severance and Conservation
Taxes and Duchesne and Uintah County Ad Valorem property taxes.
Monthly operating expenses were not escalated.
An oil sales price of $25.50 per barrel was utilized for
Yellow Wax and $21.50/bbl was used for Black Wax oil sales. This
oil price is based upon the oil price in effect on December 31,
1999 as posted by EOTT on its web site "eott.com". Oil price was
not escalated for the economic evaluation.
Gas sales price used was $2.10/mcf. The gas price used was
the estimated gas sales price in effect on December 31, 1999.
Gas prices also were not escalated for the economic life of each
well.
In some cases the offset Proved Undeveloped locations may
have different working and net revenue interest than the primary
producing well holding the acreage. Mineral interests held by us
including working and net revenue interests in Proved Undeveloped
offset acreage held by us were not independently verified.
Twenty of our 24 wells were shut in or producing oil and gas
at un-economic quantities as of December 31, 1999 using December
31, 1999 oil and gas sales prices. 8.75% was utilized for Ad
Valorem taxes based upon Duchesne and Uintah County historical
tax assessments for the wells. A Severance tax rate of 2% was
utilized for the State of Utah. The analysis was performed using
before tax evaluation procedures. No calculations of federal
taxes or credit for depreciation, depletion, or any type of tax
credits were applied to the analysis.
Production decline curves were generated using generally
accepted oil and gas economic computer programs utilizing
historical production data. All individual reports, decline
curve production plots, and the oil and gas reserve summary
report were generated utilizing the David P. Cooke and Associates
Oil and Gas Reserve Evaluation, OGRE and Interactive Decline
Evaluation and Analysis, IDEA computer programs. The David P.
Cooke and Associates computer programs are widely used and
generally accepted by the Oil and Gas Industry through the United
States for oil and gas reserve and economic analysis. A maximum
of 30 years of well life was utilized in the analysis.
Drilling and completion costs were assumed to be $355,000
for Green River development in Brundage Canyon and Myton Bench
area. Deep Wasatch and Green River formation drilling and
completion costs in Altamont and Bluebell fields were assumed to
be either $1,600,000 or $2,600,000 per well, depending on
location. Drilling and completion costs were assumed to be
$370,000 for the Green River and $550,000 for the Wasatch
formation in the West Willow Creek North prospect.
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MANAGEMENT
Our business will be managed by our officers and directors.
The following persons are the officers and directors of Mountain
Oil:
Name Age Position Since
Craig K. 47 President and Director July 1999
Phillips
Joseph F. 58 Vice President - Chief July 1999
Ollivier Financial Officer/Investor
Relations Officer and
Director
Lynn Stratford 57 Vice President - Finance February 2000
and Director
Daniel S. Sam 37 Secretary, Treasurer, July 1999
General Counsel and
Director
Biographies
The following are brief biographies of the officers and directors:
Craig K. Phillips, President and Director. Craig K.
Phillips has nearly 30 years of experience in the oil industry.
Mr. Phillips began his career on a drilling crew and progressed
into managing drilling projects, analyzing oil and gas zones,
repair, maintenance, founding oil companies, purchasing oil and
gas properties, refurbishing wells, and consulting. From 1995 to
1997, Mr. Phillips was superintendent for Uintah Oil & Gas, and
from 1997 through 1999, Mr. Phillips was self-employed as a
consultant in the oil and gas industry. Mr. Phillips has
specifically been involved with the wells in this project through
his former company Uintah Gas and Oil. Mr. Phillips knows the
Uintah Basin oil fields including Altamont, Bluebell, Myton, and
Brundage Canyon and the detailed history of each well. Mr.
Phillips' primary responsibility is the firm's day-to-day
operations. Mr. Phillips understands what makes the wells
produce efficiently and is focused on maximizing daily output.
Mr. Phillips is one of the co-founders of Mountain Oil.
Joseph F. Ollivier, Vice President, Chief Financial Officer
and Director. Since 1995, Mr. Ollivier has been a managing
member of First Capital Funding, LLC, a private mortgage company,
where he supervises loan activity. Mr. Ollivier is responsible
for overseeing our budgeting and financial direction. Mr.
Ollivier is also a director of Datigen.com, Inc., a public
company, engaged in the business of computer software
development.
Lynn Stratford, Vice President and Director. Lynn Stratford
is a Northwestern MBA graduate. Mr. Stratford worked for two
years with Arthur Andersen & Co. after graduate school. Since
1978 Mr. Stratford has been the financial specialist in his own
venture capitalist firm, starting new companies as well as buying
and selling companies. Mr. Stratford has expertise in
management, accounting, computers, and financial analysis.
Daniel S. Sam, Secretary, Treasurer, General Counsel and
Director. Mr. Sam is a licensed attorney and has been engaged in
the practice of law in Vernal, Utah, focusing on natural
resources law.
The following is a biography of the independent petroleum
engineer that perform the oil and gas reserve report:
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Mr. Ralph L. Nelms, Consulting Petroleum Engineer,
Professional Petroleum/Reservoir Engineering Services. Mr. Nelms
is a registered professional petroleum engineer with over 25
years of engineering experience. Mr. Nelms has both a bachelors
and a masters degree in Petroleum Engineering as well as an MBA.
Mr. Nelms is an expert in all facets of oil and gas production,
including property analysis, oil and gas reserve evaluation,
project management and development.
COMPENSATION
Mr. Phillips received a salary of $3,000 per month during
our last fiscal year for acting as our president. No other
director or officer has received any compensation nor are there
any employment agreements in place. We do not anticipate
compensating directors.
Stock Option
The following table sets forth certain information relating
to options granted to our executive officers from inception in
July 1999 through September 30, 2000. No options were granted to
any employee other than our executive officers
Name Number of % of Total Exercise Expiration
Securities Options Price Date
Underlying Granted $/sh
Options to
Granted Employees
Craig Phillips, 25,000 20% $1.10 1-15-2010
President
Joseph Ollivier, 25,000 20% $1.00 1-15-2010
Vice President
Lynn Stratford, 50,000 40% $1.00 1-15-2010
Vice President
Daniel S. Sam, 25,000 20% $1.00 1-15-2010
Secretary and Treasurer
All options were issued on April 3, 2000.
The following table sets forth certain information with
respect to unexercised options held by our executive officers as
of September 30, 2000.
Number of Value of
Securities Unexercised
Shares Underlying In-the-Money
Acquired Value Unexercised Options/SARs at
Name on Realized Options/SARs at Sept. 30, 2000
Exercise ($) Sept. 30, 2000 ($)
(#) Exercisable/ Exercisable/
Unexercisable Unexercisable
Craig -0- -0- 25,000/0 0/0
Phillips,
President
Joseph -0- -0- 25,000/0 0/0
Ollivier,
Vice Pres.
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Lynn 50,000 -0- 0/0 -0-
Stratford,
Vice Pres.
Daniel S. -0- -0- 25,000/0 0/0
Sam Sec./Treas.
Because there is no current public market for our shares, we
have deemed the Fair Market Value to be the exercise price of the
option.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 9, 1999, we borrowed $100,000 from Joseph
Ollivier and signed a note for that amount with interest at 12%
per year. Interest only is currently payable with the principal
due in November 20, 2000. We secured the note with pumping
equipment that we own. The note has been paid in full. Also on
November 9, 1999, we borrowed $100,000 from Daniel Sam and signed
a note for that amount with interest at 12% per year. This note
has also been paid in full.
The above transactions were on terms as favorable to us as
those generally available from unaffiliated third parties. These
transactions were approved by the two disinterested directors who
did not have an interest in the transaction.
From time to time we may enter agreements or transactions
with officers, directors or affiliates. It is our policy to
negotiate such transactions at arms length and at a price equal
to or better than what we could negotiate with unrelated parties.
All future material affiliated transactions and loans, and any
forgiveness of loans, must be approved by a majority of our
independent directors who do not have an interest in the
transaction and who have access, at our expense, to our legal
counsel or independent legal counsel. Because our some of our
officers and directors hold positions in other companies, there
may be a conflict of interest.
PRINCIPAL STOCKHOLDERS
The following table sets for the beneficial ownership of our
common stock as of the date of this prospectus, and as adjusted
to reflect the sale of 222,222 should the minimum number of
shares be sold and to reflect the sale of 1,000,000 should the
maximum number of shares be sold.
The table includes:
*each person known to us to be the beneficial owner of more than five
percent of the outstanding shares
*each director of Mountain Oil
*each named executive officer of Mountain Oil
*all directors and executive officer of Mountain Oil as a group
Name & Address # of Shares % Before % After Offering
Beneficially Offering Minimum Maximum
Owned
Craig K. Phllips 390,000 21.04% 18.79% 13.67%
P.O. Box 1622
Roosevelt, UT 84066
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Joseph F. Ollivier 347,000 18.72% 16.72% 12.16%
3191 N.Canyon Rd.
Provo, UT 84604
Lynn Stratford 105,000 5.67% 5.06% 3.68%
4376 N. Churchill Dr.
Provo, UT 84604
Daniel S. Sam 390,000 21.04% 18.79% 13.67%
319 W. 100 S.
Vernal, UT 84078
All officers 1,232,000 66.49% 59.37% 43.18%
and Directors as a
Group (4 persons)
The shares attributed to Lynn Stratford are held in the
following names: 35,000 shares in the name LRS Unitrust, Lynn R.
Stratford as Trustee; 40,000 shares in the name LRS Unitrust #3,
Lynn R. Stratford as Trustee; and 20,000 shares in the name of
Lynn R. Stratford.
DESCRIPTION OF THE SECURITIES
Common stock
We are authorized to issue up to 50,000,000 shares of common
stock. As of June 30, 2000, there are 1,853,000 shares of common
stock issued and outstanding.
The holders of common stock are entitled to one vote per
share on each matter submitted to a vote of stockholders. In the
event of liquidation, holders of common stock are entitled to
share ratably in the distribution of assets remaining after
payment of liabilities, if any. Holders of common stock have no
cumulative voting rights, and, accordingly, the holders of a
majority of the outstanding shares have the ability to elect all
of the directors. Holders of common stock have no preemptive or
other rights to subscribe for shares. Holders of common stock
are entitled to such dividends as may be declared by the board of
directors out of funds legally available. The outstanding common
stock is, and the common stock to be outstanding upon completion
of this offering will be, validly issued, fully paid and non-
assessable.
We anticipate that we will retain all of our future
earnings, if any, for use in the operation and expansion of our
business. We do not anticipate paying any cash dividends on our
common stock in the foreseeable future.
Preferred stock
We are authorized to issue up to 10,000,000 shares of
preferred stock. As of June 30, 2000, there are no shares of
preferred stock issued and outstanding.
Our preferred stock may be issued from time to time in one
or more series, with such distinctive serial designations as may
be stated or expressed in the resolution or resolutions providing
for the issue of such stock adopted from time to time by our
board of directors. Our board of directors are expressly
authorized to fix:
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* Voting rights
* The consideration for which the shares are to be issued
* The number of shares constituting each series
* Whether the shares are subject to redemption and the terms
of redemption
* The rate of dividends, if any, and the preferences and
whether such dividends shall be cumulative or noncumulative
* The rights of preferred stockholders regarding
liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding up of Mountain Oil
* The rights of preferred stockholders regarding conversion
or exchange of shares for another class of our shares
We will not offer preferred stock to promoters except on the
same terms as it is offered to all other existing shareholders or
to new shareholders or unless the issuance of preferred stock is
approved by a majority of our independent directors do not have
an interest in the transaction and who have access, at our
expense, to our legal counsel or independent legal counsel.
Convertible debenture
We have sold convertible debentures to accredited investors
for $825,000. These debentures are convertible to common stock
at $1.50 per share, 677 shares per $1,000 note, for a total of
550,000 shares of common stock. The notes are due on March 31,
2002 and are convertible up to that time. The debentures pay
interest at a rate of 7% per annum from the date of issuance.
Stock options
We have reserved 300,000 shares of common stock for issuance
to key employees, officers, directors and consultants upon the
exercise of options available for grant under our Long-Term Stock
Incentive Plan.
Currently, we have granted options for 75,000 shares of
common stock. The options are fully vested and are exercisable
at $1.00 and $1.10 per share for a period of ten years. As of
the date of this prospectus, options for 50,000 shares of common
stock have been exercised at $1.00 per share.
The sale of any shares upon exercise of the stock options
could adversely affect the market price for our common stock.
Other than options issued under our qualified Long-Term
Stock Incentive Plan are exercisable more than five years from
the date of this prospectus.
Transfer agent
Interwest Transfer Company, Inc., 1981 E. 4800 S., Salt Lake City,
Utah 84124 is our transfer agent.
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SHARES AVAILABLE FOR FUTURE SALE
As of the date of this prospectus, there are 1,853,000
shares of our common stock issued and outstanding. Upon the
effectiveness of this registration statement, 222,222 shares of
common stock will be freely tradeable if the minimum number of
shares are sold and 1,000,000 shares of common stock will be
freely tradeable if the maximum number of shares are sold. The
remaining 1,853,000 shares of common stock will be subject to the
resale provisions of Rule 144. Sales of shares of common stock
in the public markets may have an adverse effect on prevailing
market prices for the common stock.
Rule 144 governs resale of "restricted securities" for the
account of any person, other than an issuer, and restricted and
unrestricted securities for the account of an "affiliate of the
issuer. Restricted securities generally include any securities
acquired directly or indirectly from an issuer or its affiliates,
which were not issued or sold in connection with a public
offering registered under the Securities Act. An affiliate of
the issuer is any person who directly or indirectly controls, is
controlled by, or is under common control with the issuer.
Affiliates of may include directors, executive officers, and
person directly or indirectly owning 10% or more of the
outstanding common stock. Under Rule 144 unregistered re-sales
of restricted common stock cannot be made until it has been held
for one year from the later of its acquisition from us or an
affiliate. At that time shares of common stock may be resold
without registration subject to Rule 144's volume limitation,
aggregation, broker transaction, notice filing requirements, and
requirements concerning publicly available information about us.
Re-sales by our affiliates of restricted and unrestricted common
stock are subject to the applicable requirements. The volume
limitations provide that a person, or persons who must aggregate
their sales, cannot, within any three-month period, sell more
that the greater of one percent of the then outstanding shares,
or the average weekly reported trading volume during the four
calendar weeks preceding each such sale. A non-affiliate may
resell restricted common stock that has been held for two years
free of the applicable requirements.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
We currently have 35 holders of record or our common stock.
There is no market for our common stock. Presently, we are
privately owned, and there is no market for any of our
securities. This is our initial public offering.
Most initial public offerings are underwritten by a
registered broker-dealer firm or an underwriting group. These
underwriters generally will act as market makers in the stock of
a company they underwrite to help insure a public market for the
stock. This offering is to be sold by our officers and
directors. We have no commitment from any brokers to sell shares
in this offering. As a result, we will not have the typical
broker public market interest normally generated with an initial
public offering. Lack of a market for shares of our common stock
could adversely affect a shareholder in the event a shareholder
desires to sell his shares.
Currently, there is no public trading market for our
securities and there can be no assurance that any market will
develop. If a market develops for our securities, it will likely
be limited, sporadic and highly volatile.
Broker-dealers are subject to certain restrictions when they
deal in our securities that impair the liquidity of the common
stock. Public trading of the common stock is covered by Rule
15c2-6 of the Securities Exchange Act of 1934, which imposes
certain sales practice requirements on broker-dealers who sell
certain designated securities to persons other than established
customers and certain categories of investors. For transactions
covered by the Rule, the broker-dealer must make a suitability
determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to sale. Under
certain circumstances, the purchaser may enjoy the right to
rescind the transaction within a certain period
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of time. Consequently, so long as the common stock is a
designated security under the Rule, the ability of broker-dealers
to effect certain trades may be affected adversely, thereby
impeding the development of a meaningful market in the common
stock.
PLAN OF DISTRIBUTION
Mr. Josh Miller, a Mountain Oil employee, will sell the
common shares offered on a "best efforts" basis. Our directors,
officers and other affiliates may purchase shares in this
offering in order to satisfy the minimum. We have appointed
Bonneville Bank, 1675 North 200 West, Provo, Utah 84604 as the
escrow agent who will hold proceeds from the sale of shares until
the minimum $500,000 has been received. If we have not received
$500,000 within 90 days from the date of this prospectus, unless
extended by us for up to an additional 30 days, funds will be
promptly returned to investors with interest and without any
deductions. In order to buy our shares, you must complete and
execute the subscription and make payment of the purchase price
for each share purchased either in cash or by check payable to
the order of Mountain Oil, Inc. A copy of the subscription
agreement which shall include the name, address, social security
or other tax identification number of each subscriber and the
date and amount of each subscription will be included with each
deposit made into the escrow account.
The sole duty of Bonneville Bank other than described in the
Escrow Agreement, shall be to establish and maintain the escrow
account and receive and hold the funds deposited by us. We
acknowledge that Bonneville Bank is performing the limited
function as Escrow Agent and that this fact in no way means that
Bonneville Bank has passed in any way upon the merits or
qualifications of, or has recommended, or given approval to, any
person, security or transaction.
Solicitation for purchase of our shares will be made only by
means of this prospectus and communications with officers and
directors of Mountain Oil who are employed to perform substantial
duties unrelated to the offering, who will not receive any
commission or compensation for their efforts, and who are not
associated with a broker or dealer.
LEGAL MATTERS
The legality of the issuance of the shares offered and
certain other matters will be passed upon for Mountain Oil by
Lehman, Walstrand & Associates, LLC, Salt Lake City, Utah.
EXPERTS
The financial statements of Mountain Oil as of June 30,
2000, unaudited, and December 31, 1999, audited, appearing in
this prospectus and Registration Statement have been prepared by
Tanner & Co., independent auditors, as set forth in their report
appearing elsewhere, and are included in reliance upon such
report given upon the authority of Tanner & Co. as experts in
accounting and auditing.
22
<PAGE>
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 under
the Securities Act of 1933, with respect to the shares offered.
This prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules.
For further information with respect to Mountain Oil and the
shares offered, reference is made to the Registration Statement
and the exhibits and schedules filed with the Securities and
Exchange Commission. Statements contained in this prospectus as
to the contents of any contract or any other document referred to
are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the
Registration Statement, and the exhibits and schedules, may be
inspected without charge at the public reference facilities
maintained by the Securities and Exchange Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, telephone
1-800-SEC-0330 and at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of all or any part of the Registration
Statement may be obtained from the Commission upon payment of a
prescribed fee. This information is also available from the
Commission's Internet web site at www.sec.gov.
23
<PAGE>
MOUNTAIN OIL, INC.
Index to Financial Statements
Page
Independent Auditor's report F-2
Balance sheet F-3
Statement of operations F-4
Statement of stockholders' equity F-5
Statement of cash flows F-6
Notes to financial statements F-7
Schedules of supplementary information on
oil and gas operations F-16
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Mountain Oil, Inc.
We have audited the accompanying balance sheet of Mountain Oil,
Inc. as of December 31, 1999, and the related statements of
operations, stockholders' equity, and cash flows for the period
from July 30, 1999 (date of inception) to December 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
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Mountain Oil, Inc. as of December 31, 1999, and the results of
its operations and its cash flows for the period from July 30,
1999 (date of inception) to December 31, 1999 in conformity with
generally accepted accounting principles.
/s/ Tanner + Co.
TANNER + CO.
Salt Lake City, Utah
February 2, 2000, except for note 11
which is dated April 30, 2000
F-2
<PAGE>
MOUNTAIN OIL, INC.
Balance Sheet
June 30, 2000 (Unaudited) and December 31, 1999
2000
(Unaudited) 1999
Assets
Current assets:
Cash $ 35,000 $ 512,000
Accounts receivable 70,000 78,000
Subscription receivable - 10,000
Note receivable 330,000 _
Prepaid expenses 29,000 1,000
Total current assets 464,000 601,000
Property and equipment, net 1,131,000 417,000
Deposits and other assets 24,000 11,000
$ 1,619,000 $ 1,029,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 140,000 $ 183,000
Accrued expenses 12,000 4,000
Related party notes payable - 200,000
Current portion of long-term debt 6,000 12,000
Total current liabilities 158,000 399,000
Long-term debt 866,000 44,000
Commitments - -
Stockholders' equity:
Preferred stock, no par value, authorized 10,000,000 - -
shares; no shares issued or outstanding
Common stock, no par value, authorized 50,000,000
shares; 1,853,000 and 1,803,000 shares issued and 653,000 603,000
outstanding, respectively
Accumulated deficit (58,000) (17,000)
Total stockholders' equity 595,000 586,000
$ 1,619,000 $ 1,029,000
F-3
<PAGE>
MOUNTAIN OIL, INC.
Statement of Operations
Six Months Ended June 30, 2000 (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
2000
(Unaudited) 1999
Oil and gas sales $ 338,000 $ 77,000
Cost of sales 106,000 45,000
Gross profit 232,000 32,000
General and administrative expenses (226,000) (33,000)
Depreciation, depletion and amortization expense (43,000) (12,000)
Loss from operations (37,000) (13,000)
Interest expense (18,000) (4,000)
Other income 14,000 -
Loss before provision for income taxes (41,000) (17,000)
Provision for income taxes - -
Net loss $ (41,000) $ (17,000)
Loss per common share - basic and diluted $ (.02) $ (.02)
Weighted average number of common share - basic and
diluted 1,815,000 1,106,000
F-4
<PAGE>
MOUNTAIN OIL, INC.
Statement of Stockholders' Equity
Six Months Ended June 30, 2000 (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock Accumulated
Shares Amount Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance at July 30, 1999 - $ - - $ - $ - $ -
(date of inception)
Issuance of common stock to - - 1,200,000 - - -
the founders
Issuance of common stock for:
Cash - - 509,000 509,000 - 509,000
Stock subscription
receivable - - 10,000 10,000 - 10,000
Equipment - - 84,000 84,000 - 84,000
Net loss - - - - (17,000) (17,000)
Balance at December 31, 1999 - - 1,803,000 603,000 (17,000) 586,000
Issuance of common stock for
cash (unaudited) 50,000 50,000 50,000
Net loss (unaudited) - - - - (41,000) (41,000)
Balance at
June 30, 2000 (unaudited) - $ - 1,853,000 $ 653,000 $ (58,000) $ 595,000
</TABLE>
F-5
<PAGE>
MOUNTAIN OIL, INC.
Statement of Cash Flows
Six Months Ended June 30, 2000, (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
2000
(Unaudited) 1999
Cash flows from operating activities:
Net loss $ (41,000) $ (17,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 43,000 (12,000)
(Increase) decrease in:
Accounts receivable 8,000 (78,000)
Prepaid expenses (28,000) (1,000)
Deposits and other assets (13,000) (11,000)
Increase (decrease) in:
Accounts payable (43,000) (95,000)
Accrued expenses 8,000 4,000
Net cash used in
operating activities (66,000) (186,000)
Cash flows from investing activities:
Purchase of property and equipment (757,000) (10,000)
Note receivable (330,000) -
Net cash used in investing
Activities (1,087,000) (10,000)
Cash flow from financing activities:
Proceeds from long-term debt 825,000 -
Payments on related party notes payable (200,000) -
Payments on long-term debt (9,000) (7,000)
Collection of subscription receivable 10,000 -
Proceeds from issuance of common stock 50,000 509,000
Proceeds from related party notes payable - 206,000
Net cash provided by
financing activities 676,000 708,000
Net (decrease) increase in cash (477,000) 512,000
Cash, beginning of period 512,000 -
Cash, end of period $ 35,000 $ 512,000
F-6
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
December 31, 1999
1.Organization Organization
and The Company is incorporated under the
Summary laws of the state of Utah and is primarily
of Significant engaged in the business of acquiring,
Accounting developing, producing and selling oil and
Policies gas products and properties to companies
located in the continental United States.
Unaudited Financial Information
The unaudited financial statements include
the accounts of the Company and include
all adjustments (consisting of normal
recurring items), which are, in the
opinion of the management, necessary to
present fairly the financial position as
of June 30, 2000 and the results of
operations and cash flows for the six
months ended June 30, 2000. The results
of operations for the six months ended are
not necessarily indicative of the results
to be expected for the entire year.
Cash and Cash Equivalents
For purposes of the statement of cash
flows, the Company considers all highly
liquid investments with a maturity of
three months or less to be cash
equivalents.
Concentration of Credit Risk
Financial instruments which potentially
subject the Company to concentration of
credit risk consist primarily of trade
receivables. In the normal course of
business, the Company provides credit
terms to its customers. Accordingly, the
Company performs ongoing credit
evaluations of its customers and maintains
allowances for possible losses which, when
realized, have been within the range of
management's expectations. As more fully
described in note 5, the Company generated
all of its revenue from one customer. The
Company has aggregate receivables of
approximately $61,000 from this customer
at December 31, 1999.
The Company maintains its cash in bank
deposit accounts which, at times, may
exceed federally insured limits. The
Company has not experienced any losses in
such account. The Company believes it is
not exposed to any significant credit risk
on cash and cash equivalents.
F-7
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
1. Organization Oil and Gas Producing Activities
and The Company utilizes the successful
Summary of efforts method of accounting for its oil
Significant and gas producing activities. Under this
Accounting method, all costs associated with
Policies productive exploratory wells and
continued productive or nonproductive development
wells are capitalized while the costs of
nonproductive exploratory wells are
expensed. If an exploratory well finds
oil and gas reserves, but a determination
that such reserves can be classified as
proved is not made after one year
following completion of drilling, the
costs of drilling are charged to
operations. Indirect exploratory
expenditures, including geophysical costs
and annual lease rentals, 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. 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 depreciated over their estimated
useful lives.
On the 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
the 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 the 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 had 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.
F-8
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
1. Organizaton Property and Equipment
and Property and equipment are stated at cost
Summary of less accumulated depreciation.
Significant Depreciation is provided using the straight-
Accounting line method over the estimated useful lives
Policies of the assets. Expenditures for
continued maintenance and repairs are expensed when
incurred and betterments are capitalized.
When assets are sold, retired or otherwise
disposed of, the applicable costs and
accumulated depreciation, depletion, and
amortization are removed from the accounts,
and the resulting gain or loss is reflected
in operations.
Income Taxes
Deferred income taxes arise from temporary
differences resulting from income and
expense items reported for financial
accounting and tax purposes in different
periods. Deferred taxes are classified as
current or concurrent, depending on the
classification of the assets and
liabilities to which they relate. Deferred
taxes arising from temporary differences
that are not related to an asset or
liability are classified as current or
concurrent depending on the periods in
which the temporary differences are
expected to reverse.
Earnings Per Share
The computation of basic earnings per
common share is based on the weighted
average number of shares outstanding during
the period.
The computation of diluted earnings per
common share is based on the weighted
average number of shares outstanding during
the period plus the common stock
equivalents which would arise from the
exercise of stock options and warrants
outstanding using the treasury stock method
and the average market price per share
during the period. Common stock
equivalents are not included in the diluted
earnings per share calculation when their
effect is antidilutive.
At December 31, 1999, the Company had no
options or warrants outstanding.
Revenue Recognition
Revenue is recognized from oil sales at
such time as the oil is delivered to the
buyer. Revenue is recognized from gas
sales when the gas passes through the
pipeline at the well head. Revenue from
overriding royalty interest is recognized
when earned.
The Company does not have any gas balancing
arrangements.
F-9
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
1. Organization Use of Estimates in the Preparation of
and Financial Statements
Summary of The preparation of financial statements in
Significant conformity with generally accepted
Accounting accounting principles requires management
Policies to make estimates and assumptions that
continued 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.
2.Property Property and equipment consists of the following at December 31,
and 1999:
Equipment
Oil and gas properties (successful efforts method) $ 174,000
Oil and gas equipment 104,000
Vehicles and equipment 118,000
Building and land 29,000
Office furniture and fixtures 4,000
429,000
Less accumulated depreciation, depletion
and amortization (12,000)
$ 417,000
F-10
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
3.Long-Term Long-term debt consists of the following at December 31, 1999:
Debt
Mortgage payable, due in monthly installments of $300,
including interest at 8%, secured by real property $ 28,000
Note payable to a finance company, due in monthly
installments of $500, including interest at 10.3%,
secured by equipment 22,000
Note payable to an individual, bearing interest at 10%.
The note is unsecured and due on demand 6,000
-----
56,000
(12,000)
--------
$ 44,000
----------
Future maturities of long-term debt are as follows:
Year Ending December 31: Amounts
2000 $12,000
2001 6,000
2002 7,000
2003 7,000
2004 7,000
Thereafter 17,000
-------
$56,000
F-11
<PAGE>
4. Income The provision for income taxes differs from the
Taxes amount computed at federal
statutory rates as follows at December 31, 1999:
Income tax benefit at statutory rate $ 3,000
Change in valuation allowance (3,000)
$ -
Deferred tax assets (liabilities) are comprised of the following at
December 31, 1999:
Net operating loss carry forward $ 3,000
Valuation allowance (3,000)
$ -
A valuation allowance has been recorded for
the full amount of the deferred tax
asset because it is more likely than not that
the deferred tax asset will not be
realized.
As of December 31, 1999, the Company had a net
operating loss carryforward of
approximately $17,000. This carry forward
expires in 2019. If substantial changes
in the Company's ownership should occur, there
would be an annual limitation of
the amount of NOL carry forward which could be
utilized. The ultimate realization
of this carry forward is due, in part, on the
tax law in effect at the time and future
events which cannot be determined.
5. Sales to The Company's sales for the period from July
Major 30, 1999 (date of inception) to
Customer December 31, 1999 were all to one customer.
6. Related Related party payables at December 31, 1999
Party consist of notes payable to
Payables officers/shareholders totaling $200,000. The
notes bear interest at rates ranging
from 11% to 12%. The notes are secured by
property and equipment and are
due on demand.
F-12
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
7. Supplemental Operations reflect actual amounts paid for
Disclosures interest and income taxes as follows:
of Cash Flow
Information
Six Months July 30, 1999
Ended June 30, (Date of
2000 Inception) to
(Unaudited) December 31,
1999
Interest $ 18,000 $ 4,000
Income taxes $ - $ -
During the period July 30, 1999 (date of
inception) to December 31, 1999:
The Company issued 84,000 shares of common
stock in exchange for equipment in the
amount of $84,000.
* The Company acquired oil and gas
properties and related equipment in
exchange for accounts payable and long-term
debt of $307,000.
* The Company acquired equipment in
exchange for long-term debt of $28,000.
* The Company issued 10,000 shares of
common stock in exchange for a stock
subscription receivable which was collected
subsequent to year end.
F-13
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
8. Preferred The Company's preferred stock may be issued
Stock from time to time in one or more series,
with such distinctive serial designations
as may be stated or expressed in the
resolution or resolutions providing for the
issue of such stock adopted from time to
time by the Board of Directors. In such
resolution or resolutions providing for the
issuance of shares of each particular
series, the Board of Directors is also
expressly authorized to fix:
* The right to vote
* The consideration for which the shares
of such series are to be issued, the number
of shares constituting such series and
whether shares of such series shall be
subject to redemption and the terms
* The rate of dividends, the times at
which dividends shall be payable, and
preferences and whether such dividends
shall be cumulative or noncumulative
* The rights which the holders of shares
of such series shall have in the event of
any voluntary or involuntary liquidation,
merger, consolidation, distribution or sale
of assets, dissolution or winding up of the
affairs of the corporation
* The rights which the holder of shares
of such series shall have to convert such
shares into or exchange such shares for
shares of any other class or any other
series of stock of the corporation
9.Fair Value of The Company's financial instruments consist of cash,
Financial receivables, payables, and notes payable. The carrying
Instruments amount of cash, receivables and payables approximates fair
value because of the short-term nature of these items.
The aggregate carrying amount of the notes payable
approximates fair value as the individual
borrowings bear interest at market interest rates.
F-14
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
10. Recent In June 1999, the FASB issued SFAS No. 137,
Accounting "Accounting for Derivative
Pronounce- Instruments and Hedging Activities - Deferral of
ments the Effective date of FASB Statement No. 133." SFAS 133
establishes accounting and reporting standards for
derivative instruments and requires recognition
of all derivatives as assets or
liabilities in the statement of financial
position and measurement of those
instruments at fair value. SFAS 133 is now
effective for fiscal years beginning
after June 15, 2000. The Company believes that
the adoption of SFAS 133 will
not have any material effect on the financial
statements of the Company.
11.Subsequent On January 15, 2000, the Company adopted a long-
Events term stock incentive plan. The plan allows for the issuance
of stock options to eligible participants. The options
are exercisable at amounts not less than the
fair market value of the stock on the
date of grant. The options, eligible
participants and exercise price is established by
a committee selected by the Board of Directors
of the Company.
On April 30, 2000, the Company completed the
issuance of $825,000 convertible
debentures. The debentures are convertible at
$1.50 per share and are due on
March 31, 2002. The debentures are convertible
at any time until the due date.
F-15
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information
on Oil and Gas Operations
The information on the Company's oil and gas operations as shown
in this schedule is based on the successful efforts method of
accounting and is presented in conformity with the disclosure
requirements of Statement of Financial Accounting Standards No.
69 "Disclosures about Oil and Gas Producing Activities."
Capitalized Costs Relating to Oil and Gas Producing Activities
December
31, 1999
Proved oil and gas properties and related equipment $ 278,000
Unproved oil and gas properties -
---------
Subtotal 278,000
Accumulated depreciation, depletion and amortization
and valuation allowances 12,000
------
$ 266,000
Costs Incurred in Oil and Gas Acquisition,
Exploration and Development Activities
Period
From July
30, 1999
(Date of
Inception) to
December 31,
1999
Acquisition of properties:
Proved $ 174,000
Unproved $ -
Exploration costs $ -
Development costs $ -
F-16
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information
on Oil and Gas Operations
Continued
Results of Operations for Producing Activities
Period
From July
30, 1999
(Date of
Inception) to
December 31,
1999
Oil and gas sales $ 77,000
Production costs (45,000)
Exploration costs -
Depreciation, depletion and amortization and
valuation provisions (10,000)
Net income before income taxes 22,000
Income tax provision (3,000)
Results of operations from producing activities $ 19,000
(excluding corporate overhead and interest costs)
F-17
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information on Oil and Gas Operations
Continued
Reserve Quantity Information (Unaudited)
The estimated quantities of proved oil and gas reserves disclosed
in the table below are based upon estimates by Ralph L. Nelms, a
petroleum engineer. Such estimates are inherently imprecise and
may be subject to substantial revisions.
Revisions may occur because current prices of oil and gas and
current costs of operating are subject to fluctuations; past
performance of wells does not necessarily guarantee future
performance and rates used to estimate decline of reserves could
vary from that which is projected.
All quantities shown in the table are proved reserves and are
located within the United States.
Period From July
30, 1999 (Date of
Inception) to
December 31,1999
Oil Gas
(bbls) (mcf)
Proved developed and undeveloped
reserves:
Beginning of period - -
Revision in previous estimates - -
Discoveries and extension - -
Purchase in place 931,000 1,979,000
Production (2,000) (150,000)
Sales in place - -
End of period 929,000 1,829,000
Proved developed reserves:
Beginning of period - -
End of period 40,000 34,000
F-18
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information on Oil and Gas Operations
Continued
Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves (Unaudited)
Period
From July
30, 1999
(Date of
Inception) to
December 31,
1999
Future cash inflows $ 28,283,000
Future production and development costs (20,486,000)
Future income tax expenses (2,651,000)
-------------
5,146,000
10% annual discount for estimated timing of
cash flows (4,102,000)
-----------
Standardized measure of discounted future
net cash flows $ 1,044,000
------------
The preceding table sets forth the estimated future net cash
flows and related present value discounted at a 10% annual rate
from the Company's proved reserves of oil, condensate and gas.
The estimated future net revenue is computed by applying the
period end prices of oil and gas (including price changes that
are fixed and determinable) and current costs of development and
production to estimated future production assuming continuation
of existing economic conditions. The values expressed are
estimates only, and may not reflect realizable values or fair
market values of the oil and gas ultimately extracted and
recovered. The ultimate year of realization is also subject to
accessibility of petroleum reserves and the ability of the
Company to market the products.
F-19
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information
on Oil and Gas Operations
Continued
Changes in the Standardized Measure of
Discounted Future Net Cash Flows (Unaudited)
Period
From July
30, 1999
(Date of
Inception) to
December 31,
1999
Balance, beginning of period $ -
Sales of oil and gas produced net of production costs (30,000)
Net changes in prices and production costs -
Extensions and discoveries, less related costs -
Purchase and sales of minerals in place 1,074,000
Revisions of estimated development costs -
Revisions of previous quantity estimate -
Accretion of discount -
Net changes in income taxes -
Balance, end of period $ 1,044,000
F-20
<PAGE>
=============================== ===============================
Until _____________, 2000, all
dealers that effect
transactions in these
securities, whether or not
participating in this offering, $2,225,000
may be required to deliver a
prospectus. This is in
addition to the dealers'
obligation to deliver a
prospectus when acting as MOUNTAIN OIL, INC.
underwriters and with respect [logo]
to their unsold allotments or
subscriptions.
1,000,000 Shares
------------------------------- Common Stock
TABLE OF CONTENTS $.001 Par Value
------------------------------
Prospectus Summary 4
Risk Factors 4
Forward-Looking Statements 6 ---------------------
PROSPECTUS
Dilution and Comparative Data 6 ---------------------
Use of Proceeds 7
Capitalization 8
Plan of Operation 8
Results of Operation 11
Business 11
Oil and Gas Reserve Information 15 ___________________ 2000
Management 18
Compensation 19
Certain Relationships and
Related Transactions 20
Principal Stockholders 20
Description of the Securities 21
===============================
Shares Available for Future
Sale 23
Market for Common Stock 23
Plan of Distribution 24
Legal Matters 24
Experts 24
Additional Information 24
Index to Financial Statements 26
No dealer, salesperson or other
person has been authorized to
give any information or to make
any representations other than
those contained in this
prospectus and, if given or
made, such information or
representations must not be
relied upon as having been
authorized by us. This
prospectus does not constitute
an offer to sell or a
solicitation of an offer to buy
any of the securities offered
to whom it is unlawful to make
such offer in any jurisdiction.
Neither the delivery of this
prospectus nor any sale made
shall, under any circumstances,
create any implication that
information contained in this
prospectus is correct as of any
time subsequent to the date of
this prospectus or that there
has been no change in the
affairs of Mountain Oil since
such date.
===============================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection
with this Registration Statement. We will pay all expenses of
the offering. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission and
NASD.
Securities and Exchange Commission Filing Fee $ 594.00
Printing Fees and Expenses 10,000
Legal Fees and Expenses 50,000
Accounting Fees and Expenses 30,000
Blue Sky Fees and Expenses 10,000
Trustee's and Registrar's Fees 5,000
Miscellaneous 5,725
TOTAL $ 111,319
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Charter provides that, to the fullest extent that
limitations on the liability of directors and officers are
permitted by the Utah Revised Business Corporations Act no
director or officer of Mountain Oil shall have any liability to
Mountain Oil or its stockholders for monetary damages. The Utah
Revised Business Corporations Act provides that a corporation's
charter may include a provision which restricts or limits the
liability of its directors or officers to the corporation or its
stockholders for money damages except: (1) to the extent that it
is provided that the person actually received an improper benefit
or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually
received, or (2) to the extent that a judgment or other final
adjudication adverse to the person is entered in a proceeding
based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in
the proceeding. Our Charter and Bylaws provide that we shall
indemnify and advance expenses to its currently acting and its
former directors to the fullest extent permitted by the Utah
Revised Business Corporations Act and that Mountain Oil shall
indemnify and advance expenses to its officers to the same extent
as its directors and to such further extent as is consistent with
law.
The Charter and Bylaws provide that Mountain Oil will
indemnify its directors and officers and may indemnify employees
or agents of Mountain Oil to the fullest extent permitted by law
against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices
with Mountain Oil. However, nothing in our Charter or Bylaws of
protects or indemnifies a director, officer, employee or agent
against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office. To the extent that a director has been successful in
defense of any proceeding, the Utah Revised Business Corporations
Act provides that he shall be indemnified against reasonable
expenses incurred in connection with the proceeding.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised, that in the opinion of the
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Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In August of 1999, we issued 1,200,000 shares of common
stock to individuals for nominal consideration in connection with
services rendered in the formation of Mountain Oil. We believe
this transaction was exempt from registration under Section 4(2)
of the Securities Act as an isolated transaction by an issuer not
involving a public offering.
In November of 1999 we issued 84,000 shares of common stock
to an individual in exchange for equipment valued at $84,000.
The shares were sold to an accredited investor in reliance on
Regulation D, Rule 506 and Section 4(2) of the Securities Act in
transactions by an issuer not involving a public offering.
In December of 1999 we issued 509,000 shares of common stock
for $509,000 cash to 22 accredited investors. The shares were
sold in reliance on Regulation D, Rule 506 and Section 4(2) of
the Securities Act in transactions by an issuer not involving a
public offering.
In January of 2000 we issued 10,000 shares of common stock
to an accredited investor in exchange for a note for $10,000.
The shares were sold in reliance on Regulation D, Rule 506 and
Section 4(2) of the Securities Act in transactions by an issuer
not involving a public offering.
In April of 2000, we issued convertible debentures to
individuals in exchange for $825,000. The debentures were issued
to accredited investors in reliance on Section 4(2) of the
Securities Act in transactions by an issuer not involving a
public offering. Each of the investors received written
information Mountain Oil on its existing and proposed business
activities, financial condition and terms of the investment.
In May of 2000 we issued 50,000 shares to an officer and
director upon exercise of an option for 50,000 shares. The
exercise price was $1.00 per share and we received $50,000. The
shares were issued in reliance on Section 4(2) of the Securities
Act in a transaction by an issuer not involving a public
offering.
ITEM 16. EXHIBITS.
Exhibits.
Exhibit No. SEC Ref. No. Title of Document Location
1 3.1 Articles of Incorporation Initial Filing
2 3.1 Amended Articles of Incorporation Initial Filing
3 3.1 By-laws Initial Filing
4 5 Legal Opinion and Consent Attached
5 10 EOTT Purchase Contract Attached
6 10 Coastal Gas Agreement Attached
7 10 Form of Convertible Note Initial Filing
8 24 Consent of Tanner & Co.,
Certified Public Accountants Attached
9 24.1 Consent of Independent Petroleum
Engineer Attached
10 25 Power of Attorney Attached
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11 27 Financial Data Schedule
- December 31, 1999 Initial Filing
12 27 Financial Data Schedule
- June 30, 2000 Attached
13 99 Options Issued to Management -Phillips Initial Filing
14 99 Options Issued to Management -Ollivier Initial Filing
15 99 Options Issued to Management -Stratford Initial Filing
16 99 Options Issued to Management - Sam Initial Filing
17 99 Stock Option Plan Initial Filing
18 99 Escrow Agreement Attached
19 99 Subscription Agreement Initial Filing
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions described in this Registration Statement or otherwise,
the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities,
other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling persons of the
Registrant in the successful defense of any action, suit or
proceeding, is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to
the underwriter at the closing specified in the underwriting
agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
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(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement or
Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Provo, Utah, on October 17, 2000.
MOUNTAIN OIL, INC.
By /s/ Craig K. Phillips,
President
Pursuant to the requirements of the Securities Act of 1933,
this registration statement or Amendment has been signed below by
the following persons in the capacities and on the dates
indicated.
/s/ Craig K. Phillips, Chief Executive Officer Date: October 17, 2000
and Director
/s/ Lynn Stratford, Director Date: October 17, 2000
/s/ Daniel S. Sam, Director Date: October 17, 2000
/s/ Joseph Ollivier, Chief Financial Officer Date: October 17, 2000
and Director
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