As filed with the Securities and Exchange Commission December27, 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. 2
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.)
3954 East 200 North East P.O. Box 1574
Highway 40 Roosevelt, UT 84066
Ballard, UT 84066
(Street Address) (Mailing Address)
(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. [ ]
CALCULATION OF REGISTRATION FEE
Title of
Each Class Amount to be Proposed Offering Proposed Maximum Amount of
Of Securities Registered Price Per Share Aggregate Offering Registration
To be Registered Fee
Common Stock 1,000,000 $2.25 per share $2,250,000 $594.00
Shares
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.
Subject to completion December 27, 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 2 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 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 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,
which means the wells have pumps in place that draw oil and gas
to the surface for sale. Our plan is to use the net proceeds of
this offering over the next 10 months to rework our producing
wells and bring an additional 11 wells into production.
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
In the event less than 222,222
shares are sold on _________, 2001,
or, if extended at our election, on
_________, 2001, subscriptions will
be promptly returned to investors
with interest and without deducting
expenses of this offering.
Offering Terms The offering price is $2.25 per share
Subscription payments will be
promptly deposited with the escrow
agent, Bonneville Bank, who will
return funds if the minimum shares
are not sold in time or disburse
funds to Mountain Oil if they are.
Common Stock tobe 2,075,222 shares minimum
Outstanding 2,853,000 shares maximum
After the Offering
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
* for working capital
RISK FACTORS
If we do not establish more producing wells we will not
become profitable or be able to develop our oil and gas property.
We were formed in July 1999 and since that time our business
activities have been limited to reworking and operating 22 wells.
At our current level of operation we are operating at a loss,
because we are incurring substantial expense to rework our wells.
We do not believe Mountain Oil will be able to recover these
expenses and operate at a profit unless we are able to make our
wells produce oil in commercial amounts.
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We do not have sufficient capital to rework our wells as
planned. If we do not raise enough money through this offering,
our plans to rework our wells will be delayed, which will
adversely affect our results of operations. We have limited
capital and we need the proceeds of this offering to rework our
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 will
take much longer and our results of operations will be adversely
affected.
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. Our
largest source of operating income is from the sale of oil. We
believe it will be profitable to rework existing wells because of
the current level of oil prices. However, we currently hold only
22 wells, which means our operations are small compared to other
oil and gas companies. Due to our size, we are much more
sensitive to fluctuations in oil prices, which means a
significant drop in oil prices will have a substantial adverse
impact on our operations and financial condition.
We lease the oil and gas rights on the property where our
wells are located, so if we fail to perform our obligations under
the leases, we could lose the leases and our business. Our oil
and gas leases require that we develop or produce oil and gas or
pay an annual lease fee to keep the leases. In the event we fail
to continue production from the wells located on leased land, pay
annual lease fees, or make royalty payments, we could lose our
right to the mineral rights.
We have outstanding options and convertible notes and we
cannot predict if the option and convertible notes will be
exercised or converted or how much, but if a large amount are
exercised and converted your ownership interest in Mountain Oil
will be substantially diluted. As of November 30, 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
offering, and our failure to raise capital will delay work on our
wells and adversely affect our results of operations. The shares
are being offered on a minimum-maximum basis directly by Mountain
Oil, 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.
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
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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 September 30, 2000, we had an unaudited net tangible
book value of $545,000, or a net tangible book value per share of
approximately $0.29. 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 September 30, 2000,
except the sale of the minimum and maximum number of shares
offered.
Assuming Assuming
Minimum 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
per share
Net tangible book value before offering $0.29 $0.50 $0.98
Increase attributable to purchase of shares by
new investors $0.21 $0.69
Pro forma net tangible book value after offering $1,045,000 $2,795,000
Dilution per share to new investors $1.75 $1.27
Percent dilution 77.78% 56.44%
The following table summarizes the comparative ownership and
capital contributions of existing common stock shareholders and
investors in this offering as of September 30, 2000:
Shares Owned Total Average Price
Number Consideration $
% Amount
Per Share
Present
Shareholders
Minimum Offering 1,853,000 56% $653,000 $0.29
Maximum Offering 1,853,000 22% $653,000 $0.29
New Investors
Minimum Offering 222,222 44% $500,000 $2.25
Maximum Offering 1,000,000 78% $2,250,000 $2.25
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.
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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, in order of priority, 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
Oil & Gas Development
Purchase Oil Well Equipment 50,000 250,000
Rework & Re-complete Oil Wells 298,000 980,000
Purchase Service Equipment 50,000
Payoff Liabilities
Payoff Equipment Loan - Backhoe 20,000
Exercise Option to Purchase Hot Oil Truck 25,000
Repayment of Director Loans * 338,000
Interest on Indebtedness 20,000 10,000
Working Capital 20,681 465,681
TOTAL NET PROCEEDS $388,681 $2,138,681
* From September through November 2000 certain directors of
Mountain Oil advanced a total of $337,729 to us represented by
promissory notes due in February 2001. We have used this bridge
financing to advance the rework program on our wells and for
general and administrative expenses.
If more than the minimum, but less than the maximum
amount, is raised, Mountain Oil will use approximately 70% of the
excess amount for reworking wells, 15% of the excess amount for
purchasing oil well and service equipment, and the remaining 15%
for debt reduction, general and administrative expenses and
working capital.
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.
CAPITALIZATION
The following tables sets forth our capitalization as of
September 30, 2000, on an actual basis. This table should be
read in conjunction with our financial statements and notes.
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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 shares issued and outstanding 653,000
Additional paid-in capital -0-
Accumulated deficit (108,000)
Total Stockholders equity $545,000
PLAN OF OPERATION
Proposed operations and capital requirements
We currently own 24 wells in seven oil and gas fields. A
total of 11 of the 24 wells are producing oil and gas with pumps
in place. Four of our wells were producing with pumps at
economic rates as of December 31, 1999 and were assigned proved
developed oil and gas reserves of 37 Mbbls and 0 Mmcf. Mbbls
means 1,000 barrels and Mmcf means million cubic feet. We are
gathering oil from four additional wells by swabbing. Swabbing
brings oil to the surface without a pump. Between July 1999 and
September 2000 Mountain Oil generated $647,000 in gross oil sales
revenues. All of the gas produced from our wells to date has
been used to fuel the batteries and pumps on our wells.
All of our wells are drilled and cased, however, various
rework is required on the wells to improve existing production
and to establish production in wells that are not now producing.
Two wells are not economically feasible to stimulate or repair
and have been plugged and abandoned. We have 12 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. Hot oil treatment involves
pumping heated fluid into the well to stimulate the flow of oil.
Our goal is to rework our 22 wells over the next 10
months. We have estimated the total cost at $2,377,500 to
refurbish our existing wells, or an average cost of $108,068 per
well. To date we have spent approximately $1,098,000 on our
rework project, so we estimate we will spend $1,279,500 more on
reworking our wells. The reworking 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. We believe reworking
our existing wells will boost oil and gas production.
Simultaneously, we will install pipe and compressors to gather
natural gas at the wells that lack such development for delivery
to local gas collection systems.
Coastal Field Services operates a gas gathering system in
the area where our currently producing wells are located and has
agreed to purchase all of our natural gas at spot prices as
quoted by Bloomberg. Coastal Field Services delivers to us
propane or butane to run our batteries and pumps, the cost of
which is offset against the amount owed for the gas gathered from
our wells. To date, the value of the gas we deliver has not
exceeded the value of the propane or butane we receive, so we
have not realized any net revenue from the sale of gas. Our
agreement with Coastal Field Service can be terminated by either
party at any time. If the agreement were terminated, we would
seek other purchasers who would take delivery through the Coastal
gas system. In the future we may negotiate with other natural
gas purchasers and transportation systems, depending on the
location of the well.
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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.
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 come due on March 31, 2002. An officer and
director exercised options for $50,000 in April 2000. From
September through November 2000, two directors loaned a total of
$337,729 to us, which bears interest at the rate of 12% per annum
and is due in February 2001. These financings have been used to
begin work on our wells, purchase equipment, cover operating
expenses, and to pay general and administrative expenses. As a
result of these expenditures, our working capital decreased from
$202,000 at December 31, 1999 to a working capital deficit of
$202,000 at September 30, 2000, and our property and equipment
increased from $417,000 to $1,552,000. This increase in property
and equipment is attributable to the purchase of a work over rig
and surface and down hole well equipment.
We intend to finance future reworking of our wells with
the proceeds of this offering and internally with revenues from
operations. If we fail to raise the maximum $2,250,000 from the
sale of shares in this offering, our schedule for reworking our
wells will be delayed unless we can find other sources of
financing. We have not identified any alternative sources of
financing for reworking our wells should that become necessary.
Results of operations
From inception to year ended December 31, 1999
Oil sales were $97,000 from July 30, 1999, date of
inception, to December 31, 1999. Operating costs and production
taxes for that period were $65,000 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. We
purchased property and equipment of $429,000 for $10,000 in cash,
common stock of $84,000 and accounts payable and long term debt
of $335,000. 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. At December 31,1999, we had
$512,000 of cash on hand.
For the nine months ended September 30, 2000
Oil sales were $550,000 for the nine months ended
September 30, 2000. Operating costs and production taxes for
that period were $232,000 with a gross profit of $318,000. The
increase is due to increased production from our operating wells.
General and administrative expenses were $312,000 with
depreciation, depletion and amortization expenses of $76,000 for
the nine months ended September 30, 2000. Interest expense was
$34,000 and other income was $13,000. We recognized a net loss
of $91,000 for the nine months ended September 30, 2000.
Net cash used in operating activities for the nine-month
period ended September 30, 2000 was $65,000. During that period
we invested $1,211,000 in property and equipment, and our net
cash used in
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investing activities was $1,218,000. We paid $200,000 on related
party notes during the period, received $825,000 on convertible
notes we issued, and obtained $110,000 on a new related party
note, so that net cash provided by financing activities was
$785,000. As a result of these changes, we had a net decrease in
cash during the nine-month period ended September 30, 2000 of
$498,000, and at September 30, 2000, we had $14,000 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. The wells are completed in oil and gas
formations between 4,000 and 17,000 feet deep. 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.
Total proved reserves are 893 Mbbls of oil and 837 Mmcf
of natural gas with a net present value of $1,178,692 as of
December 31, 1999. The net present value of our proved reserves
is the present value of the future revenues we estimate will be
generated from production of proved reserves net of estimated
lease operating expenses, production taxes, and future
development costs using costs and prices as of the date of
estimation without future escalation and without giving effect to
non-property related expenses and discounted at an annual
discount rate of 10 percent. An oil price of $21.55/bbl for
black wax crude and $25.50/bbl for yellow wax crude, and a gas
price of $2.10/mcf was used in the economic analysis of the
reserves. Oil and gas prices were not escalated. Proved
developed reserves were assigned at December 31, 1999, to four
pumping wells totaling 37 Mbbls of oil and 0 Mmcf of natural gas
with a net present value of $181,169. Proved undeveloped
reserves were assigned to nine undrilled locations and three
existing non-producing wells totaling 856 Mbbls of oil and 837
Mmcf of natural gas with a net present value of $997,523. 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. However, we have no agreements or arrangements to
develop any of our drilling locations, and we do not intend to
pursue any drilling programs until after we complete reworking
our existing wells.
We produce two grades of oil, black wax crude oil and
yellow wax crude oil, and we also produce natural gas. Black wax
crude oil has a thinner consistency and is lower in wax content
than yellow wax crude. Wax extracted from oil is used in
cosmetics, ink, and other products, and it is the higher wax
content of yellow wax crude that accounts for its higher price.
The production mix of each type of oil or gas varies according to
each well.
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
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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.
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, in essence, traded to Coastal Field
Services for propane or butane, which is used to run the pump
jacks and other equipment used for production.
Operations
We conduct our own operator services for our oil and gas
wells. Operating services includes maintaining producing wells
and related equipment, swabbing certain wells without pumps to
bring oil to the surface, and pulling pipe and performing other
tasks related to reworking our wells. We employ 12 persons on a
full time basis to perform these services. We own an office and
storage facility in Ballard, Utah where we store equipment and
tools and from which we operate to service our wells.
We estimate that it will take approximately 10 months to
complete reworking our existing wells. As the rework project
progresses, Mountain Oil will evaluate opportunities to develop
its undeveloped lease acreage by drilling new wells. 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.
Our operations are subject to all of the risks incident
to exploration for and production of oil and gas, including blow-
out of the well due to excessive pressure, cratering of the well
due to ground subsidance, 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.
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 November 30,
2000 was $34.00 per barrel for Yellow Wax Crude and $30.75 per
barrel for Black Wax Crude based on quotes from "eott.com". The
spot price for natural gas at Henry Hub in Louisana on November
30, 2000 was $6.26. 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. We decided to sell to ENRON based on quality of service
and relationships between our companies. If for any reason our
contract with ENRON is terminated, we would seek to sell our oil
to other purchasers who are active in the area, including,
Chevron, Flying J, AMOCO, Calumet, and Phillips. 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.
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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 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.
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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.
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
12 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.
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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. If these estimates of quantities, prices
and costs prove inaccurate, we are unsuccessful in increasing our
producing oil and gas wells, 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.
At December 31, 1999, Mountain Oil held 4.00 total oil
wells and 2.39 net productive oil wells. Our oil wells also
produce natural gas and we do not own any wells that produce only
gas. The wells are situated on 2,080 total gross acres and 1,261
net developed acres of oil and gas leases in Duchesne and Uintah
Counties, Utah. The wells are between 7,000 and 14,000 feet deep
and are completed to either the Green River or Wasatch substrata
formations. For the period from inception on July 30, 1999, to
December 31, 1999, the average sales price per unit of oil
produced from our wells was $24.25 and the average production
cost per unit of production was $16.25.
The following table presents a summary of the proved
developed 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 Net Gas Net Present Value
Classification Remaining Remaining At 10% Discount
Mbbls Mmcf
Proved Developed 37 0 $181,692
Proved Undeveloped 856 837 $997,523
Total Proved 893 837 $1,758,692
Total proved reserves are 893 Mbbls of oil and 837 Mmcf
of natural gas with a net present value discounted at 10% of
$1,178,692 as of December 31, 1999. Proved developed reserves
were assigned to four wells totaling 37 Mbbls of oil and 0 Mmcf
of natural gas with a net present value discounted at 10% of
$181,169. Since we used all of our gas production in 1999 to
operate our wells so that we had no net sales of gas, no value
for natural gas was assigned to the proved developed reserves.
Proved undeveloped reserves were assigned to nine undrilled
locations totaling 856 Mbbls of oil and 837 Mmcf of natural gas
with a net present value discounted at 10% of $997,523. Revenues
for the proved undeveloped reserves were discounted back to
December 31, 1999 with a production start date of January 1,
2002.
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Mountain Oil has 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. These drilling locations represent
1,480 gross and 1,134 net acres of undeveloped lease acreage. In
addition, Mountain Oil holds 8,696 gross and 7,324 net acres of
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.
Mountain Oil intends to focus its efforts over the next 10 months
on reworking existing wells for production and will use the net
proceeds of this offering for that purpose. During this period
we will also seek opportunities for developing our undeveloped
lease acreage, but at the present time we have no drilling
programs or arrangements planned for our undeveloped acreage.
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 per barrel 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".
A Gas sales price of $2.10/mcf was used, which was based on the
average wellhead gas price in Utah for December 1999, as reported
on Oil-N-GasStats.com. Oil and gas prices 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.
Estimates of the production decline curves were derived
by applying Mountain Oil's historical production data to 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. Actual economic life for each well
analyzed and assigned proved oil and gas reserves did not exceed
the maximum economic life of 30 years used in the computer
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.
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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. Phillips 47 President and Director July 1999
Joseph F. Ollivier 58 Vice President - Chief July 1999
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 and oil and gas production
services. From January 1995 to October 1997, Mr. Phillips was
superintendent for Uintah Oil & Gas, and from October 1997
through July 1999, Mr. Phillips was self-employed as a consultant
in the oil and gas industry. Mr. Phillips' primary
responsibility is the firm's day-to-day operations. 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 for the past nine years.
The following is a biography of the independent petroleum
engineer that perform the oil and gas reserve report:
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
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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. From
January 1996 to July 1998, Mr. Nelms was a manager of engineering
and development for Petroglyph Operating Company, based in
Hutchinson, Kansas. From August 1998 to April 2000, Mr. Nelms
held the position of senior reservoir engineer with Burlington
Resources in Farmington, New Mexico. From May 2000 to the
present, Mr. Nelms has offered as an independent contractor
reservoir engineering and consulting services to four companies
with operations in Colorado and New Mexico.
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% $1.00 1-15-2010
Secretary and
Treasurer
All options were issued on April 3, 2000.
The following table sets forth certain information with
respect to unexercised options held by our executive officers as
of September 30, 2000.
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Number of Value of
Securities Unexercised
Shares Underlying In-the-Money
Acquired Value Unexercised Options/SARs at
Name on Realized Options/SARs at Sept. 30, 2000
Exercise ($) Sept. 30, 2000 ($)
(#) Exercisable/ Exercisable/
Unexercisable Unexercisable
Craig Phillips -0- -0- 25,000/0 0/0
President
Joseph Ollivier -0- -0- 25,000/0 0/0
Vice Pres.
Lynn Stratford 50,000 -0- 0/0 -0-
Vice Pres.
Daniel S. Sam -0- -0- 25,000/0 0/0
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 was payable with the principal due on
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.
In September 2000, we borrowed $85,000 from Joseph
Ollivier and $25,000 from Daniel Sam. In October 2000, we
borrowed an additional $5,000 from Daniel Sam. On November 1
2000, we borrowed an additional $150,000 from Joseph Ollivier.
Each of these loans is represented by a promissory note bearing
interest at the rate of 12% per year. All interest and principal
is due in February 2001, except the first note issued to Joseph
Ollivier for $85,000, which provides for interest to be paid
monthly. We secured the note to Mr. Ollivier in the amount of
$85,000 with a work over rig and pumping equipment that we own.
On November 28, 2000, Mr. Ollivier agreed to make and additional
$100,000 available to us under a promissory note, which is
identical to the other notes we issued to Mr. Ollivier. To date
we have drawn $72,729 against this note.
The above transactions were on terms as favorable to us as
those generally available from unaffiliated third parties. These
transactions were approved by all the 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.
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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 % Before % After Offering
Shares Offering Minimum Maximum
Beneficially
Owned
Craig K. Phillips 390,000 21.04% 18.79% 13.67%
P.O. Box 1622
Roosevelt, UT 84066
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 and 1,232,000 66.49% 59.37% 43.18%
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 30,000 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 September 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
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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 September 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:
* 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.
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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.
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 is sold and 1,000,000 shares of common stock will be
freely tradeable if the maximum number of shares is 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 an affiliate
or us. 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 of 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
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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
the Penny Stock rule adopted under 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 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
The common shares are offered by Mountain Oil on a self-
underwritten basis. Mr. Josh Miller, an officer and employee,
will make the offer for Mountain Oil in all states where we are
required to license or register a sales agent, as well as other
states. Other officers and directors may participate in the
offering in states that have no agent licensing requirement or
are willing to waive the requirement.
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. Our directors,
officers and other affiliates may purchase shares in this
offering in order to satisfy the minimum.
In order to buy our shares, you must complete and sign
the subscription agreement, 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. 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. A copy of the subscription
agreement is attached to this prospectus.
The sole duty of Bonneville Bank as escrow agent is to
establish and maintain the escrow account, receive and hold the
funds deposited on subscriptions, and to return funds to
investors if the minimum shares offered are not sold or disburse
funds to Mountain Oil if the minimum is sold. 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, will not receive any commission
or compensation for their efforts, and are not associated with a
broker or dealer.
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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 December 31,
1999, appearing in this prospectus and registration statement
have been audited 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.
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.
21
<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.
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
September 30, 2000 (Unaudited) and December 31, 1999
2000
(Unaudited) 1999
Assets
Current assets:
Cash $ 14,000 $ 512,000
Accounts receivable 77,000 78,000
Subscription receivable - 10,000
Note receivable 7,000 -
Prepaid expenses 8,000 1,000
Total current assets 106,000 601,000
Property and equipment, net 1,552,000 417,000
Deposits and other assets 60,000 11,000
$ 1,718,000 $ 1,029,000
Liabilities and Stockholders'Equity
Current liabilities:
Accounts payable $ 173,000 $ 183,000
Accrued expenses 19,000 4,000
Related party notes payable 110,000 200,000
Current portion of long-term debt 6,000 12,000
Total current liabilities 308,000 399,000
Long-term debt 40,000 44,000
7% convertible notes due March 2002 825,000 -
Total liabilities 1,173,000 443,000
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 outstanding, respectively 653,000 603,000
Accumulated deficit (108,000) (17,000)
Total stockholders' equity 545,000 586,000
$ 1,718,000 $ 1,029,000
See accompanying notes to financial statements.
F-3
<PAGE>
MOUNTAIN OIL, INC.
Statement of Operations
Nine Months Ended September 30, 2000 (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
2000
(Unaudited) 1999
Oil and gas sales $ 550,000 $ 97,000
Costs and expenses:
Operating costs 172,000 45,000
Production and other taxes 60,000 20,000
General and administrative expenses 312,000 33,000
Depreciation, depletion and amortization expense 76,000 12,000
620,000 110,000
Loss from operations (70,000) (13,000)
Interest expense (34,000) (4,000)
Other income 13,000 -
Loss before provision for income taxes (91,000) (17,000)
Provision for income taxes - -
Net loss $ (91,000) $ (17,000)
Loss per common share - basic and diluted $ (.05) $ (.02)
Weighted average number of common shares
- basic and diluted 1,828,000 1,106,000
See accompanying notes to financial statements.
F-4
<PAGE>
MOUNTAIN OIL, INC.
Statement of Stockholders' Equity
Nine Months Ended September 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 the founders - - 1,200,000 - - -
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 from
option exercise (unaudited) - - 50,000 50,000 - 50,000
Net loss (unaudited) - - - - (91,000) (91,000)
Balance at
September 30, 2000 - $ - 1,853,000 $653,000 $(108,000) $545,000
See accompanying notes to financial statements.
F-5
<PAGE>
MOUNTAIN OIL, INC.
Statement of Cash Flows
Nine Months Ended September 30, 2000, (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
2000
(Unaudited) 1999
Cash flows from operating activities:
Net loss $ (91,000) (17,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 76,000 12,000
(Increase) decrease in:
Accounts receivable 1,000 (78,000)
Prepaid expenses (7,000) (1,000)
Deposits and other assets (49,000) (11,000)
Increase (decrease) in:
Accounts payable (10,000) (95,000)
Accrued expenses 15,000 4,000
Net cash used in
operating activities (65,000) (186,000)
Cash flows from investing activities:
Purchase of property and equipment (1,211,000) (10,000)
Note receivable (7,000) -
Net cash used in investing
Activities (1,218,000) (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 (10,000) (7,000)
Collection of subscription receivable 10,000 -
Proceeds from issuance of common stock 50,000 509,000
Proceeds from related party notes payable 110,000 206,000
Net cash provided by
financing activities 785,000 708,000
Net (decrease) increase in cash (498,000) 512,000
Cash, beginning of period 512,000 -
Cash, end of period $ 14,000 512,000
See accompanying notes to financial statements.
F-6
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
December 31, 1999
1. Organization
Organization The Company is incorporated under the
and laws of the state of Utah and is primarily
Summary of engaged in the business of acquiring,
Significant developing, producing and selling oil and
Accounting of gas products and properties to companies
Policies 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 September 30, 2000 and the results of
operations and cash flows for the nine
months ended September 30, 2000. The
results of operations for the nine 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.Organization 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 noncurrent, 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
noncurrent 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
and following at December 31, 1999:
Equipment
September
30, 2000 December 31,
(unaudited) 1999
Oil and gas properties
(successful efforts method) $ 1,456,000 $ 278,000
Vehicles and equipment 147,000 118,000
Building and land 31,000 29,000
Office furniture and fixtures 6,000 4,000
1,640,000 429,000
Less accumulated depreciation,
depletion and amortization (88,000) (12,000)
$ 1,552,000 $ 417,000
F-10
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
3. Long-Term Long-term debt consists of the following at
Debt December 31, 1999:
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>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
4.Income The provision for income taxes differs from
Taxes the 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
Major July 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 Nine Months July 30, 1999
Ended (Date of
September 30, Inception) to
2000 December 31,
(Unaudited) 1999
Interest $ 33,000 $ 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 of
$278,000 and building and land of
$29,000, 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 The Company's financial instruments consist
of of cash, receivables, payables, and notes
Financial payable. The carrying amount of cash,
Instruments 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 Instruments and
Pronounce- Hedging Activities - Deferral of the
ments 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
Events long-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. Interest at 7% is due monthly. 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 valuaton allowances 10,000
$ 268,000
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 $ 97,000
Production costs (65,000)
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 897,000 837,000
Production (4,000) -
Sales in place - -
End of period 893,000 837,000
Proved developed reserves:
Beginning of period - -
End of period 37,000 -
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 $ 23,411,000
Future production costs (8,424,000)
Future development costs (8,798,000)
Future income tax expenses (2,104,000)
4,085,000
10% annual discount for estimated timing
of cash flow (3,307,000)
Standardized measure of discounted future
net cash flow $ 778,000
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.
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 (32,000)
Net changes in prices and production costs -
Extensions and discoveries, less related costs -
Purchase and sales of minerals in place 813,000
Revisions of estimated development costs -
Revisions of previous quantity estimate -
Accretion of discount -
Net changes in income taxes (3,000)
Balance, end of period $ 778,000
F-20
<PAGE>
=============================== ===============================
Until _____________, 2001, 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 2
Risk Factors 2 ----------------------
Forward-Looking Statements 3 PROSPECTUS
Dilution and Comparative Data 4 ----------------------
Use of Proceeds 5
Capitalization 5
Plan of Operation 6
Business 8
Oil and Gas Reserve Information 11 ___________________ 2000
Management 14
Compensation 15
Certain Relationships and
Related Transactions 16
Principal Stockholders 17
Description of the Securities 17
Shares Available for Future Sale 19
Market for Common Stock 19
Plan of Distribution 20
Legal Matters 21
Experts 21 ===============================
Additional Information 21
Index to Financial Statements F-1
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 $ 594.00
Commission Filing Fee
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 our four officers and directors for nominal
consideration valued at approximately $250 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 for transactions 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.
On January 15, 2000, we issued options to purchase
common stock of Mountain Oil to our officers and directors in
reliance on the exemption set forth in Section 4(2) of the
Securities Act in transactions by an issuer not involving a
public offering. The following table shows the number of options
issued to each person and the exercise price and expiration date
of the options.
Name Number of options Exercise Price Expiration
Craig Phillips 25,000 $1.10 1-15-2010
Joseph Ollivier 25,000 $1.00 1-15-2010
Lynn Stratford 50,000 $1.00 1-15-2010
Daniel S. Sam 25,000 $1.00 1-15-2010
In April of 2000, we issued convertible debentures to 41
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.
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ITEM 16. EXHIBITS.
Exhibits.
Exhibit No. SEC Ref. No. Title of Document Location
1 3.1 Articles of Incorporation Initial filing
2 3.2 Amended Articles of Incorporation Initial filing
3 3.3 By-laws Initial filing
4 5.1 Legal Opinion and Consent Amend. 1
5 10.1 EOTT Purchase Contract Amend. 1
6 10.2 Coastal Gas Agreement Amend. 1
7 10.3 Form of Convertible Note Initial filing
7.1 10.4 Note issued to Joseph Ollivier
September 5, 2000 Attached
7.2 10.5 Note issued to Joseph Ollivier
November 1, 2000 Attached
7.3 10.6 Note issued to Joseph Ollivier
November 28, 2000 Attached
7.5 10.7 Note issued to Daniel Sam
September 28, 2000 Attached
7.6 10.8 Note issued to Daniel Sam
October 13, 2000 Attached
7.7 10.9 Financing Statement Issued to
Joseph Ollivier Attached
7.8 10.10 Form of Oil and Gas Lease with
U.S. Bureau of Land Management* Attached
7.9 10.11 Form of Oil and Gas Lease with
U.S. Bureau of Indian Affairs* Attached
7.10 10.12 Form of Oil and Gas Lease with
Private Person* Attached
7.11 10.13 Schedule of Leases with BLM, BIA and
Private Persons* Attached
8 23.1 Consent of Tanner & Co., Certified
Public Accountants Attached
9 23.2 Consent of Independent Petroleum
Engineer Attached
10 25.1 Power of Attorney Amend. 1
11 27.1 Financial Data Schedule -
December 31, 1999 Initial filing
12 27.2 Financial Data Schedule -
September 30, 2000 Attached
13 99.1 Options Issued to Management - Phillips Initial filing
14 99.2 Options Issued to Management - Ollivier Initial filing
15 99.3 Options Issued to Management - Stratford Initial filing
16 99.4 Options Issued to Management - Sam Initial filing
17 99.5 Stock Option Plan Initial filing
18 99.6 Escrow Agreement Amend. 1
19 99.7 Subscription Agreement Initial filing
* Exhibit 10.10, Form of Oil and Gas Lease with U.S. Bureau of
Land Management ("BLM"), Exhibit 10.11, Form of Oil and Gas Lease
with U.S. Bureau of Indian Affairs ("BIA"), and Exhibit 10.12,
Form of Oil and Gas Lease with Private Person, are the three form
contracts under which all of the leases of Mountain Oil are held.
Exhibit 10.13, Schedule of Leases with BLM, BIA, and Private
Persons, is a complete list of the leases with material details
on each lease.
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,
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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
(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 December 26, 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: December 26, 2000
and Director
/s/ Lynn Stratford, Director * Date: December 26, 2000
/s/ Daniel S. Sam, Director * Date: December 26, 2000
/s/ Joseph Ollivier, Chief Financial Officer Date: December 26, 2000
and Director
* Craig K. Phillips, pursuant to powers of attorney (executed
by each of the officers and directors listed above and indicated
as signing above, and filed with the Securities and Exchange
Commission as Exhibit 10, SEC Ref. No. 25, in Amendment No. 1 to
this registration statement), by signing his name hereto does
hereby sign and execute this registration statement on behalf of
each of the persons referenced above.
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