SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PIONEER OIL AND GAS
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filling Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined).
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------
2) Form, Schedule, or Registration Statement No.:
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3) Filing Party:
------------------
4) Date Filed:
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<PAGE>
May 10, 2000
Dear Shareholder: Enclosed please find our combined notice of
annual meeting, proxy statement and annual report. Also enclosed is a
proxy which we urge you to sign and return in the enclosed envelope.
Completing the enclosed proxy will not prevent you from voting your
shares in person if you attend the meeting.
During fiscal 1999 Pioneer Oil and Gas successfully emerged from
Chapter 11 bankruptcy proceedings. This was due in no small part to
the help of many shareholders who contributed additional equity to the
Company.
In addition, during fiscal 1999 the Company sold all of its low
BTU Colorado (non-producing) properties and several non-operated
properties. The sale of these properties resulted in a net gain of
approximately $1,800,000. The Company also abandoned most of its
Nevada properties and wrote off some other non-producing properties.
The net result of all these actions was a gain of $1,323,080 on
'assets sold or abandoned.'
As a result of the sale of the above assets and the contribution
of equity by shareholders the Company was able to retire all of its
bank debt as of September 30, 1999. The Company was also able to
obtain a $750,000 bank line of credit for additional working capital.
The Company's current exploration efforts include: coal bed
methane development in Wyoming, a high potential subthrust drilling
project in Fremont County, Wyoming and a newly developed play in
Nevada. These projects range from low risk good return (coal bed
methane) to high-risk 'company making' projects (if successful) such
as our Wyoming subthrust and Nevada plays.
Finally the Company became fully reporting on March 7, 2000 and
as a result retained its OTC Bulletin Board listing. The Company has
updated it web site at www.piol.com and will endeavor to keep it up to
date. You can find the latest news releases, financial information
links and selected project information at our web site. We are
currently featuring our Northwest Sheldon Dome, Wyoming, subthrust
project at the web site.
We appreciated your support during the trying times of our
Chapter 11 proceedings and having emerged from that cloud we look
forward to a bright future for your Company.
Sincerely,
/s/ Don J. Colton
------------------------
Don J. Colton
President and Chairman of the Board
<PAGE>
PROXY PIONEER OIL AND GAS
1206 W. South Jordan Parkway, Unit B South Jordan, Utah
84095-4551 Annual Meeting of Shareholders June 28, 2000 THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The Undersigned hereby
appoints the Board of Directors of Pioneer Oil and Gas, as proxies
with full power of substitution, and hereby authorizes them to
represent and to vote as designated below, all of the shares of common
stock of Pioneer Oil and Gas, held of record by the undersigned on May
10, 2000, at the Annual Meeting of Shareholders to be held on June 28,
2000, or any adjournment thereof:
1. The Board of Directors recommends a vote FOR the election of
the nominees for Directors as set forth in the Proxy Statement:
FOR_____________________ AGAINST____________________
2. The Board of Directors recommends a vote FOR the ratification
of the selection by the Board of Directors of Tanner + Co. as
independent auditors for Pioneer Oil and Gas for the next fiscal year
ending September 30, 2000.
FOR_____________________AGAINST___________________
This proxy is solicited on behalf of the Board of Directors.
Unless otherwise specified, the shares will be voted 'FOR' items 1 and
2. This Proxy also delegates discretionary authority to the proxy to
vote with respect to any other business which may properly come before
the Annual Meeting of Stockholders held on June 28, 2000 any and all
adjournments or postponements thereof to the extent allowed by Rule
14a-4(c) as promulgated by the U.S. Securities and Exchange
Commission.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF
ANNUAL MEETING, PROXY STATEMENT AND ANNUAL REPORT OF PIONEER OIL AND
GAS.
Please sign exactly as the name appears on your stock
certificate. When joint tenants hold shares, both should sign. When
signing as attorney-in-fact, executor, administrator, trustee or
guardian, please give full title as such. If a corporation owns the
shares, sign in the full corporate name by an authorized officer. If
the shares are owned by a partnership, sign in the name of the
partnership by an authorized officer. Also, please list your address
below.
PLEASE PRINT YOUR NAME CAREFULLY OR ATTACH YOUR MAILING LABEL TO
ASSURE THE CORRECT VOTING OF YOUR SHARES.
------------------------ -------------------------
ADDRESS OF SHAREHOLDER SIGNATURE
------------------------ -------------------------
CITY, STATE AND ZIPCODE SIGNATURE, IF JOINTLY OWNED
----- ---------------- -------------------------
DATED NO. OF SHARES OWNED PLEASE PRINT NAME CLEARLY
PLEASE PLACE YOUR PROXY IN THE ENCLOSED STAMPED ENVELOPE AND MAIL
IMMEDIATELY.
<PAGE>
PIONEER OIL AND GAS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of
Pioneer Oil and Gas (the "Company") will be held on Wednesday, June 28,
2000, starting at 10:00 A.M., Mountain Daylight Time, at the Company's
office, 1206 W. South Jordan Parkway, Unit B, South Jordan, Utah 84095. The
following matters are on the agenda for the Meeting:
1. To Elect the Board of Directors;
2. To ratify the appointment of Tanner + Co., as independent auditors
for the current fiscal year;
3. To transact any other business matters that may properly come
before the meeting or any adjournment or postponement thereof.
The Directors have fixed the close of business on May 10th, 2000, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting or any adjournment or postponement thereof. A
complete list of such shareholders will be available at the corporate
office of the Company during normal business hours and shall be open to the
examination of any such shareholder for any purpose relevant to the
Meeting.
A record of the Company's activities during the year ending September
30, 1999 and financial statements for that year, are in the Company's
annual report to shareholders, which this year is contained within the
proxy statement that accompanies this notice.
You are cordially invited to attend the Meeting. Any shareholder that
does not expect to attend the Meeting in person is requested to complete,
date, and sign the enclosed form of Proxy and return it promptly to Pioneer
Oil and Gas. Thank you for your cooperation.
BY ORDER OF THE BOARD OF DIRECTORS
DON J. COLTON
Chairman of the Board of Directors, and President
YOUR VOTE IS IMPORTANT TO PIONEER OIL AND GAS. EVEN IF YOU EXPECT TO
ATTEND THE ANNUAL MEETING, WE URGE YOU TO COMPLETE, DATE, AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. COMPLETING
THE ENCLOSED PROXY WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON
IF YOU DO ATTEND THE MEETING
<PAGE>
PIONEER OIL AND GAS
1206 W. South Jordan Parkway
Unit B
South Jordan, Utah 84095-4551
---------------------------
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on
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GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of Pioneer Oil
and Gas (the "Company"), in connection with the solicitation of proxies on
behalf of the Board of Directors of Pioneer Oil and Gas (the "Directors") for
use at the Company's 2000 Annual Meeting of Stockholders and any and all
adjournments or continuations thereof (the "Meeting"), to be held on Wednesday,
June 28th, 2000 for the purposes set forth under the next paragraph. These
materials will be first mailed to stockholders on or about May 10th, 2000.
PURPOSE OF ANNUAL MEETING
At the Meeting, stockholders will be asked: (i) to elect a Board of
Directors to serve until the next annual meeting of the stockholders, or until
their successors are duly elected and qualified; (ii) to ratify the selection by
the Directors of Tanner + Co. as independent auditors of the Company for the
fiscal year ending September 30th, 2000 ("Fiscal 2000"); and (iii) to transact
such other business as may properly come before the Meeting or any adjournments
or postponements thereof.
QUORUM, VOTING RIGHTS AND OTHER MATTERS
The Company presently has one class of capital stock, common stock, $.001
par value, of which 8,135,018 shares were issued and outstanding at the close of
business on May 10th, 2000. Only shareholders of record at the close of business
on May 10th, 2000 will be entitled to notice of and to vote at the meeting. The
presence at the meeting in person or by proxy of a majority of the shares
entitled to a vote shall constitute a quorum for the transaction of business.
All voting is non-cumulative.
The Directors know of no other matters, which are likely to be brought
before the Meeting. If any other matters properly come before the Meeting,
however, the person named in the enclosed proxy, or that person's duly
constituted substitute acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with such matters. If the enclosed proxy is
properly executed and returned prior to voting at the
<PAGE>
Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. In the absence of instructions, executed
proxies will be voted "FOR" the items listed in the Notice. The Directors
recommend a vote "FOR" each of the proposals. Directors are elected by a
plurality of the common stock represented at the meeting.
In accordance with Utah State law, certain corporate actions, generally,
may create shareholder's rights of dissent and entitlement to payment of the
fair market value of shares held. However, none of the proposals at the Annual
Meeting creates such shareholder dissenters' rights.
Any stockholder executing a proxy has the power to revoke such proxy at any
time prior to its exercise. A proxy may be revoked prior to exercise by (i)
filing with the Company a written revocation of the proxy, (ii) appearing at the
Meeting and casting a vote contrary to that indicated on the proxy, or (iii)
submitting a duly executed proxy bearing a latter date.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of mails, officers, directors, employees and
agents of the Company may solicit proxies by written communication, telephone or
personal call. Such persons are to receive no special compensation for any
solicitation activities. The Company will reimburse banks, brokers and other
persons holding common stock in their names, or those of their nominees, for
their expenses in forwarding proxy solicitation materials to beneficial owners
of common stock.
The Company will appoint one or more inspectors of election to act at the
Meeting and report the results. Prior to the Meeting, each inspector will sign
an oath to perform his duties in an impartial manner and according to the best
of his ability. Inspectors will ascertain the number of shares outstanding and
the voting power of each, determine the shares represented at the Meeting and
the validity of proxies and ballots, count all votes and ballots, and perform
certain other duties as required by law. Inspectors will tabulate the number of
votes cast for or withheld in the election of directors, and the number of votes
cast for or against all other proposals, including abstentions and other
non-votes.
The required quorum necessary to transact business at the Meeting is a
majority of the issued common stock outstanding on the record date. If a quorum
is present, a plurality of the votes cast for directors will determine the
directors elected and the approval of each proposal at the Meeting requires the
affirmative vote of a majority of the common stock actually voted on such
proposal. Abstentions and broker non-votes will be counted to determine if a
quorum is present but will not otherwise affect the voting on any proposal.
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
A Board of three directors is to be elected at the Meeting. The
nominees are the present directors, all of whom are standing for re-election. No
director nominee has declined the nomination or is unable or unfit to serve.
Under the Bylaws of the Company, the Company must have a minimum of three and
maximum of seven directors. Each director serves until the next annual
shareholders meeting or until a successor is duly elected. Don J. Colton and
Gregg B. Colton are brothers and John O. Anderson is their uncle. The following
table sets forth information about the nominees.
Name Age Position(s) Held Director Since
Don J. Colton 53 Director, CEO, President October 1980
and Treasurer
Gregg B. Colton 46 Director, Vice President October 1980
and Secretary
John O. Anderson 57 Director January 1988
Don J. Colton serves as the Company's President, Treasurer and Chairman of
its Board of Directors. Since the Company's inception in October 1980 Mr. Colton
has served as the Company's President and has been involved in all aspects of
the business including exploration, acquisition and development of producing
properties. From 1979 to 1981, Mr. Colton was Chief Financial Officer and a
member of the Board of Directors of Drilling Research Laboratory in Salt Lake
City, Utah. The Drilling Research Laboratory is a subsidiary of Terra Tech, Inc.
and prior to his involvement with the Drilling Research Laboratory, Mr. Colton
was Manager of Special Projects for Terra Tech. Mr. Colton received a BS in
Physics from Brigham Young University in 1970 and a Master of Business
Administration from the University of Utah in 1974.
Gregg B. Colton serves as the Company's Vice President, Secretary, General
Counsel and a member of the Board of Directors. Mr. Colton has been employed
with the Company since it actually commenced business in 1981. Mr. Colton is
involved in handling the contracts, sales of oil and gas products and legal
problems of the Company along with the day to day decision making for the
Company with the Company's President. From 1981 to 1984, Mr. Colton was also a
partner in the law firm of Cannon, Hansen & Wilkinson. Mr. Colton is a member of
the Utah State Bar and a real estate broker. He is also a member of the
Corporate Counsel section for the Utah State Bar. Mr. Colton earned his BA from
the University of Utah in 1976 and a Juris Doctor and a Master of Business
Administration from Brigham Young University in 1981.
John O. Anderson serves as the Company's Office Manager along with being a
member of the Board of Directors. Mr. Anderson as Office Manager handles the day
to day accounting for the Company along with handling the procurement of office
<PAGE>
supplies. The Company has employed Mr. Anderson since 1981 and prior to joining
the Company he worked in land investments. Mr. Anderson received his BS in
Zoology in 1968 from the University of California.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"THE ELECTION OF THE MEMBERS OF THE
BOARD OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors held a total of seven Board of Directors meetings
during the fiscal year ending September 30, 1999. All directors attended all of
the meetings of the Board of Directors. The Board of Directors does not have a
standing audit, nominating or compensation committee or a committee that
performs similar functions.
The Company's directors hold office until the end of their respective terms
or until their successors have been duly elected and qualified. Presently, the
Board of Directors do not receive any cash compensation for serving on the
Board. However, each member of the Board of Directors for serving on the Board
has received 60,000 options to acquire the Company's common stock at a price of
$.30 per share until December 31, 2002.
At the annual shareholders meeting in 1991, the shareholders approved an
amendment to the Company's Articles of Incorporation, limiting the personal
liability of directors to the Company and its shareholders, to the extent
allowed by Utah law. In effect, the shareholders approved the adoption of
statutory provisions, which permit a Utah corporation to eliminate the personal
liability of directors for monetary damages for breach of fiduciary duty.
The Company's executive officers are appointed by the Board of Directors
and serve at the discretion of the Board.
EXECUTIVE OFFICERS
The following table sets forth (i) the names of the executive officers,
(ii) their ages as of the Record Date and (iii) the capacities in which they
serve the Company:
Name Age Position(s) Officer Since
Don J. Colton 53 President/Treasurer 1980
Gregg B. Colton 46 Vice President/Secretary 1980
Note: Don J. Colton and Gregg B. Colton are brothers.
Section 16(a) of the Securities and Exchange Act of 1934
requires officers, directors, and persons who own more than ten percent of a
<PAGE>
registered class of a company's equity securities to file initial reports of
beneficial ownership and to report changes in ownership of those securities with
the Securities and Exchange Commission. They are also required to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the
copies of the Form 3 furnished to the Company, the Company has determined that
the pertinent officers, directors and principal shareholders have complied with
all applicable Section 16(a) requirements since the Company became subject to
Securities Exchange Act of 1934. The Company became subject to the Securities
Exchange Act of 1934 on February 26th, 2000.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth all cash
compensation paid, distributed or accrued for services, including salary and
bonus amounts rendered in all capacities for the Company's CEO during the fiscal
years ended, September 30, 1999, 1998, and 1997. All other tables required to be
reported have been omitted as there has been no compensation awarded to, earned
by or paid to any of the executives of the Company that is required to be
reported other than what is stated below:
SUMMARY COMPENSATION TABLE
Name and Amount of Fiscal
Principal Position Compensation Year Ended
Don J. Colton, CEO $72,403(1) 1999
Don J. Colton, CEO $72,403(1) 1998
Don J. Colton, CEO $82,998(1) 1997
(1) The amount of compensation included in the table above for each
fiscal year does not include amounts paid by the Company for the
Company's Employee Stock Ownership Plan. Under the Employee Stock
Ownership Plan 10% of the employees compensation for salary or bonuses
is paid on behalf of the employee for Company stock in the Company's
Employee Stock Ownership Plan. All full-time employees of the Company
participate in the Employee Stock Ownership Plan on the same terms and
conditions as management. For the fiscal years shown above 10% of the
compensation amount above was paid towards the Employee Stock Ownership
Plan in the form of Company stock.
OPTION GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
to purchase common stock for the executive named in the Summary Compensation
Table:
<PAGE>
<TABLE>
<CAPTION>
% of Total
Number of Options
Securities Granted to
Underlying Employees in ExerciseExp.
Name Options Granted Fiscal Year Price ($/Sh) Date
<S> <C> <C> <C> <C>
Don J. Colton, CEO 120,000 28.57% $.30/Share (1)
</TABLE>
(1) The expiration date for 60,000 of the 120,000 options granted above
are due to expire on December 31, 2001, and the other 60,000 options
are due to expire on December 31, 2002.
No options were exercised by any party having options in the Company
during the fiscal year 1999.
The Board of Directors reviews and sets compensation levels of the
executive officers of the Company by evaluating their respective performance in
light of a number of factors, including the Board's assessment of the
performance of the Company, as well as the range of compensation paid by the
Company in comparison to the range of compensation paid by similar oil and gas
companies in the western United States. The board weighs other factors, such as
the officer's performance relative to the continued acquisition of favorable
properties, and relative to the Company's financial performance.
The Company's executive compensation policy continues to look at three
variable elements: base salary, stock awards and option grants. The policy
factors, which determine the setting of these compensation elements, are largely
aimed at attracting and retaining executives considered essential to the
Company's long-term success.
The granting of stock and/or options is designed as an incentive to
increasingly focus management's interests in closer alignment with interests of
shareholders. The Company's executive compensation policy seeks to engender
committed leadership and strategic management to favorably posture the Company
for continued growth, stability and strength of shareholder equity.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock by each person or group that
is known by the Company to be the beneficial owner of more than five percent of
its outstanding Common Stock, each director of the Company, each person named in
the Summary Compensation Table, and all directors and executive officers of the
Company as a group as September 30, 1999. Unless otherwise indicated, the
Company believes that the persons named in the table below, based on information
<PAGE>
furnished by such owners, have sole voting and investment power with respect to
the Common Stock beneficially owned by them, where applicable.
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Owner of Class
<S> <C> <C> <C>
Common Don J. Colton 728,121(1) 8.6%
2172 E Gambel Oak Drive
Sandy, Utah 84092
Common Gregg B. Colton 760,700(1) 9.0%
10026 Ridge Gate Circle
Sandy, Utah 84092
Common John O. Anderson 453,567(1) 5.3%
7462 S Parkridge Circle
Salt Lake City, Utah 84121
Common Kenneth M. Woolley 500,000 5.9%
2795 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
Common Pioneer Employee Stock 1,681,132(2) 19.8%
Ownership Plan
1225 Fort Union Blvd., #100
Midvale, Utah 84047
All Directors and Officers as a Group
(3 Persons) 1,839,389 22.9%
</TABLE>
(1) Includes currently exercisable options to purchase common stock in
the Company as long as the person is serving as a director and employee
of the Company. Each of the persons listed under this footnote have
options to purchase 120,000 shares of the Company's Common Stock.
(2) Persons listed above have their vested shares under the Pioneer
Employee Stock Ownership Plan included under their name. Don J. Colton
and Gregg B. Colton as Trustees of the Pioneer Employee Stock Ownership
Plan have the right to vote all the shares of the Plan at any
shareholder meeting of the Company.
The Company currently has no arrangements, which may result in a change
of control.
<PAGE>
TRANSACTIONS WITH RELATED PARTIES
The Board of Directors approved more than 10 years ago a resolution to
allow employees of the Company to purchase 25% of any oil and gas producing
property acquired by the Company at the same time as the Company acquires the
property. The resolution required that the employees pay for 25% of the cost of
the oil and gas properties at the same time the Company purchased the
properties. In the event, the Company is unable to fund the total cost of any
producing properties the employees of the Company may purchase the amount the
Company is unable to fund even if it exceeds 25%. The employees also have the
right to acquire 25% of any non-producing oil and gas leases acquired by the
Company on similar terms as those for producing
properties.
The Company also leases office space that is owned by the
Board of Directors. The office space is leased to the Company on terms
reasonable for the same kind of office space in the area that it is located. The
office space is 1,950 square feet with an unfinished basement of approximately
975 square feet.
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Tanner + Co. served as the independent accountants for the Company for the
year ended September 30, 1999. There have been no disagreements during the three
fiscal years ended September 30, 1999, 1998 and 1997, or at any other time with
Company's present or former independent public accountants. Management of the
Company intends to continue with its selection of Tanner + Co. for the fiscal
year ending September 30, 2000. A representative of Tanner + Co. is not expected
to be present at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF TANNER + CO. AS THE COMPANY'S ACCOUNTANTS.
PROPOSAL THREE: OTHER BUSINESS
The Company has not received any shareholder proposals for this Annual
Meeting. The Board of Directors knows of no other business, other than stated in
this proxy statement, to be presented for the action at the Annual Meeting. If
other business is properly presented at the Meeting, however, which was not
known, or did not become known to the Board a reasonable time before the
solicitation, then the person designated in the enclosed Proxy will vote, or
refrain from voting, in accordance with his best judgment.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for
stockholder action at the Company's annual meetings consistent with regulations
adopted by the SEC. For such proposals to be considered for inclusion in the
<PAGE>
proxy statement and form of proxy relating to the 2001 annual meeting, they must
be received by the Company not later than September 15, 2000 or such later date
as the Company may specify in its SEC filings. Such proposals should be
addressed to the Company's office at 1206 W. South Jordan Parkway, Unit B, South
Jordan, Utah 84095-4451
OTHER MATTERS
Management does not intend to present, and has no information as of the
date of preparation of this Proxy Statement that others will present, any
business at the Meeting other than business pertaining to matters required to be
set forth in the Notice of Annual Meeting and Proxy Statement. However, if other
matters requiring the vote of the stockholders properly come before the Meeting,
it is the intention of the persons named in the enclosed proxy to vote the
proxies held by them in accordance with their best judgement on such matters.
DESCRIPTION OF BUSINESS
The Company
Pioneer Oil and Gas (the "Company") was organized on October 16, 1980
under the laws of the State of Utah. The Company's principal place of business
is located at 1206 West South Jordan Parkway, Unit B, South Jordan, Utah
84095-4551. The Company has primarily been engaged in the acquisition and
exploration of oil and gas properties in Utah, Wyoming, Colorado and Nevada.
The Company filed a Chapter 11 bankruptcy petition on February 19, 1997
and filed an Amended Plan of Reorganization (the "Plan") on June 11, 1998. The
United States Bankruptcy Court for the District of Utah, Central Division (the
"Court") entered an order approving the Plan on August 5, 1998. The Order that
granted the final decree was entered into on November 6, 1998. Twenty days after
the Order was mailed on November 26, 1998, the Company emerged from bankruptcy.
Prior to the Plan's implementation, the Company in June of 1998
effected a 10 for 1 reverse stock split of the Company's common shares to allow
the Company to raise capital from the sale of new shares to existing
shareholders. The Plan implemented by the Company and approved by the Court
combined the sale of some of the Company's assets along with the sale of its
common shares to existing shareholders. The capital raised by the Company was
used to pay unsecured creditors 100% of the first $500 of any unsecured
creditor's claim plus approximately 5.0% of the claim above $500.00. The
Company's principal secured creditor Zions Bank (the "Bank") agreed to the Plan
based on the Bank being repaid the full amount owed by the Company to the Bank
by December 1999. In September of 1999 the Company completed the sale of several
of its oil and gas assets and retired all the debt owed the Bank.
<PAGE>
The Business
The Company has focused its efforts over the years in acquiring oil and
gas properties from other companies selling producing wells and in acquiring new
oil and gas leases for the purpose of exploring for oil and gas. Leases have
also been acquired over the years for the purpose of reselling them at a profit
to other oil and gas companies.
Most of the Company's present production from oil and gas properties
was acquired from large oil companies selling properties they considered to be
marginal producers. The Company has found that it can operate these properties
at a profit. Presently, the Company operates 9 producing oil and gas wells in
Utah and Wyoming.
The Company also owns an interest in several non-operated oil and gas
wells and overriding royalty interests in oil and gas wells located in Utah,
Colorado, and Wyoming. An overriding royalty interest, is an interest in a well
that receives a percentage of the production from a well without paying any
operation expenses.
The Company over the last 3 years has focused most of its exploration
efforts in drilling exploratory wells in Wyoming and Nevada. Prior to drilling
an exploratory well a geological review of the prospective area is made by the
Company's staff to determine the potential for oil and gas. If an area is
determined to have promise the Company will attempt to acquire oil and gas
leases over the prospective area. The Company will then acquire geophysical data
(generally seismic and gravity data) to further evaluate the area. After the
evaluation of the geophysical data, if the area appears to contain significant
accumulations of oil and gas in the Company's opinion for the area, the Company
will market a drilling program to outside investors covering the Company's
leases. Significant accumulations cannot be quantified because it depends on
many factors such as how much it costs to drill and complete wells in a certain
area, how close the wells are to pipelines, what the price of oil or gas is, how
accessible the area is, whether the project is a developmental or wildcat
project, what the cost of oil and gas leases are in an area, the type of return
investors are seeking at that time in the different exploration areas, and many
other geological, geophysical and other considerations.
When the Company markets a drilling program its sells a portion of its
oil and gas leases over the prospect area along with obtaining a drilling
commitment from the parties purchasing the leases to drill a well on the
prospect area. A drilling program will generally allow the Company to recoup its
investment in the area with the Company also retaining an ongoing interest in
new wells to be drilled in the area.
The Company markets its drilling programs to other industry partners.
Drilling programs have been marketed by placing ads in industry journals,
attending trade shows and by traveling to the office of prospective partners. In
the past, the Company has sold drilling programs to major oil companies and
large independents and occasionally to individuals.
<PAGE>
The Company has been acquiring oil and gas leases for coal bed methane
drilling in the Powder River Basin and is attempting to acquire other leases
with coal bed methane potential in Utah, Colorado and Wyoming.
Leases acquired for resale have been acquired in areas determined to be
prospective by the Company's staff. An area is determined to be prospective
based on a geological review of the area, drilling in the area and review of the
Company's geophysical data if available. Usually resale leases are acquired for
the purpose of selling at a profit along with the Company retaining an
overriding royalty interest in the leases sold.
DESCRIPTION OF SECURITIES.
Qualification. The following statements constitute brief summaries of
the Company's Articles of Incorporation and Bylaws. Such summaries do not
purport to be fully complete and are qualified in their entirety by reference to
the full text of the Articles of Incorporation and Bylaws of the Company.
Common Stock. The Company's Articles of Incorporation authorize
it to issue up to 50,000,000 (fifty million) Shares of its Common Stock, which
carry a par value of $0.001 per Share.
Liquidation Rights. Upon liquidation or dissolution, each
outstanding Common Share will be entitled to share equally in the assets of the
Company legally available for the distribution to shareholders after the payment
of all debts and other liabilities.
Dividend Rights. There are no limitations or restrictions upon
the rights of the Board of Directors to declare dividends out of any funds
legally available therefor. The Company has not paid dividends to date and it is
not anticipated that any dividends will be paid in the foreseeable future. The
Board of Directors initially will follow a policy of retained earnings, if any,
to finance the future growth of the Company. Accordingly, future dividends, if
any, will depend upon, among other considerations, the Company's need for
working capital and its financial conditions at the time.
Voting Rights. Holders of Common Shares of the Company are entitled to cast
one vote for each share held at all shareholders meetings for all purposes.
Other Rights. Common Shares are not redeemable, have no
conversion rights and carry no preemptive or other rights to subscribe to or
purchase additional Common Shares in the event of a subsequent offering.
Transfer Agent. The Company's transfer agent is Atlas Stock Transfer whose
address is 5899 South State Street, Murray, Utah 84107. The phone number of
Atlas Stock Transfer is (801) 266-7151.
<PAGE>
The Securities and Exchange Commission has adopted Rule 15g-9
which established the definition of a "penny stock", for the purposes relevant
to the Company, as any equity security that has a market price of less than
$5.00 per share, or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that broker or dealer approve a person's account
for transactions in penny stocks; and, (ii) the broker or dealer receive from
the investor a written agreement to the transaction, setting forth the identity
and quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must (i) obtain
financial information and investment experience objectives of the person; and
(ii) make a reasonable determination that the transaction(s) in penny stocks are
suitable for that person and the person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlighted form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investors prior
to the transaction. Disclosure also has to be made about the risks of investing
in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and registered representative,
current quotations for the securities and the rights and remedies available to
an investor in case of fraud in penny stock transaction. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stocks held in the account and information on the limited market in penny
stocks.
MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
The Company is listed on the over-the-counter market on the
NASDAQ OTC Bulletin Board. The range of high and low bid information for the
shares of the Company's stock for the last two complete fiscal years, as
reported by the OTC Bulletin Board National Quotation Bureau, is set forth
below. Such quotations represent prices between dealers, do not include retail
markup, markdown or commission, and do not represent actual transactions.
Year Ended September 30, 1999 High Low
First Quarter $0.15 $0.10
Second Quarter 0.2813 0.125
Third Quarter 0.2188 0.125
Fourth Quarter 0.375 0.125
Year Ended September 30, 1998 High Low
First Quarter $0.055 $0.035
Second Quarter 0.05 0.035
<PAGE>
Third Quarter 0.04 0.02
Fourth Quarter 0.025 0.015
As of November 18, 1999, the Company had issued and outstanding
8,135,018 common shares held by approximately 1,165 holders of record.
There have been no cash dividends declared by the Company since
its inception. Further, there are no restrictions that would limit the Company's
ability to pay dividends on its common equity or that would be likely to do so
in the future.
The Company has no plans to register any of its securities under
the Securities Act for sale by security holders. There is no public offering of
equity and there is no proposed public offering of equity.
LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings, nor is the Company
aware of any disputes that may result in legal proceedings.
FINANCIAL AND OTHER INFORMATION
The audited financial statements regarding the Company for the fiscal
year ended September 30, 1999, are presented in the Appendix following the proxy
statement. A summary of selected financial data, and the information contained
in the disclosures entitled " Management's Discussion and Analysis of Financial
Condition and Results of Operations", are presented below.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations -1999 Compared to 1998
Total revenue for fiscal year 1999 was $1,993,944 as compared to total
revenue for fiscal year 1998 of $1,084,592. The increase in revenue was due
primarily to the sales of non-performing oil and gas properties for which
Pioneer realized a net gain of $1,323,080. Oil and gas sales dropped from
$902,992 to $655,446 due entirely to reduced gas production. A decline in oil
production of 13 percent due to natural production declines was offset by 13
percent higher oil prices. Even though oil prices reached their lowest prices
since World War II (adjusted for inflation) in the first fiscal quarter of 1999,
prices rebounded sufficiently during the last quarter to still exceed prices the
Company received in fiscal 1998. Gas production declined 54 percent due to
natural declines in several properties and the fact that our Pilot gas property
and Badger Wash gas properties were shut in for most of the year. The Pilot gas
property was shut in due to down-hole problems and should resume production in
fiscal 2000 following an extensive work-over. The Badger Wash property was shut
in due to greater pipeline restrictions on low BTU gas. The property was one of
<PAGE>
several sold during fiscal 1999 to raise working capital for the company.
Project and lease sales income dropped from $159,637 to $3,270 as the
Company sold off most of its resale leases to cover operating costs.
Costs of operations declined from $591,260 to $462,711. This item
includes all well operating expenses and any amounts paid to employees and other
interest owners for their interest in producing properties. The Company
instituted costs savings to reduce operations costs and the revenue paid to
employees was reduced due to lower product prices.
General and administrative costs were reduced in 1999 because of the
absence of legal fees associated with the Chapter 11 bankruptcy filing.
The Company sold all of its low BTU Colorado gas properties and several
small non-operated oil properties in Wyoming. The sale of these properties
resulted in a gain of approximately $1,800,000. The Company also abandoned most
of its Nevada properties and wrote off some other small non-producing
properties. The net result of all these actions was gain of $1,323,080 on
"assets sold or abandoned."
During fiscal year ending September 30, 1999, the Company retired all
of its bank debt with proceeds from the sale of properties mentioned above. The
Company also received $164,068 from the issuance of common stock to its
shareholders during the fiscal year ending September 30, 1999. The prior fiscal
year, the Company received an additional $251,240 from the issuance of common
stock to its shareholders pursuant to the plan of reorganization. Common stock
of the Company for the $415,308 received by the Company from the shareholders
was issued to the shareholders over the months from July 1998 to February 1999.
The Company has retired all of its bank debt as of September 30, 1999.
Total stockholders' equity increased from a negative $31,462 (FY 1998) to a
positive $924,530 (FY 1999) a gain of $955,992 due primarily to the gain on sale
of non-performing oil and gas properties. This increase in shareholder's equity
was primarily the result of the gain on assets sold and the proceeds from the
issuance of additional common stock. The current ratio improved from .22 (FY
1998) to 3.55 (FY 1999). Net income increased from $220,375 to $785,384.
Liquidity and Capital Resources
Historically the Company has funded operations primarily from earnings
and bank borrowing. As of September 30, 1999 the Company had working capital of
$335,525 and an unused line of credit with Zions Bank for $750,000. This line of
credit is collateralized by all of the companies operated oil and gas
properties. The line of credit bears interest at prime rate plus 1.5%. The line
of credit with Zions Bank matured on December 1, 1999, and was renewed for a
<PAGE>
two-year period ending December 31, 2001. As of September 30, 1999, no amount
was owing on the line of credit.
During fiscal 1999 cash used in operating activities was $793,570 while
cash provided in investing activities was $1,967,425. Cash used in financing
activities $1,085,084. Net increase in cash was $88,771, as cash increased from
$255,148 to $343,919. The changes in cash from operating activities, investing
activities and financing activities from 1998 to 1999, were all primarily a
result of the sale of the non-performing oil and gas assets which is addressed
above in Results of Operations.
Oil and Gas Properties
The Company as of the date of this filing is the owner of several oil
and gas properties located throughout the Rocky Mountain Region. The Company
operates three properties in Utah, three in Wyoming and one in Colorado. The
discounted future net cash flows of all the Company's properties is $1,736,000
as of September 30, 1999.
Income Taxes
The Company's present net operating loss carryforward arises from
operations for the year ended September 30th, 1997. Carryforwards of net
operating losses for years prior to the year ended September 30th, 1997 were
completely used for tax purposes to offset net income for the year ended
September 30th, 1999. The present loss carryforward of the Company will expire
in the year 2012.
The Company does not anticipate that it will have taxable income during
the carryforward period for the applicable net operating losses.
THE COMPANY UNDERTAKES TO PROMPTLY FURNISH (WITHOUT CHARGE EXCEPT AS TO
THE EXHIBITS IF REQUESTED THAT INCLUDE ARTICLES OF INCORPORATION, BYLAWS, LETTER
FROM PETROLEUM ENGINEER AND FINANCING AGREEMENTS WITH ZIONS BANK) A COPY OF ITS
FORM 10-SB FILED PREVIOUSLY WITH THE SECURITIES AND EXCHANGE COMMISSION, TO ANY
SHAREHOLDER OF RECORD UPON WRITTEN REQUEST, WHICH SHALL ALSO INCLUDE A GOOD
FAITH REPRESENTATION THAT, AS OF MAY 10TH, 2000 THE PERSON MAKING THE REQUEST
WAS THE BENEFICIAL OWNER OF COMMON STOCK OF THE COMPANY ENTITLED TO VOTE AT THE
ANNUAL MEETING. The Form 10-SB filed by the Company with the SEC can be viewed
in its entirety at Securities and Exchange website www.sec.gov by searching the
Edgar Archives with the keywords "Pioneer Oil and Gas".
<PAGE>
BY ORDER OF THE BOARD OF DIRECTORS:
By: Don J. Colton
Chairman of the Board of Directors,
and President
PIONEER OIL AND GAS
<PAGE>
APPENDIX
TO THE PROXY STATEMENT OF PIONEER OIL AND GAS
PIONEER OIL AND GAS
CONSOLIDATED FINANCAIL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Pioneer Oil and Gas
We have audited the accompanying balance sheet of Pioneer Oil and Gas as of
September 30, 1999 and 1998, and the related statements of income, stockholders'
equity (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pioneer Oil and Gas as of
September 30, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/S/Tanner + Co.
Salt Lake City, Utah
November 15, 1999
<PAGE>
<TABLE>
<CAPTION>
PIONEER OIL AND GAS
Statement of Income
Years Ended September 30,
- - ----------------------------------------------------------------------------------------------------------
1999 1998
-----------------------------------
Revenue:
<S> <C> <C>
Oil and gas sales $ 585,121 $ 772,774
Royalty revenue 70,325 129,654
Operational reimbursements 12,148 11,255
Project and lease sales income 3,270 159,637
-----------------------------------
670,864 1,073,320
-----------------------------------
Costs and expenses:
Cost of operations 462,711 591,260
General and administrative expenses 304,734 357,986
Exploration costs 152,934 157,687
Lease rentals 4,710 1,710
Depreciation, depletion and amortization 151,472 117,163
-----------------------------------
1,076,561 1,225,806
-----------------------------------
Loss from operations (405,697) (152,486)
-----------------------------------
Other income (expense):
Gain on assets sold or abandoned 1,323,080 -
Gain on marketable securities - (114,325)
Interest expense (129,372) (121,640)
Other (expense) income (2,627) 11,272
-----------------------------------
1,191,081 (224,693)
-----------------------------------
Income (loss) before provision
for income taxes 785,384 (377,179)
Provision for income taxes - -
-----------------------------------
Income (loss) before extraordinary item 785,384 (377,179)
Extraordinary gain from extinguishment of debt
(net of income taxes of $-0-) - 597,554
-----------------------------------
Net income $ 785,384 $ 220,375
- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-1-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIONEER OIL AND GAS
Balance Sheet
September 30,
- - ----------------------------------------------------------------------------------------------------------
Assets 1999 1998
------
-----------------------------------
Current assets:
<S> <C> <C>
Cash $ 343,919 $ 255,148
Accounts receivable 105,798 85,093
Resale leases, at lower of cost or market 17,333 52,046
-----------------------------------
Total current assets 467,050 392,287
Property and equipment - net (successful efforts method) 586,005 1,381,822
Other assets 3,000 3,000
-----------------------------------
$ 1,056,055 $ 1,777,109
-----------------------------------
- - ----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Cash overdraft $ - $ 78,854
Accounts payable 109,099 170,601
Accrued expenses 22,426 303,424
Note payable - 1,255,692
-----------------------------------
Total current liabilities 131,525 1,808,571
-----------------------------------
Commitments and contingencies - -
Stockholders' equity (deficit):
Common stock, par value $.001 per share, authorized
50,000,000 shares; 8,135,018 shares and 5,644,792
shares issued and outstanding, respectively 8,134 5,644
Additional paid-in capital 2,521,069 2,059,491
Stock subscription receivable (293,460) -
Accumulated deficit (1,311,213) (2,096,597)
-----------------------------------
Total stockholders' equity (deficit) 924,530 (31,462)
-----------------------------------
$ 1,056,055 $ 1,777,109
-----------------------------------
- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-2-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIONEER OIL AND GAS
Statement of Stockholders' Equity (Deficit)
Years Ended September 30, 1999 and 1998
- - ----------------------------------------------------------------------------------------------------------
Additional Stock Unrealized
Common Stock Paid-in Subscription Holding Accumulated
-------------------
Shares Amount Capital Receivable Loss Deficit Total
---------------------------------------------------------------------------------
Balance,
<S> <C> <C> <C> <C> <C> <C> <C>
October 1, 1997 4,235,807 $ 4,235 $ 1,785,871 $ - $ (85,141) $(2,316,972) $ (612,007)
Shares issued to
employee stock ownership
plan as follows:
April 1998 53,624 54 11,341 - - - 11,395
September 1998 99,161 99 12,295 - - - 12,394
Shares issued in
conjunction with
bankruptcy reorganization 1,256,200 1,256 249,984 - - - 251,240
Change in unrealized
holding loss - - - - 85,141 - 85,141
Net income - - - - - 220,375 220,375
---------------------------------------------------------------------------------
Balance,
September 30, 1998 5,644,792 5,644 2,059,491 - - (2,096,597) (31,462)
Issuance of common stock for:
Cash 990,226 990 163,078 - - - 164,068
Receivable 1,500,000 1,500 298,500 (300,000) - - -
Payments on stock
subscription receivable - - - 6,540 - - 6,540
Net income - - - - - 785,384 785,384
---------------------------------------------------------------------------------
Balance,
September 30, 1999 8,135,018 $ 8,134 $ 2,521,069 $ (293,460)$ - $(1,311,213) $ 924,530
---------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIONEER OIL AND GAS
Statement of Cash Flows
Years Ended September 30,
- - ----------------------------------------------------------------------------------------------------------
1999 1998
-----------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 785,384 $ 220,375
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Gain on assets sold or abandoned (1,323,080) 18,795
Depreciation, depletion and amortization 151,472 117,163
Gain on forgiveness of debt - (597,554)
Realized loss on marketable securities - 114,325
Stock issued to employee stock ownership plan - 23,789
(Increase) decrease in:
Accounts receivable (20,705) 14,492
Resale leases 34,713 10,873
Other assets - 50,720
Increase (decrease) in:
Outstanding checks in excess of bank balance (78,854) 78,854
Accounts payable (61,502) 61,986
Accrued expenses (280,998) (8,053)
-----------------------------------
Net cash (used in) provided by
operating activities (793,570) 105,765
-----------------------------------
Cash flows from investing activities:
Proceeds from sale of property 2,002,000 75,113
Acquisition of property and equipment (34,575) (2,847)
-----------------------------------
Net cash provided by
investing activities 1,967,425 72,266
-----------------------------------
Cash flow from financing activities:
Proceeds from note payable 75,727 20,000
Payments on note payable (1,331,419) (234,315)
Proceeds from issuance of common stock 164,068 251,240
Collection of stock subscription receivable 6,540 -
-----------------------------------
Net cash (used in) provided by
financing activities (1,085,084) 36,925
-----------------------------------
Net increase in cash 88,771 214,956
Cash, beginning of year 255,148 40,192
-----------------------------------
Cash, end of year $ 343,919 $ 255,148
-----------------------------------
- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-4-
</TABLE>
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
September 30, 1999 and 1998
- - ------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization
The Company is incorporated under the laws of the state of Utah and is primarily
engaged in the business of acquiring, developing, producing and selling oil and
gas properties to companies located in the continental United States.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Concentration of Credit Risk
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.
Resale Leases
The Company capitalizes the costs of acquiring oil and gas leaseholds held for
resale, including lease bonuses and any advance rentals required at the time of
assignment of the lease to the Company. Advance rentals paid after assignment
are charged to expense as carrying costs in the period incurred. Costs of oil
and gas leases held for resale are valued at lower of cost or net realizable
value and included in current assets since they are expected to be sold within
one year, although the holding period of individual leases may be in excess of
one year. The cost of oil and gas leases sold is determined on a specific
identification basis.
- - ------------------------------------------------------------------------------
-5-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Continued
Oil and Gas Producing Activities
The Company utilizes the successful efforts method of accounting for its oil and
gas producing activities. Under this method, all costs associated with
productive exploratory wells and 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, 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. Other uproved properties are amortized based
on the Company's experience of successful drilling and average holding period.
Capitalized costs of producing oil and gas properties, after considering
estimated dismantlement and abandonment costs and estimated salvage values, are
depreciated and depleted by the unit-of-production method. Support equipment and
other property and equipment are 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.
- - ------------------------------------------------------------------------------
-6-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Continued
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets. Expenditures for 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. Temporary differences
result primarily from intangible drilling costs and depletion.
Earnings Per Share
The computation of basic earnings per common share is based on the weighted
average number of shares outstanding during each year.
The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the year 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 year. Common stock equivalents are not included in the diluted
earnings per share calculation when their effect is antidilutive.
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 interests is
recognized when earned.
The Company does not have any gas balancing arrangements.
- - ------------------------------------------------------------------------------
-7-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Continued
Use of Estimates in the Preparation of Financial Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. Property and Equipment
Property and equipment consists of the following:
September 30,
-----------------------------------
1999 1998
-----------------------------------
Oil and gas properties (successful
efforts method) $ 1,590,708 $ 2,316,836
Office furniture and equipment 118,427 122,069
-----------------------------------
1,709,135 2,438,905
Less accumulated depreciation,
depletion and amortization (1,123,130) (1,057,083)
-----------------------------------
$ 586,005 $ 1,381,822
-----------------------------------
3. Bank Line of Credit
At September 30, 1999, the Company has a bank revolving line-of-credit in the
amount of $750,000 bearing interest at the bank's prime rate plus 1.5 percent
and is secured by producing properties. The line-of-credit matures on December
1, 1999 and had no outstanding balance at September 30, 1999.
At September 30, 1998, the Company had a note payable to a bank in monthly
installments of $26,100 including interest at a rate equal to the bank's prime
rate plus 1.5 percent. The note payable had an outstanding balance of $1,255,692
at September 30, 1998. The note was repaid, in full, during the year ended
September 30, 1999.
- - ------------------------------------------------------------------------------
-8-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
4. Income Taxes
The provision for income taxes differs from the amount computed at federal
statutory rates as follows:
Years Ended
September 30,
-----------------------------------
1999 1998
-----------------------------------
Income tax (provision) benefit at
statutory rate $ (267,000) $ 120,000
Change in valuation allowance/
deferred tax asset 267,000 (120,000)
-----------------------------------
$ - $ -
-----------------------------------
Deferred tax assets (liabilities) are comprised of the following:
September 30,
--------------------------------
1999 1998
--------------------------------
Intangible drilling costs and depletion $ (107,000) $ (105,000)
Net operating loss carry forward 736,000 1,090,000
AMT credit carry forward 3,000 3,000
Capital loss carry forward 53,000 53,000
Investment tax credit carry forwards - 19,000
--------------------------------
685,000 1,060,000
Valuation allowance (685,000) (1,060,000)
--------------------------------
$ - $ -
--------------------------------
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.
- --------------------------------------------------------------------------------
-9-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
4. Income Taxes
Continued
As of September 30, 1999, the Company has a net operating loss carryforward of
approximately $2,164,000. This carryforward expires in 2012. 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. Also, the
ultimate realization of these carry forwards is due, in part, on the tax law in
effect at the time and future events which cannot be determined.
The Company's valuation allowance was reduced for the expiration of both the
investment tax credit carryforward and a portion of the net operating loss
carryforward.
5. Sales to Major Customers
The Company had sales to major customers during the year ended September 30,
1999 and 1998, which exceeded ten percent of total sales as follows:
Years Ended
Sepember 30,
--------------------------------
1999 1998
--------------------------------
Company A $ 191,844 $ -
Company B $ 86,025 $ -
6. Related Party Transactions
The Company acts as the operator for several oil and gas properties in which
employees, officers and other related and unrelated parties have a working or
royalty interest. At September 30, 1999 and 1998 there was $7,390 and $-0-,
respectively, included in accounts payable due to related parties as a result of
these activities. The Company also is the general partner in certain
insignificant limited partnerships and the operator for certain joint ventures
formed for the purpose of oil and gas exploration and development.
- - ------------------------------------------------------------------------------
-10-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
7. Supplemental Disclosuresc of Cash Flow Information
Operations reflect actual amounts paid for interest and income taxes as follows:
Years Ended
September 30,
--------------------------------
1999 1998
--------------------------------
Interest $ 129,000 $ 121,326
--------------------------------
Income taxes $ 100 $ 100
--------------------------------
During the year ended September 30, 1999:
o The Company issued 1,500,000 shares of common stock in exchange for a stock
subscription receivable in the amount of $300,000.
8. Fair Value of Financial Instruments
The Company's financial instruments consist of cash, receivables, payables, and
notes payable. The carrying amount of cash, receivables and payables
approximates fair value because of the short-term nature of these items. The
carrying amount of the notes payable approximates fair value as the individual
borrowings bear interest at floating market interest rates.
9. Common Stock Reverse Split
On June 22, 1998, the Company's Board of Directors approved a 1 for 10 reverse
stock split. All references in the financial statements to number of shares, and
per share amounts have been retroactively restated to reflect the decreased
number of shares outstanding.
10. Stock Options and Warrants
Employee Stock Ownership Plan
The Company has adopted a noncontributory employee stock ownership plan (ESOP)
covering all full-time employees who have met certain service requirements. It
provides for discretionary contributions by the Company as determined annually
by the Board of Directors, up to the maximum amount permitted under the Internal
Revenue Code. The plan has received IRS approval under Section 401(A) and 501(A)
of the Internal Revenue Code. Pension expense charged to operations for the
years ended September 30, 1999 and 1998 was $24,540 and $23,790, respectively.
All outstanding shares held by the ESOP are included in the calculation of
earnings per share.
- - ------------------------------------------------------------------------------
-11-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
10. Stock Options and Warrants
Continued
The Company has granted stock options and warrants to certain officers and
employees of the Company to purchase shares of the Company's common stock. The
exercise price of the options and warrants is equal to or in excess of the fair
market value of the stock on the date of grant. A schedule of the options and
warrants at September 30, 1999 is as follows:
Exercise
Number of Price Per
------------------------------
Options Warrants Share
---------------------------------------------
Outstanding at
September 30, 1998
and 1997 60,000 300,000 $ .55 - 1.20
Granted 420,000 300,000 .30
Canceled (60,000) (300,000) .55 - 1.20
---------------------------------------------
Outstanding at
September 30, 1999 420,000 300,000 $ .30
---------------------------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123) gives entities the choice between adopting a fair value
method or continuing to use the intrinsic value method under Accounting
Principles Board (APB) Opinion No. 25 with footnote disclosures of the pro forma
effects if the fair value method had been adopted. The Company has opted for the
latter approach. Had compensation expense for the Company's stock options and
warrants been determined based on the fair value at the grant date for awards in
1999, consistent with the provisions of SFAS No. 123, the Company's results of
operations would have been as follows:
Year Ended
September 30,
1999
------------------
Net income - as reported $ 785,384
Net income - pro forma $ 685,195
Earnings per share - as reported $ .10
Earnings per share - pro forma $ .09
------------------
- - ------------------------------------------------------------------------------
-12-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
10. Stock Options and Warrants
Continued
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
September 30,
1999
------------------
Expected dividend yield $ -
Expected stock price volatility 116%
Risk-free interest rate 6.06%
Expected life of options 2 to 3 years
------------------
The weighted average fair value of options and warrants granted during 1999 was
$.14.
During the year ended September 30, 1998, no options or warrants were granted
and, therefore, there would be no pro forma effect on the 1998 operations.
The following table summarizes information about stock options and warrants
outstanding at September 30, 1999:
Outstanding Exercisable
------------------------------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Outstanding Contractual Average Exercisable Average
Exercise at Life Exercise at Exercise
Price 9/30/99 (Years) Price 9/30/99 Price
- - ------------------------------------------------------------------------
$ .30 720,000 2.00 $ .30 720,000 $ .30
- - ------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
-13-
<PAGE>
PIONEER OIL AND GAS
Notes to Financial Statements
Continued
- - ------------------------------------------------------------------------------
11. Earnings Per Share
Financial accounting standards require companies to present basic earnings per
share (EPS) and diluted earnings per share along with additional informational
disclosures. Information related to earnings per share is as follows:
September 30,
------------------------------
1999 1998
------------------------------
Basic and Diluted EPS:
Net income available to common
stockholders $ 785,384 $ 220,375
------------------------------
Weighted average common
shares 7,723,000 4,258,000
------------------------------
Net income (loss) per share:
Continuing operations $ .10 $ (.09)
Extraordinary item - .14
------------------------------
$ .10 $ .05
------------------------------
12. Commitments and Contingencies
Limited Partnerships
The Company has an immaterial interest in two limited partnership drilling
programs and acts as the general partner. As the general partner, the Company is
contingently liable for any obligations of the partnerships and may be
contingently liable for claims generally incidental to the conduct of its
business as general partner. As of September 30, 1999, the Company was unaware
of any such obligations or claims arising from these partnerships.
Employment Agreements
The Company has entered into severance pay agreements with officers of the
Company who also serve as board members. Under the terms of the agreements, a
board member who is terminated shall receive severance pay equal to the amount
such board member received in salary and bonus for the two years prior to
termination.
- - ------------------------------------------------------------------------------
-14-
<PAGE>
PIONEER OIL AND GAS
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 the Statement of
Financial Accounting Standards No. 69 "Disclosures about Oil and Gas Producing
Activities."
<TABLE>
<CAPTION>
Capitalized Costs Relating to Oil and Gas Producing Activities
September 30,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
Proved oil and gas properties and related equipment $ 1,584,261 $ 2,190,465
Unproved oil and gas properties 6,447 126,371
-------------------------------
Subtotal 1,590,708 2,316,836
Accumulated depreciation, depletion and amortization
and valuation allowances (1,012,865) (953,880)
-------------------------------
$ 577,843 $ 1,362,956
-------------------------------
</TABLE>
Costs Incurred in Oil and Gas Acquisition,
Exploration and Development Activities
Years Ended
September 30,
-------------------------------
1999 1998
-------------------------------
Acquisition of properties:
Proved $ - $ -
Unapproved - -
Exploration costs 152,934 157,687
Development costs 20,250 264,190
- - ------------------------------------------------------------------------------
-15-
<PAGE>
PIONEER OIL AND GAS
Schedule of Supplementary Information
on Oil and Gas Operations
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Results of Operations for Producing Activities
Years Ended
September 30,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
Oil and gas - sales $ 655,446 $ 902,428
Production costs net of reimbursements 450,563 (580,005)
Exploration costs (152,934) (157,687)
Depreciation, depletion and amortization
and valuation provisions (144,411) (107,140)
-------------------------------
Net (loss) income before income taxes (92,462) 57,596
Income tax benefit (provision) 20,000 (9,000)
-------------------------------
Results of operations from producing activities
(excluding corporate overhead and interest costs) $ (72,462) $ 48,596
-------------------------------
</TABLE>
- - ------------------------------------------------------------------------------
-16-
<PAGE>
PIONEER OIL AND GAS
Schedule of Supplementary Information
on Oil and Gas Operations
- - ------------------------------------------------------------------------------
Reserve Quantity Information (Unaudited)
The estimated quantities of proved oil and gas reserves disclosed in the table
below are based upon estimates by the Company in fiscal 1998 and proved
developed properties by Fall Line Energy and proved undeveloped properties by
the Company in 1999. Such estimates are inherently imprecise and may be subject
to substantial revisions.
The revisions may occur because among other things 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.
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------------------
1999 1998
---------------------------------------------------
Oil Gas Oil Gas
(bbls) (mcf) (bbls) (mcf)
---------------------------------------------------
Proved developed and undeveloped
reserves:
<S> <C> <C> <C> <C>
Beginning of year 185,006 5,899,880 147,525 1,333,376
Revision in previous estimates 11,061 14,540 59,732 (24,170)
Discoveries and extension - - - -
Purchase in place - - - 4,777,092
Production (19,265) (85,430) (22,251) (186,418)
Sales in place - (5,460,854) - -
---------------------------------------------------
End of year 176,802 368,136 185,006 5,899,880
---------------------------------------------------
Proved developed reserves:
Beginning of year 185,006 609,768 147,525 584,596
End of year 176,802 368,136 185,006 609,768
</TABLE>
- - ------------------------------------------------------------------------------
-17-
<PAGE>
PIONEER OIL AND GAS
Schedule of Supplementary Information
on Oil and Gas Operations
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standardized Measure of Discounted Future Net Cash Flows
Changes Therein Relating to Proved Oil and Gas Reserves (Unaudited)
Years Ended
September 30,
1999 1998
-------------------------------
<S> <C> <C>
Future cash inflows $ 4,644,000 $ 12,464,000
Future production and development costs (1,794,000) (3,734,000)
Future income tax expenses (969,000) (2,968,000)
-------------------------------
1,881,000 5,762,000
10% annual discount for estimated timing of cash flows (828,000) (2,051,000)
-------------------------------
Standardized measure of discounted future net cash flows $ 1,053,000 $ 3,711,000
-------------------------------
</TABLE>
- - ------------------------------------------------------------------------------
-18-
<PAGE>
PIONEER OIL AND GAS
Schedule of Supplementary Information
on Oil and Gas Operations
- - ------------------------------------------------------------------------------
Standardized Measure of Discounted Future Net Cash Flows
Changes Therein Relating to Proved Oil and Gas Reserves (Unaudited) - Continued
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 year 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, without actual long-term
production to base the production flows, and may not reflect realizable values
or fair market values of the oil and gas ultimately extracted and recovered. The
ultimate year of realization is also subject to accessibility of petroleum
reserves and the ability of the Company to market the products.
Changes in the Standardized Measure of
Discounted Future Cash Flows (Unaudited)
Years Ended
September 30,
-------------------------------
1999 1998
-------------------------------
Balance, beginning of year $ 3,711,000 $ 1,153,000
Sales of oil and gas produced net of
production costs (670,000) (840,000)
Net changes in prices and production costs (671,000) (369,000)
Extensions and discoveries, less related
costs - -
Purchase and sales of minerals in place (4,100,000) 7,100,000
Revisions of estimated development costs - -
Revisions of previous quantity estimate 1,662,000 (2,478,000)
Accretion of discount 371,000 115,000
Net changes in income taxes 750,000 (970,000)
-------------------------------
Balance, end of year $ 1,053,000 $ 3,711,000
-------------------------------
- - ------------------------------------------------------------------------------
-19-
