As Filed with the Securities and Exchange Commission on July 22, 1997
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PEASE OIL AND GAS COMPANY
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(Name of registrant as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
87-0285520
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(I.R.S. Employer Identification No.)
751 Horizon Court, Suite 203
P.O. Box 60219
Grand Junction, Colorado 81506-8758
(970) 245-5917
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(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Willard H. Pease, Jr.
751 Horizon Court, Suite 203
P.O. Box 60219
Grand Junction, Colorado 81506-8758
(970) 245-5917
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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With Copies to:
Alan W. Peryam, Esq.
Alan W. Peryam, LLC
1120 Lincoln Street, Suite 1000
Denver, Colorado 80203
(303) 866-0900
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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. [ ]
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. [ ]
(i)
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities To Be Registered(3) Registered Per Share Offering Price Fee
- ----------------------------- ---------------- --------------------- ---------------- -------------
<S> <C> <C> <C> <C>
Common Stock............................ 1,788,450 Shares(1) $2.90(2) $5,186,505(2) $1,530(2)
======================================== ======================= ===================== ==================== ==============
</TABLE>
(1) Includes 1,552,000 shares of Common Stock which were issued in
private placements; 74,950 shares of Common Stock underlying
Common Stock Purchase Warrants exercisable at $3.75 per share
which were issued in connection with a private placement;
101,500 shares of Common Stock underlying Common Stock
Purchase Warrants exercisable at $1.00 per share; and 60,000
shares of Common Stock held by an officer of the Company.
(2) The registration fee was calculated in accordance with Rule
457 (c) and (g)(1) and is based on the average of the high and
low prices of Registrant's Common Stock, as reported on the
NASDAQ Small-Cap Market on July 21, 1997
(3) In accordance with Rule 416, there are hereby being registered
an indeterminate number of additional shares of Common Stock
which may be issued as a result of the anti-dilution
provisions of the Warrants or as a result of any future stock
split or stock dividend.
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 REGISTRA TION
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.
(ii)
<PAGE>
PEASE OIL AND GAS COMPANY
REOFFER PROSPECTUS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Location in Prospectus of Information Required by Part I of Form S-3.
Item Heading Caption in Prospectus
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<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus
Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages Available Information; Certain Documents
of Prospectus Incorporated by Reference; Table of Contents;
Back Cover Page
3. Summary Information, Risk Factors Front Cover Page of Prospectus; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Incorporation of Certain Documents by Reference
10. Interest of Named Experts and Counsel Experts
11. Material Changes Not Applicable
12. Incorporation of Certain Information by Incorporation of Certain Documents by Reference
Reference
13. Disclosure of Commission Position on Certain Provisions of the Articles of Incorporation
Indemnification for Securities Act Liabilities and Bylaws
</TABLE>
(iii)
<PAGE>
SUBJECT TO COMPLETION DATED JULY 22, 1997
PROSPECTUS
PEASE OIL AND GAS COMPANY
1,788,450 Shares of Common Stock
This Prospectus relates to the resale by the holders (the "Selling
Securityholders") named herein of Common Stock of Pease Oil and Gas Company
("Company") of 1,788,450 shares of the $0.10 par value common stock ("Common
Stock") of the Company, which are currently issued and outstanding or which are
issuable upon the exercise of warrants ("Warrants") to purchase shares of Common
Stock, which Warrants are currently outstanding. The shares of Common Stock
being offered for resale include 1,552,000 shares of Common Stock issued in a
private placement; 74,950 shares of Common Stock underlying Common Stock
Purchase Warrants exercisable at $3.75 per share issued in a private placement,
101,500 shares of Common Stock underlying Common Stock Purchase Warrants
exercisable at $1.00 per share held by an officer; and 60,000 shares of Common
Stock held by an officer of the Company. See "Selling Securityholders."
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Securityholders. While there is no assurance that all or
any portion of the Warrants will be exercised, holders of the Warrants must
exercise the Warrants in order to sell the shares of Common Stock offered for
resale hereby. If all Warrants are exercised, the Company would receive proceeds
of approximately $382,000.
-----------------------------
For information concerning certain factors which should be considered by
purchasers of the Common Stock offered hereby, see "Risk Factors."
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------
The offer and sale of the Shares will be made in accordance with the plan
of distribution described in the Prospectus. See "Plan of Distribution." The
Company will pay all expenses of this offering (the "Offering"), other than
selling commissions to, or expenses of, brokers or dealers retained by the
Selling Securityholders, which commissions and expenses will be paid by the
Selling Securityholders.
If any agent of any Selling Securityholder or a dealer is involved in the
sale of the Shares in respect of which the Prospectus is being delivered, the
net proceeds to the Selling Securityholders from sale will be the purchase price
of such Shares less such commission in the case of an agent, the purchase price
of such Shares in the case of a dealer, and less, in each case, other
attributable issuance expenses. The aggregate proceeds to the Selling
Securityholders from all the Shares will be the purchase price of Shares sold
less the aggregate of agents' commissions and other expenses of issuance and
distribution. See "Plan of Distribution" for possible indemnification
arrangements for the agents and dealers.
The date of this Prospectus is July __, 1997
(iv)
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance with the Exchange
Act files periodic reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
(at prescribed rates) at the Commission's Public Reference Section, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, 13th Floor, New York, New York 10048. The commission maintains a Web
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding the Company. In addition, reports,
proxy statements and other information concerning the Company can be inspected
and copied at the office of the National Association of Securities Dealers,
Inc., 9513 Key West Avenue, Rockville, Maryland 20850-3389.
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to the Common Stock offered hereby. This Prospectus, which is
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain items of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock, reference is hereby made to the Registration Statement and such
exhibits and schedules.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference.
(a) Annual Report on Form 10-KSB for the year ended December 31, 1996 (the
"Annual Report on Form 10-KSB");
(b) The Company's Proxy Statement, dated April 30, 1997 in connection with
the Annual Meeting of Shareholders of the Company held May 31, 1997
(the "Proxy Statement");
(c) Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997
(the "First Quarter Report");
(d) Current Report on Form 8-K dated January 10, 1997;
(e) Current Report on Form 8-K dated February 14, 1997;
(f) Current Report on Form 8-K dated March 13, 1997;
(g) Current Report on Form 8-K dated May 31, 1997;
(h) Current Report on Form 8-K dated June 11, 1997;
(i) Current Report on Form 8-K dated June 19, 1997;
(j) Current Report on Form 8-K dated June 27, 1997;
(k) The description of the Company's shares of Common Stock, $0.10 par
value, contained in the Company's Registration Statement No.33-94536
on Form SB-2, filed under the Securities Act, and any further
amendment or any report filed under the Exchange Act for the purpose
of updating such description; and
(l) All documents filed after the date of this Prospectus by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the termination of the Offering.
Any statement contained in the documents referenced in items (a) through
(k) above shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus modifies
or supersedes such statement. Likewise, any statement contained in such document
or in this Prospectus shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that information contained in any document
referenced in item (l) above modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Copies of any documents or portions of such other documents incorporated in
this Prospectus, not including exhibits to the information that is incorporated
by reference, unless such exhibits are specifically incorporated by reference in
this Prospectus, may be obtained at no charge by any person (including any
beneficial owner) to whom this Prospectus is delivered by a written or oral
request to Patrick J. Duncan, Corporate Secretary, 751 Horizon Court, P.O. Box
60219, Grand Junction, Colorado 81506-8758, telephone (970) 245-5917.
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<PAGE>
PROSPECTUS SUMMARY
This Prospectus and documents incorporated herein by reference contain
certain forward-looking statements that involve substantial risks and
uncertainties. When used in this Prospectus or the documents incorporated herein
by reference, the words "anticipate," "belief," "intend," "estimate," "plans,"
"expect" and similar expressions as they relate to the Company or its business
or the management of the Company, are intended to identify such forward-looking
statements. The Company's actual results, performances and achievements could
differ materially from the results in, or implied by, these forward-looking
statements. Factors that could cause or contribute to such differences include
those discussed in "Risk Factors."
The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus or contained in other reports and documents of the Company which
are incorporated by reference in this Prospectus.
The Company
Pease Oil and Gas Company ("Company"), a Nevada corporation, has been
engaged in the oil and gas explora tion, development and production business
since 1972. The Company's operations have been conducted primarily in Colorado,
Nebraska, Utah and Wyoming. In late 1996 and early 1997, the Company acquired
interests in producing and exploratory oil and gas properties in Louisiana and
intends to focus substantial efforts on the Gulf Coast area of the southeastern
United States.
The Company's business strategy is to expand its reserve base and cash flow
primarily through:
o Participating in exploration projects that have opportunities involving
relatively small amounts of capital that could potentially generate
significant rates of return. These projects include areas with large field
potentials in Alabama, southern Louisiana, Texas and the Gulf of Mexico.
Generally, the exploration projects will target prospects with potential
reserves of 10 million barrels of oil or 100 Bcf of natural gas;
o Developing alliances with major oil and gas finders who have been trained
by major oil companies;
o Positioning itself with strategic sources of capital and partners that can
react to opportunities in the oil and gas business when presented;
o Raising significant capital to take advantage of leading edge
technology-driven exploration projects, enhanced 2-D and 3-D seismic and
horizontal drilling;
o Acquiring properties that build upon and enhance the Company's existing
asset base;
o Reinvesting operating cash flows into development drilling and recompletion
activities;
o Implementing the Company's investment strategy to carefully consider,
analyze, and exploit the potential value of the Company's existing assets
to increase the rate of return to its shareholder;
o Continuing the implementation of asset rationalization and operating
efficiencies designed to improve operating margins and lower per unit
operating cost;
o Developing a long term track record regarding stock price performance and a
reasonable rate of return to shareholders.
As of July 1, 1997, the Company had varying ownership interests in 185
gross productive wells (150 net) located in six states. The Company operates 177
of the wells (134 net wells), with the other wells being operated by independent
operators under contracts that are standard in the industry.
The Company's address is 751 Horizon Court, Suite 203, Grand Junction,
Colorado 81506-8718 and its telephone number is (970) 245-5917.
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<PAGE>
RISK FACTORS
Prospective purchasers of shares of Common Stock of the Company should
consider carefully the following factors, in addition to other information
concerning the Company and its business contained in this Prospectus and
documents incorporated herein by reference. The following risk factors are not
considered a definitive list of all risks associated with an investment in
shares of the Company's Common Stock.
Company's Continuing Losses and Financial Condition. As described in the
financial statements contained in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996 and the First Quarter Report, the
Company has sustained operating losses during each of the last five fiscal years
and for the three months ended March 31, 1997. The Company had net losses of
approximately $1,707,000, $765,000, $1,412,000 and $514,000 for the fiscal years
ended December 31, 1994, 1995, 1996 and the three months ended March 31, 1997,
respectively, and net losses applicable to common shareholders of $2,865,000,
$2,609,000, $1,614,000 and $559,000 for fiscal years 1994, 1995, 1996 and for
the three months ended March 31, 1997, respectively. Although the Company's
current assets and the estimated present value of the Company's oil and gas
reserves exceeded the Company's liabilities as of June 30, 1997, there can be no
assurance that the Company can produce the oil and gas reserves or otherwise
liquidate those assets during the times or at the prices assumed in valuing
those reserves. In addition, no assurance can be made that the Company will
generate cash flows from operations or operate profitably in the future as an
oil and gas exploration, development and production company. Any likelihood of
future profitability of the Company must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with the oil and natural gas exploration, development and production
business in which the Company will be engaged.
Need for Additional Capital. The Company's ability to complete its planned
drilling and development programs which are intended to expand its reserve base
and diversify its operations, is dependent upon the Company's ability to obtain
the necessary capital. The Company's cash flow and borrowing capacity, together
with any proceeds from this offering, will not be sufficient for the Company to
complete its planned drilling and development programs. Additional sources of
financing will be needed and there can be no assurance that additional sources
of financing will be available at all or at a reasonable cost. See "Management's
Discussion and Analysis" in The First Quarter Report.
Development Risks and Production. A portion of the Company's oil and gas
reserves are proved undeveloped reserves. Successful development and production
of such reserves, although they are categorized as "proved," cannot be assured.
Additional drilling will be necessary in future years both to maintain
production levels and to define the extent and recoverability of existing
reserves. There is no assurance that present oil and gas wells of the Company
will continue to produce at current or anticipated rates of production, that
development drilling will be successful, that production of oil and gas will
commence when expected, that there will be favorable markets for oil and gas
which may be produced in the future or that production rates achieved in early
periods can be maintained.
Convertible Debenture Repayment Priority. As of June 30, 1997, the
Company's obligations under its outstanding 10% collateralized convertible
debentures, (the "Convertible Debentures"), in the principal amount of
$4,180,000, together with interest thereon, is secured by a first priority
security interest in substantially all of the Company's oil and gas reserves in
Larimer and Weld Counties, Colorado, which reserves totaled over 50% of all the
Company's reserves at December 31, 1996. The Convertible Debentures are due in
2001 and interest is paid quarterly. If the Company's obligations under the
Convertible Debentures are ever declared immediately due and payable, the
holders of the Convertible Debentures would have a first lien on the pledged
assets and the Company might be required sell all or a significant portion of
the assets to repay the Convertible Debentures.
Price Volatility. The revenues generated by the Company and estimated
future net revenue are highly dependent upon the prices of oil, natural gas and
natural gas liquids. The volatile energy market makes it difficult to estimate
future prices of oil, natural gas or natural gas liquids. The Company's average
collected price for oil in 1994 was $15.94 per barrel and for natural gas was
$1.36 per thousand cubic feet ("mcf"), for 1995 was $16.77 and $1.18,
respectively and for 1996, $20.35 and $1.26, respectively. For the quarter ended
March 31, 1997 the Company's average collected price was $21.22 per barrel of
oil and $1.95 per mcf for gas. The reserve valuations shown in the Company's
Annual Report on Form 10-KSB are based on prices being received by the Company
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<PAGE>
at December 31, 1996 which were $24.43 per barrel of oil and $3.73 per mcf of
natural gas, which are higher than the average prices received during the first
half of 1997. Various factors beyond the control of the Company affect prices of
oil and natural gas, including worldwide and domestic supplies of, and demand
for, oil and natural gas, the ability of the members of the Organization of
Petroleum Exporting Countries ("OPEC") to agree to and maintain oil price and
production controls, political instability or armed conflict in oil-producing
regions, the price of foreign imports, the level of consumer demand, the price
and availability of alternative fuels, the availability of pipeline capacity and
changes in existing federal regulation and price controls. As in the past, it is
likely that oil and gas prices will continue to fluctuate in the future which
may adversely affect the Company's business.
Limitations on Accuracy of Reserve Estimates and Future Net Revenue. This
Prospectus and the Annual Report on Form 10-KSB contain estimates of the
Company's oil and gas reserves and the future net revenue therefrom which have
been prepared by independent petroleum engineers. These estimates are based on
various assumptions and, therefore, are inherently imprecise. Estimates of
reserves and of future net revenue prepared by different petroleum engineers may
vary substantially depending, in part, on the assumptions made and may be
subject to adjustment either up or down in the future. Actual future production,
revenue, taxes, development expenditures, operating expenses and quantities of
recoverable oil and gas reserves may vary substantially from those assumed in
the estimates. In addition, the Company's reserves may be subject to downward or
upward revision, based upon production history, results of future exploration
and development, prevailing oil and gas prices and other factors. If these
estimates of quantities, prices and costs prove inaccurate, the Company is
unsuccessful in expanding its oil and gas reserves base with its capital
expenditure program, and/or declines in and instability of oil and natural gas
prices occur, then writedowns in the capitalized costs associated with the
Company's oil and gas assets may be required.
Risks Inherent in Oil and Gas Operations The search for oil and gas is a
highly speculative activity that may be marked by numerous unproductive efforts.
Many wells will be dry, and productive wells may not produce enough oil or gas
to produce a profit or even return the invested capital. The Company must
continually acquire and explore for and develop new oil and gas reserves to
replace those being depleted by production. Without successful drilling or
acquisition ventures, the Company's assets, properties and revenues will
decline. Oil and gas exploration and development are speculative, involve a high
degree of risk and are subject to all the hazards typically associated with the
search for, development of, and production of oil and gas. The Company's
operations are subject to all of the risks incident to exploration for and
production of oil and gas including blow-outs, cratering, pollution and fires,
each of which could result in damage to or destruction of oil and gas wells or
production facilities or damage to persons and property. The Company's insurance
may not fully cover certain of these risks and the occurrence of a significant
event not fully insured against could have a material adverse effect on the
Company's financial position. The process of drilling for oil and gas can be
hazardous and carry the risk that no commercially viable oil or gas production
will be obtained. The cost of drilling, completing and operating wells is often
uncertain. Moreover, drilling may be curtailed, delayed or canceled as the
result of many factors, including title problems, weather conditions, shortages
of or delays in delivery of equipment, as well as the financial instability of
well operators, major working interest owners and well servicing companies. The
availability of a ready market for the Company's oil and gas depends on numerous
factors beyond its control, including the demand for and supply of oil and gas,
the proximity of the Company's 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 delivery arrangements are acquired or developed.
The Company's business will always be subject to these types of risks.
Exploration Risks. The Company intends to pursue a significant number of
wildcat projects in southern Louisiana, Texas and the Gulf Coast, and through
June 30, 1997 had drilled or participated in the drilling of three exploratory
wells, of which one was dry and two wells have been completed as producing
wells. The Company expects to expend at least $5 million in exploratory drilling
and related exploration activities during the remainder of 1997 and at least an
additional $8 million in 1998. Exploration for oil and gas involves an extremely
high degree of risk that no commercial production will be obtained or that the
production will be insufficient to recover drilling and completion costs. The
costs of drilling, completing and operating wells is, at best, uncertain.
Drilling operations may be curtailed, delayed or canceled as a result of
numerous factors, including title problems, weather conditions, compliance with
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<PAGE>
governmental regulations and shortages and delays in the delivery of equipment.
Furthermore, completion of a well does not assure a profit on the investment or
a recovery of drilling, completion and operating costs.
Risks of Purchasing Interests in Oil and Gas Properties. The Company
expects to continue to make acquisitions of producing and exploratory oil and
gas properties in the future. The Company often will not control the operation
of properties in which an interest is acquired. It is generally not feasible for
the Company to review in-depth every property it purchases and all records with
respect to such properties. However, even an in-depth review of properties and
records may not necessarily reveal existing or potential problems, nor will it
permit the Company to become familiar enough with the properties to assess fully
their deficiencies and capabilities. Evaluation of future recoverable reserves
of oil, gas and natural gas liquids, which is an integral part of the property
selection process, is a process that depends upon evaluation of existing
geological, engineering and production data, some or all of which may prove to
be unreliable or not indicative of future performance. To the extent the seller
does not operate the properties, obtaining access to properties and records may
be more difficult. Even when problems are identified, the seller may not be
willing or financially able to give contractual protection against such
problems, and the Company may decide to assume environmental and other
liabilities in connection with acquired properties.
Competition. The oil and gas industry is highly competitive in many
respects, including identification of attractive oil and gas properties for
acquisition, drilling and development, securing financing for such activities
and obtaining the necessary equipment and personnel to conduct such operations
and activities. In seeking suitable opportunities, the Company competes with a
number of other companies, including large oil and gas companies and other
independent operators with greater financial resources and, in some cases, with
more experience. Many other oil and gas companies in the industry have financial
resources, personnel and facilities substantially greater than those of the
Company and there can be no assurance that the Company will continue to be able
to compete effectively with these larger entities.
Shortage of Equipment, Services, and Supplies. There is often competition
for scarce drilling and completion equipment, services and supplies, and there
can be no assurance that sufficient drilling and completion equipment, services
and supplies will be available when needed. The likelihood of shortages is
greater at the present time than in the past because of the recent increase in
oil and gas prices causing an increase in drilling activity and a resulting
decrease in available material and equipment. Any such shortages could delay the
proposed exploration, development, and sales activities of the Company and could
cause a material adverse affect to the financial condition of the Company.
Dependence on Key Personnel. The success of the Company will largely be
dependent upon the efforts and active participation of Willard H. Pease, Jr. the
President of the Company, James N. Burkhalter, the Vice President of Engineering
and Production of the Company, Patrick J. Duncan the Chief Financial Officer of
the Company, and certain other key employees. The loss of the services of any of
its officers or other key employees may adversely affect the Company's business.
Government Regulation and Environmental Risks. 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 increases may occur, although increases in state energy taxes
would have no predictable effect on natural gas and oil prices. The Company
believes it is 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.
The production and sale of oil and natural gas are subject to various
federal, state and local governmental regulations, which may be changed from
time to time in response to economic or political conditions. Matters subject to
regulation include discharge permits for drilling operations, drilling bonds,
reports concerning operations, the spacing of wells, unitization and pooling of
properties, taxation and environmental protection. From time to time, regulatory
agencies have imposed price controls and limitations on production by
restricting the rate of flow of oil and gas wells below actual production
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<PAGE>
capacity in order to conserve supplies of oil and gas. From time to time,
regulatory agencies have also reviewed certain aspects of the operations of oil
and gas companies in the D-J Basin to determine if additional regulations or
regulatory action is necessary. State statutes, rules and regulations affecting
oil and gas companies may, if changed as proposed by certain interest groups,
render drilling in certain locations more expensive or uneconomical due to
increased surface owner compensation and bonding requirements or environmental
regulatory constraints. The Colorado Oil and Gas Conservation Commission
recently enacted and is considering stricter regulation of matters such as oil
conservation, land reclamation, fluid disposal and bonding of oil and gas
companies. Additionally, various cities and counties in which the Company
operates have conducted and continue to conduct hearings to review their
ordinances to determine the level of regulatory authority they should assert
over such matters. At present, it cannot be determined to what degree stricter
regulations would adversely impact the Company's operations.
Various federal, state and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the public health and the environment, may affect the Company's
operations, expenses and costs. Moreover, the recent trend toward stricter
standards in environmental legislation and regulations is likely to continue.
Legislation and regulations concerning the disposal of oil and gas waste were
adopted by the Colorado Oil and Gas Conservation Commission during the summer of
1993. The Colorado Air Quality Control Commission has adopted regulations to
implement the federal Clean Air Act. These regulations generally exempt oil and
gas exploration and production activities, except from certain routine filings.
These governmental agencies may impose further regulatory restrictions and
reporting requirements which could adversely impact the Company's operating
costs. However, at present the Company cannot predict if or to what degree its
costs and operations will be impacted.
Anti-Takeover Protections. The Company's Articles of Incorporation and
Bylaws include certain provisions, the effect of which may be to inhibit a
change of control of the Company. These include the authorization for issuance
of additional classes of Preferred Stock and classification of the Board of
Directors so that approximately one-third of the Company's directors are elected
annually. In addition, certain of the Company's officers have entered into
employment contracts providing for certain payments to be made upon any
termination of employment. These provisions may discourage a third party from
attempting to obtain control of the Company.
Dividend Policy. Payment of dividends on Common Stock is subject to
declaration by the Board of Directors. The Company does not currently pay cash
dividends on its Common Stock and does not anticipate paying such dividends in
the foreseeable future.
Shares Available For Future Sale. As of June 30, 1997, a total of 5,369,322
outstanding shares of Common Stock are "restricted securities" as that term is
defined under Rule 144 of the Securities Act. An additional 7,493,579 shares of
Common Stock, issuable upon conversion of outstanding convertible debentures and
exercise of outstanding Warrants and options would also be "restricted
securities" upon issuance. All of such Common Stock has been or is expected to
be registered under the Securities Act for resale by the holders at or prior to
the time the Shares may be resold by purchasers in this Offering. Sales of
substantial amounts of Common Stock into the market by such holders or the
potential of such sales may have a depressive effect on the market price of the
Company's Common Stock.
Outstanding Options and Warrants. As of June 30, 1997, the Company has
outstanding options and warrants to purchase a total of 6,280,871 shares of the
Company's Common Stock at an average exercise price of $4.02 per share. The
exercise prices of the outstanding options and warrants range from $.70 per
share to $6.00 per share. If all these warrants and options should be exercised,
the Company would receive gross proceeds of approximately $25.2 million. The
holders of the outstanding options and warrants might have the opportunity to
profit from a rise in the market price (of which there is no assurance) of the
shares of the Company's Common Stock underlying the options and warrants, and
their exercise may dilute the ownership interest in the Company held by other
stockholders.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares by the
Selling Securityholders. If all the Warrants should be exercised, the Company
should receive proceeds of approximately $382,000 which the Company would expect
to use for general corporate purposes.
- 7 -
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding the shares of
Common Stock beneficially owned as of June 1, 1997, by each Selling
Securityholder herein as adjusted to reflect the sale by all Selling
Securityholders of the shares offered hereby by each Selling Securityholder.
This list indicates the number of Common Shares owned by such Selling
Securityholder prior to the offering, the maximum number of shares to be offered
for such Selling Securityholder's account, the amount of the class owned by the
Selling Securityholder after completion of the offering (assuming the Selling
Securityholder sold the maximum number of shares of Common Stock) and any
position, office or other material relationship with the Company that the
Selling Securityholder had within the past three (3) years. The Selling
Securityholders are not required, and may choose not, to sell any of their
shares of Common Stock.
<TABLE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Alter, Scott C. .............................. 4,000 4,000
Aris, Oussama ................................ 10,000 10,000
Bernstein, Herman & Elizabeth K.,
U/T/D 8/9/70, Herman Bernstein, TTEE ......... 5,000 5,000
Blackhawk Inc. Profit Sharing Plan,
K.A. Wallace, Trustee ........................ 10,000 10,000
Blute, James F., III, MD, PC Pension
Plan ......................................... 10,000 10,000
Bourgi, Philip ............................... 2,000 2,000
The Brigham Family Trust dated 1/14/87
Kenneth R. & Charline Brigham, TTEES ......... 40,000 40,000
Chammas, Jacques ............................. 4,000 4,000
Chammas, Dr. Sabah ........................... 20,000 20,000
Chammas, Zeina ............................... 1,000 1,000
Chen, Paul P. and Lily Lee ................... 7,000 7,000
Chiu, Sung L. and Phoebe Y. .................. 6,000 6,000
Cohen, Armand ................................ 5,000 5,000
Cowin, Jacqueline I. C/F Transcorp
#58349 ....................................... 11,000 11,000
Cowin, Leland Rhey C/F Transcorp
#69990 ....................................... 29,000 29,000
Cummings, Richard J. Revocable Trust,
Richard J. & Laura R. Cummings,
TTEES UTD 1/17/96 ............................ 8,000 8,000
Curry, P. Gregg .............................. (4) 40,833 20,000 20,833
D'Asaro, Michael A. .......................... (4) 24,833 4,000 20,833
- 8 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Davidson, Janice A. TTEE UTD 5/19/
81 FBO Janice A. Davidson Revocable
Trust ........................................ (5) 86,667 20,000 66,667
Dawes, Steven A. ............................. (7) 81,667 40,000 41,667
Dombrowski, Donald J. ........................ 40,000 40,000
Engler, Moe .................................. 5,000 5,000
Evans, Mark & Stacey ......................... 4,000 4,000
Foster, Leita Revocable Trust, Raymond
T. & Leita Foster, TTEES ..................... (6) 20,667 4,000 16,667
Francis, Jihad ............................... 2,000 2,000
Frey, Philip Jr. ............................. (7) 61,667 20,000 41,667
Froggatte, Theron L. ......................... 8,000 8,000
Fung, Joseph ................................. 10,000 10,000
Galbraith, Jack H., TTEE,
Jack H. Galbraith Living Trust U/A dtd
5/25/95 ...................................... (8) 12,333 4,000 8,333
Gaiser, John Jr. & Anna ...................... 40,000 40,000
George, Deborah Jeanne ....................... 12,000 12,000
George, Donald J. ............................ 5,000 5,000
Ghelfi, Brent M. & Lisa A. ................... 4,000 4,000
Gilchick, Stephen ............................ 11,000 11,000
Gordon, Kilbourn III, MD ..................... (8) 13,333 5,000 8,333
Gordon, Caroline Britton IRA Ameritra-
de Inc. C/FBO ................................ 800 800
Gordon, Kilbourn III, SAR SEP IRA
Ameritrade Inc. C/FBO ........................ 4,000 4,000
The Gori Family Limited Partnership .......... 10,000 10,000
Grobe Securities Company, Charles S.
Grobe, TTEE .................................. 80,000 80,000
Gutknecht, Edwin C. .......................... 5,000 5,000
Hadaya, John ................................. 4,450 4,450
Hankerson, William A. ........................ 6,000 6,000
- 9 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Hankerson, William A. IRA, First Trust
Corp., TTEE .................................. 8,000 8,000
Harris, Jerry S. IRA Rollover
Longview National Bank, TTEE ................. 10,000 10,000
Harvey, Patrick L. ........................... (7) 51,667 10,000 41,667
Hayes, Louise M. Revocable Trust,
Robert L. Hayes, TTEE ........................ 4,000 4,000
Hill, T. William & Barbara ................... 10,000 10,000
Hiscox, Dwight & Judy ........................ 30,000 30,000
Huber, David Samuel .......................... 10,000 10,000
Huey, Steven C. .............................. 5,000 5,000
Huml, Stephen E. ............................. 4,000 4,000
IJB Properties Ltd. .......................... 10,000 10,000
Jacobson, Jerome, TTEE, The Jerome
Jacobson Living Trust ........................ 10,000 10,000
Jastremski, Bruce ............................ 10,000 10,000
Kanne, Charles R., Jr. ....................... (9) 186,666 20,000 166,666
Khasigian, Harry A. & Lynda H.
TTEES, The Khasigian Revocable
Living Trust ................................. 20,000 20,000
Kilpatrick, Byron & Myriam ................... 20,000 20,000
King, Gerald W. & Edith C. TTEES,
King Family Trust dtd 1/22/93 ................ 20,000 20,000
King, James J. ............................... 8,000 8,000
King, Myrna L. ............................... 6,000 6,000
Kinsman, Robert L. and Annette M.
Family Ltd. Partnership ...................... 3,000 3,000
Kite Family Trust DTD 2/1/93, Roy A.
Jr. & Linda R. Kite, TTEES ................... 20,000 20,000
Kite, Robert ................................. 5,000 5,000
Koechlin, Monica ............................. 20,000 20,000
Koutures, Chris G. ........................... 3,120 3,120
Koutures, George Anthony ..................... 8,000 8,000
- 10 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Koutures, George C. & Maria .................. 58,880 58,880
Lapp, Michael & Sandi ........................ 5,000 5,000
Lebco Group Ltd. ............................. 4,000 4,000
The Lewis Family Living Trust, H.
Wayne & Janet A. Lewis, TTEES ................ 62,000 62,000
Lindberg, Daniel W. .......................... 4,000 4,000
Lowther, Muriel TTEE, Thomas J. Jr.
& Muriel Lowther Trust DTD 3/22/82 ........... 20,000 20,000
Lukac, Jan Simon ............................. 5,000 5,000
Madaien, Hanna ............................... (10) 143,883 60,550 83,333
Marbrusal Partners ........................... 10,000 10,000
Marjadan, L.L.C. ............................. 5,000 5,000
Martin, Marilyn A., C/F Mesirow Finan
cial Acct. FE37-88053647-FE14 ................ 14,500 14,500
Massad, Jamara Issa .......................... 10,000 10,000
Mautner, Robert S. ........................... 10,000 10,000
Maxwell, Vance ............................... 10,000 10,000
McDermott, Kevin B. .......................... 8,000 8,000
McDonald, Thomas, Gammage &
Burnham Profit Sharing Plan #18 DTD
1/1/85 FBO ................................... (4) 24,833 4,000 20,833
McKendry Enterprises Inc. Profit Shar
ing Plan & Retirement Trust, Stephen
M. McKendry, TTEE ............................ 5,000 5,000
Meram, Sam M. ................................ 5,000 5,000
Meyer, Dennis C. ............................. (6) 20,667 4,000 16,667
Mirza, Robert ................................ 6,000 6,000
Mitchell, William & Deborah .................. 5,000 5,000
Moore, John Temple TTEE,
John Temple Moore Revocable Living
Trust DTD 11/16/94 ........................... (7) 61,667 20,000 41,667
Moucharafieh, Bassam C., TTEE,
Bassam C. Moucharafieh, MD, Inc.,
Emp. Pension Plan ............................ 2,000 2,000
- 11 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Nagata, Mark ................................. 15,000 15,000
Nelson, Daniel A. & Wanda .................... 10,000 10,000
Ogilvie, Frank L. & Ruth S. TTEES,
UTD 2/19/87 FBO Frank L. & Ruth S.
Ogilvie Trust ................................ 8,000 8,000
O'Neill, Hugh Irrevocable Trust II, UA
DTA 8/30/85, Key Trust Company of
Ohio, Custodian .............................. 20,000 20,000
Pabst, Patricia K. ........................... 5,000 5,000
Parker, Charles H. TTEE,
Charles H. Parker MD Ltd. Pension and
Profit Sharing Plan .......................... 5,000 5,000
Parker, Gerald M. Family Limited Part-
nership ...................................... 10,000 10,000
Peare, Dan C. ................................ 4,000 4,000
Peery, Larry L. .............................. 7,500 7,500
Penfield, Carole, c/o
Delaware Charter Guarantee & Trust
Co., TTEE FBO ................................ 4,000 4,000
Pepper, Ronald E. IRA
First Trust Corp. TTEE ....................... 20,000 20,000
Peryam, Alan W. .............................. 3,000 3,000
Rabinowitz, Milton ........................... (7) 51,667 10,000 41,667
Ray Living Trust ............................. 8,000 8,000
Rice Owls of Arizona Ltd. Partnership ........ 8,000 8,000
Rogers, Travis K. ............................ 5,000 5,000
Rowan, Edward ................................ 10,000 10,000
Salem, Fakhri M. ............................. 6,800 6,800
Scanlon, Keith Lawrence ...................... 8,000 8,000
Schmidt, Sandra .............................. 6,000 6,000
Schroeder, Walter W. & Karen F. .............. 50,000 50,000
Sears, Charles D. TTEE, Charles D. &
Priscilla M. Sears Living Trust dtd
7/29/91 ...................................... 5,000 5,000
- 12 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
The Singer Family Trust,
Richard A. & Jacqueline C. Singer,
TTEES ........................................ 10,000 10,000
Snyder, Richard L. & Beverly A.
TTEES, Richard L. & Beverly A.
Snyder Trust dtd 1/27/86 ..................... 20,000 20,000
Solomon, Esta ................................ 7,000 7,000
Sproul, David E., TTEE, Clifton W.
Sproul Trust ................................. 4,000 4,000
Sproul, David E. & Sidney K. JTWROS .......... 4,000 4,000
Stammer, Daniel .............................. 5,000 5,000
Stone, John G. & Susan M. JTWROS ............. 3,000 3,000
Sunderland, Hoyt & Evelyn, JTWROS ............ 4,400 4,400
Sunderland, Rickey Scott & Evelyn ............ 6,000 6,000
Swain, Lee ................................... 10,000 10,000
Tarazi, Aida F. .............................. 20,000 20,000
Tarkoff, Eugene & Maxynne .................... 4,000 4,000
Tolbert, Donald .............................. 5,000 5,000
Totman, James W., TTEE, James W.
Totman Trust UTD 12/18/86 .................... (7) 51,667 10,000 41,667
Travis, Arnold & Joan ........................ 10,000 10,000
Travis, Lawrence I. & Ellen B. ............... 6,000 6,000
Waterfall, Economides, Caldwell,
Hanshaw & Villamana Profit Sharing
Plan F/B/O Gordon G. Waterfall,
Gordon G. Waterfall, TTEE .................... 5,000 5,000
Wells Family Trust, Donny R. & Lynn
M. Wells, TTEES .............................. 4,000 4,000
Welsh, Glenn L. .............................. 5,000 5,000
Western Plains Development Money
Purchase Plan dtd 12/31/90, Larry
Peery, TTEE .................................. 10,000 10,000
The Woesner Family Living Trust,
Randall E. & Janis M. Woesner, TTEES ......... 5,000 5,000
Yong, Tony ................................... 9,000 9,000
- 13 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Younger, James A. Jr. ........................ 5,000 5,000
Pease, Willard H. Jr. ........................ (1) 786,139 161,500 624,639
BAL Associates c/o Meridian Capital
Group, Inc. .................................. (2) 100 100
Birchtree Financial Services, Inc. ........... (2) 347 347
Batchkoff, J. Franklin, III, c/o Meridian
Capital Group, Inc. .......................... (2) 1,240 1,240
Buys, Jeni c/o Coleman & Company
Securities, Inc. ............................. (2) 1,289 389 900
Brown, Gordon Christopher c/o Merid-
ian Capital Group, Inc. ...................... (2) 490 490
Carey, Thomas c/o Tradeway Securities
Group, Inc. .................................. 1,695 1,695
Carib Financial Group, Ltd. .................. (2) 51,250 5,000 46,250
Coleman & Company Securities ................. 5,156 1,556 3,600
Fischer, Stephen L. c/o Signal Securi-
ties, Inc. ................................... (3) 215,100 1,700 213,400
Fox & Company Investments .................... (2) 18,568 754 17,814
Froggate, Theron c/o Birchtree Finan-
cial Services, Inc. .......................... (2) 1,123 1,123
Gloisten Family Trust c/o GBS Finan
cial Corp. ................................... (2) 3,322 322 3,000
Golden, Michael c/o First Colonial
Securities Group, Inc. ....................... (2) 1,500 1,500
Gulbranson, Scott c/o Fox & Company
Investments, Inc. ............................ (2) 875 250 625
Hankerson Financial Inc. ..................... (2) 8,000 8,000
Hayes, Michael D. c/o Peacock, Hislop,
Staley & Given, Inc. ......................... (2) 350 350
Herndon, William c/o Birchtree Finan-
cial Services, Inc. .......................... (2) 8,500 2,000 6,500
Hickcox, Frank c/o Tradeway Securities
Group, Inc. .................................. (2) 1,600 1,600
Huey, S. Chris c/o Coleman & Com-
pany Securities, Inc. ........................ (2) 6,445 1,945 4,500
Hunter, Dawn S. c/o Meridian Capital
Group, Inc. .................................. (2) 100 100
- 14 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Kamphuis, Joel c/o First Colonial Secu-
rities Group, Inc. ........................... (2) 2,000 2,000
Kavanua, L. Chris, c/o Meridian Capital
Group, Inc. .................................. (2) 760 760
Koonce, J. Peter c/o GBS Financial
Corp. ........................................ (2) 34,765 1,828 32,937
Lichtenberg, Ben c/o First Colonial Se-
curities Group, Inc. ......................... (2) 1,500 1,500
Meridian Capital Group, Inc. ................. (2) 5,500 3,500 2,000
Minert, Timothy L. c/o Peacock, Hislop,
Staley & Given, Inc. ......................... (2) 350 350
Moore, John Temple c/o Signal Securi-
ties, Inc. ................................... (2) 2,125 2,125
Neff, Howard c/o Meridian Capital
Group, Inc. .................................. (2) 100 100
Peacock, Hislop, Staley & Given, Inc. ........ (2) 700 700
Prigger, William III c/o Meridian Capi-
tal Group, Inc. .............................. (2) 435 435
Rabinovich, Issie c/o Meridian Capital
Group, Inc. .................................. (2) 200 200
Rodgers, Travis K. c/o Fox & Company
Investments, Inc. ............................ (2) 1,968 250 1,718
Sand, Jeffrey W. c/o Fox & Company
Investments, Inc. ............................ (2) 63 63
Securities Underwriting Corp. c/o Fox
& Company Investments, Inc. .................. (2) 558 558
Sentra Securities Corporation ................ (2) 1,400 1,400
Signal Securities, Inc. ...................... (2) 675 675
Smith, L. Jason, c/o Meridian Capital
Group, Inc. .................................. (2) 2,000 2,000
Snow, Ron E. c/o Meridian Capital
Group, Inc. .................................. (2) 100 100
Stout, Lanny Rex c/o Sentra Securities
Corp. ........................................ (2) 12,600 12,600
Taha, Jamal c/o Tradeway Securities
Group, Inc. .................................. (2) 11,195 6,195 5,000
Thorne, Don c/o Meridian Capital
Group, Inc. .................................. (2) 200 200
Tradeway Securities Group, Inc. .............. (2) 2,200 2,200
- 15 -
<PAGE>
<CAPTION>
Shares Owned Shares Owned
Foot- Prior Shares Being After
Name note To Offering Offered Offering
- ------------------------------------- ---- ------------- -------- --------
<S> <C> <C> <C> <C>
Weddon, C. Bradley, c/o Meridian Capital
Group, Inc. .................................. (2) 1,500 1,500
Weschler, Charles J. c/o Fox & Com-
pany Investments, Inc. ....................... (2) 1,375 125 1,250
Yee, Desmond, Schroeder, & Allen,
Inc. ......................................... (2) 3,125 3,125
</TABLE>
Footnotes:
1. Mr. Pease is the Company's President, CEO and Chairman of the Board. The
shares owned prior to the offering include 121,173 shares that are owned
directly by Mr. Pease, 364,966 shares are owned by entities affiliated with
Mr. Pease over which shares Mr. Pease has sole voting and investment power,
148,500 shares underlying presently exercisable options, 50,000 shares
underying options that become exercisable on July 24, 1997, and 101,500
shares underlying presently exercisable warrants. The shares being offered
include 60,000 shares that were issued in December 1996 when Mr. Pease
converted a $60,000 promissory note and 101,500 shares underlying presently
exercisable warrants that were granted by the Company Board of Directors in
March 1996.
2. The total shares owned prior to the offering represent shares underlying
presently exercisable warrants that were issued to registered
broker/dealers as a part of their compensation for selling shares or units
in a private placement. If the selling security holder listed is an
individual, the warrants were assigned to them by the respective
broker/dealer.
3. Mr. Fischer works for Beta Capital Group, Inc. ("Beta") as an independent
contractor. The Company entered into a three-year consulting agreement with
Beta in March 1996. The President of Beta, Steve Antry, has been a director
of the Company since August 1996. Included in the total shares owned prior
to the offering are 206,700 shares underlying presently exercisable
options. The 1,700 shares being offered represent presently exercisable
warrants that were assigned to Mr. Fischer by Signal Securities, Inc. for
his participation in selling shares of the Company in a private placement.
4. Includes 8,333 shares underlying convertible debentures.
5. Includes 26,667 shares underlying convertible debentures.
6. Includes 6,667 shares underlying convertible debentures.
7. Includes 16,667 shares underlying convertible debentures.
8. Includes 3,333 shares underlying convertible debentures.
9. Includes 66,666 shares underlying convertible debentures.
10. Includes 33,333 shares underlying convertible debentures.
PLAN OF DISTRIBUTION
The shares of Common Stock issuable upon exercise of the Warrants will be
issued directly by the Company to the Warrant holders upon surrender of the
particular Warrants together with payment of the exercise price. The exercise is
subject to the terms of the Warrants and such Warrants may be exercisable during
different periods of time. Shares issued upon exercise of Warrants will be, and
Shares held by other Selling Securityholders are, restricted securities as
defined in Rule 144 adopted under the Securities Act of 1933, as amended, while
held by the Selling Securityholders.
The Selling Securityholders (or their pledgees, donees, transferees, or
other successors in interest) from time to time may sell all or a portion of the
Shares "at the market" to or through a market maker or into an existing trading
market, in private sales, including direct sales to purchasers, or otherwise at
prevailing market prices or at negotiated or fixed prices. By way of example,
and not by way of limitation, the Common Shares may be sold by one or more of
the following methods: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the Shares as agent but may purchase and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
- 16 -
<PAGE>
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the seller may arrange for other brokers or
dealers to participate. Brokers or dealers will receive commissions or discounts
from the seller in amounts to be negotiated immediately prior to the sale. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act, in connection
with such sales. In addition, any securities covered by the Prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under
Rule 144 rather than pursuant to the Prospectus.
The Selling Securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the Shares
against certain liabilities, including liabilities arising under the Securities
Act. Any commissions paid or any discounts or concessions allowed to any such
broker-dealer which purchases Shares as principal or any profits received on the
resale of such Shares may be deemed to be underwriting discounts and commissions
under the Securities Act.
In order to comply with certain state securities laws, if applicable, the
Shares may not be sold in certain states unless the Shares have been registered
or qualified for sale in such states or an exemption from registration or
qualification is available and is complied with.
The Shares offered hereby will be sold by the Selling Securityholders (or
their pledgees, donees, transferees or other successors in interest) acting as
principals for their own account. The Registrant will receive none of the
proceeds from such sales.
No underwriting arrangements exist as of the date of this Prospectus for
the Selling Securityholders to sell their shares. Upon being advised of any
underwriting arrangements that may be entered into by a Selling Securityholder
after the date of this Prospectus, the Company will prepare a supplement to this
Prospectus to disclose such arrangements. It is anticipated that the per share
selling price for the shares will be at or between the "bid" and "asked" prices
of the Company's Common Stock as quoted in the over-the-counter market
immediately preceding the sale. Expenses of any such sale will be borne by the
parties as they may agree.
Certain Provisions of the Articles of Incorporation, Bylaws and Nevada Law
The Company's ability to issue shares of new classes of preferred stock and
to determine the rights, preferences, privileges, designations and limitations
of such stock, including the dividend rights, dividend rate, conversion rights,
voting rights, terms of redemption and other terms of conditions of such stock,
could make it more difficult for a person to engage in, or discourage a person
from engaging in, a change in control transaction without the cooperation of
management. Also, the Company has adopted Bylaws pursuant to which the Board of
Directors has been classified such that in the future approximately one-third of
the directors will be elected at each annual meeting of stockholders for a three
year term. As a result of this "staggered" Board of Directors, it would be more
difficult for a person to assume control of the Company by changing the Board of
Directors without the cooperation of the Board of Directors.
The Company's Articles of Incorporation contain a provision, authorized
under Nevada law, which limits the liability of directors or officers of the
Company for monetary damages for breach of fiduciary duty as an officer or
director other than for intentional misconduct, fraud or a knowing violation of
law or for payment of a dividend in violation of Nevada law. Such provision
limits recourse for money damages which might otherwise be available to the
Company or stockholders for negligence by individuals while acting as officers
or directors of the Company. Although this provision would not prohibit
injunctive or similar actions against directors or officers, the practical
effect of such relief would be limited.
The Articles of Incorporation and Bylaws also contain provisions requiring
the Company to indemnify officers, directors and certain employees for certain
liabilities incurred in connection with actions taken on behalf of the Company,
including expenses incurred in defending against such liabilities. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
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<PAGE>
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 40,000,000 shares of $0.10 par value
Common Stock and 2,000,000 shares of preferred stock, $0.01 par value of which
740,000 shares are undesignated and the balance have been retired (hereafter the
"Preferred Stock"). As of June 30, 1997 there were outstanding 13,161,077 shares
of Common Stock, warrants to purchase up to 5,297,571 shares of Common Stock and
options to purchase up to 983,300 shares of Common Stock. No shares of Preferred
Stock were outstanding.
Common Stock
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company. Except as may be
required by applicable law, holders of shares of Common Stock will not vote
separately as a class, but will vote together with the holders of outstanding
shares of other classes of capital stock. There is no right to cumulate votes in
the election of directors. A majority of the issued and outstanding Common Stock
constitutes a majority of the outstanding shares is required to effect certain
fundamental corporate changes such as liquidation, merger or amendment of the
Articles of Incorporation.
Holders of shares of common Stock are entitled to receive dividends, if,
as, and when declared by the Board of Directors out of finds available therefor,
after payment of dividends required to be paid on outstanding shares of
preferred stock. The Company's agreement with its bank lender prohibits payment
of Common Stock dividends without the consent of the lender. Upon liquidation of
the Company, holders of shares of Common Stock are entitled to share ratably in
all assets of the Company remaining after payment of liabilities, subject to the
liquidation preference rights of any outstanding shares of preferred stock.
Holders of shares of Common Stock have no conversion, redemption or preemptive
rights. The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of preferred stock. The
outstanding shares of Common Stock are and all shares of Common Stock sold
pursuant to this offering will be, fully paid and nonassessable. The shares of
Common Stock issued upon conversion of preferred stock, or exercise of Warrants
and payment therefor, will be validly issued, fully paid and nonassessable.
Preferred Stock
Under the Company's Articles of Incorporation, as amended ("Articles"), the
Board of Directors has the power, without further action by the holders of the
Common Stock, to designate the relative rights and preferences of the Company's
preferred stock, when and if issued. Such rights and preferences could include
preferences as to liquidation, redemption and conversion rights, voting rights,
dividends or other preferences, any of which my be dilutive of the interest of
the holders of the Common Stock. The Board previously designated Series A
Cumulative Convertible Preferred Stock, none of which is outstanding and all of
which has been retired. Additional classes of preferred stock may be designated
and issued from time to time in one or more series with such designations,
voting powers or other preferences and relative other rights or qualifications
as are determined by resolution of the Board of Directors of the Company. The
issuance of preferred stock may have the effect of delaying or preventing a
change in control of the Company and may have an adverse effect on the rights of
the holders of Common Stock.
Publicly Traded Warrants
As of June 30, 1997, issued and outstanding warrants to purchase up to
3,175,808 shares of Common Stock, are traded publicly on the Nasdaq Small-Cap
Market under the symbol WPOGW. The Warrants expire, if not previously exercised
by holders, on August 13, 1998 and are subject to redemption by the Company, in
whole or in part, on a pro rata basis, at the option of the Company, upon not
less than 30 days prior notice, at a redemption price qual to $0.25 per Warrant.
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Each Warrant represents the right to purchase one share of Common Stock on
or before 5:00 p.m. Eastern Time on August 13, 1998 at an initial exercise price
of $6.00 per share. The exercise price and the number of shares underlying the
Warrants are subject to adjustment in certain events, including the issuance of
Common Stock as a dividend on shares of Common Stock; subdivisions, combinations
and reclassifications of the shares of the Common Stock; the distribution to all
holders of Common Stock of evidences of indebtedness of the Company or assets
(other than cash dividends); and certain mergers, a consolidation or a sale of
substantially all of the assets of the Company. Except as stated in the
preceding sentence, the Warrants do not contain provisions protecting against
dilution resulting from the sale of additional shares of Common Stock for less
than the exercise price of the Warrants or the current market price.
Holders of Warrants will be entitled to notice if (a) the Company grants
holders of its Common Stock rights to purchase any shares of capital stock or
any other rights, or (b) the Company authorizes a reclassification, capital
reorganization, consolidation, merger or sale of substantially all of its
assets.
The Warrants being offered by the Company will be issued pursuant to the
terms of Warrant Agreement between the Company and American Securities Transfer
and Trust, Inc. as Warrant Agent. The Company and the Warrant Agent may from
time to time supplement or amend the Warrant Agreement, without the approval of
any Warrant Holders, to correct or supplement defective or inconsistent
provisions or to make any other provisions in regard to matters or questions
arising under the Warrant Agreement which shall not adversely affect the Warrant
Holders, including (but not limited to) extending the Expiration Date and any
conditional or unconditional reduction in the Exercise Price, as the Board of
Directors may determine. The Company and the Warrant Agent may make any other
amendment to the Warrant Agreement upon obtaining the consent of a majority of
the holders of outstanding Warrants, except that the consent of all Warrant
Holders is necessary to shorten the time of exercise of any Warrant or to
increase the Exercise Price.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance on exercise of the
Warrants. Exercise of each Warrant may be effected by delivery of the Warrant,
duly endorsed for exercise and accompanied by payment of the exercise price, to
the Warrant Agent. The shares of Common Stock issuable on exercise of the
Warrants will be, when issued and paid for in the manner contemplated by the
Warrants, fully paid and nonassessable.
For the life of the Warrants, the holders thereof have the opportunity to
profit from a rise in the market for the Company's Common Stock, with a
resulting dilution in the interest of all other stockholders. So long as the
Warrants are outstanding, the terms on which the Company could obtain additional
capital may be adversely affected. The holders of the Warrants might be expected
to exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital by a new offering of securities on terms more
favorable than those provided for by the Warrants.
Except as described above, the holders of the Warrants have no rights as
stockholders until they exercise their Warrants. Shares of Common Stock issuable
upon exercise of the Warrants have been registered under the Securities Act for
resale by holders.
LEGAL MATTERS
The validity of the Common Stock will be passed upon for the Company by
Alan W. Peryam, LLC, Denver, Colorado.
EXPERTS
The consolidated financial statements as of December 31, 1996, and for each
of the two years in the period ended December 31, 1996, incorporated by
reference in this Prospectus, have been audited by HEIN + ASSOCIATES LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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<PAGE>
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<TABLE>
<CAPTION>
<S> <C>
No dealer, salesperson or other person has been
authorized to give any information or to make any
representation not contained in this Prospectus
and, if given or made, such information or
representation must not be relied upon as having PEASE OIL AND GAS COMPANY
been authorized by the Company or any Selling
Securityholder. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to 1,788,450 SHARES OF COMMON STOCK
buy any of the securities offered hereby in any
jurisdiction to any persons to whom it is unlawful
to make such offer in such jurisdiction.
-----------------------------------
Page No. ---------------------
PROSPECTUS
AVAILABLE INFORMATION............................. 2
---------------------
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE.......................... 2
PROSPECTUS SUMMARY................................ 3
RISK FACTORS...................................... 4
USE OF PROCEEDS................................... 7
SELLING SECURITYHOLDERS........................... 8
PLAN OF DISTRIBUTION............................. 16
DESCRIPTION OF SECURITIES........................ 18
LEGAL MATTERS.................................... 19 July __, 1997
EXPERTS ........................................ 19
</TABLE>
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable by Registrant in connection with the issuance and
distribution of the securities being registered hereby are as follows:
SEC Registration Fee ........................................ $ 1,530*
Accounting Fees and Expenses ................................ 6,000*
Legal Fees and Expenses ..................................... 10,000*
Printing, Freight and Engraving ............................. 1,000*
Miscellaneous ............................................... 6,470 *
-------
Total ................................................... $ 25,000*
- -----------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
Article VII of the Registrant's Articles of Incorporation provides that no
director or officer of the Registrant shall be personally liable to the
Registrant or any of its stockholders for damages for breach of fiduciary duty
as a director or officer, except that such provision will not eliminate or limit
the liability of a director or officer for any act or omission which involves
intentional misconduct, fraud or a knowing violation of law or for the payment
of any dividend in violation of Section 78.300 of the Nevada Revised Statutes.
Section 78.751 of the Nevada Revised Statutes permits the Registrant to
indemnify its directors, officers, employees and agents if such person acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, has no reasonable cause to believe his conduct was
unlawful.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, the
corporation must provide indemnification against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the defense.
Section 43 of the Registrant's Bylaws provides that the Registrant shall
provide indemnification to Registrant's officers, directors and employees to the
fullest extent permitted under the Nevada General Corporation Law.
Item 16. Exhibits.
In addition to the exhibits previously filed by Registrant, the following
is a list of all exhibits filed as part of this Registration Statement or, as
noted, incorporated by reference to this Registration Statement:
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
(3.1) Amendment to Article IV of the Articles of Incorporated as
filed with the Nevada Secretary of State, increasing the
authorized shares of Common Stock of the Registrant to
40,000,000 shares, $0.10 par value, incorporated by reference
to Exhibit 3(i) of the Registrant's Form 8-K Dated June 11,
1997.
(5.1) Opinion of Company counsel.
II-21
<PAGE>
(23.1) Consent of Alan W. Peryam, LLC.
(23.2) Consent of HEIN + ASSOCIATES LLP Independent Certified Public
Accountants.
Item 17. Undertakings
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which Registrant offers or sells securities,
a post-effective amendment to this registration statement to include any
material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat such
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed 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.
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 Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnifi cation against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person 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 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.
For purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement 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.
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Grand Junction, Mesa County, State of Colorado, on
July 21, 1997.
PEASE OIL AND GAS COMPANY
By:/s/ Willard H. Pease, Jr.
----------------------------------
Willard H. Pease, Jr.
Chief Executive Officer
By:/s/ Patrick J. Duncan
------------------------------
Patrick J. Duncan,
Principal Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Willard H. Pease, Jr. Director, Principal Executive July 21, 1997
Willard H. Pease, Jr. Officer
/s/ Patrick J. Duncan Director, Chief Financial Of July 21, 1997
Patrick J. Duncan ficer, Treasurer and Principal
Accounting Officer
/s/ Richard A. Houlihan Director July 21, 1997
Richard A. Houlihan
/s/ James N. Burkhalter Director July 21, 1997
James N. Burkhalter
/s/ Homer C. Osborne Director July 21, 1997
Homer C. Osborne
/s/ James C. Ruane Director July 21, 1997
James C. Ruane
/s/ R. Thomas Fetters, Jr. Director July 21, 1997
R. Thomas Fetters, Jr.
/s/ Clemons F. Walker Director July 21, 1997
Clemons F. Walker
/s/ William F. Warnick Director July 21, 1997
William F. Warnick
</TABLE>
II-23
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ----------- --------
<S> <C> <C>
(3.1) Amendment to Article IV of the Articles of Incorporated as N/A
filed with the Nevada Secretary of State, increasing the
authorized shares of Common Stock of the Registrant to
40,000,000 shares, $0.10 par value, incorporated by reference
to Exhibit 3(i) of the Registrant's Form 8-K Dated June 11,
1997.
(5.1) Opinion of Company counsel.
(23.1) Consent of Alan W. Peryam, LLC.
(23.2) Consent of HEIN + ASSOCIATES LLP Independent Certified Public
Accountants.
</TABLE>
ALAN W. PERYAM. LLC
1120 Lincoln Street, Suite 1000
Denver, Colorado 80203
July 21, 1997
Pease Oil and Gas Company
751 Horizon Court, Suite 203
Grand Junction, Colorado 81506-8758
Gentlemen:
We refer to the Registration Statement on Form S-3 ("Registration
Statement") of Pease Oil and Gas Company, a Nevada corporation ("Company"), to
be filed with the United States Securities and Exchange Commission on or about
July 22, 1997, relating to 1,788,450 shares of $0.10 par value common stock (the
"Common Stock") for resale by holders of such securities as described therein.
We have reviewed such documents and records as we have deemed necessary to
enable us to express an informed opinion on the matters covered thereby and we
are of the opinion that the Common Stock described in the Registration statement
is, or will be upon exercise of warrants in accordance with their terms upon
issuance, be legally issued, fully paid and nonassessable.
Sincerely,
ALAN W. PERYAM, LLC
By /s/ Alan W. Peryam
---------------------------------
Alan W. Peryam
CONSENT OF ATTORNEY
Reference is made to the Registration Statement on Form S-3 pursuant to
which certain Selling Securityholders described therein propose to sell a
maximum of 1,788,450 shares of the $0.10 par value common stock ("Common Stock")
of the Company. Reference is also made to the opinion dated July 21, 1997
included as Exhibit (5.1) to the Registration Statement relating to the legality
of the securities proposed to be issued and to be sold.
I hereby consent to the filing of the opinion dated July 21, 1997, as an
exhibit to the Company's Registration Statement on Form S-3 and reference to the
undersigned in the Registration Statement under the caption "Legal Matters."
/s/ Alan W. Peryam
--------------------------------------
Alan W. Peryam
Denver, Colorado
Dated: July 21, 1997
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S CONSENT
We consent to the incorporation by reference in the Registration Statement of
Pease Oil and Gas Company on Form S-3 of our report dated February 21, 1997 on
our audits of the consolidated financial statements of Pease Oil and Gas Company
as of December 31, 1996, and for the years ended December 31, 1996 and 1995,
which report is included in the Annual Report of Pease Oil and Gas Company on
Form 10-KSB.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
July 16, 1997
