As Filed: October 16, 1997 SEC File No. 333-37793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Registration Statement on Form S-3
Under the Securities Act of 1933
FORELAND CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada 87-0422812
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12596 West Bayaud, Suite 300, Lakewood, Colorado 80228-2019 (303) 988-3122
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
N. Thomas Steele, 12596 West Bayaud, Suite 300, Lakewood, Colorado 80228-2019
(303) 988-3122
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
James R. Kruse
KRUSE, LANDA & MAYCOCK, L.L.C.
50 West Broadway, Eighth Floor
Salt Lake City, Utah 84101
Telephone: (801) 531-7090
Telecopy: (801) 359-3954
CompuServe E-Mail 72204,1417
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
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, check the following box. /x/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
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,
check the following box. / /
Pursuant to Rule 429, the prospectus contained in this registration
statement also relates to the offer and sale by selling stockholders of
471,465 shares of Common Stock registered in registration statement
number 333-19063 and remaining unsoldd as of the date hereof.
This Amendment No. 1 is filed to add the preceding paragraph regarding
the application of Rule 429 and to reference the correct bylaws of the
registrant as set forth in Part II of this Amendment. The bylaws included
as an exhibit to the initial filing of this registration statement have not
been adopted by the registrant and should be ignored.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
Subject to Completion -- Preliminary Prospectus Dated October 16, 1997.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation, or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
FORELAND CORPORATION
Common Stock
This Prospectus relates to the public offer and sale by certain
stockholders (the "Selling Stockholders") of an aggregate of up to 515,639
shares of common stock, par value $0.001 per share (the "Common Stock"), of
Foreland Corporation, a Nevada corporation (the "Company"). (See "SELLING
STOCKHOLDERS" and "DESCRIPTION OF SECURITIES").
The Selling Stockholders will offer their Common Stock through or to
securities brokers or dealers designated by them in the over-the-counter market
or in other transactions negotiated by the Selling Stockholders. Any such sale
of Common Stock by a Selling Stockholder must be accompanied by, or follow the
delivery of, a prospectus filed with a current registration statement relating
to the Common Stock being offered, unless a Selling Stockholder elects to rely
on Rule 144 or another exemption from the registration requirements in
connection with a particular transaction. The Selling Stockholders and any
broker, dealer, or agent that participates with the Selling Stockholders in the
sale of the Common Stock offered hereby may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commissions or discounts received by them and any profit on the resale of
the Common Stock purchased by them may be deemed to be underwriting commissions
under the Securities Act. (See "SELLING STOCKHOLDERS" and "PLAN OF
DISTRIBUTION.")
The Company's Common Stock is included on the Nasdaq SmallCapSM Market
("Nasdaq") under the symbol "FORL." On October 15, 1997, the closing sales
price for the Company's Common Stock on Nasdaq was $3.9375.
THE ACQUISITION AND OWNERSHIP OF THE COMMON STOCK INVOLVE A HIGH DEGREE
OF RISK. THE COMMON STOCK SHOULD BE PURCHASED ONLY BY INVESTORS
WHO ARE ABLE TO AFFORD THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
(See "RISK FACTORS" on page 8.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE OR OTHER REGULATORY AUTHORITY, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR REGULATORY
AUTHORITY PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Offering Proceeds to Proceeds to
Public(1) Commissions(2) Selling Stockholders Company(3)
--------- -------------- -------------------- -----------
<S> <C> <C> <C> <C>
By Selling Stockholders
Per Share $ 3.9375 -- $ 3.9375 --
Total (4) $2,030,329 -- $2,030,329 --
</TABLE>
[FN]
(1) The price per share for the securities offered by the Selling Stockholders
is estimated at the closing sales price quoted by Nasdaq for the Common
Stock at $3.9375 on October 15, 1997. The Common Stock may be offered at
the current market price, which may vary through the period during which
the securities may be offered, or at such other prices as may be
negotiated by the Selling Stockholder and the purchaser at the time of
sale. (See "ITEM 5: MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS" in the Company's 1996 Form 10-K.)
(2) The securities to be sold by Selling Stockholders may be sold by them
through or to securities brokers or dealers, which sales may involve the
payment of commissions by the Selling Stockholders. There is no agreement
between the Company and any broker or dealer respecting such sales.
(3) Does not reflect expenses of this offering payable by the Company estimated
at $12,000. (See "PLAN OF DISTRIBUTION" below.)
(4) The total figures reflect an aggregate of 515,639 shares of Common Stock
issued by the Company on conversion of 1996-4 Preferred Stock.
The date of this Prospectus is October -----, 1997.
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders. (See "USE OF PROCEEDS.") In connection with
this offering, the Company estimates that it will incur costs of approximately
$12,000 for legal, accounting, printing, and other costs. Any separate costs of
the Selling Stockholders will be borne by them. Commissions or discounts paid
in connection with the sale of securities by the Selling Stockholders will be
determined by negotiations between them and the broker-dealer through or to
which the securities are to be sold and may vary depending on the broker-
dealers' commission or mark up schedule, the size of the transaction, and other
factors. (See "PLAN OF DISTRIBUTION" below.)
ADJUSTMENTS FOR STOCK SPLIT
All share and per share data in this Prospectus have been adjusted to
reflect a 3-for-1 reverse stock split of the Common Stock effective on June 15,
1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's annual report on Form 10-K for the year ended December 31,
1996 ("1996 Form 10-K"), quarterly reports on Form 10-Q for the quarters ended
March 31, 1997 ("March 1997 Form 10-Q"), and June 30, 1997 ("June 1997 Form
10-Q"), and current reports on Form 8-K dated January 13, 1997,
January 22, 1997, February 20, 1997, March 18, 1997, May 2, 1997,
May 12, 1997, and September 3, 1997, are incorporated herein by reference.
All documents subsequently filed by the Company pursuant to section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior to termination
of the offering shall be deemed to be incorporated by reference into this
Prospectus. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to Shareholder
Relations, Foreland Corporation, Union Terrace Office Building, 12596 West
Bayaud, Suite 300, Lakewood, Colorado 80228-2019; telephone (303) 988-3122.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). The Company has filed with the Securities and Exchange
Commission a Registration Statement on Form S-3 under the Securities Act of
1933, as amended. For the purposes hereof, the term "Registration Statement"
means the original Registration Statement and any and all amendments thereto.
This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, to which reference hereby is
made. Each statement made in this prospectus concerning a document filed as an
exhibit to the Registration Statement is qualified in its entirety by reference
to such exhibit for a complete statement of its provisions. Any interested
party may inspect the Registration Statement and its exhibits, as well as the
other reports and information filed by the Company, without charge, at the
public reference facilities of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at its regional offices at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, Suite 1300,
New York, New York 10048. Any interested party may obtain copies of all or any
portion of the Registration Statement and its exhibits we well as the other
reports and information filed by the Company at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, the SEC
maintains an internet site that contains reports, proxy and information
statements and other information regarding the Company and other registrants
that file electronically with the SEC at http://www.sec.gov.
No person is authorized to give any information or make any representation
not contained in this Prospectus and, if given or made, such information or
representation should not be relied on as having been authorized.
SUMMARY AND INTRODUCTION
The following summary is qualified in its entirety by the more detailed
information, including the financial statements and notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein.
Unless otherwise indicated, all information herein relating to oil and gas
reserves has been calculated in accordance with the rules and regulations of the
Securities and Exchange Commission (the "SEC").
Each prospective investor is urged to read this Prospectus in its entirety,
particularly the matters set forth under "RISK FACTORS."
The Company
Since its organization in June 1985, the Company has been engaged
principally in oil exploration in the Great Basin and Range of Nevada ("Great
Basin"), an area that management believes is one of the most promising
unexplored onshore domestic areas with potential for the discovery of major oil
reserves. In continuing to advance this exploration, the Company's strategy is
to generate exploration prospects with the most recent generally available
scientific techniques, expand and improve the Company's strategic land position,
and establish arrangements with other oil exploration firms active in Nevada to
obtain additional scientific data, leases, and funding.
Until 1994, the Company had only limited revenue, consisting of modest
amounts of interest income earned on net proceeds from the sale of securities
and revenue from producing properties. In order to supplement its own
exploration efforts, between 1993 and 1994, the Company acquired certain leases
and properties in Railroad Valley, Nevada, including the Eagle Springs field. In
the Eagle Springs field, the Company has reworked and returned to production
eleven acquired wells, drilled a new water injection well, drilled and placed
into production eight additional wells, replaced and improved surface equipment
to handle increased production and to lower long-term operating costs, and
undertook a 3D seismic evaluation program. Much of this development work was
conducted under an agreement with Plains Petroleum Operating Company, which was
acquired in August 1995 by Barrett Resources Corporation (together, "Barrett"),
resulting in Barrett acquiring a 40% interest in the Eagle Springs field. In
November 1996, the Company acquired Barrett's interest in the Eagle Springs
field, effective August 1, 1996. The Company plans to continue additional
drilling in the Eagle Springs field to place into production undeveloped
reserves and to drill at additional locations to test horizons that are
productive in existing wells.
During 1996, the Company continued with exploration drilling on two
prospects, including a test that discovered the Ghost Ranch field on a different
geologic structure approximately one-half mile south of the Eagle Springs field
in a different formation. The first Ghost Ranch discovery well reached total
depth in late July 1996 and resulted in significant production and increases in
the Company's oil reserves. The Company plugged a second Ghost Ranch well in
November 1996, after determining it was not economic to produce. The Company
completed a third Ghost Ranch well for production in February 1997, which is now
producing at levels comparable to the discovery well, and completed a fourth
well in May 1997 that the Company is continuing to work to increase oil
production. The Company has a 60% working interest in the Ghost Ranch field and
is the operator. Barrett continues to hold the remaining 40% working interest
pursuant to the agreement discussed above. Of the other wells drilled during
1996, one well in Toano Draw is still being tested and one well in Pine Valley
was plugged and abandoned.
During most of the first half of 1996, the Company's exploration and
development activities were significantly restricted due to shortages of working
capital and cash. Following the receipt of net proceeds from the sale of
securities during the second quarter of 1996, the Company was financially able
to resume its exploration and development program.
The Company continues to increase and improve its geological and
geophysical expertise respecting the Great Basin of Nevada through its own
efforts and by obtaining data from third parties as part of joint exploration,
property acquisition, or data sharing arrangements and from drilling and other
field work in which the Company participates. In addition, all information is
continually reanalyzed as additional drilling data is gathered and as new
computer modeling and other analytical tools become available to the industry.
This has enabled the Company to increase substantially its understanding of the
geology, location, potential, and other characteristics of exploration prospects
in Nevada. To date, the Company has funded its exploration program principally
from the sale of its equity securities. The Company also benefits from capital
provided by oil industry participants for drilling and other exploration of
certain oil prospects through joint arrangements typical in the oil industry.
In November 1996 the Company established a bank credit facility to provide debt
financing.
During recent years, the Company has focused its activities on drilling in
the Eagle Springs to exploit proved undeveloped reserved and to evaluate at new
locations horizons that are productive in existing wells and to drill in
additional exploratory prospects in the Pine, Railroad, and Huntington Valleys
and Toano Draw of Nevada. In 1996, the Company's exploration effort led to the
discovery of the Ghost Ranch field, which it is now developing. Through 1997,
the Company will continue its exploration and development activities in such
areas. In addition, the Company will continue its acquisition of 3D seismic
data and reanalysis of existing 2D seismic data. The Company will also continue
its evaluation of data to identify additional exploration targets, expand its
lease holdings where warranted, and seek additional exploration arrangements
with other industry participants.
The Company's management and technical team consists of individuals with a
broad mix of formal education and over 70 years of combined Nevada exploration
experience, including positions with major oil companies such as Gulf, Amoco,
and Chevron, all Nevada oil exploration pioneers. (See "ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF REGISTRANT" in the Company's 1995 Form 10-K.)
The Company's principal executive offices are located at 12596 West Bayaud,
Suite 300, Lakewood, Colorado 80228-2019 and its telephone number is (303) 988-
3122.
1996-4 Preferred Stock
The Company issued 255 shares of 1996-4 Preferred Stock in an offering
completed in November 1996 for which the Company received net proceeds of
approximately $2,310,000. The 1996-4 Preferred Stock became convertible 15% on
March 20, 1997, and 15% each month thereafter. Prior to September 20, 1997, no
more than 20% of the aggregate number of shares could be converted during any 30
day period. Pursuant to the terms of the 1996-4 Preferred Stock, each share of
1996-4 Preferred Stock was convertible into a number of shares of Common Stock,
plus an accretion at 8% per annum, based on the market price of the Common Stock
at the time of conversion. As of the date of this prospectus, all of the 1996-4
Preferred Stock has been converted into an aggregate of 1,172,972 shares of
Common Stock.
On January 30, 1997, a registration statement filed with the Securities and
Exchange Commission became effective, which registration statement registered,
among other things, the resale of up to 788,799 shares of Common Stock issuable
by the Company on the conversion of the 1996-4 Preferred Stock and up to 283,333
shares of Common Stock on exercise of investor warrants issuable to the holders
of the 1996-4 Preferred Stock under certain circumstances. Because none of the
holders of the 1996-4 Preferred Stock held their preferred shares for the
requisite period of time, no investor warrants have been or will be issued to
the holders of the 1996-4 Preferred Stock by the Company.
The number of shares of common stock issued by the Company upon the
conversion of the 1996-4 Preferred Stock exceeds the number of shares of common
stock registered for resale under the prior registration statement. This
prospectus relates to the resale of the shares of Common Stock issued by the
Company on the conversion of the 1996-4 Preferred Stock in excess of the shares
covered by the prior registration statement.
(See "DESCRIPTION OF SECURITIES" below.)
Capitalization
The following table shows the capitalization of the Company as of June 30,
1997, and as adjusted to give effect to the issuance of 963,758 shares of Common
Stock on conversion of outstanding shares of Preferred Stock:
<TABLE>
<CAPTION>
June 30, 1997
---------------------------
Historical As Adjusted
----------- -----------
<S> <C> <C>
Long term debt, net of current portion $ 765,575 $ 765,575
----------- -----------
Stockholders' Equity
Preferred Stock, par value $0.001 per share, 5,000,000 shares authorized
1991 Convertible Preferred Stock, 40,000 shares issued and
outstanding 40 40
1994 Convertible Redeemable Preferred Stock, 165,140 shares
issued and outstanding 165 165
1995 Convertible Redeemable Preferred Stock, 613,334 shares
issued and outstanding 613 613
1996 Series 6% Convertible Preferred Stock, 12.5 and 0 shares
issued and outstanding, respectively -- --
1996-4 Series Preferred Stock, 198 and 0 shares issued and
outstanding, respectively -- --
Common Stock, par value $0.001 per share, 50,000,000 shares
authorized, 7,506,310 and 8,470,068 shares issued and outstanding,
respectively 7,506 8,470
Additional paid in capital 32,723,443 32,722,479
Less note and stock subscriptions receivable (1,133,214) (1,133,214)
Accumulated deficit (23,214,317) (23,214,317)
----------- -----------
Total stockholders' equity 8,384,236 8,384,236
----------- -----------
Total capitalization $ 9,149,811 $ 9,149,811
=========== ===========
</TABLE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities offered by Selling Stockholders.......................... 515,639 shares of Common Stock(1)
Common Stock outstanding before the offering........................ 8,470,068 shares
Common Stock outstanding after the offering......................... 8,470,068 shares(1)
Common Stock reserved for issuance.................................. 2,500,182 shares(2)
Fully diluted Common Stock.......................................... 10,970,250 shares(2)
Nasdaq Symbols:
Common Stock...................................................... FORL
</TABLE>
[FN]
(1) All of the 515,639 shares of Common Stock offered hereby by Selling
Stockholders were issued on conversion of the 1996-4 Preferred Stock.
(2) Consists of (i) up to 272,824 shares of Common Stock issuable on the
conversion of outstanding shares of Preferred Stock; (ii) up to 1,887,358
shares of Common Stock issuable on the exercise of outstanding options and
warrants at a weighted average exercise price of $7.25 per share; and
(iii) up to 340,000 shares of Common Stock issuable on the exercise of
outstanding options subject to vesting requirements at a weighted average
exercise price of $4.88 per share. (See "ITEM 11. EXECUTIVE
COMPENSATION," "ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT," and "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS," in the Company's 1996 Form 10-K, and "DESCRIPTION OF
SECURITIES--Preferred Stock, Warrants, and Options Outstanding" below.)
The board of directors has authority to authorize the offer and sale of
additional securities without the vote of or notice to existing shareholders,
and it is likely that additional securities will be issued to provide future
financing. The issuance of additional securities could dilute the percentage
interest and per share book value of existing shareholders, including persons
purchasing securities in this offering. (See "DESCRIPTION OF SECURITIES" below)
Use of Proceeds
The Company has not received and will not receive any net proceeds from the
conversion of the 1996-4 Preferred Stock or from the sale by the Selling
Stockholders of the Common Stock issued on such conversion. If all options and
warrants held by persons other than the Selling Stockholders were exercised to
acquire 2,227,358 shares of Common Stock, the Company would receive proceeds of
$15,338,037. There can be no assurance that any of the outstanding options or
warrants will be exercised to provide any proceeds therefrom to the Company.
Risk Factors
Offerees should not purchase these securities without carefully reading and
considering the risks involved and unless they are willing and able to accept
the complete loss of their investment. The securities offered hereby are
speculative and involve an unusually high degree of risk. (See "RISK FACTORS"
below.)
No Dividends
The Company has not paid dividends. The Company seeks growth and expansion
of its business through the reinvestment of profits, if any, and does not
anticipate that it will pay dividends in the foreseeable future. In addition,
the Company's credit agreement with a commercial bank contains, among other
provisions, a negative covenant that prohibits the Company from paying
dividends.
RISK FACTORS
The purchase of the Common Stock involves certain risks. Prospective
purchasers should consider, in addition to the negative implications of the
other information and financial data set forth herein or incorporated herein by
reference, the following risk factors before making an investment in the Common
Stock.
This document and all Company disclosures, including periodic reports filed
with the Commission, contain certain forward-looking statements and information
relating to the Company that are based on the beliefs of Company management as
well as assumptions made by and information currently available to Company
management. When used herein and in other Company disclosures, the words
"anticipate," "believe," "estimate," "expect," "intend," and similar
expressions, as they relate to the Company or Company management, are intended
to identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to certain
risks, uncertainties and assumptions, including the risk factors described
below. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected, or intended. The Company does not intend to update these forward-
looking statements.
Risks Related to the Business of the Company
Concentration of Risks Resulting From Barrett Acquisition
Prior to the acquisition of the 40% interest in the Eagle Springs field
from Barrett in November 1996, the Company diversified the economic risks
associated with drilling and the other activities in the Eagle Springs field
because, as a 40% working interest owner, Barrett was responsible for 40% of all
costs. As a result of the acquisition by the Company of Barrett's interest, the
Company assumed the cost and associated risk of 100% of operations in the Eagle
Springs field.
Company's Ability to Continue as a Going Concern/Shortages of Working
Capital and Continuing Losses
The Company has an accumulated deficit of $23,214,317 since its inception
in 1985 and expects that its accumulated deficit will increase. During 1995 the
Company experienced a net loss of $2,275,565. These losses continued, with a
loss of $3,385,287 for the year ended December 31, 1996, and a loss of $528,689
for the first six months of 1997. The Company anticipates continuing losses
through the balance of 1997. Based on current production and oil prices,
management believes that its production revenue is now sufficient to meet its
fixed and recurring operating costs. The Company will also incur substantial
additional exploration costs, depending on the level of its drilling activity,
which may vary dramatically from quarter to quarter. The Company's independent
auditor's report on the financial statements for the year ended December 31,
1996, as for preceding fiscal years, contains an explanatory paragraph as to the
Company's ability to continue as a going concern. (See "ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA" and "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" in the Company's 1996
Form 10-K and March and June 1997 Form 10-Qs.)
Additional Possible Expenses Related to Capitalized Costs
The Company includes in oil and gas properties on its balance sheets costs
of wells in progress, which are capitalized until a decision is made to plug and
abandon or, if the well is still being evaluated, until one year after reaching
total depth, at which time such costs are charged to expense, even though the
well may subsequently be placed into production. At June 30, 1997, oil and gas
properties included approximately $420,000 related to a single well in progress.
The Company is continuing to evaluate this property. If the evaluation of this
property does not establish reserves by year end, the costs associated with such
well will be charged to expense.
The Company evaluates its proved oil and gas properties for impairment
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. When such an assessment is required, the Company compares
the net carrying value on a lease-by-lease basis to the related estimates of
undiscounted future net cash flows for each property. If the net carrying value
exceeds the estimated net cash flows, then impairment expense is recognized to
reduce the carrying value to the estimated fair value. Estimates of future cash
flows for specific properties are based upon reserve engineering evaluations
which are impacted by a number of factors, including historical oil production
levels, adjacent drilling results, lease operating costs, and historical and
projected prices for oil, which have typically been volatile.
At June 30, 1997, the Company also had a net investment of $651,400 in
undeveloped oil and gas leases for which no proved reserves have been
established. For these properties, it will be necessary to drill exploratory
wells to determine if sufficient economic oil and gas reserves exist.
Management periodically assesses these properties for impairment by considering
a number of factors, including unsuccessful drilling activity by the Company or
others in the vicinity of the lease, management's plans to pay delay rentals or
to drill a well prior to the expiration of the primary lease term, opportunities
to obtain and/or evaluate seismic data related to the lease, and management's
expectations about oil and gas prices, production costs and development costs.
Adverse information related to any of the above matters could have a
material adverse impact on the Company's future results of operations.
Dependence on Joint Exploration Arrangements with Industry Participants
The Company has entered into a number of joint exploration agreements with
industry participants to obtain leases, scientific data, and funds for drilling
and other exploration. These agreements typically set forth obligations that
the Company must perform timely in order to earn specified property interests,
permit funding participants to terminate their participation at specified points
during the exploration program, and condition continuation of joint efforts on
obtaining satisfactory results. If such a participant elects not to continue
with respect to any well, the Company would be required to fund all of the costs
of such well, in which case it would be dependent on proceeds from the sale of
securities and production revenue, which would delay or limit planned drilling.
Limited Production Revenue
The Company has only recently established revenue from oil production from
its Eagle Springs, Nevada, property acquired during 1993, and its Ghost Ranch
field. Based on current production and oil prices, management believes that its
production revenue is now sufficient to meet its current fixed and recurring
operating costs as well as a portion of the Company's costs of exploration.
There can be no assurance, however, that ongoing oil production in commercial
quantities will continue, that oil prices will not decrease dramatically, or
that oil reserves will be proved as a result of the Company's exploration
efforts. (See "ITEM 1. BUSINESS" in the Company's 1996 Form 10-K.)
Limited Commercial Drilling Success to Date
Despite the expertise of management, the significant amount of data that
the Company has collected with respect to Nevada, and the expenditure of several
million dollars in property acquisition, data collection, and exploration since
1985, the Company has established only limited reserves and developed limited
ongoing production as a result of its drilling program. The Ghost Ranch
discovery well, which was placed into production recently, is the first
exploration test by the Company that has resulted in significant ongoing
production. The oil production from the Eagle Springs field was acquired by the
Company in 1993 and, except for the increased production resulting from certain
reworking of existing wells and the development wells drilled by the Company,
did not result from the Company's exploration or drilling activities. Although
the Company began to receive oil production revenue from the Eagle Springs field
in early 1994 and from the Ghost Ranch well in mid-1996, the Company's success
will continue to depend on the results of drilling, evaluation, and testing of
its various prospects. (See "ITEM 1. BUSINESS" in the Company's 1996 Form 10-K
and "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in the Company's 1996
Form 10-K and March and June 1997 Form 10-Qs.)
Need for Additional Funds
The nature, extent, and cost of exploring prospects in the Great Basin
province over several years cannot be predicted, but the total cost could amount
to tens of millions of dollars. Because of the size of the total exploration
possibilities and the Company's limited resources, it is likely that the
interest of the Company's shareholders in the Company and the interest of the
Company in its drilling prospects will continue to be diluted substantially as
the Company continues to obtain funding through the sale of additional
securities or through sharing arrangements with industry participants. There
can be no assurance that exploration funds will be available to the Company when
required or, if available, that such funds can be obtained on terms acceptable
or favorable to the Company. (See "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION" in the Company's 1996 Form 10-K
and March and June 1997 Form 10-Qs.)
Concentration of Activities in Frontier Area
Management of the Company has focused its efforts on acquiring lease
positions, developing data, and exploring and drilling in the Great Basin area
of Nevada, a largely unproved and unexplored geological province. While the
Company holds exploration rights to a significant number of acres, its holdings
are insignificant when compared to the size of the potential geological area.
Other than in the Eagle Springs field and Ghost Ranch field, no significant
ongoing commercial production of oil has been established on the Company's
properties. In addition, the areas targeted by the Company, other than the
Eagle Springs field and Ghost Ranch field, have geological, geophysical,
drilling, completion, and production problems which to date have prevented the
Company and others with larger exploration budgets from developing or
establishing significant production or reserves. There is no assurance that
these problems can be overcome or that the Company's drilling program will be
commercially successful. (See "ITEM 1. BUSINESS" in the Company's 1996 Form
10-K.)
Dependence on Key Employees
The business of the Company is dependent on its management and technical
team and their substantial Nevada exploration experience, the loss of any one of
whom could adversely affect the Company's proposed activities. The Company does
not have and does not intend to acquire key man life insurance on any of its
executives. (See "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT" in
the Company's 1996 Form 10-K.)
Speculative Nature of Oil and Gas Industry
Exploration for oil is a highly speculative business. There is no way to
know in advance of drilling and testing whether any prospect will yield oil in
sufficient quantities to be economically feasible. The completion of a well for
production or the initiation of production in paying quantities does not
necessarily mean that the well will be economic because it may not produce
sufficient revenues to recover related costs and generate a financial return to
the Company.
High Operating Costs
The costs of exploring, drilling, producing, and transporting are higher in
the geological province targeted by management than they would be in a more
fully developed oil producing area. Access roads to drilling targets over
relatively long distances frequently have to be completed, drilling equipment
and services typically must be brought in from considerable distances, and there
is no collection pipeline so that any oil that is produced must be trucked to a
refinery. Most of the Company's oil is transported to a refinery in Salt Lake
City, Utah, a distance of several hundred miles. (See "ITEM 1. BUSINESS--Oil
Properties" in the Company's 1996 Form 10-K.)
Uncertainty of Reserve Estimates and Future Net Revenues
There are numerous uncertainties inherent in estimating quantities of
proved oil reserves. The estimates in the 1996 Form 10-K which are incorporated
into this Prospectus are based on various assumptions relating to rates of
future production, timing and amount of development expenditures, oil prices and
the results of planned development work. Actual future production rates and
volumes, revenues, taxes, operating expenses, development expenditures and
quantities of recoverable oil reserves may vary substantially from those assumed
in the estimates. Any significant change in these assumptions, including
changes that result from variances between projected and actual results, could
materially and adversely affect future reserve estimates. In addition, such
reserves may be subject to downward or upward revision based upon production
history, results of future development, prevailing oil prices and other factors.
(See "ITEM 2. PROPERTIES" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION--Liquidity and Capital Resources"
in the 1996 Form 10-K.)
Dependence on Oil Prices
The Company's oil exploration and production activities are dependent on
the prevailing price for oil, which is beyond the Company's control or
influence, and there is no assurance that the Company's wells can be produced at
levels in excess of related production costs. Oil prices have increased
materially during 1996, but there can be no assurance that such prices will
continue. Oil and gas prices have been and are likely to continue to be
volatile and subject to wide fluctuations in response to any of the following
factors: relatively minor changes in the supply of and demand for oil and gas;
market uncertainty; political conditions in international oil producing regions;
the extent of domestic production and importation of oil; the level of consumer
demand; weather conditions; the competitive position of oil or gas as a source
of energy as compared with coal, nuclear energy, hydroelectric power, and other
energy sources; the refining capacity of prospective oil purchasers; the effect
of federal and state regulation on the production, transportation and sale of
oil; and other factors, all of which are beyond the control or influence of the
Company. In an effort to limit the adverse effects of extreme declines in oil
prices, the Company has entered into an agreement with Crysen Refining, Inc.,
Salt Lake City, Utah, to sell oil from its currently producing fields (other
than a portion of the Ghost Ranch field) through August 1997 at minimum fixed
prices. Notwithstanding this agreement, adverse changes in the market or
regulatory environment would likely have an adverse effect on the Company's
ability to obtain funding from lending institutions, industry participants, the
sale of additional securities, and other sources. (See "ITEM 1. BUSINESS--Oil
Properties" in the Company's 1996 Form 10-K.)
Operating Risks and Uninsured Hazards
Oil drilling involves hazards such as fire, explosion, pipe failure, cave
in, collapse, encountering unusual or unexpected formations, pressures, and
other conditions, environmental damage, personal injury, and other occurrences
that could result in the Company incurring substantial losses and liabilities to
third parties. As is customary in exploration arrangements with other energy
companies under which specified drilling is to be conducted, the operator is
required to purchase and pay for insurance against risks customarily insured
against in the oil and gas industry by others conducting similar activities.
(See "ITEM 1. BUSINESS--Operational Hazards and Insurance" in the Company's
1996 Form 10-K.) Nevertheless, the Company may not be insured against all
losses or liabilities that may arise from all hazards because such insurance is
unavailable at economic rates, because the operator has not fulfilled its
obligation to purchase such insurance, or because of other factors. Any
uninsured loss could have a material adverse effect on the Company.
Risks of Adverse Weather
The Company's activities are subject to periodic interruptions due to
weather conditions, which may be quite severe at various times of the year.
Periods of heavy precipitation make travel to exploration or drilling locations
difficult and/or impossible, while extremely cold temperatures limit or
interrupt drilling, pumping, and/or production activities or increase operating
costs.
Intense Competition in Oil and Gas Industry
The acquisition and exploration of oil and gas prospects are highly
competitive. Many of the Company's current and potential competitors engaged in
oil exploration in the Great Basin of Nevada have greater financial resources,
broader exploration programs, and a greater number of managerial and technical
personnel. Because the Company's resources will be limited even on successful
completion of this offering, there can be no assurance that it will be able to
compete effectively in the exploration for oil in Nevada. (See "ITEM 1.
BUSINESS--Competition and Markets" in the Company's 1996 Form 10-K.)
Environmental and Other Governmental Regulation
Oil and gas exploration and production are subject to comprehensive
federal, state, and local laws and regulations controlling the exploration for
and production and sale of oil and gas and the possible effects of such
activities on the environment. To date, the Company has not been required to
expend significant resources in order to satisfy applicable environmental laws
and regulations respecting its own activities. Although management believes
that the Company has substantially completed certain remediation work that it
agreed to undertake in connection with the acquisition of the Eagle Springs
field, there can be no assurance that additional work may not be required. In
addition, present, as well as future, legislation and regulations could cause
additional expenditures, restrictions, and delays in the Company's business, the
extent of which cannot be predicted and which may require the Company to limit
substantially, delay or cease operations in some circumstances or subject the
Company to various governmental controls. From time to time, regulatory
agencies have proposed or imposed price controls and limitations on production
by restricting the rate of flow of oil and gas wells below actual production
capacity in order to conserve supplies of oil and gas. Because federal energy
and taxation policies are subject to constant revisions, no prediction can be
made as to the ultimate effect of such governmental policies and controls on the
Company. (See "ITEM 1. BUSINESS--Government Regulation" in the Company's 1996
Form 10-K.)
General Risks Relating to Offering
Volatility of Common Stock
The market price for the Common Stock has been volatile in the past and
could fluctuate significantly in response to the results of specific exploration
drilling tests, variations in quarterly operating results, and changes in
recommendations by securities analysts. Further, the trading volume of the
Common Stock is relatively small, and the market for the Common Stock may not be
able to efficiently accommodate significant trades on any given day.
Consequently, sizable sales or purchases of the Common Stock have in the past,
and may in the future, cause volatility in the market price of the Common Stock
to a greater extent than in other more actively traded securities. Until more
trading volume develops, larger transactions may not be able to be closed at the
then current market price for the Common Stock. In addition, the securities
markets regularly experience significant price and volume fluctuations that are
often unrelated or disproportionate to the results of operations of particular
companies. These broad fluctuations may adversely affect the market price of
the Common Stock. See "ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS" in the Company's 1996 Form 10-K.
Substantial Warrants and Options Outstanding
The Company has issued to employees, officers, directors, and others
providing services to the Company vested options to purchase up to 1,147,333
shares of Common Stock with exercise prices ranging from $3.93 to $9.75 per
share. Options to purchase a total of 94,000 shares contain a provision that,
on exercise, the holder is granted a new option covering the number of shares
for which the prior option was exercised, with the exercise price of the new
option fixed at the then fair market value of the Common Stock. In addition,
the Company has outstanding options held by unrelated third parties to purchase
110,000 shares of Common Stock at prices ranging from $3.75 per share to $6.90
per share and warrants to purchase a total of 630,025 shares of Common Stock at
a weighted average exercise price of $11.58 per share. The existence of such
options and warrants may prove to be a hindrance to future financing by the
Company, and the exercise of options and warrants may further dilute the
interests of the stockholders. The possible future sale of Common Stock
issuable on the exercise of such options and warrants could adversely affect the
prevailing market price of the Company's Common Stock. Further, the holders of
options and warrants may exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company. (See "DESCRIPTION OF SECURITIES--Preferred Stock, Warrants, and
Options Outstanding" below and "ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" in the Company's 1996 Form 10-K.)
Issuance of Additional Common Stock
The Company has authorized 5,000,000 shares of Preferred Stock, par value
$0.001 per share, and 50,000,000 shares of Common Stock, par value $0.001 per
share. As of the date of this Prospectus, 8,470,068 shares of Common Stock were
issued and outstanding, and 2,250,723 additional shares were reserved for
issuance on the exercise or conversion of options, warrants, and shares of
Preferred Stock issued and outstanding or issuable on exercise of placement
agent warrants. The Company's board of directors also has authority, without
action or vote of the shareholders, to issue all or part of the authorized but
unissued shares. Any such issuance will dilute the percentage ownership of
shareholders and may further dilute the book value of the Company's Common
Stock.
Preferential Rights of Preferred Stock Outstanding
The Company has 40,000 shares of 1991 Preferred Stock, 165,140 shares of
1994 Preferred Stock, and 613,334 shares of 1995 Preferred Stock issued and
outstanding. The 1991 Preferred Stock has a liquidation preference of $1.25 per
share, the 1994 Preferred Stock has a liquidation preference of $2.00 per share,
and the 1995 Preferred Stock has a liquidation preference of $1.50 per share.
On liquidation or termination of the Company, an aggregate of $1,300,281 in
assets would be distributed to the holders of the currently issued and
outstanding Preferred Stock, after payment of all of the Company's obligations,
prior to any distribution to the holders of Common Stock. The 1991, 1994 and
1995 Preferred Stock vote as a single class with the Common Stock. If the
Company seeks to amend its certificate of incorporation to change the provisions
relating to the Preferred Stock or to approve a merger containing provisions
that would require a class vote if they were contained in an amendment to the
certificate of incorporation, the approval of each class of Preferred Stock
affected thereby, voting as a separate class, will be required. Consequently,
the holders of a relatively minor number of shares of Preferred Stock may be
able to block such proposals, even in circumstances where they would be in the
best interests of the holders of Common Stock. (See "DESCRIPTION OF SECURITIES-
- -Preferred Stock, Warrants, and Options Outstanding" below.)
Determination of Purchase and Exercise Price
The conversion ratio of the outstanding Preferred Stock and the exercise
prices of the outstanding options and warrants were determined by the Company,
taking into account the history of, and recent prices for, the Common Stock as
quoted on Nasdaq at the time the Preferred Stock, options, and warrants were
issued, the business history and prospects of the Company, the number of
securities to be offered, and the general condition of the securities market,
all as assessed by the Company's management. Such prices bear no relationship
to the assets, earnings, or net tangible book value of the Company or any other
traditional criteria of value. (See "PLAN OF DISTRIBUTION" and "DESCRIPTION OF
SECURITIES" below.)
Substantial and Immediate Dilution
Persons purchasing the Common Stock will suffer a substantial and immediate
dilution to the net tangible book value below the purchase price of such Common
Stock. (See "DILUTION" below.)
No Dividends
The Company has not paid dividends in the past and does not plan to pay
dividends in the foreseeable future, even if it were profitable. Earnings, if
any, are expected to be used to advance the Company's exploration activities and
for general corporate purposes, rather than to make distributions to
shareholders. In addition, the Company's credit agreement with a commercial bank
contains, among other provisions, a negative covenant that prohibits the Company
from paying dividends.
Registration Rights of Existing Shareholders
The Company has previously granted to existing shareholders and holders of
options and warrants, including officers and directors, registration rights that
require the Company to include securities in future registration statements
filed by the Company, subject to the approval of the managing underwriter in
such future offerings and, in some cases, to file registration statements with
respect to the resale, exercise, or conversion of the securities held by the
holders of such registration rights, all at the expense of the Company. The
Company has obtained the effectiveness of a registration statement respecting
all of its registration obligations, subject to the requirement for updating
through supplements or post-effective amendments. (See "DESCRIPTION OF
SECURITIES--Registration Rights" below.)
NO NET PROCEEDS
The Company has not received and will not receive any net proceeds from the
conversion of the Preferred Stock or from the sale by the Selling Stockholders
of the Common Stock issued on such conversion or exercise. If all options and
warrants held by persons other than the Selling Stockholders were exercised to
acquire an additional 2,227,358 shares of Common Stock, the Company would
receive proceeds of $15,338,037. There can be no assurance that any of the
outstanding options or warrants will be exercised to provide any proceeds
therefrom to the Company.
THE COMPANY
For information regarding the Company, reference is made to the Company's
annual report on Form 10-K for the year ended December 31, 1996, the Company's
quarterly report on Form 10-Q for the quarters ended March 31, 1997, and June
30, 1997, and all documents subsequently filed by the Company pursuant to
section 13(a), 13(c), 14, or 15(d) of the Exchange Act.
DILUTION
Immediately prior to this offering, the Company had a pro forma net
tangible book value of $8,384,236, with 8,470,068 shares of Common Stock issued
and outstanding, or approximately $0.99 per share. The pro forma net tangible
book value per share decreases to $0.84 after deducting liquidation preferences
of an aggregate of $1,300,281 with respect to the shares of outstanding 1991,
1994, and 1995 Preferred Stock. The pro forma net tangible book value is
determined by adjusting the net tangible book value of the Company as of June
30, 1997, to give pro forma effect to the subsequent issuance of 963,758 shares
of Common Stock on conversion of outstanding shares of Preferred Stock. (See
"ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in the Company's 1996
Form 10-K and March and June 1997, Form 10-Qs.)
Purchasers of shares of Common Stock from Selling Stockholders will likely
suffer substantial and immediate dilution in the adjusted net tangible book
value per share of the Common Stock they purchase below the purchase price for
such shares. Similarly, holders of Preferred Stock will suffer dilution in the
adjusted net tangible book value per share received on conversion or exercise
below their effective purchase price per share. Based on the Company's net
tangible book value immediately prior to this offering, which gives effect to
the conversion of all outstanding shares of Company Preferred Stock to acquire
the 100,840 shares of Common Stock to be sold in this offering, the Company
would have a net tangible book value of $7,083,955, or approximately $0.84 per
share, which represents a reduction of $3.10 per share from the closing sales
price of $3.9375 for the Company's Common Stock on Nasdaq on October 15, 1997.
SELLING STOCKHOLDERS
The following table provides certain information, as of the date of this
Prospectus, respecting the Selling Stockholders, the shares of Common Stock held
by them, to be sold, and to be held following the offering, assuming the sale by
such Selling Stockholders of all shares of Common Stock offered.
The Selling Stockholders named below confirmed at the time they acquired
the Preferred Stock and the Warrants that such securities were acquired for
investment purposes only and without a view toward their resale and acknowledged
the existence of restrictions on resale applicable to such securities. Such
Selling Stockholders can sell such securities only in limited circumstances.
The Company is not aware of any intention by any Selling Stockholder to sell
such Preferred Stock or Warrants prior to their conversion or exercise. This
offering relates only to the sale of shares of Common Stock held or to be held
by the Selling Stockholders named in the following table. If a Selling
Stockholder sells the Preferred Stock or Warrants held by such Selling
Stockholder prior to converting or exercising such securities into shares of
Common Stock, such shares of Common Stock will not be registered and may not be
resold pursuant to this offering.
<TABLE>
<CAPTION>
Securities Owned Shares Owned
Prior to the Offering After Offering
--------------------- ----------------
1996-4
Common Preferred Shares to
Selling Stockholders Stock Stock(2) Be Offered Number %
- ----------------------------- ------- --------- ---------- ------ ---
<S> <C> <C> <C> <C> <C>
Banque Edouard Constant 64,606 -- 64,606 -- --
Global Bermuda, L.P. 137,832 -- 137,832 -- --
Lakeshore International, Ltd. 86,487 -- 86,487 -- --
Legong Investments, N.V. 86,637 -- 86,637 -- --
The Matthew Fund, N.V. 83,124 -- 83,124 -- --
Otato Limited Partnership 56,953 -- 56,953 -- --
Total 515,639 -- 515,639 -- --
======= == ======= == ==
</TABLE>
[FN]
(1) Shares owned prior to the offering include all shares of Common Stock and
underlying securities convertible or exercisable into shares of Common
Stock owned by or issuable to the Selling Stockholder. Shares owned
after the offering assume the sale of all shares of Common Stock offered
pursuant to this offering. Percentage figures respecting the securities
owned after the offering give effect to the conversion of all shares of
Preferred Stock by all Selling Stockholders.
(2) The 1996-4 Preferred Stock became convertible 15% on March 20, 1997, and
15% each month thereafter; until September 20, 1997, no more than 20% of
the aggregate number of shares could be converted during any 30 day
period. All of the 1996-4 Preferred Stock has been converted into an
aggregate of 1,172,972 shares of Common Stock. Each share of 1996-4
Preferred Stock was convertible into the number of shares of Common
Stock, plus an accretion at 8% per annum, based on the market price
of the Common Stock at the time of conversion. (See "DESCRIPTION OF
SECURITIES" below.)
DESCRIPTION OF SECURITIES
The Company is authorized to issue 5,000,000 shares of preferred stock, par
value $0.001 per share, and 50,000,000 shares of Common Stock, par value $0.001
per share.
Common Stock
The holders of the Company's Common Stock are entitled to one vote per
share on each matter submitted to vote at any meeting of shareholders. Shares
of Common Stock do not carry cumulative voting rights, and therefore, a majority
of the shares of outstanding Common Stock is able to elect the entire board of
directors, and if they do so, minority shareholders would not be able to elect
any persons to the board of directors. The Company's bylaws provide that one-
third of the issued and outstanding shares of the Company shall constitute a
quorum for shareholders' meetings, except with respect to certain matters for
which a greater percentage quorum is required.
Shareholders of the Company have no preemptive right to acquire additional
shares of Common Stock or other securities. The Common Stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Company, the shares of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities. The shares
of Common Stock, when issued, are fully paid and nonassessable.
Holders of Common Stock are entitled to receive such dividends as the board
of directors may from time to time declare out of funds legally available for
the payment of dividends. The Company seeks growth and expansion of its
business through the reinvestment of profits, if any, and does not anticipate
that it will pay dividends in the foreseeable future.
The board of directors has the authority to issue the authorized but
unissued shares without action by the shareholders. The issuance of such shares
would reduce the percentage ownership held by persons purchasing stock in this
offering and may dilute the book value of the then existing shareholders.
Preferred Stock, Warrants and Options Outstanding
As of the date of this Prospectus, the Company had the following Preferred
Stock, options, and warrants outstanding as discussed in detail below.
<TABLE>
<CAPTION>
Number of Shares of Price Per Share of
Common Stock or Common Stock or
Common Stock Common Stock
Description Equivalent Equivalent
- ------------------------------------ ------------------- ------------------
<S> <C> <C>
Preferred Stock
1991 Series 13,334 $3.75
1994 Series 55,047 $6.00
1995 Series 204,443 $4.50
Warrants to purchase Common Stock 17,450 $4.50
29,353 $7.50
583,222 $12.00
Options to purchase Common Stock(1) 10,000 $3.75
22,667 $3.93
440,000 $4.00
128,000 $4.50
300,000 $5.00
1,667 $5.63
216,667 $6.375
100,000 $6.90
6,666 $7.50
28,333 $9.00
3,333 $9.75
</TABLE>
[FN]
(1) Does not include options subject to vesting requirements to purchase up
to 340,000 shares of Common Stock at a weighted average exercise price
of $4.88 per share.
Preferred Stock
The Company has 40,000 shares designated as 1991 Series Convertible
Preferred Stock, 165,140 shares designated as 1994 Series Convertible Redeemable
Preferred Stock, and 613,334 shares designated as the 1995 Series Convertible
Preferred Stock issued and outstanding as of the date of this Prospectus. The
Company has no current plans to issue any additional Preferred Stock, except
70,000 shares of 1993 Preferred Stock to be issued on the exercise of the
outstanding 1993 Placement Agent Warrants and 131,622 shares of 1994 Preferred
Stock to be issued on the exercise of the outstanding 1994 Placement Agent
Warrants. The Company's articles of incorporation provide that the board of
directors of the Company has authority, without action by the shareholders, to
issue the authorized but unissued Preferred Stock in one or more series, and to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series.
The 1991, 1994 and 1995 Preferred Stock is convertible, at the election of
the holder, into the Company's Common Stock at the rate of one share of Common
Stock for each three shares of Preferred Stock, after giving effect to the 3-
for-1 reverse stock split of the Common Stock. The 1993 Preferred Stock issuable
on the exercise of the 1993 Placement Agent Warrants is convertible, at the
election of the holder, into the Company's Common Stock at the rate of two
shares of Common Stock for each three shares of Preferred Stock.
The 1996-4 Preferred Stock was convertible into the Company's Common Stock
at the rate of one share of 1996-4 Preferred Stock for the number of shares of
Common Stock determined by dividing $10,000, plus an accretion at 8% per annum,
by the lesser of $7.50 or a percentage of the average closing bid price of the
Common Stock as reported on Nasdaq for the five days preceding the date of
conversion. Such percentage was 90% of the 1996-4 Preferred Stock if converted
after March 20, 1997, and before May 20, 1997, 85% if after May 20, 1997, and
before November 20, 1997, and 82.5% if after November 20, 1997. All of the 1996-
4 Preferred Stock has been converted into an aggregate of 1,172,972 shares of
Common Stock.
The 1991 Preferred Stock carries a preference of $1.25 per share on
dissolution and liquidation of the Company, the 1994 Preferred Stock carries a
preference of $2.00 per share, and the 1995 Preferred Stock carries a
liquidation preference of $1.50 per share. The 1991, 1994, and 1995 Preferred
Stock votes as a single class with the Common Stock except as otherwise provided
by the corporate laws of the state of Nevada. Shares of 1991, 1994 and 1995
Preferred Stock are entitled to one vote per share. None of the issued and
outstanding Preferred Stock is entitled to preferential dividends, but
participates with the Common Stock in the unlikely event that a dividend is
declared.
The 1991 Preferred Stock is redeemable at $1.25 per share at any time after
December 31, 1995, the 1994 Preferred Stock is redeemable at $4.00 per share at
any time after March 31, 1996, and the 1995 Preferred Stock is redeemable at
$3.00 per share at any time after December 31, 1995. In each case, the
Preferred Stock can be converted prior to the redemption date fixed in the
notice.
This Prospectus relates to the resale of Common Stock issued on conversion
of 1996-4 Preferred Stock in excess of the shares registered in a prior
registration.
Warrants
The Company has issued and outstanding the following warrants to purchase
Common Stock and has reserved an equivalent number of shares of Common Stock for
issuance on exercise of such warrants. Each of the warrants described below is
governed by a warrant agreement between the Company and the warrant agent. The
following summary is subject to the detailed provisions of the warrant agreement
governing such warrants.
Holders of warrants are deemed to be shareholders of the Company only to
the extent of the shares of Common Stock held by them. Holders of warrants, as
such, are not entitled to vote with respect to matters submitted to the
shareholders of the Company, are not entitled to participate in dividends, if
any, and do not have ownership rights on termination or liquidation of the
Company.
$4.50 Warrants. The Company has issued and outstanding warrants to
purchase 8,333 shares of Common Stock at an exercise price of $4.50 per share
which expire in June 2000.
N Warrants. Effective January 1, 1997, the Company issued to the record
holders of the class L Warrants, which warrants expired pursuant to their terms
on December 31, 1996, warrants to purchase 414,000 shares of Common Stock at
$12.00 per share. The N Warrants are exercisable through December 31, 1998. The
N Warrants are subject to redemption by the Company at a redemption price of
$0.10 per Warrant if the average closing price of the Common Stock is at least
$12.00 per share for 20 consecutive trading days preceding the date of notice of
redemption, subject to certain other conditions. Such Warrants may be exercised
during the period after notice of redemption has been given and prior to the
redemption date.
M Warrants. The Company has issued and outstanding 507,666 M Warrants.
Giving effect to the reverse stock split, the M Warrants entitle the holder to
purchase one share of Common Stock for each three M Warrants held at $12.00 at
any time through December 1, 1998. The M Warrants are subject to redemption by
the Company at a redemption price of $0.10 per Warrant if the average closing
price of the Common Stock is at least $12.00 per share for 20 consecutive
trading days preceding the date of notice of redemption, subject to certain
other conditions. Such Warrants may be exercised during the period after notice
of redemption has been given and prior to the redemption date.
1996 Placement Agent Warrants. The placement agent in the offering in
which the 1996 Preferred Stock was sold has warrants to acquire 9,117 shares of
Common Stock at a price equal to the lesser of $4.50 or 75% of the closing bid
price of the Common Stock as reported on Nasdaq on the day preceding the date of
exercise. The placement agent's warrants are exercisable before March 25, 2001.
1996-4 Placement Agent Warrants. The designees of the placement agent in
the 1996-4 Preferred Stock offering have warrants to purchase an aggregate of
29,353 shares of Common Stock at an exercise price equal to the lesser of $7.50
or 125% of the average closing price of the Common Stock as reported on Nasdaq
for the five days preceding each anniversary of the issuance of such warrants.
Such warrants are exercisable at any time prior to November 8, 2001.
Options
The Company has issued and outstanding options to purchase up to 1,257,333
shares of Common Stock at a weighted average exercise price of $5.07 per share,
including options to purchase 1,147,333 shares of Common Stock at a weighted
average exercise price of $4.93 per share of Common Stock issued to executive
officers, directors and employees of the Company. In addition, the Company has
issued to employees of the Company options to purchase up to 340,000 shares of
Common Stock that at a weighted average exercise price of $4.88 per share that
are subject to vesting requirements.
General
Each of the foregoing warrants and options contain provisions that protect
the holders thereof against dilution by adjustment in the number of shares of
Common Stock purchasable on exercise of the warrants and options in certain
events such as stock splits or stock dividends. In the event the number of
warrant or option shares purchasable is increased, through the operation of the
anti-dilution provisions, the exercise price will be reduced proportionately.
Conversely, if the number of warrant or option shares purchasable is decreased,
the exercise price will be increased proportionately.
Registrar and Transfer Agent
The registrar and transfer agent of the Company's securities is Atlas Stock
Transfer Corporation, 5899 South State Street, Salt Lake City, Utah 84107,
telephone (801) 266-7151.
PLAN OF DISTRIBUTION
General
This Prospectus relates to the public offer and sale by certain
shareholders (the "Selling Stockholders") of an aggregate of up to 515,639
shares of Common Stock of the Company issued on conversion of shares of 1996-4
Preferred Stock. (See "SELLING STOCKHOLDERS" and "DESCRIPTION OF SECURITIES"
above.)
Sale of Common Stock
The Common Stock to be sold by the Selling Stockholders may be sold by them
from time to time directly to purchasers. Alternatively, the Selling
Stockholders may, from time to time, offer the Common Stock for sale in the
over-the-counter market through or to securities brokers or dealers that may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Stockholders and/or the purchasers of Common Stock for whom they may
act as agent. Any such sale of Common Stock by Selling Stockholders must be
accompanied by, or follow the delivery of, a prospectus filed with a current
registration statement relating to the Common Stock being offered, unless a
Selling Stockholder elects to rely on Rule 144 or another exemption from the
registration requirements in connection with a particular transaction. The
Selling Stockholders, and any dealers or brokers that participate in the
distribution of the Common Stock, may be deemed to be "underwriters" as that
term is defined in the Securities Act, and any profit on the sale of Common
Stock by them and any discounts, commissions, or concessions received by any
such dealers or brokers may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Common Stock may be sold by the Selling Stockholders from time to time
in one or more transactions at a fixed offering price, which may be changed, or
at prices that may vary through the period during which the securities may be
offered, or at such other prices as may be negotiated by the Selling Stockholder
and the purchaser at the time of sale. The Company does not intend to enter into
any arrangement with any securities dealer concerning solicitation of offers to
purchase the Common Stock.
The Company estimates that it will incur costs of approximately $10,000 in
connection with this offering for legal, accounting, printing, and other costs.
Any separate costs of the Selling Stockholders will be borne by them.
Commissions or discounts paid in connection with the sale of securities by the
Selling Stockholders will be determined by negotiations between them and the
broker-dealer through or to which the securities are to be sold and may vary
depending on the broker-dealers' commission or mark up schedule, the size of the
transaction, and other factors.
LEGALITY OF SECURITIES
The validity under the Nevada Revised Statutes of the issuance of the
Common Stock have been passed on for the Company by Kruse, Landa & Maycock,
L.L.C.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by Hein + Associates LLP, certified public
accountants, as stated in their report, which is incorporated herein by
reference, and has been so incorporated in reliance upon such report given on
the authority of that firm as experts in accounting and auditing.
The year end independent reserve dated December 31, 1996, incorporated by
reference into this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, has been prepared by the firm of
Malkewicz Hueni Associates, Inc., Golden, Colorado, as stated in its report,
which is incorporated by reference and has been so incorporated by reference in
reliance and upon such report given on the authority of that firm as experts in
mining engineering.
TABLE OF CONTENTS FORELAND CORPORATION
<TABLE>
<CAPTION>
Section Page
<S> <C>
SUMMARY AND INTRODUCTION.........................3 SHARES OF COMMON STOCK
RISK FACTORS.....................................7
NO NET PROCEEDS.................................13
THE COMPANY.....................................13
DILUTION........................................13
SELLING STOCKHOLDERS............................14
DESCRIPTION OF SECURITIES.......................15
PLAN OF DISTRIBUTION............................18
LEGALITY OF SECURITIES..........................18
EXPERTS.........................................18
</TABLE>
No dealer, salesman, or other PROSPECTUS
person has been authorized in
connection with this offering to give
any information or to make any
representation other than as
contained in this Prospectus and, if
made, such information or
representation must not be relied on
as having been authorized by the
Company. This Prospectus does not
constitute an offer to sell or the
solicitation of an offer to buy any
securities covered by this Prospectus
in any state or other jurisdiction to
any person to whom it is unlawful to
make such offer or solicitation in
such state or jurisdiction. October -----, 1997
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
distribution of the securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee $ 133
Legal fees 6,000
State "blue sky" fees and expenses (including attorneys' fees) 1,000
Accounting fees and expenses 3,000
Printing expenses 500
Listing fees 1,367
--------
Total $ 12,000
========
</TABLE>
All expenses, except the SEC fees, are estimates.
The Selling Shareholder will not bear any portion of the foregoing
expenses, but will pay fees in connection with the sale of the Common Stock
offered hereby in those transactions completed to or through securities broker
and/or dealers in the form of markups, markdowns, or commissions.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.037 and 78.751 of the Nevada Revised Statutes and "ARTICLE VII.
INDEMNIFICATION OF DIRECTORS AND OFFICERS" of the Registrant's articles of
incorporation provide for indemnification of the Registrant's directors and
officers in a variety of circumstances, which may include liabilities under the
Securities Act of 1933, as amended.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons pursuant to the
foregoing provisions, the Registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is contrary to
public policy as expressed in the Securities Act and, therefore, is
unenforceable. (See "ITEM 17. UNDERTAKINGS.")
ITEM 16. EXHIBITS
Copies of the following documents are included as exhibits to this
Registration Statement, pursuant to item 601 of regulation S-K.
Exhibits
<TABLE>
<CAPTION>
SEC
Exhibit Reference
No. No. Title of Document Location
- ------- --------- ------------------------------------------------------ ----------------
<S> <C> <C> <C>
Item 3. Articles of Incorporation and Bylaws
3.01 3 Articles of Restatement of the Articles of Initial Filing
Incorporation
3.02 3 Bylaws Incorporated by
Reference(2)
Item 4. Instruments Defining the Rights of Security Holders,
Including Indentures
4.01 4 Specimen Common Stock Certificate Incorporated by
Reference(1)
4.02 4 Designation of Rights, Privileges, and Preferences of Incorporated by
1991 Series Preferred Stock Reference(1)
4.03 4 Designation of Rights, Privileges and Preferences of Incorporated by
1994 Series Convertible Preferred Stock Reference(3)
4.04 4 Designation of Rights, Privileges and Preferences of Incorporated by
1995 Series Convertible Preferred Stock Reference(7)
4.05 4 Designation of Rights, Privileges and Preferences of Incorporated by
1996 Series 6% Convertible Preferred Stock Reference(8)
4.06 4 Designation of Rights, Privileges and Preferences of Incorporated by
1996-2 Series 6% Convertible Preferred Stock Reference(9)
4.07 4 Designation of Rights, Privileges and Preferences of Incorporated by
1996-3 Series 8% Convertible Preferred Stock Reference(9)
4.08 4 Certificate of Designation of 1996-4 Series Preferred Incorporated by
Stock Reference(10)
4.09 4 Form of Underwriter's Warrant to Purchase Units Incorporated by
Reference(5)
4.10 4 Form of Warrant Agreement between the Company and Incorporated by
Atlas Stock Transfer Corporation relating to M Warrants Reference(7)
4.11 4 Form of Warrants to Kevin L. Spencer and Jay W. Enyart Incorporated by
Reference(9)
4.12 4 Warrant to First Geneva Holdings, Inc., relating to Incorporated by
offering of 1996 Preferred Stock Reference(9)
4.13 4 Form of Warrant to placement agent and assigns relating Incorporated by
to offer of 1996-4 Series Preferred Stock, with related Reference(10)
schedule
4.14 4 Form of First Amendment to the Designation of Rights, Incorporated by
Privileges, and Preferences of 1996-2 Series 6% Reference(13)
Convertible Preferred Stock
4.15 4 Form of Warrant Agreement between the Company and Incorporated by
Atlas Stock Transfer Corporation relating to N Warrants Reference(14)
Item 5. Opinion re Legality
5.01 5 Opinion and Consent of Kruse, Landa & Maycock, L.L.C. Initial Filing
Item 10. Material Contracts
10.01 10 Option Agreement between N. Thomas Steele and Incorporated by
Foreland Corporation, dated June 24, 1985** Reference(6)
10.02 10 Option Agreement between Kenneth L. Ransom and Incorporated by
Foreland Corporation, dated June 24, 1985** Reference(6)
10.03 10 Option Agreement between Grant Steele and Foreland Incorporated by
Corporation, dated June 24, 1985** Reference(6)
10.04 10 Form of Options to directors dated April 30, 1991 with Incorporated by
respect to options previously granted 1986** Reference(1)
10.05 10 Form of Stock Appreciation Rights Agreement between Incorporated by
the Company and officers, with related schedule** Reference(4)
10.06 10 Form of Nonqualified Stock Option between the Company Incorporated by
and unrelated third parties, with related schedule Reference(4)
10.07 10 Crude Oil Purchase Agreement between the Company Incorporated by
and Crysen Refining, Inc., dated September 1, 1993 (Nye Reference(3)
County, Nevada)
10.08 10 Crude Oil Purchase Agreement between the Company Incorporated by
and Crysen Refining, Inc., dated September 1, 1993 Reference(3)
(Eureka County, Nevada)
10.09 10 Lease Agreement dated June 7, 1993, by and between Incorporated by
Ulster Joint Venture and the Company regarding Union Reference(3)
Terrace Office, as amended
10.10 10 Agreement dated August 9, 1994, between Plains Incorporated by
Petroleum Operating Company and the Company Reference(3)
10.11 10 Form of Promissory Notes relating to certain options Incorporated by
exercised by officers, with related schedule Reference(5)
10.12 10 Form of Option granted pursuant to reload provisions of Incorporated by
previously granted options with related schedule Reference(5)
10.13 10 Letter dated January 25, 1995 from Plains Petroleum Incorporated by
Operating Company regarding Plains' election under the Reference(7)
Agreement dated August 9, 1994.
10.14 10 Form of Letter Agreement dated March 8, 1995 between Incorporated by
the Company and Parsley & Parsley Development, L.P. Reference(7)
regarding Exploration Agreement.
10.15 10 Form of Letter Agreement dated March 24, 1995 between Incorporated by
the Company and Mobil Exploration & Producing U.S., Reference(7)
Inc., regarding the Rustler Prospect Farmout Agreement
10.16 10 Form of Registration Agreement relating to Units Incorporated by
consisting of 1995 Series Preferred Stock and M Reference(7)
Warrants
10.17 10 Crysen Refining, Inc., document respecting extension of Incorporated by
Crude Oil Purchase Agreement Reference(7)
10.18 10 Form of Registration Agreement relating to 1996 Series Incorporated by
Convertible Preferred Stock Reference(9)
10.19 10 Amendment and Replacement of Acreage Exchange Incorporated by
and Seismic Agreement dated September 1, 1995 Reference(9)
between Foreland Corporation, Hugoton
Energy Corporation and Maxwell Petroleum, Inc.
10.20 10 Form of Revised Executive Employment Agreement Incorporated by
between the Company and executive officers, with Reference(10)
related schedule**
10.21 10 Form of Nonqualified Stock Options granted to executive Incorporated by
officers dated July 18, 1996, with related schedule** Reference(10)
10.22 10 Form of Nonqualified Stock Options granted to executive Incorporated by
officers in connection with employment agreements, with Reference(10)
related schedule**
10.23 10 Form of Nonqualified Stock Options granted to Incorporated by
employees in connection with employment agreements, Reference(10)
with related schedule
10.24 10 Form of Registration Rights Agreement relating to offer Incorporated by
of 1996-4 Series Preferred Stock, with related schedule Reference(10)
10.25 10 Purchase and Sale Agreement dated November 14, 1996, Incorporated by
between Plains Petroleum Operating Company and Reference(11)
Eagle Springs Production Limited Liability Company,
respecting the purchase of Plains' interest in the
Eagle Springs Field, with related Assignment, Conveyance,
and Bill of Sale
10.26 10 Purchase Contract Confirmation dated September 1, 1996, Incorporated by
between the Company and Petro Source Refining Partners Reference(12)
10.27 10 Revolving Credit Agreement dated November 13, 1996, Incorporated by
by and among the Company, Eagle Springs Production Reference(13)
Limited Liability Company, and Colorado National Bank
10.28 10 Promissory Note dated November 13, 1996, by the Incorporated by
Company and Eagle Springs Production Limited Liability Reference(13)
Company
Item 23. Consents of Experts and Counsel
23.01 23 Consent of Kruse, Landa & Maycock, L.L.C., counsel to See Item 5
Registrant
23.02 23 Consent of Hein + Associates LLP, certified public Initial Filing
accountants
23.03 23 Consent of Malkewicz Hueni Associates, Inc. Initial Filing
Item 24. Power of Attorney
24.01 24 Power of Attorney See Signature
Page
</TABLE>
[FN]
(1) Incorporated by reference from the Company's registration statement on form
S-2, SEC file number 33-42828.
(2) Incorporated by reference from the Company's registration statement on form
S-1, SEC file number 33-19014.
(3) Incorporated by reference from the Company's registration statement on form
S-1, SEC file number 33-81538.
(4) Incorporated by reference from the Company's registration statement on form
S-2, SEC file number 33-64756.
(5) Incorporated by reference from the Company's registration statement on form
S-2, , SEC file number 33-86076.
(6) Incorporated by reference from the Company's annual report on form 10-K for
the fiscal year ended December 31, 1985.
(7) Incorporated by reference from the Company's annual report on form 10-K for
the fiscal year ended December 31, 1994.
(8) Incorporated by reference from the Company's annual report on form 10-K for
the fiscal year ended December 31, 1995.
(9) Incorporated by reference from the Company's registration statement on form
S-3, SEC file number 333-3779.
(10) Incorporated by reference from the Company's quarterly report on form 10-Q
for the period ending September 30, 1996.
(11) Incorporated by reference from the Company's interim report on form 8-K
dated November 15, 1996.
(12) Incorporated by reference from the Company's registration statement on
form S-3, SEC file number 333-19063.
(13) Incorporated by reference from the Company's annual report on form 10-K
for the fiscal year ended December 31, 1996.
(14) Incorporated by reference from the Company's registration statement on
form S-2, SEC file number 333-28471.
** Identifies each management contract or compensatory plan or arrangement
required to be filed as an exhibit.
ITEM 17. UNDERTAKINGS
Rule 415 Offerings: Post-Effective Amendments. [Regulation S-K, Item 512(a)]
The undersigned Registrant will:
(1) File, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Filings Incorporating Subsequent Exchange Act Documents by Reference [Regulation
S-K, Item 512(b)]
The undersigned registrant hereby undertakes that, 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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
Incorporated Annual and Quarterly Reports [Regulation S-K, Item 512(e)]
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of rule 14a-3 or rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
article 3 of regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Indemnification. [Regulation S-K, Item 512(h)]
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer, or controlling person of the small business issuer
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 small business issuer 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 Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lakewood, state of
Colorado, on the 16th day of October, 1997.
FORELAND CORPORATION
(Registrant)
By /s/ N. Thomas Steele
N. Thomas Steele, President
Pursuant to the requirements of the Securities Act, this Amendment No. 1
to the Registration Statement has been signed below by the following persons
in the capacities indicated and on the 16th day of October, 1997.
N. Thomas Steele, Director and
President (Principal Executive Officer)
Dr. Grant Steele, Director
/s/ N. Thomas Steele
By N. Thomas Steele, Attorney-in-Fact
Kenneth L. Ransom, Director and Vice-
President of Exploration
Bruce C. Decker, Director and Vice-
President of Operations (Principal
Financial and Accounting Officer)
