As filed with the Securities and Exchange Commission, ________, 1998.
Securities Act File No. 333- ; Exchange Act File No. 0-20760
=============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
HORIZONTAL VENTURES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1091986
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
630 Fifth Avenue, Suite 1501
New York, NY 10111
(212) 218-4680
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_____________________
Randeep S. Grewal, Chairman and Chief Executive Officer
Horizontal Ventures, Inc.
630 Fifth Avenue, Suite 1501
New York, NY 10111
(212) 218-4680
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________________
Copies of Communications to:
Roger V. Davidson, Esq.
Cohen Brame & Smith
Professional Corporation
1700 Lincoln Street, Suite 1800
Denver, Colorado 80203
(303) 837-8800
Approximate date of commencement of proposed sale to public:
As soon as practicable after the registration statement becomes effective
__________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest investment 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.[ ]
CALCULATION OF REGISTRATION FEE
Title of Each Amount Proposed Proposed Amount of
Class of Being Maximum Maximum Registration
Securities Registered Offering Aggregate Fee
Being Registered Price Per Share Offering Price
Common Stock,
no par value 679,735 Shares $10.50 (1)(2) $7,137,218 $2,105
Total. . . . . . . . . . . . . .$2,105
(1) The average of the bid and asked price of the common stock on the
Nasdaq SmallCap Stock Market on August 3, 1998.
(2) Estimated solely for the purpose of determining the registration fee
and calculated pursuant to Rule 457(c). No separate registration fee is
required for the warrants pursuant to Rule 457(g).
(3) This registration statement covers an additional indeterminate number
of shares of common stock which may be issued in accordance with Rule 416.
_____________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.<PAGE>
PROSPECTUS
SELLING SECURITY HOLDERS OFFERING
Horizontal Ventures, Inc.
No Par Value Common Stock
Horizontal Ventures, Inc.(the "Company") has registered for offer and
sale, on behalf of certain of its security holders, a total of 679,735 shares
of the Company's no par value common stock (the "Common Stock"). The Common
Stock offered hereby is being sold for the accounts of these certain security
holders (the "Selling Security Holders") and the Company will not receive any
proceeds from the sale of Common Stock by the Selling Security Holders. No
Selling Security Holder is required to sell. This prospectus which is part of
a registration statement on file with the Securities and Exchange Commission
was filed pursuant commitments made to the Selling Security Holders. The
Common Stock is traded on the Nasdaq SmallCap Stock Market ("Nasdaq") under
the trading symbol "HVNV." The reported closing bid price on Nasdaq on July
24, 1998 for the Common Stock was $10.00.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES 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.
THERE ARE CERTAIN RISKS INVOLVED WITH THE OWNERSHIP OF THE COMPANY'S
SECURITIES, INCLUDING RISKS RELATED TO ITS BUSINESS AND THE MARKETS FOR ITS
SECURITIES. (SEE "RISK FACTORS".)
The Company will pay substantially all of the expenses of any offering
(not including commissions and discounts of underwriters, dealers, or agents),
estimated to be $140,000.
The Common Stock will be sold directly, through agents, underwriters, or
dealers as designated from time to time, or through a combination of such
methods on terms to be determined at the time of sale, at market prices
obtainable at the time of sale or otherwise in privately negotiated
transactions at prices determined by negotiation.
The date of this Prospectus is August ___, 1998.
No dealer, salesman, or other person has been authorized to give any
information or to make any representation other than those contained in or
incorporated by reference to this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company, the Selling Security Holders, or any underwriter,
dealer, or agent. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy the securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information concerning the Company may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; at the Commission's
Regional Office at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and Seven World Trade Center, Thirteenth Floor, New York, New York
10048. Copies of such material can also be obtained upon written request
addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such materials
filed electronically by the Company with the Commission are available at the
Commission's World Wide Web site at http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information, reference is hereby made to the Registration
Statement which may be inspected and copied in the manner and at the sources
described above. With respect to each such agreement, instrument, or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act (file number 0-20760) are incorporated herein by
reference:
(1) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
(2) The Company's Quarterly Reports on Form 10-QSB for the quarterly
periods ended March 31, 1998 and June 30, 1998.
(3) The Company's Current Reports on Form 8-K dated January 15, 1998
and April 28, 1998.
(4) The description of the Company's Common Stock contained in the
Company's amendment to the Registration Statement on Forms 8-A filed with the
Commission September 12, 1997.
(5) The Company's Proxy Statement dated May 27, 1998 concerning the
Company's July 2, 1998 Annual Meeting of Shareholders.
(6) All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in any subsequently filed document (which is deemed to be
incorporated by reference herein) 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.
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 incorporated herein by reference
(other than exhibits thereto, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or telephone requests for such copies should be
directed to the Company's principal office: Horizontal Ventures, Inc., 630
Fifth, Suite 1501, New York, NY 10022, (212) 218-4680.
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the detailed
information found elsewhere in the Prospectus, the financial statements and
the December 31, 1997 Form 10-KSB incorporated by reference, as well as the
other documents referred to herein under "Incorporation of Certain Documents
by Reference." As used in this Prospectus, the "Company" refers to Horizontal
Ventures, Inc. unless otherwise stated or indicated by the context.
The Company
During most of 1997, the Company and all its subsidiaries were
essentially dormant pending reorganization and emergence from bankruptcy.
During this period of dormancy, management focused all its efforts on its plan
of reorganization, acquisitions and mergers, and restructuring the new
combined business to its new plan of operation and strategy. The plan of
reorganization was approved in bankruptcy court on August 28th, 1997 and case
closed on March 26th, 1998 following successful implementation of all the
objectives under the new management team.
The Company's mission is to provide shareholder value through becoming an
industry leader in exploiting declining production
wells by capitalizing on its experience and field knowledge to a low cost
horizontal drilling technology, developed by and patented by Amoco
Corporation, to significantly boost production rates. Horizontal drilling,
used in re-developing older reservoirs, increases the recoverable oil in place
due to various characteristics, such as, a greater exposure of the reservoir
to the well bore. Primary recovery methods may leave over 80% of the oil in
place leaving significant reserves to be exploited.
The Company has a two-prong approach capitalizing on this niche
technology to obtain its objective and growth: Exploitation & Production and
Contract Services.
Exploitation & Production: Numerous mature fields worldwide are
experiencing declining production and even more have been
abandoned. Even after the latest recovery methods are applied, vast oil
resources are left unrecovered due to unfavorable economics. The Company
having amassed the most experience in the industry for applying Amoco's
technology, has a low risk, high reward business plan focused on acquiring
fields with proven producing wells and applying this niche technology to
exploit and produce the remaining reserves. By targeting these mature fields
with the entire production infrastructure in place, the Company substantially
reduces the capital costs for production relative to its drilling program.
Furthermore, the existing and historical production providing actual reservoir
performance along with the comprehensive geological evaluations essentially
confirms the targeted zones eliminating the risks of drilling dry holes.
The Company intends to reactivate existing producing fields that have
reached their economic limit. The application of the its short radius
horizontal drilling technology in untapped reservoirs within the productive
reach of an existing well bore or in a reservoir that may have inefficient
characteristics at the vertical bore, which can lead to a several fold
increase in production rates. Increasing production rates through such
enhancement programs will provide significantly favorable effects to the
reserve valuations and relative net present value. The Company made its first
such acquisition in September 1997 and drilled the first horizontal wells for
its own account in the fourth quarter of 1997. The added strain to the
operators of such mature fields as a result of the declining oil prices helps
facilitate these acquisitions under favorable terms and further reduces the
capital requirements to the Company.
Contract Services: In the last three years that the technology has been
commercialized in the industry, the Company has drilled over forty wells for
various clients such as Chevron, Texaco, Exxon, OXY, Oklahoma Natural Gas to
name a few. The Company intends to continue providing its services to the
industry on a contract basis. Such contract services are to be scheduled with
coordination to the Company's internal drilling programs thus enhancing the
productivity and efficiency of its service rigs and crews. Contract services
are targeted to begin in the late third quarter of 1998.
The Company changed its name to Horizontal Ventures, Inc. at its July 2,
1998 Annual Meeting of Shareholders. The Company's executive offices are
located at 630 Fifth Avenue, Suite 1501, New York, New York. The telephone
number at that address is (212) 218-4680. The Company also has an operations
headquarters in Tulsa, Oklahoma.
The Offering
Shares of Common Stock
Outstanding Prior to this Offering. . . . . . . . . . . 1,570,981
Shares of Common Stock Offered Hereby . . . . . . . . . 679,735
Nasdaq SmallCap Stock Market Symbol: Common Stock (HVNV).
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, together with the other information contained in this
Prospectus, the following factors:
This Prospectus, including the documents incorporated by reference,
includes certain statements that may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act, and
Section 21E of the Exchange Act. All statements, other than statements of
historical facts, included in this Prospectus that address activities, events
or developments that the Company expects, believes or anticipates will or may
occur in the future, including such matters as future capital costs of
research and development, the size of various markets, market share, project
margins, repayment of debt, business strategies, expansion and growth of the
Company's operations and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate in the circumstances. Such statements are subject to a number
of assumptions, risks and uncertainties, including the risk factors discussed
below, general economic and business conditions, the business opportunities
(or lack thereof) that may be presented to and pursued by the Company, changes
in laws or regulations and other factors, many of which are beyond the control
of the Company. Prospective investors are cautioned that any such statements
are not guarantees of future performance and that actual results or
developments may differ materially from those projected in the forward-looking
statements.
History of Operating Losses
During most of 1997, the Company and all of its subsidiaries were
essentially dormant pending reorganization and emergence from bankruptcy. The
plan of reorganization was approved in bankruptcy court on August 28, 1997 and
the case closed on March 26, 1998. Prior to the Company's emergence from
bankruptcy, it had a history of operating losses. There can be no assurance
that the Company's operations will generate sufficient revenues to become
profitable.
Volatility of Oil and Gas Prices and Markets
The Company's revenues, cash flow, profitability and future rate of
growth are substantially dependent upon prevailing prices for oil and gas.
The Company's ability to maintain or increase its borrowing capacity and to
obtain additional capital on attractive terms is also substantially dependent
on oil and gas prices. Historically, oil and gas prices and markets have been
volatile and are likely to continue to be volatile in the future. Prices for
oil and gas are subject to wide fluctuations in response to relatively minor
changes in supply of and demand for oil and gas, market uncertainty and a
variety of additional factors that are beyond the control of the Company.
These factors include international political conditions, the domestic and
foreign supply of oil and gas, the level of consumer demand, weather
conditions, domestic and foreign governmental regulations, the price and
availability of alternative fuels and overall economic conditions. In
addition, various factors, including the availability and capacity of gas
gathering systems and pipelines, the effect of federal and state regulation of
production and transportation, general economic conditions, changes in supply
due to drilling by other producers and changes in demand may adversely affect
the Company's ability to market its oil and gas production and its contract
services for horizontal drilling. Any significant decline in the price of oil
or gas would adversely affect the Company's revenues, operating income and
borrowing capacity and may require a reduction in the carrying value of the
Company's oil and gas properties.
Replacement of Reserves
The Company's future success depends upon its ability to find, develop or
acquire additional oil and gas reserves that are economically recoverable.
Except to the extent that the Company conducts successful exploitation and
production activities or acquires properties containing proved reserves, the
estimated net proved reserves of the Company will generally decline as
reserves are produced. There can be no assurance that the Company's planned
exploitation and production projects and acquisition activities will result in
significant additional reserves or that the Company will have continuing
success drilling productive wells economically. If prevailing oil and gas
prices were to increase significantly, the Company's costs to add new reserves
could increase. The drilling of oil and gas wells involves a high degree of
risk, especially the risk of dry holes or of wells that are not sufficiently
productive to provide an economic return on the capital expended to drill the
wells. In addition, the Company's drilling operations, including its contract
services, may be curtailed, delayed or canceled as a result of numerous
factors, including title problems, weather conditions, compliance with
governmental requirements and shortages or delays in the delivery of
equipment.
Uncertainty of Estimates of Reserves and Future Net Revenues
The documents incorporated by reference into this Prospectus include
estimates of the Company's net proved oil and gas reserves and the future net
revenues from those reserves which have been prepared by the Company and its
independent petroleum engineers. There are numerous uncertainties inherent in
estimating quantities of proved oil and gas reserves, including many factors
beyond the control of the Company. Reserve engineering is a subjective
process of estimating the underground accumulations of oil and gas that cannot
be measured in an exact manner. The estimates incorporated by reference into
this Prospectus are based on various assumptions required by the Commission,
including constant oil and gas prices, operating expenses and capital
expenditures, and, therefore, are inherently imprecise indications of future
net revenues. Actual future production, revenues, taxes, operating expenses,
development expenditures and quantities of recoverable oil and gas reserves
may vary substantially from those assumed in the estimates. Any significant
variance in these assumptions could materially affect the estimated quantity
and value of reserves incorporated by reference into this Prospectus. In
addition, the Company's reserves may be subject to downward or upward revision
based upon production history, results of future development, availability of
funds to acquire additional reserves, prevailing oil and gas prices and other
factors. In addition, the calculation of the estimated present value of the
future net revenue using a 10% discount rate as required by the Commission is
not necessarily the most appropriate discount factor based on interest rates
in effect from time to time and risks associated with the Company's reserves
or the oil and gas industry in general.
It is also possible that reserve engineers may make different estimates
of reserves and future net revenues based on the same available data. In
calculating reserves on a BOE basis, gas was converted to oil at a certain
ratio. While this convention approximates the energy equivalent of oil and
gas on a Btu basis, it may not represent the relative prices received by the
Company on the sale of its oil and gas production.
The estimated future net revenues attributable to the Company's net
proved reserves are prepared in accordance with Commission guidelines, and are
not intended to reflect the fair market value of the Company's reserves. In
accordance with the rules of the Commission, the Company's reserve estimates
are prepared using period end prices received for oil and gas. Future
reductions in prices below those prevailing at year end 1997 would result in
the estimated quantities and present values of the Company's reserves being
reduced.
Operating Hazards and Uninsured Risks
The oil and gas business involves a variety of operating risks, including
fire, explosions, blow-outs, pipe failure, casing collapse, abnormally
pressured formations and environmental hazards such as oil spills, gas leaks,
ruptures and discharges of toxic gases, the occurrence of any of which could
result in substantial losses to the Company due to injury and loss of life,
severe damage to and destruction of property, natural resources and equipment,
pollution and other environmental damage, clean-up responsibilities,
regulatory investigation and penalties and suspension of operations. The
Company maintains general liability insurance coverage for its operations but
has not obtained insurance coverage for certain environmental hazards. The
occurrence of a significant unfavorable event not fully covered by insurance
will have a material adverse effect on the Company's financial condition and
results of operations. Furthermore, the Company cannot predict whether
insurance will continue to be available at a reasonable cost or at all.
Substantial Capital Requirements
The Company makes, and will continue to make, substantial capital
expenditures for the exploitation, production and acquisition of oil and gas
reserves. The Company recently has financed these expenditures primarily from
the sale of Common Stock. If revenues or the Company's ability to borrow
decreases as a result of lower oil and gas prices, operating difficulties or
declines in reserves, the Company may have limited ability to fund the capital
requirements to undertake or complete future exploitation, production and
acquisition programs. There can be no assurance that additional debt or
equity financing or cash generated by operations will be available to meet
these requirements.
Acquisition Risks
The Company intends to acquire oil and gas properties. Although the
Company performs a review of the acquired properties that it believes is
consistent with industry practices, such reviews are inherently incomplete. It
generally is not feasible to review in depth every individual property
involved in each acquisition. Ordinarily, the Company will focus its due
diligence efforts on the higher valued properties and will sample the
remainder. However, even an in-depth review of all properties and records may
not necessarily reveal existing or potential problems nor will it permit a
buyer to become sufficiently familiar with the properties to assess fully
their deficiencies and capabilities. Inspections may not be performed on every
well, and structural or environmental problems, such as ground water
contamination, are not necessarily observable even when an inspection is
undertaken. The Company may be required to assume preclosing liabilities,
including environmental liabilities, and may acquire interests in properties
on an "as is" basis. There can be no assurance that the Company's
acquisitions will be successful.
Competition
The oil and gas industry is highly competitive. The Company competes in
the areas of property acquisitions and the exploitation, production and
marketing of oil and gas with major oil companies, other independent oil and
gas concerns and individual producers and operators. Many of these
competitors have substantially greater financial and other resources than the
Company. However, despite being a relatively small company, management
believes it has an advantage over its competition due to the level of its
field expertise in applying the patented Amoco Short Radius Horizontal
Drilling technology and its ability to provide this technology at a fraction
of the cost of the competition. Although Amoco has provided licenses to
others, the Company feels that its experience and its two prong approach is
sheltered from other licensees who are concentrating on services within their
respective geographical area.
Governmental Regulation and Environmental Risks
The Company's business is subject to various federal, state and local
laws and 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
capacity in order to conserve supplies of oil and gas.
The Company's operations could result in liability for personal injuries,
property damage, oil spills, discharge of hazardous materials, remediation and
clean-up costs and other environmental damages. The Company could be liable
for environmental damages caused by previous property owners. As a result,
substantial liabilities to third parties or governmental entities may be
incurred, the payment of which could have a material adverse effect on the
Company's financial condition and results of operations. The Company
maintains general liability insurance coverage for its operations, but has not
obtained insurance coverage for certain environmental hazards. Accordingly,
the Company may be subject to liability or may lose substantial portions of
its properties in the event of certain environmental damages. The Company
could incur substantial costs to comply with environmental laws and
regulations.
The Oil Pollution Act of 1990 imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills. The
implementation of new, or the modification of existing, environmental laws of
regulations, including regulations promulgated pursuant to the Oil Pollution
Act of 1990, could have a material adverse impact on the Company.
The recent trend toward stricter standards in environmental legislation
and regulation is likely to continue. For instance, legislation has been
introduced in Congress that would reclassify certain exploration and
production wastes as "hazardous wastes" which would make the reclassified
wastes subject to much more stringent handling, disposal and clean-up
requirements. If such legislation were enacted, it could have a significant
impact on the operating costs of the Company, as well as the oil and gas
industry in general. Initiatives to further regulate the disposal of oil and
gas wastes are also pending in certain states, and these various initiatives
could have a similar impact on the Company.
Dilution
To the extent that any warrants, options or other securities convertible
into shares of Common Stock currently outstanding or subsequently granted to
purchase the Company's Common Stock are exercisable at a price less than the
net tangible book value per share of the Common Stock, there will be dilution
to the Company's then current shareholders upon the exercise of such
securities.
No Dividends on Common Stock
The Company has not previously paid any cash or other dividends on its
Common Stock and does not anticipate payment of any dividends for the
foreseeable future, it being anticipated that any earnings would be retained
by the Company to finance its operations and future growth and expansion.
Possible Volatility of Stock Price
The trading prices of the Company's securities could be subject to wide
fluctuations in response to quarterly variations in actual or anticipated
results of operations of the Company, changes in analysts' earnings estimates,
announcements of technological innovations by the Company or its competitors,
general conditions in the oil and gas industries or other factors. In
addition, the securities markets frequently experience extreme price and
volume fluctuation which affect market prices for securities of companies
generally. Such fluctuations are often unrelated to the operating performance
of the affected companies. Broad market fluctuations may adversely affect the
market price of the Company's securities.
Future Issuances of Stock by the Company Without Shareholder Approval
The Company's authorized but unissued shares of Common Stock not reserved
for specific purposes may be issued without any action or approval of the
Company's shareholders. Any such issuances could be used as a method of
discouraging, delaying or preventing a change in control of the Company or
could significantly dilute the public ownership of the Company, which could
adversely affect the market. There can be no assurance that the Company will
not undertake to issue such shares if it deems it appropriate to do so. The
holders of options, warrants and other securities convertible into shares of
Common Stock have the opportunity to profit from a rise in the market price of
the Common Stock, if any, without assuming the risk of ownership, with a
resulting dilution in the interest of other shareholders. The existence of
options and warrants granted by the Company may prove to be a hindrance to
future equity financing by the Company. Further, the holders of such warrants
and options 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.
USE OF PROCEEDS
All of the proceeds to be realized from this offering will be paid to the
Selling Security Holders. The Company will not receive any portion of the
proceeds of the securities sold by the Selling Security Holders.
SELLING SECURITY HOLDERS
The following table shows for the Selling Security Holders, (i) the
number of shares of Common Stock beneficially owned by them as of July 24,
1998, (ii) the number of shares of Common Stock covered by this Prospectus,
and (iii) the number of shares of Common Stock to be retained after this
offering, if any. The Company is unaware of present interest in the past of
any selling shareholder to actually sell said shares. The registration
statement of which this prospectus forms a part is being filed pursuant to
obligations to register the following described shares.
Number of
Shares of Number of Number of
Common Stock Shares of Shares
Owned Before Common Stock to be Owned
Name the Offering(1) to be Sold(2) after the Offering
Erik L. Greve 78,493 78,493 -0-
Randeep S. Grewal 70,000 70,000 -0-
Grupo De Creacion Ltd. 78,493 78,493 -0-
IPH 276,093 276,093 -0-
Pieter J. A. Riksman 78,493 78,493 -0-
Angelique Van Den Belt 78,493 78,493 -0-
Parvin E. Day 29,670 19,670 10,000
(1) The number of shares of Common Stock indicated includes those shares
underlying warrants held by a Selling Security Holder. Each warrant entitles
the warrant holder to purchase one share of the Company's Common Stock at an
exercise price of $15.00 per share any time on or after January 2, 1998 until
December 31, 1999.
(2) The Selling Security Holder will not own in excess of one (1%) percent
of the Company's outstanding securities subsequent to the offering when
combined with other offerings in which other securities owned by the Selling
Security Holder have been registered.
Information set forth in the tables regarding the securities owned by
each Selling Security Holder is provided to the best knowledge of the Company
based on information furnished to the Company by the respective Selling
Security Holder and/or available to the Company through its stock transfer
records.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be sold by the Selling
Security Holders or by pledgees, donees, transferees or other
successors-in-interest. Such sales may be made in the over-the-counter market
through Nasdaq, in privately negotiated transactions, or otherwise, at prices
and at terms then prevailing, at prices related to the then current market
prices or at negotiated prices. The shares of Common Stock 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 stock as agent but may position and
resell a portion of the block as principal in order to consummate the
transaction; (b) a purchase by a broker or dealer as principal, and the resale
by such broker or dealer for its account pursuant to this Prospectus,
including resale to another broker or dealer; or (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
effecting sales, brokers or dealers engaged by a Selling Security Holder may
arrange for other brokers or dealers to participate. Any such brokers or
dealers will receive commissions or discounts from a Selling Security Holder
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. Any gain realized by
such a broker or dealer on the sale of shares which it purchases as a
principal may be deemed to be compensation to the broker or dealer in addition
to any commission paid to the broker by a Selling Security Holder.
The securities covered by this Prospectus may in the future also be sold
under Rule 144 or Regulation S instead of under this Prospectus. Rule 144
provides an exemption from registration for the resale of securities by
persons other than the issuer after the securities have been held by persons
for at least one (1) year from original issuance, and such securities are sold
in strict compliance with Rule 144 requirements and maximum number of shares
requirements. Regulation S provides an exemption from registration for
certain securities transactions occurring outside of the United States. The
Company will not receive any portion of the proceeds of the securities sold by
the Selling Security Holders. There is no assurance that the Selling Security
Holders will sell any or all of the securities offered hereby.
The Selling Security Holders have been advised by the Company that during
the time each is engaged in distribution of the securities covered by this
Prospectus, each must comply with Rule 10b-5 and Regulation M under the
Exchange Act, and pursuant thereto: (i) each must not engage in any
stabilization activity in connection with the Company's securities; (ii) each
must furnish each broker through which securities covered by this Prospectus
may be offered the number of copies of this Prospectus which are required by
each broker; and (iii) each must not bid for or purchase any securities of the
Company or attempt to induce any person to purchase any of the Company's
securities other than as permitted under the Exchange Act. Any Selling
Security Holders who may be "affiliated purchasers" of the Company as defined
in Regulation M, have been further advised that pursuant to Securities
Exchange Act Release 34-38067 (December 20, 1996), they must coordinate their
sales under this Prospectus with each other and the Company for purposes of
Regulation M.
LEGAL MATTERS
Certain legal matters with respect to the shares offered hereby have been
passed upon for the Company by Cohen Brame & Smith, Professional Corporation,
Denver, Colorado.
EXPERTS
The Company's consolidated financial statements incorporated by reference
in this Prospectus from the Company's Form 10-KSB for the year ended December
31, 1997 have been audited by Bateman & Co., Inc. P.C., independent certified
public accountants, to the extent and for the periods set forth in their
report incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION
The Colorado Business Corporation Act provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in
connection with an action suit, or proceeding brought by reason of their
position as a director, employee, or agent. The person being indemnified must
have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation.
The Company's Articles of Incorporation obligate the Company to indemnify
its directors and officers to the fullest extent permitted under Colorado law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed 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.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus. Any information or
representation not herein contained, if given or made, must not be relied upon
as having been authorized by the Company. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any security other than
the securities offered by this Prospectus, nor does it constitute an offer to
sell or a solicitation of an offer to buy the securities by any person in any
jurisdiction where such offer or solicitation is not authorized, or in which
the person making such offer is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
Prospectus shall not, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents
By Reference 2
Prospectus Summary 3
Risk Factors 4
Use of Proceeds 7
Selling Security Holders 7
Plan of Distribution 7
Legal Matters 8
Experts 8
Securities And Exchange Commission Position
on Certain Indemnification 8
HORIZONTAL VENTURES, INC.
No Par Value
Common Stock
------
PROSPECTUS
------
_______________________
__________________, 1998
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses of the offering, all of which are to be borne by
the Company, are as follows:
Total
Total Registration Fee Under
Securities Act of 1933. . . . . . . . . . . . . . . .. .$___2,105_______
Printing and Engraving . . . . . .. . . . . . . . . .. . ___1,000__ *
Accounting Fees and Expenses . . . . . . . .. . . . . . ___1,000 __*
Legal Fees and Expenses. . . . . . . . . . . . . . . . ___6,000 __*
Blue Sky Fees and Expenses
(including related legal fees). . . . . . . . .. . . . ___1,500_ _*
Transfer Agent Fees. . . . . . . . . .. . . . . . ..... 500 *
Miscellaneous. . . . . . . .. . . . . . . . . . . . . . 1,895 *
Total. . . . . . . . . . . . . .. . . . $__14,000 *______
*Estimated
Item 15. Indemnification of Directors and Officers.
The Company's Articles of Incorporation obligate the Company to indemnify
its directors and officers to the fullest extent permitted under Colorado law.
A summary of some of the Colorado laws concerning indemnification are set
forth below.
Section 7-109-102 of the Colorado Business Corporation Act gives each
corporation the power to indemnify against liability any current or former
directors, officers, employees and agents. As provided in section 7-109-102,
a director must show that (1) he conducted himself in good faith, (2) that his
conduct was not opposed to the corporation's best interests, or if acting in
his official capacity, that his conduct was in the corporation's best
interests and (3) that in a criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. Section 7-108-402 of the Colorado Business
Corporation Act also gives each corporation the power to eliminate or limit
the personal liability of a director or officer to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director
or officer unless the breach of fiduciary duty involves breach of loyalty to
the corporation or its shareholders, acts or omissions involving intentional
misconduct or a knowing violation of law, acts specified in sections 7-108-403
(improper distribution of assets, dividends or share repurchase) or any
transaction whereby the director or officer derived an improper personal
benefit.
Item 16. Exhibits
The following Exhibits are filed as part of this Form S-3 Registration
Statement pursuant to Item 601 of Regulation S-B by incorporation by reference
to other filings:
2.1 First Amended Plan of Reorganization is incorporated by reference
from Exhibit 2.1 to Form 8-K filed for event dated August 28,
1997.
3.1 Articles of Incorporation and Bylaws are incorporated by
reference from Exhibit 3 to the Registrant's Registration
Statement (Number 33-24265-LA).
3.2 Amended Articles of Incorporation are incorporated by reference
to Exhibit 2B to Registrant's Form 8 Registration Statement (File
Number 0-20760).
4.1 Form of Certificate for Common Stock of Registrant is
incorporated by reference from Exhibits 1A and 1B of Registrant's
Form 8-A/A Registration Statement (File Number 0-20760).
5.1 Opinion, with Consent, of Cohen Brame & Smith Professional
Corporation**
23.1 Consent of Bateman & Co., Inc. P.C.**
23.2 Consent of Cohen Brame & Smith Professional Corporation (included
in Exhibit 5.1)**
_________________
** Filed herewith.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
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 Company 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.
The undersigned Company hereby undertakes:
(1) 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) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
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 registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of New York, State of New York on the 31st day of
July, 1998.
Horizontal Ventures, Inc.
By: /s/ Randeep S. Grewal
Randeep S. Grewal, Chairman, Chief Executive Officer,
Chief Financial Officer, Chief Accounting Officer and
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/Randeep S. Grewal Chairman, Chief Executive July 31, 1998
Randeep s. Grewal Officer, Chief Financial Officer,
Chief Accounting Officer
and Director
/s/Donald A. Christensen Director July 31, 1998
Donald A. Christensen
/s/ Jan F. Holtrop Director July 31, 1998
Jan F. Holtrop
/s/ Dirk Van Keulen Director July 31, 1998
Dirk Van Keulen
/s/ George G. Andrews Director July 31, 1998
George G. Andrews
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
___________________________________
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
HORIZONTAL VENTURES, INC.
(Name of Company as specified in charter)
=====================================
HORIZONTAL VENTURES, INC.
FORM S-3 REGISTRATION STATEMENT
The following Exhibits are filed as part of the Company's Form S-3
Registration Statement pursuant to Item 601 of Regulation S-B.
Exhibit
Number Description
2.1 First Amended Plan of Reorganization is incorporated by reference
from Exhibit 2.1 to Form 8-K filed for event dated August 28,
1997.
3.1 Articles of Incorporation and Bylaws are incorporated by
reference from Exhibit 3 to the Registrant's Registration
Statement (Number 33-24265-LA).
3.2 Amended Articles of Incorporation are incorporated by reference
from Exhibit 2B to Registrant's Form 8 Registration Statement
(File Number 0-20760).
4.1 Form of Certificate for Common Stock of Registrant is
incorporated by reference from Exhibits 1A and 1B of
Registrant's Form 8-A/A Registration Statement (File Number
0-20760).
5.1 Opinion, with Consent, of Cohen Brame & Smith Professional
Corporation**
23.1 Consent of Bateman & Co., Inc. P.C.**
23.2 Consent of Cohen Brame & Smith Professional Corporation (included
in Exhibit 5.1)**
______________
** Filed herewith.
EXHIBIT 5.1
OPINION OF COHEN BRAME & SMITH PROFESSIONAL CORPORATION
COHEN BRAME & SMITH
Professional Corporation
Attorneys at Law
One Norwest Center, Suite 1800
1700 Lincoln Street
Denver, CO 80203
August 3, 1998
Horizontal Ventures, Inc.
630 Fifth Avenue, Suite 1501
New York, NY 10111
Re: Form S-3 Registration Statement relating to shares of no par value
Common Stock for Selling Security Holders
Ladies and Gentlemen:
We have acted as counsel for Horizontal Ventures, Inc. (the
"Company") in connection with the Form S-3 Registration Statement to be filed
by the Company with the Securities and Exchange Commission relating to the
shares of the Company's no par value common stock (the "Common Stock") being
offered for sale by certain holders of the Company's securities. As such
counsel, we have examined and relied upon such records, documents,
certificates and other instruments as in our judgment are necessary or
appropriate to form the basis for the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that the shares of
Common Stock being offered when sold in accordance with the terms set forth in
the Registration Statement will be validly issued and outstanding, fully paid
and nonassessable.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Roger V. Davidson
Roger V. Davidson
Cohen Brame & Smith,
Professional Corporation
Exhibit 23.1
Bateman & Co., Inc., P.C.
Certified Public Accountants
5 Briardale Court
Houston, TX 77027-2904
(713) 552-9800
FAX (713) 552-9700
www.batemanhouston.com
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the reference to our firm under the heading "experts" and
to the incorporation of our report dated April 14, 1998 with respect to the
financial statements of Petro Union, Inc., dba Horizontal Ventures, Inc. as of
December 31, 1997 and for the years ended December 31, 1997 and 1996, which
are incorporated by reference in this Registration Statement on Form S-3, and
the related Prospectus of Petro Union, Inc. dba Horizontal Ventures, Inc.
BATEMAN & CO., INC., P.C.
Houston, Texas
July 31, 1998
