SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 12, 2003
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IMPERIAL PETROLEUM, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-9923 95-338601
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(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
11600 GERMAN PINES DRIVE, EVANSVILLE, IN 47725
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) - 867-1433
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ITEM 1. Changes in Control:
None.
ITEM 2. Acquisition or Disposition of Assets:
Registrant entered into and closed the acquisition of 25,680,000 shares of
the common stock of Powder River Basin Gas Corp., representing
approximately 55.4% of the issued and outstanding shares of Powder River on
May 12, 2003 in connection with an Exchange Agreement (See "Exchange
Agreement" included herein) between Registrant and the management and
control shareholders of Powder River, Mr. Greg Smith, Taghmen Joint Venture
Ltd. and E-Stone Ventures, Ltd. In connection with the Exchange Agreement,
Registrant issued 2,650,000 shares of its common stock to Mr. Smith et al,
representing 9.08 % of the issued and outstanding shares of Registrant and
signed a Note Payable with Mr. Smith in the amount of $200,000. In
conjunction with the closing, approximately $315,000 in notes payable from
Powder River to Mr. Smith et al was deemed paid in full. Mr. Smith resigned
as an officer and director of Powder River and Mr. Jeffrey Wilson,
president of Registrant, was appointed president and sole director of
Powder River. As a result of the acquisition, Powder River will become a
consolidated subsidiary of Registrant.
ITEM 7. Financial Statements and Exhibits:
Attached is a summary of the financial statements of Powder River Basin Gas
Corp. as included in its most recent Form 10-K for the period ending
December 31, 2002 (filed April 16, 2003) and for the most recent Form 10-Q
for the period ending March 31, 2003 (filed May 20, 2003). The financial
statements included herein have been prepared in accordance with Generally
Accepted Accounting Practices (US GAAP) for the periods covered. The Form
10-K and Form 10-Q of Powder River are attached hereto.
Exhibits
A. Exchange Agreement by and between Imperial Petroleum, inc. and Greg
Smith, Taghmen Joint Ventures Ltd. And E-Stone Ventures, Ltd. Dated
February 13, 2003.
B. Form 10-Q for Powder River Basin Gas Corp. for the period ending March
31, 2003.
C. Form 10-K for Powder River Basin Gas Corp. for the year ended December
31, 2002.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Imperial Petroleum, Inc.
By: ___________________
Jeffrey T. Wilson President
Dated: May 21, 2003
Item 7.
Selected Financial Data
Three Months Ending Year Ended December 31
March 31, 2003 2002 2001
------- -----
Operating Revenue $ 0 15,000 0
Income (loss) $ (4,205) (1,326,213)
(1,765,596) continuing operations
Net Income(loss) $ (4,205) (1,344,796) (1,786,236)
Net Income(loss) $ (0.00) (0.07) (0.19)
Per Share
Total Assets $ 1,808,217 1,866,025 1,572,392
Long-term debt $ 199,461 0 0
Shareholder's $ 884,747 758,952 689,798
Equity
No dividends were declared during the periods presented.
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT ("the Agreement") is entered into this 13th day of
February 2003 by and between IMPERIAL PETROLEUM, INC., a Nevada corporation
("Imperial"); and Greg Smith, an individual; E-Stone Ventures, Ltd., a
partnership formed under the laws of the Cayman Islands and Taghmen Ventures,
Ltd, a partnership formed under the laws of the State of Texas ; (herein
collectively as the "PRVB Stockholders.")
WHEREAS, the PRVB Stockholders own 63.3% (on a fully diluted basis) of the
capital stock of Powder River Basin Gas Corporation ("Powder River") and desire
to sell their position in PRVB for cash and common stock in Imperial; and
WHEREAS, the PRVB Stockholders and Imperial deem it advisable and in the
best interests of Powder River and Imperial to enter into this Agreement to
facilitate the acquisition of control of Powder River and a timely transition of
management; and
WHEREAS, as a condition to this Agreement, Imperial has required that The
PRVB Stockholders (a) resign as officers and directors of Powder River, and (b)
appoint Imperial's nominees as officers and directors of Powder River until the
next regularly scheduled shareholders meeting; and
WHEREAS, the PRVB Stockholders are each Accredited Investors as that term
is defined by the Securities Act of 1933 as amended; and
WHEREAS, the Board of Directors of Imperial deems it advisable and in the
best interests of Imperial to approve the transactions contemplated herein;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto agree
as follows.
1.01 Exchange. Subject to the terms and conditions herein set forth, at the
time of closing set forth in Section 1.02 hereof; Imperial hereby agrees to
issue or cause to be issued and deliver at closing a total of 2,650,000 shares
(par value $0.006) of the common stock of Imperial ("Imperial Shares") as
follows:
(a) 2,400,000 shares of restricted common stock of Imperial shall be
issued to the PRVB Stockholders in exchange for the assignment of
18,000,000 shares of the common stock of Powder River to Imperial
(representing at least 63.3% of the issued and outstanding capital stock of
Powder River on a fully diluted basis, the "Powder River Shares") and the
cancellation of any and all financial obligations owed or owing to the PRVB
Stockholders by Powder River whether asserted or unasserted at the time of
closing.
(b) 250,000 shares of the freely tradable common stock of Imperial
shall be issued to the PRVB Stockholders at closing.
(c) a total cash consideration of $200,000 shall be paid to the PRVB
Stockholders in two equal increments with the initial payment at closing
and the subsequent payment on or before 30 days after the closing date.
(d) At closing, The PRVB Stockholders shall resign as officers and
directors of Powder River and shall use their reasonable best efforts to
appoint Imperial's nominees as officers and directors of Powder River.
1.02 Closing. Subject to the terms and provisions of this Agreement, the
closing of the exchange transaction will be at 10:00 a.m. at the offices of
Imperial Petroleum, Inc., 11600 German Pines Drive, Evansville, IN 47725 on or
before April 1, 2003, or at such earlier or later date or such other place as
shall be mutually agreed upon by Imperial and the PRVB Stockholders, such date
and time sometimes being referred to herein as the "Closing" or "Closing Date."
2. Representations and Warranties of the PRVB Stockholders.
Each of the PRVB Stockholders severally, and jointly, represents and
warrants to Imperial that, with respect to the Powder River shares owned by such
PRVB Stockholder as set forth on Exhibit "A" attached hereto, the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 2.
2.01 Authorization. The PRVB Stockholder has full power and authority to
execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the PRVB
Stockholder, enforceable in accordance with its terms and conditions. The PRVB
Stockholder need not give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government, governmental agency, or
other person in order to consummate the transactions contemplated by this
Agreement.
2.02 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any statute, regulation, rule, judgement, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the PRVB Stockholder is subject, or conflict with, result in a
breach of; constitute a default under, result in the acceleration of; create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest, or other arrangement to which the PRVB
Stockholder is a party or by which he is bound or to which any of his assets are
subject.
2.03 Ownership. The PRVB Stockholder holds of record or owns beneficially
the number of Powder River Shares set forth opposite his name as set forth on
Exhibit "A" attached hereto. The PRVB Stockholder holds his Powder River Shares
free and clear of any restrictions on transfer (other than restrictions under
federal and state securities laws), claims, taxes, security interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. The PRVB
Stockholder is not a party to any option, warrant, contract, call, put or other
agreement or commitment providing for the disposition or acquisition of any
capital stock of Powder River (other than this Agreement). The PRVB Stockholder
is not a party to any voting trust, proxy or other agreement or understanding
with respect to the voting of any capital stock of Powder River.
2.04 Speculative Nature and Risk. The PRVB Stockholders each understand and
acknowledge the speculative nature of and substantial risk of loss associated
with an investment in the Imperial Shares which may be subject to substantial
dilution. The PRVB Stockholders each represent and warrant that the Imperial
Shares constitute an investment which is suitable and consistent with their
respective financial conditions and that they are each able to bear the risks of
this investment for an indefinite period of time, which may include the total
loss of their investment in Imperial. The PRVB Stockholders each further
represent that they have adequate means of providing for their respective
current financial needs and corporate and personal contingencies and no need for
liquidity in their investment in Powder River and that they each have sufficient
financial and business experience to evaluate the merits and risks of an
investment in Powder River.
2.05 Federal or State Securities Laws. The PRVB Stockholders each
understand and acknowledge that the Imperial Shares to be issued in 1.01(a)
above have not been, and will not be, registered under the Securities Act of
1933, as amended (the "1933 Act"), or applicable state securities laws, and the
PRVB Stockholders are each aware that no federal or state agency has made any
review, finding or determination regarding the terms of their acquisition of the
Imperial Shares nor any recommendation or endorsement of the Imperial Shares as
an investment, and the PRVB Stockholders must each forego the security, if any,
that such a review would provide.
2.06 Acquisition for Own Account. The PRVB Stockholders each understand and
acknowledge that the Imperial Shares are being offered and sold under exemptions
from registration provided by the 1933 Act and exemptions provided by applicable
state securities laws and the PRVB Stockholders each warrant and represent that
the Imperial Shares are being acquired by them solely for their own account, for
investment purposes only, and not with a view to or for the resale,
distribution, subdivision or fractionalization thereof. The PRVB Stockholders
each represent and warrant that they have no agreement or other arrangement,
formal or informal, with any person to sell, transfer or pledge any part of the
Imperial Shares or which would guarantee them any profit or protect them against
any loss with respect to the Imperial Shares. Further, the PRVB Stockholders
have no plans to enter into any such agreement or arrangement, and,
consequently, they must each bear the economic risk of an investment in the
Imperial Shares for an indefinite period of time.
2.07 Limitations on Resale or Transfer. The PRVB Stockholders each
understand and acknowledge that the Imperial Shares will be "restricted" as
defined in Rule 144 under the 1933 Act and that therefore they cannot offer to
sell or otherwise transfer or distribute the Imperial Shares without
registration thereof; under both the 1933 Act and any applicable state
securities laws, or unless an exemption is, in the opinion of Imperial's
counsel, available to them under the 1933 Act and any applicable state
securities laws. Such exemption is not now available and it is not anticipated
that any such exemption will become available in the future. The PRVB
Stockholders each further understand and acknowledge that the restrictions on
the transfer of the Imperial Shares will be noted on the books of Imperial and
that the stock certificate representing the Imperial Shares will bear a written
legend setting forth the restriction on the transferability of the Imperial
Shares in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE
SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
Imperial agrees that, subject to compliance with Rule 144 and all applicable
securities laws, it will not impede the removal of the restrictive legend so
placed upon the stock received by the PRVB Stockholders at such time as the
applicable holding period has been satisfied.
2.08 Independent Investigation of Imperial. The PRVB Stockholders confirm
that they have received, reviewed, understand and have fully considered
(including, without limitation, the financial statements contained therein) for
purposes of their acquisition of the Imperial Shares, the business prospects and
leases of Imperial. The PRVB Stockholders acknowledge that (i) Imperial has
limited financial resources and will need additional sources of capital to
implement its current business plan, the availability of which is uncertain and
cannot be assured, and (ii) the Imperial Shares are a highly speculative
investment with a high degree of risk of loss by the PRVB Stockholders of their
investment therein. The PRVB Stockholders represent and warrant that in making
the decision to acquire the Imperial Shares, they have relied upon their own
independent investigation of Imperial and the independent investigations by
their representatives, including their own professional legal, tax and business
advisors, and that the PRVB Stockholders and their representatives have been
given the opportunity to examine all relevant documents and to ask questions of
and to receive answers from Imperial, or person(s) acting on its behalf;
concerning the terms and conditions of acquisition by the PRVB Stockholders of
the Imperial Shares and any other matters concerning an investment in Imperial,
and to obtain any additional information the PRVB Stockholders deem necessary to
verify the accuracy of the information provided.
2.09 Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of Imperial
Imperial represents and warrants to the PRVB Stockholders that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date.
3.01 Organization. Qualification and Corporate Power. Imperial is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Imperial is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. Imperial has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Imperial has made available for inspection by the PRVB Stockholders
correct and complete copies of the Certificate of Incorporation and Bylaws of
Imperial (as amended to date). The minute books containing the records of
meetings of the stockholders, the Board of Directors and any committees of the
Board of Directors, the stock certificate books and the stock record books of
Imperial are correct and complete. Imperial is not in default under or in
violation of any provision of its Certificate of Incorporation or Bylaws.
3.02 Capitalization. The entire authorized capital stock of Imperial
consists of (i) 50,000,000 shares of common stock, par value $0.006 per share,
of which 25,681,455 shares are issued and outstanding and 116,667 shares are
held in treasury. All of the issued and outstanding shares have been duly
authorized, are validly issued, fully paid, and non-assessable and are held of
record by the respective Imperial shareholders as set forth in Imperial's stock
record books. There are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which Imperial is a party or which are binding upon
Imperial providing for the issuance, disposition or acquisition of any of its
capital stock, except as disclosed in the Company's filings with the SEC and its
most recent annual and quarterly reports. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Imperial.
There are no voting trusts, proxies or any other agreements or understandings
with respect to the voting of the capital stock of Imperial. Upon issuance, the
Imperial Shares to be issued to the PRVB Stockholders pursuant to this Agreement
will be duly authorized, validly issued, fully paid and non-assessable.
3.03 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Imperial is subject or any provision of its Certificate of
Incorporation or Bylaws of Imperial or (ii) conflict with, result in a breach
of; constitute a default under, result in the acceleration of; create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Imperial is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Imperial is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government, governmental agency or
other person in order for Imperial to consummate the transactions contemplated
by this Agreement.
3.04 Common Stock Trading Market. The common stock of Imperial is eligible
for quotation and is quoted on the National Association of Securities Dealers
("NASD") OTC Bulletin Board in accordance with the applicable rules of the NASD
and Securities and Exchange Commission ("SEC") and is in compliance with
applicable NASD and SEC rules for continuing quotation on the NASD Bulletin
Board. There are a number of broker-dealers which are market-makers in the
common stock of Imperial and a complete list is available at the web site for
the OTC Bulletin Board ("Market-Makers"). Imperial has furnished each
Market-Maker and each other broker-dealer effecting transactions in the
Company's common stock with all information required by SEC Rule 15c2-l 1 as
required. Imperial, its officers, directors and affiliates have fully complied
with any and all requests for information by the Market-Makers and all other
broker-dealers, whether or not acting in the capacity of a market-maker,
pursuant to SEC Rule 15c2-l 1. Any and all information provided by Imperial to
the Market-Makers and all other broker-dealers, whether or not acting in the
capacity of a market-maker, was, at the time if was furnished, accurate in all
material respects.
3.05 Speculative Nature and Risk. Imperial understands and acknowledges the
speculative nature of and substantial risk of loss associated with an investment
in the Powder River Shares which may be subject to substantial dilution.
Imperial represents and warrants that the Powder River Shares constitute an
investment which is suitable and consistent with its financial conditions and
that it is able to bear the risks of this investment for an indefinite period of
time, which may include the total loss of its investment in Powder River.
Imperial further represents that it has adequate means of providing for its
respective current financial needs and corporate and personal contingencies and
no need for liquidity in its investment in Powder River and that it has
sufficient financial and business experience to evaluate the merits and risks of
an investment in Powder River.
3.06 Federal or State Securities Laws. Imperial understands and
acknowledges that the Powder River Shares have not been, and will not be,
registered under the 1933 Act, or applicable state securities laws and Imperial
is aware that no federal or state agency has made any review, finding or
determination regarding the terms of their acquisition of the Powder River
Shares nor any recommendation or endorsement of the Powder River Shares as an
investment, and Imperial must forego the security, if any, that such a review
would provide.
3.07 Acquisition for Own Account. Imperial understands and acknowledges
that the Powder River Shares are being offered and sold under exemptions from
registration provided by the 1933 Act and exemptions provided by applicable
state securities laws and Imperial warrants and represents that the Powder River
Shares are being acquired by it solely for its own account, for investment
purposes only, and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof. Imperial represents and warrants that
it has no agreement or other arrangement, formal or informal, with any person to
sell, transfer or pledge any part of the Powder River Shares or which would
guarantee them any profit or protect them against any loss with respect to the
Powder River Shares. Further, Imperial has no plans to enter into any such
agreement or arrangement, and, consequently, it must bear the economic risk of
an investment in the Powder River Shares for an indefinite period of time.
3.08 Limitations on Resale or Transfer. Imperial understands and
acknowledges that the Powder River Shares will be "restricted" as defined in
Rule 144 under the 1933 Act and that therefore it cannot offer to sell or
otherwise transfer or distribute the Powder River Shares without registration
thereof; which Powder River is not obligated to do, under both the 1933 Act and
any applicable state securities laws, or unless an exemption is, in the opinion
of Powder River's counsel, available to them under the 1933 Act and any
applicable state securities laws. Such exemption is not now available and it is
not anticipated that any such exemption will become available in the future.
Imperial further understands and acknowledges that the restrictions on the
transfer of the Powder River Shares will be noted on the books of Powder River
and that the stock certificate representing the Powder River Shares will bear a
written legend setting forth the restriction on the transferability of the
Powder River Shares in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE
SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
3.09 Independent Investigation of Powder River. Imperial confirms that it
has received, reviewed, understands and has fully considered (including, without
limitation, the financial statements contained therein) for purposes of its
acquisition of the Powder River Shares, the business prospects and leases of
Powder River. Imperial acknowledges that (i) Powder River has limited financial
resources and will need additional sources of capital to implement its current
business plan, the availability of which is uncertain and cannot be assured, and
(ii) the Powder River Shares are a highly speculative investment with a high
degree of risk of loss by Imperial of its investment therein. Imperial
represents and warrants that in making the decision to acquire the Powder River
Shares, it has relied upon its own independent investigation of Powder River and
the independent investigations by its representatives, including its own
professional legal, tax and business advisors, and that Imperial and its
representatives have been given the opportunity to examine all relevant
documents and to ask questions of and to receive answers from Powder River, or
person(s) acting on its behalf; concerning the terms and conditions of
acquisition by Imperial of the Powder River Shares and any other matters
concerning an investment in Powder River, and to obtain any additional
information Imperial deems necessary to verify the accuracy of the information
provided.
3.10 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
4. Survival.
All of the representations and warranties of the parties contained in this
Agreement shall expire at the Closing Date.
5. Consents.
Prior to Closing, the PRVB Stockholders and Imperial shall each use his or
its respective reasonable efforts to obtain the consent or approval of each
person whose consent or approval shall be required in order to permit the PRVB
Stockholders or Imperial, as the case may be, to consummate the transaction.
6. Conditions to Closing.
6.01 General Conditions. The obligations of the parties to effect
the Closing shall be subject to the following conditions:
(a) The Board of Directors of Imperial shall have approved this
Agreement in accordance with applicable provisions of state law.
(b) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, filing or charge
would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of Imperial to acquire and own the Powder River Shares, (iv)
affect adversely the right of the PRVB Stockholders to acquire and own the
Imperial Shares; or (v) affect adversely the right of either Imperial or
Powder River to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect).
(c) All governmental approvals, the absence of which would have a
materially adverse effect on Imperial or Powder River, respectively, on a
consolidated basis, after the Closing Date, shall have been received.
6.02 Conditions of Obligations of Imperial. The obligation of Imperial to
proceed with the Closing on the Closing Date shall at all times be subject to
the following conditions precedent, any of which may be waived by Imperial in
writing:
(a) (i) The representations and warranties of the PRVB Stockholders
contained herein shall be true and correct in all material respects at the
Closing Date with the same effect as though made at such time, and (ii) the
PRVB Stockholders shall have each performed all material obligations and
complied with all material covenants required by this Agreement to be
performed or complied with by him or it prior to the Closing Date.
(b) The PRVB Stockholders shall have each obtained and delivered to
Imperial any consents to the transactions contemplated by this Agreement
from the parties to all material contracts which require such consent.
(c) There shall not have occurred (i) any material adverse change,
since the most recent Powder River fiscal year end, in the business,
properties, results of operations or financial condition of Powder River,
or (ii) any loss or damage to any of the properties or assets (whether or
not covered by insurance) of Powder River which will materially affect or
impair the ability of Powder River to conduct the business now being
conducted by Powder River.
(d) Powder River shall be current in all of its required filings with
the SEC, including its Form 10-K effective as of 12/31/02.
(e) The total outstanding notes and accounts payable of Powder River
shall not exceed $300,000 at closing.
(f) All statutory requirements for the valid consummation by the
Powder River Stockholders of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals of all federal, state or local governmental agencies and
authorities required to be obtained in order to permit consummation by the
PRVB Stockholders of the transactions contemplated by this Agreement and to
permit the business presently carried on by Powder River to continue
unimpaired to any material degree immediately following the Closing Date
shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local,
shall have instituted (or threatened to institute in a writing directed to
the PRVB Stockholders, Powder River, Imperial or any of their subsidiaries
or affiliates) an investigation which is pending at the Closing Date
relating to the Closing and between the date of this Agreement and the
Closing Date no action or proceeding shall have been instituted or, to the
knowledge of the PRVB Stockholders, shall have been threatened by any party
(public or private) before a court or other governmental body to restrain
or prohibit the transactions contemplated by this Agreement or to obtain
damages in respect thereof.
(g) The PRVB Stockholders shall have each acknowledged by their
execution of this Agreement to Imperial in writing (i) that the shares of
Imperial common stock to be issued to them pursuant to the Closing will be
issued without registration under the 1933 Act, or the securities laws of
any state in reliance upon available exemptions from the registration
requirements thereof; (ii) that all such shares of Imperial common stock
will be subject to restrictions on transferability and may not be offered
for sale, sold or otherwise transferred unless subsequently registered
under the 1933 Act and all other applicable securities laws or unless
exemptions from the registration requirements of the 1933 Act and all other
applicable securities laws are available, as established to the
satisfaction of Imperial, and (iii) the certificates evidencing such
Imperial common stock will bear an appropriate legend evidencing the above
referenced restrictions on transferability.
(h) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 7.03 shall be delivered at
Closing.
6.03 Conditions of Obligation of the PRVB Stockholders. The obligation of
the PRVB Stockholders to proceed with the Closing on the Closing Date shall at
all times be subject to the following conditions precedent, any of which may be
waived by the PRVB Stockholders in writing:
(a) (i) the representations and warranties of Imperial herein shall be
true in all material respects at the Closing Date with the same effect as
though made at such time; and (ii) Imperial shall have performed all
material obligations and complied with all material covenants required by
this Agreement to be performed or complied with by it prior to the Closing
Date.
(b) Imperial shall have obtained and delivered to the PRVB
Stockholders any consents to the transactions contemplated by this
Agreement from the parties to all material contracts which require such
consent.
(c) There shall not have occurred (i) any material adverse change
since the most recent Imperial fiscal year end in the business, properties,
results of operations or financial condition of Imperial, or (ii) any loss
or damage to any of the properties or assets (whether or not covered by
insurance) of Imperial which will materially affect or impair the ability
of Imperial to conduct the business now being conducted by Imperial.
(d) All statutory requirements for the valid consummation by Imperial
of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals of all federal,
state, local and foreign governmental agencies and authorities required to
be obtained in order to permit consummation by Imperial of the transactions
contemplated by this Agreement shall have been obtained. Between the date
of this Agreement and the Closing Date, no governmental agency, whether
federal, state or local, shall have instituted (or threatened to institute
in writing directed to the PRVB Stockholders, Powder River, Imperial or any
of their subsidiaries or affiliates) an investigation which is pending at
the Closing Date relating to the Closing and between the date of this
Agreement and the Closing Date no action or proceeding shall have been
instituted or, to the knowledge of Imperial shall have been threatened by
any party (public or private) before a court or other governmental body to
restrain or prohibit the transaction contemplated by this Agreement or to
obtain the damages in respect thereof..
(e) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 7.02 shall have been delivered at
Closing.
7. Actions at Closing.
7.01 Actions at the Closing. At the Closing, Imperial and the PRVB
Stockholders will each deliver, or cause to be delivered to the other, the
securities to be exchanged in accordance with Section 1.01 of this Agreement,
and each party shall pay any and all federal and state taxes required to be paid
in connection with the issuance of delivery of their own securities.
Certificates representing the Imperial Shares shall be issued and delivered as
set forth on Exhibit "B" attached hereto. Certificates representing the Powder
River Shares shall be duly endorsed by each of the PRVB Stockholders for
transfer to Imperial or in blank, or have appropriately executed powers of
attorney attached, and signatures shall be witnessed.
7.02 Deliveries by Imperial. At Closing, Imperial will deliver to the
Powder River Stockholders:
(a) certificates for the Imperial Shares as provided by Section 7.01
hereof; and
(b) certified bank check in the amount of $100,000 made payable to the
PRVB Stockholders or their nominee.
7.03 Deliveries by the PRVB Stockholders. At Closing, the PRVB Stockholders
shall deliver to Imperial:
(a) certificates for the Powder River Shares as provided by Section
7.01 hereof; and
(b) resignations by the PRVB Stockholders of their positions as
officers or directors of Powder River.
8. Termination.
8.01 Termination of the Agreement. The parties may terminate this Agreement
as provided below:
(a) Imperial and the PRVB Stockholders may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) Either party may terminate this Agreement by giving written notice
to the other party on or before the Closing Date if either party is not
satisfied with the results of their continuing business, legal and
accounting due diligence regarding each other;
(c) The PRVB Stockholders may terminate this Agreement by giving
written notice to Imperial at any time prior to the Closing (i) in the
event Imperial has breached any representation, warranty or covenant
contained in this Agreement in any material respect, the PRVB Stockholders
has notified Imperial of the breach and the breach has continued without
cure for a period of 10 days after the notice of breach, or (ii) if the
Closing shall not have occurred on or before April 1, 2003, or such later
date as may be agreed to in writing by the PRVB Stockholders and Imperial,
by reason of the failure of any condition precedent under Section 6.01 or
Section 6.03 hereof (unless the failure results primarily from the PRVB
Stockholders themselves breaching any representation, warranty or covenant
contained in this Agreement); and
(d) Imperial may terminate this Agreement by giving written notice to
the PRVB Stockholders at any time prior to the Closing (i) in the event the
PRVB Stockholders have breached any representation, warranty or covenant
contained in this Agreement in any material respect, Imperial has notified
Powder River and the PRVB Stockholders of the breach and the breach has
continued without cure for a period of 10 days after the notice of breach
or (ii) if the Closing shall not have occurred on or before April 1, 2003,
or such later date as may be agreed to in writing by the PRVB Stockholders
and Imperial, by reason of the failure of any condition precedent under
Section 6.01 or Section 6.02 hereof (unless the failure results primarily
from Imperial itself breaching any representation, warranty or covenant
contained in this Agreement).
8.02 Effect of Termination. If either the PRVB Stockholders or Imperial
terminates this Agreement pursuant to Section 8.01 above, all rights and
obligations of the parties hereunder shall terminate without any liability of
any party to any other party.
9. General.
9.01 Brokers and Finders. Each Party hereto represents that no broker,
agent, finder or other party has been retained by either Party, and no brokerage
or finder's fees or agent's commissions or other like payment has been agreed to
be paid by him or it in connection with this Agreement or on account of the
transactions contemplated by this Agreement. Each Party agrees to indemnify and
hold harmless the other parties from and against any and every claim arising by
breach of the aforesaid representation and warranty and all costs and expenses,
legal or otherwise, which any such party may incur as the result of any such
claim.
9.02 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable efforts to advise the other Party prior to making the
disclosure.)
9.04 Survival of Covenants Representations and Warranties. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished at the Closing
Date.
9.05 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and consummated in accordance with the laws of the
State of Nevada.
9.06 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
If to Imperial:
Imperial Petroleum, Inc.
11600 German Pines Drive
Evansville, IN 47725
Attn. Mr. Jeffrey T. Wilson
President
If to the PRVB Stockholders:
Powder River Basin Gas Corporation.
3303 Lee Parkway, Suite 415
Dallas, TX 75209
Attn: Mr. Greg Smith
Chairman
9.07 No Assignment. This Agreement may not be assigned by operationof law
or otherwise, without the express written consent of each party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
IMPERIAL PETROLEUM, INC. Greg Smith
By:__________________________ By:____________________________
Jeffrey T Wilson,President Greg Smith, an individual
Taghmen Ventures Ltd.
By: ___________________________
Greg Smith, General Partner
E-Stone Ventures, Ltd.
By: ___________________________
Greg Smith, General Partner
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-31945
For the quarter ended March 31, 2003
POWDER RIVER BASIN GAS CORP.
(Exact name of small business issuer as specified in its charter)
Colorado
(State of incorporation)
84-1521645
(IRS Employer Identification #)
P.O. Box 7500
Dallas, TX 75209
(214) 526-5678
(Address and telephone number of principal executive office)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of March 31, 2003, 25,237,833 shares of common stock, $0.001 par value, were
outstanding.
Transitional Small Business Disclosure Format (check one): [ X ] Yes [ ] No .
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Powder River Basin Gas Corp.
Consolidated Balance Sheets
As of March 31, 2003 and December 31, 2002
(unaudited)
March 31 December 31
------------------------------
------------------------------
ASSETS
CURRENT ASSETS
Cash $ 13,307 $ 12,556
Accounts receivable - -
Other current assets 500 -
------------------------------
------------------------------
Total current assets 13,807 12,556
Oil and gas properties using full cost
accounting (note 3)
Properties not subject to amortization 1,794,410 1,853,469
Accumulated amortization - -
------------------------------
------------------------------
Net oil and gas properties 1,794,410 1,853,469
------------------------------
------------------------------
Total assets $ 1,808,217 $ 1,853,469
==============================
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 39,909 $ 114,020
Accrued expenses - 48,953
Related party payable 317,700 317,700
Notes payable 366,400 626,400
------------------------------
------------------------------
Total current liabilities 724,009 1,107,073
------------------------------
------------------------------
Long term debt (note 4) 199,461 -
Total liabilities 923,470 1,107,073
------------------------------
------------------------------
STOCKHOLDERS' EQUITY
Common stock, par value $.001 per share;
50,000,000 shares authorized; 20,437,833
and 19,907,833 shares issued and
19,517,833 and 16,347,833 outstanding 25,637 20,437
Capital in excess of par value 3,995,267 3,870,467
Accumulated deficit (3,135,237) (3,131,032)
Treasury stock; 920,000 and 3,560,000
shares (920) (920)
------------------------------
------------------------------
Total stockholders' equity 884,747 758,952
------------------------------
------------------------------
Total liabilities and stockholders' equity $ 1,808,217 $ 1,866,025
==============================
POWDER RIVER BASIN GAS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
AS OF MARCH 31, 2003 AND MARCH 31, 2002
Three Months Ending March 31
2003 2002
----------------- ---------------
----------------- ---------------
REVENUE
Oil and gas sales $ - $ -
Other operating revenue - -
-----------------
----------------- ---------------
- -
----------------- ---------------
Total revenue
EXPENSES
General and administrative 4,205 65,048
Lease operating costs 26 55,104
Legal and professional - 23,637
Travel - 7,816
----------------- ---------------
Total expenses 4,205 151,606
NET OPERATING LOSS (4,205) (151,606)
OTHER INCOME (EXPENSE)
Interest expense - (503)
----------------- ---------------
NET LOSS $ (4,205) $ (152,109)
BASIC LOSS PER COMMON SHARE $ (0.00) $ (0.02)
----------------- ---------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 20,437833 9,341,538
================= ===============
Powder River Basin Gas Corp.
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Period Ended March 31, 2003
Common Stock Capital in Treasury Stock
---------------------- Excess of Retained ---------------------
Shares Amount Par Value Deficit Shares Amount
---------- --------- -------------------------------------------------
Balance at inception on June 13, 2001 - $ - $ - $ - $ -
Common stock issued for organization
costs; $0.001 per share 3,350,000 3,350 (3,350) - - -
Common stock issued for services; $0.001
per share 5,650,000 5,650 (5,650) - - -
Common stock returned due to non
completion of services; $0.001 per share - - - - (5,040,000) (5,040)
Reverse acquisition adjustment 9,960,000 9,960 (9,960) - - -
Common stock issued for related party
payable at $0.81 per share 100,000 100 89,900 - - -
Common stock issued for services at
$0.81 per share - - 453,040 - 560,000 560
Common stock issued for cash at $1.10
per share 600,000 600 664,390 - - -
Common stock issued for services at
$1.11 per share - - 1,023,730 - 920,000 920
Common stock issued for payable at $1.00
per share 247,833 247 247,587 - - -
Net loss for the year ended December 31,
2002 - - - (1,786,236) - -
---------- --------- ----------- -----------------------------------
Balance at December 31, 2001 19,907,833 19,907 2,459,687 (1,786,236) (3,560,000) (3,560)
Powder River Basin Gas Corp.
Consolidated Statement of Stockholders' Equity (Unaudited) (continued)
For the Period Ended September 30, 2002
Common Stock Capital In Treasury Stock
--------------------- Excess of Retained --------------------
Shares Amount Par Value Deficit Shares Amount
---------- ------ ----------------------------------------------
Balance at December 31, 2001 19,907,833 19,907 2,459,687 (1,786,236) (3,560,000) (3,560)
Common stock issued for payables; $0.61
per share - - 152,250 - 250,000 250
Common stock issued for services at
$0.65 per share - - 407,420 - 630,000 630
Common stock issued for cash at $1.00
per share 30,000 30 29,970 - - -
Common stock issued for services at
$0.59 per share - - 665,570 - 1,130,000 1,130
Common stock issued for services; $0.09
per share - - 56,070 - 630,000 630
Common stock issued for related party
payables; $0.20 per share 500,000 500 99,500 - - -
Net loss for the year ended December 31,
2002 - - - (1,344,796) - -
---------- --------- ----------- -----------------------------------
Balance at December 31, 2002 20,437,833 $ 20,437 $ 3,870,467 $ (3,131,032) (920,000) $ (920)
---------- --------- ----------- -----------------------------------
---------- --------- ----------- -----------------------------------
Common stock issued for accrued
salaries and services; $0.025 per share 5,200,000 5,200 124,800
---------- --------- ----------- -----------------------------------
---------- --------- ----------- -----------------------------------
Net loss for the period ended March 31,
2003 (4,205)
---------- --------- ----------- -----------------------------------
---------- --------- ----------- -----------------------------------
Balance at March 31, 2003 25,637,833 25,637 3,995,267 (3,135,237) (920,000) (920)
---------- --------- ----------- -----------------------------------
---------- --------- ----------- -----------------------------------
========== ========= =========== ===================================
Powder River Basin Gas Corp.
Consolidated Statements of Cash Flows (Unaudited)
For the Three Month Period Ending March 31
2003 2002
------------ ------------
------------ ------------
Cash flows from operating activities
Net loss $ (4,205) $ (152,109)
Adjustments to net loss provided by
operating activities:
Common stock issued for services
rendered - -
Common stock issued for retirement of
accounts payable (130,000) 200,000
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable - (75,000)
Increase in other current assets - -
(Decrease) increase in accounts
payable - (167,313)
------------ ------------
Net cash provided by (used in)
operating activities (134,205) (194,421)
------------ ------------
Cash flows from investing activities
Cash for acquisition - -
Expenditures for oil and gas property
development - (42,000)
------------ ------------
Net cash used in investing activities - (42,000)
------------ ------------
Cash flows from financing activities
Proceeds from notes payable and long-term
liabilities (1,282) 134,466
Proceeds from issuance of common stock 130,000 100,000
------------ ------------
Net cash provided by financing
activities 128,718 234,466
------------ ------------
Net increase (decrease) in cash and cash
equivalents (5,630) (1,955)
Cash at beginning of period 18,938 2,323
------------ ------------
Cash at end of period $ 13,307 $ 368
============ ============
Cash paid for:
Interest $ - $ -
Income taxes $ - $ -
Non cash financing activities:
Common stock issued for payment of accounts
payable pertaining to acquisition of oil and
gas properties $ - $ -
Common stock issued to retire accounts payable $ 130,000 $ -
Powder River Basin Gas Corp.
Notes to Consolidated Financial Statements
For the Period Ended March 31, 2003
NOTE 1 - PREPARATION OF FINANCIAL STATEMENTS
The unaudited consolidated financial statements of Powder River Basin Gas Corp.
for the period ended March 31, 2003, included herein have been prepared in
accordance with generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission ("SEC") and should be read
in conjunction with the audited financial statements and notes thereto contained
in the Company's latest Annual Report filed with the SEC on Form 10-KSB/A. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim period presented have been reflected
herein. The results of operations for the interim period are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosures
contained in the audited financial statements for the most recent year, 2002, as
reported in the Form 10-KSB/A, have been omitted.
NOTE 2 - ORGANIZATION
The Company was incorporated under the laws of Colorado on August 27, 1999 as
Celebrity Sports Network, Inc. The principal activities since inception have
been organizational matters and obtaining financing. The Company was formed in
an effort to broaden the scope of public appearances available to current and
former professional athletes. The Company, however, changed their operations in
2001 through a reverse acquisition with Powder River Basin Gas Corp., an oil and
gas company.
Power River Basin Gas Corp. (PRBG) was incorporated in Colorado on June 13,
2001. The Company is engaged in the business of assembling and managing a
portfolio of undeveloped acreage in the Powder River basin coal bed methane
(CBM) play in Sheridan County, Wyoming. This acreage is located in a proven
geological setting and near operators such as Western Gas Resources, Barrett
Resources, Phillips Petroleum, J.M. Huber and others. The Company has leasehold
interests in 8,096.83 net acres. Two wells have been drilled on one lease and
eleven additional wells have been spudded.
Pursuant to a reverse acquisition and reorganization agreement, PRBG was
acquired by Celebrity Sports on September 5, 2001. At the time of the
acquisition, the Company changed its name to Power River Basin Gas Corp. and
issued 9 million shares of common stock for all the issued and outstanding stock
of PRBG; thus, making PRBG a wholly-owned subsidiary of the Company. Because
PRBG is the accounting acquirer in the reverse acquisition, all financial
history in these financial statements are that of PRBG.
The Company issued 9 million shares of common stock for 9 million shares of
PRBG, therefore, an adjustment to the shares outstanding was necessary to
reflect the other shareholders of the Company at the time of acquisition. No
goodwill was recorded in the acquisition and the purchase method of accounting
was used to record the transaction.
NOTE 3 - OIL AND GAS PROPERTIES
The full cost method is used in accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and development
of oil and gas reserves, including directly related overhead costs, are
capitalized. In addition, depreciation on property and equipment used in oil and
gas exploration and interest costs incurred with respect to financing oil and
gas acquisition, exploration and development activities are capitalized in
accordance with full cost accounting. Capitalized interest for the quarter ended
March 31, 2003 was $0. All capitalized costs of proved oil and gas properties
subject to amortization are being amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects not subject to amortization are not amortized until proved
reserves associated with the projects can be determined or until impairment
occurs. If the results of an assessment indicate that the properties are
impaired, the amount of the impairment is added to the capitalized costs to be
amortized. As of March 31, 2003, proved oil and gas reserves had been identified
on one of the Company's oil and gas properties, however, no extraction has
begun; therefore, no amortization was recorded for the period ending March 31,
2003. All other wells are incomplete as of March 31, 2003.
NOTE 4 - LONG TERM DEBT
At March 31, 2003, the Company had the following long-term liabilities:
Debentures held by accredited investors, which are
convertible into Company common stock upon effective
registration and bear interest at 6% per annum,
though maturity or conversion; Debentures are
convertible into Company common stock at a price
equal to 75% of the lowest closing bid price per
share (as reported by Bloomberg, LP) of the Company's
common stock for the seven trading days immediately
preceding the conversion date $ 199,461
--------------
Powder River Basin Gas Corp.
Notes to Consolidated Financial Statements (continued)
For the Period Ended March 31, 2003
NOTE 5 - COMMON STOCK
In February 2003, the Company issued 5,200,000 shares of treasury stock to
satisfy debt associated with accrued salaries and other services at $0.025 per
share.
SUBSEQUENT EVENTS:
The Chairman of the Company and entities controlled by him entered into an
Exchange Agreement with Imperial Petroleum, Inc., a Nevada corporation, dated
February 13, 2003 to sell all of their stock holdings in the Company
(approximately 63.3% of the common stock of the Company) and any notes and other
amounts due to each entity in exchange for 2.65 million shares of the common
stock of Imperial. The transaction closed on May 12, 2003.
ITEM 2: Management's Discussion and Analysis OR PLAN OF OPERATION
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
The Company is including the following cautionary statement to make applicable
and take advantage of the safe harbor provision of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statements made by, or on
behalf of, the Company. This quarterly report on form 10-QSB/A contains
forward-looking statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, expectations, future events or
performance and underlying assumptions and other statements which are other than
statements of historical facts. Certain statements contained herein are
forward-looking statements and, accordingly, involve risks and uncertainties
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The Company's expectations, beliefs
and projections are expressed in good faith and are believed by the Company to
have a reasonable basis, including without limitations, management's examination
of historical operating trends, data contained in the Company's records and
other data available from third parties, but there can be no assurance that
management's expectations, beliefs or projections will result or be achieved or
accomplished. In addition to other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause actual results to differ materially from those discussed in the
forward-looking statements: the ability of the Company to respond to changes in
the information system environment, competition, the availability of financing,
and, if available, on terms and conditions acceptable to the Company, and the
availability of personnel in the future.
PLAN OF OPERATION
The Company's business strategy for the next twelve months includes focused
acquisitions and drilling operations which may be curtailed, delayed or canceled
as a result of a variety of factors, including unexpected drilling conditions,
pressure or irregularities in formations, equipment failures or accidents,
weather conditions and shortages or delays in equipment delivery. The Company
has drilled two gas wells that will produce commercially viable gas resources
once the appropriate infrastructure (i.e., pipeline) is in place. The Company
does not currently have sufficient funds to implement drilling and completion
operations on its leases and properties alone. As a result, the Company is
seeking out and entertaining offers from outsiders who wish to purchase all or
part of the Company.
Liquidity and Capital Resources
The Company's working capital deficit on March 31, 2003 was $710,202, resulting
primarily from the use of accounts payable to finance the acquisition of
leasehold interests in the Powder River Basin. The Company has no established
revenue sources and continues to rely on loans from shareholders, sales of
equity and other financing to sustain operations as a going concern. There is
currently no agreement from any officer or shareholder to continue to provide
working capital in order to maintain operations. The Company is seeking to raise
the necessary funds to commence drilling operations on its leasehold properties
and it may become necessary to farmout or joint venture a portion or all of its
properties, if sufficient funds cannot be raised..
Current Liabilities
On March 31, 2003, the Company had approximately $684,100 in current
liabilities. Of this amount, approximately $215,000 is due to various entities
for the purchase of leasehold interests in the Powder River Basin and related
expenses incurred by the Company. $317,700 was due to Taghmen Ventures, Ltd. and
Mr. Gregory C. Smith, Chairman of the Company; Mr. Smith is also the General
Partner for Taghmen Ventures Ltd. $25,000 is due under a note payable to an
individual, who is the brother of Mr. Smith for monies loaned to the Company.
Need for Additional Financing for Growth
The growth of the Company's business will require substantial capital on a
continuing basis, and there is no assurance that any such required additional
capital will be available on satisfactory terms and conditions, if at all. The
Company may pursue, from time to time, opportunities to acquire oil and natural
gas properties and businesses that may utilize the capital currently expected to
be available for its present operations. The amount and timing of the Company's
future capital requirements, if any, may depend upon a number of factors,
including drilling, transportation, and equipment costs, marketing expenses,
staffing levels, competitive conditions, and purchases or dispositions of
assets, many of which are not in the Company's control. Failure to obtain any
required additional financing could materially adversely affect the growth, cash
flow and earnings of the Company. In addition, the Company's pursuit of
additional capital could result in the incurrence of additional debt or
potentially dilutive issuances of equity securities.
The Company's ability to meet any future debt service obligations will be
dependent upon the Company's future performance, which will be subject to oil
and natural gas prices, the Company's level of production, general economic
conditions and financial, business and other factors affecting the operations of
the Company, many of which are beyond its control. There can be no assurance
that the Company's future performance will not be adversely affected by such
changes in oil and natural gas prices and/or production nor by such economic
conditions and/or financial, business and other factors. In addition, there can
be no assurance that the Company's business will generate sufficient cash flow
from operations or that future bank credit will be available in an amount to
enable the Company to service its indebtedness or make necessary expenditures.
In such event, the Company would be required to obtain such financing from the
sale of equity securities or other debt financing. There can be no assurance
that any such financing will be available on terms acceptable to the Company.
Should sufficient capital not be available, the Company may not be able to
continue to implement its business strategy.
ITEM 3: CONTROLS AND PROCEDURES
Based on their evaluation of the Company's disclosure controls and procedures as
of a date within 90 days of the filing of this Report, the Chairman and Chief
Executive Officer have concluded that such controls and procedures are
effective.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect such controls subsequent to the date of
evaluation.
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is a Plaintiff involved in a legal proceeding in the United States
District Court for the District of Colorado, Civil Action No. 02-0764, versus
John Skinner, an individual. The lawsuit was settled in the fourth quarter of
2002 and as a result, the Company recorded a note payable to Mr. Skinner of
$40,000 which remains outstanding as of March 31, 2003.
ITEM 2: CHANGES IN SECURITIES
Subsequent to March 31, 2003, the Company filed a Schedule 14C , Definitive
Information Statement in which the majority of the shareholders of the company
had agreed to amend the Articles of Incorporation of the Company and increase
the authorized shares of common stock, par value $0.001, of the Company from
50,000,000 shares to 200,000,000 shares of common stock, par value, $0.001. The
Schedule 14C is included herein by reference.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5: OTHER INFORMATION
NONE
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibit 99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 of the Chief Executive Officer.
(b) Reports
Report on Form 8-K, as amended, Celebrity Sports Network, Inc.,
filed January 24, 2002; Change in Registrant's Certifying Accountant
Signatures
Pursuant to the requirements of Section 13 or 15(d) the Securities and Exchange
Act of 1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Powder River Basin Gas Corp.
Registrant
By: \s\ Jeffrey T. Wilson, President
Jeffrey T. Wilson, President
Date: May 20, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 000-31945
POWDER RIVER BASIN GAS CORP.
(Name of small business issuer as specified in its charter)
P.O. Box 7500
Dallas, Texas 75209
(214) 526-5678
(Address of principalexecutive office & telephone number)
Colorado
(State of incorporation)
84-1521645
(IRS Employer Identification #)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.001 par value
[X]
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
[X] Check if disclosure of delinquent filers in response to Item 405 of
Regulation SB is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB
State issuer's revenues for the most recent fiscal year: $15,000
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity, as of December 31, 2002 was $467,642 based on the closing price
on the OTC Bulletin Board on that day.
The current number of shares outstanding of Powder River Basin Gas Corp. common
stock was 20,437,833 as of December 31, 2002.
Documents Incorporated by Reference
Powder River Basin Gas Corp. incorporates by reference in Part III of this Form
10-KSB, the registrant's Report on Form 8-K, as amended, with exhibits thereto,
filed October 22, 2002 under the Securities Act of 1933.
Powder River Basin Gas Corp. incorporates by reference in Part III of this Form
10-KSB, the registrant's Report on Form 8-K, as amended, with exhibits thereto,
filed December 4, 2001 under the Securities Act of 1933.
Powder River Basin Gas Corp. incorporates by reference in Part III of this Form
10-KSB, the registrant's Registration Statement on Form 10-SB, with exhibits
thereto, filed December 14, 2000 under the Securities Act of 1933.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
POWDER RIVER BASIN GAS CORP.
ANNUAL REPORT
Table of Contents
Part I
Description of Business 4
Description of Properties 5
Legal Proceedings 6
Submission of Matters to a Vote of Security Holders 6
Part II
Market for Common Equity and Related Stockholder Matters 6
Management's Discussion and Analysis or Plan of Operation 7
Financial Statements 14
Changes In and Disagreements With Accountants on Accounting and 28
Financial Disclosure
Part III
Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 28
Executive Compensation 29
Security Ownership of Certain Beneficial Owners and Management 29
Certain Relationships and Related Transactions 30
Exhibits and Reports on Form 8-K 31
Signatures 32
Certification of Principal Executive Officer 33
Description of Business
Powder River Basin Gas Corp. ("PRVB" or the "Company") was incorporated as
Celebrity Sports Network ("Celebrity Sports") in the State of Colorado on August
27, 1999. On September 5, 2001; Celebrity Sports Network acquired PRVB, a
private corporation incorporated in the State of Colorado on June 13, 2001.
Subsequently, Celebrity Sports Network changed its name from Celebrity Sports
Network to Powder River Basin Gas Corp. Celebrity Sports was formed in an effort
to broaden the scope of appearances available to current and former professional
athletes. It intended to assist athletes in refining their speaking and
presentation skills to increase marketability, gain a market for the athletes,
and market the athletes for speaking engagements. From inception, Celebrity
Sports remained a development stage company, with primary focus on
organizational matters, acquiring candidate athletes as clients, and developing
its marketing and business plans. Due to disappointing results; operational
losses, lack of working capital, and less than acceptable results from initial
business plan implementations; Celebrity Sports decided to explore other
business opportunities, both within and outside the sports management industry.
Ultimately, Celebrity Sports acquired and became Powder River Basin Gas Corp.
Business
PRVB is an oil and gas exploration company that is engaged in the evaluation and
development of coalbed methane ("CBM") reserves as well as shallow oil reserves
within the Powder River Basin in the State of Wyoming. PRVB`s focus has been in
obtaining leasehold interests in acreage within the Powder River Basin,
currently a prolific coal bed methane gas exploration play in the domestic
United States. Its attributes include low cost, shallow depth drilling and
completion; a proven play with major operators and an existing and expanding
infrastructure; greater and longer production yields when comparing cost/benefit
analyses to other basins and, a low exploration risk.
As of December 31, 2002, PRVB owns a total of 14,622 acres in fourteen different
leases within Converse, Crook, Johnson, and Sheridan counties. The company has a
80 percent to 100 percent working interests in all of its leases to date. The
Company's leases are adjacent to larger CBM developers and operators such as
Western Gas Resources, Williams Companies, Phillips Petroleum, J.M. Huber and
others. This close proximity to other operators allows PRVB to benefit from the
established infrastructure of gathering systems, pipelines, electricity sources,
roads, etc.
In January 2002, the Company drilled and completed two CBM wells in their Zullig
Lease, located just west of Clearmont, Wyoming in Sheridan County. Both wells
are completed in the Monarch coal seam, which is located at a depth of
approximately 800 feet. One of the two wells was tested and produced at an
initial rate of 702 Mcf (thousand cubic) per day. In addition, the Company
drilled eleven other wells on the lease to a minimal depth of ten percent of
their total depth in order to meet certain state requirements in reducing the
well spacing from eighty acres to forty acres. Because the pipeline did not
arrive during 2002, as expected, the Company did not sell any gas during the
year. In January 2003, the Company entered into an agreement with Rimrock
Pipeline to provide pipeline services to the Company.
Pricing
PRVB's average cost to drill, complete and tie-in a CBM well to existing
infrastructure is estimated to be $75,000, which is below the basin's average
cost of $89,000 per CBM well. The projected costs are less due to the fact that
a majority of their coal seam objectives are at depths less than 800 feet. The
Company anticipates that the development of its CBM assets can generate a
substantial profit. Plan of Operation
PRVB's short-term focus will continue to be on developing and monetizing its CBM
and shallow oil assets within the Powder River Basin and to seek additional
opportunities to expand its current asset base as well as pursue other
acquisitions that will enhance shareholder.
Marketing
The Company intends to review and analyze its available options to sell at the
wellhead or transport its production to the highest value markets and intends to
implement those options that generate the highest overall value for the Company.
The available natural gas pipelines near the Company's acreage include: Rimrock
Pipeline, Bitter Creek Pipeline, Williston Basin Interstate Pipeline, Fort
Union, MIGC, and Northern Pipeline. It is anticipated that no additional
processing or treating will be necessary to meet pipeline specifications.
Description of Properties
The Company's offices are located in Dallas, Texas and it has non-exclusive use
of desks and storage space and available business services. The Company's
Chairman has been providing these office facilities at no cost to the Company.
As of December 31, 2002 and 2001, Powder River Basin Gas Corp. had 80 to 100
percent working interests in the following CBM and shallow oil leases:
Lease County Net Acres Gross Acres
Bell Converse 907 907
Haefele Converse 640 640
Cranston Crook 1,934 1,934
Franklin Crook 620 1,944
Griffith(1) Crook 320 640
Griffith (2) Crook 160 320
Griffith (3) Crook 440 600
Kanode Crook 920 1,000
Olds (D-Road) Crook 200 640
Olds (Keyhole) Crook 120 480
Karmon Johnston 320 320
Noteboom Johnston 800 800
Hanft Sheridan 898 1,197
Legerski Sheridan 340 360
Robb Sheridan 1,486 2,520
Zullig Sheridan 256 320
10,361 14,622
Legal Proceedings
PRVB has never been in bankruptcy, receivership or any similar legal proceeding,
and is not subject to any pending legal proceedings. Powder River Basin Gas
Corp. is not aware of any threatened legal proceedings. The foregoing is also
true with respect to each officer, director and control shareholder as well as
any entity owned by any officer, director and control shareholder, over the last
five years.
During 2002 the Company filed a lawsuit against a former service provider,
alleging violations of Section 16 of the Securities and Exchange Act of 1934 and
Section 5 of the Securities Act of 1933. In order to avoid the additional
expense and uncertainty of litigation, agreed to settle and resolve all of the
claims between them. As part of the settlement agreement, the Company recorded a
$50,000 liability, of which, $40,000 remains outstanding at December 31, 2002.
Submission of Matters to a Vote of Security Holders
None during the years ended December 31, 2002 and 2001.
Market for Common Equity and Related Stockholder Matters
Market Information
The common stock of Powder River Basin Gas Corp. is traded on the OTC Bulletin
Board under the symbol PRVB.
Holders
Powder River Basin Gas Corp. had 20,437,833 and 19,907,833 shares of common
stock outstanding as of December 31, 2002 and 2001, respectively and had
approximately 320 and 278 shareholders at the end of 2002 and 2001, respectively
Dividend Policy
PRVB has never paid dividends on its common stock and does not anticipate paying
any dividends in the foreseeable future. Management anticipates that earnings
will be retained to fund the company's working capital needs and expansion of
the business.
Management's Discussion and Analysis
The following discussion of the Company's financial condition and the results of
operations should be read in conjunction with the Financial Statements and Notes
thereto appearing elsewhere in this document.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that in addition to the description of historical
facts contained herein, this report contains certain forward-looking statements
that involve risks and uncertainties as detailed herein and from time to time in
the Company's other filings with the Securities and Exchange Commission and
elsewhere. Such statements are based on management's current expectations and
are subject to a number of factors and uncertainties, which could cause actual
results to differ materially from those, described in the forward-looking
statements.
These factors include, among others: (a) the availability of financing or
additional investment capital; (b) the retention of qualified operational
management; (c) drilling and operational hazards; (d) pricing fluctuations (e)
ability to develop additional reserves.
The Company's operations consist primarily of exploration and development of oil
and gas properties. While oil and natural gas are the principal products
currently produced by the Company, the Company does not refine or process the
oil and natural gas that it produces. The Company sells the gas it produces
under short-term contracts at market prices in the areas in which the producing
properties are located, generally at F.O.B. field prices posted by the principal
purchaser of oil in such areas.
Results of Operations
During 2002 we discovered accounting inaccuracies in certain prior period
financial statements, requiring restatement of the financial statements for
these periods. We conducted an internal investigation under the direction of our
Board of Directors to determine the scope and magnitude of these inaccuracies.
As a result of the internal accounting investigation, our consolidated
statements of operations, cash flows and stockholders' equity for the year ended
December 31, 2001 and the consolidated balance sheet as of December 31, 2001
have been restated. In addition, to give effect to accumulated prior period
adjustments and their related tax impacts, and to give effect of additional
treasury stock issuances during 2002, the consolidated statements of operations,
cash flows and stockholders' equity for the periods ended March 31, 2002, June
30, 2002 and September 30, 2002 and the consolidated balance sheets for the
periods then ended, have also been restated.
Revenues
The Company has not yet generated significant revenue from the sale of natural
gas. This is primarily due to the fact the infrastructure required to realize
these sales has not yet been extended to the Company's properties. The Company
has drilled two gas wells that will produce commercially viable gas resources
once the appropriate infrastructure (i.e., pipeline) is in place. The Company
plans on implementing its drilling plan and begin recognizing revenues during
2003.
Costs and Expenses
The Company's general and administrative expenses for the fiscal years ended
December 31, 2002 and 2001 were $414,568 and $25,927, respectively, which
represents 30.9% and 1.5% of total expenses. The increase is because 2002
included a full year of operations, while 2001 was a short year and did not
include any management salaries and 2002 includes significant costs associated
with being a public company.
The Company incurred legal and professional expenses of $673,293 and $1,597,563
for the years ending December 31, 2002 and 2001, respectively, which amounts are
not included in the general and administrative expenses noted above and
represent 50.2% and 89.5% of the total expenses incurred by the Company. The
decrease is because the Company completed its merger with Celebrity Sports in
2001 and incurred significant legal and professional fees in the form of common
stock and treasury stock.
The Company incurred lease operating expenses totaling $231,517 and $95,451
during 2002 and 2001, respectively, which represents 17.3% and 5.3% of the total
expenses. In 2002, the Company drilled a few wells and performed procedures
related to making several properties operational, including working with various
operators in the Powder River Basin. The Company's travel expenses were $21,835
and $66,655 for the years ended December 31, 2002 and 2001, respectively, which
represents 1.6% and 3.7% of the total expenses incurred by the Company during
the respective fiscal years, because 2001 included many trips between Texas and
Wyoming to acquire leasehold interests, while 2002 had less such activity.
In 2002, the management of the Company was unable to secure financing for the
proposed drilling programs which was primarily due to general market conditions
and the fact that the Chief Executive Officer, which the Company hired during
2002, resigned in the 3rd Quarter for personal reasons. The Company, however,
anticipates that it will be able to raise the necessary funds to commence
drilling operations on its leasehold properties during the 2003 fiscal year.
Net Income (Loss)
Net loss for the fiscal years ended December 31, 2002 and 2001 were $1,344,796
and $1,786,236, respectively or $0.07 and $0.19 per share. The majority of the
net loss is categorized in general and administrative expenses, lease operating
costs, legal and professional services and travel, as more fully described
above.
Liquidity and Capital Resources
Net cash used in operating activities was $241,720 and $176,967 for the fiscal
years ended December 31, 2002 and 2001, respectively. Cash used in investing
activities was $283,400 and $843,400 for the same periods and cash provided by
investing activities was $535,353 and $1,022,690 for the fiscal years ended
December 31, 2002 and 2001, respectively.
The Company's working capital deficit on December 31, 2002 and 2001 was
$1,094,517 and $880,271, respectively. This deficit resulted primarily from the
use of short-term debt and accounts payable to finance the acquisition of
leasehold interests in the Powder River Basin, which as noted above, amounted to
$283,400 and $843,400 during 2002 and 2001, respectively, as well as the ongoing
operations of the Company and costs associated with being a public company.
The Company has no established revenue sources and continues to rely on loans
from shareholders, sales of equity and other financing to sustain operations as
a going concern. There is currently no agreement from any officer or shareholder
to continue to provide working capital as required, to maintain operations.
Non-Cash Transactions
The non cash transactions for the year ended December 31, 2002 were as follows:
250,000 shares of treasury stock was issued to a vendor to satisfy an accounts
payable and 630,000 shares of treasury stock were issued in January 2002 for
services at $0.61 per share; 1,130,000 shares of treasury stock were issued
March 2002 for services at $0.59 per share; 630,000 shares of treasury stock
were issued in July 2002 for services at $0.09 per share; and 500,000 shares of
common stock were issued in July 2002 to a related party for reduction of debt
at $0.20 per share.
The non cash transactions for the year ended December 31, 2001 were as follows:
3,350,000 shares of common stock were issued on June 13, 2001 for organizational
expenses at $0.001 per share; 5,650,000 shares of common stock were issued in
September, 2001 for the acquisition of Powder River Basin Gas Corp. at $0.001
per share; 5,040,000 shares of common stock were returned due to non-completion
of services in connection with the acquisition of Powder River Basin Gas Corp.
at $0.001 per share; 100,000 shares of common stock issued in September, 2001
for satisfaction of certain accounts payable at $0.81 per share; 560,000 shares
of treasury stock were issued in October, 2001 for services at $0.81 per share;
920,000 shares of treasury stock were issued in November, 2001 for services at
$1.11 per share; and 247,833 shares of common stock issued in December, 2001 to
satisfy debt associated with the acquisition of oil and gas leases at $1.00 per
share.
Current Liabilities
On December 31, 2002 and 2001, the Company had approximately $1,107,073 and
$882,594, respectively, in current liabilities. $317,700 and $332,700 at
December 31, 2002 and 2001, respectively, was due Taghmen Ventures, Ltd. Mr.
Gregory C. Smith, Chairman of the Company is the General Partner for Taghmen
Ventures Ltd. and owns approximately 1% of Taghmen Ventures Ltd. These amounts
represent funds advanced to the Company in 2001 by Taghmen Ventures, Ltd. for
working capital purposes.
History of Losses
The Company incurred net losses of $1.3 million and $1.8 million for the years
ended December 31, 2002 and 2001, respectively. Prior to 2001, the Company had
no previous net losses due to its formation in 2001. The Company may continue to
incur net losses during 2003 and, to the extent that it remains without
operational funding, such losses may continue.
Operational Management
The Company currently has no operational management and will require the
retention of qualified individuals in the field of oil and gas exploration in
order for it to realize the full potential of its leasehold assets and therefore
maximize shareholder value. The Company has been actively recruiting experienced
personnel in this area and believes it has identified a management team to
initiate its development plans.
Need for Additional Financing for Growth
The growth of the Company's business will require substantial capital on a
continuing basis, and there is no assurance that any such required additional
capital will be available on satisfactory terms and conditions, if at all. The
Company may pursue, from time to time, opportunities to acquire oil and natural
gas properties and businesses that may utilize the capital currently expected to
be available for its present operations. The amount and timing of the Company's
future capital requirements, if any, may depend upon a number of factors,
including drilling costs, transportation costs, equipment costs, marketing
expenses, staffing levels and competitive conditions, and any purchases or
dispositions of assets, many of which are not within the Company's control.
Failure to obtain any required additional financing could materially adversely
affect the growth, cash flow and earnings of the Company. In addition, the
Company's pursuit of additional capital could result in the incurrence of
additional debt or potentially dilutive issuances of additional equity
securities.
The Company's ability to meet any future debt service obligations will be
dependent upon the Company's future performance, which will be subject to oil
and natural gas prices, the Company's level of production, general economic
conditions and financial, business and other factors affecting the operations of
the Company, many of which are beyond its control. There can be no assurance
that the Company's future performance will not be adversely affected by such
changes in oil and natural gas prices and/or production nor by such economic
conditions and/or financial, business and other factors. In addition, there can
be no assurance that the Company's business will generate sufficient cash flow
from operations or that future bank credit will be available in an amount to
enable the Company to service its indebtedness or make necessary expenditures.
In such event, the Company would be required to obtain such financing from the
sale of equity securities or other debt financing. There can be no assurance
that any such financing will be available on terms acceptable to the Company.
Should sufficient capital not be available, the Company may not be able to
continue to implement its business strategy.
Acquisition Risks
The Company's business strategy includes focused acquisitions of , and drilling
operations may be curtailed, delayed or canceled as a result of a variety of
factors, including unexpected drilling conditions, pressure or irregularities in
formations, equipment failures or accidents, weather conditions and shortages or
delays in the delivery of equipment. In addition, any use by the Company of
3-dimensional seismic and other advanced technology requires greater
pre-drilling expenditures than traditional drilling strategies. There can be no
assurance as to the success of the Company's future drilling activities.
Geographic Concentration of Operations
All of the Company's current operations are located in Wyoming. Because of this
concentration, any regional events that increase costs or competition, reduce
availability of equipment or supplies, reduce demand or limit production will
impact the Company more adversely than if the Company was geographically
diversified.
Inability to Develop Additional Reserves
The Company's future success as an oil and natural gas producer depends upon its
ability to find, develop and acquire additional oil and natural gas reserves
that are economically recoverable. Except to the extent that the Company
conducts successful development activities or acquires properties containing
proved reserves, the Company's proved reserves will generally decline as
reserves are produced. There can be no assurance that the Company will be able
to locate additional reserves or that the Company will drill economically
productive wells or acquire properties containing proved reserves.
Certain Industry and Marketing Risks
The Company's operations are subject to the risks and uncertainties associated
with drilling for, producing and transporting of oil and natural gas. The
Company's future ability to market its natural gas and oil production will
depend upon the availability and capacity of natural gas gathering systems and
pipelines and other transportation facilities. Federal and state regulation of
oil and natural gas production and transportation, general economic conditions,
changes in supply and in demand all could materially adversely affect the
Company's ability to market its oil and natural gas production.
Effects of Changing Prices
The future financial condition and results of operations of the Company depend
upon the prices it receives for its oil and natural gas and the costs of
acquiring, developing and producing oil and natural gas. Oil and natural gas
prices have historically been volatile and are subject to fluctuations in
response to changes in supply, market uncertainty and a variety of additional
factors that are also beyond the Company's control. These factors include,
without limitation, the level of domestic production, the availability of
imported oil and natural gas, actions taken by foreign oil and natural gas
producing nations, the availability of transportation systems with adequate
capacity, the availability of competitive fuels, fluctuating and seasonal demand
for natural gas, conservation and the extent of governmental regulation of
production, weather, foreign and domestic government relations, the price of
domestic and imported oil and natural gas, and the overall economic environment.
A substantial or extended decline in oil and/or natural gas prices could have a
material adverse effect on the Company's estimated value of its natural gas and
oil reserves, and on its financial position, results of operations and access to
capital. The Company's ability to maintain or increase its borrowing capacity,
to repay current or future indebtedness and to obtain additional capital on
attractive terms is substantially dependent upon oil and natural gas prices.
The Company uses the full cost method of accounting for its investment in oil
and gas properties. Under the full cost method of accounting, all costs of
acquisition, exploration and development of oil and gas reserves are capitalized
into a "full cost pool" as incurred, and properties in the pool are depleted and
charged to operations using the unit-of-production method based on the ratio of
current production to total proved oil and gas reserves. To the extent that such
capitalized costs (net of accumulated depreciation, depletion and amortization)
less deferred taxes exceed the SEC PV-10 (present value discounted at 10% as
dictated by the SEC) of estimated future net cash flow from proved reserves of
oil and gas, and the lower of cost or fair value of unproved properties after
income tax effects, such excess costs are charged against earnings. Once
incurred, a write-down of oil and gas properties is not reversible at a later
date even if oil or gas prices increase.
Operating Hazards and Uninsured Risks
The Company's operations are subject to the risks inherent in the oil and
natural gas industry, including the risks of fire, explosions, blow-outs, pipe
failure, abnormally pressured formations and environmental accidents such as oil
spills, gas leaks, ruptures or discharges of toxic gases, brine or well fluids
into the environment (including groundwater contamination). The occurrence of
any of these risks could result in substantial losses to the Company due to
injury or loss of life, severe damage to or destruction of property, natural
resources and, equipment, pollution or other environmental damage, clean-up
responsibilities, regulatory investigation and penalties and suspension of
operations. In accordance with customary industry practice, the Company
maintains insurance against some, but not all, of the risks described above.
There can be no assurance that any insurance maintained by the Company will be
adequate to cover any such losses or liabilities. Further, the Company cannot
predict the continued availability of insurance, or availability at commercially
acceptable premium levels. The Company does not carry business interruption
insurance. Losses and liabilities arising from uninsured or under-insured events
could have a material adverse effect on the financial condition and operations
of the Company. From time to time, due primarily to contract terms, pipeline
interruptions or weather conditions, the producing wells in which the Company
owns an interest have been subject to production curtailments. The curtailments
range from production being partially restricted to wells being completely
shut-in. The duration of curtailments varies from a few days to several months.
In most cases the Company is provided only limited notice as to when production
will be curtailed and the duration of such curtailments. The Company is not
currently experiencing any material curtailment on its production.
Inflation and Changing Prices
The impact of inflation, as always, is difficult to assess. The Company cannot
anticipate whether the present level of inflation will remain, however, a sudden
increase in inflation and/or an increase in operating costs or drilling costs
coupled with a reversal of current pricing could have an adverse effect on the
operations of the Company.
Financial Statements
Contents
Page
Independent Auditors' Report F-2
Financial Statements
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholder's Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Powder River Basin Gas Corp.
Dallas, TX
We have audited the accompanying consolidated balance sheets of Powder River
Basin Gas Corp. as of December 31, 2002 and 2001 and the related consolidated
statements of operations, stockholders' equity and cash flows for the period
ended December 31, 2002 and from inception on June 13, 2001 through December 31,
2001 and 2002. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Powder
River Basin Gas Corp. as of December 31, 2002 and 2001 and the consolidated
results of their operations and their cash flows for the period ended December
31, 2002 and from inception on June 13, 2001 through December 31, 2001 and 2002,
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note to the
consolidated financial statements, the Company has suffered recurring operating
losses and is dependent upon financing to continue operations, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans with regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
\s\
Chisholm & Associates
North Salt Lake, Utah
April 10, 2003
POWDER RIVER BASIN GAS CORP.
Consolidated Balance Sheets
ASSETS
December 31, December 31,
2002 2001
----------------------------
CURRENT ASSETS
Cash $ 12,556 $ 2,323
------------ ------------
Total Current Assets $ 12,556 2,323
----------- ------------
OIL AND GAS PROPERTIES USING
FULL COST ACCOUNTING (Note 1)
Properties not subject to amortization 1,853,469 1,570,069
Accumulated amortization - -
------------ ------------
Net Oil and Gas Properties 1,853,469 1,570,069
----------- ------------
TOTAL ASSETS $ 1,866,025 $ 1,572,392
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 114,020 $ 524,894
Accrued expenses 48,953 -
Related party payable (Note 3) 317,700 332,700
Notes payable (Note 3) 626,400 25,000
----------- ------------
Total Current Liabilities 1,107,073 882,594
----------- ------------
Total Liabilities 1,107,073 882,594
----------- ------------
STOCKHOLDERS' EQUITY
Common stock; par value $0.001 per share;
authorized 50,000,000 shares; 20,437,833
and 19,907,833 shares issued and 19,517,833
and 16,347,833 outstanding, respectively 20,437 19,907
Capital in excess of par value 3,870,467 2,459,687
Accumulated deficit (3,131,032) (1,786,236)
Treasury stock; 920,000 and 3,560,000 shares (920) (3,560)
----------- ------------
Total Stockholders' Equity 758,952 689,798
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,866,025 $ 1,572,392
=========== ============
The accompanying notes are an integral part of
these consolidated financial statements.
POWDER RIVER BASIN GAS CORP.
Consolidated Statements of Operations
From
From Inception Inception on
For the Year on June 13, June 13,
Ended 2001 through 2001 Through
December December 31, December 31,
2002 2001 2002
-----------------------------------------
REVENUE
Oil and gas sales $ 15,000 $ - $ 15,000
----------- ----------- ------------
Total Revenue $ 15,000 - 15,000
----------- ----------- ------------
EXPENSES
General and administrative 414,568 25,927 440,495
Lease operating costs 231,517 95,451 326,968
Legal and professional 673,293 1,597,563 2,270,856
Travel 21,835 66,655 88,490
----------- ----------- ------------
Total Expenses 1,341,213 1,785,596 3,126,809
----------- ----------- ------------
NET OPERATING LOSS (1,326,213) (1,785,596) (3,111,809)
----------- ----------- -------------
OTHER INCOME (EXPENSES)
Interest expense (18,583) (640) (19,223)
----------- ----------- -------------
Total Other Income (Expenses) (18,583) (640) (19,223)
----------- ----------- -------------
NET LOSS $(1,344,796) $(1,786,236) $(3,131,032)
========================================
BASIC LOSS PER COMMON SHARE $ (0.07) $ (0.19) $ (0.18)
========================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 20,161,422 9,341,538 17,249,831
========================================
The accompanying notes are an integral part of
these consolidated financial statements.
POWDER RIVER BASIN GAS CORP.
Consolidated Statements of Stockholders' Equity
From Inception on June 13, 2001 through December 31, 2002
Common Stock Treasury Stock
------------------- Paid-In Retained ----------------------
Shares Amount Capital Deficit Shares Amount
--------- --------- ---------- --------- ---------- ----------
Balance at inception on
June 13, 2001 - $ - $ - $ - - $ -
Common stock issued for
organization costs, $0.001
per share 3,350,000 3,350 - - - -
Common stock issued for
services at $0.001 per share 5,650,000 5,650 - - - -
Common stock returned due to
noncompletion of services at
$0.001 per share - - - - (5,040,000) (5,040)
Reverse acquisition adjustment 9,960,000 9,960 (9,960) - - -
Common stock issued for related
party payable at $0.81 per share 100,000 100 80,900 - - -
Common stock issued for services
at $0.81 per share - - 453,040 - 560,000 -
Common stock issued for cash
at $1.10 per share 600,000 600 664,390 - - -
Common stock issued for services
at $1.11 per share - - 1,023,730 - 920,000 920
Common stock issued in lieu of
accounts payable at $1.00 per share 247,833 247 247,587 - -
Net loss for the year ended
December 31, 2001 - - - (1,786,236) - -
---------- --------- ---------- -------------------------------------
Balance, December 31, 2001 19,907,833 $ 19,907 $2,459,687 $(1,786,236) (3,560,000) $ (3,560)
The accompanying notes are an integral part of
these consolidated financial statements.
POWDER RIVER BASIN GAS CORP.
Consolidated Statements of Stockholders' Equity
From Inception on June 13, 2001 through December 31, 2002 (continued)
Common Stock Treasury Stock
--------------------- Paid-In Retained -----------------------
Shares Amount Capital Deficit Shares Amount
---------- --------- ----------- ----------- ---------- ----------
Balance, December 31, 2001 19,907,833 $ 19,907 $2,459,687 $(1,786,236) (3,560,000) $ (3,560)
Common stock issued for payables
at $0.61 per share - - 152,250 - 250,000 250
Common stock issued for services
valued at $0.61 per share - - 407,420 - 630,000 630
Common stock issued for cash at
$1.00 per share 30,000 30 29,970 - - -
Common stock issued for services
at $0.59 per share - - 665,570 - 1,130,000 1,130
Common stock issued for services
at $0.09 per share - - 56,070 - 630,000 630
Common stock issued for related party
payables at $0.20 per share 500,000 500 99,500 - - -
Net loss for the year ended
December 31, 2002 - - - (1,344,796) - -
---------- --------- ---------- ----------- ---------- -------
Balance, December 31, 2002 20,437,833 $ 20,437 $3,870,467 $(3,131,032) (920,000) (920)
========== ========= ========== ============ ========= ========
The accompanying notes are an integral part of
these consolidated financial statements.
POWDER RIVER BASIN GAS CORP.
Consolidated Statements of Cash Flows
From From
Inception Inception
For the Year June 13, June 13,
Ended 2001 through 2001 through
December December 31, December 31,
2002 2001 2002
------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (1,344,796) $(1,786,236) (3,131,032)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Common stock issued for services rendered 1,131,450 1,482,210 2,613,660
Common stock issued for retirement of accounts payable 252,500 81,000 333,500
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable (361,921) 46,059 (234,815)
----------- ---------- -----------
Net Cash Provided (Used) by Operating Activities (322,767) (176,967) (418,687)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for oil and gas property development (283,400) (843,400) (1,126,800)
----------- ------------- ----------
Net Cash (Used) by Investing Activities (283,400) (843,400) (1,126,800)
----------- ------------- ----------
(843,400) (1,126,800)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable and long-term liabilities (88,100)
- - (169,147)
Proceeds from notes payable and long-term liabilities 674,500 357,700 1,032,200
Proceeds from issuance of common stock 30,000 664,990 694,990
----------- ----------- -----------
Net Cash Provided by Financing Activities 616,400 1,022,690 1,558,043
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 10,233 2,323 12,556
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,323 - -
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR 12,556 $ 2,323 12,556
=========== =========== ===========
CASH PAID FOR:
Interest $ 18,583 $ 640 $ 19,223
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for payment of accounts payable pertaining
to acquisition of oil and gas properties $ 152,500 $ 247,834 $ 400,334
Common stock issued to retire accounts payable $ 100,000 $ 81,000 $ 181,000
POWDER RIVER BASIN GAS CORP.
Notes to the Consolidated Financial Statements
December 31, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was incorporated under the laws of Colorado on August 27, 1999 as
Celebrity Sports Network, Inc. The principal activities since inception have
been organizational matters and obtaining financing. The Company was formed in
an effort to broaden the scope of public appearances available to current and
former professional athletes. The Company, however, changed their operations in
2001 through a reverse acquisition with Powder River Basin Gas Corp., an oil and
gas company.
Power River Basin Gas Corp. (PRBG) was incorporated in the state of Colorado on
June 13, 2001. The Company is engaged in the business of assembling and managing
a portfolio of undeveloped acreage in the Powder River basin coal bed methane
(CBM) play in Sheridan County, Wyoming. This acreage is located in a proven
geological setting and near operators such as Western Gas Resources, Barrett
Resources, Phillips Petroleum, J.M. Huber and others. The Company has leasehold
interests in 8,096.83 net acres. Two wells have been drilled on one lease and
eleven additional wells have been spudded.
Pursuant to a reverse acquisition and reorganization agreement, PRBG was
acquired by Celebrity Sports on September 5, 2001. At the time of the
acquisition, the Company changed its name to Power River Basin Gas Corp. The
Company issued 9,000,000 shares of common stock for all the issued and
outstanding stock of PRBG; thus, making PRBG a wholly-owned subsidiary of the
Company.
Because PRBG is the accounting acquirer in the reverse acquisition, all
financial history in these financial statements are that of PRBG.
The Company issued 9,000,000 shares of common stock for the receipt of 9,000,000
shares of PRBG, therefore, an adjustment to the shares outstanding was necessary
to reflect the other shareholders of the Company at the time of acquisition. No
goodwill was recorded in the acquisition, and the purchase method of accounting
was used in recording the business combination.
b. Revenue and Cost Recognition
The Company's consolidated financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31, year end.
Powder River BAsin Gas Corp.
Notes to Consolidated Financial Statements (continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Oil and Gas Properties
The full cost method is used in accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and development
of oil and gas reserves, including directly related overhead costs, are
capitalized. In addition, depreciation on property and equipment used in oil and
gas exploration and interest costs incurred with respect to financing oil and
gas acquisition, exploration and development activities are capitalized in
accordance with full cost accounting. Capitalized interest for the year ended
December 31, 2002 was $0. All capitalized costs of proved oil and gas properties
subject to amortization are being amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects not subject to amortization are not amortized until proved
reserves associated with the projects can be determined or until impairment
occurs. If the results of an assessment indicate that the properties are
impaired, the amount of the impairment is added to the capitalized costs to be
amortized. As of December 31, 2002, proved oil and gas reserves had been
identified on one of the Companies oil and gas properties, however, no
extraction has begun; therefore, no amortization has been recorded for the year
ending December 31, 2002. All other wells are incomplete as of December 31,
2002.
c. Bad Debts
Bad debts on receivables are charged to expense in the year the receivable is
determined uncollectible, therefore, no allowance for doubtful accounts in
included in the financial statements. Amounts determined as uncollectible are
not significant to the overall presentation of the financial statements.
d. Basis of Consolidation
The consolidated financial statements include the accounts of Celebrity Sports
Network, Inc. and PRBG. All significant inter-company accounts and transactions
have been eliminated in the consolidation.
e. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Income (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
For the year ended December 31, 2002:
Basic EPS
Income (loss) to common
stockholders $(1,344,796) 20,161,422 $ (0.07)
=========== ============= ===========
For the year ended December 31, 2001:
Basic EPS
Income (loss) to common
stockholders $ (1,786,236) 9,341,538 $(0.19)
============ ========= =======
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
g. Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss, tax
credit carry-forwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax will not
be realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
December 31, December 31,
2002 2001
Deferred tax assets:
Net operation loss carry-forwards $ 3,100,000 $ 1,700,000
------------ -----------
Total Deferred Tax Assets 1,054,000 578,000
Valuation allowance for deferred
tax assets (1,054,000) (578,000)
------------ -----------
$ - $ -
============ ===========
At December 31, 2002, the Company has net operating losses of $3,131,032 which
expire beginning in 2022.
h. Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. In these financial statements assets and
liabilities involve extensive reliance on management's estimates. Actual results
could differ from those estimates.
i. Property and Equipment
In accordance with Financial Accounting Standards Board Statement No. 121, the
Company records impairment of long-lived assets to be held and used or to be
disposed of when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the carrying
amount. At December 31, 2002 and 2001, no impairments were recognized.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Financial Instruments
The recorded amounts of financial instruments, including cash equivalents,
accounts payable and accrued expenses, and long-term debt approximate their
market values as of December 31, 2002. The Company has no investments in
derivative financial instruments.
k. Newly Issued Pronouncements
In July 2001, the Financial Accounting Standards Board issued two statements -
Statement 141, BUSINESS COMBINATIONS, and Statement 142, GOODWILL AND OTHER
INTANGIBLE ASSETS.
Statement 141:
o Eliminates the pooling method for accounting for business
combinations.
o Requires that intangible assets that meet certain criteria be
reported separately from goodwill.
o Requires negative goodwill arising from a business combination to be
recorded as an extraordinary gain.
Statement 142:
o Eliminates the amortization of goodwill and other intangibles that
are determined to have an indefinite life.
o Requires, at a minimum, annual impairment tests for goodwill and
other intangible assets that are determined to have an indefinite life.
Upon adoption of these Statements, the Company is required to:
o Re-evaluate goodwill and other intangible assets that arose from
business combinations entered into before July 1, 2001. If the recorded
other intangibles assets do not meet the criteria for recognition, they
should be reclassified to goodwill. Similarly, if there are other
intangible assets that meet the criteria for recognition but were not
separately recorded from goodwill, they should be reclassified from
goodwill.
o Reassess the useful lives of intangible assets and adjust the
remaining amortization periods accordingly.
o Write-off any remaining negative goodwill.
The Company completed its assessment of the effects of these new pronouncements
on its financial statements and believes the effects to be immaterial. The
standards were implemented by the Company in its 2002 consolidated financial
statements.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
recurring operating losses and is dependent upon raising capital to continue
operations. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. It is management's plan to raise
additional funds to continue the exploration of the leases, and then to begin
extracting methane to sell and generate the necessary funds to continue
operations.
NOTE 3 - LONG-TERM LIABILITIES
Long-term liabilities are detailed in the following schedules as of
December 31, 2002:
Notes payable:
Note payable to a company, due in total in January 2002,
including interest at 10%. $ 86,400
Note payable to an individual, due in total in January 2003,
including interest at 12% 25,000
Note payable to an individual, due in total in May 2003 40,000
Convertible debenture to a Company, due in total by conversion of
stock, including interest at 6% 260,000
Note payable to a Company, due in total on March 2003,
including interest at 7.10% 215,000
------------
Total Notes Payable $ 626,400
------------
NOTE 3 - LONG-TERM LIABILITIES (Continued)
Notes payable - related party
Note payable to Taghmen Ventures, LLC a company owned
partially by Greg Smith, the Company's president, unsecured
and bears no interest. $ 317,700
------------
Total notes payable - related party 317,700
------------
Total long-term liabilities 944,100
------------
Less: current portion (626,400)
Less: current portion-related party (317,700)
------------
Total current portion (944,100)
------------
Total Long-Term Liabilities $ -
------------
Future minimum principal payments on notes payable
are as follows: 2003 $ 944,100
------------
Total $ 944,100
NOTE 4 - RELATED PARTY TRANSACTIONS
During 2001, Taghmen Ventures Ltd. advanced funds to the Company. Gregory C.
Smith, the Company's Chairman, is the General Partner of Taghmen Ventures and
owns approximately 1%. Advances of $350,000 and payments of $17,300 were made
during 2001 and payments of $15,000 were made during 2002. The note has a
balance due at December 31, 2002 and 2001 of $317,700 and $332,700,
respectively. The note is non-interest bearing and due in February 2002. During
2002 Gregory C. Smith converted $100,000 in accrued compensation into 500,000
shares of common stock.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company has entered into various oil and gas leases from several land
owners. Associated with the agreements, the Company is committed to various
royalty agreements ranging from 15% to 25% of gross revenue production. Some of
the leases also provide for a minimum royalty. As of December 31, 2002, no
royalties were due.
NOTE 6 - STOCK TRANSACTIONS
On June 13, 2001, the Company issued 3,350,000 shares of common stock for
organization expenses at $0.001 per share.
In September 2001, the Company issued 5,650,000 shares for services provided in
connection with the acquisition of Powder River Basin Gas Corp. at $0.001 per
share.
In September 2001, 5,040,000 shares of the Company's common stock was returned
due to noncompletion of services in connection with the acquisition of Powder
River Basin Gas Corp. at $.001 per share.
In September 2001, the Company issued 100,000 shares to a vendor for
satisfaction of accounts payable at $0.81 per share.
In October 2001, the Company issued 560,000 shares of treasury stock for
services at $0.81 per share.
In October 2001, the Company authorized the issuance of 600,000 shares for cash
of $664,990 at $1.10 per share, pursuant to a Reg D 506 exempt offering,
In November 2001, the Company issued 920,000 shares of treasury stock for
services at $1.11 per share.
In December 2001, the Company issued 247,833 shares to satisfy debt associated
with the acquisition of oil and gas leases at $1.00 per share.
In January 2002, the Company issued 250,000 shares of treasury stock to a vendor
to satisfy accounts payable at $0.61 per share.
In January 2002, the Company issued 630,000 shares of treasury stock for
services at $0.61 per share.
In March 2002, the Company issued 30,000 shares of common stock at $1.00 per
share.
In March 2002, the Company issued 1,130,000 shares of treasury stock for
services at $0.59 per share.
In July 2002, the Company issued 630,000 shares of treasury stock for services
at $0.09 per share.
In July 2002, the Company issued 500,000 shares of common stock to a related
party for reduction of debt at $0.20 per share.
NOTE 7 - SUBSEQUENT EVENTS
In March 2003, loans associated with leased properties were in default and as a
result properties were given back to satisfy debt, properties were valued at
$455,000.
In January 2003, 4,000,000 shares of common stock was issued to reduce debt in
the amount of $130,000.
NOTE 8 - PRIOR PERIOD RESTATEMENT FOR COMMON STOCK TRANSACTIONS
The Company previously omitted the return of 5,040,000 shares of their common
stock to treasury stock and the subsequent issuance of 1,480,000 shares of
treasury stock. The 5,040,000 shares were returned to the Company in September
at a value of $5,040. In October and November, the Company issued 1,480,000
shares of treasury stock for services valued at $1,478,250. Due to the omission
of these transactions, the financial statements at December 31, 2001 have been
restated.
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
During 2001, Powder River Basin Gas Corp. elected to change from the auditing
accounting firm of:
Cordovano and Harvey, P.C.
201 Steele Street, Suite 300
Denver, Colorado 80206
To the auditing accounting firm of:
Chisholm & Associates
P.O. Box 540216
North Salt Lake, Utah 84054
The Company's management is familiar with the new firm and felt that the new
independent accountant will provide quality and timely service.
The Board of Directors approved the change in accounting firm as of November 27,
2001.
The new accounting firm was not consulted prior to engagement on any specific
accounting matter either completed or proposed.
Powder River Basin Gas Corp. has never had nor anticipates having, nor had
during the most recent two fiscal years or any subsequent interim period
proceeding the date of change, any disagreements with accountants on matters of
accounting, financial disclosure, matter of accounting principles or practices,
or auditing scope or procedure; nor has any principal accountant, currently or
in the past recent years, resigned or declined to stand for reelection.
The financial statements audited by the principal accountant for the past two
years do not contain an adverse opinion or disclaimer of opinion or were
modified as to uncertainty, audit scope or accounting principles.
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act
Powder River Basin Gas Corp.'s sole director and principal executive officer is
as follows:
Name Age Position
Gregory C. Smith 42 President and Chairman of the Board
Gregory C. Smith has been involved in the workout and structured finance
business for eighteen years. From 1996 to 1998, Mr. Smith was an independent
merchant banker in the real estate industry, where he primarily acted as an
investor and developer. Since 1998, he has served as President of Renaissance
Companies, Inc., a privately held firm specializing in providing debt and
structured finance advisory services to real estate opportunity funds,
institutional investors and developers. Previous experience includes work in the
commercial real estate field as both a principle and advisor and the financing
and ownership of oil and gas properties in Texas and Oklahoma. Currently, Mr.
Smith also serves as a Special Consultant to Fossil Bay Resources, a junior oil
and gas company listed on the CDNX. Mr. Smith holds a Bachelor of Science in
Business from the University of Nevada.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
directors and officers, and persons who own more than ten-percent (10%) of the
company's common stock, to file with the Securities and Exchange Commission
reports of ownership on Form 3 and reports of change in ownership on Forms 4 and
5. Such officers, directors and ten-percent stockholders are also required to
furnish the company with copies of all Section 16(a) reports they file. Based
solely on its review of the copies of such forms received by the company and on
written representations from certain reporting persons, the Company believes
that all Section 16(a) reports applicable to its officers, directors and
ten-percent stockholders with respect to the fiscal years ended December 31,
2002 and 2001 were filed.
Executive Compensation
Since inception, Powder River Basin Gas Corp. has paid no cash compensation to
its officers or directors. Officers of the company will be reimbursed for
out-of-pocket expenses and may be compensated for the time devoted to the
Company. In addition, officers may receive compensation for services performed
on behalf of the Company. The terms of any such compensation will be determined
on the basis of the nature and extent of the services which may be required and
will be no less favorable to the company than the charges for similar services
made by independent third parties who are similarly qualified.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of Powder River Basin Gas Corp.'s common stock as of December 2001, by
each person or entity known to be the beneficial owner of more than 5% of the
outstanding shares of common stock, each of our directors and named executive
officers.
Title of Class Name of Beneficial Owner Number Shares % of Class
Common Stock Gregory C. Smith 4,430,000 21.68
Common Stock Alan L. Edgar 1,200,000 5.87
Common Stock Taghmen Ventures Ltd. 5,455,000 26.69
Total Shares of 5% or more Beneficial Ownership 11,085,000 54.24
Total Shares Issued and Outstanding 20,437,833
Gregory C. Smith is the General Partner for Taghmen Ventures Ltd. and has
dispositive control of those shares and is the beneficial owner of 1% of the
outstanding shares thereof.
Certain Relationships and Related Transactions
During 2001, Taghmen Ventures Ltd. advanced funds to the Company. The Company's
president is the general partner of Taghmen Ventures Ltd. and is the beneficial
owner of one percent (1%) of the entity. Advances of $350,000 were made in 2001
and payments of $15,000 and $17,300 were made during 2002 and 2001,
respectively. The balance of the note was $317,700 and $332,700 at December 31,
2002 and 2001, respectively and the note is non-interest bearing and was due in
February 2002.
On June 13, 2001, the Company issued 3,350,000 shares of common stock for
organization expenses at $0.001 per share.
In September 2001, the Company issued 5,650,000 shares for services provided in
connection with the acquisition of Powder River Basin Gas Corp. at $0.001 per
share.
In September 2001, 5,040,000 shares of the Company's common stock were returned
due to non-completion of services in connection with the acquisition of Powder
River Basin Gas Corp. at $0.001 per share.
In September 2001, the Company issued 100,000 shares to a vendor for
satisfaction of accounts payable at $0.81 per share.
In October 2001, the Company issued 560,000 shares of treasury stock for
services at $0.81 per share.
In October 2001, the Company authorized the issuance of 600,000 shares for cash
of $664,990 at $1.10 per share, pursuant to a Reg. D 506 exempt offering
In November 2001, the Company issued 920,000 shares of treasury stock for
services at $1.11 per share.
In December 2001, the Company issued 247,833 shares to satisfy debt associated
with the acquisition of oil and gas leases at $1.00 per share.
In January 2002, the Company issued 250,000 shares of treasury stock to a vendor
to satisfy accounts payable at $0.61 per share and issued 630,000 shares of
treasury stock for services at $0.61 per share.
In March 2002, the Company issued 30,000 shares of common stock at $1.00 per
share.
In March 2002, the Company issued 1,130,000 shares of treasury stock for
services at $0.59 per share.
In July 2002, the Company issued 630,000 shares of treasury stock for services
at $0.09 per share.
In July 2002, the Company issued 500,000 shares of common stock to a related
party for reduction of debt at $0.20 per share.
Exhibits and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1) Independent auditors' report.
2) Powder River Basin Gas Corp. financial statements:
3) Consolidated balance sheets as of December 31, 2002 and 2001
4) Consolidated statement of operations from inception (June 13, 2001) through
December 31, 2002 and for the years ended December 31, 2002 and 2001
5) Consolidated statement of stockholders' equity from inception(June 13, 2001)
through December 31, 2002 and for the years ended December 31, 2002 and 2001
6) Consolidated statements of cash flows from inception (June 13, 2001) through
December 31, 2002 and for the years ended December 31, 2002 and 2001
7) Notes to consolidated financial statements
(b) Exhibits
Number Description
3 (a) Articles of Incorporation
Powder River Basin Gas Corp. incorporates by reference the exhibit
3(a)(i) Articles of Incorporation, and exhibit 3(a)(ii) Amended and
Restated Articles of Incorporation, filed with registration statement
on Form 10-SB, November 14, 2000.
3 (b) Bylaws
Powder River Basin Gas Corp. incorporates by reference the exhibit 3(b)
Bylaws as filed with its registration statement on Form 10-SB, filed
November 14, 2000.
16 Letter on Change in Certifying Accountant
Powder River Basin Gas Corp. incorporates by reference the exhibit 16
filed with its Report on Form 8-K, as amended, filed December 4, 2001.
99.1 Certification of Principal Executive Officer and Chief Financial
Officer pursuant to 18 U.S.S. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(c) Reports on Form 8-K
1. Report on Form 8-K, Celebrity Sports Network, Inc., filed September 20, 2001;
a) Change of Control of Registrant
b) Acquisition or Disposition of Assets
c) Other Events - 39:1 Stock Dividend Distribution
d) Resignation of Registrant's Directors
e) Financial Statements and Exhibits
Financial Statements of Powder River Basin Gas Corp.
for the period from inception to August 31, 2001.
2. Report on Form 8-K, as amended, Celebrity Sports Network, Inc., filed
December 4, 2001; Change in Registrant's Certifying Accountant
3. Report on Form 8-K, as amended, Powder River Basin Gas Corp. filed October
22, 2002; Resignation of Chief Executive Officer
Controls and Procedures
Within the 90 days prior to the date of this Form 10-KSB, PRVB carried out an
evaluation, under the supervision and with the participation of management,
including its chief executive officer and chief accounting officer, of the
effectiveness of the design and operation of its disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, its
chief executive officer and chief accounting officer concluded that the
disclosure controls and procedures are effective in timely alerting them to
material information relating to the company required to be included in periodic
SEC filings. There have been no significant changes in internal controls or in
other factors, which could significantly affect internal controls subsequent to
the date management carried out their evaluation
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has dully caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. Powder River Basin Gas
Corp. Registrant
By: \s\ Gregory C. Smith, President and Chairman
Gregory C. Smith, President and Chairman
Date: April 15, 2003
Certificate of Chief Executive Officer
I, Gregory C. Smith, President and Chairman of Powder River Basin Gas Corp.
certify that:
1. I have reviewed this annual report on Form 10-KSB of Powder River Basin
Gas Corp. ("PRVB").
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report.
3. Based on my knowledge, the financial statements and other financial
information included in this annual report fairly present, in all material
respects, the financial condition, results of operations and cash flows of
PRVB as of, and for, the periods presented in this report.
4. PRVB's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in the
Exchange Act Rules 13a-14 and 15d-14) for PRVB and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to PRVB, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b. evaluated the effectiveness of PRVB's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. PRVB's other certifying officers and I have disclosed, based on our most
recent evaluation, to our auditors:
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect PRVB's ability to record,
process, summarize and report financial data and have identified for
PRVB's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in PRVB's internal
controls.
6. PRVB's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 15th, 2003 ____________________________________________________
Gregory C. Smith, President and Chairman
Exhibit 99.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code) (the "Act"),
each of the undersigned officers of Powder River Basin Gas Corp., a Colorado
corporation (the "Company"), does hereby certify that:
The Annual Report on Form 10-KSB for the year ended December 31, 2002 (the
"Periodic Report") of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
780(d)) and information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Gregory C. Smith
-----------------------------------
Gregory C. Smith
President
Powder River Basin Gas Corp.
Dated: April 15, 2003
The foregoing certification is being furnished solely pursuant to Section 906 of
the Act and is not being filed as part of the Periodic Report or as a separate
disclosure document.