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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 2001
REGISTRATION NO. 333-62484
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2 -- SECOND AMENDMENT
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GEOCOM RESOURCES INC.
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(Exact name of registrant as specified in its charter)
NEVADA 1381 98-0349734
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(State of incorporation) (Primary Standard (IRS Employer
Industrial Identification #)
Classification Code)
GEOCOM RESOURCES INC. ROBERT PAUL TURNER, ESQ.
1030 W. GEORGIA STREET, SUITE 1208 SUTTON LAW CENTER
VANCOUVER, B.C., CANADA V6E 2Y3 699B SIERRA ROSE DRIVE
(604) 662-7900 RENO, NEVADA 89511
- ------------------------------------------ (775) 824-0300
(Address, Zip Code and Telephone Number of ----------------------------
Principal Executive Offices) (Name, address and telephone
number of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional common stock for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
Amount of
Securities To Be Amount To Be Offering Price Per Aggregate Offering Registration
Registered Registered Share Price Fee[1]
Common Stock: 2,000,000 $0.10 $200,000 $100
[1] Estimated solely for purposes of calculation the registration fee pursuant
to Rule 457(c).
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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PROSPECTUS
GEOCOM RESOURCES INC.
SHARES OF COMMON STOCK
NO MINIMUM - 2,000,000 MAXIMUM
Prior to this offering, there has been no public market for the common stock.
We are offering up to a total of 2,000,000 shares of common stock. The offering
price is $0.10 per share. There is no minimum number of shares that we have to
sell. There will be no escrow account. All money received from the offering will
be immediately used by us and there will be no refunds. The offering will be for
a period of 90 days from the effective date and may be extended for an
additional 90 days if we so choose to do so.
Talal Yassin, one of our officers and directors, will be the only person
offering or selling our shares.
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
STARTING AT PAGE 6.
PRICE PER MAXIMUM AGGREGATE MAXIMUM PROCEEDS
SHARE OFFERING PRICE TO US
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COMMON STOCK $0.10 $200,000 $150,000
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There is no minimum number of shares that has to be sold in this offering.
Because there is no minimum number of shares that has to be sold in this
offering, there is no assurance that we will achieve the proceeds level
described in the above table. If we do not raise at least $100,000 in this
offering we will not be able to continue with our proposed operations and we
will go out of business. If we go out of business, investors will lose their
entire investment.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _________________, 2001.
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TABLE OF CONTENTS
Page No.
SUMMARY OF PROSPECTUS ........................................... 5
RISK FACTORS .................................................... 6
RISKS ASSOCIATED WITH OUR COMPANY ...................... 6
RISKS ASSOCIATED WITH THIS OFFERING .................... 12
USE OF PROCEEDS ................................................. 14
DETERMINATION OF OFFERING PRICE ................................. 16
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES ................... 16
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING ..................... 19
BUSINESS ........................................................ 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................. 23
MANAGEMENT ...................................................... 27
EXECUTIVE COMPENSATION .......................................... 31
PRINCIPAL SHAREHOLDERS .......................................... 33
DESCRIPTION OF SECURITIES ....................................... 34
CERTAIN TRANSACTIONS ............................................ 35
LITIGATION ...................................................... 36
EXPERTS ......................................................... 36
LEGAL MATTERS ................................................... 36
FINANCIAL STATEMENTS ............................................ F-1
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SUMMARY OF OUR OFFERING
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This summary provides an overview of selected information contained in this
prospectus. It does not contain all the information you should consider before
making a decision to purchase the shares we are offering. You should very
carefully and thoroughly read the more detailed information in this prospectus,
and particularly the Risk Factors section, review our financial statements and
review all other information that is incorporated by reference in this
prospectus.
SUMMARY INFORMATION ABOUT OUR COMPANY
We are a development stage oil and gas exploration company. We have no
properties or business operations. We acquired a 5% working interest in a
farm-out agreement in respect of the exploration and development of certain oil
and gas interests located in California known as the Coalinga Nose Prospect. To
date we have paid a total of $72,060 in respect of this interest. This amount
completed our acquisition and exercise of the option to participate in the
project and included our proportionate share of costs in respect the initial
test well. We have additional and ongoing obligations to pay our proportionate
share of costs in respect of the initial test well and any subsequent wells on
the Prospect. We are entitled to participate in any revenues arising from any
oil or natural gas discovered on the Prospect only if we continue to pay our
proportionate share of drilling and completion costs. SEE THE "BUSINESS" SECTION
FOR A MORE DETAILED DESCRIPTION OF OUR PROPOSED PLAN FOR CONTINUING
PARTICIPATION IN THE COALINGA NOSE PROSPECT.
On May 4, 2001 we issued a total of 5,000,000 shares of common stock to Talal
Yassin, Andrew B. Stewart and Lawford Dupres, our officers and directors,
pursuant to the exemption from registration contained in Section 4(2) of the
Securities Act of 1933.
Our administrative office is located at 1030 W. Georgia St., Suite 1208,
Vancouver, British Columbia, Canada V6E 2Y3, telephone (604) 662-7900 and our
registered statutory office is located at Suite 880 -- 50 West Liberty Street,
Reno, Nevada, 89501. Our fiscal year end is June 30.
THE OFFERING
Following is a brief summary of this offering. PLEASE SEE THE "PLAN OF
DISTRIBUTION; TERMS OF THE OFFERING" IN THIS PROSPECTUS FOR A MORE DETAILED
DESCRIPTION OF THE TERMS OF THE OFFERING.
Securities being offered...............................Up to 2,000,000 shares of
common stock, par value
$0.00001
Offering price per share...............................$0.10
Offering period........................................The shares are being
offered for a period not
to exceed 90 days,
unless extended by our
board of directors for
an additional 90 days.
Maximum possible net proceeds to our company...........Up to $150,000
Use of proceeds........................................We will use the proceeds
to pay for offering
expenses and to pay our
proportionate share of
ongoing costs in respect
of the Coalinga Nose
Prospect. SEE "USE OF
PROCEEDS."
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Number of shares outstanding
Before the offering....................................5,000,000
Maximum possible number of shares outstanding
After the offering.....................................7,000,000
We will sell the shares in this offering through Talal Yassin, one of our
officers and directors. Mr. Yassin intends to offer the shares through
advertisements and investment meetings and to friends of our officers and
directors.
There is no minimum number of shares that have to be sold in this offering and
the shares will be sold on a best efforts basis only. If we do not raise at
least $100,000 in this offering we will not be able to continue with our
proposed operations and we will go out of business. If we go out of business,
investors will lose their entire investment.
We are not listed for trading on any exchange or an automated quotation system.
Because we are not listed for trading on any exchange or automated quotation
system, you may not be able to resell your shares.
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RISK FACTORS
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Please consider the following risk factors before deciding to invest in the
common stock.
RISKS ASSOCIATED WITH OUR COMPANY:
1. OUR AUDITORS HAVE ISSUED A GOING CONCERN OPINION BECAUSE WE MAY NOT BE ABLE
TO ACHIEVE OUR OBJECTIVES AND WE MAY HAVE TO SUSPEND OR CEASE OUR PROPOSED
OPERATIONS ENTIRELY.
Our auditors have issued a going concern opinion. This means that there is doubt
that we can continue with our proposed business operations for the next twelve
months. We believe that if we do not raise at least $50,000 from our offering,
we may have to suspend or cease operations within four months.
2. WE HAVE NO OPERATING HISTORY AND HAVE MAINTAINED LOSSES SINCE INCEPTION WHICH
WE EXPECT TO CONTINUE INTO THE FUTURE.
We were incorporated in June 2000 and only just recently acquired a 5% working
interest in respect of the Coalinga Nose Prospect in California. We have not
realized any revenues to date. We have no operating history upon which an
evaluation of our future success or failure can be made. Our net loss since
inception is $375,173. Our ability to achieve and maintain profitability and
positive cash flow is dependent upon:
the results of the exploration on the Coalinga Nose Prospect
the performance of all parties to the participation option agreement as
contracted our ability to acquire, explore and develop profitable oil
and gas properties or interests
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our ability to generate ongoing revenues
our ability to reduce exploration and development costs
our ability to compete with more established oil and gas exploration
companies
Based upon our proposed plans, we expect to incur operating losses in future
periods. This will happen because there are costs and expenses associated with
the research, exploration and development of oil and gas properties. We may fail
to generate revenues in the future. Failure to generate revenues will cause us
to go out of business.
3. COALINGA NOSE PROSPECT, HAS NO KNOWN OIL OR GAS RESERVES. OIL OR GAS MAY NOT
EVER BE DISCOVERED ON THE PROSPECT, AND EVEN IF OIL OR GAS IS DISCOVERED,
PRODUCTION MAY NOT BE PROFITABLE.
The Coalinga Nose Prospect has no known oil or natural gas reserves. The
companies currently exploring the prospect have not identified any oil or
natural gas on the property and they may never find any oil or natural gas. Even
if they find that there is oil or natural gas on the prospect, they may be
unable to recover the oil or natural gas. Even if oil or natural gas is
recovered, we may not be able to make a profit from our very limited
participation option.
4. WE DO NOT OWN ANY PROPERTY ON WHICH TO EXPLORE FOR OIL AND NATURAL GAS AND
UNLESS WE ARE ABLE TO CONTINUALLY ACQUIRE ANY PROPERTY OR INTERESTS THAT
PROFITABLY PRODUCE OIL GAS OUR BUSINESS WILL FAIL.
We do not own any property on which to explore for oil and natural gas. If the
Coalinga Nose Prospect does not profitably produce oil or gas and we are unable
to acquire any property or other participation interests that profitably produce
oil or gas our business will fail and you will lose your entire investment. We
may never be able to acquire any property or any other interests. Even if we do
acquire our own property we may never be able to explore for oil and gas. Even
if we do explore for oil and gas, we may never discover any oil or gas. Even if
we discover oil or gas, we may still never make a profit. Even if we acquire
other participation interests they may not profitably produce any oil or gas. If
we are unable to continually locate and acquire new properties or interests that
produce oil and natural gas our business will fail because the volume of
production from oil and natural gas reserves declines as reserves are depleted.
5. IF NO OIL OR GAS RESERVES ARE FOUND AND DEVELOPED BY THE COMPANIES EXPLORING
THE COALINGA NOSE PROSPECT AND WE ARE UNABLE TO ACQUIRE OTHER PARTICIPATION
INTERESTS THAT PRODUCE OIL OR NATURAL GAS THEN YOU WILL LOSE YOUR INVESTMENT.
Our success depends on the success of the companies exploring the Coalinga Nose
Prospect locating and developing oil or natural gas reserves on the Prospect. If
they are unable to find an oil or natural gas reserve containing oil or natural
gas or they cannot develop the oil or gas reserve, either because they do not
have the money to do it or because it is not economically feasible to do it, we
will cease operations and you will lose your investment. If we are unable to
acquire other interests that produce oil or natural gas you will lose your
investment.
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6. IF WE DO NOT RAISE AT LEAST $100,000 IN THIS OFFERING WE WILL BE UNABLE TO
CONTINUE OUR PROPOSED OPERATIONS AND YOU WILL LOSE ALL YOUR INVESTMENT. THE RISK
THAT YOU COULD LOSE ALL OF YOUR INVESTMENT INCREASES WITH ANY SHORTFALL OF THE
$200,000 MAXIMUM AMOUNT THAT WE ARE TRYING TO RAISE.
Because we are a very small company with limited capital, we require the
proceeds from this offering to pay our proportionate share of costs in respect
of our 5% working interest on the Coalinga Nose Prospect. We must raise at least
$100,000 in this offering to be able to pay our offering expenses, pay our
estimated final costs in respect of the initial test well and participate in at
least one subsequent well on the Prospect. If it turns out that we have not
raised enough money to pay our proportionate costs in respect of the initial
test well or subsequent wells on the Prospect, we will try to raise additional
funds from a second public offering, a private placement or loans. At the
present time, we have not made any plans to raise additional money and there is
no assurance that we would be able to raise additional money in the future. If
we need additional money and cannot raise it, we will have to suspend or cease
operations. In particular, if we are unable to pay our offering expenses and our
remaining share of costs in respect of the initial test well we will go out of
business and you will lose your investment. If we are unable to pay our
proportionate share of costs in respect of any and all subsequent wells drilled
on the Prospect we will not be able to participate in any revenues arising from
them. If we are unable to participate in any revenues arising from wells drilled
on the Prospect we will go out of business and you will lose your entire
investment.
Even if we raise the entire $200,000 maximum amount we are trying to raise in
this offering you could lose all of your investment if we do not have enough
money to implement and complete our proposed business operations. The risk that
you could lose all of your investment increases with any shortfall of the
$200,000 maximum amount that we are trying to raise in this offering. Your risk
increases because if we raise less money it would be more likely that we will
not have sufficient funds to implement or complete our proposed business
operations. We will close this offering in 90 days even if the amount we raise
only a nominal amount and we will not refund any money we raise. We need a
minimum of $50,000 to cover our estimated offering expenses. We may not even be
able to raise this amount. If we are not able to raise sufficient funds to cover
our estimated operating expenses and implement and complete our proposed
business operations we will go out of business and you will lose your entire
investment.
7. OUR COMPANY'S SUCCESS IS MATERIALLY DEPENDENT ON THE USE OF SEISMIC SURVEY
DATA AND EXPLORATORY DRILLING ACTIVITIES.
The success of our proposed business materially depends on successful use of
three and four-dimensional seismic surveying data. Although we believe that the
proper use of seismic data will increase the probability of successful
exploratory drilling and reduce costs through the elimination of prospects that
might otherwise be drilled we may be wrong. Even with the proper use seismic
data, exploratory drilling is a highly speculative activity. Even when fully
utilized and properly interpreted, seismic data can only assist geoscientists in
identifying subsurface structures and does not enable a determination as to
whether hydrocarbons are present. The use of seismic data and other advanced
technologies is expensive and requires greater pre-drilling expenditures than
traditional drilling strategies. We could incur losses as result of such
increased expenditures.
The success of our proposed business materially depends on successful
exploratory drilling. Exploratory drilling involves many risks, including the
most fundamental risk that no oil or natural gas is discovered. Other risks
include unexpected drilling conditions, such as pressure or irregularities in
surface formations, equipment failures, accidents and adverse weather
conditions. There are also
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substantial costs for exploratory drilling. The success of our current and
future projects will depend on our ability to minimize costs for successful
exploratory drilling. If we are unsuccessful in this, we may go out of business.
8. EVEN IF WE LOCATE OIL OR NATURAL GAS, OUR SUCCESS WILL BE SUBSTANTIALLY
DEPENDENT UPON THE PREVAILING PRICES OF OIL AND NATURAL GAS.
Even if oil or natural gas is discovered on the Coalinga Nose Prospect or on any
future interest we may acquire, our success is substantially dependent upon the
prevailing price of oil and natural gas. Oil and natural gas prices are
extremely volatile and subject to wide fluctuations in response to relatively
minor changes in supply and demand, market uncertainty and a variety of
additional factors beyond our control. These factors include the level of
consumer product demand, weather conditions, domestic and foreign governmental
regulation, the price and availability of alternative fuels, political
conditions in the Middle East, the foreign supply of oil and natural gas, the
price of foreign imports and overall economic conditions. It is impossible for
us to predict future oil and natural gas price movements. If the prices of oil
and gas decline, this may harm our business.
9. BECAUSE WE ARE SMALL AND DO NOT HAVE MUCH CAPITAL, WE MUST LIMIT OUR
EXPLORATION AND DEVELOPMENT. THIS MAY PREVENT US FROM REALIZING ANY REVENUES AND
YOU MAY LOSE YOUR INVESTMENT AS A RESULT.
Because we are small and do not have much capital, we must limit the time and
money we expend on exploration and development of interests that we may acquire.
In particular, we will not:
devote the time we would like to exploring any property or interest
which we acquire.
spend as much money as we would like to exploring any property or
interest which we acquire.
rent the quality of equipment we would like to have for exploration.
have the number of people working on any property or interest that we
acquire that we would like to have.
By limiting our operations, it will take longer to generate revenues to us and
for you to realize any profit on your investment. If we do not discover oil or
gas, you will not realize anything on your investment. There are other larger
exploration companies that could and probably would spend more time and money in
exploring any property that we may acquire.
10. IF WE DO NOT HAVE ACCESS TO ALL OF THE EQUIPMENT, SUPPLIES, MATERIALS AND
SERVICES NEEDED, WE MAY HAVE TO SUSPEND OUR OPERATIONS AS A RESULT. IF WE HAVE
TO SUSPEND OPERATIONS THIS MAY HARM OUR BUSINESS.
Competition and unforeseen limited sources of supplies in the industry may
result in occasional spot shortages of equipment, supplies and materials. In
particular, we may experience possible unavailability of drilling rigs, drill
pipe as well as materials and services used in oil and natural gas drilling.
Such unavailability could result in increased costs and delays to our
operations. We have not attempted to locate or negotiate with any suppliers of
products, equipment or materials. We will attempt to locate products, equipment
and materials after this offering is complete. If we cannot find the products
and equipment we need, we will have to suspend our exploration plans until we do
find the products and equipment we need.
11. OUR BUSINESS IS SUBJECT TO THE NORMAL OPERATING RISKS COMMON TO COMPANIES
ENGAGED IN OIL AND NATURAL GAS OPERATIONS. IF ONE OF MORE OF THESE RISKS
MATERIALIZE THIS MAY RESULT IN SUBSTANTIAL FINANCIAL HARM TO OUR COMPANY.
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Our business is subject to many operational risks common to oil and gas
exploration companies. These risks include hazards such as well blowouts,
craterings, explosions, uncontrollable flows of oil, fires, pipeline ruptures or
spills, pollution, releases of toxic gas and other environmental hazards. We may
elect not to obtain insurance in respect of these risks if we believe the cost
of doing so is excessive and, in accordance with industry practice, many of our
contractors may also elect not to obtain insurance against some of these risks.
The occurrence of a risk not fully covered by insurance could severely harm our
financial situation.
12. THE SUCCESS OF OUR BUSINESS WILL REQUIRE THAT WE KEEP UP WITH TECHNOLOGICAL
ADVANCEMENTS IN THE OIL AND GAS INDUSTRY. IF WE ARE UNABLE IMPLEMENT NEW
TECHNOLOGIES WE WILL BE UNABLE TO COMPETE AND OUR BUSINESS WILL FAIL.
The oil and gas industry is characterized by rapid and significant technological
advances. If our competitors use or develop new technologies that we do not have
we will be forced, at significant cost to our company, to implement the same new
technologies or suffer a competitive disadvantage. We may not be able to respond
to these competitive pressures and we may be unable to implement new
technologies on a timely basis or at an acceptable cost to our business. If we
are unable to implement and utilize the most advanced commercially available
technology in a cost efficient manner our business will fail.
13. OUR BUSINESS IS REGULATED BY VARIOUS GOVERNMENT LAWS AND REGULATIONS.
COMPLIANCE WITH THESE LAWS AND REGULATIONS IS ONEROUS AND COSTLY.
Our business is subject to many federal, state and local government laws and
regulations which are subject to frequent change in response to political and
economic conditions. We are unable to predict the ultimate cost of compliance
with these requirements or their affect on our operations. Matters regulated
include discharge permits for drilling operations, drilling and abandonment
bonds, reports concerning operations, the spacing of wells and unitization and
pooling of properties and taxation. Regulations may also impose price controls
and limitations on production so as to conserve oil and gas supplies.
Environmental and health laws regulate production, handling, storage,
transportation and disposal of oil and natural gas, by-products from crude oil
and natural gas and other substances and materials produced or used in
connection with crude oil and natural gas operations. We must comply with all of
these applicable laws and regulations as failure to do so would subject our
company to substantial potential liability. Compliance with these laws and
regulations will be onerous and costly.
14. WE ARE COMPLETELY RELYING ON THE PERFORMANCE OF OTHER COMPANIES TO CARRY OUT
THE EXPLORATION AND DEVELOPMENT OF THE COALINGA NOSE PROSPECT AND IF THOSE
COMPANIES FAIL TO PERFORM AS EXPECTED WE MAY NOT MAKE ANY PROFIT AND YOU MAY
LOSE YOUR ENTIRE INVESTMENT.
In our current project we are completely relying upon the skill and performance
of other companies to carry out the exploration and development of the Coalinga
Nose Prospect. The companies may not perform according to industry standards or
meet our expectations. The companies may fail to properly use seismic data and
exploratory drilling, use proper tools and equipment, take adequate safety
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measures, obtain insurance and comply with all applicable laws and regulations.
If the companies on whom we rely fail to perform as expected or according to
industry standards then we may not make any profit and you may lose all of your
investment.
15. OUR OFFICERS AND DIRECTORS LACK EXPERIENCE IN OIL AND GAS EXPLORATIONS AND
WILL BE DEVOTING ONLY A FRACTION OF THEIR PROFESSIONAL TIME TO OUR ACTIVITIES.
IF OUR ESTIMATES RELATED TO EXPENDITURES ARE ERRONEOUS OUR BUSINESS WILL FAIL
AND YOU WILL LOSE YOUR ENTIRE INVESTMENT.
Our officers and directors have little or no direct experience in the management
or operation of oil or gas explorations. Only one of our directors, Lawford
Dupres, has any experience within the oil and gas industry but will be devoting
only approximately 1% of his professional time to our operations. Our other
current directors and officers, Talal Yassin and Andrew Stewart, have no
experience in oil and gas explorations and will be devoting only approximately
5% of their professional time to our operations. Our management's lack of
experience may make us more vulnerable than others companies to certain risks,
and it may also cause us to be more vulnerable to business risks associated with
errors in judgment that could have been prevented by more experienced
management. In particular, if management's estimates of expenditures are
erroneous our business will fail and you will lose your entire investment. Our
management's lack of previous experience may harm our operations or cause us to
go out of business.
16. BECAUSE OUR DIRECTORS HAVE FOREIGN ADDRESSES THIS MAY CREATE POTENTIAL
DIFFICULTIES RELATING TO SERVICE OF PROCESS IN THE EVENT THAT YOU WISH TO SERVE
THEM WITH LEGAL DOCUMENTS.
None of our current directors and officers have resident addresses in the United
States. Two of our directors and officers, Talal Yassin and Andrew Stewart, are
resident in Canada. Our other director, Lawford Dupres, is resident in the West
Indies. Because all of our directors and officers have foreign addresses this
may create potential difficulties relating to the service of legal or other
documents on any of them in the event that you wish to serve them with legal
documents.
17. WE OWE ONE OF OUR OFFICERS AND DIRECTORS A SUBSTANTIAL AMOUNT OF MONEY THAT
HE IS ENTITLED TO DEMAND AT ANY TIME AND IF HE DEMANDS REPAYMENT OF THE AMOUNT
WE OWE HIM IT MAY COMPROMISE OUR BUSINESS OPERATIONS AND YOU COULD LOSE YOUR
ENTIRE INVESTMENT.
Our President, Talal Yassin, has loaned us a total of $80,173. The amount
consists of $22,500 paid by Mr. Yassin to acquire the 5% working interest in the
Coalinga Nose Prospect. This interest was
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assigned by to our company by Mr. Yassin in exchange for a first promissory
payable note to him in the amount of $22,500 plus interest. In addition, the
total loan amount from Mr. Yassin to our company consists of $49,560 that was
paid by Mr. Yassin on behalf of our company in respect of our company's
obligation to pay its proportionate share of costs of its 5% working interest in
the Coalinga Nose Prospect and to exercise its option in respect of that
interest. This amount was paid in exchange for a second promissory note payable
to Mr. Yassin in the amount of $49,560 plus interest. In addition, our company
has incurred professional and administrative expenses of $8,113 that were paid
by Mr. Yassin on behalf of the company in exchange for two additional promissory
notes in the respective amounts of $4,043 and $4,070 plus interest. Under the
terms of the promissory notes Mr. Yassin is entitled to demand repayment at any
time. If Mr. Yassin demands repayment of the money owed to him before we are in
a position to pay it this may harm our proposed business operations and new
investors may lose their investment.
18. WE MAY CONDUCT FURTHER OFFERINGS IN THE FUTURE IN WHICH CASE YOUR
SHAREHOLDINGS WILL BE DILUTED.
We may conduct further offerings in the future to finance our current project or
to finance subsequent projects that we decide to undertake. If we decide to
raise money or conduct further offerings in the future your shareholdings will
be diluted.
RISKS ASSOCIATED WITH THIS OFFERING:
19. THERE IS NO MINIMUM NUMBER OF SHARES THAT MUST BE SOLD AND WE WILL NOT
REFUND ANY FUNDS TO YOU.
There is no minimum number of shares that must be sold in this offering, even if
we raise a nominal amount of money. Any money we receive will be immediately
appropriated by us. We may not raise enough money to pay costs associated with
our working interest in the Coalinga Nose Prospect. No money will be refunded to
you under any circum stances.
20. BECAUSE THE SEC IMPOSES ADDITIONAL SALES PRACTICE REQUIREMENTS ON BROKERS
WHO DEAL IN OUR SHARES WHICH ARE PENNY STOCKS, SOME BROKERS MAY BE UNWILLING TO
TRADE THEM. THIS MEANS THAT YOU MAY HAVE DIFFICULTY IN RESELLING YOUR SHARES AND
MAY CAUSE THE PRICE OF THE SHARES TO DECLINE.
Our shares qualify as penny stocks and are covered by Section 15(g) of the
Securities Exchange Act of 1934 which imposes additional sales practice
requirements on broker/dealers who sell our securities in this offering or in
the aftermarket. For sales of our securities, the broker/dealer must make a
special suitability determination and receive from you a written agreement prior
to making a sale to you. Because of the imposition of the foregoing additional
sales practices, it is possible that brokers will not
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want to make a market in our shares. This could prevent you from reselling your
shares and may cause the price of the shares to decline.
21. BECAUSE MESSRS. YASSIN, STEWART AND DUPRES WILL OWN MORE THAN 50% OF THE
OUTSTANDING SHARES AFTER THIS OFFERING, THEY WILL BE ABLE TO DECIDE WHO WILL BE
THE DIRECTORS AND YOU MAY NOT BE ABLE TO ELECT ANY DIRECTORS.
Even if we sell all 2,000,000 shares of common stock in this offering, Messrs.
Yassin, Stewart and Dupres will still own 5,000,000 shares and will continue to
control us. As a result, after completion of this offering, regardless of the
number of shares we sell, Messrs. Yassin, Stewart and Dupres will be able to
elect all of our directors and control our operations.
22. YOU ARE RISKING UP TO $200,000 TO FUND OUR PROPOSED OPERATIONS. IF OUR
PROPOSED OPERATIONS FAIL FOR ANY REASON, YOU WILL LOSE YOUR ENTIRE INVESTMENT.
You will be providing up to $200,000 to fund our proposed operations. Since you
are providing all of the cash for our proposed operations, if we cease proposed
operations for any reason, you will lose your entire investment.
23. MESSRS. YASSIN, STEWART AND DUPRES' CONTROL PREVENTS YOU FROM CAUSING A
CHANGE IN THE COURSE OF OUR OPERATIONS.
Because Messrs. Yassin, Stewart and Dupres will control us after the offering,
regardless of the number of shares sold, your ability to cause a change in the
course of our operations is eliminated. As such, the value attributable to the
right to vote is gone. This could result in a reduction in value to the shares
you own because of the ineffective voting power.
24. THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, SO YOU MAY BE UNABLE
TO SELL YOUR SHARES.
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There is currently no public trading market for our common stock. A market may
never develop for our common stock. If a market does not develop, it will be
very difficult, if not impossible for you to resell your shares.
25. SALES OF COMMON STOCK BY OUR OFFICERS AND DIRECTORS WILL LIKELY CAUSE THE
MARKET PRICE FOR THE COMMON STOCK TO DROP.
A total of 5,000,000 shares of stock were issued to our three officers and
directors. They paid an average price of $0.056 per share. Subject to the
restrictions described under "FUTURE SALES BY EXISTING STOCKHOLDERS" ON PAGE 32
of this prospectus, they will likely sell a portion of their stock if the market
price goes above $0.10. If they do sell there stock into the market, the sales
may cause the market price of the stock to drop.
CAUTIONARY STATEMENT REGARDING FORWARDING-LOOKING STATEMENTS
Some discussions in this prospectus may contain forward-looking statements that
involve risks and uncertainties. A number of important factors could cause our
actual results to differ materially from those expressed in any forward-looking
statements made by us in this prospectus. Such factors include, those discussed
in "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and "BUSINESS," as well as those discussed elsewhere
in this prospectus. Forward-looking statements are often identified by words
like: believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events.
- --------------------------------------------------------------------------------
USE OF PROCEEDS
- --------------------------------------------------------------------------------
The net proceeds to us after deducting offering expenses of $50,000 will be
$150,000 if all of the shares are sold. The first $50,000 raised will be used
for offering expenses. We will use the net proceeds as follows:
- ------------------------ ------- -------- -------- --------
Amount raised: $50,000 $100,000 $150,000 $200,000
- ------------------------ ------- -------- -------- --------
Allocation
- ------------------------ ------- -------- -------- --------
Offering expenses $50,000 $ 50,000 $ 50,000 $ 50,000
- ------------------------ ------- -------- -------- --------
Our estimated $ 0 $ 45,000 $ 95,000 $145,000
proportionate share of
costs on the Coalinga
Nose Prospect
- ------------------------ ------- -------- -------- --------
Working capital $ 0 $ 5,000 $ 5,000 $ 5,000
- ------------------------ ------- -------- -------- --------
Our estimated proportionate share of costs on the Coalinga Nose Prospect are the
expenditures we plan to make in connection with our 5% working interest in
respect of the initial well and subsequent wells on the Prospect. To acquire and
exercise our 5% working interest in respect of the initial test well on
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Pool A of the Prospect, and to cover our proportionate share of costs in respect
of this, we paid a total of $72,560. We anticipate our remaining costs in
respect of the initial test well on Pool A to be approximately $15,000 for
completion. This estimate is based on our 5% share of the completion costs of
$300,000. We expect to participate in at least one subsequent well drilled in
Pool A on the Prospect. We anticipate our costs to be approximately $35,000 per
well, including all drilling and completion costs. This estimate is based on our
net 3.75% proportionate share of costs for subsequent wells drilled in Pool A
and estimated drilling and completion costs of $900,000 per well. This amount is
based on the costs we have paid in respect of our proportionate interest in the
initial test well. If the initial test well on Pool A is successful, we also
expect to participate in a second test well on Pool B. We anticipate our costs
for the second test well on Pool B to be approximately $17,500, including
drilling and completion costs. This estimate is based on our net 2.5%
proportionate share of costs for the test well on Pool B and estimated drilling
and completion costs of $900,000 per well. We also expect to participate in at
least one subsequent well drilled on Pool B, for which we expect our
proportionate share of costs to be $17,500 per well, including drilling and
completion costs.
PLEASE SEE "RISK FACTORS" STARTING AT PAGE 6 AND, IN PARTICULAR, SEE RISK FACTOR
NUMBER 16 REGARDING OUR MANAGEMENT'S LACK OF EXPERIENCE IN OIL AND GAS
EXPLORATIONS.
If we raise less than $50,000 in this offering we may not be able to pay our
offering expenses and we will not be able to pay our final costs associated with
the initial test well and any costs associated with subsequent wells drilled on
the Prospect. If we are unable to pay our proportionate share of costs we will
not be entitled to participate in any revenues arising from the wells. If we
raise $65,000 we expect that we will be able to pay our offering expenses and
pay our final costs associated with the initial test well. Although this will
entitle us to share in any revenues arising from the initial test well we will
not be able to participate in any subsequent wells drilled on the Prospect. If
we raise $100,000 we expect that we will be able to pay our offering expenses,
pay the final costs associated with the initial test well and to participate in
one more well on Pool A of the Prospect. If we raise $150,000 we will be able to
pay our offering expenses, pay our final costs in respect of the initial test
well and participate in two subsequent wells on Pool A. Depending upon the
result of the initial test well on Pool A, we may also be able to participate in
the test well on Pool B. If we raise $200,000 we will be able to pay our
offering expenses, pay our final costs in respect of the initial test well,
participate in two subsequent wells on Pool A, and participate in the test well
on Pool B and at least one subsequent well on Pool B. The expenditures include
costs for drilling and completion of the wells. We are not going to spend any
sums of money or pay any more costs of our proportionate share for the drilling
of subsequent wells on the Coalinga Nose Prospect until this offering is
completed.
Working capital is the cost related to operating our office. We estimate that
$5,000 of working capital will last our company one year. The amount includes
sufficient funds for one year's worth of rent under our sublease agreement with
Alpha Beta Developments Ltd. Our monthly rent is $350 and includes telephone and
utilities, printing, faxing, high- speed Internet service, and the shared use of
secretarial services two days per week. We have allocated the remaining $800 of
working capital for miscellaneous administrative expenses such as office
supplies, postage and delivery charges that we may incur during the year.
We have allocated a wide range of money to pay the costs of our proportionate
share for the drilling of subsequent wells on the Coalinga Nose Prospect. That
is because we do not know how much will ultimately be needed to fund these
costs. If the operator of the project is successful in finding oil or gas
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costs of exploring will then cease. We may incur proportionate costs in
development of any reserves which are discovered. On the other hand, if the
operator of our project does not immediately find oil or gas, they will continue
to explore. If we have to continue to explore for oil and natural gas, the costs
of exploration will increase.
While we currently intend to use the proceeds of this offering substantially in
the manner set forth above, we reserve the right to reassess and reassign such
use if, in the judgment of our board of directors, such changes are necessary or
advisable. At present, no material changes are contemplated. Should there be any
material changes in the above projected use of proceeds in connection with this
offering, we will issue an amended prospectus reflecting the same.
- --------------------------------------------------------------------------------
DETERMINATION OF OFFERING PRICE
- --------------------------------------------------------------------------------
The price of the shares we are offering was arbitrarily determined in order for
us to raise up to a total of $200,000 in this offering. The offering price bears
no relationship whatsoever to our assets, earnings, book value or other criteria
of value. The factors considered were:
our lack of operating history
the proceeds to be raised by the offering
the amount of capital to be contributed by purchasers in this
offering in proportion to the amount of stock to be retained by our
existing Stockholders our relative cash requirements the price we
believe a purchaser is willing to pay for our stock
SEE "PLAN OF DISTRIBUTION; TERMS OF THE OFFERING."
- --------------------------------------------------------------------------------
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
- --------------------------------------------------------------------------------
"Dilution" represents the difference between the offering price and the net
tangible book value per share immediately after completion of this offering.
"Net tangible book value" is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises mainly as a
result of our arbitrary determination of the offering price of the shares being
offered. Dilution of the value of the shares new investors purchase is also a
result of the lower book value of the shares held by our existing stockholders.
As of May 4, 2001, the net tangible book value of our shares of common stock was
a deficit of ($97,673) or a deficit of approximately (0.02) per share based upon
5,000,000 shares outstanding.
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Upon completion of this offering, in the event all of the shares are sold, the
net tangible book value of the 7,000,000 shares to be outstanding will be
$102,327, or approximately $0.01 per share. The net tangible book value of the
shares held by our existing stockholders will be increased by $0.03 per share
without any additional investment on their part. New investors will incur an
immediate dilution from $0.10 per share to $0.01 per share.
Upon completion of this offering, in the event 75% of the shares are sold, the
net tangible book value of the 6,500,000 shares to be outstanding will be
$52,327, or approximately $0.01 per share. The net tangible book value of the
shares held by our existing stockholders will be increased by $0.03 per share
without any additional investment on their part. New investors will incur an
immediate dilution from $0.10 per share to $0.01 per share.
Upon completion of this offering, in the event 50% of the shares are sold, the
net tangible book value of the 6,000,000 shares to be outstanding will be
$2,327, or approximately NIL per share. The net tangible book value of the
shares held by our existing stockholders will be increased by 0.2 per share
without any additional investment on their part. New investors will incur an
immediate dilution from $0.10 per share to NIL per share.
Upon completion of this offering, in the event 25% of the shares are sold, the
net tangible book value of the 5,500,000 shares to be outstanding will be a
deficit of ($47,673), or a deficit of approximately (0.01) per share. The net
tangible book value of the shares held by our existing stockholders will be
increased by 0.01 per share without any additional investment on their part. New
investors will incur an immediate dilution from $0.10 per share to a deficit of
approximately (0.01) per share.
After completion of this offering, if 2,000,000 shares are sold, new investors
will own approximately 29% of the total number of shares then outstanding for
which new investors will have made a cash investment of $200,000, or $0.10 per
share. Our existing stockholders will own approximately 71% of the total number
of shares then outstanding, for which they have made contributions of cash
and/or services and/or assets, totalling $277,500, or approximately $0.056 per
share.
After completion of this offering, if 1,500,000 shares are sold, new investors
will own approximately 23% of the total number of shares then outstanding for
which new investors will have made a cash investment of $150,000, or $0.10 per
share. Our existing stockholders will own approximately 77% of
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the total number of shares then outstanding, for which they have made
contributions of cash and/or services and/or assets, totalling $277,500, or
approximately $0.056 per share.
After completion of this offering, if 1,000,000 shares are sold, new investors
will own approximately 17% of the total number of shares then outstanding for
which new investors will have made a cash investment of $100,000, or $0.10 per
share. Our existing stockholders will own approximately 71% of the total number
of shares then outstanding, for which they have made contributions of cash
and/or services and/or assets, totalling $277,500, or approximately $0.056 per
share.
After completion of this offering, if 500,000 shares are sold, new investors
will own approximately 9% of the total number of shares then outstanding for
which new investors will have made a cash investment of $50,000, or $0.10 per
share. Our existing stockholders will own approximately 91% of the total number
of shares then outstanding, for which they have made contributions of cash
and/or services and/or assets, totalling $277,500, or approximately $0.056 per
share.
The following table compares the differences of new investors' investment in our
shares with the investment of our existing stockholders.
EXISTING STOCKHOLDERS
Price per share........................................................$0.056
Net tangible book value per share before offering......................($0.02)
Net tangible book value per share after offering.......................$0.01
Increase to present stockholders in net tangible book
value per share after offering.........................................$0.03
Capital contributions..................................................$277,500
Number of shares outstanding before the offering.......................5,000,000
Number of shares after offering
held by existing stockholders..........................................5,000,000
Percentage of ownership after offering.................................71%
PURCHASERS OF SHARES IN THIS OFFERING IF ALL SHARES SOLD
Price per share........................................................$0.10
Dilution per share.....................................................$0.09
Capital contributions..................................................$200,000
Number of shares after offering held
by public investors...................................................2,000,000
Percentage of ownership after offering.................................29%
PURCHASERS OF SHARES IN THIS OFFERING IF 75% OF SHARES SOLD
Price per share........................................................$0.10
Dilution per share.....................................................$0.09
Capital contributions..................................................$150,000
Number of shares after offering held
by public investors...................................................1,500,000
Percentage of ownership after offering.................................23%
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PURCHASERS OF SHARES IN THIS OFFERING IF 50% OF SHARES SOLD
Price per share........................................................$0.10
Dilution per share.....................................................$0.10
Capital contributions..................................................$100,000
Number of shares after offering held
by public investors...................................................1,000,000
Percentage of ownership after offering.................................17%
PURCHASERS OF SHARES IN THIS OFFERING IF 25% OF SHARES SOLD
Price per share........................................................$0.10
Dilution per share.....................................................$0.11
Capital contributions..................................................$50,000
Number of shares after offering held
by public investors...................................................500,000
Percentage of ownership after offering.................................9%
- --------------------------------------------------------------------------------
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING
- --------------------------------------------------------------------------------
The offering price is $0.10 per share. There is no minimum number of shares that
we have to sell. There will be no escrow account. All money received from the
offering will be immediately used by us and there will be no refunds. The
offering will be for a period of 90 days from the effective date and may be
extended for an additional 90 days if we choose to do so.
There is no minimum number of shares that must be sold in this offering. Any
money we receive will be immediately appropriated by us for the uses set forth
in the Use of Proceeds section of this prospectus. No funds will be placed in an
escrow account during the offering period and no money will be returned once the
subscription has been accepted by us.
We will sell the shares in this offering through Talal Yassin, one of our
officers and directors. Mr. Yassin will contact individuals and corporations
with whom has an existing or past pre-existing business or personal relationship
and will attempt to sell them our common stock. Mr. Yassin will receive no
commission from the sale of any shares. Mr. Yassin will not register as a
broker-dealer pursuant to Section 15 of the Securities Exchange Act of 1934 in
reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a
person associated with an issuer may participate in the offering of the issuer's
securities and not be deemed to be a broker-dealer. The conditions are that:
1. The person is not subject to a statutory disqualification, as that term
is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
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2. The person is not compensated in connection with his participation by
the payment of commissions or other remuneration based either directly
or indirectly on transactions in securities; and
3. The person is not at the time of their participation, an associated
person of a broker-dealer; and,
4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1
of the Exchange Act, in that he (A) primarily performs, or is intended
primarily to perform at the end of the offering, substantial duties for
or on behalf of the Issuer otherwise than in connection with
transactions in securities; and (B) is not a broker or dealer, or an
associated person of a broker or dealer, within the preceding twelve
(12) months; and (C) do not participate in selling and offering of
securities for any Issuer more than once every twelve (12) months other
than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
Mr. Yassin has not sold and will not sell our securities during the periods
described, except pursuant to this offering. Mr. Yassin is not subject to
disqualification, is not being compensated, and is not associated with a
broker-dealer. Mr. Yassin is and will continue to be one of our officers and
directors at the end of the offering and has not been during the last twelve
months and is currently not a broker/dealer or associated with a broker/dealer.
Mr. Yassin has not during the last twelve months and will not in the next twelve
months offer or sell securities for another corporation. Mr. Yassin intends to
contact persons with whom he had a past or has a current personal or business
relationship and solicit them to invest in this offering.
Only after the SEC declares our registration statement effective, do we intend
to advertise, through tombstones, and hold investment meetings in various states
where the offering will be registered. We will not utilize the Internet to
advertise our offering. We will also distribute the prospectus to potential
investors at the meetings and to our friends and relatives who are interested in
us and in a possible investment in the offering.
OFFERING PERIOD AND EXPIRATION DATE
This offering will commence on the date of this prospectus and continue for a
period of 90 days. We may extend the offering period for an additional 90 days,
or unless the offering is completed or otherwise terminated by us.
PROCEDURES FOR SUBSCRIBING
If you decide to subscribe for any shares in this offering, you must:
execute and deliver a subscription agreement;
deliver a check or certified funds to us for acceptance or
rejection.
All checks for subscriptions must be made payable to "GEOCOM RESOURCES INC."
RIGHT TO REJECT SUBSCRIPTIONS
We have the right to accept or reject subscriptions in whole or in part, for any
reason or for no reason. All monies from rejected subscriptions will be returned
immediately by us to the subscriber, without interest or deductions.
Subscriptions for securities will be accepted or rejected within 48 hours after
we receive them.
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REGULATION M
Our officers and directors will not be purchasing any of the shares of common
stock offered by us in this offering. We and our distribution participants will
comply with the provisions of Regulation M. Other than the foregoing, no
consideration has been given to the compliance of Regulation M of the Exchange
Act. Regulation M is intended to preclude manipulative conduct by persons with
an interest in the outcome of an offering, while easing regulatory burdens on
offering participants.
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BUSINESS
- --------------------------------------------------------------------------------
GENERAL
The company was incorporated in the State of Nevada on June 19, 2000 under the
name Commerce Direct Inc. No business was ever commenced under the name Commerce
Direct Inc. nor was the Initial List of Officers and Directors filed with the
Nevada Secretary of State. On April 23, 2001 we changed our name from Commerce
Direct Inc. to Geocom Resources Inc., filed our Initial List of Officers and
Directors appointing our current management team, and commenced our operations.
We maintain our statutory registered agent's office at Suite 880 -- 50 West
Liberty Street, Reno, Nevada, 89501 and our business office is located at 1030
West Georgia Street, Suite 1208, Vancouver, British Columbia, Canada V6E 4Y3.
Our telephone number is (604) 662-7900. Our offices are leased from Alpha Beta
Developments Inc. on a month-to-month basis and our monthly rental is $350.
BACKGROUND
On May 4, 2001 we acquired an option to participate in a 5% working interest in
a farmout/participation agreement with Brothers Oil and Gas Inc. ("Brothers") in
respect of the exploration of certain oil and natural gas interests in the state
of California referred to as the Coalinga Nose Prospect. We acquired the option
by way of an assignment from Talal Yassin, our current President and a member of
the board of directors, in exchange for a demand promissory note in the amount
of $22,500 plus interest payable to Mr. Yassin. Pursuant to the terms of the
participation agreement, we were required to make a final payment of $49,560 to
Brothers by May 24, 2001 to exercise our option. Our President, Talal Yassin,
paid this amount on our behalf in exchange for a demand promissory note in the
amount of $49,560 plus interest. The option entitles us to participate, as
described below, in any revenues that may be generated if oil or natural gas are
discovered on the prospect. We intend to use the funds raised in this offering,
if any, to acquire, explore and develop our own oil and gas interests. We have
not yet acquired any of our own property or implemented our own program of
exploration.
CURRENT PROJECT -- THE COALINGA NOSE PROSPECT
Our first and current project involves the participation option we acquired on
May 4, 2001 in respect of the Coalinga Nose Prospect. Greka, AM, Inc. ("Greka"),
Nahama Natural Gas Company ("Nahama") and George Froley ("Froley") are the
owners of certain oil and gas leases, divided into Blocks 1 and 2, covering the
lands in Fresno County, California known as the Coalinga Nose Prospect.
Production Specialties Co. ("Production") entered into a joint operating
agreement with Greka, Nahama and Froley, dated January 1, 2001, whereby
Production obtained a 100% working interest and a 100% net revenue interest less
applicable landowner royalties covering the prospect. Production entered into a
letter
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agreement with Brothers Oil and Gas Inc. and Olympic Resources (Arizona) Ltd.
("Olympic") whereby Production farmed out to Brothers and Olympic 100% of
Production's interest in the prospect on the basis that, among other things: (a)
Production would retain a 2% overriding royalty interest on all revenue earned
by the working interest held by Brothers and Olympic, (b) Brothers and Olympic
would each respectively agree to assume 50% of Production's interest less the 2%
overriding royalty, (c) Brothers and Olympic would agree to retain a further 3%
overriding royalty to be held equally by them, (d) Brothers and Olympic would
farm out their interests to third parties but that any farmout which retained
interests over and above the Production 2%, the Brothers 1.5% and the Olympic
1.5% would be retained by the farmor exclusively, and (d) Brothers and Olympic
would agree to be bound by the joint operating agreement between Greka, Nahama
and Production.
On May 1, 2001 Talal Yassin, one of our directors and our current President,
acquired an option to participate in a 5% working interest in a farmout in
respect of the prospect from Brothers upon his payment of $22,500. On May 4,
2001 we acquired that option to participate by way of an assignment from Mr.
Yassin in exchange for a demand promissory note in the amount of $22,500 plus
interest. Pursuant to the terms of the participation agreement, we were required
to make a final payment of $49,560 to Brothers by May 24, 2001 to exercise our
option. Our President, Talal Yassin, paid this amount on our behalf in exchange
for a demand promissory note in the amount of $49,560 plus interest. The option
entitles us to participate in any revenues that may be generated if oil or
natural gas are discovered on the prospect. On the initial test well on the
Block 1 leases, the farmees pay 100% of the cost of the initial test well to
earn 74% net revenue before payout and 56.25% after payout. On subsequent wells
on Block 1, the farmees earn 56.25% before and after payout. On Block 2 leases,
the farmees pay 50% working interest to earn 37.5% net revenue interest.
For the initial test well on Block 1, the net revenues to us will be 5% of the
74% net revenue before payout of all parties' working interest expenditures, or
3.75%. After payout our net interest will be 5% of the 56.25% net revenue after
payout of all parties' working interest expenditures, or 2.815%. For all
subsequent wells on Block 1, the net revenues to us will be 5% of the 56.25% net
revenue before and after payout of working interest expenditures, or 2.915%. For
all wells on Block 2, the net revenues to us will be 5% of 37.5% net revenue
before and after payout of working interest expenditures, or 1.875%.
LOCATION OF AND DESCRIPTION OF PROSPECT
The following information concerning the location and description of the
Coalinga Nose Prospect is based upon the information which we have received,
whether directly or indirectly, from Brothers, Production, Nahama and/or Greka.
The Coalinga Nose Prospect is a cretaceous gas prospect located in Bakersfield
in Fresno County, California. The prospect area consists of 5,000 acres of
leased land and is located less than one mile southeast of the East Coalinga
Extension. The prospect is also less than one mile northwest of the Kettleman
Hills Field.
Approximately $2,000,000 has been spent on the land including a 3-dimensional
seismic survey shot in 1997 covering 16 square miles including the prospect
area. The companies exploring the prospect will be targeting the Cretaceous
Brown Mt. Sand in which only one well has ever been tested within the seismic
shoot area which occurred in 1942. This well had significant gas shows. A shell
well drilled 3 miles northwest of the seismic shoot area had oil production on a
Cretaceous formation test. The Brown Mt. Sand has produced 2.4 million barrels
of oil 6 miles to the northwest of the prospect area in what is referred to as
"Oil City." Since the Oil City oil field was discovered in the late 1890's, no
records of gas production were kept as natural gas was vented and not a valuable
commodity at that
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time. The prospect is also on the same anticlinal trend as Kettleman Hills Field
located directly southeast of the prospect area.
The prospect is to be tested with a 13,000 foot test well which will be located
one mile to the northwest and 500 feet up dip of the 1942 well within the best
amplitude response for this fault block.
Drilling of the initial test well commenced on July 9, 2001. It is anticipated
that the drilling and completion of the initial test well will take up to 2
months. We cannot determine the precise timing of our ongoing payments for
exploration costs. We have an ongoing obligation to pay our proportionate share
of costs and these costs are payable whenever we receive a cash call from
Production Specialties, the operator of the project.
The exploration of this prospect is an aggressive undertaking and we may not
ever discover any oil or natural gas.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
At present, we have no employees, other than Messrs. Yassin, Stewart and Dupres,
our officers and directors, who were compensated in shares for their services.
Messrs. Yassin, Stewart and Dupres, do not have employment agreements with us.
We presently do not have pension, health, annuity, insurance, stock options,
profit sharing or similar benefit plans; however, we may adopt such plans in the
future. There are presently no personal benefits available to any employees.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
We are a start-up, exploration stage company and have not yet generated or
realized any revenues from our business operations.
Our auditors have issued a going concern opinion. This means that our auditors
believe there is doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we are thinly capitalized and our founders have not made a commitment of
financial support to meet our obligations. This is also because we have not
generated any revenues and no revenues are anticipated unless and until oil or
natural gas is discovered on a property in which we have an interest.
Accordingly, we must raise cash from sources other than the sale of oil or
natural gas. That cash must be raised from other sources. Our only other source
for cash at this time is investments by others in our company. We must raise
cash in order to implement our project and stay in business.
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In order to meet our need for cash we are attempting to raise money from this
offering. There is no assurance that we will be able to raise enough money
through this offering to stay in business. Whatever money we do raise, will be
applied first to our offering expenses and then to pay ongoing our proportionate
share of costs in respect of the Coalinga Nose Prospect. If we do not raise all
of the money we need from this offering, we will have to find alternative
sources, such as a second public offering, a private placement of securities, or
loans from our officers or others. At the present time, we have not made any
arrangements to raise additional cash, other than through this offering. If we
need additional cash and cannot raise it we will either have to suspend
operations until we do raise the cash, or cease operations entirely.
We are not going to buy or sell any equipment. We do not expect a change in our
number of employees.
LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about our company upon which to
base an evaluation of our performance. We are a start-up exploration company and
have not generated any revenues from our proposed operations so far. We may not
be successful in our proposed business operations. Our business is subject to
risks inherent in the establishment of a new business enterprise, including
limited capital resources, possible delays in the exploration and/or development
of our interests, and possible cost overruns due to price and cost increases in
services.
We are seeking equity financing in this current offering in order pay our
ongoing proportionate share of costs in respect of our 5% working interest on
the Coalinga Nose Prospect. We expect these costs to be as follows. We expect to
pay an additional $15,000 for completion costs in respect of the initial test
well. If we are unable to make this payment we lose our entitlement to
participation in any revenues arising from the initial test well. In addition,
we intend to participate in at least one subsequent well on Pool A of the
Prospect. We expect to pay approximately $35,000 for participation in each
subsequent well on Pool A. We also expect to participate in a second test well
on Pool B for which we anticipate the costs to be approximately $17,500 in
total. We also expect to participate in at least one subsequent well drilled on
Pool B and we expect our proportionate share of costs to be $17,500 per well,
including for drilling and completion costs.
We have no assurance that future financing will be available to us on acceptable
terms. If such financing is not available on satisfactory terms, we may be
unable to continue, develop or expand our operations. Equity financing could
result in additional dilution to existing shareholders.
RESULTS OF OPERATIONS
FROM INCORPORATION ON JUNE 19, 2000
We are a start-up oil an gas exploration company. We do not own any oil or
natural gas properties. On May 1, 2001 Talal Yassin, one of our directors and
our current President, acquired a 5% working interest in a farm-out agreement
from Brothers Oil & Gas Inc. in respect of the Coalinga Nose Prospect. for
$22,500. On May 4, 2001 we acquired that option by way of an assignment from Mr.
Yassin in exchange for a demand promissory note in the amount of $22,500 plus
interest. Pursuant to the terms
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of the participation agreement, we were required to make a final payment of
$49,560 to Brothers by May 24, 2001 which amount would exercise our option and
fund our proportionate share of the dry well costs in respect of the initial
test well on Pool A. Our President, Talal Yassin, paid this amount on our behalf
in exchange for a demand promissory note in the amount of $49,560 plus interest.
The option entitles us to participate in any revenues that may be generated if
oil or natural gas are discovered on the initial test well on the Prospect.
We have additional and ongoing obligations to pay our proportionate share of
costs in respect of our 5% working interest. In respect of the initial test well
on Pool A, we anticipate an obligation for us to pay an additional $15,000 for
completion costs. This estimate is based on our 5% share of the completion costs
of $300,000. We expect that we will have no further payment to entitle us to
share in any revenues arising from the initial test well. We expect to
participate in at least one subsequent well drilled in Pool A on the Prospect
and anticipate the costs to be approximately $35,000 per well. We anticipate our
costs to be approximately $35,000 per well, including all drilling and
completion costs. This estimate is based on our net 3.75% proportionate share of
costs for subsequent wells drilled in Pool A and estimated drilling and
completion costs of $900,000 per well. This amount is based on the costs we have
paid in respect of our proportionate interest in the initial test well. If the
initial test well on Pool A is successful, we expect to participate in a second
test well on Pool B and we anticipate the costs for the second test well on Pool
B to be approximately $17,500 in total. This estimate is based on our net 2.5%
proportionate share of costs for the test well on Pool B and estimated drilling
and completion costs of $900,000 per well. We expect to participate in at least
one subsequent well drilled on Pool B and we expect our proportionate share of
costs to be $17,500 per well, including for drilling and completion costs.
PLEASE SEE "RISK FACTORS" STARTING AT PAGE 6 AND, IN PARTICULAR, SEE RISK FACTOR
NUMBER 16 REGARDING OUR MANAGEMENT'S LACK OF EXPERIENCE IN OIL AND GAS
EXPLORATIONS.
On the initial test well on the Block 1 leases, the farmees pay 100% of the cost
of the initial test well to earn 74% net revenue before payout and 56.25% after
payout. This means that for Block 1, the net revenues to us will be 5% of the
74% net revenue before payout of all parties' working interest expenditures, or
3.75%. After payout our net interest will be 5% of the 56.25% net revenue after
payout of all parties' working interest expenditures, or 2.815%. On subsequent
wells on Block 1, farmees earn 56.25% before and after payout. This means that
for subsequent wells on Block 1, the net revenues to us will be 5% of 56.25%
before and after payout, or 2.815%. On Block 2 leases, farmees pay 50% of the
costs to earn 50% net revenue before payout and 37.5% after payout. This means
that for Block 2, the net revenues to us will be 5% of the 50% net revenue
before payout of all parties' working interest expenditures, or 2.5%. After
payout our net interest will be 5% of the 37.5% net revenue after payout of all
parties' working interest expenditures, or 1.875%.
Since inception, we have used our common stock to raise money, for corporate
expenses and to repay outstanding indebtedness. Net cash provided by debt and
equity financing activities from inception on June 19, 2000 to May 4, 2001 was
$102,673 as a result of proceeds received from short-term loans and advances.
On May 4, 2001 we paid our officers a total of $275,000 in non-cash compensation
by issuing them a total of 2,500,000 shares of common stock at a price of $0.11
per share. Mr. Yassin received $110,000 in non-cash compensation by the issuance
of 1,000,000 shares of common stock at a price of $0.11 per
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share. Mr. Stewart also received $110,000 in non-cash compensation by the
issuance of 1,000,000 shares of common stock at a price of $0.11 per share. Mr.
Dupres received $55,000 in non-cash compensation by the issuance of 500,000
shares of common stock at a price of $0.11 per share. The officers received this
non-cash compensation in lieu of any salary for the year. These officers will
receive no other compensation for the year, even after this offering is
complete.
On May 4, 2001 we entered into a consulting agreement with Mr. Stewart for his
provision of legal advice and services in respect of this offering in exchange
for the payment of $20,000 which is to be made on completion of this offering.
LIQUIDITY AND CAPITAL RESOURCES
As of the date of this registration statement, we have yet to generate any
revenues from our business operations.
We issued 5,000,000 shares of common stock through a Section 4(2) offering on
May 4, 2001. This was accounted for as a compensation expense of $275,000 and
cash of $2,500.
Our material commitments for capital expenditures include offering expenses in
the estimated amount of $50,000. We require funds from this offering to pay all
of these costs. However, any administrative or other costs such as legal and
accounting fees, rent, printing, phone services and so forth which must be paid
prior to completion of this offering will be paid by Mr. Yassin in the form of
short-term advances on behalf of the company.
Our remaining material commitments for capital expenditures are the ongoing
costs in respect of our 5% working interest in the Coalinga Nose Prospect. We
need proceeds from this offering to pay these ongoing costs. We anticipate
needing $15,000 to pay for completion costs in respect of the initial test well
on the Prospect. If we cannot pay this amount we will not be entitled to
participate in any revenues arising from the initial test well and we will go
out of business. We expect to incur costs of approximately $35,000 per well for
subsequent wells drilled on Pool A of the Prospect. We expect to incur costs of
approximately $17,500 per well for subsequent wells drilled on Pool B. We
require proceeds from this offering to pay for these costs and if we are not
able to pay our proportionate share of costs as required we will not be able to
participate in any revenues arising from these subsequent wells on the Prospect.
We cannot determine the precise timing of our ongoing payments for exploration
costs. We have an ongoing obligation to pay our proportionate share of costs and
these costs are payable whenever we receive a cash call from Production
Specialties, the operator of the project.
If we do not raise at least $100,000 in this offering we will not be able to
continue any proposed operations and we will go out of business. PLEASE SEE THE
"RISK FACTORS" NUMBER 6.
As of May 4, 2001, our total assets were $2,500 and our total liabilities were
$100,173.
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MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Each of our directors is elected by the Stockholders to a term of one (1) year
and serves until his or her successor is elected and qualified. Each of our
officers is elected by the board of directors to a term of one (1) year and
serves until his or her successor is duly elected and qualified, or until he or
she is removed from office. The board of directors has no nominating, auditing
or compensation committees.
The names, addresses, ages and positions of our present officers and directors
are set forth below:
- ---------------------------------- ----------- -----------------------------------
Name and Address: Age: Position(s):
- ---------------------------------- ----------- -----------------------------------
Talal Yassin 28 President, Treasurer, Chief
1325 Cammeray Rd. Financial Officer and member of the
West Vancouver, BC Board of Directors
Canada, V7S 2N2
- ---------------------------------- ----------- -----------------------------------
Andrew B. Stewart 29 Secretary, Corporate Finance
3301 -- 1009 Expo Blvd. Officer and member of the Board of
Vancouver, BC Directors
Canada, V6Z 2V9
- ---------------------------------- ----------- -----------------------------------
Lawford Dupres 63 Chief Technical Officer and member
24 Westvale Ave. of the Board of Directors
Glencoe
Trinidad & Tobago, WI
- ---------------------------------- ----------- -----------------------------------
The persons named above have held their offices/positions and are expected to
hold their offices/positions until the next annual meeting of our stockholders.
BACKGROUND OF OFFICERS AND DIRECTORS
TALAL YASSIN BEEN OUR PRESIDENT, TREASURER, CHIEF FINANCIAL OFFICER AND A MEMBER
OF OUR BOARD OF DIRECTORS SINCE THE INCEPTION OF OUR BUSINESS. MR. YASSIN HAS
DEVOTED APPROXIMATELY 5% OF HIS PROFESSIONAL TIME TO OUR BUSINESS AND INTENDS TO
CONTINUE TO DEVOTE THIS AMOUNT OF TIME IN THE FUTURE.
- Since January 2001 Mr. Yassin has been the President and Chief
Executive Officer of Universco Broadband Networks Inc., a British
Columbia company providing broadband wireless communications services.
- Since September 2000 Mr. Yassin has been a director of Info Touch
Technologies Corp. (IFT:CDNX).
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- Since May 2000 Mr. Yassin is has been a director and the Chief
Financial Officer of Cora Capital Corp. (COD:CDNX), a CDNX Capital Pool
Company the principal business of which is to find and acquire a
promising business or asset. Cora is currently undergoing a merger
transaction with Global American Technology Corporation, a private New
Jersey company in the wireless communications industry.
- Since January 2000 Mr. Yassin has been involved with the inception and
financing of Transmeridian Corp., the parent company of
Realestatetours.com., a Vancouver based company offering web services
and marketing tools to real estate brokers.
- Since 1996 Mr. Yassin has been the Vice President of Development and a
director of Alpha Beta Developments Ltd., a private Vancouver based
real estate development company, where he is involved in numerous
aspects of the real estate and development business, including
acquisitions, financing, construction and marketing.
- In 1996 Mr. Yassin obtained his Bachelor of Arts Degree from Simon
Fraser University, British Columbia.
- Mr. Yassin is fluent in Arabic and Greek and has developed substantial
contacts in the land and development industry inside and outside of
North America.
ANDREW B. STEWART HAS BEEN OUR SECRETARY, CORPORATE FINANCE OFFICER AND A MEMBER
OF OUR BOARD OF DIRECTORS SINCE THE INCEPTION OF OUR BUSINESS. MR. STEWART HAS
DEVOTED APPROXIMATELY 5% OF HIS PROFESSIONAL TIME TO OUR BUSINESS AND INTENDS TO
CONTINUE TO DEVOTE THIS AMOUNT OF TIME IN THE FUTURE.
- Mr. Stewart is a practicing corporate finance lawyer in Vancouver,
British Columbia where he specializes in corporate and securities law.
- Since April 2001 Mr. Stewart has been the President and a director of
Gusana Explorations Inc., a Vancouver based mining corporation.
- Since January 2001 Mr. Stewart has been the Secretary and a director of
Universco Broadband Networks Inc., a British Columbia company providing
broadband wireless communications services.
- From November 2000 to May 2001 Mr. Stewart practiced as a corporate and
securities lawyer with Catalyst Corporate Finance Lawyers, in
Vancouver, British Columbia.
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- From May 1999 to November 2000 Mr. Stewart practiced as a tax attorney
with Thorsteinssons, Tax Lawyers, in Vancouver, British Columbia, where
he assisted clients with a variety of corporate tax planning,
compliance and litigation matters.
- In 1998 Mr. Stewart obtained his Master of Laws from the University of
Cambridge, England.
- Since 1998 Mr. Stewart has been a member of the British Columbia Bar,
the Canadian Bar Association, British Columbia Bar Association.
- In 1997 Mr. Stewart obtained his Bachelor of Laws from the University
of Alberta (Silver Medal) with Distinction.
- Between 1996 and 1998 Mr. Stewart worked at a Vancouver commercial
litigation firm, Hordo, Ross & Bennett.
- In 1994 Mr. Stewart obtained his Bachelor of Arts from the University
of British Columbia.
LAWFORD DUPRES HAS BEEN OUR CHIEF TECHNICAL OFFICER AND A MEMBER OF THE BOARD OF
DIRECTORS SINCE THE INCEPTION OF OUR BUSINESS. MR. DUPRES HAS DEVOTED
APPROXIMATELY 1% OF HIS PROFESSIONAL TIME TO OUR BUSINESS AND INTENDS TO
CONTINUE TO DEVOTE THIS AMOUNT OF TIME IN THE FUTURE.
- Born in Trinidad & Tobago, Mr. Dupres has thirty-four years of
international experience in the Petroleum industry.
- Since 1998 Mr. Dupres has been the Executive Director of the Trinidad &
Tobago Bureau of Standards where he manages a staff of 185 employees
engaged in the development and enforcement of standards within the
manufacturing and service sectors.
- From 1997 to 1998 Mr. Dupres was the President, Chief Executive Officer
and managing director of the state owned Petroleum Company of Trinidad
and Tobago (now Petronin). Mr. Dupres was responsible for overall
company performance and the implementation of a strategic plan,
targeting cost reductions, increased refinery throughputs,
reorganization of corporate structure and realignment of service
functions for improved efficiency and accountability, which he
developed with the assistance of a major U.S. consultant. Mr. Dupres
spearheaded the development of significant engineering capability
within Petronin to design and implement major corporate capital works,
computer based systems and new standards/specifications for its
engineering division. Mr. Dupres has participated in extensive
interactions with large international companies, state companies,
government ministries and other state agencies during business,
licensor and contract negotiations. He coordinated engineering studies
and contracts development for several projects in Trinidad & Tobago
involving both international and state companies.
- From 1993 to 1997 Mr. Dupres was the Divisional Manager of Marketing
and Business Development for Petronin where he led the marketing and
business development efforts of the company to increase procurement of
crude oil and refinery sales arising out of a major refinery upgrading
at Pointe-a-Pierre, Trinidad. Prior to that Mr. Dupres held the
position of Divisional
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Manager of General Engineering and Technical Services for the Trinidad
and Tobago Oil Company Ltd.
- From 1980 to 1990 Mr. Dupres occupied the positions of Project
Executive, Divisional Manager of Planning, Technology and Information
Services and Divisional Manager of General Engineering for the Trinidad
& Tobago Oil Company Ltd.
- Between 1964 and 1975, Mr. Dupres worked for Esso Imperial Oil Company
of Canada Ltd. at the refineries in Vancouver, British Columbia and
Sarnia, Ontario as well as the company's head office in Toronto,
Ontario where he was involved in process engineering, logistics,
facilities planning, economic analysis and refinery scheduling.
- Mr. Dupres has a Bachelor of Applied Sciences Degree in Chemical
Engineering from the University of British Columbia and one year of his
MBA degree at the University of Toronto.
There is no familial relationship among the three members of our management.
CONFLICTS OF INTEREST
We believe that we have a potential conflict of interest with our President,
Talal Yassin. The potential conflict arises because we owe Mr. Yassin a total of
$80,173 which he is entitled to demand repayment of at any time. This amount
consists of $22,500 paid by Mr. Yassin to acquire the 5% working interest in the
Coalinga Nose Prospect. Mr. Yassin assigned this interest to us in exchange for
a first promissory note payable to him in the amount of $22,500 plus interest.
In addition, the total loan amount from Mr. Yassin to us consists of $49,560
that was paid by Mr. Yassin on our behalf in respect of our obligation to pay
our proportionate share of costs on the Coalinga Nose Prospect project and to
exercise our option in respect of that interest. This amount was paid in
exchange for a second promissory note payable to Mr. Yassin in the amount of
$49,560 plus interest. In addition, we have incurred professional and
administrative expenses of $8,113 that were paid by Mr. Yassin on our behalf in
exchange for two additional promissory notes in the respective amounts of $4,043
and $4,070 plus interest. Under the terms of the promissory notes Mr. Yassin is
entitled to demand repayment at any time. Mr. Yassin does not intend to exercise
the notes until we are in a position to repay the same without compromising our
business operations. However, the potential conflict of interest exists because
Mr. Yassin may need his money before we are in a position to repay it without
compromising our business operations. Furthermore, there are no agreements with
Mr. Yassin regarding the exercise of any of the notes and Mr. Yassin is entitled
to exercise the notes at any time if he wishes. If Mr. Yassin demands repayment
of the money owed to him before we are in a position to pay it this may harm our
proposed business operations and new investors may lose their investment.
PLEASE REFER TO "RISK FACTOR" NUMBER 17 AT PAGE 11.
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Other than the above, we believe that none of our directors and officers will be
subject to conflicts of interest other than their devotion of time to projects
that do not involve us.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION
Mr. Yassin, our President and one of our directors, was compensated for his
services in shares of common stock in the amount of $110,000. Mr. Stewart, our
Secretary and one of our directors, was compensated for his services in shares
of common stock also in the amount of $110,000. Mr. Dupres, our Chief Technical
Officer and one of our directors, was compensated for his services in shares of
common stock in the amount of $55,000. There are no plans to compensate our
officers and directors in the near future, unless and until we begin to realize
revenues and become profitable in our business operations.
On May 4, 2001 we entered into a consulting agreement with Mr. Stewart for his
provision of legal advice and services in respect of this offering in exchange
for the payment of $20,000 which is to be made on completion of this offering.
The following table sets forth the compensation paid to our officers and
directors since our inception. This information includes the dollar value of
base salaries, bonus awards and number of stock options granted, and all other
compensation.
SUMMARY COMPENSATION TABLE
- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
(a) (b) (c) (d) (e) (f) (g) (h)
- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
Name & Securities
Principal Other Annual Restricted Underlying All LTIP Other
Position Salary Bonus Compensation Stock Awards Options/SARs Payments Compensation
- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
Talal Yassin, _ _ _ $110,000 _ _ _
President,
Treasurer and
Chief
Financial
Officer
- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
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- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
Andrew B. _ _ _ $110,000 _ _ _
Stewart,
Secretary,
Corporate
Finance
Officer
- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
Lawford _ _ _ $55,000 _ _ _
Dupres, Chief
Technical
Officer
- --------------- --------- --------- ----------------- ------------- ----------------- ------------ -----------------
There are no stock option, retirement, pension, or profit sharing plans for the
benefit of our officers and directors.
OPTION/SAR GRANTS
No individual grants of stock options, whether or not in tandem with stock
appreciation rights known as SARs and freestanding SARs have been made to any
executive officer or any director since our inception, accordingly, no stock
options have been exercised by any of the officers or directors since we were
founded.
LONG-TERM INCENTIVE PLAN AWARDS
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance to occur over a period longer than one
fiscal year, whether such performance is measured by reference to our financial
performance, our stock price, or any other measure.
COMPENSATION OF DIRECTORS
We do not have any plans to pay our directors any money for their services as
directors. Our directors receive compensation only in their capacity as officers
or consultants, not for serving as members of the board of directors. The Board
has not implemented a plan to award options.
On May 4, 2001 we entered into a consulting agreement with Mr. Stewart for his
provision of legal advice and services in respect of this offering in exchange
for the payment of $20,000 which is to be made on completion of this offering.
We do not expect to pay any cash salaries to our officers until such time as we
generate sufficient revenues to do so.
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INDEMNIFICATION
Pursuant to the Restated Articles of Incorporation and Bylaws of the
corporation, we may indemnify an officer or director who is made a party to any
proceeding, including a lawsuit, because of his position, if he acted in good
faith and in a manner he reasonably believed to be in our best interest. In
certain cases, we may advance expenses incurred in defending any such
proceeding. To the extent that the officer or director is successful on the
merits in any such proceeding as to which such person is to be indemnified, we
must indemnify him against all expenses incurred, including attorney's fees.
With respect to a derivative action, indemnity may be made only for expenses
actually and reasonably incurred in defending the proceeding, and if the officer
or director is judged liable, only by a court order. The indemnification is
intended to be to the fullest extent permitted by the laws of the State of
Nevada.
Regarding indemnification for liabilities arising under the Securities Act of
1933, as amended, which may be permitted to directors or officers pursuant to
the foregoing provisions, we are informed that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy, as
expressed in the Act and is, therefore, unenforceable.
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PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
The following table sets forth, as of the date of this prospectus, the total
number of shares owned beneficially by each of our directors, officers and key
employees, individually and as a group, and the present owners of 5% or more of
our total outstanding shares. The table also reflects what such ownership will
be, assuming completion of the sale of all shares in this offering. Shares will
be sold on a best efforts basis only and it may be the case that less than all
or even no shares will be sold in this offering. The stockholder listed below
has direct ownership of his shares and possesses sole voting and dispositive
power with respect to the shares.
- ----------------------------- --------------------- --------------------- ---------------------- -------------------
Percentage of
Name and Address of Number of Shares Number of Shares Percentage of Ownership If No
Beneficial Owner [1] Before Offering After Offering Ownership After Shares Sold in
Offering the Offering
- ----------------------------- --------------------- --------------------- ---------------------- -------------------
Talal Yassin 2,000,000 2,000,000 28.57% 40%
1325 Cammeray Rd.
West Vancouver, BC
Canada, V7S 2N2
- ----------------------------- --------------------- --------------------- ---------------------- -------------------
Andrew B. Stewart 2,000,0000 2,000,000 28.57% 40%
3301 -- 1009 Expo Blvd.
Vancouver, BC
Canada, V6E 4P1
- ----------------------------- --------------------- --------------------- ---------------------- -------------------
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Lawford Dupres 1,000,000 1,000,000 14.29% 20%
24 Westvale Ave.
Glencoe
Trinidad & Tobago, WI
- ----------------------------- --------------------- --------------------- ---------------------- -------------------
All Officers and Directors 5,000,000 2,500,000 71.43% 100%
as a Group (3)
- ----------------------------- --------------------- --------------------- ---------------------- -------------------
[1] The persons named above may be deemed to be a "parent" and "promoter" of our
company, within the meaning of such terms under the Securities Act of 1933, as
amended, by virtue of his/its direct and indirect stock holdings. Messrs.
Yassin, Stewart and Dupres are the only "promoters" of our company.
FUTURE SALES BY EXISTING STOCKHOLDERS
A total of 5,000,000 shares of common stock were issued to the existing
stockholders, all of which are "restricted securities," as that term is defined
in Rule 144 of the Rules and Regulations of the SEC promulgated under the
Securities Act. Under Rule 144, such shares can be publicly sold, subject to
volume restrictions and certain restrictions on the manner of sale, commencing
one (1) year after their acquisition.
Shares purchased in this offering, which will be immediately resalable, and
sales of all of our other shares after applicable restrictions expire, could
have a depressive effect on the market price, if any, of our common stock and
the shares we are offering.
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DESCRIPTION OF SECURITIES
- --------------------------------------------------------------------------------
COMMON STOCK
Our authorized capital stock consists of 100,000,000 shares of common stock, par
value $0.00001 per share. The holders of our common stock:
have equal rateable rights to dividends from funds legally available if
and when as and if declared by our board of directors;
are entitled to share rateably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution or
winding up of our affairs;
do not have pre-emptive, subscription or conversion rights and there are
no redemption or sinking fund provisions or rights; and
are entitled to one non-cumulative vote per share on all matters on
which stockholders may vote.
All shares of common stock now outstanding are fully paid for and non-assessable
and all shares of common stock which are the subject of this offering, when
issued, will be fully paid for and non-assessable. We refer you to our Restated
Articles of Incorporation, Bylaws and the applicable statutes
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of the State of Nevada for a more complete description of the rights and
liabilities of holders of our securities.
NON-CUMULATIVE VOTING
Holders of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of the outstanding shares, voting
for the election of directors, can elect all of the directors to be elected, if
they so choose, and, in such event, the holders of the remaining shares will not
be able to elect any of our directors. After this offering is completed,
assuming the maximum number of shares are sold, the present stockholders will
own approximately 71.43% of our outstanding shares. If no shares are sold under
the offering, the present stockholders will own 100% of our outstanding shares.
CASH DIVIDENDS
As of the date of this prospectus, we have not paid any cash dividends to
stockholders. The declaration of any future cash dividend will be at the
discretion of our board of directors and will depend upon our earnings, if any,
our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to
pay any cash dividends in the foreseeable future, but rather to reinvest
earnings, if any, in our business operations.
REPORTS
After we complete this offering, we will not be required to furnish you with an
annual report. Further, we will not voluntarily send you an annual report. We
will be required to file reports with the SEC under section 15(d) of the
Securities Act. The reports will be filed electronically. The reports we will be
required to file are Forms 10-KSB, 10-QSB, and 8-K. You may read copies of any
materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC also maintains an Internet site that will contain copies of the reports we
file electronically. The address for the Internet site is www.sec.gov.
Our common stock is defined as a "penny stock" under the Securities and Exchange
Act of 1934, and its rules. Because we are a penny stock, you may be unable to
resell our shares. Also, the Exchange Act and the penny stock rules impose
additional sales practice and disclosure requirements on broker-dealers who sell
our securities to persons other than certain accredited investors. As a result,
fewer broker/dealers are willing to make a market in our stock and it may effect
the level of news coverage you receive.
STOCK TRANSFER AGENT
Our stock transfer agent for our securities is The Nevada Agency And Trust
Company, Suite 880 -- West Liberty Street, Reno, Nevada, 89501 and its telephone
number is (775) 322-0626.
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CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
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We were incorporated in the State of Nevada on June 19, 2000 as Commerce Direct
Inc. No business was ever commenced under the name Commerce Direct Inc. nor was
the Initial List of Officers and Directors filed with the Nevada Secretary of
State. On April 23, 2001 we changed our name from Commerce Direct Inc. to Geocom
Resources Inc., filed our Initial List of Officers and Directors appointing our
current management team, and commenced our operations.
On May 4, 2001, we issued a total of 5,000,000 shares of restricted common stock
to Talal Yassin, Andrew B. Stewart and Lawford Dupres, officers and directors of
our company. This was accounted for as a compensation expense of $275,000 and
cash of $2,500.
Since our inception, Mr. Yassin has advanced loans to us in the total sum of
$80,173, which were used for organizational and start-up costs, legal and
auditor fees, operating capital and for acquiring and exercising our
participation option in respect of the Coalinga Nose Prospect. The loans bear
interest at a rate of 10% per annum and have not been paid as of the date
hereof. There are documents reflecting the loan but they are not due on any date
certain. Mr. Yassin will accept repayment from us when money is available.
Since our inception, Mr. Stewart has provided us with legal advice and services
for total sum of $20,000 which amount we have agreed to pay him on completion of
this offering.
In the opinion of management, the terms of the above-described transactions were
as favorable as those that could have been obtained in arms' length transactions
with unaffiliated third parties.
- --------------------------------------------------------------------------------
LITIGATION
- --------------------------------------------------------------------------------
We are not a party to any pending litigation and none is contemplated or
threatened.
- --------------------------------------------------------------------------------
EXPERTS
- --------------------------------------------------------------------------------
Our financial statements for the period from inception to May 4, 2001, included
in this prospectus have been audited by Davidson & Company, Independent
Certified Public Accountants, address, as set forth in their report included in
this prospectus.
- --------------------------------------------------------------------------------
LEGAL MATTERS
- --------------------------------------------------------------------------------
The validity of the common stock offered hereby and certain legal matters have
been passed on by Sutton Law Center, a Professional Corporation, Reno, Nevada.
The validity of certain legal matters have also been passed on by Andrew B.
Stewart, the Secretary and a Director of the Company, in his capacity as a
practicing corporate and securities law attorney.
-36-
37
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Our fiscal year end is June 30. We will provide audited financial statements to
our stockholders on an annual basis; the statements will be prepared by an
Independent Certified Public Accountant.
Our audited financial statement from inception to May 4, 2001 immediately
follows:
-37-
38
GEOCOM RESOURCES INC.
(FORMERLY COMMERCE DIRECT INC.)
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
MAY 4, 2001
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of
Geocom Resources Inc.
(formerly Commerce Direct Inc.)
We have audited the accompanying balance sheet of Geocom Resources Inc.
(formerly Commerce Direct Inc.) as at May 4, 2001 and the related statements of
operations, stockholders' equity and cash flows for the period from date of
incorporation on June 19, 2000 to May 4, 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Geocom Resources Inc. (formerly Commerce
Direct Inc.) as at May 4, 2001 and the results of its operations and its cash
flows for the period from date of incorporation on June 19, 2000 to May 4, 2001,
in conformity with United States generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Geocom
Resources Inc. (formerly Commerce Direct Inc.) will continue as a going concern.
The Company is in the exploration stage and does not have the necessary working
capital for its planned activity which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are discussed in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
May 9, 2001
- F-1 -
39
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
BALANCE SHEET
AS AT MAY 4, 2001
================================================================================
ASSETS
CURRENT
Cash $ 2,500
===================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 24,043
Notes payable (Note 5) 72,060
4,070
---------
DUE TO RELATED PARTY 100,173
---------
STOCKHOLDERS' EQUITY
Capital stock (Note 6)
Authorized
100,000,000 common shares with a par value of $0.00001
Issued and outstanding
5,000,000 common shares 50
Additional paid in capital 277,450
Deficit accumulated during the exploration stage (375,173)
---------
(97,673)
---------
Total liabilities and stockholders' equity $ 2,500
===================================================================================
The accompanying notes are an integral part of these financial statements.
- F-2 -
40
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
================================================================================
Period From
Inception on
June 19, 2000
to May 4, 2001
- ----------------------------------------------------------------------------------
EXPENSES
Accounting fees $ 2,000
Acquisition of oil and gas working interest 72,060
Consulting fees 20,000
Executive compensation 275,000
Filing fees 235
Legal fees 3,000
OFFICE AND MISCELLANEOUS 628
RENT 1,050
TRANSFER AGENT FEES 1,200
---------
LOSS FOR THE PERIOD $(375,173)
===============================================================================
BASIC AND DILUTED LOSS PER SHARE $ (6.00)
===============================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 62,500
===============================================================================
The accompanying notes are an integral part of these financial statements.
- F-3 -
41
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
================================================================================
Deficit
Accumulated
Common Stock Additional During the Total
------------------------ Paid in Exploration Stockholders'
Shares Amount Capital Stage Equity
- --------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 19, 2000 -- $ -- $ -- $ -- $ --
Capital stock issued for cash 2,500,000 25 2,475 -- 2,500
Capital stock issued for services 2,500,000 25 274,975 -- 275,000
Loss for the period -- -- -- (375,173) (375,173)
--------- --------- --------- --------- ---------
BALANCE, MAY 4, 2001 5,000,000 $ 50 $ 277,450 $(375,173) $ (97,673)
=================================================================================================================
The accompanying notes are an integral part of these financial statements.
- F-4 -
42
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
================================================================================
Period
From Inception
on June 19,
2000 to
May 4,
2001
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $(375,173)
Items not affecting cash:
Shares issued for services 275,000
Acquisition of oil and gas working interest 72,060
Changes in non-cash working capital items
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 24,043
Increase in due to related party 4,070
---------
NET CASH USED IN OPERATING ACTIVITIES --
---------
CASH FLOWS FROM FINANCING ACTIVITIES
ISSUANCE OF CAPITAL STOCK 2,500
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,500
---------
CASH POSITION, END OF THE PERIOD $ 2,500
=============================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
CASH PAID FOR INCOME TAXES $ --
CASH PAID FOR INTEREST --
=============================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
COMMON SHARES ISSUED FOR SERVICES $ 275,000
EXPENSES PAID BY RELATED PARTY ON BEHALF OF THE COMPANY 4,070
NOTE PAYABLE ACCRUED FOR ACQUISITION OF OIL AND GAS WORKING INTERESTS 72,060
=============================================================================================
The accompanying notes are an integral part of these financial statements.
- F-5 -
43
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MAY 4, 2001
1. ORGANIZATION OF THE COMPANY
The Company was incorporated on June 19, 2000 under the laws of Nevada
to engage in any lawful business or activity for which corporations may
be organized under the laws of the State of Nevada.
The Company changed its name from Commerce Direct Inc., filed its
Initial List of Officers and Directors and commenced operations on
April 23, 2001. The Company's fiscal year end will be June 30.
The Company entered the exploration stage in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 7 on June 19, 2000. The
Company plans to pursue opportunities in the oil and natural gas
industry. Operations since incorporation consisted primarily of
obtaining capital contributions by the initial investors and activities
regarding the registration of the offering with the United States
Securities and Exchange Commission.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has no current
source of revenue. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The
Company's management plans on raising cash from sources other than the
sale of minerals found on their property on an as needed basis and in
the longer term, revenues from the acquisition, exploration and
development of oil and natural gas interests, if found. The Company's
ability to continue as a going concern is dependent on these additional
cash financings, and, ultimately, upon achieving profitable operations
through the development of oil and natural gas interests.
===============================================================
May 4,
2001
---------------------------------------------------------------
Deficit accumulated during the exploration stage $(375,173)
Working capital deficiency (97,673)
===============================================================
- F-6 -
44
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MAY 4, 2001
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the year. Actual results could differ from
these estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share". Under SFAS 128, basic and
diluted earnings per share are to be presented. Basic earnings per
share is computed by dividing income available to common shareholders
by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common
shares outstanding (computed under basic earnings per share) and
potentially dilutive common shares.
INCOME TAXES
Income taxes are provided in accordance with SFAS 109, "Accounting for
Income Taxes". A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net
operating loss carryforwards. Deferred tax expenses (benefit) result
from the net change during the year of deferred tax assets and
liabilities.
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 assets 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.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In September 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, the FASB issued SFAS
137 and 138 to
- F-7 -
45
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MAY 4, 2001
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd)
defer the effective date of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its
financial statements.
OIL AND GAS PROPERTIES
The Company has adopted the "successful efforts" method of accounting
for its oil and gas exploration and development activities, as set
forth in SFAS No. 19, as amended, issued by the FASB. However, due to
the Company's current nascent status, the successful efforts accounting
policies disclosed thereof are not applicable.
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (the
Statement). The Statement specifies when an impairment loss should be
recognized and how impairment losses should be measured for long-lived
assets to be held and used and for long-lived assets to be disposed of.
In accordance with the Statement, the costs of proved oil and gas
properties and equipment are periodically assessed on a lease by lease
basis to determine if such costs exceed undiscounted future cash flows,
and if conditions warrant an impairment reserve will be provided based
on the estimated future discounted cash flows.
The Company currently has no long-lived assets and that SFAS 121 is
inapplicable at the current time.
DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
SFAS 131, " Disclosure About Segments of an Enterprise and Related
information" requires use of the management approach model for segment
reporting. The management approach model is based on the way a
company's management organizes segments within the company for making
operating decisions and assessing performance. Reporting segments are
based on products and services, geography, legal structure, management
structure, or any other manner in which the management disaggregates a
company. Currently, SFAS 131 has no effect on the Company's financial
statements as substantially all of the Company's operations are
conducted in one industry segment in the United States of America.
- F-8 -
46
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MAY 4, 2001
================================================================================
4. OIL AND NATURAL GAS PROPERTIES
The Company's current project is its option in respect of the Coalinga
Nose Prospect. The project involves Greka, AM, Inc. ("Greka"), Nahama
Natural Gas Company ("Nahama") and George Froley ("Froley") who are the
owners of the oil and gas leases covering the lands in Fresno County,
California. On January 1, 2001, Production Specialties Co.
("Production") entered into a joint operating agreement with Greka,
Nahama and Froley whereby Production obtained a 100% working interest
and a 100% net revenue interest less applicable landowner royalties
covering the prospect. Production then entered into a letter agreement
dated March 19, 2001 with Brothers Oil and Gas Inc. ("Brothers") and
Olympic Resources (Arizona) Ltd. ("Olympic") whereby Production farmed
out to Brothers and Olympic 100% of Production's interest in the
prospect. Brothers then offered a director of the Company, an option to
participate in a 5% working interest in the farmout described above.
On May 4, 2001, the director assigned to the Company his right, title
and interest in the option agreement between himself and Brothers for
consideration of a promissory note in the amount of $22,500. Pursuant
to the terms of the participation agreement, a final payment of $49,560
would be made on behalf of the Company by the director in exchange for
a second promissory note of which amount would exercise the option.
Both promissory notes are subject to certain terms and conditions (Note
5). The agreement between Brothers and the Company provides that if the
Company as an optionee under the participation option, would earn the
following:
a) On the Block 1 leases, the net revenues to the Company will be 5%
of the 74% net revenue before payout of all parties' working
interest expenditures, or 3.7%. After payout the Company's net
interest will be 5% of the 56.25% net revenue after payout of all
parties working interest expenditures, or 2.815%. On subsequent
wells on Block 1, the net revenues to the Company will be 5% of
56.25% before and after payout, or 2.815%.
b) On Block 2 leases, the net revenues to the Company will be 5% of
the 50% net revenue before payout of all parties working interest
expenditures, or 2.5%. After payout the Company's net interest
will be 5% of the 37.5% net revenue after payout of all working
interest expenditures, or 1.875%.
The Company is obligated to pay its proportionate share of costs with
respect to its 5% working interest.
- F-9 -
47
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MAY 4, 2001
================================================================================
5. NOTES PAYABLE
The Company has issued two promissory notes to a director of the
Company in the amounts of $22,500 and $49,560. Each promissory note is
payable on demand to or to the order of the director and bears interest
at the rate of 10% per annum. If the Company fails to pay on demand,
any payment of the sum, the balance of the principal sum on the
promissory note shall become immediately due and payable.
6. CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of common stock, with a par value of $0.00001 per share. All shares of
common stock have equal voting rights and, when validly issued and
outstanding, are entitled to one non-cumulative vote per share in all
matters to be voted upon by shareholders. The shares of common stock
have no pre-emptive, subscription, conversion or redemption rights and
may be issued only as fully paid and non-assessable shares. Holders of
the common stock are entitled to equal rateable rights to dividends and
distributions with respect to the common stock, as may be declared by
the Board of Directors out of funds legally available.
On April 30, 2001, the Company issued 5,000,000 shares of common stock
for services and cash at an agreed value of $277,500.
PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company is preparing a Form SB-2 registration statement with the
United States Securities and Exchange Commission with an offer for sale
of up to 2,000,000 common stock at $0.10 per share.
7. INCOME TAXES
A reconciliation of income taxes at statutory rates with the reported
taxes is as follows:
============================================================================
Loss before income taxes $(375,173)
============================================================================
Income taxes at statutory rate of 34% $(127,559)
Unrecognized tax benefits of losses and temporary differences 127,559
---------
Total income taxes $ --
============================================================================
- F-10 -
48
GEOCOM RESOURCES INC.
(formerly Commerce Direct Inc.)
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MAY 4, 2001
================================================================================
7. INCOME TAXES (cont'd.....)
The Company's total deferred tax asset at May 4, 2001 is as follows:
=============================================================
Tax benefit of net operating loss carryforward $ 127,559
Valuation allowance (127,559)
---------
$ --
=============================================================
The Company has a net operating loss carryforward of approximately
$375,000, which if not used, will expire in 2021. The Company has
provided a full valuation allowance on the deferred tax asset because
of the uncertainty regarding realizability.
8. RELATED PARTY TRANSACTIONS
During the period ended May 4, 2001, the Company entered into an
assignment agreement with a director of the Company to acquire his
option to participate in a 5% working interest in a
farmout/participation agreement for an oil and natural gas exploration
project in respect of certain oil and gas leases in the state of
California (Note 4). The option was acquired in exchange for a
promissory note dated May 4, 2001, issued by the Company to the
director in the amount of $22,500 plus interest.
Pursuant to the option agreement between Brothers and the Company,
payment of a final $49,560 to exercise the option was made to Brothers.
The amount was paid on behalf of the Company by a director in exchange
for a promissory note dated May 25, 2001, in the amount of $49,560 plus
interest.
In addition, the Company incurred professional and administrative
expenses of $4,070 which were paid on behalf of the Company by a
director.
During the period, the Company entered into a consulting agreement with
a director and officer of the Company. Pursuant to this agreement, the
Company has retained the services of the director for the provision of
legal advice and services in assisting the Company to obtain a
quotation of its securities on the Over-The-Counter Bulletin Board in
the United States. The Company shall compensate the director by paying
him a total of $20,000 on the completion of a public offering of the
Company made pursuant to an SB-2 Registration Statement.
- F-11 -
49
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrangement under
which any controlling person, director or officer of the Registrant is insured
or indemnified in any manner against any liability which he may incur in his
capacity as such, is as follows:
1. Article XII of the Articles of Incorporation of the company, filed as
Exhibit 3.1 to the Registration Statement.
2. Article XI of the Bylaws of the company, filed as Exhibit 3.2 to the
Registration Statement.
3. Nevada Revised Statutes, Chapter 78.
The general effect of the foregoing is to indemnify a control person, officer or
director from liability, thereby making the company responsible for any expenses
or damages incurred by such control person, officer or director in any action
brought against them based on their conduct in such capacity, provided they did
not engage in fraud or criminal activity.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering (assuming all shares are sold), all of
which are to be paid by the registrant, are as follows:
SEC Registration Fee $ 100.00
Printing Expenses $ 7,000.00
Accounting Fees and Expenses $ 5,000.00
Legal & Consulting Fees/Expenses $23,000.00
Blue Sky Fees/Expenses $ 5,000.00
Transfer Agent Fees $ 3,500.00
Miscellaneous Expenses $ 6,400.00
----------
TOTAL $50,000.00
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant has sold the following securities
which were not registered under the Securities Act of 1933, as amended.
- -----------------------------------------------------------------------------------------------
Name and Address Date Shares Consideration
- -----------------------------------------------------------------------------------------------
Talal Yassin May 4, 2001 2,000,000 Services and $1,000 cash
1325 Cammeray Rd.
West Vancouver, BC
Canada, V7S 2N2
- -----------------------------------------------------------------------------------------------
Andrew B. Stewart May 4, 2001 2,000,000 Services and $1,000 cash
3301 -- 1009 Expo Blvd.
Vancouver, BC
Canada, V6Z 2V9
- -----------------------------------------------------------------------------------------------
50
- -----------------------------------------------------------------------------------------------
Lawford Dupres May 4, 2001 1,000,000 Services and $500 cash
24 Westvale Ave.
Glencoe
Trinidad & Tobago, WI
- -----------------------------------------------------------------------------------------------
We issued the foregoing restricted shares of common stock to Messrs. Yassin,
Stewart and Dupres pursuant to Section 4(2) of the Securities Act of 1933.
Messrs. Yassin, Stewart and Dupres are sophisticated investors, are officers and
directors of the company, and where in possession of all material information
relating to the company. Further, no commissions were paid to anyone in
connection with the sale of the shares and general solicitation was made to
anyone.
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement,
pursuant to Item 601 of Regulation K.
Exhibit No. Document Description
- ----------- ------------------------------------------------------------------
* 3.1 Articles of Incorporation.
* 3.2 Bylaws.
* 4.1 Specimen Stock Certificate.
**4.1.1 Specimen Stock Certificate, as amended.
* 5.1 Opinion of Skinner, Sutton, Watson & Rounds, P.C., regarding the
legality of the Securities being registered.
**5.1.1 Opinion of Sutton Law Center, P.C., regarding the legality of the
Securities being registered.
5.1.2 Opinion of Sutton Law Center, P.C., regarding the legality of the
Securities being registered.
* 10.1 Participation Agreement
**10.1.1 Participation Agreement, as executed
* 10.2 Cash Call No. 2
* 10.3 Assignment Agreement
* 23.1 Consent of Davidson & Company, Certified Public Accountants.
**23.1.1 Consent of Davidson & Company, Certified Public Accountants.
23.1.2 Consent of Davidson & Company, Certified Public Accountants.
* 23.2 Consent of Skinner, Sutton, Watson & Rounds, P.C., (included in
Exhibit 5.1)
**23.2.1 Consent of Sutton Law Center (included in Exhibit 5.1.1)
23.2.2 Consent of Sutton Law Center (included in Exhibit 5.1.2)
* 99.1 Subscription Agreement.
**99.2 Notice of Proposed Registered Offering.
99.2.1 Notice of Proposed Registered Offering.
**99.3 Proposed Form of Advertisement for Registered Offering.
**99.4 Initial List of Officers, Directors and Resident Agent of Commerce
Direct, Inc.
**99.5 Promissory Note dated May 4, 2001.
**99.6 Promissory Note dated May 25, 2001.
* Previously filed as an exhibit to our Form SB-2, filed June 7, 2001.
** Previously filed as an exhibit to our Form SB-2 Amendment No. 1, filed August
2, 2001.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification
51
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
c. To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing of this Form SB-2 Registration Statement and has duly
caused this Form SB-2 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Vancouver, British Columbia, on this
31st day of August, 2001.
GEOCOM RESOURCES INC.
BY: /s/ Talal Yasin
-----------------------------------
Talal Yassin, President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below
constitutes and appoints Talal Yassin, as true and lawful attorney-in-fact and
agent, with full power of substitution, for his and in his name, place and
stead, in any and all capacities, to sign any and all amendment (including
post-effective amendments) to this registration statement, and to file the same,
therewith, with the Securities and Exchange Commission, and to make any and all
state securities law or blue sky filings, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite or necessary to be
52
done in about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying the confirming all that said
attorney-in-fact and agent, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS FORM SB-2
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
- -----------------------------------------------------------------------------------------------------
Signature Title Date
- -----------------------------------------------------------------------------------------------------
/s/ Andrew B. Stewart Secretary, Corporate Finance August 31, 2001
- ----------------------------- Officer and member of Board of
Andrew B. Stewart Directors
- -----------------------------------------------------------------------------------------------------