U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-27321
Vista Exploration Corporation
-----------------------------
(Name of small business issuer in its charter)
Colorado 84-1493152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11952 Farley, Shawnee Mission, KS 66213
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(Address of principal executive offices, including ZIP Code)
Issuer's telephone number: (913) 814-8313
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
No par value common stock
-------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year ended March 31, 2003
were $0.
The aggregate market value of the 790,000 shares of the issuer's
outstanding common stock held by non-affiliates of the issuer was $79,000 as of
June 28, 2003. The stock price for computation purposes was $0.10 per share
which is the opening price that has been applied for in the issuer's NASD OTC
Bulletin Board application. Presently there is no market for the issuer's
securities.
The issuer had 1,690,000 shares of its common stock issued and outstanding
as of June 28, 2003, the latest practicable date before the filing of this
report.
VISTA EXPLORATION CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-KSB
Page
----
PART I.........................................................................4
Item 1. Description of Business......................................4
Item 2. Description of Property......................................9
Item 3. Legal Proceedings............................................9
Item 4. Submission of Matters to a Vote of Security Holders..........9
PART II.......................................................................10
Item 5. Market for Common Equity and Related Stockholder Matters....10
Item 6. Plan of Operation...........................................12
Item 7. Financial Statements........................................13
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.........................13
PART III......................................................................13
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act................................................13
Item 10. Executive Compensation......................................14
Item 11. Security Ownership of Certain Beneficial Owners and
Management..................................................15
Item 12. Certain Relationships and Related Transactions..............16
Item 13. Exhibits and Reports on Form 8-K............................18
Item 14. Controls and Procedures.....................................18
Item 15. Principal Accountant Fees and Services......................19
2
PART I
Forward-Looking Statements
This report on Form 10-KSB contains forward-looking statements that concern
our business. Such statements are not guarantees of future performance and
actual results or developments could differ materially from those expressed or
implied in such statements as a result of certain factors, including those
factors set forth in "Description of Our Business," "Plan of Operation" and
elsewhere in this report. All statements, other than statements of historical
facts, included in this report that address activities, events or developments
that we expect, believe, intend or anticipate will or may occur in the future,
including the following matters, are forward looking statements:
o our ability to locate and negotiate a transaction with a private
entity desiring to become a public company;
o our ability to raise enough capital to continue operations pending a
merger or acquisition transaction;
o the ability of the successor management to file and have declared
effective a registration statement, re-registering the resale of our
common shares;
o the continued demand for shell corporations; and
o the expansion and growth of our operations.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our product research. Such statements are subject to
a number of assumptions including the following:
o risks and uncertainties, including the risks discussed in this annual
report,
o general economic and business conditions,
o the business opportunities that may be presented to and pursued by us,
and
o changes in laws or regulations and other factors, many of which are
beyond our control.
The cautionary statements contained or referred to in this report should be
considered in connection with any subsequent written or oral forward-looking
statements that may be issued by us or persons acting on our behalf. We
undertake no obligation to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
3
Item 1.
Our history:
We were incorporated in Colorado on April 9, 1998 as a "blank check"
company for the purpose of evaluating, structuring, and completing a merger with
or acquisition of a privately owned corporation. Our purpose was to provide a
method for a foreign or domestic private company to become a reporting (or
public) company whose securities would be qualified for trading in the United
States secondary market. In furtherance of these goals, on September 13, 1999,
our management voluntarily filed a Registration Statement on Form 10-KSB with
the Securities and Exchange Commission and we became a reporting company. Our
management also actively sought a suitable acquisition or merger candidate but
did not find one.
On or about March 3, 2001, we and our largest shareholder, Corporate
Management Services, Inc. (or "CMS") entered into an Agreement for the Purchase
of Common Stock whereby CMS sold a controlling interest in the Company to
Charles A. Ross, Sr. for the purpose of changing us from an inactive company to
an oil and gas company. Prior to entering into the Stock Purchase Agreement, Mr.
Ross was not affiliated with us and did not own any of our common stock. In
connection with the sale, our then sole officer and director, Mr. George
Andrews, resigned and Mr. Ross became our president and sole director. We moved
our principal place of business from Littleton, Colorado to Shawnee Mission,
Kansas and we changed our fiscal year-end from April 30 to March 31 of each
year. Subsequently, we changed our name from Bail Corporation to Vista
Exploration, our current name and commenced operations toward investing in oil
and gas properties. In the spring of 2001, we investigated acquiring 125,000
acres in the northeast region of Alabama but dropped the project when we were
unable to get comfortable with the title to the properties we were looking at.
Subsequently, we attempted to acquire drilling interests on approximately 3,500
acres in Unitah County, Utah but later determined that we did not have the
financial resources to adequately determine the appropriate drilling locations
and determined to pass on this opportunity as well. Subsequently, we became
interested in a coalbed methane play in southeast Kansas. As of February 1,
2002, we had entered into 115 separate leases covering approximately 15,388
acres in Coffey and Lyon Counties, Kansas. All of the leases required annual
payments of $10.00 per acre to maintain the lease. However, as a result of our
very poor financial condition as discussed hereinafter, we were unable to make
the annual lease payments during 2003 and our leases expired. At the present
time, we no longer have any oil and gas properties under lease, active drilling
sites or any other interests in oil and gas properties.
Following Mr. Ross's acquiring control of the Company in the spring of
2001, we sold 4,680,000 common shares in three private offerings for net
proceeds of $217,543 after deducting offering costs of approximately $35,457.
During July 2001, the Company filed a Registration Statement to register for
resale certain of the common shares sold to the original shareholders of Vista
and a majority of the shares sold in the recent private placements. That
registration statement was declared effective in April of 2002 immediately
followed by an application by the Company for a trading symbol with the NASD
which would allow us to commence trading on the Over The Counter Bulletin Board
("OTCBB"). As part of the process to obtain the trading symbol, the NASD
objected to certain of the Company's shareholders who it was determined had
prior regulatory problems with the NASD and SEC. As part of this procedure, it
also was determined that several non-offensive shareholders were introduced to
the Company by some of the shareholders who had regulatory issues. As a result
of the objections imposed by the NASD, the Company determined to rescind the
sales of most of the private placement shares sold during 2001 and entered into
settlement agreements with a total of ten shareholders owning a total of
4,400,000 shares of the 4,860,000 sold in the private offerings. Our management
was able to essentially repurchase the shares in exchange for the original
purchase price of a total of $158,696.80 which was paid by the issuance of
corporate promissory notes in that amount as the Company had no cash available
to it. The notes were repayable on November 14, 2002 unless the payment would be
prohibited pursuant to the terms of Section 7-106-401 of the Colorado Business
Corporation Act that restricts a company's ability to pay for a stock redemption
during any period of time when such a redemption would cause it to be insolvent.
Under these circumstances the notes automatically extend without interest until
August 14, 2003, after which date the notes have the same restrictions on
repayment however, they commence accruing interest at the lowest available
applicable federal rates. The notes are guaranteed by Mr. Ross, however, the
guaranty cannot be enforced until such time as the notes may be repaid pursuant
to Colorado law but have not been repaid. At the time of the issuance of the
above referenced notes, the Company received back all 4,400,000 shares of its
common stock being repurchased which shares were cancelled back into authorized
but unissued capital of the Company. Immediately upon confirmation of the stock
repurchase, the NASD approved the Company's request for a trading symbol and the
Company received a trading symbol of "VXPL". However, trading has not yet
commenced in the Company's common stock.
4
As a result of our inability to fund oil and gas operations (partially due
to our need to repurchase the shares) management determined to revise our plan
of operations back to the original plan of seeking a merger with or acquisition
of an operating business desiring to become a public company.
Plan of Operation
At March 31, 2003, the Company has a working capital deficit of $349,166.
The Company has insufficient capital with which to provide merger or acquisition
candidates with substantial cash or other assets. However, Management believes
the Company will offer owners of potential merger or acquisition candidates the
opportunity to acquire a controlling ownership interest in a public company at
substantially less cost than is required to conduct an initial public offering.
The target company will, however, incur significant post-merger or acquisition
registration costs in the event target company shareholders wish to offer a
portion of their shares for subsequent sale. Further, while target company
shareholders will receive "restricted securities" in any merger or acquisition
transaction, those restricted securities will represent, if a trading market
develops for the Company's common stock, ownership in a "publicly-traded" as
opposed to a "privately-held" company. Management also believes target company
shareholders may benefit in obtaining a greater ownership percentage in the
Company remaining after a merger or acquisition that may be the case in the
event a target company offered its shares directly for sale to the public.
Nevertheless, the Officers and Directors of the Company have not conducted
market research and are not aware of statistical data that would support the
perceived benefits of a merger or acquisition transaction for target company
shareholders.
The Company expects to concentrate primarily on the identification and
evaluation of prospective merger or acquisition "target" entities including
private companies, partnerships or sole proprietorships. The Company does not
intend to act as a general or limited partner in connection with partnerships it
may merge with or acquire. Management has not identified any particular area of
interest within which the Company will concentrate its efforts.
Management contemplates that the Company will seek to merge with or acquire
a target company with either assets or earnings, or both, and that preliminary
evaluations undertaken by the Company will assist in identifying possible target
companies. The Company has not established a specific level of earnings or
assets below which the Company would not consider a merger or acquisition with a
target company. Moreover, management may identify a target company which is
generating losses which it will seek to acquire or merge with the Company. The
merger with or acquisition of a target company which is generating losses or
which has negative shareholders' equity may have a material adverse effect on
the price of the Company's Common Shares.
5
Plan of Acquisition
The Company intends to follow a systematic approach to identify its most
suitable acquisition candidates.
First, management intends to concentrate on identifying any number of
preliminary prospects which may be brought to the attention of management
through present associations or by virtue of the very limited advertising
campaign the Company may conduct. Management will then apply certain of its
broad criteria to the preliminary prospects. Essentially, this will entail a
determination by management as to whether or not the prospects are in an
industry which appears promising and whether or not the prospects themselves
have potential within their own industries. During this initial screening
process, management will ask and receive answers to questions framed to provide
appropriate threshold information, depending upon the nature of the prospect's
business. Such evaluation is not expected to be an in-depth analysis of the
target company's operations although it will encompass a look at most, if not
all, of the same areas to be examined once one or more target companies are
selected for an in-depth review. For instance, at this stage, management may
look at a prospect's unaudited balance sheet. Once a prospect is selected for an
in-depth review, management will review the prospect's audited financial
statements. Nevertheless, management anticipates this evaluation will provide a
broad overview of the business of the target company and should allow a large
percentage of preliminary prospects to be eliminated from further consideration.
Assuming management is able to complete the preliminary evaluation process
and select a limited number of companies for further study, of which there can
be no assurance, the Company may enter into preliminary negotiations with target
company management in order to obtain detailed financial and operational
information. Following the Company's receipt of such information, management
will conduct an in-depth analysis of five (5) major areas of concern with
respect to the target company as follows:
1. Managerial and Financial Stability. Management of the Company will
review audited financial statements of the target company and will also research
the background of each director and member of management of the target company
in order to discern whether the stability of the Company is such that further
negotiations are warranted.
2. Industry Status. Management will research the potential of the target
company's industry. The concern here is whether the industry is in a growth,
stagnant or declining stage.
6
3. Production of Product. If the target company is a manufacturer,
management will review whether it has the necessary resources or access to the
necessary resources and supplies to produce a quality product in a timely
manner.
4. Acceptance and Potential of Product. Management will review the
acceptance of the target company's product in the marketplace. Management will
also review whether or not the product is realistic (therefore, is there
potential for the product to be workable and for it to fulfill its intended
purpose).
5. Development of Target Company. Management will review the target
company's stage of development (examples: start-up stage, established company,
etc.)
The foregoing is an outline of the areas of concern which most often arise
and merit careful scrutiny by management. Because of the possible varieties of
target companies which may come to the attention of management, additional
factors will most likely be considered in any given analysis. Also, the
procedures used in such a review are expected to vary depending upon the target
company being analyzed. Management may select a target company for further
negotiations even though the target may not receive a favorable evaluation as to
some of the five areas of concern.
Management considers it unlikely that it will evaluate more than two or
three firms on this basis in view of capital and managerial time constraints.
Following the identification of at most one or two target companies which appear
to be suitable merger or acquisition candidates, the Company expects to
commission appraisals, professional studies of reserve and asset reports to be
conducted by outside consultants. The Company has limited funds with which to
engage consultants and, accordingly, management intends to conserve such funds
pending management's evaluation.
Management expects to enter into further negotiations with target company
management following successful conclusion of financial and evaluation studies.
Negotiations with target company management will be expected to focus on the
percentage of the Company which target company shareholders would acquire in
exchange for their shareholdings in the target company. Depending upon, among
other things, the target company's assets and liabilities, the Company's
shareholders will in all likelihood hold a lesser percentage ownership interest
in the Company following any merger or acquisition. The percentage ownership may
be subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then-shareholders.
7
The final stage of any merger or acquisition to be effected by the Company
will require the Company to retain the services of its counsel and a qualified
accounting firm in order to properly effect the merger or acquisition. The
Company may be expected to incur significant legal fees and accounting costs
during the final stage of a merger or acquisition. Also, if the merger or
acquisition is successfully completed, management anticipates that certain costs
will be incurred for public relations, such as the dissemination of information
to the public, to the shareholders and to the financial community. If the
Company is unable to complete the merger or acquisition for any reason, the
Company's capital may be substantially depleted if legal fees and accounting
costs have been incurred. Management intends to retain legal and accounting
services only on an as-needed basis in the latter stages of a proposed merger or
acquisition. Due to the very limited resources we may have to seek additional
financing in order to continue operations.
Competition
The Company will remain an insignificant participant among the firms which
engage in mergers with and acquisitions of privately-financed entities. There
are many established venture capital and financial concerns which have
significantly greater financial and personnel resources and technical expertise
than the Company. In view of the Company's combined limited financial resources
and limited management availability, the Company will continue to be at a
significant competitive disadvantage compared to the Company's competitors.
Regulation and Taxation
The Company could be subject to regulation under the Investment Company Act
of 1940 in the event the Company obtains and continues to hold a minority
interest in a number of entities. However, management intends to seek at most
one or two mergers or acquisitions and management's plan of operation is based
upon the Company obtaining a controlling interest in any merger or acquisition
target company and, accordingly, the Company may be required to discontinue any
prospective merger or acquisition of any company in which a controlling interest
will not be obtained.
The Company could also be required to register under the Investment Company
Act of 1940 in the event the Company comes within the definition of an
Investment Company contained in that Act due to its assets consisting
principally of shareholdings held in a number of subsidiaries. Management
intends to seek at most one or two mergers or acquisitions, which transactions
will not result in the Company holding an interest in any subsidiaries.
8
Any securities which the Company acquires in exchange for its Common Stock
will be "restricted securities" within the meaning of the Securities Act of 1933
(the "1933 Act"). If the Company elected to resell such securities, such sale
could not proceed unless a registration statement had been declared effective by
the Securities and Exchange Commission or an exemption from registration was
available. Section 4(1) of the 1933 Act, which exempts sales of securities not
involving a distribution, would in all likelihood be available to permit a
private sale if various restrictions pertaining to such a sale are complied
with. Although management's plan of operation does not contemplate resale of
securities acquired, in the event such a sale were necessary, the Company would
be required to comply with the provisions of the 1933 Act.
In the event the Company were to successfully complete a merger or
acquisition following the conclusion of this offering, the 1933 Act may require
the "integration" of any exchange offer of the Company's Common Shares with the
public offering of the Company's Common Shares hereunder. Integration of an
exchange offer with this offering is not expected to cause the Company to exceed
applicable dollar limitations under the 1933 Act.
As a condition to any merger or acquisition, it is possible target company
management may request registration of the Company's Common Shares to be
received by target company shareholders. In such event, the Company could incur
registration costs, and management intends to require the target company to bear
most, if not all, of the cost of any such registration. Alternatively, the
Company may issue "restricted securities" to any prospective target company,
which securities may be subsequently registered for sale or sold in accordance
with Rule 144 of the Securities Act of 1933.
The Company intends to structure a merger or acquisition in such a
manner as to minimize federal and state tax consequences to the Company and any
target company.
Item 2. Description of Property.
In April 2001, we moved our headquarters to 11952 Farley, Shawnee Mission,
Kansas 66213, where we occupy offices in the home of our sole officer and
director at no cost to us. Mr. Ross has agreed to continue this arrangement
until we make other arrangements.
Item 3. Legal Proceedings.
We do not know of any pending or threatened legal proceedings to which we
are a party. We also are not aware of any proceedings being contemplated by
governmental authorities against us.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no items submitted to a vote of security holders during the
fourth quarter of the year ended March 31, 2003.
9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Principal Market or Markets
The company's stock was granted the symbol "VXPL" on December 31, 2002 to permit
it to trade on the Over the Counter Bulletin Board ("OTCBB"). To date upon
information there have been no trades in the Company's stock. A registration
statement on Form SB-2 was declared effective in April of 2002 and subsequently
a post-effective Amendment was declared effective in July of 2002. However, the
information contained in the Registration Statement is currently out of date and
no trading can occur in reliance on that Registration Statement until it is
subsequently amended. At the present time, Public Securities, an NASD market
maker, has posted a bid of $.05 and an ask price of $.15 for our securities. We
plan on filing a post-effective Amendment to our Registration Statement as soon
as practicable subsequent to engaging in a merger or acquisition transaction.
(b) Recent Sales of Unregistered Securities During the most recent three
years, the Registrant has sold securities which were not registered a follows:
Date Name No. of Shares Consideration
--------------------------------------------------------------------------------------------------------------
(1) April 23, 2001 Jeffery P. Frazier 1,000,000 $10,000
(2) April 23, 2001 Terrie L. Pham 1,000,000 $10,000
(3) April 25, 2001 Gary J. Grieco 1,000,000 $10,000
(4) April 30, 2001 3 shareholders 100,000 each/ $1,000 each/
300,000 total $3,000 total
(5) June 7, 2001 Gary J. Grieco 250,000 $25,000
(6) June 7, 2001 Mallard Management Inc. 250,000 $25,000
(7) June 7, 2001 Harvey M. Burstein 250,000 $25,000
(8) June 28, 2001 The Hedge Fund, LLC 360,000 $90,000
(9) Dec. 1, 2001 U.S. Capital Growth Fund, L.L.C. 250,000 $25,000
(principal, Kevin Luetje)
(10) Jan. 14, 2002 Smania Francesco (Verona, Italy) 100,000 $15,000
(11) Jan. 14, 2002 Baciga Marino (Verona, Italy) 100,000 $15,000
(12) April 1, 2002;
November 11, 2003 Option Grants 2,000,000 $.10 exercise price
The sales by the Registrant listed in lines (1) through (12) were made
pursuant to Section 4(2) and Rule 506 of Regulation D adopted under the
Securities Act of 1933. All of the purchasers listed in lines (1) through (12)
are "accredited investors" as defined in Rule 501 of Regulation D and
represented their status as such to the Registrant in writing.
No underwriter or selling or placement agent was involved in any of the
transactions described in lines (1) through (9) and (12) above. A finders fee of
approximately $1,500 was paid to a non-U.S. finder with respect to the overseas
sales listed in lines (10) and (11).
All of the individuals and/or entities listed above that purchased the
unregistered securities were all known to the Registrant and its management
through pre-existing business or personal relationships, as long standing
business associates, friends, employees, relatives or members of the immediate
family or management or other shareholders. All purchasers were provided access
to the material information that they requested and all information necessary to
verify such information, and were afforded access to management of the
Registrant in connection with their purchases. All purchasers of the
unregistered securities acquired such securities for investment and not with a
view toward distribution, acknowledging such intent to the Registrant.
10
During the third quarter of 2003 the company repurchased all but 460,000 of
the shares sold in these private placements.
(c) Approximate Number of Holders of Common Stock. The number of holders of
record of our common stock as of July 11, 2003, was approximately 65.
(d) Dividends. Holders of our common stock are entitled to receive such
dividends as may be declared by our Board of Directors. We did not declare or
pay any dividends on our common stock during the periods reported herein nor do
we anticipate paying dividends in the foreseeable future.
(e) Securities Authorized for Issuance Under Equity Compensation Plans. The
following table sets forth information regarding our equity compensation plans
as of the most recently completed fiscal year.
Equity # of Securities to be Issued Weighted-Average Exercise # of Securities Remaining
Compensation Upon Exercise of Outstanding Price of Outstanding Available for Future Issuance
Plans: Options, Warrants & Rights Options, Warrants & Rights Under Equity Compensation Plans (1)
------ -------------------------- -------------------------- -----------------------------------
Approved by 0 $0.00 0
security holders
Not approved by 2,000,000 $0.10/ share 0 (2)
security holders
(1) Excluding securities issuable upon the exercise of outstanding options,
warrants and rights.
(2) There are no current plans to issue additional options.
Pursuant to an employment agreement entered into with our president as of
April 1, 2003, we granted him options to acquire 500,000 shares of our common
stock at a purchase price of $0.10 per share for a period of five years. The
options immediately vested on April 1, 2003. We have agreed to use our best
efforts to register, on or before June 29, 2003, the shares of common stock
issuable upon exercise of the options. If we terminate our president's
employment with cause, or if he terminates the employment agreement by
resigning, the options will expire six months after such termination. On
November 11, 2002, we granted an additional 1,500,000 option to Owen
Enterprises, LLC and Laredo Enterprises, LLC. These options vested immediately
and will expire on November 10, 2007 if not exercised. They are exercisable for
$.10 per share.
11
Item 6. Plan of Operation.
Liquidity and Capital Resources
Our auditors included an explanatory paragraph in their opinion on our
financial statements for the year ended March 31, 2003, to state that our losses
since inception and our net capital deficit at March 31, 2003 raise substantial
doubt about our ability to continue as a going concern. Our ability to continue
as a going concern is dependent upon raising additional capital and achieving
profitable operations. There is no guarantee that our business plans will be
successful in addressing this issue.
During the fiscal year ended March 31, 2003, we had no revenues and spent
approximately $200,000 pursuing our business plan and becoming a publicly
trading company, including $95,000 in compensation paid to our president, and
$96,881 in legal and accounting fees. These fees were incurred in connection
with preparing for filing the registration statement that was declared effective
on April 23, 2003. At March 31, 2003, we had cash of $853, and current
liabilities of $350,019.
Due to our lack of funds, we have not yet developed a formal budget for the
next fiscal year. Since we were unable to pay annual renewal fees for our leases
we were required to take charges for impairment of oil and gas properties of
$40,832.
Our Capital Requirements
We will need to raise additional funds to finance our planned operations
during the next 12 months to locate and complete a merger with or acquisition of
a business opportunity.
We currently do not have any binding commitments for, or readily available
sources of, additional financing. There is no guarantee that additional
financing will be available to us when needed or, if available, that it can be
obtained on commercially reasonably terms. If we do not obtain additional
financing we will not be able to implement our plan to locate and complete a
merger with or acquisition of a business opportunity. Furthermore, we could be
forced to cease our operations and liquidate our assets.
If we do not obtain additional financing through an equity or debt
offering, we may attempt to acquire a private company with adequate cash to pay
our accrued and current debt, however, this could result in greater dilution to
our current shareholders.
12
Employees
We currently have no full time employees. Our president has agreed to
devote as much time to our activities as is required to implement our plan of
operation. In July 2001 we retained two independent leasing consultants to help
us lease land for our oil and gas operations. We terminated our agreements with
the independent leasing consultants in October 2001 and December 2001.
Item 7. Financial Statements.
The independent auditors' report and the financial statements listed on the
accompanying index at page F-1 of this report are filed as part of this report
and incorporated herein by reference.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
We did not have any disagreements on accounting and financial disclosure
with our present accounting firm during the reporting period.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
(a) Directors and Executive Officers. The names and ages of our current
directors and executive officers are as follows:
Name Age Position Term
---- --- -------- ----
Charles A. Ross, Sr. 63 Director and President April 2001 to
August 2004
Charles A. Ross, Sr. has been our President and a Director since April 10,
2001. Mr. Ross has agreed to devote as much time to our activities as is
required to implement our new plan of operation. In addition to Vista, Mr. Ross
devotes some of his time to a new venture called ICOP Digital, Inc., a
development stage company developing electronic surveillance equipment for law
enforcement agencies.
From January 2001 through March 2001, Mr. Ross was exploring opportunities
in the oil and gas business, which led to his investment in us. From July 1999
until December 2000, he owned and operated a business that supplied recruiting
and business cards to a number of multi-level marketing companies. From June
1998 through July 1999, Mr. Ross was self-employed designing musical instrument
amplifiers, an industry in which he has been involved since the 1960's.
From August 1995 until May 1998, he was the President and CEO and a
director of Edgerton Technology, Inc. and from July 1996 until May 1998 he was
the Chairman of the Board, President, CEO and Treasurer of Edgerton Musical
Amplifiers, Inc. From August 1992 to August 1995, Mr. Ross was a self-employed
consultant and investor.
Other public companies in which Mr. Ross served as an officer or director
include Copilot Electronic Products, Inc. from 1989 to 1992, Birdview Satellite
Communications, Inc. from 1981 to 1986, and Kustom Electronics, Inc. from 1965
to 1973. In 1968 he was named Kansas Small Businessman of the Year by the Small
Business Administration.
13
Our board of directors consists of three directors and we currently have
two vacancies. Under our Articles of Incorporation, our board is evenly divided
into three classes, Class A, Class B and Class C. The initial Class A director,
Mr. Ross, was elected for 3 years. The term of the initial Class B director is 2
years, and the term of the initial Class C director is 1 year. Upon the
expiration of the initial staggered terms, directors will be elected for terms
of three years, to succeed those whose terms have expired. Mr. Ross is actively
seeking additional qualified individuals to serve as directors on our board.
Section 16(a) Beneficial Reporting Compliance
Under U.S. securities laws, directors, executive officers and persons
holding more than 10% of our common stock must report their initial ownership of
the common stock and any changes in that ownership on reports that must be filed
with the SEC and us. The SEC has designated specific deadlines for these reports
and we must identify in this Form 10-KSB those persons who did not file these
reports when due.
Based upon information provided to us by our directors, executive officers
and persons holding more than 10% of our common stock, we believe that there
were no late filings except the final statements of ownership for Gary Grieco,
Mallard Management, and Harvey H. Burstein were not filed.
Item 10. Executive Compensation.
The following table sets out the annual compensation paid to our officers
for the last three completed fiscal years. No executive officer of ours received
annual compensation in excess of $100,000 during the last three completed fiscal
years.
Summary Compensation Table
Long-Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
------------------------------ ----------------------- -----------------------
Securities
Fiscal Other Restricted Underlying
Name and Principal Year Annual Stock Options/ LTIP All Other
Position Ending Salary ($) Bonus ($) Comp. Awards ($) SARs (#) Payouts ($) Comp.($)
-------- ------ ---------- --------- ----- ---------- -------- ----------- --------
Charles Ross, 3/31/03 $95,000 0 0 0 500,000 0 0
President 3/31/02 $40,000 0 0 0 0 0 0
Option Exercises and Values
Pursuant to an employment agreement entered into with Mr. Charles Ross as
of April 1, 2003, we have granted Mr. Ross options to acquire 500,000 shares of
our common stock at a purchase price of $0.10 per share for a period of five
years. The options immediately vested on April 1, 2003. We have agreed to use
our best efforts to register, on or before June 29, 2003, the shares of common
stock issuable upon exercise of the options. If we terminate Mr. Ross'
employment with cause, or if he terminates the employment agreement by
resigning, the options will expire six months after such termination.
Option/SAR Grants in Last Fiscal Year
(Individual Grants)
Number of Percent of
Securities Underlying total options/SARs Exercise or
Name and Principal Options/SARs granted to employees base price Expiration
Position granted (#) in fiscal year ($/Sh) Date
----------------------- ---------------------- --------------------- -------------- -----------------
Charles Ross, President 500,000 100% $.10 Mar. 31, 2007
14
Long-Term Incentive Plans
We do not have any long-term incentive plans. No retirement, pension,
profit sharing, stock option, insurance programs or other similar programs have
been adopted by us for the benefit of our employees.
Employment Contracts and Termination of Employment Arrangements
Effective as of April 1, 2002, we entered into an employment agreement with
Mr. Charles Ross pursuant to which he will serve as our President and we will
compensate him $30,000 per year for his services. Mr. Ross has agreed to defer
payment of his salary until the earliest to occur of the following events: (i)
we have raised an additional $200,000 in debt or equity capital; (ii) we have
begun generating revenues from operations; (iii) there is a change in control of
the company; or (iv) October 1, 2003. The initial term of employment is from
April 1, 2002, through March 31, 2003, and will be extended automatically for
additional one-year terms unless either party notifies the other of its intent
to not renew at least 30 days before the expiration of the then-current term.
Pursuant to the employment agreement, we will employ Mr. Ross for a minimum
of one year, unless he dies, resigns or becomes disabled, or we terminate the
employment for cause. If we terminate the employment agreement for any other
reason during the first year, he will be entitled to receive his entire first
year salary ($30,000) minus any amounts of first-year salary actually paid on or
before the date of termination. If we terminate the employment agreement for any
other reason during any subsequent year, he is entitled to receive, in addition
to his salary and any prorated bonuses, severance equal to six months' salary
for each full year of employment he has completed for us and continuation of his
employee benefits for a period of six months.
Director Compensation
None of our directors received any compensation during our most recent
fiscal year for serving in their position as directors. If we do have funds
available in the future, we likely will reimburse our directors for expenses
incurred by them in their duties as a director.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding beneficial ownership
as of July 11, 2003, of Vista Exploration Corporation common stock by any person
who we know to be the beneficial owner of more than 5% of our voting securities,
and by each of our directors and executive officers and by our directors and
executive officers as a group. As of July 11, 2003 there were 1,690,000 shares
of our common stock issued and outstanding.
All beneficial owners listed below have sole voting and investment power
with respect to the shares shown, unless otherwise indicated.
15
Name and Address of Common Stock Percent of Class
Beneficial Owner Beneficially Owned (1) Beneficially Owned
---------------- ---------------------- ------------------
Charles A. Ross, Sr., 1,400,000 (2) 21.24%
Director and President
11952 Farley
Shawnee Mission, KS 66213
All directors and executive
officers as a group (1 person): 1,400,000 21.24%
David Owen 1,500,000 (3) 47.02%
19933 West 162nd Street
Olathe, KS 66062
-------------------
(1) According to Rule 13d-3 under the Securities Exchange Act of 1934, a
beneficial owner of securities includes any person who directly or
indirectly has, or shares, voting power and/or investment power with
respect to such securities. Rule 13d-3 also includes as a beneficial owner
of a security any person who has the right to acquire beneficial ownership
of such security within 60 days through any means, including the exercise
of any option, warrant or conversion of a security. Any securities not
outstanding which are subject to such options, warrants or conversion
privileges are deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such person.
Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
(2) Includes 500,000 shares of common stock issuable upon the exercise of
outstanding options.
(3) Consists of 1,500,000 options exercisable at $.10 per share owned by Owen
Enterprises, LLC and Laredo Enterprises, LLC of which Mr. Owen is a control
person.
Item 12. Certain Relationships and Related Transactions.
On April 11, 1998, we issued a total of 1,000,000 shares of our common
stock to Corporate Management Services, Inc., or CMS, in exchange for services
related to management and organization costs of $500. Mr. George Andrews, our
sole officer and director until April 2001, is the sole director and a 50%
shareholder of CMS. From April 11, 1998, to April 10, 2001, CMS provided us with
administrative and marketing services on an as-needed basis without additional
charge.
Additionally, from our inception to March 31, 2001, we incurred an expense
of $100 per month for rent and other administrative services that were performed
by CMS on our behalf. As of March 31, 2001, we had incurred rent and
administrative service expenses totaling $3,600, which amount has been credited
to additional paid-in capital on our financial statements.
16
From April 11, 1998, to April 10, 2001, CMS advanced to us any additional
funds which we needed for operating capital and for costs in connection with
searching for or completing an acquisition or merger. Such advances were made
without expectation of repayment (other than offsets of earned interest) unless
the owners of a business which we acquired or merged with agreed to repay all or
a portion of such advances. As of March 31, 2001, CMS had advanced a total of
$5,155 to us for legal, accounting, general and administrative expenses, which
amount was treated as an accrued liability on our financial statements but which
was forgiven by CMS as of April 30, 2001. No funds were advanced to us by CMS
subsequent to March 2001.
On or about March 3, 2001, we and CMS entered into an Agreement for the
Purchase of Common Stock with Charles A. Ross, Sr. pursuant to which CMS sold
900,000 shares of our common stock to Mr. Ross for $1,000. Pursuant to that
agreement, on April 10, 2001, Mr. Andrews resigned as our sole officer and
director and Mr. Ross became our sole officer and director.
On June 17, 2001, we acquired a one-year option for a lease on 4,560 acres
in Island Township, Blaine County, Montana from Geominerals Corp. for $1,400.
Geominerals Corp. is controlled by George Andrews, our former president and
director. If we exercise the option, we will pay $2.50 per acre for a total
purchase price of $10,000 (after credit of the amount paid for the option).
However, we currently do not intend to exercise this option.
In anticipation of Mr. Charles Ross' acquisition of shares from CMS, he
advanced to us $10,500 for working capital on February 28, 2001. The advance
carried no interest rate and was payable on demand. We repaid the advance in
April 2001 from the proceeds of our private placement in April 2001. Mr. Ross
also paid travel and administrative expenses totaling $6,115 on our behalf prior
to March 31, 2001, and $18,403 during the fiscal year ended March 31, 2003. Mr.
Ross received reimbursements and advances from us totaling $32,783 during the
fiscal year ended March 31, 2003. The net advance of $8,265 is included in our
financial statements as expenses advanced to an officer at March 31, 2003.
During November 2002, Laredo Enterprises, LLC and Owen Enterprises, LLC
loaned us $2,500 and $7,500 respectively and received 500,000 and 1,000,000
options respectively as consideration for the loan and for consulting services
to be rendered for strategic planning and asset acquisitions. The Note is a
demand Note bearing interest at the rate of 5% per annum. The options are
exercisable for a period of five years at a price of $.10 per share of common
stock.
17
Item 13. Exhibits and Reports on Form 8-K.
(a) The following exhibits are furnished as part of this report:
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (incorporated by reference to Exhibit
2.1 of the Registration Statement on Form 10-SB filed with the
Commission on September 13, 1999).
3.2 First Articles of Amendment to Articles of Incorporation
(incorporated by reference to Exhibit 3.1 of the Form 8-K filed
August 16, 2001).
3.3 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 of the Form 8-K filed August 16, 2001).
10.1 Agreement for the Purchase of Common Stock dated as of February
27, 2001, and effective as of March 3, 2001, by and between
Corporate Management Services, Inc., Bail Corporation and Charles
A. Ross, Sr. (incorporated by reference to Exhibit 7.1 of the
Form 8-K filed March 9, 2001).
10.2 Mutual Release dated as of April 30, 2001, between Bail
Corporation and Corporate Management Services, Inc. (incorporated
by reference to Exhibit 10.2 of the 10-KSB for the period ended
March 31, 2001).
10.3 Agreement dated June 22, 2001, between Bail Corporation, TCC
Royalty Corp. and Austin Exploration L.L.C. regarding Shiloh
Project / Cherokee Basin Coal Bed Methane (incorporated by
reference to Exhibit 10.2 of the 10-KSB for the period ended
March 31, 2001).
10.4 Form of Oil and Gas Lease (incorporated by reference to Exhibit
10.4 to Vista Exploration Corporation's Registration Statement on
Form SB-2 filed with the Commission on March 8, 2003 (file No.
333-65798)).
10.5 Employment Agreement dated as of April 1, 2003, between Vista
Exploration Corporation and Charles A. Ross, Sr. (incorporated by
reference to Exhibit 10.4 to Vista Exploration Corporation's
Registration Statement on Form SB-2 filed with the Commission on
April 23, 2003 (file No. 333-65798)).
10.6 First Amendment to Employment Agreement between Vista Exploration
Corporation and Charles A. Ross, Sr. dated as of June 1, 2003
(incorporated by reference to Exhibit 10.6 to Form 10-KSB for
year ended March 31, 2002 (file No. 000-27321)).
99.1 Rule 13a-14 Certification.*
99.2 Section 1350 Certification.*
---------
* Filed herewith.
(b) Reports on Form 8-K.
None.
Item 14. Controls and Procedures.
Currently we have only one employee who is also our sole officer and
director and therefore we have not adopted any specific internal controls or any
disclosure controls and procedures. There have been no changes in our internal
controls or in any other factors that could impact our controls subsequent to
our date of evaluation.
18
Item 15. Principal Accountant Fees and Services
2002 2003
--------------------------------------------------------------------------------
1) Audit fees $9,435 $3,675
2) Audit related fees and services* 675 150
3) Fees for tax related services 0 0
4) All other fees 0 0
*Fees for the review of registration statements.
19
Item 1. Financial Statements
VISTA EXPLORATION CORPORATION
Index to Financial Statements
Page
----
Report of Independent Auditors.............................................. F-2
Balance Sheet at March 31, 2003............................................. F-3
Statements of Operations for the years
ended March 31, 2003 and 2002.......................................... F-4
Statement of Changes in Shareholders' Deficit for the period from
April 9, 1998 (inception) through March 31, 2003....................... F-5
Statements of Cash Flows for the years
ended March 31, 2003 and 2002.......................................... F-6
Notes to Financial Statements............................................... F-7
F-1
Report of Independent Auditors
To the Board of Directors and Shareholders
Vista Exploration Corporation (formerly Bail Corporation)
We have audited the balance sheet of Vista Exploration Corporation (formerly
Bail Corporation) as of March 31, 2003 and the related statements of operations,
changes in shareholders' deficit and cash flows for the years ended March 31,
2003 and 2002. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vista Exploration Corporation
as of March 31, 2003, and the related statements of operations and cash flows
for the years ended March 31, 2003 in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has incurred losses since inception and has a net
capital deficit at March 31, 2003. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Cordovano and Harvey, P.C.
------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
June 20, 2003
F-2
VISTA EXPLORATION CORPORATION
Balance Sheet
March 31, 2003
ASSETS
Current assets:
Cash ........................................................ $ 853
---------
Total current assets 853
Oil and gas properties, at cost, net of impairment ................ --
---------
$ 853
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts Payable ............................................ $ 164,622
Loans from Shareholder ...................................... 16,700
Notes Payable ............................................... 158,697
Notes Payable, related parties .............................. 10,000
---------
Total current liabilities 350,019
---------
Shareholders' equity:
Preferred Stock, no par value, 5,000,000 shares
authorized, -0- shares issued and outstanding ............. --
Common stock, no par value, 50,000,000 shares
authorized, 1,690,000 shares issued and outstanding ...... 65,119
Stock options outstanding ................................... 80,000
Deficit accumulated ......................................... (494,285)
---------
Total shareholders' equity (349,166)
---------
$ 853
=========
See accompanying notes to financial statements
F-3
VISTA EXPLORATION CORPORATION
Statements of Operations
Year Ended
March 31,
--------------------------
2003 2002
----------- -----------
Costs and expenses:
Legal fees .................................... $ 84,591 $ 116,455
Accounting fees ............................... 12,290 10,650
Travel ........................................ 4,112 26,305
General and administrative .................... 4,191 15,763
Compensation .................................. 95,000 40,000
Project evaluation costs ...................... -- 28,902
Impairment of oil and gas properties .......... 40,832 --
----------- -----------
Operating loss (241,016) (238,075)
Interest income ................................... -- --
Interest expense .................................. (379) --
----------- -----------
Loss before income taxes (241,395) (238,075)
Provision for income taxes ........................ -- --
----------- -----------
Net loss $ (241,395) $ (238,075)
=========== ===========
Basic and diluted loss per common share ........... $ (0.06) $ (0.04)
=========== ===========
Basic and diluted weighted average
common shares outstanding ..................... 3,715,205 5,375,233
=========== ===========
See accompanying notes to financial statements
F-4
VISTA EXPLORATION CORPORATION
Statement of Changes in Shareholders' Deficit
Preferred Stock Common Stock
----------------------- ------------------------
Shares Amount Shares Amount
---------- ---------- ---------- ----------
Balance at inception,
April 9, 1998 ..................... -- $ -- -- $ --
April 1998, common stock issued in
exchange for services and
organizational costs (Note 2) ..... -- -- 1,000,000 500
Contributed rent (Note 2) ............. -- -- -- --
Net loss ....................... -- -- -- --
---------- ---------- ---------- ----------
Balance at
April 30, 1998 .................... -- -- 1,000,000 500
May 1998, sale of common stock net of
offering costs of $127 (Note 2) ... -- -- 230,000 2,173
Contributed rent (Note 2) ............. -- -- -- --
Net loss ....................... -- -- -- --
---------- ---------- ---------- ----------
Balance at
April 30, 1999 .................... -- -- 1,230,000 2,673
Contributed rent (Note 2) ............. -- -- -- --
Net loss ....................... -- -- -- --
---------- ---------- ---------- ----------
Balance at
April 30, 2000 .................... -- -- 1,230,000 2,673
Contributed rent (Note 2) ............. -- -- -- --
Net loss for the eleven
months ended March 31, 2001 ... -- -- -- --
---------- ---------- ---------- ----------
Balance at
March 31, 2001 .................... -- -- 1,230,000 2,673
April 2001, sale of common stock,
$.01 per share (Note 4) ........... -- -- 3,300,000 33,000
June 2001, sale of common stock,
$.10 per share (Note 4) ........... -- -- 750,000 75,000
June 2001, sale of common stock,
$.25 per share (Note 4) ........... -- -- 360,000 90,000
December 2001, sale of common stock,
$.10 per share (Note 4) ........... -- -- 250,000 25,000
January 2002, sale of common stock,
$.15 per share (Note 4) ........... -- -- 200,000 30,000
Offering costs incurred (Note 4) ...... -- -- (35,457) --
Net loss ....................... -- -- -- --
---------- ---------- ---------- ----------
Balance at
March 31, 2002 .................... -- -- 6,090,000 220,216
September 2002, repurchase and
cancellation of common stock
(Note 4) ........................ -- -- (4,400,000) (158,697)
Stock options issued .................. -- -- -- --
Net loss ....................... -- -- -- --
---------- ---------- ---------- ----------
Balance at
March 31, 2003 .................... -- -- 1,690,000 $ 61,519
========== ========== ========== ==========
F-5
VISTA EXPLORATION CORPORATION
Statement of Changes in Shareholders' Deficit
Additional Stock
Paid-in Options Deficit
Capital Issued Accumulated Total
---------- ---------- ---------- ----------
Balance at inception,
April 9, 1998 ..................... $ -- $ -- $ -- $ --
April 1998, common stock issued in
exchange for services and
organizational costs (Note 2) ..... -- -- -- 500
Contributed rent (Note 2) ............. 100 -- -- 100
Net loss ....................... -- -- (688) (688)
---------- ---------- ---------- ----------
Balance at
April 30, 1998 .................... 100 -- (688) (88)
May 1998, sale of common stock net of
offering costs of $127 (Note 2) ... -- -- -- 2,173
Contributed rent (Note 2) ............. 1,200 -- -- 1,200
Net loss ....................... -- -- (2,420) (2,420)
---------- ---------- ---------- ----------
Balance at
April 30, 1999 .................... 1,300 -- (3,108) 865
Contributed rent (Note 2) ............. 1,200 -- -- 1,200
Net loss ....................... -- -- (5,269) (5,269)
---------- ---------- ---------- ----------
Balance at
April 30, 2000 .................... 2,500 -- (8,377) (3,204)
Contributed rent (Note 2) ............. 1,100 -- -- 1,100
Net loss for the eleven
months ended March 31, 2001 ... -- -- (6,438) (6,438)
---------- ---------- ---------- ----------
Balance at
March 31, 2001 .................... 3,600 -- (14,815) (8,542)
April 2001, sale of common stock,
$.01 per share (Note 4) ........... -- -- -- 33,000
June 2001, sale of common stock,
$.10 per share (Note 4) ........... -- -- -- 75,000
June 2001, sale of common stock,
$.25 per share (Note 4) ........... -- -- -- 90,000
December 2001, sale of common stock,
$.10 per share (Note 4) ........... -- -- -- 25,000
January 2002, sale of common stock,
$.15 per share (Note 4) ........... -- -- -- 30,000
Offering costs incurred (Note 4) ...... -- -- (35,457)
Net loss ....................... -- -- (238,075) (238,075)
---------- ---------- ---------- ----------
Balance at
March 31, 2002 .................... 3,600 -- (252,890) (29,074)
September 2002, repurchase and
cancellation of common stock
(Note 4) ........................ -- -- -- (158,697)
Stock options issued .................. -- 80,000 -- 80,000
Net loss ....................... -- -- (241,395) (241,395)
---------- ---------- ---------- ----------
Balance at
March 31, 2003 .................... $ 3,600 $ 80,000 (494,285) $ (349,166)
========== ========== ========== ==========
See accompanying notes to financial statements
F-5(Con't)
VISTA EXPLORATION CORPORATION
Statements of Cash Flows
Year Ended
March 31,
----------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net loss ......................................... $(241,395) $(238,075)
Transactions not requiring cash:
Impairment of oil and gas properties .......... 40,832 --
Stock options granted ......................... 80,000 --
Changes in operating assets and liabilities:
Receivables and advances .................. 8,265 (8,265)
Accounts payable and accrued liabilities .. 98,139 75,068
--------- ---------
Net cash used in operating activities .. (14,159) (171,272)
--------- ---------
Cash flows from investing activities:
Investment in oil and gas properties ............. -- (40,832)
--------- ---------
Net cash used in investing activities ...... -- (40,832)
--------- ---------
Cash flows from financing activities:
Advances from officer ............................ -- (10,500)
Proceeds of notes payable related parties ........ 10,000 --
Sale of common stock ............................ -- 253,000
Offering costs incurred .......................... -- (25,457)
--------- ---------
Net cash provided by financing activities .. 10,000 217,043
--------- ---------
Net change in cash ................................... (4,159) 4,939
Cash, beginning of period ............................ 5,012 73
--------- ---------
Cash, end of period .. $ 853 $ 5,012
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period
for:
Interest ...................................... $ -- $ --
========= =========
Income taxes .................................. $ -- $ --
========= =========
Non-cash financing activities:
Notes issued to acquire common stock .......... 158,697 --
========= =========
See accompanying notes to financial statements
F-6
VISTA EXPLORATION CORPORATION
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
Organization and Basis of Presentation
Vista Exploration Corporation (the "Company") (formerly Bail Corporation) was
incorporated under the laws of Colorado on April 9, 1998 to engage in any lawful
corporate undertaking. The Company was a development stage enterprise in
accordance with Statement of Financial Accounting Standard (SFAS) No. 7 until
the quarter ending March 31, 2003. Effective March 31, 2003, the company
abandoned its oil and gas operations. The Company now plans to maintain its
existence while it identifies opportunities. The Company was originally formed
as a "blank check" company with the purpose to evaluate, structure and complete
a merger with, or acquisition of, a privately owned corporation. Effective March
3, 2001, approximately 73 percent (900,000 shares) of the Company's issued and
outstanding common stock was sold, resulting in a change in control of the
Company. The Company's new business plan was to engage in the oil and gas
business by acquiring oil and gas properties and developing those properties
and/or purchasing producing properties principally located in the mid-western
and western United States.
The Company completed its leasing activities in southeast Kansas and sought to
obtain additional financing before it could implement the next phase of its
current plan of operation, which would involve identifying the most promising
and cost-effective drill sites on the Company's leased acres, drilling and
testing wells to prove reserves, completing promising test wells, extracting the
oil, gas and other hydrocarbons that the Company finds, and delivering them to
market. The Company anticipated that it would need approximately $850,000 to
achieve its initial goal of drilling, testing and completing ten coalbed methane
gas producing wells.
Following the change in control, the Company sold 4,860,000 shares of its no par
value common stock through three private offerings for net proceeds of $217,543
after deducting offering costs of $35,457 (see Note 5). The Company used the net
proceeds from those offerings for administrative and professional fees required
to transition the business and to acquire oil and gas properties and develop a
drilling program. The Company required additional funds to commence drilling
operations and there were no commitments in place for any additional funds.
On September 16, 2002, the company repurchased a total of 4,400,000 shares of
its common stock from 10 shareholders who had purchased their shares in private
placements conducted in April 2001, June 2001, December 2001 and January 2002.
The prices paid for the shares by the company equaled the prices paid by the
shareholders when such shares were originally purchased from the company. The
company paid for the shares by issuing promissory notes in an aggregate
principal amount of $158,696.80. The repurchased shares were cancelled and are
not included in issued or outstanding share totals at 12/31/02. The purchases
were made to facilitate the company's application for a trading symbol.
During August 2001, the Company changed its name from Bail Corporation to Vista
Exploration Corporation.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company is in the development
stage. It has incurred losses since inception and has a net capital deficit at
March 31, 2003. These factors, among others, may indicate that the Company will
be unable to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company raised gross proceeds of $253,000, through private
stock offerings during FY 2002 (see Note 5), to fund its operations. However,
the Company believes it will need additional capital to develop the property
leases discussed above. There is no assurance that the Company will obtain the
additional capital or that it will attain profitability.
F-7
VISTA EXPLORATION CORPORATION
Notes to Financial Statements
On April 18, 2001, the Company changed its year-end from April 30 to March 31.
The accompanying statements of operations, changes in shareholders' deficit and
cash flows reflect the changed period ended March 31, 2001.
Cash Equivalents
The Company considers all highly liquid securities with original maturities of
three months or less when acquired to be cash equivalents. The Company had no
cash equivalents at March 31, 2003.
Financial Instruments
The Company has determined, based on available market information and
appropriate valuation methodologies, the fair values of its financial
instruments approximate carrying values. The carrying amounts of cash, accounts
payable, and other current liabilities approximate fair value due to the
short-term maturity of the instruments.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Organization costs
Costs related to the organization of the Company have been expensed as incurred.
Deferred offering costs
Costs related to common stock offerings are recorded initially as a deferred
asset until the offering is successfully completed, at which time they are
recorded as a reduction of gross proceeds in shareholders' deficit. If an
offering is not successful, the costs are charged to operations at that time.
Oil and gas properties
The Company follows the full cost method of accounting for oil and gas
properties. Accordingly, all costs associated with acquisition, exploration, and
development of oil and gas reserves, including directly related overhead costs,
are capitalized. No internal overhead costs have been capitalized to date.
All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects are not amortized until proved reserves associated with the
projects can be determined or until impairment occurs. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
The capitalized costs are subject to a "ceiling test," which limits capitalized
costs to the aggregate of the "estimated present value," discounted at a
10-percent interest rate, of future net revenues from proved reserves (based on
current economic and operating conditions), plus the lower of cost or fair
market value of unproved properties.
Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in income.
Abandonment's of properties are accounted for as adjustments of capitalized
costs with no loss recognized.
F-8
VISTA EXPLORATION CORPORATION
Notes to Financial Statements
As of March 31, 2002, the Company had executed 115 separate leases totaling
approximately 15,388 acres, of which approximately 13,902 acres are located in
Coffey County and approximately 1,486 acres are in Lyon County, which adjoins
Coffey County.
A charge for impairment of value of the oil and gas properties has been recorded
due to the expiration or impending expiration of the initial lease terms and the
present lack of funding necessary to extend and develop these properties.
Loss per common share
The Company reports loss per share using a dual presentation of basic and
diluted loss per share. Basic loss per share excludes the impact of common stock
equivalents. Diluted loss per share uses the average market price per share when
applying the treasury stock method in determining common stock equivalents.
However, the Company has a simple capital structure for the period presented and
has incurred operating losses, therefore, no variance between the basic and
diluted loss per share is presented.
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Stock based Compensation
The Company accounts for stock-based compensation arrangements in accordance
with Statement of financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of Accounting Principle Board ("APB") Opinion No. 25 and provide pro
forma net earnings (loss) disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to apply the provisions of SFAS No. 123 and recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant.
(2) Related Party Transactions
During the year ended March 31, 2002, an officer paid travel and administrative
expenses totaling $18,403 on behalf of the Company. The company owed the officer
$6,115 at March 31, 2001. The Company repaid the $24,518 and advanced the
officer an additional $8,265 which was offset against the officer's expenses
during the year ended March 31, 2003. During the year ended March 31, 2003, the
officer advanced an additional $1,700 to the company and accrued $15,000 of
compensation, both of which remain unpaid at March 31, 2003.
The Company incurred an expense of $100 per month through March 31, 2001 for
office space contributed by Corporate Management Services, Inc. ("CMS"), an
affiliate of the Company. The Company reported rent expense of $-0-, $-0-, and
$3,600, respectively, for the years ended March 31, 2003 and 2002 and the period
from April 9, 1998 (inception) through March 31, 2002. The rent expense has been
offset by charges to additional paid-in capital. From July 2001 to November
2001, the Company leased office space in Burlington, Kansas at $350 per month.
The Company's officer currently provides office space free of charge in his
home.
F-9
VISTA EXPLORATION CORPORATION
Notes to Financial Statements
On April 11, 1998, the Company issued an affiliate 1,000,000 shares of common
stock in exchange for services related to management and organization costs of
$500. The affiliate provided administrative and marketing services as needed.
The affiliate, from time to time, advanced the Company any additional funds that
the Company needed for operating capital and for costs in connection with
searching for or completing an acquisition or merger.
During 1998, the Company sold 230,000 shares of common stock in a private
placement for $2,300. The private placement also included the offering of common
shares in nineteen other corporations. The costs related to the offering and
certain legal fees and general and administrative fees were allocated to each of
the twenty companies participating in the offering. The Company's pro rate one
twentieth share of the costs and expenses were deducted from the gross proceeds
from the sale of the Company's common shares. The gross proceeds of $2,300 were
transferred to the Company net of offering costs of $127 and certain general and
administrative costs incurred by the affiliate of $89.
On September 16, 2002, the company repurchased a total of 4,400,000 shares of
its common stock from 10 shareholders who had purchased their shares in private
placements conducted in April 2001, June 2001, December 2001 and January 2002.
The prices paid for the shares by the company equaled the prices paid by the
shareholders when such shares were originally purchased from the company. The
company paid for the shares by issuing promissory notes in an aggregate
principal amount of $158,696.80. The repurchased shares were cancelled and are
not included in issued or outstanding share totals at 3/31/03. The purchases
were made to facilitate the company's application for a trading symbol.
The company granted five-year options to an officer and two outside entities,
respectively, to purchase 500,000 and 1,500,000 shares of common stock at a
price of $0.10 per share. The fair value of these options was estimated to be
$80,000 in accordance with Statement of Financial Accounting Standards 123,
utilizing the Black-Scholes pricing model. This value was based on a weighted
average risk-free interest rate of 1.98%, expected option life of 5 years,
expected volatility of 10.0% and no expected dividend yield.
(3) Income Taxes
Following are reconciliations of U.S. statutory federal income tax rate to the
effective rate:
Year Ended Year Ended
March 31, March 31,
2003 2002
------ ------
U.S. statutory federal rate ....................... 31.62% 31.62%
State income tax rate, net of federal benefit ..... 3.17% 3.17%
Net operating loss (NOL) for which no tax
benefit is currently available .................. -34.79% -34.79%
------ ------
0.00% 0.00%
====== ======
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The changes in the valuation allowance for the year ended
March 31, 2003 and 2002 and for the period from April 9, 1998 (inception)
through March 31, 2003 were $83,981, $82,823, and $169,287, respectively. Net
operating loss carryforwards at March 31, 2003 will expire through 2023.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
F-10
VISTA EXPLORATION CORPORATION
Notes to Financial Statements
(4) Shareholders' Deficit
The preferred stock may be issued in series as determined by the Board of
Directors. As required by law, each series must designate the number of share in
the series and each share of a series must have identical rights of (1)
dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions
for the redemption of the share, (5) terms of conversion and (6) voting rights.
On September 16, 2002, the company repurchased a total of 4,400,000 shares of
its common stock from 10 shareholders who had purchased their shares in private
placements conducted in April 2001, June 2001, December 2001 and January 2002.
The prices paid for the shares by the company equaled the prices paid by the
shareholders when such shares were originally purchased from the company. The
company paid for the shares by issuing promissory notes in an aggregate
principal amount of $158,696.80. The repurchased shares were cancelled and are
not included in issued or outstanding share totals at 3/31/03. The purchases
were made to facilitate the company's application for a trading symbol.
The company granted five-year options to an officer and two outside entities,
respectively, to purchase 500,000 and 1,500,000 shares of common stock at a
price of $0.10 per share. The fair value of these options was estimated to be
$80,000 in accordance with Statement of Financial Accounting Standards 123,
utilizing the Black-Scholes pricing model. This value was based on a weighted
average risk-free interest rate of 1.98%, expected option life of 5 years,
expected volatility of 10.0% and no expected dividend yield.
During January 2002, the Company sold 200,000 shares of its no par value common
stock for $.15 per share pursuant to an exemption from registration claimed
under Rule 506 of Regulation D of the Securities Act of 1933, as amended (the
"Act"). The Company received net proceeds of $28,408 after deducting offering
costs totaling $1,592.
During December 2001, the Company sold 250,000 shares of its no par value common
stock for $.10 per share pursuant to an exemption from registration claimed
under Rule 506 of Regulation D of the Act. The Company received net proceeds of
$21,592 after deducting offering costs totaling $3,303.
During June of 2001, the Company conducted a private placement offering of
1,000,000 shares of its no par value common stock for $.25 per share pursuant to
an exemption from registration claimed under Rule 506 of Regulation D of the
Act. The Company closed the offering after selling 360,000 shares. The Company
received net proceeds of $79,812 after deducting offering costs totaling
$10,188.
During June of 2001, the Company conducted a private placement offering of
800,000 shares of its no par value common stock for $.10 per share pursuant to
an exemption from registration claimed under Rule 506 of Regulation D of the
Act. The Company closed the offering after selling 750,000 shares. The Company
received net proceeds of $64,813 after deducting offering costs totaling
$10,187.
During April 2001, the Company conducted a private placement offering of
5,000,000 shares of its no par value common stock for $.01 per share pursuant to
an exemption from registration claimed under Rule 506 of Regulation D of the
Act. The Company closed the offering after selling 3,300,000 shares. The Company
received net proceeds of $22,813 after deducting offering costs totaling
$10,187.
Note E: Notes Payable
---------------------
Notes payable issued to ten shareholders to repurchase common stock total
$158,697 at March 31, 2003. These notes were due November 14, 2002 unless
payment was prohibited pursuant to the terms of Section 7-106-401 of the
Colorado Business Corporation Act. The company may extend the payment date and
may further restructure these notes in compliance with this act. If the notes
remain unpaid at August 14, 2003, interest will begin to accrue at the lowest
available Applicable Federal Rate. These notes are further guaranteed by an
officer of the company.
Note E: Notes Payable - Related Parties
---------------------------------------
In November 2002, the Company borrowed $10,000 under unsecured demand notes
payable accruing interest at the rate of 10% per annum. The holders of these
notes payable also hold options to purchase 1,500,000 shares of common stock.
F-11
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VISTA EXPLORATION CORPORATION
Date: July 15, 2003 By: /s/ Charles A. Ross, Sr.
----------------------------------
Charles A. Ross, Sr., chief executive officer and
principal financial and accounting officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- -----
/s/ Charles A. Ross, Sr. Director July 15, 2003
------------------------
Charles A. Ross, Sr.