U.S. Securities and Exchange
Commission Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 2002
[_] 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
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11952 Farley, Shawnee Mission, KS 66213
---------------------------------------
(Address of principal executive offices, including ZIP Code)
Issuer's telephone number: (913) 814-8313
N.A.
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(Former name, address and fiscal year, if changed since last report)
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 [ ]
Transitional Small Business Disclosure Format Yes [ ] No [X]
The issuer had 1,690,000 shares of its common stock issued and outstanding
as of February 13, 2003, the latest practicable date before the filing of this
report.
VISTA EXPLORATION CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Page
PART I--FINANCIAL INFORMATION ...............................................3
Item 1. Financial Statements
Balance Sheet - December 31, 2002 (Unaudited).......................4
Statements of Operations (Unaudited) - three months
ended December 31, 2001 and 2000....................................5
Statements of Operations (Unaudited) - nine months
ended December 31, 2001 and 2000 and April 9, 1998
(inception) through December 31, 2002...............................6
Statements of Cash Flows (Unaudited) - nine months
ended December 31, 2001 and 2000 and April 9, 1998
(inception) through December 31, 2002...............................7
Notes to condensed financial statements (Unaudited).................8
Item 2. Plan of Operation..................................................10
Item 3. Controls and Procedures............................................11
PART II--OTHER INFORMATION..................................................11
Item 1. Legal Proceedings..................................................11
Item 2. Changes in Securities and Use of Proceeds..........................11
Item 3. Defaults Upon Senior Securities....................................11
Item 4. Submission of Matters to a Vote of Security Holders................11
Item 5. Other Information..................................................12
Item 6. Exhibits and Reports on Form 8-K...................................12
Signatures.........................................................12
Certifications.....................................................12
2
PART I - FINANCIAL INFORMATION
Forward-Looking Statements
This report on Form 10-QSB 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 Item 2 - 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 acquire valuable oil and gas producing properties,
o our ability to obtain sufficient financing to commence drilling
operations,
o our ability to discover producible gas on our leased properties,
o capital costs of drilling and completing wells,
o capital costs of building other related production or gathering
facilities,
o the availability of contract operators and drillers, and
o the continued demand for natural gas.
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,
o general economic and business conditions,
o the business opportunities that may be presented to and pursued by us,
o changes in laws or regulations and other factors, many of which are
beyond our control, and
o ability to obtain financing on favorable conditions.
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. Financial Statements
VISTA EXPLORATION CORPORATION
(A Development Stage Company)
Balance Sheet (Unaudited)
December 31, 2002
ASSETS
Current assets:
Cash ........................................................ $ 1,581
--------
Total current assets 1,581
Oil and gas properties, at cost, net of impairment................. --
--------
$ 1,581
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts Payable ............................................ $158,808
Loans from Shareholder....................................... 15,700
Notes Payable ............................................... 158,697
Notes Payable, related parties............................... 10,000
--------
Total current liabilities 343,205
--------
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 during the development stage ............ (486,743)
--------
Total shareholders' equity (341,624)
--------
$ 1,581
========
See accompanying notes to financial statements
4
VISTA EXPLORATION CORPORATION
(A Development Stage Company)
Statements of Operations (Unaudited)
Three Months Ended
December 31,
-----------------------
2002 2001
----------- ----------
Costs and expenses:
Legal fees ....................................$ 9,349 $ 17,462
Accounting fees ............................... 1,000 1,550
Travel ........................................ -- 4,347
General and administrative .................... 1,518 3,125
Compensation................................... 80,000 10,000
----------- ----------
Operating loss (91,867) (36,484)
Interest expense................................... (133) --
----------- ----------
Loss before income taxes and extraordinary item (92,000) (36,484)
Provision for income taxes......................... -- --
----------- ----------
Net loss $ (92,000) $ (36,484)
=========== ==========
Basic and diluted loss per common share:...........$ (0.05) $ (0.01)
=========== ==========
Basic and diluted weighted average
common shares outstanding ..................... 1,690,000 5,716,087
=========== ==========
See accompanying notes to financial statements
5
VISTA EXPLORATION CORPORATION
(A Development Stage Company)
Statements of Operations (Unaudited)
April 9, 1998
Nine Months Ended (Inception)
December 31, Through
----------------------- December 31,
2002 2001 2002
----------- ---------- ----------
Costs and expenses:
Legal fees .................................... $ 80,368 $ 65,730 $ 200,718
Accounting fees ............................... 10,240 5,100 26,641
Travel ........................................ 4,112 19,337 35,756
General and administrative .................... 3,168 11,556 19,930
Compensation................................... 95,000 25,000 135,000
Project evaluation costs ...................... -- 28,902 28,902
Rent, related party ........................... -- -- 3,600
Organizational costs .......................... -- -- 500
Impairment of oil and gas properties........... 40,832 -- 40,832
----------- ---------- ----------
Operating loss (233,720) (155,625) (491,879)
Interest income ................................... -- -- 114
Interest expense................................... (133) -- (133)
----------- ---------- ----------
Loss before income taxes and extraordinary item (233,853) (155,625) (491,898)
Provision for income taxes......................... -- -- --
----------- ---------- ----------
Loss before extraordinary item (233,853) (155,625) (491,898)
Extraordinary gain on extinguishment of debt,
net of income taxes of $-0- ................... -- -- 5,155
----------- ---------- ----------
Net loss $ (233,853) $ (155,625) $ (486,743)
=========== ========== ==========
Basic and diluted loss per common share:
Before extraordinary item .....................$ (0.05) $ (0.03)
=========== ==========
Gain on extinguishment of debt ................$ -- $ --
=========== ==========
Net loss ......................................$ (0.02) $ (0.03)
=========== ==========
Basic and diluted weighted average
common shares outstanding ..................... 4,378,000 5,072,582
=========== ==========
See accompanying notes to financial statements
6
VISTA EXPLORATION CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Unaudited)
April 9, 1998
Nine Months Ended (Inception)
December 31, Through
-------------------- December 31,
2002 2001 2002
-------- -------- --------
Cash flows from operating activities:
Net loss ...................................... $(233,853) $(155,625) $(486,743)
Transactions not requiring cash:
Common stock issued for services ........... -- -- 500
Contributed rent ........................... -- -- 3,600
Impairment of oil and gas properties........ 40,832 -- 40,832
Stock options granted ...................... 80,000 -- 80,000
Changes in operating assets and liabilities:
Receivables and advances ............... 8,265 (2,972) --
Accounts payable and accrued liabilities 91,325 18,867 174,508
-------- -------- --------
Net cash used in operating activities (13,431) (139,730) (187,303)
-------- -------- --------
Cash flows from investing activities:
Investment in oil and gas properties........... -- (49,832) (40,832)
-------- -------- --------
Net cash used in investing activities -- (49,832) (40,832)
-------- -------- --------
Cash flows from financing activities:
Advances from officer.......................... -- (10,500) --
Proceeds of notes payable...................... 10,000 -- 10,000
Sale of common stock ......................... -- 223,000 250,405
Offering costs incurred ....................... -- (20,561) (30,689)
-------- -------- --------
Net cash provided by financing activities 10,000 191,939 229,716
-------- -------- --------
Net change in cash ................................ (3,431) 2,377 1,581
Cash, beginning of period ......................... 5,012 73 --
-------- -------- --------
Cash, end of period $ 1,581 $ 2,450 $ 1,581
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................... $ -- $ -- $ --
======== ======== ========
Income taxes ............................... $ -- $ -- $ --
======== ======== ========
Non-cash financing activities:
Extraordinary gain on the extinguishment
of debt ........... .................... $ -- $ -- $ 5,155
Notes issued to acquire common stock........ 158,697 -- 158,697
======== ======== ========
See accompanying notes to financial statements
7
VISTA EXPLORATION CORPORATION
A Development Stage Company
---------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2002
Note A: Basis of Presentation
------------------------------
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its audited financial statements for
the period ended March 31, 2002, as filed in its annual report on Form 10K-SB
filed July 1, 2002, and should be read in conjunction with the notes thereto.
The Company entered the development stage in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 7 on April 9, 1998 and its purpose
was to evaluate, structure and complete a merger with, or acquisition of, a
privately owned corporation. On or about March 3, 2001, a transfer of ownership
of common stock was completed in order to change from an inactive company to an
oil and gas company.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited. The unaudited interim
financial information presented herein has been prepared by the Company in
accordance with the policies in its audited financial statements for the period
ended March 31, 2002 and should be read in conjunction with the notes thereto.
On April 18, 2001, the Company changed its year-end from April 30 to March 31.
The accompanying statements of operations and cash flows reflect the nine-month
period ended December 31, 2002. The comparative figures for the nine-month
period ended December 31, 2001 have been included in the accompanying statements
of operations and cash flows for comparison on an unaudited basis.
Note B: Summary of Significant Accounting Policies
--------------------------------------------------
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.
8
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.
Abandonments of properties are accounted for as adjustments of capitalized costs
with no loss recognized.
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.
Note C: Related Party Transactions
----------------------------------
On February 28, 2001, an officer advanced the Company $10,500 for working
capital. The advance carried no interest rate and was payable on demand. The
Company repaid the advance in April 2001. The officer also paid travel and
administrative expenses totaling $6,115 on behalf of the Company prior to March
31, 2001, $33,325 during the year ended March 31, 2002, and $5,765 during the
nine months ended December 31, 2002. He received reimbursements and advances
from the Company totaling $45,705 and received compensation totaling $40,000
through March 31, 2002. During the nine months ended December 31, 2002, he
advanced $3,200 to the Company and compensation to the officer of $15,000 was
accrued and remains unpaid at December 31, 2002.
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.
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.
Note D: Income Taxes
--------------------
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the periods shown on the condensed financial
statements resulting in a deferred tax asset, which was fully allowed for,
therefore the net benefit and expense result in $0 income taxes.
9
Note E: Notes Payable
---------------------
Notes payable issued to ten shareholders to repurchase common stock total
$158,696.80 at December 31, 2002. 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.
Item 2. Plan of Operation.
We initially developed a three-phase plan of operation to acquire and
develop coalbed methane gas producing properties in the United States, with our
initial efforts focused on southeast Kansas. Phase one of our three-phase plan
of operation consisted of identifying the most promising areas to drill for
coalbed methane gas and acquiring mineral rights for as many properties within
the identified area as practicable. Phase two involved drilling and testing
wells on the leased acres to prove reserves, completing promising test wells,
extracting the oil, gas and other hydrocarbons that we find, and delivering them
to market. In phase three we planned to expand our drilling operations to
maximize our production. In August 2001 we changed our name from "Bail
Corporation" to "Vista Exploration Corporation" to reflect our new plan of
operation.
As of January 2002, we had successfully completed phase one of our plan and
were waiting to implement phase two upon the receipt of adequate funding. We
intended to raise the necessary funds through one or more equity or debt
offerings commencing in early 2002. However, our capital raising efforts were
significantly hindered by overall economic and market factors and by the fact
that there is no market for our stock. To facilitate our application for a
trading symbol, in September 2002 we repurchased a total of 4,400,000 shares of
our common stock from 10 shareholders who had purchased their shares in private
placements conducted in April 2001, June 2001, December 2001 and January 2002.
In implementing phase one of our plan, our management and consultants
identified the southwestern quarter of Coffey County, Kansas, as our targeted
area. As of December 1, 2001, we had acquired 115 separate leases covering
approximately 15,388 acres, of which approximately 13,902 acres were in Coffey
County and approximately 1,486 acres were in an adjacent county. Regardless of
whether or not we were producing oil and gas from a leased property or acres
pooled therewith, on the one-year anniversary of each lease we were required to
pay the lessor $10 per net mineral acre leased. Failure to make such payment
resulted in the lease terminating 30 days thereafter. Pursuant to these lease
payment terms, we were obligated to make one-year anniversary payments beginning
in August 2002 and ending in October 2002. Because we did not have sufficient
capital, we were unable to make any of the payments due and thus we have lost
our rights to all of our leased acres.
We believe that we will be able to secure adequate additional capital to
resume operations, if and when a market for our stock commences. We have had
preliminary discussions with several persons who have indicated an interest in
financing our continued operations, once a market for our stock commences.
During our third quarter, we received permission to make a market in our
securities and our common stock was issued "VXPL" as a trading symbol.
10
We believe that if we are able to secure additional capital, we will be
able to negotiate new leases with a majority of the lessors of our expired
leases. We are also exploring other related business opportunities, but we will
be unable to progress beyond mere discussions until such time as we have devised
a clear plan for raising the capital needed to eliminate our indebtedness and
commence our operations. If we are able to secure such capital, we will
reconsider and revise, as appropriate, our three-phase plan of operation as more
fully described in our annual report on Form 10-KSB for the year ended April 30,
2002. If we do not obtain additional financing, it is likely we will liquidate
our assets.
Liquidity and Capital Resources
Our auditors included an explanatory paragraph in their opinion on our
financial statements for the year ended March 31, 2002, to state that our losses
since inception and our net capital deficit at March 31, 2002 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. We cannot assure you that our plan of operation will be
successful in addressing this issue.
During the nine months ended December 31, 2002, we spent approximately
$193,000 maintaining the company's status, including $90,608 in legal and
accounting fees and $15,000 in officer compensation, substantially all of which
remains unpaid, and $80,000 of non-cash expense related to the option grant. We
also issued promissory notes in an aggregate principal amount of $158,696.80 to
repurchase a total of 4,400,000 shares of our common stock from 10 shareholders.
At December 31, 2002, we had cash of $1,581 and current liabilities of $343,205.
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.
Item 3. Controls and Procedures
Currently we have only one employee who is also our sole officer and
director and therefore we have not adopted any internal controls or any
disclosure controls and procedures.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
11
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are furnished as part of this report:
None.
(b) Reports on Form 8-K.
None.
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: February 14, 2003 By: /s/ Charles A. Ross, Sr.
-------------------------
Charles A. Ross, Sr.,
President and Chief Accounting Officer
CERTIFICATIONS
I, Charles A. Ross, Chief Executive Officer and Chief Accounting Officer of
Vista Exploration Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of the registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
12
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filling date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significant affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Charles A. Ross, Sr.
-------------------------
Charles A. Ross, Sr.
Chief Executive Officer and Chief Accounting Officer
February 14, 2003
13
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, I, Charles A. Ross, Sr., Chief Executive Officer and
Chief Accounting Officer of Vista Exploration Corporation (the "Company"),
hereby certify that the Company's Quarterly Report on Form 10-QSB for the period
ending December 31, 2002, as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934
and that the information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Charles A. Ross, Sr.
-------------------------
Charles A. Ross, Sr.
Chief Executive Officer and Chief Accounting Officer
February 14, 2003
14