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 June 30, 2001
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 0-27321
Bail 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
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 5,640,000 shares of its common stock issued and outstanding
as of August 8, 2001, the latest practicable date before the filing of this
report.
BAIL CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Page
----
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements*
Condensed balance sheet - June 30, 2001 (Unaudited)............... 4
Condensed statement of operations (Unaudited) -
Three months ended June 30, 2001 and 2000 and
April 9, 1998 (inception) through June 30, 2001................... 5
Condensed statements of cash flows (Unaudited) -
Three months ended June 30, 2001 and 2000 and
April 9, 1998 (inception) through June 30, 2001................... 6
Notes to condensed financial statements (Unaudited)............... 7
Item 2. Plan of Operation................................................. 9
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................................................. 11
Item 6. Exhibits and Reports on Form 8-K.................................. 12
Signatures........................................................ 13
*The accompanying financial statements are not covered by
an Independent Certified Public Accountant's report.
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 properties,
o future capital costs of acquisitions and exploration,
o the size of various markets,
o market share,
o project margins,
o business strategies, and
o 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 perception of the following:
o historical trends,
o current conditions,
o expected future developments, and
o other factors we believe are appropriate under the circumstances.
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
BAIL CORPORATION
(A Development Stage Company)
Balance Sheet (Unaudited)
June 30, 2001
ASSETS
Current assets:
Cash ........................................................ $120,154
Expense advance to Officer................................... 8,127
--------
Total current assets 128,281
--------
$128,281
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued liabilities ......................................... $ 34,014
--------
Total current liabilities 34,014
--------
Shareholders' equity (Note D):
Preferred Stock, no par value, 5,000,000 shares
authorized, -0- shares issued and outstanding ............. --
Common stock, no par value, 20,000,000 shares
authorized, 5,640,000 shares issued and outstanding ....... 170,111
Additional paid-in capital .................................. 3,600
Deficit accumulated during the development stage ............ (79,444)
--------
Total shareholders' equity 94,267
--------
$128,281
========
See accompanying notes to financial statements
4
BAIL CORPORATION
(A Development Stage Company)
Statements of Operations (Unaudited)
April 9, 1998
Three Months Ended (Inception)
June 30, Through
-------------------------- June 30,
2001 2000 2001
----------- ----------- -----------
Costs and expenses:
Legal fees .................................... 25,374 488 29,269
Accounting fees ............................... 3,000 1,250 8,751
Travel ........................................ 6,087 -- 11,426
General and administrative .................... 2,565 21 3,564
Project evaluation costs ...................... 27,603 -- 27,603
Rent, related party ........................... -- 300 3,600
Organizational costs .......................... -- -- 500
----------- ----------- -----------
Operating loss (64,629) (2,059) (84,713)
Interest income ................................... -- 8 114
----------- ----------- -----------
Loss before income taxes and extraordinary item (64,629) (2,051) (84,599)
Provision for income taxes (Note C) ............... -- -- --
----------- ----------- -----------
Loss before extraordinary item (64,629) (2,051) (84,599)
Extraordinary gain on extinguishment of debt,
net of income taxes of $-0- ................... -- -- 5,155
----------- ----------- -----------
Net loss $ (64,629) $ (2,051) $ (79,444)
=========== =========== ===========
Basic and diluted loss per common share:
Before extraordinary item ..................... $ * $ *
=========== ===========
Gain on extinguishment of debt ................ $ * $ *
=========== ===========
Net loss ...................................... $ * $ *
=========== ===========
Basic and diluted weighted average
common shares outstanding ..................... 3,848,352 1,230,000
=========== ===========
* Less than $.01 per share
See accompanying notes to financial statements
5
BAIL CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Unaudited)
April 9, 1998
Three Months Ended (Inception)
June 30, Through
-------------------- June 30,
2001 2000 2001
-------- -------- --------
Cash flows from operating activities:
Net loss ...................................... $(64,629) $ (2,051) $(79,444)
Transactions not requiring cash:
Common stock issued for services ........... -- -- 500
Contributed rent ........................... -- 300 3,600
Changes in operating assets and liabilities:
Receivables and advances ............... (8,127) (8) (8,127)
Accounts payable and accrued liabilities 25,898 1,093 34,014
-------- -------- --------
Net cash used in operating activities (46,858) (666) (49,457)
-------- -------- --------
Cash flows from financing activities:
Advances from officer (Note B) ................ (10,500) -- --
Sale of common stock ......................... 198,000 -- 200,300
Offering costs incurred ....................... (20,561) -- (30,689)
-------- -------- --------
Net cash provided by financing activities 166,939 -- 169,611
-------- -------- --------
Net change in cash ................................ 120,081 (666) 120,154
Cash, beginning of period ......................... 73 813 --
-------- -------- --------
Cash, end of period $120,154 $ 147 $120,154
======== ======== ========
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
======== ======== ========
See accompanying notes to financial statements
6
BAIL CORPORATION
A Development Stage Company
---------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2001
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, 2001 as filed in its Form 10K-SB filed July 13, 2001
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 a company active in
the oil and gas business.
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, 2001 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 three-month
period ended June 30, 2001. The comparative figures for the three months ended
June 30, 2000 have been included in the accompanying statements of operations
and cash flows for comparison on an unaudited basis.
Note B: Related Party Transactions
----------------------------------
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 to the Company additional funds that
the Company needed for operating capital and for costs in connection with
searching for or completing an acquisition or merger.
7
On behalf of the Company, the affiliate sold 230,000 shares of the Company's
common stock in a private placement for $2,300. The private placement, which
closed in July 1998, 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 rata 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 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 during the three months ended March 31, 2001 and $7,963
during the three months ended June 30, 2001. He received reimbursements and
advances from the Company totaling $22,102 during the three months ended June
30, 2001. The net advance of $8,127 is included in the accompanying financial
statements as expense advance to officer at June 30, 2001.
Note C: 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.
Note D: Shareholders' Equity
----------------------------
During April of 2001, the Company conducted a private placement offering of up
to 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
Securities Act of 1933, as amended (the "Act"). The Company closed the offering
after selling 3,300,000 shares. The Company received proceeds of $33,000.
During June of 2001, the Company conducted a private placement offering of up to
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 proceeds of $75,000.
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 proceeds of $90,000. In conjunction with the three private placement
offerings, the Company incurred offering costs totaling $30,561.
8
Item 2. Plan of Operation.
We intend to acquire and develop oil and gas producing properties in the
United States. This may be accomplished by way of leasing oil and gas interests
and drilling the leased property to prove reserves or by acquiring working
interests in production or reserves.
In June 2001 we retained a geological consultant to identify areas in
southeast Kansas suitable for coal bed methane exploration and development. We
are interested in properties lying in the Cherokee Basin which contain
Pennsylvanian age coal beds. These coal beds are believed to be contiguous from
the northern part of the basin that runs from the Bourbon Arch in the north to
the state border with Oklahoma to the south.
Historically, coal bed methane gas flow rates for wells completed in the
Cherokee Basin south of Miami and Johnson Counties in Kansas and south of
Jackson County in Missouri have varied from 50 to over 900 thousand cubic feet
(or "Mcf") from a single four foot coal seam or black shale. Water production
from these wells generally has been less than 50 barrels per day initially,
eventually dropping to below 10 barrels per day. Other wells drilled in the
Cherokee Basin within the last 15 years have reported similar reservoir
thickness and production rates in Labette, Wilson, Neosho and Cherokee Counties,
Kansas.
In July 2001 we opened an office in Burlington, Kansas for $350.00 per
month and, with the help of our consultant, we have chosen to start leasing land
in the south half of Coffey County, Kansas (the "Shiloh Project") which is also
in the Cherokee Basin. If we are successful at leasing enough land to move
forward with drilling activities (25,000 acres is our minimum goal), we will
need additional capital to develop these properties. Our initial intent is to
drill and, if commercial quantities of gas is produced, to complete the drilled
wells. If this phase is successful, we may determine to perform core drilling
activities to prove up reserves. If we take this action and we are able to prove
up reserves that merit additional drilling activity, our management may
determine to either raise additional funds to expand drilling or partner or farm
out certain parcels to rapidly develop our leases.
Although there are existing gas pipelines in southern Kansas, until we
identify specific properties to lease it will be difficult to estimate the costs
of transporting our products to such pipelines or other distribution facilities,
should we successfully drill and complete any gas wells.
The prices obtained for oil and gas are dependent on numerous factors
beyond our control, including domestic and foreign production rates of oil and
gas, market demand and the effect of governmental regulations and incentives. We
do not have any delivery commitments with respect to any oil or gas produced
from any properties that we acquire. However, due to the high demand for natural
gas, we do not anticipate any difficulties in selling any oil and gas that we
produce, once it has been delivered to a distribution facility. Assuming we
discover and prove reserves on any properties that we lease, we may decide to
sell some or all of these fields if we receive an appropriate offer for them.
9
In addition to our activities in Kansas, in June 2001 we acquired an option
for a lease on 4,560 acres in Blaine County, Montana from Geominerals Corp. for
$1,400. Geominerals Corp. is controlled by George Andrews, our former president
and director.
We intend to change our name to "Vista Exploration Corporation" to reflect
our new plan of operation. At our annual shareholders meeting scheduled for
Friday, August 10, 2001, our shareholders will vote on an amendment to our
Articles of Incorporation to change our name.
Liquidity and Capital Reserves
In April and June of 2001 we concluded three private placements of our
common stock, selling 4,410,000 shares of our common stock and raising $198,000.
We used $16,615 of the proceeds to repay advances to us by Mr. Charles Ross in
March 2001. We spent approximately $36,000 pursuing potential oil and gas
properties and approximately $55,000 in legal fees in connection with
negotiating potential acquisitions, preparing investment documents in connection
with our capital raising efforts, and preparing and filing a registration
statement with the Securities and Exchange Commission registering the resale of
a portion of our outstanding shares of common stock.
We intend to use the remaining proceeds to acquire oil and gas leases in
the Shiloh Project, to get our registration statement effective, and to fund our
operations. At June 30, 2001, we had cash of $120,154, an increase of $120,081
from March 31, 2001. At June 30, 2001, we had current liabilities of $34,014,
which liabilities have since been paid.
We anticipate that each well in the Shiloh Project will cost approximately
$25,000 to drill and test and an additional $15,000 to complete. We intend to
hire third parties to perform our drilling activities. We will need to raise
additional funds to commence drilling operations.
As a result of our changed plan of operation, we have not yet developed a
formal budget for the balance of the fiscal year. Our budget is almost entirely
discretionary and therefore our inability to finance operations will slow our
progress but should not cause us to cease operations. However, if we were unable
to meet a required payment for land leased for our oil and gas operations or
lack the resources necessary to move forward with our drilling activities, we
could suffer a substantial loss of a business opportunity.
Employees
We currently have no full time employees except our president who is
devoting his full-time to our activities. In July 2001 we retained two
independent leasing consultants to help us lease land for our oil and gas
operations. We have agreed to pay these consultants $0.50 for each leased acre
in the Shiloh Project.
10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
During the first quarter of the year ended June 30, 2001, we sold 4,410,000
shares of our common stock at prices ranging from $0.01 to $0.25 per share to 9
accredited investors without registering the shares under the Securities Act of
1933. No underwriter, sales or placement agent was involved in any of these
sales. All of the sales were made pursuant to Section 4(2) and Rule 506 of
Regulation D adopted under the Securities Act of 1933. All of the purchasers
were known to us and our management through pre-existing business or personal
relationships, as long standing business associates, friends, employees,
relatives or members of the immediate family of management or other
shareholders. All purchasers were provided access to the material information
which they requested and all information necessary to verify such information,
and were afforded access to our management 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
us.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no items submitted to a vote of security holders during the
first quarter of the year ended June 30, 2001.
Item 5. Other Information.
None.
11
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are furnished as part of this report:
Exhibit No. Description
----------- -----------
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 herein to
Exhibit 7.1 of the Form 8-K filed March 9, 2001, Commission
file #000-27321).
10.2 Mutual Release dated as of April 30, 2001, between Bail
Corporation and Corporate Management Services, Inc.
(incorporated by reference herein to Exhibit 10.2 of the
Registrant's 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 herein to Exhibit 10.3 of the Registrant's 10-KSB
for the period ended March 31, 2001).
(b) Reports on Form 8-K.
Bail Corporation filed a current report on Form 8-K on May 2, 2001, to
report under Item 8 the change in fiscal year end from April 30 to March 31.
12
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.
BAIL CORPORATION
Date: August 9, 2001 By: /s/ Charles A. Ross
-----------------------
Charles A. Ross, Sr.,
President and Chief Accounting Officer
13