-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BSWomK0lw6cmHvlSC4nckNhKtssiuc2sprN8Vk+LGB+9cKnU84M67YghiMfEDZ3L r48DGC99UjHnLTRuCSqU2w== 0000918402-96-000115.txt : 19960725 0000918402-96-000115.hdr.sgml : 19960725 ACCESSION NUMBER: 0000918402-96-000115 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19960724 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEASE OIL & GAS CO /CO/ CENTRAL INDEX KEY: 0000076878 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870285520 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-94536 FILM NUMBER: 96598014 BUSINESS ADDRESS: STREET 1: 751 HORIZON COURT STE 203 STREET 2: P O BOX 60219 CITY: GRAND JUNCTION STATE: CO ZIP: 81506-8758 BUSINESS PHONE: 3032455917 MAIL ADDRESS: STREET 1: 751 HORIZON CT STE 203 STREET 2: P O BOX 60219 CITY: GRAND JUNCTION STATE: CO ZIP: 81506-8758 FORMER COMPANY: FORMER CONFORMED NAME: WILLARD PEASE OIL & GAS CO DATE OF NAME CHANGE: 19920703 POS AM 1 PE-AMENDMENT NO. 1 ON FORM S-3 TO FORM SB-2 As filed with the Securities and Exchange Commission on July 24, 1996 Registration No. 33-94536 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 POST-EFFECTIVE AMENDMENT NO. 1* ON FORM S-3 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PEASE OIL AND GAS COMPANY ---------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 87-0285520 ------------------------------ ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 751 Horizon Court, Suite 203 P.O. Box 60219 Grand Junction, Colorado 81506-8758 (970) 245-5917 -------------------------------------------- (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Willard H. Pease, Jr. 751 Horizon Court, Suite 203 P.O. Box 60219 Grand Junction, Colorado 81506-8758 (970) 245-5917 --------------------------------------- (Name, address, including ZIP code, and telephone number, including area code, of agent for service) ----------------------------------------------------- With Copies to: Annita M. Menogan, Esq. Hopper and Kanouff, P.C. 1610 Wynkoop Street, Suite 200 Denver, Colorado 80202 (303) 892-6000 ----------------------------------------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. ----------------------------------------------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest investment plans, please check the following box. [ ] ----------------------------------------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] ----------------------------------------------------- If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ----------------------------------------------------- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ----------------------------------------------------- If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ----------------------------------------------------- *Pursuant to Rule 429 adopted under the Securities Act of 1933, this Registration Statement constitutes post-effective Amendment No. 5, and the prospectus filed as part of this Registration Statement also relates to Registration Statement No. 33-64448. ----------------------------------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. PROSPECTUS PEASE OIL AND GAS COMPANY 5,038,437 Shares of Common Stock This Prospectus relates to the resale by the holders (the "Selling Securityholders") named herein of, or the exercise or conversion of other securities of Pease Oil and Gas Company ("Company") for, up to 5,038,437 shares of the $0.10 par value common stock ("Common Stock") of the Company, which are either currently issued and outstanding, or which are issuable upon the exercise of warrants ("Warrants") to purchase shares of Common Stock, which Warrants are either currently outstanding or are issuable upon conversion of shares of the Company's Series A Cumulative Preferred Stock ("Preferred Stock"). Of the 5,038,437 shares of Common Stock offered hereby for resale or upon exercise or conversion, 1,264,820 shares which are currently outstanding are being offered for resale by certain stockholders of the Company; 3,082,429 shares are issuable upon exercise of Warrants that were issued or which are issuable upon conversion of shares of Preferred Stock; and 691,188 shares are offered for resale after exercise by the holders of other outstanding warrants of the Company. See "Selling Securityholders." The Company will not receive any proceeds from the sale of shares by the Selling Securityholders and will not receive any proceeds upon the conversion of the Preferred Stock which is convertible without payment of additional consideration into Common Stock or Common Stock and Warrants. If all of the Warrants are exercised, of which there is no assurance, the Company will receive proceeds of up to approximately $19,476,255. There is no assurance that the all or any portion of the Warrants will be exercised. However, the holders of the Warrants will have to exercise the Warrants in order to sell the shares of Common Stock offered for resale hereby, excluding the 1,264,820 shares which are currently outstanding and offered hereby. ----------------------------------------------- FOR INFORMATION CONCERNING CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PURCHASERS OF THE COMMON STOCK OFFERED HEREBY AND BY PERSONS WHO CONVERT THEIR PREFERRED STOCK OR CONVERTIBLE DEBENTURES OR WHO EXERCISE WARRANTS, SEE "RISK FACTORS" COMMENCING ON PAGE 5 OF THIS PROSPECTUS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is ________________, 1996 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance with the Exchange Act files periodic reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company with the Commission can be inspected and copied (at prescribed rates) at the Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New York 10048. The Commission maintains a Website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding the Company. In addition, reports, proxy statements and other information concerning the Company can be inspected and copied at the office of the National Association of Securities Dealers, Inc., 9513 Key West Avenue, Rockville, Maryland 20850-3389. The Company has filed with the Commission registration statements (the "Registration Statements") under the Securities Act of 1933 (the "Securities Act") with respect to the Common Stock offered hereby. This Prospectus, which is part of the Registration Statements, does not contain all the information set forth in the Registration Statements and the exhibits and schedules thereto, certain items of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the Common Stock, reference is hereby made to the Registration Statements and such exhibits and schedules. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated in this Prospectus by reference. (a) Annual Report on Form 10-KSB for the year ended December 31, 1995 (the "Annual Report on Form 10-KSB"); and (b) Quarterly Report on Form 10-QSB for the Quarter ended March 31, 1996 (the "First Quarter Report"). Any statement contained in the above-referenced documents shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in this Prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. All documents filed after _______, 1996, by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering shall be deemed to be incorporated by reference into this Prospectus. Copies of any documents or portions of such other documents incorporated in this Prospectus, not including exhibits to the information that is incorporated by reference, unless such exhibits are specifically incorporated by reference in this Prospectus, may be obtained at no charge by any person (including any beneficial owner) to whom this Prospectus is delivered by a written or oral request to Patrick J. Duncan, Corporate Secretary, 751 Horizon Court, P.O. Box 60219, Grand Junction, Colorado 81506-8758, telephone (970) 245-5917. 2 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and related notes appearing elsewhere in this Prospectus or contained in other reports and documents of the Company which are incorporated by reference in this Prospectus. The Company Pease Oil and Gas Company, a Nevada corporation ("Company"), has been engaged in the oil and gas exploration, development and production business since 1972. The Company's operations have been conducted primarily in Colorado, Nebraska, Utah and Wyoming. Through the acquisition of Skaer Enterprises, Inc. in 1993 and its affiliated properties and businesses, the Company substantially expanded its operations. The Company's general business strategy is to increase reserves and cash flow by: (a) establishing and building upon a regional base of operations and technical expertise; (b) pursuing low risk acquisitions, which contain proven reserves, established production history, and significant undeveloped reserve potential; (c) pursuing acquisitions of family-owned and private companies, while the competition's focus is on major-company divestitures; (d) enhancing production and reserves by employing advanced technical procedures and utilizing the Company's regional database; and (e) expanding the throughput of the natural gas processed by the Company's Gas Plant. The Company does not intend to conduct a significant amount of exploratory drilling. As of June 30, 1996, the Company had varying ownership interests in 216 gross productive wells (186 net) located in four states. The Company operates 196 of the wells, with the other wells being operated by independent operators under contracts that are standard in the industry. In May 1995, the Company restructured its operations by substantially downsizing its oil field service and supply store operations as well as closing its administrative office in Denver, Colorado. As a result of this restructuring, the Company terminated 40 of its 71 employees. Management of the Company does not expect any material negative impact in its financial condition as a result of the restructuring. Prior to its actions in May 1995, and due to the Company's cash position, in December 1994, the Board of Directors of the Company voted not to declare the quarterly dividend on the Company's Preferred Stock. In March 1995, the Board of Directors voted to suspend indefinitely the payment of any future Preferred Stock dividends, although dividends will continue to accrue on a monthly basis. In January 1995, the Company commenced a tender offer to the Preferred Stockholders to convert each share of Preferred Stock and all then accrued dividends through March 31, 1995 into 4.5 shares of Common Stock and warrants to purchase 2.625 shares of Common Stock. Prior to the tender offer, the Preferred Stock would have been convertible into 2.625 shares of Common Stock. As a result of the tender offer, 933,492 shares of Preferred Stock were converted into 4,200,716 shares of Common Stock and warrants to purchase 2,450,416 shares of Common Stock. 3 Pursuant to the Company's Articles of Incorporation, the Preferred Stockholders are permitted to elect two directors to the Company's Board of Directors whenever quarterly dividends have not been paid for six quarters. Because no dividends have been paid since September 1994, holders of Preferred Stock will be able to elect two directors at the Company's annual meeting in August 1996. The Company has also proposed to amend the Certificate of Designation for the Preferred Stock to change the event which triggers automatic conversion of the Preferred Stock into Common Stock and Warrants, to lower the price for converting Preferred Stock into Common Stock and Warrants and to state the exercise price of the Warrants issuable upon conversion of the Preferred Stock. All stockholders of the Company may vote on the proposed amendment at the annual meeting. The Company's address is 751 Horizon Court, Suite 203, Grand Junction, Colorado 81506 and its telephone number is (970) 245-5917. 4 RISK FACTORS Company's Continuing Losses and Financial Condition. As described in the financial statements contained in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, the Company has sustained operating losses during each of the last five years. The Company had net losses of approximately $1,707,000, and $765,000 for the fiscal years ended December 31, 1994 and 1995, respectively, and net losses applicable to common shares of $2,865,000 and $2,609,000 for fiscal years 1994 and 1995, respectively. However, the Company had operating cash flow of approximately $383,000 (unaudited) for the first quarter of 1996. Although the Company's current assets and the estimated present value of the Company's oil and gas reserves exceeded the Company's liabilities by $8.58 million as of December 31, 1995, there can be no assurance that the Company can produce the oil and gas reserves or otherwise liquidate those assets during the times or at the prices assumed in valuing those reserves. In addition, despite the results for the first quarter of 1996, no assurance can be made that the Company will operate profitably in the future as an oil and gas exploration, development and production company. Any likelihood of future profitability of the Company must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the oil and natural gas exploration, development and production business in which the Company will be engaged. Need for Additional Capital. The Company's ability to complete its planned drilling and development programs which is intended to expand its reserve base and diversify its operations, is dependent upon the Company's ability to obtain the necessary capital. The Company's cash flow and borrowing capacity, together with any proceeds from this offering, will not be sufficient for the Company to complete its planned drilling and development programs. Additional sources of financing will be needed and there can be no assurance that additional sources of financing will be available at all or at a reasonable cost. In April 1996, the Company began offering, in a private placement, $2,000,000 of units, each consisting of one $50,000 10% Collateralized Convertible Debentures and 25,000 Warrants to purchase shares of the Company's Common Stock at $1.25 per share. The offering expires August 14, 1996 but may be extended by the Company. The Company believes that the proceeds of such placement, when combined with the cash that the Company currently has and anticipates receiving from operations, will support the Company for at least 12 months and additional financing will be required thereafter. Development Risks and Production. A portion of the Company's oil and gas reserves are proved undeveloped reserves. Successful development and production of such reserves, although they are categorized as "proved," cannot be assured. Additional drilling will be necessary in future years both to maintain production levels and to define the extent and recoverability of existing reserves. There is no assurance that present oil and gas wells of the Company will continue to produce at current or anticipated rates of production, that development drilling will be successful, that production of oil and gas will commence when expected, that there will be favorable markets for oil and gas which may be produced in the future or that production rates achieved in early periods can be maintained. Bank Loan Repayment Priority. As of June 30, 1996, the Company's outstanding loan ("Bank Loan") with Colorado National Bank ("Bank") was $1,271,374. The Bank Loan is secured by a first priority security interest on substantially all of the Company's oil and gas reserves as well as the Company's gas processing facility. If the Company's obligations under the terms of the Bank Loan agreement are ever declared immediately due and payable, the Bank would have a first lien on all of the Company's major assets and might sell a significant portion of the assets to repay the Bank Loan. Price Volatility. The revenues generated by the Company and estimated future net revenue are highly dependent upon the prices of oil, natural gas and natural gas liquids. The energy market makes it difficult to estimate future prices of oil, natural gas and natural gas liquids. For instance, the price of oil dropped from approximately $18.00 per barrel as of December 31, 1992, to less than $12.00 per barrel as of December 31, 1993. The Company's average collected price for oil in 1994 was $15.94 per barrel and for natural gas was $1.36 per thousand cubic feet ("mcf"), for 1995 was $16.77 and $1.18, respectively and through May 1996, $18.60 and $1.23, respectively. On April 19, 1996, the posted price for oil was $22.50 per barrel and for natural gas was $1.46 per mcf but on July 19, 1996, the price for oil was $20.25 per barrel and $1.11 for natural gas per mcf. The reserve valuations shown in the Company's 5 Annual Report on Form 10-KSB are based on the December 31, 1995 prices of $17.66 per barrel of oil and $1.71 per mcf of natural gas. Various factors beyond the control of the Company affect prices of oil and natural gas, including worldwide and domestic supplies of, and demand for, oil and natural gas, the ability of the members of the Organization of Petroleum Exporting Countries ("OPEC") to agree to and maintain oil price and production controls, political instability or armed conflict in oil-producing regions, the price of foreign imports, the level of consumer demand, the price and availability of alternative fuels, the availability of pipeline capacity and changes in existing federal regulation and price controls. As in the past, it is likely that oil and gas prices will continue to fluctuate in the future which may adversely affect the Company's business. Limitations on Accuracy of Reserve Estimates and Future Net Revenue. This Prospectus contains estimates of the Company's oil and gas reserves and the future net revenue therefrom which have been prepared by independent petroleum engineers. These estimates are based on various assumptions and, therefore, are inherently imprecise. Estimates of reserves and of future net revenue prepared by different petroleum engineers may vary substantially depending, in part, on the assumptions made and may be subject to adjustment either up or down in the future. Actual future production, revenue, taxes, development expenditures, operating expenses and quantities of recoverable oil and gas reserves may vary substantially from those assumed in the estimates. In addition, the Company's reserves may be subject to downward or upward revision, based upon production history, results of future exploration and development, prevailing oil and gas prices and other factors. If these estimates of quantities, prices and costs prove inaccurate, the Company is unsuccessful in expanding its oil and gas reserves base with its capital expenditure program, and/or declines in and instability of oil and natural gas prices occur, then writedowns in the capitalized costs associated with the Company's oil and gas assets may be required. Purchasers should note the different categories of reserves and that the category of "probable" reserves carries substantially more risk than the category of "proved" reserves. Risks Inherent in Oil and Gas Operations The search for oil and gas is a highly speculative activity that may be marked by numerous unproductive efforts. Many wells will be dry, and productive wells may not produce enough oil or gas to produce a profit or even return the invested capital. The Company must continually acquire and explore for and develop new oil and gas reserves to replace those being depleted by production. Without successful drilling or acquisition ventures, the Company's assets, properties and revenues will decline. Oil and gas exploration and development are speculative, involve a high degree of risk and are subject to all the hazards typically associated with the search for, development of and production of oil and gas. The Company's operations are subject to all of the risks incident to exploration for and production of oil and gas including blow-outs, cratering, pollution and fires, each of which could result in damage to or destruction of oil and gas wells or production facilities or damage to persons and property. The Company's insurance may not fully cover certain of these risks and the occurrence of a significant event not fully insured against could have a material adverse effect on the Company's financial position. Although the Company has recently emphasized development drilling in the Denver--Julesburg Basin where drilling operations are believed to be of a lower risk than in some other areas, the process of drilling for oil and gas can be hazardous and carry the risk that no commercially viable oil or gas production will be obtained. The cost of drilling, completing and operating wells is often uncertain. Moreover, drilling may be curtailed, delayed or canceled as the result of many factors, including title problems, weather conditions, shortages of or delays in delivery of equipment, as well as the financial instability of well operators, major working interest owners and well servicing companies. The availability of a ready market for the Company's oil and gas depends on numerous factors beyond its control, including the demand for and supply of oil and gas, the proximity of the Company's natural gas reserves to pipelines, the capacity of such pipelines, fluctuations in production and seasonal demand, the effects of inclement weather and governmental regulation. New gas wells may be shut-in for lack of a market until a gas pipeline or gathering system with available capacity is extended into the area. New oil wells may have production curtailed until production facilities and delivery arrangements are acquired or developed. The Company's business will always be subject to these types of risks. Loss of Revenue from Take-or-Pay Contract. A "take-or-pay" contract with Public Service Company of Colorado which called for PSCo to purchase annually a minimum of 2.92 billion cubic feet (BCF) of natural gas from the Company expired 6 June 30, 1996. Historically, the price paid by PSCo under that contract had been at a premium above the market and therefore allowed for the "marketing and trading" activities which represented gas purchased from third parties and sold to PSCo under the terms of the contract. The Company is currently negotiating with PSCo for a new long-term contract, as well as examining other alternatives with natural gas end users. However, with the increasing competition fostering within all phases of the natural gas industry, it is unlikely that the contract will be renewed at an above market premium. Accordingly, the expiration of this contract will have a material negative impact on the Company's future operations since this activity generated gross margin between $500,000 and $600,000 annually. Competition. The oil and gas industry is highly competitive in many respects, including identification of attractive oil and gas properties for acquisition, drilling and development, securing financing for such activities and obtaining the necessary equipment and personnel to conduct such operations and activities. In seeking suitable opportunities, the Company competes with a number of other companies, including large oil and gas companies and other independent operators with greater financial resources and, in some cases, with more experience. Many other oil and gas companies in the industry have financial resources, personnel and facilities substantially greater than those of the Company and there can be no assurance that the Company will continue to be able to compete effectively with these larger entities. Shortage of Equipment, Services, and Supplies. The Company is involved in intense competition for scarce drilling and completion equipment, services and supplies, and there can be no assurance that sufficient drilling and completion equipment, services and supplies will be available when needed. The likelihood of shortages is greater at the present time than in the past because of the recent increase in oil and gas prices causing an increase in drilling activity and a resulting decrease in available material and equipment. Any such shortages could delay the proposed exploration, development, and sales activities of the Company and could cause a material adverse affect to the financial condition of the Company. Dependence on Key Personnel. The success of the Company will largely be dependent upon the efforts and active participation of Willard H. Pease, Jr. the President of the Company, James N. Burkhalter, the Vice President of Engineering and Production of the Company and Patrick J. Duncan the Chief Financial Officer of the Company. The loss of the services of any of its officers may adversely affect the Company's business. Government Regulation and Environmental Risks. The production and sale of gas and oil are subject to a variety of federal, state and local government regulations, including regulations concerning the prevention of waste, the discharge of materials into the environment, the conservation of natural gas and oil, pollution, permits for drilling operations, drilling bonds, reports concerning operations, the spacing of wells, the unitization and pooling of properties, and various other matters, including taxes. Many jurisdictions have at various times imposed limitations on the production of gas and oil by restricting the rate of flow for gas and oil wells below their actual capacity to produce. In addition, many states have raised state taxes on energy sources and additional increases may occur, although increases in state energy taxes would have no predictable effect on natural gas and oil prices. The Company believes it is in substantial compliance with applicable environmental and other government laws and regulations, however, there can be no assurance that significant costs for compliance will not be incurred in the future. Anti-Takeover Protections. The Company's Articles of Incorporation and Bylaws include certain provisions, the effect of which may be to inhibit a change of control of the Company. These include the authorization of additional classes of Preferred Stock and classification of the Board of Directors. In addition, certain of the Company's officers have entered into employment contracts providing for certain payments to be made upon termination. These provisions may discourage a party from making a tender offer for or otherwise attempting to obtain control of the Company. Preferred Stock. The Company is authorized to issue 2,000,000 shares of preferred stock. The shares of preferred stock may be issued from time to time in one or more series as may be determined by the Board of Directors without stockholder approval. Further, the voting powers and preferences, the relative rights of each such series, and the qualifications, limitations and restrictions may be established by the Board of Directors without stockholder approval. The 7 Company has previously issued a total of 1,170,000 shares of Preferred Stock, 202,688 shares of which are currently outstanding and currently are convertible into 595,396 shares of Common Stock and 595,396 Warrants. The other 967,312 shares of Preferred Stock that were issued were converted into 4,288,005 shares of Common Stock and 2,537,705 Warrants. If stockholders approve, at the Company's Annual Meeting in August 1996, certain proposed amendments to the Certificate of Designation of the Preferred Stock which is contained in the Company's Articles of Incorporation, the conversion rate will change and the Preferred Stock will be convertible into 952,633 shares of Common Stock and Warrants. Any issuance of Preferred Stock could affect the rights of the holders of Common Stock and therefore reduce the value of the Common Stock. Holders of the shares of Preferred Stock are entitled to preferences ahead of holders of Common Stock as to dividends and at liquidation and any such preferences could affect the value of the Common Stock. Any preferences will be lost if the holders of the outstanding shares of Preferred Stock have conversion rights and convert their Preferred Stock into Common Stock and Warrants. Dividend Policy. Holders of shares of Preferred Stock are entitled to receive cumulative cash dividends at an annual rate of 10% per year (equal to $1.00 per share annually) payable quarterly in arrears, when, as and if declared by the Board of Directors of the Company out of funds at the time legally available therefor. Payment of dividends is subject to declaration by the Board of Directors and if not declared, dividends will cumulate from quarter to quarter without interest until declared and paid. Unpaid dividends increase the number of shares of Common Stock into which Preferred Stock may be converted. The Company's Board of Directors decided not to pay the 1994 fourth quarter dividend in December 1994. In March 1995, the Board of Directors suspended the payment of preferred stock dividends indefinitely. As of June 30, 1996, there was $354,704, or $1.75 per share, of preferred stock dividends in arrears. The Company does not currently pay cash dividends on its Common Stock (into which the Preferred Stock is convertible) and does not anticipate paying such dividends in the foreseeable future. The Company's agreement with Colorado National Bank restricts the payment of dividends on its Common Stock without consent of the lender. Election of Additional Directors by Preferred Stockholders. The Company's Articles of Incorporation provide that whenever dividends on the Preferred Stock (or any outstanding shares of Parity Stock, as defined) have not been paid in an aggregate amount equal to at least six quarterly dividends on such shares (whether or not consecutive), the number of directors of the Company will be increased by two, and the holders of the Preferred Stock, voting separately as a class, will be entitled to elect such two additional directors to the Board of Directors at any meeting of stockholders of the Company at which directors are to be elected held during the period such dividends remain in arrears. Such voting rights will terminate when all such dividends accrued and in default have been paid in full or set apart for payment. The term of office of all directors so elected will terminate immediately upon such payment or setting apart for payment. As of June 30, 1996, no dividends had been declared or paid on the Preferred Stock for seven quarters. Accordingly, two directors will be elected by the Preferred Stockholders at the Company's 1996 Annual Meeting in August 1996. Outstanding Options and Warrants. As of June 30, 1996, the Company has outstanding options and warrants to purchase a total of 5,028,501 shares of the Company's Common Stock. The exercise prices of the outstanding options and warrants range from $.70 per share to $6.00 per share. The holders of the outstanding options and warrants might have the opportunity to profit from a rise in the market price (of which there is no assurance) of the shares of the Company's Common Stock underlying the options and warrants, and their exercise may dilute the ownership interest in the Company held by other stockholders. USE OF PROCEEDS The Company will not receive any proceeds from the sale of shares by the Selling Securityholders and will not receive any proceeds upon the conversion of the Preferred Stock or convertible debentures, which are convertible without payment of additional consideration into Common Stock or Common Stock and Warrants. If all of the Warrants are exercised, of which there is no assurance, the Company will receive proceeds of up to approximately $19,476,255. Any proceeds from the exercise of Warrants will be used by the Company for general corporate purposes. 8 SELLING SECURITYHOLDERS The following table sets forth certain information regarding the shares of Common Stock beneficially owned as of June 30, 1996, by each Selling Securityholder herein as adjusted to reflect the sale by all Selling Securityholders of the shares offered hereby by each Selling Securityholder. This list indicates any position, office or other material relationship with the Company that the Selling Securityholder had within the past three (3) years, the number of Common Shares owned by such Selling Securityholder prior to the offering, the maximum number of shares to be offered for such Selling Securityholder's account and the amount of the class owned by the Selling Securityholder after completion of the offering (assuming the Selling Securityholder sold the maximum number of shares of Common Stock). The Selling Securityholders are not required, and may choose not, to sell any of their shares of Common Stock.
Shares Owned Shares Prior to Being Shares Owned Name Offering Offered After Offering - ---- ------------ ------- -------------- Bell, Howard B. & Leslie R .............................. 9,375 9,375 0 Bronstein, Irwin I. (1) ................................. 40,000 40,000 0 Broadbent, Robert C. & Helena ........................... 15,625 15,625 0 Broadbent, Robert N. & Marjie Sue Family Trust .......... 15,625 15,625 0 Buehler, John J. & Jeri L ............................... 31,250 31,250 0 Burkhalter, James N. (2) ................................ 130,709 3,906 126,803 Crownover, Enid E. & Clyde .............................. 62,500 62,500 0 Dawes, Steven A ......................................... 31,250 31,250 0 Dawson, Kent J. & Ruth W ................................ 15,625 15,625 0 Duncan, Patrick J. & Eilleen M. (3) ..................... 134,531 15,625 118,906 Ellis, Robert P. & Sandra D ............................. 15,625 15,625 0 Findlay, Clifford O. IRA ................................ 15,625 15,625 0 Findlay, Pete Olds Profit Sharing ....................... 15,625 15,625 0 Flood, Laurence B ....................................... 58,824 58,824 0 Flynn, Timothy P. & Terri L ............................. 62,500 62,500 0 Fried, Stanley and Helen Fried Family Trust ............. 15,625 15,625 0 Gleave, Rodney S. & Kelly ............................... 15,625 15,625 0 Gleave, Kelly W. (4) .................................... 45,000 45,000 0 Greene Clark & Associates, (P/S Trust FBO A. Kent Greene) ........................................ 15,625 15,625 0 9 Shares Owned Shares Prior to Being Shares Owned Name Offering Offered After Offering - ---- ------------ ------- -------------- Harris, Webb & Garrison (5) ............................. 11,250 11,250 0 Hutchings, Darryl & Birgit .............................. 9,375 9,375 0 Invest L'Inc ............................................ 31,250 31,250 0 Mcferran, Sam ........................................... 5,882 5,882 0 Mart Warehousing & Storage Inc. (6) ..................... 31,250 31,250 0 Michelas, Michael T. (7) ................................ 45,625 45,625 0 Moleton, Gerald P. (Southwest Securities CF IRA Rollover) ............................................. 15,625 15,625 0 Paris, T. Mark and Janiel ............................... 15,625 15,625 0 Pfeiffer, Gene F. & Jeanne .............................. 15,625 15,625 0 Plasso, Frank ........................................... 9,375 9,375 0 Presidential Securities (8) ............................. 5,000 5,000 0 Ritger, William J. (9) .................................. 20,000 20,000 0 Ronin Group, Ltd. (10) .................................. 200,000 200,000 0 Ruane, James C (11) ..................................... 253,183 100,000 153,183 Rufty, Archibald ........................................ 15,625 15,625 0 Rufty, Frances F. C/F Sara F. Parkton UTNUGMA ........... 15,625 15,625 0 Stock, Lincoln F. and Helen, TTESS Lincoln F. and Helen Revocable Trust (12) ............................. 73,125 73,125 0 Jack D. and Maurine Swartz Family Trust ................. 15,625 15,625 0 Swartz, George C ........................................ 15,625 15,625 0 Tanner, Janet, First Trust Corp. TTEE Janet J. Tanner IRA .......................................... 15,625 15,625 0 Tanner, Max C. (Delaware Charter C/F Max C. Tanner Profit Sharing Keogh) ........................... 62,500 62,500 0 Tanner, Max C., Southwest Securities Inc., FBO IRA (13) ........................................... 50,000 50,000 0 Tanner, Max C. & Janet J. (14) .......................... 45,833 45,833 0 Tanner, Morris & Christi ................................ 11,250 11,250 0 Tanner, Mont E .......................................... 6,250 6,250 0 Thermo Cogeneration Partnership, L.P. ................... 65,000 65,000 0 10 Shares Owned Shares Prior to Being Shares Owned Name Offering Offered After Offering - ---- ------------ ------- -------------- TNC Incorporated (15) ................................... 50,000 50,000 0 USA Capital Management (16) ............................. 3,125 3,125 0 Wagner Investment Managment, Inc. (17) .................. 50,000 50,000 0 Wagner, Rolf (18) ....................................... 20,375 20,375 0 Wagner, W. Rolf, Scott & Stringfellow, Inc., FBO IRA................................................. 25,000 25,000 0 Walker, Clemons F. (19) ................................. 171,813 171,813 0 Walker, Clemons F., First Trust Corp TTEE IRA (20) .......................................... 93,750 93,750 0 Walker, Clemons F. & Leslie A. Walker Family Trust ........................................... 75,000 75,000 0 Warren, Clark A. & Melissa M ............................ 11,250 11,250 0 Weekley, Richard ........................................ 31,250 31,250 0 Witkowski, John J. & Carolyn A .......................... 15,625 15,625 0 --------- --------- --------- Totals ......................................... 2,354,899 1,956,007 398,892 ========= ========= =========
- ---------------------- (1) Includes 20,000 shares issuable upon exercise of presently exercisable warrants. (2) Mr. Burkhalter is the Vice President of Engineering and Production for the Company. Includes 115,000 shares underlying currently exercisable options. (3) Mr. Duncan is the Company's Chief Financial Officer. Includes 3,281 shares underlying presently exercisable warrants and 105,000 shares underlying presently exercisable options. (4) Includes 15,000 shares underlying presently exercisable warrants. (5) Consists of 11,250 shares underlying presently exercisable warrants. (6) Willard H. Pease, Jr. owns approximately 30% of the outstanding common stock of Mart Warehousing and Storage, Inc., and is President of Mart Warehousing and Storage, Inc. 11 (7) Includes 30,000 shares underlying presently exercisable warrants. (8) Consists of 5,000 shares underlying presently exercisable warrants. (9) Consists of 20,000 shares underlying presently exercisable warrants. (10) Consists of 200,000 shares underlying presently exercisable warrants. (11) Includes 4,560 shares held by Mr. Ruane as trustee for two trusts, over which shares Mr. Ruane may be deemed to have shared voting and investment power, 45,083 shares underlying presently exercisable warrants to purchase Common Stock and 56,675 shares underlying presently exercisable options, and 11,750 shares of Common Stocks underlying convertible preferred stock. Mr. Ruane is a director of the Company. (12) Includes 15,000 shares underlying presently exercisable warrants. (13) Includes 16,667 shares underlying presently exercisable warrants. (14) Consists of 45,833 shares underlying presently exercisable warrants. (15) Consists of 50,000 shares underlying presently exercisable warrants. (16) Consists of 3,125 shares underlying presently exercisable warrants. (17) Consists of 50,000 shares underlying presently exercisable warrants. (18) Includes 12,500 shares underlying presently exercisable warrants. (19) Includes 138,480 shares underlying presently exercisable warrants. (20) Includes 25,000 shares underlying presently exercisable warrants. PLAN OF DISTRIBUTION The shares of Common Stock issuable upon exercise of the Warrants and the shares of Common Stock and Warrants issuable upon conversion of the shares of Preferred Stock will be issued directly by the Company to the Warrant holders or Preferred Stockholders upon submission of the particular Warrants together with the exercise price or upon submission of the shares of Preferred Stock or convertible debentures to the Company. The exercise or conversion are subject to the terms of the Warrants and shares of Preferred Stock, and such Warrants and shares of Preferred Stock may be exercisable or convertible during different periods of time. The Selling Securityholders intend to sell their shares directly, through agents, dealers, or underwriters, in the over-the-counter market, or otherwise, on terms and conditions determined at the time of sale by the Selling Securityholders or as a result of private negotiations between buyer and seller. Sales of the shares of Common Stock may be made pursuant to this Prospectus and pursuant to Rule 144 adopted under the Securities Act of 1933, as amended. No underwriting arrangements exist as of the date of this Prospectus for the Selling Securityholders to sell their shares. Upon being advised of any underwriting arrangements that may be entered into by a Selling Securityholder after the date of this Prospectus, the Company will prepare a supplement to this Prospectus to disclose such arrangements. It is anticipated that the per share selling price for the shares will be at/or between the "bid" and "asked" prices of the Company's Common Stock as quoted in the over-the-counter market immediately preceding the sale. Expenses of any such sale will be borne by the parties as they may agree. 12 Paulson Investment Company ("Paulson"), who participated as the Representative of the underwriters in the Company's previous offering of Preferred Stock, may participate in the distribution of the securities offered hereby. Because Paulson is an affiliate of the Company, as defined by the By-Laws ("By-Laws") of the National Association of Securities Dealers, Inc. ("NASD"), any such participation must comply with the provisions of Schedule E of the By-Laws. The Company will pay securities broker-dealers who are members of the NASD a solicitation fee of 5% of the exercise price of the shares of Common Stock issued upon exercise of the Warrants of the Company that are exercisable at $5.00 per share until December 1996 and, thereafter at $6.00 per share through expiration of the Warrants on August 13, 1998, for soliciting the exercise and assisting in the exercise of the Company's outstanding Warrants. In order to qualify to receive the solicitation fee, the broker-dealer must be designated in writing by the Warrant holder as having solicited the exercise of the Warrant and the compensation payable to the broker-dealer in connection with the exercise of the Warrant must have been disclosed to the Warrant holder. The Company will pay the solicitation fee to qualifying broker-dealers through the expiration of the Warrants. No solicitation fee will be paid with respect to the exercise of Warrants directly by Warrant holders without the assistance or participation of a broker-dealer. No broker-dealers which are members of the NASD will be entitled to receive the solicitation fee if (i) the exercise of the Warrants is made at a time when the market price of the Company's Common Stock is lower than the exercise price of the Warrants, (ii) the Warrants to be exercised are held in a discretionary account or (iii) the solicitation of the exercise of such Warrants would violate Rule 10b-6 promulgated under the Securities Exchange Act of 1934, as amended. Further, unless granted an exemption by the Securities and Exchange Commission to its Rule 10b-6, the soliciting broker-dealers might be prohibited from engaging in any market making activities with regard to the Company's securities for the period from two or nine business days prior to any solicitation of the exercise of Warrants until the later of the termination of such solicitation activity or the termination (by waiver or otherwise) of any right that the soliciting broker-dealers may have to receive a fee for the exercise of Warrants following the solicitation. As a result, the soliciting broker-dealers may be unable to continue to provide a market for the Company's securities during certain periods while the Warrants are exercisable. LEGAL MATTERS The validity of the Common Stock will be passed upon for the Selling Securityholders by Hopper and Kanouff, P.C., Denver, Colorado. EXPERTS The consolidated financial statements as of December 31, 1995 and 1994, and for each of the two years in the period ended December 31, 1995, incorporated by reference in this Prospectus, have been audited by HEIN + Associates LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 13 - ------------------------------------------------------------------------------- No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as PEASE OIL AND GAS COMPANY having been authorized by the Company or any Selling Securityholder. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby 5,038,437 SHARES OF COMMON STOCK in any jurisdiction to any persons to whom it is unlawful to make such offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances create an implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Company since such date. ----------------------------------- ----------------- Page No. PROSPECTUS AVAILABLE INFORMATION................... 2 ----------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................. 2 PROSPECTUS SUMMARY...................... 3 RISK FACTORS............................ 5 USE OF PROCEEDS......................... 8 SELLING SECURITYHOLDERS................. 9 PLAN OF DISTRIBUTION.................... 12 LEGAL MATTERS........................... 13 EXPERTS................................. 13 July __, 1996 - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Expenses payable by Registrant in connection with the issuance and distribution of the securities being registered hereby are as follows: SEC Registration Fee**................... N/A Accounting Fees and Expenses*............ $ 2,000 Legal Fees and Expenses*................. 15,000 Printing, Freight and Engraving*......... 1,500 Miscellaneous*........................... 500 ------- Total........................... $19,000 ======= - ----------------- * Estimated. **Previously paid; no change from previous registration statement. Item 15. Indemnification of Directors and Officers. No changes from Registration Statement previously filed. Item 16. Exhibits. In addition to the exhibits previously filed by Registrant, the following is a list of all exhibits filed as part of this Registration Statement or, as noted, incorporated by reference to this Registration Statement: Exhibit No. Description and Method of Filing (10.23) Agreement between Beta Capital Group, Inc. and Pease Oil and Gas Company dated March 9, 1996, incorporated by reference to the Company's 1995 Annual Report on Form 10-KSB as Exhibit No. 10.22. (10.25) Form of $50,000 Five Year 10% Collateralized Convertible Debenture issuable by Registrant in connection with its 1996 private placement.* (10.26) Form of Warrant to Purchase Common Stock issuable in connection with Registrant's 1996 private placement.* (23.1) Consent of HEIN + ASSOCIATES LLP Independent Certified Public Accountants. - ---------------- *To be filed by amendment. Item 17. Undertakings The undersigned registrant hereby undertakes that it will: II-1 (1) File, during any period in which Registrant offers or sells securities, a post-effective amendment to this registration statement to include any material information on the plan of distribution. (2) For determining liability under the Securities Act, treat such post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time shall be deemed to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-3, and authorized this Registration Statement to be signed on its behalf by the undersigned, in the City of Grand Junction, State of Colorado on July 23, 1996. PEASE OIL AND GAS COMPANY By /s/Willard H. Pease, Jr. ------------------------------------- Willard H. Pease, Jr., President and Chief Executive Officer By /s/ Patrick J. Duncan ------------------------------------- Patrick J. Duncan, Principal Financial Officer and Principal Accounting Officer In accordance with the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated: Signature Title Date - --------- ----- ----- /s/ Willard H. Pease, Jr. Director July 23, 1996 - ------------------------- Willard H. Pease, Jr. /s/ Patrick J. Duncan Director July 23, 1996 - ------------------------- Patrick J. Duncan /s/ James N. Burkhalter* Director July 23, 1996 - ------------------------- James N. Burkhalter /s/ James C. Ruane* Director July 23, 1996 - ------------------------- James C. Ruane /s/ Robert V. Timlin* Director July 23, 1996 - ------------------------- Robert V. Timlin /s/ William F. Warnick* Director July 23, 1996 - ------------------------- William F. Warnick /s/ Homer C. Osborne* Director July 23, 1996 - ------------------------- Homer C. Osborne /s/ Willard H. Pease, Jr. - ------------------------- *by Willard H. Pease, Jr. Power of Attorney II-3 EXHIBIT INDEX Exhibit Description Page No. - ------- ----------- -------- (10.23) Agreement between Beta Capital Group, Inc. and Pease Oil N/A and Gas Company dated March 9, 1996, incorporated by reference to the Company's 1995 Annual Report on Form 10-KSB as Exhibit No. 10.22. (10.25) Form of $50,000 Five Year 10% Collateralized Convertible N/A Debenture issuable by Registrant in connection with its 1996 private placement.* (10.26) Form of Warrant to Purchase Common Stock issuable in N/A connection with Registrant's 1996 private placement.* (23.1) Consent of HEIN + ASSOCIATES LLP Independent Certified Public Accountants. - ----------------- *To be filed by amendment. EX-1 2 EXHIBIT 23.1 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S CONSENT We consent to the incorporation by reference in the Registration Statement of Pease Oil and Gas Company on Form S-3 of our report dated March 2, 1996 on our audits of the financial statements of Pease Oil and Gas Company as of December 31, 1995 and for the years ended December 31, 1995 and 1994, which report is included in the Annual Report of Pease Oil and Gas Company on Form 10-KSB (SEC File No. 0-6580). /s/ Hein + Associates LLP HEIN + ASSOCIATES LLP Denver, Colorado July 23, 1996 -----END PRIVACY-ENHANCED MESSAGE-----