Item 1. and Item 2.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any other current or pending legal proceeding (nor are any of the Company's properties subject to a pending legal proceeding).
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year ended August 31, 2001.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market For Common Equity
Our common stock has been listed on the American Stock Exchange under the market symbol "PYR" since December 8, 1999. Before then it was included for quotation on the OTC Bulletin Board under the symbol "PYRX." The following table sets forth the range of high and low sales prices per share of our common stock for the periods indicated.
High Low ------ ------ Fiscal Year Ended August 31, 2000 First Quarter.......................... $5.312 $3.625 Second Quarter......................... 4.625 2.875 Third Quarter.......................... 5.938 2.750 Fourth Quarter......................... 7.125 3.500 Fiscal Year Ended August 31, 2001 First Quarter.......................... $7.625 $4.500 Second Quarter......................... 9.960 6.000 Third Quarter.......................... 9.900 5.070 Fourth Quarter......................... 8.700 1.750
On December 12, 2001, the last reported sales price of our common stock on the AMEX was $1.99.
Stockholders Of Record
As of December 12, 2001, the number of record holders of our common stock was approximately 800 and the number of beneficial owners of our common stock was approximately 3,600.
Dividends
We have not declared or paid, and do not anticipate declaring or paying in the near future, any dividends on our common stock.
Use Of Proceeds
On January 5, 2001, our "shelf" registration statement (SEC file number 333-51764), pertaining to the sale from time to time of up to $75 million of our securities, was declared effective by the Securities and Exchange Commission. The securities that may be offered by the Company pursuant to this registration statement may include shares of common stock, shares of preferred stock, which may be issued in the form of depositary shares evidenced by depositary receipts, warrants to purchase common stock, preferred stock or any combination of those securities, or any combination of any of these securities.
On March 9, 2001, we received a total of $11.6 million in gross proceeds from the sale of 1,450,000 shares of our common stock. The common stock was sold pursuant to a prospectus supplement with respect to the shelf registration statement. We incurred offering expenses of $160,470 in this offering, so that we received net proceeds of $11,439,530 from this sale of common stock. These expenses do not include any direct or indirect payments to directors, officers, persons owning 10% or more of any class of equity securities, or affiliates of the Company. Because these securities were sold directly by the Company in an offering that did not involve an underwriter, we did not pay any underwriting discounts or commissions, finder's fees or other expenses to or for underwriters.
Through August 31, 2001, $2,963,058 of the proceeds from this sale of common stock have been used as described in the prospectus supplement to fund our planned exploration and development activities, primarily in the San Joaquin Basin of California. As of August 31, 2001, the balance of the net proceeds continue to be held for those purposes and for possible acquisition and general corporate purposes as described in the prospectus supplement.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data of the Company for each of the last five fiscal years ended August 31:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial Statements and Notes thereto referred to in "Item 8. Financial Statements and Supplemental Data", and "Items 1. and 2. Business and Properties - Disclosures Regarding Forward-Looking Statements" of this Form 10-K.
Overview
We are a development stage independent oil and gas exploration company whose strategic focus is the application of advanced seismic imaging and computer aided exploration technologies in the systematic search for commercial hydrocarbon reserves, primarily in the onshore western United States. We attempt to leverage our technical experience and expertise with seismic data to identify exploration and exploitation projects with significant potential economic return. We intend to participate in selected exploration projects as a working interest owner, currently as a non-operator, sharing both risk and rewards with our partners. Our financial results depend on our ability to sell prospect interests to outside industry participants. We will not be able to commence exploratory drilling operations without outside industry participation. We have pursued, and will continue to pursue, exploration opportunities in regions where we believe significant opportunity for discovery of oil and gas exists. By attempting to reduce drilling risk through seismic technology, we seek to improve the expected return on investment in our oil and gas exploration projects.
Our future financial results continue to depend primarily on (1) our ability to discover commercial quantities of hydrocarbons; (2) the market price for oil and gas; (3) our ability to continue to source and screen potential projects; and (4) our ability to fully implement our exploration and development program with respect to these and other matters. There can be no assurance that we will be successful in any of these respects or that the prices of oil and gas prevailing at the time of production will be at a level allowing for profitable production.
Liquidity and Capital Resources
At August 31, 2001, we had approximately $8,786,000 in working capital.
During the fiscal year ended August 31, 2001, our capitalized costs for undeveloped oil and gas properties decreased by approximately $316,000. The decrease is the result of an impairment taken against our oil and gas properties in the amount of $13,340,000, offset by approximately $13,024,000 of costs incurred for drilling and completion, the cost of acquiring an additional 1.5433% working interest in our East Lost Hills project, transportation pipeline costs, production facilities costs, delay rentals, and other related direct costs with respect to our exploration and development projects.
During the fiscal year ended August 31, 2000, our capitalized costs for undeveloped oil and gas properties increased by approximately $6,230,000. This net increase is comprised of total costs of approximately $6,430,000 for drilling costs, costs associated with acquiring and retaining exploration acreage, seismic costs associated with undeveloped oil and gas projects, and reclassification of costs paid during the fiscal year ended August 31, 1999 for claims relating to the 1998 blowout, offset by a property impairment of $200,000 recorded against our Cal Canal project.
During the fiscal year ended August 31, 1999, our capitalized costs for undeveloped oil and gas properties increased by a net amount of approximately $2,572,000. This net increase is comprised of expenditures on undeveloped oil
and gas prospects of approximately $2,878,000, offset by property abandonments and impairments of approximately $306,000.
During the quarter ended November 30, 2000, the holders of our Series A Convertible Preferred Stock converted all of the remaining outstanding shares of Series A Convertible Preferred Stock into shares of common stock at a conversion price of $.60 per share. This resulted in a cashless transaction whereby 14,263 shares of Series A Convertible Preferred Stock were converted into a total of 2,377,234 shares of common stock. At November 30, 2000, there were no remaining shares of Series A Convertible Preferred Stock outstanding. In November 2000, warrants to purchase 100,000 shares of common stock issued in connection with the private placement of the Series A Convertible Preferred Stock were exercised at the exercise price of $0.75 per share. In December 2000, warrants to purchase an additional 16,667 shares of common stock were exercised. We received $87,500 in cash as the result of these exercises. There are no additional outstanding warrants associated with this private placement.
During the quarter ended November 30, 2000, warrants were exercised to purchase a total of 17,125 shares of our common stock at a purchase price of $2.50 per share. Total proceeds received from this warrant exercise were $42,813. Previously, during the fiscal year ended August 31, 2000, warrants were exercised to purchase a total of 164,063 shares of our common stock for total proceeds issued in the May 1999 private placement had been of $410,157. During December 2000, all the remaining outstanding warrants from the May 1999 private placement were exercised to purchase an aggregate of 256,312 shares of common stock, resulting in aggregate proceeds to us of $640,781.
During November 2000 and January 2001, warrants issued in conjunction with the August 2000 private placement were exercised to purchase 144,286 shares of common stock at an exercise price of $4.80 per share. This resulted in proceeds to us of $692,573.
During January 2001, the holders of the remaining outstanding warrants issued in connection with a private placement that was completed in May 2000 exercised their warrants to purchase an aggregate of 22,000 shares of common stock for $93,500.
On March 12, 2001, we received an aggregate $11,600,000 in gross proceeds through the sale of 1,450,000 shares of our common stock. The common stock was sold pursuant to a shelf registration statement and prospectus supplement. After costs and expenses, we received a net of $11,440,000. Investors consisted of a total of ten separate funds managed by four California based institutions.
We had no outstanding long-term debt at August 31, 2001 or at August 31, 2000. We have not entered into any commodity swap arrangements or hedging transactions. Although we have no current plans to do so, we may enter into commodity swap and hedging transactions in the future in conjunction with oil and gas production.
It is anticipated that the future development of our business will require additional, and possibly substantial, capital expenditures. Our capital expenditure budget for the fiscal year ending August 31, 2002 will depend on our
success in selling additional prospects for cash, the level of industry participation in our exploration projects, the availability of debt or equity financing, and the continuing results at our East Lost Hills project. We anticipate spending a minimum of approximately $7 million for capital expenditures relating to our existing drilling commitments and related development expenses, and other exploration costs. To limit capital expenditures, we intend to form industry alliances and exchange an appropriate portion of our interest for cash and/or a carried interest in our exploration projects. We may need to raise additional funds to cover capital expenditures. These funds may come from cash flow, equity or debt financings, a credit facility, or sales of interests in our properties, although there is no assurance additional funding will be available.
Capital Expenditures
During fiscal 2001, we incurred approximately $10,922,000 for costs relating to drilling and completing wells at our East Lost Hills Project, and for acquiring an additional 1.554% working interest at East Lost Hills. We incurred approximately $2,102,000 for costs related to our other exploration projects including continued leasing and optioning of acreage. We generated $1,201,979 in revenues from oil and gas production during 2001.
During fiscal 2000, we incurred approximately $1,319,000 for costs related to continued leasing and optioning of acreage and approximately $4,038,000 for drilling and seismic costs associated with deep exploratory drilling at our East Lost Hills project. We had no revenues from oil and gas production during 2000.
During fiscal 1999, we incurred approximately $876,000 for costs related to continued leasing and optioning of acreage, $1,094,000 for positions in additional exploration projects in California, $313,000 for costs relating to seismic and $480,000 in drilling costs associated with deep exploratory drilling at our East Lost Hills project.
We currently anticipate that we will participate in the drilling of from three to seven wells during our fiscal year ending August 31, 2002, although the number of wells may increase as additional projects are added to our portfolio. However, there can be no assurance that any such wells will be drilled and if drilled that any of these wells will be successful.
Our future financial results continue to depend primarily on (1) our ability to discover commercial quantities of hydrocarbons; (2) the market price for oil and gas; (3) our ability to continue to source and screen potential projects; and (4) our ability to fully implement our exploration and development program with respect to these and other matters. There can be no assurance that we will be successful in any of these respects or that the prices of oil and gas prevailing at the time of production will be at a level allowing for profitable production.
Results of Operations
The twelve months ended August 31, 2001 ("2001") compared with the twelve months ended August 31, 2000 ("2000")
Operations during the fiscal year ended August 31, 2001 resulted in a net loss of $13,142,291 compared to a net loss $982,547 for the fiscal year ended August 31, 2000.
Oil and Gas Revenues and Expenses. Production commenced at the East Lost Hills ELH #1 well on February 6, 2001. We recorded $1,055,382 from the sale of 99,535 mcf of natural gas for an average price of $10.60 per mcf and $146,597 from the sale of 5,804 bbls of hydrocarbon liquids for an average price of
$25.26 per barrel during the year ended August 31, 2001. Lease operating expenses during this period were $102,018. We recorded no revenues or expenses from oil and gas operations for the year ended August 31, 2000. None of our oil or gas properties was producing before February 6, 2001.
Interest Income. We recorded $422,117 and $165,411 in interest income for the years ended August 31, 2001 and August 31, 2000, respectively. The increase in the year ended August 31, 2001 is attributable to interest earned on cash balances remaining from the common stock offering in March 2001 and the private placement completed in August of 2000.
General and Administrative Expense. We incurred $1,306,635 and $929,420 in general and administrative expenses during 2001 and 2000, respectively. The increase is primarily attributable to unrecoverable financing costs and increases in personnel and salaries.
Depreciation, Depletion and Amortization. We recorded no depreciation, depletion and amortization expense from oil and gas properties for the years ended August 31, 2001 or August 31, 2000. Although we commenced our first production during 2001, we recorded an impairment against our entire amortizable full cost pool at August 31, 2001, and therefore had no costs to amortize. In the prior year, none of our oil and gas properties were producing and, therefore no DD&A expense was recognized. We recorded $17,823 and $18,327 in depreciation expense associated with capitalized office furniture and equipment during the years ended August 31, 2001 and August 31, 2000, respectively.
Dry Hole, Impairment and Abandonments. In 2001, we recorded an impairment of $13,340,000 against our oil and gas properties as the result of the capitalized costs of a portion of our oil and gas properties exceeding the present value of estimated future net revenues of proved reserves. The costs from this impairment relating to our East Lost Hills project include drilling and completion costs associated with our working interests in the ELH #1, ELH #2, ELH #3, Bellevue 1-17 and 1-17R wells and allocated land, geological and geophysical costs. In addition, we have recorded property impairments with respect to our Southeast Maricopa project and our interests in the Cal Canal and Lucky Dog prospects in the approximate amount of $2,812,000. In 2000, we recorded an impairment of $200,000 against our Cal Canal project.
Interest Expense. We recorded no interest expense for the year ended August 31, 2001 and nominal interest expense for the year ended August 31, 2000.
The twelve months ended August 31, 2000 ("2000") compared with the twelve months ended August 31, 1999 ("1999")
Operations during the fiscal year ended August 31, 2000 resulted in a net loss of $982,547 compared to a net loss $1,140,407 for the fiscal year ended August 31, 1999.
Oil and Gas Revenues and Expenses. At August 31, 2000 and August 31, 1999, the Company did not own any producing or proved oil and gas properties, and no oil and gas production revenues or expenses had been recorded by the Company.
General and Administrative Expense. The Company incurred $929,000 and $743,000 in general and administrative expenses during 2000 and 1999, respectively. The increase results from increases in shareholder and investor relations costs resulting from our listing on the American Stock Exchange and from our expanding investor and shareholder base, and from additional increases in personnel and salaries.
Dry Hole, Impairment and Abandonments. In 2000, the Company recorded an impairment of $200,000 against its Cal Canal project. In 1999, the Company re-evaluated its School Road project and recorded an impairment of approximately $285,000 against its basis in this project. Also in 1999, the Company had abandoned projects and recorded an abandonment cost of approximately $21,000 associated with these projects.
Interest Expense. The Company recorded nominal interest expense in 2000. The Company recorded $183,000 in interest expense during 1999, predominately associated with the 10% Convertible Debentures that were outstanding from October 26, 1998 through April 16, 1999. Per the Convertible Debenture agreement, the Company elected to pay this interest by issuing 53,326 shares of the Company's common stock. These Debentures were converted into Series A Convertible Preferred Stock on April 16, 1999. The Company is obligated to pay a 10 percent dividend on the outstanding preferred stock. During 2000, the Company paid dividends to the holders of preferred stock of approximately $178,600 by issuing a total of 38,531 shares of common stock.
Depreciation, Depletion and Amortization. The Company recorded no depletion expense from oil and gas properties in 2000 or 1999. At August 31, 2000 and 1999, the Company did not own any proved reserves and had no oil or gas production. The Company recorded $18,327 and $24,111 in depreciation expense associated with capitalized office furniture and equipment during 2000 and 1999, respectively.
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required under Item 7A
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Financial Statements and schedules that constitute Item 8 are attached at the end of Annual Report on Form 10-K. An index to these Financial Statements and schedules is also included in Item 14(a) of this Annual Report on Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The directors and executive officers of the Company, their respective positions and ages, and the year in which each director was first elected, are set forth in the following table. Each director has been elected to hold office until the next annual meeting of stockholders and thereafter until his successor is elected and has qualified. Additional information concerning each of these individuals follows the table.
D. Scott Singdahlsen has served as President, Chief Executive Officer, and Chairman of the Board of the Company since August 1997. Mr. Singdahlsen co-founded PYR Energy, LLC in 1996, and served as General Manager and Exploration Coordinator. In 1992, Mr. Singdahlsen co-founded Interactive Earth Sciences Corporation, a 3-D seismic management and interpretation consulting firm in Denver, where he served as vice president and president and lead seismic interpretation specialist from 1992 to 1996. Prior to forming Interactive Earth Sciences Corporation, Mr. Singdahlsen was employed as a Development Geologist for Chevron USA in the Rocky Mountain region. At Chevron, Mr. Singdahlsen was involved in 3-D seismic reservoir characterization projects and geostatistical analysis. Mr. Singdahlsen started his career at UNOCAL as an Exploration Geologist in Midland, Texas. Mr. Singdahlsen earned a B.A. in Geology from Hamilton College and a M.S. in Structural Geology from Montana State University.
Andrew P. Calerich has served as Chief Financial Officer of the Company since August 1997, as Secretary of the Company since May 1998 and as Vice President since August of 1999. From 1993 to 1997, Mr. Calerich was a business consultant specializing in accounting for public and private oil and gas producers in Denver. From 1990 to 1993, Mr. Calerich was employed as corporate Controller at a public oil and gas company in Denver. Mr. Calerich began his professional career in public accounting at Arthur Andersen & Company. Mr. Calerich is a Certified Public Accountant and earned B.S. degrees in both Accounting and Business Administration at Regis College.
Keith F. Carney has served as a Director of the Company since 1997. Since October 2001, Mr. Carney has been President of Dolomite Advisors, LLC, a manager of energy investment funds. From October 1997 until August, 2001, Mr. Carney served as Executive Vice-President of Cheniere Energy, Inc., a Houston-based natural gas company. From July 1996 until September 1997 Mr. Carney served as Chief Financial Officer of Cheniere. Mr. Carney is currently a Director of Cheniere. After earning his M.B.A. degree from the University of Denver in 1992, Mr. Carney was employed as a Securities Analyst in the oil and gas exploration/production sector with Smith Barney, Inc. Mr. Carney began his career as an exploration Geologist at Shell Oil after earning B.S. and M.S. degrees in Geology from Lehigh University.
S. L. Hutchison has been a Director of the Company since April 1999, when he was nominated and elected to the Board in connection with the sale by the Company of convertible promissory notes issued in a private placement
transaction in October and November 1998. Since 1979, Mr. Hutchison has served as Vice President and Chief Financial Officer of Victory Oil Company, an oil and gas production company based in California, and other companies in the Victory Group of Companies. Also during that period, Mr. Hutchison has served as Vice-President and Chief Financial Officer and a Director of Crail Capital, a real estate investment company that is owned by Victory Oil Company, and Victex, Inc., a real estate and oil and gas company. Mr. Hutchison also serves as Chief Financial Officer and a director of each of the Crail Johnson Foundation and the Independent Oil Producers Agency, and is the Treasurer and a director of the Los Angeles Maritime Institute. Mr. Hutchison received a Bachelor's degree in accounting from the University of Washington in 1954.
Bryce W. Rhodes has been a Director of the Company since April 1999, when he was nominated and elected to the Board in connection with the sale by the Company of convertible promissory notes issued in a private placement transaction in October and November 1998. Since 1996, Mr. Rhodes has served as Vice President of Whittier Energy Company ("WEC"), an oil and gas investment company. Mr. Rhodes served as Investment Manager of WEC from 1990 until 1996. Mr. Rhodes received B.A. degrees in Geology and Biology from the University of California, Santa Cruz, in 1976 and an MBA degree from Stanford University in 1979.
Kenneth R. Berry, Jr. has served as Vice President of land since August, 1999 and as land manager for the Company since October 1997. Mr. Berry is responsible for the management of all land issues including leasing and permitting. Mr. Berry has 23 years of experience as an independent landman. Prior to joining the Company, Mr. Berry served as the managing land consultant for Swift Energy Company in the Rocky Mountain region. Mr. Berry began his career in the land department with Tenneco Oil Company after earning a B.A. degree in Petroleum Land Management at the University of Texas - Austin.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's directors, executive officers and holders of more than 10% of the Company's common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. The Company believes that during the year ended August 31, 2001, its officers, directors and holders of more than 10% of the Company's common stock complied with all Section 16(a) filing requirements. In making these statements, the Company has relied upon representations and its review of copies of the Section 16(a) reports filed for the fiscal year ended August 31, 2001 on behalf of the Company's directors, officers and holders of more than 10% of the Company's common stock.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the information to be provided in the Company's definitive proxy statement for the 2002 annual meeting of shareholders, which is to be filed within 120 days after our fiscal year end on August 31, 2001.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the information to be provided in the Company's definitive proxy statement for the 2002 annual meeting of shareholders, which is to be filed within 120 days after our fiscal year end on August 31, 2001.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended August 31, 2001, there were no transactions between the Company and its directors, executive officers or known holders of greater than five percent of the Company's common stock in which the amount involved exceeded $60,000 and in which any of the foregoing persons had or will have a material interest.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (a)(2) Financial Statements And Financial Statement Schedules
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
INDEX
Independent Auditor's Report
Balance Sheets August 31, 2001 and 2000
Statements of Operations Years Ended August 31, 2001, 2000, and 1999 and Cumulative Amounts from Inception to August 31, 2001
Statements of Members'/ Stockholders' Equity Period from Inception (May 31, 1996) to December 31, 1996, Eight Months Ended August 31, 1997 and Years Ended August 31, 1999, 2000, and 2001 -
Statements of Cash Flows Years Ended August 31, 2001, 2000, and 1999 and - Cumulative Amounts from Inception to August 31, 2001
Notes to Financial Statements -
All other schedules are omitted because the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the Financial Statements and Notes thereto.
(a)(3) Exhibits. --------
Exhibit Index
Number Description - ------ -----------
3.1 Articles Of Incorporation filed with the Maryland Secretary Of State on June 18, 2001.
3.2 Articles of Merger filed with the Maryland Secretary Of State on July 3, 2001 in connection with Maryland reincorporation.
3.3 Bylaws
(b) Reports On Form 8-K. -------------------
During the fourth quarter of the fiscal year ended August 31, 2001, the Company filed three Current Reports on Form 8-K dated July 5, 2001, July 16, 2001 and August 24, 2001. These events consisted of the dissemination of press releases by the Company and were reported under "ITEM 5. OTHER EVENTS".
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PYR ENERGY CORPORATION
Date: December 14, 2001 By: /s/ D. Scott Singdahlsen --------------------------------------------- D. Scott Singdahlsen, Chief Executive Officer
In accordance with the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
PYR ENERGY CORPORATION (A Development Stage Company)
INDEX
Independent Auditor's Report
Balance Sheets August 31, 2001 and 2000
Statements of Operations Years Ended August 31, 2001, 2000, and 1999 and Cumulative Amounts from Inception to August 31, 2001
Statements of Members'/ Stockholders' Equity Period from Inception (May 31, 1996) to December 31, 1996, Eight Months Ended August 31, 1997 and Years Ended August 31, 1999, 2000, and 2001 -
Statements of Cash Flows Years Ended August 31, 2001, 2000, and 1999 and - Cumulative Amounts from Inception to August 31, 2001
Notes to Financial Statements -
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders PYR ENERGY CORPORATION
We have audited the accompanying balance sheets of PYR Energy Corporation (a development stage company) as of August 31, 2001 and 2000 and, the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2001 and cumulative amounts from inception to August 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PYR Energy Corporation as of August 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2001 and cumulative amounts from inception to August 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
/s/ Wheeler Wasoff, P.C. ------------------------- Wheeler Wasoff, P.C.
Denver, Colorado November 13, 2001
PYR ENERGY CORPORATION (A Development Stage Company) STATEMENTS OF CASH FLOWS (continued) YEARS ENDED AUGUST 31, 2001, 2000 and 1999 and PERIOD FROM INCEPTION TO AUGUST 31, 2001
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended August 31, 2001, 2000 and 1999, the Company paid cash for interest of $0, $211 and $371 respectively, on a capital lease.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the year ended August 31, 2001, the Company issued 9,825 shares of common stock as payment of dividends on preferred stock.
During the year ended August 31, 2000, the Company issued common stock, valued at $20,000, for services; issued warrants, valued at $110,606, as partial consideration for a finders fee in connection with a private placement sale of common stock; and issued 38,531 shares of common stock as payment of dividends on preferred stock.
During the year ended August 31, 1999, the Company issued common stock, valued at $637,732, as partial consideration for oil and gas properties; issued common stock, valued at $116,822 for interest on convertible debt; and issued warrants, valued at $56,833, as partial consideration for a finders fee in connection with the sale of convertible debt.
During the year ended August 31, 1998, the Company entered into a capital lease obligation of $5,195 for office equipment.
During 1996 and 1997 the President of the Company performed services for PYR LLC valued at $12,000 and $24,000, respectively. The value of these services was charged to members' equity as a non-cash capital contribution.
In August 1997, 4,000,000 shares of common stock were issued to the members of PYR Energy, LLC ("PYR LLC") in exchange for 100 percent of the ownership interests in PYR LLC, for which the net members' equity in PYR LLC was $33,868. These shares were issued pursuant to a plan of reorganization and merger effective August 6, 1997 (Note 1).
The accompanying notes are an integral part of the financial statements
F - 10
PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
PYR Energy Corporation (the "Company") is an independent oil and gas company primarily engaged in the exploration for, acquisition, development and production of, crude oil and natural gas. The Company's current activities are principally conducted in the State of California and the Rocky Mountain region of the United States. As of August 31, 2001, the Company is considered a development stage company as defined by Statement of Financial Accounting Standards No. 7 (SFAS 7).
The Company's predecessor, Mar Ventures Inc. ("Mar"), was incorporated under the laws of the State of Delaware on March 27, 1996 for the purpose of producing and marketing traditional television programming and marketing its film library. Mar was a public company which had no significant operations as of July 31, 1997. On August 6, 1997 Mar acquired all the interests in PYR Energy LLC ("PYR LLC") (a Colorado limited liability company organized on May 31, 1996), a development stage company as defined by SFAS No. 7. PYR LLC, an independent exploration company, was engaged in the acquisition of oil and gas properties for exploration and exploitation in the Rocky Mountain region and California. Effective August 6, 1997, Mar transferred to its former president substantially all its assets and liabilities that were related to its film library operations.
Upon completion of the acquisition of PYR LLC by Mar, PYR LLC ceased to exist as a separate entity. Mar remained as the legal surviving entity and, effective November 12, 1997, Mar changed its name to PYR Energy Corporation. For financial reporting purposes, the business combination was accounted for as an additional capitalization of Mar (a reverse acquisition with PYR LLC as the acquirer). The operations of PYR LLC are the only continuing operations of the Company. Effective July 02, 2001, the Company was reincorporated in Maryland through the merger of the Company into a wholly owned subsidiary, PYR Energy Corporation, a Maryland corporation.
The Company is an exploration stage oil and gas company. The Company's efforts, since August 1997, have consisted of financing activities and the acquisition of unproven properties and related seismic data. The Company has entered into participation and farm-in agreements with industry partners on certain of its properties pursuant to which these partners have acquired, for cash, interests in the Company's properties. During the year ended August 31, 1998, drilling of two test wells was commenced, with one well being plugged and abandoned and the other suffering a blowout. During the years ended August 31, 1999 and 2000, the Company continued its acquisition of unproven properties and related seismic data with industry partners, and participated in exploration of the properties, including the drilling of exploratory wells. During the year ended August 31, 2001, initial production of oil and gas commenced from the Company's East Lost Hills prospect. Although initial production resulted in test revenue from oil and gas sales of $1,201,979 being earned through August 31, 2001, a reserve report prepared as of August 31, 2001 by an independent petroleum engineering firm concluded that reserves from the Company's producing properties are not economic to produce. (See Notes 2 and 3). Accordingly, based on the ceiling test limitation required for oil and gas companies utilizing the full cost method of accounting, the Company recognized an impairment of $13,339,911 on its oil and gas properties at August 31, 2001.
As of the nine months period ended May 31, 2001, the Company disclosed in it's Form 10QSB filed with the Securities and Exchange Commission that it was no longer a development stage company. This was based on the Company's assessment that it had commenced principal operations from its oil and gas activities due to initial production from its East Lost Hills prospect. Based on the results of the reserve report prepared as of August 31, 2001, the Company has determined that it is still a development stage Company as defined by SFAS 7.
F - 11
PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY AND EQUIPMENT
Furniture and equipment is recorded at cost. Depreciation and amortization of assets under capital lease is provided by use of the straight-line method over the estimated useful lives of the related assets of three to five years. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Long-lived assets, other than oil and gas properties, are evaluated for impairment to determine if current circumstances and market conditions indicate the carrying amount may not be recoverable. The Company has not recognized any impairment losses on non oil and gas long-lived assets.
OIL AND GAS PROPERTIES
The Company utilizes the full cost method of accounting for oil and gas activities. Under this method, subject to a limitation based on estimated value, all costs associated with property acquisition, exploration and development, including costs of unsuccessful exploration, are capitalized within a cost center. The Company's oil and gas properties are located within the United States, which constitutes one cost center. No gain or loss is recognized upon the sale or abandonment of undeveloped or producing oil and gas properties unless the sale represents a significant portion of oil and gas properties and the gain significantly alters the relationship between capitalized costs and proved oil and gas reserves of the cost center. Depreciation, depletion and amortization of oil and gas properties is computed on the units of production method based on proved reserves. Amortizable costs include estimates of future development costs of proved undeveloped reserves. A reserve report prepared as of August 31, 2001 by an independent petroleum engineering firm concluded that reserves from the Company's producing properties are not currently economic to produce and, therefore, at August 31, 2001, the Company had no proved reserves.
Capitalized costs of oil and gas properties may not exceed an amount equal to the present value, discounted at 10%, of the estimated future net cash flows from proved oil and gas reserves plus the cost, or estimated fair market value, if lower, of unproved properties. Should capitalized costs exceed this ceiling, an impairment is recognized. The present value of estimated future net cash flows is computed by applying year end prices of oil and natural gas to estimated future production of proved oil and gas reserves as of year end, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. The Company has not accrued costs for future site restoration, dismantlement and abandonment costs related to oil and gas properties because the Company estimates that such costs will be offset by the salvage value of the equipment sold upon abandonment of such properties.
At August 31, 2001, the ceiling test limitation resulted in the Company's recognizing an impairment expense of $13,339,911 on its oil and gas properties. At August 31, 2000 and 1999, the Company had determined that an impairment loss of $200,000 and $285,229, respectively, on evaluated oil and gas properties be recognized.
The Company leases non-producing acreage for its exploration and development activities. The cost of these leases is included in unevaluated oil and gas property costs recorded at the lower of cost or fair market value.
REVENUE RECOGNITION
The Company recognizes oil and gas revenues from its interests in producing wells as oil and gas is produced and sold from these wells. The Company has no gas balancing arrangements in place. Oil and gas sold is not significantly different from the Company's product entitlement.
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company has adopted the provisions of SFAS No. 109, "Accounting for Income Taxes". SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
At August 31, 2001, the Company had a net operating loss carryforward of approximately $14,100,000 that may be offset against future taxable income through 2021. These carryforwards are subject to review by the Internal Revenue Service.
The Company has fully reserved the $3,085,000 tax benefit of operating loss carryforwards, by a valuation allowance of the same amount, because the likelihood of realization of the tax benefit cannot be determined. Of the total tax benefit, $1,700,000 is attributable to 2001.
Temporary differences between the time of reporting certain items for financial and tax reporting purposes consist primarily of exploration and development costs on oil and gas properties, and impairment pursuant to the ceiling test limitation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs. At this time, management knows of no substantial costs from environmental accidents or events for which it may be currently liable. In addition, the Company's oil and gas business makes it vulnerable to changes in wellhead prices of crude oil and natural gas. Such prices have been volatile in the past and can be expected to be volatile in the future. By definition, proved reserves are based on current oil and gas prices and estimated reserves. Price declines reduce the estimated quantity of proved reserves and increase annual amortization expense (which is based on proved reserves).
(LOSS) PER SHARE
(Loss) per common share is computed based on the weighted average number of common shares outstanding during each period. Common shares issued to the members of PYR LLC upon completion of the merger are considered outstanding for all periods presented. Convertible equity instruments, such as stock options and warrants, are not considered in the calculation of net loss per share as their inclusion would be antidilutive.
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 1 -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SHARE BASED COMPENSATION
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation", was issued. This standard defines a fair value based method of accounting for an employee stock option or similar equity instrument. This statement gives entities a choice of recognizing related compensation expense by adopting the new fair value method or to continue to measure compensation using the intrinsic value approach under Accounting Principles Board (APB) Opinion No. 25. The Company has elected to utilize APB No. 25 for measurement; and will, pursuant to SFAS No. 123, disclose supplementally the pro forma effects on net income and earnings per share of using the new measurement criteria.
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers as cash equivalents all highly liquid investments with a maturity of three months or less at the time of purchase. On occasion, the Company has cash in banks in excess of federally insured amounts. See below, "Concentration of Credit Risks".
NEW TECHNICAL PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 141 "Business Combinations" and SFAS 142 "Goodwill and Other Intangible Assets". SFAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for under the purchase method. For all business combinations for which the date of acquisition is after June 30, 2001, SFAS 141 also establishes specific criteria for the recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as an extraordinary gain rather than deferred and amortized. SFAS 142 changes the accounting for goodwill and other intangible assets after an acquisition. The most significant changes made by SFAS 142 are: 1) goodwill and intangible assets with indefinite lives will no longer be amortized; 2) goodwill and intangible assets with indefinite lives must be tested for impairment at least annually; and 3) the amortization period for intangible assets with finite lives will no longer be limited to forty years. The Company does not believe that the adoption of these statements will have a material effect on its financial position, results of operations, or cash flows.
In June 2001, the FASB also approved for issuance SFAS 143, "Asset Retirement Obligations." SFAS 143 establishes accounting requirements for retirement obligations associated with tangible long-lived assets, including (1) the timing of the liability recognition, (2) initial measurement of the liability, (3) allocation of assets retirement cost to expense, (4) subsequent measurement of the liability, and (5) financial statement disclosure. SFAS 143 requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. The adoption of SFAS 143 is not expected to have a material effect on the Company's financial position, results of operations, or cash flows.
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 1 -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In August 2001, the FASB also approved SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets ." SFAS 144 replaces SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The new accounting model for long-lived assets to be disposed of by sale applies to all long-lived assets, including discounted operations, and replaces the provisions of APB Opinion No. 30, "Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business," for the disposal of segments of a business. SFAS 144 requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discounted operations. Therefore, discounted operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. SFAS 144 also broadens the reporting of discontinued operations to include all components of an entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, are to be applied prospectively. The adoption of SFAS 144 is not expected to have a material effect on the Company's financial position, results of operations, or cash flows.
FAIR VALUE
The carrying amount reported in the balance sheet for cash, accounts receivable, prepaid expenses, accounts payable and accrued liabilities approximates fair value because of the immediate or short-term maturity of these financial instruments.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and receivables. The Company maintains cash accounts at one financial institution. The Company periodically evaluates the credit worthiness of financial institutions, and maintains cash accounts only in large high quality financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts. The Company believes that credit risk associated cash is remote. The Company's receivables are from oil and gas sales due from one purchaser, a major U.S. oil and gas company. Based on the credit worthiness of this Fortune 500 Company, the Company believes that credit risk associated with receivables is nominal.
RECLASSIFICATION
Certain reclassifications have been made to 2000 and 1999 amounts to conform to the 2001 presentation.
NOTE 2 - ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
Accounts receivable at August 31, 2001 includes $1,173,155 of net revenue due from operator for oil and gas sales for the initial period from February to August 2001. The Company has not received any payments for production from the operator, and the joint operating agreement underlying the East Lost Hills prospect does not provide for the Company to offset the receivable for oil and gas revenue against amounts due to the operator. The Company believes that the operator is legally responsible to remit payment. Until the Company receives payment, management intends to offset payments due to the operator for cash calls and other liabilities in an amount equal to the revenue due. Although the joint operating agreement provides that the operator can charge interest on past due cash calls and billings, no interest has been charged to the Company.
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 3 - PROPERTY AND EQUIPMENT (continued)
During the year ended August 31, 2001, the Company earned its initial revenues from its oil and gas producing activities. A reserve report prepared as of August 31, 2001 by an independent petroleum engineering firm concluded that reserves from the Company's producing properties are not economic to produce, and, therefore, at August 31, 2001, the Company had no proved reserves. Therefore, the Company has recorded an impairment of $13,339,911 based on the ceiling test limitation. Depreciation, depletion and amortization of $68,456 previously recorded through May 31, 2001 has been reclassified as a component of the impairment charge at August 31, 2001. The Company recorded impairment losses on undeveloped oil and gas properties of $200,000 and $285,229 for the years ended August 31, 2000 and 1999, respectively. During the year ended August 31, 1999, the Company abandoned properties with a carrying cost of $21,140
At August 31, 2001, 2000, and 1999, accumulated charges to impairment were $13,825,140, $485,229 and $285,229, respectively.
Depreciation expense for the years ended August 31, 2001, 2000 and 1999 was $17,823, $18,327, and $24,111, respectively.
In November 2000, the Company purchased from a privately held non-related entity an additional 1.544% interest in the East Lost Hills project. At August 31, 2001, the Company had a 12.119% interest in East Lost Hills.
NOTE 4 - CONVERTIBLE NOTES PAYABLE
In November 1998, the Company completed the sale of $2,500,000, 10% convertible notes, due October 1999. The notes were convertible into an aggregate 25,000 shares of a newly designated Series A Preferred Stock of the Company. The Company obtained stockholder approval for authorization of the Series A Preferred Stock and, in April 1999, all notes were converted to Series A Preferred Stock. Accrued interest due as of the date of conversion of $116,822 was paid by the issuance of 53,326 shares of common stock, valued at $2.19 per share, the non-discounted trading price of the Company's common stock at the transaction date. In conjunction with the sale of $1,500,000 of the notes, the Company paid a finder's fee consisting of $45,000 and warrants to purchase 175,000 shares of the Company's common stock at an exercise price of $.75 per share for a period of five years. The warrants were valued at $56,833.
NOTE 5 - STOCKHOLDERS' EQUITY
PREFERRED STOCK
In April 1999, the stockholders of the Company approved an amendment to the Certificate of Incorporation wherein the Company was authorized to issue 1,000,000 shares of preferred stock, with a par value of $.001 per share. The Board of Directors authorized the designation of a "Series A Preferred Stock," consisting of 25,000 shares, face value of $100 per share, 10% cumulative dividend payable in cash or shares of common stock on January 1 and July 1 of each year. Holders of Series A Preferred Stock receive preference in the event of any liquidation, dissolution or winding up of the Company. The shares of Series A Preferred Stock were convertible into shares of common stock of the Company at an initial conversion price of $.60 per share. No beneficial interest has been accrued to the preferred stockholders as the conversion price of $.60 per share was substantially in excess of the fair market value of the common shares as of the transaction date.
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 5 - STOCKHOLDERS' EQUITY (continued)
In April 1999, the holders of convertible notes (Note 5) converted the notes to 25,000 shares of Series A Preferred Stock. As of August 31, 2001, all shares of Series A Preferred Stock were converted to 4,166,664 shares of common stock at the initial conversion price of $.60 per share.
COMMON STOCK
Effective August 6, 1997 Mar completed a merger with PYR LLC (Note 1). In conjunction with the merger, the members of PYR LLC received 4,000,000 shares of common stock of Mar. These shares were recorded at the net members' equity of PYR LLC as of that date of $33,868. The 1,059,804 Mar shares outstanding as of the date of merger were recapitalized to the net assets of Mar of $336. For financial statement reporting purposes, this transaction was treated as a reverse acquisition whereby PYR LLC was considered the surviving and reporting entity. For legal purposes, however, Mar remained as the surviving entity; therefore, the capital structure of the Company was accordingly restated.
In July 1997, the Company completed the sale of common stock and warrants pursuant to a private placement as follows:
o 2,095,000 units, at a price of $.25 per unit, consisting of 2,095,000 shares of common stock, warrants to purchase 1,047,500 shares of common stock at an exercise price of $1.25 per share before October 31, 1997, and warrants to purchase 1,047,500 shares of common stock at an exercise price of $1.75 per share before January 31, 1998. Subsequent to the offering, each of the warrant expiration dates was extended one or more times, and all the warrants ultimately expired without having been exercised.
In August 1997, the Company completed the sale of common stock and warrants pursuant to a private placement as follows:
o 2,000,000 units, at a price of $.75 per unit, consisting of 2,000,000 shares of common stock, warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.25 per share before October 31, 1997, and warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.75 per share before January 31, 1998. Subsequent to the offering, each of the warrant expiration dates was extended one or more times, and all the warrants ultimately expired without having been exercised.
Proceeds from these offerings were $523,750 and $1,500,000, respectively, before costs of the offerings of $280,711.
In May 1999, the Company completed the sale of 437,500 units of common stock and warrants pursuant to a private placement at a price of $16 per unit. Each unit consisted of 10 shares of common stock and one warrant to purchase one share of common stock at an exercise price of $2.50 per share for a period of five years. The Company may repurchase the warrants for $.001 per warrant at any time after the weighted average trading price of the Company's common stock has been at least $6.00 per share for a 45-day period. Proceeds from the offering were $7,000,000, before costs of the offering of $83,155.
During the year ended August 31, 1999, the Company issued shares of common stock, valued at non-discounted trading market price as of the date of the transaction, in conjunction with the assignment to the Company of certain undeveloped oil and gas prospects located in California as follows:
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 5 - STOCKHOLDERS' EQUITY (continued)
o 266,666 shares, valued at $.75 per share, as full consideration for property received. o 218,866 shares, valued at $2.00 per share, as partial consideration for property received.
In May 2000, the Company completed the sale of 22,000 units of common stock and warrants pursuant to a private placement at a price of $32.50 per unit. Each unit consisted of 10 shares of common stock and one warrant to purchase one share of common stock at an exercise price of $4.25 per share for a period of three years. The Company may repurchase the warrants for $.001 per warrant at any time after the weighted average trading price of the Company's common stock has been at least $7.50 per share for a 30 day period. Proceeds from the offering were $715,000, before costs of the offering of $11,857.
In August 2000, the Company completed the sale of 540,000 units of common stock and warrants pursuant to a private placement at a price of $17.50 per unit. Each unit consisted of five shares of common stock and one warrant to purchase one share of common stock at an exercise price of $4.80 per share for a period of three years. The Company may repurchase the warrants for $.001 per warrant at any time after the weighted average trading price of the Company's common stock has been at least $10.00 per share for a 30 day period. Proceeds from the offering were $9,450,000, before costs of the offering of $567,436, which included warrants valued at $110,606.
During the year ended August 31, 2000, the Company issued 5,000 shares of common stock for services, valued at the non-discounted trading market price as of the date of the transaction of $20,000 ($4.00 per share).
During the year ended August 31, 2001, the Company sold 1,450,000 shares of common stock pursuant to a shelf registration at a price of $8.00 per share. Proceeds from the offering were $11,600,000 before costs of $160,470.
WARRANTS
In 1999, the Company issued warrants to purchase 175,000 shares of common stock at an exercise price of $.75 per share through October 26, 2003 as partial consideration for a finder's fee in conjunction with the private placement of convertible notes. The warrants are valued at $56,833, using the Black-Scholes option pricing model. In May 1999, in conjunction with the sale of 437,500 units of common stock and warrants as described above, the Company issued warrants to purchase 437,500 shares of common stock at an exercise price of $2.50 through May 14, 2004.
In 2000, the Company issued warrants to purchase 70,875 shares of common stock at an exercise price of $5.50 per share through July 31, 2003 as partial consideration for a finder's fee in conjunction with the private placement of common stock. The warrants are valued at $110,606, using the Black-Scholes option pricing model. In May 2000, in conjunction with the sale of units of common stock and warrants as described above, the Company issued warrants to purchase 22,000 shares of common stock at an exercise price of $4.25 through May 19, 2003. In August 2000, in conjunction with the sale of units and common stock, the Company issued warrants to purchase 540,000 shares of common stock at an exercise price of $4.80 through July 31, 2003.
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PYR ENERGY CORPORATION (A Development Stage Company) Notes to Financial Statements
NOTE 8 - SEGMENT REPORTING
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information", was issued, which amends the requirements for a public enterprise to report financial and descriptive information about its reportable operating segments. Operating segments, as defined in the pronouncement, are components of an enterprise about which separate financial information is available and that are evaluated regularly by the Company in deciding how to allocate resources and in assessing performance. The financial information is required to be reported on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments.
The Company has one reportable segment, oil and gas exploration and production. The Company has concentrated its oil and gas acquisition and exploration activities in the western United States, primarily in California and the Rocky Mountain region. All significant activities in this segment have been with industry partners.
During 2001, initial production commenced on the Company's East Lost Hills Prospect in California. Results of operations for oil and gas operations in 2001 are as follows:
Revenues Oil and gas sales $ 1,201,979 -------------
Expense Lease operating expense 40,055 Ad Valorem Taxes 61,963 Impairment 13,339,911 -------------
13,441,929
(Loss) from oil and gas operations $ (12,239,950) =============
All sales of oil and gas were made to one customer.
No depletion has been recorded on oil and gas properties. Based on the ceiling test limitation as of August 31, 2001, the Company recorded an impairment against its entire amortizable cost pool. (See Note 3).
NOTE 9 - COMPREHENSIVE INCOME
There are no adjustments necessary to net (loss) as presented in the accompanying statements of operations to derive comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income."
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