U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended: December 31, 2001
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 0-27737
Red Butte Energy, Inc.
(Name of small business issuer in its charter)
Nevada 77-0454856
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
700 Ioco Road, Port Moody, B.C., Canada V3H 2W8
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(Address of principal executive offices) (Zip code)
eSportbike.com, Inc., Suite #700-509 Richards St.,
Vancouver, B.C., Canada, V6B 2Z6
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(Former name and former address)
Issuer's telephone number (604) 461-4946
---------------
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock, par value $.001
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ 0
---
As of April 20, 2002, there were 2,050,000 shares of the Registrant's
common stock, par value $0.001, issued and outstanding. The aggregate market
value of the Registrant's voting stock held by non-affiliates of the Registrant:
as of December 31, 2001 there has been no public trading in the common stock.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
NONE
Transitional Small Business Disclosure Format (check one): Yes ; NO X
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TABLE OF CONTENTS
Item Number and Caption Page
----------------------- -----
PART I
Item 1. Description of Business.......................................................4
Item 2. Description of Property.......................................................8
Item 3. Legal Proceedings.............................................................8
Item 4. Submission of Matters to a Vote of Security Holders...........................8
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......................8
Item 6. Management's Discussion and Analysis or Plan of Operations...................10
Item 7. Financial Statements.........................................................11
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.........................................................12
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............................12
Item 10. Executive Compensation.......................................................14
Item 11. Security Ownership of Certain Beneficial Owners and Management...............14
Item 12. Certain Relationships and Related Transactions...............................15
Item 13. Exhibits and Reports on Form 8-K.............................................16
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
General
Beginning in late 2001 and continuing through early 2002, we entered
into a series of transactions that we believe will result in our resuming
business operations, although in a significantly different industry than the
traditional industries in which we have operated. Those transactions include the
following transactions:
o During the fourth quarter the Board of Directors decided to discontinue
the internet portion of the business. The Company will not proceed with
the development of any software business in Asia. Similarly the Company
has decided not to operate any web based business related to sportbikes
or any other products. The Company will concentrate on opportunities in
the oil and gas industry.
o On March 13, 2002 the majority shareholders of the Company entered into
an agreement whereby investors associated with Epic Finance Corporation
agreed to acquire the shares owned by the majority shareholders.
o On March 19, 2002 the Board of Directors approved a 1 for 8 reverse
stock split. As well on the same date the Company changed it's name to
Red Butte Energy, Inc.
o On April 18, 2002 the Company entered into a letter of intent to acquire
an undivided 50% interest in the Coal Creek Basin and adjacent
properties in McBrien Twp., Ontario, Canada. The Company will the
property for coal bed methane. The Company expects to complete this
agreement shortly.
o The Company will continue to pursue opportunities in coal bed methane
and oil and gas principally but not limited to Canada and California.
Our management believes these actions had a beneficial effect on our
financial position. Some of the transactions described below occurred, or are
anticipated to occur, after December 31, 2001, the closing date of the period
covered by this report. We have included descriptions of these matters in this
report to provide a more balanced description of our operations, business and
prospects on a going-forward basis.
The Company formerly was an Internet destination providing community,
content and commerce for the sportbike and motorcycle enthusiast. The
eSportbike.com website was a location where individuals, could create their own
websites, publish pictures of their bikes, share information, communicate, shop
and discover meaningful, relevant content targeted to their specific interests.
The Company discontinued this activity during the fourth quarter of 2001. The
Company's current business strategy is comprised of pursuing opportunities in
coal bed methane and oil and gas principally but not limited to Canada and
California.
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On March 19, 2002, we amended our Articles of Incorporation to change
our name from "eSportbike.com, Inc." to "Red Butte Energy, Inc." The purpose of
this amendment was to reflect the scope and type of our business activities. At
the same time, we effected a reduction in our outstanding capitalization by
effecting a "reverse split" pursuant to which we issued one share of our common
stock in exchange for every eight (8) outstanding shares of our common stock. As
a result of the reverse split, the number of issued and outstanding shares of
our common stock was reduced from 16,400,000 share to 2,050,000 shares. The
rights and preferences of our common stock were not modified or amended in
connection with the reverse split.
During the period covered by this report, we conducted only minimal
business operations, we engaged in no mineral research activities or related
development and did not expend any amounts on mineral research or exploration.
We currently have no employees. Certain administrative services relating to our
minimal maintenance operations were provided by employees of our majority
shareholders.
History
Company was organized as Morenci Corp., a Nevada Corporation, for the
purpose of creating a corporate vehicle to seek, investigate and, where
appropriate, acquire an interest in one or more business opportunities presented
to it by persons or firms who or which desire to seek perceived advantages of a
publicly held corporation.
Morenci was incorporated on April 7, 1997 and was formed specifically to
be a "clean public shell." for the purpose of either merging with or acquiring
an operating company. The Company ceased all activities from October 29, 1996 to
July 9, 1999 and was considered dormant. On July 9, 1999, the Company obtained a
certificate of renewal from the State of Nevada. On March 2, 2000 the Company
entered into an agreement whereby the Company, in a reverse merger, purchased
the assets of eSportbike.com, Inc. The Company also changed its name to
eSportbike.com, Inc. From March 2, 2000 to October 2001 the Company operated an
internet web site in the sport bike industry. On March 19, 2002 the Company
changed its name to Red Butte Energy, Inc.
The Company's authorized capital is 100,000,000 shares of common stock,
par value $0.001 per share. It is quoted and traded from time to time on the
National Association of Security Dealers, Inc. (the "NASD's") OTC Bulletin Board
Under the symbol "ESPB."
The executive offices of the Company are located at 700 Ioco Road,
Coquitlam, B.C. Canada V3H 2W8. Its telephone number is (604) 461-4946.
OPERATING LOSSES
The Company has incurred net losses of approximately $20,000 and
$252,000 for the fiscal years ended December 31, 2001 and December 31, 2000,
respectively. Such operating losses reflect developmental and other start-up
activities. The Company expects to incur losses in the near future. The
Company's operations are subject to numerous risks associated with establishing
any new
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business, including unforeseen expenses, delays and complications. There can be
no assurance that the Company will achieve or sustain profitable operations or
that it will be able to remain in business.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company was not in full operations during 2001 and 2000 and thus,
the revenues generated are not representative of those that will be generated
once the Company becomes fully operational. Revenues are not yet sufficient to
support the Company's operating expenses and are not expected to reach such
levels during 2002. Since the Company's formation, it has funded its operations
and capital expenditures primarily through private placements of debt and equity
securities. See "Recent Sales of Unregistered Securities." The Company expects
that it will be required to seek additional financing in the future. There can
be no assurance that such financing will be available at all or available on
terms acceptable to the Company.
GOVERNMENT REGULATION
The Company is subject to all pertinent Federal, State, and Local laws
governing its business. The Company is subject to licensing and regulation by a
number of authorities in its Province (State) or municipality. These may include
health, safety, and fire regulations. The Company's operations are also subject
to Federal and State minimum wage laws governing such matters as working
conditions and overtime.
RISK OF LOW-PRICED STOCKS
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act") impose sales practice and disclosure requirements
on certain brokers and dealers who engage in certain transactions involving "a
penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity for the Company's securities may be severely adversely affected, with
concomitant adverse effects on the price of the Company's securities.
Under the penny stock regulations, a broker or dealer selling penny
stock to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker or dealer or the transaction is otherwise exempt. A broker or dealer is
also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the Securities. In
addition, a broker or dealer is required to send monthly statements
6
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
THE VOLATILITY OF OUR STOCK PRICE
Our quarterly operating results may fluctuate significantly as a result
of a variety of factors, many of which are outside of our control. These factors
include:
o The amount and timing of orders for our services or products;
o Disruptions in the supply of delivering services or products;
o Seasonal variations in the sale of our services or products; and
o General economic conditions.
LACK OF TRADEMARK AND PATENT PROTECTION
The Company relies on a combination of trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect its products. Notwithstanding these safeguards, it is possible for
competitors of the company to obtain its trade secrets and to imitate its
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by the Company.
COMPETITION
The Company faces competition from a wide variety of coal bed methane
operators, many of which have substantially greater financial, marketing and
technological resources than we have.
We believe however, numerous opportunities for development and
participation in coal bed methane and oil and gas plays for an aggressive junior
company. The Coal Creek opportunity is significant in that while it was well
researched and evaluated in prior years as a coal deposit there has been no
significant follow up with the opportunity to develop the methane associated
with the coal. There has been in recent years new emphasis on the development of
coal bed methane related to high energy costs and a desire for more self
sufficiency in energy resources within North America. This has caused the
Company to desire to acquire this project as it could be of significant economic
value.
EMPLOYEES
As of April 20, 2002, the Company had no employees.
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ITEM 2 DESCRIPTION OF PROPERTY
Since 1997 all administrative activities of the Company have been
conducted by corporate officers from either their home or business offices.
Currently, there are no outstanding debts owed by the Company for the use of
these facilities and there are no commitments for future use of the facilities.
Since March 2001, the Company has been using office space provided by
public Idea Capital Ltd., on a gratis basis. Charles Spooner shareholder and
director of the Company is also a shareholder and director of public Idea
Capital Ltd.
ITEM 3 LEGAL PROCEEDINGS
Not Applicable.
ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No matters were subject to a vote of security holders during the year
2001.
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded from time to time on the NASD's OTC
Bulletin Board under the symbol "ESPB." The following table presents the high
and low bid quotations for the Common Stock as reported by the NASD for each
quarter during the last two years. Such prices reflect inter-dealer quotations
without adjustments for retail markup, markdown or commission, and do not
necessarily represent actual transactions.
8
2000: High Low
First Quarter $ 6.00 $ 2.938
Second Quarter 4.438 0.156
Third Quarter 0.40 0.08
Fourth Quarter 0.30 0.07
2001:
First Quarter $ 0.17 $ 0.075
Second Quarter - -
Third Quarter - -
Fourth Quarter - -
DIVIDENDS
The Company has never declared or paid any cash dividends. It is the
present policy of the Company to retain earnings to finance the growth and
development of the business and, therefore, the Company does not anticipate
paying dividends on its Common Stock in the foreseeable future.
The number of shareholders of record of the Company's Common Stock as of
April 20, 2002 was approximately 36.
RECENT SALES OF UNREGISTERED SECURITIES
In connection with organizing the Company, on April 18, 1997,
twenty-eight persons consisting of its officers, directors, and other
individuals were issued a total of 1,000 shares of Common Stock at a value of
$.001 per share. On May 6, 1999, those outstanding shares were forward split
1,000 to 1, resulting in a total of 1,000,000 shares outstanding.
On February 23, 2000, Mr. Daniel L. Hodges returned 800,000 shares to
the treasury and the shares were canceled, resulting in 200,000 remaining shares
outstanding.
On February 23, 2000 the Company declared a forward split 27 to 1, resulting in
a total of 5,400,000 shares outstanding.
On March 20, 2000, the Company issued 5,000,000 shares of the Company's
common stock to each of Robert E. McLachlan and Kent Courtice and
1,000,000shares to M. Gregg Marshall for services to the Company as officers and
directors.
On March 13, 2001, Robert Mclauchlan and Kent Courtice each transferred
5,000,000 shares of the Company's common stock to Sinoray. In exchange, Xue Ming
Liang and Public Idea Capital Ltd. assumed two hundred and twenty thousand
dollars in debt that the Company owed to McLauchlan and Courtice.
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ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
The following information should be read in conjunction with the
information in Item 7, Financial Statements, and other information regarding our
financials performance for the period covered by this report included elsewhere
in this report. The following discussions and other parts of this report may
contain forward-looking statements that involve risks and uncertainties. Our
actual results may differ significantly from the results discussed in those
forward-looking statements. Factors that might cause such differences include,
but are not limited to, our history of unprofitability and the uncertainty of
our profitability, our ability to develop and introduce new services and
products, the uncertainty of market acceptance of those services or products,
our potential reliance on collaborative partners, our limited sales and
marketing experience, the highly competitive industries in which we operate and
general economic and business conditions, some or all of which may be beyond our
ability to control.
Plan of Operations - The Company was organized for the purpose of
creating a corporate vehicle to seek, investigate and, if such investigation
warrants, acquire an interest in one or more business opportunities presented to
it by persons or firms who or which desire to seek perceived advantages of a
publicly held corporation.
The Company may incur significant post-merger or acquisition
registration costs in the event management wishes to register a portion of their
shares for subsequent sale. The Company will also incur significant legal and
accounting costs in connection with the acquisition including the costs of
preparing post- effective amendments, Forms 8-K, agreements and related reports
and documents.
The Company will not have sufficient funds (unless it is able to raise
funds in a private placement) to undertake any significant development,
marketing and manufacturing of the products acquired. Accordingly, following the
acquisition, the Company will, in all likelihood, be required to either seek
debt or equity financing or obtain funding from third parties, in exchange for
which the Company may be required to give up a substantial portion of its
interest in the acquired product. There is no assurance that the Company will be
able either to obtain additional financing or interest third parties in
providing funding for the further development, marketing and manufacturing of
any products acquired.
On March 13, 2002 the majority shareholders of the Company entered into
an agreement whereby investors associated with Epic Finance Corporation agreed
to acquire the shares owned by the majority shareholders.
On March 19, 2002 the Board of Directors approved a 1 for 8 reverse
stock split. As well on the same date the Company changed it's name to Red Butte
Energy, Inc.
On April 18, 2002 the Company entered into a letter of intent to
acquire an undivided 50% interest in the Coal Creek Basin and adjacent
properties in McBrien Twp., Ontario, Canada. The
10
Company will explore the property for coal bed methane. The Company expects to
complete this agreement shortly.
The Company will continue to pursue opportunities in coal bed methane
and oil and gas principally but not limited to Canada and California.
The Company will not proceed with the development of any software
business in Asia. Similarly the Company has decided not to operate any web based
business related to sportbikes or any other products. The Company will
concentrate on opportunities in the oil and gas industry.
Results of Operations - From April 7, 1997 to July 9, 1999 the Company
was an inactive corporation. From July 9, 1999 the Company was a development
stage company and had not begun principal operations. During 2001 and 2000 the
Company attempted to provide an internet web site that has since proved
uneconomical and has been abandoned. Accordingly, comparisons with prior periods
are not meaningful.
LIQUIDITY AND CAPITAL RESOURCES
The Company has met its capital requirements through the sale of its
Common Stock .
Since the Company's re-activation in July 9, 1999, the Company's
principal capital requirements have been the funding of the development of the
Company.
The Company expects future development and expansion will be financed
through cash flow from operations and other forms of financing such as the sale
of additional equity and debt securities, capital leases and other credit
facilities. There are no assurances that such financing will be available on
terms acceptable or favorable to the Company.
Government Regulations - The Company is subject to all pertinent
Federal, State, and Local laws governing its business. The Company is subject to
licensing and regulation by a number of authorities in its Province (State) or
municipality. These may include health, safety, and fire regulations. The
Company's operations are also subject to Federal and State minimum wage laws
governing such matters as working conditions and overtime.
ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are
included beginning immediately following the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.
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ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As a result of the previously reported change of control the registrant
engaged a new independent accountant as the principal accountant to audit the
registrant's financial statements. The new independent accountant is Robison,
Hill & Co., Certified Public Accountants. The change in accountants, which was
effective April 20, 2002 was recommended by the registrant's chief financials
officer and approved by the Board of Directors.
There are not and have not been any disagreements between the Company
and its accountants on any matter of accounting principles, practices, financial
statements disclosure or auditing scope or procedure.
Prior to the new engagement, the registrant had not consulted the new
accountant regarding: (I) the application of accounting principles to a specific
completed or contemplated transactions, or the type or audit opinion that might
be rendered on the financial statements, or any advice as to any accounting,
auditing or financial reporting issue; or (ii) any matter that was the subject
of a disagreement with the previous accountant.
The registrant has provided the former accountant James Stafford,
Chartered Accountant with a copy of the disclosures it is making in response to
this item in this Form 10-KSB and has requested the former accountant to furnish
a letter addressed to the Securities and Exchange Commission stating whether the
former accountant agrees with the statements made and, if not, stating the
respects in which it disagrees. The registrant will file the letter as an
exhibit to an amendment to this Form 10-KSB.
PART III
ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT
Executive Officers and Directors
The members of the Board of Directors of the Company serve until the next annual
meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. The following table
sets forth the name, age, and position of each executive officer and director of
the Company:
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Director's Name Age Office Term Expires
Xue Ming Liang 45 President & Director next annual meeting
Charles Spooner 51 Director next annual meeting
Set forth below is certain biographical information, present occupation
and business experience for the past five years of each director and
executive officer of the Company. Officers of the Company are elected by
the Board of Directors and hold office until their successors are chosen
and qualified, until their death or until they resign or have been
removed from office. All corporate officers serve at the discretion of
the Board of Directors.
Xue M. Liang is the President and Director of the Company and a member
of the Board of Directors since March 2000. Prior to joining the Company he was
a Vice Technical Director for the Bank of China from March 1992 to May 2000,
specializing in financial software applications and development.
Charles Spooner joined the Company as a member of the Board of Directors
in March 2000. He has been President and Director of Sonrae Corporation since
1982. Sonrae Corporation is a private investment company with interests in
consulting, hospitality, oil and gas and real estate. Since October 2000 he is
also a shareholder and director of Public Idea Capital Ltd., a private
management consulting company and subsidiary of Sonrae Corporation.
Daniel Hodges, former sole Director, President, CEO and Secretary of the
Company, and W. Scott Marshall, former President and Director of the Company,
each resigned his position as an officer and director of the Company during the
Calendar year 2000. Robert McLauchlan, CEO and Director of the Company, and Kent
Courtice, President, Secretary and Treasurer of the Company, each resigned his
position as an officer and director of the Company during 2001.
Conflicts of Interest
Certain conflicts of interest existed at December 31, 2001 and may continue to
exist between the Company and its officers and directors due to the fact that
each has other business interests to which they devote their primary attention.
Each officer and director may continue to do so notwithstanding the fact that
management time should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its management,
and conflicts may develop in the future. The Company has not established
policies or procedures for the resolution of current or potential conflicts of
interests between the Company, its officers and directors or affiliated
entities. There can be no assurance that management will resolve all conflicts
of interest in favor of the Company, and failure by management to conduct the
Company's business in the Company's best interest may result in liability to the
management. The officers and directors are accountable to the Company as
fiduciaries, which means that they are required to exercise good faith and
integrity in handling the Company's affairs. Shareholders who believe that the
Company has been harmed by failure of an officer or director to appropriately
resolve any conflict of interest may, subject to applicable rule of civil
procedure, be able to bring a class action or derivative suit to enforce their
rights and the Company's rights.
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Board Meetings and Committees
The Directors and Officers will not receive remuneration from the
Company until a subsequent offering has been successfully completed, or cash
flow from operating permits, all in the discretion of the Board of Directors.
Directors may be paid their expenses, if any, of attendance at such meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor. No compensation has been paid to
the Directors. The Board of Directors may designate from among its members an
executive committee and one or more other committees. No such committees have
been appointed.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year except M.
Gregg Marshall, Robert E. McLauchlan and Kent Courtice did not file Form 3.
ITEM 10 EXECUTIVE COMPENSATION
None of the executive officer's salary and bonus exceeded $100,000
during any of the Company's last two fiscal years.
ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of
record or who was known by the Company to own beneficially more than 5% of the
2,050,000 shares of issued and outstanding Common Stock of the Company as of
April 20, 2002 and information as to the ownership of the Company's Stock by
each of its directors and executive officers and by the directors and executive
officers as a group. Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.
14
Name and Address
of Beneficial Owners / Nature of Shares
Directors Ownership Owned Percent
-----------------------------------------------------------------------------------------
Sinoray Technology Limited common stock 1,250,000* 60.98%
P.O. Box 957
Offshore Incorporations Centre
Road Town, Tortola
British Virgin Islands
Xue Ming Liang common stock 1,250,000* 60.98%
Suite #700-509 Richards St.,
Vancouver, B.C., Canada, V6B 2Z6
Charles Spooner common stock 60,250 2.94%
Suite #700-509 Richards St.,
Vancouver, B.C., Canada, V6B 2Z6
- -
All Executive Officers
and Directors as a Group
(2 persons) common stock 1,310,250 63.92
* Mr. Liang is a controlling shareholder and director of Sinoray.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 13, 2002, the majority shareholders of Sinoray Technology
entered into an agreement with Epic Finance corporation and it's investor group
to acquire their shares of the Company. This transaction is slated to close on
or before September 1, 2002. In exchange for the shares Epic Finance Corporation
will pay to the Sinoray a total of $300,000 plus the costs associated with the
transaction.
On March 13, 2001, Robert McLauchlan and Kent Courtice entered into an
agreement with Public Idea Capital Ltd., Xue Ming Liang, Sinoray Technology and
the Company (the "change in control agreement") whereby each of McLauchlan and
Courtice transferred 625,000 shares of the Company's common stock to Sinoray
Technology. In exchange, Xue Ming Liang and Public Idea Capital Ltd. assumed
$220,000 in debt that the Company owed to McLaughlan and Courtice and received
the right to convert the debt into shares of the Company's common stock at a
price of $.08 per share on a pro rata basis proportionate to who paid the debt.
Mr. Liang is a controlling shareholder and director of Sinoray
Technology and Charles Spooner is a shareholder and director of Public Idea
Capital Ltd. In connection with the transfer, McLauchlan and Courtice each
resigned his position as an officer and director of the Company. As
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a result of the transfer Sinoray Technology now owns a controlling interest in
the Company. Under Rule 405 promulgated under the Securities Act of 1933, Mr.
Liang and Mr. Spooner may be deemed to be a promoter of the Company. No other
persons are known to Management that would be deemed to be promoters.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements Page
Report of Robison, Hill & Co., Independent Certified Public Accountants....................F-1
Balance Sheets as of December 31, 2001, and 2000...........................................F-2
Statements of Operations for the years ended
December 31, 2001, and 2000...........................................................F-3
Statement of Stockholders' Equity Since
April 7, 1997 (inception) to December 31, 2001........................................F-4
Statements of Cash Flows for the years ended
December 31, 2001, and 2000...........................................................F-5
Notes to Financial Statements..............................................................F-6
2. Financial Statement Schedules
The following financial statement schedules required by Regulation S-X
are included herein.
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this report:
Exhibit
16
Number Title of Document
2.1 Change in Control Agreement dated January 15, 2001 (1)
3.1 Articles of Incorporation (2)
3.2 Amended Articles of Incorporation (2)
3.3 Bylaws (2)
(1) Incorporated by reference to the Registrant's quarterly report on Form
10-QSB filed on May 21, 2001.
(2) Incorporated by reference to the Registrant's registration statement on
Form 10-SB filed on October 20, 1999.
(b) Reports on Form 8-K filed.
No reports on Form 8-K were filed during the prior quarter.
17
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
Red Butte Energy, Inc.
Dated: April 29, 2002 By /S/ Xue Ming Liang
------------------------------------
Xue Ming Liang
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 29th day of April 2002.
Signatures Title
/S/ Xue Ming Liang
-------------------------------------------------------------------
Xue Ming Liang President and Director
(Principal Executive Officer)
(Principal Financial and Accounting Officer)
/S/ Charles Spooner
--------------------------------------------------------------------
Charles Spooner Director
18
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
-:-
INDEPENDENT ACCOUNTANTS' REPORT
DECEMBER 31, 2001 AND 2000
CONTENTS
Page
Independent Auditor's Report...........................................................F - 1
Balance Sheets
December 31, 2001 and 2000...........................................................F - 2
Statements of Operations for the
Years Ended December 31, 2001 and 2000...............................................F - 3
Statement of Stockholders' Equity
Since April 7, 1997 (inception) to December 31, 2001..................................F - 4
Statements of Cash Flows for the
Years Ended December 31, 2001 and 2000...............................................F - 5
Notes to Financial Statements..........................................................F - 6
INDEPENDENT AUDITOR'S REPORT
Red Butte Energy, Inc.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
We have audited the accompanying balance sheet of Red Butte Energy, Inc.
(formerly eSportbike.com, Inc.) (a development stage company) as of December 31,
2001 and the related statements of operations and cash flows for the year then
ended and the statement of stockholders' equity from April 7, 1997 (inception)
to December 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 audit. The financial statements of Red Butte
Energy, Inc. (formerly eSportbike.com, Inc.) (a development stage company) as of
December 31, 2000, were audited by other auditors whose report dated May 8,
2001, expressed an unqualified opinion with a going concern-uncertainty on those
statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit 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 Red Butte Energy,
Inc. (formerly eSportbike.com, Inc.) (a development stage company) as of
December 31, 2001 and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operation
and has a deficit in stockholders' equity as of December 31, 2001 that together
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters also are described in Note 1. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
April 20, 2002
F - 1
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
BALANCE SHEETS
December 31,
-------------------------------
2001 2000
-------------- ---------------
Assets:
Cash and cash equivalents $ 2,086 $ -
Accounts receivable - 4,913
Prepaid expenses - 1,155
-------------- ---------------
Total Current Assets 2,086 6,068
Property and Equipment:
Computer equipment 4,664 4,667
Furniture and equipment 417 426
Software - 1,914
-------------- ---------------
5,081 7,007
Less accumulated depreciation (3,265) (3,555)
-------------- ---------------
Net Property and Equipment 1,816 3,452
-------------- ---------------
Other Assets - intangibles, net - 3,396
-------------- ---------------
Total Assets $ 3,902 $ 12,916
============== ===============
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 17,399 $ 16,926
Short term notes payable - 55
-------------- ---------------
Total current liabilities 17,399 16,981
Due to shareholders 244,036 233,035
-------------- ---------------
Total liabilities 261,435 250,016
-------------- ---------------
Stockholders' Equity:
Common Stock, Par value $.001, Authorized
100,000,000 shares, Issued 2,050,000 shares
at December 31, 2001 and 2000 2,050 2,050
Paid-In Capital 18,162 18,162
Retained Deficit (273,432) (257,312)
Deficit Accumulated During the
Development Stage (4,313) -
Foreign Currency Translation Adjustment - -
-------------- ---------------
Total Stockholders' Equity (257,533) (237,100)
-------------- ---------------
Total Liabilities and Stockholders' Equity$ 3,902 $ 12,916
============== ===============
The accompanying notes are an integral part of these financial
statements.
F - 2
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
since
December 1,
2001
For the year ended inception of
December 31, development
------------------------------
2001 2000 stage
-------------- -------------- ---------------
Revenues $ - $ - $ -
Expenses:
General and administrative 4,313 - 4,313
-------------- -------------- ---------------
Total expenses 4,313 - 4,313
-------------- -------------- ---------------
Discontinued Operations:
Income (Loss) from
operations
of discontinued operations (16,120) (252,026) -
-------------- -------------- ---------------
Net Loss $ (20,433) $ (252,026) $ (4,313)
============== ============== ===============
Basic & Diluted loss per share $ (0.01) $ (0.12)
============== ==============
The accompanying notes are an integral part of these financial
statements.
F - 3
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
SINCE APRIL 7, 1997 (INCEPTION) TO DECEMBER 31, 2001
Deficit
Accumulated
Since April 7,
Common Stock Paid-In Retained 1997
Shares Par Value Capital Deficit Inception
------------ ----------- --------- ----------- --------------
Balance at April 7, 1997
(inception) - $ - $ - $ - $ -
April 18, 1997 Issuance of Stock
for payment of accounts payable 675,000 675 8,537 - -
Net Loss - - - (1,100) -
------------ ----------- --------- ----------- --------------
Balance at December 31, 1997 675,000 675 8,537 (1,100) -
Net Loss - - - (100) -
------------ ----------- --------- ----------- --------------
Balance at December 31, 1998 675,000 675 8,537 (1,200) -
Net Loss - - - (4,086) -
------------ ----------- --------- ----------- --------------
Balance at December 31, 1999 675,000 675 8,537 (5,286) -
March 31, 2000 Issuance of Stock
for payment of accounts payable 1,375,000 1,375 9,625 - -
Net Loss - - - (252,026)
------------ ----------- --------- ----------- --------------
Balance at December 31, 2000 2,050,000 2,050 18,162 (257,312) -
Net Loss - - - (16,120) (4,313)
------------ ----------- --------- ----------- --------------
Balance at December 31, 2001 2,050,000 $ 2,050 $ 18,162 $ (273,432) $ (4,313)
============ =========== ========= =========== ==============
The accompanying notes are an integral part of these financial
statements.
F - 4
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Since
December 1,
2001
For the years ended Inception of
December 31, Development
-----------------------
2001 2000 Stage
----------- ----------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss for the period $ (20,433)$ (252,026) $ (4,313)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 5,032 6,952 1,272
Changes in Operating Assets and Liabilities
(Increase) decrease in accounts receivable 4,913 (4,913) -
(Increase) decrease in prepaid expenses 1,155 (1,155) -
Increase (Decrease) in Accounts Payable 473 14,175 -
----------- ----------- ---------------
Net Cash Used in operating activities (8,860) (236,967) (3,041)
----------- ----------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment - (13,800) -
----------- ----------- ---------------
Net cash provided by investing activities - (13,800) -
----------- ----------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (decrease) in amounts due shareholders 11,001 239,712 2,300
Payment of short term notes payable (55) - -
Issuance of Stock for accounts payable - 11,000 -
----------- ----------- ---------------
Net Cash Provided by Financing Activities 10,946 250,712 2,300
----------- ----------- ---------------
Net (Decrease) Increase in
Cash and Cash Equivalents 2,086 (55) (741)
Cash and Cash Equivalents
at Beginning of Period - 55 741
----------- ----------- ---------------
Cash and Cash Equivalents
at End of Period $ 2,086 $ - $ -
=========== =========== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
F - 5
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a "going concern", which assume that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of
approximately $278,000 for the period from April 7, 1997 (inception) to December
31, 2001, has a liquidity problem, and requires additional financing in order to
finance its business activities on an ongoing basis. The Company is actively
pursuing alternative financing and has had discussions with various third
parties, although no firm commitments have been obtained.
The Company's ability to survive will depend on numerous factors
including, but not limited to, the Company's receiving continued financial
support, completing public equity financing, or generating profitable operations
in the future.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported revenues and expenses, and the
balance sheet classifications used.
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Red Butte Energy, Inc.(formerly
eSportbike.com, Inc.) is presented to assist in understanding the Company's
financial statements. The accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
April 7, 1997. The Company ceased all operating activities during the period
from April 7, 1997 to July 9, 1999 and was considered dormant. On July 9, 1999,
the Company obtained a Certificate of renewal from the State of Nevada. During
2000 the Company developed an Internet website which provided community,
F - 6
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Organization and Basis of Presentation (continued)
content and commerce for the sportbike and motorcycle enthusiast. During
November 2001 the Company abandoned the internet business and since December
2001, the Company is in the development stage, and has not commenced planned
principal operations. On March 19, 2002 the Company's name was changed from
eSportbike.com, Inc. to Red Butte Energy, Inc. to reflect the new focus of the
Company.
Nature of Business
The company has no products or services as of December 31, 2001. The
Company was organized as a vehicle to seek merger or acquisition candidates. The
Company intends to acquire interests in various business opportunities, which in
the opinion of management will provide a profit to the Company
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized as services are performed
F - 7
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the year ended December 31, 2001
Basic Loss per Share
Loss to common shareholders $ (20,433) 2,050,000 $ (0.01)
=============== =============== ==============
For the year ended December 31, 2000
Basic Loss per Share
Loss to common shareholders $ (252,026) 2,050,000 $ (0.12)
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for December 31, 2001 and 2000 and are thus not considered.
Foreign Currency Translation
The functional currency of the Company is Canadian dollars. Balance
sheet accounts are translated to U.S. dollars at the current exchange rate as of
the balance sheet date. Income statement items are translated at average
exchange rates during the period. The resulting translation adjustment is
recorded as a separate component of stockholders' equity.
Reclassifications
Certain reclassifications have been made in the 2000 financial
statements to conform with the 2001 presentation.
F - 8
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Advertising Expense
Advertising costs are expensed when the services are provided..
Income Taxes
The Company has a net operating loss for income taxes. Due to the
regulatory limitations in utilizing the loss, it is uncertain whether the
Company will be able to realize a benefit from these losses. Therefore, a
deferred tax asset has not been recorded. There are no significant tax
differences requiring deferral.
Concentrations of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
Depreciation
Fixed assets are stated at cost. Depreciation and amortization is
calculated on a straight-line basis over the estimated useful lives of the
assets as follows:
Asset Rate
--------------------------------------- --------------
Computer equipment 3 years
Furniture and equipment 5 years
Maintenance and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.
F - 9
RED BUTTE ENERGY, INC.
(formerly eSportbike.com, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 3 - COMMITMENTS
As of December 31, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 4 - STOCK SPLIT
On May 6, 1999 the Board of Directors authorized 1,000 to 1 stock split,
changed the authorized number of shares to 100,000,000 shares and the par value
to $.001 for the Company's common stock. As a result of the split, 999,000
shares were issued.
On February 23, 2000 the Board of Directors authorized the acceptance of
800,000 shares of restricted common stock returned to the Company by and on
behalf of Mr. Daniel L. Hodges, formerly the sole Officer and Director of the
Company. The 800,000 shares were canceled immediately upon receipt. Also on
February 23, 2000 the Board of Directors authorized a 27 to 1 stock split. As a
result of this split the Company issued 5,200,000 shares of common stock.
On March 19, 2002 the Board of Directors approved a 1 for 8 reverse
stock split. All references in the accompanying financial statements to the
number of common shares and per-share amounts have been restated to reflect the
stock split and cancellation of shares.
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to the name change and change of direction for the Company,
it has been pursuing opportunities in the oil and gas industry. The Company has
entered into a letter of intent to acquire an undivided 50% interest in the Coal
Creek Basin Property and adjacent properties in McBrien Twp, Ontario, Canada.
This property is being explored for coal bed methane. The Company expects to be
able to finalize and close this agreement in short order. The Company is also
pursuing other opportunities in oil and gas in Canada and California.
F - 10