to be Bought Out . . . Sorta

23 April 2005

According to a press release from John Wall's and Craig Carpenter's Energy Source, Source Energy is going to buy out At least, that is how a normal person would understand a press release that says, in part, "Source Energy Corp., a Utah corporation ("Source Energy" or the "company") (OTCBB: SRCX - News), announced the execution of a letter of intent to acquire Inc., a Washington corporation ("Vista"), entered into on April 19, 2005."

But, as is often the case, things are not always as they seem. This becomes obvious, when you read Source Energy's most recent annual report.

But first, let's look at a few other items in that press release before we delve into SEC documentation. According to the press release, "Vista presently has outstanding approximately 10,550,000 shares of common stock and 2,800,000 options, warrants and convertible securities." Also, according to the same release, Source Energy will acquire Vista in a one for one exchange of shares.

Imagine my surprise when I learned from the Source Energy 10K/SB that they currently have 404,000 shares outstanding and $161,241 in assets. Amazing to think that such a small company could buy out a company with offices in four cities and millions of privately held shares.

Of course, it may be that privately held bit which explains all of this. You see, Vista is privately held. Source Energy currently trades OTC. So, if Vista shares are exchanged for Source Energy shares, you have taken a private company public without an IPO. But, then again, I don't really understand finance.

It's odd that a company with $161,241 in assets and total revenues last year of $64,618 will be purchasing a company like Vista. Odder still that, according to that press release, "Vista would pay a fee of $300,000 and 500,000 shares of Vista common stock, which shares would be exchanged in the merger for Source Energy common stock, to Jensen Services Inc. and Craig Carpenter, president, director and the majority shareholder of Source Energy, as consideration for the payment and indemnification of all liabilities of Source Energy arising prior to the closing, except for $75,000 currently owed to Carpenter."

So, a company that has less than $200K in assets and about 400K shares outstanding is going to purchase a much, much larger company by having the other company pay the owners of the smaller company 500K shares and $300K dollars. Plus, the holders of the 10+ million shares in the larger company will actually be the majority owners in the combined company. Yep, sounds like the smaller one bought the larger one to me. Hey, anybody else who wants to set up a deal like this, I can set up a very, very small company.

See all the long boring stock discussions.

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