SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
-----------------
Pursuant to Section 12(g) of
The Securities Exchange Act of 1934
DRUCKER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware (N/A)
- - ----------------------------- -----
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
#1- 1035 Richards Street, Vancouver, B.C. Canada V6B 3E4
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(604)681-4421
-------------
Registrant's telephone number, including area code:
Securities to be registered pursuant to Section 12(b)of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of class
Common 50,000,000 Shares of Common Stock
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business .................................. 3
Item 2. Financial Information .................................... 10
Item 3. Properties ............................................... 15
Item 4. Security Ownership of Certain
Beneficial Owners and Management ........................ 17
Item 5. Directors and Executive Officers ......................... 18
Item 6. Executive Compensation ................................... 20
Item 7. Certain Relationships and Related
Transactions ............................................ 22
Item 8. Legal Proceedings ........................................ 23
Item 9. Market Price of and Dividends on
Registrants Common Equity and
Related Stockholder matters ............................. 23
Item 10. Recent Sales of Unregistered Securities................... 24
Item 11. Description of Securities ................................ 35
Item 12. Indemnification of Directors and Officers ................ 37
Item 13. Financial Statements and Exhibits ........................ 37
Item 14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................... 38
Item 15. Financial Statements and
Supplementary Data ...................................... 38
Exhibit Index ................................... 39
Signatures ...................................... 41
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Description and Development of Business.
HISTORY OF COMPANY
(Through December 31, 1995)
On February 4, 1971, the Registrant was incorporated under the laws of the
State of Idaho, under the name of Monetary Metals Corporation.
On December 16, 1988, Drucker Sound Design Corporation was incorporated
under the laws of the State of California.
On October 18, 1989, Gul Industries Corp. was incorporated under the laws
of the State of Delaware.
On December 14, 1989, the Registrant entered into an Agreement and Plan of
Reorganization, whereby the issuer acquired 100% of the assets subject to
liabilities of Drucker Sound Design Corporation, a California corporation. The
Registrant began engaging in the manufacturing and distribution of audio,
cellular, C.B., radar, and other electronic installation systems for
automobiles. The Company decided to redomicile in Delaware and entered into a
merger agreement with Gul Industries, Inc., a Delaware corporation. On April 16,
1990, the Registrant filed Articles of Amendment in the State of Idaho changing
its name from Monetary Metals Corporation to Drucker Sound Design Corporation.
On June 6, 1990, Gul Industries Corp. filed a Certificate of Amendment to the
State of Delaware changing its name to Drucker Sound Design Corporation. On June
19, 1990, a Certificate of Merger was filed in the State of Delaware. On August
7, 1990, a Certificate of Merger was filed in the State of Idaho. Prior to
September 1991, the Registrant discontinued engaging in the business of
manufacturing and distributing of audio, cellular, C.B., radar, and other
electronic installation systems for automobiles. On September 4, 1991, the
Registrant filed Certificate of Amendment in the State of Delaware changing its
name to Drucker Industries, Inc.
In September 1991, the Company purchased the license to the "N-Viro
Process" in Japan from N-Viro Energy Systems, Ltd. for $466,063. The Company
made a $100,000 down payment and paid the balance by quarterly installments. The
Company was delinquent on minimum royalty payments due June 30, 1994 and
September 30, 1994, totalling $50,000, and consequently all rights and
privileges granted to the Company under the license agreement were cancelled by
the licensor. The license agreement costs, net of accumulated amortization, were
written-off during the year ended December 31, 1994.
No activities were conducted in 1995.
1
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THE COMPANY BUSINESS
1. General Operations
------------------
The Company has had very limited operations within the last three years,
and such operations have been restricted to investigation of opportunities,
evaluation and negotiations of the joint venture agreements described hereafter.
Current Business
----------------
The Company was inactive until late 1996. In early 1997, the Company
negotiated joint venture farm-in agreements with two Vancouver based oil
companies for a 50% interest in certain oil projects in the People's Republic of
China. The Company's primary business focus is the acquisition, exploration and
development of mineral properties and oil and natural gas properties. The
Registrant has contractual interests in the following described in (d) below.
The Company anticipates that its business will require capital to take
advantage of business opportunities and to make required financial investments
under the joint venture agreements. The Company intends to use the capital
Markets of the United States and Europe to secure the capital funding required
by the Company and its acquired operations. It has no commitments for funding as
of the date of this registration statement, nor anticipated sources of debt or
equity funding.
(SPACE INTENTIONALLY LEFT BLANK)
2
<PAGE>
12 MONTH OPERATING BUDGET - 1997
--------------------------------
Capital Raised 5,179,500
Projected Oil Income (assumed for purposes of budget only) 120,000
----
Interest Income 60,000
---------
Total Cash Resources 5,359,500
=========
Richi Joint Venture
Office and Business License (China) 100,000
Geology Survey 240,964
KV Finger Print Survey 70,000
Land - 10Km2 243,902
2 Exploratory Wells - 2,200 m 800,000
Yinchuan Office Operating 180,723
---------
Total 1,635,589
---------
Milco Joint Venture
Office and Business License (China) 100,000
Geology Survey 70,000
Land - 10Km2 243,902
3 Wells - 1,000 m 420,000
Xian Office Operating 140,843
---------
Total 974,746
---------
North America
Personnel 100,000
Rent 24,000
Office & Administration 24,000
Communications 20,000
Travel 50,000
Professional Services 150,000
Stock Transfer & Filing 100,000
---------
Total 468,000
---------
TOTAL CASH EXPENDITURES 3,078,335
=========
The Company's current business plan is in oil and gas production,
exploration, and foreign minerals joint ventures. The Company has determined
that it must build an asset base through acquisition of assets; by exchange of
stock for other companies, real estate, oil and gas
3
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leases, oil and gas properties for production or workover/if necessary, or gas
pipelines if the opportunity to exchange stock for pipeline interests as arises.
The Company believes that debt will rarely be desirable to acquire any asset or
business. The Company may acquire other assets by exchange of stock and will
consider the following factors in approving such acquisition:
1. The affect on the financial statements of the Company.
2. The affect on the debt position of the Company.
3. The potential for appreciation on the asset, or the profit potential,
if any.
4. The market value, if determinable, of the asset.
5. The cost of increasing the asset value, or making the asset produce
income if oil and gas leases or interests, are to be acquired; the
costs of testing, drilling, operations, workover, and the risks of
loss therefrom, to attempt to achieve oil and gas production. (No
formula is set for such determination due to numerous unknown factors.
It is solely the discretionary decision based on subjective judgments
whether or not to drill, explore or attempt workover).
6. The asset value per share of the asset being acquired. No formula has
been set, but the Company would follow the general consideration that
each successive acquisition would contribute asset value or revenue to
the company.
The Company intends to pursue acquisitions which appear to hold potential
for adding equity and/or cash flow to the Company.
The Company has not established, and does not intend to formally establish,
criteria for the selection or evaluation of oil and gas properties or
participations. When a property is located which the management, in its opinion,
believes holds the potential for profit for the Company, an attempt will be made
to secure an option, or lease, in the property. Shareholder approval will not be
sought for property acquisitions. Therefore, shareholders will be dependent upon
the judgment of management in selecting properties (see "Management"). If such
an interest is acquired, the Company will then expend funds for preliminary
exploration and testing of the property to determine the feasibility of
production of such property. Based on the results of such preliminary testing,
the Company will decide, without shareholder approval, whether to acquire or
abandon the property. A property may be acquired by outright purchase; by
purchasing or leasing the oil, gas or mineral rights of the property; or by
exchange of the shares for leases or interests in properties.
The Company may expend funds to rework, explore or test any properties its
acquires to determine the economic production feasibility of such properties.
The Company will rely on outside consultants (none of whom have been designated)
to provide management with competent evaluation and recommendations concerning
property or interests in properties to be
4
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considered for acquisition. The Company has no agreement or understanding,
express or implied, with any outside professional; and there is no assurance
that it will be able to retain the services of competent experts or as to the
fees which such experts will charge the Company. Based upon the results of such
exploration and tests, as interpreted by management, the Company will then
determine whether such properties should be acquired, explored further, sold or
leased to a third party, held for possible later development or abandoned; or
whether development to production should be attempted by the Company either by
itself or through joint venture or other business arrangements with other
companies or entities.
The Company owns no subsidiaries.
The Company currently maintains its offices #1- 1035 Richards Street,
Vancouver, B.C. Canada V6B 3E4. Its telephone number is 604-681-4421.
(b) Parents and Subsidiaries
Parent
------
DRUCKER INDUSTRIES, INC., a Delaware corporation
Subsidiaries
------------
None
(c) Oil and Gas Activities.
Registrants oil and gas exploration, development and production activities
have been limited due to lack of capital and lack of focus in such area prior to
late 1996. The Company has commenced preparation to attempt to finance its oil &
gas joint ventures in China and intends to actively pursue opportunities in oil
and gas in China over the next year.
The Company's proposed principal areas of activities are described below.
Exploration and Production Activity. The Company's strategy with respect to
its oil exploration related activities is to identify geological areas in which
the Company may invest or participate in non-producing or producing oil and gas
prospects or joint ventures for development and where the company may lease
prospects for oil and gas exploration.
During the last five (5) fiscal years, the parent Company conducted no
exploration activities on oil and gas properties as a consult or otherwise. The
Company may agree to assign rights in certain properties to be drilled to the
general or managing partner of a partnership or joint venture which thereby
becomes the owner of the working interest in the property. The Company may also
agree to supervise and manage all drilling activities on the property and to
5
<PAGE>
obtain through subcontractors, all necessary drilling and related services and
equipment. The Company actively reviews prospects for putting together
exploration or development drilling joint ventures, but currently has no
proposal being negotiated on any specific property, least or asset, not
otherwise discussed herein.
The Company does not own any drilling rigs, nor does it employ drilling or
operating crews. The Company will not be the actual contract driller of wells.
The Company will contract with third-party drilling companies to drill oil and
gas wells on a fixed-cost (turnkey) basis. Once a well has reached its desired
depth, the Company, in consultations with experts, will then determine whether
to complete such wells and/or to plug and abandon the well. All well completion
activities are conducted under supervision of the Company and its consultants,
by third party service contractors.
The Company is not carrying any reserve values of any properties due to the
lack of any production. The Company intends to attempt to workover some of the
additional wells within the next 6 months.
Financing of Oil and Gas Activities. The Company's oil and gas financing
activities will be conducted primarily pursuant to ventures with Independent
companies and through Joint Ventures in which the Company acts as managing
venturer ("Company-Joint Ventures"). The Company has contacted numerous
independent companies who have indicated an interest in participating in near
term financing if the project interests them. The Company hopes to put together
some participations in the next six months.
The following table sets forth, for the years indicated, the funds received
by the Company pursuant to contracts with Independent Partnerships and
Company-Joint Ventures. The Company may record revenues from operations on the
percentage of completion method as the oil and gas projects are drilled or
constructed, rather than when funds are received.
Year Ended December 31, 1996
1993 1994 1995 1996
---- ---- ---- ----
Independent Partnerships 0 0 0 0
Company Joint Ventures $0 $0 $0 $0
------ ------ ------ ------
Total $0 $0 $0 $0
The Company offered and sold 5,179,500 units at $1.00 per unit pursuant to
an Offering Memorandum. Each unit is to consist of one common share and one
share purchase warrant which will entitle the holder thereof to acquire an
additional unit at $1.50 per unit. This warrant will expire in eighteen months
from the closing of the Offering Memorandum. The additional unit is to consist
of one common share and one additional share purchase warrant to acquire one
common share at $2.00 per share. This warrant will expire in thirty months from
the date of closing of the Offering Memorandum.
6
<PAGE>
(d) Narrative Description of Business.
The primary initial focus of business operations will be to capitalize an
investment in this joint ventures in China.
See also (c) "Oil and Gas Activities").
Products, Services, Markets, Methods of Distribution and Revenues. Oil and
natural gas are presently the principal products sought to be produced by the
company but none is presently being produced.
Joint Ventures with Milco Petroleum, Inc. and Richi Petroleum Corp. (See
"Material Agreements" Item 3 (i))
1. Milco Joint Venture. By joint venture farm-in agreement dated January
21, 1997, made between the Registrant and Milco Petroleum, Inc. (the
"Operator"), the Registrant plans to spend approximately US$5,000,000 for the
surveying, drilling, completion, equipment, operating and other costs for the
drilling and operations associated with the exploration and/or development
and/or completion of oil and/or gas wells in or around the Ordos Basin in north
central China in Shaanxi/Ningxia area. The wells are to be drilled on Peoples
Republic of China Government lands, estimated production cost including taxes
and royalties is about US$4.50 per barrel. Production is expected to be sold at
Rmb 1,000 (PRC currency) or US $16.60 per barrel. The price is currently
controlled but is expected to change in the future as China moves to a market
economy. Spacing units equating to 50 acres for each oil well have been
designated on the 316,000 acre concession.
2. The Registrant and Richi Petroleum Corp. ("Richi") have entered into a
Participation Agreement dated as of January 21, 1997, (the "Richi Participation
Agreement").
Under terms of the Richi Participation Agreement, the Registrant agrees to
pay 100% of all of the costs of operating, exploring and developing the Richi
Concession to Richi, as consideration for an undivided 50% interest in all of
the profits generated from the Richi Concession and paid to the joint venture.
The Registrant will also participate in all other future concessions acquired by
Richi on the same 50% participation terms.
The Company has one part time employee and has opened offices in Beijing,
PRC. If the Company is successful in its plan the number of employees would
increase in the United States and in the PRC. The Company is seeking financing
for investment in business ventures from investors in the United States, Europe
and Asia. At this time no assurance can be given that such financing can be
obtained or if such joint ventures can be organized.
Working Capital Needs. The working capital needs of the company consist
primarily of: investigation activities, acquisition of prospect acreage and
costs of participation in joint ventures in the People's Republic of China.
These requirements may be met by private placement of
7
<PAGE>
stock or loans or sale of working interests. The Company will need to develop
additional working capital for future operations.
(3) Dependence on a Single Customer or a Few Customers.
--------------------------------------------------
a) Revenues - None. The Company has no customers at this time.
b) Client Services revenues - none
During the five (5) years ending June 30, 1997, no revenues were
generated from client services.
(4) Backlog of Orders. None at this time.
-----------------
(5) Government Contracts. None.
--------------------
(6) Competitive Conditions. The oil and gas industry is highly
competitive. The Company faces competition from large numbers of oil and gas
companies, public and private drilling programs and major oil companies engaged
in the acquisition, exploration, development and production of hydrocarbons in
all areas in which it may attempt to operate in the future. Many of the programs
and companies so engaged possess greater financial and personnel resources than
the Company and therefore have greater leverage to use in acquiring prospects,
hiring personnel and marketing oil and gas. Accordingly, a high degree of
competition in these ares is expected to continue. The markets for crude oil and
natural gas production have increased substantially in recent years. Oil prices
have stabilized generally, but the world market for crude oil should be
considered unstable due to uncertainty in the Mideast. There is considerable
uncertainty as to future production levels of major oil producing countries.
Significant increases in production could create additional downward pressure on
the price of oil. A precipitous drop in oil & natural gas prices in the future
market occurred in January 1986, but the Company does not expect to be adversely
affected further.
In the past surpluses in natural gas supplies and other factors have
combined to have a negative impact on the natural gas business. Purchasers have
canceled contracts or might propose to cancel contracts. Other purchasers have
lowered the price they will pay for unregulated natural gas, which previously
commanded premium prices. There is no assurance that the Company's revenues, if
any ever develop, will not be adversely affected by these factors.
The market in China is controlled by the Government, which could impose
taxes or restrictions at any time which would make operations, if any,
unprofitable and infeasible and cause a write off of capital investment in
chinese oil and gas opportunities.
The China oil exploration situation is highly competitive. The Company
faces competition from large numbers of companies in any areas in which it may
attempt to operate
8
<PAGE>
in the future. Many of the companies so engaged possess much greater financial
and personnel resources than the Company and therefore have greater leverage to
use in acquiring sites, hiring personnel and marketing. Accordingly, a high
degree of competition in these areas is expected to continue.
(7) Registrant Sponsored Research and Development. None.
(8) Compliance with Environmental Laws and Regulations. The operations of
the Company are subject to local, provincial and national laws and regulations
in the People's Republic of China. To date, compliance with these regulations by
the Company has had no material effect on the Company's operations, capital,
earnings, or competitive position, and the cost of such compliance has not been
material. The Company is unable to assess or predict at this time what effect
such regulations or legislation could have on its activities in the future.
(a) Local Regulation -
The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new regulations or
changes in existing regulations.
(b) National Regulation -None.
The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new regulations or
changes in existing regulations.
The value of the Company's investments in the Milco and Richi may be
adversely affected by significant political, economic and social uncertainties
in the People's Republic of China ("PRC"). Any changes in the policies by the
Government of the PRC could adversely affect the company in the Milco and Richi
Joint Ventures by, among other factors, changes in laws, regulations or the
interpretation thereof, confiscatory taxation, restrictions on currency
conversion, imports and sources of supplies, the expropriation or
nationalization of private enterprises, or political relationships with other
countries.
(c) Environmental Matters - None at the date of this registration
statement.
(d) Other Industry Factors - Oil and gas drilling operations are
subject to hazards such as fire, explosion, blowouts, cratering and oil spills,
each of which could result in substantial damage to oil and gas wells, producing
facilities, other property and the environment or in personal injury.
(9) Number of Persons Employed. As of April 30, 1997, the Company had two
part time employees, A. Ken Kow, manager of Petroleum Operations at a salary of
$3,000 Canadian per month and the President, Gerald William Runolfson at no
salary.
9
<PAGE>
ITEM 2. FINANCIAL INFORMATION
The information presented herein, should be read in conjunction with the
Company's consolidated financial statements and related notes appearing
elsewhere herein.
Selected Financial Information
<TABLE>
<CAPTION>
(A DEVELOPMENT STAGE COMPANY)
Fiscal Year Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Revenues 0 0 0 0 0
Cost of
Revenues 0 0 0 0 0
Gross Profit 0 0 0 0 0
General and
Administrative
Expenses 3,118 46,004 89,541 34,865 27,943
Income (loss)
from
operations 0 0 0
Other income
(expense) 0 (33,451) (64,769) (99,081) (41,323)
Amortization of
License Agreement (409,236) (27,415) (29,412)
Income (loss)
before income
taxes (3,118) (79,455) (563,546) (161,361) (98,678)
Provisions for
income taxes 0 0 0 0 0
Net income
(loss) per Greater
common share than (.00) (.004) (.028) (.01) (.005)
Average shares
outstanding 26,554,183 21,575,697 20,477,500 20,377,500 19,802,500
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
FY FY
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Current Assets 50,802 0 1,344 39,340 13,145
Total 50,802 0 0 448,576 449,796
Assets
Current 53,327 37,407 562,012 472,698 312,557
Liabilities
Long-term debt,
net of current
portion 0 0 0 0 0
Deficit Accum-
ulated during
Development
Stage (1,161,943) (1,158,825) (1,079,370) (515,824) (384,963)
Stockholders'
equity (deficiency) (2,525) (37,407) (560,668) (24,122) 137,239
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has no primary income source at this time. Capital from private
placements or borrowing against assets are required to fund future operations.
The company completed a private offering of Stock at $1.00 per share for
$5,179,500, which has terminated.
The Company revenues for the twelve month period ending December 31, 1996,
were none. The Company recommenced limited business operations in late 1996, and
expects a significant net loss from operations in 1997 resulting from costs of
attempting develop its joint oil exploration ventures in Peoples Republic of
China. The Company may continue to show losses resulting from the start up of
operations for an indeterminate time.
RESULTS OF OPERATIONS
During its operations ended December 31, 1996, the Company incurred
expenses in irregular amounts through year ended December 31, 1996. By
"irregular", the Company is referring to the fact that due to suspended
operations, fixed expenses such as rent, general and administrative, accounting,
telephone, etc. have been variable, and sporadic. The Company has generated no
business revenue from operations in 1996, or in the first two quarters of 1997.
11
<PAGE>
The Company incurred the following expenses in the past fiscal year.
December 31 December 31
1995 1996
---- ----
Operating expenses
General and Administrative 46,004 3,118
Salaries 0 0
Interest 33,451 0
Total operating
costs (79,455) (3,118)
It is expected that expenses will continue at a significantly increased
rate due to costs of seeking and investigating China oil opportunities and
implementing exploration pursuant to joint ventures.
Cash Flows:
----------
The Company has achieved no revenues from any operations during the
previous year or past six months, ending June 30, 1997.
The income from operations for prior years compares as follows: Fiscal
years 1994 and 1995 ($0) and ($0) to Fiscal year ended December 31, 1996. The
Company has never had any income, revenue or profits.
At this time, the Company is dependent upon private placements or loans for
future operations and funding. Therefore it will have to either borrow money, if
possible, or raise funds through subsequent public or private offerings to
continue operations until when, or if, it ever develops sufficient revenue from
its assets to maintain operations. If such revenues are not generated, or
participants not found the Company will be forced to develop another line of
business, or to finance its operations through borrowed funds, the sale of
assets it has, or enter into the sale of stock for additional capital none of
which may be feasible when needed. The Company has no management ability, and no
financial resources or plans to enter any other business as of this date
although the Company will be open to suggestion and opportunity.
CHANGES IN FINANCIAL CONDITION
- - ------------------------------
At year end 1996 the Company's assets increased to $50,802 compared to $0
at end of 1995. The increase was a result of advances for expenditures for the
exploration and development of the China joint ventures by Richco Investors,
Inc., its largest shareholder.
The liabilities, nearly all of which are current liabilities, also
increased significantly as a result of advances to bind the joint venture at
$50,802. At year end 1996, current liabilities were $53,327, an increase of 43%
over the 1995 year end liabilities of $37,407.
12
<PAGE>
Stockholders' deficit at year end 1996 was (2,525), a decrease of 92% over
the 1995 stockholder's deficit of (37,407). The Company, in other words,
continued to increase the stockholders' deficit. This was exacerbated by the
Company's failure to generate any revenues from any source, in spite of
continued expenses and oil and gas prospect investment and exploration costs.
From the aspect of whether the Company can continue toward its business
goal of commencing production from its China oil prospects, the Company is
deficient in needed capital. Without continued capital infusions or loans or a
combination thereof, it is unlikely that the company can carry out its business
goals regarding the China joint venture operations on the oil prospects.
Comparison of Results of Operation for the Fiscal Years Ended December 31, 1996
and 1995
- - --------------------------------------------------------------------------------
The Corporation had no operating revenues in either 1996 or 1995.
The Company incurred operating expenses, all of which are general and
administrative in nature, totaling $3,118 in 1996 as compared to $79,455 in
1995. As a result of having no operating income, the Company incurred operating
losses of $(3,118) in 1996 and $(79,455) in 1995. The Company anticipates that
the trend of net losses will continue in 1997 as it continues to incur major
expenses in attempting to start up its China oil joint ventures.
General and Administrative costs decreased in 1996 to $3,118 from a total
of $46,004 in 1995. Expenses of a General and Administrative nature will
increase substantially as a result of registering its common stock under the
Securities and Exchange Act of 1934, increased audit costs and expenses related
to private placements to fund the China oil joint ventures and miscellaneous
operations costs.
Travel expenses in 1996 were about the same as 1995; they are expected to
increase in 1997 for travel to China.
Office expenses, including telephone, were $0 in 1996 and $0 in 1995. These
expenses were contributed by President Gerry Runolfson. This may increase in
1997 due to expanded operations.
1996 expense for accounting totaled $0, while in 1995 accounting and other
professional expenses were $0. Likewise, accounting and other professional
expenses in 1997 will be materially larger due to efforts required to bring the
Company's accounting current.
It should be expected that legal and accounting expenses will increase
substantially for 1997.
The per-share loss amounted to $.000 in 1996 as compared to $.004 in 1995.
13
<PAGE>
The Company incurred interest expenses in 1996 of $0 as opposed to 1995
interest of $33,451. The conversion of loans to equity led to the decrease in
interest. This decreased interest cost may not continue, but will probably
increase, in the coming year with possible borrowings to fund China joint
ventures.
Comparison of Results of Operations for Fiscal Years Ended December 31,
1995 and 1994. During the fiscal year ended December 31, 1994, the Registrant
realized a net loss on operations of $(563,546) ($.028/share) compared to
$(79,455) ($.004/share) for the fiscal year ended December 31, 1995. The large
loss in 1994 was as a result of a $409,236 write off of the N-Viro licenses and
$25,000 in royalties.
Operating expenses decreased during 1995 to $79,455 compared to 1994 at
$154,310 except license write off as a result of the decrease in royalty and
fiscal agent.
LIQUIDITY
- - ---------
The Company expects that its need for liquidity will increase for the
coming year due to its anticipation of expending funds to form joint ventures in
the Peoples Republic of China or make acquisitions of interests in businesses.
Short Term.
----------
On a short term basis, the Company does not generate any revenue to cover
operations. Based on prior experience, the Company believes it will continue to
have insufficient revenue to satisfy current and recurring liabilities as it
seeks to locate business opportunities. For short term needs the Company will be
dependent on receipt, if any, of private placement proceeds.
The Company's current assets $50,802 at December 31, 1996, were exceeded by
its current liabilities, $53,327. Of the current total liabilities, $50,802 was
owed to a shareholder group, who have agreed to convert the short term
liabilities to a one year loan. The Company had no liquid assets or cash at year
end. It has recently completed a private placement of its securities to
capitalize its business.
Long Term.
---------
On a long-term basis, the Company has no fixed assets.
The Company has no business at this time from which it generates income.
Its operations have no net cash flow at this time. It is reliant upon success in
its China joint ventures, at this time, for possibility of future income.
CAPITAL RESOURCES
The primary capital resources of the Company are its stock only. Stock may
be illiquid because it is restricted in an unproved company with no assets or
business.
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<PAGE>
The Company has completed a private placement of 5,179,500 Units consisting
of common shares and warrants @ $1.00 per unit for operating capital. The
Offering ceased as of May 31, 1997.
The Company intends to continue to attempt to acquire business assets
through the use of its stock, in exchange for assets, under the circumstances
discussed in Item 1 (Business).
As of the date of the registration statement, the Company has material
commitments for capital expenditures within the next year, pursuant to the
Richco and Milco joint ventures, which amounts may exceed its available capital
of $4,500,000.
ITEM 3. PROPERTIES
(a) Real Estate. None
(b) Title to properties. See item (i) below.
(c) Oil and Gas Drilling Activities. None.
(d) Oil and Gas Production. None.
(e) Oil and Gas Reserves. None
(f) Present value of Estimated future Net Reserves From Proved
Developed Oil and Gas Reserves. None.
(g) Reserves Reported to Other Agencies. None.
(h) Natural Gas Gathering/Processing Facilities. None.
(i) Present Activities and Subsequent Events:
Material Agreements
-------------------
(1) Richi Petroleum Corp. Agreement
Under the Agreement the Registrant earns a 50% interest in the profits to
be received by a joint venture named Ningxia RichiTian Oil Development Co. Ltd.
("RichiTian") established by Richi Petroleum Corp. (a company owned by Director
Ernest Cheung and holder of 4% of Registrants common stock) and LanTian
Materials Company (a subsidiary of Ningxia Petroleum Company), a corporation
formed under the laws of the People's Republic of China ("PRC").
15
<PAGE>
The joint venture is governed by the laws of the PRC.
Richi Petroleum Corp. owns an 80.5% interest in RichiTian joint venture,
which in turn holds the rights to explore, develop and produce oil and gas from
certain concessions located in YanChi County, Ningxia Province and WuQu County,
Shaanxi Province, in the PRC (collectively, the "Richi Concession"):
County Concession Sq.Km. Acres
------ ---------- ------ -----
YanChi HongJingZi 70 17,290
WuQi WuGuCheng 250 61,750
WuQi TieBianCheng 150 37,050
--- -------
Total 470 116,090
(2) Milco Petroleum, Inc. Agreement
The Registrant and Milco Petroleum, Inc. ("Milco") have entered into a
Participation Agreement dated as of January 21, 1997 (the "Milco Participation
Agreement") pursuant to which the Registrant earns a 50% interest in the profits
to be received by a joint venture named Shaanxi ZhongDa Energy Development Co.,
Ltd. ("ZhongDa") established by Milco and ZhongYuan Enterprise Company
("ZhongYuan"), a corporation formed under the laws of the PRC. The joint venture
is governed by the laws of the PRC. Milco has represented that it has an 85.0%
profit interest in ZhongDa, which in turn holds the rights to explore, develop
and produce oil and gas from certain concessions located in Northern Shaanxi
Province in the PRC, as follows (collectively, the "Milco Concession"):
County Concession Sq.Km Acres
------ ---------- ----- -----
AnSai QinBanWan 100 24,700
HaoJiaPing 20 4,940
JingBian QiaGou 80 19,760
PanGou 60 14,820
WuQi ZhouWanZhen 200 49,400
ChangGuanMiao 50 12,350
WuCangPu 200 49,400
DingBian HanQu 100 24,700
Total 810 200,700
----- --- -------
Under terms of the Milco Participation Agreement, the Company agrees to pay
100% of all of the costs of operating, exploring and developing the Milco
Concession to Milco, as consideration for an undivided 50% interest in all of
the profits generated from the Milco Concession and paid to the joint venture.
The Company will also participate in all other future concessions acquired by
Milco on the same 50% participation terms.
16
<PAGE>
(j) Criteria:
The Company will consider the following criteria when evaluating whether to
participate in an oil and gas prospect in China:
1) Market demand for products;
2) Efficient transportation availability;
3) Location;
4) Weather;
5) Management;
6) Cost of participation;
7) Terms;
8) Risk vs. rewards;
9) Feasibility study;
10) Whether capital is available to fund participation.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AS OF AUGUST 14, 1997
(a) Beneficial owners of five percent (5) or greater, of the Registrant's
Common Stock and Warrants: No Preferred Stock is outstanding at the date of this
offering. The following sets forth information with respect to ownership by
holders of more than five percent (5%) of the Company's Common Stock known by
the Company based upon 30,576,250 shares outstanding at August 14, 1997.
<TABLE>
<CAPTION>
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Interest Class
- - ----- ---------------- ------------------- -----
<S> <C> <C> <C>
Common Stock Richco Investors, Inc. 9,225,000 30.17% (1)(2)
789 West Pender St. #830
Vancouver, B.C. Canada V6C 1H2
b) The following sets forth information with respect to the Company's
Common Stock beneficially owned by each Officer and Director, and by all
Directors and Officers as a group.
Amount and
Title Name of Nature of Percent
of Beneficial Beneficial of
Class Owner Ownership Class
- - ----- ----- --------- -----
Common Gerald Runolfson 512,501 (a)(b)(c) 1.67%
President and Director
4151 Rose Crescent
West Vancouver, B.C. Canada
(a) Porta-Pave Industries, Inc. (a company
owned by Runolfson family) 57,001
(b) Elaine Runolfson (wife of Gerald Runolfson) 38,000
(c) Gerald Runolfson, individually 417,500
-------
512,501
17
<PAGE>
Amount and
Title Name of Nature of Percent
of Beneficial Beneficial of
Class Owner Ownership Class
- - ----- ----- --------- -----
Common Ernest Cheung 9,225,000 30.17% (1)(2)
Secretary and Director
904 - 183 Keefer Place
Vancouver, B.C. Canada
V6B 6B9
Common Patrick Chan 0 0%
Director and Chairman
#7 Conduit Road, Flat 6E
Hong Kong
Common Joseph Tong, Director 0 0%
33 Allview Crescent
North York, Ont., Canada
M2J 2R4
Officers and Directors
as a Group 9,737,501 31.84%
</TABLE>
(1) 9,225,000 shares are owned by Richco Investors, Inc. of which Ernest
Cheung is a director, officer and shareholder.
(2) Richco Investors, Inc. is beneficially owned by Raoul Tsakok through
ownership of 50%+ shares of common stock.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
(a) The following table furnishes the information concerning the directors
of the Company as of August 14, 1997. The directors of the Company are elected
every year and serve until their successors are elected and qualify.
Name Age Title Term
- - ---- --- ----- ----
Gerald William Runolfson 57 President and Director Annual
Ernest Cheung 47 Secretary and Director Annual
Patrick Pak Ling Chan 43 Director and Chairman Annual
Joseph S. Tong 47 Director Annual
The term of office for each director is one (1) year, or until his/her
successor is elected at the Company's annual meeting and qualified. The term of
office for each officer of the Company is at the pleasure of the board of
directors.
18
<PAGE>
The board of directors has no nominating, auditing committee but has set up
a compensation committee. Therefore, the selection of person or election to the
board of directors was neither independently made nor negotiated at arm's
length.
The term of office for each director is one (1) year, or until his/her
successor is elected at the Company's annual meeting and qualified. The term of
office for each officer of the Company is at the pleasure of the board of
directors.
(c) Identification of Certain Significant Employees.
There are no employees other than the executive officers disclosed above
who make, or are expected to make, significant contributions to the business of
the Company, the disclosure of which would be material.
(d) Family Relationships. None.
(e) Business Experience.
The following is a brief account of the business experience during the past
five years of each director and executive officer of the Company, including
principal occupations and employment during that period and the name and
principal business of any corporation or other organization in which such
occupation and employment were carried on.
MANAGEMENT EXPERIENCE
Gerald William Runolfson, President and Director, age 57, has been
President and Director of the Company since 1991. He received a Bachelor of
Science in Civil Engineering in 1963 from University of Saskatchewan Canada. He
studied Business Administration 1970 - 1971 at University of Alberta, Canada.
From 1988 to date, he has been President of International Butec Industries
Corp., Vancouver, B.C. From 1991 to 1994 he was President of N-Viro Recovery,
Inc. From 1994 to present he has been President of Eikon Products, Inc. of
Vancouver, B.C. He has been a Director of Horseshoe Gold Mines since 1991.
Ernest Cheung, Secretary and Director, age 47, received an MBA in Finance
and Marketing from Queen's University, in Kingston, Ontario in 1975, and
obtained a Bachelors Degree in Math in 1973 from University of Waterloo,
Ontario. From 1984 to 1991 he was vice President and Director, Capital Group
Securities, Ltd. in Toronto, Canada. From 1991 to 1993 he was Vice President of
Midland Walwyn Capital, Inc. of Toronto, Canada. From 1993 to 1994 he was Vice
Chairman, Tele Pacific International Communications Corp. of Vancouver, B.C.
From 1992 - 1995 he has served as a Director of Tele Pacific International
Communications Corp. (VSE). He has also served as a Director for Richco
Investors, Inc. (CDN) since 1995. From 1994 to 1996 he was Vice President of
Finance and Director of BIT Integration Technology, Inc. of Toronto, Canada.
Since 1996 he has been a Director of BIT Integration Technology, Inc. (ASE) and
since 1997 he has served as Director of the following
19
<PAGE>
companies: Agro International Holdings, Inc. (VSE); Spur Ventures, Inc. (VSE);
Placer Technologies, Inc. (Nasdaq Bulletin Board); and Global-Pacific Minerals,
Inc. (VSE). From January 1997 to present he has been President of Richco
Investors, Inc. of Vancouver, B.C. He has been a Director of Registrant since
January 1997. He is currently a Director of Agro International Holdings, Inc.
since January 1997, Spur Ventures, Inc. since 1997 and Placer Technologies, Inc.
since 1997. He has held a Canadian Securities license, but which is currently
inactive.
Patrick Pak Ling Chan, age 43, has been a Director of Registrant since
January 1997 and is now Chairman. He graduated from McGill University in
Montreal, Quebec with a Bachelor of Commerce in Accounting in 1977. He is a
Chartered Accountant in British Columbia (since 1980). From 1992 to 1993 he was
executive assistance to the Chairman, Solid Pacific Enterprises, a company
engaged in manufacturing and distribution of confectionery products in Hong Kong
and China. From 1985 to 1992 he was employed at Coopers & Lybrand, Toronto,
Canada, and focused on mergers and acquisitions. From 1993 to 1995 he was a
registered Securities Representative with Bache Securities.
Joseph S. Tong, age 47, has been a director of Registrant since January
1997. Mr. Tong matriculated from La Salle College, Kowloon, Hong Kong in 1968.
From 1986 to 1990 he was a Branch Manager for Canadian Imperial Bank of
Commerce. From 1990 to 1994 he was Regional Manager, Asian Banking, Canadian
Imperial Bank of Commerce. From 1994 to 1995 he was President of China Growth
Enterprises Corporation. From 1995 to present he has been a Director, Corporate
Finance, of Corporate Capital Group in Ontario, Canada. He is currently a
director of Agro International Holdings, Inc. of Vancouver, B.C. since January
1997 and Global Pacific Minerals, Inc. of Vancouver, B.C. since January 1997.
Directors Compensation
Each member of the Board of Directors of the Company receives $1,000.00
plus reasonable outside travel expenses for each Board meeting he attends and
for each Committee meeting he attends during the fiscal year. Directors who are
also officers of the Company receive no compensation for services as a director.
ITEM 6. EXECUTIVE COMPENSATION
(a) Cash Compensation.
Compensation paid by the Company for all services provided during the
fiscal year ended December 31, 1996, (1) to each of the Company's five most
highly compensated executive officers whose cash compensation exceeded $60,000
and (2) to all officers as a group is set forth below under directors.
20
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
----------------------------------------
Annual Compensation Awards
==================================================================================================================================
Name and Year Salary ($) Bonus Other Annual Restricted Securities
Principal ($) Compensation ($) Stock Underlying
Position Award(s)($) Options/SARs(#)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald 1994 0 0 0 0 0
Runolfson,
President and
Director
--------------------------------------------------------------------------------------------------------------
1995 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------
1996 0 0 0 0 0
==================================================================================================================================
Ernest Cheung, 1994 0 0 0 0 0
Secretary and
Director
--------------------------------------------------------------------------------------------------------------
1995 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------
1996 0 0 0 0 0
==================================================================================================================================
Patrick Chan, 1994 0 0 0 0 0
Director
--------------------------------------------------------------------------------------------------------------
1995 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------
1996 0 0 0 0 0
==================================================================================================================================
Joseph Tong, 1994 0 0 0 0 0
Director
--------------------------------------------------------------------------------------------------------------
1995 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------
1996 0 0 0 0 0
==================================================================================================================================
</TABLE>
(b) Compensation Pursuant to Plans. None.
(c) Other Compensation. None. No stock appreciation rights or warrants
exist to management
(d) Compensation of Directors.
Compensation paid by the Company for all services provided during the
fiscal year ended December 31, 1996, (1) to each of the Company's directors
whose cash compensation exceeded $60,000 and (2) to all directors as a group is
set forth below:
21
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
------------------------------------------
(Except for compensation of Officers who are also Directors which
Compensation is listed in Summary Compensation Table of Executives)
Cash Compensation Security Grants
=================================================================================================================================
Name Annual Meeting Consulting Number Number of Securities
Retainer Fees ($) Fees/Other of Underlying
Fees ($) Fees ($) Shares Options/SARs(#)
(#)
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A. Director 0 0 0 0 0
Gerald Runolfson
- - ---------------------------------------------------------------------------------------------------------------------------------
B. Director 0 0 0 0 0
Ernest Cheung
- - ---------------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------------
C. Director 0 0 0 0 0
Patrick Chan
- - ---------------------------------------------------------------------------------------------------------------------------------
D. Director 0 0 0 0 0
Joseph Tong
=================================================================================================================================
</TABLE>
(e) Termination of Employment and Change of Control Arrangements.
None
(f) KEY EMPLOYEES INCENTIVE STOCK OPTION PLAN: NONE
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain Transactions
--------------------
The amount due to a related party at December 31, 1996, was due to a
director of the company for unpaid fees in 1995: $9,000. This amount was
unsecured, non-interest bearing and had no specific terms for repayment. During
the year ended December 31, 1995, the company issued 710,351 common shares to
settle $71,035 due to this related party at that time.
Richco Investors, Inc. is the parent of Richi Petroleum Corp. and is
deemed beneficially owned by Ernest Cheung, Secretary and a Director.
Raoul Tsakok of Vancouver, B.C. owns more than 50% of the outstanding
equity of Richco Investors, Inc. Richi Petroleum Corp. and Milco Petroleum, Inc.
are wholly owned subsidiaries of Richco Investors, Inc. Richco Investors, Inc.
owns 9,225,000 shares of common stock of the Company (30.17% of the outstanding
stock of registrant). The Registrant has entered into joint ventures in China
with Richi and Milco (see Page 7 "Joint Ventures with Milco Petroleum, Inc. and
Richi Petroleum Corp.").
During the year ended December 31, 1995, a director of the Company, Gerald
Runolfson, charged consulting fees to the Company in the amount of $36,000. No
such fees were charged in 1996.
22
<PAGE>
ITEM 8. LEGAL PROCEEDINGS
None at date of Registration Statement
ITEM 9. (a) MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is not now traded on the "Over-the-Counter"
market, but when traded will be quoted in the National Quotation Bureau or the
NASD Electronic Bulletin Board. The following table sets forth high and low bid
prices of the Company's common stock for the three (3) years ended March 31,
1997, 1996, 1995, and 1994 as follows:
Bid
High Low
1997
First Quarter 2 1/8 1 1/8
Second Quarter 1 13/16 1
Bid
High Low
1996
First Quarter 1/4 1/8
Second Quarter 15/32 1/8
Third Quarter 5/16 9/32
Fourth Quarter 2 1/16 1/8
Bid
High Low
1995
First Quarter 1/2 1/4
Second Quarter Not Traded
Third Quarter 1/4 3/16
Fourth Quarter 1/3 1/16
Bid
High Low
1994
First Quarter No Data
Second Quarter 1 1/2 3/4
Third Quarter 1 1/4 1/2
Fourth Quarter 1/3 1/16
23
<PAGE>
Such over the counter market quotations reflect interdealer prices, without
retail mark up, mark down or commission and may not necessarily represent actual
transactions.
(b) As of July 17, 1997, the Company had 182 shareholders of record of the
common stock.
(c) No dividends on outstanding common stock have been paid within the last
two fiscal years, and interim periods. The Company does not anticipate or intend
upon paying dividends for the foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
UNREGISTERED STOCK SALES IN THE THREE YEAR PERIOD PRIOR TO THIS
REGISTRATION STATEMENT.
<TABLE>
<CAPTION>
Purchase Amount of
Shareholder Price Shares Consideration
- - ----------- ----- ---------- -------------
1994
<S> <C> <C> <C>
Anker Bank $.015 200,000 Warrant Exercise
1995
Porta Pave Industries, Inc. $.010 713,508 Shares for Debt
Singer, Lewak Greenbaum & $0.30 25,000 Shares for Debt
Goldstein
Ecology Projects, Inc. $0.10 710,909 Shares for Debt
Warec Developments Ltd. $0.10 710,909 Shares for Debt
S&T Finance, Inc. $0.10 699,060 Shares for Debt
Environmental Capital Corp. $0.10 643,169 Shares for Debt
Givigest Fiduciaria SA $0.10 1,000,000 Shares for Debt
Benton Enterprises Limited $0.10 1,474,128 Shares for Debt
---------
5,976,683
1996
Porta Pave Industries, Inc. $0.10 380,002 Shares for Debt
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
All of the following sales were made in Reliance upon the exemption
provided under Regulation S.
Private Placement in April - May 1997
==========================================================================================
Name & Address Number of Units Dollar Exemption
Amount No.
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Floyd R. Hill 43,500 $43,500 **
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
- - ------------------------------------------------------------------------------------------
Corrine Angell 25,000 $25,000 **
6360 Sheridan Avenue
Richmond, B.C. V7E 4W7
- - ------------------------------------------------------------------------------------------
Don Beck 7,500 $7,500 *
202 - 3200 Capilano Road
North Vancouver, B.C. V7R 1C5
- - ------------------------------------------------------------------------------------------
James Brydon 25,000 $25,000 **
#3 - 15123 Marine Drive
White Rock, B.C. V4B 1C5
- - ------------------------------------------------------------------------------------------
Pegasus Holdings, Ltd. 25,000 $25,000 **
147 West 16th Street
North Vancouver, B.C. V7M 1T3
(Principal Shareholders -
Michael Byrne & Michael Weir)
- - ------------------------------------------------------------------------------------------
Gordon Duff 18,500 $18,500 **
800 - 1030 West Georgia Street
Vancouver, B.C. V6E 3B9
- - ------------------------------------------------------------------------------------------
Dr. Antonia Gall 18,500 $18,500 **
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
- - ------------------------------------------------------------------------------------------
NOR Investment Group, Inc. 60,000 $60,000 **
7483 Tamarind Drive
Vancouver, B.C. V5S 3Z9
(Principal Shareholder -
Ronald V. Genovese)
- - ------------------------------------------------------------------------------------------
25
<PAGE>
- - ------------------------------------------------------------------------------------------
FRI Corp., Inc. 100,000 $100,000 ***
4557 West 8th Avenue
Vancouver, B.C. V6R 2A4
(Principal Shareholder -
Charles Klar)
- - ------------------------------------------------------------------------------------------
378255 B.C. Ltd 18,500 $18,500 **
1500 - 701 West Georgia Street
Vancouver, B.C. V7Y 1A1
(Principal Shareholder -
Ben Moxon)
- - ------------------------------------------------------------------------------------------
Dr. Judith Naylor 18,500 $18,500 **
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
- - ------------------------------------------------------------------------------------------
Don Simpson 25,000 $25,000 **
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
- - ------------------------------------------------------------------------------------------
Kim Simpson 25,000 $25,000 **
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
- - ------------------------------------------------------------------------------------------
Epp Talstra 50,000 $50,000 **
5390 Coulhard Place
Surrey, B.C. V3X 3E4
- - ------------------------------------------------------------------------------------------
Max Waibler 18,500 $18,500 **
2068 West 29th Avenue
Vancouver, B.C. V6A 3A1
- - ------------------------------------------------------------------------------------------
Charles Walker 18,500 $18,500 **
1455 Belview Avenue
West Vancouver, B.C. V2T 1C3
- - ------------------------------------------------------------------------------------------
Janet Sparling 18,500 $18,500 **
1900 Cypress Street
Vancouver, B.C. V6J 3L8
- - ------------------------------------------------------------------------------------------
Terry Lightheart 10,000 $10,000 *
633 East 1st Street
North Vancouver, B.C. V7L 1C1
- - ------------------------------------------------------------------------------------------
George Guy 40,000 $40,000 **
2100 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
- - ------------------------------------------------------------------------------------------
26
<PAGE>
- - ------------------------------------------------------------------------------------------
Ann Barends 10,000 $10,000 *
1805 Palmerston Avenue
West Vancouver, B.C. V7Y 2V3
- - ------------------------------------------------------------------------------------------
Mobax Enterprises Ltd. 30,000 $30,000 **
2876 West 16th Avenue
West Vancouver, B.C. V6R 3C6
(Principal Shareholder -
Andrew Thomas)
- - ------------------------------------------------------------------------------------------
Andrew Thomas 50,000 $50,000 **
2876 West 16th Avenue
West Vancouver, B.C. V6R 3C6
- - ------------------------------------------------------------------------------------------
Alan Slaughter 40,000 $40,000 **
Box 15, RR#1
1368 Madrona Drive
Nanoose Bay, B.C. V0R 2R0
- - ------------------------------------------------------------------------------------------
Katherine Angus 10,000 $10,000 *
216 - 1728 Alberni Street
Vancouver, B.C. V6R 1B2
- - ------------------------------------------------------------------------------------------
Brock Smeaton 7,500 $7,500 *
3956 Sharon Place
West Vancouver, B.C. V7Y 4I6
- - ------------------------------------------------------------------------------------------
Maggie Newman 5,000 $5,000 *
5517 Deerhorn Lane
North Vancouver, B.C. V7R 4S8
- - ------------------------------------------------------------------------------------------
A.L. Cinnamon 10,000 $10,000 *
6331 Buckingham Drive
Burnaby, B.C. V5E 1A8
- - ------------------------------------------------------------------------------------------
Heidi Handja 5,000 $5,000 *
2451 Dolly Varden Road
Campbell River, B.C. V9W 4W5
- - ------------------------------------------------------------------------------------------
Robert McGrenera 10,000 $10,000 *
3420 Norwood Avenue
North Vancouver, B.C. V7N 3P5
- - ------------------------------------------------------------------------------------------
27
<PAGE>
- - ------------------------------------------------------------------------------------------
Seabright Financial 30,000 $30,000 **
Consultants, Inc.
5210 Marguerite Street
Vancouver, B.C. V6M 3K2
(Principal Shareholder -
Jim Kungle)
- - ------------------------------------------------------------------------------------------
Tom Parkinson 25,000 $25,000 **
111 - 1141 West 7th Avenue
Vancouver, B.C. V6H 1B5
- - ------------------------------------------------------------------------------------------
Raymond Shum 10,000 $10,000 *
1548 Marine Drive
Wet Vancouver, B.C. V7H 1H8
- - ------------------------------------------------------------------------------------------
Walter Wysota 10,000 $10,000 *
4695 Woodview Place
West Vancouver, B.C. V7S 2X7
- - ------------------------------------------------------------------------------------------
Michael Angus 10,000 $10,000 *
1715 Oughton Drive
Port Coquitlam, B.C. V3C 1H8
- - ------------------------------------------------------------------------------------------
David Gradley 7,000 $7,000 *
4640 North Piccadilly
West Vancouver, B.C. V7W 1E2
- - ------------------------------------------------------------------------------------------
Robert Gradley 4,000 $4,000 *
3895 West 22nd Avenue
Vancouver, B.C. V6S 1J8
- - ------------------------------------------------------------------------------------------
Sabina Chow 8,000 $8,000 *
6819 Iverness Street
Vancouver, B.C. V5X 4G5
- - ------------------------------------------------------------------------------------------
Harris Wheeler 10,000 $10,000 *
P.O. Box 503
Charlie Lake, B.C. V0C 1H0
- - ------------------------------------------------------------------------------------------
Cascadia Holdings 10,000 $10,000 *
2225 West 41st Avenue
Vancouver, B.C. V6M 4L3
(Principal Shareholder -
Lawrence Beadle)
- - ------------------------------------------------------------------------------------------
28
<PAGE>
- - ------------------------------------------------------------------------------------------
Sharon Slaughter 5,000 $5,000 *
Box 15, R.R. #1
1368 Madrona Drive
Nanoose Bay, B.C. V0R 2R0
- - ------------------------------------------------------------------------------------------
Mira Nesin 10,000 $10,000 *
3636 Crown Street
Vancouver, B.C. V6S 2K2
- - ------------------------------------------------------------------------------------------
Shui-Moon To 50,000 $50,000 **
2689 West 21st Avenue
Vancouver, B.C. V6L 1K2
- - ------------------------------------------------------------------------------------------
May-Ying To 50,000 $50,000 **
2689 West 21st Avenue
Vancouver, B.C. V6L 1K2
- - ------------------------------------------------------------------------------------------
Gemma Oosterman 5,000 $5,000 *
202 - 4675 Valley Drive
Vancouver, B.C. V6J 4B7
- - ------------------------------------------------------------------------------------------
Frances Roitman 20,000 $20,000 **
606 - 1945 Barclay Street
Vancouver, B.C. V6G 1L2
- - ------------------------------------------------------------------------------------------
J. Chris Lay 20,000 $20,000 **
2100 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
- - ------------------------------------------------------------------------------------------
Jerry Dugger 10,000 $10,000 *
200 - 1594 Kobet Way
Port Coquitlam, B.C. V3L 5N5
- - ------------------------------------------------------------------------------------------
Christel Meyer 5,000 $5,000 *
4580 Woodgreen Drive
West Vancouver, B.C. V7S 2V2
- - ------------------------------------------------------------------------------------------
Aldo Trinetti 5,000 $5,000 *
608 - 2041 Bellwood Avenue
Burnaby, B.C. V5B 4V5
- - ------------------------------------------------------------------------------------------
Graham MacMillan 20,000 $20,000 **
301 - 2232 Marine Drive
West Vancouver, B.C. V7V 1K4
- - ------------------------------------------------------------------------------------------
29
<PAGE>
- - ------------------------------------------------------------------------------------------
Canaccord Capital Corporation 30,000 $30,000 **
ITF Graham MacMillan
Account No. 2295745
2000 - 609 Granville Street
Vancouver, B.C. V7Y 1H2
- - ------------------------------------------------------------------------------------------
Nicola Nielsen 15,000 $15,000 *
14 - 636 Clyde Avenue
West Vancouver, B.C. V7Z 1E1
- - ------------------------------------------------------------------------------------------
Christine Smith 5,000 $5,000 *
314 - 3738 Norfolk Street
Burnaby, B.C. V5G 4V4
- - ------------------------------------------------------------------------------------------
G.D. Nielsen Developments Ltd. 5,000 $5,000 *
14 - 636 Clyde Avenue
West Vancouver, B.C. V7Z 1E1
(Principal Shareholder -
Greg Nielsen)
- - ------------------------------------------------------------------------------------------
Janet Hutchinson 5,000 $5,000 *
4115 Ripple Road
West Vancouver, B.C. V7V 3C1
- - ------------------------------------------------------------------------------------------
Glen Mitchell 20,000 $20,000 **
6th Floor
700 West Georgia Street
Vancouver, B.C. V7Y 1A2
- - ------------------------------------------------------------------------------------------
Allan Gauthier 30,000 $30,000 **
6th Floor
700 West Georgia Street
Vancouver, B.C. V7Y 1A2
- - ------------------------------------------------------------------------------------------
Janine Harris 5,000 $5,000 *
545 Ventura Crescent
North Vancouver, B.C. V7N 3G8
- - ------------------------------------------------------------------------------------------
Warren Wagstaff 10,000 $10,000 *
2500 - 666 Burrard Street
Vancouver, B.C. V6C 2X8
- - ------------------------------------------------------------------------------------------
Dominic Spooner 10,000 $10,000 *
2500 - 666 Burrard Street
Vancouver, B.C. V6C 2X8
- - ------------------------------------------------------------------------------------------
30
<PAGE>
- - ------------------------------------------------------------------------------------------
Anne Peterson-Angus 110,000 $110,000 ***
3160 Benbow Road
West Vancouver, B.C. V7V 3E2
- - ------------------------------------------------------------------------------------------
Jack Bell 10,000 $10,000 *
2703 - 2055 Pendred Street
Vancouver, B.C. V6G 1T9
- - ------------------------------------------------------------------------------------------
J. Michael Leckie 10,000 $10,000 *
1548 Marine Drive
West Vancouver, B.C. V7H 1H8
- - ------------------------------------------------------------------------------------------
Eric Feilden 10,000 $10,000 *
900 - 4720 Kingsway Avenue
Burnaby, B.C. V5H 4N2
- - ------------------------------------------------------------------------------------------
Helen Killas 100,000 $100,000 ***
3 - 2498 Point Grey Road
Vancouver, B.C. V6K 1A2
- - ------------------------------------------------------------------------------------------
Mr. Declan MacFadden 50,000 $50,000 **
JF Evertslaan 18
1406KP Bussum
Netherlands
- - ------------------------------------------------------------------------------------------
Robert Manchester 10,000 $10,000 *
1850 Burrill Avenue
North Vancouver, B.C. V7K 1M2
- - ------------------------------------------------------------------------------------------
Jeff Read 5,000 $5,000 *
1420 Queens Avenue
West Vancouver, B.C. V7T 2H9
- - ------------------------------------------------------------------------------------------
Dr. James Findlay 10,000 $10,000 *
7 - 20691 Lougheed Highway
Maple Ridge, B.C. V2X 2P9
- - ------------------------------------------------------------------------------------------
Steven J. Bryant 5,000 $5,000 *
18999 - 59th Avenue
Surrey, B.C. V3S 7R8
- - ------------------------------------------------------------------------------------------
Sharif Property Holdings 50,000 $50,000 **
1080 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
(Principal Shareholder -
- - ------------------------------------------------------------------------------------------
31
<PAGE>
- - ------------------------------------------------------------------------------------------
Intergulf Investment Corp. 250,000 $250,000 ***
1000 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
(Principal Shareholder -
- - ------------------------------------------------------------------------------------------
Carlo K. Rahal 50,000 $50,000 **
6410 Charing Court
Burnaby, B.C. V5E 3Y3
- - ------------------------------------------------------------------------------------------
Nell Dragovan 50,000 $50,000 **
900 - 900 West Hastings Street
Vancouver, B.C. V6C 1E5
- - ------------------------------------------------------------------------------------------
Thesis Group, Inc. 100,000 $100,000 ***
19 Hanover Terrace
Regents Park
London, England NW1 4RT
(Principal Shareholder -
Maurice Colson)
- - ------------------------------------------------------------------------------------------
Sharon Scholz 25,000 $25,000 **
425 Rabbit Lane
West Vancouver, B.C. V7S 1J1
- - ------------------------------------------------------------------------------------------
John Gigliotti 25,000 $25,000 **
3100 - 666 Burrard Street
Vancouver, B.C. V6C 3B1
- - ------------------------------------------------------------------------------------------
Michael Case 15,000 $15,000 *
674 Leg in Boot Square
Vancouver, B.C. V5Z 4B4
- - ------------------------------------------------------------------------------------------
BSM Enterprises Ltd. 75,000 $75,000 ***
6228 Tiffany Boulevard
Richmond, B.C. V7C 4Z2
(Principal Shareholder -
Balraj Mann)
- - ------------------------------------------------------------------------------------------
Trudy Mann 25,000 $25,000 **
6228 Tiffany Boulevard
Richmond, B.C. V7C 4Z2
- - ------------------------------------------------------------------------------------------
Billee Davidson 25,000 $25,000 **
3902 West 38th Avenue
Vancouver, B.C.
- - ------------------------------------------------------------------------------------------
32
<PAGE>
- - ------------------------------------------------------------------------------------------
First Marathon Securities, Ltd. 100,000 $100,000 ***
ITF Seabright Investments
Consultants, Inc.
2 First Canadian Place
Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
(Principal Shareholder -
Jim Kungle)
- - ------------------------------------------------------------------------------------------
First Marathon Securities, Ltd. 100,000 $100,000 ***
ITF David Lyall
2 First Canadian Place
Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
- - ------------------------------------------------------------------------------------------
First Marathon Securities Ltd. 75,000 $75,000 ***
ITF Rob Hartvikson
2 First Canadian Place
Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
- - ------------------------------------------------------------------------------------------
First Marathon Securities Ltd. 75,000 $75,000 ***
ITF Blayne B. Johnson
2 First Canadian Place
Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
- - ------------------------------------------------------------------------------------------
Sam Magid 100,000 $100,000 ***
1888 West 5th Avenue
Vancouver, B.C. V6J 1P3
- - ------------------------------------------------------------------------------------------
Arron Fediuk 25,000 $25,000 **
3655 Ash Street
Vancouver, B.C.
- - ------------------------------------------------------------------------------------------
Brent Norrey 5,000 $5,000 *
3946 West 11th Avenue
Vancouver, B.C. V6R 2L2
- - ------------------------------------------------------------------------------------------
William Burk 10,000 $10,000 *
1321 Grover Avenue
Coquitlam, B.C. V3J 3G3
- - ------------------------------------------------------------------------------------------
33
<PAGE>
- - ------------------------------------------------------------------------------------------
Century Square Enterprises, Inc. 30,000 $30,000 **
23/F Chekiang First Bank Bldg.
58-63 Gloucester Road
Hong Kong
(Principal Shareholder -
- - ------------------------------------------------------------------------------------------
J.R. Ing Associates Ltd. 20,000 $20,000 **
1350 West 32nd Street
Vancouver, B.C. V6H 2J3
(Principal Shareholder -
John R. Ing)
- - ------------------------------------------------------------------------------------------
J. Denis Mote 20,000 $20,000 **
1188 Englishman River Road
P.O. Box 464
Errington, B.C. V0R 1V0
- - ------------------------------------------------------------------------------------------
Barry Fraser 17,500 $17,500 *
c/o McCarthy Tetrault
777 Dunsmuir Street, #1300
Vancouver, B.C.
- - ------------------------------------------------------------------------------------------
Rusty Goepel 50,000 $50,000 **
6215 McCleery Street
Vancouver, B.C. V6M 1C3
- - ------------------------------------------------------------------------------------------
Capital Management Limited 200,000 $200,000 ***
222 Merchants Street
Valletta, Malta VLT 10
(Principal Shareholder -
Rene Frendo Randon)
- - ------------------------------------------------------------------------------------------
The Canada Trust Company 500,000 $500,000 ***
ITF Account No. 058-1044318
2nd Floor, 161 Bay Street
Toronto, Ontario
M5J 2T2 - REF: DK53
- - ------------------------------------------------------------------------------------------
Richco Investors, Inc. 1,225,000 $1,225,000 ***
Suite 830
789 West Pender Street
Vancouver, B.C. V6C 1H2
(A public company listed
on the Canadian Dealings
Network, Inc.)
- - ------------------------------------------------------------------------------------------
34
<PAGE>
- - ------------------------------------------------------------------------------------------
Trevor Young 100,000 $100,000 ***
Minane House
Minane Bridge
County Cork, Ireland
- - ------------------------------------------------------------------------------------------
Royal Bank of Canada 100,000 $100,000 ***
ITF Torbay Company
Global Securities Services
Royal Bank Plaza, S.L. Level
South Tower, 200 Bay Street
Toronto, Ontario M5B 2J5
- - ------------------------------------------------------------------------------------------
Global Securities Corporation 100,000 $100,000 ***
ITF Cayman Island Securities
2900 - 1055 West Georgia Street
Vancouver, B.C. V6E 3R5
- - ------------------------------------------------------------------------------------------
Canaccord Capital Corp. 50,000 $50,000 **
ITF Neil Linder
Account No. 200-063S-4
2300 - 609 Granville Street
Vancouver, B.C. V7Y 1H2
- - ------------------------------------------------------------------------------------------
Pie Capital Communications, Inc. 50,000 $50,000 **
3566 Point Grey Road
Vancouver, B.C. V6R 1A8
(Principal shareholder -
Albert Aimers)
- - ------------------------------------------------------------------------------------------
Marc Hung 15,000 $15,000 *
Unit #6
1200 Brunette Avenue
Coquitlam, B.C. V3K 1G3
==========================================================================================
</TABLE>
* Rules Section 128(a) (B.C.)
** Rules Section 128(b) (B.C.)
*** Act Section 55(2)(4) (B.C.)
No other sales have occurred in the three years preceding filing of this
registration statement, except for those transactions set forth in Item 7, on
page 22.
ITEM 11. DESCRIPTION OF SECURITIES TO BE REGISTERED
The Company is presently authorized to issue fifty million (50,000,000)
shares of its $.001 par value common shares in such classes as the Board may
determine. As of the effective date of this Registration Statement, thirty
million five hundred seventy six hundred two hundred fifty (30,576,250) Common
Shares are presently issued and outstanding.
35
<PAGE>
Common Shares
- - -------------
All shares, when issued, will be fully paid and non-assessable. All shares
are equal to each other with respect to voting, liquidation, and dividend
rights. Special shareholders' meetings may be called by the officers or
director, or upon the request of holders of at least one-tenth (1/10th) of the
outstanding shares. Holders of shares are entitled to one vote at any
shareholders' meeting for each share they own as of the record date fixed by the
board of directors. There is no quorum requirement for shareholders' meetings.
Therefore, a vote of the majority of the shares represented at a meeting will
govern even if this is substantially less than a majority of the shares
outstanding. Holders of shares are entitled to receive such dividends as may be
declared by the board of directors out of funds legally available therefor, and
upon liquidation are entitled to participate pro rata in a distribution of
assets available for such a distribution to shareholders. There are no
conversion, pre-emptive or other subscription rights or privileges with respect
to any shares. Reference is made to the Company's Articles of Incorporation and
its By-Laws as well as to the applicable statutes of the State of Colorado for a
more complete description of the rights and liabilities of holders of shares. It
should be noted that the By-Laws may be amended by the board of directors
without notice to the shareholders. The shares of the Company do not have
cumulative voting rights, which means that the holders of more than fifty
percent (50%) of the shares voting for election of directors may elect all the
directors if they choose to do so. In such event, the holders of the remaining
shares aggregating less than fifty percent (50%) of the shares voting for
election of directors may not elect all the directors if they choose to do so.
In each event, the holders of the remaining shares aggregating less than fifty
percent (50%) will not be able to elect directors.
Share Purchase Warrants
- - -----------------------
The Warrants are non-transferable and one (1) such Warrant will entitle the
holder to purchase on or before September 30, 1998, one (1) additional Unit of
the Issuer at a price of US $1.50 per Unit, each Unit consisting of one (1)
common share and one additional warrant. The additional warrant entitles the
holder to purchase one additional share at a price of US $2.00 per share on or
before September 30, 1999.
The Warrants contain, among other things, anti-dilution provisions and
provision for appropriate adjustment of the class, number and price of shares
issuable pursuant to any exercise thereof upon the occurrence of certain events
including any subdivision, consolidation or reclassification of the shares of
the Issuer.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Laws and Company by-laws offer protection by way of
indemnification to any officer, director or employee of the Company. The
indemnification extends to expenses, including attorney's fees, judgments, fines
36
<PAGE>
and amounts paid in settlement actually and reasonably incurred in connection
with an action, suit or proceeding if the party acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Company and with respect to any criminal proceeding if the party had no
reasonable cause to believe the conduct was unlawful.
The general effect of the above indemnification provisions allow the
employees, directors, and officers of the Company to function and engage in the
day to day business activities of the Company knowing the Company will offer
protection against the threat or event of litigation subject to the limitations
that said individual must exercise good faith and reasonableness.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 or Securities Exchange Act of 1934 may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
ITEM 13. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
a) None
b) In connection with audits of two most recent fiscal years and any
interim period preceding resignation, no disagreements exist with any former
accountant on any matter of accounting principles or procedure, which
disagreements if not resolved to the satisfaction of the former accountant would
have caused him to make reference in connection with his report to the subject
matter of the disagreement(s).
c) The principal accountant's report on the financial statements for
any of the past two years contained no adverse opinion or a disclaimer of
opinion nor was qualified as to uncertainty, audit scope, or accounting
principles except for the "going concern" qualification.
d) The decision to change accountants was approved by the Board of
Directors as the registrant has no audit committee.
ITEM 14. FINANCIAL STATEMENTS AND EXHIBITS
The following documents are filed as a part of this report:
1) Financial Statements: (See Financial Exhibits Index below and Financial
Exhibits furnished as Pages F-1 through F-20).
2) Financial Statement Schedules: None
37
<PAGE>
3) SK Exhibits: (See SK Exhibits Index SK, page 39, and SK Exhibits, SK-3.0
through SK-24.2.)
4) Supplemental Oil and Gas Information - None.
ITEM 15. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEX TO FINANCIAL STATEMENTS
AND SUPPORTING SCHEDULES
Page
Reports of Independent Public Accountants F-2
I. Financial Statements:
Consolidated Balance Sheets, Dec. 31, F-3
1994, 1995, and 1996
Consolidated Statements of Operations, F-4
Dec. 31, 1994, 1995, and 1996
Statement of Equity F-5 - F-6
Statement of Cash Flows F-7 - F-8
Notes to Consolidated Financial Statements F-9 - F-11
II. Financial Statements:
Notice to Reader F-13
Balance Sheets, March 31, 1996 and 1997 F-14
Statements of Operations, March 31, 1996 and 1997 F-15
Statements of Stockholders' Equity F-16 - F-17
Statements of Cash Flows F-18 - F-19
Notes to Financial Statements F-20
38
<PAGE>
INDEX
SK EXHIBITS
-----------
1.0 None
2.0 None
3.1* Monetary Metals Corporation: Certificate of Incorporation - Idaho
(2/4/71)
3.2* Articles of Incorporation of Monetary Metals
3.3* Articles of Amendment of Monetary Metals
3.4* Drucker Sound Design Corporation: Articles of Incorporation -
California (12/16/88)
3.5 Gul Industries Corp.: Certificate of Incorporation Delaware (10/18/89)
3.6* Agreement and Plan of Reorganization (12/14/89)
3.7* Monetary Metals Corporation: Certificate of Amendment - Idaho (4/16/90)
3.8 Gul Industries Corp.: Certificate of Amendment - Delaware (6/6/90)
3.9 Filed Certificate of Merger - Delaware (6/19/90)
3.10 Drucker Sound Design Corporation: Certificate of Amendment - Delaware
(9/4/91)
3.11 Bylaws
4.0 None
5.0 None
6.0 None
7.0 None
8.0 None
9.0 None
10.0 Material Contracts
10.1 Richi Joint Venture
10.2 Milco Joint Venture
11.0 None
12.0 None
13.0 None
14.0 None
16.0 None
17.0 None
18.0 None
19.0 None
20.0 None
21.0 None
22.0 None
23.0 None
24.1 Consent of Accountant
25.0 None
26.0 None
27.0 None
*Documents which fall under the Hardship Exemption rule for filing
electronically.
39
<PAGE>
SUPPLEMENTAL OIL AND GAS INFORMATION
All of the Company's undeveloped oil and gas properties are located within
the continental United States. No reserve study has been done, nor is it
feasible to reliably estimate reserves on the small working interests of the
Company.
Reserve Category
Proved Developed Proved Undeveloped Total
- - ---------------- ------------------ -----
Oil (bbls) Gas (MCF) Oil (bbls) Gas (MCF) Oil (bbls) Gas (MCF)
1996 0 0 0 0
1995 0 0 0 0
1994 0 0 0 0
1993 0 0 0 0
1992 0 0 0 0
Present Value of Estimate Future Net Revenues From Proved Developed Oil and
Gas Reserves. None can be made due to the insubstantial, uncertain nature of the
working interests in non-producing wells owned by the Company.
Standardized Measure of Discounted Cash Flows
Relating to Proved Oil and Gas Reserve Quantities
(Thousands of Dollars) None
Summary of Changes in the Standardized
Measure of Discounted Net Cash Flows
(Thousands of Dollars) None
40
<PAGE>
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED: _________________, 1997.
DRUCKER INDUSTRIES, INC.
by:
--------------------------------
President
Directors:
-----------------------------------
-----------------------------------
-----------------------------------
41
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1996 and 1995
(Stated in U.S. dollars)
F-1
<PAGE>
AUDITORS' REPORT
To the Stockholders,
Drucker Industries, Inc.
We have audited the balance sheets of Drucker Industries, Inc. as at December
31, 1996 and 1995 and the statements of operations, stockholders' equity and
cash flows for each of the years in the three year period ended December 31,
1996 and for the period from inception, February 4, 1991 to December 31, 1996.
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 generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1996 and 1995
and the results of its operations and cash flows for each of the years in the
three year period ended December 31, 1996 and for the period from inception,
February 4, 1991 to December 31, 1996 in accordance with generally accepted
accounting principles in the United States.
Vancouver, B.C.
March 5, 1997 Chartered Accountants
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict
- - -------------------------------------------------------------------------
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is
substantial doubt about a company's ability to continue as a going concern. The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes the realization of assets
and discharge of liabilities in the normal course of business. As discussed in
Note 1 to the accompanying financial statements and in respect of the company's
substantial losses from operations, substantial doubt about the company's
ability to continue as a going concern exists. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our report to the shareholders dated March 5, 1997 is expressed in accordance
with Canadian reporting standards which do not permit a reference to such
uncertainty in the auditors' report when the uncertainty is adequately disclosed
in the financial statements.
Vancouver, B.C.
March 5, 1997 Chartered Accountants
F-2
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 1996 and 1995
(Stated in U.S. dollars)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Resource project advance - Note 8 $ 50,802 $ --
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current
Accounts payable and accrued expenses - Note 6 $ 2,525 $ 28,407
Due to a related party - Note 3 -- 9,000
Advance payable - Note 8 50,802
----------- -----------
Total current liabilities 53,327 37,407
----------- -----------
Stockholders' Equity (Deficiency) - Note 4
Common stock $.001 par value, authorized 50,000,000 shares:
26,934,185 shares issued and outstanding 26,935 26,555
Additional paid-in capital 1,132,483 1,094,863
Deficit accumulated during the development stage (1,161,943) (1,158,825)
----------- -----------
Total stockholders' deficiency (2,525) (37,407)
----------- -----------
$ 50,802 $ --
=========== ===========
SEE ACCOMPANYING NOTES
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
and February 4, 1971 (Date of Inception)
to December 31, 1996
(Stated in U.S. dollars)
------------------------
February 4, 1971
(Date of inception) to
Year ended December 31 December 31,
1996 1995 1994 1996
--------------------------------------------------- ----------------------
<S> <C> <C> <C> <C>
General and administrative expenses $ 3,118 $ 46,004 $ 89,541 $ 442,587
Amortization of license agreement -- -- -- 56,827
Royalties - Note 4 -- -- 25,000 75,000
Interest expense -- 33,451 30,719 114,063
Fiscal agent fees -- -- 9,050 64,230
Write-off of license agreement -- -- 409,236 409,236
------------ ------------ ------------ ------------
Net loss $ (3,118) $ (79,455) $ (563,546) $ (1,161,943)
------------ ------------ ------------ ------------
Net loss per share $ (0.000) $ (.004) $ (.028)
------------ ------------ ------------
Weighted average shares outstanding 26,554,183 21,575,697 20,477,500
------------ ------------ ------------
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the years ended December 31, 1989 to December 31, 1996 and
February 4, 1971 (Date of Inception) to December 31, 1996
(Stated in U.S. dollars)
------------------------
Deficit
Accumulated
Common Stock Additional During the
------------ Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
(Note 7)
<S> <C> <C> <C> <C> <C>
Shares issued to acquire
Monetary Metals, Inc. 675,000 $ 675 $ (675) $ --
Shares issued to acquire
net assets of
Drucker Sound Design
Corporation 2,700,000 2,700 65,046 67,746
Net loss from inception
to December 31, 1989 $ (8,115) (8,115)
Net loss for year ended
December 31, 1990 (144,333) (144,333)
Five for one forward split
of outstanding shares 13,500,000 13,500 (13,500) --
Funds contributed by
stockholder 124,196 124,196
Sale of units for cash,
September 1991 1,050,000 1,050 103,950 105,000
Sale of units for cash,
December 1991 750,000 750 74,250 75,000
Shares issued to settle
debts 52,500 53 5,197 (5,250) --
Shares issued to directors
as compensation 450,000 450 44,550 (45,000) --
Correct funds contributed
to stockholders (24,990) (24,990)
Interest on note payable (7,370) (7,370)
Net loss for year ended
December 31, 1991 (38,417) (38,417)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1991,
as previously reported 19,177,500 19,178 378,024 (248,485) 148,717
Adjustments to previously
reports amounts:
Fiscal agent fees (18,000) (7,300) (25,300)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1991,
as restated 19,177,500 19,178 360,024 (255,785) 123,417
Sale of common stock,
March 1992 700,000 700 69,300 70,000
Sale of common stock,
September 1992 500,000 500 54,500 55,000
Net loss for year ended
December 31, 1992 (78,078) (78,078)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1992,
as previously reported 20,377,500 20,378 483,824 (333,863) 170,339
Adjustments to previously
reported amounts:
Fiscal agent fees (12,500) (20,600) (33,100)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1992,
as restated 20,377,500 20,378 471,324 (354,463) 137,239
------------ ------------ ------------ ------------ ------------
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the years ended December 31, 1989 to December 31, 1996 and
February 4, 1971 (Date of Inception) to December 31, 1996
(Stated in U.S. dollars)
------------------------
Deficit
Accumulated
Common Stock Additional During the
------------ Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
(Note 7)
<S> <C> <C> <C> <C> <C>
Balance forward, December 31, 1992, as restated 20,377,500 20,378 471,324 (354,463) 137,239
Net loss for the year ended December 31, 1993 (134,081) (134,081)
----------- ----------- ---------- ----------- -----------
Balance, December 31, 1993 20,377,500 20,378 471,324 (488,544) 3,158
Adjustment to previously reported amounts:
Fiscal agent fees (27,280) (27,280)
----------- -----------
Balance, December 31, 1993, as restated 20,377,500 20,378 471,324 (515,824) (24,122)
Sale of common stock, July, 1994 200,000 200 29,800 30,000
Fiscal agent fees (3,000) (3,000)
Net loss for the year ended December 31, 1994 (563,546) (563,546)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 20,577,500 20,578 498,124 (1,079,370) (560,668)
Shares issued to settle debts 5,976,683 5,977 596,739 602,716
Net loss for the year ended December 31, 1995 (79,455) (79,455)
----------- ----------- ----------- ------------ -----------
Balance, December 31, 1995 26,554,183 26,555 1,094,863 (1,158,825) (37,407)
Shares issued to settle debts 380,002 380 37,620 38,000
Net loss for the year ended December 31, 1996 (3,118) (3,118)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 26,934,185 $ 26,935 $ 1,132,483 $(1,161,943) $ (2,525)
----------- ----------- ----------- ----------- -----------
F-6
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOW
for the years ended December 31, 1996, 1995 and 1994
and February 4, 1971 (Date of Inception)
to December 31, 1996
(Stated in U.S. dollars)
------------------------
Year Ended December 31,
------------------------------------------- February 4, 1971
1996 1995 1994 (Date of Inception) to
---- ---- ---- December 31, 1996
---------------------
Cash flow from operating activities:
<S> <C> <C> <C> <C>
Net loss $ (3,118) $ (79,455) $ (563,546) $(1,161,943)
Adjustments to reconcile net loss to net cash
used in operations:
Amortization of license agreement -- -- -- 56,827
Stock issued for payment of expenses -- -- -- 50,250
Write-off of license agreement -- -- 409,236 409,236
----------- ----------- ----------- -----------
(3,118) (79,455) (154,310) (645,630)
Changes in non-cash items related to the operations
Increase (decrease) in royalties payable -- -- (12,500) --
Net decrease in assets/liabilities (25,882) (533,605) 51,476 (319,080)
Stock issued for payment of accounts payable 38,000 243,716 -- 281,716
Stock issued for payment of promissory note -- 359,000 -- 359,000
----------- ----------- ----------- -----------
Net cash used in operating activities 9,000 (10,344) (115,334) (323,994)
Cash flows used in investing activities
Payments for license agreement -- -- -- (100,000)
Resource project advance (50,802) -- -- (50,802)
----------- ----------- ----------- -----------
(50,802) -- -- (150,802)
----------- ----------- ----------- -----------
F-7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOW
for the years ended December 31, 1996, 1995 and 1994
and February 4, 1971 (Date of Inception)
to December 31, 1996
(Stated in U.S. dollars)
------------------------
Cash flows from financing activities:
<S> <C> <C> <C> <C>
Payments on license agreement payable -- -- (49,013) (366,063)
Proceeds from sale of common stock -- -- 27,000 301,500
Proceeds from promissory notes payable -- -- 55,000 345,000
Other capital contributions -- -- -- 99,206
Due to a related party (9,000) 9,000 44,351 44,351
Advance payable 50,802 -- -- 50,802
-------- -------- -------- --------
Net cash provided by financing activities 41,802 9,000 77,338 474,796
Net decrease in cash -- (1,344) (37,996) --
Cash, beginning of period -- 1,344 39,340 --
-------- -------- -------- --------
Cash, end of period $ -- $ -- $ 1,344 $ --
-------- -------- -------- --------
</TABLE>
Supplemental Disclosures of Cash Flows:
Interest paid in 1993 was $4,857. Interest accrued in 1995 was $33,451 (1994 was
$30,719). In 1993, $14,000 of accrued and unpaid interest was converted into
notes payable.
F-8
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
(Stated in U.S. dollars)
Note 1 Continuance of Operations
-------------------------
The company is in the development stage at December 31, 1996.
Recovery of the company's assets is dependent upon future events,
the outcome of which is indeterminable. In addition, successful
completion of the company's development program and its transition,
ultimately, to the attainment of profitable operations is dependent
upon obtaining adequate financing to fulfil its development
activities and achieving a level of sales adequate to support the
company's cost structure.
These financial statements have been prepared on a going concern
basis. The company has a working capital deficiency of $53,327 as at
December 31, 1996. The company's ability to continue as a going
concern is dependent on the ability of the company to generate
profitable operations in the future and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
Organization
------------
The company was incorporated in Idaho on February 4, 1971, as
Monetary Metals, Inc. On December 14, 1989, the company acquired all
the net assets of Drucker Sound Design, Inc. in exchange for
2,700,000 shares (13,500,000 shares after split) of common stock. On
December 30, 1989, the company changed its name to Drucker Sound
Design, Inc., and on June 19, 1990, the company changed its domicile
to Delaware. On September 5, 1991, the company changed its name to
Drucker Industries, Inc., and forward split the outstanding shares
of common stock on the basis of five for one.
Line of Business
----------------
The company currently is in the process of reviewing new business
opportunities and subsequent to December 31, 1996 has entered into
an agreement in respect to exploration and development of oil and
gas properties in China.
Development Stage Company
-------------------------
The company is a development stage company as defined in Statement
of Financial Accounting Standards No. 7. The company is devoting
substantially all of its present efforts to establish a new business
and none of its planned principal operations have commenced. All
losses accumulated since inception have been considered as part of
the company's development stage activities.
Income Taxes
------------
The company uses the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards, No. 109
"Accounting for Income Taxes".
F-9
<PAGE>
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Net Loss Per Share
------------------
Net loss per share is based on the weighted average number of common
shares outstanding during each year.
Note 3 Related Party Transactions
--------------------------
The amount due to a related party at December 31, 1996 was due to a
director of the company for unpaid fees ($Nil; 1995: $9,000). This
amount was unsecured, non-interest bearing and had no specific terms
for repayment. During the year ended December 31, 1995 the company
issued 710,351 common shares to settle $71,035 due to this related
party at that time.
During the year ended December 31, 1996, a director of the company
charged consulting fees to the company in the amount of $Nil (1995:
$36,000).
Note 4 Common Stock
------------
During the year ended December 31, 1996, the company issued 380,002
common stock at $0.10 per share to settle debts of $38,000.
Note 5 Income Taxes
------------
No provision for income taxes has been provided in 1996 and 1995 due
to the net loss. The company has net operating loss carryforwards,
which expire commencing in the year 2004 totalling approximately
$690,000, the benefits of which have not been recorded.
Under the provisions of the Tax Reform Act of 1986, when there has
been a change in an entity's ownership of fifty percent of greater,
utilization of net operating loss carryforwards may be limited. As a
result of equity transactions occurring through December 31, 1996,
the company will be subject to such limitation. The annual
limitations have not been determined.
Note 6 Contingency
-----------
A creditor of the company has indicated to the company that it is
owed $50,000 in respect to unpaid royalties of a license agreement
cancelled during the year ended December 31, 1994. This contingent
liability has been assumed by a director of the company. Management
is of the opinion that this claim is without foundation or merit and
has not included this with accounts payable. Any settlement
resulting from the resolution of this contingency, if any, will be
accounted for as a prior period adjustment.
Note 7 Prior Period Change
-------------------
The company determined that accounts payable at December 31, 1993
was understated by $85,680 due to accrued fiscal agent fees not
recorded. Of these fees, $27,280 related to the year ended December
31, 1993 and $58,400 related to years prior to the year ended
December 31, 1993. Consequently accounts payable at December 31,
1993 and fiscal agent fees for the year then ended and deficit
accumulated during the development stage December 31, 1993 and at
December 31, 1992 and additional paid-in capital at December 31,
1992 were restated to reflect this adjustment.
F-10
<PAGE>
Note 8 Subsequent Events
-----------------
i) By Farm-in Agreements dated January 21, 1997, the company has
agreed to participate in an exploration and development program
on a 316,000 acre concession in the Shaanxi Province, China. The
company will pay all drilling and associated costs to earn a 50%
interest in the concession. The term of this agreement ends on
the earliest of:
- January 21, 2007
- the date on which the required amount has been expended
pursuant to this agreement; or
- upon default by the company.
ii) The operators of the farm-in agreements dated January 21,
1997 advanced $50,802 to the project on behalf of the company
during December 1996 and a further $70,000 during January 1997.
These advances are non-interest bearing, unsecured and have no
specific terms for repayment.
iii) The company proposes to offer up to 6,500,000 units at $1.00
per unit pursuant to an Offering Memorandum. Each unit is to
consist of one common share and one share purchase warrant which
will entitle the holder thereof to acquire an additional unit at
$1.50 per unit. This warrant will expire in eighteen months from
the closing of the Offering Memorandum. The additional unit is to
consist of one common share and one additional share purchase
warrant to acquire one common share at $2.00 per share. This
warrant will expire in thirty months from the date of closing of
the Offering Memorandum.
A finders fee equal to 7% of the actual gross proceeds of the
Offering (exclusive of amounts, if any, received upon the
exercise of the share purchase warrants) will be paid by issuance
of units at a deemed value of $1.00 per unit.
F-11
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 1997 and 1996
(Stated in U.S. dollars)
(Unaudited - See Notice to Reader)
----------------------------------
F-12
<PAGE>
NOTICE TO READER
We have compiled the balance sheet of Drucker Industries Inc. as at March 31,
1997 and the statements of loss and deficit and changes in financial position
for the three month period then ended from information provided by the company.
We have not audited, reviewed or otherwise attempted to verify the accuracy or
completeness of such information. Readers are cautioned that these statements
may not be appropriate for their purposes.
Vancouver, B.C. /s/ Amisano Hanson
May 9, 1997 --------------------------
Chartered Accountants
F-13
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, 1997 and 1996
(Stated in U.S. dollars)
(Unaudited - See Notice to Reader)
----------------------------------
ASSETS 1997 1996
------ ---- ----
Resource project $ 196,565 $ --
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current
Accounts payable and accrued expenses $ 161,341 $ 28,407
Due to a related party -- 9,000
Advance payable 50,802 --
----------- -----------
Total current liabilities 212,143 37,407
----------- -----------
Stockholders' Equity (Deficiency) - Note 2
Common stock $.001 par value, authorized 50,000,000 shares:
26,934,185 shares issued and outstanding 26,935 26,555
Additional paid-in capital 1,132,483 1,094,863
Deficit accumulated during the development stage (1,174,996) (1,153,825)
----------- -----------
Total stockholders' deficiency (15,578) (37,407)
----------- -----------
$ 196,565 $ --
----------- -----------
F-14
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
for the three months ended March 31, 1997, 1996
and years ended December 31, 1996, 1995 and 1994
and February 4, 1971 (Date of Inception)
to March 31, 1997
(Stated in U.S. dollars)
February 4, 1971
(Date of inception)
Three months ended March 31, Year ended December 31 to March 31,
1997 1996 1996 1995 1994 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General and administrative expenses $ 13,053 $ -- $ 3,118 $ 46,004 $ 89,541 $ 455,640
Amortization of license agreement -- -- -- -- -- 56,827
Royalties -- -- -- -- 25,000 75,000
Interest expense -- -- -- 33,451 30,719 114,063
Fiscal agent fees -- -- -- -- 9,050 64,230
Write-off of license agreement -- -- -- -- 409,236 409,236
------------ ------------ ------------ ------------ ----------- -----------
Net loss $ (13,053) $ -- $ (3,118) $ (79,455) $ (563,546) $(1,174,996)
------------ ------------ ------------ ------------ ------------ ------------
Net loss per share $ (0.000) $ (0.000) $ (0.000) $ (.004) $ (.028)
------------ ------------ ------------ ------------ ------------
Weighted average shares outstanding 26,934,185 26,554,183 26,554,183 21,575,697 20,477,500
------------ ------------ ------------ ------------ ------------
F-15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the three months ended March 31, 1997 and 1996
and years December 31, 1989 to December 31, 1996
and February 4, 1971 (Date of Inception) to March 31,1997
(Stated in U.S. dollars)
(Unaudited - See Notice To Reader)
----------------------------------
Deficit
Accumulated
Common Stock Additional During the
------------ Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
(Note 7)
<S> <C> <C> <C> <C> <C>
Shares issued to acquire
Monetary Metals, Inc. 675,000 $ 675 $ (675) $ --
Shares issued to acquire
net assets of Drucker
Sound Design Corporation 2,700,000 2,700 65,046 67,746
Net loss from inception
to December 31, 1989 $ (8,115) (8,115)
Net loss for year ended
December 31, 1990 (144,333) (144,333)
Five for one forward split
of outstanding shares 13,500,000 13,500 (13,500) --
Funds contributed by
stockholder 124,196 124,196
Sale of units for cash,
September 1991 1,050,000 1,050 103,950 105,000
Sale of units for cash,
December 1991 750,000 750 74,250 75,000
Shares issued to settle
debts 52,500 53 5,197 (5,250) --
Shares issued to directors
as compensation 450,000 450 44,550 (45,000) --
Correct funds contributed
to stockholders (24,990) (24,990)
Interest on note payable (7,370) (7,370)
Net loss for year ended
December 31, 1991 (38,417) (38,417)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1991,
as previously reported 19,177,500 19,178 378,024 (248,485) 148,717
Adjustments to previously
reports amounts
Fiscal agent fees (18,000) (7,300) (25,300)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1991,
as restated 19,177,500 19,178 360,024 (255,785) 123,417
Sale of common stock,
March 1992 700,000 700 69,300 70,000
Sale of common stock,
September 1992 500,000 500 54,500 55,000
Net loss for year ended
December 31, 1992 (78,078) (78,078)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1992,
as previously reported 20,377,500 20,378 483,824 (333,863) 170,339
Adjustments to previously
reported amounts:
Fiscal agent fees (12,500) (20,600) (33,100)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1992, as restated 20,377,500 20,378 471,324 (354,463) 137,239
------------ ------------ ------------ ------------ ------------
F-16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the three months ended March 31, 1997 and 1996 and
years ended December 31, 1989 to December 31, 1996
and February 4, 1971 (Date of Inception) to March 31, 1997
(Stated in U.S. dollars)
(Unaudited - See Notice to Reader)
----------------------------------
Deficit
Accumulated
Common Stock Additional During the
------------ Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
(Note 7)
<S> <C> <C> <C> <C> <C>
Balance forward, December 31,
1992, as restated 20,377,500 20,378 471,324 (354,463) 137,239
Net loss for the year ended
December 31, 1993 (134,081) (134,081)
Balance, December 31, 1993 20,377,500 20,378 471,324 (488,544) 3,158
Adjustment to previously
reported amounts:
Fiscal agent fees (27,280) (27,280)
----------- ----------- ---------- ---------- ----------
Balance, December 31, 1993,
as restated 20,377,500 20,378 471,324 (515,824) (24,122)
Sale of common stock,
July, 1994 200,000 200 29,800 30,000
Fiscal agent fees (3,000) (3,000)
Net loss for the year
ended December 31, 1994 (563,546) (563,546)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 20,577,500 20,578 498,124 (1,079,370) (560,668)
Shares issued to settle debts 5,976,683 5,977 596,739 602,716
Net loss for the year ended
December 31, 1995 (79,455) (79,455)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 26,554,183 26,555 1,094,863 (1,158,825) (37,407)
Net loss for the three months
ended March 31, 1996 -- --
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1996 26,554,183 26,555 1,094,863 (1,158,825) (37,407)
Shares issued to settle debts 380,002 380 37,620 38,000
Net loss for the nine months
ended December 31, 1996 (3,118) (3,118)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 26,934,185 $ 26,935 $ 1,132,483 $(1,161,943) $ (2,525)
Net loss for the three months
ended March 31, 1997 (13,053) (13,053)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 26,934,185 $ 26,935 $ 1,132,483 $(1,174,996) $ (15,578)
----------- ----------- ----------- ----------- -----------
F-17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOW
for the three months ended March 31, 1997 and 1996 and
years ended December 31, 1996, 1995 and 1994 and
February 4, 1971 (Date of Inception) to March 31, 1997
(Stated in U.S. dollars)
(Unaudited - See Notice to Reader)
----------------------------------
February 4, 1971
(Date of inception)
Three months ended March 31, Year ended December 31 to March 31,
1997 1996 1996 1995 1994 1997
-------------------------- ----------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net loss $ (13,053) $ -- $ (3,118) $ (79,455) $ (563,546) $(1,174,996)
Adjustments to reconcile net loss
to net cash used in operations:
Amortization of license agreement -- -- -- -- -- 56,827
Stock issued for payment of
expenses -- -- -- -- -- 50,250
Write-off of license agreement -- -- -- -- -- 409,236
----------- ----------- ----------- ----------- ----------- -----------
(13,0523) -- (3,118) (79,455) (154,310) (658,683)
Changes in non-cash items related
to the operations
Increase (decrease) in royalties
payable -- -- -- -- (12,500) --
Net decrease in assets/liabilities 158,816 -- (25,882) 51,476 (533,605) (160,264)
Stock issued for payment of
accounts payable -- -- 38,000 243,716 -- 281,716
Stock issued for payment of
promissory note -- -- -- 359,000 -- 359,000
----------- ----------- ----------- ----------- ----------- -----------
Net cash used in operating activities 145,763 -- 9,000 (10,344) (115,334) (178,231)
----------- ----------- ----------- ----------- ----------- -----------
Cash flows used in investing activities
Payments for license agreement -- -- -- -- -- (100,000)
Resource project (145,763) -- (50,802) -- -- (196,565)
----------- ----------- ----------- ---------- ----------- -----------
(145,763) -- (50,802) -- -- (296,565)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOW
for the three months ended March 31, 1997 and 1996 and
years ended December 31, 1996, 1995 and 1994 and
February 4, 1971 (Date of Inception) to March 31, 1997
(Stated in U.S. dollars)
(Unaudited - See Notice to Reader)
----------------------------------
1997 1996 1996 1995 1994 1997
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flow from financing activities:
Payments on license agreement
payable $- $- $- $- $(49,013) $(366,063)
Proceeds from sale of common
stock - - - - 27,000 301,500
Proceeds from promissory notes
payable - - - - 55,000 345,000
Other capital contributions - - - - - 99,206
Due to a related party - - (9,000) 9,000 44,351 44,351
Advance payable - - 50,802 - - 50,802
----- ----- ------- ------ ------- --------
Net cash provided by financing
activities - - 41,802 9,000 77,338 474,796
----- ----- ------- ------ ------- --------
Net decrease in cash - - - (1,344) (37,996) -
Cash, beginning of period - - - 1,344 - -
----- ----- ------- ------ ------- --------
Cash, end of period $- $- $- $- $1,344 $-
----- ----- ------- ------ ------- --------
</TABLE>
Supplemental Disclosures of Cash Flows:
Interest paid in 1993 was $4,857. Interest accrued in 1995 was $33,451 (1994 was
$30,719). In 1993, $14,000 of accrued and unpaid interest was converted into
notes payable.
F-19
<PAGE>
DRUCKER INDUSTRIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 and 1996
(Stated in U.S. dollars)
(Unaudited - See Notice to Reader)
----------------------------------
Note 1 Interim Reporting
-----------------
While the information presented in the accompanying interim three
months financial statements is unaudited, includes all adjustment
which are, in the opinion of management, necessary to present fairly
the financial position, results of operations and changes in financial
position for the interim period presented.
Note 2 Resource Project
----------------
By Farm-in Agreements dated January 21, 1997, the company has agreed
to participate in an exploration and development program on a 316,000
acre concession in the Shaanxi Province, China. The company will pay
all drilling and associated costs to earn a 50% interest in the
concession. The term of this agreement ends on the earliest of:
- January 21, 2007
- the date on which the required amount has been
expended pursuant to this agreement; or
- upon default by the company.
Note 3 Subsequent Event
----------------
Subsequent to March 31, 1997, the company completed a private
placement of 5,179,500 units at $1.00 per unit for proceeds of
$5,179,500. Each unit consists of one common share and one share
purchase warrant which entitles the holder thereof to acquire an
additional unit at $1.50 per unit. This warrant expires on September
30, 1998. The additional unit consists of one common share and one
additional share purchase warrant to acquire one common share at $2.00
per share. This warrant expires September 30, 1999.
A finders fee of 7% of the gross proceeds of the placement (exclusive
of amounts, if any, received upon the exercise of the share purchase
warrants) is payable by the issuance of units at a deemed value of
$1.00 per unit or 362,565 units.
F-20
<PAGE>
SK EXHIBIT 3.5
GUL INDUSTRIES CORP.
CERTIFICATE OF INCORPORATION DELAWARE (10/18/89)
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "GUL INDUSTRIES CORP." FILED IN THIS OFFICE ON THE EIGHTEENTH
DAY OF OCTOBER, A.D. 1989, AT 9 O'CLOCK A.M.
/s/ William T. Quillen
--------------------------------------
William T. Quillen, Secretary of State
<PAGE>
CERTIFICATE OF INCORPORATION
OF
GUL INDUSTRIES CORP.
FIRST: The name of this corporation is Gul Industries Corp.
SECOND: Its registered office in the State of Delaware is to be located at
725 Market Street in the City of Wilmington, County of New Castle. The
registered agent in charge thereof is The Company Corporation, at same as above.
THIRD: The nature of the business and the objects and purposes proposed to
be transacted, promoted and carried on, are to do any or all the things herein
mentioned, as fully and to the same extent as natural persons might or could do
and in any part of the world. viz:
"The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.:
FOURTH: The amount of the total authorized capital stock of this
corporation is 25,000,000 shares of $0.01 Par Value.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME: ADDRESS:
Caroline Walters 725 Market St., Wilmington, DE 19801
SIXTH: The powers of the incorporator are to terminate upon filing of the
certificate of incorporation, and the name(s) and mailing address(es) of persons
who are to serve as director(s) until the first annual meeting of stockholders
or until their successors are elected and qualify are as follows:
Pat O. Mackinga, 1214 D. Westlake Blvd., Westlake Village, CA 91361
Frank Dobrucki, 6345 Balboa Blvd. #230, Encino, CA 91316
Brett J. Mackinga, 1890 W. Hillcrest #601, Newbury Park, CA 91320
SEVENTH: the Directors shall have power to make and to alter or amend the
By- Laws to fix the amount to be reversed as working capital, and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchise of the Corporation.
With the consent in writing and pursuant to a vote of the holders of a
majority of the capital stock issued and outstanding, the Directors shall have
the authority to dispose, in any manner, of the whole property of this
corporation.
The By-Laws shall determine whether and to what extent the accounts and
books of this corporation, or any of them shall be open tot he inspection of the
stockholders: and no stockholder shall have any right of inspecting any account,
or book or document of this Corporation, except as conferred by the law or the
By-Laws, or by resolution of the stockholders.
<PAGE>
The stockholders and directors shall have power to hold their meetings and
keep the books, documents and papers of the Corporation outside of the State of
Delaware, at such places as may be form time to time designated by the By-Laws
or by resolution of the stockholders or directors, except as otherwise required
by the Laws of Delaware.
It is the intention that the objects, purposes and powers specified in the
Third paragraph hereof shall except where otherwise specified in said paragraph,
be no wise limited or restricted by reference to or inference from the terms of
any other clause or paragraph in this certificate of incorporation, but that the
objects, purposes and powers specified in the Third paragraph and in each of the
clauses or paragraphs of this charter shall be regarded as independent objects,
purposes and powers.
EIGHTH: Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach of fiduciary
duties unless her breach involves: (1) a director's duty of loyalty to the
corporation or its stockholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; (3)
liability for unlawful payments of dividends or unlawful payments of dividends
or unlawful stock purchases or redemption by the corporation; or (40 a
transaction from which the director derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws
of the State of Delaware, do make, file and record this Certificate and do
certify that the facts herein are true and I have accordingly hereunto set my
hand.
DATED AT: October 18, 1989
State of Delaware
County of New Castle /s/ Caroline Walters
------------------------
<PAGE>
SK EXHIBIT 3.8
GUL INDUSTRIES CORP.
CERTIFICATE OF AMENDMENT - DELAWARE (6/6/90)
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "GUL INDUSTRIES CORP." FILED IN THIS OFFICE ON THE SIXTH DAY OF
JUNE, A.D. 1990, AT 10:15 O'CLOCK A.M.
/s/ William T. Quillen
-----------------------------------------
William T. Quillen, Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Gul Industries Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of Gul Industries Corp.
resolutions were dully adopted setting forth the proposed amendments of the
Certificate of Incorporation of said corporation, declaring said amendments to
be advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendments is
as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Articles thereof numbered "1 and 4" so that, as amended
said Articles shall be read as follows:
"The name of the corporation is amended to: Drucker Sound Design
Corporation."
"The total authorized capital stock of the corporation is amended to
10,000,000 shares of $0.001 par value, all of one class."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendments.
THIRD: That said amendments as duly adopted in accordance with the
provision of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendments.
IN WITNESS WHEREOF, said Gul Industries Corp. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Pat O. Mackinga its
President and Brett Mackinga its secretary, this 30th day of March, 1990.
/s/ Brett Mackinga /s/ Pat Mackinga
----------------------- --------------------
Secretary President
<PAGE>
Notary:
STATE OF CALIFORNIA )
)
COUNTY OF VENTURA )
Before me, a notary public, on this day personally appeared Pat O. Mackinga
and Brett Mackinga proven to me to be the persons whose names are subscribed to
the foregoing document, and being duly sworn, declared that the statements
therein contained are true and correct. given under my hand and seal of office
this 30th day of March, 1990.
/s/ Wendy D. Fisher
-------------------
Name printed: Wendy D. Fisher
My commission expires: March 1, 1991
Notary Seal:
<PAGE>
SK EXHIBIT 3.9
FILED CERTIFICATE OF MERGER - DELAWARE (6/19/90)
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
MERGER OF DELAWARE & FOREIGN CORPORAITONS OF "DRUCKER SOUND DESIGN CORPORATION"
FILED IN THIS OFFICE ON THE NINETEENTH DAY OF JUNE, A.D. 1990, AT 9 O'CLOCK A.M.
/s/ William T. Quillen
----------------------------------------
William T. Quillen, Secretary of State
<PAGE>
CERTIFICATE OF MERGER
DRUCKER SOUND DESIGN CORPORATION, an Idaho corporation
INTO
DRUCKER SOUND DESIGN CORPORATION, a Delaware corporation
as the surviving corporation
CERTIFICATE OF MERGER, dated the 28th day of May, 1990, between Drucker
Sound Design Corporation, an Idaho corporation, herein called "Drucker-Idaho",
and all of the Directors thereof, and Drucker Sound Design Corporation, a
Delaware corporation, and all of the Directors thereof, the two corporations
being hereinafter sometimes called the "Constituent Corporations".
WHEREAS, The Board of Directors deems it advisable and generally to the
welfare of Drucker Sound Design Corporation that the corporation merger to be
effected pursuant to the statutes of the State of Idaho and the statutes of the
State of Delaware, and they have duly approved and authorized the form of
certificate of merger.
WHEREAS, Drucker Sound Design Corporation, is a Corporation duly organized
under the laws of the State of Delaware having been incorporated October 18,
1989 as Gul Industries Corp., having authorized capital consisting of Ten
Million (10,000,000) shares of common stock with a one mil ($0.001) par value.
WHEREAS, the laws of the States of Idaho and Delaware permit such a merger,
and the Constituent Corporations desire to merger pursuant to the provisions of
the laws of their respective states;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants herein contained, it is certified that Drucker-Idaho,
is merged into Drucker Sound Design Corporation of Delaware which shall be the
Surviving Corporation, and the terms and conditions of such merger and the mode
of carrying it into effect are and shall be as follows:
1. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation,
which is sometimes hereinafter referred to as the Surviving
Corporation, shall, from and after the effective date of the merger,
be Drucker Sound Design Corporation. The separate existence of
Drucker-Idaho shall cease at the effective time of merger, except
insofar as it may be continued by laws of in order to carry out the
purposes of this Certificate of Merger and except as continued in the
Surviving Corporation.
2. ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The Articles of
Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of Drucker Sound Design Corporation of Delaware as
amended.
3. BYLAWS. The bylaws of Drucker Sound Design Corporation of Delaware at
the effective time of the merger shall be the bylaws of the Surviving
Corporation until altered or repealed as provided therein.
<PAGE>
4. BOARD OF DIRECTORS AND OFFICERS. The members of the Board of Directors
and the officers of the Surviving Corporation immediately after the
effective time of the merger shall be those persons who were the
members of the Board of Directors and the officers, prior to the
effective time of the merger, and such person shall serve in such
offices, respectively, for the terms provided by law of in the Bylaws,
or until their respective successors are elected and qualified.
5. AUTHORITY TO CONDUCT BUSINESS. Drucker Sound Design Corporation, of
Delaware, represents that the corporation has not filed an application
for authority to do business in Delaware. The Surviving Corporation,
Drucker Sound Design Corporation, of Delaware, will conduct no such
business in Delaware without first filing and having such application
approved. Drucker Sound Design Corporation, of Delaware will file its
application for authority to conduct business in Delaware immediately
upon completion of the merger.
6. CONVERSION OF SHARES. The manner of converting the units of Drucker
Sound Design Corporation, of Idaho into shares of Drucker Sound Design
Corporation of Delaware shall be set forth in this paragraph:
(a) The manner of converting the units of Drucker-Idaho into
shares of the Drucker Sound Design Corporation of Delaware
shall be as follows:
Immediately upon the effective date of the merger, each one
share of stock of the Drucker-Idaho outstanding in the hands
of the public (being all of the shares of Drucker-Idaho,
outstanding) without any action on the part of the holder
thereof, shall automatically become and be converted into
common stock of Drucker of Delaware on a share for share
basis and each outstanding certificate representing shares
of common stock of Drucker Sound Design Corporation, of
Idaho, shall thereupon be deemed for all corporate purposes
(other than the payment of dividends) to evidence the
ownership of the number of fully paid, nonassessable shares
of common stock of Drucker Sound Design Corporation of
Delaware into which such shares of common stock of
Drucker-Idaho shall have been converted.
7. RIGHTS OF SHAREHOLDERS. After the effective time of the merger, any
holder of a certificate or certificates which therefor represented
shares of Common Stock of Drucker-Idaho may, but shall not be required
to, surrender the same to the Transfer Agent of the Drucker Sound
Design Corporation, of Delaware. UNITED STOCK TRANSFER, 5680 Greenwood
Plaza, Suite 500, Englewood, Colorado 80111, and shall thereupon be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of Common Stock of the Drucker Sound
Design Corporation, of Delaware into which the shares of Common Stock
of Drucker-Idaho theretofore represented by such certificate or
certificates shall have been converted.
<PAGE>
8. EFFECTIVE DATE OF MERGER. (a) For all purposes of the laws of the State
of Delaware, this Certificate of Merger and the merger herein provided for shall
become effective and the separate existence of Drucker-Idaho except insofar as
it may be continued by statute, shall cease as soon as: This Certificate of
Merger shall have been adopted, approved, signed, acknowledged in accordance
with the laws of the state of Delaware and certificates of its adoption and
approval shall have been executed in accordance with such laws; and this
Certificate of merger shall been filed in the Office of the Department of the
State of Delaware.
(b) The corporate identity, existences, purposes, powers, objects,
franchises, rights, and immunities of Drucker Sound Design Corporation, of
Delaware shall continue unaffected and unimpaired by the merger hereby provided
for; and entities, identities, existences, purposes, powers, objects,
franchises, rights and immunities of Drucker-Idaho shall be continued in and
merged into Drucker Sound Design Corporation, of Delaware shall be fully vested
therewith.
9. AUTHORIZATION. The parties hereto acknowledge and respectively represent
that this Merger Certificate is authorized by the laws of the respective
jurisdications of the Constituent Corporations and that the matter was approved
at a special shareholder meeting of the respective entities at which the
shareholders voted as follows:
Corporation: Drucker Sound Design Corporation
(an Idaho corporation)
Shares Outstanding: 3,375,000
Voted For: 2,7000,000
Voted Against: 0
10. FURTHER ASSURANCES OF TITLE. As when requested by the Surviving
Corporation or by its successors or assigns, Drucker-Idaho will execute and
deliver or cause to be executed and deliver all such deeds and instruments and
will take or cause to be taken all such further action as the Surviving
Corporation, Drucker Sound Design Corporation, of Delaware, may deem necessary
or desirable in order to vest in and confirm to the Surviving Corporation title
to and possession of any Surviving Corporation title to and possession of any
property of any of Drucker Sound Design Corporation, of Idaho acquired by
Drucker Sound Design Corporation, of Delaware by reason or as a result of the
merger herein provided for and otherwise to carry out the intent and purposes
hereof, and the officers and directors of Drucker-Idaho and the officers and
directors of Drucker Sound Design Corporation, of Delaware are fully authorized
in the name of Drucker Sound Design Corporation, of Idaho or otherwise to take
any and all such action.
<PAGE>
11. SERVICE OF PROCESS ON SURVIVING CORPORATION.
(a) Idaho: The Surviving Corporation agrees that it may be served
with process in the state of Idaho in any proceeding for
enforcement of any obligation of Drucker-Idaho as for the
enforcement of any obligation of the Surviving Corporation
arising from the merger, including any suit or other proceeding
to enforce the right of any shareholder as determined in
appraisal proceedings pursuant to the provisions of the General
Law of Idaho and hereby irrevocably appoints the Secretary of
State of idaho as its agent to accept service of process in any
suit or other proceedings. Copies of such process shall be mailed
to Drucker Sound Design Corporation c/o Richard Rosenbaum, United
Stock Transfer, 3680 Greenwood Plaza, Suite 500, Englewood,
Colorado 80111.
12. SHAREHOLDERS RIGHT TO PAYMENT. The Surviving Corporation agrees that
subject to the provisions of General Business Corporation Law of the State of
Idaho, it will pay to the shareholders may be entitled under the provisions of
the above statutes of the law of the State of Idaho as the case may be.
13. ABANDONMENT. This Certificate of Merger may be abandoned (a) by either
Constituent Corporation, acting by its Board of Directors, at anytime prior to
its adoptions by the shareholder of both of the Constituent Corporation as
provided by law; or (b) by the mutual consent of the Constituent Corporations,
acting each by its Board of Directors, at any time after such adoption by such
shareholders and prior to the effective time of the merger. in the event of
abandonment of the Certificate of Merger pursuant to (a) above, notice thereof
shall be given by the Board of Directors of the Constituent Corporation, and
thereupon, or abandonment pursuant to (b) above, this Certificate of Merger
shall become wholly void and of no effect and there shall be no further
liability or obligation hereunder on the part of either of the Constituent
Corporations of its Board of Directors of shareholders.
IN WITNESS WHEREOF, each of the Constituent Corporations pursuant to
authority duly granted by its Board of Directors, has caused this Certificate of
Merger to be executed by a majority of its directors and its President and
Secretary.
The respective Directors and Officers of the Constituent Corporation do
hereby certify that the above Certificate of Merger was adopted by vote of the
Shareholders of the Constituent Corporation as set forth in the above
Certificate and that said resolution has not been revoked or amended.
DRUCKER SOUND DESIGN DRUCKER SOUND DESIGN
CORPORATION - IDAHO CORPORATION - DELAWARE
By: /s/ Pat Mackinga by: /s/ Pat Mackinga
----------------- ---------------------------
President President
By: /s/ Brett Mackinga by: /s/ Brett Mackinga
------------------ -----------------------------
Secretary Secretary
<PAGE>
Notary:
STATE OF CALIFORNIA )
)
COUNTY OF VENTURA )
Before me, a Notary Public, on this day personally appeared Pat O.
Mackinga and Brett Mackinga proven to me to be the persons whose names are
subscribed to the foregoing document, and being duly sworn, declared that the
statements therein contained are true and correct. Given under my hand and seal
of office this 30th day of March, 1990.
/s/ Wendy D. Fisher
-------------------
Name printed: Wendy D. Fisher
My commission expires: March 1, 1991
Notary Seal:
<PAGE>
SK EXHIBIT 3.10
DRUCKER SOUND DESIGN CORPORATION:
CERTIFICATE OF AMENDMENT - DELAWARE
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCOPORATION
Drucker Sound Design Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of Drucker Sound Design
Corporation resolutions were duly adopted setting forth the proposed amendments
of the Certificate of Incorporation of said corporation, declaring said
amendments to be advisable and calling a meeting of the stockholders of said
corpiration for consideration thereof. The resolution setting forth the proposed
amendments is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Articles thereof number "1 and 4" so that, as
amended said Articles shall be read as follows:
"The name of the corporation is amended to: Drucker Industries,
Inc."
"The total authorized capital stock of the corporation is amended
to 50,000,000 shares of $0.001 par value, all of one class".
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendments.
THIRD: That said amendments as duly adopted in accordance with the
provision of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendments.
IN WITNESS WHEREOF, said Drucker Sound Design Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be signed by Pat
O. Mackinga its President and Richard Rogge its secretary, this 30th day of
August, 1991.
/s/ Richard Rogge /s/ Pat Mackinga
- - --------------------- ------------------------
Secretary President
<PAGE>
Notary:
STATE OF CALIFORNIA )
)
COUNTY OF VENTURA )
Before me, the undersigned, a Notary Public in and for said State,
personally appeared Pat O. Mackinga and Richard Rogge personally known to me or
proven to me on the basis of satisfactory evidence to be the persons whose names
are subscribed to this instrument and acknowledged that they executed the same.
WITNESS my hand and official seal dated this 30th day of August, 1991.
/s/ Julie Ellerman Notary Seal
- - -------------------------------
Notary Public Signature
/s/ Wendy D. Fisher
---------------------------
Name printed: Wendy D. Fisher
My commission expires: March 1, 1991
Notary Seal:
<PAGE>
SK EXHIBIT 3.11
BYLAWS
<PAGE>
BY-LAWS
of
DRUCKER INDUSTRIES, INC.
a Delaware Corporation
ARTICLE I
The initial principal office of the Corporation shall be in Delaware. The
Corporation may have offices at such other places within or without the State of
Delaware as the Board of Directors may from time to time establish.
ARTICLE II
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken in
connection with corporate action, by any provisions of the statutes of the
Certifiate of Incorporation, the meeting and vote of stockholders may be
dispensed with, if all the stockholders who should have been entitled to vote
upon the action if such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III
Board of Directors
Section 1. GENERAL POWERS. The business of the Corpration shall be managed
by the Board of Directors, except as otherwise provided by statute or by the
Certificate of Incorporation.
Section 2. NUMBER AND QUALIFICATIONS. The Board of Directors shall consist
of up to three (3) members. Except as provided in the Certificate of
Incorporation, this number can be increased only by the vote or written consent
of the holders of ninety (90) percent of the stock of the Corporation
outstanding and entitled to vote. The current number of Directors shall be
determined by the Board of Directors at its annual meeting. No Director need be
a stockholder.
Section 3. ELECTION AND TERM OF OFFICE. The Directors shall be elected
annually by the stockholders, and shall hold office until their successors are
respectively elected and qualified.
Election of Directors need not be by ballot.
<PAGE>
Section 4. COMPENSATION. The members of the Board of Directors shall be
paid a fee of $10.00 for attendance at all annual, regular, special and
adjourned meetings of the Board. No such fee shall be paid any director if
absent. Any director of the Corporation may also serve the Corporation in any
other capacity, and receive compensation therefor in any form. Members of
special or standing committees may be allowed like compensation for attending
committee meetings.
Section 5. REMOVAL AND RESIGNATIONS. The stockholders may, at any meeting
called for the purpose, by vote of two-thirds of the capital stock issued and
outstanding, remove any directors from office, with or without cause; provided
however, that no director shall be removed in case the vote of a sufficient
number of shares are cast against his removal, which if cumulatively voted at
any election of directors would be sufficient to elect him, if cumulative voting
is allowed by the Articles of Incorporation.
The stockholders may, at any meeting, by vote of a majority of such stock
represented at such meeting accept the resignation of any director.
Section 6. VACANCIES. Any vacancy occurring in the office of director may
be filled by a majority of the directors then in office, though less than a
quorum, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified, unless
sooner displaced.
When one or more directors resign from the Board, effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have powers to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations become effective.
ARTICLE IV
Meetings of Board of Directors
Section 1. REGULAR MEETINGS. A regular meeting of the Board of Directors
may be held without call or formal notice immediately after and at the same
place as the annual meeting of the stockholders or any special meeting of the
stockholders at such places within or without the State of Delaware and at such
times as the Board may by vote from time to time determine.
Section 2. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any place whether within or without the State of Delaware at any time
when called by the President, Treasurer, Secretary or two or more directors.
Notice of the time and place thereof shall be given to each director at least
three (3) days before the meeting if by mail or at least twenty-four hours if in
person or by telephone or telegraph. A waiver of such notice in writing, signed
by the person or persons entitled to said notice, either before or after the
time stated therein, shall be deemed equivalent to such notice. Notice of any
adjourned meeting of the Board of Directors need not be given.
<PAGE>
Section 3. QUORUM. The presence, at any meeting, of one-third of the total
number of directors, but in no case less than two (2) directors, shall be
necessary and sufficient to constitute a quorum for the transaction of business
except as otherwise required by statute or by the Certificate of Incorporation,
the act of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a quorum,
a majority of the directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum be present.
Section 4.a. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise
restricted by the Certificate of Incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the Board or committee, and such written
consent is filed within the minutes of the Corporation.
b. The Board of Directors may hold regular or special meetings by telephone
conference call, provided that any resolutions adopted shall be recorded in
writing within 3 days of such telephone conference, and written ratification of
such resolutions by the directors shall be provided within 10 days thereafter.
ARTICLE V
Committees of Board of Directors
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist of two or
more of the directors of the Corporation, which, to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors.
The committees of the Board of Directors shall keep regular minutes of
their proceedings and report the same to the Board of Directors when required.
ARTICLE VI
Officers
Section 1. NUMBER. The Corporation shall have a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such other officers, agents and
factors as may be deemed necessary. One person may hold any two offices except
the offices of President and Vice President and the offices of President and
Secretary.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. The officers
specifically designated in Section 1 of this Article VI shall be chosen annually
by the Board of Directors and shall hold office until their successors are
chosen and qualified. No officer need be a director.
<PAGE>
Section 3. SUBORDINATE OFFICERS. The Board of Directors from time to time
may appoint other officers and agents, including one or more Assistant
Secretaries and one or more Assistant Treasurers, each of whom shall hold office
for such period, have such authority and perform such duties as are provided in
these By-Laws or as the Board of Directors from time to time may determine. The
Board of Directors may delegate to any office the power to appoint any such
subordinate officers, agents and factors and to prescribe their respective
authorities and duties.
Section 4. REMOVALS AND RESIGNATIONS. The Board of Directors may at any
meeting called for the purpose, by vote of a majority of their entire number,
remove from office any officer or agent of the Corporation, or any member of any
committee appointed by the Board of Directors.
The Board of Directors may at any meeting, by vote of a majority of the
directors present at such meeting, accept the resignation of any officer of the
Corporation.
Section 5. VACANCIES. Any vacancy occurring in the office of President,
Vice President, Secretary, Treasurer or any other office by death, resignation,
removal or otherwise shall be filled for the expired portion of the term in the
manner prescribed by these By-Laws for the regular election or appointment to
such office.
Section 6. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
business, affairs and property of the Corporation, and control over its
officers, agents and employees. The President shall preside at all meetings of
the stockholders and of the Board of Directors at which he is present. The
President shall do and perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 7. THE VICE PRESIDENT. At the request of the President or in the
event of his absence or disability, the Vice President, or in case there shall
be more than one Vice President, the Vice President designated by the President,
or in the absence of such designation, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President. Any Vice President shall perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors, or the President.
Section 8. THE SECRETARY. The Secretary shall:
a. Record all the proceedings of the meetings of the Corporation and
directors in a book to be kept for that purpose;
b. Have charge of the stock ledger (which may, however, be kept by any
transfer agent or agents of the Corporation under the direction of the
Secretary), an original or duplicate of which shall be kept at the principal
office or place of business of the Corporation in the State of Delaware;
<PAGE>
c. Prepare and make, at least ten (10) days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order;
d. See that all notices are duly given in accordance with the provisions of
these By- Laws or as required by statute;
e. Be custodian of the records of the Corporation and the Board of
Directors, and of the seal of the Corporation, and see that the seal is affixed
to all stock certificates prior to their issuance and to all documents, the
execution of which on behalf of the Corporation under its seal have been duly
authorized;
f. See that all books, reports, statements, certificates and the other
documents and records required by law to be kept or filed are properly kept or
filed; and
g. In general, perform all duties and have all powers incident to the
office of Secretary and perform such other duties and have such powers as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors or the President.
Section 9. THE TREASURER. The Treasurer shall:
a. Have supervision over the funds, securities, receipts, and disbursements
of the Corporation;
b. Cause all monies and other valuable effects of the Corporation to be
deposited in its name and to its credit, in such depositories as shall be
selected by the Board of Directors or pursuant to authority conferred by the
Board of Directors.
c. Cause the funds of the Corporation to be disbursed by checks or drafts
upon the authorized depositories of the Corporation, when such disbursements
shall have been duly authorized;
d. Cause to be taken and preserved proper vouchers for all monies
disbursed;
e. Cause to be kept at the principal office of the Corporation correct
books of account of all its business and transactions;
f. Render to the President or the Board of Directors, whenever requested,
an account of the financial condition of the Corporation and of his transactions
as Treasurer;
g. Be empowered to require from the officers or agents of the Corporation
reports or statements giving such information as he may desire with respect to
any and all financial transactions of the Corporation; and
h. In general, perform all duties and have all powers incident to the
office of Treasurer and perform such other duties and have such power as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors or President.
Section 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and Assistant Treasurers shall have such duties as from time to time
may be assigned to them by the Board of Directors or the President.
<PAGE>
Section 11. SALARIES. The salaries of the officers of the Corporation shall
be fixed from time to time by the Board of Directors, except that the Board of
Directors may delegate to any person the power to fix the salaries or other
compensation of any officers or agents appointed in accordance with the
provisions of Section 3 of this Article VI. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
Section 12. SURETY BOND. The Board of Directors may secure the fidelity of
any or all of the officers of the Corporation by bond or otherwise.
ARTICLE VII
Execution of Instruments
Section 1. EXECUTION OF INSTRUMENTS GENERALLY. All documents or writings of
any nature shall be signed, executed, verified, acknowledged and delivered by
such officer or officers or such agent of the Corporation and in such manner as
the Board of Directors from time to time may determine.
Section 2. CHECKS, DRAFTS, ETC. All notes, drafts, acceptances, checks,
endorsements, and all evidence of indebtedness of the corporation whatsoever,
shall be signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time may
determine. Endorsements for deposit to the credit of the Corporation in any of
its duly authorized depositories shall be made in such manner as the Board of
Directors from time to time may determine.
Section 3. PROXIES. Proxies to vote with respect to shares of stock of
other corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by the
President or Vice President and the Secretary or Assistant Secretary of the
Corporation or by any other person or persons duly authorized by the Board of
Directors.
ARTICLE VIII
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed in the name of the Corporation
by the Chairman or Vice President of the Board of Directors, the President or a
Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation; provided, however, that where such certificate
is signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of any
such Chairman of the Board of Directors, President, Vice President, Treasurer,
Assistant Treasurer, Secretary, or Assistant Secretary may be facsimile. In case
any officer or officers who shall have signed, or whole facsimile signature or
signatures shall have been used thereon, any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
may nevertheless be adopted by the Corporation and be issued and delivered as
<PAGE>
though the person or persons who signed such certificate or certificates, or
whose facsimile signature or signatures shall have been used thereon, had not
ceased to be such officer or officers of the Corporation, and any such delivery
shall be regarded as an adoption by the Corporation of such certificate or
certificates.
Certificates of stock shall be in such form as shall, in conformity to law,
be prescribed from time to time by the Board of Directors.
Section 2. TRANSFER OF STOCK. Shares of stock of the Corporation shall only
be transferred on the books of the Corporation by the holder of record thereof
or by his attorney duly authorized in writing, upon surrender to the Corporation
of the certificates for such shares endorsed by the appropriate person or
persons, with such evidence of the authenticity of such endorsement, transfer,
authorization and other matters as the Corporation may reasonably require, and
accompanied by all necessary stock transfer tax stamps. In that event, it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction on its books.
Section 3. RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior
to the surrender to the Corporation of the certificates for shares of stock with
a request to record the transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner.
Section 4. CLOSING STOCK TRANSFER BOOK. The Board of Directors may close
the Stock Transfer Book of the Corporation for a period not exceeding fifty (50)
days preceding the date of any meeting of the stockholders or the date for
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect or
for a period of not exceeding (50) days in connection with obtaining the consent
of stockholders for any purpose. However, in lieu of closing the Stock Transfer
Book, the Board of Directors may fix in advance a date, not exceeding fifty (50)
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such stockholders, and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
Section 5. LOST, DESTROYED AND STOLEN CERTIFICATES. Where the owner of a
Certificate for shares claims that such certificate has been lost, destroyed or
wrongfully taken, the Corporation shall issue a new certificate in place of the
original certificate if the owner (a) so requests before the Corporation has
notice that the shares have been acquired by a bona fide purchaser; (b) files
with the Corporation a sufficient indemnity bond; and (c) satisfies such other
reasonable requirements, including evidence of such loss, destruction, or
wrongful taking, as may be imposed by the Corporation.
<PAGE>
ARTICLE IX
Dividends
Section 1. SOURCES OF DIVIDENDS. The directors of the Corporation, subject
to any restrictions contained in the statutes and Certificate of Incorporation,
may declare and pay dividends upon the shares of the capital stock of the
Corporation either (a) out of its new assets in excess of its capital, or (b) in
case there shall be no such excess, out of its net profits for the fiscal year
then current or the current and preceding fiscal year.
Section 2. RESERVES. Before the payment of any dividend, the directors of
the Corporation may set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose, and the
directors may abolish any such reserve in the manner in which it was created.
Section 3. RELIANCE ON CORPORATE RECORDS. A director shall be fully
protected in relying in good faith upon the books of account of the Corporation
or statements prepared by any of its officials as to the value and amount of the
assets, liabilities and net profits of the Corporation, or any other facts
pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid.
Section 4. MANNER OF PAYMENT. Dividends may be paid in cash, in property,
or in shares of the capital stock of the Corporation at par.
ARTICLE X
Seal
The Corporate seal, subject to alteration by the Board of Directors, shall
be in the form of a circle and shall bear the name of the Corporation and shall
indicate its formation under the laws of the State of Delaware. Such seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE XI
Fiscal Year
Except as from time to time otherwise provided by the Board of Directors,
the fiscal year of the Corporation shall be the calendar year.
<PAGE>
ARTICLE XII
Amendments
Section 1. BY THE STOCKHOLDERS. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, these By-Laws may be amended
or repealed, or new By-Laws may be made and adopted by a majority vote of all
the stock of the Corporation issued and outstanding and entitled to vote at any
annual or special meeting of the stockholders, provided that notice of intention
to amend shall have been contained in the notice of meeting.
Section 2. BY THE DIRECTORS. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, these By-Laws, including
amendments adopted by the stockholders, may be amended or repealed by a majority
vote of the whole Board of Directors at any regular or special meeting of the
Board, provided that the stockholders may from time to time specify particular
provisions of the By-Laws which shall not be amended by the Board of Directors.
ARTICLE XIII
Indemnification
The Board of Directors hereby adopt the provision of C.R.S. 7-3-101 S (as
it may be amended from time to time) relating to Indemnification and in
corporate such provisions by this reference as fully as if set forth herein.
<PAGE>
SK EXHIBIT 10.1
RICHI JOINT VENTURE
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT entered into as of the 21st day of January, 1997.
BETWEEN:
RICHI PETROLEUM CORP.
Suite 830 - 789 West Pender Street,
Vancouver, British Columbia V6C 1H2
(hereinafter called "Richi")
OF THE FIRST PART
AND:
DRUCKER INDUSTRIES, INC.
Suite 1 - 1035 Richards Street,
Vancouver, British Columbia V6B 3E4
(hereinafter called "Drucker" or the "Participant")
OF THE SECOND PART
WHEREAS Richi holds the right to an 80.5% profit interest in oil and gas
concessions in YanChi County, NingXia Province, in the Peoples Republic of China
("PRC"), and WuQi County, Shaanxi Province PRC approximating 116,100 acres as
more fully described in Schedule "A" (the "Concessions") pursuant to a
Co-operative Venture agreement dated November 10, 1996 made with the LanTian
Material Company of YinChuan, NingXia, PRC (the "Prime Agreement") attached
hereto as Schedule "B".
AND WHEREAS Richi wishes to farmout an undivided 50% profit interest to the
Participant hereunder;
AND WHEREAS the Participant has agreed to accept said interest under the
terms and conditions set out herein.
NOW THEREFORE this agreement witnesseth that in consideration of the
premises and the covenants hereinafter contained, the parties hereto agree as
follows:
1. INTERPRETATION
- - ------------------
(a) If any of the terms or conditions of this Agreement conflict with a term or
condition of the Prime Agreement, then such term or condition of the Prime
Agreement shall prevail and this Agreement shall be deemed to be modified
accordingly.
<PAGE>
(b) Headings of the articles of this Agreement are inserted for the convenience
of reference only, and shall not affect the meaning or construction thereof.
2. CONSIDERATION
- - -----------------
2.01 Drucker agrees to pay 100% of all the costs of exploring and developing the
Concessions to Richi, as consideration for an undivided 50% interest in all of
the profits generated from the Concessions and paid to a joint venture company
incorporated in the PRC and owned 80.5% by Richi (the "CJV") and which holds the
right to operate the Concessions.
The Participant agrees to advance to Richi all monies required to explore
and develop the Concessions and to drill each of the test wells and required to
perform all earning obligations pursuant to the Prime Agreement which funds are
to be advanced to Richi within fifteen (15) days of the request for such funds
being received by the Participant from Richi.
The Participant acknowledges that the amount payable by the Participant for
the drilling and completion of a test well is an estimate of such costs only and
should the actual costs be in excess of the estimated costs the Participant
agrees to advance such additional costs within fifteen (15) days of the request
for such funds being received by the Participant from Richi. If, in the drilling
of the test wells, Richi encounters practically impenetrable geological horizons
or mechanical difficulties, which make further drilling impractical, Richi may
abandon any such well and within thirty (30) days after such abandonment, may
commence the drilling of a substitutional well which well shall be conclusively
deemed to be the respective test well and all the terms and provisions of this
Agreement shall apply thereto, mutatis mutandis, with the same force and effect
as the well so abandoned.
(a) Upon the Participant advancing the funds set forth in this clause, the
Participant shall earn an undivided 50% interest in the profit generated to the
CJV from the respective test well being drilled.
The Participant covenants and agrees that it shall advance funds to Richi
within fifteen (15) days of the written request for such funds being received by
the Participant where the funds are required for the drilling of a proposed
well. Should the Participant decide not to advance its participating interest
share of such funds, it shall be forever barred from earning an interest in the
test well spacing Unit of the proposed well and in any and all substances
produced from the proposed well.
3. OPERATIONS
- - --------------
(a) The Participant hereby engages Richi to perform on behalf of the
Participant, the Participant's share of the duties, responsibilities, and
obligations in respect of the operations on the Concessions. Richi shall have
the control and management of all operations conducted on behalf of the
Participant, including, without limiting the generality of the foregoing, the
drilling, completion and equipping (and plugging, if a dry hole) of any wells
(and any substitute well if any well cannot be drilled to total depth because of
drilling problems) and the handling and marketing of all petroleum and natural
gas substances produced therefrom as well as the payment of all costs, expenses,
rentals, royalties, taxes (except income taxes) and other charges which may
arise or become due and payable in connection therewith.
<PAGE>
(b) The Participant hereby makes, constitutes and appoints Richi as its true and
lawful attorney and agent, with full power and authority in its name, place and
stead, to execute, swear to, acknowledge, deliver, file and record all
certificates, instruments, documents, materials and agreements in relation to
the Concessions and the operating agreements which in Richi's sole opinion are
necessary or desirable for the proper and expedient conduct of operations on,
maintenance for or disposal of the petroleum products from Concessions. The
Participant hereby declares its power of attorney to be an irrevocable power
complied with an interest and it shall extend to the successors and assigns of
the Participant. The Participant hereby agrees to be bound by any act of Richi
while acting in good faith pursuant to the within power of attorney, and the
Participant hereby waives any and all defenses which may be available to it
contest, negate or disaffirm the action of Richi taken in good faith in
accordance with the terms of the within power of attorney.
(c) Richi shall for the account of the Participant conduct the operations if
required to do so under the operating arrangements in accordance with the
provisions of the Laws of the PRC and for such purposes Richi may engage the
services of independent contractors at rates prevailing in the area for such
services to be performed.
(d) Richi shall have the exclusive charge, control and supervision of any
operations conducted under this Agreement and in the conduct of such operations
Richi shall act in good faith in the best interests of the Participant and
observe the standards of a reasonably prudent operator and carry out all
operations in accordance with good oilfield practice. All operations shall be
conducted at the sole expense and risk of the Participant subject only to any
liability imposed upon Richi by this agreement.
(e) Notwithstanding anything herein contained or implied, Richi shall not be
liable to the Participant for any loss or damage which the Participant may
suffer or for any claim against the Participant by any other party by reason of
anything done or omitted by Richi in the performance of the Operations under
this Agreement except in the case of the wilful act or default or gross
negligence on the part of Richi. No act or omission of Richi shall of itself be
deemed a wilful act or default or gross negligence if such act or omission is
done or omitted at the instruction of or with the express knowledge and
concurrence of the Participant.
(f) The Participant shall be responsible for all of the costs and expenses
relating to the operations hereunder conducted by or on behalf of Richi.
(g) Richi shall be entitled to require the Participant to advance to it from
time to time the cost of additional operations which Richi may be required to
bear.
(h) The Participant does hereby agree to reimburse Richi for all costs of the
operations which Richi has borne on behalf of the Participant under this
Agreement and said costs will be advanced by the Participant within fifteen(15)
days of being billed by Richi for same.
<PAGE>
(i) The Participant hereby indemnifies Richi with respect to any matter arising
from its operations hereunder and agrees to hold Richi and its agents and
employees harmless in carrying out the provisions hereof.
(j) The Participant acknowledges that any information it may receive from Richi
with respect to the operations hereunder is confidential and release of same may
not be made to third parties without the consent of Richi in writing first had
and received except as required by law or the rules and regulations of any Stock
Exchange or Securities Commission or similar authority having jurisdiction over
the Participant.
4. ASSIGNMENT TO THIRD PARTIES
- - -------------------------------
Any party may dispose of an interest hereunder, provided that no such
disposition shall be effective to increase or multiply the obligations of the
other party under this Agreement and at no time will the other party have to
deal with more than one party with respect to any interest hereunder. In the
event that a party assigns all of its interest hereunder, it will cause its
assignee to assume and be bound by all of the terms and provisions hereof and
should an interest be assigned to more than one assignee, then the assigning
party shall remain liable under this Agreement until such time as one assignee
assumes all the duties and obligations hereunder as agent for the other
assignees and is novated into this Agreement.
5. NO WARRANTY
- - ---------------
The Parties hereto acknowledge that the lands and leases are encumbered by
various royalties and other burdens and are subject to the laws of the PRC and
that Richi gives no warranty with respect to title thereto.
6. NO PARTNERSHIP
- - ------------------
This Agreement is not intended to create and shall not be construed to
create a relationship of partnership or an association for profit between the
parties hereto. Notwithstanding any provisions herein, the rights and
liabilities hereunder are several and not joint or collective and the Agreement
shall not create a partnership.
7. TAX PARTNERSHIP
- - -------------------
The parties recognize that this Agreement may create a partnership for
Federal and State income tax purposes in the United States of America and the
parties do hereby agree to elect not to be excluded from the application of
Subchapter K of Chapter 1 of Subtitle A of the United States Internal Revenue
Code of 1954, as amended, or any subsequent Federal or similar State Statute.
All parties agree that if necessary Federal and State partnership income tax
returns shall be filed covering operations under this Agreement and Richi agrees
<PAGE>
to use diligent efforts in the preparation and filing of the partnership tax
returns and in making any appropriate elections on such returns, acting on
behalf of itself and the other party hereto, and on so doing Richi may make
charges for its performance of any internal administrative or professional
service in connection with the keeping of records or the filing of returns.
8. FURTHER ASSURANCES
- - ----------------------
Each of the parties hereto shall at all times do all such further acts and
execute and deliver all such further deeds and documents as shall be reasonably
required in order to fully perform and carry out the terms of this Agreement.
9. CONCESSION RENEWALS
- - -----------------------
Any renewals of the Concessions shall be paid by the Participant. Should
the Participant not pay the cost of the said renewal on a timely basis as set
out herein then it shall have no interest in the respective Concession renewal.
10. ADDRESSES FOR SERVICE & NOTICE
- - -----------------------------------
The addresses of the parties for service herein shall be as set forth on
the first page hereof.
All notices so required or permitted hereunder shall be in writing and
shall be deemed to have been properly given and delivered when delivered
personally or when sent from a point within Canada or the U.S.A. by mail or by
fax with all postage or charges fully prepaid and addressed to the Parties
hereto respectively as set out above.
Any notice or communication so mailed shall be deemed to have been given to
and received by the addressee ninety-six (96) hours after the mailing thereof,
Saturdays, Sundays and statutory holidays excepted. Any Party may change its
address for the purposes hereof by directing a notice in writing of such change
to each of the other parties at its above address and thereafter such changed
address shall be effective for all purposes hereunder.
GENERAL
- - -------
11. All references in this Agreement to monies are expressed in the currency of
the United States of America.
12. This Agreement shall be construed, interpreted and enforced in accordance
with the laws of the Province of British Columbia, Canada.
13. This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
14. Whenever the singular or masculine or neuter is used in this Agreement, the
same shall be construed as meaning the plural or feminine or body politic or
corporate or vice versa where the context or the parties hereto so require.
<PAGE>
15. The terms of this Agreement express and constitute the entire agreement
between the parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
RICHI PETROLEUM CORP.
Per: ____________________________
DRUCKER INDUSTRIES, INC.
Per: ____________________________
<PAGE>
SK EXHIBIT 10.2
MILCO JOINT VENTURE
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT entered into as of the 21st day of January, 1997.
BETWEEN:
MILCO PETROLEUM INC.
Suite 830 - 789 West Pender Street,
Vancouver, British Columbia V6C 1H2
(hereinafter called "Milco")
OF THE FIRST PART
AND:
DRUCKER INDUSTRIES, INC.
Suite 1 - 1035 Richards Street,
Vancouver, British Columbia V6B 3E4
(hereinafter called "Drucker" or the "Participant")
OF THE SECOND PART
WHEREAS Milco holds the right to an 85% profit interest in oil and gas
concessions in North Shaanxi Province, in the Peoples Republic of China ("PRC"),
approximating 800 square kilometres as more fully described in Schedule "A" (the
"Concessions") pursuant to a Joint Venture agreement dated November 13, 1996
made with the Zhong Yuan Enterprise Company Shaanxi, 75, LianHu Road, Xi'an, PRC
(the "Prime Agreement") attached hereto as Schedule "B".
AND WHEREAS Milco wishes to farmout an undivided 50% profit interest to the
Participant hereunder;
AND WHEREAS the Participant has agreed to accept said interest under the
terms and conditions set out herein.
NOW THEREFORE this agreement witnesseth that in consideration of the
premises and the covenants hereinafter contained, the parties hereto agree as
follows:
1. INTERPRETATION
- - ------------------
(a) If any of the terms or conditions of this Agreement conflict with a term or
condition of the Prime Agreement, then such term or condition of the Prime
Agreement shall prevail and this Agreement shall be deemed to be modified
accordingly.
<PAGE>
(b) Headings of the articles of this Agreement are inserted for the convenience
of reference only, and shall not affect the meaning or construction thereof.
2. CONSIDERATION
- - -----------------
2.01 Drucker agrees to pay 100% of all the costs of exploring and developing the
Concessions to Milco, as consideration for an undivided 50% interest in all of
the profits generated from the Concessions and paid to a joint venture company
incorporated in the PRC and owned 85% by Milco (the "JV") and which holds the
right to operate the Concessions.
The Participant agrees to advance to Milco all monies required to explore
and develop the Concessions and to drill each of the test wells and required to
perform all earning obligations pursuant to the Prime Agreement which funds are
to be advanced to Milco within fifteen (15) days of the request for such funds
being received by the Participant from Milco.
The Participant acknowledges that the amount payable by the Participant for
the drilling and completion of a test well is an estimate of such costs only and
should the actual costs be in excess of the estimated costs the Participant
agrees to advance such additional costs within fifteen (15) days of the request
for such funds being received by the Participant from Milco. If, in the drilling
of the test wells, Milco encounters practically impenetrable geological horizons
or mechanical difficulties, which make further drilling impractical, Milco may
abandon any such well and within thirty (30) days after such abandonment, may
commence the drilling of a substitutional well which well shall be conclusively
deemed to be the respective test well and all the terms and provisions of this
Agreement shall apply thereto, mutatis mutandis, with the same force and effect
as the well so abandoned.
(a) Upon the Participant advancing the funds set forth in this clause, the
Participant shall earn an undivided 50% interest in the profit generated to the
JV from the respective test well being drilled.
The Participant covenants and agrees that it shall advance funds to Milco
within fifteen (15) days of the written request for such funds being received by
the Participant where the funds are required for the drilling of a proposed
well. Should the Participant decide not to advance its participating interest
share of such funds, it shall be forever barred from earning an interest in the
test well spacing Unit of the proposed well and in any and all substances
produced from the proposed well.
3. OPERATIONS
- - --------------
(a) The Participant hereby engages Milco to perform on behalf of the
Participant, the Participant's share of the duties, responsibilities, and
obligations in respect of the operations on the Concessions. Milco shall have
the control and management of all operations conducted on behalf of the
Participant, including, without limiting the generality of the foregoing, the
drilling, completion and equipping (and plugging, if a dry hole) of any wells
(and any substitute well if any well cannot be drilled to total depth because of
drilling problems) and the handling and marketing of all petroleum and natural
gas substances produced therefrom as well as the payment of all costs, expenses,
rentals, royalties, taxes (except income taxes) and other charges which may
arise or become due and payable in connection therewith.
<PAGE>
(b) The Participant hereby makes, constitutes and appoints Milco as its true and
lawful attorney and agent, with full power and authority in its name, place and
stead, to execute, swear to, acknowledge, deliver, file and record all
certificates, instruments, documents, materials and agreements in relation to
the Concessions and the operating agreements which in Milco's sole opinion are
necessary or desirable for the proper and expedient conduct of operations on,
maintenance for or disposal of the petroleum products from Concessions. The
Participant hereby declares its power of attorney to be an irrevocable power
complied with an interest and it shall extend to the successors and assigns of
the Participant. The Participant hereby agrees to be bound by any act of Milco
while acting in good faith pursuant to the within power of attorney, and the
Participant hereby waives any and all defenses which may be available to it
contest, negate or disaffirm the action of Milco taken in good faith in
accordance with the terms of the within power of attorney.
(c) Milco shall for the account of the Participant conduct the operations if
required to do so under the operating arrangements in accordance with the
provisions of the Laws of the PRC and for such purposes Milco may engage the
services of independent contractors at rates prevailing in the area for such
services to be performed.
(d) Milco shall have the exclusive charge, control and supervision of any
operations conducted under this Agreement and in the conduct of such operations
Milco shall act in good faith in the best interests of the Participant and
observe the standards of a reasonably prudent operator and carry out all
operations in accordance with good oilfield practice. All operations shall be
conducted at the sole expense and risk of the Participant subject only to any
liability imposed upon Milco by this agreement.
(e) Notwithstanding anything herein contained or implied, Milco shall not be
liable to the Participant for any loss or damage which the Participant may
suffer or for any claim against the Participant by any other party by reason of
anything done or omitted by Milco in the performance of the Operations under
this Agreement except in the case of the wilful act or default or gross
negligence on the part of Milco. No act or omission of Milco shall of itself be
deemed a wilful act or default or gross negligence if such act or omission is
done or omitted at the instruction of or with the express knowledge and
concurrence of the Participant.
(f) The Participant shall be responsible for all of the costs and expenses
relating to the operations hereunder conducted by or on behalf of Milco.
(g) Milco shall be entitled to require the Participant to advance to it from
time to time the cost of additional operations which Milco may be required to
bear.
(h) The Participant does hereby agree to reimburse Milco for all costs of the
operations which Milco has borne on behalf of the Participant under this
Agreement and said costs will be advanced by the Participant within fifteen(15)
days of being billed by Milco for same.
<PAGE>
(i) The Participant hereby indemnifies Milco with respect to any matter arising
from its operations hereunder and agrees to hold Milco and its agents and
employees harmless in carrying out the provisions hereof.
(j) The Participant acknowledges that any information it may receive from Milco
with respect to the operations hereunder is confidential and release of same may
not be made to third parties without the consent of Milco in writing first had
and received except as required by law or the rules and regulations of any Stock
Exchange or Securities Commission or similar authority having jurisdiction over
the Participant.
4. ASSIGNMENT TO THIRD PARTIES
- - -------------------------------
Any party may dispose of an interest hereunder, provided that no such
disposition shall be effective to increase or multiply the obligations of the
other party under this Agreement and at no time will the other party have to
deal with more than one party with respect to any interest hereunder. In the
event that a party assigns all of its interest hereunder, it will cause its
assignee to assume and be bound by all of the terms and provisions hereof and
should an interest be assigned to more than one assignee, then the assigning
party shall remain liable under this Agreement until such time as one assignee
assumes all the duties and obligations hereunder as agent for the other
assignees and is novated into this Agreement.
5. NO WARRANTY
- - ---------------
The Parties hereto acknowledge that the lands and leases are encumbered by
various royalties and other burdens and are subject to the laws of the PRC and
that Milco gives no warranty with respect to title thereto.
6. NO PARTNERSHIP
- - ------------------
This Agreement is not intended to create and shall not be construed to
create a relationship of partnership or an association for profit between the
parties hereto. Notwithstanding any provisions herein, the rights and
liabilities hereunder are several and not joint or collective and the Agreement
shall not create a partnership.
7. TAX PARTNERSHIP
- - -------------------
The parties recognize that this Agreement may create a partnership for
Federal and State income tax purposes in the United States of America and the
parties do hereby agree to elect not to be excluded from the application of
Subchapter K of Chapter 1 of Subtitle A of the United States Internal Revenue
Code of 1954, as amended, or any subsequent Federal or similar State Statute.
All parties agree that if necessary Federal and State partnership income tax
returns shall be filed covering operations under this Agreement and Milco agrees
<PAGE>
to use diligent efforts in the preparation and filing of the partnership tax
returns and in making any appropriate elections on such returns, acting on
behalf of itself and the other party hereto, and on so doing Milco may make
charges for its performance of any internal administrative or professional
service in connection with the keeping of records or the filing of returns.
8. FURTHER ASSURANCES
- - ----------------------
Each of the parties hereto shall at all times do all such further acts and
execute and deliver all such further deeds and documents as shall be reasonably
required in order to fully perform and carry out the terms of this Agreement.
9. CONCESSION RENEWALS
- - -----------------------
Any renewals of the Concessions shall be paid by the Participant. Should
the Participant not pay the cost of the said renewal on a timely basis as set
out herein then it shall have no interest in the respective Concession renewal.
10. ADDRESSES FOR SERVICE & NOTICE
- - -----------------------------------
The addresses of the parties for service herein shall be as set forth on
the first page hereof.
All notices so required or permitted hereunder shall be in writing and
shall be deemed to have been properly given and delivered when delivered
personally or when sent from a point within Canada or the U.S.A. by mail or by
fax with all postage or charges fully prepaid and addressed to the Parties
hereto respectively as set out above.
Any notice or communication so mailed shall be deemed to have been given to
and received by the addressee ninety-six (96) hours after the mailing thereof,
Saturdays, Sundays and statutory holidays excepted. Any Party may change its
address for the purposes hereof by directing a notice in writing of such change
to each of the other parties at its above address and thereafter such changed
address shall be effective for all purposes hereunder.
GENERAL
- - -------
11. All references in this Agreement to monies are expressed in the currency of
the United States of America.
12. This Agreement shall be construed, interpreted and enforced in accordance
with the laws of the Province of British Columbia, Canada.
13. This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
14. Whenever the singular or masculine or neuter is used in this Agreement, the
same shall be construed as meaning the plural or feminine or body politic or
corporate or vice versa where the context or the parties hereto so require.
<PAGE>
15. The terms of this Agreement express and constitute the entire agreement
between the parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
MILCO PETROLEUM INC.
Per: ____________________________
DRUCKER INDUSTRIES, INC.
Per: ____________________________
SK EXHIBIT 24.1
CONSENT OF ACCOUNTANT
<PAGE>
AMISANO HANSON
CHARTERED ACCOUNTANTS
750 West Pender Street, #604
Vancouver, B.C. V6C 2T7
(604)-689-0188
Fax: (604) 689-9773
August 6, 1997
CONSENT FOR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DRUCKER INDUSTRIES, INC.
We consent to the use in the Form 10, General Form for Registration of
Securities, of Drucker Industries, Inc. of our report of the financial
statements of Drucker Industries, Inc. as of December 31, 1996, and to the use
of our name and the statements with respect to us as appearing under the heading
"Exhibits" in the Form 10.
/s/ Amisano Hanson
---------------------------------
