As filed with SEC on _______________,2000 File No. 0-29670
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
Amendment No. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SEC FILE NO. 333-51314
Commission file number 0-29670
DRUCKER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE N/A
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(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
#1 - 1035 RICHARDS STREET, VANCOUVER B.C., CANADA V6B 3E4
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(Address of principal executive offices) (Zip Code)
GERALD RUNOLFSON, PRESIDENT, #1 - 1035 RICHARDS STREET,
VANCOUVER B.C., CANADA V6B 3E4
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(604) 681-4421
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(Agent for Service of Process)
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering /__/.
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering /__/.
If this form is a post-effective registration statement filed pursuant
to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering /__/.
If delivery of the prospectus is expected to be made pursuant to Rule
434; please check the following box /__/.
Page 1 of 70 pages
Exhibit Index Begins on Page 71
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<CAPTION>
Calculation of Registration Fee
<S> <C> <C> <C> <C>
Title of each Proposed Proposed Proposed Amount of
class of Amount of maximum maximum registration fee
securities to be shares to be offering price aggregate
registered registered per share(4) offering price (4)
------------------------------------------------------------------------------------------------------------------
Common 5,542,065 $.20 $110,813 $487.70
Stock(1)
Shares
Underlying A 5,542,065 $.20 $110,813 $487.70
Warrants(2)
Shares
Underlying B 5,542,065 $.20 $110,813 $487.70
Warrants(3)
======================= ======================= ======================= ======================= ======================
Total 16,626,195 $.20 $3,325,239 $1,463.10
======================= ======================= ======================= ======================= ======================
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the commission acting pursuant to said Section 8(a)
may determine.
(1) The shares of common stock registered represent the number of shares held by
selling shareholders.
(2) The shares of common stock registered represent the shares underlying A
warrants held by selling shareholders.
(3) The shares of common stock registered represent the shares underlying B
warrants which may be purchased by selling shareholders if the A warrants are
exercised.
(4) Based on the average of the bid and ask price on the OTC Bulletin Board for
the Company's Common Stock for the trading day preceding filing computed
pursuant to Rule 457.
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<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K and Rule 404(a) the following
cross-reference sheet shows the location in the prospectus of the information
required to be included in response to Items of Form SB-2.
PART I
<S> <C> <C>
ITEM LOCATION
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Item 1 Forepart of Registration Forepart of Registration
Statement and Outside Front Cover Statement and Outside Front
Page of Prospectus Cover Page of Prospectus
Item 2 Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
Item 3 Summary Information, Risk Factors Summary, Risk Factors
and Ratio of Earnings to Fixed
Charges
Item 4 Use of Proceeds Use of Proceeds
Item 5 Determination of Offering Price Determination of Offering Price
Item 6 Dilution
Item 7 Selling Security Holders Selling Security Holders
Item 8 Plan of Distribution Plan of Distribution
Item 9 Legal Proceedings Legal Matters
Item 10 Directors, Executive Officers, Directors, Executive Officers,
Promoters and Control Persons Promoters and Control Persons
Item 11 Security Ownership of Certain Security Ownership of Certain
Beneficial Ownership and Beneficial Ownership and
Management Management
Item 12 Description of Securities Description of Securities
Item 13 Interest of Named Experts and Experts
Counsel
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Item 14 Disclosure of Commission Position Management - Indemnification of
on Indemnification For Securities Officers and Directors
Act Liabilities
Item 15 Organization within Last Five Business History
Years
Item 16 Description of Business Business History
Item 17 Management Discussion and Management Discussion and
Analysis of Operations Analysis of Operations
Item 18 Description of Property Business History
Item 19 Certain Relationships and Related Relationships and
Party Transactions Related Party Transactions
Item 20 Market for Common Equity and Price Range of Our Common Stock
Related Stockholder Matters & Stockholder Matters
Item 21 Executive Compensation Executive Compensation
Item 22 Financial Statements Financial Statements
Item 23 Changes In and Disagreements Changes In and Disagreements
With Accountants With Accountants
PART II
Item 24 Indemnification of Officers and Indemnification
Directors
Item 25 Other Expenses of Issuance and Other Expenses of Offering
Distribution Registration and Distribution
Item 26 Recent Sales of Unregistered Recent Sales of Unregistered
Securities Securities
Item 27 Exhibits, Financial Statements Exhibits, Financial Statements
and Schedules and Schedules
Item 28 Undertakings Undertakings
Item 29 Financial Statements and Schedules Financial Statements and Schedules
4
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED, WE MAY
NOT DISTRIBUTE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
SALE IS NOT PERMITTED.
PROSPECTUS DATED __________________, 2000
DRUCKER, INC.
16,626,195 Shares of Common Stock
The offering price per share will be a price based upon current market
price. Drucker, Inc. is engaged in the acquisition, exploration and development
of mineral properties and oil and natural gas properties.
Drucker, Inc. is offering 16,626,195 shares of common stock, 5,542,065
of which shares are outstanding and 5,542,065 are shares underlying A warrants
and 5,542,065 are shares underlying B warrants if the A warrants are exercised
in full.
WE URGE YOU TO READ THE RISK FACTORS BEGINNING ON PAGE 12 ALONG WITH
THIS PROSPECTUS BEFORE YOU MAKE YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SHARES, OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We will not receive any proceeds from the shares of common stock sold
by the selling stockholders. However, we may receive proceeds from sale of
shares if the A warrants are exercised, and subsequently, if the B warrants are
exercised. See "Use of Proceeds".
Our offering (the "Offering") is not being underwritten. Our
shareholders are offering up to 16,626,195 shares of common stock including
shares underlying A and B warrants which have been registered for sale by
certain of our selling stockholders (as defined) pursuant to this prospectus
from time to time to purchasers directly, or through agents, brokers or dealers
at market or negotiated prices. We are also registering 11,084,130 shares which
underly the A warrants, if exercised, and B warrants, if exercised. Thus, the
distribution of shares of common stock may occur over an extended period of
time. See "Plan of Distribution." Our selling shareholder's shares registered
under this prospectus will be sold over an extended period of time, on a delayed
or continuous basis.
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The Selling Stockholders and any broker-dealer who acts in connection
with the sale of shares may be deemed to be "underwriters," as that term is
defined in the Securities Act, and any commission received by them and profit on
any resale of the shares of common stock as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The selling
stockholders will pay or assume brokerage commissions or underwriting discounts
incurred in connection with the sale of their shares of common stock, which
commissions or discounts will not be paid or assumed by us. See "Plan of
Distribution."
Our common stock is currently trading on the OTC Bulletin Board under
the symbol of "DKIN." The last reported sale price of common stock on November
30, 2000 on the OTCBB was $.21 closing.
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TABLE OF CONTENTS
Prospectus Summary 8
Summary of Financial Information 10
Risk Factors 12
Risks Relating to Oil and Gas Business in General 18
Business 22
Price Range of Our Common Stock & Stockholder Matters 32
Management's Discussion and Analysis of Financial
Condition and Results of Operations 33
Capitalization 40
Management 42
Security Ownership of Principal Owners and Management 46
Relationships and Related Transactions 48
Legal Matters 49
Changes In and Disagreements with Accountants 50
Description of Securities 50
Transfer Agent and Registrar 51
Limitations on Directors Liability 51
Plan of Distribution 51
Selling Stockholders 52
Determination of Offering Price 66
Experts 66
Where You Can Find More Information 66
Index to Financial Statements 68
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SIGNIFICANT ASPECTS OF OUR BUSINESS AND THIS
OFFERING, BUT YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL
DATA AND RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. WHEN WE REFER TO
OUR COMPANY IN THIS PROSPECTUS, WE REFER TO US AND OUR SUBSIDIARIES, AS A
COMBINED ENTITY, EXCEPT WHERE WE INDICATE OTHERWISE. YOU SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS."
The information set forth in this prospectus includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Words "estimated," "intends," "believes," "plans,"
"planning," "expects," and "if" are intended to identify forward-looking
statements. Although we believe that the assumptions made and expectations
reflected in the forward-looking statements are reasonable, it must be
recognized that there is no assurance that the underlying assumptions will, in
fact, prove to be correct or that actual future results will not be different
from the Company's expectations.
DRUCKER, INC.
On February 4, 1971, we were incorporated under the laws of the State
of Idaho, under the name of Monetary Metals Corporation. We went through a
succession of mergers and reorganizations through 1995, without operating
successfully.
On September 4, 1991, we filed a Certificate of Amendment in the State
of Delaware changing our name to Drucker Industries, Inc.
At December 31, 1995, we had terminated any attempts in the N-Viro
business. No activities were conducted in 1995 or 1996. In 1997, we engaged new
management who adopted a business plan to engage in oil and gas exploration. We
drilled an unsuccessful test well in China in 1998 and then abandoned further
attempts in China. We are currently participating in oil exploration in Egypt in
a joint venture in which six wells have been completed as producers, and have
participated in two wells in Algeria in an exploration venture in 2000.
We changed our name to Drucker, Inc. in October 2000.
We are still in the early stages of operations, and we may not fulfill
our stated goals until much later in the future, if at all. We have had a
limited operating history since our organization in 1971 and have experienced
significant losses since inception. We are dependent on private placements with
investors for our resources and funding. See "Risk Factors."
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SELLING SHAREHOLDERS
Our selling shareholders are offering 16,626,195 common shares,
5,542,065 of which they previously purchased, for sale as market conditions
allow and if they exercise A warrants which they hold, they will have up to an
additional 5,542,065 shares to sell. If they then exercise B warrants, up to an
additional 5,542,065 shares may be sold by our selling shareholders. (See
"Selling Shareholders" and "Plan of Distribution.")
THE OFFERING
The selling shareholders propose to offer 16,626,195 shares of our
common stock at the market prices, continuously, upon effectiveness of the
Registration Statement. (See "Plan of Distribution" for information concerning
the offering.)
NET PROCEEDS TO THE SELLING SHAREHOLDERS
Offering @ market price $ (To be inserted in final
amendment)
Outstanding common stock offered
By selling shareholders 5,542,065 shares
Common stock outstanding now 32,476,250 shares
Common stock outstanding if our
shareholders exercise all of A warrants 38,018,315 shares
Common stock outstanding if
B warrants are exercised 43,560,380 shares
Total shares offered by our
selling stockholders 16,626,195 shares
Use of Proceeds. We will not receive any
proceeds from the sale of
shares of common stock by
the selling stockholders.
OTC Bulletin Board Symbol DKIN
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SUMMARY FINANCIAL INFORMATION
The summary financial information presented below as of December 31,
1999 and 1998 was derived from our audited financial statements appearing
elsewhere in this prospectus. The financial information for the nine months
ended September 30, 2000 was derived from our unaudited financial statements. In
the opinion of management the financial information for the nine months ended
September 30, 2000, contain all adjustments, consisting only of normal recurring
accruals necessary for the fair presentation of the results of operations and
financial position for that period. You should read this summary financial
information in conjunction with our plan of operation, financial statements and
related notes to the financial statements, each appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Financial information for the year ended December 31, 1999 is compared
to the year ended December 31, 1998.
<S> <C> <C>
1999 1998
---- ----
Total Currents Assets 1,887,666 2,771,380
Other 1,606,290 1,262,106
Total Assets $3,493,956 $4,033,486
Total Current Liabilities 81,109 47,455
Total Shareholder's Equity 3,412,847 3,986,031
Total Revenues and Fees 0 0
General and Administrative Expenses 218,441 182,405
Income From Operations 0 0
Total Other Income (Expenses) 0 0
Net Income (Loss) (573,184) (641,130)
Basic and Diluted Earnings Per
Common Shares (.02) (.02)
================================================
Weighted Average Number of Common
Shares Outstanding 32,476,250 32,476,250
================================================
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<TABLE>
<CAPTION>
The following unaudited supplementary data presents comparative summary
financial information for the nine months ended September 30, 2000 (unaudited):
<S> <C> <C>
First Nine Months First Nine Months
1999 2000
--------------------------- ------------------------------
Total Revenues - 2,223,398
Royalties - 961,822
--------------------------- ------------------------------
Operating Expenses 704,737 1,045,260
--------------------------- ------------------------------
General & Administrative Expenses 138,492 145,299
--------------------------- ------------------------------
Income (loss) From Operations (843,229) 71,017
Total Other Income (Expenses) 105,449 61,002
Net Income (loss) (737,780) 132,019
=========================== ==============================
Basic and Diluted Earnings Per Common $(0.02) $0.00
Share
=========================== ==============================
Basic Weighted Average Number of Common
Shares Outstanding 32,476,250 32,476,250
=========================== ==============================
</TABLE>
<TABLE>
<CAPTION>
The following unaudited supplementary data presents net income per
share for the fiscal year ended December 31, 1999 and the nine months ended
September 30, 2000 (unaudited). There will be no effect or change to the number
of shares outstanding.
<S> <C> <C>
PERIOD
------
1999 2000
--------------------------- -----------------------
Net income (loss) before income taxes as reported $(336,348) $132,019
Net income $(336,348) $132,019
Basic and diluted Weighted average common shares 32,476,250 32,476,250
outstanding
Basic and diluted Income per common share $(0.01) $0.00
=========================== =======================
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE
OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO PURCHASE SHARES OF OUR
COMMON STOCK.
RISK FACTORS
The securities to be offered by this prospectus may involve a high
degree of risk. Certain risk factors relating to our business are set forth
below. IF OIL GATHERING AND TRANSPORTATION IS NOT AVAILABLE IT MAY AFFECT OUR
CASH FLOW.
We depend on oil gathering and transportation facilities to move our
production to market and we cannot guarantee that these facilities will be
available when needed or that we will have access to these facilities when
needed. If these facilities are not available, we will be unable to sell the oil
we have produced.
The marketability of our oil production depends in part on the
availability, proximity and capacity of gathering systems, pipelines and if
necessary, transport facilities. The expansion of transportation capacity in the
area is likely to require significant capital outlays by the transport
companies. Our ability to market our oil production could also be limited
because much of our production is transported on an overland basis and,
therefore, the transporter could unilaterally elect to stop transporting our oil
due to many factors, including lack of available capacity. We cannot guarantee
that our wells will not be shut-in for significant periods of time due to the
lack of transportation.
ESTIMATES OF OIL RESERVES ARE UNCERTAIN AND INHERENTLY IMPRECISE. WE
HAVE NOT COMPLETED A STUDY OF OUR ACTUAL RESERVES. OUR ACTUAL RESERVES COULD BE
MATERIALLY LESS THAN THE ESTIMATES IF WE EVER MAKE ANY ESTIMATES.
Reserve estimates are based upon various assumptions, including
assumptions relating to oil prices, drilling and operating expenses, capital
expenditures, taxes and the availability of funds. The process of estimating oil
reserves is complex. This process requires significant judgment in the
evaluation of available geological, geophysical, engineering and economic data
for each reservoir. Therefore, estimates are inherently imprecise. Because of
the limited amount of performance data currently available for our wells, the
potential for future reserve revisions and unknown nature of the field area, a
reserve estimate is not able to be completed within typical reserve estimate
parameters.
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Actual future production, oil prices, revenues, operating expenses,
taxes, development expenditures and quantities of recoverable oil reserves will
most likely vary from those when estimated. Any significant variance could
materially affect the estimated quantities and present value of future net
revenues. Our properties may also be susceptible to hydrocarbon drainage from
production by other operators on adjacent properties. In addition, we may adjust
future estimates of proved reserves to reflect production history, results of
exploration and development, prevailing oil prices and other factors, many of
which are beyond our control.
You should not assume that the present value of any future net cash
flows which we may compute is the current market value of our estimated oil
reserves. In accordance with SEC requirements, the estimated discounted future
net cash flows from proved reserves are generally based on prices and costs as
of the date of the estimate. Actual future prices and costs may be materially
higher or lower than the prices and costs as of the date of the estimate. Any
changes in consumption by oil purchasers or changes in governmental regulations
or taxation could also affect actual future net cash flows. The timing of both
the production and the expenses from the development and production of oil
properties will affect the timing of actual future net cash flows from proved
reserves and their present value. In addition, the 10% discount factor, which is
required by the SEC to be used in calculating discounted future net cash flows
for reporting purposes, is not necessarily the most appropriate discount factor.
The effective interest rate at various times and the risks associated with our
Company or the oil and gas industry in general will affect the accuracy of the
10% discount factor.
WE HAVE A LIMITED OPERATING HISTORY, WHICH PROVIDES LITTLE HISTORICAL
INFORMATION TO AN INVESTOR.
We generated no revenues until January 2000. We are subject to all the
risks inherent in the development of a new business. There is a limited
operating history upon which to base an assumption that we will be able to
successfully implement our business plans and achieve our business goals, and an
investor may not have sufficient performance information, which increases the
investment risk.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS COULD LIMIT OUR
DRILLING ACTIVITIES AND INCREASE OUR COSTS TO OPERATE. IN TURN, THIS COULD
ADVERSELY AFFECT OUR DEVELOPMENT PROGRAM AND CASH FLOW.
We could face significant liabilities to governmental agencies and
third parties for discharging oil, oil or other pollutants into the air, soil or
water, and be required to spend substantial amounts on investigations,
litigation and remediation. We cannot be certain that existing environmental
laws or regulations, as interpreted now or in the future, or future laws or
regulations will not materially adversely affect our results of operations and
financial condition or that we will not face material indemnity claims with
respect to properties we own. Our industry is subject to extensive regulation
which may increase our costs.
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OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATION UNDER LOCAL AND
NATIONAL LAWS RELATING TO THE EXPLORATION FOR, AND THE DEVELOPMENT, PRODUCTION,
MARKETING, PRICING, TRANSPORTATION AND STORAGE OF OIL, AS WELL AS ENVIRONMENTAL
AND SAFETY MATTERS.
New laws or regulations, or changes to current requirements, could have
a material adverse effect on our business. In the past, prices of oil have been
controlled by governmental regulation and there can be no assurance that price
controls will not be implemented again.
DEPRESSED PRICES FOR OIL WOULD AFFECT OUR BUSINESS.
Our revenues, operating results, profitability, future rate of growth
and the carrying value of our properties depend heavily on prevailing market
prices for oil. We expect the markets for oil to continue to be volatile. Any
substantial or extended decline in the price of oil would have a material
adverse effect on our financial condition and results of operations. A decline
could reduce our cash flow and borrowing capacity, as well as the value and
quantity of our oil reserves. Various factors beyond our control will affect
prices of oil, including:
--World supplies of oil;
--domestic economic conditions;
--marketability of production;
--the level of consumer demand;
--the price, availability and acceptance of alternative fuels;
--the availability of pipeline and compressor capacity;
--weather conditions; and
--actions of local and foreign authorities.
These external factors and the volatile nature of the energy markets
make it difficult to estimate future prices of oil.
WE FACE RISKS RELATED TO TITLE TO THE LEASES WE ENTER INTO THAT MAY
RESULT IN ADDITIONAL COSTS AND AFFECT OUR OPERATING RESULTS.
It is customary in the oil and gas industry to acquire a leasehold
interest in a property based upon a preliminary title investigation. If the
title to the leases in which we particpate is defective, we could lose the money
already spent on acquisition and development, or incur substantial costs to cure
the title defect. It is possible that the terms of oil and gas leases in which
we participate may be interpreted differently depending on the state in which
the property is located. For instance, royalty calculations can be substantially
different from country to country, depending on each country's interpretation of
lease language concerning the costs of production. We cannot guarantee that
there will be no litigation concerning the proper interpretation of the terms of
our leases. Adverse decisions in such litigation could result in material costs
or the loss of one or more leases.
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WE FACE COMPETITION FROM OTHER COMPANIES IN THE EXPLORATION AND
DEVELOPMENT OF OIL AND FOR THE ACQUISITION OF SUITABLE LEASEHOLD INTERESTS. THIS
COMPETITION COULD RESULT IN AN INCREASE IN OUR COSTS TO ACQUIRE LEASEHOLD
INTERESTS AND/OR REDUCE THE MARGINS WE ACHIEVE ON SALES OF OIL.
Competition to acquire leasehold interests, as well as competition in
the oil and gas exploration and production industry as a whole, is intense. We
compete with a number of companies that possess greater financial, marketing,
personnel, and other resources than are available to us. Different companies
evaluate potential acquisitions differently. This results in widely differing
bids. If other bidders are willing to pay higher prices than we believe are
supported by our evaluation criteria, then our ability to acquire prospects
could be limited. Low or uncertain prices for leasehold interests could cause
potential sellers to withhold or withdraw properties from the market. In such an
environment, we cannot guarantee that there will be a sufficient number of
suitable prospects available for acquisition. We may also be limited in our
options for developing prospects. As oil and gas industry continues to do well
we expect leasehold acquisition costs to increase. In this type of an
environment, we will be required to acquire leasehold interests for costs that
are greater than we have paid historically.
WE MAY NOT BE ABLE TO OBTAIN ADEQUATE FINANCING TO EXECUTE OUR
OPERATING STRATEGY.
We will address our long-term liquidity needs through the use of bank
credit facilities, the issuance of debt and equity securities, joint venture
financing, production payments and the use of cash provided by operating
activities.
The availability of these sources of capital will depend upon a number
of factors, some of which are beyond our control. These factors include general
economic and financial market conditions, oil prices and the market value and
operating performance of our Company. We may be unable to execute our operating
strategy if we cannot obtain capital from these sources.
SHUT-IN WELLS, CURTAILED PRODUCTION AND OTHER PRODUCTION INTERRUPTIONS
MAY AFFECT OUR ABILITY TO DO BUSINESS AND RESULT IN DECREASED REVENUES.
Our production may be curtailed or shut-in for considerable periods of
time due to any of the following factors:
--a lack of market demand;
--government regulation;
--pipeline and processing interruptions;
--production allocations;
--equipment or manpower shortages;
15
<PAGE>
--diminished pipeline capacity; and
--force majeure.
These curtailments may continue for a considerable period of time
resulting in a material adverse effect on our results of operations and
financial condition.
WE ARE SUBJECT TO OPERATING RISKS THAT MAY NOT BE COVERED BY OUR
INSURANCE.
The exploration for and production of oil involves certain operating
hazards, such as:
--well blowouts;
--craterings;
--explosions;
--fires;
--uncontrollable flows of oil or well fluids;
--formations with abnormal pressures;
--pipeline ruptures or spills;
--pollution;
--releases of toxic gas; and
--other environmental hazards and risks.
Any of these hazards could cause us to suffer substantial losses if
they occur. We may also be liable for environmental damage caused by previous
owners of the property we have leased. As a result, substantial liabilities to
third parties or governmental entities may be incurred, the payment of which
could reduce or eliminate our funds available for acquisitions, exploration and
development or cause us to suffer losses. In accordance with customary industry
practices, we maintain insurance against some, but not all, risks and losses. We
currently carry well control insurance as well as property and general liability
insurance. We may elect to self-insure if our management believes that the cost
of insurance, although available, is excessive relative to the risks presented.
The occurrence of an event that is not covered, or not fully covered, by
insurance could have a material adverse effect on our financial condition and
results of operations.
EXPLORATORY DRILLING IS AN UNCERTAIN PROCESS WITH MANY RISKS TO THE
COMPANY AND OUR INVESTORS.
Exploratory drilling involves numerous risks, including the risk that
we will not find any commercially productive oil reservoirs. The cost of
drilling, completing and operating wells is often uncertain, and a number of
factors can delay or prevent drilling operations, including:
--unexpected drilling conditions;
--pressure or irregularities in formations;
--equipment failures or accidents;
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--adverse weather conditions;
--compliance with governmental requirements; and
--shortages or delays in the availability of drilling rigs and the delivery of
equipment.
Our future drilling activities may not be successful, nor can we be
sure that our overall drilling success rate or our drilling success rate for
activity within a particular area will not decline. Unsuccessful drilling
activities could have a material adverse effect on our results of operations and
financial condition. Also, we may not be able to obtain any options or lease
rights in potential drilling locations. Although we have identified numerous
potential drilling locations, we cannot be sure that we will ever drill them or
that we will produce oil from them or any other potential drilling locations.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR ABILITY TO OPERATE.
Our operations depend on a relatively small group of key management and
technical personnel. We cannot assure you that these individuals will remain
with us for the immediate or foreseeable future. The unexpected loss of the
services of one or more of these individuals could have a detrimental effect on
us. Our future success will depend on our ability to attract and retain skilled
management personnel.
OUR SHARES THAT ARE ELIGIBLE FOR FUTURE SALE MAY HAVE AN ADVERSE EFFECT
ON THE PRICE OF OUR STOCK.
As of December 31, 1999, 32,476,250 shares of common stock were
outstanding. In addition, options and warrants to purchase 14,034,130 shares are
outstanding, of which 11,084,130 were exercisable at March 31, 2002. These
outstanding options and warrants are exercisable at prices ranging from $.40 to
$.60 per share. Sales of substantial amounts of common stock, or a perception
that such sales could occur, and the existence of options or warrants to
purchase shares of common stock at prices that may be below the then current
market price of the common stock could adversely affect the market price of the
common stock and could impair our ability to raise capital through the sale of
our equity securities.
WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE.
We anticipate using all of our revenues and profits, if any, toward
additional exploration, and general and administrated expenses.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus that relate to our
business and the industry we operate in are forward-looking. Statements or
assumptions related to or underlying such forward-looking statements include,
without limitation, statements regarding:
17
<PAGE>
-the quality of our properties with regard to, among other things, the existence
of reserves in economic quantities;
-our ability to increase our reserves through exploration and development;
-the number of locations to be drilled and the time frame within which they will
be drilled;
-anticipated demand for oil; and
-the adequacy of our sources of capital resources and liquidity.
Actual results may differ materially from those suggested by the
forward-looking statements for various reasons, including those discussed under
the caption "Risk Factors".
RISKS RELATED TO THE OIL AND GAS BUSINESS IN GENERAL WHICH COULD
ADVERSELY AFFECT US
Our operations will be subject to all of the risks normally incident to
the production of oil and gas, including blowouts, pollution and fires. Each of
these incidents could result in damage to or destruction of oil and gas wells or
formations or production facilities or damage to persons or property. As is
common in the oil and gas industry, we are not fully insured against these risks
either because insurance is not available or because we have elected not to
insure due to prohibitive premium costs.
Our future oil and gas activities may involve a significant risk that
commercial oil or gas production will not be maintained. The costs of drilling,
completing reworking or operating wells is often uncertain. Further, operations,
may be curtailed or delayed as a result of many factors, weather conditions,
delivery delays, shortages of pipe and equipment, and the availability of
workover equipment.
The oil and gas business is further subject to many other contingencies
which are beyond our control. Wells may have to be shut-in because they have
become uneconomical to operate due to changes in the price of oil, depletion of
reserves, or deterioration of equipment. Changes in the price of imported oil,
the discovery of new oil and gas fields and the development of alternative
energy sources have had and will continue to have an important effect on our
business.
Because of these factors, our operating results in one or more future
periods could fail to meet or exceed the expectations of securities analysts or
investors. In that event, any trading price of our common stock would likely
decline.
18
<PAGE>
WE WILL NEED SIGNIFICANT ADDITIONAL FUNDS, WHICH WE MAY NOT BE ABLE TO OBTAIN
The expansion and development of our business will require significant
additional capital. We intend to seek substantial additional financing in the
future to fund the growth of our operations, including funding the significant
capital expenditures and working capital requirements necessary for us to
provide service in our targeted markets. We believe that our current capital
resources will be sufficient to fund our aggregate capital expenditures and
working capital requirements, including operating losses, through approximately
December 2001. In addition, our actual funding requirements may differ
materially if our assumptions underlying this estimate turn out to be incorrect.
We may be unable to obtain any future equity or debt financing on
acceptable terms or at all. Recently the financial markets have experienced
extreme price fluctuations. A market downturn or general market uncertainty may
adversely affect our ability to secure additional financing. If we are unable to
obtain additional capital or are required to obtain it on terms less
satisfactory than what we desire, we will need to delay deployment of our
network services or take other actions that could adversely affect our business,
prospects, operating results and financial condition. To date, our cash flow
from operations has been insufficient to cover our expenses and capital needs.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
OUR SUCCESS DEPENDS ON OUR RETENTION OF KEY PERSONNEL AND ON THE PERFORMANCE OF
THOSE PERSONNEL
Our success depends on the performance of our officers and key
employees. They are Gerald Runolfson, Ken Kow, Ernest Cheung, Patrick Chan, and
Joseph S. Tong. Members of our management team have worked together for only a
short period of time. We do not have "key person" life insurance policies on any
of our employees nor do we have employment agreements for fixed terms with any
of our employees. Any of our employees, including any member of our management
team, may terminate his or her employment with us at any time. Given our early
stage of development, we depend on our ability to retain and motivate high
quality personnel, especially our management. Our future success also depends on
our continuing ability to identify, hire, train and retain highly qualified
personnel. Moreover, the industry in which we compete has a high level of
employee mobility and aggressive recruiting of skilled personnel. We may be
unable to continue to employ our key personnel or to attract and retain
qualified personnel in the future. We face intense competition for qualified
personnel, particularly in software development, network engineering and product
management. Please see "Business-Employees" and "Management."
19
<PAGE>
WE EXPECT OUR STOCK PRICE TO BE VOLATILE
Our stock price could fluctuate widely in response to many factors,
including the following:
1. our historical and anticipated quarterly and annual operating results;
2. variations between our actual results and analyst and investor
expectations;
3. announcements by us of significant acquisitions, strategic
partnerships, joint venture or capital commitments;
4. additions or departures of key personnel;
5. general market and economic conditions.
In addition, in recent years the stock market in general, and the
Nasdaq National Market and the market for oil and gas companies in particular,
have experienced extreme price and volume fluctuations. These fluctuations have
often been unrelated or disproportionate to the operating performance of these
companies. These market and industry factors may materially and adversely affect
our stock price, regardless of our operating performance.
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT BE ACCURATE
Included in this prospectus are various forward-looking statements
which can be identified by the use of forward looking terminology such as "may,"
"will," "expect," "anticipate," "estimate," "continue," "believe" or other
similar words. We have made forward-looking statements with respect to the
following, among others:
1. our goals and strategies;and
2. revenues.
These statements are forward-looking and reflect our current
expectations. They are subject to a number of risks and uncertainties, including
but not limited to, business environment outlined above. In light of the many
risks and uncertainties, prospective purchasers of the shares offered should
keep in mind that we cannot guarantee that the forward-looking statements
described this prospectus will transpire.
DILUTION FROM ISSUANCES OF SHARES IN THE FUTURE
We may issue additional shares to finance our future capital and
operations requirements and for acquisitions of other companies to consolidate
into our operations. Any issuance will reduce the present percent of ownership
of previous investors (see "Risk Factor - Control") and may result in additional
dilution to investors purchasing shares from this offering.
20
<PAGE>
DRUCKER, INC.
On February 4, 1971, we were 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, we 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. We began engaging in the manufacturing and distribution of audio,
cellular, C.B., radar, and other electronic installation systems for
automobiles. We decided to redomicile in Delaware and entered into a merger
agreement with Gul Industries, Inc., a Delaware corporation. On April 16, 1990,
we filed Articles of Amendment in the State of Idaho changing our 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, we 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, we filed a Certificate of
Amendment in the State of Delaware changing our name to Drucker Industries, Inc.
In September 1991, we purchased the license to the "N-Viro Process" in
Japan from N-Viro Energy Systems, Ltd. for $466,063. We made a $100,000 down
payment and paid the balance by quarterly installments. We were delinquent on
minimum royalty payments due June 30, 1994 and September 30, 1994, totalling
$50,000, and consequently all rights and privileges granted to us under the
license agreement were cancelled by the licensor. The license agreement costs
and net of accumulated amortization, were written-off during the year ended
December 31, 1994. On December 31, 1995, we terminated any attempts in the
N-Viro business.
In October 2000, we changed our name to Drucker, Inc.
No activities were conducted in 1995 or 1996. In 1997, new management
was engaged and a business plan to engage in oil and gas exploration was
adopted.
We are still in the early stages of operations, and we may not fulfill
our stated goals until much later in the future, if at all. We have had a
limited operating history since our organization in 1971 and have experienced
significant losses since inception. We are dependent on private placements with
investors for our resources and funding. See "Risk Factors."
21
<PAGE>
THE COMPANY BUSINESS
GENERAL OPERATIONS
We have 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,
and joint venture participations in oil exploration projects in China in fall
1997 which were unsuccessful and in Egypt in 1999.
CURRENT BUSINESS
We were inactive from 1994 until late 1996. Our primary business focus
is the acquisition, exploration and development of mineral properties and oil
and natural gas properties through venture participation with other industry
partners. In early 1997, we negotiated joint venture farm-in agreements with two
Vancouver based oil companies with whom the companies' officers and directors
are affiliates for a 50% interest in certain oil projects in the People's
Republic of China. The projects were unsuccessful and were abandoned in 1998,
although we retain an investment in China in the Shaanxi exploration project
which is not under active exploration. We have a participation in the Gulf of
Suez joint venture in Egypt, West Gharib which in 1999 made one oil discovery,
has drilled one dry hole, and has drilled a third well which was completed
successfully as an appraisal well in the last quarter of 1999. In the first half
of 2000, four development wells were completed successfully. All six wells are
in production at present. In October 1999, we entered into an agreement for an
interest in the North Ghadames joint venture in Algeria. The discovery well was
drilled in 1996 and the overall three well program is designed to prove the mega
structure concept. A well was drilled successfully in August 2000 and another
well is being drilled.
We anticipate that our business will continue to require capital to
make required financial investments under exploration joint venture agreements.
We intend to use the capital markets of the United States, Canada, and Europe to
secure the capital funding required by us and our operations. We have no
commitments for funding as of the date of this report, nor anticipated sources
of debt or equity funding, except our cash on hand.
We have not established, and do 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 our opinion,
believes holds the potential for profit, 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, we 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, we 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.
22
<PAGE>
We may expend funds to rework, explore or test any oil and gas
prospects we acquire to determine the economic production feasibility of such
properties. We 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 considered for acquisition.
We have no agreement or understanding, express or implied, with any outside
professional; and there is no assurance that we will be able to retain the
services of competent experts or as to the fees which such experts will charge.
Based upon the results of such exploration and tests, as interpreted by
management, we 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 us either alone or through joint venture or other business
arrangements with other companies or entities.
Criteria:
We will consider the following criteria when evaluating whether to
participate in an oil and gas prospect in any area of interest:
1) Geological and Seismic (when available) Data
2) Market demand for products;
3) Efficient transportation availability;
4) Location;
5) Weather;
6) Management;
7) Cost of participation;
8) Terms;
9) Risk vs. rewards;
10) Feasibility study;
11) Whether capital is available to fund participation.
The Company currently maintains its offices #1- 1035 Richards Street,
Vancouver, B.C. Canada V6B 3E4. Its telephone number is 604-681-4421.
PARENTS AND SUBSIDIARIES
Parent DRUCKER, INC., a Delaware corporation
(Formerly Drucker Industries, Inc.)
Subsidiaries DRUCKER PETROLEUM, INC., a British Virgin Islands corporation
DRUCKER PETROLEUM, (Algeria) INC., a British Virgin Islands
corporation
23
<PAGE>
OIL AND GAS ACTIVITIES.
----------------------
Our 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
1997. In 1997 we received stock sale proceeds to finance our oil & gas joint
ventures. We terminated our China exploration ventures 1998 after drilling a dry
hole.
Our proposed principal areas of activities are described below.
EXPLORATION AND PRODUCTION ACTIVITY.
-----------------------------------
Our strategy with respect to our oil exploration related activities is
to identify geological areas in which we may invest for producing oil and gas
prospects, or for development joint ventures and where we may lease prospects
for oil and gas exploration. In 1997, we joined joint ventures to explore for
oil and gas in China. In 1998, we terminated and abandoned our joint venture in
China after drilling one dry hole and finding our other China prospects to bear
slim chances of success. In Egypt, we have participated in three wells in 1999 -
a discovery well, a dry hole and an appraisal well completed successfully as a
producer, and four successful development wells in the first half of 2000. We
have an indirect interest in a well in North Ghadames Basin, Algeria. The well
was successfully drilled by August 2000 and another well is being drilled. In
1998, the Company did not complete any successful oil or gas wells.
The Hana-1 well in Egypt was drilled to a total depth of 7,415 feet and
production casing was landed at 5,475 feet in order to evaluate the prospective
Middle Miocene Kareem formation. Logs run through casing indicate a gross sand
section of 116 feet with 60 feet of net sand pay which is believed to be
hydrocarbon bearing. The uppermost 20 feet of sand interval was perforated from
4,868 to 4,888 feet and the well flowed oil to surface. Typical wells in this
region require pumping equipment to maximize production. When assisted with a
nitrogen string set at 2,500 feet, the Hana-1 well flowed at rates averaging 500
barrels of oil per day at 25.8 degrees API gravity oil with zero water content.
The Hana 2 appraisal well was drilled in late 1999 and began production at 750
b/d in late December 1999. After about one month of production, the combined
output of Hana-1 and 2 reached 2,000 b/d. In the first half of 2000, four
development wells were drilled and completed successfully. The production was
increased to about 3,000 b/d in June 2000 but has dropped gradually to about
2,000 b/d at present. The down hole pumps are to be reconfigured to increase the
production. Also wells will be drilled in strategic locations to maintain the
reservoir pressure.
ALGERIAN CONCESSION
By a letter of intent dated October 27, 1999, we acquired 10% of the
issued capital stock of Santa Catalina (Algeria) Ltd. ("Algeria Concessions SLM
Algeria"), a company which, through its wholly-owned subsidiary, Santa Catalina
L.H. Ludin (Algeria) Ltd. ("SLM Lundin"), entered into an agreement to acquire a
25% participating interest in an oil and gas concession in
24
<PAGE>
Algeria. The discovery well was drilled in 1996 and an overall three well
drilling program has been designed to test the mega structure concept. Subject
to SLM Ludin earning its 25% participating interest, we may earn up to a 2.5%
indirect interest in the property by paying SLM Algeria $625,000 (paid) to
acquire 10% of its capital stock and by funding its pro-rata share of SLM
Ludin's portion of the drilling and general and administrative costs in excess
of US$5,000,000 for testing and drilling of the second well in the drilling
program.
In order to participate in the third well in the drilling program, we
must pay SLM Algeria $600,000 (paid). We will be responsible for their pro-rata
share of SLM Lundin's portion of the drilling costs and general and
administrative costs in excess of $5,000,000 for that well. This agreement is in
effect for one year.
During the last five (5) fiscal years, we conducted exploration
activities on oil and gas properties for joint venture participation in China,
Egypt and Algeria. If we acquire oil and gas prospects in the future, we 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 a working interest in the property and we will retain an interest in
the property. We actively review prospects for participation in exploration or
development drilling joint ventures, but currently have no proposal being
negotiated on any specific property, lease or asset, not otherwise discussed
herein.
We do not own any drilling rigs, nor do we employ drilling or operating
crews. We will not be the actual contract driller of wells. If and when we
decide to drill to explore a prospect, we will contract with third-party
non-affiliated drilling companies to drill oil and gas wells on a fixed-cost
(turnkey) basis. Once a well has reached its desired depth, our 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 us and our consultants, by third party service
contractors. When we are merely a participant in a venture on a minority basis,
all decisions regarding drillers, operations, and consultants will be made by
third party management of the venture and not by our company.
We are not carrying any reserve values of any properties due to the
lack of sufficient production history and reservoir information of our
discoveries.
Exploration Results 1999 1998 Prior Years
Gas Wells 0 0 0
Dry Holes 1 1 0
Oil Wells 2 0 0
25
<PAGE>
FINANCING OF OIL AND GAS ACTIVITIES.
-----------------------------------
Our future oil and gas financing activities will be conducted primarily
pursuant to ventures with other independent companies and through joint ventures
in which we may act as co-venturer ("Company-Joint Ventures") or as a working
interest participant. We have contacted some independent companies who have
indicated an interest in participating in financing if the project interests
them. We are a participant in the West Gharib, Gulf of Suez, Egypt exploration
venture (see "Joint Venture Interests" hereafter). In 1997, we participated in
exploration participation in China in which it paid 100% of costs for a 50%
interest in the concession and any production found. The 1997 results were one
dry hole in the China venture.
The following table sets forth, for the years indicated, the funds
invested by us pursuant to contracts under participation agreements and joint
ventures. We 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,
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Participation Payments $0 $50,802 $1,275,217 $1,262,106 $352,000
Under Agreements
Deferred Exploration $629,290
------------------------------------------------------
Total $0 $50,802 $1,275,217 $1,262,106 $981,290
In 1997, we offered and sold 5,179,500 units at $1.00 per unit pursuant
to an offering memorandum. The cash proceeds of this offering have been used to
fund our operations. Each unit consists of one common share and one "A" Share
Purchase Warrant which will entitle the holder thereof to acquire an additional
unit at $1.50 per unit. The additional unit consists of one common share and one
"B" Warrant which will entitle the holder to acquire one common share at $2.00
per share. In December 1998, the exercise price of "A" Warrant has been reduced
from $1.50 to $0.40 and from $2.00 to $0.60 for the "B" Warrant. The expiry of
the "A" Warrant was extended to March 31, 2000 and "B" Warrant to March 31,
2001. In February 2000, the terms of the "A" and "B" Warrants have been extended
further to March 31, 2001 and March 31, 2002, respectively.
GOVERNMENTAL REGULATION FOR OIL EXPLORATION OPERATIONS
General - Our oil and gas production activities are subject to
extensive regulation by numerous national, state and local governmental
authorities in the countries where project participation is commenced. Taxation
and regulation of our production, transportation and sale of
26
<PAGE>
oil or gas, and federal price and allocation controls in particular, have a
significant effect on us and our operating results.
State Regulation - The production operations are subject to regulation
by national bureaus or ministries which have authority to issue permits prior to
the commencement of drilling activities, establish allowable rates of
production, control spacing of wells, establish prices or taxes, prevent waste
and protect correlative rights, and aid in the conservation of oil and gas.
Typical state regulations require permits to drill and produce oil or gas,
protection of fresh water horizons, and confirmation that wells have been
properly plugged and abandoned.
Environmental Matters - Various national and state authorities have
authority to regulate the production and development of oil and gas and mineral
properties with respect to environmental matters. Such laws and regulations,
presently in effect or as hereafter promulgated, may significantly affect the
cost of the workover and development activities contemplated by us and could
result in loss or liability to us in the event that our operations are
subsequently deemed inadequate for purposes of any such law or regulation. New
regulations, if adopted, could result in significant capital expenditures by us,
resulting in unprofitable operations.
UNCERTAINTIES RELATED TO THE OIL AND GAS BUSINESS IN GENERAL
------------------------------------------------------------
Our operations will be subject to all of the risks normally incident to
the production of oil and gas, including blowouts, pollution and fires. Each of
these incidents could result in damage to or destruction of oil and gas wells or
formations or production facilities or damage to persons or property. As is
common in the oil and gas industry, we are not fully insured against these risks
either because insurance is not available or because we have elected not to
insure due to prohibitive premium costs.
Our future oil and gas activities may involve a significant risk that
commercial oil or gas production will not be maintained. The costs of drilling,
completing reworking or operating wells is often uncertain. Further, operations,
may be curtailed or delayed as a result of many factors, weather conditions,
delivery delays, shortages of pipe and equipment, and the availability of
workover equipment.
The oil and gas business is further subject to many other contingencies
which are beyond the control of the Registrant. Wells may have to be shut-in
because they have become uneconomical to operate due to changes in the price of
oil, depletion of reserves, or deterioration of equipment. Changes in the price
of imported oil, the discovery of new oil and gas fields and the development of
alternative energy sources have had and will continue to have an important
effect on the Registrant's business.
27
<PAGE>
JOINT VENTURES
West Gharib Concession
On April 27, 1998, we, through our wholly owned subsidiary, Drucker
Petroleum, Inc. (DPI), entered into a farm-in agreement to acquire an undivided
20% participating interest in the right to explore for and exploit petroleum in
a concession located in West Gharib, Gulf of Suez, Egypt. The agreement provided
that DPI shall pay:
1. $352,000 within seven days of the execution of the agreement, which we
paid
2. pay 20% of all costs and expenses incurred subsequent to the execution
of the agreement related to this concession, which we have paid.
3. 40% of the costs and expenses associated with the drilling of first two
exploratory wells to a maximum cost to us of $500,000; thereafter, DPI
shall pay 20% of all costs and expenses associated with any further
activity associated with the concession, which we have paid.
4. In addition, DPI provided a bank guarantee of $2,000,000 within seven
days of the execution of the agreement, being 40% of a letter of
guarantee, which we have provided.
We have the right but not the obligation to participate in additional
wells in the West Gharib, Egypt concession. We have paid and performed upon all
our obligations under the Farm In Agreement.
Our interest in this oil and gas concession is subject to 7% net profit
interest payable to a related company, after we have recovered all its
exploration and development expenditures. This company is related by virtue of
common directors.
Drucker Petroleum, Inc., our wholly owned subsidiary, holds the 20%
interest. Tanganyika Oil Company, Ltd., through its wholly owned subsidiary,
Dublin International Petroleum (Egypt) Limited, is the operator of the West
Gharib block holding a 50% interest and GHP Exploration (West Gharib) Ltd., a
wholly owned subsidiary of TransAtlantic Petroleum (USA) Corp. holds the
remaining 30% interest.
PRODUCTS, SERVICES, MARKETS, METHODS OF DISTRIBUTION, AND REVENUES.
------------------------------------------------------------------
Oil and natural gas are presently the principal products sought to be
produced by us. Oil production commenced in first quarter 2000.
WORKING CAPITAL NEEDS.
---------------------
The working capital needs consist primarily of: investigation
activities and costs of participation in joint ventures. These requirements may
be met by private placement of stock or loans or sale of working interests. We
may need to develop additional working capital for future operations.
28
<PAGE>
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
Our industry's segment is the oil and gas industry. Our geographic
segments are Canada, China, Algeria and Egypt.
<S> <C> <C> <C> <C>
December 31, 1999
CANADA ALGERIA EGYPT TOTAL
Identifiable Assets
Current $1,887,666 $ - $ - $ 1,887,666
-------------- ---------- ---------- ----------------
Oil and gas projects - 625,000 981,290 1,606,290
-------------- ---------- ---------- ----------------
$1,877,666 $ 625,000 $981,290 $ 3,493,956
============== ========== ========== ================
December 31, 1998
CANADA CHINA EGYPT TOTAL
Identifiable Assets
Current $2,771,380 $ - $ - $ 2,771,380
-------------- ---------- ---------- ----------------
Oil and gas projects - 895,306 366,800 1,262,106
-------------- ---------- ---------- ----------------
$2,771,380 $895,306 $366,800 $ 4,033,486
============== ========== ========== ================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year ended December 31,
1999 1998 1997
==== ==== ====
Operations
Canada $( 83,511) $( 24,867) (116,019)
China ( 70,135) ( 368,290) (433,795)
Egypt ( 419,538) ( 247,973) -
========== ========= =========
$ (573,184) $(641,130) (549,814)
========== ========= =========
</TABLE>
29
<PAGE>
DEPENDENCE ON A SINGLE CUSTOMER OR A FEW CUSTOMERS.
During the five (5) years ending December 31, 1999, no revenues were
generated from client services.
BACKLOG OF ORDERS.
None at this time.
GOVERNMENT CONTRACTS.
None.
COMPETITIVE CONDITIONS.
The oil and gas industry is highly competitive. We face 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 we may attempt
to operate in the future. Many of the programs and companies so engaged possess
greater financial and personnel resources than us 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 areas 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 futures market occurred in January 1986, and we could
be adversely affected if further drops occur in the future.
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 our revenues, if any ever
develop, will not be adversely affected by these factors.
Oil concessions in foreign countries are usually controlled by the
government, which after 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 oil and gas opportunities.
30
<PAGE>
The oil exploration situation is highly competitive. We face
competition from large numbers of companies in any areas in which we may attempt
to operate in the future. Many of the companies so engaged possess much greater
financial and personnel resources than us and therefore have greater leverage to
use in acquiring participation interests, hiring personnel and marketing.
Accordingly, we face a high degree of competition in these areas.
A number of factors, beyond our control and the effect of which cannot
be accurately predicted, affect the production and marketing of oil and gas.
These factors include crude oil imports, actions of foreign oil producing
nations, the availability of adequate pipeline and other transportation
facilities, the marketing of competitive fuels and other matters affecting the
availability of a ready market, such as fluctuating supply and demand.
REGISTRANT SPONSORED RESEARCH AND DEVELOPMENT.
None.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS.
The exploration operations of our company are subject to local,
provincial and national laws and regulations in the country of Egypt, Algeria
and in China if any exploration is recommended. To date, compliance with these
regulations by us has had no material effect on our operations, capital,
earnings, or competitive position, and the cost of such compliance has not been
material. We are unable to assess or predict at this time what effect such
regulations or legislation could have on our activities in the future.
(a) Local Regulation - We cannot determine to what extent future
operations and earnings may be affected by new legislation, new regulations or
changes in existing regulations.
(b) National Regulation - We cannot determine to what extent future
operations and earnings may be affected by new legislation, new regulations or
changes in existing regulations.
The value of our investments in the joint ventures may be adversely
affected by significant political, economic and social uncertainties in the area
of interest. Any changes in the policies by the government of the area of
interest could adversely affect our area of interest 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, wars, or political
relationships with other countries.
(c) Environmental Matters - None at the date of this report.
(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.
31
<PAGE>
NUMBER OF PERSONS EMPLOYED.
As of December 31, 1999, we had one full-time consultant, A. Ken Kow,
Manager of Petroleum Operations at a salary of $5,000 Canadian per month and a
part-time employee the President, Gerald William Runolfson, at no salary based
in Vancouver, B.C.
PRICE RANGE OF OUR COMMON STOCK & STOCKHOLDER MATTERS
(a) Market Information
The following information sets forth the high and low bid price for our
common stock for each quarter within the three years preceding the date of this
registration statement. Our common stock is traded over the counter and quoted
on the OTC Bulletin Board.
Bid (U.S. $)
HIGH LOW
2000
First Quarter .55 .325
Second Quarter .51 .3
Third Quarter .4 .21
1999
First Quarter .27 .17
Second Quarter .35 .175
Third Quarter .65 .135
Fourth Quarter 5/8 .365
1998
First Quarter .53 .24
Second Quarter .62 .18
Third Quarter .50 .14
Fourth Quarter .29 .17
1997
First Quarter 2 1/8 1 1/8
Second Quarter 1 13/16 1
Third Quarter 1.09 .65
Fourth Quarter .84 .31
Because of recent changes in the rules and regulations governing the
trading of small issuers securities, our securities are presently classified as
"Penny Stock," which classification places significant restrictions upon
broker-dealers desiring to make a market in these securities. It has been
32
<PAGE>
difficult for management to interest any broker-dealers in our securities and it
is anticipated that these difficulties will continue until we are able to obtain
a listing on NASDAQ at which time market makers may trade our securities without
complying with the stringent requirements. The existence of market quotations
should not be considered evidence of the "established public trading market."
The public trading market is presently extremely limited as to number of market
markers in our stock and the number of states within which our stock is
permitted to be traded.
The over-the-counter market quotations above reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
(b) Holders. As of December 31, 1999 we had approximately 450 shareholders
on record.
(c) Dividends. No dividends on outstanding common stock have been paid
within the last two fiscal years, and interim periods. We do not
anticipate or intend upon paying dividends for the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 1999, we have no primary income source from oil produced other than
interest on deposits but commencing in 2000, we have both oil income and
interest on deposits. Capital from private placements or borrowing against
assets may be required to fund future operations. We have completed a private
offering of units at $1.00 per share for $5,542,065, in May 1997.
We had no operating revenues for the twelve month period ending
December 31, 1999, but had interest income of $134,930. We recommenced limited
business operations in late 1996, and have incurred a significant net loss from
operations in 1997 through 1999, resulting from costs of participation in our
joint oil exploration venture in Peoples Republic of China which we have now
terminated and our West Gharib, Egypt joint venture participation. We may
continue to show losses resulting from joint venture participation for an
indeterminate time. In 1997, we commenced regular operations and have incurred
significantly greater expenses which continued through 1999.
33
<PAGE>
<TABLE>
<CAPTION>
We incurred the following expenses in the past fiscal year compared to the 1998
fiscal year.
<S> <C> <C>
December 31, December 31,
1998 1999
---- ----
OPERATING EXPENSES
Accounting $ 44,651 $40,011
Consulting 38,288 54,436
Foreign exchange (gain) loss 1,111 1,866
Interest and bank charges 619 2,421
Investor relations 9,834 28,118
Legal 12,104 27,852
Office and general 29,957 31,153
Printing 0 0
Promotion 0 0
Rent 8,020 9,217
Telephone 0 0
Transfer Agent 2,718 1,632
Travel 11,042 21,732
Write-off of advances 24,061 0
TOTAL OPERATING COSTS $182,405 $218,441
============= ===========
</TABLE>
It is expected that expenses may continue at a significantly increased
rate due to costs of development of our oil opportunities and implementing
exploration pursuant to joint ventures. In the event oil exploration joint
ventures continue to be unsuccessful, continued significant losses should be
anticipated.
Cash Flows:
We have achieved no revenues from any operations during the year,
ending December 31, 1999.
Revenues from oil production have commenced in early 2000, and through
September 30, 2000, the company had received revenues of $2,223,398 and net
income of $132,019.
CHANGES IN FINANCIAL CONDITION
At year end 1999 our assets were $3,493,956 compared to $4,033,486 at
end of 1998. The decrease was a result of continuing expenditures for the
exploration for drilling participations in Egypt.
34
<PAGE>
The liabilities, all of which are current liabilities, increased
significantly as a result of accounts payable related to expenses for the oil
exploration participation in Egypt. At year end 1999, current liabilities were
$81,109 an increase of 85% over the 1998 year end liabilities of $47,455.
Stockholders' equity at year end 1999 was $3,412,847, a decrease over
the 1998 stockholder's equity of $3,986,031, resulting from losses on
operations.
From the aspect of whether we can continue toward our business goal of
exploring for oil, we may use all of our available capital without generating
revenues. Without revenues from oil production and without continued capital
infusions or loans or a combination thereof, it is doubtful that we can carry
out our business goals regarding any oil exploration operations or
participations for any extended period beyond 2000. We expect significant
revenues in 2000 from the participation in the six successful oil wells in West
Gharib, Egypt. First revenues were received in first quarter 2000.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1999 COMPARED TO SAME PERIOD
IN 1998
We had no revenues from operations in 1999 or 1998. However, we had
interest income of $134,930 in 1999 and $157,538 in 1998.
We participated in two oil wells in the West Gharib, Egypt area in
1999, both of which were completed as producers. Revenue from production did not
begin until year 2000 due to restricted transportation from the locale. We have
a 20% working interest in the two wells in West Gharib, Egypt. The exploration
expenses in 1999 on the wells were $489,673 as compared to expenditures of
$616,263 in 1998.
We had general and administrative expenses of $218,441 in 1999 and
$182,405 in such expenses in 1998. The largest items of expenses for 1999 and
1998 are shown below.
1999 1998
---- ----
Accounting & Audit $40,011 $44,651
Consulting 54,436 38,288
Investor Communications 28,118 9,834
Legal 27,852 12,104
Office & General 31,153 29,957
Travel 21,735 11,042
The increased expenses for consulting, legal, office/general, and
travel are due to the increased activity level in dealing with our investment in
the West Gharib, Egypt venture. The increased cost of investor communications
results from our efforts to more effectively inform our shareholders of our
business activities.
35
<PAGE>
We had a net loss on operations of ($708,114) in 1999 compared to the
net loss on operations in 1998 of ($798,668). The net loss after interest income
was ($573,184) in 1999 and ($641,130) in 1998. The net loss per share in 1999
was ($.02) compared to ($.02) 1998.
<TABLE>
<CAPTION>
EXPLORATION EXPENSES
<S> <C> <C> <C> <C> <C>
January 1,
1997 (date of
Inception of
Exploration
Stage) to
Nixgxia December
Concession West Gharib 1999 Total 1998 Total 1997 Total 31, 1999
------------- ------------- ------------ ----------- ------------- ---------------
$70,135 $419,538 $489,673 $616,263 $433,793 $1,539,731
</TABLE>
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
COMPARED TO THE SAME PERIOD IN 1999.
For the first nine months of 2000, gross oil revenue amounted to $2,223,398
compared to no revenue from production in the same nine months in 1999. This
revenue was generated from oil produced from the West Gharib project in Egypt
where the Company has a 20% working interest. Expenses of production were
$606,707 for the Company's share of production of 95,732 barrels or $6.34 per
barrel, depletion was $33,262, general and administrative costs were $145,299
and exploration expenses (mostly for 3-D seismic acquisition program) were
$405,291, for total expenses of $1,190,559 in the first nine months in 2000. In
the same period in 1999, the general and administrative expenses were $138,492,
and the exploration expenses were $704,737 for a total of $843,229. The
operating income for the first nine months in 2000 was $71,017 compared to an
operating loss of $737,780 in the same period in 1999. The Company had interest
income of $61,002 in the first nine months in 2000 and $105,449 in 1999. The net
income from the period in 2000 was $132,019 and for 1999 the net loss was
$737,780. The profit per share was $.0041 in 2000 compared to a loss of $.023 in
1999.
To date, seven wells are in production in the Hana field in West Gharib,
Egypt and are currently producing an average of 3,300 b/d of oil. In October
2000, the Hana-7 well was successfully drilled and completed as an infill
producer. An additional development well, Hana-8, has recently spudded and has a
planned total depth of 4,900 ft. Both Hana-7 and Hana-8 constitute the initial
phase of a multi-well development and pressure maintenance drilling program in
the Hana field and these initiatives are expected to substantially boost
sustainable field production.
36
<PAGE>
Besides the Hana field, a 400 sq km 3D seismic acquisition program has
been completed over a portion of the prospective lands in the 2,530 sq km West
Gharib Block. The processing and interpretation of these data will be completed
by year end. A multi-well exploration program will be conducted in 2001 to
evaluate several of the numerous large drilling prospects validated by this 3D
program.
In Algeria, the recent successfully drilled SMRE-1 well, within the
3,192 square kilometer onshore Hassi Bir Rekaiz concession, was a 15 kilometer
stepout to the east of the SMR-1 discovery well and the data shows that a
continuous oil column of at least 60 meters in height is present between the two
wells (light sweet crude of 40 degrees API). The upcoming Sahara El Mehadjer-1
(SEM-1) well will be a 10 kilometer stepout to the north from these two wells
and is prognosed to intersect the main reservoirs at least 20 meters higher,
thereby potentially establishing an even larger oil column and confirming the
continuity of a significant portion of the Semhari structure. The Semhari
structure is one of the largest structures in northern Africa and is one of
several promising structures within the Hassi Bir Rekaiz concession. The project
is located within a prolific oil producing region hosting multi-billion barrel
oil fields with extensive oil facilities and pipeline infrastructure in place.
In the last week of October 2000, BP Amoco has hired a new contractor to
drill the upcoming SEM-1 well. BP, the third largest oil company in the world
(next to Exxon) and Shell) is the operator of the project and holds a 50%
interest. The SEM-1 will be the third well drilled on the 70,000 acre (283 sq
km) Semhari mega-structure, following the two successful SMR-1 and SMRE-1 wells.
The access road to the SEM-1 location has already been completed and the drill
site prepared. Spudding of the well is anticipated in the first part of
December, 2000. The rig to be used is a Pride Forasol Rig 2. It has a top drive
which will allow the well to be drilled more quickly and with a reduced
potential for lost time and drilling related problems. The rig was recently used
in the area and the crew is familiar with operating the rig and drilling the
targeted reservoirs. Pride are internationally recognized contractors with an
excellent reputation.
Drucker has an indirect 2.5% interest through Santa Catalina (Algeria)
Ltd. which holds a 25% interest in the Hassi Bir Rekaiz concession. ARCO
Ghadames, Inc. (BP Amoco) is the operator holding a 50% interest. Turkish
Petroleum holds the remaining 25%.
37
<PAGE>
LIQUIDITY
We expect that our need for liquidity will increase for the coming year
due to our drilling expense obligations on our Egyptian and Algerian oil venture
participation.
Short Term.
For short term needs we will be dependent on cash reserves and revenues
from oil production which commenced in 2000. On a short term basis, we generate
enough revenue to cover operations.
We had current assets of $1,887,666 at December 31, 1999 and had
current liabilities of $81,109.
Long Term.
On a long-term basis, we have no fixed assets and no long term debt. We
did have at year end 1999 $1,867,417 in cash.
In 1999 we had no business from which we generated income. Our
operations had no net cash flow at this time. However, oil revenues have begun
from the two successful well participations in West Gharib, Egypt. We are
reliant upon success in our oil exploration ventures, at this time, for
possibility of future income, none of which are assured.
CAPITAL RESOURCES
Our primary capital resources are our stock and cash on deposit only.
Stock may be illiquid because it is restricted in an unproved company with no
income.
As of the date of this report, we have material commitments for capital
expenditures within the next year, pursuant to the Egyptian and Algerian joint
ventures, which amounts may exceed our available capital of $1,887,666.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1996, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," which is effective for both interim and annual periods ending after
December 15, 1997. SFAS No. 128 requires all prior period earnings per share
data to be restated to conform to the provisions of the statement. The Company
adopted SFAS No. 128 for the six-months ended December 31, 1997. The adoption of
this standard did not affect the Company's earnings per share.
38
<PAGE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which established standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by, or
distributions to, owners. Among other disclosures, SFAS No.130 requires that all
items that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards for the reporting of information about operating segments
by public companies in both annual and interim financial statements. SFAS No.
131 defines an operating segment as a component of an enterprise for which
separate financial information is available and whose operating results are
reviewed regularly by the chief operating decision maker to make decisions about
resources to be allocated to the segment and to assess its performance.
SFAS Numbers 130 and 131 are both effective for financial statements
for periods beginning after December 15, 1997 and both require comparative
information for earlier years to be restated. The adoption of SFAS No. 130 is
not expected to have a material effect on the Company's financial position or
results of operations. The adoption of SFAS No. 131 will have no effect on the
Company's financial position or results of operations and the Company is
currently reviewing SFAS No. 131 in order to fully evaluate the impact, if any,
the adoption of the provisions of this Statement, will have on future financial
disclosures.
MARKET RISK
We do not hold any derivatives or investments that are subject to
market risk. The carrying values of any financial instruments, approximate fair
value as of those dates because of the relatively short-term maturity of these
instruments which eliminates any potential market risk associated with these
instruments.
LEGAL PROCEEDINGS
Our company, in the normal course of business, may be engaged in
lawsuits, as a plaintiff or defendant, involving matters such as compensation
disputes, employment matters, contract disputes and other matters related to our
business. No lawsuits are presently pending.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
No matters have been submitted to security holders in the past year.
39
<PAGE>
<TABLE>
<CAPTION>
CAPITALIZATION
Our capitalization as of September 30, 2000 and as adjusted to reflect
the sale and issuance of the shares underlying the "A" warrants and shares
underlying "B" warrants being registered by us is as follows (see Financial
Statements for further information):
<S> <C> <C> <C>
Amount Amount to be outstanding if
outstanding as Warrants are exercised
--------------------------------------------
of September "A" warrant "B"warrant
30, 2000(1) shares shares
STOCKHOLDER'S EQUITY
Common Stock, $0.001 par value, 32,476,250 38,018,315 43,560,380
50,000,000 shares authorized
Paid in Capital 6,306,803 2,216,826 3,325,239
Capital in excess of par value (2) 2,167,000 3,290,000
Accumulated deficit (2,794,052) (2,794,052) (2,794,052)
---------------------- ----------------------- --------------------
TOTAL SHAREHOLDER'S EQUITY $4,844,199 $6,061,025 $9,386,264
---------------------- ----------------------- --------------------
(1) Includes the sale of 5,179,500 shares of common stock in 1997. Does not
include up to 2,950,000 shares reserved for issuance pursuant to an
Incentive Stock Option Plan. See "Management: Stock Option Plans."
(2) After estimated expenses of this offering.
</TABLE>
OUR PROPOSED USE OF PROCEEDS
From Exercise of 5,542,065 Series "A" warrants of
US$.40/warrant and 5,542,065 Series "B"
warrants at US$.60/warrant
(US$2,216,826 + US$3,325,239)
We will use the proceeds resulting from the exercise of the 5,542,065
series "A" warrants and the 5,542,065 series "B" warrants if all are exercised
for a total amount of US$5,542,065 to expand the business in oil and gas
exploration and operation.
The following breakdown indicates our best estimates at the present
time. However, actual numbers for any expenditure item may differ significantly
from estimates.
After deducting the estimated registration expenses not yet paid, our
net proceeds from this offering will be approximately $2,167,000 if the maximum
number of A warrants is sold and
40
<PAGE>
$3,290,000 if the maximum number of B warrants is sold. We expect to apply the
net proceeds of the A Warrants substantially in the manner set forth below. In
the case of the maximum exercise, we expect to expand the proceeds during the
next 12 months, and in the case of the B Warrants exercises, we anticipate
expanding proceeds during the next 18 months.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
"A" warrant % "B" warrant %
Proceeds Proceeds
------------------ ----------- ------------------ -----------
Joint Venture Expenses: $1,711,900 79% $2,796,000 85%
Software
Offices (News)
Advertising Promotion $43,400 2%
Hardware
General and Administrative Expenses $108,300 5% $165,000 5%
Officers' Salaries and Related
Benefits (2)
Support Personnel (3)
Office Rent
Accounting and Legal $43,400 2%
Travel and Related Expenses $43,300 2%
Working Capital and Contingency $216,7000 10% $329,000 10%
TOTAL $2,167,000 100% $3,290,000 100%
(1) See Business
(2) See Management: Executive Compensation
(3) See Business: Employees
</TABLE>
41
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
AND SIGNIFICANT MEMBERS OF MANAGEMENT
The following table furnishes the information concerning our directors
and officers as of December 31, 1999. The directors of the Registrant are
elected every year and serve until their successors are elected and qualify.
NAME AGE TITLE TERM
Gerald William Runolfson 60 President and Director Annual
Ernest Cheung 50 Secretary and Director Annual
Patrick Chan 46 Director and Chairman Annual
Joseph S. Tong 51 Director Annual
Ken A. Kow 58 Director Annual
The following table sets forth the portion of their time the Directors
devote to the company:
Gerald Runolfson 25% Patrick Chan 20%
Ernest Cheung 25% Joseph S. Tong 20%
Ken A. Kow 100%
The term of office for each director is one (1) year, or until his/her
successor is elected at our annual meeting and is qualified. The term of office
for each officer is at the pleasure of the board of directors.
The board of directors has neither a nominating nor auditing committee.
Therefore, the selection of persons or election to the board of directors was
neither independently made nor negotiated at arm's length.
Identification of 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,
the disclosure of which would be material.
Family Relationships. None.
42
<PAGE>
Business Experience.
The following is a brief account of the business experience during the
past five years of each director and executive officer, including principal
occupations and employment during that period and the name and principal
business of any corporation or other organization in which the occupation and
employment were carried on.
GERALD WILLIAM RUNOLFSON, President and Director, age 60, has been
President and Director 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 Elkon Products, Inc. of Vancouver, B.C. He has been a
Director of Horseshoe Gold Mines since 1991.
ERNEST CHEUNG, Secretary and Director, age 50, 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 1994 - 1996 he was Vice President of Finance of BIT Integration Technology,
Inc. of Toronto, Canada. From May 1995 to present he has served as President of
Richco Investors, Inc. of Vancouver, BC.
From 1992-1995, he served as a Director of Tele Pacific International
Communications Corp. (VSE). He has also served as a Director of Richco
Investors, Inc. (CDN) since 1995. From 1995-1996, he was a Director of BIT
Integration Technology, Inc. (ASE). Since 1 997, he has served and is still
serving as Director of the following companies: Agro International Holdings,
Inc. (VSE); Spur Ventures, Inc. (VSE); Drucker Industries, Inc. (NASD Bulletin
Board); Xin Net Corp. (NASD Bulletin Board); Speechlink Communications Corp.
(NASD); Global-Pacific Minerals, Inc. (TSE); and Pacific E-Link Corp. (VSE);
NetNation Communications, Inc. (Nasdaq small cap.).
He has held a Canadian Securities license but is currently inactive. He
has been a Director of Registrant since January 1997.
PATRICK CHAN, age 46, has been a Director 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 assistant 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
43
<PAGE>
on mergers and acquisitions. From 1993 to 1995 he was a registered Securities
Representative with Bache Securities.
JOSEPH S. TONG, age 51, has been a director 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.
KEN A. KOW, Director, age 58, has been a consultant to the Company and
as Manager, Petroleum Operations in charge of petroleum exploration since 1997.
He received a Bachelor of Science in Chemistry in 1965 and a Ph.D in Chemistry
in 1980 from University of London, England. From 1984 to 1986, he was Manager of
Core Analysis with Geotechnical Resources, Ltd. in Calgary, Alberta and from
1986 to 1988 he was Technical Manager with C&G Laboratories in Calgary, Alberta.
From 1988 to 1997 he was employed with Waha Oil Company as a Petroleum Analyst
in Tripoli, Libya, North Africa. He has served as Secretary since 1997 to
present and as Director since 1998 to present, of Richco Investors, Inc. (CDN,
and CDNX from 2000).
EXECUTIVE COMPENSATION
Cash Compensation.
Compensation paid for all services provided up to December 31, 1999 (1)
to each of our executive officers and (2) to all officers as a group.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Cash Compensation Security Grants
<S> <C> <C> <C> <C> <C> <C> <C>
Name and Year Salary Bonus Consulting Number Securities Long Term
Principal Fees/Other of Underlying Compensa-
Position Fees ($) Shares Options/ tion/Option
SARs (#)
-------------------- -------- ------------ ----------- ---------------- ------------- ----------------- -----------------
Gerald 1998 0 0 0 0 0 0
William
Runolfson, 1999 0 0 0 0 0 0
President
-------------------- -------- ------------ ----------- ---------------- ------------- ----------------- -----------------
Ernest 1998 0 0 0 0 0 0
Cheung,
Secretary 1999 0 0 0 0 0 0
-------------------- -------- ------------ ----------- ---------------- ------------- ----------------- -----------------
Patrick Chan, 1998 0 0 0 0 0 0
Chairman 1999 0 0 0 0 0 0
-------------------- -------- ------------ ----------- ---------------- ------------- ----------------- -----------------
Officers as a 1998 0 0 0 0 0 0
Group 1999 0 0 0 0 0 0
-------------------- -------- ------------ ----------- ---------------- ------------- ----------------- -----------------
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF DIRECTORS
(To December 31, 1999)
<S> <C> <C> <C> <C> <C> <C>
Name and Year Annual Meeting Consulting Number of Securities
Principal retainer Fees ($) Fees/Other Shares Underlying
Position Fees ($) Fees ($) Options/
SARs (#)
==================== ======== =========== =========== ================ ============= =================
Gerald William 1998 0 0 0 0 0 (6)
Runolfson 1999 0 0 0 0 0
-------------------- -------- ----------- ----------- ---------------- ------------- -----------------
Ernest Cheung 1998 0 0 0 0 0
1999 0 0 0 0 0
-------------------- -------- ----------- ----------- ---------------- ------------- -----------------
Patrick Chan 1998 0 0 0 0 0 (1)
1999 0 0 0 0 0
-------------------- -------- ----------- ----------- ---------------- ------------- -----------------
Joseph S. Tong 1998 0 0 0 0 0 (8)
1999 0 0 0 0 0
-------------------- -------- ----------- ----------- ---------------- ------------- -----------------
Ken A. Kow 1998 0 0 0 0 0 (3)
1999 0 0 0 0 0
-------------------- -------- ----------- ----------- ---------------- ------------- -----------------
Directors as a 1998 0 0 0 0 0
Group 1999 0 0 0 0 0
==================== ======== =========== =========== ================ ============= =================
</TABLE>
Termination of Employment and Change of Control Arrangements. None.
Stock purchase options:
Share Purchase Options
Patrick Chan 550,000 shares (1)
FKT Exploration Consultants, Ltd. 325,000 shares (2)
Ken K Consulting, Ltd. 325,000 shares (3)
Cobilco Inc. 550,000 shares (4)
Lancaster Pacific Investment Ltd. 550,000 shares (5)
Gerry Runolfson 300,000 shares (6)
Yonderiche Int'l Consultants 150,000 shares (7)
808719 Ont. Ltd. 100,000 shares (8)
Gemsco Management Ltd. 100,000 shares (9)
The above options shall be 5 years in length to expire on May 31, 2004
and exercisable in whole or in part at US$0.40 per share.
45
<PAGE>
(1) Mr. Chan is Chairman of the Board.
(2) FKT Exploration Consultant, Ltd. is owned by Fred Tse, a consultant.
(3) Ken K Consultant, Ltd. is owned by Ken Kow, a paid consultant and
director to the company.
(4) Cobilco is owned by Raoul Tsakok, a director, of Richco Investors,
Inc., a major shareholder.
(5) Lancaster Pacific Investment, Ltd. is owned by Paul Chan, a consultant.
(6) Mr. Runolfson is President and director.
(7) Yonderiche Int'l Consultants is owned by Jack Song.
(8) 808719 Ont. Ltd. is owned and controlled by Joe Tong, a director.
(9) Gemsco Management, Ltd. is owned and controlled by Maurice Tsakok, a
director of Richco Investors, Inc. a major shareholder.
Section 16(a) of the Securities Exchange Act of 1934, as amended (The
"Exchange Act"), requires the Registrant's officers and directors, and persons
who own more than 10% of a registered class of the Registrant's equity
securities, to file reports of ownership and changes in ownership of equity
securities of the Registrant with the Securities and Exchange Commission and
NASDAQ. Officers, directors and greater-than 10% shareholders are required by
the Securities and exchange Commission regulation to furnish to our company with
copies of all Section 16(a) information that they file.
Some of the officers and directors will not devote more than a portion
of their time to the affairs of our company. There will be occasions when the
time requirements conflict with the demands of their other business and
investment activities. These conflicts may require that we attempt to employ
additional personnel. There is no assurance that the services of these persons
will be available or that they can be obtained upon terms favorable.
There is no procedure in place which would allow officers or directors
to resolve potential conflicts in an arms-length fashion. Accordingly, they will
be required to use their discretion to resolve them in a manner which they
consider appropriate.
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF PRINCIPAL OWNERS AND MANAGEMENT
(a) Beneficial owners of five percent (5%) or greater, of our common
stock: The following sets forth information with respect to ownership by holders
of more than five percent (5%) of our common stock known by us based upon
32,476,250 shares outstanding at September 30, 2000.
<S> <C> <C> <C> <C> <C>
AFTER AFTER
TITLE OF NAME AND ADDRESS AMOUNT OF PERCENT OF "A" "B"
CLASS OF BENEFICIAL OWNER BENEFICIAL INTEREST CLASS NOW WARRANTS
----- ------------------- ------------------- OUTSTANDING EXERCISED
----------- --------------
Common Richco Investors, Inc. 9,225,000(1)(2) 28.4% 24.2% 21.1%
Stock 789 West Pender St. #830
Vancouver, B.C. Canada 9,875,000 29.8% 25.5% 22.2%
V6C 1H2 including options
with affiliates
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
(b) The following sets forth information with respect to our common
stock beneficially owned by each officer and director, and by all directors and
officers as a group, at December 31, 1999. (Table includes options granted to
officers and directors and is computed pursuant to Section 13(d)). See Executive
Compensation Employee Stock Options.)
<S> <C> <C> <C> <C> <C>
Title of Name and Address of Amount of Percent of After "A" After "B"
Class Beneficial Owner Beneficial Class Now Warrants Warrants
Interest Outstanding Exercised Exercised
--------------- -------------------------------- ------------------ ------------------ --------------- ---------------
Common Gerald Runolfson 512,501(a) 1.5% 1.3% 1.1%
President & Director
4151 Rose Crescent 812,501(b) 2.4% 2.1% 1.8%
West Vancouver, B.C. including
Canada options
Common Ernest Cheung 9,225,000(1) 28.4% 27.5% 26.8%
Secretary and Director
6091 Richards Drive 9,875,000(1) 29.8% 29.2% 28.3%
Richmond, B.C. Canada including
V7C 5R2 options
Common Patrick Chan 0 (2) 0% 0 0
Director and Chairman
#7 Conduit Road, 550,000 1.6% 1.4% 1.2%
Flat 6E through
Hong Kong options
Common Joseph Tong 0 (3) 0% 0% 0%
Director
33 Allview Crescent 100,000 .3% .2% .2%
North York, Ont. share options
Canada M2J 2R4
Common Ken A. Kow, Director 0 (4) 0% 0% 0%
2957 E. 56th Ave.
Vancouver, B.C. Canada 325,000 1.00% .85% .75%
V5S 2A2 share options
Officers & Directors as 9,737,501 29.9%
a Group (5) shares now
outstanding
11,662,501 (5) 35.9%
(a) Porta-Pave Industries, Inc. (company owned by Runolfson family) owns
380,002 shares
(b) Gerald Runolfson, individually owns 132,499 shares and has an option to
acquire 300,000 shares
(1) 9,225,000 shares are owned by Richco Investors, Inc. of which Ernest
Cheung is a director, officer and shareholder. Richco Investors, Inc.
is beneficially owned by Raoul Tsakok
47
</TABLE>
<PAGE>
through ownership of 50%+ shares of common stock of Richco Investors,
Inc. Mr. Raoul Tsakok, through Cobilco, Inc., has an option to acquire
550,000 shares. Through Gemsco Management, Ltd., Mr. Maurice Tsakok
has an option for 100,000 shares.
(2) Mr. Chan has an option to acquire 550,000 shares.
(3) Joseph Tong (through 808719 Ont. Ltd.) owns a 100,000 share option.
(4) Ken Kow (through Ken K Consulting Ltd.) owns a 325,000 share option.
(5) Including exercises of options by affiliates.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We have established a compensation committee on May 28, 1999 which
consists of two directors, Gerry Runolfson and Ernest Cheung.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. On January 5, 1998, the Board of Directors established
an Audit Committee, which consists of two directors, Gerry Runolfson and Ernest
Cheung. The Audit Committee will be charged with recommending the engagement of
independent accountants to audit our financial statements, discussing the scope
and results of the audit with the independent accountants, reviewing the
functions of our management and independent accountants pertaining to our
financial statements and performing other related duties and functions as are
deemed appropriate by the Audit Committee and the Board of Directors.
Compensation Committee. The Compensation Committee will be responsible
for reviewing general policy matters relating to compensation and benefits of
directors and officers, determining the total compensation of the officers and
directors.
DIRECTOR RENUMERATION
All directors will be reimbursed for out-of-pocket expenses incurred in
connection with attendance at board and committee meetings. We may grant options
to directors under any Stock Incentive Plan subsequently adopted.
RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
Our interest in the West Gharib Egyptian oil and gas concession is
subject to a 7% net profit interest payable to a related company, Richco
Investors, Inc., beneficially owned by Ernest Cheung, director and secretary,
after DPI has recovered all of its exploration and development expenditures.
This company is related by virtue of common directors.
48
<PAGE>
Oil and gas project costs - advances to (due from) project are advanced
to companies with a common director. These advances are unsecured, non-interest
bearing and have no specific terms for repayment.
We were charged the following expenses by a related company:
1999 1998 1997
---- ---- ----
Consulting $ - $ - $ -
Office & general 13,785 - -
Rent 8,020 - -
--------------------------------------------
$21,805 $ - $ -
============================================
This company was related by virtue of common directors.
Certain employees, officers, directors, and affiliates were granted
options in November 1999. The options are exercisable at $.40 per share and
extend until May 31, 2004.
1. Mr. Chan, who is Chairman of the Board, was granted an option for
550,000 shares.
2. FKT Exploration Consultants, Ltd. is owned by Fred Tse, a consultant.
It received a 325,000 share option.
3. Ken K Consultant, Ltd. is owned by Ken Kow, a paid consultant and a
director as of October 2000. It received a 325,000 share option.
4. Cobilco is owned by Raoul Tsakok, a director, of Richco Investors,
Inc., a majority shareholder. Cobilco was granted a 550,000 share
option.
5. Lancaster Pacific Investment, Ltd. is owned by Paul Chan, a consultant.
It received a 550,000 share option.
6. Mr. Runolfson is President and director. He received a 300,000 share
option.
7. Yonderiche Int'l Consultants is owned by Jack Song. It received a
100,000 share option.
8. 808719 Ont. Ltd. is owned and controlled by Joseph Tong, a director. It
received a 100,000 share option.
9. Gemsco Management, Ltd. is owned and controlled by Maurice Tsakok,
a director of Richco Investors, Inc. a major shareholder. It received
100,000 share option.
LEGAL MATTERS
We may from time to time be a party to legal proceedings. We are not
presently involved in any legal proceedings.
49
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Amisano Hanson completed the audit of the balance sheets as of December
31, 1998, and 1999 and the related statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1998, and 1999. The
Independent Audit Report for 1998 contained an opinion which included a
paragraph discussing uncertainties related to continuation of the Company as a
going concern. In connection with these prior audits, no disagreement exists
with any former Accountant on any matter of accounting principles or practices,
financial statements disclosure, or auditing scope of procedure, which
disagreement if not resolved to the satisfaction of the former Account would
have caused the Accountant to make reference in connection with his report to
the subject matter of the disagreement(s).
DESCRIPTION OF SECURITIES
COMMON STOCK
Our Articles of Incorporation as amended authorize the issuance of
50,000,000 shares of common stock at $.001 par value. Each record holder of
common stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.
Our holders of common stock are entitled to dividends as may be declared
from time to time by the Board of Directors out of legally available funds; and,
in the event of liquidation, dissolution or winding up of the affairs of our
company, holders are entitled to receive, ratably the net assets available to
stockholders after distribution is made to the creditors. Our holders of common
stock have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of common stock are, and all unissued shares when sold will
be, duly authorized, validly issued, fully paid, and nonassessable. To the
extent that we issue additional shares of common stock, the relative interests
of our existing stockholders may be diluted.
WARRANTS
In 1997, we offered and sold 5,179,500 units at $1.00 per unit pursuant
to an offering memorandum. The cash proceeds of this offering have been used to
fund our operations. Each unit consists of one common share and one "A" Share
Purchase Warrant which will entitle the holder thereof to acquire an additional
unit at $1.50 per unit. The additional unit consists of one common share and one
"B" Warrant which will entitle the holder to acquire one common share at $2.00
per share. In December 1998, the exercise price of "A" Warrant has been reduced
from $1.50 to $0.40 and from $2.00 to $0.60 for the "B" Warrant. The expiry of
the "A" Warrant was extended to March 31, 2000 and "B" Warrant to March 31,
2001. In February 2000, the terms of the "A" and "B" Warrants have been extended
further to March 31, 2001 and March 31, 2002, respectively.
50
<PAGE>
REPORT TO STOCKHOLDERS
We shall make available annual reports to stockholders containing
audited financial statements reported upon by our independent auditors. We
intend to release unaudited quarterly and other interim reports to our
stockholders as we deem appropriate.
TRANSFER AGENT AND REGISTRAR
United Stock Transfer, Inc. is the transfer agent and registrar for all
of our securities, including the $.001 par value common stock.
LIMITATIONS ON DIRECTOR LIABILITY
Our Bylaws require us to indemnify our directors and officers, and
allow us to indemnify our other employees and agents, to the fullest extent
permitted by law. We have also entered into agreements to indemnify our
directors and executive officers. We believe that these provisions and
agreements are necessary to attract and retain qualified directors and executive
officers. At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent where indemnification will be required or
permitted. We are not aware of any threatened litigation or proceeding that
might result in a claim for indemnification. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling our company pursuant to the foregoing
provisions, we have been informed that, in the opinion of the Securities and
Exchange Commission, it is against public policy and is therefore unenforceable.
The Board of Directors may alter, amend or repeal the Bylaws by the
affirmative vote of at least a majority of the entire Board of Directors,
provided that any Bylaws adopted by the Board of Directors may be amended or
repealed by the shareholders. The shareholders may also adopt, repeal, or amend,
the Bylaws by the affirmative vote of at least a majority of the shares that are
issued and outstanding and entitled to vote.
PLAN OF DISTRIBUTION
The shares of common stock have been registered for offer and sale from
time to time by selling stockholders to purchasers directly or through agents,
brokers or dealers. These sales may be made in the over-the-counter market or
otherwise at market prices then prevailing or in negotiated transactions. No
selling stockholder is obligated to sell any common stock pursuant to this
prospectus.
Selling stockholders and any brokers or dealers participating in the
registration of the shares of common stock may be deemed to be "underwriters"
under the Securities Act, and any profit on the sale of the shares of common
stock by them and any discounts, commissions or concessions received by any
broker or dealer may be deemed to be underwriting discounts and
51
<PAGE>
commissions under the Securities Act. We are not aware of any arrangement among
selling stockholders to sell or refrain from selling any shares of common stock.
Expenses in connection with the registration of the shares of common
stock pursuant to this prospectus, including fees and expenses of our legal
counsel and independent auditors, filing fees and printing expenses, will be
borne by us. Selling stockholders will bear additional legal expenses that they
incur, if any, as well as commissions and discounts received by brokers or
dealers in connection with the sale of shares of common stock. We have agreed to
indemnify selling stockholders against civil liabilities in connection with the
Registration Statement of which this prospectus is a part (the "Registration
Statement"), including liabilities under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares of common stock may not
simultaneously engage in market making activities for specified periods prior to
the commencement of the distribution. In addition, and without limiting the
foregoing, each selling stockholder will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including, without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of
purchases and sales of common stock by selling stockholders.
SELLING STOCKHOLDERS
The Registration Statement has been filed pursuant to Rule 415 under
the Securities Act to afford the holders of shares of common stock registered,
the opportunity to sell the shares of common stock in a public transaction
rather than pursuant to an exemption from the registration and prospectus
delivery requirements of the Securities Act.
We are registering outstanding shares of common stock owned by selling
shareholders under the Securities Act. The registration fee related to the
registration of these shares is being paid by our company. We will be
responsible for their own accounting expenses, brokerage commissions or
underwriting discounts, and transfer fees incurred in the sale of their shares.
The selling security holders intend to sell their shares directly, through
agents, dealers, or underwriters in the public market or otherwise on terms and
conditions and at prices determined at the time of sale by the selling security
holders or as a result of private negotiations between buyer and seller. We will
not be assisting the selling security holders in selling their shares. We intend
to deliver to the selling security holders copies of a current prospectus to be
used in connection with their sales. They will be advised as to the date as of
which this prospectus will no longer be current. Expenses of any sale will be
borne by the parties as they may agree. We will realize no proceeds from the
sale of any of these shares.
All of the selling security holders are listed below. We are
registering the shares owned by each selling security holder (concurrent with
the effectiveness of the Registration Statement) and
52
<PAGE>
shares underlying A warrants and B warrants. If all of the selling security
holders are successful in offering all of their shares, they will own no shares
of our company, but may retain warrants to purchase units or shares until
warrants are exercised. No selling security holder, except Richco Investors,
Inc., has held any position or office with our company or has any material
relationship with our company, except as noted in the footnotes.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Name & Address Number of % being Shares Shares % owned
Shares registered Underlying Underlying if all
Registered "A" "B" warrants &
warrants warrants shares sold
-------------------------------------------------------------------------------------------------------------------------
Floyd R. Hill 18,500 .05% 18,500 18,500 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
Floyd R. Hill 25,000 .07% 25,000 25,000 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
Corrine Angell 25,000 .07% 25,000 25,000 0%
6360 Sheridan Avenue,
Richmond, B.C. V7E 4W7
Donald Beck 7,500 .02% 7,500 7,500 0%
202 - 3200 Capilano Road
North Vancouver, B.C. V7R4H7
James Brydon 25,000 .06% 25,000 25,000 0%
#3 - 15123 Marine Drive
White Rock, B.C. V4B 1C5
Pegasus Holdings Ltd. 25,000 .07% 25,000 25,000 0%
147 West 16th Street
North Vancouver, B.C. V7M
1T3
Gordon Duff 18,500 .05% 18,500 18,500 0%
800 - 1030 West Georgia Street
Vancouver, B.C. V6E 3B9
Dr. Antonia Gaal 18,500 .05% 18,500 18,500 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
53
<PAGE>
NOR Investment Group Inc. 60,000 .18% 60,000 60,000 0%
7483 Tamarind Drive
Vancouver, B.C. V5S 3Z9
FRI Corp., Inc. 100,000 .3% 100,000 100,000 0%
4557 West 8th Avenue
Vancouver, B.C. V6R 2A4
378255 B.C. Ltd. 18,500 .05% 18,500 18,500 0%
1500 - 701 West Georgia Street
Vancouver, B.C. V7Y 1A1
Dr. Judith Naylor 18,500 .05% 18,500 18,500 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
Donald Simpson 25,000 .07% 25,000 25,000 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
Kimberley Simpson 25,000 .07% 25,000 25,000 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
Epp Talstra 50,000 .15% 50,000 50,000 0%
5390 Coulhard Place
Surrey, B.C. V3X 3E4
Max Waibler 18,500 .05% 18,500 18,500 0%
2068 West 29th Avenue
Vancouver, B.C. V6A 3A1
Charles Walker 18,500 .05% 18,500 18,500 0%
1455 Belview Avenue
West Vancouver, B.C. V2T 1C3
Janet Sparling 18,500 .05% 18,500 18,500 0%
1900 Cypress Street
Vancouver, B.C. V6J 3L8
54
<PAGE>
Terry Lightheart 10,000 .03% 10,000 10,000 0%
633 East 1st Street
North Vancouver, B.C.
V7L 1C1
George Guy 40,000 .12% 40,000 40,000 0%
2100 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
Ann Barends 10,000 .03% 10,000 10,000 0%
1805 Palmerston Avenue
West Vancouver, B.C.
V7V 2V3
Mobax Enterprises Ltd. 30,000 .09% 30,000 30,000 0%
2876 West 16th Avenue
West Vancouver, B.C.
V6R 3C6
Andrew Thomas 50,000 .15% 50,000 50,000 0%
2876 West 16th Avenue
West Vancouver, B.C.
V6R 3C6
Alan Slaughter 40,000 .12% 40,000 40,000 0%
Box 15, RR#1, 1368 Madrona
Drive
Nanoose Bay, B.C. V0R 2R0
Katherine Angus 10,000 .03% 10,000 10,000 0%
216 - 1728 Alberni Street
Vancouver, B.C. V6R 1B2
Brock Smeaton 7,500 .02% 7,500 7,500 0%
3956 Sharon Place
West Vancouver, B.C. V7V 4I6
Maggie Newman 5,000 .015% 5,000 5,000 0%
5517 Deerhorn Lane
North Vancouver, B.C. V7R 4S8
55
<PAGE>
Verne Cinnamon 10,000 .03% 10,000 10,000 0%
6331 Buckingham Drive
Burnaby, B.C. V5E 1A8
Heidi Handja 5,000 .015% 5,000 5,000 0%
2451 Dolly Varden Road
Campbell River, B.C.V9W 4W5
Robert McGrenera 10,000 .03% 10,000 10,000 0%
3420 Norwood Avenue
N. Vancouver, B.C. V7N 3P5
Seabright Financial 30,000 .09% 30,000 30,000 0%
Consultants Inc.
5210 Marguerite Street
Vancouver, B.C. V6M 3K2
Tom Parkinson 25,000 .07% 25,000 25,000 0%
111 - 1141 West 7th Avenue
Vancouver, B.C. V6H 1B5
Raymond Shum 10,000 .03% 10,000 10,000 0%
1548 Marine Drive
West Vancouver, B.C. V7V1H8
Walter Wysota 10,000 .03% 10,000 10,000 0%
4695 Woodview Place
West Vancouver, B.C. V7S 2X7
Michael Angus 10,000 .03% 10,000 10,000 0%
1715 Oughton Drive
Port Coquitlam, B.C. V3C 1H8
David Gradley 7,000 .02% 7,000 7,000 0%
4640 North Piccadilly
West Vancouver, B.C. V7W1E2
Robert Gradley 4,000 .014% 4,000 4,000 0%
3895 West 22nd Avenue
Vancouver, B.C. V6S 1J8
56
<PAGE>
Sabina Chow 8,000 .025% 8,000 8,000 0%
6918 Iverness Street
Vancouver, B.C. V5X 4G5
Harris Wheeler 10,000 .03% 10,000 10,000 0%
P.O. Box 503
Charlie Lake, B.C. V0C 1H0
Cascadia Holdings 10,000 .03% 10,000 10,000 0%
2225 West 41st Avenue
Vancouver, B.C. V6M 4L3
Sharon Slaughter 5,000 .015% 5,000 5,000 0%
Box 15, R.R.#1,
1368 Madrona Drive
Nanoose Bay, B.C. V0R 2R0
Mira Nesin 10,000 .03% 10,000 10,000 0%
3636 Crown Street
Vancouver, B.C. V6S 2K2
Shui-Moon To 50,000 .15% 50,000 50,000 0%
2689 West 21st Avenue
Vancouver, B.C. V6L 1K2
May-Ying To 50,000 .15% 50,000 50,000 0%
2689 West 21st Avenue
Vancouver, B.C. V6L 1K2
Gemma Oosterman 5,000 .015% 5,000 5,000 0%
202 - 4675 Valley Drive
Vancouver, B.C. V6J 4B7
Frances Roitman 20,000 .06% 20,000 20,000 0%
606 - 1945 Barclay Street
Vancouver, B.C. V6G 1L2
Christopher Lay 20,000 .06% 20,000 20,000 0%
2100 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
57
<PAGE>
Jerrald Dugger 10,000 .03% 10,000 10,000 0%
200 - 1594 Kobet Way
Port Coquitlam, B.C. V3L 5N5
Christel Meyer 5,000 .015% 5,000 5,000 0%
4580 Woodgreen Drive
West Vancouver, B.C. V7S 2V2
Aldo Trinetti 5,000 .015% 5,000 5,000 0%
608 - 2041 Bellwood Avenue
Burnaby, B.C. V5B 4V5
Graham MacMillan 20,000 .06% 20,000 20,000 0%
301 - 2232 Marine Drive
West Vancouver, B.C. V7V1K4
Canaccord Capital Corporation 30,000 .09% 30,000 30,000 0%
ITF Graham MacMillan
Account No. 2295745
2000 - 609 Granville Street
Vancouver, B.C. V7Y 1H2
Nicola Nielsen 15,000 .045% 15,000 15,000 0%
14 - 636 Clyde Avenue
West Vancouver, B.C. V7Z 1E1
Christine Smith 5,000 .015% 5,000 5,000 0%
314 - 3738 Norfolk Street
Burnaby, B.C. V5G 4V4
G.D. Nielsen Developments Ltd. 5,000 .015% 5,000 5,000 0%
14 - 636 Clyde Avenue
West Vancouver, B.C. V7Z 1E1
Janet Hutchinson 5,000 .015% 5,000 5,000 0%
4115 Ripple Road
West Vancouver, B.C. V7V3C1
Glen Mitchell 20,000 .06% 20,000 20,000 0%
6th Floor, 700 West Georgia St
Vancouver, B.C. V7Y 1A2
58
<PAGE>
Allan Gauthier 30,000 .09% 30,000 30,000 0%
6th Floor, 700 West Georgia St
Vancouver, B.C. V7Y 1A2
Janine Harris 5,000 .015% 5,000 5,000 0%
545 Ventura Crescent
N. Vancouver, B.C. V7N3G8
Warren Wagstaff 10,000 .03% 10,000 10,000 0%
2500 - 666 Burrard Street
Vancouver, B.C. V6C 2X8
Dominic Spooner 10,000 .03% 10,000 10,000 0%
2500 - 666 Burrard Street
Vancouver, B.C. V6C 2X8
Anne Peterson-Angus 110,000 .33% 110,000 110,000 0%
3160 Benbow Road
West Vancouver, B.C. V7V3E2
Jack Bell 10,000 .03% 10,000 10,000 0%
2703 - 2055 Pendred Street
Vancouver, B.C. V6G 1T9
J. Michael Leckie 10,000 .03% 10,000 10,000 0%
1548 Marine Drive
West Vancouver, B.C. V7V1H8
Eric Feilden 10,000 .03% 10,000 10,000 0%
900 - 4720 Kingsway Avenue
Burnaby, B.C. V5H 4N2
Helen Killas 100,000 .3% 100,000 100,000 0%
3 - 2498 Point Grey Road
Vancouver, B.C. V6K 1A2
Mr. Declan MacFadden 50,000 .15% 50,000 50,000 0%
JF Evertslaan 18
1406KP Bussum, Netherlands
Robert Manchester 10,000 .03% 10,000 10,000 0%
1850 Burrill Avenue
N. Vancouver, B.C. V7K1M2
59
<PAGE>
Jeff Read 5,000 .015% 5,000 5,000 0%
1420 Queens Avenue
West Vancouver, B.C. V7T2H9
Dr. James Findlay 10,000 .03% 10,000 10,000 0%
7 - 20691 Lougheed Highway
Maple Ridge, B.C. V2X 2P9
Steven J. Bryant 5,000 .015% 5,000 5,000 0%
18999 - 59th Avenue
Surrey, B.C. V3S 7R8
Sharif Property Holdings 50,000 .15% 50,000 50,000 0%
1080 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
Intergulf Investment Corp. 250,000 .7% 250,000 250,000 0%
1080 - 885 West Georgia Street
Vancouver, B.C. V6C 3E8
Carlo K. Rahal 50,000 .15% 50,000 50,000 0%
6410 Charing Court
Burnaby, B.C. V5E 3Y3
Nell Dragovan 50,000 .15% 50,000 50,000 0%
900 - 900 West Hastings Street
Vancouver, B.C. V6C 1E5
Thesis Group Inc. 100,000 .3% 100,000 100,000 0%
19 Hanover Terrace
Regents Park
London, England NW1 4RT
Sharon Scholz 25,000 .07% 25,000 25,000 0%
425 Rabbit Lane
West Vancouver, B.C. V7S 1J1
John Gigliotti 25,000 .07% 25,000 25,000 0%
3100 - 666 Burrard Street
Vancouver, B.C. V6C 3B1
60
<PAGE>
Michael Case 15,000 .045% 15,000 15,000 0%
674 Leg in Boot Square
Vancouver, B.C. V5Z 4B4
BSM Enterprises Ltd. 75,000 .23% 75,000 75,000 0%
6228 Tiffany Boulevard
Richmond, B.C. V7C 4Z2
Trudy Mann 25,000 .07% 25,000 25,000 0%
6228 Tiffany Boulevard
Richmond, B.C. V7C 4Z2
Billee Davidson 25,000 .07% 25,000 25,000 0%
3902 West 38th Avenue
Vancouver, B.C.
First Marathon Securities Ltd. 100,000 .3% 100,000 100,000 0%
ITF Seabright Investments
Consultants Inc.
2 First Canadian Place, Ste 3200
P.O. Box 21,
Toronto, Ontario M5X 1J9
First Marathon Securities Ltd. 100,000 .3% 100,000 100,000 0%
ITF David Lyall
2 First Canadian Place, Ste 3200
P.O. Box 21,
Toronto, Ontario M5X 1J9
First Marathon Securities Ltd. 75,000 .23% 75,000 75,000 0%
ITF Rob Hartvikson
2 First Canadian Place, Ste 3200
P.O. Box 21
Toronto, Ontario M5X 1J9
First Marathon Securities Ltd. 75,000 .23% 75,000 75,000 0%
ITF Blayne B. Johnson
2 First Canadian Place, Ste 3200
P.O. Box 21
Toronto, Ontario M5X 1J9
61
<PAGE>
Sam Magid 100,000 .3% 100,000 100,000 0%
1888 West 5th Avenue
Vancouver, B.C. V6J 1P3
Arron Fediuk 25,000 .07% 25,000 25,000 0%
3655 Ash Street
Vancouver, B.C.
Brent Norrey 5,000 .015% 5,000 5,000 0%
3946 West 11th Avenue
Vancouver, B.C. V6R 2L2
William Burk 10,000 .03% 10,000 10,000 0%
1321 Grover Avenue
Coquitlam, B.C. V3J 3G3
Century Square Enterprises Inc. 30,000 .09% 30,000 30,000 0%
23/F Chekiang First Bank Bldg.
58-63 Gloucester Road
Hong Kong
J.R. Ing Associates Ltd. 20,000 .06% 20,000 20,000 0%
1350 West 32nd Street
Vancouver, B.C. V6H 2J3
J. Denis Mote 20,000 .06% 20,000 20,000 0%
1188 Englishman River Road
P.O. Box 464
Errington, B.C. V0R 1V0
Barry Fraser 17,500 .05% 17,500 17,500 0%
c/o McCarthy Tetrault
Suite 1300, 777 Dunsmuir St.
Vancouver, B.C.
Ruston Goepel 50,000 .15% 50,000 50,000 0%
6215 McCleery Street
Vancouver, B.C. V6M 1C3
Capital Management Limited 200,000 .6% 200,000 200,000 0%
222 Merchants Street
Valletta, Malta, VLT 10
62
<PAGE>
The Canada Trust Company 500,000 1.5% 500,000 500,000 0%
ITF Account No. 058-1044318
- REF: DK53
2nd Floor, 161 Bay Street
Toronto, Ontario M5J 2T2
Richco Investors Inc. 1,225,000 3.7% 1,225,000 1,225,000 21.2%(1)
Suite 830, 789 West Pender St.
Vancouver, B.C. V6C 1H2
Trevor Young 100,000 .3% 100,000 100,000 0%
Minane House, Minane Bridge
County Cork, Ireland
Torbay Company 100,000 .3% 100,000 100,000 0%
Global Securities Services,
Royal Bank Plaza
S.L.Level, S. Tower, 200 BaySt
Toronto, Ontario M5B 2J5
Global Securities Corporation 100,000 .3.% 100,000 100,000 0%
ITF Cayman Island Securities
2900 - 1055 West Georgia St.
Vancouver, B.C. V6E 3R5
Canaccord Capital Corp. 50,000 .15% 50,000 50,000 0%
ITF Neil Linder,
Account No. 200-063S-4
2300 - 609 Granville Street
Vancouver, B.C. V7Y 1H2
Pie Capital Communications Inc. 50,000 .15% 50,000 50,000 0%
3566 Point Grey Road
Vancouver, B.C. V6R 1A8
Marc Hung 15,000 .045% 15,000 15,000 0%
Unit #6, 1200 Brunette Avenue
Coquitlam, B.C.V3K 1G3
Odlum Brown Ltd. 36,085 .11% 36,085 36,085 0%
1800 - 609 Granville Street
Vancouver, B.C. V7Y 1A3
63
<PAGE>
Gundyco 23,625 .07% 23,625 23,625 0%
B.C.E. Place, P.O. Box 500
Toronto, Ontario M5J 2S8
Gundyco 55,330 .17% 55,330 55,330 0%
B.C.E. Place, P.O. Box 500
Toronto, Ontario M5J 2S8
Charlene Hoyle 23,000 .07% 23,000 23,000 0%
1548 Marine Drive
West Vancouver, B.C. V7V1H8
Salman Partner Inc. 9,800 .03% 9,800 9,800 0%
#2230 - 885 West Georgia St.
Vancouver, B.C. V6C 3A8
Maurice Colson 7,000 .02% 7,000 7,000 0%
218 Walmer Road, Toronto
Ontario M5R 3R7
RBC Dominion Securities Inc. 4,550 .014% 4,550 4,550 0%
#3100 - 666 Burard Street
Vancouver, B.C. V6C 3C7
Pacific International Securities, Inc. 9,275 .027% 9,275 9,275 0%
1900 - 666 Burrard Street
Vancouver, B.C. V6C 3N1
RBC Dominion Securities Inc. 1,750 .005% 1,750 1,750 0%
#2100 - 666 Burraard Street
Vancouver, B.C. V6C 2X8
David Lyall 24,500 0.075% 24,500 24,500 0%
6745 West Boulevard
Vancouver, B.C. V6P 5R8
Maison Placement Canada Inc. 4,900 .015% 4,900 4,900 0%
#906 - 130 Adelaide Street West
Toronto, Ontario M5H 3P5
64
<PAGE>
Ruston Goepel 3,500 .01% 3,500 3,500 0%
621 McCleery Street
Vancouver, B.C. V6M 1G3
Michael O'Brian 14,000 .044% 14,000 14,000 0%
2nd Floor, 750 West Pender St.
Vancouver, B.C. V6C 1B5
IDF Financial Services Inc. 35,000 .11% 35,000 35,000 0%
#13 - 1155 Melville Street
Vancouver, B.C. V6E 4C4
Whalen Beliveau & Associates, Inc. 70,000 .22% 70,000 70,000 0%
#3210, Park Place,
666 Burrard Street
Vancouver, B.C. V6C 2X8
Global Securities Corporation 7,000 .02% 7,000 7,000 0%
#2900 - 1055 West Georgia St.
Vancouver, B.C. V6E 3R5
Haywood Securities Inc. 7,000 .02% 7,000 7,000 0%
11th Floor, Commerce Place,
400 Burrard Street
Vancouver, B.C. V6C 3A6
Cayman Island Securities Ltd. 22,750 .07% 22,750 22,750 0%
One Capital Place
Grand Cayman, B.W.I.
Kosti Killas 3,500 .01% 3,500 3,500 0%
c/o Canaccord Capital Corp.,
Suite 2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2
TOTAL 5,542,065 5,542,065 5,542,065
(1) Includes shares of officers directors and affiliates of Richco
Investors, Inc.
65
</TABLE>
<PAGE>
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been a very limited market for the
shares of our common stock. The offering price will be based upon the market
price at the time of sale of shares. There is no direct relation between the
market price and the assets, book value, shareholders' equity or net worth of
our company.
LEGAL MATTERS
The law firm of Michael A. Littman, 7609 Ralston Road, Arvada, Colorado
80002, has acted as counsel in connection with this offering.
EXPERTS
The financial statements of the Company as of December 31, 1999 have
been included in the Registration Statement in reliance upon the report of
Amisano Hanson, independent auditor, and upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU CAN FIND INFORMATION
We have filed a Registration Statement on Form SB-2 under the
Securities Act of 1933 with the Securities and Exchange Commission, Washington,
D.C., relating to the securities offered. This prospectus, filed as part of the
Registration Statement, does not contain certain information set forth in, or
annexed as exhibits to, the Registration Statement. For further information with
respect to the Company and the securities offered, reference is made to the
Registration Statement, including the exhibits, which may be inspected without
charge at the Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or inspected and copied at, and obtained at prescribed
rates from, the Public Reference Section of the Securities and Exchange
Commission at its principal office at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Statements contained in this prospectus
regarding the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of the
contract or other document filed as an exhibit to the Registration Statement,
each statement being qualified in all respects by that reference.
IN ADDITION, WE FILE REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH THE
SEC. YOU MAY READ AND COPY ANY DOCUMENT WE FILE AT THE SEC'S PUBLIC REFERENCE
ROOMS IN WASHINGTON, D.C., NEW YORK, NEW YORK AND CHICAGO, ILLINOIS. PLEASE CALL
THE SEC AT 1-800-SEC-0330 FOR FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOMS.
OUR SEC FILINGS ARE ALSO AVAILABLE TO THE PUBLIC ON THE SEC'S WEBSITE AT
HTTP://WWW.SEC.GOV.
66
<PAGE>
PART II
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is a statement of expenses expected to be incurred by
the company in connection with the issuance and distribution of the securities
to be registered, other than underwriting discounts and commissions.
Legal Fees $35,000*
Accounting Fees $15,000*
Filing Fees $15,000*
Printing & Engraving
share certificates and prospectuses $10,000*
Miscellaneous Expenses $15,000*
(* Estimates Only)
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Within the last three (3) years, no sales have been made of the
Company's $.001 par value voting common stock.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No. Item.
3.1 Articles of Incorporation to Drucker Industries, Inc.*
3.2 Bylaws to Drucker Industries, Inc.*
3.3 Certificate of Amendment to Certificate of Incorporation
(changing name to Drucker, Inc.)
5.1 Form of Opinion of Michael A. Littman
23.1 Consent of Michael A. Littman, dated November 30, 2000
23.2 Consent of Auditor, dated November 30, 2000
* Incorporated by reference to Form 10SB Registration Statement filed August 18,
1997, file #0- 29670.
67
<PAGE>
FINANCIAL STATEMENT SCHEDULES
(1) Financial statements of Drucker, Inc. and subsidiaries
YEAR 1999 PAGE
Cover page F-1
Index to Financial Statements F-2
Independent Auditors' Report for years ended December 31,
1999 and December 31, 1998 F-3
Consolidated Balance Sheet at December 31, 1999 F-4
Consolidated Statement of Operations As of End of December 31, 1999 F-5
Consolidated Statement of Stockholders Equity - December 31, 1999 F-6-F-8
Consolidated Statement of Cash Flows As of End of December 31, 1999 F-9
Consolidated Schedule of General and Administrative Expenses F-10
Consolidated Schedule of Exploration Expenses F-11
Notes to the Consolidated Financial Statements F-12-F-20
Interim Financial Statements for September 30, 2000 Cover Page F-21
Index to Financial Statements F-22
Consolidated Balance Sheet at September 30, 2000 F-23
Consolidated Statement of Operations As of End of September 30, 2000 F-24
Consolidated Statement of Stockholders Equity - September 30, 2000 F-25
Consolidated Statement of Cash Flows As of End of September 30, 2000 F-26
Consolidated Schedule of General and Administrative Expenses F-27
Consolidated Schedule of Production Expenses F-28
Consolidated Schedule of Exploration Expenses F-29
Notes to the Consolidated Financial Statements F-30
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes.
68
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
a post effective amendment to this registration statement.
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933; +
(ii) To reflect in the prospectus facts or events arising
after the effective date of the registration statement (or the
most recent post effective amendment) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
(iii) To include any material information with respect to the
plan of distribution previously disclosed in the registration
statement or any material change to the information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of these securities at that time shall be deemed to be the initial bona
fide offering.
(3) To remove from registration by means of a post effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To provide certificates in denominations and registered in names as
required by Selected Dealers to permit prompt delivery to each purchaser.
(5) See Item 14 for Registrant's undertaking with respect to
indemnification.
69
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vancouver, British Columbia, Canada, on December
12, 2000.
DRUCKER, INC.
BY:/S/Gerald Runolfson
Its: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ GERALD RUNOLFSON President December 12, 2000
-------------------- and Director
Gerald Runolfson
/S/ ERNEST CHEUNG Secretary December 12, 2000
----------------- and Director
Ernest Cheung
/S/ PATRICK CHAN Director December 12, 2000
----------------
Patrick Chan
/S/ JOSEPH S. TONG Director December 12, 2000
------------------
Joseph S. Tong
/S/KEN A. KOW Director December 12, 2000
--------------
Ken A. Kow
70
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Cover page F-1
Index to Financial Statements F-2
Independent Auditors' Report for years ended December 31,
1999 and December 31, 1998 F-3
Consolidated Balance Sheet at December 31, 1999 F-4
Consolidated Statement of Operations As of End of December 31, 1999 F-5
Consolidated Statement of Stockholders Equity - December 31, 1999 F-6-F-8
Consolidated Statement of Cash Flows As of End of December 31, 1999 F-9
Consolidated Schedule of General and Administrative Expenses F-10
Consolidated Schedule of Exploration Expenses F-11
Notes to the Consolidated Financial Statements F-12-F-20
F-2
<PAGE>
TERRY AMISANO LTD. AMISANO HANSON
KEVIN HANSON, C.A. CHARTERED ACCOUNTANTS
AUDITORS' REPORT
To the Stockholders,
Drucker Industries, Inc.
We have audited the consolidated balance sheets of Drucker Industries, Inc. as
at December 31, 1999 and 1998 and the statements of operations, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1999 and for the period from inception of the exploration stage,
January 1, 1997 to December 31, 1999. 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 consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1999
and 1998 and the results of its operations and cash flows for each of the years
in the three year period ended December 31, 1999 and for the period from
inception of the exploration stage, January 1, 1997 to December 31, 1999, in
accordance with generally accepted accounting principles in the United States.
Vancouver, Canada "AMISANO HANSON"
March 10, 2000 Chartered Accountants
Suite 604 - 750 West Pender Street, Vancouver, BC, Canada, V6C 2T7
Telephone: (604) 689-0188
Facsimile: (604) 689-9773
E-MAIL: [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
SEE ACCOMPANYING NOTES
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
(Stated in U.S. dollars)
<S> <C> <C>
ASSETS 1999 1998
------ ---- ----
Current
Cash and cash equivalents - Note 3 $ 1,867,417 $ 2,763,628
Accrued interest receivable 10,958 5,483
Prepaid expenses 1,089 2,269
Advances receivable 8,202 -
1,887,666 2,771,380
Oil and gas projects - Notes 4 and 6 1,606,290 1,262,106
$ 3,493,956 $ 4,033,486
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued expenses $ 81,109 $ 47,455
Stockholders' Equity - Notes 5 and 10
Common stock $.001 par value, authorized 50,000,000 shares:
32,476,250 shares issued and outstanding 32,115 32,115
Additional paid-in capital 6,306,803 6,306,803
Deficit accumulated during the exploration stages ( 2,926,071) ( 2,352,887)
Total stockholders' equity 3,412,847 3,986,031
$ 3,493,956 $ 4,033,486
Nature of Operations - Note 1
Commitment - Note 5
Subsequent Event - Note 10
</TABLE>
APPROVED BY THE BOARD:
"Gerry Runolfson" "Ernest Cheung"
--------------------------, Director --------------------------, Director
SEE ACCOMPANYING NOTES
F-4
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1999, 1998 and 1997
and January 1, 1997 (Date of Inception of Exploration Stage)
to December 31, 1999
(Stated in U.S. dollars)
<S> <C> <C> <C> <C>
January 1, 1997
(Date of
Inception of
Exploration
Stage) to
Year ended December 31, December 31,
1999 1998 1997 1999
---- ---- ---- ----
Interest income $ ( 134,930) $ ( 157,538) $ ( 135,266) $ ( 427,734)
General and administrative expenses
- Schedule 1 218,441 182,405 247,566 648,412
Fiscal agent fees - - 3,719 3,719
Exploration expenses - Schedule 2 489,673 616,263 433,795 1,539,731
Net loss $ ( 573,184) $ ( 641,130) $ ( 549,814) $ ( 1,764,128)
Net loss per share $ ( 0.02) $ ( 0.02) $ ( 0.02)
Weighted average shares outstanding 32,476,250 32,476,250 30,167,056
</TABLE>
SEE ACCOMPANYING NOTES
F-5
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the years ended December 31, 1989 to December 31,
1999 and February 4, 1971 (Date of Inception) to December 31, 1999
(Stated in U.S. dollars)
<S> <C> <C> <C> <C> <C>
Deficit
Additional Accumulated
Common Stock Paid-in During
Shares Amount Capital Exploration Stages Total
------------------------------------------------------------------------
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 reported 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
.../cont'd.
</TABLE>
SEE ACCOMPANYING NOTES
F-6
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the years ended December 31, 1989 to December 31,
1999 and February 4, 1971 (Date of Inception) to December 31, 1999
(Stated in U.S. dollars)
<S> <C> <C> <C> <C> <C>
Deficit
Additional Accumulated
Common Stock Paid-in During
Shares Amount Capital Exploration Stages Total
--------------------------------------------------------------------------
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)
</TABLE>
.../cont'd.
F-7
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the years ended December 31, 1989 to December 31,
1999 and February 4, 1971 (Date of Inception) to December 31, 1999
(Stated in U.S. dollars)
<S> <C> <C> <C> <C> <C>
Deficit
Additional Accumulated
Common Stock Paid-in During
Shares Amount Capital Exploration Stages Total
------------------------------------------------------------------------------
Balance forward, December 31, 1996 26,934,185 26,935 1,132,483 (1,161,943) ( 2,525)
Sale of common stock, May, 1997 5,179,500 5,180 5,174,320 - 5,179,500
Shares issued for finder's fee 362,565 - - - -
Net loss for the year ended December 31, 1997 - - - ( 549,814) ( 549,814)
Balance, December 31, 1997 32,476,250 32,115 6,306,803 (1,711,757) 4,627,161
Net loss for the year ended December 31, 1998 - - - ( 641,130) ( 641,130)
Balance, December 31, 1998 32,476,250 32,115 6,306,803 (2,352,887) 3,986,031
Net loss for the year ended December 31, 1999 - - - ( 573,184) ( 573,184)
Balance, December 31, 1999 32,476,250 $32,115 $6,306,803 $( 2,926,071) $ 3,412,847
</TABLE>
SEE ACCOMPANYING NOTES
F-8
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
for the years ended December 31, 1999, 1998 and 1997
and January 1, 1997 (Date of Inception of Exploration Stage)
to December 31, 1999
(Stated in U.S. dollars)
<S> <C> <C> <C> <C>
January 1, 1997
(Date of Inception
of Exploration
Stage) to
Year ended December 31 December 31,
1999 1998 1997 1999
---- ---- ---- ----
Cash flow from operating activities:
Net loss $ ( 573,184) $ ( 641,130) $ ( 549,814) $ ( 1,764,128)
Add items not affecting cash:
Capital assets written-off - 40,288 - 40,288
Write-off of advances - 31,285 - 31,285
Project advances written-off 35,427 - - 35,427
( 537,757) ( 569,557) ( 549,814) ( 1,657,128)
Net changes in non-cash working
capital items related to operations:
Accrued interest receivable ( 5,475) ( 5,483) - ( 10,958)
Prepaid expenses 1,180 ( 2,269) - ( 1,089)
Advances receivable ( 8,202) 250,709 ( 250,709) ( 8,202)
Accounts payable and accrued expenses 33,654 ( 39,084) 84,014 78,584
Net cash used in operating activities ( 516,600) ( 365,684) ( 716,509) ( 1,598,793)
Cash flow used in investing activity
Oil and gas project costs ( 379,611) ( 58,462) ( 1,224,415) ( 1,662,488)
Net cash provided by (used in) investing
activity ( 379,611) ( 58,462) ( 1,224,415) ( 1,662,488)
Cash flow from financing activities:
Proceeds from sale of common stock - - 5,179,500 5,179,500
Advance payable - ( 50,802) - ( 50,802)
Net cash provided by (used in )
financing activities - ( 50,802) 5,179,500 5,128,698
Net increase (decrease) in cash ( 896,211) ( 474,948) 3,238,576 1,867,417
Cash and cash equivalents, beginning of period 2,763,628 3,238,576 - -
Cash and cash equivalents, end of period $ 1,867,417 $ 2,763,628 $ 3,238,576 $ 1,867,417
Cash and cash equivalents consist of:
Cash $ 186,417 $ 63,628 $ 39,948 $ 186,417
Term deposit 1,681,000 2,700,000 3,198,628 1,681,000
$ 1,867,417 $ 2,763,628 $ 3,238,576 $ 1,867,417
</TABLE>
Supplemental disclosures of cash flows:
Stock issued for payment of accounts payable in 1996 - $38,000 (1995: $243,716)
Stock issued for payment of promissory note in 1995 - $359,000
SEE ACCOMPANYING NOTES
F-9
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
for the years ended December 31, 1999, 1998 and 1997 and
January 1, 1997 (Date of Inception of Exploration Stage)
to December 31, 1999
(Stated in US Dollars)
<S> <C> <C> <C> <C>
January 1, 1997
(Date of
Inception of
Exploration
Stage) to
December 31,
1999 1998 1997 1999
---- ---- ---- ----
Accounting and audit fees $ 40,011 $ 44,651 $ 9,539 $ 94,201
Advances written-off - Note 6 - 24,061 - 24,061
Consulting - Note 6 54,436 38,288 32,185 124,909
Foreign exchange 1,866 1,111 ( 778) 2,199
Investor communication costs 28,118 9,834 46,689 84,641
Interest and bank charges 2,421 619 406 3,446
Legal 27,852 12,104 59,795 99,751
Office and general 31,153 29,957 46,576 107,686
Rent 9,217 8,020 7,376 24,613
Transfer agent fees 1,632 2,718 - 4,350
Travel 21,735 11,042 45,778 78,555
-----------------------------------------------------------------
$ 218,441 $ 182,405 $ 247,566 $ 648,412
</TABLE>
SEE ACCOMPANYING NOTES
F-10
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
CONSOLIDATED SCHEDULE OF EXPLORATION EXPENSES
for the years ended December 31, 1999, 1998 and 1997 and January 1, 1997 (Date of Inception of Exploration Stage)
to December 31, 1999
(Stated in US Dollars)
<S> <C> <C> <C> <C> <C> <C>
January 1, 1997
(Date of
Inception of
Exploration
Stage) to
Ningxia West 1999 1998 1997 December 31,
Concession Gharib Total Total Total 1999
---------- ------ ----- ----- ----- ----
Administration $ - $ 76,266 $ 76,266 $ 40,529 $ 9,657 $ 126,452
Amortization - - - 7,901 12,968 20,869
Audit - - - 4,246 5,000 9,246
Consulting - - - - 10,875 10,875
Consumables - 77,924 77,924 30,072 - 107,996
Development costs - 4,139 4,139 - - 4,139
Drilling - 167,965 167,965 420 - 168,385
Entertainment - - - 4,752 9,816 14,568
Geological/geophysical - 70,157 70,157 164,940 - 235,097
Insurance (rebate) - - - ( 2,611) 5,256 2,645
Office Supplies - - - 64 6,272 6,336
Other - - - 3,237 7,526 10,763
Project advances written-off 65,406 - 65,406 31,285 - 96,691
Rent - - - 7,908 918 8,826
Repairs and maintenance - - - 629 1,983 2,612
Surveying and testing - - - 242,600 262,982 505,582
Telephone - - - 2,567 3,375 5,942
Travel 4,729 - 4,729 4,668 62,718 72,115
Wages and benefits - 23,087 23,087 43,948 34,449 101,484
Capital assets written-off - - - 40,288 - 40,288
Interest income - - - ( 7,614) - ( 7,614)
Other income - - - ( 3,566) - ( 3,566)
------------------------------------------------------------------------------------------
$ 70,135 $ 419,538 $ 489,673 $ 616,263 $ 433,795 $ 1,539,731
</TABLE>
SEE ACCOMPANYING NOTES
F-11
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 1 Nature of Operations
-----------------------------------
The company currently is in the business of exploration and
development of oil and gas properties in Egypt and Algeria.
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.
The company is in the exploration stage and is in the process of
exploring its resource properties and has not yet determined
whether these properties contain reserves that are economically
recoverable. The recoverability of amounts shown for resource
properties is dependent upon the discovery of economically
recoverable reserves and confirmation of the company's interest in
the underlying properties, the ability of the company to obtain
necessary financing to satisfy the expenditure requirements under
resource property agreements and to complete the development of
the properties, and upon future profitable production or from the
sale thereof.
Note 2 Summary of Significant Accounting Policies
--------------------------------------------------------
The consolidated financial statements of the company have been
prepared in accordance with generally accepted accounting
principles in the United States. Because a precise determination
of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful
judgement. Actual results may vary from these estimates.
The consolidated financial statements have, in management's
opinion been properly prepared within reasonable limits of
materiality and within the framework of the significant accounting
policies summarized below:
Principles of Consolidation
These consolidated financial statements include the accounts of
Drucker Industries, Inc. and its wholly-owned subsidiaries,
Drucker Petroleum Inc. ("DPI") and Drucker Petroleum (Algeria)
Inc. ("DPA"). DPI and DPA were incorporated by the company in the
British Virgin Islands on April 16, 1998 and September 22, 1999,
respectively. All inter-company transactions have been eliminated.
Exploration Stage Company
The company is an exploration stage company as defined in
Statement of Financial Accounting Standards No. 7 and the
Securities and Exchange Commission's Exchange Act Guide 7. The
company is devoting substantially all of its present efforts to
the business of exploration and development of oil and gas
properties in Egypt and Algeria. For the purposes of providing
cumulative amounts for the statements of operations and cash flow,
these amounts consider only those losses for the period from
January 1, 1997 to December 31, 1999, the period in which the
company has undertaken a new exploration stage activity.
F-12
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 2 Summary of Significant Accounting Policies - (cont'd)
-------------------------------------------------------------------
Oil and Gas Project Costs
The company follows the successful efforts method of accounting
for its oil and gas properties. Under this method, the initial
acquisition costs and the costs of drilling and equipping
development wells, are capitalized. The costs of drilling
exploratory wells are initially capitalized and, if subsequently
determined to be unsuccessful, are charged to operations as dry
hole expenses. Costs and reserves of properties are aggregated by
country. All other exploration expenditures, including geological
and geophysical costs and annual rentals on exploration acreage,
are charged to operations as incurred. Lease acquisition costs,
subsequently determined to be impaired in value, are charged to
operations.
No gains or losses are recognized on the sale or disposition of
oil and gas properties except when there is a material disposition
of reserves of a country. All other proceeds are credited against
the cost of the related properties.
Depletion of the net capitalized costs of producing wells and
leases is charged to operations on the unit-of-production method,
by country, based upon estimated proved reserves.
Investments in a company that is organized for the sole purpose of
holding an indirect interest in oil and gas concessions and such
investment is less than a 20% investment is accounted for under
the above noted oil and gas project costs policy.
Environmental Costs
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when environmental assessments
and/or remedial efforts re probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of:
i) completion of a feasibility study; or
ii) the company's commitment to a plan of action based on the then
known facts.
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".
Net Loss Per Share
Net loss per share is based on the weighted average number of
common shares outstanding during each year.
Values
The amounts shown for oil and gas project costs represent costs to
date and do not necessarily reflect present or future values.
F-13
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 3 Cash Equivalents
-------------------------------
At December 31, 1999, included in cash and cash equivalents is a
financing deposit of $1,681,000 as required by a farm-out
agreement (Note 4). This deposit is held as collateral for a
letter of guarantee. The deposit will be used as payment for the
costs incurred in exploring the concession located in West Gharib,
Gulf of Suez, Egypt (Note 4).
Note 4 Oil and Gas Projects - Note 6
-------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999 1998
Ningxia Shaanxi Total Total
China Concessions
Project advance $ - $ - $ - $ 893,670
Capital assets - - - 1,636
------------ ------------ ------------ ------------
$ - $ - - 895,306
------------ ------------ ------------ ------------
West Gharib, Egypt Concession
Acquisition costs
Cash 352,000 352,000
Project advance - 14,800
------------ ------------
352,000 366,800
Deferred exploration costs 629,290 -
------------ ------------
981,290 366,800
------------ ------------
Algerian Concession
Acquisition costs 625,000 -
------------ ------------
$ 1,606,290 $ 1,262,106
============ ============
</TABLE>
Project advances are advances to companies with a common director.
These advances are unsecured, non-interest bearing and have no
specific terms for repayment.
China Concessions
By a participation agreement dated January 21, 1997, the company
agreed to pay 100% of all the costs of exploring and developing
the Ningxia oil and gas concessions in Yanchi County, Ningxia
Province and WuQi county, Shaanxi Province, Peoples Republic of
China as consideration for an undivided 50% interest in all of the
profits generated from the concession.
By a participation agreement dated January 21, 1997, the company
agreed to pay 100% of all the costs of exploring and developing
the Shaanxi oil and gas concessions in North Shaanxi Province,
Peoples Republic of China as consideration for an undivided 50%
interest in all of the profits generated from the concessions.
F-14
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 4 Oil and Gas Project Costs - Note 6 - (cont'd)
----------------------------------------------------------
China Concessions - (cont'd)
By a participation agreement dated September 9, 1997, the company
agreed to pay 100% of all the costs of exploring and developing
the Fuxian oil and gas property in Fuxian County, Shaanxi
Province, Peoples Republic of China as consideration for an
undivided 50% interest in all of the profits generated from the
properties.
During the year ended December 31, 1998, the Fuxian concession was
abandoned. During the year ended December 31, 1999, the Ningxia
and Shaanxi oil and gas concessions were abandoned and all related
costs were included with exploration expenses.
The parties to the above agreements are related to the company by
virtue of common directors.
West Gharib Concession
On April 27, 1998, DPI entered into a farm-out agreement to
acquire an undivided 20% participating interest in the right to
explore for and exploit petroleum in a concession located in West
Gharib, Gulf of Suez, Egypt.
DPI shall pay:
- $352,000 within seven days of the execution of the agreement
(paid)
- pay 20% of all costs and expenses incurred subsequent to the
execution of the agreement related to this concession.
- 40% of the costs and expenses associated with the drilling of
an exploratory well to a maximum cost to the company of
$500,000; thereafter, DPI shall pay 20% of all costs and
expenses associated with any further activity associated with
the concession.
In addition, DPI provided a bank guarantee of $2,000,000 within
seven days of the execution of the agreement, being 40% of a
letter of guarantee (Note 3). As at December 31, 1999, this bank
guarantee has been reduced to $1,681,000
DPI's interest in this oil and gas concession is subject to a 7%
net profit interest payable to a related company, after DPI has
recovered all of its exploration and development expenditures.
This company is related by virtue of common directors.
During the year ended December 31, 1999, the company included
drilling costs of $167,965 related to an abandoned well with
exploration expenses.
At December 31, 1999, $629,290 incurred in respect to drilling an
exploration well and drilling and equipping a development well
have been capitalized.
F-15
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 4 Oil and Gas Project Costs - Note 6 - (cont'd)
-----------------------------------------------------------
Algerian Concession
By a letter of intent dated October 27, 1999, the company acquired
10% of the issued capital stock of Santa Catalina (Algeria) Ltd.
(Algeria Concession SLM Algeria"), a company which, through its
wholly-owned subsidiary, Santa Catalina L.H. Lundin (Algeria) Ltd.
("SLM Lundin"), entered into an agreement to acquire a 25%
participating interest in an oil and gas concession in Algeria.
Subject to SLM Lundin earning its 25% participating interest, the
company may earn up to a 2.5% indirect interest in the property by
paying SLM Algeria $625,000 (paid) to acquire 10% of its capital
stock, and by funding its pro-rata share of SLM Lundin's portion
of the drilling and general and administrative costs in excess of
US$5,000,000 for testing and drilling of the first well.
In order to participate in the second well, the company must pay
SLM Algeria $600,000. The company will then be responsible for
their pro-rata share of SLM Lundin's portion of the drilling costs
and general and administrative costs in excess of $5,000,000
associated with the drilling and testing of the second well. This
agreement is in effect for one year.
All costs associated with this concession are shown as oil and gas
project costs.
Note 5 Common Stock - Note 10
------------------------------------
During the year ended December 31, 1997, the company issued
5,179,500 shares of common stock at $1.00 per share for proceeds
of $5,179,500.
The company also issued 362,565 shares of common stock as a
finder's fee.
Commitment
Share Purchase Warrants
At December 31, 1999, 5,179,500 share purchase warrants are
outstanding. Each warrant entitles the holder to purchase one
additional unit of the company at $0.40 per unit until the earlier
of March 31, 2000 and the 90th day after the day on which the
weighted average trading price of the company's shares exceed
$0.90 per share for 10 consecutive trading days. Each unit
consists of one common share of the company and one additional
warrant. Each additional warrant entitles the holder to purchase
one additional common share of the company at $0.60 per share. The
additional warrants will expire one year after the occurrence of
the exercise of the original warrant.
Share Purchase Options
During the year ended December 31, 1999, the company granted
2,950,000 share purchase options entitling the holders thereof the
right to acquire 2,950,000 common shares at $0.40 per share to
June 30, 2004.
F-16
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 6 Related Party Transactions - Note 4
--------------------------------------------------
During the year ended December 31, 1998, the company wrote-off
advances to a related company in the amount of $24,061 advanced
with respect to administration relating to the China oil and gas
exploration projects. This company is related by virtue of a
common director.
The company was charged the following by a director of the
company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
January 1, 1997
(Date of Incep-
tion of Explora-
tion Stage) to
December 31
1999 1998 1997 1999
---- ---- ---- ----
Consulting $ - $ - $ - $ 36,000
============== ============== ============== ==============
</TABLE>
Note 7 Deferred Tax Assets
----------------------------------
The Financial Accounting Standards board issued Statement Number
109 in Accounting for Income Taxes ("FAS 109") which is effective
for fiscal years beginning after December 15, 1992. FAS 109
requires the use of the asset and liability method of accounting
of income taxes. Under the assets and liability method of FAS 109,
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and
liabilities and loss carryforwards and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the year in which
those temporary differences are expected to be recovered or
settled.
The following table summarized the significant components of the
company's deferred tax assets:
Total
Deferred Tax Assets
Net operating loss carryforward $ 3,500,000
===============
Deferred tax assets $ 1,750,000
Valuation allowance for deferred tax assets (1,750,000)
---------------
$ -
===============
The amount taken into income as deferred tax assets must reflect
that portion of the income tax loss carryforwards which is likely
to be realized from future operations. The company has chosen to
provide an allowance of 100% against all available income tax loss
carryforwards, regardless of their time of expiry.
F-17
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 8 Income Taxes
--------------------------
No provision for income taxes has been provided in 1999, 1998 and
1997 due to the net loss. The company has net operating loss carry
forwards, which expire commencing in the year 2004 totalling
approximately $3,500,000, 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 or
greater, utilization of net operating loss carry forwards may be
limited. As a result of equity transactions occurring through
December 31, 1999, the company will be subject to such limitation.
The annual limitations have not been determined.
Note 9 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 the deficit accumulated
during the exploration stage at December 31, 1993 and at December
31, 1992 and additional paid-in capital at December 31, 1992 were
restated to reflect this adjustment.
Note 10 Subsequent Event
------------------------------
Subsequent to December 31, 1999, the company extended the terms of
the share purchase warrants to read as follows:
Each warrant entitles the holder to purchase one additional unit
of the company at $0.40 per unit until the earlier of March 31,
2001 and the 90th day after the day on which the weighted average
trading price of the company's shares exceed $2.50 per share for
10 consecutive trading days. Each unit consists of one common
share of the company and one additional warrant. Each additional
warrant entitles the holder to purchase one additional common
share of the company at $0.60 per share. The additional warrants
will expire one year after the occurrence of the exercise of the
original warrant.
F-18
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 11 Segmented Information
-----------------------------------
The company's industry's segment is the oil and gas industry. The
company's geographic segments are Canada, China, Egypt and
Algeria.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
December 31, 1999
Canada China Egypt Algeria Total
Identifiable Assets
Current $ 1,887,666 $ - $ - $ - $ 1,887,666
Oil and gas projects - - 981,290 625,000 1,606,290
------------- ------------- ------------- ------------- -------------
$ 1,877,666 $ - $ 981,290 $ 625,000 $ 3,493,956
============= ============= ============= ============= =============
December 31, 1998
Canada China Egypt Algeria Total
Identifiable Assets
Current $ 2,771,380 $ - $ - $ - $ 2,771,380
Oil and gas projects - 895,306 366,800 - 1,262,106
------------- ------------- ------------- ------------- -------------
$ 2,771,380 $ 895,306 $ 366,800 $ - $ 4,033,486
============= ============= ============= ============= =============
Year ended December 31,
1999 1998 1997
Operations
Canada $ ( 83,511) $ ( 24,867) $ ( 116,019)
China ( 70,135) ( 368,290) ( 433,795)
Egypt ( 419,538) ( 247,973) -
------------- ------------- ---------------
$( 573,184) $ ( 641,130) $ ( 549,814)
============= ============= ===============
</TABLE>
Note 12 New Accounting Standards
--------------------------------------
In December 1997, the Accounting Standards Board Issued statement
3465, "Income Taxes", which establishes standards for the
recognition, measurement, presentation and disclosure of income
and refundable taxes. This statement is effective for fiscal years
beginning on or after January 1, 2000. Adopting this standard will
not have a significant impact on the company's consolidated
financial position, results of operations or cash flows.
In April 1998, the Accounting Standards Executive Committee issued
SOP 98-5, "Reporting on the costs of start-up activities". This
statement is effective for fiscal years beginning after December
15, 1998. Adopting this standard does not have a significant
impact on the company's consolidated financial position, results
of operations or cash flows.
F-19
<PAGE>
DRUCKER INDUSTRIES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in U.S. dollars)
Note 12 New Accounting Standards - (cont'd)
------------------------------------------------
In June 1998, the Financial Accounting Standards board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which standardized the accounting for derivative
instruments. SFAS is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. Adopting this standard
will not have a significant impact on the company's consolidated
financial positions, results of operations or cash flows.
Note 13 Uncertainty Due to the Year 2000 Issue
----------------------------------------------------
The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using the year 2000 date is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. Although the change in date has occurred, it is not
possible to conclude that all aspects of the Year 2000 Issue that
may affect the entity, including those related to customers,
suppliers or other third parties, have been fully resolved.
Note 14 Comparative Figures
---------------------------------
Certain prior year's comparative figures have been reclassified to
conform with the presentation used in the current year.
F-20
<PAGE>
DRUCKER INDUSTRIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Stated in U.S. dollars)
(Unaudited)
---------
F-21
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Interim Financial Statements for September 30, 2000 Cover Page F-21
Index to Financial Statements F-22
Consolidated Balance Sheet at September 30, 2000 F-23
Consolidated Statement of Operations As of End of September 30, 2000 F-24
Consolidated Statement of Stockholders Equity - September 30, 2000 F-25
Consolidated Statement of Cash Flows As of End of September 30, 2000 F-26
Consolidated Schedule of General and Administrative Expenses F-27
Consolidated Schedule of Production Expenses F-28
Consolidated Schedule of Exploration Expenses F-29
Notes to the Consolidated Financial Statements F-30
F-22
<PAGE>
<TABLE>
<CAPTION>
SEE ACCOMPANYING NOTES
DRUCKER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
(Unaudited)
(Stated in U.S. dollars)
----------------------
<S> <C> <C>
ASSETS September 30 December 31,
------
2000 1999
---- ----
Current
Cash and cash equivalents $ 1,243,156 $ 1,867,417
Receivables - oil 253,296 -
- interest 2,075 10,958
Prepaid expenses - 1,089
Advances receivable 11,545 8,202
----------------- -----------------
1,510,072 1,887,666
Oil and gas projects 2,330,958 1,606,290
Capital assets, net 3,169 -
----------------- -----------------
$ 3,844,199 $ 3,493,956
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued expenses $ 299,333 $ 81,109
---------------- -----------------
Stockholders' Equity - Note 2
Common stock $.001 par value, authorized 50,000,000 shares:
32,476,250 shares issued and outstanding 32,115 32,115
Additional paid-in capital 6,306,803 6,306,803
Deficit ( 2,794,052) ( 2,926,071)
---------------- -----------------
3,544,866 3,412,847
---------------- -----------------
$ 3,844,199 $ 3,493,956
================= =================
</TABLE>
Commitment - Note 2
Subsequent Event - Note 3
SEE ACCOMPANYING NOTES
F-23
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the nine months ended September 30, 2000 and 1999
(Unaudited)
(Stated in U.S. dollars)
<S> <C> <C> <C> <C>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue
Oil and natural gas $ 934,312 $ - $ 2,223,398 $ -
Royalties ( 407,016) - ( 961,822) -
---------------- ---------------- ---------------- ----------------
527,296 - 1,261,576 -
Interest income 17,194 37,961 61,002 105,449
---------------- ---------------- ---------------- ----------------
544,490 37,961 1,322,578 105,449
---------------- ---------------- ---------------- ----------------
Expenses
Production - Schedule 2 294,882 - 606,707 -
Depletion 14,597 - 33,262 -
General and administrative expenses
- Schedule 1 56,889 32,426 145,299 138,492
Exploration expenses
- Geological/geophysical - seismic 360,072 - 401,474 -
- Drilling and other - Schedule 3 2,207 406,964 3,817 704,737
---------------- ---------------- ---------------- ----------------
728,647 439,390 1,190,559 843,229
---------------- ---------------- ---------------- ----------------
Net income (loss) $ ( 184,157) $ ( 401,429) $ 132,019 $ ( 737,780)
================ ================ ================ ================
Net income (loss) per share $ ( 0.01) $ ( 0.01) $ 0.00 $ ( 0.02)
================ ================ ================ ================
Weighted average shares outstanding 32,476,250 32,476,250 32,476,250 32,476,250
================ ================ ================ ================
</TABLE>
SEE ACCOMPANYING NOTES
F-24
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the nine months ended September 30, 2000 and
1999 and February 4, 1971 (Date of Incorporation) to September 30, 2000
(Unauditd)
(Stated in U.S. dollars)
----------------------
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Exploration
------------
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, December 31, 1998 32,476,250 $ 32,115 $ 6,306,803 $ ( 2,352,887) $ 3,986,031
Net loss for the nine months ended
September 30, 1999 - - - ( 737,780) ( 737,780)
---------- -------------- --------------- --------------- ---------------
Balance, September 30, 1999 32,476,250 32,115 6,306,803 ( 3,090,667) 3,248,251
Net income for the three months ended
December 31, 1999 - - - 164,596 164,596
---------- -------------- --------------- --------------- ---------------
Balance, December 31, 1999 32,476,250 32,115 6,306,803 ( 2,926,071) 3,412,847
Net income for the nine months ended
September 30, 2000 - - - 132,019 132,019
---------- -------------- --------------- --------------- ---------------
Balance, September 30, 2000 32,476,250 $ 32,115 $ 6,306,803 $ ( 2,794,052) $ 3,544,866
========== ============== =============== =============== ===============
</TABLE>
SEE ACCOMPANYING NOTES
F-25
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
for the nine months ended September 30, 2000 and 1999
(Unaudited)
(Stated in U.S. dollars)
----------------------
<S> <C> <C>
Nine months ended September 30,
2000 1999
---- ----
Cash flow from operating activities:
Net income (loss) $ 132,019 $ ( 737,780)
Add items not affecting cash:
Amortization 511 -
Depletion 33,262 -
------------------ ------------------
165,792 ( 737,780)
Net changes in non-cash working capital items
related to operations:
Receivable - oil ( 253,296) -
- interest 8,883 ( 1,669)
Prepaid expenses 1,089 2,269
Advance receivable ( 3,343) -
Accounts payable and accrued expenses 218,224 95,238
------------------ ------------------
Cash flow provided by (used in) operating activities 137,349 ( 641,942)
------------------ ------------------
Cash flows used in investing activities
Oil and gas projects costs ( 757,930) 776,700
Capital assets ( 3,680) -
------------------ ------------------
Cash flow provided by (used in) investing activities ( 761,610) 776,700
------------------ ------------------
Net increase (decrease) in cash ( 624,261) 134,758
Cash and cash equivalents, beginning of period 1,867,417 2,763,628
------------------ ------------------
Cash and cash equivalents, end of period $ 1,243,156 $ 2,898,386
================== ==================
Cash and cash equivalents consists of:
Cash (bank overdraft) $ 55,471 $ ( 1,060,594)
Term deposits 1,187,685 3,958,980
------------------ ------------------
$ 1,243,156 $ 2,898,386
================== ==================
</TABLE>
SEE ACCOMPANYING NOTES
F-26
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC. Schedule 1
CONSOLIDATED SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
for the nine months ended September 30, 2000 and 1999
(Unaudited)
(Stated in U.S. dollars)
----------------------
<S> <C> <C> <C> <C>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Accounting and audit fees $ 9,740 $ 1,824 $ 27,417 $ 39,481
Amortization 307 - 511 -
Consulting 11,166 10,763 33,004 43,537
Foreign exchange loss 944 662 1,732 1,213
Interest and bank charges 501 1,095 1,143 1,707
Investor relations 9,035 9,611 30,863 21,028
Legal 11,225 - 13,910 66
Office and general 8,570 5,726 23,805 18,290
Rent 3,249 2,010 8,800 6,049
Transfer agent fee 920 425 2,425 1,074
Travel 1,232 310 1,689 6,047
--------------- -------------- --------------- --------------
$ 56,889 $ 32,426 $ 145,299 $ 138,492
=============== ============== =============== ==============
</TABLE>
SEE ACCOMPANYING NOTES
F-27
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC. Schedule 2
CONSOLIDATED SCHEDULE OF PRODUCTION EXPENSES
for the nine months ended September 30, 2000 and 1999
(Unaudited)
(Stated in U.S. dollars)
----------------------
<S> <C> <C> <C> <C>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Administration $ 49,958 $ - $ 107,775 $ -
General operating expenses 135,954 - 244,178 -
Handling and trucking 108,970 - 254,754 -
-------------- -------------- -------------- --------------
$ 294,882 $ - $ 606,707 $ -
============== ============== ============== ==============
</TABLE>
SEE ACCOMPANYING NOTES
F-28
<PAGE>
<TABLE>
<CAPTION>
DRUCKER INDUSTRIES, INC. Schedule 3
CONSOLIDATED SCHEDULE OF EXPLORATION EXPENSES - DRILLING AND OTHER
for the nine months ended September 30, 2000 and 1999
(Unaudited)
(Stated in U.S. dollars)
----------------------
<S> <C> <C> <C> <C>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Administration $ - $ 8,559 $ - $ 44,845
Consumables - - - 111,119
Drilling - 368,821 - 409,841
General operating expenses - 29,584 - 55,546
Geological/Geophysical - other 2,207 - 3,817 83,386
-------------- -------------- -------------- --------------
$ 2,207 $ 406,964 $ 3,817 $ 704,737
============== ============== ============== ==============
</TABLE>
SEE ACCOMPANYING NOTES
F-29
<PAGE>
DRUCKER INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
(Stated in U.S. dollars)
----------------------
NOTE 1 INTERIM REPORTING
While the information presented in the accompanying interim nine
months financial statements is unaudited, (except for as indicated
in Independent Accountants' Report), it includes all adjustment
which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash
flows for the interim periods presented. All adjustments are of a
normal recurring nature. It is suggested that these interim
financial statements be read in conjunction with the company's
December 31, 1999 annual financial statements.
NOTE 2 COMMON STOCK
Commitments
Share Purchase Warrants
At September 30, 2000, 5,542,065 share purchase warrants are
outstanding. Each warrant entitles the holder to purchase one
additional unit of the company at $0.40 per unit until the earlier
of March 31, 2001 and the 90th day after the date on which the
weighted average trading price of the company's shares exceed
$2.50 per share for 10 consecutive trading days. Each unit
consists of one common share of the company and one additional
warrant. Each additional warrant entitles the holder to purchase
one additional common share of the company at $0.60 per share. The
additional warrants will expire one year after the occurrence of
the exercise of the original warrants.
Share Purchase Options
At September 30, 2000, 2,950,000 share purchase options are
outstanding. Each option entitles the holder thereof the right to
acquire one new common share of the company at $0.40 per share to
June 30, 2004
NOTE 3 SUBSEQUENT EVENT
Subsequent to September 30, 2000, the company advanced $600,000
pursuant to a cash call for its share of costs for a second well
in Algeria.
F-30
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DRUCKER, INC.
(Exact name of Registrant as specified in charter)
EXHIBITS
71
<PAGE>
EXHIBIT INDEX
Exhibit No. Item
3.1 Articles of Incorporation to Drucker Industries, Inc.*
3.2 Bylaws to Drucker Industries, Inc.*
3.3 Certificate of Amendment to Certificate of Incorporation
(name change to Drucker, Inc.)
5.1 Form of Opinion of Michael A. Littman
23.1 Consent of Michael A. Littman, dated November 30, 2000
23.2 Consent of Auditor, dated November 30, 2000
*Incorporated by reference to Form 10SB Registration Statement filed August 18,
1997, #0- 29670
72
