U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 of 15(d) of
Securities Exchange Act of 1934
For the fiscal year ended December 31, 19999
Commission file Number: 0-24259
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
BRITISH COLUMBIA, CANADA IRS No. 75-2712845
P.O. Box 1629
1301 Ave. M
Cisco, Texas 76437
(254) 442-2638
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, no par value
The registrant (1) has filed all reports required to be filed by section 13
or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for the past 90
days. Yes_X__ No____
State the aggregate market value of the voting stock held by non- affiliates
of the Registrant as of April 12, 2000.
Common stock 1,150,000 shares, $575,000.00 Market Value
On December 31,1999 the Registrant had 5,150,000 shares of Common Stock
outstanding with no par value. On January 1, 2000 the total number of shares
outstanding were 5,150,000.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Australian-Canadian Oil Royalties Ltd. ("ACOR" or "the Company") was
incorporated in British Columbia, Canada, in April of 1997. The Company's
U.S. office is located at 1304 Avenue L., Cisco, Texas 76437.
The business of ACOR during 1999 was to make a study of available oil and
gas development acreage in Australia and select and apply for an
exploration permit on the area which demonstrates a high probability of
success with the maximum rate of return for dollars invested. The area
selected is offshore in the most prolific oil- producing basin in
Australia, approximately 1 1/2 miles east of the Kingfish Oil Field in
the southern Gippsland Basin in the Bass Straits.
The Kingfish Oil Field, the largest oil field in Australia, has produced
over one billion barrels of oil since its discovery. There are currently
23 producing wells in this field. Present cumulative production figures
are approximately 46,000,000 barrels per producing well. The average
Kingfish well has produced as much oil as 5,000 to 6,000 oil wells in
Central West Texas. The permeabilities in the pay section ranges between
5,000 millidarcies and 40,000 millidarcies, which is extremely high.
At the April 6, 2000 New York crude price of $26.00 per barrel, this
amounts to approximately $US 1,196,000,000 gross return per well. The cost
of drilling a Kingfish well is approximately $US 5,500,000, therefore the
production is approximately 217 times the drilling and completion costs.
During flush production, the wells were making 6,400 barrels of oil per
day.
ACOR (50%) and Ely Sakhai (50%) have applied for the 214,000 acre
application area V99-2 in offshore Victoria. ACOR-Sakhai engaged
International Oil Lease Service Corp. (IOLSC) to lease the area for them
for $US25,000 and a 2% overriding royalty interest on a no delivery-no
pay basis. Robert Kamon is Secretary of ACOR and President and Director of
IOLSC. Mr. Sakhai has committed his sizable financial statement and
personal backing to the application. Otherwise, it would not have been
possible for ACOR to demonstrate the large financial liquidity required
for the application.
The ACOR-Sakhai exploration bid on the area is very aggressive and the
Victoria and Commonwealth Governments both extended their first invitation
to meet with ACOR/Sakhai to review the application.
Prior to the meeting, ACOR-Sakhai entered into an arrangement committing
75% of the working interest in V99-2 to an oil and gas operations director
who has drilled several thousand wells in the United States and a number
of wells offshore. At the meeting, the operations director, on behalf of
ACOR-Sakhai, submitted an additional $US 20,000,000 performance bond to
guarantee the first 3 years expenditure to both Governments' six
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representatives, plus resumes of the excellent technical staff for the
operation. These individuals have been selected as the key personnel for
the exploration and drilling program and are presently on the operator's
payroll.
At this time there is approximately $US 5,000,000 worth of seismic
completed on application area V99-2. ACOR-Sakhai has purchased the seismic
data and currently has it on the hard drives of their computers. A copy
has been submitted to the Company's Chief Geologist for the area. In
addition the Company has committed to three 3-D seismic programs on the
area.
On present mapping there are 14 structures on the application area V99-2,
which includes one oil and gas field with 16 pays and over 1,000 feet of
pay section and a second with one gas pay section. Appraisal wells will
need to be drilled to bring these fields into production.
Quoting from VIMP Report 61, published by the Victorian Government:
"The Kingfish Southeast Prospect is the largest structural play in
V99-2. It has a four-way dip (fault, independent closure) mapped at
several intra- Latrobe horizons and at the top of the Golden Beach
Subgroup. This play is estimated to contain 117 million barrels of
recoverable oil.
The Archer/Anemone/Anemone Southeast areas could be developed
together. Total developable reserves are potentially 35.5 million
barrels of oil and 117 billion cubic feet of gas."
The Breem, Kingfish and Kingfish Southeast Structures are in the same
primary trend. The fault structure, through the middle of the Kingfish
Field, extends into the Kingfish Southeast Structure on V99-2. Drilling a
well on each of the Kingfish Southeast Anticline and the Anemone Southeast
Structure is included in the first three years work program, as well as
other drilling.
The Application includes nine offshore exploration wells with minimum
total expenditures of $A 93,000,000.00 ($US 55,800,000.00). Experienced
offshore drilling personnel have been engaged for the program and are
currently on the payroll. The Chief Australian Geologist has years of
experience in the geology of the offshore South Gippsland Basin.
The Company was organized to engage in the oil/gas business and to
purchase, hold and sell producing and non-producing oil and gas royalty
interests in Australia, Canada and the United States. Since its
organization, ACOR has acquired overriding royalty interests (ORRIs) under
eleven concessions covering 13,621,619 gross surface acres in Australia.
Production has been discovered on five of the properties where ACOR holds
ORRIs. The Company is currently receiving revenues from three of the
ORRIs, Authorities to Prospect 299, 267 and 543. Total gross revenues
received from ATP 299, ATP 267 and ATP 543 for the year 1999, were $7,118.
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The Company plans to further develop its business by forming consortiums
of oil and gas entities with the necessary financial strength to apply for
Australian oil and gas concessions, which involve certain financial
requirements for exploration and drilling activities.
Since its organization in 1997, the Company has not been involved in any
bankruptcy, receivership, or similar proceeding and has undergone no
material reclassification, merger, or consolidation.
(b) Business of Issuer
As a purchaser and holder of overriding royalty interests, ACOR's business
is related to the principal products of oil and gas, and is dependent on
various factors, which are discussed following. The average sales price
per barrel of oil from Australia during 1999 was $US18.36.
The acquisition, exploration, development, production and sale of oil and
gas are subject to many factors that are outside the Company's control.
These factors include: market prices; national and international economic
conditions; import and export quotas; availability of drilling rigs,
casing, pipe, and other equipment and supplies; availability of and
proximity to pipelines and other transportation facilities; the supply and
price of competitive fuels; and the regulation of prices, production,
transportation, and marketing by domestic and foreign governmental
authorities. Additionally, the Company generally has no control over
whether the owner or operator of leases to which its overriding royalty
interests are attributable will elect to explore for oil and gas on such
properties, or to develop them following discoveries that may occur. Each
of these factors may affect the rate at which oil and gas are produced on
properties in which the Company has an interest or affect whether wells
will be drilled on such properties, and could otherwise materially affect
ACOR's earnings.
Competition and Markets
The Company is competing with other oil companies for an oil and gas
permit covering V99-2. The oil and gas industry is highly competitive in
all of its phases, with competition for favorable producing royalties,
overriding royalties, and good oil and gas leases being particularly
intense. The Company believes that the exploration program, promised
expenditures, geological and geophysical skill, and familiarity with an
area of operations are the primary competitive factors in the
identification, selection, and acquisition of desirable leases. When
attempting to purchase interests in such properties, the Company competes
with independent operators and major oil companies.
Foreign Taxes and United States Tax Credits
As a result of its overriding royalty interests attributable to properties
outside the United States, the Company is subject to the imposition of
taxes by foreign governments upon the Company's income derived from such
foreign jurisdictions. These taxes are of various types, with differing
tax rates, and are subject to change. Generally, the Company's income from
a foreign jurisdiction will be taxed in the same manner as that for other
companies operating in the jurisdiction, but discriminatory taxation by a
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particular jurisdiction may occur. The current corporate income tax rate
in Australia, for overriding royalty interests, is approximately 30% of
net profits. Offshore production is exempt from royalty, but is subject to
the Petroleum Resource Rent Tax. The Petroleum Resource Rent Tax is
figured out of indexed net income. Indexing increases deductions from net
income and reduces the net through these deductions. These figures are
calculated by using various rates such as GDP and other rates. The
Petroleum Resource Rent Tax is a deduction from income tax.
As a Canadian corporation, the Company is liable for income taxes under
the laws of Canada. Under Canadian law the Company's Australian-source
income is subject to a 46% tax (on Canadian dollars). We believe the 30%
Australian tax should be a credit toward the payment of the 46% Canadian
tax under double taxation treaties between the countries.
The Company is taxable in the U.S. on U.S. source income. Because there
has been neither U.S. source net income nor any income effectively
connected with a U.S. trade or business, there have been no U.S. taxes
incurred to date.
Governmental Regulation
Oil and gas operations are subject to federal, state and local laws and
regulations governing waste, environmental quality, pollution control,
conservation and other measures regarding environmental and ecological
matters. It is impossible to predict the impact of environmental
legislation and regulations on the Company's operations and earnings in
the future.
The Company's operations could also be affected from time to time by other
federal, state and local laws and regulations and by political
developments, such as the Native Title issue in onshore Australia. The
domestic production and sale of oil and gas are subject to federal
regulation by the Department of Energy and the Federal Energy Regulation
Commission. Rates of production of oil and gas have for many years been
subject to federal and state conservation laws and regulations. In
addition, oil and gas operations are subject to extensive federal and
state regulations concerning exploration, development, production,
transportation and pricing, and even to interruption or termination by
governmental authorities.
In foreign countries, the Company may be subject to governmental
restrictions on production, pricing and export controls. Regulations
existing or imposed upon the Company or its properties at the time of
their acquisition may change to an unpredictable extent. The Company will
have little or no control over the change of regulations or imposition of
new regulations and restrictions, expropriation or nationalization by
foreign governments or the imposition of additional foreign taxes.
Management believes that these actions are unlikely to be undertaken by
the state governments of South Australia or Queensland, where all of the
foreign oil and gas properties from which the Company receives royalty
income are currently located. The same applies for the government of
Victoria, in the event ACOR/Sakhai is successful in acquiring application
area V99-2.
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Foreign Currency
Due to the nature of the Company's activities in Australia, portions of
the Company's operating capital may at times be held in various foreign
currencies. This subjects the Company to the risk of currency fluctuations
and changes in rates of conversion for different currencies. The Company
does not engage or expect to engage in any hedging or other transactions,
which are intended to manage risks relating to foreign currency
fluctuations. Additionally, revenues generated in foreign countries in
which the Company has or may acquire interests may be subject to
governmental regulations, which restrict the free convertibility of such
funds, and all remittances of funds out of these countries might require
the approval of the applicable government's exchange control agency.
Presently, the Company experiences no difficulties with the free
convertibility of funds from Australia. In the Company's opinion, the
foreign exchange control laws currently in effect in Australia, do not
unreasonably delay the remittance of funds generated in Australia to the
United States.
Personnel
The Company employs two people who serve the Company as needed on a part-
time basis, and an outside consultant. The Company expects a sizable
increase in personnel if application area V99-2 is granted. Several
individuals are on the joint venture payroll at the present time.
Definitions
The following definitions are provided to clarify certain terms used in
this report:
Application Area - An area for which the Company has applied for the grant
of an Exploration Permit.
Authority to Prospect ("ATP") - a concession granted by the State of
Queensland, Australia, which entitles its holders to an exclusive right to
explore for oil and natural gas in Queensland in the particular area
covered by the ATP. Each ATP has an initial term of four years. The area
covered by an ATP is reduced by relinquishment of approximately one-fourth
of the area at the start of the third year of its effectiveness and an
additional one-fourth of the original area at the start of the fourth year
of its effectiveness. The area to be relinquished is chosen by the holder
of the ATP. An ATP will require some kind of geological and/or
geophysical operations, such as new seismic or seismic interpretation,
drilling or other operations during the term of the tenure. The amount of
work to be performed depends upon the expenditures required for each
specific year of the tenure. Holders are only required to expend those
amounts as set out in the original concession document. Applications for
renewal may be filed at the time of expiration of an ATP.
Developmental Wells - oil and gas wells drilled within the proven area of
an oil or gas reservoir to the depth of a stratigraphic horizon known to
be productive.
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Dry Hole - a well found to be incapable of producing oil or gas in
sufficient quantities to justify completion.
Exploration Permit an exclusive offshore exploration permit with a term
of six years. Said permit is managed by the Victorian State Government.
Exploratory Well - a well drilled to find and produce oil and gas in an
unproved area or to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir.
Gross Production - the total production of oil, gas, or natural gas
liquids from a property or group of properties for any specified period of
time.
MCF - thousand cubic feet of natural gas
MMCF - million cubic feet of natural gas
Net Royalty Acre - generally, a measurement of royalty or overriding
royalty and the equivalent of the full customary one-eighth royalty of the
gross production of revenue free and clear of exploration, drilling and
production costs from one acre of land. The number of net royalty acres
used in this report applies to figures as of January 5, 1999 and the
number will change as relinquishments take place on the ATPs, as an ATP
expires or is canceled, or any new areas are added. Overriding Royalty
Interest ("ORRI") - an interest assigned out of the lessee's leasehold or
working interest. The amounts payable from ORRIs are payments calculated
as a percentage of either gross production or the gross revenues of the
working interest (based on the wellhead price) from a concession or lease,
usually free and clear of all exploration, drilling and development and
production costs, except for any applicable taxes and federal levies. In
calculating the wellhead price, pipeline and trucking costs have already
been deducted from the refinery price. The overriding royalties discussed
herein are generally expressed as a percent of the gross production.
Petroleum Exploration License ("PEL") - an exclusive oil and gas
exploration permit issued by the South Australian Department of Primary
Industries and Resources. The initial term of the tenure is for a five (5)
year period.
Producing Wells - wells capable of producing oil or gas in commercial
quantities, including those wells capable of producing in commercial
quantities that are shut in, or wells which are not currently producing in
commercial quantities but have been commercially productive in the past.
Royalty - generally, a share of the production reserved by the grantor of
an oil or gas lease or concession. The royalty interest is customarily
free of cost or expense incident to exploration, development or
production, except for production or gathering taxes.
Working Interest ("WI") - all or a fractional part of the ownership rights
granted by a concession or lease. The owner of a WI or a part thereof
pays all costs of exploration and is entitled to the gross production,
less royalties retained by the grantor or lessor, and less ORRIs or other
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non-operating interests created and assigned from the WI. The owner of a
WI may incur operating expenses in excess of income.
Petroleum Resource Rent Tax a tax on net income in Australia reduced by
indexing on offshore production, which replaces the royalty and is a
deduction from Australian income tax.
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth the ATP number of each Australian
concession in which the Company had an ORRI as of February 1, 2000 (date
of the title searches on the properties), and upon which productive wells
had been drilled, the percentage interest of the Company therein, the
number of such wells, the gross acreage of each concession, and the net
royalty acres held in each concession.
Percentage
of 1% of Net
Area & Gross Gross Royalty
No. Of Wells Concession Holder Acres Production Acres Blocks
- -----------------------------------------------------------------------------
267 - 21 wells Santos Producing Block 558,000 17.15% 7,656 30
299 - 65 wells Santos Producing Block 446,400 05.75% 2,053 24
543 - 1 well Vernon E. Faulconer
Australia Inc. 1,545,600 25.00% 30,912 84
560 - 3 wells First Sourcenergy
Group Inc. 868,430 25.00% 17,369 46
Patchawarra SW Santos Producing Block 1,069,717 06.25% 5,349 58
The following table sets forth the undeveloped acreage in which the
Company had an ORRI in Australia as of February 1, 2000, the date of the
title searches on the Queensland properties.
Percentage
of 1% of Net
Gross Gross Royalty
Area Concession Holder Acres Production Acres Blocks
- ------------------------------------------------------------------------------
538 Dyad Australia, Inc. 483,600 03.80% 1,470 26
544 Australian Petroleum
Industries Pty. Ltd. 911,400 08.08% 5,891 49
550 Discovery Geo (AUSTRALIA)
Corporation 390,600 25.00% 7,812 21
554 Dyad Australia, Inc. 483,072 25.00% 9,662 25
582 Cooper-Eromanga Oil,Inc. 6,716,000 67.10% 360,515 365
616 East Jackson Oil, Inc. 148,800 333.33% 39,680 80
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The estimated number of non-producing wells on the above areas is included
below:
Area Estimated number of
non-producing wells
267 5
299 8
543 10
560 8
538 2
544 6
550 5
554 2
582 1
616 3
The total acreage under which ACOR holds overriding royalty interests in
Queensland and South Australia is 491,612 net royalty acres under
13,621,619 gross surface acres.
ACOR holds overriding royalty interests in eleven concessions covering
13,621,619 surface acres in the Eromanga and Cooper Basins in Australia.
Production has been discovered on five of the concessions. The Eromanga
Basin encompasses the southwestern portion of the province of Queensland
and the northeast corner of South Australia, and is Australia's main
onshore producing oil and gas basin. The Cooper Basin is located in the
northeast part of the province of South Australia. Management believes
ACOR's overrides are in a prime location since the majority of ACOR's
interests form nearly continuous blocks adjoining the producing block of
Santos et al. which has reserves in excess of 1,056,000,000 barrels of oil
equivalent and is making $A930,000,000 worth of oil, gas and associated
hydrocarbons per year (equivalent to about $550 million in U. S. dollars).
On the 13,621,619 surface acres where ACOR holds overriding royalty
interests, there are giant anticlines, large faults and hundreds of
seismic highs, all of which indicate possibilities of oil and gas
reserves. In addition, about $27 million worth of seismic information has
been completed and is available on the areas.
ACOR is currently receiving revenues from three of its overriding royalty
interests - ATP 267, ATP 543 and ATP 299.
Plans for the next 12 months on the areas in Queensland and South
Australia are at the discretion of the working interest holders, as are
any costs associated with operations. All Company assets associated with
these properties are overriding royalties, therefore, all exploration
costs are borne by the working interest holders.
On ATP 543, a successful gas well was completed with an initial potential
of 6.2 million cubic feet of gas per day. This well has just gone on-line
after completion of a new pipeline.
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ITEM 3. LEGAL PROCEEDINGS
The Company was not a party to any legal proceedings as of December 31,
1999. However, the Company plans to work with legal counsel in Australia
to undertake necessary litigation to perfect its title in an overriding
royalty interest in the Patchawarra Southwest Block of PEL 5 and PEL 6.
The overriding royalty interest was created in June, 1971, and since that
time has been assigned to six different companies with the last assignee
being ACOR. The Company has determined that due to the extensive time
elapsing between assignments and the failure of some intermediate
assignees to properly assign title, it will be necessary to engage in
litigation in order to collect past royalty payments of approximately
$36,081, and royalty payments in the future. The expected cost of the
barrister's fees for ACOR's part will be approximately $15,750 in addition
to any stamp duty which may be required, or other potential fees.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
(a) Market Information
Currently, there is a public trading market for the
Company's common stock in the States of New York, Colorado, and Florida,
for 1,150,000 of the total 5,150,000 shares of the Company; however, the
Company is not presently a member of any exchanges. There are currently
5,150,000 common shares issued and outstanding. The 5,150,000 shares are
owned by 300 shareholders. The current market price is 50 cents (US) per
share.
The Company plans to apply for listing on the OTC Bulletin Board and
Standard & Poor's in the United States, and apply for listing on the
Vancouver Stock Exchange in Canada, when the Company has met all exchange
requirements.
(b) Holders
The approximate number of securities holders of record of
Australian-Canadian Oil Royalties Ltd. on April 13, 2000 was 300.
(c) Dividends
The Company does not anticipate the payment of cash dividends in the
foreseeable future. Payment of cash dividends is within the discretion of
the Company's Board of Directors and will depend on, among other factors,
earnings, capital requirements and the operating and financial condition
of the Company.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's plan of operation is to find the best available oil and gas
leases or concessions, acquire them through application, and complete the
geology and seismic for exploration and development. The Company has found
what it feels is the best offshore area in the Bass Straits of Victoria,
starting 11/2 miles east of Australia's largest oil field. Upon
examination of the geological and geophysical data, and project economics,
the Company thinks this is one of the best areas available at this time.
As mentioned, the Company, with a joint venture partner, has applied for
this area. ACOR has the exploration financed through the first 3 years and
has these expenditures guaranteed with an $US 20,000,000.00 performance
bond. The Company has put together a dedicated exploration group, which in
our opinion is exceptional. As of April 13, 2000 ACOR is awaiting a reply
from the Commonwealth and State of Victoria to determine is our joint
venture is the successful applicant.
Liquidity
The Company's cash on hand as of December 31, 1999 was $246,152.00 with
liabilities of $1,279.00, giving a Liquidity of 176 times as much cash as
liabilities.
Capital Resources
The Company's cash in hand as of December 31, 1998 was $263,188.00 and on
December 31, 1999 was on hand $ 246,152.00 a decrease of $17,036. This
decrease was due to costs associated with expenditures for one-half of the
filing fee to the Australian Governments on applying for area V99-2,
accountants, bookkeeping, and other administrative activities. Total
assets were $570,159.00 as of December 31, 1998 and $553,223.00 December
31, 1999 a decrease of $16,936.00. The Stockholders equity was $570,159.00
December 31, 1998 and $553,326 December 31, 1999 a decrease of $14,759.
The net loss in 1998 was $36,557 and the net loss in 1999 was $35,557, an
improvement of $18,543 in 1999.
Results of Operations
The Company is looking forward to hearing from the Commonwealth and
Victorian Governments as to the status of the V99-2 application. Rough
seas in the Bass Straights together with the necessity to spend tax
dollars before year-end make it very important to get a permit issued as
soon as possible. There is no assurance that the area will be granted to
ACOR/Sakhai. If it is not granted to ACOR/Sakhai, the Company will select
another area for which to apply.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). This statement
standardized the accounting for derivative instruments including certain
derivative instruments embedded in other contracts, requiring that an
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entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement generally
provides for matching the timing of gain or loss recognition on the hedged
instrument with the recognition of (a) the changes in fair value of the
hedged assets or liabilities that are attributable to the hedged risk, or
(b) the earnings effect of the hedged transaction. The statement is
effective for all fiscal quarters of all fiscal years beginning after June
15, 1999, with earlier application encouraged, and shall be applied
retroactively to financial statements of prior periods. Adoption of SFAS
133 is expected to have no effect on the Company's financial statements.
Disclosure Regarding Forward-Looking Statements
The forward-looking statements in this Form 10-KSB reflect the Company's
current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ from those
anticipated. In the Form 10-KSB, the words "anticipates," "believes,
"expects," "intends," "future" and similar expressions identify
forward-looking statements. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that may arise after the date hereof. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by
this section.
ITEM 7. FINANCIAL STATEMENTS.
The following financial statement information for Australian-Canadian Oil
Royalties Ltd., begins following the signature page of this form. The
Index to the Financial Statements is on page F-1.
Report of Independent Certified Public Accountants
Balance Sheets
Statement of Operations and Comprehensive Income
Statement of Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors - The Board of Directors of the Company presently consists of
five members. Each director is elected at the annual meeting of
shareholders to hold office until the next annual meeting of shareholders
and until his successor has been elected and qualified. The following
table sets forth information concerning the persons currently serving as
directors of the Company.
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Date First
Position With Elected
Name Age the Company as Director
---------------------------------------------------------
Larry Braun 56 Director 1997
Kenneth W. Campbell 70 Director 1997
Robert Kamon 72 Director & 1997
Secretary
William A. Randall 59 Director 1997
Ely Sakhai 48 Director & 1997
President
Executive Officers - Unless otherwise specified by the Board, all
executive officers are elected for a term of one year, commencing with the
date of the first meeting of the Board following the annual meeting of
shareholders, and serve until their successors are elected or appointed
and qualified, or until their respective death, resignation, removal or
disqualification. All of the Company's officers are executive officers.
The following table sets forth certain information with respect to the
persons currently serving as executive officers of the Company.
Date First
Position With Elected
Name Age the Company as Officer
-----------------------------------------------------------
Robert Kamon 72 Secretary and 1997
Director
Ely Sakhai 48 President and 1997
Director
There are no family relationships between any of the officers or directors
of the Company.
Larry Braun, Director, was president and owner of Cordoba Resources, Ltd.
previous to June 1993. Between June 1993 and May 1995, he was President
of Senercorp Ventures, Inc. Since May 1995, he has been a Vice President
of Carpatsky Petroleum in Calgary, Alberta, Canada.
Kenneth W. Campbell, Director, is a graduate of the University of Brandon
(Manitoba, Canada). He is President of Solar Energy Resources, Ltd., a
privately held independent Canadian oil and gas producer.
Robert Kamon, Director and Secretary, is a petroleum engineering graduate
of the University of Texas at Austin, Texas. Mr. Kamon has been President
of three NASDAQ listed companies. He is currently the President of
several private companies - Australian Grazing and Pastoral Co. Pty. Ltd.
since 1954, International Oil Lease Service Corp. since 1961, and Tensleep
Oil and Production Inc. since 1989.
William A. Randall, Director, is a graduate of the University of British
Columbia and has an LLB degree from the University of British Columbia.
He has been a practicing commercial attorney for the last thirty years,
and is currently a partner in the Vancouver firm of Russell and DuMoulin.
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Ely Sakhai, Director and President, is a civil engineering graduate of
Columbia University. He has been engaged in the art gallery business in
New York City for the last fifteen years.
ITEM 10. EXECUTIVE COMPENSATION
Value of the office space used by ACOR was $1,200* for 1999.
Value of the time cost by ACOR executives $ 2,400* for 1999.
*These have been recorded as expenses and contributed capital in the
financial statements in their respective periods.
The executive officers of ACOR have received no salary, bonus or stock
compensation since the organization of the Company. The Company has no
bonus, pension, or profit sharing plans. The Company pays for copies,
phone usage, travel expenses, and other labor to non-related parties.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of the common stock of the Company as of April 13, 2000 by each
of the Company's officers and directors, each person who is known by the
Company to own beneficially more than 5% of the outstanding common stock
and all officers and directors of the Company as a group. The title of
class is common stock, no par value.
# of Shares
Name and Beneficially Percent of
Address of Stockholder Owned Class
---------------------------------------------------------------------
Australian Grazing & Pastoral Co. Pty. Ltd.* 1,008,000 19.57%
1304 Avenue L
Cisco, Texas 76437
Larry Braun -0- 00.00%
26 Lake Fraser Place, SE
Calgary, Alberta, T2J 3T5
Canada
Ken Campbell 100,000 01.94%
Box 5, Site 16, SS1
Calgary, Alberta T2M 4N3
Canada
Robert Kamon** 1,600,000 31.07%
1304 Avenue L
Cisco, Texas 76437
William A. Randall 20,000 00.39%
2100-1075 W. Georgia St.
Vancouver, British Columbia V6E 3G2
Canada
14
<PAGE>
<PAGE>
Ely Sakhai 1,400,000 27.18%
10 Windsor Dr.
Old Westbury, New York 11568
All officers and directors as a group 3,120,000 60.57%
Jan Soleimani 800,000 15.53%
21 Windsor Dr.
Old Westbury, New York 11568
*Australian Grazing (AGP) is controlled by Robert Kamon.
**Robert Kamon (592,000 shares) and AGP's (1,008,000 shares) holdings
are included together in Robert Kamon's ownership percentage.
Note: The stockholders identified in this table have sole voting and
investment power with respect to the shares beneficially owned by them.
The owners have no rights to acquire additional shares through options,
warrants, rights, or conversion privileges within the next sixty days. The
present principal owners have not sold any of the original 4,000,000
shares since incorporation, except that International Oil Lease Service
Corp., an original shareholder, sold 592,000 shares on December 1, 1997,
to Robert Kamon, prior to the Company initiating its 504 Regulation D
issue.
Management is not aware of any current arrangements, which would result in
a change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACOR and Ely Sakhai, currently President of ACOR, have applied jointly for
the application area V99-2 located in offshore Victoria, Australia.
Three of the directors of the Company, Robert Kamon, Ken Campbell and
Larry Braun, are active in the oil and gas industry personally. The
activities of each could result in a conflict of interest between their
other oil and gas activities and those of the Company.
Robert Kamon is President of International Oil Lease Service Corp. Mr.
Kamon is also Secretary of Australian-Canadian Oil Royalties Ltd.
International Oil Lease Service Corp. is in the business of applying for
and acquiring oil and gas concessions in Australia; therefore, its
activities may involve a conflict of interest with the Company.
Australian Grazing & Pastoral Co. Pty. Ltd., (AGP) controlled by Robert
Kamon, is in the business of applying for and acquiring oil and gas
concessions in Australia and its activities may involve a conflict of
interest with the Company.
Item 13. Exhibits and Reports on Form 8-K.
None
15
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, Australian-Canadian Oil Royalties Ltd. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AUSTRALIAN-CANADIAN OIL
ROYALTIES LTD.
Dated: April 13, 2000 /s/ ELY SAKHIA
Ely Sakhai, President & Director
Dated: April 13, 2000 /s/ ROBERT KAMON
Robert Kamon, Secretary & Director
Dated: April 13, 2000 /s/ KEM CAMPBELL
Ken Campbell, Director
Dated: April 13, 2000 /s/ LARRY BRAUN
Larry Braun, Director
Dated: April 13, 2000 /s/ WILLIAM A. RANDALL
William A. Randall, Director
16
<PAGE>
<PAGE>
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants . . . . . F-2
Balance Sheets as of December 31, 1999 and 1998 . . . . . . F-3
Statements of Operations and Comprehensive Income for
the fiscal years ended December 31, 1999 and 1998 . . . . . F-4
Statement of Stockholders' Equity for the fiscal years ended
December 31, 1999 and 1998 . . . . . . . . . . . . . F-5
Statements of Cash Flows for the fiscal years ended
December 31, 1999 and 1998 . . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . F-7
Supplementary Data - Reserves Of Oil And Gas . . . . . . . . F-13
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Australian-Canadian Oil Royalties Ltd.
Cisco, Texas
We have audited the accompanying balance sheet of Australian-Canadian Oil
Royalties Ltd. as of December 31, 1999, and 1998, and the related
statements of operations, stockholders' equity, and cash flows for the
years then ended. 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 the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Australian-Canadian Oil
Royalties Ltd. as of December 31, 1999, and 1998, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ ROBERT EARLY & COMPANY, P.C.
Robert Early & Company, P.C.
Abilene, Texas
April 10, 2000
F-2
<PAGE>
<PAGE>
Australian-Canadian Oil Royalties Ltd.
Balance Sheets
As of December 31, 1999 and 1998
1999 1998
--------- ---------
Assets
CURRENT ASSETS
Cash $ 246,152 $ 263,188
Accounts receivable 1,575 1,674
Accrued interest receivable 311 -
Prepaid expenses 1,343 1,965
--------- ---------
Total current assets 249,381 266,827
--------- ---------
PROPERTY AND EQUIPMENT
Oil and Gas Properties 308,966 307,976
Accumulated Depletion (10,426) (6,363)
--------- ---------
Net Property and Equipment 298,540 301,613
--------- ---------
OTHER ASSETS
Investment in unconsolidated
subsidiary at cost 4,212 -
Organization Costs (net of accumulated
amortization of $1,455 and $926,
respectively) 1,190 1,719
--------- ---------
Total other assets 5,402 1,719
--------- ---------
TOTAL ASSETS 553,323 $ 570,159
========= =========
Liabilities & Stockholders' Equity
CURRENT LIABILITIES $ 1,279 $ 3,356
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock no par (50,000,000
shares authorized, none outstanding) - -
Common stock, no par (50,000,000
shares authorized, 5,150,000 and
5,150,000 shares respectively
outstanding) 611,448 607,848
Accumulated deficit (59,251) (40,708)
Other comprehensive income:
Foreign currency translation adjustment (153) (337)
--------- ---------
Total Stockholders' Equity 552,044 566,803
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 553,323 $570,159
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
Australian-Canadian Oil Royalties Ltd.
Statements of Operations and Comprehensive Income
For the years ended December 31, 1999 and 1998
1999 1998
OPERATING REVENUES
Oil & gas revenues $ 7,118 $ 5,545
OPERATING EXPENSES
Depletion and amortization 4,592 3,466
Personnel costs 13,148 6,136
Professional fees 12,086 24,164
General and administrative expenses 2,566 6,664
--------- ---------
Total operating expenses 32,392 40,430
--------- ---------
INCOME/(LOSS) FROM OPERATIONS (25,274) (34,885)
OTHER INCOME
Interest 8,866 -
--------- ---------
INCOME/(LOSS) BEFORE INCOME TAXES (16,408) (34,885)
Australian income taxes 2,135 1,672
--------- ---------
NET LOSS (18,543) (36,557)
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment 184 (140)
--------- ---------
TOTAL COMPREHENSIVE LOSS $ (18,359) $ (36,697)
========= =========
Net loss per weighted average
share outstanding $ (0.00) $ (0.01)
========= =========
Weighted average shares outstanding 5,150,000 4,098,833
========= =========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
Australian-Canadian Oil Royalties Ltd.
Statement of Stockholders' Equity
For the years ended December 31
Accu-
mulated
Other
Accumulated Compre-
Common Stock Earnings/ hensive
Shares Amount (Deficit) Income
----------- --------- --------- -------
BALANCES, January 1, 1998 $ 4,000,000 $ 354,790 $ (4,151) $ (197)
Stock issued 1,150,000 287,500 - -
Direct cost of stock issue - (38,042) - -
Additional contributed capital - 3,600 - -
Net loss - - (36,557) -
Other comprehensive income:
Foreign currency translation
adjustment - - - (140)
----------- --------- --------- -------
BALANCES, December 31, 1998 5,150,000 607,848 (40,708) (337)
Additional contributed capital - 3,600 - -
Net loss - - (18,543) -
Other comprehensive income:
Foreign currency translation
adjustment - - - 184
----------- --------- --------- -------
BALANCES, December 31, 1999 5,150,000 $ 611,448 $ (59,251) $ (153)
=========== ========= ========= =======
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
Australian-Canadian Oil Royalties Ltd.
Increases/(Decreases) in Cash Flow
For the years ended December 31, 1999 & 1998
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,543) $ (36,557)
Adjustments to reconcile net income/(loss) to
net cash provided by operations:
Depletion and amortization 4,592 3,466
Adjustment for foreign currency translation 184 (140)
Value of expenses contributed by officers 3,600 3,600
Changes in:
Receivables (212) (234)
Prepaid expenses 622 893
Accounts payable (2,077) 3,356
--------- ---------
NET CASH PROVIDED/(USED) BY
OPERATING ACTIVITIES (11,834) (25,616)
CASH FLOWS FROM INVESTING ACTIVITIES:
Oil & Gas Properties (990) -
Investment in unconsolidated subsidiary (4,212) -
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES: (5,202) -
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock - 249,457
--------- ---------
Increase/(Decrease) in cash for period (17,036) 223,841
Cash, Beginning of period 263,188 39,347
--------- ---------
Cash, End of period $ 246,152 $ 263,188
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Interest $ - $ -
Australian income taxes 2,745 1,654
Contributed expenses 3,600 3,600
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
Australian-Canadian Oil Royalties Ltd.
Notes to Financial Statements
December 31, 1999 and 1998
GENERAL:
Australian-Canadian Oil Royalties Ltd. (the Company) was incorporated April
28, 1997 in Vancouver, British Columbia, Canada. Its primary business
activity is the purchase and sale of overriding royalties for long-term
passive income and capital gains. The Company also engages third parties
for leasing operations in various countries. At present, all of the
properties held by the Company are located in Australia's main onshore oil
and gas producing basin. These financial statements are prepared in U.S.
dollars for use in U.S. securities filings.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment -- The Company follows the full cost method of
accounting for oil and gas producing activities and, accordingly,
capitalizes all costs incurred in the acquisition, exploration, and
development of proved oil and gas properties, including the costs of
abandoned properties, dry holes, geophysical costs, and annual rentals.
Costs are recorded in cost centers on a country-by- country basis. At
present, all of the Company's oil and gas properties consist of overriding
royalty interests and are located in a single cost center - Australia.
The Company has not participated in the exploration and development of
proved oil and gas properties. Capitalized costs are subject to a "ceiling
test," which basically limits such costs to the aggregate of the "estimated
present value," discounted at a 10% interest rate of future net revenues
from proved reserves, based on current economic and operating conditions,
plus the lower of cost or fair market value of unproved properties. Costs
in excess of the ceiling test are adjusted against income. Sales or
abandonments of properties are accounted for as adjustments of overall
capitalized costs with no gain or loss recognized.
Costs of producing royalty interests are being amortized over the estimated
reserves reported by the Queensland, Australia government at June 30, 1997,
based on actual quantities sold. (This report was released during
1999.)Costs of non-producing interests are not being amortized pending
development or production and sale of oil or gas.
Investments in Unconsolidated Subsidiaries -- The Company's investment of
20% of the common stock of Cooper Basin Oil and Gas, Inc. is carried at
cost because the activities of CBOG have been immaterial through the end of
1999. Had the equity method been adopted, the investment would be carried
at approximately $1,992 and net loss would have been increase by $120.
Intangible Assets and Amortization -- Intangible assets consist of
organization costs. These costs, which were incurred in the formation of
the Company, are being amortized over a period of 60 months on a
straight-line basis. Amortization totaled $529 for each of 1999 and 1998.
These amounts are included with depletion expense for presentation
purposes.
F-7
<PAGE>
<PAGE>
Income Taxes -- Deferred tax liabilities and assets result from temporary
differences between the financial statement and income tax bases of assets
and liabilities. The Company records and adjusts any deferred tax asset
valuation based on judgments as to future realization of the deferred tax
benefits supported by demonstrated trends in the Company's operating
results.
As a Canadian corporation, the Company is liable for income taxes under
the laws of Canada. Under Canadian law the Company's Australian-source
income is subject to a 46% tax (on Canadian dollars). The operating losses
can be carried forward for seven years. The Company has available at
December 31, 1999, unused operating loss carry forwards that may be applied
against future Canadian taxable income and that expire as presented below.
Because the timing of realization of the tax benefit from these loss carry
forwards cannot be currently projected, a valuation allowance has been
established to completely offset this asset.
Amount of Unused Operating Expiring During Year Ended
Loss Carry forwards December 31,
$ 4,151 2004
36,557 2005
18,543 2006
-------------
$ 59,251
=============
The Company has no U.S. source income nor any income effectively connected
with a U.S. trade or business. Therefore, there is no U.S. tax liability
or benefit related to its activities to date.
The Company's Australian oil royalty income is subject to a 30% Australian
income tax on oil and gas production which is withheld by the royalty
payer. The Company incurred Australian income taxes on oil and gas
production totaling $2,135 and $1,673 in 1999 and 1998.
Earnings Per Share -- Accounting rules provide for the calculation of
"Basic" and "Diluted" earnings per share. Basic earnings per common share
excludes dilutive securities and is computed by dividing net income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per common share
reflects the potential dilution of securities that could share in the
earnings of the entity on an as if converted basis. This is done by
dividing net income available to common shareholders, as adjusted if
necessary, by the weighted average number of common shares outstanding plus
potential dilutive securities.
Weighted average shares outstanding was 5,150,000 for 1999 and 4,095,833
for 1998 .
Foreign Currency Transactions -- As noted above, these statements have been
prepared in U.S. dollars. However, the Company conducts transactions in
Canadian, Australian and U.S. dollars. Transactions denominated in
Canadian or Australian dollars are translated to equivalent U.S. dollars
F-8
<PAGE>
<PAGE>
for recording in the financial statements based on the currency exchange
rates existing at the dates of the transactions. Ending balances of
accounts which are denominated in Canadian dollars are translated to U.S.
dollars based on the currency exchange rates existing at December 31, 1999,
or 1998 respectively. The exchange gains and losses that result from
translating these amounts to U.S. dollars are accumulated and reported as a
separate component of the Company's stockholders' equity.
Comprehensive Income During 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income",
which establishes standards for the reporting and display of comprehensive
income. Comprehensive income includes all changes in equity except those
resulting from investments by stockholders and distributions to
stockholders. The Company currently has only one component of
comprehensive income which is foreign currency translation adjustment. The
Company reported its current year change and accumulated amounts of
comprehensive income (loss) from foreign currency translation in its
financial statements. Due to the lack of probability of realizing the tax
benefit of its losses (as discussed under Income Taxes above), no income
tax effect is reported for comprehensive income amounts.
Cash Flows The Company considers cash and cash investments with an initial
maturity or marketability of three months or less to be cash equivalents
for purposes of presenting its Statement of Cash Flows.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
NOTE 2: ACCOUNTS RECEIVABLE
At December 31, 1999 and 1998 the Company has accrued receivables for oil
and gas production from its Australian overriding royalty interests
totaling $1,575 and $1,674, respectively. Collection of the accrued
Australian production generally occurs during the quarter following the
quarter of production. The cost basis of the receivable is believed to
approximate its fair value. No allowance for bad debts has been
established because the Company has not experienced any significant
inability to collect its receivables.
NOTE 3: PREPAID EXPENSES
During 1997, the Company advanced $C5,000 to Dales, Matheson, Carr-Hilton,
Chartered Accountants of Vancouver, British Columbia for services in
connection with the formation of the Company and the initial public
offering. During 1999 and 1998, this firm billed the Company for services
totaling $US728 and $US693, respectively, for accounting and tax services.
Balances at December 31, 1995 and 1998 were $US1,342 and $US1,965.
F-9
<PAGE>
<PAGE>
NOTE 4: OIL AND GAS PROPERTIES
During 1997, the Company acquired a package of overriding royalty interests
comprising 1,005,142.8 net royalty acres under 28,572,609 gross surface
acres in Australia's main onshore oil and gas producing basin in exchange
for 4,000,000 shares of its common stock as described in NOTE 5 below. In
addition to the acquisition cost, the Company incurred costs associated
with preparation of assignments and registering chain of title transactions
in Australia. Below is a summary of capitalized costs related to these oil
and gas properties:
1999 1998
---------- ----------
Acquisition cost $ 300,000 $ 300,000
Assignment and transfer costs 7,976 7,976
---------- ----------
Total 307,976 307,976
Less accumulated depletion (10,426) (6,363)
---------- ----------
Net Oil and Gas Properties $ 297,550 $ 301,613
========== ==========
Costs of royalty interests for producing properties are being amortized
over reserves estimates reported by the Queensland, Australia government
for June 30, 1997 based on quantities produced. These producing properties
are ATP 267, ATP 299, and ATP 543. Other interests have not produced
salable oil or gas from which the Company has received revenues. The
costs associated with these properties are not being amortized pending
determination of reserve quantities and commencement of production.
Depletion expense totaled $4,063 and $2,936 for 1999 and 1998.
NOTE 5: STOCK TRANSACTIONS
During 1998, the Company undertook an offering of its common stock in New
York, Florida, and Colorado. Pursuant to this offering, the Company issued
1,150,000 shares of its no-par-value common stock for $287,500. The direct
costs incurred in the offering totaled $38,043.
NOTE 6: TRANSACTIONS WITH RELATED PARTIES
During 1997, the Company issued stock for the package of overriding royalty
interests comprising 1,005,142.8 net royalty acres in Australia as
described in NOTE 4 above. Since these properties were acquired from
related parties (stockholders), they were recorded by the Company at the
transferor's cost basis. On May 19, 1997, the Company acquired 60% of these
interests from Ely Sakhai, Jan Soleimani and Mike Altamura (Sakhai group)
for 2,400,000 shares of the Company's common stock. The Sakhai group had
previously acquired these royalties from Australian Grazing and Pastoral
Co., Pty. Ltd. (AGP) at a cost of $300,000. There was no affiliation
between the Sakhai group and AGP. Therefore, this transaction established
the cost basis of the Sakhai group. This in turn became the cost basis for
F-10
<PAGE>
<PAGE>
recording the properties as received by the Company in exchange for its
stock. On May 22, 1997, the Company acquired the remaining 40% of the
overriding royalty package from AGP and International Oil Lease Service.
(IOLS) for 1,600,000 shares of the Company's common stock. The cost basis
of AGP and IOLS in these royalties is not susceptible to reasonable,
cost-effective substantiation. As a result, this portion of the royalty
package was recorded by the Company at a cost of zero ($0).
Office space and time provided by officers had estimated unpaid values of
$3,600 during each of 1999 and 1998. These amounts have been reported as
operating expenses and also recorded as additional capital in their
respective years.
During 1998, the Company undertook a private placement of its stock. The
chairman of the board of directors advanced $15,000 to an underwriter for
costs in connection with the placement of stock. The Company has
reimbursed the board chairman and recorded the associated expenses.
During 1998 and 1999, the Company reimbursed a commonly-controlled entity
for personnel and offices expenses which were incurred in its behalf.
NOTE 7: FOREIGN OPERATIONS
The Company operates primarily in Australia where all of its properties are
presently located. All revenues reported by the Company during 1999 and
1998 were received from Australian oil and gas royalty interests.
Depletion expense and Australian income taxes reported by the Company
during 1999 and 1998 are also related to the revenue received from the
Australian royalties. The Company also incurred organization costs and
personnel and office expenses in the United States. All of the U.S. costs
and expenses were general and administrative in nature.
NOTE 8: INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
During the first quarter of 1999, the Company contributed $2,100 of the
creation capital of Cooper Basin Oil & Gas, Inc. (CBOG) for a 20% ownership
interest. CBOG was created to pursue Australian oil and gas concessions.
As the owner of a 20% interest in CBOG, the company has agreed that it will
fund 20% of new concession costs or forfeit its ownership interest. CBOG
entered into an agreement with a third party to attempt to negotiate on its
behalf for six Petroleum Exploration Licenses in Australia. This effort
was unsuccessful and no funds were expended by CBOG. During the last
quarter of 1999, the company contributed $2,112 toward costs to be incurred
in 2000 for an application for another concession.
This investment as discussed above is carried at cost. The Company's share
of the expenses of CBOG totaled approximately $120.
F-11
<PAGE>
<PAGE>
NOTE 9: CONTINGENCY
The package of Australian overriding royalty interests acquired by the
Company in 1997 includes a 1/8 of 1% interest in all production from the
Patchawarra Southwest Block of PEL's 5 & 6. This overriding royalty
comprises approximately 5,348 net royalty acres under 1,069,717 surface
acres. The Patchawarra Southwest Block became productive in June, 1989 and
has produced approximately $A67,119,716 in revenues from oil, gas and LPG
since that time. This overriding royalty was first created in June, 1971
as a 1/4 of 1% interest out of a 10% working interest. Since that time,
this interest has been assigned to six different companies with the last
assignee being Australian-Canadian Oil Royalties Ltd. During 1997, the
Company determined that, due to the extensive time elapsing between
assignments and the failure of some intermediate assignees to properly
assign title, it will be necessary to engage in litigation in order to
collect both past and future royalty payments. In addition to the legal
costs incurred in this litigation, the Company will be required to pay the
stamp duty, payable to the Australian government, for any previous
assignment between parties which has not been paid.
The Company is working with legal counsel in Australia to undertake the
necessary litigation to perfect its title in this royalty interest. As of
December 31, 1999, no litigation had been undertaken. Legal counsel has
advised the Company that the expected cost of the litigation process will
be in the range of $A25,000 in addition to any stamp duty which may be
required. The required stamp duty will be based on the state's
determination of value and will be required to be paid for each
unregistered transfer in the chain of title. At this time no estimate of
this cost can be made. Upon successfully clearing title to the property,
the Company expects to collect approximately $A42,000 in royalties on
previous production.
NOTE 10: CONCENTRATION OF RISK
The productive assets of the Company are all presently located in
Australia.
- ---------------------------------------------------------------------------
F-12
<PAGE>
<PAGE>
SUPPLEMENTARY DATA - RESERVES OF OIL AND GAS
(UNAUDITED)
December 31, 1999 and 1998
Reserves of oil and gas - Royalty Interests
The current quantities of proved reserves of oil and gas relating to
royalty interests are not presented because the necessary information is
not available or the Company's interests are not large enough to
economically and reasonably obtain this information. The Company's share of
oil and gas produced from the producing interests is presented in the
following schedule:
Australia
Oil (bbls.)
1999 1998
--------- ---------
Reserves reported by the Queensland
government as of June 30, 1997 3,962 3,962
Cumulative previous production (860) (463)
Current year productions (549) (397)
========= =========
Unrecovered reserves 2,553 3,102
========= =========
Results of Operations for Producing Activities
For the Years Ended December 31, 1999 and 1998
Australia
1999 1998
--------- ---------
Sales of oil and gas $ 7,118 $ 5,545
Production costs (including taxes) - -
Acquisition & exploration costs - -
Depletion 4,062 2,936
--------- ---------
Results of operations from producing activities
(excluding corporate overhead) $ 3,056 $ 2,609
========= =========
F-13
<PAGE>
<PAGE>
Capitalized Costs Relating to Oil and Gas Producing Activities
At December 31, 1999 and 1998
Australia
1999 1998
--------- ---------
Unproved properties (not being amortized) $ 184,404 $ 184,404
Proved properties (being amortized) 123,572 123,572
Unevaluated proved properties 990 -
--------- ---------
Total Capitalized Costs 308,966 307,976
Accumulated Depletion (10,426) (6,363)
--------- ---------
Net Capitalized Costs $ 298,540 $ 301,613
========= =========
Costs Incurred in Oil and Gas Property Acquisition, Exploration and
Development
For the Years Ended December 31, 1999 and 1998
Australia
1999 1998
--------- ---------
Property acquisition costs:
Proved $ - $ -
Unproved - -
Exploration costs 990 -
Development costs - -
--------- ---------
Total $ 990 $ -
========= =========
F-14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following schedule contains summary financial
information which has been extracted from the financial statements of
Australian-Canadian Oil Royalties LTD.s for the annual financial statements
filed on Form 10KSB for the periods presented. These summary schedules are
qualified in their entirety by reference to such financial statements and
the notes thereto.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 246,152 263,188
<SECURITIES> 0 0
<RECEIVABLES> 1,575 1,674
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 249,381 266,827
<PP&E> 308,966 307,976
<DEPRECIATION> (10,426) (6,363)
<TOTAL-ASSETS> 553,323 570,159
<CURRENT-LIABILITIES> 1,279 3,356
<BONDS> 0 0
0 0
0 0
<COMMON> 611,448 607,848
<OTHER-SE> (59,404) (41,045)
<TOTAL-LIABILITY-AND-EQUITY> 553,323 570,159
<SALES> 7,118 5,545
<TOTAL-REVENUES> 7,118 5,545
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 32,392 40,430
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (16,408) (34,885)
<INCOME-TAX> 2,135 1,672
<INCOME-CONTINUING> (18,543) (36,557)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (18,543) (36,557)
<EPS-BASIC> 0 (0.01)
<EPS-DILUTED> 0 (0.01)
</TABLE>
