UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the calendar year ended December 31, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ________________
Commission file number 0-28794
CityView Corporation Limited
(Exact name of Registrant as specified in its charter)
Western Australia, Australia
(Jurisdiction of incorporation or organization)
63 Burswood Road, Burswood, Western Australia 6100
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
NONE N/A
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Ordinary Shares
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
56,761,616 ordinary shares as at December 31, 2001
Indicate by check mark whether 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
Indicate by check mark which financial statement item the registrant has elected
to follow.
X Item 17 Item 18
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No Not applicable
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Providing information called for in Item 1 is not required for filing a Form
20-F as an Annual Report under the Exchange Act. Nevertheless, the Company is
providing its "Corporate Directory" updated from as it appeared in the Annual
Report for the year ended December 31, 2001 as filed with Australian Stock
Exchange Limited.
Directors
Yusufali M Jumabhoy Chairman
Peter Mark Smyth Vice Chairman
Goh Yong Kheng Chief Executive
Ee Beng Yew Director
Thinagaran Director
Company Secretary
Warren Martin Baillie
Registered Office and place of business
63 Burswood Road
Burswood Western Australia 6100
Telephone: (61-8) 6250 9099
Facsimile: (61-8) 6250 9088
Email: info@cityviewcorp.com
Web: www.cityviewcorp.com
2
Auditors - Australia
BDO Chartered Accountants
(member of the Australian Institute of Chartered Accountants)
267 St George's Terrace
Perth Western Australia 6000
Auditors - USA
Feldman Sherb & Co., P C
805 Third Avenue,
New York NY 10022
Stock Exchange Listings
Australian Stock Exchange Limited
Trading symbol: CVI
NASD OTC Bulletin Board
Trading symbol: CTVWF
3
Australian Share Registry
Computershare Registry Services
45 St. George's Terrace,
Perth Western Australia, 6000
Telephone: (61-8) 9323 2000
Facsimile: (61-8) 9323 2033
USA Share Registry
Computershare Trust Company, Inc
350 Indiana Street, Suite 800
Golden, Colorado CO 80401
Denver, Colorado 80202-1817
Telephone: (303) 262 0600
Facsimile: (303) 262 0603
Attorney - Australia
Simon Watson
17 Ord Street
West Perth Western Australia 6005
Attorney - USA
Gary B Wolff, P C
747 Third Avenue
New York NY 10017
4
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable
ITEM 3. KEY INFORMATION
A. Selected financial data Selected Consolidated Financial Data
The selected historical data presented below has been derived from the
financial statements of the Company, which have been examined by Feldman Sherb
and Co., P.C. in their report for the years ended December 31, 2001, 2000,
1999, and 1998 and by Deloitte Touche Tohmatsu, Chartered Accountants, in
their report for the year ended December 31, 1997
The consolidated financial statements are presented in Australian dollars and
have been prepared in accordance with Australian generally accepted accounting
principles ("Australian GAAP"), which may vary in certain respects from
generally accepted accounting principles in the United States ("US GAAP").
The following table summarizes certain financial information and should be
read in conjunction with "Item 5 - Operating and Financial Review and
Prospects." The Company has not declared a dividend during each of the years
ended December 31,1997, 1998, 1999, 2000 and 2001. There were significant
fluctuations in revenues and net income (loss) between the years stated in the
table below. Please refer to Item 5 - Operating and Financial Review and
Prospects. For the reasons set forth herein the information shown below may
not be indicative of the Company's future results of operation.
Statement of Loss and Accumulated Deficit Data:
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1998 1999 2000 2001
-------------- ----------------- ---------------- ---------------- ---------------
Amounts in AUD$ AUD$ AUD$ AUD$ AUD$
Accordance with
Australian GAAP
Income Statement
Data:
Operating
revenues - - - - -
Loss from
continuing
operations (1) (2,382,196) (20,362,087) (11,095,107) (5,537,576) (4,165,287)
Per Ordinary
Share (dollars)
(2) (0.21) (1.53) (0.70) (.13) (.08)
Balance Sheet
Data:
Total Assets 24,688,249 13,247,886 7,579,445 16,227,889 15,857,736
Shareholders'
equity 16,150,035 (2,803,225) 5,491,274 15,936,943 15,749,381
Amounts in
Accordance with
US GAAP
Income Statement
Data:
Operating Revenues - - - - -
Loss from
continuing
operations (1) (20,973,206) (12,188,902) (8,043,615) (10,373,578) (4,374,487)
Per Ordinary
Share (dollars)
(2) (1.84) (.92) (0.51) (.25) (.08)
Balance Sheet
Data:
Total Assets 5,052,513 737,413 136,645 4,165,087 3,794,934
Shareholders'
equity (3,485,701) (15,313,698) (1,951,526) 3,874,141 3,686,579
(1) Net income (loss) consists of operating profit (loss) after income tax
attributable to members of the parent entity.
(2) Per share data has been retroactively restated to reflect the effects of a 1
for 5 reverse stock split effective April 14, 1997.
5
Exchange Rates
Solely for informational purposes, this Form 20-F contains translations of
certain Australian dollar amounts into or from US dollars at a specified rate.
These translations should not be construed as representation that the
Australian dollar amounts represented in the US dollar amounts indicated, or
could be converted into or from US dollars at the rate indicated. The
following table sets forth, for the financial periods indicated, certain
information concerning the Noon Buying Rate for Australian dollars expressed
in US dollars per AUD$1.00.
Period High Low Period-End Average(1)
------------------------------- ---------- --------- ---------- -----------
12 months to December 31, 1997 0.7944 0.6515 0.6515 0.7428
------------------------------- ---------- --------- ---------- -----------
12 months to December 31, 1998 0.6806 0.5500 0.6139 0.6150
------------------------------- ---------- --------- ---------- -----------
12 months to December 31, 1999 0.6569 0.62.40 0.6500 0.6429
------------------------------- ---------- --------- ---------- -----------
12 months to December 31, 2000 0.6685 0.5073 0.5599 0.5828
------------------------------- ---------- --------- ---------- -----------
12 months to December 31, 2001 0.5727 0.4773 0.5115 0.5182
------------------------------- ---------- --------- ---------- -----------
December 1 to December 31, 2001 0.5227 0.5035 0.5115 0.5145
January 1 to January 31, 2002 0.5276 0.5049 0.5069 0.5172
February 1 to February 28, 2002 0.5198 0.5052 0.5156 0.5130
March 1 to March 31, 2002 0.5355 0.5148 0.5339 0.4255
April 1 to April 30, 2002 0.5461 0.5256 0.5393 0.5362
May 1 to May 31, 2002 0.5665 0.5339 0.5644 0.5493
At June 5, 2002 the Australian dollar expressed in US dollars per AUD$1.00 is
$0.5730.
[1] Represents the average of the Noon Buying Rates on the last day of each
month during the period.
Nature Of Trading Market
The Company's ordinary shares commenced trading on the Australian Stock Exchange
Limited on January 2, 1992 and commenced trading on the Electronic
Over-the-Counter Bulletin Board in the United States on April 11, 1997. The
Company subsequently gained clearance to trade on the NASDAQ Small Capital
Market on June 11, 1997 and continuously traded on that exchange until its
delisting effective May 8, 2000 subsequent to a February 11, 2000 oral hearing
before the NASDAQ Listing Qualifications Panel which delisting was upheld (upon
Company appeal) by the NASDAQ Listing and Hearing Review Council on October 25,
2000. On December 29, 2000 the Company's securities were listed for trading on
the NASD Electronic Over The Counter Bulletin Board ("OTCBB").
As of May 31, 2002 the Company had 1,239 holders of record of its Ordinary
Shares.
6
The Company has not paid any dividends since it's inception and does not
anticipate paying any dividends on its Ordinary Shares in the foreseeable
future.
The following reflects the high and low bid price for the Company's Ordinary
Shares as reflected on the Australian Stock Exchange Limited for the last
three years.
Quarter Ending High High Low Low Volume
AUD$ US$ AUD$ US$ in 000's
---------------------- ---------- ---------- ------------ ------------- ------
March 31 1999 1.02 0.69 0.63 0.34 1,551
---------------------- ---------- ---------- ------------ ------------- ------
June 30 1999 0.80 0.53 0.55 0.31 929
---------------------- ---------- ---------- ------------ ------------- ------
September 30 1999 1.00 0.71 0.47 0.22 2,748
---------------------- ---------- ---------- ------------ ------------- ------
December 31 1999 0.95 0.59 0.65 0.31 9,423
---------------------- ---------- ---------- ------------ ------------- ------
March 31 2000 3.91 2.72 0.56 0.34 132,174
---------------------- ---------- ---------- ------------ ------------- ------
June 30 2000 2.30 1.47 0.75 0.34 34,245
---------------------- ---------- ---------- ------------ ------------- ------
September 30 2000 1.74 1.13 0.92 0.38 9,004
---------------------- ---------- ---------- ------------ ------------- ------
December 31 2000 1.17 0.50 0.61 0.16 13,205
---------------------- ---------- ---------- ------------ ------------- ------
March 31, 2001 1.14 0.64 0.35 0.18 16,864
---------------------- ---------- ---------- ------------ ------------- ------
June 30, 2001 0.57 0.30 0.33 0.15 15,892
--------------------- -------------------------------------------------------
September 31, 2001 0.39 0.18 0.20 0.10 8,257
------------------------------------------------------------------------------
December 31, 2001 0.27 0.13 0.15 0.07 9,455
------------------------------------------------------------------------------
March 31, 2002 0.29 0.16 0.16.5 0.7.7 12,780
7
ITEM 3 A (i) COMPANY AUDITORS
BDO Chartered Accountants (through their office in Perth, Western Australia)
is the Company's independent auditors in connection with its reporting
obligations in Australia only while Feldman Sherb & Co., P.C. ("FS") is the
Company's independent auditors in connection with US reporting obligations.
B. Capitalization and indebtedness
Not applicable
C. Reasons for the offer and use of proceeds
Not applicable
D. Risk factors
Risks in respect of the Company's energy portfolio
The future profitability and viability of operations and activities in the
Company's energy portfolio will depend on a number of risks including but not
limited to the following:
1. Commodity prices and in particular the price of oil and gas;
2. Currency exchange rate fluctuations;
3. The strength of the equity markets at the time of any capital raising
by the Company;
4. Judicial decisions and legislative amendments;
5. Environmental management issues with which the Company may from time to
time have to comply;
6. General economic conditions in Australia and south east Asian
countries and their major trading partners and in particular
inflation rates, commodity supply and demand factors and industrial
disruption;
7. Risks inherent in exploration including, amongst other things,
successful exploration, identification, development and
exploitation of use of resources and reserves,and competent management;
8. Political stability of south east Asian countries.
8
There is no assurance that any of the Company's energy properties contain
significant commercially viable reserves until appropriate and sufficient
exploration work is done and an economic and feasibility study based upon such
work is conducted and concluded. The Company also owned certain gold interests
which were disposed of during 1999.
Recoverability of loans by the Company to other companies.
The loans of AUD$7,952,187 to Medco Madura Pty Ltd and Medco Simenggaris Pty
Ltd represent moneys owing to the Company for work previously carried out on
the Madura and Simenggaris blocks in Indonesia and paid for by the Company.
The ultimate recoverability of these loans is dependent upon the future
development and successful exploitation of the Madura and Simenggaris blocks
by those companies.
Early in 2000, CityView acquired the rights to take up a strategic interest in
Sands Solutions Group Pty Ltd ("Sands Solutions"), a developer of integrated
B2B applications. Under the terms of the Heads of Agreement, CityView agreed
to make a commercial loan to Sands Solutions with the right to convert the
loan into equity upon conclusion of extensive due diligence and an independent
valuation. CityView has advanced AUD$3 million under the terms of the loan.
The loan to Sands Solutions is secured by a registered fixed and floating
charge over all the assets and undertaking of that company. Its recoverability
is reliant in the normal course of trading on the planned expansion of and
increased revenues from the businesses conducted by Sands Solutions or the
sale of those businesses and other assets of that company. On 26 February 2002
Curtin Consultancy Services advised CityView that it had formed the view that
there was sufficient potential value in the intellectual property rights owned
by Sands Solutions to provide security for the loan of AUD$3 million. If the
Company acquires an interest in Sands Solution then it would set off the loan
against any purchase money payable for that acquisition.
9
ITEM 4. INFORMATION ON THE COMPANY
A. History and development of the Company
The term "Company" refers to CityView Corporation Limited, a corporation
organized under the laws of Western Australia on May 3, 1987, and its one
wholly owned subsidiary CityView Asia Pty Ltd. During 2000 the Company
deregistered five of the Company's subsidiary companies as these companies
were inactive and superfluous to the Company's requirements. The names of
these companies were: Western Akar Petroleum Pty Ltd; Western Wisesa Petroleum
Pty Ltd; Western Nusantara Energi Pty Ltd; Western Resources NL; and Western
Sangkimah NL. Another two of the Company's former subsidiaries (Western Madura
Pty Ltd and Western Simenggaris Petroleum Pty Ltd) are no longer subsidiaries
of the Company as these companies are now controlled by Pt Medco Energi
Corporation which now owns 75% of the shares in each of these companies.
The Company publishes its consolidated financial statements expressed in
Australian dollars. In this document, references to "US dollars" or "US$" are
to the currency of the United States of America and references to "Australian
Dollars" or "AUD$" are to currency of Australia. Solely for convenience, Form
20-F contains translations of certain Australian dollar amounts into US
dollars at specified rates. These translations should not be construed as
representations that the Australian dollar amounts actually represent such US
dollar amounts or could have been or could be converted into US dollars at the
rates indicated or any other rates. For information regarding rates of
exchange between Australian dollars and US dollars from 1991 to the present,
see "Item 3A. Selected Financial Data - Exchange Rates."
The current financial period is for the twelve months ended December 31, 2001.
References in this document to a particular prior year are to the calendar
year unless otherwise indicated. The Company produces annual reports
containing audited consolidated financial statements and an opinion thereon by
the Company's independent public accountants. Such financial statements have
been audited in accordance with Australian Standards ("AIS"). The Company also
produces quarterly reports as required by Australian Stock Exchange Limited,
which contain selected financial information, and notices to shareholders of
the Company. The Company also produces financial statements prepared in
accordance with Australian Accounting Principles ("AAP"), which are required
to be furnished to shareholders under Australian law. AAP may vary in certain
respects from Generally Accepted Accounting Principles in the United States
("US GAAP"). A reconciliation between Australian and US GAAP for the financial
periods ended December 2001, 2000, 1999, and 1998 are disclosed in footnote 25
to the financial statements contained herein.
The Company is a corporation organized under the laws of Western Australia on
May 3, 1987 under the name CityView Investments Limited and was listed on
Australian Stock Exchange Limited as an investment company. The Company was
initially listed on the Second Board of the Perth Stock Exchange on October
20, 1987 and was transferred to the Main Board of Australian Stock Exchange
Limited on January 2 1992. The Company changed its name to CityView
Corporation Limited on August 9 1996, to CityView Energy Corporation Limited
on May 19, 1996 and on May 31, 2000 changed its name to CityView Corporation
Limited. CityView's investments were focused originally on realty, then gold
and realty, then energy and gold and then e-commerce and energy. Since early
2002 the Company's investments have focused primarily on energy.
10
Australian Government Regulation
The Australian Securities and Investments Commission is an Australian
government instrumentality that administratively enforces the Australian
Corporations Act 2001, which is the main body of law regulating companies in
Australia. The Corporations Act 2001 covers matters such as directors' duties
and responsibilities, preparation of accounts, auditor control, issue and
transfer of shares, control of shareholder meetings, rights of minority
interests, amendments to capital structure, preparation and filing of public
documents such as annual reports, changes in directors and changes in capital.
Australian Stock Exchange Limited imposes listing rules on all listed
companies, including the Company. The listing rules cover such issues as
immediate notification to the market of relevant information, periodic
financial reporting and the prior approval of shareholder reports by the
Australian Stock Exchange Limited.
11
The Company believes that it is in compliance with the foregoing Australian
laws and regulations.
B. Business overview
General
The Company identified Indonesia for its focus for acquisitions and
development of oil and gas reserves. Indonesia was selected after considering
prospectively for oil and gas, demand for the produced product, availability
of supportive infrastructure, foreign company participation terms and
conditions and sovereign risk.
Benefits Associated with Indonesia
Indonesia has a record for honouring participation agreements and keeping tax
and terms stable. The process for co-operation with domestic and foreign
parties is explained as follows:
o All oil and natural gas exploitation in Indonesia is the
responsibility of Perusahaan Pertambangan Minyak dan Gas Bumi Negara
("Pertamina"), an enterprise established under the Law of the
Republic of Indonesia Number 8 Year 1971.
o Pertamina may co-operate with other parties by way of a "Production
Sharing Contract," (hereinafter "PSC"), the form and terms of which
are established by government regulations.
o While terms have altered marginally since the PSC was first
introduced, usually the objective of the change has been to improve
the terms in an attempt to attract further foreign investment in
Indonesia.
o The PSC format has proved a stable and reliable contract for
international investment.
o The Company is involved in two PSCs with Pertamina located onshore
Madura Island and Onshore North East Kalimantan and the PSCs are held
by Medco Madura Pty Ltd and Medco Simenggaris Pty Ltd respectively
(collectively hereinafter called "Madura and Simenggaris").
Indonesia is considered one of the more mature regions of the world for oil
and gas investment in respect to security of tenure in contracts covering oil
and gas rights of a foreign company.
12
Risks Associated with Indonesia
There are a number of factors which may have a material downside effect on
Madura and Simenggaris' future financial performance in Indonesia or the value
of the shares in the Company. These factors include:
o Fluctuations in the world market price of oil and gas;
o Fluctuations in the value of the Indonesian rupiah against the US
dollar;
o Abnormal interruptions in oil and gas production or delivery resulting
from war, political disturbance, civil unrest or industrial disruption;
o Changes in government, government regulations or the relevant fiscal
regime;
o Unforeseen adverse geological conditions; o Unavailability or excessive
costs of industry service support, caused by any of the above.
The Company believes that the benefits described above far outweigh the risks.
There is no assurance, however, that one or more of the aforementioned risks
will not severely damage Company prospects and operations.
Selection of Target Areas for Acquisition
The criteria for assessing oil and gas opportunities in Indonesia includes
consideration of the following:
o Detailed review of geological and geophysical information available from
Pertamina and other sources.
o Assessing proximity of the oil and/or gas prospect to a means of
transporting the production to market. The foregoing component of
production costs can significantly affect the economics of a project.
o Assessing access to support services such as engineering, rig
services and service contractors. Costs for mobilization and
demobilization of such services is an important consideration.
o Assessing field prospects of oil and gas, usually determined by
quality and quantity of geophysical, geological, petrophysical and
production data available.
o Assessing the degree of difficulty in producing the oil and gas
prospect from an engineering perspective, to enable an accurate
assessment of production costs.
o Conducting commercial analysis to establish the ability of a
particular project to achieve adequate rate of return on investment.
Evaluation Techniques
Experienced geologists and geophysicists are engaged as contractors to employ
the most advanced technologies of investigation in assessing hydrocarbon
prospects. These include reprocessing and reinterpretation of existing seismic
data. Afterwards the data in its original interpreted form can be enhanced to
enable more accurate mapping of the structure. The technology available for
seismic acquisition and processing is continually being improved.
Interpretation tools such as computer mapping and modelling packages, enable
greater amounts of data to be processed and superior interpretations to be
made. Madura and Simenggaris utilize both the data directly relating to the
field being investigated, along with regional data to compile as complete an
understanding as the available data will allow.
13
Electrical wireline logs are utilized where available to interpret reservoir
parameters of interval thickness, hydrocarbon presence, porosity, water
saturation and other important parameters. This data is interpreted utilizing
experienced engineers and advanced software packages designed for such
analysis. The result are then integrated with the geological and geophysical
information, in an endeavour to use one form of analysis to confirm the other.
Utilizing the geophysical mapping and the petrophysical interpretation, the
reservoir engineer is then able to estimate potential oil and/or gas reserves
and recovery factors likely to be achieved. Any available past production
records are analysed and can often be utilized as a means of predicting future
production rates and cumulative production forecast, by extrapolation of the
past results, utilizing accepted engineering practices. The application of
computer models can also aid the reservoir engineer in forecasting production
potential. An accurate model can duplicate past production history.
Market for Oil and Gas Production
The market for oil and gas production in Indonesia is generally regulated.
Under the terms of the PSC, Madura and Simenggaris have the right to sell
their oil production to Pertamina at the government established Indonesian
Crude Price (hereinafter "ICP") and Pertamina cannot refuse to buy the
production. The ICP is an average price for a basket of crude oil. The basket
used in the ICP calculation is comprised of Sumatra Light Crude (SLC), Tapis
crude (from Malaysia), Oman crude, Dubai crude and Gippsland crude (Australia)
prices. The ICP is adjusted on a monthly basis at the end of each month and
then applied to the same month. The price for a particular crude oil in
Indonesia is then adjusted relative to the crude quality. Pertamina has
strategically located facilities throughout most of Indonesia, where crude oil
can be delivered, commonly referred to as the "Point of Custody Transfer."
Madura and Simenggaris are responsible for their portion of costs for
delivering the crude to the Point of Custody Transfer. Above certain levels of
production, Madura and Simenggaris have the right to sell its oil production
on the world market if it is able to negotiate preferred selling terms.
Preferred selling terms are terms which are more favourable then those
available to the contractor under the ICP pricing system.
Under the standard terms of Technical Assistance Contracts and Production
Sharing Contracts, the contractor has the right during the term thereof to
freely lift, dispose of and export 100% of its share of crude oil, and retain
abroad the proceeds obtained therefrom. After 5 years of production the
contractor is required to meet its domestic market obligation and sell 25% of
its share of production to Pertamina at 15% of the prevailing price.
All producers in a producing region receive the same price. The major oil
companies purchase crude oil offered for sale at posted field prices. There
are price adjustments for quality difference from the Bench Mark. Oil sales
are normally contracted with a gatherer who will pick-up the oil at the well
site. In some instances there may be deductions for transportation from the
well head to the sales point. At this time the majority of crude oil
purchasers do not charge transportation fees, unless the well is outside their
service area. The oil gatherer will usually handle all check disbursements to
both the working interest and royalty owners. The Company was a working
interest owner to December 31, 1999. In January 2000 the Company entered an
agreement for the Company's interest in the new work programs to be carried by
Pt Medco Energi Corporation Tbk. The Company expects to be a working interest
owner at the end of the free carry arrangement. When it becomes a working
interest owner, the Company will be responsible for the payment of its
proportionate share of the operating expenses of the well. Royalty owners and
over-riding royalty owners receive a percentage of gross oil production for
the particular lease and are not obligated in any manner whatsoever to pay for
the cost of operating the lease.
14
Gas is sold direct to consumers at prices determined by Pertamina in the
following range:
Industry Price Range per MCF
Fertilizer manufacture US$1.00 - US$1.50
Petrochemical US$2.00
Steel Industry Process US$0.65
Steel Industry Fuel/Power US$2.00
Electricity generation US$2.45 - US$3.00
Cement manufacture US$3.00
Other US$2.70
The lower gas prices in some industry sectors are a form of subsidy imposed by
the government. Larger gas reserves near to LNG facilities are able to supply
gas to these operations. Indonesia is the largest exporter of LNG in the
world.
The gas purchaser will pay the well operator 100% of the sales proceeds each
and every month for the previous months sales. The operator is responsible for
all checks and distributions to the working interest and royalty owners. There
is no standard price for gas. Depending on the type of contract, ultimate
destination, transportation, treatment and compression charges, the prices
will vary. Prices will fluctuate with the seasons and the general market
conditions. The Company does not anticipate any significant change in the
manner production is purchased. However, no assurance can be given at this
time that such changes will not occur.
As Indonesia moves closer towards becoming a net importer of crude oil, the
Indonesian government, through the state owned enterprise Pertamina in which
all oil and gas reserves are vested, is endeavouring to increase production
through new incentives to attract foreign expertise and capital for
exploration and production, through development and enhancement of existing
reserves.
Government incentives for PSCs include:
o After tax split for oil, new incentive 35% Contractor Equity, from a
previous range of 15% to 25%. This in effect means that the
Contractor can receive a larger portion of the total production from
any field, after the deduction of Operating Costs. Allowing for a tax
rate of 44%, the Contractor is entitled under this legislation, to
62.5% of remaining production after recovery of Operating Costs pre
tax, as opposed to the previous entitlement of 26.7857% to 44.6428%
pre tax.
o After tax split for gas 40% for Contractor, from 35% previously. As
for the above, the Contractor is entitled to 71.426% of the
production, after deducting Operating Costs, as opposed to 62.5%
previously.
o Domestic market oil fee increased from 15% of crude price to 25%
of crude price. Under the terms of all TACs and PSCs, the Contractor
is required to sell and deliver to Pertamina a portion of the
share of the Crude Oil to which the Contractor is entitled, at the
Domestic Market Oil Fee, which is a set percentage of the price
realized by the Contractor for all other production from the Contract
Area. Under the previous regulations, the Contractor received
only 15% of such price, whereas under the new legislation, the
Contractor receives 25% of the realized price. The net result is
that the Contractor is receiving an additional 10% of the Crude
Oil price for that portion of Crude Oil which it is obligated to
sell and deliver to Pertamina to fulfil the Contractor's obligation
towards the supply of the domestic market in Indonesia.
15
o First Tranche Petroleum reduced from 20% to 15%. First Tranche
Petroleum, being a portion of the total Petroleum production to be
split between the parties before any deduction for recovery of
Operating Costs, reduces the amount available for recovery of
Operating Costs. As the Contractor is providing funding under the
contract terms, it is in the Contractor's interest to have as much of
the Petroleum production available for recovery of such costs, prior
to distribution between the parties thereafter. Reduction of the
First Tranche Petroleum percentage from 20% to 15% means an
additional 5% of the Petroleum production is available to the
Contractor for Cost Recovery.
The price for oil in Indonesia is tied to a basket of crude oils around the
world, ensuring an "international" price dependency. The basket of crude oils
used to establish the ICP effectively means that the ICP is very much subject
to world oil prices, giving it international stability as opposed to being
affected by domestic constraints. The ICP compares favourably with other
comparable crude oils in that its price is formulated from a basket of
comparable crudes from other countries.
Energy Portfolio
Madura Block onshore Madura Island near Surabaya east Java
On January 28, 1997 the President Director of Pertamina awarded the Madura
Block to CityView and signed the authorization for CityView's then 100% owned
subsidiary Western Madura Pty Ltd ("Western Madura") to commence operations on
the Madura Block prior to the formal signing of the PSC-JOB agreement. The
signing of the contract took place on May 15, 1997, awarding the 2728km2
Madura Block to Western Madura for an exploration term of 10 years and
production term of 20 years. CityView was not required to make any cash
payment for this award and no payment in cash or otherwise was made by or on
behalf of CityView for the award of the Madura Block.
The block covers an area of 674,100 acres and lies in the oil and gas region
of east Java. A number of large fields have been discovered in the vicinity
and it is these same producing trends which are being examined on Madura. The
block lies close to the heavily industrialized city of Surabaya where there is
a ready market for oil and gas.
History
Oil and gas exploration began on Madura Island in the late 1800's to 1910 with
over 100 shallow (less than 500m) wells drilled on oil seeps and surface
features. Production was marginal with a cumulative total of less than 1.0MMBO
("Million barrels of Oil"). Exploration was limited on the block until the
1970's when it was held in succession by Indonesia Cities Services, Pertamina
and Shell. Several generations of seismic data were acquired in the 1980's and
1990's but only 6 wells have been drilled on the Island since 1910.
Throughout 1999, discussions took place with PT Medco Energi Corporation TBK
("Medco") for Medco to supervise and pay for the new work programs for the
development and bringing into production of the Madura block.
Approval was given at the Company's General Meeting held on December 30,1999
for the Company to allot a 75% interest in Western Madura to Medco in
consideration of Medco carrying out and paying for the new work programs. The
agreement was signed between CityView and Medco on January 25, 2000. The
Company's interest in Western Madura was reduced from 100% to 25% and Western
Madura was renamed Medco Madura Pty Ltd. In accordance with the above, Medco
submitted to Pertamina for approval a Year 2000 budget of US$3,519,000 for the
drilling of three wells on the Sebaya and Karasan prospects at Madura in the
second and third quarters. Medco is the operator of the block and required to
supervise and pay for the new work programs for development and bringing into
production of the fields. After that, Medco and the Company will contribute on
a pro-rata basis in accordance with the respective 75% and 25% interests with
the Company continuing to receive 25% of any profits generated.
16
Regional Setting
There is an E-W terrain running across the block that underwent inversion in
the Plio-Pleistocene. Within that band, a number of structures have been
identified due to the inversion at fairly shallow levels. These relatively
shallow features are the principal target for the Medco Madura Pty Ltd
program.
Prospects
Market
Medco Madura Pty Ltd has discussed with the local Madura government downstream
projects which include a small refinery and a power plant to supply the local
market and displace imports from East Java.
Simenggaris Block onshore north-east Borneo
On September 28, 1997 the President Director of Pertamina signed the
authorization for CityView's then 100% owned subsidiary Genindo Western
Petroleum Pty Ltd ("Western Simenggaris") to commence operations on the
Simenggaris Block prior to the formal signing of the PSC-JOB agreement.
The signing of the Contract took place on February 24, 1998 awarding the
2734km2 Simenggaris Block to Genindo. The contract term is 10 years for
exploration and 20 years for production. Genindo changed its name to Western
Simenggaris Petroleum Pty Ltd on June 22 1998. CityView was not required to
make any cash payment for this award and no payment in cash or otherwise was
made by or on behalf of CityView for the award of the Simenggaris Block.
The block covers an area of 675,582 acres and lies in the oil and gas Tarakan
Basin region. The nearby giant Pamusian field was discovered in 1905 and the
Bunyu field in 1920. Four discoveries have been made within the block: the
Sembakung oilfield (40 million barrels oil), the Bangkudulis oilfield,
Sesayap-1 and S.Sembakung-1. The former two are producing fields excluded from
the contract area and the latter two are undeveloped gas-condensate
discoveries which do form part of the contract area.
Similar to the agreement negotiated with Medco on Madura, CityView retains a
25% interest in exchange for being free carried throughout the new work
program as per the January 25, 2000 agreement.
History
The Simenggaris Block is adjacent to some of the earliest oil production in
Indonesia with exploration dating back to the 1890's. Exploration was limited
on the block until the late 1960's when portions of the block were held in
succession by Japex, ARCO, Deminex and Pertamina. Several generations of
seismic data were acquired and 15 wells were drilled within the Block leading
to four discoveries: Sembakung oil field, Bangkudulis oil field, Sesayap-1 and
S.Sembakung-1. The former two are producing fields excluded from the Contract
area and the latter two are undeveloped gas-condensate discoveries.
17
Regional Setting
The Simenggaris Block lies in the Tarakan Basin region. The Tarakan Basin
stratigraphy consists of a classic prograding deltaic sequence from upper
Miocene through Pliocene time. The majority of the reserves are found along
the Kalimantan coast in Pliocene age deltaic reservoirs. Further inland gas
and oil are found in upper Miocene age, paleogeographic equivalent, deltaic
reservoirs. The upper Miocene age reservoirs are under explored and will be
the focus of the Medco work program.
Prospects
Market
Several gas markets have been identified for the Simenggaris Block with gas
prices of US$1.00-1.50 per MCF expected, based on current pricing levels.
These markets include a future fertilizer plant and also a methanol plant on
Bunyu Island.
Philippines Block SC41, offshore Sabah Malaysia
CityView has a 2.5% interest in the petroleum permit block held under Service
Contract 41 which is an offshore oil and gas exploration area of approximately
3 million acres in the Sandakan Basin within Philippine waters adjacent to the
border with east Malaysia. The Sandakan Basin is filled mainly with
Mio-Pliocene age fluvio-deltaic sedimentary rocks that are analogous in many
ways to the prolific Baram and Mahakam deltas adjacent to Borneo. The block
contains the Rhino prospect for which Robertson Blackwatch has calculated a
range of possible STOIIP (stock tank barrels of oil initially in place) of
between 1,260 and 2,730 million stock tank barrels (MMstb) of oil and a
possible range of between 0.9 and 1.96 trillion cubic feet of gas (TCF).
CityView has been free carried through a two well program (Hippo-1 and
Wildebeest-1) by MMC Exploration & Production (Philippines) Pte Ltd, a
subsidiary of Malaysia Mining Corporation Berhad. The next program is
currently under review by the operator Unocal. All contributions to
expenditure on the past work program of two wells within the block have been
met on behalf of CityView by MMC Exploration & Production (Philippines) Pte
Ltd.
Market
Oil is easier to produce and market as it would simply be produced from a
floating production storage unit ("FPSU") and then delivered anywhere in the
country. Gas is more difficult to monetize as it will require a pipeline to
get the gas to market and costs associated with laying a pipeline far exceed
production and marketing costs for oil in the regions discussed herein.
Marketing opportunities in nearby Sabah would be examined.
Competition
The oil and gas industry is highly competitive. The Company's competitors and
potential competitors include major oil companies and independent producers of
varying sizes which are engaged in the acquisition of producing properties and
the exploration and development of prospects. Many of the Company's
competitors have greater financial, personnel and other resources than does
the Company and therefore have a 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.
Indonesian Government Regulation
The Company may either sell its production on the international market or opt
to sell it domestically. There is a commitment to sell 25% of any oil
production domestically (called Domestic Market Obligation) at 15% of the
crude price. This commitment is imposed in the terms of all PSCs and does not
vary between PSCs. This commitment becomes effective after the first 60 months
of production. As the fields have not reached a level of commercial
production, the commitment does not currently apply. There are no constraints
on production. Indonesia has no exchange controls; therefore, foreigners are
able to move funds freely in and out of the country through accounts
denominated in local foreign currency.
18
On all projects in which a company enters into a PSC with Pertamina, it is
obligated to:
o Conduct an environmental baseline assessment at the beginning of its
activities.
o Take the necessary precautions for protection of ecological
systems, navigation and fishing, and prevent extensive
pollution of the area, sea or rivers as the result of
operations undertaken under the work program.
o After the expiration or termination or relinquishment of any
contract area, or abandonment of any field, remove all
equipment and installations from the area in a manner
acceptable to Pertamina, and perform all necessary site
restoration activities in accordance with applicable government
regulations, the costs of which are treated as operating costs
and are thus cost recoverable, through project revenues.
The Company considers these environmental obligations to be a part of its
policy of good oil field practice and further acknowledges that the terms are
considered normal throughout the world. Further, the Company believes that the
foregoing obligations will not have a material impact on the Company's
operations.
B2B E-Commerce Investment
In January 2000, CityView agreed to acquire certain rights to take up a
strategic interest in Sands Solutions Group Pty Ltd ("Sands Solutions"), a
developer of integrated B2B applications. Under the terms of the Heads of
Agreement, CityView agreed to make a commercial loan under the security of a
fixed and floating charge over Sands Solutions, with the right to convert the
loan into equity. CityView has advanced AUD$3 million under the terms of the
loan. The acquisition by CityView of any interest in Sands Solutions above 10%
may require that a Prospectus be filed by CityView with Australian Stock
Exchange Limited in accordance with the requirements of the Australian
Securities and Investments Commission. While the filing of such Prospectus
does not generate comments, it does require accuracy of all material
information so as to avoid director's personal liability for material
misstatements.
The Heads of Agreement was negotiated on an arms-length basis between the
directors of each corporation not having any overlapping interest in the other
corporation. Similarly the due diligence of Sands Solutions has been conducted
by the independent directors of each Company.
This manner of proceeding has been necessary due to the fact that a family
trust of a CityView director, Mr Smyth, used to own fifty percent of Sands and
McDougall and owns one-third of Sands Solutions. The trustee of the Smyth
family trust is Salant Nominees Pty Ltd and its two directors are Mr Smyth and
his wife Jennifer Lee Smyth. Mr and Mrs Smyth control the family trust in
their capacity as its sole two directors. Also, Mr Smyth was a director of
both Sands and McDougall and Sands Solutions although he is no longer a
director of either.
To avoid potential conflicts the independent directors have represented
CityView in dealings with Sands Solutions while Sands Solutions is primarily
represented by Paul William Keogh, one of its directors.
Under the terms of the agreements between CityView and Sands Solutions,
CityView can elect to have all moneys repaid to it on 1 July 2003 or CityView
can elect to convert the loan into equity in Sands Solutions on a formula
based on an independent valuation to be undertaken prior to the repayment
date. CityView anticipates that payment for the acquisition of an equity
interest would be accomplished through conversion of the AUD$3 million loan to
Sands Solutions and through further funds it may be able to receive from
private placements of CityView's shares with otherwise unaffiliated third
parties.
19
CityView raised the AUD$3 million that has been lent to Sands Solutions, in
part, by issuing 7,300,000 CityView shares in January 2000 to private
placement participants for proceeds of AUD$3,613,500 with these shares (once
issued) then representing approximately 20% of all outstanding CityView shares
and with no one participant (or group of participants acting in concert) being
or becoming a principal stockholder of CityView.
C. Organizational structure
The Company conducts its operations through itself and its wholly owned
subsidiary CityView Asia Pty Ltd.
In November 2001, CityView acquired a United Kingdom subsidiary company -
CityView Corporation (UK) Ltd ("CityView (UK)") which was formerly known as
Comstock Industries (UK) Limited. CityView (UK) was acquired as the vehicle to
expand the Company's existing investment in the high-technology sector by
acquiring a number of profitable high-technology companies, to complement
CityView's energy interest.
CityView recognised that there were opportunities to acquire profitable new
technology businesses available due to the downturn in global technology
valuations and which would deliver immediate cash flow to CityView. These new
technology companies were undervalued by the capital markets due to their lack
of public listing and have the potential to deliver high levels of revenue and
PBIT growth.
CityView identified several companies which fitted the above criteria and these
were enumerated to shareholders at the Company's General Meeting of 24 December
2001.
During the due diligence process, the potential of CityView's energy interests
began to emerge as the results of Medco's work program started to filter in and
the Company recognised the need to focus its resources on the Company's energy
interests. On 4 April 2002, the Board of CityView decided not to proceed with
the proposed acquisitions of technology companies and instead to dispose of
CityView (UK). A management buy-out was organised and CityView (UK) was disposed
of on April 11, 2002. In due course CityView's investment in Sands Solutions and
Global Network may also be disposed of.
D. Property, plant and equipment
Particulars of oil leases - Madura (Medco Madura Pty Ltd) and Simenggaris (Medco
Simenggaris Pty Ltd) The Company's wholly owned subsidiary CityView Asia Pty Ltd
owns 25% of Medco Madura Pty Ltd and 25% of Medco Simenggaris Pty Ltd since May
26, 2000 having previously owned (since December 31, 1999) 100% of such
companies.
Executive address The Company's offices are at leased premises at 63 Burswood
Road, Burswood, Western Australia, telephone: (61 8) 6250 9099, fax: (61 8) 6250
9088, email: info@cityviewcorp.com, website: www.cityviewcorp.com.
20
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating results
The current financial period is for the twelve months ended December 31, 2001.
The Company's consolidated financial statements are prepared in accordance
with Australian Generally Accepted Accounting Principals ("Australian GAAP")
which may vary in certain respects from Generally Accepted Accounting
Principals in the United States ("US GAAP"). A reconciliation between
Australian and US GAAP for the financial periods ended December 31, 2001, 2000
and 1999 are disclosed in footnote 25 to the financial statements contained
herein.
The following discussion references the amounts computed in accordance with
Australian GAAP for the results of operations of the Company for the financial
periods ended December 31, 2001, 2000, and 1999.
Principal Activities
The principal activities of the Company during the financial year were
investments in energy and technology.
Results of operations
The discussion set forth below relates to the Company's results of operations
as prepared in accordance with Australian GAAP. A reconciliation between
Australian and US GAAP for the financial periods ended December 31, 2001,
2000, and 1999, are disclosed in footnote 26 to the financial statements
contained herein.
Year Ended December 31, 2001 compared to Year Ended December 31, 2000.
The net loss of the consolidated entity for the financial year after providing
for income tax and eliminating outside equity interests was AUD$4,165,287
compared to a loss of AUD$5,537,576 for the previous financial year. The
decrease in operating loss resulted primarily by the decrease in the write off
of exploration costs of approximately AUD$950,000.
Year Ended December 31, 2000 compared to Year Ended December 31, 1999.
The net loss of the consolidated entity for the financial year after providing
for income tax and eliminating outside equity interests was AUD$5,537,576
compared to a loss of AUD$11,095,107 for the previous financial year. The
decrease in operating loss resulted primarily by the decrease in the write off
of exploration costs of approximately AUD$4,800,000, a decrease in loss on
disposed subsidiary of AUD$1,200,000, and a decrease in interest expense of
approximately AUD$920,000 because of conversion of debentures in 1999 offset
by an increase in selling, general and administrative costs of approximately
AUD$1,400,000.
Dividends
The directors did not recommend the payment of a dividend and no dividends
have been paid or declared since the end of the previous financial year.
21
Review of Operations
Although a fairly extensive description of the operations of the Company is
included in the Business overview which precedes this report a summary of the
pertinent aspects of those operations is contained in this Item 5.
Energy
Indonesia - Madura Block onshore Madura Island near Surabaya east Java
CityView owns 25% of Medco Madura Pty Ltd, the holder of the Madura Block under
a Production Sharing Contract-Joint Operating Body agreement ("PSC-JOB") with
the Government for an exploration term of ten years commencing 15 May 1997 and a
production term of twenty years. The Block covers an area of 674,100 acres close
to the heavily industrialised city of Surabaya where there is a ready market for
oil and gas. A number of large fields have been discovered in the vicinity and
it is these same producing trends which are being examined on Madura.
The operator of the block is PT Medco Energi Corporation TBK ("Medco") which has
been free carrying CityView throughout the current work program. The first well
drilled by Medco was Sebaya-1 into a large faulted anticlinal feature underlying
the old Kertegeneh field discovered in 1900. Medco spudded Sebaya-1 on 20
September 2001.
Medco's original objective for Sebaya-1 was to drill to a depth of 1230 metres
(4035 feet) and test the Tawun sands at 200 metres (656 feet) and the Tuban
sands at 900 metres (2953 feet). During the course of the drilling three zones
of oil and gas shows were encountered between 2250-3100 feet.
Medco was sufficiently encouraged by the drilling results to decide to deepen
the well to explore its deeper zones, Lower Tuban Limestone or Upper Kujung
Limestone. During the deepening of the well Medco encountered high formation
pressures. The rig was only equipped with a 3000 psi Blowout Preventor (BOP).
Oil and gas shows were encountered at 4527 feet and 5793 feet. Due to lost
circulation problems at 4531 feet and high formation pressures encountered below
this depth, deeper drilling was suspended at 5954 feet. The well was plugged
back with cement to 5498 feet and 7-inch liner was run and cemented with the
bottom of the liner at 5310 feet.
A zone that had encountered oil and gas shows from 4527-4570 feet was production
tested to determine the pressure, fluid content and potential production rates
of the formation. The 7-inch liner was perforated with four perforations per
foot from 4528-4548 feet. Small amounts of salt water were recovered. An attempt
to inject salt water into the perforations with 1100 psi at the surface was
negative. Based on the test results, Medco is of the opinion that the
perforation failed to make holes through the liner and cement into the
formation.
Medco will shortly commence the testing of the higher zones of Sebaya-1. Three
zones will be tested: (i) between 4528-2548 feet; (ii)between 2962-2978 feet;
and (iii) between 2630-2655 feet. Due to high pressures, the testing of the zone
between 5800-5950 feet will be deferred. Instead of drilling a deeper well at
Sebaya-1, Medco will drill a well to 6000 feet at Tambuku situated immediately
to the north.
The second well drilled by Medco in the Madura Block was Karasan-1 which was
drilled to only 4186 feet as the rig did not have the capacity to reach the
deeper zones. Testing of gas flows in the upper zone was inconsequential. Medco
has decided that instead of drilling deeper at this location, it will drill a
well at nearby Telaga. This well will have a target depth of up to 9000 feet and
should provide a better understanding of the deep zone at Karasan.
22
Indonesia - Simenggaris Block onshore north-east Borneo
CityView owns 25% of Medco Simenggaris Pty Ltd which holds the Simenggaris Block
under a PSC-JOB agreement for a ten year exploration term commencing 24 February
1998 followed by a production term of twenty years. The Block encompasses an
area of 675,582 acres and lies in the oil and gas Tarakan Basin region. Four
discoveries have been made within the Block: the Sembakung oilfield (40 million
barrels oil), the Bangkudulis oilfield, Sesayap-1 and S.Sembakung-1. The former
two are producing fields excluded from the contract area and the latter two are
undeveloped gas-condensate discoveries which do form part of the contract area.
Similar to the agreement negotiated with Medco on Madura, CityView is free
carried throughout the current work program. The first drilling location
selected by Medco was at Pidawan on the same trend as the Sembakung oilfield.
The Pidawan-1 well was spudded on 21 February 2002 with a target depth of
approximately 7000 feet: to date the well has reached a depth of approximately
2000 feet.
23
Pidawan-1 is a strategic well with the lowest probability in comparison to the
other prospects on this trend. As soon as the drilling of Pidawan-1 is
completed, Medco plans to drill the more optimum prospects of Sesayap-B and
Bangkupesar.
Philippines - Block SC41, offshore Sabah Malaysia
CityView has a 2.5% interest in the petroleum permit block held under Service
Contract 41 which is an offshore oil and gas exploration area of approximately 3
million acres in the Sandakan Basin within Philippine waters adjacent to the
border with east Malaysia. The Sandakan Basin is filled mainly with Mio-Pliocene
age fluvio-deltaic sedimentary rocks that are analogous in many ways to the
prolific Baram and Mahakam deltas adjacent to Borneo. The block contains the
Rhino prospect for which Robertson Blackwatch has calculated a range of possible
STOIIP (stock tank barrels of oil initially in place) of between 1,260 and 2,730
million stock tank barrels (MMstb) of oil and a possible range of between 0.9
and 1.96 trillion cubic feet of gas (TCF).
CityView has been free carried through a two well program (Hippo-1 and
Wildebeest-1) by MMC Exploration & Production (Philippines) Pte Ltd, a
subsidiary of Malaysia Mining Corporation Berhad. The next program is currently
under review by the operator Unocal. All contributions to expenditure on the
past work program of two wells within the block have been met on behalf of
CityView by MMC Exploration & Production (Philippines) Pte Ltd.
24
Technology
During 2000 and 2001 CityView lent AUD$3 million to Sands Solutions against the
security of a registered charge over Sands Solutions with the right to convert
the loan into equity. A Due Diligence Committee was established to monitor the
performance of Sands Solutions and to review the security of the loan. The Due
Diligence Committee was assisted by independent legal, financial and technical
advisors.
On 26 February 2002, Curtin Consultancy Services advised CityView that it had
formed the view that there was sufficient potential value in the intellectual
property rights owned by Sands Solutions to provide security for the loan of $3
million.
In April 2002, in accordance with the recommendations of the Due Diligence
Committee, the Company signed agreements with Sands Solutions pursuant to which
the Company no longer has an interest in Primeorder AG and the Company has been
released from all obligations to provide more funds to Sands Solutions or its
subsidiary Primeorder AG. Also under the terms of the agreements between
CityView and Sands Solutions, CityView can elect to have all moneys repaid to it
on 1 July 2003 or CityView can elect to convert its loan into equity in Sands
Solutions on a formula based on an independent valuation to be undertaken prior
to the repayment date.
Global Network Technologies Pty Ltd
In November 2000 CityView acquired an interest in Telezon Limited (formerly
called Min-Tech 8 Limited), a regional telecommunications company that is
incorporated in Australia and was listed on Australian Stock Exchange Limited
under the code "TLZ". In August 2001 CityView made an off market scrip bid for
50% of Telezon's shares and options: this bid was withdrawn after Telezon
appointed administrators.
After extensive negotiations with Telezon's principal shareholder GWT Systems
Limited, CityView rolled its investment into a shareholding of 20% in Global
Network Technologies Pty Ltd (Global Networks) which had acquired the prime
assets of Telezon's business.
The principal asset of Global Networks is Intellink Communications which sells
and installs:
o Panasonic Telephone systems and communication accessories;
o Point to point microwave links for high speed data networks and carries on
a small run production/refurbishment service of Plessey telephones.
CityView Corporation (UK) Ltd
In November 2001, CityView acquired a United Kingdom subsidiary company -
CityView Corporation (UK) Ltd ("CityView (UK)") which was formerly known as
Comstock Industries (UK) Limited. CityView (UK) was acquired as the vehicle to
expand the Company's existing investment in the high-technology sector by
acquiring a number of profitable high-technology companies, to complement
CityView's energy interest.
CityView recognised that there were opportunities to acquire profitable new
technology businesses available due to the downturn in global technology
valuations and which would deliver immediate cash flow to CityView. These new
technology companies were undervalued by the capital markets due to their lack
of public listing and have the potential to deliver high levels of revenue and
PBIT growth.
25
CityView identified several companies which fitted the above criteria and these
were enumerated to shareholders at the Company's General Meeting of 24 December
2001.
During the due diligence process, the potential of CityView's energy interests
began to emerge as the results of Medco's work program started to filter in and
the Company recognised the need to focus its resources on the Company's energy
interests. On 4 April 2002, the Board of CityView decided not to proceed with
the proposed acquisitions of technology companies.
Employee Share and Option Benefits
The shareholders of the Company at its annual general meeting held on 31 May
2000 approved an Employee Share Plan which included an Incentive Option Plan.
The Company issued 2,500,000 options in 2001 under the Plan exercisable on or
before 30 June 2002 at a price of $0.35 and 200,000 options exercisable on or
before 30 June 2002 at a price of $0.20 each.
Options
At the date of this report there are on issue 13,400,000 unlisted options
convertible into fully paid ordinary shares at an exercise price of $0.40 each
on or before 24 June 2002. In addition the Company issued the following options
throughout the year:
On 16 February 2001 the Company issued 3,500,000 options to London Broking
Services Pty Ltd, exercisable on or before 30 April 2001 at a price of $0.70
each. On 1 March 2001 the Company by mutual agreement with the holder agreed to
cancel 2,000,000 of those options. The remaining 1,500,000 options expired on 30
April 2001.
On 2 March 2001 the Company issued to London Broking Services Pty Ltd another
2,000,000 options exercisable on or before 31 March 2001 at a price of $0.50
each. In order to secure the exercise of these options for the purposes of
providing additional capital, the Company on 16 February 2001 and 1 March 2001
entered into agreements with London Partners Australia Pty Ltd under which that
company would ensure that the options would be exercised. These agreements were
subject to the price of shares in CityView remaining at certain specified levels
which were not achieved. In spite of the price of the shares not achieving those
levels London Partners Australia Pty Ltd arranged the exercise of a total of
1,300,000 options to raise $650,000 as additional working capital.
On 30 June 2001 the Company issued 3,500,000 options to London Broking Services
Pty Ltd exercisable on or before 31 December 2001 at a price of $0.35 each. On 1
August 2001 the Company by mutual agreement with the holder agreed to cancel
these options.
On 1 August 2001 the Company issued 2,000,000 options to London Broking Services
Pty Ltd exercisable on or before 31 August 2001 at a price of $0.25 each.
707,100 of these options were exercised on 28 August 2001. The remaining options
expired. Also on 1 August 2001 a further 1,500,000 options were issued to London
Broking Services Pty Ltd exercisable on or before 30 September 2001 at a price
of $0.30 each. These options expired.
Refer to item 8B (b) - Significant changes
25A
Inflationary and other economic pressures
The Company is not currently generating revenues from its oil and gas
operations. Future revenues in this segment are governed primarily by
worldwide commodity pricing. No immediate effect in respect to inflation and
changes on prices is expected. However, inflationary pressures affect the
Company's exploration and development expenditure which is primarily incurred
in U.S. dollars. The directors estimation of inflation is considered in
regards to the general state of the world economy, and of the United States
and Indonesia in particular. This exposure to inflationary pressure is
dependent on the mix of goods and services provided to the Company by
suppliers, sourced internally in Indonesia and externally. At this stage the
Company is unable to quantify the mix of inflationary pressures from different
sources that will affect the supply of goods and services to the Company.
The average official government released Indonesian inflation rates for the
seven years beginning 1994 were as follows:
1994 1995 1996 1997 1998 1999 2000 2001
Inflation Rates % 9.24 8.64 6.47 11.05 77.63 2.01 9.35 9.00
It is the policy of the directors to regularly monitor the cost of operations
on a per barrel basis in respect to viability of individual projects and will
take any necessary actions.
The Company's operations in these industries comprise exploration and
development expenditure and therefore are not affected by inflationary and
price pressures of oil and gas product pricing. However, this expenditure is
effected by normal inflationary pressures on the Company's general expenditure
on goods and services.
Government Policies
The Company has considered the issue of political risk in the Republic of
Indonesia in which the Company has acquired assets and will continue to do so
as a matter of normal business practice. The Company's expected initial
producing properties are located in Indonesia where there has been a long
established petroleum industry, with significant elements of foreign capital
investments and no history of expropriation.
The Republic of Indonesia is a separate national state and like many other
national states regulates, controls and taxes activities conducted by
residents and non-residents in the country and the flow of investment into the
country and the return of capital out of the country. All of these controls
and regulations are subject to change from time to time. Some of the interests
of the Company in Indonesia are by way of contract between a subsidiary of the
Company and bodies which are wholly owned arms of the Government of the
Republic of Indonesia. These contracts are subject to controls and regulations
by the contracting parties and by the government of the Republic of Indonesia.
These factors, in addition to the usual exploration and production risk and
the economic and political stability of the host country, Indonesia must all
be taken into account in relation to the Company's operations in Indonesia.
Other than the effect of the government's economic fiscal monetary or
political policies of the Republic of Indonesia, or factors upon the
operations of the Company, these policies or factors do not affect investments
by United States Nationals in Ordinary Shares of the Company.
Likely Developments and Expected Results of Operations
Information on likely developments and expected results of operations (ie
financial forecasts and/or forward looking information) of the consolidated
entity has not been included in this report management considers such
information to be commercially sensitive and/or confidential and/or not
subject sufficient certainty.
26
Indemnification of Officers and Auditors
During the financial year, the Company paid a premium in respect of a contract
insuring the directors, the company secretary and all executive officers of
the Company and of any related body corporate against a liability incurred as
a director, secretary or executive officer to the extent permitted by the
Corporations Law. The contract of insurance prohibits disclosure of the nature
of the liability and the amount of the premium.
The Company has not otherwise, during or since the financial year, indemnified
or agreed to indemnify an officer or director of the Company or any related
body corporate against a liability incurred as an officer or auditor.
27
B. Liquidity and capital resources
Year Ended December 31, 2001 compared to Year Ended December 31, 2000
At December 31, 2001, the Company had working capital of AUD$167,015 compared
to a working capital of AUD$531,613 at December 31, 2000.
Cash flow used in operating activities increased from AUD$2,854,435 in the
year ended December 31, 2000 to AUD$3,878,839 in the year ended December 31,
2001. The primary differences for increase in funds used was for marketing
fees, brokerage fees and corporate advisory fees.
Cash flow used for investing decreased from AUD$4,000,147 for the year ended
December 31, 2000 to AUD$819,562 in the year ended December 31, 2001. This
decrease in funds used for investing activities was primarily due to decreased
payments for acquisition, exploration, evaluation and development of oil
fields. A further loan of AUD$500,000 was advanced to Sands Solutions during
the year ended December 31, 2001 compared to AUD$2,500,000 during the year
ended December 31, 2000..
The Company generated cash flows from financing activities of AUD$3,977,725 in
the year ended December 31, 2001 compared to AUD$7,679,977 in the year ended
December 31, 2000. Cash flows from financing activities principally comprise
the issue of ordinary shares in the Company by private placements and the
conversion of share options into ordinary share capital of the Company.
Year Ended December 31, 2000 compared to Year Ended December 31, 1999
At December 31, 2000, the Company had working capital of AUD$531,613 compared
to a working capital deficit of AUD$2,072,377 at December 31, 1999.
Cash flow used in operating activities increased from AUD$1,982,595 in the
year ended December 31, 1999 to AUD$2,854,435 in the year ended December 31,
2000. The primary differences for increase in funds used was for marketing
fees, brokerage fees and corporate advisory fees.
Cash flow used for investing increased from AUD$ nil for the year ended
December 31, 1999 to AUD$4,000,147 in the year ended December 31, 2000. This
increase in funds used for investing activities was primarily due to increased
payments for acquisition, exploration, evaluation and development of oil
fields. A loan of AUD$2,500,000 was advanced to Sands Solutions during the
year ended December 31, 2000.
The Company generated cash flows from financing activities of AUD$7,679,977 in
the year ended December 31, 2000 compared to AUD$1,992,771 in the year ended
December 31, 2000. Cash flows from financing activities principally comprise
the issue of ordinary shares in the Company by private placements and the
conversion of share options into ordinary share capital of the Company.
28
C. Research and development, patents and licences
Not applicable
D. Trend information
Not applicable
29
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management
Name Age Position
Yusufali M Jumabhoy 64 Chairman and Chairman of the audit committee
Peter Mark Smyth 62 Vice Chairman and Director
Goh Yong Kheng 55 Chief Executive and Director
Ee Beng Yew 48 Director and member of the audit committee
Thinagaran 39 Director and member of the audit committee
Warren Martin Baillie 29 Company Secretary and General Counsel
All directors hold office until the next annual general meeting of
shareholders and until their successors have been elected and qualified. The
Company's officers are elected by the Board of Directors after each annual
meeting of the Company's shareholders and hold office until their death,
resignation or removal from office.
Directors
The names and particulars of the directors of the Company in office during and
since the end of the financial year are:
Yusufali M Jumabhoy - Chairman
Mr Jumabhoy was appointed as Chairman of the Board of Directors of CityView and
Chairman of the Independent Audit Committee on October 16, 2001. Mr Jumabhoy
holds a law degree from London University and is a barrister from the Inner
Temple in London. He was the Senior Partner of a law firm for many years and
served as council member of the Law Society of Singapore. Mr Jumabhoy has
extensive business experience as a commercial lawyer and is well known in the
South East Asian investment community. He is presently a consultant to a
commercial law firm in Singapore.
Peter Mark Smyth -Vice Chairman
Mr Smyth holds a masters degree in jurisprudence from Oxford University. After
admission as an attorney in London, he worked for Arthur Andersen in Sydney and
then Price Waterhouse as a taxation specialist. In 1969 Mr Smyth became the
company secretary and treasurer of the Australian branch of the Selection Trust
Group (now BP Minerals). Since leaving Selection Trust, Mr Smyth has founded and
developed a number of successful companies in various parts of the world. He was
Chief Executive of CityView from 1995 to December 2001.
Goh Yong Kheng - Chief Executive
Mr Goh holds a Masters degree of Science from the Australian National
University. After working with the University of Singapore for three years, Mr
Goh managed his own Marketing Consultant businesses in South East Asia for eight
years. Mr Goh was a Management Consultant in China for two years for a Hong Kong
company prior to his current position as a Director of a group of companies in
the water and oil technology businesses. Mr Goh was appointed a Director on
March 22, 2002 and Chief Executive on April 10, 2002.
Ee Beng Yew - Director
Mr Ee Beng Yew is an Associate of the Institute of Chartered Accountants in
England and Wales and has several years of working experience in Chartered
Accountants and Certified Public Accountants firms in England and Singapore
respectively. Mr Ee was also a Director of a public company listed on both the
Singapore and Malaysian Stock Exchanges and he was Managing Director of several
of its subsidiaries. Mr Ee was appointed a Director and member of the Company's
Independent Audit Committee on April 8, 2002.
30
Thinagaran - Director
Mr Thinagaran holds a law degree from the National University of Singapore and
has been in practice for the past 13 years as an advocate and solicitor in
Singapore. He was a partner with an established law firm and is currently
practicing as a consultant with the same firm. Mr Thinagaran was appointed a
Director and a member of the Company's Independent Audit Committee on March 22,
2002 .
Warren Martin Baillie - Company Secretary and General Counsel
In May 2000 Mr Baillie was appointed Company Secretary and General Counsel of
the Company. His experience is in both legal and financial arenas. Mr Baillie
has practiced as an attorney in the area of commercial and corporate law with
the major independent law firm Jackson McDonald. He has also worked with Ernst &
Young, Chartered Accountants. Mr. Baillie's qualifications include a Bachelor of
Law degree from Murdoch University in Western Australia and a Bachelor of
Commerce degree from the University of Western Australia. He is a qualified
Chartered Secretary and a member of the international Institute of Chartered
Secretaries and Administrators
The following persons previously served as Directors during part of 2001:
Leslie Robert Maurice Friday
Mr Friday was a director of CityView throughout the year until his resignation
on 4 December 2001.
Peter John Augustin Remta
Mr Remta was a director of CityView throughout the year until his resignation on
12 October 2001.
William Mansell Shotton
Mr Shotton was a director from November 16, 2001 until his resignation on April
11, 2002.
David Michael Saunders
Mr Saunders was a director from November 22, 2001 until his resignation on April
11, 2002.
Refer to item 8B (d) - Significant Changes regarding resignations and
appointments of officers or directors on May 31, 2002.
B. Compensation
Remuneration of Directors
The remuneration of all directors is determined and reviewed on a periodic
basis and appropriate recommendations are made to the board of directors. In
each instance the remuneration is assessed with regard to the nature of the
remuneration and the performance of the recipient together with all other
relevant factors with the overall objective of achieving maximum benefits for
shareholders by providing sufficient expertise and experience within the board
and executive officers.
The remuneration is made up of several elements including base fees and
salaries, incentive benefits (including the Incentive Option Plan established
under the Employee Share Plan) and other general benefits covering travel and
vehicle expenses and similar outgoings.
31
The remuneration for each director for the financial year (inclusive of benefits
to associated or related parties) was:
Name Base fee Other fees Incentives
$ $ (Options)
Y M Jumabhoy Nil Nil 200,000
P M Smyth 10,000 253,523 (1) 900,000
W M Shotton Nil 141,898 Nil
D M Saunders Nil 26,682 Nil
P J A Remta 10,000 91,135 700,000
L R M Friday 10,000 20,785 500,000
Note (1) See also Item 7B hereinafter.
Mr P M Smyth and Mr W M Shotton were executive directors of the Company while
the other directors were non - executive.
The options accruing to the directors were issued under the Company's Incentive
Option Plan and have been valued at 13.2 cents each using the Black Schoeles
Model except Mr Jumabhoy's options which have been valued at 5.6 cents each. The
Company's Employee Share Plan is described in Item 6.E.
No amount of money has been set aside by the Company to provide pension or
similar benefits for its officers and directors.
C. Board practices
The board of directors resolved on 14 June 2000 to formalize the terms of
reference of the board audit committee. The board has adopted a formal audit
charter with the primary objective of assisting the board in fulfilling its
responsibilities to shareholders, potential shareholders and the investment
community relating to accounting and reporting practices of the Company and
its present or future subsidiaries and the quality and integrity of the
financial reporting.
D. Employees
At December 31, 2001 the Company had 2 full time employees at its registered
office in Australia. Much of the Company's work is undertaken by consultants
on a per diem basis.
E. Share ownership
See Item 7A Major shareholders
Employee Share Plan
On 25 June 2001 the Company issued a total of 2,500,000 options under the
Incentive Option Plan forming part of the Employee Share Plan that was approved
by shareholders at the annual general meeting held on 31 May 2000. During the
year there were no more than ten eligible participants for the Employee Share
Plan. The options were issued as a performance incentive for no consideration to
eligible employees under the Incentive Option Plan. Each of these options
confers the right to acquire one (1) ordinary fully paid share in the capital of
the Company at a price of $0.35 each on or before 30 June 2002. In accordance
with the terms of the Employee Share Plan all issues of options under the
Employee Share Plan are at the discretion of the directors.
32
On 31 October 2001 a further 200,000 options were issued under the Incentive
Option Plan exercisable at a price of $0.20 each on or before 30 June 2002.
The remaining 2,000,000 employee options remained unexercised at the date of
this report.
Of the total of 2,300,000 that were issued to directors under the Incentive
Option Plan during 2001, 900,000 options were issued to Mr P M Smyth, 700,000
options were issued to Mr P J A Remta, 500,000 options were issued to Mr L R M
Friday and 200,000 options were issued to Mr Y M Jumabhoy. The options issued to
Messrs Remta and Friday expired on 12 December 2001 and 4 February 2002
respectively due to their resignations.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
A. Major shareholders
The following table sets forth the Ordinary Share ownership of each person
known by the Company to be the beneficial owner of five percent or more of the
Company's shares, each director and officer individually and the directors and
officers as a group as at March 31, 2002. Each person has sole voting and
investment power with respect to the shareholdings shown and all ownership is
of record and beneficial.
Name and address
of owner Number of Shares Position Percent of Class
Peter Mark Smyth
19 View Street
Peppermint Grove 6011
Western Australia 196,084 Vice Chairman *
Ee Beng Yew Nil
38 Toh Close (but Mr Ee is a shareholder of
Singapore 508011 Falcon Oil Pte Ltd which owns
13,000,000 fully paid ordinary
shares and options in the Company) Director
Goh Yong Kheng Nil
38B Jln Mat Jambol (but Mr Goh is a shareholder of
#02-12 Falcon Oil Pte Ltd which owns Chief Executive and
Singapore 119520 13,000,000 fully paid ordinary Director
shares and options in the Company)
33
Warren Baillie
3 Bennetts Place
Sorrento 6020 Company Secretary/
Western Australia 12,000 General Counsel
Falcon Oil Pte Ltd (2)
63 Robinson Road
Afro Asia Building
#03-16
Singapore 068894 13,000,000 18.53%
Malaysia Mining
Corporation Berhad
32nd Floor, Menara PNB
201A Jalan Tung Razak
Kuala Lumpur 50400
Malaysia 8,616,188 (1) 12.28%
Note (1) Includes an additional 6,624,790 Ordinary Shares issued on July 11,
2000 subject to an irrevocable contractual agreement made to Malaysia Mining
Corporation Berhad for consideration received. Note (2) See Item 8B (b)
regarding issue to Falcon Oil Pte Ltd of 13,000,000 securities. Falcon Oil Pte
Ltd is a Singaporean energy company which is a co-venturer with CityView in
the Madura and Simenggaris Blocks. Falcon's shareholders have interests in
substantial oil and gas producing fields in Central Asia and also interests in
water treatment and oil technology businesses.
Based on 70,161,616 shares outstanding as of March 31, 2002.
* Represents less than 1%
B. Related party transactions
Mr P M Smyth's family trust has a one-third equity interest in Sands Solutions.
The Company has lent $3,000,000 to Sands Solutions during 2000 and 2001 and has
charged Sands Solutions interest at 7% per annum payable in monthly instalments.
Mr P M Smyth is a director and shareholder of Romarcam Investments Pty Ltd. The
Company has entered into a contract with Romarcam Investments Pty Ltd dated 3
December 2001 for the provision of management services. Fees paid during the
financial year at normal commercial rates were AUD$253,523 compared to
AUD$213,825 in the previous year.
Mr P J A Remta is an employee and members of his family are shareholders of
Westchester Pty Ltd which provided consultancy and corporate management services
to the Company during 2001 under a consultancy agreement dated 1 February 2001.
Fees paid during the financial year at normal commercial rates were AUD$91,135.
34
Mr L R M Friday is a director and shareholder of Lifestyle Nominees Pty Ltd
which provided consultancy services to the Company. Fees paid during the
financial year were AUD$20,785.
During 2001 the Company issued a total of 2,300,000 options to directors under
the Incentive Option Plan established by the Employee Share Plan. Of that number
900,000 options were issued to Mr P M Smyth, 700,000 options were issued to Mr P
J A Remta, 500,000 options were issued to Mr L R M Friday and 200,000 options
were issued to Mr Y M Jumabhoy. The options issued to Messrs Remta and Friday
have expired.
There are no additional interests of management in transaction involving the
Company except for those stated herein or in Item 17 - notes to financial
statements.
C. Interests of experts and counsel
Not applicable
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Reference is made to "Item 17. Financial Statements" for the financial
statements included in this annual report.
Legal proceedings
The Company is not a party to any material litigation and to its knowledge, no
action, suit or proceedings against it has been threatened by any person or
firm.
To date, the Company has not paid a dividend. The declaration, amount, and
date of distribution of any dividend in the future will be decided by the
Board of Directors from time to time based upon and subject to the Company's
earnings, financial requirements, and other conditions prevailing at the time.
B. Significant changes
There has been no financial statement effect for the year ended 31 December
2001 for each of the subsequent events listed below unless otherwise stated:
(a) On 8 January 2002 the Company, through its wholly owned subsidiary
CityView Asia Pty Ltd, entered an agreement to acquire shares in an oil
company which holds legally and owns beneficially 50% of the
shareholding in another energy based company which has identified and
is entitled to be the owner of three separate gas-gathering projects.
Under the agreement, the Company has an option to acquire shares with
the intention that through that shareholding the Company will become
entitled to the benefits from the development of the projects.
On 28 February 2002 the Company paid an option fee of US$200,000. The
option fee is refundable if necessary regulatory approvals are not
obtained and if the Company exercises its option to acquire shares then
the option fee will form part of the consideration payable.
35
(b) On 14 January 2002 the Company issued 400,000 ordinary fully paid
shares to private investors in the United Kingdom. The shares were
issued at a price of AUD$0.20 with each share entitled to one unlisted
option convertible into one ordinary fully paid share at an exercise
price of AUD$0.40 each and exercisable by June 24, 2002.
On 28 February 2002 the Company issued 13 million ordinary fully paid
shares to Falcon Oil Pte Ltd ("Falcon") a Singaporean energy company
which is co-venturer with CityView in the Madura and Simenggaris
blocks. The shares were issued at a price of AUD$0.24 with each share
entitled to one unlisted option convertible into one ordinary fully
paid share at an exercise price of AUD$0.40 each and exercisable by
June 24, 2002.
Both of these placements were in accordance with the authority given by
shareholders at the Company's general meeting held on 24 December 2001.
(c) On 4 February 2002 due to a director's resignation, 500,000 employee
options expired.
(d) On 22 March 2002 the Company appointed Mr Goh Yong Kheng and Mr
Thinagaran as directors of the Company and on 4 April 2002 appointed Mr
Ee as a director of the Company. On 11 April 2002 Messrs Shotton and
Saunders resigned as directors of the Company and Mr Shotton organised
a management buy-out of the Company's former subsidiary CityView
Corporation (UK) Ltd. Mr Goh was appointed Chief Executive of the
Company on 10 April 2002.
On May 31, 2002 Mr Smyth resigned as a director of the Company and
Messrs Saddique, Ramli and Arbouw were appointed directors
Mr Saddique was appointed Chief Executive and also a director of the
Company on May 31, 2002 to replace Mr Goh, who resigned as Chief
Executive on that day. Mr Saddique is the president of Central Asia
Petroleum and is also a director and shareholder of Falcon Oil Pte Ltd.
Mr Md Nazri Ramli is a senior geologist with Malaysia Mining
Corporation Berhad ("MMC").
Mr John Arbouw is a journalist, writer and communications consultant
with over 25 years experience in newspapers and magazines in Canada,
Europe, Asia, New Zealand and Australia.
(e) On 28 February 2000 the Company acquired 1,000,000 shares in CGX Energy
Inc at a cost of $1,676,150 which was lent to it by Azure Energy Fund
Inc. On 18 May 2000 the Company sold the shares for the equivalent of
$2,531,000 and after settlement of the loan realised a gross profit of
$854,850. That profit was not received from Azure Energy Fund Inc
during 2000 and was fully provisioned during that year. The receivable
and corresponding provision were written off during 2001.
On 2 April 2002 a net profit of US$183,831 was received in relation to
the sale. This will be brought to income in the Company's financial
statements for the year ending 31 December 2002.
36
(f) In April 2002, in accordance with the recommendations of the due
diligence committee, the Company signed agreements with Sands Solutions
pursuant to which the Company no longer has a contingent liability for
Primeorder AG.
The financial effects of the transactions referred to in this item will be
included in the Company's accounts for the year ended 31 December 2002.
37
ITEM 9. THE OFFER AND LISTING
Not applicable
ITEM 10. ADDITIONAL INFORMATION
A. Share capital
Not applicable
B. Memorandum and articles of association
This information has been previously provided.
C. Material contracts
Petroleum Permit Block SC41 - offshore Western Philippines
On 30 June 1999 CityView's wholly owned subsidiary, CityView Asia Pty
Ltd, executed an agreement with Malaysia Mining Corporation Berhad
("MMC") for the transfer of the Company's 49% interest in MMC
Exploration & Production (Philippines) Pte Ltd ("MMCEPPL") in full or
partial satisfaction of the Company's then outstanding debt to MMC and
to discharge the Deed of Charge of 4 February 1998. At the general
meeting of the Company's shareholders on 30 December 1999, the
shareholders approved the sale and the Deed of Charge was discharged on
24 January 2000.
In April 2000 the Company, through its subsidiary CityView Asia Pty
Ltd, entered an agreement to acquire an interest of 2.5% in Block SC 41
from ASAB Resources Limited. As part of this acquisition all
contributions to expenses of the current work program of two wells
(which includes Rhino) within the block have been met on behalf of the
Company by MMCEPPL. The consideration for the acquisition was the issue
to ASAB Resources Limited as vendor of 2,200,000 million shares in the
capital of the Company valued at US$1,100,000 for each percentage point
interest.
Indonesia - Madura and Simenggaris
25 January 2000, agreements were signed between the Company and PT
Medco Energi Corporation Tbk ("Medco") in respect of the Madura and
Simenggaris Production Sharing Contracts. Under these agreements Medco
will supervise and pay for the new work programs for the development
and bringing into production of the oil and gas files covered by these
contracts. The Company anticipates that from 2002 onwards each party
will contribute on a pro-rata basis in accordance with their interests
in each PSC, which are Medco 75% and CityView 25%.
Gas gathering projects
On 8 January 2002 the Company, through its wholly owned subsidiary
CityView Asia Pty Ltd, entered an agreement to acquire shares in an oil
company which holds legally and owns beneficially 50% of the
shareholding in another energy based company which has identified and
is entitled to be the owner of three separate gas-gathering projects.
Under the agreement, the Company effectively has an option to acquire
shares with the intention that through that shareholding the Company
will become entitled to the benefits from the development of the
projects.
38
In 2002 the Company has paid an option fee of US$400,000. The option
fee is refundable if necessary regulatory approvals are not obtained
and if the Company exercises its option to acquire shares then the
option fee will form part of the consideration payable.
Sands Solutions
In 2000 a heads of agreement was entered between CityView and Sands
Solutions under which CityView acquired the rights to take up a
strategic interest in Sands Solutions, a developer of integrated B2B
applications. Under the terms of the heads of agreement, CityView
agreed to make a commercial loan to Sands Solutions with the right to
convert the loan into equity upon conclusion of extensive due diligence
and an independent valuation.
In April 2002, in accordance with the recommendations of the Due
Diligence Committee, the Company signed agreements with Sands Solutions
pursuant to which CityView can elect to have all moneys repaid to it on
1 July 2003 or CityView can elect to convert its loan into equity in
Sands Solutions on a formula based on an independent valuation to be
undertaken prior to the repayment date.
Primeorder AG
In November 2000 the Company entered an agreement with Sands Solutions
under which the Company acquired a beneficial interest of 25% in
Primeorder AG which is a marketing company established in Hamburg,
Germany to market the e-commerce applications of Sands Solutions
throughout Europe. Sands Solutions has a 26% interest in Primeorder AG.
As partial consideration for the Company's interest in Primeorder AG,
the Company agreed to lend up to AUD$2,000,000 to Sands Solutions. This
money will be used for the establishment and promotion of Primeorder
AG. The extent of the payments and when they will be made to satisfy
the loan will depend on how rapidly Primeorder AG expands its business
in Europe. The Company has already advanced AUD$332,251 to Sands
Solutions for use by Primeorder AG with the advance forming part of the
loan disclosed herein.
As further consideration for the acquisition of its interest in
Primeorder AG, the Company issued 500,000 options in November 2000 to
persons in Germany who are associated with Primeorder AG. The options
were convertible into fully paid ordinary shares at an exercise price
of AUD$0.80 each and all the options expired unexercised on 14 June
2001.
In April 2002, in accordance with the recommendations of the Due
Diligence Committee, the Company signed agreements with Sands Solutions
pursuant to which the Company no longer has an interest in Primeorder
AG and the Company has been released from all obligations to provide
more funds to Sands Solutions or its subsidiary Primeorder AG.
39
D. Exchange controls
Exchange controls and other limitations affecting security holders
Australia has largely abolished exchange controls on investment transactions.
The Australian dollar is freely convertible into US dollars except that all
payments and cash transactions in excess of $5,000 to non-residents must be
reported to the Australian Cash Transactions Agency, which monitors such
transactions, whether they be in the form of cash, dividends, capital or
profits.
The Foreign Acquisitions and Takeovers Act ("Foreign Acquisitions Act") sets
forth limitations on the rights of non-Australian residents to own or vote the
ordinary shares of an Australian company. The Foreign Acquisitions Act permits
the Commonwealth Treasurer to examine acquisitions and arrangements that could
result in foreign persons controlling an Australian business. The Commonwealth
Treasurer may prohibit a proposed takeover if it would lead to a change of
control of a business where the resultant control would be foreign and
therefore considered to be against the national interest. The Foreign
Acquisitions Act contains divestiture provisions to ensure it can be enforced,
as well as, stringent monetary-penalty provisions for breaches and the making
of false or misleading statements.
The Foreign Acquisitions Act requires the prior approval of the Commonwealth
Treasurer for certain classes of persons to enter into an agreement to acquire
shares of an Australian company, if, after the acquisition, such person or
corporation would hold a substantial interest in such corporation, as
explained herein. The foregoing approval requirement applies to the following
classes of persons: (i) any natural person not ordinarily resident in
Australia, (ii) any corporation in which either a natural person not
ordinarily resident in Australia or a foreign corporation (as defined in the
Foreign Acquisitions Act) holds a substantial interest, and (iii) two or more
such persons or corporations which hold an aggregate substantial interest.
The Foreign Acquisitions Act requires foreign persons or foreign-controlled
entities to give forty (40) days notice to the Commonwealth Treasurer of a
proposal to acquire or increase (or offer to acquire or increase) a single
interest of 15% or more of the ownership or voting power of an Australian
company. If two or more foreign persons or foreign-controlled entities are
acting together, the threshold is 40% in the aggregate.
The Constitution of the Company does not contain any additional limitations on
a non-resident's right to hold or vote the Company's securities.
E. Taxation
The following discussion summarizes US federal and Australian tax consequences
of the ownership of Shares by a person ("US Portfolio Stockholder") that: (i)
is a citizen or resident of the US, a US corporation or that otherwise will be
subject to US federal income tax on a net income basis in respect of the
Shares; (ii) is not a resident of Australia for Australian tax purposes; (iii)
has not, within the preceding five years, beneficially owned 10% of the issued
capital or voting stock in the Company; and, (iv) has not used the Shares in
carrying on a trade or business, wholly or partly through a permanent
establishment in Australia.
The statements regarding US and Australian tax laws set forth herein are based
on those laws as in force on the date of this document that may affect the tax
consequence described herein (some of which may have retroactive effect). This
summary is not exhaustive of all possible tax consideration and investors are
advised to satisfy themselves as to the overall tax consequences, including
specifically the consequences under US, state, local and other laws, of the
acquisition, ownership and disposition of Shares by consulting their own tax
advisers.
40
Taxation of Gains on Sale
A US Portfolio Stockholder is not subject to Australian income tax on the sale
of its Shares in the Company.
Passive Foreign Investment Company Status
A foreign corporation is classified as a passive foreign investment company (a
"PFIC") in any taxable year in which, after taking into account the income and
assets of certain subsidiaries pursuant to the applicable US Internal Revenue
Code "look-through" rules, either (i) at least 75% of its gross income is
passive income, or (ii) at least 50% of the average value of its assets is
attributable to assets that produce passive income from cash holdings and
profits from the sale of marketable securities, even if derived from an active
business.
If the Company were a PFIC during any year in which a US Portfolio Stockholder
owned Shares, that US Portfolio Stockholder would be subject to additional
taxes on any gain realized from the sale or any other disposition of the
Shares, or any excess distribution received from the Company.
A US Portfolio Stockholder will have an excess distribution to the extent that
distributions on Shares during a taxable year exceeded 125% of the average
amount received during the three preceding taxable years (or, if shorter, the
US Portfolio Stockholders' holding period for the Shares). To compute the tax
on gain or on an excess distribution, (i) the excess distribution or the gain
is allocated ratably over the US Portfolio Stockholder's holding period for
the Shares, (ii) the amount allocated to the current taxable year at the
highest applicable marginal rate in effect for each year and (iii) an interest
charge is imposed to recover the deemed benefit from the deferred payment of
the tax attributable to each year.
If the Company is a PFIC, US persons that own an interest in another entity
that owns shares in the Company may be treated as indirect holders of their
proportionate share of that entity's Shares, and may be taxed on their
proportional share of any gain or excess distribution from that entity
attributable to the entity's in the Company. A US person that owns an interest
in the entity that is an actual holder of Shares will be treated as an
indirect holder if (i) the actual holder is itself a PFIC, (ii) the actual
holder is a foreign corporation other than a PFIC in which the US person who
owns an interest in the actual holder owns (directly or indirectly) at least
50% in value of the actual holder's shares, or (iii) the actual holder is a
partnership, trust or estate in which the US Portfolio Stockholder is a
partner or beneficiary. An indirect holder must take into income its portion
of any excess distribution received by the actual holder or any gain
recognized by the actual holder on the Shares. An indirect holder also must
treat an appropriate portion of its gain on the sale or disproportion of its
interest in the actual holder as gain on the sale of the Shares. If the
Company were a PFIC, a US Portfolio Stockholder of Shares would generally be
subject to similar rules with respect to distribution by, and dispositions of
the shares of, any direct or indirect subsidiaries of the Company that were
PFICs.
The Internal Revenue Code provides each US stockholder in an PFIC with an
election whereby the additional US tax burden imposed on gain on sale of PFIC
stock and receipt of excess distributions from a PFIC, as described above, can
be avoided. This election generally requires that the PFIC stockholder include
in its income, its pro-rata share of the PFICs distributed and undistributed
income, as computed under US tax accounting principles, on an current basis.
In certain cases, a further election is available to an electing PFIC
stockholder to defer the tax payable with respect to the stockholder's
pro-rata share of the PFICs undistributed income, although in this case
interest applies on the deferred tax. Thus, even if the first or both of these
elections are made, a US stockholder of a PFIC loses the tax benefit, which is
available with respect to investment in a non-PFIC corporation, of deferring
and converting to capital gain the investor's personal US tax liability with
respect to the Company's undistributed income. These elections also generally
require that the PFIC annually provide the electing PFIC shareholder, for
inspection by the Internal Revenue Service, an analysis of the PFICs income
computed under US tax accounting principals.
41
The Company does not intend to furnish any US Portfolio Stockholder with the
information that it would need in order to avoid the PFIC tax treatment
described by electing to include its share of the Company's income on a
current basis. Therefore these elections may not be available to the
Company's US Portfolio Stockholders.
There are other adverse US tax rules associated with holding Shares in a
company that has been a PFIC during any part of a US Portfolio Stockholders
holding period. These include a denial of a step-up in a tax basis on the
death of a US individual stockholder, and burdensome reporting requirements.
If the Company ceases to be a PFIC, a US Portfolio Stockholder may avoid the
contained application of the tax treatment described above by electing to be
treated as if it sold its Shares on the last day of the last taxable year in
which the Company was a PFIC. Any gain is recognized and subjected to tax
under the rules described above. Loss is not recognized. The US Portfolio
Stockholder's basis in the Shares is increased by the amount of gain
recognized on the deemed sale. This election is not available to a US
Portfolio Stockholder that previously elected to include its share of the
Company's income on a current basis. The US Congress recently has considered
legislation that would alter the PFIC rules substantially. Prospective
investors should consult their own tax advisors as to the potential
application of the PFIC rules, as well as, the impact of any proposed
legislation that could affect them.
Taxation of Dividends
The Company does not expect to pay cash dividends for the foreseeable future,
but, rather, to retained earnings, if any, to finance expansion of its
business. Should the Company begin paying dividends, however, the Company's
dividends to its US Portfolio Stockholders would be exempt from Australian
dividend withholding tax to the extent such dividends are considered to be
"franked" for Australian tax purposes. A dividend is considered to be
"franked" to the extent that such dividend is paid out of the Company's income
on which Australian corporate tax has been levied. Even if not "franked," a
dividend will be exempt from Australian dividend withholding tax if it is paid
out of the Company's non-Australian source dividend income and the Company
specifies a "foreign dividend account declaration percentage" for such
purpose. The Company anticipates that if it pays dividends, such dividends
would likely be either "franked," or paid from the Company's non-Australian
source dividend income as specified in the foreign dividend account
declaration percentage, and therefore would be exempt from Australian dividend
withholding tax.
If, however, dividends are paid by the Company that are not "franked," nor
paid from the initial Company's non-Australian source dividend income as
specified in the foreign dividend account declaration percentage, such
dividend would then be subject to Australian dividend withholding tax.
However, in accordance with the provisions of the Australia/United States
Income Tax Treaty, Australian withholding tax on dividend income derived by a
US stockholder would be limited to 15% of the gross amount of the dividend.
Subject to certain limitations, any Australian dividend withholding tax may be
claimed as a credit against the federal income tax liability of the US
stockholder. The overall limitation on non-US taxes eligible for US credit is
calculated separately with respect to specific classes, or "baskets" of
income. For this purpose, dividends distributed by the Company will generally
constitute "passive income" or, in the case of certain US Portfolio
Stockholder, "financial service income." The US tax credits allowable with
respect to each income basket cannot exceed the US federal income tax payable
with respect to such income. The consequences of the separate limitation
calculation will depend on the nature and sources of each US Portfolio
Stockholder's income and the deductions allocable thereto.
42
Distributions on the Shares will constitute dividends for US Federal income
tax purposes to the extent paid out of current or accumulated earnings and
profits, if any of the Company, as determined for US federal income tax
purposes. If the Company pays a dividend, such dividend would likely be paid
in Australian dollars. The amount of dividend income for a US Portfolio
Stockholder will be the US dollar value of the dividend payment on the date of
receipt, even if the dividend is not converted into US dollars Gain or loss,
if any, realized on a sale or other disposition of Australian Dollars will be
ordinary income or loss to the US Portfolio Stockholder. Dividends paid by the
Company will not be eligible for the "inter-corporate dividends received"
deduction allowed to US corporations.
Estate and Gift Tax
Australia does not impose any estate, inheritance or gift taxes. Therefore, no
Australian estate tax, inheritance tax or gift tax will be imposed on the
death or upon a lifetime gift by, a US Portfolio Stockholder.
F. Dividends and paying agents
Not applicable
G. Statement by experts
Not applicable
H. Documents on display
Persons having a right of inspection of the Company's records
under the Australian corporations and securities legislation can inspect
such records by contacting the Company's registered office at 63 Burswood
Road, Burswood, Western Australia, Telephone: (61 8) 6250 9099,
Fax: (61 8) 6250 9088, email: info@cityviewcorp.com.
I. Subsidiary information
Additional information not applicable
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
A. Debt securities
Not applicable
B. Warrants and rights
Not applicable
43
C. Other securities
Not applicable
D. American depositary shares
Not applicable
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
Not applicable
E. Use of proceeds
Not applicable
ITEM 15. [RESERVED]
ITEM 16. [RESERVED]
44
PART IV
ITEM 17. FINANCIAL STATEMENTS.
CITYVIEW CORPORATION LIMITED
Annual Report For The Financial Year Ended 31 December 2001
Page Number
---------------
Auditors' Report F-2
Statement of Financial Performance F-4
Statement of Financial Position as at 31 December 2001 F-5
Statement of Cash Flow F-6
Notes to and Forming Part of the Financial Statements F-7-F-28
F-1
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
CityView Corporation Limited
We have audited the accompanying consolidated statement of financial
position of CityView Corporation Limited as of December 31, 2001 and 2000 and
the related consolidated statements of financial performance, and cash flows for
the years ended December 31, 2001, 2000, and 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 audit.
We conducted our audit in accordance with United States 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, the consolidated financial position of CityView Corporation Limited as
of December 31, 2001 and 2000 and the consolidated results of its financial
performance and its cash flows for the years ended December 31, 2001, 2000 and
1999 in conformity with Australian generally accepted accounting principles.
/s/Feldman Sherb & Co., P.C.
Feldman Sherb & Co., P.C.
Certified Public Accountants
New York, New York
June 4, 2002
F-2
The accompanying financial statements have been prepared in accordance with
Australian generally accepted accounting principles.
F-3
CITYVIEW CORPORATION LIMITED
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-99 31-Dec-01 31-Dec-00
NOTE AUD$ AUD$ AUD$ AUD$ AUD$
Revenues from ordinary activities 2 229,087 207,368 208 229,087 207,368
Employee wages and benefits expense (185,558) (118,123) (271,269) (185,558) (118,123)
Depreciation and amortization expense (5,226) (2,184) (8,252) (5,226) (2,184)
Brokerage and advisory fees (549,638) (607,455) - (549,638) (607,455)
Other expenses from ordinary activities (3,653,952) (5,017,182) (10,815,794) (3,805,528) (4,986,568)
------------------------------------------ ------------------------
Profit (loss) from ordinary activities before
income tax expense 3 (4,165,287) (5,537,576) (11,095,107) (4,316,863) (5,506,962)
------------------------------------------ ------------------------
Profit (loss) from ordinary activities after related
income tax expense (4,165,287) (5,537,576) (11,095,107) (4,316,863) (5,506,962)
Net profit (loss) attributable to members of the
parent entity (4,165,287) (5,537,576) (11,095,107) (4,316,863) (5,506,962)
------------------------------------------ ------------------------
Basic earnings (loss) per share (cents per share) 16 (0.08) (0.13) (0.70)
The accompanying notes form part of these financial statements.
F-4
CITYVIEW CORPORATION LIMITED
STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2001
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
NOTE AUD$ AUD$ AUD$ AUD$
CURRENT ASSETS
Cash 8 101,883 822,559 56,425 822,551
Receivables 9 173,487 - 17,836 -
------------------------------- -----------------------------
TOTAL CURRENT ASSETS 275,370 822,559 74,261 822,551
------------------------------- -----------------------------
NON CURRENT ASSETS
Receivables 10 10,952,187 10,225,105 15,572,187 14,845,105
Investments 11 - 550,500 16 550,510
Property, plant and equipment 12 10,177 9,723 10,177 9,723
Acquisition, exploration and development 13 4,620,002 4,620,002 - -
------------------------------- -----------------------------
TOTAL NON CURRENT ASSETS 15,582,366 15,405,330 15,582,380 15,405,338
------------------------------- -----------------------------
TOTAL ASSETS 15,857,736 16,227,889 15,656,641 16,227,889
------------------------------- -----------------------------
CURRENT LIABILITIES
Accounts payable 14 108,355 290,946 58,836 290,946
------------------------------- -----------------------------
TOTAL CURRENT LIABILITIES 108,355 290,946 58,836 290,946
------------------------------- -----------------------------
TOTAL LIABILITIES 108,355 290,946 58,836 290,946
------------------------------- -----------------------------
NET ASSETS/(LIABILITIES) 15,749,381 15,936,943 15,597,805 15,936,943
=============================== =============================
SHAREHOLDERS' EQUITY
Contributed capital 15(a) 64,851,446 60,873,721 54,295,996 50,318,271
Accumulated losses 15(e) (49,102,065) (44,936,778) (38,698,191) (34,381,328)
------------------------------- -----------------------------
Shareholders' equity attributable to the
members of the parent entity 15,749,381 15,936,943 15,597,805 15,936,943
------------------------------- -----------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 15,749,381 15,936,943 15,597,805 15,936,943
=============================== =============================
The accompanying notes form part of these financial statements.
F-5
CITYVIEW CORPORATION LIMITED
STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-99 31-Dec-01 31-Dec-00
NOTE AUD$ AUD$ AUD$ AUD$ AUD$
Cash Flows From Operating Activities
Interest received 211,251 139,119 205 211,251 139,119
Interest and other costs of finance paid (549,638) (607,455) (11,040) (549,638) (607,455)
Payments to suppliers and employees (3,540,452) (2,386,099) (1,971,760) (3,181,553) (2,386,099)
-------------------------------------- ---------------------------
Net cash provided (used) by operating activities 19(d) (3,878,839) (2,854,435) (1,982,595) (3,519,940) (2,854,435)
-------------------------------------- ---------------------------
Cash flows from investing activities
Loan to Sands Solutions.com Pty Ltd ("Sands Solutions") (500,000) (2,500,000) - (500,000) (2,500,000)
Payment for the development of oil fields - (949,647) - - (949,647)
Payment for investment in listed corporation. (163,911) (550,500) - (163,911) (550,500)
Payment for the acquisition, exploration,
evaluation and development of oil fields (155,651) - - - -
Advance to controlled entities - - - (560,000)
-------------------------------------- ---------------------------
Net cash provided/(used) by investing activities (819,562) (4,000,147) - (1,223,911) (4,000,147)
-------------------------------------- ---------------------------
Cash from financing activities
Proceeds from the issue of shares 3,977,725 7,679,977 1,992,771 3,977,725 7,679,977
Proceeds from the issue of debentures - - - - -
Loans from related party - - - - -
Repayment of loan from related party - - - - -
-------------------------------------- ---------------------------
Net cash provided/(used) by financing activities 3,977,725 7,679,977 1,992,771 3,977,725 7,679,977
-------------------------------------- ---------------------------
Net increase (decrease) in cash (720,676) 825,395 10,176 (766,126) 825,395
Cash at the beginning of the financial year 822,559 11,679 1,503 822,551 (3,371)
Adjustment re cash held in entities disposed - (14,515) - - 527
-------------------------------------- ---------------------------
Cash at the end of the financial year 19(a) 101,883 822,559 11,679 56,425 822,551
====================================== ===========================
The accompanying notes form part of these financial statements.
F-6
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
1. Statement of Accounting Policies
Basis of Reporting
The financial report is a general purpose financial report which has been
prepared in accordance with the Corporations Act 2001, all applicable
Accounting Standards and Urgent Issues Group Consensus Views and other
authoritative pronouncements of the Australian Accounting Standards Board,
and complies with other legal requirements.
The financial report covers the consolidated entity CityView Corporation
Limited ("CityView") and its controlled entities and CityView as an
individual parent entity. CityView is a listed public company, incorporated
and domiciled in Australia.
The financial report has been prepared on an accrual basis and is based on
historical cost and, except where stated, does not take into account
changing money values or current valuations of non current assets. Cost is
based on the consideration given in exchange for assets.
Significant Accounting Policies
Accounting policies are selected and applied in a manner which ensures that
the resulting financial information satisfies the concepts of relevance and
reliability, and that the substance of underlying transactions and other
events is reported.
The following significant accounting policies have been adopted in the
preparation and presentation of the financial report:
(a) Principles of Consolidation
A controlled entity is an entity controlled by CityView. Control exists
where CityView has the capacity to dominate the decision making in relation
to the financial and operating policies of another entity so that the other
entity operates with CityView to achieve the objectives of CityView. A list
of controlled entities is contained in Note 18 to the financial
statements.
All inter-company balances and transactions between entities in the
consolidated entity, including any unrealized profits or losses, have been
eliminated on consolidation.
Where controlled entities have entered or left the consolidated entity
during the year, their operating results have been included from the date
control was obtained or until the date control ceased.
Outside interests in the equity and results of the entities that are
controlled are shown as a separate item in the consolidated financial
report.
(b) Taxation
The Company adopts the liability method of tax effect accounting under
which the income tax expense shown in the statement of financial
performance is calculated on profit/(loss) from ordinary activities
adjusted for permanent differences. The tax effect of timing differences
arising from items being brought to account in different periods for income
and accounting purposes is carried forward in the balance sheet as a future
tax benefit or a deferred tax liability.
Future income tax benefits:
(i) are not brought to account unless realisation of the asset is
assured beyond reasonable doubt; and
(ii) where they relate to tax losses are only brought to account when
their realisation is virtually certain.
F-7
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Summary of Accounting Policies (cont)
(c) Foreign Currency
Foreign currency transactions during the year are converted to Australian
currency at the rates of exchange applicable at the dates of the
transactions. Amounts receivable and payable in foreign currencies at
balance date are converted at the rates of exchange ruling at that date.
The gains and losses from conversion of short-term assets and liabilities,
whether realised are included in profit from ordinary activities as they
arise.
The assets and liabilities of the overseas controlled entities which are
self-sustaining, are translated at year-end rates and operating results are
translated at the rates ruling at the end of each month. Gains and losses
arising on translation are taken directly to the foreign currency
translation reserve.
(d) Acquisition, Exploration and Development Expenditure
The consolidated entity has interests in contracts to develop and operate
oil and gas fields in Indonesia and the Philippines. These contracts are
under standard terms for foreign companies operating in those countries and
the amounts for acquisition costs and exploration and development
expenditure are recorded at cost. The contracts are subject to controls and
regulations by the respective host countries and to some extent may be
affected by the political stability of those countries. While the share of
revenue from shareable oil and gas from the operations in Indonesia and the
Philippines will be receivable by the consolidated entity in US dollars,
the ultimate recoverability of the acquisition costs and exploration and
development expenditure will be dependent on the future development and
successful exploitation of the respective areas of interest or the ultimate
sale of those areas. The directors are not able to determine what effect
these factors, together with any fall in world oil and gas prices, may have
on the future values of any expenditure carried forward.
(e) Equipment
Each class of equipment is carried at cost or fair value less, where
applicable, any accumulated depreciation.
The carrying amount of equipment is reviewed annually by directors to
ensure it is not in excess of the recoverable amount from these assets. The
recoverable amount is assessed on the basis of the expected net cash flows
which will be received from the assets employment and subsequent disposal.
The expected net cash flows hav3e not been discounted to their present
values in determining recoverable amounts.
The cost of fixed assets constructed within the consolidated entity
includes the cost of materials, direct labour, borrowing costs and an
appropriate proportion of fixed and variable overheads.
(f) Depreciation
All equipment has been depreciated on a straight-line basis so as to write
off the net cost of each asset over its expected useful life. The normal
estimated useful life for equipment adopted for depreciation purposes is 3
years.
(g) Investments
Investments in controlled entities are recorded at cost and other
investments are carried at cost or valuation determined by the directors.
(h) Payables
Trade payables and other accounts payable are recognized when the
consolidated entity becomes obliged to make payments for the purchase of
goods or services received.
F-8
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Summary of Accounting Policies (cont)
(i) Receivables
Trade and other receivables are recorded at amounts due less provision for
doubtful debts if recovery of the full amount due is no longer probable.
(j) Recoverable Amount of Non-current Assets
Non-current assets are written down to the recoverable amount where the
carrying value of a non-current asset exceeds the recoverable amount. In
determining the recoverable amount expected net cash flows have not been
discounted.
(k) Employee Entitlements
Provision is made for the company's liability for employee entitlements
arising from services rendered by employees to balance date. Employee
entitlements expected to be settled within one year together with
entitlements arising from wages and salaries, annual leave and sick leave
which will be settled after one year, have been measured at their nominal
amount. Other employee entitlements payable later than one year have been
measured at the present value of the estimated future cash outflows to be
made for those entitlements.
Contributions are made by the consolidated entity to employee
superannuation funds and are charged as expenses when incurred.
The Company does not record as an asset or a liability, the difference
between the employer established defined benefit superannuation plan's
accrued benefits and the net market value of the plans assets.
The Company operates an Employee Share Plan, details of which are provided
in Note 6 to the financial statements. Profits or losses incurred by
employees, being the difference between the market value and the par value
of the shares acquired, are not recorded by the Company as remuneration
paid to employees.
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
-------------- -------------- ----------------- ----------------
Number of employees at year end 2 2 2 2
The Company also uses the services of several consultants and contractors
on an as needs basis.
(l) Cash
For the purpose of the statement of cash flows, cash includes:
- Cash on hand and at call deposits with banks or financial
institutions, net of bank overdrafts and;
- Investments in money market instruments with less than 14
days to maturity.
(m) Revenue
Interest revenue is recognised on a proportional basis taking into
account the interest rates applicable to the financial assets.
Dividend revenue is recognised when the right to receive a dividend has
been established. Dividends received from associates and joint venture
entities are accounted for in accordance with the equity method of
accounting.
(n) Comparative Figures
Where required by Accounting Standards comparative figures have been
adjusted to conform with changes in presentation for the current
financial year.
F-9
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Summary of Accounting Policies (cont)
(o) Going Concern
The financial statements have been prepared adopting the going concern
convention which assumes continuity of normal business activities and the
realisation of assets and the settlement of liabilities in the ordinary
course of business. The going concern convention has been adopted as
agreements have been entered into under which the share of all expenditure
for exploration and development of the areas of interest in Indonesia and
the Philippines normally payable by the consolidated entity will in each
case be met by outside joint venture partners (refer to Note 21(a). In
addition arrangements have been made to raise sufficient funds to meet
continuing operations of the consolidated entity.
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-99 31-Dec-01 31-Dec-00
A$ A$ A$ A$ A$
2. Revenue
Revenue - Non Operating Activities
Proceeds from the sale of non current
investment - - 3 - -
Revenue - Operating Activities
Sales - - - - -
Interest received on loan to Sands Solutions 216,522 63,095 - 216,522 63,095
Interest received - other parties 12,565 76,024 205 12,565 76,024
Foreign exchange gain - 68,249 - - 68,249
------------------------------------------------------------------------
Total Revenue 229,087 207,368 208 229,087 207,638
------------------------------------------------------------------------
The shareholders of the Company on 30 December 1999 agreed to partially satisfy
the debt to Malaysia Mining Corporation Berhad of $14,861,564 by the sale to it
of the Company's interest of 6.125% in the Petroleum Permit Block held under
Service Contract 41 in offshore Philippines. This net interest in Service
Contract 41 accrued to the Company through its shareholding of 49% in MMC
Exploration & Production (Philippines) Pte Ltd. The sale was achieved by the
Company transferring to Malaysia Mining Corporation Berhad all of its
shareholding in MMC Exploration & Production (Philippines) Pte Ltd for a price
of $10,555,450. The interest of the Company in Service Contract 41 (represented
by its shareholding in MMC Exploration & Production (Philippines) Pte Ltd) had
been written down to a nil value The sale of $10,555,450 was recorded in the
financial statements of the Company for the year ended 31 December 1999 as a
capital contribution.
3. Loss from ordinary activities
Loss from ordinary activities before income tax has been determined after:
Expenses
General and administrative expenses 870,930 1,728,903 3,910,909 834,336 1,698,289
Depreciation 5,226 2,184 9,097 5,226 2,184
Provision for doubtful debts - 854,850 - - 854,850
Interest expense - 59,570 973,121 - 59,570
Marketing services 1,579,107 1,499,430 - 1,579,107 1,499,430
Corporate public relations 229,864 818,007 - 229,864 818,007
Financial and brokerage services 319,774 86,000 - 319,774 86,000
Consultants services 675,063 696,000 - 303,233 696,000
Investment loss 714,410 - - 714,410 -
Loss on disposal of subsidiary - - 1,201,388 - -
Provision for diminution of investment - - 214,413 560,000 -
Exploration expenditure written off - - 4,786,387 - -
------------------------------------------------------------------------
Total expenses 4,394,374 5,744,944 11,095,315 (4,545,950) (5,714,330)
------------------------------------------------------------------------
Net Income (Loss) (4,165,287) (5,537,576) (11,095,107) (4,316,863) (5,506,962)
========================================================================
F-10
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-99 31-Dec-01 31-Dec-00
A$ A$ A$ A$ A$
4. Income Tax
(a) The prima facie income tax benefit on loss
from ordinary activities before income tax
reconciles to the income tax benefit in the
financial statements as follows:
Loss from ordinary activities before
income tax (4,165,287) (5,537,576) (11,095,107) (4,316,863) (5,506,962)
---------------------------------------------------------------------
Income tax expense/(benefit) calculated at 30% of
Operating profit for year ended 31 December 2001
and 34% for year ended 31 December 2000 (1,249,586) (1,882,775) (3,994,239) (1,295,095) (1,872,367)
Permanent differences 974,333 - - 1,028,492 -
Timing differences and tax losses not brought to
account as future income tax benefits 275,253 1,882,775 3,994,239 266,567 1,872,367
---------------------------------------------------------------------
Income tax expense - - - - -
---------------------------------------------------------------------
(b) Future income tax benefits not brought to
account as assets 15,460,666 14,211,080 12,328,305 14,787,758 13,492,663
---------------------------------------------------------------------
15,460,666 14,211,080 12,328,305 14,787,758 13,492,663
---------------------------------------------------------------------
The taxation benefits of tax losses and timing differences not brought to
account will only be obtained if:
i) assessable income is derived of a nature and of an amount sufficient to
enable the benefit from the deductions to be realized:
ii)conditions for deductibility imposed by the law are complied with; and
iii)no changes in tax legislation adversely affect the realization of the
benefit from the deductions.
F-11
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
5. Directors' Remuneration
The directors of the Company for
the year ended 31 December 2000
were :
Peter Mark Smyth
Yusufali M Jumabhoy (Appointed 16 October 2001)
William Mansell Shotton Appointed 16 November 2001)
David Michael Saunders (Appointed 22 November 2001)
Peter John Augustin Remta (Resigned 12 October 2001)
Leslie Robert Maurice Friday (Resigned 4 December 2001)
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-99 31-Dec-01 31-Dec-00 31-Dec-99
A$ A$ A$ A$ A$ A$
The aggregate of income paid or payable,
or otherwise made available, in respect
of the financial year, to all directors
of the Company, directly or indirectly,
by the Company or by any related party. 564,023 284,915 985,000
--------------------------------
The aggregate of income paid or payable,
or otherwise made available, in respect
of the financial year, to all directors
of each entity in the consolidated
entity, directly or indirectly, by the
entities in which they are directors or
by any related party. 564,023 284,915 985,000
---------------------------------
The number of directors of the Company whose total
income falls within each successive $10,000 band of
income;
Nil 1 - 1 -
$10,000 - $19,999 - 1 - 1
$20,000 - $29,999 1 - 1 -
$30,000 - $39,999 1 - 1 -
$50,000 - $59,999 - 1 - 1
$100,000 - $109,999 1 - 1 -
$140,000 - $149,999 1 - 1 -
$220,000 - $229,999 - 1 - 1
$260,000 - $269,999 1 - 1 -
All of the executives of the Company were also its directors during the
financial year.
F-12
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
6. Employee Share Plan
On June 25, 2001 the Company issued a total of 2,500,000 options under the
Incentive Option Plan forming part of the Employee Share Plan that was approved
by shareholders a the annual general meeting held on 31 May 2000. During the
year there were no more than ten eligible participants for the Employee Share
Plan. The options were issued as a performance incentive for no consideration to
eligible employees under the Incentive Option Plan. Each of these options
confers the right to acquire one (1) ordinary fully paid share in the capital of
the company at a price of $0.35 each on or before 30 June 2002. Due to a
director's resignation, 700,000 options expired on 12 December 2001.
On 31 October 2001 a further 200,000 options were issued under the Incentive
Option Plan exercisable at a price of $0.20 each on or before 30 June 2002.
The remaining 2,000,000 employee options remained unexercised at 31 December
2001. In accordance with the terms of the Employee Share Plan all issues of
options under the Employee Share Plan are at the discretion of the directors.
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
A$ A$ A$ A$
7. Remuneration of Auditors
Amounts received, or due and receivable
from the Company and any related organisation for:
Auditing the financial statements 65,000 20,000 50,000 20,000
Other services 15,000 15,000 15,000 15,000
----------------------------- --------------------------
80,000 35,000 65,000 35,000
----------------------------- --------------------------
8. Cash
Cash on hand 500 500 500 500
Cash at bank 101,383 822,059 55,925 822,051
----------------------------- ---------------------------
101,883 822,559 56,425 822,551
----------------------------- ---------------------------
9. Current Receivables
Other debtors 173,487 854,850 17,836 854,850
Provision for doubtful debt - (854,850) - (854,850)
----------------------------- ---------------------------
173,487 - 17,836 -
----------------------------- ---------------------------
10. Non Current Receivables
Loans to controlled entities - - 5,180,000 4,620,000
Provision for investment write down-at cost - - (560,000) -
Loan to Sands Solutions 3,000,000 2,500,000 3,000,000 2,500,000
Loans to Medco Madura Pty Ltd and
Medco Simenggaris Pty Ltd 7,952,187 7,725,105 7,952,187 7,725,105
----------------------------- ----------------------------
10,952,187 10,225,105 15,572,187 14,845,105
----------------------------- ----------------------------
The loans to Medco Madura Pty Ltd and Medco Simenggaris Pty Ltd represent moneys
owing to the Company for work previously carried out on the Madura and
Simenggaris blocks in Indonesia and paid for by the Company. The ultimate
recoverability of these loans is dependent upon the successful exploitation of
the Madura and Simenggaris blocks by those companies.
F-13
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
10. Non Current Receivables (cont.)
The loan to Sands Solutions is secured by a registered fixed and floating charge
over all the assets and undertaking of that company. Its recoverability is
reliant in the normal course of trading on the planned expansion of and
increased revenues from the businesses conducted by Sands Solutions or the sale
of those businesses and other assets of that company. It is considered that in
the event of default a sale of those businesses and assets would realise
sufficient funds to satisfy the loan. The directors would set off the loan
against any purchase money payable for the acquisition by the Company of an
interest in Sands Solutions.
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
A$ A$ A$ A$
11. Non-Current Investments
In controlled entities-at cost
CityView Asia Pty Ltd - - 10 10
CityView Corporation (UK) Ltd - - 6 -
------------------------------- ---------------------------
- - 16 10
------------------------------- ---------------------------
In Non-related entities-at cost
Shares in Telezon Limited (Administrator Appoined) - 550,000 - 550,000
------------------------------- ---------------------------
- 550,000 - 550,000
------------------------------- ---------------------------
Total Non-current Investments - 550,000 16 550,510
------------------------------- ---------------------------
12. Equipment
Equipment at cost 17,586 11,907
17,586 11,907
Less accumulated depreciation (7,409) (2,184) (7,409) (2,184)
------------------------------- ---------------------------
10,177 9,723 10,177 9,723
------------------------------- ---------------------------
Balance at the beginning of year 9,723 - 9,723 -
Additions 5,680 11,907 5,680 11,907
Depreciation expense (5,226) (2,184) (5,226) (2,184)
------------------------------- ---------------------------
Carrying amount at year end 10,177 9,723 10,177 9,723
------------------------------- ---------------------------
13. Acquisition, Exploration and Development
Acquisition costs and exploration and development
expenditure carried forward in respect of areas of
interest at cost: 4,620,002 4,620,002 - -
------------------------------- ---------------------------
4,620,002 4,620,002 - -
------------------------------- ---------------------------
The consolidated entity has entered into a contract to explore and develop oil
and gas fields in the Philippines. This contract is under standard
terms for foreign companies operating in those countries. The costs will be
amortised over the life of the various projects once production commences. The
ultimate recoverability of the acquisition costs and exploration and development
expenditure is dependent upon the future development and successful exploitation
or the possible sale of the area of interest.
14. Current Payables
Unsecured:
Trade creditors 48,250 113,006 48,250 113,006
Accrued expenses 60,105 177,940 10,586 177,940
------------------------------- ---------------------------
108,355 290,946 58,836 290,946
------------------------------- ---------------------------
F-14
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
15. Equity-Parent Company
(a) Contributed equity
During the year ended 31 December 2001 the Company issued the shares
listed below. All placements have been approved by shareholders.
Issue price Number of Share capital
Date Nature of Issue for each share Shares A$
- ---- --------------- ---------- ------ -
09 03 01 Option exercise 0.50 300,000 150,000
09 03 01 Option exercise 0.50 300,000 150,000
12 03 01 Option exercise 0.50 400,000 200,000
12 03 01 Shares issued 0.55 320,690 * 176,380
12 03 01 Shares issued 0.55 79,310 * 43,620
16 03 01 Option exercise 0.50 300,000 150,000
16 03 01 Shares cancellation - (500,000) -
04 30 01 Shares issued 0.48 200,000 * 96,000
07 05 01 Shares issued 0.50 1,600,000 * 800,000
11 05 01 Shares issued 0.47 500,000 * 237,500
11 05 01 Shares issued 0.47 400,000 * 190,000
08 06 01 Shares issued 0.44 200,000 * 89,000
12 06 01 Shares issued 0.50 1,100,000 # 550,000
25 06 01 Shares issued 0.35 300,000 * 105,000
28 06 01 Shares issued 0.33 250,000 * 83,750
23 08 01 Shares issued 0.25 250,000 * 62,500
28 08 01 Option exercise 0.25 20,000 5,000
28 08 01 Option exercise 0.25 10,000 2,500
28 08 01 Option exercise 0.25 20,000 5,000
28 08 01 Option exercise 0.25 197,100 49,275
28 08 01 Option exercise 0.25 280,000 70,000
28 08 01 Option exercise 0.25 20,000 5,000
28 08 01 Option exercise 0.25 20,000 5,000
28 08 01 Option exercise 0.25 10,000 2,500
28 08 01 Option exercise 0.25 80,000 20,000
28 08 01 Option exercise 0.25 20,000 5,000
28 08 01 Option exercise 0.25 30,000 7,500
06 11 01 Shares issued 0.19 250,000 * 47,500
08 11 01 Shares issued 0.17 240,000 * 40,000
14 11 01 Shares issued 0.25 1,250,000 # 314,850
14 11 01 Shares issued 0.25 1,250,000 # 314,850
--------------- -----------------------
9,697,100 3,977,725
Ordinary fully paid shares at 31 December 2000 47,064,516 50,318,271
--------------- -----------------------
Ordinary fully paid shares at 31 December 2001 56,761,616 54,295,996
=============== =======================
* Shares issued for services rendered or satisfaction of debt # Shares issued
for cash to raise working capital
F-15
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Equity (cont.)
Ordinary shares participate in dividends and the proceeds on winding up of the
parent entity in proportion to the number of shares held
At shareholders' meetings each ordinary shareholder is entitled to one vote when
a poll is called, otherwise each shareholder has one vote on a show of hands.
(b) Options:
As at 31 December 2001 there were on issue:
(i) 1,800,000 unlisted Employee options convertible into fully paid
ordinary shares at an exercise price of $0.35 each on or before 30 June
2002; and
(ii) 200,000 unlisted Employee options convertible into fully paid ordinary
shares at an exercise price of $0.20 each on or before 30 June 2002.
(c) Dividends:
No dividend was declared by the Directors during the reporting period.
(d) Franking credits
The Company retains no franking credits for the year ended 31 December
2001 and the year ended 31 December 2000.
(e) Accumulated losses
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Accumulated losses at the beginning of the
financial year 44,936,778 39,399,202 34,381,328 39,429,816
Net loss attributable to the members of the parent
entity 4,165,287 5,537,576 4,316,863 5,506,962
------------------------------- -------------------------
Accumulated losses at the end of the financial year 49,102,065 44,936,778 38,698,191 34,381,328
-------------------------------- --------------------------
16. Earnings per share 31-Dec-01 31-Dec-00 31-Dec-99
Basic earnings/(loss) per share (cents per share) (.08c) (.13c) (.70c)
The weighted average number of ordinary shares on
issue used in the calculation of basic earnings per share
51,579,570 41,999,364 15,899,719
Diluted earnings per share are not disclosed as they are not materially
different from basic earnings per share. Please refer to Note 22 for ordinary
shares issued subsequent to year end.
F-16
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
17. Financial Reporting by Segments
(a) Industry Segments
Investments Exploration
31 Dec 01 31 Dec 00 31 Dec 99 31 Dec 01 31 Dec 00 Dec 31 99
A$ A$ A$ A$ A$ A$
Revenue outside the
consolidated entity 211,251 139,119 - - - 208
----------------------------------------------------------------------------------------------------
Segment operating
profit and (loss)
after tax (4,392,369) (604,656) - 227,082 (4,932,920) (11,095,107)
--------------- --------------- ---------------- ---------------- ------------------ -----------------
Segment assets 3,285,547 3,882,782 - 12,572,189 12,345,107 7,579,445
Consolidated
31 Dec 01 31 Dec 00 31 Dec 99
A$ A$ A$
Revenue outside the
consolidated entity 211,251 139,119 208
---------------- ---------------- ---------------
Segment operating profit
and (loss) after tax (4,165,287) (5,537,576) (11,095,107)
---------------- ---------------- ---------------
Segment assets 15,857,736 16,227,889 7,579,445
The major products and services covered by those segments are: Investments from
general financing and corporate activities Exploration of oil and gas interests
(b) Geographical Segments
Indonesia Australia
31 Dec 01 31 Dec 00 31 Dec 99 31 Dec 01 31 Dec 00 31 Dec 99
A$ A$ A$ A$ A$ A$
Revenue Outside the
consolidated entity - - - 211,251 139,119 208
Segment operating profit
and (loss) after tax 227,082 (4,932,920) (11,545,307) (3,983,945) (604,656) 450,200
-------------- ------------- ------------------ ---------------- ---------------- --------------
Segment Assets 12,572,189 12,345,107 7,579,445 3,084,446 3,882,782 7,442,800
United Kingdom Eliminations
31 Dec 01 31 Dec 00 31 Dec 99 31 Dec 01 31 Dec 00 31 Dec 99
A$ A$ A$ A$ A$ A$
Revenue Outside the
consolidated entity - - - - - -
Segment operating profit
and (loss) after tax (408,424) - - - - -
-------------- ------------- ------------------ ---------------- ---------------- --------------
Segment Assets 201,101 - - - - (7,442,800)
Consolidated
31 Dec 01 31 Dec 00 31 Dec 99
A$ A$ A$
Revenue Outside the
consolidated entity 211,251 139,119 208
Segment operating profit
and (loss) after tax (4,165,287) (5,537,576) (11,095,107)
-------------- ------------- ------------------
Segment Assets 15,857,736 16,227,889 7,579,445
F-17
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
18. Particulars Relating to All Entities
Country of Type of Principal Ownership
Incorporation Shares Held Activity interest
Parent entity 2001 2000
---- ----
CityView Corporation Limited Australia Ordinary Investment 100% 100%
Controlled entities
CityView Asia Pty Ltd Australia Ordinary Exploration 100% 100%
CityView Corportion (UK) Ltd UK Ordinary Investment 100% -
Other
Medco Madura Pty Ltd Australia Ordinary Exploration 25% 25%
Medco Simenggaris Pty Ltd Australia Ordinary Exploration 25% 25%
On 27 November 2001 the parent entity acquired 100% of the share capital of
CityView Corporation (UK) Ltd, formerly known as Comstock Industries (UK)
Limited, for a nominal consideration (see Note 19) with the parent entity
entitled to all profits/(losses) from that controlled entity form that time. Mr
W M Shotton is a director and Chief Executive of CityView Corporation UK Ltd.
The accounts of Medco Madura Pty Ltd and Medco Simenggaris Pty Ltd are not
included in the consolidated accounts according to the equity method of
accounting for investments because the Company does not exercise a significant
influence over those companies. The loans to Medco Madura Pty Ltd and Medco
Simenggaris Pty Ltd are classified as non-current receivables in the balance
sheet (refer to Note 10).
F-18
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Consolidated Entity Parent Entity
31-Dec-01 31-Dec-00 31-Dec-99 31-Dec-01 31-Dec-00
19. Notes to Statement of Cash Flow A$ A$ A$ A$ A$
(a) Reconciliation of cash
Cash at the end of the financial year
as shown in the statement of cash
flows is reconciled to the related
items in the balance sheet as follows:
Borrowings - - - - -
Cash 101,883 822,559 11,679 56,425 822,551
--------------------------------------------------------------
101,883 822,559 11,679 56,425 822,551
--------------------------------------------------------------
(b) Business acquired
During the year 100% of the controlled
entity CityView Corporation (UK) Ltd
was acquired. - - - - -
Purchase consideration - - - 6 -
---------------------------------------------------------------
Cash consideration - - - 6 -
Amount due under contract of sale - - - - -
---------------------------------------------------------------
Cash outflow/inflow - - - 6 -
---------------------------------------------------------------
Assets and liabilities held at
acquisition date
Receivables - - - - -
Inventories - - - - -
Property, plant and equipment - - - - -
Creditors - - - - -
---------------------------------------------------------------
- - - - -
---------------------------------------------------------------
Goodwill on consolidation - - - - -
Outside equity interests in
acquisitions - - - - -
---------------------------------------------------------------
- - - - -
---------------------------------------------------------------
(c) Business disposed of - - - - -
Consideration
Cash - - 3 - -
---------------------------------------------------------------
Book value of net assets sold
Cash - - - - -
Non current receivables (net of
foreign exchange gain) - - - - -
Non current investments - - - - -
---------------------------------------------------------------
Net assets disposed of - - - - -
Adjustment for accumulated losses
already brought to account - - (1,201,391) - -
Loss on disposal - - 1,201,388 - -
---------------------------------------------------------------
- - 3 - -
---------------------------------------------------------------
F-19
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
Consolidated Entity Parent Entity
19. Note to Statement of Cash Flow 31 Dec-01 31-Dec-00 31 Dec-99 31-Dec-01 31-Dec-00
(cont) A$ A$ A$ A$ A$
(d) Reconciliation of loss from
ordinary activities after tax to net
cash provided by/(used by) operating
activities
Loss from ordinary activities (4,165,287) (5,537,576) (11,095,107) (4,316,863) (5,506,962)
Less non cash operating items:
Depreciation 5,226 2,184 9,097 5,226 2,184
Mineral exploration expenditure written
off - - 4,786,387 - -
Interest expense - 59,570 973,121 - 59,570
Loss on disposal of subsidiaries - - 1,201,388 - -
Loss on sale of investments - - 214,413 - -
Exchange (gain)/Loss - (68,249) - - (68,249)
Issue of shares in lieu of payment to
suppliers and employees 762,743 6,600,556 829,872 1,067,425 6,460,550
Write-downs to recoverable amount of
investment 701,300 - - 701,300 -
Purchase of Block SC41 Philippines - - - - 4,620,000
(Increase)/decrease in receivables (920,025) (2,782,305) 483,331 (744,918) (7,402,305)
(Decrease)/increase in payables (262,796) (1,128,615) 614,903 (232,110) (1,019,223)
---------------------------------------------------------------
Net cash provided/(used) by operating
activities (3,878,839) (2,854,435) (1,982,595) (3,519,940) (2,854,435)
---------------------------------------------------------------
(e) Non-cash financing and investing activities
The Company settled a number of creditors through the issue of shares and
options as referred to in Note 15.
(f) For the purpose of the statement of cash flows, cash includes cash on hand
and in banks and investments in money market instruments, net of outstanding
bank overdrafts
20. Related Party Disclosures
Transactions between related parties are on normal commercial terms and
conditions are no more favorable than those available to other parties unless
otherwise stated.
(a) Directors
The following persons held the position of director of the Company during
the financial year ended 31 December 2001:
Peter Mark Smyth
Y M Jumabhoy Appointed 16 October 2001
W M Shotton Appointed 16 November 2001
D M Saunders Appointed 22 November 2001
P J A Remta Resigned 12 October 2001
L R M Friday Resigned 4 December 2001
The remuneration of directors is disclosed in Note 5 to the financial
statements.
(b) Interests of directors
(i) As at 31 December 2001 the directors of the Company and their related
entities hold a relevant interest in the following shares and options in
the Company:
31 December 01 31 December 00
Shares 1,446,084 343,076
Options 1,100,000 1,100,000
F-20
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
(ii)On 15 November 2001 Mr W M Shotton applied for and was issued 1,250,000
shares in the Company for a subscription price of US$0.13 a share.
(c) Transactions with directors and related entities
(i) Mr P M Smyth is a director and shareholder of Romarcam Investments Pty
Ltd. The Company has entered into a contract with Romarcam Investments
Pty Ltd dated 3 December 2001 for the provision of management
services. Fees paid during the financial year at normal commercial
rates were $253,523 compared to $213,825 in the previous year. These
transactions have been reflected in Note 5.
(ii) Mr P M Smyth's family trust has a one-third equity interest in Sands
Solutions. The Company has lent $3,000,000 to Sands Solutions during
2000 and 2001 and has charged Sands Solutions interest at 7% per annum
payable in monthly installments. These transactions have been
reflected in Notes 10 and 23.
(iii)Mr P J A Remta is an employee and members of his family are
shareholders of Westchester Pty Ltd which provided consultancy and
corporate management services to the Company during 2001 under a
consultancy agreement dated 1 February 2001. Fees paid during the
financial year at normal commercial rates were $91,135. These
transactions have been reflected in Note 5.
(iv)Mr L R M Friday is a director and shareholder of Lifestyle Nominees
Pty Ltd which provided consultancy services to the Company. Fees paid
during the financial year were $20,785. These transactions have been
reflected in Note 5.
(v) During 2001 the Company issued a total of 2,300,000 options to
directors under the Incentive Option Plan established by the Employee
Share Plan. Of that number 900,000 options were issued to Mr P M
Smyth, 700,000 options were issued to Mr P J A Remta and 500,000
options were issued to Mr L R M Friday. And 200,000 options were
issued to Mr Y M Jumabhoy. The options issued to Messrs Remta and
Friday have expired.
(d) Interests in director-related entities
Apart from the disclosures in this note, no director has entered into a
material contract with the Company since the end of the financial year and
there were no material contracts involving interests of directors or
payment upon termination subsisting at the end of the financial year.
(e) Equity interests in controlled entities
As disclosed in Note 18 the Company has the entire ownership of CityView
Asia Pty Ltd and CityView Corporation (UK) Ltd which are its only
controlled entities.
(f) Transactions within the group
The parent in the consolidated entity is CityView Corporation Limited. As
included in Note 10, CityView Asia Pty Ltd owes $4,620,000 to CityView
Corporation Limited. These amounts are interest free operating
loans with no repayment terms.
In addition, Medco Simenggaris Pty Ltd and Medco Madura Pty Ltd owe the
Company $3,408,082 and $4,544,105 respectively, although these companies
are not part of the consolidated entity (refer to Note 18).
21. Commitments for Expenditure
(a) Madura and Simenggaris
Under the agreements between the Company and PT Medco Energi Corporation
TBK ("Medco") all of the expenditure for exploration and development of the
Madura and Simenggaris blocks, under a new work program as defined in the
agreements and as agreed between Medco and the Indonesian state owned oil
and gas organization known as Pertamina would be met by Medco. The new work
program, as already agreed, covers exploration and development work.
F-21
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
The cost of any subsequent work to the Madura and Simenggaris blocks will
need to be met by the Company in proportion to its equity interests.
(b) Service Contract 41
The documents relating to the acquisition by the consolidated entity of the
interest of 2.5% in Petroleum Permit Block Service Contract 41 provide that
MMC Exploration & Production (Philippines) Pte Ltd will pay for all the
expenditures attributable to that interest through the current work
program.
There are no other commitments for expenditure.
22. Subsequent Events
There has been no financial statement effect for the year ended 31 December 2001
for each of the subsequent events listed below unless otherwise stated:
(a) On 8 January 2002 the Company, through its wholly owned subsidiary CityView
Asia Pty Ltd, entered an agreement to acquire shares in an oil company which
holds legally and owns beneficially 50% of the shareholding in another energy
based company which has identified and is entitled to be the owner of three
separate gas-gathering projects.
Under the agreement, the Company has an option to acquire shares with the
intention that through that shareholding the Company will become entitled to the
benefits from the development of the projects.
On 28 February 2002 the Company paid an option fee of US $200,000. The option
fee is refundable if necessary regulatory approvals are not obtained and if the
Company exercises its option to acquire shares then the option fee will form
part of the consideration payable.
(b) On 14 January 2002 the Company issued 400,000 ordinary fully paid shares to
private investors in the United Kingdom. The shares were issued at a price of
AUD$0.20 with each share entitled to one unlisted option convertible into one
ordinary fully paid share at an exercise price of AUD$0.40 each and exercisable
by June 24, 2002.
On 28 February 2002 the Company issued 13 million ordinary fully paid shares to
Falcon Oil Pte Ltd ("Falcon") a Singaporean energy company which is co-ventureer
with CityView in the Madura and Simenggaris blocks. The shares were issued at a
price of AUD$0.24 with each share entitled to one unlisted option convertible
into one ordinary fully paid share at an exercise price of AUD$0.40 each and
exercisable by June 24, 2002.
Both of these placements were in accordance with the authority given by
shareholders at the Company's general meeting held on 24 December 2001.
(c) On 4 February 2002 due to a director's resignation, 500,000 employee options
expired.
(d) On 22 March 2002 the Company appointed Mr Goh Yong Kheng and Mr Thinagaran
as directors of the Company. On 4 April 2002 the Company appointed Mr Ee as a
director of the Company.
(e) On 28 February 2002 the Company acquired 1,000,000 shares in CGX Energy Inc
at a cost of $1,676,150 which was lent to it by Azure Energy Fund Inc. On 18 May
2000 the Company sold the shares for the equivalent of $2,531,000 and after
settlement of the loan realised a gross profit of $854,850. That profit was not
received from Azure Energy Fund Inc. during 2000 and was fully provisioned
during that year. The receivable and corresponding provision were written off
during 2001. On 2 April 2002 a net profit of US$183,831 was received in relation
to the sale. This will be brought to income in the Company's financial
statements for the year ending 31 December 2002.
(f) In April 2002, in accordance with the recommendations of the due diligence
committee, the Company signed agreements with Sands Solutions pursuant to which
the Company no longer has a contingent liability for Primeorder AG.
F-22
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
23. Financial Instruments
(a) Significant Accounting Policies
Details of the significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement and the
basis on which revenues and expenses are recognised, in respect of each
class of financial asset, financial liability and equity instrument are
outlined in Note 1 to the financial statements.
(b) The consolidated entity's exposure to interest rate risk which is the risk
that a financial instrument's value will fluctuate as a result of changes
in market interest rates and the effective weighted average interest rates
on classes of financial assets and financial liabilities is as follows:
FIXED INTEREST
- --------------------------- ---------- ----------- ------------- ------------ -------------- -------------- --------------
Average Variable Less than 1 to 5 More than 5 Non-Interest Total
Interest Interest 1 Year Years years Bearing
2001 rate % $ $ $ $ $ $
- --------------------------- ---------- ----------- ------------- ------------ -------------- -------------- --------------
Financial Assets
Cash 101,883 101,883
Receivables 173,487 173,487
Loan - Sands Solutions 7% 3,000,000 3,000,000
Financial Liabilities
Payables 108,355 108,355
FIXED INTEREST
- --------------------------------------------------------------------------------------------------------------------------
Average Variable Less than 1 to 5 More than 5 Non-Interest Total
Interest Interest 1 Year Years years Bearing
2000 rate % $ $ $ $ $ $
- --------------------------- ---------- ----------- ------------- ------------ -------------- -------------- --------------
Financial Assets
Cash 822,559 822,559
Receivables
Loan - Sands Solutions 7% 2,500,000 2,500,000
Financial Liabilities
Payables 290,946 290,946
(c) Credit Risk
The Company has adopted a policy of only dealing with credit worthy parties
and, where appropriate, obtaining sufficient collateral or security as a
means of mitigating the risk of financial loss through defaults in
contractual obligations.
Except as disclosed in Note 10 the Company does not have any significant
credit risk exposure to a single debtor or group of debtors having similar
characteristics.
The carrying amount of financial assets recorded in the financial
statements, without provision for losses, represents the maximum exposure
of the consolidated entity to credit risk without taking into account the
value of any collateral or other security.
The credit risk exposure of the consolidated entity would also include the
difference between the carrying amount and the realisable amount.
(d) Currency hedging
The consolidated entity has not entered into forward foreign exchange
contracts to hedge the exchange rate risk arising from transactions in
foreign currencies.
(e) Net Fair Value
The carrying amount of assets and liabilities recorded in the financial
statements represents their respective net fair values determined in
accordance with the accounting policies referred to in Note 1.
F-23
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2001
24. Company Details
The registered offices are:
CityView Corporation Limited
63 Burswood Road
Burswood
Western Australia 6100
CityView Corporation (UK) Ltd
18 Bedford Row
London WC1R 4EQ
United Kingdom
F-24
25. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES RECONCILIATION ("US
GAAP")
The following is a summary of all material differences between Australian and
United States generally accepted accounting principles.
(a) Marketable Securities
Investments (or Marketable Securities) are valued at the lower of cost and
recoverable amount (often equated to market value). Any such write-down is
adjusted through the profit and loss account. For US GAAP purposes,
securities are separated into portfolios of "Trading", "Available for Sale"
and "Held to Maturity". The amounts recorded as current investments
represent these which would be classified as "Available for Sale" under US
GAAP. Available for Sale are accounted for at market value, with movements
adjusted through shareholders' equity. An "other than temporary" decline in
the market value of investments has been recognized as impairments and
recorded in the profit and loss account. Realized profits and losses are
reversed and adjusted to the profit and loss account.
(b) Capitalized Exploration Expenditure
Exploration expenditure incurred by CityView, directly or through it's
joint venture interest, are capitalized as incurred to the extent the
expenditure is expected to be recouped through the sale of successful
development of the area, or where the activities have not yet reached a
stage that permits reasonable assessment of the existence of economically
recoverable reserves. US GAAP requirements indicate that these costs are
generally written-off as incurred, or until economically recoverable
reserves are identified.
(c) Income tax
There are no major differences between accounting for income tax under
Australian and US GAAP. However, where adjustments for other reconciling
items result in a permanent difference, appropriate adjustment has been
made.
(d) SFAS 121: Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of
This pronouncement is similar to an Australian Corporations Law requirement
that requires directors to review the carrying value of all non-current
assets annually, determine if they are being recorded at greater than their
recoverable amount, and if so, write-down the value of the asset to its
recoverable amount of disclose information to prevent the accounts from
being misleading.
F-25
(e) Principles of Consolidation
As indicated in Note 1(l) to the financial statements, Australian GAAP
requires consolidation of controlled entities. In accordance with
Australian GAAP, control exists where an entity has the "capacity to
dominate decision making in relation to the financial and operating
policies of another entity..." US GAAP, however, requires than an entity
must control another entity usually as indicated by its ownership
interests. As the ownership interest in the Company's subsidiaries is
greater then 50% in all cases (representing ownership and actual control),
no reconciling Australian/US GAAP adjustments are required.
(f) The company's accounting policy in respect of amortization of carried
forward exploration expenditure is calculated based on the economically
recoverable proven reserves of the company. US GAAP requires the
amortization to be based on the proven and probable reserves of the
company. As significant production has not commenced CityView has not
applied this accounting policy in the financial statements for the
financial periods ended 31 December 1999, 31 December 2000 and 31 December
2001 and therefore no reconciliation adjustment is required.
(g) New Accounting Standards
The effect of the application of the following recent pronouncements is
considered below. Their application will not have a material effect on the
Australian/US GAAP reconciliations detailed in this note.
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
141, Business Combinations. SFAS 141 supersedes APB 16,Business
Combinations, and SFAS 38, Accounting for Preacquisition Contingencies of
Purchased Enterprises. SFAS 141 requires the purchase method of accounting
for all business combinations initiated after June 30, 2001 and eliminates
the pooling-of-interests method. The Company does not expect the adoption
of SFAS 141 to have a material effect on its financial condition or results
of operations.
In July 2001, the FASB issued SFAS 142, Goodwill and Other Intangible
Assets. SFAS 142 supersedes APB 17, Intangible Assets, and requires the
discontinuance of goodwill amortization. In addition, SFAS 142 includes
provisions regarding the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the testing for impairment of existing
goodwill and other intangibles. SFAS 142 is required to be applied for
fiscal years beginning after December 15, 2001, with certain early adoption
permitted. The Company expects to adopt SFAS 142 for its first fiscal
quarter of 2002, and does not expect the adoption to have a material effect
on its financial condition or results of operations.
F-26
In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets
and the associated retirement costs. The Company is in the process of
assessing the effect of adopting SFAS 143.
In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes SFAS 121, Accounting for
the Impairment of Long-Lived Assets to be Disposed Of. SFAS 144 addresses
financial accounting and reporting for the impairment of long-lived assets
and for long-lived assets to be disposed of. However, SFAS 144 retains the
fundamental provisions of SFAS 121 for: 1) recognition and measurement of
the impairment of long-lived assets to be held and used; and 2) measurement
of long-lived assets to be disposed of by sale. SFAS 144 is effective for
fiscal years beginning after December 15, 2001. The Company is in the
process of assessing the effect of adopting SFAS 144.
(h) Employee Stock Purchase Plan
The Company has one stock-based compensation plan.The Company applies
Australian GAAP and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its stock option
plan.Under US GAAP under FASB 123, Accounting for Stock Based Compensation,
disclosure is required of compensation expense that would have been
recognized on FASB 123. Had compensation cost for the Company's stock-based
compensation plan been determined based on the fair value at the grant
dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's net loss and loss per share would have been
increased to the pro forma amounts indicated below:
31-Dec-01 31-Dec-01 31-Dec-00 31-Dec-99
US$ A$ A$ A$
--------------- ----------------- ----------------- ------------------
Net Profit (Loss) after Income Tax attributable to
members of the parent company
- As reported (2,131,794) (4,165,287) (5,537,576) (11,095,107)
- Pro Forma (2,199,351) (4,297,287) (5,681,576) (11,235,107)
Basic earnings (loss) per share
- As reported (.04) (.08) (.13) (0.70)
- Pro Forma (.04) (.08) (.14) (0.71)
The fair value of each option grant was estimated as of the date of grant using
the Black- Scholes option-pricing model with the following weighted-average
assumptions used for grants in the period ended December 31, 2001, 2000 and
1999: no dividends will be paid, expected volatility of 50.0% risk-free interest
rate of 5% and expected lives of 1 year.
F-27
Reconciliation Adjustments
The following reconciliations show the effect on net profit/loss for the
financial periods ended December 31, 2001, 2000 and 1999 using the US GAAP basis
of accounting for the matters outlined in items (a) to (h) above.
31-Dec-01 31-Dec-01 31-Dec-00 31-Dec-99
Note US$ A$ A$ A$
- --------------------------------------- ----------- ---------------- ---------------- ----------------- ----------------
Reconciliation Adjustments
Net income (loss) after tax
in accordance with Australian GAAP (2,131,794) (4,165,287) (5,537,576) (11,095,107)
Reconciliation Adjustments
Transfer realized temporary share
portfolio losses from shareholder's
equity (reserve) (g)(1) - - - (1,734,895)
Exploration expenditure
written-off as incurred - - (4,620,002) 4,786,387
Stock based compensation cost (h) (107,068) (209,200) (216,000) -
---------------- ---------------- ----------------- ----------------
Net income (loss) after tax in
accordance with US GAAP (2,238,862) (4,374,487) (10,373,576) (8,043,615)
================ ================ ================= ================
Earnings (loss) per share from
Continuing Operations in accordance
with US GAAP (in cents) (.04) (.08) (.25) (.51)
(1) Represents the realized loss on the sale of Triton Investment.
31-Dec-01 31-Dec-01 31-Dec-00 31-Dec-99
Note US$ A$ A$ A$
----------- ---------------- ---------------- ----------------- ----------------
Reconciliation Adjustments
Shareholder's equity attributable
to member of the chief entity in
accordance with Australian GAAP 8,060,533 15,749,381 15,936,943 5,491,274
Reconciliation Adjustments
Exploration expenditure
written-off as incurred (b) (6,173,742) (12,062,802) (12,062,802) (7,442,800)
---------------- ---------------- ----------------- ----------------
Total shareholder's equity in
accordance with US GAAP 1,886,791 3,686,579 3,874,141 (1,951,526)
================ ================ ================= ================
F-28
ITEM 18. FINANCIAL STATEMENTS.
Not applicable. Consolidated financial statements are provided under Item 17.
ITEM 19. EXHIBITS.
None
45
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
CITYVIEW CORPORATION LIMITED
SIGNATURE: /s/W M Baillie
W M BAILLIE
Company Secretary
Dated: 28 June 2002
46