As filed with the Securities and Exchange Commission on
June, 2001
Registration No. _________________
________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ASDAR GROUP
(Exact name of small business issuer as specified in its charter)
Nevada ________________ __88-0195105__
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification
organization) Code Number)
ASDAR GROUP
1239 West Georgia Street, Suite 3004
Vancouver, BC V6E 4R8
(604) 664-0499
(Address, zip code and telephone number, including
area code, of registrant's principal executive offices)
________________________________________________________________
Robert Waters, President
1239 West Georgia Street, Suite 3004
Vancouver, BC V6E 4R8
Telephone: (604) 664-0499
(Address, zip code and telephone number
including area code, of agent for service)
Copies of all communications to:
James E. Pratt, Esq. Robert Waters, President
Law Offices of James E. Pratt Asdar Group
195 Kildare Road 1239 West Georgia St.
Garden City, NY 11530 Vancouver, BC,
(516) 741-2978 Canada V6E 4R8
(516) 873-1140 (Fax) (604) 664-0499
(604) 664-0498 (Fax)
Approximate date of commencement of proposed sale to the public:
As soon as practical after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
_____________________________________________________________________________________
Title of Each Amount to be Proposed Proposed Amt.
Class of Registered Maximum Maximum of
Securities to Offering Aggregate Regis-
be Registered Price Per Offering tration
Item (1) Price (1) Fee
_____________________________________________________________________________________
Series A Units, each con-
sisting of one Common
Share par value $.001 per 1,500,000 $.50 $750,000 $396.00
Share, and one Common Units
Share Purchase Warrant
Common Shares, par value
$.001 per Share (under- 1,500,000
lying the Series A Unit Shares $.60 $900,000 $396.00
Warrants) (2)
Series B Units, each con-
sisting of one Common 1,000,000 $.__ $______ $264.00
Share, par value $.001 per Units
Share and one Common
Share Purchase Warrant
Common Shares, par 1,000,000 $.__ $_____ $264.00
value $.001 per share Shares
(underlying the Series B
Unit Warrants) (3)
Common Shares, par
value $.001 per Share 1,000,000 $.70 $700,000 $264.00
(3) Shares
Common Shares, par
value $.001 per Share 1,000,000 $.75 $750,000 $264.00
(underlying the warrants Shares
held by the Selling
Securityholders) (4)
Totals $_______ $1,848.00
_____________________________________________________________________________________
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(a) and (g).
(2)(3) Reserved for issuance upon exercise of the Warrants. Price represents
the Warrant exercise price.
(3) Registered on behalf of certain Selling Shareholders.
(4) Reserved for issuance upon exercise of the Warrants owned by certain
Selling Securityholders and registered on behalf of certain Selling
Securityholders.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
PROSPECTUS
ASDAR GROUP
1,500,000 Series A Units
Each Unit Consisting of
One Common Share and
One Redeemable Common Share Purchase Warrant
Offering Price: $.50 per Unit
and
1,000,000 Series B Units
Each Unit Consisting of
One Common Share and
One Redeemable Common Share Purchase Warrant
Offering Price: $.__ per Unit
and
1,000,000 Selling Shareholder's Common Shares
and
1,000,000 Common Shares underlying the
warrants owned by Selling Shareholders
This prospectus (the "Prospectus") relates to an offering of a maximum
of 2,500,000 Units (1,500,000 Series A Units and 1,000,000 Series B Units)
which are being sold, on a "best efforts basis" in units (the "Units"), each
Unit consisting of one common share, $0.001 par value per Share (the "Shares")
and one redeemable common share purchase warrant (the "Unit Warrants"). The
Unit Warrants are detachable upon issuance and will trade separately after
being detached. (See "Description of Securities") There is no minimum amount
of the Offering. Thus, there is no escrow account; all proceeds from the
Offering will be deposited in the Company's bank account; and subscribers are
not entitled to a refund of their subscriptions regardless of the amount
raised in the Offering. The Offering will terminate on , 2001.
In addition, the Prospectus relates to an offering of 1,000,000 common shares
issued and 1,000,000 common shares underlying warrants issued. These shares
may be offered for sale by Selling Securityholders directly to the public.
Each Series A Unit Warrant entitles the holder to purchase one Share
for a period of eighteen months commencing on the closing date (the "Close")
of the offering made hereby (the "Offering") at an exercise price of $.60.
Each Series B Unit Warrant entitles the holder to purchase one share
for a period of eighteen months commencing on the closing date (the "Close")
of the offering made hereby (the "Offering") at various exercise prices.
THERE IS NO MINIMUM AMOUNT OF THE OFFERING. THUS, THERE IS NO ESCROW
ACCOUNT. ALL PROCEEDS FROM THE OFFERING WILL BE DEPOSITED IN THE COMPANY'S
BANK ACCOUNT AND SUBSCRIBERS ARE NOT ENTITLED TO A REFUND OF THEIR
SUBSCRIPTIONS REGARDLESS OF THE AMOUNT RAISED IN THE OFFERING.
The Offering will terminate on , 2001.
ASDAR GROUP
1239 West Georgia Street, Suite 3004
Vancouver, BC V6E 4R8
(604) 664-0499
The date of this Prospectus is , 2001.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL BOOK VALUE DILUTION. PROSPECTIVE PURCHASERS SHOULD BE
PREPARED TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS" AND
"DILUTION").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Broker-Dealer Proceeds to
Public Commissions Company (2)(3)
- ----------------------------------------------------------------------
Per Series A Unit (1) $750,000 $ -0- $750,000
Per Series B Unit (1) $______ $ -0- $_______
Total Maximum $_______
- ----------------------------------------------------------------------
(1) Units will continue to be offered until a maximum of 2,500,000
Units (the "Maximum Units") are sold, the Offering Period ends or the Offering
is terminated, whichever event first occurs. (See "Terms of the Offering")
(2) The Units will be offered directly to the public by ASDAR GROUP,
without payment of commissions or any other form of remuneration.
(3) The proceeds to the Company have been computed before deduction
of Offering expenses, including filing, printing, legal, accounting, transfer
agent, and other fees. Such expenses are estimated at $75,000. The net
Offering proceeds are estimated at $ upon sale of the Maximum
Units.
Until , 2001 (90 days from the date of the
Prospectus), all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver
a current Prospectus to any subscriber prior to or concurrent with the receipt
of confirmation of sale of the Company's securities.
ALL PAYMENTS FOR UNITS MUST BE MADE BY CHECK, BANK DRAFT OR MONEY
ORDER, PAYABLE TO ASDAR GROUP.
The Units are offered subject to prior sale when, as and if delivered
to and accepted by the Company and subject to approval of certain legal
matters by counsel and to certain other conditions. The Company reserves the
right to withdraw, modify or cancel the Offering without notice and to reject
orders in whole or in part.
No one has been authorized to give any information or to make any
representations other than those contained herein in connection with the
Offering, and such information or representation, if given or made, must not
be relied upon as having been made by the Company. Neither the delivery of the
Prospectus nor any sale hereunder shall, under any circumstances, create any
implication that there has been no change in the Company's affairs since the
date hereof. The Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized, or
in which the person making such offer or solicitation is not qualified to do
so, or to any person to whom it is unlawful to make such offer or
solicitation.
The Company intends to deliver to its shareholders an annual report
containing audited financial statements within 90 days of the end of each
fiscal year.
TABLE OF CONTENTS Page
Summary of Prospectus........................................11
The Company..................................................11
The Offering ................................................14
Summary Financial Data.......................................17
Risk Factors.................................................18
Dilution.....................................................24
Use of Proceeds..............................................25
Management Discussion and Analysis...........................27
Management...................................................37
Principal Shareholders.......................................39
Certain Relationships and Related Transactions...............40
Description of Securities....................................41
Dividend Policy..............................................42
Legal Matters................................................43
Experts......................................................43
Additional Information.......................................43
Financial Statements.........................................44
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Indicating the location in the Prospectus included in this Registration
Statement of the Information called for by the Items of Part I of Form SB-2
Form SB-2 Item and Heading Caption in Prospectus
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus......... Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus........ Inside Front Cover,
Outside Back Cover,
Additional Information
3. Summary Information and
Risk Factors............................ Summary of Prospectus,
The Company, Risk
FACTORS
4. Use of Proceeds...................... Use of Proceeds
5. Determination of Offering Price...... Front Cover Page
6. Dilution............................. Dilution
7. Selling Security Holders............. The Offering -
Securities offered
concurrently by
selling securities
holders
8. Plan of Distribution................. Front Cover Page
9. Legal Proceedings.................... Management's
Discussion and
Analysis - LAK Ranch
OIL
Project - Legal
Proceedings
10. Directors and Executive Officers........ Management
11. Security Ownership of Certain
Beneficial Owners and Management........ Principal Shareholders
12. Description of the Securities
to be Registered...................... Front Cover Page,
Summary of Prospectus
Description of
SECURITIES
13. Interest of Named Experts Legal Matters
and Counsel............................ Experts
14. Statement as to Indemnification.... Limitations on Directors
and Officers Liability
15. Description of Business................. Summary of Prospectus,
The Company,
MANAGEMENT'S DISCUSSION AND ANALYSIS
16. Description of Property.................. Management's Discussion
and Analysis
17. Interest of Management and Certain Relationships and
Others in Certain Transactions......... Related Transactions
18. Certain Market Information...............
19. Remuneration of Directors
and Officers........................... Executive Compensation
20. Financial Statements..................... Financial Statements
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Securities
Act of 1933, as amended with respect to the securities offered hereby with the
United States Securities and Exchange Commission ("SEC"), 450 Fifth Street,
N.W., Washington, D.C. 20549. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information contained in
the Registration Statement and the exhibits and schedules thereto, certain
items of which are omitted in accordance with the rules and regulations of the
SEC. For further information with respect to the Company and the securities
offered hereby, reference is made to the Registration Statement, including all
exhibits and schedules therein, which may be examined at the SEC's
Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C. 20549
without charge, or copies of which may be obtained from the SEC upon request
and payment of the prescribed fee. Statements made in this Prospectus as to
the contents of any contract, agreement or document are summarized herein, and
in each instance reference is made to the copy of such contract, agreement or
other document filed as an exhibit to the Registration Statement, and each
such summary is qualified in its entirety by such reference. The Company is a
reporting company under the Securities Exchange Act of 1934, as amended, and
in accordance therewith files reports and other information with the SEC. All
of such reports and other information may be inspected and copied at the
public reference facilities maintained by the SEC at the address set forth
above in Washington, D.C. and at regional offices of the SEC located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. In addition, the Company
provides its shareholders with annual reports, including audited financial
statements, unaudited semi-annual reports and such other reports as the
Company may determine. The SEC maintains a Web site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the SEC at http://www.sec.gov.
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus. Each prospective investor should carefully read this Prospectus in
its entirety, including the section titled "RISK FACTORS."
THE COMPANY
The Company was formed under the laws of the State of Nevada on
November 29, 1983 under the name Venture Group, Inc. On February 11, 1986, the
Company filed an amendment to the Articles of Incorporation changing the
corporate name to Asdar Corporation. On December 11, 1987, another amendment
to the Articles of Incorporation was filed changing the corporate name to
Asdar Group. On February 18, 2001, Asdar Group ( the "Company") filed a
Certificate of Reinstatement with the Secretary of State of Nevada.
The Company was originally incorporated to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Nevada. The Company, under former management, from its inception in
1983 to 1986, was engaged primarily in the acquisition of controlling equity
positions in companies experiencing financial or operating difficulties.
During 1985 and 1986, the Company sold its equity positions in these
companies.
The Company, under former management, in 1987, announced its Registration
Distribution Program, which was designed to assist privately-owned companies
in becoming publicly held. As a result of a regulatory review in 1988,
certain changes were required to be made to the program which former
management deemed to be impracticable and all efforts in this business were
terminated in 1990.
The Company was inactive and a shell corporation from 1991 to December 1995,
when the Company began the process of identifying potential business
interests, including, but not necessarily limited to, interests in the
"Internet E-Commerce".
Until March 2000, the Company conducted no business operations other
than the pursuit of a merger, or reverse acquisition with an active operation
interested in restructuring itself as a publicly-held company.
INTERNET E-COMMERCE
The Company's initial focus was related to Internet E-Commerce, In
this regard, on March 8, 2000, the Company signed a Technology Development
Agreement ("Tech Agreement") with TekMaster Ltd., a British Columbia
corporation ("TEK"), and with Xntrik Enterprises Ltd., a British Columbia
corporation ("EXL") to fund development of a Scalable Server Platform
("Scalable Server").
The Tech Agreement called for the Company to issue two million
(2,000,000) shares of the company's $.001 par value common stock with Rule 144
Restrictions and to fund two hundred thousand ($200,000) dollars in Canadian
Funds for ongoing development costs, and the Tech Agreement called for Xntrik
Enterprises Ltd., to design and develop the software and for Tek Master Ltd.
to design an interface for an administrative toolkit to manage clients.
At the end of October, 2000, this project was put on hold. There is no
time frame nor a definite date for the Company to revive this project. See
MANAGEMENT'S DISCUSSION AND ANALYSIS - Internet E-Commerce.
LAK RANCH OIL PROJECT
The management of the Company has always been seeking new business
opportunities designed to maximize shareholder value. In May 2000, the
management of the Company was made aware of an Oil and Gas Project in Wyoming,
USA.
On September 20, 2000, the Company signed an "Asset Purchase and Sale
Agreement" with 2U Online.com, Inc. ("2U"), a Delaware corporation under
common management, whereby the Company acquired all of 2U's working interest
to the oil and natural gas rights on Wyoming Property located in the Powder
River Basin of eastern Wyoming (the "LAK Ranch") for five million (5,000,000)
shares of the Company's $0.001 par value common stock.
On October 13, 2000, the "Assignment of Working Interest in Oil and
Gas Lease" was filed in the Offices of County Clerk for Weston County,
Wyoming, whereby 2U's 25% working interest in the Wyoming Property was
transferred and assigned to the Company and the Company issued to 2U five
million (5,000,000) shares of the Company's $0.001 par value common stock with
Rule 144 restrictions.
The LAK Ranch Oil Project is located four miles south of the town of
Newcastle in Wyoming's prolific oil producing Powder River Basin. Previous
exploration activities at the LAK Ranch have been headed up by Texaco, Conoco,
Parent Oil, Mapco and Surtek (previously Exoil Services). Surtek conducted
field mapping studies, the drilling and coring of numerous wells, and a
resource estimate based upon their work and all previous drill hole data. In
1984 Surtek estimated that the LAK Ranch contained a resource of 100+ million
barrels of napthenic oil.
Economically feasible recovery of this oil depends upon the success of
a process known as Steam Assisted Gravity Drainage (SAGD). The SAGD process
has not been used in commercial operation. However, the success of the process
has been demonstrated at a pre-commercial pilot in the Athabasca oil sands.
Pursuant to an agreement dated September 24, 1997, Derek Resources
Corporation acquired an option to earn a 75% interest in the LAK Ranch oil
property in Wyoming by incurring certain expenditures to develop a Steam
Assisted Gravity Drainage (SAGD) pilot plant on the Property and by making
certain option payments. In 1998, Derek completed preliminary site
investigation, engineering and confirmation drilling on the Property. The
data returned indicated that a SAGD project was viable for the property.
Derek commenced the drilling and installation of the first SAGD well
pair on the LAK Ranch property June 22, 2000 and by August of 2000 the well
pair had been successfully installed. During the remainder of 2000, Derek
continued working on construction of the SAGD plant and in January 2001,
announced that final installation and assembly procedures including
fabrication, welding, electrical and instrument component installation and
equipment testing were nearing completion. Further, a 33,000 foot long four-
inch natural gas pipeline was installed to the site and the completed sections
successfully pressure tested. In March 2001, Derek announced that steam
generation and injection to its SAGD well pair had commenced. The SAGD
operation will take several months to achieve sustained production due to the
needed steam and heat build-up in the reservoir.
As of March 31,2001, total exploration and development costs incurred
on the LAK Ranch project by Derek totaled approximately $6,900,000. See
MANAGEMENT'S DISCUSSION AND ANALYSIS - LAK Ranch Oil Project - Litigation.
During December 2000 and January 2001, a dispute arose between the
Company and Derek concerning Derek's expenditures and operations under a
September 24, 1997 Option Agreement addressing development of a pilot SAGD oil
recovery plant on the LAK Ranch site. The parties were unable to agree about
Derek's decision to incur certain expenses for the LAK project in light of the
terms of the Option Agreement. Derek also asserted certain demands for payment
concerning its development of the LAK Ranch site project which Asdar felt were
inconsistent with the terms of the Option Agreement. Derek ultimately asserted
a purported right to foreclose a lien against Asdar's interest in the LAK
property and Asdar disagreed and disputed the legality of Derek's lien
assertions and activities. As a result, the company filed a lawsuit against
Derek in Wyoming District Court in Weston County, Wyoming requesting an
accounting by Derek of its expenditures and seeking other relief. That lawsuit
is currently pending. See MANAGEMENT'S DISCUSSION AND ANALYSIS - LAK ranch Oil
Project - Litigation.
HARVESTER PROSPECT
On February 26, 2001, the Company signed a working interest agreement
with International Brooks Petroleum Ltd. ("IBP") whereby the Company acquired
a 50% working interest in 1, 120 acres located in the San Joaquin Basin, Kings
County, California, for $300,000. See MANAGEMENT'S DISCUSSION AND ANALYSIS -
Harvester Prospect.
THE COMPANY'S FACILITIES
The Company does not own any real or personal property. Prior to
August 1, 2000, the Company's offices were located in the residence of its
President. However, as of August 1, 2000, the Company leases office space from
Holm Investments Ltd. The Company leases the office space for $2,050.00 per
month. The Company's principal corporate offices are located at 1239 West
Georgia Street, Suite 3004, Vancouver, BC V6E 4R8.
=============================================================================
THE OFFERING
SECURITIES OFFERED BY THE UNDERWRITERS
1, 500,000 Series A Units. Each Series A Unit
consists of one common share, par value $.001 per share and one Common Share
Purchase Warrant. Each Common Share Purchase Warrant entitles the holder to
purchase one share of Common Stock at an exercise price of $.60 at any time
until eighteen months from the effective date of this Prospectus. The Common
Stock Purchase Warrants are subject to redemption.
1, 000,000 Series B Units. Each Series B Unit consists of one common share,
par value $.001 per share and one Common Share Purchase Warrant. Each Common
Share Purchase Warrant entitles the holder to purchase one share of Common
Stock at an exercise price to 100% of public offering price for the Common
Stock at any time until eighteen months from the effective date of this
Prospectus. The Common Stock Purchase Warrants are subject to redemption.
SECURITIES OFFERED CONCURRENTLY BY SELLING SECURITIES HOLDERS
1,000,000 shares of Common Stock are being sold by Selling Shareholders. Any
sales of the Selling Shareholders Common Stock will be made only in accordance
with Prospectus delivery requirement described in the Prospectus.
1,000,000 shares of Common Stock are being registered and reserved for
issuance upon exercise of Common Stock Purchase Warrants owned by certain
Selling Securityholders. Each Common Stock Purchase Warrant entitles the
holder to purchase one share of Common Stock at an exercise price of $.75 at
any time until two (2) years from the effective date of this Prospectus. The
Common Stock Purchase Warrants have no expiration date and are subject to
redemption.
SECURITIES OUTSTANDING PRIOR TO THE OFFERING
12,211,707 shares of Common Stock.
1,000,000 private Common Share
Purchase Warrants (1)
SECURITIES OUTSTANDING AFTER THE OFFERING ....
14,711,707 shares of Common Stock
1,000,000 Common Share Private
Purchase Warrants
1,500,000 Warrants issued
pursuant to
Series A Units
1,000,000 Warrants issued pursuant to
Series B Units
(1) Includes 1,000,000 warrants issued to Selling Shareholders in March, 2001
pursuant to private purchase of Units consisting of one Common Share and one
Common Share Purchase Warrant.
(2) Does not include up to 3,500,000 Common Shares issuable upon exercise of
the outstanding Series A, Series B and private Common Share Purchase Warrants.
EXERCISE PRICE OF THE WARRANTS Series A $.60 per share
Series B $.65 per share
Owned by
Selling Shareholder $.75 per share
EXPIRATION DATE OF THE WARRANTS Series A ____, 2003
Series B ____, 2003
Owned by
Selling Shareholder ______, 2003
REDEMPTION OF WARRANTS Series A Redeemable
Series B Redeemable
Owned by
Selling Shareholders
Not redeemable
ESTIMATED NET PROCEEDS TO THE COMPANY $_____________
USE OF PROCEEDS ....
The Company intends to use the net proceeds of this Offering for working
capital, ongoing exploration and development cost on the Harvester Property,
California, and future costs related to the LAK Ranch Property, Wyoming (See
MANAGEMENT'S DISCUSSION AND ANALYSIS - LAK Ranch Oil Project - Litigation).
NASDAQ ELECTRONIC
BULLETIN BOARD SYMBOL: "XBET"
NASDAQ ELECTONIC
BULLETIN BOARD PROPOSED
SYMBOL FOR WARRANTS: "XBETW"
SUMMARY FINANCIAL DATA
The following sets forth summary income statement and balance sheet
data for the year ended December 31, 1999 as reported on by Schvaneveldt and
Company, Certified Public Accountant, and summary income statement and balance
sheet data for the year ended December 31, 2000 as reported on by Labonte &
Co., Chartered Accountants. This data should be read in conjunction with the
Financial Statements of the Company and notes thereto as prepared by the
independent auditors. Labonte &Co. were appointed auditors in September 2000
due to the sudden death of Mr. Schvaneveldt.
STATEMENTS OF OPERATIONS DATA:
For the Year Ended
December 31,
1999 2000
---------- -----------
Total Revenues NIL NIL
Net Income (Loss) (26,218) (1,223,108)
Net Income (Loss) per Common Share (0.01) (0.23)
Weighted Average Number of
Shares Outstanding 1,854,499 5,362,288
BALANCE SHEET DATA:
Dec. 31, 1999 Dec. 31, 2000
(As Adjusted (1))
---------- -----------
Working capital (deficit) $ (35,056) $ 3,565,852
Total Assets $ 708 $ 5,307,953
Long-Term liabilities $ Nil $ Nil
Stockholders' equity (deficit) $ (35,056) $ 5,212,485
(1) Adjusted to give effect to the sale by the Company of 1,500,000 Series A
Units ($750,000); 1,500,000 Common Shares underlying the Series A Unit
Warrants ($900,000); 1,000,000 Series B Units ($_______); 1,000,000 Common
Shares underlying the Series B Warrants (_______) and 1,000,000 shares
underlying the Warrants owned by certain Selling Shareholders ($750,000)
totaling $________.
RISK FACTORS
The purchase of the Common Stock and the Warrants is speculative and
involves a high degree of risk and immediate and substantial dilution.
Prospective investors should carefully consider all of the information
contained in this Prospectus and, in particular, the following factors which
could adversely affect the operations and prospects of the Company, before
making a decision to purchase any Common Stock and Warrants.
FORWARD-LOOKING STATEMENTS. The following cautionary statements are
made pursuant to the Private Securities Litigation Reform Act of 1995 in order
for the Company to avail itself of the "safe harbor" provisions of that Act.
The discussions and information in this Prospectus may contain both historical
and forward-looking statements, To the extent that the Prospectus contains
forward-looking statements regarding the financial condition, operating
results, business prospects or any other aspect of the Company, please be
advised that the Company's actual financial condition, operating results and
business performance may differ materially from that projected or estimated by
the Company in forward-looking statements. The Company has attempted to
identify, in context, certain of the factors that it currently believes may
cause actual future experience and results to differ from the Company's
current expectations. The differences may be caused by a variety of factors,
including but not limited to adverse economic conditions, intense competition,
including entry of new competitors, increased or adverse federal, state and
local government regulation, inadequate capital, unexpected costs, lower
revenues and net income than forecast, price increases for supplies, the risk
of litigation and administrative proceedings involving the Company and its
employees, higher than anticipated labor costs, the possible fluctuation and
volatility of the Company's operating results and financial condition, adverse
publicity and news coverage, inability to carry out marketing and sales plans,
loss of key executives changes in interest rates, inflationary factors, and
other specific risks that may be alluded to in this Prospectus.
OPERATING LOSSES AND WORKING CAPITAL DEFICIT. During the fiscal years
ended 1999 and 2000, the Company experienced net losses of ($26,218) and
($1,223,108). As of December 31, 2000, the Company had an accumulated deficit
of ($8,575,779), and a shareholders' equity of $1,612,485. If the Company
cannot attain profitability or positive cash flow, it may not be able to meet
its working capital requirements, which could have a material adverse effect
on the Company. See "BUSINESS," "MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF RESULTS OF OPERATIONS" and "FINANCIAL
STAEMENTS."
DEPENDENCE ON PROCEEDS OF OFFERING. The Company is dependent on and
intends to use the net proceeds of this offering in the ongoing development of
the Harvester Property, California, and the LAK Ranch Property, Wyoming. See
"USE OF PROCEEDS..."BUSINESS".
NO ASSURANCE OF PROFITABILITY. The Company's business is speculative
and dependent upon the successful and profitable recovery of oil on the LAK
Ranch through the SAGD process. The Company's 25% interest in this property
depends upon the successful resolution of the litigation pending between the
Company and Derek Resources Corporation ("Derek"). There is no assurance that
there will be a profitable recovery of oil on the LAK Ranch through the SAGD
process or through any other oil recovery process. The Company has experienced
net losses from inception. There is no assurance that the Company will earn
significant revenues or profits from any segment of its business. Investors
cannot be guaranteed against a loss of their entire investment. In the event
the Company is unsuccessful in its lawsuit against Derek, the Company could
lose its entire investment in the LAK Ranch.
MARKETABILITY. Derek will do the marketing of all oil and gas produced
on the LAK Ranch. The Company anticipates any future production will be
marketed to third parties by Derek consistent with industry practices.
Typically, oil is sold at the wellhead at field-posted prices plus a bonus and
natural gas is sold by contract at a negotiated price based upon factors
normally considered in the industry, such as distance from the well to the
pipeline, well pressure, estimated reserves, quality of natural gas and
prevailing supply/demand conditions. The Company's marketing objective is to
receive the highest possible wellhead price for its product. There are a
variety of factors which affect the market for oil and natural gas, including
the extent of domestic production and imports of oil and natural gas, the
proximity and capacity of natural gas pipelines and other transportation
facilities, demand for oil and natural gas, the marketing of competitive fuels
and the effects of state and federal regulations on oil and natural gas
eventually produced, if any. The oil and natural gas industry also competes
with other industries in supplying the energy and fuel requirements of
industrial, commercial and individual customers. The availability of a ready
market for any oil and natural gas production depends on the proximity of
reserves to, and the capacity of, oil and natural gas gathering systems,
pipelines and trucking or terminal facilities. The Company anticipates that
its natural gas will be delivered through gas gathering systems and gas
pipelines that it does not own. Federal and State regulation of natural gas
gathering systems and gas and oil production and transportation, tax and
energy policies, changes in supply and demand and general economic conditions
all could adversely affect Derek's ability to produce and market oil and gas.
The Company anticipates that Derek will take the necessary steps to attempt to
control price risk. Even if Derek takes the proper steps, it will remain
subject to price fluctuations for natural gas sold in the spot market due
primarily to seasonality of demand and other factors beyond the Company's
control. Domestic oil prices generally follow worldwide oil prices, which are
subject to price fluctuations resulting from changes in world supply and
demand.
COMPETITION IN OIL AND NATURAL GAS PRODUCTION.
Competition in the oil and natural gas production industry is intense.
If the interests owned by the Company produce any oil or gas, the Company will
encounter intense competition from other companies and entities in virtually
all phases of the oil and gas industry. Many of these competitors have greater
financial and other resources, and more experience in the oil and gas
industry, than the Company. The Company will compete directly with other
companies and businesses that have developed, and are in the process of
developing, exploration and drilling technologies which may provide these
competitors with an advantage over the Company. The Company believes it will
encounter competition from other oil and natural gas companies in all areas of
its operations, including the acquisition of exploratory prospects and proven
properties.
The Company's competitors will include major integrated oil and
natural gas companies and numerous independent oil and natural gas companies,
individuals, and drilling and income programs. Many of its competitors will be
large, well-established companies with substantially larger operating staffs
and greater capital resources than those of the Company and which in many
instances, have been engaged in the oil and natural gas business for a much
longer time than the Company. Such Companies may be able to pay more for
exploratory prospect and productive oil and natural gas properties and may be
able to identify, evaluate, bid for and purchase a greater number of
properties and prospects than the Company's financial or human resources
permit.
ENVIRONMENTAL REGULATIONS.
The operations which the Company has interests in are subject to
numerous federal, state and local laws and regulations governing the discharge
of materials into the environment or otherwise relating to environmental
protection. These laws and regulations may require the acquisition of a
permit before drilling commences, restrict the types, quantities and
concentration of various substances that may be released into the environment
in connection with drilling and production activities, limit or prohibit
drilling activities on certain lands within wilderness, wetlands and other
protected areas, require remedial measures to mitigate pollution from former
operations, such as pit closure and plugging abandoned wells, and impose
substantial liabilities for pollution resulting from production and drilling
operations. Public interest in the protection of the environment has
increased dramatically in recent years. The trend of more expansive and
stricter environmental legislation and regulations applied to the oil and
natural gas industry could continue, resulting in increased costs of doing
business and consequently affecting profitability. To the extent laws are
enacted or other governmental action is taken that restricts drilling or
imposes more stringent and costly waste handling, disposal and cleanup
requirements, the business and prospects of the Company could be adversely
affected.
The Company anticipates that its interests will generate waste that
may be subject to the federal Resource Conservation and Recovery Act ("RCRA")
and comparable state statutes. The U.S. Environmental Protection Agency
("EPA") and various state agencies have limited the approved methods of
disposal for certain hazardous and non-hazardous wastes. Furthermore, certain
wastes generated by the Company's oil and natural gas interests that are
currently exempt from treatment as "hazardous wastes" may in the future be
designated as "hazardous wastes," and therefore be subject to more rigorous
and costly operating and disposal requirements.
The Oil Pollution Act of 1990 ("OPA") contains numerous requirements
relating to the prevention of and response to oil spills into waters of the
United States. The OPA subjects owners of facilities to strict joint and
several liability for all containment and cleanup costs and certain other
damages arising from a spill, including, but not limited to, the costs of
responding to a release of oil to surface waters. The OPA also requires
owners and operators of offshore facilities that could be the source of an oil
spill into federal or state waters, including wetlands, to post a bond, letter
of credit or other form of financial assurance in amounts ranging from $10
million in specified state waters to $35 million in federal outer continental
shelf waters to cover costs that could be incurred by governmental authorities
in responding to an oil spill. Such financial assurances may be increased by
as much as $150 million if a formal risk assessment indicates that the
increase is warranted. Noncompliance with OPA may result in varying civil and
criminal penalties and liabilities.
Future operations of the Company may also be subject to the federal
Clean Water Act ("CWA") and analogous state laws. Pursuant to the
requirements of the CWA, the EPA has adopted regulations concerning discharges
of storm water runoff. This program requires covered facilities to obtain
individual permits, participate in a group permit or seek coverage under an
EPA general permit. If the Company owns properties that require permits for
discharges of storm water runoff, the Company believes that it will be able to
obtain, or be included under, such permits, where necessary. Like OPA, the
CWA and analogous state laws relating to the control of water pollution
provide varying civil and criminal penalties and liabilities for releases of
petroleum or its derivatives into surface waters or into the ground. CERCLA,
also known as the "Superfund" law, and similar state laws impose liability,
without regard to fault or the legality of the original conduct, on certain
classes of persons that are considered to have contributed to the release of a
"hazardous substance" into the environment. These persons include the owner
or operator of the disposal site or sites where the release occurred and
companies that disposed or arranged for the disposal of the hazardous
substances found at the site. Persons who are or were responsible for
releases of hazardous substances under CERCLA may be subject to joint and
several liability for the costs of cleaning up the hazardous substances that
have been released into the environment, the damages to natural resources and
for the costs of certain health studies, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances
released into the environment.
The Company also anticipates that its interests may be subject to a
variety of federal, state and local permitting and registration requirements
relating to protection of the environment. Management believes that its
interests will be able to maintain substantial compliance with current
applicable environmental laws and regulations and that continued compliance
with existing requirements will not have a material adverse effect on the
Company.
OPERATING HAZARDS AND INSURANCE.
The oil and natural gas business involves a variety of operating
hazards and risks such as well blowouts, caterings, pipe failures, casing
collapse, explosions, uncontrollable flows of oil, natural gas or well fluids,
fires, formations with abnormal pressures, pipeline ruptures or spills,
pollution, releases of toxic gas and other environmental hazards and risks.
These hazards and risks could result in substantial losses to the Company
from, among other things, injury or loss of life, severe damage to or
destruction of property, natural resources and equipment, pollution or other
environmental damage, cleanup responsibilities, regulatory investigation and
penalties and suspension of operations. In addition, the Company may be
liable for environmental damages caused by previous owners of property
purchased and leased by the Company. As a result, substantial liabilities to
third parties or governmental entities may be incurred, the payment of which
could reduce or eliminate the funds available for exploration, development or
acquisitions or result in the loss of the Company's properties. In accordance
with customary industry practices, the Company expects that it will maintain
insurance against some, but not all, of such risks and losses. There can be
no assurance that any insurance obtained by the Company will be adequate to
cover any losses or liabilities. The Company cannot predict the availability
of insurance or the availability of insurance at premium levels that justify
its purchase. The occurrence of a significant event not fully insured or
indemnified against could materially and adversely affect the Company's
financial condition and operations. The Company may elect to self-insure if
management believes that the cost of insurance, although available, is
excessive relative to the risks presented. In addition, pollution and
environmental risks generally are not fully insurable. The occurrence of an
event not fully covered by insurance could have a material adverse effect on
the financial condition and results of operations of the Company.
SECURITIES EXCHANGE ACT INDUSTRY GUIDE 2.
The Securities Exchange Act Industry Guide 2 requires certain
information be provided by small business issuers engaged in the oil and gas
industry including estimates of oil and natural gas reserves. There are
numerous uncertainties inherent in estimating oil and natural gas reserves and
their estimated values, including many factors beyond the control of the
producer. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and natural gas that cannot be measured in an
exact manner. Estimates of economically recoverable oil and natural gas
reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions concerning future oil and
natural gas prices, future operating costs, severance and excise taxes,
development costs and work-over and remedial costs, all of which may in fact
vary considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers but at different
times may vary substantially and such reserve estimates may be subject to
downward or upward adjustment based upon such factors. Actual production,
revenues and expenditures with respect to the Company's reserves will likely
vary from estimates, when and if made, and such variances may be material. In
addition the 10% discount factor, which is required by the Securities Exchange
Commission to be used in calculating discounted future net cash flows for
reporting purposes, is not necessarily the most appropriate discount factor
based on interest rates in effect from time to time and risks associated with
the Company or the oil and natural gas industry in general.
In general, the volume of production from oil and natural gas properties
declines as reserves are depleted, with the rate of decline depending on
reservoir characteristics. Except to the extent the Company conducts
successful exploration and development activities or acquires properties
containing proved reserves, or both, the proved reserves of the Company will
decline as reserves are produced. The Company's future oil and natural gas
production is, therefore, highly dependent upon its level of success in
finding or acquiring additional reserves. The business of exploring for,
developing or acquiring reserves is capital intensive. To the extent cash flow
from operations is reduced and external sources of capital become limited or
unavailable, the Company's ability to make the necessary capital investment to
maintain or expand its asset base of oil and natural gas reserves would be
impaired. The failure of an operator of the Company's wells to adequately
perform operations, or such operator's breach of the applicable agreements,
could adversely impact the Company. In addition, there can be no assurance
that the Company's future exploration, development and acquisition activities
will result in additional proved reserves or that the Company will be able to
drill productive wells at acceptable costs. Furthermore, although the
Company's revenues could increase if prevailing prices for oil and natural gas
increase significantly, the Company's finding and development costs could also
increase. The Wyoming Property is currently in development by Derek and as
such there are no records as to average sales price, production costs, total
gross and net productive wells, drilling activities or delivery commitments.
The Company has not performed its own examination as to the net oil or gas
reserves existing on the Wyoming Property. The total amount of undeveloped
acreage is 6,360 acres. As discussed earlier, the Wyoming Property does have
potentially recoverable oil reserves but does not have proven gas reserves.
LACK OF SIGNIFICANT OPERATING HISTORY
The Company is subject to many of the risks common to enterprises with
a limited operating history, including potential under-capitalization,
limitations with respect to personnel, financial and other resources and
limited customers and revenues. The likelihood of success of the Company must
be considered in light of the problems, expenses, difficulties, complications
and delays frequently encountered in connection with the development and
expansion of new businesses. See The Company.
DEPENDENCE ON SENIOR MANAGEMENT
The Company is substantially dependent upon the personal efforts and
abilities of its senior management. Management's ability to operate the
Company at a profit depends, in large part, on its ability to implement its
policies. Although the Company's management has substantial experience, the
effect of new management's policies may not be immediately apparent. The loss
of any of the Company's senior management personnel could adversely affect the
Company. See Management.
LACK OF DIVIDENDS
While payment of dividends on the Company's Common Stock is in the discretion
of the Board of Directors, there can be no assurance that dividends can or
will ever be paid. Payments of dividends are contingent upon, among other
things, future earnings, if any, and the financial condition of the Company,
capital requirements, general business conditions, and other factors which
cannot now be predicted. The Company has never paid dividends and expects that
future earnings, if any, will be used to finance growth. See Description of
Securities - Dividend Policy.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
The Company's Articles of Incorporation provide that its directors
shall not be liable for monetary damages to the Company's shareholders except
as required by law. In addition, the Company By-laws provide indemnification
to the Company's officers and directors to the fullest extent permitted by the
Nevada law. To the extent that shareholders are unable to prevail in actions
for monetary damages against the Company's directors, their rights in this
regard are limited in comparison to those where a corporation has elected not
to include such a provision in its Articles of Incorporation. In addition, to
the extent that the Company's officers and directors may seek indemnification
from the Company, it
may suffer a financial loss as a result of its obligation to pay such amounts
(which may prove to be significant) to its officers or directors.
DILUTION
As of December 31, 2000, the pro forma net tangible book value of the
Company was approximately $1,612,485 or approximately $0.15 per share of
outstanding Common Stock. Net tangible book value per share consists of total
assets less intangible assets and liabilities, divided by the total number of
shares of Common Stock outstanding. After giving effect to the purchase of
1,000,000 Units on January 31, 2001, each Unit consisting of one common share
and one warrant to purchase an additional share, the sale of the Units as
contemplated by this Prospectus at an offering price of $0.50 per Unit for the
Series A Units and an assumed offering price of $0.55 per Unit for the Series
B Units, and without giving effect to the sale or possible exercise of any
Warrants, the pro forma net tangible book value at December 31, 2000, would
have been $3,612,485, or approximately $0.25 per share. The purchasers of the
Units offered by this Prospectus will incur an immediate dilution of
approximately $0.25 for Series A Units and $0.30 for Series B Units per share.
Holders of Common Stock may be subjected to additional dilution if any
additional securities are issued as compensation or to raise additional
financing. See "RISK FACTORS - Dilution" and "SHARES ELIGIBLE FOR FUTURE
SALE." The following table illustrates the dilution which investors
participating in this offering will incur and the benefit to current
shareholders as a result of this offering.
Price per Series A Unit................................ $0.50
Price per Series B Unit................................ $0.55
Pro Forma Net Tangible Book Value
per Share before Offering............................ $0.15
Increase in Net Tangible Book Value
Attributable to Units Offered hereby................. $0.10
Pro Forma Net Tangible Book Value
per Share after Offering............................. $0.25
Dilution of Net Tangible Book Value
per Share to Purchasers of
Series A units ...................................... $0.25
Series B units ...................................... $0.30
The following table shows the number and percentage of shares of
Common Stock acquired and the amount and percentage of consideration and
average price per share paid by existing stockholders as of December 31, 2000,
and to be paid by purchasers pursuant to this offering, before deducting the
estimated offering expenses:
Percent of
Shares of Outstanding
Capital Stock Capital Stock Percent of
Purchased After Offering Net Equity Equity
Current Common
Shareholders..... 11,211,707 76% 1,612,485 45%
New Investors... 3,500,000 24% 2,000,000 55%
========== ==== ========= ====
Total............. 14,711,707 100% 3,612,485 100%
USE OF PROCEEDS
Assuming an offering price of $.50 per Series A Unit and an exercise
price of $.60 per Series A Warrant, an offering price of $.55 per Series B
Unit and an exercise price of $.65 per Series B Unit Warrant and an exercise
price of $.75 per Warrant owned by certain Selling Securityholders, the net
proceeds to the Company after deduction of the estimated expenses of the
offering will be approximately $3,525,000. The net proceeds are anticipated to
be used as follows:
Proceeds of
$3,525,000
----------
a. Working Capital $1,525,000
b. Harvester and LAK Ranch Projects $2,000,000
The allocation of the net proceeds from this Offering set forth above
represents the Company's best estimate based on its present plans and certain
assumptions regarding general economic and industry conditions and the
Company's anticipated future revenues and expenditures. If any of these
factors change, the Company may find it necessary or advisable to reallocate
some of the proceeds from one to the other of the above-described categories.
The Company anticipates, based on its current proposed plans and assumptions
relating to its operations, that the proceeds of this Offering will be
sufficient to satisfy its contemplated cash requirements for the next 12
months, although the Company may incur operating losses and significant
capital expenses during that period.
To the extent that the funds generated by this Offering are
insufficient to fund the Company's activities in the short or long term, the
Company may need to raise additional debt or equity through public or private
financings. The Company has no commitment for any such financing, and there
can be no assurance that any additional financing will be available to the
Company, when needed, and on reasonable terms. Certain statements set forth
below under this caption constitute "forward-looking statements" within the
meaning of the Reform Act. See Risk Factors - Forward-Looking Statements for
additional factors relating to such statements.
The amounts sets forth above merely indicate the proposed use of
proceeds, and the actual expenditures may vary substantially from the
estimates. None of the items set forth in the foregoing table should be
considered as a firm commitment by the Company.
MARKET FOR COMMON STOCK.
The Company's Common Stock was approved for listing on the NASDAQ
Electronic Bulletin Board effective February 16, 2000, under the symbol
"XBET".
The range of high and low bid quotations for the Company's Common
Stock for 1999 and 2000 Nasdaq were obtained from the National Quotation
Bureau and are provided below. The volume of trading in the Company's Common
Stock has been limited and the bid and ask prices as reported may not be
indicative of the value of the Common Stock or the existence of an active
trading market. These over-the-counter market quotations reflect inter-dealer
prices without retail markup, markdown or commissions and may not necessarily
represent actual transactions.
1999 Fiscal Year High Bid Low Bid
First
Quarter.....................................$0.5000...................$ 0.0937
Second
Quarter.....................................$0.3750...................$ 0.0937
Third
Quarter.....................................$0.3750...................$ 0.0937
Fourth
Quarter.....................................$0.1875...................$ 0.1250
2000 Fiscal Year
First
Quarter.....................................$6.0000...................$ 1.1250
Second
Quarter.....................................$5.5000...................$ 0.6875
Third
Quarter.....................................$1.1700...................$ 0.5700
Fourth
Quarter.....................................$1.3750...................$ 0.8800
2001 Fiscal Year
First Quarter...............................$1.1406...................$ 0.5469
Second Quarter............................. $________.................$_______
On June ___, 2001, the last reported bid and asked prices for the
Common Stock were $_____ and $______ respectively.
The number of record holders of the Common Stock on June ___, 2001 was
approximately 1,500.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis of financial condition and
results of operations is intended to assist in understanding the financial
condition and results of operations of the Company. The information contained
in this section should be read in conjunction with the financial statements
and accompanying notes thereto and the other sections contained in the
Prospectus. Special Note: Certain statements set forth below under this
caption constitute "forward-looking statements" within the meaning of the
Reform Act. See Risk Factors -
Forward-Looking Statements for additional factors relating to such statements.
GENERAL.
The Company was formed under the laws of the State of Nevada on
November 29, 1983 under the name Venture Group, Inc. On February 11, 1986,
the Company filed an amendment to the Articles of Incorporation changing the
corporate name to Asdar Corporation. On December 11, 1987, another amendment
to the Articles of Incorporation was filed changing the corporate name to
Asdar Group. On February 18, 2001, Asdar Group (the "Company") filed a
Certificate of Reinstatement with the Secretary of State of Nevada.
The Company was originally incorporated to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Nevada. The Company, under former management. from its inception in
1983 to 1986, was engaged primarily in the acquisition of controlling equity
positions in companies experiencing financial or operating difficulties.
During 1985 and 1986, the Company sold its equity positions in these
companies.
The Company, under former management, in 1987, announced its
Registration Distribution Program, which was designed to assist privately-
owned companies in becoming publicly held. As a result of a regulatory review
in 1988, certain changes were required to be made to the program which former
management deemed to be impracticable and all efforts in this business were
terminated in 1990.
The Company was inactive and a shell corporation from 1991 to December
1995, when the Company began the process of identifying potential business
interests, including, but not necessarily limited to, interests in the
"Internet E-Commerce".
Until March 2000, the Company had conducted no business operations
other than the pursuit of a merger, or reverse acquisition with an active
business operation interested in restructuring itself as a publicly-held
company.
INTERNET E-COMMERCE.
On March 8, 2000, the Company signed a Technology Development
Agreement ("Tech Agreement") with TekMaster Ltd., a British Columbia
corporation ("TEK"), and with Xntrik Enterprises Ltd., a British Columbia
corporation ("XEL") to fund development of a Scalable Server Platform
("Scalable Server").
The Tech Agreement called for the Company to issue two million
(2,000,000) shares of the Company's $.001 par value common stock with Rule 144
Restrictions, and to fund two hundred thousand ($200,000) dollars in Canadian
Funds for ongoing development costs. The two million (2,000,000) shares were
issued by the Company with Rule 144 Restrictions.
The Tech Agreement called for XEL to design and develop certain
software modules using their proprietary technology, for XEL to grant a
license to the Company to install and use the software modules, and for TEK to
develop a Scalable Server using the software modules. TEK was to also design
an interface for an administrative toolkit to manage clients. The end product
would be an Application Programming Interface (API) that would be used for
developing server applications.
The two hundred thousand ($200,000) dollars in Canadian Funds for
ongoing development costs was to be funded over a six month period as follows:
Month 1 $25,000.00 Month 2 $35,000.00 Month 3 $30,000.00
Month 4 $40,000.00 Month 5 $30,000.00 Month 6 $40,000.00
To date, US$106,585 (C$160,000) has been expended. As the project has
been put on hold, the payment for Month 6 has not been made. All costs to
date have been expensed as incurred as they do not meet the general criteria
for capitalization.
The Tech Agreement called for XEL to design and develop certain
software modules, using their proprietary technology. The following schedule
sets forth the work to be done by XEL and the progress on the work made by
XEL.
WORK TO BE DONE BY XEL RESULTS
1. Research work consisting of designing an efficient
session management of clients and applying multi-
threading techniques to increase performance. Completed June 2, 2000
2. Develop a comprehensive interface communication
protocol for the purposes of operating in
distributed environment. Completed July 7, 2000
3. Implement the code for the server platform and
design and implement a sample application
just for testing purposes. Completed August 4, 2000
4. Develop a thin client layer for communicating with
server, mainly needed for testing purposes. Completed Sept. 8, 2000
5. Integrate the server platform with cutting-edge
security technologies (e.g. Open SSL or RSA). Completed Oct. 10, 2000
6. Design and implement the interface with the
database for logging and user account management
purposes. The design will be general and will be
suited for final integration with Oracle DB
systems. To Be Completed
The Tech Agreement also called for XEL to grant a license to the
Company to install and use the software modules, and for TEK to develop a
Scalable Server using the software modules. TEK was to also design an
interface for an administrative toolkit to manage clients and remote
administration was to be addressed. The end product would be an Application
Programming Interface (API) that would be used for developing server
applications. This work has not been completed to date.
At the end of October 2000, this project was put on hold. There is no
time frame nor a definite date for the Company to revive this project.
LAK RANCH OIL PROJECT
On September 20, 2000, the Company signed an "Asset Purchase and Sale
Agreement" ("Asset Agreement") with 2Uonline.com, Inc. ("2U"), a Delaware
corporation under common management, whereby the Company acquired all of 2U's
25% working interest in and to the oil and natural gas rights on a 6,360 acre
Wyoming Property located in the Powder River Basin of eastern Wyoming (the
"LAK Ranch") for five million (5,000,000) restricted shares of the Company's
$0.001 par value common stock.
On October 13, 2000, the "Assignment of Working Interest in Oil and
Gas Lease" ("Assignment") was filed in the Offices of County Clerk for Weston
County, Wyoming, whereby 2U's 25% working interest in the Wyoming Property was
transferred and assigned to the Company and the Company issued to 2U five
million (5,000,000) shares of the Company's $0.001 par value common stock with
Rule 144 restrictions and a finders' fee of five hundred thousand (500,000)
shares of the Company's $0.001 par value common stock with Rule 144
restrictions. The cost of the acquisition of the LAK Ranch Oil Project has
been recorded at the historical cost of 2U's purchase price which totaled
$1,595,000.
Rising Phoenix Development Group ("Rising Phoenix"), a former Canadian
Exchange listed Company, was the original 100% holder of the LAK Ranch Oil
Project which is subject to a 19.25% royalty due to the original leaseholders.
Derek Resources Corporation ("Derek"), a Canadian Venture Exchange listed
company, contracted with Rising Phoenix to acquire a 75% working interest in
the LAK Ranch property through various cash payments and a commitment to a US
$3.5 million SAGD pilot plant development program designed to test the
feasibility of potential future oil recovery on the property using SAGD
technology. Derek's commitment to develop the property was expressly set out
in the Option Agreement to a pilot plant description and budget originally
commissioned by Rising Phoenix and outlined in four 1997 reports by Dr. John
Donnelly. Dr. Donnelly is still involved with the project through Derek
Resources.
HISTORY.
Previous exploration activities at the LAK Ranch have been headed up
by Texaco, Conoco, Parent Oil, Mapco and Surtek (previously Exoil Services).
Surtek conducted field mapping studies and the drilling and coring of
numerous wells. On 1984, based upon their work and previous drill hole data,
Surtek estimated that the LAK Ranch contained a resource of 100+ million
barrels of napthenic oil.
In 1998 Paul Trost, BSc/PhD, of MTARRI, Inc., under contract to
conduct a four well drilling and coring program at the LAK Ranch, upheld the
Surtek estimate of a 100+ million barrel oil resource based upon the resulting
logs/cores and a review of the Surtek data and conclusions.
Two independent consulting engineers reviewed the LAK Ranch project in
1998, evaluating the technical and economic feasibilities of recovering the
napthenic oil by utilizing Steam Assisted Gravity Drainage (SAGD) techniques.
SAGD technology has been extensively developed and tested in Canada, and
proven to be economic for recovery of heavy oils in other fields. Ken Kisman,
PEng/PhD, and Mr. Ken Heer, PEng, reviewed the SAGD economic assumptions and
conclusions of John Donnelly, PEng/PhD and were in agreement with the
conclusions put forth by Donnelly. Donnelly and Trost both believe that SAGD
technology, in conjunction with Gas Assisted Gravity Drainage (GAGD)
technology proposed by Kisman, will recover approximately 50% of the oil
resource at LAK Ranch.
The Company's joint venture partner, Derek Resources Ltd. ("Derek") is
utilizing current technologies available such as Steam Assisted Gravity
Drainage (SAGD) and Gas Assisted Gravity Drainage (GAGD) to capitalize on
properties previously deemed non-feasible. This is further detailed in The LAK
Ranch Property and Oil Reserves.
LEGAL PROCEEDINGS
The LAK Ranch Oil Project consists of a steam assisted gravity
drainage ("SAGD") production well and surface facilities which has been
developed, and constructed solely by Derek Resources Corporation ("Derek").
Derek has asserted and maintained exclusive control of the project and
project management. Derek states that some production has been achieved from
the project during its initial operation. According to Derek, ongoing monthly
operation expenses materially exceed the value of any monthly production for
the period January 1, 2001 through early May 2001. The Company has not yet
been able to independently verify Derek's reports concerning operation,
production or costs of operation for the project.
The parties relationship in the LAK Ranch Oil Project stems from a
September 24, 1997 option agreement. The option agreement provided that Derek
could exercise an option and seek to vest a 75% working interest in the
project by exploring, developing and operating a SAGD well pair and surface
facility according to the terms of the option agreement (including the express
terms of four 1997 reports describing and budgeting the project as those
reports were expressly referenced and incorporated in the agreement). The
terms of the option agreement specifically state that Derek would fund the
first six months of operation of the project out of Derek's required initial
capital outlay. The option agreement (including four 1997 engineering reports)
set a $3.5 million US amount that Derek should spend to explore, develop and
construct the project by December 31, 2000. The company contends that Derek
was, and is, obligated to explore, develop, construct and operate this
property (for the first six months of operation) pursuant to the terms of the
option agreement.
According to Derek, as of March 31, 2001 the project was substantially
complete and operating. However, Derek claims to have incurred substantial
cost overruns of approximately $3,400,000 on this project. To the extent the
Company has been able to ascertain, these costs do not appear to have been
incurred consistent with the requirement of the option agreement. The Company
was not advised and did not agree to incurrence of these cost overruns by
Derek.
Derek is asserting a contractual right to collect 25% of its cost overrun from
the Company. The Company disputes this claim by Derek and asserts that Derek's
failures to develop the project consistent with the requirements of the option
agreement preclude vesting of a 75% interest by Derek. The Company has made
additional damages claims against Derek and Derek has filed damage
counterclaims against the Company. All of Derek's claims in this regard are
disputed. Both parties to the litigation have asserted punitive damages claims
against each other and all such claims are disputed by both parties.
On April 13, 2001, Derek purported to complete a Wyoming foreclosure of
Asdar's rights and interest in the LAK Ranch Oil Project. The Company disputes
Derek's legal rights to assert or foreclose any lien against its interests in
the project. The Company also asserts multiple material defects in Derek's
purported foreclosure activities. On April 13, 2001, Derek bid alleged
indebtedness from the Company in the amount of $852,571.11 at the purported
foreclosure sale and received a Weston County, Wyoming Sheriff's Certificate.
The entire matter remains subject to ongoing legal proceedings in Wyoming; the
outcome of those proceedings is uncertain.
On May 4, 2001, Derek filed a motion in the District Court of the Sixth
Judicial District, Wyoming requesting entry of partial summary judgment
against the Company. Specifically, Derek's motion asserts that the Court
should summarily rule that Derek has actually vested a 75% interest in the LAK
property and project without allowing the parties an opportunity in a trial to
present disputed evidence on the issue. The Company has filed pleadings
opposing this motion and may file a countermotion concerning summary
enforcement of the option agreement language.
On May 11, 2001, Derek filed a motion seeking to somehow place the 25%
interest in the LAK Ranch Oil Project it purports to have already foreclosed
against the Company into a receivership. The Company has filed pleadings
opposing this motion.
Should the Company be unsuccessful in asserting its claims and defending its
contractual rights in the Wyoming litigation it could be required to pay
between approximately $850,000 and $900,000 to Derek. Should the Company be
unsuccessful in asserting its claims to invalidate or set aside Derek's
purported foreclosure, it could forfeit or lose its interest in the LAK Ranch
Oil Project.
The Company continues to pursue all legal remedies available to protect its
interest in the LAK Ranch Oil Project. Accordingly, the loss, if any,
resulting from this litigation is presently not determinable. The Company has
not included any amount due to Derek in accounts payable at March 31, 2001.
THE LAK RANCH PROPERTY AND OIL RESERVES
The LAK Ranch contains an oil-saturated formation of low sulphur
naptha based oil. It is believed that this oil can be recovered economically
given the new technology that is now available. This process involves the use
of SAGD (Steam Assisted Gravity Drainage) technology, which has been
successful at Cold Lake, Wolf Lake and Athabasca (Suncor, Syncrude). The SAGD
wells in the Athabasca oil sands are producing at higher rates than 99% of the
oil wells in Alberta. The SAGD process involves drilling parallel horizontal
wells near the base of the reservoir with a steam generator attached to the
top well to provide heat to the formation. The lower well then collects and
pumps the oil to the surface.
The LAK Ranch Oil Project is located in the Powder River Basin of
Eastern Wyoming, three miles southeast of the town of Newcastle. The prolific
oil producing Newcastle Sand formation underlies this property. The
property's northern boundary is formed by highway 16 and its eastern border
follows the line of the western escarpment of the Black Hills. The Newcastle
Sands formation consists of two oil saturated layers separated by a thin layer
of shale and a steeply dipping (25 to 45 degrees) outcropping to the northeast
of the property, reaching a depth of 2,500 feet plus on the southwestern edge.
PAST ACTIVITIES. During the past 20 years numerous companies, have recognized
that significant quantities of oil are in place on the LAK Ranch. These
companies have tested and evaluated different recovery methods for the LAK
project. Conoco did a modified pilot steam simulation (huff and puff)
recovery project demonstrating oil recovery can be achieved; Surtek, and its
partners, conducted extensive laboratory and field pilot testing, employing
chemical methods; and Parent Engineering conducted a solvent recovery project.
Although all of these techniques were moderately successful, and did
demonstrate oil recovery is feasible, the economics were marginal. However,
employing the SAGD steam recovery process using horizontal wells and building
on the $2+ million of previous work, Asdar is confident that both a technical
and economically successful project is achievable at the LAK project. During
the 1970's and 1980's, Texaco, Conoco and Surtek extensively explored the LAK
Ranch project. In total, 26 holes have been drilled on the property. The
data resulting from all of this work has defined the reserves on the LAK Ranch
property to be in excess of 100 million barrels and possible reserves of up to
150 million barrels. An assessment of the past results has led third party
engineers to conclude that the LAK Ranch Oil Project presents one of those
rare opportunities where a proven resource can be profitably exploited as a
result of the newly developed technology.
ESTIMATED PROVEN RESERVES. An independent engineering firm (Surtek) has
previously estimated the oil in place on the LAK Ranch to exceed 100 million
barrels. Assuming a 70% recovery factor (due to the SAGD technology and steep
dip) the target production potential for the project is 70 million barrels of
oil.
OIL DESCRIPTION. This napthenic-based 190 gravity crude has 5 very important
features. First, being napthenic, the oil does not paraffin up tubulars and
flow lines, as opposed to other heavy oil. Second, being napthenic and at
this shallow depth, the oil is very alkaline sensitive which could
significantly aid in the recovery of higher volumes of oil. Third, oil has
high viscosity but the viscosity temperature curve is extremely favorable for
steam and/or any hot water recovery method. Fourth, the napthenic oil demands
a price slightly higher than the West Texas Intermediate benchmark for sales
in Texas and a price of the Wyoming Sweet Crude rate plus a $1 bonus (with no
transportation deduction) for sales in Wyoming.
This gives the LAK Ranch Oil a significant economic advantage as compared to
Athabasca and/or Kern River oil economics. Fifth, sulfur content is very low.
ENVIRONMENTAL FACTORS. The state of Wyoming actively encouraged oil
production. The area is not near, or adjacent to, any national parks,
wilderness areas or national monuments. Vegetation is sparse consisting of
grasses and shrubs and the project area is on a cattle ranch. Water is
available either through a purchase option or by development of existing
groundwater sources (Madision Formation). Water disposal will be back into
the down-dip portion of the LAK oil reservoir. Therefore no adverse
environmental factors are present which would prohibit the exploration of this
resource.
GENERAL GEOLOGIC DESCRIPTION. On the LAK oil lease the target reservoir is
the Newcastle sandstone. This sandstone is a prolific oil producer, both 7
miles west of the LAK lease and, indeed, throughout all the Powder River
Basin. On the LAK lease the Newcastle sand has produced only limited oil due
to its high viscosity (3300 centipoise) at reservoir temperature (480F); thus
the production rate is limited to a few barrels per day since the oil has
consistency of very cool honey and without the application of heat the oil
resists flowing to the well.
The LAK project is located in a synclinal feature of the northeast
flank of the Powder River Basin. Beds typically dip south and west at 24-45
degrees. The Newcastle sand outcrops on the north and eastern portions of the
lease and is at an estimated depth of 2500+ feet in the Southwestern portion
of the lease. (This steep dip is extremely beneficial to high recoveries and
favorable overall economics using SAGD steam recovery method).
Stratigraphically the 45+ feet thick Newcastle sand is composed of an
upper marine sandstone (16 feet thick) with an 6-20 ft. thick shale separating
the marine sandstone from 20-50+ feet thick alluvial sandstone. Both sands
have, generally, 22% porosity, 60-65% oil saturation and 600 950 md
permeability containing the 190 gravity, napthenic-based oil. Due to the
depositional nature of the alluvial sand, certain areas of the reservoir are
more highly oil saturated than other areas.
Steam Assisted Gravity Drainage (SAGD). The steam assisted gravity drainage
approach to the thermal recovery of heavy oil depends on long horizontal wells
placed at the base of the reservoir. Steam is introduced into the base of the
reservoir. Because of the low density of gaseous steam it rises in the
reservoir and heats the formation. The heated oil and water (both condensed
steam and heated formation water) in the formation drain down to the
horizontal well from which they are produced to surface.
The steam is injected into the reservoir from either another
horizontal well or alternatively a series of vertical wells. As the oil and
water is withdrawn from the reservoir, the steam chamber expands both upwards
and sideways. The upward growth proceeds in a random but rapid manner until
the top of the reservoir limits it. In contrast, the steam chamber expands
sideways and downwards in a very stable manner.
At a later stage in the process, when the chamber has reached the top
of the reservoir, the rate of oil production is controlled by the lateral
expansion of the steam chamber. If the oil and water are removed too quickly
from the horizontal production well, then the steam chamber will be drawn down
into the well and bypassing will occur. Essentially, the only drive mechanism
to move the oil to the well is gravity. The process is ineffective with
vertical producing wells because of the relatively low flows that can be
achieved under these conditions. However, with long horizontal wells,
economic production rates can be achieved.
The SAGD process has not been used in commercial operation. However,
the success of the process has been demonstrated at a pre-commercial pilot in
the Athabasca oil sands near the large mining projects operated by Syncrude
and Suncor. Variations of the process also have been tested by Esso at Cold
Lake, Amoco at Wolf Lake and Primrose, Shell at Peace River and Sceptre at
Tangleflags. There are also several new pilots in various stages of
construction and start up.
HARVESTER PROJECT
On February 26, 2001, the Company signed a working interest agreement
with International Brooks Petroleum Ltd. ("IBP") whereby the Company acquired
a 50% working interest in 1,120 acres located in the San Joaquin Basin, Kings
County, California. Asdar acquired this interest for a total payment to IBP of
$300,000 to be spent on a re-entry program. When the initial $300,000 has been
spent, further costs will be split evenly between the Company and IBP. Work on
this project has not yet begun but is expected to begin in June, 2001.
The Harvester Property lies in the center of the southern San Joaquin
Basin in California which extends 280 miles from Merced in the north to
Bakersfield in the south. In 1982, a gas well was drilled by Terra Resources
Incorporation, to a depth of more than 15,000 feet. The Company will conduct a
re-entry program on this gas well.
No testing has been done above 14,650 feet despite the intersection of
five potential hydrocarbon-bearing zones. In July, 2000, an independent review
and evaluation was conducted by Robert M. Scoggins P.E. Mr. Scoggins
recommended re-entry into the Harvester well for the purpose of testing zones
where gas kicks and fluorescence were recorded. If these were found to contain
hydrocarbons, Mr. Scoggins recommended completing the zone for production.
Estimated recoveries from this well are 25% to 30% of approximately 6,000,000
barrels of oil and 60% of approximately 90 billion cubic feet of natural gas.
The cost of this well was over $3,000,000. This well is cased in steel
to the depth of 15,000 feet and, thus, has maintained hole integrity. As a
consequence, the current drilling costs will be greatly reduced.
RESULTS OF OPERATIONS.
The Company has not yet realized any revenue from operations, nor does
it expect to in the foreseeable future. Loss from operations decreased from
US$45,655 in 1998, to US$26,218 in 1999, and increased to US$1,223,108 at
December 31, 2000. The cash and equivalents shown in the accompanying
financial statements constitute the Company's present internal sources of
liquidity. Because neither the Company nor its subsidiaries are generating
any significant royalty revenues, the Company's only external source of
liquidity is the sale of its capital stock.
From inception to December 31, 2000, the Company experienced a net
loss of US$8,575,779 primarily as a result of general and administrative
expenses.
In order to address the going concern problem discussed in the
Company's financial statements, the Company will require additional cash. The
Company will also require additional cash for (i) payment of increased
operating expenses and (ii) further implementation of its business strategies.
No assurance can be given, however, that the Company will have access to the
capital markets in the future, or that financing will be available on
acceptable terms to satisfy the cash requirements of the Company to implement
its business strategies. The inability of the Company to access the capital
markets or obtain acceptable financing could have a material adverse effect on
the results of operations and financial conditions of the Company and could
severely threaten the Company's ability to operate as a going concern.
The Company's forecast of the period of time through which its
financial resources will be adequate to support its operations is a forward-
looking statement that involves risks and uncertainties, and actual results
could vary as a result of a number of factors.
The Company anticipates that it will need to raise additional capital
within the next 12 months in order to continue as a going concern. Such
additional capital may be raised through additional public or private
financings, as well as borrowings and other resources. To the extent that
additional capital is raised through the sale of equity or equity-related
securities, the issuance of such securities could result in dilution of the
equity in the Company of the Company's stockholders. There can be no
assurance that additional funding will be available on favorable terms, if at
all. If adequate funds are not available within the next 12 months, the
Company may be required to curtail its operations significantly or to obtain
funds through entering into arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its assets
that the Company would not otherwise relinquish.
The Company does not anticipate any material expenditures within the
next 12 months that will affect its liquidity. However, the Company does
expect to pay additional sums for legal costs and other expenses in connection
with the Derek Resources Corporation litigation. The Company does not
anticipate any significant research and development within the next 12 months,
nor does the Company anticipate that it will lease or purchase any significant
equipment within the next 12 months. The Company does not anticipate a
significant change in the number of its employees within the next 12 months.
The Company is not aware of any material commitment or condition that may
affect its liquidity within the next 12 months.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to the
Company's directors and executive officers.
NAME AGE POSITION
Robert Waters 51 President and Director
Ferdinand Marehard 73 Secretary, Treasurer and Director
Robert Klein 53 Director
Robert Waters MBA (Director & President): Mr. Waters has been
involved in the investment banking and brokerage industry for over 15 years.
In that capacity, he has been directly involved with the financing and
development of oil and gas projects and understands the fundamentals of
running a successful producing petroleum company. He also has an association
with George S. May International, one of the largest management consultants in
the world.
Mr. Marehard was the president of West-Mar Resources Ltd. ("West-Mar")
from 1984 through 1994, during which time he managed West-Mar's participation
in various foreign and domestic gas and oil leases. In 1985, Mr. Marehard
managed West Mar's participation in the development of six gas wells in
Indiana, and also participated in negotiations for the acquisition of a
1,200,000 acre oil concession in Liberia, West Africa. In 1986 he acquired, on
behalf of West-Mar, a 5% working interest on 40,000 acres in Adams County,
Indiana. From 1990 through 1994 he participated in drilling and developing a
horizontal well and in waterflood oil production in Texas. He also acquired on
behalf of West-Mar, 17,000 acres of gas and oil leases in the State of
Washington. From 1975 through 1981 Mr. Marehard was the president of Hesce
Resources Corp. Ltd., from 1982 through 1984 he was the president of Demus
Petro Corporation; and from 1979 through 1984 he was the president of Mar-Gold
Resources, Ltd. These entities participated in the oil and gas industry and
the mining industry.
Robert Klein (Director) Mr. Klein has served on the Boards of
numerous oil and gas companies both in the public and private sector. His
experience includes directorships in three Canadian brokerage firms. During
this time, he held both management roles and institutional trading duties.
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Company are elected by the Board of
Directors and hold office until their successors are elected and qualified.
EXECUTIVE COMPENSATION
Effective September 25, 2000, Robert Waters became President and a
Director of the Company. His salary is $120,000 per year. There is no
written employment agreement with Mr. Waters; all compensation agreements are
oral.
Effective March 30, 2001, Ferdinand Marehard became Secretary-
Treasurer and a Director of the Company. He receives no salary. There is no
written employment agreement with Mr. Marehard; all compensation agreements
are oral.
The following table sets forth the annual cash compensation paid to
Robert Waters, as Director and President of the Company, to Ferdinand Marehard
as Director and Secretary-Treasurer of the Company and to Robert Klein, a
Director.
NAME AND POSITION SALARY
Robert Waters
President and Director $120,000
Ferdinand Marehard
Secretary-Treasurer and Director No Salary
Robert Klein, Director $ 48,000
In 2000, Mr. Steve Nemergut accrued a salary of $10,000 per month
until his resignation on September 25, 2000. As of September 2000, Mr. Robert
Waters accrued a salary of $10,000 per month. As of March 2000, Mr. Jack Sha
accrued a salary of $4,000 per month until his resignation in May, 2000. As
of April, 2000, Mr. Larry Sostad accrued a salary of $2,000 per month until
his resignation on October 30, 2000. As of September 2000, Mr. Robert Klein
accrued a salary of $2,000 per month until November 2000 and $4,000 per month
thereafter.
During the year ended December 31, 2000, the Company issued 500,000 common
shares to a former director and a significant shareholder as a finder's fee on
the LAK Ranch Oil Project, and 1,271,068 common shares to directors, a former
director and a significant shareholder in payment of cash advances, salaries
and expenses incurred on behalf of the Company totaling $640,900.
During the year ended December 31, 2000 the Company incurred management fees
of $132,993 to directors and officers of the Company. At December 31, 2000
$60,000 was owing to these parties.
During the year ended December 31, 2000 the Company received cash advances of
$272,300 from certain directors and a significant shareholder. At December 31,
2000 $15,000 was owing to these parties.
At December 31, 2000 an amount of $13,267 was owing from two companies with a
director in common.
EMPLOYMENT AGREEMENTS.
The Company has no employment agreements.
STOCK OPTION PLAN.
There is no stock option plan and there are no outstanding stock options.
LIMITATIONS ON DIRECTORS AND OFFICERS LIABILITY
The Articles of Incorporation of the Company provide that a Director
or Officer of the Company shall not be liable to the Company or its
shareholders for damages for breach of fiduciary duty as a Director or Officer
except where such breach involved intentional misconduct, fraud or a knowing
violation of the law and where such intentional misconduct, fraud or knowing
violation of the law was material to the breach of fiduciary duty by the
Director or Officer.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date hereof, the ownership
of the Company's Common Stock by (i) each director and executive officer of
the Company, (ii) all executive officers and directors of the Company as a
group and (iii) all persons known by the Company to beneficially own more
than 5% of the Company's Common Stock.
Percent of Class
Name and Address Amount and Nature of Before After
of Shareholder Beneficial Ownership Offering Offering
Robert Waters 107,273 0.88% 0.73%
945 Marine Drive, Ste. 911
West Vancouver, BC V7T 1A8
Robert Klein 36,364 0.29% 0.25%
4540 Woodgreen Place
West Vancouver, BC V7S 2S6
All directors and officers
as a group 143,907 1.18% 0.98%
(2 people)
May Joan Liu 575,000 4.70% 3.9%
1066 Groveland Road
West Vancouver, BC V7S 1Z4
Tek Masters Ltd. 900,000 7.4% 6.12%
1288 Alberni Street, Ste. 806
Vancouver, BC V6E 4N5
2U Online.com, Inc. 5,000,000 40.9% 34.0%
1288 Alberni Street, Ste. 806
Vancouver, BC V6E 4N5
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 14, 2000, 105,000 shares of the Company's $0.001 par value
common stock were issued to Stephen Nemergut, the Chairman and President of
the Company for accrued debt and director's fees. Also, 5,000 shares of the
Company's $0.001 par value common stock were issued to George Coleman,
Director and Secretary of the Company for director's fees. These shares were
issued pursuant to exemptions from registration of Section 4 (2) of the
Securities Act of 1933.
On March 8, 2000, pursuant to the Tech Agreement signed between the
Company, Tek Masters Ltd., and Xntrik Enterprises Ltd., the Company issued two
million (2,000,000) shares of the Company's $.001 par value common stock with
Rule 144 Restrictions to Tek Masters Ltd. These shares were valued at $600,000
($0.30 per share).
On September 12, 2000, a total of 730,000 shares of the Company's
$0.001 par value common stock were issued for an accrued debt of $306,000.
The accrued debt was comprised of $122,000 in salaries and $184,600 in loans
and/or payments made on behalf of the Company by the Company's Directors.
On October 13, 2000, the "Assignment of Working Interest in Oil and
Gas Lease" was filed in the Offices of County Clerk for Weston County,
Wyoming, whereby 2U's 25% working interest in the Wyoming Property was
transferred and assigned to the Company and the Company issued to 2U five
million five hundred thousand (5,500,000) shares of the Company's $0.001 par
value common stock with Rule 144 restrictions. The 5,500,000 shares issued to
2U included 500,000 shares issued as a finders fee. These shares were valued
at $1,595,000 ($0.29 per share).
The 5,000,000 shares issued to 2U Online.com, Inc. pursuant to the
"Asset Purchase Agreement" signed on September 20, 2000, has resulted in
"Changes in Control" as that term is defined by the provisions of Item 403 of
Regulation S-B. the 5,000,000 shares is equal to 44.796% interest of the
Company's issued and outstanding $0.001 par value common stock and is
reflected in the share capital, equity section, of the attached financial
statements.
On November 6, 2000, a total of 474,402 shares of the Company's $0.001
par value common stock were issued for an accrued debt of $355,802. The
accrued debt was comprised of $46,000 in salaries and $309,802 in loans and/or
payments made on behalf of the Company by the Company's Directors.
On January 31, 2001, investors purchased 1,000,000 units of the
Company's securities for $700,000 (US). Each unit consists of one common
share, and one warrant for the purchase of an additional share at a price of
US$0.75 for two years.
On March 21, 2001, a total of 431,724 shares of the Company's $0.001
par value common stock were issued for an accrued debt of $237,200. The
accrued debt was comprised of $100,000 in salaries, $49,000 in loans and/or
payments made on behalf of the Company by a Director of the Company and
$88,200 for consulting fees.
DESCRIPTION OF SECURITIES
COMMON STOCK.
The Company is authorized to issue up to 50,000,000 shares of Common
Stock, $.001 par value. There are 12,211,707 shares presently outstanding.
All shares of Common Stock have equal voting rights and, when validly issued
and outstanding, have one vote per share in all matters to be voted upon by
shareholders. There are approximately 1,500 holders of record of the
Company's Common Stock. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and non-assessable shares. Cumulative voting in election of directors is
not allowed, which means that the holders of a majority of the outstanding
shares represented at any meeting at which a quorum is present will be able to
elect all of the directors if they choose to do so and, in such event, the
holders of the remaining shares will not be able to elect any directors. On
liquidation of the Company, each common shareholder is entitled to receive a
pro rata share of the Company's assets available for distribution to common
shareholders.
SERIES A AND SERIES B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Each Series A Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $.60, subject to adjustment for
anti-dilutive events, at any time prior to , 2003 (eighteen months
from the date of issuance) unless earlier redeemed by the Company as described
below.
Each Series B Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price equal to the closing bid price of
the Company's Common Stock on the effective date of this Registration
Statement, subject to adjustment for anti-dilutive events, at any time prior
to , 2003 (eighteen months from the date of issuance) unless
earlier redeemed by the Company as described below.
Both Series A and Series B Warrants (the "Warrants") are subject to
redemption by the Company at $ per Warrant, at any time commencing
________ (__ months from the date of this Prospectus), on 30 days' prior
written notice to the holders of Warrants, provided that the daily trading
price per share of Common Stock has been at least $ ________(___% of the
closing bid price for the Company's Common Stock on the effective date of this
Registration Statement) for a period of at least ten consecutive trading days
ending within ten days prior to the date upon which the notice of redemption
is given. For purposes of determining the daily trading price of the Company's
Common Stock, if the Common Stock is listed on a national securities exchange,
is admitted to unlisted trading privileges on a national securities exchange,
or is listed for trading on a trading system of the NASD such as the NASDAQ
Small Cap Market or the NASDAQ/NMS, then the last reported sale price of the
Common Stock on such exchange or system each day shall be used or if the
Common Stock is not so listed on such exchange or system or admitted to
unlisted trading privileges then the average of the last reported high bid
prices reported by the National Quotation Bureau, Inc. each day shall be used
to determine such daily trading price. The Warrants will be exercisable until
the close of the business day preceding the date fixed for redemption, if any.
The Warrants will be issued in registered form pursuant to the terms
of a Warrant Agreement dated as of , 2001 (the "Warrant Agreement")
between the Company and Manhattan Transfer Registrar Co., as Warrant Agent.
Reference is made to said Warrant Agreement (which has been filed as an
Exhibit to the Registration Statement of which this Prospectus is a part) for
a complete description of the terms and conditions thereof. The description
herein is qualified in its entirety by reference to the Warrant Agreement.
The exercise prices and number of shares of Common Stock or other securities
issuable on exercise of the Warrants are subject to adjustment in certain
circumstances, including in the event of a stock dividend, stock split,
recapitalization, reorganization, merger or consolidation of the Company.
The Warrants may be exercised upon surrender of the Warrant
certificate on or prior to the expiration date at the offices of the Warrant
Agent, with the exercise form on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by full payment of the
exercise price (by cashier's or certified check payable to the Company) to the
Warrant Agent for the number of warrants being exercised. The Warrant holders
do not have the rights or privileges of holders of Common Stock.
So long as the Warrants are outstanding, the Company will undertake to
file all post-effective amendments to the registration statement required to
be filed under the Securities Act, and to take appropriate action under
Federal and State securities laws to permit the issuance and resale of Common
Stock issuable upon exercise of the Warrants. The company will use its best
efforts to register or qualify the shares issuable upon conversation of the
Warrants in all of the jurisdictions in which the securities offered hereby
are registered or qualified. However, the Company may determine not to
register or qualify the shares underlying the Warrants in certain other
jurisdictions where the time and expense involved would not justify such
registration and qualification. There can be no assurance that the Company
will be in a position to effect such action under the Federal and applicable
state securities laws, and the failure of the Company to effect such action
may cause the exercise of the Warrants and the resale or other disposition of
the Company Stock issued upon such exercise to become unlawful. The Company
may amend the terms of the Warrants, but only by extending the termination
date or lowering the exercise price. The Company has no present intention of
amending such terms.
WARRANT AGENT
The Company has designated Manhattan Transfer Register Co. as its
Warrant Agent.
DIVIDEND POLICY
Dividends are payable on Common Stock when, as, and if declared by the
Board of Directors out of funds legally available to pay dividends, subject to
any preferences which may be given to holders of preferred stock. The Company
has paid no cash dividends to date and it does not anticipate payment of cash
dividends in the foreseeable future.
THE UNITS.
Each Series A Unit consists of one Common Share, par value $.001 and
one Common Stock Purchase Warrant. Each Common Stock Purchase Warrant
entitles the holder to purchase one share of Common Stock at an exercise price
of $.60 at any time within 18 months from the effective date of this offering.
The Series A Common Stock Purchase Warrants are subject to redemption under
certain circumstances. See "Series A and Series B Warrants" in "Description of
Securities".
Each Series B Unit consists of one Common Share, par value $.001 and
one Common Stock Purchase Warrant. Each Common Stock Purchase Warrant entitles
the holder to purchase one share of Common Stock at an exercise price equal to
the bid price of the Common Stock on the effective date of this offering at
any time within 18 months from the effective date of this offering. The Series
B Common Stock Purchase Warrants are subject to redemption under certain
circumstances. See "Series A and Series B Warrants" in "Description of
Securities".
LEGAL MATTERS
Legal matters in connection with the securities being offered herein
have been passed on for the Company by The Law Offices of James E. Pratt,
Garden City, New York.
EXPERTS
The financial statements of the Company as of December 31, 2000 have
been audited by Labonte & Co. Chartered Accountants, independent public
accountants, as set forth in their report appearing elsewhere herein, and are,
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Washington, D.C. office of the
Securities and Exchange Commission a Registration Statement on Form SB-2 under
the Securities Act, with respect to the Securities offered by this Prospectus.
This Prospectus, which is part of the Registration Statement, omits certain
information contained in the Registration Statement and the exhibits thereto,
as permitted by the Rules and Regulations of the Commissions. For further
information, reference is made to the Registration Statement and to the
exhibits filed therewith, which may be examined without charge at the
Washington, D.C. office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, 13th Floor, New York, New York 10048 at 500
Madison (Suite 1400), Chicago, Illinois 60661. Copies of all or any part
thereof may be obtained from the Public Reference Section of the Commission
upon payment of the fees prescribed by the Commission. Statements contained in
this Prospectus as to the contents of any contract or other document referred
to are not necessarily complete, and in each instance such statement is
qualified by reference to each such contract or document.
SERIES A UNITS
ASDAR GROUP
a Nevada Corporation
SUBSCRIPTION DOCUMENTS FOR SERIES A UNITS
The attached Subscription Documents for Series A Units must be completed and
delivered to ASDAR Group, a Nevada corporation ("Company") as follows:
MAIL TO: ASDAR GROUP
1239 West Georgia Street, Suite 3004, Vancouver, British Columbia V6E 4R8
Subscriptions must be paid (at a price of $0.50 per Unit) by a personal check
or by a cashier's check or by a bank wire transfer. For payment,. refer to
Payment Instructions on page 3.
SECTION A - HOW TO SUBSCRIBE
To subscribe for Units be issued by the Company which are comprised of (I) one
share of the Company's $.001 par value common stock and (ii) a warrant which
will enable you to acquire from the Company one share of the Company's $.001
par value common stock at a purchase price of $.60 per share ("Units") at a
purchase price of $.50 per Unit, you must complete the enclosed series A
Subscription Agreement.
Directions for the Series A Subscription Agreement are as follows:
1. Minimum Investment ______________ Units ______________
2. Be sure to provide your correct name, address and Social Security
number or tax identification number as this information will appear on the
official records of the company.
3. Sign and be sure that you have checked and initialed the appropriate
type of ownership.
4. Signature and Supporting Material Requirements - the following
requirements have been established for the various capacities in which Units
may be purchased and held other than by you as an individual:
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP: The signatures of both joint tenants
are required.
COMMUNITY PROPERTY: The signatures of both husband and wife are required,
unless a separate document signed by both parties and designating either party
as agent of the other party for purposes of signing accompanies the
Subscription Agreement.
TENANTS IN COMMON: The signatures of all parties are required.
TENANTS BY THE ENTIRETY: The signatures of all parties are required.
PARTNERSHIP: The Subscription Agreement must be accompanied by a copy of the
signed partnership agreement.
TRUST: The Subscription Agreement must be accompanied by as copy of the signed
trust agreement.
CORPORATION: The Subscription Agreement must be accompanied by a certified
copy of the resolution of the Board of Directors of the subscribing
corporation designating the officer(s) of that corporation authorized to sign
on behalf of that corporation and of the resolution of that Board of Directors
authorizing the purchase of Units.
5. Furnish the following:
(a) Completed Subscription Agreement
(b) Supporting material if required (see Item 4 above)
(c) A personal check or cashier's check or bank wire transfer in
the amount of your subscription (Refer to Payment Instructions
on page 3).
SECTION B - SUBSCRIPTION AGREEMENT FOR SERIES A UNITS
The undersigned hereby subscribes to _____________ Series A Units, each Unit
consisting of (1) share of the Company's $0.001 par value common stock and
(ii) a warrant for the purchase of one share of the Company's $0.001 par value
common stock at a purchase price of $0.60 per share.
The undersigned confirms receipt of a Prospectus dated ___________ 2001 and
has had an opportunity to and has read the Prospectus and has had the
opportunity to receive clarification from representatives of the Company
concerning the contents of the Prospects. The undersigned further acknowledges
that no representations, written or oral, other than those contained in the
Prospectus have been made in connection with the offering of the Units and
this Subscription Agreement.
THE UNDERSIGNED IS AWARE THAT:
1) The Company has the right to accept or reject this subscription in
whole or in part. This subscription shall be deemed to be accepted by the
Company only when this Subscription Agreement is signed by the Company.
Subscriptions need not be accepted by the Company in the order in which
subscriptions are received.
2) The Company will hold all funds receipted in a separate account until
five (5) days after it has received and accepted subscriptions for not less
than 1,000,000 units in the aggregate.
3) Subscriptions for Units are irrevocable and shall survive the
subscriber's death or disability. Payment in full of the purchase price of the
Units is due and must be made upon subscription.
HOW TO SUBSCRIBE:
You are subscribing to purchase a total of __________ Units at $.50 per Unit
($_______________) by check and initial applicable line).
$ ____________ (___________Units) paid by cashier's check
$_____________(___________Units) paid by personal check; or
& ___________________(Units) paid by wiring funds.
MAKE CHECK PAYABLE TO "ASDAR GROUP"
MAIL TO: ASDAR GROUP
1239 West Georgia Street, Suite 3004
Vancouver, British Columbia V6E 4R8.
WIRE TRANSFER INSTRUCTIONS
Intermediary Bank Harris Bank International
New York
ABA 026007760
SWIFT HATRU533
Beneficiary Bank: Bank of Montreal
First Bank Tower
595 Burrard Street
Vancouver, BC V7X 11.7
Beneficiary Name: ASDAR Group
Beneficiary Acc No. 4687-341
For details, See How to Subscribe (immediately preceding this Subscription
Agreement).
Print name(s) in which Units are to be registered.
NAME _____________________________________
SOCIAL SECURITY OR TAX ID NO. _____________
ADDRESS ___________________________________
_____________________________________________
Title to your purchased Units is to be held as follows (check and initial one)
a. ________ Husband & Wife, as community property
b. ________ Joint Tenants
c. ________ Tenants in Common
d. ________ Individual
e. ________ Corporation
f. ________ Partnership
g. ________ Trust
h. ________ Other
Please Describe: _____________________________________________
NOTE: BY SIGNING THIS SUBSCRIPTION AGREEMENT AND UPON ACCEPTANCE THEREOF, YOU
ARE ENTERING INTO AN AGREEMENT AND AGREEING TO INVEST MONEY WITH THE COMPANY.
This Subscription Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof.
DATED: ___________, 2001, at ________________________________
(1) ____________________________ (2) _________________________
NOTE: If Units are to be registered in more than one name, all subscribers
must sign.
ACCEPTANCE OF SUBSCRIPTION
Agreed to and accepted:
By: /s/ ASDAR GROUP
a Nevada Corporation
By: _/s/___________________ _______________________
President
By: _/s/___________________ _______________________
Secretary
SERIES B UNITS
ASDAR GROUP
a Nevada Corporation
SUBSCRIPTION DOCUMENTS FOR SERIES B UNITS
The attached Subscription Documents for Series B Units must be completed and
delivered to ASDAR GROUP, a Nevada corporation ("Company") as follows:
MAIL TO: ASDAR GROUP
1239 West Georgia Street, Suite 3004, Vancouver, British Columbia V6E 4R8
Subscriptions must be paid (at a price of $ per Unit) by a personal
check or by a cashier's check or by a bank wire transfer. For payment,. refer
to Payment Instructions on page 3.
SECTION A - HOW TO SUBSCRIBE
To subscribe for Units to be issued by the Company which are comprised of (I)
one share of the Company's $.001 par value common stock and (ii) a warrant
which will enable you to acquire from the Company one share of the Company's
$.001 par value common stock at a purchase price of $ per share
("Units") at a purchase price of $ per Unit, you must complete the
enclosed series B Subscription Agreement.
Directions for the Series B Subscription Agreement are as follows:
1. Minimum Investment ______________ Units ______________
2. Be sure to provide your correct name, address and Social Security
number or tax identification number as this information will appear on the
official records of the company.
3. Sign and be sure that you have checked and initialed the appropriate
type of ownership.
4. Signature and Supporting Material Requirements - the following
requirements have been established for the various capacities in which Units
may be purchased and held other than by you as an individual:
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP: The signatures of both joint tenants
are required.
COMMUNITY PROPERTY: The signatures of both husband and wife are required,
unless a separate document signed by both parties and designating either party
as agent of the other party for purposes of signing accompanies the
Subscription Agreement.
TENANTS IN COMMON: The signatures of all parties are required.
TENANTS BY THE ENTIRETY: The signatures of all parties are required.
PARTNERSHIP: The Subscription Agreement must be accompanied by a copy of the
signed partnership agreement.
TRUST: The Subscription Agreement must be accompanied by as copy of the signed
trust agreement.
CORPORATION: The Subscription Agreement must be accompanied by a certified
copy of the resolution of the Board of Directors of the subscribing
corporation designating the officer(s) of that corporation authorized to sign
on behalf of that corporation and of the resolution of that Board of Directors
authorizing the purchase of Units.
5. Furnish the following:
(a) Completed Subscription Agreement
(b) Supporting material if required (see Item 4 above)
(c) A personal check or cashier's check or bank wire transfer in the
amount of your subscription (Refer to Payment Instructions on page 3).
SECTION B - SUBSCRIPTION AGREEMENT FOR SERIES B UNITS
The undersigned hereby subscribes to _____________ Series B Units, each Unit
consisting of (1) share of the Company's $0.001 par value common stock and
(ii) a warrant for the purchase of one share of the Company's $0.001 par value
common stock at a purchase price of $ per share.
The undersigned confirms receipt of a Prospectus dated ___________ 2001 and
has had an opportunity to and has read the Prospectus and has had the
opportunity to receive clarification from representatives of the Company
concerning the contents of the Prospects. The undersigned further acknowledges
that no representations, written or oral, other than those contained in the
Prospectus have been made in connection with the offering of the Units and
this Subscription Agreement.
The undersigned is aware that:
1) The Company has the right to accept or reject this subscription in
whole or in part. This subscription shall be deemed to be accepted by the
Company only when this Subscription Agreement is signed by the Company.
Subscriptions need not be accepted by the Company in the order in which
subscriptions are received.
2) The Company will hold all funds receipted in a separate account until
five (5) days after it has received and accepted subscriptions for not less
than 1,000,000 units in the aggregate.
3) Subscriptions for Units are irrevocable and shall survive the
subscriber's death or disability. Payment in full of the purchase price of the
Units is due and must be made upon subscription.
How to Subscribe:
You are subscribing to purchase a total of __________ Units at $ per
Unit ($_______________) by check and initial applicable line).
$ ____________ (___________Units) paid by cashier's check
$_____________(___________Units) paid by personal check; or
& ___________________(Units) paid by wiring funds.
MAKE CHECK PAYABLE TO "ASDAR GROUP"
MAIL TO: ASDAR GROUP
1239 West Georgia Street, Suite 3004
Vancouver, British Columbia V6E 4R8.
WIRE TRANSFER INSTRUCTIONS
Intermediary Bank Harris Bank International
New York
ABA 026007760
SWIFT HATRU533
Beneficiary Bank: Bank of Montreal
First Bank Tower
595 Burrard Street
Vancouver, BC V7X 11.7
Beneficiary Name: ASDAR Group
Beneficiary Acc No. 4687-341
For details, See How to Subscribe (immediately preceding this Subscription
Agreement).
Print name(s) in which Units are to be registered.
NAME _____________________________________
SOCIAL SECURITY OR TAX ID NO. _____________
ADDRESS ___________________________________
_____________________________________________
Title to your purchased Units is to be held as follows (check and initial one)
a. ________ Husband & Wife, as community property
b. ________ Joint Tenants
c. ________ Tenants in Common
d. ________ Individual
e. ________ Corporation
f. ________ Partnership
g. ________ Trust
h. ________ Other
Please Describe: _____________________________________________
NOTE: BY SIGNING THIS SUBSCRIPTION AGREEMENT AND UPON ACCEPTANCE THEREOF, YOU
ARE ENTERING INTO AN AGREEMENT AND AGREEING TO INVEST MONEY WITH THE COMPANY.
This Subscription Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof.
DATED: ___________, 2001, at ________________________________
(1) ____________________________ (2) _________________________
NOTE: If Units are to be registered in more than one name, all subscribers
must sign.
Acceptance of Subscription
Agreed to and accepted:
By: /s/ ASDAR GROUP
a Nevada Corporation
By: _/s/___________________ _______________________
President
By: _/s/___________________ _______________________
Secretary
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS PAGE
1 Independent Auditor's Report F-1
2 Consolidated Audited Balance Sheets
as at December 31, 1999, and December 31, 2000 F-2 through F-3
3 Consolidated Audited Statement of Operations for
Periods Ending December 31, 1999, and December 31, 2000 F-3
4 Audited Statement of Changes to Stockholders' Equity
for Periods Ending December 31, 1999, and December 31, 2000 F-4
5 Audited Statement of Cash Flows for Periods Ending
December 31, 1999, and December 31, 2000 F-5
6 Notes to Audited Financial Statements F-6 through F-10
---------------------------------------------------------------------------
INTERN FINANCIAL STATEMENTS PAGE
7 BALANCE SHEETS as at March 31, 2001 and December 31, 2000. F-11
8 STATEMENTS OF OPERATIONS for three month periods ending March 31,
2001, March 31, 2000 and from inception to March 31, 2001. F-12
9 STATEMENT OF CASH FLOWS for the three month periods ending March 31,
2001, March 31, 2000 and from inception to March 31, 2001. F-13
10 NOTES TO THE FINANCIAL STATEMENTS. F-14 to F-17
LABONTE & CO.
C H A R T E R E D A C C O U N T A N T S
1205 - 1095 West Pender Street
Vancouver, BC Canada
V6E 2M6
Telephone (604) 682-2778
Facsimile (604) 689-2778
Email rjl@labonteco.com
AUDITORS' REPORT
To the Stockholders and Board of Directors of Asdar Group
We have audited the balance sheet of Asdar Group (a development stage company)
as at December 31, 2000 and the statements of operations, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2000 and
the results of its operations and its cash flows and the changes in
stockholders' equity for the year then ended in accordance with United States
generally accepted accounting principles.
The financial statements as at December 31, 1999 and for the year then ended
were audited by other auditors who expressed an opinion without reservation in
their report dated April 24, 2000.
"LaBonte & Co."
CHARTERED ACCOUNTANTS
Vancouver, B.C.
February 28, 2001
(except for Note 8 which is dated April 11, 2001)
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING
DIFFERENCES
In the United States, reporting standards for auditors would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by conditions and events that cast
substantial doubt on the Company's ability to continue as a going concern,
such as those described in Note 1. Our report to the stockholders and Board
of Directors dated February 28, 2001 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such conditions and
events in the auditors' report when these are adequately disclosed in the
financial statements.
"LaBonte & Co."
CHARTERED ACCOUNTANTS
Vancouver, B.C.
February 28, 2001
(except for Note 8 which is dated April 11, 2001)
F-2
ASDAR GROUP
(A Development Stage Company)
BALANCE SHEETS
December 31, 2000 December 31, 1999
ASSETS
CURRENT ASSETS
Cash $ 6,056 $ 708
Taxes recoverable 264 -
Advances receivable 55,000 -
--------- ---------
61,320 708
OIL AND GAS PROPERTIES (Note 4) 1,646,633 -
--------- ---------
$ 1,707,953 $ 708
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 33,735 $ 35,764
Due to related parties (Note 6) 61,733 -
--------- ---------
95,468 35,764
--------- ---------
CONTINGENCIES (Notes 1 and 8)
STOCKHOLDERS' EQUITY (Note 5)
Common stock, $.001 par value,
50,000,000 shares authorized 10,730,433
(1999 - 1,894,499) shares issued and
outstanding 10,730 1,894
Additional paid-in capital 10,177,534 7,514,888
Treasury stock - (199,167)
Deficit accumulated during the development stage (8,575,779) (7,352,671)
--------- ---------
1,612,485 (35,056)
--------- ---------
$ 1,707,953 $ 708
========= =========
The accompanying notes are an integral part of these financial statements
F-3
ASDAR GROUP
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
Year ended Year ended from January 1, 1996
December 31, 2000 December 31, 1999 to December 31, 2000
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting fees $ 117,076 $ 24,000 $ 375,576
Litigation settlement - - 2,291,070
Management fees 132,993 - 132,993
Office and general 141,738 1,654 205,266
Professional fees 24,121 564 303,061
Software development costs (Note 3) 737,300 - 737,300
Travel and accommodation 69,880 - 69,880
--------- --------- ---------
NET LOSS FOR THE PERIOD $ 1,223,108 $ 26,218 $ 4,115,146
========= ========= =========
BASIC NET LOSS PER SHARE $ 0.23 $ 0.01
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,362,288 1,854,499
========= =========
The accompanying notes are an integral part of these financial statements
F-4
ASDAR GROUP
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 (INCEPTION) TO DECEMBER 31, 2000
Deficit
accumulated
Additional during the
Number of Paid In Treasury development
shares Amount Capital Stock stage Total
Balance, January 1, 1996 499,499 $ 499 $ 4,361,401 $ (199,167) $ (4,460,633) $ (297,900)
Shares issued to settle litigation
retroactively restated 50,000 50 2,469,832 - - 2,469,882
Net loss for the year ended
December 31, 1996 - - - - (2,726,232) (2,726,232)
Balance, December 31, 1996 549,499 549 6,831,233 (199,167) (7,186,865) (554,250)
Shares issued to settle note
payable and accrued interest 500,000 500 476,500 - - 477,000
Shares issued for services at
$.75 per share 55,000 55 41,195 - - 41,250
Shares issued for services at
$.25 per share 415,000 415 105,085 - - 105,500
Net loss for the year ended
December 31, 1997 - - - - (93,933) (93,933)
Balance, December 31, 1997 1,519,499 1,519 7,454,013 (199,167) (7,280,798) (24,433)
Shares issued for services at
$.12 per share 200,000 200 23,800 - - 24,000
Shares issued for services at
$.05 per share 15,000 15 735 - - 750
Net loss for the year ended
December 31, 1998 - - - - (45,655) (45,655)
Balance, December 31, 1998 1,734,499 1,734 7,478,548 (199,167) (7,326,453) (45,338)
Shares issued for services at
$.228 160,000 160 36,340 - - 36,500
Net loss for the year ended
December 31, 1999 - - - - (26,218) (26,218)
Balance, December 31, 1999 1,894,499 1,894 7,514,888 (199,167) (7,352,671) (35,056)
Correction of treasury stock - - (199,167) 199,167 - -
Shares issued for software
development at $.30 per share 2,000,000 2,000 598,000 - - 600,000
Shares issued for services and
interest at $.10 per share 132,500 133 13,117 - - 13,250
Shares issued for services and
advances at $.42 per share 730,000 730 305,870 - - 306,600
Shares issued for interest in
oil and gas property at $.29
per share 5,500,000 5,500 1,589,500 - - 1,595,000
Shares issued for services at
$.75 per share 474,402 474 355,326 - - 355,800
Share reconciliation (968) (1) - - - (1)
Net loss for the year ended
December 31, 2000 - - - - (1,223,108) (1,223,108)
Balance, December 31, 2000 10,730,433 $ 10,730 $ 10,177,534 $ - $ (8,575,779) 1,612,485
The accompanying notes are an integral part of these financial statements
F-5
ASDAR GROUP
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Year ended Year ended from January 1, 1996
December 31, 2000 December 31, 1999 to December 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (1,223,108) $ (26,218) $ (4,115,146)
Adjustments to reconcile net
loss to net cash from operating
activities:
- services paid for with common shares 436,100 - 436,100
- interest paid for with common shares 2,250 - 2,250
- software development costs paid for
with common shares 600,000 - 600,000
- other non-cash expenses - 36,500 2,502,381
(184,758) 10,282 (574,415)
- net changes in working capital items 37,706 (12,001) (46,929)
CASH USED IN OPERATING ACTIVITIES (147,052) (1,719) (621,344)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest in oil and gas property. (51,633) - (51,633)
CASH FLOWS FROM FINANCING ACTIVITIES
Net advances from related parties 259,033 - 259,033
Advances receivable (55,000) - 420,000
CASH FLOWS FROM FINANCING ACTIVITIES 204,033 - 679,033
INCREASE (DECREASE) IN CASH 5,348 (1,719) 6,056
CASH, BEGINNING OF PERIOD 708 2,427 -
CASH, END OF PERIOD $ 6,056 $ 708 $ 6,056
Other non-cash transactions:
During the year, the company issued 65,000 shares at $.42 per share in
settlement of cash advances of $27,300 and 280,000 shares at $.75 per share in
settlement of cash advances of $210,000
The accompanying notes are an integral part of these financial statements
F-6
ASDAR GROUP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The company was incorporated as Venture Investments Inc. under the Laws of the
State of Nevada on November 29, 1983. The company underwent a name change to
Asdar Group on December 10, 1997. The company was dormant from 1991 to 1996
and currently has no revenue generating operations. In accordance with SFAS
#7, the company is considered a development stage company since January 1,
1996. At December 31, 2000, the Company had a working capital deficiency of
$34,148 and has been dependent on directors and certain shareholders for
financing.
The financial statements have been prepared on the basis of a going concern
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company is in the
development stage, has not generated any revenues or completed development of
any commercially acceptable products or services to date and further
significant losses are expected to be incurred in developing its business.
The recoverability of the carrying value of assets and ability of the Company
to continue as a going concern is dependent on raising additional capital,
settling its outstanding litigation with Derek Resources (see Note 8) and
ultimately on generating future profitable operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements are presented in United States dollars
and are prepared in accordance with accounting principles generally accepted
in the United States.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of
three months or less when purchased, to be cash equivalents.
Oil and Gas Properties
The Company follows the full cost method of accounting for its oil and gas
operations whereby all cost related to the acquisition of petroleum and
natural gas interests are capitalized. Such costs include land and lease
acquisition costs, annual carrying charges of non-producing properties,
geological and geophysical costs, costs of drilling and equipping productive
and non-productive wells, and direct exploration salaries and related
benefits. Proceeds from the disposal of capital assets are recorded as a
reduction of the related expenditures without recognition of a gain or loss
unless the disposal would result in a change of 20 percent or more in the
depletion rate.
Depletion and depreciation of the capitalized costs will be computed using the
unit-of-production method based on the estimated proven reserves of oil and
gas determined by independent consultants.
The Company applies a ceiling test to capitalized costs to ensure that such
costs do not exceed estimated future net revenues from production of proven
reserves at year end market prices less future production, administrative,
financing, site restoration, and income tax costs plus the lower of cost or
estimated market value of unproved properties. As the Company has not
established proven recoverable reserves on properties held, the Company has
provided an impairment provision for lease costs incurred to date.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107. Disclosures about
Fair Value of Financial Instruments. The estimated fair value amounts have
been determined by the Company, using available market information and
appropriate valuation methodologies. The fair value of financial instruments
classified as current assets or liabilities including cash and cash
equivalents and notes and accounts payable approximate carrying value due to
the short-term maturity of the instruments.
Foreign Currency Translation
The financial statements are presented in United States dollars. In
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation", foreign denominated monetary assets and liabilities are
translated to their United States dollar equivalents using foreign exchange
rates which prevailed at the balance sheet date. Revenue and expenses are
translated at average rates of exchange during the year. Related translation
adjustments are reported as a separate component of stockholders' equity,
whereas gains or losses resulting from foreign currency transactions are
included in results of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted
for using the fair value method in accordance with SFAS No. 123. In addition,
with respect to stock options granted to employees, the Company provides pro-
forma information as required by SFAS No. 123 showing the results of applying
the fair value method using the Black-Scholes option pricing model.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity
instruments issued for consideration other than employee services is
determined on the earliest of a performance commitment or completion of
performance by the provider of goods or services as defined by EITF 96-18.
Income Taxes
The Company follows the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are recognized
for the estimated tax consequences attributable to differences between the
financial statement carrying values and their respective income tax basis
(temporary differences). The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Recent accounting pronouncements
In March, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25 ("FIN 44") which
clarifies the application of APB 25 for certain issues. This interpretation
is effective July 1, 2000, but certain conclusions in this interpretation
cover specific events that occur after either December 15, 1998, or January
12, 2000. The Company has determined that this pronouncement will not have a
material impact on the reporting and measurement of stock based compensation
by the Company.
In June 1998, The FASB issued Statement Number 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The
accounting for changes in fair value of the derivative depends on the intended
use of the derivative and the resulting designation. The Company does not
expect that the adoption of SFAS 133 will have a material impact on its
financial statements.
NOTE 3 - TEK MASTER PROJECT
The Technology Development Agreement for the development of the scalable
server platform software was signed on March 8, 2000 between Tek Master Ltd.,
a British Columbia corporation, and Xntrik Enterprises Ltd., a British
Columbia corporation, and the company.
The agreement calls for the Company to provide the following:
1. The issuance of two million (2,000,000) restricted shares of the company's
$.001 par value common stock, and
2. Funding of two hundred thousand $200,000 dollars Canadian for ongoing
development costs.
To date, the two million (2,000,000) shares have been issued at a value of
$0.30 per share and $86,600 (C$130,000) has been expended.
The agreement calls for Xntrik Enterprises Ltd. to design and develop the
software and for Tek Master Ltd. to design an interface to manage clients.
This project has been put on hold and the Company does not have a definitive
date to continue this software development.
All costs to date have been expenses as incurred as they do not meet the
general criteria for capitalization.
NOTE 4 - OIL AND GAS PROPERTIES
LAK Ranch Oil Project, Wyoming, USA:
On September 20, 2000, the company signed an agreement with 2U Online.com,
Inc. ("2U"), a Delaware public corporation under common management, to acquire
all of 2U's 25% interest in the oil and natural gas rights on 6,360 acres
located in the Powder River Basin of eastern Wyoming (the "LAK Ranch") in
consideration for the issuance of 5,000,000 restricted common shares and a
finder's fee of 500,000 restricted common shares. The cost of acquisition of
the LAK Ranch Oil Project has been recorded at the historical cost of 2U's
purchase price which totalled $1,595,000.
The Lak Ranch Oil Project consists of a steam assisted gravity drainage
("SAGD") production well and surface facilities which has been developed by
Derek Resources Corporation ("Derek") pursuant to an option agreement dated
September 27, 1997 between a predecessor optionor and Derek. The option
agreement provides, amongst other terms, that Derek could acquire a 75%
interest in the project by developing a SAGD well pair and surface facility
and fund the initial start up operations for six months at a budgeted cost of
$3,500,000. As at February 28, 2001, the project was substantially complete,
however Derek has incurred substantial cost overruns of approximately
$2,900,000. Derek is asserting a contractual right to collect 25% of this
cost overrun from the Company which the Company has disputed. As a result,
Derek commenced foreclosure proceedings on the Company's 25% interest in the
property. Refer to Note 8.
NOTE 5 - CAPITAL STOCK
The Company's capitalization is 50,000,000 common shares with a par value of
$0.001 per share.
During the year ended December 31, 2000 the Company issued a total of
1,336,902 shares to settle debt totalling $675,650, 2,000,000 shares for the
Tek Master Project, and 5,500,000 shares for the LAK Ranch Oil Project.
NOTE 6 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2000 the Company issued 500,000 common
shares to a former director and a significant shareholder as a finder's fee on
the LAK Ranch Oil Project, and 1,271,068 common shares to directors, a former
director and a significant shareholder in payment of cash advances, salaries
and expenses incurred on behalf of the Company totalling $640,900.
During the year ended December 31, 2000 the Company incurred management fees
of $132,993 to directors and officers of the Company. At December 31, 2000
$60,000 is owing to these parties.
During the year ended December 31, 2000 the Company received cash advances of
$272,300 from certain directors and a significant shareholder. At December
31, 2000 $15,000 is owing to these parties.
At December 31, 2000 an amount of $13,267 is owing from two companies with a
director in common.
NOTE 7 - INCOME TAXES
There were no temporary differences between the Company's tax and financial
bases, except for the Company's net operating loss carryforwards amounting to
approximately $2,996,000 at December 31, 2000. These carryforwards will
expire, if not utilized, beginning in 2002. The potential tax benefit of
these losses has not been recorded as a full deferred tax asset valuation
allowance has been provided due to the uncertainty regarding the realization
of these losses.
NOTE 8 - CONTINGENCIES
On March 12, 2001, Derek filed a Notice of Intention to Foreclose in the
District Court, Weston County, State of Wyoming for the alleged failure of the
Company to pay its share of costs of developing the LAK Ranch Oil Project of
approximately $700,000. The Company has denied any liability for these costs
which represent huge cost overruns by Derek in developing the SAGD pilot plant
for which a proper accounting has not been provided by Derek to date. The
Company filed a Complaint and Request for Injunctive Relief in the District
Court, Weston County, State of Wyoming on March 20, 2001 to protect its
interest in the LAK Ranch Oil Project and prohibit Derek from illegally
foreclosing on the Company's interest pending a final determination by the
Court of the parties' respective rights and obligations under the Sept 27,
1997 option agreement.
April 11, 2001 the Company's application for a Preliminary Injunction was
denied by the Sixth Judicial District Court of the State of Wyoming. The
Company continues to pursue all legal remedies available to protect its
interest in the LAK Ranch Oil Project. Accordingly, the loss, if any,
resulting from this litigation is presently not determinable.
NOTE 9 - SUBSEQUENT EVENTS
During January, 2001, the Company arranged a financing of 1,000,000 units at
$.70 per unit for proceeds of $700,000. Each unit consists of one common
share and one share purchase warrant entitling the holder to purchase an
additional share at a price of $0.75 per share for two years.
During February 2001, the Company acquired a 50% working interest in the
Harvester Prospect, located in the San Joaquin Basin in Kings County,
California from International Brooks Petroleum Ltd. The acquisition calls for
the Company to pay a deposit of $30,000 (paid) and advance $270,000 for at
total of $300,000 to be spent on a re-entry program. When the initial
$300,000 is spent, future costs will be split 50/50 between the Company and
International Brooks Petroleum Ltd.
- ----------------------------------------------------------------------------
TABLE OF CONTENTS FOR INTERN FINANCIAL STATEMENTS PAGE
BALANCE SHEETS as at March 31, 2001 and December 31, 2000. F-11
STATEMENTS OF OPERATIONS for three month periods ending March 31,
2001, March 31, 2000 and from inception to March 31, 2001. F-12
STATEMENT OF CASH FLOWS for the three month periods ending March 31,
2001, March 31, 2000 and from inception to March 31, 2001. F-13
NOTES TO THE FINANCIAL STATEMENTS. F-14 to F-17
ASDAR GROUP
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
F-11
ASDAR GROUP
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
2001 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 233,958 $ 6,056
Taxes recoverable 3,434 264
Advances receivable 61,300 55,000
Prepaid expenses 21,268 -
319,960 61,320
OIL AND GAS PROPERTIES (Note 3) 1,957,822 1,646,633
$ 2,277,782 $ 1,707,953
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 22,329 $ 33,735
Due to related parties (Note 5) 330 61,733
22,659 95,468
CONTINGENCIES (Notes 1 and 5)
STOCKHOLDERS' EQUITY (Note 4)
Common stock, $.001 par value, 50,000,000 shares authorized
11,161,707 shares issued and outstanding 11,161 10,730
Additional paid-in capital 10,414,303 10,177,534
Common share subscriptions (Note 4) 630,000 -
Deficit accumulated during the development stage (8,800,341) (8,575,779)
2,255,123 1,612,485
$ 2,277,782 $ 1,707,953
The accompanying notes are an integral part of these interim financial statements.
F-12
ASDAR GROUP
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Three Months Three Months from January 1,
ended March 31, ended March 31, 1996 to March 31,
2001 2000 2001
EXPENSES
Litigation settlement $ - $ - $ 2,291,070
Management and consulting fees 145,727 6,000 654,296
General and administrative 78,835 (266) 648,042
Software development costs - - 746,300
NET LOSS FOR THE PERIOD $ 224,562 $ 5,734 $ 4,339,708
BASIC NET LOSS PER SHARE $ 0.021 $ 0.003
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,739,885 1,949,499
The accompanying notes are an integral part of these interim financial statements.
F-13
ASDAR GROUP
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Three Months Three Months from January 1,
ended March 31, ended March 31, 1996 to March 31,
2001 2000 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (224,562) $ (5,734) $ (4,339,708)
Adjustments to reconcile net loss to net cash from
operating activities:
- services paid for with common shares 167,200 0 673,300
- interest paid for with common shares 0 0 2,250
- software development costs paid for with common shares 0 0 600,000
- other non-cash expenses 0 6,485 2,502,381
(57,362) 751 (561,777)
- net changes in working capital items (87,247) (781) (144,176)
CASH USED IN OPERATING ACTIVITIES (144,609) (30) (705,953)
CASH FLOWS FROM INVESTING ACTIVITIES
Oil and gas property acquisitions (311,189) 0 (62,822)
(311,189) 0 (362,822)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from common stock subscriptions 630,000 0 630,000
Net advances from related parties 60,000 0 259,033
Advances receivable (6,300) 0 413,700
CASH FLOWS FROM FINANCING ACTIVITIES 683,700 0 1,302,733
INCREASE (DECREASE) IN CASH 227,902 (30) 233,958
CASH, BEGINNING OF PERIOD 6,056 708 0
CASH, END OF PERIOD $ 233,958 $ 678 $ 233,958
The accompanying notes are an integral part of these interim financial statements.
F-14
ASDAR GROUP
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The company was incorporated as Venture Investments Inc. under the Laws of the
State of Nevada on November 29, 1983. The company underwent a name change to
Asdar Group on December 10, 1997. The company was dormant from 1991 to 1996
and currently has no revenue generating operations. In accordance with SFAS
#7, the company is considered a development stage company since January 1,
1996.
The financial statements have been prepared on the basis of a going concern
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company is in the
development stage, has not generated any revenues or completed development of
any commercially acceptable products or services to date and further
significant losses are expected to be incurred in developing its business.
The recoverability of the carrying value of assets and ability of the Company
to continue as a going concern is dependent on raising additional capital, the
disposition of its outstanding litigation with Derek Resources (see Note 6)
and ultimately on generating future profitable operations.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB of Regulation S-B. They
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, except as
disclosed herein, there has been no material changes in the information
disclosed in the notes to the financial statements for the year ended December
31, 2000 included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission. The interim unaudited financial statements
should be read in conjunction with those financial statements included in the
Form 10-KSB. In the opinion of Management, all adjustments considered
necessary for a fair presentation, consisting solely of normal recurring
adjustments, have been made. Operating results for the three months ended
March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001.
F-15
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements are presented in United States dollars
and are prepared in accordance with accounting principles generally accepted
in the United States.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments, with an original maturity of
three months or less when purchased, to be cash equivalents.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation", foreign denominated monetary assets and liabilities are
translated to their United States dollar equivalents using foreign exchange
rates which prevailed at the balance sheet date. Revenue and expenses are
translated at average rates of exchange during the year. Related translation
adjustments are reported as a separate component of stockholders' equity,
whereas gains or losses resulting from foreign currency transactions are
included in results of operations.
F-16
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
OIL AND GAS PROPERTIES
The Company follows the full cost method of accounting for its oil and gas
operations whereby all cost related to the acquisition of petroleum and
natural gas interests are capitalized. Such costs include land and lease
acquisition costs, annual carrying charges of non-producing properties,
geological and geophysical costs, costs of drilling and equipping productive
and non-productive wells, and direct exploration salaries and related
benefits. Proceeds from the disposal of capital assets are recorded as a
reduction of the related expenditures without recognition of a gain or loss
unless the disposal would result in a change of 20 percent or more in the
depletion rate.
Depletion and depreciation of the capitalized costs will be computed using the
unit-of-production method based on the estimated proven reserves of oil and
gas determined by independent consultants.
The Company applies a ceiling test to capitalized costs to ensure that such
costs do not exceed estimated future net revenues from production of proven
reserves at year end market prices less future production, administrative,
financing, site restoration, and income tax costs plus the lower of cost or
estimated market value of unproved properties.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107. Disclosures about
Fair Value of Financial Instruments. The estimated fair value amounts have
been determined by the Company, using available market information and
appropriate valuation methodologies. The fair value of financial instruments
classified as current assets or liabilities including cash and cash
equivalents and notes and accounts payable approximate carrying value due to
the short-term maturity of the instruments.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted
for using the fair value method in accordance with SFAS No. 123. In addition,
with respect to stock options granted to employees, the Company provides pro-
forma information as required by SFAS No. 123 showing the results of applying
the fair value method using the Black-Scholes option pricing model.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity
instruments issued for consideration other than employee services is
determined on the earliest of a performance commitment or completion of
performance by the provider of goods or services as defined by EITF 96-18.
NOTE 3 - OIL AND GAS PROPERTIES
LAK RANCH OIL PROJECT, WYOMING, USA:
On September 20, 2000, the company signed an agreement with 2U Online.com,
Inc. ("2U"), a Delaware public corporation under common management, to acquire
all of 2U's 25% interest in the oil and natural gas rights on 6,360 acres
located in the Powder River Basin of eastern Wyoming (the "LAK Ranch") in
consideration for the issuance of 5,000,000 restricted common shares and a
finder's fee of 500,000 restricted common shares.
The Lak Ranch Oil Project consists of a steam assisted gravity drainage
("SAGD") production well and surface facilities which has been developed, and
constructed by Derek Resources Corporation ("Derek").
The parties relationship in the LAK Ranch Oil Project stems from a September
24, 1997 option agreement. The option agreement provided that Derek could
exercise an option and seek to vest a 75% working interest in the project by
exploring, developing and operating a SAGD well pair and surface facility
according to the terms of the option agreement (including the express terms of
four 1997 reports describing and budgeting the project as those reports were
expressly referenced and incorporated in the agreement). The terms of the
option agreement specifically state that Derek would fund the first six months
of operation of the project out of Derek's required initial capital outlay.
The option agreement (including four 1997 engineering reports) set a $3.5
million US amount that Derek should spend to explore, develop, construct and
operate the project by December 31, 2000. The Company contends that Derek was,
and is, obligated to explore, develop, construct and operate this property
(for the first six months of operation) pursuant to the terms of the option
agreement.
According to Derek, as of March 31, 2001, the project was substantially
complete and operating. However, Derek claims to have incurred substantial
cost overruns of approximately $3,400,000 on this project. To the extent the
Company has been able to ascertain, these costs do not appear to have been
incurred consistent to the requirement of the option agreement. The Company
was not advised and did not agree to incurrence of these cost overruns by
Derek.
Derek is asserting a contractual right to collect 25% of its cost overrun from
the Company. The Company disputes this claim by Derek and asserts that
Derek's failures to develop the project consistent with the requirements of
the option agreement preclude vesting of a 75% interest by Derek. The Company
has made additional damages claims against Derek and Derek has filed damage
counterclaims against the Company. All of Derek's claims in this regard are
disputed. Both parties to the litigation have asserted punitive damages
claims against each other and all such claims are disputed by both parties.
On April 13, 2001, Derek purported to complete a Wyoming foreclosure of
Asdar's rights and interests in the LAK Ranch Oil Project. The Company
disputes Derek's legal rights to assert or foreclose any lien against its
interests in the project. The Company also asserts multiple material defects
in Derek's purported foreclosure activities. On April 13, 2001, Derek bid
alleged indebtedness from the Company in the amount of $852,571.11 at the
purported foreclosure sale and received a Weston County, Wyoming Sheriff's
Certificate. The entire matter remains subject to ongoing legal proceedings
in Wyoming; the outcome of those proceedings is uncertain.
Should the Company be unsuccessful in asserting its claims and defending its
contractual rights in the Wyoming litigation it could be required to pay
between approximately $850,000 and $900,000 to Derek. Should the Company be
unsuccessful in asserting its claims to invalidate or set aside Derek's
purported foreclosure, it could forfeit or lose its interest in the LAK Ranch
Oil Project.
HARVESTER PROPERTY, CALIFORNIA, USA:
On February 26, 2001, the Company acquired a 50% working interest in the
Harvester Prospect, located in the San Joaquin Basin in Kings County,
California from International Brooks Petroleum Ltd. The acquisition called
for the Company to pay a deposit of $30,000 and advance $270,000 for a total
of $300,000 to be spent on a well re-entry program. When the initial $300,000
is spent, future costs will be split 50/50 between the Company and
International Brooks Petroleum Ltd.
NOTE 4 - CAPITAL STOCK
The Company's capitalization is 50,000,000 common shares with a par value of
$0.001 per share.
During the quarter ended March 31, 2001 the Company issued a total of 431,274
shares in payment for services and to settle debt totalling $237,200. The
Company arranged a financing of 1,000,000 units at $.70 per unit for gross
proceeds of $700,000. Each unit subscribed for consists of one common share
and one share purchase warrant entitling the holder to purchase an additional
share at a price of $0.75 per share for two years. A finder's fee of 10% was
paid to a private company controlled by a significant shareholder. The
Company has received the funds from the subscriptions and as yet have not
issued the shares
NOTE 5 - RELATED PARTY TRANSACTIONS
During the quarter ended March 31, 2001 the Company issued 385,719 common
shares to directors, a former director and a significant shareholder in
payment of cash advances, salaries and expenses incurred on behalf of the
Company totalling $212,200.
During the quarter ended March 31, 2001 the Company incurred management fees
of $60,000 to directors and a former director of the Company.
During the quarter ended March 31, 2001 the Company incurred consulting fees
of $69,700 to private companies controlled by a significant shareholder.
At March 31, 2001 an amount of $89,183 is owing from two companies with a
director in common and an amount of $89,514 is owing to a company controlled
by a significant shareholder.
NOTE 6 - CONTINGENCIES
On March 12, 2001, Derek filed a Notice of Intention to Foreclose in the
District Court, Weston County, State of Wyoming for the alleged failure of the
Company to pay its share of costs of developing the LAK Ranch Oil Project of
approximately $700,000. The Company has denied any liability for these costs
which represent huge cost overruns by Derek in developing the SAGD pilot plant
for which a proper accounting has not been provided by Derek to date. The
Company filed a Complaint and Request for Injunctive Relief in the District
Court, Weston County, State of Wyoming on March 20, 2001 to protect its
interest in the LAK Ranch Oil Project and prohibit Derek from illegally
foreclosing on the Company's interest pending a final determination by the
Court of the parties' respective rights and obligations under the Sept 27,
1997 option agreement.
On April 11, 2001 the Company's application for a Preliminary Injunction was
denied by the Sixth Judicial District Court of the State of Wyoming.
On April 13, 2001, Derek purportedly foreclosed on the Company's 25% interest
in the project by bidding indebtedness it claims from the Company in the
amount of $852,571.11 in return for a Weston County, Wyoming Sheriff's
Certificate. Derek has confirmed and announced that under Wyoming law, the
Company has ninety days from April 13, 2001 to redeem and reinstate its
interests from Derek's purported foreclosure by payment of $852,571.11 plus
accrued interest.
On May 4, 2001, Derek filed a motion in the District Court of the Sixth
Judicial District, Wyoming requesting entry of partial summary judgment
against the Company. Specifically, Derek's motion asserts that the Court
should summarily rule that Derek has actually vested a 75% interest in the LAK
property and project without allowing the parties an opportunity in a trial to
present disputed evidence on the issue. The Company will oppose this motion
and may file a countermotion concerning summary enforcement of the option
agreement language. No date has been set for a hearing on Derek's motion.
On May 11, 2001, Derek filed a motion seeking to somehow place the 25%
interest in the LAK Ranch Oil Project it claimed to have already foreclosed
against the Company into a receivership. The Company will oppose this motion.
No date has been set for a hearing on Derek's motion.
The Company continues to pursue all legal remedies available to protect its
interest in the LAK Ranch Oil Project. Accordingly, the loss, if any,
resulting from this litigation is presently not determinable. The Company has
not included any amount due to Derek in accounts payable pending the outcome
of the litigation.
NOTE 7 - SUBSEQUENT EVENTS
On May 9, 2001, the Company announced it is negotiating a financing of
1,500,000 units at $0.50 per unit for proceeds of $750,000. Each unit
consists of one common share and one share purchase warrant entitling the
holder to purchase an additional share at a price of $0.60 per share for
eighteen months.
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Registration Statement, Form 10-QSB.