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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MAY 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________
______ TO _______________
COMMISSION FILE NUMBER 0-9147
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FOUNTAIN OIL INCORPORATED
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 91-0881481
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1400 Broadfield, Suite 200, Houston, Texas 77084
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
713-492-6992
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(ISSUER'S TELEPHONE NUMBER)
1023 West 23rd Street, Tulsa, Oklahoma 74107
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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The number of shares outstanding of issuer's common stock on May 31, 1995 was
10,428,731.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
Yes No X
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PART I - FINANCIAL INFORMATION
FOUNTAIN OIL INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity, Capital Resources and Changes in Financial Condition
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During February and March 1995, the Company issued and sold an aggregate of 811
Units, each consisting of 4,000 shares of its Common Stock, par value $0.10 per
share, and warrants expiring February 28, 1997 to purchase up to 4,000 shares of
Common Stock at an exercise price of $6.00 per share. The Company received
gross proceeds of $11,354,000 and net proceeds of approximately $10,321,000 from
the sale of such Units.
The Company also issued warrants (the "Placement Warrants") expiring February
28, 1997 to purchase up to 1,139,800 shares of Common Stock at an exercise price
of $5.10 per share to non-US persons without registration under the Securities
Act of 1933, as amended. The Units and the Placement Warrants may not be offered
or sold in the United States absent registration under the Securities Act or an
applicable exemption from the registration requirement contained therein.
In addition, during the quarter ended May 31, 1995, the Company issued 28,570
shares of its Common Stock upon conversion of an aggregate of $50,000 principal
amount of notes payable, and an aggregate of 329,731 stock purchase warrants
were exercised, for an aggregate consideration of $438,168, representing
additional capital to the Company.
The net cash proceeds described above will primarily be used in connection with
the activities of the Oil and Gas Division involving the acquisition and
development of oil and gas properties.
The equity financing described above enabled the Company to meet the listing
requirements for inclusion on the Nasdaq National Market, and on April 6, 1995,
Fountain Oil began to trade on this market under the symbol "GUSH". Also, a
secondary listing of the Company's shares began in May 1995 in Norway on the
Oslo Stock Exchange. Prior to April 6, 1995, the Company's Common Stock was
traded on the Nasdaq OTC Electronic Bulletin Board.
As of May 31, 1995, the Company had a total of 5,293,312 warrants outstanding
with an average exercise price of $5.03 per share. Substantially all of the
outstanding warrants can be called at any time after June 30, 1995 if the
Company's Common Stock is then trading at prices in excess of specified minimum
prices of $7 or less. This represents a possible source of additional equity
financing for the Company. In addition, on that date the Company had
outstanding options to acquire 400,000 shares of Common Stock at a price of
$1.50 per share expiring August 16, 1999.
As of May 31, 1995, the Company had current assets of $9,431,186 of which
$8,973,407 was in the form of cash and cash equivalents. Current liabilities
amount to $279,002, leaving the Company with working capital of $9,152,184.
Total Stockholders' Equity as of May 31, 1995 was $13,087,955.
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The Company has outstanding obligations with respect to the oil and gas projects
it is pursuing that require the Company to expend funds and to issue shares upon
satisfaction of certain conditions. In general, these conditions arise under
contracts and include conditions related to the formalization of project
relationships or based on the achievement of specified performance standards.
At May 31, 1995, commitments not conditioned on performance amounted to $1.3
million and 205,000 shares of the Company's Common Stock. As current and future
projects mature and are developed, significant additional obligations may be
incurred.
Results of Operations
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The Company recorded operating revenue of $77,835 during the quarter ended May
31, 1995, with revenue of $610,309 recorded for the nine month period ended May
31, 1995. All revenue relates to sales and rentals of and services related to
electrically enhanced oil recovery equipment. For corresponding periods last
year there were no operating revenues recorded.
The operating loss for the quarter ended May 31, 1995 amounted to $1,436,418,
and the operating loss for the nine month period ended May 31, 1995 was
$3,490,442. For the comparable periods last year, the operating loss was
$341,328 and $1,061,526, respectively. The increase in the operating loss
reflects the fact that the Company is in the process of building an organization
and infrastructure for its new and expanded activities.
Included in the general and administrative cost of $1,211,658 for the quarter
ended May 31, 1995 are $704,334 related to external services. For the nine
month period ended May 31, 1995, the general and administrative cost was
$2,733,802, of which external services amounted to approximately 57% of the
total general and administrative expense. A substantial portion of 1995 expense
for external services represents fees for financial public relations activities
which to a large extent are of a non-recurring nature and which have been paid
primarily by the issuance of Common Stock. General and administrative expense
for the three and nine-month comparable periods in fiscal 1994 were $79,160 and
$230,725, respectively.
Of the total depreciation, depletion and amortization costs of $234,684 reported
for the quarter ended May 31, 1995, $222,957 represents amortization of
intangible assets having a net carrying value of $2,003,555. The intangible
assets consist of patent rights for the Company's electrically enhanced oil
recovery technology initially capitalized at $8,921,413. Quarterly amortization
expense has been comparable during fiscal 1994 and 1995.
During the quarter ended May 31, 1995, the Company capitalized $1,029,421
related to oil and gas projects, bringing the total capitalized amount to
$1,524,965 as of May 31, 1995. Of the capitalized amount, approximately
$615,000 and $519,000 are attributable to the Company's Rocksprings, Texas and
Borytslaw, West Ukraine projects, respectively.
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Petroleum development activities have commenced in the Rocksprings, Texas gas
project, which involves some 9,000 acres under lease and option. One well has
been drilled and although logs indicate the presence of gas reservoirs, attempts
to achieve sustained production from the main producing zone, the Holman sands,
have thus far been unsuccessful. No attempt has yet been made to produce from
the other gas-bearing sands in this well. A second well is scheduled to be
drilled before the fiscal year end, and results from this well will help to
determine the work program to attempt production from the first well. The
Company has a 37.5% working interest, before payout, in the Rocksprings project.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOUNTAIN OIL INCORPORATED
Date: July 13, 1995 By: /s/ Gary J. Plisga
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Gary J. Plisga
Executive Vice President
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