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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended August 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
FOUNTAIN OIL INCORPORATED
(Name of small business issuer in its charter)
Delaware 91-0881481
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1400 Broadfield Blvd., Suite 200, Houston, Texas 77084-5163
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (713) 492-6992
Securities Registered Under Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
None None
Securities Registered Under Section 12(g) of the Act:
Common Stock, par value $0.10 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated herein by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year ended August 31, 1995 were
$625,457.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of September 30, 1995, was $51,781,803.
The number of shares outstanding of registrant's Common Stock on October 26,
1995 was 10,834,063.
DOCUMENTS INCORPORATED BY REFERENCE. None
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT Yes [ ] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
CORPORATE BACKGROUND
Fountain Oil Incorporated ("Fountain" and, together with its
consolidated subsidiaries, the "Company") was incorporated in Delaware in 1994
as a wholly owned subsidiary of Electromagnetic Oil Recovery, Inc., an Oklahoma
corporation ("EORI"). In December 1994, EORI effectively reincorporated in
Delaware through the merger of EORI with and into Fountain (the
"Reincorporation"). The principal results of the Reincorporation were (i) a
change in the Company's state of incorporation from Oklahoma to Delaware, (ii)
the change in the Company's name to Fountain Oil Incorporated, (iii)
accomplishing, in effect, a 1-for-25 reverse stock split through the conversion
in the merger of each 25 shares of EORI Common Stock into one share of Fountain
Common Stock, and (iv) the authorization of a class of Preferred Stock, no
shares of which have yet been issued by the Company.
Predecessors of the Company engaged in the oil and gas exploration and
production business through 1987 and in the course thereof accumulated
substantial losses. In 1988, EORI's Board of Directors approved a quasi-
reorganization based substantially upon a shift in business focus from oil and
gas exploration and production to providing the oil and gas industry with
equipment and services related to a proprietary thermal stimulation process for
heating heavy and paraffinic oil with electric current. In connection with the
quasi-reorganization, the accumulated deficit in stockholders' equity was
eliminated against capital in excess of par value. See Note 1 of Notes to
Consolidated Financial Statements.
The thermal stimulation process remained the Company's principal
business through December 1994, and the Company continues to operate that
business. Beginning in August 1994, a new management group with substantial
experience in the international oil and gas industry has become involved with
the Company, and the Company has begun to expand its activities into the
acquisition and development of oil and gas properties, including engaging in
such activities through production sharing, working interest, joint venture,
stock ownership and other arrangements.
OIL AND GAS PRODUCTION - ACQUISITION AND DEVELOPMENT
The Company's primary focus is the acquisition of ownership interests
in existing oil and gas fields that indicate a potential for increased
production through rehabilitation of the properties. In addition to petroleum
production potential, the Company, in evaluating prospective properties, looks
for, among other characteristics, convenient access to oil and gas
transportation and marketing systems and the existence of an infrastructure for
oil and gas production. Fields meeting the Company's requirements are often
found in countries that have lacked the expertise or economic resources to
exploit such fields effectively. The Company is now involved at various stages
in four projects in Eastern Europe - including one in the Republic of Adygea,
Russian Federation, two in Ukraine and one in Albania.
In addition to fields requiring rehabilitation, the Company seeks oil
and gas properties which it believes it and its associates can operate more
effectively than some other operators. This perceived advantage would arise out
of a relatively smaller overhead or through the application of modern production
techniques, including enhanced oil recovery techniques such as the Company's
proprietary thermal stimulation process.
EASTERN EUROPE
Maykop Field, Republic of Adygea, Russian Federation
Effective October 19, 1995, the Company acquired a 31% interest in
Intergas, a Russian company having rights to develop the 12,500 acre Maykop gas
condensate field in the Republic of Adygea, Russian Federation, which is near
the Black Sea. Other shareholders of Intergas include the local government and
Mostransgas, an affiliate of Gasprom which is the largest gas distribution group
in Russia. The Company will be
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the operator of the Maykop Field on behalf of Intergas and will be responsible
for arranging the financing of all drilling, development and other activities.
The Company believes that the Maykop Field is presently producing approximately
two million cubic feet of gas per day.
The Company is preparing two rigs with drilling and well completion
capabilities for shipment from the United States to the Republic of Adygea for
use by Intergas in developing the Maykop Field. The initial phase of the field
development program envisions the drilling of two new wells to assess the flow
of primary gas production, together with the recompletion and stimulation using
modern production techniques of five existing but non-producing wells. The
information developed during the initial phase of the development program will
be utilized in determining the program for the total field development.
Intergas and Mostransgas have reached an agreement in principle under
which Mostransgas would purchase the gas produced from the Maykop Field at a
price that would currently be approximately US$80 per thousand cubic meters
(approximately $2.27 per thousand cubic feet) before the cost of transportation
within the Russian Federation, which Mostransgas has quoted at approximately
$2.80 per thousand cubic meters per 100 kilometers (approximately $0.08 per
thousand cubic feet per 100 kilometers). That price will be adjusted annually
based upon fluctuations in the European Border table of World Gas Intelligence.
Based upon discussions with Mostransgas, the Company believes that if sales were
made at the present time, Intergas on average would receive approximately $2.00
per thousand cubic feet after transportation costs for gas delivered. All
revenue from the sale of gas to Mostransgas is to be in a form fully convertible
into U.S. dollars. No assurance can be given that these terms will be embodied
in a definitive agreement entered into by the parties.
Gorischt-Kocul Field, Albania
In October 1995, the Company completed negotiations with Albpetrol, the
Albanian national oil company, concerning a joint venture for the redevelopment
of the Gorischt-Kocul oil field in Western Albania near the Adriatic port of
Vlora. The Company believes that the Gorischt-Kocul Field currently produces
approximately 1,200 barrels of oil per day from 160 producing wells, utilizing
outdated equipment and technology.
Albpetrol, on behalf of the joint venture, has requested a production
license for the Gorischt-Kocul Field, and that request is pending before the
Ministry of Mines and Energy. The joint venture agreement and the license will
be submitted to the Council of Ministers of Albania which must give its approval
before redevelopment work can begin.
Under the terms of the contemplated joint venture, any increase in oil
production above a "base" production level will be shared by Albpetrol and the
Company on a 50:50 basis. Albpetrol will receive credit for "base" production
on a declining basis established in the negotiations, and the Company will be
the operator of the Gorischt-Kocul Field and as such will have responsibility
for drilling, development and other activities as well as arranging financing
for the project.
The initial phase of the project, which will commence following execution
of the joint venture agreement and receipt of all necessary approvals and
license, is expected to include the drilling of one or more horizontal wells,
test production, reservoir evaluation and detailed planning of the full field
development.
Boryslaw Field, Western Region, Ukraine
The Company has signed an agreement with the Lviv Regional Council which
contemplates the formation of a joint venture between the Ukraine National Oil
Company ("Ukrnafta"), and the Company for the development of four oil fields in
Western Ukraine. A joint venture agreement between Ukrnafta and the Company is
being negotiated. The fields that are the subject of this agreement have not
been fully developed previously because the area they occupy is environmentally
sensitive and drilling restrictions have accordingly been imposed. The Company
intends to pursue development of this field by drilling from locations outside
the restricted area utilizing directional drilling technology.
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Lelyaki Field, Pryluki Region, Ukraine
The Company has reached an agreement in principle to acquire 80% of the
outstanding stock of UK-RAN Oil Corporation ("UK-RAN"), a Canadian corporation.
UK-RAN, in turn, holds a 45% interest in Kashtan Petroleum, Ltd., a Ukrainian
joint venture, in which Ukrnafta holds the other 55%. Kashtan Petroleum has
been formed to perform an extended workover and developmental drilling of the
Lelyaki Field in the Pryluki oil and gas region of the Chernogov Oblast, east of
Kiev, in central Ukraine. Kashtan Petroleum has received the necessary
government approvals and is now awaiting registration and licensing.
Eastern European Projects
While all oil and gas development and production activities are subject to
uncertainties inherent in the oil and gas industry, the Company's projects in
Eastern Europe described above are subject to certain special risks, including
the following. The forms of government and the economic institutions in the
countries in which the projects are located have been established relatively
recently and accordingly may be subject to a greater risk of change and the risk
of greater change than may be the case with respect to governments and economies
that have been in existence for longer periods of time. The government is an
important participant in the establishment of the arrangements defining each
project, and there is a risk that a future government may seek to alter project
arrangements. The infrastructures, labor pools, sources of supply, and legal
and social institutions in these areas may not be equivalent to those the
Company normally finds in connection with projects in North America.
No assurance can be given that any or all negotiations will be
satisfactorily concluded; that all governmental and quasi-governmental
approvals, licenses and registrations required for the projects will be granted;
that negotiated arrangements will be concluded; that oil and gas will be
produced or that if produced will be produced in commercial quantities and will
be sold at a profit and for consideration that can be repatriated to the United
States in United States currency or some other form that is convertible into
United States currency.
NORTH AMERICA
Rocksprings Field, Edwards County, West Texas
As of August 31, 1995, the Company had a 37.5% working interest before
payout and a 33.3% working interest after payout in 5,644 undeveloped gross
acres (1,879 net acres) under lease which may be expanded through exercise of
certain options expiring at various times in 1996 in the Rocksprings Gas
Prospect. Two wells have been drilled by the group in which the Company is a
working interest participant. In November 1995, the second of the two wells was
completed in the Canyon sand interval and is producing, with the gas being sold
at the spot market price. While the stimulation and testing of the Holman sand
interval in the first well was unsuccessful, the Company and its associates
intend to stimulate and test the Canyon sand formation in that well. Because
the first Rocksprings well had not been proven to be productive at August 31,
1995, the capitalized cost associated with that well was charged against income
at the end of fiscal 1995. An additional well drilled by a previous operator is
also expected to be stimulated, tested and, if appropriate, completed in the
Canyon sand interval. On the basis of a review of production results and test
evaluations from these three wells expected to take place during the second
quarter of fiscal 1996, the future development plans for the Rocksprings Field
will be determined.
West Mexia Field, East Texas
The Company has a 50% working interest in the West Mexia Field, which the
Company views as primarily an opportunity to test new technology for determining
the remaining predictable oil between wells and in wells that have become early
water producers. An initial well was drilled on this project in October 1995.
The well contained a six foot oil-bearing zone and a twenty-four foot water-
bearing zone. Future development plans will be determined upon review of a core
analysis which is expected to be completed by the second quarter of fiscal 1996.
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Skiff Sawtooth Field, Alberta, Canada
The Company has a 50% working interest in oil and gas leases covering
approximately 320 undeveloped acres adjacent to a producing field. A portion of
the acreage has a heavier grade of crude oil, and wells in that area may be used
for testing and refining the Company's electrically induced thermal stimulation
process for heavy oil. The Company has not yet been involved in any drilling in
the Skiff Sawtooth Field.
Inverness Unit, Alberta, Canada
Effective September 1, 1995, Neutrino Resources, Inc., an Alberta
corporation, acquired one-half of the shares of a Canadian subsidiary of the
Company, in exchange for a 10% working interest in an Alberta oil producing
unit. The Company believes that this unit is currently producing approximately
450 barrels per day.
COMPETITION
The oil and gas industry is composed of a large number of competitors
ranging from some of the world's largest multinational companies to very small
private concerns. Many of these competitors have much greater financial and
other resources than the Company. In the competition to acquire oil and gas
properties, the Company relies substantially on the relationships its officers
have developed in the international oil and gas industry, as well as the
Company's relatively low overhead structure which enables it to consider
projects that would be deemed to be too small for consideration by many larger
competitors. The loss of a significant portion of its management group could
have a material adverse affect on the results of operations and prospects of the
Company.
TECHNOLOGY FOR ENHANCED PRODUCTION OF HEAVY OIL
EEOR Process
Fountain Oil's proprietary technology relates to a thermal stimulation
process that electrically heats the oil reservoir near the well-bore, thereby
lowering the viscosity of the oil (the "EEOR Process" - electrically enhanced
oil recovery). In certain pilot projects, the EEOR Process increased the rate
of recovery and may also increase total recovery. Unlike the other major thermal
stimulation method for heavy oil - steam injection - Fountain Oil's process is
environmentally benign, has no practical depth limit and is highly adaptable to
different well conditions and configurations.
The EEOR Process is applicable primarily to heavy oil. The term heavy oil
is generally applied to oil with gravity ratings of 20 degrees API and below.
In addition, the EEOR Process is applicable to the production of oil having
temperature related deposition problems relating to paraffin and other materials
present in the oil that under certain conditions of temperature and pressure can
precipitate from the oil being produced and clog reservoirs, well perforations,
pumps or production tubing.
In 1983, the Company entered into an arrangement with IIT Research
Institute ("IITRI") pursuant to which IITRI conducted certain research and
development related to the EEOR Process. Through the modification of that
arrangement, the Company now has an exclusive, fully paid-up license for the
patents and technology owned by IITRI relating to the EEOR Process. The Company
also holds various patents, and has applications for certain foreign patents
pending, relating to improvements to or variations of the base technology
licensed to the Company by IITRI.
The EEOR Process has been employed in pilot projects to determine its
efficacy. Pilot projects have been conducted in, among other places, Brazil,
Canada, Holland and the United States. A pilot project in China scheduled to
start in fiscal 1995 was delayed by the customer as a result of production
problems experienced with the well in which the EEOR Process equipment was to
have been installed. Installation of that equipment in
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another well is expected by the spring of 1996. In the fourth quarter of 1995,
the Company became aware that a pilot project that was commenced in Canada in
1994 would be terminated by the operator in October 1995. The Company has been
advised that the pilot project termination was not related to the functioning of
the EEOR Process equipment. However, as a result of the termination of the
Canadian project and the lack of new contracts during fiscal 1995, the Company
determined that the recoverability of the carrying value of the EEOR Process
patents was uncertain and accordingly recognized a $1.87 million impairment of
the intangible assets associated with the EEOR Process. The Company intends to
continue its efforts to commercialize the EEOR Process.
The Company believes that its patent position is important in connection
with maintaining its competitive position relating to the EEOR Process. The
IITRI license agreement covers two United States patents that expire in 2002.
The Company holds directly seven United States patents with expiration dates
ranging from 2004 to 2009 and has two United States patent applications pending.
In addition, there are sixteen issued foreign patents, expiring 2005 to 2014,
and fourteen foreign patent applications currently pending based on the
technology embodied in the United States patents and patent applications.
The Company designs, purchases in the open market or contracts for the
manufacture, assembles and then sells or leases the equipment employed in the
EEOR Process. The Company generally sells the electrodes and cables that are
placed "downhole" into the well and reservoir and generally leases the power
conditioning units that convert the electrical energy available in the oilfield
to the low frequency electricity needed to transmit the energy to the electrode
placed in the reservoir. The Company also provides engineering services to
customers for a fee.
The Company also designs, purchases and assembles and then sells or leases
equipment to heat production tubing in order to eliminate or reduce production
problems relating to the deposition of material, such as paraffin, that
precipitates out of oil being produced under certain conditions of temperature
and pressure. In general, this equipment is less sophisticated than the
equipment employed in reservoir heating.
Suppliers
The power conditioning units are presently being produced by Magna-Power
Electronics, Inc. However, relations with alternative manufacturers are being
established. The other equipment and components utilized in connection with the
EEOR Process are standard items or easily fabricated custom parts and may be
purchased from a number of manufacturers.
Research and Development
The EEOR Process has been designed for use and employed primarily in
connection with vertical wells. The Company believes that in the future
horizontal wells may play an increasingly important role in the production of
heavy oil. Accordingly, the Company intends to engage, directly and through
consultants, in research and development activities relating to the modification
of the EEOR Process for use in connection with horizontal wells.
In fiscal 1995, the Company spent approximately $54,000 on design
development related to its new power conditioning unit, which was the only
significant research and development expenditure during 1995.
During the next year, the Company expects to install EEOR Process
equipment in wells owned or controlled, in whole or part, by the Company in
order to maximize flexibility in testing and access to data.
Customers
All producers of heavy oil and oil having concentrations of materials that
could present deposition problems that would be alleviated by heating are
potential customers of the EEOR Process, and the producers of oil with such
deposition problems are potential customers for the Company's production tubing
heating system.
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Distribution
The Company distributes its products primarily through direct selling by
Company personnel. In addition, the Company has from time to time had
representatives or distributors in various foreign countries. The Company
expects to increase its use of representatives and distributors in foreign
countries in an effort to develop sales outside of North America.
Competition
The principal competition of the EEOR Process is a process based upon
injecting steam into wells to heat oil reservoirs. The steam process can heat
thicker zones faster and can heat larger volumes of a reservoir than the EEOR
Process. The steam process works best in thick, widespread formations but may
not be effective in various reservoirs by reason of factors such as climate,
depth, thickness, permeability variations, faulting, low porosity and
incompatibility of fresh water with reservoir constituents. The EEOR Process
appears to be effective under most conditions.
The EEOR Process has significant environmental advantages over the steam
process. The steam process utilizes substantial quantities of pure water in
producing the steam, and then steam condensate polluted with salt and petroleum
constituents, some of which may be carcinogenic, is returned with the oil and
must be recycled or disposed of. The EEOR Process neither utilizes fresh water
nor produces condensate. The energy generated for the EEOR Process can normally
be generated in a central facility with better pollution control measures than
those available onsite where energy for the steam process is normally produced,
and the EEOR Process is normally more energy efficient. Environmental
considerations are generally more important with respect to projects in the more
highly developed economies, such as the United States, Canada and Western
Europe.
The steam process generally is not provided on a service basis by third
party suppliers but rather is implemented by the operator of the oilfield as
part of production activities. The steam process requires substantial capital
investment, which establishes a barrier to competitive systems for those fields
where the steam process is already in place.
The principal dimensions of competition for reservoir heating systems are
the relative effectiveness, reliability and cost-effectiveness of the competing
systems; the environmental impact of the competing processes; and the ability of
the competing suppliers to respond to customers' needs in a timely fashion.
The Company's tubing heating system is not proprietary, and the market for
it is more competitive than the reservoir heating market. The principal basis
of competition for tubing heating systems is price.
EMPLOYEES
As of October 31, 1995, the Company had nineteen employees, of which
seventeen are full time employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company does not have complete ownership of any real property. The
Company leases office space in Calgary, Alberta, Houston, Texas, London, England
and Asker, Norway under leases having remaining terms varying from twenty-four
to sixty months. See "Item 1. Description of Business" regarding activities
in oil and gas properties.
Joint ventures, corporations and other associations with which the Company
is affiliated as a co-venturer, shareholder or other participant have or propose
to obtain rights to explore for and extract oil and gas under minerals leases
and licenses.
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Since September 1, 1994, the beginning of the Company's most recent
fiscal year, the Company has not filed with or included in reports to any
Federal authority or agency any estimates of total, proved net oil or gas
reserves. During the past three fiscal years, the Company has not had any
substantial production of oil and gas. In October 1995, the Company completed
its first productive well, located in the Rocksprings gas field in Edwards
County, Texas, and gas production from this well commenced in November 1995.
As of August 31, 1995, the Company had a 37.5% working interest before
payout and a 33.3% working interest after payout in 5,644 undeveloped gross
acres (1,879 net acres) under lease which may be expanded through exercise of
certain options expiring at various times in 1996 in the Rocksprings Gas
Prospect.
The Company did not drill any exploratory wells or development wells in
fiscal 1993 and 1994. In fiscal 1995, the Company drilled three gross wells
(1.3 net wells), two of which were exploratory and located in the Rocksprings
gas field in Edwards County, Texas, and one of which was dry development and
located in Evangeline Parish, Louisiana. Of the two Rocksprings wells, one has
been completed, and the other is awaiting stimulation and testing of its Canyon
sand interval, after which a decision regarding completion will be made. The
Louisiana well was abandoned as a dry hole.
As of the date of filing this document, the Company has no drilling
operations underway.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a defendant in, nor is any of its property subject
to, any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Fountain's security holders
during the fourth quarter of the fiscal year ended August 31, 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Fountain's Common Stock is currently traded on the Nasdaq National
Market System under the symbol "GUSH." It is also listed and traded on the Oslo
Stock Exchange under the symbol "FOO." Fountain's Common Stock was traded on the
Nasdaq OTC Electronic Bulletin Board under the symbol "EORI" until April 5,
1995.
High and low bid prices reported for the period through April 5, 1995
are from the OTC Electronic Bulletin Board records and reflect inter-dealer
prices, without retail mark-up, mark-downs, or commissions, and may not
necessarily represent actual transactions. Prices reported for the periods
beginning April 6, 1995 are from the NASDAQ Stock Market and reflect trade
prices.
During December 1994, the Company effected a 1-for-25 reverse split of
the Company's Common Stock. Figures for the periods prior to the effective date
of the reverse stock split have been restated to give effect to the reverse
stock split.
<TABLE>
<CAPTION>
BY FISCAL QUARTER IN THE
FISCAL YEAR ENDED COMMON STOCK
AUGUST 31, 1995 HIGH LOW
---------------------------- ----------------- ------------
<S> <C> <C>
November 30, 1994 $4.65 $3.38
February 28, 1995 6.75 2.25
May 31, 1995 7.38 4.19
August 31, 1995 7.00 5.19
</TABLE>
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<TABLE>
<CAPTION>
BY FISCAL QUARTER IN THE
TEN MONTHS ENDED COMMON STOCK
AUGUST 31, 1994 HIGH LOW
---------------------------- ----------------- -----------
<S> <C> <C>
January 31, 1994 $1.00 $.125
April 30, 1994 3.75 .25
July 31, 1994 5.00 1.25
August 31, 1994 5.00 3.00
</TABLE>
On August 31, 1995, the number of holders of record of the Common Stock
of Fountain was approximately 2,091. The Company has not paid any dividends to
its shareholders. It is the Company's present policy to retain any earnings for
working capital purposes, and accordingly the Company does not expect to pay any
dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
As of August 31, 1995, the Company had current assets of $5,290,601, of
which $4,791,645 was in the form of cash and cash equivalents, and current
liabilities of $1,102,432, leaving the Company with working capital of
$4,188,169. Total stockholders' equity as of August 31, 1995 was $9,607,890.
In August 1994, the Company completed a financing that provided
approximately $1,737,000 in additional equity, net of expenses. As a result of
this financing, the Company reported, as of August 31, 1994, current assets of
$1,745,064, cash and cash equivalents of $1,520,061, working capital of
$1,145,174 and stockholders' equity of $4,180,793.
During February and March 1995, the Company issued and sold an
aggregate of 811 units ("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
$10,320,659 from the sale of such Units.
In connection with the issuance and sale of the 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 that assisted with the distribution of the Units.
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. During the year ended
August 31, 1995, the Company also 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 715,066 shares upon exercise of stock purchase warrants for
aggregate consideration of $976,171.
As of August 31, 1995, the Company had a total of 4,927,977 warrants
outstanding with an average exercise price of $5.30 per share. Substantially
all of the outstanding warrants can be called at any time if the Company's
Common Stock is then trading at prices in excess of specified minimum prices of
$7 or less. 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.
The Company has outstanding obligations with respect to the acquisition
and development of oil and gas projects it is pursuing that require or may
require the Company to expend funds and to issue shares of its Common Stock.
Most of these obligations are subject to the satisfaction of various conditions
related to, among other things, formalization of project relationships and
achievement of specified project performance standards. At August 31 and
October 31, 1995, respectively, the Company had unconditional obligations
regarding the development of oil and gas projects amounting to $0 and $125,199,
respectively. At those dates, commitments conditioned on formalization of
project relationships, project performance and other matters amounted to
$500,000
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and 550,000 shares and $1,500,000 and 1,550,000 shares, respectively. As the
Company undertakes additional projects and develops current projects,
significant additional obligations are expected to be incurred.
Developing the oil and gas projects in which the Company has or expects
to acquire an interest, which are described in "Item 1. Description of
Business," is expected by the Company to require a net cash outlay from the
Company in the range of $20 to $25 million during fiscal 1996. The Company has
some flexibility in postponing or reducing the cash outlay by revising project
programs or delaying specific activities.
The Company anticipates financing the net development costs of such
projects through a combination of equity financing by the Company and debt
financings either by the Company or by the joint ventures or other entities that
have the development rights to such projects. Debt financing will be sought
from both international development agencies, such as the European Bank of
Reconstruction and Development and the United States Overseas Private Investment
Corporation, and conventional lenders. There can be no assurance that the
Company will be able to arrange either the equity or debt financing necessary to
develop such projects and support its corporate activities or that such
financing as is available will be on terms that are attractive or acceptable to
the Company or are deemed to be in the best interests of the Company and its
shareholders. The consolidated financial statements have been prepared under
the assumption of a going concern. Failure of the Company to arrange such debt
and equity financing on reasonable terms would have a material adverse effect on
the results of operations, financial condition, cash flows and prospects of the
Company and ultimately its ability to continue as a going concern.
RESULTS OF OPERATIONS
In September 1994, the Company's Board of Directors approved a change
in the Company's fiscal year end from October 31 to August 31. Comparisons made
are for a twelve-month period for the fiscal year ended August 31, 1995 and a
ten-month period for the fiscal year ended August 31, 1994. With the expansion
of the Company's lines of business, comparative results of operations between
1994 and 1993 are not meaningful.
The Company recorded operating revenue of $625,457 during the year
ended August 31, 1995. For the ten month period ended August 31, 1994, operating
revenues amounted to $3,613. All revenue relates to sales and rentals of and
services related to electrically enhanced oil recovery equipment.
The operating loss for the year ended August 31, 1995 amounted to
$7,882,920. For the ten months ended August 31, 1994, the operating loss was
$1,466,345.
General and administrative expense for fiscal 1995 amounted to
$4,012,510 compared to $372,777 for the ten months ended August 31, 1994. This
increase reflects the build-up of an organization and infrastructure for the
Company's oil and gas activities. Included in fiscal 1995 general and
administrative expense is $1,843,397 related to external services. Approximately
62% of fiscal 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.
Of the total depreciation and amortization costs of $1,156,772 reported
for the year ended August 31, 1995, $892,411 represents amortization of
intangible assets. The intangible assets consisted of patent rights for the
Company's electrically enhanced oil recovery technology which would have had a
net value of $1,866,600 at August 31, 1995. Due to the termination of a pilot
project conducted in Canada during fiscal 1994 and 1995 and the lack of new
contracts associated with the EEOR Process during fiscal 1995, the Company
determined that the recoverability of the carrying value of the patent rights
was uncertain and accordingly recognized a $1,866,600 impairment of the
intangible assets associated with the EEOR Process. The Company intends to
continue its efforts to commercialize the EEOR Process. Depreciation and
amortization expense for the ten months ended August 31, 1994 was $868,423 which
principally represents amortization of intangible assets.
The Company also recorded a 1995 year-end charge to income of $608,181
based on impairment of assets related to the first well drilled in the
Rocksprings, West Texas project and the dry hole drilled in Evangeline
10
<PAGE>
Parish, Louisiana. At August 31, 1995, the Company had not established that the
first Rocksprings well would be productive, after attempts to achieve sustained
production from the Holman sands were unsuccessful. This well does, however,
contain a Canyon sand interval, which the Company intends to stimulate and test.
At the end of fiscal 1995, the Company also made a charge to impairment
of assets of $175,450 related to existing heating equipment which became
obsolete because of the Company's recent technical advances. In addition, the
Company recorded a 1995 year-end charge to income of $57,602 based on impairment
of assets related to the write down of inventory to its estimated net realizable
value.
As of August 31, 1995, the Company had capitalized $1,909,890 related
to oil and gas projects. Of the capitalized amount, $1,358,205 relates to
projects in Eastern Europe and $551,685 to oil and gas properties in the United
States.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," which sets forth accounting and disclosure
requirements for stock-based compensation arrangements. The Company will adopt
this new accounting standard in accordance with the provisions thereof. The
Company has not determined the impact of adopting this standard.
The Company may be exposed to the risk of foreign currency exchange
losses in connection with its foreign operations. Such losses would be the
result of holding net monetary assets (cash and receivables in excess of
payables) denominated in foreign currencies during periods of a strengthening
U.S. dollar. The Company does not speculate in foreign currencies or maintain
significant foreign currency cash balances.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements required to be filed in this Report begin at
Page F-1 of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
With the expansion of the Company's business, the Board of Directors
determined on September 8, 1994 that it would be appropriate to engage a firm
with worldwide capabilities as the principal accountant to audit the Company's
financial statements and accordingly dismissed Cross and Robinson as such
principal accountant. Cross and Robinson's reports on the financial statements
of the Company for the fiscal years ended October 31, 1993 and 1992 contained an
explanatory paragraph describing an uncertainty about the Company's ability to
continue as a going concern. There were no disagreements between the Company
and the former principal accountant in the period since the beginning of fiscal
1992 through the interim period ended September 8, 1994, on any matter of
accounting principles or practice, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of the former
principal accountant, would have caused it to make a reference to the subject
matter thereof in connection with its reports. On September 13, 1994, the
Company engaged Coopers & Lybrand L.L.P. as the principal accountant to audit
its financial statements.
11
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------------------------- --- ----------------------------------------
<S> <C> <C>
Robert A. Halpin (1) 60 Chairman of the Board
Oistein Nyberg 53 Director, President and
Chief Executive Officer
Einar Bandlien 47 Director and Executive Vice President,
Business Development
Nils N. Trulsvik 46 Director and Executive Vice President
Stanley D. Heckman (1) 56 Director
Eugene J. Meyers 61 Director
Arild Boe 47 Executive Vice President,
International Production
Arnfin Haavik 52 Executive Vice President and
Chief Financial Officer
Svein E. Johansen 51 Executive Vice President, EOR Technology
Gary J. Plisga 52 Executive Vice President, Americas
Ravinder S. Sierra 43 Vice President, Operations
EOR International Inc. (Key Employee)
</TABLE>
- ------------------
(1) Member of Audit and Compensation Committees.
ROBERT A. HALPIN was elected a Director on March 4, 1995 and Chairman of
the Board on November 14, 1995. Mr. Halpin has long experience in the oil and
gas industry. From 1989 to his retirement September 1993, he served as Vice
President for International Exploration and Production with Petro-Canada. In
October 1993, Mr. Halpin became President of Halpin Energy Resources Ltd., a
firm he formed to provide advisory services to energy companies with emphasis on
international petroleum projects.
OISTEIN NYBERG was elected a Director on March 4, 1995 and President and
Chief Executive Officer effective March 9, 1995. From January 1984 to March
1995, Mr. Nyberg was Managing Director of Smedvig Technology A/S, a Norwegian
technology company, of which he was one of the founders. Among other services,
Smedvig provides consulting services within the areas of reservoir evaluation,
production drilling and well control.
EINAR BANDLIEN was elected a Director on August 17, 1994, Senior Vice
President of Business Development on December 15, 1994 and Executive Vice
President of Business Development on November 14, 1995. Mr. Bandlien is a
petroleum expert with extensive experience in exploration and petroleum resource
management. Prior to joining the Company, he held various positions with Nopec
a.s., a Norwegian petroleum consultant group of companies of which he was a
founder, including Director of International Activities from 1987 to 1991 and
Chairman from 1990 to 1993. He was a Special Advisor to Nopec from 1993 to
1994. Mr. Bandlien also served as Executive Secretary of the Norwegian
Petroleum Resource Management Alliance from 1991 to 1993.
NILS N. TRULSVIK was elected a Director on August 17, 1994. He has served
the Company as Executive Vice President from September 8, 1994 until November
21, 1994; as President and Chief Executive Officer from November 21, 1994 to
March 9, 1995 and as Executive Vice President since March 9, 1995. Mr. Trulsvik
is a petroleum explorationist with extensive experience in petroleum exploration
and development throughout the world. Prior to joining the Company, he held
various positions with Nopec a.s., a Norwegian petroleum consultant
12
<PAGE>
group of companies of which he was a founder, including Managing Director from
1987 to 1993 and Special Advisor from 1993 to August 1994.
STANLEY D. HECKMAN was elected a Director on March 4, 1995. For more than
the past five years, Mr. Heckman has been the owner of JSB Services Corp., a
company whose primary business is in real estate development and investments.
EUGENE J. MEYERS was elected a Director on January 3, 1994 and served as
Chairman of the Board from January 3, 1994 to November 14, 1995. He served as
Chief Executive Officer from August 16, 1994 until November 21, 1994 and as
President from September 8, 1994 to November 21, 1994. Mr. Meyers is also
President and owner of GSM Financial Corporation. Through such company and
other companies, Mr. Meyers has been involved in real estate development and
investments for the past 30 years.
ARILD BOE was elected Senior Vice President, Project Development on August
1, 1995 and Executive Vice President, International Production on November 14,
1995. From 1992 to August 1995, Mr. Boe served as Managing Director of Petec
A/S, a Norwegian reservoir engineering consulting company. During 1991 he was
Managing Director of IPAC A/S, a Norwegian company involved in the development
and sales of petroleum-related software. During 1990, Mr. Boe was Commercial
Director of Smedvig Technology A/S.
ARNFIN HAAVIK was elected Executive Vice President and Chief Financial
Officer on February 1, 1995. From 1981 to 1992, he served as Vice President of
Finance with Nopec a.s., of which he was one of the founders. From 1992 until
the fall of 1994, Mr. Haavik was the Managing Director of Nopec UK Limited,
London. From the fall of 1994 until he joined the Company, he served as
Managing Director of Petroleum Geo Services UK Ltd., London.
SVEIN E. JOHANSEN was elected Executive Vice President, EOR Technology on
December 15, 1994. From 1981 until 1992, he held various positions with Nopec
a.s., of which he was one of the founders, including Managing Director from 1981
to 1987, and Managing Director of Nopec UK Limited, London from 1989 to 1992.
From 1992 and until joining the Company in 1994, he served as Managing Director
of PGS Reservoir Services a.s., a subsidiary of Petroleum Geo Services A/S,
Oslo, Norway.
GARY J. PLISGA was elected an Executive Vice President of the Company,
with responsibility for oil and gas activity in the Americas, effective January
16, 1995. He provided consulting services to the Company from October 1994 to
January 1995. From 1991 to 1994, Mr. Plisga was employed by BPX Colombia, the
exploration and production subsidiary of British Petroleum in Colombia, as
Production Superintendent and as Field Manager for the Cusiana Field. During
1990 and 1991, he was Production Manager South for Tex/Con Oil and Gas Company.
RAVINDER S. SIERRA was elected Vice President, Operations of the Company's
subsidiary, EOR International Inc. on December 15, 1994. Mr. Sierra first
joined EOR International Inc. in November 1990 as Senior Project Engineer. Mr.
Sierra has over 16 years experience in the international oil and gas industry.
Directors hold office until the next annual meeting of stockholders and
until their successors are duly elected and qualified. Officers serve at the
pleasure of the directors, subject to the provisions of employment agreements,
if any.
13
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
The following table shows all compensation (stated in U.S. dollars)
paid or accrued by Fountain Oil and its subsidiaries during the fiscal year
ended October 31, 1993, the ten month period ended August 31, 1994 and the
fiscal year ended August 31, 1995 to certain executive officers of the Company
(the "Named Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------------------- ----------------------
Other Securities
Annual Underlying All Other
Name and Compen- Options/ Compen-
Principal Position Year Salary($) Bonus($) sation($) SARs(#) sation ($)
- ------------------ ---- -------- --------- ----------- ---------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Oistein Nyberg 1995 113,246 --- 24,199 --- 6,125 (7)
(1) 1994 --- --- --- 44,000 (6) ---
1993 --- --- --- --- ---
Nils N. Trulsvik 1995 147,754 --- --- --- 6,344 (7)
(2) 1994 --- --- --- 60,000 (6) ---
1993 --- --- --- --- ---
Eugene J. Meyers 1995 141,667 50,000 --- --- 7,063 (7)
(3) 1994 150,000 --- --- 66,667 ---
1993 --- --- --- --- ---
Arnfin Haavik 1995 92,685 --- 24,234 --- 6,279 (7)
(4) 1994 --- --- --- 36,000 (6) ---
1993 --- --- --- --- ---
Gary J. Plisga 1995 104,777 --- --- --- 6,556 (7)
(5) 1994 --- --- --- --- ---
1993 --- --- --- --- ---
</TABLE>
- ------------------
(1) Mr. Nyberg was elected President/CEO on March 9, 1995. Other annual
compensation paid in fiscal 1995 includes $11,899 in a housing allowance and
$7,738 in childrens' school fees.
(2) Mr. Trulsvik served as Executive Vice President from September 8, 1994 to
November 21, 1994; as President/CEO from November 21, 1994 to March 9, 1995
and as Executive Vice President since March 9, 1995. Mr. Trulsvik's salary
in fiscal 1995 includes $33,722 as the value of 10,900 shares received in
lieu of cash compensation.
(3) Mr. Meyers was elected an officer of the Company January 3, 1994 and served
as CEO from August 16, 1994 to November 21, 1994.
(4) Mr. Haavik was elected Executive Vice President/Chief Financial Officer on
February 1, 1995. Other annual compensation paid in fiscal 1995 includes
$20,505 for a housing allowance.
(5) Mr. Plisga was elected Executive Vice President, Americas on January 16,
1995. Mr. Plisga's salary in fiscal 1995 includes $25,610 paid for
consulting services provided by him in fiscal 1995 before his employment by
the Company.
14
<PAGE>
(6) Options were granted in August 1994. The options expire August 16, 1999 and
are exercisable only while the holder renders services to the Company as an
officer, director, employee, consultant or advisor or within six months
after the holder ceases to render such services.
(7) Represents the Company's contributions or accruals to retirement/pension
plans.
FISCAL YEAR END OPTION VALUES
Shown below is information regarding the value of unexercised stock
purchase warrants and options (referred to as "options" in the following table)
held by the Named Officers as of August 31, 1995.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised In-the-
Underlying Unexercised Options Money Options at Fiscal
Name Held at Fiscal Year End Year End (1)
- ---- ------------------------------- -------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------------- ------------- ------------ -----------------------
<S> <C> <C> <C> <C>
Oistein Nyberg 44,000 0 $195,250 $0
Eugene J. Meyers 66,667 0 $295,834 $0
Nils N. Trulsvik 60,000 0 $266,250 $0
Arnfin Haavik 36,000 0 $159,750 $0
Gary J. Plisga 0 0 $ 0 $0
</TABLE>
- --------------
(1) Represents the difference between the market value on August 31, 1995 and
the exercise price.
COMPENSATION OF DIRECTORS
For the fiscal year ended August 31, 1995, the Company paid Directors who
were not employees of the Company fees at the rate of $14,000 per year. In
addition, the Company paid Directors who were not employees of the Company fees
at the rate of $3,000 per year for service on committees of the Board of
Directors. The Company currently has three committees. Mr. Halpin serves on
the Audit, Compensation and Petroleum Committees. Mr. Heckman serves on the
Audit and Compensation Committees. The Company also pays a fee of $1,000 per
day, other than a day on which the Board meets, for those days spent by a
Director who is not an employee, on the business of the various committees which
are in excess of one day per year with respect to the Compensation Committee and
three days per year with respect to the Audit Committee and the Petroleum
Committee. The Company also pays ordinary out-of-pocket expenses for attending
Board and Committee meetings.
Halpin Energy Resources, Ltd., which is controlled by Mr. Halpin, also
provided consulting services in the area of petroleum projects to the Company
and was paid $20,500 during the fiscal year for such services. $7,500 of such
amount related to services provided after Mr. Halpin was elected a Director.
EMPLOYMENT CONTRACTS
The Company has entered into Employment Contracts with each of Oistein
Nyberg, Nils Trulsvik, Arnfin Haavik and Gary Plisga which may be terminated by
either party on six months written notice. The contracts provide for an annual
salary of $150,000 US which is subject to renegotiations at the end of each
fiscal year. In addition, beginning with April 1, 1995, each person receives an
allowance equal to 12.5% of his base salary which is used to provide minimum
life and disability insurance coverage for each such person. The remainder of
such allowance may be used by each person for additional life, medical or
accident insurance and to fund pension/retirement plans. The Company reserves
the right to review the 12.5% allowance every three years. Each person is also
entitled to receive a full year's salary in the event he is unable to provide
services due to sickness or injury.
15
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 25, 1995 with
respect to beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Company's
stock, by each director and Named Officer of the Company and by all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner* Beneficial Ownership Percent of Class
- ----------------------------------------- --------------------- -----------------
<S> <C> <C>
John M. and Renee A. Liviakis (1) 824,000 7.61%
Liviakis Financial Communications, Inc.
2118 "P" Street, Suite C
Sacramento, California 95816
Tom Landry, Jr. 552,440 (2) 5.10%
8411 Preston Road, Suite 720 LB3
Dallas, Texas 75225
Eugene J. Meyers 527,728 (3) 4.84%
Nils N. Trulsvik 202,900 (4) 1.85%
Einar Bandlien 179,968 (5) 1.65%
Oistein Nyberg 176,000 (6) 1.61%
Arnfin Haavik 168,000 (7) 1.54%
Stanley D. Heckman 100,793 (8) **
Robert A. Halpin 12,000 (9) **
Gary J. Plisga 8,300 **
All executive officers and
directors as a group (10 persons) 1,710,850 (10) 14.95%
</TABLE>
- --------------
* Includes addresses of beneficial owners of 5% or more of Common Stock.
** Less than 1%.
(1) John M. and Renee A. Liviakis, husband and wife, are the sole shareholders
and principal officers of Liviakis Financial Communications, Inc., which
is the owner of record of the shares listed.
(2) Includes 123,200 shares owned of record by Touchdown Corporation, of which
Mr. Landry is a control person; 264,481 shares owned of record by the CNW
Irrevocable Trust dated September 10, 1991, of which Mr. Landry is
Trustee; and 48,000 shares owned of record by the CNW Irrevocable Trust II
dated December 11, 1991, of which Mr. Landry is Trustee.
(3) Includes 66,667 shares underlying presently exercisable warrants.
(4) Includes 8,000 shares owned by two sons (as to which beneficial ownership
is disclaimed), 44,000 shares underlying presently exercisable warrants
and 60,000 shares underlying presently exercisable options.
(5) Includes 44,000 shares underlying presently exercisable warrants and
44,000 shares underlying presently exercisable options.
(6) Includes 44,000 shares underlying presently exercisable warrants and
44,000 shares underlying presently exercisable options.
16
<PAGE>
(7) Includes 44,000 shares underlying presently exercisable warrants and
36,000 shares underlying presently exercisable options.
(8) Includes 14,286 shares underlying presently exercisable warrants.
(9) Represents 12,000 shares underlying presently exercisable options.
(10) See Notes 3-9; also includes 179,161 issued shares and 156,000 shares
underlying currently exercisable warrants and options held by executive
officers not named in the foregoing table.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 27, 1995, the Company paid the principal and accrued interest
due on a $245,000 note payable to certain shareholders of the Company, including
Touchdown Corporation, which is controlled by Tom Landry, Jr., a more than 5%
shareholder, and a former President and Director of the Company. In connection
with the repayment, Touchdown Corporation received $75,000 of principal and
$3,250 of accrued interest.
During 1991, the Board of Directors of the Company purported to approve
additional compensation in the amount of $75,000 per year to be due Mr. Landry
at the beginning of each of his two years of employment commencing August 1,
1991 with payments to be made on a deferred basis when adequate funds were
determined by the Board of Directors to be available. Unpaid amounts were to
bear interest. This liability had been classified as non-current since 1992 as
the Board of Directors had not identified adequate funds to satisfy such
liability. In addition, various liabilities had been accrued by the Company to
reflect claims by parties affiliated with Mr. Landry. In June 1995, the Company
settled all claims with Mr. Landry and his affiliates by paying $146,315 and
transferring equipment with a net book value of $9,547. Since the liabilities
thus discharged were carried at $195,628, a gain on settlement of $39,766 was
recorded.
On December 20, 1994, the Company entered into a Consulting Agreement with
Liviakis Financial Communications, Inc. ("Liviakis") pursuant to which Liviakis
has undertaken for a two year period to advise and assist the Company with
respect to its corporate finance and financial public relations activities
including performing on behalf of the Company functions generally associated
with corporate investor relations and public relations departments,
disseminating information regarding the Company to the investment community and
preparing materials relating to the Company. For undertaking the engagement and
for its services under the Consulting Agreement, the Company issued to Liviakis
790,000 shares of the Company's Common Stock and is paying Liviakis an annual
fee of $40,000. Liviakis paid $79,000, or par value, to the Company in
connection with the issuance of the shares. The Company's Board of Directors
valued these shares, which were issued without registration under the Securities
Act of 1933, as amended, at 62.5% of the mean between the bid and asked prices
for the Company's Common Stock at the time the Consulting Agreement was
executed, or an aggregate of $1,296,000. The Company is charging the cost of
the consulting services against income over the term of the Consulting Agreement
based upon the expected rate at which effort would be expended by Liviakis over
such term in connection with this engagement. During the fiscal year ended
August 31, 1995, $1,134,875 was charged against income with respect to the
Consulting Agreement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Management Contracts, Compensation Plans and Arrangements
are identified by an asterisk (*)
2(1) Agreement and Plan of Merger between Electromagnetic Oil
Recovery, Inc. and Fountain Oil Incorporated dated November
18, 1994 (Incorporated herein by reference from December 16,
1994 Form 8-K).
17
<PAGE>
2(2) Certificate of Ownership and Merger as filed with the States
of Delaware and Oklahoma on December 16, 1994 (Incorporated
herein by reference from December 16, 1994 Form 8-K).
2(3) Agreement Relating to the Sale and Purchase of All the
Issued Share Capital of Gastron International Limited dated
August 10, 1995 by and among Ribalta Holdings, Inc. as
Vendor and Fountain Oil Incorporated as Purchaser, and John
Richard Tate as Warrantor (Incorporated herein by reference
from October 19, 1995 Form 8-K).
2(4) Supplemental Agreement Relating to the Sale and Purchase of
All the Issued Share Capital of Gastron International
Limited dated November 3, 1995 by and among Ribalta
Holdings, Inc. as Vendor and Fountain Oil Incorporated as
Purchaser, and John Richard Tate as Warrantor (Incorporated
herein by reference from October 19, 1995 Form 8-K).
3(1) Registrant's Certificate of Incorporation and amendments
thereto (Incorporated herein by reference from December 16,
1994 Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by reference
from December 16, 1994 Form 8-K).
10(1) License Agreement among IIT Research Institute, ORS
Corporation and Uentech Corporation dated October 27, 1986
(Incorporated herein by reference from October 31, 1986 Form
10-K, filed by Electromagnetic Oil Recovery, Inc., the
Company's predecessor).
10(2) Amendment to Revised Single Well Technology License
Agreement Dated October 27, 1986.
*10(3) Securities Compensation Plan (Incorporated herein by
reference from August 31, 1994 Form 10-KSB, filed by
Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(4) Form of Certificate for Common Stock Purchase Warrants
issued pursuant to the Securities Compensation Plan
(Incorporated herein by reference from Form S-8 Registration
Statement, File No. 33-82944 filed on August 17, 1994, filed
by Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(5) Form of Option Agreement for options granted to certain
persons, including Directors (Incorporated herein by
reference from August 31, 1994 Form 10-KSB, filed by
Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(6) Form of Certificate for Common Stock Purchase Warrants
issued to certain investors in August 1994, including
Directors (Incorporated herein by reference from August 31,
1994 Form 10-KSB, filed by Electromagnetic Oil Recovery,
Inc., the Company's predecessor).
*10(7) Employment Agreement between Fountain Oil Incorporated
and Oistein Nyberg.
*10(8) Employment Agreement between Fountain Oil Incorporated
and Nils N. Trulsvik.
*10(9) Employment Agreement between Fountain Oil Incorporated
and Einar H. Bandlien.
*10(10) Employment Agreement between Fountain Oil Incorporated
and Arnfin Haavik.
*10(11) Employment Agreement between Fountain Oil Incorporated
and Svein E. Johansen.
18
<PAGE>
*10(12) Employment Agreement between Fountain Oil Incorporated
and Arild Boe.
*10(13) Employment Agreement between Fountain Oil Incorporated
and Gary J. Plisga.
*10(14) Employment Agreement between Fountain Oil Incorporated
and Robert B. Case.
*10(15) Employment Agreement between Fountain Oil Incorporated
and Ravinder S. Sierra.
*10(16) Employment Agreement between Fountain Oil Incorporated
and Susan E. Palmer.
10(17) Consulting Agreement between Fountain Oil Incorporated and
Liviakis Financial Communications, Inc. dated December 20,
1994 (Incorporated herein by reference from December 16,
1994 Form 8-K).
16 Letter Regarding Change in Certifying Accountants
(Incorporated herein by reference from September 8, 1994
Form 8-K, filed by Electromagnetic Oil Recovery, Inc., the
Company's predecessor).
21 List of Subsidiaries.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule.
(B) REPORTS ON FORM 8-K:
None.
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOUNTAIN OIL INCORPORATED
(Registrant)
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/Oistein Nyberg Date: November 28, 1995
-----------------------------------------------------
Oistein Nyberg, President and Chief Executive Officer
</TABLE>
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/Oistein Nyberg Date: November 28, 1995
-----------------------------------------------------
Oistein Nyberg, Director, President and
Chief Executive Officer
By: /s/Arnfin Haavik Date: November 28, 1995
-----------------------------------------------------
Arnfin Haavik, Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
By: /s/Robert A. Halpin Date: November 28, 1995
-----------------------------------------------------
Robert A. Halpin
Chairman of the Board of Directors
By: /s/Einar H. Bandlien Date: November 28, 1995
-----------------------------------------------------
Einar H. Bandlien, Director
By: /s/Stanley D. Heckman Date: November 28, 1995
-----------------------------------------------------
Stanley D. Heckman, Director
By: /s/Eugene J. Meyers Date: November 28, 1995
-----------------------------------------------------
Eugene J. Meyers, Director
By: /s/Nils N. Trulsvik Date: November 28, 1995
-----------------------------------------------------
Nils N. Trulsvik, Director
</TABLE>
20
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT FILED WITH
NUMBER EXHIBIT THIS REPORT
- ------ ------- ----------------
<S> <C> <C>
2(1) Agreement and Plan of Merger between Electromagnetic Oil Recovery, Inc.
and Fountain Oil Incorporated dated November 18, 1994 (Incorporated
herein by reference from December 16, 1994 Form 8-K).
2(2) Certificate of Ownership and Merger as filed with the States of Delaware
and Oklahoma on December 16, 1994 (Incorporated herein by reference from
December 16, 1994 Form 8-K).
2(3) Agreement Relating to the Sale and Purchase of All the Issued Share
Capital of Gastron International Limited dated August 10, 1995 by and among
Ribalta Holdings, Inc. as Vendor and Fountain Oil Incorporated as Purchaser,
and John Richard Tate as Warrantor (Incorporated herein by reference from
October 19, 1995 Form 8-K).
2(4) Supplemental Agreement Relating to the Sale and Purchase of All the Issued
Share Capital of Gastron International Limited dated November 3, 1995
by and among Ribalta Holdings, Inc. as Vendor and Fountain Oil
Incorporated as Purchaser, and John Richard Tate as Warrantor (Incorporated
herein by reference from October 19, 1995 Form 8-K).
3(1) Registrant's Certificate of Incorporation and amendments thereto
(Incorporated herein by reference from December 16, 1994 Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by reference from December 16,
1994 Form 8-K).
10(1) License Agreement among IIT Research Institute, ORS Corporation and
Uentech Corporation dated October 27, 1986 (Incorporated herein by reference
from October 31, 1986 Form 10-K, filed by Electromagnetic Oil Recovery, Inc.,
the Company's predecessor).
10(2) Amendment to Revised Single Well Technology License Agreement Dated
October 27, 1986. X
*10(3) Securities Compensation Plan (Incorporated herein by reference from
August 31, 1994 Form 10-KSB, filed by Electromagnetic Oil Recovery, Inc.,
the Company's predecessor).
*10(4) Form of Certificate for Common Stock Purchase Warrants issued pursuant
to the Securities Compensation Plan (Incorporated herein by reference from
Form S-8 Registration Statement, File No. 33-82944 filed on August 17,
1994, filed by Electromagnetic Oil Recovery, Inc., the Company's predecessor).
*10(5) Form of Option Agreement for options granted to certain persons,
including Directors (Incorporated herein by reference from August 31, 1994
Form 10-KSB).
</TABLE>
21
<PAGE>
EXHIBIT INDEX
continued
<TABLE>
<CAPTION>
EXHIBIT FILED WITH
NUMBER EXHIBIT THIS REPORT
- ------ ------- ----------------
<S> <C> <C>
*10(6) Form of Certificate for Common Stock Purchase Warrants issued to
certain investors in August 1994, including Directors (Incorporated
herein by reference from August 31, 1994 Form 10-KSB, filed by
Electromagnetic Oil Recovery, Inc., the Company's predecessor).
*10(7) Employment Agreement between Fountain Oil Incorporated and Oistein Nyberg. X
*10(8) Employment Agreement between Fountain Oil Incorporated and Nils N. Trulsvik. X
*10(9) Employment Agreement between Fountain Oil Incorporated and Einar H. Bandlien. X
*10(10) Employment Agreement between Fountain Oil Incorporated and Arnfin Haavik. X
*10(11) Employment Agreement between Fountain Oil Incorporated and Svein E. Johansen. X
*10(12) Employment Agreement between Fountain Oil Incorporated and Arild Boe. X
*10(13) Employment Agreement between Fountain Oil Incorporated and Gary J. Plisga. X
*10(14) Employment Agreement between Fountain Oil Incorporated and Robert B. Case. X
*10(15) Employment Agreement between Fountain Oil Incorporated and Ravinder S. Sierra. X
*10(16) Employment Agreement between Fountain Oil Incorporated and Susan E. Palmer. X
10(17) Consulting Agreement between Fountain Oil Incorporated and Liviakis Financial
Communications, Inc. dated December 20, 1994 (Incorporated herein by reference
from December 16, 1994 Form 8-K).
16 Letter Regarding Change in Certifying Accountants
(Incorporated herein by reference from September 8, 1994 Form 8-K, filed
by Electromagnetic Oil Recovery, Inc., the Company's predecessor).
21 List of Subsidiaries. X
23 Consent of Coopers & Lybrand L.L.P. X
27 Financial Data Schedule. X
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Fountain Oil Incorporated
We have audited the accompanying consolidated balance sheet of
Fountain Oil Incorporated and subsidiaries (the "Company") as of August 31,
1995, and the related comparative consolidated statements of operations,
stockholders' equity and cash flows for the year ended August 31, 1995 and the
ten months ended August 31, 1994. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Fountain Oil Incorporated and subsidiaries as of August 31, 1995,
and the consolidated results of their operations and their cash flows for the
year ended August 31, 1995 and the ten months ended August 31, 1994, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Fountain Oil Incorporated will continue as a going concern. As
more fully described in Note 2 to the consolidated financial statements, the
Company has incurred recurring operating losses and will require substantial
cash from external sources to finance its oil and gas ventures. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regards to these matters are also
described in Note 2 to the consolidated financial statements. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
COOPERS & LYBRAND L.L.P.
Houston, Texas
November 17, 1995
F-1
<PAGE>
FOUNTAIN OIL INCORPORATED
CONSOLIDATED BALANCE SHEET
As of August 31, 1995
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 4,791,645
Accounts receivable, net 44,020
Inventories 17,946
Prepaid expenses 436,990
------------
Total current assets 5,290,601
------------
Property and equipment, net 529,831
Oil and gas properties, net, full cost method (including $357,533 unevaluated) 551,685
Notes receivable 2,980,000
Investment in oil and gas ventures 1,358,205
------------
Total assets $ 10,710,322
============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $ 666,903
Accrued liabilities 414,279
Note payable 21,250
------------
Total current liabilities 1,102,432
------------
Commitments and contingencies (Notes 2 and 11)
Stockholders' equity:
Preferred stock, par value $0.10 per share,
5,000,000 shares authorized: no shares
issued or outstanding ---
Common stock, par value $0.10 per share,
25,000,000 shares authorized: 10,834,063
shares issued and outstanding 1,083,406
Capital in excess of par value 29,249,175
Accumulated deficit since October 31, 1988
when a deficit of $39,952,292 was eliminated (20,724,691)
------------
Total stockholders' equity 9,607,890
------------
Total liabilities and stockholders' equity $ 10,710,322
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE>
FOUNTAIN OIL INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
and the Ten Months Ended August 31, 1994
<TABLE>
<CAPTION>
For the For the Ten
Year Ended Months Ended
August 31, August 31,
1995 1994
------------- -------------
<S> <C> <C>
Operating Revenues:
Sales $ 464,044 $ 3,413
Power unit rentals 50,504 200
Consulting income 110,909 ---
----------- -----------
625,457 3,613
----------- -----------
Operating expenses:
Cost of sales 479,224 1,200
General and administrative 4,012,510 372,777
Depreciation and amortization 1,156,772 868,423
Employee stock compensation 152,038 150,000
Impairment of inventory 57,602 77,558
Impairment of property and equipment 175,450 ---
Impairment of intangibles 1,866,600 ---
Impairment of oil & gas properties 608,181 ---
----------- -----------
8,508,377 1,469,958
----------- -----------
Operating loss (7,882,920) (1,466,345)
----------- -----------
Other income (expense):
Interest income 251,276 1,543
Interest expense (28,475) (46,850)
Other, net 89,108 (7,348)
Loss on disposition of assets --- (313,502)
----------- -----------
311,909 (366,157)
----------- -----------
Net loss before income tax provision (7,571,011) (1,832,502)
Income tax expense (28,600) ---
----------- -----------
Net loss $(7,599,611) $(1,832,502)
=========== ===========
Loss per common share $(.91) $(.45)
=========== ===========
Weighted average number of common
shares outstanding 8,341,783 4,108,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
FOUNTAIN OIL INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Year Ended August 31, 1995
and the Ten Months Ended August 31, 1994
<TABLE>
<CAPTION>
Common Stock
------------------------
Number of Additional Total
Shares Paid-In Accumulated Stockholders'
Issued Par Value Capital Deficit Equity
----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, October 31,
1993 3,638,276 $ 363,828 $14,630,884 $(11,287,545) $ 3,707,167
Purchase of
treasury stock (63,901) (6,390) 2,795 --- (3,595)
Contribution of
treasury stock (421,906) (42,191) 42,191 --- ---
Sale of common stock
and treasury stock,
net of expense of
offering of $262,413 2,472,952 247,295 1,749,961 --- 1,997,256
Issuance of common
stock as employee
compensation and
for settlement of
obligations 348,889 34,889 282,611 --- 317,500
Other --- --- --- (5,033) (5,033)
Net loss --- --- --- (1,832,502) (1,832,502)
---------- ---------- ----------- ------------ -----------
Balance, August 31,
1994 5,974,310 $ 597,431 $16,708,442 $(13,125,080) $ 4,180,793
Sale of common stock,
net of expense of
offering of $1,033,118 3,958,998 395,900 10,900,930 --- 11,296,830
Issuance of common
stock as employee
compensation and
for other obligations 900,755 90,075 1,639,803 --- 1,729,878
Net loss --- --- --- (7,599,611) (7,599,611)
---------- ---------- ----------- ------------ -----------
Balance, August 31,
1995 10,834,063 $1,083,406 $29,249,175 $(20,724,691) $ 9,607,890
========== ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
FOUNTAIN OIL INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended August 31, 1995
and the Ten Months Ended August 31, 1994
<TABLE>
<CAPTION>
For the For the Ten
Year Ended Months Ended
August 31, 1995 August 31, 1994
--------------- ----------------
<S> <C> <C>
Operating activities:
Net loss $(7,599,611) $(1,832,502)
Depreciation and amortization 1,156,772 868,423
Gain on settlement of liabilities (58,230) ---
Loss on disposition of assets --- 313,502
Impairment of inventory 57,602 77,558
Impairment of property and equipment 175,450 ---
Impairment of intangibles 1,866,600 ---
Impairment of oil and gas properties 608,181 ---
Issuance of common stock for services and expenses 1,482,664 167,500
Other --- 4,064
Changes in assets and liabilities:
Accounts receivable 65,977 (108,340)
Other assets (325,289) (85,585)
Accounts payable 394,784 83,501
Accrued liabilities 217,022 8,635
----------- -----------
Net cash used by operating activities (1,958,078) (503,244)
----------- -----------
Investing activities:
Capital expenditures (404,822) (15,432)
Investment in oil and gas properties (1,159,866) ---
Investment in oil and gas ventures (1,298,730) ---
Notes receivable (2,980,000) ---
----------- -----------
Net cash used in investing activities (5,843,418) (15,432)
----------- -----------
Financing activities:
Proceeds from short-term borrowings 47,813 200,000
Proceeds from sale of common stock, net of expenses 11,296,830 1,997,256
Principal payments on short-term borrowings (271,563) (195,000)
Purchase of treasury stock --- (3,595)
----------- -----------
Net cash provided by financing activities 11,073,080 1,998,661
----------- -----------
Net increase in cash and cash equivalents 3,271,584 1,479,985
Cash and cash equivalents, beginning of year 1,520,061 40,076
----------- -----------
Cash and cash equivalents, end of year $ 4,791,645 $ 1,520,061
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts
of Fountain Oil Incorporated and its subsidiaries (collectively the
"Company"). The subsidiaries are Fountain Oil U.S., Inc. (formerly
Universal Drilling Company), Uentech Corporation, EOR Canada Ltd.,
Electromagnetic Oil Recovery International Inc. and Electromagnetic Oil
Recovery Ltd. All significant intercompany transactions and accounts have
been eliminated.
QUASI-REORGANIZATION - The Board of Directors of the Company approved a
quasi-reorganization effective October 31, 1988. As a result of the quasi-
reorganization, the accumulated deficit of $39,952,292 was eliminated
against capital in excess of par value.
CHANGE IN FISCAL YEAR - In September 1994, the Company's Board of Directors
approved a change in the Company's fiscal year end from October 31 to
August 31.
CASH AND CASH EQUIVALENTS - The Company considers short-term, highly liquid
investments with maturities of three months or less at the time of purchase
to be cash equivalents. Cash and cash equivalents at August 31, 1995
consist of $1,256,286 in cash, $2,041,896 in a time deposit and $1,493,463
in government securities.
INVENTORY - Inventory consists primarily of pipe, coating materials and
other supplies used in the application of the patented technology and is
stated at the lower of cost or market using the average cost method.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures for major renewals and betterments, which extend the original
estimated economic useful lives of applicable assets are capitalized.
Expenditures for normal repairs and maintenance are charged to expense as
incurred. The cost and related accumulated depreciation of assets sold or
retired are removed from the accounts and any gain or loss thereon is
reflected in operations. Depreciation of property and equipment is
computed using the straight-line method over the estimated useful lives of
the assets ranging from three to ten years.
OIL AND GAS PROPERTIES - The Company accounts for its oil and gas
properties under the full cost method. Under this accounting method, all
costs associated with property acquisition and exploration for, and
development of, oil and gas reserves are capitalized within cost centers
established on a country-by-country basis. Capitalized costs within a cost
center, as well as the estimated future expenditures to develop proved
reserves and estimated net costs of dismantlement and abandonment, are
amortized using the unit-of-production method based on estimated proved oil
and gas reserves. All costs relating to production activities are charged
to expense as incurred. Capitalized oil and gas property costs, less
accumulated depreciation, depletion and amortization and related deferred
income taxes, are limited to an amount (the ceiling limitation) equal to
the sum of (a) the present value (discounted at 10%) of estimated future
net revenues from the projected production of proved oil and gas reserves,
calculated at prices in effect as of the balance sheet date (with
consideration of price changes only to the extent provided by fixed and
determinable contractual arrangements), and (b) the lower of cost or
estimated fair value of unproved and unevaluated properties, less (c)
income tax effects related to differences in the book and tax basis of the
oil and gas properties.
F-6
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
REVENUE RECOGNITION - The Company recognizes revenues when goods have been
delivered, when services have been performed, or when hydrocarbons are
produced.
RESEARCH AND DEVELOPMENT - Research and development expenditures are
charged to expense when incurred. Such expenditures represent costs for
research and field testing of the Company's thermal stimulation process for
heavy oil. Total research and development expenditures for the year ended
August 31, 1995 and for the ten months ended August 31, 1994, were
approximately $63,000 and $25,000, respectively.
FOREIGN CURRENCY TRANSLATION - The U.S. dollar is the functional currency
for all of the Company's operations. Accordingly, all monetary assets and
liabilities denominated in foreign currency are translated into U.S.
dollars at the rate of exchange in effect at the balance sheet date and the
resulting unrealized translation gains or losses are reflected in the
statement of operations. Other assets are translated at historical
exchange rates. Revenue and expense items (excluding depreciation and
amortization which are translated at the same rates as the related assets)
are translated at the average rate of exchange for the year. Foreign
currency translation amounts recorded in operations for the year ended
August 31, 1995 and for the ten months ended August 31, 1994 were not
material.
INCOME TAXES - The Company follows the provisions of Statement of Financial
Standard No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial
statement or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial
statement and the tax bases of assets and liabilities using enacted rates
in effect for the year in which the differences are expected to reverse.
Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
IMPAIRMENT OF LONG-LIVED ASSETS - In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No. 121
"Accounting for the Impairment of Long-Lived Assets and Assets to be
Disposed Of" ("SFAS 121"). SFAS 121 requires that long-lived assets held
and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this standard in the fourth quarter of fiscal
1995 had no effect on the Company's financial statements. The Company
reviews all of its long-lived assets, except for its oil and gas
properties, for impairment in accordance with SFAS 121. Prior to the end
of fiscal 1995, all long-lived assets including intangible assets, other
than oil and gas properties, were reviewed for impairment by comparing the
carrying value of such assets to future expected net cash flows. The
Company evaluates its oil and gas properties in accordance with the full
cost ceiling test.
RECLASSIFICATIONS AND RESTATEMENT - Certain previously reported amounts
have been reclassified to conform to the 1995 presentation. In addition,
common stock, additional paid-in-capital and per share amounts for all
periods presented have been retroactively adjusted to reflect the 1-for-25
reverse stock split on December 15, 1994.
F-7
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. GOING CONCERN ASSUMPTION
The Company has adopted an aggressive growth strategy which, if fully
implemented, will require a substantial capital commitment during fiscal
1996. Because the Company has incurred recurring operating losses and its
current operations are not generating cash flows, the ability of the
Company to continue as a going concern and to pursue this growth strategy
successfully is highly dependent upon generating funds from external
sources.
Without sufficient cash from external sources, the Company's ability to
arrange financing for its oil and gas ventures and continue as a going
concern is doubtful. However, the Company's management believes that it
will be able to access external sources of funds through a combination of
equity financing by the Company and debt financing by the Company or the
joint ventures or other entities that are developing projects.
The consolidated financial statements do not give effect to any impairment
of its investments in oil and gas ventures or other adjustments which would
be necessary should the Company be unable to obtain sufficient funds from
external sources and continue as a going concern.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable at August 31, 1995 included the following:
<TABLE>
<CAPTION>
<S> <C>
Trade accounts receivable $ 80,094
Insurance claim 69,150
---------
149,244
Less: Allowance for doubtful accounts (105,224)
---------
$ 44,020
=========
</TABLE>
4. NOTES RECEIVABLE
The Company's notes receivable at August 31, 1995 consisted of the
following:
$2,450,000 note receivable, associated with the Maykop Field venture,
Republic of Adygea, Russian Federation, due September 30, 1995 bearing
interest at 10% per annum from an entity that the Company at August 31,
1995 was proposing to acquire (see Note 17).
$450,000 note receivable, associated with the Lelyaki Field venture,
Pryluki Region, Ukraine, due November 15, 1995 which is non-interest
bearing, the principal amount of which may be applied against the purchase
price of an 80% interest in a corporation that the Company at August 31,
1995 was proposing to acquire. The Company has extended the due date of
the note pending completion of the acquisition.
$80,000 note receivable, associated with the Lelyaki Field venture, Pryluki
Region, Ukraine, from an entity in which the Company at August 31, 1995 was
proposing to acquire an 80% interest.
F-8
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INTANGIBLE ASSETS
The Company had capitalized certain costs associated with the patents of
its electrically enhanced oil recovery technology. As a result of the
termination of a pilot project conducted in Canada during fiscal 1994 and
1995 and the lack of new contracts during fiscal 1995, the Company
determined that the recoverability of the capitalized costs of these
patents was uncertain. Therefore, at the end of fiscal 1995, the Company
recognized a non-cash pre-tax and after-tax charge of $1.87 million.
6. PROPERTY AND EQUIPMENT, NET
Property and equipment and the related accumulated depreciation at August
31, 1995 included the following:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation Net
----------- ------------ ---------
<S> <C> <C> <C>
Equipment $ 426,030 $322,010 $104,020
Office furniture, fixtures and
equipment and other 511,376 211,359 300,017
Construction-in-progress 125,794 --- 125,794
---------- -------- --------
$1,063,200 $533,369 $529,831
========== ======== ========
</TABLE>
During fiscal 1995, the Company wrote off $175,450 of certain equipment
rendered obsolete by the Company's recent technical advances.
7. OIL AND GAS PROPERTIES, FULL COST METHOD
Oil and gas property costs at August 31, 1995 included the following:
<TABLE>
<CAPTION>
<S> <C>
Proved properties $ 802,333
Unproved properties 357,533
----------
1,159,866
Less accumulated impairment (608,181)
----------
$ 551,685
==========
</TABLE>
Costs incurred for oil and gas activities during fiscal 1995 included
$412,245 for property acquisitions, $463,000 for exploration and $284,621
for development.
As of August 31, 1995, the Company recognized an impairment of $608,181 on
its oil and gas properties as a result of applying the full cost ceiling
test. Unevaluated properties and associated costs not currently being
amortized and included in oil and gas properties at August 31, 1995 were
$357,533, substantially all of which relates to the Rocksprings property.
These leasehold costs, which were incurred in fiscal year 1995, are for
properties on which the Company intends to commence exploration or
development activities subsequent to August 31, 1995. The Company believes
that these unevaluated properties will be substantially evaluated within
twenty-four months of August 1995, and it will begin to amortize these
costs as they are evaluated.
F-9
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INVESTMENT IN OIL AND GAS VENTURES
During the fiscal year ended August 31, 1995, the Company capitalized
$1,358,205 associated with the planned acquisition of interests in foreign
joint ventures, corporations and similar associations which will be
entities through which the development of oil and gas properties will
occur. The amounts capitalized at August 31, 1995 are as follows:
<TABLE>
<CAPTION>
Venture Cost
----------------------------------------- ----------
<S> <C>
Maykop Field, Republic of Adygea $ 174,564
Gorischt-Kocul Field, Albania 196,944
Boryslaw Field, Western Region, Ukraine 942,182
Lelyaki Field, Pryluki Region, Ukraine 44,515
----------
$1,358,205
==========
</TABLE>
In addition to the amounts capitalized for these ventures, the Company
held, at August 31, 1995, certain notes receivable associated with such
planned acquisitions (see Notes 4 and 17).
9. ACCRUED LIABILITIES
Accrued liabilities at August 31, 1995 included the following:
<TABLE>
<CAPTION>
<S> <C>
Related parties $ 48,263
Accounting and audit fees 53,324
Consulting and legal fees 98,807
Salaries and taxes 213,885
--------
$414,279
========
</TABLE>
10. NOTE PAYABLE
The Company's note payable consisted of a $47,813 note payable dated March
3, 1995, with interest at 7.25% payable monthly, due December 4, 1995. The
outstanding balance on this note is $21,250. The fair value of the debt at
August 31, 1995 approximates book value.
11. COMMITMENTS AND CONTINGENCIES
INVESTMENT IN OIL AND GAS VENTURES - The Company has contingent obligations
and may incur additional obligations, absolute and contingent, with respect
to developing an oil and gas venture to which it had certain rights at
August 31, 1995 and completing its acquisition of and developing certain
oil and gas ventures which it was pursuing at August 31, 1995. These
obligations are expected to require principally the expenditure of funds
and the issuance of shares of the Company's common stock. At August 31,
1995, the Company had a contingent obligation to pay $500,000 and issue
175,000 shares which would become absolute before the Company will be able
to commence developing an oil and gas venture to which it had certain
rights at that date. At August 31, 1995, the Company was contingently
obligated to issue an additional 375,000 shares in connection with this
venture upon the achievement of specified production standards.
F-10
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENCIES - continued
Subsequent to August 31, 1995, the Company became contingently obligated in
connection with other oil and gas ventures to pay up to $1,000,000 and
issue up to 1,000,000 shares upon satisfaction of various conditions.
LEASE COMMITMENTS - The Company leases office space under non-cancelable
operating lease agreements and off-site storage facilities for records and
inventory. The leases have remaining terms ranging up to five years, some
of which may be renewed at the Company's option. Rental expense for 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
Related parties $ --- $ 3,000
Other 119,133 6,285
-------- --------
$119,133 $ 9,285
======== ========
</TABLE>
Future minimum rental payments for the Company's lease obligations as of
August 31, 1995, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $127,289
1997 108,454
1998 72,333
1999 78,023
2000 56,896
Later years ---
--------
$442,995
========
</TABLE>
CONCENTRATIONS OF CREDIT RISK - The Company's financial instruments that
are exposed to concentrations of credit risk, other than the notes
receivable described in Note 4, consist primarily of cash and cash
equivalents. The Company has temporary cash investments held with high
credit quality financial institutions. While at times such cash
investments may be in excess of government insured limits, the Company
believes that credit risk in such cash investments is minimal. At August
31, 1995 and August 31, 1994, the Company had cash deposits concentrated
primarily in nine and three financial institutions, respectively.
12. STOCKHOLDERS' EQUITY
During 1994, the authorized capital stock of the Company was increased from
100,000,000 shares to 200,000,000 shares of common stock, $0.01 par value.
On December 15, 1994, at an Annual Meeting of Shareholders, the
shareholders of the Company approved an Agreement and Plan of Merger
pursuant to which the Company, among other things, effected a 1-for-25
reverse stock split of the outstanding shares of common stock and modified
the authorized capital stock of the Company to consist of 25,000,000 shares
of common stock and 5,000,000 shares of preferred stock, each having $0.10
par value per share.
The preferred stock may be issued from time to time with such powers,
preferences and rights as may be determined by the Board of Directors. As
of August 31, 1995, there had been no issuances of preferred stock.
F-11
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' EQUITY - continued
During fiscal 1994 and 1995, the Company's Board of Directors authorized
and approved the following transactions regarding the Company's common
stock, warrants and options to purchase the Company's common stock.
1994
. The repurchase of 63,901 shares at a price of $0.0625 per share by the
Company from certain shareholders.
. The return to the Company without consideration of 421,906 shares by
certain shareholders.
. The following are included in sales of common stock:
.. The issuance of 66,000 shares at an effective price of $0.25 per
share to an investor.
.. The issuance of 700,000 shares at a price of $0.3575 per share to
investors, 485,807 of which shares were from treasury stock.
.. The issuance of 3,685 shares at a price of $0.4375 per share in a
warrant exercise.
.. The issuance of 30,822 shares at a price of $0.25 per share in a
warrant exercise.
.. The issuance to investors of 1,644,000 shares and warrants
exercisable at $1.50 per share to purchase 822,000 shares for
aggregate proceeds of $1,619,087 net of $230,413 of related
offering costs.
.. The issuance of 28,444 shares and warrants exercisable at $1.50
per share to purchase 14,223 shares for legal services related to
equity financing efforts in the amount of $32,000.
.. The adjustment to capital in excess of par in the amount of
$102,351 related to cash received for stock sold at below par in
1993.
. The issuance of 200,000 shares and warrants exercisable at $1.50 per share
to purchase 100,000 shares upon conversion of notes payable in an aggregate
principal amount of $150,000.
. The issuance of 133,333 shares and warrants exercisable at $1.50 per share
to purchase 66,667 shares to an employee as compensation in the amount of
$150,000.
. The issuance of 15,556 shares and warrants exercisable at $1.50 per share
to purchase 7,778 shares in payment of legal services rendered in the
amount of $17,500.
F-12
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' EQUITY - continued
. The issuance of warrants exercisable at $1.125 per share to purchase
200,000 shares to a firm for financial advisory and investment banking
services.
. The issuance of warrants exercisable at $1.75 per share to purchase an
aggregate of 28,572 shares to two shareholders in connection with their
lending the Company an aggregate of $50,000 represented by convertible
notes payable by the Company.
. The issuance of options exercisable at $1.50 per share to purchase 400,000
shares to various individuals who, at August 31, 1994, were serving or were
expected in the future to serve the Company as officers, directors,
employees, consultants and advisors.
1995
. The following are included in the sales of common stock:
.. The issuance of 20,000 shares at a price of $0.25 per share in
a warrant exercise.
.. The issuance to investors of 3,244,000 shares and warrants
exercisable at $6.00 per share to purchase 3,244,000 shares for
aggregate proceeds of $10,320,882 net of $1,033,118 of related
offering costs.
.. The issuance of 480,780 shares at a price of $1.50 per share in a
series of warrant exercises.
.. The issuance of 200,000 shares at a price of $1.125 per share in
a series of warrant exercises.
.. The issuance of 14,286 shares at a price of $1.75 per share in a
warrant exercise.
.. The retirement of 68 shares recorded at $223.14 to reflect the
payment of cash for fractional shares in connection with the
December 1994 reverse stock split.
. The following are included in the issuance of common stock as employee
compensation:
.. The adjustment to capital in excess of par in the amount of
$4,275 related to shares received by three employees for stock
issued at below par in 1993.
.. The issuance of 23,479 shares at a price of $3.09 per share
to four employees as compensation in the amount of $72,638.
.. The issuance of 4,000 shares at a price of $4.38 per share to an
employee as compensation in the amount of $17,500.
F-13
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' EQUITY - continued
.. The issuance of 10,000 shares at a price of $5.77 per share to two
employees as compensation in the amount of $57,625.
. The issuance of 790,000 restricted shares at a value of $1.64 per share for
financial consulting services to be performed over two years amounting to
$1,296,000, of which $1,134,875 was expensed in 1995 and the balance of
$161,125 was included in prepaid expenses at August 31, 1995.
. The issuance of 4,706 shares at a price of $4.25 per share for legal
services in the amount of $20,000.
. The issuance of 28,570 shares and warrants exercisable at $1.75 per share
to purchase 28,572 shares upon conversion of notes payable in an aggregate
principal amount of $50,000.
. The issuance of warrants exercisable at $5.10 per share to purchase
1,139,800 shares to firms that participated in the distribution of the
Company's securities.
. The issuance of 30,000 shares at a price of $5.88 per share for consulting
services in the amount of $176,250.
. The issuance of 10,000 restricted shares at a price of $3.56 per share in
the amount of $35,594 along with a cash payment of $60,000 for a paid-up
license.
The following table summarizes warrants and options outstanding to purchase the
Company's common stock:
<TABLE>
<CAPTION>
AUGUST 31, 1995
Warrants Price Exp. Date Options Price Exp. Date
--------- ---------- ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Directors and officers 330,667 $ 1.50 11/3/97 264,000 $1.50 8/16/99
14,286 $ 1.75 6/30/97
---------
344,953
Stockholders, employees
and others 4,583,024 $1.50-6.00 2/28/97 to 136,000 $1.50 8/16/99
--------- 11/3/97 -------
Total outstanding 4,927,977 400,000
--------- -------
Shares exercisable 4,927,977 344,000
--------- -------
</TABLE>
F-14
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' EQUITY - continued
<TABLE>
<CAPTION>
AUGUST 31, 1994
Warrants Price Exp. Date Options Price Exp. Date
--------- ---------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Directors and officers 162,667 $ 1.50 11/3/97 104,000 $1.50 8/16/99
Stockholders, employees
and others 1,096,573 $0.25-1.75 8/1/95 to 296,000 $1.50 8/16/99
--------- 11/3/97 -------
Total outstanding 1,259,240 400,000
--------- -------
Shares exercisable 1,259,240 104,000
--------- -------
</TABLE>
No options were exercised during the fiscal year ended August 31, 1995 and
the ten months ended August 31, 1994. During the fiscal year ended August
31, 1995 and the ten months ended August 31, 1994, respectively, 715,066
and 34,507 warrants were exercised for an aggregate consideration of
$976,171 and $9,318.
13. NET LOSS PER COMMON SHARE
Net loss per common share at the fiscal year ended August 31, 1995 and the
ten months ended August 31, 1994 is based on the weighted average number of
common shares outstanding. The weighted average number of shares used was
8,341,783 and 4,108,200, respectively.
14. INCOME TAXES
The Company follows the provisions of Statement of Financial Standard
No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under this method,
deferred income taxes are recorded to reflect the tax consequences in
future years of differences between the tax bases of assets and their
financial reporting amounts at each year end. Valuation allowances are
established, when appropriate in accordance with SFAS 109, to reduce
deferred tax assets to the amount expected to be realized. Due to the
implementation of the quasi-reorganization as of October 31, 1988, future
reductions of the valuation allowance relating to those deferred tax assets
existing at the date of the quasi-reorganization, if any, will be allocated
to capital in excess of par.
The Company and its domestic subsidiaries file U.S. consolidated
income tax returns. No benefit for U.S. income taxes have been recorded in
these financial statements because of the Company's inability to recognize
deferred tax assets under provisions of SFAS 109. The provision for
income taxes for fiscal 1995 consisted of taxes applicable to foreign
operations.
F-15
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES - continued
A reconciliation of the differences between income taxes computed at the
U.S. federal statutory rate (34%) and the Company's reported provision for
income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Income tax expense (benefit) at statutory rate $ (2,574,144) $ (440,223)
Benefit of losses not recognized for books 2,566,836 440,223
Foreign tax provision 28,600 ---
Other, net 7,308 ---
------------ ------------
Provision for income taxes $ 28,600 $ ---
============ ============
Effective tax rate (0.4%) ---
============ ============
</TABLE>
The components of the deferred tax amounts as of August 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net operating loss carryforwards $ 17,464,823 $ 15,993,359
Patent rights and related equipment 1,588,341 894,044
Bad debt allowance 35,776 46,635
Foreign tax credits 28,600 ---
Other --- 65,296
------------ ------------
19,117,540 16,999,334
Valuation allowance (19,117,540) (16,999,334)
------------ ------------
Net deferred tax asset
recognized in balance sheet $ --- $ ---
============ ============
</TABLE>
At August 31, 1995, the Company has net operating loss carryforwards
of $42,667,125. In addition, there are $8,700,000 in federal net operating
loss carryforwards subject to the separate return limitation rules and
$3,258,135 of net operating loss carryforwards relating to Canadian
subsidiaries. The net operating loss carryforwards limited under the
separate return limitation rules may only be offset against the separate
income of the respective subsidiaries. The net operating loss
carryforwards expire from 1996 to 2006.
On August 1, 1991, the Company experienced a change in the Company's
ownership as defined in Section 382 of the Internal Revenue Code ("IRC").
The effect of this change in ownership limits the utilization of the net
operating loss carryforwards for income tax purposes to approximately
$1,100,000 per year. As a result, only approximately $21,400,000 of the
total U.S. net operating loss carryforwards of $51,367,125 will be
available for utilization by the Company. The Canadian net operating loss
carryforwards are subject to a limitation similar to IRC Section 382.
Therefore, their utilization may also be limited. During fiscal 1994, the
Company experienced another change in ownership which may result in another
IRC Section 382 adjustment. While the amount of this adjustment has not
been determined, the current U.S. limitation of $1,100,000 per year may be
reduced as a result of the 1994 change in ownership. Of the available U.S.
net operating loss carryforwards at August 31, 1995 amounting to
approximately $21,400,000, approximately $5,200,000 were incurred
subsequent to 1994 and therefore are not subject to the IRC Section 382
F-16
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES - continued
adjustment and could be fully utilized to reduce the Company's U.S.
taxable income in future years, subject to the carryforward expiration
rules.
The Company also has investment tax credit carryovers of $185,221
which begin to expire in 1996. These carryovers are also subject to IRC
Section 382.
15. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
In fiscal 1994, the Company operated in one business segment providing
electrically enhanced oil recovery (the "EEOR Process") sales and services
to the oil and gas industry. In fiscal 1995, the Company expanded its
business to include the acquisition and development of oil and gas
properties. This expansion has been effected through the acquisition of
working interest and interests in joint ventures, corporations and other
entities that develop oil and gas properties; however, there were no
significant revenues in this segment in fiscal 1995. The Company's 1995 and
1994 operations in various geographic areas were as follows:
<TABLE>
<CAPTION>
EEOR Process Oil and Gas
Sales and Acquisition and
Service Development
------------- ---------------
<S> <C>
OPERATING REVENUE
United States
1995 $ --- $ ---
1994* $ 3,413 $ ---
- --------------------------------------------------------------- ----------------------------
Canada
1995* $255,457 $ ---
1994 $ --- $ ---
- --------------------------------------------------------------- ----------------------------
Europe
1995 $ --- $ ---
1994 $ --- $ ---
- --------------------------------------------------------------- ----------------------------
China
1995* $370,000 $ ---
1994 $ --- $ ---
- --------------------------------------------------------------- ----------------------------
Other
1995 $ --- $ ---
1994* $ 200 $ ---
- --------------------------------------------------------------- ----------------------------
TOTAL OPERATING REVENUE
1995 $625,457 $ ---
1994 $ 3,613 $ ---
=============================================================== ============================
</TABLE>
* For each of the geographic areas identified, one customer provided all the
revenues for 1995 and 1994, respectively.
F-17
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS - continued
<TABLE>
<CAPTION>
EEOR PROCESS OIL AND GAS
SALES AND ACQUISITION AND
SERVICE DEVELOPMENT
---------------- ----------------
<S> <C> <C>
OPERATING PROFIT (LOSS)
United States
1995 $ (25) $ (608,822)
1994 $(1,191,050) $ ---
- ---------------------------------------------------------------- ----------- -----------
Canada
1995 $(3,411,070) $ ---
1994 $ (229,999) $ ---
- ---------------------------------------------------------------- ----------- -----------
Europe
1995 $ --- $(3,961,622)
1994 $ --- $ ---
- ---------------------------------------------------------------- ----------- -----------
China
1995 $ 116,915 $ ---
1994 $ --- $ ---
- ---------------------------------------------------------------- ----------- -----------
Other
1995 $ (18,296) $ ---
1994 $ (45,296) $ ---
- ---------------------------------------------------------------- ----------- -----------
TOTAL OPERATING PROFIT (LOSS)
1995 $(3,312,476) $(4,570,444)
1994 $(1,466,345) $ ---
================================================================ =========== ===========
IDENTIFIABLE ASSETS
United States
1995 $ --- $ 4,998,632
1994 $ 4,437,034 $ ---
- ---------------------------------------------------------------- ----------- -----------
Canada
1995 $ 456,202 $ 19,815
1994 $ --- $ ---
- ---------------------------------------------------------------- ----------- -----------
Europe
1995 $ --- $ 5,230,673
1994 $ 256,761 $ ---
- ---------------------------------------------------------------- ----------- -----------
China
1995 $ --- $ ---
1994 $ --- $ ---
- ---------------------------------------------------------------- ----------- -----------
Other
1995 $ --- $ 5,000
1994 $ 250,129 $ ---
- ---------------------------------------------------------------- ----------- -----------
TOTAL IDENTIFIABLE ASSETS
1995 $ 456,202 $10,254,120 (1)
1994 $ 4,943,924 $ ---
================================================================ =========== ===========
</TABLE>
(1) Includes cash and cash equivalents and other assets not specifically related
to the electrically enhanced oil recovery process.
F-18
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS - continued
The percentage of operating revenues generated by geographic areas is recapped
below:
<TABLE>
<CAPTION>
EEOR PROCESS OIL AND GAS
SALES AND ACQUISITION AND
SERVICE DEVELOPMENT
---------------- ----------------
<S> <C> <C>
United States
1995 0% 0%
1994 94% 0%
- ---------------------------------------------------------------- ----------- -----------
Canada
1995 41% 0%
1994 0% 0%
- ---------------------------------------------------------------- ----------- -----------
Europe
1995 0% 0%
1994 0% 0%
- ---------------------------------------------------------------- ----------- -----------
China
1995 59% 0%
1994 0% 0%
- ---------------------------------------------------------------- ----------- -----------
Other
1995 0% 0%
1994 6% 0%
- ---------------------------------------------------------------- ----------- -----------
</TABLE>
16. SUPPLEMENTAL CASH FLOW INFORMATION AND NONMONETARY TRANSACTIONS
The following represents supplemental cash flow information for the fiscal
years ended 1995 and 1994:
<TABLE>
<CAPTION>
For the For the Ten
Year Ended Months Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid during the year $ 28,474 $ 47,284
--------------- ---------------
Supplemental schedule of non-cash activities:
Issuance of common stock upon conversion of
notes payable $ 50,000 $150,000
--------------- ---------------
Issuance of common stock in connection with
compensation earned and third party services
provided $1,729,878 $ 17,500
--------------- ---------------
Issuance of common stock in connection with
services related to equity financing activities $ --- $ 32,000
--------------- ---------------
Accruals recorded applicable to
investment in oil and gas ventures $ 59,475 $ ---
--------------- ---------------
</TABLE>
F-19
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS - UNAUDITED
Effective October 19, 1995, the Company acquired the outstanding
capital stock of Gastron International, Ltd. ("Gastron") for nominal
consideration paid plus contingent consideration payable only upon
satisfaction of various conditions. Gastron's principal assets include
drilling equipment and a 31% interest in Intergas, a Russian private joint
stock company having the as yet unexercised right to develop the Maykop gas
condensate field in the Republic of Adygea, Russian Federation. Assuming
the Gastron acquisition occurred on August 31, 1995, the pro-forma effects
on the Company's balance sheet at that date would be to increase property
and equipment by $4,535,000, decrease notes receivable by $2,450,000 and
increase accounts payable and other current liabilities by $2,085,000.
In November 1995, the Sweeten #2 well in the Rocksprings Field,
Edwards County, West Texas produced gas that was sold in the spot market.
F-20
<PAGE>
Exhibit 10(2)
AMENDMENT TO REVISED
SINGLE WELL TECHNOLOGY
LICENSE AGREEMENT DATED
OCTOBER 27, 1986
This Amendment is made this 31st day of July, 1995, between IIT Research
Institute (hereinafter "IITRI"), an Illinois not for profit corporation with
principal Offices located at 10 West 35th Street, Chicago, Illinois 60616,
U.S.A., and Fountain Oil Incorporated, a Delaware Corporation with principal
offices located at 1400 Broadfield, Suite 200, Houston, Texas 77084 U.S.A.
(hereinafter "Fountain"). This Amendment supersedes a similar Amendment
executed by the parties on June 7, 1995.
WITNESSETH
WHEREAS, IITRI and ORS Corporation, then an Oklahoma corporation, and
Uentech Corporation, an Oklahoma Corporation, were the original parties to an
agreement known as the "Revised Single Well Technology License Agreement"
("Agreement") as amended, entered into on October 27, 1986. Subsequent to the
execution of the Agreement on October 27, 1986, a series of mergers and other
corporate transactions resulted in ORS Corporation becoming Fountain Oil
Incorporated, with Uentech Corporation now a wholly-owned subsidiary of
Fountain; and
WHEREAS, IITRI and Fountain desire to amend the Agreement pursuant to
negotiations regarding certain future royalties and payments which were
previously agreed to by the parties to the Agreement: and
WHEREAS, Fountain, for itself and on behalf of its wholly-owned subsidiary
Uentech Corporation, desires to obtain a fully paid-up world-wide exclusive
license to the base technology as defined in the Agreement, including any
patents and know-how acquired by IITRI since October 27, 1986;
NOW THEREFORE, for and in consideration of the premises and mutual
covenants herein contained, IITRI and Fountain herewith agree to amend the
Agreement as follows:
1. All references to ORS Corporation shall be deleted and replaced where
appropriate as follows:
"Fountain Oil Incorporated"
2. Section 5. (a). Term and Termination
The parties hereto agree that the burden of reporting and making payments
under this Section 5. (a) is deleted in its entirety.
<PAGE>
3. Section 6. Royalties and Payments
Section 6. Royalties and Payments, and the Amendment dated May 15, 1989,
shall be deleted in their entirety, and shall be replaced as follows:
"Section 6. Royalties and Payments. In consideration of the license
granted Fountain herein and for the period over which such license is in effect,
Fountain agrees to pay IITRI the sum of Sixty Thousand Dollars ($60,000.00),
plus Ten Thousand (10,000) shares of the restricted common stock, $.10 par
value, of Fountain Oil Incorporated, which receipt in full by IITRI shall
constitute a world-wide exclusive paid-up license with no further reporting,
payments or royalties due IITRI by Fountain under any section of this Agreement
for its duration."
4. IITRI has in progress Canadian Patent Application Serial No. 2,090,629
styled "ELECTRICAL HEATING SYSTEMS FOR LOW-COST RETROFITTING OF OIL WELLS". As
additional consideration for the payment of funds and the issuance of shares by
Fountain, IITRI agrees to assign to Fountain or its designee, the above
referenced Patent Application, with all future processing costs to be borne by
Fountain.
5. In connection with the issuance of the restricted common shares to IITRI by
Fountain, IITRI hereby represents and warrants to and covenants with Fountain
(or, the "Company") as follows:
a. IITRI represents and warrants that IITRI:
(i) has received and read all reports filed by Fountain with the
Securities and Exchange Commission pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934, as amended, during the past twelve months:
(ii) has been given the opportunity to ask questions of Fountain and
its management concerning the Company, the Company's common stock, par value US
$0.10 per share ("Common Stock"), and other matters pertaining to IITRI's
proposed acquisition of shares of Common Stock ( the "Shares"), in order for
IITRI to evaluate the merits and risks of an acquisition of Common Stock, and
IITRI has received satisfactory responses to all such questions; and
(iii) by reason of the business and financial experience of its
directors, officers and employees, IITRI has the capacity to evaluate the
Company and the merits and risks of an acquisition of Common Stock and to
protect IITRI's interests in connection with the acquisition of the Shares and
transactions associated therewith.
b. IITRI agrees that, since the offer and issuance of the Shares by
the Company to IITRI have not been registered under the Securities Act of 1933,
as amended (the "Securities Act") in reliance upon a statutory exemption from
the registration requirements of the Securities Act and such shares will
therefore be "restricted securities" as defined by Rule 144 promulgated under
the Securities Act, IITRI will offer or resell the Shares only in compliance
with the provisions of the Securities Act and all other applicable securities
laws and regulations. IITRI will offer and resell Shares only if such Shares
are registered under the Securities Act or an exemption from such registration
is available. Rule 144 provides such an exemption if certain conditions are met
regarding (i) the availability of public information about the Company (all
reports required
<PAGE>
during prior 12 months under the Securities Exchange Act of 1934 have been
filed); (ii) holding period (currently a minimum of two years but proposed rule
would reduce minimum period to one year); (iii) limitation on amount of
securities sold (greater of 1% of outstanding [in excess of 10 million] or
average weekly trading volume in any 3 month period); (iv) manner of sale
(brokers' transactions in which buy orders are not solicited and no more than
normal brokerage commissions are paid); and (v) filing of a notice of sale with
the SEC. Unless the Shares that are the subject of such offer or sale are
registered under the Securities Act or an exemption from registration is
available (in which latter case the Company shall have received an opinion of
IITRI's counsel who shall be experienced in securities law matters, in form and
substance reasonably satisfactory to Fountain, to such effect), the Company
shall not permit the transfer of the Shares. IITRI understands and agrees that
the Company may take such steps as it deems appropriate to ensure compliance
with the offer and resale restrictions imposed by the Securities Act or other
applicable laws and regulations or contained in this Agreement, including
instituting "stop transfer" instructions with respect to the Shares with the
transfer agent for the Common Stock and endorsing restrictive legends,
substantially in the form of Exhibit A hereto, on certificates representing the
Shares to be issued to IITRI.
c. IITRI represents and warrants that IITRI (i) is acquiring the
Shares for its own account for investment purposes and not with a view towards
the distribution thereof and (ii) does not have any contract, understanding,
or arrangement with any person to sell, transfer, or grant participation to such
person or any third person with respect to the Shares, and no other person has a
beneficial interest in the Shares.
d. IITRI agrees, to indemnify, protect, defend, and hold harmless the
Company, and its affiliates, officers, directors, stockholders, agents,
employees, attorneys, accountants, successors, and assigns from and against all
claims, actions, causes of action, damages, losses, costs, liabilities, and
expenses (including costs of investigation, defense, and attorneys' fees)
whatsoever which may result from a breach or an alleged breach of the
representations, warranties and agreements of IITRI contained herein; and the
Company agrees to indemnify, protect, defend and hold harmless IITRI and its
affiliates, officers, directors, stockholders, agents employees, attorneys,
accountants, successors, and assigns from and against all claims, actions,
causes of action, damages, losses, costs, liabilities, and expenses (including
costs of investigation, defense, and attorney's fees) whatsoever which may
result from a breach or an alleged breach of the representations, warranties and
agreements of the Company contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
fully executed as of the date first above written.
Fountain Oil Incorporated IIT Research Institute
1400 Broadfield, Ste 200 10 West 35th Street
Houston, Texas 77084 Chicago, Illinois 60616
By: /s/ Gary Plisga By: /s/ A R Valentino
---------------------------- ---------------------------
Title: Executive Vice President Title: Group Vice President
-------------------------- -----------------------
<PAGE>
Exhibit 10(7)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 1st day of March 1995, between FOUNTAIN OIL INCORPORATED,
a Delaware, USA registered company (hereinafter referred to as the COMPANY) as
the one part, and OISTEIN NYBERG (hereinafter referred to as the EMPLOYEE) as
the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 1st day of
March, 1995 and can be terminated by either Party by giving to the other
Party six months notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as
President & Chief Executive Officer. The Employee in this position will
report to the Chairman of the Board. The Employee shall exercise such
powers and perform such duties in relation to the business of the Company
as may from time to time be vested in or assigned to him by the Company and
shall comply with all reasonable direction from time to time given him by
the Company. A job description will be written for the position outlining
the major responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's offices in
London, UK. Transfer to another location and/or position within the
Company and its Branches and/or Subsidiary companies could happen at a
later stage in agreement between the two Parties. The Company will
endeavour to accommodate the Employee's wishes as far as it is practicable
possible in this respect. The Employee is relocated from Stavanger Norway.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his employment hereunder or thereafter use to the detriment
or prejudice of the Company or (except in the proper course of his duties
hereunder) divulge to any person any trade secret or any other confidential
information concerning the business or affairs of the Company which may
have come to his knowledge during his employment hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his employment hereunder or relating to
the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his employment
hereunder) deliver to the Company all lists of clients or customers,
correspondence and all other
<PAGE>
documents, papers and records which may have been prepared by him or have
come into his possession in the course of his employment hereunder, and the
Employee shall not be entitled to and shall not retain any copy thereof.
Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for his
services during employment hereunder a basic salary at the rate of Great
Britain Pound Sterling 100,000 per annum. Such salary shall be paid by
equal monthly installments. At the end of each fiscal year possible
changes in the Employment remuneration shall be discussed and decided by
the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves the right to review the 12.5% contribution over 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
traveling, hotel, entertainment and other out of pocket expenses that he
may incur in the execution of his duties hereunder in accordance with a
budget or extraordinary approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 25 working days holiday in every calendar year to be taken
at such time or times as may be approved by the Company.
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme to be established for the Company.
The Employee will participate in the Company Share Option plan and
allocations.
<PAGE>
(b) VISITS TO NORWAY. The Company will pay for three return tickets per
calendar year from assigned location to Stavanger, Norway for the Employee,
wife and son (Mark Erik). The trips should be in connection with business
if possible.
(c) RELOCATION. The Company will pay for the relocation from Stavanger to
London or other assigned locations during the service of the Employee, and
return to Stavanger by either party termination of the employment.
(d) EDUCATION. The Company will pay for the High School educational cost
for Mark Erik (son) at the place of relocation.
(e) HOUSING. The Company will pay for a representative housing that can
be used for entertainment of customers and business relations at the place
of relocation. The facilities shall also room a small office space. The
Company will as long as the Employee is in London pay for the fixed rent of
the localities. Utilities will be paid by the Employee.
(f) TELEPHONE/FACSIMILE. The Company will pay for home telephones, mobile
phone, and home facsimile on behalf of the Employee.
(g) MEMBERSHIP IN PROFESSIONAL ORGANIZATION/CLUBS. The Company will pay
for membership fees in professional and social clubs that can and will
improve the business in relation to the employment. Special approvement is
needed if the membership exceeds $1,000 annual.
(h) NEWSPAPERS, MEDIA INFORMATION. The Company will pay for economical
and technical publication needed for the business and two daily
publications sent to the home of the Employee.
Signed, Signed,
Date and Place, Date and Place,
London, 5 November 1995 Marina del Rey, California
10. November 1995
/s/ Oistein Nyberg /s/ Eugene J. Meyers
Employee, Oistein Nyberg Company,
Chairman, Eugene Meyers
<PAGE>
Exhibit 10(8)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 1st day of September 1994, between FOUNTAIN OIL
INCORPORATED, a Delaware, U.S.A. registered company (hereinafter referred to as
the COMPANY) on the one part, and NILS N. TRULSVIK (hereinafter referred to as
the EMPLOYEE) on the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 1st day of
September, 1994 and can be terminated by either Party by giving to the
other Party six months notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as
EXECUTIVE VICE PRESIDEN, INTERNATIONAL OPERATION. The Employee in this
position will report to the Chief Exeuctive Officer. The Employee shall
exercise such powers and perform such duties in relation to the business of
the Company as may from time to time be vested in or assigned to him/her by
the Company and shall comply with all reasonable direction from time to
time given to him/her by the Company. A job description will be written
for the position outlining the major responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's office in
Asker, Norway. Transfer to another location and/or position within the
Company and its Branches could happen at a later stage. The Company will
endeavour to accommodate the Employee's wishes as far as is practicable in
this respect.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his/her employment hereunder or thereafter use to the
detriment or prejudice of the Company or (except in the proper course of
his/her duties hereunder) divulge to any person any trade secret or any
other confidential information concerning the business or affairs of the
Company which may have come to his/her knowledge during his/her employment
hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his/her employment hereunder or
relating to the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his/her employment
hereunder) deliver to the Company all lists of clients or customers,
correspondence and all other
<PAGE>
documents, papers and records which may have been prepared by him/her or
have come into his/her possession in the course of his/her employment
hereunder, and the Employee shall not be entitled to and shall not retain
any copy thereof. Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for
his/her services during his/her employment hereunder a basic salary at the
rate of NOK1,000,000 per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves the right to review the 12.5% contribution every 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
travelling, hotel, entertainment and other out of pocket expenses that
he/she may incur in the execution of his/her duties hereunder in accordance
with a budget approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 25 working days holiday in every calendar year to be taken
at such time or times as may be approved by the Company.
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme and share option scheme, to be established for the Company.
(b) TELEPHONE/FACSIMILE. The Company will pay for home telephone, mobile
phone, and home facsimile on behalf of the Employee.
(c) NEWSPAPERS. The Company will pay for two daily newspapers.
<PAGE>
(d) MEMBERSHIP IN PROFESSIONAL ORGANISATIONS/CLUBS. The Company will pay
membership fees in professional organisations/Clubs up to a maximum annual
cost of US$750.
/s/ Oistein Nyberg London 9. October 1995
- ------------------- -----------------------
Signature/Company Place and Date
/s/ Nils N. Trulsvik Oslo 24. October, 1995
- -------------------- -----------------------
Signature/Employee Place and Date
<PAGE>
Exhibit 10(9)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 1st day of September 1994, between FOUNTAIN OIL
INCORPORATED, a Delaware, U.S.A. registered company (hereinafter referred to as
the COMPANY) on the one part, and EINAR H. BANDLIEN (hereinafter referred to as
the EMPLOYEE) on the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 1st day of
September, 1994 and can be terminated by either Party by giving to the
other Party six (6) months notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as
SENIOR VICE PRESIDENT BUSINESS DEVELOPMENT. The Employee in this position
will report to Exeuctive Vice President International. The Employee shall
exercise such powers and perform such duties in relation to the business of
the Company as may from time to time be vested in or assigned to him by the
Company and shall comply with all reasonable direction from time to time
given to him by the Company. A job description will be written for the
position outlining the major responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's office in
Asker, Norway. Transfer to another location and/or position within the
Company and its Branches could happen at a later stage. The Company will
endeavour to accommodate the Employee's wishes as far as is practicable in
this respect.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his employment hereunder or thereafter use to the detriment
or prejudice of the Company or (except in the proper course of his duties
hereunder) divulge to any person any trade secret or any other confidential
information concerning the business or affairs of the Company which may
have come to his knowledge during his employment hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his employment hereunder or relating to
the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his employment
hereunder) deliver to the Company all lists of clients or customers,
correspondence and all other
<PAGE>
documents, papers and records which may have been prepared by him or have
come into his possession in the course of his employment hereunder, and the
Employee shall not be entitled to and shall not retain any copy thereof.
Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for his
services during his employment hereunder a basic salary at the rate of NOK
700.000,- per annum (calculated at 70% of NOK 1.000.000,-, based on
carrying estimated 70% of full work load). This percentage, and
consequently the actual salary, can vary over a period of time pending
mutual agreement between the Parties.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves all rights to review the 12.5% contribution every 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
travelling, hotel, entertainment and other out of pocket expenses that
he/she may incur in the execution of his duties hereunder in accordance
with a budget approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 25 working days' holiday in every calendar year to be taken
at such time or times as may be approved by the Company.
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme and share option scheme, to be established for the Company.
(b) TELEPHONE/FACSIMILE. The Company will pay for home telephone, mobile
phone, and home facsimile on behalf of the Employee.
<PAGE>
(c) NEWSPAPERS. The Company will pay for two daily newspapers.
(d) CREDIT CARD FEES. The Company will pay annual fees for two credit
cards.
(e) MEMBERSHIP IN PROFESSIONAL ORGANISATIONS/CLUBS. The Company will pay
membership fees in professional organisations/Clubs up to a maximum annual
cost of US$750.-.
/s/ Nils N. Trulsvik Houston 14. 11.95
- ---------------------- ------------------
Signature/Company Place and Date
/s/ Einar H. Bandlien Houston 14. 11.95
- ---------------------- -------------------
Signature/Employee Place and Date
<PAGE>
Exhibit 10(10)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 1st day of February, 1995, between FOUNTAIN OIL
INCORPORATED, a Delaware, U.S.A. registered company (hereinafter referred to as
the COMPANY) on the one part, and ARNFIN HAAVIK (hereinafter referred to as the
EMPLOYEE) on the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 1st day of
February, 1995 and can be terminated by either Party by giving to the other
Party six months notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as CHIEF
FINANCIAL OFFICER/EXECUTIVE VICE PRESIDENT. The Employee in this position
will report to the Chief Exeuctive Officer. The Employee shall exercise
such powers and perform such duties in relation to the business of the
Company as may from time to time be vested in or assigned to him/her by the
Company and shall comply with all reasonable direction from time to time
given to him/her by the Company. A job description will be written for the
position outlining the major responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's office in
London, UK. Transfer to another location and/or position within the
Company and its Branches could happen at a later stage. The Company will
endeavour to accommodate the Employee's wishes as far as is practicable in
this respect.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his/her employment hereunder or thereafter use to the
detriment or prejudice of the Company or (except in the proper course of
his/her duties hereunder) divulge to any person any trade secret or any
other confidential information concerning the business or affairs of the
Company which may have come to his/her knowledge during his/her employment
hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his/her employment hereunder or
relating to the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his/her employment
hereunder) deliver to the Company all lists of clients or customers,
correspondence and all other
<PAGE>
documents, papers and records which may have been prepared by him/her or
have come into his/her possession in the course of his/her employment
hereunder, and the Employee shall not be entitled to and shall not retain
any copy thereof. Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for
his/her services during his/her employment hereunder a basic salary at the
rate of (Pounds)65,000 per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves the right to review the 12.5% contribution every 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
travelling, hotel, entertainment and other out of pocket expenses that
he/she may incur in the execution of his/her duties hereunder in accordance
with a budget approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 25 working days holiday in every calendar year to be taken
at such time or times as may be approved by the Company.
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme to be established for the Company.
(b) VISITS TO NORWAY. The Company will pay for two return tickets to
Norway for the Employee and wife. The trips will be combined with business
when possible.
<PAGE>
(c) RELOCATION. The Company will pay moving costs for the Employee when
going back to Oslo.
(d) NEXT WORK LOCATION. The Employee will work in London for another one
to two years, thereafter, he will be given the opportunity to work in
Asker, Norway.
(e) TELEPHONE/FACSIMILE. The Company will pay for home telephone, mobile
phone, and home facsimile on behalf of the Employee.
(f) NEWSPAPERS. The Company will pay for two daily newspapers.
(g) MEMBERSHIP IN PROFESSIONAL ORGANISATIONS/CLUBS. The Company will pay
membership fees in professional organisations/Clubs up to a maximum annual
cost of US$750.
(h) HOUSING. The Company will, as long as the employee is working in
London, pay house rent up to a maximum of GB(Pounds)1,600 per month. The
amount to be escalated annually in line with the retail price index
(minimum 3% maximum 7%).
/s/ Oistein Nyberg London 12.5.95
- ----------------- ---------------
Signature/Company Place and Date
/s/ Arnfin Haavik London 23.4.95
- ---------------- ---------------
Signature/Employee Place and Date
<PAGE>
Exhibit 10(11)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 1st day of November 1994, between FOUNTAIN OIL
INCORPORATED, a Delaware, U.S.A. registered company (hereinafter referred to as
the COMPANY) on the one part, and SVEIN E. JOHANSEN (hereinafter referred to as
the EMPLOYEE) on the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 1st day of
November, 1994 and can be terminated by either Party by giving to the other
Party six months notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as
EXECUTIVE VICE PRESIDENT, EOR TECHNOLOGY. The Employee in this position
will report to the Chief Exeuctive Officer. The Employee shall exercise
such powers and perform such duties in relation to the business of the
Company as may from time to time be vested in or assigned to him/her by the
Company and shall comply with all reasonable direction from time to time
given to him/her by the Company. A job description will be written for the
position outlining the major responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's office in
Asker, Norway. Transfer to another location and/or position within the
Company and its Branches could happen at a later stage. The Company will
endeavour to accommodate the Employee's wishes as far as is practicable in
this respect.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his/her employment hereunder or thereafter use to the
detriment or prejudice of the Company or (except in the proper course of
his/her duties hereunder) divulge to any person any trade secret or any
other confidential information concerning the business or affairs of the
Company which may have come to his/her knowledge during his/her employment
hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his/her employment hereunder or
relating to the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his/her employment
hereunder) deliver to the Company all lists of clients or customers,
correspondence and all other
<PAGE>
documents, papers and records which may have been prepared by him/her or
have come into his/her possession in the course of his/her employment
hereunder, and the Employee shall not be entitled to and shall not retain
any copy thereof. Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for
his/her services during his/her employment hereunder a basic salary at the
rate of NOK700,000 per annum (calculated as 70% of NOK1,000,000, based on
carrying estimated 70% of full work load). This percentage, and
consequently the actual salary, can vary over a period of time pending
mutual agreement between the Parties.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves the right to review the 12.5% contribution every 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
travelling, hotel, entertainment and other out of pocket expenses that
he/she may incur in the execution of his/her duties hereunder in accordance
with a budget approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 17 1/2 working days holiday in every calendar year to be
taken at such time or times as may be approved by the Company (70% of 25
days ref. paragraph 7).
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme and share option scheme, to be established for the Company.
(b) TELEPHONE/FACSIMILE. The Company will pay for home telephone, mobile
phone, and home facsimile on behalf of the Employee.
<PAGE>
(c) NEWSPAPERS. The Company will pay for two daily newspapers.
(d) MEMBERSHIP IN PROFESSIONAL ORGANISATIONS/CLUBS. The Company will pay
membership fees in professional organisations/Clubs up to a maximum annual
cost of US$750.
/s/ Oistein Nyberg London 9. October 1995
- ----------------- -----------------------
Signature/Company Place and Date
/s/ Svein E. Johansen Asker 2/11/95
- --------------------- -----------------------
Signature/Employee Place and Date
<PAGE>
Exhibit 10(12)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 10th day of August, 1995, between FOUNTAIN OIL
INCORPORATED, a Delaware, U.S.A. registered company (hereinafter referred to as
the COMPANY) on the one part, and ARILD BOE (hereinafter referred to as the
EMPLOYEE) on the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 10th day of
August, 1995 and can be terminated by either Party by giving to the other
Party six (6) months notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as
SENIOR VICE PRESIDENT PROJECT DEVELOPMENT. The Employee in this position
will report to Exeuctive Vice President International (International
Operations) and to Executive Vice President Technology (EOR Technology) as
the case may be. The Employee shall exercise such powers and perform such
duties in relation to the business of the Company as may from time to time
be vested in or assigned to him by the Company and shall comply with all
reasonable direction from time to time given to him by the Company. A job
description will be written for the position outlining the major
responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's office in
Asker, Norway. Transfer to another location and/or position within the
Company and its Branches could happen at a later stage. The Company will
endeavour to accommodate the Employee's wishes as far as is practicable in
this respect.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his employment hereunder or thereafter use to the detriment
or prejudice of the Company or (except in the proper course of his duties
hereunder) divulge to any person any trade secret or any other confidential
information concerning the business or affairs of the Company which may
have come to his knowledge during his employment hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his employment hereunder or relating to
the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his employment
hereunder)
<PAGE>
deliver to the Company all lists of clients or customers, correspondence
and all other documents, papers and records which may have been prepared by
him or have come into his possession in the course of his employment
hereunder, and the Employee shall not be entitled to and shall not retain
any copy thereof. Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for his
services during his employment hereunder a basic salary at the rate of NOK
1.000.000,- per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves all rights to review the 12.5% contribution every 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
travelling, hotel, entertainment and other out of pocket expenses that
he/she may incur in the execution of his duties hereunder in accordance
with a budget approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 25 working days' holiday in every calendar year to be taken
at such time or times as may be approved by the Company.
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme and share option scheme, to be established for the Company.
(b) TELEPHONE/FACSIMILE. The Company will pay for home telephone, mobile
phone, and home facsimile on behalf of the Employee.
(c) NEWSPAPERS. The Company will pay for two daily newspapers.
<PAGE>
(d) CREDIT CARD FEES. The Company will pay annual fees for two credit
cards.
(e) MEMBERSHIP IN PROFESSIONAL ORGANISATIONS/CLUBS. The Company will pay
membership fees in professional organisations/Clubs up to a maximum annual
cost of US$750.-.
/s/ Nils N. Trulsvik Houston 15. Nov, 1995
- -------------------- ----------------------
Signature/Company Place and Date
/s/ Arild Boe Stavanger 15 November 1995
- ------------------- ----------------------------
Signature/Employee Place and Date
<PAGE>
Exhibit 10(13)
FOUNTAIN OIL INCORPORATED
EMPLOYEE CONTRACT
This contract is made the 1st day of June, 1995 and FOUNTAIN OIL INCORPORATED,
a Delaware, USA registered company (hereinafter referred to as the COMPANY) on
the one part and Gary J. Plisga, (hereinafter referred to as the EMPLOYEE) on
the other part.
Whereas the parties have agreed as follows:
PERIOD/TERMINATION OF EMPLOYMENT
This agreement commences 1st day of June, 1995 and can be terminated by
either Party by giving to the other Party 6 month(s) notice in writing.
POWERS AND DUTIES
The company has employed the Employee to serve as Executive Vice President
- The Americas. The Employee in this position will report to Oistein
Nyberg. The Employee shall exercise such powers and perform duties in
relation to the business of the Company as may from time to time be vested
in or assigned to him/her by the Company and shall comply with all
reasonable direction from time to time given to him/her by the Company. A
job description will be written for the position outlining the major
responsibilities and duties.
WORK LOCATION
The Employee will be located at the Company's offices in Houston, TX.
Transfer to another location and/or position within the Company and its
Branches could happen at a later stage. The Company will endeavor to
accommodate the Employees wishes as far as is practicable in this respect.
CONFIDENTIAL INFORMATION
The Employee shall not either during the continuance of his/her employment
hereunder or thereafter use to the detriment or prejudice of the Company or
(except in the proper course of his/her duties hereunder) divulge to any
person any trade secret or any other confidential information concerning
the business or affairs of the Company which may have come to his/her
knowledge during his/her employment hereunder.
<PAGE>
COMPANY INFORMATION
The employee shall at all times promptly give to the Company all such
information and explanations as it may require in connection with matters
relating to his/her employment hereunder or relating to the business of the
Company.
RETURN OF DOCUMENTS ETC.
The Employee shall promptly whenever required by the Company (and in any
event upon the termination of his/her employment hereunder) deliver to the
Company all list of clients or customers, correspondence and all other
documents, papers and records which may have been prepared by him/her or
have come into his/her possession in the course of his/her employment
hereunder and the Employee shall no be entitled to and shall not retain any
copy thereof. Title and copyright thereto shall vest in the Company.
REMUNERATION
The Employee shall be paid by way of remuneration for his/her services
during his/her employment hereunder a basic salary at the rate of
$150,000.00 per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from April 1, 1995, pay for a
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus etc.). The local management of each Company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD $50,000 and (b) Income Protection with disability of
USD $500 per week, starting after 6 months. Within the above framework,
the Employee is free to decide how the remainder of the 12.5% allowance is
to be used on (a) Pension (b) Life Insurance (c) Income Protection (d)
Private Health Care and (e) Accident Insurance.
The Company reserves the right to review the 12.5% contribution every three
years.
EXPENSES
The Company shall reimburse the Employee a reasonable traveling, hotel,
entertainment and other our of pocket expenses that he/she may incur in the
execution of his/her duties hereunder in accordance with a budget approved
by the Company.
<PAGE>
HOLIDAYS
In addition to Public holidays the Employee shall be entitled to 15 working
day holiday in every calendar year to be taken at such time or times as may
be approved by the Company.
SICKNESS/INJURY
The Company shall pay to the Employee Statutory Sick Pay (hereinafter
referred to as SSP) in accordance with regulations prevailing in the
country of residence. These payments will be supplemented by the Company
up to full Salary for the first 12 months of absence from work due to
Sickness or Injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
NOTE:
Additional employee benefits to be included in individual contacts where
appropriate.
(A) BONUS SCHEME - The employee will participate in the management bonus scheme
to be established for the Company.
(B) RELOCATION - The Company will pay moving costs for the employee.
(C) TELEPHONE/FACSIMILE - The Company will pay for home telephone, mobile phone
and home facsimile on behalf of the employee.
(D) NEWSPAPERS - The Company will pay for two daily newspapers
(E) MEMBERSHIP IN PROFESSIONAL ORGANIZATION/CLUBS - The Company will pay
membership fees in professional organizations/clubs up to a maximum annual
cost of USD $750
/s/ Oistein Nyberg London 10 October 95
- ---------------------- ------------------------
Signature/Company Location and Date
/s/ Gary Plisga 8/30/95 Houston, Tx
- ---------------------- ---------------------
Signature/Employee Location and Date
<PAGE>
Exhibit 10(14)
FOUNTAIN OIL INCORPORATED
EMPLOYEE CONTRACT
This contract is made the 1st day of June, 1995 and FOUNTAIN OIL INCORPORATED,
a Delaware, USA registered company (hereinafter referred to as the COMPANY) on
the one part and Robert B. Case, (hereinafter referred to as the EMPLOYEE) on
the other part.
Whereas the parties have agreed as follows:
PERIOD/TERMINATION OF EMPLOYMENT
This agreement commences 1st day of June, 1995 and can be terminated by
either Party by giving to the other Party 2 month(s) notice in writing.
POWERS AND DUTIES
The company has employed the Employee to serve as Vice President -
Aquisitions. The Employee in this position will report to Gary Plisga. The
Employee shall exercise such powers and perform duties in relation to the
business of the Company as may from time to time be vested in or assigned
to him/her by the Company and shall comply with all reasonable direction
from time to time given to him/her by the Company. A job description will
be written for the position outlining the major responsibilities and
duties.
WORK LOCATION
The Employee will be located at the Company's offices in Houston, TX.
Transfer to another location and/or position within the Company and its
Branches could happen at a later stage. The Company will endeavor to
accommodate the Employees wishes as far as is practicable in this respect.
CONFIDENTIAL INFORMATION
The Employee shall not either during the continuance of his/her employment
hereunder or thereafter use to the detriment or prejudice of the Company or
(except in the proper course of his/her duties hereunder) divulge to any
person any trade secret or any other confidential information concerning
the business or affairs of the Company which may have come to his/her
knowledge during his/her employment hereunder.
<PAGE>
COMPANY INFORMATION
The employee shall at all times promptly give to the Company all such
information and explanations as it may require in connection with matters
relating to his/her employment hereunder or relating to the business of the
Company.
RETURN OF DOCUMENTS ETC.
The Employee shall promptly whenever required by the Company (and in any
event upon the termination of his/her employment hereunder) deliver to the
Company all list of clients or customers, correspondence and all other
documents, papers and records which may have been prepared by him/her or
have come into his/her possession in the course of his/her employment
hereunder and the Employee shall no be entitled to and shall not retain any
copy thereof. Title and copyright thereto shall vest in the Company.
REMUNERATION
The Employee shall be paid by way of remuneration for his/her services
during his/her employment hereunder a basic salary at the rate of
$60,000.00 per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from April 1, 1995, pay for a
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus etc.). The local management of each Company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD $50,000 and (b) Income Protection with disability of
USD $500 per week, starting after 6 months. Within the above framework,
the Employee is free to decide how the remainder of the 12.5% allowance is
to be used on (a) Pension (b) Life Insurance (c) Income Protection (d)
Private Health Care and (e) Accident Insurance.
The Company reserves the right to review the 12.5% contribution every three
years.
EXPENSES
The Company shall reimburse the Employee a reasonable traveling, hotel,
entertainment and other our of pocket expenses that he/she may incur in the
execution of his/her duties hereunder in accordance with a budget approved by
the Company.
<PAGE>
HOLIDAYS
In addition to Public holidays the Employee shall be entitled to 15 working
day holiday in every calendar year to be taken at such time or times as may
be approved by the Company.
SICKNESS/INJURY
The Company shall pay to the Employee Statutory Sick Pay (hereinafter
referred to as SSP) in accordance with regulations prevailing in the
country of residence. These payments will be supplemented by the Company
up to full Salary for the first 12 months of absence from work due to
Sickness or Injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
/s/ Gary Plisga Houston 8/31/95
- -------------------- ---------------------
Signature/Company Location and Date
/s/ Robert B. Case Houston, Tx 8/31/95
- -------------------- ----------------------
Signature/Employee Location and Date
<PAGE>
Exhibit 10(15)
FOUNTAIN OIL INCORPORATED
EMPLOYMENT CONTRACT
This contract is made 15th day of December 1994, between EOR INTERNATIONAL, INC.
(hereinafter referred to as the COMPANY) on the one part, and Ravinder S. Sierra
(hereinafter referred to as the EMPLOYEE) on the other part.
Whereas the Parties have agreed as follows:
1. PERIOD/TERMINATION OF EMPLOYMENT. This agreement commences 15th day of
December, 1994 and can be terminated by either Party by giving to the other
Party six (6) months' notice in writing.
2. POWERS AND DUTIES. The Company has employed the Employee to serve as Vice
President of Operations. The Employee shall exercise such powers and
perform such duties in relation to the business of the Company as may from
time to time be vested in or assigned to him/her by the Company and shall
comply with all reasonable direction from time to time given to him/her by
the Company. A job description will be written for the position outlining
the major responsibilities and duties.
3. WORK LOCATION. The Employee will be located at the Company's office in
Calgary, AB. Transfer to another location and/or position within the
Company and its Branches could happen at a later stage. The Company will
endeavour to accommodate the Employee's wishes as far as is practical in
this respect.
4. CONFIDENTIAL INFORMATION. The Employee shall not either during the
continuance of his/her employment hereunder or thereafter use to the
detriment or prejudice of the Company or (except in the proper course of
his/her duties hereunder) divulge to any person any trade secret or any
other confidential information concerning the business or affairs of the
Company which may have come to his/her knowledge during his/her employment
hereunder.
5. COMPANY INFORMATION. The Employee shall at all times promptly give to the
Company all such information and explanations as it may require in
connection with matters relating to his/her employment hereunder or
relating to the business of the Company.
6. RETURN OF DOCUMENTS ETC. The Employee shall promptly whenever required by
the Company (and in any event upon the termination of his/her employment
hereunder) deliver to the Company all lists of clients or customers,
correspondence and all other documents, papers and records which may have
been prepared by him/her or have come
<PAGE>
into his/her possession in the course of his/her employment hereunder, and
the Employee shall not be entitled to and shall not retain any copy
thereof. Title and copyright thereto shall vest in the Company.
7. REMUNERATION. The Employee shall be paid by way of remuneration for
his/her services during his/her employment hereunder a basic salary at the
rate of $80,000 USD per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from 1 April, 1995, pay for
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus, etc.). The local management of each company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD 100,000 and (b) Income Protection with disability of USD
1,500 per month index linked, starting after 6 months. Within the above
framework, the Employee is free to decide how the remainder of the 12.5%
allowance is to be used on (a) Pension (b) Life Insurance (c) Income
protection (permanent health insurance) (d) Private Health Care and (e)
Accident Insurance.
The Company reserves the right to review the 12.5% contribution every 3
years.
8. EXPENSES. The Company shall reimburse the Employee all reasonable
travelling, hotel, entertainment and other out of pocket expenses that
he/she may incur in the execution of his/her duties hereunder in accordance
with a budget approved by the Company.
9. HOLIDAYS. In addition to Bank and other Public holidays the Employee shall
be entitled to 25 working days holiday in every calendar year to be taken
at such time or times as may be approved by the Company.
10. SICKNESS/INJURY. The Company shall pay to the Employee Statutory Sick Pay
(hereinafter referred to as SSP) in accordance with regulations prevailing
in the country of residence. These payments will be supplemented by the
Company up to full salary for the first 12 months of absence from work due
to sickness or injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
11. SPECIAL TERMS.
(a) BONUS SCHEME. The Employee will participate in the management bonus
scheme and share option scheme, to be established for the Company.
(b) TELEPHONE/FACSIMILE. The Company will pay for home telephone, mobile
phone, and home facsimile on behalf of the Employee.
(c) NEWSPAPERS. The Company will pay for two daily newspapers.
<PAGE>
(d) CREDIT CARD FEES. The Company will pay annual fees for two credit
cards.
(d) MEMBERSHIP IN PROFESSIONAL ORGANIZATIONS/CLUBS. The Company will pay
membership fees in professional organizations/clubs up to a maximum annual
cost of US$750.
IN WITNESS WHEREOF, the Parties hereto have executed this Contract.
/s/Svein E. Johansen Calgary, Alberta, Canada November 16, 1995
- -------------------- -------------------------------------------
Signature/Company Place and Date
/s/R. S. Sierra Calgary, Alberta, Canada November 16, 1995
- --------------- -------------------------------------------
Signature/Employee Place and Date
<PAGE>
Exhibit 10(16)
FOUNTAIN OIL INCORPORATED
EMPLOYEE CONTRACT
This contract is made the 1st day of June, 1995 and FOUNTAIN OIL INCORPORATED,
a Delaware, USA registered company (hereinafter referred to as the COMPANY) on
the one part and Susan E. Palmer, (hereinafter referred to as the EMPLOYEE) on
the other part.
Whereas the parties have agreed as follows:
PERIOD/TERMINATION OF EMPLOYMENT
This agreement commences 1st day of June, 1995 and can be terminated by
either Party by giving to the other Party 2 month(s) notice in writing.
POWERS AND DUTIES
The company has employed the Employee to serve as Corporate Secretary. The
Employee in this position will report to Arnfin Haavik functionally and
Gary Plisga administratively. The Employee shall exercise such powers and
perform duties in relation to the business of the Company as may from time
to time be vested in or assigned to him/her by the Company and shall comply
with all reasonable direction from time to time given to him/her by the
Company. A job description will be written for the position outlining the
major responsibilities and duties.
WORK LOCATION
The Employee will be located at the Company's offices in Houston, TX.
Transfer to another location and/or position within the Company and its
Branches could happen at a later stage. The Company will endeavor to
accommodate the Employees wishes as far as is practicable in this respect.
CONFIDENTIAL INFORMATION
The Employee shall not either during the continuance of his/her employment
hereunder or thereafter use to the detriment or prejudice of the Company or
(except in the proper course of his/her duties hereunder) divulge to any
person any trade secret or any other confidential information concerning
the business or affairs of the Company which may have come to his/her
knowledge during his/her employment hereunder.
<PAGE>
COMPANY INFORMATION
The employee shall at all times promptly give to the Company all such
information and explanations as it may require in connection with matters
relating to his/her employment hereunder or relating to the business of the
Company.
RETURN OF DOCUMENTS ETC.
The Employee shall promptly whenever required by the Company (and in any
event upon the termination of his/her employment hereunder) deliver to the
Company all list of clients or customers, correspondence and all other
documents, papers and records which may have been prepared by him/her or
have come into his/her possession in the course of his/her employment
hereunder and the Employee shall no be entitled to and shall not retain any
copy thereof. Title and copyright thereto shall vest in the Company.
REMUNERATION
The Employee shall be paid by way of remuneration for his/her services
during his/her employment hereunder a basic salary at the rate of
$42,000.00 per annum.
Such salary as above shall be paid by equal monthly installments. At the
end of each fiscal year possible changes in the Employee's remuneration
shall be discussed and decided by the Company.
In addition the Company will, with effect from April 1, 1995, pay for a
Pension/Insurance package at the cost of 12.5% of regular salary (excluding
any overtime, bonus etc.). The local management of each Company and/or
Branch will determine the Group policies to be entered into bearing in mind
the package should cover as a minimum (a) Life Insurance with death and
disability of USD $50,000 and (b) Income Protection with disability of
USD $500 per week, starting after 6 months. Within the above framework,
the Employee is free to decide how the remainder of the 12.5% allowance is
to be used on (a) Pension (b) Life Insurance (c) Income Protection (d)
Private Health Care and (e) Accident Insurance.
The Company reserves the right to review the 12.5% contribution every three
years.
EXPENSES
The Company shall reimburse the Employee a reasonable traveling, hotel,
entertainment and other our of pocket expenses that he/she may incur in the
execution of his/her duties hereunder in accordance with a budget approved
by the Company.
<PAGE>
HOLIDAYS
In addition to Public holidays the Employee shall be entitled to 15 working
day holiday in every calendar year to be taken at such time or times as may
be approved by the Company.
SICKNESS/INJURY
The Company shall pay to the Employee Statutory Sick Pay (hereinafter
referred to as SSP) in accordance with regulations prevailing in the
country of residence. These payments will be supplemented by the Company
up to full Salary for the first 12 months of absence from work due to
Sickness or Injury. From 13 months the Employee shall be entitled to
disability payment as provided for under the Permanent Health Insurance
package as well as any State support.
/s/ Gary Plisga Houston 9/25/95
- -------------------- --------------------
Signature/Company Location and Date
/s/ Susan E. Palmer Houston 9/25/95
- ------------------ --------------------
Signature/Employee Location and Date
<PAGE>
Exhibit 21
FOUNTAIN OIL INCORPORATED
LIST OF SUBSIDIARIES
As of October 31, 1995
Name Jurisdiction of Incorporation
---- -----------------------------
Fountain Oil U.S., Inc. Oklahoma
Uentech Corporation Oklahoma
Electromagnetic Oil Recovery International, Inc. Alberta, Canada
Fountain Oil Production Incorporated Delaware
Fountain Oil Adygea Incorporated Delaware
Fountain Oil Boryslaw Incorporated Delaware
Gastron International Ltd. British Virgin Islands
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Fountain Oil Incorporated on Form S-8, as amended in Amendment No. 1, (File
No. 33-82944) of our report which includes a paragraph regarding the Company's
ability to continue as a going concern, dated November 17, 1995, on our audit of
the consolidated financial statements of Fountain Oil Incorporated as of August
31, 1995 and for the ten month period ended August 31, 1994 and the year ended
August 31, 1995, which report is included in this Annual Report on Form 10-KSB.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Houston, Texas
November 28, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 4,791,645
<SECURITIES> 0
<RECEIVABLES> 149,244
<ALLOWANCES> 105,224
<INVENTORY> 17,946
<CURRENT-ASSETS> 5,290,601
<PP&E> 1,063,200
<DEPRECIATION> 533,369
<TOTAL-ASSETS> 10,710,322
<CURRENT-LIABILITIES> 1,102,432
<BONDS> 0
<COMMON> 1,083,406
0
0
<OTHER-SE> 8,524,484
<TOTAL-LIABILITY-AND-EQUITY> 10,710,322
<SALES> 464,044
<TOTAL-REVENUES> 625,457
<CGS> 479,224
<TOTAL-COSTS> 479,224
<OTHER-EXPENSES> 4,016,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,475
<INCOME-PRETAX> (7,571,011)
<INCOME-TAX> 28,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,599,611)
<EPS-PRIMARY> (.91)
<EPS-DILUTED> 0
</TABLE>
