<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT ON FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1998
CANARGO ENERGY CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-9147 91-0881481
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1580, 727-7th Avenue SW, Calgary, Alberta T2P 0Z5
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 403-777-1185
Fountain Oil Incorporated
1400 Broadfield Blvd., Suite 100, Houston, Texas 77084
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
In connection with the Registrant's acquisition of all of the common
shares of CanArgo Oil and Gas Inc., formerly known as CanArgo Energy Inc.
("CAOG"), a majority of the directors of Registrant changed. In accordance with
the Amended and Restated Combination Agreement between Registrant and CAOG dated
as of February 2, 1998 (the "Combination Agreement"), Michael Binnion, J.F.
Russell Hammond, Peder Paus and David Robson were elected as directors of
Registrant effective July 15, 1998 to succeed Einar Bandlien, Stanley D.
Heckman, Eugene J. Meyers and Oistein Nyberg, who resigned. Messrs. Binnion,
Hammond and Robson had been directors of CAOG.
For more information regarding this change in the composition of the
Registrant's Board of Directors, see Registrant's Registration Statement on Form
S-3, as amended, File No. 333-48287 (the "Registration Statement"), which is
incorporated herein by reference.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective July 15, 1998, Registrant and CAOG consummated a transaction
(the "Transaction") pursuant to the Combination Agreement whereby the Registrant
became the owner of all of CAOG's common shares and approximately 9,975,000
shares of the Registrant's Common Stock, par value ten cents ($0.10) per share
("Common Stock"), are issuable to the former holders of CAOG's common stock and
persons who prior to the Transaction were entitled to receive shares of CAOG's
common stock without the payment of additional consideration on the basis of an
exchange ratio of 0.8 share of Registrant's Common Stock (as presently
constituted following a one-for-two reverse stock split effective July 15, 1998)
for each CAOG common share outstanding or issuable immediately prior to the
Transaction. Completion of the transaction was approved by Registrant's
stockholders, CAOG's shareholders and the Ontario Court (General Division).
The consideration was determined on the basis of negotiations between
Registrant and CAOG, which resulted in a conclusion that in a business
combination involving the Registrant and CAOG approximately equal value should
be accorded each of the two constituent companies on a fully diluted basis.
The principal physical assets acquired by Registrant through the
Transaction are oil and gas properties located in the Republic of Georgia,
utilized by CAOG in the business of oil and gas exploration and production.
Registrant intends to continue such use.
For more information regarding the Transaction, the Combination
Agreement, the nature and amount of consideration paid in the Transaction, the
process and principles by which the amount of such consideration was determined,
CAOG and CAOG's assets, see the Registration Statement, which is incorporated
herein by reference.
2
<PAGE>
ITEM 5. OTHER EVENTS
On July 15, 1998, Registrant amended its Certificate of Incorporation
(i) to change its name from Fountain Oil Incorporated to CanArgo Energy
Corporation and (ii) to effect a one-for-two reverse stock split.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Incorporated herein by reference to the Registration Statement, in
which they are included, are: the consolidated balance sheet of CAOG as at
December 31, 1997 and the consolidated statements of operations and deficit and
cash flows for the six month period then ended audited by Ernst & Young,
Chartered Accountants; the unaudited consolidated balance sheet of CAOG as at
March 31, 1998 and the consolidated statements of operations and deficit and
cash flows for the three month period then ended; the balance sheet of
Ninotsminda Oil Company Limited ("NOC") as at June 30, 1997 and December 31,
1996 and the statements of operations and retained earnings and cash flows for
the six month period ended June 30, 1997 and the period from October 24, 1995 to
December 31, 1996 audited by Ernst & Young, Chartered Accountants; and the
unaudited balance sheet of NOC as at March 31, 1997 and the statements of
operations and retained earnings and cash flows for the three month period then
ended.
(b) The pro forma financial information required by this Item is
incorporated herein by reference to the Registration Statement, in which it is
included.
(c) Exhibits
2(1) Amended and Restated Combination Agreement between Fountain Oil
Incorporated and CanArgo Energy Inc. dated as of February 2, 1998
(Incorporated herein by reference from the Registration Statement, in
which it is included).
2(2) Voting, Support and Exchange Trust Agreement (Incorporated herein by
reference from the Registration Statement, in which it is included).
3(1) Registrant's Certificate of Incorporation and amendments thereto.
23(1) Consent of PricewaterhouseCoopers LLP independent accountants.
23(2) Consent of Ernst & Young, Chartered Accountants, Calgary, Canada.
23(3) Consent of Ernst & Young, Chartered Accountants, Limassol, Cyprus.
3
<PAGE>
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CANARGO ENERGY CORPORATION
Date: July 24, 1998 By: /s/Susan E. Palmer
------------------
Susan E. Palmer
Corporate Secretary
4
<PAGE>
EXHIBIT INDEX
FILED WITH
EXHIBIT THIS
NUMBER EXHIBIT REPORT
- ------- ------- ----------
2(1) Amended and Restated Combination Agreement between
Fountain Oil Incorporated and CanArgo Energy Inc.
dated as of February 2, 1998 (Incorporated herein by
reference from Form S-3 Registration Statement,
File No. 333-48287 filed on June 9, 1998).
2(2) Voting, Support and Exchange Trust Agreement
(Incorporated herein by reference as Annex G from
Form S-3 Registration Statement, File No. 333-48287
filed on June 9, 1998).
3(1) Registrant's Certificate of Incorporation and
amendments thereto. X
23(1) Consent of PricewaterhouseCoopers LLP independent
accountants. X
23(2) Consent of Ernst & Young, Chartered Accountants,
Calgary, Canada. X
23(2) Consent of Ernst & Young, Chartered Accountants,
Limassol, Cyprus. X
<PAGE>
Exhibit 3(1)
CERTIFICATE OF INCORPORATION
OF
CANARGO ENERGY CORPORATION
(AS AMENDED THROUGH JULY 15, 1998)
FIRST: The name of the Corporation is CanArgo Energy Corporation (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 32 Loockerman Square, Suite L-100, Dover, Delaware 19904, in the
City of Dover, County of Kent. The name of the registered agent at that address
is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH:
(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is fifty-five million
(55,000,000), in two (2) classes consisting of:
(1) A class consisting of five million (5,000,000) shares of
Preferred Stock, par value ten cents ($.10) per share (the "Preferred
Stock"); and
(2) A class consisting of fifty million (50,000,000) shares of
Common Stock, par value ten cents ($.10) per share (the "Common
Stock").
Upon an amendment of this paragraph (a) of Article Fourth that
reflects the inclusion of this sentence becoming effective (the "Effective
Date"), each two (2) shares of the Corporation's common stock, par value
ten cents ($.10) per share, issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall be reclassified as, and
changed, converted and combined into, one (1) validly issued, fully paid
and non-assessable outstanding share of Common Stock of the Corporation,
without any action on the part of the holder thereof. No fractional shares
shall be issued in connection with such reclassification. Each stockholder
who would otherwise be entitled to receive a fractional share of Common
Stock in connection with such reclassification shall be entitled to
receive, in lieu thereof, a cash payment equal to such fraction
<PAGE>
multiplied by two times the fair market value of one share of the
Corporation's Old Common Stock as of the close of business on the business
day immediately preceding the Effective Date. For this purpose, fair market
value shall be deemed to be the mean between the high and low prices at
which the Corporation's Old Common Stock trades on the National Market
System of the Nasdaq Stock Market, Inc. on the trading day immediately
preceding such Effective Date, or if such Old Common Stock does not so
trade, then the fair market value as determined by the Corporation's Board
of Directors based upon recent trades and bid and asked prices of the Old
Common Stock. Each certificate that immediately prior to the Effective Date
represented shares of Old Common Stock shall upon and after the Effective
Date represent (i) that number of shares of Common Stock into which the
shares of Old Common Stock represented by such certificate shall have been
reclassified and (ii) the right to receive cash in lieu of fractional
shares of Common Stock as aforesaid; provided, however, that each person
holding of record a stock certificate or certificates that immediately
prior to the Effective Date represented shares of Old Common Stock shall
receive, upon surrender of such certificate or certificates, (x) a new
certificate or certificates evidencing and representing the number of
shares of Common Stock to which such person is entitled pursuant to the
foregoing reclassification and (y) a cash payment in lieu of the issuance
of fractional shares of Common Stock as aforesaid.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The directors of the Corporation need not be elected by written
ballot unless the Bylaws of the Corporation so provide.
(b) The directors shall have the concurrent power with the stockholders
to adopt, amend or repeal the Bylaws of the Corporation.
SIXTH: A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derives an improper
personal benefit.
If the Delaware General Corporation Law is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of the directors of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
<PAGE>
Any repeal or modification of the foregoing provisions of the Article Sixth
by the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SEVENTH: The Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation in the manner prescribed by the
laws of the State of Delaware and all rights conferred upon stockholders are
granted subject to this reservation.
EIGHTH: The name and mailing address of the sole incorporator are as
follows:
Name Address
---- -------
J.E. Costelloe 5670 Wilshire Blvd., Ste. 750
Los Angeles, CA 90071
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereto set by hand this 6th day of October, 1994.
/s/J.E. Costelloe
-----------------
J.E. Costelloe, Incorporator
<PAGE>
Exhibit 23 (1)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in (i) this Form 8-K, (ii)
Registration Statement on Form S-8, as amended in Post-Effective Amendment No. 1
(File No. 33-82944) (iii) Registration Statement on Form S-8 (File No. 333-
02651) and (iv) Registration Statement on Form S-8 (File No. 333-59367) of
CanArgo Energy Corporation (formerly Fountain Oil Incorporated), of our report
which includes paragraph regarding the Company's ability to continue as a going
concern, dated March 9, 1998 (except for the sixth paragraph of Note 6, as to
which the date is June 8, 1998), on our audits of the consolidated financial
statements of Fountain Oil Incorporated as of December 31, 1997, December 31,
1996, and August 31, 1996, and for the year ended December 31, 1997, the four
month period ended December 31, 1996 and the years ended August 31, 1996 and
1995, which report is included in the Company's Registration Statement on Form
S-3, as amended, File No. 333-48287, also incorporated by reference in this
Form 8-K.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Houston, Texas
July 24, 1998
<PAGE>
Exhibit 23 (2)
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements on
Form S-8, as amended, (File Nos. 33-82944, 333-02651, and 333-59367) pertaining
to the Electromagnetic Oil Recovery, Inc. Securities Compensation Plan, the 1995
Long-Term Incentive Plan and the CanArgo Energy Inc. Stock Option Plan,
respectively, of our reported dated February 18, 1998, with respect to the
consolidated financial statements of CanArgo Energy Inc. as at and for the six
month period ended December 31, 1997, included in the Registration Statement on
Form S-3, as amended, (File No. 333-48287) of Fountain Oil Incorporated, filed
with the Securities and Exchange Commission.
/s/Ernst & Young
Chartered Accountants
Calgary, Canada
July 24, 1998
<PAGE>
Exhibit 23 (3)
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements on
Form S-8, as amended, (File Nos. 33-82944, 333-02651, and 333-59367) pertaining
to the Electromagnetic Oil Recovery, Inc. Securities Compensation Plan, the 1995
Long-Term Incentive Plan and the CanArgo Energy Inc. Stock Option Plan,
respectively, of our reported dated February 18, 1998, with respect to the
financial statements of Ninotsminda Oil Company Limited (formerly "JKX
(Ninotsminda) Limited") as at June 30, 1997 and December 31, 1996 and for the
six month period ended June 30, 1997 and the period from October 24, 1995 to
December 31, 1996, included in the Registration Statement on Form S-3, as
amended, (File No. 333-48287) of Fountain Oil Incorporated, filed with the
Securities and Exchange Commission.
/s/Ernst & Young
Chartered Accountants
Limassol, Cyprus
24 July, 1998
