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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from
Commission File Number 0-9147
CANARGO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-0881481
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1580, 727 - 7TH AVENUE SW
CALGARY, ALBERTA, CANADA T2P 0Z5
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (403) 777-1185
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:
Common Stock, par value $0.10 per share
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(Title of Class)
Indicate by check mark whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment
to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of December 31, 1998, was $4,973,937.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: Common Stock, $0.10 par value,
19,389,920 shares outstanding as of February 28, 1999. An additional 1,874,723
shares of Common Stock are issuable at any time without additional consideration
upon exercise of CanArgo Oil & Gas Inc. Exchangeable Shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock traded from April 6, 1995 through March 29, 1999
on the Nasdaq National Market System under the symbol "GUSH." CanArgo common
stock has also been listed and traded on the Oslo Stock Exchange since May 1995,
and its symbol there is "CNR." On March 29, 1999, CanArgo was advised by The
Nasdaq Stock Market that it had delisted CanArgo's common stock effective with
the close of business on March 29, 1999. CanArgo has appealed the delisting
decision. On March 30, 1999, CanArgo's common stock commenced trading on the
OTC Bulletin Board.
As a result of the shift in the principal domestic market for CanArgo
common stock from the Nasdaq National Market System to the OTC Bulletin Board,
stockholders may:
o find it more difficult to obtain accurate and timely quotations regarding
the bid and asked prices for common stock;
o experience greater spreads between bid and asked prices;
o be charged relatively higher transactional costs when buying or selling
common stock; and
o encounter more difficulty in effecting sales or purchases of common stock.
In addition, while securities listed on The Nasdaq National Market System are
exempt from the registration requirements of state securities laws, securities
traded on the OTC Bulletin Board must comply with the registration requirements
of state securities laws, which increases the time and costs associated with
complying with state securities laws when raising capital.
The listing of CanArgo common stock on the Oslo Stock Exchange has been a
secondary listing, with the primary listing being on The Nasdaq Stock Market.
CanArgo is appealing The Nasdaq Stock Market delisting decision, but if that
appeal does not result in the readmission of CanArgo common stock to trading on
The Nasdaq Stock Market and CanArgo is unable to establish another listing
acceptable to the Oslo Stock Exchange, CanArgo could not maintain its secondary
listing on the Oslo Stock Exchange. While CanArgo could apply for a primary
listing on the Oslo Stock Exchange, administrative requirements of that exchange
attaching to a primary listing make an Oslo Stock Exchange primary listing not a
feasible alternative for CanArgo.
Prices reported in the table below are from The Nasdaq Stock Market and
reflect trade prices. During July 1998, CanArgo effected a 1-for-2 reverse stock
split of CanArgo'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
YEAR ENDED COMMON STOCK
DECEMBER 31, 1998 HIGH LOW
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<S> <C> <C>
QUARTER ENDED:
March 31, 1998 $2.63 $1.44
June 30, 1998 2.25 1.00
September 30, 1998 1.81 0.47
December 31, 1998 0.81 0.22
</TABLE>
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<TABLE>
<CAPTION>
BY FISCAL QUARTER IN THE
YEAR ENDED COMMON STOCK
DECEMBER 31, 1997 HIGH LOW
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<S> <C> <C>
QUARTER ENDED:
March 31, 1997 $14.25 $8.75
June 30, 1997 10.13 7.81
September 30, 1997 9.13 4.84
December 31, 1997 7.00 1.19
</TABLE>
On December 31, 1998 the number of holders of record of the common stock of
CanArgo was approximately 3,849. CanArgo has not paid any cash dividends on its
common stock. CanArgo currently intends to retain future earnings, if any, for
use in its business and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. The payment of future dividends, if any,
will depend, among other things, on CanArgo's results of operations and
financial condition and on such other factors as CanArgo's Board of Directors
may, in its discretion, consider relevant. Under a loan agreement, the ability
of CanArgo's principal, majority-owned, operating subsidiary, Ninotsminda Oil
Company, to transfer funds to CanArgo and its other affiliates is severely
restricted. In addition, CanArgo may not pay dividends on its common stock
unless its subsidiary, CanArgo Oil & Gas Inc., is able to pay and simultaneously
pays an equivalent dividend on the exchangeable shares issued by that
subsidiary.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 28, 1999 with
respect to aggregate beneficial ownership of outstanding shares of Common Stock
and shares of Common Stock that would be issued upon exchange of Exchangeable
Shares either outstanding or issuable for no additional consideration, by each
person known by the Company to be the beneficial owner of more than 5% of the
aggregate of such shares, 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
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<S> <C> <C>
Terrenex Acquisition Corporation
1580, 727 - 7th Avenue SW
Calgary, AB, Canada T2P 0Z5 2,355,391 (1) 11.27%
Provincial Securities Limited
607 Gilbert House, Barbican
London EC2Y 8BD UK 1,671,250 8.17%
Michael R. Binnion 418,158 (2) 2.04%
Peder Paus 365,894 (3) 1.79%
Nils N. Trulsvik 103,700 (4) *
David Robson 75,000 (5) *
J.F. Russell Hammond 28,750 (6) *
Robert A. Halpin 13,500 (7) *
Rune Falstad 10,500 *
Alfred Kjemperud 0 0%
All executive officers and
Directors as a group (8 persons) 1,025,002 (8) 4.95%
</TABLE>
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* Less than 1%.
(1) Includes 447,360 shares underlying presently exercisable warrants to
acquire Exchangeable Shares issued by the Company's subsidiary, CanArgo Oil
& Gas Inc. and exchangeable for the Company's Common Stock on a share for
share basis.
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(2) Includes 13,792 Exchangeable Shares and 58,333 shares underlying presently
exercisable options beneficially owned by Mr. Binnion. Also includes
127,191 shares, but excludes 2,228,200 shares beneficially owned by
Terrenex Acquisition Corporation of which Mr. Binnion is President, a
director and an approximately 5.4% shareholder. Mr. Binnion disclaims
beneficial ownership of all shares beneficially owned by Terrenex, other
than the 127,191 shares which represent his 5.4% proportionate interest.
See Note (1) above.
(3) Includes 15,715 shares underlying presently exercisable warrants to acquire
Exchangeable Shares and 3,750 shares underlying presently exercisable
options.
(4) Includes 30,000 shares underlying presently exercisable options.
(5) Represents 75,000 shares underlying presently exercisable options.
(6) Represents 28,750 shares underlying presently exercisable options.
Excludes 2,355,391 shares owned by Terrenex Acquisition Corporation of
which Mr. Hammond is Chairman, and 1,671,250 shares owned by Provincial
Securities Limited for which Mr. Hammond is an investment advisor as to
which Mr. Hammond disclaims beneficial ownership.
(7) Includes 7,500 shares underlying presently exercisable options.
(8) See Notes 2-7; also includes 20,000 shares underlying presently exercisable
options held by an executive officer not named in the foregoing table.
CHANGES IN CONTROL
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Nicholas G. Dobrotwir served as Vice President of the Company from
September 1997 until January 26, 1998. He continues to provide consulting
services to the Company. Pursuant to a Memorandum of Agreement dated May 16,
1995 between Fielden Management Services Pty, Ltd. ("Fielden") and the Company,
under which the Company acquired its interest in the Stynawske field, in the
first quarter of 1997 the Company paid $500,000 and issued 87,500 shares of
Common Stock having a value of $1,060,938 to Fielden in connection with an
agreement to develop and operate the Stynawske field project. Mr. Dobrotwir has
indirect beneficial ownership of the 87,500 shares of Common Stock owned by
Fielden. Under the agreement, Fielden has the contingent right to receive up to
an additional 187,500 shares of the Company's Common Stock subject to the
satisfaction of conditions related to the achievement of specified performance
standards by the Stynawske field project.
The Company is a 50% shareholder of CanArgo Power Corporation, which in
turn owns 85% of a Georgian private power company. The other 50% of CanArgo
Power is owned by Terrenex Acquisition Corporation, an entity that is affiliated
with three of the Company's directors and is itself a principal stockholder of
the Company. Michael R. Binnion is President and a director of both the Company
and Terrenex; J. F. Russell Hammond is a director of the Company and Chairman of
Terrenex; and Peder Paus, a director of the Company, is a 12% stockholder of
Terrenex. During the first half of 1998, Terrenex, on behalf of both itself and
the Company, provided all of the funds required by CanArgo Power. After the
July 1998 business combination between the Company and CanArgo Oil & Gas Inc.
was completed, the Company reimbursed Terrenex $398,000, representing half of
the amount that had been advanced through that time. The Company and Terrenex
have funded CanArgo Power equally since that time.
In May 1998, Terrenex agreed to lend CanArgo Oil & Gas Inc. up to
$1,000,000 through August 31, 1998 and subsequently advanced the $1,000,000.
CanArgo Oil & Gas Inc. paid Terrenex a $10,000 commitment fee, $50,000 in draw
down fees and interest at the rate of 1/2% per month. In addition, CanArgo Oil
& Gas Inc. granted Terrenex options exercisable until December 31, 1998 to
acquire 12 1/2% of the stock of CanArgo's subsidiary that holds a production
sharing contract for the Nazvrevi and Block XIII areas in the Republic of
Georgia and 15% of
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CanArgo Oil & Gas Inc.'s position in any license received as a result of a
consortium submission in certain offshore drilling and production rights that
CanArgo might acquire in the Russian Republic of Dagestan. Either option could
be exercised by Terrenex paying CanArgo that percentage of all amounts expended
by CanArgo through the exercise date on the relevant project equal to the
percentage of the project being acquired by Terrenex through exercise of the
option. The terms of the loan, including the option terms, were negotiated and
approved by the directors of CanArgo Oil & Gas Inc. who had no affiliation with
Terrenex. CanArgo subsequently extended the options through March 31, 1999 in
consideration of the efforts of Terrenex in attempting to arrange financing for
CanArgo. CanArgo repaid the Terrenex loan following completion of the business
combination in July 1998. In light of the relationship between Terrenex and
CanArgo, Terrenex decided that any investment related to CanArgo that it would
make at this time should be in the entity CanArgo Energy Corporation and not in
specific CanArgo projects, and accordingly, Terrenex permitted the options to
expire unexercised.
On July 14, 1998, CanArgo Oil & Gas Inc. issued to Peder Paus but retained
in escrow 225,000 of its common shares, which were issued to Mr. Paus for
financial services rendered in connection with the business combination that had
been negotiated between CanArgo, then known as Fountain Oil Incorporated, and
CanArgo Oil & Gas Inc. Upon the consummation of the business combination, Mr.
Paus became a director of CanArgo, and the 225,000 common shares of CanArgo Oil
& Gas Inc. were converted into 180,000 CanArgo Oil & Gas Inc. exchangeable
shares, each of which could be exchanged for a share of CanArgo common stock.
The shares were issued to Mr. Paus subject to the condition that the financial
services rendered by Mr. Paus result in completed transactions. Although the
business combination closed, post-combination financing that had been
contemplated did not take place. As a result, Mr. Paus and CanArgo Oil & Gas
Inc. agreed in September 1998 that since the condition had not been satisfied,
the shares were not earned and should be canceled. The 180,000 exchangeable
shares were subsequently canceled.
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.
CANARGO ENERGY CORPORATION
(Registrant)
By: /s/ Michael Binnion Date: April 29, 1999
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Michael Binnion, President and
Chief Financial Officer
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