U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___________ TO _______________
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) (ZIP CODE)
403-777-1185
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check whether the registrant (1) has 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 [ ]
The number of shares of registrant's common stock outstanding on April 30, 2000
was 40,664,263. An additional 523,659 shares of common stock are issuable at
any time without additional consideration upon exercise of CanArgo Oil & Gas
Inc. Exchangeable Shares.
<PAGE>
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
Unaudited
-----------------------------
MARCH 31, December 31,
2000 1999
------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . $ 2,939,318 $ 3,534,983
Accounts receivable . . . . . . . . . . . . . . . . . 571,162 464,435
Advances to operator. . . . . . . . . . . . . . . . . 245,233 -
Inventory . . . . . . . . . . . . . . . . . . . . . . 58,677 188,500
Other current assets. . . . . . . . . . . . . . . . . 58,718 94,174
------------- --------------
Total current assets. . . . . . . . . . . . . . . . $ 3,873,108 $ 4,282,092
Property and equipment, net . . . . . . . . . . . . . 7,178,184 7,101,125
Oil and gas properties, net, full cost method
(including unevaluated amounts of $12,531,313
and $12,531,313 respectively). . . . . . . . . . . 30,840,184 30,707,037
Investments in and advances to oil and gas and other
ventures net. . . . . . . . . . . . . . . . . . . . 1,700,666 1,709,215
------------- --------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . $ 43,592,142 $ 43,799,469
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . . . . . . . . . . $ 897,670 $ 1,159,949
Accrued liabilities . . . . . . . . . . . . . . . . . 189,911 393,411
------------- --------------
Total current liabilities . . . . . . . . . . . . . $ 1,087,581 $ 1,553,360
Provision for future site restoration . . . . . . . . 21,190 12,700
Minority interest in subsidiaries . . . . . . . . . . 4,407,583 4,370,785
Stockholders' equity:
Preferred stock, par value $0.10 per share. . . . . - -
Common stock, par value $0.10 per share . . . . . . 3,749,292 3,735,292
Capital in excess of par value. . . . . . . . . . . 106,314,864 106,216,164
Accumulated deficit . . . . . . . . . . . . . . . . (71,988,370) (72,088,832)
------------- --------------
Total stockholders' equity. . . . . . . . . . . . . . $ 38,075,786 $ 37,862,624
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . $ 43,592,142 $ 43,799,469
============= ==============
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements
<PAGE>
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
--------------------------
Three Months Ended
MARCH 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Operating Revenues:
Oil and gas sales . . . . . . . . . . . . . . . . $ 1,884,676 $ 113,667
Other . . . . . . . . . . . . . . . . . . . . . . 196,300 -
------------ ------------
2,080,976 113,667
------------ ------------
Operating Expenses:
Lease operating expense . . . . . . . . . . . . . 372,596 127,848
Direct project costs. . . . . . . . . . . . . . . 136,309 224,070
General and administrative. . . . . . . . . . . . 373,874 684,834
Depreciation, depletion and amortization. . . . . 1,075,490 25,000
Equity loss from investments in
unconsolidated subsidiaries . . . . . . . . . . 13,000 21,581
------------ ------------
1,971,269 1,083,333
------------ ------------
OPERATING INCOME (LOSS) . . . . . . . . . . . . . . 109,707 (969,666)
------------ ------------
Other Income (Expense):
Interest, net . . . . . . . . . . . . . . . . . . 34,335 (48,259)
Other . . . . . . . . . . . . . . . . . . . . . . (6,780) (40,885)
------------ ------------
TOTAL OTHER INCOME (EXPENSE). . . . . . . . . . . . 27,555 (89,144)
------------ ------------
Minority interest in loss (income) of consolidated
subsidiary. . . . . . . . . . . . . . . . . . . . (36,800) 87,587
------------ ------------
NET INCOME AND COMPREHENSIVE INCOME . . . . . . . . $ 100,462 $ (971,223)
============ ============
Weighted average number of
common shares outstanding . . . . . . . . . . . . 37,422,144 21,222,976
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE-BASIC. . . . . . $ 0.00 $ (0.05)
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE-DILUTED. . . . . $ 0.00 $ (0.05)
------------ ------------
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements
<PAGE>
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
--------------------------
Three Months Ended
MARCH 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net Income (Loss). . . . . . . . . . . . . . . . . . . . . $ 100,462 (971,223)
Depreciation, depletion and amortization . . . . . . . . . 1,075,490 25,000
Issuance of common stock for services. . . . . . . . . . . 112,700 -
Equity loss from investments in unconsolidated
subsidiaries. . . . . . . . . . . . . . . . . . . . .. . 13,000 21,581
Minority interest in gain(loss) of consolidated subsidiary 36,800 (87,587)
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . (106,727) 42,668
Advances to operator . . . . . . . . . . . . . . . . . . (245,233) 124,302
Inventory. . . . . . . . . . . . . . . . . . . . . . . . 129,823 (127,744)
Other current assets . . . . . . . . . . . . . . . . . . 35,456 152,967
Accounts payable . . . . . . . . . . . . . . . . . . . . (262,279) 605,378
Accrued liabilities. . . . . . . . . . . . . . . . . . . (203,500) 93,724
------------ ------------
NET CASH GENERATED (USED) IN OPERATING ACTIVITIES. . . . . . 685,992 (120,934)
------------ ------------
Investing activities:
Investments in oil and gas properties. . . . . . . . . . . (1,177,147) (842,573)
Purchase of property and equipment . . . . . . . . . . . . (100,059) (62,805)
Investments in and advances to oil and gas and other
ventures . . . . . . . . . . . . . . . . . . . . . . . . (4,451) (192,789)
------------ ------------
NET CASH GENERATED (USED) IN INVESTING ACTIVITIES. . . . . . (1,281,657) (1,098,167)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . (595,665) (1,219,101)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . 3,534,983 1,924,908
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . $ 2,939,318 $ 705,807
------------ ------------
Non cash investing and financing activities:
Issuance of common stock in connection with
acquisition of oil and gas properties. . . . . . . . . . . $ - $ 109,500
============ ============
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements
<PAGE>
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 (UNAUDITED)
(1) Basis of Presentation - The interim consolidated condensed financial
statements and notes thereto of CanArgo Energy Corporation and its
subsidiaries (collectively, CanArgo) have been prepared by management
without audit. In the opinion of management, the consolidated condensed
financial statements include all adjustments, consisting of normal
recurring adjustments, necessary for a fair statement of the results
for the interim period. The accompanying consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the CanArgo's
Annual Report on Form 10-K for the year ended December 31, 1999 filed
with the Securities and Exchange Commission.
Certain items in the consolidated condensed financial statements have
been reclassified to conform to the current year presentation. There
was no effect on net loss as a result of these reclassifications.
Oil and Gas Properties - CanArgo and the unconsolidated entities for
which it accounts using the equity method account for oil and gas
properties and interests under the full cost method. Under this
accounting method, costs, including a portion of internal 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 (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), plus (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.
(2) Need for Significant Additional Capital, Possible Impairment of Assets
Development of the oil and gas properties and ventures in which
CanArgo has interests involves multi-year efforts and substantial
cash expenditures.CanArgo had working capital of $2,785,527 at March 31,
2000, which it considered inadequate to proceed with full implementation
of its program of developing its oil and gas properties. Full
development of these properties would require the availability
of substantial funds from external sources. CanArgo believes that it
will be able to generate funds from external sources including
quasi-governmental financing agencies such as the International Finance
Corporation, conventional lenders, equity investors and other oil
and gas companies that may desire to participate in CanArgo's oil and
gas projects.
Ultimate realization of the carrying value of CanArgo's oil and gas
properties will require production of oil and gas in sufficient
quantities and marketing such oil and gas at sufficient prices to
provide positive cash flow to the CanArgo, which is dependent upon,
among other factors, achieving significant production at costs that
provide acceptable margins, reasonable levels of taxation from local
authorities, and the ability to market the oil and gas produced at
or near world prices. In addition, CanArgo must mobilize drilling
equipment and personnel to initiate drilling, completion and production
activities. If one or more of the above factors, or other factors, are
different than anticipated, CanArgo may not recover its carrying
value. CanArgo generally has the principal responsibility for arranging
financing for the oil and gas properties and ventures (see note 5)
in which it has an interest. There can be no assurance, however, that
CanArgo or the entities that are developing the oil and gas properties
and ventures will be able to arrange the financing necessary to develop
the projects being undertaken or to support the corporate and other
activities of CanArgo or that such financing as is available will be on
terms that are attractive or acceptable to or are deemed to be in the
best interests of CanArgo, such entities or their respective
stockholders or participants.
<PAGE>
The consolidated financial statements of CanArgo do not give effect to
any additional impairment in the value of CanArgo's investment in
oil and gas properties and ventures or other adjustments that would be
necessary if financing cannot be arranged for the development of such
properties and ventures or if they are unable to achieve profitable
operations. Failure to arrange such financing on reasonable terms or
failure of such properties and ventures to achieve profitability would
have a material adverse effect on the financial position, including
realization of assets, results of operations, cash flows and prospects
of the CanArgo.
(3) Property and Equipment, Net
Property and equipment, net of accumulated depreciation and impairment,
at March 31, 2000 and December 31, 1999 include the following:
<TABLE>
<CAPTION>
December 31,
MARCH 31, 2000 1999
--------------------------------------- ------------
ACCUMULATED
DEPRECIATION
COST AND IMPAIRMENT NET NET
------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Oil and gas related
Equipment . . . . . . . $ 9,701,702 $2,847,035 $6,854,667 $ 6,794,473
Office furniture, fixtures
and equipment and other 734,076 410,560 323,516 306,652
------------- ------------ ---------- ------------
PROPERTY AND EQUIPMENT . . $ 10,435,778 $3,257,595 $7,178,184 $ 7,101,125
============= ============ ========== ============
</TABLE>
Oil and gas related equipment includes new or refurbished drilling rigs
and related equipment, substantially all of which has been transported
to the Republic of Georgia for use by CanArgo in the development of the
Ninotsminda field.
(4) Oil and Gas Properties, Net
CanArgo has acquired interests in oil and gas properties through joint
ventures and other joint operating arrangements. Oil and gas properties,
net of accumulated depletion and impairment, at March 31, 2000 and
December 31, 1999 include the following:
<TABLE>
<CAPTION>
December 31,
MARCH 31, 2000 1999
--------------------------------------------------- -------------
REPUBLIC OF
GEORGIA CANADA USA TOTAL TOTAL
-------------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Proved properties. . . . . . . . . $ 20,509,030 $ -- $ 1,174,734 $21,683,764 $ 20,506,617
Unproved properties. . . . . . . . 12,517,905 13,408 -- 12,531,313 12,531,313
Less: accumulated
depletion and impairment. . . . (2,200,159) -- (1,174,734) (3,374,893) (2,330,893)
-------------- ------- ------------ ------------ -------------
TOTAL OIL AND GAS PROPERTIES, NET $ 30,826,776 $13,408 $ -- $30,840,184 $ 30,707,037
============== ======= ============ ============ =============
</TABLE>
<PAGE>
Unproved properties and associated costs not currently being amortized
and included in oil and gas properties were $12,531,313 at March 31,
2000 and December 31, 1999. Unproved oil and gas properties at March 31,
2000 include costs of $12,517,905 with respect to properties in
Eastern Europe. These properties are expected to be evaluated over
the next 57 months. Remaining costs of $13,408 relate to the minor
property interests in Western Canada which are expected to be evaluated
over the next 24 months. If no proved reserves are added, these
properties could experience additional impairment.
(5) Investments in and Advances to Oil and Gas and Other Ventures
CanArgo has acquired interests in oil and gas and other ventures through
less than majority interests in corporate and corporate-like entities.
A summary of CanArgo's net investment in and advances to oil and gas
ventures as of March 31, 2000 and December 31, 1999 is set out below:
<TABLE>
<CAPTION>
MARCH 31, December 31,
INVESTMENTS IN AND ADVANCES TO OIL AND GAS AND OTHER VENTURES 2000 1999
- -------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Ukraine - Stynawske Field, Boryslaw
Through 45% ownership of Boryslaw Oil Company. . . . . . . . . $6,086,254 $ 6,086,254
Republic of Georgia - Sartichala
Through 12.9% ownership of Georgian American Oil Refinery. . . . 1,008,845 1,008,845
Republic of Georgia - Ninotsminda
Through an effective 42.5% ownership Sagarego Power Corporation. 635,713 635,713
Republic of Georgia - Ninotsminda
Through an effective 50% ownership of East Georgian Pipeline Co. 5,000 --
Uentech International Corporation
Through an effective 45% voting interest . . . . . . . . . . . . 273,761 274,310
----------- --------------
TOTAL INVESTMENTS IN AND ADVANCES TO OIL AND GAS
AND OTHER VENTURES . . . . . . . . . . . . . . . . . . . . . . . . . $8,009,573 $ 8,005,122
=========== ==============
EQUITY IN PROFIT (LOSS) OF OIL AND GAS AND OTHER VENTURES
- ---------------------------------------------------------
Ukraine - Stynawske Field, Boryslaw. . . . . . . . . . . . . . . . . $ (626,461) $ (626,461)
Republic of Georgia - Sagarego Power Corporation . . . . . . . . . . (186,074) (186,074)
Uentech International Corporation . . . . . . . . . . . . . . . . . (36,579) (23,579)
------------- --------------
CUMULATIVE EQUITY IN PROFIT (LOSS) OF OIL AND GAS
AND OTHER VENTURES . . . . . . . . . . . . . . . . . . . . . . . . . $ (849,114) $ (836,114)
------------- --------------
IMPAIRMENT - STYNAWSKE FIELD . . . . . . . . . . . . . . . . . . . . (5,459,793) (5,459,793)
------------- --------------
TOTAL INVESTMENTS IN AND ADVANCES TO OIL AND GAS
AND OTHER VENTURES, NET OF EQUITY LOSS AND IMPAIRMENT. . . . . . . $ 1,700,666 $ 1,709,215
============= ==============
</TABLE>
CanArgo's ventures are in the development stage. Accordingly,
realization of these investments is dependent upon successful
development of and ultimately cash flows from operations of the
ventures.
<PAGE>
(6) Accrued Liabilities
Accrued liabilities at March 31, 2000 and December 31, 1999 include
the following:
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
---------- -------------
<S> <C> <C>
Professional fees $ 64,000 $ 167,500
Workovers . . . . 50,000 150,000
Other . . . . . . 75,911 75,911
---------- -------------
$ 189,911 $ 393,411
========== =============
</TABLE>
(7) Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
NUMBER OF
SHARES ADDITIONAL TOTAL
ISSUED AND PAID-IN ACCUMULATED STOCKHOLDERS'
ISSUABLE PAR VALUE CAPITAL DEFICIT EQUITY
------------- ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
TOTAL, DECEMBER 31, 1999 . . . . 37,352,922 $ 3,735,292 $106,216,164 $ (72,088,832) $37,862,624
Less shares issuable at
beginning of period. . . . . . . (529,759) (52,976) (994,678) -- (1,047,654)
Issuance of common stock upon
exchange of CanArgo Oil & Gas
Inc. Exchangeable Shares . . . . 6,100 610 11,453 -- 12,063
Issuance of common stock for
services . . . . . . . . . . . . 140,000 14,000 98,700 -- 112,700
Net income . . . . . . . . . . . -- -- -- 100,462 100,462
------------- ------------ ------------- --------------- ------------
BALANCE, MARCH 31, 2000. . . . . 36,969,263 $ 3,696,926 $105,331,639 $ (71,988,370) $37,040,195
Shares issuable upon exchange
of CanArgo Oil & Gas Inc.
Exchangeable Shares without
receipt of further consideration 523,659 52,366 983,225 -- 1,035,591
------------- ------------ ------------- --------------- ------------
TOTAL, MARCH 31, 2000. . . . . . 37,492,922 $ 3,749,292 $106,314,864 $ (71,988,370) $38,075,786
============= ============ ============= =============== ============
</TABLE>
Subsequent to March 31, 2000, CanArgo closed a private placement of
3,695,000 shares at NOK 7.50 per share. Gross proceeds from the
placement were $3,184,166. After completion of the private placement,
CanArgo has 40,664,263 common shares outstanding as of April 30, 2000.
(8) Net Income (Loss) Per Common Share
Basic and diluted net income (loss) per common share for the periods
ended March 31, 2000 and March 31, 1999 are based on the weighted
average number of common shares outstanding during those periods. The
weighted average numbers of shares issued and issuable without receipt
of additional consideration for the three month periods ended March 31,
2000 and 1999 are 37,422,144 and 21,222,976, respectively. Options to
purchase CanArgo's common stock were outstanding at March 31, 2000 but
were not included in the computation of diluted net income (loss) per
common share because the effect of such inclusion would have been anti-
dilutive.
(9) Commitments and Contingencies
OIL AND GAS PROPERTIES AND INVESTMENTS IN OIL AND GAS VENTURES
CanArgo has contingent obligations and may incur additional obligations,
absolute and contingent, with respect to acquiring and developing oil
and gas properties and ventures. At March 31, 2000, CanArgo had
the contingent obligation to issue an aggregate of 187,500 shares of its
common stock, subject to the satisfaction of conditions related to the
achievement of specified performance standards by the Stynawske field
project.
<PAGE>
POTENTIAL CLAIMS RELATING TO PREVIOUSLY IMPAIRED PROJECTS
As a result of CanArgo's decision to cease active development of the
Maykop project, CanArgo may be subject to contingent liabilities in the
form of claims from the joint venture developing the project or from
others participating in the project. CanArgo was advised during the
first quarter of 1998 that Intergas and another shareholder of Intergas
were considering asserting such claims in relation to the project, but
no such claims have yet been asserted. CanArgo is unable to estimate the
range that such claims, if made, might total. However, if one or more of
such claims were asserted and determined to be valid, they could have a
material adverse effect on CanArgo's financial position, results of
operations, cash flows and prospects. Such claims may be adjudicated in
the host country forum under host country laws.
(10) Segment Information
For the three month periods ended March 31, 2000 and 1999, CanArgo
operated through one business segment, oil and gas exploration and
production. Operating revenues for the three month periods ended March
31, 2000 and 1999 by geographical area were as follows:
<TABLE>
<CAPTION>
MARCH 31, March 31,
2000 1999
---------- ----------
<S> <C> <C>
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe. . . . . . . . . . . . . . . . . . $2,080,976 $ 68,000
Canada. . . . . . . . . . . . . . . . . . . . . . -- 45,667
---------- ----------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . $2,080,976 $ 113,667
========== ==========
</TABLE>
Operating income (loss) for the three month periods ended March 31,
2000 and 1999 by geographical area were as follows:
<TABLE>
<CAPTION>
MARCH 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe . . . . . . . . . . . . . . . . . . $ 496,581 $ (336,194)
Canada . . . . . . . . . . . . . . . . . . . . . . -- (85,503)
----------- -----------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . $ 496,581 $ 421,697
CORPORATE EXPENSES . . . . . . . . . . . . . . . . . $ (386,874) $ (547,969)
----------- -----------
TOTAL OPERATING INCOME (LOSS). . . . . . . . . . . . $ 109,707 $ (969,666)
=========== ===========
</TABLE>
<PAGE>
Identifiable assets as of March 31, 2000 and December 31, 1999 by
business segment and geographical area were as follows:
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
----------- -------------
<S> <C> <C>
CORPORATE
Eastern Europe. . . . . . . . . . . . . . . . . . $ 58,677 $ 262,174
Canada. . . . . . . . . . . . . . . . . . . . . . 3,775,992 3,981,274
Western Europe. . . . . . . . . . . . . . . . . . 38,439 38,644
----------- -------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $ 3,873,108 $ 4,282,092
----------- -------------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe. . . . . . . . . . . . . . . . . . $38,004,959 $ 37,794,754
Canada. . . . . . . . . . . . . . . . . . . . . . 13,409 13,408
----------- -------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $38,018,368 $ 37,808,162
----------- -------------
OTHER ENERGY PROJECTS
Eastern Europe. . . . . . . . . . . . . . . . . . $ 1,409,433 $ 1,458,484
Canada . . . . . . . . . . . . . . . . . . . . . 291,233 250,731
----------- -------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $ 1,700,666 $ 1,709,215
----------- -------------
IDENTIFIABLE ASSETS - TOTAL . . . . . . . . . . . . $43,592,142 $ 43,799,469
=========== =============
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUALIFYING STATEMENT WITH RESPECT TO FORWARD-LOOKING INFORMATION
The United States Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for certain forward looking statements. Such forward looking
statements are based upon the current expectations of CanArgo and speak only as
of the date made. These forward looking statements involve risks, uncertainties
and other factors. The factors discussed below under "Forward Looking
Statements" and elsewhere in this Quarterly Report on Form 10=Q are among those
factors that in some cases have affected CanArgo's historic results and could
cause actual results in the future to differ significantly from the results
anticipated in forward looking statements made in this Quarterly Report on Form
10-Q, future filings by CanArgo with the Securities and Exchange Commission, in
CanArgo's press releases and in oral statements made by authorized officers of
CanArgo. When used in this Quarterly Report on Form 10-Q, the words "estimate,"
"project," "anticipate," "expect,""intend," "believe," "hope," "may" and similar
expressions, as well as "will," "shall" and other indications of future tense,
are intended to identify forward looking statements.
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
In April 2000, CanArgo closed a private placement resulting in the issuance
of 3,695,000 shares at NOK 7.50 per share for gross proceeds of $3,184,166.
CanArgo's management believes that cash and cash equivalents at March 31, 2000,
augmented by net proceeds from this offering and cash generated from operations
should be sufficient to cover operating needs during the next twelve month
period. However, no assurances can be given that CanArgo's operations will
generate positive cash flow and that the funds provided by the sources noted
above or from other sources will be sufficient to satisfy CanArgo's operating
needs during the next twelve months.
While CanArgo's management believes that CanArgo should have sufficient
cash to cover operating expenses, CanArgo's cash balance at March 31, 2000 and
subsequent proceeds from its April private placement is not sufficient to fully
implement its current Ninotsminda field development plan. Current development
plans for the Ninotsminda field includes the completion of well N97 to the
Cretaceous, a horizontal sidetrack of well N98 and seven major rehabilitations
of existing wells, with a view towards increasing oil and gas production. The
development plan is scheduled to be implemented in 2000 and the first half of
2001, but that timing is dependent upon funding for the development being
available promptly. A key portion of the funding program is not yet in place.
In December 1998, Ninotsminda Oil Company entered into a convertible loan
agreement with International Finance Corporation ("IFC"), an affiliate of the
World Bank, under which IFC agreed under specified conditions, to lend $6
million to Ninotsminda Oil Company primarily to fund the Ninotsminda field
current development program. IFC has the right, upon notice to CanArgo, to
terminate its loan commitment if, among other things, the first disbursement
under the loan agreement is not made by June 30, 1999, or such other date as IFC
and CanArgo agree. IFC has no obligation to disburse funds after June 29, 2000.
Pursuant to an agreement dated October 19, 1999, IFC agreed under specified
conditions to an initial $1.5 million disbursement under the loan. Ninotsminda
Oil Company has pledged substantially all of its assets to IFC to secure the
loan. The loan will bear interest at LIBOR plus 3%. In addition, Ninotsminda Oil
Company has paid to IFC a facility fee of $60,000 as well as a commitment fee
equal to 1/2 of 1% per annum on the disbursed portion of the $6 million that has
not been disbursed. No assurance can be given that the conditions to
disbursement will be satisfied, or, if not satisfied, waived, or that the IFC
will fund all or any part of the $6 million loan.
If the various conditions of the loan are either satisfied or waived and
IFC makes the initial $1.5 million disbursement under the loan agreement with
Ninotsminda Oil Company, CanArgo intends to use the first draw of $1.5 million
together with internally generated cash flow to fund its current development
plan for the Ninotsminda field.
While a considerable amount of infrastructure for the Ninotsminda field
has been put in place, CanArgo cannot provide assurance that:
- - funding of the Ninotsminda field current development plan will be timely,
- - that the development plan will be successfully completed or will increase
production, or
- - that the Ninotsminda field operating revenues after completion of the
development plan will exceed operating costs.
While it is highly speculative and will depend significantly upon the
results of the current development program, CanArgo currently estimates that a
full Ninotsminda field development plan would entail an additional $16 million
and the drilling of nine additional wells. Should Ninotsminda Oil Company
attempt to implement such a plan during the two or three years immediately
following completion of the current development plan, it would require
substantial additional funding. It is unlikely CanArgo could provide such
funding unless CanArgo itself obtained substantial additional funding.
To avoid cutbacks to CanArgo's capital expenditure and working capital
plans, CanArgo is seeking additional capital. Potential sources of funds
include additional equity, project financing, debt financing and the
participation of other oil and gas entities in CanArgo's projects. Based on
continuing discussions including those with major stockholders, investment
bankers and other companies, CanArgo believes that such required funds will
be available. However, there is no assurance that such funds will be available,
and if available, will be offered on attractive or acceptable terms.
Development of the oil and gas properties and ventures in which CanArgo has
interests involves multi-year efforts and substantial cash expenditures. Full
development of CanArgo's oil and gas properties and ventures will require the
availability of substantial additional financing from external sources. CanArgo
also intends where opportunities exist to transfer portions of its interests in
oil and gas properties and ventures to entities in exchange for such financing.
CanArgo generally has the principal responsibility for arranging financing for
the oil and gas properties and ventures in which it has an interest. There can
be no assurance, however, that CanArgo or the entities that are developing the
oil and gas properties and ventures will be able to arrange the financing
necessary to develop the projects being undertaken or to support the corporate
and other activities of CanArgo. There can also be no assurance that such
financing as is available will be on terms that are attractive or acceptable to
or are deemed to be in the best interest of CanArgo, such entities and their
respective stockholders or participants
Ultimate realization of the carrying value of CanArgo's oil and gas
properties and ventures will require production of oil and gas in sufficient
quantities and marketing such oil and gas at sufficient prices to provide
positive cash flow to CanArgo. Establishment of successful oil and gas
operations is dependent upon, among other factors, the following:
- - mobilization of equipment and personnel to implement effectively drilling,
completion and production activities;
- - achieving significant production at costs that provide acceptable margins;
- - reasonable levels of taxation, or economic arrangements in lieu of
taxation in host countries; and
- - the ability to market the oil and gas produced at or near world prices.
CanArgo has plans to mobilize resources and achieve levels of production
and profits sufficient to recover the carrying value of its oil and gas
properties and ventures. However, if one or more of the above factors, or other
factors, are different than anticipated, these plans may not be realized, and
CanArgo may not recover the carrying value of its oil and gas properties and
ventures.
CanArgo will be entitled to distributions from the various properties and
ventures in which it participates in accordance with the arrangements governing
the respective properties and ventures. Until Ninotsminda Oil Company repays
the IFC loan, CanArgo will have the limited ability to transfer funds from
Ninotsminda Oil Company to CanArgo.
CHANGES IN FINANCIAL POSITION
As of March 31, 2000, CanArgo had working capital of $2,786,000, compared
to working capital of $2,729,000 as of December 31, 1999. The $57,000 increase
in working capital from December 31, 1999 to March 31, 2000 principally reflects
positive contribution to working capital from operations in the period, less
capital expenditures.
Cash and cash equivalents decreased $596,000 during the first three months
of 2000 from $3,535,000 at December 31, 1999 to $2,939,000 at March 31, 2000,
primarily as a result of operating and capital expenditures. Cash and cash
equivalents at March 31, 2000 included $351,000 held by Ninotsminda Oil Company,
to which CanArgo has limited access.
Accounts receivable increased from $464,000 at December 31, 1999 to
$571,000 at March 31, 2000. The increase is primarily as a result of accounts
receivable relating to equipment rentals and gas sales in the period.
Advances to operator increased from nil at December 31, 1999 to $245,000
at March 31, 2000, as a result of advances to the operator of the Ninotsminda
field for future expenditures on behalf and at the direction of CanArgo.
Inventory decreased from $189,000 at December 31, 1999 to $59,000 at March
31, 2000, as result of the sale of oil from storage to the Georgian domestic and
regional market during the period. Depending on the demand and price for oil in
the Georgian domestic and regional market CanArgo may decide to place, as a
strategic initiative, additional production in storage. At March 31, 2000,
approximately 20,000 barrels of oil were held in storage.
Property and equipment, net, increased from $7,101,000 at December 31,
1999, to $7,221,000 at March 31, 2000, primarily as a result of the acquisition
of gas production equipment, pipeline and other infrastructure.
Oil and gas properties, net, increased from $30,707,000 at December 31,
1999, to $30,798,000 at March 31, 2000 primarily as a result of workover and
capitalized general and administrative costs of $1,177,000 partially offset by
depletion charges of $1,044,000.
Investments in and advances to oil and gas and other ventures, net
decreased slightly from $1,709,000 at December 31, 1999, to $1,701,000. The
decrease reflects CanArgo's equity share of loss of Uentech International
Corporation partially offset by an investment in East Georgian Pipeline Company
of $5,000. East Georgian Pipeline Company leases from Georgian Oil the pipeline
used to transport natural gas from Sartichala to the Gardabani power plant.
At March 31, 2000, CanArgo held 45% of the voting common shares of Uentech
International Corporation and 78% of the total common shares outstanding.
Uentech International Corporation specializes in the exploitation of patented
downhole-heating technology. The core technology of the Reservoir Heating
System (RHS) heats the oil in the producing formation, lowering the viscosity
and improving the oil's preferential ability to flow. The technology has been
applied in the field with evidence showing flow rate increases typically in the
2 - 3 time's primary range. Management believes this system is a viable economic
alternative to other tertiary recovery methods with competing technologies
significantly more capital and infrastructure intensive. Uentech International
Corporation has developed relationships with several strategic partnerships that
will assist in the further exploitation of the technology. When fully developed,
this technology is anticipated to provide CanArgo with a competitive advantage
in developing heavy and medium weight oil fields.
CanArgo has contingent obligations and may incur additional obligations,
absolute or contingent, with respect to the acquiring and developing oil and
gas properties and ventures. At March 31, 2000, CanArgo had a contingent
obligation to issue 187,500 shares of common stock to a third party upon
satisfaction of conditions relating to the achievement of specified Stynawske
field project performance standards. As CanArgo develops current projects
and undertakes other projects,it could incur significant additional obligations.
Minority interest in subsidiaries at March 31, 2000, of $4,408,000 relates
to the 21.2% (prior to November 30, 1999 and 1998 - 31.5% and 44.1%
respectively) interest of the non-controlling shareholder in Ninotsminda Oil
Company. In January 2000, CanArgo and the other shareholder reached an
agreement for the possible purchase by CanArgo, of the other shareholders
interest in Ninotsminda Oil Company. Total consideration would be $4,500,000
payable in common shares of CanArgo. Closing is subject to regulatory and board
approval by both parties.
YEAR 2000 COMPLIANCE
The Year 2000 problem is the result of computer programs being written
using two digits to define the applicable year. If not corrected, any programs
or equipment that have time sensitive components could fail or produce erroneous
results. In 1999 CanArgo completed a review of its existing information
technology and non-information technology systems and upgraded its accounting
information systems to software that the developer represented to be Year 2000
compliant. Since January 1, 2000, CanArgo has had no report of issues with
respect to the Year 2000 problem although there can be no assurance that such
issues will not arise in the future.
CanArgo identified several significant suppliers of goods and services,
primarily in the banking, transportation, refining, utility and communication
sectors, whose inability or failure to become Year 2000 compliant in a timely
manner could have a material adverse effect on CanArgo's business, financial
condition, results of operations or cash flows. Since January 1, 2000, there has
been no report of issues with respect to the Year 2000 problem on CanArgo's
ability to produce, sell and receive payment for its crude oil on a timely
basis.
NEW ACCOUNTING STANDARDS
In 1998, FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities which will be adopted in the 2001 fiscal year. CanArgo
is currently evaluating the impact of SFAS No. 133 on its financial statements.
RESULTS OF OPERATIONS
Three Month Period Ended March 31, 2000 Compared to Three Month Period Ended
March 31, 1999
In 1999, CanArgo completed its restructuring of the combined assets and
administration of Fountain Oil Incorporated and CanArgo Oil & Gas Inc. following
the business combination of the two companies in July 1998. Since the business
combination, CanArgo has focused primarily on the development of the Ninotsminda
field and the reduction of corporate overheads.
CanArgo recorded operating revenue of $2,081,000 during the three month
period ended March 31, 2000 compared with $114,000 for the three month period
ended March 31, 1999. The increase is primarily due to increases in gross crude
oil and natural gas production from the Ninotsminda field, higher crude oil
prices and the placement by Ninotsminda Oil Company in the three month period
ended March 31, 1999 of a significant portion of its share of production into
storage.
Ninotsminda Oil Company generated $1,885,000 of revenue in the three month
period ended March 31, 2000. Its net share of the 126,478 barrels (1,405
barrels per day) of gross oil production from the Ninotsminda field in the
period amounted to 66,033 barrels. An additional 10,000 barrels of oil were
removed from storage and sold in the period. For the three month period ended
March 31, 1999, Ninotsminda Oil Company's net share of the 107,800 barrels
(1,185 barrels per day) of gross production was 39,000 barrels of which 31,431
were placed into storage.
All of Ninotsminda Oil Company's share of production was sold into the
Georgian local and regional market. Because lower transportation costs are
involved, CanArgo believes that sales of Ninotsminda oil to customers in the
Georgian local and regional market generally yield relatively higher net sales
prices to Ninotsminda Oil Company than sales to other customers. Net sale
prices for Ninotsminda oil sold during the first quarter of 2000 averaged $18.68
per barrel as compared with an average of $8.98 per barrel in the first three
months of 1999. Its net share of the 550,000 mcf of gas delivered was 359,000
mcf at an average net sale price of $1.25 per mcf of gas. All gas sales were
made to one client, AES Telasi.
Oil and gas revenues for the three months ended June 30, 2000 are expected
to decrease following the unanticipated shut down and maintenance overhaul of
two generating units at the Gardabani power plant to correct issues discovered
after a recent change in operatorship of the units. Another local purchaser will
take gas under similar terms as the existing agreement with AES Telasi and thus
any interruption is expected to be temporary.
CanArgo recorded in the three months ended March 31, 2000, other revenue of
$196,000 with respect to equipment rentals. There were no equipment rentals for
the corresponding period in 1999.
The operating income for the three month period ended March 31, 2000
amounted to $110,000 compared with an operating loss of $970,000 for the
corresponding period in 1999. The decrease in the operating loss is
attributable primarily to increased oil production and sales, the addition of
gas sales, and a significant reduction in general and administrative costs.
Lease operating expenses increased to $373,000 for the three month period
ended March 31, 2000 as compared to $128,000 for the three month period ended
March 31, 1999. The increase is primarily a result of the deferral in 1999 of
Ninotsminda field operating expenses related to oil production placed into
storage in the period.
Direct project costs decreased to $136,000 for the three month period ended
March 31, 2000, from $224,000 for the three month period ended March 31, 1999,
reflecting efforts initiated in early 1999 to reduce Ninotsminda project
expenses.
General and administrative costs decreased to $374,000 for the three month
period ended March 31, 2000, from $685,000 for the three month period ended
March 31, 1999. The decrease is primarily attributable to higher legal costs in
1999 as part of the Fountain restructuring and reduction in involvement in
development of the Stynawske field.
The increase in depreciation, depletion and amortization expense from
$25,000 for the three month period ended March 31, 1999 to $1,075,000 for the
three month period ended March 31, 2000 is attributable principally to depletion
related to Ninotsminda field oil production and depreciation of drilling
equipment.
The equity loss from investments in unconsolidated subsidiaries decreased
to $13,000 for the three month period ended March 31, 2000, from $22,000 for the
three month period ended March 31, 1999 as a result of the termination of
CanArgo's involvement in the development activities of some Eastern European oil
and gas ventures conducted through unconsolidated subsidiaries.
CanArgo recorded net other income of $28,000 for the three months ended
March 31, 2000, as compared to other loss of $89,000 during the three months
ended March 31, 1999. The principal reason for the increase is interest income
during the three months ended March 31, 2000 on cash balances and the payment of
a facility fee in the three months ended March 31, 1999 related to Ninotsminda
Oil Company's Loan Agreement with the International Finance Corporation.
The net income of $100,000 or $nil per share for the three month period
ended March 31, 2000 compares to a net loss of $971,000, or $0.05 per share for
the three month period ended March 31, 1999. The weighted average number of
common shares outstanding was substantially higher during the three month period
ended March 31, 2000 than during the three month period ended March 31, 1999,
due in large part to a registered public offering in August 1999 of 11,850,362
shares and a private placement of 3,300,000 shares in late 1999.
FORWARD LOOKING STATEMENTS
The forward looking statements contained in this Item 2 and elsewhere in
this Form 10-Q are subject to various risks, uncertainties and other factors
that could cause actual results to differ materially from the results
anticipated in such forward looking statements. Included among the important
risks, uncertainties and other factors are those hereinafter discussed.
Few of such forward looking statements deal with matters that are within
the unilateral control of CanArgo. Joint venture, acquisition, financing and
other agreements and arrangements must be negotiated with independent third
parties and, in some cases, must be approved by governmental agencies. Such
third parties generally have interests that do not coincide with those of
CanArgo and may conflict with CanArgo's interests. Unless CanArgo and such
third parties are able to compromise their respective objectives in a mutually
acceptable manner, agreements and arrangements will not be consummated.
Operating entities in various foreign jurisdictions must be registered by
governmental agencies, and production licenses for development of oil and gas
fields in various foreign jurisdictions must be granted by governmental
agencies. These governmental agencies generally have broad discretion in
determining whether to take or approve various actions and matters. In
addition, the policies and practices of governmental agencies may be affected or
altered by political, economic and other events occurring either within their
own countries or in a broader international context.
CanArgo does not have a majority of the equity in the entity that is the
licensed developer of some projects that CanArgo may pursue in Eastern Europe
such as the Stynawske field project, even though CanArgo may be the designated
operator of the oil or gas field. In such circumstances, the concurrence of
co-venturers may be required for various actions. Other parties influencing the
timing of events may have priorities that differ from those of CanArgo, even if
they generally share CanArgo's objectives. As a result of all of the foregoing,
among other matters, the forward looking statements regarding the occurrence and
timing of future events may well anticipate results that will not be realized.
The availability of equity or debt financing to CanArgo or to the entities
that are developing projects in which CanArgo has interests is affected by many
factors including:
- - world economic conditions;
- - international relations;
- - the stability and policies of various governments;
- - fluctuations in the price of oil and gas and the outlook for the oil and
gas industry;
- - competition for funds; and
- - an evaluation of CanArgo and specific projects in which CanArgo has an
interest.
Rising interest rates might affect the feasibility of debt financing that is
offered. Potential investors and lenders will be influenced by their
evaluations of CanArgo and its projects and comparisons with alternative
investment opportunities. CanArgo's ability to finance all of its present oil
and gas projects and other ventures according to present plans is dependent upon
obtaining additional funding. An inability to obtain financing could require
CanArgo to scale back its project development, capital expenditure, production
and other plans.
The development of oil and gas properties is subject to substantial risks.
Expectations regarding production, even if estimated by independent petroleum
engineers, may prove to be unrealized. There are many uncertainties inherent in
estimating production quantities and in projecting future production rates and
the timing and amount of future development expenditures. Estimates of
properties in full production are more reliable than production estimates for
new discoveries and other properties that are not fully productive.
Accordingly, estimates related to CanArgo's properties are subject to change as
additional information becomes available.
Most of CanArgo's interests in oil and gas properties and ventures are
Located in Eastern European countries. Operations in those countries are subject
to certain additional risks including the following:
- - enforceability of contracts;
- - currency convertibility and transferability;
- - unexpected changes in tax rates;
- - sudden or unexpected changes in demand for crude oil and or natural gas;
- - availability of trained personnel; and
- - availability of equipment and services and other factors that could
significantly change the economics of production.
Production estimates are subject to revision as prices and costs change.
Production, even if present, may not be recoverable in the amount and at the
rate anticipated and may not be recoverable in commercial quantities or on an
economically feasible basis. World and local prices for oil and gas can
fluctuate significantly, and a reduction in the revenue realizable from the sale
of production can affect the economic feasibility of an oil and gas project.
World and local political, economic and other conditions could affect CanArgo's
ability to proceed with or to effectively operate projects in various foreign
countries.
Demands by or expectations of governments, co-venturers, customers and
others may affect CanArgo's strategy regarding the various projects. Failure to
meet such demands or expectations could adversely affect CanArgo's participation
in such projects or its ability to obtain or maintain necessary licenses and
other approvals.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CanArgo had no interest in investments subject to market risk during the
period covered by this report.
<PAGE>
PART II - OTHER INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In the three month period ended March 31, 2000, CanArgo issued 140,000
shares of common stock in consideration for financial consulting services. The
shares were valued at the market price on the date of issuance in the amount of
$112,700.
The offer and sale of the shares was exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), under
Section 4(2) of the Act as a transaction by an issuer not involving a public
offering. The purchaser of the shares represented to CanArgo, among other
things, that it was acquiring the shares for its own account; that it was
acquiring the shares for investment and not with a view toward the distribution
thereof; and that it would not sell the shares without registration under the
Act or an applicable exemption from such registration requirement. The
certificate representing the shares has a restrictive legend endorsed thereon
reflecting the restrictions on transferability arising out of the foregoing
matters, and CanArgo has issued "stop transfer" instructions to its transfer
agent with respect to such shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Management Contracts, Compensation Plans and Arrangements
are identified by an asterisk (*)
<C> <S>
1(1) Escrow Agreement with Signature Stock Transfer, Inc. (Incorporated herein by reference
from Form S-1 Registration Statement, File No. 333-72295 filed on June 9, 1999).
1(2) Selling Agent Agreement with each of Credifinance Securities Limited, David Williamson
Associates Limited, and Orkla Finans (Fondsmegling) ASA (Incorporated herein by
reference from Form S-1 Registration Statement, File No. 333-72295 filed on June 9,
1999).
1(3) Escrow Agreement with Orkla Finans (Fondsmegling) ASA (Incorporated herein by
reference from Form S-1 Registration Statement, File No. 333-72295 filed on June 9,
1999).
1(4) Selling Agent Agreement with National Securities Corporation (Incorporated herein by
reference from Post-Effective Amendment No. 1 to Form S-1 Registration Statement, File
No. 333-72295 filed on July 29, 1999).
1(5) Escrow Agreement with Continental Stock Transfer & Trust Company (Incorporated herein
by reference from Post-Effective Amendment No. 1 to Form S-1 Registration Statement,
File No. 333-72295 filed on July 29, 1999).
2(1) 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(2) 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).
2(3) Supplemental Deed Relating to the Sale and Purchase of All the Issued Share Capital of
Gastron International Limited dated May 29, 1996 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 June 30, 1997 Form 10-Q).
2(4) Memorandum of Agreement between Fielden Management Services Pty, Ltd., A.C.N. 005
506 123 and Fountain Oil Incorporated dated May 16, 1995 (Incorporated herein by
reference from December 31, 1997 Form 10-K/A).
2(5) 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(6) 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 (Incorporated herein by
reference from July 15, 1998 Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by reference from Post-Effective Amendment No.
1 to Form S-1 Registration Statement, File No. 333-72295 filed on July 29, 1999).
*10(1) 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(2) Employment Agreement between Fountain Oil Incorporated and Susan E. Palmer
(Incorporated herein by reference from August 31, 1995 Form 10-KSB).
*10(3) Amended and Restated 1995 Long-Term Incentive Plan (Incorporated herein by reference
from Post-Effective Amendment No. 1 to Form S-1 Registration Statement, File No. 333-
72295 filed on July 29, 1999).
*10(4) Fee Agreement dated November 15, 1995 between Fountain Oil Incorporated and Robert
A. Halpin (Incorporated herein by reference from August 31, 1996 Form 10-KSB).
*10(5) Amended Fee Agreement dated December 10, 1996 between Fountain Oil Incorporated and
Robert A. Halpin (Incorporated herein by reference from December 31, 1996 Form 10-K).
*10(6) Amended and Restated CanArgo Energy Inc. Stock Option Plan (Incorporated herein by
reference from September 30, 1998 Form 10-Q).
*10(7) Workorder between CanArgo Energy Inc. and Nils N. Trulsvik as Consultant (Incorporated
herein by reference from September 30, 1998 Form 10-Q).
*10(8) Consultancy Agreement between CanArgo Energy Corporation and Fincom AS, Norway
(Incorporated herein by reference from September 30, 1998 Form 10-Q).
*10(9) Employment Contract between CanArgo Energy Inc. and Anthony J. Potter (Incorporated
herein by reference from September 30, 1998 Form 10-Q).
*10(10) Workorder between CanArgo Energy Inc. and Alfred Kjemperud as Consultant
(Incorporated herein by reference from Form S-1 Registration Statement, File No. 333-
72295 filed on February 12, 1999).
10(11) Convertible Loan Agreement between Ninotsminda Oil Company (NOC) and International
Finance Corporation (IFC) dated December 17, 1998 (Incorporated herein by reference
from Form S-1 Registration Statement, File No. 333-72295 filed on February 12, 1999).
10(12) Put Option Agreement between CanArgo Energy Corporation, JKX Oil & Gas PLC. and
IFC dated December 17, 1998 (Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on February 12, 1999).
10(13) Guarantee Agreement between CanArgo Energy Corporation and IFC dated December 17,
1998 (Incorporated herein by reference from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(14) Agreement between Georgian Oil Refinery Company and CanArgo Petroleum Products Ltd.
dated September 26, 1998 (Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on February 12, 1999).
10(15) Terrenex Acquisition Corporation Option regarding CanArgo (Nazvrevi) Limited
(Incorporated herein by reference from Form S-1 Registration Statement, File No. 333-
72295 filed on February 12, 1999).
10(16) Production Sharing Contract between (1) Georgia and (2) Georgian Oil and JKX Navtobi
Ltd. dated February 12, 1996 (Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on June 7, 1999).
10(17) Agreement and Promissory Note dated July 19, 1999, with Terrenex Acquisition
Corporation (Incorporated herein by reference from Post-Effective Amendment No. 1 to
Form S-1 Registration Statement, File No. 333-72295 filed on July 29, 1999).
10(18) Agreement between CanArgo Energy Corporation, Ninotsminda Oil Company and IFC
dated October 19, 1999 (Incorporated herein by reference from September 30, 1999 Form
10-Q).
10(19) Agreement on Financial Advisory Services between CanArgo Energy Corporation, Orkla
Finans (Fondsmegling) A.S and Sundal Collier & Co. ASA dated December 8, 1999
(Incorporated herein by reference from December 28, 1999 Form 8-K).
10(20) Form of Subscription Agreement (Incorporated herein by reference from December 28,
1999 Form 8-K).
10(21) Agreement between CanArgo Energy Corporation and JKX Nederland BV dated January
19, 2000 (Incorporated herein by reference from December 31, 1999 Form 10-K).
*10(22) Employment Agreement between CanArgo Energy Corporation and Paddy Chesterman
dated February 24, 2000 (Incorporated herein by reference from December 31, 1999 Form
10-K).
10(23) Agreement between Ninotsminda Oil Company and AES Gardabani dated March 10, 2000
(Incorporated herein by reference from December 31, 1999 Form 10-K).
21 List of Subsidiaries (Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on February 12, 1999).
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CANARGO ENERGY CORPORATION
Date: May 12, 2000 By: /s/Michael Binnion
------------------
Michael Binnion
President and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED
HEREWITH EXHIBIT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1(1) Escrow Agreement with Signature Stock Transfer, Inc. (Incorporated herein by reference
from Form S-1 Registration Statement, File No. 333-72295 filed on June 9, 1999).
1(2) Selling Agent Agreement with each of Credifinance Securities Limited, David Williamson
Associates Limited, and Orkla Finans (Fondsmegling) ASA (Incorporated herein by
reference from Form S-1 Registration Statement, File No. 333-72295 filed on June 9,
1999).
1(3) Escrow Agreement with Orkla Finans (Fondsmegling) ASA (Incorporated herein by
reference from Form S-1 Registration Statement, File No. 333-72295 filed on June 9,
1999).
1(4) Selling Agent Agreement with National Securities Corporation (Incorporated herein by
reference from Post-Effective Amendment No. 1 to Form S-1 Registration Statement, File
No. 333-72295 filed on July 29, 1999).
1(5) Escrow Agreement with Continental Stock Transfer & Trust Company (Incorporated herein
by reference from Post-Effective Amendment No. 1 to Form S-1 Registration Statement,
File No. 333-72295 filed on July 29, 1999).
2(1) 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(2) 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).
2(3) Supplemental Deed Relating to the Sale and Purchase of All the Issued Share Capital of
Gastron International Limited dated May 29, 1996 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 June 30, 1997 Form 10-Q).
2(4) Memorandum of Agreement between Fielden Management Services Pty, Ltd., A.C.N. 005
506 123 and Fountain Oil Incorporated dated May 16, 1995 (Incorporated herein by
reference from December 31, 1997 Form 10-K/A).
2(5) 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(6) 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 (Incorporated herein by
reference from July 15, 1998 Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by reference from Post-Effective Amendment No.
1 to Form S-1 Registration Statement, File No. 333-72295 filed on July 29, 1999).
*10(1) 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(2) Employment Agreement between Fountain Oil Incorporated and Susan E. Palmer
(Incorporated herein by reference from August 31, 1995 Form 10-KSB).
*10(3) Amended and Restated 1995 Long-Term Incentive Plan (Incorporated herein by reference
from Post-Effective Amendment No. 1 to Form S-1 Registration Statement, File No. 333-
72295 filed on July 29, 1999).
*10(4) Fee Agreement dated November 15, 1995 between Fountain Oil Incorporated and Robert
A. Halpin (Incorporated herein by reference from August 31, 1996 Form 10-KSB).
*10(5) Amended Fee Agreement dated December 10, 1996 between Fountain Oil Incorporated and
Robert A. Halpin (Incorporated herein by reference from December 31, 1996 Form 10-K).
*10(6) Amended and Restated CanArgo Energy Inc. Stock Option Plan (Incorporated herein by
reference from September 30, 1998 Form 10-Q).
*10(7) Workorder between CanArgo Energy Inc. and Nils N. Trulsvik as Consultant (Incorporated
herein by reference from September 30, 1998 Form 10-Q).
*10(8) Consultancy Agreement between CanArgo Energy Corporation and Fincom AS, Norway
(Incorporated herein by reference from September 30, 1998 Form 10-Q).
<PAGE>
*10(9) Employment Contract between CanArgo Energy Inc. and Anthony J. Potter (Incorporated
herein by reference from September 30, 1998 Form 10-Q).
*10(10) Workorder between CanArgo Energy Inc. and Alfred Kjemperud as Consultant
(Incorporated herein by reference from Form S-1 Registration Statement, File No. 333-
72295 filed on February 12, 1999).
10(11) Convertible Loan Agreement between Ninotsminda Oil Company (NOC) and International
Finance Corporation (IFC) dated December 17, 1998 (Incorporated herein by reference
from Form S-1 Registration Statement, File No. 333-72295 filed on February 12, 1999).
10(12) Put Option Agreement between CanArgo Energy Corporation, JKX Oil & Gas PLC. and
IFC dated December 17, 1998 (Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on February 12, 1999).
10(13) Guarantee Agreement between CanArgo Energy Corporation and IFC dated December 17,
1998 (Incorporated herein by reference from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(14) Agreement between Georgian Oil Refinery Company and CanArgo Petroleum Products Ltd.
dated September 26, 1998 (Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on February 12, 1999).
10(15) Terrenex Acquisition Corporation Option regarding CanArgo (Nazvrevi) Limited
(Incorporated herein by reference from Form S-1 Registration Statement, File No. 333-
72295 filed on February 12, 1999).
10(16) Production Sharing Contract between (1) Georgia and (2) Georgian Oil and JKX Navtobi
Ltd. dated February 12, 1996 (Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on June 7, 1999).
10(17) Agreement and Promissory Note dated July 19, 1999, with Terrenex Acquisition
Corporation (Incorporated herein by reference from Post-Effective Amendment No. 1 to
Form S-1 Registration Statement, File No. 333-72295 filed on July 29, 1999).
10(18) Agreement between CanArgo Energy Corporation, Ninotsminda Oil Company and IFC
dated October 19, 1999 (Incorporated herein by reference from September 30, 1999 Form
10-Q).
10(19) Agreement on Financial Advisory Services between CanArgo Energy Corporation, Orkla
Finans (Fondsmegling) A.S and Sundal Collier & Co. ASA dated December 8, 1999
(Incorporated herein by reference from December 28, 1999 Form 8-K).
10(20) Form of Subscription Agreement (Incorporated herein by reference from December 28,
1999 Form 8-K).
10(21) Agreement between CanArgo Energy Corporation and JKX Nederland BV dated January
19, 2000 (Incorporated herein by reference from December 31, 1999 Form 10-K).
*10(22) Employment Agreement between CanArgo Energy Corporation and Paddy Chesterman
dated February 24, 2000 (Incorporated herein by reference from December 31, 1999 Form
10-K).
10(23) Agreement between Ninotsminda Oil Company and AES Gardabani dated March 10, 2000
(Incorporated herein by reference from December 31, 1999 Form 10-K).
21 List of Subsidiaries (Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on February 12, 1999).
X 27 Financial Data Schedule.
</TABLE>
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2939318
<SECURITIES> 0
<RECEIVABLES> 571162
<ALLOWANCES> 0
<INVENTORY> 58677
<CURRENT-ASSETS> 3873108
<PP&E> 10435778
<DEPRECIATION> 3257595
<TOTAL-ASSETS> 43592142
<CURRENT-LIABILITIES> 1087581
<BONDS> 0
0
0
<COMMON> 3749292
<OTHER-SE> 34326494
<TOTAL-LIABILITY-AND-EQUITY> 43592142
<SALES> 2080976
<TOTAL-REVENUES> 2080976
<CGS> 0
<TOTAL-COSTS> 508905
<OTHER-EXPENSES> 1088490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 100462
<INCOME-TAX> 0
<INCOME-CONTINUING> 100462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100462
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
