As filed with the Securities and Exchange Commission on September 11, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CANARGO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-0881481
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1580, 727 - 7 AVENUE SW
CALGARY, ALBERTA, CANADA T2P 0Z5
(403) 777-1185
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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DAVID ROBSON
CANARGO ENERGY CORPORATION
1580, 727 - 7 AVENUE SW
CALGARY, ALBERTA, CANADA T2P 0Z5
(403) 777-1185
(Name, address, including zip code, and telephone number, including area code
of agent for service)
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Please forward a copy of all correspondence to:
PETER A. BASILEVSKY
SATTERLEE STEPHENS BURKE & BURKE LLP
11TH FLOOR, 230 PARK AVENUE
NEW YORK, NY 10169
PHONE: (212) 818-9200
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROPOSED
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PRICE PER SHARE (2) PRICE (2) FEE (2)
Common stock,
0.10 par value 14,220,000 $ 1.455 $ 20,690,100.00 $ 5,462.19
</TABLE>
(1) Includes an indeterminate number of shares of common stock as may from
time to time be issued at indeterminate prices upon exercise of
outstanding warrants and options.
(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(c) on the basis of the average of
the bid and ask prices for the Common Stock on September 8, 2000 as
reported on the Over the Counter (OTC) Bulletin Board
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
********************************************************************************
SUBJECT TO COMPLETION
Preliminary Prospectus dated September 8, 2000.
PROSPECTUS
-------------------
CANARGO ENERGY CORPORATION
(CANARGO LOGO)
14,220,000 SHARES
COMMON STOCK
This prospectus relates to the offer and sale of 14,220,000 shares of common
stock of CanArgo Energy Corporation by certain of our securityholders, including
1,720,000 shares issuable on the exercise of special stock options and 500,000
shares issuable on the exercise of warrants. Neither such options nor such
warrants have been nor will be registered under the Securities Act of 1933, as
amended, and this prospectus does not constitute any offer to sell or a
solicitation of an offer to purchase any such options or warrants. The selling
securityholders will receive all of the proceeds from the sale of the shares
covered by this prospectus. We will not receive any proceeds from the sale of
any shares covered by this prospectus. We will receive $3,106,640 if all of
the special stock options and warrants are fully exercised. All expenses of
registration of the shares which may be offered hereby under the Securities Act
will be paid by us (other than underwriting discounts and selling commissions,
and fees and expenses of advisors to any of the selling securityholders).
Our common stock is traded in the over-the-counter market (symbol: GUSH). On
September 8, 2000, the closing bid price of the common stock on the OTC Bulletin
Board was $ 1.406. The common stock is also traded on the Oslo Stock Exchange
(symbol: CNR). The last reported sale price of our common stock on September 8,
2000, was $1.46 per share in the over-the-counter market and 13.80 NOK on the
Oslo Stock Exchange. On September 8, 2000 one U.S. dollar equaled 9.254 NOK as
reported by the Federal Reserve Bank of New York.
The selling securityholders and any broker-dealers, agents or underwriters that
participate with them in the distribution of the common stock may be deemed
underwriters, as that term is defined in the Securities Act and any commissions
received by them and any profit on the resale of the common stock purchased by
them may be deemed underwriting commissions or discounts under the Securities
Act. The common stock may be offered by the selling securityholders in one
or more transactions through the facilities of any stock exchange on which the
shares are then listed for trading, in the over-the-counter market or in
negotiated transactions or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The common stock may be sold either (a)
to a broker or dealer as principal for resale by such broker or dealer for its
account pursuant to this prospectus (for example, in transactions with a market
maker) or (b) in brokerage transactions, including transactions in which the
broker solicits purchasers or (c) directly to third persons. See "Plan of
Distribution" beginning on page 17.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENT IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
__________________________________
The date of this Prospectus is September **, 2000
TABLE OF CONTENTS
PAGE
Where You Can Find More Information 3
Documents Incorporated by Reference 3
Forward Looking Statements 4
Risk Factors 5
The Company 11
Use of Proceeds 11
The Selling Securityholders 12
Limitation of Liability and Indemnification 16
Plan of Distribution 17
Legal Matters 19
Experts 19
___________________
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any document we file at the SEC's public reference rooms at Judiciary
Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the Commission's Regional Offices located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
This prospectus is part of a registration statement that we filed with the SEC.
The registration statement contains more information than this prospectus
regarding CanArgo Energy Corporation and our common stock, including certain
exhibits. You can get a copy of the registration statement from the SEC at the
addresses listed above or from its Internet site.
Our common stock is listed on the Over the Counter (OTC) Bulletin Board. Our
common stock is also listed on the Oslo Stock Exchange. Information about us
is also available at those locations.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents that are considered part of this prospectus. Later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made by us with the SEC under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 until this offering of securities has
been completed:
- Annual Report on Form 10-K for the year ended December 31, 1999
- Quarterly Report on Form 10-Q for the three month period ended March 31,
2000
- Quarterly Report on From 10-Q for the six month period ended June 30,
2000
- Current Report on Form 8-K filed June 16, 2000
- Current Report on Form 8-K filed July 20, 2000
- Current Report on Form 8-K filed July 28, 2000
- Current Report on Form 8-K filed August 24, 2000
- Current Report on Form 8-K filed September 7, 2000
- The description of CanArgo's common stock contained in a Registration
Statement (Reg. File No. 333-72295) filed by CanArgo with the SEC on Form
S-1/A dated June 9, 1999
- Definitive Proxy Materials dated May 9, 2000
We will provide without charge to each person to whom a copy of this prospectus
is delivered, upon request, a copy of the foregoing documents (without
exhibits). Written or telephone requests for such copies should be directed to
Jason D'Silva, CanArgo Energy Corporation, 1580 Guinness House, 727 Seventh
Avenue SW, Calgary, Alberta, Canada, telephone (403) 777-1185.
You should rely only on the information contained in this prospectus and any
supplement. We have not authorized any other person to provide you with
different or additional information. If anyone provides you with different or
additional information, you should not rely on it. This prospectus is not an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in or
incorporated by reference in this prospectus and any supplement is accurate as
of its date only. Our business, financial condition, results of operations and
prospects may have changed since that date.
FORWARD-LOOKING STATEMENTS
The United States Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements in this prospectus. When used in
this prospectus, 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. The forward-looking statements are based on our
current expectations and speak only as of the date made. These forward-looking
statements involve risks, uncertainties and other factors that in some cases
have affected our historical results and could cause actual results in the
future to differ significantly from the results anticipated in forward-looking
statements made in this prospectus. Important factors that could cause such a
difference are discussed in this prospectus, particularly in this section and
the section "Risk Factors". You are cautioned not to place undue reliance on the
forward-looking statements.
Few of the forward-looking statements in this prospectus deal with matters that
are within our unilateral control. 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. These
third parties generally have interests that do not coincide with ours and may
conflict with our interests. Unless the third parties and we are able to
compromise their various 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. Finally, due to the developing
nature of the legal regimes in many Eastern European countries where we operate,
our contractual rights and remedies may be subject to certain legal
uncertainties.
We do not have a majority of the equity in the entity that is the licensed
developer of some projects, such as the Stynawske field project, that we may
pursue in Eastern Europe, even though we may be the designated operator of the
oil or gas field. In these 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 us, even if they generally share our
objectives. As a result of all of the foregoing, among other matters, any
forward-looking statements regarding the occurrence and timing of future events
may well anticipate results that will not be realized. Demands by or
expectations of governments, co-venturers, customers and others may affect our
strategy regarding the various projects. Failure to meet such demands or
expectations could adversely affect our participation in such projects or our
ability to obtain or maintain necessary licenses and other approvals.
Our ability to finance all of our 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 us to scale back or
abandon our project development, capital expenditure, production and other
plans. The availability of equity or debt financing to us or to the entities
that are developing projects in which we have 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 us and our projects and comparisons with alternative investment
opportunities.
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider the
risks described below, as well as all other information in this prospectus,
before investing in our common stock. This prospectus contains forward-looking
statements that involve risks and uncertainties. Future events and our actual
results could differ materially from those anticipated in these forward-looking
statements. Some of the important factors that might cause such a difference are
discussed in the various risk factors that follow and in the "Forward-Looking
Statements" section of this prospectus.
OUR FUTURE IS CURRENTLY DEPENDENT ON THE SUCCESS OF THE NINOTSMINDA OIL FIELD
We are directing substantially all of our efforts and most of our available
funds to the development of the Ninotsminda oil field in the Republic of Georgia
and some ancillary activities closely related to the Ninotsminda field project.
We cannot assure investors that our development plans for the Ninotsminda field
will be successful. For example, the Ninotsminda field may not produce
sufficient quantities of oil and gas to justify the investment we have made and
are making in that field, and we may not be able to produce the oil and gas at a
sufficiently low cost or market the oil and gas produced at a sufficiently high
price to generate a positive cash flow and a profit.
OUR OPERATION OF THE NINOTSMINDA OIL FIELD IS GOVERNED BY A PRODUCTION SHARING
CONTRACT WHICH MAY BE SUBJECT TO CERTAIN LEGAL UNCERTAINTIES
Our principal business and assets are derived from production sharing contracts
in the Republic of Georgia. The legislative and procedural regimes governing
production sharing agreements and mineral use licenses in Georgia have undergone
a series of changes in recent years resulting in certain legal uncertainties.
Our production sharing agreements and mineral use licenses, entered into prior
to the introduction in 1999 of a new Petroleum Law governing such agreements
have not, as yet, been amended to reflect or ensure compliance with current
legislation. As a result, despite references in the current legislation
grandfathering the terms and conditions of our production sharing contracts,
conflicts between the interpretation of our production sharing contracts and
mineral use licenses and current legislation could arise. Such conflicts, if
they arose, could cause an adverse effect on our rights under the production
sharing contracts.
To confirm the validity of our Ninotsminda production sharing contract and the
mineral usage license prior to the introduction in 1999 of the petroleum law, in
connection with its preparation of the Convertible Loan Agreement with CanArgo,
IFC received in November 1998 confirmation from the State of Georgia, that among
other things:
i. the State of Georgia recognizes and confirms the validity and
enforceability of the production sharing contract and the license
and all undertakings the State has covenanted with Ninotsminda Oil
Company there under;
ii. the license was duly authorized and executed by the State at the time of
its issuance and remained in full force and effect throughout its
term; and
iii. the license constitutes a valid and duly authorized grant by the State,
being and remaining in full force and effect as of the signing
of this confirmation and the benefits of the license fully extend to
Ninotsminda Oil Company by virtue of its interest in the license
holder and the contractual rights under the production sharing contract.
Despite this confirmation and the grandfathering of the terms of our production
sharing contract in the Petroleum Law, subsequent legislative or other
governmental changes could conflict with, challenge our rights or otherwise
change current operations under the production sharing contract.
WE COULD BE REQUIRED TO WRITE OFF THE VALUE OF UNSUCCESSFUL PROPERTIES AND
PROJECTS
In order to realize the carrying value of our oil and gas properties and
ventures, we must produce oil and gas in sufficient quantities and then sell
such oil and gas at sufficient prices to produce a profit. We have a number of
unevaluated oil and gas properties having carrying values totaling $12,531,000
at June 30, 2000, that we have not actively developed. The risks associated with
successfully developing unevaluated oil and gas properties are even greater than
those associated with successfully continuing development of producing oil and
gas properties, because the existence and extent of commercial quantities of oil
and gas in unevaluated properties have not been established. During 1997, we
recorded impairment charges totaling $19.4 million relating to three
unsuccessful ventures and in 1999, recorded impairment charges totalling $5.5
million relating to a fourth venture. We could be required in the future to
write off our investments in additional projects, including the Ninotsminda
field project, if such projects prove to be unsuccessful or, if we determine not
to pursue these projects.
WE MAY NOT BE ABLE TO RAISE THE ADDITIONAL FUNDS WE NEED FOR OUR LONG-TERM OIL
AND GAS DEVELOPMENT PLANS
It will take many years and substantial cash expenditures to develop fully our
oil and gas properties. We generally have the principal responsibility to
provide financing for our oil and gas properties and ventures. We may not be
able to obtain that additional financing. If adequate funds are not available,
we may not be able to fully develop our existing properties and ventures
including exploration activities on our existing undeveloped properties. The
carrying value of the Ninotsminda field may not be realized unless additional
capital expenditures are incurred to develop the field.
OUR OIL AND GAS ACTIVITIES INVOLVE RISKS, MANY OF WHICH ARE BEYOND OUR CONTROL
Our exploration, development and production activities are subject to a number
of factors and risks, many of which may be beyond our control. First, we must
successfully identify commercial quantities of oil and gas. The development of
an oil and gas deposit can be affected by a number of factors which are beyond
the operator's control, such as:
- Unexpected or unusual geological conditions.
- The recoverability of the oil and gas on an economic basis.
- The availability of infrastructure and personnel to support operations.
- Local and global oil prices.
- Government regulation and legal uncertainties.
Our activities can also be affected by a number of hazards, such as:
- Labor disputes.
- Natural phenomena, such as bad weather and earthquakes.
- Operating hazards, such as fires, explosions, blow-outs, pipe failures and
casing collapses.
- Environmental hazards, such as oil spills, gas leaks, ruptures and discharges
of toxic gases.
Any of these hazards could result in damage, losses or liability for us. We
experience an increased risk of some of these hazards in connection with
operations that involve the rehabilitation of fields where less than optimal
practices and technology were employed in the past, as was often the case in
Eastern Europe. We do not purchase insurance covering all of the risks and
hazards that are involved in oil and gas exploration, development and
production.
THE DEVELOPMENT OF OUR PROPERTIES IS AFFECTED BY CONDITIONS IN EASTERN EUROPE,
INCLUDING THE REPUBLIC OF GEORGIA
Our principal oil and gas properties, including the Ninotsminda field, are
located in Eastern Europe. Development of these fields is subject to a number of
conditions endemic to Eastern European countries, including:
- Political Instability -- The present governmental arrangements in the Eastern
European countries in which we operate were established relatively recently,
when they replaced Communist regimes. If they fail to maintain the support of
their citizens, these governments could themselves be replaced by other
institutions, including a possible reversion to a totalitarian form of
government. Our operations typically involve joint ventures or other
participatory arrangements with the national government or state-owned
companies. As a result, our operations could be adversely affected by
political instability, changes in government institutions, legislation,
personnel or policies, or shifts in political power. There is also the risk
that governments could seek to nationalize, expropriate or otherwise take
over our oil and gas properties.
- Social and Economic Instability -- The political institutions in Eastern
Europe have recently become more fragmented, and the economic institutions of
Eastern European countries have recently converted to a market economy from a
planned economy. Social and economic instability have accompanied these
changes due to many factors which include:
- Low standards of living.
- High unemployment.
- Undeveloped legal and social institutions.
- Conflicts with neighboring countries.
This instability can make continued operations difficult or impossible.
- Inadequate or Deteriorating Infrastructure -- Countries in Eastern Europe
often either have underdeveloped infrastructures or, as a result of shortages
of resources, have permitted infrastructure to deteriorate. The lack of
necessary infrastructure can adversely affect operations. For example,
the lack of a reliable power supply caused Ninotsminda Oil Company to suspend
drilling of one well and the testing of a second well during the 1998-99
winter season.
- Currency Risks -- Payment to us for oil and gas products sold in Eastern
European countries may be in local currencies. Although we currently sell our
oil principally for U.S. dollars, we may not be able to continue to demand
payment in hard currencies. Although most Eastern European currencies are
presently convertible into U.S. dollars, there is no assurance that
convertibility will continue. Even if currencies are convertible, the rate at
which they convert into U.S. dollars is subject to fluctuation. In addition,
our ability to transfer currencies into or out of Eastern European countries
may be restricted or limited in the future. We may also enter into contracts
with suppliers in these countries to purchase goods and services in U.S.
dollars. If we cannot receive payment for our oil in U.S. dollars and the
value of the local currency relative to the U.S. dollar deteriorates, we
could face significant negative changes in working capital. We have not,
as of yet, suffered any currency problems to date.
- Tax Risks -- Countries in Eastern Europe frequently add to or amend
existing taxation policies in reaction to economic conditions including state
budgetary and revenue shortfalls. Since we are dependent on international
operations, specifically those in Georgia, we are subject to changing
taxation policies including the possible imposition of confiscatory
excess profits, production, remittance, export and other taxes.
OUR OPERATIONS ARE SIGNIFICANTLY AFFECTED BY CHANGES IN THE MARKET PRICE OF OIL
AND GAS
Prices for oil and natural gas are subject to wide fluctuations in response to a
number of factors which are beyond our control, including:
- Changes in the supply and demand for oil and natural gas.
- Actions of the Organization of Petroleum Exporting Countries.
- Weather conditions.
- Domestic and foreign governmental regulations.
- The price and availability of alternative fuels.
- Political conditions in the Middle East and elsewhere.
- Overall economic conditions.
A reduction in oil prices can affect the economic viability of our operations.
For example, the significant decline in oil prices during 1998 adversely
affected our results of operations and increased our operating loss in 1998.
There can be no assurance that oil prices will be at a level that will enable us
to operate at a profit.
OUR ACTUAL OIL AND GAS PRODUCTION COULD VARY SIGNIFICANTLY FROM OUR RESERVE
ESTIMATES
Estimates of oil and natural gas reserves and their values by petroleum
engineers are inherently uncertain. These estimates are based on professional
judgments about a number of elements including:
- The amount of recoverable crude oil and natural gas present in a reservoir.
- The costs that will be incurred to produce the crude oil and natural gas.
- The rate at which production will occur.
Reserve estimates are also based on evaluations of geological, engineering,
production and economic data. The data can change over time due to, among other
things:
- Additional development activity.
- Evolving production history.
- Changes in production costs, market prices and economic conditions.
As a result, the actual amount, cost and rate of production of our oil and gas
reserves and the revenues derived from sale of the oil and gas produced in the
future will vary from those anticipated in the most recent report on CanArgo's
oil and gas reserves prepared by Ashton Jenkins Mann as of December 31, 1999.
The magnitude of those variations may be material.
The rate of production from crude oil and natural gas properties declines as
reserves are depleted. Except to the extent we acquire additional properties
containing proved reserves, conduct successful exploration and development
activities or, through engineering studies, identify additional productive zones
in existing wells or secondary recovery reserves, our proved reserves will
decline as reserves are produced. Future crude oil and natural gas production
is therefore highly dependent upon our level of success in replacing depleted
reserves.
OUR OIL AND GAS OPERATIONS ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION
Governments at all levels -- national, regional and local -- regulate oil and
gas activities extensively. We must comply with laws and regulations which
govern many aspects of our oil and gas business, including:
- Exploration.
- Development.
- Production.
- Occupational health and safety.
- Labor standards.
- Environmental matters.
We expect the trend towards more burdensome regulation of our business to result
in increased costs and operational delays. This trend is particularly applicable
in developing economies, such as those in Eastern Europe where we have our
principal operations. In these countries, the evolution towards a more developed
economy is often accompanied by a move towards the more burdensome regulations
that typically exist in the more developed economies.
WE ENCOUNTER COMPETITION
The oil and gas industry can be highly competitive. Our competitors include
integrated oil and gas companies, independent oil and gas companies, drilling
and income programs, and individuals. Many of our competitors are large,
well-established, well-financed companies. Because of our small size and lack of
financial resources, we may not be able to compete effectively with these
companies.
Competition is particularly intense with respect to the acquisition of desirable
undeveloped crude oil and natural gas properties. We anticipate encountering
such competition in connection with any expansion of its activities in Eastern
Europe. The principal competitive factors in the acquisition of such
undeveloped crude oil and natural gas properties include the staff and data
necessary to identify, investigate and acquire interests in such properties,
close working relationships with governmental authorities who control
acquisition, exploration, production and marketing activities in the region, and
the financial resources necessary to acquire and develop such properties. Many
of our competitors have financial resources, staff and facilities substantially
greater than those we currently have or will be able to obtain in the future.
There can be no assurance that we will be able to secure such staff, data, and
financial resources and establish such working relationships to enable us to
expand our operations successfully in Eastern Europe.
The principal raw materials and resources necessary for the exploration and
production of crude oil and natural gas are interests in prospective properties
under which crude oil and natural gas reserves may be discovered, drilling rigs
and related equipment to explore for such reserves, certain supplies used in
such drilling operations such as drill pipe and drilling fluids and
knowledgeable personnel to conduct all phases of crude oil and natural gas
operations. We must compete for such raw materials and resources with both
major integrated energy companies and independent operators. Although we
believe that our current operating and financial resources are adequate to
preclude any significant disruption of our operations in the immediate future,
the continued availability of such materials and resources, which are sometimes
in short supply, cannot be assured.
OUR OPERATIONS ARE DEPENDENT ON OUR CHIEF EXECUTIVE
David Robson, the Chairman and Chief Executive Officer of CanArgo is our
executive who has the most experience in the oil and gas industry and who has
the most extensive business relationships in Eastern Europe. The business and
operations of CanArgo could be significantly harmed if Mr. Robson were to leave
the Company or become unavailable because of illness or death. Mr Robson has
signed an agreement with a three years non competing clause effective from the
date of the signing. CanArgo does not carry key employee insurance on any of its
employees.
WE ARE MOVING OUR OFFICE TO LONDON
Our Board of Directors has approved the move of our administrative and support
office to London. While this is intended to make operations and administration
more efficient there is a risk it could result in less efficient operations and
administration. All key management will be offered positions and a number are
expected to move over the next year, however, should key management determine
not to move, administration and support of operations could be adversely
affected.
FUTURE STOCK ISSUANCES AND THE PROVISIONS OF DELAWARE LAW COULD HAVE
ANTI-TAKEOVER EFFECTS
Our board of directors may at any time issue additional shares of preferred
stock and common stock without any prior approval by the securityholders, which
might impair or impede a third party from making an offer to acquire us.
Holders of outstanding shares have no right to purchase a pro rata portion of
additional shares of common or preferred stock issued by us. In addition, the
provisions of Section 203 of the Delaware General Corporation Law, to which we
are subject, places certain restrictions on third parties who seek to effect a
business combination with a company opposed by the company's board of directors.
See the section entitled "Limitation of Liability and Indemnification-Section
203 of the Delaware General Corporation Law" in this prospectus.
THE PRICE OF OUR COMMON STOCK MAY BE SUBJECT TO WIDE FLUCTUATIONS
The market price of our common stock could be subject to wide fluctuations in
response to quarterly variations in the Company's results of operations, changes
in earnings estimates by analysts, changing conditions in the oil and gas
industry or changes in general market or economic conditions.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE
We have not paid any cash dividends to date on the common stock and there are no
plans for such dividend payments in the foreseeable future.
THE COMPANY
We are engaged in the acquisition, development, production and exploration of
oil and natural gas reserves. Our activities also include investments in
downstream operations such as refining, marketing and independent power
production. Our properties are concentrated in Eastern Europe and, in particular
the Republic of Georgia. Our management and technical staff have substantial
experience in these areas. Our principal product is crude oil, and the sale of
that oil is our principal source of revenue.
To date our reserves and production have been derived principally through
development of the Ninotsminda field. We typically focus on properties that
either offer us existing production as well as additional exploitation
opportunities, or exploration prospects management believes have significant
potential. We believe that our cash flow from operations and our financial
resources will provide us with the ability to fully develop our current
properties, to finance our current exploration projects and to pursue new
acquisition opportunities in the coming year.
Our business strategy is focused on the following:
FURTHER DEVELOPMENT OF EXISTING PROPERTIES
We intend to further develop our properties that have established oil. We seek
to add proved reserves and increase production through the use of advanced
technologies, including detailed technical analysis of our properties, drilling
new structures from existing locations and selectively recompleting existing
wells. We also plan to drill step-out wells to expand known field limits.
GROWTH THROUGH EXPLOITATION AND EXPLORATION
We conduct an active technology-driven exploitation and exploration program that
is designed to complement our property acquisition and development drilling
efforts with moderate to high-risk exploration projects that have greater
reserve potential. We generate exploration prospects through the analysis of
geological and geophysical data and the interpretation of seismic data. We
intend to manage our exploration expenditures through the optimal scheduling of
our drilling program and, if considered appropriate, selectively reducing our
participation in certain exploratory prospects through sales of interests to
industry partners.
PURSUIT OF STRATEGIC ACQUISITIONS
We continually review opportunities to acquire producing properties, leasehold
acreage and drilling prospects. We seek to acquire operational control of
properties that we believe have significant exploitation and exploration
potential. We are especially focused on increasing our holdings in fields and
basins from which we leverage existing infrastructure and resources.
RATIONALIZATION OF PROPERTY PORTFOLIO
We intend, where possible, to actively pursue opportunities to reduce and
control operating costs through the consolidation of overlapping operations and
sale of marginal properties.
OUR ADMINISTRATIVE AND SUPPORT OFFICE
Our administrative and support office is currently located at Suite 1580,
Guinness House, 727 - 7th Avenue, S.W., Calgary, Alberta, Canada T2P 0Z5, and
our telephone number is (403) 777-1185. We have recently announced publicly our
intention to transfer our administrative and support office to London, England
over the next year.
USE OF PROCEEDS
The selling securityholders are offering all of the shares of common stock
covered by this prospectus. We will not receive any proceeds from sales of these
shares. We will, however, receive $3,106,640 if all of the special stock
options and warrants are fully exercised in accordance with their respective
terms. Those proceeds will be used for general working capital purposes.
THE SELLING SECURITYHOLDERS
Of the 14,220,000 shares being offered, 12,000,000 shares were acquired by the
selling securityholders pursuant to a private placement of 12,000,000 shares of
common stock at Norwegian Kroner (NOK) 11.20 per share which was completed on
August 18, 2000. Gross proceeds from the placement were approximately US$ 15.2
million (NOK 134 million). The shares issued in connection with the private
placement were issued in transactions intended to qualify for an exemption from
registration under the Securities Act afforded by Regulation S promulgated
thereunder by the SEC and may not be offered or sold in the United States or to
U.S. persons (as defined in such Regulation) absent registration under the
Securities Act or pursuant to an applicable exemption from such registration.
We agreed, as soon as practicable after the closing of the private placement,
to prepare and file with the SEC a registration statement registering the shares
on Form S-3, if available, for resale. In addition, if CanArgo fails to file a
registration statement in a timely manner, CanArgo is required to pay
subscribers to the private placement a cash fee of 3.33% of the purchase price
of their shares for each full 30 day period after closing until a registration
statement registering such shares is declared effective by the SEC up to a
maximum cash fee of 10% of the subscription price.
Of the remaining 2,220,000 shares being offered, 1,720,000 shares are issuable
on the exercise of special stock options and an aggregate of 500,000 shares are
issuable on the exercise of warrants. The special stock options and warrants
were awarded on September 1, 2000 to certain of our directors and employees to
attract and retain their services and motivate them to increase the Company's
share value. The options are exercisable at an exercise price of $1.437 and may
be exercised after various vesting dates between six months after the date of
grant and prior to the close of business on September 1, 2005. One warrant
entitles the registered holder to purchase one share of common stock at a
purchase price of $1.27 per share and may be exercised after various dates
between six months after the date of grant and prior to the close of business
on September 1, 2005. The special stock options and warrants were issued (and
the shares of common stock issuable on their exercise will be issued) in
transactions intended to qualify for an exemption from registration under the
Securities Act afforded by Regulation S promulgated thereunder by the SEC and
such securities may not be offered or sold in the United States or to U.S.
persons (as defined in such Regulation) absent registration under the Securities
Act or pursuant to an applicable exemption from such registration. In
addition, pursuant to the requirements of Regulation S and the terms of the
options and warrants, they may not be exercised in the United States and the
shares of common stock issuable upon such exercise may not be deliverable within
the United States upon exercise, other than in offerings deemed to meet the
definition of an "offshore transaction" as defined in Regulation S, unless
registered under the Securities Act or an exemption from such registration is
available.
Our registration of the shares does not necessarily mean that any of the
securityholders will sell any or all of his, her, or its shares.
The following table sets forth the number of shares owned by each of the
securityholders who may offer or are offering shares by this prospectus. Shares
issuable on the exercise of special stock options are marked with an "S" in the
table below and shares issuable on the exercise of warrants are marked with a
"W" in the table below. Directors and employees issued special stock options
and warrants are not U.S. persons (as defined in Regulation S). All information
contained in the table below is based upon their beneficial ownership as of
September 7, 2000. The issued shares are restricted and not available for
trading on the Over the Counter (OTC) Bulletin Board or the Oslo Stock Exchange
until a Registration Statement filed with the United States Securities and
Exchange Commission becomes effective or such shares can otherwise be offered
and sold in transactions exempt from the registration requirements of the
Securities Act. The following table assumes that all of the shares being
registered will be sold. The selling security holders are not making any
representation that any shares covered by the prospectus will be offered for
sale. The selling securityholders reserve the right to accept or reject, in
whole or in part, any proposed sale of shares. As of September 7, 2000, CanArgo
had an aggregate of 73,419,877 common shares outstanding.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED NUMBER OF SHARES NUMBER OF SHARES PERCENT OF
PRIOR TO THE REGISTERED FOR OWNED AFTER THE OUTSTANDING SHARES
NAME OF SELLING SECURITYHOLDER OFFERING (1) SALE HEREBY OFFERING AFTER THE OFFERING
<S> <C> <C> <C> <C> <C>
Gjensidige Nor div kti 1,400,000 1,400,000 * *
SE Banken Stockholm 580,000 580,000 * *
S David Robson (2) (3) 1,075,000 (5) 535,000 540,000 *
Gelesia Ventures 1,455,000 1,005,000 450,000 *
Storebrand - AksjeSpar 500,000 500,000 * *
Akin A.S. 420,000 420,000 * *
T.A. Voldberg 400,000 400,000 * *
Morgan Stanley 1,987,000 400,000 1,587,000 2.16
Strata 350,000 350,000 * *
Einar Hanasan 280,000 280,000 * *
C. Borchgrevink 295,000 275,000 20,000 *
Tyren Norge 275,000 275,000 * *
Sverre Stiksrud 524,000 274,000 250,000 *
Pal Gundersen 250,000 250,000 * *
W Nils Trulsvik (2) 384,283 (6) 250,000 134,283 *
S Peder Paus (2) 4,698,489 (7) 280,000 4,418,489 6.02
W J.F. Russell Hammond (2) 5,623,379 (8) 250,000 5,373,379 7.32
S Roger Brittain (2) 258,800 (9) 250,000 8,800 *
S Murray Chancellor (4) 250,000 250,000 * *
Harald Dahl 200,000 200,000 * *
S Tamara Smales (4) 203,333 (10) 180,000 23,333 *
Munkenes 175,000 175,000 * *
Pesveco 1,175,000 175,000 1,000,000 1.36
Per Sveum 675,000 175,000 500,000 *
Trond Havdal 175,000 175,000 * *
Captura 525,000 175,000 350,000 *
Ander Wilhelmsen AS 775,000 175,000 600,000 *
Storebrand - PensjonSpar 155,000 155,000 * *
CG Holding Invest ANS 200,000 150,000 50,000 *
Orn Noterte 150,000 150,000 * *
SR Bank 700,000 150,000 550,000 *
Storebrand - Norge I 400,000 125,000 275,000 *
SCC Forvaltning - Sundal Collier Aktiv 325,000 125,000 200,000 *
Panorama Invest 125,000 125,000 * *
S Niko Tevzadze (3) 163,333 (11) 120,000 43,333 *
Trond Sorum 110,000 110,000 * *
B. R. Gjelsten 100,000 100,000 * *
Artel Holding 145,300 100,000 45,300 *
Aksel Gresvig 100,000 100,000 * *
Scan Corp 100,000 100,000 * *
Storebrand - Norge 300,000 100,000 200,000 *
Ulf Leirvik 205,000 155,000 50,000 *
W Anthony Potter (3) 117,000 (12) 105,000 12,000 *
Storebrand - Vekst 859,000 95,000 764,000 1.04
Sportskameratene 155,000 90,000 65,000 *
Storebrand - Spar 2040 80,000 80,000 * *
SCC Forvaltning - Globus Norge 175,000 75,000 100,000 *
Tore Traaseth 70,000 70,000 * *
Atlantis Vest 70,000 70,000 * *
Egil Stenshagen 65,000 65,000 * *
Storebrand - BedriftPensjon 65,000 65,000 * *
C.EMTOR TRADING 165,000 65,000 100,000 *
Finanskjop 365000 65,000 300,000 *
Aker Seil AS 104,000 60,000 44,000 *
NSV Invest 800,000 60,000 740,000 1.01
Glaamene Industrier AS 155,000 55,000 100,000 *
Netup Invest 55,000 55,000 * *
Granly 50,000 50,000 * *
Karmasol & Partner 50,000 50,000 * *
Finn B Carlsen Eiendom 114,000 50,000 64,000 *
Storebrand - BarneSpar 50,000 50,000 * *
SCC Forvaltning - Sundal Collier Spar 150,000 50,000 100,000 *
Anabeth 45,000 45,000 * *
Storebrand - Spar 2020 45,000 45,000 * *
Storebrand - Spar 2030 45,000 45,000 * *
Briskasen 80,000 40,000 40,000 *
Ole M B Jacobsen 40,000 40,000 * *
SE Banken Kapitalforvaltning 40,000 40,000 * *
Storebrand - Spar 2010 40,000 40,000 * *
Strurla Brattli 40,000 40,000 * *
Falkum 35,000 35,000 * *
Jan Tore Lekman 35,000 35,000 * *
Thore Holte 35,000 35,000 * *
Rune Martinsen 32,000 32,000 * *
Arne Bullow Berntzen 33,000 32,000 1,000 *
Jan Thore Johansen 32,000 32,000 * *
Karlander Inv. 30,000 30,000 * *
SE Banken Luxemburg 30,000 30,000 * *
Margit Eide 30,000 30,000 * *
Park og Vedlikehold 30,000 30,000 * *
Tom Grunnteig 30,000 30,000 * *
Nyboco AS 260,000 30,000 230,000 *
Adrian AS 363,000 30,000 333,000 *
Delta Invest 30,000 30,000 * *
Cato Rojan 45,000 30,000 15,000 *
Toffin AS 30,000 30,000 * *
Sam Juel 70,000 30,000 40,000 *
Haakon Saeter 30,000 30,000 * *
As Benoni 30,000 30,000 * *
Janne Leirvik 30,000 30,000 * *
Fredrik Moen 30,000 30,000 * *
Tore Halvorsen 30,000 30,000 * *
Magnus Reidar Nordby 30,000 30,000 * *
Lars Liaeker 130,000 30,000 100,000 *
Harald Storen 30,000 30,000 * *
Erik Stensrud 30,000 30,000 * *
Skottvoll Eiendom 30,000 30,000 * *
Arthur Kalland 30,000 30,000 * *
Jon Dalheim 30,000 30,000 * *
Raymond Svendsen 30,000 30,000 * *
Peder Eiendom AS 35,000 30,000 5,000 *
Hanko Fjordhotell AS 30,000 30,000 * *
Lars S. Andersen 41,500 30,000 11,500 *
Terje Andersen 50,000 30,000 20,000 *
-------------------------------------------------------------------------------------------------------------------
SUM 34,073,417 14,220,000 19,853,417
===================================================================================================================
</TABLE>
* Less than one percent.
(1) The numbers in the columns above include shares which are issuable
upon exercise of special stock options and warrants.
(2) Denotes director of CanArgo Energy Corporation.
(3) Denotes officer of CanArgo Energy Corporation.
(4) Denotes employee of CanArgo Energy Corporation.
(5) Includes 120,000 shares beneficially owned and 420,000 shares underlying
presently exercisable options.
(6) Includes 73,450 shares beneficially owned and 35,833 shares underlying
presently exercisable options.
(7) Includes 213,429 shares beneficially owned and 39,583 shares underlying
presently exercisable options. Mr. Paus is also a Director of Terrenex
Acquisition Corporation ("Terrenex") which is currently the beneficial
owner of 3,712,546 shares of common stock. Mr. Paus owns 12.2% of the
outstanding shares of Terrenex. The number of shares of common stock
reported by Mr. Paus in this table also includes 3,712,546 shares of
common stock beneficially owned by Terrenex. Mr. Paus disclaims any
beneficial ownership of the shares owned by Terrenex.
(8) Includes 39,583 shares underlying presently exercisable options.
J.F. Russell Hammond, a Director of CanArgo, is an Investment Advisor
to Provincial Securities Limited which currently beneficially owns
1,621,250 shares of common stock. In accordance with the rules of the
SEC, includes 1,621,250 shares of common stock owned by Provincial
Securities Limited. Mr. Hammond also is the Chairman of Terrenex which
is currently the beneficial owner of 3,712,546 shares of common stock.
In accordance with the rules of the SEC, the number of shares of common
stock reported by Mr. Hammond in this table also includes 3,712,546
shares of common stock beneficially owned by Terrenex. Mr. Hammond
disclaims any beneficial ownership of the shares owned by Provincial
Securities Limited and Terrenex.
(9) Includes 8,800 shares beneficially owned.
(10) Includes 23,333 shares beneficially owned.
(11) Includes 43,333 shares underlying presently exercisable options.
(12) Includes 12,000 shares underlying presently exercisable options.
This prospectus also covers any additional shares of common stock that become
issuable in connection with the outstanding shares being registered by reason of
any stock dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an increase in
the number of our outstanding shares of common stock and such indeterminate
number of shares of common stock as may from time to time be issued at
indeterminate prices upon exercise of outstanding special stock options and
warrants in accordance with the anti-dilution adjustment provisions contained in
the options and warrants.
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Our certificate of incorporation limits or eliminates the liability of our
directors or officers to us or our securityholders for monetary damages to the
fullest extent permitted by the Delaware General Corporation Law. Delaware law
provides that a director of CanArgo will not be personally liable to CanArgo or
our securityholders for monetary damages for a breach of fiduciary duty as a
director, except for liability: (1) for any breach of the director's duty of
loyalty; (2) for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law; (3) for the payment of unlawful
dividends and some other actions prohibited by Delaware corporate law; and (4)
for any transaction resulting in receipt by the director of an improper personal
benefit.
INDEMNIFICATION
Delaware General Corporation Law provides that a corporation may indemnify our
present and former directors, officers, employees and agents (each, an
"indemnitee") against all reasonable expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement incurred in an action, suit or
proceeding, other than in actions initiated by or in the right of the
corporation, to which the indemnitee is made a party by reason of service as a
director, officer, employee or agent, if such individual acted in good faith and
in a manner which he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation and, in the case of a criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful. A Delaware
corporation shall indemnify an indemnitee to the extent that he or she is
successful on the merits or otherwise in the defense of any claim, issue or
matter associated with an action, suit or proceeding, including one initiated by
or in the right of the corporation. Our Bylaws provide for indemnification of
directors and officers to the fullest extent permitted by Delaware General
Corporation Law.
Delaware General Corporation Law allows and our Bylaws provide for the advance
payment of an indemnity for expenses prior to the final disposition of an
action, provided that the indemnitee undertakes to repay any such amount
advanced if it is later determined that the indemnitee is not entitled to
indemnification with regard to the action for which the expenses were advanced.
Our directors and officers are insured, under policies of insurance maintained
by us, within the limits and subject to the limitations of the policies, against
certain expenses in connection with the defense of actions, suits or
proceedings, to which they are parties by reason of being or having been such
directors or officers.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons who may control us pursuant to
the foregoing provisions, we have been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law, which is applicable to
CanArgo as a Delaware corporation, prohibits various business combinations
between a Delaware corporation and an "interested securityholder," that is,
anyone who beneficially owns, alone or with other related parties, at least 15%
of the outstanding voting shares of a Delaware corporation. Business
combinations subject to Section 203 include mergers, consolidations, sales or
other dispositions of assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and some transactions that would
increase the interested securityholder's proportionate share ownership in the
corporation. Section 203 prohibits this type of business combination for three
years after a person becomes an interested securityholder, unless:
- the business combination is approved by the corporation's board of
directors prior to the date the person becomes an interest
securityholder;
- the interested securityholder acquired at least 85% of the voting stock of
the corporation, other than stock held by directors who are also officers
or by specified employee stock plans, in the transaction in which it
becomes an interested securityholder; or
- the business combination is approved by a majority of the board of
directors and by the affirmative vote of two-thirds of the outstanding
voting stock that is not owned by the interested securityholder.
PLAN OF DISTRIBUTION
Under the terms of the private placement, the issued shares are restricted and
not available for trading on the Over the Counter (OTC) Bulletin Board or the
Oslo Stock Exchange until after a Registration Statement filed with SEC becomes
effective or offers and sales of such shares are otherwise exempt from the
registration requirements of the Securities Act. Thereafter, the shares may be
sold or distributed from time to time by the selling securityholders named in
this prospectus, by their donees, pledgees or transferees, or by their other
successors in interest. The selling securityholders may sell their shares at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices at the time of sale, at negotiated prices, or at fixed
prices, which may be changed. Each selling securityholder reserves the right to
accept or reject, in whole or in part, any proposed purchase of shares, whether
the purchase is to be made directly or through agents. We are not aware that any
of the selling securityholders have entered into any arrangements with any
underwriters or broker-dealers regarding the sale of their shares of common
stock. The registration rights available to selling securityholders after the
Registration Statement becomes effective shall terminate at such time as all
shares qualified by this Registration Statement are sold by the selling
securityholder in accordance with this prospectus or in accordance with the
provisions of Rule 144 or its equivalent under the Securities Act or have been
sold pursuant to a transaction effected through the facilities of the Oslo Stock
Exchange in accordance with the provisions of Rule 904 or are otherwise freely
transferable without restriction under applicable United States securities laws.
The selling securityholders may offer their shares, subject to the restrictions
outlined above, at various times in one or more of the following transactions:
- in ordinary brokers' transactions and transactions in which the broker
solicits purchasers;
- in transactions involving cross or block trades or otherwise on any
national securities exchange, such as the American Stock Exchange, on
which the common stock may be listed;
- in transactions in which brokers, dealers or underwriters purchase the
shares as principal and resell the shares for their own accounts
pursuant to this prospectus;
- in transactions "at the market" to or through market makers in the common
stock;
- in other ways not involving market makers or established trading markets,
including direct sales of the shares to purchasers or sales of the
shares effected through agents;
- through transactions in options, swaps or other derivatives which may or
may not be listed on an exchange;
- in privately negotiated transactions;
- in transactions to cover short sales; or
- in a combination of any of the foregoing transactions.
In addition, the selling securityholders also may sell their shares in private
transactions or in accordance with Rules 144, 144A or 904 under the Securities
Act rather than under this prospectus.
From time to time, one or more of the selling securityholders may pledge or
grant a security interest in some or all of the shares owned by them. If the
selling securityholders default in the performance of the secured obligations,
the pledgees or secured parties may offer and sell the shares from time to time.
The selling securityholders also may transfer and donate shares in other
circumstances. The number of shares beneficially owned by selling
securityholders who donate or otherwise transfer their shares will decrease as
and when the selling securityholders take these actions. The plan of
distribution for the shares offered and sold under this prospectus will
otherwise remain unchanged, except that the transferees, donees or other
successors in interest will be selling securityholders for purposes of this
prospectus. The selling securityholders may use brokers, dealers, underwriters
or agents to sell their shares. The persons acting as agents may receive
compensation in the form of commissions, discounts or concessions. This
compensation may be paid by the selling securityholders or the purchasers of the
shares for whom such persons may act as agent, or to whom they may sell as a
principal, or both. The selling securityholders and any agents or broker-dealers
that participate with the selling securityholders in the offer and sale of the
shares may be deemed to be "underwriters" within the meaning of the Securities
Act. Any commissions they receive and any profit they realize on the resale of
the shares by them may be deemed to be underwriting discounts and commissions
under the Securities Act. Neither any selling securityholders nor we can
presently estimate the amount of such compensation. Because selling
securityholders may be deemed to be "underwriters" within the meaning of the
Securities Act, selling securityholders and persons participating in the offer
and sale of their shares may be subject to the prospectus delivery requirements
of the Securities Act.
The selling securityholders and any other person participating in a distribution
of the securities covered by this prospectus will be subject to applicable
provisions of the Exchange Act and the rules and regulations under the Exchange
Act, including Regulation M, which may limit the timing of purchases and salesof
any of the securities by the selling securityholders and any other such person.
Furthermore, under Regulation M, any person engaged in the distribution of the
securities may not simultaneously engage in market-making activities with
respect to the particular securities being distributed for certain periods
prior to the commencement of or during such distribution. All of the above may
affect the marketability of the securities and the availability of any person or
entity to engage in market-making activities with respect to the securities.
Under our agreements with the selling securityholders, we are required to bear
the expenses relating to the registration of this offering. The selling
securityholders will bear any underwriting discounts or commissions, brokerage
fees, stock transfer taxes and fees of their legal counsel.
If we are notified by a selling securityholder that any material arrangement has
been entered into with a broker-dealer for the sale of shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, we will file a supplement to this prospectus, if
required, pursuant to Rule 424(b) under the Securities Act. In addition, if we
are notified by a selling securityholder that a donee or pledgee intends to sell
more than 500 shares, we will file a supplement to this prospectus.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed upon
for us by Satterlee Stephens Burke & Burke LLP, New York, New York.
EXPERTS
The financial statements incorporated in this prospectus by reference from our
Annual Report on Form 10-K have been audited by PricewaterhouseCoopers LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The oil and gas reserve data incorporated by reference to our Annual Report on
Form 10-K for the year ended December, 31, 1999, has been prepared by Ashton
Jenkins Mann and such reserve report dated March 27, 2000 has been incorporated
herein in reliance upon the authority of such firm as experts in estimating
proved oil and gas reserves.
================================================================
14,220,000 SHARES
(CANARGO LOGO)
CANARGO ENERGY CORPORATION
COMMON STOCK
_________________________
PROSPECTUS
_________________________
SEPTEMBER *, 2000
================================================================
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses, all of which are to be
borne by the Company, in connection with the registration, issuance and
distribution of the securities being registered hereby. All amounts are
estimates except the SEC registration fee.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee . . . . . $ 5,462
Legal Fees and Expenses. . . . 5,000
Accountant's Fees and Expenses 3,000
Printing Expenses. . . . . . . 2,000
Miscellaneous. . . . . . . . . 2,000
-------
Total. . . . . . . . . . . . . 17,462
=======
</TABLE>
Item 15. Indemnification of Directors and Officers.
Delaware General Corporation Law provides that a corporation may indemnify its
present and former directors, officers, employees and agents (each, an
"indemnitee") against all reasonable expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement incurred in an action, suit or
proceeding, other than in actions initiated by or in the right of the
corporation, to which the indemnitee is made a party by reason of service as a
director, officer, employee or agent, if such individual acted in good faith and
in a manner which he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation and, in the case of a criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful. A Delaware
corporation shall indemnify an indemnitee to the extent that he or she is
successful on the merits or otherwise in the defense of any claim, issue or
matter associated with an action, suit or proceeding, including one initiated by
or in the right of the corporation. Our Bylaws provide for indemnification of
directors and officers to the fullest extent permitted by Delaware General
Corporation Law.
Delaware General Corporation Law allows and our Bylaws provide for the advance
payment of an indemnity for expenses prior to the final disposition of an
action, provided that the indemnitee undertakes to repay any such amount
advanced if it is later determined that the indemnitee is not entitled to
indemnification with regard to the action for which the expenses were advanced.
The directors and officers of the registrant are insured, under policies of
insurance maintained by the registrant, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits or proceedings, to which they are parties by reason of
being or having been such directors or officers.
See Item 17(c) below for a discussion of the SEC's position with respect to the
enforceability of such indemnification provisions in regard to violations of the
Securities Act.
Item 16. Exhibits.
The following exhibits are filed as part of this registration statement.
Exhibit
No. Description of Exhibit
------- ----------------------
5.1 Opinion of Satterlee Stephens Burke & Burke LLP as to the legality
of the securities being registered (to be filed by amendment)
23.1 Consent of Satterlee Stephens Burke & Burke LLP to the use of
their opinion with respect to the legality of the securities
being registered (included in opinion filed as Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Ashton Jenkins Mann
25.1 Power of attorney of certain signatories (contained on the
signature page included in Part II of the Registration Statement)
Item 17. Undertakings.
The registration rights available to selling securityholders after the
Registration Statement becomes effective shall terminate at such time as all
shares qualified by this Registration Statement are sold by the selling
securityholders pursuant to this prospectus or in accordance with the provisions
of Rule 144 or its equivalent under the Securities Act or have been sold
pursuant to a transaction effected through the facilities of the Oslo Stock
Exchange in accordance with the provisions of Rule 904 or are otherwise freely
transferable without restriction under applicable United States securities laws.
(a) Subject to the restrictions noted above, the undersigned registrant hereby
undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereto) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Calgary, Alberta, Canada on September 8, 2000.
CANARGO ENERGY CORPORATION
By: /s/ Anthony J. Potter
---------------------------
Anthony J. Potter
VP Finance and Group Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Each person whose
signatures appear below hereby authorizes David Robson, Michael Binnion and
Anthony J. Potter, or any of them, as attorney-in-fact to execute in the name
and on behalf of each such person individually and in each capacity stated below
and to file any amendments to this Registration Statement, including any and all
pre-effective and post-effective amendments, with all exhibits thereto and other
documents in connection therewith.
By: /s/Michael Binnion Date: September 8, 2000
-------------------
Michael Binnion, Director, President and
Chief Financial Officer
By: /s/Anthony J. Potter Date: September 8, 2000
----------------------
Anthony J. Potter, Vice President
(Principal Accounting Officer)
By: /s/David Robson Date: September 8, 2000
----------------
David Robson, Chief Executive Officer
By: /s/Russell Hammond Date: September 8, 2000
-------------------
Russell Hammond, Director
By: /s/Peder Paus Date: September 8, 2000
--------------
Peder Paus, Director
By: /s/Roger S. Brittain Date: September 8, 2000
--------------------
Roger Brittain, Non-Executive Chairman of the Board
By: /s/Nils N. Trulsvik Date: September 8, 2000
---------------------
Nils N. Trulsvik, Director
EXHIBIT INDEX
FILED EXHIBIT
HEREWITH
--------------------------------------------------------------------------------
X 23.2 Consent of PricewaterhouseCoopers LLP
X 23.3 Consent of Ashton Jenkins Mann
X 25.1 Power of attorney of certain signatories (contained on
signature page included in Part II of the Registration
Statement
