<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 24, 1996
GATEWAY ENERGY CORPORATION
------------------------------------------------------
(Exact Name Of Registrant As Specified In Its Charter)
Delaware 1-4766 44-0651207
-----------------------------------------------------------------
(State Or Other Jurisdiction Of (Commission (IRS Employer
Incorporation Or Organization) File No.) Identification Number)
10842 Old Mill Road, Suite #5
Omaha, NE 68154
-----------------------------------------------------------------
(Address Of Principal Executive Offices) (Zip Code)
(402) 330-8268
-------------------------------------------------------
Registrant's Telephone Number, Including Area Code:
Not Applicable
------------------------------------------------------------
(Former Name or Former Address, If Changed Since Last Report.)
<PAGE>
Gateway Energy Corporation
Amendment No. 1
Form 8-K dated February 7, 1996
This amendment includes the Pro Forma financial statements required by the
Regulation S-B of the Securities and Exchange Commission in connection with the
acquisition of a business. This amendment also includes the audited financial
statements of the acquired business.
The Registrant has submitted only the audited financial statements of
revenues and direct operating expenses. The property interests acquired were
only part of the assets of the Seller and, therefore it is not feasible to
provide an audited balance sheet since these property interests were not
segregated as a separate entity by the Seller.
Item 7. Financial Statements and Exhibits
a) Pro Forma Balance Sheet as of November 30, 1995.
b) Pro Forma Statement of Operations for the Nine Months Ended
November 30, 1995.
c) Pro Forma Statement of Operations for the Year Ended
February 28, 1995.
d) Pro Forma Adjustments to Financial Statements.
e) Report of Independent Certified Public Accountants.
f) Audited Combined Statement of Revenue and Direct Operating
Expenses of Certain Acquired Property Interests of Castex Energy
1995, L.P.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GATEWAY ENERGY CORPORATION
/s/ Neil A.Fortkamp
-----------------------------
Chief Financial Officer
April 5, 1996
- -----------------------
(Date)
<PAGE>
Gateway Energy Corporation
Pro Forma Financial Statements
On January 24, 1996, but effective July 1, 1995, Castex Energy 1995, L.P.,
acquired oil and gas producing properties known as the South Lake Arthur
interests from Wynn-Crosby for $10,798,000 in cash and the assumption of certain
liabilities. Castex Energy L.P. was formed by Castex Energy, Inc. an 80% owned
subsidiary of Gateway Energy Corporation; Castex Energy, Inc. is the general
partner. Castex Energy 1995, L.P. obtained a $15.0 million financing line of
credit from Bank of America and raised $2.0 million in equity funds to make the
acquisition. Gateway Energy Corporation, through direct investment in the
partnership and contribution of various leases owns a 55% partnership interest
in Castex Energy 1995, L.P.
The pro forma financial statements present the financial statements of
Gateway Energy Corporation as of November 30, 1995, its latest financial
statements filed on Form 10-Q and the opening balance sheet of Castex Energy
1995, L.P. as of January 1, 1996. The statement of operations presented
reflects the revenue and direct operating expenses of the South Lake Arthur
properties for the nine months ended November 30, 1995 and the statement of
operations of Gateway Energy Corporation for the nine months ended November 30,
1995.
<PAGE>
Gateway Energy Corporation
Pro Forma Statement of Operations
For The Year Ended February 28, 1995
<TABLE>
<CAPTION>
Gateway Castex Energy
Energy Corp 1995 LP
Year Ended Year Ended Pro Forma Pro Forma
Feb. 28, 1995 Feb. 28, 1995 Total Adjustments Balance
------------- ------------- ----------- ------------ -----------
(See Note)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $8,107,559 $4,000,684 $12,108,243 $12,108,243
OPERATING COSTS AND EXPENSES
Cost of Natural Gas Purchased 4,919,655 4,919,655 4,919,655
Operation and Maintenance 1,311,433 436,140 1,747,573 1,747,573
Depreciation, Depletion & Amort. 339,665 339,665 (D) 2,009,239 2,348,904
General and Administrative 984,889 984,889 984,889
------------- ------------- ----------- ------------ -----------
7,555,642 436,140 7,991,782 2,009,239 10,001,021
------------- ------------- ----------- ------------ -----------
OPERATING PROFIT 551,917 3,564,544 4,116,461 (2,009,239) 2,107,222
OTHER INCOME (EXPENSE)
Interest Income 64,593 64,593 64,593
Interest Expense (12,631) (12,631)(E) (855,000) (867,631)
Minority Interests 18,016 18,016 (F) (315,100) (297,084)
Other 0 0
------------- ------------- ----------- ------------ -----------
69,978 0 69,978 (1,170,100) (1,100,122)
------------- ------------- ----------- ------------ -----------
Earnings Before Income Taxes 621,895 3,564,544 4,186,439 (3,179,339) 1,007,100
INCOME TAXES 46,637 0 46,637 46,637
------------- ------------- ----------- ------------ -----------
Net Earnings 575,258 3,564,544 4,139,802 (3,179,339) 960,463
Provision for Preferred Dividends 1,280,920 1,280,920 (C) 192,240 1,473,160
------------- ------------- ----------- ------------ -----------
Loss Applicable to Common Stock ($705,662) $3,564,544 $2,858,882 ($3,371,579) ($512,697)
------------- ------------- ----------- ------------ -----------
------------- ------------- ----------- ------------ -----------
Loss Per Common Share $(0.03) $(0.02)
------------- -----------
------------- -----------
</TABLE>
Note:
The amounts reflected in the Statement of Operations for the year
ended February 28, 1995, were derived from the three months
ended February 28, 1995, as included in the audited Combined
Statement of Revenue and Direct Operating Expenses for the year
ended November 30, 1995, included herewith. The results of the
three months operations were annualized to be comparative to the
Statement of Operations for Gateway Energy Corporation for the
year ended February 28, 1995.
This annualization of the three-month period ended February 28,
1995, was necessary as operating results prior to December 1, 1994
for the properties acquired from Wynn-Crosby 1994, Ltd were
not available.
<PAGE>
Gateway Energy Corporation
Adjusting Entries
Pro Forma Financial Statements
BALANCE SHEET
(A)
Investment in Castex Energy 1995 LP $1,345,560
Preferred Stock $1,602
Paid-in Capital $1,343,958
To adjust for funds raised for investment
in Castex Energy 1995 LP.
(B)
Partnership Capital $2,446,473
Investment in Castex Energy 1995 LP $1,345,560
Minority Interest $1,100,913
To eliminate the equity in the limited
partnership and to reflect the minority
interest.
INCOME STATEMENT
(C)
Nine Months Year Ended
----------- ----------
Preferred Stock Dividends $144,180 192,240
To reflect preferred dividends on the
funds raised to make the equity investment
of $1,602,000 times 12% dividend rate.
(D)
Depletion and Amortization $1,266,800 2,009,239
To reflect depletion on the production
for the respective periods, at
$.93 per MCF produced.
(E)
Interest Expense $641,250 855,000
To reflect interest expense on funds
borrowed by the partnership to acquire
the producing properties at 9% per annum
on $9,500,000.
(F)
Minority Interests
To reflect the minority interest of the $228,700 315,100
limited partners other than Gateway
Energy Corporation of 45%.
<PAGE>
Gateway Energy Corporation
Pro Forma Balance Sheet
November 30, 1995
<TABLE>
<CAPTION>
Gateway Castex
Energy Energy
Corporation 1995 LP Pro Forma Pro Forma
Nov. 30, 1995 Jan. 1, 1996 Total Adjustments Balance
------------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $361,800 $1,386,871 $1,748,671 $1,748,671
Trade Accounts Receivable 3,032,400 3,032,400 3,032,400
Other Current Assets 674,600 98,749 773,349 773,349
---------- ---------- ---------- -----------
Total Current Assets 4,068,800 1,485,620 5,554,420 5,554,420
INVESTMENT IN CASTEX ENERGY 1995 LP (A) 1,345,560 0
(B) (1,345,560)
PROPERTY AND EQUIPMENT, AT COST
Gas Gathering and transmission 10,705,300 10,705,300 10,705,300
Oil and Gas Properties, using 1,244,100 10,797,938 12,042,038 12,042,038
full cost accounting
Other Fixed Assets 381,500 381,500 381,500
Less Accumulated Depreciation,
Depletion and Amortization 977,400 977,400 977,400
---------- ----------- ----------- --------- -----------
Total Property and Equipment 11,353,500 10,797,938 22,151,438 0 22,151,438
OTHER ASSETS 969,700 320,000 1,289,700 1,289,700
---------- ----------- ----------- --------- ----------
$16,392,000 $12,603,558 $28,995,558 $0 $28,995,558
---------- ----------- ----------- --------- -----------
---------- ----------- ----------- --------- -----------
CURRENT LIABILITIES
Accounts Payable $2,218,900 $166,171 $2,385,071 $2,385,071
Other Current Liabilities 659,500 490,914 1,150,414 1,150,414
Current Maturities 64,300 1,121,000 1,185,300 1,185,300
---------- ----------- ----------- --------- ----------
Total Current Liabilities 2,942,700 1,778,085 4,720,785 0 4,720,785
LONG TERM DEBT 152,600 8,379,000 8,531,600 8,531,600
MINORITY INTERESTS 54,900 0 54,900 (C) 1,100,913 1,155,813
PREFERRED STOCK OF SUBSIDIARY 341,500 0 341,500 341,500
MANDATORY REDEEMABLE PREF. STOCK 8,454,200 0 8,454,200 8,454,200
STOCKHOLDERS' EQUITY
Preferred Stock 6,300 0 6,300 (B) 1,602 7,902
Common Stock 261,400 0 261,400 261,400
Partners' Capital Accounts 2,446,473 2,446,473 (C) (2,446,473) 0
Paid in Capital 8,287,700 0 8,287,700 (A) 1,343,958 9,631,658
Accumulated Deficit (4,109,300) 0 (4,109,300) (4,109,300)
---------- ----------- ----------- ---------- -----------
Total Stockholders' Equity 4,446,100 2,446,473 6,892,573 (1,100,913) 5,791,660
$16,392,000 $12,603,558 $28,995,558 $0 $28,995,558
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Gateway Energy Corporation
Pro Forma Statement of Operations
Nine Months Ended November 30, 1995
<TABLE>
<CAPTION>
Gateway Castex Energy
Energy Corp 1995 LP
Nine Months Nine Months Pro Forma Pro Forma
Nov. 30, 1995 Nov. 30 1995 Total Adjustments Balance
------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $8,368,200 $2,743,200 $11,111,400 $11,111,400
OPERATING COSTS AND EXPENSES
Cost of Natural Gas Purchased 4,755,700 4,755,700 4,755,700
Operation and Maintenance 1,651,600 326,800 1,978,400 1,978,400
Depreciation, Depletion & Amort. 513,600 513,600 (D) 1,266,800 1,780,400
General and Administrative 1,240,800 1,240,800 1,240,800
---------- ---------- ---------- --------- ---------
8,161,700 326,800 8,488,500 1,266,800 9,755,300
---------- ---------- ---------- --------- ---------
OPERATING PROFIT 206,500 2,416,400 2,622,900 (1,266,800) 1,356,100
OTHER INCOME (EXPENSE)
Interest Income 73,000 73,000 73,000
Interest Expense (49,000) (49,000)(E) (641,300) (690,300)
Minority Interests 83,200 83,200 (F) (228,700) (145,500)
Other 18,800 18,800 18,800
---------- ---------- ---------- --------- ---------
126,000 0 126,000 (870,000) (744,000)
---------- ---------- ---------- --------- ---------
Earnings Before Income Taxes 332,500 2,416,400 2,748,900 (2,136,800) 612,100
INCOME TAXES 31,900 0 31,900 31,900
---------- ---------- ---------- --------- ---------
Net Earnings 300,600 2,416,400 2,717,000 (2,136,800) 580,200
Provision for Preferred Dividends 1,726,800 1,726,800 (C) 144,180 1,870,980
---------- ---------- ---------- --------- ---------
Loss Applicable to Common Stock ($1,426,200) $2,416,400 $990,200 ($2,280,980) ($1,290,780)
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
Loss Per Common Share $(0.06) $(0.05)
---------- ---------
---------- ---------
</TABLE>
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
GATEWAY ENERGY CORPORATION
NOVEMBER 30, 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Gateway Energy Corporation
We have audited the accompanying combined statement of revenue and direct
operating expenses of certain acquired property interests of Castex Energy 1995,
L.P. (a limited partnership in which Gateway Energy Corporation has a 55%
partnership interest) (see note A), as of November 30, 1995. These financial
statements are the responsibility of Gateway Energy Corporation's management.
Our responsibility is to express an opinion on the financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides reasonable basis for our opinion.
The accompanying financial statement prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion on Form 8-K of Gateway Energy Corporation) as
described in note A to the financial statements and are not intended to be a
complete presentation of Gateway Energy Corporation's revenues and expenses.
In our opinion, the financial statement referred to above present fairly,
in all material respects, the combined revenue and direct operating expenses of
certain acquired property interests of Castex Energy 1995, L.P., described in
note A, as of November 30, 1995, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Houston, Texas
March 22, 1996
<PAGE>
GATEWAY ENERGY CORPORATION
COMBINED STATEMENTS OF REVENUE AND DIRECT OPERATING
EXPENSES OF CERTAIN ACQUIRED PROPERTY INTERESTS
OF CASTEX ENERGY 1995, L.P.
Year ended November 30, 1995
<TABLE>
<S> <C>
Revenue - oil and gas sales $3,865,964
Direct operating expense
Lease operations 256,370
Production taxes 179,479
----------
435,849
----------
Excess of revenue over direct operating expenses $3,430,115
----------
----------
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
GATEWAY ENERGY CORPORATION
NOTES TO COMBINED STATEMENT OF REVENUE AND
DIRECT OPERATING EXPENSES OF CERTAIN ACQUIRED
PROPERTY INTERESTS OF CASTEX ENERGY 1995, L.P.
November 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND GENERAL INFORMATION
The accompanying combined statement of revenue and direct operating expenses
present the ownership interest of Castex Energy 1995, L.P. (Partnership) (a
limited partnership in which Gateway Energy Corporation has a 55% partnership
interest) in the revenue and direct operating expenses of certain oil and gas
property interests (Properties) acquired from Wynn-Crosby 1994, Ltd. The
combined statement includes the revenue and direct operating expenses of
the Properties for the year ended November 30, 1995.
The accompanying combined statement does not reflect provisions for
depletion, depreciation and amortization, if any, which may have been
recorded in the financial records of the previous interest owner. The
combined statement also does not reflect certain additional expenses that may
have been incurred in connection with the ownership of the Properties such as
interest on indebtedness and general and administrative expenses incurred
individually by the prior interest owners as such costs are not comparable to
those which will result from the future operation of the properties.
Lease operations expense includes monthly administrative overhead costs and
other direct costs of operating the Properties which were charged to the
joint account of all working interest owners by the operator of the wells.
The Properties are not taxpaying entities. Any taxable income arising from
the operation of the Properties accrues directly to the interest owner.
Accordingly, no provision for income taxes has been made in the combined
statement of revenue and direct operating expenses.
NOTE B - GAS BALANCING OBLIGATION
The Properties follow the cash method of accounting for significant gas
imbalances. Under the cash method, the Properties recognize revenues based
on the amount of gas sold to purchasers, which may differ from the amount to
which the Partnership is entitled based on its working interest in the
properties. Gas imbalances at November 30, 1995 are as follows:
4
<PAGE>
GATEWAY ENERGY CORPORATION
NOTES TO COMBINED STATEMENT OF REVENUE AND
DIRECT OPERATING EXPENSES OF CERTAIN ACQUIRED
PROPERTY INTERESTS OF CASTEX ENERGY 1995, L.P. - Continued
November 30, 1995
NOTE B - GAS BALANCING OBLIGATION - CONTINUED
<TABLE>
<CAPTION>
MCF Amount
--------- ----------
<S> <C> <C>
Total Overtakes (product only) 101,732 $ 188,204
Total Undertakes (product and cash
balancing) (182,219) (405,851)
-------- --------
Total Net Undertakes (80,487) $(217,647)
-------- --------
-------- --------
</TABLE>
NOTE C - DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
The Properties' oil and gas activities are conducted entirely in the United
States. A summary of the Properties' changes in quantities of proved oil and
gas reserves for the year ended November 30, 1995 follows:
<TABLE>
<CAPTION>
Oil Gas
(Bbl) (Mcf)
-------- ------------
<S> <C> <C>
Total proved reserves -
developed and undeveloped:
Balance, December 1, 1994 34,650 13,508,964
Production 4,350 1,902,264
------- -----------
Balance, November 30, 1995 30,300 11,606,700
------- -----------
------- -----------
Proved developed reserves:
December 1, 1994 34,650 13,508,964
------- -----------
------- -----------
November 30, 1995 30,300 11,606,700
------- -----------
------- -----------
</TABLE>
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves at November 30, 1995 follows:
<TABLE>
<S> <C>
Future cash flows $22,017,700
Future production and development costs 4,978,200
-----------
Future net cash flows 17,039,500
10% annual discount for estimated
timing of cash flows 4,863,900
-----------
Standardized measure of discounted
future net cash flows $12,175,600
-----------
-----------
</TABLE>
5
<PAGE>
GATEWAY ENERGY CORPORATION
NOTES TO COMBINED STATEMENT OF REVENUE AND
DIRECT OPERATING EXPENSES OF CERTAIN ACQUIRED
PROPERTY INTERESTS OF CASTEX ENERGY 1995, L.P. - Continued
November 30, 1995
NOTE C - DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) -
CONTINUED
The changes in the standardized measure of discounted future net cash flows
relating to proved oil and gas reserves for the year ended November 30, 1995:
<TABLE>
<S> <C>
Sales of oil and gas produced,
net of production costs $ 3,430,115
Net change in prices and
production costs 2,785,608
Net change in discount (1,721,812)
Other 548,604
-----------
Net decrease 5,042,515
Beginning of period 17,218,115
-----------
End of period $12,175,600
-----------
-----------
</TABLE>
The estimate of proved reserves and related valuations were determined
based primarily upon the reserve report prepared by independent petroleum
engineers in accordance with the provisions of Statement of Financial
Accounting Standards No. 69 (SFAS 69) DISCLOSURES ABOUT OIL AND GAS
PRODUCING ACTIVITIES.
The estimates of proved reserves are inherently imprecise and are
continually subject to revision based on production history, results of
additional exploration and development, price changes and other factors.
The standardized measure of discounted future net cash flows related to
proved oil and gas reserves and the changes in standardized measure of
discounted future net cash flows relating to proved oil and gas reserves
were prepared in accordance with the provisions of SFAS 69. Future cash
inflows were computed by applying current prices at year-end to estimated
future production. Future production and development costs are computed by
estimating the expenditures to be incurred in developing and producing the
proved oil and gas reserves at year-end, based on year-end costs and
assuming continuation of existing economic conditions. No future income
tax expenses were calculated as the Properties are not taxpaying entities.
Future net cash flows are discounted at a rate of 10% annually to derive
the standardized measure of discounted future net cash flows. This
calculation procedure does not necessarily result in an estimate of the
fair market value or the present value of the Properties.
6
