UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Amendment No. 1)
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-1381-D
EuroGas, Inc.
(Exact name of small business issuer as specified in charter)
Utah 87-0427676
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
435 West Universal Circle, Sandy, Utah 84070
(Address of principal executive offices) (Zip Code)
(801) 255-0862
(Issuer's Telephone number, including area code)
N/A
(Former name, former address, and former fiscal
year, if changed since last report)
Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during
the past 12 months (or for such shorter period that the Issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Issuer filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 31, 1995, the Issuer had 27,910,181 shares of its
common stock, par value $0.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
Page 1 of _____ consecutively numbered pages.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 5. OTHER INFORMATION
EuroGas, Inc. (the "Registrant"), hereby amends and supplements
its report on form 10-QSB for the period ended March 31, 1995,
by filing financial statements in connection with its acquisition
of the remaining interest of Globegas B.V. (formerly McKenzie
Methane Poland, B.V.) (a development stage enterprise). In
connection with the filing of these financials, it should be
noted that the acquisition announced in the original report was
not fully completed until October 4, 1995.
The following financial statements are included as part of this
statement:
Pro Forma Financial Statements
Pro forma Condensed Combined Balance Sheet of EuroGas, Inc.,
and Globegas B.V. as of September 30, 1994 (Globegas statements
are as of December 31, 1994)
Pro forma Condensed Combined Statement of Operations of
EuroGas, Inc., and Globegas B.V. as of September 30, 1994
(Globegas statements are as of December 31, 1994)
Consolidated Financial Statements and Report of Independent
Registered Auditors of Globegas B.V. (Formerly McKenzie Methane
Poland, B.V.) (A development State Enterprise) December 31, 1994
and 1993
Report of independent registered auditors, Grant Thornton
Consolidated Balance Sheets of Globegas B.V. as of December 31,
1994 and 1993
Consolidated Statements of Operations of Globegas B.V. for the
years ended December 31, 1994 and 1993, and the period from
inception (June 7, 1991) through December 31, 1994
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1994, 1993, and 1992, and the period from
inception (June 7, 1991) through December 31, 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993, and 1992, and the period from inception
(June 7, 1991) through December 31, 1994; and the notes thereto.
<PAGE>
EUROGAS, INC.
Notes to Pro forma Condensed Combined Financial Statements
(Unaudited)
The proforma condensed combined financial statements have been
prepared assuming the acquisition of Globegas B.V. by EuroGas as
of the beginning of the individual fiscal years of the companies
(January 1, 1994 for Globegas and October 1, 1993 for EuroGas).
The pro forma combined statements include the financial statement
balances for Globegas at December 31, 1994 and for the year then
ended and the financial statement balances for EuroGas at September
30, 1994 and for the year then ended.
(1) To record the acquisition of the remaining ownership
interest of EuroGas in Globegas and to adjust the value of
Globegas on EuroGas' financial statements to the book value
of the net assets of Globegas as follows:
<TABLE>
<CAPTION>
<S> <C>
Net assets of Globegas as of 12/31/94 $ 3,203,973
EuroGas' ownership interest in Globegas 18.22%
Value of EuroGas' interest in Globegas $ 583,764
at Globegas' book net asset value
Historical cost of EuroGas' 18.22% $ 18,550,000
ownership interest in Globegas
Adjustment from EuroGas' historical $ (17,966,236)
cost to Globegas' net asset value
Value of remaining Globegas' net asset 2,620,209
value
Net adjustment to EuroGas' investment $ (15,346,027)
in Globegas
</TABLE>
(2) The pro forma consolidated financial statements represent
the combination of the financial statements of EuroGas and its
wholly-owned subsidiary, Globegas. All intercompany accounts and
transactions have been eliminated in the consolidation. The basis
for valuation of the net assets of Globegas is the book value of
those assets.
(3) Subsequent to the acquisition of Globegas, and as part of a
general restructuring, convertible debentures existing as of the
audit date of September 30, 1994 were converted into common stock.
The conversion of convertible debentures adjusts EuroGas
stockholders' equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Stockholders' equity as of 12/31/94 $ (7,556,795)
Convertible debentures at historical cost 10,541,000
Stockholders' equity restated for $ 2,984,205
conversion of convertible debentures
</TABLE>
<PAGE>
EuroGas, Inc.
Proforma Condensed Combined Balance Sheet
<TABLE>
<CAPTION>
Globegas B.V.
(formerly
McKenzie
Methane
EuroGas, Inc. Poland, B.V.) Restructuring Proforma
as of 9/30/94 as of 12/31/94 Adjustments Adjustments
(audited) (audited) (audited) (audited) Combined
ASSETS
Current Assets
<S> <C> <C> <C> <C> <C>
Cash 51,332 793,795 845,127
Misc. receivables 2,193 16,900 19,093
Materials & supplies 8,284 8,284
Deferred tax asset 1,052 1,052
Prepayments 22,647 22,647
Total Current Assets 54,577 841,626 0 0 896,203
Long Term Assets
Investment in
Globegas, B.V. 18,550,000 (15,346,027)(1) (3,203,973)(2) 0
Gas properties 6,745,050 6,745,050
Fixed assets 11,635 2,341,903 2,353,538
Accumulated depre-
ciation (388) (2,446,002) (2,446,390)
Deposits 70,727 70,727
Total Longterm Assets 18,631,974 6,640,951 (15,346,027) (3,203,973) 6,722,925
TOTAL ASSETS 18,686,551 7,482,577 (15,346,027) (3,203,973) 7,619,128
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Account payable 11,478 114,050 125,528
Payroll taxes 30,289 30,289
Current portion,
long term debt 2,200,000 2,200,000
Accrued expenses 226,880 226,880
Unsecured notes
payable 447,201 447,201
Taxes payable 1,231,613 1,231,613
Total Current
Liabilities 41,767 4,219,744 0 0 4,261,511
Long Term Liabilities
Due to related parties 313,500 58,860 372,360
Convertible debentures 10,541,000 10,541,000(3)
Deferred tax liability 1,052 1,052
Total Long Term
Liabilities 10,855,552 58,860 0 0 10,914,412
Total Liabilities 10,897,319 4,278,604 0 0 15,175,923
Stockholders' Equity
Common stock 26,794 25,007 2,620,209(1) (25,007)(2) 2,647,003
Add'l paid in capital 7,982,889 11,282,795 (11,282,795)(2) 7,982,889
Cumulative foreign
currency adjustment (67,872) (67,872)(2) 0
Retained earnings
deficit (220,451) (8,035,957) (17,966,236) 8,035,957(2) (18,186,687)
Total Stockholders'
Equity 7,789,232 3,203,973 (15,346,027) (3,203,973) (7,556,795)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 18,686,551 7,482,577 (15,346,027) (3,203,973) 7,619,128
</TABLE>
<PAGE>
EuroGas, Inc.
Proforma Condensed Combined Statement of Operations
<TABLE>
<CAPTION>
Globegas B.V.
(formerly
McKenzie
Methane
EuroGas, Inc. Poland, B.V.) Restructuring Proforma
as of 9/30/94 as of 12/31/94 Adjustments Adjustments
(audited) (audited) (audited) (audited) Combined
REVENUES
<S> <C> <C> <C> <C> <C>
Interest Income 198 18,562 18,760
Foreign exchange
gains 83,422 83,422
Total Revenues 198 101,984 0 0 102,192
COSTS AND EXPENSES
Depreciation and
valuation allow 388 614,393 614,781
General & Adminis. 180,109 1,087,913 1,268,022
Interest expense 316,330 316,330
Other expense 132,975 132,975
Restructuring exp. (17,966,236)(1) (17,966,236)
Total Costs & Exp. 180,497 2,151,611 (17,966,236) 0 (15,634,128)
LOSS BEFORE TAXES (180,299) (2,049,627) 17,966,236 0 15,736,128
INCOME TAXES 154,656 154,656
NET LOSS (180,299) (2,204,283) 17,966,236 0 15,581,654
</TABLE>
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 793,795 $ 166,206
Sundry debtors 16,900 31,491
Materials and supplies 8,284 55,373
Prepayments 22,647 39,287
Total current assets 841,626 292,357
PROPERTY AND EQUIPMENT - AT COST
Gas properties not subject to
amortization, at cost using the full
cost method of accounting 6,745,050 5,094,626
Other property and equipment 2,341,903 2,156,433
9,086,953 7,251,059
Less accumulated depreciation and 2,446,002 1,831,609
valuation allowance
6,640,951 5,419,450
$ 7,482,577 $ 5,711,807
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 114,050 $ 159,858
Current maturities of long-term debt 2,200,000 2,200,000
Accrued expenses 226,880 4,100
Unsecured notes payable 447,201 283,772
Taxes payable 1,231,613 1,076,957
Due to related parties 58,860 104,230
Total current liabilities 4,278,604 3,828,916
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Common stock - $57.80 par value;
authorized 2000 shares; issued
and outstanding 442 shares in 1994
400 shares in 1993 25,007 23,120
Contributed capital 11,282,795 7,675,624
Cumulative foreign currency
translation adjustment (67,872) 16,181
Deficit accumulated in the
development stage (8,035,957) (5,831,674)
Total stockholders' equity 3,203,973 1,882,891
$ 7,482,577 $ 5,711,807
</TABLE>
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from
June 7, 1991
(inception)
through
Year ended December 31, December 31,
1994 1993 1992 1994
Revenues
<S> <C> <C> <C> <C>
Interest income $ 18,562 $ 239,423 $ 3,689 $ 269,986
Foreign exchange
gains 83,422 72,810 - 211,676
101,984 312,233 3,689 481,662
Costs and expenses
Impairment of gas
properties - 969,101 - 969,101
Depreciation and
valuation allowance 614,393 588,345 257,279 1,479,901
General &
administrative 1,087,913 1,614,116 189,223 3,581,548
Foreign exchange
losses, net - - 263,336 290,137
Interest 316,330 258,797 - 575,127
Other 132,975 105,166 16,902 390,192
2,151,611 3,336,296 726,740 7,286,006
LOSS BEFORE TAXES 2,049,627 3,223,292 723,051 6,804,344
INCOME TAXES 154,656 140,004 910,312 1,231,613
NET LOSS $ 2,204,283 $ 3,363,296 $1,633,363 $8,035,957
Net loss per share $ 5,324.36 $ 8,408.24 $ 4,083.41 $19,890.98
Weighted average
outstanding shares 414 400 400 404
</TABLE>
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1994, 1993, and 1992 and the period from
June, 1991 (inception) through December 31, 1994
Total
Deficit Capital
Cumulative Accumulated & Stock
Capital Stock Contributed Translation Development Holders
Shares Amount Capital Adjustment Deficit Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at 6/91 - $ - $ - $ - $ - $ -
(inception)
Contributed capital - - 3,675,264 - - 3,675,264
Net loss - - - - (835,015) (835,015)
Balance Jan. 1, 1992 - - 3,675,264 - (835,015) (835,015)
Issuance of capital
stock 400 23,120 - - (835,015) 2,840,249
Net loss - - - - (1,633,363) (1,633,363)
Foreign currency trans-
lation adjustment - - - (382) - (382)
Balance Dec. 31, 1992 400 23,120 3,675,264 (382) (2,468,378) 1,229,624
Contributed capital - - 4,000,000 - - 4,000,000
Foreign currency trans-
lation adjustment - - - 16,563 - 16,563
Net loss - - - - (3,363,296) (3,363,296)
Balance Dec. 31, 1993 400 23,120 7,675,264 16,181 (5,831,674) 1,882,891
Issuance of additional
shares of capital
stock 42 1,887 3,607,531 - - 3,609,418
Foreign currency trans-
lation adjustment - - - (84,053) - (84,053)
Net loss - - - - (2,204,283) (2,204,283)
Balance Dec. 31, 1994 442 $ 25,007 $11,282,795 $ (67,872) $(8,035,957) $3,203,973
</TABLE>
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASHFLOWS
Period from
June 7, 1991
(inception)
Through
Year Ended December 31, December 31
1994 1993 1992 1994
<S> <C> <C> <C> <C>
Net loss $ (2,204,283) $ (3,363,296) $ (1,633,363) $ (8,035,957)
Adjustments to reconcile
net loss to net cash used
in operating activities
Impairment - 969,101 - 969,101
Depreciation & amortization 614,393 588,345 257,279 1,479,901
Decrease (increase) in
sundry debtors 11,593 9,426 91,499 112,331
Decrease (increase) in
materials & supplies 43,652 12,025 63,140 (7,517)
Decrease (increase) in
prepayments 13,540 10,728 (81,409) (57,141)
(Decrease) increase in
accounts payable (63,616) (143,284) (401,593) (194,805)
Increase (decrease) in
accrued expenses 223,457 (21,815) 39,793 241,802
Increase (decrease) in
taxes payable 154,656 140,004 910,312 1,231,613
Net cash used in operating
activities (1,206,608) (1,798,766) 77,436 (3,871,062)
Cash flows from investing
activities
Payments for gas properties (1,650,424) (1,951,464) (1,850,442) (6,745,050)
Capital expenditure for
other property and equip. (185,470) (186,835) (110,599) (2,341,903)
Net cash used in investing
activities (1,835,894) (2,138,299) (1,961,041) (9,086,953)
Cash flows from financing
activities
Proceeds from related party
borrowings 286,339 1,516,264 1,455,026 5,604,037
Repayment of related party
borrowings (331,709) (3,665,160) - (5,545,177)
Proceeds from issuance of
long-term debt - 2,200,000 - 2,200,000
Proceeds from issuance of
notes payable 163,429 114,804 168,968 447,201
Proceeds from issuance of
stock and capital
contributions 3,609,418 4,000,000 23,120 11,307,802
Net cash provided by
financing activities 3,727,477 4,165,908 1,647,114 14,013,863
Effect of exchange rate on
cash (57,386) (66,456) (20,112) (262,053)
NET INCREASE(DECREASE) IN
CASH AND CASH EQUIVALENTS 627,589 162,387 (411,475) 793,795
Cash and cash equivalents
at beginning of year 166,206 3,819 415,294 -
Cash and cash equivalents
at end of year $ 793,795 $ 166,206 $ 3,819 $ 793,795
</TABLE>
Supplemental information: no interest or tax payments have been made since
inception.
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Description of Business and Principles of Consolidation
On August 2, 1994 MCK Development entered into an agreement with
Energy Global AG (EGA), a subsidiary of Eurogas, Inc., to sell all
of the outstanding shares of Globegas B.V. The agreement provides
for the acquisition to be on an installment basis which has
resulted in 100% ownership of Globegas BV by EGA as of October 4,
1995. Effective August 25, 1995, Globegas B.V. changes its name
from McKenzie Methane Poland B.V.
The consolidated financial statements include the accounts of
Globegas B.V. and its two Polish subsidiaries - Pol-Tex Methane Sp.
zo.o (PTM) and McKenzie Methane Rybkin Sp. zo.o (MMR). Globegas
B.V. (the Company) is a Dutch holding company. PTM was formed
with the state owned Jastrzebska Spolka Weglowa Spolka Akcjna
(JSWSA) who hold a 15% interest and MMR was formed with the
state owned Rybnicka Spolka Weglowa Spolka Akcjna (RSWSA) who
holds a 15% interest. PTM has obtained a 35 year concession for
exploration from the Polish Ministry of Environmental Protection
of Natural Resources and Forestry and is in the process of
developing coal bed methane gas reserve in the Upper Silesian
Coal Fields of Poland. The Company began methane gas exploration
in 1991. It is devoting substantially all of its efforts to
exploring and developing the methane gas reserves. However,
proved reserves have not been established. MMR has no current
activities. Intercompany accounts and transactions have been
eliminated in consolidation. As operating losses in PTM
applicable to the minority interest (JSWSA) exceed the minority
interest's share capital, all the losses have been charged to
PTM and included in the accompanying financial statements.
2. Development Stage Enterprise
The Company's operating subsidiary has devoted substantially all
of its efforts to exploring for and development of coal bed
methane gas reserves. Commercial production has not commenced
at December 31, 1994.
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
3. Gas Properties Not Subject to Amortization
The full cost method of accounting is used to account for gas
properties. Under this method of accounting all costs incidental
to the acquisition, exploration, and development of properties
are capitalized and amortized using the units of production method.
These costs include costs of drilling and equipping wells, as well
as directly related overhead costs which includes the costs of
company owned equipment. At December 31, 1994, a determination
cannot be made about the extent of methane gas reserves that
should be classified as proven reserves. Consequently, the
associated properties have not yet been amortized. The Company
expects to begin gas production in 1997. These costs are
evaluated periodically for impairment and if an impairment is
indicated, the costs are charged to operations. Due to drilling
in certain areas for which the Company did not have its
concession confirmed and currently has no rights to future
production, impairment has been deemed to occur and the
capitalized costs and certain properties are included in costs
and expenses in the accompanying statement of operations for
the year ended December 31, 1993.
Costs incurred for gas properties consist of the following:
<TABLE>
<CAPTION>
Acquisition and
Period Incurred Exploration Costs
<S> <C>
Year ended December 31, 1994 $ 1,650,424
Year ended December 31, 1993 1,951,464
Year ended December 31, 1992 1,850,442
Period from June 7, 1991 to December 31, 1991 1,292,720
$ 6,745,050
</TABLE>
All the Company's gas properties are located in Poland. The
Company had the following capitalized costs relating to gas
properties at December 31,
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Unevaluated gas properties $ 5,775,949 $ 4,125,525
Proved gas properties 969,101 969,101
6,745,050 5,094,626
Less accumulated valuation allowance 969,101 969,101
$ 5,775,949 $ 4,125,525
</TABLE>
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
4. Depreciation
Depreciation is provided on a straight-line basis over the
estimated useful lives, at the following rates:
<TABLE>
<CAPTION>
<S> <C>
Buildings 40 years
Equipment and vehicle 3 to 5 years
</TABLE>
5. Loss Per Share
Loss per share is calculated using the weighted average number of
shares outstanding during each year. Common stock equivalents
result in negative dilution and have not been included in the
calculation.
6. Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents. At December 31, 1994 and 1993 $64,489 and $113,263
respectively were held by banks in Poland. The Company would
incur certain costs if the cash were to be transferred out of
Poland.
7. Foreign Currency Translation
The financial statements of the Company are measured using the
local currency, the Dutch Guilder, as the functional currency.
The consolidated balance sheet accounts are translated into U.S.
dollars at the year-end rates of exchange and the consolidated
balance statements of operations items are translated at the
weighted average exchange rates for the year. Accordingly, the
effect of translating the Company's financial statements into
U.S. dollars is recorded as a separate component of stockholders'
equity. Foreign exchange adjustments attributable to the
financial statements of the Company's subsidiaries, due to the
highly inflationary Polish economy in which they operate, are
reflected in the operating statement
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
8. Date of Inception - Stock Agreement
The Company was formed under an agreement dates June 7, 1991.
The Company was "in formation" until the stock was formally
issued in July 1992.
The June 7, 1991 agreement identified a former investor as a
50% owner. The agreement also required the former investor to
make cash contributions up to $20,300,000 for funding of the
Polish methane gas exploration. Of the $20,300,000 required
contribution, the former investor only made cash contributions
prior to March 1992 of $3,675,264. When the stock was issued
in July 1992, due to the unfulfillment of the former investor's
required cash contributions, he was not issued shares of stock.
Instead, the amount is included as capital contribution.
9. Income Taxes
Deferred taxes and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax cases at enacted tax rates when such
amounts are expected to be realized or settled.
NOTE B - REALIZATION OF ASSETS
At December 31, 1994, current liabilities exceeded current assets
by $3,436,978 and the Company had loses of $8,035,957 accumulated
since inception in July 1991. The Company is considered a
development stage company as defined by Statement of Financial
Accounting Standard No. 7, having not commenced planned principal
operations. Activities have been limited to exploration
activities with no significant production of methane gas to
date. Realization of the amounts included in gas properties is
dependent on the Company developing sufficient quantities of
proven and probable reserves of methane gas. If exploration
activities prove to be unsuccessful, all or a portion of the gas
properties not subject to amortization will be charged to
operations. These factors raise substantial doubt about the
ability of the Company to continue in it current form. In order
to continue, the Company will need to raise debt and equity
capital to meet the short and long term obligations of the
Company and to fund the exploration and development of proven
reserves of methane gas on concessions currently held by the
Company. The financial statements do not include any
adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable
to continue in existence.
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
NOTE C - OTHER PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Other property and equipment consists of the following at
December 31,:
<S> <C> <C>
1994 1995
Buildings and land $ 254,440 $ 254,440
Drilling rigs and related equipment 2,087,463 1,901,993
2,341,903 2,156,433
Less accumulated depreciation 1,476,901 862,508
$ 865,002 $ 1,293,925
</TABLE>
NOTE D - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt payable at December 31, 1994 and 1993 is as follows:
December 31,
1994 1995
<S> <C> <C>
Note payable to OMV Aktiengesellschaft, $ 2,200,000 $ 2,200,000
an Austrian company, with interest at
7% repayable $400,000 due March 31,
1995 and subsequent quarterly install-
ments of $260,000 plus interest begin-
ning July 1, 1995. The note is denom-
inated in U.S. dollars. The note is
secured by certain drilling equipment,
office equipment, and land and buildings.
The note contains an option OMV can
exercise to purchase 25% of Pol-Tex
Methane Sp. zo.o should the Company
default on the repayment of the note.
2,200,000 2,200,000
Less Current Maturities 2,200,000 2,200,000
$ - $ -
</TABLE>
The Company has not made the quarterly repayments as required
by the terms of the note payable to OMV. As a result, the
Company is in default, and accordingly, the whole amount of
the note has been classified as current in the accompanying
balance sheet. OMV has not exercised their option to
purchase PTM
<PAGE>
Globegas B.V. (formerly McKenzie Methane Poland, B.V.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
NOTE E - UNSECURED NOTES PAYABLE
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Unsecured notes payable to employee,
denominated in US. dollars, payable
on demand with interest rate at 12.5% 290,206 164,804
Unsecured note payable to former director,
denominated in U.S. dollars, payable
in March 1995 with interest rate of 10% 108,027 70,000
Other 48,968 48,968
$ 447,201 $ 283,772
</TABLE>
NOTE F - INCOME TAXES
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
<S> <C> <C> <C>
The provision for income tax expense,
all current, consists of the following:
Dutch domestic income tax 154,656 140,004 910,312
Deferred tax assets are comprised of
the following:
Tax loss carry forwards 264,000 167,000 78,000
Less valuation allowance (264,000) (167,000) (78,000)
$ - $ - $ -
</TABLE>
The net charge in the deferred tax valuation allowance was $97,000
and $89,000 for the years ended 1994 and 1993, respectively. At
December 31, 1994 PTM had tax loss carry forwards of approximately
$264,000 in Poland, expiring at various dates through 1997.
Dutch Domestic income tax is assessed at various rates on foreign
exchange gains, gains on the sale of property and equipment and
interest income.
NOTE G - RELATED PARTY TRANSACTIONS
A stockholder and director of the Company provides various
administrative services through a company for which he is an
employee. The payments for these services in the years ended
December 31, 1994 and 1993 were approximately $194,000 and
$237,000, respectively.
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company has entered into employment contracts for consulting
services with certain individuals, which include a former
director and members of his immediate family. The contracts
range from six months to three years and will continue until
either party to the contract gives notice to terminate.
Current future commitments under these contracts is as follows:
<TABLE>
<CAPTION>
<S> <C>
Payable in 1995 $ 876,400
Payable in 1996 720,400
Payable in 1997 445,233
$ 2,042,033
</TABLE>
Dutch law requires the annual statutory filing of financial
statements with the Chamber of Commerce in the Netherlands. The
Company has only filed through the year ended December 31, 1992
and as a result could incur a maximum penalty of $5,000. The
Company has not filed Dutch income tax returns through the
year ended December 31, 1993. As these returns are past due,
interest charges amounting to $23,327 in 1994 and @2,148 in
1993 have been accrued in the accompanying financial
statements.
NOTE I - SUBSEQUENT EVENT
On August 9, 1995, the Company's parent, Eurogas, Inc. was
served a formal order of private investigation by the U.S.
Securities and Exchange Commission (SEC). To date, the SEC
has issued a subpoena requiring the production of certain
documents. The SEC staff has advised that its inquiry should
not be construed as an indication by the SE or its staff that
any violations of law have occurred.
The Company is not in compliance with its concession
agreement with the Polish Ministry of Environmental
Protection of Natural Resources and Forestry. The agreement
provides for the Company to meet an investment timetable
over the period of development. The Company has applied to
the Ministry for an extension of the timetable and
management believes that this extension will be granted.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Issuer has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
EUROGAS, INC.
Date: March 27, 1996 By /s/ Hank Blankenstein
Hank Blankenstein
Secretary/Treasurer