SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendmend No. 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): July 12, 1996
EuroGas, Inc.
-----------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Utah 33-1381-D 87-0427676
-----------------------------------------------------------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number Identification No.)
942 East 7145 South, #101A, Midvale, Utah 84047
-----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 255-0862
--------------
(Former name, former address, and formal fiscal year, if changed since
last report)
EuroGas, Inc. (the "Company"), hereby amends its report on Form 8-K dated
Juy 12, 1996, as follows:
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On July 12, 1996, the Company completed the acquisition of Danube
International Petroleum Company, Inc., a Texas corporation ("Danube"), as a
wholly owned subsidiary.
Danube's primary asset is a joint venture with Nafta Gbely a.s. (part of
the recently privatized Slovakian national gas company) which owns the rights
to explore and develop hydrocarbons, principally natural gas, on approximately
128,000 acres located in the East Slovak Basin (the "Slovakian Concession").
Between 1960 and 1982 (13 years prior to Danube's involvement in the area)
eleven wells were drilled on the Slovakian Concession, all of which tested
gas or had gas shows, with the most significant wells testing up to 2 million
cubic feet per day (mmcf). None of these wells were completed for commercial
production due to (1) more significant wells located in producing fields to
the north; and (2) the fact that modern completion techniques, such as
fracing, were not then available under the Czech communist regime.
The joint venture intends to concentrate on the exploration of regional
gas occurrences in areas which are generally characterized by large gross
reserve thickness, sometimes known as "pay zones", up to several thousand feet.
The initial wells are to be drilled only a short distance from the wells
drilled in the past. Danube is required to pay 75% of the costs for the
initial test phase which is estimated to be approximately $6,640,000. If
warranted, Danube would then pay for 60% of the costs of drilling for the
next production phase estimated to be about $6,800,000. Thereafter, the
drilling is expected to be completed on a 50-50 basis.
Danube holds a 47.5% net revenue interest in the Slovak concession.
Danube also has a joint venture with Moravske Naftave Doly a.s., a recently
privatized national owned Czech company which owns the oil and gas
exploration rights to approximately 40,000 acres located near the city of
Brno (the "Czech Concession"). That joint venture agreement provides that
Danube shall act as an operator for the project and shall provide an initial
$1,200,000 for the testing of the field in exchange for a 25% working
interest. There were four wells previously drilled and tested on
approximately 735 acres of the Czech Concession. Danube is planning to
retest those wells in early August to determine if their flow rates are
sufficient to complete them for production and to hook them up to delivery
pipelines and then will develop a more comprehensive drilling program during
the last quarter of 1996.
Under the terms of the agreement with Danube (the " Agreement"), the
Company acquired all of the issued and outstanding stock of Danube in exchange
for $3,000,000 in cash ($500,000 paid at closing and $2,500,000 to be paid on
December 31, 1996), 2,500,000 shares of the Company's restricted common stock,
1,250,000 shares of a newly created preferred stock which is convertible into
2,500,000 additional shares of the Company's common stock, and the right to
purchase up to 5,000,000 shares of common stock for $3.00 per share during
the next five years. The Danube assets are subject to approximately
$1,000,000 of indebtedness which was subsequently converted to a 5% interest
in the operating subsidiary of Danube.
As part of the transaction with Danube, Dr. Martin A. Schuepbach agreed
to become president and chief executive officer of EuroGas. Dr. Schuepbach
subsequently resigned and has asserted a breach of his employment agreement.
Concurrently, the Company acquired the rights held by a third party,
Chemilabco, to participate in the projects of Danube. Chemilabco had already
provided $500,000 in financing for drilling by Danube. In the past,
Chemilabco had also arranged financing for EuroGas' existing Polish Concession.
In exchange for Chemilabco's participation rights, prior accommodations for
the Company, and the arrangement of an additional $3,500,000 in financing
(subsequently reduced to $2,200,000), Chemilabco received 12,500,000 shares
of the Company's common stock.
The Company paid a $100,000 fee to SBC-Warburg, a leading United
Kingdom investment bank, for providing merger advisory services to the Company
in connection with the Danube transaction.
The Company is currently in litigation with Moyes Newby & Company over
fees it claims are due in connection with the transaction.
ITEM 7. FINANCIAL INFORMATION
EuroGas, Inc. (the "Company"), hereby amends and supplements its report of
a current event on Form 8-K dated July 12, 1996, by filing financial statements
in connection with its acquisition of Danube International Petroleum Company
("Danube"), a development stage enterprise.
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 Danube as
of June 30, 1996.
Pro forma Condensed Combined Statement of Operations of EuroGas, Inc., and
Danube as of June 30, 1996.
Consolidated Financial Statements and Report of Independent Certified
Accountants of Danube (A Development Stage Enterprise).
Report of independent certified public accountants, Hansen, Barnett &
Maxwell.
Consolidated Balance Sheets - June 30, 1996 (Unaudited) and December 31,
1995 and 1994.
Consolidated Statements of Operations for the Six Months Ended June 30,
1996 (Unaudited), for the Year Ended December 31, 1995 for the Period from
October 31, 1994 (Date of Inception) through December 31, 1994, and for the
Cumulative Period from October 31, 1994 through June 30, 1996 (Unaudited).
Consolidated Statements of Stockholders' Deficit for the Period from
October 31, 1994 (Date of Inception) through December 31, 1994, for the
Year Ended December 31, 1995, and for the Six Months Ended June 30, 1996
(Unaudited).
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
1996 (Unaudited) for the Year Ended December 31, 1995, for the Period from
October 31, 1994 (Date of Inception) through December 31, 1994, and for the
Cumulative Period from October 31, 1994 through June 30, 1996 (Unaudited).
Notes to Consolidated Financial Statements.
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: February 7, 1997 By /s/ Hank Blankenstein
--------------------------------------
Hank Blankenstein, Secretary/Treasurer
EUROGAS, INC. AND SUBSIDIARIES
Unaudited Condensed Pro Forma Financial Statements
On July 3, 1996, the Company completed an acquisition of Danube International
Petroleum Company and Subsidiaries (Danube). Danube is a joint venture partner
in agreements for the exploration and production of natural gas in Slovakia
and the Czech Republic. All of the issued and outstanding common stock of
Danube was acquired for $500,000 paid at closing, an obligation to pay
$2,500,000 on or before December 31, 1996, 15,000,000 shares of the Company's
common stock, 1,250,000 shares of a newly created 1996 Series preferred stock
which is convertible into an aggregate of 2,500,000 shares of common stock,
and the issuance of warrants to purchase up to 5,000,000 shares of common
stock at $3.00 per share during the five years subsequent to the date of the
acquisition. The acquisition of Danube was accomplished by Eurogas forming
a wholly-owned subsidiary incorporated in Texas and Danube was merged into
the subsidiary.
The acquisition has been accounted for by the purchase method of accounting
with the total purchase price being $4,102,085. The preferred stock issued
was assigned a value of $1,250, which is equal to its par value, and the
common stock was assigned a value of $15,000, which is also its par value.
The purchase price was allocated to the net assets acquired based on their
value. No goodwill was recognized from the acquisition. The following
pro forma condensed balance sheet has been prepared assuming the
acquisition of Danube occurred on December 31, 1995. The pro forma
statements of operations present the combined operations as if the
acquisition had occurred at January 1, 1995.
The accompanying pro forma financial statements have been condensed and
should be read in conjunction with the historical financial statements
of the Company and of Danube. The pro forma statements are not
necessarily indicative of the results that would have occurred had
the acquisition occurred on Janaury 1, 1995, nor are they necessarily
indicative of the results of operations that will occur during the
remaining portion of 1996.
Eurogas, Inc. & Subsidiaries
Unaudited Condensed Pro Forma Consolidated Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
Eurogas Danube Pro Forma Pro Forma
Consolidated Consolidated Adjustments
------------ ------------ ----------- -----------
Assets
<S> <C> <C> <C> <C>
Current Assets
Cash $ 413,954 $ 820,370 (C)$ 914,165 $ 2,148,489
Other receivables 504,010 595 504,605
Inventory 5,656 - 5,656
Prepaid expenses 2,499 - 2,499
----------- ----------- ----------- -----------
Total Current Assets 926,119 820,965 2,661,249
----------- ----------- ----------- -----------
Property and Equipment
Mineral intersts in unproved properties 7,704,597 581,389 (A) 4,837,009 13,122,995
Other property and equipment 2,391,531 4,570 2,396,101
Less: accumulated depreciation (2,257,170) (2,366) (2,259,536)
----------- ----------- ----------- -----------
Total Property and Equipment 7,838,958 583,593 13,259,560
----------- ----------- ----------- -----------
Other Assets
Investment in Danube - - -
Receivable from danube - - -
Goodwill 15,242 - 15,242
Deposits 208,424 3,758 (A) (3,758) 208,424
----------- ----------- ----------- -----------
Total Other Asets 223,666 3,758 223,666
----------- ----------- ----------- ------------
Total Assets $ 8,988,743 $ 1,408,316 $ 5,747,416 $16,144,475
=========== =========== =========== ===========
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable $ 248,254 $ 212,012 $ 460,266
Accrued expenses 3,144,970 160,829 3,305,799
Accrued income taxes 576,121 - 576,121
Notes payable - current 2,270,593 500,000 (B) 2,000,000 4,770,593
Notes payable-related parties-current 1,212,007 - 1,212,007
----------- ----------- ----------- -----------
Total Current Liabilities 7,451,945 872,841 10,324,786
----------- ----------- ----------- -----------
Long-Term Debt
Notes payable 2,206,841 - (C) 2,000,000 4,206,841
Notes payable-related parties 3,011,750 - 3,011,750
Deferred income taxes - - (A) 816,641 816,641
----------- ----------- ----------- -----------
Total Long-Term Debt 5,218,591 - 8,035,232
----------- ----------- ----------- -----------
Minority Interest - 950,000 950,000
----------- ----------- ----------- -----------
Stockholder's Deficit
Preferred stock 2,392 - (B) 1,250 3,642
Common stock 33,174 30 (A)(B) 14,970 48,174
Additional paid-in-capital 11,894,871 50,920 (A)(B) 449,080 12,394,871
Cumulative translation adjustment (14,749) - (14,749)
Deficit accum. during the devel. stage (15,597,481) (465,475) (A) 465,475 (15,597,481)
----------- ----------- ----------- -----------
Total Stockholder's Deficit (3,681,793) (414,525) (3,165,543)
----------- ----------- ----------- -----------
Total Liabilities & Stockholder's Deficit $ 8,988,743 $ 1,408,316 $ 5,747,416 $16,144,475
=========== =========== =========== ===========
</TABLE>
Eurogas, Inc. & Subsidiaries
Unaudited Condensed Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Eurogas Danube Pro Forma Pro Forma
Consolidated Consolidated Adjustments
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ $ -
----------- ----------- ----------- -----------
Expenses
Depreciation & valuation allow 480,999 1,577 482,576
General & administrative 3,528,114 61,724 3,589,838
----------- ----------- ----------- -----------
Total Operating Expenses 4,009,113 63,301 4,072,414
----------- ----------- ----------- -----------
Other Expenses
Interest Income 9,580 11,739 21,319
Interest expense (644,991) (C) (150,000) (794,991)
Foreign currency exchange loss, net (81,213) (831) (82,044)
Other Income 16,184 - 16,184
----------- ----------- ----------- -----------
Total Other Expenses (700,440) 10,908 (839,532)
----------- ----------- ----------- -----------
Loss before taxes (4,709,553) (52,393) (4,911,946)
----------- ----------- ----------- -----------
Benefit from income taxes 468,148 - 468,148
----------- ----------- ----------- -----------
Net Loss (4,241,405) (52,393) (4,443,798)
Dividends Applicable to Preferred Shares 86,176 - (B) 62,500 148,676
----------- ----------- ----------- -----------
Net Loss Applicable to Common Shares $(4,327,581) $ (52,393) $ (212,500) (4,592,474)
=========== =========== =========== ===========
Net Loss Per Common Share $ (0.13) $ (0.10)
=========== =========== =========== ===========
Weighted Average Number of Common
Shares Used in per Share Calculation 32,459,436 15,000,000 47,459,436
For the Six Months Ended June 30, 1996
Revenues $ - $ - $ $ -
----------- ----------- ----------- -----------
Expenses
Depreciation & valuation allow 413 789 1,202
General & administrative 1,791,792 387,283 2,179,075
----------- ----------- ----------- -----------
Total Operating Expenses 1,792,205 388,072 2,180,277
----------- ----------- ----------- -----------
Other Expenses
Interest Income 565 11,393 11,958
Interest expense (73,900) - (C) (75,000) (148,900)
Foreign currency exchange gain, net - 1,362 1,362
Other Income - - -
----------- ----------- ----------- -----------
Total Other Expenses (73,335) 12,755 (135,580)
----------- ----------- ----------- -----------
Loss before taxes (1,865,540) (375,317) (2,315,857)
Benefit from income tax 186,554 - 186,554
----------- ----------- ----------- -----------
Net Loss (1,678,986) (375,317) (2,129,303)
Dividends Applicable to Preferred Shares 59,800 - (B) 31,250 91,050
----------- ----------- ----------- -----------
Net Loss Applicable to Common Shares $(1,738,786) $ (375,317) $ (106,250) $(2,220,353)
=========== =========== =========== ===========
Net Loss Per Common Share $ (0.05) $ $ $ (0.05)
=========== =========== =========== ===========
Weighted Average Number of Common
Shares Used in Per Share Calculation 33,174,033 15,000,000 48,174,033
</TABLE>
EUROGAS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA FINANCAIL STATEMENTS
A - The purchase price of $4,102,085 was allocated to the net assets of
Danube based on their fair values. The purchase price in excess of
the carrying value of the assets was allocated to unproved properties.
B - The Company incurred a liability of $2,500,000 to acquire Danube
as well as issuing 15,000,000 shares of common stock and 1,250,000
shares of the 1996 Series preferred stock. The preferred stock
has an annual dividend requirement of $0.05 per share, and the
preferred stock is convertible into two shares of common stock
for each share of preferred stock.
C - The Company also borrowed $2,000,000 from a third party lender and
used $1,085,835 thereof to invest directly into Danube. The loan
bears interest at 7.5% and is due in 2001.
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND
SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
AND
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
and
December 31, 1995 and 1994
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND
SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets - June 30, 1996
(Unaudited) and December 31, 1995 and 1994 F-3
Consolidated Statements of Operations for the
Six Months Ended June 30, 1996 (Unaudited),
for the Year Ended December 31, 1995, for the
Period from October 31, 1994 (Date of Inception)
through December 31, 1994, and for the Cumulative
Period from October 31, 1994 through June 30, 1996
(Unaudited) F-4
Consolidated Statements of Stockholders' Deficit for
the Period from October 31, 1994 (Date of Inception)
through December 31, 1994, for the Year Ended
December 31, 1995, and for the Six Months Ended
June 30, 1996 (Unaudited) F-5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 (Unaudited), for the
Year Ended December 31, 1995, for the Period from
October 31, 1994 (Date of Inception) through
December 31, 1994, and for the Cumulative Period
from October 31, 1994 through June 30, 1996
(Unaudited) F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East Broadway, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors
Danube International Petroleum Company
We have audited the accompanying consolidated balance sheets of Danube
International Petroleum Company and Subsidiaries ( an exploration enterprise in
the development stage) as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the year ended December 31, 1995, and for the period from October 31,
1994 (date of inception of the development stage) through December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Danube International
Petroleum Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the year ended December 31,
1995 and for the period from October 31, 1994 through December 31, 1994, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continues as a going concern. The Company is a development
stage enterprise engaged in acquiring oil and gas mineral interests and the
exploration and development of those properties. As discussed in Note 1 to the
consolidated financial statements, the Company's operating losses since
inception and the deficit accumulated during the development stage raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
HANSEN, BARNETT & MAXWELL
/s/ Hansen, Barnett & Maxwell
Salt Lake City, Utah
October 15, 1996
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND SUBSIDIARIES
(An Exploration Enterprise in the Development Stage)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31,
--------------------------
1996 1995 1994
----------- ----------- -----------
(Unaudited)
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 820,370 $ 590,569 $ 38,511
Other receivables 595 1,900 -
Deposits - 576 -
----------- ----------- -----------
Total Current Assets 820,965 593,045 38,511
----------- ----------- -----------
Property and Equipment
Mineral interests in unproved properties 581,389 535,369 13,830
Other equipment 4,570 4,570 -
----------- ----------- -----------
585,959 539,939 13,830
Less: Accumulated depreciation (2,366) (1,577) -
----------- ----------- -----------
Net Property and Equipment 583,593 538,362 13,830
Other Assets 3,758 52,127 2,694
----------- ----------- -----------
Total Assets $ 1,408,316 $ 1,183,534 $ 55,035
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C> <C>
Current Liabilities
Accounts payable $ 212,012 $ 131,696 $ 2,800
Accrued expenses 160,829 91,046 -
Notes payable 500,000 1,000,000 30,000
------------- ------------- --------------
Total Current Liabilities 872,841 1,222,742 32,800
------------- ------------- --------------
Minority Interest 950,000 - -
------------- ------------- --------------
Stockholders' Deficit
Common stock - $0.01 par value; 10,000 shares
authorized; 2,997 shares, 2,997 shares and 467
shares issued and outstanding, respectively 30 30 5
Additional paid-in capital 50,920 50,920 59,997
Deficit accumulated during the development stage (465,475) (90,158) (37,765)
------------- ------------- --------------
Total Stockholders' Equity (Deficit) (414,525) (39,208) 22,235
------------- ------------- --------------
Total Liabilities and Stockholders' Equity (Deficit) $ 1,408,316 $ 1,183,534 $ 55,035
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND SUBSIDIARIES
(An Exploration Enterprise in the Development Stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
Cumulative
For the Period Period from
from October October 31,
For the 31,1994 (Date 1994 (Date of
Six Months For the of Inception) Inception)
Ended Year Ended Through Through
June 30, December 31, December 31, June 30,
1996 1995 1994 1996
----------- ------------ -------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue $ - $ - $ - $ -
--------- ----------- ---------- -----------
Operating Expenses
Depreciation and valuation allowance 789 1,577 142 2,508
General and administrative 387,283 61,724 37,623 486,630
Foreign exchange losses (gains), net (1,362) 831 - (531)
--------- ----------- ---------- -----------
Total Operating Expenses 386,710 64,132 37,765 488,607
--------- ----------- ---------- -----------
Interest Income 11,393 11,739 - 23,132
--------- ----------- ---------- -----------
Net Loss $(375,317) $ (52,393) $ (37,765) $ (465,475)
========= =========== ========== ===========
Net Loss Per Share $ (125.23) $ (29.30) $ (123.42) $ (232.62)
========= =========== ========== ===========
Weighted Average Common Shares Used
in Per Share Calculation 2,997 1,788 306 2,001
========= =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND SUBSIDIARIES
(An Exploration Enterprise in the Development Stage)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
Number Paid-In Development
of Shares Amount Capital Stage
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance - October 31, 1994 (Date of Inception) $ - $ - $ - $ -
Issuance of common stock for cash, November 21,
1994, $128 per share 467 5 59,995 -
Net loss for the period from October 31, 1994
through December 31, 1994 - - - (37,765)
----------- ------------- ------------ -------------
Balance - December 31, 1994 467 5 59,995 (37,765)
Issuance of common stock for cash, throughout
the year, average of $128 per share 2,296 23 294,977 -
Conversion of note payable, December 31, 1995,
$128 per share 234 2 29,998 -
Distributions to stockholders - - (334,050) -
Net loss for the year ended December 31, 1995 - - - (52,393)
----------- ------------- ------------ -------------
Balance - December 31, 1995 2,997 30 50,920 (90,158)
Net loss for the six months ended June 30,
1996 (Unaudited) - - - (375,317)
----------- ------------- ------------ -------------
Balance - June 30, 1996 (Unaudited) 2,997 $ 30 $ 50,920 $ (465,475)
=========== ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND SUBSIDIARIES
(An Exploration Enterprise in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
Cumulative
For the Period Period from
from October October 31,
For the 31,1994 (Date 1994 (Date of
Six Months For the of Inception) Inception)
Ended Year Ended Through Through
June 30, December 31, December 31, June 30,
1996 1995 1994 1996
----------- ------------ -------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (375,317) $ (52,393) $ (37,765) $ (465,475)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 789 1,577 142 2,508
Other receivables 1,305 (1,900) - (595)
Deposits 576 (576) - -
Accounts payable 80,316 15,247 2,800 98,363
Accrued expenses 69,783 21,046 - 90,829
---------- --------- --------- -----------
Net Cash Used in Operating Activities (222,548) (16,999) (34,823) (274,370)
---------- --------- --------- -----------
Cash Flows From Investing Activities
Capital expenditure for other property
and equipment (47,651) (391,893) (16,666) (456,210)
---------- --------- --------- -----------
Net Cash Used in Investing Activities (47,651) (391,893) (16,666) (456,210)
---------- --------- --------- -----------
Cash Flows From Financing Activities
Proceeds from notes payable 500,000 1,000,000 30,000 1,530,000
Proceeds from issuance of common stock 295,000 60,000 355,000
Distributions to stockholders - (334,050) - (334,050)
---------- --------- --------- -----------
Net Cash Provided by Financing Activities 500,000 960,950 90,000 1,550,950
---------- --------- --------- -----------
Net Increase in Cash and Cash Equivalents 229,801 552,058 38,511 820,370
Cash and Cash Equivalents at Beginning
of Period 590,569 38,511 - -
---------- --------- --------- -----------
Cash and Cash Equivalents at End of Period $ 820,370 $ 590,569 $ 38,511 $ 820,370
========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
DANUBE INTERNATIONAL PETROLEUM COMPANY
AND SUBSIDIARIES
(An Exploration Enterprise in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and to the six months
ended June 30, 1996 is unaudited.)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Danube International Petroleum Company, Ltd. (a Texas limited
partnership, referred to herein as the Partnership) was formed on October
31,1994 for the purpose of investing in joint ventures in Slovakia and the Czech
Republic under the terms of license agreements. On May 10, 1996, the Partnership
was merged into Danube International Petroleum Company (a corporation
incorporated under the laws of the state of Texas on May 9, 1996, referred to
herein as the Corporation). To accomplish the merger, the Corporation issued
1,998 shares of its common stock to the partners of the Partnership. The merger
of the Partnership into the Corporation was a transaction between entities under
common control and, accordingly, the merger was accounted for in a manner
similar to pooling of interests. The accompanying financial statements have been
restated for the periods prior to the merger to reflect the stock issued.
In September 1995, the Partnership formed a Cayman partnership named Danube
International Petroleum Company (referred to herein as Cayman). In connection
with the merger of the Partnership and the Corporation, a subsidiary company was
formed under the laws of the Netherlands now named Danube International
Petroleum Holding B.V. and a subsidiary thereof was formed under the laws of the
Netherlands Antilles now named Central European Petroleum N.V. The contracts
and agreements of the Partnership were held by Cayman and in 1996 were
transferred to Central European Petroleum N.V.
The Company is engaged in the acquisition, exploration and development of oil
and gas mineral properties.
Consolidation - The accompanying consolidated financial statements include the
accounts of Danube International Petroleum Company (the Partnership and, after
the merger, the Corporation) its wholly-owned subsidiaries, Danube International
Petroleum Holding B.V., Central European Petroleum N.V., Danube International
Petroleum Company (Cayman), and the joint venture interest in Slovakia
(collectively referred to herein as the Company). All significant inter-company
accounts and transactions have been eliminated in consolidation.
Basis of Presentation - The accompanying consolidated financial statements have
been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
shown in the accompanying financial statements, the Company has a deficit which
has accumulated since inception in October 1994 of $465,475 through June 30,
1996. Realization of the amounts included in gas mineral interests in unproved
properties is dependent on the Company developing sufficient quantities of
proven or provable reserves of oil or gas. If exploration activities prove to
be unsuccessful, all or a portion of the mineral interests will be charged to
operations. These factors raise substantial doubt about the ability of the
Company to continue in its current form. The Company has obtained a limited
amount of capital and, subsequent to June 30, 1996, it merged with a subsidiary
of Eurogas, Inc. In order to continue, however, the Company will need to obtain
additional capital and, ultimately, obtain profitable operations.
Interim Financial Information - The accompanying consolidated financial
statements as of June 30, 1996 and for the six months then ended are unaudited.
In the opinion of management of the Company, these interim financial statements
reflect all adjustments (consisting only of normal and recurring adjustments)
necessary for a fair presentation. The results of operations for the six month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the full year ending December 31, 1996.
Cash and Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. Due to their size, cash balances are subject to a concentration of
risk.
Mineral Interests in Properties - The Company uses the full cost method of
accounting to account for mineral interests in properties. Under this method
all costs incidental to the acquisition, exploration, and development of oil and
gas properties are capitalized. These costs include costs of drilling and
equipping wells, as well as directly related overhead cost. Costs of unproved
properties are assessed periodically and any resulting provision for impairment
which is required is charged to operations. All capitalized costs of oil and
gas properties, including the estimated future costs to develop proved reserves,
if found, will be amortized using the units-of-production method. Costs incurred
for mineral interests in properties were $46,020 during the six months ended
June 30, 1996, $521,539 during the year ended December 31, 1995 and $13,830
during the period from October 31, 1994 through December 31, 1994.
Other Equipment - Other equipment is stated at cost. Additions and improvements
are capitalized while repairs and maintenance costs are expensed when incurred.
Depreciation is computed using straight-line method over the estimated useful
lives of the equipment, which is five years.
Loss Per Common Share - Loss per common share is based on the weighted average
number of shares of common stock outstanding.
NOTE 2--RELATED PARTY TRANSACTIONS
Two individual lenders provided $1,000,000 in financing to the Company during
1995. During 1996, the Company entered into an agreement with the individuals
to convert the debt into a five percent interest in Danube International
Petroleum Holding B.V. The common stock of Danube International Petroleum
Holding, B.V. held by these individuals is reflected in the accompanying
financial statements at June 30, 1996 as minority interest.
NOTE 3--INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires the
recognition of a liability or asset, net of a valuation allowance, for the
deferred tax consequences of all temporary differences between the tax bases and
the reported amounts of assets and liabilities, and for the future benefit of
operating loss carry forwards. The tax effects of significant temporary
differences and carry forwards are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
----------------------
1996 1995 1994
--------- --------- ----------
(Unaudited)
<S> <C> <C> <C>
Operating loss carry forwards $ 127,607 $ 17,814 $ 12,840
Less valuation allowance (127,607) (17,814) (12,840)
--------- --------- ----------
Net Deferred Tax Asset $ - $ - $ -
========= ========= ==========
</TABLE>
The Company has $465,475 of operating loss carry forwards that expire if not
used in 1996 through 2010.
NOTE 4--NOTES PAYABLE
During 1994, the Company borrowed $30,000 under the terms of a note payable. On
December 31, 1995, the holder of the note converted it into 234 shares of common
stock at $128 per share.
During 1995, $1,000,000 was borrowed from two investors. As explained in Note
2, the notes were converted into a five percent interest in Danube International
Petroleum Holding, B.V.
The Company borrowed $500,000 from a company during the six months ended June
30, 1996. The loan was converted into common stock of Eurogas, Inc. upon the
merger with a Eurogas, Inc. subsidiary in July 1996.
NOTE 6--CONTINGENCIES AND COMMITMENTS
The Company has a commitment to spend approximately $6,180,000 in connection
with its joint venture agreements in Slovakia and Czechoslovakia.
On January 17, 1997, the Company's joint venture partner in the Czech Republic
notified the company it is delinquent in the payment of certain obligations of
the joint venture agreement and threatened to terminate the association. The
Company disagrees with the assertion and has invoked its right to arbitrate this
dispute. Pending resolution, the Company has suspended any further work in the
Czech Republic. The Company is currently unable to predict the outcome or make
any estimates regarding the related loss contingency. (Unaudited.)
A financial consulting firm was retained by the Company to assist in raising
capital in exchange for commissions based on the capital obtained. The
financial consultant filed a complaint asserting a claim of $435,000 in
commissions plus interest and legal fees. The financial consulting firm was
successful in raising a $1,000,000 and Eurogas, Inc. has offered a settlement of
$50,000, the approximate amount it believes is due, plus additional commissions
for future financing received as a result of the consulting firm's efforts.
$50,000 relating to the commission is included in accrued liabilities in the
accompanying financial statements at December 31, 1995 and at June 30, 1996.
The Company has entered into an employment agreement with its president for
monthly compensation of $20,000. The employment agreement was for an indefinite
period of time and was superseded in connection with the merger with Eurogas.
As of July 3, 1996, the Company entered into an agreement and plan of merger
with Eurogas, Inc. whereby the Company was merged into a wholly-owned subsidiary
of Eurogas, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE PRO FORMA BALANCE SHEET AS OF JUNE 30, 1996, AND PRO FORMA
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996,
INCLUDED IN THE REPORT ON FORM 8-K/A DATED JULY 12, 1996, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,148,489
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 5,656
<CURRENT-ASSETS> 2,661,249
<PP&E> 15,519,096
<DEPRECIATION> 2,259,536
<TOTAL-ASSETS> 16,144,475
<CURRENT-LIABILITIES> 10,324,786
<BONDS> 0
<COMMON> 48,174
0
3,642
<OTHER-SE> (3,217,359)
<TOTAL-LIABILITY-AND-EQUITY> 16,144,475
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,180,277
<OTHER-EXPENSES> (13,320)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148,900
<INCOME-PRETAX> (2,129,303)
<INCOME-TAX> (186,554)
<INCOME-CONTINUING> (1,942,749)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,033,799)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
