1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___________ TO _______________
COMMISSION FILE NUMBER 0-9147
------------------------------
CANARGO ENERGY CORPORATION
-------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 91-0881481
------------------------------------ -------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
CanArgo Services (UK) Limited
150 Buckingham Palace Road, London, England SW1W 9TR
------------------------------------------- ----------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(44) 207 808 4700
--------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
--------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- ---------
The number of shares of registrant's common stock outstanding on April 30, 2001
was 75,535,523. An additional 415,158 shares of common stock are issuable at any
time without additional consideration upon exercise of CanArgo Oil & Gas Inc.
Exchangeable Shares.
2
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEET
Unaudited
-------------------------------------------
MARCH 31, December 31,
2001 2000
---------------- ---------------
ASSETS
Cash and cash equivalents $ 18,512,731 $ 28,627,013
Accounts receivable 1,531,960 786,570
Advances to operator 4,989,378 1,146,584
Inventory 432,592 695,909
Other current assets 351,558 334,402
---------------- ---------------
Total current assets $ 25,818,219 $ 31,590,478
Capital assets 53,067,104 50,477,344
Investments in and advances to oil and gas and other
ventures - net 772,006 696,374
Deferred acquisition costs 139,178 -
---------------- ---------------
TOTAL ASSETS $ 79,796,507 $ 82,764,196
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 2,384,193 $ 2,691,118
Advances from joint venture partner 1,937,781 5,888,573
Accrued liabilities 198,936 323,936
---------------- ---------------
Total current liabilities $ 4,520,910 $ 8,903,627
Provision for future site restoration 50,290 40,990
Minority interest in subsidiaries 3,125,724 1,393,915
Stockholders' equity:
Preferred stock, par value $0.10 per share - -
Common stock, par value $0.10 per share 7,595,069 7,595,069
Capital in excess of par value 139,071,031 139,071,031
Accumulated deficit (74,566,517) (74,240,436)
---------------- ---------------
Total stockholders' equity $ 72,099,583 $ 72,425,664
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 79,796,507 $ 82,764,196
================ ===============
See accompanying notes to unaudited consolidated
condensed financial statements.
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3
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Unaudited
---------------------------------
MARCH 31, March 31,
2001 2000
------------- -------------
Operating Revenues:
Oil and gas sales $ 1,748,195 $ 1,884,676
Refining and marketing 1,849,608 -
Other - 196,300
------------- -------------
3,597,803 2,080,976
------------- -------------
Operating Expenses:
Field operating expenses 502,217 372,596
Purchases of crude oil and products 1,157,724 -
Refinery operating expenses 120,406 -
Direct project costs 249,580 136,309
General and administrative 927,889 373,874
Depreciation, depletion and amortization 1,185,788 1,075,490
------------- -------------
4,143,604 1,958,269
------------- -------------
OPERATING INCOME (LOSS) (545,801) 122,707
------------- -------------
Other Income (Expense):
Interest, net 391,156 34,335
Other (104,279) (6,780)
Equity loss from investments in
unconsolidated subsidiaries (37,000) (13,000)
------------- -------------
TOTAL OTHER INCOME (EXPENSE) 249,877 14,555
------------- -------------
NET INCOME (LOSS) BEFORE MINORITY INTEREST (295,924) 137,262
Minority interest in income of consolidated
subsidiaries (30,157) (36,800)
------------- -------------
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) $ (326,081) $ 100,462
============= =============
Weighted average number of
common shares outstanding 75,950,681 37,422,144
------------- -------------
NET LOSS PER COMMON SHARE - BASIC $ (0.00) $ 0.00
------------- -------------
NET LOSS PER COMMON SHARE - DILUTED $ (0.00) $ 0.00
------------- -------------
See accompanying notes to unaudited consolidated
condensed financial statements.
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4
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
------------------------------------
MARCH 31, March 31,
2001 2000
----------------- -----------------
Operating activities:
Net income (loss) $ (326,081) $ 100,462
Depreciation, depletion and amortization 1,185,788 1,075,490
Issuance of common stock for services - 112,700
Equity loss from investments in unconsolidated subsidiaries 37,000 13,000
Allowance for doubtful accounts 100,000 -
Minority interest in income of consolidated subsidiaries 30,157 36,800
Changes in assets and liabilities:
Accounts receivable (845,390) (106,727)
Advances to operator (3,842,794) (245,233)
Inventory 263,317 129,823
Other current assets (17,156) 35,456
Accounts payable (306,925) (262,279)
Accrued liabilities (125,000) (203,500)
----------------- -----------------
NET CASH GENERATED BY (USED IN) OPERATING ACTIVITIES (3,847,084) 685,992
----------------- -----------------
Investing activities:
Capital expenditures (3,766,248) (1,277,206)
Investments in and advances to oil and gas and other
ventures (112,632) (4,451)
Acquisition costs (139,178) -
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (4,018,058) (1,281,657)
----------------- -----------------
Financing Activities:
Advances from minority interest 1,701,652 -
Advances from joint venture partner (3,950,792) -
----------------- -----------------
NET CASH PROVIDED BY (USED FROM) FINANCING ACTIVITIES (2,249,140) -
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,114,282) (595,665)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,627,013 3,534,983
----------------- -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 18,512,731 $ 2,939,318
================= =================
See accompanying notes to unaudited consolidated
condensed financial statements.
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PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000 (UNAUDITED)
(1) Basis of Presentation
The interim consolidated condensed financial statements and notes
thereto of CanArgo Energy Corporation and its subsidiaries
(collectively, CanArgo) have been prepared by management without audit.
In the opinion of management, the consolidated condensed financial
statements include all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the
interim period. The accompanying consolidated condensed financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the CanArgo's Annual
Report on Form 10-K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission. All amounts are in U.S. dollars.
Certain items in the consolidated condensed financial statements have
been reclassified to conform to the current year presentation. There
was no effect on net loss as a result of these reclassifications.
(2) Need for Significant Additional Capital, Possible Impairment of Assets
Development of the oil and gas properties and ventures in which CanArgo
has interests involves multi-year efforts and substantial cash
expenditures. Full development of these properties will require the
availability of substantial funds from external sources. CanArgo
believes that it will be able to generate funds from external sources
including quasi-governmental financing agencies, conventional lenders,
equity investors and other oil and gas companies that may desire to
participate in CanArgo's oil and gas projects.
Ultimate realization of the carrying value of CanArgo's oil and gas
properties will require production of oil and gas in sufficient
quantities and marketing such oil and gas at sufficient prices to
provide positive cash flow to CanArgo. This is dependent upon, among
other factors, achieving significant production at costs that provide
acceptable margins, reasonable levels of taxation from local
authorities and the ability to market the oil and gas produced at or
near world prices. In addition, CanArgo must mobilize drilling
equipment and personnel to initiate drilling, completion and production
activities. If one or more of the above factors, or other factors, are
different than anticipated, CanArgo may not recover its carrying value.
CanArgo generally has the principal responsibility for arranging
financing for the oil and gas properties and ventures (see note 5) in
which it has an interest. There can be no assurance, however, that
CanArgo or the entities that are developing the oil and gas properties
and ventures will be able to arrange the financing necessary to develop
the projects being undertaken or to support the corporate and other
activities of CanArgo or that such financing as is available will be on
terms that are attractive or acceptable to or are deemed to be in the
best interests of CanArgo, such entities or their respective
stockholders or participants.
The consolidated financial statements of CanArgo do not give effect to
any additional impairment in the value of CanArgo's oil and gas
properties and ventures or other adjustments that would be necessary
if financing cannot be arranged for the development of such properties
and ventures or if they are unable to achieve profitable operations.
Failure to arrange such financing on reasonable terms or failure of
such properties and ventures to achieve profitability would have a
material adverse effect on the financial position, including
realization of assets, results of operations, cash flows and prospects
of the CanArgo.
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6
(3) Foreign Operations
CanArgo's future operations and earnings will depend upon the results of
CanArgo's operations in the Republic of Georgia and the Ukraine. There can
be no assurance that CanArgo will be able to successfully conduct such
operations, and a failure to do so would have a material adverse effect on
the CanArgo's financial position, results of operations and cash flows.
Also, the success of CanArgo's operations will be subject to numerous
contingencies, some of which are beyond management control. These
contingencies include general and regional economic conditions, prices for
crude oil and natural gas, competition and changes in regulation. Since
CanArgo is dependent on international operations, CanArgo will be subject
to various additional political, economic and other uncertainties. Among
other risks, CanArgo's operations may be subject to the risks and
restrictions on transfer of funds, import and export duties, quotas and
embargoes, domestic and international customs and tariffs, and changing
taxation policies, foreign exchange restrictions, political conditions and
regulations.
(4) Capital Assets, Net
Capital assets, net of accumulated depreciation and impairment, at March
31, 2001 and December 31, 2000 include the following:
MARCH 31, DECEMBER 31,
2001 2000
-------------------------------------------------------------- -------------------
ACCUMULATED
DEPRECIATION NET NET
COST AND IMPAIRMENT CAPITAL ASSETS CAPITAL ASSETS
---------------- -------------------- ------------------- ------------------
OIL AND GAS PROPERTIES
Proved properties $ 27,792,922 $ (6,582,509) $ 21,210,413 $ 22,702,703
Unproved properties 13,873,551 - 13,873,551 13,897,096
---------------- -------------------- ------------------- ------------------
41,666,473 (6,582,509) 35,083,964 36,599,799
PROPERTY AND EQUIPMENT
Oil and gas related
equipment 13,502,886 (2,989,868) 10,513,018 8,895,300
Office furniture,
fixtures and
equipment and other 1,105,944 (550,583) 555,361 462,502
---------------- -------------------- ------------------- ------------------
14,608,830 (3,540,451) 11,068,379 9,357,802
REFINING AND MARKETING 7,202,318 (287,557) 6,914,761 4,519,743
---------------- -------------------- ------------------- ------------------
$ 63,477,621 $ (10,410,517) $ 53,067,104 $ 50,477,344
================ ==================== =================== ==================
Oil and gas related equipment includes new or refurbished drilling rigs and
related equipment, substantially all of which have been transported to the
Republic of Georgia for use by CanArgo in the development of the
Ninotsminda field.
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(5) Investments in and Advances to Oil and Gas and Other Ventures
CanArgo has acquired interests in oil and gas and other ventures
through less than majority interests in corporate and corporate-like
entities. A summary of CanArgo's net investment in and advances to oil
and gas and other ventures at March 31, 2001 and December 31, 2000 is
set out below:
MARCH 31, DECEMBER 31,
INVESTMENTS IN AND ADVANCES TO OIL AND GAS AND OTHER VENTURES 2001 2000
-------------- ---------------
Ukraine - Stynawske Field, Boryslaw
Through 45% ownership of Boryslaw Oil Company $ 6,086,254 $ 6,086,254
Republic of Georgia
Through 50.0% effective ownership CanArgo Power Corporation 752,215 676,583
Republic of Georgia - Ninotsminda
Through an effective 50% ownership of East Georgian Pipeline Co. 127,500 90,500
Uentech International Corporation
Through an effective 45% voting interest 304,943 304,943
Other Investments 75,001 75,001
-------------- ---------------
TOTAL INVESTMENTS IN AND ADVANCES TO OIL AND GAS
AND OTHER VENTURES $ 7,345,913 $ 7,233,281
============== ===============
EQUITY IN PROFIT (LOSS) OF OIL AND GAS AND OTHER VENTURES
Ukraine - Stynawske Field, Boryslaw (626,461) (626,461)
Republic of Georgia - CanArgo Power Corporation (186,074) (186,074)
Republic of Georgia - East Georgian Pipeline Co. (87,000) (50,000)
Uentech International Corporation (214,579) (214,579)
-------------- ---------------
CUMULATIVE EQUITY IN PROFIT (LOSS) OF OIL AND GAS
AND OTHER VENTURES $ (1,114,114) $ (1,077,114)
IMPAIRMENT - STYNAWSKE FIELD (5,459,793) (5,459,793)
-------------- ---------------
TOTAL INVESTMENTS IN AND ADVANCES TO OIL AND GAS
AND OTHER VENTURES, NET OF EQUITY LOSS AND IMPAIRMENT $ 772,006 $ 696,374
============== ===============
As of March 31, 2001, CanArgo had a 50% interest in CanArgo Power
Corporation and an effective 42.5% interest in Sagarego Power
Corporation, a Georgian joint stock company, for which operations have
not yet begun. In April 2001, CanArgo acquired from a wholly owned
subsidiary of Terrenex Acquisition Corporation the remaining 50%
interest it did not own in CanArgo Power Corporation for cash
consideration of $425,000. In a related but separate transaction,
CanArgo sold in April 2001 all of its voting and non voting shares of
Uentech International Corporation to a wholly owned subsidiary of
Terrenex Acquisition Corporation. Proceeds from the sale of Uentech
International Corporation were $125,000. On completion of the
acquisition, CanArgo Power Corporation became a subsidiary of CanArgo
and CanArgo has an effective 85% interest in Sagarego Power
Corporation.
CanArgo's ventures are in the development stage. Accordingly,
realization of these investments is dependent upon successful
development of and ultimately cash flows from operations of the
ventures.
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8
(6) Accrued Liabilities
Accrued liabilities at March 31, 2001 and December 31, 2000 include the
following:
MARCH 31, December 31,
2001 2000
------------ -------------
Professional fees $ 50,000 $ 175,000
Office relocation 126,666 126,666
Other 22,270 22,270
------------ -------------
$ 198,936 $ 323,936
============ =============
(7) Stockholders' Equity
COMMON STOCK
------------------------------
NUMBER OF
SHARES ADDITIONAL TOTAL
ISSUED AND PAID-IN ACCUMULATED STOCKHOLDERS'
ISSUABLE PAR VALUE CAPITAL DEFICIT EQUITY
---------- ------------- ------------ --------------- ---------------
TOTAL, DECEMBER 31, 2000 75,950,681 $ 7,595,069 $139,071,031 $ (74,240,436) $ 72,425,664
Less shares issuable at
beginning of period (423,791) (42,379) (795,712) -- (838,091)
Issuance of common stock upon
exchange of CanArgo Oil &
Gas Inc. Exchangeable Shares 8,633 863 16,209 -- 17,072
Net income (loss) -- -- -- (326,081) (326,081)
---------- ------------- ------------ --------------- ---------------
BALANCE, MARCH 31, 2001 75,535,523 $ 7,553,553 $138,291,528 $ (74,566,517) $ 71,278,564
Shares issuable upon exchange
of CanArgo Oil & Gas Inc.
Exchangeable Shares without
receipt of further consideration 415,158 41,516 779,503 -- 821,019
---------- ------------- ------------ --------------- ---------------
Total, March 31, 2001 75,950,681 $ 7,595,069 $139,071,031 $ (74,566,517) $ 72,099,583
========== ============= ============ ================ ===============
(8) Net Income (Loss) Per Common Share
Basic and diluted net income (loss) per common share for the periods ended
March 31, 2001 and March 31, 2000 are based on the weighted average number
of common shares outstanding during those periods. The weighted average
numbers of shares issued and issuable without receipt of additional
consideration for the three month periods ended March 31, 2001 and 2000 are
75,950,681 and 37,422,144 respectively. Options to purchase CanArgo's
common stock were outstanding at March 31, 2001 but were not included in
the computation of diluted net income (loss) per common share because the
effect of such inclusion would have been anti-dilutive.
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(9) Commitments and Contingencies
OIL AND GAS PROPERTIES AND INVESTMENTS IN OIL AND GAS VENTURES
CanArgo has contingent obligations and may incur additional obligations,
absolute and contingent, with respect to acquiring and developing oil and
gas properties and ventures. At March 31, 2001, CanArgo had the contingent
obligation to issue an aggregate of 187,500 shares of its common stock,
subject to the satisfaction of conditions related to the achievement of
specified performance standards by the Stynawske field project. In December
2000, CanArgo announced that a preliminary development plan had been
reached with the joint venture partner.
(10) Segment Information
For the three month period ended March 31, 2000, CanArgo operated through
one business segment, oil and gas exploration and production. In the fourth
quarter of 2000, CanArgo expanded its oil and gas exploration and
production activities to include the refining and marketing of crude oil
and crude oil products.
Operating revenues for the three month periods ended March 31, 2001 and
2000 by geographical area were as follows:
MARCH 31, March 31,
2001 2000
----------------- -------------------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe $ 1,967,544 $ 2,080,976
REFINING AND MARKETING
Eastern Europe 1,849,608 --
INTERSEGMENT ELIMINATIONS (219,349) --
---------------- ------------------
TOTAL $ 3,597,803 $ 2,080,976
================ ==================
Operating income (loss) for the three month periods ended March 31, 2001
and 2000 by geographical area was as follows:
MARCH 31, March 31,
2001 2000
----------------- ------------------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe $ 454,635 $ 496,581
REFINING AND MARKETING
Eastern Europe 64,683 --
CORPORATE AND OTHER EXPENSES (1,065,119) (373,874)
----------------- ------------------
TOTAL OPERATING INCOME (LOSS) $ (545,801) $ 122,707
================= ==================
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Net income (loss) before minority interest for the three month periods
ended March 31, 2001 and 2000 by geographic area was as follows:
MARCH 31, March 31,
2001 2000
----------------- -------------------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe $ 453,585 $ 496,581
REFINING AND MARKETING
Eastern Europe 59,962 --
CORPORATE AND OTHER EXPENSES (809,471) (359,319)
----------------- ------------------
NET INCOME (LOSS) BEFORE MINORITY INTEREST $ (295,924) $ 137,262
================= ==================
Identifiable assets as of March 31, 2001 and December 31, 2000 by business
segment and geographical area were as follows:
MARCH 31, December 31,
2001 2000
-------------- ---------------
CORPORATE
Eastern Europe $ 432,592 $ 695,909
Western Europe 25,385,627 30,894,569
-------------- ---------------
TOTAL 25,818,219 31,590,478
-------------- ---------------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe 46,657,957 46,348,728
REFINING AND MARKETING
Eastern Europe 6,548,325 4,128,616
OTHER ENERGY PROJECTS
Eastern Europe 772,006 696,374
-------------- ---------------
IDENTIFIABLE ASSETS - TOTAL $ 79,796,507 $ 82,764,196
============== ===============
(11) Subsequent Events
In April 2001, CanArgo acquired from a wholly owned subsidiary of Terrenex
Acquisition Corporation the remaining 50% interest it did not own in
CanArgo Power Corporation for cash consideration of $425,000. In a related
but separate transaction, CanArgo sold in April 2001 all of its voting and
non voting shares of Uentech International Corporation to a wholly owned
subsidiary of Terrenex Acquisition Corporation. Proceeds from the sale of
Uentech International Corporation were $125,000. Russell Hammond is a
director of CanArgo and Chairman of Terrenex Acquisition Corporation; and
Peder Paus, a director of CanArgo, is a director of Terrenex Acquisition
Corporation and a 12% stockholder of Terrenex Acquisition Corporation. Both
transactions were approved by an independent committee of the Board of
Directors.
On April 30, 2001 CanArgo acquired 26,450,702 common shares of Lateral
Vector Resources Inc. for cash consideration of approximately $1,883,200
(Cdn $2,909,577). The purchase represented approximately 77% of the common
shares of Lateral Vector Resources Inc. on a fully diluted basis. The
purchase of common shares was originally made pursuant to an offer dated
March 20, 2001 by a wholly owned subsidiary of CanArgo to purchase all
outstanding common shares of Lateral Vector Resources Inc. The offer was
subsequently amended on April 9, 2001 to increase the purchase price to Cdn
$0.11 per share and to amend and remove certain conditions to CanArgo's
obligation to purchase the common shares. CanArgo intends to acquire any
shares not deposited under the offer by way of a second stage
10
11
transaction particulars of which are set out in section 12 of the Circular
dated March 20th 2001 which accompanied the document containing CanArgo's
original offer for Lateral Vector Resources Inc. common shares.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
QUALIFYING STATEMENT WITH RESPECT TO FORWARD-LOOKING INFORMATION
The United States Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward looking statements. Such forward looking
statements are based upon the current expectations of CanArgo and speak only as
of the date made. These forward looking statements involve risks, uncertainties
and other factors. The factors discussed below under "Forward Looking
Statements" and elsewhere in this Quarterly Report on Form 10-Q are among those
factors that in some cases have affected CanArgo's historic results and could
cause actual results in the future to differ significantly from the results
anticipated in forward looking statements made in this Quarterly Report on Form
10-Q, future filings by CanArgo with the Securities and Exchange Commission, in
CanArgo's press releases and in oral statements made by authorized officers of
CanArgo. When used in this Quarterly Report on Form 10-Q, the words "estimate,"
"project," "anticipate," "expect," "intend," "believe," "hope," "may" and
similar expressions, as well as "will," "shall" and other indications of future
tense, are intended to identify forward looking statements.
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
CanArgo's management believes that cash and cash equivalents at March 31, 2001
should be sufficient to cover operating needs for existing projects during the
next twelve month period. Also, CanArgo's cash balance at March 31, 2001
satisfies CanArgo's near term funding requirements with respect to its
activities in the Republic of Georgia envisaged in August 2000. Current
development plans for the Ninotsminda field includes the drilling of exploration
well N100, several rehabilitations of existing wells and quantification of the
reserve and production potential of the recently announced discoveries in the
Saramatian and Upper Eocene sequences. These plans are scheduled to be
implemented in 2001 and the first half of 2002, but that timing is dependent
upon key supplies and other equipment for the development being available
promptly as well as adequate financing.
While a considerable amount of infrastructure for the Ninotsminda field has been
put in place, CanArgo cannot provide assurance that:
o funding of the Ninotsminda field development plan will be timely,
o that the development plan will be successfully completed or will increase
production, or
o that the Ninotsminda field operating revenues after completion of the
development plan will exceed operating costs.
To pursue additional projects and opportunities, CanArgo would require
additional capital. Potential sources of funds include additional equity,
project financing, debt financing and the participation of other oil and gas
entities in CanArgo's projects. Based on CanArgo's past history of raising
capital and continuing discussions including those with major stockholders,
investment bankers and other companies, CanArgo believes that such required
funds may be available. However, there is no assurance that such funds will be
available, and if available, will be offered on attractive or acceptable terms.
Development of the oil and gas properties and ventures in which CanArgo has
interests involves multi-year efforts and substantial cash expenditures. Full
development of CanArgo's oil and gas properties and ventures will require the
availability of substantial additional financing from external sources. CanArgo
also may, where opportunities exist, seek to transfer portions of its interests
in oil and gas properties and ventures to entities in exchange for such
financing. CanArgo generally has the principal responsibility for arranging
financing for the oil and gas properties and ventures in which it has an
interest. There can be no assurance, however, that CanArgo or the entities that
are developing the oil and gas properties and ventures will be able to arrange
the financing necessary to develop the projects being undertaken or to support
the corporate and other activities of CanArgo. There can also be no assurance
that such financing as is available will be on terms that are attractive or
acceptable to or are deemed to be in the best interest of CanArgo, such entities
and their respective stockholders or participants.
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Ultimate realization of the carrying value of CanArgo's oil and gas properties
and ventures will require production of oil and gas in sufficient quantities and
marketing such oil and gas at sufficient prices to provide positive cash flow to
CanArgo. Establishment of successful oil and gas operations is dependent upon,
among other factors, the following:
o mobilization of equipment and personnel to implement effectively drilling,
completion and production activities;
o achieving significant production at costs that provide acceptable margins;
o reasonable levels of taxation, or economic arrangements in lieu of taxation
in host countries; and
o the ability to market the oil and gas produced at or near world prices.
CanArgo has plans to mobilize resources and achieve levels of production and
profits sufficient to recover the carrying value of its oil and gas properties
and ventures. However, if one or more of the above factors, or other factors,
are different than anticipated, these plans may not be realized, and CanArgo may
not recover the carrying value of its oil and gas properties and ventures.
CanArgo will be entitled to distributions from the various properties and
ventures in which it participates in accordance with the arrangements governing
the respective properties and ventures.
CHANGES IN FINANCIAL POSITION
As of March 31, 2001, CanArgo had working capital of $21,297,000, compared to
working capital of $22,687,000 as of December 31, 2000. The $1,390,000 decrease
in working capital from December 31, 2000 to March 31, 2001 is principally due
to capital and operating expenditures.
Cash and cash equivalents decreased from $28,627,000 at December 31, 2000 to
$18,513,000 at March 31, 2001. The decrease was primarily due to the cost of a
three-well exploration program currently underway at the Ninotsminda field.
Cash and cash equivalents at March 31, 2001 included $1,938,000 held by
Ninotsminda Oil Company with respect to initial advances, less capital
expenditures, from AES Gardabani related to AES Gardabani's participation in a
three well exploration program in the Republic of Georgia.
Accounts receivable increased from $787,000 at December 31, 2000 to $1,532,000
at March 31, 2001. The increase is primarily as a result of accounts receivable
generated from oil and natural gas sales in 2001.
Advances to operator increased from $1,147,000 at December 31, 2000 to
$4,989,000 at March 31, 2001 as a result of advances to the operator of the
Ninotsminda field for future expenditures on behalf and at the direction of
CanArgo.
Inventory decreased from $696,000 at December 31, 2000 to $433,000 at March 31,
2001 primarily as result of the sale of inventory by Georgian American Oil
Refinery. In addition to the crude oil and refined product in inventory at
Georgian American Oil Refinery, at March 31, 2001, approximately 31,900 barrels
of oil were held in storage by Ninotsminda Oil Company for sale in the Georgian
domestic and regional market or in the international market. Depending on the
demand and price for oil in the Georgian domestic and regional market CanArgo
may decide to place, as a strategic initiative, additional production in
storage.
Capital assets, net increased from $50,477,000 at December 31, 2000 to
$53,067,000 at March 31, 2001, primarily as a result of investment of $3,509,000
in capital assets including oil and gas properties and equipment, principally
related to the Ninotsminda field.
Investments in and advances to oil and gas and other ventures, net increased
from $696,000 at December 31, 2000 to $772,000 at March 31, 2001. The increase
reflects principally advances to CanArgo Power Corporation related to
preparation of CanArgo Power Corporation's 3 megawatt electricity producing
powerplant in anticipation of its use at the Ninotsminda field.
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Deferred acquisition costs relate to costs associated with CanArgo's acquisition
subsequent to March 31, 2001 of 77% of the outstanding common shares of Lateral
Vector Resources Inc. on a fully diluted basis. Under purchase accounting,
Lateral Vector Resources Inc.'s results will be included in CanArgo's
consolidated financial statements from April 30, 2001, the date of acquisition.
CanArgo has contingent obligations and may incur additional obligations,
absolute or contingent, with respect to the acquisition and development of oil
and gas properties and ventures in which it has interests that require or may
require CanArgo to expend funds and to issue shares of its Common Stock. CanArgo
believes that it has no further obligation to fund any operations relating to
the Lelyaki and Maykop field projects. At March 31, 2001, CanArgo had a
contingent obligation to issue 187,500 shares of common stock to a third party
upon satisfaction of conditions relating to the achievement of specified
Stynawske field project performance standards. As CanArgo develops current
projects and undertakes other projects, it could incur significant additional
obligations.
Accounts payable decreased to $2,384,000 at March 31, 2001 from $2,691,000 at
December 31, 2000 primarily as a result of payments related to the 2000 seismic
program.
Advances from joint venture partner decreased to $1,938,000 at March 31, 2001
compared to $5,889,000 at December 31, 2000 as capital expenditures were
incurred as part a three well exploration program in the Republic of Georgia.
Minority interest in subsidiaries increased to $3,126,000 at March 31, 2001
compared to $1,394,000 at December 31, 2000 following the expansion of CanArgo
Standard Oil Products in Tbilisi, Georgia and related investment by CanArgo's
partners in the venture. CanArgo consolidates its 50% interest in CanArgo
Standard Oil Products as it has the ability to control the strategic operating
and financial activities of the joint venture.
RESULTS OF OPERATIONS
Three Month Period Ended March 31, 2001 Compared to Three Month Period Ended
March 31, 2000
In November 2000, CanArgo acquired a 51% interest in Georgian American Oil
Refinery and Georgian American Oil Refinery became a subsidiary of CanArgo.
Under purchase accounting, Georgian American Oil Refinery's results have been
included in CanArgo's consolidated financial statements since the date of
acquisition. In December 2000, the first of several petrol stations planned by
CanArgo Standard Oil Products also opened in Tbilisi, Georgia.
CanArgo recorded operating revenue of $3,598,000 during the three month period
ended March 31, 2001 compared with $2,081,000 for the three month period ended
March 31, 2000. The increase is primarily due to refining and marketing revenue
from Georgian American Oil Refinery and CanArgo Standard Oil Products.
Ninotsminda Oil Company generated $1,748,000 of revenue in the three month
period ended March 31, 2001. Its net share of the 130,960 barrels (1,423 barrels
per day) of gross oil production for sale from the Ninotsminda field in the
period amounted to 79,760 barrels. An additional 6,700 barrels of oil were
removed from storage and sold in the period. For the three month period ended
March 31, 2000, Ninotsminda Oil Company's net share of the 126,478 barrels
(1,405 barrels per day) of gross production was 66,033 barrels.
All of Ninotsminda Oil Company's share of production was sold into the Georgian
local and regional market. Because lower transportation costs are involved,
CanArgo believes that sales of Ninotsminda oil to customers in the Georgian
local and regional market generally yield relatively higher net sales prices to
Ninotsminda Oil Company than sales to other customers. Net sale prices for
Ninotsminda oil sold during the first quarter of 2001 averaged $20.22 per barrel
as compared with an average of $18.68 per barrel in the first three months of
2000. Its net share of the 446,700 mcf of gas delivered was 290,330 mcf at an
average net sale price of $1.16 per mcf of gas. For the three month period ended
March 31, 2000, Ninotsminda Oil Company's net share of the 550,000 mcf of gas
delivered was 359,000 mcf at an average net sales price of $1.25 per mcf of gas.
All gas sales were made to one customer, AES Telasi.
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Oil and gas revenues for the three month period ending June 30, 2001 may
decrease following a second shut down for maintenance of two generating units at
the Gardabani power plant and to allow for drilling of N100, a deep Cretaceous
exploration well, to continue. Arrangements have been made with a second
customer to purchase gas while maintenance at the Gardabani power plant is
performed.
Refining and marketing revenue for the three month period ended March 31, 2001
relate to operating activities of Georgian American Oil Refinery and CanArgo
Standard Oil Products. In the first quarter of 2001, sales from the refinery
continued to be nominal following the imposition of restrictions and subsequent
excise tax on feedstock. These issues were expected to have been addressed by
authorities in Georgia culminating in new legislation addressing indigenous
refining activities in March 2001. In April 2001, these changes were passed. No
assurance can be given, however, that new legislation will not be put forward
that will reintroduce restrictions and excise taxes on feedstock and refined
product.
CanArgo had no revenue from equipment rentals in the first quarter of 2001
compared to other revenue from equipment rentals of $196,000 for the three month
period ended March 31, 2000.
The operating loss for the three month period ended March 31, 2001 amounted to
$546,000 compared with an operating income of $123,000 for the corresponding
period in 2000. The increase in operating loss is attributable primarily to
significant increases in operating and corporate activity.
Lease operating expenses increased to $502,000 for the three month period ended
March 31, 2001 as compared to $373,000 for the three month period ended March
31, 2000. The increase is primarily a result of increased activity at the
Ninotsminda field.
Purchases of crude oil and products and refinery operating expenses of
$1,158,000 and $120,000 respectively for the three month period ended March 31,
2001 relate to operating activities of Georgian American Oil Refinery and
CanArgo Standard Oil Products respectively.
Direct project costs increased to $250,000 for the three month period ended
March 31, 2001, from $136,000 for the three month period ended March 31, 2000,
reflecting increased activity within Georgia and reestablishment of activity
with respect to the licence Boryslaw Oil Company holds in the Stynawske field,
Ukraine. Direct project costs are expected to further increase following the
acquistion of Lateral Vector Resources Inc. Lateral Vector Resources Inc.
negotiated and concluded a Joint Investment Production Activity (JIPA) agreement
in 1998 to develop the Bugruvativske field in eastern Ukraine together with
Ukrnafta. Under the terms of this JIPA, LVR have certain rights to incremental
production from the field, which CanArgo understands is currently producing oil,
and is one of the larger oil fields in that area. Under the terms of the JIPA
and associated work programmes, it would be planned to significantly increase
production from the Field by investment in both remedial workover activity and
potential infill drilling, horizontal drilling and pressure maintenance
utilising appropriate technologies.
General and administrative costs increased to $928,000 for the three month
period ended March 31, 2001, from $374,000 for the three month period ended
March 31, 2000. The increase is primarily attributable to significant increased
operating and corporate activity, higher costs attributed to the London office
following the move of administrative and finance functions from Calgary to
London in 2000 and general and administrative costs of $190,400 related to
refining and marketing activities.
The increase in depreciation, depletion and amortization expense to $1,186,000
from $1,075,000 for the three month period ended March 31, 2000 is attributable
principally to depletion related to Ninotsminda field oil production and
depreciation of drilling equipment.
The equity loss from investments in unconsolidated subsidiaries increased to
$37,000 for the three month period ended March 31, 2001, from $13,000 for the
three month period ended March 31, 2000 as a result of expenses related to
operation of the gas pipeline from Ninotsminda to the Gardabani power station.
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CanArgo recorded net other income of $250,000 for the three months ended March
31, 2001, as compared to other loss of $15,000 during the three months ended
March 31, 2000. The principal reason for the increase is interest income on cash
balances less an allowance for doubtful accounts of $100,000 related to
outstanding gas sales.
The net loss of $326,000 or $nil per share for the three month period ended
March 31, 2001 compares to a net income of $100,000, or $nil per share for the
three month period ended March 31, 2000. The weighted average number of common
shares outstanding was substantially higher during the three month period ended
March 31, 2001 than during the three month period ended March 31, 2000, due in
large part to private placements in April, June and August 2000.
NEW ACCOUNTING STANDARDS
In 1998, FASB issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities and in June 2000 issued SFAS No. 138, which amended certain
provisions of SFAS 133. SFAS 133, as amended, will be adopted in the 2001 annual
financial statements and based on present circumstances would not have any
material effect on CanArgo's financial statements.
FORWARD LOOKING STATEMENTS
The forward looking statements contained in this Item 2 and elsewhere in this
Form 10-Q are subject to various risks, uncertainties and other factors that
could cause actual results to differ materially from the results anticipated in
such forward looking statements. Included among the important risks,
uncertainties and other factors are those hereinafter discussed.
Few of such forward looking statements deal with matters that are within the
unilateral control of CanArgo. Joint venture, acquisition, financing and other
agreements and arrangements must be negotiated with independent third parties
and, in some cases, must be approved by governmental agencies. Such third
parties generally have interests that do not coincide with those of CanArgo and
may conflict with CanArgo's interests. Unless CanArgo and such third parties are
able to compromise their respective objectives in a mutually acceptable manner,
agreements and arrangements will not be consummated.
Operating entities in various foreign jurisdictions must be registered by
governmental agencies, and production licenses for development of oil and gas
fields in various foreign jurisdictions must be granted by governmental
agencies. These governmental agencies generally have broad discretion in
determining whether to take or approve various actions and matters. In addition,
the policies and practices of governmental agencies may be affected or altered
by political, economic and other events occurring either within their own
countries or in a broader international context.
CanArgo does not have a majority of the equity in the entity that is the
licensed developer of some projects that CanArgo may pursue in Eastern Europe
such as the Stynawske field project, even though CanArgo may be the designated
operator of the oil or gas field. In such circumstances, the concurrence of
co-venturers may be required for various actions. Other parties influencing the
timing of events may have priorities that differ from those of CanArgo, even if
they generally share CanArgo's objectives. As a result of all of the foregoing,
among other matters, the forward looking statements regarding the occurrence and
timing of future events may well anticipate results that will not be realized.
The availability of equity or debt financing to CanArgo or to the entities that
are developing projects in which CanArgo has interests is affected by many
factors including:
o world economic conditions;
o international relations;
o the stability and policies of various governments;
o fluctuations in the price of oil and gas and the outlook for the oil and
gas industry;
o competition for funds; and
o an evaluation of CanArgo and specific projects in which CanArgo has an
interest.
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Rising interest rates might affect the feasibility of debt financing that is
offered. Potential investors and lenders will be influenced by their evaluations
of CanArgo and its projects and comparisons with alternative investment
opportunities. CanArgo's ability to finance all of its present oil and gas
projects and other ventures according to present plans is dependent upon
obtaining additional funding. An inability to obtain financing could require
CanArgo to scale back its project development, capital expenditure, production
and other plans.
The development of oil and gas properties is subject to substantial risks.
Expectations regarding production, even if estimated by independent petroleum
engineers, may prove to be unrealized. There are many uncertainties inherent in
estimating production quantities and in projecting future production rates and
the timing and amount of future development expenditures. Estimates of
properties in full production are more reliable than production estimates for
new discoveries and other properties that are not fully productive. Accordingly,
estimates related to CanArgo's properties are subject to change as additional
information becomes available.
Most of CanArgo's interests in oil and gas properties and ventures are located
in Eastern European countries. Operations in those countries are subject to
certain additional risks including the following:
o enforceability of contracts;
o currency convertibility and transferability;
o unexpected changes in tax rates;
o sudden or unexpected changes in demand for crude oil and or natural gas;
o availability of trained personnel; and
o availability of equipment and services and other factors that could
significantly change the economics of production.
Production estimates are subject to revision as prices and costs change.
Production, even if present, may not be recoverable in the amount and at the
rate anticipated and may not be recoverable in commercial quantities or on an
economically feasible basis. World and local prices for oil and gas can
fluctuate significantly, and a reduction in the revenue realizable from the sale
of production can affect the economic feasibility of an oil and gas project.
World and local political, economic and other conditions could affect CanArgo's
ability to proceed with or to effectively operate projects in various foreign
countries.
Demands by or expectations of governments, co-venturers, customers and others
may affect CanArgo's strategy regarding the various projects. Failure to meet
such demands or expectations could adversely affect CanArgo's participation in
such projects or its ability to obtain or maintain necessary licenses and other
approvals.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CanArgo had no interest in investments subject to market risk during the period
covered by this report.
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PART II - OTHER INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Management Contracts, Compensation Plans and Arrangements
are identified by an asterisk (*)
1(1) Escrow Agreement with Signature Stock Transfer, Inc.
(Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on September 9, 1999).
1(2) Selling Agent Agreement with each of Credifinance Securities
Limited, David Williamson Associates Limited, and Orkla
Finans (Fondsmegling) ASA (Incorporated herein by reference
from Form S-1 Registration Statement, File No. 333-72295
filed on September 9, 1999).
1(3) Escrow Agreement with Orkla Finans (Fondsmegling) ASA
(Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on September 9, 1999).
1(4) Selling Agent Agreement with National Securities Corporation
(Incorporated herein by reference from Post-Effective
Amendment No. 1 to Form S-1 Registration Statement, File No.
333-72295 filed on July 29, 1999).
1(5) Escrow Agreement with Continental Stock Transfer & Trust
Company (Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1 Registration
Statement, File No. 333-72295 filed on July 29, 1999).
2(1) Agreement Relating to the Sale and Purchase of All the
Issued Share Capital of Gastron International Limited dated
August 10, 1995 by and among Ribalta Holdings, Inc. as
Vendor and Fountain Oil Incorporated as Purchaser, and John
Richard Tate as Warrantor (Incorporated herein by reference
from October 19, 1995 Form 8-K).
2(2) Supplemental Agreement Relating to the Sale and Purchase of
All the Issued Share Capital of Gastron International
Limited dated November 3, 1995 by and among Ribalta
Holdings, Inc. as Vendor and Fountain Oil Incorporated as
Purchaser, and John Richard Tate as Warrantor (Incorporated
herein by reference from October 19, 1995 Form 8-K).
2(3) Supplemental Deed Relating to the Sale and Purchase of All
the Issued Share Capital of Gastron International Limited
dated May 29, 1996 by and among Ribalta Holdings, Inc. as
Vendor and Fountain Oil Incorporated as Purchaser, and John
Richard Tate as Warrantor (Incorporated herein by reference
from September 30, 1997 Form 10-Q).
2(4) Memorandum of Agreement between Fielden Management Services
Pty, Ltd., A.C.N. 005 506 123 and Fountain Oil Incorporated
dated May 16, 1995 (Incorporated herein by reference from
December 31, 1997 Form 10-K/A).
2(5) Amended and Restated Combination Agreement between Fountain
Oil Incorporated and CanArgo Energy Inc. dated as of
February 2, 1998 (Incorporated herein by reference from Form
S-3 Registration Statement, File No. 333-48287 filed on
September 9, 1998).
2(6) Voting, Support and Exchange Trust Agreement (Incorporated
herein by reference as Annex G from Form S-3 Registration
Statement, File No. 333-48287 filed on September 9, 1998).
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2(7) Offer Circular relating to a proposed purchase all of the
outstanding common shares of Lateral Vector Resources, Inc.
dated March 20, 2001 (Incorporated herein by reference from
Form 14D-1F dated March 21, 2001).
2(8) Notice of Extension and Variation amending Registrant's
offer to purchase all of the outstanding common shares of
Lateral Vector Resources, Inc. dated April 9, 2001
(Incorporated herein by reference from Amendment No. 1 to
Form 14D-1F dated April 11, 2001).
3(1) Registrant's Certificate of Incorporation and amendments
thereto (Incorporated herein by reference from July 15, 1998
Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1 Registration
Statement, File No. 333-72295 filed on July 29, 1999).
4(1) Registration Rights Agreement between Registrant and JKX
Nederland B.V. dated September 28, 2000, relating to
purchase of 21.2% interest in Ninotsminda Oil Company
(Incorporated herein by reference from July 20, 2000 Form
8-K).
*10(1) Form of Option Agreement for options granted to certain
persons, including Directors (Incorporated herein by
reference from August 31, 1994 Form 10-KSB, filed by
Electromagnetic Oil Recovery, Inc., the Company's
predecessor).
*10(2) Amended and Restated 1995 Long-Term Incentive Plan
(Incorporated herein by reference from Post-Effective
Amendment No. 1 to Form S-1 Registration Statement, File No.
333-72295 filed on July 29, 1999).
*10(3) Amended and Restated CanArgo Energy Inc. Stock Option Plan
(Incorporated herein by reference from September 30, 1998
Form 10-Q).
*10(4) Workorder between CanArgo Energy Inc. and Nils N. Trulsvik
as Consultant (Incorporated herein by reference from
September 30, 1998 Form 10-Q).
*10(5) Employment Contract between CanArgo Energy Inc. and Anthony
J. Potter (Incorporated herein by reference from September
30, 1998 Form 10-Q).
10(6) Put Option Agreement between CanArgo Energy Corporation, JKX
Oil & Gas PLC. and IFC dated December 17, 1998 (Incorporated
herein by reference from Form S-1 Registration Statement,
File No. 333-72295 filed on February 12, 1999).
10(7) Guarantee Agreement between CanArgo Energy Corporation and
IFC dated December 17, 1998 (Incorporated herein by
reference from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(8) Agreement between Georgian American Oil Refinery Company and
CanArgo Petroleum Products Ltd. dated September 26, 1998
(Incorporated herein by reference from Form S-1 Registration
Statement, File No. 333-72295 filed on February 12, 1999).
10(9) Terrenex Acquisition Corporation Option regarding CanArgo
(Nazvrevi) Limited (Incorporated herein by reference from
Form S-1 Registration Statement, File No. 333-72295 filed on
February 12, 1999).
10(10) Production Sharing Contract between (1) Georgia and (2)
Georgian Oil and JKX Navtobi
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Ltd. dated February 12, 1996 (Incorporated herein by
reference from Form S-1 Registration Statement,
File No. 333-72295 filed on September 7, 1999).
10(11) Agreement and Promissory Note dated July 19, 1999, with
Terrenex Acquisition Corporation (Incorporated herein by
reference from Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on July 29,
1999).
10(12) Agreement between CanArgo Energy Corporation, Ninotsminda
Oil Company and IFC dated October 19, 1999 (Incorporated
herein by reference from September 30, 1999 Form 10-Q).
10(13) Agreement on Financial Advisory Services between CanArgo
Energy Corporation, Orkla Finans (Fondsmegling) A.S and
Sundal Collier & Co. ASA dated December 8, 1999
(Incorporated herein by reference from December 28, 1999
Form 8-K).
10(14) Form of Subscription Agreement (Incorporated herein by
reference from December 28, 1999 Form 8-K).
10(15) Agreement between CanArgo Energy Corporation and JKX
Nederland BV dated January 19, 2000 (Incorporated herein by
reference from December 31, 1999 Form 10-K).
*10(16) Employment Agreement between CanArgo Energy Corporation and
Paddy Chesterman dated February 24, 2000 (Incorporated
herein by reference from December 31, 1999 Form 10-K).
10(17) Agreement between Ninotsminda Oil Company and AES Gardabani
dated March 10, 2000 (Incorporated herein by reference from
December 31, 1999 Form 10-K).
10(18) Term Sheet dated September 27, 2000 relating to sale of
15,660,916 shares of Registrant's common stock (Incorporated
herein by reference from July 20, 2000 Form 8-K).
10(19) Form of Subscription Agreement relating to sale of
15,660,916 shares of the Registrant's common stock
(Incorporated herein by reference from July 20, 2000 Form
8-K).
10(20) Subscription Agreement between Registrant and JKX Nederland
B.V. dated September 15, 2000 relating to purchase of 21.2%
interest in Ninotsminda Oil Company (Incorporated herein by
reference from July 20, 2000 Form 8-K).
*10(21) Employment Agreement between CanArgo Energy Corporation and
Dr. David Robson dated June 29, 2000 (Incorporated herein
by reference from September 30, 2000 Form 10-Q).
10(22) Tenancy Agreement between CanArgo Energy Corporation and
Grosvenor West End Properties dated September 8, 2000
(Incorporated herein by reference from September 30, 2000
Form 10-Q).
10(23) Agreement between CanArgo Energy Corporation and Roger
Brittain dated August 18, 2000 (Incorporated herein by
reference from December 31, 2000 Form 10-K).
*10(24) Employment Agreements between CanArgo Energy Corporation and
Murray Chancellor dated September 22, 2000 (Incorporated
herein by reference from December 31, 2000 Form 10-K).
*10(25) Employment Agreements between CanArgo Energy Corporation and
Anthony Potter dated October 1, 2000 (Incorporated herein
by reference from December 31, 2000 Form 10-K).
10(26) Production Sharing Contract between (1) Georgia and (2)
Georgian Oil and CanArgo (Incorporated herein by reference
from December 31, 2000 Form 10-K).
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Norio Limited dated December 12, 2000.
10(27) Agreement between CanArgo Energy Corporation and Georgian
British Oil Services Company dated November 10, 2000 relating
to the purchase of 9.35% interest in Georgian American Oil
Refinery (Incorporated herein by reference from
December 31, 2000 Form 10-K).
10(28) Share Exchange Agreement between CanArgo Energy Corporation
and Argonaut Oil and Gas Limited dated November 10, 2000,
related to the purchase of 28.7% interest in Georgian
American Oil Refinery (Incorporated herein by reference
from December 31, 2000 Form 10-K).
21 List of Subsidiaries (Incorporated herein by reference from
Form S-1 Registration Statement, File No. 333-72295 filed on
February 12, 1999).
(b) Reports on Form 8-K:
On March 8, 2001, CanArgo announced that it intended to make an offer to
purchase all outstanding common shares of Lateral Vector Resources Inc. The
Offer was made through a wholly owned subsidiary of CanArgo organised for
the purposes of making the offer. The basis of the Offer to Lateral Vector
Resources Inc. shareholders was Canadian $0.10 in cash for each outstanding
Lateral Vector Resources Inc. share.
On April 30, 2001 CanArgo acquired 26,450,702 common shares of Lateral
Vector Resources Inc. for cash consideration of approximately $1,883,200
(Canadian $2,909,577). The purchase represented approximately 77% of the
common shares of Lateral Vector Resources Inc. on a fully diluted basis.
The purchase of common shares was originally made pursuant to an offer
dated March 20, 2001 by a wholly owned subsidiary of CanArgo to purchase
all outstanding common shares of Lateral Vector Resources Inc. The offer
was subsequently amended on April 9, 2001 to increase the purchase price to
Cdn $0.11 per share and to amend and remove certain conditions to CanArgo's
obligation to purchase the common shares. CanArgo intends to acquire any
shares not deposited under the offer by way of a second stage transaction
particulars of which are set out in section 12 of the Circular dated March
20th 2001 which accompanied the document containing CanArgo's original
offer for Lateral Vector Resources Inc.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CANARGO ENERGY CORPORATION
Date: May 14, 2001 By: /s/Anthony J. Potter
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Anthony J. Potter
Chief Financial Officer
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