SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 22, 1999
ENERGY RESEARCH CORPORATION
________________________________________________________________________________
(Exact Name Of Registrant As Specified In Its Charter)
NEW YORK
________________________________________________________________________________
(State or Other Jurisdiction of Incorporation)
0-24852 06-0853042
_____________________________ ____________________________________
(Commission File Number) (I.R.S. Employer Identification No.)
3 Great Pasture Road, Danbury, Connecticut 06813
__________________________________________ ____________________________________
(Address of Principal Executive Offices) (Zip Code)
(203)825-6000
________________________________________________________________________________
(Registrant's Telephone Number, Including Area Code)
N/A
________________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On February 22, 1999 (the "Distribution Date"), Energy Research
Corporation, a New York corporation ("ERC"), effected a special tax-free
distribution (the "Distribution") to its stockholders of one share of Common
Stock, $.01 par value ("Evercel Common Stock"), of Evercel, Inc. ("Evercel") for
every three shares of Common Stock, $.0001 par value, of ERC ("ERC Common
Stock") held of record as of the close of business on February 19, 1999 (the
"ERC Record Date").
Prior to the Distribution, ERC owned all of the outstanding shares of
Evercel Common Stock. Evercel was formed as a wholly-owned subsidiary of ERC on
June 22, 1998; on February 16, 1999, ERC transferred to Evercel the principal
assets related to ERC's battery business group ("Battery Business Group"), and
Evercel assumed certain liabilities related to those assets. ERC effected the
Distribution by delivering its shares of Evercel Common Stock to Continental
Stock Transfer & Trust Company (the "Distribution Agent"), for cancellation and
instructing the Distribution Agent to distribute all of the issued and
outstanding shares of Evercel Common Stock to the holders of record of ERC
Common Stock as of the ERC Record Date.
Shares of Evercel Common Stock received in the Distribution may not be sold
or otherwise disposed of prior to the closing of the rights offering (the
"Rights Offering") being conducted by Evercel immediately following the
Distribution. Until such closing occurs, the Evercel Common Stock will be
uncertificated. Following such closing, which is expected to occur on or about
April 5, 1999, the Distribution Agent will begin to mail stock certificates
representing the shares of Evercel Common Stock to ERC stockholders as of the
ERC Record Date. Holders of ERC Common Stock on the ERC Record Date will not be
required to make any payment or to take any other action to receive their
portion of the Distribution.
The principal effect of the Distribution will be to separate ERC's Battery
Business Group and operations from its fuel cell business and related
activities. After the Distribution, each business will be conducted by a
separate, publicly held corporation. Evercel will own and operate the battery
business, and ERC will retain and continue to own and operate the fuel cell
business.
The Distribution did not require stockholder approval, and Evercel's
stockholders will not be entitled to appraisal rights in connection with the
Distribution.
After the Distribution, ERC Common Stock will continue to be traded on the
American Stock Exchange. As a result of the Distribution, the trading prices of
ERC Common Stock are likely to be lower than the trading prices of ERC Common
Stock immediately prior to the Distribution. The aggregate trading prices of ERC
Common Stock and Common Stock of Evercel after the Distribution may be less
than, equal to or greater than the trading prices of ERC Common Stock prior to
the Distribution. In addition, until the market has fully analyzed the
operations of ERC without the battery business, the prices at which ERC Common
Stock trades may fluctuate significantly.
Reasons for the Distribution
The Board of Directors of ERC has determined, for the reasons set forth
below, to separate ERC into two publicly held companies: Evercel, a newly formed
corporation which will own and operate the battery business and operations, and
ERC, which will continue to own and operate its fuel cell business.
The battery business of Evercel and the fuel cell business of ERC have
distinctly different investment, operating and financial characteristics. For
instance, the battery markets are mature markets in which Evercel expects to
introduce a new product, while the fuel cell market is in its preliminary stage.
Currently, there are widespread commercial markets for batteries, while no such
markets exist for fuel cells. Battery products require mass production, while
fuel cell products are expected to be much more customized depending on their
use. Batteries have different retail market segments ranging from electronic
equipment, such as cell phones and computers to electric cars, while ERC's fuel
cells are mainly geared towards stationary electric power. The two businesses
attract investors having different investment criteria, and operation of the two
businesses by the same corporation or affiliated group of corporations may
reduce the ability of each business to attract equity capital.
The ERC Board therefore considers it to be in the best interests of both
the battery business and fuel cell business that they be separated, which will
allow management of each company to more appropriately undertake capital raising
requirements and investment decisions, as well as to allow investors to invest
in either business without consideration of the other.
In addition, the Distribution will allow Evercel to offer its employees an
effective equity-based employee compensation package as well as to allow ERC to
provide its employees with incentive plans that more appropriately relate to the
performance of its fuel cell business. Furthermore, the Board of Directors of
ERC believes that Evercel's post-Distribution capital structure and business
focus should help it better compete with other battery companies while enabling
ERC to devote its capital and personnel solely to the development of its fuel
cell technology.
Pursuant to the Distribution, a stockholder will have an ownership interest
in both ERC and Evercel after the Distribution. However, as a result of the
Distribution, current stockholders and prospective investors will have the
ability to make separate investment decisions regarding each business.
Manner of Effecting the Distribution
In connection with the Distribution, the Distribution Agent distributed all
of the outstanding shares of Evercel Common Stock to the holders of record of
ERC Common Stock as of the ERC Record Date. Shares of Evercel Common Stock
received in the Distribution may not be sold or otherwise disposed of prior to
the date on which the Subscription Agent for the Rights Offering delivers to
Evercel final notice of the number of shares of Common Stock subscribed for in
the Rights Offering (the "closing") pursuant to a restriction on transfer
contained in Evercel's Amended and Restated Certificate of Incorporation
("Certificate"). Until such closing occurs, the Evercel Common Stock will be
uncertificated. It is expected that shares of Evercel Common Stock will be
delivered by the Distribution Agent to ERC stockholders promptly following the
closing of the Rights Offering.
Fractional shares of Evercel Common Stock were not issued in the
Distribution. A cash payment will be made to ERC stockholders otherwise entitled
to a fractional share of Evercel Common Stock as a result of the Distribution.
The amount of such payment will be based upon the average bid price on the first
day of trading of the Evercel Common Stock. Such payment will, therefore, not be
made until the Evercel Common Stock begins trading after the closing of the
Rights Offering.
No holder of ERC Common Stock will be required to pay any cash or other
consideration for the shares of Evercel Common Stock received in the
Distribution or surrender or exchange shares of ERC Common Stock. The
Distribution will not affect the number of, or the rights attaching to,
outstanding shares of ERC Common Stock. All shares of Evercel Common Stock will
be fully paid and non-assessable and the holders of those shares will not be
entitled to preemptive rights.
Listing and Trading of Evercel Common Stock
There is not currently a public market for the Evercel Common Stock. Prior
to the closing of the Rights Offering, the Evercel Common Stock received in the
Distribution may not be sold or otherwise disposed of pursuant to a restriction
on transfer contained in Evercel's Certificate. Prices at which Evercel Common
Stock may trade on a "when-issued" basis or after the closing of the Rights
Offering cannot be predicted. Until the Evercel Common Stock is fully
distributed, the Rights Offering is closed and an orderly market develops, the
prices at which trading in such stock occurs may fluctuate significantly.
Evercel Common Stock has been conditionally approved for listing on The Nasdaq
SmallCap Market under the symbol "EVRC" and Evercel has applied to have the
Evercel Common Stock listed for quotation on the Boston Stock Exchange under the
symbol "EVL", following the closing of the Rights Offering. The prices at which
Evercel Common Stock trades will be determined by the marketplace and may be
influenced by many factors, including the depth and liquidity of the market for
Evercel Common Stock, investor perception of Evercel and the industries in which
Evercel or its customers participate, and other general economic and market
conditions.
Federal Income Tax Aspects of the Distribution
Evercel has been advised by its counsel, Brown, Rudnick, Freed & Gesmer,
that the Distribution qualifies as a tax free spin-off under Sections 355 and
368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"). Such
counsel has issued an opinion of counsel satisfactory to the ERC Board to the
same effect. So long as the Distribution qualifies under Sections 355 and
368(a)(1)(D) of the Code, in the opinion of Brown, Rudnick, Freed & Gesmer, the
principal Federal income tax consequences of the Distribution will be as
follows:
(1) No gain or loss will be recognized by (and no amount will be included
in the income of) a holder of ERC Common Stock upon the receipt of Common Stock
in the Distribution, other than on account of cash received in lieu of
fractional shares. A stockholder who receives cash in lieu of fractional shares
will recognize gain or loss equal to the difference between the amount of cash
received and the allocated basis of the fractional share deemed surrendered in
exchange for such cash. Provided the fractional share is a capital asset in the
hands of the stockholder, such gain or loss will be capital gain or loss.
(2) The aggregate basis of the ERC Common Stock and the Evercel Common
Stock (including fractional shares in lieu of which cash will be issued) in the
hands of the stockholders of ERC immediately after the Distribution will be the
same as the aggregate basis of the ERC Common Stock held immediately before the
Distribution, allocated in proportion to the fair market value of each.
(3) The holding period of the Evercel Common Stock (including fractional
shares in lieu of which cash will be issued) received by the stockholders of ERC
will include the holding period of ERC Common Stock with respect to which the
Distribution will be made, provided that such stockholder held the ERC Common
Stock as a capital asset on the Distribution Date.
(4) No gain or loss will be recognized by ERC upon the Distribution.
The foregoing is only a summary of the material federal income tax
consequences of the Distribution under current law, and does not take into
account any special circumstances that may apply to particular stockholders.
Each stockholder should consult his or her tax advisor as to the particular
consequences of the Distribution to such stockholder, including the application
of state, local and foreign tax laws, and as to possible changes in tax laws
that may affect the tax consequences described above. This summary may not be
applicable to stockholders who received their ERC Common Stock pursuant to the
exercise of employee stock options, under an employee stock purchase plan or
otherwise as compensation or who are not citizens or residents of the United
States.
The opinions of counsel referred to above would not be binding upon the
Internal Revenue Service (the "IRS") and would be subject to certain factual
representations and assumptions. ERC is not aware of any present facts or
circumstances which should cause such representations and assumptions to be
untrue. However, certain future events not within the control of ERC or Evercel,
including certain extraordinary purchases of ERC Common Stock or Evercel Common
Stock, could cause the Distribution not to qualify as tax-free. Depending on the
event, Evercel may be liable for some or all of the taxes resulting from the
Distribution not qualifying under Sections 355 and 368(a)(1)(D) of the Code as
tax-free. If the Distribution were taxable, then (i) each holder of ERC Common
Stock who receives shares of Evercel Common Stock in the Distribution would be
treated as if such shareholder received a taxable distribution, taxed as a
dividend to the extent of such shareholder's pro rata share of ERC's current and
accumulated earnings and profits and then treated as a return of capital to the
extent of the holder's basis in the ERC Common Stock and finally as gain from
the sale or exchange of ERC Common Stock and (ii) corporate level taxes would be
payable by the affiliated group of which ERC is the common parent, based upon
the excess of the fair market value of the Evercel Common Stock on the date of
the Distribution over ERC's tax basis therein.
Relationship Between ERC and Evercel after the Distribution
For purposes of governing certain relationships between ERC and Evercel
after the Distribution and providing for an orderly transition, ERC and Evercel
have entered into various agreements, including those described below. Copies of
certain of the agreements are included as exhibits hereto, and the following
discussions with respect to such agreements are qualified in their entirety by
reference to the agreements as filed.
Distribution Agreement
ERC and Evercel have entered into a Distribution Agreement (the
"Distribution Agreement"), which provides for, among other things, the principal
corporate transactions required to effect the Distribution, the transfer to
Evercel of the principal assets of the Battery Business Group, the division
between ERC and Evercel of certain liabilities and obligations, the distribution
by ERC of all outstanding shares of the Evercel Common Stock to ERC stockholders
and certain other agreements governing the relationship between ERC and Evercel.
Subject to certain exceptions, the Distribution Agreement provides for,
among other things, assumptions of obligations and liabilities and
cross-indemnities designed to allocate financial responsibility for the
obligations and liabilities arising out of or in connection with the battery
business to Evercel and financial responsibility for the obligations and
liabilities arising out of or in connection with the fuel cell business to ERC.
ERC has entered into a joint venture in China, called Xiamen Three
Circles-ERC Battery Corp., Ltd. (the "Joint Venture") with Xiamen Three Circles
Co., Ltd, a Chinese entity, to develop and manufacture nickel-zinc batteries to
be used to power electric bicycles, scooters, off-road vehicles and miners' cap
lamps to be marketed and sold in China and Southeast Asia. The Joint Venture and
ERC entered into a Technology Transfer and License Contract (the "Three Circles
License Agreement") pursuant to which ERC licensed certain of its nickel-zinc
battery technology to the Joint Venture. The Distribution Agreement provides
that ERC will transfer the Joint Venture and the Three Circles License Agreement
to Evercel after it obtains the consent of the Joint Venture and ERC's Chinese
partner and the approval of the appropriate examination and approval authority
of the PRC to the transfer. The Distribution Agreement also provides that ERC
will retain a limited license to use the technology transferred by ERC to
Evercel until all consents and approvals to the transfer to Evercel of the Three
Circles License Agreement and the related Joint Venture have been obtained.
In the Distribution Agreement, ERC has agreed to endeavor to cause Evercel
to become a party to a joint venture formed by ERC with the City of Xiamen,
China, called Xiamen-ERC Technology Company, Limited, in order to pursue
research in advanced electrochemical technologies. ERC has also agreed that this
joint venture will not undertake any projects involving battery technology
without Evercel's prior consent, until Evercel becomes a party to the joint
venture.
In accordance with the terms of the Option Agreement entered into by ERC
and Mr. Leitman at the time that Mr. Leitman joined ERC, which provides for the
grant by ERC to Mr. Leitman of stock options (the "ERC Options") to acquire
250,000 shares of ERC Common Stock, the Distribution Agreement provides that
Evercel will issue to Mr. Leitman one share of Evercel Common Stock for every
three shares of ERC Common Stock which he purchases pursuant to his exercise of
the ERC Options. The ERC Options began to vest in August 1997: 100,000 shares in
the first year and annual installments of 50,000 shares thereafter. These
options will become fully vested in August 2001. The Distribution Agreement
provides that ERC and Evercel will allocate the exercise price of the ERC
Options between them based proportionately upon the relative fair market values
of the ERC Common Stock and the Evercel Common Stock.
The Distribution Agreement also provides that each of Evercel and ERC will
be granted access to certain records and information in the possession of the
other, and requires the retention by each of Evercel and ERC for a period of six
years following the Distribution of all such information in its possession, and
thereafter requires that each party give the other prior notice of its intention
to dispose of such information. In addition, the Distribution Agreement provides
for the allocation of shared privileges with respect to certain information
(including, for example, the attorney-client privilege) and requires each of
Evercel and ERC to obtain the consent of the other prior to waiving any shared
privilege.
The Distribution Agreement provides that, except as otherwise set forth
therein or in any related agreement, all costs and expenses in connection with
the Distribution will be charged to the party for whose benefit the expenses are
incurred.
Tax Sharing Agreement
ERC and Evercel have entered into a tax sharing agreement (the "Tax Sharing
Agreement") that defines the parties' rights and obligations with respect to
filing of returns, payments, deficiencies and refunds of federal, state and
other income, franchise or certain other taxes relating to ERC's business for
periods prior to and including the Distribution and with respect to Evercel
after the Distribution. With respect to periods ending on or before the last day
of the taxable year in which the Distribution occurs, ERC is responsible for (i)
filing both consolidated federal tax returns for the ERC affiliated group and
combined or consolidated state tax returns for any group that includes a member
of the ERC affiliated group, including, in each case, Evercel for the relevant
periods of time that Evercel was a member of the applicable group, and (ii)
paying the taxes relating to such returns (including any subsequent adjustments
resulting from the redetermination of such tax liabilities by the applicable
taxing authorities). Evercel is responsible for filing returns and paying taxes
relating to it for periods that begin before and end after the Distribution and
for periods that begin after the Distribution. ERC and Evercel have agreed to
cooperate with each other and to share information in preparing such tax returns
and in dealing with other tax matters.
Services Agreement
Pursuant to the terms of the Distribution Agreement, ERC and Evercel have
entered into a Services Agreement (the "Services Agreement"), under the terms of
which ERC will provide to Evercel certain management and administrative
services, as well as the use of certain office, research and development, and
manufacturing and support facilities and services. The Services Agreement shall
continue until terminated by either party upon 120 days' notice. In addition,
Evercel may terminate the Services Agreement as to one or more of the services,
upon 60 days' notice to ERC.
The types of services to be provided pursuant to the Services Agreement by
ERC, through its employees, include financial reporting, accounting, auditing,
tax, office services, payroll, human resources, analytical lab, microscopic
analysis, machine shop and drafting, as well as the part time management
services of Jerry Leitman and Joseph Mahler, the Chief Executive Officer and
Chief Financial Officer, respectively, of ERC. ERC will also provide office,
research and development and manufacturing space for Evercel. The method of
calculating the applicable charges to be paid by Evercel for each type of
service are set forth in the Services Agreement; such charges are payable
quarterly.
ERC estimates that the net fees to be paid by Evercel to ERC for services
performed will initially be approximately $208,000 per quarter, excluding
certain services billed on the basis of usage, such as purchasing, analytical
lab, microscopic analysis, machine shop and drafting, which amount takes into
account ERC's additional costs related to providing such services, and will
decline as the services performed decrease. ERC presently expects that most of
such services will be provided by ERC for approximately one year.
License Assistance Agreement
Evercel and ERC have entered into a License Assistance Agreement (the
"License Assistance Agreement") pursuant to which Evercel has agreed to provide
all services and assistance necessary for Evercel to effectively fulfill, on
behalf of ERC, all of ERC's obligations under the Joint Venture contract and the
Three Circles License Agreement, pending the receipt of certain consents and
approvals to be obtained prior to the transfer of this contract and agreement to
Evercel, in exchange for payment to Evercel by ERC of all future remuneration
paid and other benefits accruing to ERC pursuant to such contract and agreement.
The intent of the License Assistance Agreement is to provide that Evercel will
bear the obligations and receive the benefits of ERC under the Joint Venture
contract and license agreement. In addition, until such consents and approvals
are obtained, ERC has agreed that should any vacancy occur in the Board of
Directors of the Joint Venture relating to a directorship which ERC is entitled
to appoint, ERC will request a nominee from Evercel to fill such vacancy. In
addition, in the event that the transfer of the Joint Venture contract and the
license agreement to Evercel has not taken place within six months from the date
of the License Assistance Agreement, upon the request of Evercel, ERC will
replace its appointees to the Board of Directors of the Joint Venture with
nominees specified by Evercel. ERC also agrees to exercise its residual rights
and powers in the Joint Venture interests including voting rights, in accordance
with Evercel's instructions. Evercel has also agreed to reimburse ERC for any
expenses incurred by ERC under the License Assistance Agreement; ERC anticipates
that such expenses, if any, will be minimal.
Line of Credit and Guarantees
On February 5, 1999, Evercel entered into a Loan Agreement and Line of
Credit Note (the "Line of Credit") to borrow up to $3,450,000 (including
borrowings described below) from ERC for working capital and capital
expenditures purposes. Any outstanding borrowings will be secured by all of
Evercel's tangible and intangible personal property and bear interest at the
London Interbank Offered Rate (LIBOR) plus 1 1/2%, payable monthly in arrears.
The Line of Credit terminates on the earlier of August 5, 2000 or the date on
which Evercel has received net proceeds from the Rights Offering or from other
financing equal to at least $3,450,000.
In addition to the Line of Credit, ERC has unconditionally guaranteed
Evercel's obligations under a loan from First Union National Bank. The loan was
entered into by Evercel for the purpose of acquiring machinery and equipment. As
of February 28, 1999, Evercel had borrowed $608,000 of the $1,000,000 available
under this facility. ERC has also pledged $1,000,000 in cash as security for
this loan which will be payable from proceeds of the Rights Offering. ERC has
also guaranteed Evercel's performance under its lease for manufacturing and
office space. In the event of a default by Evercel under the lease, ERC's
liability is limited to $500,000 reduced each anniversary date of the lease by
$100,000. Notwithstanding the foregoing, the guaranty terminates after the first
anniversary of the lease upon Evercel's net worth exceeding $3,000,000.
Item 7. Financial Statements and Exhibits.
- ------- ----------------------------------
(b) Pro forma financial information:
Balance sheet and income statement as of and for the year
ended October 31, 1998.
(c) Exhibits:
2 Distribution Agreement between ERC and Evercel, dated as of
February 16, 1999.
99 Press Release dated February 23, 1999.
Item 7. Financial Statements and Exhibits
Pro Forma Financial Information
As noted above, on February 22, 1999, ERC effected a special tax-free
distribution to its stockholders of record on February 19, 1999, one share of
Evercel Stock for every three share of ERC Common Stock.
Pro forma
The following unaudited pro forma consolidated information is based on the
historical consolidated financial statements of Energy Research Corp adjusted to
give offset to the Distribution.
The unaudited pro forma consolidated balance sheet as of October 31, 1998
gives effect to the elimination of the battery business group, as well as other
adjustments, assuming the distribution had taken place on October 31, 1998.
The unaudited pro forma consolidated income statement for the year ended
October 31, 1998 gives effect to the elimination of the battery business group
as well as other adjustments, assuming the Distribution had taken place as of
the beginning of the period.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable.
The following unaudited pro forma consolidated financial statements have
been prepared in accordance with the rules and regulation of the Securities and
Exchange Commission. Management does not believe that this pro forma
presentation is indicative of the financial position and results which would
have occurred had the transaction occurred on the date indicated in the pro
forma consolidated financial statements because of the hypothetical nature of
the pro forma information and because ERC may have operated its fuel cell
business differently during that period.
ENERGY RESEARCH CORPORATION
PRO FORMA CONSOLIDATED INCOME STATEMENT
Year Ended October 31, 1998
($000, except per share amounts)
Historically Divestment Pro Forma
Reported Evercel Adjustments Pro Forma
------------ ---------- ----------- ---------
Revenues $24,318 19 24,299
Costs and expenses:
Cost of revenues 14,590 87 14,503
Administrative and selling 6,986 1,805 664 (a) 5,845
Depreciation 1,529 45 1,484
Research and development 2,258 1,832 1,787 (a) 2,213
------------- ------------- ------------- -------------
Total costs and expenses 25,363 3,769 2,451 24,045
------------- ------------- ------------- -------------
Income(loss) from operations (1,045) (3,750) 2,451 254
License fee income net 678 419 259
Interest expense (269) - (269)
Interest and other income, net 267 - 267
------------- ------------- ------------- -------------
Income (loss) before provision
for income taxes (369) (3,331) 2,451 511
Provision (benefit) for income taxes 13 (1,006) (833) (b) 186
------------- ------------ ------------- -------------
Net Income (loss) ($382) (2,325) 1,618 325
============= ============= ============= =============
Basic Earnings(Loss) per share ($0.09) $0.08
============= =============
Basic shares Outstanding 4,081,018 4,081,018
Diluted Earnings(Loss) per share ($0.09) $0.08
============= =============
Diluted shares Outstanding 4,081,018 4,227,428
Notes to Pro Forma Consolidated Income Statement for the year ended October
31, 1998.
(Unaudited)
The preceding pro forma income statements present the consolidated income
of ERC for the year ended October 31, 1998 after eliminating the battery
business group and after giving effect to the adjustment described below.
The adjustments made to the pro forma income statement assume that the
distribution occurred as of the beginning of the period.
It is management's opinion that these pro forma results are not necessarily
indicative of the results which would have occurred had the distribution been
made at the beginning of the period.
Historically Reported
The historically reported column represents the historical consolidated
income of ERC for the year ended October 31, 1998.
Divestment Evercel
The divestment represents the historical results of the battery business
group for the year ended October 31, 1998.
Pro Forma Adjustments
(a) This adjustment reflects the allowable administrative and selling and
research and development expenses recovered under government contracts
that was applied to the battery business group. The revenue for these
costs have remained with ERC.
(b) The tax benefit for these costs was recognized using the statutory tax
rate of ERC for the year ended October 31, 1998.
ENERGY RESEARCH CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
Year Ended October 31, 1998
($000)
Historically Divestment Pro Forma
Reported Evercel Adjsutments Pro Forma
ASSETS
------------ ------------ ------------- ---------
Current Assets:
Cash & cash equivalents $10,304 1 603 (c) 10,906
Accounts receivable 3,813 17 3,796
Inventories 30 - 30
Deferred income taxes 1,073 - 1,073
Other current assets 646 - (333) (d) 313
----------- ------------ ------------ -----------
Total current assets 15,866 18 270 16118
Property Plant and equipment, net 8,347 825 7,522
Other assets, net 2,630 333 333 (d) 2,630
------------ ----------- ----------- -----------
Total assets 26,843 1,176 603 26,270
============ =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $755 - 755
Accounts Payable 620 53 567
Accrued Liabilities 2,928 80 2,848
Current portion of deferred license fee income 1,329 - 1,329
Due to ERC - 603 (603) (c) -
----------- ---------- ------------ -----------
Total Current Liabilities 5632 736 (603) 5,499
Long term liabilities:
Long-term debt 1,944 - 1,944
Deferred income taxes 177 17 160
----------- ----------- ----------- -----------
Total Liabilities 7,753 753 (603) 7,603
Minority interest 3,220 - 3,220
Stockholders' equity:
Convertible Preferred 600 - 600
Common Stock - - - -
Additional Paid in Capital 12,943 423 12,520
Retained Earnings 2,327 - 2,327
----------- ----------- ----------- ----------
Total stockholders' equity: 15,870 423 - 15,447
----------- ----------- ---------- ----------
Total liabilities and stockholders' equity: 26,843 1,176 (603) 26,270
=========== =========== =========== ===========
Notes to Pro Forma Consolidated Balance Sheet as of October 31, 1998.
(Unaudited)
The preceding pro forma balance sheet presents the consolidated financial
position as of October 31, 1998 after eliminating the battery business group and
after giving effect to the adjustments described below.
The adjustments made to this pro forma balance sheet assume that the
distribution occurred as of October 31, 1998.
Historically Reported
The historically reported column represents the historical balance sheet of
ERC as of October 31, 1998.
Divestment Evercel
The divestment's represent the historical balance sheet positions of the
battery business group and the amounts related to the Distribution as of October
31, 1998.
Pro Forma Adjustments
(c) Reflects $603 received from ERC based on subsequent borrowings by Evercel
after October 31, 1998 to repay ERC for fixed asset acquisitions.
(d) Deferred rights offering costs amounting to $333 has been reclassified to
non current assets on ERC's consolidated balance sheet.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENERGY RESEARCH CORPORATION
Dated: March 9, 1999
By: \s\ Jerry D. Leitman
-------------------------------------
Jerry D. Leitman
President and Chief Executive Officer