FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
August 21, 1996
------------------------------------------------
Date of Report (date of earliest event reported)
EVERGREEN RESOURCES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
COLORADO 0-10077 84-0834147
- ---------------------------- ---------------- ------------------
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
1000 Writer Square
1512 Larimer Street
Denver, Colorado 80202
----------------------------------------
(Address of Principal Executive Offices)
(303) 534-0400
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
Page Number
-----------
(a) PRO FORMA FINANCIAL INFORMATION
Evergreen Resources, Inc. and Subsidiaries
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Financial Statements
Pro Forma Explanatory Headnote F-1
For the Three Months Ended June 30, 1996 (Unaudited)
Unaudited Pro Forma Consolidated Balance Sheet F-2
Unaudited Pro Forma Consolidated Statement of Operations F-4
For the Year Ended March 31, 1996 (Unaudited)
Unaudited Pro Forma Consolidated Statement of Operations F-5
Notes to Pro Forma Consolidated Financial Statements F-6
(b) FINANCIAL STATEMENTS
EVERGREEN RESOURCES, INC. AND SUBSIDIARIES
The following documents, all of which were previously filed with the
Commission, all hereby incorporated by reference in this Form 8-K/A:
1) Evergreen Resources, Inc. and Subsidiaries Annual Report
on Form 10-K for the year ended March 31, 1996.
2) Evergreen Resources, Inc. and Subsidiaries Quarterly Report
on Form 10-Q for the three months ended June 30, 1996.
POWERBRIDGE, INC. AND AFFILIATES, FINANCIAL STATEMENTS
Independent Auditors' Report F-7
Consolidated Balance Sheets, June 30, 1996 (unaudited) and
December 31, 1996 and 1995 F-8
Consolidated Statements of Operations and Retained Earnings
(Accumulated Deficit) for the Six Months Ended June 30,
1996 and 1995 (Unaudited) and for the Years Ended
December 31, 1995, 1994 and 1993 F-9
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited) and for the Years Ended
December 31, 1995, 1994 and 1993 F-10
Notes To Consolidated Financial Statements F-11
(c) Exhibits: Filed herewith pursuant to Reg. S-K Item 601.
EXHIBIT NO.
1* Agreement and Plan of Merger dated August 14, 1996 by
and among Powerbridge, Inc., Evergreen Resources, Inc.
and Evergreen Raton Properties, Inc.
2* Agreement for Acquisition of Limited Partnership
Interests between Evergreen Resources, Inc. and both
Energy Investors Fund LP and Energy Investors Fund II,
LP dated August 14, 1996
3* August 14, 1996 Reserve Report prepared by Resources
Services, International, Inc.
* Previously filed
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.
EVERGREEN RESOURCES, INC.
By: /s/ James S. Williams
----------------------------------
James S. Williams
Chairman of the Board
Dated: September 6, 1996
EVERGREEN RESOURCES, INC AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited pro forma consolidated financial statements give
effect to the acquisition by Evergreen Resources, Inc. ("the Company" or
"Evergreen" ) of 100% of the outstanding common stock of Powerbridge, Inc.
and the limited partnership interests of Energy Investors Funds I and II
(collectively "PBI" ) pursuant to the Agreement between the parties; to
reflect the issuance of 1,162,266 of the Company's common stock and the
assumption of $3.6 million in long-term debt, and are based on the estimates
and assumptions set forth herein. This unaudited pro forma information has
been prepared utilizing the historical financial statements and notes
thereto, which are incorporated by reference herein. The unaudited pro forma
financial data does not purport to be indicative of the results which
actually would have been obtained had the purchase been effected on the dates
indicated or of the results which may be obtained in the future. The
unaudited pro forma financial statements should be read in conjunction with
the historical financial statements set forth herein.
The pro forma consolidated balance sheet assumes the acquisition was
consummated at June 30, 1996. The accompanying unaudited pro forma statements
of operations have been derived from the statements of operations of the
Company for the three months ended June 30, 1996 and PBI for the three months
ended June 30, 1996 and statements of operations of the Company for the
fiscal year ended March 31, 1996 and PBI for the year ended December 31,
1995, and adjust such information to give effect to the acquisition as if the
acquisition had occurred as of the beginning of the periods presented.
F-1
EVERGREEN RESOURCES, INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
POWERBRIDGE, INC.
------------------------
PRO FORMA CONSOLIDATED
EVERGREEN ACTUAL ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ------------
ASSETS
CURRENT ASSETS
Cash $ 1,440,449 $ 176,852 $ - $ 1,617,301
Accounts receivable:
Oil and gas sales 265,455 439,211 704,666
Other 1,240,464 66,850 1,307,314
Prepaid expenses 303,172 139,817 442,989
----------- ---------- ----------- ------------
TOTAL CURRENT ASSETS 3,249,540 822,730 4,072,270
----------- ---------- ----------- ------------
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties, full cost 37,357,042 3,965,153 3,568,389 (a) 44,890,584
Unevaluated properties 7,946,873 600,000 (a) 8,546,873
Gas gathering equipment 5,310,184 3,478,563 8,788,747
Support equipment 622,838 51,819 674,657
----------- ---------- ----------- ------------
Total cost 51,236,937 7,495,535 4,168,389 62,900,861
Less accumulated dd & a (11,746,864) (208,321) 208,321 (a) (11,746,864)
----------- ---------- ----------- ------------
NET PROPERTY AND EQUIPMENT 39,490,073 7,287,214 4,376,710 51,153,997
DESIGNATED CASH 1,059,233 1,059,233
OTHER ASSETS 756,106 206,187 (178,689)(b) 783,604
----------- ---------- ----------- ------------
$44,554,952 $8,316,131 $ 4,198,021 $ 57,069,104
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
See accompanying Headnote and Notes to Pro Forma Consolidated
Financial Statements.
F-2
EVERGREEN RESOURCES, INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
POWERBRIDGE, INC.
------------------------
PRO FORMA CONSOLIDATED
EVERGREEN ACTUAL ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 769,154 $ 530,797 $ 100,000 (a) 1,399,951
Accrued expenses and other 287,936 428,555 (250,000)(b) 466,491
Amounts payable to oil and gas property owners 1,176,194 1,176,194
----------- ---------- ----------- -----------
TOTAL CURRENT LIABILITIES 2,233,284 959,352 (150,000) 3,042,636
PRODUCTION TAXES PAYABLE 1,059,233 1,059,233
LONG-TERM LIABILITIES 2,239,678 4,589,701 (584,901)(b) 6,244,478
----------- ---------- ----------- -----------
TOTAL LIABILITIES 5,532,195 5,549,053 (734,901) 10,346,347
----------- ---------- ----------- -----------
REDEEMABLE PREFERRED STOCK 7,500,000 7,500,000
----------- ---------- ----------- -----------
MINORITY INTERESTS 3,434,330 (3,434,330) --
----------- ---------- ----------- -----------
COMMON STOCKHOLDERS' EQUITY
Common stock 58,998 5,470 6,153 (a) 70,621
Additional paid-in capital 41,822,026 7,688,377 (a) 49,510,403
Foreign exchange gain (loss) (394,582) (394,582)
Deficit (9,963,685) (672,722) 672,722 (a),(b) (9,963,685)
----------- ---------- ----------- -----------
TOTAL COMMON STOCKHOLDERS' EQUITY 31,522,757 (667,252) 8,367,252 39,222,757
----------- ---------- ----------- -----------
$44,554,952 $8,316,131 $ 4,198,021 $57,069,104
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
See accompanying Headnote and Notes to Pro Forma Consolidated
Financial Statements.
F-3
EVERGREEN RESOURCES, INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
POWERBRIDGE, INC
PERIOD
EVERGREEN ENDED JUNE 30, 1996
THREE MONTHS --------------------------
ENDED PRO FORMA CONSOLIDATED
JUNE 30, 1996 ACTUAL(i) ADJUSTMENTS PRO FORMA
-------------- -------- ----------- ------------
REVENUE
Oil and gas production $ 526,344 $ 499,741 $(190,427)(i) $ 835,658
Oil and gas services 190,909 (18,945)(c) 171,964
Interest 51,599 7,114 (3,229)(i) 55,484
Other income 10,028 17,069 (17,069)(d),(i) 10,028
---------- -------- --------- ----------
TOTAL REVENUE 778,880 523,924 (229,670) 1,073,134
---------- -------- --------- ----------
COSTS AND EXPENSES
Cost of production 131,953 150,365 (73,097)(c),(e),(i) 209,221
Gas gathering costs 43,898 43,898
Cost of oil and gas services 184,841 12,884 (e) 197,725
Depreciation, depletion and amortization 201,840 86,284 (7,301)(f),(i) 280,823
General and administrative 149,270 233,893 (233,893)(g),(i) 149,270
Interest expense 9,385 255,906 (160,022)(h),(i) 105,269
Other (2,337) (2,337)
---------- -------- --------- ----------
TOTAL EXPENSES 718,850 726,448 (461,429) 983,869
---------- -------- --------- ----------
NET INCOME (LOSS) 60,030 $(202,524) $ 231,759 89,265
--------- ---------
--------- ---------
PREFERRED STOCK CASH DIVIDENDS 150,000 150,000
---------- ----------
NET LOSS ATTRIBUTABLE TO COMMON STOCK $ (89,970) $ (60,735)
---------- ----------
---------- ----------
LOSS PER SHARE OF COMMON STOCK $ (0.02) $ (0.01)
---------- ----------
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (j) 5,899,736 7,062,002
---------- ----------
---------- ----------
See accompanying Headnote and Notes to Pro Forma Consolidated
Financial Statements.
F-4
EVERGREEN RESOURCES, INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
POWERBRIDGE, INC YEAR ENDED
DECEMBER 31, 1995
EVERGREEN ----------------------------
YEAR ENDED PRO FORMA CONSOLIDATED
MARCH 31, 1996 ACTUAL ADJUSTMENTS PRO FORMA
-------------- ----------- ----------- ------------
REVENUE
Oil and gas production $1,392,695 $ 189,829 $ 156,945 (e) $1,739,469
Oil and gas services 779,146 (77,954)(c) 701,192
Interest 206,769 6,728 (e) 213,497
Other income 556,221 122,389 (122,389)(d) 556,221
---------- ----------- ----------- ----------
TOTAL REVENUE 2,934,831 312,218 (36,670) 3,210,379
---------- ----------- ----------- ----------
COSTS AND EXPENSES
Cost of production 875,543 297,058 (45,281)(c),(e) 1,127,320
Cost of oil and gas services 727,121 39,442 (e) 766,563
Depreciation, depletion and amortization 589,936 270,285 (175,546)(f) 684,675
General and administrative 818,805 760,311 (760,311)(g),(e) 818,805
Interest expense 36,620 294,756 (117,417)(h) 213,959
Other (10,997) (10,997)
---------- ----------- ----------- ----------
TOTAL EXPENSES 3,037,028 1,622,410 (1,059,113) 3,600,325
---------- ----------- ----------- ----------
NET LOSS (102,197) $(1,310,192) $ 1,022,443 (389,946)
----------- -----------
----------- -----------
PREFERRED STOCK CASH DIVIDENDS 504,620 504,620
---------- ----------
---------- ----------
NET LOSS ATTRIBUTABLE TO COMMON STOCK $ (606,817) $ (894,566)
---------- ----------
---------- ----------
LOSS PER SHARE OF COMMON STOCK $ (0.10) $ (0.13)
---------- ----------
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (j) 5,800,036 6,962,302
---------- ----------
---------- ----------
See accompanying Headnote and Notes to Pro Forma Consolidated
Financial Statements.
F-5
EVERGREEN RESOURCES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Reflects the allocation of PBI's purchase price, consisting of 1,162,266
shares of the Company's common stock at $7,700,000 ($6.625 per share). The
purchase price has been allocated as follows:
Proved oil and
gas properties 3,776,000
Unevaluated properties 600,000
Amounts attributable
to minority interest,
PBI deficit and
miscellaneous 3,324,000
----------
Total $7,700,000
----------
----------
(b) Reflects the forgiveness of debt and accrued interest (total $835,000)
negotiated as part of the acquisition and elimination of intangible assets
not related to the business combination.
(c) Reflects the elimination of overhead charges and management fees billed by
Evergreen to PBI for which billing discontinued with the acquisition.
(d) Reflects the elimination of PBI non-operating income amounts which
discontinue with the Evergreen acquisition and amounted to $17,000 for the
six months ended June 30, 1996 and $122,000 for the year ended December 31,
1995.
(e) To reclassify PBI's gas revenue and production expenses to conform to
Evergreen's financial statement presentation and to eliminate PBI's
production expenses ($30,250 for the three month period and $111,000 for
the year) which terminated as a result of the acquisition.
(f) To adjust depreciation, depletion and amortization for additional
$3,776,000 of purchase price allocation to proved oil and gas properties
and converting PBI to full cost method of accounting utilizing combined
Evergreen and PBI reserve amounts.
(g) Reflects elimination of general and administrative expenses terminated
as a result of the acquisition.
(h) To eliminate interest expense on $750,000 in debt forgiven as part of the
acquisition which bore interest at rates ranging from prime to 20%.
(i) Actual results for PBI encompass the six months ended June 30, 1996 and
therefore results for the three months ended March 31, 1996 are eliminated
to make the PBI period presented correspond with those for Evergreen.
(j) Pro forma weighted average shares reflect the issuance of 1,162,266 shares
of Evergreen's common stock for the acquisition of PBI for all periods
presented.
F-6
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Powerbridge, Inc.:
We have audited the accompanying consolidated balance sheets of Powerbridge,
Inc. and its affiliates (the "Company") as of December 31, 1995 and 1994, and
the related consolidated statements of operations and retained earnings
(accumulated deficit), and of cash flows for each of the three years in the
period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its affiliates
as of December 31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As described in
Note 2 to the consolidated financial statements, the Company's ongoing
losses, negative cash flow from operations and stockholders' deficit raise
substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 2.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
April 12, 1996
(August 15, 1996 as to Note 9)
F-7
POWERBRIDGE, INC. AND AFFILIATES
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------------
June 30, December 31,
---------- ---------------------------
ASSETS 1996 1995 1994
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 176,852 $ 426,533 $1,086,746
Accounts receivable 439,211 207,803 29,633
Drilling advances 87,621 287,354 498,777
Deposits receivable - net of allowance of $90,000 in 1994 (Note 4) 66,850 68,856 110,000
Other current assets 52,196 6,704 15,196
---------- ---------- ----------
Total current assets 822,730 997,250 1,740,352
PROPERTY AND EQUIPMENT:
Gas properties (successful efforts accounting method) 3,965,153 3,394,937 1,619,792
Gas gathering system 3,478,563 2,752,956 2,058,712
Furniture, fixtures and equipment 51,819 57,283 82,463
---------- ---------- ----------
7,495,535 6,205,176 3,760,967
Accumulated depreciation, amortization and depletion 208,321 129,560 28,926
---------- ---------- ----------
Property and equipment - net 7,287,214 6,075,616 3,732,041
LONG-TERM RECEIVABLE (Note 4) 17,998 47,565
OTHER ASSETS 188,189 219,749 110,365
---------- ---------- ----------
TOTAL $8,316,131 $7,340,180 $5,582,758
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 530,797 $ 425,549 $1,355,036
Notes payable 250,000 250,000 6,906
Payable to related parties 88,599 108,999
Capital lease obligation 89,956 49,972
---------- ---------- ----------
Total current liabilities 959,352 834,520 1,361,942
NOTES PAYABLE (Long-term portion) (Notes 5 and 7) 4,180,901 3,339,569 500,000
CAPITAL LEASE OBLIGATION (Note 6) 408,800 196,598
MINORITY INTEREST IN CONSOLIDATED AFFILIATES (Note 1) 3,434,330 3,553,353 3,997,465
STOCKHOLDERS' DEFICIT (Notes 8 & 9):
Common stock, $.01 par value; 5,000,000 shares authorized;
547,000 and 536,000 shares issued and outstanding 5,470 5,360 5,360
Accumulated deficit (672,722) (589,220) (282,009)
---------- ---------- ----------
Total stockholders' deficit (667,252) (583,860) (276,649)
---------- ---------- ----------
TOTAL $8,316,131 $7,340,180 $5,582,758
---------- ---------- ----------
---------- ---------- ----------
See notes to consolidated financial statements.
F-8
POWERBRIDGE, INC. AND AFFILIATES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
- ----------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, Year Ended December 31,
----------------------------- ----------------------------------------------
1996 1995 1995 1994 1993
(unaudited)
REVENUES:
Oil and gas revenues $ 499,741 $ 69,273 $ 189,829 $ - $ 328,658
Commissions (Note 3) - - - 124,606 39,416
Other and miscellaneous income 24,183 35,878 122,389 56,447 11,755
--------- --------- ----------- ----------- -----------
Total revenues 523,924 105,151 312,218 181,053 379,829
COSTS AND EXPENSES:
Direct development (150,366) (127,928) (297,058) (118,577) (394,462)
General and administrative (Note 7) (233,893) (548,121) (760,311) (1,282,243) (739,912)
Depreciation and amortization (86,284) (66,747) (270,285) (49,688) (24,035)
Interest (Notes 5 and 7) (255,906) (79,757) (294,756) (23,114) -
--------- --------- ----------- ----------- -----------
Total costs and expenses (726,449) (822,553) (1,622,410) (1,473,622) (1,158,409)
MINORITY INTEREST IN LOSSES OF
CONSOLIDATED AFFILIATES (Note 1) 119,023 508,924 1,002,981 935,811 849,456
--------- --------- ----------- ----------- -----------
NET INCOME (LOSS) (83,502) (208,478) (307,211) (356,758) 70,876
RETAINED EARNINGS
(ACCUMULATED DEFICIT):
Beginning of the period (589,220) (282,009) (282,009) 74,749 3,873
--------- --------- ----------- ----------- -----------
End of the period $(672,722) $(490,487) $ (589,220) $ (282,009) $ 74,749
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
See notes to consolidated financial statements.
F-9
POWERBRIDGE, INC. AND AFFILIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1996 1995 1995 1994 1993
(Unaudited)
OPERATING ACTIVITIES:
Net income (loss) $ (83,502) $ (208,478) $ (307,211) $ (356,758) $ 70,876
Adjustment to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 86,284 66,747 270,285 39,042 24,035
Gain on sale of property and equipment - - (4,782) - -
(Recovery of) provision for uncollectible portion
of deposit receivable - (45,000) (45,000) 90,000
Minority interest in losses of consolidated affiliates (119,023) (508,924) (1,002,981) (935,811) (849,456)
Noncash interest expense 48,608 53,761 31,436 - -
Changes in operating assets and liabilities:
Accounts receivable (231,408) (66,557) (165,870) 37,934 (2,567)
Other current assets (45,492) 10,396 8,492 (12,434) (2,500)
Accounts payable 84,848 (62,182) 204,763 456,290 40,465
Deferred revenue - - - - (203,658)
---------- ----------- ----------- ----------- ----------
Net cash used in operating activities (259,685) (760,237) (1,010,868) (771,737) (832,805)
---------- ----------- ----------- ----------- ----------
INVESTING ACTIVITIES:
Additions to property and equipment (973,020) (1,702,296) (3,083,679) (1,978,657) (894,979)
Drilling advances 199,733 209,119 211,423 (98,003) (400,774)
Deposit receivable (Note 4) 31,573 - 39,604 - (200,000)
Organization costs - - - (26,223) (60,966)
Proceeds from sale of property and equipment - - 12,300 - -
Other (13,669) - (33,603) - (38,727)
---------- ----------- ----------- ----------- ----------
Net cash used in investing activities (755,383) (1,493,177) (2,853,955) (2,102,883) (1,595,446)
---------- ----------- ----------- ----------- ----------
FINANCING ACTIVITIES:
Common stock issued to employees - - - 360 -
Dividends paid - - - - (52,541)
Proceeds from issuance of notes payable 796,000 1,500,000 4,700,000 500,000 -
Repayments of note payable (30,613) (7,368) (1,656,906) (11,475) (4,373)
Payment of loan origination costs - (114,441) (230,128) - -
Minority investment in consolidated affiliates - 391,644 391,644 3,307,732 2,410,001
---------- ----------- ----------- ----------- ----------
Net cash provided by financing activities 765,387 1,769,835 3,204,610 3,796,617 2,353,087
---------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (249,681) (483,579) (660,213) 921,997 (75,164)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 426,533 1,086,746 1,086,746 164,749 239,913
---------- ----------- ----------- ----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 176,852 $ 603,167 $ 426,533 $ 1,086,746 $ 164,749
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
NONCASH ACTIVITIES:
Accounts receivable - sale of property and equipment $ - $ - $ 13,324 $ - $ -
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
Deposits receivable (Note 4) $ - $ - $ 115,396 $ - $ -
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
Capital lease additions (Note 6) $ 279,523 $ 275,000 $ 275,000 $ - $ 18,381
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
Property additions accrued $ - $ - $ - $ 858,027 $ -
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
Minority investment in consolidated affiliate $ - $ - $ - $ - $ 65,000
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
INTEREST PAID $ 207,298 $ - $ 227,888 $ - $ -
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
See notes to consolidated financial statements.
F-10
POWERBRIDGE, INC. AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNAUDITED AS TO THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995)
- ------------------------------------------------------------------------------
1. ORGANIZATION AND SHARING ARRANGEMENTS
Powerbridge, Inc. (the "Company") is a full service cogeneration and
independent power project developer. The Company, through a general and
limited partner's interest, holds a majority and controlling interest in
its affiliates, PBI Fuels, L.P. and PBI Capital, L.P. Energy Investors
Fund I, L.P. and Energy Investors Fund II, L.P. ("Energy Investors") hold
the limited partner's interest in these partnerships representing the
minority interest in these financial statements. The Company, as general
partner, manages all the activities of the affiliated partnerships.
2. GOING CONCERN AND MANAGEMENT'S PLANS
The Company's consolidated financial statements for the year ended
December 31, 1995, have been prepared on a going-concern basis, which
contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company has incurred
aggregate net losses of $664,000 in the last two years and, as of
December 31, 1995, had a stockholders' deficit of $589,000. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Management's plans include the consideration of the sale of the Company or
the operations of its affiliates. Management is also investigating the
possibility of adding additional investors in its affiliates or in the
individual projects of its affiliates. Management continues to minimize
operating and development costs to enable the Company to continue
operations with available resources while additional sources of capital are
generated. However, no assurance can be given that the Company will be
successful in generating additional capital. Further, there can be no
assurance, assuming the Company raises additional capital, that the Company
will achieve profitable operations or positive cash flow.
See Note 9 regarding the acquisition of the Company.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial statements of the
Company have been prepared in conformity with generally accepted accounting
principles and include the accounts of the Company and its majority owned
affiliates. The proportional consolidation method is used for an
unincorporated joint venture which owns and operates a gas gathering
system. An affiliate of the Company owns a 50% interest in the joint
venture. Significant intercompany accounts and transactions have been
eliminated in consolidation. The preparation of financial statements
requires the use of significant estimates and assumptions by management;
actual results could differ from those estimates.
In accordance with the Partnership agreements, losses of affiliates have
been allocated to the minority interest to the extent such losses exceed
the Company's capital invested in such affiliates and the minority interest
has positive capital. Losses in excess of total affiliate capital have
been allocated to the Company, as general partner. As of December 31,
1995, approximately $719,000 of excess losses have been allocated to the
Company. The Company or the minority interest, as applicable, will recoup
such losses from any future profits prior to allocations of profits to the
other party.
CASH AND CASH EQUIVALENTS - All liquid investments with an original
maturity of three months or less are considered to be cash equivalents.
DRILLING ADVANCES - During 1995, the Company funded drilling advances to a
joint interest owner of certain gas properties. Unexpended advances of
$287,354 at December 31, 1995, will be applied toward the payment of
F-11
drilling costs expected to be incurred in 1996. At June 30, 1996, the
Company had unexpended advances of $87,621 to be applied toward future
drilling costs.
GAS GATHERING SYSTEM - Depreciation is provided using the straight-line
method over 20 years.
GAS PROPERTIES - The Company follows the successful efforts method of
accounting for gas operations. Accordingly, acquisition costs of unproved
properties are capitalized, and related delay rentals and geological and
geophysical costs are charged to expense as incurred. The costs of
drilling and equipping exploratory wells which result in the discovery of
proved reserves are capitalized, while costs associated with unsuccessful
exploratory wells are expensed. Unsuccessful developmental drilling costs
are capitalized. Currently, the Company's gas development activities are
limited to developmental drilling on properties with proved reserves.
As of December 31, 1995, 22 developmental wells had been drilled on the
Raton Basin properties. The gas gathering system and pipeline was
completed and placed in service in January 1995. Seventeen completed and
producing wells are connected to the pipeline.
Through June 30, 1996, 32 developmental wells have been drilled in the
Raton Basin. Thirty-one completed and producing wells are connected to
the pipeline.
Depreciation, depletion and amortization of producing gas properties is
computed on the unit-of-production method based on estimated proved oil and
gas reserves.
FURNITURE, FIXTURES AND EQUIPMENT are stated at cost. Depreciation is
provided using the straight-line method over five to seven years.
ORGANIZATION COSTS - Organization costs of $105,255 are included in other
assets and are amortized on a straight-line basis over five years.
Accumulated amortization was $53,761 and $32,237 at December 31, 1995 and
1994, respectively, and $64,286 at June 30, 1996.
REVENUES - Commissions include fees earned from a gas supply contract.
FEDERAL INCOME TAXES - Federal income taxes are provided using the
liability method. The Company has a net operating loss carryforward of
approximately $790,000. In addition, the Company's share of suspended
losses of an affiliate is approximately $1,040,000. These losses are
available to offset future taxable income of those affiliates or available
to the Company to the extent funded by the Company. A valuation allowance
equal to the deferred tax asset related to current year tax losses has been
provided due to the uncertainty of future realization of such loss
carryforward. As a result of the acquisition discussed in Note 9 the
future utilization of such losses will be subject to annual limitations.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Management believes that the carrying
value of loans obtained from third parties (see Note 5) approximate fair
market value. Management believes that the fair market value of the loans
obtained from related parties (see Note 7), due to their nature, cannot be
practicably estimated.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," requires that
long-lived assets and certain intangible assets to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment is evaluated by comparing future cash flows
(undiscounted and without interest charges) expected to result from the
use of the asset and its eventual disposition to the carrying amount of
the asset. This new accounting principle is effective for the Company's
fiscal year ending December 31, 1996. The Company believes that this new
accounting principle will not have a material impact on its financial
position or results of operations.
UNAUDITED PERIODS - The financial information with respect to the six
months ended June 30, 1996 and 1995, is unaudited. In the opinion of
management, such information contains all adjustments, consisting only of
normal recurring accruals necessary for a fair presentation of the results
for such period. The results of operations for interim periods are not
necessarily indicative of the results of operations for the full fiscal
year.
F-12
4. DEVELOPMENT FEE AND DEPOSIT RECEIVABLE
During 1993, the Company paid a $200,000 refundable deposit under an
agreement with Far West Capital, Inc. ("Far West") in connection with its
proposed participation in a series of independent power projects. In
addition, the Company paid $50,000 in nonrefundable development fees to
Far West which were expensed in 1993. In December 1993, the Company
halted its participation with Far West in development activities and, in
accordance with the deposit agreement, demanded refund of the deposit. In
February 1994, the Company started legal proceedings against Far West to
collect the deposit, plus cost and attorneys' fees. Far West filed a
counterclaim seeking offsets, damages and attorneys' fees in an unspecified
amount, alleging breach of implied covenant of good faith and fair dealing,
and breach of the terms of the letter of intent. An allowance for $90,000
was provided in 1993 to cover management's estimate of the uncollectible
portion of the deposit. In 1995, the Company settled this matter with Far
West for $155,000. The Company received a $25,000 initial payment, with
the remaining $130,000 due in 24 equal monthly payments plus interest
at 12%.
5. NOTES PAYABLE
In July 1993, the Company entered into a term loan agreement with a bank
to purchase an automobile. This loan was payable in 24 equal monthly
installments of $1,025. The loan bore interest at 7.5% per annum and was
collateralized by the automobile. The loan was paid off in 1995.
In October 1995, an affiliate obtained a loan of $2,700,000 from Hibernia
National Bank. The loan was obtained under a revolving credit facility
which allows for total borrowings of $3,500,000. The affiliate used the
proceeds to pay off a $1,650,000 loan obtained from Enron Capital and
Trade Resources in February 1995, to fund the development of gas properties
and to fund the construction of the gas gathering system. An additional
$100,000 had been borrowed under the facility as of December 1995, for a
total outstanding balance of $2,800,000. The loan bears interest at prime
plus 2.5% (at December 31, 1995, the prime rate was 8.5%) and is due
June 30, 1997. The loan is collateralized by the affiliate's oil and gas
property and the related production as well as by distributions to the
affiliate from a related party. The loan restricts the payment of dividends
and distributions and additional investments. Prior to December 31, 1995,
the affiliate informed the lender that it would be out of compliance with
two financial covenants of the loan agreement. Subsequent to December 31,
1995, the lender agreed to waive compliance with one covenant and to amend
the other covenant as of December 31, 1995. With the waiver and amendment,
the affiliate is not in default under the provisions of the loan agreement.
Subsequent to year-end, the lender allowed the affiliate to borrow an
additional $450,000 in order to fund development of additional gas wells
and additions to the gas gathering system.
At June 30, 1996, the borrowings from the bank were increased to
$3,596,000.
6. LEASE COMMITMENTS
The Company leases office space under an operating lease with a minimum
term in excess of one year. At December 31, 1995, future minimum lease
payments, less future sublease income, were $33,847 in 1996. Net rent
expense was $22,776 and $19,089 for the years ended December 31, 1995 and
1994, respectively, and $16,800 and $11,388 for the six months ended
June 30, 1996 and 1995, respectively.
F-13
Through a 50% interest in a joint venture, an affiliate has a capital lease
for equipment with a lease term through 2001. At December 31, 1995, the
affiliate has the obligation to pay the following future minimum lease
amounts:
Year ending December 31,
1996 $ 73,000
1997 61,200
1998 61,200
1999 61,200
2000 61,200
Thereafter 15,300
----------
Total minimum lease payments 333,100
Less amounts representing interest 86,530
----------
Present value of minimum lease payments 246,570
Less current portion 49,972
----------
Long-term portion $ 196,598
----------
----------
7. RELATED PARTY TRANSACTIONS
In October 1994, the Company entered into two loan agreements with Energy
Investors for $500,000. The loans bear interest at the prime rate (8.5%
at December 31, 1995). Interest is payable on each April 1 through the
maturity date of April 1, 1999, at which time the entire principal amount
and unpaid interest are due. In 1995, $31,436 of accrued interest was
added to the principal on the loans. Also, in 1995, Energy Investors
loaned the Company an additional $250,000 in the form of a revolving note.
The loan bears interest at 20% and is reviewed by Energy Investors
annually. The principal and interest on the revolving note were due July
1996, and on August 14, 1996, Energy Investors agreed to cancel the notes
in connection with the acquisition discussed in Note 9.
During 1995, 1994 and 1993, the Company has received approximately
$719,000, $643,000 and $419,944, respectively, from its affiliates for
reimbursement of expenses incurred on their behalf. This amount has been
eliminated in the accompanying consolidated financial statements.
During 1995, the Company sold a vehicle to a related party at a gain of
$4,782. In connection with the sale, at December 31, 1995, the Company has
received $12,300 in payments and has a receivable of $13,324 to be received
in 13 equal monthly installments.
During 1993 the Company received a project development fee of $125,000 from
a 1% owned affiliate in which the Company is the general partner. The fee
was paid for services rendered in connection with acquisition of working
interests in certain gas properties.
8. CAPITAL STOCK TRANSACTIONS
In 1995, the Company amended the par value of its common stock from $.10
per share to $.01 per share. During 1994, 36,000 shares of the Company's
capital stock were issued to employees by the Board of Directors. The
Board also agreed, on an annual basis, to issue 5,000 shares each to two
employees through January 1, 1999, contingent upon continued employment
with the Company. During 1996, the Company issued 11,000 shares of common
stock to three employees. As a result of the Acquisition discussed in
Note 9, the employee agreements were cancelled.
9. SUBSEQUENT EVENT (UNAUDITED)
On August 15, 1996, effective August 1, 1996, Evergreen Resources, Inc.,
acquired the PBI Fuels, LP limited partnership interests owned by Energy
Investors Fund, LP and Energy Investors Fund II, LP, and 100% of the
common stock of Powerbridge, Inc. for a purchase price of $11.3 million.
The purchase price is comprised of 1,162,266 shares of Evergreen Resources,
Inc.'s restricted common stock valued at $7.7 million and the assumption
by Evergreen Resources, Inc. of $3.6 million of long-term debt.
F-14