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)
August 23, 2000
U.S. ENERGY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-10238 52-1216347
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
Incorporation)
515 N. Flagler Drive, Suite 702, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 820-9779
<PAGE>
Item 7. Financial Statements and Exhibits
a. Financial statements of business acquired.
Set forth herein.
b. Pro forma financial information
Not required
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
ANNUAL REPORT
DECEMBER 31, 1999
Table of Contents
<TABLE>
<CAPTION>
<S>
<C>
Page
No.
Independent Auditors' Report.............................................................................. F-2
Statement of Financial Condition.......................................................................... F-3
Statement of Income and Members' Equity................................................................... F-4
Statement of Cash Flows................................................................................... F-5
Notes to Financial Statements............................................................................. F-6-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members
Castlebridge Partners, L.L.C.
Chicago, Illinois
We have audited the accompanying statement of financial condition of
Castlebridge Partners, L.L.C. as of December 31, 1999, and the related
statements of income and members' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Castlebridge Partners, L.L.C.
as of December 31, 1999, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Gleeson, Sklar, Sawyers & Cumpata LLP
-----------------------------------------
Gleeson, Sklar, Sawyers & Cumpata LLP
Elgin, Illinois
September 29, 2000
F-2
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
STATEMENT OF FINANCIAL CONDITION
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S>
<C>
ASSETS
-------
Current assets
--------------
Cash $ 104,079
Accounts receivable, net of allowance for doubtful accounts of $0 20,000
-------
Total current assets 124,079
Equipment, less accumulated depreciation of $13,679 24,854
--------------------------------------------------- -------
Total assets $ 148,933
------------ -------
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
Current liabilities
-------------------
Accounts payable $ 46,540
Current portion of capital lease obligations 3,965
------
Total current liabilities 50,505
Capital lease obligations 7,427
-------------------------
Equity
------
Members' equity 91,001
------
Total liabilities and members' equity $ 148,933
------------------------------------- =======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
STATEMENT OF INCOME AND MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S>
<C>
Revenues $ 921,103
Expenses:
Salaries and wages 552,600
General and administrative 362,889
-------
Total expenses 915,489
-------
Operating income 5,614
Interest expense 2,509
-------
Net income 3,105
Beginning members' equity 87,896
-------
Ending members' equity $ 91,001
=======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S>
<C>
Cash flows from operating activities:
-------------------------------------
Net income $ 3,105
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation 9,306
Decrease in accounts receivable 835
Increase in accounts payable 41,593
------
Net cash provided by operating activities 54,839
Cash flows used in investing activities:
----------------------------------------
Purchase of equipment (700)
Cash flows used in financing activities:
----------------------------------------
Principal payments under capital lease obligation (3,707)
------
Net increase in cash 50,432
Cash, beginning of year 53,647
Cash, end of year $ 104,079
=======
Supplemental schedule of non-cash investing and financing transactions:
-----------------------------------------------------------------------
Equipment acquired in exchange for capital lease obligation assumed $ 15,099
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
Castlebridge Partners, L.L.C. (the "Company") is a Chicago-based consulting
firm that focuses on structuring risk management in the electric power
markets and commodity derivative markets, including risk management and
hedging of weather risk, fuel, emission credits, and electric power. The
company markets its services across the United States.
Summary of significant accounting policies
The following is a summary of the significant accounting policies applied
by management in the preparation of the accompanying financial statements.
Limited liability
As a limited liability company, the members have limited liability.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash
Cash includes investments in highly liquid money market funds.
Equipment
Equipment is stated at the lower of cost or net realizable value, and
is depreciated over the estimated useful lives of the related assets.
Depreciation is computed using accelerated depreciation methods, over
five to seven years.
Depreciation expense for the year was $9,306.
Income taxes
The Company is not a taxpaying entity for federal income tax purposes,
and thus no income tax expense has been recorded in the statements.
Income of the Company is taxed to the members in their respective
returns. The Company is not responsible for state income taxes as none
of the members of the Company are individuals.
F-6
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
Note 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Continued
Concentration of credit risk
The Company deposits its cash primarily in deposit accounts with major
banks. Certain cash deposits may occasionally be in excess of federally
insured limits. The Company has not incurred and does not expect losses
related to its cash.
Note 2 - OPERATING LEASES
The Company occasionally enters into operating lease agreements for various
property and equipment, including transportation equipment. These leases
expire in 2000. Total rent expense under operating leases for 1999 was
$55,345.
Note 3 - CAPITAL LEASE OBLIGATIONS
The Company has entered into a capital lease agreement for the purchase of
telephone equipment. This capital lease expires in March 2002. The asset is
recorded at the present value of the minimum lease payments, and is being
depreciated over seven years. Depreciation expense for this asset is
included in depreciation expense for 1999 and totaled $2,161.
Following is a summary of property held under capital leases at December
31, 1999:
Office equipment $ 15,099
Less accumulated depreciation 2,161
-----------------
$ 12,938
=================
Minimum future lease payments under capital leases as of December 31, 1999
for each of the next three years and in the aggregate are:
Year ended December 31,
2000 $ 6,216
2001 6,216
2002 2,546
-----------------
Total minimum lease payments 14,978
Less: amounts representing interest 3,586
-----------------
Present value of net minimum lease 11,392
Less: current maturity 3,965
-----------------
Long-term portion $ 7,427
=================
F-7
<PAGE>
Note 4 - SUBSEQUENT EVENT
The ownership of Castlebridge Partners, L.L.C. changed significantly
subsequent to December 31, 1999. In 1999 the Company was owned by two
entities, Crossbridge Partners (the management), which owned a 51% member
interest, and Castlebridge Partners, Inc. (the investor), which owned a 49%
member interest.
In May of 2000, management merged Crossbridge Partners into a new entity,
GKM II, Inc. Consequently, the member interest in Castlebridge Partners,
L.L.C. owned by Castlebridge Partners, Inc. was at the same time purchased
and sold out to Kemper-Castlebridge, Inc., a subsidiary of the Kemper
Casualty Company. As of May 31, 2000, Castlebridge Partners, L.L.C. was
owned 50% by GKM II, Inc. and 50% by Kemper-Castlebridge, Inc.
On August 23, 2000, US Energy Systems Castlebridge, L.L.C., a subsidiary of
US Energy Systems, Inc.(USEY), purchased an aggregate 25% interest in
Castlebridge Partners, L.L.C. in exchange for stock of USEY.
F-8
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
August 31, 2000
Table of Contents
<TABLE>
<CAPTION>
<S>
<C>
PAGE NO.
Statement of Financial Condition (unaudited).................................................. F-10
Statement of Income and Members's Equity (unaudited)......................................... F-11
Statement of Cash Flows unaudited)............................................................ F-12
</TABLE>
F-9
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
STATEMENT OF FINANCIAL CONDITION
AUGUST 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
<S>
<C>
ASSETS
-------
Current assets
--------------
Cash $ 127,491
Accounts receivable, net of allowance for doubtful accounts of $0 3,351
Stock 2,772,656
---------
Total current assets 2,903,498
Equipment, less accumulated depreciation of $14,479 29,406
--------------------------------------------------- ---------
Total assets $2,932,904
------------ =========
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
Current liabilities
-------------------
Accounts payable $ 30,699
Current portion of capital lease obligations 6,879
---------
Total current liabilities 37,578
Capital lease obligations 3,714
-------------------------
Equity
------
Members' equity 2,891,612
-----------
Total liabilities and members' equity $2,932,904
------------------------------------- ===========
</TABLE>
F-10
<PAGE>
CASTLEBRIDGE PARTNERS, L.L.C.
STATEMENT OF INCOME AND MEMBERS' EQUITY
FOR THE EIGHT MONTHS ENDED AUGUST 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
<S>
<C>
Revenues $ 381,576
Expenses:
Salaries and wages 368,797
General and administrative 240,476
---------
Total expenses 609,273
---------
Operating income (227,697)
Interest income 2,386
Interest expense ---
Other expense ---
---------
Net income (225,311)
Beginning members' equity 91,001
Member contribution/distribution 3,025,922
---------
Ending members' equity $2,891,612
=========
</TABLE>
F-11
<PAGE>
CASTLEBRIDGE PARTNERS , L.L.C.
STATEMENT OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
<S>
<C>
Cash flows from Operating Activities
Net Income ($225,311)
Adjustments to Reconcile net income to net cash flows from operating activities:
Depreciation $800
Decrease in Accounts Receivable $16,649
Decrease in Accounts Payable ($15,841)
---------
Net Cash provided by operating activities ($223,703)
Cash flows used in investing activities
Purchase of Equipment ($5,352)
Cash flow used in financing activities
Principal payments under capital lease obligation ($799)
Net capital contributed $3,025,922
Capital contributed-Non cash ($2,772,656)
---------
Net cash provided from Financing Activities $252,467
Net increase in cash $23,412
Cash Beginning of year $104,079
-------
Cash as of 08/31/00 $127,491
=======
</TABLE>
F-12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to this report to be signed
on its behalf by the undersigned hereunto duly authorized.
U.S. Energy Systems, Inc.
/s/ Robert C. Benson
---------------------------------------------
Robert C. Benson, Chief Financial Officer
Dated: November 6, 2000
Chicago, Illinois
