Amended Form 10-QSB -- Quarterly or Transitional Report
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission File Number 0-23814
CONCORD ENERGY INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 22-2670198
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
75 Claremont Road, Bernardsville, New Jersey 07924
(Address of principal executive offices)
908-766-1020
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ___
At September 30, 1995, the outstanding common equity of Concord Energy
Incorporated comprised 15,521,122 shares of common stock, $.0001 par value.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements are filed as part of this report:
Pages
-----
Consolidated Balance Sheet (Unaudited),
September 30, 1995 and 1994 F-1
Consolidated Statements of Operations and
Accumulated Deficit (Unaudited)
Three Months Ended September 30, 1995, 1994 and 1993 F-2
Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended September 30, 1995, 1994 and 1993 F-3
Notes to Consolidated Financial Statements F-4 - F-14
2
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Item 2. Management's Discussion and Analysis or Plan of Operation.
General Operations
In May 1993 the Registrant consummated an Agreement and Plan of
Reorganization ("Agreement") pursuant to which it entered into the oil and gas
industry. Under the Agreement, the Registrant changed its name to Concord Energy
Incorporated (referred to herein as the "Company") and became the parent of an
entity which manages and owns interests in approximately 125 oil and gas wells
primarily located in East Texas and the Louisiana Gulf Coast. Concord's oil and
gas subsidiary was formed in June 1991 in order to effectuate a consolidation of
166 oil and gas partnerships. Following Monoclonal's acquisition of Concord, the
Company changed its fiscal year end to June 30 in order to coincide with the
fiscal year of its operating subsidiary (Concord).
In May 1995, the Company acquired KEMCO, which locates, designs,
refurbishes, and installs gas processing plants for the natural gas industry.
The effective date of the acquisition was April 1, 1995.
Results of Operations
The Company's revenues are primarily generated through the sale of oil and
gas. The Company also realizes revenue through syndication sales by its
affiliate Integrated Energy Incorporated ("Integrated") and revenue interests in
such syndications as well as through well operations. During the three months
ended September 30, 1995 the Company reported total income from operations of
$3,160,628. Contract revenues during the three month period were $2,781,384.
Rental income for during the three month period were $34,447. Oil sales during
3
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the three month period were $155,643 while gas sales totaled $94,837. The
Company reported revenue from syndication sales and revenue interest income of
$80,000 and well operating income of $14,317 during the three month period ended
September 30, 1995. By comparison, during the three month period ended September
30, 1994 the Company reported total income from operations of approximately
$485,624, oil sales of $192,592 and, gas sales of $133,524, revenue from
syndication sales and revenue interests of $143,950 and well operating income of
$15,558.
Total revenues increased by $2,675,004 during the three months ended
September 30, 1995 compared to the three month period ended September 30, 1994.
This increase is primarily due to the addition of KEMCO's operations.
Total costs and expenses during the three months ended September 30, 1995
were $5,725,108. Cost of contract revenue during the period were $1,573,934.
Lease operating expenses accounted for $218,717, during the three month period.
Lease operating expenses as a percentage of total oil and gas sales were
approximately 87%. In comparison, during three month period ended September 30,
1994 total costs and expenses were $696,186, lease operating expenses were
$179,871 and lease operating expenses as a percentage of oil and gas sales were
approximately 55%. Total costs and expenses increased by $5,028,922, and lease
operating expenses increased by $38,846, during the three month period ended
September 30, 1995 as compared to the three month period ended September 30,
1994, and lease operating expenses as a percentage of total oil and gas sales
increased by approximately 22%. The increases in costs and expenses primarily
relates to the inclusion of KEMCO's cost of operations and the recording of a
$3,043,055 inventory restatement. This was a result of a retail market value
4
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being booked at the time of the KEMCO acquisition rather than a wholesale value
with the balance of the cost of acquisition being charged to goodwill as it
should have been. Management has determined that the allocated costs were in
error and has chosen to take a one time adjustment to more accurately reflect
the operations of the Company.
During the three month period ended September 30, 1995 general and
administrative expenses were $748,358. $348,000 of such expenses were incurred
under the Company's management agreement with its affiliate Integrated. Other
general and administrative expenses, which include KEMCO's administrative costs
as well as professional fees and franchise taxes, were $400,358, during the
three month period ended September 30, 1995. During the three month period ended
September 30, 1994, the Company's total general and administrative expenses were
$400,180. $348,000 of such expenses were incurred under the Company's management
agreement with Integrated. The primary increase in the Company's general and
administrative costs are those additional costs associated with KEMCO.
Depreciation, depletion and amortization expenses during the three month
period ended September 30, 1995 were $141,044. During the three month period
ended September 30, 1994 these expenses were $116,135. The $24,909 increase in
these expenses primarily result from the additional depreciation related to
KEMCO's property, plant and equipment which total $30,000 for the three month
period ended September 30, 1995.
Interest expense for the three month period ended September 30, 1995 was
$348,096. During the three month period ended September 30, 1994 these expenses
5
<PAGE>
were $37,751. The increase of $310,345 is the result of the additional debt
obtained for KEMCO's inventory acquisitions and the financing related to the
KEMCO acquisition.
For the three month period ended September 30, 1995 the Company reported a
net loss of $2,906,268. For the three month period ended September 30, 1994 the
Company reported a net loss of $247,119. The increased net loss of $2,659,149
for the three months ending September 30, 1995 as compared to the three months
ending September 30, 1994, resulted primilary from the inventory restatement of
$3,043,055 previously discussed.
Liquidity and Capital Resources
As of September 30, 1995 the Company reported working capital of $3,843,101
compared to working capital of $219,299 at September 30, 1994. Total current
assets increased by $7,533,196 which is the combination of an increase in cash
and cash equivalents of $282,680 and an increase in receivables of $1,251,990
and an increase in inventories and other current assets of $5,998,526, as
compared to September 30, 1994. Total current liabilities increased from
$752,537 as of September 30, 1994 to $4,661,931 as of September 30, 1995, for a
net increase of $3,909,394. The combination of the foregoing resulted in a net
increase in working capital of $3,623,802 from September 30, 1994 to September
30, 1995. This increase is primarily related to the acquisition of KEMCO and the
related long term debt and equity financing
On July 7, and August 21, 1995 the Company issued $500,000 and $275,000,
respectively, of convertible notes to private investors. During the three month
6
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period ending September 30, 1995 the Company made principal payments of notes
payable Totaling $693,750.
On October 4, 1995 the Company completed a sale of properties for which the
Company will realize net proceeds of approximately $450,000. A majority of these
funds will be used to meet the obligations represented by the notes payable
associated with the KEMCO acquisition.
Capital Expenditures and Commitments
During the three months ended September 30, 1995, the Company incurred
capital expenditures of $37,601. These capital expenditures consisted primarily
of equipment purchases by KEMCO.
7
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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.
CONCORD ENERGY INCORPORATED
(Registrant)
s\Deral Knight
----------------------------------------
Dated: December 16, 1995 Deral Knight
President, Chief Executive Officer
and Chairman of the Board of Directors
Dated: December 16, 1995 s\Scott Kalish
----------------------------------------
Scott Kalish
Treasurer (Principal Accounting Officer)
8
<PAGE>
Concord Energy Incorporated and Subsidiaries
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
September 30, September 30,
1995 1994
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 791,027 $ 508,347
Costs and estimated earnings in excess
of billings on uncompleted contracts 787,979 --
Accounts receivable, net of allowance for
doubtful accounts of $67,490 and $0 811,898 255,352
Receivable due from Integrated -- 208,137
Receivable from stockholder 115,602 --
Receivable due from affiliated company -- --
Inventories 5,842,350 --
Prepaid expenses and other assets 156,176 --
------------ ------------
Total current assets 8,505,032 971,836
Property, plant and equipment, net 9,029,312 8,728,359
Bond issuance costs, net 494,649 70,000
Other assets 50,000 --
------------ ------------
Total assets $ 18,078,993 $ 9,770,195
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Current portion of notes payable to stockholders $ 325,000 $ 343,749
Current portion of long-term debt 1,200,000 --
Accounts payable 1,196,106 329,548
Accrued expenses 1,375,882 79,240
Payable due to Integrated, net 428,107 --
Federal income taxes payable 136,836 --
------------ ------------
Total current liabilities 4,661,931 752,537
Long term liabilities
Notes payable to stockholders -- 50,000
Notes payable 5,641,174 700,500
Capital lease obligations 46,673 --
------------ ------------
Total Long term liabilities 5,687,847 750,500
------------ ------------
Commitments and Contingencies
Stockholders' equity
Preferred Stock, $.01 par value, 1,000 shares
authorized, 0 shares issued and outstanding -- --
Common stock, $.0001 par value, 20,000,000 shares
authorized, 15,521,122 and 11,111,660 shares issued and outstanding 1,552 1,111
Paid-In capital 14,935,326 11,233,768
Accumulated deficit (7,207,663) (2,967,721)
------------ ------------
Total stockholders' equity 7,729,215 8,267,158
------------ ------------
Total liabilities and stockholders' equity $ 18,078,993 $ 9,770,195
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F - 1
<PAGE>
Concord Energy Incorporated and Subsidiaries
Consolidated Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Quarter Ended Quarter Ended
September 30, September 30,
1995 1994
<S> <C> <C>
Revenue
Oil sales $ 155,643 $ 192,592
Gas sales 94,837 133,524
----------- -----------
Total oil and gas sales 250,480 326,116
Contract revenue 2,781,384 --
Syndication sales and revenue interests 80,000 143,950
Well operating income 14,317 15,558
Rental income 34,447 --
----------- -----------
Total revenue 3,160,628 485,624
----------- -----------
Costs and Operating Expenses
Lease operating 218,717 179,871
Cost of contract revenue 1,573,934 --
Inventory - adjustment to lower of cost or market 3,043,055 --
General and administrative:
Management agreement 348,000 348,000
Other expenses 400,358 52,180
Depreciation, depletion and amortization 141,044 116,135
----------- -----------
Total costs and operating expenses 5,725,108 696,186
----------- -----------
Income (Loss) from Operations (2,564,480) (210,562)
----------- -----------
Other income (expense)
Other income 6,308 1,194
Interest expense (348,096) (37,751)
----------- -----------
(341,788) (36,557)
----------- -----------
Income (Loss) before income taxes (2,906,268) (247,119)
----------- -----------
Income tax expense -- --
----------- -----------
Net Income (Loss) $(2,906,268) $ (247,119)
=========== ===========
Accumulated deficit, beginning of period (4,301,395) (2,720,602)
=========== ===========
Accumulated deficit, end of period $(7,207,663) $(2,967,721)
=========== ===========
Income (Loss) per share $ (0.19) $ (0.02)
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F - 2
<PAGE>
Concord Energy Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Quarter Ended Quarter Ended
September 30, September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $(2,906,268) $ (247,119)
Adjustments to reconcile net income/loss to net cash
(used in) provided by operating activities:
Depreciation, depletion and amortization 141,044 116,135
Other noncash transactions 3,043,055
Decrease (Increase) in assets:
Accounts receivable (115,340) 41,642
Costs and estimated earning in excess
of billings on uncompleted contracts (326,327) --
Receivable due from Stockholder (11,983) --
Receivable due from affiliated company 15,937 --
Inventories (432,780) --
Deferred taxes 22,006 --
Other assets and liabilities (77,327) (63,832)
(Decrease) Increase in liabilities
Accounts payable 337,571 12,733
Accrued expenses 846,264 (35,858)
Federal income tax payable 16,738 --
Franchise tax payable 25,000 (21,000)
Receivable due from/payable due to Integrated, net (166,578) --
Interest payable to stockholders 3,375 --
----------- -----------
Net cash provided by (used in) operating activities 414,388 (197,299)
----------- -----------
Cash flows from investing activities
Purchase of propery, plant , oil and gas equipment,
well workovers and recompletions 37,601 (4,619)
Sale of oil and gas interests -- 16,082
----------- -----------
Net cash (used in) provided by investing activities 37,601 11,463
----------- -----------
Cash flows from financing activities
Proceeds from bonds payable -- 700,500
Net proceeds from note payable 775,000 --
Principal payment of notes payable (693,750) (72,918)
----------- -----------
Net cash flows provided by (used in)
financing activities 81,250 627,582
----------- -----------
Net increase (decrease) in cash and cash equivalents 533,238 441,746
----------- -----------
Cash and cash equivalents at beginning of period 257,788 66,601
----------- -----------
Cash and cash equivalents at end of period $ 791,027 $ 508,347
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F - 3
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Organization, Recapitalization, and Operations
Concord Energy Incorporated (the "Company") is an oil and gas production and
service company which also locates, designs, refurbishes and installs gas plants
and gas processing equipment for customers in the natural gas industry. In
addition, the Company provides rentals of gas plants and gas processing
equipment and provides services such as engineering, procurement, dismantling,
reapplication and relocation of complete gas processing facilities. The Company
is headquartered in Bernardsville, New Jersey with substantially all of its oil
and gas operations in East Texas and Louisiana Gulf Coast. The Company's
wholly-owned subsidiaries, Concord Operating, Inc. ("COI") and Knight Equipment
and Manufacturing Corporation ("KEMCO") are located in Houston, Texas and
Jourdanton, Texas, respectively.
Concord Energy, Inc., (the Company's name prior to the recapitalization
described below) was formed in June 1991 for the purpose of combining the net
assets and operations of 166 previously independent oil and gas partnerships
(the "Partnerships") and the net assets and operations of COI through an
exchange of Partnership and COI net assets for common stock in Concord Energy,
Inc. The exchange was accounted for at historical cost. Certain limited partners
in the Partnerships which did not participate in the exchange were allocated net
working interests in the properties previously held by the respective
Partnerships.
Prior to the exchange, the Partnerships were managed by Integrated Energy, Inc.
("Integrated") and Tucker Financial, Inc. ("Tucker") which were in the business
of establishing and managing oil and gas limited partnerships. Subsequent to the
exchange, Integrated continues to provide certain management and administrative
services to the Company pursuant to a management agreement between the Company
and Integrated. COI manages the production of Company-owned oil and gas
properties.
On May 19, 1993, Monoclonal International Technology, Inc. ("MITI") acquired all
of the outstanding common stock of Concord Energy, Inc., with MITI as the
acquirer (i.e. a reverse acquisition). In connection with the acquisition, MITI
later changed its name to Concord Energy Incorporated, approved a 1 for 230
reverse split of its 127,784,100 shares of common stock and issued 10,556,077
shares of its common stock in exchange for all the outstanding common stock of
Concord Energy, Inc. Historical stockholders; equity has been retroactively
restated for all periods presented in the accompanying consolidated financial
statements to account for the equivalent number of shares received in the
acquisition totaling 11,111,660 shares, after giving effect to the difference in
par value of Concord Energy, Inc. and MITI stock with the offset to
F - 4
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
paid-in capital. Costs incurred in connection with the recapitalization totaling
$45,000 were recorded as a reduction in paid-in capital during 1993.
2. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements are comprised of the Company and its
wholly-owned subsidiaries, Concord Energy, Inc., Concord Operating, Inc., and
Knight Equipment & Manufacturing Corporation and its wholly-owned subsidiary, K
& S Engineering, Inc. All significant intercompany accounts and transactions are
eliminated in consolidation.
Cash equivalents
Cash and cash equivalents include all cash and highly liquid investments with
original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market using the first-in
first-out method. Inventory consists principally of gas plants, compressors,
separators, supplies and repair parts utilized by the Company in conjunction
with its design and refurbishing of gas plants and gas processing equipment.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation,
depletion and amortization.
The Company accounts for its oil and gas properties under the full cost method
of accounting. Under the full cost method, all costs incurred in acquiring,
exploring and developing oil and gas reserves are capitalized to the full cost
pool. When oil and gas properties are sold, retired or otherwise disposed of,
any applicable proceeds are credited to the full cost pool, with no gain or loss
recognized, unless the sale would have a significant impact on the relationship
between capitalized costs and proved reserves. Since all of its oil and gas
operations are within the United States, the Company utilizes one cost pool to
account for its oil and gas properties. Depreciation, depletion and amortization
of oil and gas properties is computed based on the unit-of production method for
the cost pool, based on estimates of proved reserves as determined by an
independent reserve engineer.
F - 5
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Other property, plant and equipment is recorded at lost less accumulated
depreciation. Repairs and maintenance costs which do not extend the useful lives
of the assets are expenses as incurred. Depreciation is provided for on the
straight-line method over the estimated useful lives of the assets which range
from three to seven years, except for buildings and improvements which are
depreciated over estimated useful lives ranging from 20 to 30 years.
Leases
Leases which meet certain criteria evidencing substantive ownership by the
company are capitalized and the related capital lease obligations are included
in liabilities. Amortization and interest are charges to expense, with rent
payments being treated as payments of the capital lease obligation. All other
leases are accounted for as operating leases, with rent payments being charges
to expense as incurred.
Deferred financing and bond issuance costs
Costs incurred in conjunction with obtaining financing (including costs
associated with the issuance of bonds) are amortized using the straight-line
method over the term of the related financing agreement or bond.
Revenue recognition
Oil and gas sales
Revenues from oil and gas sales are accrued as earned based on joint interest
billings obtained from the well operator.
Contract revenue
Revenues from construction contracts are recognized based on the percentage of
completion method, measured on the basis of costs incurred to date to estimated
total budgeted costs for each contract. Contract costs include all direct
material and labor costs, including those indirect labor and repair costs
related to contract performance. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, estimated profitability and final contract
settlements are monitored on a periodic basis in order to determine if revisions
to the income and cost estimates are necessary as a result of such changes.
Revisions to the income and cost estimates, if any, are recognized in the period
in which such revisions are determined to be necessary. Costs and earning in
excess of billings on uncompleted contracts represents an asset based on
revenues recognized in excess of amounts billed to customers. Billings in excess
of costs and earnings on uncompleted contracts is recorded as a liability and
F - 6
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
represents contracts for which billings to date exceed cumulative revenues
recognized based on the percentage of completion method.
Syndication sales
Under an agreement between the company and Integrated (see Note 12), the Company
is entitled to receive 20% of all sales made by Integrated of syndicated retail
partnerships. This revenue is recognized when earned.
Well operating income
The Company, through its wholly owned subsidiary COI, manages and operates
wells. The revenue generated from these services is recognized when earned.
Rental revenue
The Company leases certain gas plants and separators to customers under short
term leases which are accounted for as operating leases. At June 30, 1995, there
are no significant future minimum rentals to be received under these
noncancelable operating leases.
Income taxes
The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized based upon differences arising from the carrying amounts of the
Company's assets and liabilities for tax and financial reporting purposes using
enacted tax rates in effect for the year in which the differences are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period when the change in tax rates is
enacted.
Net loss per share
Net loss per share of common stock is based upon the weighted average number of
shares of common stock outstanding (15,521,122 in fiscal 1996 and 11,111,650 in
both fiscal 1995 and 1994). The Company's common stock equivalents, which
consist of outstanding warrants to purchase the Company's common stock, are not
considered in the net loss per share calculation since their effect is
anti-dilutive.
3. Business Combination
On May 7, 1995, the company acquired all of the issued and outstanding shares of
commons stock of KEMCO for $7,000,000 in a business combination accounted for
under the purchase method of accounting. The acquisition was financed through
2,000,000 shares of the Company's commons stock and $4,500,000 in cash.
Financing for the cash portion of the purchase price was obtained primarily
F - 7
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
through the net proceeds from debt financing totaling approximately $3,700,000
and the net proceeds from the issuance of 1,300,000 shares of the Company's
common stock totaling approximately $800,000. The results of operations of KEMCO
and its wholly-owned subsidiary, K & S Engineering, Inc., subsequent to April 1,
1995, the date effective control of KEMCO transferred to the Company for
financial reporting purposes, are included in these consolidated financial
statements.
4. Accounts Receivable and Concentration of Credit Risk
Accounts receivable represent amounts due from customers who are in the oil and
gas business throughout North and South America. Fluctuations in market
conditions impact the credit worthiness of these customers. The Company reviews
the financial condition of purchasers and joint interest participants prior to
signing sales or joint interest agreements. Payment terms are on a short-term
basis and in accordance with industry standards.
5. Inventory - Lower of Cost or Market Adjustment
Based on a comparison of the estimated potential sales prices to the recorded
carrying costs of the inventory of plants acquired in the KEMCO acquisition,
management has determined that the recorded cost of the inventory of such plants
was in excess of the market value of the plants which would allow a reasonable
profit margin on the sale of the plants. The recorded cost of the inventory of
such plants had been determined based on an appraisal obtained and relied upon
to establish the value of the plants at the time KEMCO was acquired. Management
subsequently determined that the values assigned to the plants were the
appraiser's estimated retail sales price of the plants rather than a wholesale
market value that would allow a reasonable profit margin on the sales of the
plants.
To adjust the carrying cost of the plants to their estimated market value, an
adjustment of $3,043,055 was charged to expense for the quarter ended September
30, 1995.
5. Property, Plant and Equipment, Net
Significant components comprising property, plant and equipment at September 30
include the following:
F - 8
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1995 1994
Oil & gas properties:
Leasehold costs $ 7,368,416 $ 7,368,416
Lease well & equipment 1,944,882 1,944,882
Intangibles 1,904,925 1,904,925
Property, plant & equipment 945,431 913,407
Other 58,551 22,630
------------ ------------
12,222,205 12,154,260
------------ ------------
Other property, plant & equipment
Land 159,913 --
Buildings & improvements 239,675 --
Machinery & equipment 186,820 --
Vehicles 218,769 --
Furniture, fixtures & software 81,710 53,016
------------ ------------
886,887 53,016
------------ ------------
Accumulated depreciation,
depletion and amortization (4,079,780) (3,478,917)
------------ ------------
Property, plant and equipment, net $ 9,029,312 $ 8,728,359
------------ ------------
Depreciation, depletion and amortization of oil and gas properties, and
depreciation of other property, plant and equipment for the periods ended
September 30 is as follows:
1995 1994
Oil and gas properties $111,044 $115,514
Other property, plant
and equipment 30,000 621
-------- --------
$141,044 $116,135
6. Debt and Capital Lease Obligations
Debt
Long-term debt includes the following at September 30:
F - 9
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1995
Bond payable, dated May 1995, with interest at 10%
per annum, requiring semi-annual interest payments
through maturity on May 1, 1997. The bond is
secured by the assets of KEMCO. As additional
consideration, the Company issued 450,000 shares
of common shares to the lender.
$2,920,000
Secured notes payable, dated December 1994, with a
face value of $2,500,000 issued at $750,000
discount. The notes bear interest at 9% per annum
with an effective interest rate of 15% per annum.
Semi-annual interest payments of $112,500 are
required through maturity in January 2010. The
notes are secured by certain gas plants and
equipment and a guarantee of the Company.
1,762,387
Secured notes payable, dated September 1994, with
a face value of $1,400,000 issued at a $604,500
discount. The notes bear interest at 6% per annum
payable semi-annually with an effective interest
rate of 14.02% per annum. Annual principal
payments of $140,000 are required beginning in
August 2005 through maturity in August 2009. The
notes are secured by certain oil and gas property
owned by the Company. 708,787
Acquisition bridge financing evidenced by notes
payable which bear interest at 12% per annum. The
interest and related principal are due at various
maturity dates through November 1995.
Approximately $500,000 of the notes at September
30, 1995 are secured by a personal guarantee from
Jerry Swon, the Chief Executive Officer of the
Company, who is also a shareholder of the Company. 500,000
F - 10
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
In July, 1995 issued $500,000 of 12% convertible
notes. Upon maturity, or any time prior thereto,
each $250,000 portion of the obligation is
convertible into additional shares of common
stock. The notes mature, one half each July 7,
1996 and August 7, 1996, respectively. 500,000
On August 21, 1995, the Company issued $275,000 of
12% convertible notes. Upon maturity, or any time
prior thereto, the obligation is convertible into
additional shares of common stock at $1.00 per
shares. The note matures on August 21, 1996. 275,000
Unsecured note payable, originally in the amount
of $300,000 bearing interest at 7% per annum.
Principal and interest are due at various dates
through fiscal 1996. 50,000
12% convertible notes, dated October 1994,
convertible at maturity into shares of Company's
common stock at $1 per share. During 1995,
$125,000 of these notes matured and were converted
into 125,000 shares of the Company's common stock.
Upon the conversion, an additional 15,000 shares
of the Company's common stock was issued
consideration for accrued interest expense through
the date of conversion totaling $15,000. The
remainder of the notes mature in October 1996. The
notes are secured by certain oil and gas property
owned by the Company. 125,000
----------
Total debt outstanding 6,841,174
Less: current portion 1,200,000
----------
Long-term debt $5,641,174
----------
As of September 30, 1995, maturities and scheduled payments for the next five
fiscal years and thereafter are: $1,200,000 in 1996; $3,695,000 in 1997; and the
remainder after fiscal year 2001.
F - 11
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Capital Lease Obligations
In conjunction with its acquisition of KEMCO, the Company acquired certain
leased equipment which is accounted for as capital leases. prior to the
acquisition, the leases were prepaid at inception. Capital lease obligations
recorded in the accompanying consolidated financial statements represent the
present value of the lease purchase options which are exercisable at the end of
the lease term in December 1997, discounted at an interest rate of 16%.
Capital lease obligations as of September 30, 1995 consist of the following:
Total future minimum lease payments due
in fiscal 1998 $67,106
Less: amounts representing interest 20,433
-------
Present value of minimum lease payments $46,673
-------
7. Commitments and Contingencies
Minimum Rental Commitments
The Company has several noncancelable operating leases, primarily for office
equipment, that expire over the next five years. These leases generally contain
renewal options for periods ranging from three to five years and require the
Company to pay all executory costs such as maintenance and insurance.
8. Transactions with Related Parties
Related Party Ownership Interests
Integrated and Tucker, which are owned by an officer and director of the
Company, own 1.81% and 1.73%, respectively, of the Company's common stock as of
September 30, 1995. Additionally, certain officers and directors of the Company,
together with Integrated own or control 26.03% of the Company's common stock as
of September 30, 1995.
Receivables from Related Parties/Affiliated Company
Integrated and the Company have an agreement by which the associated receivables
and payables may be netted. At September 30, 1995, the Company has a net payable
due to Integrated of $428,107. At September 30, 1994, the Company had a net
receivable due from Integrated of $208,137.
F - 12
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
As part of its ongoing operations, the Company conducts business with Atascosa
Electric Services ("AES"), an entity which is owned and controlled by Deral
Knight, the president of KEMCO, who is also a stockholder of the Company. At
September 30, 1995, the receivable due from stockholder (Deral Knight) and due
from affiliated company (AES) were $115,602 and $0, respectively.
Under the provisions of the agreement whereby the Company acquired Deral
Knight's stock in KEMCO, Deral Knight has agreed to return to the Company,
Concord Energy Incorporated common stock valued at $1.25 per shares to the
extent that Deral Knight owes money to the Company at June 30, 1995.
Accordingly, in liquidation of the receivable balance, approximately 83,000
shares of Company common stock issued to Deral Knight as part of the purchase
price of his KEMCO stock will be returned to the Company.
Notes Payable to Stockholders
Notes payable to stockholders bear interest at rates ranging from ^5 to 12% per
annum which are generally payable in monthly installments through maturity.
Interest expense incurred on these notes during fiscal 1995, 1994 and 1993
totals $42,661, $67,892 and $74,029, respectively. The notes mature at various
dates through August 1996. Approximately $100,000 of the notes at September 30,
1995 are secured by future production of approximately 75,000 equivalent barrels
of oil.
Joint Venture Agreement with Integrated
In December 1994, KEMCO (prior to its acquisition by the Company) entered into
an agreement with Integrated (the "Joint Venture Agreement") in which Integrated
agreed to finance the purchase of certain gas plant and gas processing
equipment, which is to be sold by KEMCO, in exchange for 50% of the profit
realized by KEMCO on the sale of the inventory. During the three months ended
June 30, 1995, the Company sold the related inventory for $900,000 which was
included in contract revenue for fiscal 1995. Integrated's share of the profit
totaling $182,500 and the $535,000 cost of the inventory, were included in cost
of contract revenue for fiscal 1995.
Management Agreement
The Company and Integrated have entered into an agreement (the "Management
Agreement") that requires Integrated to provide certain management,
administrative and accounting services to the Company and certain subsidiaries
for $116,00 per month through June 30, 1996. The services provided by Integrated
include the receipt of cash for oil and gas sales and the payment of operating
and capital expenditures of behalf of the Company. In accordance with the
original provisions of the Management Agreement, the Company is also entitled to
10% of all syndicated retail partnership
F - 13
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
gross sales made by Integrated. As additional consideration for the Management
Agreement, Integrated assigned to the Company, effective June 1, 1991 through
March 31, 1994, its revenue sharing in future program syndications. Effective
March 31, 1994, the Management Agreement was modified to provide the Company
with 20% of all syndicated retail partnership gross sales made by Integrated.
During fiscal 1994, the Company sold to Integrated all of its revenue sharing
interests which were earned under the Management Agreement, aggregating
$363,266. Revenue interest income earned was also remitted to Integrated in
connection with the sale. The proceeds from the sale were recorded as reduction
to the Company's full-cost oil and gas properties pool. The period ended
September 30, the Company recorded income from Integrated as follows:
1995 1994
Syndication income $ 80,000 $139,000
Revenue interest income -- --
Management fee income -- 4,950
-------- --------
$ 80,000 $143,950
-------- --------
Other Related Party Transactions
The two automobiles held under capital lease are to be transferred to an officer
and an employee of KEMCO upon the execution of the lease purchase options at the
expiration of the lease terms.
9. Events Subsequent to Date of Balance Sheet
On August 9, 1995 a warrant was issued for the purchase of 100,000 shares of
common stock at the price of $1.125 per share. This warrant's expiration date is
contingent upon the market price of the stock.
On October 4, 1995, the Company completed a sale of oil and gas properties for
which the Company will realize net proceeds of approximately $450,000.
On October 28, 1995, the Company issued 98,125 shares of common stock for
services rendered.
F - 14
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 791,027
<SECURITIES> 0
<RECEIVABLES> 994,990
<ALLOWANCES> 67,490
<INVENTORY> 5,842,350
<CURRENT-ASSETS> 8,505,032
<PP&E> 13,109,092
<DEPRECIATION> 4,079,780
<TOTAL-ASSETS> 18,078,993
<CURRENT-LIABILITIES> 4,661,931
<BONDS> 5,391,174
0
0
<COMMON> 1,552
<OTHER-SE> 7,727,663
<TOTAL-LIABILITY-AND-EQUITY> 18,078,993
<SALES> 3,031,864
<TOTAL-REVENUES> 3,160,628
<CGS> 1,792,651
<TOTAL-COSTS> 5,725,108
<OTHER-EXPENSES> (6,308)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 348,096
<INCOME-PRETAX> (2,906,268)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,906,268)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
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