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, 1997
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission File Number 2-6806-NY
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)
1515 Simmons Street, Jourdanton, TX 78026
(Address of principal executive offices)
(210) 769-3955
(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, 1997, the outstanding common equity of Concord Energy
Incorporated comprised 6,045,745 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, 1997 and 1996 F-1
Consolidated Statements of Operations and
Accumulated Deficit (Unaudited)
Three Months Ended September 30, 1997, and 1996 F-2
Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended September 30, 1997, and 1996 F-3
Notes to Consolidated Financial Statements F-4 - F-18
2
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Item 2. Management's Discussion and Analysis or Plan of Operation.
General Operations
In May, 1993 the Company consummated an Agreement and Plan of
Reorganization ("Agreement") pursuant to which it entered the oil and gas
industry. Under the Agreement, the Company 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 75 oil and gas wells
primarily located in East Texas and the Louisiana Gulf Coast. The Company's oil
and gas subsidiary had been formed in June 1991 in order to effectuate a
consolidation of 166 oil and gas partnerships.
In May, 1995, the Company acquired Knight Equipment & Manufacturing
Corporation ("KEMCO"), which locates, designs, refurbishes, and installs gas
processing plants for the natural gas industry.
In March, 1996, the Company acquired Integrated Petroleum Systems
Corporation ("IPS"), which developed a unique, proprietary software used to
collect, process and transmit data relative to petroleum production and
processing operations.
Results of Operations
The Company's revenues are primarily derived through its KEMCO subsidiary
from the engineering, manufacturing, construction and leasing of gas processing
equipment. The Company also realizes revenue through the sale of oil and gas,
well operations and the sale of oil and gas data gathering software developed by
IPS. During the three months ended September 30, 1997 the Company reported total
revenues of $10,896,886. Contract revenues during the three month period were
$10,655,301. Rental income for the three month period was $22,058. The Company's
oil sales during the three month period were $120,000 while gas sales totaled
3
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$80,000. The Company reported revenue from well operating income of $8,522 and
software sales of $11,005 during the three month period ended September 30,
1997. By comparison, during the three month period ended September 30, 1996 the
Company reported total revenues of $4,496,759, including contract revenues of
$3,978,351, rental income of $37,367, oil sales of $241,356, gas sales of
$178,479, well operating income of $10,721 and software sales of $50,485.
Total revenues increased by $6,400,127 during the three months ended
September 30, 1997 compared to the three month period ended September 30, 1996.
This increase is primarily due to the increases in contract revenue of
$6,676,950.
Total costs and operating expenses during the three months ended September
30, 1997 were $10,123,045, an increase of $6,073,872 from the three month period
ended September 30, 1996, and is primarily the result of an increase in the cost
of contract revenue associated with the increase in contract revenues. This
substantial increase is the result of the Company's obtaining a variety of
larger contracts compared to contracts obtained in prior periods
Cost of contract revenue during the period was $9,228,571. Cost of contract
revenue as a percentage of contract revenue was approximately 87%. In
comparison, during the three month period ended September 30, 1996 total costs
and operating expenses were $4,049,173, costs of contract revenue were
$2,922,840 and cost of contract revenue as a percentage of contract revenue was
approximately 73%. The increase in cost of contract revenue of $6,305,731 is
primarily the result of the increase in contract revenues.
During the three month period ended September 30, 1997 general and
administrative expenses were $526,060. During the three month period ended
September 30, 1996, the Company's total general and administrative expenses were
$751,281, which include costs of
4
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$155,740 associated with the winding down of the Company's New Jersey and
Houston office's and staff.
Depreciation, depletion and amortization expenses during the three month
period ended September 30, 1997 were $168,070. During the three month period
ended September 30, 1996 these expenses were $207,113. The decrease of $39,043
is primarily due to the elimination of amortization of IPS' goodwill which in
the three month period ended September 30, 1996 totaled $33,165.
Interest expense for the three month period ended September 30, 1997 was
$234,566. During the three month period ended September 30, 1996 interest
expense was $243,612.
For the three month period ended September 30, 1997 the Company reported a
net income of $541,995. For the three month period ended September 30, 1996 the
Company reported a net income of $209,144. The increase of $332,851 for the
three months ended September 30, 1997 as compared to the three months ended
September 30, 1996, primarily resulted from the combination of the above
described increase in contract revenue partially offset by the above described
increased cost of contract revenue.
Liquidity and Capital Resources
As of September 30, 1997 and 1996, the Company reported working capital
(deficit) of $(115,204) and $2,491,153, respectively, resulting in a decrease of
$2,606,357. This decrease in 1997 is the result of a decrease in current assets
of $737,851 and an increase in current liabilities of $1,868,506. The decrease
in current assets primarily resulted from a combination of a decrease in cash,
costs and estimated earnings in excess of billings on uncompleted contracts,
accounts receivables, prepaid expenses and other assets of $1,608,007 partially
offset by an increase in
5
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inventories of $870,156. The increase in current liabilities primarily resulted
from an increase in accounts payable and accrued expenses of $2,711,930
partially offset by a decrease in the current portion of notes and taxes payable
of $843,424.
During the three months ended September 30, 1997, cash provided in
operating activities was $308,501, representing an increase of $782,499 from the
three months ended September 30, 1996. This increase primarily resulted from the
combination of the increased accounts payable and accrued expenses, increased
inventories, increased net income and decrease in accounts receivables.
Management notes that the accompanying financial statements have been
prepared with the assumption that the Company will continue as a going concern.
As discussed in Note 11 of the financial statements, the Company has suffered
recurring losses and negative cash flows from operations in the prior fiscal
years, has a negative working capital at September 30, 1997, as well as
significant debt maturing in the near future.
The Company has obtained an extension of maturity, to December 31, 1997, of
its notes payable which were to mature on November 1, 1997 in the total
principal amount of $2,920,000. The Company believes that it will be successful
in obtaining refinancing utilizing certain portions of the KEMCO inventory as
collateral, however there are no current commitments to refinance this
indebtedness.
Capital Expenditures and Commitments
During the three months ended September 30, 1997, the Company incurred
capital expenditures of $28,829. These capital expenditures primarily consisted
of equipment purchases by KEMCO.
6
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Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibits marked with an asterisk have been previously filed with the
Securities and Exchange Commission by the Company, and are incorporated by
reference, as indicated. Other exhibits, if no so designated are filed with this
Form 10-QSB.
(3)* - Certificate of Incorporation as amended and by-laws, incorporated
herein as an exhibit by reference to the Current Report. Exhibit 3 therein
under the Securities Exchange Act of 1934, filed by Registrant on Form 8-K
with the Securities and Exchange Commission on May 18, 1993, SEC File No.
2-6806.
(4) - Indenture of Trust Amendment No. 2 between Concord Energy
Incorporated and First Union National Bank, as Successor Trustee dated as
of October 31, 1997.
(99) - Certificate for Renewal and Revival of Charter.
b) Reports on Form 8-K
No current reports on Form 8-K have been filed during the first quarter of
this fiscal year.
- ------------
* Previously filed
7
<PAGE>
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: November 13, 1997 Deral Knight
President, Chief Executive Officer
and Chairman of the Board of Directors
Dated: November 13, 1997 s\Scott Kalish
------------------------------
Scott Kalish
Treasurer (Principal Accounting Officer)
8
<PAGE>
Concord Energy Incorporated and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
(Unaudited) (Unaudited)
September 30, September 30,
1997 1996
------------ ------------
Assets
Current assets
Cash and cash equivalents $ 254,978 $ 761,929
Costs and estimated earnings in excess
of billings on uncompleted contracts 634,016 1,515,817
Accounts receivable, net of allowance for
doubtful accounts of $178,643 and $132,930 2,191,395 2,190,894
Receivable due from Integrated, net 24,754 197,364
Inventories 6,346,055 5,475,899
Prepaid expenses and other assets 64,119 111,265
------------ ------------
Total current assets 9,515,317 10,253,168
Property, plant and equipment, net 7,901,870 8,433,538
Goodwill, net -- 2,550,028
Bond issuance costs, net 198,465 293,075
Other assets 37,500 50,000
------------ ------------
Total assets $ 17,653,152 $ 21,579,808
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Current portion of notes payble to stockholders $ -- $ 250,000
Current portion of long-term debt 3,602,553 4,126,344
Current portion of capital lease obligations 2,566 15,161
Accounts payable 3,424,652 1,772,613
Accrued expenses 2,559,870 1,499,979
Federal income taxes payable 40,880 97,918
------------ ------------
Total current liabilities 9,630,521 7,762,015
Long term liabilities
Notes payable 2,501,115 2,539,549
Capital lease obligations -- 52,368
------------ ------------
Total long term liabilities 2,501,115 2,591,917
------------ ------------
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, 6,045,717 and 5,958,811
(post-split) shares issued and outstanding 605 594
Paid-In capital 22,812,110 22,605,392
Accumulated deficit (16,810,633) (10,899,544)
------------ ------------
6,002,082 11,706,442
Cost of Treasury Stock (480,566) (480,566)
------------ ------------
Total stockholders' equity 5,521,516 11,225,876
------------ ------------
Total liabilities and stockholders' equity $ 17,653,152 $ 21,579,808
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
F - 1
<PAGE>
Concord Energy Incorporated and Subsidiaries
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Quarter Ended Quarter Ended
September 30, September 30,
1997 1996
------------ ------------
Revenue:
Oil sales $ 120,000 $ 241,356
Gas sales 80,000 178,479
------------ ------------
Total oil and gas sales 200,000 419,835
Contract revenue 10,655,301 3,978,351
Well operating income 8,522 10,721
Rental income 22,058 37,367
Software Sales 11,005 50,485
------------ ------------
Total revenue 10,896,886 4,496,759
------------ ------------
Costs and Operating Expenses:
Lease operating 200,344 167,939
Cost of contract revenue 9,228,571 2,922,840
General and administrative: 526,060 751,281
Depreciation, depletion and amortization 168,070 207,113
------------ ------------
Total costs and operating expenses 10,123,045 4,049,173
------------ ------------
Income from Operations 773,841 447,586
------------ ------------
Other income (expense):
Other income 2,720 5,170
Interest expense (234,566) (243,612)
------------ ------------
Total other income (expense) (231,846) (238,442)
------------ ------------
Income before income taxes 541,995 209,144
------------ ------------
Income tax benefit -- --
------------ ------------
Net Income $ 541,995 $ 209,144
============ ============
Accumulated deficit, beginning of period (17,352,628) (11,108,688)
============ ============
Accumulated deficit, end of period $(16,810,633) $(10,899,544)
============ ============
Net Income per share $ 0.09 $ 0.04
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
F - 2
<PAGE>
Concord Energy Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Quarter Ended Quarter Ended
September 30, September 30,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ 541,995 $ 209,144
Adjustments to reconcile net income/loss to net cash
(used in) provided by operating activities:
Depreciation, depletion and amortization 168,070 207,113
Other noncash transactions 7,053 132,485
Decrease (Increase) in assets:
Accounts receivable (1,479,540) (931,109)
Costs and estimated earning in excess
of billings on uncompleted contracts (173,021) (1,398,722)
Inventories (620,213) 606,074
Other assets and liabilities (969) (91,001)
(Decrease) Increase in liabilities
Accounts payable 1,285,528 440,222
Accrued expenses 657,720 312,745
Federal income tax payable 8,333 --
Receivable due from/payable due to Integrated, net (31,697) 39,051
Billings in excess of costs and estimated earnings on
uncompleted contracts (54,758) --
----------- -----------
Net cash provided by (used in) operating activities 308,501 (473,998)
----------- -----------
Cash flows from investing activities
Purchases of equipment, well workovers and recompletions (28,829) (73,882)
----------- -----------
Net cash (used in) provided by investing activities (28,829) (73,882)
----------- -----------
Cash flows from financing activities
Net proceeds from note payable 14,414 --
Net proceeds from issuance of common stock -- 856,665
Principal payments on notes payable and capital lease obligations (81,047) (444,939)
----------- -----------
Net cash flows provided by (used in)
financing activities (66,633) 411,726
----------- -----------
Net increase (decrease) in cash and cash equivalents 213,039 (136,154)
----------- -----------
Cash and cash equivalents at beginning of period 41,939 898,083
----------- -----------
Cash and cash equivalents at end of period $ 254,978 $ 761,929
=========== ===========
</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 exploration and
production company which also locates, designs, refurbishes and installs gas
plants and gas processing equipment for customers in the natural gas industry.
The Company also 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. In addition, the Company
has developed unique, proprietary software which is used to collect, process,
and transmit data relative to petroleum production and processing operations.
The Company is headquartered in Jourdanton, Texas with substantially all of its
oil and gas operations in East Texas and the Louisiana Gulf Coast. The Company's
wholly-owned subsidiaries, Concord Energy, Inc., Concord Operating, Inc.
("COI"), and Knight Equipment & Manufacturing Corporation ("KEMCO") are located
in Jourdanton, Texas, and Integrated Petroleum Systems Corporation ("IPS") is
located in Denver, Colorado.
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 their 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 and through June 30, 1996, Integrated continued to provide certain
management and administrative services to the Company pursuant to a management
agreement between the Company and Integrated, which terminated on June 30, 1996.
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.. For accounting
purposes, the acquisition was treated as a recapitalization 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.
In December 1995, the company effectuated a 1 for 5 reverse split of its
outstanding stock. Historical stockholders' equity and net loss per share
information has been retroactively restated for all periods presented in the
accompanying consolidated financial statements to reflect this reverse split.
F-4
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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., Knight
Equipment & Manufacturing Corporation and its wholly-owned subsidiary, K & S
Engineering, Inc. and Integrated Petroleum Systems. All significant intercompany
accounts and transactions are eliminated in consolidation.
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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 cost 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.
Goodwill
Goodwill recorded as a result of the acquisition of IPS was being amortized,
straight-line over it's originally estimated useful life of 15 years in
accordance with Generally Accepted Accounting Principles. At June 30, 1997
management determined that the remaining unamortized goodwill had no future
benefit and the balance was written-off as a charge against income from
operations.
Other Assets
Other assets of the Company, which include the drawings and blue prints of amine
units manufactured and serviced by Perry Gas Processors, Inc., is being
amortized, straight-line over it's estimated useful life of 5 years in
accordance with Generally Accepted Accounting Principles.
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 charged
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. Bond issuance
costs at September 30, 1997 and 1996 are stated net of accumulated amortization
of $372,296 and $227,686, respectively.
Revenue recognition
Oil and gas sales
Revenues from oil and gas sales are accrued as earned based on production volume
statements and joint interest billings obtained from the well operator.
F-6
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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 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 earnings in excess of billings on
uncompleted contracts represent an asset based on revenues recognized in excess
of amounts billed to customers. Billings in excess of costs and earnings on
uncompleted contracts are recorded as a liability and represent 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 10) which was
terminated on June 30, 1996, the Company was entitled to receive a percentage of
the proceeds of all sales made by Integrated of syndicated retail partnerships.
This revenue was 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 September 30, 1997
and 1996, there are no significant future minimum rentals to be received under
these noncancelable operating leases.
Software sales
The Company, through its wholly owned subsidiary IPS, sells, installs and
maintains its proprietary software. The revenue generated from these services is
recognized when earned.
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 of 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.
F-7
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Net loss per share
Net loss per share of common stock is based upon the weighted average number of
shares of common stock outstanding (5,904,086 and 5,958,811 at September 30,
1997 and 1996, respectively). The Company's common stock equivalents, which
consist of outstanding warrants to purchase the Company's common stock, are not
considered in the net income per share calculation since their effect is
anti-dilutive.
3. Business Combinations
KEMCO - On May 7, 1995, the Company acquired all of the issued and outstanding
shares of the common stock of KEMCO for $7,000,000 in a business combination
accounted for under the purchase method of accounting. The acquisition was
financed by the issuance of 400,000 shares of the Company's common stock and
payment of $4,500,000 in cash. Financing for the cash portion of the purchase
price was obtained primarily through the net proceeds from debt financing
totaling approximately $3,700,000 and the net proceeds from the sale of 260,000
shares of the Company's common stock totaling approximately $800,000.
IPS - On March 1, 1996 the Company acquired all of the issued and outstanding
shares of the common stock of IPS for 600,000 shares of the Company's common
stock, valued at $1,800,000, in a business combination accounted for under the
purchase method of accounting. The results of operations of IPS subsequent to
March 1, 1996, are included in these consolidated financial statements.
At the time of purchase, IPS' liabilities exceeded the value of its assets by
$853,208, which when added to the $1,800,000 value assigned to the shares of
common stock issued resulted in goodwill of $2,653,208 being recorded. Based on
the results of operations for IPS since its acquisition, management has
determined that the unamortized goodwill at June 30, 1997 of $2,417,368 had no
future benefit. Accordingly, at June 30, 1997 the balance of the unamortized
goodwill was written-off as a charge against income from operations.
Amortization of goodwill of $103,180 is recorded as of September 30, 1996.
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.
The Company maintains account balances at several financial institutions.
Accounts are insured by the Federal Deposit Insurance Corporation up to
$100,000. In the course of business, the Company may maintain account balances,
which are generally transient in nature, in excess of the federally insured
limits.
F-8
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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 wholesale market
value, an adjustment of $3,043,055 was charged to expense for the year ended
June 30, 1996.
6. Property, Plant and Equipment, Net
Significant components comprising property, plant and equipment at September 30
include the following:
1997 1996
Oil & gas properties:
Leasehold costs $ 7,495,916 $ 7,495,916
Lease well & equipment 1,845,508 1,845.508
Intangibles 1,904,925 1,904,925
Property, plant & equipment 484,181 484,181
Other 80,632 80,632
------------ ------------
11,811,162 11,811,162
------------ ------------
Other property, plant & equipment
Land 185,413 185,413
Buildings & improvements 361,525 359,535
Machinery & equipment 335,428 305,999
Vehicles 149,727 237,896
Furniture, fixtures & software 197,305 191,679
------------ ------------
1,229,398 1,280,522
------------ ------------
Accumulated depreciation,
depletion and amortization (5,138,690) (4,658,146)
------------ ------------
Property, plant and equipment, net $ 7,901,870 $ 8,433,538
============ ============
F-9
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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:
1997 1996
Oil and gas properties $375,068 $130,498
Other property, plant and equipment 152,620 32,395
-------- --------
$527,688 $162,893
======== ========
7. Debt and Capital Lease Obligations
Debt
Notes payable and long-term debt includes the following at September 30:
1997 1996
Bond payable, dated May 1995, with
interest at 10% per annum, requiring
semi-annual interest payments through
maturity on December 31, 1997. The bond
is secured by the assets of KEMCO. As
incentive to the note holders for
extending the original maturity date of
the note from May 1, 1997, interest was
increased by 4% per annum from May 1,
1997 through maturity. $2,920,000 $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. 1,798,976 1,779,476
F-10
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1997 1996
Secured notes payable, dated September
1994, with a face value of $1,400,000
issued at a $699,500 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. 746,792 728,088
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 25, 1996. The
notes were secured by a personal
guarantee from Jerry Swon, former
Chairman of the Company's board of
directors, who was also a shareholder of
the Company. -- 60,000
12% convertible notes, dated October
1994, convertible at maturity into
shares of the Company's common stock at
$5.00 per share. During 1995, $125,000
of these notes matured and were
converted into 25,000 shares of the
Company's common stock. Upon the
conversion, an additional 3,000 shares
of the Company's common stock was issued
as consideration for accrued interest
expense through the date of conversion
totaling $15,000. The remainder of the
notes and accrued interest totaling
$20,542 were converted into 80,656
shares of common stock in March 1997.
The notes were secured by certain oil
and gas property owned by the Company. -- 125,000
Secured note payable dated January 1996,
with interest at 9% per annum. Interest
and principal of $1,271 are due monthly
through January 2000. The note is
secured with certain equipment owned by
the Company. 31,986 43,774
F-11
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1997 1996
Unsecured non-interest bearing note
payable dated March 1996 payable in
monthly installments of $43,599 through
maturity on December 15, 1996.
Subsequent to its maturity the note
bears interest at 10% per annum. 174,000 217,500
Secured note payable dated February
1996, with interest at 12% per annum
from inception through February 1, 1997.
From February 2, 1997 through August 31,
1997, interest charged increased to 18%
per annum. Interest from September 1,
1997 to maturity is at 12% per annum
Principal and interest are due at
maturity on February 1, 1998. The note
is secured by a certain gas plant owned
by the Company. 275,000 600,000
Secured note payable dated September
1997, with interest at 8.5% per annum.
Interest and principal of $356 are due
monthly through September 2001. The note
is secured with certain equipment owned
by the Company. 14,414 --
Various unsecured notes payable, bearing
interest of 4.5% to 12% per annum. The
interest and principal are due at
various maturity dates through May 1997
(see Note 8). 142,500 192,055
----------- -----------
Total debt outstanding 6,103,668 6,665,893
Less: current portion 3,602,553 4,126,344
----------- -----------
Long-term debt $ 2,501,115 $ 2,539,549
=========== ===========
As of September 30, 1997, maturities and scheduled payments for the next five
years and thereafter are: $3,602,553 in 1998, $17,541 in 1999, $8,732 in 2000,
$4,074 in 2001, and the remainder after year 2001.
F-12
<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% and the
future payments due on a lease of a yard facility discounted at 12%. The leases
for two vehicles were terminated during 1997 without exercising the option to
purchase the vehicles.
Capital lease obligations as of September 30 consist of the following:
1997 1996
Total future minimum lease payments $ 3,000 $ 79,106
Less: amounts representing interest 434 11,577
-------- --------
Present value of minimum lease payments $ 2,566 $ 67,529
======== ========
The obligations under capital lease mature as follows: $2,566 in fiscal 1998.
8. Commitments and Contingencies
Minimum Rental Commitments
The Company has several noncancelable operating leases, primarily for yard and
office equipment, that expire over the next five years. These leases generally
are for periods ranging from three to five years and require the Company to pay
all executory costs such as maintenance and insurance.
Legal Matters
As of September 30, 1997, the Company was involved in various litigation matters
which it considers to be in the normal course of business. In the opinion of
management, based upon consultation with legal counsel, the claims either lack
merit, or the potential liability, if any, upon the ultimate disposition of
these lawsuits will not have a material effect on the Company's financial
position or results of operations.
The Company, together with Integrated, Jerry Swon and Bruce Deichl, was named as
a defendant in a lawsuit commenced by three investors in two oil and gas
partnerships sponsored by Integrated. Management has determined that the costs
of defending this suit combined with the potential cost if the plaintiff's were
successful, dictated that a settlement be negotiated. A verbal agreement has
been reached to settle this cause of action for 350,000 shares of the Company's
common stock and a warrant to purchase an additional 350,000 shares of the
Company's common
F-13
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
stock at $1.00 per share. At September 30, 1997 the Company has a reserve
recorded in the amount of $175,000 for the cost of this settlement.
On August 8, 1997, the Company filed suit against Mark T. Shipley, Richard D.
Barden, June Barden, Jerry Swon and Fallon and Fallon. The litigation relates to
the Company's acquisition of IPS. The petition alleges that members of the
Company's former management, former IPS management and other interested persons
committed fraudulent acts and/or omissions in connection with the acquisition.
The specific damages sought are monetary damages in an unspecified amount, as
well as relief from certain related debt, wages and agreements. Some of the
defendants have filed suit against the Company seeking payment of debts related
to IPS.
9. Outstanding Warrants
Warrants outstanding as of September 30, 1997 entitling the holders to purchase
shares of the Company's common stock are summarized as follows:
Date of Issuance Number of Shares Exercise Price/Share Expiration Date
November 1994 1,500 $7.50 November 1997
June 1995 50,000 2.90 February 1998
November 1995 20,000 5.00 November 1998
February 1996 25,000 4.00 January 1999
May 1996 20,000 3.75 June 1998
May 1996 100,000 3.75 June 1999
May 1996 15,000 4.00 January 1998
May 1996 100,000 4.50 March 2001
May 1996 200,000 2.625 July 1999
The Company has sufficient shares authorized but not issued for use in the event
these warrants are exercised.
10. Transactions with Related Parties
Related Party Ownership Interests
A director of the Company, together with its present chairman of the board own
or control 6.07% of the Company's common stock as of September 30, 1997.
F-14
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Receivables from Related Parties/Affiliated Company
Integrated and the Company previously had an agreement by which the associated
receivables and payables were permitted to be netted. At September 30, 1997 and
1996, the Company has a net receivable due from Integrated of $24,754 and
$197,364, respectively.
As part of its ongoing operations, KEMCO conducts business with Atascosa
Electric Services ("AES"), an entity which is owned and controlled by the family
of Deral Knight, CEO, who is also Chairman of the Board of Directors and a
stockholder of the Company. At September 30, 1997 and 1996 the Company owed AES
$31,734 and $43,463, respectively, which is included in accounts payable.
At September 30, 1997 and 1996, respectively, there was $43,967 and $43,161
payable due to Deral Knight. These amounts represent unreimbursed travel and
other business expenses incurred in the normal course of business and include
$13,193 and $12,823 of accrued interest payable at September 30, 1997 and 1996.
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 $6.25 per share to the extent
that Deral Knight owed money to the Company at June 30, 1995. Accordingly, in
liquidation of the receivable balance, 17,130 shares of Company common stock
issued to Deral Knight as part of the purchase price of his KEMCO stock are
reflected as having been returned to the Company and are recorded as treasury
stock at September 30, 1997 and 1996.
Other Payables to Related Parties
At September 30, 1997 and 1996, $269,733 and $267,968, respectively, is
reflected as owed to Richard D. Barden, the former president of IPS, and his
wife June Barden (see Note 8). The balance generally consists of accrued
compensation and expense reimbursements due to them and is included in accrued
expenses in the accompanying balance sheet.
Notes Payable to Stockholders
At September 30, 1996, Notes Payable to stockholders, which bear interest of 6%
per annum, were payable to Deral Knight. Interest expense incurred on these
notes for the three months ended September 30, 1996 totaled $3,750. The notes
matured and were subsequently paid in October 1996.
Additionally, the $142,500 recorded as various unsecured notes at Note 7 as of
September 30, 1997 and the $192,500 recorded as various unsecured notes at
September 30, 1996 represent notes payable to former stockholders of IPS who
became stockholders of the Company when the Company acquired IPS.
F-15
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
In August 1996 various notes which totaled $87,696 were converted to 14,616
shares of the Company's common stock. Upon conversion, an additional 560 shares
of the Company's common stock was issued as consideration for accrued interest
expense through the date of the conversion totaling $3,362. This stock was
converted under agreements that require the Company to pay the difference
between the price the of the Company's stock on July 1, 1997 and $6.00 per
share. The value of the Company's common stock at the time of conversion of
$3.00 per share or $45,528 was recorded as paid in capital, and $3.00 per share
or $45,528 as an accrued liability in the accompanying balance sheet. An
additional accrued liability of $22,764 is recorded as an expense for the
difference in the price of the Company's common stock at the time of conversion
of $3.00 per share and the price at July 1, 1997 of $1.50 per share, in the
accompanying statement of operations for fiscal 1997. The total amount of this
accrued liability of $68,292, is included in accrued expenses in the
accompanying balance sheet.
Acquisition of IPS
In March 1996, the Company acquired IPS. Included among the individuals
acquiring Company shares, in connection with the acquisition of IPS, are ten
individuals who received 45% of the Concord stock issued as consideration for
IPS. Of these individuals, eight have made investments in the past in other
ventures in which Mr. Swon, Tucker, Integrated and/or KEMCO had an interest, and
eight of which had owned stock in the Company. Included with the acquisition of
IPS was a $300,000 liability from IPS to Tucker, for funds previously advanced
to IPS from Tucker. This $300,000 was applied to, and is included in the net
receivable balance due from Integrated to the Company at September 30, 1996 (see
Note 8).
Management Agreement
The Company and Integrated had entered into an agreement (the "Management
Agreement") that required Integrated to provide certain management,
administrative and accounting services to the Company and certain subsidiaries
for $116,000 per month, which agreement terminated on June 30, 1996. The
Management Agreement had been provided for under the terms of the consolidation
of Partnerships, the assets of which were exchanged for Concord Energy, Inc.
stock (see Note 1). The services provided by Integrated included the receipt of
cash for oil and gas sales and the payment of operating and capital expenditures
on behalf of the Company.
In accordance with the provisions of the Management Agreement, the Company was
also entitled to a percentage of all syndicated retail partnership gross sales
made by Integrated. for the Quarter ended September 30, 1996 the Company
recorded $0 of syndication income from Integrated.
F-16
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Employment Agreements
On November 1, 1991 IPS entered into an employment agreement with its former
president, Richard D. Barden. The agreement as modified on October 4, 1994
provides for him to receive an annual base salary of $96,200 per year. The
agreement also provides for certain fringe benefits and bonuses and expires
December 31, 2000. The agreement terminated upon the resignation of Mr.
Barden in July 1997.
On November 9, 1994 KEMCO entered into an employment agreement with its former
president, Deral Knight. The agreement provides for him to receive a base salary
of $125,000 per annum plus a bonus consisting of ten percent of KEMCO's pre-tax
net profits from $1,500,000 to $2,000,000 and fifteen percent of pre-tax net
profits which exceed $2,000,000. The agreement also provides for certain fringe
benefits and expires May 7, 2000.
Royalty Agreement
In March, 1992 IPS entered into a royalty agreement with its former president,
Richard D. Barden, for any related oil and gas industry applications developed
from the original idea of developing a set of proprietary software programs.
Royalties under this agreement are calculated as follows: 1% of the first
$1,500,000 of gross revenue, and 5% of gross revenue thereafter. Royalty expense
under the terms of this agreement were $111 and $505 for the Quarters ended
September 30, 1997 and 1996, respectively. The agreement expires December 31,
2015.
Other Related Party Transactions
In June 1996 the Company accepted 124,500 shares of the Company's common stock
from Integrated, at a value of $3.00 per share as a reduction of the net
receivable balance due from Integrated as of June 30, 1996. This stock is
included in the accompanying consolidated financial statement as Treasury stock
in stockholders' equity.
On December 5, 1996 KEMCO entered into a lease agreement with Deral Knight, CEO,
and Chairman of the board of directors and a stockholder of the Company. The
lease is for 2.42 acres of land located adjacent to property which KEMCO owns,
and includes a 3,200 square ft. shop building and office trailer. The lease is
for a term of five years at a cost of $975 per month.
11. Going Concern
For the fiscal years ended June 30, 1997 and 1996, the Company incurred net
losses and negative cash flow from operations. At September 30, 1997 the
Company's current liabilities exceeded current assets by $115,204, and
subsequent to September 30, 1997 the Company has become involved in a dispute
over the completion of a significant contract which has delayed collection of a
significant account receivable (see Note 12). As a result of these conditions,
the Company has
F-17
<PAGE>
Concord Energy Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
had difficulties meeting its current obligations as they come due. Additionally,
the Company has notes payable of $2,920,000 maturing on December 31, 1997, for
which it must either negotiate an extension or secure other long-term debt or
equity financing. These factors create an uncertainty about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.
Management is currently attempting to secure long-term financing secured by a
portion of the Company's inventory of plants to replace the notes that mature on
December 31, 1997. During the quarter ended September 30, 1997 the Company
reported net income of $541,995 and positive cash flow from operations of
$308,501. Additionally, subsequent to September 30, 1997 the Company has
obtained additional contracts which management estimates will generate
sufficient profit to relieve its current liquidity problems. The Company's
ability to continue as a going concern is dependent on its obtaining financing
to replace its maturing debt, meeting its profit estimates on contracts and
achieving profitable operations and sufficient positive cash flow from
operations to meet its obligations.
12. Events Subsequent to Date of Balance Sheet
a. In October 1997 the Company filed suit against one of its customers for
the collection of outstanding receivables due to the Company. As of November 8,
1997 the uncollected balance was $870,079. The customer has filed a countersuit
on this matter.
b. In October 1997 the Company obtained an extension to December 31, 1997
for the notes payable which were to mature on November 1, 1997.
F-18
"EXHIBIT 4"
INDENTURE OF TRUST AMENDMENT NO. 2 BETWEEN
CONCORD ENERGY INCORPORATED AND FIRST UNION
NATIONAL BANK, AS SUCCESSOR TRUSTEE DATED AS
OF OCTOBER 31, 1997
INDENTURE OF TRUST AMENDMENT NO. 2, dated as of October 31, 1997 (the
"Amendment No. 2"), by and between CONCORD ENERGY INCORPORATED, a Delaware
Corporation having its principal place of business at 1515 Simmons St.,
Jourdanton, Texas (the "Company") and First Union National Bank, a national
banking associations organized under the laws of the United States (the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Company and First Fidelity Bank, National Association, as
predecessor trustee have previously executed an Indenture of Trust dated as of
May 8, 1995 (the "Original Indenture") and an Indenture of Trust Amendment #1
dated as of April 30, 1997 which extended the due date of the notes from May 1,
1997 to November 1, 1997; and
WHEREAS, the Company issued $2,920,000 aggregate principal amount 10%
Promissory Notes due November 1, 1997 ("Notes") to the noteholders listed in the
Consent to Amendment attached hereto (each a "Holder" and together, the
"Holders") pursuant to such Original Indenture; and
WHEREAS, the Company has requested that the Original Indenture, as amended,
be amended in order to extend the maturity date of the Notes from November 1,
1997 to December 31, 1997; and
WHEREAS, each of the Holders have consented to such a change in the terms
of the Original Indenture and the Notes; and
WHEREAS, it is necessary to amend the Original Indenture by adopting
Amendment No. 2 (together with the Original Indenture, the "Indenture")
NOW, THEREFORE, the Issuer and the Company hereby agree as follows:
Section 1.01. Definitions. Defined terms shall have the meanings set forth
in the Original Indenture.
Section 1.02. Amendment of Section 4.04 of Original Indenture. Section 4.04
in the Original Indenture is hereby amended to read as follows:
<PAGE>
"Section 4.04. Payments Into the Debt Service Fund; Disbursements.
(A) At least five Business Days prior to each interest payment date
and any redemption date, the Company shall deposit into the Debt
Service Fund the amount required to pay the respective interest on,
and Redemption Price of, the Notes payable on such date. At least five
Business Days prior to December 31, 1997, the Company shall deposit
into the Debt Service Fund the amount required to pay the Principal of
the Notes payable on December 31, 1997.
(B) The Trustee shall pay out of the Debt Service Fund to the paying
agent (i) on or before each interest payment date for the Notes, the
amount required for the interest payable on such date; (ii) on or
before December 31, 1997, the amount required to pay the principal of
the Notes; and (iii) on or before any redemption date for the Notes,
the amount required to pay the principal of the Notes; the amount
required for the payment of the Redemption Price of such Notes."
Section 1.03. Amendment of Schedule A. Exhibit A to the Original Indenture
shall be amended to be substantially in the form set forth in Exhibit A hereto,
which is incorporated in and forms a part of this Amendment No. 2.
Section 1.04. Authority for Amendment No. 2. This Amendment No. 2 is
executed in accordance with Section 10.02 of the Original Indenture. Further, in
accordance with Sub-Section (d) of Section 10.02, because this Amendment No. 2
will change the amount or time of any payment required by the Notes, it is
necessary to obtain the consent of every Holder.
Section 1.05. Exchange of Notes. In accordance with Section 10.05 of the
Indenture, the Trustee shall exchange any Notes currently outstanding that are
surrendered to it with new Notes or, alternatively, make a notation on such
Notes to reflect the changes set forth in this Amendment No. 2.
Section 1.06. Indemnification. The Company shall indemnify the Trustee
against any loss or liability, including reasonable expenses, arising out of the
execution of this Amendment No. 2 except for any loss or liability incurred by
the Trustee as a result of the Trustee's gross negligence or willful misconduct.
Section 1.07. Effect of Consent. This Amendment No. 2 shall bind any Holder
who has consented thereto and every subsequent Holder of a Note or a portion of
a Note that evidences the same debt as the consenting Holder's Note.
2
<PAGE>
Section 1.08. Duplicate Originals. The parties may sign any number of
copies of this Amendment No. 2. Each signed copy shall be an original, but all
of them together represent the same agreement.
Section 1.09. Counterparts. This Amendment No. 2 may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
CONCORD ENERGY INCORPORATED
BY: /S/ DERAL KNIGHT
NAME: DERAL KNIGHT
TITLE: PRESIDENT & CEO
ATTEST:
BY: /S/ SHIRLEY J. BOYLE
NAME: SHIRLEY J. BOYLE
DATE: 11/7/97
FIRST UNION NATIONAL BANK, as
successor Trustee to FIRST FIDELITY
BANK, NATIONAL ASSOCIATION
BY: /S/ JAMES J. WATERS
NAME: JAMES J. WATERS
TITLE: VICE PRESIDENT
ATTEST:
BY: /S/ PAUL O'BRIEN
NAME: PAUL O'BRIEN
TITLE: ASSISTANT VICE PRESIDENT
3
<PAGE>
This Amendment No. 2 is
hereby consented to by:
KNIGHT EQUIPMENT & MANUFACTURING
CORPORATION, as Guarantor
BY: /S/ BARRY LAIDLAW
NAME: BARRY LAIDLAW
TITLE: PRESIDENT
JOINT VENTURE BETWEEN KNIGHT EQUIPMENT
& MANUFACTURING CORPORATION AND
CONCORD ENERGY, INCORPORATED, as
Guarantor
KNIGHT EQUIPMENT & MANUFACTURING
CORPORATION
BY: /S/ BARRY LAIDLAW
NAME: BARRY LAIDLAW
TITLE: PRESIDENT
CONCORD ENERGY INCORPORATED
BY: /S/ DERAL KNIGHT
NAME: DERAL KNIGHT
TITLE: PRESIDENT & CEO
4
<PAGE>
OFFICERS CERTIFICATE
The undersigned officers of Concord Energy Incorporated ("Concord") hereby
certify that Amendment No. 2 to the Indenture of Trust originally dated as of
May 8, 1995 ("Indenture") between Concord Energy Incorporated and First Fidelity
Bank, National Association, as Trustee has been approved by Concord's Board of
Directors at a duly constituted meeting as required by Section 10.06 of the
Indenture.
DATED: Jourdanton, Texas
October 31, 1997
/S/ DERAL KNIGHT
-----------------------------
Deral Knight, President
Concord Energy Incorporated
/S/ SHIRLEY J. BOYLE
-----------------------------
Shirley J. Boyle, Secretary
Concord Energy Incorporated
5
<PAGE>
EXHIBIT 4
CONSENT TO AMENDMENT NO. 2
We, the undersigned Holders of the principal amount of Notes identified
below and issued pursuant to that certain Indenture of Trust (the "Original
Indenture") between Concord Energy Incorporated and First Fidelity Bank,
National Association, as Trustee, dated as of May 8, 1995, as amended as of
April 30, 1997, hereby consent to Amendment No. 2, dated as of October 31, 1997,
to such Original Indenture, which Amendment extends the maturity date of the
Notes from November 1, 1997 to December 31, 1997. We further indemnify the
Trustee in connection with any loss or liability including reasonable expenses
arising out of the execution of such Amendment No. 2 except for any loss or
liability incurred by the Trustee as a result of the Trustee's gross negligence
or willful misconduct.
BY: /S/ NUNZIO LOCASTRO BY: /S/ JOYCE MARINO
----------------------------- -----------------------------
Nunzio Locastro Joyce Marino
6 Warwick Road 32 East River Road
East Brunswick, NJ 08816 Rumson, NJ 07760
Principal Amount: $70,000 Principal Amount: $200,000
BY: /S/ VINCENT A. STABILE BY: /S/ GERALD CHIARA
----------------------------- -----------------------------
Madeline Stabile Gerald Chiara
Foundation, Inc. 94 Boulevard
2 Claridge Drive Mountain Lakes, NJ 07046
Claridge House 2, Apt. 11LE
Verona, NJ 07044 Principal Amount: $50,000
Principal Amount: $1,075,000
BY: /S/ VINCENT A. STABILE BY: /S/ JADWIGA Z. MUES
----------------------------- -----------------------------
Vincent A. Stabile Jadwiga Z. Mues Trust
Trustee UTC 7185 Jadwiga Z. Mues TTEE DTD
2 Claridge Drive 8/31/95
Claridge House 2, Apt. 11LE 1211 Gulf of Mexico Drive
Verona, NJ 07044 Apt. 210
Long Boat Key, FL 34228
Principal Amount $400,000
Principal Amount: $30,000
6
<PAGE>
BY: /S/ STEVEN N. BLATT BY: /S/ VINCENT CALARINO
----------------------------- -----------------------------
Steven N. Blatt Vincent Calarino
Revocable Trust 473 K FDR Drive, Apt. K1101
Steven N. Blatt, Trustee New York, NY 10002
10216 W. 80th Street, Apt. 321
Overland Park, KS 66204 Principal Amount: $20,000
Principal Amount: $220,000
BY: /S/ PAUL JOSEPH BY: /S/ TAMMY BALNER
----------------------------- -----------------------------
Lewco Securities Tammy Balner
A/C Schroder Inc. /S/ PETER BALNER
Harborside Plaza 401, Plaza 3 -----------------------------
Jersey City, NJ 07311 Peter Balner JT WROS
P.O. Box 7209
Principal Amount: $70,000 Watchung, NJ 07060
Principal Amount: $100,000
BY: /S/ MEL SCHLESINGER BY: /S/ LEWIS COVELER
----------------------------- -----------------------------
Mel Schlesinger Lewis Coveler
33 Ethan Allen Dr. /S/ LINDA COVELER
Cranbury, NJ 08512 -----------------------------
Linda Coveler JT WROS
Principal Amount: $100,000 2640 Talbot
Houston, TX 77005
Principal Amount: $50,000
BY: /S/ AGNES J. HENDRY BY: /S/ MARIA WINTER
----------------------------- -----------------------------
Agnes J. Hendry Maria Winter Cust. for
1430 Rahway Road Eric M. Winter
Scotch Plains, NJ 07076-9998 Old Army Post Road
Morristown, NJ 07960
Principal Amount: $20,000
Principal Amount: $5,000
BY: /S/ HARRY HART BY: /S/ HANS LERCH
----------------------------- -----------------------------
Harry Hart Hans Lerch
12 Powderhorn Drive 198 High Street
Covent Station, NJ 07961 Manchester, CT 06040
Principal Amount: $25,000 Principal Amount: $50,000
7
<PAGE>
BY: /S/ JOEL KAPLAN BY: /S/ JANICE F. DLUGI
----------------------------- -----------------------------
Joel Kaplan Janice F. Dlugi
/S/ ROCHELLE KAPLAN 8 Barberry Row
----------------------------- Chester, NJ 07930
Rochelle Kaplan JT WROS
23 Redgrave Avenue Principal Amount: $25,000
Staten Island, NY 10306
Principal Amount: $75,000
BY: /S/ MARY NOVAK BY: /S/ WILLIAM L. LURIE
----------------------------- -----------------------------
Mary Novak William L. Lurie
587 7th Street 93 Taylor Lane
Brooklyn, NY 11215 Harrison, NY 10528
Principal Amount: $ 165,000 Principal Amount: $25,000
BY: /S/ ART WEBER BY: /S/ WALTER W. PEINE
----------------------------- -----------------------------
Art Weber Walter W. Peine
/S/ GAIL WEBER 667 W. 161st. Apt. 5B
----------------------------- New York, NY 10032
Gail Weber JT WROS
28 Chamberlain Road Principal Amount: $35,000
Flemington, NJ 08822
Principal Amount: $20,000
BY: /S/ FONG MEI CHANG
-----------------------------
Fong Mei Chang
6317 Sun High Drive
Newport Richey, FL 34655
Principal Amount: $90,000
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<PAGE>
EXHIBIT 4
CONCORD ENERGY INCORPORATED
PROMISSORY NOTE
$____________________ Bernardsville, New Jersey
May 8, 1995
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER ALL
APPLICABLE SECURITIES LAWS OR UNLESS EXEMPTIONS FROM SUCH REGISTRATION
REQUIREMENTS ARE AVAILABLE, WHICH EXEMPTIONS SHALL BE ESTABLISHED TO THE
REASONABLE SATISFACTION OF THE COMPANY, BY OPINION OF COUNSEL OR OTHERWISE.
FOR VALUE RECEIVED, the undersigned, Concord Energy Incorporated (the
"Company"), promises to pay to the order of __________________, SS#:
________________ (the "Note Holder") at ______________________ or such other
place as may be designated in writing by Note Holder, the principal sum of
_________________($______) DOLLARS, together with interest as hereinafter
provided. The principal and interest amount due hereunder shall be paid to the
Note Holder in the following manner:
(a) The Company shall pay the Note Holder in whose name this Promissory
Note is registered upon the registry books maintained by First Union National
Bank (the "Trustee"), as trustee, as of the close of business on the seventh day
(whether or not a business day) of the month preceding any interest payment date
(a "Record Date"), semiannual interest on the principal amount of this
Promissory Note on November 1 and May 1, commencing on November 1, 1995, at the
rate of ten (10%) percent per annum on the basis of a 360 day year, comprised of
twelve (12) months with thirty (30) days per month, provided, however, that upon
any Event of Default, as herein described, and so long as such Event of Default
is continuing, this Promissory Note shall bear interest at the rate of 15% per
annum.
(b) The Company shall pay the Note Holder the entire unpaid principal sum
of this Promissory Note on the 30th day of November, 1997.
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(c) This Promissory Note, issuable in the denomination of $10,000 or any
integral multiple of $5,000 in excess thereof, is one in a series of notes in
the aggregate principal amount of $2,920,000 (collectively, the "Notes") issued
under and pursuant to the Indenture of Trust, dated as of May 8, 1995, amended
May 30, 1997 and October 31, 1997, (the "Indenture"), between the Company and
the Trustee and the Notes may be redeemed prior to maturity in multiples of
$10,000 in principal amount only, at any time at the option of the Company, at a
redemption price equal to 100% of the principal amount thereof, plus accrued
interest to the date of redemption, as more fully described in the Indenture.
The Notes are also subject to mandatory redemption at any time upon the
accumulation of at least $50,000 in the Revenue Fund.
Payment of principal of and interest on this Promissory Note is guaranteed
by a Guaranty Agreement (the "Guaranty") executed by Knight Equipment &
Manufacturing Corporation ("KEMCO") and the joint venture between the Company
and KEMCO formed pursuant to a Joint Venture Agreement dated October 18, 1994
(the "Joint Venture", and together with KEMCO, the "Guarantors"). The Company
and KEMCO have also entered into a Stock Purchase Agreement dated November 9,
1994, pursuant to which the Company has agreed to purchase 100% of the
outstanding shares of capital stock of KEMCO. KEMCO and the Trustee have entered
into a security agreement dated as of May 8, 1995 (the "Security Agreement")
pursuant to which certain assets of KEMCO are pledged to the Trustee to secure
KEMCO's obligations under the Guaranty.
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to them in the Indenture.
Section 1. The Company represents and warrants to the Note Holder that:
(a) The Company is a corporation duly organized, validly existing and
is in good standing under the laws of the state of its incorporation and has all
requisite corporate power and authority to own, operate and lease its
properties, to carry on its business as now being conducted and to perform its
obligations hereunder and under each of the Indenture (collectively, the
"Transaction Documents"). The Company is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the failure to
be so qualified would have a material adverse effect upon its business or
assets.
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(b) The execution, delivery and performance by the Company of each of
the Transaction Documents has been duly authorized by all requisite corporate
action on the part of the Company. No consent, license, approval, authorization,
registration, filing or similar requirement ("Permit") is necessary in
connection therewith, there are no pending or, to the Company's knowledge,
threatened investigations or legal proceedings ("Actions") which question the
transactions contemplated thereby and none of such transactions will conflict
with or result in any violation of or constitute a breach of or default under
the certificate of incorporation or by-laws of the Company or any applicable
laws, rules, regulations, agreements with governmental authorities (together,
"Laws"), orders, injunctions, judgments, awards or decrees (together, "Orders")
or other agreements, understandings, deeds, notes, mortgages or licenses
(together, "Contracts") by which the Company or its assets are affected or will
result in the creation of any lien, charge or encumbrance (together, "Liens")
upon any of the assets of the Company pursuant to any Contracts. Each such
Transaction Document has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company enforceable
in accordance with its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights or by general equitable principles.
(c) There are no Actions which would, if adversely determined,
severally or in the aggregate, materially and adversely affect the business,
operations, assets or financial or other condition (together, the "Financial
Condition") of the Company and its Subsidiaries, taken as a whole or the
transactions contemplated by the Transaction Documents. For purposes of this
Promissory Note, "Subsidiary" shall mean each entity of which the Company or
another Subsidiary may now or hereafter control or own more than 50% of the
capital or equity.
(d) Each of the Company and its Subsidiaries is in compliance with and
not in default or violation in any material respect of any Laws, Orders, Permits
or Contracts applicable to its business which violation or default could have a
material adverse effect on the Financial Condition of the Company and its
Subsidiaries taken as a whole and has not received notice of any claim to the
contrary. To the Company's knowledge, the Company and each of its Subsidiaries
have all material Permits necessary for the conduct of their business.
(e) The Company has heretofore duly filed all forms, reports,
statements and schedules with the Securities and Exchange Commission (the "SEC")
required to be filed since May 18, 1993, as set forth in Exhibit A hereto, and
has
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delivered to the Note Holder a copy of the most recent Form 10-KSB of the
Company for the fiscal year ended ________________, ____ and the most recent
Form 10-QSB of the Company for the period ended ________________, ____. Such
forms, reports, statements and schedules were, as of their respective filing
dates, true and accurate in all material respects and did not contain any untrue
statement of a material fact or omit to state a material fact required under
applicable Laws to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The audited and unaudited consolidated financial
statements of the Company included in such filings have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as stated in such financial statements) and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited financial statements, to normal year-end
audit adjustments which are not expected to be material in amount. Since
_______________, ____, there have been no material liabilities, either absolute
or unliquidated, incurred by the Company which are not reflected on the
financial statements contained in such filing and there has been no material
adverse change in the Financial Condition of the Company and its Subsidiaries
taken as a whole, from such date to the date hereof.
(f) The Company is not an "investment company", or a company
"controlled by an investment company", within the meaning of the Investment
Company Act of 1940, as amended.
(g) To the Company's knowledge, the Transaction Documents, the
Confidential Offering Memorandum dated May 4, 1995 and prepared in connection
with the issuance, sale and delivery of the Notes (the "Confidential Offering
Memorandum") and all of the Exhibits and other written material delivered by the
Company to the Note Holders in connection with the transactions contemplated
hereby do not contain any statement that is false or misleading with respect to
any material fact and do not omit to state a material fact necessary in order to
make the statements therein not false or misleading. There is no additional fact
(other than facts generally known to the public) of which the Company is aware
that has not been disclosed in writing to the Note Holder that materially
affects adversely or, so far as the Company can reasonably foresee on the date
hereof, will materially affect adversely the Financial Condition of the Company
and its Subsidiaries taken as a whole.
(h) The Indenture is not required to be qualified under the Trust
Indenture Act of 1939, as amended.
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<PAGE>
Section 2. Until the date on which the Notes have been paid in full, the
Company shall:
(a) Comply with all Laws, Orders and Permits, except for such
noncompliance that does not have a material adverse effect on the Financial
Condition of the Company and its Subsidiaries taken as a whole;
(b) Maintain its corporate existence, its qualification and good
standing in all jurisdictions where such maintenance is necessary to the conduct
of its business and the ownership of its assets;
(c) Use the proceeds received by it from the sale of the Notes as
described in the Confidential Offering Memorandum;
(d) Cause each Subsidiary to comply with each of the covenants set
forth in Sections 2(a) through 2(c), inclusive and Section 2(h) (which covenants
shall, for purposes of this Section 2(d) apply to each such Subsidiary as if it
were the Company referred to therein);
(e) File on a timely basis any and all forms, statements, reports or
schedules required to be filed with the SEC pursuant to the Securities Exchange
Act of 1934;
(f) Promptly furnish copies of any forms, statements, reports or
schedules filed with the SEC to Note Holder and the Trustee;
(g) Provide to Note Holder and the Trustee prompt notice of:
(i) any Event of Default, as hereinafter defined;
(ii) any amendment of the certificate of incorporation or by-Laws
of the Company; or
(iii) (A) any material change since the date of this Promissory
Note in the Financial Condition of the Company and its Subsidiaries taken as a
whole or (B) the occurrence or non-occurrence, since such date, of any event of
which the Company has knowledge, in either case, that has had or is reasonably
likely to have a
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<PAGE>
materially adverse effect on the Financial Condition of the Company and its
Subsidiaries taken as a whole;
(h) Not sell or dispose, nor cause any Subsidiary to sell or dispose,
all or a substantial part of the assets of such Subsidiary, except as provided
in the Security Agreement.
Section 3. Each of the following shall constitute an Event of Default under
this Promissory Note, whatever the reason for such event and whether it shall be
voluntary or involuntary or be affected by operation of laws or orders;
(a) The Company shall fail to make any payment of principal on this
Promissory Note when due or shall fail to make within three days after the date
when due, any payment of interest on this Promissory Note; or
(b) Any representation or warranty made hereunder or in any document
delivered to the Note Holder with respect to this Promissory Note shall at any
time prove to have been incorrect or misleading in any material respect when
made; or
(c) The Company shall cease to maintain its corporate existence or
shall default in any material respect in the performance or observance of any
term, covenant, condition or agreement contained herein, and such default
continues for the period and after the notice specified below, or
(d) The Company or any Subsidiary shall fail to pay, in accordance
with its terms and when due and payable, the principal of or interest on any
liability for borrowed money in excess of $25,000 or any other liability in
excess of $25,000 evidenced by bonds, debentures, notes or similar instruments
("Indebtedness") owed to any party or the maturity of any such Indebtedness
shall have been accelerated or been required to be prepaid prior to the stated
maturity thereof or any event shall have occurred and be continuing which, with
the passage of time or the giving of notice or both, would permit the
acceleration of such maturity; or
(e) (i) The Company or any Subsidiary shall (A) commence a voluntary
case under Federal bankruptcy laws, (B) file a petition seeking to take
advantage of any other laws relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debits ("Bankruptcy"), (C) consent to
or fail to contest in a timely and appropriate manner any petition filed against
it in any involuntary case under such Bankruptcy laws or such other laws, (D)
apply for or consent to, or fail to
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<PAGE>
contest in a timely or appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator or the like
("Receiver") of itself or of a substantial part of its property, (E) admit in
writing its inability to pay, or generally not be paying, its debts as they
become due, (F) make a general assignment for the benefit of creditors, or (G)
take any corporate action for the purpose of effecting any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any Subsidiary in any court of competent jurisdiction seeking (A)
relief under Federal bankruptcy laws or under any other laws relating to
Bankruptcy, or (B) the appointment of a Receiver of the Company or any
Subsidiary of all or any substantial part of the assets of the Company or any
Subsidiary and such case or proceeding shall continue undismissed or unstayed
for a period of 60 consecutive calendar days, or an order granting the relief
requested in such case or proceeding against the Company or any Subsidiary
(including, but not limited to, an order for relief under Bankruptcy laws) shall
be entered, or
(f) A judgment or order for the payment of money shall be entered and
become final against the Company or any Subsidiary which, together with all
other outstanding undischarged or unstayed judgments against the Company and its
Subsidiaries, exceeds $50,000 in the aggregate, and such judgment or order shall
continue undischarged or unstayed for 60 days provided that for the purpose of
calculating the $50,000 amount, judgments which, in the opinion of counsel, are
covered by the Company's insurance shall not be included in such figure to the
extent so covered; or
(g) There shall be an Event of Default under any of the Guaranty, the
Transaction Documents or any Additional Security Document, as such term is
defined in each of the respective documents, or the Guaranty, the Transaction
Documents, or any Additional Security Document shall be or become or shall be
claimed to be or to have become in any respect invalid or unenforceable or the
Trustee shall at any time cease to have a valid, fully perfected first priority
security interest in the collateral referred to in the Security Agreement or any
Additional Security Document.
A default under clause (c), (d) or (f) hereof is not an Event of Default
until the Trustee or the Note Holders of at least a majority in principal amount
of the then outstanding Notes notify the Company in writing of the default and
the Company does not cure the default within 30 days after receipt of the
notice. The notice must specify the default, demand that it be remedied and
state that the notice is a "Notice of
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<PAGE>
Default". If the Note Holders of a majority in principal amount of the
outstanding Notes request the Trustee to give such written notice on their
behalf, the Trustee shall do so.
The Company will deliver to the Trustee within 10 days after the occurrence
thereof written notice of any event which with the giving of notice and the
lapse of time would become an Event of Default under Section 3 (d). The Trustee
shall not be deemed to have knowledge of any default unless either any officer
of the Trustee assigned by the Trustee to administer its corporate trust
business has actual knowledge of such default or the Trustee shall have received
written notice thereof from the Company or a Note Holder.
Upon the occurrence of any Event of Default described in Sections 3 (e) (i)
or 3 (e) (ii) above, the entire unpaid principal amount of this Promissory Note
and any interest accrued and unpaid thereon shall automatically be due and
payable. Upon the occurrence and during the continuance of any other Event of
Default, the Trustee by written notice to the Company, or the Note Holders of a
majority in principal amount of the outstanding Notes by written notice to the
Company and the Trustee, may declare the principal of and all accrued interest
on all the Notes to be immediately due and payable. No right or remedy herein
conferred is intended to be exclusive of any other rights or remedies and each
and every right or remedy shall be cumulative and shall be in addition to every
other right or remedy given hereunder or now or hereafter existing under the
Guaranty, the Transaction Documents, the Additional Security Documents, if any,
or by law or equity. No delay or omission in the exercise of any right or power
accruing upon the occurrence of any Event of Default shall impair any such right
or power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein. All amounts advanced by, or on behalf of, the Note Holder
or the Trustee in exercising its rights hereunder (including, but not limited
to, reasonable legal expenses and disbursements incurred in connection
therewith), together with interest thereon from the date of such advance, shall
be payable by the Company on demand to the party that advanced such amount.
The Note Holder shall not, by any act, delay, omission or otherwise be
deemed to have waived any of his rights or remedies hereunder and no waiver by
the Note Holder of his rights or remedies hereunder shall be valid against Note
Holder unless in writing, signed by Note Holder, and then only to the extent
therein set forth. The waiver by the Note Holder of any right or remedy
hereunder upon any one occasion shall not be construed as a bar to any right or
remedy which he would otherwise have had on any further occasion.
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The Company hereby waives presentment for payment, protest and notice for
non-payment of this Promissory Note.
CONCORD ENERGY INCORPORATED
(SEAL)
BY: _____________________________
ATTEST: DERAL KNIGHT, CEO
___________________________
Shirley J. Boyle, Secretary
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EXHIBIT A
Filings by the Company with the SEC since May 18, 1993
1. Form 8-K of the Company dated May 18, 1993
2. Form 8-K/A#1 of the Company dated May 18, 1993
3. Form 10-KSB of the Company for the fiscal year ended June 30, 1993
4. Form 10-QSB of the Company for the quarterly period ended
September 30, 1993
5. Form 10-QSB of the Company for the quarterly period ended December 31, 1993
6. Form 10-QSB of the Company for the quarterly period ended March 31, 1994
7. Form 10-KSB of the Company for the fiscal year ended June 30, 1994
8. Form 10-QSB of the Company for the quarterly period ended
September 30, 1994
9. Form 10-QSB of the Company for the quarterly period ended December 31, 1994
10. Form 10-QSB of the Company for the quarterly period ended March 31, 1995.
11. Form 10-KSB of the Company for the fiscal year ended June 30, 1995.
12. Form 10-QSB of the Company for the quarterly period ended
September 30, 1995.
13. Form 10-QSBA of the Company for the quarterly period ended
September 30, 1995.
14. Form 10-QSB of the Company for the quarterly period ended
December 31, 1995.
15. Form 10-QSBA of the Company for the quarterly period ended
December 31, 1995.
16. Form 10-QSB of the Company for the quarterly period ended March 31, 1996.
17. Form 10-QSBA of the Company for the quarterly period ended March 31, 1996.
18. Form 10-KSB of the Company for the fiscal year ended June 30, 1996.
19. Form 10-QSB of the Company for the quarterly period ended
September 30, 1996.
20. Form 10-QSB of the Company for the quarterly period ended
December 31, 1996.
21. Form 10-QSB of the Company for the quarterly period ended March 31, 1997.
22. Form 10-KSB of the Company for the fiscal year ended June 30, 1996.
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Note is one of the $2,920,000.00 principal amount of 10% Promissory
Notes of Concord Energy Incorporated due November 1, 1997 described in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
BY:___________________________
Date:_______________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 254,978
<SECURITIES> 0
<RECEIVABLES> 2,216,149
<ALLOWANCES> 178,643
<INVENTORY> 6,346,055
<CURRENT-ASSETS> 9,515,317
<PP&E> 13,041,059
<DEPRECIATION> 5,138,690
<TOTAL-ASSETS> 17,653,152
<CURRENT-LIABILITIES> 9,630,521
<BONDS> 5,465,768
0
0
<COMMON> 605
<OTHER-SE> 5,521,516
<TOTAL-LIABILITY-AND-EQUITY> 17,653,152
<SALES> 10,866,306
<TOTAL-REVENUES> 10,896,886
<CGS> 9,428,915
<TOTAL-COSTS> 10,123,045
<OTHER-EXPENSES> (2,720)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234,566
<INCOME-PRETAX> 541,995
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 541,995
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
"EXHIBIT 99"
STATE OF DELAWARE
CERTIFICATE FOR RENEWAL
AND REVIVAL OF CHARTER
Concord Energy Incorporated, a corporation organized under the laws of Delaware,
the charter of which was voided for non-payment of taxes, now desires to procure
a restoration, renewal and revival of its charter, and hereby certifies as
follows:
1. The name of this corporation is Concord Energy Incorporated
2. Its registered office in the State of Delaware is located at 1013
Centre Road Street, City of Wilmington Zip Code 19805 County of New
Castle the name and address of is registered agent is The
Prentice-Hall Corporation System, Inc 1013 Centre Road Wilmington, DE
19805
3. The date of filing of the original Certificate of Incorporation in
Delaware was September 9, 1985
4. The date when restoration, renewal, and revival of the charter of this
company is to commence is the 28th day of February, 1997 same being
prior to the date of the expiration of the charter. This renewal and
revival of the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March A.D. 1997, at
which time its charter became inoperative and void for non-payment of
taxes and this certificate for renewal and revival is filed by
authority of the duly elected directors of the corporation in
accordance with the laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters, Scott S Kalish the last
and acting authorized officer hereunto set his/her hand to this certificate this
3rd day of November 1997.
BY: /s/ Scott S Kalish
TITLE OF OFFICER: Treasurer
