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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): August 31, 1997
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Environmental Power Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-15472 04-2782065
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(State of other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
500 Market Street, Suite 1-E, Portsmouth, New Hampshire 03801
(Address of principal executive offices)
(603) 431-1780
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
As announced in a previous Form 8-K filed on September 9, 1997, the Registrant's
subsidiary, Milesburg Energy, Inc. ("Milesburg"), entered into a Buy-Out
Agreement with West Penn Power Company ("West Penn") on August 26, 1997.
Pursuant to the Buy-Out Agreement, West Penn would purchase Milesburg's rights
to the Electric Energy Purchase Agreement between the parties dated February 25,
1987 for the sum of $15 million plus 8% interest from the date (August 29, 1997)
the Buy-Out Agreement was filed for Pennsylvania Public Utility Commission
approval, plus West Penn would assume ownership of and responsibility for the
Milesburg Project facility. In light of this Buy-Out Agreement, which
establishes a value significantly in excess of the Registrant's recorded
carrying value for its investment in the Milesburg Project, the Registrant has
removed its reserve for the impairment in value of this investment which
amounted to $1,064,137 at the date of its removal. The removal of this reserve,
which was established previously by a charge against earnings due to the
uncertainties surrounding whether the Registrant would realize value from its
investment in the Milesburg Project, resulted in an increase in net earnings of
approximately $555,000 in August 1997.
The Registrant's June 30, 1997 unaudited consolidated balance sheet included
shareholders' equity of $598,975, which failed to comply with The NASDAQ
SmallCap Market's minimum requirement of $1,000,000 [Marketplace Rule
4310(c)(03)]. The Registrant failed to meet this requirement largely due to a
significant loss during the second quarter of 1997 resulting from the extended
outage to repair the generator at the Scrubgrass plant. However, largely as a
result of the removal of the Milesburg Project investment reserve and earnings
from the Scrubgrass Project during the months of July and August, the
Registrant's shareholder's equity as of August 31, 1997 exceeded the $1,000,000
requirement, as demonstrated by the condensed unaudited consolidated balance
sheet information of the Registrant set forth below:
<TABLE>
<CAPTION>
August 31, 1997
(unaudited)
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<S> <C>
ASSETS:
Current assets $ 8,551,504
Other assets 51,060,995
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Total assets $59,612,499
======================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities $ 9,536,708
Other liabilities 48,658,404
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Total liabilities 58,195,112
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Shareholders' equity 1,417,387
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Total liabilities and shareholders' equity $59,612,499
======================
</TABLE>
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CAUTIONARY STATEMENT
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements. Certain statements contained in
this Report, and in any other written or oral statements made by or on behalf of
the Registrant, such as statements concerning the estimated net gain to be
realized from the Buy-Out Agreement, the regulatory approval of the Buy-Out
Agreement, and other statements regarding matters that are not historical facts,
are forward looking statements as such term is defined in the Act. Because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors
that could cause actual results to differ materially include, but are not
limited to, the inability to predict the course or outcome of any contract or
other negotiations, uncertainties relating to government and regulatory policies
and approvals, volatile and unpredictable developments (including plant outages
and repair requirements), the difficulty of estimating repair and maintenance
costs and timeframes, the uncertainties involved in estimating insurance and
implied warranty recoveries, if any, the uncertainties relating to general
economic conditions and cyclical industry conditions, the amount and rate of
growth in expenses, the legal environment, and the competitive environment in
which the Registrant operates. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. The Registrant undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENVIRONMENTAL POWER CORPORATION
October 7, 1997 /s/ William D. Linehan
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William D. Linehan
Treasurer and
Chief Financial Officer
(principal accounting officer
and authorized officer)
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