<PAGE> 1
As filed with the Securities and Exchange Commission on November 12, 1999
Registration No. 33-95156
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 1
to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WOLVERINE ENERGY 1998-1999
DEVELOPMENT PROGRAM
Wolverine Energy 1998-1999(A) Development Company, L.L.C.,
Wolverine Energy 1998-1999(B) Development Company, L.L.C.,
Wolverine Energy 1998-1999(C) Development Company, L.L.C.,
Wolverine Energy 1998-1999(D) Development Company, L.L.C.,
Wolverine Energy 1998-1999(E) Development Company, L.L.C.,
Wolverine Energy 1998-1999(F) Development Company, L.L.C.,
Wolverine Energy 1998-1999(G) Development Company, L.L.C.,
Wolverine Energy 1998-1999(H) Development Company, L.L.C.,
Wolverine Energy 1998-1999(I) Development Company, L.L.C.,
and Wolverine Energy 1998-1999(J) Development Company, L.L.C.
(Exact name of registrants as specified in their Articles of Organization)
Michigan 1311
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
To be applied for
(I.R.S. Employer Identification Nos.)
4660 South Hagadorn Road, Suite 230
East Lansing, Michigan 48823
(517) 351-4444
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
Michael D. Ewing, Esq.
116 North Clay Street
Hinsdale, Illinois 60602
(630) 850-7125
(Address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: X
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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WOLVERINE ENERGY 1998-1999
DEVELOPMENT PROGRAM
CROSS-REFERENCE SHEET
Cross Reference Sheet Furnished Pursuant to Item 501 of Regulation S-K
<TABLE>
<CAPTION>
Item Number and Caption Heading in Prospectus
- ----------------------- ---------------------
<S> <C>
1. Forepart of Registration Statement and Outside front cover page of Prospectus
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside front cover page and outside back cover page of
Pages of Prospectus Prospectus
3. Summary Information, Risk Factors and "Summary of Program," Summary of Tax Considerations,"
Ratio of Earnings to Fixed Charges and "Risk Factors"
4. Use of Proceeds "Application of Proceeds"
5. Determination of Offering Price "Terms of Offering"
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution "Plan of Distribution" and "Terms of Offering"
9. Description of Securities to be Registered "Summary of Program," "Investor Interestholder Limited
Liability and Potential Liabilities of Participating Investor
Interestholders," "Participation in Costs and Revenues" and
"Summary of Company Operating Agreement"
10. Interests of Named Experts and Counsel "Legal Opinions" and "Experts"
11. Information With Respect to the
Registrants:
(a) Description of Business "Summary of Program," "Proposed Activities and Policies"
and "Application of Proceeds"
(b) Description of Property "Proposed Activities and Policies"
(c) Legal Proceedings Not applicable
(d) Market Price of and Dividends on Not applicable
the Registrants' Common Equity and
Related Stockholder Matters
(e) Financial Statements Not applicable
(f) Selected Financial Data Not applicable
(g) Supplementary Financial Information Not applicable
(h) Management's Discussion and Not applicable
Analysis of Financial Condition and
Results of Operations
(i) Changes in and Disagreements with Not applicable
Accountants on Accounting and
Financial Disclosure
(j) Directors and Executive Officers "Management"
(k) Executive Compensation "Management"
(l) Security Ownership of Certain "Management"
Beneficial Owners and Management
(m) Certain Relationships and Related "Proposed Activities and Policies," "Application of
Transactions Proceeds," "Participation in Costs and Revenues,"
"Compensation and Reimbursement," "Conflicts of Interest"
and "Management"
12. Disclosure of Commission Position on "Management - Fiduciary Obligations and Indemnification"
Indemnification for Securities Act and "Summary of Company Operating Agreement"
Liabilities
</TABLE>
ii
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SUPPLEMENT NO. 2
DATED: NOVEMBER , 1999
TO THE
PROSPECTUS
DATED: SEPTEMBER 4, 1998
of
WOLVERINE ENERGY 1998-1999 DEVELOPMENT PROGRAM
------------------------------------------
WOLVERINE ENERGY 1998-1999 (B)
DEVELOPMENT COMPANY, L.L.C.
Wolverine Energy 1998-1999 (B) Development Company, L.L.C. (the "Company")
is hereby commencing the offer and sale of membership interests ("Interests") in
the Company pursuant to the terms and conditions described in the Prospectus of
the Wolverine Energy 1998-1999 Development Program (the "Program") dated as of
September 4, 1998 (the "Prospectus"), as amended by this Supplement No. 2 dated
November , 1999 ("Supplement No. 2"). All capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Prospectus and all
of the material terms of the offer and sale of Interests in the Company, the
business in which it will engage and the conditions under which it will operate
are restated as of the date of this Supplement as if the Company was the Company
generically described in the Prospectus, unless modified or otherwise provided
or described herein. This Supplement No. 2 amends and restates any and all prior
Supplements to the Prospectus in their entirety. All prior Supplements, as of
the date hereof, have been superceded by this Supplement No. 2 and may not be
relied upon by any person. All terms, provisions or descriptions of any nature
appearing herein shall supercede and control any inconsistent or conflicting
terms, provisions or descriptions appearing in the Prospectus or any prior
Supplement thereto.
THE COMPANY
The Company will be activated upon the first closing of the sale of
Interests pursuant to this Supplement and the Prospectus pursuant to the terms
described in the Prospectus under the caption "Terms of the Offering." The
Company will not have significant assets or have engaged in any operations as of
that date. Upon the closing of the sale of Interests and the activation of the
Company, substantially all of its net proceeds remaining from the sale of
Interests after payment of organizational and offering costs, including the
Management Fee to the Manager, shall be used to acquire working interests in the
Properties described below and to pay certain fees and expenses to the Manager
and its affiliates, among others. See "Compensation and Reimbursement" in the
Prospectus for more information with respect to the application of the proceeds
of the sales of Interests by the Company.
TERMS OF THE OFFERING
The Interests will be offered and sold commencing on the date of this
Supplement No. 2 pursuant to the terms of the offering of Interests by the
Program described under the caption "Terms of Offering" and "Plan of
Distribution" in the Prospectus, as modified herein. The offering of Interests
of the Company commenced on the date of this Supplement No. 2. If at least
$1,000,000 of Interests have been sold, the Manager may, in its discretion,
terminate this offering at any time thereafter; provided, however, that not more
than 15,000 Interests, in the aggregate, may be sold in this offering pursuant
to this Supplement No. 2. If fewer than $1,000,000 of Interests have been sold,
this offering
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shall terminate 90 days following the date of this Supplement No. 2. The primary
object of the Manager in limiting the duration of the offering period and the
number of Interests sold will be to minimize the period during which
subscription payments are held in cash prior to investment in working interests.
Therefore, the Manager anticipates that the maximum offering period will be 180
days and the maximum number of Interests sold will be $5,000,000. In all events,
this offering shall terminate not later than December 31, 1999.
PRIOR COMPANIES' OFFERING HISTORY
The Company is the second Company in the Program to offer and sell
Interests. Wolverine Energy 1998-1999(A) Development Company, L.L.C. (the
"Previous Company") completed its offering of Interests on November , 1999,
having commenced such offering on the date of the Prospectus. The Previous
Company had accepted subscriptions for $ of Interests as of the
closing date. The Previous Company has admitted all such subscribers as
Interestholders as of the closing date; the Previous Company has terminated all
selling efforts with respect to Interests and will not accept any further
subscriptions therefor.
PRIOR COMPANIES' OPERATING HISTORY
The Company is the second Company in the Program to have raised capital.
The Previous Company has acquired or agreed to acquire and develop working
interests in natural gas properties within the Independence prospect (the
"Prospect") located in the Cherokee Basin in Montgomery County, Kansas. The
Company will acquire, develop, drill, complete and equip up to approximately
net wells in the Prospect (the "Project").
The Prospect is under development by Kansas Operating Company, L.L.C. (the
"Operator"), Independence, Kansas, and is located within the Operational Area.
The Operator is owned 50% by the Manager and 50% by an unaffiliated gas project
development company. The Operator will, in turn, subcontract substantially all
of its administrative and operational obligations to Federated Oil & Gas
Properties, Inc., an affiliate of the Manager (see "Management Additions and New
Operating Alliance of Manager" herein), and Black Rain Energy, an unaffiliated
gas well management company in Kansas. The Project will consist of the Previous
Company's percentage working interest in wells to be drilled, completed and
equipped for production on the Prospect. The Prospect has been assembled by the
Operator from working interests in such properties held by parties which are
unaffiliated with the Operator or the Manager or their respective affiliates.
The Project encompasses the right to re-enter and re-complete wells which have
been shut-in after having previously been drilled and completed by unaffiliated
parties. In addition to the wells that will constitute the Project, the Operator
also holds the rights to re-enter and re-complete additional wells in the
Prospect. The Manager, as a co-operator party to the Operating Agreement with
respect to the Prospect, has the right to participate directly and indirectly in
the development of the remainder of the wells on the Prospect that will not be a
part of the Project and anticipates that it may form additional investment
programs, including entities similar to the Program or any Company, to acquire
and develop the working interests in prospects corresponding to such wells.
Operational Area. The Company expects to focus its investment efforts on
working interests in natural gas well development projects located within the
known or highly-likely extent of the gas-bearing coalbed methane formations in
Montgomery County, Kansas. The Manager believes that the coalbed methane
formations in the Prospect have a high potential to produce gas in commercial
quantities. All of the recent prior gas development activity of the Manager and
its affiliates, other than the investment of the Previous Company in coalbed
methane formations in the Prospect, has been focused on the Antrim shale
formation. Information with respect to the experience of the Manager and its
affiliates in Antrim gas development projects in the Operational Area is
provided in "Prior Activities" herein.
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PRIOR ACTIVITIES OF THE MANAGER AND AFFILIATES
Information with respect to the activities of the Prior Antrim Partnerships
through December 31, 1998, is attached hereto as Exhibit I.
MANAGER'S FINANCIAL STATEMENTS
Audited financial statements of the Manager as of December 31, 1998, and
unaudited financial statements of the Manager as of June 30, 1999, are attached
hereto.
MANAGEMENT ADDITIONS AND NEW OPERATING ALLIANCE OF MANAGER
Joseph Kostrzewa joined the Manager as President and chief operating
officer, effective as of March 1, 1999. In addition, an operating alliance
between the Manager and Federated Oil & Gas Properties, Inc. ("Federated"), was
established at that time. Federated is owned by Kostrzewa, where he remains as
chairman. Federated operates Niagaran, Antrim and Richfield wells throughout
Michigan and acts as agent and general partner for various entities.
Mr. Kostrzewa started his career in 1965 in public accounting, working for
Arthur Andersen in their Chicago and Detroit offices, where he specialized in
corporate taxes, including mergers and acquisitions. In 1972, he joined BDO
Seidman in Traverse City, where he was the partner in charge of the office. In
1976, he joined the Preston Brothers of The Woodlands, Texas as executive
vice-president of their oil and gas exploration company (Traverse Corp.) in
Traverse City, Michigan. Upon the successful sale of the Traverse Corp. assets
to Total Petroleum in 1980, Mr. Kostrzewa started Traverse Oil Company. Traverse
Oil merged with Federated Development Corp. a Pittsburgh based oil and gas
investment company in 1983. The merged company was taken public and Mr.
Kostrzewa served as its chairman until its sale to Adobe Oil and Gas Corp. in
1988. He then formed Federated, a private company, which he has owned and
operated since.
Mr. Kostrzewa is a CPA and a member of the American Institute of Certified
Public Accountants and the Michigan Association of Certified Public Accountants.
He serves on the board of the Michigan Oil & Gas Association and has for the
last 12 years. He is vice-chairman of the Board of Trustees of Munson Medical
Center, serves on the board of Wright K Technology; is a trustee of the National
Cherry Festival and is a board member of the foundation of Northwestern Michigan
College.
The Manager has opened an administrative and field office in Traverse City,
Michigan. This office, working through the alliance with Federated, will be
responsible for all accounting and field operations and will work directly with
current project operators. The existing East Lansing office will focus primarily
on all fund raising activities, including broker-dealer relations, investor
reporting and other related matters.
DIRECT COSTS REIMBURSEMENT
The Company will not reimburse the Manager or any of its affiliates for the
fair market value of services rendered to the Company which do not constitute
customary, routine or recurring administrative tasks in the Company's day-to-day
business and which are commonly understood to be outside of the duties of the
Manager as managing member of the Company. "Direct costs" which are the subject
of reimbursement by the Company to the Manager will be limited services rendered
to or for the benefit of the Company by vendors who or which are not affiliated
with the Manager only. The description of "direct costs" which appears in the
Prospectus at pages 16, 18, 63, 67, 69-70, 129, COA-5 and COA-20 is hereby
amended and restated in their entirety to conform to the description of such
matters herein.
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MEETINGS OF MEMBERS
Section 15.2 of the form of Company Operating Agreement is hereby amended
to provide that the holders of more than 10% in interest of the Investor
Interestholders may request that a meeting of Investor Interestholders be held
to conduct a vote on a matter as to which Investor Interestholders have voting
rights, and that upon receipt of such request, that Manager is required to call
such a meeting. Section 15.2 of the form of Company Operating Agreement found on
page COA-31 of the Prospectus is intended to conform to the description of such
matters appearing on page 19 of the Prospectus. Further, the Manager will not
vote any Interests which it or its affiliates acquire in order for a Company to
obtain subscriptions for the Minimum Amount at any such meeting.
FARMOUTS
The Program will not engage in any farmout transactions with the Manager or
any affiliate of the Manager which involves any property in which the Program
has a working or any other interest, notwithstanding language to the contrary
found on page 73 of the Prospectus.
MINIMUM AMOUNT OF INTERESTS
The Minimum Amount of Interests to be sold prior to the formation of a
Company will be $1,000,000, rather than $300,000 as provided in the Prospectus.
MICHIGAN RESIDENTS ONLY
Michigan residents will be required to comply with the following
suitability standards prior to subscribing for Interests:
All Michigan residents must have a minimum net worth of $225,000 without
regard to an investment in Interests, and a minimum annual gross income of
$100,000 for the current year and for the immediate two previous years,
evidenced by information provided in the Subscription Agreement; or a
minimum net worth in excess of $750,000, inclusive of home, home
furnishings and automobiles, also evidenced by information provided in the
Subscription Agreement.
Michigan residents who elect Participating Investor Interestholder status
must have a minimum net worth of $600,000 without regard to investment in
Interests, and a minimum annual gross income of $250,000 for the current
year and for the immediate two previous years, evidenced by information
provided in the Subscription Agreement; of a minimurn net worth in excess
of $1,000,000, inclusive of home, home furnishings and automobiles,
evidenced by information provided in the Subscription Agreement.
All Michigan residents must represent in the Subscription Agreement that
they have had prior investment experience or have consulted a financial
adviser or certified public accountant prior to investing.
MICHIGAN INVESTORS: PLEASE NOTE that investor suitability differs for
Michigan residents seeking to elect the tax benefits available with
Participating Investor Interestholder status and those who do not. See the
modified Michigan suitability standards above. FURTHER NOTE that electing
Participating Investor Interestholder status subjects the investor to
unlimited personal liability in the event that the Manager does not have
adequate insurance or assets to appropriately settle any disputes that may
arise during its operations or otherwise.
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PLAN OF DISTRIBUTION
Escrowed funds will not be invested in loans to the Manager and its
affiliates and will only be invested in instruments permitted under applicable
SEC rules.
CONSENT ORDER
The Manager has entered into a consent order with the Michigan Department
of Consumer and Industry Services, Corporation, Securities and Land Development
Bureau, Securities Division, pursuant to which it neither admitted nor denied
guilt in connection with unregistered sales of Interests to Michigan residents
and agreed to comply with Michigan law in respect to the offer and sales of
securities to Michigan residents.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion should be read in conjunction with the financial
statements, accompanying notes and supplemental information attached hereto.
Year Ended December 31, 1998
Results of Operations
Net income for 1998 was $(28,433), compared with $452,656 in 1997. The
primary factor affecting the year-to-year decrease in net income was the
decrease in turnkey revenue from $6,333,944 to $5,987,964, a decrease of
$345,980, or 5.5%, which resulted in a decrease in turnkey gross profits of from
$1,151,339 in 1997 to $857,727 in 1998, a difference of $293,612 or 25.5%. Also
contributing was the $25,634, or 7.1% decrease in management fee revenue from
$362,832 to $337,198 and the increase in other income from $149,124 to $235,669,
a $86,545 increase.
The decreased earnings in 1998 were primarily driven by a shift by the
Manager in the proportion of affiliated natural gas investment vehicles which
acquired working interests on a turnkey basis as opposed to those which acquired
such interests on a promoted basis. This shift in fund-raising allocations was,
in turn, partially a product of lower natural gas prices and an increase in
worldwide natural gas production and difficulties experienced by affiliated
natural gas investment vehicles in obtaining regulatory approval to conduct
offerings of equity interests in such vehicles. These results, as well as
lagging efficiency improvements throughout the organization, produced decreased
operating profits from turnkey drilling contracts and management fees in 1998
over 1997.
Total capital raised by affiliated natural gas investment entities
increased from $6,789,374 in 1997 to $6,920,319 in 1998, an increase of $130,945
or 1.9 percent. The natural gas investment programs organized by the Manager
have not begun to generate sufficient gas production to result in meaningful
levels of distributions of operating profits to have been made to the Manager.
Therefore, the Manager has not recognized a meaningful level of operating
profits from its interests in such programs, partially as a result of the lower
level of prices for natural gas which have prevailed over the last two years
compared with the prior years.
Total turnkey expenses and related costs decreased 1.0% percent from 1997,
while corresponding turnkey revenues decreased 5.5 percent, causing a decrease
in turnkey profit margin from 18.2 percent to 14.3 percent. General and
administrative expenses for 1998 increased by 19.5 percent, reflecting the
higher level of capital raising activity at the affiliated natural gas
investment programs in 1998 over 1997 and the cumulative effect on the level of
administrative expenses of the addition of new capital in 1998 to the capital
already under management at the end of 1997 without
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reduction for return of capital to investors. Depreciation and amortization
expense decreased from $19,316 to $5,970 compared with 1997. Interest expense
increased $63,390 in 1998, from $77,901 to $141,291 (all of which was paid),
reflecting higher average borrowings outstanding during 1998
Liquidity and Capital Resources
In 1998, cash flow from operating activities amounted to $(1,095,964),
compared with $1,332,275 in 1997. Total short-and long-term debt, including
amounts outstanding under the Manager's line of credit, trade payables, amounts
due to operators and related parties and other accounts payable, was $2,497,369
at year end 1998, compared with $2,862,545 at year-end 1997. Debt as a percent
of debt-plus-equity was 78.1 percent at December 31, 1998, down from 90.3
percent at year-end 1997.
Working capital was $(179,195) at year-end 1998, compared with $(1,049,598)
at year-end 1997. At year-end 1998, the Managers's current ratio was 0.91 to 1.
Cash Distributions paid in 1998 totaled $1,552,732, compared to $483,954 in
1997, while member contributions were $1,981,219 in 1998 and $0 in 1997. The
Manager has a line of credit with Franklin Bank, Southfield, Michigan in the
current amount of $325,000, all of which is currently outstanding. The Manager
also has outstanding long-term debt totaling $731,347, of which $105,000 is due
within one year and the balance matures at various times through April 2003.
This debt bears interest at rates varying from 9.25% to 17.75%, based upon
current levels of the prime interest rate.
Working Interests Held for Sale and Capital Expenditures
Inasmuch as the Manager engages in the raising of capital for investment in
natural gas development, it has not engaged directly in capital investment in
natural gas development or production activities, except with respect to the
portion of the capital invested in such activities which the Manager provides
from its own capital and for its own account. Insofar as the Manager incurs
contingent liability for turnkey development of natural gas development projects
if development costs exceed budgeted costs by more than the anticipated turnkey
profit to the Manager, it may be required to make a capital investment in such
project(s) in the amount of such excess, though such investment is not
anticipated. As such, the Manager has not made a capital investment in any
natural gas development project in excess of its capital contribution as Manager
of the affiliated investment vehicle, which amount totaled $279,053 in 1998. The
Manager has received distributions and accrued unrealized losses with respect to
these interests and has a net recorded capital contribution of $1,154,458. The
Manager anticipates that it will make similar investments in affiliated natural
gas investment vehicles in 1999 and does not anticipate, nor has it provided
for, making any investment as a result of actual development expenses of such a
project exceeding budgeted costs by more than the anticipated turnkey profit to
the Manager.
The Manager does, however, utilize its capital to acquire working interests
for subsequent resale to affiliated investment vehicles. The amount of working
interests held for sale was $1,458,167 at December 31, 1997 and $877,580 at
December 31, 1998. These amounts consist of actual land costs and estimated
development, drilling and completion expenses for working interests in wells
held by the Manager and anticipated to be sold to one or more affiliated
investment vehicles pursuant to a turnkey drilling contract. The decrease in
these amounts from 1997 to 1998 reflects decreases in the Manager's level of
business activity with respect to affiliated investment entities which designate
the working interests in which they will invest prior to raising capital from
investors and corresponding increase in activities related to affiliated
investment entities which do not designate the working interests in which they
will invest until after capital has been raised from investors, and differences
related to the timing of the sale of such interests to affiliated investment
vehicles.
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It is anticipated that the Manager's 1999 internal capital expenditures
budget will be financed primarily by funds generated internally and through
borrowings from unaffiliated lenders. Amounts payable by the Manager to make its
scheduled capital contribution to affiliated natural gas investment programs
will likewise be financed internally by the Manager. The Manager anticipates
that it will make payments for natural gas project development costs from
turnkey payments from the affected affiliated natural gas investment program. To
the extent that such payments exceed anticipated amounts, the Manager may
finance them from internally generated capital or from borrowings under its
lines of credit. The planned expenditure level is subject to adjustment as
dictated by changing economic conditions and the success of the affiliated
natural gas investment vehicles in raising capital in 1999. The Manager does not
anticipate raising additional capital for its own account for the next twelve
months or for the foreseeable future beyond that time frame.
Environmental protection and remediation costs.
The Manager maintains insurance coverage for environmental pollution
resulting from the sudden or accidental release of pollutants. Various
deductibles per occurrence could apply, depending on the type of incident
involved. Coverage for other types of environmental obligations is not generally
provided, except when required by regulation or contract. The financial
statements do not reflect any significant recovery from claims under prior or
current insurance coverage. The Manager has not provided in its accounts for any
future costs of environmental pollution or environmental remediation
obligations. Such costs, if any, in excess of applicable insurance coverage
cannot reasonably be estimated at this time due to uncertainty of timing, the
magnitude of contamination, future technology for prevention and remediation,
regulatory changes and other factors. Although such future costs could be
significant, they are not expected to be material in relation to the Manager's
liquidity or financial position.
Six Months Ended June 30, 1999
Results of Operations
Net income for the first six months of 1999 was $(523,312), compared with
$(286,480) in the comparable period of 1998. These losses reflect the
seasonality of the Manager's business which sees a majority of profits earned in
the second half of the year, as investors' year-end tax motivated investing
occurs and turnkey drilling activity increases. The primary factor affecting the
year-to-year 82.7% increase in net loss for the comparable six-month periods was
the decrease in turnkey revenues from $1,098,989 to $904,992, a decrease of
$193,997, which nonetheless resulted in an increase in turnkey gross profits
from $153,810 in 1998 to $256,022 in 1999, a difference of $102,212 or 66.5%.
Also having an impact on profitability was the $221,581 or 38.4% increase in
general and administrative expense from $577,099 to $798,680 and the decrease in
other income from $73,783 to $6,222 for the corresponding periods.
Management anticipates that its earnings for the full year 1999 will be
primarily driven by the ability of affiliated natural gas investment vehicles to
raise capital from investors. This activity is highly seasonal and, therefore,
as has customarily been the case, the overwhelming majority of capital raised by
such entities is likely to be realized in the last six months of 1999. The
fund-raising capability of the Manager, in turn, will depend in part upon the
level of natural gas prices and production globally. Thus, management does not
believe that the level of earnings of the Manager through the first six months
of 1999 is indicative of the likely level of earnings for the entire year. The
natural gas investment programs organized by the Manager have not begun to
generate sufficient gas production to result in meaningful levels of
distributions of operating profits to have been made to the Manger. Therefore,
the Manager has not recognized a meaningful level of operating profits from its
interests in such programs which would contribute to a more stable and
predictable level of earnings.
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Total turnkey expenses and related costs decreased 31.3 percent for the
first six months of 1999 as compared with the corresponding period in 1998,
while corresponding turnkey revenues decreased 17.7 percent, causing a increase
in turnkey profit margin from 14.0 percent to 28.3 percent. General and
administrative expenses for the six months ended June 30, 1999, increased by
38.4 percent, natural gas investment program in the first six months of the 1999
over the corresponding period in 1998 and the cumulative effect on the level
administrative expenses of the addition of new capital in 1999 to the capital
already under management at the end of 1998 without reduction for return of
capital to investors.
Liquidity and Capital Resources
In the first six months of 1999, cash flow from operating activities
amounted to $88,042, compared with $48,448 for the equivalent period in 1998.
Total short- and long-term debt, including amounts outstanding under the
Manager's line of credit, trade payables, amount due to operators and related
parties and other accounts payable, was $2,272,354 at June 30, 1999, compared
with $3,594,958 at June 30, 1998. Debt as a percent of debt-plus-equity was 93.4
percent at June 30, 1999, down from 99.4 percent at year-end 1998.
Working capital was $(1,118,061) at June 30, 1999, compared with $(950,367)
at the corresponding point in June, 1998. At June 30, 1999, the Manager's
current ration was .41 to 1. At June 30, 1999, the Manager had long-term debt,
including the current portion, of $691,414, of which $305,067 was due within one
year and the balance matures at various times through April 2003, compared with
$746,924 of long-term debt at June 30, 1998. This debt bears interest at rates
varying from 9.75% to 18.25%, based upon current levels of the prime interest
rate.
The Manager has a line of credit with Franklin Bank, Southfield, Michigan
in the current amount of $325,000; at June 30, 1999, that line of credit was
fully drawn and no further borrowings were available to the Manager thereunder.
Working Interests Held For Sale and Capital Expenditures
Inasmuch as the Manager engages in the raising of capital for investment in
natural gas development, it has not engaged directly in capital investment in
natural gas development of production activities, except with respect to the
portion of the capital invested in such activities which the Manger provides
from its own capital and for its own \account. Insofar as the Manager incurs
contingent liability for turnkey development of natural gas development projects
if development costs exceed budgeted costs by more than the anticipated turnkey
profit to the Manager, it may be required to make a capital investment in such
project(s) in the amount of such excess, though such investment is not
anticipated. As such, the Manager has not made a capital investment in any
natural gas development project in excess of its capital contribution as Manager
of the affiliated investment vehicle, which amount totaled $36,150 in the first
six months of 1999. The Manager has received distributions and accrued
unrealized losses with respect to these interests, leaving a net recorded
capital contribution of $1,152,094. The Manager anticipates that it will make
similar investments in affiliated natural gas investment vehicles in 1999 as it
did in 1998 and does not anticipate, nor has if provided for, making any
investment as a result of actual development expenses of such a project
exceeding budgeted costs by more than the anticipated turnkey profit to the
Manager.
The Manager does, however, utilize its capital to acquire working interests
for subsequent resale to affiliated investment vehicles. The amount of working
interests held for sale was $246,258 at June 30, 1999, and $998,697 at June 30,
1998. These amounts consist of actual land costs and estimated development,
drilling and completion expenses for working interests in wells held by the
Manager and anticipated to be sold to one or more affiliated investment vehicles
pursuant to a turnkey drilling contract. The decrease in these amounts from June
30, 1998, to June 30, 1999 reflects decreases in the Manager's level of business
activity with respect to affiliated investment entities which designate the
working interests in which they will invest prior to raising capital from
investors and corresponding increase in activities
A-8
<PAGE> 11
related to affiliated investment entities which do not designate the working
interests in which they will invest until after capital has been raised from
investors, and differences related to the timing of the sale of such interests
to affiliated investment vehicles. The Manager does not anticipate that any of
the working interests held for sale by the Manager at June 30, 1999, will be
available for purchase by the Company.
It is anticipated that the balance of the Manager's 1999 internal capital
expenditures budget will be financed primarily by funds generated internally and
through borrowings under the Manager's line of credit. Amounts payable by the
Manager to make its scheduled capital contribution to affiliated natural gas
investment programs will likewise be financed internally by the Manger. The
Manager anticipates that it will make payments for natural gas project
development costs from turnkey payments from the affected affiliated natural gas
investment programs. To the extent that such payments exceed anticipated
amounts, the Manager may finance them from internally generated capital or form
borrowing under its line of credit. The planned expenditure level is subject to
adjustments as dictated by changing economic conditions and the success of the
affiliated natural gas investment vehicles in raising capital in the last three
months of 1999. The Manager does not anticipate raising addition capital for its
own account for the next twelve months or for the foreseeable future beyond that
time frame.
Forward-looking Statement
Statements in this prospectus that are not historical facts, including
statements in Management's Discussion and Analysis under the heading "Plan of
Operations" and other statements about industry and company growth, estimates of
expenditures and savings, and other trend projections are forward looking
statements. These statements are based on current expectations and involve risk
and uncertainties. Actual future results or trends may differ materially
depending on a variety of factors. These include specific factors identified in
the discussion accompanying such forward looking statements, industry product
supply and pricing, political stability and economic growth in relevant areas of
the world, the Manager's successful execution of its internal performance plans,
successful partnering, actions of competitors, natural disasters, and other
changes to business conditions.
PRIOR ACTIVITIES
The Prior Antrim Programs have generated the following approximate annual
returns on investment (ROIs) for their respective investors on a cash and
after-tax basis for the period commencing on the respective dates of
commencement of operations (NOT of the offering of interests to investors)
through December 31, 1998:
<TABLE>
<CAPTION>
YEARS IN ANNUAL ANNUAL ROI
PROGRAM OPERATION ROI (CASH) (AFTER-TAX)
<S> <C> <C> <C>
Wolverine Chester North Antrim Drilling Program #1 9.75 11.6% 29.3%
Wolverine Chester North Antrim Drilling Program #2 8.75 9.9% 30.3%
Wolverine Chester North Antrim Drilling Program #3 7.50 5.3% 24.5%
Wolverine Chester North Antrim Drilling Program #4 7.75 10.2% 32.3%
Wolverine Otsego County Antrim Drilling Program #5 7.50 9.1% 32.0%
Wolverine Charlton North Antrim Drilling Program #6 7.25 8.6% 30.2%
Wolverine Antrim Development Program #7 7.75 8.5% 28.9%
</TABLE>
A-9
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Wolverine Otsego County Antrim Development Program #8 7.25 6.8% 25.4%
Wolverine Antrim Development Program #11 7.00 4.7% 22.58%
Wolverine Antrim Development Program #14 7.00 2.9% 16.1%
Wolverine Antrim Development Program #15-1991 6.50 3.7% 18.1%
Wolverine Antrim Development Program #15-1992 6.00 6.0% 22.5%
Wolverine Antrim Development Program #16 6.00 5.6% 22.8%
Wolverine Antrim Development Program #17 6.00 3.0% 8.3%
Wolverine Antrim Development Trust #18 5.25 3.6% 14.3%
Wolverine Antrim Development Trust #19 5.00 4.1% 15.8%
Wolverine Antrim Development Trust #20 4.00 .65% 20.6%
Wolverine Antrim Development Trust #21 4.00 5.9% 21.0%
Wolverine Antrim Development Trust #22 3.00 9.6% 29.0%
Wolverine Antrim Development Trust 1995 3.00 3.2% 18.1%
Wolverine Antrim Development 1996-1, L.L.C. 2.50 5.1% 21.5%
Wolverine Antrim Development 1996-2, L.L.C. 1.50 2.4% 25.3%
Wolverine Antrim Development 1997-1, L.L.C. 1.25 2.3% 30.3%
Wolverine Antrim Development 1997-2, L.L.C. 1.00 2.0% 37.9%
Wolverine Antrim Development 1998-1, L.L.C. 0.25 0.0% 137.1%
</TABLE>
The column headed "Annual ROI (cash)" reflects the average annual rate of
return to investors from cash distributions only, expressed as a percentage of
their initial investment in the respective Prior Antrim Program. Prospective
investors in Investor Interests should note that the largest cash component of
return on investment in natural gas investment programs like the Prior Antrim
Programs are distributions in later years (after the costs of development,
drilling and completion of wells is completed and all capital acquisitions have
been amortized and the wells are producing at maximum volume over an extended
period).
The column headed "Annual ROI (after-tax)" reflects the average annual rate
of return to investors from (i) cash distributions, and (ii) the federal income
tax effects of allocations of program income, loss, gain, credit and deductions
to such investors from the program, combined and expressed as a percentage of
their initial investment in the respective Prior Antrim Program. The increase in
rate of return from the "Annual ROI (cash)" to the "Annual ROI (after-tax)"
column for each program reflects the cumulative effects of, inter alia, (i)
intangible drilling and development expenses of wells and other deductible items
and, (ii) with respect to Prior Antrim Programs through Wolverine Antrim
Development Trust #17, federal income tax credits under ss.29 of the Internal
Revenue Code of 1986, as amended, allocated to investors with respect to working
interests in natural gas wells invested in by such programs. Because the
A-10
<PAGE> 13
level of deductible intangible drilling and development expenses is highest in
the initial stages of any Prior Antrim Program, the differences in rates of
return between the "Annual ROI (cash)" and the "Annual ROI (after-tax)" column
for each Prior Antrim Program is greatest in the more recent programs and less
in programs of longer duration.
PRIOR ACTIVITIES SCHEDULES
Attached hereto are revised schedules which reflect the activities of the
Prior Antrim Programs through December 31, 1998. These schedules are
qualitatively identical to the corresponding schedules appearing in the
Prospectus for the period ending December 31, 1997. A description of the
schedules can be found in the Prospectus under the caption "Summary Description
of Prior Activities Schedules" on page 79 thereof.
TAX ASPECTS
The following discussion supplements the section titled "Tax Aspects"
contained in the Prospectus and should be reviewed in conjunction therewith.
Terms capitalized herein which are not otherwise defined shall have the same
meaning as capitalized terms in the "Tax Aspects" section of the Prospectus.
There can be no assurance that any of the tax consequences which are
described herein or in the Prospectus, or which a prospective Investor
Interestholder in the Company may contemplate, will be available. In addition,
no assurance can be given that legislative or administrative changes or court
decisions may not be forthcoming which would significantly modify the statements
expressed both herein and in the Prospectus. In some instances, these changes
could have substantial effect on the tax aspects on an investment in the
Company. Any future legislative changes may or may not be retroactive with
respect to transactions prior to the effective date of such changes. Bills have
been introduced in Congress in the past and may be introduced in the future
which, if enacted, would adversely effect some of the tax consequences presently
anticipated from an investment in the Company. EACH PROSPECTIVE INVESTOR
INTERESTHOLDER IS THEREFORE URGED TO CONSULT HIS/HER TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES ARISING FROM AN INVESTMENT IN THE COMPANY.
Publicly Traded Partnerships
If a partnership's securities are actively traded on an established
securities market or on a secondary market (or the substantial equivalent
thereof), it will be treated as "publicly traded," and taxed as a corporation.
The Prospectus details various exceptions to the Company's treatment as a
publicly traded partnership (see "Tax Aspects - Classification as to Partnership
- - Publicly Traded Partnerships"). In addition to those exceptions, Code Section
7704(c) also provides that 90% or more of a partnership's gross income
constitutes "qualifying income," then such partnership will not be treated as
"publicly traded," notwithstanding whether it qualifies for any other exception.
The term "qualifying income" includes "income and gains derived from the
exploration, development, mining or production, processing, refining,
transportation (including pipelines transporting gas, oil or gas products
thereof) or the marketing of any mineral or natural resource (including
fertilizer, geothermal energy and timber)." In Ltr. Rul. 199904025 (11/02/98),
the Service further defined the meaning of "qualifying income." The letter
ruling confirms that the type of activities contemplated by the Company will
generate "qualifying income," however income from the transportation of oil or
gas other than by pipeline (i.e. by truck or rail) will not constitute
"qualifying income." It is not anticipated that the Company will transport a
substantial portion of the natural gas it produces by other than pipeline.
Accordingly, while there can be no assurances that the Company will meet the
"90% of qualifying income" exception from being treated as a publicly traded
partnership, the activities of the partnership should generate gross income
which substantially constitutes "qualifying income." Accordingly, even if the
Company's Interests are deemed to be traded on the secondary market (or
substantial equivalent thereof), the Company would not likely be treated as a
publicly traded partnership.
A-11
<PAGE> 14
Allocations
In Ltr. Rul. 9829045 (4/21/98) the Service analyzed the allocations of
profit and loss of a limited partnership formed to operate oil and gas
properties within a defined geographical area. The limited partnership agreement
of the partnership in the letter ruling provided for allocations of profit and
loss in a manner substantially similar to the Company's allocations of profit
and loss, especially with respect to the allocations relating to basis of oil
and gas properties for purposes of the depletion allowance. The letter ruling
concluded that these allocations had substantial economic effect pursuant to
Code Section 704. In particular, the letter ruling determined that the
allocations met the "substantiality test" and as there was not a substantial
likelihood that allocations of deduction and loss would be offset by allocations
of income and gain. In making this determination, the letter ruling confirmed
the discussion in the Prospectus that the fair market value of partnership
property is assumed to be its book value, that is, depreciation and depletion
expenses are presumed, for purposes of the "substantiality test," to reduce the
fair market value of the property. The letter ruling concluded that: (i) given
the speculative nature of the partnership's oil and gas exploration activities,
and (ii) the fair market value of the property has been reduced for purposes of
the Code Section 704 regulations, there cannot be a strong likelihood that a
current allocation of income or loss or deduction will be offset by an
allocation of gain in the future.
This letter ruling supports the analysis contained in the Prospectus and
the opinion of Special Tax Counsel with respect to the Company's allocations of
profit and loss contained in "Tax Aspects - Allocations."
Alternative Minimum Tax
The discussion contained in the Prospectus captioned "Tax Aspects -
Alternative Minimum Tax" is deleted in its entirety and replaced with the
following section:
The Code imposes an alternative minimum tax ("AMT") in order to assure that
taxpayers may not reduce their tax below minimum levels through certain "tax
preference items." In general, the alternative minimum tax liability of a
non-corporate taxpayer is calculated by determining AMT income ("AMTI"), which
is arrived at by (i) adding together the taxpayer's adjusted gross income and
the taxpayer's tax preference items, (ii) adding and subtracting certain other
specified items, and (iii) then subtracting the applicable exemption amount of
$33,750 for single taxpayers or $45,000 for married taxpayers filing joint
returns, or $22,250 for estates, trusts and married taxpayers filing separate
returns. The alternative minimum tax is 26% of AMTI up to $175,000 and 28% of
AMTI over $175,000. The taxpayer must then pay the greater of the AMT or the
regular income tax. Generally, tax credits are not allowable against the AMT,
except the foreign tax credit. Under the Code, the $45,000 exemption ($33,750
for single taxpayers and $22,250 for estates, trusts and married taxpayers
filing separately) is phased out where AMTI exceeds $150,000 ($112,500 for
single persons and $75,000 for estates, trusts and married persons filing
separately).
Among the tax preference items that could result from investing the Company
and which would be included in determining AMTI are the following:
Depletion. The excess of the depletion deduction allowable over the
adjusted basis of the property at the end of the year, disregarding the
current year's depletion deduction, is an item of tax preference. This
excess is computed on each separate "property" as defined for depletion
purposes. Accordingly, basis in one property will not reduce excess
depletion in connection with another. The preference is measured on a
cumulative basis. Depletion will not be considered an item of tax
preference until the total depletion deductions have exceeded the adjusted
basis of the property. Then, the entire amount of the percentage depletion
in excess of that basis will be considered an item of tax preference. This
item of tax preference does not apply to taxpayers other than integrated
oil companies, that is, it does not apply to independent producers of oil
or gas. With respect to natural gas, an
A-12
<PAGE> 15
independent producer is defined as a producer whose average daily
production of domestic natural gas does not exceed the taxpayer's
"depletable natural gas quantity." Average daily production is defined as
determined by dividing the taxpayer's aggregate production of domestic
crude oil or natural gas in the taxable year by the number of days in such
taxable year. For natural gas production, the depletable natural gas
quantity for any taxpayer for each such year shall be equal to 6,000 cubic
feet multiplied by the number of barrels of the taxpayer's depletable oil
quantity which the taxpayer elects to have applied. The taxpayer's
depletable oil quantity for any taxable year shall be reduced by the number
of barrels with respect to the election described herein. The Company will
supply the Investor Interestholders with information with respect to the
independent producer exemption annually.
Intangible Drilling Costs. The amount by which an integrated oil
company's IDCs exceeds 65% of the net income from oil, gas and geothermal
properties is treated as a preference item pursuant to Code Section
57(a)(2). Independent oil and gas producers and royalty owners are not
subject to this preference item provided, however, their AMTI may not be
reduced by more than 40% of the AMTI that would otherwise be determined if
they were subject to the IDC preference and did not compute an AMTI
operating loss deduction. The definition of an independent producer is the
same as in "Depletion" above.
Depreciation. An adjustment may increase or decrease AMTI is
depreciation is attributable to personal property that differs from the
amount available under the 150% of declining balance method.
Tax Credits. Generally, tax credits other than the foreign tax credit
are not allowable against the alternative minimum tax. Thus, the Section 29
Credit for production of fuel from a non-conventional source is allowed
only to the extent that the taxpayer's regular income tax exceeds his/her
alternative minimum tax. Any Section 29 Credit which is disallowed as a
result of this limitation however may be carried forward as a credit in
future years against the excess of the regular tax or the AMT.
The applicability of the AMT must be determined by each individual Investor
Interestholder based upon the operations of the Company and his/her personal tax
situation. Due to the inherently factual nature of the application of the AMT to
an Investor Interestholder, Special Tax Counsel is unable to express an opinion
with respect to such issue. In many circumstances, the federal (and state)
minimum tax provisions will substantially eliminate the value of IDC and Section
29 Credits for individual taxpayers. Accordingly, any potential investor in the
Company should consult his/her own tax advisor to determine the tax consequences
to him/her personally of the AMT.
Possible Changes in Tax Laws
The statutes, regulations and rules with respect to the tax matters
contained in this Supplement and in the Prospectus are constantly subject to
change by Congress or by the Department of the Treasury, and the interpretations
of such statutes, regulations and rules may be modified or effected by judicial
decision or by the Department of the Treasury. Significant amendments have been
made to the Code in recent years and few final regulations have been promulgated
pursuant to such amendments to the Code. Additionally, very few rulings have
been issued. For example, the tax legislation recently passed by Congress and
vetoed by President Clinton contained several provisions which could have
materially impacted an Investor Interestholder, both with respect to his
investment in the Company and generally. Accordingly, due to the continual
changes made by Congress, the Department of the Treasury and the courts with
respect to the administration and interpretation of the tax laws, no assurance
can be given that the foregoing opinions and interpretations will be sustained
or the tax aspects summarized herein or in the Prospectus will prevail and be
available to the Investor Interestholders.
A-13
<PAGE> 16
WOLVERINE ENERGY, L.L.C.
Prior Performance Tables
Summary of investor tax benefits and cash distribution returns
As of December 31, 1998
<TABLE>
<CAPTION>
Cumulative
----------
Investor First-Year First-Year Cumulative Section 29
-------- ---------- ---------- ---------- ----------
Program Contributions Deductions IDC Depletion Credits
------- ------------- ---------- --- --------- -------
<S> <C> <C> <C> <C> <C>
Wolverine Chester North $847,154 $62,406 $397,539 $257,238 $670,997
Antrim Drilling Program #1
Wolverine Chester North 827,500 $413,206 334,679 178,468 600,410
Antrim Drilling Program #2
Wolverine Chester North 362,700 $29,439 187,899 47,087 214,308
Antrim Drilling Program #3
Wolverine Chester North 410,250 $9,564 242,121 101,385 324,111
Antrim Drilling Program #4
Wolverine Otsego County 1,117,984 51,895 659,423 280,748 941,336
Antrim Development Program #5
Wolverine Charlton North 586,496 2,315 338,419 166,086 453,112
Antrim Development Program #6
Wolverine Antrim Development 447,188 1,613 245,899 102,372 348,637
Program #7
Wolverine Otsego County 827,566 4,604 483,575 147,628 548,908
Antrim Development Program #8
Wolverine Antrim Development 493,099 759 120,373 67,932 316,936
Program #11
Wolverine Antrim Development 1,059,250 11,097 541,250 51,510 435,498
Program #14
Wolverine Antrim Development 267,000 2,697 133,687 21,751 112,110
Program #15/1991
Wolverine Antrim Development 1,568,500 36,672 703,053 181,216 724,897
Program #15/1992
Wolverine Antrim Development 1,200,000 470 328,790 140,577 646,673
Program #16
Wolverine Antrim Development 1,270,000 0 262,500 40,412 0
Program #17
Wolverine Antrim Development 2,172,132 54,545 1,142,011 127,076 11,081
Trust #18
Wolverine Antrim Development 1,910,383 49,035 1,312,776 88,424 3,998
Trust #19
Wolverine Antrim Development 2,500,000 59,904 1,692,643 210,731 6,665
Trust #20
Wolverine Antrim Development 1,109,290 28,171 726,124 86,331 3,110
Trust #21
Wolverine Antrim Development 1,700,000 102,804 1,109,000 199,474 4,443
Trust #22
Wolverine Antrim Development 2,207,000 67,143 1,687,634 62,027 2,803
Trust 1995
Wolverine Antrim Development 1,154,000 85,257 791,782 27,967 0
1996-1, L.L.C.
Wolverine Antrim Development 4,473,162 106,890 3,311,513 69,334 0
1996-2, L.L.C.
Wolverine Antrim Development 4,088,000 103,215 3,289,539 39,816 0
1997-1, L.L.C.
Wolverine Antrim Development 1,185,000 31,106 879,267 10,999 0
1997-2, L.L.C.
Wolverine Antrim Development 1,727,000 49,520 1,445,700 0 0
1998-1, L.L.C.
<CAPTION>
Total
-----
Cumulative Cumulative Cumulative
---------- ---------- ----------
Other Tax Deductible Assumed Cumulative Cash
--------- ---------- ------- ---------- ----
Program Deductions Tax Items Tax Rate Tax Savings Distributions
------- ---------- --------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Wolverine Chester North $1,753,669 $2,408,446 33.0% $1,465,784 $957,950
Antrim Drilling Program #1
Wolverine Chester North 2,144,818 2,657,965 33.0% 1,477,538 713,475
Antrim Drilling Program #2
Wolverine Chester North 695,704 930,690 33.0% 521,436 145,505
Antrim Drilling Program #3
Wolverine Chester North 804,280 1,147,786 33.0% 702,880 322,723
Antrim Drilling Program #4
Wolverine Otsego County 2,021,902 2,962,073 33.0% 1,918,820 763,491
Antrim Development Program #5
Wolverine Charlton North 902,678 1,407,183 33.0% 917,482 364,750
Antrim Development Program #6
Wolverine Antrim Development 799,030 1,147,301 31.0% 704,300 295,596
Program #7
Wolverine Otsego County 1,212,143 1,843,346 31.0% 1,120,345 405,296
Antrim Development Program #8
Wolverine Antrim Development 773,867 962,172 31.0% 615,209 162,359
Program #11
Wolverine Antrim Development 1,157,076 1,749,836 31.0% 977,947 216,887
Program #14
Wolverine Antrim Development 289,249 444,687 31.0% 249,963 64,594
Program #15/1991
Wolverine Antrim Development 1,781,243 2,665,512 31.0% 1,551,206 562,508
Program #15/1992
Wolverine Antrim Development 1,456,250 1,925,617 31.0% 1,243,614 399,858
Program #16
Wolverine Antrim Development 719,901 1,022,813 39.6% 405,034 225,341
Program #17
Wolverine Antrim Development 1,782,608 3,051,695 39.6% 1,219,552 412,962
Trust #18
Wolverine Antrim Development 1,431,273 2,832,473 39.6% 1,125,657 387,880
Trust #19
Wolverine Antrim Development 1,882,575 3,785,949 39.6% 1,505,901 558,725
Trust #20
Wolverine Antrim Development 876,390 1,688,845 39.6% 671,893 259,598
Trust #21
Wolverine Antrim Development 1,174,874 2,483,348 39.6% 987,849 491,406
Trust #22
Wolverine Antrim Development 727,009 2,476,670 39.6% 983,564 212,386
Trust 1995
Wolverine Antrim Development 374,119 1,193,868 39.6% 472,772 147,054
1996-1, L.L.C.
Wolverine Antrim Development 496,551 3,877,398 39.6% 1,535,450 159,478
1996-2, L.L.C.
Wolverine Antrim Development 284,107 3,613,462 39.6% 1,430,931 115,404
1997-1, L.L.C.
Wolverine Antrim Development 182,240 1,072,506 39.6% 424,712 24,210
1997-2, L.L.C.
Wolverine Antrim Development 49,520 1,495,220 39.6% 592,107 0
1998-1, L.L.C.
<CAPTION>
Cumulative
----------
Cumulative Cumulative Tax Savings/
---------- ---------- ------------
Tax Savings Cash Distri- Cash Distri-
----------- ------------ ------------
and Cash tions as % of tions as % of
-------- ------------- -------------
Program Distributions Contributions Contributions
------- ------------- ------------- -------------
<S> <C> <C> <C>
Wolverine Chester North $2,423,734 113.1% 286.1%
Antrim Drilling Program #1
Wolverine Chester North 2,191,013 86.2% 264.8%
Antrim Drilling Program #2
Wolverine Chester North 666,941 40.1% 183.9%
Antrim Drilling Program #3
Wolverine Chester North 1,025,603 78.7% 250.0%
Antrim Drilling Program #4
Wolverine Otsego County 2,682,311 68.3% 239.9%
Antrim Development Program #5
Wolverine Charlton North 1,282,232 62.2% 218.6%
Antrim Development Program #6
Wolverine Antrim Development 999,896 66.1% 223.6%
Program #7
Wolverine Otsego County 1,525,641 49.0% 184.4%
Antrim Development Program #8
Wolverine Antrim Development 777,568 32.9% 157.7%
Program #11
Wolverine Antrim Development 1,194,834 20.5% 112.8%
Program #14
Wolverine Antrim Development 314,557 24.2% 117.8%
Program #15/1991
Wolverine Antrim Development 2,113,714 35.9% 134.8%
Program #15/1992
Wolverine Antrim Development 1,643,472 33.3% 137.0%
Program #16
Wolverine Antrim Development 630,375 17.7% 49.6%
Program #17
Wolverine Antrim Development 1,632,514 19.0% 75.2%
Trust #18
Wolverine Antrim Development 1,513,537 20.3% 79.2%
Trust #19
Wolverine Antrim Development 2,064,626 22.3% 82.6%
Trust #20
Wolverine Antrim Development 931,491 23.4% 84.0%
Trust #21
Wolverine Antrim Development 1,479,255 28.9% 87.0%
Trust #22
Wolverine Antrim Development 1,195,950 9.6% 54.2%
Trust 1995
Wolverine Antrim Development 619,826 12.7% 53.7%
1996-1, L.L.C.
Wolverine Antrim Development 1,694,928 3.6% 37.9%
1996-2, L.L.C.
Wolverine Antrim Development 1,546,335 2.8% 37.8%
1997-1, L.L.C.
Wolverine Antrim Development 448,922 2.0% 37.9%
1997-2, L.L.C.
Wolverine Antrim Development 592,107 0.0% 34.3%
1998-1, L.L.C.
</TABLE>
<PAGE> 17
WOLVERINE ENERGY, L.L.C.
Prior Performance Tables
Administrative Costs Incurred and as a Percentage of Gross Subscriptions
As of December 31, 1998
<TABLE>
<CAPTION>
1988 1989
------------------------- ---------------------------
Costs Percentage of Costs Percentage of
----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions
------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $7,500 0.9% $18,000 2.1%
Wolverine Chester North
Antrim Drilling Program #2 13,950 1.7%
Wolverine Chester North
Antrim Drilling Program #3
Wolverine Chester North
Antrim Drilling Program #4
Wolverine Otsego County
Antrim Development Program #5
Wolverine Charlton North
Antrim Development Program #6
Wolverine Antrim Development
Program #7
Wolverine Otsego County
Antrim Development Program #8
Wolverine Antrim Development
Program #11
Wolverine Antrim Development
Program #14
Wolverine Antrim Development
Program #15/1991
Wolverine Antrim Development
Program #15/1992
Wolverine Antrim Development
Program #16
Wolverine Antrim Development
Program #17
Wolverine Antrim Development
Trust #18
Wolverine Antrim Development
Trust #19
Wolverine Antrim Development
Trust #20
Wolverine Antrim Development
Trust #21
Wolverine Antrim Development
Trust #22
Wolverine Antrim Development
Trust 1995
Wolverine Antrim Development
1996-1, L.L.C.
Wolverine Antrim Development
1996-2, L.L.C.
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1990 1991
------------------------- --------------------------
Costs Percentage of Costs Percentage of
----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions
------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $19,094 2.3% $20,504 2.4%
Wolverine Chester North
Antrim Drilling Program #2 27,900 3.4% 29,407 3.6%
Wolverine Chester North
Antrim Drilling Program #3 6,380 1.8% 18,972 5.2%
Wolverine Chester North
Antrim Drilling Program #4 5,984 1.5% 18,921 4.6%
Wolverine Otsego County
Antrim Development Program #5 10,179 0.9% 34,148 3.1%
Wolverine Charlton North
Antrim Development Program #6 0 0.0% 11,256 1.9%
Wolverine Antrim Development
Program #7 3,153 0.7% 17,090 3.8%
Wolverine Otsego County
Antrim Development Program #8 16,779 2.0%
Wolverine Antrim Development
Program #11 8,938 1.8%
Wolverine Antrim Development
Program #14
Wolverine Antrim Development
Program #15/1991
Wolverine Antrim Development
Program #15/1992
Wolverine Antrim Development
Program #16
Wolverine Antrim Development
Program #17
Wolverine Antrim Development
Trust #18
Wolverine Antrim Development
Trust #19
Wolverine Antrim Development
Trust #20
Wolverine Antrim Development
Trust #21
Wolverine Antrim Development
Trust #22
Wolverine Antrim Development
Trust 1995
Wolverine Antrim Development
1996-1, L.L.C.
Wolverine Antrim Development
1996-2, L.L.C.
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1992 1993
--------------------------- --------------------------
Costs Percentage of Costs Percentage of
----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions
------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $21,087 2.5% $21,165 2.5%
Wolverine Chester North
Antrim Drilling Program #2 30,245 3.7% 30,357 3.7%
Wolverine Chester North
Antrim Drilling Program #3 19,513 5.4% 19,585 5.4%
Wolverine Chester North
Antrim Drilling Program #4 19,461 4.7% 19,533 4.8%
Wolverine Otsego County
Antrim Development Program #5 43,256 3.9% 43,416 3.9%
Wolverine Charlton North
Antrim Development Program #6 22,765 3.9% 22,850 3.9%
Wolverine Antrim Development
Program #7 17,577 3.9% 17,643 3.9%
Wolverine Otsego County
Antrim Development Program #8 33,936 4.1% 34,061 4.1%
Wolverine Antrim Development
Program #11 15,624 3.2% 15,682 3.2%
Wolverine Antrim Development
Program #14 26,157 2.5%
Wolverine Antrim Development
Program #15/1991 4,738 1.8%
Wolverine Antrim Development
Program #15/1992 18,038 1.1%
Wolverine Antrim Development
Program #16 30,425 2.5%
Wolverine Antrim Development
Program #17
Wolverine Antrim Development
Trust #18
Wolverine Antrim Development
Trust #19
Wolverine Antrim Development
Trust #20
Wolverine Antrim Development
Trust #21
Wolverine Antrim Development
Trust #22
Wolverine Antrim Development
Trust 1995
Wolverine Antrim Development
1996-1, L.L.C.
Wolverine Antrim Development
1996-2, L.L.C.
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1994 1995
-------------------------- --------------------------
Costs Percentage of Costs Percentage of
----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions
------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $21,927 2.6% $22,913 2.7%
Wolverine Chester North
Antrim Drilling Program #2 31,450 3.8% 32,864 4.0%
Wolverine Chester North
Antrim Drilling Program #3 20,291 5.6% 21,203 5.8%
Wolverine Chester North
Antrim Drilling Program #4 20,236 4.9% 21,146 5.2%
Wolverine Otsego County
Antrim Development Program #5 44,979 4.0% 47,002 4.2%
Wolverine Charlton North
Antrim Development Program #6 23,672 4.0% 24,737 4.2%
Wolverine Antrim Development
Program #7 18,278 4.1% 19,100 4.3%
Wolverine Otsego County
Antrim Development Program #8 35,288 4.3% 36,874 4.5%
Wolverine Antrim Development
Program #11 16,246 3.3% 16,977 3.4%
Wolverine Antrim Development
Program #14 48,338 4.6% 53,692 5.1%
Wolverine Antrim Development
Program #15/1991 8,755 3.3% 9,725 3.6%
Wolverine Antrim Development
Program #15/1992 51,610 3.3% 56,006 3.6%
Wolverine Antrim Development
Program #16 39,682 3.3% 42,689 3.6%
Wolverine Antrim Development
Program #17 15,446 1.2% 31,911 2.5%
Wolverine Antrim Development
Trust #18 4,583 0.2% 0 0.0%
Wolverine Antrim Development
Trust #19 47,760 2.5% 66,863 3.5%
Wolverine Antrim Development
Trust #20 87,500 3.5%
Wolverine Antrim Development
Trust #21 40,106 3.6%
Wolverine Antrim Development
Trust #22 0 0.0%
Wolverine Antrim Development
Trust 1995 0 0.0%
Wolverine Antrim Development
1996-1, L.L.C.
Wolverine Antrim Development
1996-2, L.L.C.
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1996 1997
-------------------------- -------------------------
Costs Percentage of Costs Percentage of
----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions
------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $23,869 2.8% $24,468 2.9%
Wolverine Chester North
Antrim Drilling Program #2 34,236 4.1% 35,095 4.2%
Wolverine Chester North
Antrim Drilling Program #3 22,088 6.1% 22,642 6.2%
Wolverine Chester North
Antrim Drilling Program #4 22,029 5.4% 22,581 5.5%
Wolverine Otsego County
Antrim Development Program #5 48,963 4.4% 48,968 4.4%
Wolverine Charlton North
Antrim Development Program #6 23,192 4.0% 23,774 4.1%
Wolverine Antrim Development
Program #7 19,897 4.4% 20,396 4.6%
Wolverine Otsego County
Antrim Development Program #8 38,413 4.6% 39,377 4.8%
Wolverine Antrim Development
Program #11 17,685 3.6% 18,129 3.7%
Wolverine Antrim Development
Program #14 59,177 5.6% 60,652 5.7%
Wolverine Antrim Development
Program #15/1991 10,718 4.0% 10,374 3.9%
Wolverine Antrim Development
Program #15/1992 59,667 3.8% 52,317 3.3%
Wolverine Antrim Development
Program #16 45,717 3.8% 0 0.0%
Wolverine Antrim Development
Program #17 33,243 2.6% 34,077 2.7%
Wolverine Antrim Development
Trust #18 13,826 0.6% 27,500 1.3%
Wolverine Antrim Development
Trust #19 66,863 3.5% 66,863 3.5%
Wolverine Antrim Development
Trust #20 87,500 3.5% 87,500 3.5%
Wolverine Antrim Development
Trust #21 41,780 3.8% 42,828 3.9%
Wolverine Antrim Development
Trust #22 61,330 3.6% 62,869 3.7%
Wolverine Antrim Development
Trust 1995 60,435 2.7% 86,301 3.9%
Wolverine Antrim Development
1996-1, L.L.C. 30,139 2.6% 43,038 3.7%
Wolverine Antrim Development
1996-2, L.L.C. 31,083 0.7% 166,935 3.7%
Wolverine Antrim Development
1997-1, L.L.C. 67,069 1.6%
Wolverine Antrim Development
1997-2, L.L.C. 31,106 2.6%
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1998
-------------------------
Costs Percentage of
----- -------------
Program Incurred Subscriptions
------- -------- -------------
<S> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $26,488 3.1%
Wolverine Chester North
Antrim Drilling Program #2 36,812 4.4%
Wolverine Chester North
Antrim Drilling Program #3 24,511 6.8%
Wolverine Chester North
Antrim Drilling Program #4 0 0.0%
Wolverine Otsego County
Antrim Development Program #5 53,124 4.8%
Wolverine Charlton North
Antrim Development Program #6 25,737 4.4%
Wolverine Antrim Development
Program #7 22,080 4.9%
Wolverine Otsego County
Antrim Development Program #8 42,628 5.2%
Wolverine Antrim Development
Program #11 20,136 4.1%
Wolverine Antrim Development
Program #14 65,670 6.2%
Wolverine Antrim Development
Program #15/1991 9,991 3.7%
Wolverine Antrim Development
Program #15/1992 56,636 3.6%
Wolverine Antrim Development
Program #16 0 0.0%
Wolverine Antrim Development
Program #17 36,890 2.9%
Wolverine Antrim Development
Trust #18 55,000 2.5%
Wolverine Antrim Development
Trust #19 66,863 3.5%
Wolverine Antrim Development
Trust #20 87,500 3.5%
Wolverine Antrim Development
Trust #21 77,591 7.0%
Wolverine Antrim Development
Trust #22 68,059 4.0%
Wolverine Antrim Development
Trust 1995 (15,441) -0.7%
Wolverine Antrim Development
1996-1, L.L.C. 696 0.1%
Wolverine Antrim Development
1996-2, L.L.C. 2,098 0.0%
Wolverine Antrim Development
1997-1, L.L.C. 44 0.0%
Wolverine Antrim Development
1997-2, L.L.C. 101,741 8.6%
Wolverine Antrim Development
1998-1, L.L.C. 49,520 2.9%
</TABLE>
<PAGE> 18
WOLVERINE ENERGY, L.L.C.
Prior Performance Tables
Direct Costs Incurred and as a Percentage of Gross Subscriptions
As of December 31, 1998
<TABLE>
<CAPTION>
1988 1989 1990
------------------------ --------------------------- -------------------------
Costs Percentage of Costs Percentage of Costs Percentage of
----- ------------- ----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions Incurred Subscriptions
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $39,187 4.6% $1,500 0.2% $3,951 0.5%
Wolverine Chester North
Antrim Drilling Program #2 125 0.0% 0 0.0%
Wolverine Chester North
Antrim Drilling Program #3 988 0.3%
Wolverine Chester North
Antrim Drilling Program #4 2,494 0.6%
Wolverine Otsego County
Antrim Development Program #5 1,365 0.1%
Wolverine Charlton North
Antrim Development Program #6 114 0.0%
Wolverine Antrim Development
Program #7 114 0.0%
Wolverine Otsego County
Antrim Development Program #8 114 0.0%
Wolverine Antrim Development
Program #11
Wolverine Antrim Development
Program #14
Wolverine Antrim Development
Program #15/1991
Wolverine Antrim Development
Program #15/1992
Wolverine Antrim Development
Program #16
Wolverine Antrim Development
Program #17
Wolverine Antrim Development
Trust #18
Wolverine Antrim Development
Trust #19
Wolverine Antrim Development
Trust #20
Wolverine Antrim Development
Trust #21
Wolverine Antrim Development
Trust #22
Wolverine Antrim Development
Trust 1995
Wolverine Antrim Development
1996-1, L.L.C.
Wolverine Antrim Development
1996-2, L.L.C.
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1991 1992 1993
-------------------------- --------------------------- --------------------------
Costs Percentage of Costs Percentage of Costs Percentage of
----- ------------- ----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions Incurred Subscriptions
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $11,856 1.4% $5,380 0.6% $5,454 0.6%
Wolverine Chester North
Antrim Drilling Program #2 3,957 0.5% 6,021 0.7% 5,154 0.6%
Wolverine Chester North
Antrim Drilling Program #3 2,462 0.7% 2,695 0.7% 3,615 1.0%
Wolverine Chester North
Antrim Drilling Program #4 2,607 0.6% 3,565 0.9% 3,812 0.9%
Wolverine Otsego County
Antrim Development Program #5 4,334 0.4% 9,035 0.8% 4,886 0.4%
Wolverine Charlton North
Antrim Development Program #6 2,104 0.4% 2,002 0.3% 2,750 0.5%
Wolverine Antrim Development
Program #7 2,351 0.5% 4,862 1.1% 2,940 0.7%
Wolverine Otsego County
Antrim Development Program #8 3,136 0.4% 4,795 0.6% 3,690 0.4%
Wolverine Antrim Development
Program #11 600 0.1% 4,151 0.8% 2,147 0.4%
Wolverine Antrim Development
Program #14 5,894 0.6% 4,375 0.4%
Wolverine Antrim Development
Program #15/1991 1,450 0.5% 6,875 2.6%
Wolverine Antrim Development
Program #15/1992 107 0.0% 7,975 0.5%
Wolverine Antrim Development
Program #16 7,065 0.6%
Wolverine Antrim Development
Program #17 5,302 0.4%
Wolverine Antrim Development
Trust #18 153 0.0%
Wolverine Antrim Development
Trust #19
Wolverine Antrim Development
Trust #20
Wolverine Antrim Development
Trust #21
Wolverine Antrim Development
Trust #22
Wolverine Antrim Development
Trust 1995
Wolverine Antrim Development
1996-1, L.L.C.
Wolverine Antrim Development
1996-2, L.L.C.
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1994 1995 1996
-------------------------- -------------------------- --------------------------
Costs Percentage of Costs Percentage of Costs Percentage of
----- ------------- ----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions Incurred Subscriptions
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $4,929 0.6% $4,220 0.5% $4,075 0.5%
Wolverine Chester North
Antrim Drilling Program #2 4,475 0.5% 3,875 0.5% 3,080 0.4%
Wolverine Chester North
Antrim Drilling Program #3 2,100 0.6% 1,800 0.5% 1,502 0.4%
Wolverine Chester North
Antrim Drilling Program #4 5,480 1.3% 3,850 0.9% 3,312 0.8%
Wolverine Otsego County
Antrim Development Program #5 5,285 0.5% 8,538 0.8% 5,390 0.5%
Wolverine Charlton North
Antrim Development Program #6 3,080 0.5% 4,578 0.8% 2,738 0.5%
Wolverine Antrim Development
Program #7 2,600 0.6% 3,470 0.8% 2,093 0.5%
Wolverine Otsego County
Antrim Development Program #8 2,720 0.3% 4,242 0.5% 2,852 0.3%
Wolverine Antrim Development
Program #11 1,370 0.3% 1,973 0.4% 1,524 0.3%
Wolverine Antrim Development
Program #14 2,540 0.2% 2,656 0.3% 2,285 0.2%
Wolverine Antrim Development
Program #15/1991 2,090 0.8% 2,467 0.9% 2,265 0.8%
Wolverine Antrim Development
Program #15/1992 4,610 0.3% 4,610 0.3% 4,158 0.3%
Wolverine Antrim Development
Program #16 3,860 0.3% 3,962 0.3% 3,560 0.3%
Wolverine Antrim Development
Program #17 1,790 0.1% 1,790 0.1% 1,788 0.1%
Wolverine Antrim Development
Trust #18 4,030 0.2% 8,635 0.4% 5,434 0.3%
Wolverine Antrim Development
Trust #19 4,166 0.2% 8,635 0.5% 5,366 0.3%
Wolverine Antrim Development
Trust #20 8,751 0.4% 5,323 0.2%
Wolverine Antrim Development
Trust #21 8,751 0.8% 5,151 0.5%
Wolverine Antrim Development
Trust #22 1,616 0.1% 12,416 0.7%
Wolverine Antrim Development
Trust 1995 537 0.0% 2,056 0.1%
Wolverine Antrim Development
1996-1, L.L.C. 937 0.1%
Wolverine Antrim Development
1996-2, L.L.C. 68 0.0%
Wolverine Antrim Development
1997-1, L.L.C.
Wolverine Antrim Development
1997-2, L.L.C.
Wolverine Antrim Development
1998-1, L.L.C.
<CAPTION>
1997 1998
------------------------- -------------------------
Costs Percentage of Costs Percentage of
----- ------------- ----- -------------
Program Incurred Subscriptions Incurred Subscriptions
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $5,620 0.7% $5,635 0.7%
Wolverine Chester North
Antrim Drilling Program #2 5,108 0.6% 5,169 0.6%
Wolverine Chester North
Antrim Drilling Program #3 3,558 1.0% 2,940 0.8%
Wolverine Chester North
Antrim Drilling Program #4 5,193 1.3% 3,579 0.9%
Wolverine Otsego County
Antrim Development Program #5 7,461 0.7% 8,388 0.8%
Wolverine Charlton North
Antrim Development Program #6 4,658 0.8% 5,027 0.9%
Wolverine Antrim Development
Program #7 4,168 0.9% 3,994 0.9%
Wolverine Otsego County
Antrim Development Program #8 4,908 0.6% 6,270 0.8%
Wolverine Antrim Development
Program #11 3,533 0.7% 3,472 0.7%
Wolverine Antrim Development
Program #14 4,623 0.4% 6,667 0.6%
Wolverine Antrim Development
Program #15/1991 4,397 1.6% 3,235 1.2%
Wolverine Antrim Development
Program #15/1992 6,777 0.4% 10,408 0.7%
Wolverine Antrim Development
Program #16 3,150 0.3% 8,296 0.7%
Wolverine Antrim Development
Program #17 5,207 0.4% 6,689 0.5%
Wolverine Antrim Development
Trust #18 13,890 0.6% 12,399 0.6%
Wolverine Antrim Development
Trust #19 10,293 0.5% 26,086 1.4%
Wolverine Antrim Development
Trust #20 10,189 0.4% 15,411 0.6%
Wolverine Antrim Development
Trust #21 9,128 0.8% 23,069 2.1%
Wolverine Antrim Development
Trust #22 15,744 0.9% 12,679 0.7%
Wolverine Antrim Development
Trust 1995 5,908 0.3% 3,519 0.2%
Wolverine Antrim Development
1996-1, L.L.C. 7,465 0.6% 5,425 0.5%
Wolverine Antrim Development
1996-2, L.L.C. 9,613 0.2% 7,043 0.2%
Wolverine Antrim Development
1997-1, L.L.C. 15 0.0% 76 0.0%
Wolverine Antrim Development
1997-2, L.L.C. 0 0.0% 45 0.0%
Wolverine Antrim Development
1998-1, L.L.C. 0 0.0%
</TABLE>
<PAGE> 19
WOLVERINE ENERGY, L.L.C.
Prior Performance Tables
Sponsor operating results in prior programs
As of December 31, 1998
<TABLE>
<CAPTION>
Cumulative
----------
Cumulative Cumulative Cumulative Cash Flow Cumulative Cumulative
---------- ---------- ---------- --------- ---------- ----------
Cumulative Operating Administrative Direct from Cumulative Net Revenues Section 29
---------- --------- -------------- ------ ---- ---------- ------------ ----------
Program Revenues Costs Costs Costs Operations Cash Flow Distributed Credit
------- -------- ----- ----- ----- ---------- --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $340,416 $198,691 $36,823 $12,188 $141,725 $92,714 $131,743 $110,847
Wolverine Chester North
Antrim Drilling Program #2 $186,683 $ 96,283 $30,232 $ 3,684 $ 90,400 $56,484 $ 71,348 $ 60,041
Wolverine Chester North
Antrim Drilling Program #3 $ 61,287 $ 37,551 $17,518 $ 2,166 $ 23,736 $ 4,052 $ 14,551 $ 21,431
Wolverine Chester North
Antrim Drilling Program #4 $ 83,660 $ 48,820 $14,989 $ 3,389 $ 34,840 $16,461 $ 32,272 $ 32,411
Wolverine Otsego County
Antrim Development Program #5 $178,281 $ 91,559 $28,053 $ 4,101 $ 86,722 $54,568 $ 57,262 $ 70,600
Wolverine Charlton North
Antrim Development Program #6 $ 48,809 $ 22,374 $ 8,009 $ 1,217 $ 26,435 $17,209 $ 16,414 $ 20,390
Wolverine Antrim Development
Program #7 $ 81,391 $ 40,586 $13,038 $ 2,234 $ 40,805 $25,533 $ 24,312 $ 29,286
Wolverine Otsego County
Antrim Development Program #8 $132,656 $ 63,644 $27,736 $ 3,261 $ 69,012 $38,015 $ 40,530 $ 54,891
Wolverine Antrim Development
Program #11 $ 76,508 $ 46,915 $12,942 $ 1,877 $ 29,593 $14,774 $ 16,236 $ 31,694
Wolverine Antrim Development
Program #14 $ 51,621 $ 27,835 $15,684 $ 1,157 $ 23,786 $ 6,944 $ 10,844 $ 21,775
Wolverine Antrim Development
Program #15/1991 $ 2,625 $ 1,400 $ 543 $ 213 $ 1,225 $ 468 $ 615 $ 1,094
Wolverine Antrim Development
Program #15/1992 $ 17,079 $ 9,503 $ 2,943 $ 385 $ 7,576 $ 4,248 $ 5,578 $ 7,153
Wolverine Antrim Development
Program #16 $151,531 $ 91,129 $15,851 $ 2,989 $ 60,403 $41,562 $ 39,986 $ 64,667
Wolverine Antrim Development
Program #17 $ 74,803 $ 39,528 $14,875 $ 2,108 $ 35,276 $18,292 $ 22,534 $ 0
Wolverine Antrim Development
Trust #18 $167,197 $112,532 $10,091 $ 4,454 $ 54,665 $40,120 $ 41,296 $ 1,108
Wolverine Antrim Development
Trust #19 $135,855 $ 75,890 $31,521 $ 5,455 $ 59,966 $22,990 $ 38,788 $ 400
Wolverine Antrim Development
Trust #20 $207,863 $106,657 $35,000 $ 3,967 $101,206 $62,238 $ 55,873 $ 667
Wolverine Antrim Development
Trust #21 $ 94,661 $ 45,186 $20,231 $ 4,610 $ 49,474 $24,634 $ 25,960 $ 311
Wolverine Antrim Development
Trust #22 $146,497 $ 67,500 $19,226 $ 4,246 $ 78,998 $55,526 $ 49,141 $ 444
Wolverine Antrim Development
Trust 1995 $128,792 $ 73,147 $26,259 $ 2,302 $ 55,645 $27,084 $ 38,388 $ 561
Wolverine Antrim Development
1996-1, L.L.C. $ 48,373 $ 26,968 $ 6,862 $ 1,943 $ 21,405 $12,601 $ 16,684 $ 0
Wolverine Antrim Development
1996-2, L.L.C. $ 65,938 $ 41,580 $25,666 $ 2,499 $ 24,358 ($3,807) $ 19,476 $ 0
Wolverine Antrim Development
1997-1, L.L.C. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Wolverine Antrim Development
1997-2, L.L.C. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Wolverine Antrim Development
1998-1, L.L.C. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
<PAGE> 20
WOLVERINE ENERGY, L.L.C.
Prior Performance Tables
Investor operating results in prior programs
As of December 31, 1998
<TABLE>
<CAPTION>
Cumulative
----------
Cumulative Cumulative Cumulative Cash Flow Cumulative
---------- ---------- ---------- --------- ----------
Cumulative Operating Administrative Direct from Cumulative Net Revenues
---------- --------- -------------- ------ ---- ---------- ------------
Program Revenues Costs Costs Costs Operations Cash Flow Distributed
------- -------- ----- ----- ----- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Wolverine Chester North
Antrim Drilling Program #1 $1,856,748 $ 927,714 $182,693 $79,618 $ 929,034 $666,722 $826,207
Wolverine Chester North
Antrim Drilling Program #2 $1,680,145 $ 866,550 $272,085 $33,155 $ 813,596 $508,355 $642,128
Wolverine Chester North
Antrim Drilling Program #3 $ 551,585 $ 337,957 $157,666 $19,495 $ 213,628 $36,467 $130,955
Wolverine Chester North
Antrim Drilling Program #4 $ 752,936 $ 439,379 $134,903 $30,503 $ 313,557 $148,151 $290,451
Wolverine Otsego County
Antrim Development Program #5 $2,198,802 $1,129,228 $345,983 $50,581 $1,069,574 $673,010 $706,229
Wolverine Charlton North
Antrim Development Program #6 $1,035,838 $ 474,824 $169,974 $25,834 $ 561,014 $365,206 $348,336
Wolverine Antrim Development
Program #7 $ 887,550 $ 442,584 $142,175 $24,359 $ 444,966 $278,433 $271,284
Wolverine Otsego County
Antrim Development Program #8 $1,193,900 $ 572,793 $249,621 $29,465 $ 621,106 $342,020 $364,766
Wolverine Antrim Development
Program #11 $ 688,568 $ 422,236 $116,475 $16,893 $ 266,333 $132,964 $146,123
Wolverine Antrim Development
Program #14 $ 980,790 $ 528,856 $298,000 $27,883 $ 451,934 $126,050 $206,043
Wolverine Antrim Development
Program #15/1991 $ 268,535 $ 141,374 $ 53,758 $22,565 $ 127,161 $ 50,838 $ 63,979
Wolverine Antrim Development
Program #15/1992 $1,721,618 $ 952,316 $291,331 $38,259 $ 769,302 $439,712 $556,930
Wolverine Antrim Development
Program #16 $1,363,782 $ 820,157 $142,663 $26,904 $ 543,625 $374,059 $359,872
Wolverine Antrim Development
Program #17 $ 623,627 $ 332,754 $136,692 $20,458 $ 290,873 $133,724 $202,807
Wolverine Antrim Development
Trust #18 $1,504,774 $1,012,789 $ 90,818 $40,087 $ 491,985 $361,080 $371,666
Wolverine Antrim Development
Trust #19 $1,222,698 $ 683,006 $283,691 $49,091 $ 539,692 $206,910 $349,092
Wolverine Antrim Development
Trust #20 $1,870,767 $ 959,916 $315,000 $35,707 $ 910,851 $560,144 $502,853
Wolverine Antrim Development
Trust #21 $ 851,945 $ 406,678 $182,075 $41,490 $ 445,267 $221,703 $233,638
Wolverine Antrim Development
Trust #22 $1,318,474 $ 607,496 $173,032 $38,210 $ 710,978 $499,737 $442,265
Wolverine Antrim Development
Trust 1995 $ 524,667 $ 300,188 $105,037 $ 9,718 $ 224,479 $109,725 $173,998
Wolverine Antrim Development
1996-1, L.L.C. $ 334,347 $ 191,090 $ 67,012 $11,884 $ 143,257 $ 64,361 $130,370
Wolverine Antrim Development
1996-2, L.L.C. $ 386,577 $ 244,962 $174,450 $14,225 $ 141,615 ($47,060) $140,002
Wolverine Antrim Development
1997-1, L.L.C. $ 263,503 $ 146,640 $ 67,113 $ 91 $ 116,863 $ 49,659 $115,404
Wolverine Antrim Development
1997-2, L.L.C. $ 65,022 $ 36,249 $132,847 $ 45 $ 28,773 ($104,119) $ 24,210
Wolverine Antrim Development
1998-1, L.L.C. $ 0 $ 0 $ 49,520 $ 0 $ 0 ($49,520) $ 0
<CAPTION>
Cumulative
----------
Section 29
----------
Program Credit
------
<S> <C>
Wolverine Chester North
Antrim Drilling Program #1 $560,150
Wolverine Chester North
Antrim Drilling Program #2 $540,369
Wolverine Chester North
Antrim Drilling Program #3 $192,877
Wolverine Chester North
Antrim Drilling Program #4 $291,700
Wolverine Otsego County
Antrim Development Program #5 $870,736
Wolverine Charlton North
Antrim Development Program #6 $432,722
Wolverine Antrim Development
Program #7 $319,351
Wolverine Otsego County
Antrim Development Program #8 $494,017
Wolverine Antrim Development
Program #11 $285,242
Wolverine Antrim Development
Program #14 $413,723
Wolverine Antrim Development
Program #15/1991 $111,016
Wolverine Antrim Development
Program #15/1992 $717,744
Wolverine Antrim Development
Program #16 $582,006
Wolverine Antrim Development
Program #17 $ 0
Wolverine Antrim Development
Trust #18 $ 9,973
Wolverine Antrim Development
Trust #19 $ 3,598
Wolverine Antrim Development
Trust #20 $ 5,999
Wolverine Antrim Development
Trust #21 $ 2,799
Wolverine Antrim Development
Trust #22 $ 3,999
Wolverine Antrim Development
Trust 1995 $ 2,242
Wolverine Antrim Development
1996-1, L.L.C. $ 0
Wolverine Antrim Development
1996-2, L.L.C. $ 0
Wolverine Antrim Development
1997-1, L.L.C. $ 0
Wolverine Antrim Development
1997-2, L.L.C. $ 0
Wolverine Antrim Development
1998-1, L.L.C. $ 0
</TABLE>
<PAGE> 21
WOLVERINE ENERGY, L.L.C.
(A MICHIGAN LIMITED LIABILITY CORPORATION)
- -------------------------------------------------------------------------------
FINANCIAL REPORT
DECEMBER 31, 1998
<PAGE> 22
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
REPORT LETTER 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Member's Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-12
</TABLE>
<PAGE> 23
[PLANTE & MORAN, LLP LETTERHEAD]
Independent Auditor's Report
To the Member
Wolverine Energy, L.L.C.
We have audited the accompanying balance sheet of Wolverine Energy, L.L.C. (a
Michigan limited liability corporation) as of December 31, 1998 and 1997, and
the related statements of operations, member's equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wolverine Energy, L.L.C. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Plante & Moran, LLP
March 26, 1999
East Lansing, Michigan
<PAGE> 24
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
December 31
-----------
1998 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 454,041 $ 55,312
Accounts receivable:
Related entities (Note 5) 335,559 46,738
Other 31,932 75,000
Current portion of member note receivable (Note 5) - 200,000
Working interests held for resale 877,580 1,458,167
Prepaid expenses 14,180 -
----------- -----------
Total current assets 1,713,292 1,835,217
EQUIPMENT
Office equipment 59,513 39,703
Accumulated depreciation (39,936) (33,966)
----------- -----------
Total fixed assets 19,577 5,737
MEMBER NOTE RECEIVABLE (NOTE 5) - 400,000
INVESTMENTS IN RELATED ENTITIES (NOTE 2) 1,154,458 944,410
ACCOUNTS RECEIVABLE (NOTE 7) 329,545 -
OTHER ASSETS 10,341 7,776
----------- -----------
Total assets $ 3,227,213 $ 3,193,140
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Line of credit (Note 3) $ 325,000 $ 325,000
Current portion of long-term debt (Note 4) 105,000 -
Accounts payable:
Trade 190,828 94,333
Operators 1,136,809 2,259,967
Related party (Note 5) 12,743 84,424
Other 100,642 98,821
Accrued expenses 21,465 22,270
----------- -----------
Total current liabilities 1,892,487 2,884,815
LONG-TERM DEBT (NOTE 4) 626,347 -
MEMBER'S EQUITY 708,379 308,325
----------- -----------
Total liabilities and member's equity $ 3,227,213 $ 3,193,140
=========== ===========
</TABLE>
<PAGE> 25
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1998 1997
---- ----
<S> <C> <C>
REVENUE
Turnkey revenue $ 5,987,964 $ 6,333,944
Management fees 337,198 362,832
Other income 235,669 149,124
----------- -----------
Total revenue 6,560,831 6,845,900
EXPENSES
Cost of sales 5,130,237 5,182,605
General and administrative 1,423,744 1,190,994
----------- -----------
Total expenses 6,553,981 6,373,599
----------- -----------
OPERATING INCOME 6,850 472,301
LOSS FROM RELATED ENTITIES (35,283) (19,645)
----------- -----------
NET INCOME (LOSS) $ (28,433) $ 452,656
=========== ===========
</TABLE>
<PAGE> 26
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
STATEMENT OF MEMBER'S EQUITY
<TABLE>
<S> <C>
MEMBER'S EQUITY - January 1, 1997 $ 339,623
Net income 452,656
Distributions to member (483,954)
-----------
MEMBER'S EQUITY - December 31, 1997 308,325
Net loss (28,433)
Member contributions 1,981,219
Distributions to member (1,552,732)
-----------
MEMBER'S EQUITY - December 31, 1998 $ 708,379
===========
</TABLE>
<PAGE> 27
WOLVERINE ENERGY L.L.C.
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Cash received from customers and related parties $ 6,315,078 $ 7,114,727
Cash paid to operators, employees, and suppliers (7,269,751) (5,763,807)
Cash paid for interest (141,291) (18,645)
----------- -----------
Net cash provided by (used in) operating
activities (Note 6) (1,095,964) 1,332,275
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (19,810) (25,053)
Cash paid for investments in limited liability corporations (279,053) (610,662)
Distributions from limited liability corporations 33,722 17,419
----------- -----------
Net cash used in investing activities (265,141) (618,296)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net of repayments - 75,500
Proceeds from long-term debt 788,663 -
Payments on long-term debt (57,316) -
Loans to (repayments from) member 600,000 (299,105)
Contributions from member 1,981,219 -
Distributions to member (1,552,732) (483,954)
----------- -----------
Net cash provided by (used in) financing
activities 1,759,834 (707,559)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 398,729 6,420
CASH AND CASH EQUIVALENTS - Beginning of year 55,312 48,892
----------- -----------
CASH AND CASH EQUIVALENTS - End of year $ 454,041 $ 55,312
=========== ===========
</TABLE>
<PAGE> 28
WOLVERINE ENERGY, L.L.C.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Wolverine Energy, L.L.C. (WELLC) acquires working interests in natural
gas prospects throughout the United States, forms oil and gas entities
and sells them the interests on a turnkey basis. WELLC is responsible
for managing the operations of the entities
CASH EQUIVALENTS - WELLC considers all liquid investments purchased
with an original maturity date of three months or less to be cash
equivalents.
WORKING INTERESTS HELD FOR RESALE - WELLC has acquired certain oil and
gas working interests for the purpose of selling these interests to oil
and gas entities. Such working interests held for resale are recorded
at cost, but are periodically reviewed to determine if the market value
of the working interest has been impaired. If impairment exists, a loss
is recognized by recording an impairment allowance. Abandonments of
working interests held for resale are charged to expense. As of
December 31, 1998 and 1997, no reserve for impairment has been
recorded.
INVESTMENTS IN RELATED ENTITIES - Investments in related entities are
accounted for under the equity method since WELLC has significant
influence over the management of these entities. WELLC is the manager
of the oil and gas entities and makes initial capital contributions in
accordance with provisions in the respective placement memorandum
governing the activities of the particular entity. Income or losses are
allocated to the investment accounts according to WELLC's ownership
interest in the entities, and distributions received are deducted from
the investment accounts.
TURNKEY DRILLING REVENUE - WELLC enters into contracts with affiliated
entities to sell them oil and gas working interests under turnkey
drilling agreements. Under the terms of the agreements, the entities
pay a fixed price for acquisition, drilling and completion costs and
receive working interests in the wells. WELLC agrees to monitor the
well operators obligation to conduct the drilling and completion of
each well. Turnkey revenue is recognized when the related services have
been performed (working interests have been sold) and substantially all
future obligations have been settled.
<PAGE> 29
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COST OF SALES - The Company acquires oil and gas working interests for
resale that require the Company to pay a pro rata portion of all costs
to drill and complete a well. The Company sells these oil and gas
working interests in the wells at a fixed price, generally before the
drilling is completed. Actual costs to drill and complete a well may
exceed the sales price. The Company has the burden of paying all costs
in excess of the turnkey price. Included in accounts payable at
December 31, 1998 and 1997, and cost of sales, is the estimated total
cost that the Company will be required to pay on working interests that
have been sold. Due to uncertainties inherent in the estimation
process, it is at least reasonably possible that the Company may incur
expenses in excess of the amount recorded. Management is of the opinion
that any adjustment of the amount recorded would not have a material
adverse effect on the financial statements.
MANAGEMENT FEES - In connection with the organization and offering
stage of related oil and gas entities WELLC receives a management fee
of 2.5 percent from investor subscriptions, which is credited to income
as earned.
EQUIPMENT - Equipment is recorded at cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful
lives of the assets. Costs of maintenance and repairs are charged to
expense as incurred.
INCOME TAXES - No provision for federal income taxes has been included
in the financial statements since all income and expenses of the LLC
are allocated to the member for inclusion in his respective income tax
return.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE> 30
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - AFFILIATED OIL AND GAS ENTITIES
WELLC sponsors the formation of entities, typically limited liability
corporations, for the purpose of conducting oil and gas exploration,
development, and production activities on oil and gas properties. WELLC
serves as manager of these entities and, as such, has full and
exclusive discretion in the management and control. The turnkey
drilling and operating agreements that WELLC enters into with the
entities provide that the entities pay for the drilling costs of the
wells at an agreed-upon price per well. Profits from oil and gas
properties are allocated based on the working interest ownership
percentage of the properties.
WELLC holds the following investment interest in the following
entities:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Wolverine Antrim Development 1995, L.L.C. 18.9% 20.0%
Wolverine Antrim Development 1996-1, L.L.C. 12.8% 15.0%
Wolverine Antrim Development 1996-2, L.L.C. 14.5% 15.0%
Wolverine Antrim Development 1997-1, L.L.C. 14.8% 15.0%
Wolverine Antrim Development 1997-2, L.L.C. 14.5% 15.0%
Wolverine Antrim Development 1998-1, L.L.C. 12.5% -
Wolverine Energy 1998-1999 (A) Development
Company, L.L.C. 10.0% -
</TABLE>
Following is a summary of the financial position and results of
operations of entities whose investments are accounted for under the
equity method of accounting:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Current assets $ 565,425 $ 217,927
Other assets (net) 16,464,198 11,238,505
------------ ------------
Total assets $ 17,029,623 $ 11,456,432
============ ============
Current liabilities $ 516,797 $ 197,841
Equity 16,512,826 11,258,591
------------ ------------
Total liabilities and equity $ 17,029,623 $ 11,456,432
============ ============
Net loss $ (793,959) $ (1,092,526)
============ ============
</TABLE>
<PAGE> 31
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - LINE OF CREDIT
The line of credit to a bank is unsecured and due on demand. The line
of credit bears interest at 1.5 percent above the New York Citibank
prime rate (effective rate of 9.25 percent at December 31, 1998).
WELLC's credit limit is $325,000. The line of credit is guaranteed by
the member.
NOTE 4 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
1998 1997
---- ----
<S> <C> <C>
Notes payable to unrelated parties, due in monthly interest
payments of $2,334 for the first 12 months and the principal
and interest payments of $2,500 thereafter, at an interest rate
of 14%, with any remaining balance due January 2003. The
note is collateralized by certain investments of the Company
and is guaranteed by the member. $ 200,000 $ -
Note payable to an unrelated company, due in monthly
interest payments of $3,083, at a rate of prime plus 10% for
an effective rate of 17.75% at December 31, 1998. The note
is collateralized by all assets of the Company and is
guaranteed by the member. The principal payment is due
March 2000. 200,000 -
Note payable to bank, due in monthly installments of $502,
including interest at a rate of 15.95%. The note is
collateralized by equipment. Final payment is due July 2001. 12,687 -
Note payable to bank, due in monthly payments of $6,250
plus interest at a rate of prime plus 1.5% for an effective rate
of 9.25% at December 31, 1998. The note is colateralized by
all assets of the Company and is guaranteed by the member.
Final payment is due April 2003. 318,660 -
------- -
Subtotal 731,347 -
Less current portion 105,000 -
-------- -
Long-term portion $ 626,347 $ -
========= ===
</TABLE>
<PAGE> 32
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 4 - LONG-TERM DEBT (CONTINUED)
Minimum principal payments on long-term debt to maturity as of December
31, 1998, are as follows:
<TABLE>
<S> <C>
1999 $105,000
2000 307,500
2001 107,500
2002 107,500
2003 103,847
--------
Total $731,347
========
</TABLE>
NOTE 5 - RELATED PARTY TRANSACTIONS
Because of the nature of WELLC's business, a significant number of
transactions are with related parties.
During 1998 and 1997, WELLC earned turnkey revenue from related
entities in the amount of $5,833,889 and $5,888,335, respectively. The
balance of turnkey revenues and allocated expenses owed to WELLC
included in accounts receivable as of December 31, 1998 and 1997,
totaled $335,559 and $46,738, respectively.
During 1998 and 1997, WELLC charged management fees to related entities
in the amount of $337,198 and $362,832, respectively.
WELLC had outstanding loans totaling $600,000 at December 31, 1997, to
the member. The note is payable in equal installments over the next
three years including interest at 8 percent and is unsecured. During
1998, the entire outstanding balance was repaid.
WELLC owed related entities for administrative costs and member
contributions in the amount of $12,743 and $84,424 at December 31, 1998
and 1997, respectively.
<PAGE> 33
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 6 - CASH FLOWS
A reconciliation of net income (loss) to net cash flows from operating
activities is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net income (loss) $ (28,433) $ 452,656
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation expense 5,970 19,316
Loss from equity investments 35,283 19,645
(Increase) decrease in assets:
Accounts receivable (575,298) 268,827
Working interests held for resale 580,587 (1,046,997)
Prepaid expenses (14,180) -
Other assets (2,565) 2,745
Increase (decrease) in liabilities:
Accounts payable (1,096,523) 1,608,726
Accrued expenses (805) 7,357
----------- -----------
Net cash provided by (used in)
operating activities $(1,095,964) $ 1,332,275
=========== ===========
</TABLE>
There were no significant noncash investing and financing activities
during 1998 and 1997.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
As managing member in various affiliated oil and gas entities, WELLC is
subject to contingencies that may arise in the normal course of
business of these entities. Management is of the opinion that
liabilities, if any, related to such contingencies that may arise would
not be material to the financial statements.
<PAGE> 34
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 7 - Commitments and Contingencies (Continued)
During the year, WELLC entered into a commitment for approximately
$1,680,000 to purchase working interests in a newly developing gas
program from Kentucky Operating US, L.L.C. After advancing $329,545 for
the working interests, WELLC determined that the working interests
would not be available until substantially later than promised. WELLC,
then notified Kentucky Operating US, L.L.C. of its intention to
terminate its participation in the program. Subsequent to year-end,
WELLC started legal proceedings against Kentucky Operating US, L.L.C.
in order to recover their advance. In the opinion of management, the
ultimate disposition of this matter will not have a material adverse
effect on these financial statements and no allowance has been
recorded.
WELLC currently has two offerings it is soliciting, with a combined
maximum investor contribution limit of $22,000,000. The manager is
required to match every capital contribution from an investor with a
capital contribution ranging from 2.5 to 5 percent of the investor
contribution. If maximum investor contributions are obtained, WELLC is
committed to purchase an additional $841,475 in limited liability
company memberships.
<PAGE> 35
WOLVERINE ENERGY, L.L.C.
(A MICHIGAN LIMITED LIABILITY CORPORATION)
----------------------------------------
FINANCIAL REPORT
JUNE 30, 1999
<PAGE> 36
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
REPORT LETTER 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Member's Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-13
</TABLE>
<PAGE> 37
To the Member
Wolverine Energy, L.L.C.
We have compiled the accompanying balance sheet of Wolverine Energy, L.L.C. (a
Michigan limited liability corporation) as of June 30, 1999 and 1998, and the
related statements of operations, changes in member's equity, and cash flows for
the six month periods then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any form of assurance on them.
October 15, 1999
<PAGE> 38
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
June 30
------------------------------
1999 1998
-------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 202,952 $ 540,275
Accounts receivable:
Related entities (Note 5) 164,464 192,263
Other 31,353 2,575
Current portion of member note receivable (Note 5) 79,000 200,000
Working interests held for resale 246,258 998,697
Prepaid expenses 66,515 33,570
-------------- -------------
Total current assets 790,542 1,967,380
EQUIPMENT
Office equipment 65,414 39,703
Accumulated depreciation (43,336) (35,036)
-------------- -------------
Total fixed assets 22,078 4,667
MEMBER NOTE RECEIVABLE (Note 5) 156,000 689,884
INVESTMENTS IN RELATED ENTITIES (Note 2) 1,152,094 963,675
ACCOUNTS RECEIVABLE (Note 7) 329,545 -
OTHER ASSETS, Net 7,611 7,659
-------------- -------------
Total assets $ 2,457,870 $ 3,633,265
============== =============
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Line of credit (Note 3) $ 325,000 $ 325,000
Current portion of long-term debt (Note 4) 305,067 53,251
Accounts payable:
Trade 122,368 95,812
Operators 1,111,357 2,236,542
Related party (Note 5) 9,518 10,859
Other 12,697 179,821
Accrued expenses 22,596 16,462
-------------- -------------
Total current liabilities 1,908,603 2,917,747
LONG-TERM DEBT (Note 4) 386,347 693,673
MEMBER'S EQUITY 162,920 21,845
-------------- -------------
Total liabilities and member's equity $ 2,457,870 $ 3,633,265
============== =============
</TABLE>
See Notes to Financial Statements 2
and Accountant's Report.
<PAGE> 39
WOLVERINE ENERGY, L.L.C
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1999 1998
----------- -----------
<S> <C> <C>
REVENUE
Turnkey revenue (Note 5) $ 904,992 $ 1,098,989
Management fees (Note 5) 51,638 64,286
Other income 6,222 73,783
----------- -----------
Total revenue 962,852 1,237,058
EXPENSES
Cost of sales 648,970 945,179
General and administrative 798,680 577,099
----------- -----------
Total expenses 1,447,650 1,522,278
----------- -----------
OPERATING LOSS (484,798) (285,220)
LOSS FROM RELATED ENTITIES (Note 2) (38,514) (1,260)
----------- -----------
NET LOSS $ (523,312) $ (286,480)
=========== ===========
</TABLE>
See Notes to Financial Statements 3
and Accountant's Report.
<PAGE> 40
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN MEMBER'S EQUITY
<TABLE>
<CAPTION>
June 30
------------------------
1999 1998
----------- -----------
<S> <C> <C>
MEMBER'S EQUITY - Beginning of period $ 708,379 $ 308,325
Net loss (523,312) (286,480)
Distributions to member (22,147) -
----------- -----------
MEMBER'S EQUITY - End of period $ 162,920 $ 21,845
=========== ===========
</TABLE>
See Notes to Financial Statements 4
and Accountant's Report.
<PAGE> 41
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 1,134,726 $ 1,162,698
Cash paid to operators and suppliers (977,536) (1,067,378)
Cash paid for interest (69,148) (46,872)
----------- -----------
Net cash provided by operating
activities (Note 6) 88,042 48,448
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (5,901) -
Cash paid for investments in limited liability corporations (36,150) (61,225)
------------------------
Net cash used in investing activities (42,051) (61,225)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt (39,933) 746,924
Distributions to member (22,147) -
Loans to member (235,000) (249,184)
----------- -----------
Net cash provided by (used in) financing activities (297,080) 497,740
----------- -----------
NET INCREASE (DECREASE) IN CASH (251,089) 484,963
CASH - Beginning of period 454,041 55,312
----------- -----------
CASH - End of period $ 202,952 $ 540,275
=========== ===========
</TABLE>
See Notes to Financial Statements 5
and Accountant's Report.
<PAGE> 42
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Wolverine Energy, L.L.C. (WELLC) acquires working interests in natural
gas prospects throughout the United States, forms oil and gas entities
and sells them the interests on a turnkey basis. WELLC is responsible
for managing the operations of all the entities.
CASH EQUIVALENTS - WELLC considers all highly liquid investments with
an original maturity date of three months or less to be cash
equivalents.
WORKING INTERESTS HELD FOR RESALE - WELLC has acquired certain oil and
gas working interests for the purpose of selling these interests to oil
and gas entities. Such working interests held for resale are recorded
at cost, but are periodically reviewed to determine if the market value
of the working interest has been impaired. If impairment exists, a loss
is recognized by providing an impairment allowance. Abandonments of
working interests held for resale are charged to expense. As of June
30, 1999 and 1998, no reserve for impairment has been recorded.
INVESTMENTS IN RELATED ENTITIES - Investments in related entities are
accounted for under the equity method since WELLC has significant
influence over the management of these entities. WELLC is the manager
of the oil and gas entities and makes initial capital contributions in
accordance with provisions in the respective placement memorandum
governing the activities of the particular entity. Income or losses are
allocated to the investment accounts according to WELLC's ownership
interest in the entities, and distributions received are deducted from
the investment accounts.
TURNKEY DRILLING REVENUE - WELLC enters into contracts with affiliated
entities to sell them oil and gas working interests under turnkey
drilling agreements. Under the terms of the agreements, the entities
pay a fixed price for acquisition, drilling and completion costs and
receive working interests in the wells. WELLC agrees to monitor the
well operators obligation to conduct the drilling and completion of
each well. Turnkey revenue is recognized when the related services have
been performed (working interests have been sold) and substantially all
future obligations have been settled.
See Accountant's Report. 6
<PAGE> 43
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COST OF SALES - The Company acquires oil and gas working interests for
resale that require the Company to pay a pro rata portion of all costs
to drill and complete a well. The Company sells these oil and gas
working interests in wells at a fixed price, generally before the
drilling is completed. Actual costs to drill and complete a well may
exceed the sales price. The Company has the burden of paying all costs
in excess of the turnkey price. Included in accounts payable at June
30, 1999 and 1998, and cost of sales, is the estimated total cost that
the Company will be required to pay on working interests that have been
sold. Due to uncertainties inherent in the estimation process, it is at
least reasonably possible that the Company may incur expenses in excess
of the amount recorded. Management is of the opinion that any
adjustment of the amount recorded would not have a material adverse
effect on the financial statements.
MANAGEMENT FEES - In connection with the organization and offering
stage of related oil and gas entities WELLC receives a management fee
of 5 percent from investor subscriptions, which is credited to income
as earned.
EQUIPMENT - Equipment is recorded at cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful
lives of the assets. Costs of maintenance and repairs are charged to
expense as incurred.
INCOME TAXES - No provision for federal income taxes has been included
in the financial statements since all income and expenses of the LLC
are allocated to the member for inclusion on his respective income tax
return.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
See Accountant's Report. 7
<PAGE> 44
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 - AFFILIATED OIL AND GAS ENTITIES
WELLC sponsors the formation of entities, typically limited liability
corporations, for the purpose of conducting oil and gas exploration,
development, and production activities on oil and gas properties. WELLC
serves as manager of these entities and, as such, has full and
exclusive discretion in the management and control. The turnkey
drilling and operating agreements that WELLC enters into with the
entities provide that the entities pay for the drilling costs of the
wells at an agreed-upon price per well. Profits (losses) from oil and
gas properties are allocated based on the working interest ownership
percentage of the properties.
WELLC holds the following investment interest in the following
entities:
1999 1998
--------- ---------
Wolverine Antrim Development Trust 1995 18.9% 18.9%
Wolverine Antrim Development 1996-1, L.L.C. 12.8% 12.9%
Wolverine Antrim Development 1996-2, L.L.C. 14.5% 14.5%
Wolverine Antrim Development 1997-1, L.L.C. 14.8% 14.8%
Wolverine Antrim Development 1997-2, L.L.C. 14.5% 14.0%
Wolverine Antrim Development 1998-1, L.L.C. 12.5% -
Wolverine Energy 1998-1999 (A) Development
Company, L.L.C. 10.0% -
See Accountant's Report. 8
<PAGE> 45
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 - AFFILIATED OIL AND GAS ENTITIES (CONTINUED)
Following is a summary of financial position and results of operations
of entities whose investments are accounted for under the equity
method:
1999 1998
----------- -----------
Current assets $ 202,096 $ 296,570
Other assets (net) 16,335,730 11,886,797
----------- -----------
Total assets $16,537,826 $12,183,367
=========== ===========
Current liabilities $ 183,878 $ 192,655
Equity 16,353,948 11,990,712
----------- -----------
Total liabilities and equity $16,537,826 $12,183,367
=========== ===========
Net loss $ (401,005) $ (264,453)
=========== ===========
NOTE 3 - LINE OF CREDIT
The line of credit to a bank is unsecured and due on demand. The line
of credit bears interest at 1.5 percent above the New York Citibank
prime rate (effective rate of 9.75 percent at June 30, 1999). WELLC's
credit line is $325,000. The line of credit is guaranteed by the
member.
See Accountant's Report. 9
<PAGE> 46
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 4 - LONG-TERM DEBT
The following is the detail of long-term debt:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Notes payable to unrelated parties, due in monthly interest payments of
$2,334 for the first 12 months and then principal and interest payments
of $2,500 thereafter, at an interest rate of 14%, with any remaining
balance due in January 2003. The note is collateralized by certain
investments of the Company and is guaranteed by the member. $ 200,000 $ 200,000
Note payable to an unrelated company, due in monthly interest payments
of $3,083, at a rate of prime plus 10.00% for an effective rate of
18.25% at June 30, 1999. The note is collateralized by all assets of
the Company and is guaranteed by the member. The principal payment is
due in March 2000. 200,000 200,000
Notes payable to bank, due in monthly installments of $502, including
interest at a rate of 15.95%. The note is-collateralized by equipment.
Final payment is due in July 2001. 10,254 -
Note payable to bank, due in monthly payments of $6,250 plus interest
at a rate of prime 1.50% for an effective rate of 9.75% at June 30,
1999. The note is collateralized by all assets of the Company and is
guaranteed by the member. Final payment is due in April 2003. 281,160 346,924
---------- ----------
Subtotal 691,414 746,924
Less current portion 305,067 53,251
---------- ----------
Long-term portion $ 386,347 $ 693,673
========== ==========
</TABLE>
See Accountant's Report. 10
<PAGE> 47
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
Note 4 - Long-Term Debt (Continued)
The aggregate principal maturities at June 30, 1999, are as follows:
1999 $ 305,067
2000 53,750
2001 107,500
2002 107,500
2003 117,597
2004 -
---------
Total $ 691,414
=========
NOTE 5 - RELATED PARTY TRANSACTIONS
Because of the nature of WELLC's business, a significant number of
transactions are with related parties.
During 1999 and 1998, WELLC earned turnkey revenue from related
entities in the amount of $904,992 and $1,098,989, respectively. The
balance of turnkey revenues and allocated expenses owed to WELLC
included in accounts receivable as of June 30, 1999 and 1998, totaled
$164,464 and $192,263, respectively.
During 1999 and 1998, WELLC charged management fees to related
entities in the amount of $51,638 and $64,286, respectively.
WELLC had outstanding loans totaling $235,000 and $889,884 at June 30,
1999 and 1998, respectively, to the member. The note is payable in
installments over the next three years including interest at 8 percent
and is unsecured.
WELLC owed related entities for administrative costs and member
contributions in the amount of $9,518 and $10,859 at June 30, 1999 and
1998, respectively.
See Accountant's Report. 11
<PAGE> 48
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 6 - CASH FLOWS
A reconciliation of net loss to net cash flows used in operating
activities is as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net loss $ (523,312) $ (286,480)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation, depletion, and amortization
expense 3,400 1,187
Loss from equity investments 38,514 1,260
(Increase) decrease in assets:
Accounts receivable 171,674 (73,100)
Working interests held for resale 578,987 459,470
Other 2,730 (33,570)
Increase (decrease) in liabilities:
Accounts payable (185,082) (14,511)
Accrued expenses 1,131 (5,808)
------------ ------------
Net cash provided by operating
activities $ 88,042 $ 48,448
============ ============
</TABLE>
During 1998, WELLC sold certain investments in related entities to the
member for $40,700 in exchange for a note receivable.
There were no significant non-cash investing and financing activities
during 1999.
See Accountant's Report. 12
<PAGE> 49
WOLVERINE ENERGY, L.L.C.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 7 - COMMITMENTS AND CONTINGENCIES
As managing member in various affiliated oil and gas entities, WELLC
is subject to contingencies that may arise in the normal course of
business of these entities. Management is of the opinion that
liabilities, if any, related to such contingencies that may arise
would not be material to the financial statements.
During 1998, WELLC entered into a commitment for approximately
$1,680,000 to purchase working interests in a newly developing gas
program. After advancing $329,545 for the working interests, WELLC
determined that the working interests would not be available until
substantially later than promised. WELLC, then notified the sponsor of
the program of its intention to terminate its participation. During
1999, WELLC started legal proceedings against the program sponsor in
order to recover their advance. In the opinion of management, the
ultimate disposition of this matter will not have a material adverse
effect on these financial statements and no allowance has been
recorded.
WELLC currently has two offerings it is soliciting, with a combined
maximum investor contribution limit of $22,000,000. The manager is
required to match every capital contribution from an investor with a
capital contribution ranging from 2.5 to 5.0 percent of the investor
contribution. If maximum investor contributions are obtained, WELLC is
committed to purchase an additional $841,475 in limited liability
company memberships.
See Accountant's Report. 13
<PAGE> 50
MASTER DOCUMENT
<TABLE>
<CAPTION>
FIELD VALUES
<S> <C>
COMPANY NAME (HEADINGS) Wolverine Energy, L.L.C.
COMPANY NAME (TEXT) Wolverine Energy, L.L.C.
D/B/A WELLC
YEAR END June 30, 1999
PRIOR YEAR END June 30, 1998
2 YEAR PRIOR June 30, 1997
OPINION DATE October 15, 1999
COMPARATIVE DATE June 30, 1999 and 1998
1999 1999
1998 1998
1997 1997
</TABLE>
14
