RIDGEWOOD ELECTRIC POWER TRUST III - FORM 10-Q - October 29, 2014

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the quarterly period ended September 30, 2014
 
Or
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____
 
Commission File Number:   0-23432

RIDGEWOOD ELECTRIC POWER TRUST III
(Exact Name of Registrant as Specified in Its Charter)

Delaware
  
22-3264565
(State or Other Jurisdiction
of Incorporation or Organization)
  
(I.R.S. Employer Identification No.)

500 Delaware Avenue, #1112, Wilmington, DE
  
19801
(Address of Principal Executive Offices)
  
(Zip Code)
 
 
 (302) 888-7444
  
 
(Registrant’s Telephone Number, Including Area Code)
  
 
 
Not Applicable
  
 
(Former name, former address and former fiscal year, if changed since last report)
  

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes þ   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  þ
   
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o    No þ

As of September 30, 2014 there were 391.8444 Investor Shares outstanding. 
 
 
FORM 10-Q
 
 
 
 
PART I.   FINANCIAL INFORMATION
 
RIDGEWOOD ELECTRIC POWER TRUST III
CONDENSED STATEMENTS OF NET ASSETS
(Liquidation Basis)
(in thousands)
 
   
September 30,
    
December 31,
  
   
2014
    
2013
  
   
(unaudited)
        
ASSETS
            
Cash and cash equivalents
  
$
331
    
$
526
  
                 
LIABILITIES AND NET ASSETS
                
                 
Current liabilities:
                
Accounts payable and accrued expenses
  
$
45
    
$
175
  
Due to affiliates
    
2
      
4
  
Total liabilities
  
$
47
    
$
179
  
                 
Net assets in liquidation
  
$
284
    
$
347
  

The accompanying notes are an integral part of these condensed financial statements.
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
CONDENSED STATEMENTS OF CHANGES IN NET ASSETS
(Liquidation Basis)
(unaudited, in thousands)
 
   
Nine Months Ended September 30,
    
Three Months Ended September 30,
  
   
2014
    
2013
    
2014
    
2013
  
Net assets in liquidation, beginning of period
  
$
347
    
$
505
    
$
347
    
$
505
  
Changes in net assets in liquidation
    
(63
) 
    
-
      
(63
) 
    
-
  
                                 
Net assets in liquidation, end of period
  
$
284
    
$
505
    
$
284
    
$
505
  
 
The accompanying notes are an integral part of these condensed financial statements.
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited, dollar amounts in thousands)


1.
DESCRIPTION OF BUSINESS

Ridgewood Electric Power Trust III (the “Trust”) is a Delaware trust formed on December 6, 1993. The Trust began offering shares of beneficial interest (“Investor Shares”) in January 1994 and concluded its offering in May 1995. The Trust has 391.8444 Investor Shares outstanding. Prior to the adoption of the Trust’s Plan of Dissolution (described below), the objective of the Trust was to provide benefits to its shareholders through a combination of distributions of operating cash flow and capital appreciation. The Managing Shareholder of the Trust is Ridgewood Renewable Power LLC, a New Jersey limited liability company (the “Managing Shareholder”). Historically, the Trust focused primarily on power generation facilities located in the US.

On November 19, 2010, the Plan of Liquidation and Dissolution of Ridgewood Electric Power Trust III (the “Plan of Dissolution”) became effective. Under the Plan of Dissolution, the business of the Trust shifted, and became limited to the disposal of its remaining assets and resolution of its remaining liabilities. Upon the completion of these activities, if successful, the Managing Shareholder expects to distribute any remaining cash to the Trust’s shareholders and then proceed to terminate the Trust and its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Trust is required to make adequate provisions to satisfy its known and unknown liabilities, which could substantially delay or limit the Trust’s ability to make future distributions to shareholders. The process of accounting for the Trust’s liabilities, including those that are presently unknown, may involve difficult valuation decisions, which could adversely impact the amount or timing of any future distributions by the Trust.

Under the Plan of Dissolution, the Managing Shareholder has sole authority to conduct the Trust’s dissolution, liquidation and termination without additional shareholder approval. As of the date of the issuance of these financial statements, the Trust has not been liquidated.

The Trust does not anticipate making additional distributions until the Trust has completed the liquidation process. At that time, the Trust’s remaining cash, if any, will be distributed to its holders of Investor Shares.

For the purposes of the Trust’s estimates of fees and expenses to be incurred during liquidation, management has assumed that the liquidation of the Trust will now be completed by December 31, 2014. If the liquidation of the Trust is not completed by that date, the actual expenses that the Trust will incur will likely further increase.

The Trust has evaluated subsequent events and transactions through the date of the issuance of its financial statements, and concluded that there were no such events or transactions that require adjustment to, or disclosure in the notes to, the condensed financial statements.

2.
BASIS OF PRESENTATION

The condensed financial statements are unaudited and have been prepared pursuant to the rules of the United States Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments that are necessary for a fair presentation of the condensed financial statements for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to SEC rules. These condensed financial statements should be read in conjunction with the Trust’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 7, 2014 (the “2013 Form 10-K”). No significant changes have been made to the Trust’s accounting policies and estimates disclosed in its 2013 Form 10-K.
 
The financial statements were prepared on the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the Trust is probable. Under this basis of accounting, assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The valuation of assets and liabilities requires management to make significant estimates and assumptions. Upon conversion to the liquidation basis of accounting, the Trust accrued known estimated values of assets expected to be received and known estimated costs expected to be incurred in liquidation.  On an on-going basis, the Trust evaluates the estimates and assumptions that can have a significant impact on the Trust’s reported net assets in liquidation. Actual amounts may differ materially and adversely from these estimates. If there are delays in liquidating the Trust, actual costs incurred during the liquidation process would likely further increase, reducing net assets available in liquidation and for future distributions to shareholders.
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited, dollar amounts in thousands)

3.
CASH AND CASH EQUIVALENTS

The Trust considers all highly liquid investments with maturities, when purchased, of three months or less as cash and cash equivalents. At September 30, 2014, cash and cash equivalents exceeded federal insured limits by $81.

4.
COMMITMENTS AND CONTINGENCIES

The Trust formerly owned an investment in Byron Power Partners, L.P. (“Byron”). Byron suspended its operations in the fourth quarter of 2008 as the estimated incremental cost of production exceeded the estimated revenues from electricity sales. In 2009, due to continued projected operating losses, the Managing Shareholder of the Trust shut down the operations of Byron. In December 2010, the Trust abandoned Byron and dissolved the entities involved in operating Byron. Since that time, the Trust has not had any operating assets.

Byron was a tenant under a long-term ground lease. Byron discontinued paying rent in November 2010. Thereafter Byron received notice asserting that it was in default under its lease. The Trust has been working with the Byron landlord and the Alameda County Environmental Health Department to resolve Byron’s potential site reclamation obligations. In May 2014, the County closed its inquiry with no additional site cleanup requested. Since then, the Trust has been negotiating with the Byron landlord to obtain a written release regarding the termination of the ground lease. In September 2014, upon payment to the landlord of $35, the landlord issued a release for all matters regarding the lease, other than environmental matters. The Trust does not believe it has material liabilities associated with environmental matters, and has therefore begun to move forward to liquidate and dissolve the Trust. Barring any unforeseen items, the Trust is expected to be liquidated and dissolved by December 31, 2014.

 
 
This management’s discussion and analysis of the Trust as of September 30, 2014 is intended to help readers analyze the accompanying condensed  financial statements, notes and other information contained in this report. This discussion and analysis should be read in conjunction with the accompanying condensed financial statements, notes and other information included elsewhere in this report as well as the financial statements, notes and other information and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Trust’s 2013 Form 10-K.

Forward-Looking Statements
 
Certain statements discussed in this item and elsewhere in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the Trust’s plans, objectives and expectations for future events and include statements about the Trust’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. These statements are based upon management’s expectations, opinions and estimates as of the date they are made. Although management believes that the expectations, opinions and estimates reflected in these forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Trust’s control, which could cause actual results, performance and achievements to differ materially from the results, performance and achievements projected, expected, expressed or implied by the forward-looking statements. Examples of events that could cause actual results to differ materially from historical results or those anticipated include:

 
·
possible contingent liabilities and risks associated with the dissolution and liquidation of the Trust, including, without limitation, settlement of the Trust’s liabilities and obligations,
 
·
costs incurred in connection with the carrying out of the plan of liquidation and dissolution of the Trust,
 
·
the actual timing of the completion of the liquidation process, and
 
·
the amount, likelihood and timing of liquidating distributions, if any.
 
Additional information concerning the factors that could cause actual results to differ materially from those in the forward-looking statements is contained elsewhere in this report and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in the Trust’s 2013 Form 10-K. Any forward-looking statement that the Trust makes speaks only as of the date of this report. The Trust undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors, as a result of new information, future events or otherwise, except as required by law.

Liquidation Basis of Accounting

Upon the effectiveness of the Trust’s Plan of Dissolution, the Trust adopted the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the Trust is probable. Under this basis of accounting, assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The valuation of assets and liabilities requires management to make significant estimates and assumptions.

Critical Accounting Policies and Estimates

The discussion and analysis of the Trust’s financial condition and results of operations are based upon the Trust’s financial statements, which have been prepared in conformity with GAAP. In preparing these financial statements, the Trust is required to make certain estimates, judgments and assumptions that affect the reported amount of the Trust’s assets, liabilities, revenues and expenses, including the disclosure of contingent assets and liabilities, as well as the reported amounts of changes in net assets. The estimates also affect the reported estimated value of net realizable assets and settlement of liabilities. The Trust evaluates these estimates and assumptions on an ongoing basis. The Trust bases its estimates and assumptions on historical experience and on various other factors that the Trust believes to be reasonable at the time the estimates and assumptions are made. However, future events and their effects cannot be predicted with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may differ from these estimates and assumptions under different circumstances or conditions, and such differences may be material to the financial statements. No material changes have been made to the Trust’s accounting policies and estimates disclosed in its 2013 Form 10-K. 
 
 
Results of Operations and Changes in Financial Condition

Net assets at September 30, 2014 were $284,000, a decrease of $63,000 from both June 30, 2014 and December 31, 2013. The Trust’s cash at September 30, 2014 was $331,000 and reflects decreases of $195,000 and $62,000 for the nine and three-month periods, respectively, then ended. The decreases in cash are the result of payment of Trust liabilities, including the payment of year-to-date management fees to the Managing Shareholder of approximately $6,000. In the third quarter of 2014, the Trust paid $35,000 in connection with the settlement of a lease obligation, as described in Part I, Item 1, Note 4. “Commitments and Contingencies”. The decrease in net assets is primarily due to the $35,000 payment and due to increased expenses associated with keeping the Trust open longer than previously estimated.

For the purposes of the Trust’s estimates of fees and expenses to be incurred during liquidation, management has assumed that the liquidation of the Trust will now be completed by December 31, 2014. If the liquidation of the Trust is not completed by that date, the actual expenses that the Trust will incur will likely increase.

Future Liquidity and Capital Resource Requirements

The Trust believes it has sufficient cash and cash equivalents to provide working capital for the next 12 months. The Trust intends to distribute excess cash, if any, to its shareholders after liquidating its assets and satisfying its liabilities.

As of the date of this filing, the Trust has not been liquidated. Because the Trust does not believe it has any remaining material liabilities, it has begun to move forward to liquidate and dissolve the Trust.  Barring any unforeseen items, the Trust is expected to be liquidated and dissolved by December 31, 2014.

The Trust does not anticipate making any further distributions to shareholders until the Trust has completed the liquidation process.

Off-Balance Sheet Arrangements

None.

Commitments and Contingencies

For a discussion of matters relating to the Trust’s prior ownership of Byron, see Note 4. “Commitments and Contingencies” of Part I, Item 1.

 
Not required.

 
Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Exchange Act, the Trust’s management, with the participation of the Trust’s Chief Executive and Financial Officer, has evaluated the effectiveness of the Trust’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based on this evaluation, the Trust’s Chief Executive and Financial Officer concluded that the Trust’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Trust in reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed by the Trust is accumulated and communicated to senior management so as to allow timely decisions regarding required disclosure.
 
Changes in Internal Control over Financial Reporting

The Trust’s Chief Executive and Financial Officer has concluded that there has been no change in the Trust's internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting. 
 
 
PART II.  OTHER INFORMATION
 

None.


Not required.


None.


None.


Not applicable.


None.
 

Exhibit
No.
      
Description
     
31
*
Certification of Jeffrey H. Strasberg, Chief Executive and Financial Officer of the Registrant, pursuant to Securities Exchange Act Rule 13a-14(a).
     
32
*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Jeffrey H. Strasberg, Chief Executive and Financial Officer of the Registrant.
     
101.INS
*
XBRL Instance Document.
     
101.SCH
*
XBRL Taxonomy Extension Schema Document.
     
101.CAL
*
XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.LAB
*
XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE
*
XBRL Taxonomy Extension Presentation Linkbase Document.
                                                 
*
Filed herewith.
 
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
     
     
     
Date: October 29, 2014
By:
/s/  Jeffrey H. Strasberg
   
Jeffrey H. Strasberg
   
Chief Executive and Financial Officer
   
(Principal Executive, Financial and Accounting Officer)
 
 
 
8

RIDGEWOOD ELECTRIC POWER TRUST III Reports