Financial Statements of Guarantors

9 Months Ended

Sep. 30, 2011

Financial Statements of Guarantors

Financial Statements of Guarantors

(13)Financial Statements of Guarantors

The following information sets forth our condensed consolidating statements of operations for the three and nine months ended September 30, 2011 and 2010, our condensed consolidating balance sheets as of September 30, 2011 and December 31, 2010, and our condensed consolidating statements of cash flows for the nine months ended September 30, 2011 and 2010.  Pursuant to SEC regulations, we have presented in columnar format the financial information for Evergreen Energy Inc., the issuer of the 2007 Notes, Evergreen Operations, LLC, the guarantor, and all non-guarantor subsidiaries on a combined basis. The 2007 Notes are fully and unconditionally guaranteed, on a senior, unsecured basis by, Evergreen Operations, LLC. As a result of the sale of Buckeye on April 1, 2010, the results of operations for the mining segment are shown as discontinued operations and prior year comparative information was also restated and reflected in discontinued operations. Further, the assets and liabilities of the mining segment have been reclassified to assets of discontinued mining operations, and liabilities of discontinued mining operations, respectively. In addition, as a result of our signing of a definitive agreement to sell our Fort Union assets, our plant segment that primarily represents revenue and costs related to our Fort Union plant in Gillette has been reclassified to assets of discontinued plant operations and liabilities of discontinued plant operations for our condensed consolidating financial statements.

The condensed consolidating statements of operations, cash flows, and balance sheets include the effects of elimination of intercompany transactions and balances. Except for Southern Coal Holdings which is 50% owned by us, Evergreen Energy Asia Pacific, which is 96% owned by us, and C-Lock Technologies which is 92% owned by us, all of our other subsidiaries are 100% owned. The accounting principles used to determine the amounts reported in this note are consistent with those used in our consolidated financial statements. Transactions effecting our consolidated stockholders’ equity include net loss, exercise of options and warrants, vesting of restricted stock, issuance of common stock, warrant issuances and debt issue costs. These transactions for all periods relate to the parent corporation, Evergreen Energy Inc., with the exception of the sale of stock in Evergreen Asia Pacific for $4.0 million in the second quarter of 2007, which is included as equity in the column labeled Other.

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

SEPTEMBER 30, 2011

	Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
	(in thousands)
Assets
Current:
Cash and cash equivalents	$	1,180		$	—		$	26		$	—		$	1,206
Notes receivable	5,693			—			—			—			5,693
Prepaid and other assets	1,930			—			65			—			1,995
Assets of discontinued mining and plant operations	—			27			—			—			27
Total current assets	8,803			27			91			—			8,921
Property, plant and equipment, net of accumulated depreciation	146			—			134			—			280
Construction in progress	7,635			—			—			—			7,635
Investment in consolidated subsidiaries	305,126			—			—			(305,126		)	—
Due from subsidiaries	(312,823		)	—			—			312,823			—
Other assets	1,996			—			1,423			—			3,419
	10,883			27			1,648			7,697			20,255
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	1,583			—			17			—			1,600
Accrued liabilities	918			—			549			—			1,467
Short-term debt	4,175			—			—			—			4,175
Other current liabilities	192			—			400			—			592
Liabilities of discontinued mining and plant operations	—			581			—			—			581
Total current liabilities	6,868			581			966			—			8,415
Deferred revenue	—			—			7,715						7,715
Due to parent	—			234,657			70,469			(305,126		)	—
Derivative liability	1,408			—			—			—			1,408
Other liabilities, less current portion	1,220			—			110			—			1,330
Total liabilities	9,496			235,238			79,260			(305,126		)	18,868
Commitments and contingencies
Temporary capital	2			—			—			—			2
Total equity (deficit)	1,385			(235,211		)	(77,612		)	312,823			1,385
	$	10,883		$	27		$	1,648		$	7,697		$	20,255

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2010

	Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
	(in thousands)
Assets
Current:
Cash and cash equivalents	$	2,946		$	—		$	28		$	—		$	2,974
Prepaid and other assets	1,616			—			48			—			1,664
Assets of discontinued mining and plant operations	—			10,030			—			—			10,030
Total current assets	4,562			10,030			76			—			14,668
Property, plant and equipment, net of accumulated depreciation	1,142			—			592			—			1,734
Construction in progress	7,556			—			2,304			—			9,860
Investment in consolidated subsidiaries	(304,574		)	—			—			304,574			—
Due from subsidiaries	304,640			—			—			(304,640		)	—
Other assets	1,873			—			1,423			—			3,296
	$	15,199		$	10,030		$	4,395		$	(66	)	$	29,558
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,398		$	—		$	300		$	—		$	2,698
Accrued liabilities	2,361			—			6			—			2,367
Other current liabilities	132			—			550			—			682
Liabilities of discontinued mining and plant operations	—			5,432			—			—			5,432
Total current liabilities	4,891			5,432			856			—			11,179
Long-term debt	21,821			—			—			—			21,821
Deferred revenue	—			—			7,865			—			7,865
Due to parent	—			243,481			61,159			(304,640		)	—
Derivative liability	972			—			—			—			972
Other liabilities, less current portion	1,007			—			206			—			1,213
Total liabilities	28,691			248,913			70,086			(304,640		)	43,050
Commitments and contingencies
Temporary Capital	3			—			—			—			3
Total equity (deficit)	(13,495		)	(238,883		)	(65,691		)	304,574			(13,495		)
	$	15,199		$	10,030		$	4,395		$	(66	)	$	29,558

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2011

	Evergreen Energy Inc.			Evergreen Operations, LLC		Other			Eliminations		Evergreen Energy Consolidated
	(in thousands)
Operating revenues:
GreenCert licensing	$	—		$	—	$	125		$	—	$	125
Total operating revenue	—			—		125			—		125
Operating expenses:
General and administrative	1,399			—		1,649			—		3,048
Depreciation and amortization	120			—		23			—		143
Research and development	—			—		39			—		39
Total operating expenses	1,519			—		1,711			—		3,230
Operating loss	(1,519		)	—		(1,586		)			(3,105		)
Other income (expense):
Interest income	68			—		—			—		68
Interest expense	(244		)	—		—			—		(244		)
Other income (expense), net	2,770			—		—			—		2,770
Total other (expense) income	2,594			—		—			—		2,594
Income (loss) from continuing operations	1,075			—		(1,586		)	—		(511		)
Income from discontinued mining and plant operations	—			59		—			—		59
Equity in loss of subsidiaries	(1,527		)	—		—			1,527		—
Net income (loss)	(452		)	59		(1,586		)	1,527		(452		)
Less: net loss attributable to non-controlling interest	—			—		—			72		72
Net income (loss) attributable to Evergreen Energy Inc.	$	(452	)	$	59	$	(1,586	)	$	1,599	$	(380	)

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2010

	Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations		Evergreen Energy Consolidated
	(in thousands)
Operating revenues:
GreenCert licensing	$	—		$	—		$	100		$	—	$	100
Total operating revenue	—			—			100			—		100
Operating expenses:
General and administrative	334			—			2,960			—		3,294
Depreciation, depletion and amortization	158			—			245			—		403
Research and development	—			—			268			—		268
Impairment	—			—			3,467			—		3,467
Total operating expenses	492			—			6,940			—		7,432
Operating loss	(492		)	—			(6,840		)	—		(7,332		)
Other income (expense):
Interest income	15			—			—			—		15
Interest expense	(296		)	—			—			—		(296		)
Gain on debt for equity exchange	3,115			—			—			—		3,115
Other income (expense), net	(290		)	—			—			—		(290		)
Total other (expense) income	2,544			—			—			—		2,544
Income (loss) from continuing operations	2,052			—			(6,840		)	—		(4,788		)
Loss from discontinued mining operations	—			(102		)	—			—		(102		)
Loss from discontinued plant operations	—			(91		)	—			—		(91		)
Equity in loss of subsidiaries	(7,033		)	—			—			7,033		—
Net loss	(4,981		)	(193		)	(6,840		)	7,033		(4,981		)
Less: net loss attributable to non-controlling interest	—			—			—			388		388
Net (loss) gain attributable to Evergreen Energy Inc.	$	(4,981	)	$	(193	)	$	(6,840	)	$	7,421	$	(4,593	)

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2011

	Evergreen Energy Inc.			Evergreen Operations, LLC		Other			Eliminations		Evergreen Energy Consolidated
	(in thousands)
Operating revenues:
GreenCert licensing	$	—		$	—	$	325		$	—	$	325
Total operating revenue	—			—		325			—		325
Operating expenses:
General and administrative	3,176			—		8,683			—		11,859
Depreciation and amortization	852			—		257			—		1,109
Research and development	—			—		683			—		683
Impairment expense	503			—		2,578			—		3,081
Total operating expenses	4,531			—		12,201			—		16,732
Operating loss	(4,531		)	—		(11,876		)	—		(16,407		)
Other income (expense):
Interest income	143			—		—			—		143
Interest expense	(468		)	—		—			—		(468		)
Other income (expense), net	6,219			—		(100		)	—		6,119
Total other (expense) income	5,894			—		(100		)	—		5,794
Income (loss) from continuing operations	1,363			—		(11,976		)	—		(10,613		)
Income from discontinued mining and plant operations	—			3,782		—			—		3,782
Equity in loss of subsidiaries	(8,194		)	—		—			8,194		—
Net (loss) income	(6,831		)	3,782		(11,976		)	8,194		(6,831		)
Less: net loss attributable to non-controlling interest	—			—		—			572		572
Net loss attributable to Evergreen Energy Inc.	$	(6,831	)	$	3,782	$	(11,976	)	$	8,766	$	(6,259	)

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2010

	Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations		Evergreen Energy Consolidated
	(in thousands)
Operating revenues:
GreenCert licensing	$	—		$	—		$	303		$	—	$	303
Total operating revenue	—						303			—		303
Operating expenses:
General and administrative	1,728			—			10,253			—		11,981
Depreciation, depletion and amortization	542			—			840			—		1,382
Research and development	—			—			462			—		462
Impairment	—			—			3,467			—		3,467
Total operating expenses	2,270			—			15,022			—		17,292
Operating loss	(2,270		)	—			(14,719		)	—		(16,989		)
Other income (expense):
Interest income	20			—			—			—		20
Interest expense	(1,828		)	—			—			—		(1,828		)
Loss on early extinguishment of debt	(2,267		)	—			—			—		(2,267		)
Gain on debt for equity exchange	3,115			—			—			—		3,115
Other income (expense), net	4,593			—			(23		)	—		4,570
Total other (expense) income	3,633			—			(23		)	—		3,610
Income (loss) from continuing operations	1,363			—			(14,742		)	—		(13,379		)
Loss from discontinued mining operations	(2,525		)	(2,455		)	—			—		(4,980		)
Gain from discontinued plant operations	—			359			—			—		359
Equity in loss of subsidiaries	(16,838		)	—			—			16,838		—
Net (loss) income	(18,000		)	(2,096		)	(14,742		)	16,838		(18,000		)
Less: net loss attributable to non-controlling interest	—			—			—			558		558
Net loss attributable to Evergreen Energy Inc.	$	(18,000	)	$	(2,096	)	$	(14,742	)	$	17,396	$	(17,442	)

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW

NINE MONTHS ENDED SEPTEMBER 30, 2011

	EvergreenEnergy Inc.			EvergreenOperations,LLC			Other			Eliminations			EvergreenEnergyConsolidated
	(in thousands)
Cash used in operating activities of continuing operations	$	(5,303	)	$	—		$	(9,198	)	$	—		$	(14,501	)
Cash used in operating activities of discontinued plant and mining operations	—			(620		)	—			—			(620		)
Cash used in operating activities	(5,303		)	(620		)	(9,198		)	—			(15,121		)
Investing activities:
Purchases of construction in progress, plant property and equipment	(130		)	—			(67		)	—			(197		)
Proceeds from sale of assets	381			—			—			—			381
Other	(20		)	—			—			—			(20		)
Cash provided by (used in) investing activities of continuing operations	231			—			(67		)	—			164
Cash provided by investing activities of discontinued plant and mining operations	—			2,785			—			—			2,785
Cash provided by (used in) investing activities	231			2,785			(67		)	—			2,949
Financing Activities:
Proceeds from the 2011 common stock sale, net of offering costs	14,546			—			—			—			14,546
Proceeds from the 2011 “ATM Program”, net of commission and financing costs	412			—			—			—			412
Proceeds from exercise of warrants	1,029			—			—			—			1,029
Payment of note principal related to 2007 Notes	(5,310		)	—			—			—			(5,310		)
Payments to parent/subsidiaries	(9,885		)	—			—			9,885			—
Advances /from parent/subsidiaries	2,785			—			9,265			(12,050		)	—
Payments of debt issue cost	(262		)	—			—			—			(262		)
Other	(11		)	—			—			—			(11		)
Cash provided by financing activities of continuing operations	3,304			—			9,265			(2,165		)	10,404
Cash (used in) provided by financing activities of discontinued plant and mining operations	—			(2,165		)	—			2,165			—
Cash provided by financing activities	3,304			(2,165		)	9,265			—			10,404
Decrease in cash and cash equivalents	(1,768		)	—			—			—			(1,768		)
Cash and cash equivalents, beginning of period	2,946			—			28			—			2,974
Cash and cash equivalents, end of period	$	1,178		$	—		$	28		$	—		$	1,206

EVERGREEN ENERGY INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW

NINE MONTHS ENDED SEPTEMBER 30, 2010

	Evergreen			Evergreen									Evergreen
	Energy			Operations,									Energy
	Inc.			LLC			Other			Eliminations			Consolidated
	(in thousands)
Cash used in operating activities of continuing operations	$	(1,473	)	$	—		$	(10,532	)	$	—		$	(12,005	)
Cash used in operating activities of discontinued mining and plant operations	(2,530		)	(2,443		)	—			—			(4,973		)
Cash used in operating activities	(4,003		)	(2,443		)	(10,532		)	—			(16,978		)
Investing activities:
Purchases of construction in progress, plant property and equipment	(535		)	—			(886		)	—			(1,421		)
Restricted cash	4,953			—			—						4,953
Cash (used in) provided by investing activities of continuing operations	4,418			—			(886		)	—			3,532
Cash provided by investing activities of discontinued mining and plant operations	—			23,537			—						23,537
Cash (used in) provided by investing activities	4,418			23,537			(886		)				27,069
Financing Activities:
Proceeds from the 2010 common stock sale, net of offering costs	8,043			—			—			—			8,043
Proceeds from the issuance of 2010 convertible preferred stock, net of closing costs	8,746			—			—			—			8,746
Distributions from subsidiary	3,315			—			—			—			3,315
Payment of note principal related to 2009 Notes	(17,250		)	—			—			—			(17,250		)
Payment of dividends on convertible preferred stock	(4,312		)	—			—			—			(4,312		)
Payments to parent/subsidiaries	(27,387		)	—			—			27,387			—
Advances /from parent/subsidiaries	31,202			—			11,409			(42,611		)	—
Payments of debt issue cost	(2,179		)	—			—			—			(2,179		)
Other	17			—			—			—			17
Cash provided by (used in) financing activities of continuing operations	195			—			11,409			(15,224		)	(3,620		)
Cash provided by (used in) financing activities of discontinued mining and plant operations	2,560			(21,099		)	—			15,224			(3,315		)
Cash provided by (used in) financing activities	2,755			(21,099		)	11,409			—			(6,935		)
Increase (decrease) in cash and cash equivalents	3,170			(5		)	(9		)	—			3,156
Cash and cash equivalents, beginning of period	2,165			5			37			—			2,207
Cash and cash equivalents, end of period	$	5,335		$	—		$	28		$	—		$	5,363