UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(Date of earliest event reported): April 3, 2006
ELECTRIC CITY CORP.
(Exact name of registrant as specified in its charter)
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| DELAWARE | | 001-16265 | | 36-4197337 |
| (State or other jurisdiction of | | (Commission File #) | | (IRS Employer Identification No.) |
| incorporation or organization | | | | |
1280 Landmeier Road, Elk Grove Village, Illinois 60007-2410
(Address of principal executive offices)
(847) 437-1666
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into Material Definitive Agreement
Item 2.01 Completion of Acquisition of Disposition of Assets
On April 3, 2006, Electric City Corp. (“Electric City” or the “Company”) completed a Stock Purchase Agreement with Eugene Borucki and Denis Enberg (the “Purchasers”) in which it agreed to sell effective as of March 31, 2006, all of the outstanding common stock of Great Lakes Controlled Energy Corporation (“Great Lakes”) to the Purchasers for 212,904 shares of Electric City common stock (the “Transaction”). Closing also occurred on April 3, 2006 effective as of midnight on March 31, 2006. The Agreement also provides that in the event that Great Lakes’ Adjusted Net Book Value (defined below), is less than $20,000, then Electric City will make a cash payment to the Purchasers in the amount equal to the difference between the Adjusted Net Book Value and $20,000, and in the event that Great Lakes’ Adjusted Net Book Value exceeds $20,000, then the Purchasers will make a cash payment to Electric City in the amount equal to the amount by which the Adjusted Net Book Value exceeds $20,000. Adjusted Net Book Value is defined as net assets (excluding goodwill) less net liabilities (excluding inter-company debt), as such items are shown on the final closing date balance sheet, which will be prepared and agreed upon within approximately 60 days.
In connection with the transaction, Messrs. Borucki and Enberg both signed Non-competition, Non-disclosure and Non-solicitation agreements in which they agreed not to compete with Electric City’s ballasted lighting power reduction business, not to disclose confidential information regarding Electric City and not to solicit Electric City’s employees to work for Great Lakes.
Mr. Borucki was the President of Great Lakes, Mr. Enberg was Electric City’s Executive Vice President of Engineering and both were the former owners of Great Lakes prior to its acquisition by Electric City in June 2001.
The 212,904 shares of Electric City common stock have been retired and become authorized but un-issued shares. For accounting purposes, the Company has valued these shares at $0.91 each, which is the average closing market price of the common stock for the five days prior to entering into the letter of intent to sell Great Lakes. The Company believes that any gain or loss that it may incur as a result of the Transaction will be insignificant.
The description of the Stock Purchase Agreement and the transactions contemplated thereby is not intended to be complete and is qualified in its entirety by the complete text of the Stock Purchase Agreement and the Non-Competition, Non-Disclosure and Non-Solicitation Agreements which are attached to this report as exhibits 10.1, 10.2 and 10.3, respectively, and are incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(a) Not Applicable
(b) Pro forma financial information
The following unaudited pro forma consolidated financial statements reflect the sale of all of the capital stock of Great Lakes Controlled Energy Corporation (“Great Lakes”), giving effect to the pro forma adjustments described in the accompanying notes. The unaudited pro forma consolidated financial statements have been prepared from, and should be read in conjunction with, the historical consolidated financial statements and notes thereto of Electric City Corp., which are included in Electric City’s Annual Report on Form 10-K for the year ended December 31, 2005.
The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the sale been consummated at the dates indicated, nor is it necessarily indicative of the future operating results or financial position of Electric City.
The unaudited pro forma consolidated statements of operations give effect to the Transaction as if it had occurred at the beginning of the period presented. The unaudited pro forma consolidated balance sheet gives effect to the Transaction as if it occurred on December 31, 2005.
ELECTRIC CITY CORP.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2005
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| | | | | | | Pro-forma | | | | |
| | | Historical | | | Adjustment(1) | | | Pro-forma | |
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Assets | | | | | | | | | | | | |
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Current Assets | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 4,229,150 | | | $ | (25,697 | ) | | $ | 4,203,453 | |
| Accounts receivable, net | | | 1,747,019 | | | | (406,991 | )(2) | | | 1,340,028 | |
| Inventories | | | 1,457,789 | | | | (10,000 | ) | | | 1,447,789 | |
| Advances to suppliers | | | 324,677 | | | | — | | | | 324,677 | |
| Costs and estimated earnings in excess of billings on uncompleted contracts | | | 28,462 | | | | — | | | | 28,462 | |
| Prepaid expenses and other | | | 207,480 | | | | (9,590 | ) | | | 197,890 | |
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Total Current Assets | | | 7,994,577 | | | | (452,278 | ) | | | 7,542,299 | |
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Net Property and Equipment | | | 2,514,196 | | | | (16,028 | ) | | | 2,498,168 | |
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Deferred Financing Costs,net of amortization | | | 299,964 | | | | — | | | | 299,964 | |
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Intangibles, net of amortization | | | 1,960,835 | | | | — | | | | 1,960,835 | |
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Cost in Excess of Assets Acquired | | | 4,329,402 | | | | (173,743 | ) | | | 4,155,659 | |
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| | | $ | 17,098,974 | | | $ | (642,049 | ) | | $ | 16,456,925 | |
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ELECTRIC CITY CORP.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2005
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| | | | | | | Pro-Forma | | | | |
| | | Historical | | | Adjustment(1) | | | Pro-Forma | |
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Liabilities and Stockholders’ Equity | | | | | | | | | | | | |
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Current Liabilities | | | | | | | | | | | | |
| Line of credit | | $ | 2,000,000 | | | $ | — | | | $ | 2,000,000 | |
| Notes payable | | | 150,000 | | | | — | | | | 150,000 | |
| Current maturities of long-term debt | | | 651,313 | | | | (2,160) | | | | 649,153 | |
| Accounts payable | | | 913,369 | | | | (73,825) | | | | 839,544 | |
| Accrued expenses | | | 1,228,765 | | | | (81,167) | | | | 1,147,598 | |
| Deferred revenue | | | 984,728 | | | | (241,154) | | | | 743,574 | |
| Customer deposits | | | 1,419,919 | | | | (50,000) | | | | 1,369,919 | |
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Total Current Liabilities | | | 7,348,094 | | | | (448,306) | | | | 6,899,788 | |
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Deferred Revenue | | | 1,044,524 | | | | — | | | | 1,044,524 | |
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Long-Term Debt, less current maturities | | | 4,328,719 | | | | — | | | | 4,328,719 | |
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Total Liabilities | | | 12,721,337 | | | | (448,306 | ) | | | 12,273,031 | |
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Stockholders’ Equity | | | | | | | | | | | | |
| Preferred stock: | | | | | | | | | | | | |
| Series E | | | 2,363 | | | | — | | | | 2,363 | |
| Common stock | | | 5,081 | | | | (21) | (3) | | | 5,060 | |
| Additional paid-in capital | | | 64,768,814 | | | | — | | | | 64,768,814 | |
| Accumulated deficit | | | (60,398,621 | ) | | | (193,722 | ) | | | (60,592,343 | ) |
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Total Stockholders’ Equity | | | 4,377,637 | | | | (193,743 | ) | | | 4,183,894 | |
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| | | $ | 17,098,974 | | | $ | (642,049 | ) | | $ | 16,456,925 | |
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ELECTRIC CITY CORP.
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2005
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| | | | | | | Pro-Forma | | | | |
| | | Historical | | | Adjustment(4) | | | Pro-Forma | |
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Revenue | | $ | 4,854,772 | | | $ | (1,161,356 | ) | | $ | 3,693,416 | |
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Expenses | | | | | | | | | | | | |
| Cost of sales | | | 4,489,227 | | | | (797,387 | ) | | | 3,691,840 | |
| Selling, general and administrative | | | 6,450,836 | | | | (372,738 | ) | | | 6,078,098 | |
| Impairment Loss | | | 242,830 | | | | (242,830 | ) | | | — | |
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| | | | 11,182,893 | | | | (1,412,955 | ) | | | 9,769,938 | |
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Operating loss | | | (6,328,121 | ) | | | 251,599 | | | | (6,076,522 | ) |
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Other Income (Expense) | | | | | | | | | | | | |
| Interest income | | | 58,737 | | | | — | | | | 58,737 | |
| Interest expense | | | (603,354 | ) | | | 364 | | | | (602,990 | ) |
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| Total other income (expense) | | | (544,617 | ) | | | 364 | | | | (544,253 | ) |
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Net Loss | | | (6,872,738 | ) | | | 251,963 | | | | (6,620,775 | ) |
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Preferred Stock Dividends | | | (1,851,345 | ) | | | — | | | | (1,851,345 | ) |
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Net Loss Available to Common Shareholders | | $ | (8,724,083 | ) | | $ | 251,963 | | | $ | (8,472,120 | ) |
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| | | | �� | | | | | | | | | |
| Basic and Diluted Loss Per Common Share | | $ | (0.18 | ) | | $ | 0.00 | | | $ | (0.18 | ) |
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Weighted Average Common Shares Outstanding | | | 47,859,964 | | | | (212,904) | (3) | | | 47,647,060 | |
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ELECTRIC CITY CORP.
Notes to the Unaudited Pro Forma Financial Statements
| 1. | | Eliminates certain assets and liabilities sold or transferred as part of the Transaction as if the Transaction had occurred on the balance sheet date. |
| 2. | | The Adjusted Net Book Value adjustment to the purchase price based on the December 31, 2005 balance sheet would result in an amount due to Electric City of $32,464. This amount has been included in the pro-forma accounts receivable. |
| 3. | | Represents shares of Electric City common stock received from the Purchasers of Great Lakes as consideration for the sale and subsequently retired. |
| 4. | | Eliminates the results of operation of Great Lakes for the period as if the Transaction had been completed at the beginning of the period presented. |
(c) Not Applicable
(d) Exhibits
| | 10.1 | | Stock Purchase Agreement dated as of April 3, 2006 |
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| | 10.2 | | Non-Competition, Non-Disclosure And Non-Solicitation Agreement Dated as of March 31, 2006 between Electric City Corp. and Eugene Borucki |
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| | 10.3 | | Non-Competition, Non-Disclosure And Non-Solicitation Agreement Dated as of March 31, 2006 between Electric City Corp. and Denis Enberg |
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | ELECTRIC CITY CORP.:
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| Dated: April 7, 2006 | By: | /s/ Jeffrey Mistarz | |
| | | Jeffrey Mistarz | |
| | | Chief Financial Officer & Treasurer | |
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