U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
Commission File Number 1-12738
ONSITE ENERGY CORPORATION
Delaware 33-0576371
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
701 Palomar Airport Road, Suite 200, Carlsbad, CA 92009
- ------------------------------------------------- --------------------------
(Address of principal executive offices) (ZIP Code)
Issuer's telephone number, including area code: (619) 931-2400
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 X No
The number of Class A common stock, $0.001 par value, outstanding as of November
7, 1996 is 10,817,012
Onsite Energy Corporation
Consolidated Balance Sheet
September 30, 1996
Assets
Current Assets:
Cash $ 299,048
Accounts receivable, net of allowance for doubtful
accounts of $60,000 2,201,125
Costs and estimated earnings in excess of billings
on uncompleted contracts 2,120,560
Net assets held for sale 938,637
Other assets 68,955
----------------
TOTAL CURRENT ASSETS 5,628,325
Cash-restricted 265,944
Costs incurred on future projects 176,060
Property and equipment, net 131,943
Goodwill, net of amortization of $1,033,000 566,667
Other 231,436
----------------
TOTAL ASSETS $ 7,000,375
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,561,608
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,119,046
Current portion of notes payable 1,004,468
Accrued expenses and other liabilities 1,823,483
Deferred income 50,000
----------------
TOTAL CURRENT LIABILITIES 5,558,605
Long-Term Liabilities:
Notes payable, less current portion 37,050
Related party notes payable 53,134
Accrued future operation and maintenanence costs
associated with energy services agreements 469,759
----------------
TOTAL LIABILITIES 6,118,548
----------------
Commitments and contingencies
Shareholders' Equity:
Preferred Stock,$.001 par value, 1,000,000 shares authorized:
none issued and outstanding
Common Stock, $.001 par value, 24,000,000 shares authorized:
Class A common stock, 23,999,000 shares
authorized, 10,817,012 issued
and outstanding 10,817
Class B common stock, 1,000 shares
authorized, none issued and outstanding
Additional paid-in capital 16,956,561
Accumulated deficit (16,085,551)
----------------
TOTAL SHAREHOLDERS' EQUITY 881,827
----------------
TOTAL LIABILTIES AND SHAREHOLDERS' EQUITY $ 7,000,375
================
The accompanying notes are an integral part of the financial statements
Onsite Energy Corporation
Consolidated Statements of Operations
Three Months Ended September 30,
1996 1995
---------------- ---------------
Revenues $ 3,310,866 $2,538,180
Cost of sales 2,494,539 1,704,606
---------------- ---------------
Gross Margin 816,327 833,574
Selling, General,
and Administrative Expenses 1,089,497 1,217,306
---------------- ---------------
Operating income (loss) (273,170) (383,732)
---------------- ---------------
Other income (expense):
Interest (expense) (58,444) (68,696)
Interest income 4,672 3,753
---------------- ---------------
Total other income (expense) (53,772) (64,943)
--------------- ---------------
Income (loss) from operations before
provision(benefit) for income taxes (326,942) (448,675)
Provision (benefit)
for income taxes - -
---------------- ---------------
Net income (loss) $ (326,942) $ (448,675)
================ ===============
Net income (loss) per
Class A common share $ (0.03) $ (0.11)
================ ===============
Weighted average shares
outstanding 10,535,547 5,427,400
================ ===============
The accompanying notes are an integral part of the financial statements
Onsite Energy Corporation
Consolidated Statements of Cash Flows
Three Months Ended September 30,
1996 1995
---------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (326,942) $ (448,675)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Amortization of goodwill 100,000 189,999
Amortization of acquired contract
costs 224,381 5,392
Depreciation and amortization 19,769 22,534
Change in operating assets
and liabilities:
Accounts receivable (551,155) (123,643)
Increase (decrease) in billings
related to costs
and estimated earnings on
uncompleted contracts (129,117) 37,254
Other assets 91,737 145,717
Cash-restricted (43,244)
Accounts payable and accrued expenses 32,140 246,343
Deferred income 25,000
---------------- ---------------
Net cash provided (used)
by operating activities (557,431) 74,921
---------------- ---------------
Cash flows from investing
activities:
---------------- ---------------
Net cash provided
(used) by investing activities - -
---------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of debt - 54,698
Proceeds from exercise of
stock options 15,604
Repayment of long-term debt (135,595) (55,496)
Repayment of capital
lease obligations (1,774)
---------------- ---------------
Net cash (used)
by financing activities (119,991) (2,572)
---------------- ---------------
Net increase (decrease)
in cash (677,422) 72,349
Cash, beginning of year 976,470 17,569
--------------- ---------------
Cash, end of quarter $ 299,048 $ 89,918
================ ===============
The accompanying notes are an integral part of the financial statements
ONSITE ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: As contemplated by the Securities and Exchange Commission under Item
310 of Regulation S-B, the accompanying financial statements and
footnotes have been condensed and do not contain all disclosures
required by generally accepted accounting principles and, therefore,
should be read in conjunction with the Form 10-KSB for Onsite Energy
Corporation ("Onsite") as of and for the year ended June 30, 1996. In
the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly its financial position and
results of its operations for the interim period.
NOTE 2: The consolidated balance sheet as of September 30, 1996, and the
consolidated statements of operations and cash flows for the three
months ended September 30, 1996 and 1995, represent the financial
position and results of operations of Onsite.
NOTE 3: Net income (loss) per common share is based upon the net income
(loss) for the period divided by the weighted average number of common
shares and common share equivalents outstanding during the period.
Options and other convertible securities that are anti-dilutive or do
not qualify as a common stock equivalents as of September 30, 1995 have
been excluded from the per share calculations.
NOTE 4: Onsite has been in negotiations for the sale of all or
substantially all of its interests in Television City Cogen, L.P.
("TCC"), subject to the prospective buyer arranging the required
financing and other terms and conditions, including approvals of
third parties. As a result of the negotiations, and as a result of
the desire of TCC's lender for full repayment of long term debt
secured by the assets of TCC, Onsite agreed to a modification of the
maturity date under the note to December 20,1996. The original
maturity of the loan was November 30, 2000 and as of September 30,
1996 the loan had an outstanding principal balance of $806,500. As a
result of delays in the sale, Onsite has commenced efforts to arrange
for refinancing the debt with a new lender. Onsite believes that it
can obtain new financing. However, the new financing may be under
terms that are less favorable than existing terms. No assurance can
be given that Onsite will be able to meet its commitment for payoff
of the note by December 20, 1996 through completion of the sale or a
refinancing. If unsuccessful, the current lender will be able to
enforce its rights under the note including declaring TCC in default
and instituting foreclosure proceedings against the assets of TCC. A
default under the TCC loan may also trigger a default on another of
Onsite's long term notes payable that is secured by substantially all
of the assets of Onsite.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Background
Onsite is an energy efficiency services company ("ESCO") specializing in the
development, engineering, installation and operation of energy efficient
retrofits for industrial, commercial and institutional facilities. By combining
development, engineering, analysis, project management and financial management
skills, Onsite provides a complete package of services, ranging from feasibility
assessment through construction and operation for energy efficiency projects
incorporating lighting, energy management systems, HVAC upgrades, cogeneration
and other energy efficiency measures.
Onsite, a Delaware corporation, was formed pursuant to a business reorganization
effective February 15, 1994 (the "Reorganization"), between Western Energy
Management, Inc., a Delaware corporation formed in 1991 ("Western"), and Onsite
Energy, a California corporation formed in 1982 ("Onsite-Cal"). Under the
Reorganization, Onsite-Cal merged with and into Onsite, and a newly formed
subsidiary of Onsite merged with and into Western, which survived and became a
wholly-owned subsidiary of Onsite. This transaction was accounted for as a
purchase of Onsite-Cal by Onsite.
Onsite also owns general and limited partnership interests in TCC. Onsite owns
all the stock of Onsite/TCC Corp., a Delaware corporation, which is the other
partner in TCC. Thus, directly and indirectly, Onsite owns 100% of TCC. Onsite
also owns a general partnership interest in Onsite Partners, a California
general partnership, and a general partnership interest in American Private
Power II, a California general partnership, both of which are inactive.
In addition, on June 16, 1994, Onsite acquired Lanikai Lighting, Inc., a Hawaii
corporation ("Lanikai"). Onsite sold its interests in Lanikai effective February
20, 1996. While under Onsite ownership, Lanikai installed lighting and other
energy efficiency measures at commercial and institutional facilities in Hawaii
Unless the context indicates otherwise, reference to Onsite shall include all of
its wholly-owned subsidiaries.
RESULTS OF OPERATIONS. Revenues for the three month period ended September 30,
1996 were $3,310,866, compared to $2,538,180 for the same period in 1995, an
increase of $772,686, or approximately 30.4 percent. The increase in revenues
was attributable to projects implemented pursuant to Onsite's Demand Side
Management ("DSM") contract with Southern California Edison as well as revenues
from several other new projects. Revenues in the first three months of 1995 were
predominantly derived from projects with customers pursuant to Onsite's DSM
contract with Pacificorp and also included revenues from Lanikai.
Cost of sales for the quarter ended September 30, 1996 was $2,494,539, compared
to $1,704,606 for the quarter ended September 30, 1995, an increase of $789,933,
or approximately 46.3 percent. Gross margin for the three month period ended
September 30, 1996 was $816,327 (24.7 percent of revenues), compared to $843,759
(32.8 percent of revenues), a decrease of $17,247. The decrease in gross margin
as a percentage of sales was the result of the difference in nature of the
projects explained above, particularly for projects that did not benefit from
DSM payments from utilities and, as a result, had a lower gross margin to
Onsite. The decline also was attributable to a shift in the type of projects
from predominantly lighting efficiency in 1995 to a mix of lighting efficiency
and custom projects such as energy management systems.
Selling, general and administrative ("SG&A") expense for the quarter ended
September 30, 1996 was $1,089,497, compared to $1,217,306 for the quarter ended
September 30, 1995, a decrease of $127,809, or approximately 10.5 percent. The
decrease in SG&A was primarily attributable to inclusion of Lanikai in the prior
year.
Net other expense for the quarter ended September 30, 1996 was $53,772, compared
to $64,943 for the three month period ended September 30, 1995, an increase of
$11,171, or approximately 17.2 percent.
Net loss for the three months ended September 30, 1996 was $326,942, or $.03 per
share, compared to a net loss of $448,675, or $.11 loss per share for the same
period in 1995. The decline in loss per share was the result of 4,177,135 new
shares of Class A Common Stock issued when the Preferred Stock Series A and B
shareholders converted their shares.
LIQUIDITY AND CAPITAL RESOURCES. Onsite's cash and cash equivalents were
$299,048 as of September 30, 1996, compared to $976,470 as of June 30,
1996. Working capital was $69,720 as of September 30, 1996 compared to $354,544
as of June 30, 1996.
Cash flows used by operating activities during the three months ended September
30, 1996 were $557,431, compared to cash flows provided by operating activities
of $74,921 for the same period in 1995, a decrease of $632,352. A significant
contributing factor to the decrease was a net increase in accounts receivable of
$551,155 in 1996.
There were no cash flows from investing activities in either of the first three
months of 1996 and 1995.
Cash flows used by financing activities were $119,991 during the three months
ended September 30, 1996, compared to $2,572 for the comparable period last
year. There was $54,698 in new debt added in the previous year and reductions in
notes payable of $135,595 in the first three months of the current fiscal year,
compared to reductions in notes payable of $55,496 in the first three months of
fiscal 1995.
Onsite issued 4,553,549 shares of its Class A Common Stock during the three
months ended September 30, 1996. A total of 4,177,135 shares were issued as a
result of the conversion of Series A and B convertible preferred shares into
Class A Common Stock. A total of 347,048 shares were issued in lieu of cash for
dividend payments on the Class A and B preferred stocks. Other issuances totaled
29,366 and resulted from shares issued to the Onsite 401(k) plan (20,504) and
from the exercise of employee stock options (8,862).
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders-Not Applicable
Item 5. Other - With the exception of historical facts stated herein, the
matters discussed in this report are "forward looking" statements that involve
risks and uncertainties that could cause actual results to differ
materially from projected results. Such "forward looking" statements
include, but are not necessarily limited to , statements regarding
anticipated levels of future revenue and earnings from operations of Onsite,
projected costs and expenses related to Onsite's energy services agreements,
and the availability of future debt and equity capital on commercially
reasonable terms. Factors that could cause actual results to differ
materially include, in addition to the other factors identified in this
report, the cyclical and volatile price of energy, the inability to continue
to contract sufficient customers to replace contracts as they become
completed, unanticipated delays in the approval of proposed energy
conservation measures by Onsite's customers, delays in the receipt of, or
failure to receive necessary governmental or utility permits, or approvals, or
the renewals thereof, risks and uncertainties relating to general economic and
political conditions, both domestically and internationally, changes in the law
and regulations governing Onsite's activities as an energy services company and
the activities of the nation's public utilities seeking energy conservation as a
cost effective alternative to constructing new power generation facilities,
results of project specific and company working capital and financing efforts
and market conditions, and other risk factors detailed in Onsite's Securities
and Exchange Commission ("SEC") filings including the risk factors set forth in
Onsite's Registration Statement on Form S-4, SEC File NO. 33-66010. Readers of
this report are cautioned not to put undue reliance on "forward looking
statements which are, by their nature, uncertain as reliable indicators of
future performance. Onsite disclaims any intent or obligation to publicly update
these "forward looking" statements, whether as a result of new information,
future events, or otherwise.
Item 6. Exhibits and Reports on Form 8-K
Exhibit
Number
11 Statement re per share earnings
27 Financial Data Schedule
SIGNATURES
In accordance with the requirements of the Securities Exchange Act , the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ONSITE ENERGY CORPORATION
Dated: November 8, 1996 By: s\ Richard T. Sperberg
Richard T. Sperberg
Chief Executive Officer
Dated: November 8, 1996 By: S\J. Bradford Hanson
J. Bradford Hanson
Chief Financial Officer and Principal
Accounting Officer