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 MARCH 31, 1997
|_| 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
incorporation or organization) Identification No.)
701 Palomar Airport Road, Suite 200, Carlsbad, CA 92009
- ------------------------------------------------- ---------------------------
(Address of principal executive offices) (ZIP Code)
Issuer's telephone number, including area code: (760) 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 May 9,
1997 is 10,944,172
Onsite Energy Corporation
Consolidated Balance Sheet
March 31, 1997
(Unaudited)
ASSETS
Current Assets:
Cash $ 253,626
Accounts receivable, net of allowance for doubtful
accounts of $40,000 1,630,425
Costs and estimated earnings in excess of billings
on uncompleted contracts 268,629
Amount due pursuant to sale of subsidiary 421,834
Other assets 31,458
----------
TOTAL CURRENT ASSETS 2,605,972
Cash-restricted 495,292
Costs incurred on future projects 13,668
Property and equipment, net 91,056
Goodwill, net of amortization of $1,233,000 366,667
Other 27,403
----------
TOTAL ASSETS $3,600,058
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,355,089
Billings in excess of costs and estimated earnings
on uncompleted contracts 435,763
Current portion of notes payable 547,994
Accrued expenses and other liabilities 868,066
Deferred income 25,000
----------
TOTAL CURRENT LIABILITIES 3,231,912
Long-Term Liabilities:
Notes payable, less current portion -
Related party notes payable 50,440
Accrued future operation and maintenanence costs
associated with energy services agreements 521,613
----------
TOTAL LIABILITIES 3,803,965
----------
Commitments and contingencies -
Shareholders' Equity:
Preferred Stock,$.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, 10,944,172 issued
and outstanding 10,944
Class B common stock, 1,000 shares
authorized, none issued and outstanding -
Additional paid-in capital 17,052,963
Accumulated deficit (17,267,814)
-----------
TOTAL SHAREHOLDERS' EQUITY (203,907)
-----------
TOTAL LIABILTIES AND SHAREHOLDERS' EQUITY $3,600,058
===========
Onsite Energy Corporation
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
-------- ------- ------- -------
Revenues $1,646,305 $7,122,996 $7,892,695 $16,476,396
Cost of sales 1,322,262 5,354,319 5,782,767 12,604,979
------------ ------------ ------------ ------------
Gross Margin 324,043 1,768,677 2,109,928 3,871,417
Selling, General,
and
Administrative
Expenses 857,085 1,154,034 3,059,959 2,800,576
------------ ------------ ------------ ------------
Operating income
(loss) (533,042) 614,643 (950,031) 1,070,841
------------ ------------ ------------ ------------
Other income (expense):
Interest (expense) (40,858) (69,726) (141,688) (207,595)
Interest income 383 9,643 7,759 18,090
Loss on disposition
of subsidiaries (425,240) - (425,240) (288,103)
------------ ------------ ------------ ------------
Total other income
(expense) (465,715) (60,083) (559,169) (477,608)
------------ ------------ ------------ ------------
Income (loss) from
operations before
provision(benefit)
for income taxes (998,757) 554,560 (1,509,200) 593,233
Provision (benefit)
for income taxes - - - -
------------ ------------ ------------- ------------
Net income (loss) $(998,757) $ 554,560 $(1,509,200) $ 593,233
============ ============ ============= ============
Net income (loss)
per Class A
common share $ (0.09) $ 0.03 $ (0.14) $ 0.01
============ ============ ============= ============
Weighted average
shares outstanding 10,935,598 11,765,841 10,776,607 10,483,694
============ ============ ============= ============
Onsite Energy Corporation
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
1997 1996
------- -------
Cash Flows from
operating activities:
Net income (loss) $(1,509,200) $ 593,233
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Amortization of goodwill 300,000 335,723
Amortization of acquired
contract costs 386,773 -
Depreciation and amortization 60,656 158,335
Loss on sale of subsidiaries 425,640 288,103
(Increase) decrease in
operating assets 484,602 (1,372,047)
Decrease (increase) in
operating liabilitites (1,062,347) 904,542
------------ ------------
Net cash provided (used)
by operating activities (913,876) 907,889
------------ ------------
Cash flows from investing activities:
Proceeds from sale of subsidiary 778,166 -
------------ -------------
Net cash provided (used)
by investing activities 778,166 -
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of debt - 54,698
Proceeds from exercise of stock 44,679 -
Repayment of long-term debt (631,813) (283,085)
Repayment of capital lease obligations - (3,589)
------------ -------------
Net cash (used)
by financing activities (587,134) (231,976)
------------ -------------
Net increase (decrease) in cash (722,844) 675,913
Cash, beginning of year 976,470 17,569
------------ ------------
Cash, end of quarter $ 253,626 $ 693,482
============ ============
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 March 31, 1997, and the
consolidated statements of operations and cash flows for the three
and nine months ended March 31, 1997 and 1996, 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
March 31, 1997 have been excluded from the per share calculations.
There were 5,488,986 and 4,917,440 in common stock equivalents added
to the weighted average shares outstanding for the three and nine
month periods ended March 31, 1996, respectively.
NOTE 4: Onsite entered into an agreement for the sale of all or substantially
all of its interests in Television City Cogen, L.P. ("TCC"), subject
to the buyer paying the purchase price as well as obtaining the
consent of certain third parties. The first two of three installment
payments to be received under the purchase and sale agreement,
totaling $778,166 were received on a timely basis by Onsite and
were used to retire the TCC debt on March 31, 1997, its scheduled
maturity date. The third and final installment is due on or
before May 31, 1997 and will be used to retire another of Onsite's
existing term notes. As a result of the sale, Onsite recorded a loss
of approximately $425,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Background
Onsite is an energy efficiency services company ("ESCO") involved 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 has also been involved in marketing
comprehensive energy supply services to commercial and industrial customers
related to the evolving competitive retail market for electricity.
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. The transaction was accounted for as a
purchase of Onsite-Cal by Onsite.
Onsite 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.
Nine Months ended March 31, 1997 compared to the nine months ended March 31,
1996
Results of Operations. Revenues for the nine months ended March 31, 1997 were
$7,892,695 compared to $16,476,396 for the nine months ended March 31, 1996, a
decrease of $8,583,701. Fiscal 1996 revenues benefited from four major projects
while fiscal 1997 had just one project of similar significance (greater than $2
million).
Gross margin for the nine months ended March 31, 1997 was $2,109,928, or 26.7%
of revenues, compared to $3,871,417, or 23.5 % of revenues, for the nine months
ended March 31, 1996. The improvement in margin as a percentage of revenues is
primarily due to a higher percentage of projects implemented under the Southern
California Edison ("SCE") Demand Side Management contract in the current year
that had higher margins as a result of the SCE payment contributions for
estimates of achieved savings.
Selling , General and Administrative expenses ("SG&A") were $3,059,959 for the
nine month period ended March 31, 1997, compared to $2,800,576 for the same nine
month period a year ago. The increase of $259,383, or 9.3% was primarily to due
increases in staffing at several of Onsite's offices, including its new Northern
California office (opened in June, 1996) and increased staff at its El Paso,
Texas and Troy, Michigan (subsequently closed in March 1997) offices. SG&A
expense includes $300,000 in expense for the amortization of goodwill. The
goodwill is being amortized at the rate of $100,000 per quarter through
February, 1998.
Net other income/expense was $559,169 net other expense for the nine months
ended March 31, 1997, up $81,561 from $477,608 in net other expense for the nine
months ended March 31, 1996. Included in net other expense for the nine months
ended March 31, 1997 was a one time non-recurring loss on the sale of Onsite's
interests in TCC of $425,240. Included in net other expense for the nine months
ended March 31, 1996 was a one time non-recurring loss on the sale of Onsite's
interests in Lanikai of $288,103.
Net loss for the nine months ended March 31, 1996 was $1,509,200, or $.14 loss
per share, compared to Net income of $593,233, or $.01 earnings per share for
the nine month period ended March 31, 1995. Per share numbers in 1996 were
adjusted for dividends accrued on then existing convertible Preferred Stock
which was converted to Class A Common Stock at the beginning of the current
fiscal year.
As a result of the decline in revenues in the current fiscal year, Onsite has
reduced staff, closed its Michigan Office and implemented other savings and cash
outflow reductions in an effort to improve overall operating results. In
addition, Onsite has substantially increased its reimbursable consulting
activities which has an immediate benefit of more predictable margins and cash
flows. Additionally, as a forward looking statement, Onsite's consulting
activities may lead to additional energy efficiency projects, subject to project
identification, analysis and successful contract negotiation.
Three Months ended March 31, 1997 compared to the three months ended March 31,
1996
Results of Operations. Revenues for the three month period ended March 31, 1997
were $1,646,305 compared to $7,122,996 for the three months ended March 31,
1996, a decrease of $5,476,691. Four projects contributed approximately $5.8
million in revenues in the three month period ended March 31, 1996. The largest
single project in the current fiscal quarter contributed approximately $150,000.
Gross Margin was $324,043, or 19.7% of revenues for the three month period ended
March 31, 1997, compared to $1,768,677, or 24.8% of revenues for the three month
period ended March 31, 1996. The decrease in margin as a percentage of revenues
was attributable to higher than expected costs in completing several projects in
the quarter.
SG&A expenses were $857,085 for the three months ended March 31, 1997, compared
to $1,154,034 for the three months ended March 31, 1996, a decrease of $296,949.
The decrease was substantially attributable to staff and other overhead
reductions started in late December 1996 and continuing during the quarter.
Net other income/expense was $465,715 in net expense in the quarter ended March
31, 1997, compared to $60,083 in net other expense for the three month period
ended March 31, 1996, an increase of $405,632 in net other expense. As discussed
above, the increase is due to the $425,240 one time non-recurring loss recorded
on the sale of Onsite's interest in TCC.
Net loss for the three months ended March 31, 1997 was $998,757, or $.09 loss
per share, compared to net income of $554,560, or $.03 earnings per share, for
the same three month period in the previous fiscal year.
Liquidity and Capital Resources Onsite's cash and cash equivalents were $253,626
as of March 31, 1997, compared to $976,470 as of June 30, 1996. Working capital
was a negative $625,940 as of March 31, 1997 compared to a positive $354,544 as
of June 30, 1996.
Cash flows used by operating activities during the nine months ended March 31,
1996 were $913,876, compared to cash flows provided by operating activities of
$907,889 for the same period in 1996, a decrease of $1,821,765. Significant
contributing factors to the decrease was: the net loss for the nine months ended
March 31, 1996 of $1,509,200, compared to net income of $593,233; an increase in
amounts due pursuant to the sale of TCC of $421,834; and a net decrease in
accounts payable and accrued expenses of $1,062,347 from June 30 1996.
Cash flows provided from investing activities was $778,166 for the nine month
period ended March 31, 1997, compared to none in 1996. The cash flows provided
from investing activities in 1997 were entirely attributable to the sale of TCC,
which will ultimately result in proceeds to Onsite totaling approximately
$1,200,000.
Cash flows used by financing activities were $587,134 during the nine months
ended March 31, 1997, compared to $231,976 for the comparable period last year.
The increase in cash used by financing activities in the current year includes
regularly scheduled principal payments.
Onsite issued 4,680,709 shares of its Class A Common Stock during the nine
months ended March 31, 1997. 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 156,526
and resulted from shares issued to the Onsite 401(k) plan (48,562), from the
exercise of employee stock options (45,887) and from shares issued in lieu of
cash for services rendered (62,077).
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 efficiency 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 efficiency 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
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: May 13, 1997 By:s/Richard T. Sperberg
-------------------------
Richard T. Sperberg
Chief Executive Officer
Dated: May 13, 1997 By:s/J. bradford Hanson
-------------------------
J. Bradford Hanson
Chief Financial Officer and
Principal Accounting Officer