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, 2000.
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
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(Name of small business issuer in its charter)
Delaware 33-0576371
- ---------------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
701 Palomar Airport Road, Suite 200, Carlsbad, CA 92009
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(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 November
9, 2000 is 19,392,396.
2
Part I - Financial Information
Item 1. Financial Statements
Onsite Energy Corporation
Condensed Consolidated Balance Sheet
September 30, 2000
(Unaudited)
ASSETS
Current Assets:
Cash $ 546,202
Accounts receivable, net of allowance for doubtful accounts of $37,000 847,787
Costs and estimated earnings in excess of billings on uncompleted contracts 14,055
Other assets 88,724
-------------
TOTAL CURRENT ASSETS 1,496,768
Property and equipment, net of accumulated depreciation and amortization of $372,000 387,535
Other assets 27,748
-------------
TOTAL ASSETS $ 1,912,051
=============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable, current portion $ 183,127
Capitalized lease obligation, current portion 219,305
Liabilities in excess of assets held for sale 4,136,016
Accounts payable 2,020,459
Billings in excess of costs and estimated earnings on uncompleted contracts 520,983
Accrued expenses and other liabilities 1,098,434
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TOTAL CURRENT LIABILITIES 8,178,324
Long-Term Liabilities:
Notes payable, less current portion 139,381
Capitalized lease obligation, less current portion 121,737
Deferred income 801,096
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TOTAL LIABILITIES 9,240,538
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Commitments and contingencies
Shareholders' Equity (Deficit):
Preferred Stock, Series C, $.001 par value, 842,500 shares authorized,
649,120 issued and outstanding
(aggregate $3,245,600 liquidation preference) 649
Preferred Stock, Series D, $.001 par value,
157,500 shares authorized, issued and outstanding and held in escrow -
Preferred Stock, Series E, $.001 par value, 50,000 shares authorized,
issued and outstanding (aggregate $1,000,000 liquidation preference) 50
Common stock, $.001 par value, 24,000,000 shares authorized:
Class A common stock, 23,999,000 shares authorized, 19,347,730 issued and
outstanding 19,348
Class B common stock, 1,000 shares authorized, none issued and outstanding --
Additional paid-in capital 27,906,386
Notes receivable - shareholders (838,964)
Accumulated deficit (34,415,956)
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TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (7,328,487)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 1,912,051
=============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
Onsite Energy Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended September 30,
2000 1999
------------ -------------
Revenues $ 2,090,509 $ 9,594,181
Progect incentive revenue 844,122 145,900
------------ -------------
Total revenues 2,934,631 9,740,081
Cost of sales 1,327,486 7,443,959
------------ -------------
Gross margin 1,607,145 2,296,122
Selling, general, and administrative expenses 1,004,244 2,979,350
Depreciation and amortization expense 69,800 143,625
Recovery of reserve provided for sale
of subsidiary -- (358,670)
------------ -------------
Operating income (loss) 533,101 (468,183)
------------ -------------
Other income (expense):
Interest expense (28,773) (118,834)
Gain on sale of property and equipment 15,045 --
Interest income -- 5,623
------------ -------------
Total other expense (13,728) (113,211)
------------ -------------
Income (loss) before provision for income taxes and
extraordinary item 519,373 (581,394)
Provision for income taxes -- 3,600
------------ -------------
Income (loss) from operations 519,373 (584,994)
Extraordinary item:
Gain on extinguishment of liabilities 42,742 --
------------ -------------
Net income (loss) $ 562,115 $ (584,994)
============ =============
Net income (loss) allocated to common shareholders $ 481,075 $ (1,347,756)
============ =============
Basic earnings (loss) per common share
Income (loss) from operations $ 0.02 $ (0.07)
Extraordinary item -- --
------------ -------------
Net income (loss) $ 0.02 $ (0.07)
============ =============
Diluted earnings (loss) per common share
Income (loss) from operations $ 0.01 $ (0.07)
Extraordinary item -- --
------------ -------------
Net income (loss) $ 0.01 $ (0.07)
============ =============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
Onsite Energy Corporation
Condensed Consolidated Statement of Cashflows
(Unaudited)
Three Months Ended September 30,
2000 1999
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 562,115 $ (584,994)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Amortization of excess purchase price over net assets acquired -- 8,279
Amortization of acquired contract costs -- (59,147)
Depreciation and amortization 69,800 135,345
Recovery of reserve provided for sale or disposal of subsidiary -- (358,670)
Non-cash compensation upon issuance of stock -- 47,500
Non-cash compensation for stock options under a variable plan 176,902 --
(Increase) decrease:
Accounts receivable (335,751) 705,086
Costs and estimated earnings in excess of billings
on uncompleted contracts (53,541) 381,431
Capitalized project costs 94,617 --
Other assets (56,988) (13,585)
Cash-restricted -- 29,063
Increase (decrease):
Accounts payable (24,504) 980,634
Billings in excess of costs and estimated earnings
on uncompleted contracts 302,072 (440,965)
Accrued expenses and other liabilities (140,251) (594,497)
Deferred income (45,005) (23,739)
------------ ------------
Net cash provided by operating activities 549,466 211,741
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (5,609) (21,186)
Loans to shareholders (88,964) (242,424)
------------ ------------
Net cash used in investing activities (94,573) (263,610)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 1,000,000
Proceeds from notes payable 136,122 --
Repayment of notes payable - related party -- (130,458)
Repayment of notes payable (270,893) (1,132,756)
------------ ------------
Net cash used in financing activities (134,771) (263,214)
------------ ------------
Net increase (decrease) in cash 320,122 (315,083)
Cash, beginning of period 226,080 900,408
------------ ------------
Cash, end of period $ 546,202 $ 585,325
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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 (the "Company") as of
and for the year ended June 30, 2000 and all other subsequent
filings. 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, 2000, and the
consolidated statements of operations and cash flows for
the three months ended September 30, 2000 and 1999, represent the
financial position and results of operations of the Company. The
results for the interim period ended September 30, 2000 are not
necessarily indicative of results that will be obtained in future
periods.
NOTE 3: Earnings per share calculations for the three month periods
ended September 30, 2000 and September 30, 1999 are as follows:
6
Three Months
Ended September 30,
2000 1999
------------- --------------
BASIC
Net Income/(Loss) $ 562,115 $ (584,994)
Less: Preferred stock dividends (81,040) (762,762)
------------- --------------
Net income/(loss) allocated to common shareholders $ 481,075 $ (1,347,756)
============= ==============
Weighted average number of common shares 18,694,159 18,628,894
============= ==============
Basic earnings/(loss) per common share $ 0.02 $ (0.07)
============= ==============
DILUTED
Net income available to common shareholders $ 481,075 $ (1,347,756)
Preferred stock dividends $ 81,040 *
------------- --------------
Net income available to common shareholders
plus assumed conversion $ 562,115 $ (1,347,756)
============= ==============
Weighted average number of common shares 18,694,159 18,628,894
Common stock equivalent shares representing assumed
conversions of preferred stock 23,995,600 *
Common stock equivalent shares representing shares
issuable upon exercise of stock options 362,471 *
------------- --------------
Weighted average number of shares used in
calculation of diluted income per common share 43,052,230 18,628,894
============= ==============
Diluted earnings per common share $ 0.01 $ (0.07)
============= ==============
* Not applicable as effect would be anti-dilutive
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Background
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995. With the exception of historical facts
stated herein, the matters discussed in this quarterly report are "forward
looking" statements that involve risks and uncertainties that could cause actual
results to differ materially from projected results. The "forward looking"
statements contained herein are cross-referenced to this paragraph. Such
"forward looking" statements include, but are not necessarily limited to,
statements regarding anticipated levels of future revenue and earnings from
operations of the Company, projected costs and expenses related to the Company's
7
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 the Company'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 the Company's activities as an energy services company
and the activities of the nation's regulators and 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
the Company's Securities and Exchange Commission filings including the risk
factors set forth in the Company's Form 10-KSB for the fiscal year ended June
30, 2000 (as the same has been amended). 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. The Company
disclaims any intent or obligation to publicly update these "forward looking"
statements, whether as a result of new information, future events or otherwise.
The Company is an energy services company ("ESCO") that assists energy customers
in lowering their energy costs by developing, engineering, installing, owning
and operating efficient, environmentally sound energy efficiency and power
supply projects, and advising customers on the purchasing of energy in
deregulating energy markets. The Company offers its services to industrial,
commercial and institutional customers. By combining development, engineering,
analysis, and project and financial management skills, the Company provides a
comprehensive package of services, ranging from feasibility assessment through
construction and operation for projects incorporating energy efficient lighting,
energy management systems, heating, ventilation and air conditioning (HVAC)
upgrades, cogeneration and other energy efficiency measures. In addition, the
Company offers bill auditing, tariff analysis, transmission and distribution
analysis and upgrades, and measurement and verification ("M&V") services. The
Company also provides professional consulting services in the areas of direct
access planning, market assessment, business strategies and public policy
analysis. The Company has been accredited by the National Association of Energy
Service Companies. It is the Company's mission to help customers save money
through independent energy solutions.
As of June 30, 2000, the Company's auditors issued a qualified opinion subject
to the Company's ability to continue as a going concern. The going concern
issues are the result of continued operating losses, negative working capital
and negative shareholders' equity. See the Liquidity and Capital Resources
discussion below for details of the Company's plan for dealing with these
issues.
In October 1997, the Company acquired Westar Business Services, Inc., which was
renamed Onsite Business Services, Inc., and subsequently renamed Onsite Energy
Services, Inc. ("OES"). OES previously provided utility services and industrial
water services primarily in the states of Kansas, Missouri and Oklahoma.
However, as a result of the February 2000 sale of substantially all of the
assets of Onsite/Mid-States, Inc. ("OMS"), a wholly-owned subsidiary of OES, and
the loss of certain key employees of OES in connection with that transaction,
all as discussed in detail below, OES currently focuses primarily on industrial
water services.
In February 1998, OES acquired the operating assets of Mid-States Armature
Works, Inc. through its newly-formed subsidiary, OMS. OMS provides specialized
medium and high voltage electrical fabrication, installation, maintenance and
repair services to municipal utility customers and others, primarily in the
states of Kansas, Nebraska, Missouri, Iowa and Oklahoma. In February 2000, OMS
8
completed a transaction to sell substantially all of the assets of OMS to a
private buyer in exchange for $300,000 cash plus uncollected earnings on
existing projects that were transferred as part of the assets. As part of the
transaction, all of the employees of OMS and certain key employees of OES ceased
employment with OMS and/or OES, as applicable, and began employment with the
buyer.
In April 1998, the Company formed Onsite Energy de Panama, S.A., a Panamanian
corporation, to facilitate the development and acquisition of potential projects
in Panama and Latin America. There has been no financial activity in this
subsidiary since its inception.
In June 1998, the Company acquired Lighting Technology Services, Inc. ("LTS").
LTS provides energy efficiency projects through retrofits of lighting and
controls either independently or as a subcontractor to other energy services
companies primarily in Southern California. Effective September 30, 1999, the
Company sold 95 percent of its interest in LTS. In exchange for the shares of
LTS, the Company received the 690,000 shares of the Company's Class A Common
Stock that it originally had issued in connection with the acquisition of LTS,
as well as a 10 year non-interest bearing note for approximately $936,000, which
may be repaid by LTS by providing lighting services to the Company. The Company
incurred a loss of approximately $651,000 as a result of the sale. In addition,
the note has been fully reserved due to uncertainty surrounding its
recoverability.
On June 30, 1998, the Company acquired the assets and certain liabilities of
SYCOM Enterprises, LLC ("SYCOM LLC"), through a newly-formed subsidiary, SYCOM
ONSITE Corporation ("SO Corporation"). SYCOM LLC was also an ESCO with customers
primarily on the East Coast of the United States.
Effective April 1, 1999, the Company formed REEP Onsite, Inc. ("REEP") and ERSI
Onsite, Inc. ("ERSI"), for the purpose of acquiring substantially all of the
assets and certain liabilities of REEP, Inc. REEP provides residential energy
services while ERSI is a commercial lighting contractor. The operations of these
entities were terminated effective June 30, 2000 in connection with the
termination of the Sale and Noncompetition Agreement discussed below.
Since the close of the SYCOM transaction in June 1998, Onsite has experienced
significant losses and as a result has terminated the Sale and Noncompetition
Agreement with Sycom Corporation effective June 30, 2000. The Company, however,
will retain the project assets purchased from SYCOM LLC in June 1998 as well as
projects developed since that date. In connection with the termination, S. Lynn
Sutcliffe resigned as a director and the President of the Company.
The Company will maintain its subsidiary, SO Corporation, for the purpose of
completing several long-term construction projects as well as for the management
of other revenue generating activities and to meet its ongoing commitments for
M&V for projects primarily located on the East Coast. Efforts by SO Corporation
to develop any new business in this region ceased as of June 30, 2000.
As of October 15, 2000, the Company is in default on its requirement to pay
dividends on the Series C Preferred Stock for four quarters. Under the
Certificate of Designations for the Series C Stock if, at any time, four or more
quarterly dividends, whether or not consecutive, on the Series C Stock are in
default, in whole, or in part, the holders of the Series C Stock are entitled to
elect the smallest number of directors as would constitute a majority of the
Board of Directors of the Company and the holders of the Company's Class A
Common Stock as a class are entitled to elect the remaining directors.
Additionally, under the October 1997 Stock Subscription Agreement entered into
by Westar and the Company, Westar agreed for a period of five years to limit its
equity ownership of the Company to 45 percent of the outstanding shares of the
Class A Common Stock on a fully diluted basis and to not take certain other
actions related to controlling or attempting to control the Company unless it
receives the Company's permission via the majority vote of the directors of the
9
Company's Board of Directors who are not directors designated by Westar or are
affiliates of Westar. However, if, at any time, Westar exercises its rights to
elect the majority of the Board of Directors because four or more quarterly
dividends, whether or not consecutive, on the Series C Stock are in default, in
whole or in part, all directors are entitled to vote on such ownership issue and
not just the non-Westar designated directors.
In March 2000, the Company reached an agreement with Westar whereby the
dividends due on October 15, 1999, and January 15, 2000, were waived by Westar
in exchange for the Company's release of Westar and its parent, Western
Resources, Inc., from certain non-compete agreements. The amounts waived by
Westar were 16,208 shares of Series C stock related to the October 15, 1999
dividend, valued at $28,202, and $83,015 in cash related to the January 15, 2000
dividend. The Company remains delinquent on the July 15, 1999 (15,823 shares of
Series C Stock valued at $1,661), the April 15, 2000 ($81,040 cash), July 15,
2000 ($81,040 cash) and the October 15, 2000 ($81,040 cash) dividend
requirements
As discussed above, the Company acquired OES, OMS, LTS and SO Corporation during
the fiscal year 1998, and REEP and ERSI during the fiscal year 1999. During the
fiscal year 2000, the Company sold LTS, OMS and limited the operation of OES to
industrial water purification in Kansas. In addition, the Company terminated its
Sale and Noncompetition agreement with SYCOM Corporation and discontinued the
operations of REEP and ERSI. To accurately depict the change in operations,
liquidity and capital resources, the Company has given a consolidated
comparative and also a comparative that removes the impact of its newly acquired
and or divested subsidiaries. The comparative that removes the impact of newly
acquired and or divested subsidiaries includes the results of Onsite Energy
Corporation and the results of Onsite Energy Services.
The Company has gone through significant changes over the past few years that
involved aggressive growth through acquisition and the subsequent divestiture or
ceased operations of nearly all of the added/created subsidiaries. As a result,
the Company anticipates substantial reductions in revenues, cost of sales and
selling, general and administrative expenses. The Company has focused itself
back on its core business of being an energy services company with primary
emphasis in California markets.
Unless the context indicates otherwise, reference to the Company shall include
all of its wholly-owned subsidiaries.
Results of Operations.
Revenues for the three month period ended September 30, 2000 were $2,934,631,
compared to $9,740,081, a decrease of $6,805,450, or 69.9 percent. Revenues in
the current year three month period include approximately $566,000, with no
associated costs, in one time project incentive revenues related to two projects
of SO Corporation. After elimination of discontinued and or divested
subsidiaries, revenues for the three months ended September 30, 2000 were
$1,954,564 compared to $2,378,392, a decrease of $423,828. The decrease was
primarily due to the narrowing of OES activities resulting in a decline in
revenue at OES of $461,656.
Cost of sales for the three months ended September 30, 2000 was $1,327,486
compared to $7,443,959 for the three months ended September 30, 1999, a decrease
of $6,116,473. After elimination of discontinued and or divested subsidiaries,
cost of sales was $1,149,173 for the three months ended September 30, 2000,
compared to $1,818,313, a decrease of $669,140.
Gross margin for the three months ended September 30, 2000 was $1,607,145 (54.8
percent of revenues), compared to $2,296,122 (23.6 percent of revenues), a
10
decrease of $688,977. Gross margin as a percentage of revenues was higher in
the current year as a result of approximately $566,000 in one time project
incentive revenues with no associated costs, as well as an increase in
consulting revenues with traditionally higher margins. After elimination of
discontinued and or divested subsidiaries, gross margin for the three months
ended September 30, 2000 was $805,392 (41.2 percent of sales), compared to
$560,077 (23.5 percent of sales), an increase in margin of $245,315. The
increase as a percentage of revenues was attributable to a higher proportion of
consulting revenue in the current year.
Selling, general and administrative ("SG&A) expense was $1,004,244 for the three
months ended September 30, 2000, compared to $2,979,350 for the same three
months last year, a decrease of $1,975,106. After elimination of discontinued
and or divested subsidiaries, SG&A for the three months ended September 30, 2000
was $1,000,571, compared to $1,014,380, a decrease of $13,809. SG&A includes
$176,902 in expense in the current quarter associated with options accounted for
under a variable plan due to the repricing of stock options in June 2000.
Depreciation expense for the three month period ended September 30, 2000 was
$69,800 compared to $143,625 for the same three months in the prior year, a
decrease of $73,825. After elimination of discontinued and or divested
subsidiaries, depreciation and amortization expense for the three months ended
September 30, 2000 was $69,800, compared to $69,854 for the same three month
period in 1999.
Recovery of reserve provided for sale or disposal of subsidiary was a reduction
in the operating loss of $358,670 for the three months ended September 30, 1999
and is a non recurring item relating specifically to the sale of 95% of the
Company's interest in LTS. In June 1999, the Company had decided on exploring
options for the sale of LTS, and at that time established a reserve for possible
loss of $1,010,000 based upon estimates derived from the facts that existed
prior to a definitive agreement for sale. The ultimate sale resulted in a loss
of approximately $651,000.
Net other expense was $13,728 for the three month period ended September 30,
2000, compared to net other expense of $113,211 for the same three months in
1999, a decrease in expense of $99,483. This decrease was primarily attributable
to a decrease in interest expense of $90,061. After elimination of discontinued
and or divested subsidiaries, net other expense for the three months ended
September 30, 2000 was $13,259 compared to $7,970 for the three months ended
September 30, 1999.
Net income for the three months ended September 30, 2000 was $562,115, or $0.02
per share, after inclusion of an extraordinary gain of $42,742 for the reduction
of liabilities at amounts that were less than the face value of amounts due. Net
loss for the three months ended September 30, 1999 was $584,994, or $0.07 loss
per share. The change from the net loss in the three month periods ended
September 30, 1999 to September 30, 2000 represents an improvement of
$1,147,109. After elimination of discontinued and or divested subsidiaries, net
loss for the three months ended September 30, 2000 was $263,192 compared to a
net loss of $324,768 for the three months ended September 30, 1999 representing
an improvement of $61,576 in the current three month period.
11
Liquidity and Capital Resources
The Company's cash and cash equivalents were $546,202 as of September 30, 2000,
compared to $585,325 at September 30, 1999. Working capital was a negative
$6,681,556 as of September 30, 2000, compared to $6,079,050 at September 30,
1999, an increase in negative working capital of $602,506.
Cash flows provided by operating activities was $549,466 for the three months
ended September 30, 2000, compared to $211,741 for the same three month period
in the prior year. The improvement is attributable to having net income in the
current year of $562,115 compared to a loss in the prior year three month period
of $584,994 offset by changes in accounts receivable and accounts payable.
Cash flows used in investing activities was $94,573 for the three months ended
September 30, 2000, compared to $263,610 for the same three month period in
1999,a decrease of $169,037. The decrease was primarily attributable to a
decrease in loans to shareholders of $153,460.
Cash flows used in financing activities was $134,771 for the three months ended
September 30, 2000, compared to cash flows used in financing activities of
$263,214 for the same three month period last year, a decrease of $128,443. The
decrease is due to reduction in repayments of notes payable offset by the
proceeds from the sale of preferred stock in the three months ended September
30, 1999.
The Company has suffered significant losses from operations for the past two
fiscal years. For the years ended June 30, 2000 and 1999, the Company had net
losses of $6,637,046 and $6,477,458, respectively, and had a negative working
capital of $7,703,629 and an accumulated deficit of $34,978,075 as of June 30,
2000. Management believes that the Company will be able to generate additional
revenues and improve operating efficiencies through a substantial reduction in
overhead, the addition of new projects as well as by other means to achieve
profitable operations. During the year ended June 30, 2000, the Company took
steps to mitigate the losses and enhance its future viability. During the fiscal
year, the Company sold its wholly-owned subsidiaries, LTS and OMS in an effort
to raise cash and reduce operating losses. In a further step to reduce operating
losses, the Company terminated its Sale and Noncompetition agreement with Sycom
Corporation, discontinued the operations of REEP Onsite, Inc and ERSI Onsite,
Inc. Management believes that all of the above actions will allow the Company to
continue as a going concern, with reduced revenues and reduced expenses. Future
cash requirements depend on the Company's profitability, it's ability to manage
working capital requirements and its rate of growth.
Seasonality and Inflation. Management does not believe that the business of the
Company is effected by seasonality or inflation.
Impact of Recently Issued Standards. In Fiscal 1999, the FASB issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. It requires that an entity recognizes all
derivatives as either assets or liabilities in the statement of financial
position and measures those instruments at fair value. Subsequently, the FASB
issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133, which
amends the effective date of SFAS No. 133 to all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company plans to adopt SFAS No. 133 in
Fiscal Year 2001 and is currently assessing the impact this statement will have
on its consolidated financial statements. Management believes that the impact of
SFAS No. 133 will not be significant to the Company.
12
In December 1999, the Securities and Exchange Commission (SEC) released Staff
Accounting bulletin (SAB) 101 "Revenue Recognition in Financial Statements". SAB
101 establishes guidelines in applying generally accepted accounting principles
to the recognition of revenue in financial statements based on the following
four criteria; persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the seller's price to the buyer is
fixed or determinable, and collectibility is reasonably assured. SAB 101, as
amended by SAB 101A, is effective no later than the first fiscal quarter of the
fiscal year beginning after December 15, 1999, except that registrants with
fiscal years that begin between December 16, 1999 and March 15, 2000, may report
any resulting change in accounting principle no later than their second fiscal
quarter of the fiscal year beginning after December 15, 1999. The Company does
not believe that the adoption of SAB 101 will have a material effect on its
financial position or result of operations.
Part II - Other Information
Item 1. Legal Proceedings. In October 2000, three former employees of Sycom
Corporation (including one who also had served as an officer of the Company)
filed a complaint (Superior Court of New Jersey, Law Division, Essex County,
Case No. L9289-00) against the Company, Sycom Corporation and other parties,
including two of the Company's current or former directors and officers, for
wages, bonuses and commissions (totaling $252,662) allegedly due and owing, plus
interest, costs of suit and other alleged damages. The employees were not
employees of the Company. The matter initially is set to be heard on an
expedited basis but the defendants, including the Company, are contesting this
order and the Company is in the process of preparing its responsive pleadings.
Item 2. Changes in Securities and Use of Proceeds - 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 Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
None
Exhibit 27 Financial Data Schedules
13
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
Date: November 13, 2000 By: \s\ RICHARD T. SPERBERG
-----------------------------
Richard T. Sperberg
Chief Executive Officer
By: \s\ J. BRADFORD HANSON
-----------------------------
J. Bradford Hanson
Chief Financial Officer and
Principal Accounting Officer