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, 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
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Delaware 33-0576371
(State or other jurisdiction of incorporation
or organization) (I.R.S. Employer
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
November 11, 1997 is 14,644,172
Onsite Energy Corporation
Consolidated Balance Sheet
September 30, 1997
Assets
Current Assets:
Cash $316,326
Cash-Restricted 151,025
Accounts Receivable, net of allowance for
doubtful accounts of $15,030 965,906
Costs and estimated earnings in excess of
billings on uncompleted contracts 227,839
Other assets 26,074
-----------
TOTAL CURRENT ASSETS 1,687,170
Cash-restricted 78,990
Costs incurred on future projects 1,409
Property and equipment, net of accumulated
depreciation and amortization 38,850
Goodwill, net of amortization of $1,433,333 166,667
Other 24,159
-----------
TOTAL ASSETS 1,997,245
===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $1,101,784
Billings in excess of costs and estimated
earnings on uncompleted contracts 14,226
Current portion of notes payable 75,572
Accrued expenses and other liabilities 391,993
----------
TOTAL CURRENT LIABILITIES 1,583,575
Long-Term Liabilities:
Related party notes payable 31,805
Accrued future operation and maintenance costs
associated with energy services agreements 421,432
----------
TOTAL LIABILITIES 2,036,812
----------
Commitments and contingencies
Shareholders' Equity (Deficit):
Preferred Stock, Series A, 4,000 shares authorized,
none issued and outstanding -
Preferred Stock, Series B, 625,000 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 10,942
Class B common stock, 1,000 shares authorized,
none issued and outstanding -
Additional paid-in capital 17,052,963
Accumulated deficit (17,103,472)
----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) ( 39,567)
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT) $1,997,245
----------
The accompanying notes are an integral part of the financial statements
Onsite Energy Corporation
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
1997 1996
Revenues $ 2,237,805 $ 3,310,866
Cost of sales 1,586,794 2,494,539
----------- -----------
Gross Margin 651,011 816,327
----------- -----------
Selling, General,
and Administrative Expenses 490,270 969,728
Depreciation and Amortization 105,777 119,769
----------- -----------
Operating income (loss) 54,964 (273,170)
----------- -----------
Other income (expense):
Interest (expense) (8,588) (58,444)
Interest income 4,103 4,672
----------- -----------
Total other income (expense) ( 4,485) ( 53,772)
----------- -----------
Income (loss) from operations
before provision(benefit)
For income taxes 50,479 (326,942)
Provision (benefit) for
income taxes 6,738 -
----------- -----------
Net income (loss) $ 43,741 $ (326,942)
=========== ===========
Net income (loss) per Class A
common share * (0.03)
=========== ===========
Weighted average shares outstanding 10,944,172 10,535,547
=========== ===========
*Less than $0.01 per share
The accompanying notes are an integral part of the financial statements
Onsite Energy Corporation
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 43,741 $ (326,942)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Amortization of goodwill 100,000 100,000
Amortization of acquired contract
costs - 224,381
Provision for bad debts 6,772 -
Depreciation and amortization 5,777 19,769
Change in operating assets and liabilities:
Accounts receivable (107,724) (551,155)
Increase (decrease) in billings
related to costs and estimated
earnings on uncompleted contracts (262,728) (129,117)
Other assets ( 5,346) 91,737
Cash-restricted 43,152 ( 43,244)
Accounts payable 130,388 32,140
Accrued expenses and other liabilities (113,301) -
Deferred income - 25,000
-------- --------
Net cash used in operating activities (159,269) (557,431)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options - 15,604
Repayment of long-term debt ( 51,299) (135,595)
-------- --------
Net cash used in financing activities ( 51,299) (119,991)
-------- --------
Net increase (decrease) in cash (210,568) (677,422)
Cash, beginning of year 526,894 976,470
-------- --------
Cash, end of year $ 316,326 $ 299,048
========= =========
The accompanying notes are an integral part of the 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/A for Onsite Energy
Corporation ("Onsite") as of and for the year ended June
30, 1997. 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, 1997, and
the consolidated statements of operations and cash flows
for the three months ended September 30, 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 if dilutive,
common share equivalents outstanding during the period.
Common share equivalents are antidilutive for the three
months ending September 30, 1997 and 1996.
NOTE 4: On October 28, 1997, Onsite entered into a Stock Subscription
Agreement with Westar Capital, Inc. ("Westar Capital"), a
wholly owned subsidiary of Western Resources Inc.
(NYSE:WR) and completed the private placement of $2
million of its securities to Westar Capital. Westar
Capital purchased two million (2,000,000) shares of
Onsite's Class A common Stock at fifty cents ($0.50) per
share and two hundred thousand (200,000) shares of
Onsite's newly created Series C convertible Preferred at
five dollars ($5.00) per share. Each share of Series C
Convertible Preferred Stock is convertible into five
shares of Onsite's Class A Common Stock and earns a
dividend of 9.75 percent per annum.
In a related transaction, Onsite has completed the
acquisition of Westar Business Services, Inc. ("WBS"), a
wholly owned indirect subsidiary of Western Resources Inc.
WBS provides performance contracting services, utility
services and industrial water services primarily in the
states of Kansas, Missouri and Oklahoma. The purchase
price was 1.7 million Shares of Onsite's Class A Common
Stock upon closing, plus an additional 800,000 shares
which have been escrowed, to be released upon the
development of additional business. Westar Business
Services has been renamed Onsite Business Services as a
part of the transaction.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
BACKGROUND
Onsite is a comprehensive energy service company ("ESCO") that assists its
customers in reducing electricity and fuel costs by developing, designing,
constructing, owning and operating efficient, environmentally sound energy
projects. Onsite offers a full range of professional consulting services, which
include direct access planning, market assessments, business strategy and
public policy analyses, utility deregulation and environmental
impact/feasibility studies. It is Onsite's mission to be a premier provider of
energy services solutions for industrial, institutional and commercial
customers.
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 whollyowned subsidiary of Onsite. This transaction
was accounted for as a purchase of Onsite-Cal by Onsite.
As of October 31, 1997 Onsite owns all of the stock in Onsite Business
Services, which provides performance contracting services, utility services and
industrial water services primarily in the states of Kansas, Missouri and
Oklahoma.
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, 1997 were $2,237,805,
compared to $3,310,866 for the same period in 1996, a decrease of $1,073,061,
or approximately 32.4 percent. The decrease in revenues was attributable to
several smaller sized contracts in 1997 rather than one significant contract in
1996.
Cost of sales for the quarter ended September 30, 1997 was $1,586,794, compared
to $2,494,539 for the quarter ended September 30, 1996, a decrease of $907,745,
or approximately 36.4 percent. Gross margin for the three month period ended
September 30, 1997 was $651,011 (29.0 percent of revenues), compared to
$816,327 (24.9 percent of revenues). The increase in gross margin as a
percentage of sales was the result of a larger percentage of consulting
revenues, which generally provide higher gross margins.
Selling, general and administrative ("SG&A") expense for the quarter ended
September 30, 1997 was $490,270, compared to $969,728 for the quarter ended
September 30, 1996, a decrease of $479,458, or approximately 49 percent. The
decrease in SG&A was primarily attributable to the continued efforts by Onsite
to implement savings and expense reductions in an effort to improve overall
operating results.
Net other expense for the quarter ended September 30, 1997 was $4,485, compared
to $53,772 for the three month period ended September 30, 1996, a decrease of
$49,287, or approximately 92 percent, is due to a decline in interest expense
attributable to substantial reductions in principal balances outstanding.
Net income for the three months ended September 30, 1997 was $43,741 or less
than $0.01 per share, compared to a net loss of $326,942, or $0.03 loss per
share for the same period in 1996.
7
LIQUIDITY AND CAPITAL RESOURCES
Onsite's cash and cash equivalents were $316,326 as of September 30, 1997,
compared to $526,894 as of June 30, 1997. Working capital was $103,595 as of
September 30, 1997, compared to $30,333 as of June 30, 1997.
Cash flows used by operating activities during the three months ended September
30, 1997 were $159,269, compared to cash flows used by operating activities of
$557,431 for the same period in 1996, a decrease of $398,162. The decrease is a
result of Onsite's continued efforts to implement savings and cash outflow
reductions in an effort to improve overall operating results.
There were no cash flows from investing activities in either of the first three
months of 1997 and 1996.
Cash flows used by financing activities were $51,299 during the three months
ended September 30, 1997, compared to $119,991 for the comparable period last
year. Reductions in notes payable of $51,299 in the first three months of the
current fiscal year, compared to reductions in notes payable of $135,595 in the
first three months of fiscal 1996.
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
On October 28, 1997, Onsite entered into a Stock Subscription Agreement with
Westar Capital, Inc. ("Westar Capital"), a wholly owned subsidiary of Western
Resources Inc. (NYSE:WR) and completed the private placement of $2 million of
its securities to Westar Capital. Westar Capital purchased two million
(2,000,000) shares of Onsite's Class A common Stock at fifty cents ($0.50) per
share and two hundred thousand (200,000) shares of Onsite's newly created
Series C convertible Preferred at five dollars ($5.00) per share. Each share of
Series C Convertible Preferred Stock is convertible into five shares of
Onsite's Class A Common Stock and earns a dividend of 9.75 percent per annum.
In a related transaction, Onsite has completed the acquisition of Westar
Business Services, Inc. ("WBS"), a wholly owned indirect subsidiary of Western
Resources Inc. WBS provides performance contracting services, Utility services
and industrial water services primarily in the states of Kansas, Missouri and
Oklahoma. The purchase price was 1.7 million Shares of Onsite's Class A Common
Stock upon closing, plus an additional 800,000 shares which have been escrowed,
to be released upon the development of additional business. Westar Business
Services has been renamed Onsite Business Services as a part of the
transaction.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Full disclosure of the above mentioned items in Item 5. Other, were filed
with the Securities and Exchange Commission on Form 8-K, dated October 28,
1997, and filed on November 12, 1997. Financial statements of Onsite Business
Services, Inc. will be filed by amendment within 60 days.
8
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 11, 1997 By: RICHARD T. SPERBERG
Richard T. Sperberg
President, Chief Financial Officer
and Principal Accounting Officer
8