UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-QSB/A
(Amendment No. 1)
(Filed on November 12, 1998)
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 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
(Name of small business issuer in its charter)
Delaware 33-0576371
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
701 Palomar Airport Road, Suite 200
Carlsbad, California 92009
(Address of principal executive offices) (Zip Code)
(760) 931-2400
(Issuer's telephone number)
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 February
19, 1998 is 14,712,372.
2
ONSITE ENERGY CORPORATION
Part I - Financial Information Page
Item 1 Financial Statements
Condensed Consolidated Balance Sheet at
December 31, 1997 3
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 1997 and 1996
Six Months Ended December 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended December 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 1. Financial Statements
[Remainder of page intentionally left blank]
3
Onsite Energy Corporation
Condensed Consolidated Balance Sheet
December 31, 1997
Assets
Current Assets:
Cash $ 1,642,509
Cash-restricted 152,925
Accounts receivable, net of allowance for doubtful
accounts of $15,030 2,619,332
Costs and estimated earnings in excess of billings
on uncompleted contracts 460,840
Other assets 33,055
-------------
TOTAL CURRENT ASSETS 4,908,661
Cash-restricted 78,990
Costs incurred on future projects 1,767
Property and equipment, net of accumulated
depreciation and amortization 809,366
Goodwill, net of amortization of $1,533,333 73,887
Other 128,994
-------------
TOTAL ASSETS $ 6,001,665
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,704,709
Billings in excess of costs and estimated earnings
on uncompleted contracts 178,691
Current portion of notes payable 75,572
Accrued expenses and other liabilities 868,078
-------------
TOTAL CURRENT LIABILITIES 2,827,050
Long Term Liabilities:
Accrued future operation and maintenance costs
associated with energy services agreements 421,432
-------------
TOTAL LIABILITIES 3,248,482
Commitments and contingencies
Shareholders' Equity:
Preferred Stock, Series C, 1,000,000 shares
authorized, 200,000 issued and outstanding
(Aggregate $1,000,000 liquidation preference) 200
Common Stock, $.001 par value, 24,000,000
shares authorized:
Class A common stock, 23,999,000 shares authorized,
14,661,272 shares issued and outstanding 14,661
Class B common stock, 1,000 shares authorized,
none issued and outstanding -
Additional paid-in capital 20,191,975
Accumulated deficit (17,453,653)
-------------
TOTAL SHAREHOLDERS' EQUITY 2,753,183
-------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,001,665
=============
The accompanying notes are an integral part of these condensed financial
statements
4
Onsite Energy Corporation
Condensed Consolidated Statements of Operations
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenues $3,303,578 $2,935,524 $5,541,383 $6,246,390
Cost of sales 2,555,071 1,965,966 4,141,865 4,460,505
---------- --------- --------- ---------
Gross Margin 748,507 969,558 1,399,518 1,785,885
Selling, General,
and Administrative Expenses 938,755 943,663 1,429,025 1,913,391
Depreciation and Amortization 158,147 169,714 263,924 289,483
------- ------- ------- -------
Operating loss (348,395) (143,819) (293,431) (416,989)
--------- --------- --------- ---------
Other income (expense):
Interest (expense) - (42,386) (8,588) (100,830)
Interest income 9,271 2,704 13,374 7,376
Other income (expense) (5,559) - (5,559) -
------- --------- ------- ---------
Total other income (expense) 3,712 (39,682) (773) (93,454)
----- -------- ----- --------
Loss from operations
before provision for income taxes (344,683) (183,501) (294,204) (510,443)
Provision for income taxes 5,499 - 12,237 -
----- -------- ------ --------
Net loss $ (350,182) $ (183,501) $(306,441) $(510,443)
========== ========== ========== ==========
Basic and diluted loss per
Common share $ (0.03) $ (0.02) $ (0.03) $ (0.05)
========= ========= ========= =========
Weighted average shares outstanding 13,519,572 10,859,203 12,231,872 10,698,414
========== ========== ========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
5
Onsite Energy Corporation
Condensed Consolidated Statements of Cash Flows
Six Months Ended
December 31,
1997 1996
-------------- --------------
Cash flows from operating activities:
Net loss $ (306,441) $ (510,443)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of goodwill 200,000 200,000
Amortization of acquired contract costs - 363,536
Depreciation and amortization 63,924 89,483
Change in operating assets and liabilities:
Accounts receivable (1,235,923) (673,083)
Increase (decrease) in costs related to billings
and estimated earnings on uncompleted contracts (331,264) 10,060
Other assets (116,753) 243,526
Cash-restricted 41,252 (43,244)
Accounts payable and accrued expenses 1,054,863 (456,255)
Deferred income - 25,000
----------- ----------
Net cash used in operating activities (630,342) (751,420)
----------- ----------
Cash flows from investing activities:
Acquisition of Fixed Assets (123,190) -
----------- ---------
Net cash used in investing activities (123,190) -
----------- ---------
Cash flows from financing activities:
Proceeds from issuance of stock 1,947,287 -
Proceeds from exercise of stock options 4,964 20,110
Repayment of long-term debt (83,104) (212,372)
----------- ---------
Net cash provided by (used in) financing activities 1,869,147 (192,262)
----------- ---------
Net increase (decrease) in cash 1,115,615 (943,682)
Cash, beginning of year 526,894 976,470
----------- ---------
Cash, end of period $ 1,642,509 $ 32,788
=========== =========
The accompanying notes are an integral part of these condensed financial
statements.
6
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, as amended, for Onsite Energy Corporation
(the "Company") 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 condensed consolidated balance sheet as of December 31, 1997, and
the condensed consolidated statements of operations and cash flows for the
three and six months ended December 31, 1997 and 1996, represent the
financial position and results of operations of the Company. The results of
operations for the three and six months ended December 31, 1997 and 1996
are not necessarily indicative of the results to be expected for the entire
year.
NOTE 3: In February 1997, the Financial Accounting Standards Board issued a new
statement titled "EARNINGS PER SHARE" ("FAS 128"). The new statement is
effective for both interim and annual periods ending after December 15,
1997. FAS 128 replaces the presentation of primary and fully diluted
earnings per share with the presentation of basic and diluted earnings per
share. Basic earnings per share excludes dilution and is calculated by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Common stock equivalents for the three and
six months ended December 31, 1997 were anti-dilutive and excluded in the
earnings per share computation for the periods presented.
NOTE 4: On October 28, 1997, the Company entered into a Stock Subscription
Agreement (the "Stock Agreement") with Westar Capital, Inc. ("Westar
Capital"). Pursuant to the Stock Agreement, the Company made a private
placement of 2,000,000 shares of its Class A Common Stock at $0.50 per
share and 200,000 shares of its newly created Series C Convertible
Preferred Stock ("Series C Stock") at $5.00 per share. Each share of Series
C Stock is convertible into five shares of the Company's Class A Common
Stock and earns a dividend of 9.75 percent per annum.
In a related transaction on October 28, 1997, the Company entered into a
Plan and Agreement of Reorganization (the "Reorganization Agreement")
with Westar Capital, Westar Energy, Inc., and Westar Business Services,
Inc. ("WBS"). Pursuant to the Reorganization Agreement, the parties
effected a "tax free" exchange under Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Reorganization"). Specifically, the
Company acquired 100 percent of WBS's issued and outstanding capital stock,
consisting solely of Common Stock,
7
no par value, in exchange for 1,700,000 shares of the Company's Class A
Common Stock, par value $0.001 per share. An additional 800,000 shares
of the Company's Class A Common Stock will be delivered to Westar Capital
in the event that WBS executes certain additional business contracts.
The number of shares issued was determined through negotiations between the
parties. As a result of the Reorganization, WBS is now a wholly-owned
subsidiary of the Company, and has changed its name to Onsite Business
Services, Inc. ("OBS").
OBS provides performance contracting services, utility services and
industrial water services in the states of Kansas, Missouri and Oklahoma.
The following presents Pro Forma information as if the acquisition of
WBS occurred on July 1, 1996:
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Revenues $3,453,245 $3,702,445 $ 6,140,052 $7,404,890
========== ========== =========== ==========
Loss from Operations $(403,062) $(293,972) $ (512,872) $(587,943)
========== ========== =========== ==========
Net Loss $(404,849) $(293,972) $ (525,109) $(587,943)
========== ========== =========== ==========
Basic and Diluted Loss Per Share $ (0.03) $ (0.03) $ (0.04) $ (0.05)
=========== ========== =========== ==========
NOTE 6: The purpose of this amendment to the Form 10-QSB for the Company for the
period ending December 31, 1997 (the "Original Filing") is to reflect
adjustments arising from inadvertent errors in the way it was accruing
revenue from some of its projects which was not consistent with the
percentage of completion method of accounting for revenue recognition, in
the valuation of equipment acquired in a business combination, and in
revenue recognition on two contracts.
Any item in the Original Filing not expressly changed hereby shall be as
set forth in the Original Filing. All information contained in this amend-
ment and the Original Filing is subject to updating and supplementing as
provided in the Company's periodic reports filed with the SEC subsequent to
the date of such reports.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information included in this Form 10-QSB/A should be read in conjunction
with Management's Discussion and Analysis and financial statements and notes
thereto included in the Company's Form 10-KSB, as amended, for the fiscal year
ended June 30, 1997.
8
Background
The Company is a comprehensive energy services company (an ESCO) that assists
its customers in reducing electricity and fuel costs by developing, designing,
constructing, owning and operating efficient, environmentally sound energy
projects. The Company 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 the Company's mission to save its customers
money and improve the quality of the environment through independent energy
solutions.
The Company, 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 ("WEM"),
and Onsite Energy, a California corporation formed in 1982 ("Onsite-Cal"). Under
the Reorganization, Onsite-Cal merged with and into the Company, and a newly
formed subsidiary of the Company merged with and into WEM, which survived and
became a wholly-owned subsidiary of the Company. This transaction was accounted
for as a purchase of Onsite-Cal by the Company.
As of October 28, 1997, the Company owns all of the stock in OBS, 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 the Company shall include
all of its wholly-owned subsidiaries.
Six Months Ended December 31, 1997 Compared to the Six Months Ended December 31,
1996
Results of Operations. Revenues for the six months ended December 31,
1997 were $5,541,383 compared to $6,246,390 for the six months ended December
31, 1996. The decrease in revenues was attributed to several smaller sized
contracts in 1997, rather than one significant contract in 1996.
Gross margin for the six months ended December 31, 1997 was $1,399,518, or 25.3
percent of revenues, compared to $1,785,885, or 28.6 percent of revenues, for
the six months ended December 31, 1996. The decrease in margin reflects a lower
budgeted gross margin on one large contract in process during the period.
Selling, General and Administrative expenses ("SG&A") were $1,429,025 for the
six month period ended December 31, 1997, compared to $1,913,391 for the six
months ended December 31, 1996. The reduction of $484,366 or 25.3 percent is
attributable to the continued efforts by the Company to implement savings and
expense reductions in an effort to improve overall operating results. This
decrease was partially offset by the increased SG&A from OBS for the period from
October 28, 1997 to December 31, 1997.
Net other income/expense was a $773 expense for the six months ended December
31, 1997, compared to $93,454 in net other expense for the six months ended
December 31, 1996. The decrease is due to a decline in interest expense
attributable to substantial reductions in principal loan balances outstanding.
Net loss for the six months ended December 31, 1997 was $306,441, or
approximately $0.03 loss per share, compared to net loss of $510,443, or $.05
loss per share for the six month period ended December 31, 1996.
9
Three Months Ended December 31, 1997 Compared to the Three Months Ended December
31, 1996
Results of Operations. Revenues for the three month period ended
December 31, 1997 were $3,303,578, compared to $2,935,524 for the three months
ended December 31, 1996, an increase of $368,054, or 12.5 percent. The increase
in revenues is due to the completion of several new smaller sized contracts and
the recognition of revenues of the newly-acquired OBS.
Gross margin was $748,507, or 22.7 percent of revenues for the three-month
period ended December 31, 1997, compared to $969,558, or 33.0 percent of
revenues for the three-month period ended December 31, 1996. The decrease in
margin resulted from smaller margins on smaller contracts in 1997 and lower
margin on one large contract in process during the period, versus a larger
margin on one large contract in 1996.
SG&A expenses were $938,755 for the three months ended December 31, 1997,
compared to $943,663 for the three months ended December 31, 1996. The small
change was attributable to the Company's continued efforts to decrease expenses
offset by the additional expenses acquired with OBS, offset by increased SG&A
associated with OBS.
Net other income/expense was $3,712 in other income in the three months ended
December 31, 1997, compared to $39,682 in net other expense for the three month
period ended December 31, 1996, a decrease of $43,394. The decrease in net other
expense was substantially attributable to a decrease in interest expense.
Net loss for the three months ended December 31, 1997 was $350,182, or
approximately $0.03 loss per share, compared to net loss of $183,501, or $0.02
loss per share.
Liquidity and Capital Resources. The Company's cash and cash equivalents
were $1,642,509 as of December 31, 1997, compared to $526,894 as of June 30,
1997. Working capital was $2,081,611 as of December 31, 1997 compared to a
negative working capital of $30,333 as of June 30, 1997. The increase in working
capital is largely due to the transaction, including the sale of securities,
with Westar Capital completed in October 1997.
Cash flows used by operating activities during the six months ended December 31,
1997 were $630,342, compared to cash flows used by operating activities of
$751,420 for the six months ended December 31, 1996, a decrease of $121,078.
Cash flows used by investing activities included $123,190 of fixed assets
purchased during the six months ended December 31, 1997. There was no cash flow
from investing activities for the six months ended December 31, 1996.
Cash flows provided by financing activities were $1,869,147 during the six
months ended December 31, 1997, compared to cash flows used by financing
activities of $192,262 for the comparable period last year. The increase in cash
provided by financing activities in the current year includes $1,947,287 in
proceeds from the issuance of stock to Westar Capital, which is offset by
$83,104 in repayment of long-term debt.
10
Year 2000. The Company is developing plans to address issues related to the
impact on its computer systems of the year 2000. Financial and operational
systems are being assessed and plans are being developed to address systems
modification requirements. The financial impact of making the required systems
changes is not expected to be material to the Company's consolidated financial
position, liquidity and results of operations.
11
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 12, 1998 By: RICHARD T. SPERBERG
------------------------------
Richard T. Sperberg
Chief Executive Officer (Principal Executive
Officer) and Interim Chief Financial Officer
(Principal Accounting and Financial Officer)