SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K/A/2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
---------------------
March 22, 1999
Date of Report (Date of earliest event reported)
BESICORP LTD.
(Exact name of registrant as specified in its charter)
New York 000-25209 14-1809375
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
Incorporation)
1151 Flatbush Road, Kingston, New York 12401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 336-7700
This Amendment No. 2 to Current Report on Form 8-K amends the Company's Current
Report on Form 8-K filed on or about April 4, 1999, as amended by an amendment
to such report filed on or about July 14, 1999.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
The financial statements required by Item 7(a) is filed herewith.
(b) Pro Forma Financial Information
The pro forma financial information required by Item 7(b) is filed
herewith and is included under Note 15 of the Notes to the Combined
Financial Statements of the Distributed Businesses of Besicorp Group
Inc.
CITRIN COOPERMAN & COMPANY, LLP
Certified Public Accountants
529 Fifth Avenue, Tenth Floor
New York, NY 10017
212-697-1000
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
BESICORP LTD.
Independent Auditors' Report
We have audited the accompanying combined balance sheet of the Distributed
Businesses of Besicorp Group Inc. as at March 22, 1999 and March 31, 1998 and
the related combined statements of operations and combined equity and cash flows
for the period April 1, 1998 through March 22, 1999 and the year ended March 31,
1998. These financial statements are the responsibility of the Businesses'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned combined financial statements present fairly,
in all material respects, the financial position of the Distributed Businesses
of Besicorp Group Inc. as at March 22, 1999 and March 31, 1998 and the results
of their operations and their cash flows for the period April 1, 1998 through
March 22, 1999 and the year ended March 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Distributed Businesses of Besicorp Group Inc. will continue as a going concern.
As discussed in Note 14 to the financial statements, the Distributed Businesses
of Besicorp Group Inc. have suffered recurring losses from operations and have
previously received (but will not in the future receive) substantial financial
support from the former parent company that raise substantial doubt about its
ability to continue as a going concern without such support. Management's plans
in regard to these matters are also described in Note 14. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Citrin Cooperman & Company, LLP
CITRIN COOPERMAN & COMPANY, LLP
June 8, 1999
New York, New York
F-1
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED BALANCE SHEET
ASSETS March 22, March 31,
1999 1998
--------- ---------
Current Assets:
Cash $ 1,873,862 $ 104,428
Trade accounts receivable (less allowance for doubtful
accounts of $32,000 at March 22, 1999 and
$23,000 at March 31, 1998) 982,621 369,494
Due from affiliates 373,925 47,662
Current portion of long-term notes receivable:
Others (includes interest of $3,708 at March 22, 1999
and $8,316 at March 31, 1998) 107,602 102,054
Inventories 1,058,262 944,013
Other current assets 459,035 485,052
--------- ---------
Total Current Assets 4,855,307 2,052,703
--------- ---------
Property, Plant and Equipment:
Land and improvements 229,660 237,160
Buildings and improvements 1,914,029 1,906,952
Machinery and equipment 714,734 714,620
Furniture and fixtures 237,423 246,702
--------- ---------
3,095,846 3,105,434
Less: accumulated depreciation and amortization (1,516,076) (1,478,950)
--------- ----------
Net Property, Plant and Equipment 1,579,770 1,626,484
--------- ----------
Other Assets:
Patents and trademarks, less accumulated
amortization of $2,325 at March 22, 1999
and $1,691 at March 31, 1998 12,555 7,823
Long-term notes receivable:
Affiliate - net of allowance of $555,376 at March 31, 1998 - -
Others - net of allowance of $1,944,624 at March 31, 1998 - 129,886
Deferred costs - 1,316,693
Investment in partnerships 4,009,810 -
Other assets 76,620 95,063
--------- ---------
Total Other Assets 4,098,985 1,549,465
---------- ---------
TOTAL ASSETS $10,534,062 $ 5,228,652
========== =========
See accompanying notes to combined financial statements.
F-2
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED BALANCE SHEET
LIABILITIES AND COMBINED EQUITY
March 22, March 31,
1999 1998
--------- --------
Current Liabilities:
Accounts payable and accrued expenses $ 526,325 $ 1,234,920
Current portion of long-term debt 20,000 109,208
Current portion of accrued reserve and warranty expense 111,035 152,891
Taxes other than income taxes 94,890 100,693
------- ---------
Total Current Liabilities 752,250 1,597,712
Long-Term Accrued Reserve and Warranty Expense 174,463 152,402
Long-Term Debt 115,308 3,768,233
--------- ---------
Total Liabilities 1,042,021 5,518,347
Combined Equity 9,492,041 (289,695)
--------- ----------
TOTAL LIABILITIES AND COMBINED EQUITY $ 10,534,062 $ 5,228,652
========== =========
See accompanying notes to combined financial statements.
F-3
DISTRIBUTED BUSINESSES OF BESICORP GROUP, INC.
COMBINED STATEMENT OF OPERATIONS AND COMBINED EQUITY
Period April 1, 1998
through Year Ended
March 22, 1999 March 31, 1998
-------------------- --------------
Revenues:
Product sales $ 4,902,642 $3,838,351
Other revenues 485,705 426,154
Interest and other investment income 19,188 35,482
Other income 105,041 108,435
--------- ---------
Total Revenues 5,512,576 4,408,422
--------- ---------
Costs and Expenses:
Cost of product sales 4,661,182 3,932,301
Selling, general and
administrative expenses 9,251,042 8,466,360
Interest expense 134,110 481,651
Other expense 11,018 2,519,114
---------- ----------
Total Costs and Expenses 14,057,352 15,399,426
---------- -----------
Loss Before Income Taxes (8,544,776) (10,991,004)
Credit for Income Taxes 2,902,200 3,767,000
--------- ---------
Net Loss (5,642,576) (7,224,004)
Combined Equity - Beginning (289,695) 2,221,758
Net Transactions with Oldco 15,424,312 4,712,551
---------- ----------
Combined Equity - Ending $ 9,492,041 $ (289,695)
---------- ----------
Loss per Common Share $ (46.23) $ (59.19)
========== ==========
See accompanying notes to combined financial statements.
F-4
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
COMBINED STATEMENT OF CASH FLOWS
Period April 1, 1998
through Year Ended
March 22, 1999 March 31, 1998
------------------- --------------
Operating Activities:
Net loss $(5,642,576) $ (7,224,004)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization of discounts on notes (2,196) (2,196)
Provision for uncollectibles 9,000 2,483,654
Realized and unrealized (gains)/losses 7,500 6,066
Depreciation and amortization 160,972 243,793
Changes in assets and liabilities:
Accounts and notes receivable (821,856) 326,916
Inventories (114,249) 236,252
Accounts payable and accrued expenses (708,595) (510,223)
Taxes payable (5,803) (1,393)
Other assets and liabilities, net 1,357,906 (94,844)
Net Cash Used --------- ---------
By Operating Activities (5,759,897) (4,535,979)
--------- ---------
Financing Activities:
Repayment of borrowings (3,742,133) (72,640)
Net transactions with Oldco 11,392,588 4,712,551
---------- ---------
Net Cash Provided
By Financing Activities 7,650,455 4,639,911
---------- ---------
Investing Activities:
Acquisition of property, plant and equipment (121,124) (149,266)
Net Cash Used By Investing --------- ---------
Activities (121,124) (149,266)
--------- -------
Increase in Cash 1,769,434 45,334
Cash Beginning 104,428 59,094
--------- --------
Cash Ending $ 1,873,862 $ 104,428
Supplemental Cash Flow Information: ========= =======
Interest paid $ 94,689 $ 445,601
See accompanying notes to combined financial statements.
F-5
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
Besicorp Group Inc. ("Oldco"), was the parent corporation of Besicorp Ltd.
("Newco") prior to the Distribution (as defined below). Oldco was a party to an
Agreement and Plan of Merger dated November 23, 1998, as amended, (the "Plan of
Merger") among Oldco, BGI Acquisition LLC ("Acquisition") and BGI Acquisition
Corp. ("Merger Sub"), a wholly owned subsidiary of Acquisition. Pursuant to the
Plan of Merger, Merger Sub was merged into Oldco which became a wholly owned
subsidiary of Acquisition (the "Merger"). Because Acquisition did not want to
acquire certain assets or assume certain liabilities of Oldco, it was a
condition precedent to the Merger that Oldco, prior to the Merger, spin-off its
photovoltaic and independent power development businesses (the "Distributed
Businesses") to its shareholders. Therefore, Oldco formed Newco to assume the
operations of the Distributed Businesses by having Oldco assign to Newco all of
its assets relating to the Distributed Businesses and substantially all of
Oldco's other assets (other than Oldco's cash, securities, the subsidiaries
which held Oldco's interests in partnerships which owned or leased five
cogeneration natural gas power plants (the "Retained Subsidiaries") and certain
other assets (including in particular, other claims of Oldco and awards made to
Oldco in the aggregate stated amount of approximately $1 million)), and by
having Newco assume substantially all of Oldco's liabilities other than the
following liabilities (collectively, the "Permitted Liabilities"): (i) the
liabilities of Oldco and any Retained Subsidiary (actual or accrued) for unpaid
federal income taxes for Oldco's 1999 fiscal year based on the consolidated net
income of Oldco through the effective date of the Merger (i.e. March 22, 1999),
(ii) the liabilities of Oldco or its subsidiaries for New York State income
taxes for the 1999 fiscal year, and (iii) certain intercompany liabilities. The
Plan of Merger contemplated that prior to the consummation of the Merger Oldco
would effect this contribution of assets to Newco (and the assumption of these
liabilities by Newco) and distribute all of Newco's stock to Oldco's
shareholders. Therefore, following the contribution, which took place shortly
prior to the Merger which was consummated on March 22, 1999, Oldco distributed
100% of Newco's common stock (the "Distribution"), and Newco became a separate,
publicly held company.
Assets and liabilities were transferred to Newco at Oldco's historical cost. The
historical actions of Oldco's Distributed Businesses, including Newco's
accounting policies, are attributable to Newco. The financial results in these
financial statements are not necessarily indicative of the results that would
have occurred if Newco had been an independent public company during the periods
presented or of future results of Newco The financial results in these financial
statements include all the normal recurring expenses of the Distributed
Businesses on a historical basis with the exception of additional rent and
interest expense that would be charged on a stand alone basis. Interest expense
was not incurred on net transactions with Oldco, although the interest expense
represented in these financial statements includes interest on debt used to
finance Oldco's working capital and, therefore, approximates the interest that
would have been allocated had Oldco made such allocation. Adjustment for
interest in the pro forma financial statements was not made, as the terms of
financing of any additional debt can not be predicted at this time. Rental
expense will be incurred by Newco on certain equipment which the Plan of Merger
contemplated would be retained by Oldco. (See Note 12.) Such rental charges will
approximate the depreciation currently being incurred by Oldco and are not
included in the historical results of the Distributed Businesses. There are no
additional charges that were incurred by Oldco that would be allocated to the
Distributed Businesses. See Unaudited Pro Forma Combined Financial Information
found in Note 15.
Amounts shown as net transactions with Oldco represent the net effect of cash
generated or used by the Distributed Businesses and transferred to or from
Oldco. The financial statements for March 22, 1999 represent the financial
position, results of operations and cash flows from April 1, 1998 through March
22, 1999, the date of the Distribution (the "Abbreviated 1999.")
Business
- --------
Newco specializes in the development, assembly, manufacture, marketing and
resale of photovoltaic products and systems ("Product Segment") and the
development of power plant projects ("Project Segment").
F-6
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
Use of Estimates
- ----------------
Management uses estimates in preparing the combined financial statements, in
conformity with generally accepted accounting principles. Significant estimates
include collectibility of accounts receivable, warranty costs, profitability on
long-term contracts, as well as recoverability of long-term assets and residual
values. Newco regularly assesses these estimates and, while actual results may
differ from these estimates, management does not anticipate a material
difference in its actual results versus estimates in the near term.
Inventories
- -----------
Inventories are carried at the lower of cost (first-in, first-out method) or
market.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost. Depreciation on such assets is
computed on a straight-line basis at rates adequate to allocate the cost over
their expected useful lives as follows: (i) land improvements - 15 years, (ii)
buildings and improvements - 20 years to 39 years; (iii) furniture and fixtures
- - three years to 35 years; and (iv) machinery and equipment - three years to 35
years.
Patents and Trademarks
- ----------------------
Costs of patents ($14,395 at March 22, 1999 and $9,029 at March 31, 1998) are
capitalized and amortized on a straight-line basis over the remaining useful
life of the patent of up to 17 years. Trademark costs ($485 at March 22, 1999
and $485 at March 31, 1998) are capitalized and amortized on a straight-line
basis over the estimated useful life of 35 years. During the year ended March
31, 1998, $690,467 of patent and trademark costs were written off upon the
discontinuance of the related product lines as a result of management's decision
to focus Newco's alternative energy business on photovoltaic products and
systems. The write-off of these costs is reflected in selling, general and
administrative expenses in that period.
Deferred Costs
- --------------
Consists of engineering and legal fees, licenses and permits, site testing, bids
and other charges, including salaries and employee expenses, incurred by Newco
in developing projects. These costs are deferred until the date the project
construction financing is arranged and then expensed against development fees
received, or, in some cases, such costs are reimbursed periodically or at the
time of closing. When in the opinion of management it is determined that a
project will not be completed, the deferred costs are expensed.
Impairment of Long-Lived Assets
- -------------------------------
Newco adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," as of April 1, 1996. The Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairments whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Adoption of this Statement
did not have an impact on Newco's financial position or results of operations.
Basic/Diluted Earnings Per Common Share
- ---------------------------------------
Effective December 15, 1997, Newco adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. The
Statement required companies with a complex capital structure to report both
Basic Earnings per Share and Diluted Earnings per Share. Diluted Earnings per
Share considers the effect of potential common shares such as stock options and
warrants. Loss per common share is computed based on the 122,057 shares being
issued on the Distribution and Spin-Off. Since there were no potential Common
Shares as of March 22, 1999, Basic and Diluted Earnings per Share are the same
for both periods.
Product Warranties
- ------------------
Warranty expense for Newco's product sales is provided on the basis of
management's estimate of the future costs to be incurred under product
warranties presently in force. Adjustments to revenue or expense are reflected
in the period in which revisions to such estimates are deemed appropriate.
F-7
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
Revenue Recognition
- -------------------
Revenues on product sales are recognized at the time of shipment of goods. Other
revenues, primarily cost reimbursement billings, are recognized when deemed
payable under the applicable agreement.
Research and Development
- ------------------------
Research and development costs are expensed when incurred.
Statement of Cash Flows
- -----------------------
For purposes of the combined statement of cash flows, Newco considers temporary
investments with a maturity of three months or less when purchased to be cash
equivalents. There were no cash equivalents in any of the periods presented.
Concentration of Credit Risk
- ----------------------------
Financial instruments which potentially subject Newco to concentrations of
credit risk consist principally of cash and trade receivables. Newco places its
cash and investments with high credit qualified financial institutions and, by
policy, limits the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising Newco's customer base, and their
dispersion across many different industries and regions. During Abbreviated
1999, no sales to one customer equaled or exceeded 10% of product sales. During
the year ended March 31, 1998 ("Fiscal 1998"), one customer accounted for
approximately 14% of product sales.
Investment in Partnerships
- --------------------------
As part of the Merger and Distribution, Oldco contributed to Newco its ownership
interests as of March 22, 1999 in the partnerships which owned or leased five
cogeneration natural gas power plants. The investment was recorded under the
equity method of accounting.
Goodwill
- --------
The excess of the purchase price over the book value of a corporation acquired
at March 31, 1993 of $557,898 was added to the basis of the land and buildings
of such corporation based upon an independent appraisal of the property acquired
and is being amortized on a straight-line basis over the asset lives of 31.5
years. The remaining book value at March 22, 1999 and March 31, 1998 was
$458,848 and $475,057, respectively.
NOTE 2 - INVENTORIES
-----------
Inventories consist of the following:
March 22, 1999 March 31, 1998
-------------- ---------------
Assembly parts $239,485 $298,239
Finished goods 818,777 645,774
--------- -------
$1,058,262 $944,013
========= =======
F-8
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 3 - DEFERRED COSTS
--------------
Deferred and reimbursable costs at March 22, 1999 and March 31, 1998 were as
follows:
Internal Costs Third
Payroll Expenses Party Costs Total
------- -------- ----------- -----
Balance March 31, 1997 $917,671 $267,947 $295,110 $1,480,728
Additions 259,335 34,706 388,238 682,279
Expensed (634,631) (85,142) (64,335) (784,108)
Reimbursements (58,825) - (3,381) (62,206)
--------- -------- ------- ---------
Balance March 31, 1998 483,550 217,511 615,632 1,316,693
Additions 75,504 11,851 43,716 131,071
Expensed (513,375) (229,362) (659,348) (1,402,085)
Reimbursements (45,679) - - (45,679)
--------- -------- ------- --------
Balance March 22, 1999 $0 $0 $0 $0
========= ========= ======= ========
Newco wrote off all deferred costs during the second quarter of Abbreviated 1999
due to the uncertain nature of the development of the projects and due to the
uncertain political and economic conditions in the countries where the projects
are located (principally India and Brazil). Newco determined, in accordance with
its existing policy, that due to the uncertain development of the projects and
uncertain economic conditions in the respective countries the carrying amounts
may be impaired.
NOTE 4 - NOTES RECEIVABLE
----------------
Long-term notes receivable consist of the following:
March 22, 1999 March 31, 1998
-------------- --------------
Due from affiliate (net of allowance of
$0 at March 22, 1999 and
$555,376 at March 31, 1998 (a) $0 $0
====== =======
Due from others:
- Greenhouse (net of allowance of
$0 at March 22, 1999 and
$1,944,624 at March 31, 1998 (a) $0 $0
- 9% notes receivable due from limited
partnerships, receivable in annual
installments through December, 1999 (b) 103,894 223,623
Less current portion - net of interest (103,894) (93,737)
------- -------
TOTAL $0 $129,886
======= =======
(a) In connection with a project (the "Project"), Newco advanced an aggregate of
$2,500,000 (see Note 7(d)) of which, at March 31, 1998, $1,944,624 and $555,376
was owed to Newco by, respectively, an affiliated partnership and an unrelated
company ("Allegany"). During Fiscal 1998, Newco reserved the full amount of such
loan due to the impairment of such loan and wrote off the combined loan during
the third quarter of Abbreviated 1999 because the Company relinquished its
rights thereunder pursuant to the plan of reorganization approved by the United
States Bankruptcy Court for the District of New Jersey (Case No. 95-28703 (WT))
and the related settlement agreements. Newco did not in Abbreviated 1999 or
Fiscal 1998 record any interest income with respect to such advances.
F-9
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(b) Newco contracted to design, build, and operate energy systems with limited
partnerships. Under the terms of the agreements with these partnerships, the
partnerships provided Newco with initial cash payments and issued long-term
notes. Additional interest on these notes was imputed at the rate of 2% per
annum to yield an effective rate of 11% per annum on substantially all of the
long-term notes.
NOTE 5 - INVESTMENTS IN PARTNERSHIPS
---------------------------
Newco's interests in partnerships range from 35.715% to 50.2% and are accounted
for under the equity method. The investment in partnerships of $4,009,810 at
March 22, 1999 primarily represents the tax basis of the partnership interests
of $2,310,549, which were contributed by Besicorp Group Inc. to the Company. In
addition, included in the investment balance is a receivable of $1,721,175 which
was also contributed to Newco by Oldco and represents the funds due from certain
revenues earned by the partnerships in March 1999. The partnerships are
presently in liquidation. In June 1999, Newco received distributions from the
partnerships of approximately $2,000,000. Also included in the investment
balance are (a) approximately $550,000 which management expects will be received
by the Company, reduced by certain expenses to be incurred, upon liquidation of
one partnership around October and (b) approximately $1.4 million (the
ALiquidated Partnership Funds@) held in cash escrow accounts which were
established in connection with the liquidated partnerships. The Liquidated
Partnership Funds, if any, may be released to the Company between June 2000 and
May 2002 subject to the satisfaction of certain conditions, as to which no
assurance can be given.
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
-------------------------------------
Accounts payable and accrued expenses were comprised of the following:
March 22, 1999 March 31, 1998
-------------- ---------------
Trade accounts payable $186,944 $ 465,584
Accrued interest expense - 39,421
Accrued legal fees - 308,281
Accrued salaries 32,802 134,640
Due to affiliate - 56,624
Deposits and other payables 306,579 230,370
--------- -------
$526,325 $1,234,920
======= =========
F-10
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 7 - LONG-TERM DEBT
--------------
Long-term debt consists of the following: March 22, 1999 March 31, 1998
-------------- --------------
- Installment loans at 0% to 10.54% maturing through
September 2000 (a) $- $75,639
- Mortgage loan payable in monthly installments of
$4,180 including interest at prime plus 1.5% through
April 2007, when the unpaid balance was due (b) - 315,455
- Second mortgage payable in monthly installments
of $1,771 plus interest at prime plus 1.5% through
March 2002, when the unpaid balance was due (b, c) - 288,646
- Mortgage loan payable in monthly installments of
$1,060 plus interest at prime plus 1.5% to March 1998
and prime plus .5% thereafter through March 2001 (b, c) - 50,680
- Obligation on SunWize asset acquisition (e) 135,308 147,021
- Working capital loan (d) - 3,000,000
------- ---------
Total 135,308 3,877,441
Less: Current maturities 20,000 109,208
------ ---------
$115,308 $3,768,233
======= =========
Long-term debt maturities at March 22, 1999, including current maturities, are
as follows:
March 22, 1999
2000 $20,000
2001 20,000
2002 20,000
2003 20,000
2004 20,000
Thereafter 35,308
$135,308
=======
With the exception of the SunWize acquisition obligation, all debt (other than
trade and similar debt incurred in the ordinary course of business) was repaid
during Abbreviated 1999.
a. Collateral for the installment loans consists of automobiles, machinery and
equipment, computer equipment and furniture and fixtures with a net book value
of $60,468 at March 31, 1998. All these loans were repaid prior to December 31,
1998.
b. Collateralized by mortgages on land and/or buildings with a net book value of
$1,153,622 at March 31, 1998. These mortgages were repaid prior to December 31,
1998.
c. As a part of his guarantees of the Newco's debts of $339,326 at March 31,
1998, a major shareholder had a security interest in various assets, patents and
personal property owned by Newco. These mortgages were repaid prior to December
31, 1998 and the related security interests released.
d. On June 1, 1992, Oldco and its partnership co-developer with respect to
certain projects entered into a loan agreement with Stewart & Stevenson
Services, Inc. to borrow up to $3,000,000 each for working capital. Interest on
F-11
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
advances under the agreement were payable quarterly in arrears at the rate of 2%
above prime. The loan required payments of interest only during the initial
term. Principal was to be repaid based on termination dates of operating and
maintenance contracts on certain projects with an initial term of six years that
may be extended an additional six years. Loans were secured by cash flows of
certain of the partnerships in the event of default. During Fiscal 1993 and 1994
Oldco borrowed $2,500,000 under the agreement to fund development activities of
one of the partnerships (see Note 4), and, in February 1997, borrowed the
remaining $500,000 available under the loan agreement. The loan was repaid in
full in July 1998.
e. Obligation payable on the acquisition of SunWize assets, payable on an annual
basis as a percentage of gross margins of the SunWize division. $11,713 was paid
in Abbreviated 1999. $19,878 was paid in Fiscal 1998.
NOTE 8 - INCOME TAXES
-----------
The credit for income taxes for all periods presented represents the allocated
benefits of the respective losses which Oldco was able to use in filing its
consolidated tax returns. The asset and liability method of accounting for
income taxes is used, whereby deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities.
Tax benefits are allocated based on the taxable loss of the companies and
deferred taxes are provided on temporary differences in recognition of income
between book and tax. Such tax benefits and deferred taxes are charged or
credited to the amount due to or from Oldco and included in the net transactions
with Oldco.
Deferred tax assets of approximately $360,000 primarily from equipment and
depreciation differences are offset by valuation allowances since it is more
likely than not that some portion of the deferred tax asset will not be
realized.
Upon conclusion of the Merger and Spin-Off, Newco became an independent entity
and will no longer have its results included with the consolidated tax return of
Oldco.
NOTE 9 - RELATED PARTIES
---------------
Amounts due from affiliates at March 22, 1999 and March 31, 1998 relate to
receivables from companies owned by a major shareholder which provided certain
services to Oldco, and which will continue to provide services to Newco, for
airport usage, plane services and engineering consulting services totaling
$59,925 and $31,939 for Abbreviated 1999 and Fiscal 1998, respectively.
Also, included in amounts due from affiliates at March 22, 1999 is $314,000 of
funds due from Oldco. Additional cash balances were identified subsequent to the
Merger which were not included in the calculation of the Merger consideration.
The funds were transferred to Newco subsequent to the balance sheet date.
Included in other current assets at March 31, 1998 is a receivable of $164,211
from the President of the Company representing primarily the balance due on
$186,000 of legal fees incurred in connection with a certain legal proceeding
(the "Proceeding") which the President had agreed, subject to a determination
that such repayment was not required, to reimburse to the Company. In January
1999, after the receipt of a report from independent legal counsel addressing
the propriety under the BCL and Oldco's by-laws of indemnifying the President, a
committee of the Oldco directors (composed of independent directors) determined
that the President was entitled to full indemnification with respect to the
Proceeding and (i) authorized the repayment to the President of the fine of
$36,673 he had paid in connection with the Proceeding and the refund of $45,000
he had previously reimbursed Oldco; (ii) acknowledged that the President had no
further obligations with respect to the $141,000 he had, subject to a
determination as the propriety of indemnification, agreed to reimburse Oldco;
and (iii) authorized the reimbursement of the President for the legal fees and
expenses (approximately $39,180) incurred by third parties in connection with
the Proceeding and which were paid by him. All such reimbursements were made
during the fourth quarter of Abbreviated 1999 and any related receivables were
written off and charged to expense during the same period.
F-12
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 10 - SUPPLEMENTARY INCOME STATEMENT INFORMATION
------------------------------------------
Abbreviated 1999 Fiscal 1998
---------------- -----------
Advertising costs $ 70,934 $142,154
Research and development expenses(1) 589,996 697,182
Warranty expense 3,452 53,701
Amortization of patents and trademarks 634 40,632
Maintenance and repairs 101,719 84,903
Taxes other than payroll and income taxes 57,059 57,721
(1) Expenditures for research and development were $589,996 in Abbreviated 1999
and $697,182 in Fiscal 1998. Personnel expenses, comprising the largest portion
of these amounts, were $217,701 in Abbreviated 1999 and $330,428 in Fiscal 1998.
Of the total amounts, expenses attributable to agreements with the New York
State Energy Research and Development Authority were $316,562 for Abbreviated
1999 and $520,950 in Fiscal 1998.
NOTE 11 - LEGAL PROCEEDINGS
-----------------
Oldco is a party to numerous legal proceedings in the normal course of business
and certain shareholder suits.
As part of the Plan of Merger, there is (i) an indemnification agreement which
obligates Newco to indemnify the purchaser from any damages it suffers arising
out of, among other things, Oldco's breach of representations and warranties set
forth in the Plan of Merger and certain liabilities, taxes and litigation of
Oldco and (ii) an escrow agreement governing the $6.5 million initially placed
in escrow to satisfy Newco's obligations under the indemnification agreement and
provides for payment of, among other things, certain litigation and related
costs.
Management is of the opinion that there are meritorious defenses in the various
legal proceedings and that the balance in the escrow will cover any legal costs
and settlements that might result from these actions.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
-----------------------------
Other than the equipment lease described below, at March 22, 1999, Newco has no
significant minimum annual rental commitments under non-cancelable operating
leases for equipment and office space. Newco has three leases for office and
warehouse space. One lease calls for monthly rental of $575 for a period of 12
months ending April 1999 and subsequently extended for another year. The second
lease calls for monthly rental of $410 per month for a period of 12 months
ending January 2000. The third lease term of this lease was for an initial
period of six months, commencing on October 1, 1995 and ending on March 31,
1996. The term automatically renews for successive periods of six months each.
Either party may terminate the lease at any time by giving the other party at
least ninety days notice in writing. The annual rent from September 1, 1995
forward is $102,000, which will be adjusted in future periods based on the
Consumer Price Index. Rent expense on all operating leases for Abbreviated 1999
and Fiscal 1998 was $149,433 and $155,197, respectively.
Since March 1994, Newco has been entering into cost-sharing agreements with the
New York State Energy Research and Development Authority ("NYSERDA") with
completion dates extending through April 2001. The agreements provide for
payment to the Company by NYSERDA of $1,442,237 (approximately $1,015,822 has
been earned through March 22, 1999) for funding and development of photovoltaic
projects with estimated costs of $2,963,235. Funds advanced by NYSERDA are to be
repaid from revenues on sales of products developed under the agreements, if
any.
Newco has a 401(k) plan covering substantially all full-time employees for which
Newco makes matching contributions as defined. Expenses under the plan for
Abbreviated 1999 and Fiscal 1998 were $98,868 and $72,692, respectively.
As part of the Plan of Merger, certain equipment with an original cost of
$827,000 was retained by Oldco and leased to Newco. Rentals under the two year
F-13
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
lease will be approximately $63,474 per quarter. Newco has the option to
purchase the equipment after the first year for $288,479. Oldco has the option
to require Newco to purchase the equipment at the end of the lease for $55,000.
The lease is accounted for as an operating lease on Newco's books.
In connection with the Merger and Distribution, approximately 122,057 shares of
Newco common stock will be issued to the holders of Oldco's common stock on a
one share of Newco for 25 shares of Oldco's basis, subject to adjustment based
upon the payment of cash in lieu of the issuance of fractional shares.
In February 1999, Newco adopted the 1999 Incentive Plan to provide for the
issuance of up to 40,000 shares of Newco common stock as an equity incentive
program. On May 14, 1999, grants of 15,000 restricted shares were made under the
plan.
NOTE 13 - SEGMENTS OF BUSINESS
--------------------
Newco specializes in the development, assembly, manufacture, marketing and
resale of photovoltaic products and systems ("Product Segment") and the
development of power plant projects ("Project Segment"). Segments are reported
based on the subsidiary involved with the activity of that segment, with no
intersegment revenues and expenses. Export product sales, principally to Europe
and the Pacific Rim, for Abbreviated 1999 and the year ended March 31, 1998 were
$153,543 and $299,293, respectively. A summary of industry segment information
for Abbreviated 1999 and Fiscal 1998 is as follows:
For Project Product
Abbreviated 1999 Segment Segment Eliminations Total
- ---------------- ------- ------- ------------ -----
Net revenues $142,639 $5,369,937 $5,512,576
Loss before taxes 6,737,846 1,806,930 8,544,776
Income tax credit 2,288,500 613,700 2,902,200
Net loss 4,449,346 1,193,230 5,642,576
Identifiable assets 21,227,535 1,175,088 $(11,868,561) 10,534,062
Investment in partnerships 4,009,810 - 4,009,810
Capital expenditures - 121,124 121,124
Depreciation and amortization 82,251 78,721 160,972
For the Year Ended Project Product
March 31, 1998 Segment Segment Eliminations
- -------------- ------- ------- ------------
Total
- -----
Net revenues $158,427 $4,249,995 $4,408,422
Loss before taxes 8,435,438 2,578,566 10,991,004
Income tax credit 2,868,000 899,000 3,767,000
Net loss 5,544,438 1,679,566 7,224,004
Identifiable assets 17,355,904 1,947,316 $(14,074,568) 5,228,652
Investment in partnerships - - -
Capital expenditures 39,478 109,788 149,266
Depreciation and amortization 152,662 91,131 243,793
NOTE 14 - GOING CONCERN
-------------
The Distributed Businesses have suffered recurring losses from operations and
have previously received (but will not in the future receive) substantial
financial support from Oldco, which raises substantial doubt about Newco's
ability to continue as a going concern without such support. Newco is exploring
a potential transaction in which a major shareholder would acquire all
outstanding shares not already owned by him (the "Transaction"). In this regard,
F-14
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
Newco has retained a financial advisor to render financial and other general
advice with respect to the Transaction, including an evaluation of the fairness
of the Transaction from a financial point of view, and to assist the Company in
responding to proposed alternative transactions, if any. No assurance can be
given that the Transaction will be completed or that alternative transactions
will be available.
NOTE 15 - UNAUDITED PRO FORMA FINANCIAL INFORMATION
-----------------------------------------
The unaudited pro forma financial statements below reflect the pro forma
adjustments for the additional rental expense of $253,896 on equipment that will
be leased from Oldco (See Note 12) net of income taxes at 40% and the
capitalization of the combined equity upon the Distribution and issuance of
approximately 122,057 shares of Newco. The adjustment to operations reflects the
effect as if the transaction had occurred as of April 1, 1997. There was no
effect on the financial position, as the transaction resulted in the same
combined equity.
Combined Balance Sheet
March 22, 1999
----------------------
Historical Adjustments Pro Forma
Current Assets: ---------- ----------- ---------
Cash $1,873,862 $ $1,873,862
Trade accounts receivable (less allowance for
doubtful accounts of $32,000) 982,621 982,621
Inventories 1,058,262 1,058,262
Other current assets 940,562 940,562
----------- ------------ ----------
Total Current Assets 4,855,307 0 4,855,307
---------- ------------ ----------
Property, Plant and Equipment 3,095,846 3,095,846
Less: accumulated depreciation and
amortization (1,516,076) (1,516,076)
----------- ------------ -----------
Net Property, Plant and Equipment 1,579,770 0 1,579,770
---------- ------------- ----------
Other Assets:
Deferred costs - -
Investment in partnerships 4,009,810 - 4,009,810
Other assets 89,175 89,175
----------- ------------ ----------
Total Other Assets 4,098,985 0 4,098,985
--------- ------------ ---------
TOTAL ASSETS $10,534,062 $0 $10,534,062
=========== ============ ===========
F-15
DISTRIBUTED BUSINESSES OF BESICORP GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
Current Liabilities $752,250 $752,250
Other Liabilities 289,771 289,771
--------- ------------- -------------
Total Liabililities 1,042,021 0 1,042,021
Common stock, $.01 par value
authorized 5,000,000 shares
issued 122,057 shares 1,221 1,221
Additional paid in capital 9,490,820 9,490,820
Combined Equity 9,492,041 (9,492,041) 9,492,041
---------- ------------- -------------
TOTAL LIABILITIES AND COMBINED EQUITY $10,534,062 $(9,492,041) $10,534,062
=========== ============ ===========
Combined Statements of Operations
Abbreviated 1999
Historical Adjustments Pro Forma
Revenues: ---------- ----------- ---------
Product sales $4,902,642 $4,902,642
Other revenues 609,934 609,934
------------- ------------ ----------
Total Revenues 5,512,576 0 5,512,576
------------ ------------ ----------
Costs and Expenses:
Cost of product sales 4,661,182 4,661,182
Selling, general and administrative expenses 9,251,042 253,896 9,504,938
Interest expense 134,110 134,110
Other expense 11,018 11,018
------------- ------------ ----------
Total Costs and Expenses 14,057,352 253,896 14,311,248
---------- ------------ ----------
Loss Before Income Taxes (8,544,776) (253,896) (8,798,672)
Credit for Income Taxes 2,902,200 101,600 3,003,800
------------ ----------- ----------
Net Loss (5,642,576) (152,296) (5,794,872)
=========== =========== ===========
Loss per Common Share $(46.23) $(1.25) $(47.48)
============== ============= ===========
Shares to be Outstanding 122,057 122,057 122,057
============ ============= ===========
F-16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BESICORP LTD.
/s/ James Curtin
--------------------
James Curtin, Vice President and Controller
(Principal Accounting Officer)
Dated: January 6, 2000
Kingston, New York