SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1999 Commission file number 000-25209
BESICORP LTD.
______________________________________________________________________________
(Exact name of small business issuer as specified in its charter)
New York 14-1809375
____________________________________ ______________________________
(State or other jurisdiction of (Internal Revenue Service
incorporation or organization) Employer Identification No.)
1151 Flatbush Road, Kingston, New York 12401
______________________________________________________________________________
(Address of principal executive office) (Zip Code)
Issuer's Telephone Number, including area code: (914) 336-7700
N/A
_____________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the preceding 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_______
Common stock outstanding as of February 14, 2000 135,986
Transitional Small Business Disclosure Format Yes______ No ___X___
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BESICORP LTD.
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
<S>
<C> <C>
December 31, March 31,
1999 1999
------------ ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 474,159 $ 1,824,139
Trade accounts and notes receivable (less allowance
for doubtful accounts of $28,906 as of
December 31, 1999 and $32,000 at March 31, 1999) 872,174 988,589
Due from affiliates 69,305 374,250
Notes receivable: (includes interest of $5,771 at
December 31, 1999 and $4,057 at March 31, 1999) 88,214 107,951
Inventories 1,998,091 1,165,761
Other current assets 349,842 465,566
--------- ---------
Total Current Assets 3,851,785 4,926,256
--------- ---------
Property, Plant and Equipment:
Land and improvements 229,660 229,660
Buildings and improvements 1,914,029 1,914,029
Machinery and equipment 581,792 726,958
Furniture and fixtures 237,423 237,423
Construction in progress 94,572 0
--------- ---------
3,057,476 3,108,070
Less: accumulated depreciation and amortization (1,429,775) (1,520,385)
--------- ---------
Net Property, Plant and Equipment 1,627,701 1,587,685
--------- ---------
Other Assets:
Patents and trademarks, less accumulated
amortization of $3,243 at
December 31, 1999 and $2,350, at March 31, 1999 17,817 12,530
Investment in partnerships 0 4,009,810
Deferred costs 919,283 0
Other assets 1,567,956 76,620
--------- ---------
Total Other Assets 2,505,056 4,098,960
--------- ---------
TOTAL ASSETS $ 7,984,542 $ 10,612,901
========= ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
BESICORP LTD.
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
<S>
<C> <C>
December 31, March 31,
1999 1999
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $1,563,259 $ 763,531
Current portion of long-term debt 42,000 20,000
Current portion of accrued reserve and warranty expense 66,954 111,215
Taxes other than income taxes 98,122 103,207
Income taxes payable 10,185 5,300
--------- -------
Total Current Liabilities 1,780,520 1,003,253
Long-Term Accrued Reserve and Warranty Expense 198,677 174,462
Long-Term Debt 51,070 115,308
--------- ---------
Total Liabilities 2,030,267 1,293,023
--------- ---------
Shareholders' Equity:
Common stock, $.01 par value: authorized
5,000,000 shares; issued 136,382
at December 31, 1999 and 121,382 at March 31, 1999 1,364 1,214
Additional paid in capital 10,135,677 9,490,827
Unamortized deferred compensation (544,093) 0
Retained earnings (deficit) (3,621,473) (172,163)
--------- ---------
5,971,475 9,319,878
Less: treasury stock at cost (400 shares and 0 shares,
respectively) (17,200) 0
--------- ---------
Total Shareholders' Equity 5,954,275 9,319,878
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,984,542 $ 10,612,901
========= ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
BESICORP LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
Three months ended December 31, Nine months ended December 31,
----------------------------------- -------------------------------
1999 1998 1999 1998
--------- --------- --------- --------
Revenues:
Product sales $ 1,855,884 $1,187,805 $6,143,793 $3,273,495
Other revenues 108,728 179,520 314,791 406,841
Income from partnerships 131,786 - 56,599 -
Interest and other investment income 23,808 5,200 87,030 18,404
Other income 0 26,808 0 78,441
--------- --------- -------- ---------
Total Revenues 2,120,206 1,399,333 6,602,213 3,777,181
--------- --------- --------- ---------
Costs and Expenses:
Cost of product sales 1,586,174 1,162,704 5,283,389 3,144,571
Selling, general and administrative expenses 1,475,563 2,058,474 4,751,746 6,577,230
Interest expense 0 6,927 287 111,234
Other expense 1 25 79 8,832
--------- -------- ---------- ----------
Total Costs and Expenses 3,061,738 3,228,130 10,035,501 9,841,867
--------- --------- ---------- ----------
Loss Before Income Taxes (941,532) (1,828,797) (3,433,288) (6,064,686)
Provision (Credit) for Income Taxes 2,088 (627,700) 16,022 (2,062,000)
-------- --------- --------- ----------
Net Loss $(943,620) $(1,201,097) $(3,449,310) $(4,002,686)
======= ========= ========= ==========
Basic Loss per Share $ (6.94) $ (9.90) $ (25.76) $ (32.98)
======= ======== ========= ===========
Basic Weighted Average Number of Shares
Outstanding 135,982 121,382 133,899 121,382
======= ========= ========= ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
BESICORP LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
<S>
<C> <C>
Nine months ended December 31,
------------------------------
1999 1998
------------ -----------
Operating Activities:
Net loss $(3,449,310) $ (4,002,686)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization of discounts on notes (1,009) (1,647)
Income from partnerships (56,599) 0
Stock compensation 83,707 0
Provision for uncollectibles (3,094) 45,929
Depreciation and amortization 108,858 126,954
Changes in assets and liabilities:
Accounts and notes receivable 445,200 (288,089)
Inventories (832,330) (222,660)
Accounts payable and accrued expenses 799,728 (305,892)
Taxes payable/refundable (200) 571
Other assets and liabilities, net (644,814) 1,556,565
----------- ---------
Net cash used by operating activities (3,549,863) (3,090,955)
----------- ---------
Financing Activities:
Repayment of borrowings (42,238) (3,742,133)
Net transactions with Besicorp Group Inc. 0 6,821,694
----------- ----------
Net cash provided by financing activities (42,238) 3,079,561
----------- ---------
Investing Activities:
Disposal of property, plant and equipment 0 73,829
Distribution from partnerships 2,390,102 0
Acquisition of property, plant
and equipment (147,981) (70,637)
----------- ---------
Net cash provided (used) by investing activities 2,242,121 3,192
----------- ---------
Decrease in Cash and Cash Equivalents (1,349,980) (8,202)
Cash and Cash Equivalents - Beginning 1,824,139 104,428
----------- ---------
Cash and Cash Equivalents - Ending $ 474,159 $ 96,226
=========== ========
Supplemental Cash Flow Information:
Interest paid $ 287 $ 93,685
Income taxes paid 8,556 0
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
BESICORP LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with the generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of Besicorp Ltd. (together with its
subsidiaries, the "Company") as of December 31, 1999, and March 31, 1999; the
results of operations for the three and nine months ended December 31, 1999 and
1998; and the statement of cash flows for the corresponding nine month periods.
The balance sheet at March 31, 1999 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. For further information, refer to the audited consolidated financial
statements and footnotes thereto included in the Form 10-KSB, as amended, filed
by the Company for the year ended March 31, 1999.
Besicorp Group Inc. ("Oldco"), the former parent of Besicorp Ltd., 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 then
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
Besicorp Ltd. to assume the operations of the Distributed Businesses by having
Oldco assign to Besicorp Ltd. 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 and awards made to Oldco in the aggregate stated amount of approximately $1
million)), and by having Besicorp Ltd. (the "Company") 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 Besicorp Ltd. (and the assumption of these liabilities by Besicorp Ltd.) and
distribute all of Besicorp Ltd.'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 Besicorp Ltd.'s
common stock (the "Distribution"), and Besicorp Ltd. became a separate, publicly
held company.
Besicorp Ltd. and subsidiaries consolidated financial statements at and prior to
the Distribution reflect the operations, financial position and cash flows of
Besicorp Ltd. and subsidiaries as if they were a separate entity. Such financial
statements were derived from the consolidated financial statements of Oldco
using historical results of operations and historical basis in the assets and
liabilities of the business operated by Besicorp Ltd.
The financial information for the year ended March 31, 1999 may not necessarily
reflect the consolidated results of operations, financial position, cash flows
and changes in shareholders' equity of Besicorp Ltd. had Besicorp Ltd. been a
separate entity during that period.
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.
6
<PAGE>
B. Business
Besicorp Ltd. specializes in the development, assembly, manufacture, marketing
and resale of photovoltaic products and systems and the development of power
plant projects.
Basic/Diluted Earnings per Common Share
Effective December 15, 1997, the Company 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 for the three and nine months ended December 31,
1999 is based on the weighted average number of shares of 135,982 and 133,899
outstanding during those respective periods. Loss per common share for the three
and nine months ended December 31, 1998 is computed based on 121,382 shares
being issued as adjusted after the Distribution and Spin-Off. Since there were
no potential Common Shares as of December 31, 1999 and December 31, 1998, Basic
and Diluted Earnings per Share are the same for both fiscal years.
D. The results of operations for the three and nine months ended December 31,
1999 are not necessarily indicative of the results to be expected for any other
interim period or for the full year.
E. Inventories
Inventories are carried at the lower of cost (first-in, first-out method), or
market. Inventories at December 31, 1999 and March 31, 1999, consist of:
December 31, 1999 March 31, 1999
----------------- --------------
Assembly parts $ 452,081 $ 263,761
Finished goods 1,546,010 902,000
--------- ---------
$1,998,091 $1,165,761
========= =========
F. Deferred Costs
Deferred costs and reimbursable costs at December 31, 1999 and March 31, 1999
were as follows:
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
Internal Costs Third
Payroll Expenses Party Costs Total
------- --------- ----------- -----
Balance March 31, 1999 $ 0 $ 0 $ 0 $ 0
Additions 258,526 9,672 651,085 919,283
Expensed 0 0 0 0
Reimbursements 0 0 0 0
------- ----- ------- -------
Balance December 31, 1999 $258,526 $ 9,672 $651,085 $ 919,283
======= ===== ======= =======
</TABLE>
In accordance with its existing policy, the Company is deferring all
reimbursable costs, as presented above, incurred with respect to the development
of a recycled newsprint manufacturing plant and adjacent 475 megawatt natural
gas-fired cogeneration power plant in Ulster County, New York (the "Empire
Newsprint Project").
G. Investments in Partnerships
As of December 31, 1999, the partnerships, which owned or leased five
cogeneration natural gas power plants, had been liquidated. During the three
months ended December 31, 1999, the Company received liquidating distributions
totaling approximately $350,000 from the last unliquidated partnership. All
other partnerships were liquidated during the three months ended June 30, 1999,
and the applicable liquidating distributions of approximately $2,000,000 were
received on June 1, 1999. Cash held in escrow accounts (the "Liquidated
Partnerships Funds"), which had been classified as Investment in Partnerships in
prior filings, are now classified as Other Assets (non-current) (see Note H).
7
<PAGE>
Other Assets
Included in Other Assets is approximately $1.48 million which represents the
Company's share of the Liquidated Partnerships Funds. The Liquidated
Partnerships Funds (if any) are to be released to Besicorp Ltd. between June
2000 and May 2002 subject to the satisfaction of certain conditions, as to which
no assurance can be given.
I. Revenue Recognition
Revenues on sales of products are recognized at the time of shipment of goods.
Development and management fee revenue is recognized when deemed payable under
the applicable agreement.
J. Segments of Business
The Company 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 subsidiaries involved with the activity of the segment, with no
intersegment revenues and expenses. A summary of industry segment information
for the nine months ended December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
Project Product
December 31, 1999 Segment Segment Eliminations Total
- ----------------- ------- ------- ------------ -----
Net revenues $ 210,512 $ 6,391,701 $ 6,602,213
Loss before taxes (2,597,758) (835,530) (3,433,288)
Income tax provision (credit) 14,281 1,741 16,022
Net income (loss) (2,612,039) (837,271) (3,449,310)
Identifiable assets 20,155,153 2,300,957 ($14,471,568) 7,984,542
Investment in partnerships 0 0 0
Capital expenditures 21,801 126,180 147,981
Depreciation and amortization 78,384 30,474 108,858
Project Product
December 31, 1998 Segment Segment Eliminations Total
- ----------------- ------- ------- ------------ -----
Net revenues $ 114,750 $ 3,662,431 $ 3,777,181
Loss before taxes (4,711,364) (1,353,322) ( 6,064,686)
Income tax provision (credit) (1,592,626) (469,374) (2,062,000)
Net income (loss) (3,118,738) (883,948) (4,002,686)
Identifiable assets 13,566,367 2,430,400 ($11,994,756) 4,002,011
Investment in partnerships 0 0 0
Capital expenditures 35,508 35,129 70,637
Depreciation and amortization 82,389 44,565 126,954
</TABLE>
8
<PAGE>
Item 1. LEGAL PROCEEDINGS
In February 2000, the New York Supreme Court (New York County)
dismissed with prejudice the lawsuit captioned Fenster v. Besicorp Group Inc.
et. al. The complaint alleged, among other things, that the merger consideration
paid to shareholders of Oldco in the merger consummated in March 1999 was
inadequate.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
-----------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-QSB constitute "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including without limitation, statements concerning the Company's
future or anticipated operating results or capital and other commitments and the
sources of funding for such commitments. These forward looking statements rely
on a number of assumptions concerning future events, including anticipated
operating results of the Company's various business activities and the status of
the Empire Newsprint Project and management's belief as to the viability of such
project. These forward looking statements are subject to a number of
uncertainties and other factors many of which are outside the control of the
Company that could cause actual results to differ materially from such
statements. The Company disclaims any intention or obligation to update or
revise any forward looking statements whether as a result of new information,
future events or otherwise.
RESULTS OF OPERATIONS
Third Quarter Developments and Subsequent Events
- ------------------------------------------------
The Company has entered into an amended and restated agreement and plan of
merger (the "Agreement") with Besicorp Holdings, Ltd. (the "Parent") and Besi
Acquisition Corp., a wholly-owned subsidiary of Parent. The Agreement is
generally structured as a cash merger whereby Besi Acquisition Corp. will be
merged into Besicorp Ltd., which will then be wholly-owned by Besicorp Holdings,
Ltd. Michael F. Zinn, the President and CEO of Besicorp Ltd., controls Besicorp
Holdings, Ltd.
Generally, pursuant to the terms of the Agreement, shareholders of the Company
(other than shares of Company common stock owned by the Parent) will receive
approximately $58.87 in cash for each share of stock that they own plus the
right to receive additional cash distributions, if any, during the next several
years in the event the surviving corporation receives certain funds and/or to
the extent monies are released from the $6.5 million escrow fund established in
connection with Oldco's merger in March 1999. No assurance can be given that any
such funds will be received.
Consummation of the merger is subject to the satisfaction of a number of
conditions, including approval by the Company's shareholders. No assurance can
be given that the merger will be consummated.
REVENUES
Consolidated
Consolidated revenues increased by $720,873, or 52%, to $2,120,206 during the
three months ended December 31, 1999 from $1,399,333 during the three months
ended December 31, 1998. Consolidated revenues for the nine months ended
December 31, 1999 increased by $2,825,032, or 75%, to $6,602,213, as compared to
$3,777,181 during the nine months ended December 31, 1998.
Product Sales. Revenues from product sales during the three-month period ended
December 31, 1999 increased by $668,079, or 56%, to $1,855,884 as compared to
$1,187,805 for the three months ended December 31, 1998. During the nine months
ended December 31, 1999, revenues increased by $2,870,298, or 88%, to
$6,143,793, from $3,273,495 for the nine months ended December 31, 1998. The
increase for both periods is due primarily to increased sales volume of
photovoltaic products primarily as a result of increases to the sales and
marketing support staff made primarily during the fourth quarter of Fiscal 1998
and to the general increase in demand for solar electric products associated
with Year 2000 expectations. No assurance can be given that the Company will be
able to maintain such revenue levels or that revenues will not decrease.
9
<PAGE>
Other Revenues. Other revenues are primarily comprised of contract revenue
received from various sources, including the New York State Energy Research and
Development Authority and Motorola, Inc. in accordance with funding agreements
with the Company. Other revenues decreased by $70,792, or 39%, for the three
months ended December 31, 1999 and decreased by $92,050, or 23%, for the nine
months ended December 31, 1999 from the corresponding periods in the prior year.
Contract revenue may vary from quarter to quarter based upon the degree of
completion of the various tasks outlined in the applicable agreements.
Income from Partnerships. Income from partnerships for the three and nine months
ended December 31, 1999 was $131,786 and $56,599, respectively, compared to $0
for the corresponding periods in the prior year. The income is comprised
primarily of final adjustments made at the time of liquidation of the
partnerships which owned or leased five natural gas cogeneration power plants.
Interest and Other Investment Income. Interest and other investment income
during the three months ended December 31, 1999 increased by $18,608 to $23,808
from $5,200 for the three months ended December 31, 1998. Interest and other
investment income during the nine months ended December 31, 1999 increased
$68,628 to $87,030 compared to $18,404 for the nine months ended December 31,
1998. The increases in both current periods are due primarily to higher invested
principal balances and to interest earned on the Liquidated Partnership Funds
(see Note G, Investments in Partnerships, of the Notes to the Unaudited
Consolidated Financial Statements included herein).
COSTS AND EXPENSES
Cost of Product Segment Sales
- -----------------------------
Cost of product sales for the three months ended December 31, 1999 and 1998 was
$1,586,174 and $1,162,704, respectively, or 85% and 98% of revenues attributable
to product sales. During the nine months ended December 31, 1999 and 1998, cost
of product sales was $5,283,389 and $3,144,571, respectively, or 86% and 96% of
revenues attributable to product sales. The decrease in cost of sales percentage
in both periods is due primarily to the overall increase in product sales which
has resulted in increased coverage of fixed costs resulting in higher margins
and to a lesser extent, to improved efficiencies in the manufacturing process
which also contributed to higher margins.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses ("SG&A") decreased by $582,911, or
28%, to $1,475,563 for the three months ended December 31, 1999 from $2,058,474
for the three-month period ended December 31, 1998. During the nine months ended
December 31, 1999, SG&A decreased by $1,825,484 or 28% to $4,751,746, from
$6,577,230 for the nine months ended December 31, 1998.
The decrease in the three months ended December 31, 1999 is due primarily to a
decrease in professional fees of $237,000 and a decrease of $30,000 in general
and administrative wages.
SG&A for the nine months ended December 31, 1999, decreased from the
corresponding period in the prior year primarily because the results for the
prior year include the write-off, during the second quarter of Fiscal 1999, of
project costs previously deferred of $1,402,000. These costs were written off
due to the uncertain political and economic conditions in the countries where
the projects are located. Management determined, in accordance with its
accounting policy, that due to the uncertain development of the projects, the
carrying amounts may be impaired. Also contributing to the decrease in SG&A for
the nine months ended December 31, 1999 was a decrease in general and
administrative wages of $159,000, and a decrease in professional fees of
$98,000. These decreases were partially offset by increased marketing expense of
$198,000 in the Company's Product Segment and increased equipment rental expense
of $80,000 associated with the Company's lease agreement with Oldco
10
<PAGE>
Interest Expense
- ----------------
Interest expense for the three months ended December 31, 1999 compared to the
three months ended December 31, 1998 decreased by $6,927 to $0. Interest expense
for the nine months ended December 31, 1999 decreased by $110,947 to $287 from
$111,234 for the nine months ended December 31, 1998. The decrease in both the
three and nine month periods is due primarily to the Company's repayment of all
its interest bearing debt during the second and third quarter of Fiscal 1999.
Provision for Income Taxes
- --------------------------
The provision for income taxes increased during the three months ended December
31, 1999 by $629,788 to $2,088 compared to the credit for income taxes of
$627,700 for the same period last year. During the nine-month period ended
December 31, 1999, the provision for income taxes increased by $2,078,022, or
101%, to $16,022 compared to the credit for income taxes of $2,062,000 for the
same period last year. The Company provides federal and state income taxes based
on enacted statutory rates adjusted for projected benefits of tax operating loss
carry forwards and other credits. The tax benefit associated with the operating
loss for the current period was offset by a corresponding increase in valuation
allowance.
Net Loss
- --------
The Company's net loss for the three months ended December 31, 1999 decreased by
$257,477, or 21%, to $943,620 from the net loss of $1,201,097 for the three
months ended December 31, 1998. During the nine-month period ended December 31,
1999, the Company's net loss decreased by $553,376, or 14%, to $3,449,310 from
the net loss of $4,002,686 for the nine months ended December 31, 1998. The
factors contributing to the decrease in net loss are discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had working capital of $2,071,265 and cash of
$474,159 and at January 31, 2000, the Company had cash of $19,440. The Company's
working capital decreased by $1,851,738 from $3,923,003 at March 31, 1999, to
$2,071,265 at December 31, 1999 as a result of the Company's operating losses
which resulted in a decrease in cash, a decrease in accounts receivable, an
increase in accounts payable and accrued expenses, partially offset by an
increase in inventory. Other than cash generated by the Company's photovoltaic
activities, which is generally expended in these activities, management
anticipates no significant cash inflows in the near future. Given the Company's
current net cash use rate of approximately $500,000 to $600,000 per month,
(after giving effect to the salary deferment program which has resulted in a
monthly cash savings of approximately $45,000 to $50,000), management estimates
that, after drawing on the Parent Loans (as defined), the Company will have
sufficient funds to continue operations only until the end of March 2000.
Accordingly, the Company will not, without additional funds, be able to pay its
obligations as they become due. It is anticipated that the Company's liquidity
and capital resource difficulties will be resolved subsequent to the Merger, at
which time is it anticipated that the Company will be funded by or with the
assistance of the Parent or its affiliates. Other than the consummation of the
Agreement, the Company has not developed any other acceptable alternatives to
its liquidity and capital resource problems. If the Merger is not consummated by
the end of March, no assurance can be given that the Company will be able to
continue operations.
Short-Term Commitments
- ----------------------
The Company's principal short-term material commitments (i.e., expenditures the
Company plans to make during the twelve months ending December 31, 2000) are as
follows:
* the internal overhead and employee costs associated with
monitoring its power plant initiatives and projects and
internal costs ascribed with the development of new projects
(approximately $400,000);
* funds (approximately $800,000) required to fund SunWize's
operating losses;
* approximately $2 million required for the construction of
a 30,000 square foot facility in Kingston to house the solar
electric product development and manufacturing operations
(the "SunWize Facility");
11
<PAGE>
* third-party costs of approximately $250,000 associated with
the Company's foreign development projects and initiatives;
and
* approximately $1.2 million in connection with the Empire
Newsprint Project.
The Company currently intends to address these commitments in the manner
described below, though the Company reserves the right to address such
commitments differently than in the manner contemplated below should, in
management's discretion, circumstances so dictate.
SunWize
- -------
SunWize's operating losses (currently approximately $45,000 to $65,000 per
month) are currently being funded by the Company's cash on hand and the Parent
Loans. The construction of the SunWize Facility will be financed through the
issuance of an industrial development agency bond, which bond is to be secured
by a letter of credit to be issued by HSBC Bank USA and secured by the building
and the interest of SunWize in the real property upon which this facility is
situated. The Company expects this financing to be completed in April 2000.
Foreign Development Project Initiatives
- ---------------------------------------
Activity with respect to the foreign development initiatives are being funded by
cash on hand and the Parent Loans.
Empire Newsprint Project
- ------------------------
Management intends to fund its commitments (which includes approximately $1
million of Total Development Costs (as defined)) with respect to the Empire
Newsprint Project through the Parent Loans (as defined) and the Barter
Arrangements (as defined).
Long-Term Capital Commitments
- -----------------------------
The principal long-term material capital commitments of the Company are the
estimated (i) $5 million to $7 million of total development costs ("Total
Development Costs") required to bring the Empire Newsprint Project to the point
where it is able to obtain long-term financing for actual construction of the
facilities contemplated by this project (the "Financial Close"), which funds are
to be expended over the next 24 to 30 months and (ii) $650 million cost of
constructing the Empire Newsprint Project ("Total Construction Costs"). It is
anticipated that the funds required for the Total Development Costs would come
in the form of advances of cash or services from, among other sources, vendors
interested in participation in the construction of the project (the "Barter
Arrangements"); such vendors generally would be repaid in whole or in part at
Financial Close. The Company has also engaged PricewaterhouseCoopers Securities
LLC ("PWC") to provide financial advisory services for the project, including
placement of debt, equity or equity-related securities with institutional or
strategic investors necessary to finance the Total Development Costs and to
bring this project to Financial Close. The Company has not specifically
identified the manner in which it will finance the Total Construction Costs but
it anticipates that (i) it will have to surrender part of its equity interest in
this project in connection with the financing of the Total Construction Costs
and (ii) PWC may assist it in obtaining such financing.
Parent Loans and Financial Support
- ----------------------------------
Pursuant to the Agreement, the Parent agreed to lend the Company (the "Parent
Loans") such amounts as the Company reasonably requests in order to satisfy its
obligations with respect to certain operating expenses of the Company and its
subsidiaries; provided, however, that Parent is not required to make loans
within a thirty day period in excess of $350,000, loans with a cumulative amount
in excess of $1,050,000, or under certain other circumstances relating to the
status of the Agreement and the merger contemplated thereby. Through February
11, 2000, an aggregate of $562,500 in Parent Loans have been made. The Company
has obtained options to acquire land to be used in connection with the Empire
Newsprint Project. These options require the Company to make certain periodic
payments. In connection therewith and in addition to the Parent Loans, the
Parent or its affiliate has caused a letter of credit to be issued in the amount
of $450,000 to secure the Company's obligation with respect to these option
payments. This letter of credit will be reduced as the option payments are made.
12
<PAGE>
During the nine months ended December 31, 1999, cash of $3,549,863 was used in
operations primarily as a result of the net loss for the period of $3,449,310.
Net changes in other assets and liabilities produced additional negative cash
flow of $232,416. These uses of cash were partially offset by non-cash items of
$131,863.
The Company's investing activities provided cash of $2,242,121 during the
nine-month period ended December 31, 1999 primarily as a result of distributions
from partnerships of $2,390,102, partially offset by the acquisition of
property, plant and equipment of $147,981. The distributions received from
partnerships are non-recurring in nature and primarily represent the Company's
share of the proceeds from the sale of certain pollution control emission
allowances and distributions made upon liquidation of certain partnerships.
For the nine months ended December 31, 1999, the Company's financing activities
resulted in a decrease in cash of $42,238, due to the repayment of borrowings.
Year 2000
- ---------
The disclosure set forth below includes actions taken by Oldco (including
actions taken by Oldco's Year 2000 Management Committee) with respect to Year
2000 issues.
Besicorp does not expect additional expenditures for the balance of Fiscal 2000.
Besicorp has not experienced any material Year 2000 difficulties subsequent to
December 31, 1999.
Many existing computer systems and software applications use two digits, rather
than four, to record years, i.e., "98" instead of "1998." Unless modified, such
systems will not properly record or interpret years after 1999, which could lead
to business disruptions, including, among other things, a temporary inability to
process transactions, send invoices, determine whether payments have been
received or engage in similar normal business activities. This is known as the
Year 2000 issue.
Besicorp relies on computer hardware, software, and related technology primarily
in its internal operations, such as billing and accounting. During Fiscal 1998,
Besicorp formed a Year 2000 Management Committee to address the potential
financial and business consequences of Year 2000 issues, such as the disruptions
mentioned above, the failure to receive essential supplies and services or the
loss of customers, with respect to both Besicorp's hardware, software,
applications and interfaces (collectively, "IT Systems") and non-information
technology systems such as telemetry, security, power and transportation
(collectively, the "Non-IT Systems"). In general, the Year 2000 Management
Committee divided its efforts with respect to both the IT Systems and the Non-IT
Systems into three phases: (1) inventory and assessment ("Phase One"), (2)
strategy and contingency planning ("Phase Two") and (3) upgrades, conversions
and other solutions, at the end of which the systems are tested to confirm Year
2000 compliance ("Phase Three").
With respect to the IT Systems, Besicorp completed its evaluation of its
hardware, software and other IT Systems and has migrated from a 486 PC
environment to an Intel Pentium environment. All workstations and software have
been replaced as necessary to assure Y2K compliance. All key vendors have
supplied written documentation of their Y2K compliance. Systems were tested
through January 2000 and no significant problems arose.
With respect to the Non-IT Systems, Besicorp relies on outside providers for its
basic needs such as electricity, telephone service and other utilities. As part
of its evaluation of its Non-IT Systems, the Year 2000 Management Committee
generally contacted the utilities and other providers through written
correspondence. All Non-IT systems indicate that they are compliant except voice
mail, which is scheduled for an upgrade in the summer of 1999.
Besicorp has communicated with certain of its vendors, suppliers, and customers
to both monitor and encourage their respective remedial efforts regarding Year
2000 issues. Besicorp has contacted by letter or phone all of its significant
vendors and suppliers and its largest customers to determine the extent to which
Besicorp's systems might be vulnerable as a result of third parties' failure to
resolve their own Year 2000 issues. Besicorp's photovoltaic business is
dependent on components provided by photovoltaic module suppliers. Failure by
vendors and suppliers to successfully address their Year 2000 issues could
13
<PAGE>
result in delays in their providing various products and services to Besicorp.
However, Besicorp has determined that it is not necessary to seek replacement
vendors to assure availability of products and services. At present, Besicorp
has no reason to believe it will not be able to obtain all necessary products
and services, either from the present vendors and suppliers, or replacement
vendors and suppliers. Failure by customers could disrupt their ability to
maximize their use of Besicorp's products and services and lead to a reduction
in revenues; therefore, Besicorp has sent a newsletter to its product customers
to help develop each customer's awareness of Year 2000 issues and their
implications.
The Year 2000 Management Committee believes that Besicorp's internal operations
will not be affected by Year 2000 problems. Besicorp does not rely solely on its
IT Systems in order to produce products it sells or to develop project
opportunities. In fact, in July 1998, Besicorp=s IT Systems temporarily ceased
to function due to a lightning strike that destroyed many components of the
system, and while inconvenienced, the business operated, deadlines were met, and
relationships were cultivated.
Besicorp did not develop a contingency plan. Based on Besicorp's research,
evaluation, and actions in preparation for Year 2000, Besicorp had no reason to
believe it would be unable to obtain all necessary products and services from
present vendors and suppliers. In the unlikely event that replacement vendors
and suppliers are required, a situation that our current vendors and suppliers
do not believe will occur, Besicorp believes such replacements can be made with
little difficulty. Further, Besicorp does not rely solely on its IT systems in
order to produce products it sells or to develop project opportunities. Many
functions are done by hand or via in person communication. Transitioning to
manual accounting can be accommodated in the event of an unexpected Year 2000
emergency.
Short of any third party disaster that Besicorp is unable to control and for
which Besicorp cannot develop contingency plans, such as the failure of a
utility providing power or telecommunications, Besicorp does not believe its
business will be detrimentally impacted by potential Year 2000 problems. The
most reasonably likely worst case Year 2000 scenario would be minor delays in
production and distribution (and for a brief period higher costs) which could
reduce revenues and income, and perhaps a reduction in sales.
Through December 31, 1999 Besicorp spent $194,327 on Year 2000 compliance. Of
this amount, $138,836 was spent during Fiscal 1999, $17,042 in Fiscal 2000, and
the balance was spent in Fiscal 1997 and 1998.
14
<PAGE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
<TABLE>
<CAPTION>
<S>
<C>
Exhibit Exhibit
Number
2.1 Form of Contribution and Distribution Agreement by and between Besicorp Ltd. (the "Company")
and Oldco ("BGI"). (B)
2.2 Amended and Restated Agreement and Plan of Merger dated as of November 24, 1999 by and between
the Company, Besicorp Holdings, Ltd., and Besi Acquisition Corp. (C)
3(i) Certificate of Incorporation of the Company. (A)
3(ii) By-Laws of the Company. (A)
10.1 Form of Indemnification Agreement by and among the Company, BGI Acquisition LLC ("LLC") and BGI
Acquisition Corp. ("Acquisition")(A)
10.2 Form of Escrow Agreement by and among the Company, BGI, LLC and Acquisition. (A)
10.3 Form of Lease by and between the Company and BGI. (B)
10.4 1999 Incentive Plan. (B)
10.5 Memorandum of Understanding by and between Empire State Newsprint LLC and Besicorp Development,
Inc. (D)
27 Financial Data Schedule - 9 Months ended December 31, 1999
27.1 Financial Data Schedule - 9 Months ended December 31, 1998
</TABLE>
Notes:
A. Incorporated by reference to the corresponding exhibit filed with the
Form 10-SB of the Company filed on December 23, 1998.
B. Incorporated by reference to the corresponding exhibit filed with
Post-Effective Amendment No. 2 to the Form 10-SB/A of the Company filed
on March 22, 1999.
C. Incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on or about December 16, 1999.
D. Incorporated by reference to the corresponding exhibit filed on January
26, 2000 on the Company's Quarterly Report on Form 10-QSB/A for the
period ended June 30, 1999.
(b) Reports on Form 8-K
On or about October 19, 1999 and December 16, 1999, the Company filed
reports on Form 8-K announcing under "Item 5. Other Events" certain matters
regarding the Agreement.
15
<PAGE>
SIGNATURES
- ----------
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 thereunto duly authorized.
Besicorp Ltd., Registrant
Date: February 15, 2000 /s/ Michael F. Zinn
----------------- --------------------------
Michael F. Zinn
President
(principal executive officer)
Date: February 15, 2000 /s/ James E. Curtin
----------------- -----------------------------
James E. Curtin
Vice President and Controller
(principal accounting officer)
16
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<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 474,159
<SECURITIES> 0
<RECEIVABLES> 901,080
<ALLOWANCES> 28,906
<INVENTORY> 1,998,091
<CURRENT-ASSETS> 3,851,785
<PP&E> 3,057,476
<DEPRECIATION> 1,429,775
<TOTAL-ASSETS> 7,984,542
<CURRENT-LIABILITIES> 1,780,520
<BONDS> 51,070
0
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<COMMON> 1,364
<OTHER-SE> 5,952,911
<TOTAL-LIABILITY-AND-EQUITY> 7,984,542
<SALES> 6,143,793
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<NET-INCOME> (3,449,310)
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<LOSS-PROVISION> 111,234
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