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, 1998 Commission file number 0-9964
BESICORP GROUP INC.
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(Exact name of small business issuer as specified in its charter)
New York 14-1588329
___________________________________________________________________________
(State or other jurisdiction of (Internal Revenue Service
incorporation or organization) Employer Identification No.)
1151 Flatbush Road, Kingston, New York 12401
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(Address of principal executive office) (Zip Code)
Issuer's Telephone Number, including area code: (914) 336-7700
N/A
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(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 3, 1999 3,038,935
Transitional Small Business Disclosure Format Yes______ No ___X___
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PART 1 - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
December 31, 1998 March 31,1998
ASSETS
Current Assets:
Cash and cash equivalents $110,439,930 $ 812,971
Short-term investments 879,301 1,056,778
Investment in Niagara Mohawk Power Corporation common stock 22,161,716 0
Trade accounts receivable (less allowance for doubtful accounts
of $68,929 and $23,000 as of December 31, 1998
and March 31, 1998, respectively) 603,401 369,539
Due from affiliates 64,223 870,295
Current portion of long-term notes receivable:
Others (includes interest of $16,950 and $8,316, respectively) 127,919 102,053
Inventories 1,166,673 944,013
Deferred income taxes 93,600 93,600
Other current assets 287,984 485,052
Total Current Assets 135,824,747 4,734,301
Property, Plant and Equipment:
Land and improvements 237,159 237,159
Buildings and improvements 1,914,029 1,906,953
Machinery and equipment 1,546,587 1,226,115
Furniture and fixtures 247,364 246,701
3,945,139 3,616,928
Less accumulated depreciation and amortization 1,980,261 1,769,212
Net Property, Plant and Equipment 1,964,878 1,847,716
Other Assets:
Patents and trademarks, less accumulated
amortization of $2,131 and $1,691, respectively 9,011 7,823
Long-term notes receivable:
Others 94,112 129,886
Due from affiliates 0 375,000
Investment in partnerships 4,444,233 0
Deferred costs 0 1,316,693
Deferred income taxes 634,200 916,600
Other assets 77,645 116,977
Total Other Assets 5,259,201 2,862,979
TOTAL ASSETS $143,048,826 $ 9,444,996
See accompanying notes to consolidated financial statements.
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BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
December 31, 1998 March 31,1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,319,611 $1,403,504
Current portion of long-term debt 11,700 111,367
Current portion of accrued reserve and warranty expense 140,305 152,891
Taxes other than income taxes 114,541 114,811
Income taxes payable 47,947,538 172,246
Total Current Liabilities 49,533,695 1,954,819
Investment in Partnerships 0 33,870
Long-Term Accrued Reserve and Warranty Expenses 167,934 152,402
Long-Term Debt 123,608 3,766,074
Total Liabilities 49,825,237 5,907,165
Shareholders' Equity:
Common stock, $.10 par value: authorized
5,000,000 shares; issued 3,234,958 shares 323,495 323,495
Additional paid-in capital 5,565,352 5,492,072
Retained earnings (deficit) 88,948,053 (615,259)
94,836,900 5,200,308
Less: treasury stock at cost (265,023 shares and 278,234
shares, respectively) (1,613,311) (1,662,477)
Total Shareholders' Equity 93,223,589 3,537,831
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 143,048,826 $ 9,444,996
See accompanying notes to consolidated financial statements.
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BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<C> <C> <C> <C>
Three months ended December 31, Nine months ended December 31,
1998 1997 1998 1997
______________________________ _______________________________
Revenues:
Product sales $ 1,187,805 $ 788,193 $3,273,495 $3,056,859
Development and management fees 0 162,133 2,043,334 1,070,139
Other revenues 184,064 102,320 417,419 237,703
Income from partnerships 2,233,382 2,418,708 138,938,314 7,408,310
Interest and other investment income 2,388,024 39,700 5,212,956 134,614
_________ _________ ___________ __________
Total Revenues 5,993,275 3,511,054 149,885,518 11,907,625
_________ _________ ___________ __________
Costs and Expenses:
Cost of product sales 1,155,438 776,517 3,121,707 2,850,416
Selling, general and administrative expenses 2,989,889 2,406,166 8,820,244 6,490,961
Interest expense 13,238 207,619 133,336 404,134
Other expense 24 40 8,832 8,387
_________ _________ __________ _________
Total Costs and Expenses 4,158,589 3,390,342 12,084,119 9,753,898
_________ _________ __________ _________
Income Before Income Taxes 1,834,686 120,712 137,801,399 2,153,727
Provision (Credit) for Income Taxes 728,888 (68,802) 48,238,087 631,402
__________ _________ ___________ _________
Net Income $ 1,105,798 $ 189,514 $ 89,563,312 $ 1,522,325
========== ========= =========== =========
Basic Earnings per Common Share $ .37 $ .06 $ 30.16 $ .52
========== ========= =========== =========
Basic Weighted Average Number of Shares Outstanding
(in Thousands) 2,969 2,957 2,968 2,946
========== ======== =========== =========
Diluted Earnings per Common Share $ .36 $ .06 $ 29.52 $ .51
========== ======== =========== =========
Diluted Weighted Average Number of Shares Outstanding
(in Thousands) 3,036 3,016 3,034 3,003
========== ======== =========== =========
Dividends per Common Share NONE NONE NONE NONE
========== ======== =========== =========
See accompanying notes to consolidated financial statements.
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BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
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Nine months ended December 31,
1998 1997
______________________________
Operating Activities:
Net income $ 89,563,312 $ 1,522,325
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes 282,400 44,373
Amortization of discounts on notes (1,647) (1,647)
Provision for uncollectibles 45,929
Depreciation and amortization 211,488 216,855
Realized and unrealized losses (3,740,136) 9,620
Partnership income recognized (138,938,314) (7,408,310)
Distributions from partnerships 134,460,210 5,482,429
Changes in assets and liabilities:
Short-term investments 316,016 (32,806)
Investment in Niagara Nohawk Power Corporation
common stock (18,560,119)
Accounts and notes receivable 912,838 1,495,424
Inventory (222,659) 40,100
Accounts payable and accrued expenses (83,894) (286,661)
Taxes payable 47,899,522 182,298
Other assets and liabilities, net 1,554,411 (587,838)
Net cash provided by operating activities 113,699,357 676,162
Financing Activities:
Increase in borrowings 0 247,000
Repayment of borrowings (3,742,133) (209,061)
Purchase of common stock (53,187) (140,077)
Issuance of common stock 51,133 128,100
Net cash provided (used) by financing activities (3,744,187) 25,962
Investing Activities:
Acquisition of property, plant and equipment (328,211) (262,654)
Net cash used by investing activities (328,211) (262,654)
Increase in Cash and Cash Equivalents 109,626,959 439,470
Cash and Cash Equivalents - Beginning 812,971 210,533
Cash and Cash Equivalents - Ending $ 110,439,930 $ 650,003
Supplemental Cash Flow Information:
Interest paid $ 175,226 $ 287,225
Income taxes paid 188,740 398,426
Additions which were financed and not included above:
Property, plant and equipment $ 0 $ 66,375
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BESICORP GROUP INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. 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 (including normal recurring adjustments) necessary to present fairly
the financial position of Besicorp Group Inc. (together with its subsidiaries,
the "Company") as of December 31, 1998, and March 31, 1998; the results of
operations for the three and nine months ended December 31, 1998 and 1997; and
the statement of cash flows for the corresponding nine month periods. MRA
related income has been included on the Statement of Operations in income from
partnerships pending a determination as to what portion of that item should be
reported as an extraordinary item.
The balance sheet at March 31, 1998 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 Annual Report on Form 10-KSB,
as amended, filed by the Company for the year ended March 31, 1998.
B. Business and Proposed Merger
The Company specializes in the development of power projects and energy
technologies. Working with partners, the Company develops independent power
projects. The Company also provides engineering, system design, project
management, and turnkey installation of photovoltaic systems, and fabricates,
manufactures, markets, and distributes photovoltaic products and systems through
a domestic and international network.
The Company, BGI Acquisition LLC ("Acquisition"), a Wyoming limited liability
company, and BGI Acquisition Corp. ("Merger Sub"), a New York corporation and a
wholly owned subsidiary of Acquisition, entered into an Agreement and Plan of
Merger dated November 23, 1998, as amended, (the "Plan of Merger"), that
provides that Merger Sub will be merged with and into the Company, with the
Company being the surviving corporation and wholly owned by Acquisition (the
"Merger"). If the Merger is consummated, the Company's shareholders will be
entitled to receive $34.50 (the "Merger Consideration") in cash for each share
of Besicorp Common Stock, subject to upward adjustment if the Base Amount (as
defined in the Plan of Merger) exceeds $105,275,000. It is anticipated that if
there is any upward adjustment, such adjustment will not exceed $4.00 per share.
There will not be a downward adjustment to the Merger Consideration; however, no
assurance can be given that there will be any upward adjustment to the Merger
Consideration. Consummation of the Merger is subject to the satisfaction of
numerous conditions, including the adoption of the Plan of Merger by the
Company's shareholders and the Company's distributing (the "Spin-Off") to its
shareholders on a pro rata basis all of the shares of common stock (the "Newco
Common Stock") of Besicorp Ltd. ("Newco"), a subsidiary of Besicorp, which at
the time of the Spin-Off will, among other things, own Besicorp's photovoltaic
and independent power plant development businesses and have assumed
substantially all of the Company's liabilities (other than the Permitted
Liabilities, as such term is defined in the Plan of Merger). No assurance can be
given that such transactions will be consummated.
C. Basic/Diluted Earnings per Common Share
Diluted Earnings per Share considers the effect of potential common shares such
as stock options and warrants. The dilution in the three and nine months ended
December 31, 1998 and December 31, 1997 is due to the net incremental effect of
stock options and warrants of 81,500 and 67,000, respectively.
D. The results of operations for the three and nine months ended December 31,
1998 is not indicative of the results to be expected for any other interim
period or for the full year.
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E. Inventories
Inventories are carried at the lower of cost (first-in, first-out method), or
market. Inventories at December 31, 1998 and March 31, 1998, consist of:
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December 31, 1998 March 31, 1998
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Assembly parts $ 373,336 $298,239
Finished goods 793,337 645,774
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$1,166,673 $944,013
=========== ===========
F. Deferred Costs
Deferred costs and reimbursable costs at December 31, 1998 and March 31, 1998
were as follows:
Internal Costs Third
Payroll Expenses Party Costs Total
________ ________ ___________ ______
Balance March 31, 1998 $483,550 $217,511 $615,632 $1,316,693
Additions 75,504 11,851 43,716 131,071
Write-offs (513,375) (229,362) (659,348) (1,402,085)
Reimbursements (45,679) (45,679)
-------- -------- ------- ---------
Balance December 31, 1998 $0 $0 $0 $0
======= ======= ======= =========
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The Company decided to write off all deferred costs during the second quarter of
Fiscal 1999 due to the uncertain nature of the development of the projects, due
to the uncertain political and economic conditions in the countries where the
projects are located (principally India and Brazil), and the current trend in
accounting principles regarding non-deferral of development expenses.
G. Investments in Partnerships
At September 30, 1998, the Company had partnership interests in six completed
gas-fired cogeneration plants located in New York State. The partnerships which
owned the plants sold five of the plants during the third quarter of Fiscal 1999
and the rights with respect to the sixth were relinquished in connection with
the settlement of certain legal proceedings (described in the Company's
Quarterly Report on Form 10-QSB, as amended, for the period ended September 30,
1998 (the "September Quarterly Report"). At December 31, 1998 and March 31,
1998, the balance of recorded investments was comprised of the following:
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December 31, 1998 March 31, 1998
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Capital contributions and investments $2,976,813 $2,976,813
Partnership distributions (162,611,424) (28,151,213)
Recognized share of income 164,078,844 25,140,530
------------- ------------
$4,444,233 $(33,870)
========== ==========
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The aggregate financial position and results of operations for the partnerships
(excluding one partnership which relinquished its ownership interest in a power
plant in connection with the settlement described above) as reported in the
financial statements issued by the respective partnerships as at September 30,
1998 (unaudited) and December 31, 1997 (audited) and for the nine months and
year then ended were as follows:
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Nine Months Ended Year Ended
September 30, 1998 December 31, 1997
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Total Partnerships:
Assets $48,991,660 $520,329,768
Plant and equipment 27,500,000 391,492,464
Secured debt 0 508,289,568
Partners' equity (deficit) 46,007,334 (17,572,222)
Revenues 99,773,839 149,469,661
Income 311,702,871 20,238,179
Company's Share:
Partners' equity (deficit) 21,771,178 (7,354,035)
Income 146,359,017 10,113,516
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The operating assets of the partnerships in which the Company has investments
secured the projects' debt, and the significant losses incurred by the
partnerships in the early years of operation were funded by that debt.
Consequently, the Company, having no obligation to fund the losses or pay the
partnerships' debt, did not generally record the losses in its consolidated
financial statements. The income from partnerships, which has been recorded on
the financial statements in the amount of $138,938,314 has been recognized on
partnerships where income has exceeded prior unrecognized accumulated losses of
$3,110,466. The recorded income also reflects the write-down of impaired value
of the investments of $4,306,848 in two partnerships. The amounts reported
above, as at September 30, 1998 and for the nine months then ended, include
adjustments made to the partnerships' financial statements to reflect the gross
amounts received by the partnerships from the sale of the plants during December
1998.
The following schedule contains summarized financial information for each of the
partnerships:
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Besicorp Group Inc.
Partnership Summary Financial Information
As At September 30, 1998 and For the Nine Months Then Ended
Kamine/Besicorp Kamine/Besicorp Kamine/Besicorp Kamine/Besicorp
Carthage L.P. So. Glens Falls L.P. Natural Dam L.P. Beaver Falls L.P.
Cash $ 721,489 $ 7,828,535 $ 368,153 $ 11,192,421
Other Current Assets 74,061 186,663 22,649 191,849
Property, Plant & Equipment 3,200,000 4,400,000 4,400,000 7,500,000
Total Assets $ 3,995,550 $12,415,198 $ 4,790,802 $ 18,884,270
Current Liabilities $ 50,112 $ 587,673 $ 245,200 $ 2,061,368
Long Term Liabilities - - - -
Total Liabilities 50,112 587,673 245,200 2,061,368
Total Equity 3,945,438 11,827,525 4,545,602 16,822,902
Total Liabilities and Equity $ 3,995,550 $ 12,415,198 $ 4,790,802 $ 18,884,270
Revenues $11,698,106 $ 12,895,084 $ 11,128,522 $ 22,260,072
Expenses 9,727,417 10,898,588 8,531,347 15,765,589
Other Income 54,719,117 58,814,238 46,813,975 59,372,792
Net Income $56,689,806 $ 60,810,734 $ 49,411,150 $ 65,867,275
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Besicorp Group Inc.
Partnership Summary Financial Information
As At September 30, 1998 and For the Nine Months Then Ended
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Kamine/Besicorp Kamine/Besicorp
Syracuse L.P. GlenCarthage L.P. Total
Cash $ 636,240 $ 4,475 $ 20,751,313
Other Current Assets 265,125 - 740,347
Property, Plant & Equipment 8,000,000 - 27,500,000
Total Assets $ 8,901,365 $ 4,475 $ 48,991,660
Current Liabilities $ 37,973 $ 2,000 2,984,326
Long Term Liabilities - - -
Total Liabilities 37,973 2,000 2,984,326
Total Equity 8,863,392 2,475 46,007,334
Total Liabilities and Equity $ 8,901,365 $ 4,475 48,991,660
Revenues $ 19,593,713 $ 22,198,342 $ 99,773,839
Expenses 16,218,741 10,646,876 71,788,558
Other Income 63,997,468 - 283,717,590
Net Income $ 67,372,440 $ 11,551,466 $ 311,702,871
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The Company was a party to a Master Restructuring Agreement ("MRA") which was
entered into on July 10, 1997 between Niagara Mohawk Power Corporation ("Niagara
Mohawk") and 16 independent power producers ("IPPs") holding 29 Power Purchase
Agreements ("PPAs") including the Company's five PPAs. On June 30, 1998, the MRA
was consummated. Pursuant to the terms of the MRA, the Company's five PPAs,
which had provided a total of 323 Megawatts of capacity and energy to Niagara
Mohawk, were terminated. As a result of the MRA and related transactions, and
the operations of the project partnerships, the Company has received through
December 31, 1998 (i) 4,615,770 shares of Niagara Mohawk common stock (the
"Niagara Mohawk Common Stock") and (ii) net cash of approximately $70 million
(including the Company's share of the net proceeds from the sale of the power
plants of approximately $11 million), of which approximately $4 million
continues to be retained at the partnership level primarily in regard to ongoing
obligations of the projects. The closing price of the Niagara Mohawk Common
Stock on June 30, 1998 was $14.94 per share for an aggregate value of
approximately $69 million. In accordance with SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," this investment qualifies as
trading securities, which are reported at fair value, with changes in fair value
included in the statement of operations. The value of the investment in Niagara
Mohawk Common Stock of $22,161,716 reflected on the balance sheet at December
31, 1998 reflects 1,374,370 shares at a market price per share of $16.13.
Through February 8, 1999, the Company had sold 3,391,500 shares of Niagara
Mohawk Common Stock, realizing net proceeds of approximately $52.7 million for a
gain of approximately $2.2 million. The remaining 1,224,270 shares of Niagara
Mohawk Common Stock based on the closing price of that date of $15.06, have an
aggregate value of approximately $18.4 million. Unrealized gains on the shares
of Niagara Mohawk Common Stock were $1,632,064 at December 31, 1998 and realized
gains for the three and nine months ended December 31, 1998 were $1,635,565
and $1,964,734, respectively. The net proceeds received by the Company as a
result of the MRA reflect the fact that a substantial portion of the gross
proceeds received by the partnerships from Niagara Mohawk was used to terminate
most obligations with third parties, including lenders, lessors, fuel suppliers
and transporters, thermal hosts, and others. The Company's share of these
termination payments was approximately $290 million.
With the exception of development fees of $1.8 million received from the
Kamine/Besicorp Beaver Falls L.P. ("Beaver Falls"), which were recognized as
revenue during the first quarter of Fiscal 1999, development fees of $.9 million
received from the Kamine/Besicorp Syracuse L.P. ("Syracuse"), which were
recorded as a receivable from the project in Fiscal 1998, and certain cost
reimbursements totaling $800,000, the MRA, operating results, and plant sale
proceeds were accounted for as partnership distributions.
During the three and nine months ended December 31, 1998, the Company recorded
income, which is non-recurring, of $2,233,382 and $138,938,314, respectively,
predominantly as a result of the MRA and, to a minimal extent, the operating
results of the project partnerships. These amounts give effect to write-downs,
net to the Company of approximately $84 million, recorded to reflect the
proceeds received from the sale of the Beaver Falls and Syracuse power plants.
With respect to the Kamine/Besicorp Carthage L.P. ("Carthage"), Kamine/Besicorp
South Glens Falls L.P. ("South Glens Falls"), and Kamine/Besicorp Natural Dam
L.P. ("Natural Dam") which held leasehold interests in three power plants, the
income amounts reflect the expensing of all costs associated with the
termination of those long-term leases reduced by the proceeds received upon the
disposition of the facilities. The Company's share of the cost of the lease
terminations was approximately $77 million. Since the power plant sales were
consummated by the end of calendar 1998, the Company does not expect that there
will be further significant adjustments to the recorded income.
On December 7, 1998, the Company announced it had consummated the sales of the
three leased power plants - Carthage, Natural Dam, and South Glens Falls. The
Company holds partnership interests of 50 per cent in each of the projects. The
Company's share of the net proceeds from these sales, which was received on
December 29, 1998, was approximately $1.4 million, $1.9 million, and $1.9
million, respectively.
On December 14, 1998, the Company announced it had consummated the sale of the
Syracuse power plant. The Company holds a partnership interest of 35.715 per
cent in the project. The Company's share of the net proceeds from this sale,
which was received on December 29, 1998, was approximately $2.3 million.
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On December 22, 1998, the Company announced it had consummated the sale of the
Beaver Falls power plant. The Company holds a partnership interest of 50.2 per
cent in the project. The Company's share of the net proceeds from this sale,
which was received on December 29, 1998, was approximately $3.2 million.
H. Notes Receivable
The Company has settled litigation involving a project partnership (the
settlement is described in the September Quarterly Report). As a result, the
Company will be unable to recover combined loans of $2.5 million to the project
and adjacent steam host. The Company had established reserves during the year
ended March 31, 1998 to cover such losses and wrote-off the combined loan during
the quarter ended December 31, 1998.
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 agreement. See Note B regarding the proposed merger.
J. Segments of Business
The Company specializes in the development of power projects and energy
technologies. Working with partners, the Company develops independent power
projects (the "Project Segment"). The Company also provides engineering, system
design, project management, and turn-key installation of photovoltaics, and
fabricates, manufacturers, markets, and distributes photovoltaic products and
systems through a domestic and international network (the "Product Segment"). A
summary of industry segment information for the nine months ended December 31,
1998 and 1997 is as follows:
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Project Product
December 31, 1998 Segment Segment Eliminations Total
- ----------------- ------- ------- ------------ -----
Net revenues $146,239,294 $3,646,224 $149,885,518
Net income (loss) 90,961,135 (1,397,823) 89,563,312
Identifiable assets 300,716,924 2,532,375 $(160,200,473) 143,048,826
Capital expenditures 154,015 174,196 328,211
Depreciation and amortization 144,450 67,038 211,488
December 31, 1997
Net revenues $8,652,649 $3,254,976 $11,907,625
Net income (loss) 3,282,348 (1,760,023) 1,522,325
Identifiable assets 42,469,708 3,574,248 $(34,514,124) 11,529,832
Capital expenditures 54,718 274,311 329,029
Depreciation and amortization 117,773 49,082 216,855
</TABLE>
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K. Legal Proceedings
See Part II, Item 1 which is incorporated herein by reference.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RECENT DEVELOPMENTS
The Company was a party to a Master Restructuring Agreement ("MRA") which was
entered into on July 10, 1997 between Niagara Mohawk Power Corporation ("Niagara
Mohawk") and 16 independent power producers ("IPPs") holding 29 Power Purchase
Agreements ("PPAs") including the Company's five PPAs. On June 30, 1998, the MRA
was consummated. Pursuant to the terms of the MRA, the Company's five PPAs,
which had provided a total of 323 Megawatts of capacity and energy to Niagara
Mohawk, were terminated. As a result of the MRA and related transactions, and
the operations of the project partnerships, the Company has received through
December 31, 1998 (i) 4,615,770 shares of Niagara Mohawk common stock (the
"Niagara Mohawk Common Stock") and (ii) net cash of approximately $70 million
(including the Company's share of the net proceeds from the sale of the power
plants of approximately $11 million), of which approximately $4 million
continues to be retained at the partnership level primarily in regard to ongoing
obligations of the projects. The closing price of the Niagara Mohawk Common
Stock on June 30, 1998 was $14.94 per share for an aggregate value of
approximately $69 million. In accordance with SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," this investment qualifies as
trading securities, which are reported at fair value, with changes in fair value
included in the statement of operations. The value of the investment in Niagara
Mohawk Common Stock of $22,161,716 reflected on the balance sheet at December
31, 1998 reflects 1,374,370 shares at a market price per share of $16.13.
Through February 8, 1999, the Company had sold 3,391,500 shares of Niagara
Mohawk Common Stock, realizing net proceeds of approximately $52.7 million for a
gain of approximately $2.2 million. The remaining 1,224,270 shares of Niagara
Mohawk Common Stock based on the closing price of that date of $15.06, have an
aggregate value of approximately $18.4 million. Unrealized gains on the shares
of Niagara Mohawk Common Stock were $1,632,064 at December 31, 1998 and realized
gains for the three and nine months ended December 31, 1998 were $1,635,565
and $1,964,734, respectively. The net proceeds received by the Company as a
result of the MRA reflect the fact that a substantial portion of the gross
proceeds received by the partnerships from Niagara Mohawk was used to terminate
most obligations with third parties, including lenders, fuel suppliers and
transporters, thermal hosts, and others. The Company's share of these
termination payments was approximately $290 million.
With the exception of development fees of $1.8 million received from the
Kamine/Besicorp Beaver Falls L.P. ("Beaver Falls"), which were recognized as
revenue during the first quarter of Fiscal 1999, development fees of $.9 million
received from the Kamine/Besicorp Syracuse L.P. ("Syracuse"), which were
recorded as a receivable from the project in Fiscal 1998, and certain cost
reimbursements totaling $800,000, the MRA, operating results, and plant proceeds
were accounted for as partnership distributions.
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During the three and nine months ended December 31, 1998, the Company recorded
income, which is non-recurring, of $2,233,382 and $138,938,314, respectively,
predominantly as a result of the MRA and, to a minimal extent, the operating
results of the project partnerships. These amounts give effect to write-downs,
net to the Company of approximately $84 million, recorded to reflect the
proceeds received from the sale of the Beaver Falls and Syracuse power plants.
With respect to the Kamine/Besicorp Carthage L.P. ("Carthage"), Kamine/Besicorp
South Glens Falls L.P. ("South Glens Falls"), and Kamine/Besicorp Natural Dam
L.P. ("Natural Dam") which held leasehold interests in three power plants, the
income amounts reflect the expensing of all costs associated with the
termination of those long-term leases reduced by the proceeds received upon the
disposition of the facilities. The Company's share of the cost of the lease
terminations was approximately $77 million. Since the power plant sales were
consummated by the end of calendar 1998, the Company does not expect that there
will be further significant adjustments to the recorded income.
On December 7, 1998, the Company announced it had consummated the sales of the
three leased power plants - Carthage, Natural Dam, and South Glens Falls. The
Company holds partnership interests of 50 per cent in each of the projects. The
Company's share of the net proceeds from these sales, which was received on
December 29, 1998, was approximately $1.4 million, $1.9 million, and $1.9
million, respectively.
On December 14, 1998, the Company announced it had consummated the sale of the
Syracuse power plant. The Company holds a partnership interest of 35.715 per
cent in the project. The Company's share of the net proceeds from this sale,
which was received on December 29, 1998, was approximately $2.3 million.
On December 22, 1998, the Company announced it had consummated the sale of the
Beaver Falls power plant. The Company holds a partnership interest of 50.2 per
cent in the project. The Company's share of the net proceeds from this sale,
which was received on December 29, 1998, was approximately $3.2 million.
As a result of the sale of the power plants and the assumption by the buyers of
the ongoing project obligations, approximately $4 million of the $8 million
previously reserved by the Company with respect to its share of the MRA and
operating proceeds retained by the project partnerships has been released to the
Company by the partnerships through December 31, 1998.
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The Company, BGI Acquisition LLC ("Acquisition"), a Wyoming limited liability
company, and BGI Acquisition Corp. ("Merger Sub"), a New York corporation and a
wholly owned subsidiary of Acquisition, entered into an Agreement and Plan of
Merger dated November 23, 1998, as amended, (the "Plan of Merger"), that
provides that Merger Sub will be merged with and into the Company, with the
Company being the surviving corporation and wholly owned by Acquisition (the
"Merger"). If the Merger is consummated, the Company's shareholders will be
entitled to receive $34.50 (the "Merger Consideration") in cash for each share
of Besicorp Common Stock, subject to upward adjustment if the Base Amount (as
defined in the Plan of Merger) exceeds $105,275,000. It is anticipated that if
there is any upward adjustment, such adjustment will not exceed $4.00 per share.
There will not be a downward adjustment to the Merger Consideration; however, no
assurance can be given that there will be any upward adjustment to the Merger
Consideration. Consummation of the Merger is subject to the satisfaction of
numerous conditions, including the adoption of the Plan of Merger by the
Company's shareholders and the Company's distributing (the "Spin-Off") to its
shareholders on a pro rata basis all of the shares of common stock (the "Newco
Common Stock") of Besicorp Ltd. ("Newco"), a subsidiary of Besicorp, which at
the time of the Spin-Off will, among other things, own Besicorp's photovoltaic
and independent power plant development businesses and have assumed
substantially all of the Company's liabilities (other than the Permitted
Liabilities). No assurance can be given that such transactions will be
consummated.
RESULTS OF OPERATIONS
Net income for the three months ended December 31, 1998 increased by $416,284,
to $1,105,798 from the net income of $189,514 recorded for the three months
ended December 31, 1997. Net income for the nine months ended December 31, 1998
of $89,563,312 represents an increase of $88,040,987 from the net income of
$1,522,325 for the nine months ended December 31, 1997. The factors which
contributed to these changes in net income are discussed below.
REVENUES
Consolidated
Consolidated revenues increased by $2,482,221 to $5,993,275 during the three
months ended December 31, 1998, as compared to $3,511,054 during the three
months ended December 31, 1997. Consolidated revenues for the nine months ended
December 31, 1998 increased by $137,977,893 to $149,885,518, as compared to
$11,907,625 during the nine months ended December 31, 1997.
Project Segment
Development and Management Fees. There were no revenues attributable to
development and management fees for the Company's independent power projects
("Project Segment") during the three months ended December 31, 1998 compared to
$162,133 in revenues during the three months ended December 31, 1997.
The revenues attributable to the Project Segment during the nine months ended
December 31, 1998 increased by $973,195 to $2,043,334, as compared to $1,070,139
for the nine months ended December 31, 1997. The increase during the period is
due primarily to a development fee of $1.8 million received from the Beaver
Falls project. The Company received development fees of $600,000 from the Beaver
Falls project during the nine months ended December 31, 1997. The Company also
earned $243,334 in management fees during the nine months ended December 31,
1998 in connection with its projects compared to $470,139 during the nine months
ended December 31, 1997. As a result of the MRA consummation and the resulting
termination of the PPAs, the Company will no longer receive management fee or
development fee income from the project partnerships that owned the five power
plants.
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<PAGE>
Income from Partnerships. During the three months ended December 31, 1998, the
Company recognized $2,233,382 of income from partnerships, a decrease of
$185,326 compared to $2,418,708 recognized for the three months ended December
31, 1997. During the nine months ended December 31, 1998, the Company recognized
$138,938,314 of income from partnerships, an increase of $131,530,004 from the
$7,408,310 recognized for the nine months ended December 31, 1997. The decrease
during the current three month period represents the winding down of the
partnership's operations as a result of the consummation of the MRA. The income
recognized during the three months ended December 31, 1998 reflects adjustments
made to value the power plants in accordance with the proceeds received upon
sale. The increase in the nine month period was predominantly due to the
consummation of the MRA, in which five project partnerships participated, and,
to a minimal extent, the operations of the partnerships.
The partnerships will generate no significant future income as a result of the
consummation of the MRA and the resulting termination of the PPAs.
Interest and Other Investment Income. Interest and other investment income
during the three months ended December 31, 1998 increased by $2,348,324 to
$2,388,024 compared to $39,700 for the three months ended December 31, 1997.
Interest and other investment income during the nine months ended December 31,
1998 increased by $5,078,342 to $5,212,956 compared to $134,614 for the nine
months ended December 31, 1997. The increase in both current periods is due
primarily to realized and unrealized gains on the shares of Niagara Mohawk
Common Stock and to significantly higher invested principal balances.
Product Segment
Product Sales. Revenues for the Company's energy technology products (the
"Product Segment") sales activities during the three month period ended December
31, 1998 increased by $399,612 to $1,187,805, from $788,193 for the three months
ended December 31, 1997. The increase for the period is due to an increase of
$546,380 in sales of photovoltaic products. That increase was partially
offset by a decrease of $146,768 in sales of solar thermal and heat transfer
products.
During the nine-month period ended December 31, 1998, revenues increased by
$216,636 to $3,273,495, as compared to $3,056,859 for the nine months ended
December 31, 1997. The increase for the period is due primarily to an increase
of $1,128,539 in sales of photovoltaic products as a result of increased sales
volume, which was partially offset by the decrease of $911,903 in sales of solar
thermal and heat transfer products, a result of the Company's decision to
discontinue those product lines.
Other Revenues. Other revenues derived from the Project and Product Segments
increased by $81,744 and $179,716, respectively, for the three and nine months
ended December 31, 1998 from the corresponding periods in the prior year. 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.
Contract revenue may vary from quarter to quarter based upon the degree of
completion of the various tasks outlined in the applicable agreements.
COSTS AND EXPENSES
Cost of Product Segment Sales
Cost of product sales for the three months ended December 31, 1998 and 1997 was
$1,155,438 and $776,517, respectively, or 97% and 99% of revenues attributable
to product sales. During the nine months ended December 31, 1998 and 1997, cost
of product sales was $3,121,707 and $2,850,416, respectively, or 95% and 93% of
revenues attributable to product sales. The decrease in the quarter ended
December 31, 1998 is due primarily to efficiencies achieved in the photovoltaic
product manufacturing process. For the nine months ended December 31, 1998, the
increase in cost of sales percentage is due primarily to the discontinuance of
the solar thermal and heat transfer product lines which had lower costs of sales
historically. This was partially offset by the effect of the manufacturing
efficiencies referenced above.
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Costs of Project Segment Development and Management Fees
There are no current specific costs and expenses identified with development and
management fee revenue. Costs and expenses associated with this segment are the
selling, general, and administrative expenses of the Company.
Selling, General and Administrative Expenses
Consolidated. Selling, general, and administrative expenses ("SG&A") increased
by $583,723, or 24%, to $2,989,889 for the three months ended December 31, 1998,
as compared to $2,406,166 for the three months ended December 31, 1997. During
the nine months ended December 31, 1998, SG&A increased by $2,329,283, or 36%,
to $8,820,244, from $6,490,961 for the nine months ended December 31, 1997. As
discussed below, small decreases in the Product Segment partially offset
increases in the Project Segment.
Project Segment. For the Project Segment, SG&A for the three months ended
December 31, 1998 and December 31, 1997 was $2,334,015 and $1,644,228,
respectively, representing 78% and 68% of the total SG&A. SG&A for the nine
months ended December 31, 1998 and December 31, 1997 was $6,926,990 and
$4,331,699, respectively, representing 79% and 67% of the total SG&A. The
increase of $689,787 during the three-month period is due primarily to increased
compensation expense of $335,425 and increased legal and consulting expenses of
$534,713 which were primarily related to the Merger. These increases were
partially offset by a decrease of $147,152 in Gross Receipts Tax. The increase
of $2,595,291 in the nine-month period is primarily due to the write-off of
project costs previously deferred of $1,402,085 due to the uncertain political
and economic conditions in the countries where the projects are located
(principally India and Brazil), and the current trend in accounting principles
regarding non-deferral of development expenses, increased compensation expense
of $1,567,535, primarily the result of incentive compensation paid to employees
in connection with the consummation of the MRA, and increased legal and
consulting expenses of $613,266, which were primarily related to the Merger.
These increases were partially offset by certain cost reimbursements of $613,113
received during the second quarter of Fiscal 1999 in connection with the MRA
consummation and by a decrease of $301,922 in Gross Receipts Tax.
Product Segment. SG&A expenses for the Company's Product Segment for the three
months ended December 31, 1998 and 1997 were $655,874 and $761,938,
respectively, representing 22% and 32% of the total SG&A. SG&A expenses for the
Company's Product Segment for the nine-month periods ended December 31, 1998 and
1997 were $1,893,254 and $2,159,262, respectively, representing 21% and 33% of
the total SG&A. These decreases of $106,064 and $266,008 for the respective
three and nine months ended December 31, 1998 are due primarily to the
discontinuance of the Company's heat transfer product lines and to the
reclassification of certain labor charges to Cost of Product Sales.
Interest Expense
Interest expense for the three months ended December 31, 1998 decreased by
$194,381 to $13,238 from $207,619 for the three months ended December 31, 1997.
Interest expense for the nine months ended December 31, 1998 decreased by
$270,798 to $133,336 from $404,134 for the nine months ended December 31, 1997.
The decrease in the both the three- and nine-month periods is due primarily to
the payment on July 10, 1998 of the $3 million Working Capital Loan from Stewart
and Stevenson, Inc. and to a decrease in interest, and with respect to certain
litigation.
Provision for Income Taxes
The provision for income taxes increased during the three months ended December
31, 1998 by $797,690 to $728,888 compared to $(68,802) for the same period last
year. During the nine-month period ended December 31, 1998, the provision for
income taxes increased by $47,606,685 to $48,238,087 compared to $631,402 for
the same period last year. The increase in the current three-month period is due
to the increase in Income Before Income Taxes which is due primarily to the
increase in Interest and Other Investment Income. The increase in the current
nine-month period is due to the increase in Income Before Income Taxes which
resulted primarily from the increase in income from partnerships. 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.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $83,511,570 from $2,779,482 at
March 31, 1998, to $86,291,052 at December 31, 1998 primarily as a result of the
consummation of the MRA.
During the nine months ended December 31, 1998, cash of $113,699,357 was
provided from operations. The net income of $89,563,312, when adjusted for
non-cash revenue/expense items of $142,140,280, including income from
partnerships of $138,938,314, resulted in a cash decrease of $52,576,968. Major
factors offsetting this cash decrease included cash distributions from the
partnerships of $134,460,210, of Niagara Mohawk Common Stock, the receipt of a
development fee receivable at March 31, 1998 of $900,000, and net changes in
assets and liabilities of $30,916,115.
During the current nine-month period, the Company's financing activities
resulted in a decrease in cash of $3,744,187, primarily due to the repayment of
borrowings.
Investing activities during the current nine-month period resulted in a decrease
in cash of $328,211 due to the acquisition of property, plant, and equipment.
As previously discussed, the consummation of the MRA and related transactions
and partnership operating results through December 31, 1998, resulted in the
receipt of approximately $70 million and the shares of Niagara Mohawk Common
Stock valued at approximately $69 million as of June 30, 1998. As previously
discussed, the Company has, through February 8, 1999, sold 3,391,500 Niagara
Mohawk Common Stock resulting in cash proceeds of approximately $52.7 million
for a gain of approximately $2.2 million. In accordance with its established
investment objectives and guidelines, the Company has invested surplus cash in
money market funds and commercial paper. The Company's five PPAs with Niagara
Mohawk were terminated as a result of the consummation of the MRA and,
consequently, there will be no significant future periodic distributions to the
Company from the operations of the projects. Pending the consummation of the
Merger, the Company expects that capital requirements for its operations and for
repayment of long-term debt will be met by its current cash and short-term
investment position.
Year 2000
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.
The Company relies on computer hardware, software, and related technology
primarily in its internal operations, such as billing and accounting. During
Fiscal 1998, the Company 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 the Company'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 is dividing 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 ("Phase Three").
With respect to the IT Systems, the Company has completed its evaluation of its
hardware, software and other IT Systems and decided to migrate from a 486 PC
environment to an Intel Pentium environment. Thus the efforts are now in Phase
Three. To date all workstations and financial software have been replaced.
Microsoft Office Suite software and back-up software has been upgraded, virus
protection software is now Year 2000 compliant, and Year 2000 compliant servers
have been installed. To complete Phase Three, the Company will upgrade
accounting software, e-mail exchange servers, internet proxy server, and all
other servers to NT 4.0, upgrade all workstations to Windows 98, send second
notices to IT Systems vendors that have not responded to the Company's request
to receive written certification and begin to seek replacement vendors, if
necessary. The Company expects to complete Phase Three by July 1999. With
respect to the Non-IT Systems, the Partnerships are responsible for the
day-to-day management of the Power Plants, so the Year 2000 Management Committee
restricted its efforts to the photovoltaic business, other operations unrelated
to the Power Plants, and administration. The Company 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 contacted the utilities and other suppliers. Phase One has been
completed and the Year 2000 Management Committee is studying the results in its
efforts to determine what, if anything, will be required to prepare the Non-IT
Systems for the Year 2000 and to assure itself that utility services will not be
interrupted. The Year 2000 Management Committee expects to complete Phase Two by
April 1999 and Phase Three by July 1999.
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<PAGE>
The Company is also communicating with its vendors, suppliers, and customers to
both monitor and encourage their respective remedial efforts regarding Year 2000
issues. The Company is in the process of contacting by letter or phone all of
its significant vendors and suppliers and its largest customers to determine the
extent to which the Company's systems might be vulnerable as a result of third
parties' failure to resolve their own Year 2000 issues. The Company is concerned
about receiving all necessary utility services; in addition, the Company's
photovoltaic business is dependent on components provided by photovoltaic module
suppliers. Since failure by vendors and suppliers to successfully address their
Year 2000 issues could result in delays in their providing various products and
services to the Company, the Company will seek replacement vendors as is
necessary to assure availability of products and services. Failure by customers
could disrupt their ability to maximize their use of the Company's products and
services and lead to a reduction in revenues; therefore, the Company will send a
newsletter to its product customers to help develop each customer's awareness of
Year 2000 issues and their implications.
So long as the Company's efforts to become Year 2000 compliant continue on
schedule, the Year 2000 Management Committee believes that its internal
operations will not be affected by Year 2000 problems. The Company 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, the Company'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. The Company expects to
complete its upgrade and replacement purchases by the first half of calendar
1999. Testing is underway and will continue through January 2000.
There can be no assurance that year 2000 problems of third parties upon which
the Company's systems and operations rely will not have a material adverse
effect on the Company's operating results or financial condition. However, the
Company does not anticipate any adverse impact on its business due to a lack of
availability of supplies or difficulties of customers. Therefore, short of any
third party disaster that the Company is unable to control and for which the
Company cannot develop contingency plans, such as the failure of a utility
providing power or telecommunications, the Company does not believe its business
will be detrimentally impacted by potential Year 2000 problems.
Except for capital expenditures associated with computer hardware and software
upgrades which are planned for Fiscal 1999 and which may be partially Year
2000-related, the Company does not anticipate that the incremental expenses
related to the Year 2000 issue for Fiscal 1999 will be material. Such
incremental expenses incurred during Fiscal 1998 were not significant.
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS
For a more extensive discussion of various legal proceedings in which the
Company is involved, including the proceedings described below, see "Item 3.
Legal Proceedings" of the Company's Annual Report on Form 10-KSB for the year
ended March 31, 1998.
***
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In January 1999, Alan Fenster ("Fenster") commenced an action in the New York
Supreme Court, New York County, against the Company, Merger Sub, Acquisition,
Josephthal & Co., Inc., the financial advisor to the Company with respect to the
Merger, and each of the members of the Board of Directors of the Company (the
"Board"). In the complaint Fenster indicates that he is seeking class
certification. The complaint alleges that the Merger Consideration is inadequate
and less than the Company's intrinsic value, that in adopting the Plan of Merger
the Board has been unduly influenced by Michael F. Zinn (the Chairman of the
Board, Chief Executive Officer and President of the Company) and the Board has
breached its fiduciary duty to its shareholders; the complaint also alleges that
Mr. Zinn and the other members of the Board will receive an unlawful additional
consideration that the remaining shareholders will not receive: the escrow fund
of $6,000,000 that is to be established pursuant to the Plan of Merger, that,
according to the complaint, has been established primarily to benefit them, the
acceleration of certain of their options and warrants, and bonuses for certain
members of senior management. Fenster is seeking, among other things, to enjoin
the Merger, as well as unspecified compensatory damages and an order that the
defendants shall take appropriate measures to maximize shareholder value. The
Company has not yet answered the complaint.
In December 1998, Energy Investment Research, Inc. ("EIR") commenced an action
in the New York Supreme Court, Westchester County, against the Company. The
complaint alleges among other things, that the Company is obligated to pay EIR
1.5% of all net cash and/or securities received by the Company from its general
partnership interests in the Carthage and South Glen Falls Partnerships (the
"Projects"). EIR seeks, among other things, declaratory judgment that it is
entitled to 1.5% of the distributions from the MRA relating to the Projects, and
has asked for payments in excess of $750,000. The Company has answered this
complaint and denied all of the material allegations. In addition, the Company
asserted various affirmative defenses, including unclean hands and asserted a
counterclaim against EIR for breach of a confidentiality agreement. In that
counterclaim, the Company seeks, among other things, a declaratory judgement
that EIR's breach excuses performance by the Company of all obligations, if any,
to EIR.
In August 1997, John Bansbach commenced a shareholder derivative action in the
New York Supreme Court, Ulster County, entitled John Bansbach v. Michael F.
Zinn, Michael J. Daley, Gerald A. Habib, Harold Harris, Richard E. Rosen, and
Besicorp Group Inc. (the "Bansbach Litigation"). The lawsuit sought to hold
certain of Besicorp's current and former officers liable for, among other
things, certain expenses incurred in connection with the other legal proceedings
involving the Company and certain of its directors and officers. In April 1998,
the New York Supreme Court dismissed the action, stating that the plaintiff had
failed to make the requisite pre-suit demand upon the Board and had failed to
demonstrate that such a demand would be futile. The plaintiff appealed this
decision. On February 4, 1999, the Appellate Division reversed the lower court's
dismissal and reinstated the action finding that allegations set forth in the
complaint were sufficient to permit the complaint to proceed.
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<PAGE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 2.3 Amendment No.2 dated February 16, 1999 to the
Agreement and Plan of Merger by and among the Company,
BGI Acquisition LLC, and BGI Acquisition Corp.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
Besicorp Group Inc. did not file any reports on Form 8-K for the
quarter ended December 31, 1998.
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 Group Inc., Registrant
Date: February 17, 1999 By: /s/ Michael F. Zinn
-------------------
Michael F. Zinn
President
(principal executive officer)
Date: February 17, 1999 By: /s/ Michael J. Daley
--------------------
Michael J. Daley
Executive Vice President and Chief
Financial Officer
(principal financial officer)
Date: February 17, 1999 By: /s/ James E. Curtin
-------------------
James E. Curtin
Vice President and Controller
(principal accounting officer)
This AMENDMENT NO. 2 TO THE AGREEMENT AND PLAN OF MERGER (this
"Amendment") is entered into this 16th day of February, 1999, by and among BGI
Acquisition LLC, a Wyoming limited liability company ("Parent"), BGI Acquisition
Corp., a New York corporation ("Purchaser"), and Besicorp Group Inc., a New York
corporation formed under the name Bio-Energy Systems Inc. (the "Company").
RECITALS:
A. Parent, Purchaser and the Company are parties to an Agreement and
Plan of Merger (the "Initial Plan") dated November 23, 1998, as amended by that
certain Amendment No. 1 to the Initial Plan dated January 28, 1999 (the Initial
Plan, as amended, is the "Amended Plan").
B. Capitalized terms used in this Amendment have the meanings ascribed
to them by the Amended Plan.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Base Amount. Clause (v) of Section 2.2.1(b)(A) of the Amended
Plan is hereby amended to read in its entirety as follows:
"to the extent not already contributed pursuant to the Escrow Agreement
, $6,500,000."
2. Escrow Agreement. Section 2.6 of the Amended Plan is hereby amended
to read in its entirety as follows:
"At Closing, the Company will cause $6,500,000 in cash to be delivered
to the Escrow Agent under the Escrow Agreement."
3. Conditions to Parent's and Purchaser's Obligations. Section 6.3.8 of
the Amended Plan is hereby amended to read in its entirety as follows:
"The Indemnification Agreement and the Escrow Agreement shall have been
executed and delivered by BL and shall each be valid, legal, binding
and enforceable obligations of BL, and the Company shall have deposited
$6,500,000 in cash with the Escrow Agent under the Escrow Agreement."
<PAGE>
4. Exhibit B to the Amended Plan. The first sentence of Section 2(b) of
Exhibit B to the Amended Plan is hereby amended to read in its entirety as
follows:
"Simultaneously with the execution of this Agreement, Besicorp shall
deposit with the Escrow Agent the sum of six million five hundred
thousand dollars ($6,500,000) ("the Escrow Fund")."
5. Entire Agreement. This Amendment, the Amended Plan, the
Confidentiality Agreement referred to in Section 5.2 to the Amended Plan and the
instruments to be delivered by the parties pursuant to the provisions of the
Amended Plan constitute the entire Amended Plan between the parties and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns.
6. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
7. Applicable Law. This Amendment shall be governed and controlled as
to validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York applicable to contracts
made in that State.
8. Assignability. This Amendment shall not be assignable by either
party without the prior written consent of the other party.
IN WITNESS WHEREOF the parties have executed this Amendment on the date
first above written.
PARENT:
BGI ACQUISITION LLC
By: /s/ James Haber
_____________________________
James Haber, President of
the Sole Manager of BGI
Acquisition LLC
PURCHASER:
BGI ACQUISITION CORP.
By: /s/ James Haber
_____________________________
James Haber
Its: President
THE COMPANY
BESICORP GROUP INC.
By: /s/ Michael J. Daley
____________________
Michael J. Daley
Its: Executive Vice
President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 110,439,930
<SECURITIES> 23,041,017
<RECEIVABLES> 672,330
<ALLOWANCES> 68,929
<INVENTORY> 1,166,673
<CURRENT-ASSETS> 135,824,747
<PP&E> 3,945,139
<DEPRECIATION> 1,980,261
<TOTAL-ASSETS> 143,048,826
<CURRENT-LIABILITIES> 49,533,695
<BONDS> 123,608
0
0
<COMMON> 323,495
<OTHER-SE> 92,900,094
<TOTAL-LIABILITY-AND-EQUITY> 143,048,826
<SALES> 3,273,495
<TOTAL-REVENUES> 149,885,518
<CGS> 3,121,707
<TOTAL-COSTS> 3,121,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133,336
<INCOME-PRETAX> 137,801,399
<INCOME-TAX> 48,238,087
<INCOME-CONTINUING> 89,563,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,563,312
<EPS-PRIMARY> 30.16
<EPS-DILUTED> 29.52
</TABLE>
