U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-KSB/A/2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998 Commission file number 0-9964
BESICORP GROUP INC.
(Name of small business issuer in its charter)
New York 14-1588329
(State or other jurisdiction of (Internal Revenue Service Employer
incorporation or organization) Identification No.)
1151 Flatbush Road, Kingston, N.Y. 12401
(Address of principal executive offices) (Zip Code)
(914) 336-7700
(Issuer's Telephone Number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Common Stock, $.10 par value
Name of each exchange on which registered: AMEX Emerging Company Marketplace
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ No___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. __X__
The issuer's revenues for its most recent fiscal year: $17,014,256
The aggregate market value of Common Stock, $.10 par value, held by
nonaffiliates based upon the closing AMEX sale price on June 19, 1998 was
approximately $48,594,024.75
The number of outstanding shares of Common Stock, $.10 par value, on
June 19, 1998 was 2,967,174 Common Shares.
Transactional Small Business Disclosure Format: Yes____ No __X_
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
The Company's net income for Fiscal 1998 of $195,386 represents a decrease of
$978,336 from the net income of $1,173,722 for Fiscal 1997. The decrease in
Fiscal 1998 is due primarily to the reserve of $2.5 Million for the possible
uncollectibiity of the combined loans to one of the project partnerships (see
Recent Developments and Subsequent Events and Note 4a. Notes Receivable, of the
Notes to Consolidated Financial Statements), an increase of $1,339,794 in
selling, general and administrative expenses ("SG&A") and a decrease of $236,693
in margin on product sales. These were partially offset by increases of
$2,151,456 and $876,926 in income from partnerships and development and
management fees, respectively, and a decrease in the provision for income taxes
of $185,000.
The Company's net income for Fiscal 1997 of $1,173,722 represents an increase of
$3,652,041 from the net loss of $2,478,319 for Fiscal 1996. The increase in
Fiscal 1997 is due primarily to an increase in Income from Partnerships of
$4,462,335 and an increase in development and management fees of $1,298,788,
which were partially offset by an increase in SG&A of $1,771,799, a decrease of
$279,828 in gross margins on the Company's product sales and an increase in the
provision for income taxes of $308,400.
The Project Segment's net income for Fiscal 1998 decreased by $42,092 to
$2,846,475 from the net income of $2,888,567 recorded for Fiscal 1997. The
decrease is due primarily to the reserve for the possible uncollectibility of
the $2.5 Million combined loan discussed above and an increase in SG&A of
$740,006. These were partially offset by increases in income from partnerships
and development and management fees of $2,151,456 and $876,926, respectively.
The Project Segment's net income for Fiscal 1997 increased by $3,791,289 to
$2,888,567 from the net loss of $902,722 recorded for Fiscal 1996. The increase
is due primarily to the increases in income from partnerships and development
and management fees of $4,462,335 and $1,298,788, respectively, partially offset
by an increase in SG&A allocated to this segment of $1,587,673.
The Product Segment's net loss of $2,651,089 for Fiscal 1998 represents a
decrease in net income of $936,244, as compared to Fiscal 1997. The decrease is
due primarily to a decrease in margins on product sales of $236,693 and
increased SG&A of $599,788. Income of $150,000 earned from the settlement of a
complaint against a competitor also contributed to more favorable results in
Fiscal 1997. The gross margins for this segment for Fiscal 1998, 1997, and 1996
were (2%), 4%, and 12%.
The Product Segment's net loss for Fiscal 1997 of $1,714,845 reflects a decrease
in net income of $139,248 as compared to Fiscal 1996. This decrease was due
primarily to increases in cost of product sales.
Recent Developments and Subsequent Events
On October 22, 1997, the Company and its Chairman, Chief Executive Officer and
President, Michael F. Zinn, were sentenced in the United States District Court,
Southern District, White Plains, New York, in connection with the
previously-disclosed guilty pleas entered for offenses relating to illegal
contributions to the 1992 election campaign of Congressman Maurice Hinchey. The
Company was fined $36,400, and Mr. Zinn was fined $36,673 and sentenced to a
six-month term of incarceration (commencing November 12, 1997), and a two-year
term of supervised release thereafter. Effective November 11, 1997, Mr. Zinn
tendered his resignation as Chairman of the Board, Director, Chief Executive
Officer and President of the Company.
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On May 8, 1998, Mr. Zinn was released from confinement, and on May 12, 1998,
accepted an invitation from the Company's Board of Directors to resume his
position as Chairman of the Board, President and Chief Executive Officer. In a
related action effective May 12, 1998, Michael J. Daley, who had been the
Chairman of the Board, President, Chief Executive Officer and Chief Financial
Officer, was appointed to serve as Executive Vice President and to continue to
serve as Chief Financial Officer and as a Director.
On August 1, 1996 Niagara Mohawk Power Corporation ("NIMO") offered to terminate
44 of the power purchase agreements ("PPA's") with 19 independent power
producers ("IPP's"), including the five contracts held by the Company's
partnerships On March 10, 1997 an agreement in principle was announced whereby
NIMO would restructure or terminate the 44 PPA's. On July 10, 1997 it was
announced that a master restructuring agreement ("MRA") was entered into between
NIMO and 16 IPP's holding 29 PPA's, including the Company's five PPA's,
formalizing the agreement in principle with respect to those parties. The IPP's
will receive combinations of cash and common stock. Certain IPP's also will
enter into restructured contracts. On September 25, 1997 NIMO announced that it
had reached an agreement with the staff of the New York Department of Public
Service on a rate and restructuring plan (including recommended approval of the
MRA). After a series of hearings and testimony by interested parties, on
December 29, 1997 the assigned administrative law judge recommended approval of
the rate and restructuring plan with some modifications. On February 24, 1998
the Public Service Commission of the State of New York ("PSC") approved the MRA,
and, on March 20, 1998, it issued an Opinion and Order Adopting Terms of
Settlement Subject to Modifications and Conditions which NIMO accepted on April
2, 1998. On May 8, 1998 NIMO announced that third party conditions had been
satisfied or waived by 14 IPP's holding 27 PPA's, including the five PPA's held
by the Company, and, on May 14, 1998 NIMO's Board of Directors approved the MRA.
The closing date of the MRA is projected to be June 30, 1998 but remains subject
to approval by NIMO's common stockholders of both the increase in the number of
authorized shares of common stock and the issuance of common stock to the IPP's
pursuant to the MRA.
On April 13, 1998 Norcen Energy Resources Limited ("Norcen"), a Canadian
corporation which supplies natural gas to the Natural Dam, Syracuse and Beaver
Falls cogeneration facilities in which the Company holds partnership interests
ranging from 35.715% to 50.2%, initiated a civil complaint against those
partnerships and NIMO alleging breach of contract and tortious interference with
contracts related to the Partnerships' gas purchase agreements with regard to
the Partnerships' participation in the MRA with NIMO. At the time the complaint
was received, the Partnerships were negotiating with Norcen regarding payment in
consideration of termination of the gas purchase agreements. The complaint
requested not less than $200 million from the defendants and $600 million from
NIMO as punitive damages. The Company does not believe that any breach of
contract or tortious interference with contracts occurred. On May 5, 1998 the
Partnerships entered into Termination and Settlement Agreements with Union
Pacific Resources, Inc., as successor by amalgamation to Norcen, which provided
for the complaint to be withdrawn subject to conditions including the three
Partnerships consummating the MRA and making the agreed-upon payments for
terminating the gas purchase agreements. The Company's share of the total
termination costs was approximately $57 million.
In January 1998 Fort James Corporation (formerly James River II) announced plans
to close the host paper mill for the Carthage Cogeneration Project Facility
located in Carthage, NY, in April 1998 and discontinue purchasing steam under
the Energy Services Agreement ("ESA") between the project partnership and Fort
James. The Company, through two subsidiaries, holds an interest in the project
partnership, Kamine/Besicorp Carthage L.P. ("KBC"). Fort James has certain
obligations under the ESA to ensure that the Facility is able to continue as a
Qualifying Facility. Alternatives are currently being considered regarding this
situation.
The inability of the Facility to maintain QF status could have a material
adverse effect on the operations of the Facility. The Company is uncertain as to
what effect this development may have on its operations. No adjustments have
been made to the financial statements due to the uncertainty of this matter.
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On February 6, 1998 Rochester Gas & Electric Corp. ("RG&E") announced an
agreement in principle to settle legal proceedings relating to the Allegany
Cogeneration Facility in Hume, New York in which the Company, through its
subsidiary, Beta Allegany Inc. ("Beta Allegany"), holds an interest in the
project partnership, Kamine/Besicorp Allegany L.P. ("KBA"). RG&E stated that the
plan was contingent upon reaching final agreements between RG&E and the project
lender, as well as other interested parties. On June 8, 1998 RG&E announced that
the proposed settlement had been filed with the PSC, and set forth items of the
proposed settlement. The Company does not believe the proceeds of the proposed
settlement are likely to exceed the claims of the secured and unsecured
creditors of KBA. As discussed above, the Company funded combined loans of $2.5
million to the project and Allegany Greenhouse, Inc., ("AGI") an unrelated
company. The Company's ability to recover this investment will likely be
jeopardized by this settlement, and, as a result, the Company has established
reserves to cover losses that may result from the possible uncollectibility of
the loans related to this funding. The proposed settlement must be approved by
both the PSC and the Bankruptcy Court, as the project partnership has been
operating under Chapter 11 of the United States Bankruptcy Code since November
13, 1995. Besicorp is consulting with legal counsel concerning the proposed
settlement agreement and related bankruptcy court filings. (See Item 3. Legal
Proceedings and Note 4. Notes Receivable for further discussion of this
project).
On February 19, 1998, after resolving to increase the Board of Directors from
three to five members, the Company announced that Melanie Norden was appointed
as the Company's fourth director. Ms. Norden is the founder of BENCHMARKS, a
full service consulting firm, providing consultation, management and planning
services in fundraising, organizational development, conference and event
planning and execution, volunteer, board and staff training, and public
relations and marketing. BENCHMARKS, which provides services to both for-profit
and not-for-profit clients, has a diverse client base which has included, among
others, the International Planned Parenthood Federation, the National Coalition
for Women's Business Enterprise, the University of the West Indies, and Mt.
Sinai Medical Center.
On April 10, 1998 the New York State Supreme Court dismissed a shareholder
derivative suit brought against certain current and former executive officers
and directors of the Company. The Court ruled that the plaintiff in the lawsuit,
John Bansbach, was precluded from initiating suit because he failed to make a
demand upon the Company's Board of Directors to initiate legal proceedings
before he commenced suit. The suit sought to impose damages upon certain current
and former Besicorp officers and directors arising out of the Company's defense
of itself and Michael F. Zinn, against charges of campaign finance and tax law
violations relating to the 1992 campaign of Congressman Maurice Hinchey. The
plaintiff has filed an appeal (see Item 3. Legal Proceedings).
As previously disclosed, the Company and Kamine Development Corporation ("KDC")
engaged PaineWebber Incorporated ("PW") to solicit participants for a potential
business combination involving its independent projects which supply electricity
to NIMO. PW notified KDC and the Company on December 12, 1997 of its intent to
terminate the engagement effective November 18, 1997. Since that time PW has
provided no further services. The Company has since engaged Josephthal &
Company, Inc. to render certain investment banking services to it in connection
with a potential business combination.
REVENUES
Consolidated
Consolidated revenues increased by $2,446,705 from $14,567,551 to $17,014,256
during Fiscal 1998 as compared to Fiscal 1997 and consolidated revenues
increased by $6,488,032 from $8,079,519 to $14,567,551 during Fiscal 1997 as
compared to Fiscal 1996.
Project Segment
Revenues for the Company's Project Segment development activities for the Fiscal
Years 1998, 1997 and 1996 were $12,797,085, $9,638,394, and $4,046,089,
respectively, representing 75%, 66% and 50% of consolidated revenues.
During Fiscal 1998 the Company earned development fees of $1,250,000 and
$600,000 from the Syracuse project and Beaver Falls project, respectively, in
connection with conversions of the construction financing to permanent term
financing. The Company also earned $654,601 in management fees during Fiscal
1998 in connection with its projects. There were no reimbursements in excess of
development costs received by the Company during Fiscal 1998.
During Fiscal 1997 the Company earned development fees of $1,250,000 from the
Syracuse project in connection with conversion of the construction financing to
term financing but received no reimbursements in excess of deferred costs. The
Company also earned $377,675 in management fees during Fiscal 1997 in connection
with its projects.
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During Fiscal 1996 the Company earned $328,887 in management fees in connection
with its projects. The Company received no development fees or reimbursements in
excess of deferred costs during Fiscal 1996.
The capital costs for any particular project vary depending on its size and the
complexity of the system as well as specific contractual arrangements concerning
the development of the project. It has been the Company's experience, based upon
the cogeneration projects it has developed to date, that the capital costs of
any particular project do not necessarily correlate to the Company's direct
out-of-pocket development costs prior to obtaining construction financing nor to
the anticipated level of future revenues or cash flows achieved from such
projects.
Due to the nature of the Company's activities in the project development area,
results of operations from year to year may fluctuate significantly. As noted
above, the Company earned significant development fees during Fiscal 1998 and
1997, but none during Fiscal 1996. Development fees earned in connection with
project financings are subject to negotiations with lenders and co-participants.
Therefore, the Company does not recognize development fee revenue until deemed
earned and payable under the applicable contract due to the significant
contingencies associated with obtaining development fees from lenders to each
partnership in which the Company is a partner. Prior to Fiscal 1996 the Company
had received significant development fees in Fiscal 1988, 1990, 1993, 1994 and
1995 only. Due to the contingent nature of the payment of these fees, the
Company can not accurately project on a year-to-year basis when such events will
occur.
During Fiscal 1998 the Company recorded income from partnership of $10,058,849,
an increase of $2,151,456 over amounts recorded for Fiscal 1997. The increase
for Fiscal 1998 versus Fiscal 1997 is due primarily to income of $3,408,978
recorded on the Beaver Falls project, an increase of $2,402,969 as compared to
the income of $1,106,009 recorded on that project during Fiscal 1997. During
Fiscal 1997 the Company recorded income from partnerships of $7,907,393, an
increase of $4,462,335 over amounts recorded for Fiscal 1996.
Consummation of the MRA may result in the receipt of substantial proceeds by the
project partnerships and, as a result, significant gains for the Company. Such
consummation would also result in the termination of the PPA's and, as a result,
termination of future periodic ownership distributions and future earnings to
the Company from the operations of the projects. Should the MRA not be
consummated, the PPA's will remain in place, but certain events involving NIMO's
financial viability could occur which could impact its ability to continue
making payments pursuant to the PPA's. Any such interruption or termination of
payments to the project partnerships could hinder the Company's ability to
continue operating as a going concern. However, the ultimate impact on the
Company cannot presently be determined.
Product Segment
Revenues for the Company's Product Segment sales activities for the Fiscal Years
1998, 1997 and 1996 were $3,838,351, $4,474,925 and $3,900,754, respectively,
representing 23%, 31% and 48% of the consolidated revenues.
Sales for Fiscal 1998 decreased by $636,574 compared to Fiscal 1997 due
primarily to lower sales of solar thermal products of $552,485 and heat transfer
products of $283,887. The reduction in sales of both product lines is primarily
due to competitive pricing activity and to the Company's decision, which
resulted in lower sales levels primarily during the later portion of the year,
to discontinue both product lines effective March 31, 1998. The Company had
discontinued the non-agricultural portion of its heat transfer product line
during the third quarter of Fiscal 1997, which also contributed to lower sales
of heat transfer products during Fiscal 1998. These decreases were partially
offset by increased sales of solar electric products of $199,798, which was
primarily due to increased sales in the product fabrication and distribution
business unit.
Sales for Fiscal 1997 increased by $574,171 compared to Fiscal 1996, due to
increased sales of solar electric products of $993,836, due primarily to the
expansion of the customer base. This increase was partially offset by lower
sales of solar thermal products of $172,093 and heat transfer products of
$247,572.
Included in Product Segment sales are international sales for Fiscal 1998, 1997
and 1996 of $299,293, $297,761 and $455,114, respectively. Generally,
international sales are made based upon payment in U.S. dollars via confirmed
irrevocable letters of credit or by wire transfers.
Other revenues attributable to the Product Segment were $378,820, $295,922 and
$127,224, representing 2%, 2% and 2% of consolidated revenues for Fiscal Years
1998, 1997 and 1996, respectively. The increase in this category for Fiscal 1998
versus Fiscal 1997, and for Fiscal 1997 versus Fiscal 1996 is due primarily to
revenue received from New York State Energy Research and Development Authority
("NYSERDA") in accordance with several cost-sharing agreements which became
effective in late Fiscal 1995.
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Interest and Other Investment Income
Interest and other investment income increased by $41,186 in Fiscal 1998 to
$175,766 compared to $134,580 for Fiscal 1997. The increase is due primarily to
higher invested principal balances.
Interest and other investment income decreased by $38,358 in Fiscal 1997 to
$134,580. Income from interest-bearing investments decreased during Fiscal 1997,
due primarily to lower average interest rates compared to Fiscal 1996. In
addition, a decrease in unrealized holding gain of $12,527 during Fiscal 1997
also contributed to the decrease.
Other Income
Other income for the Fiscal Years 1998, 1997 and 1996 was $0, $66,253 and
$49,451, respectively. The amount recorded in Fiscal 1997 reflects income of
$150,000 earned from the settlement of a complaint against a competitor. This
was partially offset by expenses incurred during that period in connection with
the expansion of the Company's marketing function.
COSTS AND EXPENSES
Cost of Product Sales
As a percentage of revenues attributable to product sales, cost of sales in
Fiscal 1998, 1997 and 1996 were 102%, 96% and 88%, respectively. The increase in
the cost of sales percentage is due primarily to lower sales volume of solar
thermal and heat transfer products as a result of the Company's decision to
discontinue those product lines as discussed above. Fixed overhead costs for
these product lines were consistent with the prior year, resulting in margin
erosion. Competitive activity in the solar thermal pool heating market also
contributed to reduced margins, and inventory liquidation sales of heat transfer
products at or below cost also resulted in reduced margins.
Costs of Development and Management Fees
Other than settlement of deferred costs in conjunction with project closings,
there are no specific costs and expenses identified with the development and
management fee revenue. Costs and expenses associated with the Project Segment
are the normal selling, general and administrative expenses of the Company.
Selling, General and Administrative Expenses
Consolidated
Consolidated SG&A increased by $1,339,794, or 16%, in Fiscal 1998 as compared
to Fiscal 1997 and increased by $1,771,799, or 27%, in Fiscal 1997 as compared
to Fiscal 1996.
Project Segment
SG&A for the Company's Project Segment for the Fiscal Years 1998, 1997 and 1996
were $6,630,256, $5,890,250 and $4,303,177, respectively, representing 69%, 72%
and 67% of the consolidated totals.
During Fiscal 1998 SG&A increased by $740,006 compared to Fiscal 1997. The
primary reasons for the increase are the increase in the write-off of project
costs previously deferred of $519,293, the judgment of $126,750 paid in
connection with the Tecogen litigation (see Item 3. Legal Proceedings), the
write-down of property by $141,468 to its estimated net realizable value in
connection with the discontinuance of the Company's solar thermal and heat
transfer technology product lines, and increased Board of Directors compensation
and related expenses of $241,529. The write-off of deferred project costs
occurred on projects whose completion was considered by management to be
unlikely and, accordingly, the Company does not intend to pursue such projects.
These increases were partially offset by a net decrease in professional fees of
$276,814, primarily the result of the reversal of a reserve of $200,000
previously established for legal fees and other expenses incurred in connection
with the Federal Criminal Proceeding and a reduction in legal expenses of
$186,000, representing the agreed reimbursement to the Company of legal fees
paid on behalf of the Company's Chairman, Chief Executive Officer and President,
Michael F. Zinn. Partially offsetting these decreases in legal fees was an
increase in consulting fees of $114,746, primarily the result of expenses
incurred in connection with the solicitation of participants for a possible
business combination (see Recent Developments and Subsequent Events).
During Fiscal 1997 SG&A increased by $1,587,073 compared to Fiscal 1996. Factors
contributing to the increase include legal fees and other expenses of $821,066
incurred in connection with the Federal Criminal Proceeding (see Item 3. Legal
Proceedings). Other legal fees increased by $82,142 during Fiscal 1997, due
primarily to the Lichtenberg shareholder derivative lawsuit (see Item 3. Legal
Proceedings). The Company also experienced an increase in other professional
fees of $132,574. Also contributing to the increased selling, general and
administrative expenses in Fiscal 1997 was an increase in consulting fees of
$237,019, including finders fees of $127,557 incurred in connection with the
Company's receipt of cash distributions from certain projects, the write-off of
project costs previously deferred of $264,815, and an increase of $43,356 in
gross receipts taxes. The write-off of deferred project costs occurred on
projects whose completion was considered by management to be unlikely and,
accordingly, the Company does not intend to pursue such projects.
The Company's policy concerning remuneration of its executive and development
staff is to pay base salaries plus discretionary bonuses upon the completion of
transactions that create revenue and/or equity interests that are expected to
benefit the Company.
Product Segment
SG&A for the Product Segment for Fiscal Years 1998, 1997 and 1996 were
$2,930,334, $2,330,546 and $2,145,820, respectively, representing 31%, 28% and
33% of the consolidated totals. The increase in Fiscal 1998 is due primarily to
increased compensation expense of $535,652 resulting from the addition of
several management positions, as well as increases in the sales and marketing
support staff of the Company's solar electric business. Increased solar electric
advertising and promotional expenses of $73,741 and increased research and
development spending of $50,365 during the year also contributed to higher SG&A
expenses. The increase in Fiscal 1997 is due primarily to an increase in
research and development expenses of $220,578.
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Interest Expense
Interest expense for Fiscal 1998 increased by $156,580 to $513,765 compared to
Fiscal 1997. The increase is due primarily to interest expense of $115,585
incurred in connection with the Tecogen judgment and to higher interest payments
associated with increased borrowing under the Stewart & Stevenson, Inc. ("S&S")
loan agreement.
For Fiscal 1997 interest expense decreased by $98,207 to $357,185 compared to
Fiscal 1996. The higher amount incurred in Fiscal 1996 was due primarily to the
interest expense of $70,000 on additional federal income taxes for Fiscal 1993
and 1994 (see Note 8. Income Taxes, of the Notes to Consolidated Financial
Statements). Also contributing to the decrease in Fiscal 1997 were lower average
interest rates incurred during the current year on both the S&S loan and on the
mortgages on the Company's corporate headquarters.
Other Expense
Other expense increased during Fiscal 1998 to $2,513,548 from $0 for both Fiscal
1997 and 1996, due primarily to the Company's decision to reserve for the
possible uncollectibility of the combined loan of $2,500,000 to KBA and AGI (see
"Recent Developments" and "Note 4a. Notes Receivable).
Provision for Income Taxes
The provision for income taxes for Fiscal 1998 of $331,000 represents a decrease
of $185,000 when compared to Fiscal 1997. The provision for income taxes for
Fiscal 1997 of $516,000 represents an increase of $308,400 when compared to
Fiscal 1996. The Company provides for federal and state income taxes based on
enacted statutory rates adjusted for projected benefits of tax operating loss
carryforwards and other credits (see Note 8. Income Taxes).
INFLATION
The Company's operations have not been, nor in the near term are expected to be,
materially affected by inflation. However, as the Company continues to develop
business opportunities internationally, it may become subject to risks of
inflation in the foreign countries in which it operates.
LIQUIDITY AND CAPITAL RESOURCES
During Fiscal 1998 the company's working capital increased by $201,633 from
$2,577,849 to $2,779,482. During Fiscal 1997 the Company's working capital
increased by $1,674,759 from $903,090 to $2,577,849.
Cash of $1,042,282 was provided by operating activities in Fiscal 1998. The net
income of $195,386, when adjusted for non-cash revenue/expense items of
$6,681,575, including income from partnerships of $10,058,849 and the reserve of
$2,500,000 for the possible uncollectibility of the combined loans to KBA and
AGI, resulted in a cash loss of $6,486,189. The major factor offsetting this
cash loss was distributions from partnerships of $7,533,437.
Cash of $150,992 was used by financing activities due to a net repayment of
borrowings of $139,016 and the purchase of the Company's common stock associated
with the repurchase of option shares.
The Company's investing activities used cash of $288,852 during Fiscal 1998
due to the acquisition of property, plant and equipment.
Financing for the construction of development projects is generally provided by
loans to the particular partnerships which are secured by the project assets
only. Except for financing provided to the Allegany project, the Company
generally does not incur significant capital costs associated with construction
of these projects. The Company provided financing to the Allegany project in
Fiscal 1993 and 1994 utilizing $2,500,000 of its $3,000,000 line of credit under
the S&S loan agreement. On February 20, 1997 the Company borrowed the remaining
$500,000 available under the agreement. As discussed above and in "Recent
Developments," due to the nature of the proposed settlement involving RG&E and
the Allegany project, the Company believes that its ability to recover all or
part of the financing provided to the Allegany project will be jeopardized and,
as a result, has reserved for the possible uncollectibility of the related
loans. (See Note 4a., Notes Receivable, and Note 7d. Long-Term Debt, of the
Notes to Consolidated Financial Statements).
The Company has no significant capital commitments for Fiscal 1999 other than as
disclosed above.
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The Company expects that capital requirements for its operations, for repayment
of long-term debt and for project development costs will be met by its current
cash and short-term investment position as well as by anticipated cash flows
from ownership distributions from operations of the projects and the anticipated
cash flows from projects currently under development, and by future borrowings
against project interests and other corporate financings, as available. As
previously discussed, consummation of the MRA may result in the receipt of
substantial proceeds by the project partnerships at the time of closing and
would also result in the termination of the PPA's and, as a result, termination
of future periodic ownership distributions to the Company from the operations of
the projects. Should the MRA not be consummated, the PPA's will remain in place,
but certain events involving NIMO's financial viability could occur which could
impact its ability to continue making payments pursuant to the PPA's. Any such
interruption or termination of payments to the project partnerships could hinder
the Company's ability to continue operating as a going concern. However, the
ultimate impact on the Company cannot presently be determined.
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. 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 and to direct the
implementation of appropriate solutions, including hardware and software
upgrades. The Company expects to complete such upgrade purchases during 1998
with testing to be done during 1999.
The Company is also communicating with its vendors, suppliers and customers to
both monitor and encourage their respective remedial efforts regarding the Year
2000 issue. Failure by vendors and suppliers to successfully address the issue
could result in delays in various products and services becoming available to
the Company. Failure by customers could disrupt their ability to maximize their
use of the Company's products and services. There can be no assurance that
failure of systems of third parties on which the Company's systems and
operations rely to be Year 2000 compliant will not have a material adverse
effect on the Company's business, operating results or financial condition.
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 significant. Such
incremental expenses incurred during Fiscal 1998 were not significant.
<PAGE>
SIGNATURES
Pursuant to the requirements of of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 to the
Annual Report on Form 10-KSB to be signed on its behalf by the undersigned
thereunto duly authorized.
BESICORP GROUP INC., Registrant
By: /s/ Michael F. Zinn
Michael F. Zinn
President
(principal executive officer)
Dated: February 1, 1999
Pursuant to the requirements of Securities Exchange Act of 1934, this Amendment
No. 2 has been signed below by the following persons on behalf of the Registrant
and in the capacities on the dates indicated.
SIGNATURES:
By: /s/ Michael J. Daley
Michael J. Daley
Chief Financial Officer
(principal financial officer)
Dated: February 1, 1999
By: /s/ James E. Curtin
James E. Curtin
Vice President, Controller
(principal accounting officer)
Dated: February 1, 1999
KPMG Peat Marwick LLP
New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Independent Auditors' Report
The Partners
Kamine/Besicorp Carthage L.P.
We have audited the acompanying balance sheets of Kamine/Besicorp Carthage L.P.
as of December 31, 1997 and 1996, and the related statements of operations,
partners' equity (deficiency), and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kamine/Besicorp Carthage L.P.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
February 24, 1998
KPMG Peat Marwick LLP
New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Independent Auditors' Report
The Partners
Kamine/Besicorp South Glens Falls L.P.
We have audited the acompanying balance sheets of Kamine/Besicorp South Glens
Falls L.P. as of December 31, 1997 and 1996, and the related statements of
operations, partners' equity (deficiency), and cash flows for each of the years
in the three-year period ended December 31, 1997. These financial statements are
the responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kamine/Besicorp South Glens
Falls L.P. as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1997 in conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
February 24, 1998
KPMG Peat Marwick LLP
New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Independent Auditors' Report
The Partners
Kamine/Besicorp GlenCarthage Partnership
We have audited the acompanying balance sheets of Kamine/Besicorp GlenCarthage
Partnership as of December 31, 1997 and 1996, and the related statements of
operations, partners' equity (deficiency), and cash flows for each of the years
in the three-year period ended December 31, 1997. These financial statements are
the responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kamine/Besicorp GlenCarthage
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1997 in conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
FEBRUARY 24, 1998
KPMG Peat Marwick LLP
New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Independent Auditors' Report
The Partners
Kamine/Besicorp Natural Dam L.P.
We have audited the acompanying balance sheets of Kamine/Besicorp Natural Dam
L.P. as of December 31, 1997 and 1996, and the related statements of operations,
partners' equity (deficiency), and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kamine/Besicorp Natural Dam
L.P. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997 in conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
February 24, 1998
KPMG Peat Marwick LLP
New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Independent Auditors' Report
The Partners
Kamine/Besicorp Syracuse L.P.
We have audited the acompanying balance sheets of Kamine/Besicorp Syracuse L.P.
as of December 31, 1997 and 1996, and the related statements of operations,
partners' equity (deficiency), and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kamine/Besicorp Syracuse L.P.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
February 24, 1998
KPMG Peat Marwick LLP
New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Independent Auditors' Report
The Partners
Kamine/Besicorp Beaver Falls L.P.
We have audited the acompanying balance sheets of Kamine/Besicorp Beaver Falls
L.P. as of December 31, 1997 and 1996, and the related statements of operations,
partners' equity (deficiency), and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kamine/Besicorp Beaver Falls
L.P. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997 in conformity with generally accepted accounting principles.
/s/KPMG PEAT MARWICK LLP
February 24, 1998
