SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
Amending Consolidated Statement of Operations, Consolidated
Statement of Cash Flow, Note 5 (Additional Financing and
Related Party Transactions) and Management's Discussion and Analysis
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter ended April 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES ACT OF
1934
Commission File Number:
0-10238
-------
U.S. ENERGY SYSTEMS, INC.
- - ------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 52-1216347
------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
515 N. Flagler Drive, Suite 202, West Palm Beach, FL 33401
- - ------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(561) 820-9779
- - ------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for a 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. [ X ].
Indicate by check mark whether issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
distribution of securities under a Plan of Reorganization confirmed by the
court. [ X ].
As of April 30,1996, the number of outstanding shares of the registrant's
Common Stock was as follows:
Title of Class Number of Shares
---------------- ------------------
Common (After giving effect to reverse split, 1 for 40) 439,650
Transitional Small Business Disclosure Format: [ ] Yes [ X ] No
<PAGE>
Page 1 of 2
U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
April 30,1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 2,000
Other current assets 1,000
------------
Total current assets 3,000
Investments in Joint Ventures - at equity:
Lehi Independent Power Associates, L.C. 1,150,000
Plymouth Cogeneration Limited Partnership 684,000
Other assets 161,000
------------
TOTAL $ 1,998,000
============
LIABILITIES
Current liabilities:
Accrued expenses and other current liabilities
(including due to related parties of $642,000) $ 1,253,000
Pre-reorganization income taxes payable and accrued
interest - current 182,000
Loans payable 910,000
-----------
Total current liabilities 2,345,000
Convertible subordinated secured debentures
(including due to related parties of $325,000) 1,525,000
Notes payable (including due to related parties of $775,000) 970,000
Deferred interest (including due to related parties of $12,000) 114,000
Pre-reorganization income taxes payable and accrued interest 184,000
Advances from Joint Ventures 19,000
------------
Total liabilities 5,157,000
------------
CAPITAL DEFICIENCY
Preferred stock, $.01 par value, authorized
5,000,000 shares; issued and outstanding 57,500
(liquidating preference $575,000) 1,000
Common Stock, $.01 par value, authorized
35,000,000 shares; issued and outstanding 439,650 4,000
Additional paid-in capital 112,000
Accumulated deficit (3,276,000)
------------
Total capital deficiency (3,159,000)
------------
TOTAL $ 1,998,000
============
See notes to financial statements
</TABLE>
<PAGE>
U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended April 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues $ - $ -
----------- -----------
Administrative expense 221,000 197,000
Interest expense 170,000 99,000
Loss from Joint Ventures 39,000 39,000
----------- -----------
Total Expenses 430,000 335,000
----------- -----------
Net (Loss) $ (430,000) $ (335,000)
==========
Dividends on preferred stock (14,000)
-----------
(Loss) applicable to
common stock $ (444,000)
===========
Net (loss) per
common share $ (1.01) $ (0.77)
=========== ========
Weighted average
shares outstanding 439,622 436,167
=========== ===========
See notes to financial statements
</TABLE>
<PAGE>
U.S. ENERGY SYSTEMS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
Three Months Ended April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------- ------------------
Additional
Number Number Paid-in
of Shares Amount of Shares Amount Capital
--------- ------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Balance,
January 31, 1996 57,500 $1,000 439,650 $4,000 $112,000
Net (loss) for the three
months ended April
30, 1996 (Unaudited)
--------- ------ ---------- ------- --------
Balance, April 30, 1996
(Unaudited) 57,500 $1,000 439,650 $4,000 $112,000
========= ====== ========== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Deficit Total
------------ ------------
<S> <C> <C>
Balance, January 31, 1996 $(2,846,000) $(2,729,000)
Net (loss) for the three months
ended April 30, 1996 (Unaudited) (430,000) (430,000)
------------ ------------
Balance, April 30, 1996
(Unaudited) $(3,276,000) $(3,159,000)
============ ============
</TABLE>
See notes to financial statements
<PAGE>
U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended April 30, 1996 & 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(430,000) $(335,000)
Adjustments to reconcile net
(loss)to net cash (used in)
operating activities:
Amortization of debt discount 5,000 3,000
Amortization of purchase price
in excess of equity in Joint Ventures 14,000 14,000
Amortization of deferred
financing and registration costs 19,000
Equity in (income)/loss of Joint
Ventures, net of distributions 25,000 20,000
Deferred interest 53,000
Accrued interest on pre-reorganization
income taxes payable 4,000 2,000
Changes in operating assets and liabilities:
Decrease in current assets 15,000
Increase in accounts payable and
accrued expenses 280,000 151,000
---------- ----------
Net cash (used in) operating activities (68,000) (92,000)
---------- ----------
Cash flows from investing activities:
Loan from officers 40,000
Collections of loans receivable - officer 16,000
---------- ----------
Net cash provided by (used in)
investing activities 56,000
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of convertible
subordinated debt 25,000
Proceeds from issuance of common stock 9,000
Proceeds from loans payable and preferred stocks 125,000
Payment of pre-reorganization income taxes payable (3,000) (8,000)
Advances from Joint Ventures 4,000 3,000
Deferred registration costs (58,000)
---------- ----------
Net cash provided by financing activities 68,000 29,000
---------- ----------
NET INCREASE (DECREASE) IN CASH -0- (7,000)
Cash - beginning of the period 2,000 8,000
---------- ----------
CASH - END OF THE PERIOD $ 2,000 $ 1,000
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 34,000 $ 15,000
Schedule of noncash financing activity: NONE
See notes to financial statements.
</TABLE>
<PAGE>
U. S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1996 AND 1995
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with instructions to Form 10-QSB and, accordingly, do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal accruals)
considered necessary for a fair presentation have been included. The results
for the three months are not necessarily indicative of results for the full
year.
For further information see Management's Discussion and Analysis, and
refer to the financial statements and footnotes included in the Company's
Annual Report on Forms 10-KSB and 10KSB/A for its fiscal year ended January
31, 1996.
Note 2 - Income Taxes
No income tax provisions have been made due to losses incurred. Deferred
income tax benefits have been fully reserved due to the uncertainty of future
realization.
Note 3 - Net (Loss) Per Share
Net (Loss) per share has been computed on the basis of the weighted
average number of shares outstanding during the period. Common stock
equivalents have not been included in the computation since their inclusion
would be anti-dilutive or immaterial. All references to shares and per share
amounts have been adjusted retroactively to reflect the reverse split of the
Company's Common Stock which became effective on May 10, 1996.
Note 4 - Subsequent Events
The Company has filed a Schedule 14C Information Statement with the
Securities and Exchange Commission stating that the Company's name is being
changed to U. S. Energy Systems, Inc. to avoid confusion with another company,
and to be more representative of the Company's business. The name change will
become effective on June 27, 1996.
The stockholders of the Company, at the 1995 annual meeting and its
adjournments, approved a reverse split of the Company's Common Stock, one new
share for forty old shares. The effective date set by the Board of Directors
was May 10, 1996. This has been given retroactive effect in this filing, and
all references to shares and per share amounts have been adjusted to reflect
the reverse split.
On-going Projects
Lehi, Utah. As previously reported, in December 1995, Lehi
Independent Power Associates, L.C. ("LIPA") concluded a sale of non-essential
parts and commenced plans to bring the remaining 10 megawatt engines to
operational readiness. Restoring the engines to reliable service is necessary
before either a power purchase agreement for the 10 megawatts can be
negotiated with the municipal power authority or, alternatively, a sale of the
10 megawatt engines can be concluded with interested parties. LIPA has
received such a purchase bid which it is currently evaluating. If the 10
megawatt engines are sold, it would be LIPA's intent to acquire larger, more
efficient gas turbines which could be accommodated under the air permit. The
Company and its partners believe the market for electricity in the Utah area
will continue to grow.
Plymouth, New Hampshire. The study regarding expanding the
facility to 10 megawatts from its present 2.5 megawatts is still under way.
The purpose would be to provide power to two other state college campuses.
Further plans are under development to install special fuel treatment
equipment which will allow the existing engines to burn less costly and more
efficient fuels. Fuel savings would be shared equally between the college and
the partnership, Plymouth Cogeneration Limited Partnership ("Plymouth").
Steamboat Geothermal Power Plants. The Company's agreements,
subject to financing, to form a limited liability company ("Steamboat LLC"),
which will own two geothermal power plants, awaits only the completion of the
private and public financing for the Company more fully described below in
Note 5. It is expected that this will be completed during June and July.
Shopping Malls. The joint development company which was formed by
the Company and Cowen Investment Group has been informed by the mall owner
that the contract for the first mall cannot be drawn before mid-July at the
earliest. When that is signed, construction will begin within 60 days.
U. S. Virgin Islands. The contract with Bluebeard Holding Company
for construction of a 2 megawatt cogeneration project for Bluebeard's Castle
in St. Thomas, U.S. Virgin Islands, is expected to be signed during June.
Engineering drawings are in the preliminary draft stage.
New Projects
Other potential projects are being explored by the Company. These
include power plants in India, Panama, Israel, New York , Illinois, and
elsewhere in the Caribbean basin.
Legal Proceedings
The suit brought by the owner of a farm adjacent to the LIPA
facility in Lehi, Utah, is being heard by the court. While depositions are
being taken, LIPA continues to explore settlement options with the plaintiff.
Neither the Company nor its partners believe that the plaintiff has a strong
case, but settlement might be less costly than further extensive work on
testing and on litigation.
Note 5 - Additional Financing and Related Party Transactions
On May 3, 1996, the Company filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 for a public offering of
1,625,000 shares of Common Stock at $4.00 per share, and 1,625,000 Redeemable
Common Stock Purchase Warrants at ten cents per Warrant. Each Warrant
entitles the holder to purchase one share of Common Stock for $4.00 during the
four-year period commencing one year from the date of the offering. The
underwriters, Gaines Berland, Inc., have the option to purchase an additional
243,750 shares of Common Stock and 243,750 Redeemable Common Stock Purchase
Warrants to cover over-allotments, if any. The total of this offering to the
public, before the exercise of the underwriters' over-allotment option, will
be $6,662,500.
The Company has also signed contracts with two private investors for
a total of $3,500,000 in Preferred Stock and Private Warrants, to be closed
concurrently with the closing of the public underwriting described above.
1,600,000 shares of 11% Preferred Stock is to be sold to Enviro Partners, L.P.
for $3,100,000, and 500,000 Private Warrants are to be sold to Energy
Management Corporation for $400,000.
Further details will be found in Forms 10-KSB and 10-KSB/A of
January 31, 1996.
<PAGE>
U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended April 30, 1996 Compared to 1995
The periods had no revenues. The losses shown were made up of the following
major elements:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Administrative expenses:
Salaries and consulting fees $121,000 $ 84,000
Legal and professional fees 51,000 33,000
Corporate expenses 6,000 32,000
All other 43,000 48,000
-------- --------
Total administrative expenses $221,000 $197,000
======== ========
Interest expenses $170,000 $ 99,000
</TABLE>
Loss From Joint Ventures breaks down as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Lehi Independent Power Associates, L.C. $21,000 $19,000
Plymouth Cogeneration Limited Partnership 18,000 20,000
------ ------
Total loss from Joint Ventures $39,000 $39,000
====== ======
</TABLE>
Consulting agreements which began during 1995 and were not in existence during
the 1995 quarter accounted for the increase in salaries and consulting fees.
Legal and professional fees were higher in the current quarter due to the
additional costs related to the additional bridge loans, amortized over the
terms of the loans. Costs incurred in connection with the public and private
financing have been deferred. As of April 30, 1996, these amounted to
$108,000.
Interest expenses increased in the 1996 quarter due principally to the
additional borrowings in bridge loans, which came into being starting in June
1995.
Liquidity and Capital Resources
During the 1996 quarter, cash flow has been carefully conserved. Salaries
have been deferred and additional bridge loan borrowings amounting to $125,000
were received. 50% of interest payments to holders of the subordinated
debentures continue to be deferred, by agreement of the bondholders.
As of April 30, 1996, the Company had a working capital deficiency of
$2,342,000 and a capital deficiency of $3,159,000. This compared with
$860,000 and $1,736,000 respectively a year earlier. The private and public
offerings described in Note 5 above will bring both capital and working
capital to positive figures.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 22, 1996
U. S. Energy Systems, Inc.
By:_____________/s/____________
Richard H. Nelson
President and Chief Executive Officer
By:____________/s/____________
Seymour J. Beder
Chief Accounting Officer and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 2,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,998,000
<CURRENT-LIABILITIES> 2,345,000
<BONDS> 1,525,000
0
1,000
<COMMON> 4,000
<OTHER-SE> (3,164,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,998,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 260,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,000
<INCOME-PRETAX> (430,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (430,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (430,000)
<EPS-PRIMARY> (1.01)
<EPS-DILUTED> (1.01)
</TABLE>
