U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A No. 1
(Mark One)
<checked-box> ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June_30,_1997.
<square> TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________TO______________
COMMISSION FILE NUMBER 1-12738
ONSITE ENERGY CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Delaware 33-0576371
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
701 Palomar Airport Road, Suite 200 92009
Carlsbad, California (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(760) 931-2400
(ISSUER'S TELEPHONE NUMBER)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Class A Common Stock OTC Bulletin Board
Check whether the issuer (1) 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 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 <checked-box> No <square>
Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is 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. <square>
State issuer's revenues for its most recent fiscal year.............$9,561,375
State the aggregate market value of the voting and non-voting common equity
held by non affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days $1,835,946 as of September 22, 1997
The number of shares of Common Stock outstanding as of September 22, 1997, is
10,944,172.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS INCORPORATED BY REFERENCE 10-K PART AND ITEM WHERE INCORPORATED
Definitive Proxy Statement for Annual Part III: Items 9, 10, 11 and 12
Stockholders of the Registrant to be
held December 5, 1997.
<PAGE>2
PART II
ITEM 7. FINANCIAL STATEMENTS.
Onsite's consolidated financial statements are attached as pages F-1
through F-19.
<PAGE>3
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibit
NO.
2.1 The Amended and Restated Agreement and Plan of Reorganization by and
between Western Energy Management, Inc. and Onsite Energy, as amended*
3.1 Certificate of Incorporation*
3.2 Form of Bylaws*
10.1 1993 Stock Option Plan*
10.2 Form of Employment Agreement between Onsite Energy Corporation and
Richard T. Sperberg*
10.3 Form of Employment Agreement between Onsite Energy Corporation and
William M. Gary III*
10.4 Form of Employment Agreement between Onsite Energy Corporation and Frank
J. Mazanec*
10.5 Form of Employment Agreement between Onsite Energy Corporation and Hector
A. Esquer*
10.11 Energy Services Agreement (between Western Energy Management, Inc. and
Tustin Unified School District dated October 1992)*
10.29 Television City Cogen L.P. Energy Services Agreement (between Onsite
Energy and CBS Operations & Engineering, a division of CBS Inc., dated
5/20/87)*
10.32 A. Extension and Amendment to Agreement for $2,000,000 Note dated
9/27/93 (between Television City Cogen, L.P. and Shawmut Bank
N.A.)*
B. Amended and Restated Term Loan for $2,000,000 dated 9/27/93
(between Television City Cogen, L.P. and Shawmut Bank, N.A.)*
10.46 EUA/Onsite, L.P., and Santa Ana Unified School District, as amended*
10.47 EUA/Onsite, L.P., and Chino Unified School District, as amended*
10.48 Energy Services Agreement between Western Energy Management, Inc., and
R._E._Thomason General Hospital*
10.50 Agreement between Onsite Energy and EUA Cogenex Corporation**
10.51 Agreement for the Sale and Purchase of Stock (to acquire Lanikai
Lighting, Inc.)**
10.52 Debt Conversion and Preferred Stock Purchase Agreement**
<PAGE>4
10.53 Settlement Agreement and Release with George T. McLaughlin, dated July
21, 1995***
10.54 Master Energy Efficiency Services Agreement between Onsite and Hercules
Incorporated, predecessor-in-interest to Alliant Techsystems Inc., dated
February 8, 1995***
10.55 Master Energy Efficiency Services Agreement between Onsite and IHC
Hospitals, Inc., dated February 28, 1995***
10.56 Master Energy Efficiency Services Agreement between Onsite and First
Security Bank of Utah, N.A., dated February 17, 1995***
10.57 Master Energy Efficiency Services Agreement between Onsite and Utah
National Guard, dated December 30, 1994***
10.58 Master Energy Efficiency Services Agreement between Onsite and The Boyer
Company, dated August 18, 1995***
10.59 Southern California Edison Company Demand Side Management Bidding Pilot
Industrial & Large Commercial Energy Efficiency Agreement between Onsite
and Southern California Edison Company, dated May 4, 1994***
10.60 Southern California Edison Company Demand Side Management Bidding Pilot
Industrial & Large Commercial Energy Efficiency Agreement between
KENETECH Energy Management, Inc., and Southern California Edison Company,
dated May 4, 1994, acquired by Onsite on June 20, 1995***
10.61 Energy Service Agreement between Onsite and Ford Motor Company, dated
August 2, 1995***
10.62 Standard Energy Savings Agreement between Onsite and Public Service
Electric and Gas Company, dated July 21, 1995***
10.63 Purchase Order No. B11 PO95 470871, from Ford Motor Company to Onsite,
dated August 30, 1995
10.64 Conservation Purchase Agreement with Puget Sound Power & Light Company,
dated June 21, 1994***
10.65 Peak Load Reduction Agreement with Nevada Power Company, dated May 31,
1994***
10.66 Agreement to Accept Proceeds from Sale of Stock for Services Rendered,
dated January 30, 1995***
10.67 Purchase Order No. 7-6R0212 to Onsite from Hughes Aircraft Company, dated
October 20, 1995****
10.68 Purchase Order No. 7-6R0213 to Onsite from Hughes Aircraft Company, dated
October 20, 1995****
10.69 Engineering, Procurement and Construction Agreement between Onsite and
Parke Industries, Inc., dated November 21, 1995****
10.70 Engineering, Procurement and Construction Agreement between Onsite and
General Motors Corporation, Truck & Bus Division, dated December 20,
1995****
10.71 Master Lease Agreement between Onsite and General Motors Corporation,
Truck & Bus Division, dated December 20, 1995****
<PAGE>5
10.72 Master Lease Agreement, Supplemental Terms, between Onsite and General
Motors Corporation, Truck & Bus Division, dated December 20, 1995****
10.73 Equipment Schedule No. 1 to Master Lease Agreement, between Onsite and
General Motors Corporation, Truck & Bus Division, dated December 20,
1995****
10.74 Financing Agreement, Agreement for Purchase and Sale of Equipment and
Assignment of Rights between Onsite and ChiCorp Financial Services, Inc.,
dated December 1995****
10.76 Engineering, Procurement and Construction Agreement between Onsite and
Geissenberger Manufacturing Corp. dba The Robert Group, dated January 11,
1996****
10.77 Master Engineering, Procurement and Construction Agreement between Onsite
and Ram Air Engineering, dated September 30, 1995****
10.78 Acquisition and Release Agreement for Lanikai Lighting, Inc. among Joel
Hemington, Tom Halvorsen, Onsite and Lanikai Lighting, Inc., dated
February 20, 1996*****
10.79 Contract Change Order No. 1 [Amendment No. 1] to Engineering, Procurement
and Construction Agreement between Onsite and General Motors Corporation,
Truck & Bus Division, dated March 1, 1996*****
10.80 Amendment No. 1 dated March 1, 1996, to Equipment Schedule No. 1 to
Master Lease Agreement, between Onsite and General Motors Corporation,
Truck & Bus Division, dated March 1, 1996*****
10.81 Pacific Gas & Electric Company Demand Side Management Agreement between
Onsite and Pacific Gas & Electric Company, dated March 5, 1996*****
10.82 Purchase and Assignment Agreement between Onsite and KENETECH Energy
Management, Inc., dated March 20, 1996*****
10.83 Operation and Maintenance Agreement between Onsite and El Paso County
Hospital District dated June 1996 (executed March 1, 1996)*****
10.84 Master Energy Efficiency Services Agreement between Onsite and West
Covina Unified School District, dated June 3, 1996******
10.85 Financing Agreement, Agreement for Purchase and Sale of Equipment and
Assignment of Rights between Onsite and ChiCorp Financial Services, Inc.,
dated June 3, 1996******
10.86 Master Energy Efficiency Services Agreement between Onsite and California
State University, Fresno, dated June 28, 1996******
10.87 Energy Services Agreement No. 97-031 A, dated January 27, 1997, between
Onsite Energy Corporation and State of Washington, Department of General
Administration, Energy Conservation Services, Northern State
Multi-Service Center, Sedro Woolley, Washington
A. Energy Services Agreement Amendment No. 1 dated July 14, 1997
B. Energy Services Agreement Amendment No. 2 dated August 4, 1997
<PAGE>6
11 Statement Regarding Computation of Per Share Earnings
21 Subsidiaries of the Registrant
23.1 Consent of Independent Auditors
* Previously filed as exhibits to Onsite's Registration Statement, Form
S-4, Registration No. 33-66010, filed with the Securities and Exchange
Commission on December 20, 1993.
** Previously filed as exhibits to Onsite's Form 10-KSB, as amended and
restated on July 19, 1995.
*** Previously filed as exhibits to Onsite's Form 10-KSB, as filed for the
year ended June 30, 1995.
**** Previously filed as exhibits to Onsite's Form 10-QSB, as filed for the
quarter ended December 31, 1995.
***** Previously filed as exhibits to Onsite's Form 10-QSB, as filed for the
quarter ended March 31, 1996.
****** Previously filed as exhibits to Onsite's Form 10-KSD, as filed for the
year ended June 30, 1996
b) REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Onsite has duly caused this Form 10-KSB to be signed on
its behalf by the undersigned, thereunto duly authorized.
ONSITE ENERGY CORPORATION
Date: October 13, 1997 By: RICHARD T. SPERBERG
Richard T. Sperberg, President
<PAGE>F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT - Hein + Associates LLP.......................F-2
CONSOLIDATED BALANCE SHEET - June 30, 1997.................................F-3
CONSOLIDATED STATEMENTS OF OPERATIONS - For the Years ended
June 30, 1997 and 1996...............................................F-4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - For the
Years ended June 30, 1997 and 1996...................................F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Years ended
June 30, 1997 and 1996...............................................F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENT..................................F-7
<PAGE>F-2
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Onsite Energy Corporation
Carlsbad, California
We have audited the accompanying consolidated balance sheet of Onsite Energy
Corporation and subsidiaries (the "Company") as of June 30, 1997 and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for the years ended June 30, 1997 and 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Onsite Energy
Corporation and subsidiaries at June 30, 1997 and the results of their
operations and their cash flows for the years ended June 30, 1997 and 1996 in
conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California
August 28, 1997
<PAGE>F-3
ONSITE ENERGY CORPORATION
Consolidated Balance Sheet
June 30, 1997
Assets
Current Assets:
Cash $ 526,894
Cash-restricted 194,764
Accounts receivable, net of allowance for doubtful
accounts of $40,000 864,954
Costs and estimated earnings in excess of billings
on uncompleted contracts 100,738
Other assets 20,732
-----------------
TOTAL CURRENT ASSETS 1,708,082
Cash-restricted 78,403
Costs incurred on future projects 1,409
Property and equipment, net of accumulated depreciation
and amortization 44,627
Goodwill, net of amortization of $933,333 266,667
Other 24,155
----------------
TOTAL ASSETS $ 2,123,343
================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 971,396
Billings in excess of costs and estimated earnings
on uncompleted contracts 149,853
Current portion of notes payable 111,872
Accrued expenses and other liabilities 505,294
---------------
TOTAL CURRENT LIABILITIES 1,738,415
Long-Term Liabilities:
Related party notes payable 46,804
Accrued future operation and maintenance costs
associated with energy services agreements 421,432
--------------
TOTAL LIABILITIES 2,206,651
--------------
Commitments and contingencies (Notes 4, 12 and 13)
Shareholders' Equity (Deficit):
Preferred Stock, Series A, 4,000 shares authorized,
none issued and outstanding
Preferred Stock, Series B, 625,000 shares authorized,
none issued and outstanding
Common Stock, $.001 par value, 24,000,000 shares authorized:
Class A common stock, 23,999,000 shares
authorized, 10,944,172 issued and outstanding 10,942
Class B common stock, 1,000 shares authorized,
none issued and outstanding
Additional paid-in capital 17,052,963
Accumulated deficit (17,147,213)
----------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (83,308)
----------------
TOTAL LIABILTIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 2,123,343
================
The accompanying notes are an integral part of the financial statements
<PAGE>F-4
ONSITE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
Revenues $ 9,561,375 $ 22,722,728
Cost of sales 6,692,198 17,566,988
--------------- ---------------
Gross Margin 2,869,177 5,155,740
Selling, General, and Administrative Expenses 3,726,095 3,748,988
Loss on disposition of partnership interests 425,240 -
Loss on disposition of Lanakai - 296,128
Gain on sale of assets (17,686) -
--------------- --------------
Operating income (loss) (1,264,472) 1,110,624
--------------- --------------
Other income (expense):
Interest (expense) (159,028) (270,088)
Interest income 43,402 29,728
--------------- --------------
Total other income (expense) (115,626) (240,360)
--------------- --------------
Income (loss) before provision
for income taxes (1,380,098) 870,264
Provision for income taxes 8,500 51,000
--------------- --------------
Net income (loss) $ (1,388,598) $ 819,264
=============== ==============
Net income (loss) per Class A common share $ (0.13) $ 0.03
=============== ==============
Weighted average shares outstanding 10,818,498 6,639,837
=============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>F-5
ONSITE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Class A Series A Series B
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1995 5,418,995 $ 5,418 3,910 $ 4 617,436 $ 617
Issued to Onsite 401k plan 50,989 51
Conversion of accounts
payable to Class A common stock 162,796 163
Issued pursuant to legal settlement 158,416 158
Common shares issued for
Series A and B preferred dividends 283,445 284
Conversion of Series A
preferred stock 93,740 94 (100)
Conversion of Series B
preferred stock 11,795 12 (11,795) (12)
Exercise of stock options 83,287 83
Common shares issuable for Series
A and B preferred dividends
Net Income
- ----------------------------------------------------------------------------------------------------
Balance June 30, 1996 6,263,463 6,263 3,810 4 605,641 605
Issued to Onsite 401k plan 48,562 49
Conversion of accounts payable
to Class A common stock 62,077 63
Common shares issued for Series
A and B preferred dividends 347,048 347
Conversion of Series A
preferred stock 3,571,494 3,571 (3,810) (4)
Conversion of Series B
preferred stock 605,641 605 (605,641) (605)
Exercise of stock options 45,887 44
Net Loss
- -----------------------------------------------------------------------------------------------------
Total to June 30, 1997 10,944,172 10,942 - $ - - $ -
- -----------------------------------------------------------------------------------------------------
</TABLE>
ONSITE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
(CONTINUED)
<TABLE>
<CAPTION>
Additional
Common Shares Paid-In Accumulated
Issuable Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1995 $ 44,161 $15,388,386 $(15,365,854) $ 72,732
Issued to Onsite 401k plan (44,161) 44,110 -
Conversion of accounts
payable to Class A common stock 146,114 146,277
Issued pursuant to legal settlement 124,842 125,000
Common shares issued for
Series A and B preferred dividends 603,302 (603,586) -
Conversion of Series A
preferred stock (94) -
Conversion of Series B
preferred stock - -
Exercise of stock options 29,809 29,892
Common shares issuable for Series
A and B preferred dividends 608,439 - (608,439) -
Net Income 819,264 819,264
- --------------------------------------------------------------------------------------------------------------
Balance June 30, 1996 608,439 16,336,469 (15,758,615) 1,193,165
Issued to Onsite 401k plan 24,931 24,980
Conversion of accounts payable
to Class A common stock 66,972 67,035
Common shares issued for Series
A and B preferred dividends (608,439) 608,092
Conversion of Series A
preferred stock (3,567)
Conversion of Series B
preferred stock - -
Exercise of stock options 20,066 20,110
Net Loss (1,388,598) (1,388,598)
- ------------------------------------------------------------------------------------------
Total to June 30, 1997 $ - $ 17,052,963 $(17,147,213) $ (83,308)
- ------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>F-6
ONSITE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
Cash flows from operating activities:
Net income (loss) $ (1,388,598) $ 819,264
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Amortization of goodwill 400,000 490,000
Amortization of acquired contract costs 399,032 205,681
Additions (reductions) to reserve
for future operation and
maintenance costs (45,925) 104,652
Provision for bad debts 37,093 18,700
Depreciation and amortization 187,077 209,570
Loss on disposition of
partnership interests 425,240 -
(Gain) on sale of assets (17,686) -
Change in operating assets and
liabilities:
Accounts receivable 747,923 (1,255,552)
Increase (decrease) in billings
related to costs and estimated earnings
on uncompleted contracts 921,512 (1,538,301)
Other assets 260,322 50,769
Cash-restricted (50,467) 206,366
Accounts payable (1,464,594) 1,914,323
Accrued expenses and other liabilities (344,632) 402,527
Deferred income (25,000) (325,000)
--------------------------
Net cash provided by operating activities 41,297 1,302,999
--------------------------
Cash flows from investing activities:
Purchases of property and equipment (4,473) (43,907)
Proceeds from sale of assets 540,081 214,426
-------------------------
Net cash provided by investing activities 535,608 170,519
-------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 45,090 29,892
Repayment of long-term debt (1,071,571) (535,356)
Repayment of capital lease obligations - (3,589)
-------------------------
Net cash provided by financing activities (1,026,481) (509,053)
-------------------------
Net increase (decrease) in cash (449,576) 964,465
Cash, beginning of year 976,470 85,751
Less: Cash in Lanikai and cash included in net
assets held for sale - (73,746)
-------------------------
Cash, end of year $ 526,894 $ 976,470
=========================
Supplemental disclosures of non-cash
transactions:
Payment of Series A and Series B
preferred dividends with common stock $ 347 $ 608,439
Payment of accounts payable with
common stock 67,035 146,277
Payment of legal settlement with
common stock - 125,000
Conversion of preferred stock to
common stock 4,176 -
Supplemental disclosures of cash
transactions:
Interest paid 159,028 258,267
Income taxes paid 41,290 9,100
The accompanying notes are an integral part of the financial statements
<PAGE>F-7
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______
1. BUSINESS ACTIVITY
BACKGROUND
Onsite Energy Corporation ("Onsite") is an energy efficiency services company
(ESCO) that develops, designs, constructs, owns and operates comprehensive
energy efficiency projects and assists customers in reducing the cost of
purchased electricity and fuel. Onsite also offers professional consulting
services in the areas of market assessment, business strategies, public policy
analysis, environmental studies and utility deregulation. It is Onsite's
mission to be a premier provider of energy efficiency solutions for
institutional, commercial and industrial customers.
Onsite was formed pursuant to a reorganization between Western Energy
Management, Inc., a Delaware corporation ("Western"), and Onsite Energy, a
California corporation formed in 1982 ("Onsite Energy"), which was effective
February 15, 1994. Under the reorganization, Onsite Energy merged with and into
Onsite and a newly formed subsidiary of Onsite merged with and into Western,
which survived and became a wholly owned subsidiary of Onsite. This
transaction was accounted for as a purchase of Onsite Energy by Onsite.
Onsite also owned general and limited partnership interests in Television City
Cogen, L.P., a California limited partnership ("TCC"). Onsite owned all the
stock of Onsite/TCC Corp., a Delaware Corporation ("Onsite/TCC"), which was the
other partner in TCC. Thus, directly and indirectly, Onsite owned 100% of TCC.
Effective February 17, 1997, Onsite sold its interests in TCC and Onsite/TCC.
As a result of the sale, Onsite incurred a loss of $425,240.
Onsite also owns a general partnership interest in Onsite Partners, a
California general partnership, and a general partnership interest in American
Private Power II, a California general partnership, both of which are inactive.
Onsite also owned Lanikai Lighting, Inc. ("Lanikai"). Effective February 20,
1996, Onsite sold its interests in Lanikai in exchange for a royalty earnout of
up to $400,000 with payments due monthly calculated as a percentage of gross
sales. Such amount will be recorded as income to Onsite when received. During
the fiscal year ended June 30, 1997, Onsite did not receive any such payments.
Unless the context indicates otherwise, reference to Onsite shall include all
of its wholly owned subsidiaries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Onsite and all of
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
<PAGE>F-8
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
REVENUE RECOGNITION
Revenues on development and construction of energy efficiency projects
requiring contract performance prior to commencement of deliveries are recorded
using the percentage of completion method. Under this method, the revenue
recognized is that portion of the total contract price that the cost expended
to date bears to the anticipated final total costs based on current estimates
of the costs to complete the project. When the total estimated costs to
complete a project exceed the total contract amount, thereby indicating a loss,
the entire anticipated loss is recognized currently.
GUARANTEED SAVINGS
Ongoing revenues on contracts containing guaranteed savings to customers are
recognized when the guaranteed savings are achieved. No warranties or reserves
are applicable to these contracts.
SERVICE REVENUE
Revenues for development, management, marketing and similar services are
recognized as the services are performed.
OPERATION AND MAINTENANCE AGREEMENTS
Commencing July 1, 1993, Onsite began entering into long term operation and
maintenance agreements with its customers. In instances where estimated costs
exceed estimated revenue, Onsite discounts the estimated future deficit cash
flows at an appropriate long-term interest rate and recognizes expense and a
related liability in its financial statements. For the year ended June 30,
1997, the liability for deferred operations and maintenance was $421,432.
RESTRICTED CASH
Restricted cash consists of amounts on deposit with financial institutions for
the purpose of securing performance milestones under several of Onsite's demand
side management ("DSM") contracts. Funds become available to Onsite over a
period of 24 to 36 months following completion of the last contract provided
certain conditions and milestones are achieved. In the event that conditions
or milestones are not achieved, Onsite will be required to forfeit its right to
some or all of the funds on deposit. As of June 30, 1997, Onsite believes that
all conditions and milestones will be achieved and that no funds under these
DSM contracts will be subject to forfeiture.
<PAGE>F-9
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
COSTS INCURRED ON FUTURE PROJECTS
Costs incurred on future projects include Onsite's investment in contracts
pending approval, and its cost to purchase projects from third parties, which
are in the implementation process. Costs are charged to expense in relation to
the progress towards completion of the implementation of the various projects.
Some of the costs incurred on future projects are for projects pending
regulatory approval. In the event the regulatory authority rejects those
projects, costs incurred will be charged to expense. For the fiscal year ended
June 30, 1997, Onsite charged to expense approximately $486,924 in previously
capitalized acquisition costs for projects that will likely be rejected by the
governing regulatory authority.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Replacements and improvements are
capitalized, while repairs and maintenance are charged to expense as incurred.
Depreciation and amortization are provided using the straightline method with
estimated useful lives ranging from five to 20 years for office equipment,
equipment, tools and vehicles. Leasehold improvements and leased equipment are
amortized over the useful life or term of the respective lease, whichever is
less. When an asset is sold or otherwise disposed of, the cost and accumulated
depreciation or amortization is removed from the accounts and any resulting
gain or loss is recognized currently.
CASH AND CASH EQUIVALENTS
Onsite considers all short-term, highly liquid investments with an original
maturity of three months or less to be cash equivalents.
GOODWILL
Goodwill consists of certain intangible assets acquired in connection with the
purchase of Onsite Energy and represents the purchase price in excess of the
fair value of the assets acquired adjusted to net realizable value. Goodwill
is being amortized over four years using the straightline method beginning in
February 1994. The carrying value of Goodwill is evaluated at least annually.
Onsite considers current facts and circumstances, including expected future
operating income and cash flows to determine whether it is probable that
impairment has occurred.
INCOME TAXES
Onsite accounts for income taxes under the liability method, which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the financial statements or
tax returns. Deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
<PAGE>F-10
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary earnings per share is computed by subtracting the applicable year's
required preferred dividends from the net income in order to determine net
income attributable to common shareholders. In 1996, the required dividend was
subtracted from the net income in order to determine net income attributable to
common shareholders. Earnings (loss) per share and common equivalent share are
then computed based on the weighted average number of shares of common stock
and, if dilutive, common equivalent shares (preferred stock, options and
warrants) outstanding during the period. Common stock equivalents as of June
30, 1997, were antidilutive and excluded from the earnings per share
computation.
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that the cost of assets may
be impaired, an evaluation of recoverability would be performed. If an
evaluation were required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow is required.
There were no impairments of long-lived assets for the year ended June 30,
1997.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. Onsite currently accounts for its stock-based compensation plans
using the accounting prescribed by Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (See Note 9). FAS 123 encourages, but
does not require, companies to recognize compensation expense for grants of
stock, stock options, and other equity instruments to employees based on fair
value. Transactions in equity instruments with non-employees for goods or
services must be accounted for on the fair value method. Since Onsite is not
required to adopt the fair value based recognition provisions prescribed under
SFAS No. 123, it has elected only to comply with the disclosure requirements
set forth in the Statement, which includes disclosing pro forma net income as
if the fair value based method of accounting had been applied. (See Note 9.)
IMPACT OF RECENTLY ISSUED STANDARDS
In February 1997, the Financial Accounting Standards Board issued a new
statement titled "Earnings per Share" ("FAS 128"). The new statement is
effective for both interim and annual periods ending after December 15, 1997.
FAS 128 replaces the presentation of primary and fully diluted earnings per
share with the presentation of basic and diluted earnings per share. Basic
earnings per share excludes dilution and is calculated by dividing income by
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Had this new statement been in effect for the periods presented, Onsite would
report basic earnings per share for the fiscal years ended June 30, 1997, and
1996, of $(.13) and $.03. Diluted earnings per share for the fiscal years
ended June 30, 1997, and 1996, would be $(.10) and $.08.
<PAGE>F-11
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
USE OF ESTIMATES
The preparation of Onsite's consolidated financial statements in conformity
with generally accepted accounting principles requires Onsite's management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
Onsite's financial statements are based upon a number of significant estimates,
including the allowance for doubtful accounts, estimates in costs and earnings
in excess of billings on uncompleted contracts, the estimated useful lives
selected for property and equipment and intangible assets, realizability of
deferred tax assets, and accrued future operation and maintenance costs
associated with energy services agreements. Due to the uncertainties inherent
in the estimation process, it is at least reasonably possible that these
estimates will be further revised in the near term and such revisions could be
material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values for financial instruments under SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The estimated
fair values of Onsite's financial instruments, which includes all cash,
accounts receivables, accounts payable, long-term debt and other debt,
approximates the carrying value in the consolidated financial statements at
June 30, 1997.
CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise from
financial instruments exist for groups of customers or groups of counterparties
when they have similar economic characteristics that would cause their ability
to meet contractual obligations to be similarly effected by changes in economic
or other conditions. In accordance with SFAS No. 105, DISCLOSURE OF
INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK, the credit risk
amounts shown do not take into account the value of any collateral or security.
<PAGE>F-12
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. ACCOUNTS RECEIVABLE
Accounts Receivable consisted of the following as of June 30, 1997:
Contract receivables
Completed contracts $ 281,260
Contracts in progress 148,600
----------
429,860
Trade receivables 475,094
----------
904,954
Less: Allowance for doubtful accounts (40,000)
----------
$ 864,954
==========
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on contracts as of June 30, 1997, consisted
of the following:
Costs incurred $ 7,646,678
Estimated earnings 1,918,101
------------
$ 9,564,779
Less: Billings to date (9,613,894)
------------
$ (49,115)
============
Included in the accompanying Balance Sheet under
the following captions:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 100,738
Billings in excess of costs
and earnings on
uncompleted contracts (149,853)
-----------
$ (49,115)
===========
<PAGE>F-13
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1997, consisted of:
Office furniture $ 64,305
Equipment and Tools 463,193
Vehicles 2,450
Cogeneration Systems 65,756
Leasehold improvements 17,778
------------
613,482
Less: Accumulated depreciation and amortization (568,855)
------------
$ 44,627
============
6. NOTES PAYABLE
Notes payable at June 30, 1997, consisted of the following:
Notes payable to a third party, interest at 10.00%, with all
unpaid interest and principal due February 2, 1998. $ 111,872
Unsecured notes payable to related parties consisting of four
separate notes; Interest at prime rate plus 1.00% to 2.00%
(totaling 11% to 12% at June 30, 1997) due monthly, maturing
July 1998. 46,804
------------
Total: 158,676
Less: Current portion (111,872)
------------
$ 46,804
============
Maturities of the longterm debt as of June 30, 1997,
are as follows:
Fiscal year ending June 30,
1999 $ 46,804
7. ACCRUED EXPENSES AND OTHER LIABILITIES
At June 30, 1997, accrued expenses and other liabilities consisted of the
following:
Payroll and Related $ 215,698
Deferred Salary 64,238
Accrued Interest 13,205
Accrued Commission 31,500
Accrued Other 180,653
-----------
$ 505,294
===========
<PAGE>F-14
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. SHAREHOLDERS' EQUITY (DEFICIT)
Class A Common Stock
Holders of Class A Common Stock are entitled to one vote per share for the
election of directors and other corporate matters which shareholders are
entitled or permitted to vote. Holders are entitled to receive dividends when
and as declared by the Board of Directors.
WARRANTS
No warrants were issued or exercised during the fiscal year ended June 30,
1997.
As of June 30, 1997, Onsite has issued and outstanding a total of 430,311
warrants to purchase shares of its Class A Common Stock. The exercise prices
range from $.88 to $18.79 per share with expiration dates ranging from
September 1997 through June 1999.
9. STOCK OPTION PLANS:
WESTERN 1990 NONSTATUTORY STOCK OPTION PLAN (FORMERLY WESTERN STOCK OPTION
PLAN)
Effective February 15, 1994, Onsite adopted the Western 1990 NonStatutory Stock
Option Plan (the "1990 Plan"). The 1990 Plan provides for the granting of
options to directors, officers, employees and consultants to purchase up to
100,000 shares of Onsite Class A Common Stock. The 1990 Plan is administered by
a committee appointed by the Board of Directors.
As of June 30, 1997, the status of the 1990 Plan was as follows:
Outstanding Exercise Price Exercisable
Options Per Share Options
July 1, 1995 500 $6.10 500
-----
July 1, 1996 500 $6.10 500
Options Granted 500 $0.2956
Options Canceled (500) $6.10
-----
June 30, 1997 500 $0.2956 500
=====
At June 30, 1997, no additional options have been provided for granting.
WESTERN 1991 NONSTATUTORY STOCK OPTION PLAN
Effective February 15, 1994, Onsite adopted the Western 1991 NonStatutory Stock
Option Plan (the "1991 Plan"). The 1991 Plan provides for the granting of
options to nonemployee directors, officers, employees and consultants to
purchase up to 160,000 shares of Onsite Class A Common Stock. The 1991 Plan is
administered by a committee appointed by the Board of Directors.
<PAGE>F-15
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
As of June 30, 1997, the status of the 1991 Plan was as follows:
Outstanding Exercise Price Exercisable
Options Per Share Options
July 1, 1995 90,000 $5.3125 - $29.70 90,000
------
July 1, 1996 90,000 $5.3125 - $29.70 90,000
Options canceled (5,000) $29.70
------
June 30, 1997 85,000 $5.3125 85,000
======
At June 30, 1997, no additional options have been provided for granting.
NONPLAN OPTIONS
During fiscal year 1993, Western issued stock options that were not part of the
1990 Plan or the 1991 Plan (the "Non-Plan Options"). Effective February 15,
1994, Onsite adopted the NonPlan Options, and has provided for the granting of
options to various parties to purchase up to 113,000 shares of Onsite Class A
Common Stock.
As of June 30, 1997, the status of the NonPlan Options was as follows:
Outstanding Exercise Price Exercisable
Options Per Share Options
July 1, 1995 106,500 $5.3125 - $6.10
Options canceled (1,500) $6.10 103,142
-------
July 1, 1996 105,000 $5.3125 - $6.10
Options Canceled (1,000) $5.3125 105,000
Options Granted 104,000 $0.2956
Options Canceled (104,000) $5.3125 - $6.10
--------
June 30, 1997 104,000 $0.2956 104,000
========
At June 30, 1997, no additional options have been provided for granting.
THE ONSITE 1993 STOCK OPTION PLAN
During fiscal 1994, Onsite adopted the Onsite 1993 Stock Option Plan (the "1993
Plan"). The 1993 Plan, as amended, provides for the granting of options to
directors, officers, employees and consultants to purchase up to 2,950,000
shares of Class A Common Stock and is administered by a committee appointed by
the Board of Directors.
<PAGE>F-16
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
As of June 30, 1997, the status of the 1993 Plan was as follows:
Outstanding Exercise Price Exercisable
Options Per Share Options
July 1, 1995 1,399,426 $0.8125 - $5.625 233,765
Options granted 1,754,677 $0.25 - $2.25
Options canceled (1,263,333) $0.25 - $0.875
Options exercised (83,287) $0.25 - $0.875
----------
July 1, 1996 1,807,483 $0.25 - $5.625 1,395,901
Options granted 1,508,440 $0.24 - $5.3125
Options canceled (816,645) $0.25 - $0.50
Options exercised (42,553) $0.25 - $0.50
----------
June 30, 1997 2,456,725 $0.24 - $5.3125 1,729,593
==========
At June 30, 1997, additional options may be granted to purchase 493,275 shares
of Class A Common Stock.
A summary of option transactions during the years ended June 30, 1996, and
1997, is as follows:
Fixed Options Shares Weighted-Average
Exercise Price
July 1, 1995 1,399,426 $2.0544
Granted 1,754,677 $0.6115
Exercised (83,287) $0.3595
Canceled (1,263,333) $2.0178
-----------
June 30, 1996 1,807,483 $0.7573
===========
Fixed Options Shares Weighted-Average
Exercise Price
July 1, 1996 1,807,483 $0.7573
Granted 1,508,440 $0.2909
Exercised (42,553) $0.4628
Canceled (816,645) $0.4764
----------
June 30, 1997 2,456,725 $0.5789
==========
<PAGE>F-17
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
During fiscal year ended June 30, 1997, the Compensation Committee and Board of
Directors approved a price reduction for 400,440 options with original exercise
prices ranging between $1.94 and $6.10 to $0.2956. This was accounted for as a
reprice of options to the fair market value on the date of the repricing. The
weighted average contractual life for all options as of June 30, 1997, was
approximately 5.5 years, with exercise prices ranging from $0.24 to $5.31.
Proforma Information
As stated in Note 2, Onsite has not adopted the fair value accounting
prescribed by FAS 123 for employees. Had compensation cost for stock options
issued to employees been determined based on the fair value at grant date for
awards in 1997 and 1996 consistent with the provisions of FAS 123, Onsite's net
income (loss) and net income (loss) per share would have been adjusted to the
proforma amounts indicated below:
June 30,
1997 1996
Net Income (Loss) $(1,471,328) $(170,732)
Per Common Share Income (Loss) $(0.14) $(0.02)
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model using the following weighted-average
assumptions: expected volatility of 101.93%, an expected life of three years
for option shares, no dividends would be declared during the expected term of
the options, and a risk-free interest rate using the monthly US Treasury
T-Strip Rate at the option grant date for fiscal years ended 1997, and 1996,
respectively.
The weighted-average fair value of stock options granted to employees during
the years ended June 30, 1997, and June 30, 1996, was $0.19 and $0.40,
respectively.
10. INCOME TAXES
Income tax expense for the years ended June 30, 1997, and 1996, is as follows:
1997 1996
Federal $ $ 21,000
State 8,500 30,000
-------- ------------
$ 8,500 $ 51,000
======== ============
<PAGE>F-18
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Income tax expense for the years ended June 30, 1997, and 1996, differed from
the amount computed by applying the U.S. Federal income tax rate of 34% to
pretax income as a result of the following:
1997 1996
Computed expected tax expense (benefit) $ (469,200) $ 295,800
Effect of alternative minimum tax - 21,000
State taxes, net 5,600 13,300
Other 4,400 5,600
Change in valuation allowance for
deferred tax assets 467,700 (284,700)
----------- ----------
$ 8,500 $ 51,000
=========== ==========
The components of the deferred tax accounts at June 30, 1997, and 1996, are as
follows:
1997 1996
Net deferred tax assets:
Litigation settlement accrual $ 6,700 $ 49,500
Deferred operation & maintenance
Reserve 169,200 185,100
Net Operating Loss carry forwards 4,504,600 3,983,400
Alternative minimum tax credit 15,200 26,500
Goodwill due to difference in
amortization 392,500 271,100
Other 35,500 25,900
Capital Loss Carry Forward 66,100 -
Vacation Accrual 29,100 35,200
Deferred Compensation 27,300 -
Valuation allowance (5,246,200) (4,576,700)
------------- -------------
$ - $ -
============= =============
At June 30, 1997, Onsite has a net operating loss carryforward of approximately
$12,110,800, which would expire through 2011. As a result of various stock
transactions, certain of these net operating loss carry forwards are subject to
annual limitations of approximately $726,000 to be used in future periods.
Also, Onsite has a California net operating loss for the year ended June 30,
1997, of $4,160,100, which is also subject to annual limitations of
approximately $726,000.
<PAGE>F-19
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. RELATED PARTIES
During the fiscal year ended June 30, 1997, Onsite paid H. Tate Holt, a
Director of Onsite, approximately $23,500 for consulting services rendered. In
addition, Onsite has borrowed funds from two officers and directors. As of
June 30, 1997, the balance outstanding on these loans was $46,804. These notes
bear interest at 1.00% to 2.00% above the prime rate with interest payable
monthly. For the year ended June 30, 1997, the officers and directors earned
$6,433 in interest, of which $1,421 had been paid.
12. COMMITMENTS AND CONTINGENCIES
LEASES
Onsite leases its administrative facility under a noncancellable operating
lease expiring in 1998 with a five-year renewal option.
Future minimum lease payments under this operating lease is as follows:
YEAR ENDING JUNE 30,
1998 $ 180,680
1999 15,056
----------
Total minimum lease payments $ 195,736
==========
Total rent expense, including monthtomonth equipment rentals, was $272,641 and
$272,591 in 1997, and 1996, respectively.
ENVIRONMENTAL COSTS
Onsite is subject to federal, state and local environmental laws and
regulations. Environmental expenditures are expensed or capitalized depending
on their future economic benefit. Expenditures that relate to an existing
condition caused by past operations and that have no future economic benefits
are expensed. Liabilities for expenditures of a non-capital nature are
recorded when environmental assessments are probable, and the costs can be
reasonably estimated. At June 30, 1997, there is no known pending actions or
related notices with respect to environmental matters. Although the level of
future expenditures for environmental matters cannot be determined with any
degree of certainty, it is management's opinion that such costs when determined
will not have a material adverse effect on the financial position or results of
operations of Onsite.
GUARANTEED SAVINGS
Onsite is contingently liable to its customers pursuant to contractual terms in
the event annual guaranteed savings are not achieved by the customer.
LITIGATION
Onsite is involved in certain legal actions and claims arising in the ordinary
course of business. Management believes, based on discussions with legal
counsel, that such litigation and claims will be resolved without material
effect on Onsite's consolidated financial position.
<PAGE>F-20
ONSITE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. DEFINED CONTRIBUTION PLAN
Onsite sponsors a 401(k) defined contribution plan, which covers substantially
all employees. Onsite contributions are determined annually at the discretion
of management and vest at the rate of 20% per year of employment. During the
years ended June 30, 1997 and 1996, Onsite's matching contribution was $43,088
and $37,977, respectively.
14. SIGNIFICANT CUSTOMERS
Revenues from three customers accounted for 32% (10%, 9%, 13% each) of total
revenues in fiscal 1997, and revenues from three other customers accounted for
53% (22%, 18%, 13%) of total revenues in fiscal 1996.
15. CONCENTRATION OF CREDIT RISK
Onsite operates in one industry segment, energy services. Onsite's customers
generally are located in the Western United States. Financial instruments that
subject Onsite to credit risk consist principally of accounts receivable and
costs and estimated earnings in excess of billings.
At June 30, 1997, accounts receivable, and costs and estimated earnings in
excess of billings totaled $1,005,692, and Onsite has provided an allowance for
doubtful accounts of $40,000.
For the years ended June 30, 1997, and 1996, bad debts totaled $37,093 and
$18,700 respectively.
Onsite performs periodic credit evaluations on its customers' financial
condition and believes that the allowance for doubtful accounts is adequate.
At June 30, 1997, Onsite maintained cash balances with a commercial bank, which
were approximately $405,000 in excess of FDIC insurance limits.
16. SUBSEQUENT EVENTS
On September 11, 1997, Onsite issued warrants to acquire common stock to an
officer/director and another board member in exchange and as consideration for
posting the necessary collateral and personal guarantees for a payment and
performance bond required on a construction project. The exercise of the
warrants will result in the right of the related parties to acquire 525,988
shares of Onsite's Class A Common Stock.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(33-79894, 33-87104, 33-89642, 33-98806, 333-25879) on Form S-8 of Onsite
Energy Corporation of our report dated August 28, 1997, relating to the
consolidated balance sheet of Onsite Energy Corporation and subsidiaries
as of June 30, 1997 and the related statements of operations, shareholders'
equity (deficit) and cash flows for the years ended June 30, 1997 and 1996
which report appears in the June 30, 1997 annual report on Form 10-KSB, as
amended, of Onsite Energy COrporation.
HEIN + ASSOCIATES
Certified Public Accountants
Orange, California
October 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-KSB
FOR THE PERIOD ENDED JUNE 30, 1997, FOR ONSITE ENERGY CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 800,061
<SECURITIES> 0
<RECEIVABLES> 904,954
<ALLOWANCES> (40,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,708,082
<PP&E> 613,482
<DEPRECIATION> (568,855)
<TOTAL-ASSETS> 2,123,343
<CURRENT-LIABILITIES> 1,738,415
<BONDS> 0
0
0
<COMMON> 10,942
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,123,343
<SALES> 9,561,375
<TOTAL-REVENUES> 9,561,375
<CGS> 6,692,198
<TOTAL-COSTS> 6,692,198
<OTHER-EXPENSES> 4,249,275
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,380,098)
<INCOME-TAX> 8,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,388,598)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.10)
</TABLE>
