U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997.
[ ] 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 incorporation or (I.R.S. Employer
organization) Identification No.)
701 Palomar Airport Road, Suite 200, Carlsbad, CA 92009
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (760) 931-2400
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
The number of Class A common stock, $0.001 par value, outstanding as of
February 19, 1998 is 14,712,372.
<PAGE>2
Onsite Energy Corporation
Consolidated Balance Sheet
December 31, 1997
Assets
Current Assets:
Cash $ 1,642,509
Cash-restricted 152,925
Accounts receivable, net of allowance for doubtful
accounts of $15,030 2,737,779
Costs and estimated earnings in excess of billings
on uncompleted contracts 581,084
Other assets 20,340
TOTAL CURRENT ASSETS 5,134,637
Cash-restricted 78,990
Costs incurred on future projects 1,767
Property and equipment, net of accumulated
depreciation and amortization 677,408
Goodwill, net of amortization of $1,536,201 210,664
Other 24,159
TOTAL ASSETS $6,127,625
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,704,709
Billings in excess of costs and estimated earnings
on uncompleted contracts 151,135
Current portion of notes payable 75,572
Accrued expenses and other liabilities 613,884
TOTAL CURRENT LIABILITIES 2,545,300
Long Term Liabilities:
Accrued future operation and maintenance costs
associated with energy services agreements 421,432
TOTAL LIABILITIES 2,966,732
Commitments and contingencies
Shareholders' Equity:
Preferred Stock, Series A, 4,000 shares authorized,
none issued and outstanding -
Preferred Stock, Series B, 625,000 shares authorized,
none issued and outstanding -
Preferred Stock, Series C, 1,000,000 shares authorized,
200,000 issued and outstanding 200
Common Stock, $.001 par value, 24,000,000 shares authorized:
Class A common stock, 23,999,000 shares authorized
14,661,272 shares issued and outstanding 14,659
Class B common stock, 1,000 shares authorized,
none issued and outstanding -
Additional paid-in capital 20,191,977
Accumulated deficit (17,046,303)
TOTAL SHAREHOLDERS' EQUITY 3,160,533
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,127,265
The accompanying notes are an integral part of the financial statements.
<PAGE>3
Onsite Energy Corporation
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenues $3,706,109 $2,935,524 $5,943,914 $6,246,390
Cost of sales 2,555,071 1,965,966 4,141,865 4,460,505
Gross Margin 1,151,038 969,558 1,802,049 1,785,885
Selling, General,
and Administrative Expenses 938,755 943,663 1,429,025 1,913,391
Depreciation and Amortization 153,328 169,714 259,105 289,483
Operating income (loss) 58,955 (143,819) 113,919 (416,989)
Other income (expense):
Interest (expense) - (42,386) (8,588) (100,830)
Interest income 9,271 2,704 13,374 7,376
Other income (expense) (5,559) - (5,559) -
Total other income (expense) 3,712 (39,682) (773) (93,454)
Income (loss) from operations
before provision
for income taxes 62,667 (183,501) 113,146 (510,443)
Provision for income taxes 5,499 - 12,237 -
Net income (loss) $ 57,168 $ (183,501) $ 100,909 $(510,443)
Net income (loss) per
Class A common share $ ** $ (0.02) $ ** $(0.05)
Weighted average shares
outstanding 13,519,572 10,859,203 12,231,872 10,698,414
** less than $ 0.01 per share
The accompanying notes are an integral part of the financial statements.
<PAGE>4
Onsite Energy Corporation
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 100,909 $(510,443)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Amortization of goodwill 202,868 200,000
Amortization of acquired contract costs - 363,536
Depreciation and amortization 56,237 89,483
Change in operating assets and liabilities:
Accounts receivable (1,354,370) (673,083)
Increase (decrease) in costs related to
billings and estimated earnings on
uncompleted contracts (479,064) 10,060
Other assets 797 243,526
Cash-restricted 41,252 (43,244)
Accounts payable and accrued expenses 801,029 (456,255)
Deferred income - 25,000
Net cash provided (used) by operating
activities (630,342) (751,420)
Cash flows from investing activities:
Acquisition of Fixed Assets (123,190) -
Net cash provided (used) by investing
activities (123,190) -
Cash flows from financing activities:
Proceeds from issuance of stock 1,947,287 -
Proceeds from exercise of stock options 4,964 20,110
Repayment of long-term debt (83,104) (212,372)
Net cash provided (used) by
financing activities 1,869,147 (192,262)
Net increase (decrease) in cash 1,115,615 (943,682)
Cash, beginning of year 526,894 976,470
Cash, end of period $ 1,642,509 $ 32,788
Noncash investing and financing activities:
Acquisition of Westar Business Services,
Inc.:
Accounts Receivable $ 518,029
Water Treatment Plants 599,457
Equipment 27,216
Intangible and Other Assets 147,631
Accounts Payable (40,874)
Common Stock and Paid in Capital
to acquire WBS, Inc. $ 1,251,459
The accompanying notes are an integral part of the financial statements.
<PAGE>5
ONSITE ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: As contemplated by the Securities and Exchange Commission
under Item 310 of Regulation S-B, the accompanying
financial statements and footnotes have been condensed and
do not contain all disclosures required by generally
accepted accounting principles and, therefore, should be
read in conjunction with the Form 10-KSB, as amended, for
Onsite Energy Corporation ("Onsite") for the year ended
June 30, 1997. In the opinion of management, the
accompanying unaudited financial statements contain all
adjustments (consisting of normal recurring adjustments)
necessary to present fairly its financial position and
results of its operations for the interim period.
NOTE 2: The consolidated balance sheet as of December 31, 1997, and
the consolidated statements of operations and cash flows
for the three and six months ended December 31, 1997 and
1996, represent the financial position and results of
operations of Onsite. The results of operations for the
three and six months ended December 31, 1997 and 1996 are
not necessarily indicative of the results to be expected
for the forthcoming year.
**The remainder of this page left intentionally blank**
<PAGE>6
NOTE 3: 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
available to common stockholders by the weighted-average
number of 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. Common stock
equivalents for the three and six months ended December 31,
1996 were anti-dilutive and excluded in the earnings per
share computation.
Onsite Energy Corporation
Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net Income (Loss) $ 57,168 $ (183,501) $ 100,909 $(510,443)
Less-Preferred Stock Dividends 3,419 - 3,419 -
Net Income applicable to common
shareholders $ 53,749 $ (183,501) $ 97,490 $ (510,443)
Weighted Average number of common shares 13,519,572 10,859,203 12,231,872 10,698,414
Basic Earnings (Loss) per Share $ ** $ (0.02) $ ** $ (0.04)
DILUTED EARNINGS PER SHARE:
Net Income from primary income per
common share $ 53,749 $ (183501) $ 97,490 $ (510,443)
Add: Preferred Stock Dividend 3,419 - 3,419 -
Net Income for diluted earnings
(loss) per share 57,168 (183,501) 100,909 (510,443)
Weighted average number of shares
used in calculating basic earnings
per common share 13,519,572 10,859,203 12,231,872 10,698,414
Add: Common equivalent shares 1,237,480 - 866,318 -
Weighted Average number of shares used
in calculation of diluted earnings
per share 14,757,052 10,859,203 13,098,190 10,698,414
Diluted Earnings (Loss) per Share $ ** $ (0.02) $ ** $ (0.04)
</TABLE>
** Less than $ 0.01 per share
<PAGE>7
NOTE 4: On October 28, 1997, Onsite Energy Corporation, Inc. entered
into a Stock Subscription Agreement (the "Stock Agreement")
with Westar Capital, Inc. Pursuant to the Stock Agreement,
Onsite has made a private placement of Two Million
(2,000,000) shares of Onsite's Class A Common Stock at Fifty
Cents ($.50) per share and Two Hundred Thousand (200,000)
shares of Onsite's newly created Series C Convertible
Preferred Stock at Five Dollars ($5.00) per share. Each
share of Onsite's Series C Convertible Preferred Stock is
convertible into five shares of Onsite's Class A Common Stock
and earns a dividend of 9.75% per annum.
In a related transaction on October 28, 1997, Onsite entered
into a "Plan and Agreement of Reorganization" (the
"Reorganization Agreement") with Westar Business Services,
Inc., a Kansas corporation ("WBS").
Pursuant to the Reorganization Agreement, the parties
effected a "tax free" exchange under Section 368 (a) (1) (B)
of the Internal Revenue Code of 1986, as amended (the
"Reorganization"). Specifically, Onsite acquired 100% of
WBS's issued and outstanding capital stock, consisting solely
of Common Stock, no par value, in exchange for One Million
Seven Hundred Thousand (1,700,000) shares of Onsite's Class A
Common Stock, par value $0.001 per share. An additional
800,000 shares of Onsite Class A Common Stock will be
delivered to Westar Capital in the event that WBS has
executed certain additional business contracts. The number
of shares issued was determined through negotiations between
the parties. As a result of the Reorganization, WBS is now a
wholly owned subsidiary of Onsite, and legally changed its
name to Onsite Business Services, Inc.
WBS provides performance contracting services, utility
services and industrial water services in the states of
Kansas, Missouri and Oklahoma. The acquisition provides
Onsite with the ability to develop new markets in the mid-
west and other areas.
The following presents Pro Forma information as if the acquisition of WBS, Inc.
occurred on July 1, 1996:
Three Months Ended Six Months Ended
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
Revenues $ 3,855,776 $ 3,702,445 $ 6,542,582 $ 7,404,890
Income (Loss) from
Operations $ 4,288 $ (293,972) $ (105,522) $ (587,943)
Net Income (Loss) $ 2,501 $ (293,972) $ (117,759) $ (587,943)
Income (Loss) Per
Share $ ** $ 0.03) $ ** $ (0.05)
** Less than $ 0.01 per share
<PAGE>8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
BACKGROUND
Onsite is a comprehensive energy service company ("ESCO") that assists its
customers in reducing electricity and fuel costs by developing, designing,
constructing, owning and operating efficient, environmentally sound energy
projects. Onsite offers a full range of professional consulting services, which
include direct access planning, market assessments, business strategy and
public policy analyses, utility deregulation and environmental
impact/feasibility studies. It is Onsite's mission to be the premier
independent provider of energy efficiency services for industrial,
institutional and commercial customers.
Onsite, a Delaware corporation, was formed pursuant to a business
reorganization effective February 15, 1994 (the "Reorganization"), between
Western Energy Management, Inc., a Delaware corporation formed in 1991
("Western"), and Onsite Energy, a California corporation formed in 1982
("Onsite-Cal"). Under the Reorganization, Onsite-Cal 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-Cal by Onsite.
As of October 31, 1997 Onsite owns all of the stock in Onsite Business
Services, which provides performance contracting services, utility services and
industrial water services primarily in the states of Kansas, Missouri and
Oklahoma.
Unless the context indicates otherwise, reference to Onsite shall include all
of its wholly owned subsidiaries.
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE SIX MONTHS ENDED DECEMBER
31, 1996
RESULTS OF OPERATIONS. Revenues for the six months ended December 31, 1997 were
$5,943,914 compared to $6,246,390 for the six months ended December 31, 1996.
The decrease in revenues was attributed to several smaller sized contracts in
1997, rather than one significant contract in 1996.
Gross margin for the six months ended December 31, 1997 was $1,802,049, or 30.3
percent of revenues, compared to $1,785,885, or 28.6 percent of revenues, for
the six months ended December 31, 1996. The increase in margin as a percentage
of revenues was the result of a larger percentage of consulting revenues, which
generally provide higher gross margins.
Selling, General and Administrative expenses ("SG&A") were $1,429,025 for the
six month period ended December 31, 1997, compared to $1,913,391 for the six
months ended December 31, 1996. The reduction of $484,366, or 25 percent is
attributable to the continued efforts by Onsite to implement savings and
expense reductions in an effort to improve overall operating results.
Net other income/expense was $773 net other expense for the six months ended
December 31, 1997, compared to $93,454 in net other expense for the six months
ended December 31, 1996. The decrease of $92,681, or approximately 99 percent,
is due to a decline in interest expense attributable to substantial reductions
in principal balances outstanding.
Net income for the six months ended December 31, 1997 was $100,909, or less
than $0.01 income per share, compared to Net loss of $510,443, or $.05 loss per
share for the six month period ended December 31, 1996. Per share numbers in
1997 were adjusted for dividends accrued on the convertible Series C Preferred
Stock.
<PAGE>9
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1996
RESULTS OF OPERATIONS. Revenues for the three month period ended December 31,
1997 were $3,706,109, compared to $2,935,524 for the three months ended
December 31, 1996, an increase of $770,585, or 26 percent. The increase in
revenues is due to the completion of several new smaller sized contracts and
the recognition of revenues of the newly acquired acquisition, Onsite Business
Services, Inc.
Gross Margin was $1,151,038, or 31 percent of revenues for the three month
period ended December 31, 1997, compared to $969,558, or 33 percent of revenues
for the three month period ended December 31, 1996. The decrease in margin is
attributable to lower margins reflected from the newly acquired acquisition,
"OBS".
SG&A expenses were $938,755 for the three months ended December 31, 1997,
compared to $943,666 for the three months ended December 31, 1996. The change
was attributable to Onsite's continued efforts to decrease expenses offset by
the additional expenses acquired with OBS.
Net other income/expense was $3,712 in other income in the three months ended
December 31, 1997, compared to $39,682 in net other expense for the three month
period ended December 31, 1996, a decrease of $43,394. The decrease in net
other expense was substantially attributable to a decrease in interest expense.
Net income for the three months ended December 31, 1997 was $57,168, or less
than $ 0.01 income per share, compared to net loss of $183,501, or $ 0.02 loss
per share.
LIQUIDITY AND CAPITAL RESOURCES. Onsite's cash and cash equivalents were
$1,642,509 as of December 31, 1997, compared to $526,894 as of June 30, 1997.
Working capital was $2,589,337 as of December 31, 1997 compared to a negative
working capital $30,333 as of June 30, 1997.
Cash flows used by operating activities during the six months ended December
31, 1997 were $630,342, compared to cash flows used by operating activities of
$751,420 for the six months ended December 31, 1996, a decrease of $121,078.
Cash flows used by investing activities included $123,190 of fixed assets
purchased during the six months ended December 31, 1997. There was no cash
flow from investing activities for the six months ended December 31, 1996.
Cash flows provided by financing activities were $1,869,147 during the six
months ended December 31, 1997, compared to cash flows used by financing
activities of $192,262 for the comparable period last year. The increase in
cash provided by financing activities in the current year includes $1,947,287
in proceeds from the issuance of stock to Westar Capital, Inc., which is offset
by $83,104 in repayment of long-term debt.
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults upon Senior Securities - Not Applicable
<PAGE>10
Item 4. Submission of Matters to a Vote of Security Holders-Not Applicable
The Annual Meeting of Stockholders of Onsite was held in San Diego, California,
on December 5, 1997. The following matters were submitted to a vote of
stockholders:
1. To elect three directors of Onsite by holders of Class A Common Stock
to hold office until the 1999 Annual Meeting of Stockholders and
until their respective successors are elected and qualified; and
2. To approve amendments to Onsite's 1993 Stock Option Plan (I)
increasing the number of shares available for grant under the Plan;
and (ii) authorizing the Board of Directors to amend the Plan as
necessary to comply with applicable federal and state securities law,
rules and regulations, and to make discretionary grants of options to
non-employee directors of Onsite (and approving grants that were made
by the Board of Directors to the non-employee directors in April
1997, subject to stockholder approval.
Stockholders of record at the close of business on October 10, 1997 were
entitled to notice of, and to vote at, the meeting.
The following is a summary of the results of that meeting:
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Name of Director Result Votes For Votes Total
Withheld
Charles C. McGettigan ELECTED 10,340,002 40,271 10,380,273
Richard T. Sperberg ELECTED 10,340,002 40,271 10,380,273
Rita A. Sharpe ELECTED 10,340,002 40,271 10,380,273
PROPOSAL NO. 2 - AMENDMENT TO STOCK OPTION PLAN
Proposal Result Votes For Votes Votes Total
Against Withheld
Amendment to
ADOPTED 9,690,375 168,547 21,876 9,880,798
1993 Stock
Option Plan
ITEM 5. OTHER - None
<PAGE>11
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT, THE
REGISTRANT CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
ONSITE ENERGY CORPORATION
DATED: FEBRUARY 19, 1998 By: RICHARD T. SPERBERG
Richard T. Sperberg
Chief Executive Officer,
Chief Financial Officer
DATED: FEBRUARY 19, 1998 By: ANGELA BELFIORE
Angela Belfiore
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-QSB
FOR THE PERIOD ENDED DECEMBER 31, 1997 FOR ONSITE ENERGY CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,642,509
<SECURITIES> 0
<RECEIVABLES> 2,752,809
<ALLOWANCES> (15,030)
<INVENTORY> 0
<CURRENT-ASSETS> 5,134,637
<PP&E> 1,236,747
<DEPRECIATION> (559,339)
<TOTAL-ASSETS> 6,127,625
<CURRENT-LIABILITIES> 2,545,300
<BONDS> 0
0
200
<COMMON> 14,659
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,127,625
<SALES> 5,943,914
<TOTAL-REVENUES> 5,943,914
<CGS> 4,141,865
<TOTAL-COSTS> 4,141,865
<OTHER-EXPENSES> 1,693,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,588
<INCOME-PRETAX> 113,146
<INCOME-TAX> 12,237
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,909
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
