_____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 12, 1998
(Date of Report)
ONSITE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE [1-12738] [33-0576371]
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
701 Palomar Airport Road, Suite 200, Carlsbad, California 92009
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 760-931-2400
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
a. FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
(1) Financial statements of Westar Business Services, Inc. are
attached hereto.
b. EXHIBITS.
2.1 Copy of the Plan and Agreement of Reorganization{(1)}
4.1 Copy of the Certificate of Designation of the Rights,
Privileges and Preferences of the Series C Convertible
Preferred Stock of Onsite Energy Corporation{(1)}
10.1 Copy of the Stock Subscription Agreement{(1)}
10.2 Copy of the Registration Rights Agreement{(1)}
(1) Incorporated by reference to the Company's Form 8-K filed November 12,
1997.
<PAGE>1
ONSITE ENERGY CORPORATION
PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information is presented to reflect the
acquisition of Westar Business Services, Inc. (WBS) from Westar Capital, Inc.
by Onsite Energy Corporation (Onsite) for 1,700,000 shares of Onsite's common
stock pursuant to the Plan and Agreement of Reorganization dated October 28,
1997, and the sale of 2,000,000 shares of Onsite's Class A Common stock at
$0.50 per share and 200,000 shares of Onsite's Series C Convertible Preferred
Stock at $5.00 per share to Westar Capital, Inc. pursuant to the Stock
Subscription Agreement dated October 28, 1997.
The accompanying pro forma financial information includes:
1. A Pro Forma Balance Sheet as of September 30, 1997, prepared as if
the transactions occurred as of that date.
2. Pro Forma Statements of Operations for the year ended June 30, 1997
and the three months ended September 30, 1997, prepared as if the
transactions occurred at the beginning of the periods presented.
The pro forma balance sheet was derived from the unaudited balance sheets of
Onsite and WBS as of September 30, 1997. The pro forma statements of operations
for the year ended June 30, 1997 were derived from the audited financial
statements of Onsite for the year then ended and the audited financial
statements of WBS for the year ended December 31, 1996 less the unaudited
financial statements for the six months ended June 30, 1996 plus the unaudited
financial statements for the six months ended June 30, 1997. The pro forma
statements of operations for the three months ended September 30, 1997 were
derived from the unaudited financial statements of Onsite for the three months
then ended and the unaudited financial statements of WBS for the nine months
ended September 30, 1997 less the unaudited financial statements of WBS for the
six months ended June 30, 1997. Revenues and Net Income (Loss) for WBS were
$2,947,000 and ($390,000) and $2,148,000 and $111,000 for the six months ended
June 30, 1996 and 1997, respectively.
The assumptions used in preparing the pro forma adjustments are described in
the footnotes to the pro forma financial statements. However, due to the
uncertainties inherent in the assumption process, it is at least reasonably
possible that the assumptions might require further revision and that such
revision could be material.
The pro forma financial information should be read in conjunction with the
historical financial statements of Onsite and WBS which were used to prepare
the pro forma financial information. The historical WBS financial statements
are attached hereto, while the historical financial statements of Onsite are
contained in Onsite's Form 10-KSB.
The pro forma financial information presented is not necessarily indicative of
future operations or the actual results that would have occurred had the
transactions been consummated at the beginning of the period indicated.
<PAGE>2
ONSITE ENERGY CORPORATION
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
<S> <C> <C> <C> <C> <C>
Onsite Energy Westar Business PRO FORMA PRO FORMA
Corporation Services, Inc. Adjustments Combined
ASSETS
CURRENT ASSETS:
Cash $ 316,000 $ - (b) $ 2,000,000 $ 2,316,000
Cash - restricted 151,000 - - 151,000
Trade receivables, net 966,000 729,000 (c) (163,000) 1,532,000
Related party receivable - 58,000 (c) (58,000) -
Cost and estimated
earnings in
excess of billings on 228,000 - - 228,000
uncompleted contracts
Prepaid expenses - 3,000 (c) (3,000) -
Other assets 26,000 - - 26,000
Total current assets 1,687,000 790,000 1,776,000 4,253,000
PROPERTY AND EQUIPMENT, net 39,000 622,000 (c) (7,000) 654,000
OTHER ASSETS:
Cash - restricted 79,000 - - 79,000
Costs incurred on future 1,000 - - 1,000
projects
Goodwill, net 167,000 - (a) 85,000 252,000
Other 24,000 - - 24,000
TOTAL ASSETS $ 1,997,000 $ 1,412,000 $ 1,854,000 $ 5,263,000
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,102,000 $ 57,000 (c) $ (30,000) $ 1,129,000
Billings in excess of
costs and
estimated earnings on 14,000 - - 14,000
uncompleted contracts
Accrued liabilities 392,000 239,000 (c) (184,000) 447,000
Current portion of notes 76,000 - - 76,000
payable
Total current liabilities 1,584,000 296,000 (214,000) 1,666,000
LONG TERM LIABILITIES:
Related party notes 32,000 2,827,000 (c) (2,827,000) 32,000
payable
Accrued future operation
and maintenance costs 421,000 - - 421,000
associated
with energy service agreements
Total liabilities 2,037,000 3,123,000 (3,041,000) 2,119,000
STOCKHOLDERS' EQUITY
(DEFICIT):
Preferred stock - - (b) 200 200
Common stock 11,000 1,000 (a) 2,000
(b) 2,000 16,000
Additional paid in 17,053,000 - (a) 1,188,000
capital (b) 1,997,800 20,238,800
Accumulated deficit (17,104,000) (1,712,000) (a) (1,105,000)
(c) 2,810,000 (17,111,000)
Total stockholders' equity (40,000) (1,711,000) 4,895,000 3,144,000
(deficit)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 1,997,000 $ 1,412,000 $ 1,854,000 $ 5,263,000
</TABLE>
<PAGE>3
ONSITE ENERGY CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
<S> <C> <C> <C> <C> <C>
ONSITE ENERGY WESTAR BUSINESS PRO FORMA PRO FORMA
Corporation Services, Inc. Adjustments Combined
REVENUES $ 9,561,000 $ 5,405,000 (c) $ (3,088,000) $ 11,878,000
COST OF GOODS SOLD 6,692,000 2,390,000 (c) (1,065,000) 8,017,000
Gross Margin 2,869,000 3,015,000 (2,023,000) 3,861,000
OPERATING EXPENSES:
Selling, general and (c) (2,720,000)
administrative 3,726,000 3,850,000 (d) 17,000 4,873,000
Loss on disposal of
partnership interests 425,000 - - 425,000
Gain on sale of assets (18,000) - - (18,000)
4,133,000 3,850,000 (2,703,000) 5,280,000
LOSS FROM OPERATIONS (1,264,000) (835,000) 680,000 (1,419,000)
OTHER INCOME (EXPENSES):
Interest income and other 43,000 - - 43,000
Interest (expense) (159,000) (111,000) (c) 111,000 (159,000)
(116,000) (111,000) 111,000 (116,000)
LOSS BEFORE INCOME TAX (1,380,000) (946,000) 791,000 (1,535,000)
EXPENSE
Income tax expense 9,000 - - 9,000
NET LOSS $ (1,389,000) $ (946,000) $ 791,000 $ (1,544,000)
NET LOSS PER COMMON SHARE $ (.13) $ (.10)
WEIGHTED AVERAGE SHARES
OUTSTANDING 10,818,498 (a) & 3,700,000 14,518,498
(b)
</TABLE>
<PAGE>4
ONSITE ENERGY CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
<S> <C> <C> <C> <C> <C>
ONSITE ENERGY WESTAR BUSINESS PRO FORMA PRO FORMA
Corporation Services, Inc. Adjustments Combined
REVENUES $ 2,238,000 $ 1,041,000 (c) $ (592,000) $ 2,687,000
COST OF GOODS SOLD 1,587,000 680,000 (c) (483,000) 1,784,000
Gross Margin 651,000 361,000 (109,000) 903,000
OPERATING EXPENSES:
Selling, general and (c) (232,000)
administrative 596,000 644,000 (d) 4,000 1,012,000
INCOME (LOSS ) FROM 55,000 (283,000) 119,000 (109,000)
OPERATIONS
OTHER INCOME (EXPENSES):
Interest income and other 4,000 - - 4,000
Interest (expense) (9,000) (93,000) (c) 93,000 (9,000)
(5,000) (93,000) 93,000 (5,000)
INCOME BEFORE INCOME TAX
EXPENSE 50,000 (376,000) 212,000 (114,000)
Income tax expense 6,000 - - 6,000
NET INCOME (LOSS) $ 44,000 $ (376,000) $ 212,000 $ (120,000)
NET INCOME (LOSS) PER
COMMON SHARE * $ (.01)
WEIGHTED AVERAGE SHARES
OUTSTANDING 10,944,172 (a) & 3,700,000 14,644,172
(b)
* Represents less than $.01
per share
</TABLE>
<PAGE>5
ONSITE ENERGY CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
(a) To reflect the acquisition of WBS in a purchase
transaction where Onsite acquired 100% of the stock of WBS
for 1,700,000 shares of Onsite's Class A Common Stock. The
acquisition was valued at $1,190,000, resulting in
goodwill of approximately $85,000 which will be amortized
over 5 years.
(b) To reflect the sale of 2,000,000 shares of Onsite's Class
A Common Stock at $0.50 per share and 200,000 shares of
Onsite's Series C Convertible Preferred Stock at $5.00 per
share.
(c) To eliminate the effect of certain account balances and
operating activities not acquired.
(d) To reflect the amortization of goodwill using the
straight-line method over a period of five years resulting
from the value assigned in the purchase price allocation.
<PAGE>F-1
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report...........................................F-2
BALANCE SHEETS - December 31, 1996 and September 30, 1997 (unaudited)..F-3
STATEMENTS OF OPERATIONS - For the Year Ended December 31, 1996,
and for the nine months ended September 30, 1996 and 1997
(unaudited)....................................................F-4
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - For the Year Ended
December 31, 1996,
and for the nine months ended September 30, 1997 (unaudited)...F-5
STATEMENTS OF CASH FLOWS - For the Year Ended December 31, 1996,
and for the nine months ended September 30, 1996 and 1997
(unaudited)....................................................F-6
NOTES TO FINANCIAL STATEMENTS..........................................F-7
<PAGE>F-2
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors
Westar Business Services, Inc.
Topeka, Kansas
We have audited the accompanying balance sheet of Westar Business Services,
Inc., as of December 31, 1996, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 Westar Business Services,
Inc., as of December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California
December 22, 1997
<PAGE>F-3
WESTAR BUSINESS SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, September 30,
1996 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Accounts receivable - trade, net of allowance for
doubtful $ 255,433 $ 729,431
accounts of $0 and $11,204 (unaudited),
respectively
Accounts receivable - related party 46,730 58,104
Other current assets 5,660 2,498
Total current assets 307,823 790,033
PROPERTY AND EQUIPMENT, net 213,682 621,978
TOTAL ASSETS $ 521,505 $ 1,412,011
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 832,305 $ 56,846
Accrued liabilities 155,152 239,327
Total current liabilities 987,457 296,173
DUE TO PARENT 980,581 2,826,698
Total liabilities 1,968,038 3,122,871
COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, no par value, 1000 shares
authorized, 1,000 1,000
1,000 shares issued and outstanding
Accumulated deficit (1,447,533) (1,711,860)
Total stockholders' equity (deficit) (1,446,533) (1,710,860)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 521,505 $ 1,412,011
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
<PAGE>F-4
WESTAR BUSINESS SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE MONTHS ENDED
<S> <C> <C> <C>
DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
(unaudited) (unaudited)
REVENUES $6,204,306 $ 4,471,738 $ 3,188,603
COST OF GOODS SOLD 1,696,761 1,009,733 2,124,180
Gross Margin 4,507,545 3,462,005 1,064,423
OPERATING EXPENSES:
General and administrative 5,951,801 4,034,132 1,128,343
LOSS FROM OPERATIONS (1,444,256) (572,127) (63,920)
INTEREST EXPENSE (3,277) (310) (200,407)
LOSS BEFORE INCOME TAXES (1,447,533) (572,437) (264,327)
PROVISION (BENEFIT) FOR INCOME TAXES - - -
Net Loss $ (1,447,533) $ (572,437) $ (264,327)
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
<PAGE>F-5
WESTAR BUSINESS SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996,
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ACCUMULATED STOCKHOLDERS'
<S> <C> <C> <C> <C>
SHARES AMOUNT DEFICIT EQUITY (DEFICIT)
BALANCES, January 1, 1996 1,000 $ 1,000 $ - $ 1,000
Net loss - - (1,447,533) (1,447,533)
BALANCES, December 31, 1996 1,000 1,000 (1,447,533) (1,446,533)
Net income (unaudited) - - (264,327) (264,327)
BALANCES, September 30, 1997 1,000 $ 1,000 $ (1,711,860) $ (1,710,860)
(unaudited)
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
<PAGE>F-6
WESTAR BUSINESS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE MONTHS ENDED
<S> <C> <C> <C>
DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,447,533) $(572,437) $(264,327)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 26,700 13,055 70,938
Bad debt expense - - 11,204
Changes in operating assets and
liabilities:
Accounts receivable (255,433) (344,419) (485,202)
Accounts receivable - related (46,730) (42,631) (11,374)
party
Other current assets (5,660) (6,829) 3,162
Accounts payable 832,305 32,403 (775,459)
Accrued liabilities 155,152 60,970 84,174
Net adjustments 706,334 (287,451) (1,102,557)
Net cash provided by (used in)
operating (741,199) (859,888) (1,366,884)
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (240,382) (108,845) (542,340)
Net cash used in investing (240,382) (108,845) (542,340)
activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash from sale of stock 1,000 1,000 -
Net advances from parent 980,581 992,283 1,909,224
Net cash provided by financing 981,581 993,283 1,909,224
activities
NET INCREASE (DECREASE) IN CASH - 24,550 -
CASH AND CASH EQUIVALENTS, beginning of
period - -
CASH AND CASH EQUIVALENTS, end of period $ - $ 24,550 $ -
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Non-cash investing and financing
transactions:
Property and equipment net of
accumulated
depreciation of $25,874 $ - $ - $ 63,106
transferred at net book value to
affiliated company
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
<PAGE>F-7
WESTAR BUSINESS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Information subsequent to December 31, 1996 is unaudited)
1. NATURE OF OPERATIONS:
Westar Business Services, Inc., (the Company) was incorporated in the
state of Kansas as a wholly owned subsidiary of Westar Energy, Inc., on
November 11, 1995 and commenced operations on January 1, 1996. The
Company was formed to provide utility related services to customers of
Western Resources, Inc., the parent company of Westar Energy, Inc. In
addition, the Company provides marketing and development services for
Western Resources, Inc. The Company also provides industrial water
services and performance contracting services in the states of Kansas,
Missouri and Oklahoma.
2. SIGNIFICANT ACCOUNTING POLICIES:
STATEMENT OF CASH FLOWS - For purposes of the statements of cash flows,
the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost and
depreciated using the straight-line method over the estimated useful
lives (ranging from 2 to 5 years) of the respective assets. The cost of
normal maintenance and repairs is charged to operating expense as
incurred. Material expenditures which increase the life of an asset are
capitalized and depreciated over the estimated remaining useful life of
the asset. The cost of fixed assets sold, or otherwise disposed of, and
the related accumulated depreciation are removed from the accounts, and
any gains or losses are reflected in current operations.
INCOME TAXES - The Company accounts for income taxes under the liability
method on a separate return basis, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statements and
tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. The
actual results could differ from those estimates.
The Company's financial statements are based upon a number of significant
estimates, including the allowance for doubtful accounts and the
estimated useful lives selected for property and equipment. 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.
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and
circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recoverability would be performed. If an
<PAGE>F-8
evaluation is 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 value is required.
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 described below. In accordance
with FASB Statement 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 described in Note
8 do not take into account the value of any collateral or security.
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
the Company's financial instruments, which includes all cash, accounts
receivables, accounts payable, and other debt, approximates the carrying
value in the financial statements at December 31, 1996.
IMPACT OF RECENTLY ISSUED STANDARDS - The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards 130,
"Reporting Comprehensive Income" and Statement of Financial Accounting
Standards 131 "Disclosures About Segments of an Enterprise and Related
Information." Statement 130 establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, Statement 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement
that displays such information with the same prominence as other
financial statements. Statement 131 supersedes Statement of Financial
Accounting Standards 14 "Financial Reporting for Segments of a Business
Enterprise." Statement 131 establishes standards on the way that public
companies report financial information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. Statement 131 defines
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and
in assessing performance.
Statements 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if
any, the standards may have on the future financial statement
disclosures. Results of operations and financial position, however, will
be unaffected by implementation of these standards.
<PAGE>F-9
INTERIM FINANCIAL INFORMATION - The September 30, 1996 and 1997 financial
statements have been prepared by the Company without audit. In the
opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation of the Company's financial position as
of September 30, 1997, and the results of their operations and cash flows
for the nine month periods ended September 30, 1996 and 1997. The
results of operations for the nine month periods ended September 30, 1996
and 1997 are not necessarily indicative of those that will be obtained
for the entire fiscal year.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
December 31, SEPTEMBER 30,
1996 1997
Plant and equipment $ 84,518 $ 658,965
Office equipment and furniture 8,204 34,010
Work in Progress 147,660 767
240,382 693,742
Accumulated Depreciation (26,700) (71,764)
$ 213,682 $ 621,978
Depreciation expense was $13,055, $26,700 and $70,938 for the nine month
period ending September 30, 1996, for the year ending December 31, 1996
and for the nine month period ending September 30, 1997, respectively.
4. ACCRUED LIABILITIES:
Accrued liabilities consists of the following:
December 31, SEPTEMBER 30,
1996 1997
Accrued payroll and benefits $ 22,924 $ 14,214
Accrued interest 2,967 12,531
Accrued sales tax 1,446 25,326
Deferred compensation 127,815 132,646
Other - 54,610
$ 155,152 $ 239,327
<PAGE>F-10
5. DUE TO PARENT:
Due to parent represents net cash and working capital advances. During
1997, interest was charged on cash advances at prime plus 1%. For the
nine month period ending September 30, 1997, interest expense related to
cash advances was $190,843.
6. RELATED PARTY TRANSACTIONS:
The financial statements of the Company reflect the proportional cost
allocation of certain common expenses of the parent and the Company,
including accounting and human resources. Management believes that such
allocation method is reasonable and approximates the expenses that would
have been incurred by the Company on a stand alone basis. The
accompanying financial statements include all costs of doing business in
accordance with Staff Accounting Bulletin Topic 1B.
The Company provided marketing and development services to Western
Resources, Inc. Such services amounted to $3,065,719, $4,444,622, and
$1,512,782 for the nine month period ending September 30, 1996, for the
year ending December 31, 1996 and for the nine month period ending
September 30, 1997, respectively. In June 1997, these activities were
transferred to Western Resources, Inc.
The Company provided industrial water treatment services to Western
Resources, Inc. Such services amounted to $47,000 and $257,232 for the
year ending December 31, 1996 and for the nine month period ending
September 30, 1997, respectively. No such services were provided for the
nine month period ending September 30, 1996.
7. COMMITMENTS:
The Company leases office space in Topeka, Kansas from their parent
Company, Western Resources, Inc. The total future minimum lease payments
are as follows:
YEARS ENDING
DECEMBER 31, AMOUNT
1997 $ 117,139
1998 63,975
1999 63,975
$ 245,089
Rent expense was $27,105, $85,075 and $69,147 for the nine month period
ending September 30, 1996, for the year ending December 31, 1996 and for
the nine month period ending September 30, 1997, respectively.
<PAGE>F-11
8. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK, MAJOR CUSTOMERS AND OTHER
RISKS AND UNCERTAINTIES:
Most of the Company's sales are to customers located in Kansas.
Financial instruments that subject the Company to credit risk consist
primarily of accounts receivable. The Company frequently makes large
credit sales to customers. At December 31, 1996, approximately $160,500
or 64% of the Company's accounts receivable are due from three customers.
Also see Note 6.
9. INCOME TAXES:
Income tax expense is comprised of the following:
FOR THE YEAR
ENDED FOR THE NINE MONTHS ENDED
December 31, September 30,
1996 1996 1997
(unaudited) (unaudited)
Federal $ - $ - $ -
State - - -
$ $ - $ -
<TABLE>
<S> <C> <C>
December 31, SEPTEMBER 30,
1996 1997
(unaudited)
Current Deferred Tax Assets (Liabilities)
Deferred compensation $ 47,918 $ 53,192
Write down of inventory for book not tax 6,397 6,397
Pension fund contributions (4,073) -
Medical claims reserve (7,919) -
Other - 8,204
42,323 67,793
Valuation allowance (42,323) (67,793)
Net deferred tax asset $ - $ -
Long Term Deferred Tax Assets (Liabilities)
Depreciation $ (18,481) $ (12,034)
Net operating loss carryforward 516,244 627,255
497,763 615,221
Valuation allowance (497,763) (615,221)
Net long term deferred tax asset $ - $ -
</TABLE>
The Company is a member of Western Resources, Inc.'s federal consolidated
group for income tax purposes. Under FAS 109, the consolidated amount of
current and deferred tax expense should be allocated to each member of
the group. The Company's portion of consolidated current and deferred
tax expense is determined as if the Company had filed a separate income
tax return.
The use of the above method produces a deferred tax asset for the net
operating loss carryforward. However, the Company's net operating loss
was fully utilized by Western Resources, Inc.
10. SUBSEQUENT EVENTS:
On October 28, 1997, the Company entered into an Agreement and Plan of
Reorganization with Onsite Energy Corporation, a Delaware Corporation,
("Onsite"). Through a tax free exchange, Onsite acquired all of the
issued and outstanding shares of the Company in exchange for 1,700,00
shares of Onsite's Class A common stock. An additional 800,000 shares of
Onsite Class A Common Stock will be delivered to Westar Capital in the
event that the Company has executed certain additional business
contracts.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 12, 1998
ONSITE ENERGY CORPORATION
By: RICHARD T. SPERBERG
Richard T. Sperberg
President
