●
Earnings Feed
Filings
Companies
Insiders
Pricing
Blog
⌘
K
Login
Start Free
ENERGY & POWER SOLUTIONS, INC.
|
S-1
Mar 30, 5:41 PM ET
ENERGY & POWER SOLUTIONS, INC. S-1
Loading document...
Contents
443
Registration No. 333-_________
UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM S-1
Energy and Power Solutions, Inc.
150 Paularino Avenue, Suite A120 Costa Mesa, California 92626 (714) 586-8002
Jay B. Zoellner Chairman, Chief Executive Officer and President Energy and Power Solutions, Inc. 150 Paularino Avenue, Suite A120 Costa Mesa, California 92626 (714) 586-8002
CALCULATION OF REGISTRATION FEE
SUBJECT TO COMPLETION, DATED MARCH 30, 2010
Energy and Power Solutions, Inc.
TABLE OF CONTENTS
Industry and Market Data
PROSPECTUS SUMMARY
Overview
Industry Overview and Market Opportunity
Competitive Strengths
Our Growth Strategy
Customers
Risk Factors
Corporate Information
The Offering
Summary Consolidated Financial and Other Data
Consolidated statement of operations data ($ in thousands):
Consolidated balance sheet data ($ in thousands):
RISK FACTORS
Risks Related to Our Business
We have incurred significant operating losses in our recent history and may not achieve or sustain profitability in the future.
Our revenues have historically been concentrated with a few large customers. If we lose one or more of these customers, our business, results of operations and financial condition could be materially adversely affected.
If we are unable to develop, position and price our products and services to meet the energy efficiency market opportunity, our growth and results of operations would be adversely affected.
The longevity of our business depends in part on our ability to enhance and sell the functionality of our current solutions and technology platform to remain competitive and meet customer needs.
We may not be able to successfully deploy our solutions in a timely manner.
Our energy monitoring service is immature and volatile, and if it develops slower than we expect, our business could be harmed.
Our failure or inability to obtain or protect our intellectual property rights could weaken our competitive position.
Our proprietary rights could potentially conflict with the rights of others and we may be prevented from selling some of our products.
Our business depends on our ability to identify at least a minimum threshold of energy savings under some of our long-term service contracts or otherwise meet certain minimum performance standards on our projects.
Any decline in service renewals, projects, or other business resulting from our performance could cause a decline in revenue and harm our future operating results.
Problems with our IT infrastructure and software could cause disruption to our business, harm our reputation, and cause us to lose revenue and incur additional costs to remedy.
We have grown rapidly in recent years and we have limited operating experience at our current scale of operations; if we are unable to manage our operations at our current size or manage any future growth effectively, our service levels and financial performance may suffer.
We operate in a highly competitive industry and if we are unable to compete successfully our revenue and profitability will be adversely affected.
Equipment we use in our Engineer-Procure-Construct, or EPC, projects involve significant capital investment and may not provide us or our customers an optimal return on investment.
Our EPC projects sometimes require us or our subcontractors to work in hazardous conditions and remediate environmental hazards caused by our activities, which could result in claims against us.
We are dependent on third parties to complete substantial work under our contracts. Failure of third parties to provide quality products or services in a timely manner could cause delays in delivery of our solutions.
If we are unable to form teaming arrangements, our ability to compete for and win certain contracts may be negatively impacted.
Our revenues are, in part, derived from our relationships with utilities and other energy service providers. If we lose revenues from these sources, our business and results of operations could be materially adversely affected.
We expect that our revenue will fluctuate, which could cause our stock price to decline.
Because we recognize revenue from subscriptions for our service over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our operating results.
We bear the risk of cost overruns in a majority of our energy project contracts, which we may not be able to recover from our customers, which could result in reduced profits or losses.
If the timing of our operating expenses is not aligned with our revenues, it could have a material adverse affect on our business, results of operations and financial condition.
Outages or other interruptions in the operations of our CHP plants could result in a material adverse effect on our business, results of operations and financial condition.
If we are unable to recover claims against project owners for payment, our financial condition could suffer.
If we experience delays and/or defaults in customer payments, we could suffer liquidity problems or we could be unable to recover all expenditures.
We are dependent upon our management team and development and operations personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.
Our success is dependent upon our ability to hire, retain, mobilize and utilize qualified personnel and subcontractors.
Failure to adequately expand our direct sales force and develop and expand our indirect sales channel will impede our growth.
Interruptions, delays or security breaches in our data center hosting facilities could impair the delivery of our solutions, result in losses of revenues, cause us to incur legal and other costs to remedy, and our business and reputation will suffer.
Our backlog may not be a reliable indicator of our future earnings.
Our previously recorded revenue or profits could be reduced or reversed if our estimates materially change under our percentage-of-completion accounting method for projects.
Personal injury, product liability and other claims against us could have a material adverse effect on our business, results of operations and financial condition.
Our loan agreements contain financial covenants and operating restrictions that may limit our access to credit. If we fail to adhere to such covenants and restrictions, we could be required to repay all or a portion of our indebtedness.
We may need to raise additional capital to grow our business, and we may not be able to raise capital on terms acceptable to us or at all.
Our ability to use our net operating loss carry forwards could be subject to additional limitation if our ownership has or will change by more than 50%, which could potentially result in increased future tax liability.
Unanticipated changes in our effective tax rate could adversely affect our future results.
The current worldwide financial crisis will likely affect a portion of our customer base, subcontractors and suppliers and could materially affect our backlog and profits.
Acquisitions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of a transaction.
In the event we make acquisitions using our stock as consideration, we could dilute share ownership.
Charges to earnings resulting from acquisitions may adversely affect our operating results.
Natural disasters, acts of terrorism, or other catastrophic events beyond our control could disrupt our operations and cause delays in delivery of our solutions.
Risks Related to Our Industry
Fluctuating commodity prices could adversely affect our profitability and results of operations.
Our CHP plants are subject to state air quality regulations which could adversely affect our results of operations.
Existing and future anticipated greenhouse gas and carbon legislation could adversely affect profitability of our CHP plants or render our technology platform obsolete if we cannot develop software to help our customers comply with new regulations.
Environmental, safety and health regulation changes could impose significant additional costs or cause the size of our market to decline.
The economic viability of our owned CHP projects depends on customer demand for electric and thermal power, which creates a risk that our projects will be uneconomic.
The economic viability of our owned CHP projects depends on the price spread between natural gas and electricity, and the variability of the prices of these components creates a risk that our projects will be uneconomic.
Utility regulations may make the market for our Asset Operations business more difficult or less economical, and any slowdown in the utility deregulation process would be an impediment to the growth of our business.
Our CHP PPA business is largely unproven and may not be accepted by a sufficient number of customers.
Risks Related to the Offering
There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity.
The price of our common stock may fluctuate significantly and you could lose all or part of your investment.
If securities or industry analysts do not publish research or reports about our business, if they change their recommendations regarding our stock adversely or if our operating results do not meet their expectations, our stock price could decline.
As a public company, we will become subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy, will increase our costs and may divert management attention from our business.
The changes required by becoming a public company will require a significant commitment of additional resources and management oversight that will cause us to incur increased costs and which might place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns. In addition, we might not be successful in implementing these requirements.
Our principal stockholders and their affiliates will continue to own a substantial amount of our stock after this offering, which ownership will give them significant influence over our business.
Sales of outstanding shares of our stock into the market in the future could cause the market price of our stock to drop significantly, even if our business is doing well.
You will suffer immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
We will have broad discretion in applying the net proceeds of this offering and may not use those proceeds in ways that will enhance the market value of our common stock.
Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.
We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
Provisions in our certificate of incorporation and bylaws and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our stock.
Non-U.S. investors may have difficulty effecting service of process against us or enforcing judgments against us in courts of non-U.S. jurisdictions.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Other Significant Developments
Basis of Presentation
Revenues
Costs of Sales
Operating Expenses
Research and Development Expenses
Selling, General and Administrative Expenses
Interest Income
Interest Expense
Factors Affecting Comparability
Public company expenses
Stock-based compensation
Results of Operations
Comparison of the Years Ended December 31, 2009 and 2008
Revenue
Energy Services
Energy Sales
Cost of Revenues and Gross Profit (Loss)
Energy Services
Energy Sales
Operating Expenses
Research and Development Expenses
Selling, General and Administrative Expenses
Other Income (Expense)
Interest Income
Interest Expense
Other Income (Expense), Net
Provision for Income Taxes (Income Tax Benefit)
Comparison of the Years Ended December 31, 2008 and 2007
Revenues
Energy Services
Energy Sales
Cost of Revenues and Gross Profit (Loss)
Energy Services
Energy Sales
Operating Expenses
Research and Development Expenses
Selling, General and Administrative Expenses
Other income (expense)
Interest Income
Interest Expense
Other Income (Expense), Net
Provision for Income Taxes (Income Tax Benefit)
Liquidity and Capital Resources
Overview
Cash Flows
Cash Flows Used in Operating Activities
Cash Flows Provided by and Used in Investing Activities
Cash Flows Provided by and Used in Financing Activities
Equity Financing Activities
Credit Facility Borrowings
Capital Spending
Contractual Obligations
Off-Balance Sheet Arrangements
Qualitative and Quantitative Disclosures About Market Risk
Critical Accounting Policies and Estimates
Revenue and Cost Recognition
Energy Services
Energy Sales
Allowance for Doubtful Accounts
Property, Plant and Equipment
Goodwill
Long-Lived Assets
Income Taxes
Recently Issued Accounting Standards
BUSINESS
Overview
The EPS WayTM and Our Lines of Business
The xChange PointTM Solutions Process
Industry Overview
Market Size
Market Opportunity
Governmental Programs, Incentives and Regulations
Our Competitive Strengths
Our Growth Strategy
Our Solutions
xChange PointTM
xChange PointTM Features.
xChange PointTM Communication and Data Security
Energy Projects
Energy Projects Flow of Services
Auto-Demand Response (Illustrative)
Permanent Load Shifting (Illustrative)
Asset Operations
Asset Operations Flow of Services
Energy and Emissions Savings of Clean Heat and Power (Illustrative)
Financial Products
Sales and Marketing
Target Market
Sales
Customers
Our History
Intellectual Property
Competition
Employees
Facilities
Legal Proceedings
MANAGEMENT
Directors and Executive Officers
Board Composition
Director Independence
Board Committees
Audit Committee
Compensation Committee
Nominating and Corporate Governance Committee
Code of Ethics
EXECUTIVE COMPENSATION
Summary Compensation Table — 2009
Narrative Disclosure to the Summary Compensation Table
Fiscal Year 2009 Management Incentive Program
Fiscal Year 2010 Management Incentive Program
Employment Agreements with Named Executive Officers
Prior Employment Agreement Provisions for Messrs. Zoellner, Subramanya and Akerstrom
Equity Compensation Awards
Amended and Restated 2007 Stock Award Plan
Outstanding Equity Compensation Awards
Outstanding Equity Awards at Fiscal Year-End — 2009
Director Compensation
Director Compensation — 2009
Outstanding Equity Awards at Fiscal Year-End — 2009
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Voting Agreement
Registration Rights Agreement
Indemnification Agreements
Securities Sold and Purchased by Insiders
Series A Convertible Preferred Stock
Bridge Debt Financing
Series B Convertible Preferred Stock
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
DESCRIPTION OF CAPITAL STOCK
General
Common Stock
Preferred Stock
Options and Warrants to Purchase Capital Stock
Registration Rights Agreement
Provisions of Delaware Law and our Certificate of Incorporation and Bylaws with Anti-Takeover Implications
Section 203 of the Delaware General Corporation Law
Certificate of Incorporation and Bylaw Provisions in Effect Upon Closing of this Offering
Written Consent of Stockholders
Amendment of the Bylaws
Amendment of Certificate of Incorporation
Special Meetings of Stockholders
Other Limitations on Stockholder Actions
Blank-Check Preferred Stock
Limitations of Director Liability and Indemnification Directors, Officers and Employees
Transfer Agent and Registrar
SHARES ELIGIBLE FOR FUTURE SALE
Rule 144
Rule 701
Registration on Form S-8
Lock-up Agreements
Registration Rights
MATERIAL U.S. FEDERAL TAX CONSEQUENCES
Taxation of U.S. Holders
Dividends and Distributions
Sale or Other Taxable Disposition of Common Stock
Proposed Legislation
Information Reporting and Backup Withholding
Taxation of Non-U.S. Holders
Dividends and Distributions
Sale or Other Taxable Disposition of Common Stock
New Legislation Relating to Foreign Accounts
Information Reporting and Backup Withholding
UNDERWRITING
Standstill Provisions
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Energy and Power Solutions, Inc. and Subsidiaries
NEC–EPS Holding, LLC and Subsidiaries
Report of Independent Registered Public Accounting Firm
Energy and Power Solutions, Inc. and Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except per share amounts)
Energy and Power Solutions, Inc. and Subsidiaries Consolidated Statements of Operations
Energy and Power Solutions, Inc. and Subsidiaries Consolidated Statements of Redeemable Preferred Stock and Stockholders’ Equity (Deficit) (Dollars in thousands)
Energy and Power Solutions, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
1. Description of Business
2. Summary of Significant Accounting Policies
Basis of Presentation
Principles of Consolidation
Use of Estimates
Revenue and Cost Recognition
Energy Services, Construction
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies – (continued)
Energy Services, XChange Point
Energy Sales
Cash and Cash Equivalents
Restricted Cash
Unbilled Receivables
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies – (continued)
Allowance for Doubtful Accounts
Property, Plant and Equipment
Goodwill
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies – (continued)
Long-Lived Assets
Asset Retirement Obligations
Advertising Costs
Income Taxes
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies – (continued)
Subsequent Events
Recently Issued Accounting Standards
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies – (continued)
3. Acquisition
NEC-EPS Holdings, LLC
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
3. Acquisition – (continued)
4. Costs and Estimated Earnings on Uncompleted Contracts
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
4. Costs and Estimated Earnings on Uncompleted Contracts – (continued)
5. Investments in Affiliates
DairyGen, LLC
6. Property, Plant and Equipment, net
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
7. Intangible Assets, net
8. Accrued Liabilities
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
9. Debt
Long-term Debt
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
9. Debt – (continued)
Revolving Lines of Credit
Commitment Fees
10. Other Long-term Liabilities
Interest Rate Swap
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
10. Other Long-term Liabilities – (continued)
Asset Retirement Obligations
11. Commitments and Contingencies
Office Leases
Legal
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
11. Commitments and Contingencies – (continued)
12. Redeemable Preferred Stock and Stockholders’ Equity (Deficit)
Redeemable Preferred Stock
Dividends
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
12. Redeemable Preferred Stock and Stockholders’ Equity (Deficit) – (continued)
Liquidation Preferences
Voting Rights
Conversion
Redemption
Common Stock
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
12. Redeemable Preferred Stock and Stockholders’ Equity (Deficit) – (continued)
Stock Warrants
Stock Award Plan
2007 Stock Award Plan
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
12. Redeemable Preferred Stock and Stockholders’ Equity (Deficit) – (continued)
13. Related Party Transactions
NEC-EPS Holdings, LLC
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
13. Related Party Transactions – (continued)
14. Income Taxes
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
14. Income Taxes – (continued)
Uncertain Tax Positions
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
14. Income Taxes – (continued)
15. Fair Value Measurements
Financial Instruments
Non-Financial Assets and Liabilities
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
16. Concentration of Credit Risk
17. Segment Reporting
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
17. Segment Reporting – (continued)
Energy and Power Solutions, Inc. and Subsidiaries Notes to Consolidated Financial Statements
17. Segment Reporting – (continued)
Schedule II Valuation and Qualifying Accounts
Independent Auditor's Report
NEC-EPS Holding, LLC and Subsidiaries Consolidated Balance Sheets December 31, 2007 and 2006
NEC-EPS Holding, LLC and Subsidiaries Consolidated Statements of Operations For the Years Ended December 31, 2007 and 2006
NEC-EPS Holding, LLC and Subsidiaries Consolidated Statements of Changes in Members' Equity and Comprehensive Income (Loss) For the Years Ended December 31, 2007 and 2006
NEC-EPS Holding, LLC and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended December 31, 2007 and 2006
NEC-EPS Holding, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2007 and 2006
(1) Organization and Nature of Operations
(2) Summary of Significant Accounting Policies
NEC-EPS Holding, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2007 and 2006
(2) Summary of Significant Accounting Policies – (continued)
(3) Intangible Assets and Deferred Charges
NEC-EPS Holding, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2007 and 2006
(4) Construction and Term Note Payable
(5) Interest Rate Swap Derivative
NEC-EPS Holding, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2007 and 2006
(5) Interest Rate Swap Derivative – (continued)
(6) Concentrations of Credit Risk and Fair Value of Financial Instruments
(7) Commitments and Contingent Liabilities
NEC-EPS Holding, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2007 and 2006
(7) Commitments and Contingent Liabilities – (continued)
(8) Related Party Transactions
NEC-EPS Holding, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2007 and 2006
(9) Other Information
(10) Subsequent Event
Independent Auditor’s Report on Consolidating Information
NEC-EPS Holding, LLC and Subsidiaries Consolidating Balance Sheet December 31, 2007
NEC-EPS Holding, LLC and Subsidiaries Consolidating Statement of Operations For the Year Ended December 31, 2007
NEC-EPS Holding, LLC and Subsidiaries Consolidated Statements of Changes in Members' Equity and Comprehensive Income (Loss) For the Year Ended December 31, 2007
NEC-EPS Holding, LLC and Subsidiaries Consolidating Statement of Cash Flows For the Year Ended December 31, 2007
NEC-EPS Holding, LLC and Subsidiaries Consolidating Balance Sheet December 31, 2006
NEC-EPS Holding, LLC and Subsidiaries Consolidating Statement of Operations For the Year Ended December 31, 2006
NEC-EPS Holding, LLC and Subsidiaries Consolidated Statements of Changes in Members' Equity and Comprehensive Income (Loss) For the Year Ended December 31, 2006
NEC-EPS Holding, LLC and Subsidiaries Consolidating Statement of Cash FlowsFor the Year Ended December 31, 2006
Independent Auditor’s Report
NEC-EPS Holding, LLC and Subsidiaries Consolidating Balance Sheets December 31, 2005
NEC-EPS Holding, LLC and Subsidiaries Consolidating Statements of Operations For the Period January 19, 2005 through December 31, 2005
NEC-EPS Holding, LLC and Subsidiaries Statements of Changes in Members' Capital For the Period January 19, 2005 through December 31, 2005
NEC-EPS Holding, LLC Consolidating Statements of Cash Flows For the Period January 19, 2005 through December 31, 2005
NEC-EPS Holdings, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2005
(1) Organization and Nature of Operations
(2) Summary of Significant Accounting Policies
NEC-EPS Holdings, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2005
(2) Summary of Significant Accounting Policies – (continued)
(3) Intangible Assets and Deferred Charges
NEC-EPS Holdings, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2005
(4) Construction and Term Note Payable
(5) Interest Rate Swap Derivative
NEC-EPS Holdings, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2005
(5) Interest Rate Swap Derivative – (continued)
(6) Concentrations of Credit Risk and Fair Value of Financial Instruments
(7) Commitments and Contingent Liabilities
NEC-EPS Holdings, LLC and Subsidiaries Notes to Consolidating Financial Statements December 31, 2005
(7) Commitments and Contingent Liabilities – (continued)
(8) Related Party Transactions
Shares
Energy and Power Solutions, Inc.
Common Stock
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Item 14. Indemnification of Directors and Officers
Item 15. Recent Sales of Unregistered Securities.
Sales of Convertible Promissory Notes and Preferred Stock
Warrants
Options and Common Stock
Item 16. Exhibits
(a) Exhibits.
(b) Financial Statement Schedules.
Item 17. Undertakings
SIGNATURES
POWER OF ATTORNEY
Exhibit Index