WORLD ENERGY SOLUTIONS, INC.

Transcription

1 WORLD ENERGY SOLUTIONS, INC. FORM 8-K/A (Amended Current report filing) Filed 08/13/07 for the Period Ending 06/01/07 Address 100 FRONT STREET WORCESTER, MA Telephone CIK SIC Code Business Services, Not Elsewhere Classified Industry Investment Banking & Brokerage Services Sector Financials Fiscal Year 12/31 Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

2 WORLD ENERGY SOLUTIONS, INC. FORM 8-K/A (Amended Current report filing) Filed 8/13/2007 For Period Ending 6/1/2007 Address 446 MAIN STREET WORCESTER, Massachusetts Telephone CIK Industry Not Assigned Fiscal Year 12/31

3 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 1, 2007 World Energy Solutions, Inc. (Exact Name of Registrant as Specified in Charter) Delaware (State or Other Juris- (Commission File Number) (IRS Employer diction of Incorporation Identification No.) 446 Main Street Worcester, Massachusetts (Address of Principal Executive Offices) (Zip Code) Registrant s telephone number, including area code: (508) n/a (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

4 The purpose of this report is to amend World Energy Solutions, Inc. s (the Company ) Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2007 (the Initial Report ) which reported the Company s acquisition of EnergyGateway, LLC. This report amends the Initial Report so as to provide the information under Items 9.01(a) and 9.01(b) of Form 8-K. ITEM COMPLETION OF ACQUISITION OR DISPOSITION 0F ASSETS. On June 1, 2007, the Company acquired substantially all of the assets of EnergyGateway, LLC, an Ohio limited liability company ( EnergyGateway ), pursuant to an Asset Purchase Agreement with EnergyGateway and its members dated May 23, The Company paid approximately $4.95 million in cash and issued million shares of its common stock to EnergyGateway as consideration in the transaction. The shares were valued at approximately $6.5 million based on the average closing price for the two days before and after the announcement date of $1.22 per share million of the shares that the Company paid to EnergyGateway in connection with this transaction are being held in escrow for 18 months following the closing to secure various indemnification obligations of EnergyGateway and its members. EnergyGateway is an online broker of natural gas and electricity for commercial and industrial customers in the United States, providing its customers with professional energy purchasing services, including access to its proprietary post and bid online procurement system called EGate. The total purchase price, including related acquisition costs of approximately $290,000, was approximately $11.4 million, net of cash acquired and liabilities assumed of approximately $138,000. The cash used by the Company to acquire EnergyGateway came from the Company s cash assets. ITEM (a) FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Balance sheets of EnergyGateway as of December 31, 2006 and 2005 (audited) and as of March 31, 2007 (unaudited) and the related statements of income, members equity and cash flows for the years ended December 31, 2006 and 2005 (audited) and for the three months ended March 31, 2007 and 2006 (unaudited), with the report of the independent registered public accounting firm thereon, are attached hereto as Exhibit 99.2 and are incorporated herein by reference. 2

5 (b) PRO FORMA FINANCIAL INFORMATION Pro forma unaudited combined statements of income of the Company for the three months ended March 31, 2007 and the year ended December 31, 2006, all giving pro forma effect to the Company s acquisition of EnergyGateway, are attached hereto as Exhibit 99.3 and are incorporated herein by reference. (d) EXHIBITS 2.1 Asset Purchase Agreement by and among World Energy Solutions, Inc., EnergyGateway, LLC and Members of EnergyGateway, LLC dated May 23,2007. * 23.1 Consent of UHY LLP Press Release issued by the Company dated June 4, * 99.2 Balance sheets of EnergyGateway, LLC as of December 31, 2006 and 2005 (audited) and as of March 31, 2007 (unaudited) and the related statements of income, members equity and cash flows for the years ended December 31, 2006 and 2005 (audited) and for the three months ended March 31, 2007 and 2006 (unaudited) with the report of the independent registered public accounting firm thereon Unaudited pro forma combined balance sheet as of March 31, 2007 giving effect to the acquisition of the assets of EnergyGateway as if the transaction had occurred on March 31, 2007 and unaudited pro forma combined statements of operations of the Company for the three months ended March 31, 2007 and the year ended December 31, 2006, all giving pro forma effect to the Company s acquisition of the assets of EnergyGateway as if the transaction had occurred on January 1, * Previously filed with the Company s 8-K on June 5,

6 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. World Energy Solutions, Inc. Dated: August 13, 2007 By: /s/ James F. Parslow James F. Parslow Chief Financial Officer 4

7 EXHIBIT INDEX Exhibit Description 23.1 Consent of UHY LLP Balance sheets of EnergyGateway, LLC as of December 31, 2006 and 2005 (audited) and as of March 31, 2007 (unaudited) and the related statements of income, members equity and cash flows for the years ended December 31, 2006 and 2005 (audited) and for the three months ended March 31, 2007 and 2006 (unaudited), with the report of the independent registered public accounting firm thereon Unaudited pro forma combined balance sheet as of March 31, 2007 giving effect to the acquisition of the assets of EnergyGateway as if the transaction had occurred on March 31, 2007 and unaudited pro forma combined statements of operations of the Company for the three months ended March 31, 2007 and the year ended December 31, 2006, all giving pro forma effect to the Company s acquisition of the assets of EnergyGateway as if the transaction had occurred on January 1,

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9 EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders World Energy Solutions, Inc.: We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No ) of World Energy Solutions, Inc. and subsidiary of our report dated August 13, 2007, with respect to the balance sheets of EnergyGateway, LLC as of December 31, 2006 and 2005, and the related statements of income, members equity and cash flows for each of the two years in the period ended December 31, 2006, which report appears in this Form 8-K/A of World Energy Solutions, Inc. and subsidiary. /s/ UHY LLP Boston, Massachusetts August 13, 2007

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11 EXHIBIT 99.2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Members of EnergyGateway, LLC Dublin, Ohio We have audited the accompanying balance sheets of EnergyGateway, LLC, as of December 31, 2006 and 2005 and the related statements of income, members equity and cash flows for each of the two years in the period ended December 31, 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 audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of EnergyGateway, LLC, as of December 31, 2006 and 2005 and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ UHY LLP Boston, Massachusetts August 13, 2007

12 EnergyGateway, LLC Balance Sheets Assets March 31, December 31, (Unaudited) Current assets Cash and cash equivalents $ 352,356 $ 716,832 $ 507,805 Accounts receivable, net of allowance of $6,874 at March 31, 2007 and December 31, 2006 and $5,000 at December 31, , , ,642 Prepaid expenses and other assets 39,206 19,345 23,684 Total current assets 744, , ,131 Property and equipment, net 21,732 24,455 32,480 Intangible assets, net 63,279 71,829 37,652 Deposits 2,357 2,357 2,357 Total assets $ 832,019 $ 1,021,697 $ 749,620 Liabilities and Members Equity Current liabilities Accounts payable $ 24,204 $ 14,912 $ 11,559 Accrued compensation 43,692 87,698 27,011 Accrued expenses 92, ,560 43,232 Total liabilities 159, ,170 81,802 Commitments (Notes 5 and 7) Members equity Contributed capital 2,053,922 2,053,922 2,053,922 Accumulated deficit (1,381,851) (1,240,395) (1,386,104) Total members equity 672, , ,818 Total liabilities and members equity $ 832,019 $ 1,021,697 $ 749,620 The accompanying notes are an integral part of these financial statements.

13 EnergyGateway, LLC Statements of Income Three Months Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Revenues: Transaction fees $ 503,595 $ 503,453 $ 1,494,524 $ 1,100,627 Management fees 319, ,345 1,360,056 1,012,994 Total revenue 823, ,798 2,854,580 2,113,621 Cost of revenue 161, , , ,661 Gross profit 662, ,148 2,023,799 1,672,960 Sales and marketing 283, , , ,714 General and administrative 223, , , ,189 Total operating expenses 506, ,194 1,559,798 1,338,903 Operating income 155, , , ,057 Other income (expense): Interest income 3,627 3,194 12,284 6,794 Other expense (833) (14) (2,150) Total other income 2,794 3,194 12,270 4,644 Net income $ 158,485 $ 243,148 $ 476,271 $ 338,701 The accompanying notes are an integral part of these financial statements.

14 EnergyGateway, LLC Statements of Members Equity Contributed Capital Accumulated Deficit Total Members Equity Balance, January 1, 2005 $ 2,053,922 $ (1,455,161) $ 598,761 Distributions (269,644 ) (269,644 ) Net income 338, ,701 Balance, December 31, ,053,922 (1,386,104 ) 667,818 Distributions (330,562 ) (330,562 ) Net income 476, ,271 Balance, December 31, ,053,922 (1,240,395 ) 813,527 Distributions (Unaudited) (299,941 ) (299,941 ) Net income (Unaudited) 158, ,485 Balance, March 31, 2007 (Unaudited) $ 2,053,922 $ (1,381,851 ) $ 672,071 The accompanying notes are an integral part of these financial statements.

15 EnergyGateway, LLC Statements of Cash Flows Three Months Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 158,485 $ 243,148 $ 476,271 $ 338,701 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 13,409 13,775 53,201 45,061 Bad debt expense 1,874 Loss on disposal of equipment (600) Changes in operating assets and liabilities: Accounts receivable (166,210) (251,476) (43,111) (77,903) Prepaid and other assets (19,861) (2,932) 4,339 (19,767) Accounts payable and accrued expenses (48,222) 54, ,368 37,949 Net cash (used in) provided by operating activities (62,399) 56, , ,441 Cash flows from investing activities: Cost incurred in software development (17,250) (69,000) (13,337) Purchases of property and equipment (2,136) (10,353) (7,231) Net cash used in investing activities (2,136) (17,250) (79,353) (20,568) Cash flows from financing activities: Member distributions (299,941) (207,142) (330,562) (269,644) Net cash used in financing activities (299,941) (207,142) (330,562) (269,644) Net (decrease) increase in cash and cashequivalents (364,476 ) (167,450 ) 209,027 33,229 Cash and cash equivalents, beginning of period 716, , , ,576 Cash and cash equivalents, end of period $ 352,356 $ 340,355 $ 716,832 $ 507,805 The accompanying notes are an integral part of these financial statements.

16 EnergyGateway, LLC Notes to Financial Statements NOTE 1 NATURE OF BUSINESS EnergyGateway, LLC (the Company ) was organized under the laws of the state of Ohio on October 21, The Company provides energy procurement and value-added energy services to customers from nearly every major industry in the U.S. and Canada, from large multisite Fortune 500 industrials to middle-market manufacturing and small commercial operations. The Limited Liability Company Agreement (the Agreement ) provides for perpetual existence. The Company s profits, losses and cash flow distributions are allocated in proportion to each member s respective percentage interest and other various provisions as outlined in the Agreement. As of March 31, 2007, December 31, 2006 and 2005, there were 1,000,000 share units outstanding which were allocated in proportion to each member s contributions in the Company. NOTE 2 SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Revenue Recognition The Company recognizes revenues in accordance with the United States Securities and Exchange Commission s ( SEC ) Staff Accounting Bulletin No. 104, Revenue Recognition ( SAB 104 ). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) the service has been rendered; (3) the fee is fixed or determinable; and (4) collectibility is reasonably assured. The Company has two primary revenue streams consisting of transaction fees and management fees. Transaction fees are billed to and paid by the energy supplier awarded business on the EnergyGateway system. Transaction fees for natural gas and electricity awards are established prior to award and are the same for each supplier. The Company bills the energy supplier upon the conclusion of the transaction a fixed amount based on the anticipated energy volume to be transacted for the entire award term multiplied by the transaction fee. Management fees are paid by the Company s customers and are generally billed on a monthly basis for services rendered based on terms and conditions included in contractual arrangements with its customers. Cash and Cash Equivalents The Company considers all highly liquid debt instruments with an original maturity date of three months or less at time of purchase to be cash equivalents. Property and Equipment Property and equipment are stated at cost. Depreciation is computed by use of the straight-line method over an estimated useful life of three years.

17 NOTE 2 SIGNIFICANT ACCOUNTING POLICIES ( C ontinued ) Software Development Certain acquired software and significant enhancements to the Company s software are recorded in accordance with Statement of Position ( SOP ) 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use. The Company amortizes internally developed and purchased software over the estimated useful life of the software (generally three years). Accordingly, during the three months ended March 31, 2006 and the years ended December 31, 2006 and 2005, the Company capitalized costs of $17,250, $69,000 and $13,337 related to implementation, coding and configuration of software. No costs were capitalized during the three-months ended March 31, The Company amortized internally developed software costs to cost of revenues of $8,550 and $8,793 for the three months ended March 31, 2007 and 2006 and $34,823 and $26,092 for the years ended December 31, 2006 and 2005, respectively. At December 31, 2006, estimated amortization expense for capitalized internally developed software is as follows: 2007 $ 34, , ,457 $ 71,094 In addition, intangible assets, net include $735 related to trademark costs. Long-Lived and Intangible Assets Long-lived assets primarily include property and equipment and intangible assets with finite lives (capitalized software) and a trademark with an indefinite life. In accordance with the Financial Accounting Standards Board s ( FASB ) Statement of Financial Accounting Standards ( SFAS ) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company periodically reviews long-lived assets and intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of those assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows to the discounted cash flow analysis. Income Taxes The Company is structured as a limited liability company which is a pass-through entity for U.S. income tax purposes. Members are taxed individually on their allocable share of Company earnings. Therefore, no provision for income taxes is required in the financial statements. Advertising Expense Advertising expense primarily includes promotional expenditures and is expensed as incurred, as such efforts have not met the direct-response criteria required for capitalization. Amounts incurred for advertising expense were not material for the years ended December 31, 2006 and Fair Value of Financial Instruments SFAS No. 107, Disclosures about Fair Value of Financial Instruments ( SFAS 107 ), requires management to disclose the estimated fair value of certain assets and liabilities defined by SFAS 107 as financial instruments. Financial instruments are generally defined as cash, evidence of ownership interest in an entity, or a contractual obligation that both conveys to one entity a right to receive cash or other financial instruments from another entity and imposes on the other entity the obligation to deliver cash or other financial instruments to the first entity. At December 31, 2006, management believes that the carrying value of cash and cash equivalents, receivables and payables approximated fair value because of the short maturity of these financial instruments.

18 NOTE 2 SIGNIFICANT ACCOUNTING POLICIES ( C ontinued ) Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents held at a major financial institution, accounts receivable and accounts payable. The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. The risk with respect to accounts receivable is minimized as the Company performs credit evaluations of its customers financial condition when management deems it appropriate. Generally, the Company requires no collateral from its customers. Credit losses have been within management s expectations. The Company receives transaction fees from energy suppliers based on the estimated energy usage transacted between energy consumers and energy suppliers. The following represents revenue and accounts receivable from energy suppliers exceeding 10% of the total in each category as of and for the year ended December 31, 2006 and 2005: December 31, 2006 December 31, 2005 Accounts Accounts Customer Revenues Receivable Revenues Receivable A 17% B 13% 15% C 12% 10% D 11% 11% E 21% The Company also receives management fees from its customers. The following represents revenue and accounts receivable from its customers exceeding 10% of the total in each category as of and for the year ended December 31, 2006 and 2005: December 31, 2006 December 31, 2005 Accounts Accounts Customer Revenues Receivable Revenues Receivable A 23% 32% B 13% 16% C 13% 23% D 18% Recent Accounting Pronouncements In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ( FIN 48 ), which applies to all tax positions accounted for under SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition of such tax positions, classification, interest and penalties, accounting in interim periods and disclosure. The Company s adoption of FIN 48 as of January 1, 2007 did not have a material impact on the Company s financial position or results of operations.

19 NOTE 2 SIGNIFICANT ACCOUNTING POLICIES ( C ontinued ) Recent Accounting Pronouncements (Continued) In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ( SFAS No. 157 ). This statement establishes a formal framework for measuring fair value under GAAP and expands on disclosure of fair value measurements. Although SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA pronouncements, it does not, of itself, require any new fair value measurements, nor does it establish valuation standards. SFAS No 157 applies to all other accounting pronouncements requiring or permitting fair value measurements, except for; SFAS No. 123 (R), share based payment and related pronouncements, the practicability exceptions to fair value determinations allowed by various other authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue recognition. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following as of: March 31, 2007 December 31, 2006 December 31, 2005 Computer equipment $ 85,091 $ 85,091 $ 74,738 Furniture and fixtures 32,783 30,647 30, , , ,385 Less: accumulated depreciation and amortization (96,142) (91,283) (72,905) $ 21,732 $ 24,455 $ 32,480 Depreciation expense for the three months ended March 31, 2007 and 2006 was $4,859 and $4,982 and for the years ended December 31, 2006 and 2005 was $18,378 and $18,969, respectively. NOTE 4 PENSION AND PROFIT SHARING PLAN The Company maintains a tax-deferred, contributory pension and profit sharing plan in accordance with section 401(k) of the Internal Revenue Code. The Company matches 25% of employee contributions to a maximum of 10% of gross earnings. For the three months ended March 31, 2007 and 2006 and for the years ended December 31, 2006 and 2005, the Company matched $17,207, $8,511, $189,091 and $151,765, respectively, of employee contributions.

20 NOTE 5 COMMITMENTS Leases In December 2004, the Company entered into an operating lease for its office space under a five year agreement, paid in installments due the beginning of each month and which expires in December Future aggregate minimum payments under capital and operating leases as of December 31, 2006 were as follows: The accompanying statements of income for the three months ended March 31, 2007 and 2006 and the years ended December 31, 2006 and 2005 includes approximately $4,600, $6,600, $29,000 and $26,000 of rent expense, respectively. NOTE 6 RELATED PARTY TRANSACTIONS 2007 $ 31, , ,672 $ 96,324 In 2006 and 2005, the Company had an agreement with the Company s majority investor to perform certain consulting services. Costs incurred during the three months ended March 31, 2007 and 2006 and for the year ended December 31, 2006 and 2005 were approximately $10,071, $0, $188,000 and $1,000, respectively. NOTE 7 SUBSEQUENT EVENTS On May 23, 2007, the Company and its Members entered into a definitive Asset Purchase Agreement with World Energy Solutions, Inc. Pursuant to the Asset Purchase Agreement, World Energy Solutions acquired substantially all of the assets of the Company for $4,951,758 in cash and 5,375,000 common shares of World Energy plus the assumption of certain liabilities. The total purchase price including acquisition costs of $239,401 was $11,450,209, net of cash acquired, plus the assumption of certain liabilities of $138,128. The acquisition closed on June 1, On July 18, 2007, World Energy Solutions entered into an amendment to the Company s operating lease for its office space. The amendment expanded the square footage by 50% and extended the term until August 30, 2012.

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22 EXHIBIT 99.3 Unaudited Pro Forma Combined Financial Information The following unaudited pro forma combined statements of operations of World Energy Solutions, Inc. (the Company or World Energy ) for the three-months ended March 31, 2007 and for the year ended December 31, 2006, gives effect to the acquisition of EnergyGateway, LLC ( EnergyGateway ) as if the transaction had occurred on January 1, The unaudited condensed balance sheet at March 31, 2007 gives effect to the acquisition of EnergyGateway as if the transaction had occurred on March 31, 2007 The accompanying unaudited pro forma combined financial information reflects World Energy s acquisition of EnergyGateway pursuant to an Asset Purchase Agreement dated May 23, In accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, the Company used the purchase method of accounting for a business combination to account for the acquisition as well as the related accounting and reporting regulations for goodwill and other intangibles. Under the purchase method of accounting, the total purchase price, including direct acquisition costs, is allocated to the net assets and liabilities acquired based upon estimates of the fair value of those assets and liabilities. Any excess purchase price is allocated to goodwill. The preliminary allocation of the purchase price was based upon estimates of the fair value of the acquired assets and liabilities in accordance with SFAS No The following unaudited pro forma combined financial statements of the Company have been prepared by management in accordance with generally accepted accounting principles in the United States and do not reflect any operating efficiencies and cost savings that World Energy believes are achievable. The unaudited pro forma combined financial information is presented for illustrative purpose only and is not necessarily indicative of the operating results that would have occurred if the acquisition had been consummated at the beginning of the periods presented, nor is it necessarily indicative of future operating results. The pro forma adjustments are based upon available information and upon certain assumptions described in the notes to the unaudited pro forma combined financial statements that World Energy s management believes are reasonable in the circumstances. The accompanying pro forma financial combined information should be read in conjunction with the historical consolidated financial statements and accompanying notes thereto of World Energy included in its Annual Report on Form 10-K for the year ended December 31, 2006 and EnergyGateway financial statements included elsewhere herein.

23 World Energy Solutions, Inc. Pro Forma Combined Balance Sheet March 31, 2007 (Unaudited) World Energy Solutions EnergyGateway Pro Forma Adjustments Note Pro Forma Assets Current assets Cash and cash equivalents $ 16,099,796 $ 352,356 $ (51,028) A $ 11,449,366 (4,951,758) B Accounts receivable, net 1,632, ,089 1,985,434 Prepaid expenses and other assets 241,768 39,206 (19,603) A 261,371 Total current assets 17,973, ,651 (5,022,389) 13,696,171 Property and equipment, net 257,362 21, ,094 Capitalized software, net 133,060 63,279 (62,544) A 133,795 Intangible assets, net 8,790,000 B 8,790,000 Goodwill 2,347,236 B 2,347,236 Deferred taxes and other assets 1,338,468 2,357 1,340,825 Total assets $ 19,702,799 $ 832,019 $ 6,052,303 $ 26,587,121 Liabilities and Stockholders Equity Current liabilities Accounts payable $ 388,224 $ 24,204 $ $ 412,428 Accrued expenses 1,370, ,744 (51,028) A 1,706, ,170 B Deferred revenue and customeradvances 231, ,864 Capital lease obligations 54,602 54,602 Total current liabilities 2,044, , ,142 2,405,827 Capital lease obligations, net of current portion 75,902 75,902 Total liabilities 2,120, , ,142 2,481,729 Commitments (Notes 8 and 9) Stockholders equity: Preferred stock Common stock 7, B 8,189 Additional paid-in capital 22,225,312 6,522,694 B 28,748,006 Accumulated deficit (4,650,803) (4,650,803) Members equity 672,071 (672,071) A, B Total stockholders equity 17,582, ,071 5,851,161 24,105,392 Total liabilities and stockholders equity $ 19,702,799 $ 832,019 $ 6,052,303 $ 26,587,121

24 World Energy Solutions, Inc. Pro Forma Combined Statement of Operations For the year ended December 31, 2006 (Unaudited) World Energy Solutions EnergyGateway Pro Forma Adjustments Note Pro Forma Revenue $ 5,763,098 $ 2,854,580 $ $ 8,617,678 Cost of revenue 1,166, , ,500 C, D 2,641,707 Gross profit 4,596,672 2,023,799 (644,500) 5,975,971 Sales and marketing 3,227, , ,917 C, D 4,905,880 General and administrative 1,862, , ,250 C, D 3,044,798 Total operating expenses 5,089,713 1,559,798 1,301,167 7,950,678 Operating (loss) income (493,041) 464,001 (1,945,667) (1,974,707) Interest (expense) income, net (312,280) 12,270 (465,465) E (765,475) Income (loss) before income taxes (805,321) 476,271 (2,411,132) (2,740,182) Income tax benefit (304,228) (730,937) F (1,035,165) Net income (loss) $ (501,093) $ 476,271 $ (1,680,195) $ (1,705,017)

25 World Energy Solutions, Inc. Pro Forma Combined Statement of Operations For the three-months ended March 31, 2007 (Unaudited) World Energy Solutions EnergyGateway Pro Forma Adjustments Note Pro Forma Revenue $ 1,501,137 $ 823,442 $ $ 2,324,579 Cost of revenue 396, , ,125 C, D 703,818 Gross profit 1,104, ,110 (146,125 ) 1,620,761 Sales and marketing 1,102, , ,479 C, D 1,599,642 General and administrative 912, ,291 95,813 C, D 1,232,097 Total operating expenses 2,015, , ,292 2,831,739 Operating (loss) income (910,252) 155,691 (456,417) (1,210,978) Interest income (expense), net 204,024 2,794 (64,373) E 142,445 Income (loss) before income taxes (706,228) 158,485 (520,790) (1,068,533) Income tax benefit (266,792) (136,868) F (403,660) Net income (loss) $ (439,436) $ 158,485 $ (383,922) $ (664,873)

26 World Energy Solutions, Inc. Notes to Pro Forma Combined Financial Statements For the three-months ended March 31, 2007 and the year ended December 31, 2006 Note A: Note B: Reflects excluded assets and retained liabilities of Energy Gateway according to the Asset Purchase Agreement. Reflects elimination of the historical equity accounts of EnergyGateway and the allocation of total purchase price as follows: Assets $ 698,844 Liabilities acquired (108,920) Intangibles 8,790,000 Goodwill 2,347,236 Total purchase price $ 11,727,160 The total consideration paid to the members of EnergyGateway in consideration for the acquisition is $4,951,758 in cash and 5,375,000 common shares of World Energy Solutions valued at approximately $1.22 plus direct acquisition costs of $239,401. 2,175,000 of the common shares that World Energy Solutions paid to EnergyGateway in connection with this transaction are being held in escrow for 18-months following the closing to secure various indemnification obligations of EnergyGateway and its members. Note C: Reflects the pro forma adjustments to amortization of intangible assets as if the acquisition had occurred on January 1, 2006 using lives from 1 to 10 years. Note D: Reflects additional employee compensation based on revised compensation agreements and adjustments made at the time of the acquisition. Note E: Reflects interest expense on borrowed amounts to fund the purchase of EnergyGateway effective January 1, Note F: Reflects the pro forma tax effect of the proposed pro forma adjustments outlined above.

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