Restatement of Previously Issued Financial Statements

12 Months Ended

Dec. 31, 2011

Restatement of Previously Issued Financial Statements [Abstract]

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

NOTE 2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company accounts for the correction of an error in its previously issued financial statements in accordance with the provisions of ASC Topic 250, “Accounting Changes and Error Corrections.” In accordance with the disclosure provisions of ASC 250, when financial statements are restated to correct an error, an entity is required to disclose that its previously issued financial statements have been restated along with a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings or other appropriate component of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented.

The Company’s Board of Directors, based on the recommendation of the Audit Committee of the Company’s Board of Directors and in consultation with management, concluded that the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 should no longer be relied upon and must be restated to properly record revenue from commissions earned by the Company’s mid-market product line.

The Company concluded that the timing of revenue recognition for certain commission payments was recorded incorrectly. This incorrect treatment related to the Company’s revenue recognition policy for its mid-market product line, an area the Company entered with its acquisition of GSE Consulting, LP (“GSE”, See Note 4) on October 31, 2011. Under its accounting policies in effect at the time, the Company recognized revenue from up-front commissions as cash was received from the energy supplier, beginning with the quarter ended December 31, 2011. As a result of its review, the Company has determined that it was required to record these revenues upon contract completion, or earlier to the extent that actual energy usage data is received from the energy supplier or can be reliably estimated. The difference between recognizing these commissions upon cash receipt and over the energy flow period is a matter of timing.

In addition, the Company has adjusted its accounts receivable and goodwill balances related to the acquisition of GSE. The Company had assigned a fair value of approximately $490,000 to accounts receivable related to the acquisition of GSE on October 31, 2011. Based on its revised revenue recognition policy, the Company has determined that there should be no value assigned to accounts receivable at October 31, 2011. As a result, the Company has reduced accounts receivable and increased goodwill by approximately $490,000 as of December 31, 2011.

Throughout this Amendment No. 1, all amounts presented from prior periods and prior period comparisons that have been revised are labeled “As Restated” and reflect the balances and amounts on a restated basis.

The following table presents the cumulative effect of the restatement described above for the period shown.

	Year Ended December 31, 2011
Net income as originally reported	$	515,541
Adjustments related to revenue		(562,018	)
Net loss as restated	$	(46,477	)
Cumulative effect to accumulated deficit	$	(562,018	)

The tables below set forth the effect of the adjustments as of December 31, 2011 and for the year ended December 31, 2011 as applicable:

Balance Sheet items affected:

	At December 31, 2011
	As Reported			Adjustment			As Restated
Trade accounts receivable, net	$	4,057,215		$	(453,581	)	$	3,603,634
Total current assets		6,575,477			(453,581	)		6,121,896
Goodwill		11,817,236			490,019			12,307,255
Total assets	$	33,824,540		$	36,438		$	33,860,978
Deferred revenue and customer advances	$	320,899		$	71,864		$	392,763
Total current liabilities		10,046,722			71,864			10,118,586
Deferred revenue and customer advances, net of current portion		—			526,592			526,592
Total liabilities		12,643,421			598,456			13,241,877
Accumulated deficit		(21,565,497	)		(562,018	)		(22,127,515	)
Total stockholders’ equity		21,181,119			(562,018	)		20,619,101
Total liabilities and stockholders’ equity	$	33,824,540		$	36,438		$	33,860,978

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	Year Ended December 31, 2011
	As Reported			Adjustment			As Restated
Revenue:
Brokerage commissions, transaction fees and efficiency projects	$	20,087,139		$	(562,018	)	$	19,525,121
Management fees		999,446			—			999,446
Total revenue		21,086,585			(562,018	)		20,524,567
Cost of revenue		4,009,995			—			4,009,995
Gross profit		17,076,590			(562,018	)		16,514,572
Operating expenses:
Sales and marketing		10,631,035			—			10,631,035
General and administrative		5,790,264			—			5,790,264
Total operating expenses		16,421,299			—			16,421,299
Operating income		655,291			(562,018	)		93,273
Interest income (expense):
Interest income		51,245			—			51,245
Interest expense		(52,771	)		—			(52,771	)
Total interest expense, net		(1,526	)		—			(1,526	)
Income before income taxes		653,765			(562,018	)		91,747
Income tax expense		138,224			—			138,224
Net income (loss)	$	515,541		$	(562,018	)	$	(46,477	)
Net income (loss) per share:
Net income (loss) per common share — basic and diluted	$	0.05		$	(0.05	)	$	—
Weighted average shares outstanding — basic		10,521,910						10,521,910
Weighted average shares outstanding — diluted		10,583,630						10,521,910

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	Quarter Ended December 31, 2011 (Unaudited)
	As Reported			Adjustment			As Restated
Revenue:
Brokerage commissions, transaction fees and efficiency projects	$	5,648,955		$	(562,018	)	$	5,086,937
Management fees		257,490			—			257,490
Total revenue		5,906,445			(562,018	)		5,344,427
Cost of revenue		1,102,636			—			1,102,636
Gross profit		4,803,809			(562,018	)		4,241,791
Operating expenses:
Sales and marketing		3,245,794			—			3,245,794
General and administrative		2,179,372			—			2,179,372
Total operating expenses		5,425,166			—			5,425,166
Operating income		(621,357	)		(562,018	)		(1,183,375	)
Total interest expense, net		(43,172	)		—			(43,172	)
Income before income taxes		(664,529	)		(562,018	)		(1,226,547	)
Income tax expense		116,474			—			116,474
Net income (loss)	$	(781,003	)	$	(562,018	)	$	(1,343,021	)
Net income (loss) per share:
Net income (loss) per common share — basic and diluted	$	(0.07	)	$	(0.05	)	$	(0.12	)
Weighted average shares outstanding — basic		11,513,481						11,513,481
Weighted average shares outstanding — diluted		11,513,481						11,513,481