10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013; or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission file number: 001-34289

World Energy Solutions, Inc.

(Exact name of registrant as specified in its charter)

Delaware	04-3474959
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

100 Front Street

Worcester, Massachusetts 01608

(Address of principal executive offices) (Zip code)

508-459-8100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 1, 2013, the registrant had 12,234,186 shares of common stock outstanding.

TABLE OF CONTENTS

		Page
PART I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012		2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012		3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012		4
	Notes to Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosure about Market Risk		22
Item 4.	Controls and Procedures		22
PART II. Other Information
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3.	Defaults Upon Senior Securities		24
Item 4.	Mine Safety Disclosures (Not applicable)		25
Item 5.	Other Information		25
Item 6.	Exhibits		25

1

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	2,518,377		$	3,307,822
Trade accounts receivable, net		7,108,011			7,242,603
Inventory		501,406			154,626
Current portion of deferred tax asset		1,533,280			1,632,280
Prepaid expenses and other current assets		439,721			361,813
Total current assets		12,100,795			12,699,144
Property and equipment, net		603,183			639,839
Intangibles, net		16,168,723			19,092,998
Goodwill		16,167,834			16,167,834
Deferred tax asset, net of current portion		5,617,565			5,844,980
Other assets, net		626,269			685,867
Total assets	$	51,284,369		$	55,130,662
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,621,439		$	1,044,459
Accrued commissions		1,492,563			1,052,802
Accrued compensation		2,251,733			2,494,404
Accrued contingent consideration		2,868,734			3,792,505
Accrued expenses and other current liabilities		707,827			1,390,188
Deferred revenue and customer advances		3,378,824			1,929,377
Current portion of related party subordinated notes payable		2,000,000			1,500,000
Current portion of long-term debt, net of unamortized debt discount of $39,873 at September 30, 2013 and December 31, 2012		1,960,127			1,960,127
Total current liabilities		16,281,247			15,163,862
Long-term debt, net of unamortized debt discount of $59,809 at September 30, 2013 and $89,714 at December 31, 2012		2,940,191			4,410,286
Subordinated notes payable		4,000,000			4,000,000
Deferred revenue and customer advances, net of current portion		4,026,184			3,379,635
Accrued contingent consideration, net of current portion		—			966,752
Related party subordinated notes payable, net of current portion		—			500,000
Other liabilities		15,747			—
Total liabilities		27,263,369			28,420,535
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.0001 par value; 30,000,000 shares authorized; 12,071,425 shares issued and 12,013,436 shares outstanding at September 30, 2013 and 11,998,313 shares issued and 11,949,376 shares outstanding at December 31, 2012		1,201			1,195
Additional paid-in capital		44,319,151			43,770,108
Accumulated deficit		(20,040,161	)		(16,836,823	)
Treasury stock, at cost; 57,989 shares at September 30, 2013 and 48,937 shares at December 31, 2012		(259,191	)		(224,353	)
Total stockholders’ equity		24,021,000			26,710,127
Total liabilities and stockholders’ equity	$	51,284,369		$	55,130,662

See accompanying notes to condensed consolidated financial statements.

2

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenue:
Brokerage commissions, transaction fees and efficiency projects	$	8,552,381		$	7,364,110		$	24,767,574		$	20,849,513
Management fees		186,176			241,744			564,122			734,947
Total revenue		8,738,557			7,605,854			25,331,696			21,584,460
Cost of revenue		2,243,875			2,632,913			6,621,481			6,614,811
Gross profit		6,494,682			4,972,941			18,710,215			14,969,649
Operating expenses:
Sales and marketing		4,875,985			3,638,961			14,744,413			11,171,915
General and administrative		1,817,996			1,769,718			6,046,690			5,748,957
Total operating expenses		6,693,981			5,408,679			20,791,103			16,920,872
Operating loss		(199,299	)		(435,738	)		(2,080,888	)		(1,951,223	)
Interest expense, net		(253,822	)		(86,917	)		(733,956	)		(274,624	)
Other income		3,378			—			16,671			53,106
Loss before income taxes		(449,743	)		(522,655	)		(2,798,173	)		(2,172,741	)
Income tax expense		142,555			22,500			405,165			72,500
Net loss	$	(592,298	)	$	(545,155	)	$	(3,203,338	)	$	(2,245,241	)
Net loss per share:
Net loss per common share – basic and diluted	$	(0.05	)	$	(0.05	)	$	(0.27	)	$	(0.19	)
Weighted average shares outstanding – basic and diluted		12,007,667			11,904,469			11,985,629			11,888,660

See accompanying notes to condensed consolidated financial statements.

3

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2013			2012
Cash flows from operating activities:
Net loss	$	(3,203,338	)	$	(2,245,241	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		3,116,907			2,265,386
Deferred income taxes		326,415			—
Share-based compensation		435,234			319,619
Loss on disposal of property and equipment		11,177			—
Gain on sale of investment		—			(53,106	)
Non-cash interest expense on warrants		29,905			—
Interest on accrued contingent consideration		23,124			75,070
Changes in operating assets and liabilities:
Trade accounts receivable		134,592			(2,372,194	)
Inventory		(346,780	)		(454,026	)
Prepaid expenses and other current assets		(77,908	)		(345,068	)
Accounts payable		576,980			680,297
Accrued commissions		439,761			130,671
Accrued compensation		(242,671	)		(245,838	)
Accrued expenses, contingent consideration and other current liabilities		(1,153,133	)		317,947
Deferred revenue and customer advances		2,095,996			3,292,192
Net cash provided by operating activities		2,166,261			1,365,709
Cash flows from investing activities:
Decrease in other assets		34,078			—
Proceeds from sale of investment		—			770,042
Proceeds from sale of property and equipment		8,750			—
Purchases of property and equipment		(128,967	)		(346,423	)
Net cash (used in) provided by investing activities		(86,139	)		423,619
Cash flows from financing activities:
Proceeds from exercise of stock options		113,815			152,695
Purchase of treasury stock		(34,838	)		(2,577	)
Proceeds from issuance of long-term debt		—			2,500,000
Principal payments on long-term debt		(1,500,000	)		—
Principal payments on notes payable		—			(1,000,000	)
Payments of contingent consideration		(1,435,548	)		(2,250,000	)
Principal payments on capital lease obligations		(12,996	)		(13,157	)
Net cash used in financing activities		(2,869,567	)		(613,039	)
Net (decrease) increase in cash and cash equivalents		(789,445	)		1,176,289
Cash and cash equivalents, beginning of period		3,307,822			1,837,801
Cash and cash equivalents, end of period	$	2,518,377		$	3,014,090
Supplemental disclosure of cash flow information:
Cash paid for interest	$	(724,033	)	$	(192,009	)
Cash paid for income taxes	$	(123,587	)	$	(99,937	)
Non-cash activities:
Equipment acquired under capital leases	$	21,416		$	—

See accompanying notes to condensed consolidated financial statements.

4

WORLD ENERGY SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2013

1. Nature of Business and Basis of Presentation

World Energy Solutions, Inc. (“World Energy” or the “Company”) offers a range of energy management solutions to commercial and industrial businesses, institutions, utilities, and governments to reduce their overall energy costs. The Company comes to market with a holistic approach to energy management helping customers a) contract for a competitive price for energy, b) engage in energy efficiency projects to minimize quantity used and c) pursue available rebate and incentive programs. The Company made its mark on the industry with an innovative approach to procurement via its online auction platform, the World Energy Exchange^®. With recent investments and acquisitions, World Energy is building out its energy efficiency practice by engaging new customers while also pursuing more cross-selling opportunities for its procurement services.

2. Interim Financial Statements

The December 31, 2012 condensed consolidated balance sheet has been derived from audited consolidated financial statements and the accompanying September 30, 2013 unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on April 16, 2013.

In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments consisting of normal recurring adjustments and accruals necessary for the fair presentation of the Company’s financial position as of September 30, 2013, the results of its operations for the three and nine months ended September 30, 2013 and 2012 and the results of its cash flows for the nine months ended September 30, 2013 and 2012, respectively. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013.

The preparation of financial statements in conformity with GAAP 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 the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from these estimates.

The Company’s most judgmental estimates affecting its condensed consolidated financial statements are those relating to revenue recognition and the estimate of actual energy delivered from the bidder to the lister of such energy; share-based compensation; the valuation of intangible assets and goodwill; the valuation of contingent consideration; impairment of long-lived assets; and estimates of future taxable income as it relates to the realization of our net deferred tax assets. The Company regularly evaluates its estimates and assumptions based upon historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, future results of operations may be affected.

3. Loss Per Share

As of September 30, 2013 and 2012, the Company only had one issued and outstanding class of stock – common stock. As a result, the basic loss per share for the three and nine months ended September 30, 2013 and 2012 is computed by dividing net loss by the weighted average number of common shares outstanding for the period.

5

The following table provides a reconciliation of the denominators of the Company’s reported basic and diluted earnings per share computation for the three and nine months ended September 30, 2013 and 2012, respectively:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Weighted number of common shares – basic		12,007,667		11,904,469		11,985,629		11,888,660
Common stock equivalents		—		—		—		—
Weighted number of common shares – diluted		12,007,667		11,904,469		11,985,629		11,888,660

The computed loss per share does not assume conversion, exercise, or contingent exercise of securities that would have an antidilutive effect on loss per share. As the Company was in a net loss position for the three and nine month periods ended September 30, 2013 and 2012, all common stock equivalents in these periods were antidilutive.

The following represents issuable weighted average share information for the respective periods:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Common stock options		25,313		18,785		51,992		21,281
Common stock warrants		311		8,305		828		26,171
Unvested restricted stock		34,929		14,945		38,431		9,065
Total common stock equivalents		60,553		42,035		91,251		56,517

In addition, common stock options, unvested restricted stock and common stock warrants of 480,914, 30,000 and 45,045, respectively, were excluded from the calculation of net loss per share, as inclusion of such shares would be antidilutive due to exercise prices or value of proceed shares exceeding the average market price of the Company’s common stock during the three months ended September 30, 2013, and common stock options, unvested restricted stock and common stock warrants of 469,463, 25,000 and 45,045, respectively, were excluded from the calculation of net loss per share, as inclusion of such shares would be antidilutive due to exercise prices or value of proceed shares exceeding the average market price of the Company’s common stock during the nine months ended September 30, 2013.

Common stock options of 711,989 and 676,051, respectively, were excluded from the calculation of net loss per share, as inclusion of such shares would be antidilutive due to exercise prices or value of proceed shares exceeding the average market price of the Company’s common stock during the three and nine months ended September 30, 2012, respectively.

4. Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company has no material off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. The Company places its cash with one institution, which management believes is of high credit quality. As of September 30, 2013, all of the Company’s cash is held in an interest bearing account.

The Company provides credit in the form of invoiced and unbilled accounts receivable in the normal course of business. Collateral is not required for trade accounts receivable, but ongoing credit evaluations are performed. While the majority of the Company’s revenue is generated from retail energy transactions where the winning bidder pays a commission to the Company, commission payments for certain auctions can be paid by the lister, bidder or a combination of both. Management provides for an allowance for doubtful accounts on a specifically identified basis, as well as through historical experience applied to an aging of accounts, if necessary. Trade accounts receivable are written off when deemed uncollectible. To date, write-offs have not been material.

The following represents revenue and trade accounts receivable from bidders exceeding 10% of the total in each category:

	Revenue for the three months ended September 30,						Revenue for the nine months ended September 30,						Trade Accounts Receivable as of September 30,
Bidder	2013			2012			2013			2012			2013			2012
A		6	%		8	%		8	%		10	%		8	%		8	%
B		13	%		12	%		12	%		12	%		14	%		13	%
C		8	%		3	%		8	%		3	%		10	%		5	%

6

In addition to its direct relationship with bidders, the Company also has direct contractual relationships with listers for the online procurement of certain of their energy, demand response or environmental needs. These listers are primarily large businesses and government organizations and do not have a direct creditor relationship with the Company. For the three and nine months ended September 30, 2013 and 2012, no lister represented more than 10% individually of the Company’s aggregate revenue, respectively.

5. Trade Accounts Receivable, Net

The Company does not invoice bidders for the commissions earned on retail electricity, certain natural gas and demand response transactions and, therefore, reports a significant portion of its receivables as “unbilled.” Unbilled accounts receivable represent management’s best estimate of energy provided by the energy suppliers to the energy consumers for a specific completed time period at contracted commission rates.

The Company generally invoices bidders for commissions earned on retail natural gas and wholesale transactions as well as energy efficiency customers, which are reflected as billed accounts receivable. For natural gas and wholesale transactions, the total commission earned on these transactions is recognized upon completion of the procurement event and are generally due within 30 days of invoice date. For efficiency projects, revenue is recognized and invoiced upon project installation and acceptance, as required, and are generally due within 30 days of invoice date. In addition, the Company invoices the bidder, lister or combination of both for certain auctions performed for environmental commodity product transactions. These transactions are earned and invoiced either upon lister acceptance of the auction results or, in some cases, upon delivery of the credits or cash settlement of the transaction. Trade accounts receivable, net consists of the following:

	September 30, 2013			December 31, 2012
Unbilled accounts receivable	$	5,999,795		$	5,343,559
Billed accounts receivable		1,383,395			2,074,223
		7,383,190			7,417,782
Allowance for doubtful accounts		(275,179	)		(175,179	)
Trade accounts receivable, net	$	7,108,011		$	7,242,603

6. Inventory

Inventory is maintained in the Company’s Energy efficiency services segment and consists of prepaid expendables and project materials. Prepaid expendables represents consumable components that are used in project installations and are stated at the lower of cost or market, with cost being determined on a first-in, first-out (FIFO) basis. Historical inventory usage and current trends are considered in estimating both excess and obsolete inventory. To date, there have been no write-downs of inventory and therefore no allowance for excess or obsolete inventory was recorded at September 30, 2013 or December 31, 2012, respectively. Project materials represent direct costs incurred on projects-in-process as of each reporting period. Inventory consists of the following:

	September 30, 2013		December 31, 2012
Prepaid expendables	$	53,781	$	32,419
Project materials		447,625		122,207
Total inventory	$	501,406	$	154,626

7

7. Intangibles, Net

Intangibles, net with finite lives were comprised of the following as of September 30, 2013 and December 31, 2012:

		September 30, 2013						December 31, 2012
	Estimated Useful Life	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Customer contracts	1 - 4 years	$	5,276,000	$	2,593,000	$	2,683,000	$	5,276,000	$	1,322,000	$	3,954,000
Customer relationships	7 - 10 years		13,792,000		4,458,000		9,334,000		13,792,000		3,398,000		10,394,000
Non-compete agreements	5 years		2,585,000		833,000		1,752,000		2,585,000		445,000		2,140,000
Trade names	4 years		1,090,000		426,000		664,000		1,090,000		221,000		869,000
Total		$	22,743,000	$	8,310,000	$	14,433,000	$	22,743,000	$	5,386,000	$	17,357,000

The Company also recorded acquisition related intangible assets with indefinite lives in the amount of approximately $1.7 million pertaining to customer relationships, which is not reflected in the above table.

Amortization expense was approximately $2.9 million and $2.1 million for the nine months ended September 30, 2013 and 2012, respectively. In addition, approximately $2.4 million of fully amortized intangible assets were removed from the 2013 and 2012 presentations. The approximate future amortization expense of intangible assets is as follows as of September 30, 2013:

	Amount
Remainder of 2013	$	975,000
2014		3,369,000
2015		2,801,000
2016		2,416,000
2017		1,272,000
2018 and thereafter		3,600,000
Total future amortization expense	$	14,433,000

8. Deferred Revenue and Customer Advances

Deferred revenue and customer advances are primarily related to the Company’s mid-market product line where energy suppliers pay all or a portion of the total commission due from the completed procurements before the Company has met all of the necessary criteria to recognize revenue. As a result, cash received from commission payments are deferred until actual usage data is received or contract end. Deferred revenue and customer advances expected to be recognized as revenue by year are approximately as follows as of September 30, 2013:

	Amount
Remainder of 2013	$	515,000
2014		3,087,000
2015		2,074,000
2016		1,299,000
2017		265,000
2018 and thereafter		165,000
Total deferred revenue and customer advances	$	7,405,000

The following table provides a rollforward of deferred revenue and customer advances:

	Amount
Balance at January 1, 2013	$	5,309,000
Cash received		3,623,000
Revenue recognized		(1,527,000	)
Balance at September 30, 2013	$	7,405,000

8

9. Segment Reporting

The Company operates its business based on two industry segments: Energy procurement and Energy efficiency services. The Company delivers its Energy procurement services to four markets: retail energy, wholesale energy, demand response and environmental commodity. The Energy procurement process is substantially the same regardless of the market being serviced and is supported by the same operations personnel utilizing the same basic technology and back office support. There is no discrete financial information for these product lines nor are there segment managers who have operating responsibility for each product line. Energy efficiency services focuses on turn-key electrical, mechanical and lighting energy efficiency measures servicing commercial, industrial and institutional customers.

Segment operating loss represents loss from operations including share-based compensation, amortization of intangible assets and depreciation. The following tables present certain continuing operating division information in accordance with the provisions of Accounting Standards Codification (“ASC”) 280, “Segment Reporting”.

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Consolidated revenue from external customers:
Energy procurement	$	7,295,276		$	5,626,444		$	21,673,273		$	17,480,645
Energy efficiency services		1,443,281			1,979,410			3,658,423			4,103,815
Consolidated total revenue	$	8,738,557		$	7,605,854		$	25,331,696		$	21,584,460
Consolidated loss before income taxes:
Energy procurement	$	(332,233	)	$	(443,278	)	$	(2,131,734	)	$	(1,775,952	)
Energy efficiency services		(117,510	)		(79,377	)		(666,439	)		(396,789	)
Consolidated loss before income taxes	$	(449,743	)	$	(522,655	)	$	(2,798,173	)	$	(2,172,741	)
Energy Procurement:
Amortization	$	943,977		$	587,772		$	2,831,927		$	1,978,902
Depreciation	$	50,482		$	49,626		$	148,309		$	140,678
Interest expense, net	$	253,822		$	61,432		$	733,956		$	174,344
Energy Efficiency Services:
Amortization	$	39,289		$	39,289		$	117,868		$	127,971
Depreciation	$	5,891		$	5,817		$	18,803		$	17,835
Interest expense, net	$	—		$	25,485		$	—		$	100,280

	September 30, 2013		December 31, 2012
Consolidated total assets:
Energy procurement	$	45,566,740	$	48,839,503
Energy efficiency services		5,717,629		6,291,159
Consolidated total assets	$	51,284,369	$	55,130,662

10. Fair Value Measurement and Fair Value of Financial Instruments

The Company follows ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) for fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value, which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The hierarchy established under ASC 820 gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Level 1 – Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

9

Level 2 – Pricing inputs are quoted prices for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

Level 3 – Pricing inputs are unobservable for the investment, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Level 3 includes investments that are supported by little or no market activity.

Assets and liabilities of the Company measured at fair values on a recurring basis as of September 30, 2013 and December 31, 2012 are summarized as follows:

	September 30, 2013			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents	$	2,518,377		$	2,518,377	$	—		$	—
Total Assets	$	2,518,377		$	2,518,377	$	—		$	—
Liabilities
Contingent consideration	$	2,868,734		$	—	$	—		$	2,868,734
Debt discount		(99,682	)		—		(99,682	)		—
Total Liabilities	$	2,769,052		$	—	$	(99,682	)	$	2,868,734

	December 31, 2012			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents	$	3,307,822		$	3,307,822	$	—		$	—
Total Assets	$	3,307,822		$	3,307,822	$	—		$	—
Liabilities
Contingent consideration	$	4,759,257		$	—	$	—		$	4,759,257
Debt discount		(129,587	)		—		(129,587	)		—
Total Liabilities	$	4,629,670		$	—	$	(129,587	)	$	4,759,257

The Company determines the fair value of acquisition-related contingent consideration based on assessment of the probability that the Company would be required to make such future payment. Changes to the fair value of contingent consideration are recorded in general and administrative expense. The following table provides a rollforward of the fair value, as determined by Level 3 inputs, of the contingent consideration.

	September 30, 2013
Outstanding balance at January 1, 2013	$	4,759,257
Payments		(1,435,548	)
Change in fair value included in earnings		(478,099	)
Accrued interest		23,124
Outstanding balance at September 30, 2013	$	2,868,734

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The change in fair value reflects the Company’s updated probability related to the Northeast Energy Partners, LLC (“NEP”) earn-out. See Note 13 for additional details. The carrying amounts and fair values of the Company’s debt obligations are as follows:

	September 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, net of debt discount	$	4,900,318	$	4,900,318	$	6,370,413	$	6,370,413
Debt discount		99,682		99,682		129,587		129,587
Subordinated notes payable		4,000,000		4,000,000		4,000,000		4,000,000
Related party subordinated notes payable		2,000,000		2,000,000		2,000,000		2,000,000
Total debt obligations	$	11,000,000	$	11,000,000	$	12,500,000	$	12,500,000

The carrying amount for fixed rate long-term debt and variable rate long-term debt approximate fair value because the underlying instruments are primarily at current market rates available to the Company for similar borrowings. The interest rate on the Silicon Valley Bank (“SVB”) debt is tied to the prime rate and will fluctuate with changes in that rate. Related party notes payable are classified as short-term on the Company’s accompanying condensed consolidated balance sheets.

11. Credit Arrangements

Credit Facility

The Company has a $9.0 million credit facility with SVB consisting of a $6.5 million term note and a $2.5 million line-of-credit. Under the Fifth Loan Modification and Waiver Agreement with SVB, entered into by the Company on May 13, 2013, the $6.5 million term loan is for 42 months and bears interest at prime rate (currently 3.25%) plus 4.5%. This interest rate can be adjusted downward based on certain EBITDA and leverage ratios. The term loan was interest only for the first three months followed by 39 equal principal payments which commenced on January 1, 2013. The outstanding balance of the term loan is $5.0 million, of which $2.0 million is classified as a current liability at September 30, 2013.

The $2.5 million line-of-credit matures on March 14, 2014 and no borrowings have been made under the line-of-credit to date. Advances under the line-of-credit are subject to availability against certain eligible accounts receivable and eligible retail backlog. The credit facility bears interest at a floating rate per annum based on the prime rate plus 1.25% on advances made against eligible accounts receivable and prime rate plus 2.00% on advances made against eligible retail backlog. These interest rates are subject to change based on the Company’s maintenance of an adjusted quick ratio of one-to-one. The facility contains minimum cash and availability and minimum fixed charge coverage ratio covenants and financial reporting requirements. The Company was in compliance with its covenants as of September 30, 2013.

Subordinated Notes

On October 3, 2012, the Company entered into a Note Purchase Agreement with Massachusetts Capital Resource Company (“MCRC”), in which the Company entered into an 8-year, $4 million Subordinated Note due 2020 with MCRC (the “MCRC Note”). The MCRC Note bears interest at 10.5% and is interest only for the first four years followed by 48 equal principal payments commencing October 31, 2016. The Company must pay a premium of 3% if it prepays the MCRC Note before October 1, 2014, and a 1% premium if it prepays the MCRC Note before October 1, 2015. The MCRC Note is subordinated to the Company’s credit facility with SVB and contains a consolidated net earnings available for interest charges to interest charges covenant, as adjusted, of not less than one-to-one and financial reporting requirements that the Company was in compliance with as of September 30, 2013.

12. Commitments and Contingencies

Litigation

Three former employees/consultants of GSE Consulting, LP (“GSE”) have filed three separate complaints in Texas County Court alleging, among other things, claims related to breach of contract, quantum meruit, promissory estoppel, and tortious interference. Each plaintiff claims that GSE and/or the Company failed to pay commissions due for services that they provided prior to the date of the Company’s purchase of certain GSE assets, based on their respective employment or independent contractor agreements with GSE. Each plaintiff has also asserted claims for recovery of their attorneys’ fees. The Company denies the allegations and has filed counterclaims for damages, asserting claims for conversion, unjust enrichment, misappropriation of confidential information, and violation of the Texas Theft Liability Act against each of the plaintiffs. The Company has also filed a counterclaim against one of the plaintiffs for her breach of a non-competition and non-solicitation agreement, based on her working for a competitor of the Company’s during her 1-year restrictive period and her improper

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solicitation of former GSE customers on behalf of the competitor. The Company also filed cross claims against GSE for indemnification under the Asset Purchase Agreement in each of the three cases. Discovery is proceeding in each matter and the court has assigned respective trial dates in January and February 2014.

The Company has estimated the potential commissions due to these former employees to be approximately $400,000. The Company intends to defend these actions vigorously and is currently unable to estimate a range of payments, if any, it may be required to pay, with respect to these claims. However, the Company believes that the resolution of these matters will not result in a material effect to its condensed consolidated financial statements. However, due to uncertainties that accompany litigation of this nature, there could be no assurance that the Company will be successful, and the resolution of the lawsuits could have a material effect on its condensed consolidated financial statements.

13. Acquisitions

The Company accounts for acquisitions using the purchase method in accordance with ASC 805, “Business Combinations.” The results of operations of each acquisition have been included in the accompanying condensed consolidated financial statements as of the date of the acquisition.

On October 3, 2012, the Company acquired substantially all of the assets and certain obligations of NEP pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) between the Company, NEP, and its members. NEP is a Connecticut-based energy management and procurement company.

The acquisition-date fair value of the consideration transferred totaled approximately $12.1 million. As part of the total consideration, NEP can earn up to $3,180,000 in contingent consideration if certain performance criteria are met post-acquisition. This potential contingent consideration consists of $2.5 million in cash and 153,153 shares of common stock and is due on December 31, 2013. The fair value of the contingent consideration was based on the weighted probability of achievement of certain revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”) levels for the 12-months ending September 30, 2013. The Company valued this contingent payment at $2.2 million at acquisition, which has been recorded within current liabilities as accrued contingent consideration. In initially measuring the fair value of the contingent consideration, the Company assigned probabilities to these performance criteria, based among other things on the nature of the performance criteria and the Company’s due diligence performed at the time of the acquisition. Based on financial results through September 30, 2013, the Company reduced the accrued contingent consideration by $0.4 million to $1.8 million. The $0.4 million reduction in this liability has been recorded as a reduction in general and administrative expense for the nine months ended September 30, 2013.

The NEP acquisition operating results have been included within the Company’s Energy procurement services segment since the date of acquisition and, therefore, discrete operating results are not maintained for its operations. The following unaudited pro forma information assumes that the acquisitions of NEP had been completed as of the beginning of 2012:

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Revenues	$	8,905,511		$	25,589,150
Net loss	$	(583,178	)	$	(2,744,736	)
Net loss per share:
Basic and diluted	$	(0.05	)	$	(0.23	)
Weighted average shares outstanding – basic and diluted		11,904,469			11,888,660

The pro forma financial information is not necessarily indicative of the results to be expected in the future as a result of the acquisition of NEP, as the acquisition did not necessarily reflect the purchase of stand-alone or complete operations, and included several non-recurring revenue events.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q including this Item 2, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. Readers can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words. Our actual results and the timing of certain events may differ significantly from the results and timing discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed or referred to in this report and in the “Risk Factors” section of our Annual Report on Form 10-K and any later publicly available filing with the Securities and Exchange Commission (“SEC”). The following discussion and analysis of our financial condition and results of operations should be read in light of those factors and in conjunction with our accompanying condensed consolidated financial statements and notes thereto.

Overview

World Energy offers a range of energy management solutions to commercial and industrial businesses, institutions, utilities, and governments to reduce their overall energy costs. We come to market with a holistic approach to energy management helping customers a) contract for a competitive price for energy, b) engage in energy efficiency projects to minimize quantity used and c) pursue available rebate and incentive programs. We made our mark on the industry with an innovative approach to procurement via our online auction platform, the World Energy Exchange^®. With recent investments and acquisitions, we are building out our energy efficiency practice by engaging new customers while also pursuing more cross-selling opportunities for our procurement services.

We provide energy management services utilizing state-of-the-art technology and the experience of a seasoned management team to bring lower energy costs to its customers. We use a simple equation

E = P · Q – i

to help customers to understand the holistic nature of the energy management problem. Total energy cost (E) is a function of Energy Price (P) times the Quantity of Energy Consumed (Q), minus any rebates or incentives (i) the customer can earn. This approach not only makes energy management more approachable for customers, simplifying what has become an increasingly dynamic and complex problem, it also highlights the inter-related nature of the energy management challenge. We assert that point solution vendors may optimize one of the three elements, but we believe it takes looking at the problem holistically to unlock the most savings.

Acquisitions are an important component of our business strategy. Our focus is on both our core procurement business as well as new product lines within the energy management services industry such as energy efficiency services.

On October 3, 2012, we acquired substantially all of the assets and assumed certain obligations of Northeast Energy Partners, LLC (“NEP”) pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) between us, NEP, and its members. NEP was a Connecticut based energy management and procurement company. The purchase price was approximately $7.9 million in cash and a $2.0 million Promissory Note with NEP (the “NEP Note”). The NEP Note bears interest at 4% with $1.5 million of principal plus interest due on October 1, 2013 and the remaining $500,000 of principal plus interest due April 1, 2014. NEP may also earn up to an additional $2.5 million in cash and 153,153 in shares based on achieving certain 12-month revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”) targets, as defined. The NEP Note is unsecured and subordinated to financing with Silicon Valley Bank (“SVB”). We financed this acquisition through the use of long-term debt. We borrowed $4.0 million in the form of a 42-month term loan from SVB, bringing our total borrowing under our term loan with them to $6.5 million, and $4.0 million in the form of an 8-year subordinated note from Massachusetts Capital Resource Company (“MCRC”). On October 1, 2013, we made the $1.5 million principal and interest payment against the NEP Note. In addition, based on NEP’s financial performance against the earn-out through September 30, 2013, we estimate that NEP will achieve the second level of the earn-out, which would equate to a $1.25 million cash payment and issuance of 76,577 shares by December 31, 2013. This calculation is subject to review and has not been finalized. As a result, we have decreased accrued contingent consideration by $0.4 million to $1.8 million at September 30, 2013.

Our business model is heavily dependent on our people. We have significantly grown our employee base from 20 at the time of our initial public offering in November 2006 to 125 at September 30, 2013. This planned investment in staffing has been, and will continue to be, a key component of our strategic initiatives and revenue growth. While these infrastructure investments result in increased operating costs in the short–term, once they commence to generate incremental revenue the operating leverage within our business model results in positive cash flow and profitability although there can be no assurances of this. To date we have funded our acquisitions and strategic investments primarily with cash on-hand, notes payable, cash from operations and, most recently, long-term notes payable. We have also deferred portions of the purchase prices through the

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use of earn-outs that are tied to the ongoing performance of the acquired entity. Through the utilization of seller notes and earn-outs, we have been able to finance a portion of the cost of the acquisitions over time with the targets’ ongoing cash flow. These acquisition activities will increase our operating costs both in the short and long-term and may require us to borrow against our current credit facility and/or raise funds through additional capital raises.

Operations

Revenue

Retail Electricity Transactions

We earn a monthly commission on energy sales contracted through our online auction platform from each bidder or energy supplier based on the energy usage transacted between the bidder and lister or energy consumer. Our commissions are not based on the retail price for electricity; rather on the amount of energy consumed. Commissions are calculated based on the volume of energy usage transacted between the energy supplier and energy consumer multiplied by our contractual commission rate. Our contractual commission rate is negotiated with the energy consumer on a procurement-by-procurement basis based on energy consumer specific circumstances, including the size of auction, the effort required to organize and run the respective auction and competitive factors, among others. Once the contractual commission is agreed to with the energy consumer, all energy suppliers participating in the auction agree to that rate. That commission rate remains fixed for the duration of the contractual term regardless of energy usage. Energy consumers provide us with a letter of authorization to request their usage history from the local utility. We then use this data to compile a usage profile for that energy consumer that will become the basis for the auction. This data may also be used to estimate revenue on a going forward basis, as noted below.

We do not invoice our electricity energy suppliers for monthly commissions earned and, therefore, we report a substantial portion of our receivables as “unbilled.” Unbilled accounts receivable represents management’s best estimate of energy provided by the energy suppliers to the energy consumers for a specific completed time period at contracted commission rates and is made up of two components. The first component represents energy usage for which we have received actual data from the supplier and/or the utility, but for which payment has not been received at the balance sheet date. The majority of our contractual relationships with energy suppliers require them to supply actual usage data to us on a monthly basis and remit payment to us based on that usage. The second component represents energy usage for which we have not received actual data, but for which we have estimated usage. Commissions paid in advance by certain bidders are recorded as deferred revenue and amortized to commission revenue on a monthly basis on the energy exchanged that month.

Retail Natural Gas Transactions

There are two primary fee components to our retail natural gas services: transaction fees and management fees. Transaction fees are billed to and paid by the energy supplier awarded business on the platform. These fees are established prior to award and are the same for each supplier. For the majority of our natural gas transactions, we bill the supplier upon the conclusion of the transaction based on the estimated energy volume transacted for the entire award term multiplied by the transaction fee. Management fees are paid by our energy consumers and are generally billed on a monthly basis for services rendered based on terms and conditions included in contractual arrangements. While substantially all of our retail natural gas transactions are accounted for in accordance with this policy, a certain percentage is accounted for as the natural gas is consumed by the energy consumer and recognized as revenue in accordance with the retail electricity transaction revenue recognition methodology described above.

Mid-Market Transactions

We earn a monthly commission on energy sales from each energy supplier based on the energy usage transacted between the energy supplier and energy consumer. The commissions are not based on the retail price for electricity but rather on the amount of energy consumed. Commissions are calculated based on the energy usage transacted between the energy supplier and energy consumer multiplied by our contractual commission rate. Revenue from commissions is recognized as earned over the life of each contract as energy is consumed, provided there is persuasive evidence of an arrangement, the sales price is fixed or determinable, collection of the fee is reasonably assured, and customer acceptance criteria, if any, has been successfully demonstrated. We generally recognize revenue on these transactions when we have received verification from the electricity supplier of the end-users power usage and electricity supplier’s subsequent collection of the fees billed to the end user. The verification is generally accompanied with payment of the agreed upon fee to us, at which time the revenue is recognized. Commissions paid in advance are recorded as customer advances and are recognized monthly as commission revenue based on the energy exchanged that month. To the extent we do not receive verification of actual energy usage or we cannot reliably estimate what actual energy usage was for a given period, revenue is deferred until usage and collection data is received from the energy supplier.

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Demand Response Transactions

Demand response transaction fees are recognized when we have received confirmation from the demand response provider (“DRP”) that the energy consumer has performed under the applicable Regional Transmission Organization (“RTO”) or Independent System Operator (“ISO”) program requirements. The energy consumer is either called to perform during an actual curtailment event or is required to demonstrate its ability to perform in a test event during the performance period. For the PJM Interconnection (“PJM”), an RTO that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, the performance period is June through September in a calendar year. Test results are submitted to the PJM by the DRPs and we receive confirmation of the energy consumer’s performance in the fourth quarter. DRPs typically pay us ratably on a quarterly basis throughout the demand response fiscal (June to May) year.

Wholesale and Environmental Commodity Transactions

Wholesale transaction fees are invoiced upon the conclusion of the auction based on a fixed fee. These revenues are not tied to future energy usage and are recognized upon the completion of the online auction. For reverse auctions where our customers bid for a consumer’s business, the fees are paid by the bidder. For forward auctions where a lister is selling energy products, the fees are typically paid by the lister.

Environmental commodity transaction fees are accounted for utilizing two primary methods. For regulated allowance programs like the Regional Greenhouse Gas Initiative (“RGGI”), fees are paid by the lister and are recognized quarterly as revenue as auctions are completed and approved. For most other environmental commodity transactions both the lister and the bidder pay the transaction fee and revenue is recognized upon the consummation of the underlying transaction as credits are delivered by the lister and payment is made by the bidder.

Historically, our revenue and operating results have varied from quarter-to-quarter and are expected to continue to fluctuate in the future. These fluctuations are primarily due to the buying patterns of our wholesale and natural gas customers, which tend to have large, seasonal purchases during the fourth and first quarters and electricity usage having higher demand in our second and third quarters. In addition, the activity levels on the World Energy Exchange can fluctuate due to a number of factors, including market prices, weather conditions, energy consumers’ credit ratings, the ability of suppliers to obtain financing in credit markets, and economic and geopolitical events. To the extent these factors affect the purchasing decisions of energy consumers our future results of operations may be affected. Contracts between energy suppliers and energy consumers are signed for a variety of term lengths, with a one to two year contract term being typical for commercial and industrial energy consumers, and government contracts typically having two to three year terms.

Energy Efficiency Services

Our Energy efficiency services segment is primarily project driven where we identify efficiency measures that energy consumers can implement to reduce their energy usage. We present retrofit opportunities to customers, get approval from them to proceed and submit the proposal to the local utility for cost reimbursement. Once the utility approves funding for the project, we install the equipment, typically new heating, ventilation or air conditioning equipment, or replace lighting fixtures to more efficient models. We recognize revenue for Energy efficiency services when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. Due to the short-term nature of projects (typically two to three weeks), we utilize the completed-contract method. We also assess multiple contracts entered into by the same customer in close proximity to determine if the contracts should be combined for revenue recognition purposes. Revenues are recognized based upon factors such as passage of title, installation, payments and customer acceptance.

Cost of revenue

Cost of revenue consists primarily of:

• salaries, bonus and commissions, employee benefits and share-based compensation associated with our auction management and efficiency services, which are directly related to the development and production of the online auction and maintenance of market-related data on our auction platform and monthly management fees (our supply desk function);

• project costs including direct labor equipment and materials directly associated with efficiency projects; and

• rent, depreciation and other related overhead and facility-related costs.

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Sales and marketing

Sales and marketing expenses consist primarily of:

• salaries, bonus and commissions, employee benefits and share-based compensation related to sales and marketing personnel;

• third party commission expenses to our channel partners;

• travel and related expenses;

• amortization related to customer relationships and contracts;

• rent, depreciation and other related overhead and facility-related costs; and

• general marketing costs such as trade shows, marketing materials and outsourced services.

General and administrative

General and administrative expenses consist primarily of:

• salaries, bonus and commissions, employee benefits and share-based compensation related to general and administrative personnel;

• accounting, legal, investor relations, information technology, insurance and other professional fees; and

• rent, depreciation and other related overhead and facility-related costs.

Interest expense, net

Interest expense, net consists primarily of:

• interest income earned on cash held in the bank; and

• interest expense related to bank term loans, note payable and contingent consideration.

Income tax expense

Income tax expense reflects the utilization of our deferred tax assets, mainly net operating loss carryforwards, against projected annualized taxable income, federal alternative minimum tax liability and state income taxes.

Results of Operations

The following table sets forth certain items as a percent of revenue for the periods presented:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
Revenue		100	%		100	%		100	%		100	%
Cost of revenue		26			35			26			31
Gross profit		74			65			74			69
Operating expenses:
Sales and marketing		56			48			58			52
General and administrative		20			23			24			26
Operating loss		(2	)		(6	)		(8	)		(9	)
Interest expense, net		(3	)		(1	)		(3	)		(1	)
Other income		—			—			—			—
Income tax expense		(2	)		—			(2	)		—
Net loss		(7	)%		(7	)%		(13	)%		(10	)%

Comparison of the Three Months Ended September 30, 2013 and 2012

Revenue

	For the Three Months Ended September 30,
	2013		2012		Increase (Decrease)
Energy procurement	$	7,295,276	$	5,626,444	$	1,668,832		30	%
Energy efficiency services		1,443,281		1,979,410		(536,129	)	(27	)
Total revenue	$	8,738,557	$	7,605,854	$	1,132,703		15	%

Revenue increased 15% for the three months ended September 30, 2013 as compared to the same period in 2012 as our Energy procurement segment revenue grew 30%, which was partially offset by a 27% decrease in our Energy efficiency

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segment. Our Energy procurement segment revenue increased due to the acquisition of NEP and increased transaction activity from new customers in our retail product line. Revenue from our Energy efficiency services segment decreased 27% as we completed fewer projects under our NSTAR utility program in 2013 compared to the third quarter of 2012.

Cost of revenue

	For the Three Months Ended September 30,
	2013					2012
	$		% of Revenue			$		% of Revenue			Increase (Decrease)
Energy procurement	$	1,141,432		16	%	$	1,088,393		19	%	$	53,039		5	%
Energy efficiency services		1,102,443		76			1,544,520		78			(442,077	)	(29	)
Total cost of revenue	$	2,243,875		26	%	$	2,632,913		35	%	$	(389,038	)	(15	)%

Cost of revenue decreased 15% for the three months ended September 30, 2013 as compared to the same period in 2012 due to a decrease in equipment, material and labor costs associated with projects completed by our Energy efficiency services segment. Cost of revenue from our Energy procurement segment increased 5% due to increased payroll costs associated with our NEP acquisition. Cost of revenue associated with our Energy procurement segment as a percent of revenue decreased by 3% due to the 30% increase in revenue which was only partially offset by the cost increases. Cost of revenue associated with our Energy efficiency services segment decreased by 29% due to the 27% revenue decrease which was partially offset by our continued investment in our Energy efficiency team. Cost of revenue associated with our Energy efficiency services segment as a percent of revenue improved 2% as improved project contribution margins outweighed the added payroll cost.

Operating expenses

	For the Three Months Ended September 30,
	2013					2012
	$		% of Revenue			$		% of Revenue			Increase
Sales and marketing	$	4,875,985		56	%	$	3,638,961		48	%	$	1,237,024	34	%
General and administrative		1,817,996		20			1,769,718		23			48,278	3
Total operating expenses	$	6,693,981		76	%	$	5,408,679		71	%	$	1,285,302	24	%

Sales and marketing expenses increased 34% for the three months ended September 30, 2013 as compared to the same period in 2012 primarily due to increases in payroll, internal and third-party commissions and amortization of intangible assets. Payroll and internal commissions increased due to an increase of ten sales and marketing employees versus the same period in 2012 primarily due to new hires in our mid-market product line primarily from our acquisition of NEP. Internal commissions increased due to a change in commission policy for our mid-market group implemented in the second quarter of 2013. Under the revised policy, we continue to pay commissions based on cash received from mid-market transactions that are deferred for revenue purposes. In addition, our mid-market sales reps are entitled to certain bookings and quota bonuses to offset the impact of a change in our policy to only accept monthly payment terms for all mid-market transactions. Third-party commissions increased 33% due to the 35% increase in channel partners compared to the prior period. Amortization expense related to intangible assets increased in 2013 due to our 2012 acquisition of NEP. Sales and marketing expense as a percentage of revenue increased by 8% as the increase in costs described above were only partially offset by the 15% increase in revenue.

The 3% increase in general and administrative expenses for the three months ended September 30, 2013 as compared to the same period in 2012 was primarily due to increases in payroll, occupancy and amortization expense. The increases in occupancy and amortization costs were primarily due to our 2012 acquisition of NEP. The increase in payroll was primarily due to back office additions we made to support our recent acquisitions. These increases were partially offset by a decrease to contingent consideration. The 3% decrease in general and administrative expenses as a percent of revenue was due to the 15% increase in revenue that was only partially offset by the above noted cost increases.

Interest expense, net and other income

Interest expense, net was approximately $254,000 for the three months ended September 30, 2013 compared to interest expense, net of approximately $87,000 for the three months ended September 30, 2012. The increase in interest expense, net in 2013 was primarily due to interest charged on our long-term debt.

Income tax expense

We recorded income tax expense of approximately $143,000 for the three months ended September 30, 2013 compared to income tax expense of approximately $23,000 for the three months ended September 30, 2012. In the third quarter of 2013 income tax expense reflects a deferred tax provision, federal alternative minimum tax liability and state income taxes. In 2012 income tax expense reflected a federal alternative minimum tax liability and state income taxes.

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Net loss

We reported a net loss of approximately $0.6 million for the three months ended September 30, 2013 compared to $0.5 million for the three months ended September 30, 2012, as the $1.3 million increase in operating expenses and $0.3 million increase in interest and income tax expense in 2013 were substantially offset by the $1.5 million increase in revenue and gross margin improvement.

Comparison of the Nine Months Ended September 30, 2013 and 2012

Revenue

	For the Nine Months Ended September 30,
	2013		2012		Increase (Decrease)
Energy procurement	$	21,673,273	$	17,480,645	$	4,192,628		24	%
Energy efficiency services		3,658,423		4,103,815		(445,392	)	(11	)
Total revenue	$	25,331,696	$	21,584,460	$	3,747,236		17	%

Revenue increased 17% for the nine months ended September 30, 2013 as compared to the same period in 2012 due to a 24% increase in our Energy procurement segment, partially offset by an 11% decrease in revenue from our Energy efficiency services segment. Our Energy procurement segment revenue increased due to the acquisition of NEP and increased transaction activity due to new customers in our retail product line. These increases were partially offset by a decrease of in-period revenue from gas and wholesale transaction activity due to the timing of certain transactions in 2013 compared to 2012. Revenue from our Energy efficiency services segment decreased by 11% as compared to the prior year as we completed fewer projects within our NSTAR utility efficiency program in the third quarter of 2013 compared to 2012.

Cost of revenue

	For the Nine Months Ended September 30,
	2013					2012
	$		% of Revenue			$		% of Revenue			Increase (Decrease)
Energy procurement	$	3,639,116		17	%	$	3,518,073		20	%	$	121,043		3	%
Energy efficiency services		2,982,365		82			3,096,738		75			(114,373	)	(4	)
Total cost of revenue	$	6,621,481		26	%	$	6,614,811		31	%	$	6,670		—	%

Cost of revenue was relatively unchanged for the nine months ended September 30, 2013 as compared to the same period in 2012 as costs associated with the acquisition of NEP were offset by decreases in equipment, material and labor costs associated with projects completed by our Energy efficiency services segment. Cost of revenue for our Energy procurement segment increased 3% as the increased payroll costs associated with NEP and our retail product group were partially offset by a decrease in amortization expense. Cost of revenue associated with our Energy procurement segment as a percent of revenue decreased by 3% due to the 24% increase in revenue which was only partially offset by the cost increases. Cost of revenue associated with our Energy efficiency services segment decreased 4% primarily due to a decrease in project material costs associated with the 11% decrease in revenue that were substantially offset by increased payroll costs due to the continued investment in our project management team. Cost of revenue associated with our Energy efficiency services segment as a percent of revenue increased by 7% due to the increased payroll costs and the impact of a low contribution margin on a large municipal project completed during the second quarter.

Operating expenses

	For the Nine Months Ended September 30,
	2013					2012
	$		% of Revenue			$		% of Revenue			Increase
Sales and marketing	$	14,744,413		58	%	$	11,171,915		52	%	$	3,572,498	32	%
General and administrative		6,046,690		24			5,748,957		26			297,733	5
Total operating expenses	$	20,791,103		82	%	$	16,920,872		78	%	$	3,870,231	23	%

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Sales and marketing expenses increased 32% for the nine months ended September 30, 2013 as compared to the same period in 2012 primarily due to increases in payroll, internal and third party commissions and amortization of intangible assets. Payroll and internal commissions increased due to an increase of ten sales and marketing employees versus the same period in 2012 due to new hires in our mid-market product line primarily from our acquisition of NEP and hires in our Energy efficiency services segment. Third-party commissions increased 28% due to the 35% increase in channel partners compared to the prior period. Amortization expense related to intangible assets increased in 2013 due to our 2012 acquisition of NEP. Sales and marketing expense as a percentage of revenue increased 6% due to the increase in costs and the change in our mid-market commission plan both described above, which were partially offset by the 17% increase in revenue.

The 5% increase in general and administrative expenses for the nine months ended September 30, 2013 as compared to the same period in 2012 was primarily due to increases in payroll, legal, occupancy and amortization expense. These increased costs were primarily due to additions in our back office operations to support our growth, costs associated with the GSE litigation and our 2012 acquisition of NEP and were partially offset by a decrease to contingent consideration. General and administrative expenses as a percent of revenue decreased 2% as the 17% increase in revenue offset the above noted cost increases.

Interest expense, net and other income

Interest expense, net was approximately $734,000 for the nine months ended September 30, 2013 compared to interest expense, net of approximately $275,000 for the nine months ended September 30, 2012. The increase in interest expense, net in 2013 was primarily due to interest charged on our long-term debt. Other income in the first quarter of 2012 primarily consisted of $53,000 that was recognized from the sale of our investment in Retroficiency.

Income tax expense

We recorded income tax expense of approximately $405,000 for the nine months ended September 30, 2013 compared to income tax expense of $73,000 for the nine months ended September 30, 2012. In the first nine months of 2013 income tax expense reflects a deferred tax provision, federal alternative minimum tax liability and state income taxes. In 2012 income tax expense reflected a federal alternative minimum tax liability and state income taxes.

Net loss

Net loss increased approximately $1.0 million for the nine months ended September 30, 2013 compared to the same period in 2012, primarily due to the $3.9 million increase in operating expenses, $0.5 million increase in interest expense and the $0.3 million increase in income taxes, which were partially offset by the 17% increase in revenue and the gross margin improvement.

Liquidity and Capital Resources

At September 30, 2013 we had no commitments for material capital expenditures. We have identified and executed against a number of strategic initiatives that we believe are key components of our future growth, including: making strategic acquisitions; entering into other energy-related markets including wholesale transactions with utilities, energy efficiency, and demand response; expanding our community of listers, bidders and channel partners on our exchanges; strengthening and extending our long-term relationships with government agencies; and growing our direct and inside sales force. As of September 30, 2013 our workforce numbered 125, a decrease of one employee from the number that we employed at December 31, 2012. At September 30, 2013, we had 59 professionals in our sales and marketing and account management groups, 43 in our supply desk group and 23 in our general and administrative group.

We paid $10.4 million to acquire three businesses in 2011 through the use of cash on hand, cash flow from ongoing operations as well cash flow generated by the acquisitions. In addition, we have paid $6.7 million in seller notes and earn-outs bringing the total cash paid for the 2011 acquisitions to $17.1 million. In early 2012 we expanded our credit facility with SVB to include a 4-year, $2.5 million term loan. We borrowed an additional $10.0 million to acquire NEP in October 2012 which included: increasing our term loan with SVB by $4.0 million to $6.5 million, borrowing $4.0 million in subordinated long-term debt from MCRC, and entering into a $2.0 million seller note with NEP. In addition, NEP may also earn an additional $2.5 million in cash and 153,153 shares in the form of earn-outs if certain operating performance criteria are met post-acquisition. The $2.0 million seller note related to the NEP acquisition is due in two tranches: $1.5 million on October 1, 2013 and $0.5 million on April 1, 2014. The first installment was made on October 1, 2013. While the expansion/addition of these debt instruments significantly increased our commitments, we believe we have the

19

resources to meet both our short- and long-term obligations under these arrangements based on cash on-hand, operating cash flows from our base business and cash expected to be generated from all of our acquired businesses. During the first nine months of 2013 we generated cash flow from operations of $2.2 million and ended the quarter with $2.5 million in cash and cash equivalents. We estimate that NEP will achieve the second level of the earn-out, which will equate to a $1.25 million cash payment, but is subject to final determination.

Comparison of September 30, 2013 to December 31, 2012

	September 30, 2013			December 31, 2012			Increase (Decrease)
Cash and cash equivalents	$	2,518,377		$	3,307,822		$	(789,445	)	(24	)%
Trade accounts receivable, net		7,108,011			7,242,603			(134,592	)	(2	)
Days sales outstanding		75			65			10		15
Deferred revenue and customer advances		7,405,008			5,309,012			2,095,996		39
Working capital (deficit)		(4,180,452	)		(2,464,718	)		(1,715,734	)	(70	)
Stockholders’ equity		24,021,000			26,710,127			(2,689,127	)	(10	)

Cash and cash equivalents decreased 24% primarily due to approximately $1.4 million of payments of contingent consideration and $1.5 million of principal payments on the SVB term note. These decreases were partially offset by cash flows from operations of approximately $2.2 million. Trade accounts receivable decreased $0.1 million as compared to the fourth quarter of 2012 due to a $1.5 million, or 14%, decrease in revenue in the third quarter of 2013 versus the fourth quarter of 2012. This decrease was partially offset by an increase in days sales outstanding. Days sales outstanding (representing accounts receivable outstanding at September 30, 2013 divided by the average sales per day during the current quarter, as adjusted) increased 15% due to the timing of in-period revenue recognized within the third quarter of 2013 as compared to the fourth quarter of 2012. Revenue from bidders representing 10% or more of our revenue decreased to 12% from one bidder during the nine months ended September 30, 2013, from 22% from two bidders during the same period in 2012.

Deferred revenue and customer advances increased 39% due primarily to upfront commission payments related to our mid-market product line being deferred to future periods for revenue recognition purposes. The working capital balance at September 30, 2013 (consisting of current assets less current liabilities) decreased $1.7 million from December 31, 2012 primarily due to the reclassifications of $1.5 million of long-term debt, $1.0 million of accrued contingent consideration and $0.5 million of related party subordinated notes payable from non-current to current. These decreases were partially offset by a $1.5 million increase in cash and cash equivalents generated by adjusted EBITDA for the nine months ended September 30, 2013. Stockholders’ equity decreased 10% for the nine months ended September 30, 2013 due to a $3.2 million net loss, partially offset by share-based compensation and proceeds from the exercise of stock options.

Cash Flow Analysis

Cash provided by operating activities for the nine months ended September 30, 2013 was approximately $2.2 million compared to cash provided by operating activities for the nine months ended September 30, 2012 of approximately $1.4 million. Cash flow from operations in 2013 was primarily due to a $2.1 million increase in deferred revenue and customer advances partially offset by a $1.2 million decrease in accrued expenses, contingent consideration and other current liabilities. Cash used in investing and financing activities for the nine months ended September 30, 2013 was approximately $3.0 million primarily due to the payment of $1.4 million of contingent consideration and $1.5 million of principal payments on our SVB term loan. Cash used in investing and financing activities for the nine months ended September 30, 2012 was approximately $0.2 million primarily due to cash received from the sale of our Retroficiency investment and proceeds from our term loan with SVB, offset by the payment of $2.3 million of contingent consideration related to our 2011 acquisitions, $1.0 million paid against seller notes and $0.3 million of fixed asset additions related to our office moves.

EBITDA

EBITDA, representing net loss before interest, income taxes, depreciation and amortization was $0.8 million and $1.1 million for the three and nine months ended September 30, 2013, respectively, an increase from approximately $0.6 million and $0.8 million for the same periods in the prior year. Adjusted EBITDA, representing EBITDA before share-based compensation, was $1.0 million and $1.5 million for the three and nine months ended September 30, 2013, respectively, representing increases of $0.6 million and $0.8 million compared to the same periods in the prior year. Please refer to the section below discussing non-GAAP financial measures for a reconciliation of non-GAAP measures to the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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In this Quarterly Report on Form 10-Q, we provide certain “non-GAAP financial measures”. A non-GAAP financial measure refers to a numerical financial measure that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable financial measure calculated and presented in accordance with GAAP in our financial statements. In this Quarterly Report on Form 10-Q, we provide EBITDA and adjusted EBITDA as additional information relating to our operating results. These non-GAAP measures exclude expenses related to share-based compensation, depreciation related to our fixed assets, amortization expense related to acquisition-related assets and other assets, interest expense on bank borrowings, notes payable to sellers and contingent consideration, interest income on invested funds and notes receivable, and income taxes. Management uses these non-GAAP measures for internal reporting and bank reporting purposes. We have provided these non-GAAP financial measures in addition to GAAP financial results because we believe that these non-GAAP financial measures provide useful information to certain investors and financial analysts in assessing our operating performance due to the following factors:

• We believe that the presentation of a non-GAAP measure that adjusts for the impact of share-based compensation expenses, depreciation of fixed assets, amortization expense related to acquisition-related assets and other assets, interest expense on bank borrowings, seller notes and contingent consideration, interest income on invested funds and notes receivable, and income taxes, provides investors and financial analysts with a consistent basis for comparison across accounting periods and, therefore, is useful to investors and financial analysts in helping them to better understand our operating results and underlying operational trends;

• Although share-based compensation is an important aspect of the compensation of our employees and executives, share-based compensation expense is generally fixed at the time of grant, then amortized over a period of several years after the grant of the share-based instrument, and generally cannot be changed or influenced by management after the grant;

• We do not acquire intangible assets on a predictable cycle. Our intangible assets relate solely to business acquisitions. Amortization costs are fixed at the time of an acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition;

• We do not regularly incur capitalized software and website costs. Our capitalized software costs relate primarily to the build-out of our exchanges. Amortization costs are fixed at the time the costs are incurred and are then amortized over a period of several years and generally cannot be changed or influenced by management after the initial costs are incurred;

• We do not regularly invest in fixed assets. Our fixed assets relate primarily to computer and office equipment and furniture and fixtures. Depreciation costs are fixed at the time of purchase and are then depreciated over several years and generally cannot be changed or influenced by management after the purchase;

• We do not regularly enter into bank debt, seller notes and/or pay interest on contingent consideration. Our seller notes and contingent consideration relate to acquisition activities. Interest expense is fixed at the time of purchase and recorded over the life of the lease and generally cannot be changed or influenced by management after the purchase;

• We do not regularly earn interest on our cash accounts and notes receivable. Our cash is invested in U.S. Treasury funds and has not yielded material returns to date and these returns generally cannot be changed or influenced by management; and

• We do not regularly pay federal or state income taxes due to our net operating loss carryforwards. Our income tax expense reflects the release of our deferred tax assets to apply to projected annualized taxable income, and an anticipated alternative minimum tax liability based on statutory rates that generally cannot be changed or influenced by management.

Pursuant to the requirements of the SEC, we have provided below a reconciliation of the non-GAAP financial measures used to the most directly comparable financial measures prepared in accordance with GAAP. These non-GAAP financial measures are not prepared in accordance with GAAP. These measures may differ from the GAAP information, even where similarly titled used by other companies, and therefore should not be used to compare our performance to that of other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net loss prepared in accordance with GAAP.

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
GAAP net loss	$	(592,298	)	$	(545,155	)	$	(3,203,338	)	$	(2,245,241	)
Add: Interest expense, net		253,822			86,917			733,956			274,624
Add: Income taxes		142,555			22,500			405,165			72,500
Add: Amortization of intangibles		974,759			618,228			2,924,275			2,076,369
Add: Amortization of other assets		8,507			8,833			25,520			30,504
Add: Depreciation		56,373			55,443			167,112			158,513
Non-GAAP EBITDA	$	843,718		$	246,766		$	1,052,690		$	367,269
Non-GAAP EBITDA per share	$	0.07		$	0.02		$	0.09		$	0.03
Add: Share-based compensation		142,925			120,175			435,234			319,619
Non-GAAP adjusted EBITDA	$	986,643		$	366,941		$	1,487,924		$	686,888
Non-GAAP adjusted EBITDA per share	$	0.08		$	0.03		$	0.12		$	0.06
Weighted average diluted shares		12,068,220			11,946,504			12,076,880			11,945,177

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires us 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 the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from these estimates.

The most judgmental estimates affecting our condensed consolidated financial statements are those relating to revenue recognition and the estimate of actual energy delivered from the bidder to the lister of such energy; share-based compensation; the valuation of intangible assets and goodwill; the valuation of contingent consideration; impairment of long-lived assets; and estimates of future taxable income as it relates to the realization of our net deferred tax assets. We regularly evaluate our estimates and assumptions based upon historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates; future results of operations may be affected. Refer to Note 2 of our consolidated financial statements within our Annual Report on Form 10-K as filed with the SEC on April 16, 2013 for a description of our accounting policies.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). In designing and evaluating our disclosure controls and procedures, our management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, our management was required to apply its reasonable judgment.

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2013.

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Internal Control Over Financial Reporting

On October 3, 2012, we acquired substantially all of the assets and certain obligations of NEP. While our financial statements for the three and nine months ended September 30, 2013 included the results of NEP from the acquisition date through September 30, 2013, as permitted by the rules and regulations of the SEC, our management’s assessment of our internal control over financial reporting did not include an evaluation of NEP’s internal control over financial reporting. Further, our management’s conclusion regarding the effectiveness of our internal control over financial reporting as of September 30, 2013 and December 31, 2012 does not extend to NEP’s internal control over financial reporting. We continue to integrate policies, processes, technology and operations for the combined companies and will continue to evaluate our internal control over financial reporting as we develop and execute our integration plans.

Based on its evaluation, our management concluded that, as of September 30, 2013, our internal control over financial reporting was not effective based on the COSO criteria and that we had a material weakness. A “material weakness” is defined as a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

As disclosed in our previous filings with the Securities and Exchange Commission, on March 29, 2013, our Board of Directors, based on the recommendation of the Audit Committee and in consultation with management, made the determination to restate our previously issued audited financial statements for the year ended December 31, 2011 included in our Annual Report on Form 10-K, and our unaudited financial statements for the quarterly periods ended March 31, 2012, June 30, 2012, and September 30, 2012 included in our Quarterly Reports on Forms 10-Q and the unaudited pro forma disclosures included in our Current Report on Form 8-K/A filed on December 17, 2012. In connection with the preparation of our annual report on Form 10-K for the year ended December 31, 2012, we identified a material weakness in the design and operating effectiveness of our internal control over financial reporting related to the recording of revenue recognition for certain commission payments related to our mid-market product line. Specifically, we did not select and apply the appropriate accounting policies for GSE, which we acquired on October 31, 2011. Consequently, effective controls did not exist to ensure that revenue from this product line was appropriately and accurately recorded.

Plan for Remediation of Material Weakness

As soon as we learned of the material weakness, we began taking steps intended to remediate this material weakness and to improve our control processes and procedures with respect to revenue recognition in general as part of our efforts to become compliant with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. These activities include:

• implementing a revised accounting policy for our mid-market product-line;

• establishing new policies, procedures and controls to ensure the new policy is administered correctly;

• evaluating the proper organizational structure, including hiring a sufficient complement of personnel with the requisite knowledge and expertise of revenue recognition accounting standards under U.S. GAAP; and

• to the extent necessary, hiring consultants with accounting expertise with specific expertise with revenue recognition.

In particular, our remediation plan is being designed to ensure that the recording of revenue recognition for certain commission payments is appropriate. We have made significant progress in addressing this issue and continue to implement processes and procedures strengthening our organizational structure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Three former employees/consultants of GSE Consulting, LP (“GSE”) have filed three separate complaints in Texas County Court alleging, among other things, claims related to breach of contract, quantum meruit, promissory estoppel, and tortious interference. Each plaintiff claims that GSE and/or we failed to pay commissions due for services that they provided prior to the date of our purchase of certain GSE assets, based on their respective employment or independent contractor agreements with GSE. Each plaintiff has also asserted claims for recovery of their attorneys’ fees. We deny the allegations and have filed counterclaims for damages, asserting claims for conversion, unjust enrichment, misappropriation of confidential information, and violation of the Texas Theft Liability Act against each of the plaintiffs. We have also filed a counterclaim against one of the plaintiffs for her breach of a non-competition and non-solicitation agreement, based on her working for a competitor of ours during her 1-year restrictive period and her improper solicitation of former GSE customers on behalf of the competitor. We also filed cross claims against GSE for indemnification under the Asset Purchase Agreement in each of the three cases. Discovery is proceeding in each matter and the court has assigned respective trial dates in January and February 2014.

We have estimated the potential commissions due to these former employees to be approximately $400,000. We intend to defend these actions vigorously and are currently unable to estimate a range of payments, if any, it may be required to pay, with respect to these claims. However, we believe that the resolution of these matters will not result in a material effect to our consolidated financial statements. However, due to uncertainties that accompany litigation of this nature, there could be no assurance that we will be successful, and the resolution of the lawsuits could have a material effect on our consolidated financial statements.

From time to time, we are subject to legal proceedings and claims arising from the conduct of our business operations, including litigation related to employment matters. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, we believe that the aggregate amount of such liabilities, if any, will not have a material adverse effect on our consolidated financial position and/or results of operations. It is possible, however, that future financial position or results of operations for any particular period could be materially affected by changes in our assumptions or strategies related to those contingencies or changes out of our control.

Item 1A. Risk Factors

There have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission on April 16, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

During the quarter ended September 30, 2013, we did not sell any unregistered equity securities.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In connection with the vesting of restricted stock granted to employees, we withheld certain shares with value equivalent to employees’ minimum statutory obligations for the applicable income and other employment taxes.

A summary of the shares withheld to satisfy employee tax withholding obligations for the three months ended September 30, 2013 is as follows:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans Or Programs		Maximum Number of Shares That May Yet Be Purchased Under The Plans Or Programs
7/01/13 – 7/31/13		37	$	3.64		—		—
8/01/13 – 8/31/13		—		—		—		—
9/01/13 – 9/30/13		39		3.29		—		—
Total		76	$	3.46		—		—

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures (not applicable)

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Certification of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from World Energy Solutions, Inc.’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2013, formatted in Extensible Business Reporting Language: (i) the condensed consolidated balance sheets; (ii) the condensed consolidated statements of operations; (iii) the condensed consolidated statements of cash flows; and (iv) notes to the condensed consolidated financial statements.

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SIGNATURES

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, thereunto duly authorized.

	World Energy Solutions, Inc.
Dated: November 8, 2013	By:	/s/ Philip Adams
		Philip Adams
		Chief Executive Officer
Dated: November 8, 2013	By:	/s/ James Parslow
		James Parslow
		Chief Financial Officer

26

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

§302 OF THE SARBANES-OXLEY ACT OF 2002

I, Philip Adams, certify that:

1. I have reviewed this quarterly report on Form 10-Q of World Energy Solutions, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 8, 2013	By:	/s/ Philip Adams
		Philip Adams
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

§302 OF THE SARBANES-OXLEY ACT OF 2002

I, James Parslow, certify that:

1. I have reviewed this quarterly report on Form 10-Q of World Energy Solutions, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 8, 2013	By:	/s/ James Parslow
		James Parslow
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED

PURSUANT TO §906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of this quarterly report of World Energy Solutions, Inc. (the “Company”) on Form 10-Q (the “Report”) for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof, I, Philip Adams, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 8, 2013	By:	/s/ Philip Adams
		Philip Adams
		Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED

PURSUANT TO §906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of this quarterly report of World Energy Solutions, Inc. (the “Company”) on Form 10-Q (the “Report”) for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof, I, James Parslow, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 8, 2013	By:	/s/ James Parslow
		James Parslow
		Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Litigation

Three former employees/consultants of GSE Consulting, LP (“GSE”) have filed three separate complaints in Texas County Court alleging, among other things, claims related to breach of contract, quantum meruit, promissory estoppel, and tortious interference. Each plaintiff claims that GSE and/or the Company failed to pay commissions due for services that they provided prior to the date of the Company’s purchase of certain GSE assets, based on their respective employment or independent contractor agreements with GSE. Each plaintiff has also asserted claims for recovery of their attorneys’ fees. The Company denies the allegations and has filed counterclaims for damages, asserting claims for conversion, unjust enrichment, misappropriation of confidential information, and violation of the Texas Theft Liability Act against each of the plaintiffs. The Company has also filed a counterclaim against one of the plaintiffs for her breach of a non-competition and non-solicitation agreement, based on her working for a competitor of the Company’s during her 1-year restrictive period and her improper solicitation of former GSE customers on behalf of the competitor. The Company also filed cross claims against GSE for indemnification under the Asset Purchase Agreement in each of the three cases. Discovery is proceeding in each matter and the court has assigned respective trial dates in January and February 2014.

The Company has estimated the potential commissions due to these former employees to be approximately $400,000. The Company intends to defend these actions vigorously and is currently unable to estimate a range of payments, if any, it may be required to pay, with respect to these claims. However, the Company believes that the resolution of these matters will not result in a material effect to its condensed consolidated financial statements. However, due to uncertainties that accompany litigation of this nature, there could be no assurance that the Company will be successful, and the resolution of the lawsuits could have a material effect on its condensed consolidated financial statements.

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue:
Brokerage commissions, transaction fees and efficiency projects	$ 8,552,381	$ 7,364,110	$ 24,767,574	$ 20,849,513
Management fees	186,176	241,744	564,122	734,947
Total revenue	8,738,557	7,605,854	25,331,696	21,584,460
Cost of revenue	2,243,875	2,632,913	6,621,481	6,614,811
Gross profit	6,494,682	4,972,941	18,710,215	14,969,649
Operating expenses:
Sales and marketing	4,875,985	3,638,961	14,744,413	11,171,915
General and administrative	1,817,996	1,769,718	6,046,690	5,748,957
Total operating expenses	6,693,981	5,408,679	20,791,103	16,920,872
Operating loss	(199,299)	(435,738)	(2,080,888)	(1,951,223)
Interest expense, net	(253,822)	(86,917)	(733,956)	(274,624)
Other income	3,378		16,671	53,106
Loss before income taxes	(449,743)	(522,655)	(2,798,173)	(2,172,741)
Income tax expense	142,555	22,500	405,165	72,500
Net loss	$ (592,298)	$ (545,155)	$ (3,203,338)	$ (2,245,241)
Net loss per share:
Net loss per common share - basic and diluted	$ (0.05)	$ (0.05)	$ (0.27)	$ (0.19)
Weighted average shares outstanding - basic and diluted	12,007,667	11,904,469	11,985,629	11,888,660

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Trade Accounts Receivable, Net

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Trade Accounts Receivable, Net

5. Trade Accounts Receivable, Net

The Company does not invoice bidders for the commissions earned on retail electricity, certain natural gas and demand response transactions and, therefore, reports a significant portion of its receivables as “unbilled.” Unbilled accounts receivable represent management’s best estimate of energy provided by the energy suppliers to the energy consumers for a specific completed time period at contracted commission rates.

The Company generally invoices bidders for commissions earned on retail natural gas and wholesale transactions as well as energy efficiency customers, which are reflected as billed accounts receivable. For natural gas and wholesale transactions, the total commission earned on these transactions is recognized upon completion of the procurement event and are generally due within 30 days of invoice date. For efficiency projects, revenue is recognized and invoiced upon project installation and acceptance, as required, and are generally due within 30 days of invoice date. In addition, the Company invoices the bidder, lister or combination of both for certain auctions performed for environmental commodity product transactions. These transactions are earned and invoiced either upon lister acceptance of the auction results or, in some cases, upon delivery of the credits or cash settlement of the transaction. Trade accounts receivable, net consists of the following:

	September 30, 2013			December 31, 2012
Unbilled accounts receivable	$	5,999,795		$	5,343,559
Billed accounts receivable		1,383,395			2,074,223
		7,383,190			7,417,782
Allowance for doubtful accounts		(275,179	)		(175,179	)
Trade accounts receivable, net	$	7,108,011		$	7,242,603

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Deferred Revenue and Customer Advances (Tables)

9 Months Ended

Sep. 30, 2013

Revenue Recognition [Abstract]

Deferred Revenue and Customer Advances Expected to be Recognized as Revenue by Year

Deferred revenue and customer advances expected to be recognized as revenue by year are approximately as follows as of September 30, 2013:

	Amount
Remainder of 2013	$	515,000
2014		3,087,000
2015		2,074,000
2016		1,299,000
2017		265,000
2018 and thereafter		165,000
Total deferred revenue and customer advances	$	7,405,000

Rollforward of Deferred Revenue and Customer Advances

The following table provides a rollforward of deferred revenue and customer advances:

	Amount
Balance at January 1, 2013	$	5,309,000
Cash received		3,623,000
Revenue recognized		(1,527,000	)
Balance at September 30, 2013	$	7,405,000

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Acquisitions

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisitions

13. Acquisitions

The Company accounts for acquisitions using the purchase method in accordance with ASC 805, “Business Combinations.” The results of operations of each acquisition have been included in the accompanying condensed consolidated financial statements as of the date of the acquisition.

On October 3, 2012, the Company acquired substantially all of the assets and certain obligations of NEP pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) between the Company, NEP, and its members. NEP is a Connecticut-based energy management and procurement company.

The acquisition-date fair value of the consideration transferred totaled approximately $12.1 million. As part of the total consideration, NEP can earn up to $3,180,000 in contingent consideration if certain performance criteria are met post-acquisition. This potential contingent consideration consists of $2.5 million in cash and 153,153 shares of common stock and is due on December 31, 2013. The fair value of the contingent consideration was based on the weighted probability of achievement of certain revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”) levels for the 12-months ending September 30, 2013. The Company valued this contingent payment at $2.2 million at acquisition, which has been recorded within current liabilities as accrued contingent consideration. In initially measuring the fair value of the contingent consideration, the Company assigned probabilities to these performance criteria, based among other things on the nature of the performance criteria and the Company’s due diligence performed at the time of the acquisition. Based on financial results through September 30, 2013, the Company reduced the accrued contingent consideration by $0.4 million to $1.8 million. The $0.4 million reduction in this liability has been recorded as a reduction in general and administrative expense for the nine months ended September 30, 2013.

The NEP acquisition operating results have been included within the Company’s Energy procurement services segment since the date of acquisition and, therefore, discrete operating results are not maintained for its operations. The following unaudited pro forma information assumes that the acquisitions of NEP had been completed as of the beginning of 2012:

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Revenues	$	8,905,511		$	25,589,150
Net loss	$	(583,178	)	$	(2,744,736	)
Net loss per share:
Basic and diluted	$	(0.05	)	$	(0.23	)
Weighted average shares outstanding – basic and diluted		11,904,469			11,888,660

The pro forma financial information is not necessarily indicative of the results to be expected in the future as a result of the acquisition of NEP, as the acquisition did not necessarily reflect the purchase of stand-alone or complete operations, and included several non-recurring revenue events.

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Commitments and Contingencies - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013 Complaints Employee
Commitments And Contingencies Disclosure [Abstract]
Number of employees/consultants filed complaints	3
Number of complaints	3
Potential commission on service due to former employees	$ 400,000

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Intangibles, Net - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Intangible Assets [Line Items]
Amortization expense	$ 2.9	$ 2.1
Amortized intangible assets removed	2.4	2.4
Customer Relationships [Member]
Intangible Assets [Line Items]
Amount acquisition related intangible assets with indefinite lives	$ 1.7

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Pro Forma Information for Acquisitions

The following unaudited pro forma information assumes that the acquisitions of NEP had been completed as of the beginning of 2012:

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Revenues	$	8,905,511		$	25,589,150
Net loss	$	(583,178	)	$	(2,744,736	)
Net loss per share:
Basic and diluted	$	(0.05	)	$	(0.23	)
Weighted average shares outstanding – basic and diluted		11,904,469			11,888,660

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Fair Value Measurement and Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

Assets and liabilities of the Company measured at fair values on a recurring basis as of September 30, 2013 and December 31, 2012 are summarized as follows:

	September 30, 2013			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents	$	2,518,377		$	2,518,377	$	—		$	—
Total Assets	$	2,518,377		$	2,518,377	$	—		$	—
Liabilities
Contingent consideration	$	2,868,734		$	—	$	—		$	2,868,734
Debt discount		(99,682	)		—		(99,682	)		—
Total Liabilities	$	2,769,052		$	—	$	(99,682	)	$	2,868,734

	December 31, 2012			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents	$	3,307,822		$	3,307,822	$	—		$	—
Total Assets	$	3,307,822		$	3,307,822	$	—		$	—
Liabilities
Contingent consideration	$	4,759,257		$	—	$	—		$	4,759,257
Debt discount		(129,587	)		—		(129,587	)		—
Total Liabilities	$	4,629,670		$	—	$	(129,587	)	$	4,759,257

Summary of Rollforward of Fair Value

The following table provides a rollforward of the fair value, as determined by Level 3 inputs, of the contingent consideration.

	September 30, 2013
Outstanding balance at January 1, 2013	$	4,759,257
Payments		(1,435,548	)
Change in fair value included in earnings		(478,099	)
Accrued interest		23,124
Outstanding balance at September 30, 2013	$	2,868,734

Carrying Amounts and Fair Values of Company's Debt Obligations

The carrying amounts and fair values of the Company’s debt obligations are as follows:

	September 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, net of debt discount	$	4,900,318	$	4,900,318	$	6,370,413	$	6,370,413
Debt discount		99,682		99,682		129,587		129,587
Subordinated notes payable		4,000,000		4,000,000		4,000,000		4,000,000
Related party subordinated notes payable		2,000,000		2,000,000		2,000,000		2,000,000
Total debt obligations	$	11,000,000	$	11,000,000	$	12,500,000	$	12,500,000

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Fair Value Measurement and Fair Value of Financial Instruments - Carrying Amounts and Fair Values of Company's Debt Obligations (Detail) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Carrying amount and fair value of the company's debt obligations
Subordinated notes payable	$ 4,000,000	$ 4,000,000
Carrying Value [Member]
Carrying amount and fair value of the company's debt obligations
Long-term debt, net of debt discount	4,900,318	6,370,413
Debt discount	99,682	129,587
Subordinated notes payable	4,000,000	4,000,000
Related party subordinated notes payable	2,000,000	2,000,000
Total debt obligations	11,000,000	12,500,000
Fair Value [Member]
Carrying amount and fair value of the company's debt obligations
Long-term debt, net of debt discount	4,900,318	6,370,413
Debt discount	99,682	129,587
Subordinated notes payable	4,000,000	4,000,000
Related party subordinated notes payable	2,000,000	2,000,000
Total debt obligations	$ 11,000,000	$ 12,500,000

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Trade Accounts Receivable, Net - Trade Accounts Receivable, Net (Detail) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Receivables [Abstract]
Unbilled accounts receivable	$ 5,999,795	$ 5,343,559
Billed accounts receivable	1,383,395	2,074,223
Trade accounts receivable, gross	7,383,190	7,417,782
Allowance for doubtful accounts	(275,179)	(175,179)
Trade accounts receivable, net	$ 7,108,011	$ 7,242,603

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Deferred Revenue and Customer Advances - Deferred Revenue and Customer Advances Expected to be Recognized as Revenue by Year (Detail) (USD $)	Sep. 30, 2013
Deferred Revenue Disclosure [Abstract]
Remainder of 2013	$ 515,000
2014	3,087,000
2015	2,074,000
2016	1,299,000
2017	265,000
2018 and thereafter	165,000
Total deferred revenue and customer advances	$ 7,405,000

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Acquisitions - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Business Acquisition [Line Items]
Reduction in liability for contingent consideration		$ 400,000
NEP [Member]
Business Acquisition [Line Items]
Total consideration of other acquisitions		12,100,000
Contingent consideration maximum amount earned		3,180,000
Contingent consideration	2,500,000	2,500,000
Consideration paid as common stock		153,153
NEP [Member] | Current Liabilities [Member]
Business Acquisition [Line Items]
Contingent consideration net	$ 2,200,000	$ 1,800,000

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Concentration of Credit Risk and Off-Balance Sheet Risk - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2013 Customer	Sep. 30, 2012 Customer	Sep. 30, 2013 Customer Institution	Sep. 30, 2012 Customer
Risks And Uncertainties [Abstract]
Number of institution the Company places its cash with			1
Minimum percentage of revenue and trade receivable accounted for major customers	10.00%	10.00%	10.00%	10.00%
Number of energy consumption more than 10%	0	0	0	0
Minimum limit of energy consumption			10.00%

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Segment Reporting - Segment Reporting (Detail) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Consolidated revenue from external customers:
Consolidated total revenue	$ 8,738,557	$ 7,605,854	$ 25,331,696	$ 21,584,460
Consolidated loss before income taxes:
Consolidated loss before income taxes	(449,743)	(522,655)	(2,798,173)	(2,172,741)
Consolidated total assets:
Consolidated total assets	51,284,369		51,284,369		55,130,662
Energy Procurement [Member]
Consolidated revenue from external customers:
Consolidated total revenue	7,295,276	5,626,444	21,673,273	17,480,645
Consolidated loss before income taxes:
Consolidated loss before income taxes	(332,233)	(443,278)	(2,131,734)	(1,775,952)
Amortization	943,977	587,772	2,831,927	1,978,902
Depreciation	50,482	49,626	148,309	140,678
Interest expense, net	253,822	61,432	733,956	174,344
Consolidated total assets:
Consolidated total assets	45,566,740		45,566,740		48,839,503
Energy Efficiency Services [Member]
Consolidated revenue from external customers:
Consolidated total revenue	1,443,281	1,979,410	3,658,423	4,103,815
Consolidated loss before income taxes:
Consolidated loss before income taxes	(117,510)	(79,377)	(666,439)	(396,789)
Amortization	39,289	39,289	117,868	127,971
Depreciation	5,891	5,817	18,803	17,835
Interest expense, net		25,485		100,280
Consolidated total assets:
Consolidated total assets	$ 5,717,629		$ 5,717,629		$ 6,291,159

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

The following tables present certain continuing operating division information in accordance with the provisions of Accounting Standards Codification (“ASC”) 280, “Segment Reporting”.

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Consolidated revenue from external customers:
Energy procurement	$	7,295,276		$	5,626,444		$	21,673,273		$	17,480,645
Energy efficiency services		1,443,281			1,979,410			3,658,423			4,103,815
Consolidated total revenue	$	8,738,557		$	7,605,854		$	25,331,696		$	21,584,460
Consolidated loss before income taxes:
Energy procurement	$	(332,233	)	$	(443,278	)	$	(2,131,734	)	$	(1,775,952	)
Energy efficiency services		(117,510	)		(79,377	)		(666,439	)		(396,789	)
Consolidated loss before income taxes	$	(449,743	)	$	(522,655	)	$	(2,798,173	)	$	(2,172,741	)
Energy Procurement:
Amortization	$	943,977		$	587,772		$	2,831,927		$	1,978,902
Depreciation	$	50,482		$	49,626		$	148,309		$	140,678
Interest expense, net	$	253,822		$	61,432		$	733,956		$	174,344
Energy Efficiency Services:
Amortization	$	39,289		$	39,289		$	117,868		$	127,971
Depreciation	$	5,891		$	5,817		$	18,803		$	17,835
Interest expense, net	$	—		$	25,485		$	—		$	100,280

	September 30, 2013		December 31, 2012
Consolidated total assets:
Energy procurement	$	45,566,740	$	48,839,503
Energy efficiency services		5,717,629		6,291,159
Consolidated total assets	$	51,284,369	$	55,130,662

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Nature of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

World Energy Solutions, Inc. (“World Energy” or the “Company”) offers a range of energy management solutions to commercial and industrial businesses, institutions, utilities, and governments to reduce their overall energy costs. The Company comes to market with a holistic approach to energy management helping customers a) contract for a competitive price for energy, b) engage in energy efficiency projects to minimize quantity used and c) pursue available rebate and incentive programs. The Company made its mark on the industry with an innovative approach to procurement via its online auction platform, the World Energy Exchange^®. With recent investments and acquisitions, World Energy is building out its energy efficiency practice by engaging new customers while also pursuing more cross-selling opportunities for its procurement services.

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Loss Per Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Loss Per Share

3. Loss Per Share

As of September 30, 2013 and 2012, the Company only had one issued and outstanding class of stock – common stock. As a result, the basic loss per share for the three and nine months ended September 30, 2013 and 2012 is computed by dividing net loss by the weighted average number of common shares outstanding for the period.

The following table provides a reconciliation of the denominators of the Company’s reported basic and diluted earnings per share computation for the three and nine months ended September 30, 2013 and 2012, respectively:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Weighted number of common shares – basic		12,007,667		11,904,469		11,985,629		11,888,660
Common stock equivalents		—		—		—		—
Weighted number of common shares – diluted		12,007,667		11,904,469		11,985,629		11,888,660

The computed loss per share does not assume conversion, exercise, or contingent exercise of securities that would have an antidilutive effect on loss per share. As the Company was in a net loss position for the three and nine month periods ended September 30, 2013 and 2012, all common stock equivalents in these periods were antidilutive.

The following represents issuable weighted average share information for the respective periods:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Common stock options		25,313		18,785		51,992		21,281
Common stock warrants		311		8,305		828		26,171
Unvested restricted stock		34,929		14,945		38,431		9,065
Total common stock equivalents		60,553		42,035		91,251		56,517

In addition, common stock options, unvested restricted stock and common stock warrants of 480,914, 30,000 and 45,045, respectively, were excluded from the calculation of net loss per share, as inclusion of such shares would be antidilutive due to exercise prices or value of proceed shares exceeding the average market price of the Company’s common stock during the three months ended September 30, 2013, and common stock options, unvested restricted stock and common stock warrants of 469,463, 25,000 and 45,045, respectively, were excluded from the calculation of net loss per share, as inclusion of such shares would be antidilutive due to exercise prices or value of proceed shares exceeding the average market price of the Company’s common stock during the nine months ended September 30, 2013.

Common stock options of 711,989 and 676,051, respectively, were excluded from the calculation of net loss per share, as inclusion of such shares would be antidilutive due to exercise prices or value of proceed shares exceeding the average market price of the Company’s common stock during the three and nine months ended September 30, 2012, respectively.

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Inventory

9 Months Ended

Sep. 30, 2013

Inventory Disclosure [Abstract]

Inventory

6. Inventory

Inventory is maintained in the Company’s Energy efficiency services segment and consists of prepaid expendables and project materials. Prepaid expendables represents consumable components that are used in project installations and are stated at the lower of cost or market, with cost being determined on a first-in, first-out (FIFO) basis. Historical inventory usage and current trends are considered in estimating both excess and obsolete inventory. To date, there have been no write-downs of inventory and therefore no allowance for excess or obsolete inventory was recorded at September 30, 2013 or December 31, 2012, respectively. Project materials represent direct costs incurred on projects-in-process as of each reporting period. Inventory consists of the following:

	September 30, 2013		December 31, 2012
Prepaid expendables	$	53,781	$	32,419
Project materials		447,625		122,207
Total inventory	$	501,406	$	154,626

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Concentration of Credit Risk and Off-Balance Sheet Risk

9 Months Ended

Sep. 30, 2013

Risks And Uncertainties [Abstract]

Concentration of Credit Risk and Off-Balance Sheet Risk

4. Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company has no material off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. The Company places its cash with one institution, which management believes is of high credit quality. As of September 30, 2013, all of the Company’s cash is held in an interest bearing account.

The Company provides credit in the form of invoiced and unbilled accounts receivable in the normal course of business. Collateral is not required for trade accounts receivable, but ongoing credit evaluations are performed. While the majority of the Company’s revenue is generated from retail energy transactions where the winning bidder pays a commission to the Company, commission payments for certain auctions can be paid by the lister, bidder or a combination of both. Management provides for an allowance for doubtful accounts on a specifically identified basis, as well as through historical experience applied to an aging of accounts, if necessary. Trade accounts receivable are written off when deemed uncollectible. To date, write-offs have not been material.

The following represents revenue and trade accounts receivable from bidders exceeding 10% of the total in each category:

	Revenue for the three months ended September 30,						Revenue for the nine months ended September 30,						Trade Accounts Receivable as of September 30,
Bidder	2013			2012			2013			2012			2013			2012
A		6	%		8	%		8	%		10	%		8	%		8	%
B		13	%		12	%		12	%		12	%		14	%		13	%
C		8	%		3	%		8	%		3	%		10	%		5	%

In addition to its direct relationship with bidders, the Company also has direct contractual relationships with listers for the online procurement of certain of their energy, demand response or environmental needs. These listers are primarily large businesses and government organizations and do not have a direct creditor relationship with the Company. For the three and nine months ended September 30, 2013 and 2012, no lister represented more than 10% individually of the Company’s aggregate revenue, respectively.

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Deferred Revenue and Customer Advances - Rollforward of Deferred Revenue and Customer Advances (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013
Deferred Revenue Disclosure [Abstract]
Balance at January 1, 2013	$ 5,309,000
Cash received	3,623,000
Revenue recognized	(1,527,000)
Balance at September 30, 2013	$ 7,405,000

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Loss Per Share - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of issued and outstanding class of stock	1	1	1	1
Common Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock options, common stock warrants and unvested restricted stock excluded from calculations of net earning per share	480,914	711,989	469,463	676,051
Unvested Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock options, common stock warrants and unvested restricted stock excluded from calculations of net earning per share	30,000		25,000
Common Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock options, common stock warrants and unvested restricted stock excluded from calculations of net earning per share	45,045		45,045

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Concentration of Credit Risk and Off-Balance Sheet Risk - Revenue and Trade Accounts Receivable from Bidders (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Concentration Risk [Line Items]
Concentration Risk, Percentage	10.00%	10.00%	10.00%	10.00%
Sales Revenue, Net [Member] | Bidder A [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	6.00%	8.00%	8.00%	10.00%
Sales Revenue, Net [Member] | Bidder B [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	13.00%	12.00%	12.00%	12.00%
Sales Revenue, Net [Member] | Bidder C [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	8.00%	3.00%	8.00%	3.00%
Accounts Receivable [Member] | Bidder A [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage			8.00%	8.00%
Accounts Receivable [Member] | Bidder B [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage			14.00%	13.00%
Accounts Receivable [Member] | Bidder C [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage			10.00%	5.00%

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Intangibles, Net - Intangibles, Net with Finite Lives (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	$ 22,743,000	$ 22,743,000
Accumulated Amortization	8,310,000	5,386,000
Total future amortization expense	14,433,000	17,357,000
Customer contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	5,276,000	5,276,000
Accumulated Amortization	2,593,000	1,322,000
Total future amortization expense	2,683,000	3,954,000
Customer contracts [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	4 years
Customer contracts [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	1 year
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	13,792,000	13,792,000
Accumulated Amortization	4,458,000	3,398,000
Total future amortization expense	9,334,000	10,394,000
Customer Relationships [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	10 years
Customer Relationships [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	7 years
Non-compete agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	5 years
Carrying Amount	2,585,000	2,585,000
Accumulated Amortization	833,000	445,000
Total future amortization expense	1,752,000	2,140,000
Trade names [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	4 years
Carrying Amount	1,090,000	1,090,000
Accumulated Amortization	426,000	221,000
Total future amortization expense	$ 664,000	$ 869,000

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Acquisitions - Pro Forma Information for Acquisitions (Detail) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Business Combinations [Abstract]
Revenues	$ 8,905,511	$ 25,589,150
Net loss	$ (583,178)	$ (2,744,736)
Net loss per share:
Basic and diluted	$ (0.05)	$ (0.23)
Weighted average shares outstanding - basic and diluted	11,904,469	11,888,660

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Fair Value Measurement and Fair Value of Financial Instruments - Summary of Rollforward of Fair Value (Detail) (Contingent Consideration [Member], USD $)	9 Months Ended
	Sep. 30, 2013
Contingent Consideration [Member]
Changes to the fair value of contingent consideration
Beginning balance	$ 4,759,257
Payments	(1,435,548)
Change in fair value included in earnings	(478,099)
Accrued interest	23,124
Ending balance	$ 2,868,734

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Current portion of long-term debt unamortized debt discount	$ 39,873	$ 39,873
Long-term debt unamortized debt discount	$ 59,809	$ 89,714
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	12,071,425	11,998,313
Common stock, shares outstanding	12,013,436	11,949,376
Treasury stock, shares	57,989	48,937

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Segment Reporting

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

9. Segment Reporting

The Company operates its business based on two industry segments: Energy procurement and Energy efficiency services. The Company delivers its Energy procurement services to four markets: retail energy, wholesale energy, demand response and environmental commodity. The Energy procurement process is substantially the same regardless of the market being serviced and is supported by the same operations personnel utilizing the same basic technology and back office support. There is no discrete financial information for these product lines nor are there segment managers who have operating responsibility for each product line. Energy efficiency services focuses on turn-key electrical, mechanical and lighting energy efficiency measures servicing commercial, industrial and institutional customers.

Segment operating loss represents loss from operations including share-based compensation, amortization of intangible assets and depreciation. The following tables present certain continuing operating division information in accordance with the provisions of Accounting Standards Codification (“ASC”) 280, “Segment Reporting”.

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Consolidated revenue from external customers:
Energy procurement	$	7,295,276		$	5,626,444		$	21,673,273		$	17,480,645
Energy efficiency services		1,443,281			1,979,410			3,658,423			4,103,815
Consolidated total revenue	$	8,738,557		$	7,605,854		$	25,331,696		$	21,584,460
Consolidated loss before income taxes:
Energy procurement	$	(332,233	)	$	(443,278	)	$	(2,131,734	)	$	(1,775,952	)
Energy efficiency services		(117,510	)		(79,377	)		(666,439	)		(396,789	)
Consolidated loss before income taxes	$	(449,743	)	$	(522,655	)	$	(2,798,173	)	$	(2,172,741	)
Energy Procurement:
Amortization	$	943,977		$	587,772		$	2,831,927		$	1,978,902
Depreciation	$	50,482		$	49,626		$	148,309		$	140,678
Interest expense, net	$	253,822		$	61,432		$	733,956		$	174,344
Energy Efficiency Services:
Amortization	$	39,289		$	39,289		$	117,868		$	127,971
Depreciation	$	5,891		$	5,817		$	18,803		$	17,835
Interest expense, net	$	—		$	25,485		$	—		$	100,280

	September 30, 2013		December 31, 2012
Consolidated total assets:
Energy procurement	$	45,566,740	$	48,839,503
Energy efficiency services		5,717,629		6,291,159
Consolidated total assets	$	51,284,369	$	55,130,662

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Condensed Consolidated Statements of Cash Flows (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net loss	$ (3,203,338)	$ (2,245,241)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	3,116,907	2,265,386
Deferred income taxes	326,415
Share-based compensation	435,234	319,619
Loss on disposal of property and equipment	11,177
Gain on sale of investment		(53,106)
Non-cash interest expense on warrants	29,905
Interest on accrued contingent consideration	23,124	75,070
Changes in operating assets and liabilities:
Trade accounts receivable	134,592	(2,372,194)
Inventory	(346,780)	(454,026)
Prepaid expenses and other current assets	(77,908)	(345,068)
Accounts payable	576,980	680,297
Accrued commissions	439,761	130,671
Accrued compensation	(242,671)	(245,838)
Accrued expenses, contingent consideration and other current liabilities	(1,153,133)	317,947
Deferred revenue and customer advances	2,095,996	3,292,192
Net cash provided by operating activities	2,166,261	1,365,709
Cash flows from investing activities:
Decrease in other assets	34,078
Proceeds from sale of investment		770,042
Proceeds from sale of property and equipment	8,750
Purchases of property and equipment	(128,967)	(346,423)
Net cash (used in) provided by investing activities	(86,139)	423,619
Cash flows from financing activities:
Proceeds from exercise of stock options	113,815	152,695
Purchase of treasury stock	(34,838)	(2,577)
Proceeds from issuance of long-term debt		2,500,000
Principal payments on long-term debt	(1,500,000)
Principal payments on notes payable		(1,000,000)
Payments of contingent consideration	(1,435,548)	(2,250,000)
Principal payments on capital lease obligations	(12,996)	(13,157)
Net cash used in financing activities	(2,869,567)	(613,039)
Net (decrease) increase in cash and cash equivalents	(789,445)	1,176,289
Cash and cash equivalents, beginning of period	3,307,822	1,837,801
Cash and cash equivalents, end of period	2,518,377	3,014,090
Supplemental disclosure of cash flow information:
Cash paid for interest	(724,033)	(192,009)
Cash paid for income taxes	(123,587)	(99,937)
Non-cash activities:
Equipment acquired under capital leases	$ 21,416

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Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 2,518,377	$ 3,307,822
Trade accounts receivable, net	7,108,011	7,242,603
Inventory	501,406	154,626
Current portion of deferred tax asset	1,533,280	1,632,280
Prepaid expenses and other current assets	439,721	361,813
Total current assets	12,100,795	12,699,144
Property and equipment, net	603,183	639,839
Intangibles, net	16,168,723	19,092,998
Goodwill	16,167,834	16,167,834
Deferred tax asset, net of current portion	5,617,565	5,844,980
Other assets, net	626,269	685,867
Total assets	51,284,369	55,130,662
Current liabilities
Accounts payable	1,621,439	1,044,459
Accrued commissions	1,492,563	1,052,802
Accrued compensation	2,251,733	2,494,404
Accrued contingent consideration	2,868,734	3,792,505
Accrued expenses and other current liabilities	707,827	1,390,188
Deferred revenue and customer advances	3,378,824	1,929,377
Current portion of related party subordinated notes payable	2,000,000	1,500,000
Current portion of long-term debt, net of unamortized debt discount of $39,873 at September 30, 2013 and December 31, 2012	1,960,127	1,960,127
Total current liabilities	16,281,247	15,163,862
Long-term debt, net of unamortized debt discount of $59,809 at September 30, 2013 and $89,714 at December 31, 2012	2,940,191	4,410,286
Subordinated notes payable	4,000,000	4,000,000
Deferred revenue and customer advances, net of current portion	4,026,184	3,379,635
Accrued contingent consideration, net of current portion		966,752
Related party subordinated notes payable, net of current portion		500,000
Other liabilities	15,747
Total liabilities	27,263,369	28,420,535
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued or outstanding
Common stock, $0.0001 par value; 30,000,000 shares authorized; 12,071,425 shares issued and 12,013,436 shares outstanding at September 30, 2013 and 11,998,313 shares issued and 11,949,376 shares outstanding at December 31, 2012	1,201	1,195
Additional paid-in capital	44,319,151	43,770,108
Accumulated deficit	(20,040,161)	(16,836,823)
Treasury stock, at cost; 57,989 shares at September 30, 2013 and 48,937 shares at December 31, 2012	(259,191)	(224,353)
Total stockholders' equity	24,021,000	26,710,127
Total liabilities and stockholders' equity	$ 51,284,369	$ 55,130,662

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Loss Per Share - Basic and Diluted Earnings Per Share (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share [Abstract]
Weighted number of common shares - basic	12,007,667	11,904,469	11,985,629	11,888,660
Common stock equivalents
Weighted number of common shares - diluted	12,007,667	11,904,469	11,985,629	11,888,660

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Intangibles, Net (Tables)

9 Months Ended

Sep. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Intangibles, Net with Finite Lives

Intangibles, net with finite lives were comprised of the following as of September 30, 2013 and December 31, 2012:

		September 30, 2013						December 31, 2012
	Estimated Useful Life	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Customer contracts	1 - 4 years	$	5,276,000	$	2,593,000	$	2,683,000	$	5,276,000	$	1,322,000	$	3,954,000
Customer relationships	7 - 10 years		13,792,000		4,458,000		9,334,000		13,792,000		3,398,000		10,394,000
Non-compete agreements	5 years		2,585,000		833,000		1,752,000		2,585,000		445,000		2,140,000
Trade names	4 years		1,090,000		426,000		664,000		1,090,000		221,000		869,000
Total		$	22,743,000	$	8,310,000	$	14,433,000	$	22,743,000	$	5,386,000	$	17,357,000

Future Amortization Expense of Intangible Assets

The approximate future amortization expense of intangible assets is as follows as of September 30, 2013:

	Amount
Remainder of 2013	$	975,000
2014		3,369,000
2015		2,801,000
2016		2,416,000
2017		1,272,000
2018 and thereafter		3,600,000
Total future amortization expense	$	14,433,000

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Fair Value Measurement and Fair Value of Financial Instruments - Fair Value Measurement of Assets and Liabilities (Detail) (Recurring [Member], USD $)	Sep. 30, 2013	Dec. 31, 2012
Assets
Cash and cash equivalents	$ 2,518,377	$ 3,307,822
Total Assets	2,518,377	3,307,822
Liabilities
Contingent consideration	2,868,734	4,759,257
Debt discount	(99,682)	(129,587)
Total Liabilities	2,769,052	4,629,670
Level 1 [Member]
Assets
Cash and cash equivalents	2,518,377	3,307,822
Total Assets	2,518,377	3,307,822
Liabilities
Contingent consideration
Debt discount
Total Liabilities
Level 2 [Member]
Assets
Cash and cash equivalents
Total Assets
Liabilities
Contingent consideration
Debt discount	(99,682)	(129,587)
Total Liabilities	(99,682)	(129,587)
Level 3 [Member]
Assets
Cash and cash equivalents
Total Assets
Liabilities
Contingent consideration	2,868,734	4,759,257
Debt discount
Total Liabilities	$ 2,868,734	$ 4,759,257

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Intangibles, Net - Future Amortization Expense of Intangible Assets (Detail) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2013	$ 975,000
2014	3,369,000
2015	2,801,000
2016	2,416,000
2017	1,272,000
2018 and thereafter	3,600,000
Total future amortization expense	$ 14,433,000	$ 17,357,000

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Inventory - Additional Information (Detail) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Inventory Disclosure [Abstract]
Allowance for excess or obsolete inventory recorded	$ 0	$ 0
Inventory write down	$ 0	$ 0

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Inventory - Summary of Inventory (Detail) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Inventory [Line Items]
Total inventory	$ 501,406	$ 154,626
Prepaid Expendables [Member]
Inventory [Line Items]
Total inventory	53,781	32,419
Project Materials [Member]
Inventory [Line Items]
Total inventory	$ 447,625	$ 122,207

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Deferred Revenue and Customer Advances

9 Months Ended

Sep. 30, 2013

Revenue Recognition [Abstract]

Deferred Revenue and Customer Advances

8. Deferred Revenue and Customer Advances

Deferred revenue and customer advances are primarily related to the Company’s mid-market product line where energy suppliers pay all or a portion of the total commission due from the completed procurements before the Company has met all of the necessary criteria to recognize revenue. As a result, cash received from commission payments are deferred until actual usage data is received or contract end. Deferred revenue and customer advances expected to be recognized as revenue by year are approximately as follows as of September 30, 2013:

	Amount
Remainder of 2013	$	515,000
2014		3,087,000
2015		2,074,000
2016		1,299,000
2017		265,000
2018 and thereafter		165,000
Total deferred revenue and customer advances	$	7,405,000

The following table provides a rollforward of deferred revenue and customer advances:

	Amount
Balance at January 1, 2013	$	5,309,000
Cash received		3,623,000
Revenue recognized		(1,527,000	)
Balance at September 30, 2013	$	7,405,000

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Loss Per Share - Weighted Average Share (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Unvested restricted stock	34,929	14,945	38,431	9,065
Total common stock equivalents	60,553	42,035	91,251	56,517
Common Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock	25,313	18,785	51,992	21,281
Common Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock	311	8,305	828	26,171

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Segment Reporting - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2013 Markets Segment
Segment Reporting [Abstract]
Number of industry segments	2
Number of markets	4

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Credit Arrangements

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Credit Arrangements

11. Credit Arrangements

Credit Facility

The Company has a $9.0 million credit facility with SVB consisting of a $6.5 million term note and a $2.5 million line-of-credit. Under the Fifth Loan Modification and Waiver Agreement with SVB, entered into by the Company on May 13, 2013, the $6.5 million term loan is for 42 months and bears interest at prime rate (currently 3.25%) plus 4.5%. This interest rate can be adjusted downward based on certain EBITDA and leverage ratios. The term loan was interest only for the first three months followed by 39 equal principal payments which commenced on January 1, 2013. The outstanding balance of the term loan is $5.0 million, of which $2.0 million is classified as a current liability at September 30, 2013.

The $2.5 million line-of-credit matures on March 14, 2014 and no borrowings have been made under the line-of-credit to date. Advances under the line-of-credit are subject to availability against certain eligible accounts receivable and eligible retail backlog. The credit facility bears interest at a floating rate per annum based on the prime rate plus 1.25% on advances made against eligible accounts receivable and prime rate plus 2.00% on advances made against eligible retail backlog. These interest rates are subject to change based on the Company’s maintenance of an adjusted quick ratio of one-to-one. The facility contains minimum cash and availability and minimum fixed charge coverage ratio covenants and financial reporting requirements. The Company was in compliance with its covenants as of September 30, 2013.

Subordinated Notes

On October 3, 2012, the Company entered into a Note Purchase Agreement with Massachusetts Capital Resource Company (“MCRC”), in which the Company entered into an 8-year, $4 million Subordinated Note due 2020 with MCRC (the “MCRC Note”). The MCRC Note bears interest at 10.5% and is interest only for the first four years followed by 48 equal principal payments commencing October 31, 2016. The Company must pay a premium of 3% if it prepays the MCRC Note before October 1, 2014, and a 1% premium if it prepays the MCRC Note before October 1, 2015. The MCRC Note is subordinated to the Company’s credit facility with SVB and contains a consolidated net earnings available for interest charges to interest charges covenant, as adjusted, of not less than one-to-one and financial reporting requirements that the Company was in compliance with as of September 30, 2013.

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Intangibles, Net

9 Months Ended

Sep. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Intangibles, Net

7. Intangibles, Net

Intangibles, net with finite lives were comprised of the following as of September 30, 2013 and December 31, 2012:

		September 30, 2013						December 31, 2012
	Estimated Useful Life	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Customer contracts	1 - 4 years	$	5,276,000	$	2,593,000	$	2,683,000	$	5,276,000	$	1,322,000	$	3,954,000
Customer relationships	7 - 10 years		13,792,000		4,458,000		9,334,000		13,792,000		3,398,000		10,394,000
Non-compete agreements	5 years		2,585,000		833,000		1,752,000		2,585,000		445,000		2,140,000
Trade names	4 years		1,090,000		426,000		664,000		1,090,000		221,000		869,000
Total		$	22,743,000	$	8,310,000	$	14,433,000	$	22,743,000	$	5,386,000	$	17,357,000

The Company also recorded acquisition related intangible assets with indefinite lives in the amount of approximately $1.7 million pertaining to customer relationships, which is not reflected in the above table.

Amortization expense was approximately $2.9 million and $2.1 million for the nine months ended September 30, 2013 and 2012, respectively. In addition, approximately $2.4 million of fully amortized intangible assets were removed from the 2013 and 2012 presentations. The approximate future amortization expense of intangible assets is as follows as of September 30, 2013:

	Amount
Remainder of 2013	$	975,000
2014		3,369,000
2015		2,801,000
2016		2,416,000
2017		1,272,000
2018 and thereafter		3,600,000
Total future amortization expense	$	14,433,000

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Interim Financial Statements

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Interim Financial Statements

2. Interim Financial Statements

The December 31, 2012 condensed consolidated balance sheet has been derived from audited consolidated financial statements and the accompanying September 30, 2013 unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on April 16, 2013.

In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments consisting of normal recurring adjustments and accruals necessary for the fair presentation of the Company’s financial position as of September 30, 2013, the results of its operations for the three and nine months ended September 30, 2013 and 2012 and the results of its cash flows for the nine months ended September 30, 2013 and 2012, respectively. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013.

The preparation of financial statements in conformity with GAAP 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 the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from these estimates.

The Company’s most judgmental estimates affecting its condensed consolidated financial statements are those relating to revenue recognition and the estimate of actual energy delivered from the bidder to the lister of such energy; share-based compensation; the valuation of intangible assets and goodwill; the valuation of contingent consideration; impairment of long-lived assets; and estimates of future taxable income as it relates to the realization of our net deferred tax assets. The Company regularly evaluates its estimates and assumptions based upon historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, future results of operations may be affected.

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Credit Arrangements - Additional Information (Detail) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	May 13, 2013	Oct. 03, 2012
Credit Agreements [Line Items]
Line of credit	$ 2,500,000
Credit facility			9,000,000
Term loan	5,000,000			6,500,000
Period of debt installment with interest	4 years
Agreement term loan equal principal payments	48 months
Current liability	2,000,000
Term loan interest rate	3.25%
Line of credit facility, expiration date	Mar. 14, 2014
Adjusted quick ratio	1
Note purchase agreement period		8 years
Subordinated notes payable				4,000,000
MCRC Note bears interest				10.50%
Principal outstanding prepays the MCRC Note before October 1, 2014				3.00%
Principal outstanding prepays the MCRC Note before October 1, 2015				1.00%
Outstanding borrowings of line of credit facility	0
Advances Made Against Eligible Accounts Receivable [Member]
Credit Agreements [Line Items]
Interest rate on line of credit facility	1.25%
Advances Made Against Eligible Retail Backlog [Member]
Credit Agreements [Line Items]
Interest rate on line of credit facility	2.00%
Fourth Modification Agreement [Member]
Credit Agreements [Line Items]
Line of credit				2,500,000
Term loan				$ 6,500,000
Description of term loan term and interest and principal payments	Term loan is for 42 months and bears interest at prime rate (currently 3.25%) plus 4.5%. This interest rate can be adjusted downward based on certain EBITDA and leverage ratios. The term loan was interest only for the first three months followed by 39 equal principal payments which commenced on January 1, 2013.
Period of debt installment with interest	3 months
Agreement term loan equal principal payments	39 months
Agreement period	42 months
Fifth Modification Agreement [Member]
Credit Agreements [Line Items]
Interest on term loan	4.50%

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Trade Accounts Receivable, Net - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2013
Receivables [Abstract]
Maturity period of trade accounts receivables	30 days

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Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Basic and Diluted Earnings Per Share

The following table provides a reconciliation of the denominators of the Company’s reported basic and diluted earnings per share computation for the three and nine months ended September 30, 2013 and 2012, respectively:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Weighted number of common shares – basic		12,007,667		11,904,469		11,985,629		11,888,660
Common stock equivalents		—		—		—		—
Weighted number of common shares – diluted		12,007,667		11,904,469		11,985,629		11,888,660

Weighted Average Share

The following represents issuable weighted average share information for the respective periods:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Common stock options		25,313		18,785		51,992		21,281
Common stock warrants		311		8,305		828		26,171
Unvested restricted stock		34,929		14,945		38,431		9,065
Total common stock equivalents		60,553		42,035		91,251		56,517

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Fair Value Measurement and Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurement and Fair Value of Financial Instruments

10. Fair Value Measurement and Fair Value of Financial Instruments

The Company follows ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) for fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value, which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The hierarchy established under ASC 820 gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Level 1 – Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Level 2 – Pricing inputs are quoted prices for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

Level 3 – Pricing inputs are unobservable for the investment, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Level 3 includes investments that are supported by little or no market activity.

Assets and liabilities of the Company measured at fair values on a recurring basis as of September 30, 2013 and December 31, 2012 are summarized as follows:

	September 30, 2013			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents	$	2,518,377		$	2,518,377	$	—		$	—
Total Assets	$	2,518,377		$	2,518,377	$	—		$	—
Liabilities
Contingent consideration	$	2,868,734		$	—	$	—		$	2,868,734
Debt discount		(99,682	)		—		(99,682	)		—
Total Liabilities	$	2,769,052		$	—	$	(99,682	)	$	2,868,734

	December 31, 2012			Level 1		Level 2			Level 3
Assets
Cash and cash equivalents	$	3,307,822		$	3,307,822	$	—		$	—
Total Assets	$	3,307,822		$	3,307,822	$	—		$	—
Liabilities
Contingent consideration	$	4,759,257		$	—	$	—		$	4,759,257
Debt discount		(129,587	)		—		(129,587	)		—
Total Liabilities	$	4,629,670		$	—	$	(129,587	)	$	4,759,257

The Company determines the fair value of acquisition-related contingent consideration based on assessment of the probability that the Company would be required to make such future payment. Changes to the fair value of contingent consideration are recorded in general and administrative expense. The following table provides a rollforward of the fair value, as determined by Level 3 inputs, of the contingent consideration.

	September 30, 2013
Outstanding balance at January 1, 2013	$	4,759,257
Payments		(1,435,548	)
Change in fair value included in earnings		(478,099	)
Accrued interest		23,124
Outstanding balance at September 30, 2013	$	2,868,734

The change in fair value reflects the Company’s updated probability related to the Northeast Energy Partners, LLC (“NEP”) earn-out. See Note 13 for additional details. The carrying amounts and fair values of the Company’s debt obligations are as follows:

	September 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, net of debt discount	$	4,900,318	$	4,900,318	$	6,370,413	$	6,370,413
Debt discount		99,682		99,682		129,587		129,587
Subordinated notes payable		4,000,000		4,000,000		4,000,000		4,000,000
Related party subordinated notes payable		2,000,000		2,000,000		2,000,000		2,000,000
Total debt obligations	$	11,000,000	$	11,000,000	$	12,500,000	$	12,500,000

The carrying amount for fixed rate long-term debt and variable rate long-term debt approximate fair value because the underlying instruments are primarily at current market rates available to the Company for similar borrowings. The interest rate on the Silicon Valley Bank (“SVB”) debt is tied to the prime rate and will fluctuate with changes in that rate. Related party notes payable are classified as short-term on the Company’s accompanying condensed consolidated balance sheets.

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Inventory (Tables)

9 Months Ended

Sep. 30, 2013

Inventory Disclosure [Abstract]

Summary of Inventory

Inventory consists of the following:

	September 30, 2013		December 31, 2012
Prepaid expendables	$	53,781	$	32,419
Project materials		447,625		122,207
Total inventory	$	501,406	$	154,626

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Concentration of Credit Risk and Off-Balance Sheet Risk (Tables)

9 Months Ended

Sep. 30, 2013

Risks And Uncertainties [Abstract]

Revenue and Trade Accounts Receivable from Bidders

The following represents revenue and trade accounts receivable from bidders exceeding 10% of the total in each category:

	Revenue for the three months ended September 30,						Revenue for the nine months ended September 30,						Trade Accounts Receivable as of September 30,
Bidder	2013			2012			2013			2012			2013			2012
A		6	%		8	%		8	%		10	%		8	%		8	%
B		13	%		12	%		12	%		12	%		14	%		13	%
C		8	%		3	%		8	%		3	%		10	%		5	%

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 01, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Entity Registrant Name	World Energy Solutions, Inc.
Entity Central Index Key	0001371781
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,234,186

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Trade Accounts Receivable, Net (Tables)

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Trade Accounts Receivable, Net

Trade accounts receivable, net consists of the following:

	September 30, 2013			December 31, 2012
Unbilled accounts receivable	$	5,999,795		$	5,343,559
Billed accounts receivable		1,383,395			2,074,223
		7,383,190			7,417,782
Allowance for doubtful accounts		(275,179	)		(175,179	)
Trade accounts receivable, net	$	7,108,011		$	7,242,603