<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ___________
Commission File Number 0-21279
THERMACELL TECHNOLOGIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-3223708
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
(813)622-7171
(Issuer's telephone number)
Check whether the issuer (1) 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 a 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 ___
The number of shares outstanding of the Issuer's Common Stock, $.0001 Par
Value, as of August 31, 1996 was 1,207,763.
Transitional small business disclosure format:
Yes ___ No X
<PAGE> 2
THERMACELL TECHNOLOGIES, INC.
FORM 10-QSB
<TABLE>
<CAPTION>
INDEX PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Balance Sheets as of November 30, 1995 and 3
August 31, 1996
Statements of Income for the three month and nine months
ended August 31, 1995 and 1996 5
Statement of Cash Flows for the nine months ended
August 31, 1995 and 1996 6
Notes to financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
<PAGE> 3
THERMACELL TECHNOLOGIES, INC.
Balance Sheet
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
November 30, August 31,
1995 1996
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<S> <C> <C>
CURRENT ASSETS
Cash accounts $ 90,773 $ 24,278
Accounts receivable
Trade 2,677 118,324
Employees 224 --
Officers 18,582 12,869
-------- -----------
21,483 131,193
-------- -----------
Note receivable -- 200,000
Inventory 71,016 143,522
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TOTAL CURRENT ASSETS 183,272 498,993
-------- -----------
PROPERTY, PLANT & EQUIPMENT 114,373 268,622
Less accumulated depreciation 11,011 34,527
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103,362 234,095
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OTHER ASSETS
Note receivable 100,000
Deposits paid 7,543 6,323
Organizational costs - net 2,445 1,956
Patent 10,058 12,720
Agreement not to compete - net 25,000 18,750
Deferred costs 96,575 403,420
Deferred income tax benefit 125,657 270,013
Goodwill - net 80,821 76,780
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TOTAL OTHER ASSETS 448,099 789,962
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$734,733 $1,523,050
======== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
THERMACELL TECHNOLOGIES, INC.
Balance Sheet
LIABILITIES
(Unaudited)
<TABLE>
<CAPTION>
November 30, August 30,
1995 1996
------------ - ----------
<S> <C> <C>
CURRENT LIABILITIES
NOTES PAYABLE
Convertible debt $ 740,203 $ 997,500
Stockholders 178,304 1,056,804
Other 25,000 -0-
---------- ------------
943,507 2,054,304
---------- ------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Trade accounts payable 16,181 200,391
Accrued expenses 105,440 176,167
---------- ------------
TOTAL CURRENT LIABILITIES 1,065,128 2,430,862
---------- ------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.0001 497 497
Authorized 5,000,000 shares outstanding
4,975,000 in 1995 and 2,500,000 in 1996
Capital Stock 66 74
Authorized 20,000,000 shares outstanding
667,472 in 1995 and 919,013 in 1996
Additional paid in capital 184,329 184,329
Deficit accumulated deficit (515,287) (1,092,712)
---------- ------------
TOTAL EQUITY (330,395) (907,812)
---------- ------------
$ 734,733 $ 1,523,050
========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
THERMACELL TECHNOLOGIES, INC.
Statements of Income
Three months and nine months ended August 31, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
August 31, August 31,
1995 1996 1995 1996
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 27,044 $ 171,777 $ 40,824 $ 430,597
Cost of Sales 39,269 78,549 46,583 248,687
--------- --------- --------- --------
Gross Profit (12,225) 93,228 (5,749) 181,911
Selling & Administrative 108,767 278,210 212,782 754,190
--------- --------- --------- --------
Operating Profit (120,992) (184,982) (218,531) (572,279)
Other Expenses (net) 145 58,789 242 149,502
-------- --------- --------- --------
Income before taxes (121,137) (243,771) (218,773) (721,781)
Provision for taxes 24,227 48,754 43,755 144,356
--------- --------- --------- --------
Net Income (loss) $ (96,910) $(195,017) $(175,018) $(577,425)
========= ========= ========= =========
Weighted average number of
common shares outstanding 626,191 707,515 626,191 707,515
========= ========= ========= =========
Net Income per share $ (0.15) $ (0.28) $ (0.28) $ (0.82)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
THERMACELL TECHNOLOGIES, INC.
Statements of Cash Flows
for the nine months ended August 31, 1995 and August 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
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<S> <C> <C>
Operating Activities:
Net income $ (314,857) $ (577,425)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation & Amortization 7,092 30,998
Change in assets & liabilities:
Receivables 8,926 (109,710)
Inventories (71,016) (72,506)
Deferred Income Tax Benefit (79,175) (144,356)
Other Assets (118,279) (205,867)
Accounts Payable (8,372) 184,211
Accrued Liabilities 105,440 70,726
----------- ----------
Net cash used in operating activities (470,241) (823,929)
----------- ----------
Investing Activities:
Purchases of equipment (92,349) (154,241)
Issuance of note receivable (100,000) (100,000)
----------- ----------
Net cash used in investing activities (192,349) (254,241)
----------- ----------
Financing Activities:
Net proceeds from (repayment) of loans payable 1,037,707 1,110,797
Principal payments on notes payable (194,200) --
Costs associated with obtaining financing (96,575) (99,122)
Issuance of common stock 6,400 -0-
----------- ----------
Net cash provided by financing activities 753,332 1,011,675
----------- ----------
Net increase (decrease) in cash 90,742 (66,495)
Cash at beginning of period 31 90,773
----------- ----------
Cash at end of period $ 90,773 $ 24,278
=========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
(Unaudited)
Note 1. Basis of presentation - The accompanying financial statements are
unaudited and should be read in conjunction with the ThermaCell Technologies,
Inc. financial statements included in the Company's Registration Statement on
Form SB-2. Operating results for the nine-month period ended August 31, 1996,
are not necessarily indicative of the results that may be expected for the full
year. In the opinion of management all adjustments necessary for a fair
presentation of interim operating results are reflected herein.
Note 2. Per share calculations - per share calculations are determined on
the weighted average number of common and common equivalent shares outstanding
during each period. On August 12, 1996, the company announced a ten (10) for
one (1) reverse common stock split. Retroactive effect was given to the
outstanding stock.
Note 3. Inventories - Inventory is comprised of the following:
<TABLE>
<CAPTION>
November 30, 1995 August 31, 1996
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<S> <C> <C>
Finished goods $ 34,383 $ 70,862
Raw materials 36,633 72,660
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Total $ 71,016 $143,522
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</TABLE>
Note 4. Included in notes payable at November 30, 1995 and August 31, 1996
are $740,203 and $1,883,500, respectively, representing the aggregate amounts
raised by the Company in various debt related offerings as of those dates.
Included in those amounts are $740,203 and $997,500 at November 30, 1995 and
August 31, 1996, respectively, raised by the underwriters through the issuance
of the securities under private placement offerings described above. The notes
bear interest at the rate of twelve percent (12%), with principal and interest
due on the earlier of the date of closing of the public offering or one year
from the date of the notes, which were executed during the period October 15,
1995 through August 31, 1996. The notes are convertible, at the option of the
holder, to an amount of common stock based between 50% and 60% of the price of
the shares of the Company's common stock to be offered in the public offering.
<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONAL ACTIVITIES
The Company has been marketing its various insulated roof and wall coatings
throughout Florida through in-house salespeople and outside of Florida through
word of mouth. Sales have continued to increase with independent paint dealers
and end users becoming more aware of the superiority of the products in
application and energy efficiency. We have successfully completed negotiation
with one company and are in negotiations with others to exclusively market our
paints and coatings. The company is poised to begin exporting large quantities
of the insulated roof coatings to the Caribbean Islands, South America, Europe
and India, as well as extending its domestic sales throughout the Sunbelt
Region of the United States. The company is currently negotiating with an
individual on distribution rights for India, as well as several large orders to
be shipped to Europe and South America.
RESULTS OF OPERATIONS
Nine months ended August 31,1996 compared to nine months ended August 31, 1995
Total revenue for the nine months ended August 31,1996 was $430,597 compared to
$40,834 for the same period of 1995, which represents an increase of $389,763.
The increase was a result of expanded sales of paint products and coatings
produced by the Company paint manufacturing facility acquired in the fourth
quarter of the 1995 fiscal year. The increased sales were a direct result of
increased marketing efforts and production capabilities. The net loss, after
the provision for income taxes, and net loss per share were $577,425 and $.82
per share respectively, for the nine months ended August 31,1996 as compared to
a net loss and net loss per share of $175,018 and $.28, respectively, for the
same period of 1995. Included in the loss for 1996 is $152,765 interest on
$1,883,500 in loans made by bridge loan investors. Interest will be paid on
all notes up to the close of the offering. Additional costs incurred during the
nine months ended August 31, 1996, include the additional staff who will be
needed immediately upon the close of the offering to facilitate increased sales
and administrative functions. As discussed below under Liquidity and Capital
Resources the Company plans to institute an intense marketing campaign
immediately upon the close of the public offering to cover the Sunbelt region
of the United States. In addition to the marketing effort, the Company plans
to build or buy a manufacturing facility which will enable it to increase
production, and thereby sales, of its proprietary products. The increase in
gross sales is a result of intensified marketing efforts, with a more extensive
campaign covering the Sunbelt region to be initiated upon completion of this
offering. For the nine months ended August 31, 1996, total selling, general
and administrative expenses was $754,190, as compared to $212,782 for the same
period of the previous year, an increase of approximately $541,408, or 354%.
The increases were due to expenses incurred with the initial production of the
Company's proprietary products in its recently acquired manufacturing facility,
expenses incurred in relation to the refinement of the formulations of the
paint and paint coatings being manufactured, as well as costs associated with
increased marketing efforts, staffing and other expenses associated with the
Company's expanded operations. The Company has accumulated net operating
losses of $1,092,712 for the period from inception through August 31, 1996.
Based upon management's current estimates of future taxable income, tempered by
consideration of the Company's developmental stage of operating activities to
date, (management determined a valuation allowance of fifty percent (50%) is
sufficient at November 30, 1994 and 1995 and August 31, 1996 to represent that
<PAGE> 9
portion of deferred taxes that may not be realized). As discussed below under
Strategy to Achieve Profitable Operations, the Company anticipates realizing
improved purchasing procedures as well as cost reductions in the manufacturing
process during the fiscal year 1996. The Company anticipates an increase in its
gross profit margins during the twelve month period following this offering.
Results of operations for the first nine months of the 1996 fiscal year reflect
the impact of the additional expenses incurred by the Company in positioning
itself to realized full-scale production, which is expected to occur at the
close of fiscal year 1996.
Three months ended August 31,1996 compared to three months ended August 31,
1995.
Total revenue for the three months ended August 31,1996 was $171,777 compared
to $27,044 for the same period of 1995, which represents an increase of
$144,733. The increase was a result of expanded sales of paint products and
coatings produced by the Company paint manufacturing facility acquired in the
fourth quarter of the 1995 fiscal year. The increased sales were a direct
result of increased marketing efforts and production capabilities. The net
loss, after the provision for income taxes, and net loss per share were
$195,017 and $.28 per share respectively, for the three months ended August
31,1996 as compared to a net loss and net loss per share of $96,910 and $.15,
respectively, for the same period of 1995.
STRATEGY TO ACHIEVE PROFITABLE OPERATIONS
Development of roof and wall coatings has been an ongoing process that has
progressed from the Company's product being manufactured by a third party to
its current capability of manufacturing its proprietary product. The
acquisition of the operating assets of a paint manufacturing company, effective
November 30, 1995, has provided the Company with the equipment, expertise, and
initial distribution channels necessary for the Company to generate cash flow
sufficient to fund its current operations. The acquisition of the paint
company, which has a long-standing history of successful operations in the West
Central Florida area, has enabled the Company to position itself to become
fully operational. Production of paint products and coatings has increased due
to current demands that have resulted from increased marketing efforts. The
company has improved its purchasing procedures by buying to support larger
production volumes and expanding its supplier base. As a result, the cost of
manufactured products has dropped by more than 20%. The current cost of a
gallon of insulated coating has dropped by more than $3 per gallon due to the
current capabilities of manufacturing the Company's proprietary product as well
as its improved purchasing practices. The reduced costs are expected to
continue to be realized or improved during fiscal year 1996, when the Company
expects to be in full scale production. As a result of the factors described
above, the Company anticipates gross profit margins on its products will
increase during the twelve month period following the completion of this
offering. Products purchased for resale will represent less than 10% of total
sales. The Company anticipates increased percentage of sales and manufactured
products, with greater margins expected in the proprietary products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its initial capital operations and product development
activities with funds provided by the sale of its securities and from
borrowings. During fiscal years 1994 and 1995, the Company raised
approximately $184,900 through issuance of its common stock. During the period
November 1995 through August 3 the company raised approximately $2,054,300
through private placement of its convertible notes, notes and common stock.
<PAGE> 10
The Company anticipates satisfying all indebtedness related to these obligations
either through the payment of such notes with the proceeds of the offering or
the conversion of certain of these notes into shares of the Company's common
stock. The Company is not presently generating sufficient revenues from
operations to fund capital requirements. The ability of the Company to
alleviate its working capital deficit and obtain capital adequate to fund
future costs associated with operations and expansion plans is dependent upon
(i) successful completion of the initial public offering; (ii) the Company's
ability to increase consumer awareness and acceptance of its existing and new
products; and (iii) realization of projected increases in sales of new product
lines. Upon completion of this offering, the Company will institute an intense
marketing campaign to cover the Sunbelt region of the United States. In
addition to the marketing effort, the Company plans to build or buy a
manufacturing facility which will enable the Company to increase production of
its proprietary products. In the opinion of management, the net proceeds from
this offering will provide sufficient working capital to enable the Company to
sustain operations and finance planned expansion for the next 60 months without
the need for additional capital.
FORWARD-LOOKING INFORMATION
The information set forth above includes "Forward-looking" information as
outlined in the recently enacted Private Securities Litigation Reform Act of
1995.
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on form 8K - No reports on Form 8K have been
filed during the quarter ended August 31, 1996.
Exhibits
27 Financial Data Schedule (for SEC Use Only)
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.
ThermaCell Technologies, Inc.
Dated: 10/21/96 /s/ John Pidorenko
---------------- ------------------------------------
John Pidorenko
Chairman
President
Dated: 10/21/96 /s/ John Trusty
---------------- ------------------------------------
John Trusty
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 24,278
<SECURITIES> 0
<RECEIVABLES> 331,193
<ALLOWANCES> 0
<INVENTORY> 143,522
<CURRENT-ASSETS> 498,993
<PP&E> 268,622
<DEPRECIATION> 34,527
<TOTAL-ASSETS> 1,523,050
<CURRENT-LIABILITIES> 2,430,862
<BONDS> 0
0
497
<COMMON> 74
<OTHER-SE> (907,812)
<TOTAL-LIABILITY-AND-EQUITY> 1,523,050
<SALES> 430,597
<TOTAL-REVENUES> 430,597
<CGS> 248,687
<TOTAL-COSTS> 1,002,876
<OTHER-EXPENSES> (3,263)
<LOSS-PROVISION> (721,781)
<INTEREST-EXPENSE> 152,765
<INCOME-PRETAX> (721,781)
<INCOME-TAX> 144,356
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (577,425)
<EPS-PRIMARY> (0.82)
<EPS-DILUTED> 0
</TABLE>
