<PAGE>
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 February 28, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
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 of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5419 PROVOST DR., HOLIDAY, FL 34690
(Address of Principal Executive Offices)
(813) 938-3269
(Issuer's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 February 28, 1997 was 869,899.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
THERMACELL TECHNOLOGIES, INC.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
November 30, 1996 and February 28, 1997 ..................... 1 - 2
Statements of Loss -
Three months ended February 29, 1996 and February 28, 1997 .. 3
Statements of Changes in Stockholders' Equity -
Three months ended February 28, 1997 ........................ 4
Statements of Cash Flows -
Three months ended February 29, 1996 and February 28, 1997 .. 5
Notes to financial statements ................................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 7 - 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 10
Item 5. Other Information ............................................ 10
Item 6. Exhibits and Reports on Form 8-K ............................. 10
Signatures ................................................... 10
Exhibit 11 ............................................................. 11
i
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THERMACELL TECHNOLOGIES, INC.
Balance Sheets
(Unaudited)
ASSETS
February 28, November 30,
1997 1996
------------ -----------
CURRENT ASSETS
Cash $ - $ 3,512
Notes receivable 210,000 213,750
Accounts receivable
Trade, net of allowance for uncollectible accounts
of $20,067 for 1997 and $21,000 for 1996 118,966 64,006
Officers 113,414 4,637
Other 2,640 6,000
----------- -----------
235,020 74,643
----------- -----------
Inventories 117,236 150,872
Prepaid expenses and other 12,484 14,018
----------- -----------
TOTAL CURRENT ASSETS 574,740 456,795
----------- -----------
PROPERTY AND EQUIPMENT 325,223 322,979
Less accumulated depreciation 52,931 41,060
----------- -----------
272,292 281,919
----------- -----------
OTHER ASSETS
Restricted cash 15,000 15,000
Deferred offering costs 310,344 297,648
Deferred income tax benefit, net 375,631 337,350
Goodwill and other intangibles, net 123,067 148,561
----------- -----------
824,042 798,559
----------- -----------
$ 1,671,074 $ 1,537,273
----------- -----------
----------- -----------
See notes to financial statements.
1
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THERMACELL TECHNOLOGIES, INC.
Balance Sheets (continued)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
February 28, November 30,
1997 1996
------------ ------------
CURRENT LIABILITIES
Bank overdraft $ 17,196 $ -
Notes payable
Bridge financing 1,898,500 1,898,500
Stockholders 135,000 135,000
Other 222,723 24,323
------------ ------------
2,273,419 2,057,823
Accounts payable and accrued expenses
Trade accounts 510,761 444,537
Accrued payroll and payroll taxes 176,281 175,696
Accrued interest and other 261,464 223,156
------------ ------------
TOTAL CURRENT LIABILITIES 3,221,925 2,901,212
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.0001
5,000,000 shares, authorized, issued
and outstanding, 1997 and 1996 500 500
Common stock, par value $.0001
Authorized 20,000,000 shares,
outstanding 869,899 shares,
1997 and 1996, respectively 87 87
Additional paid-in capital 184,314 184,314
Accumulated deficit:
During developmental stage (515,287) (515,287)
Subsequent to developmental stage (1,220,465) (1,033,553)
------------ ------------
Total accumulated deficit (1,735,752) (1,548,840)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (1,550,851) (1,363,939)
------------ ------------
$ 1,671,074 $ 1,537,273
------------ ------------
------------ ------------
See notes to financial statements.
2
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THERMACELL TECHNOLOGIES, INC.
STATEMENTS OF LOSS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
---------------------------
FEBRUARY 28, FEBRUARY 29,
1997 1996
--------- ---------
REVENUE
Sales $ 215,525 $ 112,189
LESS: COST OF SALES 106,267 61,669
--------- ---------
GROSS PROFIT 109,258 50,520
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 266,034 208,233
--------- ---------
LOSS FROM OPERATIONS (156,776) (157,713)
--------- ---------
OTHER EXPENSE
Commissions 35,000 -
Interest expense 33,418 -
--------- ---------
TOTAL OTHER EXPENSE 68,418 -
--------- ---------
LOSS BEFORE INCOME TAXES (225,194) (157,713)
INCOME TAXES
Deferred income tax benefit 38,282 31,543
--------- ---------
NET LOSS $(186,912) $(126,170)
========= =========
Loss per common share $ (0.21) $ (0.18)
========= =========
Weighted average number of
common shares outstanding 869,899 697,072
========= =========
See notes to financial statements.
3
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THERMACELL TECHNOLOGIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
COMMON STOCK PREFERRED STOCK
--------------------- ------------------- ADDITIONAL
NUMBER OF NUMBER OF PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ------ --------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance November 30, 1996 869,899 $87 5,000,000 $500 $184,314 $(1,548,840) $(1,363,939)
Net loss for the three months ended
February 28, 1997 - - - - - (186,912) (186,912)
------- --- --------- ---- -------- ----------- -----------
Balance February 28, 1997 869,899 $87 5,000,000 $500 $184,314 $(1,735,752) $(1,550,851)
======= === ========= ==== ======== =========== ===========
</TABLE>
See notes to financial statements.
4
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THERMACELL TECHNOLOGIES, INC
Statements of Cash Flows
(Unaudited)
<TABLE>
For the Three Months Ended
------------------------------
February 28, February 29,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Reconciliation of net loss to net cash
used in operating activities
Net loss $ (186,912) $ (126,170)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation 11,871 4,050
Amortization 27,837 8,309
(Increase) decrease in accounts receivable (160,377) (42,283)
(Increase) decrease in inventories 33,636 (86,830)
(Increase) decrease in prepaid expenses and other 1,534 (2,900)
Increase in deferred income tax benefit (38,281) (31,543)
Increase in other assets (2,343) (1,100)
Increase (decrease) in accounts payable 66,224 43,369
Increase (decrease) in accrued expenses 38,893 (46,145)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (207,918) (281,243)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on note receivable 3,750 -
Capital expenditures (2,244) (86,110)
Issuance of note receivable - (100,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES 1,506 (186,110)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft 17,196 -
Proceeds from issuance of common stock - -
Proceeds from issuance of notes payable 200,000 595,068
Principal payments on notes payable (1,600) (97,505)
Costs associated with obtaining financing (12,696) (103,200)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 202,900 394,363
----------- -----------
NET (DECREASE) IN CASH (3,512) (72,990)
CASH BEGINNING 3,512 90,773
----------- -----------
CASH ENDING $ - $ 17,783
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements.
5
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THERMACELL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements, have been prepared in
accordance with generally accepted accounting principles for interim
information and with the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the management, the accompanying unaudited financial
statements contain all adjustments (which are of a normal and recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the three month period are not necessarily
indicative of the results to be expected for the full year.
NOTE 2 - PER SHARE CALCULATIONS
Per share data was computed by dividing net loss by the weighted average
number of shares outstanding during the 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 - SUBSEQUENT EVENTS
On March 19, 1997, the Company completed a public offering for 1,375,000
Units, each Unit consisting of one share of Common Stock, $.0001 par value,
and one Series A Redeemable Common Stock Purchase Warrant, at a price of
$4.00 per Unit. In addition, the underwriter exercised its over-allotment
purchase option and purchased 206,250 additional Units at the initial per
Unit public offering price less the underwriting discounts and commission.
On February 7, 1997, the Company closed the corporate office and the retail
outlet that had opened in the first quarter of 1996. The Company may have a
contingent liability for leases of these premises up to a maximum amount of
$67,500. Management anticipates these actions will represent substantial
savings to the Company by reducing operating costs.
6
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THERMACELL TECHNOLOGIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10-QSB contains forward looking information and statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward looking statements contained in this Form
10-QSB.
GENERAL
The Company was incorporated in Florida in August, 1993, for the purpose of
developing, manufacturing and marketing insulating materials and coatings
using partially evacuated glass mircospheres ("shells"). The Company's
technology utilizes insertions of the shells in various materials and
products which improve the thermal resistive characteristics of such products.
The Company's business strategy is to (i) expand the marketing and
distribution of Thermacool-TM- paints and coatings, (ii) develop and
manufacture the Company's own shells and (iii) expand the shell technology to
other products, such as drywall, gypsum board, home siding materials, and
space foam insulation, among others.
On November 30, 1995, the Company acquired the assets of C.F. Darling Paint &
Chemicals, Inc., a paint manufacturing company, located in Holiday, Florida.
The Company acquired these assets so that it would have a facility to produce
and develop paints and coatings for its Thermacool-TM- product line.
On March 19, 1997, the Company completed a public offering for 1,375,000
Units, each Unit consisting of one share of Common Stock, $.0001 par value,
and one Series A Redeemable Common Stock Purchase Warrant, at a price of
$4.00 per Unit. In addition, the underwriter exercised its over-allotment
purchase option and purchased 206,250 additional Units at the initial per
Unit public offering price less the underwriting discounts and commission.
The Company has sustained significant operating losses since its inception
resulting in an accumulated deficit of ($1,735,752) at February 28, 1997. As
of February 28, 1997, the Company has a negative net tangible net worth of
($1,427,784) and negative working capital of ($2,647,185). The Company's
independent auditors in their report regarding the Company's financial
statements as of November 30, 1996, indicated that since the Company had a
history of recurring losses from operations and insufficient cash resources
to fund a plan of operations, substantial doubt existed as to the Company's
ability to continue as a going concern. However, since the successful
closing of the public offering on March 19, 1997, the Company raised
additional equity capital of more than $6 million which substantially changed
both the Company's tangible net worth and working capital position. As a
result, management believes the Company will be able to both develop its
technology and fund its present operational needs.
Management's strategy of expanding the Thermacool-TM- product line, developing
a commercially viable manufacturing process for shells and expansion into new
markets for its shell technology
7
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THERMACELL TECHNOLOGIES, INC.
may result in the Company incurring additional losses due to the cost
associated with these strategies. The Company expects to use a portion of the
net proceeds of its offering for repayment of all of its existing
indebtedness and for general working capital purposes. The Company may
continue to incur losses until the Company is able to increase its sales,
expand its product line and increase its distribution capabilities
sufficiently to offset ongoing operating and expansion costs. There is no
assurance that the Company's strategy will be successful.
RESULTS OF OPERATIONS
Three months ended February 28, 1997 compared to three months ended February
29, 1996
Total revenue for the three months ended February 28, 1997 was $215,525
compared to $112,189 for the same period of 1996, which represents an
increase of $103,336, or 92%. The increase was a result of expanded sales of
paint products and coatings produced by the Company's paint manufacturing
facility which was acquired during fiscal year 1995. The increased sales
were a direct result of increased marketing efforts and production
capabilities.
Gross profit margins were 51% and 45%, respectively, for the present period
ending February 28, 1997 as compared to the prior period ending February 29,
1996. This increase was the result of a change in mix of paint and coatings
products sold with the higher margined products contributing more
significantly during the quarter.
For the three months ended February 28, 1997, total selling, general and
administrative expenses were $266,034, as compared to $208,233 for the same
period of the previous year, an increase of approximately $57,801, or 28%.
This increase was due to higher expenses incurred by the company with
production of the Company's proprietary products in its manufacturing
facility, expenses incurred in the development of formulations of the paint
and paint coatings being manufactured, as well as higher personnel costs
associated with marketing, staffing and other expenses associated with the
Company's operations. During the quarter ending February 28, 1997, the
Company initiated a restructuring program which involved the downsizing of
its operations which was necessitated by its limited operating funds in the
early part of the quarter. This downsizing did not materially benefit the
present period's operating results, although it is anticipated that as a
result of such action approximately $186,000 of costs have been eliminated
from S,G&A expenses on an annual basis. It is further anticipated that
expansion of the Company's business operations and marketing efforts will
again commence because of the recent successful underwriting. This will
allow the Company to significantly grow its business over the next twelve
months.
The Company continued to experience a loss from operations of $156,776 for
the period ending February 28, 1997 as compared to a loss of $157,713 for the
same prior year period. Although the gross profit for the current period was
$109,258, its higher contribution was offset by the higher level of S, G & A
expenses incurred during the period. Management anticipates that increasing
levels of sales will result in an improvement in its operating performance
during the balance of the fiscal year.
8
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THERMACELL TECHNOLOGIES, INC.
Based upon management's current estimates of future taxable income,
management has determined that a valuation allowance of fifty percent (50%)
is appropriate during the current period ending February 28, 1997 to
represent that portion of deferred taxes that may be realized in the future.
The net loss, after income taxes benefit, and net loss per share were
$186,912 and $.21 per share respectively, for the three months ended February
28, 1997 as compared to a net loss and net loss per share of $126,170 and
$.18, respectively, for the same period in 1996. Included in the loss for
1997 is $33,418 of interest on loans the Company incurred during fiscal year
1996. There was no interest expense in the prior period. During the current
period there was a one time commission charge of $35,000 related to procuring
of capital for the benefit of the Company. There was not a similar charge in
the previous year period.
The Company plans to aggressively market its paint and coatings products as a
result of the recent closing of its successful public offering. A focus of
its strategy will be on its effort to expand within the Sunbelt Region of the
United States. In addition to the marketing effort, the Company plans to
expand its manufacturing facility which will enable it to increase
production, and thereby support a significantly higher level of sales of its
proprietary products. Management is optimistic about the benefits of its
near-term marketing programs.
The Company anticipates improved raw material purchasing economies as well as
cost reductions in its manufacturing processes during fiscal year 1997. The
Company also anticipates some improvement in its gross profit margins during
fiscal year 1997. Results of operations for the first three months of the
1997 fiscal year reflect the impact of the expenses incurred by the Company
in positioning itself for full-scale production which is expected to occur
during fiscal year 1997. The completion of its Initial Public Offering
("IPO") within the second quarter of the 1997 fiscal year provides the
Company with sufficient capital to meet its working capital needs and
provides funds for the expansion of its operations for at least the next
twelve months.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded its operations and product development
activities with funds provided by issuing securities and from borrowings.
During the recent quarter ended February 28, 1997, the Company raised
$200,000 through issuance of notes. The Company intends to repay its
indebtedness with the proceeds of the Offering, or the conversion of a
portion of these notes into shares of the Company's common stock.
The Company is not presently profitable in its operating business and
therefore cannot self fund its capital requirements. The successful
completion of the Offering following the first quarter of fiscal year 1997
has provided the Company with additional capital which improves its working
capital position and will provide adequate capital to fund future operation
and expansion plans. The Company will focus its marketing efforts within the
Sunbelt Region of the United States during fiscal 1997 to increase consumer
awareness and acceptance of both its existing and new products. In addition
to this marketing effort, the Company plans to build or buy a manufacturing
facility which will enable the Company to substantially increase production
of its proprietary
9
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THERMACELL TECHNOLOGIES, INC.
products. Management believes the proceeds from the Offering will provide
sufficient working capital to enable the Company to sustain its operations
and finance planned expansion for the next twelve months.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
On February 6, 1997, the Company received a letter from the counsel to
the Williams family which owns in the aggregate 21,923 shares of the
Company's common stock which was acquired for an aggregate purchase price of
$31,950. The Williams family claims Mr. John Pidorenko, President of the
Company, fraudulently induced their investment and the Company is obligated
for personal disputes between Mr. Pidorenko and this family which primary
concern a disagreement over a purchase of a personal residence. The Company
does not believe it is obligated to these individuals for personal disputes
with Mr. Pidorenko. The Williams family has rejected the Company's request to
purchase their shares at their original purchase price. The Company believes
it has meritorious defenses to any legal proceedings which may be instituted
by such individuals. Mr. Pidorenko has agreed to indemnify the Company
against any claims asserted by these parties.
Item 5. OTHER INFORMATION
On March 19, 1997, the Company closed a public offering of 1,375,000
Units, each Unit consisting of one share of Common Stock, $.0001 par value,
and one Series A Redeemable Common Stock Purchase Warrant at a price of $4.00
per Unit. In addition, the underwriter exercised his option to cover
over-allotments and purchased 206,250 additional Units at the initial per
Unit public offering price less the underwriting discounts and commission.
Item 6. EXHIBITS AND REPORTS ON FORM 8K
No reports on Form 8K have been filed in the quarter ended February 28,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
had duly caused the report to be signed on its behalf by the undersigned
thereunto duly authorized.
ThermaCell Technologies, Inc.
Dated: 4/14/97 /s/ JOHN PIDORENKO
---------------------------------
John Pidorenko
Chairman, Chief Executive Officer
President
10
<PAGE>
Exhibit 11
THERMACELL TECHNOLOGIES, INC.
Computation of Earnings Per Common Share
For the Three Months Ended
--------------------------
February 28, February 29,
1997 1996
------------ -----------
Shares outstanding: 869,899 726,672
Weighted average shares outstanding 869,899 697,072
Net loss $(186,912) $(126,170)
--------- ---------
--------- ---------
Net loss per share $ (0.21) $ (0.18)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 139,033
<ALLOWANCES> 20,067
<INVENTORY> 117,236
<CURRENT-ASSETS> 574,740
<PP&E> 325,223
<DEPRECIATION> 52,931
<TOTAL-ASSETS> 1,671,074
<CURRENT-LIABILITIES> 3,221,925
<BONDS> 0
0
500
<COMMON> 87
<OTHER-SE> (1,551,438)
<TOTAL-LIABILITY-AND-EQUITY> (1,671,074)
<SALES> 215,525
<TOTAL-REVENUES> 215,525
<CGS> 106,267
<TOTAL-COSTS> 372,301
<OTHER-EXPENSES> 68,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,418
<INCOME-PRETAX> (255,194)
<INCOME-TAX> (38,282)
<INCOME-CONTINUING> (186,912)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (186,912)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
