U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number
0-26315
GEOTEC THERMAL GENERATORS, INC
(Name of Small Business Issuer in Its Charter)
FLORIDA 59-3357040
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1615 S. Federal Highway, Suite 101, Boca Raton, Florida 33432
(Address of Principal Executive Offices)(Zip Code)
(561) 447- 7370
(Issuer's Telephone Number, Including Area Code)
Check mark whether the Issuer (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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 21,469,774 shares of Common
Stock as of July 31, 2000.
<PAGE>
Geotec Thermal Generators
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - June 30, 2000 2
Statements of Operations (unaudited) for the
Three and Six Months Ended June 30, 2000 and 1999
and February 2, 1998(inception) through June 30, 2000 3
Statement of Cash Flows (unaudited) for the Six
Months Ended June 30, 2000 and 1999 and
February 2, 1998 (inception) through June 30, 2000 4
Notes to Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis and Plan of 7 - 8
Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
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GEOTEC THERMAL GENERATORS, INC.
(A Development Stage Enterprise)
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
June 30,
2000
(Unaudited)
-------------------
<S> <C><C>
CURRENT ASSETS
Cash $ 133,460
Accounts Receivable 71,615
Inventories 50,540
Prepaid Expenses 25,000
-------------------
TOTAL CURRENT ASSETS 280,615
-------------------
PROPERTY AND EQUIPMENT, net 53,457
ORGANIZATION COSTS, net 496
OTHER ASSETS 19,522
-------------------
$ 354,090
===================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 104,067
Notes Payable 355,000
-------------------
TOTAL CURRENT LIABILITES 459,067
-------------------
NOTES PAYABLE 119,500
-------------------
SHAREHOLDERS' DEFICIT:
Common stock, $.001 par value, 50,000,000
shares authorized; 21,465,274 shares
issued and outstanding 21,465
Additional paid-in capital 3,436,636
Deferred compensation (664,889)
Accumulated deficit (3,017,689)
-------------------
TOTAL SHAREHOLDERS' DEFICIT (224,477)
-------------------
$ 354,090
===================
</TABLE>
See notes to financial statements
2
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GEOTEC THERMAL GENERATORS, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
February 2,
1998
(Inception)
For the Three Months For the Six Monhts through
Ended June 30 Ended June 30, June 30,
2000 1999 2000 1999 1999
=============== =============== =============== ================ ===============
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C><C> <C><C> <C><C> <C><C>
REVENUES $ 71,615 $ - $ 71,615 $ - $ 71,615
COST OF GOOD SOLDS 138,012 - 150,418 - 150,418
--------------- --------------- --------------- ---------------- ---------------
GROSS LOSS (66,397) - (78,803) - (78,803)
COSTS AND EXPENSES:
General and administrative 281,641 116,127 525,589 151,047 1,326,440
Stock compensation expense 1,198,110 - 1,586,950 - 1,586,950
--------------- --------------- --------------- ---------------- ---------------
OPERATING LOSS (1,546,148) (116,127) (2,191,342) (151,047) (2,992,193)
OTHER EXPENSES
Interest (expense) (14,630) - (22,811) - (25,496)
--------------- --------------- --------------- ---------------- ---------------
NET LOSS $ (1,560,778)$ (116,127) $ (2,214,153) $ (151,047)$ (3,017,689)
=============== =============== =============== ================ ===============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.07)$ (0.01) $ (0.11) $ (0.01)$ (0.14)
=============== =============== =============== ================ ===============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 21,086,512 20,552,363 20,914,465 20,558,048 20,914,465
=============== =============== =============== ================ ===============
</TABLE>
See notes to financial statements
3
<PAGE>
GEOTEC THERMAL GENERATORS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
For the Six Months February 2, 1998
Ended June 30 (Inception) through
June 30,
2000 1999 1999
--------------- --------------- --------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C><C> <C><C> <C><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,214,153) $ (151,047)$ (3,017,689)
--------------- --------------- --------------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,729 1,715 11,050
Deferred compensation 174,360 - 174,360
Issuance of common stock options 388,840 - 388,840
Stock issued for compensation 1,134,000 - 1,166,538
Changes in assets and liabilities:
Increase in accounts receivable (71,615) - (71,615)
Decrease (increase)in inventories 79,420 - (50,540)
Increase in prepaid expenses (25,000) - (25,000)
Increase in organizational costs - - (1,242)
Increase in other assets (2,643) - (19,521)
Increase in accounts
payable and accrued expenses 94,329 1,370 104,067
--------------- --------------- --------------------
NET CASH USED IN OPERATING ACTIVITIES (436,733) (147,962) (1,340,752)
--------------- --------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and equipment (51,448) (683) (63,761)
--------------- --------------- --------------------
NET CASH USED IN INVESTING ACTIVITIES (51,448) (683) (63,761)
--------------- --------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 235,000 - 474,500
Proceeds from issuance of common stock 362,248 184,000 1,063,473
--------------- --------------- --------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 597,248 184,000 1,537,973
--------------- --------------- --------------------
NET INCREASE (DECREASE) IN CASH 109,067 35,355 133,460
CASH, beginning of period 24,393 21 -
--------------- --------------- --------------------
CASH, end of period $ 133,460 $ 35,376 $ 133,460
=============== =============== ====================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Income taxes $ - $ - $ -
=============== =============== ====================
Interest $ 4,825 $ - 4,868
=============== =============== ====================
Non-cash investing and financing activity:
Common stock issued for services $ 729,000 $ - $ 839,250
=============== =============== ====================
</TABLE>
See notes to financial statements
4
<PAGE>
Geotec Thermal Generators
Notes to Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with 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 management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations for the
Three-month and Six-month period ended June 30, 2000 are not necessarily
indicative of the results to be expected for the year ended December 31, 2000.
The condensed interim financial statements should be read in conjunction with
the audited financial statements and notes, contained in the Company's Annual
Report on Form 10-KSB for the year-ended December 31, 1999.
2.PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of June 30, 2000
Furniture and Fixtures 5 Years $ 32,829
Data processing equipment 3 Years 30,931
-------------
63,760
Less: accumulated depreciation (10,303)
-------------
$ 53,457
=============
3. NOTES PAYABLE
In November 1999, the Company borrowed $120,000 from a Bahamian Company. The
terms of the loan are for the monthly interest payments at an annualized rate of
12.50%. The principal of the loan is to be paid one year from the date of
issuance. The Company has pledged .42% of all common stock outstanding on the
date of the note's issuance.
In November 1999, the Company borrowed $119,500 from a Investment Trust based in
Bermuda. The loan is due in November 2001, two years from the date of issuance.
Interest on the note is 12.50% per annum, payable upon repayment of the
principal.
In March 2000 the Company borrowing a total of $235,000 from four investors the
notes bear interest at 12.5% per annum and payable one year from date of
issuance.
4.COMMON STOCK
In March the Company completed a private placement of 10,250 shares of its
common Stock.
In April 2000 the Company issued 200,000 shares of common stock to a consultant
for financial services.
In April 2000 the Company issued 378,000 shares of common stock to three
employees.
In April 2000 the Company completed a private placement of 100,000 shares of
common stock. In connection with this placement the Company also issued 50,000
common stock warrants expiring April 2003. Each Warrant entitles the holder to
purchase one share of common stock at a price of $4.50.
5
<PAGE>
Between May and June 2000 the Company has completed a private placement of 9,250
shares of its common stock.
In June 2000 the Company issued 30,000 shares of common stock for investor
relation services.
5. STOCK ISSUED FOR COMPENSATION
The Company issued 200,000 shares of common stock for financial consulting
services. The term of the agreement is from April 22, 2000 until April 22, 2001.
The Company recorded deferred compensation of $600,000 and is amortizing the
cost over the term of the agreement.
The Company issued 30,000 shares of common stock for public relation services.
The term of the agreement is from June 30, 2000 until June 30, 2001. The Company
recorded deferred compensation of $129,000 and is amortizing the costs over the
term of the agreement.
The Company issued 378,000 shares of common stock to three employees. The
Company recorded an expense of $1,134,000 associated with the issuance.
6
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This Quarterly Report on Form 10-QSB 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. All statements,
other than statements of historical facts, included in or incorporated by
reference into this Form 10-QSB, are forward-looking statements. In addition,
when used in this document, the words "anticipate," "estimate," "project" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements are subject to certain risks, uncertainties and
assumptions including risks relating to our limited operating history and
operations losses; significant capital requirements; development of markets
required for successful performance by the Company as well as other risks
described in the Company's Annual Report on Form 10-KSB as well as in this
report on Form 10-QSB. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected. Although the
Company believes that the expectations we include in such forward-looking
statements are reasonable, we cannot assure you that these expectations will
prove to be correct
The following discussion and analysis should be read in conjunction
with the financial statements of the Company and the notes thereto appearing
elsewhere herein.
RESULTS OF OPERATIONS
The Company is in the development stage. Since its inception in February 2,
1998(Inception), the Company's efforts have been principally devoted to
research, development, initial marketing activities, licensing and raising
capital. The Company has generated nominal revenue and has incurred substantial
operating losses to date, which losses are continuing. Since inception, the
Company has sustained cumulative losses of ($3,017,689). These losses have
resulted primarily from expenditures for general and administrative activities,
including salaries and professional fees, which have aggregated $1,326,440 since
inception. Losses are expected to continue through fiscal year 2000.
Revenue increased from $0 for the three and six months ended June 30, 1999 to
$71,615 for the three and six months ended June 30, 2000. In May 2000 the
Company began the transfer of technology from Russian Federation and began
treating wells in the United States. Revenues for the Company are not immediate.
An oil or gas well is treated with all the expense for the Company occurring at
the moment of treating the well. It can take 60-90 days after a well treatment
before the Company will see the initial revenues. The process requires that well
be cleaned (or swabbed), tubing, rods, oil tanks and pump must be replaced or
installed and the well flowed for a few weeks to establish the optimum
production for the formation. Finally, oil is collected in tanks and when full,
delivered for payment. The oil wholesaler pays the operator and the Company
approximately 30 days later.
While the costs are incurred up front, the well revenue can last for many months
or years, without additional expense to the Company. The revenues posted in this
report are indicative of less than two months production for the minority of
wells treated.
7
<PAGE>
Cost of good sold increased from $0 for the three and six months ended June 30,
1999 to $138,012 for the three and $150,418 for the six months ended June 30,
2000. Cost of good sold represents the cost incurred with treating the company
initial wells. Even though the Company expects future revenue from these
treatments it has elected to expenses costs as they are incurred.
General and administrative expenses increased from $116,127 for the three months
ended June 30, 1999 to $281,641 for the three months ended June 30, 2000. An
increase of $165,514. General and administrative expenses increased from
$151,047 for the six months ended June 30, 1999 to $525,589 for the six months
ended June 30, 2000. An increase of $374,542. The increases were due to
additional employees hired, and increased legal and accounting fees incurred in
connection with the Company's expanding activities and patent applications.
Stock compensation expense increased from $0 for the three months ended June 30,
1999 to $1,198,100 for the three months ended June 30, 2000. Stock compensation
expense increased from $0 for the six months ended June 30, 1999 to $1,586,950
for the six months ended June 30, 2000. The Company issued common stock to three
employees of the Company and issued common stock for financial consulting and
public relation services.
LIQUIDITY AND CAPITAL RESOURCES
In November 1999, the Company borrowed $119,500 from an Investment Trust based
in Bermuda. The loan is due in November 2001, two years from the date of
issuance. Interest on the note is 12.50% per annum, payable upon repayment of
the principal.
In March 2000 the Company borrowing a total of $242,500 from four investors the
notes bear interest at 12.5% per annum and payable one year from date of
issuance.
In March 2000 the Company borrowed a total of $242,500 from four investors the
notes bearing interest at 12.5% per annum and are due in March 2001.
In March the Company completed a private placement of 10,250 shares of its
common stock at prices ranging from $2.50 to $3.20 per share.
In April 2000 the Company issued 200,000 shares of common stock to a consultant
for financial services. The contract expires April 2001.
In April 2000 the Company issued 378,000 shares of common stock to three
employees.
In April 2000 the Company completed a private placement of 100,000 shares of
common stock at a price of $3.00 per share. In connection with this placement
the Company also issued 50,000 common stock warrants expiring April 2003. Each
Warrant entitles the holder to purchase one share of common stock at a price of
$4.50.
Between May and June 2000 the Company has completed a private placement of 9,250
shares of its common stock at prices ranging from $4.00 to $5.00 per share net
of offering expenses of $8,250.
In June 2000 the Company issued 30,000 shares of common stock for investor
relation services.
The Company anticipates that its use of cash will be substantial for
the foreseeable future. In particular, management of the Company expects
substantial expenditures in connection with the treatment of additional wells
The Company expects that funding for these expenditures will be available out of
the Company's future cash flow and issuance of equity and/or debt securities
during the next 12 months and thereafter. There can be no assurance whether or
not such financing will be available on terms satisfactory to management.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
In March the Company completed a private placement of 10,250 shares of its
common Stock.
In April 2000 the Company issued 200,000 shares of common stock to a consultant
for financial services.
In April 2000 the Company issued 378,000 shares of common stock to three
employees.
In April 2000 the Company completed a private placement of 100,000 shares of
common stock. In connection with this placement the Company also issued 50,000
common stock warrants expiring April 2003. Each Warrant entitles the holder to
purchase one share of common stock at a price of $4.50.
Between May and June 2000 the Company has completed a private placement of 9,250
shares of its common stock.
In June 2000 the Company issued 30,000 shares of common stock for investor
relation services.
ITEM 5. Other Information
On July 12 the Company and the Marquardt Family Trust, a European Trust has
purchased Emerald Production and Restoration Company. For its assistance in the
transaction the Company received 5% ownership. The Marquardt Family Trust and
Phoenix Foundation (also owned by the family trust) have investments in other
oil wells in Colorado, gold mines and other businesses in the U.S. and Europe.
The Company will retain its production override of 50% of the increased
hydrocarbon production and, in addition, own 5% of Emerald Production and
Restoration. Engineering is ongoing and all wells, are expected to be treated,
by the Geotec process by the end of the fourth quarter. The Marquardt Trust has
previously owned 23% of Emerald and has increased its ownership to majority
position of 90%.
On August 2, 2000, the Company entered into a Private Equity Line of Credit
Agreement with Investwell Investments Ltd. ("IIL") pursuant to which the Company
will have the right to sell to IIL up to 6,000,000 shares of its Common Stock
following effectiveness of the Company's registration statement relating to the
transaction. Under the Agreement, Geotec would have the right to provide put
notices for its Common Stock in amounts not less than $200,000 nor in excess of
the lesser of $2,500,000 or 15% of the weighted average price of its Common
Stock during the applicable trading period multiplied by the total trading
volume of Geotec Common Stock during this trading period. The purchase price for
these shares is equal to 88% of the specified market price during the evaluation
period for the put. The Company also issued to IIL a warrant to purchase 500,000
shares of Common Stock of the Company, which is exercisable during its
three-year term at an exercise price of $4.89, subject to certain adjustments as
provided in the warrant. Under the terms of the Agreement, the Company is also
authorized to issue separate warrants equal to 50% of the number of shares
purchased by IIL in each put transaction based on the price of the Common Stock
purchased as part of the put arrangement. Geotec has agreed to file a
registration statement for the transaction within 60 days of the date of
execution of the contract. The Company has also agreed to limit future financing
during the commitment period of the Agreement, subject to various exceptions and
financings in which IIL would have a right of first refusal.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by item 601 of Regulation S-B
The following exhibits are filed as part of this report:
10.10 Escrow Agreement Equity Line of Credit
10.7 Private Equity Line of Credit
10.8 Registration Rights Agreement
10.9 Stock Purchase Warrant
10.6 Securities Placement Agent Agreement
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed during the period ended June 30, 2000.
9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Geotec Thermal Generators, Inc.
DATE:August 14, 2000 By: /s/ Daniel Pepe
---------------
President and COB
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
DATE:August 14,2000 /s/ Daniel Pepe
----------------
President and COB
DATE:August 14, 2000 /s/ W. Richard Lueck
--------------------
CEO, Secretary and Treasurer
DATE:August 14, 2000 /s/ Martin P. Scott
-------------------
Chief Financial Officer
10
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