<PAGE>
PAGE 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] 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 0-19260
RENTECH, INC.
(Name of small business issuer in its charter)
Colorado 84-0957421
- - ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1331 17th Street, Suite 720
Denver, Colorado 80202
-----------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code:
(303) 298-8008
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 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 each of the issuer's classes of
common equity, as of March 31, 1996: common stock - 10,006,868.
This report consists of 14 pages, including one page constituting the
cover page.
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<PAGE>
PAGE 2
RENTECH, INC.
FORM 10-QSB QUARTERLY REPORT
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three months
ended March 31, 1996 and March 31, 1995 . . . . . . . . . . 5
Condensed Consolidated Statement of Stockholders' Equity
for the three months ended March 31, 1996 . . . . . . . . . 6
Consolidated Statement of Cash Flows for the three
months ended March 31, 1996 and March 31, 1995 . . . . . . 7
Notes to the Consolidated Financial Statements . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Change in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 13
(a) Exhibits - None
(b) Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 13<PAGE>
<PAGE>
PAGE 3
<TABLE>
RENTECH, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
ASSETS March 31, 1996 December 31, 1995
- - ------ -------------- -----------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 125,309 $ 15,908
Restricted cash, current portion 25,000 25,000
Accounts receivable 45,533 237,070
Advances and other current assets 441 4,272
---------- ----------
Total Current Assets 196,283 282,250
---------- ----------
Property and Equipment
Equipment, net of accumulated
depreciation of $81,896 and
$77,744 as of March 31, 1996
and December 31, 1995, respectively 69,880 76,032
Other Assets
Licensed technology, net of accumulated
amortization of $601,092 and $543,907
as of March 31, 1996 and December 31,
1995, respectively 2,830,056 2,887,241
Synhytech plant held for sale 199,500 199,500
Deposits and other 16,390 9,709
---------- ----------
Total Other Assets 3,045,946 3,096,450
---------- ----------
Total Assets $3,312,109 $3,454,732
========== ==========
</TABLE>
See notes to the consolidated financial statements.<PAGE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C>
Current Liabilities
Accounts payable $ 564,610 $ 620,255
Accrued liabilities 79,046 50,154
Total Current Liabilities 643,656 670,409
Stockholders' Equity
Preferred stock - $10 par value;
1,000,000 shares authorized; none issued
and outstanding
Common stock - $.01 par value;
100,000,000 shares authorized;
10,006,868 and 9,956,868 shares issued
and outstanding as of March 31, 1996
and December 31, 1995, respectively 100,067 99,567
Additional paid-in capital 10,043,502 9,994,002
Accumulated deficit (7,475,116) (7,309,246)
---------- ----------
Total Stockholders' Equity 2,668,452 2,784,323
---------- ---------
Total Liabilities and Stockholders' Equity $3,312,109 $3,454,732
========== ==========
</TABLE>
See notes to the consolidated financial statements.<PAGE>
<PAGE>
<PAGE 5>
<TABLE>
RENTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
REVENUES:
Contract revenues $ -0- $ 474,004
License fees 120,000 -0-
----------- ------------
Total Revenue 120,000 474,004
----------- ------------
COSTS OF SALES:
Cost of contracts -0- 342,854
----------- ---------
GROSS PROFIT 120,000 131,150
----------- ----------
EXPENSES:
General and Administrative 216,752 302,286
Property and Sales Taxes 5,000 6,000
Depreciation and Amortization 63,337 81,064
Total Expenses 285,089 389,350
----------- ----------
LOSS FROM OPERATIONS (165,089) (258,200)
OTHER INCOME (EXPENSE):
Gain (loss) on sale of assets -0- (230,000)
(Loss) on foreign currency -0- 3,712
Other income 1,200 8,588
Interest income 781 7,625
Interest expense (2,762) (1,056)
----------- -----------
Total Other Income (Expense) (781) (211,131)
NET LOSS $ (165,870) $ (469,331)
=========== ===========
Weighted average number
of shares outstanding 10,006,868 9,806,868
Per Share (Loss) $(0.02) $(0.05)
</TABLE>
See notes to the consolidated financial statements.<PAGE>
<PAGE>
<PAGE 6>
RENTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional
Par Paid-In Accumulated
Shares Value Capital Deficit
--------- ------- ----------- --------------
<S> <C> <C> <C> <C>
Balances,
December 31, 1995 9,956,868 $ 99,567 $ 9,994,002 $(7,309,246)
Common Stock Issuances 50,000 500 49,500
Net loss for the three
months ended
March 31, 1996 (165,870)
---------- -------- ----------- -----------
Balances, March 31, 1996
(unaudited) 10,006,868 $100,067 $10,043,502 $(7,475,116)
========== ======== =========== ===========
</TABLE>
See notes to the consolidated financial statements.<PAGE>
<PAGE>
<PAGE 7>
<TABLE>
RENTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating Activities
Net Income (Loss) $(165,870) $(469,331)
Adjustments to reconcile net loss to net cash
provided (used in) operating activities:
Allowance for loss on sale of assets -0- 230,000
Foreign currency translation -0- 5,155
Depreciation and amortization 63,337 81,064
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable 191,537 (19,955)
(Increase) Decrease in other current assets 3,831 (4,231)
(Increase) Decrease in deposits and other assets (6,681) 11,263
Increase (Decrease) in billings in excess of
costs and estimated earnings on
uncompleted contracts -0- (109,393)
Increase (Decrease) in accounts payable
and other accrued expenses (26,753) 41,848)
Net Cash Provided By (Used in) Operating Activities: 59,401 (317,276)
--------- --------
Investing Activities
Proceeds from sale of assets -0- -0-
Purchase of equipment -0- -0-
(Increase) Decrease in deferred costs -0- -0-
--------- -----------
Net Cash Provided By (Used in) Investing Activities: -0- -0-
--------- -----------
Financing Activities
Proceeds from issuance of private placement offering 50,000 -0-
Payment on capital lease obligation -0- (275)
--------- -----------
Net Cash Provided (Used) by Financing Activities 50,000 (275)
--------- -----------
Increase (Decrease) in Cash 109,401 (317,551)
Cash Beginning Balance 15,908 890,717
--------- ---------
Cash Ending Balance $ 125,309 $ 573,166
========= =========
</TABLE>
See notes to consolidated financial statements.<PAGE>
<PAGE>
<PAGE 8>
RENTECH, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying statements should be read in
conjunction with the audited financial statements included in the Company's
1995 annual report on Form 10-KSB. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the full calendar year ending December 31,
1996. All dollar amounts included herein are in U.S. dollars, unless
otherwise indicated. The financial statements are presented on an accrual
basis.
2. Significant Accounting Policies
Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned foreign subsidiary, Future Fuels
Pty Limited (Future Fuels). All material intercompany accounts and
transactions have been eliminated in consolidation. Future Fuels, an
Australian company organized on March 31, 1988, was engaged in the business of
developing process plants that use the Company's proprietary technology before
its liquidation for accounting purposes during December 1995.
Translation of Foreign Currencies - Assets and liabilities of the
Company's foreign subsidiary, Future Fuels, are translated at the rate of
exchange in effect on the balance sheet date; income and expenses, in general,
are translated at the average rates of exchange prevailing during the year.
Transaction gains and losses as a result of exchange rate changes on
transactions denominated in currencies other than the functional currency are
included in determining net income for the period incurred.
Licensed Technology - Capitalized investment in licensed technology
represents costs incurred by the Company primarily for the purpose of
demonstrating the Company's proprietary technology to prospective licensees,
which it licenses to third parties under various fee arrangements. These
capitalized costs are being amortized using the straight line method over 15
years.
Synhytech Plant Held for Sale - The Synhytech plant held for sale is
recorded at the lower of cost or net realizable value.
Equipment - Equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, which
range from five to seven years. Maintenance and repairs are expensed as
incurred. Major renewals and improvements are capitalized and assets replaced
are retired. When property and equipment are retired or otherwise disposed
of, the asset and accumulated depreciation are removed from the accounts and
the resulting profit or loss is reflected in income.
Investments - Long-term investments in common stock are accounted for
under the cost method of accounting.
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Revenue Recognition - The Company reports its contract revenue on
fixed-priced contracts using the percentage-of-completion method of
accounting measured by the percentage of job costs incurred to date to
the latest estimated cost to complete for each project. Job costs
incurred prior to the Company's entering into a contract are expensed
as incurred and excluded from the percentage-of-completion calculation.
Contract costs include all direct material, labor, travel and other costs
directly related to contracts and indirect costs. Indirect costs include all
other costs indirectly related to contract completion such as indirect labor,
supplies, tools and equipment rental.
Research and Development Costs - Research and development costs are
charged to expense as incurred.
Net Income (Loss) Per Share - The net loss per share of common stock is
determined using the weighted-average number of shares outstanding during the
period according to rules of the Securities and Exchange Commission. Options
for common stock and warrants are not considered in the computation of net
loss per share as their inclusion would be antidilutive.
<PAGE>
<PAGE>
<PAGE 10>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
During the three months ended March 31, 1996 and 1995, the Company
recorded losses of $165,870 and $469,331, respectively. The primary reasons
for the decrease in the net loss during the current period is the inclusion
during the first quarter of 1995 of a $230,000 loss allowance on the sale of
the Synhytech assets and the inclusion of $36,620 in general and
administrative expenses related to the consolidation of Future Fuels. If
these items were excluded, the comparable first quarter losses for 1996 and
1995 would be $165,870 and $202,711, respectively, a decrease of 18%.
During the three months ended March 31, 1996, the Company had no contract
revenues compared to $474,004 during the comparable period ended March 31,
1995. This reduction to zero during the current period reflects the
termination of the Henan Project by Future Fuels Pty Limited, a wholly-owned
subsidiary that was liquidated during 1995 for accounting purposes. See the
following section entitled "Liquidity and Capital Resources" for further
details regarding the Henan Project and Future Fuels liquidation.
During the three months ended March 31, 1996, the Company received a
$120,000 license fee from Donyi Polo. Donyi Polo purchased the Company's
Synhytech plant during the first quarter of 1995 with the intent to dismantle
the plant located in Pueblo, Colorado, ship it to Arunachal Pradesh, India,
reassemble the plant, and then use the Company's licensed technology to
operate the plant as a commercial facility. There were no license fees
received during the first quarter of 1995.
Cost of contracts decreased to zero during 1996 compared to $342,854
during 1995. The elimination of both the contract revenue and the cost of
contracts is due to the discontinuation of the Henan Project contract and the
resulting liquidation of Future Fuels for accounting purposes during 1995.
Gross profit decreased 8% to $120,000 from $131,150 for the comparable
three month periods ended March 31, 1996 and 1995, respectively. Although the
reduction in gross profit is only slight during the comparable first quarters,
no such contract revenues nor additional license fees are anticipated during
the remainder of 1996.
General and administrative expenses decreased by $85,534 or 28% for the
first quarter of 1996, compared to the same quarter in 1995. This reduction
reflects the liquidation of Future Fuels Pty Limited during December 1995.
The first quarter of 1995 reflects $36,620 in Future Fuels' expenses compared
to zero during the first quarter of 1996. Excluding the Future Fuels'
expenses, the comparable general and administrative expenses decreased during
the first quarter of 1996 by $48,914 or 18%. The decrease is due primarily to
reimbursements from Donyi Polo, required under its contract, to the Company
for a major portion of the Synhytech holding costs.
Property and sales taxes are estimated at slightly less during 1996 due
to the anticipated sale of the remaining buildings at the Synhytech plant.
Depreciation and amortization decreased by 21% to $63,337 for the current
quarter ended March 31, 1996 from $81,064 for the quarter ended March 31,
1995. The reduction is due primarily to the liquidation of Future Fuels and
the write off of approximately $800,000 of goodwill during 1995 that was to be
amortized over the next 12 years.
Allowance for loss on sale of assets reflects the sale of the Synhytech
plant at a non-cash loss of approximately $230,000 during the first quarter of
1995. The remaining value of the Synhytech assets held for sale is $199,500
at March 31, 1996, which is the contract price for the sale of those assets to
Donyi Polo.
<PAGE>
<PAGE 11>
Loss on foreign currency during the first quarter of 1995 was related to
the consolidation of the Company's financial statements with those of Future
Fuels, which was liquidated during December 1995 for accounting purposes.
Other income during the first quarter of 1996 was less than the same
quarter in 1995 due to an unexpected $7,500 payment received during the first
quarter of 1995 regarding the sale of a non-valued asset.
Interest income was nearly ten times greater during the first quarter of
1995 as compared to the first quarter of 1996 because of the Company's
completion of a private placement of its restricted common stock during the
third quarter of 1994 which netted $1,117,054.
Interest expense during the first quarter of 1996 was over twice that of
the first quarter of 1995 due to additional interest charges on trade accounts
payable.
Liquidity and Capital Resources.
The Company has incurred losses since its inception and at March 31,
1996, the Company had a working capital deficit of $447,373 as compared to
$388,159 at December 31, 1995. The $59,214 or 15% increase in the working
capital deficit is due to the ongoing losses from operations which raises
substantial doubt about the ability of the Company to continue as a going
concern.
The Company's financial outlook was seriously worsened in the fourth
quarter of 1995 when a contract dispute arose between the Company's Australian
subsidiary, Future Fuels Pty Ltd., and the Australian joint venture composed
of Energy Equipment Pty Ltd. and CMPS&F Pty Ltd. As a result of the dispute,
the subcontract of Future Fuels to provide basic engineering design and
operating data to the joint venture for construction of the Henan project in
China was discontinued in 1995 and considered terminated at year end for
accounting purposes.
The suspension of Future Fuels' subcontract for the Henan Project
deprived Rentech of what it had expected to be the major source of its income
for the next several years through 1998. The contract was for a total of
approximately $10.9 million, of which approximately $1,431,000 had been
received. Future Fuels was owed approximately $356,000 by the joint venture
when the subcontract was deemed terminated, and does not expect to recover
that sum from the joint venture.
As a result of the discontinuation, and ultimate termination for
accounting purposes, of Future Fuels' contract for the Henan Project, the
operations of Future Fuels were closed, the employees and independent
contractors discharged, and the business wound up in late 1995. In February
1996, Future Fuels filed for liquidation under Australian law. On March 21,
1996, a trustee was appointed to liquidate the assets and discharge the
liabilities to the extent of the assets. The liabilities of Future Fuels
exceed the value of its assets, and Rentech, as the sole shareholder and major
creditor, does not expect to receive any distribution from the liquidation of
its subsidiary.
Unanticipated delays in receipt of payments due from the license
agreement and design contract for the Arunachal Pradesh project will create a
shortage in the Company's cash flow within the next few weeks. In order to
bridge the gap between that time and later in the year when the Company
expects to receive payments on those contracts and proceeds from the
anticipated sale of the Synhytech buildings, the Company is now attempting to
<PAGE>
<PAGE 12>
raise operating capital from several of its shareholders who have substantial
stock holdings in the Company. The Company is planning to issue its non-
subordinated convertible debenture notes to the shareholders to raise
approximately $250,000 and as much as $500,000. As presently proposed, the
debenture notes would bear interest at 10% per annum, be payable in one lump
sum of principal and interest in two years, and be convertible into shares of
the Company's common stock at $.20 a share, with warrants to purchase an
additional number of shares equal to the number issued upon conversion. The
warrants would be exercisable for one year after conversion of the debentures
at the exercise price of $.25 a share. To provide additional working capital,
the Company also intends within the near future to make a private placement of
its common stock at approximately $.25 a share to raise the remainder of the
$500,000 that it seeks. The Company's long term ability to continue its
operations is dependent primarily upon income from license fees and
construction subcontracts for the Arunachal Pradesh project and ability to
generate operating income from the Company's efforts to diversify into other
energy related fields. There are no assurances that these sources of revenues
will be realized in time or in amount adequate to enable the Company to
continue its operations as a going concern.
As discussed under "Results of Operations," the Company had first quarter
net losses of $165,870 in 1996 and $469,331 in 1995. The 1995 non-cash
expenses include the allowance for loss on sale of assets of $230,000, a
foreign currency translation of $5,155, and depreciation and amortization of
$81,064. This compares to no losses recorded on the sale of assets during
1996, no foreign currency translation during 1996, and a 21% reduction in the
1996 depreciation expense due to the liquidation of Future Fuels and the write
off of the associated goodwill.
Changes in operating assets and liabilities include a $191,537 decrease
in accounts receivable during 1996 compared to a $19,955 decrease in 1995.
This decrease reflects payments received during the first quarter of 1996.
Current assets decreased by $3,831 during the first quarter of 1996 compared
to a $4,231 increase during the first quarter of 1995. Deposits and other
assets increased by $6,681 during the first quarter of 1996 compared to a
decrease of $11,263 during the comparable 1995 quarter. Billings in excess of
costs and estimated earnings on uncompleted contracts decreased during the
first quarter of 1995. With the termination of the Henan Project and no other
contracts in place, there are no first quarter 1996 increases or decreases in
billings in excess of costs and estimated earnings on uncompleted contracts.
During the first quarter of 1996 $59,401 cash was provided by operating
activities compared to a net cash usage of $317,276 for the comparable first
quarter of 1995.
There were no investing activities during the first quarters of 1996 or
1995.
The Company financed a portion of its activities by net proceeds of
$50,000 from a private placement of its common stock during the first quarter
of 1996 compared to none during 1995. In 1995, the Company paid $275 on its
capital lease obligation which was terminated through the Future Fuels
liquidation. As a result of these activities, the net cash provided by
financing activities in the first quarter of 1996 was $50,000 compared to a
cash usage of $275 during the first quarter of 1995.
Cash increased during the first quarter of 1996 by $109,401 compared to a
decrease of $317,551 for the first quarter of 1995. These changes increased
the ending cash balance to $125,309 at March 31, 1996 from $15,908 at December
31, 1995. The first quarter 1995 changes decreased the $890,717 December 31,
1994 balance to $573,166 at March 31, 1995.<PAGE>
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Change in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None
(b) Two reports on Form 8-K dated January 15, 1996 and February
13, 1996 were filed during the quarter ended March 31, 1996 reporting other
events.
<PAGE>
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<PAGE 14>
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.
RENTECH, INC.
Dated: May 13, 1996 (Signature)
----------------------------------------
Dennis L. Yakobson, President
Dated: May 13, 1996 (Signature)
----------------------------------------
Ronald C. Butz, Vice President-Legal and
Finance, and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1996 (Unaudited) and the Condensed
Consolidated Statement of Operations for the three Months Ended March 31, 1996
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MO.
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 150,309
<SECURITIES> 0
<RECEIVABLES> 45,974
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 196,283
<PP&E> 151,776
<DEPRECIATION> (81,896)
<TOTAL-ASSETS> 3,312,109
<CURRENT-LIABILITIES> 643,656
<BONDS> 0
0
0
<COMMON> 100,067
<OTHER-SE> 2,568,386
<TOTAL-LIABILITY-AND-EQUITY> 3,312,109
<SALES> 0
<TOTAL-REVENUES> 121,981
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 285,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,762
<INCOME-PRETAX> (165,870)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,870)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
