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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 20, 1997
RENTECH, INC.
(Exact name of registrant as specified in charter)
Colorado 0-19260 84-0957421
(State or other Commission I.R.S. Employer
jurisdiction of File No. Identification No.
incorporation or
organization)
1331 17th Street, Suite 720, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 298-8008
Rentech, Inc. amends its Current Report on Form 8-K dated April 3,
1997 by the addition of the following:
Item 7. Financial Statements.
The Pro Forma Consolidated Financial Statements (unaudited) and
Financial Statements for Okon, Inc., a wholly owned subsidiary acquired
by Rentech, Inc., are filed as Exhibit 99 to this report.
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SIGNATURE
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 hereunto duly authorized.
RENTECH, INC.
Date: May 20, 1997 By: (signature)
---------------------------------------
James P. Samuels, Vice President
- Finance, Chief Financial Officer
PAGE 1
OKON, INC.
Contents
Pro Forma Consolidated Financial Statements (Unaudited):
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited) F-2 - F-3
Pro Forma Consolidated Statement of Operations
(Unaudited) F-4 - F-5
Notes to Pro Forma Consolidated Financial
Statements (Unaudited) F-6
Report of Independent Certified Public Accountants F-7
Financial Statements:
Balance Sheet F-8
Statements of Income F-9
Statements of Stockholders' Equity F-10
Statements of Cash Flows F-11
Summary of Accounting Policies F-12 - F-13
Notes to Financial Statements F-14 - F-15
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Rentech, Inc.
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Introduction
The accompanying unaudited pro forma consolidated financial statements of
Rentech, Inc. give effect to the acquisition by the Company of the
assets of Okon, Inc. ( Okon ) and are based on the estimates and
assumptions set forth herein. This unaudited pro forma information has
been prepared utilizing the historical financial statements and notes
thereto, which are incorporated by reference herein. The unaudited pro
forma financial data does not purport to be indicative of the results
which actually would have been obtained had the acquisition been effected
on the date indicated or of the results which may be obtained in the
future. The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements set forth herein.
The pro forma condensed consolidated statements of operations for the six
months ended March 31, 1997 and for the nine months ended September 30,
1996 assume the acquisition was consummated as of January 1, 1996 and
October 1, 1996 for the periods presented. The Company changed its year
end from December 31 to September 30 effective September 30, 1996. The
period ended September 30, 1996 is a transition period consisting of nine
months.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
Series 1997-A Convertible Preferred Stock Offering
During March 1997, the Company completed the sale of 130,000 shares of
its Series 1997-A Convertible Preferred Stock. The Company received net
proceeds of $1,105,215 after paying $194,785 in offering costs. The
preferred shares are convertible into shares of the Company=s common
stock at an average price of $.21 per share or into common stock at a
price that is 70% of the average closing bid price of the common stock
for the five trading days preceding the date of each conversion,
whichever is less. Dividends are payable on the preferred stock at 15%
per annum, in common stock or cash, at the option of the Company, until
converted or redeemed by the Company. The Company used the proceeds from
this offering to acquire Okon.
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Rentech, Inc.
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Acquisition of Okon
On March 20, 1997, the Company acquired the assets of Okon for
$1,050,000 in cash, a $300,000 note due to the seller and $13,919 in
acquisition costs. The $300,000 note accrues interest at 9%. Accrued
interest on the note is due on March 14, 1998. Commencing on April 1,
1998, the note is payable in monthly principal payments of $25,000 plus
interest until the note is paid in full. The acquisition of Okon is
recorded using the purchase method.
The purchase price for Okon is allocated as follows:
Inventories $ 83,878
Property and equipment 82,147
Excess of cost over net assets acquired 1,197,894
-----------
Total purchase price $ 1,363,919
===========
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Rentech, Inc.
<TABLE>
<CAPTION>
Pro Forma Consolidated Statement of Operations (Unaudited)
The Company Okon
Six Months Ended The Proforma Proforma Consolidated
March 31, 1997 Company Adjustments Okon Adjustments Proforma
<S> <C> <C> <C> <C> <C>
Revenues $ 109,817 $ 602,450 $712,267
Cost of sales 37,811 242,139 279,950
----------- ---------- ---------- -------- ----------
Gross profit 72,006 360,311 432,317
Operating expenses 620,910 331,153 45,479(3) 997,542
----------- ---------- ---------- -------- ----------
Income (loss) from
operations (548,904) 29,158 (45,479) (565,225)
Other income (expense) 1,371 (12,375)(4) 1,464 (9,540)
----------- ---------- ---------- -------- ----------
Net loss from continuing
operations (547,533) (12,375) 30,622 (45,479) (574,765)
Dividend requirements on
preferred stock 175,069 89,500(2) -0- 264,569
----------- ---------- ---------- -------- ----------
Loss applicable to
common stock $ (722,602) $ (101,875) $ 30,622 $(45,479) $ (839,334)
----------- ---------- ---------- -------- ----------
Net loss per common
share from continu-
ing operations $ (0.05) $ (0.05)
----------- ---------- ---------- -------- ----------
Weighted average number
of common shares
outstanding 15,552,092 15,552,092
----------- ---------- ---------- -------- ----------
</TABLE>
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
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<TABLE>
<CAPTION>
Rentech, Inc.
Pro Forma Consolidated Statement of Operations (Unaudited)
The Company Okon
Nine Months Ended The Proforma Proforma Consolidated
September 30, 1996 Company Adjustments Okon Adjustments Proforma
<S> <C> <C> <C> <C> <C>
Revenues $ 295,176 $ 1,290,380 $ 1,585,556
Cost of sales 29,463 485,196 514,659
---------- ----------- ----------- ----------- -----------
Gross profit 265,713 805,184 1,070,897
Operating expenses 819,512 614,444 68,218(3) 1,502,174
---------- ----------- --------- ----------- -----------
Income (loss) from
operations (553,799) 190,740 (68,218) (431,277)
Other income (expense) (39,113) (20,250)(4) (4,827) (64,190)
---------- ----------- ----------- ----------- -----------
Net loss from contin-
uing operations (592,912) (20,250) 185,913 (68,218) (495,467)
Dividend requirements
on preferred stock -0- 313,319(2) -0- 313,319
---------- ----------- ----------- ----------- -----------
Loss applicable to
common stock $ (592,912) $ (333,569) $ 185,913 $ (68,218) $ (808,786)
---------- ----------- ----------- ----------- -----------
Net loss per common
share from continuing
operations $ (0.06) $ (0.08)
---------- ----------- ----------- ----------- -----------
Weighted average number
of common shares
outstanding 10,401,922 10,401,922
</TABLE>
See accompanying headnote and notes to pro forma consolidated statements
(unaudited).
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Rentech, Inc.
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
1. Pro Forma Adjustments
The pro forma condensed consolidated statements of operations for the six
months ended March 31, 1997 and for the nine months ended September 30,
1996 assume the acquisition was consummated as of January 1, 1996 and
October 1, 1996 for the periods presented.
2. Dividends on Preferred Stock
Reflects the 15% dividend on the preferred stock. For the nine months
ended September 30, 1996, the Company recorded an additional $167,069
dividend associated with the conversion feature of the preferred stock.
The preferred stock is converted at a discount from the market value of
the Company's common stock.
3. Depreciation and Amortization
Reflects additional depreciation of property and equipment due to the
increase in cost in the assets acquired using the straight-line method.
The estimated useful lives of the assets range from 5 to 15 years.
Reflects amortization of cost in excess of assets acquired using the
straight-line method over 15 years.
4. Interest Expense
Reflects interest expense for the $300,000 note payable due to the
seller.
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Report of Independent Certified Public Accountants
Stockholders and Board of Directors
Rentech, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of OKON, Inc. (the
"Company") as of December 31, 1996 and the related statements of income,
stockholders' equity and cash flows for the years ended December 31, 1996
and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company
as of December 31, 1996 and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
Denver, Colorado
April 25, 1997
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<TABLE>
<CAPTION>
OKON, Inc.
Balance Sheet
December 31, 1996
<S> <C>
Assets
Current:
Cash and cash equivalents $ 652,979
Accounts receivable, net of no allowance for doubtful accounts (Note 4) 160,843
Inventories 75,667
Prepaid expenses and other current assets 3,812
----------
Total current assets 893,301
----------
Property and equipment, net of accumulated depreciation
of $203,252 (Note 1) 43,696
Other assets 8,000
----------
$ 944,997
==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 26,341
Accrued liabilities 90,252
Deposit of sale of assets (Note 5) 50,000
----------
Total current liabilities 166,593
----------
Commitments (Note 3)
Stockholders' equity
Common stock - $1 par value; 50,000 shares
authorized; 4,865 shares issued and outstanding 4,865
Additional paid-in capital 126,415
Retained earnings 647,124
----------
Total stockholders' equity 778,404
----------
$ 944,997
==========
See summary of accounting policies and notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OKON, Inc.
Statements of Income
Years Ended December 31, 1996 1995
- ------------------------ ---------- ----------
<S> <C> <C>
Net sales $1,657,396 $1,541,168
Cost of goods sold 631,492 645,510
---------- ----------
Gross profit 1,025,904 895,658
Operating expenses:
Selling expense 501,341 505,774
General and administrative expense 297,289 278,071
---------- ----------
Total operating expenses 798,630 783,845
Income from operations 227,274 111,813
Other income 17,572 19,158
---------- ----------
Net income $ 244,846 $ 130,971
========== ==========
</TABLE>
See summary of accounting policies and notes to financial statements.
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OKON, Inc.
<TABLE>
<CAPTION>
Statements of Stockholders' Equity
Years Ended December 31, 1995 and 1996
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
------ ------ ------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 4,865 $ 4,865 $ 126,415 $ 513,125
Distributions to stockholders (110,847)
Net income 130,971
---------
Balance, December 31, 1995 4,865 4,865 126,415 533,249
Distributions to stockholders (130,971)
Net income 244,846
=========
Balance, December 31, 1996 4,865 $ 4,865 $ 126,415 $ 647,124
</TABLE>
See summary of accounting policies and notes to financial statements.
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OKON, Inc.
<TABLE>
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
<S> <C> <C>
Years Ended December 31, 1996 1995
Operating activities:
Net income $ 244,846 $130,971
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,948 15,239
Changes in operating assets and liabilities:
Accounts receivable (27,168) (12,196)
Inventories 3,833 (16,119)
Prepaid expenses and other current assets 38,646 (32,153)
Accounts payable (5,873) 22,742
Accrued liabilities (37,435) 2,599
Accrued pension and profit sharing 3,180 (819)
--------- --------
Net cash provided by operating activities 229,977 110,264
Investing activity:
Purchase of equipment - (851)
Financing activities:
Deposit on sale of assets 50,000 -
Distributions to stockholders (130,971) (110,847)
--------- --------
Net cash used in financing activities (80,971) (110,847)
Increase (decrease) in cash and cash equivalents 149,006 (1,434)
Cash and cash equivalents, beginning of year 503,973 505,407
--------- --------
Cash and cash equivalents, end of year $ 652,979 $503,973
</TABLE>
See summary of accounting policies and notes to financial statements.
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OKON, Inc.
Summary of Accounting Policies
Basis of Presentation
OKON, Inc. (the "Company") was incorporated on January 1, 1986 in the
state of Colorado. The Company manufactures and distributes a full line
of water based sealers for the construction and agriculture industries
throughout the United States. The Company's product line continues to
expand with emphasis placed on environmental safety.
Cash Equivalents
The Company considers highly liquid debt instruments purchased with
original maturities of three months or less and money market accounts to
be cash equivalents.
Inventories
Inventories, which consist of water protection sealants, chemicals and
packaging supplies, are recorded at the lower of cost (first-in, first-out)
or market.
Property and Equipment
Property and equipment are stated at cost and depreciated using various
methods over the estimated useful lives of the assets, which range from 3
to 31.5 years. Maintenance and repairs are expensed as incurred. Major
renewals and improvements are capitalized. When equipment is 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.
Property and equipment are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the expected undiscounted future cash flow from the use
of the asset and its eventual disposition is less than the carrying
amount of the asset, an impairment loss is recognized and measured using
the asset's fair value.
Revenue Recognition
Revenues are recognized as income at the time the order is shipped.
Income Taxes
Effective January 1, 1987, the Company elected to be treated as an
S-corporation; accordingly, liabilities for income taxes are the
obligation of the individual stockholders and are not recorded in the
accompanying financial statements. The tax basis of the S-corporation's
assets and liabilities as of December 31, 1996 approximates the reported
amounts.
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OKON, Inc.
Summary of Accounting Policies
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable.
The Company's cash is in demand deposit accounts placed with federally
insured financial institutions. Such deposit accounts at times may
exceed federally insured limits. The Company's cash equivalents are
placed in securities backed by the United States government, and the
instruments are issued by high quality financial institutions. The
Company has not experienced any losses on such deposit accounts or
instruments.
Concentrations of credit risk with respect to accounts receivable are
higher due to a few customers dispersed across geographic areas.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosures of fair value
information about financial instruments. Fair value estimates discussed
herein are based upon certain market assumptions and pertinent
information available to management as of December 31, 1996.
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, cash equivalents, accounts receivable, accounts payable and
accrued liabilities. Fair values were assumed to approximate carrying
values for these financial instruments since they are short term in
nature and their carrying amounts approximate fair value or they are
receivable or payable on demand.
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OKON, Inc.
Notes to Financial Statements
<TABLE>
<CAPTION>
1. Property and Equipment
Property and equipment consist of the following as of December 31, 1996:
<S> <C>
Machinery and equipment $ 70,001
Furniture and fixtures 51,156
Automotive equipment 69,366
Building improvements 15,820
Mechanical equipment 40,605
---------
246,948
Accumulated depreciation (203,252)
---------
Total $ 43,696
=========
</TABLE>
2. Related Party Transactions
The Company leases their office building and factory space from the
president of the Company. During 1996 and 1995, the Company paid
approximately $24,000 in rent expense.
3. Commitments
Pension and Profit Sharing Plan
During 1985, the Company adopted a qualified money purchase pension and
profit sharing plan administered by a committee appointed by the
Company's board of directors for participants which include all employees
age 18 and over who have been employed by the Company for two years. The
money purchase pension plan calls for the Company's contribution of 6% of
each eligible participant's recognized compensation up to the integration
level for the plan year and 10.3% over the integration level for the plan
year. The profit sharing plan contributions are made at the discretion
of the Company for eligible participants. The combined money purchase
pension and profit sharing contributions cannot exceed 25% of all
eligible employees' wages, not to exceed $30,000 per participant. For
the years ended December 31, 1996 and 1995, the Company contributed
approximately $75,000 and $72,000 to the plans.
Operating Leases
The Company leases office and warehouse space and a vehicle under
noncancelable leases which expire through March 1999. The Company's
office and warehouse lease contains a renewal option for an additional
five years. Future minimum lease payments as of December 31, 1996 are as
follows:
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OKON, Inc.
Notes to Financial Statements
<TABLE>
<CAPTION>
Years ending December 31, Amount
<S> <C>
1997 $27,500
1998 24,000
1999 6,000
-------
Total $57,500
=======
</TABLE>
Total lease expense for the years ended December 31, 1996 and 1995 was
approximately $28,000.
4. Significant Customers
As of December 31, 1996, two customers represented approximately 41% of
trade accounts receivable. For the years ended December 31, 1996 and
1995, one customer accounted for approximately 41% and 43% of total
revenues.
5. Subsequent Event
During March 1997, the Company entered into an agreement with Rentech,
Inc. for the sale of substantially all of the Company's assets. The
purchase and sale agreement was effective March 14, 1997. Rentech also
entered into an agreement to lease the Company's facility from a former
stockholder.
