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 December 31, 1997
[ ] 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.
(Exact name of small business issuer as specified 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 December 31, 1997: common stock - 30,428,608.
Transitional Small Business Disclosure Format (Check one) :
Yes No X
<PAGE>
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RENTECH, INC.
FORM 10-QSB QUARTERLY REPORT
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1997
and September 30, 1997 . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three
months ended December 31, 1997 and December 31, 1996 . . 4
Condensed Consolidated Statement of Stockholders'
Equity for the three months ended December 31, 1997 . . 5
Consolidated Statements of Cash Flows for the three
months ended December 31, 1997 and December 31, 1996 . . 6
Notes to the Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None . . . . . . . . . . . . . . . . 13
Item 2. Change in Securities and Use of Proceeds . . . . . . . . 13
Item 3. Defaults Upon Senior Securities - None . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security
Holders - None . . . . . . . . . . . . . . . . . . . . . 14
Item 5. Other Information - None . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 14
(a) Exhibits - None
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
RENTECH, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1997 1997
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 314,514 $ 391,487
Accounts receivable 155,767 150,911
Inventories 107,934 107,151
Prepaid expenses and other current assets 48,012 52,688
---------- ----------
Total Current Assets 626,227 702,237
---------- ----------
Property and equipment, net of accumulated
depreciation of $139,629 and
$126,774 as of December 31, 1997
and September 30, 1997 respectively 170,074 172,863
---------- ----------
Other Assets
Licensed technology, net of accumulated
amortization of $1,001,394 and $944,208
as of December 31, 1997 and September 30,
1997 respectively 2,429,754 2,486,940
Goodwill, net of accumulated amortization
of $63,848 and $43,685 as of December 31,
1997 and September 30,1997 respectively 1,145,867 1,166,030
Synhytech plant held for sale 99,500 99,500
Accounts receivable 191,206 191,206
Deposits and other 38,233 38,428
---------- ----------
Total Other Assets 3,904,560 3,982,104
---------- ----------
Total Assets $4,700,861 $4,857,204
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 124,190 $ 130,201
Accrued liabilities 133,083 122,166
Convertible notes payable 620,500 560,500
Current portion of long-term debt 550,000 475,000
Note payable, related party 90,000 90,000
---------- ----------
Total Current Liabilities 1,517,773 1,377,867
---------- ----------
Long-term debt, net of current portion 50,000 125,000
---------- ----------
Commitments
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; 30,428,608 and 29,539,548
shares issued and outstanding 304,283 295,392
Additional paid-in capital 13,067,649 12,794,769
Accumulated deficit (10,238,844) (9,735,824)
---------- ----------
Total Stockholders' Equity 3,133,088 3,354,337
---------- ----------
Total Liabilities and Stockholders' Equity $4,700,861 $4,857,204
========== ==========
See notes to the consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
RENTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Net sales $ 402,167 $ -0-
---------- ----------
Total Revenue 402,167 -0-
COSTS OF SALES:
Cost of sales 172,300 -0-
---------- ----------
GROSS PROFIT 229,867 -0-
EXPENSES:
General and Administrative 569,822 195,324
Depreciation and Amortization 90,204 63,510
---------- ----------
Total Expenses 660,026 258,834
---------- ----------
LOSS FROM OPERATIONS (430,159) (258,834)
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 2,470 1,294
Interest expense (75,331) -0-
---------- ----------
Total Other Income (Expense) (72,861) (1,294)
---------- ----------
NET LOSS $ (503,020) $ (257,540)
========== ==========
Weighted average number
of shares outstanding 29,995,612 14,975,116
Per Share Loss
Basic and diluted $(0.02) $(0.02)
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
RENTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997(Unaudited)
Common Stock Additional
Par Paid-In Accumulated
Shares Value Capital Deficit
------ ----- ------- -------
<S> <C> <C> <C> <C>
Balances,
September 30, 1997 29,539,548 $295,392 $12,794,769 $ (9,735,824)
Common stock issued
for cash 829,060 8,291 227,859
Common stock issued
For interest expense on
Convertible notes payable 60,000 600 45,021
Net loss for the three
months ended
December 31, 1997 (503,020)
---------- -------- ----------- -------------
Balances, December 31, 1997
(unaudited) 30,428,608 $304,283 $13,067,649 $(10,238,844)
========== ======== =========== =============
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
RENTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1997 and 1996
(Unaudited)
1997 1996
---- ----
<S> <C> <C>
Operating Activities
Net Loss $(503,020) $(257,540)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 90,204 63,510
Interest paid with Common Stock 45,621 -0-
Changes in operating assets and liabilities:
(Increase) Decrease in restricted cash -0- 25,000
(Increase) Decrease in accounts receivables (4,856) -0-
(Increase) Decrease in inventories (783) -0-
(Increase) Decrease in property tax receivable -0- 71,813
(Increase) Decrease in prepaids and
other current assets 4,676 (152)
(Increase) Decrease in deposits and
other assets 195 -0-
Increase (Decrease) in accounts payable
and other accrued expenses 4,905 (38,242)
--------- ---------
Net Cash Used in Operating Activities: (363,058) (135,611)
--------- ---------
Investing Activities
Purchase of equipment (10,065) -0-
Investment in ITN -0- (25,000)
Investment in Okon -0- (50,000)
Receipts for deposits and other -0- 918
--------- ---------
Net Cash Used in Investing Activities: (10,065) (74,082)
--------- ---------
Financing Activities
Issuance of convertible notes payable 60,000 -0-
Issuance of common stock 236,150 -0-
Proceeds from stock subscription receivable -0- 50,000
--------- ---------
Net Cash Provided by Financing Activities 296,150 50,000
--------- ---------
Decrease in Cash and Cash Equivalents (76,973) (159,693)
Cash and Cash Equivalents,
Beginning of Period 391,487 210,486
--------- ---------
Cash and Cash Equivalents,
End of Period $ 314,514 $ 50,793
========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 7
RENTECH, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(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 September 30, 1997 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 December 31, 1997 are not necessarily indicative of the results
that may be expected for the full fiscal year ending September 30,
1998. 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 subsidiary, Okon, Inc.
("Okon"). All significant intercompany accounts and transactions have
been eliminated in consolidation. Okon, which was acquired in March
1997, is engaged in the business of manufacturing and selling
water-based stains sealers and coatings.
Inventories -Inventories which consist of water protection
sealants, chemicals and packaging supplies, are recorded at the lower of
cost (first-in, first-out) and market.
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.
Property and Equipment - Property and equipment is stated at cost
and depreciated and amortized using the straight-line method over the
estimated useful lives of the assets, which range from five to seven
years, except for leasehold improvements which are amortized over the
shorter of the useful life or the remaining lease term. 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 or amortization are removed from the accounts and the
resulting profit or loss is reflected in income.
Excess of Cost Over Net Assets Acquired - The excess of cost over
net assets acquired, which relate to the acquisition of Okon, is being
amortized over a 15 year period using the straight-line method.
<PAGE>
PAGE 8
Long-Lived Assets - Long-lived assets, identifiable intangibles,
and excess of costs over net assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable. If the expected 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 - 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.
Sales of water-based stains sealers and coatings are recognized
when the goods are shipped to the customers.
Research and Development Costs - Research and development costs are
charged to expense as incurred.
Net Income (Loss) Per Share - Statement of Financial Accounting
Standards No. 128 provides for the calculation of "Basic" and "Diluted"
earnings per share. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of shares outstanding during the period. Diluted
earning per share reflect the potential dilution of securities that could
share in the earnings of the Company, similar to fully diluted earnings
per share. Options and warrants are not considered in the computation of
diluted earnings per share as their inclusion would be antidilutive.
3. Subsequent Events
As of February 10, 1998, the Company has sold 200,000 shares of its
preferred stock at $10 per share. The net proceeds were approximately
$1,765,000. The preferred shares pay a dividend of 9% per year. The
preferred shares are convertible by the shareholders over 18 months into
common stock at the lesser of the average closing bid price of the common
stock for the five trading days preceding the sale of preferred shares,
or 82.5% of the average closing bid for the five days preceding
conversion of the preferred stock into common stock. The contractual
arrangements entitle the Company to sell up to an additional 800,000
shares on its preferred stock on these terms over a period of 18 months.
While any shares of preferred stock are still outstanding, no
dividend may be paid on the common stock unless the dividend on the
preferred stock has been paid and no shares of common stock may be
purchased or funds set aside for that purpose by the Company, except in
amounts of less than $100,000 per year.
<PAGE>
PAGE 9
4. Recent Accounting Pronouncements
In June 1997, FASB issued Statement of Financial Accounting
Standard No.130 "Reporting Comprehensive Income" ("SFAS 130") and
Statement of Financial Accounting Standard No.131 "Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 130
establishes standards for reporting and display of comprehensive, its
components and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from investments by
owners and distribution to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in
a financial statement that displays with the same prominence as other
financial statements. SFAS 131 supersedes Statement of Financial
Accounting Standard No. 14 "Financial Reporting for Segments of a
Business Enterprise." SFAS 131 establishes standards of the way the
public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
It also establishes standards for disclosure regarding products and
services, geographical areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and
in assessing performance.
SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Because of the recent
issuance of these standards, management has been unable to fully evaluate
the impact if any, the standards may have on future disclosures. Results
of operations and financial position, however, will be unaffected by the
implementation of these standards.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
For the three months ended December 31, 1997 and 1996, the Company
recorded losses of $503,020 and $257,540, respectively. The increase of
approximately 95% for 1997 is primarily due to increases of $374,498 in
general and administrative expenses, $26,694 in depreciation and
amortization, and $75,331 in interest expense, which includes a
non-cash interest charge of approximately $45,000 relating to discount on
convertible notes payable. These increases are partially offset by
$229,867 in gross profit from the operations of the Company's Okon
subsidiary which was acquired in March 1997.
Revenues of $402,167 were received during the three months ended
December 31,1997 as net sales of water-based paints sealers and coatings
by the Company's Okon subsidiary. The Company acquired Okon in March
1997. No revenues were received by the Company during the three months
ended December 31, 1996.
During the period ended December 31`,1997, cost of sales related to
water-based paints, sealers and coatings was $172,300 as compared to no
costs for the three months ended December 31,1996. This increase
reflects the purchase of Okon in March 1997.
<PAGE>
PAGE 10
Gross profit increased to $229,867 for the three month period
ended December 31, 1997 compared to a gross profit of zero for the three
month period ended December 31, 1996 because of the contribution of Okon
which was acquired in March 1997.
General and administrative expenses increased by 192% to $569,822
for the three month period ended December 31, 1997, compared to the same
period in 1996. This increase of $374,498 is due to approximately
$134,000 in expenses associated with Okon which were not included in the
prior interim period, increased costs associated with public relations
and increased salary and benefit costs.
Depreciation and amortization increased for the three month period
ended December 31, 1997 compared to the three months ended December
31,1996 primarily due to depreciation of Okon's equipment and
amortization of goodwill acquired when Okon was purchased in March 1997.
Loss from operations for the three month period ended December 31,
1997 was increased by 66% to a loss of $430,159 from the $258,834 loss
reported for the comparable three month period of 1996.
Interest income was higher during the first quarter of fiscal 1997
as compared to the same quarter of 1996 because of the Company's increase
in cash on hand.
Interest expense during the first quarter of fiscal 1997 was
$75,331 compared to zero during the 1996 period due to interest charges
relating to the addition of $1,310,500 in debt.
Liquidity and Capital Resources
At December 31, 1997, the Company had a working capital deficit of
$891,546 as compared to a deficit of $675,630 at September 30, 1997. The
$215,916 or 32% increase in the working capital deficit is due to the
addition of $60,000 in convertible notes payable and to the ongoing
losses from operations. $620,500 of the $1,260,500 in current portion of
long-term debt is convertible into the Company's common stock at the
Company's option if not converted by the shareholders by April 16,1998
and if the Company does not pay the debt in cash at that time.
To achieve its stated plan to grow, diversify and acquire new
businesses, the Company negotiated the placement of 200,000 shares of
Series 1998-A Preferred Stock at $10.00 per share together with warrants
to purchase 200,000 shares of Series 1998-B Preferred Stock and, at the
option of the Company, up to an additional 600,000 shares of Series B
Preferred Shares at $10.00 per share; or a commitment by the purchasers
of up to $10,000,000 in the preferred stock. As of February 10,1998 the
Company has sold 200,000 shares of its Series 1998-A Preferred Stock at
$10 per share. The net proceeds were approximately $1,765,000. The
Series 1998-A Preferred Stock pays a dividend of 9% per year and is
convertible over 18 months into common stock at the lesser of the average
closing bid price of the common stock for the five trading days preceding
the sale of the preferred shares, or 82.5% of the average closing bid for
the five trading days preceding the conversion of the preferred stock
into common stock. The warrants provide for the purchasers, during the
18 months after purchase of the Series 1998-A Preferred Stock, to
purchase, and the Company to sell, 200,000 shares of Series 1998-B
<PAGE>
PAGE 11
Preferred Stock for $2,000,000 and provide the Company during the same
period the option to sell to the purchasers an additional 600,000 shares
of Series 1998-B Preferred Stock at $10.00 per share. The Company has no
obligation to sell any of the 600,000 shares of the Series 1998-B
Preferred Stock to the purchasers. The Company does not have to sell any
of the 800,000 shares of Series 1998-B Preferred Stock to the purchasers
if certain conditions occur, primarily related to volume and the price of
the common stock in the market. The Company has no obligation to sell
any of the 800,000 shares of Series 1998-B Preferred Stock if the average
daily share price for the common stock for the 10 trading days prior to
the sale is less than $1.00 per share. The Series 1998-B Preferred Stock
pays a dividend of 9% per year and is convertible into common stock until
December 31, 1999 at 82.5% of the average closing bid for the five
trading days preceding the date of conversion.
The Company expects to realize income during the next 15 months
from its license granted for the plant at Arunachal Pradesh in India.
The Company expects to receive license fees in the amount of $240,000,
and additional fees for engineering services are expected though not yet
under contract. Income from royalties associated with the India plant
are not expected until after the completion of construction and startup
and operation of the plant. Construction is not expected to be completed
until the first part of 1999.
The Company is discussing other proposals made by several energy
companies, including Texaco Group, Inc. for exploitation of the Company's
gas-to-liquids technology through licenses or other business ventures.
No assurances can be made that these discussions will result in either
business ventures or revenues to the Company.
The Company has deferred tax assets with a 100% valuation allowance
at December 31,1997 and September 30, 1997. Management is not able to
determine if it is more likely than not that the deferred tax assets will
be realized.
The over-the-counter markets for securities such as the Company's
Common Stock historically have experienced extreme price and volume
fluctuations. These broad market fluctuations, variations in the
Company's results of operations, and other economic and industry trends
may adversely affect the market price of the Company's common stock.
Although the common stock is listed for quotation on the NASDAQ SmallCap
Market, there are no assurances that the common stock will meet the
minimum bid price of $1.00 or other listing requirements. Accordingly
there can be no assurance that the common stock will remain eligible for
quotation on the SmallCap Market. In the event of ineligibility and
delisting, the ability of shareholders to sell their stock and the value
of the stock would be adversely affected.
Analysis of Cash Flow
As discussed under "Results of Operations," the Company had net
losses during the first fiscal quarter of $503,020 in 1997 and $257,540
in 1996. The 1997 non-cash expenses include a $45,621 charge for
interest on convertible notes payable. The period ended December 31,1997
includes depreciation on Okon's property and equipment and amortization
of goodwill acquired when Okon was purchased in March 1997 which is not
included in the comparable prior period.
<PAGE>
PAGE 12
Operating assets and liabilities included no changes in restricted
cash for the 1997 period as compared to a $25,000 decrease in the 1996
period.
There was a $4,856 increase in accounts receivable during the first
quarter of 1997 compared to no change during the 1996 period.
The quarter ended December 31, 1997 reflects no change in property
tax receivable compared to a $71,813 decrease for the same 1996 period.
There was a $4,676 decrease in prepaids and other current assets during
the first quarter of 1997 compared to a $152 decrease during the 1996
period.
Accounts payable increased by $4,905 during the first fiscal
quarter compared to a $38,242 decrease for the 1996 period.
During the first quarter of fiscal 1997, $363,058 cash was used by
operating activities compared to a net cash usage of $135,611 for the
comparable quarter of 1996.
The Company purchased $10,065 in equipment during the first quarter
of fiscal 1997 compared to two investments totaling $75,000 during the
1995 period.
The Company financed a portion of its activities by net proceeds of
$60,000 from issuance of convertible notes payable and $236,150 from an
issuance of its common stock during the 1997 period compared to $50,000
received from stock subscription receivable during the first quarter of
fiscal 1996.
Cash decreased during the first quarter of fiscal 1997 by $76,973
compared to a decrease of $159,693 for the comparable quarter of 1996.
These changes decreased the ending cash balance to $314,514 at December
31, 1997 from $391,487 at September 30, 1997. The 1996 changes decreased
the $210,486 September 30, 1996 balance to $50,793 at December 31, 1996.
Recent Accounting Pronouncements
In June 1997, FASB issued Statement of Financial Accounting
Standard No.130 "Reporting Comprehensive Income" ("SFAS 130") and
Statement of Financial Accounting Standard No.131 "Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 130
establishes standards for reporting and display of comprehensive, its
components and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from investments by
owners and distribution to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in
a financial statement that displays with the same prominence as other
financial statements. SFAS 131 supersedes Statement of Financial
Accounting Standard No. 14 "Financial Reporting for Segments of a
Business Enterprise." SFAS 131 establishes standards of the way the
public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
It also establishes standards for disclosure regarding products and
services, geographical areas and major customers. SFAS 131 defines
<PAGE>
PAGE 13
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and
in assessing performance.
SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Because of the recent
issuance of these standards, management has been unable to fully evaluate
the impact if any, the standards may have on future disclosures. Results
of operations and financial position, however, will be unaffected by the
implementation of these standards.
Year 2000
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the "Year 2000"
issue and is developing an implementation plan to resolve the issue. The
Year 2000 problem is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a major system failure or miscalculations. The Company believes that,
by converting to new software, the Year 2000 problem will not pose
significant operational problems for the Company's computer systems as so
converted. If the Company uses any time-sensitive software in material
operations (and management believes it does not), the Year 2000 problem
could have a material adverse impact on the operations of the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Change in Securities and Use of Proceeds.
The following table shows information concerning all sales of the
Company's equity securities sold by the Company during the period covered
by this report that were not registered under the Securities Act of
1933, as amended.
<TABLE>
<CAPTION>
Total Exemptions
Date Securities Securities Offering Total Class of From
of Sale Sold Sold Price Commissions Purchasers Registration
- ----------- ---------- ---------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Oct 17,1997 Promissory 26 $620,000 63,050 Accredited Rules 505,506,
Notes Investors Section 4(6)
convertible
into common
stock
</TABLE>
<PAGE>
PAGE 14
The promissory notes in the original principal balance of $620,500 are
convertible into shares of Common Stock at $.33 per share until April 16,
1998. If not converted by the note holders by then, and if the Company
does not pay the note in cash at that time, the note holders may convert
their notes into Common Stock at 70% of the average closing bid price for
the 5 days prior to conversion, not to exceed $.33 a share. The
placement agent was Neidiger/Tucker/Bruner, Inc., Denver, Colorado. In
addition to the placement fees paid in cash, the placement agent received
a warrant, exercisable for 5 years, to purchase the Company's convertible
promissory note in the amount of $58,500. The note is convertible, for
180 days from exercise of the warrant, at the same price and conversion
terms as the other notes issued in the private placement.
While any shares of preferred stock are still outstanding, no
dividends may be paid on the common stock unless dividends on the
preferred stock have been paid, and no shares of common stock may be
purchased or funds set aside for that purpose by the Company except in
amounts of less than $100,000 per year.
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
<PAGE>
PAGE 15
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: February 13, 1998 By: (signature)
--------------------------------
Dennis L. Yakobson, President
Dated: February 13, 1998 By: (signature)
--------------------------------
James P. Samuels,
Vice President-Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Financial Condition at December 31,
1997 (Unaudited) and the Condensed Consolidated Statement of Income for
the Three Months Ended December 31, 1997 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Oct-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 314,514
<SECURITIES> 0
<RECEIVABLES> 155,767
<ALLOWANCES> (2,000)
<INVENTORY> 107,934
<CURRENT-ASSETS> 626,227
<PP&E> 170,074
<DEPRECIATION> (139,629)
<TOTAL-ASSETS> 4,700,861
<CURRENT-LIABILITIES> 1,517,773
<BONDS> 0
<COMMON> 304,283
0
0
<OTHER-SE> 2,828,805
<TOTAL-LIABILITY-AND-EQUITY> 4,700,861
<SALES> 402,167
<TOTAL-REVENUES> 402,167
<CGS> 172,300
<TOTAL-COSTS> 172,300
<OTHER-EXPENSES> 660,026
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,331
<INCOME-PRETAX> (503,020)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (503,020)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
