FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 33-46104-FW
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THERMOENERGY CORPORATION
------------------------
(EXACT NAME OF REGISTRATION AS SPECIFIED IN ITS CHARTER)
Arkansas 71-00659511
--------------------------------- ----------------------
(State or other jurisdiction of (I.R.S.Employer
of incorporation or organization) Identification Number)
323 Center Street, Suite 1300, Little Rock, Arkansas 72201
-----------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(501) 376-6477
----------------------------------------------------
(Registrant's telephone number, including area code)
Innotek Corporation
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
3,157,372 shares of Common Stock, par value $.001 per share
<PAGE>
THERMOENERGY CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements are included herein:
Balance Sheets - June 30, 1997 (Unaudited) and September
30, 1996.
Statements of Operations - Cumulative During Development Stage
Through June 30, 1997 (Unaudited), Nine Months Ended June 30,
1997 and 1996 and Three Months Ended June 30, 1997 and 1996
(Unaudited).
Statements of Changes in Stockholders' Equity (Deficit) -
Periods Ended September 30, 1988 through September 30, 1996
and Nine Months ended June 30, 1997 (Unaudited).
Statements of Cash Flows - Cumulative During Development Stage
Through June 30, 1997 (Unaudited) and Nine Months Ended
June 30, 1997 and 1996 (Unaudited).
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash 50,117 62,333
Deferred public offering expenses (Note 3) 126,432
-------- --------
Total Current Assets 176,549 62,333
Advances to officers 223,365 96,200
Accrued interest receivable - officers 18,499 9,138
Property and equipment, at cost:
Equipment 14,818 14,818
Furniture and fixtures 4,991 4,991
Less accumulated depreciation (15,344) (14,147)
-------- --------
4,465 5,662
-------- --------
422,878 173,333
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable 454,792 360,288
Accrued expenses:
Salaries 522,444 364,314
Consulting Fee 100,000 100,000
Other 170,464 92,513
-------- --------
792,908 556,827
Deferred compensation 229,030 215,460
Notes payable to stockholders (Note 2) 1,341,000 735,000
--------- ---------
Total Current Liabilities 2,817,730 1,867,575
--------- ---------
Stockholders' equity (deficit)(Note 3):
Preferred stock, non-voting,
$1 par value:
Authorized - 10,000,000 shares;
none issued
Common Stock, $.001 par value:
Series A Common Stock;
Authorized - 10,000,000 shares;
no shares issued and outstanding
Series B Common Stock;
Authorized - 65,000,000 shares;
issued - 3,241,201 shares;
outstanding - 3,157,372 shares 3,241 3,241
Additional paid-in capital 3,843,918 3,843,918
Deficit accumulated during
the development stage (6,242,011) (5,541,401)
----------- -----------
(2,394,852) (1,694,242)
----------- -----------
422,878 173,333
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
During
Development Nine Months Three Months
Stage Ended Ended
Through June 30, June 30,
June 30,
1997 1997 1996 1997 1996
----------- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Operating Expenses 4,603,585 519,753 300,533 125,596 78,619
General and Admin-
istrative Payments
under licenses 627,266
Travel and entertainment 883,315 132,645 60,988 32,762 18,174
--------- -------- -------- -------- --------
6,114,166 652,398 361,521 158,358 96,793
--------- -------- -------- -------- --------
Loss From Operations (6,114,166) (652,398) (361,521)(158,358) (96,793)
----------- --------- ------------------ --------
Other Income (Expense)
Interest Income 70,146 9,361 4,961 4,036 1,834
Interest Expense (197,991) (57,573) (26,273) (25,224) (8,796)
---------- --------- --------- -------- -------
(127,845) (48,212) (21,312) (21,188) (6,962)
---------- --------- --------- -------- -------
Net Loss (6,242,011) (700,610) (382,833)(179,546)(103,755)
=========== ======== ========= ======== ========
Per Common Share
(Notes 3 and 4)
Loss From Operations (1.65) (0.17) (0.10) (0.04) (0.03)
Net Loss (1.68) (0.18) (0.10) (0.05) (0.03)
</TABLE>
See notes top financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development State Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Periods Ended September 30, 1988 Through September 30, 1996 and the
Nine Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-In Development
Stock Capital Stage Total
------- ------------ ------------ -----
<S> <C> <C> <C> <C>
Issuance of stock,
January 1988:
(2,205,762 shares
at $.08 per share) $ 2,206 $ 178,094 $ $ 180,300
Net Loss (290,483) (290,483)
-------- ---------- ------------ ----------
Balance (deficit),
September 30, 1988 2,206 178,094 (290,483) (110,183)
Conversion of $412,000
of debentures
and accrued interest,
September 1989
(306,335 shares) 306 456,695 457,001
Net loss (338,985) (338,985)
-------- ---------- --------- ---------
Balance (deficit),
September 30, 1989 2,512 634,789 (629,468) 7,833
Net loss (255,036) (255,036)
-------- ---------- --------- ---------
Balance (deficit),
September 30, 1990 2,512 634,789 (884,504) (247,203)
Conversion of $63,000
of unsecured debentures
and accrued interest
at 10%,March 1991
44,286 shares) 44 70,813 70,857
Issuance of stock,
May-June 1991,
( 387,880 shares:
366,630 at $1.60
per share;
21,250 shares
at $.80 per share: 388 603,219 603,607
Issuance of stock
for interest,
June 1991, (1,375 shares
at $1.60 per share) 1 2,199 2,200
</TABLE>
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Periods Ended September 30, 1988 Through September 30, 1996 and the
Nine Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-In Development
Stock Capital Stage Total
------- ------------ ------------ -------
<S> <C> <C> <C> <C>
Issuance of stock
for expenses incurred
by stockholders,
July 1991
(5,081 shares at
$1.60 per share) $ 5 $ 8,124 $ $ 8,129
Net Loss (670,179) (670,179)
------- ---------- ------------ -----------
Balance (deficit),
September 30,1991 2,950 1,319,144 (1,554,683) (232,589)
Issuance of stock,
October-December 1991
(150,925 shares at
$1.60 per share) 151 241,329 241,480
Shares purchased
in rescission offer
(10,562 shares) (11) (16,888) (16,899)
Issuance of stock,
public offering,
August-September 1992
(344 shares at $16.00
per share) 1 5,499 5,500
Net loss (562,751) (562,751)
------- --------- --------- ---------
Balance (deficit),
September 30,1992 3,091 1,549,084 (2,117,434) (565,259)
Issuance of stock,
public offering
October 1992 -
September 1993
(92,785 shares
at $16.00 per share) 93 1,484,457 1,484,550
Issuance of stock
for exercise of
stock options, May 1993
(2,500 shares at
$16.00 per share) 3 3,997 4,000
</TABLE>
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) CONTINUED
Periods Ended September 30, 1988 Through September 30, 1996 and the
Nine Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid in Development
Stock Capital Stage Total
------ --------- ----------- ------
<S> <C> <C> <C> <C>
Issuance of warrants to
stockholder $ $ 6,333 $ $ 6,333
Conversion of $103,000 of
notes payable to stockholders
and accrued interest,
December 1992 (6,438 shares) 6 102,994 103,000
Issuance of stock for
consulting services, June
1993 (9,375 shares at
$16.00 per share) 9 149,991 150,000
Net loss (1,207,921) (1,207,921)
------- --------- ------------ -----------
Balance (deficit),
September 30,1993 3,202 3,296,856 (3,325,355) (25,297)
Issuance of warrants to
stockholders 226,000 226,000
Issuance of stock
for exercise of stock
options, March 1994
(3,750 shares at
$1.60 per share) 4 5,996 6,000
Issuance of stock
for exercise of warrants
by stockholder,
August 1994
(3,667 shares at
$13.60 per share) 4 49,997 50,001
Net loss (767,427) (767,427)
------- --------- ---------- ----------
Balance (deficit),
September 30, 1994 3,210 3,578,849 (4,092,782) (510,723)
</TABLE>
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) CONTINUED
Periods Ended September 30, 1988 Through September 30, 1996 and the
Nine Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
------- ---------- ----------- -----
<S> <C> <C> <C> <C>
Issuance of warrants
to stockholder $ $ 9,760 $ $ 9,760
Issuance of stock,
May 1995 (6,250 shares
at $8.00 per share) 6 49,994 50,000
Issuance of stock for
exercise of warrants by
stockholder, June 1995
(6,250 shares at $8.00
per share) 6 49,994 50,000
Issuance of stock for
expenses, July 1995
(18,750 shares at
$8.00 per share) 19 149,981 150,000
----- ------- -------- --------
Net loss (896,998) (896,998)
Balance (deficit),
September 30, 1995 3,241 3,838,578 (4,989,780) (1,147,961)
Issuance of warrants to
stockholders 5,340 5,340
Net loss (551,621) (551,621)
------- ----------- ----------- -----------
Balance (deficit),
September 30, 1996 3,241 3,843,918 (5,541,401) (1,694,242)
Net loss (700,610) (700,610)
------- ----------- ----------- -----------
Balance (deficit),
June 30, 1997
(Unaudited) $3,241 $3,843,918 $(6,242,011) $(2,394,852)
======= ========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
Development Nine Months
Stage Through Ended June 30
June 30, 1997 1997 1996
-------------- ---- ----
(Unaudited)
<S> <C> <C> <C>
Operating Activities:
Net loss $(6,242,011) $(700,610) $(382,833)
Items not requiring
(providing) cash:
Depreciation 15,344 1,197 2,373
Expenses funded by Common
Stock issuance 543,187
Other 3,341
Changes in:
Advances to officers (422,348) (127,165) (28,000)
Other assets (144,931) (135,793) (4,961)
Accounts payable 454,792 94,504 58,214
Accrued expenses 792,908 236,081 151,195
Deferred compensation 428,012 13,570 12,261
------------ ---------- ----------
Net cash used in
operating activities (4,571,706) (618,216) (191,751)
------------ ---------- ----------
Investing activities:
Purchase of fixed assets (19,808)
Other (3,341)
------------ ---------- ----------
Net cash used in
investing activities (23,149)
------------ ---------- ----------
Financing activities:
Proceeds from issuance of
Common Stock and warrants 2,620,562 1,800
Proceeds from notes payable 1,595,609 606,000 88,200
Proceeds from convertible debentures 475,000
Payments on notes payable (154,609)
Other 108,410 65,000
------------ ---------- -----------
Net cash provided by
financing activities 4,644,972 606,000 155,000
------------ ---------- -----------
Increase (decrease) in cash 50,117 (12,216) (36,751)
Cash, beginning of period 0 62,333 52,524
------------ ---------- -----------
Cash, end of period $ 50,117 $ 50,117 $ 15,773
=========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
UNAUDITED
NOTE 1: FINANCIAL STATEMENTS
The balance sheet as of June 30, 1997, the statements of
operations and cash flows cumulative during development stage
through June 30, 1997, the statements of operations for the nine
months and three months ended June 30, 1997 and 1996 and the
statements of changes in stockholders' equity (deficit) and cash
flows for the nine months ended June 30, 1997, have been prepared
by Thermoenergy Corporation (the "Company"), formerly Innotek
Corporation, without audit. In the opinion of management, all
adjustments (consisting only of normal recurring items) necessary
to present fairly the financial position, results of operations
and cash flows at June 30, 1997 and for all periods presented
have been made. Operating results for the nine months ended June
30, 1997 are not necessarily indicative of the results that may
be expected for the entire year ending September 30, 1997.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted in accordance
wit Article 10 of Regulation S-X. These financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's September 30, 1996 Form
10-K.
NOTE 2: NOTES PAYABLE TO STOCKHOLDERS
As of September 30, 1996 notes payable to stockholders
aggregating $735,000 were outstanding. The unsecured notes
mature four years from the date of issuance with interest at a
rate of 6.63%. The notes provide that the principal balances and
accrued interest will become immediately due and payable at the
closing of the next public offering of securities of the Company
should that event occur prior to the stated maturity date. In
addition, if the Company obtains financing from a third party on
terms more favorable to the third party than the terms of the
notes to the stockholders, the Company and the stockholders may
agree to modify the notes to the stockholders to reflect such m
ore favorable terms. The notes payable have been classified as
current liabilities since management anticipates that they will
be paid off within one year.
In December 1996, the Board of Directors authorized the Company
to borrow from stockholders up to $500,000 to fund operations
through the completion of a proposed public offering (see Note
3). The terms of the unsecured notes provided for maturities six
months from the date of execution or the closing of the proposed
public offering, whichever was sooner, with interest at a rate of
10%. The maturity dates of the $500,000 of outstanding notes
payable were extended to December 1997 and the Board of Directors
authorized an additional $200,000 of such notes during the
quarter ended June 30, 1997. A total of $106,000 of such notes
were issued during the quarter ended June 30, 1997. The notes
also provide for the issuance of shares of Series B Common Stock
(see Note 3), to the holders of the notes, in the ratio of one
share for each $10 loan to the Company, within six months from
the date of execution of the notes or extensions thereof or the
closing of the proposed public offering, whichever is sooner.
<PAGE>
As of June 30, 1997, the Company had executed notes payable to
stockholders under this arrangement in the aggregate amount of
$606,000. The Company is committed to issue 60,600 shares of
Series B Common Stock to the holders of the notes.
NOTE 3: COMMON STOCK
On October 23, 1996, the Board of Directors of the Company
approved the execution of a nonbinding letter of intent with a
NASD member-broker-dealer to act as managing underwriter in
connection with a proposed public offering. The letter of intent
provided for the underwriting on a firm commitment basis of
approximately 1,600,000 shares of Series A Common Stock (as
described more fully below) and 1,600,000 warrants redeemable for
Series A Common Stock, based upon no more than 3,500,000 shares
of Common Stock and 1,600,000 warrants convertible to Common
Stock outstanding immediately prior to closing.
In order to comply with the pre-conditions set forth in the
letter of intent, the Board of Directors approved a resolution
for a four-to-one reverse stock split of the Company's Common
Stock in addition to the four-to-one reverse stock split approved
by stockholders in 1994. The Board of Directors also approved
amendments to the Company's Articles of Incorporation as follows:
(1) To authorize the designation of 10,000,000 shares as Series A
Common Stock and 65,000,000 shares as Series B Common Stock,
which are convertible to Series A Common Stock commencing 12
months after the effective date of a registration statement for
the proposed offering subject to certain conditions, from the
75,000,000 shares of $0.001 par value Common Stock authorized
originally under the Company's Articles of Incorporation; (2) To
authorize the designation of and reclassification of all shares
of Common Stock issued prior to the adoption of the proposed
amendments to the Articles of Incorporation to Series B Common
Stock; and (3) To change the name of the Company from Innotek
Corporation to Thermoenergy Corporation. Stockholders' approval
of these matters was obtained on December 12, 1996 during a
special stockholders' meeting.
During May 1997, the Company and the managing underwriter
terminated the nonbinding letter of intent regarding the
Company's proposed public offering. Negotiations with the
underwriter resulted in the structure for the proposed public
offering described more fully in Note 7. As of June 30, 1997,
public offering expenses aggregating $126,432 have been deferred
and will be charged against the gross proceeds of the public
offering.
The two reverse stock splits described above were implemented
during the quarter ended March 31, 1997. All numbers of common
stock shares and per share data have been restated to reflect the
reverse stock splits.
During 1997, the Board of Directors approved a Stock Option Plan
which provides for incentive and non-incentive stock options for
an aggregate of 750,000 shares of Series B Common Stock for key
employees and non-employee Directors of the Company.
Implementation of the Plan is subject to approval by
stockholders.
NOTE 4: LOSS PER COMMON SHARE
Loss per common share is computed by dividing the net loss for
the period by weighted average number of shares outstanding
during the period, after giving effect to the reverse stock
splits described in Note 3. Stock options and warrants issued
within twelve months of the initial public offering filing date
(February 27, 1992) have been treated as outstanding for all
periods presented.
The weighted average number of common shares used in the loss per
share computations were 3,706,693 shares for the period
cumulative since inception through June 30, 1997, and 3,799,555
shares for the nine month and three month periods ended June 30,
1997 and 1996.
NOTE 5: MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
The Company has incurred net losses since inception.
Additionally, substantial capital will likely be required to
commercialize the Company's technologies. The financial
statements have been prepared assuming the Company will continue
as a going concern, realizing assets and liquidating liabilities
in the ordinary course of business and do not reflect any
adjustments that might result from the outcome of the
aforementioned uncertainties. Management is considering several
alternatives for mitigating these conditions, including the sale
of stock pursuant to a public offering (see Notes 3 and 7) and
fees from projects involving the Company's technologies.
The Company plans to use the net proceeds from the public
offering to satisfy the cash requirements for its operations for
the next eighteen months. Additional funds may be necessary in
the event the Company takes on other projects or makes an
acquisition of another company to facilitate the Company's
commercial demonstration of the Technologies. During the next
twelve months, the Company expects to add two executives to
senior management, seven engineering, technical and sales
positions and three clerical positions.
In the event that the public offering is not completed,
management would continue to raise capital through private
placement financings, sales of warrants and common stock. If the
Company is unable to enter into commercially attractive
collaborative working arrangements for one or more commercial or
industrial projects, the Company may sub-license the Technologies
to third parties.
The overall goal of the Company is to successfully complete a
demonstration project for STORS and/or NitRem. Management plans
to utilize any demonstration facilities to expand the visibility
of the Company in municipal, industrial, Department of Defense
and Department of Energy markets. A successful demonstration
project is the single most important business factor in
implementation of the Company's plan of operations.
Management has determined that the financial success of the
Company may be largely dependent upon the ability and financial
resources of established third parties collaborating with the
Company with respect to projects involving the Technologies. The
Company has entered into marketing agreements with third parties
in order to pursue this business strategy.
NOTE 6: EXECUTIVE BONUS PLAN
In January 1997, the Company's Board of Directors established a
five-year Executive Bonus Plan (the "Bonus Plan") to reward
executive officers and other key employees based upon the Company
achieving certain performance levels. Under the Bonus Plan,
commencing with the Company's 1997 fiscal year and for each of
the four fiscal years thereafter, the Company will have
discretion to award bonuses in an aggregate amount in each fiscal
year equal to 1% of the Company's net sales revenues for each
fiscal year, provided and on condition that the Company achieves
a net profit before taxes of not less than 5% of net sales but
less than 15% of net sales. The Board of Directors approved
bonus payment percentages for certain individuals for fiscal
1997. In the future, the Compensation Committee of the Board of
Directors of the Company will determine the allocable amounts or
percentages of the bonus pool which may be paid annually to
participants.
NOTE 7: SUBSEQUENT EVENT
During July 1997, the Company and the managing underwriter
discussed in Note 3, executed a nonbinding letter of intent
revising the proposed public offering. The letter of intent
provides for the underwriting on a firm commitment basis of
1,100,000 units consisting of one share of Series A Common Stock,
one Series 1 Common Stock Warrant exercisable within 48 months at
120% of the offering price and callable at 200% of the offering
price, and one Series 2 Common Stock Warrant exercisable within
48 months at 200% of the offering price and callable at 300% of
the offering price.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
ThermoEnergy Corporation ("Company") is a development stage
company involved in the marketing and development of certain
environmental technologies primarily used for solving waste water
problems. These technologies include two chemical processes known
as the Sludge-To-Oil Reactor System (STORS[TM]) and Nitrogen
Removal (NitRem[TM]). The third technology, a dual-shell
pressure balance vessel, known as the Dual-Shell Reactor[TM]
("DSR"), is the unique reactor equipment in which the STORS and
NitRem chemistries are conducted (STORS, NitRem and DSR are
referred to collectively as the "Technologies"). The Company's
application of STORS and NitRem through the use of a STORS-DSR,
NitRem-DSR, or a combination of both types of equipment, are
designed to eliminate damaging organic and nitrogenous
contaminants, respectively, from municipal and industrial waste
streams.
The Company is the exclusive worldwide licensee for the
Technologies (except for STORS in Japan) which were developed by
Battelle Memorial Institute ("Battelle"), an independent research
and development organization. The Company intends to sell
equipment (i.e. STORS-DSR or NitRem-DSR) and services to
government and industrial users, sublicense the Technologies to
industrial users or third parties, or build, own and operate
municipal and/or industrial waste water treatment facilities.
The Company's business strategy is based upon entering into
collaborative working relationships with established engineering
and environmental companies, or formal joint venture agreements
relative to the application of the technologies for specified
industries or markets. The Company is currently negotiating
project-specific working arrangements with Foster Wheeler
Environmental Corporation. The Company also has joint marketing
arrangements with Roy F. Weston, Inc., Dan Cowart, Inc., and
Mitsui & Co. (U.S.A.), Inc. and plans to enter project specific
working arrangements when such projects are identified and
funding is obtained. The Company has not generated any operating
revenues or any profits. The Company currently has two projects
to demonstrate the Technologies: a nitrogen removal test facility
in New York City and a demonstration project to evaluate nitrogen
removal at the TRIES project to be delivered to the Radford Army
Ammunition Plant in Radford, Virginia. In addition, the Company
is in the process of negotiating a STORS demonstration facility
for the San Bernardino Valley Water District. The Company will
not be required to make capital contributions to any such
projects and the Company will not receive any revenues or
earnings from these demonstration projects. The Company will be
reimbursed for administrative and operating costs from the two
demonstration projects underway and is negotiating similar
arrangements for the third demonstration project.
Since its formation in 1988, the Company has devoted
substantially all of its resources to funding the payments due
under license agreements, searching for opportunities to employ
its technologies in demonstration facilities and seeking capital
necessary to sustain the Company's efforts. After a
demonstration unit has been successfully operated and the
Technologies have been proven commercially viable, the Company
may still require additional investment capital and/or debt
financing to continue its operations.
Plan of Operations
- ------------------
The Company plans to use the net proceeds from the proposed
public offering to satisfy the cash requirements for its
operations for the next eighteen months. Additional funds may be
necessary in the event the Company takes on other projects or
makes an acquisition of another company to facilitate the
Company's commercial demonstration of its technologies.
Over the next twelve months, the Company expects to add the
following personnel: (i) two executives to senior management;
(ii) seven engineering, technical and sales positions; and (iii)
three clerical positions.
The overall goal of the Company is to successfully complete
a demonstration project for STORS and/or NitRem through all of
the projects and strategic working arrangements discussed above.
Management plans to utilize these demonstration facilities to
expand the visibility of the Company in the municipal,
industrial, Department of Defense and Department of Energy
markets. A successful demonstration project is the single most
important business factor in the implementation of the Company's
plan of operation.
The Company anticipates that the Offering will enable the
Company to complete the Radford Army Ammunition Plant and the New
York City demonstration projects. The Company believes that such
projects, if successful, will allow the Company to generate
income through the commercialization of the Technologies.
Results of Operations
- ---------------------
For the nine months ended June 30, 1997, the Company
incurred a net loss of $700,610 as compared to $382,833 for the
nine months ended June 30, 1996.
General and administrative expenses and travel expenses
increased during the period ended June 30, 1997 compared to June
30, 1996 due to the Company's efforts in pursuing equity capital
and selected projects. Interest expense also increased between
the same two periods due to the increase in notes payable to
stockholders.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended June 30, 1997, the Company used
$618,216 of cash in operations compared to $191,751 during the
same period in 1996.
During the nine months ended June 30, 1997, the Company met
its liquidity needs primarily from borrowings from stockholders
(see Note 2 of Notes to Financial Statements).
Management plans to meet the Company's liquidity needs
during the year ending September 30, 1997 with proceeds from the
sale of additional stock through the proposed public offering.
Management plans to meet long-term liquidity needs primarily
from revenues derived from commercial contracts the Company hopes
to obtain subsequent to successful demonstrations of its
Technologies, such as the Radford NitRem, New York City NitRem
and San Bernardino STORS demonstration projects.
The Company believes that the net proceeds from this
Offering will be sufficient to meet its cash, operation and
liquidity requirements for a minimum of 18 months.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party
to any pending legal proceedings, nor are any legal proceedings
pending of which any of the Company's property is the subject.
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Report on Form 8-K
(a) None.
(b) No reports on Form 8-K have been filed during
the quarter ending June 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of
1934, the registrant has duly caused this amendment report to be
signed on its behalf of the undersigned, thereunto duly
authorized.
Date: July 25, 1997
THERMOENERGY CORPORATION
BY: /s/ P. L. Montesi
--------------------------------
P. L. MONTESI
President, Treasurer and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THERMOENERGY CORPORATION FOR THE QUARTER ENDED JUNE 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000884504
<NAME> THERMOENERGY CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 50,117
<SECURITIES> 0
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<CURRENT-ASSETS> 176,549
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0
0
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