FORM 10-Q/A
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 MARCH 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 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 (gives
effect to the two, four-to-one reverse stock splits approved by
stockholders on March 2, 1994 and December 12, 1996).
<PAGE>
THERMOENERGY CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements are included herein:
Balance Sheets - March 31, 1997 (Unaudited) and September
30, 1996.
Statements of Operations - Cumulative During Development Stage
Through March 31, 1997 (Unaudited), Six Months Ended March 31,
1997 and 1996 and Three Months Ended March 31, 1997 and 1996
(Unaudited).
Statements of Changes in Stockholders' Equity (Deficit) -
Periods Ended September 30, 1988 through September 30, 1996
and Three Months ended March 31, 1997 (Unaudited).
Statements of Cash Flows - Cumulative During Development Stage
Through March 31, 1997 (Unaudited) and Six Months Ended
March 31, 1997 and 1996 (Unaudited).
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
--------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash - Total Current Assets $ 112,796 $ 62,333
Advances to officers 167,700 96,200
Accrued interest receivable - officers 14,463 9,138
Property and equipment, at cost:
Equipment 14,818 14,818
Furniture and fixtures 4,991 4,991
Less accumulated depreciation (14,944) (14,147)
---------- ----------
4,865 5,662
---------- ----------
$ 299,824 $ 173,333
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 340,742 $ 360,288
Accrued expenses:
Salaries 469,734 364,314
Consulting fee 100,000 100,000
Other 145,240 92,513
---------- ----------
714,974 556,827
Deferred compensation 224,414 215,460
Notes payable to stockholders
(Note 2) 1,235,000 735,000
---------- ----------
Total Current Liabilities 2,515,130 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 (6,062,465) (5,541,401)
---------- ----------
(2,215,306) (1,694,242)
---------- ----------
$ 299,824 $ 173,333
========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
During
Development Six Months Ended Three Months Ended
Stage Through March 31, March 31,
March 31, 1997 1997 1996 1997 1996
-------------- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating expenses:
General and
administrative $ 4,477,989 $ 394,157 $ 221,914 $ 217,949 $ 90,371
Payments under
licenses 627,266
Travel and
entertainment 850,553 99,883 42,814 65,081 24,037
---------- -------- -------- -------- --------
5,955,808 494,040 264,728 283,030 114,408
---------- -------- -------- -------- --------
Loss From
Operations (5,955,808) (494,040) (264,728) (283,030) (114,408)
---------- -------- -------- -------- --------
Other Income
(Expense)
Interest income 66,110 5,325 3,127 3,012 1,630
Interest expense (172,767) (32,349) (17,477) (19,262) (8,772)
---------- -------- -------- -------- --------
(106,657) (27,024) (14,350) (16,250) (7,142)
---------- -------- -------- -------- --------
Net Loss $(6,062,465) $(521,064) $(279,078) $(299,280) $(121,550)
========== ======== ======== ======== ========
Per Common Share
(Notes 3 and 4)
Loss from
operations $ (1.61) $ (0.13) $ (0.07) $ (0.07) $ (0.03)
Net loss $ (1.64) $ (0.14) $ (0.07) $ (0.08) $ (0.03)
</TABLE>
See notes to financial statements.
<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 Six Months Ended March 31, 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) CONTINUED
Periods Ended September 30, 1988 Through September 30,
1996 and the Six Months Ended March 31, 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 $1.60 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 Six Months Ended March 31, 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 stock-
holders 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 (3,677 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 Six Months Ended March 31, 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
stockholders $ $ 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) (Note 7) 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 (521,064) (521,064)
------ --------- ---------- ----------
Balance (deficit),
March 31, 1997
(Unaudited) $3,241 $3,843,918 $(6,062,465) $(2,215,306)
====== ========= ========== ==========
</TABLE>
See notes to financial statements
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
Development Six Months Ended
Stage Through March 31,
March 31, 1997 1997 1996
-------------- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating activities:
Net loss $(6,062,465) $(521,064) $(279,078)
Items not requiring
(providing) cash:
Depreciation 14,944 797 1,582
Expenses funded by Common
Stock issuance 543,187
Other 3,341
Changes in:
Advances to officers (366,683) (71,500) (23,000)
Other receivables (14,463) (5,325) (3,127)
Accounts payable 340,742 (19,546) 58,214
Accrued expenses 714,974 158,147 98,839
Deferred compensation 423,396 8,954 8,261
---------- -------- --------
Net cash used in
operating activities (4,403,027) (449,537) (138,309)
---------- -------- --------
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 1,200
Proceeds from notes payable 1,489,609 500,000 58,800
Proceeds from convertible
debentures 475,000
Payments on notes payable (154,609)
Other 108,410 40,000
---------- -------- --------
Net cash provided by
financing activities 4,538,972 500,000 100,000
---------- -------- --------
Increase (decrease) in cash 112,796 50,463 (38,309)
Cash, beginning of period 0 62,333 52,524
---------- -------- --------
Cash, end of period $ 112,796 $ 112,796 $ 14,215
========== ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
UNAUDITED
NOTE 1: FINANCIAL STATEMENTS
- -----------------------------
The balance sheet as of March 31, 1997, the statements of
operations and cash flows cumulative during development stage
through March 31, 1997, the statements of operations for the six
months and three months ended March 31, 1997 and 1996 and the
statements of changes in stockholders' equity (deficit) and cash
flows for the six months ended March 31, 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 March 31, 1997 and for all periods presented have
been made. Operating results for the six months ended March 31,
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 with 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 more favorable terms.
The notes payable have been classified as current liabilities
since management anticipates that they will be paid off within one
year.
On December 9, 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 provide for maturities six months
from the date of execution or the closing of the proposed public
offering, whichever is sooner, with interest at a rate of 10%. 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
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
UNAUDITED
NOTE 2: NOTES PAYABLE TO STOCKHOLDERS (CONTINUED)
- --------------------------------------------------
loaned to the Company, within six months from the date of execution
of the notes or the closing of the proposed public offering,
whichever is sooner.
As of March 31, 1997, the Company had executed notes payable to
stockholders under this arrangement for the aggregate amount of
$500,000. The Company is committed to issue 50,000 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 (see Note 7). The redeemable warrants will entitle the
holder to acquire one share of Common Stock at a price per share
equal to 150% of the initial public offering price per share,
subject to adjustment. Commencing 12 months after the effective
date of a registration statement for the proposed offering, the
Company may redeem all, but not less than all, of the redeemable
warrants if specified conditions are met.
The letter of intent provided for a 10% underwriter's discount, an
over-allotment option, an expense allowance equal to 3% of the
gross proceeds of the offering, a financial advisory fee and five
year warrants, exercisable at the beginning of the second year
after issuance, to purchase 10% of the aggregate principal amount
of Common Stock and warrants offered at $.0001 per warrant. It
also provided for restrictions on the disposition by stockholders
of Common Stock outstanding prior to the proposed offering and for
the underwriter to have the right to designate one person for
election to the Company's Board of Directors for a period of five
years.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
UNAUDITED
NOTE 3: COMMON STOCK (CONTINUED)
- ---------------------------------
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 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.
On January 5, 1994, the Board of Directors adopted a resolution for
a four-to-one reverse stock split of the Company's Common Stock.
Stockholder approval for the reverse stock split was obtained at
the March 2, 1994 annual meeting of stockholders.
The reverse stock splits 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.
NOTE 4: LOSS PER COMMON SHARE
- ------------------------------
Loss per common share is computed by dividing the net loss for the
period by the 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.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
UNAUDITED
NOTE 4: LOSS PER COMMON SHARE (Continued)
- ------------------------------------------
The weighted average number of common shares used in the loss per
share computations were 3,704,164 shares for the period cumulative
since inception through March 31, 1997, and 3,799,555 shares for
the six month and three month periods ended March 31, 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.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
UNAUDITED
NOTE 5: MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
(CONTINUED)
- ------------------------------------------------------------
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
- -----------------------------
On January 3, 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 that 5% of net sales but less that 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 EVENTS
- -------------------------
During April 1997, the number of shares and warrants subject to the
Company's proposed public offering (see Note 3) were reduced from
1,600,000 to 1,000,000. During May 1997, the Company and the
managing underwriter referred to in Note 3 terminated the
nonbinding letter of intent regarding the Company's proposed public
offering. The Company has contacted other firms for the purpose of
serving as managing underwriter for the Company's proposed public
offering.
<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.
<PAGE>
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 proposed public 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 six months ended March 31, 1997, the Company incurred
a net loss of $521,064 as compared to $279,078 for the six months
ended March 31, 1996.
General and administrative expenses and travel expenses
increased during the six-month and three-month periods ended March
31, 1997 compared to March 31, 1996 due to the Company's efforts in
pursuing equity capital and selected projects. Interest expense
also increased during the same periods due to the increase in notes
payable to stockholders.
Liquidity and Capital Resources
During the six months ended March 31, 1997, the Company used
$449,537 of cash in operations compared to $138,309 during the same
period in 1996.
During the six months ended March 31, 1997 and 1996, 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 the proposed
public 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
A special meeting of shareholders of the Company was held
December 12, 1996 at the Westin Hotel, 909 North Michigan Avenue,
Chicago, Illinois 60611, at 9:30 a.m., pursuant to notice to
shareholders or record date November 18, 1996 and the consent of
the Board of Directors. The Company had 50,511,443 issued and
outstanding shares as of November 18, 1996. 40,483,255 shares were
indisputably represented at the meeting in person and by proxy.
At least 39,618,294 shares, constituting a majority of the
quorum present in person and by proxy necessary to conduct the
business of the Corporation at the Special Shareholders Meeting,
voted to reduce the number of outstanding shares of common stock of
ThermoEnergy Corporation by a 4 to 1 ratio;
At least 39,273,662 shares, constituting a majority of the
quorum present in person and by proxy necessary to conduct the
business of the Corporation at the Special Shareholders Meeting,
voted "For" each of the following items of business:
To Amend and Restate the Articles of Incorporation the Company
with the following changes:
(1) To authorize the designation of 10,000,000 shares as
"Series A Shares" and 65,000,000 shares as "Series B Shares"
from the 75,000,000 shares of $0.001 par value per share
common stock authorized originally under Section 8 of the
Articles of Incorporation;
<PAGE>
(2) To authorize the designation of and reclassification of
all issued and outstanding shares to Series B Shares as
described in Item 2 of the Proxy Statement sent to the
Shareholders with the Notice and Proxy.
(3) To change the name of the Corporation from "Innotek
Corporation" to "ThermoEnergy Corporation".
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 March 31, 1997.
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 23, 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 MARCH 31,
1997. THIS SCHEDULE HAS BEEN RESTATED TO GIVE EFFECT TO THE TWO, FOUR-TO-ONE
STOCK SPLITS APPROVED BY STOCKHOLDERS ON MARCH 2, 1994 AND DECEMBER 12, 1996 AND
IMPLEMENTED BY THE COMPANY DURING THE QUARTER ENDED MARCH 31, 1997.
</LEGEND>
<RESTATED>
<CIK> 0000884504
<NAME> THERMOENERGY CORPORATION
<S> <C>
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