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 MARCH 31, 1998
[ ] 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
-----------
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
<PAGE>
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.
3,402,968 shares of Common Stock, par value $.001 per share
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Cash - Total Current Assets $ 248,778 $ 65,046
Advances to officers 303,365 258,365
Accrued interest receivable - officers 35,356 23,669
Property and equipment, at cost:
Equipment 14,818 14,818
Furniture and fixtures 4,991 4,991
Less accumulated depreciation (18,394) (16,978)
------------- --------------
1,415 2,831
-------------- ---------------
$ 588,914 $ 349,911
=========== ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
Accounts payable $ 769,010 $ 778,712
Accrued expenses:
Salaries 712,740 590,976
Interest - stockholders 135,251 92,893
Deferred compensation 243,519 233,516
Notes payable to stockholders (Note 2) 932,900 1,052,900
------------ -----------
Total Current Liabilities 2,793,420 2,748,997
Convertible Debentures (Note 2) 456,000
----------- -----------
Total Liabilities 3,249,420 2,748,997
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 -
3,486,797 shares; outstanding -
3,402,968 shares 3,487 3,487
Additional paid-in capital 4,334,864 4,334,864
Deficit accumulated during the development stage (6,998,857) (6,737,437)
----------- -----------
(2,660,506) (2,399,086)
----------- -----------
$ 588,914 $ 349,911
=========== ============
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
During
Development
Stage Through Six Months Ended Three Months Ended
March 31, March 31, March 31,
1998 1998 1997 1998 1997
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating Expenses:
General and administrative ........................ $ 5,176,545 $ 161,847 $ 394,157 $ 41,321 $ 217,949
Payments under licenses ........................... 652,266
Travel and entertainment .......................... 973,234 54,627 99,883 25,603 65,081
---------- ---------- ---------- ---------- ----------
6,802,045 216,474 494,040 66,924 283,030
---------- ---------- ---------- ---------- ----------
Loss From Operations ................................ (6,802,045) (216,474) (494,040) (66,924) (283,030)
---------- ---------- ---------- ---------- ----------
Other Income (Expense)
Interest income ................................... 88,950 12,316 5,325 6,461 3,012
Interest expense .................................. (285,762) (57,262) (32,349) (33,891) (19,262)
---------- ---------- ---------- ---------- ----------
(196,812) (44,946) (27,024) (27,430) (16,250)
---------- ---------- ---------- ---------- ----------
Net Loss ............................................ $(6,998,857) $ (261,420) $(521,064) $ (94,354) $ (299,280)
========== ========== ========== ========== ==========
Basic and Diluted
Per Common Share (Note 4)
Loss From Operations ............................ $ (1.82) $ (0.05) $ (0.13) $ (0.02) $ (0.07)
Net Loss ........................................ $ (1.88) $ (0.06) $ (0.14) $ (0.02) $ (0.08)
</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, 1997 and the
Six Months Ended March 31, 1998 (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, 1997 and the
Six Months Ended March 31, 1998 (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, 1997 and the
Six Months Ended March 31, 1998 (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 (3,677 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, 1997 and the
Six Months ended March 31, 1998 (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) 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)
Issuance of stock, July 1997 (50,000
shares at $2.00 per share 50 99,950 100,000
Conversion of $338,100 of notes payable
to stockholders and accrued interest,
July 1997 (195,596 shares) 196 390,996 391,192
Net loss (1,196,036) (1,196,036)
--------- --------- -------------- -------------
Balance (deficit), September 30, 1997 3,487 4,334,864 (6,737,437) (2,399,086)
Net loss (261,420) (261,420)
--------- --------- ------------ ------------
Balance (deficit), March 31, 1998
(Unaudited) $ 3,487 $4,334,864 $(6,998,857) $(2,660,506)
======= ========== ============ ===========
</TABLE>
See notes to financial statements
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
During
Development Six Months Ended March 31
Stage Through -------------------------
March 31, 1998 1998 1997
-------------- ---- ----
(Unaudited) (Unaudited) (Unaudited)
Operating activities:
Net loss ........................... $(6,998,857) $(261,420) $(521,064)
Items not requiring
(providing) cash:
Depreciation ..................... 18,394 1,416 797
Expenses funded by Common
Stock issuance ................. 596,279
Other ............................ 3,341
Changes in:
Advances to officers ............. (502,348) (45,000) (71,500)
Other assets ..................... (35,356) (11,687) (5,325)
Accounts payable ................. 769,010 (9,702) (19,546)
Accrued expenses ................. 847,991 164,122 158,147
Deferred compensation ............ 442,501 10,003 8,954
----------- --------- ---------
Net cash used in
operating activities ........ (4,859,045) (152,268) (449,537)
----------- --------- ---------
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 ........ 2,720,562
Proceeds from notes payable ........ 1,665,609 20,000 500,000
Proceeds from convertible debentures 791,000 316,000
Payments on notes payable .......... (154,609)
Other .............................. 108,410 --------- --------
Net cash provided by
financing activities ...... 5,130,972 336,000 500,000
----------- --------- ---------
Increase (decrease) in cash .......... 248,778 183,732 50,463
Cash, beginning of period ............ 0 65,046 62,333
----------- --------- ---------
Cash, end of period .................. $ 248,778 $ 248,778 $ 112,796
=========== ========= =========
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
UNAUDITED
NOTE 1: FINANCIAL STATEMENTS
The balance sheet as of March 31, 1998, the statements of operations and
cash flows cumulative during development stage through March 31, 1998, the
statements of operations for the six months and three months ended March 31,
1998 and 1997 and the statements of changes in stockholders' equity (deficit)
and cash flows for the six months ended March 31, 1998, 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, 1998 and for all periods presented have
been made. Operating results for the six months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the entire year
ending September 30, 1998.
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, 1997 Form 10-K.
NOTE 2: NOTES PAYABLE TO STOCKHOLDERS AND CONVERTIBLE DEBENTURES
During November 1997, the Company executed a 10% note payable to a
stockholder for $20,000. As more fully described below, during February 1998,
the Company issued convertible debentures in exchange for $140,000 of the 10%
notes and related accrued interest. At March 31, 1998, the Company was committed
to issue 53,600 shares of Series B Common Stock to the holders of the notes.
During January 1998, the Company's Board of Directors approved the issuance
of up to $1,000,000 of Series 98, 15% Convertible Debentures, due January 15,
2003. Debentures with an aggregate principal balance of $300,000 were sold for
cash in January 1998 to related parties. Debentures with an aggregate principal
balance of $156,000 were issued to certain stockholders during February 1998 in
exchange for the 10% notes and related accrued interest due to them by the
Company. The holders of the Debentures can convert the principal amount and
accrued interest into shares of Series B Common Stock at the conversion price of
$2.00 per share at any time prior to the maturity date.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
UNAUDITED
NOTE 3: COMMON STOCK
During 1994 and 1996, the Company's stockholders approved four-to-one
reverse stock splits of the Company's Common Stock. These reverse stock splits
were implemented on March 5, 1997. All numbers of Common Stock shares and per
share data have been restated to reflect the reverse stock splits.
During October 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. 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 October 1997, the broker-dealer informed the Company that it would
be unable to complete the proposed public offering. The Company terminated its
relationship with the broker -dealer and filed a complaint with the NASD against
the firm.
The Company's 1997 Stock Option Plan contains automatic grant provisions
for non-employee Directors of the Company. At March 31, 1998, the Company was
committed to issue options under the automatic grant provisions for 5,000 shares
of Series B Common Stock.
NOTE 4: LOSS PER COMMON SHARE
During 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share". Statement No. 128 simplifies the calculation of
earnings per share and requires that all prior period earnings per share data be
restated to conform with the provisions of the Statement. Since the Company must
use the computational guidance contained in SAB 83 Topic 4D as described below,
adoption of this Statement had no effect on prior period loss per share data.
<PAGE>
THERMOENERGY CORPORATION (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
UNAUDITED
NOTE 4: LOSS PER COMMON SHARE (CONTINUED)
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, adjusted
for stock options and warrants issued within twelve months of the Company's
initial public offering filing date (February 27, 1992) which are treated as
outstanding for all periods presented in accordance with SAB 83 Topic 4D, after
giving effect to the reverse stock splits described in Note 3.
The adjusted weighted average number of common shares used in the basic and
diluted loss per share computations were 3,730,053 shares for the period
cumulative since inception through March 31, 1998, and 4,045,558 and 3,799,554
shares for the six month and three month periods ended March 31, 1998 and 1997,
respectively.
Warrants to purchase approximately 736,000 shares of Series B Common Stock,
and stock options under the 1997 Stock Option Plan, which provides for the
issuance of up to 750,000 shares of Series B Common Stock, were not included in
the computation of diluted loss per share since the effect would be
antidilutive. See Note 2 for information regarding convertible debentures issued
during 1998.
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 or private placement offering, sales of convertible
debentures and warrants for Common Stock and fees from projects involving the
Company's technologies. 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. 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.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
UNAUDITED
NOTE 5: MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS (CONTINUED)
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: SUBSEQUENT EVENTS
During January 1998, the Company's Board of Directors approved the issuance of
up to $1,000,000 of Series 98, 15% Convertible Debentures, due January 15, 2003.
Debentures with an aggregate principal balance of $300,000 were sold for cash in
January 1998. Debentures with an aggregate principal balance of $156,000 were
issued to stockholders during February 1998 in exchange for the 10% notes and
related accrued interest due to them by the Company (see Note 2). The holders of
the Debentures can convert the principal amount and accrued interest into shares
of Series B Common Stock at the conversion price of $2.00 per share at any time
prior to the maturity date.
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
three chemical processes known as the Sludge-To-Oil Reactor System (STORS),
Nitrogen Removal (NitRem) and the Ammonia Recovery Process ("ARP"). The fourth
technology, a dual-shell pressure balance vessel, known as the Dual-Shell
Reactor ("DSR"), is the unique reactor equipment in which the STORS and NitRem
chemistries are conducted (STORS, NitRem, ARP 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's ARP process is designed to recover ammonia from fluid waste streams
resulting in the manufacture of various by-products such as ammonium sulfate
fertilizer, when sulfuric acid is added to the highly concentrated ammonia
stream that is recovered.
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, NitRem-DSR, or ARP) 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
<PAGE>
generated any operating revenues or any profits. The Company has recently
completed demonstration of its NitRem-DSR technology at the TRIES, Radford Army
Ammunition Plant project in Radford, Virginia. This NitRem-DSR project took a
wastewater stream containing dinitrotoluene (DNT) and successfully reduced the
concentration of DNT from 120,000 ppb to less than 5 ppb, acheiving a
destruction efficiency of 99.996%, well below National Pollution Discharge
Elimination System (NPDES) discharge limits. Based on these test results, the
Company, individually and jointly with Foster Wheeler Environmental Corporation,
is actively marketing the NitRem-DSR units to potential industrial clients and
to various divisions within the DOD. The Company has a project to demonstrate
its ARP technology at New York City's Staten Island wastewater treatment
facility. The demonstration project is scheduled to begin mid summer of 1998 and
will run for 150 consecutive days. On March 17, 1998, the city of Colton,
California agreed to host a STORS demonstration project beginning mid-summer of
1998. This demonstration project will be funded by a $3,000,000 EPA grant to the
San Bernardino 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.
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 had planned to use the net proceeds of a proposed public
offering to fund the operations of the Company and complete the Radford Army
Ammunition Plant and the New York City demonstration projects. As discussed in
Note 3 of Notes to Financial Statements, the managing underwriter of the
proposed offering notified the Company in October 1997 that it would be unable
to complete the offering. The Company now plans to use the proceeds from the
sale of its Series 98 Convertible Debentures (see Note 2 of Notes to Financial
Statements) to satisfy the cash requirements for its basic operations for the
next year ending September 30, 1998. 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.
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 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, 1998, the Company incurred a net
loss of $261,420 as compared to $521,064 for the six months ended March 31,
1997.
General and administrative expenses and travel expenses decreased during
the six and three month periods ended March 31, 1998 compared to March 31, 1997
due to the Company's efforts to conserve cash due to the failure of the proposed
public offering. Interest expense increased significantly between the same two
periods due to the increase in notes payable to stockholders and the issuance of
the 15% Convertible Debentures.
Liquidity and Capital Resources
During the period ended March 31, 1998, the Company used $152,268 of cash
in operations compared to $449,537 in 1997. During 1992, the Company initiated a
public offering of 125,000 shares of Series B Common Stock at a price of $16.00
per share. The offering was conducted on a "best efforts" basis, primarily by
directors and officers of the Company. Effective January 5, 1994, the offering
was terminated. A total of 93,129 shares were sold at a price of $16.00 per
share and an additional 6,438 shares were issued at $16.00 per share in
satisfaction of notes payable and related accrued interest. Currently, there is
no public market for the Series B Common Stock. As previously discussed, the
Company's proposed 1997 public offering did not occur.
During 1998, 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, 1998 with proceeds from the sale of convertible debentures and
public or private placement offerings of Common Stock. 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.
Recent Pronouncements of the Financial Accounting Standards Board.
During 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", Statement No. 130, "Reporting Comprehensive Income",
and Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information". See Note 4 of Notes to Financial Statements for information
regarding Statement No. 128. Statement No. 130, which is effective during the
year ending September 30, 1999, establishes new rules for the reporting and
display of comprehensive income and its components. Application of Statement No.
130 will not impact amounts previously reported for net income or affect the
comparability of previously issued financial statements. Statement No. 131,
which is effective during the year ending September 30, 1999, changes the
requirements for reporting segment information in annual and interim financial
statements. The industry segment approach under Statement No. 14 will be
replaced with a management approach of reporting financial and descriptive
information about operating segments.
Net Operating Losses
The Company had net operating loss carry forwards as of September 30, 1997,
of approximately $5,500,000 which expire in the years 2003 through 2012. The
amount of net operating loss carried forward that can be used in any one year
will be limited by the applicable tax laws which are in effect at the time such
carry forward can be utilized. A valuation allowance of approximately $2,125,000
has been established to offset any benefit from the net operating loss carry
forwards as it cannot be determined when or if the Company will be able to
utilize the net operating losses.
<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) 10.1 License Agreement by and between the Company and Battelle
Memorial Institute dated December 30, 1997.
27.1 Financial Data Schedule
(b) No other reports on Form 8-K have been filed during the quarter ending
March 31, 1998.
<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: May 15, 1998
THERMOENERGY CORPORATION
BY: /s/ P. L. Montesi
--------------------------------
P. L. MONTESI
President, Treasurer and
Principal Financial Officer
<PAGE>
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<NAME> THERMOENERGY CORPORATION
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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<CURRENT-ASSETS> 248,778
<PP&E> 19,809
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<COMMON> 3,487
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<TOTAL-LIABILITY-AND-EQUITY> 588,914
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LICENSE AGREEMENT
THIS AGREEMENT made and entered into at Columbus, Ohio, and effective
December 30, 1997 (the "Effective Date") by and between ThermoEnergy Corporation
having its principal place of business in Little Rock, Arkansas, herein called
"LICENSEE" and Battelle Memorial Institute, having its principal place of
business in Columbus, Ohio, herein called "BMI",
WITNESSETH THAT:
WHEREAS, BMI has certain rights in patents relating to recovery of ammonia
from fluid waste streams; and
WHEREAS, LICENSEE recognizes that BMI owns inventions and intellectual
property useful in the conduct of LICENSEE's business; and
WHEREAS, LICENSEE recognizes that its anticipated business activity will
encompass the practice of technology that requires a license under patents owned
or controlled by BMI; and
WHEREAS, LICENSEE wishes to acquire the right to practice the inventions of
such patents.
NOW THEREFORE in consideration of the mutual covenants herein contained and
intending to be legally bound hereby, the parties agree as follows:
<PAGE>
1. DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
A. INVENTION or INVENTIONS means patented and unpatented BMI proprietary
technology related to apparatus and process for the recovery of ammonia from
fluid waste streams (hereinafter referred to as the ammonia recovery process or
"ARP Technology") as disclosed and claimed in the PATENTS.
B. IMPROVEMENTS shall mean only those technology advances in the ARP
Technology made by BMI's Columbus Laboratories that are within the scope of the
PATENT claims and the LICENSED FIELD. BMI shall be obligated to include herein
only those BMI IMPROVEMENTS which BMI determines to be necessary for LICENSEE's
practice of the INVENTIONS, without which such practice would constitute an
infringement of BMI's rights.
PATENT or PATENTS means the following patents and/or patent applications
covering the INVENTIONS, patents to be issued pursuant thereto, and all
divisions, continuations, reissues, substitutes, and extensions thereof:
Patent Applications
Title Country Serial No. Date Filed
Apparatus and Method for United States 60/042,175 31 March 1997
Ammonia Recovery (21988-1)
Ammonia Recovery by Formation, United States 60/060,079 25 September 1997
Recovery, and Decomposition of
Ammonium Zinc Sulfate Hexahydrate
Crystals (21988-2)
PATENTS will also include patents and patent applications covering
improvements (within the scope of the claims of the above PATENTS and the
LICENSED FIELD) made by BMI licensees in other fields where BMI has the right to
grant rights to such improvements to LICENSEE.
LICENSED TERRITORIES are defined as:
TERRITORY 1: the United States,
TERRITORY 2: the Americas outside of the United States,
TERRITORY 3: Europe, and
TERRITORY 4: Asia.
LICENSED FIELD means, and is limited to, the practice of the INVENTIONS as
applied to waste streams from municipal waste water treatment facilities and the
practice of the INVENTIONS applied to waste streams in commercial agricultural
livestock production facilities.
2. PATENT LICENSE
A. BMI hereby grants to LICENSEE, to the extent of the LICENSED FIELD and
in each of the LICENSED TERRITORIES 1, 2, 3 and 4, an exclusive license to
practice and have practiced the INVENTIONS under the PATENTS.
B. BMI reserves for itself the right to practice the INVENTIONS for
research, development, and demonstration purposes and to license the INVENTIONS
in fields and territories not exclusively licensed herein.
<PAGE>
3. LICENSE FEE
LICENSEE shall pay to BMI the sum of Twenty-Five Thousand United States
Dollars ($25,000 US) at the time of execution of this Agreement and Twenty-Five
Thousand United States Dollars ($25,000 US) on the first anniversary of the
Effective Date.
4. ROYALTIES
A. For fluid treated by the process of the INVENTION as disclosed and
claimed in the PATENTS, LICENSEE shall pay to BMI a continuing royalty at the
rate of (1) five percent (5%) of all revenues received from customers of
LICENSEE or sublicensees for which LICENSEE or a sublicensee is processing fluid
or (2) One United States Dollar ($1 US) for each one thousand (1,000) gallons of
input to the process of the INVENTION, whichever is greater, except and unless
in cases where the provisions of Paragraph 4B apply. It is the intent of the
parties that the preferred mode of payment under this Agreement is pursuant to
this Paragraph 4A.
B. However, in the event LICENSEE or its sublicensee enters into an
agreement with a customer wherein the customer will design, and/or build, and/or
own, and/or operate a facility licensed hereunder, LICENSEE or its sublicensee
may grant a license for or authorize such activity in exchange for a sum of
money or other consideration which does not contemplate the payment of
continuing royalties. In such case, LICENSEE agrees to pay to BMI five percent
(5%) of the installed cost of a facility utilizing the INVENTIONS or Forty
Thousand United States Dollars ($40,000 US), whichever is greater, in a lump
sum, according to the payment schedule defined in Article 8. In the general
case, it is anticipated that the installed cost of a facility utilizing the
INVENTIONS shall be known and supported by invoice records. If costs for land,
building, yard improvements, service facilities, taxes, contingency fees and
working capital are incorporated into the invoice supported installed cost, then
these costs may be deducted prior to determination of the royalty due to BMI. It
is understood that in some circumstances, the total installed cost of a facility
used to implement the INVENTIONS may not be separately and specifically invoiced
apart from some larger facility in such cases, for purposes of this Agreement,
the installed cost of a facility shall be calculated as equal to 2.72 times the
total delivered cost of the major purchased equipment components. The 2.72
factor includes the cost of the major equipment components, equipment
installation, instrumentation, piping, electric wiring, engineering and
supervision, construction expenses and contractor's fee of five percent (5%) on
the above. It does not include land, building yard improvements, service
facilities, taxes, contingency fees or working capital.
C. BMI shall also receive five percent (5%) of all damages, royalties or
other consideration received by LICENSEE as a result of successful lawsuits
enforcing the rights licensed hereunder in accordance with the provisions of
Article 12.
D. If this Agreement is for any reason terminated before all of the earned
royalties herein provided for have been paid, LICENSEE shall immediately pay to
BMI any remaining unpaid balance of earned royalties even though the due date
provided in Article 8 has not been reached.
<PAGE>
5. MINIMUM ROYALTIES
A. LICENSEE shall pay to BMI royalties as stated in Article 4, but in no
event shall royalties for a calendar year be less than the following minimum
royalties during each of the calendar years indicated: Minimum Royalties
Calendar Year U. S. $ per Calendar Year*
1998 $10,000
1999 $20,000
2000 $30,000
2001 and each calendar $40,000
year thereafter during
the term of this Agreement
-------------------------------------
*Net to BMI after taxes, if any, withheld at the source.
B. Separate from LICENSEE's obligation to pay minimum royalties as set
forth above, beginning in the calendar year 2001, and for each calendar year
thereafter, BMI may, in its sole discretion, elect to terminate this Agreement
with regard to a particular TERRITORY if LICENSEE has not made sales sufficient
to generate earned royalties in the amount of Twenty- Five Thousand United
States Dollars ($25,000 US) per calendar year in such TERRITORY.
In the event that the amounts due at the end of any calendar year exceed
the earned royalty requirement of the preceding paragraph but do not equal the
minimum royalties specified above for any calendar year, LICENSEE shall pay to
BMI on the last day of the following January, the amount required to satisfy the
minimum royalty obligation for the preceding calendar year.
D. If this Agreement is terminated for any reason, except for breach of
contract by BMI, during any year that minimum royalties are due to BMI, upon
termination, LICENSEE shall immediately pay to BMI the proportionate amount of
minimum royalties owed to BMI that represents that portion of the year elapsed
prior to termination. For example, if LICENSEE terminates without breach by BMI
after the expiration of three (3) months of the new year, LICENSEE shall pay to
BMI one-fourth (3) of the yearly minimum royalty due for that year.
6. SUBLICENSING
LICENSEE shall have the right to sublicense in the LICENSED FIELD and
LICENSED TERRITORIES. Sublicenses entered by LICENSEE shall be transferable and
assignable from LICENSEE only to BMI.
B. BMI shall have the right to approve any sublicense granted hereunder, as
regards to reasonable business practices, including the terms and conditions
therein. LICENSEE shallprovide BMI with a copy of each sublicense, and
<PAGE>
shall not grant to its sublicensees any BMI rights not conveyed by this
Agreement. The royalty paid to BMI under sublicenses from LICENSEE shall be no
less than that set forth for LICENSEE in Article 4, above.
If this Agreement is terminated for any reason, except breach of contract
by BMI, LICENSEE shall immediately assign all of its right, title, and interest
to all sublicenses to BMI, including the right to receive income.
DILIGENCE
In each of the TERRITORIES 1, 2 and 3, if a contract is not in place to
build a commercial facility to practice the ARP Technology within three (3)
years of the Effective Date, BMI may, in its sole discretion, elect to terminate
the LICENSEE's rights hereunder for that particular TERRITORY and BMI will be
free to license the ARP Technology to others in the LICENSED FIELD for that
particular TERRITORY.
In TERRITORY 4 (Asia), if a contract is not in place to build a commercial
facility to practice the ARP Technology within five (5) years of the Effective
Date, BMI may, in its sole discretion, elect to terminate LICENSEE's rights
hereunder for TERRITORY 4 and will be free to license the ARP Technology to
others for TERRITORY 4 and in the LICENSED FIELD.
In such cases, improvement inventions made solely by LICENSEE shall be the
exclusive property of LICENSEE, but BMI shall be granted a nonexclusive,
royalty-free, paid-up license therein, including the right to sublicense within
the LICENSED FIELD.
8. REPORTS
A. Not later than the last day of each January and July, LICENSEE shall
furnish to BMI a written statement in a form provided by BMI (Attachment 1) to
determine the amounts due and the appropriateness of the royalties paid pursuant
to Articles 4 and 6 for the semiannual periods ended the last days of the
preceding December and June, respectively, and shall pay to BMI all amounts due
to BMI. Such amounts are due at the dates the statements are due. If no amount
is accrued during any semiannual period, a written statement to that effect
shall be furnished.
B. Payments provided for in this Agreement, shall, when overdue, bear
interest at a rate per annum equal to three percent (3%) in excess of the "Prime
Rate" published by The Wall Street Journal at the time such payment is due until
payment is received by BMI.
<PAGE>
9. CONFIDENTIALITY
BMI may disclose confidential and proprietary information (Technical
Information) to LICENSEE, consisting of published or unpublished research or
development information, know how and technical data related to the ARP
Technology. As a result of LICENSEE's access to the confidential and proprietary
Technical Information disclosed by BMI hereunder, LICENSEE may generate
information which shall also be considered Technical Information. LICENSEE shall
not disclose any Technical Information to any third party without the express
written consent of BMI, until such Technical Information shall become publicly
available through no fault or action of LICENSEE. LICENSEE shall not use the
Technical Information for any use other than that expressly authorized herein.
10. REPRESENTATIONS
This Agreement is entered into by BMI in its private capacity.
B. Nothing in this Agreement shall be deemed to be a representation or
warranty by BMI of the validity of any of the PATENTS or the accuracy, safety or
usefulness for any purpose, of any Technical Information, techniques, or
practices at any time made available by BMI. Neither BMI nor any affiliated
company of BMI shall have any liability whatsoever to LICENSEE or any other
person for or on account of any injury, loss, or damage, of any kind or nature
sustained by, or any damage assessed or asserted against, or any other liability
incurred by or imposed upon LICENSEE or any other person, arising out of or in
connection with or resulting from (i) the production, use or sale of any
apparatus or product, or the practice of the INVENTIONS; (ii) the use of any
Technical Information, techniques, or practices disclosed by BMI; or (iii) any
advertising or other promotional activities with respect to any of the
foregoing, and LICENSEE shall hold BMI, and any affiliated company of BMI,
harmless in the event BMI, or any affiliated company of BMI, is held liable.
C. LICENSEE understands and acknowledges that the subject matter of this
Agreement has not yet been commercially demonstrated, and agrees to accept the
risks incident to designing, manufacturing and operating a nascent technology.
D. BMI represents that it has the right to grant all of the rights
herein, except as to such rights as the Government of The United States of
America may have or may assert.
E. BMI is unaware of any claims that have been, are, or could reasonably
be asserted against BMI by third parties with respect to patent infringement or
any other type of liability relevant to licensing of the INVENTIONS, which have
not been disclosed to LICENSEE as of the date of this Agreement.
11. TERMINATION
A. The PATENT License of Article 2 shall end upon the expiration of the
last to expire of the PATENTS included herein, or upon the abandonment of the
last to be abandoned of any patent applications if no PATENTS have issued, or a
final adjudication of invalidity of all patents included herein, whichever is
later, unless this Agreement is sooner terminated.
<PAGE>
B. LICENSEE may terminate this Agreement at any time upon sixty (60)
days' written notice in advance to BMI, or at any time after the expiration of
all patents included herein, or a final adjudication of invalidity of all
patents included herein.
C. Except as provided below in Paragraph 11D, if either party shall be
in default of any obligation hereunder, the other party may terminate this
Agreement by giving Notice of Termination by Certified or Registered Mail to the
party at fault, specifying the basis for termination. If within sixty (60) days
after the receipt of such Notice of Termination, the party in default shall
remedy the condition forming the basis for termination, such Notice of
Termination shall cease to be operative, and this Agreement shall continue in
full force; provided that if Notice of Termination is given by BMI to LICENSEE
for the third time then this grace period shall not be available unless
permitted in such third Notice of Termination, and this Agreement shall be
finally terminated.
D. LICENSEE shall inform BMI of its intention to file a voluntary
petition in bankruptcy or of another's intention to file an involuntary petition
in bankruptcy to be received at least seventy-five (75) days prior to filing
such a petition. LICENSEE's filing without conforming to this requirement shall
be deemed a material, pre-petition incurable breach not subject to the notice
requirement of Paragraph 11C.
12. LITIGATION
A. LICENSEE shall notify BMI of any suspected infringement of the
PATENTS in the LICENSED FIELD and the LICENSED TERRITORIES, and each party shall
inform the other of any evidence of such infringement(s).
B. LICENSEE shall have the first right to institute suit for
infringement(s) in the LICENSED FIELD and the LICENSED TERRITORIES so long as
this Agreement remains exclusive. However, if BMI notifies LICENSEE of its
desire to institute suit for infringement(s) and LICENSEE fails to do so within
ninety (90) days of such notice, then BMI may, at its own expense, bring suit or
take any other appropriate action. Any amounts recovered pursuant to such
infringement suit shall be retained by and be the property of the party bringing
the suit. In the event LICENSEE receives any monies or other consideration from
a third party as a result of LICENSEE's rights under this Agreement, BMI shall
receive its royalty under Article 4 as applied to all such monies or other
consideration whether such monies or other consideration are denoted as
"royalties", "damages", "release" from prior acts, or any other designation.
13. PATENTS
A. BMI shall have the sole right to file, prosecute, and maintain all of
the PATENTS covering the INVENTIONS that are the property of BMI, and shall have
the right to determine whether or not, and where, to file a patent application,
to abandon the prosecution of any patent or patent application, or to
<PAGE>
discontinue the maintenance of any patent or patent application. All reasonable
expenses incurred by BMI in the filing, prosecution or maintenance of PATENTS,
or patent applications and patents issued on IMPROVEMENTS, licensed hereunder
shall be reimbursed to BMI by LICENSEE within sixty (60) days of LICENSEE's
receipt of notice setting forth such expenses, if LICENSEE chooses to make use
of such IMPROVEMENTS.
B. All INVENTIONS conceived or reduced to practice for LICENSEE by BMI's
Columbus Laboratories and all Technical Information directly related to the
INVENTIONS developed for LICENSEE by BMI's Columbus Laboratories during the term
of this Agreement, shall be owned by BMI and shall be included in this
Agreement.
C. Improvement inventions made solely by LICENSEE shall be the exclusive
property of LICENSEE, but BMI shall be granted a nonexclusive, royalty-free,
paid-up license therein, including the right to sublicense outside the LICENSED
FIELD.
14. RECORDS
LICENSEE shall keep accurate records of all operations affecting
payments hereunder, and shall permit BMI or its duly authorized agent to inspect
all such records and to make copies of or extracts from such records during
regular business hours throughout the term of this Agreement and for a
reasonable period of not less than three (3) years thereafter.
15. ASSIGNABILITY
LICENSEE shall not assign any rights under this Agreement not
specifically transferable by its terms without the written consent of BMI. BMI
may assign its rights hereunder.
16. REFORM
A. The parties agree that if any part, term, or provision of this
Agreement shall be found illegal or in conflict with any valid controlling law,
the validity of the remaining provisions shall not be affected thereby.
B. In the event the legality of any provision of this Agreement is
brought into question because of a decision by a court of competent jurisdiction
of any country in which this Agreement applies, BMI, by written notice to
LICENSEE, may revise the provision in question or may delete it entirely so as
to comply with the decision of said court.
17. PUBLICITY
In publicizing anything made, used, or sold under this Agreement, LICENSEE
shall not use the name BMI or otherwise refer to any organization related to
BMI, except with the written approval of BMI.
<PAGE>
18. WAIVER AND ALTERATION
A. The waiver of a breach hereunder may be effected only by a writing
signed by the waiving party and shall not constitute a waiver of any other
breach.
B. A provision of this Agreement may be altered only by a writing signed
by both parties, except as provided in Article 16, above.
19. IMPLEMENTATION
Each party shall execute any instruments reasonably believed by the
other party to be necessary to implement the provisions of this Agreement.
20. CONSTRUCTION
This Agreement shall be construed in accordance with the laws of the
State of Ohio of The United States of America and in the English language, and
any action brought to enforce any provision or obligation hereunder shall be
brought in a court of competent jurisdiction in the State of Ohio.
21. EXPORTATION OF TECHNICAL INFORMATION
LICENSEE agrees not to export from The United States of America,
directly or indirectly, any technical information (or the direct product
thereof) furnished to LICENSEE either directly or indirectly by BMI, except to
the extent and to the countries permitted by the laws of The United States of
America. LICENSEE agrees to indemnify, defend and hold harmless BMI, its
officers, agents and employees from all liability involving the violation of
such export regulations, either directly or indirectly, by LICENSEE.
22. ENTIRE UNDERSTANDING
This Agreement represents the entire understanding between the parties,
and supersedes all other agreements, express or implied, between the parties
concerning the INVENTIONS in the LICENSED FIELD and LICENSED TERRITORIES.
Specifically, no future representations made by BMI staff shall be effective to
alter any provision herein unless such representation shall be made by an
authorized representative of BMI having the power to do so.
<PAGE>
23. ADDRESSES
For the purpose of all written communications between the parties, their
addresses shall be:
ThermoEnergy Corporation
1300 Tower Building
Fourth and Center Streets
Little Rock, AR 72201
Telephone: (501) 376-6477
Telefax: (501) 376-3643
Battelle Memorial Institute
Attention License Administrator
505 King Avenue
Columbus, OH 43201-2693
Telephone: (614) 424-7449
Telefax: (614) 424-3864
or any other addresses of which either party shall notify the other party in
writing.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
by their duly authorized officers on the respective dates and at the respective
places hereinafter set forth.
THERMOENERGY CORPORATION
---------------------------------------------
Signature
ATTEST:
---------------------------------------------
Typed or Printed Name
- -------------------------- ----------------------------------------------
Signature Title
- -------------------------- ----------------------------------------------
Signed at Date
BATTELLE MEMORIAL INSTITUTE
---------------------------------------------
Signature
ATTEST: Robert L. Zieg
---------------------------------------------
Typed or Printed Name
Assistant General Counsel
- ----------------------- ---------------------------------------------
Signature Title
January 5, 1998
- ----------------------- -------------------------------------------
Signed at Date
Attachment 1
<PAGE>
ATTACHMENT 1
ROYALTY REPORT TO BMI
From:
---------------------------------------------------------------------
(Company Name)
Reporting Period:
From To ----------------- ------------------- (6 Month Period Ending June
30 and December 31, to be Reported by the Following July 31 and January 31).
Article 4A. ROYALTIES (5% of all revenues received or $1 for each
1,000 gallons of input, whichever is greater)
(i) (a) Revenues Received:
$------------ X 0.05
(b) Royalty Calculated:
$------------
(ii) (c) No. of 1,000 gallons of input: x $1.00= $
---------- ------------
(d) Twenty-five percent (25%) of Gross Profit =$
------------
(e) Royalty Calculated = lesser of amount
on line (c) or (d): $
------------
Royalty owed [greater of amount on line (b) or (e)]
$
- ------------
2. Article 4B. ROYALTIES (5% of installed cost of a facility or
$40,000 whichever is greater, per facility)
<PAGE>
$ Installed cost of a facility $
------------
X 0.05
$ Amount Royalties Owed: $
------------
OR (whichever is greater)
$40,000
$ Amount Royalties Owed: $
------------
3. Article 6C. Royalties from sublicenses
$ Amount Royalties Owed: $
------------
TOTAL ROYALTIES DUE: $
------------
US
SIGNED BY
-------------------------------
PRINTED NAME
-----------------------------
TELEPHONE NO.
----------------------------
DATE
-------------------------------------
TELEFAX NO.
------------------------------
<PAGE>
LICENSE AGREEMENT
BETWEEN
BATTELLE MEMORIAL INSTITUTE
AND
THERMOENERGY CORPORATION
<PAGE>