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 DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 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
<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>
December 31, September 30,
1997 1997
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Cash - Total Current Assets $ 30,666 $ 65,046
Advances to officers 268,365 258,365
Accrued interest receivable - officers 29,368 23,669
Property and equipment, at cost:
Equipment 14,818 14,818
Furniture and fixtures 4,991 4,991
Less accumulated depreciation (17,686) (16,978)
------------- --------------
2,123 2,831
-------------- ---------------
$ 330,522 $ 349,911
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 820,031 $ 778,712
Accrued expenses:
Salaries 648,960 590,976
Interest - stockholders 116,264 92,893
Deferred compensation 238,519 233,516
Notes payable to stockholders (Note 2) 1,072,900 1,052,900
----------- -----------
Total Current Liabilities 2,896,674 2,748,997
----------- -----------
Stockholders' equity (deficit) (Notes 3 and 6):
<PAGE>
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 (6,904,503) (6,737,437)
----------- -----------
(2,566,152) (2,399,086)
----------- -----------
$ 330,522 $ 349,911
=========== ============
</TABLE>
See notes to financial statements.
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
During
Development
Stage Through Three Months Ended
December 31, December 31,
1997 1997 1996
---- ----
(Unaudited) (Unaudited)
Operating Expenses:
General and administrative $5,135,224 120,526 176,208
Payments under licenses 652,266
Travel and entertainment 947,631 29,024 34,802
6,735,121 149,550 211,010
Loss From Operations
(6,735,121) (149,550) (211,010)
Other Income (Expense)
Interest income
82,489 5,855 2,313
<PAGE>
Interest expense 251,871) (23,371) (13,087)
-------- -------- --------
(169,382) (17,516) (10,774)
Net Loss (6,904,503) (167,066) (221,784)
=========== ========= ========
Basic and Diluted
Per Common Share (Note 4)
Loss From Operations $ (1.81) $ (0.04) $ (0.06)
Net Loss $ (1.85) $ (0.04) $ (0.06)
See notes to financial statements.
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Periods Ended September 30, 1988 Through September 30, 1997 and the
Three Months Ended December 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>
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
Three Months Ended December 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, 1997 and the
Three Months Ended December 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 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
Three Months ended December 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) 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) (2,399,096)
Net loss (167,066) (167,066)
-------------------------------- ------------ ------------
Balance (deficit), December 31, 1997
(Unaudited) $ 3,487 $4,334,864 $(6,904,503) $(2,566,152)
======= ========== ============ ===========
</TABLE>
See notes to financial statements
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
Development
Stage Through Three Months Ended December 31,
December 31, 1997 1997 1996
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating activities:
Net loss $(6,904,503) $(167,066) $(221,784)
Items not requiring
(providing) cash:
Depreciation 17,686 708 406
Expenses funded by Common
Stock issuance 596,279
Other 3,341
Changes in:
Advances to officers (467,348) (10,000) (26,000)
Other assets (29,368) (5,699) (2,313)
Accounts payable 820,031 41,319 (30,637)
Accrued expenses 765,224 81,355 73,187
Deferred compensation 437,501 5,003 4,480
------------- ------------ ------------
Net cash used in
operating activities (4,761,157) (54,380) (202,661)
----------- ----------- ----------
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 20,000 185,000
Proceeds from convertible debentures 475,000
Payments on notes payable (154,609)
Other 108,410
Net cash provided by
financing activities 4,814,972 20,000 185,000
----------- ---------- ----------
Increase (decrease) in cash 30,666 (34,380) (17,661)
Cash, beginning of period 0 65,046 62,333
----------------- ---------- -----------
Cash, end of period $ 30,666 $ 30,666 $ 44,672
============ ========= ==========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
UNAUDITED
NOTE 1: FINANCIAL STATEMENTS
The balance sheet as of December 31, 1997, the statements of operations and cash
flows cumulative during development stage through December 31, 1997, the
statements of operations for the three months ended December 31, 1997 and 1996
and the statements of changes in stockholders' equity (deficit) and cash flows
for the three months ended December 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 December 31, 1997 and for all periods presented have been
made. Operating results for the three months ended December 31, 1997 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
During November 1997, the Company executed a 10% note payable to a stockholder
for $20,000, which increased the aggregate outstanding amount of such notes to
$676,000. At December 31, 1997 the Company was committed to issue 67,600 shares
of Series B Common Stock to the holders of the notes (see Note 6).
Notes payable of $30,000, $60,000 and $50,000 matured on October 25, 1997,
December 1, 1997 and February 1, 1998, respectively. The holders of these 10%
notes did not execute modification agreements extending the maturity of the
notes past those dates. During February 1998, the stockholders agreed to accept
Series 98, 15% Convertible Debentures (see Note 6) in exchange for the amounts
owed to them by the Company.
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.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
UNAUDITED
NOTE 3: COMMON STOCK (CONTINUED)
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 preconditions 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 December 31, 1997, 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, which was effective for the period
ended December 31, 1997, 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
December 31, 1997
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 3,722,213 shares for the period
cumulative since inception through December 31, 1997, and 4,045,558 and
3,799,554 shares for the three month periods ended December 31, 1997 and 1996,
respectively.
Warrants to purchase approximately 736,000 shares 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 6 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
December 31, 1997
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
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 March of 1998 and will
run for 150 consecutive days. In addition, the Company is in the process of
negotiating a STORS demonstration facility for the San Bernardino Valley
Municipal 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.iating similar arrangements for the third demonstration project.
Since its formation in 1988, the Company has devoted substantially all of
its resources to funding the payments due under license agreements, searching
for opportunities to employ its technologies in demonstration facilities and
seeking capital necessary to sustain the Company's efforts. After a
demonstration unit has been successfully operated and the Technologies have been
proven commercially viable, the Company may still require additional investment
capital and/or debt financing to continue its operations.
Plan of Operations
The Company 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 6 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.
Management is seeking other sources of funding 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
Three months ended December 31, 1997 compared to three months ended
December 31, 1996
For the three months ended December 31, 1997, the Company incurred a net
loss of $167,066 as compared to $221,784 for the three months ended December 31,
1996.
General and administrative expenses and travel expenses decreased during
the period ended December 31, 1997 compared to December 31, 1996 due to the
Company's efforts to reserve cash due to the failure of the proposed public
offering. Interest expense increased between the same two periods due to the
increase in notes payable to stockholders.
Liquidity and Capital Resources
During the period ended December 31, 1997, the Company used $54,380 of cash
in operations compared to $202,661 in 1996. 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 1997, 1996 and 1995, the Company met its liquidity needs primarily
from borrowings from stockholders (see Note 4 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 has 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
forward as it cannot be determined when or if the Company will be able to
utilize the net operating losses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party to any pending
legal proceedings, nor are any legal proceedings pending of which any of the
Company's property is the subject.
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Report on Form 8-K
(a) None.
(b) One report onm Form 8-K was filed by the Company on January 13, 1998,
listing in Item 5 - Other Events (The Company's inability to obtain financing
necessary to engage its independent auditors for providing the financial
information required for the Form 10-K for the year ending September 30, 1997.)
No other reports on Form 8-K have been filed during the quarter ending December
31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment report to be signed on its behalf of
the undersigned, thereunto duly authorized.
Date: February 26, 1998
THERMOENERGY CORPORATION
BY: /s/ P. L. Montesi
--------------------------------
P. L. MONTESI
President, Treasurer and
Principal Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS FOR THERMOENERGY CORPORATION FOR THE QUARTER
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000884504
<NAME> THERMOENERGY CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 30,666
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,666
<PP&E> 19,809
<DEPRECIATION> (17,686)
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0
0
<COMMON> 3,486,797
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<TOTAL-LIABILITY-AND-EQUITY> 330,522
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