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 SEPTEMBER 30, 1999
[ ] 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)
----------------------------------------------------
(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
------- -------
The number of shares outstanding of each of the issuer's classes of common
stock, as of September 30, 1999:
3,554,822 shares of Common Stock, par value $.001 per share
<PAGE>
ITEM 1
THERMOENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
(Unaudited) (Note 1)
ASSETS
<S> <C> <C>
Cash - Total Current Assets $ 259,995 $ 242,486
Advances to officers 556,015 381,015
Accrued interest receivable - officers 86,815 49,567
Property and equipment, at cost:
Equipment 14,818 14,818
Furniture and fixtures 4,991 4,991
Less accumulated depreciation (19,809) (19,809)
--------- ---------
$ 902,825 $ 673,068
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 604,872 $ 590,903
Accrued interest payable - primarily to related parties 347,609 246,671
Deferred compensation ,563,488 1,192,779
Notes payable to stockholders (Notes 2 and 5) 286,560 932,900
Total Current Liabilities ,802,529 2,963,253
Convertible Debentures (Notes 2 and 4) 2,199,379 906,000
- - --------- -------
Total Liabilities 5,001,908 3,869,253
Stockholders' equity (deficit) (Notes 3, 4 and 6):
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; September 30, 1999: issued - 3,638,651 shares; outstanding -
3,554,822 shares; September 30, 1998: issued - 3,486,797
shares; outstanding - 3,402,968 shares 3,639 3,487
Additional paid-in capital 4,503,287 4,334,864
--------- ---------
Deficit accumulated during the development stage (8,606,009) (7,534,536)
(4,099,083) (3,196,185)
---------- ----------
$ 902,825 $ 673,068
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
During
Development
Stage Through Nine Months Ended Three Months Ended
September 30, September 30, September 30,
1999 1999 1998 1999 1998
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating Expenses:
General and administrative $ 6,468,542 $ 725,828 $ 435,717 $ 190,186 $ 90,703
License and royalties fees 761,016 83,750 25,000 16,250 25,000
Travel and entertainment 1,165,314 128,789 61,448 53,695 26,249
--------- ------- ------ ------ ------
8,394,872 938,367 522,165 260,131 141,952
--------- ------- ------- ------- -------
Loss From Operations (8,394,872) (938,367) (522,165) (260,131) (141,952)
---------- -------- -------- -------- --------
Other Income (Expense)
Interest income 147,738 32,692 22,539 13,901 9,357
Gain on settlement of lawsuit
(Note 6) 243,779 243,779
Other 49,550 49,550
Interest expense
(652,137) (215,400) (130,407) (94,552) (56,087)
-------- -------- -------- ------- -------
(211,070) 110,621 (107,868) (80,651) (46,730)
-------- ------- -------- ------- -------
Net Loss $ (8,605,942) $ (827,746) $ (630,033) $ (340,782) $ 188,682)
============ =========== =========== =========== ==========
Basic and Diluted
Per Common Share (Note 4)
Loss From Operations $ (2.22) $ (0.23) $ (0.13) $ (0.06) $ (0.04)
Net Loss $ (2.28) $ (0.20) $ (0.16) $ (0.08) $ (0.05)
</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, 1998 and the Three Months
Ended December 31, 1998(Unaudited) and the Nine Months Ended September 30, 1999
(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
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)
</TABLE>
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) CONTINUED
Periods Ended September 30, 1988 Through September 30, 1998 and
the Three Months Ended December 31, 1998 (Unaudited) and the
Nine Months Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
----- ------- ----- -----
<S> <C> <C> <C> <C>
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
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
</TABLE>
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) CONTINUED
Periods Ended September 30, 1988 Through September 30, 1998 and
the Three Months Ended December 31, 1998 (Unaudited) and the
Nine Months Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
----- ------- ----- -----
<S> <C> <C> <C> <C>
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
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)
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)
-------- -------- -------- --------
</TABLE>
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) CONTINUED
Periods Ended September 30, 1988 Through September 30, 1998 and
the Three Months Ended December 31, 1998 (Unaudited) and the
Nine Months Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
----- ------- ----- -----
<S> <C> <C> <C> <C>
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 (797,099) (797,099)
-------- -------- -------- --------
Balance (deficit), September 30, 1998 3,487 4,334,864 (7,534,536) (3,196,185)
Net loss (243,660) (243,660)
-------- -------- -------- --------
Balance (deficit), December 31, 1998 3,487 4,334,864 (7,778,196) (3,439,845)
Issuance of stock in connection with 10%
notes payable to stockholders, January
1999 (67,600 shares at par value) 67 (67)
Conversion of $130,340 of notes payable to
stockholders and accrued interest, April
May and August 1999 (84,254 shares) 85 168,423 168,508
Net loss (827,746) (827,746)
-------- -------- -------- --------
Balance (deficit), September 30, 1999 $ 3,639 $ 4,503,287 $(8,606,009) $(4,099,083)
=== ==== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
During
Development
Stage Through Nine Months Ended September 30,
September 30, 1999 1999 1998
------------------ ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating activities:
Net loss $(8,605,942) $ (827,746) $ (630,033)
Items not requiring
(providing) cash:
Depreciation 19,809 2,123
Expenses funded by Common
Stock issuance 596,279
Other (Note 6) (215,438) (218,779) 16,000
Changes in:
Advances to officers (754,998) (133,000) (112,650)
Other receivables (86,815) (28,568) (20,199)
Accounts payable 734,495 170,312 (184,076)
Accrued expenses 514,533 215,403 72,423
Deferred compensation 1,762,470 281,374 318,232
Net cash used in
operating activities (6,035,607) (541,004) (538,180)
---------- -------- --------
Investing activities:
Purchase of fixed assets (19,808)
Proceeds from sales of securities (Note 6) 218,779 218,779
Other (3,341)
Net cash used in ---------- -------- --------
investing activities 195,630 218,779
---------- -------- --------
Financing activities:
Proceeds from issuance of
Common Stock and warrants 2,720,562
Proceeds from notes payable 1,665,609
Proceeds from convertible debentures 1,760,000 469,000 750,000
Payments on notes payable (154,609)
Other 108,410
Net cash provided by
financing activities 6,099,972 469,000 750,000
---------- -------- --------
Increase (decrease) in cash 259,995 146,775 211,820
Cash, beginning of period 0 113,220 30,666
Cash, end of period $ 259,995 $ 259,995 $ 242,486
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 1999
NOTE 1: BASIS OF PRESENTATION
On September 21, 1998, the Board of Directors of ThermoEnergy Corporation (the
"Company") approved a change in the Company's fiscal year end from September 30
to December 31. A transition report on Form 10-Q for the three months ended
December 31, 1998 was filed with the Securities and Exchange Commission in
connection with the change in fiscal year end.
The accompanying unaudited financial statements statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three- and nine-month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
The balance sheet at September 30, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
September 30, 1998.
NOTE 2: NOTES PAYABLE TO STOCKHOLDERS AND CONVERTIBLE
DEBENTURES
During November 1998, the Company's Board of Directors approved the issuance of
up to $1,500,000 (an increase of $500,000 from the amount previously authorized)
of the Series 98, 15% Convertible Debentures, due January 15, 2003. During June
1999, the Company's Board of Directors increased the authorized amount of the
Debentures to $2,500,000. The Company issued $50,000 of such Debentures during
the three months ended December 31, 1998 and $1,243,379 during the nine months
ended September 30, 1999 of which $644,756 were issued in payment of certain of
the Company's 10% notes payable to stockholders and related accrued interest and
a Debenture in the amount of $129,623 was issued in satisfaction of accounts
payable to Battelle Memorial Institute.
The Company's Board of Directors approved the issuance of Series B Common Stock
at $2.00 per share in lieu of cash payment of the Company's 6.63% notes payable
to stockholders, which had matured, and related accrued interest and the
extension of the warrant agreements executed
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 1999
NOTE 2: NOTES PAYABLE TO STOCKHOLDERS AND CONVERTIBLE
DEBENTURES (continued)
in connection with the note agreements for an additional two-year period (see
Note 3). An additional $156,825 of the notes mature during the period October 1,
1999 through December 31, 1999 and the remainder of the notes ($109,735) matures
during 2000.
NOTE 3: COMMON STOCK
In January 1999, the Company issued 67,600 shares of Series B Common Stock to
the holders of the 10% notes payable to stockholders in accordance with the
related note agreements. The Company issued 84,254 shares of Series B Common
Stock to the holders of 6.63% notes payable to stockholders, which had matured
during the nine months ended September 30, 1999, in the aggregate amount of
$168,508, including $38,168 of accrued interest. On October 5, 1999, the Company
issued 25,340 shares of Series B Common Stock in satisfaction of $39,225 of
6.63% notes payable to stockholders plus accrued interest.
During June 1999, the Board of Directors approved executive bonuses for two
officers in the form of 150,000 non-qualified stock options to each officer. The
options expire in five years and are exercisable at $2.00 per share. Since the
exercise price approximates the fair value of the Company's Series B Common
Stock, no compensation expense was accrued in the accompanying financial
statements.
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, 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. The adjusted weighted average number of common shares
used in the basic and diluted loss per share computations were 3,777,232 shares
for the period cumulative since inception through September 30, 1999, 4,148,389
and 4,045,558 shares for the nine-month periods ended September 30, 1999 and
1998, respectively, and 4,178,131 and 4,045,558 shares for the three-month
periods ended September 30, 1999 and 1998, respectively.
Warrants to purchase approximately 799,000 shares of Series B Common Stock,
stock options for up to 750,000 shares of Series B Common Stock under the 1997
Stock Option Plan and for 300,000 shares for executive bonuses, were not
included in the computation of diluted loss per share since the effect would be
antidilutive. At September 30, 1999, the Company had issued $2,199,379 of 15%
Convertible Debentures, due January 15, 2003. 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 (Unaudited)
September 30, 1999
NOTE 5: MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
The Company has incurred net losses since inception and has $156,825 of the
6.63% notes payable to stockholders maturing during the remainder of 1999 and
$109,735 of such notes maturing during 2000. Additionally, substantial capital
will likely be required to continue commercialization of the 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 during the next year. The Company
is authorized to issue up to $2,500,000 of Series 98 Convertible Debentures and
to issue Series B Common Stock to the holders of the 6.63% notes payable to
stockholders upon maturity. The sale of stock pursuant to private placement or
public offerings and fees from projects involving the Technologies are other
alternatives management is pursuing. 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.
The overall goal of the Company is to successfully complete a demonstration
project for STORS, NitRem and/or ARP. 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 agreements with third parties in
order to pursue this business strategy.
NOTE 6: COMMITMENTS AND CONTINGENCIES
During 1998, the Company filed a lawsuit seeking compensatory and punitive
damages from the broker-dealer involved in the Company's 1997 failed public
offering. During June 1999, the Company and the broker-dealer entered into a
release and settlement agreement. In connection with this agreement, the Company
received $25,000 in cash and a commitment to receive an additional $50,000 in
cash prior to the end of 1999, 50,000 shares of common stock of the parent
company of the broker-dealer (the "Stock"), and 20,000 warrants to purchase
shares of the Stock at a price of $4.00 per share for a period of five years
from the date of the agreement.
<PAGE>
THERMOENERGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 1999
NOTE 6: COMMITMENTS AND CONTINGENCIES (continued)
The Company sold all 50,000 shares of the Stock during June 1999. The Company
also exercised warrants for 5,000 shares of the Stock which were sold during
June 1999. A gain of $243,779 was recorded in the accompanying 1999 financial
statements in connection with the release and settlement agreement.
During November 1998, the Company entered into a consulting agreement with a
third party in connection with the City of New York demonstration project. The
agreement specifies compensation at an hourly rate plus expenses for services
rendered. In the event the Company sells an ARP unit to or operates an ARP unit
for the City of New York under a privatized agreement, the agreement provides
for additional cash compensation based upon a percentage of the overall capital
cost of the ARP demonstration facility and for the issuance of warrants to
purchase 62,500 shares of Series B Common Stock of the Company at an exercise
price of $4.00 per share, exercisable within two years from the date of issuance
of the warrants.
During November 1998, the Company entered into an employment agreement with an
individual to serve as the Company's Executive Vice President and Senior Vice
President of Corporate Technology. In order to assist the Company in conserving
cash, an amendment to the agreement was executed which provides the executive
with a half-time position for a period not to exceed twelve months. The
employment agreement provides for, among other things, basic, incentive and
other compensation.
The Company is the general contractor in connection with a Technology
demonstration for the City of Colton, California, which is being funded by a
federal grant. The Company has contracted with Foster Wheeler Environmental
Corporation ("FWEC") to fabricate, install and operate the demonstration unit.
The Company has received funds aggregating approximately $1,800,000 from the
City of Colton of which approximately $1,600,000 have been paid to FWEC and
other subcontractors. The custodial funds held by the Company pending payment to
subcontractors for the project, are maintained in a separate bank account which
is not included in the accompanying financial statements.
<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
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. Another component of the Company's business strategy
is to enter 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. On September 11, 1998, the Company agreed to form ThermoEnergy
Environmental Corporation ("TENC") with Foster Wheeler Environmental Corporation
("FWENC") of Livingston, New Jersey to pursue clean water projects worldwide.
The new company will combine the Company's state-of-the-art clean water
technologies with WENC's engineering expertise and global presence to pursue
industrial and municipal water/wastewater projects around the world and is the
Company's first joint venture. The Company also has joint marketing arrangements
with Roy F. Weston, Inc., Dan Cowart Inc., and Mitusi & Co. (U.S.A.) and plans
to enter project specific working arrangements when such projects are identified
and funding is obtained. (See strategic corporate alliances ). The Company does
not currently possess the technical, operational or financial resources
necessary to construct or operate STORS , NitRem or ARP facilities at either a
demonstration or commercial facility level and has relied on U.S. Government
grants and funding from its strategic partners to fund its demonstration
projects.
The Radford Army Ammunition Plant and the New York City demonstration
projects were funded by the U.S. Army and Foster Wheeler Corporation,
respectively. The Colton STORS Project is funded by a federal grant administered
by the U.S. EPA. ( See summary below) Consequently, the Company's operations
continue to depend upon its ability to attract adequate capital, so that it may
in turn acquire the technical and operational expertise and services required
for the commercialization of the STORS, NitRem the ARP technologies. With regard
to STORS, no facilities have yet been built, outside Japan, on a commercial
basis.
<PAGE>
STORS Project
In May of 1996, ThermoEnergy and Battelle representatives met with
officials at San Bernardino Valley Water District ("SBVWD") to discuss siting of
a full-scale STORS/NitRem demonstration project (the "Project") in the San
Bernardino area. Subsequently, the United States House and Senate approved ( PL
104-204, September 26, 1996) a $3,000,000 federal grant to the SBVWD for the
design, construction and operation of a large-scale STORS Waste Water Treatment
Demonstration Facility. The General Accounting Office authorized the EPA's San
Francisco office to disburse the funds accordingly and to administer this grant
for the SBVWD project. In March, 1998, the SBVWD selected the City of Colton,
California to host the Project. On September 3, 1998, the Company signed an
agreement with the City of Colton for the Company to demonstrate its
STORS/NitRem technology. The EPA grant will pay for the construction of the
demonstration test equipment. At the conclusion of the demonstration project,
all right, title and interest to the test equipment shall be vested in the EPA.
The Company will not be required to make capital contributions to this project.
The Company will not receive any revenues or earnings from this project, but
will be reimbursed for administrative and operating costs. Subsequently the
Company contracted with Foster Wheeler Environmental Corporation ( See strategic
relationships) to fabricate, install and operate the STORS demonstration unit .
The design plans for the Project have been completed. The Company is the general
contractor on the Project, and, as such, has received approximately $1,800,000
in funds from the City of Colton. Through September 30, 1999, The Company has
paid approximately $1,600,000 to subcontractors and other vendors, primarily to
FWENC. Once in operation, the Colton STORS facility will have a larger
processing capacity than 70% of the existing municipal wastewater plants in the
U.S. The demonstration project is scheduled to begin in the fourth quarter of
1999.
United States Department of the Army Program
ThermoEnergy and Sam Houston State University, doing business as the Texas
Regional Institute for Environmental Studies ("TRIES") signed an agreement in
October 1994 allowing ThermoEnergy to demonstrate its NitRem technology to
evaluate the nitrogen removal process and its ability to economically and safely
treat TNT redwater, DNT contaminated wastewater and various other RCRA waste
streams within the Department of Defense ("DoD") industrial base and DoD
commercial facilities. ThermoEnergy is the lead subcontractor on this project.
The first NitRem commercial scale DSR unit was demonstrated at the Radford
Army Ammunition Plant, in Radford, Virginia. The $5,000,000 NitRem demonstration
project has been completed and been approved by the Army Armament Research
Development Command ("ARDEC"). Pursuant to a purchase order issued by ARDEC,
ThermoEnergy engaged Glitsch Process System Inc. (a wholly-owned subsidiary of
Foster Wheeler Corporation) to fabricate the NitRem unit. The demonstration unit
was delivered to Radford on June 16, 1997 and began testing and processing DoD
waste streams July 21, 1997. Under the Company's supervision, this demonstration
facility was used to process a number of different hazardous waste streams
resulting from the manufacture of explosives, including TNT, DNT, HMX and RDX.
This NitRem system WAS been designed as a mobile system in order to
process additional waste streams from other Department of Defense sites.
Testing and processing of the of the DoD RAPP test material was concluded
on September 5, 1997. The final results and report from TRIES indicates that the
NitRem DSR reduces DNT in contaminated wastewater to a level which could be
discharged without further wastewater treatment. Based on these results, the
Company is actively marketing NitRem to the DoD and to private industry.
<PAGE>
New York City Project
The second commercial scale nitrogen removal demonstration project is a
team effort between ThermoEnergy, Foster Wheeler Environmental Corporation and
the City of New York to test the Company's capability to cost-effectively
eliminate the concentrated ammonia discharge, or centrate, from eight of New
York City's fourteen waste water treatment facilities. The City of New York
currently produces over 4.5 million gallons of centrate daily, which the City
projects will reach five million gallons daily by 2001. This concentrated
ammonia waste stream is a leading cause of eutrophication in the Long Island
Sound. Laboratory tests conducted on actual samples of New York City centrate in
May of 1996, and June of 1997, by Battelle successfully resulted in eliminating
the ammonia present in the centrate. The City of New York and the Company signed
a No Cost Test Agreement in July 1996 which allowed the Company to demonstrate,
on site, the Company's nitrogen removal processes, including NitRem and other
such nitrogen removal processes as the Company may acquire, to wit: ARP. The
Company decided to demonstrate the capabilities of its ARP technology at New
York City's Staten Island wastewater treatment facility. On August 4, 1998, the
Company signed an agreement with FWEC to provide up to $500,000 funding
necessary to demonstrate ARP and to design, fabricate and operate the ARP pilot
plant. (See Strategic Corporate relationships). The New York ARP demonstration
was successfully completed on December 18, 1998. Based on the data generated
during the demonstration and computer modeling for large-scale commercial
systems, the economics of the Centrate Ammonia Recovery or (ARP) process are
excellent when compared to alternative sources such as steam stripping, hot air
stripping and biological nitrogen reduction technologies. Depending on the
throughput of the commercial system, on a privatized basis, the cost to the
client (municipality) to treat ammonia laden wastes with ARP at the
concentrations found in the centrate, would be between 3 cents and 4 cents per
gallon, including capital equipment recovery overhead. Based upon the
demonstration results, the Company is actively seeking a privatized contract to
process New York City's centrate through it's joint venture with FWENC.
STRATEGIC CORPORATE RELATIONSHIPS
In September 1994, the Company and Foster Wheeler USA Corporation executed
a non-binding Worldwide Marketing Agreement whereby both companies have agreed
to jointly market, develop and commercialize the Technologies on a non-exclusive
basis. The companies have agreed in principle to work together to develop
marketing strategies, identify potential projects and develop joint proposals.
The agreement contemplates that when a potential project is identified, the
Company will provide Foster Wheeler USA Corporation with the necessary process
and design information, and Foster Wheeler USA Corporation will design, procure
and construct the required processing facilities for any contracts awarded.
Under the agreement, each party is subject to confidentiality obligations. The
initial term of the agreement is ten years and the agreement will be
automatically extended in three-year periods thereafter. The agreement may be
terminated by the mutual agreement of the parties. The Company and Foster
Wheeler USA Corporation are working on a marketing strategy for private sector
business, initially targeting the pharmaceutical, pulp and paper and
petrochemical industries in the U.S. and Europe. In addition, the Company and
Foster Wheeler USA Corporation have begun a joint marketing effort within the
Department of Navy Surface Systems Command.
On September 11, 1998, the Company agreed to form ThermoEnergy
Environmental Corporation with Foster Wheeler Environmental Corporation of
Livingston, New Jersey to pursue clean water projects worldwide. The new company
will combine the Company's state-of-the-art clean water technologies with
FWENC's engineering expertise and global presence to pursue industrial and
municipal water/wastewater projects around the world and is the Company's first
joint venture. The Company will own 49.9% of TENC. The main purpose of the joint
venture, among other things, is to develop, market and utilize the ARP
technology. Concurrently with agreeing to form TENC, the Company entered into a
Shareholders agreement by an among FWENC, the Company and TENC and a worldwide
sublicense of the ARP technology to TENC for municipal and agricultural
livestock production facilities.
<PAGE>
In March 1996, the Company entered into a Marketing Agreement with the
Atlanta based Dan Cowart, Inc. ("DCI") to market, develop and commercialize the
Technologies in Georgia and Florida. DCI is a multi-discipline construction and
development firm for large scale real estate projects. Under the agreement, the
Company has granted DCI the exclusive right to exploit any and all applications
of the Technologies for municipal, local governmental and real estate
development markets in Georgia and Florida, and the nonexclusive right to
exploit any and all applications of NitRem for industrial markets in Georgia and
Florida. The agreement contemplates the formation of a joint venture between the
companies to construct and operate future projects. The Company will provide
technical and administrative support to assist DCI in its efforts to obtain such
projects. The Company will derive revenue upon the sale of a STORS/DSR or NitRem
DSR unit to an end-user, and fees associated with the operation of such
projects. DCI is to be paid a one time success fee of 62,500 warrants
convertible into 62,500 shares of ThermoEnergy Series B Common Stock,
exercisable within ten years from the date of granting the warrants at a price
of $2.00 per share, within 90 days upon the signing of an agreement with a
target customer to purchase or utilize any of one of the Technologies. The
agreement is for a term of ten years and required DCI to produce a contract for
a project by March 28, 1998 to retain exclusivity. Thereafter, the contract can
be terminated by either party upon one month's written notice and DCI's rights
to the Technologies in Georgia and Florida would become nonexclusive. The
Company in conjunction with Battelle, is developing a comprehensive audio-visual
presentation to be used by DCI in its marketing efforts. In addition, DCI has
engaged the services of a regional engineering firm to work directly with the
Company and Battelle to work on scheduling meetings with municipal and state
waste water authorities in Georgia and Florida. Currently, no specific projects
are being negotiated.
In April 1996, the Company entered into a non-binding Memorandum of
Understanding with Roy F. Weston, Inc. ("Weston") of West Chester, Pennsylvania,
which may be terminated by either company upon written notice to the other.
Weston is an engineering firm which participates in the development of large
scale civil engineering projects. The purpose of the memorandum is to provide a
preliminary framework for the joint pursuit by the companies of business
opportunities for the application of the Technologies. The memorandum
contemplates that Weston will provide engineering, construction management,
installation, operations and maintenance services in connection with such
projects, while the Company will provide the Technologies at a reasonable fee no
greater than the Company's most favored licensees. The memorandum incorporates
by reference a Proprietary Information Agreement dated August 22, 1995,
previously signed by the parties pursuant to which each company has agreed to
maintain in confidence all proprietary information furnished by the other.
Currently, no specific projects are being negotiated.
In October 1996, the Company entered into a non-binding Memorandum of
Understanding ("MOU") with Foster Wheeler Environmental Corporation and Mitsui &
Co. (U.S.A.), Inc. ("Mitsui") regarding potential water and waste water projects
in Brazil, Mexico and Peru. The purpose of the MOU is to set forth the likely
roles of the companies in connection with any business involving the
Technologies. As contemplated by the MOU, ThermoEnergy Corporation would provide
the rights to use the Technologies for projects jointly developed in Brazil,
Mexico and Peru, Foster Wheeler Environmental Corporation would, on contract
awards, design, construct and, possibly, operate the Technologies at the
identified projects, and Mitsui would gather information regarding
opportunities, identify projects, and, possibly, seek to arrange financing for
various projects. The participants have held several meetings pursuant to the
MOU to discuss possible projects.
<PAGE>
The Company has historically lacked the financial and other resources
necessary to market the Technologies or to build demonstration projects. The
Company believes that its joint venture (TENC) working arrangement with Foster
Wheeler Environmental Corporation will enable the Company to identify and fund
future projects The Company believes that establishing such relationships is the
most efficient and effective way to commercialize the Technologies.
Management believes the STORS/NitRem combination facility goes further than
other technologies to solving the total waste problems faced by a waste water
facility. For example, the Company believes that STORS and NitRem offer POTWs a
more cost-effective basis for tertiary water treatment, allowing the recovery
and reuse of water processed through the waste water treatment plant with a
minimal amount of processing. STORS removes nitrogen, heavy metals, phosphorus,
many toxic compounds and produces a high energy fuel. Industrial wastewater
often poses the same issues as does municipal wastewater. In addition, there is
a large volume of toxic slurries and solutions which pose an even greater
problem for their generators than exists for municipalities. A review of the
regulatory and technical situation for industrial discharges was presented in
the industry journal "Chemical Engineering" in June of 1992: Part 1 - New
Environmental Regulations Pose Challenges for Industry, and Part 2 - A Guide to
Industrial Pretreatment. The review demonstrates the diversity of wastewater
issues faced by industrial facilities, and it is clear that the best solution
will vary by industry and even by facility. However, management believes that
there are many situations where either a robust technology, insensitive to
pollutant concentrations and solids content, or a high destruction efficiency
will be required. These situations will often become sales opportunities for the
Company. In addition, management believes by using smaller size STORS and NitRem
plants POTWs will be able to handle the same flow capacity with lower capital
and operating costs.
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 the proposed public
offering to fund it's day-to-day the operations until such time as the Company
either made substantial equipment sales or secured a long-term privatized
contract. All of the Company's demonstration projects have been funded by grants
or by its strategic corporate partners. As discussed in Note 7 of the financial
statements included in the Company's annual report of Form 10-K for the year
ended September 30, 1998, the managing underwriter of the proposed offering
notified the Company in October of 1997 that it would be unable to complete the
offering. The Company now plans to use the proceeds from the sale of $2,500,000
of convertible debentures to satisfy the cash requirements of its basic
operations for the next year. The Company also plans to repay the remaining
6.63% notes payable ( $266,560) and related accrued interest by issuing shares
of Series B restricted Common Stock to the holders of the notes if sufficient
funds are not available to repay the notes at maturity. ($156,825 mature during
the remainder of 1999 and $109,735 mature during 2000).
During June, July and August of 1999, the Company issued Series 98, 15%
Convertible Debentures in satisfaction of the 10% notes payable to stockholders
aggregating approximately $645,000, including accrued interest.
<PAGE>
On September 11, 1998, the Company agreed to form ThermoEnergy
Environmental Corporation with Foster Wheeler Environmental Corporation of
Livingston, New Jersey to pursue clean water projects worldwide. The new Company
will combine the Company's state-of-the-art clean water technologies with
FWENC's engineering expertise and global presence to pursue industrial and
municipal water/wastewater projects around the world. The Company will own 49.9%
of TENC. The main purpose of the joint venture, among other things, will be to
develop, market and utilize the ARP technology. Concurrently with forming TENC,
the Company entered into a Shareholders agreement by an among FWENC, the Company
and TENC and a worldwide sublicense of the ARP technology to TENC for municipal
and agricultural livestock production facilities. On August 4, 1998, the Company
signed an agreement FWEC to provide up to $500,000 funding necessary to
demonstrate the ARP technology and to design, fabricate and operate the ARP
pilot plant. It is thereafter anticipated that any commercial business derived
from the successful demonstration of ARP will be engaged through TENC. At the
option of the Company, projects utilizing NitRem, DSR and STORS may be engaged
through TENC.
The overall goal of the Company has been to successfully complete a full
scale demonstration of its technologies and to form strategic corporate
alliances to market the technologies discussed above. The Company has
successfully completed demonstration of the NtiRem; DSR and ARP technologies and
it scheduled to begin a STORS/NitRem project in the third quarter of 1999.
Management plans to utilize these demonstration projects and the TENC joint
venture to expand the visibility of the Company in the municipal, industrial,
Department of Defense and Department of Energy markets. These successful
demonstration projects are the single most important business factors in
implementing the Company's plan of operations as the Company takes on other
projects or makes an acquisition of another company to facilitate the
commercialization of its technologies.
<PAGE>
Results of Operations
For the nine months ended September 30, 1999, the Company incurred a net loss of
$827,746 as compared to $630,033 for the nine months ended September 30, 1998.
For the three months ended September 30, 1999, the Company incurred a net loss
of $340,782 compared to compared to $188,682 for the three months ended
September 30, 1998.
General and administrative expenses and travel expenses increased during
the nine and three-month period ended September 30, 1999, compared to September
30 1998, due to the Company's efforts regarding the projects discussed above.
Interest expense increased significantly between the same periods primarily due
to the issuance of approximately $1,293,000,of the Company's 15% Convertible
Debentures. As more fully discussed in Note 6 to the financial statements,
during June 1999, the Company recorded a gain of $243,779 in connection with the
settlement of a lawsuit filed by the Company against the managing underwriter of
the Company's proposed 1997 public offering and a gain of $49,550 in connection
with the sale of scrap parts to a third party.
Liquidity and Capital Resources
During the period ended September 30, 1999, the Company used $541,004 of
cash in operations compared to $538,180 , in the comparable period of 1998.
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 1999, 1998, and 1997, the Company met its liquidity needs primarily
from borrowings from stockholders. As discussed under Plan of Operations, the
Company converted all of its outstanding 10% notes payable to stockholders to
Series 98, 15% Convertible Debentures and plans to convert the remaining 6.63%
notes payable to stockholders to shares of Series B restricted Common Stock of
the Company if sufficient funds are not available to repay the notes at maturity
($156,825 mature during the remainder of 1999 and $109,735 mature during 2000).
Management plans to meet the Company's liquidity needs during the year ending
December 31, 1999 with proceeds from the sale of convertible debentures and
public or private placement offerings of Common Stock and from the proceeds from
the settlement of the Company's lawsuit against its former underwriter.
Management plans to meet long-term liquidity needs primarily from revenues
derived from commercial contracts the Company hopes to obtain subsequent the
successful demonstrations of its Technologies, such as the Radford NitRem and
New York City ARP projects and the upcoming Colton STORS/NitRem demonstration
project.
Net Operating Losses
The Company had net operating loss carry forwards as of September 30, 1998,
of approximately $5,500,000 which expire in the years 2003 through 2018. 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 $2,095,000
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
None
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) 10.36 Non Qualified Bonus Compensation Option Agreement for
P.L. Montesi
10.37 Non qualified Bonus Compensation Option Agreement for
Dennis Cossey
27.1 Financial Data Schedule.
(b) No other reports on Form 8-K have been filed during the quarter ending
September 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 9, 1999
THERMOENERGY CORPORATION
BY: /s/ P. L. Montesi
--------------------------------
P. L. MONTESI
President, Treasurer and
Principal Financial Officer
<PAGE>
Exhibit 10.36
OPTION
FOR THE PURCHASE OF
ONE HUNDRED FIFTY THOUSAND, (150,000)
SHARES OF SERIES B COMMON STOCK OF
THERMOENERGY CORPORATION
Incorporated under the laws of the State of Arkansas
ThermoEnergy Corporation, ( the "Corporation"), desiring to afford an
opportunity to P.L. Montesi, (" Grantee") to purchase Series B restricted common
stock of the Company to provide the Grantee with bonus compensation, hereby
grants to Grantee, and the Grantee hereby accepts, an option to purchase, one
hundred fifty thousand, (150,000) shares of Series B common stock (the "Common
Stock") ( the "OptionOption Shares") of the Corporation at a price (the
"Exercise Price") equal to Two ($2.00) per share, and to receive a certificate
or certificates for the Option shares upon the terms and conditions set forth
herein, at any time or from time to time, during the period commencing on the
date hereof and expiring at 5:00 p.m. on July 25, 2004, upon presentation and
surrender to the Corporation at the office of the Corporation, this Option with
the exercise form annexed hereto as Exhibit "1" duly completed and executed, and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check payable to the order of the
Corporation. This Option is not intended to be and shall not be treated as an
incentive stock option under Section 422 of the Internal Revenue Code.
1. This Option may be exercised at any time and from time to time
during the Exercise Period by the registered owner or owners hereof, in whole or
in part, for not less than one (1) full share of Common Stock of the
Corporation. If this Option is exercised at any time for less than the maximum
number of shares of Common Stock purchasable upon the exercise hereof, the
Corporation shall issue to the registered owner or owners of this Option a new
Option of like tenor and date representing the number of shares of Common Stock
equal to the difference between the number of shares purchasable upon full
exercise of this Option and the number of shares that were purchased upon
exercise of this Option. No fractional shares of Common Stock will be issued
upon the exercise of rights to purchase hereunder.
2. The Corporation covenants and agrees that all shares that may be
issued upon exercise of this Option shall, upon issuance, be duly and validly
issued, fully paid and nonassessable, and free of all taxes, liens, claims,
charges, encumbrances and adverse interests of any nature whatsoever, except
only for applicable restrictions under state and federal securities laws with
regard to the transferability thereof.
3. The aggregate number of shares of Common Stock of the Corporation
that the Option Holder is entitled to receive upon exercise of this Option is,
one hundred fifty thousand, (150,000) shares. The Corporation shall at all times
reserve from its authorized and unissued Common Stock and hold available a
sufficient number of shares issuable upon exercise of this Option. Unless and
until the Option Shares are registered, the Option Shares issued upon exercise
of the Option shall be subject to a stop transfer order and the certificate or
certificates evidencing such Option Shares shall bear the following legend:
" THE SHARES REPRESENTED BY THE CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT. SUCH SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
CONTAINED IN A OPTION, DATED JULY 1 1999, WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY"
<PAGE>
4. This Option may not be transferred by the Grantee other than by
will or the laws of descent and distributions and may be exercised during the
grantee's lifetime only by the Grantee or the Grantee's guardian or legal
representative. However, if these Options are not intended to be treated as an
incentive stock options under Section 422 of the Internal Revenue Code, it may
during the Grantee's lifetime also be transferred to and may thereafter be
exercised by members of the Grantee's immediate family, or a partnership whose
members include only he Grantee and/or members of the Grantee's immediate
family, or a trust for the benefit of only the Grantee and /or members of the
Grantee's immediate family; but this Options shall terminate immediately if it
has been transferred to a partnership or trust as permitted above and any person
who is not a member of the Grantee's immediate family becomes a member of such
partnership or beneficiary of such trust. At used herein, the Grantee's
immediate family includes only the Grantee's spouse, parents of other ancestors,
and children and other direct descendants of the Grantee of the Grantee's spouse
(including such ancestors and descendants by adoptions).
6. If the outstanding shares of stock of the class then subject to this
Option are increased or decreased, or are changed into or exchanged for a
different number of kind of shares or securities of to other forms of property
or rights, as a result of one or more reorganizations, recapitalization,
spin-offs, stock split, reverse stock splits, stock dividends of the like,
appropriate adjustment shall be made in the number and/or kind of shares or
securities or other forms of property or rights for which this Option may
thereafter be exercised, all without change in the aggregate exercise price
applicable to the unexercised portions of this Option, but with a corresponding
adjustment in the exercise price per share or other unit. No fractional share of
stock shall be issued under this option of in connection with any such
adjustment. Such adjustments shall be made by of under authority of the
Corporation's Board of Directors whose determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.
7. This Option will be void unless exercised by 5:00 P.M., Central
Standard Time, on July 25, 2004. If such date shall in the State of Arkansas be
a holiday or a day on which banks are authorized to close, then the Option may
be exercised on the next following day which in the State of Arkansas is not a
holiday or a day on which banks are authorized to close. This option may be
exercised by the Grantee or other person then entitled to exercise it by giving
four business days' written notice of exercise to the Corporation specifying the
number of shares to be purchased and the total purchase price, accompanied by a
check to the order of the Corporation in payment of such price. It the
Corporation is required to withhold on account of any federal, state or local
tax imposed as a result of such exercise, the notice of exercise, the notice of
exercise shall also be accompanied by a check to the order of the Corporation in
payment of the amount thus required to be withheld.
9. No person shall be entitled to the privileges of stock ownership in
respect of any shares issualbe upon exercise of the Option, unless and until
such shares have been issued to such person as fully paid shares.
8. This Option may not be redeemed by the Corporation at any time. In
witness whereof, the Corporation has caused this Option to be duly executed, by
its duly authorized officer, as of the 26st day of JulY 1999.
ThermoEnergy Corporation
By:/s/ P.L. Montesi, CEO
------------------------
P.L. Montesi, CEO
EXERCISE FORM
Exhibit "1"
The undersigned hereby: (1) subscribes for and offers to purchase ____
shares of Common Stock of ThermoEnergy Corporation, pursuant to the Option dated
July 26, 1999 to which this exhibit is attached; (2) encloses payment of
$__________ for these shares at a price of two dollars, ($2.00) per share; and
(3) requests that a certificate for the shares be issued in the name of the
undersigned or such other name as may be designated in writing by the
undersigned and delivered to the undersigned at the address specified below.
Date:______________________
(Please sign exactly as your
name appears on the Option)
------------------------------
-----------------------------
------------------------------
(Address of Option holder)
Option holder's social security
number ________________________
<PAGE>
Exhibit 10.37
OPTION
FOR THE PURCHASE OF
ONE HUNDRED FIFTY THOUSAND, (150,000)
SHARES OF SERIES B COMMON STOCK OF
THERMOENERGY CORPORATION
Incorporated under the laws of the State of Arkansas
ThermoEnergy Corporation, ( the "Corporation"), desiring to afford an
opportunity to Dennis Cossey, (" Grantee") to purchase Series B restricted
common stock of the Company to provide the Grantee with bonus compensation,
hereby grants to Grantee, and the Grantee hereby accepts, an option to purchase,
one hundred fifty thousand, (150,000) shares of Series B common stock (the
"Common Stock") ( the "OptionOption Shares") of the Corporation at a price (the
"Exercise Price") equal to Two ($2.00) per share, and to receive a certificate
or certificates for the Option shares upon the terms and conditions set forth
herein, at any time or from time to time, during the period commencing on the
date hereof and expiring at 5:00 p.m. on July 25, 2004, upon presentation and
surrender to the Corporation at the office of the Corporation, this Option with
the exercise form annexed hereto as Exhibit "1" duly completed and executed, and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check payable to the order of the
Corporation. This Option is not intended to be and shall not be treated as an
incentive stock option under Section 422 of the Internal Revenue Code.
1. This Option may be exercised at any time and from time to time
during the Exercise Period by the registered owner or owners hereof, in whole or
in part, for not less than one (1) full share of Common Stock of the
Corporation. If this Option is exercised at any time for less than the maximum
number of shares of Common Stock purchasable upon the exercise hereof, the
Corporation shall issue to the registered owner or owners of this Option a new
Option of like tenor and date representing the number of shares of Common Stock
equal to the difference between the number of shares purchasable upon full
exercise of this Option and the number of shares that were purchased upon
exercise of this Option. No fractional shares of Common Stock will be issued
upon the exercise of rights to purchase hereunder.
2. The Corporation covenants and agrees that all shares that may be
issued upon exercise of this Option shall, upon issuance, be duly and validly
issued, fully paid and nonassessable, and free of all taxes, liens, claims,
charges, encumbrances and adverse interests of any nature whatsoever, except
only for applicable restrictions under state and federal securities laws with
regard to the transferability thereof.
3. The aggregate number of shares of Common Stock of the Corporation
that the Option Holder is entitled to receive upon exercise of this Option is,
one hundred fifty thousand, (150,000) shares. The Corporation shall at all times
reserve from its authorized and unissued Common Stock and hold available a
sufficient number of shares issuable upon exercise of this Option. Unless and
until the Option Shares are registered, the Option Shares issued upon exercise
of the Option shall be subject to a stop transfer order and the certificate or
certificates evidencing such Option Shares shall bear the following legend:
" THE SHARES REPRESENTED BY THE CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT. SUCH SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
CONTAINED IN A OPTION, DATED JULY 1 1999, WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY"
<PAGE>
4. This Option may not be transferred by the Grantee other than by
will or the laws of descent and distributions and may be exercised during the
grantee's lifetime only by the Grantee or the Grantee's guardian or legal
representative. However, if these Options are not intended to be treated as an
incentive stock options under Section 422 of the Internal Revenue Code, it may
during the Grantee's lifetime also be transferred to and may thereafter be
exercised by members of the Grantee's immediate family, or a partnership whose
members include only he Grantee and/or members of the Grantee's immediate
family, or a trust for the benefit of only the Grantee and /or members of the
Grantee's immediate family; but this Options shall terminate immediately if it
has been transferred to a partnership or trust as permitted above and any person
who is not a member of the Grantee's immediate family becomes a member of such
partnership or beneficiary of such trust. At used herein, the Grantee's
immediate family includes only the Grantee's spouse, parents of other ancestors,
and children and other direct descendants of the Grantee of the Grantee's spouse
(including such ancestors and descendants by adoptions).
6. If the outstanding shares of stock of the class then subject to this
Option are increased or decreased, or are changed into or exchanged for a
different number of kind of shares or securities of to other forms of property
or rights, as a result of one or more reorganizations, recapitalization,
spin-offs, stock split, reverse stock splits, stock dividends of the like,
appropriate adjustment shall be made in the number and/or kind of shares or
securities or other forms of property or rights for which this Option may
thereafter be exercised, all without change in the aggregate exercise price
applicable to the unexercised portions of this Option, but with a corresponding
adjustment in the exercise price per share or other unit. No fractional share of
stock shall be issued under this option of in connection with any such
adjustment. Such adjustments shall be made by of under authority of the
Corporation's Board of Directors whose determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.
7. This Option will be void unless exercised by 5:00 P.M., Central
Standard Time, on July 25, 2004. If such date shall in the State of Arkansas be
a holiday or a day on which banks are authorized to close, then the Option may
be exercised on the next following day which in the State of Arkansas is not a
holiday or a day on which banks are authorized to close. This option may be
exercised by the Grantee or other person then entitled to exercise it by giving
four business days' written notice of exercise to the Corporation specifying the
number of shares to be purchased and the total purchase price, accompanied by a
check to the order of the Corporation in payment of such price. It the
Corporation is required to withhold on account of any federal, state or local
tax imposed as a result of such exercise, the notice of exercise, the notice of
exercise shall also be accompanied by a check to the order of the Corporation in
payment of the amount thus required to be withheld.
9. No person shall be entitled to the privileges of stock ownership in
respect of any shares issualbe upon exercise of the Option, unless and until
such shares have been issued to such person as fully paid shares.
8. This Option may not be redeemed by the Corporation at any time. In
witness whereof, the Corporation has caused this Option to be duly executed, by
its duly authorized officer, as of the 26st day of JulY 1999.
ThermoEnergy Corporation
By:/s/ Dennis Cossey
--------------------
Dennis Cossey, CEO
EXERCISE FORM
Exhibit "1"
The undersigned hereby: (1) subscribes for and offers to purchase ____
shares of Common Stock of ThermoEnergy Corporation, pursuant to the Option dated
July 26, 1999 to which this exhibit is attached; (2) encloses payment of
$__________ for these shares at a price of two dollars, ($2.00) per share; and
(3) requests that a certificate for the shares be issued in the name of the
undersigned or such other name as may be designated in writing by the
undersigned and delivered to the undersigned at the address specified below.
Date:______________________
(Please sign exactly as your
name appears on the Option)
------------------------------
-----------------------------
------------------------------
(Address of Option holder)
Option holder's social security
number ________________________
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<NAME> THERMOENERGY CORPORATION
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-1-1999
<PERIOD-END> SEP-30-1999
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0
0
<COMMON> 3,639
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<INTEREST-EXPENSE> 215,400
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