U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee
Required]
For the period ended May 31, 1996. . . . . . . . .
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from . . . . . . . . . . . . . .
Commission file number 1-12556
TOWER TECH, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1210013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Rural Route 3, Post Office Box 1838, Chickasha, Oklahoma 73023
(Address of principal executive offices) (Zip Code)
Issuers telephone number 405/222-2876
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during
the past 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 [ ]
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of
the Exchange Act after the distribution of securities under
a plan confirmed by a court. Yes [ ] No[ ]
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practical date.
Common Stock -- $.001 par value -- 3,330,139 -- shares as
of July 10, 1996.
<PAGE>
INDEX
TOWER TECH, INC.
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet -- May 31, 1996
Statement of Operations -- Three months ended May
31, 1996 and 1995, and six months ended May 31,
1996 and 1995
Statement of Cash Flows -- Six months ended May 31,
1996 and 1995
Notes to Financial Statements -- May 31, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part 2. Other Information
Item 1. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
TOWER TECH, INC.
BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
May 31, 1996
<S> <C>
ASSETS
Current assets:
Cash $ 882,156
Accounts receivable, net of
allowance for doubtful accounts
of $10,645 3,431,476
Accounts receivable, other 250,000
Receivables from officers and employees 31,186
Cost and estimated earnings in excess
of billings on uncompleted contracts 563,381
Inventory 2,926,357
Prepaid expenses 141,689
___________
Total current assets 8,226,245
___________
Property, plant and equipment, net 2,797,050
Rental fleet, net 515,626
Patents 147,970
Other assets 8,687
___________
$11,695,578
___________
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 669,091
Current maturities of obligations
under capital lease 65,659
Accounts payable 3,498,879
Accrued liabilities 729,625
Billings in excess of costs and
estimated earnings on uncompleted
contracts 267,517
Interest payable 46,700
___________
Total current liabilities 5,277,471
Long-term debt, net 2,836,151
____________
Obligations under capital lease 82,291
____________
Stockholders' equity (deficit):
Common stock, $.001 par value; 10,000,000
shares authorized; 3,294,239 shares
issued and outstanding 3,294
Capital in excess of par 6,658,495
Deficit (3,162,124)
___________
3,499,665
___________
$11,695,578
___________
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
TOWER TECH, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Sales and other operating revenue:
Tower sales $3,627,777 $1,272,885
Concrete tower 2,112,393 72,269
Tower rentals 224,239 383,835
Other tower revenue 150,051 25,803
__________ __________
Total tower revenue 6,114,460 1,754,792
__________ __________
Costs and expenses:
Cost of goods sold and
constructed 4,889,983 1,740,916
General and administrative 355,351 354,690
Selling expenses 224,416 123,875
Research and development 122,858 20,415
__________ __________
5,592,608 2,239,896
__________ __________
Income (loss) from operations 521,852 (485,104)
__________ __________
Other income (expense):
Interest, net (91,305) (91,078)
Miscellaneous 21,663 9,797
__________ __________
(69,642) (81,281)
__________ __________
Income (loss) before income taxes 452,210 (566,385)
Income taxes - -
__________ __________
Net income (loss) 452,210 (566,385)
Less dividends on preferred shares - (39,279)
__________ __________
Net income (loss) applicable to
common shares $ 452,210 $ (605,664)
__________ __________
Weighted average shares outstanding 3,224,866 2,428,572
__________ __________
Net income (loss) per common
share $ .14 $ (.25)
__________ __________
Weighted average shares outstanding
assuming full dilution 3,781,448 2,428,572
__________ __________
Net income (loss) per common share $ .12 $ (.25)
assuming full dilution __________ __________
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
TOWER TECH, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Sales and other operating revenue:
Tower sales $6,335,306 $3,825,747
Concrete tower 2,490,566 72,269
Tower rentals 284,202 403,412
Other tower revenue 207,534 215,446
__________ __________
Total tower revenue 9,317,608 4,516,874
Other operating revenue 339,983 -
__________ __________
9,657,591 4,516,874
__________ __________
Costs and expenses:
Cost of goods sold and
constructed 7,521,449 3,989,758
General and administrative 712,445 671,086
Selling expenses 465,977 248,574
Research and development 157,364 22,697
__________ __________
8,857,235 4,932,115
__________ __________
Income (loss) from operations 800,356 (415,241)
__________ __________
Other income (expense):
Interest, net (199,141) (157,021)
Miscellaneous 35,870 21,178
__________ __________
(163,271) (135,843)
__________ __________
Income (loss) before income taxes 637,085 (551,084)
Income taxes - -
__________ __________
Net income (loss) 637,085 (551,084)
Less dividends on preferred shares - (76,265)
__________ __________
Net income (loss) applicable to
common shares $ 637,085 $ (627,349)
__________ __________
Weighted average shares outstanding 2,883,239 2,428,572
__________ __________
Net income (loss) per common share $ .22 $ (.26)
__________ __________
Weighted average shares outstanding
assuming full dilution 3,398,719 2,428,572
__________ __________
Net income (loss) per common share
assuming full dilution $ .19 $ (.26)
__________ __________
\table>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
TOWER TECH, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 637,085 $(551,084)
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and amortization 186,550 79,878
Gain on sale of assets - (3,950)
(Increase) decrease in accounts
receivable (1,552,765) 752,572
Increase in cost in excess
of billings (563,381) -
Increase in inventory (823,272) (411,410)
Increase in prepaid expenses (53,330) (11,349)
Increase in other assets - (37,863)
Increase (decrease) in accounts
payable 939,239 (31,720)
Increase in interest payable
and accrued liabilities 128,660 143,948
(Decrease) increase in billings
in excess of costs (272,258) 172,524
Decrease in dividends payable (101,719) -
Decrease in deposits - (184,644)
__________ __________
Net cash used by operating
activities (1,475,191) (83,098)
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (334,662) (533,180)
Additions to rental fleet (50,101) (156,497)
Proceeds from sale of assets - 3,950
Increase in patent costs (104,939) (29,318)
__________ __________
Net cash used in investing activities (489,702) (715,045
__________ __________
Cash flows from financing activities:
Proceeds from borrowings 2,795,463 1,992,696
Repayments of long-term debt (2,489,609) (1,015,749)
Repayments of notes payable
- stockholder - (42,742)
Proceeds from common stock
issuances 3,465,747 -
Redemption of preferred stock (1,500,000) -
Payment of dividends (62,812) (75,000)
__________ __________
Net cash provided by financing
activities 2,208,789 859,205
__________ __________
Net increase in cash 243,896 61,062
Cash at beginning of period 638,260 158,159
__________ __________
Cash at end of period $ 882,156 $ 219,221
__________ __________
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
TOWER TECH, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The balance sheet as of May 31, 1996, and the related
statements of operations for the three month and six month
periods ended May 31, 1996 and 1995 and the statement of
cash flows for the six month period ended May 31, 1996 and
1995 are unaudited; in the opinion of management, all
adjustments necessary for a fair presentation of such
financial statements have been included.
These financial statements and notes are presented as
permitted by Form 10-QSB and should be read in conjunction
with the Company's financial statements and notes included
in the annual report on Form 10-KSB.
2. LONG-TERM DEBT
In May 1996, the Company entered into two notes payable
for $1,000,000 and $500,000. The notes bear interest, due
quarterly, at New York Prime (8.25% at May 31, 1996) plus
3%. The notes mature in May 1999 and May 1997,
respectively, and are secured by certain patents.
In May 1996, the Company increased the amount of a line
of credit with an individual from $1,400,000 to $2,000,000,
of which $1,400,000 was outstanding at May 31, 1996. The
line of credit bears interest at 13% due quarterly and
matures in May 1998. The line of credit is secured by
accounts receivable and the personal guarantee of the
Company's majority stockholder.
3. STOCKHOLDERS' EQUITY
In April 1996, the Company sold 155,776 shares of
Common Stock for the aggregate amount of $590,000. The
Company used the proceeds to purchase the Series E Preferred
Stock and for general working capital.
4. EARNINGS PER SHARE
In the second quarter of fiscal 1996, a fully dilutive
earnings per share calculation is provided as the market
price of the Common Stock exceeded the exercise price of the
outstanding warrants and employee stock options for a
continuous three month period.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1996 COMPARED TO THREE MONTH ENDED
MAY 31, 1995
Total tower revenues increased to $6,114,460 for the
three months ended May 31, 1996, from $1,754,792 in the
comparable period in the prior year. During the current
three month period, 60 percent of total tower revenues was
derived from sales of 83 modular fiberglass cooling towers,
34 percent of total tower revenues was derived from
construction of the new modular concrete towers, 4 percent of
total tower revenues was derived from rental of modular
fiberglass cooling towers, and 2 percent of total tower
revenues was derived from other tower revenues. In the
comparable three month period of 1995, 73 percent of revenues
was derived from sales of 40 modular fiberglass cooling
towers, 4 percent of total tower revenues was derived from
construction of the new modular concrete towers, 22 percent
of revenues was derived from rental of modular fiberglass
cooling towers, and 1 percent of total tower revenues was
derived from other tower revenues. Other tower revenues
consist primarily of modular tower parts sales and service.
The increase in fiberglass tower sales revenues for 1996 is
due not only to the increase in the quantity of units sold
but also due to sales of larger capacity, more expensive
units. The increase in concrete tower sales reflects the
success the Company has had marketing this product since its
introduction in the first quarter of 1995.
The Company's cost of goods sold and constructed during
the three month period ended May 31, 1996, was $4,889,983 or
80 percent of total tower revenues as compared to $1,740,916
or 99 percent of total tower revenues during the comparable
period in 1995. The increase in cost of goods sold and
constructed is due primarily to increased production and
sales of the modular fiberglass cooling tower and
construction costs of the modular concrete tower. The
Company has experienced an improvement in gross margins in
the fiberglass cooling tower line which management believes
is the result of wider recognition of the technological and
operating advantages of the Company's product over competing
products. The Company is able to capitalize on these factors
rather than competing based solely on price. In the concrete
line, the Company sees moderate improvement in gross margins
but is still incurring unexpectedly high construction costs
due to the recent introduction of the product. Management
expects that gross margins on concrete projects will continue
to show improvement in the next several quarters and will
eventually be consistent with gross margins realized on the
Company's fiberglass cooling tower line. During the three
month period ended May 31, 1996, the Company expended $85,000
to retrofit and service fiberglass towers previously sold and
$7,000 of warranty costs on concrete towers. Based on the
increase in fiberglass tower sales and concrete tower
installations, the Company increased the reserve to retrofit
and service towers previously sold to $100,000 at May 31,
1996. This increase of $30,000 is also included in cost of
goods sold for the three months ended May 31, 1996. These
expenditures compare to average quarterly retrofit and
warranty costs of $195,000 during the fiscal year ended
November 30, 1995. In 1995, design changes were made and a
complete quality control system was implemented which
management believes will continue to reduce such expenditures
on fiberglass towers in future periods. Management believes
that the reserve is sufficient to cover future costs to
retrofit and service towers previously sold.
In the three month period ended May 31, 1996, general
and administrative expenses increased slightly from $354,690
in 1995, to $355,351 in 1996. The increase is due mainly to
addition of office staff and related expenses. Selling
expenses increased from $123,875 for the three months ended
May 31, 1995 to $224,416 for the three months ended May 31,
1996, due to increased sales and marketing efforts for both
the fiberglass and the concrete modular cooling towers. The
increase over 1995 is due mainly to the increase in the sales
and marketing staff. Increases were also incurred in travel
and related expenses due to increased participation at
national and international trade shows, international joint
venture and license agreements, and direct customer calls and
presentations to engineering firms across the United States.
Research and development expenses increased from $20,415 in
the second quarter of 1995 to $122,858 in the second quarter
of 1996, due to expenditures on the new modular concrete
tower development. Management does not believe that the
Company will incur significant additional expenses on
development of the new modular concrete tower. However,
management does expect to continue to research refinements in
cooling tower design and construction, although the Company
has no fixed research and development budget.
The Company's income from operations for the three
months ended May 31, 1996, was $521,852 as compared to a loss
of $485,104 for the comparable period in the prior year.
After interest expense and miscellaneous items, the
Company's net income was $452,210 as compared to a net loss
of $566,385 for the quarter ended May 31, 1995. The increase
in the Company's net income reflects the Company's success in
developing and marketing of its technology and products both
nationally and internationally.
At May 31, 1996, the estimated backlog was $4,100,000
including a total of eight contracts for the modular concrete
cooling towers totaling $2,775,000. Seven concrete tower
contracts are scheduled for completion in the third quarter
of 1996 and the remaining contract is projected to start and
complete in the fourth quarter 1996. Interest in this product
has continued to increase dramatically in both the United
States and international markets. Substantially all of the
backlog for the modular fiberglass cooling towers is
scheduled for delivery in the third quarter of 1996.
SIX MONTHS ENDED MAY 31, 1996 COMPARED TO SIX MONTHS ENDED MAY 31, 1995
For the six months ended May 31, 1996, total tower
revenues increased to $9,317,608 from $4,516,874 for the
comparable period in the prior year. During the current six
month period, 68 percent of total tower revenues was derived
from sales of 156 modular fiberglass cooling towers, 27
percent of total tower revenues was derived from construction
of the new modular concrete cooling towers, 3 percent of
total tower revenues was derived from rental of modular
fiberglass cooling towers, and 2 percent of total tower
revenues was derived from other tower revenue. In the
comparable six month period in 1995, 84 percent of total
tower revenues was derived from sales of 106 modular cooling
towers, 2 percent of total tower revenues was derived from
construction of modular concrete towers, 9 percent of total
tower revenues was derived from rental of modular cooling
towers, and 5 percent of total tower revenues were derived
from other tower revenue. Other tower revenues consist
primarily of modular tower parts sales and service. The
increase in fiberglass tower revenues for 1996 is due not
only to the increase in the quantity of units sold but also
due to the sales of larger capacity, more expensive units in
1996. The increase in concrete tower sales reflects the
success the Company has had marketing this product since its
introduction in the first quarter of 1995. Other operating
revenue for the six months ended May 31, 1996, consists of
technology transfer fees of $339,983 which were realized as a
result of international license agreements with Shriram
Cooling Towers Ltd. covering the country of India and Ilmed
Impianti covering the Mediterranean area. These technology
transfer fees demonstrate the Company's ability to capitalize
on the technology it develops. The Company is in the
business of developing technology for the cooling tower
industry and marketing that technology, either directly or in
the form of products such as its TTMT Series cooling tower.
The Company's cost of goods sold and constructed during
the six month period ended May 31, 1996, was $7,521,449 or 81
percent of total tower revenues as compared to $3,989,758 or
88 percent during the comparable period in 1995. The
increase in cost of goods sold and constructed during the
first six months of 1996 resulted from increased production
and sales of both of the modular fiberglass and concrete
cooling towers. Included in cost of goods sold for the six
month period ended May 31, 1996, is $160,000 to retrofit and
service towers previously sold. This compares to average six
month retrofit and warranty costs of $390,000 during the
fiscal year ended November 30, 1995. In 1995, design changes
were made and a complete quality control system was
implemented which management believes will continue to reduce
such expenditures in future periods.
The six month period ended May 31, 1996 reflected a 6
percent increase in general and administrative expenses from
$671,086 in 1995 to $712,445 in 1996. The increase is due
mainly to the addition of office staff and related expenses.
Selling expenses increased from $248,574 to $465,977 due to
increased sales and marketing efforts for both the fiberglass
and the concrete modular cooling towers. The increase over
1995 is due mainly to increased salaries expense related to
the increase in the sales and marketing staff. Increases
were also incurred in travel and related expenses, due to
increased participation at national and international trade
shows, international joint venture and license agreements,
direct customer calls and presentations to engineering firms
across the United States. Increases were also incurred in
postage costs related to increased telemarketing efforts and
advertising costs related to increased direct advertising in
trade journals and magazines. Management expects the
increased investment in selling expenses to have a continued
positive impact on revenues in future periods. Research and
development expenses increased from $22,697 in the first six
months of 1995 to $157,364 in the first six months of 1996,
due mainly to expenditures on the new modular concrete tower
development, and due to development of the new water
collection system. Management does not believe that the
Company will incur significant additional expenses on
development of the new modular concrete tower. However,
management does expect to continue to research refinements in
cooling tower design and construction, although the Company
has no fixed research and development budget.
The Company's income from operations for the six months
ended May 31, 1996, was $800,356 as compared to loss from
operations of $415,241 for the comparable period in the prior
year. After interest expense and miscellaneous items, the
Company's net income was $637,085 compared to a loss of
$551,084 for the six months ended May 31, 1995. The increase
in the Company's net income reflects the Company's success in
developing and marketing of its technology and products both
nationally and internationally.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1996, the Company had working capital of
$2,948,774 as compared to working capital of $670,381 at
February 29, 1996. The Company's liquidity continued to
improve in the first and second quarter of 1996 as a result
of the sale of Common Stock, increases in long-term debt and
strengthening operating results. The Company's cash flow
provided (used) by operating activities, investing activities
and financing activities during the first six months of 1996
and the comparable period in the prior year are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Operating activities ($1,475,191) ($ 83,098)
Investing activities ($ 489,702) ($ 715,045)
Financing activities $2,208,789 $ 859,205
</TABLE>
The Company's capital requirements for its continuing
operations consist of its general working capital needs,
scheduled payments on its debt obligations and capital
expenditures. Management anticipates that the Company's
operating activities will require cash during 1996, which
primarily relates to the anticipated growth in receivables
and inventory levels to support expanding sales. The Company
tries to minimize its inventory of component parts, although
minimum order requirements of some suppliers can cause
inventory levels to fluctuate from period to period. For
example, inventory at May 31, 1996 and May 31, 1995, was
$2,926,357 and $2,081,258, respectively. Similar variances
and a general increase in inventory can be expected in the
future. Similarly, management attempts to manage accounts
receivable to increase cash flow, but it is anticipated that
accounts receivable will increase as sales increase. Other
significant variances in working capital items can also be
expected. Also, the Company's concrete construction projects
will have a greater effect on working capital requirements in
the future. At May 31, 1996, net costs in excess of billing
and estimated earnings on uncompleted contracts were $295,864
as compared to billings in excess of costs and estimated
earnings on uncompleted concrete construction projects of
$422,170 at February 29, 1996. Generally, concrete
construction projects provide for progress payments of the
contract price with a retainage of 10 to 15 percent payable
after completion of the project. Such terms ordinarily
provide positive cash flow to the Company during the terms of
the contracts.
Scheduled principal payments on capital leases will
total approximately $66,000 over the next twelve months. In
addition, $669,091 of the Company's debt will become due and
payable during the next twelve months.
Management expects to invest approximately $1,900,000 in
plant equipment, rental towers and patent costs during 1996.
It is expected that substantially all of the cash to be used
in investing activities will be funded through financing
activities. Most of the planned investment during 1996 is
discretionary. During the first six months of 1996, the
Company invested $634,662 in plant and equipment, $50,101 in
its rental fleet of modular cooling towers and $104,939 in
patents. Approximately $300,000 was funded via an installment
note to acquire extrusion equipment to produce the water
collection system for the cooling towers. Previously these
parts were out-sourced to a supplier who is relocating to
another state. In order to insure an uninterrupted supply,
the Company made the decision to bring this manufacturing
process in-house. In addition to these expenditures, the
Company is planning an expansion in Oklahoma City.
Management believes that the expansion would improve access
to transportation and labor and permit the Company to improve
its production facilities to enhance efficiency and
accommodate future growth. Management estimates that the
total cost of the expansion would be approximately $5.5 to $6
million. The Company is negotiating a commitment for debt
financing of 80 percent of the cost of the new facility. To
complete the funding, the Company would need to obtain new
equity of approximately $1.5 to $2 million. Based on
tentative discussions with financing sources, management
believes that sufficient equity could be obtained through the
sale of common stock.
The Company has secured loans with noncommercial
lenders totaling $3,600,000 to finance its working capital
needs, of which $3,000,000 was outstanding at May 31, 1996.
Interest rates and payment terms are as follows:
<TABLE>
<CAPTION>
<S> <S> <S> <S>
LOAN INTEREST INTEREST MATURITY
AMOUNT RATE PAYABLE DATE
<C> <C> <C> <C>
$2,000,000 13% Quarterly 5/31/98
$1,000,000 11.25% Quarterly 5/8/99
$ 500,000 11.25% Quarterly 5/8/97
$ 100,000 15% Quarterly 4/25/97
</TABLE>
Management also has secured a line of credit at
Chickasha Bank in the amount of $500,000 for short term cash
flow needs, none of which was outstanding at May 31, 1996.
This line of credit bears interest at the bank's base
floating rate, which was 10.25% at May 31, 1996. The
principal and interest are due April 13, 1997. In April
1995, the Company secured a real estate mortgage in the
amount of $116,000 to finance the acquisition of property
adjacent to its existing facilities to be used as offices.
Principal and interest on this mortgage is due in monthly
payments of $1,555 with the remaining principal and interest
due April 15, 1998. This mortgage bears interest at the
bank's base floating rate, which was 10.25% at May 31, 1996.
In October 1995, the Company obtained another mortgage loan
in the amount of $83,723 secured by real estate. The loan
bears interest at the bank's floating rate, which was 10.25
percent at May 31, 1996, and is payable semi-annually, and
matures on October 12, 1998. In April 1996, the Company
secured an $1,200,000 credit arrangement with one of its
major vendors to fund materials purchased from the vendor of
which $768,000 was included in accounts payable at May 31,
1996.
During the fourth quarter of 1994, the Company issued
100,000 shares of its Series A Preferred Stock to Electrical
Constructors in exchange for $1,000,000 of debt owed to
Electrical Constructors. In November 1995, the Company
issued 50,000 shares of Series D Preferred Stock to
Electrical Constructors in exchange for $500,000 of debt and
100,000 shares of Series D Preferred Stock in exchange for
all outstanding shares of Series A Preferred Stock. All of
the Series D Preferred Stock was redeemed at par in February
1996. At the time the Series A Preferred Stock was issued,
the Company also sold to Electrical Constructors the patent
covering the basic design of its TTMT Series cooling tower
and was granted the exclusive license for the patent for five
years. The patent was sold for $100,000, of which $30,000
was paid to the Company on the date of sale and the balance
of which was payable in five annual installments of $14,000
plus interest at 6 percent. The license granted to the
Company obligated it to pay license fees of $24,000 per year.
The Company repurchased the patent when it redeemed the
Series D Preferred Stock in February 1996.
In May 1995, the Company issued 35,000 shares of its
Series B Preferred Stock in exchange for $350,000 of
indebtedness. The Series B Preferred Stock was converted
into 70,000 shares of Common Stock in February 1996.
In June 1995, the Company issued 130,667 shares of
Series C Preferred Stock for an aggregate purchase price of
$490,000. In December 1995, all of the Series C Preferred
Stock was exchanged for 130,667 shares of Series E Preferred
Stock. The Company has purchased all of the Series E
Preferred Stock in April 1996 for the aggregate amount of
$495,750.
In January 1996, the Company sold 275,000 shares of
Common Stock at a price of $4.00 per share. The Company used
the proceeds for payment of debt and general working capital
needs.
In February 1996, the Company sold 350,000 shares of
Common Stock at a price of $6.60 per share in a private
placement. The Company used the net proceeds of $2,205,000
to (i) redeem all of the outstanding shares of Series D
Preferred Stock, including the payment of accrued dividends
thereon, and to repurchase certain patent rights from the
holder of the Series D Preferred Stock, (ii) pay all accrued
dividends on the Series B Preferred Stock, and (iii) pay
indebtedness in the approximate amount of $680,000 and
accrued interest thereon. At the time the Company redeemed
the Series D Preferred Stock, the holder purchased all of the
Series B Preferred Stock from Harold and Carolyn Curtis and
converted it into 70,000 shares of Common Stock. In
addition, Mr. Curtis repaid the Company for certain advances
that had been made to him and Dan and Juanita Wiltz exercised
a warrant to purchase 15,000 shares of Common Stock for the
aggregate amount of $79,687.50.
In April 1996, the Company sold 155,776 shares of Common
Stock for the aggregate amount of $590,000. The Company used
the proceeds to purchase the Series E Preferred Stock and for
general working capital.
The Company has sufficient capital resources to fund its
ordinary capital requirements for at least the next four
quarters, other than debt which will mature during the next
twelve months. Management anticipates that the Company will
be able to renew or replace its debt obligations as they
mature. Additional debt and equity capital would be required
if the Company pursues relocating to Oklahoma City.
Management would not undertake the expansion unless adequate
financing were available. Management is very pleased with
the continued improvement in the Company's liquidity and
capital resources and believes that the Company's improved
financial position will facilitate additional growth.
Although the Company's financial position has improved,
substantial growth beyond that projected by management could
increase the Company's capital requirements and require it to
obtain additional capital to maintain its growth.
PART II
ITEM 1. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits have been filed as part of
this report:
EXHIBIT NO. DESCRIPTION
3.1-1 Amended and Restated Certificate of
Incorporation of Tower Tech, Inc.
3.2-1 Amended Bylaws of Tower Tech, Inc.
3.3-1 Amendment to Bylaws
4.1-1 Warrant Certificate, dated June 14, 1993,
by and between Dan and Juanita Wiltz and
Tower Tech, Inc., entitling Dan and
Juanita Wiltz to purchase 15,000 shares
of Tower Tech, Inc.'s common stock, $.001
par value
4.2-1 Warrant Certificate, dated August 31,
1993, between David Bronstad and Tower
Tech, Inc., entitling J. David Bronstad
to purchase 15,000 shares of Tower Tech,
Inc.'s common stock $.001 par value
4.3-1 Form of Stock Certificate
4.4-1 Form of Underwriters' Warrants
4.5-4 Certificate of Designations of Series A
Preferred Stock
4.6-6 Certificate of Designations of Series B
Preferred Stock
4.7-6 Certificate of Designations of Series C
Preferred Stock
4.8-8 Certificate of Designations of Series D
Preferred Stock
4.9-8 Certificate of Designations of Series E
Preferred Stock
4.19-9 Registration Rights Agreement, dated
February 2, 1996, among Tower Tech, Inc.,
Lancer LP, Michael Taglich, and Robert
Taglich
10.1-1 Lease Agreement between Harold and
Carolyn Curtis and Tower Tech, Inc.,
made effective September 1, 1993
10.2-5 Loan Agreement between Tower Tech, Inc.
and Chickasha Bank & Trust Co., dated
March 23, 1995
10.2-5 Loan Agreement between Tower Tech, Inc.
and Chickasha Bank & Trust Co., dated
March 23, 1995
10.3 Omitted
10.4 Omitted
10.5 Omitted
10.6 Omitted
10.7 Omitted
10.8-1 Executive Employment Agreement between
Harold Curtis and Tower Tech, Inc., dated
September 1. 1993
10.9-1 Agreement between Morrison Molded Fiber
Glass Co., and Tower Tech, Inc., made
effective July 26, 1993, regarding the
purchase by Tower Tech, Inc. of certain
pultruded components from Morrison Molded
Fiber Glass
Company
10.10-1 U. S. Patent No. 5,143,657 entitled FLUID
DISTRIBUTOR issued September 1, 1993
10.11-1 U. S. Patent No. 5,152,458 entitled
AUTOMATICALLY ADJUSTABLE FLUID
DISTRIBUTOR issued October 6, 1992
10.12-1 U. S. Patent No. 5,227,095 entitled
MODULAR COOLING TOWER issued July 13,
1993
10.13-1 Exclusive License Agreement by and
between Harold D. Curtis and Tower Tech,
Inc.
10.14-1 Assignment by and between Harold D.
Curtis, as Assignor, and Tower Tech,
Inc., as Assignee
10.15-1 Assignment of Invention Contained in PCT
Application by and between Harold D.
Curtis, as assignor, and Tower Tech,
Inc., as Assignee
10.16-1 Assignment of Patent by and between
Harold D. Curtis, as Assignor, and Tower
Tech, Inc., as Assignee, of Patent
No. 5,227,095
10.17-1 1993 Stock Option Plan
10.18-1 Form of Distributorship Agreement
10.19-1 Sales Agreement, dated May 19, 1993, for
purchase of certain modular fiberglass
cooling towers by Electrical Constructors
10.20-1 Invoice, dated October 5, 1992, and
Conditions of Sale, dated October 13,
1992, for purchase of certain mobile
towers by Rental Tools & Equipment
Company International, Inc.
10.21-2 Real Estate Purchase Agreement between
Tower Tech, Inc., and Harold and Carolyn
Curtis
10.22-2 Promissory Note between Tower Tech, Inc.
and Harold and Carolyn Curtis
10.23 Omitted
10.24-3 Warrant Certificate, dated July 27, 1994,
between Electrical Constructors and Tower
Tech, Inc., entitling Electrical
Constructors to purchase 50,000 shares of
Tower Tech, Inc.'s common stock, $.001
par value
10.25 Omitted
10.26 Warrant Certificate, dated August 18,
1994, between J. David Bronstad and Tower
Tech, Inc., entitling J. David Bronstad
to purchase 100,000 shares of Tower
Tech, Inc.'s common stock, $.001 par
value
10.27-5 Security Agreement between Tower Tech,
Inc. and J. David dated August 18, 1994
10.28-4 Assignment and License Agreement between
Tower Tech, Inc. and Electrical
Constructors
10.29-9 Promissory Note between Tower Tech, Inc.
and Chickasha Bank & Trust Co., dated
October 13, 1995
10.31-6 Warrant Certificate, dated April 25,
1995, between J. David Bronstad and Tower
Tech, Inc. entitling J. David Bronstad to
purchase 40,000 shares of Tower Tech,
Inc. Common Stock
10.32-6 Warrant Certificate, dated April 25,
1995, between James McDonald and Tower
Tech, Inc. entitling James McDonald to
purchase 10,000 shares of Tower Tech,
Inc. Common Stock.
10.33-6 Security Agreement between Tower Tech,
Inc. and J. David Bronstad, dated April
25, 1995
10.34-6 Security Agreement between Tower Tech,
Inc. and James McDonald, dated April 25,
1995
10.35 Omitted
10.36-6 Promissory Note between Tower Tech, Inc.
and James McDonald, dated May 2, 1995
10.37-6 Promissory Note between Tower Tech, Inc.
and J. David Bronstad, dated May 2, 1995
10.38-6 Promissory Note between Tower Tech, Inc.
and J. David Bronstad, dated June 14,
1995
10.39-6 Promissory Note between Tower Tech, Inc.
and J. David Bronstad, dated June 27,
1995
10.40-7 Promissory Note between Tower Tech, Inc.
and Electrical Constructors, dated
September 12, 1995
10.41-9 Promissory Note between Tower Tech, Inc.
and Chickasha Bank & Trust, dated October
13, 1995
10.42-9 Promissory Note between Tower Tech, Inc.
and Juanita Wiltz, dated November 22,
1995
1 Incorporated by reference from the same numbered
exhibit to Registration Statement No. 33-69574-FW, as filed
with the Commission on September 29, 1993, and as amended.
2 Incorporated by reference from the same numbered
exhibit to Form 10-KSB for the fiscal year ended November
30, 1993.
3 Incorporated by reference from the same numbered
exhibit to Form 10-QSB for the quarter ended August 31,
1994.
4 Incorporated by reference from the same numbered
exhibit to Form 8-K, as filed with the Commission on
November 4, 1994.
5 Incorporated by reference from the same numbered
exhibit to Form 10-KSB for the year ended November 30,1994.
6 Incorporated by reference from the same numbered
exhibit to Form 10-QSB for quarter ended May 31, 1995.
7 Incorporated by reference from the same numbered
exhibit to Form 10-QSB for the quarter ended August 31, 1995.
8 Incorporated by reference from the same numbered
exhibit to Amendment No. 1 to Registration Statement
No. 33-95870.
9 Incorporated by reference from the same numbered
exhibit to Form 10-KSB/A for the year ended November 30,
1994.
10 Incorporated by reference from the same numbered
exhibit to Registration Statement No. 333-07337 on Form S-8.
(b) The Company filed a Form 8-K report with the Commission on March
12, 1996 to report the sale of 350,000 shares of Common Stock at
a price of $6.60 per share in a private placement. The Form 8-K
is incorporated herein by reference.
The Company filed a Form 8-K report with the Commission on July
2, 1996, to report a change in the Company's certifying
accountant.
<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.
TOWER TECH, INC.
(Registrant)
Date ss/HAROLD CURTIS
_______________ __________________________
Harold Curtis, President
Date ss/CHARLES D. WHITSITT
_______________ ___________________________
Charles D. Whitsitt,
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON PAGES 3 THROUGH 7 OF THE
COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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