SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Nine months Ended Commission File Number
March 31, 1996 33-87284-N4
THERMO-MIZER ENVIRONMENTAL CORP.
528 Oritan Avenue
Ridgefield, NJ 07657
Tel: 201-941-5805
Delaware 22-2312917
(State of Incorporation) (I.R.S. Employer Identification No.)
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [root]
At March 31, 1996, the latest practicable date, there were 1,896,500 shares of
Common Stock outstanding, $.001 par value.
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THERMO MIZER ENVIRONMENTAL CORP.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements:
Condensed Balance Sheets
3-4
March 31, 1996 and June 30, 1995
Condensed Statements of Operations
and Retained Earnings 5
for the three months ended
March 31, 1996 and 1995.
Condensed Statements of Income and Retained Earnings 6
for the nine months ended
March 31, 1996 and 1995.
Condensed Statements of Cash Flows 7
for the nine months ended
March 31, 1996 and 1995
Notes to Condensed Financial Statements
8
Item 2. Managements Discussion and Analysis of 9
Financial Condition and Results of Operations.
PART II. OTHER INFORMATION 11
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THERMO MIZER ENVIRONMENTAL CORP.
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
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Current Assets March 31,1996
(Unaudited)
Cash $ 95,334
Certificates of deposit 2,879,893
Contract receivables-net of allowance
of $10,000 and $15,000 577,425
Inventory 347,140
Contract revenues in excess of billings on
uncompleted contracts 116,076
Prepaid expenses and other 182,158
Total Current Assets 4,198,026
Property and Equipment - Net 72,361
Other Assets
Deferred offering costs
Security deposits 5,867
Total Other Assets 5,867
Total Assets $ 4,276,254
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THERMO MIZER ENVIRONMENTAL CORP.
CONDENSED BALANCE SHEETS
ASSETS
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Current Assets
June 30, 1995
Cash $ 59,313
Certificates of deposit
Contract receivables-net of allowance
of $10,000 and $15,000 605,439
Inventory 153,090
Contract revenues in excess of billings on
uncompleted contracts 50,631
Prepaid expenses and other 19,849
Total Current Assets 888,322
Property and Equipment - Net 66,016
Other Assets
Deferred offering costs 108,053
Security deposits 5,867
Total Other Assets 113,920
Total Assets $ 1,068,258
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SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
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THERMO MIZER ENVIRONMENTAL CORP.
CONDENSED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS EQUITY
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Current Liabilities March 31, 1996
(Unaudited)
Notes payable-Bank $ 375,000
Current maturities of long-term debt
Accounts payable - trade 69,628
Billings in excess of contract revenues
on uncompleted contracts 9,579
Accrued expenses and other taxes 137,915
Income taxes payable 7,884
Total Current Liabilities 600,006
Long-term Debt, less current maturities
Commitments and Contingencies
Stockholders Equity
Common Stock, $.001 par value,
25,000,000 shares authorized;
1,896,500 shares issued and 1,896
outstanding in 1996; and
1,125,000 shares issued and
outstanding in 1995.
Additional paid-in capital 3,243,151
Retained earnings 431,201
Total Stockholders Equity 3,676,248
Total Liabilities and
Stockholders Equity $ 4,276,254
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SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
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THERMO MIZER ENVIRONMENTAL CORP.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY
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Current Liabilities June 30, 1995
Notes payable-Bank $ 200,000
Current maturities of long-term debt 16,188
Accounts payable - trade 91,214
Billings in excess of contract revenues
on uncompleted contracts 7,419
Accrued expenses and other taxes 95,468
Income taxes payable 19,769
Total Current Liabilities 430,058
Long-term Debt, less current maturities 91,071
Commitments and Contingencies
Stockholders Equity
Common Stock, $.001 par value,
25,000,000 shares authorized;
1,896,500 shares issued and 1,125
outstanding in 1996; and
1,125,000 shares issued and
outstanding in 1995.
Additional paid-in capital 129,375
Retained earnings 416,629
Total Stockholders Equity 547,129
Total Liabilities and
Stockholders Equity $ 1,068,258
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
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THERMO-MIZER ENVIRONMENTAL CORP.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995.
(UNAUDITED)
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FOR THE THREE MONTHS
ENDED MARCH 31,
1996 1995
Contract and other revenues $ 426,084 $ 633,393
Cost of revenues 337,383 380,505
Gross profit 88,701 252,888
Expenses
Personnel and related costs 59,541 69,236
Administrative expenses 70,440 38,999
Product development costs 37,654 54,839
Selling expenses 26,189 25,259
Occupancy costs 10,840 10,603
Total expenses 204,664 198,936
Operating income (loss) (115,963) 53,952
Interest - net 1,735 (13,459)
Income before income taxes (114,228) 40,493
Income taxes(benefit) 39,294 (14,350)
Net income (loss) (74,934) 26,143
Retained earnings - beginning 506,135 399,282
Retained earnings - ending $ 431,204 $ 425,425
Earnings (Loss) Per Share ($0.05) $0.02
Weighted Average Number of Common and 1,485,033 1,125,000
Common Equivalent Shares Outstanding
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
THERMO-MIZER ENVIRONMENTAL CORP.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995.
(UNAUDITED)
FOR THE NINE MONTHS
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ENDED MARCH 31,
1996 1995
Contract and other revenues $ 1,604,011 $ 2,006,759
Cost of revenues 1,030,524 1,317,972
Gross profit 573,487 688,787
Expenses
Personnel and related costs 181,046 171,937
Administrative expenses 154,197 122,033
Product development costs 137,908 129,516
Selling expenses 50,307 43,818
Occupancy costs 27,830 31,013
Total expenses 551,288 . 498,317
Operating Income 22,199 190,470
Interest - net 12,873 33,670
Income before income taxes 9,326 156,800
Income taxes - net (benefit) (5,246) 53,324
Net Income 14,572 103,476
Retained Earnings - beginning 416,629 321,949
Retained Earnings - ending $ 431,201 $ 425,425
Earnings Per Share $.01 $.09
Weighted Average Number of Common and 1,245,011 1,125,000
Common Equivalent Shares Outstanding
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
</TABLE>
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THERMO-MIZER ENVIRONMENTAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995.
(UNAUDITED)
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ENDED MARCH 31,
1996 1995
Cash flows from operating activities:
Net income $ 14,575 $ 103,476
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation 9,225 7,513
(Increase) Decrease in net
operating assets (378,077) (78,830)
Net cash provided by (used in)
operating activities (354,277) 32,159
Cash flows used in investing activities:
Purchase of property and equipment (15,570)
Cash flows from (used in) financing activities:
Payments on debt (311,839) (83,482)
Proceeds from debt 375,000 150,000
Costs associated with proposed
initial public offering (807,400) (105,868)
Sale of common stock and
redeemable warrants 4,030,000
Net cash provided by (used in)
financing activities 3,285,761 (39,350)
Net increase (decrease) in cash 2,915,914 (7,191)
Cash and cash equivalents - beginning 59,313 47,582
Cash and cash equivalents - ending $2,975,227 $ 40,391
SEE ACCOMPANYING NOTES ON CONDENSED FINANCIAL STATEMENTS
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Notes to Condensed Interim Financial Statements (Unaudited)
1. The accompanying condensed interim financial statements for the three and
nine month periods ended March 31, 1996 and 1995 are unaudited and include
all adjustments considered necessary by management for a fair presentation.
The results of operations realized during each interim period are not
necessarily indicative of results to be expected
for a full fiscal year.
2. On February 27, 1996 the Company completed an initial public offering of its
common stock and redeemable warrants which resulted in net proceeds, after all
expenses, of $3,114,547. Each warrant entitles the holder thereof to purchase
one share of common stock for $6.00. Such warrants become exercisable one year
from the closing of the initial public offering and remain exercisable for a
period of four years thereafter. The warrants are redeemable for $.05 per
warrant commencing two years from the closing date of the offering if the
closing price of the Companys common stock equals or exceeds $7.50 for 20
consecutive days. 3. Earnings per share are calculated based on the weighted
average number of common and common equivalent shares outstanding during each
period after giving retroactive effect to the .75 to 1 reverse stock split
completed in January 1996. No redeemable warrants were assumed to be exercised
for the pupose of these calculations because such assumption would be
antidilutive.
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
General The Companys operations are currently dominated by systems
contracts with customers in the pharmaceutical and chiller control industries.
Fluctuations in sales, revenues and operating results can and do occur due to
the timing of such contracts because certain larger contracts require greater
amounts of vendors materials and use of subcontractors than do other contracts.
Sales represent confirmed customer orders while revenue is products and
services delivered and billed during the period. Generally, gross margins are
lower on those contracts which require the purchase of significant amounts of
vendor materials and services compared with contracts which are more
engineering or labor intensive. In addition, the Companys engineering staff
is capable of serving a significant volume of business. Thus, engineering
costs do not fluctuate at the same rate as revenues. This means that if
revenues increase, gross profits will increase at a faster rate than revenue.
The reverse is true if revenues were to decrease below the break even point.
Because of the Companys historical emphasis on systems sales, a substantial
portion of its revenue is derived from a relatively few number of contracts.
In general, the Company has between 45 and 50 open contracts in a fiscal quarter
of which fewer than ten comprise more than 50 percent of revenues for that
quarter. This also means that a small number of customers make up a large
percentage of sales. For the nine months ended March 31, 1996, revenue from
four customers comprised 66% of total revenue (with individual customers
comprising 22%, 17%, 14% and 13%, respectively, of total revenue.) For the
fiscal year ended June 30, 1995 revenue from three customers accounted for 50%
of total revenue with individual customers comprising 21%, 15% and 14%,
respectively, of total revenue.
The Company is implemeting a strategy to reduce its dependence on
large contracts by increasing its focus on products sales. Its product
development efforts have resulted in the recent
introduction of two new products, and several other are under development. No
assurance can be given that the Company will be successful in these efforts.
Results of Operations
Comparison of the Nine Month Periods Ended March 31, 1996 and 1995.
Contract and other revenues decreased by $402,748 from $2,006,759 in
1995 to $1,604,011 for the comparable period in 1996. This 20% decline resulted
principally from delay in certain large contracts caused by the severe winter in
the Northeast. The Company is a subcontractor with respect to these contracts
and must adhere to schedule changes established by the prime contractor. The
Companys backlog of signed contracts was $1,222,000 at March 31,1996 (compared
with $523,000 at March 31, 1995), substantially all of which is currently
scheduled to be completed by December 31, 1996.
<PAGE>
Cost of revenues declined by $287,448 (or 22%) from $1,317,972 in the nine
months ended March 31,1995 to $1,030,524 during the corresponding period in 1996
which corresponds closely to the decline in contract and other revenues which
occurred during the same period.
The gross margin percentage remained relatively consistent between periods
(36% in 1996 and 34% in 1995). The impact of the decrease in revenue volume in
1996 was offset by the fact that the ontracts performed in fiscal 1996 had a
greater percentage of labor compared with those in 1995. In general, labor
intensive jobs result in higher margins than do material intensive jobs.
Operating expenses increased by $52,971 from $498,317 during the nine months
ended March 31, 1995 to $551,288 during the corresponding period in 1996. This
11% increase resulted principally from increases in insurance $11,109), director
fees ($12,700), and audit fees ($15,750), substantially all of which were
incurred because the Company became a public entity in 1996.
Net interest expense decreased by $20,797 because the Company realized interest
income of $9,557 during the period subsequent to the completion of the public
offering. Interest expense also decreased because of a decrease in rates
brought about by market conditions and the more favorable terms negotiated with
a bank for borrowings after the completion of the public offering.
Three Months Ended March 31, 1996 and 1995.
The factors affecting the three-month period are substantially the same as those
described above for the nine-month periods, except that the impact of weather
relaated delays was more severe. The decline in revenue (of 33%) for this period
was primarily the result of contracts being delayed by weather and other
conditions beyond the Companys control. The gross margin percentage for this
three months ended March 31, 1996 was 21% which is below the Company's
historical levels because the volume for this period was low in relation to
fixed costs. Operating expenses were relatively constant. Increased levels of
insurance, audit and director costs this three month period caused by the
Company becoming a public entity were substantially offset by cutbacks in
clerical staff and discretionary product development costs.
Interest expense declined because of the amounts earned on the proceeds of
the initial public offering and a reduction in rates brought about by
refinancing outstanding loans subsequent to the initial public offering.
Liquidity and Capital Resources
The Company completed an initial public offering of its common stock and
warrants in February 1996. The net proceeds therefrom ($3,114,500) provide the
Company with adequate liquidity and resources to meet its needs during the
foreseeable future.
The Company also has a $375,000 loan dated March 8, 1996 outstanding with a bank
and is collateralized by a certificate of deposit. Such loan bears interest
spread at the rate of one percent per annum and is due on April 1, 1997. The
proceeds of this bank loan were used to repay indebtedness due principally to
trusts for family members of company officers. The bank loans are at rates more
favorable than the loans which were repaid.
The Company is considering negotiating a formal credit facility with a bank
although no additional sources of funds are necessary at this time.
<PAGE>
PART II OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
On February 27, 1996, the Company
completed an initial public offering of 771,500
shares of its common stock and 1,500,000 redeemable
warrants resulting in net proceeds of $3,114,547.The
Offering is described in Note 3 to the Unaudited
Condensed Financial Statements.
Item 3 Defaults on Senior Securities
None
Item 4 Submission of Matters to a Vote of Shareholders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
<PAGE>
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.
THERMO MIZER ENVIRONMENTAL CORP.
(Registrant) /s/ Jon J. Darcy
Jon J. Darcy President and CEO
Date: February 14, 1996
