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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 2000
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number ___________
THERMALTEC INTERNATIONAL CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 113255619
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
68A Lamar Street, West Babylon, NY 11704
(Address of principal executive offices)
(631) 643-2285
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,078,785 shares as of June, 2000.
<PAGE>
Thermaltec International Corp.and Subsidiaries
Consolidated Balance Sheets
as of
6/30/2000
(unaudited)
-----------
Assets
Current Assets
Cash and Cash Equivalents $ 318,080
Trade Accounts Receivable 182,896
Inventory 124,098
Prepaid and Other Current Assets 60,328
-----------
Total Current Assets 685,402
-----------
Fixed Assets
Machinery and Equipment 264,883
Leasehold Improvements 40,120
-----------
Gross Fixed Assets 305,003
Less: Accumulated Depreciation (104,348)
-----------
Net Fixed Assets 200,655
-----------
Other Assets
Goodwill, Net 447,016
Organization Costs, Net of Amortization 809
Other Assets 3,513
-----------
Total Other Assets 451,338
-----------
Total Assets $ 1,337,395
===========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Notes Payable $ 92,148
Vendor Accounts Payable 271,154
Other Liabilities 152,993
Shareholder Loan 211,507
-----------
Total Current Liabilities 727,802
-----------
Long-Term Liabilities
Long-Term Debt Less Current Maturities 107,390
-----------
Total Liabilities 835,192
-----------
Common Stock 408
Additional Paid-In Capital 3,512,848
Retained Earnings (Deficit) (3,027,055)
Accumulated Other Comprehensive Income:
Foreign Currency Translation Adjsutment 16,002
-----------
Total Stockholders' Equity (Deficit) 502,203
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 1,337,395
===========
See accompanying notes to consolidated financial statements.
<PAGE>
Thermaltec International Corp.and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Nine Months Ending
(Unaudited)
6/30/1999 6/30/2000
----------- -----------
Sales $204,950 $211,051
Cost of Sales 145,170 209,250
----------- -----------
Gross Profit 59,780 1,801
General and Administrative Expenses 345,382 852,873
----------- -----------
Net Loss (285,602) (851,072)
----------- -----------
Other Comprehensive Income:
Foreign Currency translation adjustments 16,078 (9,084)
----------- -----------
Total Comprehensive Income (Loss) ($269,524) ($860,156)
=========== ===========
Basic and Diluted Loss per Share ($0.12) ($0.29)
=========== ===========
Weighted Average Number of Shares Outstanding 2,455,791 3,017,551
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
Thermaltec International Corp.and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Three Months Ending
(Unaudited)
6/30/1999 6/30/2000
---------- -----------
Sales $78,714 $120,469
Cost of Sales 87,488 127,679
----------- -----------
Gross Profit (Loss) (8,684) (7,210)
General and Administrative Expenses 198,126 218,143
----------- -----------
Net Loss (206,900) (225,353)
----------- -----------
Other Comprehensive Income:
Foreign Currency translation adjustments 7,056 (14,845)
----------- -----------
Total Comprehensive Income (Loss) ($199,844) ($240,198)
=========== ===========
Basic and Diluted Loss per Share ($0.08) ($0.07)
=========== ===========
Weighted Average Number of Shares Outstanding 2,510,368 3,592,784
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
Thermaltec International Corp. and Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
For the Nine Months Ending June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Accumulated
-------------------------- Additional Retained Other
Number of Paid-In Earnings Comprehensive
Shares Amount Capital (Deficit) Income Total
-------------------------- ---------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance September 30, 1999 2,608,118 261 1,902,407 (2,175,983) 25,086 (248,229)
(UNAUDITED)
Net Loss for the
nine months ending 6/30/00 (851,072) (851,072)
Other Comprehensive Income:
Foreign Currency Translation Adjustment (9,084) (9,084)
Stock issued for services, 2/18/00 155,666 16 332,721 332,737
Warrants exercised 3/6/00 1,000 0 1,000 1,000
Stock sold and issued 4/13/00 834,000 83 833,917 834,000
Stock issued for Other loans 4/14/00 165,000 17 164,984 165,000
Shares issued for services June 2000 65,001 7 59,095 59,102
Shares issued on 6/13/00 for purchase 250,000 25 218,725 218,750
of HVT on 5/19/00
---------- ---------- ---------- ---------- ---------- ----------
Balance June 30, 2000 4,078,785 408 3,512,848 (3,027,055) 16,002 502,203
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Thermaltec International Corp.and Subsidiaries
Consolidated Statements of Cash Flow
For the Nine Months Ending
<TABLE>
<CAPTION>
(Unaudited)
6/30/1999 6/30/2000
---------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss ($285,602) ($851,072)
--------- ---------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation & Amortization 23,152 22,599
Common Stock Issued for Services 77,567 391,839
Loss on Disposal of Assets 3,375 --
Excess of Liabilities Over Assets Purchased from
High Velocity Technology -- (228,266)
(Increase) decrease in:
Receivables (19,543) (23,448)
Inventories (29,488) (104,319)
Prepaid and other current assets 3,680 (58,837)
Other Assets (329) 767
Increase (decrease) in:
Accounts Payable 26,538 95,153
Accrued Expenses and Other Current Liabilities 54,785 115,261
--------- ---------
Total Adjustments 139,737 210,749
--------- ---------
Net cash used in operating activities (145,865) (640,323)
--------- ---------
Cash Flows from Investing Activities:
Purchases of Fixed Assets & Leasehold Improvements 0 (79,004)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from sale of shares net of offering costs 78,200 835,000
Proceeds of sale of shares not yet issued -- --
Proceeds from issuance of Notes Payable -- 129,609
Repayments of Notes Payable (6) --
Net proceeds (repayments) of Shareholder Loans 106,522 (49,396)
--------- ---------
Net cash provided by financing activities 184,716 915,213
--------- ---------
Effect of Exchange on Cash 16,078 (9,084)
Net increase (decrease) in cash and cash equivalents 54,929 186,802
Cash & Cash Equivalents, Beginning of Period 5,604 131,278
--------- ---------
Cash & Cash Equivalents, End of Period $ 60,533 $ 318,080
========= =========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The Company had a non-cash investing activity of $ 218,750 that resulted
from the acquisition of a subsidiary whose net liabilities exceeded net
assets, summarized as follows:
<TABLE>
<S> <C>
Goodwill acquired $ 447,016
Stock issued for acquisition of subsidiary 218,750
---------
Excess of liabilities over assets of subsidiary acquired $ 228,266
=========
</TABLE>
In addition, the Company had a non-cash financing activity of $ 165,000
when it issued shares of stock for repayment of various loans.
See accompanying notes to financial statements
<PAGE>
THERMALTEC INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDING JUNE 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared by management in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and item 310 of Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for financial statement presentation. In the opinion of
management, all adjustments consisting of normal recurring accruals considered
necessary for a fair presentation have been included. The results of operations
for interim periods are not necessarily indicative of the results to be expected
for the full year. These consolidated interim financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Form 10-SB currently under review by the Securities and Exchange
Commission.
2. GOODWILL
As a result of the purchase of High Velocity Technology, Inc. on May 19, 2000,
the Company has recorded, in consolidation, goodwill of $450,772 less
accumulated amortization of $3,756 in the month of June. Goodwill is being
amortized on a straight-line basis over a life of ten years.
3. EQUITY TRANSACTIONS
On May 31,1999 the Company authorized the sale of 1,000,000 shares of common
stock to be offered in private transactions of 1,000 Units, representing 1,000
shares per Unit. Each Unit consisted of 1,000 common shares, 750 B Warrants and
500 C Warrants for the purchase of additional common shares of the Company. Such
offering was filed with the State of New York Department of Law. The Company
utilized an exemption from the registration provisions under Regulation D Rule
504,as amended, and sold in those States which permit the offering to take
place. The termination date of the offering was March 31, 2000. The exercise
price of the Warrants is $1.50 per B Warrant share and $2.00 per C Warrant
share, exercisable commencing one year from the date of the subscription
agreement for the B Warrant and two years from the date of the subscription
agreement for the C Warrant. The B Warrants will expire March 31, 2002 and the C
Warrants will expire March 31, 2003. 999,000 shares were subscribed in the
offering. There were 649,350 B Warrants and 499,500 C Warrants subscribed. On
April 13, 2000, 999,000 common shares were issued.
On June 13, 2000 250,000 common shares were issued as payment for the purchase
of High Velocity Technology, Inc.
During the nine months ending June 30, 2000 the Company issued 220,667 shares
for services to outside consultants as follows:
Marketing services 43,041 shares $ 67,850
Administrative services 177,626 shares $323,987
<PAGE>
4. INCOME TAXES
No provision for income taxes was recorded for the three and nine month periods
ending June 30, 2000, due to a net loss having been incurred. The Company does
not anticipate having taxable income at September 30, 2000.
5. MERGERS AND ACQUISITIONS
On January 31, 2000, the Company signed a letter of intent to acquire the assets
of Edge Management Inc. Edge Management is a privately-held firm in the
Professional Employers Organization industry; it has current annual revenues of
$ 43 million. Upon completion of the due diligence process, the Company chose to
withdraw from further negotiations with Edge Management.
On January 31, 2000 the Company signed a letter of intent to acquire one million
shares, representing 10% of the outstanding shares of I(x) Partners, Ltd. I(x)
Partners, based in Salem, NH, is active in the field of information technology,
with a special emphasis on developing and enhancing real-time data processing
systems by means of the Internet. The acquisition will be effected by the
exchange of 200,000 shares of Thermaltec common stock. The completion of the
acquisition is subject to the usual due diligence process. As of June 30, 2000,
the due diligence process was ongoing.
On February 4, 2000 the Company signed a letter of intent to acquire the assets
of High Velocity Technology, Inc., a privately-held company in the thermal spray
industry. The acquisition was consummated on May 19, 2000 by the exchange of
250,000 shares of Thermaltec common stock and $ 100,000 in cash for all of the
assets of High Velocity.
On February 14, 2000 the Company signed a letter of intent to acquire the assets
of Viaplex Communications, Inc., an information technology professional services
company with specialized expertise in the design, implementation and support of
enterprise multi-service networks and applications. Upon completion of the due
diligence process, the Company chose to withdraw from further negotiations with
Viaplex.
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS
Thermaltec International Corp.
Results of Operations
Nine Months Ending June 30, 2000 vs. June 30, 1999
For the nine months ended June 30, 2000, Thermaltec International had $ 211
thousand of consolidated sales, an increase of 3% from the prior year's
comparative period, as the inclusion of $ 71 thousand of sales from High
Velocity Technology, Inc.("HVT") for the month of June more than offset the
decline in business in Costa Rica. Gross margins were 1 %, a decline from the
29% in the prior year, primarily reflecting $52 thousand of cost overruns and
rework at Thermaltec de Costa Rica (TCR). The Company expects that gross margins
will improve significantly as improved efficiencies at TCR take effect and as
the higher-margin revenues of HVT assume a greater share of total Company
revenues. Selling, general and administrative expenses were $853 thousand, $508
thousand more than the prior period, of which $392 thousand was the result of
shares issued for services during the period. Of these expenses, $194 thousand
were required to bring the Camanco (formerly know as Solar Communications)
merger process, begun in 1999 to a conclusion. In addition, the Company incurred
$46 thousand in pursuing other mergers. During the comparative period of the
prior year, expenses included approximately $51 thousand of administrative and
legal costs associated with the planned merger with Camanco Communications.
Expenses other than merger costs were $613 thousand during the first nine
months, an increase of $319 thousand from the year ago period, as the Company
incurred $ 277 thousand of costs in technical training and expansion for its
Costa Rican subsidiary and approximately $29 thousand in costs for registration
and filing of Form 10-SB.
As stated above, the Company incurred approximately $46 thousand of
administrative and legal expenses during the nine months ending June 30, 2000 in
pursuing merger discussions and "due diligence" investigation of three
acquisition candidates, specifically High Velocity Technologies, Edge Management
Inc., and Viaplex Communications. The acquisition of High Velocity was
consummated on May 19, 2000 by the exchange of 250 thousand shares of Thermaltec
common stock and $100 thousand in cash for all of the assets of High Velocity.
The Company chose to withdraw from further negotiations with Edge Management
Inc. and with Viaplex Communications upon completion of the respective due
diligence processes.
Three Months Ending June 30, 2000 vs June 30, 1999
For the three months ended June 30, 2000 Thermaltec International had $ 120
thousand of consolidated sales, an increase of 53% from the prior year's
comparative period, as the inclusion of $ 71 thousand of sales from High
Velocity Technology more than offset the decline in NYSERDA billing during this
quarter, $13 thousand versus a $42 thousand billing during the comparative
period of last year. The Company expects to continue further NYSERDA billings
until the completion of the project. General and administrative expenses rose
10%, to $218 thousand due to $20 thousand of acquisition-related costs being
included. Without those costs, expenses were even with the comparative period of
the prior year.
Liquidity and Financial Resources
The Company has not yet achieved profitability since its inception in 1994. As a
result, it has limited the amount of the debt it has raised to cover only the
acquisition of assets with reliably predictable benefits, such as production
machinery. The Company is of the opinion that the financing necessary to fund
market development is more appropriately obtained through the sale of equity.
Debt outstanding as of June 30, 2000 consists primarily of $19 thousand of a
bank note and $ 181 thousand in equipment financing. Additional liquidity has
been provided by shareholder loans as of June 30, 2000 of $ 212 thousand. Since
inception, the Company has raised $2.4 million through the sale of common stock
other than stock issued in exchange for services.
The Company has a deficiency in working capital and has accumulated a
significant shareholders' deficit. Despite this, in the opinion of management,
the Company remains viable. Its staff in the United States and in Costa Rica has
developed considerable expertise in the application of coatings and in
developing enhanced techniques and operating parameters. The Company intends
through its acquisition of and integration with High Velocity
<PAGE>
Technology, to combine complementary skills to develop a highly competitive
engineering enterprise. The Company is installing improved processes, quality
control and cost accounting systems at Thermaltec de Costa Rica.
On May 31, 1999, the Company authorized the sale of 1,000,000 shares of common
stock to be offered in private transactions of 1,000 Units, representing 1,000
shares per Unit. Each Unit consisted of 1,000 Common shares and 750 B Warrants
and 500 C Warrants for the purchase of additional shares of the Company. Such
offering was filed with the State of New York Department of Law. The Company
utilized an exemption from the registration provisions under Regulation D Rule
504, as amended, and sold in those states which permit the offering to take
place. The termination date of the offering was March 31, 2000. The exercise
price of the Warrants is $1.50 per B Warrant share and $2.00 per C Warrant
share, exercisable commencing one year from the date of the subscription
agreement for the B Warrant and two years from the date of the subscription
agreement for the C Warrant. The B Warrants will expire March 31, 2002 and the C
Warrants will expire March 31, 2003. 999,999 shares were subscribed in the
offering. There were 649,350 B Warrants and 499,500 C Warrants subscribed. On
April 13, 2000, 999,000 shares were issued.
The Company's payment terms for its receivables are thirty calendar days after
invoicing. At June 30, 2000, there were $47 thousand due from NYSERDA,
representing retainage under the terms of the original contracts for Phase I and
for Phase II. Upon completion of the project, the remaining balance is expected
to be paid by NYSERDA.
Year 2000 Compliance
The operations of the Company have not been highly vulnerable to disruption due
to the "Y2K" problem. The Company replaced entirely its computer hardware and
accompanying software prior to the end of 1999. At the end of 1999, the Company
experienced no difficulties with the "Y2K" problem and, in the opinion of
management no cause for further concern exists.
Inflation
The amounts presented in the financial statements do not provide for the effect
of inflation on the Company's operations or its financial position. Amounts
shown for machinery, equipment and leasehold improvements and for costs and
expenses reflect historical cost and do not necessarily represent replacement
cost. The net operating losses shown would be greater than reported if the
effects of inflation were reflected either by charging operations with amounts
that represent replacement costs or by using other inflation adjustments.
Forward-looking Information
Certain statements in this document are forward-looking in nature and relate to
trends and events that may affect the Company's future financial position and
operating results. The words "expect" "anticipate" and similar words or
expressions are to identify forward-looking statements. These statements speak
only as of the date of the document; those statements are based on current
expectations, are inherently uncertain and should be viewed with caution. Actual
results may differ materially from the forward-looking statements as a result of
many factors, including changes in economic conditions and other unanticipated
events and conditions. It is not possible to foresee or to identify all such
factors. The Company makes no commitment to update any forward-looking statement
or to disclose any facts, events or circumstances after the date of this
document that may affect the accuracy of any forward-looking statement.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Act of 1934, the registrant
caused this registration statement to be signed on its behalf by the
undersigned, thereounto duly authorized.
(Registrant) THERMALTEC INTERNATIONAL CORP
Date By /s/ Andrew Mazzone
------------------- -----------------------------
Andrew Mazzone, President and
Chairman of the Board of Directors
Principal Financial Officer
Principal Accounting Officer
