UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
S
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30,
2012
or
£
|
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
THERMOENERGY CORPORATION
(Exact name of registrant as specified in
its charter)
Delaware
|
71-0659511
|
(State or other jurisdiction of
|
(I.R.S. Employer Identification No.)
|
incorporation or organization)
|
|
10 New Bond Street,
|
|
Worcester, Massachusetts
|
01606
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Registrant’s telephone number,
including area code:
(508) 854-1628
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
o
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
o
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
|
Accelerated filer
o
|
|
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
Indicate the number of shares outstanding
of each of the issuer’s classes of common stock, as of the latest practicable date.
Class – Common Stock, $.001 par value
|
Outstanding at August 10, 2012 – 116,823,372 shares
|
THERMOENERGY CORPORATION
INDEX
|
|
|
Page
No.
|
|
|
|
|
Part I.
|
Financial Information
|
|
|
ITEM 1.
|
Financial Statements
|
3
|
|
|
Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011
|
3
|
|
|
Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (As restated) (Unaudited)
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4
|
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (As Restated) (Unaudited)
|
5
|
|
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Notes to Consolidated Financial Statements (Unaudited)
|
6
|
|
ITEM 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
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18
|
|
ITEM 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
21
|
|
ITEM 4.
|
Controls and Procedures
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21
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|
|
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Part II.
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Other Information
|
|
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ITEM 1.
|
Legal Proceedings
|
22
|
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ITEM 1A.
|
Risk Factors
|
22
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|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
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22
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ITEM 3.
|
Defaults Upon Senior Securities
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22
|
|
ITEM 4.
|
Mine Safety Disclosures
|
22
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|
ITEM 5.
|
Other Information
|
22
|
|
ITEM 6.
|
Exhibits
|
22
|
|
|
|
|
Signatures
|
|
|
23
|
PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
THERMOENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value
amounts)
|
|
June
30,
2012
|
|
|
December 31,
2011
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
349
|
|
|
$
|
3,056
|
|
Accounts receivable, net
|
|
|
1,301
|
|
|
|
4,228
|
|
Costs in excess of billings
|
|
|
455
|
|
|
|
132
|
|
Inventories
|
|
|
296
|
|
|
|
167
|
|
Deposits
|
|
|
1,139
|
|
|
|
262
|
|
Other current assets
|
|
|
145
|
|
|
|
328
|
|
Total Current Assets
|
|
|
3,685
|
|
|
|
8,173
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
474
|
|
|
|
544
|
|
Other assets
|
|
|
63
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
4,222
|
|
|
$
|
8,789
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,655
|
|
|
$
|
2,640
|
|
Convertible debt, net - current portion
|
|
|
1,250
|
|
|
|
1,250
|
|
Billings in excess of costs
|
|
|
3,668
|
|
|
|
5,131
|
|
Derivative liability, current portion
|
|
|
149
|
|
|
|
706
|
|
Other current liabilities
|
|
|
2,099
|
|
|
|
1,833
|
|
Total Current Liabilities
|
|
|
9,821
|
|
|
|
11,560
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities:
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
132
|
|
|
|
101
|
|
Convertible debt, net
|
|
|
1,731
|
|
|
|
1,571
|
|
Other long term liabilities
|
|
|
100
|
|
|
|
160
|
|
Total Long Term Liabilities
|
|
|
1,963
|
|
|
|
1,832
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
11,784
|
|
|
|
13,392
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficiency:
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.01 par value: authorized: 20,000,000 shares at June 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock, liquidation value of $1.20 per share: designated: 208,334 shares at June 30, 2012 and December 31, 2011; issued and outstanding: 208,334 shares at June 30, 2012 and December 31, 2011
|
|
|
2
|
|
|
|
2
|
|
Series B Convertible Preferred Stock, liquidation preference of $2.40 per share: designated: 12,000,000 shares at June 30, 2012 and December 31, 2011; issued and outstanding: 11,664,993 shares at June 30, 2012 and December 31, 2011
|
|
|
117
|
|
|
|
117
|
|
Common Stock, $0.001 par value: authorized: 425,000,000 shares at
June 30, 2012 and December 31, 2011; issued: 91,219,622 shares at June 30, 2012 and 85,167,098 shares at December 31, 2011;
outstanding: 91,085,825 shares at June 30, 2012 and 85,033,301 shares at December 31, 2011
|
|
|
91
|
|
|
|
85
|
|
Additional paid-in capital
|
|
|
109,838
|
|
|
|
108,727
|
|
Accumulated deficit
|
|
|
(117,587
|
)
|
|
|
(113,510
|
)
|
Treasury stock, at cost: 133,797 shares at June 30, 2012 and December 31, 2011
|
|
|
(18
|
)
|
|
|
(18
|
)
|
Total ThermoEnergy Corporation Stockholders’ Deficiency
|
|
|
(7,557
|
)
|
|
|
(4,597
|
)
|
Noncontrolling interest
|
|
|
(5
|
)
|
|
|
(6
|
)
|
Total Stockholders’ Deficiency
|
|
|
(7,562
|
)
|
|
|
(4,603
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$
|
4,222
|
|
|
$
|
8,789
|
|
See notes to consolidated financial statements.
THERMOENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except share and per share
amounts
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
(As Restated - See Note 3)
|
|
|
|
|
|
(As Restated - See Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,900
|
|
|
$
|
1,434
|
|
|
$
|
3,588
|
|
|
$
|
2,382
|
|
Less: cost of revenue
|
|
|
1,779
|
|
|
|
1,280
|
|
|
|
3,207
|
|
|
|
2,247
|
|
Gross profit
|
|
|
121
|
|
|
|
154
|
|
|
|
381
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,885
|
|
|
|
1,300
|
|
|
|
2,916
|
|
|
|
2,696
|
|
Engineering, research and development
|
|
|
94
|
|
|
|
62
|
|
|
|
203
|
|
|
|
145
|
|
Sales and marketing
|
|
|
887
|
|
|
|
607
|
|
|
|
1,590
|
|
|
|
1,120
|
|
Total operating expenses
|
|
|
2,866
|
|
|
|
1,969
|
|
|
|
4,709
|
|
|
|
3,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(2,745
|
)
|
|
|
(1,815
|
)
|
|
|
(4,328
|
)
|
|
|
(3,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities
|
|
|
351
|
|
|
|
820
|
|
|
|
526
|
|
|
|
3,523
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
(147
|
)
|
|
|
—
|
|
|
|
(7,392
|
)
|
Interest and other expense, net
|
|
|
(133
|
)
|
|
|
(210
|
)
|
|
|
(265
|
)
|
|
|
(904
|
)
|
Equity in losses of joint venture
|
|
|
(5
|
)
|
|
|
(182
|
)
|
|
|
(10
|
)
|
|
|
(269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,532
|
)
|
|
|
(1,534
|
)
|
|
|
(4,077
|
)
|
|
|
(8,868
|
)
|
Net loss attributable to noncontrolling interest
|
|
|
1
|
|
|
|
27
|
|
|
|
2
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ThermoEnergy Corporation
|
|
$
|
(2,531
|
)
|
|
|
(1,507
|
)
|
|
$
|
(4,075
|
)
|
|
$
|
(8,828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to ThermoEnergy Corporation, basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
|
|
(0.04
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing loss per share, basic and diluted
|
|
|
91,085,825
|
|
|
|
56,738,188
|
|
|
|
90,713,078
|
|
|
|
56,323,824
|
|
See notes to consolidated financial statements.
THERMOENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
(As Restated –
See
Note 3)
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,077
|
)
|
|
$
|
(8,868
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
531
|
|
|
|
655
|
|
Equity in losses of joint venture
|
|
|
10
|
|
|
|
269
|
|
Decrease in derivative liabilities
|
|
|
(526
|
)
|
|
|
(3,523
|
)
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
7,392
|
|
Common stock issued for services
|
|
|
88
|
|
|
|
—
|
|
Non-cash interest added to debt
|
|
|
46
|
|
|
|
45
|
|
Loss on disposal of equipment
|
|
|
131
|
|
|
|
—
|
|
Depreciation
|
|
|
48
|
|
|
|
34
|
|
Amortization of discount on convertible debt
|
|
|
114
|
|
|
|
512
|
|
Increase (decrease) in cash arising from changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
2,927
|
|
|
|
333
|
|
Costs in excess of billings
|
|
|
(323
|
)
|
|
|
—
|
|
Inventories
|
|
|
(129
|
)
|
|
|
(71
|
)
|
Deposits
|
|
|
(877
|
)
|
|
|
—
|
|
Other current assets
|
|
|
183
|
|
|
|
(332
|
)
|
Accounts payable
|
|
|
15
|
|
|
|
1,301
|
|
Billings in excess of costs
|
|
|
(1,463
|
)
|
|
|
(655
|
)
|
Other current liabilities
|
|
|
266
|
|
|
|
(620
|
)
|
Other long-term liabilities
|
|
|
(60
|
)
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(3,096
|
)
|
|
|
(3,426
|
)
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Investment in joint venture
|
|
|
—
|
|
|
|
(256
|
)
|
Purchases of property and equipment
|
|
|
(109
|
)
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(109
|
)
|
|
|
(337
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from exercise of common stock warrants, net of issuance
costs of $38
|
|
|
498
|
|
|
|
—
|
|
Proceeds from issuance of short-term borrowings
|
|
|
—
|
|
|
|
2,909
|
|
Payments on convertible debt
|
|
|
—
|
|
|
|
(1,235
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
498
|
|
|
|
1,674
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(2,707
|
)
|
|
|
(2,089
|
)
|
Cash, beginning of period
|
|
|
3,056
|
|
|
|
4,299
|
|
Cash, end of period
|
|
$
|
349
|
|
|
$
|
2,210
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
136
|
|
Supplemental schedule of non-cash financing activities:
|
|
|
|
|
|
|
|
|
Accrued interest added to debt
|
|
$
|
23
|
|
|
$
|
153
|
|
Conversion of convertible debt and accrued interest to Series B Convertible Preferred Stock
|
|
$
|
—
|
|
|
$
|
1,129
|
|
Debt discount recognized on convertible debt
|
|
$
|
—
|
|
|
$
|
3,591
|
|
See notes to consolidated financial statements.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Note 1: Organization and summary
of significant accounting policies
Nature of business
ThermoEnergy Corporation (“the Company”)
was incorporated in January 1988 for the purpose of developing and marketing advanced municipal and industrial wastewater treatment
and carbon reducing power generation technologies.
The
Company’s wastewater treatment systems are based on its proprietary Controlled Atmosphere Separation Technology
(“CAST”) platform. The Company’s patented and proprietary platform technology is combined with
off-the-shelf technologies to provide systems that are inexpensive, easy to operate and reliable. The Company’s
wastewater treatment systems have global applications in hydraulic fracturing (“fracking”) in the oil and gas industry,
food and beverage processing, metal finishing, pulp & paper, petrochemical, refining, microchip and circuit board
manufacturing, heavy manufacturing and municipal wastewater. The CAST platform technology is owned by the Company’s
subsidiary, CASTion Corporation (“CASTion”).
The Company
also owns a patented pressurized oxycombustion technology (“POXC”) that converts fossil fuels (including coal,
oil and natural gas) and biomass into electricity while producing near zero air emissions and removing and capturing carbon
dioxide in liquid form for sequestration or beneficial reuse. This technology is intended to be used to build new or to
retrofit old fossil fuel power plants globally with near zero air emissions while capturing carbon dioxide as a liquid for
ready sequestration far more economically than any other competing technology. The pressurized
oxycombustion
technology is held in the Company’s subsidiary, ThermoEnergy Power Systems, LLC
(“TEPS”).
Principles of consolidation and basis
of presentation
The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation. The 15% third-party ownership interest in TEPS is recorded as a noncontrolling interest in the consolidated financial
statements. Certain prior year amounts have been reclassified to conform to current year classifications.
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP 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 six-month period ended June 30, 2012 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2012.
The preparation of these unaudited interim
consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The balance sheet at December 31, 2011
has been derived from the audited financial statements at that date but does not include all of the information and footnotes required
by GAAP for complete financial statements. For further information, refer to the financial statements and footnotes thereto included
in the Annual Report on Form 10-K for the year ended December 31, 2011 of ThermoEnergy Corporation.
The Company has restated its unaudited
interim consolidated financial statements for the three and six-month period ended June 30, 2011. See Note 3.
Revenue recognition
The Company recognizes revenues using
the percentage-of-completion method. Under this approach, revenue is earned in proportion to total costs incurred in relation
to total costs expected to be incurred. Contract costs include all direct material and labor costs and indirect costs related
to contract performance, such as indirect labor, supplies, tools, repairs and depreciation. The Company has a significant
concentration of revenue and receivables with the City of New York.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Recognition of revenue and profit is dependent
upon a number of factors, including the accuracy of a variety of estimates made at the balance sheet date such as engineering progress,
materials quantities, the achievement of milestones, penalty provisions, labor productivity and cost estimates made. Due to uncertainties
inherent in the estimation process, actual completion costs may vary from estimates. Changes in job performance, job conditions
and estimated profitability may result in revisions to costs and income and are recognized beginning in the period in which they
become known. Provisions for estimated losses on uncompleted contracts are made in the period in which the estimated loss
first becomes known.
Certain long-term contracts include a number
of different services to be provided to the customer. The Company records separately revenues, costs and gross profit related to
each of these services if they meet the contract segmenting criteria in Accounting Standards Codification (“ASC”) 605-35.
This policy may result in different interim rates of profitability for each segment than if the Company had recognized revenues
using the percentage-of-completion method based on the project’s estimated total costs.
Accounts receivable, net
Accounts receivable are recorded at their
estimated net realizable value. Receivables related to the Company’s contracts have realization and liquidation periods of
less than one year and are therefore classified as current assets.
The Company maintains allowances for specific
doubtful accounts based on estimates of losses resulting from the inability of customers to make required payments and record these
allowances as a charge to general and administrative expense. The Company’s method for estimating its allowance for doubtful
accounts is based on judgmental factors, including known and inherent risks in the underlying balances, adverse situations that
may affect the customer’s ability to pay and current economic conditions. Amounts considered uncollectible are written off
based on the specific customer balance outstanding. The Company did not have any allowance for doubtful accounts as of June 30,
2012 and December 31, 2011.
Inventories
Inventories are stated at the lower of
cost or market using the first-in, first-out method and consist primarily of raw materials and supplies.
Inventories consist of the following at
June 30, 2012 and December 31, 2011:
|
|
June
30,
2012
|
|
|
December
31,
2011
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
69
|
|
|
$
|
67
|
|
Work in process
|
|
|
227
|
|
|
|
100
|
|
|
|
$
|
296
|
|
|
$
|
167
|
|
Property and equipment
Property and equipment are stated at cost
and are depreciated over the estimated useful life of each asset. Depreciation is computed using the straight-line method. The
Company evaluates long-lived assets based on estimated future undiscounted net cash flows or other fair value measures whenever
significant events or changes in circumstances occur that indicate the carrying amount may not be recoverable. If that evaluation
indicates that an impairment has occurred, a charge is recognized to the extent the carrying amount exceeds the undiscounted cash
flows or fair values of the asset, whichever is more readily determinable.
The Company recorded a loss of $131,000
in the first quarter of 2012 related to the disposal of a system previously used for pre-sales testing. This loss is included in
sales and marketing expense on its Consolidated Statement of Operations for the six-month period ended June 30, 2012.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Contingencies
The Company accrues for costs relating
to litigation, including litigation defense costs, claims and other contingent matters, including liquidated damage liabilities,
when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties or on
management’s judgment, as appropriate. Revisions to accruals are reflected in earnings (loss) in the period in which different
facts or information become known or circumstances change that affect the Company’s previous assumptions with respect to
the likelihood or amount of loss. Amounts paid upon the ultimate resolution of such liabilities may be materially different from
previous estimates and could require adjustments to the estimated liability to be recognized in the period such new information
becomes known.
Stock options
The Company accounts for
stock options in accordance with ASC Topics 505, “Equity” and 718, “Compensation –
Stock Compensation”. These topics require that the cost of all share-based payments to vendors and employees, including
grants of employee stock options, be recognized in the consolidated financial statements based on their fair values on the
measurement date, which is generally the date of grant. Such cost is recognized over the vesting period of the awards. The
Company uses the Black-Scholes option pricing model to estimate the fair value of “plain vanilla” stock option
awards.
Fair value of financial instruments
and fair value measurements
The carrying amount of cash, accounts
receivable, other current assets, accounts payable and other current liabilities in the consolidated financial statements
approximate fair value because of the short-term nature of the instruments. The carrying amount of the Company’s
convertible debt was $2,981,000 and $2,821,000 at June 30, 2012 and December 31, 2011, respectively, and approximates the
fair value of these instruments. The Company’s warrant liabilities are recorded at fair value. No assets are recorded
at fair value as measured on a recurring basis.
The Company's liabilities carried at fair
value are categorized using inputs from the three levels of the fair value hierarchy, as follows:
Level
1: Quoted prices in active markets for identical assets or liabilities.
Level
2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
Level
3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
liabilities.
Liabilities measured at fair
value on a recurring basis as of June 30, 2012 are as follows: (in thousands)
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Description
|
|
Balance as of
June 30, 2012
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability – current portion
|
|
$
|
149
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
149
|
|
Derivative liability – long-term portion
|
|
$
|
132
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
281
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
281
|
|
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
The Monte Carlo Simulation lattice model
was used to determine the fair values at June 30, 2012. The significant assumptions used were: exercise prices between $0.30 and
$0.36; the Company’s stock price on June 30, 2012, $0.11; expected volatility of 80% - 85%; risk free interest rate between
0.16% and 0.23%; and a remaining contract term between 6 months and 15 months.
Liabilities measured at fair
value on a recurring basis as of December 31, 2011 are as follows: (in thousands)
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Description
|
|
Balance as of
December 31,
2011
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability – current portion
|
|
$
|
706
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
706
|
|
Derivative liability – long-term portion
|
|
|
101
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
807
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
807
|
|
The Monte Carlo Simulation lattice model
was used to determine the fair values at December 31, 2011. The significant assumptions used were: exercise prices between $0.185
and $0.36; the Company’s stock price on December 31, 2011, $0.19; expected volatility of 82.9%; risk free interest rate between
0.12% and 0.25%; and a remaining contract term between 1 and 2 years.
The following table sets forth a reconciliation of changes in
the fair value of derivatives classified as Level 3 (in thousands):
Balance at December 31, 2011
|
|
$
|
807
|
|
Change in fair value
|
|
|
(526
|
)
|
Balance at June 30, 2012
|
|
$
|
281
|
|
Series B Convertible Preferred Stock
The Company determined the initial value
of the Series B Convertible Preferred Stock and investor warrants using valuation models it considers to be appropriate. Because
the Series B Convertible Preferred Stock has an indefinite life, it is classified within the stockholders’ deficiency section
of the Company's consolidated balance sheets. The value of beneficial conversion features upon issuance are considered a “deemed
dividend” and are added as a component of net loss attributable to common stockholders in the Company’s Consolidated
Statements of Operations.
Net income (loss) per share
Basic
net income (loss) per share (“EPS”) is computed by dividing the net income (loss) attributable to the
common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator)
during the reporting periods. Fully diluted net income (loss) per share is computed by increasing the denominator by the
weighted average number of additional shares that could have been outstanding from securities convertible into common stock,
such as stock options and warrants (using the “treasury stock” method), and convertible preferred stock and debt
(using the “if-converted” method), unless the effect on net income (loss) per share is antidilutive. Under
the “if-converted” method, convertible instruments are assumed to have been converted as of the beginning of
the period or when issued, if later. The effect of including additional shares using the treasury stock and if-converted
methods in computing the Company’s diluted net loss per share would be antidilutive and, accordingly, such
additional shares have not been considered in computing diluted net loss per share for the six-month periods ended
June 30, 2012 and 2011 (as restated).
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Recent accounting pronouncements
In
May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements
in U.S. GAAP and IFRS,” which converges fair value measurement and disclosure guidance in U.S. GAAP with fair value measurement
and disclosure guidance issued by the International Accounting Standards Board (“IASB”). The amendments in the authoritative
guidance do not modify the requirements for when fair value measurements apply. The amendments generally represent clarifications
on how to measure and disclose fair value under ASC 820, “Fair Value Measurement.” The authoritative guidance is effective
prospectively for interim and annual periods beginning after December 15, 2011. Early adoption of the authoritative guidance
is not permitted.
The Company has adopted the provisions of ASU 2011-04 in the Company’s fiscal year beginning January
1, 2012, and the provisions of this guidance did not have a material impact on its financial statements or disclosures.
Note 2: Management's consideration
of going concern matters
The accompanying financial statements have
been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation
of the Company as a going concern. However, the Company has sustained substantial losses from operations in recent years, and such
losses have continued through the quarter ended June 30, 2012.
At June 30, 2012, the Company had cash
of $349,000, a decrease of approximately $2.7 million from December 31, 2011. The Company has incurred net losses since inception,
including a net loss of approximately $4.1 million during the six-month period ended June 30, 2012 and had an accumulated deficit
of approximately $117.6 million at June 30, 2012.
Based upon management's projections, the
Company will require additional capital to continue commercialization of the Company’s power and water technologies (the
“Technologies”) and to support current operations. The Company had a working capital deficit of approximately $6.1
million at June 30, 2012. Any change to management projections will increase or decrease this deficit. In addition, the Company
may be subject to tax liens if it cannot abide by the terms of the Offer in Compromise approved by the Internal Revenue Service
to satisfactorily settle outstanding payroll tax liabilities (see Note 8). Management is considering several alternatives for mitigating
these conditions.
These uncertainties raise substantial doubt
about the Company's ability to continue as a going concern for a reasonable period of time. The financial statements included in
this Form 10-Q have been prepared on a going concern basis and as such do not include any adjustments that might result from the
outcome of this uncertainty.
Management successfully completed a program
to eliminate the Company’s outstanding secured debt in 2011 and is actively seeking to raise substantial capital through
additional equity or debt financing that will allow the Company to operate until it becomes cash flow positive from operations.
Management is also actively pursuing commercial contracts to generate operating revenue. Management has determined that the financial
success of the Company is largely dependent upon the Company’s ability to collaborate with financially sound third parties
to pursue projects involving the Technologies.
As more fully
described in Note 6, on January 10, 2012,
the Company received proceeds totaling $498,000, net of issuance
costs, from the exercise of an aggregate of 5,633,344 warrants at an exercise price of $0.095 per share. Also, as more fully described
in Note 9, on July 11, 2012, the Company received proceeds totaling $1,566,000, net of issuance costs, from the issuance of 17,316,250
shares of the Company’s Common Stock and warrants for the purchase of an additional 17,316,250 shares at an exercise price
of $0.15 per share. In addition, as more fully described in Note 9, on August 9, 2012, the Company received proceeds totaling
$729,000, net of issuance costs, from the issuance of 8,287,500 shares of the Company’s Common Stock and warrants for the
purchase of an additional 8,287,500 shares at an exercise price of $0.15 per share.
Note 3: Restatement
The unaudited quarterly financial information
for the quarterly periods ended March 31, 2011, June 30, 2011 and September 30, 2011 have been restated to correct errors in the
valuation of the Company’s derivative liabilities and accounting for certain financing transactions in those periods. These
errors in the Company’s financing transactions were caused by the Company incorrectly accounting for the amendment of its
CASTion Notes and its 2010 Bridge Notes as a debt modification instead of a debt extinguishment in the first quarter of 2011. The
errors in the Company’s derivative liabilities were due to deficiencies in the Company’s valuation model and methodology
used to calculate the fair value of such liabilities in the first three quarters of 2011.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
The Company restated the effects of these
errors for the affected periods in its Annual Report on Form 10-K as of and for the year ended December 31, 2011. The net effect
of these errors is (i) a $4.7 million understatement of the Company’s net loss to common stockholders in the quarter ended
March 31, 2011, (ii) a $1.5 million overstatement of the Company’s net loss to common stockholders in the quarter ended June
30, 2011 and (iii) a $3.9 million overstatement of the Company’s net loss to common stockholders in the quarter ended September
30, 2011. The net effect is that the Company’s net loss to common stockholders for the nine-month period ended September
30, 2011 was overstated by approximately $0.7 million. None of the errors related to the Company’s cash position, revenues
or loss from operations for any of the periods in which such errors occurred.
This Quarterly Report on Form
10-Q for the quarter ended June 30, 2012 reflects the impact of this restatement on the applicable unaudited quarterly
financial information for the three and six months ended June 30, 2011 presented in the Consolidated Statements of Operations
and Consolidated Statements of Cash Flows. In addition, the Company’s future Quarterly Reports on Form 10-Q will
include restated quarter and year to date financial information for 2011.
Quarterly Reports on Form 10-Q as
originally filed for each of the first three quarters of 2011 have not been and will not be amended. The financial statements
included in such reports should not be relied on.
The impact of the errors on the Company’s
Consolidated Statement of Operations for the three and six months ended June 30, 2011 is summarized below (in thousands):
|
|
Three Months Ended
June 30, 2011
|
|
|
Six Months Ended
June 30, 2011
|
|
|
|
As Originally
Reported
|
|
|
As Restated
|
|
|
As Originally
Reported
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(1,815
|
)
|
|
$
|
(1,815
|
)
|
|
$
|
(3,826
|
)
|
|
$
|
(3,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability income
|
|
|
39
|
|
|
|
820
|
|
|
|
1,056
|
|
|
|
3,523
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
(147
|
)
|
|
|
—
|
|
|
|
(7,392
|
)
|
Interest and other expense, net
|
|
|
(1,027
|
)
|
|
|
(210
|
)
|
|
|
(2,488
|
)
|
|
|
(904
|
)
|
Equity in losses of joint venture
|
|
|
(182
|
)
|
|
|
(182
|
)
|
|
|
(269
|
)
|
|
|
(269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,985
|
)
|
|
|
(1,534
|
)
|
|
|
(5,527
|
)
|
|
|
(8,868
|
)
|
Net loss attributable to noncontrolling interest
|
|
|
27
|
|
|
|
27
|
|
|
|
40
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ThermoEnergy Corporation
|
|
|
(2,958
|
)
|
|
|
(1,507
|
)
|
|
|
(5,487
|
)
|
|
|
(8,828
|
)
|
Deemed dividend on Series B Convertible Preferred Stock
|
|
|
(91
|
)
|
|
|
—
|
|
|
|
(226
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ThermoEnergy Corporation common stockholders
|
|
$
|
(3,049
|
)
|
|
$
|
(1,507
|
)
|
|
$
|
(5,713
|
)
|
|
$
|
(8,828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to ThermoEnergy Corporation common stockholders, basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing loss per share, basic and diluted
|
|
|
56,738,188
|
|
|
|
56,738,188
|
|
|
|
56,323,824
|
|
|
|
56,323,824
|
|
Note 4: Joint Ventures
Babcock-Thermo Clean Combustion LLC
On February 25, 2009, the Company’s
majority-owned subsidiary, TEPS, and Babcock Power Development, LLC (“BPD”), a subsidiary of Babcock Power, Inc., entered
into a Limited Liability Company Agreement (the “LLC Agreement”) establishing Babcock-Thermo Carbon Capture LLC, a
Delaware limited liability company now known as Babcock-Thermo Clean Combustion LLC (the “Joint Venture”) for the purpose
of developing and commercializing its proprietary POXC technology.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
TEPS entered into a license agreement with
the Joint Venture and BPD, pursuant to which it has granted to the Joint Venture an exclusive, irrevocable (except as otherwise
provided therein), world-wide and royalty-free license to TEPS’ intellectual property related to or necessary to practice
the POXC technology. In the LLC Agreement, BPD agreed to develop, at its own expense, intellectual
property in connection with three critical subsystems relating to the POXC technology. BPD entered into a license agreement with
the Joint Venture and TEPS pursuant to which it granted the Joint Venture an exclusive, irrevocable (except as otherwise provided
therein), world-wide, fully paid up and royalty-free license to BPD’s know-how and other relevant proprietary intellectual
property. Pursuant to the LLC Agreement, TEPS and BPD each owned a 50% membership interest in the Joint Venture.
On March 2, 2012, TEPS entered into a Dissolution
Agreement with BPD to terminate the Limited Liability Company Agreement and dissolve the Joint Venture. The BTCC Board of Managers
is supervising the wind down and dissolution process.
Unity Power Alliance LLC
On March 8, 2012, the Company
announced the formation of Unity Power Alliance LLC (“UPA”). UPA was formed with the intention to work with
partners and stakeholders to develop and commercialize its pressurized oxycombustion technology.
On June 20, 2012, the Company entered into
an Agreement with Itea S.p.A. (“Itea”) for the development of pressurized oxycombustion in North America. The two parties,
through UPA, will utilize the two parties’ propriety technology to advance, develop and promote the use of the coal application
of pressurized oxycombustion, construct a pilot plant utilizing the technology, and subsequently construct a demonstration facility
based on the technology as implemented in the pilot plant. Itea was granted the option to acquire a 50% ownership interest in UPA
for nominal consideration. On July 16, 2012, Itea exercised its option and acquired the 50% ownership interest in UPA; as of June
30, 2012, UPA is a wholly-owned subsidiary of the Company.
Since Itea’s acquisition of
an ownership interest, UPA has been governed by a Board of Directors, with half of the directors nominated by each of the
Company and Itea. Administrative expenses of UPA shall be borne jointly by the Company and Itea,
and financing for development expenses will be obtained from third parties.
Also on June 20, 2012, the Company
and Itea entered into a License Agreement whereby the Company and the Company’s majority-owned subsidiary, TEPS, on the
one hand, and Itea, on the other, granted to UPA a non-exclusive, non-transferable royalty-free license to use
their intellectual property relating to pressurized oxycombustion. The licenses to UPA became effective upon
Itea’s acquisition of its ownership interest in UPA. The License Agreement further provides that, if UPA successfully
obtains funding and project support to construct the pilot plant, the parties may grant licenses of their respective
intellectual property and know-how to each other or to third parties for the operation of power plants based on such
intellectual property and know-how, and royalties will be shared as defined in the License Agreement.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Note 5: Convertible debt
Convertible debt consisted of the following
at June 30, 2012 and December 31, 2011 (in thousands):
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
|
|
|
|
|
|
|
Roenigk 2007 Convertible Promissory Note, 5%, due March 21, 2013, less discount of $78 at December 31, 2011
|
|
$
|
—
|
|
|
$
|
860
|
|
Roenigk 2008 Convertible Promissory Note, 5%, due
March 7, 2013, less discount of $181 at December 31, 2011
|
|
|
—
|
|
|
|
711
|
|
December 2011 Convertible Promissory Notes, 12.5%, due December 31, 2012
|
|
|
1,250
|
|
|
|
1,250
|
|
Roenigk 2012 Convertible Promissory Note, 8%, due March 31, 2014, less discount of $146 at June 30, 2012
|
|
|
1,731
|
|
|
|
—
|
|
|
|
|
2,981
|
|
|
|
2,821
|
|
Less: Current portion
|
|
|
(1,250
|
)
|
|
|
(1,250
|
)
|
|
|
$
|
1,731
|
|
|
$
|
1,571
|
|
Roenigk 2007 Convertible Promissory
Note
On March 21, 2007 the Company issued to
Mr. Martin A. Roenigk, a member of the Company’s Board of Directors as of that date, a 5% Convertible Promissory Note due
March 21, 2013 in the principal amount of $750,000. The principal amount and accrued interest on the Note is convertible into shares
of Common Stock at a conversion price of $0.50 per share at any time at the election of the holder. Interest on the Note is payable
semi-annually. The Company may, at its discretion, defer any scheduled interest payment until the maturity date of the Note upon
payment of a $2,500 deferral fee. The Company added $24,000 of accrued interest to the principal balance of the Note during the
six months ended June 30, 2012. Total interest added to the principal balance of the Note was $213,000 as of June 20, 2012.
On June 20, 2012, the Noteholder
tendered this Note, together with the 2008 Convertible Promissory Note discussed below, as consideration for the issuance of
the 2012 Convertible Promissory Note, as discussed below.
Roenigk 2008 Convertible Promissory
Note
On March 7, 2008, Mr. Roenigk exercised
his option to make an additional $750,000 investment in the Company under the terms of the Securities Purchase Agreement between
the Company and Mr. Roenigk dated March 21, 2007. The Company issued to Mr. Roenigk a 5% Convertible Promissory Note due March
7, 2013 in the principal amount of $750,000. The principal amount and accrued interest on the Note is convertible into shares of
Common Stock at a conversion price of $0.50 per share at any time at the election of the holder. Interest on the Note is payable
semi-annually. The Company may, at its discretion, defer any scheduled interest payment until the maturity date of the Note upon
payment of a $2,500 deferral fee. The Company added $22,000 of accrued interest to the principal balance of the Note during the
six months ended June 30, 2012. Total interest added to the principal balance of the Note was $165,000 as of June 20, 2012.
On June 20, 2012, the Noteholder tendered this Note, together with the 2007 Convertible Promissory Note discussed above, as consideration
for the issuance of the 2012 Convertible Promissory Note, as discussed below.
December 2011 Convertible Promissory
Notes
On December 2, 2011 the Company entered
into Bridge Loan Agreements with four of its principal investors pursuant to which the Investors agreed to make bridge loans to
the Company of $1.25 million in exchange for 12.5% Promissory Notes (the “December 2011 Bridge Notes”). The
December 2011 Bridge Notes bear interest at the rate of 12.5% per year and are due and payable on December 31, 2012. The entire
unpaid principal amount, together with all interest then accrued and unpaid under each December 2011 Bridge Note, is convertible
into shares of a future series of Preferred Stock.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
The December 2011 Bridge Notes contain
other conventional provisions, including the acceleration of repayment obligations upon the occurrence of certain specified Events
of Default. No such Events of Default had occurred as of June 30, 2012 and through the date of this filing.
Roenigk 2012 Convertible Promissory
Note
On June 20, 2012, the Company issued a Convertible Promissory Note dated April 1, 2012 in the principal amount of $1,877,217 in exchange
for the 2007 Convertible Promissory Note and the 2008 Convertible Promissory Note (the “Old Notes”). The Note bears interest at the rate of 5% per annum from April 1, 2012 through May 31, 2012, then bears interest at the rate of
8% per annum until the maturity date, March 31, 2014. The principal amount and accrued interest on the Note is convertible into
shares of Common Stock at a conversion price of $0.50 per share at any time at the election of the holder. Interest on the Note
is payable semi-annually. The Company may, at its discretion, defer any scheduled interest payment until the maturity date of the
Note upon payment of a $2,500 deferral fee.
The exchange of the Old Notes for
this Note has been accounted for as a troubled debt restructuring. In summary, the Company was granted a one year extension
of the maturity date of the Old Notes, and the interest rate was increased from 5% to 8% per annum. The Company evaluated
the anticipated future cash flows of this Note and determined that they exceed the carrying value (and accrued interest
thereon) of the Old Notes. As a result, the Company did not record a loss or gain on this transaction.
Note 6: Equity
Common Stock
On January 10,
2012,
the Company entered into Warrant Amendment Agreements (the “Agreements”) with six
individuals who acquired warrants from five funds affiliated with Security Investors, LLC for the purchase of an aggregate of 5,633,344
shares of the Company’s Common Stock (collectively, the “Warrants”). Pursuant to the Agreements, the Company
amended the Warrants to change the exercise prices from $0.30 per share to $0.095 per share, and the Investors agreed to exercise
all of the Warrants immediately for cash. The Company received proceeds totaling $498,000, net of issuance costs, from the exercise
of the Warrants.
On February 10, 2012, the Company issued
419,180 shares of Common Stock to ARC Capital (BVI) Limited. (“ARC”) in partial consideration for financial advisory
and other consulting services performed by ARC pursuant to a Financial Advisory and Consulting Agreement dated as of November 7,
2011. The value of this Common Stock was recorded as a component of general and administrative expense on the Company’s Consolidated
Statement of Operations in the fourth quarter of 2011.
At June 30, 2012, approximately 231 million
shares of Common Stock were reserved for future issuance under convertible debt and warrant agreements, stock option arrangements
and other commitments.
See Note 9 for discussion of the Company’s
sale of Common Stock on July 11, 2012 and on August 9, 2012.
Stock Options
During the six-month period ended June
30, 2012, the Board of Directors awarded employees and an advisor to the Board of Directors a total of 3,060,000 stock options
under the Company’s 2008 Incentive Stock Plan. The options are exercisable at $0.15 - $0.30 per share for a ten year period.
The exercise price was equal to or greater than the market price on the respective grant dates. Options granted to non-employee
directors vest on the date of the Company’s 2012 Annual Meeting of Stockholders; options granted to employees vest ratably
over a four-year period.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
The following table presents option expense
included in expenses in the Company’s Consolidated Statements of Operations for the six-month periods ended June 30, 2012
and 2011:
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
6
|
|
|
$
|
12
|
|
General and administrative
|
|
|
442
|
|
|
|
532
|
|
Engineering, research and development
|
|
|
49
|
|
|
|
55
|
|
Sales and marketing
|
|
|
34
|
|
|
|
56
|
|
Option expense before tax
|
|
|
531
|
|
|
|
655
|
|
Benefit for income tax
|
|
|
—
|
|
|
|
—
|
|
Net option expense
|
|
$
|
531
|
|
|
$
|
655
|
|
The fair value of options granted during
the six-month periods ended June 30, 2012 and 2011 were estimated at the date of grant using a Black-Scholes option pricing model
with the following assumptions:
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
0.97% - 2.23
|
%
|
|
|
3.5
|
%
|
Expected option life (years)
|
|
|
6.25 – 10.0
|
|
|
|
6.25
|
|
Expected volatility
|
|
|
92
|
%
|
|
|
91
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected forfeiture rate
|
|
|
0% - 20
|
%
|
|
|
0
|
%
|
A summary of the Company’s stock
option activity and related information for the six-month periods ended June 30, 2012 and 2011 follows:
|
|
2012
|
|
|
2011
|
|
|
|
Number of
Shares
|
|
|
Wtd. Avg.
Exercise
Price per
Share
|
|
|
Number of
Shares
|
|
|
Wtd. Avg.
Exercise
Price per
Share
|
|
Outstanding, beginning of year
|
|
|
19,674,102
|
|
|
$
|
0.38
|
|
|
|
22,065,402
|
|
|
$
|
0.57
|
|
Granted
|
|
|
3,060,000
|
|
|
$
|
0.25
|
|
|
|
1,200,000
|
|
|
$
|
0.30
|
|
Canceled
|
|
|
(740,000
|
)
|
|
$
|
0.31
|
|
|
|
(3,090,675
|
)
|
|
$
|
1.22
|
|
Outstanding, end of period
|
|
|
21,994,102
|
|
|
$
|
0.36
|
|
|
|
20,174,727
|
|
|
$
|
0.46
|
|
Exercisable, end of period
|
|
|
12,557,554
|
|
|
$
|
0.46
|
|
|
|
9,069,647
|
|
|
$
|
0.65
|
|
The weighted average fair value of options
granted was approximately $0.17 and $0.23 per share for the six-month periods ended June 30, 2012 and 2011, respectively. The weighted
average fair value of options vested was approximately $678,000 and $488,000 for the six-month periods ended June 30, 2012 and
2011, respectively.
Exercise prices for options outstanding
as of June 30, 2012 ranged from $0.15 to $1.50. The weighted average remaining contractual life of those options was approximately
7.7 years at June 30, 2012. The weighted average remaining contractual life of options vested and exercisable was approximately
7.3 years at June 30, 2012.
As of June 30, 2012, there was approximately
$685,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the
Company’s stock option plans. That cost is expected to be recognized over a weighted-average period of 1.0 years. The Company
recognizes stock-based compensation on the straight-line method.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Warrants
At June 30, 2012, there were outstanding
warrants for the purchase of 76,715,946 shares of the Company’s Common Stock at prices ranging from $0.01 per share to $0.55
per share (weighted average exercise price was $0.38 per share). The expiration dates of these warrants are as follows:
Year
|
|
Number of
Warrants
|
|
|
|
|
|
2012
|
|
|
11,333,333
|
|
2013
|
|
|
8,896,554
|
|
2014
|
|
|
6,159,436
|
|
2015
|
|
|
6,188,879
|
|
2016
|
|
|
42,795,244
|
|
After 2016
|
|
|
1,342,500
|
|
|
|
|
76,715,946
|
|
Note 7: Segments
Operating segments are identified as
components of an enterprise about which separate discrete financial information is available to the chief operating decision
maker, or decision-making group, in assessing performance and allocating resources. The Company markets and develops advanced
municipal and industrial wastewater treatment and carbon reducing clean energy technologies. The Company currently generates
almost all of its revenues from the sale and application of its water treatment technologies. Revenues from its clean energy
technologies have been limited to grants received from governmental and other agencies for continued development. In 2009,
the Company established BTCC, a joint venture with Babcock Power Development, LLC, for the purpose of developing and
commercializing the Company’s clean energy technology. This joint venture is currently in the dissolution process. In
March 2012, the Company established UPA to work with partners and stakeholders to develop and commercialize its pressurized
oxycombustion technology, and in July 2012, Itea S.p.A. acquired a 50% ownership interest in UPA, making it a joint venture.
Because revenues and costs related
to the Company’s clean energy technologies is immaterial to the entire Company taken as a whole, the financial information
presented in these financial statements represents all the material financial information related to the Company’s water
treatment technologies.
The Company’s operations are currently
conducted solely in the United States. The Company will continue to evaluate how its business is managed and, as necessary, adjust
the segment reporting accordingly.
Note 8: Commitments and contingencies
On March 25, 2011, the Company was notified
by the U.S. Internal Revenue Service that it had accepted the Company’s Offer in Compromise with respect to its tax liabilities
relating to (i) employee tax withholding for all periods commencing with the quarter ended September 30, 2005 and continuing through
September 30, 2009 and (ii) federal unemployment taxes (FUTA) for the years 2005 through 2008. Pursuant to the Offer in Compromise,
the Company has satisfied its delinquent tax liabilities by paying a total of $2,134,636 (representing the aggregate amount of
tax due, without interest or penalties).
In connection with the Offer in Compromise,
the Company has agreed that any net operating losses sustained for the years ending December 31, 2010 through December 31, 2012
will not be claimed as deductions under the provisions of Section 172 of the Internal Revenue Code except to the extent that such
net operating losses exceed the amount of interest and penalties abated. The IRS acceptance of the Offer in Compromise is conditioned,
among other things, on the Company filing and paying all required taxes for five tax years commencing on the date of the IRS acceptance.
Accrued payroll taxes, which include taxes,
penalties and interest related to state taxing authorities, totaled approximately $407,000 and are included in other current liabilities
on the Company’s Consolidated Balance Sheets as of June 30, 2012. The Company continues to work with the various state taxing
authorities to settle its remaining payroll tax obligations.
The Company is involved from time to time
in litigation incidental to the conduct of its business. Judgments could be rendered or settlements entered that could adversely
affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of its litigation
and threatened litigation as to the probability of ultimately incurring a liability and records its best estimate of the ultimate
loss in situations where it assesses the likelihood of loss as probable.
THERMOENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
Note 9: Subsequent events
On July 11, 2012, the Company
entered into Securities Purchase Agreements (the “Agreements”) with twenty-four individuals and entities
(the “Investors”) pursuant to which the Company issued an aggregate of 17,316,250 shares of Common Stock and
Common Stock Purchase Warrants for the purchase of an additional 17,316,250 shares of Common Stock. The aggregate purchase
price for the Shares and Warrants was $1,731,625, and the Company received proceeds of $1,565,908, net of issuance costs. The
Warrants entitle the holders thereof to purchase, at any time on or prior to July 11, 2017, shares of Common Stock at an
exercise price of $0.15 per share.
On August 9, 2012, the Company entered
into Securities Purchase Agreements (the “Agreements”) with eleven additional individuals and entities (the “Investors”)
pursuant to which the Company issued an aggregate of 8,287,500 shares of Common Stock and Common Stock Purchase Warrants for the
purchase of an additional 8,287,500 shares of Common Stock. The aggregate purchase price for the Shares and Warrants was $828,750,
and the Company received proceeds of $729,068, net of issuance costs. The Warrants entitle the holders thereof to purchase, at
any time on or prior to August 9, 2017, shares of Common Stock at an exercise price of $0.15 per share.
The Agreements described above
include a price protection provision pursuant to which, at any time on or before January 11, 2014, the Company issues and
sells any shares of Common Stock or securities convertible into Common Stock (“Convertible Securities”) at a
price less than $0.10 per share (a “Dilutive Transaction”), the purchase price for the Shares shall automatically
be reduced to a price equal to the price at which such shares were issued and sold (the “Reduced Price”) and the
Company will issue to the Investors, for no additional consideration, a sufficient number of additional Shares so that the
effective price per Share equals the Reduced Price. The Warrants include a similar price protection provision pursuant to
which, upon a Dilutive Transaction, the exercise price of the Warrants shall automatically be reduced to a price equal to
150% of the Reduced Price. Upon such adjustment, the number of Warrant Shares issuable upon exercise of a Warrant shall
automatically be adjusted by multiplying the number of shares issuable upon exercise of such Warrant immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which shall be the exercise price immediately prior to the Dilutive
Issuance and (ii) the denominator of which shall be the exercise price as adjusted.
ITEM 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read
in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
Overview
We are a diversified technologies company
engaged in the worldwide commercialization of advanced municipal and industrial wastewater treatment systems and carbon reducing
power generation technologies.
Our wastewater treatment systems
not only meet local, state and federal environmental regulations, but typically provide a rapid rate of return on investment
by recovering and reusing expensive feedstocks, reducing contaminated wastewater discharge and recovering and reusing
wastewater used in process operations. Our systems utilize proven technology to cost effectively process and treat brackish,
flowback and produced water in the hydraulic fracturing (“fracking”) process in the oil and gas industries. Our
wastewater treatment systems also have global applications in aerospace, food and beverage processing, metal finishing, pulp
& paper, petrochemical, refining, microchip and circuit board manufacturing, heavy manufacturing and municipal
wastewater.
We
are also the owner of a patented pressurized oxycombustion technology that converts fossil fuels (including coal, oil and natural
gas) and biomass into electricity while producing near zero air emissions, and at the same time removing and capturing carbon dioxide
in liquid form for sequestration or beneficial reuse. This technology can be used to build new or retrofit old fossil fuel power
plants globally with near zero air emissions while capturing carbon dioxide as a liquid for ready sequestration far more economically
than any other competing technology. The technology is held by our subsidiary, ThermoEnergy Power Systems, LLC (“TEPS”)
and will be developed and commercialized through the formation of our new joint venture, Unity Power Alliance.
On June 20, 2012, the Company entered into
an Agreement with Itea S.p.A. (“Itea”) for the development of pressurized oxycombustion in North America. The two parties,
through UPA, will utilize the two parties’ propriety technology to advance, develop and promote the use of the coal application
of pressurized oxycombustion, construct a pilot plant utilizing the technology, and subsequently construct a demonstration facility
based on the technology as implemented in the pilot plant. Itea was granted the option to acquire a 50% ownership interest in UPA
for nominal consideration. On July 16, 2012, Itea exercised its option and acquired the 50% ownership interest in UPA; as of June
30, 2012, UPA is a wholly-owned subsidiary of the Company.
We currently generate revenues from the
sale and development of wastewater treatment systems. We enter into contracts with our customers to provide a wastewater treatment
solution that meets the customer’s present and future needs. Our revenues are tied to the size and scale of the wastewater
treatment system required by the customer, as well as the progress made on each customer contract.
Historically we marketed and sold our products
in North America. In 2011, we began marketing and selling our products in Asia and Europe. These marketing and sales activities
are performed by our direct sales force and authorized independent sales representatives.
We have made significant progress over
the past year in resolving our past legal and financial issues, strengthening our balance sheet, hiring key management personnel
and building our business for future growth. However, we have incurred net losses and negative cash flows from operations since
inception. We incurred net losses of $4.1 million for the six-month period ended June 30, 2012 and $17.4 million for the year ended
December 31, 2011. Cash outflows from operations totaled $3.1 million for the six-month period ended June 30, 2012 and $6.1 million
for the year ended December 31, 2011. As a result, we will require additional capital to continue to fund our operations.
Restatement of Financial Statements
The unaudited quarterly financial information
for the three and six-month periods ended June 30, 2011 were restated to correct errors in the valuation of our derivative liabilities
and accounting for certain financing transactions in those periods. These errors in our financing transactions were caused by our
incorrectly accounting for the amendment of our CASTion Notes and 2010 Bridge Notes as a debt modification instead of a debt extinguishment
in the first quarter of 2011. The errors in our derivative liabilities were due to deficiencies in our valuation model and methodology
used to calculate the fair value of such liabilities in the first and second quarters of 2011.
We restated the effects of these errors
for the affected periods in our Annual Report on Form 10-K as of and for the year ended December 31, 2011. The net effect of these
errors resulted in an decrease in our net loss to common stockholders of $1.5 million in the three-month period ended June 30,
2011 and an increase to our net loss to common shareholders of $3.1 million in the six-month period ended June 30, 2011 as compared
to the amounts that had previously been reported. None of these errors related to our cash position, revenues or loss from operations
for any of the periods in which such errors occurred.
This Quarterly Report on Form
10-Q for the quarter ended June 30, 2012 included the impact of this restatement on the applicable unaudited quarterly
financial information for the three and six-month period ended June 30, 2011 presented in the Consolidated Statement of
Operations and Consolidated Statement of Cash Flows. In addition, our Quarterly Report on Form 10-Q for the quarter ending
September 30, 2012 will restate applicable 2011 comparable quarter and year to date periods.
Previously filed Quarterly Reports on Form
10-Q for each of the first three quarters of 2011 have not been and will not be amended. The financial statements included in such
reports should not be relied on.
Results of Operations
Comparison of Quarters Ended June 30,
2012 and 2011 (as restated)
Revenues totaled $1,900,000 for the
second quarter of 2012, an increase of 32% compared to $1,434,000 for the second quarter of 2011. We continued to devote
significant resources toward construction work on our $27.1 million contract with the New York City Department of
Environmental Protection (“NYCDEP”), which generated most of our revenues for the second quarter of
2012. We expect to continue generating significant revenues from the NYCDEP contract in the third and fourth
quarters of 2012. In the second quarter of 2011, we substantially completed production on one industrial contract and were in
the later stages of engineering and design work on the NYCDEP contract.
Gross profit for the second quarter of
2012 was $121,000 (6.4% of revenues), a decrease of $33,000 compared to gross profit of $154,000 (10.7% of revenues) in the second
quarter of 2011. The decrease in gross profit is attributable to the mix of work performed in the respective quarters. Gross profit
in the second quarter of 2012 related to work performed on the NYCDEP contract; gross profit in the second quarter of 2011 related
to work performed on NYCDEP as well as our completed industrial project, which generated higher margins.
General and administrative expenses increased
by $585,000 or 45% in the second quarter of 2012 compared to 2011, primarily due to increased accounting expenses in 2012 and increased legal, consulting and other professional expenses associated with our recent
financing efforts.
Engineering, research and development expenses
increased by $32,000 or 50% in the quarter ended June 30, 2012 compared to 2011. The increase is attributable to reduced utilization
of our engineering team on our various projects in 2012 compared to 2011; costs directly related to our projects are charged to
Cost of Sales.
Sales and marketing expenses increased
by $280,000 or 46% in the second quarter of 2012 compared to 2011. This increase is due to increased pre-sales pilot activity and
expenses related to development of our water treatment solutions for hydraulic fracturing in the oil and gas industry.
Changes in the fair value of our derivative
warrant liabilities resulted in the recognition of derivative mark-to-market income of $351,000 in the second quarter of 2012 compared
to $820,000 in the second quarter of 2011. Income in the second quarter of 2012 relates primarily to the passage of time and decrease
in our stock price. This derivative income is lower in the second quarter of 2012, as certain derivative liabilities valued in
the previous year no longer exist. Income in 2011 relates to the change in our stock price at June 30, 2011 compared to March 31,
2011 and increasing the expected volatility rate assumption used as of June 30, 2011.
Interest and other expense decreased during
the second quarter of 2012 compared to 2011 by $77,000, due mainly to lower debt levels in 2012.
We recognized losses related to our BTCC
joint venture totaling $5,000 in the second quarter of 2012 compared to losses of $182,000 in the second quarter of 2011. The decrease
in losses in 2012 were due to the wind down and dissolution of BTCC which began in the first quarter of 2012.
Comparison of Six-Month Periods Ended
June 30, 2012 and 2011 (as restated)
Revenues totaled $3,588,000 for
the first six months of 2012 compared to $2,382,000 for the first six months of 2011, an increase of $1,206,000 or 51%.
We devoted significant resources toward construction-related activities on our NYCDEP contract in 2012, which accounted for
most of our revenues in the first six months of 2012. In 2011, we were in the later stages of engineering and design work on
our $27.1 million contract with the NYCDEP. These efforts generated lower revenues as stipulated in our
NYCDEP contract. In 2011, we also substantially completed production on one industrial contract and started installation work
on an industrial contract for which production was completed in 2010.
Gross profit for the first six months of
2012 was $381,000 (10.6% of revenues), an increase of $246,000 compared to $135,000 (5.7% of revenues) in the first six months
of 2011. The increase is attributable to higher revenues as well as higher margins on construction-related activities for the NYCDEP
contract in 2012 compared to engineering and design work performed on that contract in 2011.
General and administrative expenses increased
by $220,000 or 8% in the six-month period ended June 30, 2012 compared to 2011, primarily due to increased accounting expenses
in 2012 associated with our 2011 financial statement audit and increased legal, consulting and other professional expenses associated
with our recent financing efforts, partially offset by large decreases in non-cash stock option expenses.
Engineering, research and development expenses
increased by $58,000 or 40% in the six-month period ended June 30, 2012 compared to 2011. The increase is attributable to reduced
utilization of our engineering team on our various projects in 2012 compared to 2011; costs directly related to our projects are
charged to Cost of Sales.
Sales and marketing
expenses increased by $470,000 or 42% in the six-month period ended June 30, 2012 compared to 2011. This increase is due to
increased pre-sales pilot activity, expenses related to development of our water treatment solutions for
hydraulic fracturing in the oil and gas industry, and higher expenses related to our international business development
activities.
Changes in the fair value of our
derivative warrant liabilities resulted in the recognition of derivative mark-to-market income of $526,000 in the six-month
period ended June 30, 2012 compared to $3,523,000 in the six-month period ended June 30, 2011. Income in the first half of
2012 relates primarily to the passage of time and decrease in our stock price. This derivative income is lower in the first half of 2012, as certain derivative liabilities valued in the previous year no longer exist in 2012. Income in 2011
relates to the change in our stock price at June 30, 2011 compared to December 31, 2010 and increasing the expected
volatility rate assumption used as of June 30, 2011.
Interest and other expense decreased during
the six-month period ended June 30, 2012 compared to 2011 by $639,000, due mainly to lower debt levels in 2012.
We recognized losses related to our BTCC
joint venture totaling $10,000 in the first six months of 2012 compared to losses of $269,000 in the first six months of 2011.
The decrease in losses were mainly due to the wind down and dissolution of BTCC which began in the first quarter of 2012.
Liquidity and Capital Resources
We have historically lacked the financial
and other resources necessary to market the Technologies or to build demonstration projects without the financial backing of government
or investment partners. We have funded our operations primarily from the sale of convertible debt, short-term borrowings, preferred
stock and common stock, generally from stockholders and other parties who are sophisticated investors in clean technology. We are
currently in discussions with current and potential new investors for equity or debt financing to fund our operations until we
can operate on a cash flow positive basis.
However, over the past year, we have
continued to make significant progress in strengthening our balance sheet and building our business for future growth. In the
past eighteen months, we have:
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Raised $8.2 million of funding in 2011
and $2.8 million of funding in 2012;
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Made debt service payments totaling $2.8
million and converted all outstanding secured debt and accrued interest totaling $10.1 million into Series B Convertible Preferred
Stock;
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Paid all amounts due to
the Internal Revenue Service under the Offer in Compromise that was accepted in March 2011; and
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Settled a lawsuit related
to a former officer’s employment agreement.
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Cash used in operations amounted to
$3,096,000 and $3,426,000 for the six-month periods ended June 30, 2012 and 2011, respectively. Cash used in
operations is primarily a result of our continued net losses in 2012 and 2011. Cash used in investing activities included
investments in BTCC of $256,000 in 2011 and purchases of property and equipment of $109,000 and $81,000 for the six-month
periods ended June 30, 2012 and 2011, respectively. Cash provided by financing activities for the six-month period ended June
30, 2012 included proceeds from the exercise of common stock warrants of $498,000; cash provided by financing activities for
the six-month period ended June 30, 2011 included proceeds from the issuance of short-term borrowings of $2,909,000,
partially offset by payments on convertible debt of approximately $1.2 million.
At June 30, 2012, we do not have sufficient
working capital to satisfy our anticipated operating expenses for the next 12 months. As of June 30, 2012, we had a cash balance
of $349,000 and current liabilities of approximately $9.8 million, which consisted primarily of accounts payable of approximately
$2.7 million, billings in excess of costs of approximately $3.7 million, convertible debt of $1.25 million, derivative liabilities
of $149,000 and other current liabilities of approximately $2.1 million.
On January 10,
2012,
we entered into Warrant Amendment Agreements (the “Agreements”) with six individuals
who acquired warrants from five funds affiliated with Security Investors, LLC for the purchase of an aggregate of 5,633,344 shares
of our Common Stock. Pursuant to the Agreements, we amended the Warrants to change the exercise prices from $0.30 per share to
$0.095 per share, and the Investors agreed to exercise all of the Warrants immediately for cash. We received proceeds totaling
$498,000, net of issuance costs, from the exercise of the Warrants.
On July 11, 2012, we entered into Securities
Purchase Agreements (the “Agreements”) with twenty-four individuals and entities (the “Investors”) pursuant
to which we issued an aggregate of 17,316,250 shares of Common Stock and Common Stock Purchase Warrants for the purchase of an
additional 17,316,250 shares of Common Stock. We received proceeds totaling $1,565,908, net of issuance costs, from this financing.
On August 9, 2012, we entered into Securities
Purchase Agreements (the “Agreements”) with eleven individuals and entities (the “Investors”) pursuant
to which we issued an aggregate of 8,287,500 shares of Common Stock and Common Stock Purchase Warrants for the purchase of an
additional 8,287,500 shares of Common Stock. We received proceeds totaling $729,068, net of issuance costs, from this financing.
Although our financial condition has improved,
there can be no assurance that we will be able to obtain the funding necessary to continue our operations and development activities.
We continue to engage current and potential new investors in discussions for equity or debt financing to fund our operations until
we can operate on a cash flow positive basis.
ITEM 3. Quantitative and
Qualitative Disclosures About Market Risk
Not applicable.
ITEM 4. Controls and Procedures
The Company, under the direction of its
Chief Executive Officer and Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure
that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded,
processed, summarized, and reported within the time periods specified in the Commission’s rules and forms. The disclosure
controls and procedures are also intended to ensure that such information is accumulated and communicated to the Company’s
management, consisting of the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosures.
The Company’s Chief Executive Officer
and Chief Financial Officer carried out an evaluation of the effectiveness of disclosure controls and procedures as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. Based on this evaluation,
the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls
and procedures were not effective as of June 30, 2012 due to (i) our failure to adequately allocate a proper and sufficient
amount of resources to ensure that necessary internal controls were implemented and followed, specifically, but not limited, to
the accounting and valuation of complex debt and equity transactions; and (ii) a lack of segregation of duties in our significant
accounting functions to ensure that internal controls were designed and operating effectively.
The Company did not make any changes to
its internal controls over financial reporting during the quarter ended June 30, 2012 that materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
Not applicable.
ITEM 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
The following exhibits are filed as part
of this report:
Exhibit No.
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Description
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10.1
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Agreement, dated June 20, 2012, by and between ThermoEnergy Corporation and Itea S.p.A. – Incorporated
by reference to Exhibit 10.1 to Current Report on Form 8-K filed June 26, 2012.
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10.2
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Detailed License Agreement, dated June 20, 2012, by and between ThermoEnergy Corporation, ThermoEnergy
Power Systems LLC, Itea S.p.A. and Unity Power Alliance LLC -- Incorporated by reference to Exhibit 10.2 to Current Report on Form
8-K filed June 26, 2012.
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10.3
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Form of Securities Purchase Agreement dated as of July 11, 2012 by and between ThermoEnergy Corporation
and each of the individuals and entities identified therein as “Investors” -- Incorporated by reference to Exhibit
10.1 to Current Report on Form 8-K filed July 17, 2012.
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10.4
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Form of Common Stock Purchase Warrant issued pursuant to the Securities Purchase Agreements dated as of
July 11, 2012 by and between ThermoEnergy Corporation and each of the individuals and entities identified therein as
“Investors” -- Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed July 17, 2012.
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31.1
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Sarbanes Oxley Act Section 302 Certificate of Principal Executive Officer — Filed herewith
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31.2
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Sarbanes Oxley Act Section 302 Certificate of Principal Financial Officer — Filed herewith
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32.1
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Sarbanes Oxley Act Section 906 Certificate of Principal Executive Officer — Filed herewith
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32.2
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Sarbanes Oxley Act Section 906 Certificate of Principal Financial Officer — Filed herewith
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101.INS *
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XBRL Instance Document
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101.SCH *
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XBRL Taxonomy Extension Schema Document
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101.CAL *
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF *
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XBRL Taxonomy Extension Definition Linkbase Document
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101 LAB *
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XBRL Extension Labels Linkbase Document
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101.PRE *
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XBRL Taxonomy Extension Presentation Linkbase Document
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* In accordance with SEC rules, this interactive
data file is deemed “furnished” and not “filed” for purposes of Sections 11 or 12 of the Securities Act
of 1933 and Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under those sections
or acts.
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: August 14, 2012
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THERMOENERGY CORPORATION
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/s/ Cary G. Bullock
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Cary G. Bullock
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President and Chief Executive Officer
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/s/ Teodor Klowan, Jr.
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Teodor Klowan, Jr. CPA
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Executive Vice President and Chief
Financial Officer
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