UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
one)
x
|
QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended March 31, 2009
o
|
TRANSITION REPORT UNDER 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
|
(IRS
Employer Identification No.)
|
Incorporation
or Organization)
|
|
124
WEST CAPITOL AVENUE, SUITE 880,
|
|
LITTLE
ROCK, ARKANSAS
|
72201
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant’s
Telephone Number, Including Area Code:
(501) 376-6477
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes
o
No
x
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 during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes
o
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 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
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: 52,150,896 shares of Common Stock
as of March 31, 2009.
THERMOENERGY
CORPORATON
INDEX
|
|
|
Page
No.
|
|
|
|
|
Part
I.
|
Financial Information
|
|
|
Item 1.
|
Financial
Statements
|
3
|
|
|
Consolidated
Balance Sheets as of March 31, 2009 (Unaudited) and
December 31, 2008
|
3
|
|
|
Consolidated
Statements of Operations for the three months ended March 31, 2009
and 2008 (Unaudited)
|
4
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit) for the year
ended January 1, 2008 through December 31, 2008 and the three
months ended March 31, 2009 (Unaudited)
|
5
|
|
|
Consolidated
Statements of Cash Flows for the three months ended March 31, 2009
and 2008 (Unaudited)
|
6
|
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
7
|
|
Item 2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
19
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
21
|
|
Item 4T.
|
Controls
and Procedures
|
21
|
Part
II.
|
Other Information
|
|
|
Item 1.
|
Legal
Proceedings
|
22
|
|
Item 1a.
|
Risk
Factors
|
22
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
22
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
23
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
23
|
|
Item 5.
|
Other
Information
|
23
|
|
Item 6.
|
Exhibits
|
24
|
Signature
|
|
|
24
|
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements
THERMOENERGY
CORPORATION
CONSOLIDATED
BALANCE SHEETS
(in
thousands, except for share and par value amounts )
|
|
March 31, 2009
|
|
|
December 31,
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
12
|
|
|
$
|
115
|
|
Accounts
Receivable, net
|
|
|
128
|
|
|
|
111
|
|
Inventories
|
|
|
159
|
|
|
|
164
|
|
Other
Current Assets
|
|
|
162
|
|
|
|
164
|
|
Total
Current Assets
|
|
|
461
|
|
|
|
554
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
289
|
|
|
|
305
|
|
Other
Assets
|
|
|
169
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
919
|
|
|
$
|
1,035
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
419
|
|
|
$
|
204
|
|
Short-Term
Borrowings
|
|
|
1,387
|
|
|
|
873
|
|
Convertible
Debt in Default
|
|
|
3,656
|
|
|
|
3,478
|
|
Contingent
Liability Reserves
|
|
|
3,334
|
|
|
|
3,334
|
|
Deferred
Revenue
|
|
|
190
|
|
|
|
264
|
|
Other
Current Liabilities
|
|
|
2,720
|
|
|
|
2,713
|
|
Total
Current Liabilities
|
|
|
11,706
|
|
|
|
10,866
|
|
|
|
|
|
|
|
|
|
|
Long
Term Liabilities:
|
|
|
|
|
|
|
|
|
Deferred
Comp Retirement Plan for Officers Net of Current Portion
|
|
|
250
|
|
|
|
261
|
|
Convertible
Debt
|
|
|
1,508
|
|
|
|
992
|
|
Total
Long Term Liabilities
|
|
|
1,758
|
|
|
|
1,253
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
13,464
|
|
|
|
12,119
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit):
|
|
|
|
|
|
|
|
|
Preferred
Stock, $0.01 par value, liquidation value of $1.20 per share: authorized -
20,000,000 shares; issued and outstanding: 2009 and 2008 - 208,334
shares
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, $.001 par value: authorized - 150,000,000 shares;
issued: 2009 - 52,234,693 shares; 2008 - 50,247,537 shares; outstanding:
2009 - 52,150,896 shares; 2008 - 50,163,740 shares
|
|
|
52
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In Capital
|
|
|
58,854
|
|
|
|
58,810
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Deficit
|
|
|
(71,453
|
)
|
|
|
(68,284
|
)
|
|
|
|
|
|
|
|
|
|
Total
ThermoEnergy Corporation Stockholders' Equity (Deficit)
|
|
|
(12,545
|
)
|
|
|
(9,422
|
)
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interest
|
|
|
|
|
|
|
(1,662
|
)
|
Total
Stockholders' Equity
|
|
|
(12,545
|
)
|
|
|
(11,084
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
919
|
|
|
$
|
1,035
|
|
See
notes to consolidated financial statements.
THERMOENERGY
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in
thousands, except per share amounts)
|
|
Three
Months Ended
|
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Contract
and Grant Income
|
|
$
|
375
|
|
|
$
|
409
|
|
Less:
Cost of Contract and Grant Income
|
|
|
480
|
|
|
|
534
|
|
Gross
Operating Income (Loss)
|
|
|
(105
|
)
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
General
and Administrative
|
|
|
962
|
|
|
|
795
|
|
Selling
Expense
|
|
|
84
|
|
|
|
67
|
|
Option
Expense
|
|
|
161
|
|
|
|
135
|
|
Warrant
Expense
|
|
|
1,030
|
|
|
|
83
|
|
Professional
Fees
|
|
|
202
|
|
|
|
229
|
|
Travel
and Entertainment
|
|
|
59
|
|
|
|
224
|
|
Total
Operating Expenses
|
|
|
2,498
|
|
|
|
1,533
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(2,603
|
)
|
|
|
(1,658
|
)
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
11
|
|
Interest
Expense
|
|
|
566
|
|
|
|
307
|
|
Total
Other Income (Expense)
|
|
|
(566
|
)
|
|
|
(296
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(3,169
|
)
|
|
|
(1,954
|
)
|
Less: Net
loss attributable to noncontrolling interest
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
Net
Loss Attributable to ThermoEnergy Corporation
|
|
$
|
(3,169
|
)
|
|
$
|
(1,910
|
)
|
|
|
|
|
|
|
|
|
|
Per
Common Share Attributable to ThermoEnergy Corporation:
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
$
|
(0.05
|
)
|
|
$
|
(0.04
|
)
|
Net
Loss
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
See
notes to consolidated financial statements.
THERMOENERGY
CORPORATION
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Year
Ended December 31, 2008 and the Three Months Ended March 31, 2009
(Unaudited)
|
|
ThermoEnergy Corporation Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Series A
Convertible
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Noncontrolling
Interest
|
|
|
Total
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
(Deficit) January 1, 2008
|
|
$
|
53
|
|
|
$
|
40
|
|
|
$
|
50,794
|
|
|
$
|
(52,548
|
)
|
|
$
|
(1,414
|
)
|
|
$
|
(3,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services
|
|
|
|
|
|
|
|
|
|
|
1,331
|
|
|
|
|
|
|
|
|
|
|
|
1,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 220,000 shares of Common Stock for services
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless
exercise of 4,662,639 warrants for 1,854,984 shares of Common
Stock
|
|
|
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
741,493 warrants for 741,493 shares of Common Stock
|
|
|
|
|
|
|
1
|
|
|
|
473
|
|
|
|
|
|
|
|
|
|
|
|
474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
grants issued to officers (250,000 shares at $1.11 per
share)
|
|
|
|
|
|
|
1
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued to officers, directors and employees
|
|
|
|
|
|
|
|
|
|
|
1,682
|
|
|
|
|
|
|
|
|
|
|
|
1,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted
Preferred Stock to Common Stock (5,051,668 shares)
|
|
|
(51
|
)
|
|
|
5
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Note converted to Common Stock (1,146,036 shares at $0.50 per
share)
|
|
|
|
|
|
|
1
|
|
|
|
572
|
|
|
|
|
|
|
|
|
|
|
|
573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for interest payments (124,172 shares at $0.47 per
share)
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
and beneficial conversion feature issued with convertible
notes
|
|
|
|
|
|
|
|
|
|
|
3,301
|
|
|
|
|
|
|
|
|
|
|
|
3,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,736
|
)
|
|
|
(248
|
)
|
|
|
(15,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
(Deficit) December 31, 2008
|
|
$
|
2
|
|
|
$
|
50
|
|
|
$
|
58,810
|
|
|
$
|
(68,284
|
)
|
|
$
|
(1,662
|
)
|
|
$
|
(11,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued to officers, directors and employees
|
|
|
|
|
|
|
|
|
|
|
468
|
|
|
|
|
|
|
|
|
|
|
|
468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modification
of warrants
|
|
|
|
|
|
|
|
|
|
|
1,030
|
|
|
|
|
|
|
|
|
|
|
|
1,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for interest payments (103,143 shares)
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 20,000 shares of Common Stock for services
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
1,428,571 shares of Common Stock for cash
|
|
|
|
|
|
|
1
|
|
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
435,442 shares of Common Stock and warrants to acquire CASTion's
noncontrolling interest
|
|
|
|
|
|
|
1
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of CASTion shares from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
(2,282
|
)
|
|
|
|
|
|
|
1,662
|
|
|
|
(620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,169
|
)
|
|
|
|
|
|
|
(3,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
(Deficit) March 31, 2009
|
|
$
|
2
|
|
|
$
|
52
|
|
|
$
|
58,854
|
|
|
$
|
(71,453
|
)
|
|
$
|
-
|
|
|
$
|
(12,545
|
)
|
See notes to consolidated financial
statements.
THERMOENERGY
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
Three
Months Ended
|
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
Operating
Activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,169
|
)
|
|
$
|
(1,954
|
)
|
|
|
|
|
|
|
|
|
|
Items
not requiring (providing) cash:
|
|
|
|
|
|
|
|
|
Options
issued to officers and directors
|
|
|
468
|
|
|
|
|
|
Warrant
expense
|
|
|
1,030
|
|
|
|
83
|
|
Depreciation
expense
|
|
|
16
|
|
|
|
6
|
|
Common
Stock issued for services
|
|
|
9
|
|
|
|
|
|
Amortization
|
|
|
369
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
Accounts
and notes receivable
|
|
|
(17
|
)
|
|
|
(44
|
)
|
Inventories
|
|
|
5
|
|
|
|
(66
|
)
|
Other
current assets
|
|
|
2
|
|
|
|
(53
|
)
|
Accounts
payable
|
|
|
215
|
|
|
|
(245
|
)
|
Deferred
revenue
|
|
|
(74
|
)
|
|
|
90
|
|
All
other current liabilities
|
|
|
304
|
|
|
|
(427
|
)
|
Deferred
compensation retirement plan
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(853
|
)
|
|
|
(2,426
|
)
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of Common Stock and warrants
|
|
|
500
|
|
|
|
-
|
|
Proceeds
from Convertible Promissory Notes
|
|
|
250
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
750
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) in cash
|
|
|
(103
|
)
|
|
|
(1,676
|
)
|
Cash,
beginning of year
|
|
|
115
|
|
|
|
3,185
|
|
Cash,
end of period
|
|
$
|
12
|
|
|
$
|
1,509
|
|
See
notes to consolidated financial statements.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 1: Basis of
presentation
In the
Notes to the Consolidated Financial Statements, we use the terms “Company”,
“we”, “our” and “us” to refer to ThermoEnergy Corporation and its
subsidiaries. The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
8-03 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month
period ended March 31, 2009 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2009.
Loss per
common share is computed by dividing the net loss for the period by the weighted
average number of shares outstanding during the period. Stock
options, warrants, and dilutive effect of the Company’s Series A Convertible
Preferred Stock were not included in the computation of diluted loss per share
since the effect would be anti-dilutive. The adjusted weighted average number of
common shares used in the basic and diluted loss per share computations were
50,971,816 and 41,005,053 shares for the periods ended March 31, 2009 and 2008,
respectively.
The
balance sheet at December 31, 2008 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. As more fully discussed in Note 2, the balance
sheet at December 31, 2008 has been reclassified in connection with the adoption
of Statement of Financial Accounting Standards No. 160 “Noncontrolling Interests
in Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”)
as of January 1, 2009.
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, 2008
of ThermoEnergy Corporation.
Note 2: Adoption
of SFAS 160 and purchase of CASTion Corporation noncontrolling
interest
As of
January 1, 2009, the Company implemented SFAS 160 which modifies the accounting
and disclosure requirements for subsidiaries which are not wholly-owned. In
accordance with the provisions of SFAS 160, the Company has reclassified the
noncontrolling interest previously reflected between long-term liabilities and
stockholders’ equity and included the amount as a component of stockholders’
equity in the accompanying consolidated balance sheets and consolidated
statements of stockholders’ equity. Additionally, the Company has presented the
net income attributable to the Company and the noncontrolling ownership
interests separately in the accompanying consolidated condensed statements of
operations.
On
January 5, 2009, the Company acquired substantially all of the remaining
outstanding shares of CASTion Corporation (“CASTion”). The Company issued to six
individuals and/or entities 435,442 shares of restricted Common Stock, $351,614
face amount of 10% convertible debt (conversion price of $.50 per share and a
maturity date of May 31, 2010) and warrants to acquire 424,164 shares of
restricted Common Stock. The fair value of the total consideration was $619,955.
The warrants have an exercise price of $0.50 per share and expire in
approximately 4.5 years. In addition, the Company escrowed $12,500 cash to
fund the purchase of the shares held by the remaining noncontrolling
stockholders that represents less than one percent of the outstanding shares.
The completion of this transaction resulted in CASTion becoming a wholly-owned
subsidiary of the Company.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 2: Adoption
of SFAS 160 and purchase of CASTion Corporation noncontrolling interest
(continued)
The
acquisition of the CASTion non-controlling interest was accounted for in
accordance with SFAS 160, which requires that the acquisition be recorded as an
equity transaction. This resulted in a reduction of consolidated
stockholders’ equity (deficit) of approximately $2,282,000 during the first
quarter of 2009.
Note 3: Formation
of Babcock-Thermo Carbon Capture LLC
On
February 25, 2009, the Company’s subsidiary, ThermoEnergy Power Systems LLC,
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 (the “Joint Venture”) for the purpose of developing
and commercializing our proprietary TIPS technology.
ThermoEnergy
Power Systems has 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, fully paid up
and royalty-free license to ThermoEnergy Power Systems’ intellectual property
related to or necessary to practice the TIPS technology (the “TIPS
License”). In the LLC Agreement, BPD has agreed to develop, at
its own expense, intellectual property in connection with three critical
subsystems relating to the TIPS technology: a combustor subsystem, a steam
generating heating surface subsystem, and a condensing heat exchangers subsystem
(collectively, the “Subsystems”) and BPD has entered into a license
agreement with the Joint Venture and ThermoEnergy Power Systems pursuant to
which it has 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 proprietary intellectual property related to or
necessary to practice the Subsystems.
Pursuant
to the LLC Agreement, each of ThermoEnergy Power Systems and BPD owns a 50%
membership interest in the Joint Venture. The LLC Agreement provides
that each member may be required, from time to time, to make capital
contributions to the Joint Venture to fund its operations (see Note
11).
The Joint
Venture will be managed by a six-person Board of Managers, with three managers
appointed by each member. The Board of Managers has adopted a set of
milestones by which it will measure the progress of the Joint
Venture. Pursuant to the LLC Agreement, either member may withdraw
from the Joint Venture if any milestone is not met (unless the failure to meet
such milestone is primarily attributable to a failure by such member to perform
its obligations under the LLC Agreement or any related
agreements). If a member exercises its right to withdraw, the
license that such member has granted to the Joint Venture will automatically
terminate.
The LLC
Agreement obligates the Joint Venture and each member to indemnify and hold the
other member and its affiliates harmless against damages and losses resulting
from such member’s fraud, gross negligence or intentional misconduct with
respect to the Joint Venture. We and Babcock Power, Inc. have entered
into separate agreements to indemnify the joint venture and its members (other
than our respective subsidiary-members) and their respective affiliates against
damages and losses resulting from fraud, gross negligence or intentional
misconduct of our respective subsidiary-members with respect to the Joint
Venture.
The LLC
Agreement contains other conventional terms, including provisions relating to
governance of the entity, allocation of profits and losses, and restrictions on
transfer of a member’s interest.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note
4: Short-term borrowings
Short-term
borrowings consisted of the following at March 31, 2009 and December 31, 2008
(in thousands):
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note dated December 22, 2008, 7.5%, due June 30,
2009, less discount of $194 in 2008
|
|
$
|
561
|
|
|
$
|
307
|
|
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note dated August 12, 2008, 7.5%, due March 31,
2009
|
|
|
576
|
|
|
|
566
|
|
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note dated February 11, 2009, 10%, due December 31,
2009
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,387
|
|
|
$
|
873
|
|
On March
31, 2009, the Company extended the maturity of the December 22, 2008 Convertible
Promissory Note to June 30, 2009, and added an extension fee of $50,000 to the
principal balance. The Note remained outstanding after that date and was amended
on September 28, 2009 in connection with the Series B Convertible Preferred
Stock financing contemplated by a term sheet dated September 16, 2009 between
the Company and an investor group (see Note 11).
The Note
dated August 12, 2008 maturing on March 31, 2009 was converted to 768,535 shares
of the Company’s Common Stock on April 1, 2009.
On
February 11, 2009, the Company issued to the Quercus Trust (“Quercus”) a 10%
Secured Convertible Promissory Note in the principal amount of $250,000 and
entered into a Security Agreement with Quercus. The Note matures on
the earlier to occur of (i) the closing of an equity or convertible debt
investment in our Company yielding gross proceeds of not less than $2,000,000.00
(a “Financing”) or (ii) December 31, 2009. Quercus may elect to
participate in the Financing by converting the principal amount of the Note into
shares of the securities to be issued in the Financing at a price per share
equal to 90% of the price per share to be paid by the other investors in the
Financing. Quercus’ right to participate in the Financing by
conversion of the Note shall be conditioned on Quercus’ entering into such
purchase agreements and related agreements as shall be executed at the closing
of the Financing by the other investors participating in the
Financing.
Interest
on the Note is payable quarterly in arrears; at our election, all or any portion
of the interest may be paid by the issuance of shares of our Common Stock valued
at 90% of the volume weighted average trading price per share of our Common
Stock for the ten trading days immediately preceding the respective interest
payment date. We may not pre-pay the Note without the prior written
consent of Quercus.
The Note
was amended and restated on September 28, 2009 in connection with the Series B
Convertible Preferred Stock financing (see Note 11).
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 4: Short-term
borrowings (continued)
To secure
payment of, and performance of our other obligations under, the Note, we and our
subsidiary CASTion, granted to Quercus, pursuant to the Security Agreement, a
security interest in all of our intellectual property assets other than certain
expressly excluded patent rights, licenses and related intellectual property
identified in the Security Agreement, including, without limitation, the
intellectual property rights used in or relating to our ThermoEnergy Power
Systems business.
Note 5: Convertible debt in
default
For the
quarter ended March 31, 2009, amortization of debt discount on the convertible
debt in default amounted to $52,000. In accordance with the Note
agreements, accrued interest of $126,000 was added to the outstanding principal
balances of the convertible debt as of March 31, 2009.
Note 6: Convertible
debt
Convertible
debt consisted of the following at March 31, 2009 and December 31, 2008 (in
thousands):
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note dated March 21, 2007, 5%, due March 21, 2013,
less discounts of $211 in 2009 and $221 in 2008
|
|
$
|
618
|
|
|
$
|
588
|
|
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note dated March 7, 2008, 5%, due March 7, 2013, less discounts
of
$596
in 2009 and $628 in 2008
|
|
|
193
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
Convertible
Promissory Note dated September 15, 2008, 10%, due September 30, 2013,
less discounts of $1,663 in 2009 and $1,737 in 2008
|
|
|
337
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
Convertible
Promissory Notes dated January 5,
2009,
10%, due May 31, 2010
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,508
|
|
|
$
|
992
|
|
In
accordance with the terms of the Notes, as of March 31, 2009 the Company added
approximately $20,000 of accrued interest to each of the outstanding principal
balances of the 5% Convertible Promissory Notes.
As more
fully discussed in Note 2, on January 1, 2009 the Company issued $352,000 face
amount of 10% Convertible Promissory Notes in connection with the acquisition of
the remaining noncontrolling interest of CASTion. The Notes are
convertible by the holder into the Company’s Common Stock at $.50 per
share. As of March 31, 2009, the Company had added $8,000 of accrued
interest to the outstanding principal balances of the Notes.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 7: Common
Stock
On
February 26, 2009, the Company awarded various officers a total of 1,000,000
non-qualified stock options. The options are exercisable at $1.50 per
share which was approximately 325% of the closing market price on the date of
issue, and expire in ten years from the date of award. Since the
options were granted as bonuses for 2008, an accrued bonus of $306,400, the fair
value of the options on the date of grant using the Black-Scholes option model,
was included in Other Current Liabilities in the 2008 Consolidated Balance
Sheet. On the grant date of February 26, 2009, additional paid-in
capital was increased by $306,400 in satisfaction of the outstanding liability
for the bonus.
On March
6, 2009, the Company issued and sold 1,428,571 shares of Common Stock for cash
at $.35 per share and issued warrants to acquire 714,286 shares of Common Stock
to an unrelated third party institutional investor. The warrants have
an exercise price of $0.525 and expire five years from the grant
date.
Pursuant
to the warrant agreements, we reduced the exercise price of the Quercus warrants
for 14,000,000 shares of the Company’s Common Stock from $1.25 to $0.525 per
share due to the March 6, 2009 sale of Common Stock at $0.35 per
share. The warrant modification resulted in the recording of
$1,030,000 of warrant expense in the first quarter of 2009.
Note 8:
Segments
The Water
Group segment represents revenue and costs related to the development and
commercialization of patented water treatment technologies and includes our
headquarters and related operations. The Power Group segment represents revenue
and costs related to the development and commercialization of patented clean
energy technologies. The Water Group segment allocates support costs
to the Energy Group segment on a percentage basis. The Company’s operations are
currently conducted in the United States.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 8: Segments
(continued)
For
the Period ended March 31, 2009
(in
thousands)
|
|
Water Group
|
|
|
Power
Group
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
|
Sales
of wastewater treatment and recovery systems
|
|
$
|
201
|
|
|
$
|
-
|
|
|
$
|
201
|
|
Grant
revenue
|
|
|
-
|
|
|
|
174
|
|
|
|
174
|
|
Total
operating income
|
|
|
201
|
|
|
|
174
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of wastewater treatment and recovery systems sales
|
|
|
306
|
|
|
|
174
|
|
|
|
480
|
|
General
and administrative
|
|
|
1,223
|
|
|
|
-
|
|
|
|
1,223
|
|
Selling
expenses
|
|
|
84
|
|
|
|
-
|
|
|
|
84
|
|
Total
operating expenses
|
|
|
1,613
|
|
|
|
174
|
|
|
|
1,787
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Segment
operating loss
|
|
$
|
(1,412
|
)
|
|
$
|
-
|
|
|
$
|
(1,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
919
|
|
|
$
|
-
|
|
|
$
|
919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segment operating loss
|
|
|
|
|
|
|
|
|
|
$
|
(1,412
|
)
|
Warrant
and stock options
|
|
|
|
|
|
|
|
|
|
|
(1,191
|
)
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
(566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to ThermoEnergy Corporation
|
|
|
|
|
|
|
|
|
|
$
|
(3,169
|
)
|
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 8: Segments
(continued)
For
the Period ended March 31, 2008
(in
thousands)
|
|
Water Group
|
|
|
Power Group
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
|
Sales
of wastewater treatment and recovery systems
|
|
$
|
226
|
|
|
$
|
-
|
|
|
$
|
226
|
|
Grant
revenue
|
|
|
-
|
|
|
|
183
|
|
|
|
183
|
|
Total
operating income
|
|
|
226
|
|
|
|
183
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of wastewater treatment and recovery systems sales
|
|
|
351
|
|
|
|
183
|
|
|
|
534
|
|
General
and administrative
|
|
|
1,331
|
|
|
|
-
|
|
|
|
1,331
|
|
Selling
expenses
|
|
|
67
|
|
|
|
-
|
|
|
|
67
|
|
Total
operating expenses
|
|
|
1,749
|
|
|
|
183
|
|
|
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Segment
operating loss
|
|
$
|
(1,523
|
)
|
|
$
|
-
|
|
|
$
|
(1,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,697
|
|
|
$
|
-
|
|
|
$
|
2,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segment operating loss
|
|
|
|
|
|
|
|
|
|
$
|
(1,523
|
)
|
Warrant
and stock options
|
|
|
|
|
|
|
|
|
|
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to ThermoEnergy Corporation
|
|
|
|
|
|
|
|
|
|
$
|
(1,910
|
)
|
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note
9: Management’s consideration of going concern
matters
The
Company has incurred net losses since inception and will require substantial
additional capital to continue commercialization of the Technologies and to fund
the Company’s liabilities, which included approximately $2,172,000 of payroll
tax liabilities (see Note 10), $3,656,000 of convertible debt securities in
default, net of debt discounts aggregating $261,000 and $3,334,000 of contingent
liability reserves (see Note 10). In addition, the Company may be
subject to tax liens if it cannot satisfactorily settle the outstanding payroll
tax liabilities and may also face criminal and/or civil action with respect to
the impact of the payroll tax matters (see Note 10). The financial
statements have been prepared assuming the Company will continue as a going
concern, realizing assets and liquidating liabilities in the ordinary course of
business and do not reflect any adjustments that might result from the outcome
of the aforementioned uncertainties. Management is considering several
alternatives for mitigating these conditions.
Management
has determined that obtaining substantial additional funding is essential to its
continued existence. Management actively engaged in negotiations with
a group of investors that had provided funding to the Company in the
past. As more fully described in Note 11, the Company and the
investor group approved a term sheet on September 16, 2009 for a Series B
Convertible Preferred Stock financing that, if fully funded, would result in
cash proceeds to the Company of $6,250,000. The financing provides for funding
in four tranches, with the first and second tranche amounts totaling $3,050,000
based on specified time periods and the third and fourth tranche amounts
totaling $3,200,000 based on the occurrence of specified events. The first
tranche Secured Convertible Promissory Notes with an aggregate principal balance
of $1,680,000 were issued on September 28, 2009.
Management
is also actively pursuing commercial contracts to produce fees from projects
involving the Technologies. Management has determined that the
financial success of the Company may be largely dependent upon the ability and
financial resources of established third parties collaborating with the Company
with respect to projects involving the Technologies. As discussed
more fully in Note 3, on February 25, 2009, ThermoEnergy Power Systems and
Babcock Power Development, LLC, a subsidiary of Babcock Power, Inc., entered
into a Limited Liability Company Agreement establishing Babcock-Thermo
Carbon Capture, LLC, a Delaware limited liability company for the purpose of
developing and commercializing our TIPS technology.
Note 10: Commitments and
contingencies
On June
2, 2009, the Company’s Audit Committee engaged special counsel to conduct an
in-depth investigation of the federal and state employment and unemployment tax
return filing and tax paying compliance record of the
Company. Questions concerning payroll tax matters arose during the
preparation of the Company’s consolidated financial statements for the year
ended December 31, 2008 and the Company’s Chief Financial Officer (“CFO”) could
not produce reliable documentation supporting the Company’s status with respect
to compliance with the tax return filing and tax paying
requirements. After discovering that no payroll tax returns had been
filed and that no payroll taxes had been paid to the Internal Revenue Service
and state taxing authorities since the CFO assumed his officer position in
mid-2005, the special counsel’s investigation was expanded to include a forensic
accounting review of the Company’s financial records by a certified public
accounting firm not involved with the audit of the Company’s financial
statements.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note 10: Commitments and
contingencies (continued)
On July
30, 2009, the special counsel presented a report to the Company’s Audit
Committee which summarized the findings of the investigation, including the
forensic accounting review. The report confirmed that the Company had
not filed any payroll tax returns or paid any payroll taxes since mid-2005 and
that the Company’s
CFO had
sole responsibility for performing those functions. A computation of
the outstanding payroll tax liabilities and of statutory interest and penalties
relating to the nonpayment of the payroll taxes and the nonfiling of the payroll
tax returns as of December 31, 2008 was included in the report.
On July
31, 2009, the Company’s Board of Directors unanimously approved a resolution
that the CFO’s employment be terminated for cause. The CFO resigned
on August 3, 2009.
During
the fourth quarter of 2008, the Company accrued additional payroll taxes of
approximately $1,064,000 resulting in total unpaid payroll taxes of
approximately $2,022,000 at December 31, 2008, and recorded a contingency
accrual of approximately $2,105,000 for estimated interest and penalties for
late filing of the payroll tax returns and nonpayment of the payroll
taxes. Unpaid payroll taxes and the contingency accrual for estimated
penalties and interest thereon as of March 31, 2009 amounted to approximately
$2,172,000 and $2,177,000, respectively. Management plans to file the
payroll tax returns as soon as possible and to present an offer in compromise
for settlement of the payroll tax liabilities to the tax authorities, which
would require a minimum cash payment of approximately $400,000 with the
offer. The Company cannot predict the outcome of the offer in
compromise proceedings.
The
Company may become subject to tax liens if it cannot satisfactorily settle the
outstanding payroll tax liabilities. Furthermore, due to the actions
of the CFO summarized above, the Company may also face criminal and/or civil
action with respect to the payroll tax matters. The Company cannot
predict what, if any, actions may be taken by the tax authorities or other
parties or the effect the actions may have on the Company’s results of
operations, financial condition or cash flows.
See Note
11 for a discussion of litigation filed against the Company in April 2009 by
Quercus and the subsequent dismissal of the litigation.
The
Company’s contingent liability reserves consisted of the following at March 31,
2009 and December 31, 2008 (in thousands):
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Estimated
penalties and interest – payroll tax liabilities
|
|
$
|
2,177
|
|
|
$
|
2,105
|
|
|
|
|
|
|
|
|
|
|
Other,
including unasserted claims
|
|
|
1,157
|
|
|
|
1,229
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,334
|
|
|
$
|
3,334
|
|
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note
11: Subsequent events
On April
6, 2009, the Company received a Complaint filed by David Gelbaum, as Trustee of
Quercus, bringing action against the Company in Delaware to enforce the
provisions of the Securities Purchase Agreement between Quercus and the Company
dated December 18, 2007. The complaint requests enforcement of the
Agreement of the shelf registration of the underlying securities and the payment
of liquidation damages for the failure to register the securities. On
April 13, 2009, the Company received a letter from Counsel of Quercus notifying
the acceleration and a demand for payment of the 10% Convertible Promissory Note
due September 30, 2013 in the principal amount of $2,000,000. The
letter claims events of default defined in the Note. On April 27,
2009, Quercus filed Form SC 13D/A (Amended Statement of Beneficial Ownership)
with The Securities and Exchange Commission disclosing that Quercus has proposed
that the Company change the composition of the Board of Directors, among other
things, and that if the Company does not make changes to the Board of Directors
and review other operational requirements, that Quercus may take other actions
to effect such changes. On April 29, 2009, Quercus brought an action
in the United States District Court for the Eastern District of Arkansas against
the Company (the “Arkansas Complaint’) to enforce the provisions of the 2008
Agreement for the $2,000,000 Convertible Note. The Arkansas Complaint alleges
that, as a result of the events of default, the Note is now due and payable and
seeks judgment in the amount of the Note (plus costs of
collection). The Arkansas Complaint also alleges that we have
breached our shelf registration obligation with respect to the shares of our
Common Stock issuable upon conversion of the Note or upon exercise of the
warrant issued to Quercus pursuant to the 2008 Agreement and seeks liquidated
damages for the failure to register such shares.
On
September 28, 2009, the litigation filed in Arkansas against the Company was
dismissed. On September 30, 2009, the litigation filed in Delaware against the
Company was dismissed.
On April
27, 2009, the Company issued to three different funds and two affiliates of
Empire Capital Partners 10% Convertible Promissory Notes aggregating
$500,000. The Notes mature on the earlier to occur of (i) the closing
of the proposed funding with Quercus as reported in the September 15, 2008
Agreement with Quercus or (ii) October 31, 2009. Pursuant
to the Purchase Agreement, Empire Capital Partners and its affiliates may elect
to convert the Notes at any time into shares of our Common Stock at a price of
$0.40 per share. The Company also issued warrants to acquire
2,500,000 shares of Common Stock to the holders of the Notes. The
warrants have an exercise price of $0.55 and expire five years from the grant
date.
The
Company estimated the fair value of the warrants issued using a Black-Scholes
option pricing model and allocated $349,000 of the proceeds received to the
warrants on a relative fair value basis. In addition, the difference between the
effective conversion price of the Note and the fair value of the Company’s
Common Stock on the date of issuance of the Note resulted in a beneficial
conversion feature amounting to $151,000, the intrinsic value of the conversion
feature on that date. The total debt discount of $500,000 is amortized to
interest expense over the stated term of the Note.
On June
25, 2009, the Company issued to Quercus a 10% Secured Convertible Promissory
Note. Under the terms of the Note, Quercus has agreed to make
advances to the Company, from time to time, up to an aggregate principal amount
of $150,000. The Note provides that advances may be used only to pay
legal and accounting fees and expenses related to the investigation by the Audit
Committee of the Board of Directors of our financial affairs or other matters
within the investigative authority of the Audit Committee (see Note
10). On June 26, 2009, Quercus made an initial advance under the Note
in the amount of $100,000. The Note matures on the earlier to occur
of (i) the closing of an equity or convertible debt investment in the Company
yielding gross proceeds of not less than $2,000,000.00 or (ii) December 31,
2009. Quercus may participate in the Financing by converting the
principal amount of the Note into shares of the securities to be issued in the
financing at a price per share equal to 80% of the price per share to be paid by
the other investors in the financing.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note
11: Subsequent events (continued)
Advances
under the Note bear interest at the rate of 10% per annum, payable in arrears on
the last day of each March, June, September and December, commencing on
September 30, 2009. At our election, all or any portion of the
interest due on any particular interest payment date may be paid by the issuance
of shares of our Common Stock, par value $0.001 per share valued at 80% of the
volume weighted average trading price per share of our Common Stock for the ten
trading days immediately preceding the respective interest payment
date. We may not pre-pay the Note without prior written consent of
Quercus.
We had
previously entered into a Security Agreement dated February 11, 2009 with
Quercus securing certain of our obligations to Quercus. The June 25,
2009 Note amends that Security Agreement to provide that the June 25, 2009 Note
shall also be secured to the same extent as the February 11, 2009
obligations. We also entered into a letter agreement with Quercus in
which we acknowledged that certain conditions to Quercus’ obligation to invest
an additional $5,000,000 in the Company pursuant to the September 15, 2008
Securities Purchase Agreement have not been and cannot be met, and we
irrevocably released any claim we may have on Quercus to make any further
investment.
On June
26, 2009, the Company issued to The Focus Fund a 10% Convertible Promissory Note
due October 15, 2009 in the principal amount of $108,000. The
outstanding principal and interest may be converted, at the holder’s election,
into shares of the Company’s Common Stock at $.36 per share. In
connection with the Note, we also issued a warrant to The Focus Fund to purchase
600,000 shares of the Company’s Common Stock on or before June 17, 2014 at an
exercise price of $.54 per share.
The
Company estimated the fair value of the warrant issued using a Black-Scholes
option pricing model and allocated $46,000 of the proceeds received to the
warrant on a relative fair value basis. In addition, the difference between the
effective conversion price of the Note and the fair value of the Company’s
Common Stock on the date of issuance of the Note resulted in a beneficial
conversion feature amounting to $19,000, the intrinsic value of the conversion
feature on that date. The total debt discount of $65,000 is amortized to
interest expense over the stated term of the Note.
On July
31, 2009, the Company issued an 8% Secured Convertible Promissory Note in the
principal amount of $600,000 to the Focus Fund L.P. The Note is due on the
earlier to occur of (i) the closing of an equity or convertible debt investment
yielding gross proceeds to the Company of not less than $2,000,000 or (ii)
December 31, 2011. The Note is convertible into to Common Stock of the Company
at the option of the holder at a price of $.30 per share and is secured by the
Company’s 85% ownership interest in ThermoEnergy Power Systems. In addition, the
Company issued a warrant to the Focus Fund L.P. for the purchase of 2,400,000
shares of the Company’s Common Stock at a price of $.50 per share. The warrant
expires on July 31, 2014.
On August
21, 2009, the Company received a short-term loan in the amount of $110,000 from
the Focus Fund L. P. This loan was repaid in September 2009.
The
Company made a $50,000 capital contribution to Babcock Thermo Carbon
Capture LLC during August 2009.
THERMOENERGY
CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March
31, 2009
Note
11: Subsequent events (continued)
On
September 16, 2009, the Company and an investor group, consisting of Quercus,
Empire Capital Partners, Robert S. Trump and the Focus Fund L.P., signed a term
sheet for a Series B Convertible Preferred Stock financing, which if fully
funded, would result in cash proceeds of $6,250,000 to the Company. The term
sheet provides for funding in four tranches, with the first and second tranche
amounts totaling $3,050,000 based on specified time periods and the third and
fourth tranche amounts totaling $3,200,000 based on the occurrence of specified
events.
In the
first tranche funding of $1,650,000, the Company issued 8% Secured Convertible
Promissory Notes on September 28, 2009 identical in form and substance to the
Company’s 8% Secured Convertible Promissory Note issued to the Focus Fund L.P.
on July 31, 2009, which was amended to provide for a conversion price of $.24
per share instead of $.30 per share and a maturity date of December 31, 2010. In
addition, the Company’s outstanding Convertible Promissory Notes payable to the
investors in the original aggregate principal amount of $3,550,000 were amended
to conform to the same terms as the 8% Secured Convertible Promissory Notes. The
security for all of the 8% Secured Convertible Promissory Notes is the Company’s
85% interest in ThermoEnergy Power Systems.
In the
second tranche funding of $1,400,000, expected to occur on or before November
15, 2009, the Company will issue shares of Series B Convertible Preferred Stock
at a price per share to be specified at that date. Upon the closing of the
second tranche funding, the outstanding principal and accrued interest on all of
the 8% Secured Convertible Promissory Notes will convert automatically into
shares of the Company’s Series B Convertible Preferred Stock at the price per
share at which such Preferred Stock will be issued. Each share of Series B
Convertible Preferred Stock will be convertible, at any time at the discretion
of the holder, into ten shares of the Company’s Common Stock. Except with
respect to the election of the Board of Directors, holders of Series B
Convertible Preferred Stock will vote on an as-converted basis together with the
Common Stock holders on all matters. The term sheet provides that the Company’s
Board of Directors will consist of seven members. Four Directors will be elected
by holders of the Company’s Series B Convertible Preferred Stock (three to be
designated by Quercus and one by Robert S. Trump) and three Directors will be
elected by the holders of the Company’s Common Stock.
If the
events specified in the agreement occur, in the third tranche funding of
$1,800,000 and the fourth tranche funding of $1,400,000, the Company will issue
shares of Series B Convertible Preferred Stock. Common Stock warrants
with an aggregate exercise price equal to 200% of the principal amount invested
will be issued to the investors at the closing of each tranche. The warrants
will expire in five years and provide for an exercise price of $.50 per
share.
The term
sheet also provides, among other things, for the following: (i) the reduction of
the exercise price to $.50 for the Company’s outstanding warrants held by the
investors which have an exercise price greater than $.50 and were issued in
conjunction with convertible notes which were amended in accordance with the
term sheet; (ii) the dismissal of the litigation filed by Quercus against the
Company; (iii) the execution by the Company and the investors of mutual general
releases of all prior claims (whether or not yet asserted); (iv) the removal of
the registration payment arrangements with Quercus; (v) the employment of a new
Chief Executive Officer and Chief Financial Officer; and (vi) the termination of
all existing employment agreements with the Company’s executive
officers.
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
Currently
the Company is primarily a “water company” with patented and proprietary water
technologies that reside in the Company’s water subsidiary,
CASTion. The water technologies address wastewater problems for
municipal and a broad range of industrial markets including water management and
conservation, chemical recovery, and water purification. The
Company’s advanced power plant technology, TIPS, is aimed at competing with and
ultimately replacing conventional energy fossil fuel combustion technologies for
both large stationary utility power plants and small industrial combined heat
and power package plants. The Company has developed TIPS mostly from funding
from federal grants, and recently completed the approximately $1.5 million
federal government grant sponsored by the U.S. Environmental Protection Agency
and administered through the Alaska Energy Authority. The Company
cannot predict the acceptability of TIPS within its target
markets. The Company currently does not possess the technical,
operational or financial resources necessary to construct or operate TIPS
commercial facilities without external project funding and the ability to source
engineering skills.
This was a major factor
in the Company’s subsidiary, ThermoEnergy Power System, LLC,
and Babcock Power Development, LLC, a subsidiary of Babcock Power,
Inc., entering into a Limited Liability Company Agreement on February
25, 2009 establishing Babcock-Thermo Carbon Capture LLC, a Delaware limited
liability company for the purpose of developing and commercializing TIPS (see
Note 3 of Notes to Consolidated Financial Statements).
Recent
events have had a significant adverse effect on the Company’s liquidity and
results of operations. As more fully discussed in Note 10 of Notes to
Consolidated Financial Statements, in 2009, the Company discovered that the
former Chief Financial Officer (“CFO”) failed to file the Company’s payroll tax
returns and to pay the related payroll taxes since he assumed his officer
position in 2005. This resulted in an accrual during the fourth
quarter of 2008 of an additional $1,064,000 of payroll taxes and $2,105,000 of
estimated interest and penalties for late filing of the tax returns and
nonpayment of the payroll taxes. The Company’s investigation into the
actions regarding payroll taxes and other activities of the former CFO have
resulted in significant delays in the Company being able to file the Annual
Report on Form 10-K for the year ended December 31, 2008 (which was filed on
October 8, 2009) and the Company’s Form 10-Q reports for the quarters ended
March 31, 2009 and June 30, 2009.
Management
has determined that obtaining substantial additional funding is essential to its
continued existence. Management actively engaged in negotiations with
a group of investors that had provided funding to the Company in the
past. As more fully described in Note 10 of Notes to the Consolidated
Financial Statements, the Company and the investor group approved a term sheet
on September 16, 2009 for a Series B Convertible Preferred Stock financing that,
if fully funded, would result in cash proceeds to the Company of
$6,250,000. The financing provides for funding in four tranches, with
the first and second tranche amounts totaling $3,050,000 based on specified time
periods and the third and fourth tranche amounts totaling $3,200,000 based on
the occurrence of specified events. The first tranche Secured
Convertible Promissory Notes with an aggregate principal balance of $1,680,000
were issued by the Company on September 28, 2009.
Since the
financing described in the preceding paragraph is in stages with over half of
the potential funding dependent on the occurrence of specific events and due to
the Company’ financial condition and to the significant uncertainties resulting
from the actions of the former CFO, there are can be no assurance that the
Company will be able to obtain the capital funds that will be needed for the
Company to continue it operations.
Results
of Operations
Comparison
of Quarter Ended March 31, 2009 and 2008
Warrant
expense for the quarter ended March 31, 2009 increased by $947,000 compared to
the quarter ended March 31, 2008 due to the modification of warrants held by the
Quercus Trust (see Note 7 of Notes to Consolidated Financial Statements) which
resulted in the recording of an expense of $1,030,000. Travel and
entertainment expense decreased by $165,000 during the 2009 quarterly period
compared to the corresponding period for 2008 due to the Company’s efforts to
conserve cash. Interest expense increased during 2009 compared to
2008 by $259,000 due to the increase of $2,404,000 in outstanding debt between
the quarters. Included in interest expense are $369,000 and $195,000
of amortization of debt discount for the quarters ended March 31, 2009 and 2008,
respectively.
Liquidity
and Capital Resources Discussion
Historical
View
The
Company has historically lacked the financial and other resources necessary to
market the Technologies or to build demonstration projects without the financial
backing of government or industrial partners. During the quarters
ended March 31, 2009 and 2008, the Company funded its operations primarily from
the sale of convertible debt and restricted stock, generally from stockholders
and other related parties.
Cash used
in operations amounted to $853,000 and $2,426,000 for the quarters ended March
31, 2009 and 2008, respectively. The majority of cash used in
operating activities during those periods ended relates to cash utilized in our
on-going operations, as adjusted for non-cash items, and changes in operating
assets and liabilities as detailed in the Consolidated Statements of Cash Flows
included herein.
Current
Cash Requirements; Need for Additional Funds
At March
31, 2009, the Company did not have sufficient working capital to satisfy its
anticipated operating expenses for the next 12 months. As of March 31, 2009, the
Company had a cash balance of approximately $12,000 and current liabilities of
approximately $11.7 million, which consisted primarily of convertible debt in
default of $3,656,000 (net of $261,000 of debt discounts), contingent liability
reserves of $3,334,000 and unpaid payroll taxes of $2,172,000.
Recent
events have had a significant adverse effect on the Company’s
liquidity. The Company’s former CFO’s actions regarding payroll tax
matters resulted in an accrual during the fourth quarter of 2008 of an
additional $1,064,000 of payroll taxes and $2,105,000 of estimated interest and
penalties for late filing of the tax returns and nonpayment of the payroll taxes
(see Note 10 of Notes to Consolidated Financial Statements for further
information regarding payroll tax matters).
The
Company may become subject to tax liens if it cannot satisfactorily settle the
outstanding payroll tax liabilities. Furthermore, due to the actions
of the CFO, the Company may also face criminal and/or civil action with respect
to the impact of the payroll tax matters. The Company cannot predict
what, if any, actions may be taken by the tax authorities or other parties or
the effect the actions may have on the Company’s results of operations,
financial condition or cash flows.
Management
has determined that obtaining substantial additional funding is essential to its
continued existence. Management actively engaged in negotiations with
a group of investors that had provided funding to the Company in the
past. As more fully described in Note 11 of Notes to the Consolidated
Financial Statements, the Company and the investor group approved a term sheet
on September 16, 2009 for a Series B Convertible Preferred Stock financing that,
if fully funded, would result in cash proceeds to the Company of
$6,250,000. The financing provides for funding in four tranches, with
the first and second tranche amounts totaling $3,050,000 based on specified time
periods and the third and fourth tranche amounts totaling $3,200,000 based on
the occurrence of specified events. The first tranche Secured
Convertible Promissory Notes with an aggregate principal balance of $1,680,000
were issued by the Company on September 28, 2009.
Since the
financing described in the preceding paragraph is in stages, with over half of
the potential funding dependent on the occurrence of specific events, and due to
the Company’ financial condition and to the significant uncertainties resulting
from the actions of the former CFO, there are can be no assurance that the
Company will be able to obtain the capital funds that will be needed for the
Company to continue it operations.
Management anticipates
that its cash requirements during the next 12 months will be approximately $6
million.
In the
event that the Company cannot raise the necessary capital to fund the Company’s
future operations and development activities, the Company will not be able to
continue its operations.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Not
required.
Item
4T. Controls and Procedures.
The
Company, under the direction of its Chief Executive Officer and Chief Financial
Officer, have 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 Chief
Executive Officer and Chief Financial Officer have reviewed and evaluated the
Company’s disclosure controls and procedures as of the end of the period covered
by this report. Based on, and as of the effective date of, that review and
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company did not maintain effective internal control over
financial reporting as of March 31, 2009. Specifically, we have
determined that our internal controls as of March 31, 2009 were deficient in
that (i) we had not adequately allocated resources to ensure that necessary
internal controls were implemented and followed throughout the Company, (ii) our
period-end reporting process did not provide sufficiently timely and accurate
financial statements and required disclosures, (iii) there was a lack of
segregation of duties in the Company’s significant accounting functions, (iv)
our contract administration and accounting procedures were deficient, and (v)
our former Chief Financial Officer engaged in acts that resulted in significant
adjustments to the Company’s consolidated financial statements and subjected the
Company to potential criminal and/or civil action with respect to the Company’s
unpaid payroll tax matters (see Note 10 of Notes to the Consolidated Financial
Statements). The former Chief Financial Officer resigned on August 3,
2009 following a vote by the Company’s Board of Directors to terminate his
employment for cause. Mr. Arthur S. Reynolds, a member of the
Company’s Board of Directors, was appointed Interim Chief Financial
Officer.
Management
has discussed its conclusions regarding the inadequacy of internal controls with
the Audit Committee and with representatives of our independent public
accountants and intends to address the remediation process for the material
weaknesses noted and the Company’s Section 404 reporting responsibilities during
the fourth quarter of 2009.
As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
of the Exchange Act. Based on such evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that as of the end
of the period covered by this report, the Company’s disclosure controls and
procedures were not effective at meeting their objectives in that our
period-ending reporting process did not provide sufficiently timely and accurate
financial statements and disclosures.
There
have been no changes in the Company’s internal control over financial reporting
that occurred during the quarter ended March 31, 2009 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART
II — OTHER INFORMATION
Item
1. Legal Proceedings
On April
6, 2009, David Gelbaum, as Trustee of The Quercus Trust (“Quercus”) brought an
action in the Delaware Chancery Court against the Company to enforce the
provisions of the Securities Purchase Agreement between Quercus and the Company
dated December 18, 2007 (the “Delaware Complaint”). The Delaware
complaint seeks specific enforcement of the Company’s “shelf” registration
obligation with respect to the shares of common stock issued or issuable to
Quercus pursuant to such agreement and the payment of liquidation damages for
the failure to register the securities. Mr. Gelbaum served as a
Director of the Company from September 10, 2008 until his resignation on January
22, 2009.
On April
29, 2009, Quercus brought an action in the United States District Court for the
Eastern District of Arkansas against the Company (the “Arkansas Complaint’) to
enforce the provisions of the 2008 Agreement for the $2,000,000 Convertible
Note. The Arkansas Complaint alleges that, as a result of the events of default,
the Note is now due and payable and seeks judgment in the amount of the Note
(plus costs of collection). The Arkansas Complaint also alleges that
we have breached our shelf registration obligation with respect to the shares of
our Common Stock issuable upon conversion of the Note or upon exercise of the
warrant issued to Quercus pursuant to the 2008 Agreement and seeks liquidated
damages for the failure to register such shares.
On
September 28, 2009, the Arkansas Complaint was dismissed. On
September 30, 2009, the Delaware Complaint was dismissed. See
Note 11 of Notes to Consolidated Financial Statement for additional
information.
Item
1a. Risk Factors
There
have been no material changes from the risk factors disclose in Item 1A to Part
I of our Annual Report on Form 10-K for the year ended December 31,
2008.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
On
February 11, 2009, we issued to The Quercus Trust (“Quercus”) a 10% Secured
Convertible Promissory Note in the principal amount of $250,000 (“Note”) and
entered into a Security Agreement with Quercus (the “Security
Agreement”).
The Note
matures on the earlier to occur of (i) the closing of an equity or convertible
debt investment in our company yielding gross proceeds of not less than
$2,000,000.00 (a “Financing”) or (ii) December 31, 2009. Quercus may
elect to participate in the Financing by converting the principal amount of the
Note into shares of the securities to be issued in the Financing at a price per
share equal to 90% of the price per share to be paid by the other investors in
the Financing. Quercus’s right to participate in the Financing
by conversion of the Note shall be conditioned on Quercus’s entering into such
purchase agreements and related agreements as shall be executed at the closing
of the Financing by the other investors participating in the
Financing.
Interest
on the Note is payable quarterly in arrears; at our election, all or any portion
of the interest may be paid by the issuance of shares of our Common Stock valued
at 90% of the volume weighted average trading price per share of our Common
Stock for the ten trading days immediately preceding the respective interest
payment date. We may not pre-pay the Note without the prior written
consent of Quercus.
To secure
payment of, and performance of our other obligations under, the Note, we and our
subsidiary CASTion Corporation granted to Quercus, pursuant to the Security
Agreement, a security interest in all of our intellectual property assets other
than certain expressly excluded patent rights, licenses and related intellectual
property identified in the Security Agreement, including, without limitation,
the intellectual property rights used in or relating to our TEPS
business.
Quercus
is a trust for the benefit of the family of David Gelbaum. Mr.
Gelbaum, the trustee of Quercus, is a former member of our Board of
Directors.
On March
6, 2009, we entered into Securities Purchase Agreements (the “March Agreements”)
with Empire Capital Partners, LP, Empire Capital Partners, Ltd, and Empire
Capital Partners Enhanced Master Fund, Ltd (collectively, “Empire”), pursuant to
which we issued to Empire an aggregate of 1,428,577 shares of our Common Stock
at a purchase price of $0.35 per share, together with warrants for the purchase
of an aggregate of 614,286 additional shares of our Common Stock at an exercise
price of $0.525 per share.
The March
Agreements contain conventional representations, warranties and covenants,
including an undertaking by us to file with the Securities and Exchange
Commission, within 120 days after closing, a registration statement covering
resale of all of the shares of our Common Stock issued to Empire pursuant to the
March Agreements and all shares of our Common Stock issuable upon exercise of
the warrants issued to Empire pursuant to the March
Agreements. The March Agreements also grant to Empire a right
of first refusal to participate, on a
pro rata
basis, in any future
financings (with certain enumerated exceptions) we undertake prior to the second
anniversary of the closing. The warrants issued to Empire pursuant to
the March Agreements may be exercised at any time on or before March 5, 2014,
subject to our right to accelerate the expiration date in the event the closing
price of our Common Stock equals of exceed 300% of the warrant exercise price
for 30 consecutive trading days
In the
March Agreements, Empire represented to us that each of them is an “accredited
investor” (as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933) and a “qualified institutional buyer” (as such term
is defined in Rule 144A under the Securities Act of 1933) and that each of them
was acquiring the shares of our Common Stock and the warrant for its own
account, for investment purposes, and without a view toward distribution or
resale of such securities. The shares of our Common Stock and
the warrants were issued to Empire in a transaction not involving a public
offering and without registration under the Securities Act of 1933 in reliance
on the exemption from registration provided by Section 4(2) of such
Act.
Item
3. Defaults Upon Senior Securities
On July
2, 2007, the Company issued Convertible Promissory Notes in the aggregate
principal amount of $3,353,127 (the “Notes”) as part of the consideration for
the acquisition of CASTion. The balance of the Notes is technically
in default and is shown in current liabilities as of March 31, 2009, due to the
fact that the Company had not made the required prepayments from the Quercus
private placement of equity closed on December 17, 2007.
Item
4. Submission of Matters to a Vote of Security Holders
No
matters were submitted to a vote of securities holders during the quarter ended
March 31, 2009.
Item
5. Other Information
None.
Item
6. Exhibits
The
following exhibits are filed as part of this report:
Exhibit No.
|
|
Description
of Exhibit
|
4.1
|
|
10%
Secured Convertible Promissory Note issued to The Quercus
Trust — Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed February 17, 2009
|
4.2
|
|
Form
of Common Stock Purchase Warrant issued pursuant to Securities Purchase
Agreement dated as of March 6, 2009 — Incorporated by reference to Exhibit
4.1 to Current Report on Form 8-K filed April 28, 2009
|
10.1
|
|
Security
Agreement dated as of February 11, 2009 among ThermoEnergy Corporation,
CASTion Corporation and The Quercus Trust — Incorporated by reference to
Exhibit 10.2 to Current Report on Form 8-K filed February 17,
2009
|
10.2
|
|
Limited
Liability Company Agreement of Babcock-Thermo Carbon Capture LLC, dated as
of February 25, 2009 — Incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K filed March 2,
2009
|
10.3
|
|
TEPS
License Agreement, dated as of February 25,
2009 — Incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K filed March 2, 2009
|
10.4
|
|
Agreement
to Indemnify Certain Members of Babcock-Thermo Carbon Capture LLC, dated
as of February 25, 2009 — Incorporated by reference
to Exhibit 10.3 to Current Report on Form 8-K filed March 2,
2009
|
!0.5 *
|
|
Amendment
to Employment Agreement by and between Alexander G. Fassbender and
ThermoEnergy Corporation, dated as of February 25,
2009 — Incorporated by reference to Exhibit 10.4 to
Current Report on Form 8-K filed March 2, 2009
|
10.6
|
|
Form
of Securities Purchase Agreement dated as of March 6, 2009 by and between
ThermoEnergy Corporation and each of the Investors party
thereto — Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed April 28, 2009
|
31.1
|
|
Sarbanes
Oxley Act Section 302 Certificate of Principal Executive
Officer — Filed herewith
|
31.2
|
|
Sarbanes
Oxley Act Section 302 Certificate of Principal Financial
Officer — Filed herewith
|
32.1
|
|
Sarbanes
Oxley Act Section 906 Certificate of Principal Executive
Officer — Filed herewith
|
32.2
|
|
Sarbanes
Oxley Act Section 906 Certificate of Principal Financial
Officer — Filed
herewith
|
* May
be deemed a compensatory plan or agreement
SIGNATURE
In
accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date:
October 14, 2009
THERMOENERGY CORPORATION
|
|
|
|
/s/
Dennis C. Cossey
|
|
Dennis C. Cossey, Chairman, and
|
|
Chief
Executive Officer
|
|
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