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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-19260
RENTECH, INC.
(Name of small business issuer in its charter)
COLORADO 84-0957421
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1331 17TH STREET, SUITE 720
DENVER, COLORADO 80202
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(Address of principal executive offices)
Issuer's telephone number, including area code:
(303) 298-8008
Check whether the issuer: (1) 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 .
--- ---
The number of shares outstanding of each of the issuer's classes of
common equity, as of May 4, 2001: common stock - 64,615,104.
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RENTECH, INC.
FORM 10-Q QUARTERLY REPORT
SECOND QUARTER OF FISCAL 2001
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2001
and September 30, 2000.......................................4
Consolidated Statements of Operations for the three and
six months ended March 31, 2001 and 2000.....................6
Consolidated Statement of Stockholders' Equity for
the six months ended March 31, 2001..........................7
Consolidated Statements of Cash Flows for the six
months ended March 31, 2001 and 2000.........................8
Notes to the Consolidated Financial Statements...............9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................15
Item 3. Quantitative and Qualitative Disclosures about Market Risk...........21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None..............................................22
Item 2. Change in Securities..................................................22
Item 3. Defaults Upon Senior Securities - None................................22
Item 4. Submission of Matters to a Vote of Security Holders - None............22
Item 5. Other Information - None..............................................22
Item 6. Exhibits and Reports on Form 8-K......................................22
(a) Exhibits - None
(b) Form 8-K
Signatures....................................................................23
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of
the federal securities laws, as well as historical and current facts. These
forward-looking statements include those relating to the Rentech GTL Technology;
the continued development of the Rentech GTL Technology to increase its economic
efficiency and use; market acceptance of the technology; ability to obtain
financing for plants using the Rentech GTL Technology; ability to economically
construct or retrofit these plants; the timing by which plants may be
constructed and begin production; ability to obtain low-cost feedstocks and to
economically operate the plants; successful operation of the plants; the market
value and acceptance of the liquid hydrocarbon products; revenues from the
Rentech GTL Technology; market acceptance of and the anticipated revenues from
the stains and sealers produced by OKON, Inc.; the market demand and anticipated
revenues from the mud logging services provided by Petroleum Mud Logging, Inc.;
ability to obtain needed capital; and statements about business strategies,
future growth, operations and financial results. These statements often can be
identified by the use of terms such as "may," "will," "should," "expect,"
"believe," "anticipate," "estimate," "intend," "plan," "project," "approximate"
or "continue," or the negative thereof. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
caution readers not to place undue reliance on any forward-looking statements.
Those statements represent our best judgment as to what may occur in the future.
Forward-looking statements, however, are subject to risks, uncertainties and
important factors beyond our control that could cause actual results and events
to differ materially from historical results of operations and events and those
presently anticipated or projected. Important factors that could cause actual
results to differ from those reflected in the forward-looking statements include
the risks of overruns in costs of constructing, retrofitting and operating
commercial plants using the Rentech GTL Technology, problems with mechanical
systems in the plants that are not directly related to the Rentech GTL
Technology, dangers associated with construction and operation of gas processing
plants like those using the Rentech GTL Technology, risks inherent in making
investments and conducting business in foreign countries, protection of
intellectual property rights, competition, difficulties in implementing our
business strategies, and other risks described in this report.
As used in this Quarterly Report on Form 10-Q, the terms "we," "our"
and "us" mean Rentech, Inc., a Colorado corporation and its subsidiaries, unless
the context indicates otherwise.
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RENTECH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
MARCH 31,
2001 September 30,
(UNAUDITED) 2000
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 921,262 $ 1,516,815
Accounts receivable, net of allowance
of $5,930 and $4,400 1,231,160 745,204
Other receivables 76,262 55,459
Subscription receivable 200,000 --
Receivable from related party 98,142 64,246
Inventories 259,388 117,866
Prepaid expenses and other current assets 254,956 106,480
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Total Current Assets 3,041,170 2,606,070
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PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $717,552 and $566,512 3,907,500 3,583,548
-------------- --------------
OTHER ASSETS
Licensed technology, net of accumulated
amortization of $1,744,809 and $1,630,437 1,686,339 1,800,711
Capitalized software costs, net of accumulated
amortization of $94,623 and $0 756,987 851,610
Goodwill, net of accumulated amortization
of $349,153 and $302,248 1,058,000 1,104,905
Investment in ITN/ES 3,079,107 3,079,107
Investment in Dresser 2,017,135 2,017,135
Investment in Sand Creek 45,803 10,584
Technology rights, net of accumulated
amortization of $96,605 and $83,039 191,141 204,707
Deposit for acquisition 1,303,252 1,019,465
Deposits, receivable and other assets, net of $167,206
allowance for doubtful accounts 313,076 184,750
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Total Other Assets 10,450,840 10,272,974
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Total Assets $ 17,399,510 $ 16,462,592
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RENTECH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
MARCH 31,
2001 September 30,
(UNAUDITED) 2000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 622,452 $ 358,885
Accrued payroll 269,571 78,005
Accrued liabilities 79,393 78,817
Payable to related party 23,897 --
Line of credit payable 78,658 --
Contract liability 750,000 --
Current portion of long-term debt 108,171 243,553
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Total Current Liabilities 1,932,142 759,260
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LONG-TERM LIABILITIES
Long-term debt, net of current portion 1,034,864 990,107
Lessee deposits 7,103 9,248
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Total Long-Term Liabilities 1,041,967 999,355
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Total Liabilities 2,974,109 1,758,615
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COMMITMENTS
STOCKHOLDERS' EQUITY
Series B convertible preferred stock - $10 par value; 800,000 shares
authorized; 613,886 shares issued and converted, none outstanding -- --
Series C participating preferred stock - $10 par value; 500,000
shares authorized; no shares issued or outstanding -- --
Common stock - $.01 par value; 100,000,000 shares
authorized; 64,615,104 and 62,824,228 shares
issued and outstanding 646,148 628,240
Additional paid-in capital 34,607,340 32,925,887
Unearned compensation (43,600) (49,829)
Accumulated deficit (20,784,487) (18,800,321)
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Total Stockholders' Equity 14,425,401 14,703,977
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Total Liabilities and Stockholders' Equity $ 17,399,510 $ 16,462,592
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See notes to the consolidated financial statements.
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RENTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
2001 2000 2001 2000
------------ ------------ ------------ ------------
REVENUES:
Product sales $ 515,253 $ 386,603 $ 977,155 $ 857,862
Service sales 1,251,141 516,558 2,211,074 980,855
Royalty income 60,000 60,000 120,000 140,000
Rental income 27,056 30,901 58,038 60,589
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Total Revenues 1,853,450 994,062 3,366,267 2,039,306
------------ ------------ ------------ ------------
COST OF SALES:
Product sales 153,638 211,001 396,811 425,511
Service sales 851,280 460,390 1,651,304 827,488
------------ ------------ ------------ ------------
Total Cost of Sales 1,004,918 671,391 2,048,115 1,252,999
------------ ------------ ------------ ------------
GROSS PROFIT 848,532 322,671 1,318,152 786,307
OPERATING EXPENSES:
General and administrative 1,214,571 1,082,901 2,759,222 1,963,295
Research and development 9,897 112,528 48,029 229,524
Depreciation and amortization 193,273 110,440 336,048 218,485
------------ ------------ ------------ ------------
Total Operating Expenses 1,417,741 1,305,869 3,143,299 2,411,304
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (569,209) (983,198) (1,825,147) (1,624,997)
OTHER INCOME (EXPENSE):
Interest income 32,164 33,258 67,246 38,391
Interest expense (22,271) (36,453) (49,219) (74,692)
Equity in loss of investee (83,576) (69,821) (177,046) (69,821)
------------ ------------ ------------ ------------
Total Other Income (Expense) (73,683) (73,016) (159,019) (106,122)
------------ ------------ ------------ ------------
NET LOSS (642,892) (1,056,214) (1,984,166) (1,731,119)
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Dividend requirement on preferred stock 463,647 -0- 466,180 89,612
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LOSS APPLICABLE TO COMMON STOCK $ (1,106,539) $ (1,056,214) $ (2,450,346) $ (1,820,731)
------------ ------------ ------------ ------------
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING 63,852,971 53,776,364 63,537,746 52,774,595
------------ ------------ ------------ ------------
PER SHARE LOSS:
Basic and diluted $ (0.02) $ (0.02) $ (0.04) $ (0.03)
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See notes to consolidated financial statements.
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RENTECH, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Six Months Ended March 31, 2001 (Unaudited)
Convertible
Preferred Stock Common Stock Additional Total
Series B Par Paid-in Unearned Accumulated Stockholders'
Shares Amount Shares Value Capital Compensation Deficit Equity
-------- --------- ---------- -------- ----------- ------------ ------------ ------------
Balances, October 1, 2000 -- $ -- 62,824,228 $628,240 $32,925,887 $(49,829) $(18,800,321) $ 14,703,977
Common stock issued for cash
on options and warrants
exercised -- -- 467,500 4,675 516,325 -- -- 521,000
Preferred stock issued for
cash and subscription
receivable, net of
offering costs of $109,713 88,888 888,888 -- -- (109,713) -- -- 779,175
Common stock issued for
conversion of preferred
stock (88,888) (888,888) 1,123,376 11,233 877,655 -- -- --
Common stock issued for
deposit on business
acquisition -- -- 200,000 2,000 242,000 -- -- 244,000
Deemed dividends on convertible
preferred stock of
$466,180 -- -- -- -- -- -- -- --
Warrants for convertible
preferred stock redeemed
for cash -- -- -- -- (2,084) -- -- (2,084)
Options granted/earned for
services -- -- -- -- 157,270 6,229 -- 163,499
Net loss for the six months
ended March 31, 2001 -- -- -- -- -- -- (1,984,166) (1,984,166)
-------- --------- ---------- -------- ----------- -------- ------------ ------------
Balances, March 31, 2001
(unaudited) -0- $ -0- 64,615,104 $646,148 $34,607,340 $(43,600) $(20,784,487) $ 14,425,401
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See notes to the consolidated financial statements.
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RENTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended March 31, (Unaudited) 2001 2000
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OPERATING ACTIVITIES:
Net Loss $ (1,984,166) $ (1,731,119)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 420,506 284,456
Increase in allowance for doubtful accounts 1,530 --
Services paid with options and warrants 163,499 17,078
Equity in loss of investee 177,046 69,821
Changes in operating assets and liabilities:
Increase in accounts receivables (487,486) (145,404)
(Increase) Decrease in other receivables and
receivable from related party (54,699) 13,195
(Increase) Decrease in inventories (141,522) 22,494
(Increase) Decrease in prepaids and other current assets (148,476) 38,126
Increase in interest receivable (39,787) --
Increase in accounts payable and other
accrued liabilities 479,606 59,670
Decrease in lessee deposits (2,145) --
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Net Cash Used in Operating Activities (1,616,094) (1,371,683)
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INVESTING ACTIVITIES:
Purchase of equipment (379,783) (141,077)
Increase in investments (212,265) (350,252)
(Increase) Decrease in deposits and other assets 5,709 (74,910)
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Net Cash Used in Investing Activities (586,339) (566,239)
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FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock, net 579,175 166,660
Proceeds from issuance of common stock, net 521,000 6,647,691
Payment for deferred offering costs (134,035) (587,491)
Redemption of preferred stock and warrants to purchase common stock (2,084) (285,000)
Proceeds from line of credit, net 78,658 --
Proceeds from contract liability 750,000 --
Payment on long-term debt and notes payable (185,834) (90,176)
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Net Cash Provided by Financing Activities 1,606,880 5,851,684
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (595,553) 3,913,762
Cash and Cash Equivalents,
Beginning of Period 1,516,815 308,182
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Cash and Cash Equivalents,
End of Period $ 921,262 $ 4,221,944
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See notes to consolidated financial statements.
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RENTECH, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2001 (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
accompanying statements should be read in conjunction with the audited financial
statements included in the Company's September 30, 2000 annual report on Form
10-K. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six months ended March 31, 2001
are not necessarily indicative of the results that may be expected for the full
fiscal year ending September 30, 2001.
2. SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Cash Equivalents - The Company considers highly liquid investments
purchased with original maturities of three months or less and money market
accounts to be cash equivalents.
Capitalized Software - Capitalized software represents fees paid to
Dresser Engineering for software development which are being amortized over a
three year period using the straight-line method.
Inventories - Inventories which consist of water protection sealants,
chemicals and packaging supplies, are recorded at the lower of cost (first-in,
first-out) or market.
Licensed Technology - Licensed technology represents costs incurred by
the Company primarily for the purpose of demonstrating the Company's proprietary
technology to prospective licensees, which it licenses to third parties under
various fee arrangements. These capitalized costs are carried at the lower of
amortized cost or realizable value and are being amortized over 15 years.
Goodwill - Goodwill, which relates to the acquisition of Okon in 1997
and the acquisition of PML in 1999, is being amortized over a 15-year period
using the straight-line method.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization expense are computed using the straight-line
method over the estimated useful lives of the assets, which range from three to
thirty years except for leasehold improvements which are amortized over the
shorter of the useful life or the remaining lease term. Maintenance and repairs
are expensed as incurred. Major renewals and improvements are capitalized. When
property and equipment are retired or otherwise disposed of, the asset and
accumulated depreciation or amortization are removed from the accounts and the
resulting profit or loss is reflected in operations.
Investment in ITN/ES - The Company has a 10% investment in ITN Energy
System, Inc. The investment is stated at cost. The investment is periodically
evaluated for impairment and is carried at the lower of cost or net realizable
value.
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Investment in Dresser - The Company has a 10% investment in Dresser
Engineers & Construction, Inc. The investment is stated at cost. The investment
is evaluated periodically and is carried at the lower of cost or net realizable
value.
Investment in Sand Creek - The Company has a 50% investment in Sand
Creek Energy, LLC. The investment is accounted for using the equity method of
accounting. Under such method, the Company's proportionate share of net income
(loss) is included as a separate item in the statement of operations.
Technology Rights - Technology rights are recorded at cost and are
being amortized on a straight-line method over a ten-year estimated life.
Long-Lived Assets - Long-lived assets, identifiable intangibles, and
associated goodwill are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
expected future cash flow from the use of the asset and its eventual disposition
is less than the carrying amount of the asset, an impairment loss is recognized
and measured using the asset's fair value.
Revenue Recognition - Sales of water-based stains sealers and coatings
are recognized when the goods are shipped to the customers. Revenues from mud
logging services are billed at the completion of the service. Rental income from
tenant leases is recognized in the period earned. Laboratory research revenues
are recognized upon completion of a project. Royalty fees are recognized when
the revenue earning activities that are to be provided by the Company have been
performed and no future obligation to perform services exist.
Income Taxes - The Company accounts for income taxes under the
liability method which requires an entity to recognize deferred tax assets and
liabilities. Temporary differences are differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements
that will result in taxable or deductible amounts in future years.
Net Loss Per Common Share - Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128") provides for the calculation of
"Basic" and "Diluted" earnings per share. Basic earnings per share includes no
dilution and is computed by dividing income (loss) available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity, similar to fully diluted earnings
per share. For the six months ended March 31, 2001 and 2000, total stock options
of 8,074,300 and 8,025,448, and total stock warrants of 4,043,504 and 4,225,834
were not included in the computation of diluted loss per share because their
effect was anti-dilutive.
Reclassifications - Certain reclassifications have been made to the
2000 balance sheet in order for it to conform to the 2001 presentation. Such
reclassifications have no impact on the Company's results of operations.
Recent Accounting Pronouncements - The Financial Accounting Standards
Board ("FASB") has recently issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133, amended by SFAS No. 137 established standards for
recognizing all derivative instruments at fair value. This Statement is
effective for quarters of fiscal years beginning after June 15, 2000. The
adoption of this statement did not have an impact on the Company's consolidated
financial statements.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation" ("FIN 44"), which was
effective July 1, 2000, except that certain conclusions in this interpretation
which cover specific events that occur after either December 15, 1998 or January
12, 2000
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are recognized on a prospective basis from July 1, 2000. This Interpretation
clarifies the application of APB Opinion 25 for certain issues relating to stock
issued to employees. The Company believes its existing stock based compensation
policies and procedures are in compliance with FIN 44 and therefore, the
adoption of FIN 44 has no material impact on the Company's financial condition,
results of operations or cash flows.
In December 1999, the Securities and Exchange Commission (the "SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements" which provides additional guidance in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB 101 is effective as of the fourth quarter of fiscal year ending September
30, 2001. Management believes the adoption of this bulletin will have no
material impact on the Company's financial statements.
3. STOCKHOLDERS' EQUITY
Common Stock - For the six months ended March 31, 2001, the Company
issued 467,500 shares of its common stock upon the exercise of stock options and
stock warrants for cash proceeds of $521,000. In February 2001, the Company
issued 200,000 shares of its common stock with a market value of $244,000 as
part of a deposit which will be used to acquire a majority interest in Ren
Corporation. Upon closing of this transaction, the majority of the advance will
be applied to the purchase price. If the transaction does not close, REN must
repay the advance plus 8% accrued interest no later than six months from the
date of the Company's written notice that the purchase will not be completed.
The final agreement is subject to the Company's due diligence, the funding of
the purchase and approval by the management of each company.
Preferred Stock - In December 2000, the Company issued for cash 44,444
shares of Series B convertible preferred stock ("preferred stock") for $394,333,
net of $50,107 in offering costs. The Company recorded a deemed dividend of
$100,006 when it issued the preferred stock as the preferred stock was
convertible at a discount into common stock of the Company. In March 2001, the
Company issued for cash and a subscription receivable 44,444 shares of preferred
stock for $384,838, net of $59,606 in offering costs. The Company recorded a
deemed dividend of $366,174 when it issued the preferred stock as the preferred
stock was convertible at a discount into common stock of the Company. As of
March 31, 2001, the subscription receivable was $200,000. The subscription
receivable was repaid in April 2001. During the second quarter of 2001, the
holder converted all of its preferred stock into 1,123,376 shares of common
stock. The original conversion period was 120 days, however, the Company
requested that the holder convert the preferred stock earlier.
Stock Options - During February 2000, the Company entered into a
consulting agreement with DSN Enterprises Ltd. ("DSN"). The Company granted the
following stock options to DSN.
o 100,000 stock options exercisable at an exercise price of
$.575 per share. These stock options are exercisable at the
date of the grant and expire during 2001.
o 180,000 stock options exercisable at an exercise price of
$1.25 per share. These stock options are exercisable at the
date of the grant and expire during 2001.
o 100,000 stock options exercisable at an exercise price of $.80
per share. These stock options are exercisable beginning on
May 10, 2000 and expire during 2001.
o 100,000 stock options exercisable at an exercise price of $.90
per share. These stock options are exercisable beginning on
October 10, 2000 and expire during 2001.
For the six months ended March 31, 2001, the Company recorded $137,550
in consulting expense from the issuance of these stock options.
During December 2000, the Company granted 350,000 options to certain
employees, directors and
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individuals who have provided contract services to the Company. The Company
recorded expense of $19,720 as a result of the issuance of these stock options.
4. SEGMENT INFORMATION
The Company operates in four business segments as follows:
o Paint - The Company manufactures and distributes water-based
stains, sealers and coatings.
o Alternative Fuels - The Company develops and markets processes
for conversion of low-value, carbon-bearing solids or gases
into valuable liquid hydrocarbons.
o Mud Logging Services - The Company is in the business of
logging the progress of drilling operations for the oil and
gas industry.
o Real Estate - The Company leases office and warehouse space to
third parties.
The Company's reportable operating segments have been determined in
accordance with the Company's internal management structure, which is organized
based on operating activities. The accounting policies of the operating segments
are the same as those described in the summary of accounting policies. The
Company evaluates performance based upon several factors, of which the primary
financial measure is segment operating income.
Three Months Ended Six Months Ended
March 31, March 31,
------------------------------------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Paint $ 515,253 $ 386,603 $ 977,155 $ 857,862
Alternative Fuels 701,763 198,035 1,124,770 380,935
Mud Logging Services 609,378 378,523 1,206,304 739,920
Real Estate 27,056 30,901 58,038 60,589
------------ ------------ ------------ ------------
$ 1,853,450 $ 994,062 $ 3,366,267 $ 2,039,306
------------ ------------ ------------ ------------
Operating income (loss):
Paint $ 103,576 $ (67,109) $ 71,926 $ 3,111
Alternative Fuels (703,514) (853,762) (1,989,527) (1,552.900)
Mud Logging Services 47,296 (61,868) 94,466 (83,697)
Real Estate (16,567) (459) (2,012) 8,489
------------ ------------ ------------ ------------
$ (569,209) $ (983,198) $ (1,825,147) $ (1,624,997)
------------ ------------ ------------ ------------
Depreciation and amortization:
Paint $ 27,846 $ 24,619 $ 55,512 $ 51,551
Alternative Fuels 166,144 70,873 281,906 155,091
Mud Logging Services 28,413 27,588 56,789 53,535
Real Estate 13,249 13,050 26,299 24,279
------------ ------------ ------------ ------------
$ 235,652 $ 136,130 $ 420,506 $ 284,456
------------ ------------ ------------ ------------
Equity in net loss of investees:
Alternative Fuels $ (83,576) $ (69,821) $ (177,046) $ (69,821)
------------ ------------ ------------ ------------
Expenditures for additions and long-lived assets:
Paint $ -- $ -- $ -- $ --
Alternative Fuels 350,141 (4,380) 369,975 68,144
Mud Logging Services 50,640 53,670 99,058 72,933
Real Estate 5,959 5,959
------------ ------------ ------------ ------------
$ 406,740 $ 49,290 $ 474,992 $ 141,077
------------ ------------ ------------ ------------
Investment in equity method investees:
Alternative Fuels $ 45,803 $ 103,380 $ 45,803 $ 103,380
------------ ------------ ------------ ------------
Total assets:
Paint $ 1,575,699 $ 1,380,741 $ 1,575,699 $ 1,380,741
Alternative Fuels 12,286,523 12,981,778 12,286,523 12,981,778
Mud Logging Services 1,904,779 1,613,255 1,904,779 1,613,255
Real Estate 1,632,509 1,671,162 1,632,509 1,671,162
------------ ------------ ------------ ------------
$ 17,399,510 $ 17,646,936 $ 17,399,510 $ 17,646,936
============ ============ ============ ============
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5. INVESTMENT IN SAND CREEK
On January 7, 2000, the Company and Republic Financial Corporation
("Republic") through Sand Creek Energy, LLC (SCE) purchased the "Sand Creek"
methanol facility and all the supporting infrastructure, buildings and the
underlying 17 acre site. The Company and Republic are developing a plan to
convert the facility to a gas-to-liquids (GTL) plant making Fischer-Tropsch
diesel, naphtha, petroleum waxes and other products.
The new owner of the facility is SCE which is 50 percent owned by
Rentech Development Corp., a wholly-owned subsidiary of Rentech, Inc., and 50
percent owned by RFC-Sand Creek Development, LLC, a wholly-owned subsidiary of
Republic Financial Corporation. Republic Financial Corporation is headquartered
in Aurora, Colorado. In connection with the acquisition of the facility, SCE
assumed certain commitments with third parties. The Company and Republic jointly
and severally guarantee the full and punctual performance and payment by SCE of
all SCE's obligations with respect to this facility. The aggregate liability of
the Company under this guaranty shall not exceed $4,000,000.
On April 15, 2000 as amended, the Company granted Texaco Energy
Systems, Inc. the exclusive right to negotiate for Texaco's participation in the
project to retrofit the Sand Creek plant for the planned purpose. Texaco has the
right to evaluate and acquire up to one-half of the Company's 50% interest in
Sand Creek Energy LLC. This agreement is in force until renewed or cancelled by
mutual agreement.
During the six months ended March 31, 2001, the Company contributed
$212,265 to SCE and recognized $177,046 related to its equity in SCE's loss. As
of March 31, 2001, the Company has recorded a $45,803 investment in SCE.
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6. LONG-TERM CONTRACT LIABILITY
On January 18, 2001, the Company was granted a services contract by the
Wyoming Business Council, Energy Section, Investment Ready Communities Division
("WBC"). Under the contract, Rentech will receive $800,000 to finance a
Gas-to-Liquids feasibility study within the State. The WBC funding will be used
to evaluate two potential GTL projects utilizing Rentech's patented and
proprietary Fischer-Tropsch Gas-to-Liquids technology. Phase I involves studying
the feasibility of retrofitting a portion of an existing methanol facility in
Wyoming. Phase II entails the study of the feasibility of constructing a
separate greenfield plant at the same site. Rentech estimates that it will take
approximately six to nine months to complete the study. If the Company
determines that it is not feasible to proceed with the conversion of the
facility, the Company will repay the grant at the rate of 120% of the original
$800,000 for a total of $960,000 over a period of time not to exceed six years.
The repayment will be from a 5% share of royalties from the conversion of
methanol facilities to Rentech GTL technology worldwide. If the Company chooses
to proceed with the conversion and/or purchase of the methanol facility in
Wyoming, the Company will repay WBC the $800,000 at the time of the financial
closing of the facility. In addition, the Company will provide to WBC a royalty
of $.15/ barrel of Rentech Fisher Tropsch liquid produced from the facility
after conversion is complete using the Rentech GTL technology. The royalty will
be paid for the first four years of commercial operation of the facility. On
February 9, 2001, the Company received the first $750,000 payment as per the
terms of the contract. The payment is recorded as a current contract liability.
7. SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS
For the six months ended March 31, 2001 and 2000, the Company made cash
interest payments of $49,219 and $74,692.
Excluded from the statements of cash flows for the six months ended
March 31, 2001 and 2000 were the effects of certain non-cash investing and
financing activities as follows:
Six Months Ended March 31, 2001 2000
------------ ------------
Issuance of common stock for conversion of convertible
preferred stock and dividends $ 888,888 $ 1,321,814
Issuance of common stock for deposit on potential business
acquisition $ 244,000 $ --
Issuance of convertible preferred stock for subscription
receivable $ 200,000 $ --
Purchase of equipment financed with a capital lease obligation $ 95,209 $ --
Decrease in accrued dividends $ -- $ (37,422)
Issuance of common stock for prepaid expenses $ -- $ 106,240
Issuance of common stock upon exercise of stock options
for stock subscriptions receivable $ -- $ 117,121
Issuance of warrants for offering costs $ -- $ 33,257
Issuance of warrants for acquisition costs in business acquisition $ -- $ 16,281
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2000
RESULTS OF OPERATIONS
Revenues. We had revenues from product sales, service sales, royalty
income, and rental income for the six months ended March 31, 2001 and 2000 of
$3,366,267 and $2,039,306, respectively.
Product Sales. Our product sales were realized from sales of
water-based stains, sealers and coatings by our subsidiary, OKON, Inc. through
which we conduct this paint business segment. These sales produced revenues of
$977,155 and $515,253 for the six and three months ended March 31, 2001. This
compares to revenues from this segment of $857,862 and $386,603 for the six and
three months ended March 31, 2000. The increase of 14% and 33% in revenues for
the six and three months ended March 31, 2001 from this segment were primarily
due to the introduction of new products, addition of new customers and increased
marketing activities.
Service Sales. Service sales are provided by two of our business
segments. The segments are the mud logging subsidiary and the technical services
related to the Rentech GTL Technology. The technical services are provided
through the scientists and technicians who staff our development and testing
laboratory.
Service sales in the amount of $1,206,304 and $609,378 were derived
from contracts for the mud logging services provided by our subsidiary,
Petroleum Mud Logging, Inc., during the six and three months ended March 31,
2001. Our mud logging service revenues for this period increased by $466,384 and
$230,855 over the service revenues of $739,920 and $378,523 during the six and
three months ended March 31, 2000. The increase in mud logging service revenues
was due primarily to increased demand for our mud logging services, particularly
for new wells drilled for natural gas. In response, we outfitted several of our
unused mud log vehicles with new equipment and were thereby able to expand our
services while having more units in the field than during the corresponding
period of 2000. In addition, we have purchased several new units to increase our
capacity in order to meet increased demand for these services.
Service sales also included revenue earned for technical services
provided to certain customers with regard to the Rentech GTL Technology. Our
service revenues for these technical services were $1,004,770 and $641,763
during the six and three months ended March 31, 2001 as compared to $240,935 and
$138,035 during the six and three months ended March 31, 2000. The increase of
317% and 365% in revenue for the six and three months ended March 31, 2001 was
primarily due to the addition of several new customers and the increase in
services provided to existing customers for which these technical services were
provided at our development and testing laboratory.
Royalty Income. Royalty income consisted of royalties that we earned as
a result of our October 1998 license of the Rentech GTL Technology to Texaco.
Under the agreement, we received royalties of $120,000 and $60,000 for the six
and three months ended March 31, 2001, as compared to $140,000 and $60,000 for
the six and three months ended March 31, 2000.
Rental Income. We leased part of our development and testing laboratory
building in Denver to two tenants. These tenants provided rental income to us.
Rental income from this facility contributed $58,038 and $27,056 in revenue for
the six and three months ended March 31, 2001 as compared to $60,589 and $30,901
for the six and three months ended March 31, 2000. The decrease in fiscal 2001
resulted from our use of part of the building for engineering and finance
offices where in fiscal 2000 we leased this space to a third party.
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Cost of Sales. Our cost of sales includes costs for our paint business
products as well as for our mud logging and technical services. During the six
and three months ended March 31, 2001, the combined cost of sales increased by
63% and 50% to $2,048,115 and $1,004,918 from $1,252,999 and $671,391 for the
comparable period from the prior year. The increase of $795,116 and $333,527
relates almost entirely to costs associated with the addition of new revenues
from these three business segments.
Cost of sales for product sales are the costs of sales of our paint
business segment for sales of stains sealers and coatings. During the six and
three months ended March 31, 2001, our cost of sales for the paint segment
decreased by $28,700 and $57,363 to $396,811 and $153,638, as compared to the
comparable period in 2000. These decreases of 7% and 27% are almost entirely
related to the efficiencies gained over time with the new production facility
which we moved into during March 2000.
Cost of sales for mud logging services were $845,620 and $408,596 for
the six and three months ended March 31, 2001, up from $586,553 and $322,355 for
the comparable period from the prior year. These increases of $259,067 and
$86,241 are directly related to the increase in revenues of this segment and are
primarily due to the addition of more mud logging vehicles and field employees
to operate them as we expanded to meet the growth in demand for mud logging for
new natural gas wells.
Cost of sales for technical services were $805,684 and $442,684 during
the six and three months ended March 31, 2001, up from $240,935 and $138,035 for
the six and three months ended March 31, 2000. These increases of $564,749 and
$304,649 are primarily due to our expanded range of technical services provided.
We added additional engineers and technicians to staff our development and
testing laboratory which increased salaries and the related overhead
expenditures for the technical services segment.
Gross Profit. Our gross profit for the six and three months ended March
31, 2001 was $1,318,152 and $848,532, as compared to $786,307 and $322,671 for
the comparable period of 2000. The increases of $531,845 and $525,861 result
from the combined contributions of additional revenues of all of our business
segments, including an increase in product sales by our paint segment (up 14%
and 33%), and increased service revenues from our mud logging and technical
services segments (up 125% and 142%). These additions to gross profit were
offset by corresponding decreases in costs of sales of 7% and 27% for the paint
segment and increases of 100% and 85% for our mud logging and technical services
segments. Cost of sales for the paint segment increased at a lower rate than
gross profit for the segment because of the efficiencies gained over time with
the new production facility. Cost of sales for the mud logging and technical
services segments increased at a higher rate than the related gross profit for
the six month period and increased at a lower rate for the three month period
ended March 31, 2001 due to the costs related to putting more mud logging units
into the field, and to the costs added at the development and testing
laboratory, as compared to overall revenue and cost of sales.
Operating Expenses. Operating expenses consist of general and
administrative expense, depreciation and amortization expense and research and
development expense.
General and Administrative Expenses. General and administrative
expenses were $2,759,222 and $1,214,571 for the six and three months ended March
31, 2001, up $795,927 and $131,670 from the six and three months ended March 31,
2000 when these expenses were $1,963,295 and $1,082,901. The increase is
attributable to an increase in business volume which includes expenses related
to the hiring of additional laboratory technicians for our technical services
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segment, increased office staffing and the inflationary impact on existing
employee salaries. In addition, the increase resulted from certain non-recurring
expenses, which include a one-time increase in accrued salaries and bonuses in
the amount of $212,679 and options granted to independent contractor consultants
in lieu of cash payments in the amount of $163,499.
Depreciation and Amortization. Depreciation and amortization expense
for the six and three months ended March 31, 2001 was $420,506 and $235,652. Of
these amounts, $84,458 and $42,379 were included in cost of sales. Depreciation
and amortization expense for the six and three months ended March 31, 2000 was
$284,456 and $136,130, of which $65,971 and $25,690 were included in cost of
sales. The increase in depreciation and amortization expense is attributable to
the additional equipment acquired for our mud logging segment and for the
development and testing laboratory, and to the amortization of software
capitalized at the end of fiscal 2000.
Research and Development. Research and development expense was $48,029
and $9,897 for the six and three months ended March 31, 2001, decreased by
$181,495 and $102,631 over the corresponding periods of 2000, when this expense
was $229,524 and $112,528. This decrease is primarily due to the significant
increase in billable work being performed at the development and testing
laboratory for customers which in turn decreased the amount of cost related to
research and development.
Total Operating Expenses. Total operating expenses for the six and
three months ended March 31, 2001 were $3,143,299 and $1,417,741, as compared to
$2,411,304 and $1,305,869 for the corresponding periods of 2000, an increase of
$731,995 and $111,872. The increase in total operating expenses is a result of
the factors, previously described, that relate to operating expenses.
Loss From Operations. Loss from operations for the six and three months
ended March 31, 2001 increased by $200,150 and decreased by $413,988 to a loss
of $1,825,147 and $569,209, as compared to a loss of $1,624,997 and $983,198 for
the corresponding periods in 2000. The increased loss for the six months ended
March 31, 2001 is primarily due to increases in operating expenses, with the
decreased loss for the three months ended March 31, 2001 being attributable to
an increase in gross profit contributed by our operating segments.
Other Income (Expense). Other income (expense) include interest income,
interest expense and equity in loss of investee.
Interest Income. Interest income for the six and three months ended
March 31, 2001 was $67,246 and $32,164, increased from $38,391 and $33,258 for
the six and three months ended March 31, 2000. The increased interest income was
due to having more funds invested in interest-bearing cash accounts and to
interest earned from the note receivable from Ren Corporation.
Interest Expense. Interest expense for the six and three months ended
March 31, 2001 was $49,219 and $22,271, decreased from $74,692 and $36,453 for
the six and three months ended March 31, 2000. The decrease in interest expense
is primarily the result of the pay-off of our indebtedness associated with
purchase of the mud logging assets.
Equity in Loss of Investee. During the six and three months ended March
31, 2001, we recognized $177,046 and $83,576 in equity in loss of investee. This
represents our 50% share of the loss incurred by our joint venture in Sand Creek
Energy LLC. The LLC is holding and maintaining the mothballed Sand Creek
methanol plant. We are considering retrofitting this plant to use it as a large
pilot plant for continuing work with the Rentech GTL Technology. This compares
to a loss of
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$69,821 for the six and three months ended March 31, 2000 because we acquired
our interest in the plant early in the second quarter of fiscal 2000.
Total Other Expenses. Total other expense increased to $159,019 and
$73,683 for the six and three months ended March 31, 2001, an increase of
$52,897 and $667 over total other expenses of $106,122 and $73,016 for the
comparable six and three months ended March 31, 2000. The increase in total
other expenses resulted from the combination of the factors previously described
as other income (expense).
Net Loss. For the six and three months ended March 31, 2001, we
experienced a net loss of $1,984,166 and $642,892 compared to net losses of
$1,731,119 and $1,056,214 for the six and three months ended March 31, 2000. The
$253,047 increase in net loss for the six months ended March 31, 2001 resulted
primarily from a combination of the factors previously described, including
$376,177 in non-cash expenses included in general and administrative expenses
and depreciation and amortization of $336,048 which includes the amortization of
our capitalized software costs. The $413,322 decrease in net loss for the three
months ended March 31, 2001 resulted primarily from the increase in gross profit
from all of our business segments.
Dividend Requirements on Convertible Preferred Stock. Dividend
requirements on convertible preferred stock is the imputed amount calculated
when there is a discount from fair market value of our common stock compared to
the conversion rate, plus the 9% dividend that accrues on the convertible
preferred stock. The dividends are deducted from net loss in order to arrive at
loss applicable to common stock. During the six and three months ended March 31,
2001 and the six months ended March 31, 2000, we issued convertible preferred
stock, and we were required to calculate a deemed dividend in both periods.
During the six and three months ended March 31, 2001, we recorded dividends of
$466,180 and $463,647 compared to $89,612 during the six months ended March 31,
2000.
Loss Applicable to Common Stock. As a result of recording
dividends on convertible preferred stock as described above, the loss applicable
to common stock was $2,450,346 or $.04 per share and $1,106,539 or $.02 per
share for the six and three months ended March 31, 2001 as compared to
$1,820,731 or $.03 per share and $1,056,214 or $.02 per share for the six and
three months ended March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, we had working capital of $1,109,028 as compared to
working capital of $1,846,810 at September 30, 2000. The decrease in working
capital is primarily due to the use of cash for operations, investing activities
and payments on long-term debt.
As of March 31, 2001, we had $3,041,170 in cash and other current
assets, including net accounts receivable of $1,231,160. At that time, our
current liabilities were $1,932,142. We had long-term liabilities of $1,041,967.
Most of our long-term liabilities relate to our mortgage on our laboratory
facility, which is due on March 1, 2029, which we purchased in February 1999.
The primary source of our liquidity has been equity capital
contributions. We added additional sources of liquidity through cash flow
generated by the purchase of OKON, Inc., the license agreement with Texaco,
billings for technical services relating to the Rentech GTL Technology and the
purchase of the assets that we operate through Petroleum Mud Logging, Inc.
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Our principal needs for liquidity in the past have been to fund working
capital, pay for research and development of the Rentech GTL Technology, pay the
costs of acquiring and initially funding the paint and mud logging business
segments, invest in the advanced technologies of ITN Energy Systems, acquire
interests in Dresser Engineers & Constructors, Inc. and to provide deposits for
the potential acquisition of Ren Corporation. We believe that our cash on hand
and revenues from operations will be sufficient to fund our operations at the
present level through the end of fiscal 2001.
We anticipate needs for substantial amounts of new capital to acquire
and retrofit one or more methanol or other industrial gas plants to use the
Rentech GTL Technology, purchase property and equipment, and to continue
significant research and development programs for the GTL projects we are
considering. We expect to undertake these types of expenditures in efforts to
commercialize the technology in one or more plants in which we may acquire
partial ownership. Even if we succeed in obtaining construction loans secured by
the projects involving the plants to be retrofitted, we expect to need
significant amounts of capital as our required share of the total investment in
these projects. We may attempt to fund some of these project costs through sales
of some part of our ownership, if we have any, in any industrial gas plant that
we may attempt to retrofit. At this time, we own a one-half interest in one
plant, which is the mothballed Sand Creek methanol plant. We are not targeting
it for use as a commercial scale plant to use our technology. Instead, we are
considering plans to retrofit it for our use as a large pilot plant for
continued improvement of the Rentech GTL Technology.
We are considering proposals to acquire ownership interests or
leasehold rights in one or more of methanol or other industrial gas plants that
are presently under-utilized. Under these proposals, we would have to contribute
capital, alone or possibly in a joint venture with a present owner, to retrofit
a plant to use the Rentech GTL Technology. Our goal is to operate any converted
plant on a commercial basis and realize a new source of revenues for the
production and sale of liquid hydrocarbons.
At this time, we do not have access to capital needed to acquire or
retrofit an existing plant. In an effort to raise capital that could enable us
to retrofit one or more industrial gas plants, we have signed a non-binding
letter of intent with an underwriter for a registered public offering of our
common stock. Subject to an increase in the market price of our stock, the
underwriter has agreed to use its best efforts to sell $75 million to $100
million of our common stock. We believe that a successful offering of this type
would provide net proceeds sufficient for us to acquire an ownership interest
and management control of one or more of these existing plants.
If this financing effort is completed and we are able to retrofit and
economically operate one or more plants in which we have acquired a share of
ownership, we anticipate two types of benefits. One of these would be new
revenues from our share of sales of liquid hydrocarbons. We also anticipate that
economic use of the Rentech GTL Technology in one or more of these plants would
lead to commercial use of our technology by others and additional revenues from
license fees, engineering services, royalties and catalyst sales.
If our proposed public offering of common stock is not completed, we
may not have the capital required to acquire interests in one or more industrial
gas plants. In addition, without these funds, our efforts to achieve commercial
use of the Rentech GTL technology by others may be delayed. We could lose this
opportunity to encourage others to use our technology on a commercial basis and
would have to depend upon their interest in building new plants, without the
benefit of having at least one commercial-scale plant in operation. Therefore,
our plan to generate new revenues from use of the technology would be hindered
and delayed.
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Based upon the possibility that the proposed public offering may not be
completed, we have retained a financial advisor in order to help the Company
evaluate and possibly implement one or more transactions involving a sale,
merger, exchange or other disposition of the Company's securities or assets in
order to achieve the above described objectives of the Company.
ANALYSIS OF CASH FLOW
Operating Activities. Operating activities produced net losses of
$1,984,166 and $1,731,119 for the six month periods ended March 31, 2001 and
2000, respectively. The cash flows used in operations for those periods resulted
from the following operating activities.
Depreciation and Amortization. Depreciation and amortization are
non-cash expenses. These expenses increased during the six months ended March
31, 2001 by $136,050, compared to the six months ended March 31, 2000. The
increase is primarily due to the addition of equipment for our development and
testing laboratory and for our mud logging business segment, and for software
capitalized at the end of fiscal 2000.
Stock Options and Warrants Issued for Services. We issued stock options
and warrants for services in the amounts of $163,499 and $17,078 for the six
months ended March 31, 2001 and 2000, respectively. These options were issued in
lieu of cash to certain independent contractor consultants for their services.
Equity in Loss of Investee. We recognized equity in loss of investee in
the amount of $177,046 during the six month period ended March 31, 2001. This
represents our 50% share of the loss incurred by our joint venture in Sand Creek
Energy LLC. The LLC is holding and maintaining the mothballed Sand Creek
methanol plant. We are considering retrofitting this plant to use the Rentech
GTL Technology as a large pilot plant for further improvements to the
technology. We acquired our investment in the plant during the second quarter of
fiscal year 2000, and therefore the $69,821 loss was less during the six months
ended March 31, 2000.
Changes in Operating Assets and Liabilities. The changes in operating
assets and liabilities result from the following factors.
Accounts Receivable. Accounts receivable increased by $485,956 and
$145,404 for the six months ending March 31, 2001 and 2000, respectively.
Accounts receivable increased during the six month periods primarily due to
increased revenues from all of our business segments.
Accounts Payable and Other Accrued Liabilities. Accounts payable and
other accrued liabilities increased by $479,606 and $59,670 during the six month
periods ended March 31, 2001 and 2000, respectively, which reflects our decrease
in working capital and increases in operations.
Net Cash Used in Operating Activities. The total net cash used in
operations increased to $1,616,094 during the six months ended March 31, 2001,
as compared to $1,371,683 for the six months ended March 31, 2000. The increase
reflects increased cash costs for general and administrative and other operating
expenses.
Investing Activities. Investing activities during the six month periods
ended March 31, 2001 and 2000 included purchases of equipment of $379,783 and
$141,077, respectively, primarily for our development and testing laboratory and
mud logging vehicles, which were specially equipped for our mud logging business
segment. Investing activities during the six month periods ended March 31,
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2001 and 2000, respectively, also included $212,265 and $350,252 which were used
to fund our 50% share of expenses of Sand Creek Energy, LLC.
Financing Activities. Financing activities during the six months ended
March 31, 2001 provided $521,000 in cash from the issuance of common stock
compared to $6,647,691 during the six months ended March 31, 2000. During the
six months ended March 31, 2001, we received net proceeds of $579,175 from the
issuance of convertible preferred stock as compared to net proceeds of $166,660
during the six months ended March 31, 2000. We redeemed warrants to purchase
common stock during the quarter ended March 31, 2001 in the amount of $2,084. We
redeemed 23,832 shares of convertible preferred stock for $285,000 in cash
during the six months ended March 31, 2000. During the six months ended March
31, 2001, we received proceeds from a contract liability of $750,000 and from a
line of credit of $78,658, and we repaid $185,834 in long-term debt obligations
as compared to no such proceeds during the six months ended March 31, 2000 and
the repayment of $90,176 in long-term debt obligations during that period.
During the six months ended March 31, 2001, we paid $134,035 in deferred
offering costs for a future equity offering, compared to $587,491 of such
payments during the six months ended March 31, 2000. The net cash provided by
financing activities during the six months ended March 31, 2001 was $1,606,880,
compared to $5,851,684 in cash provided by financing activities during the six
months ended March 31, 2000.
Cash decreased during the six months ended March 31, 2001 by $595,553
compared to an increase of $3,913,762 during the six months ended March 31,
2000. These changes decreased the ending cash balance to $921,262 at March 31,
2001 from $4,221,944 at March 31, 2000.
Net Deferred Tax Asset. The Company has a net deferred tax asset with a
100% valuation allowance as of March 31, 2001 as management is not able to
determine if it is more likely than not that the net deferred tax asset will be
realized.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk through interest rates related to
its investment of current cash and cash equivalents. These funds are generally
highly liquid with short-term maturities, and the related market risk is not
considered material. The Company's line of credit to bank has a variable
interest rate. The Company's management believes that fluctuations in interest
rates in the near term will not materially affect the Company's consolidated
operating results, financial position or cash flow.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Change in Securities.
The following table shows information concerning all sales of the
Company's equity securities sold by the Company during the period covered by
this report that were not registered under the Securities Act of 1933, as
amended.
Class of Total Exemptions
Date Securities Securities Offering Total Class of from
of Sale Sold Sold Price Commissions Purchasers Registration
------- ---------- ---------- -------- ----------- ---------- ------------
Mar. 30, 2001 Series 1998-B 44,444 $444,440 $44,444 Accredited Rules 505, 506,
Convertible Investors Section 4(6)
Preferred Stock(1)
(1) The preferred shares are convertible into common stock at 82.5% of
the average closing bid price for the five trading days prior to
conversion.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None
(b) Reports on Form 8-K:
Form 8-K dated January 18, 2001 reporting under Item 5,
Other Events
Form 8-K dated March 5, 2001 reporting under Item 5,
Other Events
Form 8-K dated March 12, 2001 reporting under Item 9,
Regulation D Disclosure
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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.
RENTECH, INC.
Dated: May 4, 2001 /s/ Dennis L. Yakobson
-----------------------------------------
Dennis L. Yakobson, President
Dated: May 4, 2001 /s/ James P. Samuels
-----------------------------------------
James P. Samuels, Vice President-Finance
and Chief Financial Officer
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