U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 2000
-----------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 0-21279
THERMACELL TECHNOLOGIES, INC.
-----------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
FLORIDA 59-3223708
------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
440 Fentress Blvd., Daytona Beach, Florida 32114
------------------------------------------------
(Address of Principal Executive Offices)
(904) 253-6262
--------------
(Issuer's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such a
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 No X
--- ---
The number of shares outstanding of the Issuer's Common Stock, $.0001
Par Value, as of December 31, 2000 was 6,107,109.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
Index
Three Months Ended December 31, 2000 and 1999
(Unaudited)
Page
Part I - Financial Information ----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet -
December 31, 2000.............................................. 1
Consolidated Statements of Operations -
Three months ended December 31, 2000 and 1999.................. 2
Consolidated Statements of Changes in Stockholders' Deficit
Three months ended December 31, 2000........................... 3
Consolidated Statements of Cash Flows -
Three months ended December 31, 2000 and 1999.................. 4
Notes to Consolidated Financial Statements.......................5 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................9 - 12
Part II - Other Information
Item 1. Legal Proceedings................................................. 13
Signatures................................................................ 14
i
ThermaCell Technologies, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 2000 (Unaudited)
Assets
Current assets:
Cash $ 77,442
Cash held in trust account 6,500
Accounts receivable, trade, net of allowance for uncollectible accounts of $10,000 66,448
Prepaid expenses and other 76,600
------------
Total current assets 226,990
------------
Property and equipment, net of accumulated depreciation 677,014
------------
Other assets:
Deposits 30,555
Prepaid expenses 22,175
Other intangibles, net of accumulated amortization of $237,034 599,304
------------
Total other assets 652,034
------------
$ 1,556,038
============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 744,918
Accrued expenses 706,548
Accrued payroll 14,964
Current maturities of long-term debt:
Notes payable 150,441
Capital leases 280,815
------------
Total current liabilities 1,897,686
------------
Long-term liabilities:
Accrued expenses 212,924
Notes payable, net of current maturities 1,367,908
------------
Total long-term liabilities 1,580,832
------------
Stockholders' deficit:
Preferred stock, Series A; $.0001 par value; 5,000,000 shares authorized; 0
shares issued and outstanding
Preferred stock, Series B convertible; $1,000 stated value; 8.0% dividend;
1,500 shares authorized; 0 shares issued and outstanding
Common stock; $.0001 par value; 20,000,000 shares authorized; 6,147,109
shares issued; 6,107,109 shares outstanding 615
Additional paid-in capital 11,659,041
Common stock payable 181,706
Common stock receivable (72,500)
Accumulated deficit (13,636,342)
Treasury stock; 40,000 common shares (55,000)
------------
Total stockholders' deficit (1,922,480)
------------
$ 1,556,038
============
The accompanying notes are an integral part of the consolidated financial
statements.
1
ThermaCell Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended
December 31,
---------------------------------
2000 1999
---------------------------------
Sales $ 467,632 $ 504,880
Cost of sales 445,895 440,038
---------------------------------
Gross profit 21,737 64,842
Selling, general and administrative expenses 216,154 759,300
---------------------------------
Loss from operations (194,417) (694,458)
Other expense:
Interest expense (66,582) (81,254)
---------------------------------
Loss from continuing operations before income taxes (260,999) (775,712)
Income taxes 0 0
---------------------------------
Loss from continuing operations after income taxes (260,999) (775,712)
Discontinued operations:
Income (loss) from operations of discontinued division 3,770 (146,347)
---------------------------------
Net loss $ (257,229) $ (922,059)
=================================
Earnings per share:
Basic loss per common share from continuing operations $ (.043) $ (.33)
Basic income (loss) per share from discontinued operations .001 (.06)
---------------------------------
Net loss per share $ (.042) $ (.39)
=================================
Weighted average number of common shares outstanding 6,147,109 2,377,788
=================================
The accompanying notes are an integral part of the consolidated financial
statements.
2
ThermaCell Technologies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders' Deficit
Three Months Ended December 31, 2000 (Unaudited)
Series A Series B
Preferred Stock Preferred Stock Common Stock
------------------------ ---------------------- -----------------
Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------
Balance, September 30, 2000 0 $ 0 0 $ 0 6,147,109 $ 615
Common stock paid for, not
issued
Net loss for the period
-------------------------------------------------------------------------
Balance, December 31, 2000 0 $ 0 0 $ 0 6,147,109 $ 615
=========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Additional Common Common
Paid-In Stock Stock Accumulated Treasury
Capital Payable Receivable Deficit Stock Total
- -------------------------------------------------------------------------------------------------------
$ 11,659,041 $ 105,500 $ (72,500) $ (13,379,113) $ (55,000) $ (1,741,457)
76,206 76,206
(257,229) (257,229)
- -------------------------------------------------------------------------------------------------------
$ 11,659,041 $ 181,706 $ (72,500) $ (13,636,342) $ (55,000) $ (1,922,480)
=======================================================================================================
3
ThermaCell Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
December 31,
-----------------------------
2000 1999
-----------------------------
Operating activities
Net loss $ (257,229) $ (922,059)
-----------------------------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 45,869 100,400
Amortization of discount on notes payable 27,815
(Increase) decrease in:
Accounts receivable and notes receivable 59,228 330,479
Inventory (79,172)
Officer advance 6,900 122,543
Prepaid and other assets 19,150 (88,708)
Increase (decrease) in:
Accounts payable (69,237) (15,778)
Accrued expenses 47,165 9,194
-----------------------------
Total adjustments 136,890 378,958
-----------------------------
Net cash used by operating activities (120,339) (543,101)
-----------------------------
Investing activities
Purchase of property and equipment (42,467)
Decrease in trust account 21,000
-----------------------------
Net cash provided (used) by investing activities 21,000 (42,467)
-----------------------------
Financing activities
Proceeds from issuance of notes payable 94,482 261,686
Proceeds from sale of common stock 76,206
Principal payments on capital leases (6,786)
Proceeds from payments on stockholder loan 263,709
-----------------------------
Net cash provided by financing activities 163,902 525,395
-----------------------------
Net increase (decrease) in cash 64,563 (60,173)
Cash at beginning of period 12,879 60,173
-----------------------------
Cash at end of period $ 77,442 $ 0
=============================
The accompanying notes are an integral part of the consolidated financial
statements.
4
ThermaCell Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2000 and 1999 (Unaudited)
1. Consolidated Financial Statements
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three months ended December 31, 2000 and 1999, (b) the
financial position at December 31, 2000, and (c) cash flows for the three-month
periods ended December 31, 2000 and 1999, have been made.
The unaudited consolidated financial statements and notes are presented as
permitted by Form10-QSB. Accordingly, certain information and note disclosures
normally included in consolidated financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted. The accompanying consolidated financial statements and notes
of ThermaCell Technologies, Inc. and Subsidiaries (the "Company") should be read
in conjunction with the audited consolidated financial statements and notes of
the Company for the fiscal year ended September 30, 2000. The results of
operations for the three-month period ended December 31, 2000 are not
necessarily indicative of those to be expected for the entire year.
The accompanying consolidated financial statements include the accounts of the
ThermaCell Technologies, Inc. and its subsidiaries, Atlas Chemical Co. ("Atlas")
and T-Coast Pavers ("T-Coast"), after elimination of material, inter-company
accounts, and transactions.
Certain minor reclassifications have been made to the 1999 consolidated
financial statements to conform to the classifications used in 2000.
2. Going Concern
The accompanying consolidated financial statements have been prepared on a going
concern basis that contemplates the realization of assets and liabilities. In
the ordinary course of business, operating losses have been incurred each year
since inception, resulting in an accumulated deficit of approximately
$13,636,000 and negative working capital of approximately $1,671,000 as of
December 31, 2000, and total liabilities exceeding total assets by approximately
$1,922,000 as of December 31, 2000. In addition, the Company has certain default
judgments against them. Currently, management is soliciting additional equity
investors to fund these losses. However, these conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements of the Company do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
5
ThermaCell Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2000 and 1999 (Unaudited)
3. Segment Information
The Company operates in two primary business segments that are identified based
on products and services.
The Company, through its wholly owned subsidiary, T-Coast, installs brick pavers
in driveways and sidewalks.
The Company, through its wholly owned subsidiary, Atlas, manufactures and
distributes paints and coatings. The paint division was discontinued during the
year ended September 30, 2000.
The Company is preparing to manufacture and sell microscopic evacuated glass
spheres (microcells) in the current fiscal year. During the current year, the
Company incurred expenses in perfecting the manufacturing process. Corporate
general and administrative expenses are included in this division. This segment
is identified as ThermaCell Technologies.
The following table presents information about the results of operations of the
Company's business segments for the three months ended December 31, 2000:
Paint ThermaCell Paver
Division Technologies Division Consolidated
-------------------------------------------------------
Sales $467,632 $ 467,632
Less cost of sales 445,895 445,895
------------------------------------------------------
Gross profit 21,737 21,737
Selling, general and administrative $ 193,316 22,838 216,154
------------------------------------------------------
Loss from operations (193,316) (1,101) (194,417)
Other expenses:
Interest expense (64,025) (2,557) (66,582)
------------------------------------------------------
Loss from continuing operations
before income taxes (257,341) (3,658) (260,999)
Income from discontinued operations $ 3,770 3,770
-------------------------------------------------------
Net income (loss) $ 3,770 $(257,341) $ (3,658) $(257,229)
=======================================================
6
ThermaCell Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2000 and 1999 (Unaudited)
3. Segment Information (continued)
The following table presents information about the results of operations of the
Company's business segments for the three months ended December 31, 1999:
Paint ThermaCell Paver
Division Technologies Division Consolidated
---------------------------------------------------------------------
Sales $ 20,000 $ 484,880 $ 504,880
Less cost of sales 440,038 440,038
-------------------------------------------------------------
Gross profit 20,000 44,842 64,842
Selling, general and administrative
expenses 707,145 52,155 759,300
-------------------------------------------------------------
Loss from operations (687,145) (7,313) (694,458)
Interest expense (77,082) (4,172) (81,254)
-------------------------------------------------------------
Loss from continuing operations
before income taxes (764,227) (11,485) (775,712)
Income taxes 0 0 0
-------------------------------------------------------------
Loss from continuing operations
after income taxes (764,227) (11,485) (775,712)
Loss from discontinued operations $ (146,347) (146,347)
-------------------------------------------------------------
Net loss $ (146,347) $ (764,227) $(11,485) $(922,059)
=============================================================
4. Discontinued Operations
The Company adopted a plan to abandon or dispose of 100 percent of the assets of
its paint division during the year ended September 30, 2000. Accordingly, the
results of operations of the paint division for the periods presented are
reported as a component of discontinued operations, with the prior year
reclassified in the consolidated statements of operations. The estimated loss on
the disposal of discontinued operations of approximately $2,900,000 was recorded
during the year ended September 30, 2000 and represents the estimated loss on
the disposition of the segment assets and operations through the disposal date
of November 24, 2000. Income (loss) on discontinued operations represents the
activity for the period ended December 31, 1999 and the period beginning October
1, 2000 through the date of disposal.
7
ThermaCell Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2000 and 1999 (Unaudited)
4. Discontinued Operations (continued)
Summarized results of the paint division are as follows:
2000 1999
-----------------------------
Net sales $ 146,050 $ 697,314
=============================
Operating income (loss) $ 3,770 $ (146,347)
=============================
Income (loss) from discontinued operations $ 3,770 $ (146,347)
=============================
The remaining assets and liabilities of the paint division consist of the
following in the December 30, 2000 consolidated balance sheet:
Current assets $ 2,448
Current liabilities (505,157)
------------
Net liabilities assumed $ (502,709)
============
8
THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this Report on Form 10-QSB, that are not purely
historical, are forward-looking information and statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These include statements regarding the Company's
expectations, intentions, or strategies regarding future matters. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof. It is important to note that the
Company's actual results could differ materially from those projected in such
forward-looking statements contained in this Form 10-QSB. The forward-looking
statements contained here in are based on current expectations that involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments regarding, among other things, the Company's ability to secure
financing or investment for capital expenditures, future economic and
competitive market conditions, and future business decisions. All these matters
are difficult or impossible to predict accurately and many of which may be
beyond the control of the Company. Although the Company believes that the
assumptions underlying its forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this form 10-QSB will prove to be
accurate.
GENERAL
We were incorporated in Florida in August 1993, for the purpose of developing,
manufacturing, and marketing insulating materials and coatings using partially
evacuated glass microspheres (sometimes referred to as "shells"). The process of
evacuation removes air and other gases from the sphere and thereby creates a
vacuum. A shell is a very small glass sphere (generally the size of a grain of
salt) made by crushing glass particles. The insertion of shells into various
materials and products ("shell technology") can substantially improve the
thermal resistive characteristics of such materials and products resulting in
improved insulation ("R") values. The more a shell is evacuated, the higher the
thermal resistive characteristics of the product or material to which the shells
are added.
Our management believes that there is a broad range of applications for
introduction in products of evacuated or partially evacuated shells, the effect
of which is improved energy efficiency of such products because of the inherent
insulating characteristics provided by the glass spheres. Our strategy is to
commercially exploit the use of its shell technology to improve the "R" values
of a number of products. In fiscal three-month period 1995, we completed the
development of our first product line that consisted of paints and coatings
containing shells in order to reduce heat transmission and improve the
insulation values of the products. The products were marketed under the
ThermaCool(TM) label. There has been little sales activities to promote this
product since its introduction due to financial limitations.
On November 30, 1995, we acquired the assets of C.F. Darling Paint & Chemicals,
Inc., a paint manufacturing company, located in New Port Richey, Florida
("Darling Paint") for approximately $250,000. in cash. We also assumed the real
estate lease for the Darling Paint facility and acquired those assets to have a
facility to produce and develop paints and coatings for its ThermaCool(TM)
product line which incorporates its shell technology. Prior to this acquisition,
we purchased paints and coatings from independent paint and coating
manufacturers.
On March 19, 1997, we successfully completed a public offering for 1,375,000
Units, with each Unit consisting of one share of Common Stock, $.0001 par value,
and one Series A Redeemable Common Stock Purchase Warrant, at a price of $4.00
per Unit. In addition, the underwriter exercised its over-allotment purchase
option and purchased 206,250 additional Units at the initial per Unit public
offering price, less the underwriting discounts and commissions.
On July 28, 1997, we acquired all the outstanding common stock, representing
100% ownership of Atlas Chemical Co., a paint manufacturer and distributor,
located in Miami, Florida. The Company acquired this firm so that it would have
a larger manufacturing facility to both expand production of paints and coatings
and to obtain an established marketing and distribution channel which included
9
major accounts such as Ace Hardware, Lowes, and others. This facility was closed
on November 24, 2000 because of the lack of funds to maintain the operation. All
personnel were terminated on that date.
We acquired T-Coast Pavers/Sealco Systems, Inc. on December 1, 1998 for 300,000
shares of its common stock, then valued at $300,000 and an employment agreement
with its founder and key executive for the payment of an additional 300,000
shares over the three three-month period employment period. This company
provides paver installation and driveway sealant and coating services primarily
to contractors in Southeast Florida.
On December 1, 1998, we acquired American Paints, Inc., a Pompano Beach, Florida
paint manufacturer and distributor for 572,000 common shares. American Paints'
operations were consolidated into the Company's Atlas manufacturing facility to
reduce duplicate costs in April 2000.
Our management's long-term business strategy is to (i) expand the marketing and
distribution of ThermaCool(TM) paints and coatings (ii) develop and manufacture
the Company's own shells and (iii) expand the shell technology to other
products, such as drywall, gypsum board, home siding materials and space foam
insulation. Other markets in which the Company may utilize its technology
include refrigeration and cooling systems, automotive and transportation
applications and cups and thermoses. There is no assurance that the Company will
continue to be successful in penetrating the market with its ThermaCool(TM)
product line, developing commercially viable manufacturing techniques, or
addressing other markets.
The Company was a developmental stage enterprise during its initial three
three-month periods of operation for the fiscal three-month periods through
December 31, 1997. During this development stage period, management devoted the
majority of its efforts to research and development, financing, marketing and
activities related to starting up production of its proprietary technology.
These activities were funded by investments from stockholders and borrowings
from unrelated third parties. Since fiscal three-month period 1998, the Company
has been an operating stage enterprise based upon the several acquisitions that
were completed. With acquisitions, particularly Atlas Chemical, we evolved from
the development stage to an operating enterprise whose principal line of
business was the sale of paints and coatings within the paint industry. With the
closing of Atlas Chemical during November 2000, the Company is not presently
manufacturing any paint or coating products. Furthermore, the Company's
ThermaCool(TM) coating is not presently being manufactured.
We have not been able to generate sufficient sales during our operating history
to fund our ongoing operating expenses or our continuing product development
activities. The successful IPO completed in March 1997 allowed the Company to
repay its then outstanding indebtedness and provided working capital. In fiscal
three-month period 1994, the Company completed the development of its first
product line. The Company has sustained significant operating losses since its
inception resulting in an accumulated deficit of $13,636,342 at December 31,
2000.
Management's restructuring strategy of developing a commercially viable
manufacturing process for microshells and expansion into markets for its shell
technology may result in the Company incurring additional losses due to the
costs associated with these strategies. The Company expects to incur losses
until it is able to increase its sales, expand its product lines, and increase
its distribution capabilities to a sufficient revenue level to offset ongoing
operating and expansion costs.
Management's previous strategies of expanding the ThermaCool(TM) product line,
developing a commercially viable manufacturing process for shells, and expansion
into new markets for its shell technology would have resulted in substantial
additional losses due to the costs associated with these strategies.
10
RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 2000 COMPARED TO THE THREE-MONTH
PERIOD ENDED DECEMBER 31, 1999
Sales
Total sales for the three-month period ended December 31, 2000, were $467,632
compared to $504,880 for the same period ending in 1999, which represented a
decrease of $37,248, or 7%. This decrease was a result of our limited capital to
expand and properly fund our Sealco/T-Coast Pavers operation in order to obtain
higher margined contracts. Our Paver segment represented the majority of our
sales during the three-month periods ended December 31, 2000 and 1999.
Cost of Sales
Cost of sales for the three-month period ended December 31, 2000, decreased
$5,857 or 1% to $445,895 from $440,038 in the same period of 1999. Cost of sales
as a percentage of sales increased to 95% from 87% for three-month period 2000
over 1999. This increase is attributed to higher cost of sales of our
Sealco/T-Coast Pavers operation experienced during more recent three-month
period. Consequently, the gross profit margin decreased to 5% for three-month
period 2000 from 13% for the prior three-month period. Our Paver segment
represented the our cost of sales during the three-month periods ended December
31, 2000 and 1999.
Selling, General and Administrative Expenses
For the three-month period ended December 31, 2000, total selling, general, and
administrative expenses were $216,154 as compared to $759,300 for the
three-month period ended December 31, 1999, a decrease of $543,146 or 72%. This
decrease was the result of a reduction in overhead costs associated with our
Daytona facility during the three-month period ended December 31, 2000. In
addition, we incurred additional costs in October 1999 associated with the
relocation of our corporate offices to 440 Fentress Blvd., Daytona Beach,
Florida from our former location in Sarasota, Florida. Our ThermaCell
Technologies segment represented selling, general, and administrative expenses
of $193,316 and $707,145 during the three-month periods ended 2000 and 1999,
respectively. Our Paver segment represented selling, general, and administrative
expenses of $22,838 and $52,155 during the three-month periods ended 2000 and
1999, respectively
Interest Expense
Interest expense, net of interest income, decreased 18%, or $14,672 to $66,582
for the three-month period ended December 31, 2000 from $81,254 in the previous
three-month period ended December 31, 1999.
Loss on Discontinued Operations
During three-month period ended December 31, 2000, the company closed its Atlas
Chemicals operation in Miami, Florida because of the lack of working capital.
This closing resulted in a charge of $2,848,852 during the fiscal year ended
September 30, 2000. During the three-month period ended December 31, 2000, we
generated income, net of all expenses, from this discontinued division of
$3,770. There was a charge of $146,347 in the prior three-month period for the
closing of a specific operation within the paint division.
Net Loss
The net loss and the net loss per share was $257,229 and $0.042 respectively,
for the three-month period ended December 31, 2000, as compared to a net loss
and net loss per share of $922,059 and $0.39, respectively, for the three-month
period ending December 31, 1999. The decrease in loss is, in part, attributed to
the Company's lower level of selling, general and administrative costs over the
prior three-month period and the charge for discontinued operations in the
current three-month period. On a weighted average basis, there were 6,147,109
shares outstanding for three-month period ending December 31, 2000 as compared
to 2,377,788 shares outstanding for three-month period ended December 31, 1999.
Our ThermaCell Technologies segment represented a net loss of $257,341 and
$764,227 during the three-month periods ended 2000 and 1999, respectively. Our
Paver segment represented a net loss of $3,658 and $11,485 during the
three-month periods ended 2000 and 1999, respectively.
11
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded its capital requirements and its business
operations, including product development activities with funds provided by the
sale of its securities and from borrowings. During three-month period ended
December 31, 2000, the Company received $76,206 from an unaffiliated investor,
PAMG LLC. During this period, only limited other capital, as discussed below,
was received by the company to conduct its operations. Consequently, without the
availability of adequate funding the company was forced to close some of its
operations that included consolidating the American Paints business into the
Miami location of Atlas Chemical, and thereafter the Atlas operation itself.
During the fiscal year ended September 30, 2000, the Company arranged the
placement of an additional $315,000 from the holder of the 9% Redeemable
Convertible Promissory notes that provided financing in fiscal year ended
September 30, 1999. In that financing, the Company issued two warrants to
purchase 50,000 shares each of the Company's common stock at $2.00 per share.
This placement was discounted from face value with the Company receiving
approximately $900,000 after placement costs and expenses. Those funds were used
for the relocation of its corporate offices to Daytona, Florida, establishment
of its microsphere manufacturing facility at that location, and to supplement
its working capital.
During March 2001, conversion of $566,000, a portion of the debt held by the
Augustine Fund, who holds all remaining convertible debt was completed into
6,888,000 shares of common stock which represents more than 50% voting control
of the outstanding common stock of the company. With this conversion, the
principals of Augustine Capital are in a position to control the affairs of the
company. Augustine Capital has agreed, subject to certain additional due
diligence, to provide additional capital to the company. No significant funding
has occurred prior to this filing.
The Company continues to experience operating losses. The Company's net working
capital and stockholders' deficit are $1,670,696 and $1,922,480 respectively, at
December 31, 2000. The Company has not historically generated sufficient
revenues from operations to self-fund its capital requirements. Management is
focusing on raising additional capital to fund it present development.
Management expects that it will be able to arrange for additional financial
resources to properly execute its strategic plan although no assurances can be
given that it will be successful in such endeavors. If it is not successful in
this endeavor, then it will choices will be limited. The Company does not have
sufficient working capital to meet its immediate needs. If capital is not
immediately made available then the Company may be forced to seek protection
within the Federal bankruptcy courts.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company believes it will experience seasonal demand for its products and
services in the coating and paver business.
INFLATION
Inflation has not proven to be a factor in the Company's business since its
inception and is not expected to have a material impact on the Company's
business in the foreseeable future.
12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
The Company is subject to a number of lawsuits and claims arising out of the
conduct of its business. Management believes that the probable resolution of
such matters may materially affect the financial position, results of operations
or cash flows of the Company.
On October 4, 2000, a judgment was rendered by the United States District Court
Middle District of Florida in a trial regarding claims made by Mr. Russell
Haraburda and Eden Group, Inc. against John Pidorenko, the Company's former
president, and the Company for monies purportedly due for arranging financing
for the Company prior to its IPO in March of 1997. The judgment concluded that
no monies or other consideration was due Mr. Haraburda or Eden Group. The
Company's claims regarding two promissory notes of the Eden Group, Inc., Mr.
Haraburda's firm, that are unpaid were also denied. Subsequently, Mr. Russell
Haraburda and Eden Group, Inc. appealed the decision to the United State Court
of Appeals for the Eleventh Circuit. The company also appealed the decision
regarding the obligations of Eden Group, Inc. under the promissory notes. No
decision has been rendered as of the date of this filing.
The company is involved in several lawsuits for obligation outstanding with
vendors, leasing company, and certain professionals for services provided. There
are default judgments that have been granted because the company has not had the
financial resources to appropriately defend itself as representation was
declined or withdrawn. It is uncertain whether the company will in the future be
able to pay these obligations. If unable to do so, then the company will likely
seek to protect its remaining assets and seek to liquidate its business in
utilizing the provisions of the Federal Bankruptcy Courts. The ability to raise
additional capital is highly uncertain at this time. Should such funding not be
available, than the company will have no choice but to seek either
reorganization or liquidation utilizing the Bankruptcy statutes.
Item 5. Other Information
-----------------
Our common stock and warrants were listed and traded on NASDAQ under the symbols
VCLL and VCLLW, respectively, until February 23, 2000 at which time they were
de-listed for non-compliance. Subsequently, our securities were listed on the
NASD BB:OTC until February 23, 2001 at which time they were removed and
thereafter listed in the Pink Sheets.
On January 5, 1998, NASD Regulation, Inc. announced that a complaint was issued
on December 23, 1997 charging Monroe Parker Securities, Inc. and certain of its
officers with price manipulation and excessive markups in the trading of Steven
Madden, Ltd. and fraud in the sales of securities of United Leisure. Neither
firm is affiliated with the Company. The complaint asked for restitution to
defrauded investors and potential sanctions that may include a fine, suspension,
individual bar, or firm expulsion from the NASD. To date, there have been no
adverse effect upon the Company relating to allegations against Monroe Parker
Securities, Inc.
Monroe Parker Securities, Inc. was the Company's investment banker and
underwriter for the public offering that was concluded on March 19, 1997. The
underwriter was granted an appointee to the board of directors as a condition
for this undertaking. During December 1997, Monroe Parker ceased substantive
market making activities in the Company's common stock. On December 19, 1997,
Stephen Drescher, who was the Monroe Parker designee to the Company's board of
directors, resigned effective that date. Since then, the Company has not
suffered any further consequence of Monroe Parker ceasing operations.
Item 6. Exhibits and reports on Form 8k
-------------------------------
none
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant had
duly caused the report to be signed on its behalf by the undersigned thereunto
duly authorized.
ThermaCell Technologies, Inc.
Dated 6/18/2001 /s/ Gerald Couture
---------------------------
Gerald Couture
Vice President, Finance
14