ThermoEnergy looks to go public.
Innotek's Incarnation Needs Cash, Fries for IPOIn a move to reverse a negative bottom line, executives at ThermoEnergy Corp., formerly known as Innotek Corp., have put together a bid to go public.
On April 1 the company filed the necessary paperwork with the Securities and Exchange Commission to be considered for public trade on the Nasdaq Stock Exchange. Included in the documents are data that show ThermoEnergy has lost more than $5.7 million since 1992. ThermoEnergy markets and develops environmental technologies used primarily for cleaning wastewater.
ThermoEnergy lost $55?? in its 1996 fiscal year, which ended Sept. 30, and lost an additional $221,784 from the Sept. 30 to Dec. 31. The company has operated by borrowing money from shareholders.
The plan to go public is one that company executives have been talking about for years. The difference this time is ThermoEnergy has three demonstration projects in the hopper that should give the company what it needs to prove its systems work, says Dennis Cossey, ThermoEnergy's chairman and chief executive officer.
"This is something we knew we had to do," Cossey says of the move. "It had just been a matter of timing. So far it's simply been marketing and pilot [demonstration] plant studies. We expect to start selling commercial units shortly, but we have to get a sales force pulled in and design and in-house support services together. It requires money to do it."
Executive Officers, Key Employees and Directors Name Age Position Dennis C. Cossey 50 Chairman of the board, chief executive officer, secretary, director Primo L. Montesi 62 President, director Alexander 42 Executive vice president, G. Fassbender engineering and technology(*) Gary P. Barket 50 Senior vice president, general counsel(*) Gerald J. Franz 54 Director Thomas Randall Kemp 43 Director Louis J. Ortmann, DDS 60 Director J. Donald Phillips 63 Director * - Positions will be assumed upon completion of the public offering. ThermoEnergy Ownership Stockholder Number of Percentage of shares shares outstanding before after offering offering P.L. Montesi Little Rock 317,103 8.25 6.53 Dennis Cossey Little Rock 309,040 8.20 6.36 J. Donald Phillips North Little Rock 6,250 * * Louis J. Ortmann Frestus, Mo. 21,437 * * Gerald J. Franz Little Rock 9,375 * * Thomas Randall Kemp Little Rock 63 * * Alexander Fassbender 625 * * Battelle Pacific Northwest Laboratories Richland, Wash. Centerpoint Power 701,875 18.19 12.74 Corp. of Virginia Springfield, Va. Frank T. Rayner Panama City, Fla. 233,302 7.23 4.85 Robert Trump New York 492,413 13.79 9.31
The company had a private-placement stock offering in 1993. To date, more than 3 million shares have been sold to about 1,700 people, including 200 investors in Arkansas, Cossey says. The shares have been sold for as much as $1 a piece, he says.
"This is as close as we've ever been to trading publicly," he says. "We haven't even attempted it before."
Since the company was founded in 1988, most of the financial resources have been devoted to funding payments under license agreements, seeking sites for demonstration facilities and acquiring necessary capital to continue efforts, according to information provided by ThermoEnergy to the SEC.
The company entered a worldwide [TABULAR DATA OMITTED] licensing agreement with Battelle Memorial Institute for the technologies used. Battelle is a Columbus, Ohio-based research and development organization that developed photocopier technology used by Xerox Corp.
Emerging Technologies
ThermoEnergy's technologies include two chemical processes known as the Sludge-to-Oil Reactor System (STORS) and Nitrogen Removal (NitRem). A third technology, the Dual-Shell Reactor (DSR), is the equipment in which the systems are conducted. The technologies are designed to eliminate organic and nitrogenous contaminants from municipal and industrial wastewater.
Cossey says two nitrogen-removal demonstration systems are in place: one in New York City and another to be delivered to the army ammunition plant in Radford, Va.
Company executives recently have received approval for a STORS in San Bernardino County, Calif.
All three projects require no capital contributions from ThermoEnergy. However, the only money received by the company for the projects is to pay for administrative expenses.
Cossey says he hopes to use the three demonstration projects to sell the processes to municipal, industrial, U.S. Defense Department and Energy Department markets.
Under ThermoEnergy's plan to go public, most of the money raised would be used for operational expenses during the next 18 months, according to the company's filing. Some of the money raised would be used to establish joint ventures, conduct research and development projects, hire new staff and pay debts.
If approved for public trading, 1.6 million shares of Series A Common Stock will be sold as well as 1.6 million 10-cent warrants, which could be converted to common stock by the shareholders within 13 months of ThermoEnergy's going public.
The company has proposed the initial public offering price of $7 per share.
According to Cossey, National Securities in Chicago is underwriting the initial stock offering. An attorney representing National Securities confirmed the security company's involvement.
No analyst could be found who knew anything about ThermoEnergy, and Cossey, who did not provide the names of any analysts, says he and other executives "didn't really work with any analysts" to gain insight on a move to go public.
Additional Staff Required
ThermoEnergy, which employs four people, expects to add 12 staffers if its IPO is approved. Of the new additions, two will be executives or senior management.
Cossey currently works with Primo L. Montesi, president, chief operating officer and director since 1988; Gary Barket, general counsel; and a clerical employee.
Once public, ThermoEnergy would hire Alexander G. Fassbender as executive vice president for engineering and technologies. Fassbender has been manager of technology commercialization at Battelle Pacific Northwest Laboratories, the research facility where the wastewater cleaning technologies were developed.
Recycling in Little Rock These figures detail the progress of Little Rock's city curbside recycling program since its inception in May 1996. Waste Management of Arkansas, which runs the program, did not release figures for its total expenses, but a spokesman for the company said the city recycling program is operating at a loss. COLLECTIONS Material Tons Paper Fiber 4,536.07 tons Co-mingled 1,230.18 tons Total 5,766.25 tons SALES Amount Material Marketed Corrugated cardboard $8,801 Newspaper 141,581 Glass 4,689 Mixed-color plastic bottles 4,632 Steel food cans 6,029 Milk jugs 25,419 Aluminum cans 80,551 Total $271,702 Annual fees from city of Little Rock: $1.17 million
The company will hire Barket as senior vice president and general counsel. Barket has been both a partner with the Davidson Law Firm of Little Rock and outside counsel to ThermoEnergy since 1990. Barket serves on the board of directors of the Little Rock Port Authority.
According to the filings with the SEC, upon completion of the IPO, ThermoEnergy will enter into a five-year employment agreement with Barker. His employment with the Davidson Law Firm will terminate, the form says.
Board members for the company include Cossey; Montesi; J. Donald Phillips, a Little Rock insurance executive; Louis J. Ortmann, a St. Louis area dentist; Thomas Randall Kemp, a Russellville CPA; Rodman D. Grimm, president of Thicksten Grimm Burgum Inc, a lobbying and governmental consulting firm based in Washington, D.C.; and Gerald J. Franz, president of McKeown & Franz Inc., an environmental consulting firm in New York City.
If approved for public trading, ThermoEnergy expects to continue to suffer significant operating losses through 1997 and may continue to have losses, the filings report.
Whether the company makes money is dependent on two key factors, it says: its ability to enter into working arrangements or sub-licenses with third parties, or the operation and financial success of any projects that the company and its potential working partners may be awarded.
Other factors that could affect ThermoEnergy's future include competition, cost and availability of raw materials, changes in governmental initiatives and requirements changes in regulatory and costs associated with equipment repair and maintenance, the company says.
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| Author: | Lee, Simon |
|---|---|
| Publication: | Arkansas Business |
| Date: | Apr 14, 1997 |
| Words: | 1334 |
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