1Q Financial from SEDAR
Consolidated Statement of Changes in Financial Position
(unaudited) for the three months ended July 31, 1999 and 1998 6
Notes to Financial Statements 7-9
Item 2. Management?s Discussion and Analysis of Financial
condition and Results of Operations 10-17
PART II ? OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security 18
Item 5. Other Information 18
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THERMO TECH„ „ TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEET
(Canadian $)
July 31
1999
(unaudited)
April 30
1999
(unaudited)
ASSETS
CURRENT ASSETS
Cash in bank $ 667,365 $ 1,058,743
Accounts Receivable ? Trade 1,146,202 1,320,954
Account s Receivable ? Other 265,948 611,407
Prepaid Expenses 163,115 192,615
Total Current Assets 2,242,630 3,183,719
OTHER ASSETS
Due from Pacific Ocean Resources Corporation 94,758 117,880
Land 2,111,646 2,111,646
Plant and Equipment 63,925,447 61,117,622
Pre-Construction Costs 886,199 881,559
Engineering Design Package 4,735,641 4,783,779
Licenses 2,973,878 3,048,878
Due from Co-venturer 1,200,000 1,200,000
Deferred Pre-Operating Cost 1,464,684 1,161,344
Total Other Assets 77,392,253 74,422,708
TOTAL ASSETS $79,634,883 $77,606,427
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THERMO TECH„ „ TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEET
(Canadian $)
July 31
1999
(unaudited)
April 30
1999
(unaudited)
LIABILITIES
CURRENT
Accounts payable $14,349,645 $16,039,121
Current portion of obligation
Under Capital leases 17,152 17,792
Current portion of long term debt 1,865,790 1,880,620
Loan payable 6,405,308 6,405,308
Total Current Liabilities 22,637,895 24,342,841
LONG TERM DEBT
Lease payable 23,593 24,730
Long term debt 2,219,041 2,427,260
Total Long term debt 2,242,634 2,451,990
SHAREHOLDERS? EQUITY
Preference Shares 6,775,141 7,434,263
Share Capital 97,694,541 90,051,271
Retained Earnings (49,715,328) (46,673,938)
Total Shareholders? Equity 54,754,354 50,811,596
TOTAL LIABILITIES $79,634,883 $77,606,427
APPROVED ON BEHALF OF THE BOARD
/s/ Rene J. Branconnier Director
/s/ Daniel B. Cumming Director
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THERMO TECH„ „ TECHNOLOGIES INC.
Consolidated Statements of Loss and Deficit
FOR THREE MONTHS ENDED July 31, 1999 and 1998
(UNAUDITED)
(Canadian $)
Three Months ended
July 31
1999 1998
Revenue $1,355,994 $910,612
Cost of Operations, Thermo Master„ Plants 570,695 507,654
Income Before Transfer Station Costs 785,299 402,958
Cost of Operations, Transfer Station Costs (660,796) (234,711)
Profit before Expenses 124,503 168,247
OPERATING EXPENSES
Selling, General & Administrative 1,088,947 1,262,447
Professional Fees 349,484 243,945
Engineering Deficiencies 34,714 201,458
Research & Development 509,334 137,467
1,982,479 1,845,317
Loss from Operations (1,857,976) (1,677,070)
OTHER EXPENSE (INCOME)
Other Expense (income) 9,154 36,115
Loss on disposal of assets - 1,096
Depreciation & Amortization 1,174,260 858,895
Total Other Expense 1,183,414 896,106
NET LOSS (3,041,390) (2,573,176)
DEFICIT BEGINNING PERIOD (46,673,938) (20,485,710)
DEFICIT END OF PERIOD $(49,715,328) $(23,058,886)
Weighted average common shares
outstanding 252,956,313 73,691,623
Loss Per Common Share $ (0.01) $(0.03)
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THERMO TECH„ „ TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THREE MONTHS ENDED July 31, 1999 and 1998 (UNAUDITED)
(Canadian $)
Three Months ended July 31
1999 1998
OPERATIONS
Net Loss $(3,041,390) $(2,573,176)
Amortization & Dep. Not affecting cash 1,174,260 858,895
(1,867,130) (1,714,281)
Change in non-cash operating working
capital items (1,139,765) 702,909
(3,006,895) (1,011,372)
FINANCING
Share Capital 7,643,270 7,891,984
Preference Shares (659,122) -Convertible
Debentures - 3,224,850
Capital Leases (1,777) 14,789
Long Term Debt (223,049) 3,861,584
Due to Officers and Directors - (736,247)
Loan Payable - 2,000,000
6,759,322 16,256,960
INVESTING
Deferred Pre-Operating Cost (303,340) -Acquisition
of Plant, Equipment
and Construction Cost (3,803,698) (12,519,401)
Proceeds (Acquisition) of Investments - (445,041)
Engineering and Design (59,889) -Repayment
from Pacific Ocean 23,122 20,426
Licenses - (2,000,000)
(4,143,805) (14,944,016)
(Decrease) Increase in Cash (391,378) 301,571
Cash, Beginning of Period 1,058,743 3,267,954
Cash, End of Period $667,365 $3,569,525
- 7 -
THERMO TECH„ „ TECHNOLOGIES INC.
NOTES TO CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
July 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in Canada for Interim Information
and with the Instructions to Form 10Q and Rule 10-1 of the United States Securities Act of 1933
or Regulation S-X. Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals and certain adjustments
to reserves and allowances considered necessary for a fair presentation have been included.
Operating results for the 3 month period ended July 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending April 30, 2000.
2. DIFFERENCE BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN
CANADA AND THOSE IN THE UNITED STATES
These consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in Canada (?Canadian GAAP?) which differ in certain significant
respects with those in the United States (?US GAAP?). The significant differences relate
principally to the following items and the adjustments necessary to restate net loss and
shareholders? equity in accordance with US GAAP are shown in the tables below.
(a) The company has advanced funds to Pacific Ocean Resources Corporation who in turn
performed research and development activities on behalf of the Company. The terms of
the agreement are such that this advance is to be repaid by Pacific Ocean Resources as
they receive royalties from the Company. As a result the advance has been set up as a
receivable. Under US GAAP such an advance would be considered a research
expenditure and would be expensed in the period the advance was made.
(b) Under US GAAP, the Company would expense pre-operating costs in the year incurred.
(c) Under US GAAP, the Company would have been required to reclassify the convertible
debentures as Mezzanine Equity.
(d) Under US GAAP, the Company wold be required to recognize interest expense on
convertible debt with below market conversion privileges at the date the debt was issued.
As a result of convertible debt issued in 1996, 1997 and 1998 with below market
conversion privileges, interest expense is recognized in these years. There is no such
requirement in accordance with Canadian GAAP.
- 8 -
July 31, 1999 July 31, 1998
Net loss under Canadian GAAP $(3,041,390) $(2,573,176)
Expense ? research (a) 23,122 20,426
Expense ? operating costs (b) (303,340) -Interest
expense (d) - (675,000)
Net Loss under US GAAP $(3,321,608) $(3,227,750)
Loss Per Share under US GAAP $(0.01) $(0.04)
Shareholders? Equity under
Canadian GAAP
$54,754,354 $40,872,879
Expense research (a) (94,758) (189,035)
Expense pre-operating costs (b) (303,340) -Convertible
debentures (c) - (3,839,750)
Shareholders? Equity
under US GAAP
$54,356,256 $36,844,094
3. SHARE CAPITAL
The Company has authorized share capital of an unlimited number of common shares without
par value and an unlimited number of Class A and Class B Preference shares without par value.
During the period, the common shares and Series One Convertible Class A Preference shares
issued are as follows:
COMMON SHARES
NUMBER AMOUNT
Balance at April 30, 1999 221,077,035 $90,051,271
Options and Warrants 42,705,000 $6,984,150
Preference Shares 5,448,543 659,120
Balance at July 31, 1999 269,230,578 $97,694,541
PREFERENCE SHARES
NUMBER AMOUNT
Balance at April 30, 1999 5,335 $5,335,000
Class A (473) (473,000)
Class B - -Balance
at July 31, 1999 4,862 $4,862,000
4. RELATED PARTIES
Included in Accounts Payable is $1,314,439 (April 30, 1999 - $2,144,150) due to companies
related to Officers and Directors.
5. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to comply with the current period?s
presentation.
- 10 -
ITEM 2.
MANAGEMENT?S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Introduction
The following discussion and analysis should be read in conjunction with the consolidated
(unaudited) financial statements of the Company, which have been prepared in accordance with
generally accepted accounting principles (?GAAP?) in Canada. A summary of material
adjustments to conform to U.S. GAAP are set out in Note 2 to the consolidated (unaudited)
financial statements.
Overview
Thermo Tech? is listed and trades on the OTC Bulletin Board under the symbol ?TTRIF?. The
Company was incorporated in 1983 pursuant to the laws of the Province of British Columbia,
Canada and has traded in the public market since 1987. The Company has continued into the
Canadian federal jurisdiction under the Canada Business Corporations Act, effective December
2, 1997. The continuation is reflective of the Company?s expansion and evolution as a Company
with national and international business interests. The Company is in the business of developing
and commercially exploiting a patented aerobic thermophilic microbial fermentation process
which efficiently and effectively converts organic waste materials to value added products
including animal feeds and fertilizers. The Company has trademarked the terms Thermo
Tech? and Thermo Master? as they are applied to its products, process and plants.
The first quarter of Fiscal Year 2000 was highlighted by the official opening of the Richmond Bio
Conversion Inc. plant near Vancouver and the simultaneous unveiling of the Mark III process.
This process offers significant economic benefits compared with the earlier Mark II process, as it
triples the capacity of waste fermentation with lower operating costs, increases the end product
production and plant revenue and expands the range of raw waste products that can be
processed at the plant.
The Mark III process provides three main advantages over the Mark II process. First, more raw
waste material is processed by the fermenters, which are the heart of the Thermo Master?
process, without an increase in the fermentation equipment. Mechanical dewatering equipment
in the waste receiving area concentrates the incoming raw waste (normally received at 0 - 15%
solids) to high-solids slurry at up to 45% solids before fermentation. This results in the
elimination of over two-thirds of the water that was previously processed through the
fermentation equipment. Now, more raw waste can be fermented with the same equipment.
Second, the ?densification? of the incoming wastes allows the plant to utilize wastes with a much
lower solids content as a feed material. This increases the market (supply) of wastes and the
capacity of the plant that can be built in any city or region for the Mark III plant. Wastes such as
soft drinks, beer and other low solids materials can now be processed economically. Third, the
Mark III process produces more end product form the raw waste supplied to the plant at a higher
value per ton that the previous processes. This increases the total plant revenue and reduces
the reliance on tipping fees for plant economics. End product revenue is now 55% of the total
plant revenue compared with tipping fees at 45%.
In the new Mark III process, dry materials such as corn or oats are blended with the concentrated
fermenter product before drying. This mixture has a solid content of over 60%, which is
- 11 -
sufficient to feed directly to the dryer without further dewatering. When the Mark III process is
making fertilizer, the fermenter product is blended with feather meal or another high nitrogen
organic material. Otherwise, the process and benefits are similar.
On June 2, 1999 the Company was notified by the British Columbia Securities Commission (the
?Commission?) that it was conducting a review of the Company?s continuous disclosure
reporting. The British Columbia Securities Commission announced in its letter of June 2, 1999
that it would be reviewing the following information disclosed by the Company over the periods
noted:
ú The company?s internet website;
ú Audited financial statements for the years ended April 30, 1998 and 1997;
ú Interim financial statements for the periods ended July 31, 1997 and 1998,
October 31, 1997 and 1998, and January 31, 1998 and 1999;
ú Quarterly reports in SEC Form 10Q and 20F for the periods referred to above;
ú News releases from March 24, 1997 to April 22, 1999
ú Material change reports from August 25, 1997 to April 22, 1999;
ú Insider reports;
ú Form 20?s (disclosure of material events);
ú The information circulars dated as of September 22, 1997 and September 25,
1998;
ú Trading history for the period November 26,1998 to November 23, 1998;
ú AIF dated September 25, 1998; and
ú Dissident Proxy Circular dated October 19, 1998.
As a consequence of this review, the Commission determined that it was not satisfied with the
Company?s continuous disclosure in respect to the Company?s acquisition of a 50% interest in
Ontario Thermo Tech?. On July 14, 1999 the British Columbia Securities Commission issued a
Cease Trade Order under Section 164 of the Securities Act R.S.B.C. 1996, c.418. The Order
concluded as follows:
?AND WHEREAS it appears to staff that, during the period of February 11, 1998 through
to the date of this order, the issuer failed to issue and file a press release, and failed to
file a material change report, that were sufficiently complete to enable a reader to
appreciate the significance of the Acquisition without references to other material,
contrary to section 85 of the Securities Act, F.S.B.C. 1996, c.418 (the ?Act?), including the
following disclosure deficiencies concerning the Acquisition:
(a) the issuer has failed to disclose the nature and substance of the transactions and
underlying agreements related to the Baha Agreement and the Acquisition,
including certain matters referred to in Paragraph 2 above; and
(b) the Issuer has failed to disclose the reasons for the Issuer incurring an
indebtedness of $11,545,464 for an acquisition valued at $5,968,992;
(collectively, the ?Required Disclosure?);
NOW THEREFORE it is ordered under section 164 of the Act that all persons cease
trading in the securities of the Issuer until the Issuer makes the Required Disclosure.
- 12 -
DATED at Vancouver, British Columbia, on July 14, 1999.?
On July 15, 1999, the Company issued a news release in regard to the Cease Trade Order,
which stated:
?On July 14, 1999 the British Columbia Securities Commission issued a Cease Trade
Order against Thermo Tech„ Technologies Inc. pursuant to Section 164 of the
Securities Act (British Columbia). Under the terms of the Order all persons (broadly
defined to include corporate entities, partnerships and trusts) in the Province of British
Columbia, Canada must not trade in securities of Thermo Tech„ pending the public
disclosure by Thermo Tech„ of certain information required by the British Columbia
Securities Commission regarding Thermo Tech„?s acquisition in March 1998 of two
Ontario transfer stations and waste management facilities and various associated
transactions.
Thermo Tech„ is using its best efforts to prepare in a timely fashion all necessary public
disclosure documents that will be satisfactory to the British Columbia Securities
Commission and will result in the lifting of the Cease Trade Order.?
The Cease Trade Order continued and on August 23, 1999 the Company made the following
news release regarding the Order and its impact on the Company:
??THERMO TECH„ TECHNOLOGIES INC. (the ?Company?) announces today that it is
continuing to use its best efforts to prepare all necessary public disclosure documents
required by the British Columbia Securities Commission to lift the cease trade order (the
?Cease Trading Order?) that was imposed on the Company on July 14, 1999 in the
shortest possible time.
The Cease Trading Order is now having a material adverse impact upon the Company
and its operations. Under the terms of the Cease Trading Order, all persons (broadly
defined to include corporate entities, partnerships and trusts) in the Province of British
Columbia, Canada ? including the Company ? must not trade in securities of the
Company pending the disclosure by the Company of certain information required by the
British Columbia Securities Commission regarding Thermo Tech„?s acquisition in
March of 1998 of two Ontario transfer stations and waste management facilities and
various associated transactions. Accordingly the Company is unable to conduct equity
financings or issue common shares upon the exercise of outstanding options and
warrants or upon the conversion of outstanding Series One convertible Class A
preference shares (the ?Convertible Preference Shares?). Furthermore, under the terms
of the $4,172,000 outstanding Convertible Preference Shares, the Company must pay up
to a US$200 penalty per day for each US$10,000 of Convertible Preferences Shares that
has been converted and for which common shares have not been issued. To date
US$645,000 of the outstanding Convertible Preference Shares have been converted for
which the Company has not been able to issue common shares as a result of the Cease
Trading Order. As a result the Company is now incurring daily penalties of $US13,800 to
holder of Convertible Preference Shares. If the holders of all the outstanding Convertible
Preference Shares exercise their conversion rights, the maximum daily penalty the
Company would face would be US$97,240 per day.
- 13 -
To date the Company has relied primarily on two courses of capital for operations: cash
flow from operating plants and equity financing. In particular, the Company has relied on
equity financing to meet the construction commitments for existing plans with the hope of
bringing itself to a positive cash flow position based on revenue from those plants. The
Cease Trading Order has left the Company unable to rely on equity financing to provide
the resources required to meet the Company?s commitments to suppliers and
contractors. With the severe fire at Richmond Bio Conversion plant on July 17, 1999, the
Company?s cash flow was severely reduced. Since the fire, the Company has
significantly downsized its operations to ease the Company?s cash flow difficulties.
However, if the Cease Trading Order is not lifted by the British Columbia Securities
Commission immediately the Company will soon reach a state where a more drastic
curtailing of operations and restructuring of the Company?s affairs will be necessary.
With the agreement of the Board of Directors, Mr. Ren‚ Branconnier, President and CEO
has provided $200,000 to the Company by way of an unsecured shareholder loan,
payable on demand and bearing interest of 10% per annum. The loan was approved by
the Board of Directors on August 19, 1999 as a prudent short term measure to address
the Company?s cash flow concerns. Mr. Branconnier abstained from voting on approval
of this shareholder loans.?
Summary of Plant Operations and Development of New Plants
Hamilton Bio Conversion Inc. Hamilton has been the Company?s leading center of operations
over a significant period of time. The Company employed Hamilton to review and correct early
engineering deficiencies, to evaluate design changes prior to adopting the new Mark II
engineering designs and more recently to develop and prove out the Mark III protocols.
Throughout, Hamilton has performed well.
Richmond Bio Conversion Inc. The newest Thermo Master„ facility was officially opened on
May 21, 1999. More than 250 shareholders, local and provincial officials and well-wishers
participated as the Minister of the Environment, Lands and Parks for British Columbia presided
at the ribbon cutting ceremony. The Company took this opportunity to announce the Mark III
processing protocol and its significance to business operations. For Richmond, the Mark III
system effectively triples receiving/processing capacity. The Mark III system is described in
detail elsewhere in this report. At the time of the opening, Richmond was well on its way to
ramping operations up to its operating capacity. The minor modifications required to fully realize
the advantages of the Mark III system were in progress.
On Saturday July 17, 1999 a serious fire occurred at the Richmond Bio Conversion plant but no
personnel were injured. The extent and cause of the fire at the Richmond Bio Conversion plant
is currently being determined by the Company?s insurer Royal & Sunalliance. Dick Engineering,
Stothert Engineering Ltd., and Milverton Millwrights Limited are working with the Company to
determine the extent and cost of the repairs and work has commenced to return the plant to full
operation. As information becomes available further announcements will be made.
Patents. The Company protects its technology through use of patents, trademarks and other
methods most suitable to the circumstance. A patent which was granted by the United States
Patent and Trademark Office on September 22, 1998 was also submitted in Canada for and to
the Patent Cooperation Treaty (?PCT?) Office. The Company has now taken steps to specifically
apply for protection under the PCT in Australia, Austria, Belgium, Denmark, Finland, Germany,
- 14 -
Greece, Italy, the Netherlands, New Zealand, Portugal, Spain, Sweden, Switzerland and the
United Kingdom. The Company is optimistic that most, if not all, of the above patent applications
will eventually prove successful, although there can be no assurance such patents will be
granted, and the Company has no control over the process and cannot predict the timing of such
grants, if any.
Results of Operations
Comparison of Three Months Ended July 31, 1999 and 1998.
Revenues. The Company?s $1,355,994 in revenue for the three months ended July 31, 1999
was an increase of $445,382 compared to revenue of $910,612 for the three months ended July
31, 1998. Higher overall revenues for the three months ended July 31, 1999 were primarily
attributable to increased processing capacity in Thermo Master„ plants and advances in
Company technology which have increased revenue potential on every ton of organic waste
processed. During commissioning and start-up of the Richmond Bio Conversion plant, all
revenue and expenses were capitalized.
Plant Operating Costs. The Company experienced plant operating costs of $570,695 for the
three months ended July 31, 1999 compared to $507,654 for the three months ended July 31,
1998. Transfer station operating costs increased to $660,796 for the three months ended July
31, 1999 from $234,711 for the three months ended July 31, 1998. This increase was primarily
due to increased waste processing activities at the Company?s Thermo Master„ plants.
Profit Before Expenses. The profit before transfer station expenses for the three months ended
July 31, 1999 was $785,299 compared to $402,958 for the corresponding period in 1998. After all
plant and transfer station operating costs, operations showed a profit of $124,503 for the three
month period ended July 31, 1999, as compared to $168,427 for the three month period ended
July 31, 1998.
Operating Expenses. Total operating expenses for the Company?s Thermo Master„ plants for
the three months ended July 31, 1999, increased to $1,982,479 from $1,845,317 during the
corresponding period in 1998. This $137,162 increase was primarily due to increased research
and development expenditures and professional costs incurred as a result of the British
Columbia Securities Commission?s review of the Company?s continuous disclosure reporting.
Engineering Deficiency Expenses. Engineering deficiency expenses during the three months
ended July 31, 1999 decreased to $34,714 from $201,458 during the corresponding period in
1998. This decrease primarily reflects the fact that plant designs have been completed, as have
most modifications and upgrades to existing facilities.
Selling, General and Administrative Expense. Selling, general and administrative expenses
decreased to $1,088,947 for the three months ended July 31, 1999 from $1,262,447 in the
corresponding period of 1998. This decrease was primarily attributable to the implementation of
cost cutting measures designed to minimize operational expenses over the past year.
Research and Development Costs. Research and development costs increased to $509,334
in the three months ended July 31, 1999 from $137,467 in the corresponding period in 1998. This
$371,867 increase was primarily due to research and development expenditures incurred in
- 15 -
connection with measures to enhance processing efficiency at the Company?s Thermo Master„
plants.
Other Expenses. Other expenses increased from $1,183,414 in the three months ended July
31, 1999 from $896,106 during the three months ended July 31, 1998. Other expenses were
predominantly comprised of depreciation and amortization expense, which increased to
$1,174,260 in the three months ended July 31, 1999 from $858,895 in the corresponding period
in 1998. This increase was primarily due to asset purchases.
Net Earnings (loss) for period. Net loss for the period ended July 31, 1999 was $3,041,390, or
$.01 per common share, as compared to $2,573,176, or $.03 per common share, at July 31,
1998. Losses were higher in the three month period ended July 31, 1999 as a result of
increased research and development expenditures and the professional costs incurred as a
result of the British Columbia Securities Commission review of the Company?s continuous
disclosure reporting.
Liquidity and Capital Resources
Cash amounted to $667,365 at July 31, 1999 as compared to $1,058,743 at April 30, 1999. This
decrease of $391,378 was mainly due to investments in Thermo Master? Mark III Plants of
$3,803,698, deferred pre-operating costs in Richmond Bio Conversion Inc. of $303,340 and the
current period net loss of $3,041,390. Cash requirements also included repayment of long term
debt of $223,049. To fund these cash requirements the Company raised $6,984,148 in equity
financing during the period.
The plant development program and asset growth has been funded to date by equity financing
This has been accomplished over the years through a combination of private placements of
common shares, issuance of convertible debentures and the issuance of preference shares.
The Company intends to enter into debt financing arrangements for future plant development. It
is currently in negotiations regarding financing of multiple plant construction programs.
Due to the July 14, 1999 Cease Trade Order of the British Columbia Securities Commission, the
Company is unable to undertake any equity financing or issue shares upon the exercise of
outstanding options and warrants or upon the conversion of outstanding Series One convertible
Class A Preference Shares.
Risks and Uncertainties
The Company is engaged in the waste management and waste processing industry. Its
operations are subject to a number of risks and uncertainties, which include:
Limited Operating History; Prior Losses. Although the Company was incorporated in 1983, it
has only a limited history of operating the Thermo Master? plants and the Thermo Master?
Mark III plants. The Company has completed and operated a total of four plants. The first plant
commenced operations in 1994, the second and third commenced operation in June, 1995 and
the fourth commenced operation in November, 1998. Accordingly the Company is subject to the
risks associated with the absence of a lengthy operating history, including limited liquidity and
financial resources.
- 16 -
The Company has operated at a net loss in each year since its formation. Risks associated with
losses have been associated with the Company?s development of the Thermo Master? plants
and the Thermo Master? Mark III plants and continuing financing requirements.
Fluctuations in Operating Results. The Company has experienced and may continue to
experience significant period-to-period fluctuations in operating results as a result of a number of
factors, including the volume of waste being processed at the Company?s operating plants, the
timing of the construction and subsequent operation of planned additional Thermo Master? Mark
III plants and the timing of sales. Additionally, the Company?s expense levels are, to a large
extent, fixed. The Company may be unable to adjust spending in a timely manner to
compensate for any revenue shortfall in a particular quarter and according any significant
shortfall in a particular quarter and accordingly any significant shortfall in revenue from the then
operating Thermo Master? Mark III plants could have a material adverse effect on the
Company?s business, operating results and financial condition.
Competition. The business environment in which the Company operates is highly competitive
and subject to rapid change. While the Company believes no products technologically similar to
the Thermo Master? Mark III process or the Thermo Master? III plants exist, the Company
experiences competition from companies involved in other type |
