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 December 31, 2002 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File Number 0-19260
RENTECH, INC.
(Exact name of registrant in its charter)
| Colorado |
84-0957421 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1331 17th Street, Suite 720
Denver, Colorado 80202
(Address of principal executive offices)
(303) 298-8008
(Issuer’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.
The number of shares outstanding of each of the issuer’s classes of common equity, as of February 12, 2003: common stock—72,192,667.
RENTECH, INC.
Form 10-Q Quarterly Report—First Quarter of Fiscal 2003
| Part I—Financial Information (Unaudited) |
||||
| Item 1. |
Consolidated Financial Statements: |
|||
| Consolidated Balance Sheets as of December 31, 2002 and September 30, 2002 (Audited) |
4 | |||
| Consolidated Statements of Operations for the three months ended December 31, 2002 and 2001 |
6 | |||
| Consolidated Statement of Stockholders’ Equity for the three months ended December 31, 2002 |
7 | |||
| Consolidated Statements of Cash Flows for the three months ended December 31, 2002 and 2001 |
8 | |||
| 10 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 | ||
| Item 3. |
45 | |||
| Item 4. |
45 | |||
| Part II—Other Information |
||||
| Item 1. |
45 | |||
| Item 2. |
45 | |||
| Item 3. |
46 | |||
| Item 4. |
46 | |||
| Item 5. |
46 | |||
| Item 6. |
46 | |||
| (a) Exhibits |
||||
| (b) Form 8-K |
||||
| 50 | ||||
| 51 | ||||
2
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. (OKON); the market demand and anticipated revenues from the mud logging services provided by Petroleum Mud Logging, Inc. (PML); the ability of REN Corporation (REN) to complete its sales orders; 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.
3
RENTECH, INC.
| December 31, 2002 (Unaudited) |
September 30, 2002 | |||||
| Assets |
||||||
| Current assets |
||||||
| Cash |
$ |
155,768 |
$ |
1,032,920 | ||
| Restricted cash |
|
500,000 |
|
500,000 | ||
| Accounts receivable, net of $17,500 and $12,000 allowance for doubtful accounts |
|
658,235 |
|
1,436,886 | ||
| Costs and estimated earnings in excess of billings (Note 9) |
|
619,329 |
|
788,727 | ||
| Stock subscription receivable |
|
— |
|
76,186 | ||
| Other receivables |
|
31,707 |
|
65,494 | ||
| Receivable from related party |
|
17,462 |
|
17,966 | ||
| Inventories (Note 2) |
|
796,026 |
|
757,393 | ||
| Prepaid expenses and other current assets |
|
618,676 |
|
253,646 | ||
| Total current assets |
|
3,397,203 |
|
4,929,218 | ||
| Property and equipment, net of accumulated depreciation and amortization of $1,405,531 and $1,300,598 |
|
4,035,498 |
|
4,120,915 | ||
| Other assets |
||||||
| Licensed technology, net of accumulated amortization of $2,134,724 and $2,077,528 |
|
1,296,425 |
|
1,353,621 | ||
| Capitalized software costs, net of accumulated amortization of $631,376 and $552,386 |
|
316,316 |
|
395,306 | ||
| Goodwill, net of accumulated amortization of $400,599 (Note 10) |
|
1,281,807 |
|
1,281,807 | ||
| Non-compete agreement, net of accumulated amortization of $46,766 and $38,500 |
|
115,735 |
|
124,001 | ||
| Investment in INICA, Inc. (Note 3) |
|
3,079,107 |
|
3,079,107 | ||
| Technology rights, net of accumulated amortization of $151,067 and $143,873 |
|
136,679 |
|
143,873 | ||
| Note and other receivable from related party |
|
573,397 |
|
571,394 | ||
| Deposits and other assets |
|
155,707 |
|
163,986 | ||
| Total other assets |
|
6,955,173 |
|
7,113,095 | ||
| $ |
14,387,874 |
$ |
16,163,228 | |||
(Continued on following page.)
See notes to consolidated financial statements.
4
RENTECH, INC.
Consolidated Balance Sheets
(Continued from previous page.)
| December 31, 2002 (Unaudited) |
September 30, 2002 |
|||||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ |
929,904 |
|
$ |
886,254 |
| ||
| Billings in excess of costs and estimated earnings (Note 9) |
|
— |
|
|
144,785 |
| ||
| Accrued payroll and benefits |
|
232,558 |
|
|
201,191 |
| ||
| Deferred compensation (Note 8) |
|
473,985 |
|
|
419,036 |
| ||
| Accrued liabilities |
|
365,169 |
|
|
508,276 |
| ||
| Other liability (Note 8) |
|
326,000 |
|
|
326,000 |
| ||
| Lines of credit payable (Note 6) |
|
1,070,841 |
|
|
1,493,839 |
| ||
| Current portion of long-term debt |
|
219,454 |
|
|
127,103 |
| ||
| Current portion of long-term convertible debt to stockholders (Note 5) |
|
48,055 |
|
|
47,048 |
| ||
| Total current liabilities |
|
3,665,966 |
|
|
4,153,532 |
| ||
| Long-term liabilities |
||||||||
| Long-term debt, net of current portion |
|
1,054,390 |
|
|
1,078,403 |
| ||
| Long-term convertible debt to stockholders, net of current portion (Note 5) |
|
2,164,894 |
|
|
2,177,292 |
| ||
| Lessee deposits |
|
7,485 |
|
|
7,485 |
| ||
| Investment in Sand Creek (Note 4) |
|
21,193 |
|
|
5,864 |
| ||
| Total long-term liabilities |
|
3,247,963 |
|
|
3,269,044 |
| ||
| Total liabilities |
|
6,913,928 |
|
|
7,422,576 |
| ||
| Minority interest |
|
261,355 |
|
|
296,710 |
| ||
| Commitments and contingencies (Notes 1, 4, 8 and 12) |
||||||||
| Stockholders’ equity (Note 7) |
||||||||
| Series A convertible preferred stock—$10 par value; 200,000 shares authorized; 200,000 shares issued and no shares outstanding; $10 per share liquidation value |
|
— |
|
|
— |
| ||
| Series B convertible preferred stock—$10 par value; 800,000 shares authorized; 691,664 shares issued and no shares outstanding; $10 per share liquidation value |
|
— |
|
|
— |
| ||
| Series C participating cumulative preferred stock—$10 par value; 500,000 shares authorized; no shares issued and outstanding |
|
— |
|
|
— |
| ||
| Common stock—$.01 par value; 100,000,000 shares authorized; 72,092,667 and 71,790,667 shares issued and outstanding |
|
720,927 |
|
|
717,907 |
| ||
| Additional paid-in capital |
|
38,786,476 |
|
|
38,629,676 |
| ||
| Accumulated deficit |
|
(32,294,812 |
) |
|
(30,903,641 |
) | ||
| Total stockholders’ equity |
|
7,212,591 |
|
|
8,443,942 |
| ||
| $ |
14,387,874 |
|
$ |
16,163,228 |
| |||
See notes to consolidated financial statements.
5
RENTECH, INC.
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| Revenues (Note 11) |
||||||||
| Product sales |
$ |
307,200 |
|
$ |
389,665 |
| ||
| Service revenues |
|
1,625,012 |
|
|
2,061,789 |
| ||
| Royalty income |
|
60,000 |
|
|
60,000 |
| ||
| Total revenues |
|
1,992,212 |
|
|
2,511,454 |
| ||
| Cost of sales |
||||||||
| Product sales |
|
155,772 |
|
|
204,637 |
| ||
| Service costs |
|
1,076,730 |
|
|
989,718 |
| ||
| Research and development contract costs (Note 12) |
|
— |
|
|
125,000 |
| ||
| Total cost of sales |
|
1,232,502 |
|
|
1,319,355 |
| ||
| Gross profit |
|
759,710 |
|
|
1,192,099 |
| ||
| Operating expenses |
||||||||
| General and administrative expense |
|
1,750,233 |
|
|
2,008,064 |
| ||
| Depreciation and amortization |
|
199,976 |
|
|
292,424 |
| ||
| Research and development |
|
85,268 |
|
|
155,301 |
| ||
| Total operating expenses |
|
2,035,477 |
|
|
2,455,789 |
| ||
| Loss from operations |
|
(1,275,767 |
) |
|
(1,263,690 |
) | ||
|
| ||||||||