x
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QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Delaware
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71-0659511
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(State
or Other Jurisdiction of
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(IRS
Employer Identification No.)
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Incorporation
or Organization)
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124
WEST CAPITOL AVENUE, SUITE 880,
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LITTLE
ROCK, ARKANSAS
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72201
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Large
accelerated filer o
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Accelerated filer o
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Non-accelerated
filer o
(Do
not check if a smaller reporting
company)
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Smaller
reporting company x
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Page
No.
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Part
I.
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Financial Information
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Item 1.
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Financial
Statements
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3
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Consolidated
Balance Sheets as of March 31, 2009 (Unaudited) and
December 31, 2008
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3
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Consolidated
Statements of Operations for the three months ended March 31, 2009
and 2008 (Unaudited)
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4
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Consolidated
Statements of Changes in Stockholders’ Equity (Deficit) for the year
ended January 1, 2008 through December 31, 2008 and the three
months ended March 31, 2009 (Unaudited)
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5
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Consolidated
Statements of Cash Flows for the three months ended March 31, 2009
and 2008 (Unaudited)
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6
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Notes
to Consolidated Financial Statements (Unaudited)
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7
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Item 2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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19
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Item 3.
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Quantitative
and Qualitative Disclosures About Market Risk
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21
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Item 4T.
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Controls
and Procedures
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21
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Part
II.
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Other Information
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Item 1.
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Legal
Proceedings
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22
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Item 1a.
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Risk
Factors
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22
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Item 2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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22
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Item 3.
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Defaults
Upon Senior Securities
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23
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Item 4.
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Submission
of Matters to a Vote of Security Holders
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23
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Item 5.
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Other
Information
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23
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Item 6.
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Exhibits
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24
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Signature
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24
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March 31, 2009
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December 31, 2008
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|||||||
(Unaudited)
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||||||||
ASSETS
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||||||||
Current
Assets:
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||||||||
Cash
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$ | 12 | $ | 115 | ||||
Accounts
Receivable, net
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128 | 111 | ||||||
Inventories
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159 | 164 | ||||||
Other
Current Assets
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162 | 164 | ||||||
Total
Current Assets
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461 | 554 | ||||||
Property
and Equipment, net
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289 | 305 | ||||||
Other
Assets
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169 | 176 | ||||||
Total
Assets
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$ | 919 | $ | 1,035 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
Current
Liabilities:
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||||||||
Accounts
Payable
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$ | 419 | $ | 204 | ||||
Short-Term
Borrowings
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1,387 | 873 | ||||||
Convertible
Debt in Default
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3,656 | 3,478 | ||||||
Contingent
Liability Reserves
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3,334 | 3,334 | ||||||
Deferred
Revenue
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190 | 264 | ||||||
Other
Current Liabilities
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2,720 | 2,713 | ||||||
Total
Current Liabilities
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11,706 | 10,866 | ||||||
Long
Term Liabilities:
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||||||||
Deferred
Comp Retirement Plan for Officers Net of Current Portion
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250 | 261 | ||||||
Convertible
Debt
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1,508 | 992 | ||||||
Total
Long Term Liabilities
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1,758 | 1,253 | ||||||
Total
Liabilities
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13,464 | 12,119 | ||||||
Stockholders'
Equity (Deficit):
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||||||||
Preferred
Stock, $0.01 par value, liquidation value of $1.20 per share: authorized -
20,000,000 shares; issued and outstanding: 2009 and 2008 - 208,334
shares
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2 | 2 | ||||||
Common
Stock, $.001 par value: authorized - 150,000,000 shares;
issued: 2009 - 52,234,693 shares; 2008 - 50,247,537 shares; outstanding:
2009 - 52,150,896 shares; 2008 - 50,163,740 shares
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52 | 50 | ||||||
Additional
Paid-In Capital
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58,854 | 58,810 | ||||||
Accumulated
Deficit
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(71,453 | ) | (68,284 | ) | ||||
Total
ThermoEnergy Corporation Stockholders' Equity (Deficit)
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(12,545 | ) | (9,422 | ) | ||||
Noncontrolling
interest
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(1,662 | ) | ||||||
Total
Stockholders' Equity
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(12,545 | ) | (11,084 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 919 | $ | 1,035 |
Three
Months Ended
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||||||||
March 31,
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||||||||
2009
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2008
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|||||||
(Unaudited)
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||||||||
Contract
and Grant Income
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$ | 375 | $ | 409 | ||||
Less:
Cost of Contract and Grant Income
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480 | 534 | ||||||
Gross
Operating Income (Loss)
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(105 | ) | (125 | ) | ||||
Operating
Expenses:
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||||||||
General
and Administrative
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962 | 795 | ||||||
Selling
Expense
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84 | 67 | ||||||
Option
Expense
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161 | 135 | ||||||
Warrant
Expense
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1,030 | 83 | ||||||
Professional
Fees
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202 | 229 | ||||||
Travel
and Entertainment
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59 | 224 | ||||||
Total
Operating Expenses
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2,498 | 1,533 | ||||||
Loss
from Operations
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(2,603 | ) | (1,658 | ) | ||||
Other
Income (Expense):
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||||||||
Interest
Income
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11 | |||||||
Interest
Expense
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566 | 307 | ||||||
Total
Other Income (Expense)
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(566 | ) | (296 | ) | ||||
Net
loss
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(3,169 | ) | (1,954 | ) | ||||
Less: Net
loss attributable to noncontrolling interest
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(44 | ) | ||||||
Net
Loss Attributable to ThermoEnergy Corporation
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$ | (3,169 | ) | $ | (1,910 | ) | ||
Per
Common Share Attributable to ThermoEnergy Corporation:
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||||||||
Loss
from Operations
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$ | (0.05 | ) | $ | (0.04 | ) | ||
Net
Loss
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$ | (0.06 | ) | $ | (0.05 | ) |
ThermoEnergy Corporation Stockholders' Equity
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||||||||||||||||||||||||
Series A
Convertible
Preferred
Stock
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Common
Stock
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Additional
Paid-In
Capital
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Accumulated
Deficit
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Noncontrolling
Interest
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Total
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|||||||||||||||||||
(in thousands)
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||||||||||||||||||||||||
Balance
(Deficit) January 1, 2008
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$ | 53 | $ | 40 | $ | 50,794 | $ | (52,548 | ) | $ | (1,414 | ) | $ | (3,075 | ) | |||||||||
Warrants
issued for services
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1,331 | 1,331 | ||||||||||||||||||||||
Issuance
of 220,000 shares of Common Stock for services
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277 | 277 | ||||||||||||||||||||||
Cashless
exercise of 4,662,639 warrants for 1,854,984 shares of Common
Stock
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2 | (2 | ) | - | ||||||||||||||||||||
Exercised
741,493 warrants for 741,493 shares of Common Stock
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1 | 473 | 474 | |||||||||||||||||||||
Stock
grants issued to officers (250,000 shares at $1.11 per
share)
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1 | 278 | 279 | |||||||||||||||||||||
Stock
options issued to officers, directors and employees
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1,682 | 1,682 | ||||||||||||||||||||||
Converted
Preferred Stock to Common Stock (5,051,668 shares)
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(51 | ) | 5 | 46 | - | |||||||||||||||||||
Convertible
Note converted to Common Stock (1,146,036 shares at $0.50 per
share)
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1 | 572 | 573 | |||||||||||||||||||||
Common
Stock Issued for interest payments (124,172 shares at $0.47 per
share)
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58 | 58 | ||||||||||||||||||||||
Warrants
and beneficial conversion feature issued with convertible
notes
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3,301 | 3,301 | ||||||||||||||||||||||
Net
Loss
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(15,736 | ) | (248 | ) | (15,984 | ) | ||||||||||||||||||
Balance
(Deficit) December 31, 2008
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$ | 2 | $ | 50 | $ | 58,810 | $ | (68,284 | ) | $ | (1,662 | ) | $ | (11,084 | ) | |||||||||
Stock
options issued to officers, directors and employees
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468 | 468 | ||||||||||||||||||||||
Modification
of warrants
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1,030 | 1,030 | ||||||||||||||||||||||
Common
Stock Issued for interest payments (103,143 shares)
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52 | 52 | ||||||||||||||||||||||
Issuance
of 20,000 shares of Common Stock for services
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9 | 9 | ||||||||||||||||||||||
Issued
1,428,571 shares of Common Stock for cash
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1 | 499 | 500 | |||||||||||||||||||||
Issued
435,442 shares of Common Stock and warrants to acquire CASTion's
noncontrolling interest
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1 | 268 | 269 | |||||||||||||||||||||
Purchase
of CASTion shares from noncontrolling interest
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(2,282 | ) | 1,662 | (620 | ) | |||||||||||||||||||
Net
Loss
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(3,169 | ) | (3,169 | ) | ||||||||||||||||||||
Balance
(Deficit) March 31, 2009
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$ | 2 | $ | 52 | $ | 58,854 | $ | (71,453 | ) | $ | - | $ | (12,545 | ) |
Three
Months Ended
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||||||||
March 31,
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||||||||
2009
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2008
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|||||||
(Unaudited)
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||||||||
Operating
Activities:
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||||||||
Net
loss
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$ | (3,169 | ) | $ | (1,954 | ) | ||
Items
not requiring (providing) cash:
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||||||||
Options
issued to officers and directors
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468 | |||||||
Warrant
expense
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1,030 | 83 | ||||||
Depreciation
expense
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16 | 6 | ||||||
Common
Stock issued for services
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9 | |||||||
Amortization
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369 | 195 | ||||||
Changes
in:
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||||||||
Accounts
and notes receivable
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(17 | ) | (44 | ) | ||||
Inventories
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5 | (66 | ) | |||||
Other
current assets
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2 | (53 | ) | |||||
Accounts
payable
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215 | (245 | ) | |||||
Deferred
revenue
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(74 | ) | 90 | |||||
All
other current liabilities
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304 | (427 | ) | |||||
Deferred
compensation retirement plan
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(11 | ) | (11 | ) | ||||
Net
cash used in operating activities
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(853 | ) | (2,426 | ) | ||||
Financing
Activities:
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||||||||
Proceeds
from issuance of Common Stock and warrants
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500 | - | ||||||
Proceeds
from Convertible Promissory Notes
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250 | 750 | ||||||
Net
cash provided by financing activities
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750 | 750 | ||||||
Increase
(Decrease) in cash
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(103 | ) | (1,676 | ) | ||||
Cash,
beginning of year
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115 | 3,185 | ||||||
Cash,
end of period
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$ | 12 | $ | 1,509 |
2009
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2008
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|||||||
Convertible
Promissory Note dated December 22, 2008, 7.5%, due June 30,
2009, less discount of $194 in 2008
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$ | 561 | $ | 307 | ||||
Convertible
Promissory Note dated August 12, 2008, 7.5%, due March 31,
2009
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576 | 566 | ||||||
Convertible
Promissory Note dated February 11, 2009, 10%, due December 31,
2009
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250 | |||||||
$ | 1,387 | $ | 873 |
2009
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2008
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|||||||
Convertible
Promissory Note dated March 21, 2007, 5%, due March 21, 2013,
less discounts of $211 in 2009 and $221 in 2008
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$ | 618 | $ | 588 | ||||
Convertible
Promissory Note dated March 7, 2008, 5%, due March 7, 2013, less discounts
of $596
in 2009 and $628 in 2008
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193 | 141 | ||||||
Convertible
Promissory Note dated September 15, 2008, 10%, due September 30, 2013,
less discounts of $1,663 in 2009 and $1,737 in 2008
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337 | 263 | ||||||
Convertible
Promissory Notes dated January 5, 2009,
10%, due May 31, 2010
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360 | |||||||
$ | 1,508 | $ | 992 |
Water Group
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Power
Group
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Total
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||||||||||
Operating
income:
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||||||||||||
Sales
of wastewater treatment and recovery systems
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$ | 201 | $ | - | $ | 201 | ||||||
Grant
revenue
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- | 174 | 174 | |||||||||
Total
operating income
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201 | 174 | 375 | |||||||||
Operating
expenses:
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||||||||||||
Cost
of wastewater treatment and recovery systems sales
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306 | 174 | 480 | |||||||||
General
and administrative
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1,223 | - | 1,223 | |||||||||
Selling
expenses
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84 | - | 84 | |||||||||
Total
operating expenses
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1,613 | 174 | 1,787 | |||||||||
- | ||||||||||||
Segment
operating loss
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$ | (1,412 | ) | $ | - | $ | (1,412 | ) | ||||
Total
assets
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$ | 919 | $ | - | $ | 919 | ||||||
Reconciliation
to net loss:
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||||||||||||
Total
segment operating loss
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$ | (1,412 | ) | |||||||||
Warrant
and stock options
|
(1,191 | ) | ||||||||||
Other
income (expense)
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(566 | ) | ||||||||||
Net
loss attributable to ThermoEnergy Corporation
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$ | (3,169 | ) |
Water Group
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Power Group
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Total
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||||||||||
Operating
income:
|
||||||||||||
Sales
of wastewater treatment and recovery systems
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$ | 226 | $ | - | $ | 226 | ||||||
Grant
revenue
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- | 183 | 183 | |||||||||
Total
operating income
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226 | 183 | 409 | |||||||||
Operating
expenses:
|
||||||||||||
Cost
of wastewater treatment and recovery systems sales
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351 | 183 | 534 | |||||||||
General
and administrative
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1,331 | - | 1,331 | |||||||||
Selling
expenses
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67 | - | 67 | |||||||||
Total
operating expenses
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1,749 | 183 | 1,932 | |||||||||
- | ||||||||||||
Segment
operating loss
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$ | (1,523 | ) | $ | - | $ | (1,523 | ) | ||||
Total
assets
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$ | 2,697 | $ | - | $ | 2,697 | ||||||
Reconciliation
to net loss:
|
||||||||||||
Total
segment operating loss
|
$ | (1,523 | ) | |||||||||
Warrant
and stock options
|
(135 | ) | ||||||||||
Other
income (expense)
|
(252 | ) | ||||||||||
Net
loss attributable to ThermoEnergy Corporation
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$ | (1,910 | ) |
2009
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2008
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|||||||
Estimated
penalties and interest – payroll tax liabilities
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$ | 2,177 | $ | 2,105 | ||||
Other,
including unasserted claims
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1,157 | 1,229 | ||||||
$ | 3,334 | $ | 3,334 |
Exhibit No.
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Description
of Exhibit
|
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4.1
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10%
Secured Convertible Promissory Note issued to The Quercus
Trust — Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed February 17, 2009
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4.2
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Form
of Common Stock Purchase Warrant issued pursuant to Securities Purchase
Agreement dated as of March 6, 2009 — Incorporated by reference to Exhibit
4.1 to Current Report on Form 8-K filed April 28, 2009
|
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10.1
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Security
Agreement dated as of February 11, 2009 among ThermoEnergy Corporation,
CASTion Corporation and The Quercus Trust — Incorporated by reference to
Exhibit 10.2 to Current Report on Form 8-K filed February 17,
2009
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10.2
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Limited
Liability Company Agreement of Babcock-Thermo Carbon Capture LLC, dated as
of February 25, 2009 — Incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K filed March 2,
2009
|
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10.3
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TEPS
License Agreement, dated as of February 25,
2009 — Incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K filed March 2, 2009
|
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10.4
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Agreement
to Indemnify Certain Members of Babcock-Thermo Carbon Capture LLC, dated
as of February 25, 2009 — Incorporated by reference
to Exhibit 10.3 to Current Report on Form 8-K filed March 2,
2009
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!0.5 *
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Amendment
to Employment Agreement by and between Alexander G. Fassbender and
ThermoEnergy Corporation, dated as of February 25,
2009 — Incorporated by reference to Exhibit 10.4 to
Current Report on Form 8-K filed March 2, 2009
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10.6
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Form
of Securities Purchase Agreement dated as of March 6, 2009 by and between
ThermoEnergy Corporation and each of the Investors party
thereto — Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed April 28, 2009
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31.1
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Sarbanes
Oxley Act Section 302 Certificate of Principal Executive
Officer — Filed herewith
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31.2
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Sarbanes
Oxley Act Section 302 Certificate of Principal Financial
Officer — Filed herewith
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32.1
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Sarbanes
Oxley Act Section 906 Certificate of Principal Executive
Officer — Filed herewith
|
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32.2
|
Sarbanes
Oxley Act Section 906 Certificate of Principal Financial
Officer — Filed
herewith
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/s/
Dennis C. Cossey
|
|
Chief
Executive Officer
|