-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jti7itlMhXf0XxnxzwKGgY4HZQG7vgJvGHK6IEfXAd1jXPAbDZNFOnXpjlPTQEzN LByOmwcayb9bRZKTi7j8cw== 0000950116-97-001499.txt : 19970815 0000950116-97-001499.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950116-97-001499 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEAN DIESEL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000949428 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CHEMICALS & ALLIED PRODUCTS [5160] IRS NUMBER: 061393453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27432 FILM NUMBER: 97661499 BUSINESS ADDRESS: STREET 1: 300 ATLANTIC ST STREET 2: STE 702 CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033277050 MAIL ADDRESS: STREET 1: 300 ATLANTIC ST STREET 2: STE 702 CITY: STAMFORD STATE: CT ZIP: 06901 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 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: 0-27432 CLEAN DIESEL TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 06-1393453 - ------------------------ ------------------- (State of Incorporation) (I.R.S. Employer Identification No.) Clean Diesel Technologies, Inc. 300 Atlantic Street - Suite 702 Stamford, CT 06901-3522 (Address of principal executive offices) (Zip Code) (203) 327-7050 (Registrant'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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- -------- As of August 12, 1997, there were outstanding 2,516,666 shares of Common Stock, par value $0.05 per share, of the registrant. =============================================================================== CLEAN DIESEL TECHNOLOGIES, INC. (A Development-Stage Company) Form 10-Q for the Quarter Ended June 30, 1997 INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets as of June 30, 1997 1 and December 31, 1996 Statements of Operations for the Three and 2 Six Months Ended June 30, 1997 and 1996 and for the Period from January 1, 1992 through June 30, 1997 Statements of Cash Flows for the Six 3 Months Ended June 30, 1997 and 1996 and for the Period from January 1, 1992 through June 30, 1997 Note to Financial Statements 4 Item 2. Management's Discussion and Analysis of 6 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 8 Item 2. Changes in Securities 8 Item 3. Defaults on Senior Securities 8 Item 4. Submission of Matters to a Vote of Security Holders 8 Item 5. Other Information 8 Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES PART I. FINANCIAL INFORMATION Item 1. Financial Statements CLEAN DIESEL TECHNOLOGIES, INC. (A Development-Stage Company) BALANCE SHEETS
June 30, December 31, 1997 1996 ------------ ------------ (Unaudited) Assets Current assets: Cash and cash equivalents $ 3,053,000 $ 3,270,000 Short-term investments -- 2,000,000 Inventories 97,000 103,000 Other current assets 249,000 222,000 ------------ ------------ Total current assets 3,399,000 5,595,000 Other assets 75,000 82,000 ------------ ------------ Total assets $ 3,474,000 $ 5,677,000 ============ ============ Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $ 870,000 $ 741,000 Loan payable to Fuel-Tech N.V 495,000 745,000 ------------ ------------ Total current liabilities 1,365,000 1,486,000 Stockholders' equity: Preferred stock, par value $.05 per share, authorized 100,000 shares, no shares issued and outstanding -- -- Common stock, par value $.05 per share, authorized 5,000,000 shares, issued and outstanding 2,516,666 and 2,500,000 shares 126,000 125,000 Additional paid-in capital 11,187,000 11,155,000 Deficit accumulated during development stage (9,204,000) (7,089,000) ------------ ------------ Total stockholders' equity 2,109,000 4,191,000 ------------ ------------ Total liabilities and stockholders' equity $ 3,474,000 $ 5,677,000 ============ ============
See note to financial statements. -1- CLEAN DIESEL TECHNOLOGIES, INC. (A Development-Stage Company) STATEMENTS OF OPERATIONS (Unaudited)
Period from Three Months Ended Six Months Ended January 1, 1992 June 30 June 30 through 1997 1996 1997 1996 June 30, 1997 ----------- ----------- ----------- ----------- ----------------- Sales $ 40,000 $ -- $ 80,000 $ -- $ 80,000 Costs and expenses: Cost of sales 23,000 -- 46,000 -- 46,000 General and administrative 462,000 492,000 958,000 950,000 4,270,000 Research and development 706,000 352,000 1,162,000 576,000 4,494,000 Patent filing and maintenance 40,000 34,000 115,000 90,000 816,000 ----------- ----------- ----------- ----------- ----------- Loss from operations 1,191,000 878,000 2,201,000 1,616,000 9,546,000 Interest income (46,000) (100,000) (110,000) (216,000) (526,000) Interest expense to Fuel-Tech N.V 9,000 15,000 24,000 30,000 184,000 ----------- ----------- ----------- ----------- ----------- Net loss during development stage $ 1,154,000 $ 793,000 $ 2,115,000 $ 1,430,000 $ 9,204,000 =========== =========== =========== =========== =========== Net loss per common share $ 0.46 $ 0.32 $ 0.84 $ 0.57 N/A =========== =========== =========== =========== =========== Average number of common shares outstanding 2,517,000 2,500,000 2,514,000 2,500,000 N/A =========== =========== =========== =========== ===========
See note to financial statements. -2- CLEAN DIESEL TECHNOLOGIES, INC. (A Development-Stage Company) STATEMENTS OF CASH FLOWS (Unaudited)
Period from Six Months Ended January 1, 1992 June 30 through 1997 1996 June 30, 1997 ------------ ------------ -------------- Operating activities Net loss $ (2,115,000) $ (1,430,000) $ (9,204,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 12,000 4,000 24,000 Issuance of stock purchase warrants 30,000 -- 60,000 Changes in operating assets and liabilities: Inventories 6,000 (27,000) (97,000) Other current assets (27,000) (78,000) (249,000) Accounts payable and accrued expenses 129,000 (6,000) 870,000 Other assets -- (18,000) (18,000) Due to Fuel-Tech N.V -- 30,000 -- ------------ ------------ ------------ Net cash used in operating activities (1,965,000) (1,525,000) (8,614,000) ------------ ------------ ------------ Financing activities Proceeds from Rights Offering, net of $630,000 of brokerage commissions in 1995 -- 2,018,000 11,156,000 Expenses of Rights Offering -- -- (425,000) Repayment of expenses of Rights Offering paid by Fuel-Tech N.V -- -- (200,000) Issuance of common stock to parent -- -- 250,000 Net parent company investment -- -- 469,000 Proceeds of loan from Fuel-Tech N.V -- -- 2,874,000 Repayment of loan to Fuel-Tech N.V (250,000) -- (2,379,000) Proceeds from exercise of stock options 3,000 -- 3,000 ------------ ------------ ------------ Net cash (used in) provided from financing activities (247,000) 2,018,000 11,748,000 ------------ ------------ ------------ Investing activities (Purchase) sale of short-term investments 2,000,000 (2,000,000) -- Purchase of fixed assets (5,000) (45,000) (81,000) ------------ ------------ ------------ Net cash (used in) provided from investing activities 1,995,000 (2,045,000) (81,000) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (217,000) (1,552,000) 3,053,000 Cash and cash equivalents at beginning of period 3,270,000 6,848,000 -- ------------ ------------ ------------ Cash and cash equivalents at end of period $ 3,053,000 $ 5,296,000 $ 3,053,000 ============ ============ ============
See note to financial statements. -3- CLEAN DIESEL TECHNOLOGIES, INC. (A Development-Stage Company) NOTE TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) Basis of Presentation The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of 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 considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three and six month periods ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Clean Diesel Technologies, Inc. ("CDT" or the "Company") is a development-stage enterprise and its efforts from January 1, 1992 through June 30, 1997 have been devoted to the research and development of a platinum fuel catalyst ("PFC") for internal combustion engines and nitrogen oxide ("NOx") reduction systems for diesel engines. Some of the technology related to the PFC is licensed to the Company by Fuel Tech. There were no material activities related to the Company's business prior to 1992. The Company's technologies will require additional research and development testing to determine their commercial viability. The Company's management believes that the Company has adequate capital to fund its operations through March 31, 1998 but that additional financing will be required in the future to commercialize its technologies. Earnings Per Share In 1996 and 1997 net loss per common share is based on the average number of shares of common stock outstanding during each period. Common equivalent shares are not included in the per share calculations where the effect of their inclusion would be antidilutive. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted by the Company as of December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, primary earnings per share will be replaced with basic earnings per share. In computing basic earnings per share the dilutive effect of stock options will be excluded. The impact of Statement 128 on the computation of primary earnings per share (to be replaced with basic earnings per share) and fully diluted earnings per share is not expected to be material. Short-Term Investments In June 1996, the Company purchased, at a discount, a note issued by the United States Federal Home Loan Bank, which matured in June 1997. The note was held until its maturity date, and had a yield to maturity of 5.84%. Inventories Inventories are stated at the lower of cost or market and consist of finished product. -4- Warrant to Purchase Common Shares In March 1997, in consideration of his undertaking to assist the Company in obtaining sources of permanent financing, the Company granted a director of the Company a warrant to purchase 25,000 shares of the Company's Common Stock for $10.00 per share, a 142% premium over fair value. The warrant expires on March 17, 2004. Included in the Company's Statement of Operations for the six months ended June 30, 1997 is $30,000 of expense related to the grant of this warrant. -5- CLEAN DIESEL TECHNOLOGIES, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Statements in this Form 10-Q which are not historical facts, so-called "forward-looking statements," are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. See Item 1 "Risk Factors of the Business" and also Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the year ended December 31, 1996. Results of Operations Sales and Cost of Sales for the second quarter and first six months of 1997 related to the Company's commercial sales to Holt Lloyd International Ltd., its strategic marketing partner. General and administrative expenses ("G&A") decreased to $462,000 in the second quarter of 1997 from $492,000 in the second quarter of 1996. The decrease was the result of efficiencies achieved through the Company's establishment of its own administrative structure in the second half of 1996. Additionally, the Company incurred higher recruitment costs in 1996 as it increased its operations and staff. G&A for the first six months of 1997 remained relatively flat, increasing to $958,000 from $950,000 in the same year-earlier period. Research and development expenses for the second quarter and first six months of 1997 increased to $706,000 and $1,162,000, respectively, from $352,000 and $576,000 during the respective comparable periods in 1996. The increase was primarily due to the addition of three senior technical employees in 1996 who were employed for the entire first six months of 1997 and expenditures relating to various test programs. The programs included the use of the Company's platinum fuel catalyst ("PFC") in gasoline and diesel vehicles, testing of nitrogen oxide ("NOx") control technologies in conjunction with Engelhard and Nalco Fuel Tech, and engine testing of the PFC as required to maintain registration with the U.S. EPA. Some of the programs relating to the PFC and NOx control work are being done in collaboration with a major U.S. diesel engine manufacturer. Patent filing and maintenance expenses were $40,000 and $115,000 in the second quarter and first six months of 1997, respectively, and $34,000 and $90,000 during the respective comparable periods in 1996. The increase was due in part to the preparation and filing of new patent applications, both in the United States and overseas. Interest income, net, deceased to $37,000 and $86,000 in the second quarter and first six months of 1997, respectively, from $85,000 and $186,000 during the respective comparable periods in 1996. The decrease was due to lower cash balances in the first six months of 1997 versus 1996. -6- Liquidity and Sources of Capital The Company is a development-stage company and has incurred losses since inception aggregating $9,204,000 at June 30, 1997. The Company expects to incur losses through the foreseeable future as it further pursues its research and development efforts and the commercialization of its products. In December 1995, the Company raised approximately $10.5 million, net of offering expenses and broker dealer commissions of approximately $1.3 million, through a Rights Offering of its shares by Fuel Tech. Approximately $2 million of this amount was received in January 1996. Total cash, cash equivalents and short-term investments were approximately $3.1 million and $5.3 million at June 30, 1997 and December 31, 1996, respectively. Working capital at June 30, 1997 was approximately $2.0 million, a decrease of approximately $2.1 million from December 31, 1996. The decrease in cash, cash equivalents, short-term investments and working capital was the result of funds used to fund the Company's operations in the first six months of 1997. The Company believes that it has sufficient cash balances to fund its requirements through March 31, 1998. The Company will, however, require additional financing in the future, and expects to meet its future cash needs through the private placement or secondary offering of its shares. The amount management seeks to raise will depend on the Company's stock price, market conditions, and the status of the development and commercialization of the Company's technologies. However, there is no guarantee that the Company will be able to raise such capital on terms satisfactory to the Company. -7- PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults on Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Company was held on June 11, 1997 at which were present in person or by proxy 1,412,959 shares of Common Stock of the Company. The proposal to elect six directors was approved by a vote of a majority of those present and voting, and, specifically with respect to each individual nominee, as follows:
Name Votes Cast Votes For Votes Withheld ---- ----------- --------- -------------- Ralph E. Bailey 1,412,959 1,410,838 2,121 Kent D.S. Durr 1,412,959 1,410,988 1,971 John A. de Havilland 1,412,959 1,410,988 1,971 Charles W. Grinnell 1,412,959 1,410,988 1,971 Jeremy D. Peter-Hoblyn 1,412,959 1,410,988 1,971 James M. Valentine 1,412,959 1,410,988 1,971
The appointment of Ernst & Young LLP as independent auditors of the Company for the year 1997 was approved by a vote of 1,409,462 shares in favor, 3,497 shares against, and no shares abstaining. The amendment of the Company's 1994 Incentive Plan (the "Plan") to provide that a number of shares equal to 17.5% rather than 12.5% of the outstanding shares of the Company's Common Stock would be available for the grant of awards under the Plan was approved by a vote of 1,377,632 shares in favor, 27,675 shares against, no shares abstaining, and 7,652 shares representing broker no-votes. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits None b. Reports on Form 8-K None -8- CLEAN DIESEL TECHNOLOGIES, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CLEAN DIESEL TECHNOLOGIES, INC. Date: August 13, 1997 By: /s/ Jeremy D. Peter-Hoblyn ------------------------- Jeremy D. Peter-Hoblyn President and Chief Executive Officer Date: August 13, 1997 By: /s/ Scott M. Schecter -------------------- Scott M. Schecter Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS 3-MOS 6-MOS DEC-31-1997 DEC-31-1997 APR-01-1997 JAN-01-1997 JUN-30-1997 JUN-30-1997 1 1 3,053,000 3,053,000 0 0 0 0 0 0 97,000 97,000 3,399,000 3,399,000 0 0 0 0 3,474,000 3,474,000 1,365,000 1,365,000 0 0 0 0 0 0 126,000 126,000 1,983,000 1,983,000 3,474,000 3,474,000 40,000 80,000 40,000 80,000 23,000 46,000 0 0 1,191,000 2,201,000 0 0 (37,000) (86,000) (1,154,000) (2,115,000) 0 0 0 0 0 0 0 0 0 0 (1,154,000) (2,115,000) (.46) (.84) 0 0
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