- Amended Quarterly Report (10-Q/A)

---

---

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

---

FORM 10-Q/A

---

 

þ    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2009

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: 0-10707

---

THERMODYNETICS, INC.

(Exact name of registrant as specified in its charter)

---

Nevada	06-1042505
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

651 Day Hill Road, Windsor, CT   06095

(Address of Principal Executive Office) (Zip Code)

 

860-683-2005

( 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 (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 þ No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer   ¨				Accelerated filer   ¨
Non-accelerated filer   ¨				Smaller reporting company   þ
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class		Outstanding at September 30, 2009
Common stock $.01 Par Value		4,600,306 Shares

 

---

---

 

 

---

 

AMENDMENT :

On March 31, 2010, the   Audit Committee of the Company's Board of Directors   and   the Company's management concluded that the equity method of accounting for the May 2006 sale of 43.68% of Turbotec Products, Plc (" Turbotec ") and subsequent reporting for the remaining 56.32% interest in Turbotec is the proper method to utilize.  Previously the Company utilized the consolidation method of accounting under Generally Accepted Accounting Principles (" GAAP ").

The affected consolidated financial statements are those for all periods since the May 2006 sale of the Turbotec shares through the quarter ended December 31, 2009; such financial statements should no longer be relied upon.

 

Thus, the Company hereby restates its financial statements for the fiscal periods ended September 30, 2009, 2008, 2007, and 2006, and restates its Management's Discussion and Analysis of Financial Condition and Results of Operations for the corresponding periods, by hereby amending its report on form 10-Q as had been filed November 13, 2009.  Items 1, 2 and 4T of Part I and Item 6 of Part II are hereby amended and restated in their entirety as follows:

 

 

2

---

 

 

PART I :  FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2009, 2008, 2007 AND 2006

(UNAUDITED)

(in 000's)

 

		2009			#	2008				2007				2006
		(Restated)				(Restated)				(Restated)				(Restated)
ASSETS
CURRENT ASSETS
Cash		$	424			$	126			$	333			$	1,244
Marketable securities			36				52				299				-
Prepaid expenses and other current assets			1,316				39				109				351
Total current assets			1,776				217				741				1,595
PROPERTY, PLANT AND EQUIPMENT, net			3,121				3,296				3,379				3,434
DEFERRED INCOME TAXES			1,200				1,200				1,200				1,760
OTHER ASSETS
Investments - at equity			3,462				5,025				4,639				3,800
Related party receivables			111				1,286				449				(53	)
Other			77				196				163				128
Total other assets			3,650				6,507				5,251				3,875
		$	9,747			$	11,220			$	10,571			$	10,664

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit		$	1,087			$	250			$	-			$	-
Accounts payable			195				186				78				32
Accrued expenses and taxes			770				248				59				135
Current portion of long-term debt			128				122				96				148
Current portion of liabilities from discontinued operations			-				-				-				71
Total current liabilities			2,180				806				233				386
LONG-TERM LIABILITIES
Long-term debt, less current maturities above			1,478				1,610				1,714				1,716
Long-term liabilities from discontinued operations			2,782				2,782				2,782				3,312
Total long-term debt			4,260				4,392				4,496				5,028
COMMITMENTS AND CONTINGENCIES			-				-				-				-
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 25,000,000 shares			46				41				40				40
Additional paid-in capital			7,262				7,138				7,116				7,237
Accumulated other comprehensive income			7				24				64				-
Deficit			(4,008	)			(1,181	)			(1,378	)			(2,027	)
			3,307				6,022				5,842				5,250
		$	9,747			$	11,220			$	10,571			$	10,664

 

 

3

---

 

 

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009, 2008, 2007 AND 2006

(UNAUDITED)

(in 000's, except for earnings per share)

 

		2009				2008				2007				2006
		(Restated)				(Restated)				(Restated)				(Restated)
REVENUES
Consulting Fee & Rental Income		$	495			$	496			$	461			$	428
Manufacturing Sales			-				-				-				2,840
COST OF SALES			-				-				-				2,160
OPERATING EXPENSES			913				689				635				927
Income (loss)  from operations			(418	)			(193	)			(174	)			181
EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY			384				558				557				178
OTHER INCOME (EXPENSE)
Other, net			(151	)			-				11				30
Interest expense			120				(71	)			(65	)			(106	)
Gain on sale of stock of subsidiary			-				-				-				2,666
Realized Loss on Impairment			(2,196	)			-				-				-
			(2,227	)			(71	)			(54	)			2,590
Income (loss) before provision for income taxes			(2,261	)			294				329				2,949
PROVISION FOR  INCOME TAXES			4				6				(149	)			107
Income (loss)  from continuing operations			(2,265	)			288				478				2,842
DISCONTINUED OPERATIONS
Loss from discontinued operations including gain on extinguishment
of debt of $605,929			-				-				-				(9	)
Net loss on discontinued operations			-				-				-				(9	)
Net income (loss)			(2,265	)			288				478				2,833
OTHER COMPREHENSIVE INCOME (LOSS), net of tax			(18	)			(14	)			62				-
Comprehensive income (loss)		$	(2,283	)		$	274			$	540			$	2,833
EARNINGS  PER COMMON SHARE		$	(0.52	)		$	0.07			$	0.12			$	0.71

 

 

4

---

 

 

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009, 2008, 2007 AND 2006

(UNAUDITED)

(in 000's)

 

 

		2009				2008				2007				2006
		(Restated)				(Restated)				(Restated)				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	(2,265	)		$	288			$	478			$	2,833
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization			97				88				87				90
Earnings in unconsolidated subsidiary			(335	)			(505	)			(273	)			(150	)
Realized loss on impairment			2,196				-				-
Gain on sale of stock of subsidiary			-				-				-				(2,666	)
Deconsolidation of subsidiary, net of cash			-				-				-				117
Increase (decrease) in deferred tax liability			-								-				(720	)
Issuance of stock			129				-				-				-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable			-				-				-				(1,147	)
Decrease (increase) in inventories			-				-				-				1,090
(Increase) decrease in prepaid expenses and other current assets			(731	)			(15	)			(72	)			240
(Increase) decrease in other assets							(30	)			-				41
Increase (decrease) in accounts payable			(10	)			105				41				(380	)
Increase (decrease) in accrued expenses and taxes			217				38				(29	)			248
Net cash provided by (used in) operating activities			(702	)			(31	)			232				(404	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment			(4	)			(17	)			-				(66	)
(Purchase) proceeds - marketable securities			(3	)			194				(21	)			-
Net cash porivded by (used in) investing activities			(7	)			177				(21	)			(66	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (increase) decrease in related party receivable			778				(288	)			(440	)			56
Proceeds from issuance of stock			-				-				-				3,213
Proceeds from short-term borrowings			25				150				-				176
Principal payments on debt and capital lease obligations			(66	)			(58	)			(52	)			(1,731	)
Net cash provided by (used in) financing activities			737				(196	)			(492	)			1,714
NET INCREASE (DECREASE) IN CASH			28				(50	)			(281	)			1,244
CASH, beginning of year			475				176				614				-
CASH, end of year		$	503			$	126			$	333			$	1,244

 

 

 

5

---

 

 

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009, 2008, 2007 AND 2006

(UNAUDITED)

 

NOTE 1: BASIS OF PRESENTATION

 

The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The results of operations for the six months ended September 30, 2009, 2008, 2007 and 2006 are not necessarily indicative of the results to be expected for the full year.

 

NOTE 2: SUBSIDIARY TRANSACTIONS

 

On May 8, 2006, the Company completed the sale of a 43.68% minority interest of its subsidiary, Turbotec Products Plc, (the “PLC”), through an offering on the AIM Market of the London Stock Exchange.

 

The Company and the PLC entered into a Relationship Agreement (RA) which provides for an annual administration fee; restrictions on related party transactions; restrictions on appointments to the board of the PLC and mutual confidentiality and reporting undertakings. See Part II, Item 1. As part of the transaction, the Company and the PLC established independent officers and directors and the two boards of directors act independently.

 

As a result of the transaction and the terms of the RA, the Company began to account for Turbotec under the equity method of accounting effective May 8, 2006.

Commercial Leases :

 

The Company and Turbotec Products, Inc. (“Turbotec Products”), a wholly-owned subsidiary of the PLC entered into formal real estate leases effective May 8, 2006, for approximately 54,500 square feet at 651 Day Hill Road, Windsor, CT, and approximately 17,000 square feet at 50 Baker Hollow Road, Windsor, CT. See Part II, Item 1. The leases commenced April 1, 2006 with a five-year term, and one extension option for three years, and a second extension option for two years. Rent charges with respect to the 651 Day Hill Road property are equal to seven dollars per square foot in years one and two, escalating annually thereafter through each of the extension terms; monthly fixed rent in year one equals $31,792, escalating to $42,010 monthly in year ten, assuming both lease extensions are exercised. Rent charges with respect to the 50 Baker Hollow Road property are equal to $5.50 per square foot in year one, escalating annually thereafter through each of the extension terms; monthly fixed rent in year one equals $7,792, escalating to $10,979 monthly in year ten, assuming both lease extensions are exercised.

 

NOTE 3: RESTATEMENT

The accompanying financial statements have been restated to utilize the equity method of accounting for the May 2006 sale of 43.68% of Turbotec Products, Plc and subsequent reporting for the remaining 56.32% interest in Turbotec Products, Plc.  Previously the Company utilized the consolidation method of accounting under Generally Accepted Accounting Principles ("GAAP).  A summary of the effects of this change is shown in the following schedules. 

 

6

---

 

 

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2009, 2008, 2007 AND 2006

 

		As Restated																As Previously Reported																Change
		2009				2008				2007				2006				2009				2008				2007				2006				2009				2008				2007				2006
ASSETS
CURRENT ASSETS
Cash		$	424			$	126			$	333			$	1,244			$	2,408			$	1,299			$	333			$	1,245			$	(1,984	)		$	(1,173	)		$	-			$	(1	)
Marketable securities			36				52				299				-				36				52				299				-				-				-				-				-
Inventories			-				-				-				-				3,725				4,035				3,897				3,653				(3,725	)			(4,035	)			(3,897	)			(3,653	)
Prepaid expenses and other current assets			1,316				39				109				351				531				314				396				529				785				(275	)			(287	)			(178	)
Total current assets			1,776				217				741				1,595				6,700				5,700				4,925				5,427				(4,924	)			(5,483	)			(4,184	)			(3,832	)
PROPERTY, PLANT AND EQUIPMENT, net			3,121				3,296				3,379				3,434				8,295				7,962				7,617				7,221				(5,174	)			(4,666	)			(4,238	)			(3,787	)
DEFERRED INCOME TAXES			1,200				1,200				1,200				1,760				980				980				980				1,760				220				220				220				-
OTHER ASSETS
Investments - at equity			3,462				5,025				4,639				3,800				-				-				-				-				3,462				5,025				4,639				3,800
Related party receivables			111				1,286				449				(53	)			-				-				-				-				111				1,286				449				(53	)
Other			77				196				163				128				178				297				258				228				(101	)			(101	)			(95	)			(100	)
Total other assets			3,650				6,507				5,251				3,875				178				297				258				228				3,472				6,210				4,993				3,647
TOTAL ASSETS		$	9,747			$	11,220			$	10,571			$	10,664			$	16,153			$	14,939			$	13,780			$	14,636			$	(6,406	)		$	(3,719	)		$	(3,209	)		$	(3,972	)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit		$	1,087			$	250			$	-			$	-			$	1,087			$	250			$	-			$	-			$	-			$	-			$	-			$	-
Accounts payable			195				186				78				32				1,364				2,384				1,975				2,308				(1,169	)			(2,198	)			(1,897	)			(2,276	)
Accrued expenses and taxes			770				248				59				135				1,077				655				772				311				(307	)			(407	)			(713	)			(176	)
Current portion of long-term debt			128				122				96				148				270				301				187				467				(142	)			(179	)			(91	)			(319	)
Current portion of liabilities from discontinued operations			-				-				-				71				-				-				-				71				-				-				-				-
Total current liabilities			2,180				806				233				386				3,798				3,590				2,934				3,157				(1,618	)			(2,784	)			(2,701	)			(2,771	)
LONG-TERM LIABILITIES
Long-term debt, less current maturities above			1,478				1,610				1,714				1,716				1,602				1,866				2,126				1,884				(124	)			(256	)			(412	)			(168	)
Long-term liabilities from discontinued operations			2,782				2,782				2,782				3,312				2,782				2,782				2,782				3,364				-				-				-				(52	)
Total long-term liabilities			4,260				4,392				4,496				5,028				4,384				4,648				4,908				5,248				(124	)			(256	)			(412	)			(220	)
DEFERRED INCOME TAXES			-				-				-				-				333				189				346				908				(333	)			(189	)			(346	)			(908	)
COMMITMENTS AND CONTINGENCIES			-				-				-				-				-				-				-				-				-				-				-				-
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 25,000,000 shares			46				41				40				40				46				41				40				40				-				-				-				-
Additional paid-in capital			7,262				7,138				7,116				7,237				7,262				7,138				7,116				7,237				-				-				-				-
Accumulated other comprehensive income			7				24				64				-				7				26				64				-				-				(2	)			-				-
Deficit			(4,008	)			(1,181	)			(1,378	)			(2,027	)			(2,450	)			(1,855	)			(2,079	)			(2,237	)			(1,558	)			674				701				210
Total Thermodynetics , Inc. Stockholders Equity			3,307				6,022				5,842				5,250				4,865				5,350				5,141				5,040				(1,558	)			672				701				210
Noncontrolling Interest			-				-				-				-				4,181				3,479				3,171				2,784				(4,181	)			(3,479	)			(3,171	)			(2,784	)
Total Equity			3,307				6,022				5,842				5,250				9,046				8,829				8,312				7,824				(5,739	)			(2,807	)			(2,470	)			(2,574	)
TOTAL LIABILITIES AND EQUITY		$	9,747			$	11,220			$	10,571			$	10,664			$	17,561			$	17,256			$	16,500			$	17,137			$	(7,814	)		$	(6,036	)		$	(5,929	)		$	(6,473	)

 

 

7

---

 

 

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009, 2008, 2007 AND 2006

 

		As Restated																As Previously Reported																Change
		2009				2008				2007				2006				2009				2008				2007				2006				2009				2008				2007				2006
REVENUES
Consulting Fee & Rental Income		$	495			$	496			$	461			$	428				-				-				-				-			$	495			$	496			$	461			$	428
Manufacturing Sales			-				-				-				2,840			$	9,734			$	14,929			$	14,458			$	11,545				(9,734	)			(14,929	)			(14,458	)			(8,705	)
COST OF SALES			-				-				-				2,160				6,670				10,416				10,509				9,106				(6,670	)			(10,416	)			(10,509	)			(6,946	)
OPERATING EXPENSES			913				689				635				927				2,714				3,448				2,849				1,773				(1,801	)			(2,759	)			(2,214	)			(846	)
Income (loss) from operations			(418	)			(193	)			(174	)			181				350				1,065				1,100				666				(1,263	)			(1,754	)			(1,735	)			(913	)
EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY			384				558				557				178				-				-				-				-				384				558				557				178
OTHER INCOME (EXPENSE)
Other, net			(151	)			-				11				30				80				(11	)			(5	)			(15	)			(231	)			11				16				45
Interest expense			120				(71	)			(65	)			(106	)			(82	)			(82	)			(80	)			(144	)			202				11				15				38
Gain on sale of stock of subsidiary			-				-				-				2,666				-				-				-				2,666				-				-				-				-
Realized loss on impairment			(2,196	)			-				-
			(2,227	)			(71	)			(54	)			2,590				(2	)			(93	)			(85	)			2,507				(29	)			22				31				83
Income before provision for income taxes			(2,261	)			294				329				2,949				348				972				1,015				3,173				(2,609	)			(678	)			(686	)			(224	)
PROVISION FOR  INCOME TAXES			4				6				(149	)			107				321				466				237				215				(317	)			(460	)			(386	)			(108	)
Income (loss) from continuing operations			(2,265	)			288				478				2,842				27				506				778				2,958				(2,292	)			(218	)			(300	)			(116	)
DISCONTINUED OPERATIONS
Loss from discontinued operations including gain on extinguishment of debt of $605,929			-				-				-				(9	)			-				-				-				(9	)			-				-				-				-
Net loss on discontinued operations			-				-				-				(9	)			-				-				-				(9	)			-				-				-				-
Net income (loss)			(2,265	)			288				478				2,833				27				506				778				2,949				(2,292	)			(218	)			(300	)			(116	)
Less Net Income attributable to the Noncontrolling Interest			-				-				-				-				(223	)			(304	)			(333	)			(128	)			223				304				333				128
Net income (loss) attributable to Thermodynetics, Inc.			(2,265	)			288				478				2,833				(196	)			202				445				2,821				(2,069	)			86				33				12
OTHER COMPREHENSIVE INCOME (LOSS), net of tax			(18	)			(14	)			62				-				(18	)			(14	)			62				-				-				-				-				-
Comprehensive income (loss) attributable to Thermodynetics		$	(2,283	)		$	274			$	540			$	2,833			$	(214	)		$	188			$	507			$	2,821			$	(2,069	)		$	86			$	33			$	12
EARNINGS  PER COMMON SHARE		$	(0.52	)		$	0.07			$	0.12			$	0.71			$	(0.05	)		$	0.05			$	0.11			$	0.70			$	(0.47	)		$	0.02			$	0.01			$	0.00

 

 

8

---

 

 

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009, 2008, 2007 AND 2006

 

		As Restated																As Previously Reported																Change
		2009				2008				2007				2006				2009				2008				2007				2006				2009				2008				2007				2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	(2,265	)		$	288			$	478			$	2,833				(196	)		$	202			$	445			$	2,821			$	(2,069	)		$	86			$	33			$	12
Adjustments to reconcile net income (loss) to net  cash provided by operating activities:
Depreciation and amortization			97				88				87				90				248				241				221				196				(151	)			(153	)			(134	)			(106	)
Earnings in unconsolidated subsidiary			(335	)			(505	)			(273	)			(150	)			-				-				-				-				(335	)			(505	)			(273	)			(150	)
Net change in minority interest in subsidiary			-				-				-				-				266				327				7				128				(266	)			(327	)			(7	)			(128	)
Realized loss on impairment			2,196				-				-				-				-				-				-								2,196				-				-				-
Gain on sale of stock of subsidiary			-				-				-				(2,666	)			-				-				-				(2,666	)			-				-				-				-
Deconsolidation of subsidiary, net of cash			-				-				-				117				-				-												-				-
Increase (decrease) in deferred tax liability			-				-				-				(720	)			(50	)			(107	)			11				43				50				107				(11	)			(763	)
Issuance of stock			129				-				-				-				129				-				-				-				-				-				-				-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable			-				-				-				(1,147	)			452				592				120				(451	)			(452	)			(592	)			(120	)			(696	)
Decrease (increase) in inventories			-				-				-				1,090				(153	)			(899	)			(481	)			(652	)			153				899				481				1,742
(Increase) decrease in prepaid expenses and  other assets			(731	)			(15	)			(72	)			240				(163	)			(118	)			(239	)			(48	)			(568	)			103				167				288
(Increase) decrease in other assets			-				(30	)			-				41				-				-				-				-				-				(30	)			-				41
Increase (decrease) in accounts payable			(10	)			105				41				(380	)			458				338				(120	)			49				(468	)			(233	)			161				(429	)
Increase (decrease) in accrued expenses and taxes			217				38				(29	)			248				(127	)			(163	)			(203	)			(25	)			344				201				174				273
Cash provided from operating activities of discontinued operations			-				-				-				-				-				-				-				9				-				-				-				(9	)
Net cash provided by (used in) operating activities			(702	)			(31	)			232				(404	)			864				413				(239	)			(596	)			(1,566	)			(444	)			471				75
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment			(4	)			(17	)			-				(66	)			(316	)			(423	)			(203	)			(262	)			312				406				203				196
(Purchase) proceeds - marketable securities			(3	)			194				(21	)			-				(3	)			207				(21	)			-				-				(13	)			-				-
Net cash provided by (used in) investing activities			(7	)			177				(21	)			(66	)			(319	)			(216	)			(224	)			(262	)			312				393				203				196
CASH FLOWS FROM FINANCING ACTIVITIES
Net (increase) decrease in related party receivable			778				(288	)			(440	)			56				-				-				-				-				778				(288	)			(440	)			56
Proceeds from issuance of stock			-				-				-				3,213				-				-				-				-				-				-				-				3,213
Proceeds from short-term borrowings			25				150				-				176				25				150				13				287				-				-				(13	)			(111	)
Payments of debt from stock offering proceeds			-				-				-				-				-								-				(4,619	)			-				-				-				4,619
Compensation Expense from stock options			-				-				-				-				-				-				19				-				-				-				(19	)
Principal payments on debt and capital lease obligations			(66	)			(58	)			(52	)			(1,731	)			(146	)			(79	)			105				(320	)			80				21				(157	)			(1,411	)
Net cash provided by  (used in) financing activities			737				(196	)			(492	)			1,714				(121	)			71				137				(4,652	)			858				(267	)			(629	)			6,366
NET INCREASE (DECREASE) IN CASH			28				(50	)			(281	)			1,244				424				268				(326	)			(5,510	)			(396	)			(318	)			45				6,754
CASH, beginning of year			475				176				614				-				1,984				1,062				659				-				(1,509	)			(886	)			(45	)			-
CASH, end of year		$	503			$	126			$	333			$	1,244			$	2,408			$	1,330			$	333			$	(5,510	)		$	(1,905	)		$	(1,204	)		$	-			$	6,754

 

 

9

---

 

 

NOTE 4: EQUITY METHOD INVESTMENT

 

The Company’s 56.32% investment in its unconsolidated subsidiary Turbotec Products, Plc, in which the Company exercises significant influence, is carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses.

At September 30, 2009, 2008, 2007 and 2006, the market values of the common stock investment in Turbotec Products, Plc were as follows:

 

Year		Carrying Value			Per Share MV			Market Value
2009		$	3,462		$	0.45		$	3,273
2008			5,025			1.16			8,325
2007			4,639			1.78			12,850
2006			3,800			1.50			10,806

 

As a result of a decline in the market value of Turbotec Products, Plc at September 30, 2009, the carrying amount of the investment exceeded its market value.  Management has evaluated this decline in market value, and deemed the decline to be other than temporary as of September 30, 2009.  Accordingly, an impairment loss of $2,196 has been charged to operations during the six months ended September 30, 2009.

Following is a summary of financial position and results of operations of Turbotec Products, Plc for the six months ended:

 

		2009				2008				2007				2006
Current assets		$	7,139			$	7,565			$	6,469			$	5,653
Property and equipment, net			5,221				4,867				4,318				3,941
Other assets, net			101				101				95				95
Total assets			12,461				12,533				10,882				9,689
Current liabilities			1,627				2,358				1,959				1,997
Long-term Debt			103				212				475				242
Deferred liabilities			781				728				573				908
			2,511				3,298				3,007				3,147
Stockholders'  equity			9,950				9,235				7,875				6,542
			12,461				12,533				10,882				9,689
Sales			14,682				22,251				20,874				17,312
Net income		$	510			$	1,342			$	1,387			$	672

 

Included in consulting fees and rental income on the income statement is $461, $462, $428, and $396 from Turbotec Products, Plc, for the six months ended September 30, 2009, 2008, 2007 and 2006, respectively.  Additionally, included in receivables on the balance sheet are net amounts from Turbotec Products, Plc which represents consulting fees, dividends receivable (net of an allowance) and pass-through rent amounts.  The balances are $111, $1,286, $449 and $(53) at September 30, 2009, 2008, 2007 and 2006 respectively .

 

 

10

---

 

 

NOTE 5: EARNINGS PER SHARE

 

Earnings per share for the six months ended September 30, 2009, 2008, 2007 and 2006 have been computed based on the weighted average of outstanding shares during the periods.

 

The weighted average numbers of shares outstanding used in the calculations are as follows:

		Six Months Ended September 30,
		(in 000's)
			2009		2008			2007		2006
Weighted Average Shares Outstanding-Basic		4,373,023			4,080,306		4,046,361			4,002,308
Weighted Average Shares Outstanding-Diluted		4,373,023			4,080,306		4,046,361			4,002,308

 

NOTE 6: CASH FLOW INFORMATION AND NON CASH INVESTING ACTIVITIES

 

The following supplemental information is disclosed pursuant to the requirements of ASC 230-10.

 

	Six Months Ended September 30,
	(in 000's)
		2009				2008				2007				2006
Cash payments for interest		$	79			$	71			$	65			$	106

During the six months ended September 30, 2008, long – term debt of approximately $35,000 was incurred to acquire a vehicle.

 

NOTE 7: INVESTMENT/LOAN

 

As of September 30, 2009, $300,000 had been advanced to a manufacturer of commercial buildings under loans which bear interest at 12%, payable monthly, and are repayable upon the financing of the manufacturer or on August 31, 2010, whichever comes first.  As a consideration of the loan described above, shares were issued to the Company representing 6% of the manufacturer; Thermodynetics’ CEO is also serving as the manufacturer’s CEO, and he has been issued shares equal to 5% of the manufacturer as an incentive.

 

NOTE 8: LINE OF CREDIT

 

The Company’s $1.1 million line of credit matured on July 31, 2009 and is due in full; however, the Company's bank has proposed terms for an extension of the due date and this is a continuing discussion.  Since July 31, 2009, the Company has continued to pay interest under the terms of the line of credit.

 

NOTE 9: FINANCIAL ACCOUNTING STANDARDS

 

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and has been adopted in these financial statements.

 

 

11

---

 

 

NOTE 10: LEGAL PROCEEDINGS

 

The following are the known or threatened legal proceedings:

a)

The lawsuit instituted by the Company on January 8, 2008 in the High Court in England, file no. HC08C00046, against Turbotec Products Plc was concluded in February, 2010.  A judgment in favor of the Company on one count and against it on two counts was rendered on May 10, 2010.  The net effect of the judgment held that administrative fees were not payable to the Company, and that the Company was required under British law to reimburse the PLC for a substantial portion of the PLC’s legal expenses.  All administrative fees that had been paid to the Company by the PLC were credited against the dividends that had been due to the Company, and no further previously declared dividend payments are payable.  The PLC has claimed total legal costs of approximately £700,000 which are to be subject to an assessment by the court if they cannot be agreed.  The PLC will be entitled to 85% of its legal costs after assessment by the court.  On May 24, 2010, in accordance with the judgment, the Company paid £350,000 to the PLC on account of their costs.  The exchange rate of pounds sterling for US dollars is approximately $1.45 per £1.

b)

Turbotec Products, Inc. commenced a lawsuit against Thermodynetics on February 27, 2008 in the Connecticut Superior Court, Judicial District of Hartford, alleging that Thermodynetics breached two commercial leases, and that Thermodynetics improperly withdrew funds from a sinking fund established under the leases. The lawsuit was transferred from the regular docket to the Housing Session and now is entitled Turbotec Product, Inc. v. Thermodynetics, Inc., Connecticut Superior Court, J.D. of Hartford, Housing Session, Docket No. 7712.

 

In 2009, Turbotec Products filed an amended complaint adding counts for fraudulent inducement, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. Sect. 42-110b, et seq.).  Thermodynetics has completed discovery.  The Company's motion to transfer the case back to the regular docket given the nature of the new claims was granted on August 5, 2009.  A prejudgment hearing is scheduled for July 21, 2010.

 

Turbotec Products claims that it suffered damages in excess of $350,000 and such damages are continuing to accrue.  Thermodynetics denies the allegations, is vigorously defending the case, and filed counterclaims for sums due under the two leases, and has claimed the case for a jury trial.   Thermodynetics does not view the risk of loss in the case as probable or material. 

(c)

There are a number of threatened and pending actions against Vulcan, and a number of material judgments obtained against Vulcan.  Thermodynetics and its other subsidiaries are not and have not been a party to any such Vulcan actions.

 

 

12

---

 

 

Item 2.                      Management's Discussion in Analysis of Financial Condition and Results of Operations.

Results of Operations .

Income resulted from consulting fees and rental income in the 3, 6 and 9 month periods ended June, September and December 2006, 2007, 2008 and 2009 respectively, in roughly equal amounts while the period from April 1, 2006 through May 10, 2006 also reflected that period’s manufacturing revenues generated by Turbotec Products, Inc.

Operating expenses increased because of the legal costs involved in the litigation regarding the interpretation of the relationship agreement that was required to complete the London IPO of Turbotec in May 2006.

The equity in earnings of Turbotec Products Plc derives from the 56.32% ownership by the Company of the Plc shares.  The sale of the 43.68% interest in the Plc is included in fiscal 2007 while the sale of a different holding in an unaffiliated entity was realized in fiscal 2009.

The Company recorded net income in each of the relevant periods except in fiscal 2009 when a loss occurred in each reported period.

Rental income derives from the two buildings located in Windsor, CT that are currently rented.  The current tenants are not expected to renew their leases and the property is being actively offered for sale or rent.  There can be no assurance that a sale or rental will be consummated, nor as to the financial effect of such transactions, if any.

 

13

---

 

 

With respect to the impairment of the Turbotec share holdings, the issues considered are the value that is carried on the Company’s books, the price of the shares as they trade on the open market, the underlying causes of the changes in share value and the duration of the price trends of the shares.  The holdings were valued at the end of each quarterly period based on GAAP and were compared to the market value based on the quoted share price; careful consideration was given to all the issues noted above as to whether the value was impaired or not.  The prevalent determining factors of these evaluations were the time duration of the decreased valuation and the affects of the global economy and related currency fluctuations, therefore it was determined that at June 30, 2009 the impairment was temporary as the price rose subsequent to June 30 and the value had only been depressed for a few months.  When evaluated during the 3 month period ended September 30, 2009, it was determined that the decrease was now other than temporary and the impairment was entered in the Company’s records as of the end of the second quarter of fiscal 2010.

 

The Company is seeking other entities that would be interested in obtaining assistance through consulting efforts for their organizations.  Such opportunities are possible from a modular building manufacturer that is currently seeking financing and a metal finishing company that has approached the Company’s management on a preliminary basis.  The difficulty in consummating such assignments is believed to be a result of the general sluggish economy and the lack of credit available through banks or other lenders.

 

Liquidity .

The Company’s working capital position was positive at June 30, September 30 and December 31, 2006 and 2007 and negative at June 30, September 30 and December 31, 2008 and 2009.  It is anticipated that future working capital will be generated by the sale of assets or from consulting assignments and rents, although no assurance can be given that these efforts will be successful.

The Company’s line of credit was due to be repaid in July 2009 and discussions with the lender as to repayment are ongoing.

Cash was generated from short term borrowings and the sale of assets as well as from fees and rents received.

FORWARD LOOKING STATEMENTS

 

This report contains certain forward-looking statements regarding the Company, its business prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause the Company’s actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: the Company’s ability to successfully and timely develop and finance new projects, the impact of competition on the Company’s revenues, the real estate market in Connecticut, and the economy as it relates to companies seeking and able to pay for consulting services.

 

When used, words such as "believes," "anticipates," "expects," "continue", "may", "plan", "predict", "should", "will", "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by the Company in this report, news releases, and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect the Company’s business.

 

 

14

---

 

Item 4T.

Controls and Procedures.

 

(a)   Evaluation of Disclosure Controls and Procedures -

 

The Company’s principal executive and principal financial officers have concluded, based on their evaluation, that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “ Exchange Act ”)), as of the end of the period covered by this report, were not effective to provide the material information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the Exchange Act.  Utilization of the consolidation method of accounting under GAAP rather than equity method of accounting was the result of the ineffective procedures.

 

(b)   Changes in Internal Controls -

 

There were no changes made and no corrective actions taken during the quarter ended for this report with respect to the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect the Company's internal control over its financial reporting, except the utilization of the equity method of accounting in the restated financial statements.

 

 

15

---

 

 

PART II - OTHER INFORMATION

 

Item 6.

Exhibits.

 

(a)       Exhibits :

 

Rule 13a-14(a)/15d-14(a) Certifications:

 

·

Exhbit 31(a)

Certification of Chief Executive Officer.

·

Exhbit 31(b)

Certification of Chief Financial Officer.

 

Section 1350 Certifications:

 

·

Exhbit 32(a)

Certification of Chief Executive Officer.

·

Exhbit 32(b)

Certification of Chief Financial Officer.

 

 

16

---

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THERMODYNETICS, INC.
Date: June 25, 2010	By:	/s/ R obert A. L erman
		Robert A. Lerman
		President and Chief Executive Officer
Date: June 25, 2010	By:	/s/ J ohn F. F erraro
		John F. Ferraro
		Treasurer and Chief Financial Officer

 

 

 

17