With ThermoEnergy Corporation (OTCBB: TMEN) announcing strong quarterly results on Tuesday alongside the deployment of a ThermoEnergy ARP system at a biogas production plant outside of Amsterdam, the Netherlands trading volume in the diversified technologies company has surged on Wednesday. Volume has already topped the 2.3 million mark by early afternoon, well beyond its 50-day average of 136,000 and 200-day average of 63,000 and their share price has followed suit, jumping as high as 0.1900 after trading as low as 0.1200 on Monday.
Yesterday TMEN announced results for the three-month period ended March 31, 2012, noting revenue increased 78% to $1.7 million compared to the three-month period ended March 31, 2011. With this revenue increase TMEN also pushed their gross profit for the most recent three-month period to $260,000.
Triggering the revenue and gross profit growth has been TMEN’s $27.1 million contract with the New York City Department of Environmental Protection (“NYCDEP”), which generated 91% of their revenues for the first quarter of 2012. TMEN stated in their quarterly filing that they expect to generate significant revenues from this contract throughout 2012.
It should be noted that the disparity in revenues from the first quarter 2011 and first quarter 2012 are due in large part to fact TMEN was in the middle of engineering and design work on the contract back in 2011. The revenue spike and higher margins earned in 2012 come from the construction phase of the NYCDEP contract so the significant difference is understandable.
Despite the strong revenue performance displayed in the first quarter 2012 TMEN did state in their quarterly report “we do not have sufficient working capital to satisfy our anticipated operating expenses for the next 12 months. As of March 31, 2012, we had a cash balance of approximately $1.9 million and current liabilities of approximately $10.5 million, which consisted primarily of accounts payable of approximately $1.3 million, billings in excess of costs of approximately $4 million, convertible debt of $2.9 million (net of discounts), derivative liabilities of $552,000 and other current liabilities of approximately $1.7 million.”
So obviously TMEN is in need of additional business and they are hoping that Tuesday’s announcement regarding the deployment of a ThermoEnergy ARP (Ammonia Recovery Process) system, owned and operated by ThermoEnergy and its partner in the Netherlands ProfiNutrients BV, will stimulate some growth.
As pointed out in that release the ARP system “will be used to recover ammonia from anaerobic digester wastewater and convert it into ammonium sulfate fertilizer for European agricultural markets. The process is environmentally-friendly and the fertilizer product will meet all EU regulatory standards. The unit is expected to start operating in August 2012.”
Cary Bullock, CEO of TMEN, expressed optimism about this partnership thanks to the elevated price of natural gas in Europe which has created strong demand for biogas. Bullock stated “Because our Thermo ARP™ systems convert wastewater ammonia into valuable fertilizer products, they not only make biogas production more environmentally friendly, they provide the industry with an additional source of revenue to offset cost.”
In addition to this partnership in the Netherlands TMEN has been active in expanding their business in other areas of the world, recently negotiating an agreement with ITEA S.p.A to accelerate the development of emissions-free power generation technology. ITEA is an Italian engineering and technology division of the Sofinter Group, one of the most dynamic European players providing high technology, energy-recovery solutions.
TMEN has also recently executed a term sheet for the deployment of effluent emission solutions at palm oil plants in Latin America.
Shares of TMEN are currently holding around the 0.1690 level, just above their 50-day moving average but still lagging behind their 200-day moving average of 0.1917. While the company has forecast strong growth for the remainder of 2012 they will have to address their current liabilities if investors are to be expected to believe that they will see real value in owning shares.