U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 0R 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,2000
( ) TRANSITION REPORT UNDER SECTION 13 OR
15 (D) OF THE EXCHANGE ACT
For the transition period from.............to...............
Commission file number 0-30544
WATER CHEF, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 86-0515678
-------- ----------
(State of other jurisdiction (IRS Employer
of incorporation or organization) identification No.)
1007 Glen Cove Avenue, Suite 1, Glen Head, New York 11545
---------------------------------------------------------
(Address of principal executive offices)
516-656-0059
------------
(Issuer's telephone number)
-----------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange act during the past 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_____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
OUTSTANDING AS OF
CLASS NOVEMBER 10, 2000
----- -----------------
Common
PAR VALUE $0.001 PER SHARE 66,278,287
<PAGE>
WATER CHEF, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
PAGE
Item 1 Financial Statements:
Balance Sheet as of September 30, 2000............. 3
Statement of Operations for the three and nine month periods
ended September 30, 2000 and 1999................... 4
Statements of Cash Flow for the nine month periods
ended September 30, 2000 and 1999................... 5
Notes to Financial Statements....................... 6
Item 2 Managements Discussion and Analysis or Plan
of Operation.......................................... 9
PART II - OTHER INFORMATION
Item 1 Legal Proceedings.................................... 10
Item 2 Changes in Securities and Use of Proceeds........... 10
Item 3 Defaults Upon Senior Securities...................... 10
Item 4 Submission of Matters to a Vote of Security Holders. 10
Item 5 Other Information.................................... 10
Item 6 Exhibits and reports on Form 8-K..................... 10
Signatures............................................................... 11
2
<PAGE>
WATER CHEF, INC.
Balance Sheet
September 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 55,052
Inventories 127,332
Other current assets 20,445
------------
TOTAL CURRENT ASSETS 202,829
PROPERTY AND EQUIPMENT 14,000
INTANGIBLE AND OTHER ASSETS 51,143
------------
$ 267,972
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable and accrued interest $ 710,125
Accounts payable 645,328
Accrued expenses 266,163
Preferred dividends payable 530,731
Loans payable - 327,781
------------
TOTAL CURRENT LIABILITIES 2,480,128
------------
Stockholders Deficit:
Preferred stock, $.001 par value; 10,000,000 shares;
authorized; 145,500 shares issued and outstanding 146
Common stock, $.001 par value; 90,000,000 shares
authorized; 64,183,449 shares issued and outstanding 64,183
Additional paid-in capital 8,518,277
Treasury stock; 4,400 common shares at cost (5,768)
Accumulated deficit (10,788,994)
-------------
TOTAL STOCKHOLDERS' DEFICIT (2,212,156)
-------------
$ 267,972
=============
See notes to financial statements.
3
<PAGE>
WATER CHEF, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---- ---- ---- ----
Net sales $ 86,533 $79,384 $ 201,945 $ 312,587
-------- ------- ------------ ---------
Costs and Expenses:
Cost of sales 31,828 57,424 106,862 154,131
Selling, general and administrative 83,852 187,000 360,979 537,446
Non-cash compensation 36,500 - 323,334 -
Depreciation and amortization 4,794 6,926 15,194 20,779
----------- ---------- -------------- -----------
156,974 251,350 806,369 712,356
----------- ---------- -------------- -----------
Loss Before Other Income (Expenses) and
Extraordinary item ( 70,441) (171,966) (604,424) (399,769)
--------- --------- -------------- -----------
Other Expenses
Equity in Loss of Joint Venture (16,759) (22,885) (52,184) (54,778)
Interest expense (6,750) (50,836) (63,680) (152,508)
------------- ----------- --------------- ------------
(23,509 ) (73,721) (115,864) (207,286)
------------ ----------- --------------- ------------
Loss before extraordinary item (93,950) (245,687) (720,288) (607,055)
Extraordinary item - Gain on early
Extinguishment of debt 1,072 - 2,075,365 -
------------ ----------- -------------- -----------
Net Income (loss) (92,878) (245,687) 1,355,077 (607,055)
Preferred stock dividends (27,075) (27,075) (81,225) (81,225)
----------- ------------ -------------- -------------
Net Profit (Loss) applicable to
Common stock $ (119,953) (272,762) $1,273,852 (688,280)
=========== ========= ============== ============
Basic income (loss) per common share:
Loss before extraordinary item $ (0.00) $ (0.01) $ (0.01) $ (0.02)
Extraordinary item 0.00 - 0.04 -
----------- ------------ ---------------- -------------
$ (0.00) $ (0.01) $ 0.03 $ (0.02)
============ ============ ================ =============
Diluted income (loss) per common share:
Loss before extraordinary item $ (0.00) $ (0.01) $ (0.01) $ (0.02)
Extraordinary item 0.00 - 0.04 -
----------- ------------ ---------------- -------------
$ (0.00) $ (0.01) $ 0.03 $ (0.02)
============ ============= ================ ==============
Weighted Average Common Shares Outstanding:
Basic 63,293,775 32,717,433 51,302,407 32,620,285
=========== =========== =============== ==============
Diluted 64,272,175 33,717,433 52,280,807 32,620,285
=========== =========== =============== ==============
</TABLE>
See notes to financial statements.
4
<PAGE>
WATER CHEF, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,355,077 $ (597,785)
Adjustments to reconcile net income (loss) earnings to
net cash used in operating activities:
Depreciation and amortization 15,194 20,780
Non-cash compensation 323,334 14,100
Equity in loss of joint venture 52,184 54,778
Extraordinary gain on extinguishment of debt (2,075,365) -
Change in assets and liabilities:
Cash held in escrow 161,988 -
Accounts receivable 2,073 (4,449)
Inventories (28,767) 101,494
Other current assets (17,044) 3,495
Accounts payable 93,392 12,618
Accrued expenses (54,133) 383,429
---------- -------
NET CASH USED IN OPERATING ACTIVITIES (172,067) (11,540)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (14,000) -
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft -- 3,616
Proceeds from sale of common stock 375,000 -
Repayment of notes payable (138,307) -
---------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 236,693 3,616
---------- --------
Net Increase (Decrease) in Cash 50,626 (7,924)
CASH, BEGINNING OF PERIOD 4,426 7,994
---------- --------
CASH, END OF PERIOD $ 55,052 $ 70
========== ========
</TABLE>
See notes to financial statements.
5
<PAGE>
WATER CHEF, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-QSB.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows for
all periods presented have been made. The results of operations for the
three and nine month periods ended September 30, 2000, are not
necessarily indicative of the operating results that may be expected
for the year ending December 31, 2000. These financial statements
should be read in conjunction with the Company's December 31, 1999 Form
10-KSB, financial statements and accompanying notes thereto.
2. GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company incurred an a
loss before extraordinary item of approximately $720,000 for the nine
months ended September 30, 2000. Additionally, the Company had working
capital and total capital deficiencies of approximately $2,277,000 and
$2,212,000 at September 30, 2000. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans with respect to these matters include restructuring
its existing debt, raising additional capital through future issuances
of stock and or debentures. The accompanying financial statements do
not include any adjustments that might be necessary should the Company
be unable to continue as a going concern.
6
<PAGE>
3. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 2000, the following common
stock transactions occurred:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Additional
Number of Par Paid in
Shares Value Capital Total
----------------- ------------- ---------------- ----------------
Issued at December 31, 1999 35,254,181 $ 35,254 $ 7,266,138 $ 7,301,392
Sale of common stock for
cash 5,983,330 5,983 319,017 325,000
Exercise of Class B
warrant 333,334 333 49,667 50,000
Issuance of shares for
consulting services 2,129,998 2,130 169,370 171,500
Conversion of notes
payable and accrued
interest 3,439,996 3,440 547,181 550,621
Conversion of other
liabilities 174,554 175 24,002 24,177
Common stock issued to
the Chief Executive
Officer and President
under terms of a non-
dilution agreement 8,931,390 8,931 142,902 151,833
Exchange of preferred
shares on a one for one
basis for common shares 7,936,666 7,937 - 7,937
----------------- ------------- ---------------- ----------------
Issued at September 30,2000 64,183,449 $ 64,183 $ 8,518,277 $ 8,582,460
================= ============= ================ ================
</TABLE>
4. EXTRAORDINARY ITEM
During the nine months ended September 30, 2000, the Company reduced
its outstanding debts payable in the amount of $2,859,986 by payments
of $234,000 in cash and by issuance of 3,439,996 shares of common stock
with a market value of $550,621, for a total of $784,621. The remaining
balance of $2,075,365 was extinguished and accounted for as an
extraordinary gain.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net sales for the three months ended September 30, 2000 were $86,533 compared to
net sales of $79,384 for the quarter ended September 30, 2000. Revenues
increased by $7,149 or 9%.
Net sales for the nine months ended September 30, 2000 were $201,955 compared to
net sales of $312,587 for the first nine months of 1999, a decrease of $110,642
or 35%.
Cost of sales for the three months and nine months ended September 30, 2000 were
$31,828 and $106,862 respectively, compared to $57,424 and $154,131 for the
three months and nine months ended September 30, 1999, primarily due to lower
rent and utility costs and productivity gains.
Selling, general and administration expenses for the quarter ended September 30,
2000 were $83,852 compared to $187,000 for the quarter ended September 30, 1999,
a decrease of $103,148, or 55%, reflecting the elimination of satellite sales
offices and reduced travel expenses.
Selling, general and administration expenses for the nine months ended September
30, 2000 were $360,979 compared to $537,446 for the nine months ended September
30, 1999, a decrease of $176,467, or 33%, primarily due to lower professional
fees, property taxes and marketing expenses.
Loss before extraordinary item for the three months and six months ended
September 30, 2000 was $93,950 and $720,288, respectively, compared to losses of
$245,687 and $607,055 in comparable periods in 2000.
During the nine months ended September 30, 2000, the Company reduced its
outstanding debts payable in the amount of $2,859,986 by payments of $234,000 in
cash and by issuance of 3,439,996 shares of common stock with a market value of
$550,621, for a total of $784,621. The remaining balance of $2,075,365 was
extinguished and accounted for as an extraordinary gain.
Net loss for the third quarter and net income for the first nine months ended
September 30, 2000 was $92,878 and $1,355,077 respectively, compared to net
losses of $245,687 and $607,055 for the third quarter and first nine months of
1999, respectively.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000 the Company had a stockholder's deficit of $2,212,156
and a working capital deficit of $2,277,299.
During the nine months ended September 30, 2000 the Company finalized the
agreement to resolve all outstanding debt with the Bear Paw Development
Corporation of Northern Montana and the Montana Department of Commerce
(principal and interest aggregating $1,867,356) for the conversion of $180,000
of debt into of 2,000,000 shares of common stock, the remainder of $1,687,356
was forgiven and is accounted for as an extraordinary item. Other notes and
accrued interest aggregating $550,621 were converted into 3,439,996 shares of
common stock.
In addition accrued expenses and other liabilities, representing $24,177 were
resolved with the issuance of 174,554 common shares.
During the nine months ended September 30, 2000 the Company raised $375,000
through the sale of stock and exercise of warrants.
With the reorganization of the Company's finances proceeding on schedule, the
Company plans an equity financing later in the year.
CAUTIONARY FACTORS REGARDING FUTURE OPERATING RESULTS
The matters discussed in this form 10-QSB other than historical material are
forward-looking statements. Any such forward-looking statements are based on
current expectations of future events and are subject to risks and
uncertainties, which could cause actual results to vary materially from those,
indicated. Actual results could differ due to a number of factors, including
negative developments relating to unforeseen order cancellations or push outs,
the company's strategic relationships, the impact of intense competition and
changes in our industry. The Company assumes no obligation to update any
forward-looking statements as a result of new information or future events or
developments.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
During the nine months ended September 30, 2000 the Company issued 333,334
common shares upon the purchase of a warrant for $50,0000 and sold 5,983,330
common shares for $325,000. Additionally 3,614,550 common shares were issued in
settlement of $574,798 of debt; 8,931,390 common shares were issued under the
terms of a non-dilution agreement valued at $151,834, and 2,129,998 shares were
issued as payment in lieu of cash for consulting services received valued at
$171,500.
ITEM 3. Default Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Securities Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
a.) The following exhibits are filed as part of this report:
EXHIBIT DESCRIPTION
27 Financial Data Schedule
b.) Reports on Form 8-K:
No reports on Form 8-K were filed during the nine months ended
September 30, 2000.
10
<PAGE>
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.
WATER CHEF, INC.
November 14, 2000 /s/David A. Conway
----------------- -----------------------------
Date: David A. Conway
President, Director and Chief
Executive Officer
(Principal Operating Officer)
11
