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 March 31, 1999
( ) 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 MARCH 31, 1999
Common --------------
Par value $0.001 per share 33,060,019
2
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WATER CHEF, INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
PAGE
Item 1 Financial Statements:
Balance Sheets as of March 31, 1999
and December 31, 1998.............................. 3
Statement of Operations for the three month periods
ended March 31, 1999 and 1998...................... 4
Statement of Stockholders' Deficit................. 5
Statements of Cash Flow for the three month periods
ended March 31, 1999 and 1998...................... 6
Notes to Consolidated Financial Statements......... 7
Item 2 Managements Discussion and Analysis of Results
of Operations and Financial Condition.................... 8
PART II - OTHER INFORMATION
Item 3 Exhibits and Reports on Form 8-K.............................. 9
Signatures........................................................... 11
2
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3
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4
WATER CHEF, INC.
Balance Sheet
March 31 December 31
1999 1998
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash $ 7,729 $ 7,994
Accounts receivable 22,890 8,050
Inventory 190,353 220,316
Other current assets 2,646 3,867
------------- ------------
Total Current Assets 223,618 240,227
Property Plant and Equipment 273,599 279,045
Investment in joint venture 111,353 125,941
Intangible and other assets 51,486 52,967
------------ ------------
$ 660,056 $ 698,180
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable $3,584,742 $3,540,249
Accounts payable 1,119,906 1,105,197
Accrued expenses 684,617 626,154
Preferred dividends payable 368,281 341,206
Loans payable - shareholder 169,413 169,413
------------ ------------
TOTAL CURRENT LIABILITIES 5,926,959 5,782,219
Stockholders Deficit:
Preferred stock, $.001 par value; 10,000,000 shares
authorized; 8,082,166 shares issued and outstanding 8,082 8,082
Common stock, $.001 par value; 40,000,000 shares
authorized; 32,560,019 shares issued and outstanding 32,560 32,339
Additional paid-in capital 7,125,386 7,103,507
Treasury stock; 4,400 common shares at cost (5,768) (5,768)
ACCUMULATED DEFICIT (12,427,163) (12,222,199)
------------ -----------
TOTAL STOCKHOLDERS' DEFICIT (5,266,903) (5,084,903)
------------ -----------
$ 660,056 $ 698,180
============ ============
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WATER CHEF, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31
1999 1998
---- ----
Net Sales $ 103,333 $ 49,353
------------ ------------
Costs and Expenses:
Cost of sales 52,352 38,780
Selling, general and administrative 155,681 256,843
Depreciation and amortization 6,926 14,683
Provision for inventory write-down - 31,250
------------ ------------
214,959 341,556
Loss Before Equity in Loss of Joint Venture (111,626) (292,203)
Equity in Loss of Joint Venture (14,588) (238,700)
------------- ------------
Net Loss From Operations (124,214) (530,903)
Other Income and Expense:
Interest expense (51,675) (40,505)
Preferred stock dividends (27,075) (27,075)
------------- ------------
Net Loss $ (204,964) $ (598,483)
============= ============
NET LOSS PER COMMON SHARE (BASIC AND DILUTED) $ (0.006) $ (0.017)
============= ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 32,524,515 35,111,237
============ ============
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WATER CHEF, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
<TABLE>
Preferred Stock Common Stock Additional Retained
--------------------------------------- Paid-in Treasury Earnings
Shares Amt. Shares Amt. Capital Stock (DEFICIT) TOTAL
------ --- ------ --- ------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1998 8,082,166 $8,082 32,339,015 $32,339 $7,103,507 $(5,768) $(12,222,199) $(5,084,039)
Common Stock Issues For:
Services 21,000 21 2,079 2,100
Extinguishment of debt 200,000 200 19,800 20,000
Preferred stock dividend
(27,075) (27,075)
Net loss (177,889) (177,889)
--------- ------ ---------- -------- ---------- ------- ------------- ----------
Balance at
March 31, 1999 8,082,166 $8,082 32,560,015 $32,560 $7,125,386 $(5,768) $(12,427,163) $(5,266,903)
========= ====== ========== ======= ========== ======== ============ ===========
</TABLE>
6
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<TABLE>
<CAPTION>
WATER CHEF, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1999 1998
---- ----
Cash Flows From Operating Activities:
<S> <C> <C>
Net (loss) $(204,964) $(598,483)
Adjustments to reconcile net (loss) earnings to
net cash used in operating activities:
Depreciation and amortization 6,926 14,702
Issuance of shares for services 2,100 -
Equity in loss of joint venture 14,588 238,700
(Increase) decrease in operating liabilities:
Accounts receivable (14,840) 13,859
Inventory 29,963 57,621
Prepaid expense 1,221 942
Increase (decrease) in operating liabilities:
Accounts payable 14,710 105,847
Accrued liabilities 78,463 64,035
Accrued preferred stock dividends 27,075 27,075
---------- ---------
Net cash used in operating activities (44,758) (75,702)
---------- ---------
Cash Flows From Investing Activities:
Purchase of plant and equipment - (1,765)
---------- ----------
NET cash provided by financing activities - (1,765)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from notes payable - 50,000
Increase in notes payable accrued interest 44,493 32,252
---------- ----------
Net cash provided by financing activities 44,493 82,252
---------- ----------
Net Increase In Cash (265) 4,785
Cash, Beginning of Period 7,994 3,123
---------- ----------
Cash, End of Period $ 7,729 $ 7,908
========== ==========
SUPPLEMENTAL DISCLOSURES OF NON CASH ACTIVITIES
Common stock issued for services $ 2,100 $ -
========== ==========
Common stock issued for debt $ 20,000 $ -
========== ==========
</TABLE>
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9
WATER CHEF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(1) 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 month period ended March 31, 1999, are not necessarily indicative
of the operations results that may be expected for the year ending December 31,
1999. These financial statements should be read in conjunction with the Company'
December 31, 1998 Form 10-KSB, financial statements and accompanying notes
thereto.
Pursuant to a Merger Agreement and Plan of Reorganization between the Company
and Water Chef-Nevada dated June 4, 1993 ("the Agreement"), the Company issued
3,800,000 shares of its common stock to Water Chef-Nevada's three stockholders,
in exchange for all issued and outstanding common stock of Water Chef-Nevada.
The common stock issued represented 62% of the issued and outstanding shares of
its common stock after the merger. In connection with this transaction, Water
Chef-Nevada's officers and its director became officers and a director of the
Company. This resulted in Water Chef-Nevada's officers and director, and
directors appointed by Water Chef-Nevada, controlling the Company's day-to-day
operations.
In accordance with Accounting Principles Board Opinion No. 16, the Water
Chef-Nevada acquisition has been accounted for as a reverse acquisition. The
historical financial statements prior to June 4, 1993 are those of Water
Chef-Nevada (Water Chef-Nevada was formed on January 25, 1993, therefore, no
financial statements are presented prior to that date). For financial statement
presentation purposes, the Company is considered to be the predecessor.
(2) As of March 31, 1999, Inventories consist of the following:
Raw Material 7,137
FINISHED GOODS 183,216
-------
$190,353
=======
(3) In February 1994 the Company formed Tianjin Tahoe Cooler Co. LTD. ("Tianjin
Tahoe") a joint venture with Tianjin Electronics and Instrument Import and
Export Corporation (TEIIEC") for the purpose of manufacturing certain Company
designed water coolers in Tianjin, Peoples Republic of China. Water Chef own 55%
of the joint venture company.
(4) In December, 1995 the Company issued one million shares of common stock to
acquire Natural Water Systems, Inc. a company producing and marketing a variety
of water filters. Such activities were discontinued in 1997.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for the quarter ending March 31, 1999 and March 31, 1998 were $103,333
and $49,353 respectively. Revenues increased $53,980, or 109% over the earlier
period.
Cost of sales for the first quarter 1999 was $52,352 compared to $38,780 in
first quarter 1998, an increase of $13,572, or 35%. Gross margins in first
quarter 1999 were 49% compared to 21% in first quarter 1998, primarily due to
improved product mix and improved productivity.
Selling, general and administrative expenses for the period ending March 31,
1999 were $155,681 compared to $256,843 in the year earlier period. The decrease
of $101,162, or 39%, was primarily due to lower consulting and travel related
expenses.
The loss from continuing operations was $126,214 in first Quarter 1999 compared
to a loss of $530,903 in the year earlier period. The decrease of $404,689, or
76%, is primarily attributable to the above factors and to Water Chef's reduced
loss recognized from equity in the joint venture ($14,588 in first quarter, 1999
compared to $238,700 in first quarter, 1998).
LIQUIDITY AND CAPITAL RESOURCES
At the end of first quarter, 1999 the Company had a stockholder's deficit of
$5,266,903 and a working capital deficit of $5,703,341.
In first quarter 1999 the Company issued 21,000 shares of common stock in
payment for services rendered and 200,000 shares as compensation in lieu of
cash.
In first quarter 1999 management entered into negotiations to sell redundant
real estate and to restructure its existing debt.
Management intends to raise additional capital through future issuances of stock
and/or debentures to finance the growth of the Company.
8
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10
PART II - OTHER INFORMATION
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:Statement re: Computation of earnings per share page 10
B. Reports on Form 8-K
9
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EXHIBIT 1
WATER CHEF, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNING
MARCH 31, 1999
Common and Common Equivalent shares outstanding beginning of period 32,339,019
EFFECT OF WEIGHTING SHARES ISSUED................................... 185,496
-----------
WEIGHTED SHARES..................................................... 32,524,515
==========
The net loss per share was calculated as follows:
NET LOSS........................................................... ($204,964)
==========
WEIGHTED SHARES.................................................... 32,525,515
==========
NET LOSS PER COMMON AND COMMON EQUIVALENT SHARES
NET LOSS PER SHARE.................................................($ 0.006)
=============
10
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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.
Date: March 10, 2000 David A. Conway
President, Director and Chief
Executive Officer
(Principal Operating Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000764839
<NAME> Water Chef Inc.,
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,729
<SECURITIES> 0
<RECEIVABLES> 39,590
<ALLOWANCES> 16,700
<INVENTORY> 190,353
<CURRENT-ASSETS> 223,618
<PP&E> 680,925
<DEPRECIATION> 407,326
<TOTAL-ASSETS> 660,056
<CURRENT-LIABILITIES> 5,926,959
<BONDS> 0
0
8,082
<COMMON> 32,560
<OTHER-SE> (5,307,545)
<TOTAL-LIABILITY-AND-EQUITY> 660,056
<SALES> 103,333
<TOTAL-REVENUES> 103,333
<CGS> 52,352
<TOTAL-COSTS> 52,352
<OTHER-EXPENSES> 177,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,675
<INCOME-PRETAX> (177,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (177,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (177,889)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
