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, 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 MAY 19, 2000
Common
Par value $0.001 per share 50,774,177
<PAGE>
WATER CHEF, INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
Page
Item 1. Financial Statements:
Balance Sheet as of March 31, 2000 1
Statements of Operations for the three months
ended March 31, 2000 and 1999 2
Statements of Cash Flow for the three months
ended March 31, 2000 and 1999 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis or Plan
of Operations 5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 2. Changes in Securities and Use of Proceeds 6
Item 3. Defaults Upon Senior Securities 6
Item 4. Submission of Matters to a Vote of Securities Holders 6
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K 6
<PAGE>
WATER CHEF INC.
BALANCE SHEET
MARCH 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 107,927
Inventories - finished goods 81,560
Other current assets 2,148
---------------
TOTAL CURRENT ASSETS 191,635
PROPERTY AND EQUIPMENT 19,994
INVESTMENT IN JOINT VENTURE 37,184
INTANGIBLE AND OTHER ASSETS 51,486
---------------
$ 300,299
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable and accrued interest $ 2,915,632
Accounts payable 587,323
Accrued expenses 355,470
Preferred dividends payable 476,581
Loans payable 327,781
---------------
TOTAL CURRENT LIABILITIES 4,662,787
---------------
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value; 10,000,00 shares authorized;
145,500 shares issued and outstanding 146
Common stock, $.001 par value; 90,000,000 shares authorized;
47,774,177 shares issued and outstanding 47,774
Additional paid-in capital 7,511,555
Treasury stock, 4,400 common shares, at cost (5,768)
Accumulated deficit (11,916,195)
---------------
TOTAL STOCKHOLDERS' DEFICIT (4,362,488)
---------------
$ 300,299
===============
See notes to financial statements.
1
<PAGE>
WATER CHEF INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
2000 1999
------------- -------------
<S> <C> <C>
NET SALES $ 36,738 $ 103,333
------------- -------------
COSTS AND EXPENSES:
Cost of sales 28,300 52,352
Selling, general, and administrative 123,895 155,681
Depreciation and amortization 5,200 6,926
------------- -------------
157,395 214,959
------------- -------------
LOSS BEFORE OTHER EXPENSES AND
EXTRAORDINARY ITEM (120,657) (111,626)
------------- -------------
OTHER EXPENSES:
Equity in loss of joint venture (14,657) (14,588)
Interest expense (31,211) (51,675)
------------- -------------
OTHER EXPENSES (45,868) (66,263)
------------- -------------
Loss before extraordinary item (166,525) (177,889)
Extraordinary item - Gain on extinguishment of debt 340,251 -
------------- -------------
Net income (loss) 173,726 (177,889)
Preferred stock dividends (27,075) (27,075)
------------- -------------
Net income (loss) applicable to common stock $ 146,651 $ (204,964)
============= =============
Basic and diluted loss per common share:
Loss before extraordinary item $ (0.01) $ (0.01)
Extraordinary item 0.01 -
================== ====================
Net income (loss) per common share-basic and diluted $ 0.00 $ (0.01)
================== ====================
Weighted average number of common shares outstanding -
basic and diluted 36,795,791 32,524,515
================== ====================
</TABLE>
See notes to financial statements.
2
<PAGE>
WATERCHEF INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
2000 1999
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 173,726 $ (177,889)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities
Depreciation and amortization 5,200 6,926
Issuance of shares for services - 2,100
Equity in loss of joint venture 14,657 14,588
Extraordinary gain on extinguishment of debt (340,251) -
Change in assets and liabilities
Due from factor 2,073 (14,840)
Cash held in escrow 161,988 -
Prepaid expenses and other current assets 1,253 1,221
Inventories 17,005 29,963
Accounts payable and accrued expenses (374) 93,173
----------------- ----------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 35,277 (44,758)
----------------- ----------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment (10,000) -
----------------- ----------------
CASH USED in INVESTING ACTIVITIES (10,000) -
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable (171,776) 44,493
Proceeds from sale of common stock 250,000 -
----------------- ----------------
CASH PROVIDED BY FINANCING ACTIVITIES 78,224 44,493
----------------- ----------------
NET INCREASE(DECREASE) IN CASH 103,501 (265)
CASH - Beginning of period 4,426 7,994
================= ================
CASH - End of period $ 107,927 $ 7,729
================= ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
================= ================
Income taxes $ - $ -
================= ================
</TABLE>
See notes to financial statements
3
<PAGE>
WATER CHEF, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited 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, 2000, are not necessarily indicative
of the results of operations 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
operating loss of $166,000 for the three months ended March 31, 2000.
Additionally, the Company had working capital and total capital
deficiencies of $4,471,000 and $4,362,000 at March 31, 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 and 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
3. STOCKHOLDERS' EQUITY
During the three months ended March 31, 2000, the Company sold
4,583,330 common shares for $250,000. Additionally, 7,936,666 preferred
shares were exchanged for a like number of common shares.
4
<PAGE>
ITEM 2 - Management's Discussion and Analysis or Plan of Operations
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 2000 and March 31, 1999 were
$36,738 and $103,333 respectively. Revenues decreased $66,595 or 64%.
Cost of sales for the three months ended March 31, 2000 was $28,300 compared to
$52,352 in the three months ended March 31, 1999, a decrease of $24,052 or 46%.
Selling, general and administrative expenses for the three months ended March
31, 2000 were $123,895 compared to $155,681 in the comparable prior period, a
reduction of $31,786, or 20%.
Net income for the three months ended March 31, 2000 was $146,652 compared to a
net loss of $203,964 for the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had a stockholder's deficit of $4,362,488 and a
working capital deficit of $4,471,152.
During the three months ended March 31, 2000, the Company reached preliminary
agreement to resolve all outstanding debt with the Bear Paw Development
Corporation of Northern Montana and the Montana Department of Commerce with the
issuance of equity. Pending only final approval by Bear Paw's Board of
Directors, this settlement will reduce the Company's debt by approximately $1.9
million.
During the three months ended March 31, 2000, WaterChef made a final cash
payment to the U.S. Small Business Administration in full settlement of $490,000
of principal and accrued interest owed to that agency. The negotiated compromise
resulted in a forgiveness of debt of $288,000.
The Company also settled trade payables of $77,000 for a cash payment of
$25,000, which resulted in a forgiveness of debt of $52,000.
The Company also raised $250,000 through the sale of stock during the period,
and has entered into an agreement with a Broker-Dealer organization to do an
equity financing for the Company later in the year.
5
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities
During the three months ended March 31, 2000, the Company sold
4,583,330 common shares for $250,000. Additionally, 7,936,666
preferred shares were exchanged for a like number of common
shares.
ITEM 3. Defaults 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
None
6
<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 hereunto duly authorized.
WATER CHEF, INC.
Date: May 19, 2000 /s/ David A. Conway
David A. Conway
President, Director and Chief
Executive Officer
<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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 107,927
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 81,560
<CURRENT-ASSETS> 191,635
<PP&E> 385,510
<DEPRECIATION> (365,516)
<TOTAL-ASSETS> 300,299
<CURRENT-LIABILITIES> 4,662,787
<BONDS> 0
0
146
<COMMON> 47,774
<OTHER-SE> (4,410,408)
<TOTAL-LIABILITY-AND-EQUITY> 300,299
<SALES> 36,738
<TOTAL-REVENUES> 36,738
<CGS> 28,300
<TOTAL-COSTS> 157,395
<OTHER-EXPENSES> 14,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,211
<INCOME-PRETAX> (166,525)
<INCOME-TAX> 0
<INCOME-CONTINUING> (166,525)
<DISCONTINUED> 0
<EXTRAORDINARY> 340,251
<CHANGES> 0
<NET-INCOME> 173,726
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
