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 June 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 August 31, 2000
----- -------------
Common
Par value $0.001 per share 64,183,497
<PAGE>
WATER CHEF, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
PAGE
Item 1 Financial Statements:
Balance Sheet as of June 30, 2000.................................. 3
Statements of Operations's for the three and six month periods
ended June 30, 2000 and 1999....................................... 4
Statements of Cash Flow for the six month periods
ended June 30, 2000 and 1999....................................... 5
Notes to Financial Statements...................................... 6
Item 2 Managements Discussion and Analysis or Plan
of Operation....................................................... 8
PART II - OTHER INFORMATION
Item 1 Legal Proceedings.....................................................9
Item 2 Changes in Securities and Use of Proceeds.......................... 9
Item 3 Defaults Upon Senior Securities.................................... 9
Item 4 Submission of Matters to a Vote of Security Holders................ 9
Item 5 Other Information.................................................. 9
Item 6 Exhibits and reports on Form 8-K................................... 9
Signatures................................................................. 10
2
<PAGE>
WATER CHEF, INC.
Balance Sheet
June 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 53,571
Inventories 115,614
OTHER CURRENT ASSETS 3,794
-------------
Total Current Assets 172,979
PROPERTY AND EQUIPMENT 14,794
INVESTMENT IN JOINT VENTURE 16,759
INTANGIBLE AND OTHER ASSETS 51,143
------------
$ 255,675
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable and accrued interest $ 704,687
Accounts payable 532,245
Accrued expenses 345,509
Preferred dividends payable 503,656
LOANS PAYABLE - 327,781
------------
TOTAL CURRENT LIABILITIES 2,413,878
-----------
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; 62,708,449 shares issued and outstanding 62,708
Additional paid-in capital 8,453,752
Treasury stock; 4,400 common shares at cost (5,768)
ACCUMULATED DEFICIT (10,669,041)
------------
TOTAL STOCKHOLDERS' DEFICIT (2,158,203)
------------
$ 255,675
============
See notes to financial statements.
3
<PAGE>
WATER CHEF, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 78,674 $139,140 $ 115,412 $ 242,473
--------- --------- ------------ ------------
Costs and Expenses:
Cost of sales 46,734 44,355 75,034 96,707
Selling, general and administrative 143,232 192,959 267,127 359,639
Non-cash compensation 296,834 - 296,834 -
Depreciation and amortization 5,200 6,926 10,400 13,853
----------- ----------- -------------- --------------
492,000 244,240 649,395 470,199
----------- ----------- -------------- --------------
Loss Before Other Expenses and
Extraordinary Item (413,326) (105,100) (533,983) (227,726)
----------- ----------- -------------- --------------
Other Expenses:
Equity in Loss of Joint Venture (20,768) (17,305) (35,425) (31,893)
Interest Expense (25,719) (51,805) (56,930) (92,480)
----------- ----------- -------------- -------------
Other Expenses (46,487) (69,110) (92,355) (124,373)
----------- ----------- -------------- -------------
Loss before extraordinary item (459,813) (174,210) (626,338) (352,099)
Extraordinary item - Gain on early
extinguishment of debt 1,734,042 - 2,074,293 -
----------- ----------- ------------- -------------
Net Income (Loss) 1,274,229 (174,210) 1,447,955 (352,099)
Preferred Stock Dividends (27,075) (27,075) (54,150) (54,150)
----------- ----------- -------------- -------------
Net Income (Loss) applicable to
Common Stock $1,247,154 ($201,825) $1,393,805 ($406,249)
=========== =========== ============== =============
Basic income (loss) per common share:
Loss before extraordinary item $ (0.01) $ (0.01) $ (0.02) $ (0.01)
Extraordinary item 0.03 - 0.05 -
----------- ----------- -------------- -------------
$ 0.02 $ (0.01) $ 0.03 $ (0.01)
=========== =========== ============== ==============
Diluted income (loss) per common share:
Loss before extraordinary item $ (0.01) $ (0.01) $ (0.01) $ (0.01)
Extraordinary item 0.03 - 0.04 -
$ 0.02 $ (0.01) $ 0.03 $ (0.01)
============= ============= =============== =============
Weighted Average Common Shares Outstanding:
Basic 52,658,376 32,717,433 45,333,725 32,620,285
============= ============= =============== =============
Diluted 53,636,776 32,717,433 46,312,125 32,620,285
============= ============= =============== ==============
</TABLE>
See notes to financial statements.
4
<PAGE>
WATER CHEF, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 1,447,955 $ (352,099)
Adjustments to reconcile net income (loss) earnings to
net cash used in operating activities:
Depreciation and amortization 10,400 13,853
Non-cash compensation 296,834 14,100
Equity in loss of joint venture 35,425 31,893
Extraordinary gain on extinguishment of debt (2,074,293) -
Change in assets and liabilities:
Cash held in escrow 161,988 -
Accounts receivable 2,073 (50,256)
Inventory (17,049) 58,942
Other current assets (393) 2,511
Accounts payable (35,263) 7,150
ACCRUED LIABILITIES 25,213 140,340
--------- --------
NET CASH USED IN OPERATING ACTIVITIES (147,110) (133,566)
--------- ---------
Cash Flows From Investing Activities:
PURCHASE OF PLANT AND EQUIPMENT (10,000) -
--------- ----------
NET CASH USED IN INVESTING ACTIVITIES (10,000) -
--------- ----------
Cash Flows From Financing Activities:
Bank overdraft - 7,061
Proceeds from sale of common stock 350,000 -
REPAYMENT OF NOTES PAYABLE (143,745) 118,987
--------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 206,255 126,048
--------- ----------
Net Increase (Decrease) in Cash 49,145 (7,518)
CASH, BEGINNING OF PERIOD 4,426 7,994
---------- ----------
CASH, END OF PERIOD $ 53,571 $ 476
========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
WATER CHEF, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 six month periods ended June 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 a loss before
extraordinary item of $626,000 for the six months ended June 30, 2000.
Additionally, the Company had working capital and total capital deficiencies of
approximately $2,241,000 and $2,158,000 at June 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 six months ended June 30, 2000, the following common stock
transactions occurred:
<TABLE>
<CAPTION>
Additional
Number of Par Paid in
Shares Value Capital Total
----------------- ------------- ---------------- --------------
<S> <C> <C> <C>
Issued at December 31, 1999 35,254,181 $ 35,254 $ 7,266,138 7,301,392
Sale of common stock for
cash 4,983,330 4,983 295,017 300,000
Exercise of Class B
warrant 333,334 333 49,667 50,000
Issuance of shares for
consulting services 1,699,998 1,700 133,300 135,000
Conversion of notes
payable and accrued
interest 3,439,996 3,440 547,181 550,621
Conversion of other
liabilities 129,554 130 19,547 19,677
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 7,936,667 7,937 - 7,937
----------------- ------------- ---------------- --------------
Issued at June 30, 2000 62,708,450 $ 62,708 $ 8,453,752 $8,516,460
================= ============= ================ ==============
</TABLE>
4. EXTRAORDINARY ITEM
During the six months ended June 30, 2000, the Company reduced certain
outstanding debts payable in the amount of $2,488,293 by payments of $234,000 in
cash and by issuance of 2,000,000 shares of common stock with a market value of
$180,000, for a total consideration of $414,000. Such reduction resulted in a
gain on extinguishment of debt of $2,074,293 which was reflected in the
financial statements as of June 30, 2000 as an extraordinary item.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Net sales for the three months ending June 30, 2000 were $78,674 compared to net
sales of $139,140 for the three months ended June 30, 1999, a decrease of
$60,466 or 43%.
Net sales for the six months ended June 30, 2000 were $115,412 compared to net
sales of $242,473 for the six months ended June 30, 1999, a decrease of $127,061
or 52%.
Cost of sales for the three months and six months ended June 30, 2000 were
$46,734 and $75,034 respectively, compared to $44,355 and $96,707 for the three
months and six months ended June 30, 1999.
Selling, general and administrative expenses for the three months ended June 30,
2000 were $143,232 compared to $192,959 for the three months ended June 30,
1999, a decrease of $49,727, or 26%.
Selling , general and administrative expenses for the six months ended June 30,
2000 were $267,127 as compared to $359,639 in the comparable period in 1999.
Loss before extraordinary item for the three months and six months ended June
30, 2000 were $459,813 and $626,338 respectively compared to losses of $174,210
and $352,099 in the comparable periods in 1999.
During the six months ended June 30, 2000, the Company reduced certain
outstanding debts payable in the amount of $2,488,293 by payments of $234,000 in
cash and by issuance of 2,000,000 shares of common stock with a market value of
$180,000, for a total consideration of $414,000. Such reduction resulted in a
gain on extinguishment of debt of $2,074,293 which was reflected in the
financial statements as of June 30, 2000 as an extraordinary item.
Net income for the three months and six months ended June 30, 2000 was
$1,274,229 and $1,447,955 respectively, compared to net losses of $174,210 and
$352,099 for the comparable period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000 the Company had a stockholder's deficit of $2,158,203 and a
working capital deficit of $2,240,899.
During the three months ended June 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 $370,621were converted into 1,439,996 shares of common stock.
In addition accrued expenses, representing $19,677 of liabilities were settled
with the issuance of 129,554 common shares.
During the six months ended June 30, 2000 the Company raised $350,000 through
the sale of stock and exercise of warrants.
8
<PAGE>
With the reorganization of the Company's finances proceeding on schedule, the
Company plans an equity financing later in the year.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
During the six months ended June 30, 2000 the Company issued 333,334 common
shares upon the exercise of a Class B warrant for $50,000 and sold 4,983,330
common shares for $300,000. Additionally 3,569,550 common shares were issued in
settlement of $2,257,654 of debt; 8,931,390 common shares were issued under the
terms of a non-dilution agreement, and 1,699,998 shares were issued as payment
in lieu of cash for consulting services received. 7,936,667 preferred shares
were exchanged for a like number of common shares.
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 six months ended June 30,
2000.
9
<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.
Date: August 31, 2000 /s/ David A. Conway
David A. Conway
President, Director and Chief
Executive Officer
(Principal Operating Officer)
10
