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, 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 SEPTEMBER 30, 1999
--------
Common
Par value $0.001 per share 33,060,019
1
<PAGE>
WATER CHEF, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
PAGE
Item 1 Financial Statements:
Balance Sheets as of September 30,1999
and December 31, 1998.............................................3
Statement of Operations for the three and nine months
periods ended September 30, 1999 and 1998.........................4
Statement of Stockholders' Deficit................................5
Statements of Cash Flow for the nine month periods
ended September 30, 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
<PAGE>
WATER CHEF, INC.
Balance Sheet
September 30 December 31
1999 1998
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash $ 70 $ 7,994
Accounts receivable 12,499 8,050
Inventory 118,822 220,316
Other current assets - 3,867
------------- ------------
Total Current Assets 131,391 240,227
Property Plant and Equipment 262,708 279,045
Investment in joint venture 71,163 125,941
Intangible and other assets 48,896 52,967
------------ ------------
$ 514,158 $ 698,180
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable $3,672,530 $3,540,249
Bank overdraft 3,616 -
Accounts payable 1,097,815 1,105,197
Accrued expenses 847,302 626,154
Preferred dividends payable 422,431 341,206
Loans payable - shareholder 169,413 169,413
------------ ------------
TOTAL CURRENT LIABILITIES 6,213,107 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 32,060 32,339
Additional paid-in capital 7,166,886 7,103,557
Treasury stock; 4,400 common shares at cost (5,768) (5,768)
ACCUMULATED DEFICIT (12,901,209) (12,222,199)
------------ -----------
TOTAL STOCKHOLDERS' DEFICIT (5,698,949) (5,084,039)
------------ -----------
$ 514,158 $ 698,180
============ ============
3
<PAGE>
WATER CHEF, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended September 30, Nine Months Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 79,384 $ 85,170 $ 312,587 $ 196,155
------------ ----------- ------------ -------------
Costs and Expenses:
Cost of sales 57,424 57,234 154,131 124,004
Selling, general and administrative 187,000 205,735 537,446 665,950
Depreciation and amortization 6,926 14,430 20,779 43,543
Provision for inventory write-down - 31,250 - 62,500
------------ ----------- ------------ -------------
251,350 308,649 712,356 895,997
------------ ----------- ------------ -------------
Loss Before Equity in Loss of Joint Venture (171,966) (223,479) (309,499) (699,842)
EQUITY IN LOSS OF JOINT VENTURE (22,885) (228,800) (54,778) (70,400)
------------- ------------ ------------ -------------
Net Loss From Operations (194,851) 5,321 (445,277) (770,242)
Other Income and Expense:
Interest expense (50,836) (64,387) (152,508) (150,349)
Preferred stock dividends (27,075) (27,075) (81,225) (81,225)
------------- ------------ ------------ -------------
Net Loss $ (272,762) $ (86,141) $ (679,010) $ (1,001,816)
Net Loss Per Common Share
(basic and diluted) $ (0.008) $ (0.002) $ (0.021) $ (0.028)
Weighted Average Common Shares
Outstanding 33,135,019 37,493,724 32,793,748 36,198,538
=========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
WATER CHEF, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
For the Nine Months Ended September 30, 1999
(Unaudited)
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 421,000 421 13,679 14,100
Extinguishment of debt 300,000 300 49,700 50,000
Preferred stock dividend (81,225) (81,225)
Net loss (597,785) (597,785)
--------- ------ ---------- ------- ---------- -------- ------------- ------------
Balance at September 30, 1999 8,082,166 $8,082 33,060,015 $33,060 $7,166,886 $(5,768) $(12,901,209) $(5,698,949)
</TABLE>
<PAGE>
<TABLE>
WATER CHEF, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) $ (679,010) $(1,001,816)
Adjustments to reconcile net (loss) earnings to
net cash used in operating activities:
Depreciation and amortization 20,780 43,562
Issuance of shares for services 14,100 -
Equity in loss of joint venture 54,778 70,400
(Increase) decrease in operating liabilities:
Accounts receivable (4,449) 84,659
Inventory 101,494 168,470
Prepaid expense 3,867 2,826
Deposits (372) -
Increase (decrease) in operating liabilities:
Accounts payable 12,618 112,447
Bank overdraft 3,616 -
Accrued liabilities 221,148 229,211
Accrued preferred stock dividends 81,225 81,225
-------- ---------
Net cash used in operating activities (170,205) (209,016)
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 sale of common stock - 107,778
Proceeds from notes payable - 50,000
Principle payments on notes payable - (60,737)
Increase in notes payable accrued interest 162,281 136,731
-------- ---------
Net cash provided by financing activities 162,281 233,772
-------- ---------
Net Increase In Cash (7,924) 22,991
Cash, Beginning of Period 7,994 3,123
-------- ---------
Cash, End of Period $ 70 $ 26,114
======== =========
SUPPLEMENTAL DISCLOSURES OF NON CASH ACTIVITIES
Common stock issued for services $ 14,100 $ -
======== =========
Common stock issued for debt $ 50,000 $ 427,656
</TABLE>
<PAGE>
7
WATER CHEF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 June 30, 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 September 30, 1999, Inventories consist of the following:
Raw Material 30,106
FINISHED GOODS 88,715
--------
$ 118,821
<PAGE>
8
(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 September 30, 1999 were $79,384 compared to net
sales of $85,170 for the quarter ending September 30, 1998, a decrease of
$5,786, or 7%.
Net sales for the nine months ending September 30, 1999 were $321,857 compared
to net sales of $196,155 for the first nine months of 1998, for an increase of
$125,702, or 64%.
Cost of sales for the third quarter 1999 was $57,424 as compared to $57,234 for
the third quarter 1998. Gross margins for the third quarter, 1999 were 28%
compared to 33% in the third quarter, 1998.
Selling, general and administrative expenses for the quarter ending September
30, 1999 were $187,000 compared to $205,735 in the third quarter, 1998, a
decrease of $18,735, or 9%.
The net loss from continuing operations in the quarter ending September 30, 1999
was $194,851 compared to a profit of $5,321 in the quarter ending September 30,
1998. The 1998 period included a profit from equity in the joint venture while
the 1999 period included a loss of $22,885.
For the first nine months of 1999, the net loss was $678,010 compared to a net
loss of $1,001,816 for the first nine months of 1998, a reduction of $322,806,
or 32%.
The loss reduction is primarily due to reduced compensation expense and
consulting expense and gross margin improvement.
LIQUIDITY AND CAPITAL RESOURCES
At the end of third quarter, 1999, the Company had a stockholders' deficit of
$5,698,949 and a working capital deficit of $6,081,716.
Management intends to restructure its existing debt and to raise additional
capital through future issuances of stock and/or debentures to finance the
growth of the Company
<PAGE>
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
<PAGE>
EXHIBIT 1
WATER CHEF, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNING
SEPTEMBER 30, 1999
Common and Common Equivalent shares outstanding beginning of period 33,060,019
EFFECT OF WEIGHTING SHARES ISSUED.................................. 75,000
----------
WEIGHTED SHARES.................................................... 33,135,019
==========
The net loss per share was calculated as follows:
NET LOSS........................................................... ($272,762)
WEIGHTED SHARES.................................................... 33,135,019
NET LOSS PER COMMON AND COMMON EQUIVALENT SHARES
NET LOSS PER SHARE.................................................($ 0.008)
<PAGE>
<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: March 10, 2000 David A. Conway
President, Director and Chief
Executive Officer
(Principal Operating Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000764839
<NAME> Water Chef Inc.,
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 70
<SECURITIES> 0
<RECEIVABLES> 29199
<ALLOWANCES> 16,700
<INVENTORY> 118,822
<CURRENT-ASSETS> 131,391
<PP&E> 680,925
<DEPRECIATION> 418,217
<TOTAL-ASSETS> 514,158
<CURRENT-LIABILITIES> 6,213,107
<BONDS> 0
0
8,082
<COMMON> 33,060
<OTHER-SE> (5,740,091)
<TOTAL-LIABILITY-AND-EQUITY> 514,158
<SALES> 321,857
<TOTAL-REVENUES> 321,857
<CGS> 154,131
<TOTAL-COSTS> 154,131
<OTHER-EXPENSES> 613,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,508
<INCOME-PRETAX> (597,785)
<INCOME-TAX> 0
<INCOME-CONTINUING> (597,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (597,785)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
