SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
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Commission File Number 0-16936
WorldWater Corp.
(Exact name of Registrant as specified in its charter)
NEVADA 33-0123045
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Pennington Business Park, 55 Route 31 South
Pennington, New Jersey 08534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 818-0700
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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 ____
As of the close of business on November 14, 1997, there were 14,319,738 shares
of the Registrant's Common Stock, $.001 par value, outstanding.
<PAGE>
WORLDWATER CORP.
Table of Contents
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Page No.
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Part I. FINANCIAL INFORMATION............................................ 3
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1997 (Unaudited) and
December 31, 1996 (Unaudited).................................... 3
Condensed Consolidated Statements of
Operations (Unaudited) for the three months
ended September 30, 1997 and 1996, and the nine
months ended September 30, 1997 and 1996..................... 4
Condensed Consolidated Statements of Cash
Flows (Unaudited) for the nine months ended
September 30, 1997 and 1996...................................... 5
Notes to the Condensed Consolidated
Financial Statements (Unaudited)................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 7
Part II. OTHER INFORMATION................................................ 9
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<PAGE>
<TABLE>
WorldWater Corp.
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 80,767 $ 14,296
Accounts Receivable 45,673 5,077
Inventory
Raw Materials 66,300 102,998
Less: Reserve -- --
Total Inventory 66,300 102,998
----------- -----------
Total Current Assets 192,741 122,371
----------- -----------
Non-Current Assets
Property, Plant & Equipment 118,710 64,809
Less: Accum Depreciation (58,730) (18,532)
----------- -----------
Net P, P&E 59,980 46,277
Security & Other Deposits 384 474
----------- -----------
Total Assets $ 253,104 $ 169,122
=========== ===========
Current Liabilities
Accounts payable and accrued expenses . $ 323,952 $ 382,730
Employment taxes/benefits 2,364 --
Accrued payroll 173,684 212,075
Accrued interest 540,399 473,378
Loan-related party -- 3,750
Notes payable 141,250 140,984
Current maturities of long-term debt - 1,565,650 1,752,000
convertible notes ----------- -----------
Total Current Liabilities 2,747,300 2,964,917
----------- -----------
Non-Current Liabilities
L/T. Debt - Convertible Notes, Net of . -- 550,000
----------- -----------
Current Maturities
Total Liabilities 2,747,300 3,514,917
----------- -----------
Stockholders Equity (Deficiency): 14,319 9,570
Common Stock: Par value $.001; 20,000,000
shares authorized; Issued and
outstanding September 30, 1997:
15,319,738 and December 31, 1996:
9,659,908
Additional Paid-In-Capital 3,554,312 2,992,911
Accumulated Deficit (6,064,316) (6,348,276)
----------- -----------
Stockholders Equity (Deficiency): (2,495,085) (3,345,795)
----------- -----------
Total Liabilities & Stockholders Equity ` $ 251,614 $ 169,122
(Deficiency) =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
<TABLE>
WorldWater Corp.
Condensed Consolidated Statements of Operations For the three
months ended September 30, 1997 and 1996,
and for the nine months ended September 30, 1997 and 1996
<CAPTION>
Three Months Nine Months
September 30,1997 September 30, 1996 September 30, 1997 September 30, 1996
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenue
Solar Pump Systems 12,780 3,988 446,444 13,988
Golden Beverage Products -- 3,119 -- 21,469
------------ ------------ ------------ ------------
Total Revenue 12,780 7,107 446,444 35,457
------------ ------------ ------------ ------------
Cost of Goods Sold
Solar Pump Systems 84,792 28,700 363,681 35,000
Golden Beverage Products -- 2,594 -- 17,081
------------ ------------ ------------ ------------
Gross Profit (Loss) (72,012) (24,187) 82,763 (16,624)
------------ ------------ ------------ ------------
Operating Expenses:
Service & Installation 13,042 8,000 35,780 21,400
Sales & Marketing 69,209 21,900 185,126 57,500
Research & Development 32,524 56,700 217,287 316,700
General & Administrative 97,913 83,842 245,091 358,178
------------ ------------ ------------ ------------
Total Operating Expenses 212,688 170,442 683,284 753,778
------------ ------------ ------------ ------------
Operating Loss (284,700) (194,629) (600,521) (770,402)
Other (Income) Expenses:
Interest expenses 71,068 46,024 180,592 136,019
Other (Income) Expense (7,668) 2,355 (1,709) 15,455
------------ ------------ ------------ ------------
NET LOSS ($348,100) ($243,008) ($779,404) ($921,876)
============ ============ ============ ============
Net Loss Per Share ($0.02) ($0.03) ($0.07) ($0.11)
Average Shares Outstanding 14,113,696 8,757,908 11,944,823 8,757,908
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
<TABLE>
WorldWater Corp.
Condensed Consolidated Statements of Cash Flows For the nine
months ended September 30, 1997 and 1996
<CAPTION>
Cash Flows from Operating Activities: September 30,1997 December 31, 1996
- ------------------------------------ ----------------- -----------------
<S> <C> <C>
Net Loss (779,404) (921,876)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 40,198 5,889
Interest expense paid for in common
stock 171,389 --
Changes in assets and liabilities:
Accounts payable and accrued expenses (58,778) 164,631
Accrued interest 67,021 135,000
Inventory 36,698 (6,673)
Accrued salaries (36,027) 41,625
Accounts receivable (40,596) 24
-------- ---------
Net Cash Used in Operating Activities (599,499) (581,380)
Cash Flows from Investing Activities
Decrease in other assets 90 3,509
Capital expenditures (53,901) (33,400)
(Decrease) increase in notes receivable (3,748) 44,500
-------- ---------
Net Cash (Used in) Provided by (57,559) 14,609
Investing Activities
Cash Flows from Financing Activities:
Proceeds from notes payable 266 560,905
Proceeds from Oppenheimer Fund -- 3,076
Proceeds from issuance of common stock 723,263 --
-------- ---------
Net Cash Provided by Financing 723,529 563,981
-------- ---------
Activities
Net increase in Cash 66,741 (2,790)
Cash at Beginning of Year 14,296 5,854
-------- --------
Cash at End of Third Quarter 80,767 3,064
======== ========
Supplemental Disclosure of Cash Flow
Information
Cash paid for interest 9,203 2,500
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
Part I. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been prepared
by WorldWater Corp. (the "Company") without audit and reflect all adjustments
(consisting only of normal and recurring adjustments and accruals) which are, in
the opinion of management necessary to present a fair statement of the results
for the interim periods presented. The statements have been prepared in
accordance with the regulations of the Securities and Exchange Commission, but
omit certain information and footnote disclosures necessary to present the
statements in accordance with generally accepted accounting principles. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full fiscal year. These
condensed financial statements should be read in conjunction with the financial
statement and footnotes thereto included as an exhibit to the Company's form 8-K
dated June 20, 1997, all previously filed with the Securities and Exchange
Commission.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary, WorldWater, Inc. All intercompany balances and transactions have
been eliminated in consolidation. The financial statements for all periods have
been restated to reflect the pooling of interests of WorldWater, Inc. and Golden
Beverage Corporation as a result of the April 7, 1997 reverse acquisition.
3. NET LOSS PER SHARE
Net loss per share for the three months ended September 30, 1997 and 1996, and
the nine months ended September 30, 1997 and 1996 is computed using the average
number of common shares of stock outstanding during the period. Common stock
equivalents are not considered in Net loss per share because their effect would
be anti-dilutive.
4. ACQUISITION
On April 7, 1997, WorldWater, Inc. concluded a reverse acquisition of Golden
Beverage Corporation, a Denver, Colorado based importer and distributor of
beverages, the latter becoming the surviving public company trading as
WorldWater Corp. with a NASDAQ Electronic Bulletin Board symbol of WWAT.
WorldWater Inc.'s Board of Directors, officers and employees replaced their
Golden Beverage equivalents and the former shareholders of WorldWater, Inc.
gained control of 87.8% of the public entity, now known as WorldWater Corp.
Outstanding Golden Beverage Corporation shares totaling 140,276,792 were
exchanged for 113,072 shares of WorldWater Inc. in a reverse split of 1240:1.
WorldWater Inc. remains as the sole subsidiary of WorldWater Corp.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS
Results of Operations
REVENUE. For the nine months ended September 30, 1997 revenue increased to
$446,444, up from $35,457 for the same period in 1996 with the third quarter
1997 contributing revenue of $12,780, up from $7,107 in the same period in 1996.
The nine-month revenue increase resulted from domestic and international sales
but was primarily due to the sale of 25 irrigation and drinking water solar
powered pump systems to the Philippine Government.
GROSS PROFIT. Gross Profit of $82,763 was recognized for the nine months ended
September 30, 1997 as against a loss of $16,624 for the same period in 1996. A
loss of $72,012 was recorded for the third quarter of 1997 compared to a loss of
$24,187 in the same period of 1996. The operating loss was $284,700 for the
third quarter in 1997 compared to an operating loss of $194,629 for the same
period in 1996.
SELLING AND MARKETING Sales and marketing expenses increased by 222 percent in
the nine-month period ending September 30, 1997 to $185,127 up from $57,500 in
the same period of 1996. Selling and marketing expenses increased by 216 percent
to $69,209 in the third quarter of 1997, up from $21,900 in the same period of
1996. The Company was primarily in an R&D mode until the last quarter of 1996
when the marketing of solar powered water pumping and electricity generation for
off-grid applications (such as power for remote communities) sharply increased
on a global basis. Selling and marketing expenses will remain high for the
remainder of the year. A refocus by senior management on marketing activities is
reflected by the reallocation of some costs from General & Administrative to
Selling & Marketing budgets. The increase resulted primarily from expenses
associated with the company's marketing efforts in the Philippines and Africa.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased by 31
percent for the nine-month period ended September 30, 1997 to $217,287 down from
$316,700 in the same period of 1996, reflecting the shift in focus to marketing.
Research and development expenses also declined by 43 percent to $32,524 in the
third quarter of 1997, down from $56,700 in the same period of 1996.
GENERAL AND ADMINISTRATIVE. General and administrative expenses declined by 32
percent to $245,091 for the nine-month period ended September 30, 1997, down
from $358,178 in 1996. This was a result of stringent cost controls and, as
stated above, a reallocation of some senior management costs to Sales and
Marketing, reflecting the greater emphasis on marketing-led growth. However
these expenses increased by 17 percent to $97,913 in the third quarter of 1997,
up from $83,842 in the same period of 1996. This was chiefly due to the addition
of a new General Manager/Financial Officer hired during the quarter and the
costs associated with a move
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<PAGE>
from a low cost operational facility in Trenton to a new facility in Pennington
which now incorporates all operational and administrative activities.
INCOME TAXES. The Company recognized no income tax expense for 1997 and 1996.
The Company has net operating loss carry forwards resulting in a tax benefit to
the company in 1997, of approximately $1,700,000.
Liquidity and Capital Resources
The Company's cash and cash equivalents increased by $66,471 to $80,767 from
December 31, 1996 to September 30, 1997. The largest use of cash was the
fulfillment of requirements in conjunction with the Philippine order, other
orders from Africa, the building of inventory levels, and working capital. The
Company received $1,172,000 from Royal Capital Inc. in return for equity in the
company in conjunction with the reverse acquisition of Golden Beverage Corp. The
Company has ended its association with Royal Capital Inc. and is actively
pursuing equity investment with other investment bankers. The Company plans to
raise further equity funding in the near future. This cash will be used to
increase marketing budgets, provide for enhanced working capital requirements,
and reduce debt. Failure to obtain sufficient funding may significantly curtail
planned company growth. There can be no assurance that the Company will obtain
any equity funding.
Forward Looking Statements
Statements contained or incorporated by reference in this Quarterly Report on
Form 10-Q that are not based on historical fact are "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may", "will", "expect", "estimate",
"anticipate", "continue", or similar terms, variations of such terms or the
negative of those terms. Such forward-looking statements include risks and
uncertainties, including, but not limited to: (i) the risk of inconsistent
margins for similar products due to varying engineering requirements at
installation sites causing difficult and unpredictable profit forecasting for
individual projects; (ii) risks associated with the Company's reliance on
international commitments; (iii) risks associated with high levels of marketing
expenses which have an immediate negative impact on profits and may never be
offset by future revenue increases as the result of such marketing expenditures;
(iv) the risks associated with time delays and extended negotiations resulting
from the open bidding process required of most government agencies and
international non-government organizations with which the Company conducts a
substantial portion of its business; (v) the risks associated with the
complexity of proper financial and trade related documentation which may delay
the procurement process in connection with the bidding process of such
government agencies and international non-government organizations; (vi) the
risk of future unavailability or limitation on the Company's net operating loss
carryforwards; (vii) risks that the Company will not be able to obtain necessary
financing to satisfy planned growth; (viii) risks associated with transacting
business with entities outside the United States; and (ix) the risks associated
with the fluctuating currency markets in contracts which may be executed in a
currency other than U.S. dollars.
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<PAGE>
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
During the quarter ended September 30, 1997, several holders of Convertible
Bridge Notes (the "Notes"), which were issued by WorldWater, Inc. and assumed by
the Company in connection with the reverse merger in April 1997, converted their
Notes and accrued interest into Common Stock of the Company. The Company issued
412,083 shares of Common Stock upon conversion of the Notes. The Notes converted
had a face amount of $170,000 plus interest of $36,041. The shares of Common
stock were issued to the Noteholders pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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<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, thereby duly authorized.
WORLDWATER CORP.
Date: November 19, 1997 By: /s/ Quentin T. Kelly
-------------------------------------
Quentin T. Kelly
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 19, 1997 By: /s/ Peter I. Ferguson
------------------------------------
Peter I. Ferguson
Vice-President
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000811271
<NAME> WorldWater Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 80,767
<SECURITIES> 384
<RECEIVABLES> 45,673
<ALLOWANCES> 0
<INVENTORY> 56,300
<CURRENT-ASSETS> 192,741
<PP&E> 118,710
<DEPRECIATION> 58,730
<TOTAL-ASSETS> 253,104
<CURRENT-LIABILITIES> 2,747,300
<BONDS> 0
0
0
<COMMON> 15,036
<OTHER-SE> (2,509,231)
<TOTAL-LIABILITY-AND-EQUITY> 253,104
<SALES> 446,444
<TOTAL-REVENUES> 446,444
<CGS> 383,681
<TOTAL-COSTS> 1,046,965
<OTHER-EXPENSES> 178,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180,592
<INCOME-PRETAX> (779,404)
<INCOME-TAX> 0
<INCOME-CONTINUING> (779,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (779,404)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
