<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
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
WorldWater Corp.
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 July 30, 1998, there were 19,792,659 shares of
the Registrant's Common Stock, $.001 par value, outstanding.
<PAGE> 2
WORLDWATER CORP
QUARTERLY REPORT ON FORM 10-QSB
PART 1.
<TABLE>
<CAPTION>
FINANCIAL INFORMATION Page No.
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<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1998 (Unaudited) and December 31,
1997 (Audited). 3
Condensed Consolidated Statements of Operations
for the six months ended June 30, 1998
(Unaudited) and 1997 (Unaudited). 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 5
(Unaudited) and 1997 (Unaudited).
Condensed Consolidated Statements of 6
Stockholders Equity for the Period
January 1, 1998 through June 30, 1998(Unaudited).
Notes to the Condensed Consolidated
Financial Statements (Unaudited). 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART 2.
Item 1 SIGNATURES 11
Item 2 Exhibit 27 Financial Data Schedule
</TABLE>
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<PAGE> 3
WorldWater Corp
Condensed Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
6/30/98 12/31/97
------- --------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 24,906 $ 61,160
Accounts Receivable 63,501 60,529
Marketable Securities 190,000 162,500
Inventory 120,316 83,858
Display Systems 47,574 --
Prepaid Expenses -- 2,627
----------- -----------
Total Current Assets 446,297 370,674
----------- -----------
Non-Current Assets
Property, Plant, and Equipment, Net 37,583 47,875
Short Term Investments-Restricted 45,048 43,973
Other Assets 8,384 8,384
----------- -----------
TOTAL ASSETS 537,312 470,906
=========== ===========
Current Liabilities
Accounts Payable & Other Accrued Expenses 312,598 343,123
Employment taxes/benefits 33,564 25,301
Accrued payroll 167,250 169,250
Accrued interest 288,361 498,136
Notes Payable 310,447 179,181
Current maturities of long-term debt 989,650 2,021,650
----------- -----------
Total Current Liabilities 2,101,870 3,236,641
----------- -----------
TOTAL LIABILITIES 2,101,870 3,236,641
----------- -----------
Stockholders Deficiency
Common Stock 19,758 15,289
(Par value $.001; 30,000,000 shares
authorized; issued and outstanding June 30,1998--
19,757,659 and December 31, 1997 --15,288,502 )
Additional paid-in capital 6,139,643 4,229,884
Retained Earnings (7,723,959) (7,010,908)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,564,558) (2,765,735)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 537,312 $ 470,906
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 4
WorldWater Corp
Condensed Consolidated Statements of Operations
For the three months ended June 30, 1998 and 1997,
and for the six months ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
3 Month 6 Month
6/30/98 6/30/97 6/30/98 6/30/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 9,815 $ 429,784 $ 50,533 $ 433,664
Cost of Goods Sold 7,551 209,557 39,068 278,889
------------ ------------ ------------ ------------
Gross (Loss) Profit 2,264 220,227 11,465 154,775
------------ ------------ ------------ ------------
Operating Expenses:
Manufacturing Costs 67,785 40,871 110,198 118,564
Research & Development 27,068 21,054 44,605 61,078
Service & Installation 51,095 10,354 52,478 19,054
Sales & Marketing 153,928 39,270 248,158 69,050
General & Administrative 135,140 104,735 215,320 202,851
------------ ------------ ------------ ------------
Total Operating Expenses 435,016 216,284 670,759 470,597
------------ ------------ ------------ ------------
Operating (Loss) Profit (432,752) 3,943 (659,294) (315,822)
------------ ------------ ------------ ------------
Other Expenses
Interest Expense 24,849 52,372 57,832 109,524
Other Expense (Income) (2,038) 5,026 (4,075) 5,959
------------ ------------ ------------ ------------
Total Other Expense (Income) 22,811 57,398 53,757 115,483
------------ ------------ ------------ ------------
Net Loss $ (455,563) $ (53,455) $ (713,051) $ (431,305)
============ ============ ============ ============
Net Loss Per Share $ (0.026) $ (0.004) $ (0.041) $ (0.036)
Average Shares Outstanding 17,511,506 12,051,454 17,511,506 12,051,454
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
WorldWater Corp
Condensed Consolidated Statements of Cash Flows
For the six-months ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
6/30/98 6/30/97
--------- -----------
<S> <C> <C>
Net loss $(713,051) $ (431,305)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation 10,292 38,698
Charges relating to common stock issued 4,764
for services
Changes in Assets and Liabilities:
Accounts Payable & Accrued Expenses (30,525) (122,230)
Employment Taxes 8,263 11,089
Prepaid Expenses 2,627 (400)
Accrued Interest 56,109 40,456
Inventory (36,458) 37,257
Accrued Salaries (2,000) (56,391)
Accounts Receivable (2,972) (424,077)
Displays in Foreign Countries (47,574) 11,089
--------- -----------
Net Cash Used in Operating Activities (750,525) (895,814)
--------- -----------
Cash Flows from Investing Activities:
Decrease in Other Assets (1,075) 90
Proceeds from Securities 50,000
Capital Expenditures -- (42,763)
Decrease in Notes Receivable -- (3,750)
--------- -----------
Net Cash Used in Investing Activities 48,925 (46,423)
--------- -----------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 207,166 21,769
Repayment of Notes Payable (50,900)
Repayment of Current Maturities (171,000)
Proceeds from Issuance of Common Stock 680,080 810,400
NJ Economic Development Agency loan -- 200,000
--------- -----------
Net Cash Provided by (Used In) Financing Activities 665,346 1,032,169
--------- -----------
Net Increase (Decrease) in Cash (36,254) 89,932
Cash at Beginning of Year 61,160 14,296
--------- -----------
Cash at end of Second Quarter 24,906 104,228
========= ===========
Schedule of noncash investing/financing activities :
Changes in Assets & liabilities
Increase in the value of
Marketable Securities 60,000 --
Accrued Interest converted to Equity 265,084 --
Financing Activities
Current Maturities converted to Equity 861,000 705,350
Conversion of Note Payable to Equity 25,000 --
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 6
WorldWater Corp
Consolidated Statements of Stockholders Equity
For the Period January 1, 1998 through June 30, 1998
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Accumulated Stockholders
Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 15,288,502 $15,289 $4,229,884 $(7,010,908) $(2,765,735)
---------- ------- ---------- ----------- -----------
Issuance of Common stock
for cash 1,026,639 1,026 358,974 -- 360,000
Debentures and accrued interest
converted into common stock 1,870,385 1,871 863,651 -- 865,522
Issuance of Common stock
for Bridge Loans converted 681,354 681 245,319 -- 246,000
Issuance of Common stock
for Note Payable converted 78,869 79 39,483 -- 39,562
Issuance of Common stock
for warrants exercised 800,000 800 320,080 -- 320,880
Issuance of Common stock 11,910 12 4,752 -- 4,764
for Services Rendered
Net loss for the six months
ended June 30, 1998 -- -- -- (713,051) (713,051)
Recognized gain on
Marketable Securities -- -- 17,500 -- 17,500
Unrealized increase in value of
Marketable Securities -- -- 60,000 -- 60,000
---------- ------- ---------- ----------- -----------
Balance at June 30, 1998 19,757,659 $19,758 $6,139,643 $(7,723,959) $(1,564,558)
---------- ------- ---------- ----------- -----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 7
PART 1.
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 and 10-K dated May 13, 1998 all previously filed with the
Securities and Exchange Commission.
2. NET LOSS PER SHARE
Net loss per share for the six months ended June 30, 1998 and 1997 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.
3. CONVERSION OF LONG TERM DEBT
During the six months ended June 30, 1998 $861,000 of Long Term Debt
and a note payable for $25,000 had matured was converted into equity. Accrued
interest of $250,522 and $14,562 associated with these debts were also
converted to equity.
4. DISPLAY SYSTEMS
As part of the company's aggressive marketing efforts, AquaSafe(TM)
Systems have been strategically placed in various third world countries and in a
remote location just outside the Company's headquarters. The costs to the
company was $47,574 for the systems and management has classified these as
current assets on the Balance Sheet.
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<PAGE> 8
5. VALUE OF MARKETABLE SECURITIES
As part of a settlement agreement between WorldWater Corp and Royal
Capital Incorporated dated December 30, 1997 the company received 50,000 shares
of the common stock of Proformix Systems, Inc. which are traded on the NASDAQ
Electronic Bulletin Board. On December 31, 1997 these shares closed at a price
of $3.25 per share giving a valuation of $162,500 to WorldWater Corp's
holding. During the six months ended June 30, 1998 the company sold 10,000
shares and received $50,000 net proceeds from the sale. The company reported a
realized gain of $17,500 on the sales of these securities. On June 30, 1998
these shares closed at $4.75 giving the remaining 40,000 shares a valuation to
WorldWater Corp's holding of $190,000 and creating an unrealized gain of $60,000
on these securities.
6. ACCOUNTING CLASSIFICATIONS
Figures from the prior period June 30, 1997 have been adjusted to
reflect the current presentation for 1998. Management adjusted these account
grouping to better reflect current operations. Accordingly, there is no change
on Net Income during the prior period.
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<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
REVENUE. For the six months ended June 30, 1998 revenue decreased to $50,533
down from $433,664 in the same period in 1997. Revenue was lower than expected
for this period due to delays in follow through orders from several markets.
During 1997, a single order from the Philippine Government accounted for 87
percent of annual sales revenue.
GROSS PROFIT. A gross profit of $11,465 was recognized for the six months ended
June 30, 1998 verse's a gain of $154,775 for the same period in 1997. Cost of
sales was $39,068 for the six months ended June 30, 1998. The operating loss of
$659,294 for the period ended June 30, 1998 was up from a loss of $315,822 for
the same period in 1997 reflecting the large contract during 1997. The net loss
of $713,051 for the six months ended June 30, 1998 was up from $431,305 for the
same period in 1997, once again reflecting a large contract in 1997.
MANUFACTURING COSTS. Manufacturing costs decreased $8,366 for the six month
period to June 30,1998 to $110,198 down from $118,564 from the same period of
1997. The decline in costs is related to lower sales during this period.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased $16,473
for the six-month period to June 30,1998 to $44,605 down from $61,078 in the
same period of 1997, reflecting the shift in focus from developing systems to
marketing the Company's product line.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$12,469 to $215,320 for the six month period ended June 30, 1998, up from
$202,851 in the same period in 1997.
SALES AND MARKETING. Sales and Marketing expenses increased $179,108 to
$248,158 in the six month period ending June 30, 1998 up from $69,050 in the
same period in 1997 which reflects a continuing strong focus on marketing the
Company's product line.
SERVICE AND INSTALLATION. Service and Installation expenses also increased
$33,424 to $52,478 for the period ended June 30, 1998, up from $19,054 in the
same period in 1997.
INCOME TAXES. The Company recognized no income tax expense for the six month
period ending June 30, 1998 and the year 1997. The Company had net operating
loss carry forwards on December 31, 1997 resulting in a tax benefit to the
company of $2,513,554.
-9-
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by all activities in the six months ended June 30, 1998
was $36,254 compared to a positive cash flow of $89,932 in the same period in
1997. The net cash used in operating activities during this six month period in
1998 was $750,525 compared to $895,814 in 1997. The primary reasons for the
consumption of cash in 1998 were the reduction of current maturities by $171,000
and the net loss of $713,051 for the six months ended June 30, 1998.
The Company's auditors have indicated that there is a substantial doubt
about its ability to continue as a going concern. The Company has taken action
to respond to this issue, including working with current debt holders seeking
conversion of their debt into shares of common stock.
During the six months ended June 30, 1998, $861,000 of long term debt
which had matured and $25,000 of Notes Payable was converted into equity.
Accrued interest of $265,084 associated with these loans was also converted into
equity. The Company is also encouraging its warrant holders to exercise their
warrants at this time in order to provide an efficient and inexpensive means of
raising capital. During the six months ended June 30, 1998 warrants for $320,080
were exercised which was converted to equity as part of $465,265 investment
mentioned in the following paragraph.
Cash provided by financing activities in the six months ended June 30,
1998 was $665,346 compared to $1,032,169 in 1997. This increase in cash during
the six months ended June 30, 1998 was the net result of an equity investment of
$680,080 and repayment of notes payable for $50,900.
The Company has also retained the investment banking firm of Dominick &
Dominick, Inc. to act as a financial advisor. Potential investment groups are
now being contacted in the United States and Europe. Failure to obtain
sufficient funding may significantly curtail planned company growth. In addition
the Company is continuing to market its products to developing countries.
SALE OF RESTRICTED SECURITIES DURING THE SECOND QUARTER 1998.
The company received $63,500 during the second quarter for the
issuance of Common stock shares in which a warrant was exercised for 160,000
shares.
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<PAGE> 11
FORWARD LOOKING STATEMENTS:
MARGINS FOR THE REMAINDER OF THE YEAR MAY BE INCONSISTENT
Implementation of the company products requires varying levels of international
commitments to training, installation and service. Special engineering
requirements may also exist at installation sites affecting costs of
implementing projects. Thus, variation of profit margins exist for delivering
the same products. Also many contracts will have a mix of products which make
profit forecasting for individual projects more difficult.
SELLING AND MARKETING EXPENSES TO REMAIN AT HIGH LEVELS FOR THE REMAINDER OF THE
YEAR.
Most current sales and marketing activities are investments in near and future
long term market development which disproportionately increase current costs as
a percentage of revenue generated.
INTERNATIONAL GOVERNMENT AND NON-GOVERNMENT ORGANIZATION CONTRACTUAL
UNCERTAINTIES Government agencies and international non-government organizations
sometimes require an open bidding process which can result in time delays and
extended negotiations. Additionally, the complexity of proper financial and
trade related documentation can delay the procurement process.
PART 2. ITEM 1
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.
DATE: June 30, 1998 WORLDWATER CORP.
By: /s/ Quentin T. Kelly By: /s/ Peter I. Ferguson
----------------------- ------------------------
Quentin T. Kelly Peter I. Ferguson
Chairman & CEO Vice-President
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 24,906
<SECURITIES> 190,000
<RECEIVABLES> 63,501
<ALLOWANCES> 0
<INVENTORY> 120,316
<CURRENT-ASSETS> 446,297
<PP&E> 107,572
<DEPRECIATION> 69,989
<TOTAL-ASSETS> 537,312
<CURRENT-LIABILITIES> 2,101,870
<BONDS> 0
0
0
<COMMON> 19,783
<OTHER-SE> (1,584,341)
<TOTAL-LIABILITY-AND-EQUITY> 537,312
<SALES> 50,533
<TOTAL-REVENUES> 50,533
<CGS> 39,068
<TOTAL-COSTS> 670,759
<OTHER-EXPENSES> (4,075)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,832
<INCOME-PRETAX> (713,051)
<INCOME-TAX> 0
<INCOME-CONTINUING> (713,051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (713,051)
<EPS-PRIMARY> (0.041)
<EPS-DILUTED> (0.041)
</TABLE>
