<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 _________
--------
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 10, 1998, there were 21,418,189 shares
of the Registrant's Common Stock, $.001 par value, outstanding.
<PAGE> 2
WORLDWATER CORP.
QUARTERLY REPORT ON FORM 10-QSB
PART I.
FINANCIAL INFORMATION Page No.
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheets
as of September 30, 1998 (Unaudited) and
December 31, 1997 (Audited)
Condensed Consolidated Statements of 4
Operations (Unaudited) for the three months
ended September 30, 1998 and 1997, and the nine
months ended September 30, 1998 and 1997
Condensed Consolidated Statements of Cash 5
Flows (Unaudited) for the nine months ended
September 30, 1998 and 1997
Condensed Consolidated Statements of Stockholders' 6
Equity (Unaudited) for the period January 1,1998
Through September 30, 1988.
Notes to the Condensed Consolidated 7-8
Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of 9-11
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1 Signatures 12
Item 2 Exhibit 27 Financial Data Schedule
2
<PAGE> 3
WORLDWATER CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
9/30/98 12/31/97
----------- -----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 46,599 $ 61,160
Accounts Receivable 30,844 60,529
Marketable Securities 87,200 162,500
Inventory 118,624 83,858
Display Systems 55,735 --
Prepaid Expenses -- 2,627
----------- -----------
Total Current Assets 339,002 370,674
----------- -----------
Non-Current Assets:
Property, Plant, and Equipment, Net 40,102 47,875
Short Term Investments-Restricted -- 43,973
Other Assets 11,085 8,384
----------- -----------
TOTAL ASSETS $ 390,189 $ 470,906
=========== ===========
Current Liabilities:
Accounts Payable & Other Accrued Expenses $ 315,613 $ 343,123
Employment taxes/benefits 46,113 25,301
Accrued payroll 179,250 169,250
Accrued interest 290,978 498,136
Notes Payable 454,647 179,181
Current maturities of long-term debt 889,650 2,021,650
----------- -----------
Total Current Liabilities 2,176,251 3,236,641
----------- -----------
TOTAL LIABILITIES 2,176,251 3,236,641
----------- -----------
Stockholders Deficiency:
Common Stock 21,418 15,289
(Par value $.001; 30,000,000 shares
authorized; issued and outstanding September 30, 1998--
21,418,189 and December 31, 1997 --15,288,502 )
Additional paid-in capital 6,282,822 4,229,884
Accumulated Deficit (8,090,302) (7,010,908)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,786,062) (2,765,735)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 390,189 $ 470,906
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
WORLDWATER CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended September 30, 1998 and 1997,
and for the nine months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
3 Months 9 Months
9/30/98 9/30/97 9/30/98 9/30/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 1,112 $ 12,780 $ 51,645 $ 446,444
Cost of Goods Sold 445 7,412 38,725 363,681
------------ ------------ ------------ ------------
Gross (Loss) Profit 667 5,368 12,920 82,763
------------ ------------ ------------ ------------
Operating Expenses:
Manufacturing Costs 54,915 77,380 169,840 152,852
Research & Development 22,643 32,524 68,882 64,435
Service & Installation 28,815 13,042 81,293 35,780
Sales & Marketing 105,512 69,209 347,576 185,126
General & Administrative 123,639 97,913 347,651 245,091
------------ ------------ ------------ ------------
Total Operating Expenses 335,524 290,068 1,015,242 683,284
------------ ------------ ------------ ------------
Operating (Loss) Profit (334,857) (284,700) (1,002,322) (600,521)
------------ ------------ ------------ ------------
Other Expenses
Interest Expense 25,890 71,068 83,174 180,592
Other Expense (Income) (2,027) (7,668) (6,102) (1,709)
------------ ------------ ------------ ------------
Total Other Expense (Income) 23,863 63,400 77,072 178,883
------------ ------------ ------------ ------------
Net Loss $ (358,720) $ (348,100) $ (1,079,394) $ (779,404)
============ ============ ============ ============
Net Loss Per Share $ (0.018) $ (0.025) $ (0.059) $ (0.065)
Average Shares Outstanding 19,967,964 14,113,696 18,417,243 11,944,823
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
WORLDWATER CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine-months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
9/30/98 9/30/97
----------- -----------
<S> <C> <C>
Net loss $(1,079,394) $ (779,404)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation 14,792 40,198
Charges relating to common stock issued 4,764
for services
Changes in Assets and Liabilities:
Accounts Payable & Accrued Expenses (27,510) (58,778)
Employment Taxes 20,812 --
Prepaid Expenses 2,627 --
Accrued Interest 78,186 238,410
Inventory 34,766 36,698
Accrued Salaries 10,000 (36,027)
Accounts Receivable 29,685 (40,596)
Displays in Foreign Countries (55,735) --
----------- -----------
Net Cash Used in Operating Activities (967,007) (599,499)
----------- -----------
Cash Flows from Investing Activities:
(Increase) in Other Assets (2,701) 90
Proceeds from Securities 50,000
Capital Expenditures (7,019) (53,901)
Decrease in Notes Receivable -- (3,748)
----------- -----------
Net Cash Used in Investing Activities 40,280 (57,559)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 326,366 266
Repayment of Notes Payable (50,900)
Repayment of Current Maturities (171,000)
Proceeds from Issuance of Common Stock 807,700 723,263
----------- -----------
Net Cash Provided by (Used In) Financing Activities 912,166 723,529
----------- -----------
Net Increase (Decrease) in Cash (14,561) 66,471
Cash at Beginning of Year 61,160 14,296
----------- -----------
Cash at end of Third Quarter $ 46,599 $ 80,767
=========== ===========
Schedule of noncash investing/financing activities :
Changes in Assets & Liabilities
(Decrease) in the value of
Marketable Securities $ (42,800) $ --
Accrued Interest converted to Equity 285,903 --
Financing Activities
Current Maturities converted to Equity 961,000 705,350
Conversion of Note Payable to Equity $ 25,000 $ --
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
WorldWater Corp
Consolidated Statements of Stockholders' Equity
For the Period January 1, 1998 through September 30, 1998
<TABLE>
<CAPTION>
Additional Total
Common Stock (Par Value $.001) 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 2,051,169 2,051 484,769 -- 486,820
Debentures and accrued interest
converted into common stock 2,506,385 2,506 983,835 -- 986,341
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
for services rendered 11,910 12 4,752 -- 4,764
Net loss for the nine months
ended September 30, 1998 -- -- -- (1,079,394) (1,079,394)
Recognized gain on
marketable securities -- -- 17,500 -- 17,500
Unrealized increase in value of
marketable securities -- -- (42,800) -- (42,800)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1998 21,418,189 $ 21,418 $ 6,282,822 $(8,090,302) $(1,786,062)
----------- ----------- ----------- ----------- -----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE> 7
PART I. ITEM 1.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
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 statements 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 three months ended September 30, 1998 and
1997, and the nine months ended September 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 nine months ended September 30, 1998, $961,000 of long-term
debt and a note payable for $25,000 were converted into equity. Accrued
interest of $271,341 and $14,562 associated with these debts was 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 emerging countries.
The costs to the Company were $55,735 for the systems, and management
has classified these as current assets on the balance sheet.
7
<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 or a valuation of
$162,500 for WorldWater Corp.'s holding. During the nine months ended
September 30, 1998 the Company sold 10,000 shares and received $50,000
net proceeds from the sale reporting a recognized gain of $17,500. On
September 30, 1998 the remaining 40,000 shares closed at $2.18 per
share, or a valuation of $87,200 for WorldWater Corp.'s holdings.
6. ACCOUNTING CLASSIFICATIONS
Figures from the prior period September 30, 1997 have been adjusted to
reflect the current presentation for 1998. Management adjusted the
account groupings to better reflect current operations. These
adjustments did not change the net income for the prior period.
8
<PAGE> 9
PART I. ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Statements in this quarterly Report on Form 10-Q concerning the Company's
outlook or future economic performance: anticipated profitability, gross
billings, commissions and fees, expenses or other financial items; and
statements concerning assumptions made or exceptions to any future events,
conditions, performance or other matter are "forward looking statements" as that
term is defined under the Federal Securities Laws. Forward looking statements
are subject to risks, uncertainties, and other factors which would cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, (1) that there can be
no assurance that the Company will grow profitably or manage its growth, (2)
risks associated with acquisitions, (3) competition, (4) the Company's quarterly
results have fluctuated in the past and are expected to fluctuate in the future,
(5) the loss of services of key individuals which could have a material adverse
effect on the Company's business, financial condition or operating results, (6)
risks associated with operating in emerging countries.
OVERVIEW
WorldWater Corp is a full-service water engineering and solar energy company,
which designs, develops and markets proprietary technology relating to water
needs and solar power applications. The Company occupies a unique niche in
international marketing--supplying emerging governments and industry throughout
the world with solar electric powered products and performing all phases of the
water cycle: from finding, to pumping, purifying, detoxifying, desalinating,
storing and recycling water. WorldWater has developed a proprietary solar-driven
water pump, the AquaSafe(TM), which can pump water from great depths, making it
possible to supply water to communities and to irrigate lands which might
otherwise lie barren. These newly developed solar pumps can supply remote town
or farm water to larger areas over longer periods of time at significantly less
cost and less maintenance than other pumping methods currently in use.
The mission of the Company is to position itself as the leader and principal
supplier of renewable energy and remote water supply for emerging nations
throughout the world.
In mid-1997, the Company made its first production shipment of its proprietary
products (to the Philippines) and has since begun limited operations in 16
emerging nations in Asia, Latin America and Africa. In recent weeks, the Company
signed a government contract (September 26, 1998) with one of the nine provinces
in Ethiopia to provide hydrogeological studies at that same government's request
the Company has drafted an additional contract to supply solar pumping and
electrical equipment; subsequent to the closing date of this quarter, the
Company has accepted orders to supply immediately its solar equipment to Haiti
(purchased by a Non-Governmental Organization) and additional pumps to
supplement its earlier shipment to the Government of Tanzania.
9
<PAGE> 10
During the early stage of market penetration, marketing and related costs
invariably exceed revenues. Management anticipates that as target markets for
solar equipment become more fully developed, operating profits will be achieved.
RESULTS OF OPERATIONS
REVENUE. For the nine months ended September 30, 1998 revenue decreased to
$51,645, down from $446,444 in 1997 with the third quarter 1998 contributing
revenue of $1,112, down from $12,780 in the same period in 1998. The nine-month
revenue decrease resulted from delays in buyer financing of existing projects
and new pending orders from several markets.
GROSS PROFIT. Gross profit of $12,920 was recognized for the nine months ended
September 30, 1998 as against a profit of $82,763 for the same period in 1997.
Cost of sales was $38,725 down from $363,681 from the previous period. The
operating loss was $334,857 for the third quarter in 1998 compared to an
operating loss of $284,700 for the same period in 1997.
MANUFACTURING COSTS. Manufacturing costs increased $16,988 for the nine-month
period to $169,840, up from $152,852 from the same period of 1997. The Company
will continue to operate with a trimmed staff until significant contracts
result.
SELLING AND MARKETING. Sales and marketing expenses increased by $162,450 in the
nine-month period ending September 30, 1998 to $347,576, up from $185,126 in the
same period of 1997. Selling and marketing expenses increased $36,303 to
$105,512 in the third quarter of 1998, up from $69,209 in the same period of
1997. The Company continues to aggressively market the Company's product line
and various consulting services.
RESEARCH AND DEVELOPMENT. Research and development expenses increased $4,447 for
the nine-month period to $68,882, up from $64,435 in the same period of 1997.
Research and development expenses declined by $9,881 to $22,643 in the third
quarter of 1998, down from $32,524 in the same period of 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
$102,560 to $347,651 for the nine month period ended September 30, 1998, up from
$245,091 in 1997. These expenses increased by $25,726 to $123,639 in the third
quarter of 1998, up from $97,913 in the same period of 1997. These increases are
due primarily to costs associated with public company reporting requirements,
additional accounting staff and costs of financial advisors.
10
<PAGE> 11
INCOME TAXES. The Company recognized no income tax expense for 1997 and 1998 to
date. The Company has net operating loss carry forwards resulting in a potential
tax benefit to the Company as of January 1, 1998 of approximate $2.5 million.
The Company recently entered into an agreement with Technology Tax Certificate,
L.L.C. to sell approximately $4.5 million in New Jersey State Tax Loss Carry
forwards. The new law allows the Company to sell its losses to profitable
companies in the State for a minimum of seventy-five (75%) percent of the tax
value. The law becomes effective in New Jersey January 1, 1999 and the Company
expects to receive about $280,000 net proceeds from the sale.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased by $14,561 to $46,599 from
December 31, 1997 to September 30, 1998.
Net cash used by all activities in the nine months ended September 30, 1998 was
$14,561 compared to net cash provided from all operations of $66,471 in the same
period in 1997. The net cash used in operating activities during this nine-month
period in 1998 was $967,007 compared to $599,499 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 $1,079,394 for the nine months ended September 30,
1998.
The Company's auditors indicated in their December 31, 1997 Annual Audit Report
that there was substantial doubt about its ability to continue as a going
concern. The Company has taken action to respond to this going concern issue.
This is defined by generally accepted accounting principles as the possibility
that current capital resources might be insufficient to meet obligations over
the next twelve months. The Company has contacted debt holders regarding
conversion of their debt into shares of common stock having the following
success: during the nine months ended September 30, 1998, $961,000 of long term
debt and $25,000 of notes payable were converted into equity. Accrued interest
of $285,903 associated with these loans was also converted into equity. The
Company continues to encourage its warrant holders to exercise their warrants in
order to provide an efficient and inexpensive means of raising capital. During
the nine months ended September 30, 1998 warrants for $320,080 were exercised
and converted to equity.
Cash provided by financing activities in the nine months that ended September
30, 1998 was $912,166 compared to $723,529 in 1997. This increase in cash was
primarily due to an equity investment of $807,700.
SALE OF RESTRICTED SECURITIES DURING THE THIRD QUARTER 1998
The Company issued 1,024,530 Common Stock shares for net proceeds of $126,820.
THE YEAR 2000.
The use of computer systems that rely on two-digit programs to perform
computations or other functions may cause such systems to malfunction with
respect to the year 2000 and subsequent years. Like many other entities, the
Company is currently assessing its computer software and database with respect
to its functionality beyond the turn of the century. The extent and estimated
cost of the modifications which will be required cannot yet be determined,
although it is expected that such expenditures will not have a material effect
on the financial conditions and results of operations of the Company. There can
be no assurance, however, that the year 2000 problem will be resolved
successfully and in a timely fashion or that any failure or delay by the
Company or any third parties which interact with the Company in achieving year
2000 compliance will not have an adverse effect on its operations.
11
<PAGE> 12
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: September 30, 1998 WORLDWATER CORP.
By: /s/ Quentin T. Kelly By: /s/ Peter I. Ferguson
--------------------- ---------------------
Quentin T. Kelly Peter I. Ferguson
President & CEO Vice-President
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 46,599
<SECURITIES> 87,200
<RECEIVABLES> 30,844
<ALLOWANCES> 0
<INVENTORY> 118,624
<CURRENT-ASSETS> 339,002
<PP&E> 107,572
<DEPRECIATION> 67,470
<TOTAL-ASSETS> 390,189
<CURRENT-LIABILITIES> 2,176,251
<BONDS> 0
0
0
<COMMON> 21,645
<OTHER-SE> (1,807,707)
<TOTAL-LIABILITY-AND-EQUITY> 390,189
<SALES> 51,645
<TOTAL-REVENUES> 51,645
<CGS> 38,725
<TOTAL-COSTS> 1,015,242
<OTHER-EXPENSES> (6,102)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,174
<INCOME-PRETAX> (1,079,394)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,079,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,079,394)
<EPS-PRIMARY> (0.059)
<EPS-DILUTED> (0.059)
</TABLE>
