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 JUNE 30, 1999
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 August 14, 1999, there were 26,124,678 shares of
the Registrant's Common Stock, $.001 par value, outstanding.
<PAGE>
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 June 30, 1999 (Unaudited) and
December 31, 1998 (Audited)
Condensed Consolidated Statements of 4
Operations (Unaudited) for the six months
ended June 30, 1999 and 1998, and the three
months ended June 30, 1999 and 1998
Condensed Consolidated Statements of Cash 5
Flows (Unaudited) for the six months ended
June 30, 1999 and 1998
Condensed Consolidated Statements of Stockholders' 6
Equity (Unaudited) for the period January 1,1999
Through June 30, 1999.
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>
WorldWater Corp
Condensed Consolidated Balance Sheet
June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
6/30/99 12/31/98
------- --------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 22,252 $ 4,162
Advance to affiliate 25,000 --
Accounts receivable 25,898 --
Marketable securities 6,250 11,875
Inventory 55,100 97,469
Prepaid expenses -- 5,335
---------- ----------
Total Current Assets 134,500 118,841
---------- ----------
Non-Current Assets
Property, plant, and equipment, net 39,174 48,268
Other assets 8,384 8,384
---------- ----------
TOTAL ASSETS 182,058 175,493
========== ==========
Current Liabilities
Accounts payable & other accrued expenses 417,889 425,307
Accrued payroll 208,500 205,200
Accrued interest 385,972 332,829
Notes payable 263,681 373,581
Deferred grant research 58,653 --
Current maturities of long term debt 853,500 917,150
---------- ----------
Total Current Liabilities 2,188,195 2,254,067
---------- ----------
TOTAL LIABILITIES 2,188,195 2,254,067
---------- ----------
Stockholders Deficiency
Common stock 25,611 21,985
(Par value $.001; 50,000,000 shares
authorized; issued and outstanding June 30,1999-
25,611,030 and December 31, 1998-21,984,904)
Additional paid-in capital 7,127,365 6,576,591
Accumulated other comprehensive loss (26,250) (20,625)
Retained earnings (9,132,863) (8,656,525)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIENCY (2,006,137) (2,078,574)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 182,058 $ 175,493
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
WorldWater Corp
Condensed Consolidated Statements of Operations
For the three months ended June 30, 1999 and 1998,
and for the six months ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
3 Month 6 Month
6/30/99 6/30/98 6/30/99 6/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $ 70,511 $ 9,815 $ 118,251 $ 50,533
Grant Revenue 153,819 -- 153,819
------------ ------------ ------------ ------------
Total Revenue 224,330 9,815 272,070 50,533
Cost of Goods Sold 95,976 75,336 163,625 149,266
------------ ------------ ------------ ------------
Gross (Loss) Profit 128,354 (65,521) 108,445 (98,733)
------------ ------------ ------------ ------------
Operating Expenses:
Research & Development 77,293 78,163 114,748 97,083
Sales & Marketing 124,449 153,928 209,880 248,158
General & Administrative 118,344 135,140 204,167 215,320
------------ ------------ ------------ ------------
Total Operating Expenses 320,086 367,231 528,795 560,561
------------ ------------ ------------ ------------
Operating (Loss) Profit (191,732) (432,752) (420,350) (659,294)
------------ ------------ ------------ ------------
Other Expenses
Interest Expense 29,865 24,849 59,204 57,832
Other Expense (Income) . (1,716) (2,038) (3,216) (4,075)
------------ ------------ ------------ ------------
Total Other Expense (Income) 28,149 22,811 55,988 53,757
------------ ------------ ------------ ------------
Net Loss $ (219,881) $ (455,563) $ (476,338) $ (713,051)
============ ============ ============ ============
Net Loss Per Share $ (0.01) $ (0.02) $ (0.02) $ (0.04)
Average Shares Outstanding 21,310,997 16,254,800 22,041,826 17,511,506
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
WorldWater Corp
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 1999 and 1998
6/30/99 6/30/98
------- -------
Net Loss $(476,338) $(713,051)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation 9,094 10,292
Charges relating to common stock issued 4,764
for services
Changes in Assets and Liabilities:
Accounts Payable & Accrued Expenses (7,418) (22,262)
Prepaid Expenses 5,335 2,627
Accrued Interest 53,143 56,109
Inventory 42,369 (36,458)
Accrued Salaries 3,300 (2,000)
Accounts Receivable (25,898) (2,972)
Advance to Affiliate (25,000) --
Displays in Foreign Countries -- (47,574)
Deferred Grant Research 58,653 --
--------- ---------
Net Cash Used in Operating Activities (362,760) (750,525)
--------- ---------
Cash Flows from Investing Activities:
Decrease in Other Assets (1,075)
Proceeds from Securities 50,000
--------- ---------
Net Cash Used in Investing Activities -- 48,925
--------- ---------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 138,350 156,266
Repayment of Current Maturities (124,500) (171,000)
Proceeds from Issuance of Warrants 50,000 --
Proceeds from Issuance of Common Stock 317,000 680,080
--------- ---------
Net Cash Provided by (Used In) Financing Activities 380,850 665,346
--------- ---------
Net Increase (Decrease) in Cash 18,090 (36,254)
Cash at Beginning of Year 4,162 61,160
========= =========
Cash at end of Second Quarter $ 22,252 $ 24,906
========= =========
See Notes to Condensed Consolidated Financial Statements
<PAGE>
WorldWater Corp
Consolidated Statements of Stockholders' Equity
For the Period January 1, 1999 through June 30, 1999
<TABLE>
<CAPTION>
Additional Accumulated Total
Common Stock (Par Value $.001) Paid-In Other Accumulated Stockholders
Shares Amount Capital Comprehensive Deficit Equity
Income
-----------------------------------------------------------------------------------------------
(loss)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 21,984,904 $21,985 $6,576,591 ($20,625) ($8,656,525) ($2,078,574)
Issuance of common stock 1,898,729 1,899 315,101 -- -- 317,000
for cash
Debt and accrued interest 1,457,397 1,457 185,943 -- -- 187,400
converted into common stock
Issuance of common stock 20,000 20 (20) -- -- --
for WorldWater Inc. Certificate
Issuance of common stock 250,000 250 49,750 -- -- 50,000
for warrants exercised
Net loss for the six months -- -- -- (5,625) (476,338) (481,963)
ended June 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 25,611,030 $25,611 $7,127,365 ($26,250) $(9,132,863) ($2,006,137)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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/A dated February 19,
1999 and 10-K dated April 15, 1999, 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, 1999 and 1998 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 DEBT
During the six months ended June 30, 1999, notes payable totaling
$187,400 were converted into equity.
4. VALUE OF MARKETABLE SECURITIES
At June 30, 1999 the Company had marketable securities recorded at fair
market value in the amount of $6,250.
5. ACCOUNTING CLASSIFICATIONS
Figures from the prior period June 30, 1998 have been adjusted to
reflect the current presentation for 1999. Management adjusted the
account groupings to better reflect current operations. These
adjustments did not change the net income for the prior period.
<PAGE>
6. Technology Grant
The company received a grant from the New Jersey Commission on Science
and Technology in the amount of $249,967. The grant funds are issued in
two increments of which the Company received $212,472 for the initial
phase and upon successful completion and review of the project an
additional payment of $37,495 will be forthcoming. After successful
completion of the project, a percentage of the Company's net income,
one percent in the first year, will be paid annually in the form of a
royalty payment to the Commission not to exceed the original grant
amount of $249,967.
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 that could 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 and
(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 the
international market place--supplying emerging countries and industry throughout
the world with solar electric powered products and performing all phases of the
water cycle: from finding, to pumping, 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 that might otherwise lie barren. These solar pumps can
supply potable water and irrigation to remote areas 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.
<PAGE>
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. The Company currently has
contract negotiations underway in seven emerging countries which, if
successfully concluded, would result in a substantial increase in revenues
during the second half of 1999, and in the year 2000.
During the early stage of market penetration, marketing and related costs
invariably exceed revenues. Management anticipates that as target markets for
its solar powered water pumping and electric equipment become more fully
developed, operating profits will be achieved.
<PAGE>
RESULTS OF OPERATIONS
REVENUE. For the six months ended June 30, 1999 revenue increased to $272,070,
up from $50,533 in the same period of 1998. For the three months ended June 30,
1999 revenue increased $214,515 to $224,330 up from $9,815 in the same period
during 1998. The primary reason for increased revenue is due to continued sales
of systems in strategic locations and the grant received from the New Jersey
Commission on Science and Technology.
GROSS PROFIT. Gross profit of $108,445 was recognized for the six months ended
June 30, 1999, up from a loss of $98,733 for the same period in 1998. Gross
profit of $95,976 was recognized for the three months ended June 30, 1999
compared to a loss of $65,521 for the same period during 1998. Cost of sales for
the six months was $163,625, up from $149,266 from the previous period, and
$95,976 for the three months, compared to $75,336 for the same period during
1999. The operating loss was $420,350 for the first six months in 1999 compared
to an operating loss of $659,294 for the same period in 1998. Operating loss was
$191,732 for the three months ended June 30, 1999, compared to an operating loss
of $432,752 for the same period during 1998.
SELLING AND MARKETING. Sales and marketing expenses decreased by $38,278 in the
six-month period ending June 30, 1999 to $209,880, down from $248,158 in the
same period of 1998. Sales and marketing expenses decreased $29,479 for the
three months ended June 30, 1999. Management believes that as a result of the
contract negotiations mentioned above, sales and marketing expenses will
increase proportionally as revenue increases.
RESEARCH AND DEVELOPMENT. Research and development expenses increased $17,665
for the six-month period to $114,748, up from $97,083 in the same period of
1998. Research and development expenses decreased $870 for the three months
ended June 30, 1999. The Company was awarded a $249,967 grant from the State of
New Jersey Commission on Science and Technology on April 29, 1999. The funds are
being used to develop its Solar Off-Grid Drip Irrigation System in conjunction
with Rutgers University of New Jersey, which when completed in the expected six
months, should contribute significantly to the Company's agricultural product
offerings and revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased by
$11,153 to $204,167 for the six month period ended June 30, 1999, down from
$215,320 in 1998. General and administrative expenses decreased $16,796 for the
three-month period ending June 30, 1999. The decrease is due primarily to the
Company's continued exercise of close control over operating costs and staffing.
Assuming that contract negotiations now underway are successfully concluded, it
will be necessary to recruit additional staff to implement the contracts.
INCOME TAXES. The Company recognized no income tax expense for 1998, and 1999 to
date. The Company has net operating loss-carry-forwards resulting in a potential
federal tax benefit to the Company as of January 1, 1999 of approximately $2.5
million. The Company 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 became effective in New Jersey January 1, 1999 and the New Jersey
Economic
<PAGE>
Development Authority is currently reviewing applications. The Company expects
to receive about $400,000 net proceeds from the sale.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased by $18,090 to $22,252 from
December 31, 1998 to June 30, 1999. The net cash used in operating activities
during this six-month period in 1999 was $362,760 compared to $750,525 in 1998.
The primary reasons for the consumption of cash in 1999 were to fund on-going
operations and the net loss of $476,338 for the six months ended June 30, 1999.
The Company's auditors indicated in their December 31, 1998 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 expects current contract negotiations to
result in expanded capital resources to meet this criterion. The Company has
contacted debt holders regarding conversion of their debt into shares of common
stock. The Company continues to encourage its warrant holders to exercise their
warrants in order to provide an efficient and inexpensive means of raising
capital. Cash provided by financing activities in the six months that ended June
30, 1999 was $380,850 compared to $665,346 in 1998.
SALE OF RESTRICTED SECURITIES DURING THE FIRST QUARTER 1999
The Company issued 1,898,729 restricted common stock shares for net proceeds of
$317,000.
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 has assessed its computer software and database with respect to its
functionality beyond the turn of the century. The extent and cost of the
modifications are nominal, and will not have a material effect on the financial
conditions and the results of operations of the Company. There can be no
assurance, however, that the year 2000 problem will be resolved successfully or
that any failure or delay by the Company or any third parties which interacts
with the Company in achieving year 2000 compliance will not have an adverse
effect on its operations.
<PAGE>
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: August 14,1999 WORLDWATER CORP.
By: /s/ Quentin T. Kelly By:/s/ Peter I. Ferguson
-------------------- --------------------
Quentin T. Kelly Peter I. Ferguson
Chairman & CEO Vice-President
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 22,252
<SECURITIES> 6,250
<RECEIVABLES> 25,898
<ALLOWANCES> 0
<INVENTORY> 55,100
<CURRENT-ASSETS> 134,500
<PP&E> 104,852
<DEPRECIATION> 65,678
<TOTAL-ASSETS> 182,058
<CURRENT-LIABILITIES> 2,188,195
<BONDS> 0
0
0
<COMMON> 25,611
<OTHER-SE> (2,031,748)
<TOTAL-LIABILITY-AND-EQUITY> 182,058
<SALES> 118,251
<TOTAL-REVENUES> 272,070
<CGS> 163,625
<TOTAL-COSTS> 528,795
<OTHER-EXPENSES> (3,216)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,204
<INCOME-PRETAX> (476,338)
<INCOME-TAX> 0
<INCOME-CONTINUING> (476,338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (476,338)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
