FORM 10-KSB ANNUAL REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934
(Fee required) for the fiscal year ended December 31, 1999
WorldWater Corp.
Nevada 33-0123045
(State or other jurisdiction of (IRS Identification Number)
Employer corporation or organization)
55 Route 31 South, Pennington, NJ 08534
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (609) 818-0700
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12 (g) of the Exchange Act: Common Stock,
$0.001 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part ll of this Form 10-KSB or any amendment to
this form 10-KSB.
The issuer's revenue for its most recent fiscal year was $526,924.
On April 12, 2000 the aggregate market value of the outstanding stock held by
non-affiliates of the registrant was approximately $25,857,534
The number of shares of Common Stock outstanding as of April 12, 2000 was
28,483,145.
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FORM 10-KSB ANNUAL REPORT
Part l
Item 1. Description of Business
WorldWater's mission is to maintain its leadership as principal provider
of renewable energy and remote water supply for emerging nations throughout the
world.
WorldWater Corp. ("the Company") has developed extremely cost efficient
power systems driven entirely by solar energy. The proprietary AquaSafe(TM) and
AquaMax 2200(TM) PV water pumping and solar electric systems provide economical
water supplies and electric power - at less cost than competing systems and in
areas where such power may otherwise not be available. The Company's primary
customers are developing countries which require non-traditional means of
fulfilling their energy and water needs. The greatest potential for PV
technology is in developing countries where roughly 2 billion people lack
electricity and water. Each year several billion dollars from various
international, national and regional sources are spent on water and independent
power projects within the emerging countries.
The Company was incorporated in the state of Nevada on April 3, 1985 under
the name Golden Beverage Company. In April 1997, the Company entered into a
reverse merger transaction with WorldWater, Inc., a Delaware corporation formed
in January 1984. Since the merger transaction, the Company, under the name of
WorldWater Corp., has been engaged exclusively in the solar/water power
industry. The Company stock is publicly traded on the OTC Bulletin Board under
the symbol WWAT.
The Company has centralized its production, servicing and administration
functions at its main plant located at 55 Route 31 South in Pennington, New
Jersey 08534.
(a) Major Customers and Export Sales
The Company's major customers continue to be national and regional
Governments, their Ministries and Departments responsible for power and
water. They include:
Sri Lanka: The Company has designed a project at the request of the
Ministry of Aquatics and Fisheries, which has decided to upgrade the
quality of life of people in fishing villages throughout the island by
installing solar electricity and delivering safe drinking water and power
needs. The Company has submitted its bid toward a Tender Offer to be
awarded in May, 2000 for a total of 250 villages to receive AquaSafe(TM)
pumping systems and SolPower(TM) electrification systems for 7500
households within these same villages. This proposal includes project
financing engendered by the Company for approximately $9,455,000. Approval
and commencement of operations are expected in mid-2000. The second
project valued at $7 million is to supply water and electrification to an
additional 200 villages. A third project is valued at $11 million for port
rehabilitation.
Philippines: The Company has been in the Philippines since 1997 when it
delivered 25 solar pumps for installation by the National Irrigation
Administration under a directive from Former President Fidel V. Ramos. As
a result of the success of that program, WorldWater Corp. has recently
concluded a 10-team feasibility study funded by the U.S. Trade and
Development Agency (USTDA) in the amount of $235,000 for a $20 million
water supply system for the island of Cebu (population 2 million). In
February, 2000, WorldWater (Phils) Inc. (see Subsequent Events Note) was
formed as a wholly owned subsidiary of WorldWater Holdings Inc. of
Delaware, which is a holding company owned 100% by WorldWater Corp. The
Company has several projects in varying phases of development. The most
immediate prospect under the Department of Interior and Local Government
(DILG) is the Cebu water supply project. Successful implementation of this
water supply project could lead to an even larger project funded by World
Bank/Local Government Unit (LGU) funds earmarked for communities of 20,000
population or less. Other prospective customers include the Department of
Agrarian Reform (DAR) to use solar energy for potable water, irrigation,
and power in rural Mindanao. Under the Local Water Utility Authority
(LWUA), there is a $7.5 million fund (LINGAP fund) available immediately
for a pilot project that uses solar pumps for drinking water needs.
Finally, the National Irrigation Administration under the Department of
Agriculture has discussed with WorldWater a program to
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supply irrigation pumps for Spanish-grant drilled wells that were
originally intended to be equipped with diesel pumps.
Pakistan: The Company has submitted a proposal to the Government for a
National Electrification and Water Supply Program for Rural Areas
utilizing Company solar power. The Company has received verbal statements
of approval from the Office of the Chief Executive but awaits a written
contract. In 1999, an AquaSafe(TM) water pumping system and SolPower(TM)
system were demonstrated in Quetta, Baluchistan. Following this successful
demonstration, an MOU was signed to supply up to $50 million worth of
solar-powered water and power systems to the Baluchistan province. In
addition, in the Punjab region, WorldWater has provided a proposal to
provide the Rangers (non-military border police) water pumps and security
lights. This project is valued at $10 million.
Tanzania: The Company sold and installed its solar pumping equipment in
the capital of Dar es Salaam to supply clean water to the city's main meat
processing plant. The solar pumping operation was inaugurated by the Prime
Minister and attended by senior government officials. As a result of the
success of the WorldWater system, the Ministry of Water has signed a
Memorandum of Understanding (MOU) with the Company to establish a
financially self- sustaining rural water supply project to be implemented
on a national level, starting with pilot projects in 7 water districts.
Funding of $150,000 may be provided by E&Co., a Rockefeller
Foundation-supported energy investment group to be applied to this 7-site
pilot project. The Company expects to complete the financing in the second
half of 2000 and to start implementation thereafter.
Because of the nature of its business with Governments, the
Company's revenue are dependent upon the annual budgetary periods of the
sovereign and regional governments and international funding agencies.
Results of selling efforts therefore are generally reflected in the
budgetary year following the presentation and agreement to purchase. For
this reason, despite its many successful demonstrations, negotiations and
agreements in 1999, the Company's revenue for the year was $526,924,
reflecting the limited discretionary funds outside the standard budgetary
process available to the government and agency departments. (See (c)
Marketing (below)).
(b) Products
AquaSafe(TM)
The AquaSafe(TM) PV pumping systems use a proprietary method of control to drive
off-the-shelf AC motors from photovoltaic (PV) power. AC pumps are low-cost,
require no maintenance and have a long track record of reliable service.
AquaSafe(TM) borehole systems are engineered for depths to 1,000 feet (300m).
Multi-stage stacked impeller submersible pumps give the flexibility of flow from
5 gallons/min (20 lpm) to 260 Gallons/Min (1,000 lpm). The pumps are sized to
power 1 to 50 HP motors.
AquaMax2200(TM)
The AquaMax2200(TM) high yield irrigation pumps take WorldWater's AquaSafe(TM)
remote water pumping systems to unprecedented levels. For the first time, more
than 2,000 gallons per minute of water for irrigation using pumps of 2 to 50 HP
and up, can be powered with solar energy --anywhere in the sun.
A 25 HP AquaMax2200(TM) delivers up to 2,200 gallons per minute (8,400 lpm) or
approximately 792,000 gallons per day (3,000 cubic meters/day).
SolPower(TM)
The WorldWater SolPower(TM) system is designed for remote homes and village
community centers. The system generates electricity for lighting, TV, radio,
computers and a host of other uses. The key market for this power system is in
developing countries where those living outside major cities are not connected
to the elctrical grid system.
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SolPower(TM) can also be used to power Security Lights and backup Security Power
systems, which are particularly useful for US Government and foreign building
operations and industrial projects, such as pipelines and remote communications
projects.
Solar Products
The Company has also introduced a number of new products including:
SolarLite(TM), a solar charged portable lantern, SolPrayer(TM) -- a solar
powered call-to-prayer public address system for mosques; SolPal(TM) -- solar
powered street lights, and solar powered security lights.
(c) Marketing
WorldWater's products are marketed primarily in developing nations where
there is a large demand for electrical power and clean water - literally
billions of dollars annually. The Company now has its proprietary solar pumping
and solar electrical systems operating in the Philippines, Sri Lanka, Tanzania,
Ethiopia, Djibouti, Ecuador and others.
In order to maintain close contacts with international government
embassies, US Government departments and agencies, as well as such international
organizations such as the World Bank and the Inter-American Bank, the Company
established an office in Washington DC in 1998. The Company Representative,
retired Ambassador Alan Lukens, a career foreign officer who spent many years in
Africa, Europe and the Caribbean for the US State Department, has strengthened
Company efforts by adding and maintaining new contacts for marketing support
within the government structure, particularly the State Department and the
Pentagon.
The Company's marketing efforts are largely concentrated in identifying
specific project opportunities that have the potential for long-term growth and
high value, and identifying institutional sources that are capable and willing
to finance these projects. In general, the long-term market potential of any
emerging country is less predictable compared with that of a developed
industrial country because emerging nations present higher degrees of political
and currency risks. WorldWater's marketing goals and forecasts are adjusted from
time to time based on new developments in any particular country.
Because of the economics involved in doing business overseas, WorldWater's
strategy is to seek large contracts in the range of $500,000 to $10,000,000 or
more. Winning contracts of this magnitude can entail months or even years of
development effort in a target market; consequently, actual sales and operating
income may vary widely from forecasts, either up or down (See (a) above).
Over the long term, however, the rapid growth of the solar industry
worldwide, doubling to more than $1.5 billion in the 1990's, is expected by
energy economists to multiply again in worldwide revenues before the year 2005.
Solar energy will command an ever-larger percentage of total world energy use
and WorldWater solar products can be expected to participate in that growth.
In addition, the need and price for water worldwide is growing annually.
The United Nations officially estimates that $8 billion annually is currently
spent in providing safe drinking water in developing countries, and that $100
billion will be required over the next 5 years. WorldWater is strongly
positioned in both of these solar power and water markets (See (d) below).
The following is a discussion of the Company's efforts in some of the
countries where the Company is demonstrating viable sales activities and
opportunities:
Sri Lanka: See Major Customers, Item 1. Description of Business (above)
Philippines: See Major Customers (above)
Pakistan: See Major Customers (above)
Tanzania: See Major Customers (above)
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Somaliland: The Company was appointed by President M.I. Egal to be the Master
Implementation Contractor for water for this entire region of what was formerly
the northwestern area of Somalia. The Company responded to a crisis in the
municipal water supply system of Hargeisa, the capital city, by sending two
senior engineers to assess the emergency and recommend immediate and long term
solutions. The Company's team prepared a detailed report for the Government and
the on-site international agencies (UNDP, UNHCR, UNICEF etc.) outlining an
appropriate solution to the urgent problem for a total budget of $10 million.
The Company's report also identified certain immediate improvements needed for a
cost of $1 million as the first phase of the larger project. This report is
being used by the Water Ministry to secure financing for this project and the
Company is assisting the Ministry to secure the financing from different
sources, including the Islamic Development Bank. The Company continues to be in
close communication with the President's office regarding the project financing
effort.
Ecuador: The Company has submitted a proposal to the Department of Renewable
Energy for a regional rural electrification project for bringing home lighting
systems to about 600 homes in the Bolivar region. The Company has also submitted
proposals to several municipalities to upgrade their municipal water supply
systems using solar pumps and financing from private institutions. The Company
plans to continue its efforts in Ecuador by entering into fee-for-service
contracts with regional electric and water utility companies.
(d) Market Size
Over the last 15 years the photovoltaic (PV) industry has grown in
revenues from $2 million to $1.5 billion. Advances in PV technology and
corresponding reduction in costs continue to fuel the increasing demand for PV
power. As stated earlier, the greatest potential for PV technology is in
developing countries where roughly 2 billion people lack electricity and water.
Applications range from remote pumping, irrigation, telecommunications and
lighting, to village size power production. Worldwide PV module shipments
continue at an accelerating rate. Global shipments of PV modules have risen from
60 Megawatts in 1993 to more than 200 Megawatts in 1999.
Formal reports and market analyses of the countries that WorldWater
services are not available. However, based on estimates by UNDP and World Bank,
to bring safe drinking water to the 2 billion people who are without access to
safe drinking water and who are targeted for such access by the international
financial agencies and national and regional Governments will cost approximately
$50 per person, or $100 billion total. Although the national and international
agencies obviously do not have such budgets, they are making concerted efforts
to involve the private sector and all levels of national, regional and local
governments to finance these top priority projects with the goal of achieving
full coverage by the year 2004. These efforts include implementation of
self-financing businesses similar to WorldWater's pending programs in Tanzania
and the Philippines.
A similar sized investment of $100 billion is needed to supply
electricity. For example, the Company's analysis of the remote power market in
the Philippines, where only 28 of the 2800 inhabited islands have access to
electricity, shows that a modest 10% penetration by solar power represents a
market opportunity of about $1 billion. In Tanzania, where 14 million people do
not have access to safe drinking water, the market opportunity is about $700
million. The Company has in place a strategy to convert these substantial
opportunities into sales.
WorldWater is presently creating a network of representatives,
distributors, licensees and joint ventures in the most significant world
markets. The Company has initiated discussion with potential Philippine
investors for WorldWater-Philippines to manufacture and market solar modules and
AquaSafe(TM) systems in the Philippines and, as the market develops, to export
to other Southeast Asian nations.
(e) Marketing Strategies
As stated, WorldWater's strategic mission is to maintain its leadership as
principal provider of renewable energy and remote water supply for emerging
nations throughout the world.
WorldWater is marketing the AquaSafe(TM) and AquaMax2200(TM) pumping
systems and its other solar products worldwide to both the public and private
sector.
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FORM 10-KSB ANNUAL REPORT
The institutional public and private sectors, including governments,
contribute billions of dollars in emerging nations to water and small
power projects that fall within the scope of WorldWater's business. These
sectors represent the largest potential markets for the Company products
in the near future. In addition to governments, public institutions
consisting primarily of national and international organizations that
assist developing countries are also potential markets. The countries are
mostly in tropical zones and have a dramatic, recognized need for water in
areas without available and economical electric power supplies. Such
national and international organizations include:
- Government Water, Energy and Agricultural Ministries
- multilateral international assistance agencies, such as the World
Bank, UNICEF, the United Nations Development Program (UNDP), the
World Health Organization (WHO) and the Food and Agricultural
Organization (FAO), and
- regional banks, such as the African Development Bank, the
Inter-American Development Bank and the Asian Development Bank, and
- bilateral development agencies in the aid-giving nations [(e.g. U.S.
Agency for International Development (USAID), Canadian International
Development Agency (CIDA) and Swedish International Development
Agency (SIDA)] as well as smaller agencies in the developing
nations, and
- quasi-public (non-profit, private) Non-Governmental Organizations
(NGO's) such as CARE (USA, Canada etc.), Save the Children, World
Vision, Food for the Hungry, Doctors Without Borders etc. and
various religious organizations (e.g. Christian and Islamic groups)
and service clubs (Rotary, Lions etc.) which contribute
substantially to aid efforts.
All of the above agencies and organizations work with and assist
emerging nation governments which wish to purchase the WorldWater
products.
International organizations and NGO's can be slow to approve a new
product. WorldWater, however, has already achieved high visibility, interest and
in many cases approval. The advantages of dealing with these organizations are
that:
- the development agencies/NGO's serve many different countries that
combine a desperate need for low cost water pumping with a good
availability of solar energy,
- acceptance by one development agency promotes acceptance by the
others, thus greatly reducing the length of the business development
cycle,
- acceptance by recognized experts in the international community
gives WorldWater an implied endorsement that helps in private
marketing, and
- the international development agencies/NGO's have substantial
available monies for water supply systems and pay dependably.
Marketing to the public sector is being done principally through
Company personnel, consultants and sales representatives, as well as through
information articles in relevant international newsletters and magazines (such
as Solar journals, UNICEF, USAID and World Bank publications), participation in
international trade shows and conferences, targeted mailings, and journal
advertising. These methods are used to contact government agencies in developing
countries that have a program to purchase the pumps and the international
assistance agencies that fund these programs. CEO Quentin Kelly and WorldWater's
executives and consultants have extensive contacts with government officials in
many countries that are potential customers and with the highest executive
levels in many key international assistance agencies. These contacts have
enabled demonstrations of the Company's products to appropriate officials,
resulting in agreements and sales in its target countries.
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The Company is actively working to broaden its sources and means by
offering multi-year financing to buyers of WorldWater products. The Company thus
maintains contacts with International Federal and State agencies including the
World Bank, U.S. Export/Import Bank (Exim), the Small Business Administration,
New Jersey's Economic Development Agency, as well as various international banks
and forfaiting companies and other potential sources to obtain lines of credit,
credit guarantees and bid guarantees.
(f) Research and Development
Research and Development expenditures were $386,936 and $167,563 in 1999
and 1998, respectively. In addition to its present pumps that have delivery
capacities between 5 and 2200 gallons per minute, WorldWater has other water and
solar products in various stages of research and development.
For example, the Company has developed a prototype water diagnostics kit
called the AquaTester(TM) that can determine if water is contaminated by placing
a small quantity in the AquaTester(TM) incubator, which can be operated by solar
power in the field or by other electrical input. After 24 hours, the user can
tell if the water is polluted by certain color changes. The Company is working
in collaboration with IDEXX Laboratories of Maine, which produces the chemical
reagents used in the AquaTester(TM) process.
The Company is also exploring the possibilities of combining its
AquaSafe(TM) and AquaTester(TM) systems with various water purification units in
those areas where clean water is otherwise difficult to find.
The Company has been awarded cost sharing grants with a NJ state agency in
collaboration with Rutgers University and has developed a breakthrough in solar
powered "drip irrigation" systems. The Company expects to continue development
research in this area including using "brackish" water for irrigation.
The Company has developed a new and improved proprietary electronic
control subsystem for its AquaDrive(TM) controller. This new subsystem is
simpler and more rugged in its operation and the Company has filed for new
patents on this device.
(g) Manufacturing
Sub-contractors currently manufacture parts of the AquaSafe(TM) and
AquaMax 2200(TM) systems in the United States. WorldWater will continue to
source materials worldwide, based on quality and cost considerations.
In the future, when justified by marketing and production requirements,
WorldWater intends to locate AquaSafe(TM) and other product assembly sites
overseas. Joint venture discussions include proposed production in the
Philippines and Pakistan (solar panel manufacturing facilities for production
and sales of solar products). Such projects will leverage the capacity of
WorldWater to obtain local permits, finance production and better market its
products in many of the world's largest and most promising potential markets.
Other prospective joint venture partners are seeking technical assistance
from WorldWater for developing local manufacturing capability, particularly to
produce the solar panels, with WorldWater shipping in the proprietary
electronics.
(h) Patents
WorldWater has filed and been issued patents and continuations-in-part for
its newly developed AquaSafe(TM) and AquaMax 2200(TM) electronics systems and
has filed for protections of its patents in certain key countries outside the
United States. Thomas McNulty, Sr. and Doug Williams of WorldWater staff and
Quentin T. Kelly, Chairman and CEO, together with Princeton University engineers
have been issued patents, all of which are assigned to WorldWater.
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(i) Source and Availability of Raw Materials
The Company's solar modules are composed of silicon and other photovoltaic
materials. The chief suppliers of solar modules to WorldWater are Siemens Solar
(see Subsequent Events), BP Solar, Evergreen, AstroPower and Solarex, all based
in the US.
(j) Competitive Conditions Affecting the Company
WorldWater Corp. products compete with both conventional and solar
technologies that bring power to remote areas. The main competitive technologies
are diesel or gasoline generators and electrical grid extension, which is very
expensive. WorldWater's proprietary technology permits unique use of
"off-the-shelf" Alternate Current (AC) pumps, opening a whole range of
previously unavailable options for solar power. These AC pumps are widely
available in countries throughout the world, allowing replacement pumps and
parts to be supplied on a local basis. Other forms of solar powered photovoltaic
(PV) pumping systems currently available use less reliable and durable Direct
Current (DC) pumps or custom AC pumps which are more costly and not readily
available in most developing countries.
The principal competitive factors affecting the Company's products are the
upfront cost of a solar pump system compared to a less expensive diesel option.
However studies by GTZ (West German counterpart of USAID) indicate that PV has a
simple payback period of 18 months for remote power applications. Electricity
costs per kilowatt-hour for PV systems now compare favorably with diesel and are
substantially less expensive for water pumping over 3-5 years.
The Company believes that it has a strong lead in the markets in which it
operates. In many regions of the world competitive products are not available.
In those markets where competition exists, the most commonly encountered
competitor is Grundfos A/S of Denmark, a manufacturer of a large range of water
pumps including a solar pump line. However, the Company product line tends to be
10%-20% less expensive than the competition and a Grundfos specialty motor is
required to run the Grundfos system. WorldWater systems can operate with a broad
line of motors.
(k) Subsidiaries
100% wholly owned by WorldWater Corp. -
WorldWater, Inc
WorldWater Holdings Inc.
WorldWater East Africa Ltd.
WorldWater Pakistan (Pvt.), Ltd.
(l) Government Regulations
Compliance with federal, state, and local provisions regarding the
production and discharge of materials into the environment is expected to have
no effect on capital expenditures, earnings and competitive position. The
Company has a program to comply fully with the US Foreign Corrupt Practices Act.
(m) Employees
On December 31, 1999, the Company employed fifteen people on a full-time
basis. The Company also hires consultants on an as-needed basis and has
strategic alliances with two water consulting companies, the hydrogeological
firm of Vincent Uhl Associates and Morehouse Engineering, specialist in water
pumping and distribution and waste water treatment. WorldWater is developing a
worldwide capability for installing and maintaining its line of products. In
some cases this involves additional consulting contracts to evaluate local water
usage requirements, to find the needed water sources, drill the necessary wells
and supply the desired water storage facilities. It may also involve training a
local installation and servicing team and supplying assistance on an
as-requested basis.
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(n) The Year 2000.
The Company did not experience any problems relating to Year 2000
compliance.
Item 2. Description of Property
The Company's executive office, manufacturing facility and research and
development facility are housed in a 12,000 square foot site in Pennington, New
Jersey. This facility is leased under an operating lease expiring June 14, 2002.
The Company also uses a second facility in Hopewell, New Jersey for conferences,
meetings and demonstrations of its products. This facility is leased from the
Company's CEO on a month-to-month basis (See Item 12).
Item 3. Legal Proceedings
The Company is occasionally subject to various claims and suits that arise from
time to time in the ordinary course of its business, including actions with
respect to contracts and intellectual property. The company does not believe
that any current action will have a material effect on the company's business,
financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
None
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PART ll.
Item 5. Market for Common Equity and Related Stockholder Matters
WorldWater Corp.'s common stock is traded on the NASDAQ Electronic
Bulletin Board and is listed on the National Association of Securities Dealers
Automated Quotation System (NASDAQ) under the stock symbol "WWAT". High and low
bid quotations are listed below:
For the year ended December 31, 1999
HIGH LOW
First Quarter................................ $0.50 $0.14
Second Quarter............................... $0.81 $0.30
Third Quarter................................ $0.48 $0.05
Fourth Quarter............................... $0.50 $0.15
As of April 12, 2000, the common stock price was $1.00 and there were
approximately 768 shareholders of record for the Company's common stock. The
number of record holders does not include holders whose securities are held in
street name.
The Company has not declared or paid, nor has it any intention to pay any
cash dividends on its common stock in the foreseeable future.
SALES OF RESTRICTED SECURITIES DURING THE FOURTH QUARTER 1999
1. Equity Investment
Joseph Marzilli invested $50,000 in the Company by purchasing 200,000
shares at $0.25 per share.
Thomas Clark invested $200,000 in the Company by purchasing 571,429 shares
at $0.35 per share.
2. Conversion to shares
One individual holding a loan totaling $25,000 principal converted to
100,000 shares at $0.25 per share.
One individual converted loan interest to 15,000 shares.
3. Services
3,843 shares were issued to Rolf Haefeli for prior services rendered.
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Item 6. Management's Discussion and Analysis and Results of Operations
Certain statements contained in Management's Discussion and Analysis, and
elsewhere in this annual report, concerning the Company's outlook or future
economic performance such as anticipated profitability, gross billings,
commissions and fees, expenses or other financial items; and conditions of
performance or other matters, 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 states in such statements. Such risks,
uncertainties and factors include, but are not limited to, the following: (1)
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.
Background
The Company designs, develops and markets proprietary technology relating
to solar water power, including solar power products and international water
management consulting. The Company's primary products are cost effective power
systems driven entirely by solar energy, such as proprietary water pumping and
solar electric systems. The Company's primary customers are developing countries
that require non-traditional means of fulfilling their energy and water needs.
Results of Operations
Year Ended December 31, 1999 ("Fiscal 1999")
Compared to December 31, 1998 ("Fiscal 1998")
The net revenues increased to $526,924 from $45,451 in 1999 primarily due
to technology grants received from the New Jersey Commission on Science and
Technology for $249,967 and the U.S. Trade Development Agency for $123,560
recognized in 1999 ($235,470 total granted). Although several solar powered
electric systems were sold in 1999, the majority of sales effort was targeted
towards large contracts on the order of $500,000 to $10 million (see Item 1(a)
and (c) and "Net Loss" paragraph below.) The Company is involved in ongoing
negotiations pending contracts with several developing countries.
Cost of sales for the year was $251,717, reflecting the fixed overhead
required selling into an international market.
Research and Development expenses were $386,936 in 1999 compared to
$167,563 in 1998, an increase of 57%, reflecting a continuing effort to
introduce technological improvements into the Company's products.
Marketing, General and Administrative expenses were $1,113,871 in 1999,
compared to $1,055,982 in 1998, an increase of 5%. The slight increase primarily
resulted from increased overseas travel expenses.
The Net Loss of $787,318 resulted partially from the marketing process of
proposing, presenting and demonstrating the Company's new technology to
appropriate officials of developing countries and the resultant lag time between
agreements and annual budgeting (See Item 1 (a) and (c)). The Company's
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marketing efforts with its successful feasibility studies was not able to secure
annual budgeting for large purchases in time for the 1999 fiscal year.
Management is focusing its efforts on those countries among the emerging nations
which can assume financing arrangements offered through the Company's financing
programs.
Liquidity and Capital Resources
Net cash provided by all activities in 1999 was $191,138 compared with net
cash used by operations of $56,998 in 1998. The net cash used in operating
activities during 1999 was $834,504 compared to $1,254,290 in 1998. The net loss
experienced in 1999 was the primary reason for the consumption of cash used in
operating activities. Inventory levels decreased $15,932 in 1999. Accounts
receivable increased $162,061.
The Company's auditors have alleviated the going concern. Management
believes that prospects for winning one or more large contracts in 2000 are
favorable. The Company has also encouraged several debt holders to convert their
notes into common stock which amounted to $902,900 of debt and accrued interest
converted in the 1st quarter of 2000. A 7% Convertible Preferred Stock Placement
has also successfully earned a $999,950 investment which occurred in March 2000
with $1 million anticipated to follow in the second quarter of 2000 (see
Subsequent Events). The Company was also able to raise $185,000 through a
private equity placement and an additional $100,000 from the exercise of
Warrants. All of these actions combined to a positive net worth as of March 31,
2000.
The Company paid no federal or state income taxes in 1999, and ended the
year with a federal net operating loss carryforward of approximately $7,663,600.
During 1999 the Company's application to the New Jersey Division of
Taxation and the New Jersey Economic Development Authority to sell its State of
New Jersey Corporate Net Operating Losses was approved. The new law was enacted
January 1, 1999 and allows emerging technology companies involved in research
and development the opportunity to sell their state loss carryforwards and
research and development credits to profitable companies in the state for not
less than 75% of their net tax value. The Company was able to sell its Net
Operating Losses for $475,285.
The Company also continues to encourage its Warrant holders to exercise
their warrants, which provide an efficient and inexpensive means of raising
capital.
Item 7. Financial Statements
The financial statements of the Company, including the notes thereto,
together with the report of the independent public accountant thereon, are
presented beginning on page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Name of Executive Officer Age Office
Quentin T. Kelly 65 Chairman & CEO
John A. Pell 74 President
Dr. Anand Rangarajan 50 Executive Vice President
Peter I. Ferguson 56 Vice President
Terri Lyn Harris 33 Vice President-Controller
Steven Salvo, Esq. 50 Secretary
12
<PAGE>
FORM 10-KSB ANNUAL REPORT
Name of Director Age Term of Office
Commenced
Quentin T. Kelly 65 1984
Rolf Haefeli 34 1997
Dr. Russell Sturzebecker 82 1997
Dr. Martin Beyer 67 1995
Joseph Cygler 64 1993
Dr. Davinder Sethi 50 1999
Quentin T. Kelly founded WorldWater in 1984 as a consulting and R&D Company and
has been Chairman and CEO since then. Mr. Kelly was previously Director of
Information Services and Assistant to the President of Westinghouse Electric
Corporation from 1965 to 1971 and subsequently became President of Kelly-Jordan
Enterprises, Inc., a publicly-held leisure products Company from 1971 to 1975,
and then President of Pressurized Products, Inc., manufacturers and
international marketers of specialized water systems and products, from 1976 to
1984. Mr. Kelly is an alumnus of Kenyon College and holds three U.S. patents
relating to water systems. He has many years' experience in international
business relating to water and power needs in the developing world. He has
worked on water supply and solar power projects with governments and several of
the international assistance agencies (USAID, UNDP and UNICEF among others) and
more than a dozen governments and private contractors throughout the world.
John A. Pell, President & Chief Operating Officer, was a senior officer with
Chase Manhattan Bank in New York and London where he was in charge of African
banking activities for U.S. Multinationals. He was Managing Director of a
European Bank Consortium and President of a trade finance banking organization
in Hong Kong. He is a graduate of Princeton University and the Wharton School
(MBA) of the University of Pennsylvania.
Dr. Anand Rangarajan, Executive Vice President, started his career at MIT
(Massachusetts Institute of Technology) Lincoln Laboratory. He is a solar and
water pump specialist with 20 years experience in all aspects of the solar
electric business and has pioneered the development of several proprietary
systems, products and markets which have been installed in over 20 countries. He
has his Ph.D. in Engineering from University of Wisconsin and holds patents in
solar energy and pumping systems. He has published technical papers and has been
a featured speaker at National and International conferences.
Peter I. Ferguson, Vice President of Administration, joined WorldWater in 1989.
He previously served as a Vice President and general management executive and
accountant for companies in New York and New Jersey. He graduated from Rutgers
University in Accounting and Management.
Terri Lyn Harris, Vice President-Controller, joined WorldWater in 1999 after 3
years of consulting to the Company. She spent the last 10 years as the
Controller for a publicly traded international manufacturing company. Ms. Harris
is a graduate of Ursinus College and holds an MBA from Rider University.
Stephen A. Salvo, Esq. Is a founder and partner of Salvo, Russell, and Fichter
specializing in Securities and Exchange Commission law and is the Company's SEC
counsel.
Rolf Haefeli, a Director of WorldWater, is President of Haefeli Asset Management
based in Switzerland, principal investors in the Company. He is a graduate in
Environmental Economics from the University of Zurich.
Dr. Russell L. Sturzebecker, a Director of WorldWater and its
Consultant-International Health, is a retired Director of Health and Education
of West Chester University (Pennsylvania). He is an author and publisher of
histories of World War II-Pacific Theater and of the Olympic Games. He is a
retired Colonel, US Air Force, who accompanied General Douglas MacArthur's
troops in the invasion of the Philippines and is a close associate of former
President Fidel V. Ramos of the Philippines.
13
<PAGE>
FORM 10-KSB ANNUAL REPORT
Dr. Martin G. Beyer, a Director of WorldWater and its Consultant - International
Marketing, was Secretary-General of the Global Consultation on Water and
Sanitation, sponsored by the United Nations Development Program and the World
Bank, held in New Delhi, India in 1990 and attended by over 600 delegates from
115 countries. Previously, Dr. Beyer was Senior Advisor for Water Supply and
Sanitation for UNICEF, Chairman of the United Nations Intersecretariat Group for
Water Resources, Chairman of the Advisory Panel to the UNDP/World Bank global
project for testing and developing of hand pumps, and Deputy Regional Director
for UNICEF in the Americas. Dr. Beyer has a Ph.D. degree in Economic Geology
from the University of Stockholm and speaks ten languages, including French,
Spanish, German, Italian and Portuguese. He resides in Princeton, New Jersey. He
was an Advisor to the Company from 1991 and became a Director in 1995.
Joseph Cygler has been a Director of WorldWater since January of 1984 and a
former Vice President of Marketing and Executive Vice-President. He has been
Chief Executive Officer of the CE&O Group, an organization assisting companies
in operations management, since 1986. Previously he was an executive at
Kepner-Tregoe, Inc., an international business consulting firm, an executive
with Honeywell Information Systems, and a marketing representative with
International Business Machines. Mr. Cygler has a BS in Engineering from the
U.S. Military Academy at West Point.
Dr. Davinder Sethi, is an independent advisor and investor in the fields of
information technologies and finance, with experience spanning academia,
research, business and investment banking. Previously, he served as Director and
Senior Advisor to Barclays de Zoete Wedd, advising global providers of
information technologies. He has lived and worked in nine overseas countries in
seventeen years in Asia, Latin America and Europe.
Item 10. Executive Compensation
Quentin T. Kelly, President and CEO, had a contract for an annual salary of
$42,000 from 1995-1997. However Mr. Kelly did not receive his full salary during
the year's 1994-1999 and has accrued salary payments of $76,750 outstanding at
December 31, 1999. He did not receive any other compensation or stock options
during the years 1995-1997 but did receive Incentive Stock Options totaling
37,975 shares for deferred salary in 1997. No Company executive earned a salary
plus bonus in excess of $60,000.
<TABLE>
<CAPTION>
Name and Principal Position Year Salary Bonus Other Annual All Other
Compensation
<S> <C> <C> <C> <C> <C>
Quentin T. Kelly 1999 $42,000 $0 $0 $0
1998 $42,000 $0 $0 $0
1997 $42,000 $0 $0 $0
</TABLE>
Item 11. Security Ownership of certain Beneficial Owners and Management
The following tables set forth the number and percentage of the shares of the
registrant's Common stock owned as of April 14, 2000 by all persons known to the
registrant who own more than 5% of the outstanding number of such shares, by all
directors of the registrant, and by all officers and directors of the registrant
as a group. Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.
14
<PAGE>
FORM 10-KSB ANNUAL REPORT
Common Stock
- ------------
Number of Shares Percent
Name Beneficially Owned of Class
- ---- ------------------ --------
Quentin T. Kelly 2,800,000 10.3%
George S. Mennen Rev. Trust 1,583,333 5.8%
William G. Mennen IV, Trustee
Rolf Haefeli 247,530 1.0%
Joseph Cygler 550,000 2.0%
Peter Ferguson 162,000 **
Dr. Martin Beyer 193,000 **
Dr. Russell Sturzebecker 136,141 **
All Directors, executive officers
as a group (6 persons) 5,672,004 19.1%
** Less than 1%
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock that such person has
the right to acquire within 60 days of April 14, 2000. For purposes of
computing the percentage of outstanding shares of Common Stock held by each
person or group of persons named above, any security which such person or
persons has or have the right to acquire within such a date is deemed to be
outstanding but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Except community
property laws, the Company believes based on information supplied by such
persons, that the persons named in this table have sole voting and
investment power with respect to all shares of Common Stock which they
beneficially own.
Item 12. Certain Relationships and Related Transactions
Included in notes payable and long-term debt at December 31, 1999 and 1998, are
amounts payable to employees, directors and their immediate relatives as
follows:
1999 1998
---- ----
Directors $ 4,500 $ 109,400
Employees 110,645 35,000
Immediate relatives 17,000 38,000
--------- ---------
Total $ 132,145 $ 182,400
========= =========
Directors notes payable declined $104,900 primarily due to conversion of such
debt into common stock.
The Company occupied space in 1999 and 1998 that is owned by its Chairman/CEO
and leased this space on a month to month basis. The amount paid to the
Chairman/CEO amounted to $30,000 in 1999 and 1998.
15
<PAGE>
FORM 10-KSB ANNUAL REPORT
Part IV
Item 13. Exhibits List and Reports on Form 8-K
None
Signatures
In accordance with section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WorldWater Corp.
(Registrant)
By: /s/ Quentin T. Kelly Date: April 14, 2000
---------------------
Quentin T. Kelly, Chairman/CEO
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
/s/ Quentin T. Kelly Chairman/Chief Executive
- ------------------------ Officer April 14, 2000
Quentin T. Kelly
/s/ John A. Pell President/Chief Operating April 14, 2000
- ------------------------ Officer
John A. Pell
/s/ Joseph Cygler Director April 14, 2000
- ------------------------
Joseph Cygler
/s/ Martin Beyer Director April 14, 2000
- ------------------------
Martin Beyer
/s/ Russell Sturzebecker Director April 14, 2000
- ------------------------
Russell Sturzebecker
/s/ Rolf Haefeli Director April 14, 2000
- ------------------------
Rolf Haefeli
16
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999 and 1998
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
December 31, 1999 and 1998
Table of Contents
Page
----
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholders' Deficiency F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-22
F-1
<PAGE>
Independent Auditors' Report
To The Board of Directors and Shareholders,
WorldWater Corp:
We have audited the accompanying consolidated balance sheet of WorldWater Corp.
and subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of operations, stockholders' deficiency and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WorldWater Corp. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
DeAngelis & Higgins, L.L.C.
Cranbury, New Jersey
April 11, 2000
F-2
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Assets 1999 1998
---- ----
<S> <C> <C>
Current Assets:
Cash $ 195,300 $ 4,162
Accounts receivable, net of allowance for
doubtful accounts of $-0- in 1999 and 1998 162,061 --
Marketable securities available for sale -- 11,875
Inventory 81,537 97,469
Prepaid expenses 500 5,335
----------- -----------
Total Current Assets 439,398 118,841
----------- -----------
Equipment and leasehold improvements, Net 37,787 48,268
Deposits 8,384 8,384
----------- -----------
Total Assets $ 485,569 $ 175,493
=========== ===========
Liabilities and Stockholders' Deficiency
Current Liabilities:
Notes payable $ 126,181 $ 136,181
Notes payable, related parties 112,145 237,400
Current maturities of long-term debt 757,736 897,150
Current maturities of long-term debt, related parties 20,000 20,000
Accounts payable 362,966 371,857
Accrued interest 407,541 332,829
Accrued salaries 191,500 205,200
Other accrued expenses 95,750 53,450
----------- -----------
Total Current Liabilities 2,073,819 2,254,067
----------- -----------
Long-term debt 200,000 --
----------- -----------
Total Liabilities 2,273,819 2,254,067
----------- -----------
Stockholders' Deficiency:
Common stock, $.001 par value; authorized 50,000,000
and 30,000,000 shares at December 31, 1999 and 1998;
issued and outstanding 27,125,854 and 21,984,904
shares at December 31, 1999 and 1998, respectively 27,126 21,985
Additional paid-in capital 7,628,467 6,576,591
Unrealized loss on available for sale securities -- (20,625)
Accumulated deficit (9,443,843) (8,656,525)
----------- -----------
Total Stockholders' Deficiency (1,788,250) (2,078,574)
----------- -----------
Total Liabilities and Stockholders' Defiency $ 485,569 $ 175,493
=========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
F-3
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenue:
Equipment sales $ 153,397 $ 45,451
Technology grant 249,967 --
Service 123,560 --
------------ ------------
Total Revenue 526,924 45,451
------------ ------------
Cost of Goods Sold 251,717 183,921
------------ ------------
Gross Profit 275,207 (138,470)
------------ ------------
Operating Expenses:
Research and development expense 386,936 167,563
Marketing, general and administrative expenses 1,113,871 1,055,982
------------ ------------
Total Expenses 1,500,807 1,223,545
------------ ------------
Loss from Operations (1,225,600) (1,362,015)
Other Expense (Income)
Interest expense 108,058 162,402
Loss on sale of marketable securities 32,500 50,000
Interest income (731) (1,575)
Other (52,824) (6,000)
------------ ------------
Total Other Expense (Income), Net 87,003 204,827
------------ ------------
Net loss before income taxes and extraordinary item (1,312,603) (1,566,842)
Benefit for income taxes 475,285 --
------------ ------------
Net loss before extraordinary item (837,318) (1,566,842)
------------ ------------
Extraordinary Item
Gain on the extinguishment of debt 50,000 --
------------ ------------
Net Loss Applicable to Common Shareholders $ (787,318) $ (1,566,842)
============ ============
Net Loss Applicable per Common Share:
Basic $ (0.03) $ (0.08)
============ ============
Diluted $ (0.03) $ (0.08)
============ ============
Shares used in Per Share Calculation:
Basic 25,703,423 19,126,684
============ ============
Diluted 25,703,423 19,126,684
============ ============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
F-4
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-In Comprehensive Accumulated
Shares Par Value Capital Income (Loss) Deficit Total
------ --------- ------- ------------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 15,288,502 15,289 4,229,884 -- (7,010,908) (2,765,735)
Issuance of common stock
for cash 2,048,949 2,049 626,412 -- -- 628,461
Issuance of common stock
for warrants exercised 827,500 827 323,378 -- -- 324,205
Debt and accrued interest
converted to common stock 3,329,073 3,329 1,280,111 -- -- 1,283,440
Issuance of common stock
for services 59,630 60 11,862 -- -- 11,922
Issuance of common stock
for settlement of asserted
claims 431,250 431 78,344 -- (78,775) --
Imputed interest 26,600 -- 26,600
Net loss -- -- -- (20,625) (1,566,842) (1,587,467)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 21,984,904 $ 21,985 $ 6,576,591 $ (20,625) $(8,656,525) $(2,078,574)
Issuance of common stock
for cash 3,346,806 3,347 721,667 -- -- 725,014
Issuance of common stock
for warrants exercised 284,000 284 54,816 -- -- 55,100
Debt and accrued interest
converted to common stock 1,357,397 1,357 211,043 -- -- 212,400
Issuance of common stock
for settlement of asserted
claims 15,000 15 5,985 -- -- 6,000
Contributed services -- -- 20,000 -- -- 20,000
Issuance of common stock
for services 137,747 138 38,365 -- -- 38,503
Net loss -- -- -- 20,625 (787,318) (766,693)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 27,125,854 $ 27,126 $ 7,628,467 $ -- $(9,443,843) $(1,788,250)
=========== =========== =========== =========== =========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
F-5
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (787,318) $(1,566,842)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 17,187 18,376
Loss on marketable security 32,500 50,000
Gain on extinguishment of debt (50,000) --
Changes in assets and liabilities:
Accounts receivable (162,061) 60,529
Inventory 15,932 (13,611)
Prepaid expenses 4,835 (2,708)
Accounts payable and accrued expenses 33,409 56,883
Accrued interest 74,712 107,133
Accrued salaries (13,700) 35,950
----------- -----------
Net Cash Used in Operating Activities (834,504) (1,254,290)
----------- -----------
Cash Flows from Investing Activities:
Proceeds on sale of marketable securities and investment -- 123,973
Purchase of equipment and leasehold improvements (6,706) (18,769)
----------- -----------
Net Cash Used in Investing Activities (6,706) 105,204
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 200,000 57,500
Payments on long-term debt (89,414) (176,000)
Proceeds from issuance of notes payable 400,345 269,400
Payments on notes payable (535,600) (50,000)
Proceeds from issuance of stock 1,057,017 991,188
----------- -----------
Net Cash Provided by Financing Activities 1,032,348 1,092,088
----------- -----------
Net Increase (Decrease) in Cash 191,138 (56,998)
Cash at Beginning of Year 4,162 61,160
----------- -----------
Cash at End of Year $ 195,300 $ 4,162
=========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
F-6
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Formation of the Company
WorldWater Corp. ("Company") was incorporated in the State of Nevada on
April 3, 1985 under the name Golden Beverage Company ("Golden"). In April
1997, the Company completed a reverse acquisition with WorldWater, Inc., a
Delaware corporation formed in January 1984 and changed its name to
WorldWater Corp. in June 1997. Pursuant to the acquisition agreement, the
Company issued on a share-for-share basis 8,141,126 post-reverse split
shares of Golden $0.001 par value voting common stock for 8,141,126 shares
of WorldWater, Inc. $0.001 par value voting common stock, which equaled
eighty percent (80%) of all WorldWater, Inc. issued and outstanding common
stock. The remaining shareholders were offered one share of the Company's
common stock for one share of WorldWater, Inc.'s common stock and are
reflected as issued and outstanding common stock of the Company. Holders
of approximately ninety-one percent (91%) of WorldWaters, Inc.'s common
stock have agreed to the stock exchange and tendered their shares.
Prior to the reverse merger transaction described above, the Company was a
non-operating publicly held company. As of the closing date, all assets
and liabilities of Golden Beverage Company were transferred to an
unrelated entity. Therefore, the reverse acquisition had the effect of
transferring the assets and liabilities of WorldWater, Inc. into the
publicly held entity. In consideration for this, the former shareholders
of Golden Beverage Company received 113,501 shares of the Company's common
stock.
(2) Going Concern Alleviated
The financial statements for the year ended December 31, 1998, expressed
substantial doubt about the ability of the Corporation to continue as a
going concern. These concerns were based on the Company's working capital
deficit, default on loan agreements, stockholders' deficiency and a lack
of adequate sales. Management has worked with debt holders, and has
converted approximately $903,000 of debt and accrued interest into equity,
has raised $999,950 through the private sale of preferred stock, $185,000
through a private equity placement and an additional $100,000 from the
exercise of Warrants. These actions have alleviated these concerns.
(3) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its controlled subsidiary companies.
F-7
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Summary of Significant Accounting Policies (continued)
Description of the Business
The Company is a full-service water management and solar energy company,
designing, developing and marketing technology relating to water needs and
solar power applications. The Company advises and supplies governments and
industry throughout the world on solar electric applications and on all
phases of water needs. The Company's primary customers are developing
countries, which require non-traditional means of fulfilling their energy
and water needs.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts that are reported in the consolidated
financial statements and accompanying disclosures. Although these
estimates are based on management's best knowledge of current events and
actions that the company may undertake in the future, actual results may
be different from the estimates.
Revenue Recognition
The Company recognizes revenue when it is realizable and earned. The
Company reduces revenue for estimated customer returns and allowances. The
following are the specific revenue policies for each major category of
revenue.
Equipment
Revenue from equipment sales is recognized when the product is shipped and
title has passed.
Service
Revenue from time and material service contracts is recognized as the
services are provided. Revenue from fixed price long-term service
contracts is recognized over the contract term based on the percentage of
service that are provided during the period compared with the total
estimated services to be provided over the entire contract. Losses on
fixed price contracts are recognized during the period in which the loss
first becomes apparent. Revenue in excess of billings on service contracts
is recorded as unbilled receivables and is included in trade account
receivable. Billings in excess of revenue that is recognized on service
contracts are recorded as deferred income until the above revenue
recognition criteria are met.
F-8
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Summary of Significant Accounting Policies (continued)
Revenue Recognition (continued)
Technology Grants
Technology grants made on the basis of entitlement periods are recorded as
revenue when entitlement occurs.
Income Taxes
Income tax expense (benefit) is based on reported income (loss) before
income taxes. Deferred income taxes (benefit) reflect the effect of
temporary differences between assets and liabilities that are recognized
for financial purposes and the amounts that are recognized for income tax
purposes. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 109 "Accounting for Income Taxes" these deferred taxes are
measured by applying current enacted tax laws.
Cash Equivalents
All, highly-liquid instruments with a maturity at the time of acquisition
of three months or less are carried at fair value and are considered to be
cash equivalents.
Inventory
Inventory is stated at the lower of cost or market determined by the
First-In, First-Out (FIFO) method. Inventory consists mainly of purchased
system components.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are carried at cost and are
depreciated for financial reporting purposes using the straight-line
method. Depreciation for income tax purposes is computed using accelerated
methods. The principal useful lives are: computers and information
equipment, 5 years; office furniture, vehicles, and test and assembly
fixtures, 5 to 7 years; leasehold improvements, 7 years. Upon retirement
or disposal, the asset cost and related accumulated depreciation are
removed from the accounts and the net amount, less any proceeds, is
charged or credited to income.
Expenditures for maintenance and repairs are charged against income as
incurred. Expenditures which significantly increase asset value or extend
useful lives are capitalized.
F-9
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Summary of Significant Accounting Policies (continued)
Research and Development Costs
Research and development costs consist of expenses associated with the
basic and applied research in the sciences and engineering and the design
and development of prototypes and processes. Research and development
costs are charged to operations when incurred.
Long-Lived Assets
Long-lived assets are comprised of equipment. Long-lived assets are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. An
estimate of undiscounted future cash flows produced by the asset is
compared to the carrying amount to determine whether impairment exists.
Common Stock
Common stock refers to the $0.001 par value capital stock as designated in
the Company's Certificate of Incorporation.
Net Loss Per Common Share
Basic earnings (net) per share is based upon weighted-average common
shares outstanding. Dilutive earnings per share is computed using the
weighted-average common shares outstanding plus any potentially dilutive
securities including stock options, warrants, and convertible debt.
Options, warrants and convertible debt were not included in the
computation of diluted net loss per common share because the effect in
years with a net loss are antidilutive.
Reclassification
Certain prior year balances have been reclassified to conform to current
year presentation.
(4) Accounting Changes
Standards implemented
Effective January 1, 1998, the company adopted SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and
displaying in a full set of general-purpose financial statements the gains
and losses not affecting retained earnings. The disclosures required by
SFAS No. 130 are presented in the Accumulated Other Comprehensive Income
(Loss) section in the Consolidated Statements of Stockholder's Deficiency.
F-10
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Equipment and Leasehold improvements
Equipment and leasehold improvements consist of the following at December
31:
1999 1998
---- ----
Computers $ 24,633 $ 24,633
Office furniture and equipment 37,531 31,537
Test and assembly fixtures 33,550 32,838
Vehicles 7,721 7,721
Leasehold improvements 8,123 8,123
-------- --------
111,558 104,852
Less: Accumulated depreciation 73,771 56,584
-------- --------
Equipment and leasehold improvements, net $ 37,787 $ 48,268
======== ========
(6) Notes Payable
The Company has outstanding several notes payable in the aggregate amounts
of $238,326 and $373,581 at December 31, 1999 and 1998, respectively. The
effective interest rates on these notes range from 0.00% to 10%. All
outstanding notes payable are unsecured.
(7) Long-Term Debt
Long-term debt consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Loans payable to individuals, with no stated interest
rate or maturity date. These uncollateralized notes are
convertible at the rate of $0.495 per common share for
146,465 shares of common stock. These loans mature at a
date six months after the closing of the Company's first
public offering. $53,500 $ 72,500
Loan payable to corporation, with no stated interest
rate or maturity date. The loan will be repaid with the
proceeds of the Company's first public offering. The
uncollateralized loan has a conversion option which is
exercisable at the option of the holder at $0.495 per
common share for a total conversion option of 101,010
shares of common stock. -- 50,000
------- --------
Subtotal $53,500 $122,500
</TABLE>
F-11
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Long-Term Debt (continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance Carryforward $53,500 $122,500
Loan payable to an individual dated October 14, 1992,
with an original maturity date of October 14, 1997,
bearing interest at 8.00 percent per annum. The loan is
uncollateralized. Payment of principal and accrued
interest were due at maturity. The loan is convertible
at the option of the holder at the rate of $0.40 per
share for a total conversion amount of 125,000 shares of
common stock. 50,000 50,000
Loan payable to an Investment Trust, dated September 28,
1994, maturing March 31, 1998, bearing interest at 9.00
percent per annum. The loan is collateralized by
inventory and accounts receivable. Payment of principal
and interest were due at maturity. The note is
convertible at the option of the holder at the rate of
$0.50 per common share for a total conversion amount of
270,000 shares of common stock. 133,236 135,000
Loans payable to individuals dated June 28, 1995 through
May 30, 1996. The loans are due upon demand and bear
interest at 10 percent per annum. The loans are
uncollateralized and are convertible at the option of
the holder at the rate of $0.50 per common share. During
1998, $125,000 of the loans and $29,369 accrued interest
were converted by the borrowers for 859,667 shares of
common stock at a rate of $0.18 per share (692,983
shares for principal and 166,684 shares for interest).
At December 31, 1998, the loans are convertible at the
option of the holders at the rate of $0.50 per common
for a total liquidation amount of 510,000 shares of
common Stock. In addition, all loan holders were granted
485,100 warrants for the purchase of common stock at the
price of $0.40 per share for signing a Forbearance
Agreement. 250,000 255,000
-------- --------
Subtotal $486,736 $562,500
</TABLE>
F-12
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Long-Term Debt (continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance Carryforward $486,736 $562,500
Loans payable to individuals dated July 17, 1995 through
February 25, 1997. The loans are due upon demand and
bear interest at 10 percent per annum. The loans are
uncollateralized and are convertible at the option of
the holder at the rate of $0.50 per common share. During
1998, $246,000 of the loans were converted by the
holders for 560,354 shares of common stock at a rate of
$0.50 per share (492,000 shares for principal and 68,354
shares for interest). At December 31, 1998, the
remaining loans are convertible at a rate of $0.50 per
common share for a total liquidation amount of 594,300
shares of common stock. In addition, all holders were
granted 602,965 warrants for the purchase of common
stock at the price of $0.60 per share. 291,000 297,150
Note payable to an individual dated December 1998,
maturing on the earlier of April 30, 1999 or receipt
from the sale of tax certificates, bearing interest at
6.00 percent per annum. Payment of principal and
interest is due at maturity. The uncollateralized note
is convertible at the sole option of the holder at the
rate of $0.15 per share for a total conversion amount of
333,333 shares of common stock. The loan holder was
granted warrants for the purchase of common stock at the
price of $0.25 per share. In the event of full
conversion of this note the warrant entitles the holder
to purchase 166,667 shares; in the event of loan
repayment, the warrant entitles the holder to purchase
50,000 shares -- 50,000
-------- --------
Subtotal $777,736 $909,650
</TABLE>
F-13
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Long-Term Debt (continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance Carryforward $777,736 $909,650
Note payable to an individual dated December 1998,
maturing on the earlier of March 31, 1999 or receipt
from the sale of tax certificates, bearing interest at
6.00 percent per annum. Payment of principal and
interest due at maturity. The uncollateralized note is
convertible at the sole option of the holder at the rate
of $0.15 per share for a total conversion amount of
50,000 shares of common stock. The loan holder was
granted warrants for the purchase of common stock at the
price of $0.25 per share. In the event of full
conversion of this note the warrant entitles the holder
to purchase 25,000 shares; in the event of loan
repayment, the warrant entitles the holder to purchase
7,500 shares. -- 7,500
Notes payable to an individual dated September 24, 1999
Maturing on September 23, 2002, bearing interest at 8.00
Percent per annum. Payment of principal and interest due
at maturity. The uncollateralized note is convertible at
the sole option of the holder at the rate of $0.50 per
share For a total conversion amount of 400,000 shares of
common Stock. The loan holder was granted a three year
warrant for The purchase of 25,000 shares of common stock
at the price of $0.75 per share. 200,000 --
-------- -------
Total $977,736 $917,150
Less current maturities 777,736 917,150
-------- --------
Total long-term debt $200,000 $ --
======== ========
</TABLE>
Principal repayments of $200,000 on this debt is required in 2002.
F-14
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Income Taxes
The components of income tax expense (benefit) are as follows:
1999 1998
---- ----
Federal:
Current $ -- $ --
Deferred -- --
--------- -------
$ -- $ --
========= =======
State:
Current $(475,285) $ --
Deferred -- --
--------- -------
$(475,285) $ --
========== =======
Total income tax benefit for the years ended is different from the amount
computed by multiplying total loss before income taxes by the statutory
Federal income tax rate of 34%.
The reason for this difference and the related tax effects are as follows:
1999 1998
---- ----
Expected tax benefit at 34% $429,285 $390,832
State tax benefit before allowance 75,000 151,167
Officer life insurance 4,420 4,760
Change in differed tax valuation allowance 508,705 434,053
Sale of state net operation loss and
Research & development credit (475,285) --
--------- --------
Income tax (benefit) $(475,285) $ --
========= ========
The tax effect of significant items comprising the Company's deferred tax
asset are as follows:
1999 1998
---- ----
Net operating losses carryforwards $3,507,905 $2,999,200
Valuation allowance 3,507,905 2,999,200
---------- ----------
Net deferred tax asset $ -- $ --
========== ==========
F-15
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Income Taxes (continued)
At December 31, 1999, the Company had net operating loss carryforwards
(NOL) and research and development credits which may be available to
offset future Federal and state taxable income, if any and will expire as
follows:
<TABLE>
<CAPTION>
Net Operating Loss Research and Development
Year Expiring Carryforwards Tax Credits
Federal State Federal State Federal State
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C>
2000 -- $ 64,376 -- -- --
2001 -- 27,481 -- -- --
2002 -- 14,778 -- -- --
2003 -- 29,505 -- -- --
2004 -- 95,302 -- -- --
2005 -- 94,557 -- -- --
2006 -- 402,684 -- -- --
2007 -- 251,079 -- -- --
2008 -- 641,341 -- -- --
2009 2001 887,929 -- 19,646 14,973
2010 2002 912,453 -- 15,207 23,395
2011 2003 981,193 205,518 15,387 23,673
2012 2004 1,263,193 361,993 12,923 2,485
2013 2005 1,337,702 69,867 20,398 --
2014 2006 660,000 660,000 16,100 8,050
</TABLE>
In 1999, the Company applied and was eligible to participate in the State
of New Jersey's Technology Tax Certificate Transfer Program. This program
allowed the Company to sell a portion of its authorized state net
operating loss and New Jersey research and development tax credits. The
Company was able to sell $5,678,519 of its state net operating loss and
$16,973 of its research and development tax credit and received a tax
benefit of $475,285.
The Tax Reform Act of 1986 (the "Act") provides for a limitation on the
annual use of NOL and research and development tax credit carryforwards
that could significantly limit the Company's ability to utilize these
carryforwards. The Company has experienced and expects in the foreseeable
future anticipated financing. Accordingly, because tax laws limit the time
during which these carryforwards may be applied against future taxes, the
Company may not be able to take full advantage of the attributes for
Federal and state income tax purposes.
F-16
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Stock-Based Compensation Plans
The Company provides a stock option plan, for the granting of incentive
stock options to key employees, directors, officers, key consultants, and
advisors to the Company. The Company may grant up to 2,780,000 shares,
with an option term not to exceed seven years.
Effective January 1999, the Board of Directors approved a reduction in the
exercise price on the 493,931 Incentive Stock Options awarded as of
December 31, 1998.
The following summarizes stock options activity and related information:
<TABLE>
<CAPTION>
1999 1998
---- ----
Weighted Average Weighted Average
Exercise Exercise
Shares Price Shares Price
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning
of the year 493,931 $0.15 322,200 $0.40
Granted 498,373 0.26 171,731 0.40
Cancelled (18,000) 0.15 -- --
Exercised (34,000) 0.15 -- --
------- ---- -------- -----
Outstanding at end
of the year 940,304 $0.21 493,931 $0.40
======= ===== ======= =====
1999 1998
---- ----
Number of shares
Exercisable at
December 31, 830,635 $0.18 493,931 $0.40
======= ===== ======= =====
Weighted-Average Remaining
Contractual Life (Years) 4.15 3.62
===== ====
</TABLE>
The Company adopted the provisions of Financial Accounting Standards No
123, "Accounting for Stock-Based Compensation," that calls for companies
to measure Stock compensation expense based on the fair value method of
accounting. However, as allowed by the Statement, the Company elected the
continued use of Accounting Principles Board (APB) Opinion 25, "Accounting
for Stock Issued to Employees," with pro forma disclosure of net income
and earnings (loss) per share determined as if the fair value method had
been applied in measuring compensation costs. Had the fair value method
been applied, the impact on net loss per share for the years ended
December 31, 1999 and 1998, was immaterial.
F-17
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Warrants
The Company accounts for transactions with non-employees, in which goods
or services are the consideration received for the issuance of equity
instruments under the fair value based method.
At December 31, 1999, warrants to purchase 4,691,345 common shares are
outstanding; 1,462,985 warrants exercisable during the year 2000, with a
strike price of $0.20 - $0.50, 457,600 warrants exercisable during the
year 2001, with a strike price of $0.40 - $0.60, 1,663,130 warrants
exercisable during the year 2002, with a strike price of $0.10 - $0.60 and
1,107,630 warrants exercisable during the year 2003, with a strike price
of $0.50 - $0.75.
(11) Employment and Consultant Agreements
On June 8, 1998, the Company entered into a one-year employment agreement
with the President/Chief Operating Officer ("COO"). The agreement was
automatically extended for an additional year, upon mutual agreement of
the parties. Compensation under the agreement is $24,000 and annual
bonuses as determined by the Company's Board of Directors. The extended
agreement also provides, five-year Incentive Stock Options (ISO) to
purchase 100,000 shares of the Company's common stock at $0.57 (fifty
cents) per share. The ISO vest monthly during employment in equal
installments of 8,333 shares per month. The agreement provides a covenant
not to disclose any proprietary information. If the Employee's employment
is terminated by reason of death or disability, the Employee's estate will
be entitled to continued compensation under the terms of this agreement.
The Company has employment agreements with the Chairman/CEO and Vice
Presidents. Aggregate compensation under these agreements are $114,000.
The Company has unpaid salaries of $191,500 which have been deferred by
the officers as of December 31, 1999. During the year ended December 31,
1999, an officer of the Company exchanged $20,000 of unpaid salaries for
52,632 warrants exercisable at $0.38.
The Company has agreements effective through December 31, 2005 with its
Chairman, a senior executive and a consultant, which provides for an
incentive fee of up to five percent (0.5%) on revenues earned by the
Company with an annual cap of $250,000 per individual. The Company
incurred incentive fee expenses of $500 and $-0- in 1999 and 1998,
respectively.
F-18
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Employment and Consultant Agreements(continued)
The Company has entered into consulting agreements with key personnel for
the Company. Compensation under these agreements totaled $88,000. The
agreements also provide, five-year Incentive Stock Options (ISO) to
purchase shares of the Company at $0.50 (fifty cents) per share, and
reimbursement of professional fees and dues up to $2,000 per year. The ISO
vest monthly during employment in equal installments of 4,000 shares per
month.
(12) Technology Grant
In 1999 the Company entered into a recoverable grant agreement with New
Jersey Commission on Science and Technology (Commission). Under the terms
of the agreement the Company was awarded $249,967 under the Technology
Transfer Program for the development and commercialization of an off-grid
drip irrigation system powered by photovoltaic power. Under the terms of
the agreement the Company is required to make royalty payments to the
Commission for a period of ten years based on the net income of the
product up to the amount of the award.
(13) Feasibility Study
During 1999, the Company entered into a contract in the amount of $235,470
with the Philippine Department of the Interior and Local Governments to
prepare a feasibility study on the installation of community water
supplies using solar electric systems in Cebu, Philippines. Revenue on
this contract is recognized as the services are provided. At December 31,
1999, the Company had recognized $123,560 on this contract.
(14) Gain on the Extinguishment of Debt
During 1999, the Company recognized as an extraordinary item in the amount
of $50,000 the gain on the cancellation of a loan obligation. Since 1989
the Company has exhausted all avenues of contacting the debt holder. Based
on the advise of the Company's legal counsel it has been determined that
the statue of limitations has expired.
(15) Leases
The Company leases its production, service and administrative premises
under a five-year lease agreement expiring June 14, 2002, with a renewal
option for an additional five-year period. The lease requires the lessee
to pay taxes, maintenance, insurance and certain other operating costs of
the leased property. Rent expense for 1999 and 1998 was $62,500 and
$52,500 respectively.
F-19
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Leases (continued)
The minimum future rental payments under this lease are as follows:
2000 $ 51,500
2001 61,000
2002 27,500
--------
Total minimum future rental payments $140,000
========
(16) Related Party Transactions
Included in notes payable and long-term debt at December 31, are amounts
payable to employees, directors and their immediate relatives as follows:
1999 1998
---- ----
Directors $ 4,500 $109,400
Employees 110,645 110,000
Immediate relatives 17,000 38,000
-------- --------
Total $132,145 $257,400
======== ========
The Company leased office and laboratory facilities from the Chairman of
the Company on a month to month basis. Lease payments to the Chairman were
$30,000 for 1999 and 1998.
In 1999, the Company entered into an agreement with a Director of the
Company to provide investor relation services to the Company. Under the
terms of the agreement, the Director received 50,000 shares of the
Company's common stock value at $12,000.
(17) Marketable Securities Available for Sale
In 1997, the Company acquired 50,000 shares of Proformix Systems, Inc., a
NASDAQ traded company as part of its settlement with Royal Capital Inc.
and recorded these securities as marketable securities available for sale
at then market value of $162,500.
During 1998, the Company sold 40,000 shares of the stock. Proceeds from
the sale were $80,000 and the Company recognized a loss on the sale of
marketable securities of $50,000. These marketable securities are stated
at fair value with any unrealized holding gains or losses included as a
component of stockholders' deficiency until realized. At December 31,
1998, the Company had an unrealized holding loss of $20,625.
During 1999, the Company determined the stock had no market value and
recognized a loss of $32,500.
F-20
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(18) Risks and Uncertainties
The Company markets its products to developing nations. The ability of
these customers to order and pay for the Company's products and services
is dependent on a variety of factors including government approval,
adequate funding and vigorous testing procedures. Sales to two major
customers accounted for 31% and 21% of the Company's sales in 1999. In
1998, sales to major customers accounted for 48%, 22%, and 22% of the
Company's sales.
(19) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to
estimate that value.
The carrying value of cash and cash equivalents, receivables, accounts
payable and accrued expenses approximate fair value because of the short
maturity of those instruments. The carrying value of marketable securities
available for sale is carried at a fair value based upon the quoted market
prices. The fair value of the Company's debt is estimated based on the
current rates offered to the Company for debt of the same remaining
maturities and similar terms. The estimated fair values of the Company's
debt instruments are as follows:
Carrying Fair
Amounts Value
------- -----
1999 $1,016,062 $1,016,062
1998 1,290,731 1,258,081
(20) Contingencies
The Company is occasionally subject to various claims and suits that arise
from time to time in the ordinary course of its business, including
actions with respect to contracts and intellectual property. The Company
does not believe that any current action will have a material effect on
the Company's business, financial condition or results of operations.
(21) Supplemental Disclosure of Cash Flow Information
1999 1998
---- ----
Cash paid during the year for:
Interest $ 32,971 $4,761
========= ======
Income taxes (benefit) $(475,285) $ --
========= ======
F-21
<PAGE>
WORLDWATER CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Supplemental Disclosure of Cash Flow Information
Supplemental schedule of non-cash investing and finance activities:
In 1999, the Company's debt holders converted $1,011,000 of debt principal
and $272,440 of accrued interest (total of $1,283,440) into 3,329,073
shares of the Company's common stock at rates between $0.15 - $0.50 per
share.
In 1998, the Company's debt holders converted $212,400 of debt principal
into 1,357,397 shares of the Company's common stock at rates between $0.15
- $0.25 per share.
(16) Subsequent Events (Unaudited)
Subsequent to December 31, 1999, the Company converted, at the consent of
its debt holders, $702,000 of notes payable and long-term debt and
$200,900 of accrued interest into 2,364,807 shares of the Company's'
common stock.
Subsequent to December 31, 1999, the Company sold, 1,111,056 shares of 7%
convertible preferred stock through a private placement for $999,950 at
the rate of $0.90 per share.
In February, 2000, WorldWater (Phils) Inc. was formed as a wholly owned
subsidiary of WorldWater Holdings Inc. of Delaware, which is a holding
company owned 100% by WorldWater Corp.
F-22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 195,300
<SECURITIES> 0
<RECEIVABLES> 162,061
<ALLOWANCES> 0
<INVENTORY> 81,537
<CURRENT-ASSETS> 439,398
<PP&E> 37,787
<DEPRECIATION> 0
<TOTAL-ASSETS> 485,569
<CURRENT-LIABILITIES> 2,073,819
<BONDS> 0
0
0
<COMMON> 27,126
<OTHER-SE> (1,815,376)
<TOTAL-LIABILITY-AND-EQUITY> 485,569
<SALES> 526,924
<TOTAL-REVENUES> 526,924
<CGS> 251,717
<TOTAL-COSTS> 1,500,807
<OTHER-EXPENSES> 21,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,058
<INCOME-PRETAX> (1,312,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 525,285
<CHANGES> 0
<NET-INCOME> (787,318)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
