SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
_____________ to _______________
Commission file number: 0-18260
THE NEW WORLD POWER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-1659436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
558 Lime Rock Road
Lime Rock, Connecticut 06039
(Address of principal executive offices) (Zip code)
(860) 435-4000
(Registrant's telephone number, including area code)
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
filing requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of the registrant's Common Stock as of
June 30, 1996 was 11,134,147.
<PAGE>
THE NEW WORLD POWER CORPORATION
Quarterly Report on Form 1O-Q
For the Three-Month Period Ended June 30, 1996
TABLE OF CONTENTS
-----------------
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Consolidated Statement of Stockholders' Equity 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 21
<PAGE>
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
ASSETS Notes (Unaudited)
----- ----------------- -------------------
<S> <C> <C> <C>
Current assets:
Cash $921,886 $681,369
Cash restricted in use 2,951,213 4,669,554
Accounts receivable 3,237,169 4,269,360
Inventories 1,456,102 1,871,170
Other current assets 1,772,652 1,572,490
----------------- -------------------
Total current assets 10,339,022 13,063,943
Notes receivable 185,600 185,600
Property, plant and equipment, net 27,236,714 29,374,876
Other non-current assets 3,859,063 4,726,555
Goodwill, net of accumulated amortization of $137,343 and $398,125 1,431,995 1,549,234
Investments 5 16,603,552 16,495,495
----------------- -------------------
Total Assets $59,655,946 $65,395,703
================= ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $6,955,505 $7,148,616
Current portion of long term debt, net 18,083,837 17,965,610
Due to related parties 4,441,410 4,627,870
Current portion of capital lease obligations 121,953 83,537
----------------- -------------------
Total current liabilities 29,602,705 29,825,633
Long-term portion of long-term debt, net 6,761,916 7,649,979
Long-term portion of capital lease obligations 37,713 76,014
Other non-current liabilities 5,173,877 5,497,644
----------------- -------------------
Total liabilities 41,576,211 43,049,270
Minority interests in consolidated subsidiaries 1,235,694 1,323,183
Stockholders' equity:
Common stock $.01 par value, 40,000,000 shares authorized
and 11,134,147 shares issued and outstanding 111,341 111,341
Currency translation adjustments 344,643 778,838
Additional paid-in capital 80,718,057 79,857,172
Accumulated deficit (64,330,000) (59,724,101)
----------------- -------------------
Total stockholders' equity 16,844,041 21,023,250
----------------- -------------------
Total liabilities and stockholders' equity $59,655,946 $65,395,703
================= ===================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------
Notes 1996 1995 1996 1995
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenue:
Grid power production revenues $ 1,976,546 $ 2,032,252 $ 4,162,776 $ 4,153,099
Wireless power sales 2,002,616 1,702,158 4,306,995 2,754,809
Other products and services 415,105 565,002 666,524 889,054
------------ ------------ ------------ ------------
Total operating revenue 4,394,267 4,299,412 9,136,295 7,796,962
------------ ------------ ------------ ------------
Cost of operations:
Grid power production 697,051 931,571 2,442,381 1,801,923
Wireless power 1,842,919 1,045,782 3,690,685 1,738,828
Other products and services 534,947 432,972 791,507 773,598
------------ ------------ ------------ ------------
Total cost of operations 3,074,917 2,410,325 6,924,573 4,314,349
------------ ------------ ------------ ------------
Gross profit:
Grid power production 1,279,495 1,100,681 1,720,395 2,351,176
Wireless power 159,697 656,376 616,310 1,015,981
Other products and services (119,842) 132,030 (124,983) 115,456
------------ ------------ ------------ ------------
Total gross profit 1,319,350 1,889,087 2,211,722 3,482,613
------------ ------------ ------------ ------------
Research and development expenses 82 0 452 0
Project development expenses (221,045) 440,393 392,966 889,518
Selling, general and administrative expenses 1,780,958 1,327,871 3,747,529 2,572,893
------------ ------------ ------------ ------------
Operating income (loss) (240,645) 120,823 (1,929,225) 20,202
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (2,029,907) (400,709) (3,119,188) (724,079)
Interest income 77,460 166,894 145,667 328,004
Net equity earnings (loss) of non-consolidated affiliates 5 45,699 159,414 108,057 233,222
Minority interests in consolidated subsidiaries 105,201 (22,149) 87,489 (13,046)
Other 78,207 (58,145) 121,277 384,824
------------ ------------ ------------ ------------
Total other income (expense) (1,723,340) (154,695) (2,656,698) 208,925
------------ ------------ ------------ ------------
Income (loss) before taxes (1,963,985) (33,872) (4,585,923) 229,127
Provision for income taxes 80 92,166 19,976 250,633
------------ ------------ ------------ ------------
Loss from continuing operations (1,964,065) (126,038) (4,605,899) (21,506)
(Income) loss from operations of discontinued Grid Power
Services 0 418,584 0 417,547
------------ ------------ ------------ ------------
Net (loss) income (1,964,065) (544,622) (4,605,899) (439,053)
Series B preferred stock dividend 0 56,506 0 111,909
Series B preferred stock discount amortization 0 18,750 0 37,500
------------ ------------ ------------ ------------
Net income (loss) attributable to common shares ($ 1,964,065) ($ 619,878) ($ 4,605,899) ($ 588,462)
============ ============ ============ ============
(Loss) per common share:
Net (loss) ($ 0.18) ($ 0.01) ($ 0.41) ($ 0.01)
Series B dividend preferred stock $ 0.00 ($ 0.01) $ 0.00 ($ 0.01)
Series B discount amortization preferred stock $ 0.00 $ 0.00 $ 0.00 $ 0.00
============ ============ ============ ============
Net (loss) attributable to common shares $ 0.00 $ 0.00 $ 0.00 ($ 0.06)
============ ============ ============ ============
Weighted-average number of shares 11,134,147 10,415,630 11,134,147 10,033,994
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Notes 1996 1995
----- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 4,605,899) ($ 439,053)
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 1,416,235 785,791
Amortization of goodwill 117,239 84,777
Amortization of Series B preferred stock offering costs 20,124
Amortization of debt discount 819,259 0
Minority interest in net income of consolidated subsidiaries 3 (87,489) 13,046
Net equity (earnings) loss in non-consolidated affiliates 2 (108,057) (233,222)
Issuance of notes in lieu of interest payments 759,584
Changes in assets and liabilities, net of effect of acquisitions:
Decrease (increase) in accounts receivable 1,032,191 (852,186)
Decrease (increase) in inventories 415,068 (578,383)
(Increase) decrease in other current assets (217,162) (224,050)
Increase (decrease) in accounts payable and accrued liabilities (193,111) 255,588
------------ ------------
Cash flows (used in) operating activities (652,142) (1,167,568)
------------ ------------
Cash flows from investing activities:
Capital expenditures 721,927 (5,613,996)
Acquisition of subsidiaries, net of cash acquired 0 (1,459,244)
(Increase) decrease in notes receivable, net of capital lease obligations 17,115 141,596
Investments in and advances to affiliates, including goodwill 0 (3,003,992)
Decrease (increase) in non-current assets 867,492 (2,004,509)
Increase(decrease) increase in non-current liabilites (323,769) (255,528)
------------ ------------
Cash flows (used in) investing activities 1,282,765 (12,195,673)
------------ ------------
Cash flows from financing activities:
Increase in short-term debt 650,000
Increase in long-term debt 2,079,811
(Decrease) in due to shareholders 0 (1,000,006)
Increase in due to shareholders 1,000,000
Decrease (increase) in restricted cash 1,718,341 (1,341,100)
Repayment of long-term debt (1,674,254) 0
Proceeds from issuance of Common Stock, net 0 8,814,521
Renewable Energy Ireland Limited minority dividend (64,451)
------------ ------------
Cash flows provided by financing activities 44,087 10,138,775
------------ ------------
Effect of exchange rate changes on cash (434,193) (451,315)
------------ ------------
Net change in cash 240,517 (3,675,781)
Cash at beginning of period 681,369 3,889,333
------------ ------------
Cash at end of period $ 921,886 $ 213,552
============ ============
</TABLE>
Continues on following page
5
<PAGE>
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(Unaudited)
Continued from prior page
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Non-cash investing and financing transactions:
Issuance of notes in lieu of interest payments $759,584
Common stock issued for majority interest in Bellacorick 637,500
Series B preferred stock dividend accrual 111,909
Series B preferred stock discount amortization 37,500
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense $489,078 $645,118
Income taxes 19,896 12,942
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Six Month Period Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
----------------------- Currency Additional Retained Total
Number Amount of translation paid in earnings
of shares Par Value adjustments capital (deficit)
------------------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 11,134,147 $ 111,341 $ 778,838 $ 79,857,172 ($59,724,101) $ 21,023,250
Issuance of Common Stock -- -- -- -- -- --
Issuance of Common Stock Warrants -- -- -- 860,885 -- 860,885
Change in Minority Interest due to sale of
subsidiarys' stock -- -- -- -- -- 0
Currency translation adjustments on
international subsidiaries consolidation -- -- (434,195) -- -- (434,195)
Net (Loss), Six month period ended
June 30, 1996 -- -- -- -- (4,605,899) (4,605,899)
---------- ------------ ------------ ------------ ------------ ------------
Balance June 30, 1996 11,134,147 $ 111,341 $ 344,643 $ 80,718,057 ($64,330,000) $ 16,844,041
========== ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
presentation of interim financial information. They do not include all
information and presentation of footnotes required by generally accepted
accounting principles for presentation of complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Certain reclassifications have been made to the financial statements
for the six month period ended June 30, 1995 to conform to the current period
presentation.
The reader is referred to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 for information which may be useful in
understanding the Company's business and financial statement presentation.
NOTE 2. GOING CONCERN
The consolidated financial statements as of, and for the six month
period ended June 30, 1996 have been prepared assuming that the Company will
continue as a going concern. During the year ended December 31, 1995, the
Company incurred a net loss of $41.3 million (including a $24.4 million
impairment charge), had negative cash flows from operations of $6.3 million and
had negative working capital. During the first quarter of 1996, due to severe
liquidity constraints, the Company defaulted on two of its principal loan
agreements and as a result, was required to restructure those loans. The Company
has amounts owed trade creditors that are past due, and certain creditors have
threatened to petition the Company into involuntary bankruptcy proceedings. As
part of the agreement to restructure its debt, management has agreed to sell
certain assets by specified dates in 1996 and use a portion of the proceeds to
repay the debt. Further, the Company anticipates having negative operating cash
flows during 1996, and as a result, will require additional capital through
financing or equity transactions in order to sustain operations. The above
matters raise substantial doubts about the Company's ability to continue as a
going concern.
In January, 1996, the Company adopted a new business plan. Key elements
of the business plan include:
o The Company intends to focus on a selected, limited number of
development projects and does not intend to acquire or expand
into any new business ventures until the Company improves its
financial position.
o The Company intends to sell down or sell off its existing
hydroelectric projects currently under development or
construction, with the exception of its investment in China
which the Company views to be a strategic geographic location.
o The Company intends to reduce, where possible, its ownership
interest in operating wind farms, as well as its wind farms
under development.
8
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
o The Company intends to use the proceeds from the sale of these
investments to meet its current and near term debt service
requirements.
o The Company does not intend to pursue any new wind farm
development projects in the United States. This element of the
business plan does not affect projects for which the Company
has completed the bidding process or has been selected through
a competitive process to operate a wind farm.
o The Company intends to focus future development on large scale
wind farm projects in countries where the Company has an
established presence, such as Mexico, Ireland and China, and
will not pursue competitively bid wind farm projects unless
the individual circumstances are uniquely compelling.
o The Company intends to simultaneously seek to integrate its
wireless business or sell its Photocomm subsidiary.
o The Company intends to reduce its administrative staff.
There are numerous risks and uncertainties surrounding management's
plans, principally the risk that management will not be able to sell the
investments (or subsidiaries) identified in its business plan within the time
frame, or for the amounts, required by the restructured loan agreement. There
can be no assurance that the Company will be successful in implementing this
plan and that the Company will continue as a going concern.
NOTE 3. OTHER COMMITMENTS AND CONTINGENCIES
Asset Sales
As discussed in Note 2, in order to satisfy the terms of its
restructured 8% convertible subordinate note, the Company must sell
certain assets or securities for specified minimum amounts during 1996.
Under the restructured agreement, the Company must sell assets for
minimum proceeds of $10 million on or before July 31, 1996, with
cumulative proceeds from the sale of assets increasing to $27 million
by November 30, 1996. A portion of the proceeds from the sale of these
assets is to be used to reduce the obligations outstanding under the
agreement. Failure to obtain sufficient proceeds and make the related
debt payments would constitute a breach of the amended agreement and
result in the debt becoming callable by the lender. Subsequent to June
30, 1996 the Company received an extension to its loan agreement to
extend the requirement to raise $10 million of net proceeds from the
sale of assets beyond July 31, 1996. Management negotiated the sale of
its Photocomm investment and Solartec subsidiary and signed a
definitive agreement for the sale of these investments for proceeds in
excess of $10 million on August 16, 1996, thereby satisfying the
lenders' requirements. The anticipated proceeds of the sale are
approximately $12.5 million. The proceeds will be used to pay off a
portion of the 8% Secured Subordinated Notes which are outstanding.
9
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance Bond
In connection with the Company's proposal to construct a hydroelectric
facility at Anderson Falls, Argentina, the Company was required to post
a $1 million performance bond. The Company's liquidity problems have
halted the construction of this facility and therefore the Company
faces the risk that this bond may be called. Management is currently
seeking a buyer for this development project who would assume the
Company's obligations under the performance bond. The Company has
recorded a reserve for its estimated exposure with respect to this
project.
Capital Expenditures
Under the power purchase contract with Consumers Power Company
("Consumers"), the Company is required to expend approximately $2.5
million for the rehabilitation of its Wolverine hydroelectric
facilities prior to December 31, 1995. Through December 31, 1995, the
Company had made qualifying capital expenditures of approximately
$2.115 million. In addition, the Company is currently re-negotiating
the terms of the Consumers' power purchase contract, as the established
contract rates expired December 31, 1995. Management anticipates
resolving the current non-compliance regarding the rehabilitation
funding requirement and reaching agreement on a new power purchase
contract. Failure to reach agreement regarding these matters may result
in the termination of the relationship by Consumers. To date, Consumers
has not sought to terminate the contract or suggest that it may seek
other relief.
Concentrations Of Risk
The Company derives all of its revenue from the production and sale of
electric power generated from renewable sources and, to a lesser
extent, the sale of products related to the renewable energy industry.
As a result, the Company is subject to several concentrations of risk.
A significant majority of the Company's revenues are derived from
contracts for the sale of power to regulated public utilities. Under
many of these contracts, the price for energy is subject to the
utilities' "avoided cost". "Avoided cost" is affected by, among other
factors, the availability and market price of oil, gas, and other
energy sources. Additionally, the Company will have to renegotiate
contracts with the utilities when the present contracts expire.
Further, the renewable energy industry has, in the past, been subject
to legislative and regulatory changes, and will likely continue to be
affected by such factors for the foreseeable future.
10
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. IMPAIRMENT CHARGE
In 1995, the Company recorded an impairment charge of $24.4 million. As
described in the Company's annual report on Form 10-K the Company has a business
plan to sell certain of its assets and investments and to abandon various
development projects. For the six month period ended June 30, 1996, there has
been no change to the impairment charge and no significant change to the
carrying value of the assets held for sale. The assets held for sale as of June
30, 1996 include:
Photocomm Makani Uwila Wind Farm
United Kingdom Wind Farms Arcadian Wind Farm
Tierras Morenas, Development Project Los Vaqueros
Solartec S.A. San Jacinto
Dona Julia, Development Project Bellacorick
Andersen Falls
NOTE 5. INVESTMENTS
The Company's investment in, and advances to unconsolidated affiliates
as of the balance sheet date, are as follows:
1996
Company Equity Change Investments
- ------- ------------- -----------
Photocomm 48% $ 152,058 $ 13,047,553
New World Entec S. A 50% 0
San Jacinto Power Company 50% (44,001) 55,999
Fujian I Hydro Project 12% 0 3,500,000
------------ ------------
Totals $ 108,057 $ 16,603,552
============ ============
The summarized balance sheets and statements of operations for
Photocomm are as follows:
June 30, December 31,
1996 1995
---- ----
BALANCE
Current assets $7,048,352 $7,334,984
Total assets 9,441,476 10,361,409
Current liabilities 2,879,420 2,676,483
Total liabilities 3,610,951 3,069,579
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
STATEMENT OF OPERATIONS
Sales $10,187,788 $11,837,520
Cost of Sales 7,275,486 9,105,515
Selling, General and Administrative 2,499,989 2,134,382
Net income 328,038 588,949
11
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SUBSEQUENT EVENTS
On July 31, 1996, the Company entered into a letter of intent to sell
its investment in Photocomm and its Solartec subsidiary. The letter of intent is
subject to finalization of a definitive agreement and satisfaction of certain
other conditions. On August 16, 1996, the Company signed a definitive agreement
for the sale. Proceeds are anticipated to be approximately $12.5 million and
will be used to pay off a portion of the outstanding 8% Secured Subordinated
Notes.
On June 29, 1996, the Company entered into letter of intent to sell its
investment in San Jacinto Power Company and expect to close during the third
quarter.
On August 1, 1996 the Company sold its investment in Los Vaqueros.
On August 19, 1996, the Company issued interest notes and warrants to
pay the interest due on the 8% Secured Subordinated Notes through July 31, 1996.
This payment in kind was in accordance with an option provided to the Company in
Amendment #2 to the 8% Secured Subordinated Note agreements.
12
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The New World Power Corporation, together with its consolidated
subsidiaries, ("the Company") is engaged in the production and sale of electric
power generated from renewable sources and, to a lesser extent, the sale of
products related to the renewable energy industry. The Company focuses on the
acquisition and development of renewable power generating facilities from wind,
solar, and hydroelectric sources.
BUSINESS ENVIRONMENT
As described in the Company's annual report on Form 10-K, Management
adopted a new business plan in January of 1996 with the objectives of improving
the Company's financial position, reducing debt, increasing equity and
alleviating the Company's short-term liquidity problems and improving long-term
liquidity.
Further, under the Company's restructured loan agreements, the Company
is required to raise $10 million in net proceeds from the sale of assets or
securities by July 31, 1996 and raise an additional $17 million in net proceeds
from the sale of assets and securities by November 30, 1996.
During the six month period ended June 30, 1996, the Company was
engaged in active negotiations to sell its investments in Photocomm, Solartec
S.A., the Makani Uwila Wind Farm, Los Vaqueros and San Jacinto. Subsequent to
June 30, 1996, the Company signed agreements to sell Los Vaqueros and San
Jacinto for aggregate net proceeds of $217,500. However, as of July 31, 1996,
the Company had not yet completed the sale of any other investments and has not
complied with provisions of its loan agreement to raise $10 million in net
proceeds from the sale of assets or securities by July 31, 1996. The Company
negotiated with the lender to extend the requirement to raise $10 million in net
proceeds and has received an extension through the end of the day on August 16,
1996.
Management had been actively negotiating the sale of its Photocomm
investment and Solartec subsidiary and signed a definitive agreement for the
sale of these assets/investments for proceeds in excess of $10 million on August
16, 1996. This sale allows the Company to meet the requirement of the loan
agreement to raise $10 million of net proceeds on or before July 31, 1996
(extended through August 16, 1996).
13
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
RESULTS OF OPERATIONS
GENERAL
The results of operations for the six month period ended June 30, 1995
reflect changes from originally reported numbers as a result of the method of
accounting for the Company's investment in Photocomm. During the year ended
December 31, 1994, the Company acquired additional shares of common stock and
other Photocomm securities (immediately converted to common stock). As a result,
after consideration of the acquisition of the additional common stock and a
short-term voting agreement the Company had control of over 51% of Photocomm's
issued and outstanding common stock as of December 31, 1994. Accordingly, the
Company originally consolidated Photocomm into its financial statements for the
six month period ended June 30 1995.
At December 31, 1995, the Company owned 6,612,447 shares of Photocomm,
representing less than 50% of the issued and outstanding shares of Photocomm.
The decrease in the Company's ownership percentage from December 31, 1994
results from various Photocomm equity transactions in which the Company did not
participate. Additionally, the short-term voting agreement, described above,
expired during 1995. As a result of the Company no longer having a controlling
interest in Photocomm, the investment in Photocomm has been accounted for on an
equity basis, for the six month period ended June 30, 1996. The Company has
restated the June 30, 1995 financial statements to reflect the de-consolidation
of Photocomm. The summarized balance sheets and statements of operations for
Photocomm are as follows:
June 30, December 31,
1996 1995
---- ----
BALANCE
Current assets $7,048,352 $7,334,984
Total assets 9,441,476 10,361,409
Current liabilities 2,879,420 2,676,483
Total liabilities 3,610,951 3,069,579
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
STATEMENT OF OPERATIONS
Sales $10,187,788 $11,837,520
Cost of Sales 7,275,486 9,105,515
Selling, General and Administrative 2,499,989 2,134,382
Net income 328,038 588,949
REVENUES
Revenues during the six month period ended June 30, 1996 increased
$1,339,333 (17%) which is primarily due to the Santa Fe project in Argentina
which was not present in the first half of 1995, as well as increased revenues
at Solartec.
14
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
COSTS OF OPERATIONS
The cost of operations for the six month period ended June 30, 1996
increased $2,610,224 (61%) compared to the same period of 1995, which is
partially attributable to the Santa Fe project in Argentina which was not
present in the first half of 1995 and increased costs of Solartec in relation to
revenues. Additionally, depreciation expense for the U.K. wind farms was
increased from the prior year to reflect accelerated methods to better match
revenues.
Project Development Expenses
Development of a power production facility requires extensive
preparatory work that includes identifying and acquiring the rights to suitable
wind or hydroelectric sites, obtaining an economically viable power purchase
contract, fulfilling all legal requirements and obtaining financing for the
project on favorable terms. All of this precedes equipment selection, contract
negotiation and actual construction.
Project development expenses decreased by $496,552 (56%) during the six
month period ended 1996 compared with 1995 which was primarily attributable to
the Company's investigations during 1995 into potential projects in China and,
to a lesser extent, various domestic projects and Chile and Argentina.
Selling, general and administrative
Selling, general and administrative expenses increased $1,174,636
(46%), during the six month period ended June 30, 1996 compared to the same
period in 1995, which is primarily attributable to increased professional fees
at Corporate Headquarters including crisis management consultants, legal fees
and accounting and auditing fees. The Company has terminated its arrangement
with the crisis management consultants in August, 1996.
Operating (Loss) Income
Operating results decreased $1,949,427 to ($2,656,698) during the six
month period ended June 30, 1996 compared to the same period in 1995. The
increased loss is attributable primarily to increased professional fees at the
Corporate level and increased depreciation for the U.K. wind farms.
15
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Other Income (Expense)
Other expense, net, increased $2,865,266 during the six month period
ended June 30, 1996 compared to the same period in 1995 which is attributable
primarily to a $2,395,109 increase in interest expense in connection with
approximately $15 million of debt the Company issued during the latter part of
the 1995. Additionally, the Company benefited in 1995 from aggregated gains of
$276,000 in connection with the settlement of certain disputes.
Net income (loss)
The net loss for the six month period ended June 30, 1996 increased
$4,584,393 compared to the same period last year. The increase in net loss is
primarily attributable to increased interest expense, professional fees at
Corporate Headquarters and, increased depreciation expense in the U.K.
SEGMENT ANALYSIS
GRID POWER PRODUCTION
Revenues
Grid power production revenues were approximately flat during the six
month period ended June 30, 1996 compared to the same period in 1995.
Cost of Operations
Cost of operations for six month period ended June 30, 1996 increased
$640,458 (36%) which is primarily attributable to increased depreciation expense
in the U.K. to reflect accelerated methods which better match revenues and
expenses. As a result Grid Power gross profit decreased $630,781.
WIRELESS POWER
This photo-voltaic (solar) business segment includes Photocomm Inc.,
Solartec S.A., and a part of New World Power Technology Company (formerly
Northern Power Systems). These companies are in the business of developing,
assembling, and marketing photo-voltaic or solar electric power systems and
related products domestically and in South America.
Sales
Sales increased $1,552,186 (56%) during the six month period ended June
30, 1996 compared to the same period in 1995 principally attributable to the
Santa Fe project in Argentina which was not present in 1995. Additionally,
Solartec revenues were also higher.
16
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Costs
Costs increased $1,951,857 during the six month period ended June 30,
1996 principally attributable to the Santa Fe project in Argentina which was not
present in 1995. Additionally, Solartec costs were higher consistent with the
increase in revenues.
Gross profit
The combination of the above resulted in a decrease in gross profit of
$399,671 during the six month period ended June 30, 1996.
OTHER PRODUCTS & SERVICES
This category includes the New World Power Technology Company
(non-solar segment), which provides scientific, engineering, and technology
services to both the Company and outside businesses and governmental units.
This category also includes the New World Village Power Company which
continues to be in a development stage, but for which the Company expects future
growth. This business unit provides stand alone power generation facilities for
remote villages. Village Power generation facilities may vary, but generally
consist of some combination of wind, solar, and diesel generation units.
Revenues decreased $222,530 (25%) during the six month period ended
June 30, 1996 compared to the same period in 1995 due to the shut-down of
Village Power partially offset by increased Technology sales. Costs were
approximately flat despite the decrease in sales, principally due to costs
incurred for of the Advanced Wind Turbine program, a joint effort with the
National Renewable Energy Laboratory. The result is a loss of $24,983 compared
to a gross profit in the six month period of 1995 of $115,456.
LIQUIDITY & CAPITAL RESERVES
During the six month period ended June 30, 1996, there has been no
significant changes in the Company's liquidity or capital reserves. The Company
has not issued any new debt obligations nor has it repaid any significant
amounts of borrowings.
The Company did not receive any proceeds from the sale of assets during
the six month period ended June 30, 1996, but has entered into several
definitive agreements in July and August 1996. The anticipated proceeds from
these definitive agreements exceed $12.5 million.
17
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Subsequent to June 30, 1996 the Company signed agreements to sell its
investments in Los Vaqueros and San Jacinto for aggregate net proceeds of
$217,500. Further, the Company has completed negotiations to sell its
investments in Photocomm and Solartec. Management signed a definitive agreement
for the sale of these investments for net proceeds in excess of $12 million on
August 16, 1996. The Company continues to pursue is business plan of improving
its financial position and liquidity throughout the sale of assets and reduction
of debt.
At June 30, 1996 the Company continues to operate under constrained
liquidity and operating cash flow. As a result, the Company made its interest
payment, due July 31, 1996, on its 8% Secured Subordinated Notes in the form of
additional notes and warrants as permitted under the restructured loan
agreement.
The Company has a working capital deficiency of $19,263,683 million
which is partially the result of certain obligations upon which the Company
defaulted in the first quarter of 1996 being currently due. There are numerous
risks and uncertainties surrounding management's plans to improve the Company's
financial position, and liquidity and reduce debt, principally the risk that
management will not be able to sell the investments (or subsidiaries) identified
in its business plan within the time frame, or for the amounts, required by the
restructured loan agreement.
18
<PAGE>
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
PART II-OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
27 Financial Data Schedule.
b) REPORTS ON FORM 8-K
The Registrant filed a Form 8-K dated May 31, 1996 regarding the
Registrant's Forbearance, Warrant Exchange Note Conversion and Amendatory
Agreement, Amendment No. 3 to Note and Warrant Purchase Agreement, press release
announcing the restructuring of the Registrant's indebtedness with its lenders,
and a letter from the Nasdaq Stock Market, Inc.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEW WORLD POWER CORPORATION
August 14, 1996 By /s/ John D. Kuhns
--------------------
John D. Kuhns
Chairman of the Board
August 14, 1996 By /s/ Frederic A. Mayer.
-------------------------
Frederic A. Mayer
Interim Controller and
Acting Chief Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 921,886
<SECURITIES> 0
<RECEIVABLES> 3,237,169
<ALLOWANCES> 0
<INVENTORY> 1,456,102
<CURRENT-ASSETS> 10,339,022
<PP&E> 27,236,714
<DEPRECIATION> 7,894,702
<TOTAL-ASSETS> 59,655,946
<CURRENT-LIABILITIES> 29,602,705
<BONDS> 0
0
0
<COMMON> 111,341
<OTHER-SE> 16,732,700
<TOTAL-LIABILITY-AND-EQUITY> 59,655,946
<SALES> 4,394,267
<TOTAL-REVENUES> 4,394,267
<CGS> 3,074,917
<TOTAL-COSTS> 4,634,912
<OTHER-EXPENSES> 306,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,029,907
<INCOME-PRETAX> (1,963,985)
<INCOME-TAX> 80
<INCOME-CONTINUING> (1,964,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,964,065)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> 0
</TABLE>
