U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
Commission File Number 0-18260
THE NEW WORLD POWER CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 52-1659436
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
14 Mount Pleasant Drive Aston, PA 19014
(Address and Zip Code of Principal Executive Offices)
(484) 840-0944
Issuer's Telephone Number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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____
There were 5,192,813 shares of the registrant's common stock
outstanding as of September 30, 2000.
<PAGE>
THE NEW WORLD POWER CORPORATION
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at September 30, 2000 (unaudited)
and December 31, 1999 1
Consolidated Condensed Statements of Operations for the Nine
Month Periods Ended September 30, 2000 and 1999 (unaudited) 2
Consolidated Condensed Statements of Operations for the Three
Month Periods Ended September 30, 2000 and 1999 (unaudited) 3
Consolidated Condensed Statements of Cash Flows for the Nine
Month Periods Ended September 30, 2000 and 1999 (unaudited) 4
Notes to Interim Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 11 - Computation of Earnings per Common Share
Exhibit 27 - Financial Data Schedule
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
SEPTEMBER 30, December 31,
2000 1999
-------------- --------------
(UNAUDITED)
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CURRENT ASSETS:
Cash and cash equivalents $ 41,072 $ 39,070
Cash restricted in use 37,180 7,973
Accounts receivable 41,618 157,882
Other current assets 55,790 13,201
-------------- --------------
TOTAL CURRENT ASSETS 175,660 218,126
-------------- --------------
Property, plant and equipment, net 12,354,349 2,809,283
Goodwill, net of accumulated amortization 490,201 342,453
Deferred project costs 196,643 183,958
-------------- --------------
13,041,193 3,335,694
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TOTAL ASSETS $ 13,216,853 $ 3,553,820
============== ==============
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,115,740 $ 452,157
Due to related parties 2,014,280 510,381
Income taxes payable 110,000 -
Current portion of lease obligations 1,031,567 -
Current portion of long-term debt 252,272 82,837
-------------- --------------
TOTAL CURRENT LIABILITIES 4,523,859 1,045,375
-------------- --------------
Long-term portion of due to related parties - 950,000
Long-term portion of debt 869,748 82,837
Long-term portion of lease obligations 4,421,070 -
Other non-current liabilities 100,000 100,000
-------------- --------------
5,390,818 1,132,837
-------------- --------------
TOTAL LIABILITIES 9,914,677 2,178,212
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized 40,000,000 shares;
5,192,813 and 3,797,912 shares issued and outstanding 51,928 37,979
Additional paid-in capital 83,951,502 83,210,751
Currency translation adjustments - (88,401)
Accumulated deficit (80,701,254) (81,784,721)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 3,302,176 1,375,608
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,216,853 $ 3,553,820
============== ==============
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
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2000 1999
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OPERATING REVENUE $ 3,303,812 $ 1,013,809
COST OF OPERATIONS 1,139,893 494,452
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GROSS PROFIT 2,163,919 519,357
Project development expenses 4,401 43,353
Selling, general and administrative expenses 635,778 532,749
------------- -------------
OPERATING INCOME 1,523,740 (56,745)
------------- --------------
OTHER INCOME (EXPENSE):
Interest expense (422,342) (98,977)
Interest income - 1,745
Other 92,069 388,387
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TOTAL OTHER INCOME (EXPENSE) (330,273) 291,155
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INCOME BEFORE TAXES 1,193,467 234,410
Provision for income taxes 110,000 3,004
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NET INCOME $ 1,083,467 $ 231,406
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BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings from continuing operations available to
common stockholders - Basic $ 0.22 $ 0.06
============= =============
- Diluted $ 0.22 $ 0.06
============= =============
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
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2000 1999
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OPERATING REVENUE $ 2,310,621 $ 239,994
COST OF OPERATIONS 804,340 181,668
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GROSS PROFIT 1,506,281 58,326
Project development expenses 4,401 12,673
Selling, general and administrative expenses 278,636 135,071
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OPERATING INCOME (LOSS) 1,223,244 (89,418)
------------- --------------
OTHER INCOME (EXPENSE):
Interest expense (237,352) (32,857)
Interest income - 127
Other 39,771 275,048
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TOTAL OTHER INCOME (EXPENSE) (197,581) 242,318
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INCOME BEFORE TAXES 1,025,663 152,900
Provision for income taxes 100,000 503
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NET INCOME $ 925,663 $ 152,397
============= =============
BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings from continuing operations available to
common stockholders - Basic $ 0.18 $ 0.04
============= =============
- Diluted $ 0.18 $ 0.04
============= =============
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,083,467 $ 231,406
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 280,693 202,213
Amortization of goodwill 9,465 7,500
Other, net 88,401 (91,235)
Amortization of deferred costs 12,685 (17,613)
Change in assets and liabilities, net of effect of
acquisitions/disposals:
Decrease in accounts receivable 116,264 239,056
(Increase) in other current assets (42,589) (9,017)
Increase (decrease) in accounts payable and accrued liabilities 663,583 (496,447)
Increase in income taxes payable 110,000 -
-------------- --------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 2,321,969 65,863
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Modular Power Systems, net (541,729) -
Capital expenditures (2,467,800) (320,243)
Deferred project costs and other - 129,643
-------------- --------------
NET CASH FLOWS (USED IN) INVESTING ACTIVITIES (3,009,529) (190,600)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in due to related parties 714,000 156,588
Proceeds (payment) of long-term debt, net 956,346 (271,058)
Payment of short term notes (375,000) -
Payment of lease obligations (1,017,777) -
Proceeds from issuance of common stock, net 441,200 -
(Increase) decrease in restricted cash (29,207) 150,616
--------------- --------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 689,562 36,146
-------------- --------------
Net change in cash and cash equivalents 2,002 (88,591)
Cash and cash equivalents at beginning of period 39,070 170,543
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 41,072 $ 81,952
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid $ 351,314 $ 98,977
Income taxes paid - 1,745
Non-cash transactions:
During the nine month period ended September 30, 2000, the Company
issued 690,000 shares of common stock valued at $313,500 for services
rendered (see Note 8) and also as part of the purchase price of Modular
(see Note 2).
Capital lease obligations in the amount of $2,998,000 were incurred when
the Company entered into leases for power generation equipment during
the nine month period ended September 30, 2000.
See also note 4 for non-cash exchange of United Kingdom operations.
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
The New World Power Corporation ("the Company") was incorporated in the State of
Delaware in 1989. The Company is an independent power producer that focuses on
distributed power solutions, including renewable and modular generation
facilities. The Company sells electrical energy to major utilities under
long-term and mid-term contracts.
In the opinion of management, the accompanying unaudited interim consolidated
condensed financial statements of The New World Power Corporation ("the
Company") and its subsidiaries, contain all adjustments of a recurring nature
considered necessary for a fair presentation of the Company's financial position
as of September 30, 2000 and the results of operations and cash flows for the
nine and three month periods ended September 30, 2000.
The consolidated condensed balance sheet presented as of December 31, 1999 has
been derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated condensed financial statements and notes
included herein should be read in conjunction with the financial statements and
notes included in the Company's Annual Report on Form 10-KSB.
The results of operations for the nine and three month periods, ended September
30, 2000 are not necessarily indicative of the results to be expected for a full
year.
NOTE 2 - SIGNIFICANT BUSINESS CHANGES:
On March 9, 2000, the Company completed the acquisition of Modular Power Systems
LLC ("Modular"). Modular owns three diesel-fired peaking facilities in Alma,
Chelsea and Coldwater, Michigan. Modular facilities contain diesel-fueled
generating equipment and related power equipment. The power generated at each of
the facilities will be sold to Consumers Power Company ("Consumers") pursuant to
mid-term power purchase agreements which commenced in June 2000. The purchase
price of the acquisition was $1.8 million and 450,000 shares of common stock of
the Company along with the assumption of debt of approximately $4.5 million. The
common stock was valued at $0.55 per share, which was the approximate market
value at the date of the acquisition. The former owners also hold a note
receivable with a principal balance of $350,000. The note bears interest at 5%
per annum and matures March 1, 2001. Under the terms of the agreement, the
former owners will continue to work with the Company to secure additional power
facilities for a minimum of two years. This acquisition was recorded under the
purchase method of accounting and the excess of the purchase price over the fair
value of the assets acquired in the amount of $157,213 was recorded as goodwill
which is being amortized over twenty years. Since Modular was an entity with
generation facilities under development, proforma information for the
consolidated statement of operations is not available.
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
NOTE 2 - SIGNIFICANT BUSINESS CHANGES (CONTINUED):
As part of the acquisition, the Company assumed two capital leases for
equipment. The assets and liabilities under capital leases are recorded at the
lower of the present value of the minimum lease payments or the fair market
value of the assets.
Minimum annual future lease payments under capital leases as of September 30,
2000 and for each of the next five years and in the aggregate are:
Year Ended September 30, Amount
------------------------ ------
2001 $1,442,902
2002 1,442,902
2003 2,160,190
2004 914,587
2005 1,087,693
----------
Total minimum lease payments 7,048,274
Amount representing interest 1,595,637
----------
Present value of minimum lease
payments $5,452,637
==========
The interest rates on the Company's capital leases at September 30, 2000 range
from 8% to 10.75%.
NOTE 3 - PLANT, PROPERTY AND EQUIPMENT:
Property, plant and equipment consists of the following as of September 30, 2000
(000's omitted):
Useful Life
(Years)
-----------
Power generation facilities and equipment:
Hydroelectric $ 4,413 40
Modular 10,301 20
-------
Total 14,714
Less accumulated depreciation and amortization 2,360
-------
$12,354
=======
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
NOTE 4 - DUE TO RELATED PARTIES:
Amounts due to related parties consists of the following at September 30, 2000
(000's omitted):
(a) Convertible Subordinated Notes $ -
(b) Synex International 1,000
(c) Strategic Electric Power Fund, LLC 664
(d) Robert Evans/Tom Waters (see Note 2) 350
----------
Total 2,014
Less current portion 2,014
Long-term portion $ -
==========
(A) CONVERTIBLE SUBORDINATED NOTES
The Company defaulted on its 8% Convertible Subordinated Notes in July
1997. The default resulted in a significant restructuring of the
indebtedness and the Company agreed to amortize an additional $850,000
under a three year note beginning in January 1998 and continuing through
December 2000. The monthly payment was $26,636 including principal and
interest. The interest rate on the notes is fixed at 8% per annum. The
notes are collateralized by a second mortgage position on Wolverine
Power Corporation, a subsidiary. The balance of the indebtedness at the
restructure date of approximately $1,346,000 was eliminated as debt and
converted by the holders of the Notes into New World common stock at a
conversion price of $1.50 per share when the market price of the
Company's common shares trading in the pink sheets was approximately
$0.25 per share. Accordingly, the Company issued approximately 897,400
shares of common stock to the holders of the Notes. In June 2000, the
Company entered into a Definitive Agreement with its Convertible
Subordinated Noteholders. The Definitive Agreement provided for the
Company to exchange its United Kingdom operations for cash and all of
the outstanding Convertible Subordinated Notes ($510,381 at the date of
exchange) and accrued interest thereon ($51,995 at the date of
exchange). The Company recorded an approximate $2,000 gain on the
exchange.
- 7 -
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
NOTE 5 - DUE TO RELATED PARTIES (CONTINUED):
(B) SYNEX
In July 1998, the Company obtained a convertible debt investment from
Synex Energy Resources Ltd., the power project development subsidiary of
Vancouver-based Synex International (TSE:SXI). Synex agreed to provide
up to $1,000,000 to the Company in the form of a convertible debenture,
which matures on June 30, 2001. The convertible debenture requires
interest only payments monthly until maturity. The convertible debenture
provides for the conversion into the Company's common stock at $1.00 per
share and its interest rate is 10.3% per annum. The convertible
debenture is secured by a first mortgage position on Wolverine. The
investment also provides for a strategic alliance with Synex and a
Participation Agreement for a minimum term of 18 months, which would
enable the Company to procure resources for project assessment at rates
detailed in the agreement. As part of the agreement, Synex purchased
100,000 shares of common stock from the Company for $25,000 and,
accordingly, their debt is classified as Due to Related Parties.
(C) STRATEGIC ELECTRIC POWER FUND, LLC
In connection with the acquisition of Modular in March 2000, the Company
issued a bridge note in the amount of $700,000 (the "Strategic Bridge
Note") to the Strategic Electric Power Fund, LLC ("Strategic"). The
Strategic Bridge Note, which matures on December 31, 2000, bears
interest at 8% per annum and is payable in cash or in stock. Interest
payments are due semi-annually in arrears on June 30 and December 31.
The notes are convertible into shares of common stock of the Company at
the option of the noteholders. The conversion price of the notes is at
$.68 per share. The Company repaid $35,780 of the note as of June 30,
2000.
NOTE 6 - LONG-TERM DEBT:
Long-term debt consists of the following at September 30, 2000 (000's omitted):
(a) Mortgage payable $ 122
(b) Note payable 1,000
------
1,122
Less: Current portion 252
------
Long-term portion $ 870
======
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
NOTE 6 - LONG-TERM DEBT (CONTINUED):
(A) MORTGAGE PAYABLE
In January 1999, the Company executed a mortgage note in the principal
amount of $275,000 with interest payable at 7.5%, secured by a third
position on Wolverine. Payments under that mortgage note are to be made
in six equal installments due on June 30 and December 31 of each year,
in the amount of $52,000.
(B) NOTE PAYABLE
In August 2000, the Company executed a note in the principal amount of
$1,000,000 with interest payable at 8%, secured by two pieces of
equipment at one of the Modular Power Systems facilities. Payments
under the note are to be made in five annual installments of $243,317,
due on June 1 of each year.
The aggregate scheduled maturities of long-term debt as of September
30, 2000 for each of the next five years are as follows (000's
omitted):
Year Amount
---- ------
2001 $ 252
2002 222
2003 198
2004 215
2005 233
NOTE 7 - DEFERRED REVENUE:
In March and May of 2000, the Company received two payments from Consumers (see
Note 2) in accordance with the provisions of the Power Purchase Agreement
between the parties. The payment represents revenues to the Company for having
installed capacity available from June 1 to September 30, 2000. Accordingly, the
Company recorded the payment as deferred revenue and will recognize it as energy
revenues in the periods earned. The Company recognized $322,850 in revenues
under the call options for the period ended June 30, 2000 and recognized the
remainder of the revenues in the third quarter.
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<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
NOTE 8 - STOCKHOLDERS' EQUITY TRANSACTIONS:
In January 2000, the Company issued 120,000 shares of common stock valued at
$30,000 to the Company's directors for services rendered. Also in January 2000,
the Company issued 120,000 of common stock valued at $36,000 to its former CEO
as part of his severance package. In March the Company issued 450,000 shares of
common stock valued at $247,500 as part of the purchase price of MPS (see Note
2). In February 2000, the Company issued 636,364 shares of common stock and
received $322,000 of cash net of $28,000 of expenses. In September 2000, the
Company received $119,200 in exchange for the issuance of 68,537 new shares.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
EMPLOYMENT AGREEMENT
Effective March 1, 2000, the Company entered into an employment agreement
with Frederic A. Mayer, its new President. Mr. Mayer's employment
agreement is for three years with an automatic renewal for three
additional years unless terminated by mutual consent. Under the
agreement, Mr. Mayer shall receive $132,000 in salary per annum with
annual increases of $12,000 per annum, 120,000 stock options exercisable
at $0.65 (vesting over three years) and an annual bonus at the discretion
of the Board of Directors. If the employment agreement is terminated
without cause, Mr. Mayer shall receive a termination payment equal to one
year's salary at the rate per annum at the termination date.
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<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND PLAN OF OPERATIONS
INTRODUCTION
The New World Power Corporation ("New World" or the "Company") is an independent
power producer that focuses on distributed power solutions, including renewable
and modular generation facilities. The Company sells electrical energy to major
utilities under long-term and mid-term contracts.
The Company is organized as a holding company. Each electric power generating
facility or discreet group of facilities is owned by a separate corporate
entity. Executive management, legal, accounting, financial and administrative
matters are provided at the holding company level. Operations are conducted at
the subsidiary level.
The Company currently owns and operates two subsidiaries, Michigan based
Wolverine Power Corporation ("Wolverine") and Modular Power Systems LLC
("Modular"). Each subsidiary owns and operates electric generation facilities.
Wolverine owns a 10.50 megawatt hydroelectric plant near Edenville, Michigan;
Modular owns 43 megawatts of mobile, trailer mounted and containerized
diesel-fired electric generating facilities at three sites in Coldwater, Chelsea
and Alma, Michigan. In June 2000, the Company exchanged the ownership of The New
World Power Company Limited located in the United Kingdom for certain
outstanding convertible notes. The New World Power Limited owned a 3-megawatt
wind farm in England, known as Caton Moor.
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
securities Exchange Act of 1934. When used in this document, the words
"anticipate", "estimate", "expect", "intend", and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may vary
materially from those set forth in the forward-looking statements.
SHORT TERM STRATEGY
Over the next 12 months New World intends to apply its available resources to
maintain positive earnings from its operating projects, while further attempting
to consummate targeted acquisitions in its core markets. The Company also
intends to develop additional electric generation facilities in North America.
The Company will continue to maintain its efforts to hold down overhead and
generate profits from existing operations. It also expects to complete another
acquisition within the next twelve months. There can be no assurance, however,
that the Company can maintain profitability or complete any acquisition on terms
acceptable to the Company, if at all. In addition, there can be no assurance
that the Company will be able to close any financings to enable it to make
acquisitions.
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<PAGE>
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated condensed financial statements and notes thereto and with the
Company's audited financial statements and notes thereto for the fiscal year
ended December 31, 1999.
REVENUES
Revenues increased to $3,303,812 for the nine months ended September 30, 2000
from $1,013,809 for the nine months ended September 30, 1999. Revenues increased
to $2,310,621 for the three months ended September 30, 2000 from $239,994 for
the three months ended September 30, 1999. Such increases in revenues were due
primarily to the increase in the revenues generated as a result of the Modular
Power Systems acquisition and the revenue recognition from the Power Purchase
Agreement (see Note 2). Revenues from Wolverine remained relatively constant.
SEASONALITY OF PROJECT REVENUES
Hydroelectric generating revenues are seasonal. The spring in North America is
the time of maximum hydroelectric output, while fall and winter also experience
reasonable flows; the summer months are dry and generally unproductive.
Hydroelectric power production can also vary from year to year based on changes
in meteorological conditions. The Modular Power Systems project revenues are
primarily generated during the months from June to September in accordance with
its agreements.
COST OF OPERATIONS
The costs of operations increased for the nine months ended September 30, 2000
to $1,139,893 as compared to $494,452 during the nine months ended September 30,
1999, primarily as a result of the increased costs of running the operations
from the Modular acquisition. The costs of operations increased for the three
months ended September 30, 2000 to $804,340 as compared to $181,668 during the
three months ended September 30, 1999, primarily from the operations of Modular.
Wolverine's cost of operations remained constant between the years.
PROJECT DEVELOPMENT EXPENSE
Project development expenses incurred during the nine months period ended
September 30, 2000 were $4,401 as compared to $43,353 for the nine months ended
September 30, 1999. For the three month period ended September 30, 2000, project
development expenses were $4,401 as compared to $12,673 for the three month
period ended September 30, 1999. The Company has curtailed its development
efforts, in line with the Company's strategy of eliminating development risk.
The expenses incurred were a result of the Company's efforts to procure
additional contracts.
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<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
These expenses increased during the nine months ended September 30, 2000 to
$635,778, as compared to $532,749 during the nine months ended September 30,
1999. The increase was primarily a result of an increase in professional fees at
the corporate level and the addition of one consultant at Wolverine. These
expenses increased for the three months ended September 30, 2000 to $278,636, as
compared to $135,071 during the three months ended September 30, 1999. Included
in expenses for the nine months ended September 30, 2000 were certain costs
associated with the annual shareholders meeting and additional legal and
professional fees pertaining to the proxy and annual report filings as well as
the preparation of a registration statement.
OTHER INCOME AND EXPENSES
During the nine months ended September 30, 2000, the Company recorded other
expense-net of $330,273, as compared to other income-net of $291,155 for the
nine months ended September 30, 1999. During the three months ended September
30, 2000, the Company recorded other expense-net of $197,581, as compared to
other income-net of $242,318 during the three months ended September 30, 1999.
Interest expense for the nine months ended September 30, 2000 increased to
$422,342 from $98,977 for the nine months ended September 30, 1999. Interest
expense for the three months ended September 30, 2000 increased to $237,352 from
$32,857 for the three months ended September 30, 1999, in line with the
incurring of additional debt and capital leases for the acquisition of Modular.
The other income for the nine and three month periods ended September 30, 2000
was from a litigation settlement and commissions earned while the other income
for the nine and three month periods ended September 30, 1999 was primarily a
result of asset sales.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company finances its operations primarily from internally
generated funds and third party credit facilities. Net cash flow provided by
operations was $2,321,969 for the nine month period ended September 30, 2000 and
$65,863 was provided by operations for the nine month period ended September 30,
1999.
The Company held Convertible Subordinated Notes outstanding totalling $510,381.
The Notes would have matured July 31, 2000, bore interest at 8.00% and were
convertible into shares of the Company's common stock at a price of $8.75 per
share. The Notes were in default at March 31, 2000. In June 2000, the Company
entered into a Definitive Agreement with the holders of the Notes. The
Definitive Agreement provided for the Company to exchange its United Kingdom
operations for cash and certain securities including all the outstanding
Convertible Subordinated Notes and accrued interest thereon. The accrued
interest as of the date of the exchange was $51,995 and the Company recorded an
approximate $2,000 gain.
The Company also has a convertible debt instrument which would provide up to
$1.0 million to the Company. The convertible debenture matures on June 30, 2001.
The convertible debenture requires interest only payments monthly until maturity
and is convertible into the Company's common stock at $1.00 per share. The
interest rate is 10.3% per annum.
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<PAGE>
The Company believes that its cash flow from operations will be sufficient to
fund foreseeable working capital and capital expenditure requirements. However,
any adverse affect on the Company's lending relationships could negatively
affect the Company's ability to meet future cash flow requirements. The Company
is currently seeking to re-finance its existing indebtedness (all amounts
including due to related parties, the capital leases and the long-term debt) to
provide additional cash flows on which to build the Company. The Company plans
to grow through the acquisition of complementary businesses or through the
deployment of fund for additional power generation facilities. A significant
acquisition or deployment of fund for additional facilities may require the
Company to secure additional debt or equity financing. While the Company
believes it would be able to secure such additional financing at reasonable
terms, there is no assurance this would be the case.
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<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 17, 2000, the shareholders elected a new Board of Directors at the
Annual Shareholders Meeting. In addition, the shareholders voted to retain the
auditing firm of Lazar, Levine and Felix, LLP as auditors for the year ended
December 31, 2000.
ITEM 5. OTHER INFORMATION.
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter for
which this report has been filed.
The following document has been filed exclusively with the Securities
and Exchange Commission:
Exhibit No. Description
----------- -----------
11 Computation of Per Share Earnings
27 Financial Data Schedule
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<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
THE NEW WORLD POWER CORPORATION
November 9, 2000 By: /s/ Frederic A. Mayer
---------------------
Frederic A. Mayer
President and Principal Accounting Officer
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