U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1999
----------------
[ ] Transition report under Section 13 or 15(d) of the exchange act of
1934 for the transition period from ______________ to ______________
COMMISSION FILE NUMBER 33-37513-D
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GLOBAL WATER TECHNOLOGIES, INC.
- -------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 84-1148204
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1767 Denver West Boulevard, Golden, Colorado 80401
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(Address of principal executive offices)
(Zip Code)
(Issuer's telephone number): (303) 215-1100
--------------------------
NA
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(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
Shares of Common Stock, $0.00001 par value, outstanding as of August 12,
1999: 294,854,250.
------------
Transitional Small Business Disclosure Format Yes X No
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<PAGE>
GLOBAL WATER TECHNOLOGIES, INC. (GWTR)
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Operations Three months and six
months ended June 30, 1999
and 1998
Consolidated Balance Sheet As of June 30, 1999
Consolidated Statements of Cash Flows Six months ended June
30, 1999 and 1998
Notes to Financial Statements June 30, 1999 and 1998
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
GLOBAL WATER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
Net revenues:
United States $ 24,583,374 $ 5,571,435
International 728,230 1,202,862
------------ ------------
Total revenues 25,311,604 6,774,297
------------ ------------
Costs and expenses:
Cost of sales 23,446,691 5,635,317
Selling, general and administrative 1,303,054 1,143,448
Research and development 12,883 56,285
------------ ------------
Total costs and expenses 24,762,628 6,835,050
------------ ------------
Operating income (loss) 548,976 (60,753)
Other income (expense):
Interest expense, net (48,438) (34,879)
Other, net 2,802 3,742
------------ ------------
Income (loss) before income taxes 503,340 (91,890)
Income taxes (benefit) 130,980 (40,449)
------------ ------------
Net income (loss) before preferred dividend 372,360 (51,441)
Preferred stock dividend 4,999 -
------------ ------------
Net income (loss) for common stockholders $ 367,361 $ (51,441)
============ ============
Income (loss) per share:
Basic weighted average shares outstanding 294,854,250 294,050,000
Basic income (loss) per share $ 0.0012 $ (0.0002)
============ ============
Fully diluted weighted average shares
outstanding 299,156,105 294,050,000
Fully diluted income (loss) per share $ 0.0012 $ (0.0002)
============ ============
The accompanying notes are an integral part of these financial statements.
3
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GLOBAL WATER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
Net revenues:
United States $ 38,465,487 $ 8,625,110
International 874,988 2,472,193
------------ ------------
Total revenues 39,340,475 11,097,303
------------ ------------
Costs and expenses:
Cost of sales 35,495,665 9,140,872
Selling, general and administrative 2,353,464 2,056,134
Research and development 18,613 108,317
------------ ------------
Total costs and expenses 37,867,742 11,305,323
------------ ------------
Operating income (loss) 1,472,733 (208,020)
Other income (expense):
Interest expense, net (137,040) (65,195)
Other, net 2,802 3,997
------------ ------------
Income (loss) before income taxes 1,338,495 (269,218)
Income taxes (benefit) 414,933 (118,507)
------------ ------------
Net income (loss) before preferred dividend 923,562 (150,711)
Preferred stock dividend 10,000 -
------------ ------------
Net income (including the effect of a change in
accounting principle for the previous year) 913,562 (150,711)
Cumulative effect of a change in an accounting
principle - net of $593,119 of related
tax effect - (754,296)
------------ ------------
Net income (loss) available for common
stockholders $ 913,562 $ (905,007)
============ ============
Income (loss) per share:
Basic weighted average shares outstanding 294,854,250 294,050,000
Basic income per share - prior to
accounting change 0.0031 (0.0005)
Cumulative effect of accounting change - (0.0026)
------------ ------------
Basic income (loss) per share available
for common $ 0.0031 $ (0.0031)
============ ============
Fully diluted weighted average shares
outstanding 297,060,078 294,050,000
Fully diluted income per share - prior
to accounting change 0.0031 (0.0005)
Cumulative effect of accounting change - (0.0026)
------------ ------------
Fully diluted income (loss) per share $ 0.0031 $ (0.0031)
============ ============
The accompanying notes are an integral part of these financial statements.
4
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GLOBAL WATER TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As of June 30, 1999
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 284,527
Trade accounts receivable, net of allowance for
doubtful accounts of $388,928 14,791,753
Other receivables 619,108
Costs and estimated earnings in excess of billings
on uncompleted contracts 10,029,657
Inventories 626,932
Prepaid expenses 450,316
------------
Total current assets 26,802,293
------------
Property and equipment, net 643,237
Intangibles, net of amortization 35,744
Deposits 51,555
------------
$ 27,532,829
============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long-term debt $ 1,015,221
Accounts payable 20,458,505
Accrued liabilities 1,573,677
Billings in excess of costs and estimated earnings
on uncompleted contracts 545,535
Income taxes payable 565,803
Deferred income taxes 106,632
------------
Total current liabilities 24,265,373
------------
Long-term debt 776,901
Deferred income taxes 78,005
Stockholders' equity:
Preferred stock, $0.00001 par value, 20,000,000
shares authorized:
- Series A; 1,000,000 shares authorized issued
and outstanding; stated at redemption value
of $0.0001 100
- Series B; 1,000 shares authorized, 250 shares
issued and outstanding; stated at redemption
value of $1,000 250,000
Common stock, $0.00001 par value; 800,000,000 shares
authorized; 294,854,250 shares issued and
outstanding 2,948
Capital in excess of par value 541,918
Retained earnings 1,617,584
------------
Total stockholders' equity 2,412,550
------------
$ 27,532,829
============
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
GLOBAL WATER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 913,562 $ (905,007)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation 107,592 85,001
Amortization 5,502 5,502
Decrease in deferred income taxes - (64,626)
(Increase) decrease in working capital:
Trade accounts receivable (6,586,191) (74,346)
Other receivables (507,743) (47,514)
Costs and estimated earnings in excess
of billings on uncompleted contracts (6,406,119) 1,408,875
Income taxes receivable 60,960 (566,180)
Inventories (308,474) (223,434)
Prepaid expenses (286,012) (38,375)
Deposits 54,465 1,138
Accounts payable 13,092,033 (592,019)
Income taxes payable 352,192 -
Accrued liabilities (311,273) 119,360
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,140,633) 671,937
------------ ------------
Net cash (used) by operating activities (960,139) (219,688)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of certificate of deposit - (5,851)
Purchase of property and equipment (125,520) (177,314)
------------ ------------
Net cash (used in) investing
activities (125,520) (183,165)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change on the lines-of-credit (267,000) (7,000)
Proceeds from issuance of debt - 496,378
Repayments of debt (114,113) (79,073)
------------ ------------
Net cash provided (used) by
financing activities (381,113) 410,305
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,466,772) 7,452
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,751,299 118,887
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 284,527 $ 126,339
============ ============
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
GLOBAL WATER TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999 and 1998
1. INTERIM FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1999, and the related
consolidated statements of operations for the three months and for the six
months ended June 30, 1999 and statements of cash flows for the six months
ended June 30, 1999 and 1998 are unaudited; in the opinion of management,
all adjustments necessary for a fair presentation of such financial
statements have been included. These financial statements and notes are
presented as permitted by Form 10-QSB and should be read in conjunction
with the Company's financial statements and notes included in Form 10-K.
2. STOCK OPTIONS
On March 8, 1999, the Company issued 4,798,800 stock options to employees
as part of the 1998 Stock Option Plan approved by the Company's
shareholders at its 1998 annual meeting. The options vest to employees on
a schedule of 20% immediately and 20% over each of the next four years. As
of June 30, 1999, none of the options have been exercised. The options can
be exercised over a period ranging from 5 - 10 years from issuance.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" defines a fair value based method of accounting
for an employee stock option or similar equity instrument. This statement
gives entities a choice of recognizing related compensation expense by
adopting the new fair value method or to continue to measure compensation
using the intrinsic value approach under Accounting Principles Board (APB)
Opinion No. 25, the former standard. If the former standard for
measurement is elected, SFAS No. 123 requires supplemental disclosure to
show the effects of using the new measurement criteria. The Company
intends to continue using the measurement prescribed by APB Opinion No. 25.
3. CHANGE IN ACCOUNTING PRINCIPLE
On November 11, 1998, the Board of Directors approved the Company's
decision to change, retroactive to January 1, 1998, its application of the
percentage of completion method of accounting for revenues and costs of
long-term construction contracts related to new cooling towers which is the
Company's primary market.
Under the previous method, the Company recognized a predetermined
percentage of its profits on new cooling towers upon the attainment of
certain project milestones, specifically the completion and delivery of
certain engineering drawings and specifications. Under the new method, the
Company will recognize profits on all phases of the project, including
engineering, in the ratio that costs incurred to date bear to total
estimated costs. Management believes that the new method is preferable for
financial statement and backlog disclosure related to revenues and gross
profit. In addition, the Company believes that the new method should
improve the comparability of its financial statements with those of other
companies which use a cost-to-cost comparison approach of percentage of
completion.
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As a result of this change, to which the Company's independent public
accounting firm concurs, the Company recorded a one-time extraordinary
charge to income as of January 1, 1998. The amount of this charge was
$754,296 net of the related tax effect of $593,119. The results for the
three and six month periods ended June 30, 1998 have been restated to
reflect the change in accounting principle from the amounts originally
reported on the Company's Form 10QSB for the second quarter of 1998.
4. OTHER RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June, 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"). FAS 133 establishes a new
model for accounting for derivatives and hedging activities and supersedes
and amends a number of existing standards. FAS 133 is effective for fiscal
years beginning after June 15, 2000 as modified by Statement No. 137. The
Company has determined that FAS 133 will not have a material impact on the
financial statements because the Company does not have material foreign
exchange, commodities or interest rate risk, and therefore does not enter
into derivatives contracts often.
5. BUSINESS SEGMENT DATA
In June 1997 the Financial Accounting Standards Board issued Statement No.
131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION"
(FAS 131). The Company adopted FAS 131 effective January 1, 1998.
The Company's primary business is the design, sale, manufacture and
building of new industrial cooling towers and in retrofitting existing
industrial cooling towers and cooling tower components for both the
international and domestic markets. All of its operations are within the
United States. Based on risks, financial resources, profitability and
internal resources consumed, management has determined that the most
relevant segment information is international and domestic transactions.
The Company's export sales were $874,988 and $2,472,193 for the six months
ended June 30, 1999 and 1998, respectively. The following schedule
summarizes the segmentation of the international and domestic business
segments for the six months ended June 30, 1999 and 1998.
BUSINESS SEGMENT STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999
---------------------------------------------------
DOMESTIC INTERNATIONAL OTHER TOTAL
-------- ------------- ----- -----
<S> <C> <C> <C> <C>
Revenues $38,465,487 $ 874,988 $ - $39,340,475
Costs $34,837,817 $ 657,848 $2,372,077 $37,867,742
Segment profit $ 3,627,670 $ 217,140 $(2,372,077) $ 1,472,733
Assets $25,790,242 $ 763,268 $ 979,319 $27,532,829
</TABLE>
8
<PAGE>
BUSINESS SEGMENT STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
1998
---------------------------------------------------
DOMESTIC INTERNATIONAL OTHER TOTAL
-------- ------------- ----- -----
<S> <C> <C> <C> <C>
Revenues $ 8,625,110 $2,472,193 $ - $11,097,303
Costs $ 7,282,187 $1,858,685 $2,164,451 $11,305,323
Segment profit $ 1,342,923 $ 613,508 $(2,164,451) $ (208,020)
Assets $ 6,549,838 $ 181,814 $1,110,613 $ 7,842,265
</TABLE>
6. BACKLOG
The Company has a backlog of $25,544,805 at June 30, 1999, compared to an
adjusted backlog amount of $17,601,061 for the similar period ended in
1998. Backlog represents the amount of revenue the Company expects to
realize from work on uncompleted contracts.
7. SUBSEQUENT EVENTS
On July 12, 1999, the Company commenced a private placement of Units, each of
which consists of 200,000 shares of the Company's Common Stock and 200,000
Class C Warrants to purchase Common Stock exercisable over a four year period.
The offering is being made on a "best-efforts, minimum-maximum" basis, with
$1,000,000 as the minimum which must be sold in order for the Company to
receive any proceeds from the placement, and $2,000,000 as the maximum. The
Placement Agent for the offering is Westminster Securities Corporation, a
subsidiary of Laidlaw & Co. The offering is currently scheduled to terminate
on September 10, 1999.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
GENERAL
Global Water Technologies, Inc. (the "Company"), primarily through its
wholly owned subsidiary, Psychrometric Systems, Inc., is in the business of
designing, selling, manufacturing and building industrial cooling towers,
repairs and maintenance in the retrofit of existing industrial cooling
towers and cooling tower components for these and similar facilities. The
Company markets its products and services worldwide to the following
industries: electric power utilities; process (such as agricultural,
industrial and pharmaceutical process industries); petrochemical; chemical;
heating, ventilation and air-conditioning ("HVAC"); manufacturing; pulp &
paper and other industries utilizing cooling towers. Typical customers
include companies such as Archer Daniels Midland, Amoco, Mitsubishi, Mobil,
Texaco, Bechtel, Fluor Daniel, Inc. and other large corporations around the
world.
The Company derives revenue primarily from the following sources: new
cooling tower sales, retrofits to existing cooling tower construction
repair projects and spare parts and supplies to existing cooling tower
customers. The Company custom designs and constructs wooden, fiberglass
and concrete towers for its customer base worldwide.
The Company recognizes revenues using the percentage-of-completion
method, based primarily on contract costs incurred to date compared with
total estimated contract costs. Contracts on selected projects where there
are both repair and new tower components are segmented between the two
distinct phases and
9
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accordingly, gross margin related to each activity is recognized as those
separate phases are completed using the percentage-of-completion method,
based primarily on contract costs incurred to date compared with total
estimated contract costs. Changes to total estimated contract costs and
to contract revenues via change orders are recognized in the period in
which they are determined. In addition, a provision is made for the
entire amount of future estimated losses, if any, on contracts in progress
in the period in which such losses are determined.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Total revenues were derived from engineering, construction, retrofits
and spare parts of cooling towers. For the three month period ended June
30, 1999, total tower revenue increased 273.6% to $25,311,604 as compared
to $6,774,297 for the three month period ended June 30, 1998.
International revenues comprised 2.9% of total revenues in 1999 versus
17.8% in 1998.
Contracts awarded ("bookings") during the three -month period ended
June 30, 1999 increased 92.7% from 1998. The increase in bookings awarded
is due to an overall increase in the number of projects won and increased
selling expenses to take advantage of market opportunities. Backlog
decreased from $34,200,281 at March 31, 1999 to $25,544,805 at June 30, 1999.
The Company's cost of sales increased 316.1% from $5,635,317 in 1998
to $23,446,691 in 1999. As a percentage of revenues, cost of sales
increased from 83.2% in 1998 to 92.6% in 1999. Management anticipates that
the actual gross margins for calendar year 1999 will be slightly less than
1998 operating results. The absolute increase in cost of sales resulted
primarily from a 273.6% increase in corresponding revenues. Due to
significant competition, there can be no assurance that the Company can
maintain its profit margins in the future.
Selling, general and administrative expenses increased 14.0% from
$1,143,448 in 1998 to $1,303,054 in 1999 as the Company continues to make
an investment in its future. As a percentage of revenues, these expenses
decreased from 16.9% in 1998 to 5.2% in 1999. As a percentage of new
bookings which increased 92.7%, these expenses decreased from 13.2% in 1998
to 7.8% in 1999. As anticipated, management believes that past investments
in personnel resources continue to have a favorable impact on the Company
and its operating results.
Research and development costs decreased to $12,883 in 1999 from
$56,285 in 1998. These costs include a portion of the research and
development facility in Idaho.
Operating income, based on the explanations noted above, was $548,976
in 1999 compared to an operating loss of ($60,753) during the comparable
period in 1998.
Other income and expense primarily consisted of interest expense,
which increased slightly, related to the Company's various debt financings.
Income taxes (benefit) increased from a benefit of ($40,449) with an
effective 44% tax rate in 1998 to a tax expense of $130,980 with an
effective tax rate of 26% in 1999.
Net income (loss) available to common stockholders improved from a
loss of ($51,441) in the three month period ended June 30, 1998 to a net
income of $367,361 in the similar period in 1999. This amount includes a
preferred stock dividend of $4,999 for the three months ended June 30,
1999. Basic and fully diluted income (loss) per share was $0.0012 in the
three-month period ended June 30, 1999 and ($0.0002) in 1998.
10
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Total revenues were derived from engineering, construction, retrofits
and spare parts of cooling towers. For the six-month period ended June 30,
1999, total tower revenue increased 254.5% to $39,340,475 as compared to
$11,097,303 for the six month period ended June 30, 1998. International
revenues comprised 2.2% of total revenues in 1999 versus 20.8% in 1998.
Contracts awarded ("bookings") during the six-month period ended June
30, 1999 increased 135.6% from 1998. The increase in bookings awarded is
due to an overall increase in the number of projects won and increased
selling expenses to take advantage of market opportunities. Backlog
decreased from $27,155,058 at December 31, 1998 to $25,544,805 at June 30, 1999.
The Company's cost of sales increased 288.3% from $9,140,872 in 1998 to
$35,495,665 in 1999. As a percentage of revenues, cost of sales increased
from 82.4% in 1998 to 90.2% in 1999. The absolute increase in cost of sales
resulted primarily from a 254.5% increase in corresponding revenues.
Management anticipates that the actual gross margins for calendar year 1999
will be slightly less than 1998 operating results. Due to significant
competition, there can be no assurance that the Company can maintain its
profit margins in the future.
Selling, general and administrative expenses increased 14.5% from
$2,056,134 in 1998 to $2,353,464 in 1999 as the Company continues to make
an investment in its future. As a percentage of revenues, these expenses
decreased from 18.5% in 1998 to 6.0% in 1999. As a percentage of new
bookings, which increased 135.6%, these expenses decreased from 12.8% in
1998 to 6.2% in 1999. Management believes that the increases in selling
expenses will continue to have a positive impact on the increase in
bookings and the recognition of the related revenues for future periods.
Research and development costs decreased to $18,613 in 1999 from
$108,317 in 1998. These costs include a portion of the research and
development facility in Idaho.
Operating income , based on the explanations noted above, was
$1,472,733 in 1999 compared to a loss of ($208,020) in 1998 during the
similar six month period.
Other income and expense primarily consisted of interest expense.
Income taxes (benefit) increased from a benefit of ($118,507) with an
effective 44.0% tax rate in 1998 to a tax expense of $414,933 with an
effective tax rate of 31.0% in 1999.
Net income (loss) was ($150,771) in the six-month period ended June 30,
1998 compared to a net income of $923,562 in the similar period in 1999.
Basic and fully diluted income (loss) per share was ($0.0031) in the
six-month period ended June 30, 1998 and $0.0031 in 1999.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had working capital of $2,536,920
compared to a working capital deficit of $42,698 at June 30, 1998. The
Company's cash flow provided by and used in its operating, investing and
financing activities during the first six months of 1999 and 1998 are as
follows:
11
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1999 1998
---- ----
Operating activities $ (960,139) $ (219,688)
Investing activities (125,520) (183,165)
Financing activities (381,113) 410,305
------------ ------------
Net increase (decrease) in
cash and cash equivalents $ (1,466,772) $ 7,452
============ ============
The Company's capital requirements for its continuing operations
consists of its general working capital needs, scheduled payments on its
debt obligations, new business opportunities and capital expenditures.
Management anticipates that due to the growth in sales volume and expansion
into new business opportunities the Company's operating activities will
require a cash investment during the remainder of the year. Management
believes that its current debt facilities and possible capital market
funding will be sufficient for its operational cash investment requirements
during the next four quarters.
At June 30, 1999, net costs in excess of billings and estimated
earnings on uncompleted contracts were $9,484,122 as compared to net costs
in excess of billings and estimated earnings on uncompleted contracts of
$115,376 at June 30, 1998. The majority of this increase related to two
projects where contractual requirements and the timing of the progress on
the projects led to the increase. Subsequent to June 30, 1999 the
investment has been reduced to be consistent with historical amounts.
Budgeted capital expenditures during the remainder of the year consist
of ongoing amounts for computer software and equipment, vehicles and office
equipment for anticipated growth.
The Company has a line of credit with a commercial lender totaling
$1,775,000 to finance its working capital needs. This is partially secured
by a stockholder's certificates of deposit. As of June 30, 1999,
$1,200,000 was outstanding on this line of credit. The line matures on
September 15, 1999. Management expects that this line of credit will be
refinanced into a long-term obligation when the obligation becomes due.
The interest rate on the note is tiered as follows - 5.85% on the first
$745,000 and 8.75% on the remaining portion. In addition to the interest
rate stated, the Company pays the above noted stockholder additional
interest of $8,131 per month on the certificates of deposit securing the
Company notes.
The Company also has a line of credit with a commercial lender
totaling $1,000,000 to finance its working capital needs on foreign
projects. This line of credit is guaranteed by the Export Import Bank of
the United States and subjects the Company to certain financial covenants
including minimum net worth requirements. The line of credit bears
interest at prime plus 1% and matures on September 15, 1999. As of June
30, 1999, there was an outstanding balance of $76,000 on this line of credit.
The Company has term loans secured by the Small Business
Administration with an outstanding balance at June 30, 1999 of $443,682.
Scheduled principal payments on these term notes are $103,692 over the next
twelve months and interest rates are stated at one percent over prime. The
Company has various term notes secured by Company vehicles. The
outstanding balance on these notes at June 30, 1999 was $72,440 with
scheduled principal payments over the next twelve months of $35,529 with
interest rates ranging from 9.5% to 10.75%.
12
<PAGE>
Management believes that the Company will have sufficient capital
resources to fund its ordinary capital requirements for at least the next
four quarters for continuing operations. No assurance can be made that the
Company will have sufficient working capital to continue its requirements
for continuing operations beyond the next four quarters.
FORWARD LOOKING STATEMENTS
Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning future
events contained in this document constitute "forward looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. As
with any future event, there can be no assurance that the events described
in forward looking statements made in this report will occur or that the
results of future events will not vary materially from those described in
the forward looking statements made in this report. Important factors that
could cause the Company's actual performance and operating results to
differ materially from the forward looking statements include, but are not
limited to, changes in the general level of economic activity in the
markets served by the company, competition in the cooling tower industry
and other industries where the Company markets its products and the
introduction of new products by competitors in those industries, delays in
refining the Company's manufacturing and construction techniques, cost
overruns on particular projects, availability of capital sufficient to
support the Company's level of activity and the ability of the Company to
implement its business strategy.
13
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of shareholders of the Company was held on June 30,
1999 at 10:00 a.m. at the Company's principal offices in Golden, Colorado.
A total of 268,842,022 shares of Common Stock, which is 91.2% of the shares
outstanding on June 4, 1999, were represented at the meeting, either in
person or by proxy. The only proposal submitted to the shareholders was
the election of the Company's Board of Directors. The following directors
were elected to serve until the next annual meeting of shareholders and
until their successors have been elected and qualities:
NOMINEE FOR WITHHELD
------- --- --------
George A. Kast 268,832,022 10,000
Gary L. Brown 268,832,022 10,000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibit required by Item 601 of Regulation S-B is
filed herewith:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) There were no current reports on Form 8-K filed during the
quarter ended June 30, 1999.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBAL WATER TECHNOLOGIES, INC.
Date: August 13, 1999 By: /s/ George A. Kast
----------------------------------------
George A. Kast, President, Chief Executive
Officer and Chairman of the Board
Date: August 13, 1999 By: /s/ Martin L. Hout
----------------------------------------
Martin L. Hout, Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM GLOBAL WATER TECHNOLOGIES' QUARTERLY REPORT TO STOCKHOLDERS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 284,527
<SECURITIES> 0
<RECEIVABLES> 15,799,789
<ALLOWANCES> 388,928
<INVENTORY> 626,932
<CURRENT-ASSETS> 26,802,293
<PP&E> 1,180,585
<DEPRECIATION> 537,348
<TOTAL-ASSETS> 27,532,829
<CURRENT-LIABILITIES> 24,265,373
<BONDS> 854,906
0
250,100
<COMMON> 2,948
<OTHER-SE> 2,159,502
<TOTAL-LIABILITY-AND-EQUITY> 27,532,829
<SALES> 39,340,475
<TOTAL-REVENUES> 39,340,475
<CGS> 35,495,665
<TOTAL-COSTS> 37,867,742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137,040
<INCOME-PRETAX> 1,338,495
<INCOME-TAX> 414,933
<INCOME-CONTINUING> 913,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 913,562
<EPS-BASIC> 0.003
<EPS-DILUTED> 0.003
</TABLE>
