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 June 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
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
14 Mount Pleasant Drive Aston, PA 19014
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(Address and Zip Code of Principal Executive Offices)
(484) 840-0944
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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 5,124,276 shares of the registrant's common stock outstanding as
of June 30, 2000.
THE NEW WORLD POWER CORPORATION
- FORM 10QSB - INDEX -
PAGE(S)
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at June 30, 2000 (unaudited)
and December 31, 1999 1
Consolidated Condensed Statements of Operations for the Six
Month Periods Ended June 30, 2000 and 1999 (unaudited) 2
Consolidated Condensed Statements of Operations for the Three
Month Periods Ended June 30, 2000 and 1999 (unaudited) 3
Consolidated Condensed Statements of Cash Flows for the Six
Month Periods Ended June 30, 2000 and 1999 (unaudited) 4
Notes to Interim Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 27 - Financial Data Schedule
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
JUNE 30, December 31,
2000 1999
-------------- --------------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 16,780 $ 39,070
Cash restricted in use 17,995 7,973
Accounts receivable 78,439 157,882
Other current assets 67,465 13,201
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TOTAL CURRENT ASSETS 180,679 218,126
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Property, plant and equipment, net 11,468,544 2,809,283
Goodwill, net of accumulated amortization 337,453 342,453
Deferred project costs 188,424 183,958
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11,994,421 3,335,694
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TOTAL ASSETS $ 12,175,100 $ 3,553,820
============== ==============
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 822,284 $ 452,157
Note payable - bank - -
Due to related parties 1,014,280 510,381
Deferred revenues 2,048,550 -
Current portion of lease obligations 1,101,187 -
Current portion of mortgage obligations 82,837 82,837
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TOTAL CURRENT LIABILITIES 5,069,138 1,045,375
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Long-term portion of due to related parties 1,000,000 950,000
Long-term portion of mortgage obligations 82,837 82,837
Long-term portion of lease obligations 3,765,814 -
Other non-current liabilities - 100,000
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4,848,651 1,132,837
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TOTAL LIABILITIES 9,917,789 2,178,212
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized
40,000,000 shares; 5,124,276 and
3,797,912 shares issued and outstanding 51,243 37,979
Additional paid-in capital 83,832,987 83,210,751
Currency translation adjustments - (88,401)
Accumulated deficit (81,626,919) (81,784,721)
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TOTAL STOCKHOLDERS' EQUITY 2,257,311 1,375,608
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,175,100 $ 3,553,820
============== =============
See accompanying notes to interim consolidated condensed financial statements.
- 1 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
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OPERATING REVENUE $ 993,191 $ 773,815
COST OF OPERATIONS 335,553 312,784
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GROSS PROFIT 657,638 461,031
Project development expenses - 30,680
Selling, general and administrative expenses 357,142 397,678
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OPERATING INCOME 300,496 32,673
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OTHER INCOME (EXPENSE):
Interest expense (184,990) (66,120)
Interest income - 1,618
Other 52,298 113,339
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TOTAL OTHER INCOME (EXPENSE) (132,692) 48,837
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INCOME BEFORE TAXES 167,804 81,510
Provision for income taxes 10,000 2,500
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NET INCOME $ 157,804 $ 79,010
============ ============
BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings from continuing operations
available to common stockholders - Basic $ 0.03 $ 0.02
============ ============
- Diluted $ 0.03 $ 0.02
============ ============
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 4,780,220 3,797,912
============ ============
AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 4,880,220 3,797,912
============ ============
See accompanying notes to interim consolidated condensed financial statements.
- 2 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
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OPERATING REVENUE $ 579,060 $ 316,146
COST OF OPERATIONS 123,770 161,481
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GROSS PROFIT 455,290 154,665
Project development expenses - 9,145
Selling, general and administrative expenses 190,554 154,362
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OPERATING INCOME (LOSS) 264,736 (8,842)
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OTHER INCOME (EXPENSE):
Interest expense (147,101) (34,368)
Interest income - 475
Other 47,674 84,922
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TOTAL OTHER INCOME (EXPENSE) (99,427) 51,029
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INCOME BEFORE TAXES 165,309 42,187
Provision for income taxes 10,000 1,275
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NET INCOME $ 155,309 $ 40,912
========== ==========
BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings from continuing operations
available to common stockholders - Basic $ 0.03 $ 0.01
========== ==========
- Diluted $ 0.03 $ 0.01
========== ==========
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 4,780,220 3,797,912
========== ==========
AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 4,880,220 3,797,912
========== ==========
See accompanying notes to interim consolidated condensed financial statements.
- 3 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 157,804 $ 79,010
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 112,153 134,623
Amortization of goodwill 5,000 2,500
Other, net 88,401 140,241
Amortization of deferred costs 3,227 (14)
Change in assets and liabilities, net of effect of acquisitions/disposals:
Decrease in accounts receivable 79,443 176,427
(Increase) in other current assets (54,264) (1,185)
Increase (decrease) in accounts payable and accrued liabilities 325,884 (129,264)
(Decrease) in non-current liabilities (100,000) -
Increase in deferred revenue 968,550 -
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NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 1,586,198 402,338
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Modular Power Systems, net (541,729) -
Capital expenditures (1,221,967) (27,017)
Deferred project costs and other (7,693) (129,643)
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NET CASH FLOWS (USED IN) INVESTING ACTIVITIES (1,771,389) (156,660)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to related parties 714,000 (103,049)
Payment of mortgage obligation - (230,031)
Payment of short term notes (175,000) -
Payment of lease obligations (688,077) -
Proceeds from issuance of common stock, net 322,000 -
(Increase) decrease in restricted cash (10,022) 20,333
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NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 162,901 (312,747)
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Net change in cash and cash equivalents (22,290) (67,069)
Cash and cash equivalents at beginning of period 39,070 170,543
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CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 16,780 $ 103,474
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid $ 154,047 $ 52,120
Income taxes paid - 1,618
Non-cash transactions:
During the six month period ended June 30, 2000, the Company issued
690,000 shares of common stock valued at $313,500 for services rendered
(see Note 7) and also as part of the purchase price of Modular (see
Note 2).
Capital lease obligations in the amount of $1,598,000 were incurred when
the Company entered into leases for power generation equipment during
the six month period ended June 30, 2000.
See also note 5 for non-cash exchange of United Kingdom operations.
See accompanying notes to interim consolidated condensed financial statements.
- 4 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 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 June 30, 2000 and the results of operations and cash flows for the six and
three month periods ended June 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 six and three month periods, ended June 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 under
construction 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 commencing
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. Since Modular
was an entity with generation facilities under development, proforma information
for the consolidated statement of operations is not available.
- 5 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 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 June 30, 2000
and for each of the next five years and in the aggregate are:
Year Ended June 30, Amount
------------------- ------
2001 $1,453,869
2002 1,158,597
2003 1,875,885
2004 630,282
2005 1,066,683
----------
Total minimum lease payments 6,185,316
Amount representing interest 1,318,315
Present value of minimum lease
payments $4,867,001
==========
The interest rates on the Company's capital leases at June 30, 2000 range from
8% to 10.75%.
NOTE 3 - PLANT, PROPERTY AND EQUIPMENT:
Property, plant and equipment consists of the following as of June 30, 2000
(000's omitted):
Useful Life
(Years)
-------
Power generation facilities and equipment:
Hydroelectric $ 4,341 40
Modular generation facilities 4,523 20
Modular generation facilities under development 4,798 *
--------
Total 13,662
Less accumulated depreciation and amortization 2,193
--------
$ 11,469
========
*When put into service these facilities will be depreciated over an estimated
useful life of 20 years.
- 6 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 4 - NOTE PAYABLE-BANK:
During the period ended March 31, 2000, the Company had an unsecured working
capital line of credit with a Bank which matured on May 31, 2000. Maximum
borrowings under this line were $375,000 and the interest rate was 9% per annum.
The note payable was fully repaid in early May 2000.
NOTE 5 - DUE TO RELATED PARTIES:
Amounts due to related parties consists of the following at June 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 1,014
------
Long-term portion $1,000
======
CONVERTIBLE SUBORDINATED NOTES (A)
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 is $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, 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 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 5 - DUE TO RELATED PARTIES (CONTINUED):
SYNEX (B)
In July 1998, the Company obtained a convertible debt investment from
Synex Energy Resources Ltd., the power project development subsidiary of
Vancouver-based Synex (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. In addition, the investment
provided Synex with warrants to purchase up to 500,000 shares of the
Company's Common Stock at $1.25 per share, that expired on June 30,
2000. Vesting in the warrants only occurs after the entire $1.0 million
has been funded by Synex. 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.
STRATEGIC ELECTRIC POWER FUND, LLC (C)
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 shall
be at $.68 per share. The Company repaid $35,780 of the note as of June
30, 2000.
NOTE 6 - 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 Call Option 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 expects to
recognize the remainder of the revenues in the third quarter.
- 8 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 7 - 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 the terminated
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).
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
(A) EMPLOYMENT AGREEMENT
Effective March 1, 2000, the Company entered into an employment agreement
with Frederic A. Mayer, its 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.
(B) OFFICE LEASE
Effective February 15, 2000, the Company entered into a lease agreement
for office space located in Aston, PA. The lease currently expires on
August 14, 2000 with monthly payments of $800.
NOTE 9 - SUBSEQUENT EVENT:
EQUIPMENT PURCHASE/FINANCING
The Company, through its Modular subsidiary, entered into a purchase
agreement to acquire five units of power generation equipment and related
switchgear from a Caterpillar dealer at a cost of $1,598,000. The Company
took delivery of the units during May 2000 and obtained financing through
Caterpillar Financial Services Corporation in July 2000. Accordingly, the
Company reclassified the accounts payable at June 30, 2000 as a capital
lease and included the lease in the capital lease information included in
Note 2.
- 9 -
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 Bay City, 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 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.
- 10 -
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 $993,191 for the six months ended June 30, 2000 from
$773,815 for the six months ended June 30, 1999. Revenues increased to $579,060
for the three months ended June 30, 2000 from $316,146 for the three months
ended June 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.
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 six months ended June 30, 2000 to
$335,553 as compared to $312,784 during the six months ended June 30, 1999,
primarily as a result of the increased costs associated with the Modular
acquisition. The costs of operations decreased for the three months ended June
30, 2000 to $123,770 as compared to $161,481 during the three months ended June
30, 1999, primarily as a result of the Company's downsizing efforts in the UK.
Wolverine's cost of operations remained constant between the years.
PROJECT DEVELOPMENT EXPENSE
No project development expenses were incurred during the six months period ended
June 30, 2000 or the three month period ended June 30, 2000 since the Company
ended its development efforts, in line with the Company's strategy of
eliminating development risk. Expenses incurred for the six month period ended
June 30, 1999 was $30,680 and for the three month period ended June 30, 1999 was
$9,145.
SELLING, GENERAL AND ADMINISTRATIVE
These expenses were reduced during the six months ended June 30, 2000 to
$357,142, as compared to $397,678 during the six months ended June 30, 1999. The
decrease was primarily a result of a decrease in personnel at the corporate
level. These expenses increased for the three months ended June 30, 2000 to
$190,554, as compared to $154,362 during the three months ended June 30, 1999.
Included in expenses for the three months ended June 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.
- 11 -
OTHER INCOME AND EXPENSES
During the six months ended June 30, 2000, the Company recorded other
expense-net of $132,692, as compared to other income-net of $48,837 for the six
months ended June 30, 1999. During the three months ended June 30, 2000, the
Company recorded other expense-net of $99,427, as compared to other income-net
of $51,029 during the three months ended June 30, 1999. Interest expense for the
six months ended June 30, 2000 increased to $184,990 from $66,120 for the six
months ended June 30, 1999. Interest expense for the three months ended June 30,
2000 increased to $147,101 from $34,368 for the three months ended June 30,
1999, in line with the incurring of additional debt for the acquisition of MPS.
The other income for the six and three month periods ended June 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 $1,586,198 for the six month period ended June 30, 2000 and
$402,338 was provided by operations for the six month period ended June 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.
The Company believes that its cash flow from operations will be sufficient to
fund foreseeable working capital and capital expenditure requirements. However,
any restriction on the availability of borrowing under the line of credit could
negatively affect the Company's ability to meet future cash flow requirements.
The Company plans to grow through the acquisition of complementary businesses. A
significant acquisition 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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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
----------- -----------
27 Financial Data Schedule
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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
August 16, 2000 By: /s/ Frederic A. Mayer
---------------------
Frederic A. Mayer
President and Principal Accounting Officer
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