SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
[X] AMENDMENT TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended:
SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____________ to
_______________
Commission file number: 0-18260
THE NEW WORLD POWER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-1659436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
558 LIME ROCK ROAD
LIME ROCK, CONNECTICUT 06039
(Address of principal executive offices) (Zip code)
(860) 435-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the registrant's Common Stock as
of September 30, 1996 was 11,134,147.
THE NEW WORLD POWER CORPORATION
QUARTERLY REPORT ON FORM 1O-Q/A
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Consolidated Statement of Stockholders' Equity 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, 1995
ASSETS NOTES (Unaudited)
----- ------------ ------------
Current assets:
Cash $ 1,465,522 $ 681,369
Cash restricted in use 4,542,578 4,669,554
Accounts receivable 1,671,572 4,269,360
Inventories 143,370 1,871,170
Other current assets 780,963 1,572,490
------------ ------------
Total current assets 8,604,005 13,063,943
Notes receivable 185,600 185,600
Property, plant and equipment, net 24,374,709 29,374,876
Other non-current assets 2,631,907 4,726,555
Goodwill, net of accumulated amortization
of $200,966 and $20,103 1,366,307 1,549,234
Investments 5 15,585,951 16,495,495
------------ ------------
Total Assets $ 52,748,479 $ 65,395,703
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,911,835 $ 7,148,616
Current portion of long term debt, net 19,266,584 17,965,610
Due to related parties 3,984,602 4,627,870
Current portion of capital lease obligations 12,077 83,537
------------ ------------
Total current liabilities 28,175,098 29,825,633
Long-term portion of long-term debt, net 5,946,223 7,649,979
Long-term portion of capital lease obligations 12,298 76,014
Other non-current liabilities 4,998,968 5,497,644
------------ ------------
Total liabilities 39,132,587 43,049,270
Minority interests in consolidated subsidiaries 641,537 1,323,183
Stockholders' equity:
Common stock $.01 par value, 40,000,000 shares authorized
and 11,134,147 shares issued and outstanding 111,341 111,341
Currency translation adjustments 434,050 778,838
Additional paid-in capital 81,337,166 79,857,172
Accumulated deficit (68,908,202) (59,724,101)
------------ ------------
Total stockholders' equity 12,974,355 21,023,250
------------ ------------
Total liabilities and stockholders' equity $ 52,748,479 $ 65,395,703
============ ============
See accompanying notes to consolidated financial statements.
3
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------
NOTES 1996 1995 1996 1995
----- ---- ---- ---- ----
Operating revenue:
Grid power production revenues $ 1,484,821 $ 1,734,452 $ 5,647,597 $ 5,887,551
Wireless power sales 1,441,065 2,207,390 5,748,060 4,962,199
Other products and services 295,569 126,585 962,093 1,015,639
------------ ------------ ------------ ------------
Total operating revenue 3,221,455 4,068,427 12,357,750 11,865,389
------------ ------------ ------------ ------------
Cost of operations:
Grid power production 1,899,789 1,588,556 4,342,170 3,390,479
Wireless power 1,374,029 1,644,028 5,064,714 3,470,452
Other products and services 232,876 286,369 1,024,383 1,059,967
------------ ------------ ------------ ------------
Total cost of operations 3,506,694 3,518,953 10,431,267 7,920,898
------------ ------------ ------------ ------------
Gross profit:
Grid power production (414,968) 145,896 1,305,427 2,497,072
Wireless power 67,036 563,362 683,346 1,491,747
Other products and services 62,693 (159,784) (62,290) (44,328)
------------ ------------ ------------ ------------
Total gross profit (285,239) 549,474 1,926,483 3,944,491
------------ ------------ ------------ ------------
Research and development expenses 833 19,831 1,285 19,831
Project development expenses 220,330 575,694 613,296 1,465,212
Selling, general and administrative expenses 1,661,875 1,978,166 5,409,404 4,819,424
------------ ------------ ------------ ------------
Operating income (loss) (2,168,277) (2,024,217) (4,097,502) (2,359,976)
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (2,008,958) (507,500) (5,128,146) (1,231,579)
Interest income 53,517 159,636 199,184 458,734
Net equity earnings (loss) of non-consolidated
affiliates 5 260,237 (246,041) 368,294 74,777
Minority interests in consolidated subsidiaries 121,611 (24,876) 209,100 (37,922)
Other (787,355) 16,098 (666,078) 429,828
------------ ------------ ------------ ------------
Total other income (expense) (2,360,948) (602,683) (5,017,646) (306,162)
------------ ------------ ------------ ------------
Income (loss) before taxes (4,529,225) (2,626,900) (9,115,148) (2,666,138)
Provision for income taxes 171 (124,187) 20,147 126,446
------------ ------------ ------------ ------------
Loss from continuing operations (4,529,396) (2,502,713) (9,135,295) (2,792,584)
(Income) loss from operations of discontinued Grid Power
Services 48,806 130,465 48,806 279,647
------------ ------------ ------------ ------------
Net (loss) income (4,578,202) (2,633,178) (9,184,101) (3,072,231)
Series B preferred stock dividend 0 57,222 0 169,131
Series B preferred stock discount amortization 0 18,750 0 56,250
------------ ------------ ------------ ------------
Net income (loss) attributable to common shares ($ 4,578,202) ($ 2,709,150) ($ 9,184,101) ($ 3,297,612)
============ ============ ============ ============
(Loss) per common share:
Net (loss) ($ 0.41) ($ 0.23) ($ 0.82) ($ 0.29)
Series B dividend preferred stock $ 0.00 ($ 0.01) $ 0.00 ($ 0.02)
Series B discount amortization preferred stock $ 0.00 $ 0.00 $ 0.00 $ 0.01
============ ============ ============ ============
Net (loss) attributable to common shares $ 0.41 $ 0.24 $ 0.82 ($ 0.32)
============ ============ ============ ============
Weighted-average number of shares 11,134,147 11,177,235 11,134,147 10,417,882
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
4
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
NOTES 1996 1995
----- ---- ----
Cash flows from operating activities:
Net income (loss) ($9,184,101) ($ 3,072,231)
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 2,821,195 2,010,479
Amortization of goodwill 181,002 198,634
Amortization of Series B preferred stock offering costs 0 30,186
Amortization of debt discount 1,372,030 0
Minority interest in net income of consolidated subsidiaries (209,100) 37,922
Net equity (earnings) loss in non-consolidated affiliates 5 (368,294) (74,777)
Issuance of notes in lieu of interest payments 1,915,255 0
Loss on sale of Los Vaqueros Power Corporation 205,299 0
Loss on sale of Painted Hills Power Corporation 162,570 0
Changes in assets and liabilities, net of effect of acquisitions:
Decrease (increase) in accounts receivable 591,849 (1,030,753)
Decrease (increase) in inventories 9,709 (838,429)
(Increase) decrease in other current assets (204,239) (238,715)
Increase (decrease) in accounts payable and accrued liabilities 345,678 1,930,629
----------- ------------
Cash flows (used in) operating activities (2,361,147) (1,047,055)
----------- ------------
Cash flows from investing activities:
Capital expenditures 747,531 (6,801,832)
Acquisition of subsidiaries, net of cash acquired 0 (1,512,090)
(Increase) decrease in notes receivable, net of capital lease obligations 16,156 245,220
Investments in and advances to affiliates, including goodwill 1,279,763 (6,468,211)
Proceeds from sale of Solartec, S. A 1,848,839 0
Proceeds from sale of Los Vaqueros Power Corporation 92,500 0
Decrease (increase) in non-current assets 1,486,726 (3,089,584)
Increase(decrease) increase in non-current liabilites (498,678) (551,590)
----------- ------------
Cash flows (used in) investing activities 4,972,837 (18,178,087)
----------- ------------
Cash flows from financing activities:
Increase in short-term debt 0 70,000
Increase in long-term debt 0 14,754,659
(Decrease) in due to shareholders 0 (1,500,006)
Increase in due to shareholders 0 1,000,000
Decrease (increase) in restricted cash 126,976 (5,271,274)
Repayment of long-term debt (1,609,725) (1,172,247)
Proceeds from issuance of Common Stock, net 0 8,820,956
Renewable Energy Ireland Limited minority dividend 0 (64,213)
----------- ------------
Cash flows provided by financing activities (1,482,749) 16,637,875
----------- ------------
Effect of exchange rate changes on cash (344,788) (3,437)
----------- ------------
Net change in cash 784,153 (2,590,704)
Cash at beginning of period 681,369 3,885,473
----------- ------------
Cash at end of period $ 1,465,522 $ 1,294,769
=========== ============
Continues on following page
5
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Continued from prior page
1996 1995
---- ----
Non-cash investing and financing transactions:
Common stock issued for majority interest in Bellacorick $ 0 $ 637,500
Common stock exchanged for Fujian I Hydroelectric Project 0 7,500,000
Common stock warrants issued 1,479,994 0
Series B preferred stock dividend accrual 0 169,131
Series B preferred stock discount amortization 0 56,250
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense $ 1,186,354 $ 838,637
Income taxes 24,054 20,991
See accompanying notes to consolidated financial statements.
6
THE NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
(Unaudited)
Common Stock Currency Additional Retained Total
Number Amount of translation paid in earnings
of shares Par Value adjustments capital (deficit)
---------- -------- --------- ----------- ------------ ------------
Balance December 31, 1995 11,134,147 $111,341 $ 778,838 $79,857,172 ($59,724,101) $ 21,023,250
Issuance of Common Stock -- -- -- -- -- --
Issuance of Common Stock Warrants -- -- -- 1,479,994 1,479,994
Currency translation adjustments on
international subsidiaries consolidation -- -- (344,788) -- -- (344,788)
Net (Loss), Nine month period ended
September 30, 1996 -- -- -- -- (9,184,101) (9,184,101)
---------- -------- --------- ----------- ------------ ------------
Balance September 30, 1996 11,134,147 $111,341 $ 434,050 $81,337,166 ($68,908,202) $ 12,974,355
========== ======== ========= =========== ============ ============
See accompanying notes to consolidated financial statements
7
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
presentation of interim financial information. They do not include all
information and presentation of footnotes required by generally accepted
accounting principles for presentation of complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Certain reclassifications have been made to the financial statements
for the nine month period ended September 30, 1995 to conform to the current
period presentation.
The reader is referred to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 for information which may be useful in
understanding the Company's business and financial statement presentation.
NOTE 2. GOING CONCERN
The consolidated financial statements as of, and for the nine month
period ended September 30, 1996 have been prepared assuming that the Company
will continue as a going concern. During the year ended December 31, 1995, the
Company incurred a net loss of $41.3 million (including a $24.4 million
impairment charge), had negative cash flows from operations of $6.3 million and
had negative working capital. During the first quarter of 1996, due to severe
liquidity constraints, the Company defaulted on two of its principal loan
agreements and as a result, was required to restructure those loans. The Company
has amounts owed trade creditors that are past due, and certain creditors have
threatened to petition the Company into involuntary bankruptcy proceedings. As
part of the agreement to restructure its debt, management has agreed to sell
certain assets by specified dates in 1996 and use a portion of the proceeds to
repay the debt. Further, the Company anticipates having negative operating cash
flows during 1996, and as a result, will require additional capital through
financing or equity transactions in order to sustain operations. The above
matters raise substantial doubts about the Company's ability to continue as a
going concern.
In January, 1996, the Company adopted a new business plan. Key
elements of the business plan include:
o The Company intends to focus on a selected, limited number of
development projects and does not intend to acquire or expand into
any new business ventures until the Company improves its financial
position.
o The Company intends to sell down or sell off its existing
hydroelectric projects currently under development or construction,
with the exception of its investment in China which the Company
views to be a strategic geographic location.
o The Company intends to reduce, where possible, its ownership
interest in operating wind farms, as well as its wind farms under
development.
8
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
o The Company intends to use the proceeds from the sale of these
investments to meet its current and near term debt service
requirements.
o The Company does not intend to pursue any new wind farm development
projects in the United States. This element of the business plan
does not affect projects for which the Company has completed the
bidding process or has been selected through a competitive process
to operate a wind farm.
o The Company intends to focus future development on large scale wind
farm projects in countries where the Company has an established
presence, such as Mexico, Ireland and China, and will not pursue
competitively bid wind farm projects unless the individual
circumstances are uniquely compelling.
o The Company intends to simultaneously seek to integrate its wireless
business or sell its Photocomm subsidiary.
o The Company intends to reduce its administrative staff.
There are numerous risks and uncertainties surrounding management's
plans, principally the risk that management will not be able to sell the
investments (or subsidiaries) identified in its business plan within the time
frame, or for the amounts, required by the restructured loan agreement. There
can be no assurance that the Company will be successful in implementing this
plan and that the Company will continue as a going concern.
NOTE 3. OTHER COMMITMENTS AND CONTINGENCIES
Asset Sales
As discussed in Note 2, in order to satisfy the terms of its
restructured 8% convertible subordinate note, the Company must sell
certain assets or securities for specified minimum amounts during
1996. Under the restructured agreement, the Company must sell assets
for minimum proceeds of $10 million on or before July 31, 1996, with
cumulative proceeds from the sale of assets increasing to $27
million by November 30, 1996. A portion of the proceeds from the
sale of these assets is to be used to reduce the obligations
outstanding under the agreement. Failure to obtain sufficient
proceeds and make the related debt payments would constitute a
breach of the amended agreement and result in the debt becoming
callable by the lender. Subsequent to June 30, 1996 the Company
received an extension to its loan agreement to extend the
requirement to raise $10 million of net proceeds from the sale of
assets beyond July 31, 1996. Management negotiated the sale of its
Photocomm investment and Solartec subsidiary and signed a definitive
agreement for the sale of these investments for proceeds in excess
of $10 million by August 16, 1996, thereby satisfying the lenders'
requirements. The anticipated proceeds of the sale are approximately
$12.5 million. The proceeds will be used to pay off a portion of the
8% Secured Subordinated Notes which are outstanding.
9
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance Bond
In connection with the Company's proposal to construct a
hydroelectric facility at Anderson Falls, Argentina, the Company was
required to post a $1 million performance bond. The Company's
liquidity problems have halted the construction of this facility and
therefore the Company faces the risk that this bond may be called.
Management is currently seeking a buyer for this development project
who would assume the Company's obligations under the performance
bond. The Company has recorded a reserve for its estimated exposure
with respect to this project.
Capital Expenditures
Under the power purchase contract with Consumers Power Company
("Consumers"), the Company is required to expend approximately $2.5
million for the rehabilitation of its Wolverine hydroelectric
facilities prior to December 31, 1995. Through December 31, 1995,
the Company had made qualifying capital expenditures of
approximately $2.115 million. In addition, the Company is currently
re-negotiating the terms of the Consumers' power purchase contract,
as the established contract rates expired December 31, 1995.
Management anticipates resolving the current non-compliance
regarding the rehabilitation funding requirement and reaching
agreement on a new power purchase contract. Failure to reach
agreement regarding these matters may result in the termination of
the relationship by Consumers. To date, Consumers has not sought to
terminate the contract or suggest that it may seek other relief.
Concentrations Of Risk
The Company derives all of its revenue from the production and sale
of electric power generated from renewable sources and, to a lesser
extent, the sale of products related to the renewable energy
industry. As a result, the Company is subject to several
concentrations of risk. A significant majority of the Company's
revenues are derived from contracts for the sale of power to
regulated public utilities. Under many of these contracts, the price
for energy is subject to the utilities' "avoided cost". "Avoided
cost" is affected by, among other factors, the availability and
market price of oil, gas, and other energy sources. Additionally,
the Company will have to renegotiate contracts with the utilities
when the present contracts expire. Further, the renewable energy
industry has, in the past, been subject to legislative and
regulatory changes, and will likely continue to be affected by such
factors for the foreseeable future.
10
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. IMPAIRMENT CHARGE
In 1995, the Company recorded an impairment charge of $24.4 million.
As described in the Company's annual report on Form 10-K the Company has a
business plan to sell certain of its assets and investments and to abandon
various development projects. For the nine month period ended September 30,
1996, there has been no change to the impairment charge and no significant
change to the carrying value of the assets held for sale. The assets held for
sale as of September 30, 1996 include:
Photocomm Makani Uwila Wind Farm
United Kingdom Wind Farms Arcadian Wind Farm
Tierras Morenas, Development Project San Jacinto
Dona Julia, Development Project Bellacorick
Andersen Falls
NOTE 5. INVESTMENTS
The Company's investment in, and advances to unconsolidated
affiliates as of the balance sheet date, are as follows:
1996
COMPANY EQUITY CHANGE INVESTMENTS
- ------- --------- -----------
Photocomm 46% $ 442,810 $12,060,467
New World Entec S. A 50% 0 0
San Jacinto Power 50% (74,516) 25,484
Company
Fujian I Hydro Project 12% 0 3,500,000
--------- -----------
Totals $ 368,294 $15,585,951
========= ===========
NOTE 6. SUBSEQUENT EVENTS
On July 31, 1996, the Company entered into a letter of intent to
sell its investment in Photocomm. On August 16, 1996, the Company signed a
definitive agreement for the sale. Proceeds are anticipated to be approximately
$10.9 million and will be used to pay off a portion of the outstanding 8%
Secured Subordinated Notes during the fourth quarter of 1996.
On June 29, 1996, the Company entered into letter of intent to sell
its investment in San Jacinto Power Company and expects to close during the
fourth quarter.
11
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The New World Power Corporation, together with its consolidated
subsidiaries, ("the Company") is engaged in the production and sale of electric
power generated from renewable sources and, to a lesser extent, the sale of
products related to the renewable energy industry. The Company focuses on the
acquisition and development of renewable power generating facilities from wind,
solar, and hydroelectric sources.
BUSINESS ENVIRONMENT
As described in the Company's annual report on Form 10-K, Management
adopted a new business plan in January of 1996 with the objectives of improving
the Company's financial position, reducing debt, increasing equity and
alleviating the Company's short-term liquidity problems and improving long-term
liquidity. Further, under the Company's restructured loan agreements, the
Company is required to raise $10 million in net proceeds from the sale of assets
or securities by July 31, 1996 and raise an additional $17 million in net
proceeds from the sale of assets and securities by November 30, 1996.
During the six month period ended June 30, 1996, the Company was
engaged in active negotiations to sell its investments in Photocomm, Solartec
S.A., the Makani Uwila Wind Farm, Los Vaqueros and San Jacinto. During the
quarter ended September 30, 1996, the Company signed agreements to sell Los
Vaqueros, San Jacinto and New World do Brazil for aggregate net proceeds of
$217,500. As of July 31, 1996, the Company had not yet completed the sale of any
other investments and had not complied with provisions of its loan agreement to
raise $10 million in net proceeds from the sale of assets or securities by July
31, 1996. The lender extended the requirement to raise $10 million in net
proceeds through the end of the day on August 16, 1996. Management subsidiary
signed a definitive agreement for the sale its Photocomm investment and Solartec
subsidiary for proceeds in excess of $10 million by August 16, 1996. This sale
allows the Company to meet the requirement of the loan agreement to raise $10
million of net proceeds on or before July 31, 1996 (extended through August 16,
1996).
During the three month period ended September 30, 1996, the Company
closed on the sale of its investments in Los Vaqueros, Solartec S.A. and New
World Power do Brazil for gross proceeds of approximately $1.7 million. The
proceeds were used to reduce the outstanding balance under its loan agreements.
Management has been actively negotiating the sale of its three wind
farms in the United Kingdom and the sale/refinancing of its wind farm in
Ireland. Subsequent to September 30, 1996, the Company has received preliminary
offers on the sale of the wind farms in the U.K. and the sale/refinancing of the
wind farm in Ireland. Management is currently reviewing those offers and
negotiating its terms.
12
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
RESULTS OF OPERATIONS
GENERAL
The results of operations for the nine month period ended September
30, 1995 reflect changes from originally reported numbers as a result of the
method of accounting for the Company's investment in Photocomm. During the year
ended December 31, 1994, the Company acquired additional shares of common stock
and other Photocomm securities (immediately converted to common stock). As a
result, after consideration of the acquisition of the additional common stock
and a short-term voting agreement the Company had control of over 51% of
Photocomm's issued and outstanding common stock as of December 31, 1994.
Accordingly, the Company originally consolidated Photocomm into its financial
statements for the nine month period ended September 30 1995.
At December 31, 1995, the Company owned 6,612,447 shares of
Photocomm, representing less than 50% of the issued and outstanding shares of
Photocomm. The decrease in the Company's ownership percentage from December 31,
1994 results from various Photocomm equity transactions in which the Company did
not participate. Additionally, the short-term voting agreement, described above,
expired during 1995. As a result of the Company no longer having a controlling
interest in Photocomm, the investment in Photocomm has been accounted for on an
equity basis, for the nine month period ended September 30, 1996. The Company
has restated the September 30, 1995 financial statements to reflect the
de-consolidation of Photocomm. The summarized balance sheets and statements of
operations for Photocomm are as follows:
September 30, December 31,
1996 1995
---- ----
BALANCE SHEET
Current assets $11,027,771 $ 7,334,984
Total assets 16,117,838 10,361,409
Current liabilities 5,849,515 2,676,483
Total liabilities 6,258,076 3,069,579
Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
STATEMENT OF OPERATIONS
Sales $18,669,869 $16,733,151
Cost of Sales 13,923,212 12,752,852
Selling, General and Administrative 4,023,625 3,273,760
Net income 1,049,474 695,711
REVENUES
Revenues during the nine month period ended September 30, 1996
increased $492,361 (4%) which is primarily due to the Santa Fe project in
Argentina which was not present in the first three quarters of 1995, as well as
increased revenues at Solartec.
13
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
COSTS OF OPERATIONS
The cost of operations for the nine month period ended September 30,
1996 increased $2,510,369 (32%) compared to the same period of 1995, which is
partially attributable to the Santa Fe project in Argentina which was not
present in 1995 and increased costs of Solartec in relation to revenues.
Additionally, depreciation expense for the U.K. wind farms was increased from
the prior year to reflect accelerated methods to better match revenues.
Project Development Expenses
Development of a power production facility requires extensive
preparatory work that includes identifying and acquiring the rights to suitable
wind or hydroelectric sites, obtaining an economically viable power purchase
contract, fulfilling all legal requirements and obtaining financing for the
project on favorable terms. All of this precedes equipment selection, contract
negotiation and actual construction.
Project development expenses decreased by $851,916 (58%) during the
nine months periods ended September 30, 1996 compared with 1995 which was
primarily attributable to the Company's investigations during 1995 into
potential projects in China and, to a lesser extent, various domestic projects
and Chile and Argentina.
Selling, general and administrative
Selling, general and administrative expenses increased $589,980
(12%), during the nine month period ended September 30, 1996 compared to the
same period in 1995, which is primarily attributable to increased professional
fees at Corporate Headquarters including crisis management consultants, legal
fees and accounting and auditing fees. The Company has terminated its
arrangement with the crisis management consultants in August, 1996.
Operating (Loss) Income
Operating results decreased $1,737,526 to ($4,097,502) during the
nine month period ended September 30, 1996 compared to the same period in 1995.
The increased loss is attributable primarily to increased professional fees at
the Corporate level and increased depreciation for the U.K. wind farms.
14
NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Other Income (Expense)
Other expense, net, increased $4,711,484 during the nine month
period ended September 30, 1996 compared to the same period in 1995 which is
attributable primarily to a $3,896,567 increase in interest expense in
connection with approximately $15 million of debt the Company issued during the
latter part of the 1995. Additionally, the Company benefited in 1995 from
aggregated gains of $276,000 in connection with the settlement of certain
disputes.
Net income (loss)
The net loss for the nine month period ended September 30, 1996
increased $6,111,870 compared to the same period last year. The increase in net
loss is primarily attributable to increased interest expense, professional fees
at Corporate Headquarters and, increased depreciation expense in the U.K.
SEGMENT ANALYSIS
GRID POWER PRODUCTION
Revenues
Grid power production revenues were decreased by approximately
$239,954 during the nine month period ended September 30, 1996 compared to the
same period in 1995. Production revenues were increased at Wolverine offset by
decreased revenues in the United Kingdom and Californian wind farms.
Cost of Operations
Cost of operations for nine month period ended September 30, 1996
increased $951,691 (28%) which is primarily attributable to increased
depreciation expense in the U.K. to reflect accelerated methods which better
match revenues and expenses. As a result Grid Power gross profit decreased
$1,191,645.
WIRELESS POWER
This photo-voltaic (solar) business segment includes Photocomm Inc.
and a part of New World Power Technology Company (formerly Northern Power
Systems). These companies are in the business of developing, assembling, and
marketing photo-voltaic or solar electric power systems and related products
domestically and in South America.
Sales
Sales increased $785,861 (16%) during the nine month period ended
September 30, 1996 compared to the same period in 1995 principally attributable
to the Santa Fe project in Argentina which was not present in 1995.
Additionally, Solartec revenues were also higher.
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NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Costs
Costs increased $1,594,262 during the nine month period ended
September 30, 1996 principally attributable to the Santa Fe project in Argentina
which was not present in 1995. Additionally, Solartec costs were higher
consistent with the increase in revenues.
Gross profit
The combination of the above resulted in a decrease in gross profit
of $808,401 during the nine month period ended September 30, 1996.
OTHER PRODUCTS & SERVICES
This category includes the New World Power Technology Company
(non-solar segment), which provides scientific, engineering, and technology
services to both the Company and outside businesses and governmental units.
This category also includes the New World Village Power Company
which continues to be in a development stage, but for which the Company expects
future growth. This business unit provides stand alone power generation
facilities for remote villages. Village Power generation facilities may vary,
but generally consist of some combination of wind, solar, and diesel generation
units.
Revenues decreased $53,546 (5%) during the nine month period ended
September 30, 1996 compared to the same period in 1995 due to the shut-down of
Village Power partially offset by increased Technology sales. Costs were
approximately flat despite the decrease in sales, principally due to costs
incurred for of the Advanced Wind Turbine program, a joint effort with the
National Renewable Energy Laboratory. The result is a loss of $X compared to a
gross profit in the nine month period of 1995 of $44,328.
LIQUIDITY & CAPITAL RESERVES
During the nine month period ended September 30, 1996, there has
been no significant changes in the Company's liquidity or capital reserves. The
Company has not issued any new debt obligations nor has it repaid any
significant amounts of borrowings. During the three month period ended September
30, 1996, the Company received approximately $1.6 million in proceeds from the
sale of assets. Subsequent to September 30, 1996, the proceeds were used to
reduce the outstanding amounts under its loan agreements.
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NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Further, the Company has completed negotiations to sell its
investment in Photocomm and signed a definitive agreement for the sale of this
investment for net proceeds in excess of $10.5 million on August 16, 1996. The
Company anticipates a closing of this sale in the fourth quarter of 1996. The
Company continues to pursue its business plan of improving its financial
position and liquidity through the sale of assets and reduction of debt.
In August, 1996 the Company continued to operate under constrained
liquidity and operating cash flow. As a result, the Company made its interest
payment, due July 31, 1996, on its 8% Secured Subordinated Notes in the form of
additional notes and warrants rather than cash as permitted under the
restructured loan agreement.
The Company has a working capital deficiency of $19,571,093 million
which is partially the result of certain obligations upon which the Company
defaulted in the first quarter of 1996 being currently due. There are numerous
risks and uncertainties surrounding management's plans to improve the Company's
financial position, and liquidity and reduce debt, principally the risk that
management will not be able to sell the investments (or subsidiaries) identified
in its business plan within the time frame, or for the amounts, required by the
restructured loan agreement.
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NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
PART II-OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
Financial Data Schedule.
b) REPORTS ON FORM 8-K
The Registrant filed a Form 8-K dated August 16, 1996 regarding the
Registrant's Stock Purchase Agreement with Golden Technologies Company, Inc.
announcing the disposition of the Registrant's assets, Waiver Agreement with
Photocomm, Inc., Robert R. Kauffman and Programmed Land, Inc. modifying their
Stock Purchase Agreement with Registrant dated October 15, 1993, and press
release announcing a letter of intent for a joint venture and management
agreement with Dominion Bridge Corporation.
The Registrant filed a Form 8-K dated September 10, 1996 regarding
the resignation of the Registrant's auditors.
The Registrant filed a Form 8-K/A dated October 29, 1996 regarding
the resignation of the Registrant's auditors.
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NEW WORLD POWER CORPORATION
AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE NEW WORLD POWER CORPORATION
January 9, 1997 By /s/ Vitold Jordan
-------------------------------------
Vitold Jordan
Acting Chief Financial Officer
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