WATERCHEF, INC.
ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
PART I PAGE
----
ITEM 1. BUSINESS 2
ITEM 2. PROPERTIES 6
ITEM 3. LEGAL PROCEEDINGS 6
ITEM 4. SUBMISSION OF MATTERS TO VOTE 7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED 8
STOCKHOLDER MATTERS.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 10
FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY 11
DATA.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH 11
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE 12
REGISTRANT.
ITEM 10. EXECUTIVE COMPENSATION 15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 16
OWNERS AND MANAGEMENT.
ITEM 12. RELATED PARTY TRANSACTIONS. 17
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. 17
SIGNATURES 17
1
ITEM 1. BUSINESS
WaterChef, Inc. (the "Company", "WaterChef"), designs, manufactures and markets
water purification equipment, water dispensers and water filters.
COMPANY HISTORY
The Company was incorporated under Arizona law in 1985 and was merged into a
Delaware corporation in 1987. On June 4, 1993 the Company, then known as Auto
Swap, U.S.A., entered into a Merger Agreement and Plan of Reorganization with
WaterChef, Inc., a Nevada corporation ("Water Chef-Nevada), and issued 3,800,000
shares of its common stock to Water Chef-Nevada's three stockholders in exchange
for all issued and outstanding common stock prior to the merger.
The Water Chef-Nevada acquisition has been accounted for as a reverse
acquisition. Therefore the historical financial statements prior to June 4, 1993
are those of Water Chef-Nevada, which was formed on January 25, 1993. For
financial statement presentation purposes, the Company is considered to be
the predecessor compamy.
PRODUCTS AND TECHNOLOGY
In May 1993, the Company built a manufacturing plant in Havre, Montana to
produce their first commercial line of water dispensers. This product, referred
to as the TAHOE(R) line, was designed as a "traditional" product, which is
configured so that the bottle of water rests upside down on top of the dispenser
with its neck protruding downward. The first TAHOE(R) unit was sold commercially
in July 1993.
In mid-1993 the Company entered into a joint venture with a Chinese company for
the manufacture of water dispensers in the People's Republic of China. The
Company received 55% of the equity in the joint venture for approximately
$475,000. The Company's investment consisted of $140,000 in cash, machinery and
equipment valued at $144,000 and design and technology valued at $156,000.
The Company began production of its TAHOE(R) Series 1 in China in November 1993.
However it was not until May of 1976 that components were shipped to Havre.
Finished product and parts kits were finally shipped to Havre in late 1997.
Since 1997 the Company, in concert with its joint venture partner in China, has
upgraded and restyled its products and has improved its manufacturing
capability.
The joint venture agreement also requires the Company to transfer certain
advanced production technology developed by the Company to the joint venture,
and for the joint venture to pay the Company royalties for any sales made in
China. The Company also entered into a distributor agreement with the joint
venture giving the Company exclusive sales and distribution rights to products
manufactured by the joint venture in all parts of the world with the exception
of the People's Republic of China, Taiwan and Hong Kong. The joint venture
agreement has approximately 15 more years to run.
2
Additional recently added products to the company's line include custom water
filtration systems for installation in various models of the Series I (Infinity)
family of water coolers, which connect directly to the water supply thus,
eliminating the need for bottled water, and a similar product which can be used
for under-the-counter installation where cooling or heating is not required.
The Company, through its acquisition of Natural Water Systems, Inc. (acquired
December 1995) offers for sale a line of high quality filter products, including
shower filters, counter-top filters and under counter filters.
While the Company believes that its products meet or exceed the design, quality
and performance of competitive products, it became apparent in 1998 that in
order to build considerable shareholder value, the Company would have to add
products to its line that would qualify as "killer applications". Addressing
this over the past two years, using in-house scientific, engineering and
manufacturing expertise, Company's management focused on the worldwide drinking
water problems related to the conversion of harmful or "bad water" into pure,
safe, drinkable water, being mindful of the need to also provide an economic
solution for third world economies. The resultant product is the Company's Pure
Safe Water Station, a portable unit that will effectively eliminate all living
pathogens--bacteria, cysts, viruses, parasites and protozoa, which threaten the
safety of drinking water, at a cost comparable or better being paid today. The
Pure Safe produces up to 10,000 gallons per day, from any water source, for as
little as 1 1/2 cents per gallon.
MANUFACTURING FACILITIES
The Company manufactures in Tianjin, People's Republic of China and in Havre,
Montana. The Montana plant, encompassing 13,000 square feet, is leased through
October 2002 for $2,700 per month. The Chinese facility is owned by the joint
venture. The Company plans to outsource the manufacture of their Pure Safe unit.
The Company distributes all water dispenser products from Havre, and converts
coolers to point-of-use through addition of plumbing and electrical parts and
specialized filtration equipment. All primary plastic molding, sourcing of
purchase parts and basic assembly and testing is done in the Company's Chinese
facility.
MARKETING AND COMPETITION
The Company believes that, except for its newly introduced Pure Water Station,
substantial competition exists for all of its products. In addition, most of its
competitors have significantly greater assets and liquidity. However, the
Company believes that its products meet the highest standards of quality and
styling, and are competitively priced. While it is the present intent of the
Company to continually upgrade, re-engineer and restyle its products, it will
focus on the further development, manufacturing and marketing of its Pure Safe
Water Station.
3
Using the Company's unique capabilities in developing single unit, high quality,
low cost water purification systems, WaterChef has developed, tested, and
brought to market a unique and highly viable solution to the drinking water
needs of developing nations and emerging economies. The Pure Safe Water Station,
modified as necessary to meet a specific water problem, can use water from that
source and purify it to U.S. Environmental Protection Agency standards.
While there are many excellent water purification systems, the Pure Safe is the
only family of products identified which was developed specifically to address
the water needs of those locations which will likely never enjoy access to
municipal water. It is a permanent, easily installed; turnkey solution offering
pure water to the world's underprivileged at a price that can't be beaten. The
existing companies in the market have tended to concentrate on the multi-billion
dollar municipal water treatment sector or the equally large residential sector.
The municipal solution requires significant investment for infrastructure
development (building a plant and laying pipe) and the residential market is
concentrated in the developed nations of the world.
The need for the Pure Safe Water Station is significant, with major parts of
Africa, the Middle East, Southeast Asia, the Indian sub-continent, Latin and
South America and the islands of the Caribbean, and much of Eastern Europe
lacking adequate supplies of pure water. In the poorer countries of the world,
while the need is evident, the ability to finance the solution is problematical.
With the world price of purified water averaging in the $0.20 to $0.30 range per
gallon, and with our ability to produce the highest quality water for pennies a
gallon, WaterChef is confident in assessing the potential market we serve to be
in the multi-billion dollar range.
During 2000 the Company entered into a master distributor agreement with Hong
Kong based 4CleanWaters Ltd., and international marketing company, to market the
Pure Safe product line.
Based on market studies commissioned by industry trade organizations, it is
estimated that well over 1,000,000 water dispensers were produced in the United
States in 2000, with a total market value of $160 million. There are three major
competitors in the industry, accounting for approximately 75% of total sales.
WaterChef, a relatively late entrant to the industry, remains at a competitive
disadvantage with these companies as they are better financed, have greater
depth of management and have established channels of distribution for their
products.
The traditional market for water dispensers has been the bottled water
companies, which lease the water dispensers to their customers for use in
connection with delivery of the bottled water companies' products, and coffee
service businesses, which provide coffee and other hot drink appliances to
offices and, in an extension of their business, now often provide water
dispensers and bottled water as well.
4
With all of its primary water cooler manufacturing and plastic molding done at
its Chinese Joint Venture facility, WaterChef enjoys manufacturing cost
efficiencies compared to its primary competitors, but conversely lacks the
volume to make full automation economically feasible. It is in the point-of-use
segment of the business where WaterChef's unit cost advantage manifests itself,
allowing the Company to be the price leader in this higher gross margin, higher
value-added segment.
The Company, via its acquisition of Natural Water Systems, participates in the
lifestyle products consumer market. The Company retains a high performance,
competitively priced line of filter products--shower filters, counter-top and
under-counter filters and purifiers, which are offered for sale on the Company's
websites, waterchef.net and tapdancefilter.com.
BACKLOG
The Company has booked Pure Safe Water Center orders for Mozambique, Tanzania,
and Nicaragua, which are expected to ship in 2001. The Company's practice is to
immediately fill orders for water dispensers for shipment in the US so no
significant backlog exists.
RAW MATERIALS
The Company believes that there are alternative sources of supply for most of
the materials used in manufacturing its products. Some of these materials,
however, must be obtained from foreign suppliers, which subjects the Company to
the risks inherent in obtaining materials from foreign sources, including supply
interruptions. The Company's suppliers are adequately meeting the requirements
of the Company.
PATENTS
The Company owns and holds eight patents that are or will be used in connection
with the manufacture of its water dispensers. The issued patents, two of which
expire in 2006, three of which expire in 2007, and three in 2008 cover such
items as the designs for cabinets for the "new Century" water dispenser, certain
methods of providing carbonated water through a water cooler, and the
refrigeration unit for the water dispensers, which features the use of ice as a
thermal storage medium to extend the peak draw capacity of a water dispenser,
e.g., the number of cups of cold water that may be drawn from the coolers in an
hour. There can be no assurance that any of its issued patents will afford
protection against a competitor or that any patents issued to the Company could
not be designed around or invalidated. In addition, the Company has filed for
patent protection for its Pure Safe Water Station (October, 1998), and is
currently marketing the system "patent pending".
There can be no assurance that any application of the Company's technologies
will not infringe patent or proprietary rights of others or that licenses, which
might be required for the Company's processes or products, would be available on
favorable terms. Furthermore, there can be no assurance that challenges will not
5
be instituted against the validity of a patent and prevent infringement can be
substantial and may have a material adverse effect on the Company's financial
position.
SEASONALITY
The Company does not expect the Pure Safe to be influenced by seasonality. Sales
of water dispensers are lower in the winter months, adversely affecting the
first and fourth quarters of the year.
RESEARCH AND DEVELOPMENT
Product design is coordinated from Glen Head, New York and accomplished by
engineering personnel in New York, Havre, Montana and Tianjin, People's Republic
of China.
INSURANCE
The Company maintains a $1,000,000 umbrella policy, in addition to a $2,000,000
general and product liability policy, which covers the manufacture and marketing
of its products. The Company believes its insurance coverage to be adequate.
EMPLOYEES
As of December 31, 2000 the Company employed three executive personnel in its
headquarters and between five and ten production personnel in Montana.
The Company believes that its relations with its employees are good. The Company
also believes there is a sufficient number of persons available at prevailing
wage rates in or near our manufacturing locations that should expansion of its
production require additional employees, they would be readily available. The
Company has no collective bargaining agreement with any of its employees.
ITEM 2. PROPERTIES
The Company's manufacturing facilities are located in Havre, Montana and the
Tianjin Tahoe Joint Venture facility located at Electronic Park, Tianjin
Economic and Technology Development Zone, Tianjin, People's Republic of China.
The Company manufactures the Pure Safe Water Station in a contract manufacturing
facility in Bohemia, New York.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in a civil proceeding brought by individuals who
participated in a subordinated debenture financing with the Company. The Company
6
believes the case is without merit, and that there are significant defenses
available, and further, that should the plaintiffs prevail, it will not have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE
No matters were submitted to the shareholders for vote during 2000.
7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
PRICE RANGE OF COMMON STOCK
Trading activity with respect to common stock and the fact that certain shares
of common stock have been registered under the Exchange Act, which may be and
are traded in the over-the-counter market, should not of itself be deemed to
constitute an "established trading market". A public trading market having the
characteristics of depth, liquidity and orderliness, depends upon the existence
of market-makers as well as the presence of willing buyers and sellers, which
are circumstances over which the Company has no control.
The Company's common stock was included on NASDAQ under the symbol SWAP, until
July 31, 1992. Subsequent to that date, the common stock has been quoted through
the NASD "Electronic Bulletin Board" under the symbol WTER.
The chart below sets forth the range of high and low bid prices for the
Company's common stock based on closing transactions during each specified
period as reported by the National Quotation Bureau, Inc. The prices reflect
inter-dealer prices without retail mark-up, markdown, quotation or commission
and do not necessarily represent actual transactions.
1997 HIGH LOW
First Quarter .23 .10.5
Second Quarter .29 .14
Third Quarter .28 .11.5
Fourth Quarter .39 .13
1998
First Quarter .21 .10
Second Quarter .13 .10
Third Quarter .07 .04
Fourth Quarter .03 .01
1999
First Quarter .02 .01
Second Quarter .17 .02
Third Quarter .08 .04
8
Fourth Quarter .07 .03
2000
First Quarter .86 .04
Second Quarter .37 .08
Third Quarter .19 .06
Fourth Quarter .17 .04
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
INTRODUCTION
WaterChef, Inc. (the "Company") is a manufacturing company engaged in the
manufacture and marketing of water dispensers and water purification and
filtration equipment through the use of its equipment, patents and other assets.
DEVELOPMENT OF THE COMPANY
Pursuant to a Merger Agreement and Plan of Reorganization between the Company
and WaterChef-Nevada dated June 4, 1993 ("the Agreement"), the company issued
3,800,000 shares of its common stock to WaterChef-Nevada's three stockholders,
in exchange for all issued and outstanding shares of its common stock after the
merger. In connection with this transaction, WaterChef-Nevada's officers and its
director became officers and a director of the Company. This resulted in
WaterChef-Nevada's officers and director, and directors appointed by
WaterChef-Nevada, controlling the Company's day-to-day operations.
In accordance with Accounting Principles Board Opinion No. 16, the
WaterChef-Nevada acquisition has been accounted for as a reverse acquisition.
The historical financial statements prior to June 4, 1993 are those of
WaterChef-Nevada, which was formed on January 25, 1993. For financial statement
presentation purposes, the Company is considered to be the predecessor.
RESULTS OF OPERATIONS
Revenues for the fiscal years ended December 31,2000 and December 31, 1999 were
$257,197 and $354,792. Revenues decreased $97,595 or 28% from the previous 12
months as the Company withdrew from the retail sale of water dispensers through
mass merchants. The December 31, 1999 revenues included $106,650 of retail sales
through mass merchants at unacceptable margins.
9
Cost of sales decreased from $247,416 for the 12 months 1999 to $169,163 for
full year 2000, a decrease of $78,253 or 32%. The decrease is due to lower sales
volume and a mix shift to higher margin products.
Selling general and administrative expenses for the twelve months ended December
31, 2000 were $1,443,585 compared to $736,357 for the twelve months ended
December 31, 1999, an increase of $707,228 or 96%. The increase in expense is
primarily due to higher than normal professional fees incurred to bring the
Company current in its reporting and start up expenses for the Pure Safe Water
Station product line.
The loss from continuing operations for the fiscal year ended December 31, 2000
was $1,583,953 compared to $878,277 for the fiscal year ended December 31, 1999,
an increase of $705,676, or 80%.
In fiscal year 2000 the Company negotiated the restructuring of major elements
of its debt resulting in an extraordinary gain of $2,236,605.
For fiscal year ended December 31, 2000 the Company had a net income of $652,652
compared to a net income of $267,653 for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000 the Company had a stockholders' deficit of $2,389,000 and a
working capital deficit of $2,446,000.
During 2000 the Company continued the restructuring of its debt. The Company
made a final payment to the US Small Business Administration in final settlement
of the principal and accrued interest owed to that agency, and reached an
agreement with the Bear Paw Development Corporation of Northern Montana and the
Montana Department of Commerce to issue 2,000,000 shares of WaterChef common
stock in satisfaction of $1,867,654 of principal and accrued interest. In total,
during 2000 the Company reduced its outstanding debt payable by $2,748,245 by
payments of $234,000 in cash and by issuance of 3,614,550 shares of common
stock. These negotiated settlements resulted in forgiveness of debt of
$2,236,606.
The Company, during 2000, raised $513,000 through the sale of stock and the
exercise of warrants.
Management is currently attempting to settle or restructure the remaining debt,
and plans to raise additional capital through future issuances of stock and/or
debentures to finance the growth of the Company.
10
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMETARY DATA
WATER CHEF, INC.
REPORT ON AUDITS OF
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2000 AND 1999
WATER CHEF, INC.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report .................................... F-2
Balance Sheet . ................................................ F-3
Statements of Operations ........................................ F-4
Statements of Stockholders' Deficit.............................. F-5
Statements of Cash Flows ........................................ F-6
Notes to Financial Statements ................................... F-7 - F-15
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Water Chef, Inc.
Glen Cove, New York
We have audited the accompanying balance sheet of Water Chef,
Inc. as of December 31, 2000 and the related statements of operations, changes
in stockholders' deficit and cash flows for the years ended December 31, 2000
and 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit also includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects the financial position of Water Chef,
Inc. as of December 31, 2000 and the results of its operations and its cash
flows for the years ended December 31, 2000 and 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements the Company incurred losses before extraordinary
item of approximately $1,584,000 and $878,000 in 2000 and 1999, respectively.
Additionally, the Company had working capital and total capital deficiencies of
approximately $2,446,000 and $2,389,000 at December 31, 2000. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 2
to the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Feldman Sherb & Co., P.C.
----------------------------
Feldman Sherb & Co., P.C.
Certified Public Accountants
March 27, 2001
New York, New York
F-2
WATER CHEF INC.
BALANCE SHEET
DECEMBER 31, 2000
ASSETS
CURRENT ASSETS:
Cash, inclusive of $30,720, restricted funds $ 158,100
Accounts receivable, net of allowance
for doubtful accounts of $2,000 3,224
Inventories 55,696
Prepaid insurance 6,783
---------------
TOTAL CURRENT ASSETS 223,803
PROPERTY AND EQUIPMENT 12,174
INTANGIBLE AND OTHER ASSETS 45,219
---------------
$ 281,196
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 449,099
Accrued expenses and other current liabilities 453,223
Notes payable and accrued interest 881,944
Loan payable-shareholder 327,781
Preferred dividends payable 557,806
---------------
2,669,853
---------------
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value;
10,000,000 shares authorized;
145,500 shares issued and outstanding 146
Common stock, $.001 par value;
90,000,000 shares authorized;
69,178,287 shares issued and outstanding 69,178
Additional paid in capital 9,066,282
Treasury stock, 4,400 common shares, at cost (5,768)
Accumulated deficit (11,518,495)
---------------
TOTAL STOCKHOLDERS' DEFICIT (2,388,657)
---------------
$ 281,196
===============
See notes to financial statements.
F-3
WATER CHEF, INC.
STATEMENTS OF OPERATIONS
Year Ended December 31,
-------------------------------
2000 1999
-------------- --------------
Net Sales $ 257,197 $ 354,792
-------------- --------------
Costs and Expenses:
Cost of sales 169,163 247,416
Selling, general and administrative 1,443,585 736,357
Research and development 33,815 -
-------------- --------------
1,646,563 983,773
-------------- --------------
Loss Before Other (Expenses) Income
and Extraordinary Item (1,389,366) (628,981)
-------------- --------------
Other (Expenses) Income:
Interest expense (85,499) (179,044)
Equity in loss of joint venture (52,184) (73,757)
Inventory write-down (56,904) -
Gain on sale of land and building - 3,505
-------------- --------------
Other (expense) income, net (194,587) (249,296)
-------------- --------------
Loss Before Extraordinary Item (1,583,953) (878,277)
Extraordinary item - Gain on early
extinguishment of debt 2,236,605 1,145,930
-------------- --------------
Net Income 652,652 267,653
Preferred stock dividends (108,300) (108,300)
-------------- --------------
Net Income Applicable to
Common Stock $ 544,352 $ 159,353
============== ==============
Basic and Diluted Income (Loss) Per Common Share:
Loss before extraordinary item $ (0.03) $ (0.03)
Extraordinary item 0.04 0.04
-------------- --------------
$ 0.01 $ 0.01
============== ==============
Weighted Average Common Shares Outstanding -
Basic and Diluted 55,044,957 32,478,507
============== ==============
See notes to financial statements.
F-4
WATER CHEF, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
Preferred Stock Common Stock Additional Total
-------------------- ------------------- Paid-in Treasury Accumulated Stockholders'
Shares Amount Shares Amount Capital Stock Deficit Deficit
--------- -------- --------- -------- ----------- ---------- ------------ -------------
BALANCE - JANUARY 1, 1999 8,082,166 $ 8,082 32,339,015 $ 32,339 $ 7,103,507 $ (5,768) $(12,222,200) $(5,084,040)
Cancellation of shares - (425,000) (425) (42,075) - - (42,500)
Shares issued for:
Services - 1,428,500 1,429 62,971 - - 64,400
Payment of accounts payable
and salaries - 1,911,666 1,911 141,735 - - 143,646
Preferred stock dividend - - - - - (108,300) (108,300)
Net Income - - - - - - 267,653 267,653
--------- -------- ---------- ------- ----------- --------- ------------ ------------
BALANCE - DECEMBER 31, 1999 8,082,166 $ 8,082 35,254,181 $35,254 $ 7,266,138 $ (5,768) $(12,062,847) $(4,759,141)
Shares issued for:
Cash 10,543,330 10,543 452,457 463,000
Services 2,564,836 2,565 583,935 586,500
Non dilution agreement 8,931,390 8,932 142,902 151,834
Conversion of debt 3,614,550 3,615 571,183 574,798
Exercise of Class "B" Warrants 333,334 333 49,667 50,000
Exchange of Preferred shares -
for Common shares (7,936,666) (7,936) 7,936,666 7,936 - -
Preferred stock dividend (108,300) (108,300)
Net Income - 652,652 652,652
---------- ------- ---------- ------- ------------ --------- ------------ -----------
BALANCE - DECEMBER 31, 2000 145,500 $ 146 69,178,287 $69,178 $ 9,066,282 $ (5,768) $(11,518,495) $(2,388,657)
========== ======= ========== ======= ============ ========== ============ ===========
See notes to financial statements.
F-5
WATERCHEF INC.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-------------------------------
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income 652,652 267,653
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 16,142 26,502
Gain on sale of land and building - (3,505)
Non-cash compensation 738,334 64,400
Equity in loss of joint venture 52,184 73,757
Extraordinary gain on extinguishment of debt (2,236,605) (1,145,930)
Inventory write-down 56,904 -
Change in assets and liabilities
Cash held in escrow 161,988 (161,988)
Accounts receivable (1,151) 5,977
Inventory (14,035) 121,751
Other assets 2,542 (3,634)
Accounts payable and accrued expenses 74,841 346,303
-------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (496,204) (408,714)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from the sale of land and building - 246,778
Purchase of property, plant and equipment (13,122) -
-------------- --------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (13,122) 246,778
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 150,000 -
Increase in loan payable - shareholder - 158,368
Proceeds from sale of common stock and exercise of warrants 513,000 -
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 663,000 158,368
-------------- --------------
NET INCREASE (DECREASE) IN CASH 153,674 (3,568)
CASH AT BEGINNING OF YEAR 4,426 7,994
-------------- --------------
CASH AT END OF YEAR $ 158,100 4,426
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
============== ==============
Income taxes $ - $ -
============== ==============
Non-cash financing and investing activities:
Common stock issued for debt $ 574,798 $ 143,646
============== ==============
See notes to financial statements.
F-6
WATER CHEF, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
--------------------------------------
1. THE COMPANY
Water Chef, Inc. (The "Company"), is a Delaware Corporation currently
engaged in the design and marketing of water dispensers and
purification equipment both in the United States and internationally.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION - The accompanying financial statements
have been prepared assuming that the Company will continue as a
going concern. The Company incurred losses before extraordinary
item of $1,584,000 and $878,000 for the years ended December 31,
2000 and 1999, respectively. Additionally, the Company had
working capital and total capital deficiencies of $2,446,000 and
$2,389,000 at December 31, 2000. Further, the Company is in
default on its notes payable. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans with respect to these matters include
restructuring its existing debt, raising additional capital
through future issuances of stock and or debentures. The
accompanying financial statements do not include any adjustments
that might be necessary should the Company be unable to continue
as a going concern.
B. INVENTORIES - Inventories are stated at the lower of cost
(average) or net realizable value.
C. PROPERTY AND EQUIPMENT - Property and equipment are stated at
cost. Depreciation is calculated using the straight-line method
over estimated useful lives of five to seven years.
D. INVESTMENT IN JOINT VENTURE - The Company's investment in its
joint venture's operations is accounted for under the equity
method of accounting.
E. INTANGIBLE ASSETS - Patents and trademarks are amortized ratably
over five to fourteen years.
F. STOCK-BASED COMPENSATION - The Company accounts for stock
transactions in accordance with APB No. 25, "Accounting for Stock
Issued to Employees". In
F-7
accordance with Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation", the
Company adopted the pro forma disclosure requirements of SFAS
123.
G. WARRANTIES - The Company provides limited warranties of one year
on its coolers and five years on its compressors. No reserve for
future warranty costs has been provided due to limited sales
volume.
H. REVENUE RECOGNITION - Revenues are recognized when products are
shipped and collectibility is reasonably assured. Allowances for
estimated bad debts, sales allowance and discounts are provided
when the sales are recorded.
I. INCOME TAXES - Income taxes are accounted for under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes", which is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.
Valuation allowances are established when necessary to reduce
deferred assets to the amounts expected to be realized.
J. INCOME (LOSS) PER SHARE - Basic loss per share was computed using
the weighted average number of outstanding common shares. Diluted
per share amounts when applicable include the effect of dilutive
common stock equivalents from the assumed exercise of options and
warrants. Diluted per share amounts are computed excluding common
stock equivalents since their inclusion would be anti-dilutive.
K. USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
L. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the
financial instruments reported in the balance sheet approximate
their fair market value due to the short-term maturity of these
instruments.
M. IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and
circumstances indicate that the cost of an asset may be impaired,
an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's
carrying amount to determine if a write-down to market value is
required. At December 31, 2000, the Company does not believe that
any impairment has occurred.
F-8
N. NEW-ACCOUNTING STANDARDS
(i) In June 1999, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard No.
137 ("SFAS No. 137"), "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133". SFAS No. 137 amends SFAS no. 133,
"Accounting for Derivative Instruments and Hedging
Activities", which was issued in June 1998. SFAS 137 defers
the effective date of SFAS No. 133 to all fiscal years
beginning after June 15,2000. Accordingly, the Company will
adopt the provisions of SFAS No. 133 for 2001. The
application of the new pronouncement should not have a
material impact on the Company's financial statements.
(ii) In December 1999, the United States Securities and Exchange
Commission released Staff Accounting Bulletin No. 101 ("SAB
No. 101"), "Revenue Recognition in Financial Statements".
(The implementation date of SAB 101, was subsequently
amended by SAB 101A and SAB 101B.) Under SAB 101 additional
guidance on revenue recognition criteria and related
disclosure requirements are required. Implementation of SAB
No. 101 is required no later than the fourth fiscal quarter
of fiscal years beginning after December 15, 1999, but is
effective retroactively to the beginning of that fiscal
period (per SAB 101B). Company management has evaluated the
standard and the reporting implications thereof, and has
determined that there will not be a significant impact on
the Company's operating results.
O. RECLASSIFICATION OF FINANCIAL STATEMENTS - The prior year
financial statements have been reclassified for comparability.
3. RESTRICTED FUNDS
Cash in the amount of $30,720 was restricted to secure an open bank
letter of credit of like amount as of December 31, 2000. Such letter of
credit expired in February 2001.
4. INVENTORIES
At December 31, 2000, inventories were as follows:
Parts and Supplies $35,256
Finished product 20,440
-------
$55,696
=======
F-9
5. INVESTMENT IN JOINT VENTURE
In February 1994, the Company formed Tianjin Tahoe "Cap" Cooler Co.,
Ltd. ("Tianjin Tahoe") a joint venture with Tianjin Electronics &
Instruments Import and Export Corporation ("TEIIEC") for the purpose of
manufacturing certain Company designed water coolers in Tianjin,
Peoples Republic of China. The Company contributed $440,000, inclusive
of cash, machinery and equipment and engineering designs in exchange
for a fifty-five percent interest in the joint venture. Limited
production commenced in May 1996. The first significant importation of
finished products and parts kits occurred in 1997.
The agreement calls for a transfer by the Company of certain advanced
production technology to the joint venture in exchange for royalties on
sales made by the joint venture to the China market for a term of
fifteen years.
The Company also has a distribution agreement with the joint venture
whereby the Company is the exclusive sales agent for products
manufactured by the joint venture. The exclusive territory covers all
parts of the world, except the People's Republic of China, Taiwan and
Hong Kong.
The Company is unable to exercise economic control over the joint
venture's operations, and accordingly, the investment is accounted for
under the equity method of accounting which, at December 31, 2000, was
fully written down.
6. PROPERTY AND EQUIPMENT
At December 31, 2000, property and equipment consisted of the
following:
Machinery and equipment $ 291,605
Furniture, fixtures and equipment 97,027
------------------
388,632
Less: accumulated depreciation 376,458
------------------
$ 12,174
==================
7. INTANGIBLE AND OTHER ASSETS
At December 31, 2000, intangible and other assets consisted of the
following:
Patents and trademarks, less accumulated
amortization of $41,525 $ 36,657
Deposits 8,562
------------------
$ 45,219
==================
Amortization of patents and trademarks in 2000 and 1999 was $5,924 in
each year.
F-10
8. NOTES PAYABLE
Notes payable at December 31, 2000 were as follows:
Bridge loans - unsecured, interest payable at 12% per annum;
amounts due inclusive of $26,250 interest were: 401,250
Loans payable - other - unsecured, interest ranging
from 10% to 15% per annum - amounts due inclusive of
$106,306 interest were: 480,694
---------------
$ 881,944
===============
The holders of the bridge loans have brought suit against the Company
(Note 18).
The remaining loans payable include $35,000 which were converted into
shares of common stock in January 2001. The Company issued two notes in
December, 2000 aggregating $150,000, bearing interest at 10% per annum.
The balance of $295,694 represents obligations from prior years for
which management is attempting to negotiate repayment terms.
9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
At December 31, 2000, accrued expenses were as follows:
Payroll $ 274,184
Rent 18,664
Other 160,375
------------------
$ 453,223
==================
10. LOAN PAYABLE - SHAREHOLDER
The Company is obligated to its Chief Executive Officer for loans and
advances made to the Company totaling $327,781 at December 31, 2000.
11. PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred
stock, issuable in series with rights, preferences, privileges and
restrictions as determined by the board of directors.
F-11
At December 31, 2000, outstanding preferred shares were as follows:
Current
Dividend
Shares Amount Accrued
------------------- ----------------- -----------------
Series A 52,500 $ 53 $ 52,500
Series D 93,000 93 55,800
------------------- ----------------- -----------------
145,500 $ 146 $ 108,300
=================== ================= =================
SERIES A:
The Series A preferred stock provides for a 10% cumulative dividend,
based on the $10 per share purchase price, payable annually in the
Company's common stock or cash, at the Company's option. The Series A
preferred stock is not convertible, and is callable by the Company at a
price of $11 per share.
SERIES D:
The Series D preferred stock provides for a 12% cumulative dividend,
based on the $5 per share purchase price, payable twice annually in the
Company's common stock or cash, at the Company's option. The Series D
preferred stock is not convertible, and is redeemable at the Company's
option.
At December 31, 2000, dividends in arrears on the Series A and Series D
preferred shares were $307,606 and $250,200 respectively.
SERIES E:
The Series E preferred stock is convertible into common stock on a one
for one basis, at the option of the Company and provides voting rights
to its holders. No interest or dividends are payable to such holders.
In May 1998, the Company issued 7,936,666 Series E preferred shares to
an officer in exchange for a like number of common shares. In March
2000, the Company issued 7,936,666 common shares for all of the issued
Series E preferred stock.
12. WARRANTS
The Company issued 3,083,338 warrants in 1997 in connection with
private placements of which 750,000 warrants expired in June 1999.
Warrants for 333,334 shares were exercised for $.15 per share in 2000.
The remaining 2,000,004 warrants at December 31, 2000 entitle the
holders to a like number of common shares and are exercisable at $0.15
each through May 2002.
F-12
13. STOCK OPTIONS
In 1994, the Company instituted a stock option plan which is available
to selected directors, officers, employees and consultants of the
Company ("Participants").
The term of each option is ten years from the date of grant or a
shorter term as determined by the Stock Option Committee (the
"Committee"). The exercise price is determinable by the Committee and
cannot be less than 110% of the fair market value of the shares on the
date of the grant. The terms, conditions and restrictions of the
options are determinable by the Committee as of the date of grant.
Options to purchase up to 50,000 shares of common stock at $0.10 per
share were granted to one employee prior to 1997. Such options remain
unexercised at December 31, 2000 and expire in the year 2002.
14. MAJOR CUSTOMERS
Sales to one customer in 2000 were approximately 13% of sales. Sales to
two customers approximated 14% and 15% of total sales in 1999.
15. LEASES
The Company is currently obligated under a lease for its administrative
facilities located in Glen Head, New York. The lease expires in
September 2001. Future minimum annual lease payments are $16,129 in
2001.
On December 9, 1999, the Company was released from all obligations
under their factory lease agreement, effective October 1, 1999. In
November 1999, the Company entered into a new factory lease which
expires in November 2002. The future minimum lease payments are $32,400
in 2001, and $29,700 in 2002.
Rent expense for 2000 and 1999 was $55,482 and $63,306, respectively.
16. INCOME TAXES
The following is a reconciliation of income taxes and amounts computed
using the U.S. Federal statutory rate and the effective tax rate for
the years ended December 31, 2000 and 1999:
F-13
2000 1999
--------------- --------------
Pre-tax income(loss) $ 653,000 $ 267,000
--------------- --------------
Tax at Federal statutory rate (35%) 229,000 94,000
Temporary differences 18,000 26,000
Net operating loss carryforwards (247,000) (120,000)
--------------- --------------
Taxes per financial statements $ - $ -
=============== ==============
The Company cannot reliably predict future profitability. Accordingly,
the deferred tax asset of $3,300,000 has been reduced in its entirety
by a valuation allowance. As of December 31, 2000, the Company had net
operating loss carry forwards of approximately $9,675,000 expiring in
years through 2020.
A significant portion of these carry forwards may be subject to
limitations on annual utilization due to "equity structure shifts" or
"owner shifts" involving "five percent stockholders" (as defined in the
Internal Revenue Code), which resulted in more than a 50% change in
ownership.
17. EXTRAORDINARY ITEM
During the year ended December 31, 2000 the Company reduced
outstanding debt of $3,045,403, which included obligations to Bear Paw
Development Corp. and to the Small Business Administration, by payment
of cash of $234,000 and issuance of 3,614,550 shares of common stock
with a value of $574,798. Accordingly, the Company effected an
extraordinary gain from the extinguishment of such debt in the amount
of $2,236,605.
Extraordinary gain of $1,145,930 in 1999 resulted from the following:
On December 9, 1999, Hill County, State of Montana, forgave the
Company's indebtedness on a note payable for $300,000 plus accrued
interest of $44,055. A gain of $801,875 in 1999 resulted from a
write-off of accrued management salaries, certain trade payables and
accrued rent from the year ended December 31, 1994. The accrued
expenses and accounts payable were incurred by prior management and,
accordingly, current management determined that they would not be paid.
18. LITIGATION
The Company is presently a defendant in an action brought by certain
debenture holders ("Bridge loans") in New Hampshire Superior Court,
seeking repayment of the $375,000 of debenture principal together with
interest from 1997, the issuance of additional penalty shares and
damages which the plaintiffs allege they have suffered for the
F-14
Company's failure to have registered the warrants issued to the
plaintiffs under the terms of the Warrant Agreement. The Company has
interposed certain defenses and counterclaims which the Company's
legal counsel believes has strong merit. The Company intends to
contest this matter vigorously and in counsel's opinion, it is more
probable than not that the Company will prevail.
19. OTHER
Commencing in March 2001 each of the three members of the Company's
Scientific Advisory Board will receive an initial stock grant of
50,000 shares of common stock. Two such members also receive $1500 per
month for their services. The Chairman of the Board is paid $3000 per
month.
F-15
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, AND MEMBERS OF THE SCIENTIFIC ADVISORY
BOARD OF THE REGISTRANT.
At year-end 2000 the Company's Directors, Executive Officers and Scientific
Advisory Board Members are:
Name Age Position(s) with the Company
David A. Conway 59 Director Chairman President
And Chief Executive Officer
Martin Clare++ 65 Director
Richard P. Farkas++ 77 Director
Ronald W. Hart + 58 Chairman, Scientific
Advisory Board
Mohamed M. Salem + 49 Member, Scientific
Advisory Board
Rudolf W. Schindler 48 Executive Vice President,
Chief Operating Officer
Marshall S. Sterman++ 69 Director
Richard Wilson + 75 Member, Scientific
Advisory Board
+ Member of the Scientific Advisory Board will receive an initial stock grant of
50,000 shares of common stock. In addition, the chairman receives $3,000.00 per
month and the other members, $1,500.00 per month for their services as Advisory
Board members.
++Also Audit Committee (Martin Clare & Richard Farkas)
Also Compensation Committee (Marshall Sterman)
12
David A. Conway
Elected to the Board in 1997 and joined the Company as President and Chief
Executive Officer in 1998. Previous experience as President, CEO of a privately
held public relations and marketing company; Director and VP Administration of
KDI Corporation (NYSE); VP Administration Keene Corporation (NYSE) and earlier
positions with CBS and Goldman Sachs & Co. Mr. Conway, who served as an infantry
officer in the US Army, holds undergraduate and graduate degrees from Fordham
University and is listed in Who's Who in America.
Martin Clare
Elected to the Board in 2000, Martin Clare is a principal of Civilization
Communications Inc., an international financial and marketing consultancy.
Previously he was a founder of Harris, Clare & Co., Inc., a NASD Broker-Dealer;
founder of Dougherty Clifford & Wadsworth, a noted media banking firm; and
founding partner of IIBC, a technology venture capital and consulting firm. Mr.
Clare is a graduate of Ithaca College, and served in the US Army.
Richard P. Farkas
Elected to the Board in 1997, Mr. Farkas is founder and Chairman of IMC
Corporation Inc., an international business consultancy providing broad-based
business services to multi-national corporations. Previously Mr. Farkas held a
number of corporate executive and operating positions with international
companies such as Illinois, ACF Industries, American Standard and Westvaco. Mr.
Farkas also acquired, and later sold, a major paper products company. Mr. Farkas
is a graduate of Princeton and Yale Universities and attended New Jersey Law
School. He served as a line officer in the US Navy for four years.
Ronald W. Hart (Ph.D.)
Agreed to form the Board of Scientific Advisors in 2000 and became Chairman. Dr.
Hart is an internationally recognized scientist and scholar who was Director of
the National Center for Toxicological Research and was named "Distinguished
Scientist in Residence" by the US Food and Drug Administration in 1992.
Recognized for his pioneering work on aging and his studies on nutrition and
health, Dr. Hart has been appointed visiting professor at a number of
universities, including Cairo University, Seoul National University and Gangzhou
University. He received his doctorate in physiology and biophysics from the
University of Illinois.
Mohamed M. Salem (MD/Ph.D.)
Appointed to the Scientific Advisory Board in early 2001. Dr. Salem is Professor
of Occupational and Environmental Medicine at the Kasr El-Aini School of
13
Medicine, Cairo University, Egypt. An internationally recognized expert on the
health effects of environmental and water contaminants including pesticides,
lead and other metals, Dr. Salem is credited with establishing infectious
disease control programs at medical centers and other public entities throughout
the Middle East. Dr. Salem is a principal of Salem Industries, an import and
export company, which is one of the leading suppliers of chemicals and oil field
equipment in the Middle East. Dr. Salem holds both MD and Ph.D. from Cairo
University.
Rudolf W. Schindler
Promoted to Executive Vice President and Chief Operating Officer of the Company
in 2000, Mr. Schindler formerly served as executive Vice President and CEO of
Stocko Connectors Corp., the US subsidiary of a leading European connector
manufacturer. He served as Director of Sales and Marketing for Stocko and prior
to that, Manager, Special Projects for Schenck, a leading manufacturer of
vibration equipment. He holds an MS in Mechanical Engineering from the Technical
University of Darmstadt, Germany, and an MBA from Adelphi University.
Marshall S. Sterman
Elected to the Board in 2000, Mr. Sterman is President of the Mayflower Group, a
Massachusetts based merchant bank. He previously served as managing partner of
Cheverie and Company and MS Sterman & Associates, merchant banking firms and
principal of Sterman & Gowell Securities, an investment banking and securities
firm. Mr. Sterman served as an officer in the US Navy and holds his BA from
Brandeis University and his MBA from Harvard University.
Richard Wilson (Ph.D.)
Appointed to the Scientific Advisory Board in 2001, Dr. Wilson is the
Mallinckrodt Research Professor of Physics at Harvard University. Dr. Wilson is
one of the foremost scientific authorities in the fields of water quality
remediation and purification, and is currently Professor of the Energy Research
Group at the University of California. Dr. Wilson is a member of the Advisory
Board of the Atlantic Legal Foundation, and is one of the principal scientists
of the water problems in Chernobyl and in Bangladesh where toxic levels of
arsenic contaminate the water supply. Dr. Wilson holds his Ph.D. from Oxford
University.
14
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Name Year Salary Bonus Non-Cash Total
Principal Position Compensation Compensation
David A. Conway 2000 $150,000 0 0 $150,000
President/CEO
DIRECTORS' COMPENSATION
Directors of the Company do not receive compensation for serving as members of
the Company's Board of Directors. All directors are reimbursed for their
expenses in attending meetings of the Board.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
eliminate in certain circumstances the liability of Directors of the Company for
monetary damages for breach of their fiduciary duty as Directors. This provision
does not eliminate the liability of a Director (i) for breach of the Director's
duty of loyalty to the Company or its stockholders (ii) for acts of omissions by
the director not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for willful or negligent declaration of an
unlawful dividend, stock purchase or redemption; (iv) for transactions from
which the Director derived an improper personal benefit; or (v) for any act or
omission occurring prior to the effective date of the Amended and Restated
Certificate of Incorporation.
The Company's Amended and Restated Certificate of Incorporation provides
generally for indemnification of the Directors and Officers to the full extent
permitted under Delaware law, and permits indemnification for all other persons
whom the Company is empowered to indemnify.
The Company's Bylaws provide that the Company may indemnify, to the fullest
extent permitted under Delaware law, any person, including officers and
directors, with regard to any action or proceeding.
The Company believes that it is the position of the Securities and Exchange
Commission that insofar as the foregoing provisions may be invoked to disclaim
liability for damages arising under the Securities Act, those provisions are
against public policy as expressed in the Securities Act and are therefore
unenforceable.
15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information as of December 31, 2000, concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the issued and outstanding common stock of the Company, all Directors, the
Executive Officers, and all Directors and Executive Officers of the Company as a
group based on the number of shares of common stock issued and outstanding as of
the date of this Offering Memorandum. For purposes of the Memorandum, beneficial
ownership is defined in accordance with the Rules of the Securities and Exchange
Commission and generally means the power to vote and/or dispose of the
securities regardless of any economic interest.
Name and Address of Number of Shares of Percentage of
Beneficial Owner of Shares Voting Stock Beneficially Owned (1) Total Voting
- -------------------------- ----------------------------------- ------------
David A. Conway (2) (3) 19,201,390 28.1%
WaterChef, Inc.
1007 Glen Cove Ave.
Glen Head, NY 11545
Martin Clare 249,999 ---
Civilization Communications Inc.
W. Hawthorne
Valley Stream, NY
Richard P. Farkas 250,000 ---
IMC
33 Baruch Dr.
Long Branch, NJ 07740
Rudolf W. Schindler (4) 2,300,000 3.4%
WaterChef, Inc.
1007 Glen Cove Ave.
Glen Head, NY 11545
Marshall S. Sterman 250,000 ---
The Mayflower Group
46 Neptune Street
Beverly, MA 01915
All executive officers and
Directors as a Group (5) 22,251,289 32.6%
===================================================
(Five-5-Persons)
16
1. Total Voting Shares are comprised of all common shares issued and
outstanding.
2. Includes 5,044,794 shares held by affiliates and 6,310,464 shares held
in and IRA Trust.
3. The shares held by Mr. Conway and affiliates are subject to anti-dilution
provisions to insure 32.6% ownership of the voting shares.
4. Shares held by Mr. Schindler are subject to anti-dilution provisions to
insure that the shareholder maintains ownership of 3.4% of the Total
Voting Shares.
5. Does not include Officers or Directors of the Company who were not such
as of the date of record.
ITEM 12. RELATED PARTY TRANSACTIONS
None.
ITEM 13. Exhibits and Reports on Form 8-K
Reports on Form 8 K - None
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.
WATER CHEF, INC.
April 2, 2001 /s/David A. Conway
- ----------------- -----------------------------
Date: David A. Conway
President, Chief Executive Officer
(Principal Operating Officer)
17