U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 2001
Commission File Number 0-18260
THE NEW WORLD POWER CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 52-1659436
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
14 Mount Pleasant Drive Aston, PA 19014
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(Address and Zip Code of Principal Executive Offices)
(484) 840-0944
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Issuer's Telephone Number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No _ .
There were 5,439,813 shares of the registrant's common stock
outstanding as of March 31, 2001.
THE NEW WORLD POWER CORPORATION
- FORM 10QSB - INDEX -
PAGE(S)
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at March 31, 2001
(unaudited) and December 31, 2000 1
Consolidated Condensed Statements of Operations for the Three
Month Periods Ended March 31, 2001and 2000 (unaudited) 2
Consolidated Condensed Statements of Cash Flows for the Three
Month Periods Ended March 31, 2001 and 2000 (unaudited) 3
Notes to Interim Consolidated Condensed Financial Statements 4 - 5
Item 2. Management's Discussion and Plan of Operations 6 - 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
MARCH 31, December 31,
2001 2000
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(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 781,750 $ 2,877,855
Cash restricted in use 36,746 38,242
Accounts receivable 112,735 57,576
Other current assets 116,002 54,487
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TOTAL CURRENT ASSETS 1,047,233 3,028,160
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Property, plant and equipment, net 13,684,811 12,936,415
Goodwill, net of accumulated amortization 481,270 485,736
Deferred project costs 177,361 190,503
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14,343,442 13,612,654
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TOTAL ASSETS $ 15,390,675 $ 16,640,814
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- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 639,651 $ 1,642,052
Due to related parties 1,664,280 2,014,280
Deferred revenues 3,864,000 2,784,000
Current portion of lease obligations 952,008 1,031,567
Current portion of long-term debt 271,839 291,455
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TOTAL CURRENT LIABILITIES 7,391,778 7,763,354
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Long-term portion of long-term debt 730,565 830,565
Long-term portion of lease obligations 4,180,685 4,553,630
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4,911,250 5,384,195
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TOTAL LIABILITIES 12,303,028 13,147,549
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized 40,000,000 shares;
5,439,813 and 5,332,813 shares 54,398 53,328
Additional paid-in capital 84,084,032 84,048,102
Accumulated deficit (81,050,783) (80,608,165)
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TOTAL STOCKHOLDERS' EQUITY 3,087,647 3,493,265
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,390,675 $ 16,640,814
============ ============
See accompanying notes to interim consolidated condensed financial statements.
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
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OPERATING REVENUE $ 297,521 $ 414,131
COST OF OPERATIONS 279,085 211,783
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GROSS PROFIT 18,436 202,348
Selling, general and administrative expenses 194,252 166,588
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OPERATING (LOSS) INCOME (175,816) 35,760
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OTHER INCOME (EXPENSE):
Interest expense (211,651) (37,889)
Interest income 3,760 19
Other (58,911) 4,605
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TOTAL OTHER INCOME (EXPENSE) (266,802) (33,265)
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(LOSS) INCOME BEFORE TAXES (442,618) 2,495
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NET (LOSS) INCOME $ (442,618) $ 2,495
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BASIC AND DILUTED EARNINGS PER SHARE:
Net (loss) earnings from continuing operations available to common
stockholders - Basic $ (0.08) $ 0.00
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- Diluted $ (0.08) $ 0.00
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AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 5,339,757 4,436,164
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AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 5,339,757 4,536,164
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See accompanying notes to interim consolidated condensed financial statements.
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (442,618) $ 2,495
Adjustments to reconcile net earnings to net cash (used in) operating activities:
Depreciation and amortization 180,977 68,955
Amortization of goodwill 4,466 2,500
Other, net -- 22,445
Amortization of deferred costs 1,614 1,615
Change in assets and liabilities, net of effect of acquisitions/disposals:
(Increase) decrease in accounts receivable (55,159) 3,561
(Increase) in other current assets (61,515) (78,676)
Decrease in other assets 11,528 --
(Decrease) in accounts payable and accrued liabilities (1,002,401) (148,320)
(Decrease) in non-current liabilities -- (50,000)
Increase in deferred revenues 1,080,000 --
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NET CASH FLOWS (USED IN) OPERATING ACTIVITIES (283,108) (175,425)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Modular Power Systems, net -- (541,729)
Capital expenditures (929,373) (86,156)
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NET CASH FLOWS (USED IN) INVESTING ACTIVITIES (929,373) (627,885)
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CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in due to related parties (350,000) --
Payment of capital lease obligation and long-term debt (572,120) --
Proceeds from short term notes -- 700,000
Proceeds from issuance of common stock, net 37,000 322,000
Decrease (increase) in restricted cash 1,496 (18,500)
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NET CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES (883,624) 1,003,500
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Net change in cash and cash equivalents (2,096,105) 200,190
Cash and cash equivalents at beginning of period 2,877,855 39,070
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CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 781,750 $ 239,260
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid $ 219,544 $ 37,889
Income taxes paid -- 19
Non-cash transactions:
During the three month period ended March 31, 2001, the Company
issued 7,000 shares of common stock valued at $7,000
See accompanying notes to interim consolidated condensed financial statements.
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2001 AND 2000
NOTE 1 - BASIS OF PRESENTATION:
The New World Power Corporation ("the Company") was incorporated in the State of
Delaware in 1989. The Company is an independent power producer that focuses on
distributed power solutions, including renewable and modular generation
facilities. The Company sells electrical energy to major utilities under
long-term and mid-term contracts.
In the opinion of management, the accompanying unaudited interim consolidated
condensed financial statements of The New World Power Corporation ("the
Company") and its subsidiaries, contain all adjustments of a recurring nature
considered necessary for a fair presentation of the Company's financial position
as of March 31, 2001 and the results of operations and cash flows for the three
month period ended March 31, 2001.
The consolidated condensed balance sheet presented as of December 31, 2000 has
been derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated condensed financial statements and notes
included herein should be read in conjunction with the financial statements and
notes included in the Company's Annual Report on Form 10-KSB.
The results of operations for the three month period ended March 31, 2001 are
not necessarily indicative of the results to be expected for a full year. The
Company only recognizes revenues from its Call Option Agreements with Consumers
Power Company during the second and third quarter of the year while it
recognizes certain costs relating to those sites in the period those expenses
are incurred.
NOTE 2 - SIGNIFICANT BUSINESS CHANGES:
In January 2001, the Company signed an agreement to acquire all of the
outstanding shares of Block Island Power Company, a Rhode Island regulated
utility. The acquisition was contingent upon the Company's completion of due
diligence and the execution of a definitive agreement. In April 2000, subsequent
to the balance sheet date, the parties mutually agreed to terminate discussions.
As part of the initial agreement, the Company made a deposit of $100,000 and
incurred costs of approximately $21,000 during the first quarter ended March 31,
2001. Upon termination of the agreement, the Company executed a mutual release
and settlement agreement and $40,000 of the deposit was retained by Block Island
Power Company. Accordingly, the Company has included the total costs of the due
diligence of approximately $61,000 in the Consolidated Condensed Statement of
Operations under the caption "Other Income (Expense)".
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2001 AND 2000
NOTE 3 - DUE TO RELATED PARTIES:
As part of the acquisition of Modular Power Systems LLC ("Modular") on March 9,
2000, the former owners of held a note receivable with a principal balance of
$350,000. The note bears interest at 5% per annum and matured March 1, 2001. In
January 2001, the Company repaid the entire note outstanding.
NOTE 4 - DEFERRED REVENUE:
On December 27, 2000, the Company received a payment of $2,784,000 from
Consumers Power Company ("Consumers") in accordance with the provisions of the
Call Option Agreement between the parties dated December 14, 2000. The payment
represents revenues to the Company for having installed capacity available from
May 1 to September 30, 2001. Accordingly, the Company recorded the payment as
deferred revenue and will recognize it as energy revenues in the periods earned
between May 1 and September 30, 2001.
In addition, on January 5, 2001, the Company received a payment of $1,080,000
from Consumers in accordance with the provisions of an another Call Option
Agreement between the parties dated February 24, 2000. The payment represents
revenues for the Company for having installed capacity available from May 1 to
September 30, 2001. Accordingly, the Company recorded the payment as deferred
revenue and will recognize it as energy revenues in the periods earned between
May 1 and September 30, 2001.
NOTE 5 - STOCKHOLDERS' EQUITY TRANSACTIONS:
In January 2001, the Company issued 7,000 shares of common stock valued at
$7,000 to an independent contractor for services rendered. In addition, on March
31, 2001 the Company issued 100,000 shares of common stock as a result of the
President exercising certain of his options.
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ITEM 2. MANAGEMENT DISCUSSION AND PLAN OF OPERATIONS
INTRODUCTION
The New World Power Corporation ("New World" or the "Company") is an independent
power producer that focuses on distributed power solutions, including renewable
and modular generation facilities. The Company sells electrical energy to major
utilities under long-term and mid-term contracts.
The Company is organized as a holding company. Each electric power generating
facility or discreet group of facilities is owned by a separate corporate
entity. Executive management, legal, accounting, financial and administrative
matters are provided at the holding company level. Operations are conducted at
the subsidiary level.
The Company currently owns and operates two subsidiaries, Michigan based
Wolverine Power Corporation ("Wolverine") and Modular Power Systems LLC
("Modular"). Each subsidiary owns and operates electric generation facilities.
Wolverine owns a 10.5 megawatt hydroelectric plant near Bay City, Michigan and
Modular owns 43 megawatts of mobile, trailer mounted and containerized
diesel-fired electric generating facilities at three sites in Coldwater, Chelsea
and Alma, Michigan.
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
securities Exchange Act of 1934. When used in this document, the words
"anticipate", "estimate", "expect", "intend", and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may vary
materially from those set forth in the forward-looking statements.
SHORT TERM STRATEGY
Over the next 12 months, New World intends to apply its available resources to
maintain positive earnings from its current operating projects and its projects
currently under development, while further attempting to consummate targeted
acquisitions in its core markets.
We also expect to complete another acquisition within the next twelve months.
There can be no assurance, however, that the Company can maintain profitability
or complete any acquisition on terms acceptable to the Company, if at all. In
addition, there can be no assurance that the Company will be able to close any
financings to enable it to make acquisitions.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated condensed financial statements and notes thereto and with the
Company's audited financial statements and notes thereto for the year ended
December 31, 2000.
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REVENUES
Revenues decreased to $297,521 for the three months ended March 31, 2001 from
$414,131 for the three months ended March 31, 2000. The decrease in revenues was
due primarily to the decrease in the amount of available water for the
hydroelectric facility at Wolverine. In addition, as a result of the terms of
the Call Option Agreements with Consumers, the Company does not recognize any
revenues from those Call Option Agreements until the second and third quarters
of each year. The Company, however, did recognize approximately $30,000 in
revenues from a spot market contract with a utility other than Consumers.
SEASONALITY OF PROJECT REVENUES
Hydroelectric generating revenues are seasonal. The spring in North America is
the time of maximum hydroelectric output, while fall and winter also experience
reasonable flows; the summer months are dry and generally unproductive.
Hydroelectric production can also vary from year to year based on changes in
meteorological conditions. Revenues from the modular power generation equipment
are subject to the terms of the Call Option Agreements and are generally
recognized in the periods earned, which is usually the second and third
quarters.
COST OF OPERATIONS
The costs of operations increased for the three months ended March 31, 2001 to
$279,085 as compared to $211,783 during the three months ended March 31, 2000,
primarily as a result of the increased costs from the Company's Modular
facilities which primarily consists of depreciation expense. Wolverine's cost of
operations remained constant between the years.
GROSS PROFIT
Gross profit decreased approximately $184,000 between the periods ended March
31, 2001 and March 31, 2000. This reduction is primarily attributable to the
additional depreciation recorded on the modular generation assets of
approximately $135,000 and the reduction in revenues from Wolverine of
approximately $84,000 offset by the spot market revenues recorded of
approximately $30,000.
SELLING, GENERAL AND ADMINISTRATIVE
These expenses increased during the three months ended March 31, 2001 to
$194,252, as compared to $166,588 during the three months ended March 31, 2000.
The increase is primarily attributable to increases in advertising and
professional fees at the corporate level and an increase in general and
administrative costs for Modular. Since the acquisition of Modular occurred on
March 8, 2000, the current year's quarter includes a full quarter of Modular's
selling, general and administrative costs.
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OTHER INCOME AND EXPENSES
During the three months ended March 31, 2001, the Company recorded other
expense-net of $58,911, as compared to other income-net of $4,605 during the
three months ended March 31, 2000. This increase is primarily attributable to
the expenses incurred in the attempted acquisition of Block Island Power
Company, which talks were terminated.
Interest expense for the three months ended March 31, 2001 increased to $211,651
from $37,889 for the three months ended March 31, 2000, in line with the
incurring of additional debt for the acquisition of MPS and additional interest
on equipment financing.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company finances its operations primarily from internally
generated funds and third party credit facilities. Net cash flow used by
operations was $283,108 for the three month period ended March 31, 2001 and
$175,425 was used by operations for the three month period ended March 31, 2000.
The Company also has a convertible debt instrument (which matures on June 30,
2001) which provided up to $1.0 million to the Company. The convertible debt
requires interest only payments monthly until maturity and is convertible into
the Company's common stock at $1.00 per share. The interest rate is 10.3% per
annum.
The Company believes that its cash flow from operations and funds expected to be
available under credit facilities will be sufficient to fund foreseeable working
capital and capital expenditure requirements. However, any restriction on the
availability of borrowing could negatively affect the Company's ability to meet
future cash flow requirements. The Company plans to grow through the acquisition
of complementary businesses, however, a significant acquisition may require the
Company to secure additional debt or equity financing. While the Company
believes it would be able to secure such additional financing at reasonable
terms, there is no assurance this would be the case.
-8-
PART II
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5. OTHER INFORMATION.
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
NONE.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter for
which this report has been filed.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE NEW WORLD POWER CORPORATION
May 14, 2001 By: /s/ Frederic A. Mayer
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Frederic A. Mayer
President, Principal Accounting Officer
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