U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 2001
Commission File Number 0-18260
THE NEW WORLD POWER CORPORATION
-------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 52-1659436
-------- ----------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
14 Mount Pleasant Drive Aston, PA 19014
---------------------------------------
(Address and Zip Code of Principal Executive Offices)
(484) 840-0944
--------------
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 June 30, 2001.
THE NEW WORLD POWER CORPORATION
- FORM 10QSB - INDEX -
<table>
<caption>
PAGE(S)
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at June 30, 2001 (unaudited)
and December 31, 2000 1
Consolidated Condensed Statements of Operations for the Six
Month Periods Ended June 30, 2001 and 2000 (unaudited) 2
Consolidated Condensed Statements of Operations for the Three
Month Periods Ended June 30, 2001 and 2000 (unaudited) 3
Consolidated Condensed Statements of Cash Flows for the Six
Month Periods Ended June 30, 2001 and 2000 (unaudited) 4
Notes to Interim Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Plan of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</table>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
<table>
<caption>
JUNE 30, December 31,
2001 2000
----------- ------------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 156,957 $ 2,877,855
Cash restricted in use 42,343 38,242
Accounts receivable 99,626 57,576
Other current assets 135,004 54,487
------------ ------------
TOTAL CURRENT ASSETS 433,930 3,028,160
------------ ------------
Property, plant and equipment, net (including construction in progress) 15,025,955 12,936,415
Goodwill, net of accumulated amortization 476,806 485,736
Deferred project costs 175,747 190,503
------------ ------------
15,678,508 13,612,654
------------ ------------
TOTAL ASSETS $ 16,112,438 $ 16,640,814
============ ============
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,837,698 $ 1,642,052
Due to related parties 1,664,280 2,014,280
Deferred revenues 3,286,965 2,784,000
Current portion of lease obligations 1,010,594 1,031,567
Current portion of long-term debt 271,839 291,455
------------ ------------
TOTAL CURRENT LIABILITIES 8,071,376 7,763,354
------------ ------------
Long-term portion of long-term debt 730,565 830,565
Long-term portion of lease obligations 3,543,036 4,553,630
------------ ------------
4,273,601 5,384,195
------------ ------------
TOTAL LIABILITIES 12,344,977 13,147,549
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized 40,000,000 shares;
5,439,813 and 5,332,813 shares issued and outstanding 54,398 53,328
Additional paid-in capital 84,084,032 84,048,102
Accumulated deficit (80,370,969) (80,608,165)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,767,461 3,493,265
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 16,112,438 $ 16,640,814
============ ============
</table>
See accompanying notes to interim consolidated condensed financial statements.
- 1 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2001 AND 2000
(UNAUDITED)
<table>
<caption>
2001 2000
---------- ----------
OPERATING REVENUE $2,526,903 $ 993,191
COST OF OPERATIONS 1,261,745 335,553
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GROSS PROFIT 1,265,158 657,638
Selling, general and administrative expenses 564,589 357,142
---------- ----------
OPERATING INCOME 700,569 300,496
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (386,729) (184,990)
Interest income 4,332 -
Other (68,976) 52,298
---------- ----------
TOTAL OTHER INCOME (EXPENSE) (451,373) (132,692)
---------- ----------
INCOME BEFORE TAXES 249,196 167,804
Provision for income taxes 12,000 10,000
---------- ----------
NET INCOME $ 237,196 $ 157,804
========== ==========
BASIC AND DILUTED EARNINGS PER SHARE:
- Basic $ 0.04 $ 0.03
========== ==========
- Diluted $ 0.04 $ 0.03
========== ==========
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 5,389,786 4,780,220
========== ==========
AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 5,988,788 4,880,220
========== ==========
</table>
See accompanying notes to interim consolidated condensed financial statements.
- 2 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
JUNE 30, 2001 AND 2000
(UNAUDITED)
<table>
<caption>
2001 2000
---------- ----------
OPERATING REVENUE $2,229,382 $ 579,060
COST OF OPERATIONS 982,660 123,770
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GROSS PROFIT 1,246,722 455,290
Selling, general and administrative expenses 370,337 190,554
---------- ----------
OPERATING INCOME 876,385 264,736
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (175,078) (147,101)
Interest income 573 -
Other (10,065) 47,674
---------- ----------
TOTAL OTHER INCOME (EXPENSE) (184,570) (99,427)
---------- ----------
INCOME BEFORE TAXES 691,815 165,309
Provision for income taxes 12,000 10,000
---------- ----------
NET INCOME $ 679,815 $ 155,309
========== ==========
BASIC AND DILUTED EARNINGS PER SHARE:
- Basic $ 0.12 $ 0.03
========== ==========
- Diluted $ 0.11 $ 0.03
========== ==========
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 5,439,813 4,780,220
========== ==========
AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 5,982,289 4,880,220
========== ==========
</table>
See accompanying notes to interim consolidated condensed financial statements.
- 3 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2001 AND 2000
(UNAUDITED)
<table>
<caption>
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 237,196 $ 157,804
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 353,553 112,153
Amortization of goodwill 8,930 5,000
Other, net 7,000 88,401
Amortization of deferred costs 3,227 3,227
Change in assets and liabilities, net of effect of acquisitions/disposals:
(Increase) decrease in accounts receivable (42,050) 79,443
(Increase) in other current assets (80,517) (54,264)
Increase in accounts payable and accrued liabilities 195,646 325,884
(Decrease) in non-current liabilities - (100,000)
Increase in deferred revenue 502,965 968,550
----------- -----------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 1,185,950 1,586,198
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Modular Power Systems, net - (541,729)
Capital expenditures (2,413,092) (1,221,967)
Deferred project costs and other 11,529 (7,693)
----------- -----------
NET CASH FLOWS (USED IN) INVESTING ACTIVITIES (2,401,563) (1,771,389)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in due to related parties (350,000) 714,000
Payment of long-term debt (119,616) -
Payment of short term notes - (175,000)
Payment of lease obligations (1,031,568) (688,077)
Proceeds from issuance of common stock, net - 322,000
(Increase) in restricted cash (4,101) (10,022)
----------- -----------
NET CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,505,285) 162,901
----------- -----------
Net change in cash and cash equivalents (2,720,898) (22,290)
Cash and cash equivalents at beginning of period 2,877,855 39,070
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 156,957 $ 16,780
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 426,175 $ 154,047
Income taxes - -
Non-cash transactions:
During the six month period ended June 30, 2001, the Company issued
7,000 shares of common stock valued at $7,000 for services rendered.
</table>
See accompanying notes to interim consolidated condensed financial statements.
- 4 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
The New World Power Corporation ("the Company") was incorporated in the State of
Delaware in 1989. The Company is an independent power producer that focuses on
distributed power solutions, including renewable and modular generation
facilities. The Company sells electrical energy to major utilities under
long-term and mid-term contracts.
In the opinion of management, the accompanying unaudited interim consolidated
condensed financial statements of The New World Power Corporation ("the
Company") and its subsidiaries, contain all adjustments of a recurring nature
considered necessary for a fair presentation of the Company's financial position
as of June 30, 2001 and the results of operations and cash flows for the six and
three month periods ended June 30, 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 presented herewith are condensed as permitted by Form
10-QSB and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated condensed financial
statements and notes included herein should be read in conjunction with the
financial statements and notes included in the Company's Annual Report on Form
10-KSB.
The results of operations for the six and three month periods, ended June 30,
2001 are not necessarily indicative of the results to be expected for a full
year.
The Company recognizes revenues from its call option agreements (the "Call
Option Agreements") with Consumers Power Company ("Consumers") only during the
second and third quarter of the year when the Call Option Agreements are in
force, while it recognizes certain costs relating to its business in the period
that expenses are incurred, generally each quarter.
NOTE 2 - SIGNIFICANT BUSINESS CHANGES:
(A) BLOCK ISLAND ACQUISITION
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 2001, 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 $32,000 during the six months ended June 30, 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
$72,000 in the Consolidated Condensed Statement of Operations
under the caption "Other Income (Expense)".
- 5 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(UNAUDITED)
NOTE 2 - SIGNIFICANT BUSINESS CHANGES (CONTINUED):
(B) MODULAR POWER SYSTEMS CONTRACT
In December 2000, the Company through its Modular Power Systems
subsidiary ("Modular") signed a new one-year Call Option Agreement
to provide 46.4 MW of electricity to Consumers. This agreement,
representing a new project to be built and known as Modular 2, is
separate and incremental from the Company's other existing Call
Option Agreements with Consumers, representing existing operating
projects known as Modular 1: See "Item 2 Management's Discussion"
below. Under the Modular 2 Call Option Agreement, the Company
received $2,784,000 and recorded that amount as deferred revenues
(See Note 5 - Deferred Revenues). Under the terms of the Modular 2
Call Option Agreement, the Company can use its Modular 1 project
to provide the required energy to satisfy any calls on Modular 2
until it is built. The Company hopes to extend the Modular 2 Call
Option Agreement for an incremental five years, and build a
permanent project. To this end, during 2001, the Company has
expended funds to pay for the development, procurement and
construction of a permanent Modular 2 project, including the
acquisition of the necessary permits to begin construction of the
projects as well as the procurement of essential long lead- time
equipment and other items for the projects, totaling approximately
$2.0 million. As mentioned above, the Company must obtain the
right to a five-year extension of the Modular 2 Call Option
Agreement and will need to obtain additional funds in order to
complete the procurement of the Modular 2 project and the purchase
of the Modular 2 Call Option Agreements. There is no guarantee
that it will be able to successfully do so. If the Company is
unable to obtain the means of successfully completing these tasks,
it would be forced to cancel the planned construction of Modular 2
and expense the cost of its development and procurement to date.
The Company has recorded approximately $600,000 in additional
expense in the second quarter to reflect some of these potential
costs. See Subsequent Events footnote to the Consolidated
Condensed Financial Statements.
NOTE 3 - DUE TO RELATED PARTIES:
As part of the acquisition of Modular (Modular 1) on March 9, 2000, the former
owners 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.
In July 1998, the Company obtained a convertible debt investment from Synex
Energy Resources Ltd., the power project development subsidiary of
Vancouver-based Synex (altogether, "Synex"). Synex provided the Company with
$1,000,000 in the form of a convertible debenture which matured on June 30,
2001. The convertible debenture is secured by a first mortgage position on
Wolverine Power Corporation ("Wolverine"), a wholly owned subsidiary of the
Company. The Company and Synex have been discussing terms under which the
convertible debenture maturity date could be extended. In August 2001,
subsequent to the balance sheet date, the Company and Synex reached an agreement
whereby the maturity date of the convertible debenture was extended to September
30, 2001.
- 6 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(UNAUDITED)
NOTE 3 - DUE TO RELATED PARTIES (CONTINUED):
In connection with the acquisition of Modular 1 in March 2000, the Company
issued a bridge note in the amount of $700,000 (the "Strategic Bridge Note") to
the Strategic Electric Power Fund, LLC and certain related investors
("Strategic"). The Strategic Bridge Note had an original maturity date of
December 31, 2000, which was extended to June 30, 2001. In August 2001,
subsequent to the balance sheet date, the Company and Strategic reached a new
agreement whereby the Strategic Bridge Note was extended to September 30, 2001
in exchange for the Company issuing warrants and the collateralization of the
Strategic Bridge Notes using Wolverine and Modular as collateral. In connection
with this transaction, Strategic advanced to the Company an additional amount of
approximately $125,000 as part of the Strategic Bridge Notes. See Subsequent
Events in the Notes to the Interim Consolidated Condensed Financial Statements.
NOTE 4 - MORTGAGE PAYABLE:
In January 1999, the Company executed a note in the principal amount of $275,000
with interest payable at 7.5% per annum secured by a third lien position on
Wolverine. Payments are to be made in six equal semi-annual installments due on
June 30 and December 31 of each year. The maturity date was to be December 31,
2001. As of June 30, 2001, the Company was in default on this obligation for
approximately $52,000, which represents the payment, which was due June 30,
2001. To date, the Company has not received a default notification from the
lender.
NOTE 5 - DEFERRED REVENUE:
On December 27, 2000, the Company received a payment of $2,784,000 from
Consumers with respect to Modular 2 (See Note 2(b)) in accordance with the
provisions of the Call Option Agreement between the parties dated December 14,
2000. The payment represents revenues for having available capacity from May 1
to September 30, 2001. Accordingly, the Company recorded the payment as deferred
revenue and has and will recognize it as operating revenues in the periods
earned between May 1 and September 30, 2001.
In January and May of 2001, the Company received two payments from Consumers in
accordance with the provisions of the Call Option Agreement between the parties
regarding the two contracts signed for the Company's existing Modular 1 projects
at Alma, Coldwater and Chelsea, Michigan. The payment represents the annual
revenues to the Company for having installed capacity available from May 1 to
September 30, at Modular 1 for each year through 2005. Accordingly, the Company
recorded the payment as deferred revenue and has and will recognize it as
operating revenues in the periods earned.
The Company recognized $1,868,455 in operating revenues under all of the Call
Option Agreements described above for the period ended June 30, 2001 and expects
to recognize the remainder of the Call Option Agreement revenues as operating
revenues in the third quarter.
- 7 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(UNAUDITED)
NOTE 6 - 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 its
President exercising certain of his options. In April 2001, the Company issued
50,000 shares of common stock valued at $30,000 to an independent contractor for
services rendered.
NOTE 7 - SUBSEQUENT EVENTS:
(A) ADDITIONAL FINANCING
In August 2001, the Company borrowed approximately $125,000 from
the Strategic Electric Power Fund, LLC, an existing lender
("Strategic"). As consideration for Strategic to provide
incremental funds to the Company, the Company agreed to secure the
entire amount of the Strategic Bridge Notes (See Note 3-Due to
Related Parties) with a third lien position on Wolverine and a
second lien position on Modular. The Strategic Bridge Notes have a
maturity date of September 30, 2001 and bear interest at 8% per
annum, payable in kind.
(B) SERVICES AGREEMENT
The Company also entered into a renewed Financial Advisory, Merger
and Acquisition and Strategic Planning Services Agreement with
Kuhns Brothers ("Kuhns Brothers"), an investment firm affiliated
with Strategic. The Agreement calls for Kuhns Brothers to provide
certain services to the Company, including but not limited to
project financing, equity financing, acquisition/disposition
services and strategic advisory services and outlines the related
fee arrangements. The services agreement is for a term of
twenty-four months with an evergreen clause.
(C) PERFORMANCE UNDER CALL OPTION AGREEMENTS
In late July and early August 2001, the state of Michigan (the
location of the Modular Project) suffered extremely hot weather
conditions. Accordingly, Modular received notice to provide
electricity to Consumers pursuant to the Modular 2 Call Option
Agreements. Since Modular 2 was not yet fully constructed and
because of certain equipment failures at Modular 1, the Company
was unable to provide the required power and is subject to
penalties payable to Consumers in the amount of approximately
$350,000, which will be reflected as an expense in the third
quarter of 2001, the period in which the power was to be provided.
- 8 -
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION
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. Each subsidiary owns and
operates electric generation facilities. Wolverine owns a 10.50 megawatt
hydroelectric plant near Bay City, Michigan; Modular owns 43 megawatts of
mobile, trailer mounted and containerised diesel-fired electric generating
facilities constituting the Modular 1 project at three sites in Coldwater,
Chelsea and Alma, Michigan. In December 2000, the Company signed a Call Option
Agreement for an additional 46 MW under a one-year Call Option with Consumers
Energy constituting a project named Modular 2. The Company is negotiating to
purchase certain interests, including an existing 5-year contract and certain
equipment, sites and interconnection rights to permanently develop and construct
Modular 2. There is no guarantee that the Company will be able to successfully
complete this transaction; if it does not, it may incur substantial expenses
with respect to expenditures and obligations incurred on Modular 2 to date. (See
Note 2(b)).
This quarterly report of Form 10QSB discusses certain matters that may be
considered "forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the intent, belief or
current expectations of the Company and its management. Prospective investors
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve a number of risks and uncertainties that could
materially affect actual results such as, but not limited to, (i) changes in
government regulations, including the anticipated deregulation of the electric
energy industry, (ii) commercial operations of new plants that may be delayed or
prevented because of various development and construction risks, such as failure
to obtain financing and the necessary permits to operate, (iii) cost estimates
are preliminary and actual cost may be higher than estimated, (iv) the assurance
that the Company will be able to acquire or develop additional plants, and (v)
the risks associated with selling power from power plants in the newly
competitive energy market. Prospective investors are also referred to the other
risks identified from time to time in the Company's reports and registration
statements filed with the Securities and Exchange Commission.
- 9 -
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached interim
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.
REVENUES
Revenues increased to $2,526,903 for the six months ended June 30, 2001 from
$993,191 for the six months ended June 30, 2000. Revenues increased to
$2,229,382 for the three months ended June 30, 2001 from $579,060 for the three
months ended June 30, 2000. Such increases in revenues were due primarily to the
increase in the operating revenues generated as a result of the Modular 2 Call
Option Agreement. The Company also recognized approximately $10,000 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 power production can also vary from year to year based on changes
in meteorological conditions. Operating revenues at Modular are generally
recognized in the periods earned, usually the second and third calendar
quarters.
COST OF OPERATIONS
The costs of operations increased for the six months ended June 30, 2001 to
$1,261,745 as compared to $335,553 during the six months ended June 30, 2000,
mainly as a result of the increased costs associated with the Company's Modular
facilities, which primarily consists of depreciation expense. The costs of
operations increased for the three months ended June 30, 2001 to $982,660 as
compared to $123,770 during the three months ended June 30, 2000, mainly as a
result of the Company's Modular facilities, which primarily consists of
depreciation. Wolverine's cost of operations remained constant between the
years.
- 10 -
SELLING, GENERAL AND ADMINISTRATIVE
These expenses increased during the six months ended June 30, 2001 to $564,589,
as compared to $357,142 during the six months ended June 30, 2000. The increase
was primarily a result of increases in professional fees at the corporate level
and an increase in general and administrative costs for Modular. These expenses
increased for the three months ended June 30, 2001 to $370,337, as compared to
$190,554 during the three months ended June 30, 2000. Included in expenses for
the three months ended June 30, 2001 were certain costs associated with the
annual shareholders meeting and additional legal and professional fees
pertaining to the proxy and annual report filings as well as the amending of an
existing registration statement.
OTHER INCOME AND EXPENSES
During the six months ended June 30, 2001, the Company recorded other
expense-net of $451,373, as compared to other expense-net of $132,692 for the
six months ended June 30, 2000. During the three months ended June 30, 2001, the
Company recorded other expense-net of $184,570, as compared to other expense-net
of $99,427 during the three months ended June 30, 2000. Interest expense for the
six months ended June 30, 2001 increased to $386,729 from $184,990 for the six
months ended June 30, 2000. Interest expense for the three months ended June 30,
2001 increased to $175,078 from $147,101 for the three months ended June 30,
2000, in line with the incurring of additional debt for the acquisition of
equipment for Modular 2. The other expense for the six and three month periods
ended June 30, 2001 was primarily a result of the expenses incurred in the
terminated acquisition of Block Island Power Company.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company finances its operations primarily from internally
generated funds and third party credit facilities. Net cash flow provided by
operations was $1,185,950 for the six-month period ended June 30, 2001 and
$1,586,198 was provided by operations for the six-month period ended June 30,
2000.
The Company also has a convertible debt instrument, which would provide up to
$1.0 million to the Company. The convertible debenture, with an original
maturity date of June 30, 2001, has been extended to September 30, 2001. The
convertible debenture requires interest only payments monthly until maturity and
is convertible into the Company's common stock at $1.00 per share. The interest
rate is 10.3% per annum.
The Company believes that its cash flow from operations and funds expected to be
available under credit facilities will be sufficient to fund foreseeable working
capital. However, any restriction on the availability of borrowings could
negatively affect the Company's ability to meet future cash flow requirements.
If the financing of Modular 2 is not successful, the Company may experience
liquidity difficulties in paying for the costs incurred.
- 11 -
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
The Registrant held its Annual Meeting of Stockholders on May 15, 2001. The
following proposals were adopted by the votes indicated.
(1) Election of the following directors to serve as directors until the 2002
annual meeting of shareholders.
Nominees Votes for Votes against Votes withheld
-------- --------- ------------- --------------
Herbert L. Oakes, Jr. 2,892,624 0 0
John D. Kuhns 2,892,624 0 0
Frederic A. Mayer 2,892,624 0 0
Alan W. Stephens 2,892,624 0 0
Gregory J. Sunell 2,892,624 0 0
Richard F. Albosta 2,892,624 0 0
Gerald R. Cummins 2,892,624 0 0
Robert F. Hussey 2,892,624 0 0
(2) Appointment of Lazar Levine & Felix , LLP as independent auditors for the
fiscal year ended December 31, 2001.
Votes for Votes against Votes withheld
--------- ------------- --------------
2,892,624 0 0
(3) To increase the number of shares subject to the 1993 Stock Option Plan From
500,000 to 1,300,000.
Votes for Votes against Votes withheld
--------- ------------- --------------
2,629,929 440 262,255
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
August 15, 2001 By: /s/ Frederic A. Mayer
---------------------
Frederic A. Mayer
President and Principal Accounting Officer
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