Add
AQWT.PK to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| AQWT.PK > SEC Filings for AQWT.PK > Form 10KSB on 14-Oct-2008 | All Recent SEC Filings |
14-Oct-2008
Annual Report
When used in this Form 10-KSB and in future filings by the company with the Commission, statements identified by the words "believe", "positioned", "estimate", "project", "target", "continue", "will", "intend", "expect", "future", "anticipates", and similar expressions express management's present belief, expectations or intentions regarding the company's future performance within the meaning of the Private Securities Litigation Reform Act of 1995. The safe harbor in the Private Securities Litigation Act of 1995 does not apply to statements made in this document. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The company has no obligations to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.
Overview
The following discussions and analysis should be read in conjunction with the Company's consolidated financial statements and the notes presented following the financial statements. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future.
Aquacell Water, Inc. builds water treatment systems for the municipal, industrial and commercial sectors of the water treatment and purification industry. We design, manufacture, install and service our custom designed turnkey systems that treat from hundreds to millions of gallons of water per day for a variety of applications, including treatment of process water for public drinking water, manufacturing, purification of water for bottling plants and food service, and removal of contaminants from municipal drinking water systems. Our customers range from drinking water providers and manufacturers, to defense contractors and the military.
We provide a process for removing arsenic from drinking water with zero wastewater discharge requiring no onsite chemicals. This process reduces both the capital and operating costs for municipalities. As of January 2006, municipalities are required to be in compliance with a mandate lowering the allowable level of arsenic in drinking water from 50 parts-per-billion to ten. We anticipate a significant portion of our business in 2009 will be in arsenic removal systems.
The adsorbent media used for arsenic removal, as well as other consumable products in our systems, must be replaced generally on an annual basis. The replacement media provides an on-going revenue source for systems installed by the Company, as well as potentially for systems installed by competitors.
The Registrant, a small business issuer with limited resources, has been behind in filing its periodic reports since March 2006. In an effort to become current the company has focused its attention and resources on completing its past due financial audits by filing a comprehensive Form 10-KSB covering the fiscal years ended 2006, 2007 and 2008.
Critical Accounting Policies
The accompanying discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and all available information. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. US GAAP requires us to make estimates and judgments in several areas, including those related to recording various accruals, income taxes, the useful lives of long-lived assets, such as property and equipment and intangible assets, and potential losses from contingencies and litigation. We believe the policies discussed below are the most critical to our financial statements because they are affected significantly by management's judgments, assumptions and estimates.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets of a business acquired. The Company has adopted Statements of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets". Fair value of the reporting unit is determined by comparing the fair value of the unit with its carrying value, including goodwill. Impairment tests are performed using discounted cash flow analysis and estimates of sales proceeds. The annual evaluation of goodwill is performed at June 30th, the end of the Company's fiscal year.
Based on impairment testing performed, the Company determined that the recorded amount of goodwill of $776,000 related to the McPhee acquisition was fully impaired at June 30, 2007. Accordingly, the Company recorded an impairment charge of $776,000 during the year ended June 30, 2007.
Income Taxes
The Company accounts for income taxes using the asset and liability method described on SFAS No. 109, "Accounting For Income Taxes", the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of Water's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than no that some portion or all of the deferred tax assets will not be realized.
New Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), an interpretation of SFAS 109, "Accounting for Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109. FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination. If the tax position is deemed "more-likely-than-not" to be sustained, the tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. FIN 48 was adopted by the Company in fiscal 2008 and did not have any impact on its consolidated results of operations and financial position.
In September 2006, the FASB issued SFAS 157, "Fair Market Measurements." SFAS 157 clarifies the definition of fair value, establishes a framework for measuring fair value and expands disclosure on fair value measurement. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and will be applied on a prospective basis. The Company does not expect the adoption of SFAS 157 to have a material impact on its consolidated results of operations, financial position or cash flows.
In February 2007, the FASB issued SFAS 159, "The Fair Value Option for
Financial Assets and Financial Liabilities." SFAS 159 permits entities to
measure many financial instruments and certain other items at fair value at
specified election dates. Under SFAS 159, any unrealized holding gains and
losses on items for which the fair value option has been elected are reported
in earnings at each subsequent reporting date. If elected, the fair value option
(1) may be applied instrument by instrument, with a few exceptions, such as
investments otherwise accounted for by the equity method; (2) is irrevocable
(unless a new election date occurs); and (3) is applied only to entire
instruments and not to portions of instruments. SFAS 159 is effective as of an
entity's first fiscal year that begins after November 15, 2007. The Company is
currently evaluating the potential impact of SFAS 159 on its consolidated
results of operations and financial position.
In December 2007, the FASB issued SFAS 141 (revised 2007), "Business Combinations". SFAS 141R is a revision to SFAS 141 and includes substantial changes to the acquisition method used to account for business combinations (formerly the "purchase accounting" method), including broadening the definition of a business, as well as revisions to accounting methods for contingent consideration and other contingencies related to the acquired business, accounting for transaction costs, and accounting for adjustments to provisional amounts recorded in connection with acquisitions. SFAS 141R retains the fundamental requirement of SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R is effective for periods beginning on or after December 15, 2008, and will apply to all business combinations occurring after the effective date. The Company is currently evaluating the potential impact of SFAS 141R on its consolidated financial statements.
In December 2007, the FASB issued SFAS 160, "Non-controlling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51, Consolidated Financial Statements" ("ARB 51"). This Statement amends ARB 51 to establish new standards that will govern the (1) accounting for and reporting of non-controlling interests in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. Non-controlling interest will be reported as part of equity in the consolidated financial statements. Losses will be allocated to the non-controlling interest, and, if control is maintained, changes in ownership interests will be treated as equity transactions. Upon a loss of control, any gain or loss on the interest sold will be recognized in earnings. SFAS 160 is effective for periods beginning after December 15, 2008. The Company is currently evaluating the potential impacts of SFAS 160 on its consolidated results of operations and financial position.
In March 2008, the FASB issued ASAS No. 161, "Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161), which establishes, among other things, the disclosure requirements for derivative instruments and hedging activities. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal periods and interim period beginning after November 15, 2008. The Company does not expect the adoption of SFAS 161 to have a material impact on its consolidated results of operations, financial position or cash flows.
Results of Operations
For the year ended June 30, 2008 revenues were $862,000 representing an increase of $168,000, or 24%, over the preceding year. The increase was due primarily to the increase of orders received for the completion of arsenic removal treatment systems as well the inclusion of the operations of Aquacell's acquisition of McPhee Environmental for the full fiscal year. Gross profit margin of 37% compared with 10% for the same period in the preceding year reflected Aquacell's emphasis and concentration on higher margin bid opportunities.
Operating expenses for the year ended June 30, 2008 totaled $2,055,000 representing an increase of $536,000, or 35%, over the preceding year. The increase was due almost entirely to the inclusion of the operations of McPhee Environmental for the full fiscal 2008 year, as reflected in the increase in salaries and wages for the additional eight McPhee Environmental full-time employees added through the acquisition.
Net loss for the year ended June 30, 2008 was $1,779,000, a decrease of $513,000 from the net loss incurred for the year ended June 30, 2007 of $2,292,000. The decrease was due primarily to the impairment loss on goodwill in connection with the acquisition of McPhee Environmental in the prior fiscal year of $776,000.
For the year ended June 30, 2007 revenues were $694,000, approximately the same as the $626,000 in revenue for the preceding fiscal year.
Operating expenses totaled $1,519,000 representing an increase of $389,000, or 34%, over the preceding year. Salaries and wages were $929,000 the year ended June 30, 2007 and represented a $175,000 increase from the preceding year. This increase was attributable to the addition of executive management personnel during fiscal 2007 as well as the addition of additional employees following the acquisition of McPhee Environmental in April 2007. Selling, general and administrative expenses increased $198,000 from the preceding year resulting primarily from accounting fees and other administrative expenses.
Net loss for the year ended June 30, 2007 was $2,292,000 representing an increase of $1,192,000 over the preceding year. This increase was due in large part to an impairment loss on goodwill of $776,000 in connection with Aquacell's acquisition of McPhee Environmental.
For the year ended June 30, 2006 revenues were $626,000, approximately the same as the $619,000 in revenue for the preceding year. Gross profit margin totaled 21% for the year ended June 30, 2006, consistent with the 23% gross profit margin for the preceding year. Total operating expenses were $1,130,000, an increase of $571,000 from the $559,000 in total operating expenses in the preceding year. This increase was due to several factors including administrative expenses incurred in connection with the separation of Aquacell from its former parent company, AquaCell Technologies on March 9, 2006.
QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following tables contain the 2008 and 2007 unaudited consolidated balance sheets as of September 30, December 31 and March 31 and the consolidated statements of operations for the three month periods ended September 30, December 31, March 31 and June 30 of 2008, 2007 and 2006. Management believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.
Unaudited quarterly results are as follows:
AQUACELL WATER, INC. AND SUBSIDIARY
Unaudited Quarterly Consolidated Balance Sheets-Fiscal 2008
September 30, December 31, March 31,
2007 2007 2008
(in thousands) (Unaudited) (Unaudited) (Unaudited)
----------------------------------------------------- ------------- ------------- -------------
Assets
Current assets:
Cash $ 32 $ 648 $ 101
Accounts receivable, net of allowance 363 118 84
Inventories - - -
Subscriptions receivable - 500 -
Receivables from related parties, net - - 44
------------- ------------- -------------
Total current assets 395 1,266 229
Other assets - - -
------------- ------------- -------------
$ 395 $ 1,266 $ 229
============= ============= =============
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft $ - $ - $ -
Advances under line of credit agreements 117 104 78
Accounts payable and accrued liabilities 875 1,018 902
Accrued officer compensation 134 134 134
Advances from related parties, net 356 532 62
Shareholder notes payable 55 55 35
Accrued interest payable 14 16 8
Customer deposits 28 94 150
------------- ------------- -------------
Total current liabilities 1,579 1,953 1,369
Commitments and contingencies
Stockholders' equity (deficiency):
Preferred stock, par value $.001; 20,000,000 shares
authorized; no shares issued and outstanding - - -
Common stock, par value $.001; 100,000,000 shares and
authorized; 58,766,306 , 50,929,641 and 29,009,408
shares issued and outstanding at June 30, 2008,
2007, and 2006, respectively 51 59 59
Additional paid-in capital 4,571 5,614 5,624
Accumulated deficit (5,806) (6,360) (6,823)
------------- ------------- -------------
Total stockholders' equity (deficit) (1,184) (687) (1,140)
------------- ------------- -------------
$ 395 $ 1,266 $ 229
============= ============= =============
|
AQUACELL WATER, INC. AND SUBSIDIARY
Unaudited Quarterly Consolidated Balance Sheets-Fiscal 2007
September 30, December 31, March 31,
2006 2006 2007
(in thousands) (Unaudited) (Unaudited) (Unaudited)
----------------------------------------------------- ------------- ------------- -------------
Assets
Current assets:
Cash $ - $ - $ 274
Accounts receivable, net of allowance 3 4 65
Inventories 3 2 2
Subscriptions receivable - - -
Receivables from related parties, net - - 211
------------- ------------- -------------
Total current assets 6 6 552
Other assets - - -
------------- ------------- -------------
$ 6 $ 6 $ 552
============= ============= =============
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft $ - $ - $ -
Advances under line of credit agreements - - -
Accounts payable and accrued liabilities 880 931 671
Accrued officer compensation 305 379 134
Advances from related parties, net 114 109 -
Shareholder notes payable 280 280 55
Accrued interest payable 8 17 10
Customer deposits 22 8 195
------------- ------------- -------------
Total current liabilities 1,609 1,724 1,065
Commitments and contingencies
Stockholders' equity (deficiency):
Preferred stock, par value $.001; 20,000,000 shares
authorized; no shares issued and outstanding - - -
Common stock, par value $.001; 100,000,000 shares and
authorized; 58,766,306 , 50,929,641 and 29,009,408
shares issued and outstanding at June 30, 2008,
2007, and 2006, respectively 31 33 44
Additional paid-in capital 1,864 1,998 3,596
Accumulated deficit (3,498) (3,749) (4,153)
------------- ------------- -------------
Total stockholders' equity (deficit) (1,603) (1,718) (513)
------------- ------------- -------------
$ 6 $ 6 $ 552
============= ============= =============
|
AQUACELL WATER, INC. AND SUBSIDIARY
Unaudited Quarterly Consolidated Statements of Operations-Fiscal 2008
Quarterly Period Ended
-------------------------------------------------------
September 30, December 31, March 31, June 30,
2007 2007 2008 2008
------------- ------------ ------------ ------------
(in thousands, except per share amounts) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------- ------------- ------------ ------------ ------------
Sales $ 472 $ 56 $ 99 $ 235
Cost of sales 268 62 88 126
------------- ------------ ------------ ------------
Gross profit 204 (6) 11 109
Operating expenses
Salaries and wages 279 311 317 391
Legal, accounting and other professional expenses 80 21 21 23
Selling, general and administrative expenses 241 209 137 25
------------- ------------ ------------ ------------
Total operating expenses 600 541 475 439
------------- ------------ ------------ ------------
Operating income (loss) (396) (547) (464) (330)
Other income (expense):
Goodwill impairment charge - - - -
Other income - - - 2
Interest income - related Parties - - - -
Gain (loss) on disposition of assets - - - -
Interest expense, net (7) (7) 1 (31)
------------- ------------ ------------ ------------
Total other income (expense) (7) (7) 1 (29)
Income (loss) before provision for income taxes (403) (554) (463) (359)
Provision for (benefit from) income taxes - - - -
------------- ------------ ------------ ------------
Net loss for the period $ (403) $ (554) $ (463) $ (359)
============= ============ ============ ============
Net loss per common share $ (0.01) $ (0.01) $ (0.01) $ -
============= ============ ============ ============
Weighted average common shares outstanding
- basic and diluted 42,520,537 47,243,748 52,403,989 54,815,360
============= ============ ============ ============
|
AQUACELL WATER, INC. AND SUBSIDIARY
Unaudited Quarterly Consolidated Statements of Operations-Fiscal 2007
Quarterly Period Ended
-------------------------------------------------------
September 30, December 31, March 31, June 30,
2006 2006 2007 2007
------------- ------------ ------------ ------------
(in thousands, except per share amounts) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------- ------------- ------------ ------------ ------------
Sales $ 29 $ 19 $ - $ 646
Cost of sales 71 4 17 532
------------- ------------ ------------ ------------
Gross profit (42) 15 (17) 114
Operating expenses
Salaries and wages 160 117 264 388
Legal, accounting and other professional expenses 38 34 (3) 8
Selling, general and administrative expenses 134 101 115 163
------------- ------------ ------------ ------------
Total operating expenses 332 252 376 559
------------- ------------ ------------ ------------
Operating income (loss) (374) (237) (393) (445)
. . .
|
|
|