eigentlich erwartungsgemäß...
sie haben eben fett investiert. Nun hoffen wir mal, dass die Liquidität ausreicht.
Im Moment werden immer noch billige Stücke auf den Markt geworfen. Ob das mal aufhört, damit der Wert endlich wieder fahrt aufnimmt? Hoffen wir´s!
Schönen Tag,
Nussriegel
15-Nov-2004
Quarterly Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-QSB CONCERNING THE COMPANY'S OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, GROSS BILLINGS, COMMISSIONS AND FEES, EXPENSES OR OTHER FINANCIAL ITEMS; AND STATEMENTS CONCERNING ASSUMPTIONS MADE OR EXCEPTIONS TO ANY FUTURE EVENTS, CONDITIONS, PERFORMANCE OR OTHER MATTER ARE "FORWARD LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL SECURITIES LAWS. FORWARD LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES, AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. SUCH RISKS, UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED TO, (1) THAT THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL GROW AND OR MANAGE ITS GROWTH PROFITABLY, (2) RISKS ASSOCIATED WITH ACQUISITIONS, (3) COMPETITION, (4) THE COMPANY'S QUARTERLY RESULTS HAVE FLUCTUATED IN THE PAST AND ARE EXPECTED TO FLUCTUATE IN THE FUTURE,
(5) THE LOSS OF SERVICES OF KEY INDIVIDUALS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS AND
(6) RISKS ASSOCIATED WITH OPERATING IN EMERGING COUNTRIES.
OVERVIEW
WORLDWATER CORP. IS AN INTERNATIONAL SOLAR ENGINEERING AND WATER MANAGEMENT COMPANY WITH UNIQUE, HIGH-POWERED SOLAR TECHNOLOGY PROVIDING SOLUTIONS TO WATER SUPPLY AND ENERGY PROBLEMS WORLDWIDE. UNTIL 2002, THE COMPANY WAS A DEVELOPMENT-STAGE ENTERPRISE ORGANIZED TO DESIGN, DEVELOP, MANUFACTURE AND MARKET SOLAR WATER PUMPING SYSTEMS FOCUSED ON HELPING DEVELOPING COUNTRIES WITH WATER AND POWER ISSUES. THROUGH RESEARCH AND DEVELOPMENT, THE COMPANY CREATED PROPRIETARY SOLAR TECHNOLOGY CAPABLE OF OPERATING PUMPS AND MOTORS UP TO 600 HORSEPOWER USED IN IRRIGATION, WATER UTILITY PUMPING SYSTEMS AND REFRIGERATION. THIS INCREASED POWER CAPABILITY, COUPLED WITH GROWING ENERGY SHORTAGES IN THE UNITED STATES, HAS OPENED DOMESTIC MARKET OPPORTUNITIES THAT HAVE NOW BECOME THE PRINCIPAL FOCUS OF ITS BUSINESS. THE COMPANY HAS FOCUSED ITS EFFORTS ON AGGRESSIVELY MARKETING THIS PROPRIETARY SOLAR TECHNOLOGY DOMESTICALLY IN CONJUNCTION WITH ITS ON-GOING INTERNATIONAL EFFORTS. IN THE U.S., THIS INCLUDES PUBLIC AND PRIVATE COMMERCIAL MARKETS, PARTICULARLY IN CALIFORNIA, NEW JERSEY AND OTHER STATES WHICH OFFER INCENTIVES FOR RENEWABLE ENERGY SOURCES. THE COMPANY CONTINUES TO SEEK OPPORTUNITIES THROUGHOUT THE WORLD, INCLUDING THE PHILIPPINES, WHERE IT MAINTAINS A SUBSIDIARY, THE MIDDLE EAST (PRIMARILY IRAQ), AND AFRICA.
RESULTS OF OPERATIONS
THE COMPANY GENERATED REVENUE FROM THE SALE OF SOLAR EQUIPMENT AND THE RECOGNITION OF GRANT REVENUE DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003. TOTAL REVENUE WAS $ 61,040 IN THE THIRD QUARTER OF 2004 COMPARED TO $76,817 IN THE THIRD QUARTER OF 2003. TOTAL REVENUE WAS $4,217,514 AND $1,224,078 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003, RESPECTIVELY. THE DIFFERENCE IN REVENUE BETWEEN QUARTERS AND BETWEEN YEARS IS ATTRIBUTABLE TO THE COMPANY'S DEPENDENCE ON INDIVIDUAL SYSTEM INSTALLATIONS.
THE COMPANY HAD A MAJOR EQUIPMENT SALES PROJECT IN CONSTRUCTION DURING THE THIRD QUARTER OF 2004. THE PROJECT WAS COMPLETED IN THE FOURTH QUARTER OF 2004 AND OUR CUSTOMER HAS BEEN FORMALLY NOTIFIED BY THE SERVING UTILITY THAT ALL REQUIREMENTS HAVE BEEN MET TO INTERCONNECT AND OPERATE THE 225 KW PHOTOVOLTAIC ELECTRIC GENERATING FACILITY. THE COMPANY USES THE COMPLETED CONTRACT METHOD OF REVENUE RECOGNITION AND THEREORE DID NOT RECOGNIZE REVENUE IN THE THIRD QUARTER FOR THIS PROJECT.
EQUIPMENT SALES AND GRANT REVENUE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 WERE $4,000,000 AND $217,514, RESPECTIVELY, AS COMPARED TO $1,107,485 AND $116,593, RESPECTIVELY, FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003. EQUIPMENT SALES INCREASED BY $2,892,515 OR 261 % AS COMPARED TO THE PREVIOUS YEAR AND GRANT REVENUE INCREASED BY $100,921 OR 87 %.
IN THE FIRST QUARTER OF 2003 WORLDWATER INSTALLED FOR THE FIRST TIME ITS SOLAR PROPRIETARY TECHNOLOGY SYSTEM TO DRIVE A MAJOR COMMERCIAL REFRIGERATION SYSTEM. THE SYSTEM INSTALLATION RESULTED IN $913,749 IN REVENUE IN 2003. DURING THE SECOND QUARTER OF 2004, THE COMPANY SERVED AS EXCLUSIVE PV SUPPLIER TO THE CONTRACTOR, FOR A ONE-MEGAWATT PV INSTALLATION DELIVERED TO CERRO COSO COMMUNITY COLLEGE IN RIDGECREST, CA. THE AMOUNT OF REVENUE RECORDED FOR THIS PROJECT DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2004 WAS $4,O00,000.
GRANT REVENUE FOR THE QUARTER ENDED SEPTEMBER 30, 2004 WAS $ 61,040, AS COMPARED TO $53,568 FOR THE QUARTER ENDED SEPTEMBER 30, 2003. GRANT REVENUE INCREASED $7,472 OR 14 % AS COMPARED SAME PERIOD IN THE PREVIOUS YEAR.
THE COMPANY ENTERED THE NEW JERSEY AGRICULTURAL MARKET IN 2003. THE NEW JERSEY BOARD OF PUBLIC UTILITIES (BPU) HAS AUTHORIZED A COMPREHENSIVE RANGE OF INCENTIVES. IN DECEMBER 2003,THE COMPANY WAS AWARDED A RENEWABLE ENERGY ECONOMIC DEVELOPMENT GRANT BY BPU IN THE AMOUNT OF $300,234 OF WHICH $ 134,513 WAS FUNDED BY BPU IN 2003 AND DEFERRED UNTIL 2004. DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2004, THE COMPANY COLLECTED $ 90,661 OF THE GRANT AND RECOGNIZED $ 202,514 OF THE GRANT AS REVENUE. IN THE THIRD QUARTER OF 2004, THE COMPANY COLLECTED $25,020 OF THE GRANT AND RECOGNIZED $ 46,040 AS GRANT REVENUE RELATED TO THIS AWARD.
COST OF SALES
COST OF SALES FOR THE QUARTER ENDED SEPTEMBER 30, 2004 AND 2003 WERE $311,669 AND $76,676, RESPECTIVELY.
COST OF SALES FOR EQUIPMENT INCREASED $212,637 TO$241,313. DURING THE THIRD QUARTER THE COMPANY COMMENCED CONSTRUCTION OF A CONTRACT FOR $2,OO1,692 FOR A 225 KW SOLAR-DRIVEN IRRIGATION SYSTEM WHICH HAS BEEN COMPLETED IN THE FOURTH QUARTER OF 2004 AND HAS DEFERRED THE APPLICABLE REVENUES AND EXPENSES OF $651,411 AND $1,812,296, RESPECTIVELY AT SEPTEMBER 30,2004. THESE AMOUNTS HAVE BEEN INCLUDED IN THE LINE ITEMS CUSTOMER DEPOSITS AND DEFERRED CONTRACT COSTS, RESPECTIVELY, ON THE BALANCE SHEET. UNDER THE CONTRACT THE COMPANY HAS GUARANTEED THE PRICE OF CERTAIN RENEWABLE ENERGY CREDITS (RECS) TO BE GENERATED BY THE SOLAR SYSTEM DURING THE FIRST SEVEN YEARS OF OPERATION. BASED ON CURRENT MARKET INDICATIONS THE COMPANY ESTIMATES ITS GUARANTEE OBLIGATION MAY RESULT IN A LOSS OF $393,617 WHICH IS TIED TO THE FUTURE MARKET AND TRADING VALUE OF RECS GENERATED IN CALIFORNIA. WITHOUT THE KNOWLEDGF OF THE FUTURE VALUE OF THESE RECS,THE COMPANY HAS RECORDED A LOSS THE ESTIMATED LOSS AS A LIABILITY ON THE BALANCE SHEET AS OF SEPTEMBER 30,2004.
AS OF SEPTEMBER 30, 2004 THE COMPANY ESTIMATES A NET LOSS (ESTIMATED GROSS PROFIT ON EQUIPMENT SALES OF $152,304 MINUS THE ESTIMATED RECS GUARANTEE OBLIGATION OF 393,617) OF $241,313 ON THE CONTRACT. THIS ESTIMATED LOSS HAS BEEN RECORDED IN THE COST OF GOODS SOLD SECTION OF THE INCOME STATEMENT. DEFERRED COSTS AND REVENUES OF THE PROJECT WILL BE RECOGNIZED WHEN THE PROJECT IS COMPLETED. THE ESTIMATED RECS GUARANTEE OBLIGATION OF $393,617 WILL BE TREATED AS A REDUCTION OF REVENUE IN THE PERIOD THE PROJECT IS COMPLETED. ADJUSTMENTS TO THE ESTIMATED GUARANTEE OBLIGATION WILL BE RECOGNIZED AS AN ADJUSTMENT OF REVENUE OVER THE SEVEN YEAR TERM OF THE GUARANTEE OBLIGATION.
COSTS ASSOCIATED WITH GRANT REVENUE INCREASED $22,356 TO $70,356 ON AN INCREASE IN REVENUE OF APPROXIMATELY 14%.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 COST OF SALES WERE $4,234,382 AND $873,213, RESPECTIVELY. COST OF SALES OF EQUIPMENT INCREASED $3,231,267 TO $ 4,003,397 ON A 261 % INCREASE IN EQUIPMENT SALES. COSTS ASSOCIATED WITH GRANT REVENUE INCREASED $129,902 TO $230,985 ON A 87% INCREASE IN GRANT REVENUE DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2004.
GROSS PROFIT (LOSS)
GROSS LOSS FOR THE QUARTER ENDED SEPTEMBER 30, 2004 WAS $250,629. THE COMPANY RECOGNIZED A GROSS PROFIT OF $141 IN THE SAME QUARTER IN 2003. IN 2004, THE GROSS LOSS ON EQUIPMENT SALES FOR THE THIRD QUARTER WAS $241,313 AS COMPARED TO A LOSS OF $5,427 IN THE THIRD QUARTER OF 2003. A GROSS LOSS OF $9,317 WAS RECOGNIZE ON GRANT REVENUES FOR THE THIRD QUARTER WHICH IS REFLECTIVE OF TIMING DIFFERENCES IN RECOGNITION OF REVENUES VERSES COSTS AND EXPENSES ATTRIBUTABLE TO GRANT REVENUE.
THE COMPANY HAD A GROSS LOSS OF $16,868 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND A GROSS PROFIT OF $350,865 DURING THE SAME PERIOD IN 2003. THE GROSS LOSS ON EQUIPMENT SALES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 WAS $3,397. THE COMPANY HAD A GROSS PROFIT ON EQUIPMENT SALES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 OF $335,355.
THE GROSS LOSS EXPERIENCED IN THE FIRST NINE MONTHS OF 2004 IS ATTRIBUTED TO (A) REQUIRED ONE-TIME DEVELOPMENT AND ADDITIONAL ENGINEERING AND CONSTRUCTION COSTS ON COMPANY PROJECTS THAT REPRESENTED THE TWO LARGEST FIRST-TIME PROJECTS OF THEIR TYPE, AND (B) RECOGNITION OF THE ANTICIPATED REC GUARANTEE OBLIGATION ASSOCIATED WITH ITS PROJECT IN CONSTRUCTION EXCEEDING THE ESTIMATED GROSS PROFIT FROM EQUIPMENT SALES.
THE COMPANY HAD A GROSS LOSS OF $13,471 ON GRANT REVENUE IN THE FIRST NINE MONTHS OF 2004 AS COMPARED TO A GROSS PROFIT OF $15,510 FOR THE SAME PERIOD IN 2003. THE GROSS LOSS IS ATTRIBUTABLE TO TIMING DIFFERENCES IN RECOGNITION OF REVENUES VERSES COSTS AND EXPENSES ATTRIBUTABLE TO GRANT REVENUE.
MARKETING, GENERAL AND ADMINISTRATIVE
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES WERE $827,646 FOR THE QUARTER ENDED SEPTEMBER 30, 2004 AS COMPARED TO $613,631 IN 2003, AN INCREASE OF 35 %. THIS INCREASE IS PRIMARILY ATTRIBUTABLE TO AN INCREASE IN SALES EFFORTS AND ASSOCIATED STAFFING NECESSARY TO DEVELOP THE DOMESTIC MARKET. THE COMPANY HAS GRADUALLY INCREASED ITS STAFFING LEVELS, BUT HAS FOUND IT NECESSARY TO HIRE CONSULTANTS FROM TIME TO TIME, THEREFORE INCREASING COSTS INCURRED AS COMPARED TO THE SAME PERIOD IN 2003. MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 WERE $2,348,327 AND $ 2,087,634, RESPECTIVELY.
DEBT AND EQUITY SOURCING FEES AND COMMISSIONS
THE COMPANY HAS INCURRED SUBSTANTIAL FEES AND COMMISSIONS ,INCLUDING INVESTOR RELATION FEES, RAISING BOTH DEBT AND EQUITY REQUIRED TO FUND ITS WORKING CAPITAL NEEDS. IN THE THIRD QUARTER OF 2004 AND 2003 THE COMPANY INCURRED $ 782,514 AND $316,967, RESPECTIVELY, AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 $1,726,082 AND $381,967, RESPECTIVELY, OF FINANCING FEES AND COMMISSIONS,INCLUDING INVESTOR RELATION FEES.
IN THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30,2004 $468,000 AND $1,116,962, RESPECTIVELY OF THE DBT AND EQUITY SOURCING FEES AND COMMISSIONS REPRESENT THE NON CASH FAIR VALUE ESTIMATED COST OF WARRANT DETERMINE USING THE BLACK SCHOLES MODEL.
RESEARCH AND DEVELOPMENT
RESEARCH AND DEVELOPMENT EXPENSES WERE $60,577 FOR THE QUARTER ENDED SEPTEMBER 30, 2004 COMPARED TO $90,862 IN 2003. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 THE COMPANY INCURRED $155,167 AND $278,342, RESPECTIVELY, IN RESEARCH AND DEVELOPMENT EXPENSES.
LOSS FROM OPERATIONS
OPERATING LOSS FOR THE QUARTER ENDED SEPTEMBER 30, 2004 WAS $1,922,201 AS COMPARED TO $1,021,319 FROM THE PREVIOUS YEAR. THE OPERATING LOSS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 WAS $4,246,444 AS COMPARED TO $2,397,078 FOR THE SAME PERIOD IN 2003.
INTEREST EXPENSE
INTEREST EXPENSE INCREASED TO $333,225 IN THE THIRD QUARTER 2004 AS COMPARED TO $201,763 IN THE THIRD QUARTER OF 2003. THIS REFELCTS THE INCREASE IN CONVERTIBLE DEBT OUTSTANDING DURING THE RESPECTIVE PERIODS AND THE GREATER AMORTIZATION OF ORIGINAL ISSUE DISCOUNT ATTRIBUTABLE TO THE VALUE OF WARRANTS THAT WERE ATTACHED TO THE CONVERTIBLE DEBT WHEN ISSUED.
INTEREST EXPENSE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 INCREASED TO $1,588,090 AND INCREASE OF $1,165,930 OVER THE $422,160 EXPENDED IN SAME PERIOD IN 2003. THIS INCREASE REFLECTS THE ADDITIONAL DEBT CONVERTIBLE DEBT OUTSTANDING DURING THE PERIOD AND THE SIGNIFICANT INCREASE IN THE AMORTIZATION OF ORIGINAL ISSUE DISCOUNT ATTRIBUTABLE TO THE VALUE OF WARRANTS THAT WERE ATTACHED TO THE CONVERTIBLE DEBT WHEN ISSUED.
INCOME TAXES
THE COMPANY RECOGNIZED NO INCOME TAX (BENEFIT) EXPENSE FOR THE THIRD QUARTER AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004.
THE COMPANY PARTICIPATES IN THE STATE OF NEW JERSEY'S CORPORATION BUSINESS TAX BENEFIT CERTIFICATE TRANSFER PROGRAM (THE "PROGRAM"), WHICH ALLOWS CERTAIN HIGH TECHNOLOGY AND BIOTECHNOLOGY COMPANIES TO TRANSFER UNUSED NEW JERSEY NET OPERATING LOSS CARRYOVERS AND RESEARCH AND DEVELOPMENT TAX CREDITS TO OTHER NEW JERSEY CORPORATION BUSINESS TAXPAYERS. THE COMPANY HAS SUBMITTED APPLICATIONS TO THE NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY (THE "EDA") TO PARTICIPATE IN THE PROGRAM FOR TAX LOSSES INCURRED IN 2003 AND 2002. THE SALE IS ANTICIPATED TO BE COMPLETED IN THE FOURTH QUARTER OF 2004.
IN THE EVENT OF A CHANGE IN OWNERSHIP, THE TAX REFORM ACT OF 1986 (THE "ACT") PROVIDES FOR A POTENTIAL LIMITATION ON THE ANNUAL USE OF NET OPERATING LOSS (NOL) AND RESEARCH AND DEVELOPMENT TAX CREDIT CARRYFORWARDS THAT COULD SIGNIFICANTLY LIMIT THE COMPANY'S ABILITY TO UTILIZE THESE CARRYFORWARDS. ACCORDINGLY, BECAUSE TAX LAWS LIMIT THE TIME DURING WHICH THESE CARRYFORWARDS MAY BE APPLIED AGAINST FUTURE TAXES, THE COMPANY MAY NOT BE ABLE TO TAKE FULL ADVANTAGE OF THE NET OPERATING LOSSES AND CREDIT CARRYFORWARDS FOR FEDERAL INCOME TAX PURPOSES.
LIQUIDITY AND CAPITAL RESOURCES
THE NET INCREASE IN CASH FROM ALL ACTIVITIES DURING THE FIRST NINE MONTHS OF 2004 WAS $170,898. AS COMPARED TO AN INCREASE OF $103,998 IN 2003. THE CASH USED IN OPERATING ACTIVITIES WAS $3,926,410 COMPARED TO $1,553,615 IN 2003. THE INCREASE IN USE OF CASH FOR OPERATING ACTIVITIES IS ATTRIBUTABLE TO THE INCREASE IN DOMESTIC SALES EFFORTS AS THE COMPANY TAKES AN AGGRESSIVE APPROACH IN CAPTURING THIS MARKET OPPORTUNITY, AND COST INCURRED TO OBTAIN EQUITY AND DEBT. THE CASH USED IN INVESTING ACTIVITIES WAS $21,576 AS COMPARED TO $52,321 DURING THE FIRST NINE MONTHS IN 2003.
THE COMPANY FINANCED ITS OPERATIONS THROUGH THE SALE OF STOCK, ISSUANCE OF CONVERTIBLE DEBENTURES AND TERM NOTES AND THE SALE OF SOLAR EQUIPMENT AND COLLECTION OF GRANT REVENUE DURING THE FIRST NINE MONTHS OF 2004 AND 2003. THE CASH PROVIDED BY FINANCING ACTIVITIES DURING THE FIRST NINEMONTHS OF 2004 WAS $4,119,904 AS COMPARED TO $1,725,739 IN 2003. IN THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003, THE COMPANY ISSUED THREE YEAR CONVERTIBLE NOTES TOTALING $1,262,550 AND $1,340,000, RESPECTIVELY, TO INSTITUTIONAL AND ACCREDITED INVESTORS. THE CONVERSION FEATURE OF THE CONVERTIBLE NOTES RESULTING IN THE RECORDING OF BENEFICIAL CONVERSION INTEREST, A NON CASH OPERATING CHARGE, OF $427,167 AND $192,334 IN THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003, RESPECTIVELY.
DURING THE FIRST NINE MONTHS OF 2004 THE COMPANY ISSUED $936,403 IN NOTES PAYABLE AND REPAID $406,752. IN APRIL, 2004, IN CONJUNCTION WITH THE ENTERING THE SPA, DESCRIBED IN NOTE 5 OF THE FINANCIAL STATEMENTS, THE COMPANY BORROWED $ 800,000.
DURING THE FIRST NINE MONTHS OF 2003, THE COMPANY ISSUED NOTES PAYABLE OF $613,000 AND REPAID NOTES PAYABLE AND LONG-TERM DEBT OF $577,261.
THE COMPANY GENERATED CASH THROUGH THE SALE OF COMMON STOCK OF $1,950,000 AND EXERCISE OF WARRANTS AND OPTIONS OF $381,503 DURING THE FIRST NINE MONTHS OF 2004. DURING THE SAME PERIOD IN 2003 THE COMPANY GENERATED CASH THROUGH THE EXERCISE OF WARRANTS OF $15,000.
AT SEPTEMBER 30, 2004, THE COMPANY HAD A WORKING CAPITAL DEFICIENCY OF $903,697 AND A STOCKHOLDERS' DEFICIENCY OF $3,588,933.
THE COMPANY EXPECTS TO CONTINUE TO INCUR LOSSES UNTIL SUCH TIME AS IT GAINS
GREATER MARKET ACCEPTANCE OF ITS TECHNOLOGY AT SELLING PRICES AND VOLUMES
WHICH PROVIDE ADEQUATE GROSS PROFIT TO COVER OPERATING COSTS AND GENERATE
POSITIVE CASH FLOW. WORKING CAPITAL REQUIREMENTS WILL DEPEND UPON NUMEROUS
FACTORS, INCLUDING THE LEVEL OF RESOURCES DEVOTED TO THE SCALE-UP OF
INSTALLATION ACTIVITIES, AND INCREASED SALES AND MARKETING. MANAGEMENT HAS
DEVELOPED A FINANCIAL PLAN TO ADDRESS WORKING CAPITAL DEFICIENCY AND TO INCREASE
THE CASH PROVIDED BY FINANCING ACTIVITIES. SINCE EARLY 2000, THIS HAS INCLUDED
THE ISSUANCE OF PREFERRED STOCK, RESTRICTED AND NON-RESTRICTED STOCK AND
CONVERTIBLE DEBENTURES. THE FINANCIAL PLAN HAS RESULTED IN SUFFICIENT FUNDING
FOR OPERATIONS TO DATE AND IS ANTICIPATED TO ADEQUATELY FUND OPERATING DEFICITS
EXPECTED TO BE INCURRED IN 2004.
AS PART OF THE FINANCIAL PLAN IN APRIL, 2004 THE COMPANY ENTERED INTO A
SECURITIES PURCHASE AGREEMENT ("SPA") WITH SBI BRIGHTLINE VIII LLC. SUBJECT TO
THE TERMS OF THE SPA THE COMPANY MAY ISSUE AND SELL TO THE PURCHASER AND
PURCHASER SHALL PURCHASE FROM THE COMPANY UP TO 17,000,000 SHARES OF COMMON
STOCK WITH 5,100,000 WARRANTS IN THREE TRAUNCHES AS SHOWN BELOW SEE THE
SECURITIES PURCHASE NOTE ABOVE.
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Yours sincerly, TheArtistFormerlyKnownAsRalph
