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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): March 19, 2002
AQUACELL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Commission File No. 1-16165
Delaware 33-0750453
------------------------ ------------------------------------
(State of incorporation) (IRS Employer Identification Number)
10410 Trademark Street
Rancho Cucamonga, CA 91730
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(Address of principal executive offices) (Zip Code)
(909) 987-0456
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(Telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) The acquisition of Water Science Technologies, Inc. on
March 19, 2002 was timely reported on Form 8-K on April 3, 2002.
The undersigned registrant hereby amends Item 7 of its Current Report
on Form 8-K dated April 3, 2002 and files such amended Item 7 with this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Balance Sheet of Water Science Technologies, Inc. at June 30,
2001 and the related statements of operations, stockholders'
equity and cash flows for the fiscal years ended June 30, 2001
and 2000.
See Index to Financial Statements.
(b) Pro Forma Financial Information.
Unaudited pro forma consolidated balance sheet of AquaCell
Technologies, Inc. as of December 31, 2001 and unaudited pro
forma consolidated statement of operations for the year ended
June 30, 2001 and the six months ended December 31, 2001.
See Index to Financial Statements.
(c) Exhibits filed with Form 8-K on April 3, 2002 are incorporated
by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AQUACELL TECHNOLOGIES, INC.
Date: May 30, 2002 By: /s/ Gary S. Wolff
--------------------------------
Gary S. Wolff
Chief Financial Officer
Index to Financial Statements
Page
----
FINANCIAL STATEMENTS OF WATER SCIENCE TECHNOLOGIES, INC.
Report of Wolinetz, Lafazan & Company, P.C.
Independent Accountants F - 1
Balance Sheet as of June 30, 2001 F - 2
Statements of Operations for the years ended
June 30, 2001 and 2000 F - 3
Statements of Stockholders' Deficiency for the
years ended June 30, 2001 and 2000 F - 4
Statements of Cash Flows for the years ended
June 30, 2001 and 2000 F - 5
Notes to Financial Statements F - 6
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Consolidated Financial Statements F - 10
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2001 F - 11
Notes to Unaudited Pro Forma Consolidated Balance Sheet F - 12
Unaudited Pro Forma Consolidated Statement of
Operations for the year ended June 30, 2001 F - 13
Unaudited Pro Forma Consolidated Statement of
Operations for the six months ended December 31, 2001 F - 14
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Water Science Technologies, Inc.
We have audited the accompanying balance sheet of Water Science Technologies,
Inc. as of June 30, 2001, and the related statements of operations,
stockholders' deficiency, and cash flows for each of the two years in the period
ended June 30, 2001. 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 auditing standards generally accepted
in the United States of America. 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 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 Science Technologies,
Inc. as of June 30, 2001, and the results of its operations and its cash flows
for each of the two years in the period ended June 30, 2001 in conformity with
accounting principles generally accepted in the United States of America.
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
May 8, 2002
F-1
WATER SCIENCE TECHNOLOGIES, INC.
BALANCE SHEET
June 30, 2001
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,000
Accounts receivable, net of allowance for doubtful 99,000
accounts of $5,000
Inventories 95,000
Prepaid expenses and other current assets 3,000
------------
Total current assets 213,000
PROPERTY AND EQUIPMENT, net 11,000
DEPOSITS 8,000
------------
$ 232,000
------------
------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable - trade $ 288,000
Payable to related party 34,000
Accrued expenses 26,000
Note payable - other 22,000
Customer deposits 14,000
------------
Total current liabilities 384,000
COMMITMENTS
STOCKHOLDERS' DEFICIENCY:
Common stock, $1 par value; 100,000 shares 2,000
authorized 1,991 shares issued and outstanding
Additional paid-in capital 313,000
Accumulated deficit (467,000)
------------
Total stockholders' deficiency (152,000)
------------
------------
$ 232,000
------------
------------
See notes to financial statements.
F-2
WATER SCIENCE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Year Ended
June 30,
--------------------------------
2001 2000
-------------- --------------
SALES - NET $ 1,153,000 $ 1,332,000
COST OF SALES 646,000 792,000
-------------- --------------
GROSS PROFIT 507,000 540,000
-------------- --------------
EXPENSES:
Salaries and wages 224,000 298,000
Selling, general and administrative 259,000 322,000
-------------- --------------
Total expenses 483,000 620,000
-------------- --------------
INCOME (LOSS) FROM OPERATIONS 24,000 (80,000)
OTHER EXPENSE - Interest 5,000 7,000
-------------- --------------
NET INCOME (LOSS) $ 19,000 $ (87,000)
-------------- --------------
-------------- --------------
See notes to financial statements.
F-3
WATER SCIENCE TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
Additional
Common paid-in Accumulated
stock capital deficit Total
------------ ------------ ------------ ------------
BALANCE, July 1, 1999 $ 2,000 $ 313,000 $ (400,000) $ (85,000)
Net loss (86,000) (86,000)
------------ ------------ ------------ ------------
BALANCE, June 30, 2000 2,000 313,000 (486,000) (171,000)
Net income 19,000 19,000
------------ ------------ ------------ ------------
BALANCE, June 30, 2001 $ 2,000 $ 313,000 $ (467,000) $ (152,000)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
See notes to financial statements.
F-4
WATER SCIENCE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
June 30,
--------------------------------
2001 2000
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 19,000 $ (86,000)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Depreciation 8,000 10,000
Decrease in allowance for doubtful accounts (3,000) (7,000)
Changes in operating assets and liabilities:
Accounts receivable 109,000 65,000
Inventories 25,000 (25,000)
Receivable from stockholder 11,000 (1,000)
Prepaid expenses and other current assets (42,000) (10,000)
Accounts payable - trade (77,000) 54,000
Accrued expenses (10,000) (13,000)
Customer deposits (43,000) 25,000
-------------- --------------
Net cash (used in) provided
by operating activities (3,000) 12,000
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (1,000) (5,000)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Principal payments on note payable to bank (2,000) (4,000)
-------------- --------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,000) 3,000
CASH AND CASH EQUIVALENTS, beginning of year 22,000 19,000
-------------- --------------
CASH AND CASH EQUIVALENTS, end of year $ 16,000 $ 22,000
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION -
Cash paid for:
Interest $ 5,000 $ 7,000
-------------- --------------
-------------- --------------
Income taxes $ - $ -
-------------- --------------
-------------- --------------
See notes to financial statements.
F-5
WATER SCIENCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
NOTE A - DESCRIPTION OF BUSINESS
Water Science Technologies, Inc. (WST or the Company) manufactures and
distributes a full line of water treatment and purification systems for sale in
the United States and international markets.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Cash and Cash Equivalents:
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
(2) Inventories:
Inventories are carried at the lower of cost, determined using the FIFO
(first-in, first-out) method or market.
(3) Property and equipment:
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets, which range from three to five years.
(4) Customer deposits:
The Company requires deposits on all large custom design projects. The
deposits are a liability to the Company prior to shipping.
(5) Revenue recognition:
Revenues are recorded at the time of shipment of products or performance
of services.
(6) Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F-6
WATER SCIENCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(7) Income taxes:
The Company accounts for income taxes using the asset and liability method
described in 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 the
Company's assets and liabilities and 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 then not
that some portion or all of the deferred tax assets will not be realized.
(8) Fair value of financial instruments:
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable and note payable approximate fair value
because of the short maturity of these instruments.
NOTE C - INVENTORIES
Inventories consist of the following at June 30, 2001:
Raw materials $ 82,000
Work in progress 6,000
Completed product 7,000
-----------
$ 95,000
-----------
-----------
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows at June 30, 2001:
Equipment - office $ 55,000
Machinery and equipment 46,000
-----------
101,000
Less accumulated depreciation 90,000
-----------
$ 11,000
-----------
-----------
Depreciation expense amounted to $8,000 and $10,000 for the years ended June
30, 2001 and 2000, respectively.
F-7
WATER SCIENCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
NOTE E - PAYABLE TO RELATED PARTY
The Company has a noninterest-bearing payable to a vendor for the purchase of
stationary and other supplies. The proprietor of this vendor is the father of
the President of the Company. The payable balance is $34,000 at June 30, 2001.
NOTE F - NOTE PAYABLE - OTHER
Note payable - other represented indebtedness to a vendor. The note was payable
in monthly installments of $3,000 with interest imputed at 7%. In March 2002
the note was paid in full (see Note I).
NOTE G - INCOME TAXES
At June 30, 2001, the Company had available federal net operating loss
carryforwards to reduce future taxable income, if any, of approximately
$239,000. The net operating loss carryforwards expire at various dates
through 2021.
The Company had deferred tax assets of approximately $100,000 at June 30, 2001,
resulting primarily from net operating loss carryforwards. The deferred tax
assets have been fully offset by a valuation allowance resulting from the
uncertainty surrounding the future realization of the net operating loss
carryforwards.
Provision for income taxes consisted of the following:
Year Ended
June 30,
-------------------------
2001 2000
----------- -----------
Current $ 3,000 $ -
Deferred (benefit) (3,000) -
----------- -----------
$ - $ -
----------- -----------
----------- -----------
Deferred tax benefit for the year ended June 30, 2001 resulted from the
utilization of net operating loss carryforwards.
F-8
WATER SCIENCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
NOTE H - COMMITMENTS
The Company occupies office space in Arizona. As of June 30, 2001, future
minimum commitments under an office lease is as follows:
Year Ending
June 30,
---------------
2002 $ 12,000
------------
------------
Rent expense amounted to $106,000 and $101,000 for the years ended June 30, 2001
and 2000, respectively.
NOTE I - SUBSEQUENT EVENTS
On March 19, 2002 AquaCell Technologies, Inc. ("AQA") acquired all of the issued
and outstanding common stock of the Company. As consideration AQA issued an
aggregate of 203,252 shares of its common stock, valued at $1,000,000, to the
four stockholders of the Company. In addition, AQA issued to various creditors
of the Company an aggregate of 55,337 shares of its common stock, valued at
$190,000, as consideration for payment of certain accounts payable in the amount
of $168,000 and note payable in the amount of $22,000.
The Company rents office space and manufacturing facilities on a month-to-month
basis from AQA effective October, 2001. AQA holds the lease for these
facilities under a five-year lease at a minimum annual rental of $45,000.
The Company entered into a five-year employment contract with its President.
The agreement calls for a minimum annual salary of $100,000 to take effect
July 1, 2002.
F-9
Unaudited Pro Forma Consolidated Financial Statements
The unaudited pro forma consolidated balance sheet as of December 31, 2001 and
the unaudited pro forma consolidated statements of operations for year needed
June 30, 2001 and the six months ended December 31, 2001 include the
consolidated accounts of AquaCell Technologies, Inc. (AQA) and Water Science
Technologies, Inc. (WST). The unaudited pro forma consolidated financial
statements have been prepared to illustrate the estimated effects of the
acquisition of WST. The acquisition is accounted for under the purchase method
of accounting. The unaudited pro forma consolidated financial statements were
derived by adjusting the historical financial statements of AQA and WST for
certain transactions pursuant to the acquisition described in the notes to the
unaudited consolidated pro forma financial statements.
The unaudited pro forma consolidated balance sheet and unaudited pro forma
consolidated statement of operations for the six months ended December 31, 2001
were prepared as if the acquisition had occurred on July 1, 2001.
The unaudited consolidated statement of operations for the year ended June 30,
2001 was prepared as if the acquisition was effective from July 1, 2000.
The unaudited pro forma consolidated financial data does not purport to be
indicative of the results which actually could have been obtained had such
transactions been completed as of the assumed dates or which may be obtained in
the future. The unaudited pro forma consolidated financial data should be read
in conjunction with the financial statements of AQA and WST.
F-10
AQUACELL TECHNOLOGIES, INC. AND WATER SCIENCE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
AquaCell Water Science
Technologies, Technologies,
Inc. Inc. Pro Forma Adjustments Consolidated
------------- ------------- ---------------------------------- -------------
ASSETS
Current assets:
Cash $ 7,000 $ 14,000 $ 21,000
Notes receivable, including
accrued interest 1,329,000 1,329,000
Accounts receivable, net 62,000 66,000 128,000
Inventories 90,000 59,000 149,000
Prepaid expenses and other current assets 293,000 2,000 3) $ 19,000 276,000
------------- ------------- ------------- -------------
Total current assets 1,781,000 141,000 19,000 1,903,000
Property and equipment, net 67,000 12,000 79,000
Other assets:
Goodwill 1) $ 1,270,000 1,270,000
Investment in Corbett Water Technologies, Inc. 274,000 274,000
Patents, net 132,000 132,000
Security deposits 12,000 5,000 17,000
------------- ------------- ------------- ------------- -------------
$ 2,266,000 $ 158,000 $ 1,270,000 $ 19,000 $ 3,675,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
LIABILITIES
Current liabilities:
Accounts payable $ 322,000 $ 347,000 2) $ 168,000 $ 482,000
3) 19,000
Accrued expenses 175,000 28,000 203,000
Note payable - other 22,000 2) 22,000 -
Customer deposits 11,000 11,000
------------- ------------- ------------- -------------
Total current liabilities 497,000 408,000 209,000 696,000
------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock 8,000 2,000 1) 2,000 1) $ 1,000 10,000
2) 1,000
Additional paid-in capital 11,465,000 313,000 1) 313,000 3) 999,000 12,653,000
2) 189,000
Accumulated deficit (9,330,000) (565,000) 1) 585,000 (9,310,000)
------------- ------------- ------------- ------------- -------------
2,143,000 (250,000) 315,000 1,775,000 3,353,000
Unamortized deferred compensation (374,000) (374,000)
------------- ------------- ------------- ------------- -------------
1,769,000 (250,000) 315,000 1,775,000 2,979,000
------------- ------------- ------------- ------------- -------------
$ 2,266,000 $ 158,000 $ 524,000 $ 1,775,000 $ 3,675,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
See notes to unaudited pro forma consolidated balance sheet.
F-11
Notes to Unaudited Pro Forma Consolidated Balance Sheet
1) Represents $1,000,000 value of 203,252 shares of common stock of AQA issued
to stockholders of WST, the elimination of the equity accounts of WST and
the recording of the resulting goodwill in consolidation.
2) Represents $190,000 value of 55,337 shares of common stock of AquaCell
issued to vendors and a note holder of WST in settlement of debt.
3) Represents elimination of intercompany account between AQA and WST.
F-12
AQUACELL TECHNOLOGIES, INC. AND WATER SCIENCE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JUNE 30, 2001
AquaCell Water Science
Technologies, Technologies,
Inc. Inc. Consolidated
------------- ------------- --------------
Net revenues $ 191,000 $ 1,153,000 $ 1,344,000
Cost of sales 82,000 646,000 728,000
------------- ------------- --------------
Gross profit 109,000 507,000 616,000
------------- ------------- --------------
Selling, general and administrative expenses:
Salaries and wages 602,000 224,000 826,000
Legal, accounting and other
professional expenses 521,000 - 521,000
Other 764,000 259,000 1,023,000
Reduction of notes receivable
carrying amount to fair value 365,000 - 365,0000
------------- ------------- --------------
2,252,000 483,000 2,735,000
------------- ------------- --------------
Income (loss) from operations before other
(expenses) income and extraordinary item (2,143,000) 24,000 (2,119,000)
------------- ------------- --------------
Other (expense) income:
Amortization of debt discount (695,000) (695,000)
Interest expense (116,000) (5,000) (121,000)
Interest income 56,000 56,000
------------- ------------- --------------
(755,000) (5,000) (760,000)
------------- ------------- --------------
Net income (loss) before extraordinary item (2,898,000) 19,000 (2,879,000)
Extraordinary item (163,000) (163,000)
------------- ------------- --------------
Net income (loss) $ (3,061,000) $ 19,000 $ (3,042,000)
------------- ------------- --------------
------------- ------------- --------------
Net loss per common share - basic and diluted:
Net loss before extraordinary item $ (0.46) $ (0.43)
Extraordinary item (0.02) (0.02)
------------- ------------- --------------
Net loss per common share $ (0.48) $ (0.45)
------------- ------------- --------------
------------- ------------- --------------
Weighted average common shares
outstanding - basic and diluted 6,339,000 6,698,000
------------- ------------- --------------
------------- ------------- --------------
F-13
AQUACELL TECHNOLOGIES, INC. AND WATER SCIENCE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED DECEMBER 31, 2001
AquaCell Water Science
Technologies, Technologies,
Inc. Inc. Consolidated
------------- ------------- --------------
Net revenues $ 156,000 $ 355,000 $ 511,000
Cost of sales 63,000 258,000 321,000
------------- ------------- --------------
Gross profit 93,000 97,000 190,000
Selling, general and administrative expenses:
Salaries and wages 467,000 96,000 563,000
Legal, accounting and other
professional expenses 267,000 - 267,000
Stock based compensation 450,000 - 450,000
Other 517,000 98,000 615,000
------------- ------------- --------------
1,701,000 194,000 1,895,000
------------- ------------- --------------
Loss from operations before other
(expenses) income (1,608,000) (97,000) (1,705,000)
------------- ------------- --------------
Other (expenses) income:
Impairment loss on investment in
Corbett Water Technologies, Inc. (1,226,000) (1,226,000)
Interest expense (1,000) (1,000)
Interest income 75,000 75,000
Other income 100,000 100,000
------------- ------------- --------------
(1,051,000) (1,000) (1,052,000)
------------- ------------- --------------
Net loss $ (2,659,000) $ (98,000) $ (2,757,000)
------------- ------------- --------------
------------- ------------- --------------
Net loss per common share
basic and diluted $ (0.33) $ (0.34)
------------- ------------- --------------
------------- ------------- --------------
Weighted average common shares
outstanding - basic and diluted 7,947,000 8,206,000
------------- ------------- --------------
------------- ------------- --------------
F-14