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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark one)
_X_ Quarterly report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2004.
___ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 1-16165
AQUACELL TECHNOLOGIES, INC.
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(Exact Name of Small Business Issuers as Specified in its Charter)
Delaware 33-0750453
------------------------ ------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
10410 Trademark Street
Rancho Cucamonga, CA 91730
----------------------------------------
(Address of Principal Executive Offices)
(909) 987-0456
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
Securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $.001 par value 13,426,428 shares outstanding as of May 14, 2004.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ ]
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AQUACELL TECHNOLOGIES, INC.
FORM 1O-QSB
FOR THE QUARTER ENDED MARCH 31, 2004
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements: PAGE
Condensed Consolidated Balance Sheet as of March 31, 2004............. 1
Condensed Consolidated Statements of Operations for the three and nine
month periods ended March 31, 2004 and 2003........................... 2
Condensed Consolidated Statements of Cash Flow for the nine month
periods ended March 31, 2004 and 2003................................. 3
Notes to Condensed Consolidated Financial Statements.................. 5
Item 2. Managements Discussion and Analysis................................... 8
Forward-Looking Statements............................................ 8
Overview.............................................................. 8
Results of Operations................................................. 9
Liquidity and Capital Resources.......................................10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...................11
Item 6. Exhibits and Reports on Form 8-K......................................12
Signature.....................................................................12
Index to Exhibits.............................................................13
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2004
(Unaudited)
ASSETS
Current assets:
Cash...................................................... $ 225,000
Notes receivable, including accrued interest of $2,000.... 25,000
Accounts receivable, net of allowance of $25,000.......... 44,000
Inventories............................................... 545,000
Prepaid expenses and other current assets................. 57,000
----------------
Total current assets................................. 896,000
----------------
Property and equipment, net.................................... 28,000
----------------
Other assets:
Goodwill.................................................. 1,042,000
Patents, net.............................................. 82,000
Security deposits......................................... 13,000
----------------
Total other assets................................... 1,137,000
----------------
$ 2,061,000
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 371,000
Accrued expenses.......................................... 573,000
Preferred stock dividend payable.......................... 9,000
Customer deposits......................................... 38,000
Installment note payable.................................. 4,000
Current portion of deferred payable-derivative............ 20,000
----------------
Total current liabilities............................ 1,015,000
Deferred payable-derivative, net of current portion............ 442,000
----------------
Total liabilities.................................... 1,457,000
----------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock - Class A, par value $.00l;
1,870,000 shares authorized;
675,000 shares issued and outstanding....................... 1,000
Preferred stock, par value $.001;
8,130,000 shares authorized;
no shares issued............................................ -
Common stock, par value $.001;
40,000,000 shares authorized;
12,774,255 shares issued and outstanding.................... 13,000
Additional paid-in capital..................................... 19,137,000
Accumulated deficit............................................ (16,334,000)
----------------
2,815,000
Unamortized deferred compensation.............................. (2,211,000)
----------------
Total stockholders' equity........................... 604,000
----------------
$ 2,061,000
================
See notes to condensed consolidated financial statements.
1
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenue:
Net sales ............... $ 117,000 $ 188,000 $ 517,000 $ 1,322,000
Rental income............ - 1,000 1,000 5,000
------------ ------------ ------------ ------------
117,000 189,000 518,000 1,327,000
Cost of sales.............. 79,000 139,000 356,000 743,000
------------ ------------ ------------ ------------
Gross profit............... 38,000 50,000 162,000 584,000
------------ ------------ ------------ ------------
Selling, general and
administrative expenses:
Salaries and wages....... 318,000 329,000 1,019,000 922,000
Legal, accounting and
other professional
expenses................ 42,000 36,000 142,000 140,000
Consulting fees and
expenses-research and
development............. 38,000 - 100,000 -
Stock based compensation. 233,000 56,000 835,000 156,000
Fair value adjustment
of derivative........... (72,000) - 322,000 -
Write-off of accrued
interest on notes....... - - 48,000 -
Recovery of notes
receivable reserve...... - (57,000) - (57,000)
Other.................... 413,000 257,000 987,000 779,000
------------ ------------ ------------ ------------
972,000 621,000 3,453,000 1,940,000
------------ ------------ ------------ ------------
Loss from operations before
other (expense) income.... (934,000) (571,000) (3,291,000) (1,356,000)
------------ ------------ ------------ ------------
Other (expense) income:
Interest expense......... - (14,000) - (36,000)
Interest income.......... 1,000 13,000 2,000 45,000
Amortization of loan fee. - (58,000) - (58,000)
------------ ------------ ------------ ------------
1,000 (59,000) 2,000 (49,000)
------------ ------------ ------------ ------------
Net loss for the period.... $ (933,000) $ (630,000) $(3,289,000) $(1,405,000)
============ ============ ============ ============
Weighted average shares
outstanding- basic and
diluted................... 12,274,000 8,692,000 10,768,000 8,631,000
============ ============ ============ ============
Loss attributable to
common stockholders:
Net loss................. $ (933,000) $ (630,000) $(3,289,000) $(1,405,000)
Preferred stock dividends 9,000 - 41,000 -
------------ ------------ ------------ ------------
Loss attributable to
common stockholders..... $ (942,000) $ (630,000) $(3,330,000) $(1,405,000)
============ ============ ============ ============
Net loss per common share.. $ (0.08) $ (0.07) $ (0.31) $ (0.16)
============ ============ ============ ============
See notes to condensed consolidated financial statements.
2
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
--------------------------
2004 2003
------------ ------------
Cash flows from operating activities:
Net loss ........................................... $(3,289,000) $(1,405,000)
Adjustment to reconcile net loss to net cash used
in operating activities:
Write-off of accrued interest on notes
receivable....................................... 48,000 -
Fair value adjustment of derivative............... 322,000 -
Stock based compensation.......................... 835,000 156,000
Amortization of loan fee.......................... - 58,000
Depreciation and amortization..................... 42,000 46,000
Reduction of reserve on notes receivable.......... - (57,000)
Changes in:
Accounts receivable............................... 30,000 (109,000)
Accrued interest receivable....................... 19,000 (44,000)
Prepaid expenses and other current assets......... 85,000 100,000
Inventories....................................... (467,000) 4,000
Accounts payable.................................. (397,000) 18,000
Accrued expenses.................................. 71,000 631,000
Customer deposits................................. 15,000 13,000
Other............................................. 4,000 5,000
------------ ------------
Net cash used in operating activities.......... (2,682,000) (584,000)
------------ ------------
Cash flows from investing activities:
Notes issued for purchase of property and
equipment, net of payments....................... (3,000) 8,000
Collections on notes receivable................... 68,000 -
Purchase of property and equipment................ (10,000) (12,000)
------------ ------------
Net cash provided by (used in) investing
activities.................................... 55,000 (4,000)
------------ ------------
Cash flows from financing activities:
Proceeds from private placements of
preferred stock.................................. - 311,000
Proceeds from private placements of common stock.. 3,205,000 -
Expenses of common stock offerings................ (305,000) -
Preferred stock dividends paid.................... (44,000) -
Exercise of stock options and warrants............ 44,000 -
Loan from unrelated third party................... - 100,000
Proceeds of loans from finance company,
net of repayments................................ - 177,000
Proceeds (repayments) of loans from
related parties, net............................. (80,000) 50,000
------------ ------------
Net cash provided by financing activities...... 2,820,000 638,000
------------ ------------
See notes to condensed consolidated financial statements.
3
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Nine Months Ended
March 31,
--------------------------
2004 2003
------------ ------------
Increase (decrease) in cash......................... $ 193,000 $ 50,000
Cash, beginning of period......................... 32,000 51,000
------------ ------------
Cash, end of period............................... $ 225,000 $ 101,000
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest............................ $ - $ 20,000
------------ ------------
Supplemental schedule of non-cash investing and
financing activities:
Issuance of preferred stock in private placement
for expenses of the offering....................... $ - $ 25,000
Issuance of common stock as loan fee................ $ - $ 62,000
Issuance of common stock and warrants for services
to the company..................................... $ 2,707,000 $ 55,000
Retirement of 82,422 shares of treasury stock....... $ - $ 251,000
Principal payments on notes receivable by
conversion of accrued officers' salaries........... $ - $ 437,000
Receivable on preferred stock....................... $ - $ 95,000
Conversion of inventory to depreciable assets for
advertising program................................ $ 6,000 $ -
Dividends payable on preferred stock................ $ 9,000 $ -
Write-off of notes receivable against reserve....... $ 177,000 $ -
Conversion of 510,000 shares of preferred stock to
common stock....................................... $ - $ -
Accrued legal fees paid as consideration for
warrant exercise................................... $ 33,000 $ -
Legal fees prepaid as consideration for warrant
exercise........................................... $ 19,000 $ -
See notes to condensed consolidated financial statements
4
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004 (Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of AquaCell Technologies, Inc. and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting principles
for interim financial information and with instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for the nine months ended March 31, 2004 are
not necessarily indicative of the results to be expected for the full year. For
further information, refer to the Company's annual report filed on Form 10-KSB
for the year ended June 30, 2003.
NOTE B - NOTES RECEIVABLE
At March 31, 2004, the notes receivable consisted of a note with a balance
of $23,000 due from a non-director/non-employee stockholder. The note, bearing
an annual interest rate of 8%, is unsecured and matured October 2002. The note
that matured in October 2002 was extended for one year. In July 2003 the Company
received a $68,000 principal payment plus accrued interest on this note and
extended the remaining balance to June 30, 2004.
At March 31, 2004, notes receivable from non-director/non-employee
stockholders and entities owned by them, in the amount of $177,000, were written
off against the balance of the reserve against these notes in the amount of
$177,000. Accrued interest of $48,000, in connection with these notes, was also
written off at December 31, 2003.
Interest receivable at March 31, 2004 amounted to $2,000.
NOTE C - INVENTORIES
Inventories consist of the following at March 31, 2004:
Raw materials....................................... $ 238,000
Work in progress.................................... 61,000
Finished goods...................................... 246,000
-----------
$ 545,000
===========
5
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004 (Unaudited)
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows at March 31, 2004:
Furniture and fixtures.............................. $ 35,000
Equipment - office.................................. 100,000
Machinery and equipment............................. 127,000
Rental units........................................ 9,000
Leasehold improvements.............................. 10,000
Truck............................................... 11,000
Coolers placed for advertising program.............. 6,000
-----------
298,000
Less accumulated depreciation....................... 270,000
-----------
$ 28,000
===========
NOTE E - INSTALLMENT NOTE PAYABLE
At March 31, 2004 installment note payable consists of a note, secured by a
truck, payable in monthly payments of $342 through February 2005.
NOTE F - EQUITY TRANSACTIONS
During July through September 2003 the Company completed a private
placement of 1,703,000 shares of its common stock. The offering consists of one
share of common stock at a price of $1.50 per share and one common stock
purchase warrant exercisable at $4.00 per share. The warrant contains a call
feature. The Company received proceeds of $2,296,000 net of expenses of
$259,000. In connection with the offering the placement agent received 341,000
common stock purchase warrants exercisable at $4.00 per share.
During August 2003 the Company entered into marketing and consulting
agreements with five separate entities. Consideration for these agreements
included cash fees of $45,000 and 1,250,000 warrants to purchase shares of
common stock of the Company at a price of $.01 per share. These warrants were
valued at $2,564,000 utilizing the Black-Scholes valuation method. Such amount
will be amortized to expense over the term of the agreements. Amortization
amounted to $533,000 for the six months ended December 31, 2003.
During February 2004 the Company completed a private placement of 650,000
shares of its common stock. The offering consists of one share of common stock
at a price of $1.00 per share and one common stock purchase warrant exercisable
at $1.75 per share. The Company received proceeds of $570,000 net of expenses of
$79,000. In connection with the offering the placement agent received 87,000
common stock purchase warrants exercisable at $1.75 per share.
6
AQUACELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004 (Unaudited)
NOTE F - EQUITY TRANSACTIONS (Continued)
During February 2004 the Company entered into a consulting agreement.
Consideration for this agreement was 150,000 warrants to purchase shares of
common stock of the Company at a price of $1.22 per share. These warrants were
valued at $143,000 utilizing the Black-Scholes valuation method. Such amount
will be amortized to expense over the term of the agreement. Amortization
amounted to $5,000 for the nine months ended March 31, 2004.
NOTE G - DERIVATIVE
For the nine months ended March 31, 2004, the Company recognized a $322,000
charge for the fair value of its put option to Corbett Water Technologies, Inc.
and S & B Technical Products, Inc., regarding the return and cancellation of all
exclusive distribution and marketing rights , which was classified as a
derivative (See Note K(2) to Form 10-KSB). As of March 31, 2004 $844,000 has
been liquidated through sales of 434,078 shares. The Company has calculated fair
value of the unliquidated balance of the put option on the unsold shares
(17,729) using the Black Scholes valuation method utilizing the following
assumptions: risk-free interest rate of 3.1%, volatility of 106% and expected
life of two months at March 31, 2004.
NOTE H - CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentration of
credit risk consists of cash. Such amounts are in excess of FDIC insurance
limits.
NOTE I - SUBSEQUENT EVENTS
During April 2004 the Company completed a private placement of 652,173
shares of its common stock. The offering consists of one share of common stock
at a price of $1.15 per share and one common stock purchase warrant exercisable
at $1.90 per share. The Company received proceeds of $675,000 net of expenses of
$85,000. In connection with the offering the placement agent received 100,000
common stock purchase warrants exercisable at $1.90 per share.
During April 2004 the Company entered into a one-year lease for warehouse
space at the annual rent of $38,000.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
When used in this Form 10-QSB 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.
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 condensed consolidated financial statements and the notes
presented following the condensed consolidated financial statements. The
discussion of results, causes and trends should not be constructed to imply any
conclusion that such results or trends will necessarily continue in the future.
Shortly after the Company's initial public offering in February 2001, we
entered into an exclusive distribution agreement with Corbett Water Technologies
and S&B Technical ("Corbett"), for sales of the Company's flagship patented
self-filling water cooler. The year and one-half relationship with Corbett
proved disastrous to the Company, hampering its marketing plans and costing the
Company significant non-cash losses of almost $2,000,000 during the term of the
agreement, in addition to lost business opportunities over the past year. At
the end of its last fiscal year, the Company was able to negotiate the return of
these exclusive rights. The period ended December 2003 represented the first
period the Company was able to restructure its marketing plan and form new sales
and marketing alliances.
During the nine-months ended March 31, 2004 the Company raised net equity
of approximately $2.9 million to enable the Company to move forward with the
restructuring of its marketing program for its patented self-filling water
cooler, a significant portion of which has been utilized for the manufacturing
of inventory and the related operating costs. This plan primarily focuses on
the "Message On The Bottle" advertising program through its AquaCell Media
subsidiary., in which AquaCell Media installs coolers free of charge in various
locations. AquaCell Media retains ownership of the coolers, and revenue is
generated through the sale of advertising on the band of the cooler's
permanently attached five-gallon bottle, similar to the concept of billboard
advertising.
The coolers are currently being installed in the pharmacy areas of national
chain drug stores and the Company is in negotiations with other retailers
including supermarkets and other national chain stores, for installations of
coolers in those locations as well. The stores in which systems have been
placed literally have customers lined up at the cooler, providing added value
8
for retailers and their customers. Store employees appreciate the patented
feature of the AquaCell cooler that eliminates the necessity of having to change
the bottle.
As presented in the advertisements the Company ran in trade magazines
during April which are available for viewing on the Company's website at
www.aquacell.com, , the "Message On The Bottle" advertising provides a unique
point-of-sale opportunity for manufacturers to reach the consumer. Advertising
on the bottle gets face-to-face impact, and the advertisers also have the option
of advertising on the cups, further reinforcing their brand message and
literally putting it right into the shoppers' hands. The Company is in the
final stages of negotiations with major manufacturers and providers of health
care related products and/or their advertising agencies, for the advertisements
of their products.
The Company has engaged several new marketing partners, including Beau
Dietl & Associates and J.DeKama Associates, who have been instrumental in
assisting the Company to acquire a wide variety of companies for both
advertising and for placement of coolers into retailers. By utilizing these and
other individuals who are responsible for payment of their own expenses, the
Company does not anticipate incurring significant sales and marketing expenses
in the roll-out of this program
The Company is embarking on additional opportunities, which we believe will
provide long-term benefits to the Company.
Results of Operations
During the nine months ended March 31, 2004 on a consolidated basis,
revenues were $518,000 as compared to $1,327,000 for the similar period of the
preceding year. Virtually the entire decrease was attributable to the lack of
sales to Corbett Water Technologies, Inc. (Corbett) the Company's former
exclusive distributor of its patented self-filling water coolers. The Company
went through a lengthy negotiation process to recover its marketing rights, from
Corbett and its parent company S & B Technical Products, Inc. (S&B), during
which time the Company was impeded from pursuing new marketing avenues or
channels of distribution.
Net loss on a consolidated basis, attributable to common stockholders, for
the nine months ended March 31, 2004 was $3,330,000 or $0.31 per share, as
compared to $1,405,000 or $0.16 per share for the same period of the prior year.
The increase in the loss is attributable to the decrease in revenues. Principal
sources of the loss in the aggregate amount of $1,157,000 resulted from stock
based compensation in the amount of $835,000 and a fair value adjustment of a
derivative in the amount of $322,000.
Salaries and wages increased by $97,000 for the nine months ended March 31,
2004 over the prior year. Legal, accounting and other professional expenses
increased by approximately $2,000 for the nine months ended March 31, 2004.
Consulting fees and expenses in connection with the research and development of
new business opportunities and the roll-out of our new AquaCell 1000 cooler,
amounted to $100,000 for the nine months ended March 31, 2004. Stock based
compensation increased by $679,000 to $835,000 for the nine months ended March
31, 2004 resulting from amortization of Black Scholes charges on common stock
purchase warrants issued in connection with marketing and consulting agreements
initiated during the period ended March 31, 2004. Other selling, general and
administrative expenses, consisting primarily of rent - $126,000, telephone and
utilities- $50,000, travel- $46,000, business promotion- $139,000, insurance-
$78,000, and vehicle expenses-$78,000 increased by approximately $208,000 to
9
$987,000 for the nine months ended March 31, 2004. The majority of the
increase was related to the complete overhaul of our marketing plan and
extensive travel and entertainment expenses in connection with developing
relationships with our new marketing partners, retail locations and potential
advertisers.
During the nine months ended March 31, 2004, the Company recorded a fair
value adjustment of a derivative, in connection with a put option relating to
the return and cancellation of all exclusive distribution and marketing rights
from Corbett and S&B in the amount of $322,000.
Liquidity and Capital Resources
During the nine months ended March 31, 2004 we raised, through the
completion of private placements of our common shares, net equity of
approximately $2,871,000.
Cash used by operations during the nine months ended March 31, 2004
amounted to $2,682,000. Net loss of $3,289,000 was reduced by non-cash stock
based compensation in the amount of $835,000, write-off of accrued interest on
notes receivable in the amount of $48,000, fair value adjustment of a derivative
in the amount of $322,000 and depreciation and amortization of $42,000. Cash
used by operations was further increased by an increase in inventories, in
anticipation of our new marketing plan, in the amount of $467,000 and a decrease
in accounts payable in the amount of $397,000. Net loss was further increased by
net changes in accrued interest receivable, prepaid expenses, accrued expenses,
customer deposits and accounts receivable amounting to $220,000.
Cash provided by investing activities during the nine months ended March
31, 2004 represented collections on a note receivable in the amount of $68,000
decreased by expenditures for property and equipment in the amount of $10,000
and decreased by payments on notes issued for the purchase of equipment in the
amount of $3,000.
Cash provided by financing activities was approximately $2,820,000.
Proceeds from sales of common stock in a private placement amounted to
$2,871,000 net of expenses of $305,000. Proceeds from exercise of stock options
amounted to $44,000. The Company paid dividends of $44,000 on its Series A
convertible preferred stock and the repayment of loans to related parties
amounted to $80,000.
We have granted warrants in connection with our initial public offering,
private placements, consulting, marketing and financing agreements that may
generate additional capital of up to approximately $16,300,000 if exercised.
There is no assurance however, that any of the warrants will be exercised.
In connection with the written put option regarding the return and
cancellation of all exclusive distribution and marketing rights from Corbett and
S&B reflected as a derivative in the accompanying financial statements, the
Company has adjusted its liability to $462,000 at March 31, 2004. Such amount
represents the fair value of liability in the event that the counterparty does
not realize $1,339,000 from the sale of its shares owned in the Company. The net
remaining obligation, if any, will be paid from 5% of future revenues to be
generated by the Company's Global Water-Aquacell, Inc. subsidiary.
10
Management believes that its present cash balance and cash flows expected
to be generated from future operations in combination with warrant conversions
or future equity raises will be sufficient to meet presently anticipated needs
for working capital and capital expenditures through at least the next 12
months; however, there can be no assurance in that regard. The Company
presently has no material commitments for future capital expenditures.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this Report the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's chief executive officer and chief financial
officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Rule 13a-14 adopted under the
Securities Exchange Act of 1934. Based upon that evaluation, the chief executive
officer and chief financial officer concluded that the Company's disclosure
controls and procedures are effective. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits.
31.1 CEO's Certification Pursuant to Rule 13a-14(a)/ 15d-14(a)
31.2 CFO's Certification Pursuant to Rule 13a-14(a)/ 15d-14(a)
32.0 Certification Pursuant to 18 U.S.C. Section 1350
B. Reports on Form 8-K.
None.
11
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AquaCell Technologies, Inc.
-----------------------------------
Registrant
Date: May 14, 2004 /s/ Gary S. Wolff
-----------------------------------
Name: Gary S. Wolff
Title: Chief Financial Officer
12
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
31.1 CEO's Certification Pursuant to Rule 13a-14(a)/ 15d-14(a)
31.2 CFO's Certification Pursuant to Rule 13a-14(a)/ 15d-14(a)
32.0 Certification Pursuant to 18 U.S.C. Section 1350
13