<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number: 0-24682
WORLDWIDE PETROMOLY, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-7125214
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1300 Post Oak Boulevard, 9th Floor, Houston, Texas 77056
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(Address of principal executive offices including zip code)
(713) 629-8300
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 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___
As of September 30, 1996, 16,007,500 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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WORLDWIDE PETROMOLY, INC.
FORM 10-QSB
INDEX
PART I: FINANCIAL INFORMATION Page No.
Item 1. Financial Information:
Unaudited Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Operations 4
Unaudited Consolidated Statements of Cash Flows 5
Notes to Unaudited Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis or
Plan of Operations 8-9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1996 1996
------------- --------
(Unaudited)(note 1)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 3,375,551 $ 920
Trade Accounts Receivable 47,788 64,561
Inventories 16,965 21,764
Prepaid Expense 735 ---
----------- ---------
Total Current Assets 3,441,039 87,245
----------- ---------
Fixed Assets:
Equipment 18,179 7,500
Less Accumulated Depreciation 1,872 ---
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16,307 7,500
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Other Product Certification and Web Site 59,750 ---
----------- ---------
Total Assets $ 3,517,096 $ 94,745
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank Loan $ --- $ 50,000
Accounts Payable 34,545 153,690
Accrued Expenses 3,950 121,816
----------- ---------
Total Current Liabilities 38,495 325,506
Advances From Stockholder 432,573 432,573
----------- ---------
Total Liabilities 471,068 758,079
Stockholders' Equity:
Common Stock, no par value, 800,000,000
shares authorized; 16,007,500 issued and
outstanding at September 30, 500,000 at
June 30; 1,500,000 reserved for stock
options at September 30, 1996 16,007 500
Additional Paid-in Capital 3,885,108 ---
Accumulated Deficit (855,087) (664,834)
----------- ---------
Total Stockholders' Equity (Deficit) 3,046,028 (664,334)
----------- ---------
Total Liabilities and
Stockholders' Equity $ 3,517,096 $ 94,745
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See accompanying notes to consolidated financial statements
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended
September 30
1996 1995
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(Unaudited)(note 1)
Net Sales $ 21,314 $ 16,770
Cost of Sales 17,264 13,249
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Gross Profit 4,050 3,521
Selling, Administrative and General Expenses 250,229 86,778
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Loss From Operations (246,179) (83,257)
Other Income, Net 55,426 3,309
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Net Loss $ (190,753) $ (79,948)
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Net Loss per Share $ (.012) $ (.005)
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Weighted Average Number of Shares Outstanding 16,007,500 16,007,500
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See accompanying notes to consolidated financial statements
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three Months ended
September 30
1996 1995
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(Unaudited)(note 1)
Cash Flows from Operating Activities:
Net Loss $ (190,753) $(79,948)
Adjustments to reconcile
Net Loss to Net Cash
Depreciation 1,872 ---
Changes in Assets and Liabilities
Accounts Receivable 16,773 51,907
Inventories 4,799 ---
Prepaid Expense (735) ---
Accounts Payable and Accrued Expenses (237,011) 49,503
---------- --------
Net Cash provided by (used in) in
Operating Activities (405,055) 21,462
---------- --------
Cash Flows from Investing Activities:
Product Certification and Web Site Costs (59,750) ---
Purchase of Equipment (10,679) ---
---------- --------
Net Cash used in Investing Activities (70,429) ---
---------- --------
Cash Flows from Financing Activities:
Issuance of Common Stock, Net of Expense 3,900,115 ---
Repayment of Bank Loans (50,000) (65,836)
Loans from Shareholder --- 43,000
---------- --------
Cash Flows provided by (used for)
Financing Activities 3,850,115 (22,836)
---------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents 3,374,631 (1,374)
Cash and Cash Equivalents,
Beginning of Period 920 11,299
---------- --------
Cash and Cash Equivalents,
End of Period $3,375,551 $ 9,925
---------- --------
See accompanying notes to consolidated financial statements.
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WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Worldwide PetroMoly, Inc.
(the "Company") and its wholly-owned subsidiary Worldwide PetroMoly
Corporation ("PetroMoly") have been prepared in accordance with the
instructions and requirements of Form 10-QSB and, therefore, do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, such financial
statements reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the results of operations and
financial position for the interim periods presented. Operating results for
the interim periods are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read in
conjunction with the Company's annual report on Form 10-KSB.
These financial statements give effect to the July 22, 1996 reverse
acquisition whereby Ogden, McDonald & Company (name subsequently changed to
Worldwide PetroMoly, Inc.) acquired all of the outstanding common stock of
Worldwide PetroMoly Corporation; as if the transaction occurred on July 1,
1995.
NOTE 2 - CAPITAL TRANSACTIONS
On July 22, 1996, the Company effected a 3-for-1 stock split which increased
its issued and outstanding common stock to 1,500,000 shares.
On July 22, 1996, the Company offered one share of its common stock for each
share of PetroMoly's common stock outstanding, or a total of 14,507,500
restricted shares (after the 3-for-1 stock split).
The accompanying unaudited financial statements reflect the net proceeds from
PetroMoly's private offering and the effect of the Company's 3-1 stock split
whereby its common stock issued and outstanding immediately after the above
transactions was 16,007,500 shares, consisting of 1,500,000 original shares
issued (after the 3-for-1 stock split) and the reverse acquisition issuance of
14,057,000 shares concurrent with PetroMoly's private offering (after the 3-
for-1 Stock split). Accordingly, the weighted average number of common shares
outstanding in the unaudited statements of loss have been adjusted to reflect
the 3-for 1 stock split.
NOTE 3 - LOSS PER SHARE
Loss per common share is computed by dividing the net loss for the period by
the weighted average number of common shares outstanding (see note 2) during
the period.
NOTE 4 - INCOME TAXES
Deferred taxes have been provided to the extent that the financial statement
basis of assets or liabilities differs from their tax basis at September 30,
1996 and June 30, 1996. The deferred tax assets at September 30, 1996 and
June 30, 1996 consist of the following:
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WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - INCOME TAXES (Continued)
September 30, 1996 June 30, 1996
------------------ -------------
Tax loss carryforwards $ 291,000 $ 195,000
Lawsuit settlement -0- 31,000
Deferred tax asset 291,000 226,000
Deferred tax asset valuation
allowance (291,000) (226,000)
Deferred tax liability
At September 30, 1996, the Company had a net operating loss carryforward for
income tax reporting purposes of approximately $855,000 available to offset
future years taxable income through 2008-2011.
NOTE 5 - PREFERRED STOCK
The Company has authorized 10,000,000 shares of no par preferred stock, none
of which is issued or outstanding.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OPERATIONS.
RESULTS OF OPERATIONS - WORLDWIDE PETROMOLY INC. ("THE COMPANY")
During the fiscal quarter ended September 30, 1996 (also referred to as the
first fiscal quarter or the third calendar quarter), the Company has invested
in recruiting and training a new sales force and establishing the Company's
infrastructure. It also did extensive field testing in an effort to expand
the customer base, while taking advantage of a seasonal slow period of
purchasing by some industrial consumers.
While keeping in perspective, this quarter's acquisition of Worldwide
PetroMoly Corporation by Ogden McDonnald (name changed to Worldwide PetroMoly
Inc.), the Company's structure has changed significantly to reflect the
activities of this subsidiary. These activities include the hiring of
experienced personnel, relocating the corporate headquarters, purchasing new
equipment, and redesigning and upgrading the corporate image and sales support
with a new logo, website, brochures, product labels and packaging.
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1995
Total net sales for the quarter ended September 30, 1996, was $21,314 as
compared to $16,770 for the quarter ended September 30, 1995, a 27% increase.
This particular quarter has followed a seasonal trend in which most of
PetroMoly's past customers are still using pre-purchased inventory from the
previous quarter, and will likely be reordering within the next two quarters.
This includes the major railroad customer which accounted for approximately
80% of the sales in calendar 1995 and 59% of the sales in calendar 1994.
While the two quarters are somewhat similar in gross sales and cost of sales,
the Company's activities are very different because of the receipt of
$3,900,115 net proceeds and the July 22, 1996 acquisition of Worldwide
PetroMoly Corporation . Since the acquisition, focus has partly been on
hiring and familiarizing an industry-experienced marketing team which will be
able to capitalize on the relatively new product technology. This includes
hiring a new president, James Danner, a former Pennzoil senior executive. The
sales focus has been on securing commitments and endorsements from several
large national and multinational corporations that are considered leaders in
their various industries. As the analysis of the product utilization by these
various customers has been extremely positive and resolute, the sales volume
and relative margins have been undervalued due to the promotional prices and
practices allowed by management during this period. The company expects sales
volume to increase significantly by the first calendar quarter of 1997 as the
promotional activities come to fruition.
Cost of sales as a percentage of net sales increased slightly from 79% for the
quarter ended September 30, 1995, to 81% for the year ended September 30,
1996. This percentage was nearly the same for both quarters because the
specifications and formulation for the products sold were essentially the
same. The Company is currently testing reformulations of its products to see
if the products can be made more cost effectively, thus reducing the cost of
sales in the future. Additionally, the projected increase in sales volume
will also reduce cost of sales due to economies of scale.
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<PAGE>
Selling, general and administrative expenses increased from $86,778 for the
quarter ended September 30, 1995, to $250,229 for the quarter ended September
30, 1996, an 188% increase. As a percentage of net sales, selling, general
and administrative expenses increased from 517% in the third calendar quarter
of 1995 to 1,174% in the third calendar quarter of 1996. The primary reason
for the increase was the widespread expansion and promotional efforts that
took place by design after the acquisition in July 1996.
Other income increased from $3,309 in the quarter ended September 30, 1995, to
$55,426 in the quarter ended September 30, 1996. $38,000 of this quarter's
other income was a result of income realized when a $90,000 accrued liability
was settled for $52,000. This liability arose when the subsidiary was
organized in 1993. The balance of $17,426 reflects the interest income from
cash reserves.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1996, the Company had a working capital of $3,402,544,
compared to a working capital deficit of ($238,261) at June 30, 1996. The
change in working capital was primarily due to net cash flows from financing
activities of $3,850,115, compared to ($22,836) for the quarter ended
September 30, 1995. During the 1995 quarter, $43,000 was provided by advances
from the subsidiary's then principal stockholder.
Operating activities for the quarter ended September 30, 1996, utilized cash
of $405,055 as compared to $21,462 of cash provided for the quarter ended
September 30, 1995. The increased utilization of cash resulted from the
significant Company expansion efforts.
Cash flows from investing activities were also significant for the quarter
ended September 30, 1996, as $59,750 was spent on constructing a website, and
for product certification testing.
During July 1996, the subsidiary sold 2,007,500 shares of its common stock at
$2.00 per share in a private offering to non-U.S. investors for total gross
proceeds of $4,015,000 and net proceeds of $3,900,115. These shares were then
exchanged for 2,007,500 of the Company's shares as part of the exchange
transaction described in note 2 to the consolidated financial statements.
As of September 30, 1996, the Company had a $65,000 revolving line of credit
with a bank which expires in December 1996. As of September 30, 1996, there
were no outstanding borrowings under this line of credit.
As of September 30, 1996, the Company had no material commitments for capital
expenditures.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None.
ITEM 2. CHANGES IN SECURITIES - None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
ITEM 5. OTHER INFORMATION - None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Data Schedule: Filed herewith electronically
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated September 19, 1996, reporting
information under ITEM 1 - CHANGES IN REGITRANT'S CERTIFYING ACCOUNTANTS.
The Company filed a report on Form 8-K dated July 22, 1996, and an amendment
thereto, reporting information under ITEM 1 - CHANGES IN CONTROL OF REGISTRANT,
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS and ITEM 5 - FINANCIAL STATEMENTS,
PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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SIGNATURES
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.
WORLDWIDE PETROMOLY, INC.
By:/s/ Gilbert Gertner
Gilbert Gertner
Chairman of the Board of Directors
Date: November 18, 1996
By:/s/ Lance Rosmarin
Lance Rosmarin
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed balance sheets and unaudited condensed statements of
income found on pages 3 and 4 of the Company's Form 10-QSB for the year
to date, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,375,551
<SECURITIES> 0
<RECEIVABLES> 47,788
<ALLOWANCES> 0
<INVENTORY> 16,965
<CURRENT-ASSETS> 3,441,039
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,517,096
<CURRENT-LIABILITIES> 38,495
<BONDS> 0
<COMMON> 16,007
0
0
<OTHER-SE> 3,030,021
<TOTAL-LIABILITY-AND-EQUITY> 3,517,096
<SALES> 21,314
<TOTAL-REVENUES> 21,314
<CGS> 17,264
<TOTAL-COSTS> 17,264
<OTHER-EXPENSES> 250,229
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (246,179)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 55,426
<CHANGES> 0
<NET-INCOME> (190,753)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
