<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 December 31, 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 December 31, 1996, 16,047,500 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 3-4
Unaudited Consolidated Statements of Operations 5
Unaudited Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and Analysis or
Plan of Operations 9-11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 June 30, 1996
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 2,887,750 $ 920
Trade accounts receivable 58,065 64,561
Notes receivable 725,000 ---
Inventories 40,466 21,764
Prepaid Expense 22,038 ---
Total current assets 3,733,319 87,245
Fixed assets:
Office furniture and equipment 35,890 ---
Warehouse equipment 12,017 ---
Vehicle 11,310 7,500
Leasehold improvements 3,936 ---
63,153 7,500
Less accumulated depreciation
and amortization 5,658 ---
Total fixed assets 57,495 7,500
Other assets
Product certification, less $2,632
accumulated amortization 76,321 ---
Deposits 6,330 ---
Total Other Assets 82,651 ---
Total Assets $ 3,873,465 $ 94,745
(Continued)
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
December 31, 1996 June 30, 1996
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $ 620,000 $ 50,000
Accounts payable 65,289 154,690
Accrued expenses 5,021 121,816
Total current liabilities 690,310 325,506
Advances from stockholder 432,573 432,573
Total liabilities 1,122,883 758,079
Stockholders' equity:
Common stock, no par value, 800,000,000
shares authorized; 16,047,500 and
1,500,000 issued and outstanding re-
spectively; 1,460,000 reserved for
stock options at December, 31 1996 16,047 500
Additional paid-in capital 3,965,569 ---
Accumulated deficit (1,231,034) (664,834)
Total stockholders equity (deficit) 2,750,582 (664,334)
Total liabilities and stockholders'
equity $ 3,873,465 $ 94,745
See accompanying notes to consolidated financial statements.
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended
December 31,1996 December 31,1996
1996 1995 1996 1995
(Unaudited) (Note 1) (Unaudited) (Note 1)
Net sales $ 25,508 $ 121,158 $ 46,822 $ 137,928
Cost of sales 15,565 95,796 32,829 109,045
Gross profit 9,943 25,362 13,993 28,883
Selling, administrative
and general expenses 422,996 11,762 673,225 98,540
Income (loss) from opera-
tions (413,053) 13,600 (659,232) (69,657)
Other income, net 37,606 4,725 93,032 8,034
Net income (loss) $ (375,447) $ 18,325 $(566,200) $ (61,623)
Net income (loss) per
share $ (.024) $ --- $ (.035) $ (.004)
Weighted average number
of shares outstanding 16,007,500 16,007,500 16,007,500 16,007,500
Proforma Proforma
See accompanying notes to consolidated financial statements.
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Six months ended
December 31
1996 1995
(Unaudited) (Note 1)
Cash flows from operating activities:
Net loss $(566,200) $(61,623)
Adjustments to reconcile net loss to
net cash
Depreciation and amortization 8,290 ---
Changes in assets and liabilities
Trade accounts receivable 6,496 42,367
Inventories (18,702) ---
Prepaid expense and deposits (28,368) ---
Accounts payable and accrued
expenses (205,196) (118,004)
Net cash (used) in operating activities (803,680) (137,260)
Cash flows from investing activities:
Capital expenditures (55,653) ---
Product certification costs (78,953) ---
Notes receivable (725,000) ---
Net cash used in investing activities (859,606) ---
Cash flows from financing activities:
Bank borrowings 620,000 ---
Repayment of bank loans (50,000) (65,836)
Loans from shareholder --- 194,914
Issuance of common stock, net of
expense 3,900,115 ---
Exercise of stock options 80,000 ---
Cash flows provided by financing
activities 4,550,115 129,078
Net increase (decrease) in cash and
cash equivalents 2,886,830 (8,182)
Cash and cash equivalents, beginning
of period 920 11,299
Cash and cash equivalents, end
of period $2,887,750 $ 3,117
See accompanying notes to consolidated financial statements.
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WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED SHEETS FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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
14,507,000 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 December 31,
1996 and June 30, 1996. The deferred tax assets at December 31, 1996 and June
30, 1996 consist of the following:
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December 31, June 30,
1996 1996
Tax loss carryforwards $ 418,000 $ 195,000
Lawsuit settlement -0- 31,000
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Deferred tax asset 418,000 226,000
Deferred tax asset valuation
allowance (418,000) (226,000)
--------- ---------
Deferred tax asset-net $ -0- $ -0-
At December 31, 1996, the Company had net operating loss carryforwards for
income tax reporting purposes of approximately $1,230,000 available to offset
future years taxable income through 2008-2011.
NOTE 4 - 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. ("PETROMOLY")
During the fiscal quarter ended December 31, 1996 (also referred to as the
second fiscal quarter or the fourth calendar), the Company has continued to
further establish the Company's infrastructure, as it has for the entire six
months ended December 31, 1996. It also continued extensive field testing and
objective lab testing while several major multinational customers were
undergoing extended final evaluation tests of the PetroMoly products on their
complex high-end machinery and fleet vehicles. These tests have been
complicated and time consuming, but all of the returned results have been
excellent, as the efforts are expected to materialize into revenue producing
contracts and agreements, giving a material rise to the PetroMoly revenues and
customer base within the next two or three fiscal quarters.
As in all of the PetroMoly working agreements, there is usually a test period
that the PetroMoly products are subjected to that can last anywhere from three
to nine months, depending on each market and end users. Railroads, buses and
gas compressor engines, for example, are very expensive and complex machinery,
requiring constant monitoring. The addition of PetroMoly's lubrication
technology to an entire line or fleet is understandably gradual. In some
instances, this test period will be shortened due to the fact that PetroMoly
has subjected its product to EPA sanctioned lab and field tests, that will
document and certify the superior results of PetroMoly engine oil on the most
complex of combustible engines.
While keeping in perspective, last quarter s acquisition of Worldwide
PetroMoly Corporation by Ogden McDonald (name changed to Worldwide PetroMoly
Inc.), the Company s structure has continued to adjust to the activities of
this subsidiary. This quarter these activities include, the testing mentioned
above, purchasing additional new equipment, vastly enhancing the website,
designing and printing both company and product brochures, and increasing
product inventory while taking advantage of the economies of scale at a higher
production volume. The sales department has been aggressively pursuing
international distributorship agreements with Europe, The Gulf States, Mexico,
South American countries, and various countries in the Far East. Each of
these agreements require an initial time and capital investment on PetroMoly's
part due to travel expense, translation of collateral material and sales
training.
REVENUES
Total net sales for the quarter ended December 31, 1996, were $25,508 as
compared to $121,158 for the quarter ended December 31, 1995, a 79% decrease.
These particular quarters are so different because PetroMoly's major railroad
customer pre-purchased inventory in December 1995, and did not order in the
comparable quarter of 1996 due to the surplus that this customer still retains
as purchased in the first calendar quarter. This customer accounted for
approximately 80% of the sales in calendar 1995 and 59% of the sales in
calendar 1994. Total net sales for the six months ended December 31, 1996,
were $46,822 as compared to $137,928 for the six months ended December 31,
1995, a 66% decrease. This decrease is likewise inclusive of the customer's
pre-purchased inventory in December 1995. Net sales are expected to increase
within the next two or three quarters due to the successful field testing that
has transpired during this quarter.
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While the fiscal 1997 quarters are somewhat similar in gross sales and cost of
sales, 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, extensive field testing has predicated the expected increases in
sales volume. The Company expects sales volume to increase significantly by
the first or second calendar quarter of 1997 as the promotional activities
come to fruition.
GROSS PROFIT AS A PERCETAGE OF SALES
1996 1995
Three months ended September 30 21% 21%
Three months ended December 31 39% 21%
Six months ended December 31 30% 21%
Cost of sales as a percentage of net sales decreased from 79% for the quarter
and six months ended December 31, 1995, to 61% for the quarter ended December
31, 1996 and to 70% in the six months ended December 31, 1996. This
percentage drop in cost reflects this quarter's activity by management to take
advantage of economies of scale with larger production runs on inventory, and
negotiating with suppliers-vendors for lower long term pricing. It is
important to note that as the agreements from the large customers come to
fruition, the higher volume runs on production should lower the cost of sales
percentages even more than this fiscal quarter, and likewise raise the profit
margins.
Additionally, as in the last quarter, 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.
SELLING, GENERAL AND ADMINISTRATION
Selling, general and administrative expenses increased from $11,762 for the
quarter ended December 31, 1995, to $422,996 for the quarter ended December
31, 1996, and for the six months ended December 31, 1995, $98,540 to $673,225
for the six months ended December 31, 1996, a 3,496% and 683% increase,
respectively. The primary reason for the increase was the widespread
expansion and promotional efforts that took place by design after the
acquisition in July 1996. The Company's activities are very different because
of the receipt of $3,900,115 net proceeds. Since the funding, 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 vice
president executive, employed for 23 years, as well as other high level
executives to properly administer the Company. The focus has also been on
expanding and improving the product lines, and spending the appropriate and
necessary amount of capital for product certification, packaging and quality
control.
OTHER INCOME
Other income increased from $4,725 in the quarter ended December 31, 1995, to
$37,606 in the quarter ended December 31, 1996. This primarily reflects the
interest income from cash reserves.
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For the six months ended, other income increased to $93,032 from $8,034 in the
comparable six months ended December 31,1995, partly due to interest income,
and as 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.
LIQUIDITY AND CAPITAL RESOURCES (1995 0N A PRO FORMA BASIS)
On December 31, 1996, the Company had a working capital of $3,043,009 compared
to a working capital deficit of ($8,182) at December 31, 1995. The change in
working capital was primarily due to net cash flows from the Company's private
offering and from bank borrowing.
Operating activities for the six months ended December 31, 1996 utilized cash
of $566,200 as compared to $137,260 of cash provided for the six months ended
December 31, 1995. The increased utilization of cash resulted from the
significant Company expansion efforts.
Cash flows from investing activities were also significant for the six months
ended December 31, 1996, as $78,953 was spent on product certification
testing. Additionally, the Company invested $725,000 on highly collateralized
notes receivable that will return at 10% interest of which $700,000 will
mature in the next quarter.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Boards ("FASB") issued
Statement of Financial Accounting Standards No. 121 "Accounting for Impairment
of Long-Lived Assets to be Disposed of" ("FASB" No. 121"). FASB No. 121
requires, among other things, that impairment losses on assets to be held, and
gains or losses from assets that are expected to be disposed of, be included
as a component of income from continuing operations. This statement is
effective for fiscal years beginning after December 15, 1995, with prospective
application. The Company will adopt FASB No. 121 in fiscal 1997, and its
implementation is not expected to have a material effect on the consolidated
financial statements.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 encourages entities to adopt the
fair value method in place of the provision of Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB No. 25"), for
all arrangements under which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of its stock. The Company does not anticipate
adopting the fair value method encouraged by SFAS No. 123, and will continue
to account for such transactions in accordance with APB No. 25. However, the
Company will be required to provide additional disclosures beginning in fiscal
1997 providing pro forma effects as if the Company had elected to adopt SFAS
No. 123.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None.
ITEM 2. CHANGES IN SECURITIES - None.
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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 - None.
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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: February 20, 1997
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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-30-1996
<CASH> 2,887,750
<SECURITIES> 0
<RECEIVABLES> 783,065
<ALLOWANCES> 0
<INVENTORY> 40,466
<CURRENT-ASSETS> 3,733,319
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,873,465
<CURRENT-LIABILITIES> 690,310
<BONDS> 0
<COMMON> 16,047
0
0
<OTHER-SE> 2,734,535
<TOTAL-LIABILITY-AND-EQUITY> 3,873,465
<SALES> 46,822
<TOTAL-REVENUES> 46,822
<CGS> 32,829
<TOTAL-COSTS> 32,829
<OTHER-EXPENSES> 673,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (659,232)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 93,032
<CHANGES> 0
<NET-INCOME> (566,200)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> 0
</TABLE>
