<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 March 31, 1997
Commission File Number: 0-24682
WORLDWIDE PETROMOLY, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-7125214
- ----------------------------- ---------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1300 Post Oak Boulevard, 9th Floor, Houston, Texas 77056
-----------------------------------------------------------
(Address of principal executive offices including zip code)
(713) 629-8300
--------------------------
(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 May 15, 1997, 16,047,500 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
<PAGE>
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 5
Unaudited Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or
Plan of Operations 9
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 11
Signatures 12
-2-
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1997 1996
------------- --------
ASSETS (Unaudited) (note 1)
Current Assets:
Cash and cash equivalents $ 2,769,099 $ 920
Trade accounts receivable 108,201 64,561
Notes receivable 486,666 --
Inventories 90,524 21,764
Prepaid expense 5,305 --
----------- ---------
Total current assets 3,459,795 87,245
----------- ---------
Fixed Assets:
Office furniture and equipment 43,166 --
Warehouse equipment 16,640 --
Vehicle 11,310 7,500
Leasehold improvements 9,269 --
----------- ---------
80,385 7,500
Less accumulated depreciation
and amortization 9,997 --
----------- ---------
Total fixed assets 70,388 7,500
----------- ---------
Other Assets:
Product certification, less $2,632
accumulated amortization 75,005 --
Deposits 14,830 --
----------- ---------
Total Other Assets 89,835 --
----------- ---------
Total Assets $ 3,620,018 $ 94,745
----------- ---------
(Continued)
-3-
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
March 31, June 30,
1997 1996
------------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) (note 1)
Current Liabilities:
Bank loans $ 620,000 $ 50,000
Accounts payable 62,700 154,690
Accrued expenses 6,142 121,816
----------- ---------
Total current liabilities 688,842 325,506
Advances From Stockholder 432,573 432,573
----------- ---------
Total Liabilities 1,121,415 758,079
Stockholders' Equity:
Common Stock, no par value, 800,000,000
shares authorized; 16,047,500 and
1,500,000 issued and outstanding
respectively; 1,460,000 reserved for
stock options at March 31, 1997 16,047 500
Additional Paid-in Capital 3,965,569 ---
Accumulated Deficit (1,483,013) (664,834)
----------- ---------
Total Stockholders' Equity (Deficit) 2,498,603 (664,334)
----------- ---------
Total Liabilities and
Stockholders' Equity $ 3,620,018 $ 94,745
----------- ---------
See accompanying notes to consolidated financial statements
-4-
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Nine months ended
March 31, March 31,
1997 1996 1997 1996
---------- ---------- --------- ----------
(Unaudited) (Note 1) (Unaudited) (Note 1)
Net sales $ 78,255 $ 170,687 $ 125,077 $ 308,615
Cost of sales 54,251 134,843 87,080 243,888
---------- ---------- ---------- ----------
Gross profit 24,004 35,844 37,997 64,727
Selling, administrative
and general expenses 317,480 44,188 990,705 142,728
---------- ---------- ---------- ----------
(Loss)from operations (293,476) (8,344) (952,708) (78,001)
Other income, net 41,497 3,207 134,529 11,241
---------- ---------- ---------- ----------
Net(loss) $ (251,979) $ (5,137) (818,179) (66,760)
---------- ---------- ---------- ----------
Net(loss)per share $ (.016) $ -- (.051) $ (.004)
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding 16,047,500 16,007,500 16,020,834 16,007,500
Proforma Proforma
---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements
-5-
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
Nine Months ended
March 31,
1997 1996
---------- --------
(Unaudited) (Note 1)
Cash flows from operating activities:
Net loss $ (818,179) $(66,760)
Adjustments to reconcile
net loss to net cash:
Depreciation and amortization 13,945 ---
Changes in assets and liabilities
Trade accounts receivable (43,640) (99,178)
Inventories (68,760) (15,634)
Prepaid expense and deposits (20,135) ---
Accounts payable and accrued expenses (206,664) (107,707)
---------- --------
Net cash (used in) in
operating activities (1,143,433) (289,279)
---------- --------
Cash flows from investing activities:
Notes receivable (486,666) ---
Product certification costs (78,953) ---
Capital expenditures (72,885) (7,500)
---------- --------
Net cash used in investing activities (638,504) (7,500)
---------- --------
Cash flows from financing activities:
Bank borrowings 570,000 49,163
Loans from shareholder -- 243,164
Issuance of common stock, net of expense 3,901,616 ---
Exercise of stock options 80,000 ---
---------- --------
Cash flows provided by
financing activities 4,551,616 292,327
---------- --------
Net increase (decrease) in cash and
cash equivalents 2,769,679 (4,452)
Cash and cash equivalents,
beginning of period 920 11,299
---------- --------
Cash and cash equivalents,
end of period $2,770,599 $ 6,847
---------- --------
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
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. Additionally, 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 operations 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 March 31, 1997
and June 30, 1996. The deferred tax assets at March 31, 1997 and June 30,
1996 consist of the following:
-7-
<PAGE>
March 31, June 30,
1997 1996
--------- ---------
Tax loss carryforwards $ 504,000 $ 195,000
Lawsuit settlement -0- 31,000
--------- ---------
Deferred tax asset 504,000 226,000
Deferred tax asset valuation
allowance (504,000) (226,000)
--------- ---------
Deferred tax asset-net $ -0- $ -0-
At March 31, 1997, the Company had net operating loss carryforwards for income
tax reporting purposes of approximately $1,483,000 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.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OPERATIONS
RESULTS OF OPERATIONS - WORLDWIDE PETROMOLY INC. ("PETROMOLY")
During the fiscal quarter ended March 31, 1997 (also referred to as the third
fiscal quarter or the first calendar), the Company has continued to expand the
Company s infrastructure, by adding new sales and sales-support personnel, and
opening a satellite office and warehouse in south Florida. It also continued
extensive field testing with several major multinational customers, as the
customer evaluation tests of the PetroMoly products have been expanded world
wide on various high-end machinery and fleet vehicles. These tests have
continued to be complicated and time consuming, but as in the last quarter,
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 fiscal
quarters.
As described in the last filing, for larger customers 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 user. Railroads,
buses and gas compressor engines, for example, are very expensive and complex
machinery, requiring constant monitoring. The addition of PetroMoly's new
lubrication technology to an entire line or fleet is understandably gradual.
The Company has enjoyed a significant amount of activity due to the test
results that PetroMoly achieved from subjecting its product to EPA sanctioned
lab and field tests, that documented and certified the superior results of
PetroMoly engine oil on the most complex of machinery.
Activities of the latest quarter include the additional field testing
mentioned above, an advertising campaign, purchasing additional new delivery
and operational equipment, designing and printing investor brochures, and
increasing product inventory while taking greater advantage of the economies
of scale at a higher production volume. The international sales department has
produced distributorship agreements with Europe, Mexico, China, and South
American countries. Domestically, the Company added a new railroad customer,
expanded its sales to its customers such as Continental Airlines, and is in
various stages of development with customers such as Fluor Daniel, Browning
Ferris and Greyhound Bus.
REVENUES
Total net sales for the quarter ended March 31, 1997, were $78,255 as compared
to $170,687 for the quarter ended March 31, 1996, a 46% decrease. These
particular quarters are so different because PetroMoly's major railroad
customer purchased product in the quarter ended March 31, 1996, and due to the
surplus that this customer still retains along with some internal changes in
this customer's management structure, this customer has not since re-ordered.
This customer accounted for approximately 80% of the sales in calendar 1995
and 46% of the sales in calendar 1996.
Total net sales for the nine months ended March 31, 1997, were $125,077 as
compared to $308,615 for the nine months ended March 31, 1996, a 41% decrease.
This decrease is likewise due to the railroad customer s purchase of inventory
in March 1996. Net sales for this quarter have increased by 67% from the
previous quarter reflecting a upward trend in sales and a recovery from the
lack of the railroad customer's orders. Net sales are expected to continually
increase due to the successful field testing that has transpired during this
quarter and the previous quarter.
-9-
<PAGE>
With regard to gross sales and cost of sales, the sales focus has continued to
be 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 by these various customers
continues to be extremely positive, extensive field-testing has predicated a
substantial increase in sales volume. As these field-test phases are upgraded
to an ongoing and wide-scale sales phase, the Company expects sales volume to
increase, which should also lead to greater economies of scale from the
product components' venders that will translate to higher margins. These
realizations are anticipated by the second or third calendar quarter of 1997
as the promotional activities come to fruition.
GROSS PROFIT AS A PERCETAGE OF SALES
1997 1996
---- ----
Three months ended March 31 31% 21%
Nine months ended March 31 31% 21%
Cost of sales as a percentage of net sales decreased from 79% for the quarter
and nine months ended March 31, 1996, to 69% for the quarter ended March 31,
1997. 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 continued negotiating with suppliers-vendors for lower long
term pricing.
SELLING, GENERAL AND ADMINISTRATION
Selling, general and administrative expenses increased from $44,188 for the
quarter ended March 31, 1996, to $317,480 for the quarter ended March 31,
1997, and from $142,728 for the nine months ended March 31, 1996, to $990,705
for the nine months ended March 31, 1997, both periods showing a consistent
86% increase. The primary reason for the increase reflects the widespread
expansion and promotional efforts that took place by design after 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 is now
capable of capitalizing on the relatively new product technology and product
lines. This includes hiring a new president, James Danner, a former Pennzoil
vice president executive, employed for 23 years, as well as other high-level
industry 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.
There has also been, and continues to be, a significant company investment to
enhance product awareness through various multi-media sources.
OTHER INCOME
Other income increased from $3,207 in the quarter ended March 31, 1996, to
$41,497 in the quarter ended March 31, 1997. This primarily reflects the
interest income from cash reserves.
For the nine months ended, other income increased to $134,529 from $11,241 in
the comparable nine months ended March 31, 1996, 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
On March 31, 1997, the Company had a working capital of $2,770,953 compared to
a negative working capital of ($238,261) at June 30, 1996. The change in
working
-10-
<PAGE>
capital was primarily due to net cash flows from the Company s private
offering and from bank borrowing.
Operating activities for the nine months ended March 31, 1997 utilized cash of
$1,143,433 as compared to $289,279 of cash utilized during the nine months
ended March 31, 1996. The increased utilization of cash resulted from the
significant Company expansion efforts.
Cash flows from investing activities were also significant for the nine months
ended March 31, 1997, as $78,953 was spent on product certification testing.
Additionally, the Company has invested $486,666 on two collateralized notes
receivable at 10% interest.
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 liabilitiesto 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.
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.
-11-
<PAGE>
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: May 19, 1997
By:/s/ Lance Rosmarin
Lance Rosmarin
Chief Financial Officer
Date: May 19, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
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, 4 and 5 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,769,099
<SECURITIES> 0
<RECEIVABLES> 594,864
<ALLOWANCES> 0
<INVENTORY> 90,524
<CURRENT-ASSETS> 3,459,795
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,620,018
<CURRENT-LIABILITIES> 688,842
<BONDS> 0
<COMMON> 16,047
0
0
<OTHER-SE> 2,482,556
<TOTAL-LIABILITY-AND-EQUITY> 3,620,018
<SALES> 125,077
<TOTAL-REVENUES> 125,077
<CGS> 87,080
<TOTAL-COSTS> 87,080
<OTHER-EXPENSES> 990,705
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (818,179)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (818,179)
<EPS-PRIMARY> (.051)
<EPS-DILUTED> 0
</TABLE>
