________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-QSB
_________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934; For the Quarterly Period Ended: September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 0-24682
WORLDWIDE PETROMOLY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1125214
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1300 Post Oak Boulevard, Suite 1985
Houston, Texas 77056
(Address of principal executive offices, including zip code)
(713) 892-5823
(Registrant's telephone number, including area code)
_________________
Check whether the issuer (1) has 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
PROCEEDINGS 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 court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
At November 16, 1998, 17,317,500 shares of common stock, no par value,
were outstanding.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [x]
________________________________________________________________________________
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONTENTS
--------
Page(s)
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998
(unaudited) and June 30, 1998 3
Consolidated Statements of Operations for the three months
ended September 30, 1998 and 1997 ( both unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended September 30, 1998 and 1997 ( both unaudited) 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 11
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 12
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES 12
- ----------
2
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ---------------------------------------------------------
Current Assets:
Cash and Cash Equivalents $ 12,786 $ 34,375
Certificates of Deposit-Restricted - 276,579
Accounts Receivable:
Trade 42,447 107,720
Affiliated Companies 56,922 38,807
Notes Receivable-Related Parties 99,151 111,151
Inventories 73,522 45,394
Prepaid Expense and Other 28,957 10,840
------------- ------------
Total Current Assets 313,785 624,866
------------- ------------
Property and Equipment, Net (Note 3) 119,653 121,419
------------- ------------
Total Assets $ 433,438 $ 746,285
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------
Current Liabilities:
Accounts Payable and Accrued Expenses $ 306,994 $ 173,592
Notes Payable - 160,000
------------- ------------
Total Current Liabilities 306,994 333,592
Advances From Stockholder 186,263 116,263
------------- ------------
Total Liabilities 493,257 449,855
------------- ------------
Stockholders' Equity:
Preferred stock, no par value, 10,000,000 shares
authorized, none issued -- --
Common stock, no par value, 800,000 shares
authorized; 16,747,500 issued and outstanding;
2,835,000 reserved for stock options 7,493,228 7,493,228
Accumulated Deficit (7,433,409) (7,196,798)
Total Stockholders' Equity 59,819 296,430
------------- ------------
Total Liabilities and Stockholders' Equity $ 433,438 $ 746,285
============= ============
See accompanying notes to consolidated financial statements
</TABLE>
3
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
September 30,
1998 1997
------------- --------------
(Unaudited) (Unaudited)
Net Sales $ 53,136 $ 91,273
Cost of Sales 37,122 65,163
------------- --------------
Gross Profit 16,014 26,110
Selling, Administrative and General Expenses 372,263 416,058
------------- --------------
Loss From Operations (356,249) (389,948)
Other Income, Net 0 3,109
------------- --------------
Net Loss $ (356,249) $ (386,839)
============= ==============
Net Loss per Common Share $ (.02) $ (.02)
============= ==============
Weighted Average Common Shares Outstanding 17,317,500 17,317,500
============= ==============
See accompanying notes to consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three Months Ended
September 30,
1998 1997
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (356,249) $ (386,839)
Adjustments to reconcile
Net Loss to Net Cash used in Operating Activities
Depreciation 6,142 5,000
Changes in Assets and Liabilities
Accounts Receivable 47,158 (22,866)
Inventories (28,128) 31,907
Prepaid Expense and Other Assets 18,117 (4,808)
Accounts Payable and Accrued Expenses 133,402 (63,192)
------------ -------------
Net Cash used in Operating Activities (215,792) (431,182)
------------ -------------
Cash Flows from Investing Activities:
Certificates of Deposit 276,579 (4,620)
Capital Expenditures (4,376) (11,487)
Related Party Loan-Repayments 12,000 32,960
------------ -------------
Net Cash provided by Investing Activities 284,203 16,853
Cash Flows from Financing Activities:
Borrowing/repayment of shareholder loans 70,000 --
Repayments of Notes Payable (160,000) --
------------ -------------
Net Cash Used in Financing Activities (90,000) --
Net decrease in Cash and Cash Equivalents (21,589) (414,329)
Cash and Cash Equivalents, Beginning of Period 34,375 864,555
------------ -------------
Cash and Cash Equivalents, End of Period $ 12,786 $ 450,226
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND BUSINESS
Worldwide PetroMoly, Inc. (the "Company"), a publicly-held Colorado
corporation, is engaged in the marketing and distribution of a line of engine
lubrication products under the tradename "PetroMoly". The Company was formed as
a result of a reverse merger on July 22, 1996, between Ogden, McDonald &
Company ("Ogden McDonald" the former name of the Registrant with the Securities
and Exchange Commission) and Worldwide PetroMoly Corporation ("WPC"). Ogden
McDonald was incorporated in the state of Colorado on October 13,1989, and
became a public "shell" company for the purpose of engaging in selected mergers
and acquisitions. WPC was incorporated in the state of Texas on April 1, 1993,
and prior to the reverse acquisition, was engaged in the same line of business
as the Company. In connection with the reverse merger, Ogden McDonald
acquired all of the outstanding common stock of WPC, and subsequently changed
its name to Worldwide PetroMoly, Inc. WPC is now a wholly owned subsidiary of
the Company.
The Company contracts with independent parties for the blending of its lubricant
products.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of the Company and its
wholly-owned subsidiary WPC 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.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of September 30, 1998
and June 30, 1998:
September 30 June 30
------------ ----------
Office furnishings and equipment $ 136,277 $ 134,536
Machinery and equipment 16,370 13,735
Vehicles 12,062 12,062
------------ ----------
164,709 160,333
Less accumulated depreciation (45,056) (38,914)
------------ ----------
Net property and equipment $ 119,653 $ 121,419
============ ==========
6
<PAGE>
WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - INCOME TAXES
Deferred taxes are determined based on temporary differences between the
financial statement and income tax basis of assets and liabilities as measured
by the enacted tax rates which will be in effect when these differences reverse.
Deferred tax assets are comprised of the following at September 30, 1998:
Net operating loss carryforwards $ 1,955,000
Stock options granted to non-employees 567,000
Amortization expense 25,500
Bad debt expense 7,000
------------
Gross deferred tax asset 2,554,500
------------
Valuation allowance (2,554,500)
------------
Net deferred tax asset $ -
============
The Company has recorded a full valuation allowance against all deferred
tax assets because it could not determine whether it was more likely than not
that the deferred tax asset would be realized against future income.
At September 30, 1998, the Company had net operating loss carryforwards
totaling approximately $5,750,000 available to reduce future taxable income
through the year 2014 (see table).
7
<PAGE>
WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The net operating loss carryforwards expire as follows:
Years ended December 31, Amount
---------------------------------- ---------------
2008 $ 70,000
2009 263,000
2010 112,000
Eighteen months ended June 30, 2012 2,753,000
Year ended June 30 2013 2,202,000
Year ended June 30, 2014 350,000
-----------
Total $ 5,750,000
===========
Note 5 - LOSS PER SHARE
Using the principles set forth in SFAS 128, basic earnings per share
includes no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Dilutive earnings per share reflects the potential dilution of
securities that could share in the earnings of the company. The company was
required to adopt this standard in the second fiscal quarter of 1998. Using the
principles set forth in SFAS 128, basic and diluted earnings per share are
identical.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OPERATIONS.
RESULTS OF OPERATIONS -WORLDWIDE PETROMOLY INC. ("THE COMPANY")
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes. See Consolidated Financial
Statements. Certain statements contained herein are not based on historical
facts, but are forward looking statements that are based upon assumptions about
future conditions that could prove not to be accurate. Actual events,
transaction and results may materially differ from the anticipated events,
transactions or results described in such statements. The Company's ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the existence of demand for and acceptance of the Company's
products and services, regulatory approvals and developments, economic
conditions, the impact of competition and pricing, results of financing efforts
and other factors affecting the Company's business that are beyond the Company's
control. The Company undertakes no obligation and does not intend to update,
revise or otherwise publicly release the result of any revisions to these
forward-looking statements that may be made to reflect events or circumstances.
RESULTS OF OPERATIONS -GENERAL
During the fiscal quarter ended September 30, 1998 (also referred to as the
first fiscal quarter or the third calendar quarter), the Company has invested in
independent laboratory product testing, additional research and development for
new products, creating retail sales brochures, purchasing lab equipment, and web
site modifications. The Company also did additional extensive field-testing in
an effort to expand the Company's industrial customer base, while continuing
to ascertaining specific avenues and alliances for launching a retail and
industrial on using an infomercial. The two areas of focus have been primarily
the commercial and industrial market, and secondarily the retail/passenger car
market. Also, a specially formulated moly racing-oil designed for NASCAR and
INDY style motors is presently being tested by world class racecar drivers.
During this quarter, the Company has added to its customer base, including a
municipality in Florida, The City of Coral Springs. to service their 660
vehicles, including police cars, fire/rescue trucks and public works fleet. The
Company also began new trial periods with several more "fortune 500" firms to
convert their fleets to the Company's lubrication products. Additionally, the
company also signed an agreement with a new distributor, Mooney Oil, a large
independent oil distributor based in Lansing, Michigan to market the Company's
products to their 500 plus customers throughout Michigan. The Company also
performed more due diligence on the direct marketing infomercial format for its
oil additive called "PetroMoly Oil Treatment" and has determined that similar
products in this category have achieved tremendous success. Bringing a new
technology to a proven category, with what the Company believes to be a
superior product with an environmental impact, is expected to increase
the Company's revenues. Additionally, the infomercial format will also give
the Company an opportunity to educate the general public about its
patent-approved lubrication technology. The same technology for suspending and
stabilizing molybdenum is used in both PetroMoly Oil Treatment and PetroMoly. As
The Company is now entering the retail arena, this format can help build a
demand for prospective customers and increase sales for both products.
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
Total net sales for the quarter ended September 30, 1998, was $53,136 compared
to $91,273 for the quarter ended September 30, 1997, a 41% decrease. This
decrease by comparison is due to the European orders that stocked up last year
were not yet ready to reorder more invetory, however, the disparity in cost of
sales is also notable. Cost of sales as a percentage of net sales decreased
from 71% for the quarter ended September 30, 1997, to 69% for the year ended
September 30, 1998. This percentage change was results from improved agreements
with suppliers, freight carriers and toll blenders, along with
streamlining procedures in manufacturing. The Company is continuing its
testing of various new products and interviewing various vendors 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. Management expects the
following quarters to begin a greater trend that reflects the retail campaign
sales, along with the maturing marketing efforts, scheduled to begin at the
beginning of the 1999 calendar year. In the past, the sales focus has been
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 continues to be extremely positive and resolute, the sales
volume and relative margins remain low due to the promotional prices and
practices allowed by management. The Company expects sales volume to increase
significantly during in the first or second calendar quarter of 1999 as
the promotional activities and advertising campaigns come to fruition.
Selling, General and Administrative expenses decreased from $416,058 for the
quarter ended September 30, 1997, to $372,263 for the quarter ended September
30, 1998, a 10.5% decrease. The primary reason for the decrease in expenses for
the compared quarters was the downsizing of the corporate structure, and
relocating of the some of the company's offices in both Houston and Florida.
Management expects that next quarter Selling, General and Administrative will
show a more significant drop due to continued practices of expense cutting where
ever possible, with out sacrifice quality or the Company's image.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1998, the Company had a working capital of $6,791, compared to
$291,274at June 30,1998. The change in working capital was primarily due to
normal general and administrative expenses, as net cash used in Operating
activities for yearly compared quarters was $215,792 for ended September
30,1998 a significant drop compared to $431,182 for ended September 30,1996,
being a 50% decrease. From time to time, the Company's Chairman, Gilbert
Gertner, has loaned money and continues to provide capital to Company as needed.
At this time there has not been a formal agreement on how Mr. Gertner will be
reimbursed and awarded for his contribution, but it is understood that when the
Company has the ability to pay him back and award his support that it will.
At September 30, 1998, the Company had net operating loss carryforwards
totaling approximately $5,750,000 available to reduce future taxable income
through the year 2012 as described in note 4 to the consolidated financial
statements.
Management has been reviewing various financial vehicles and the
possibilities for a capital infusion through equity or debt financing. Some
structures that have been presented by outside parties are more attractive than
others, and Management wants to ensure that the chosen vehicle is the most
beneficial one for the Company's long and short term goals. These goals
consider the need for corporate developments through implementation of its
business plan as well as Shareholder benefits and market conditions. Assuming
the Company does not find agreeable financing in the foreseeable future, the
Company's significant operating losses and working capital deficit raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty
OUTLOOK
In the year ended June 30 1998,the Company's strategic focus was on both
consummating relationships with a group of leaders in the industrial and
retail markets, which are known as opinion leaders of new technologies or have a
high visibility in the market. Management foresees the "testing periods" that
the Company has invested with these groups coming to a natural end during fiscal
1999, followed by significant revenue producing contracts, and testimonials
that will attract other companies in the similar industries for a greater
market share. Any one of the substantial customers that the Company is
presently working with is capable of increasing the volume production to a
much greater economies of scale. These savings will decrease cost of sales,
and possibly decrease the cost to the customers as well.
10
<PAGE>
In 1998, the Company trademarked the name "molytech" that embodies the
Company's proprietary technology that the US patent office accepted and is ready
to be patented. Management is actively pursuing licensing agreements with major
oil companies to utilize molytech in their existing lines, where the Company
would receive royalty income with pre-negotiated minimum volumes.
Management is extremely eager to begin marketing the newly developed oil
additive, PetroMoly Oil Treatment, which uses the same proprietary technology to
suspend molybdenum in motor oil for cars and light trucks. An advertising
campaign is planned for this particular product beginning with an infomercial to
create consumer awareness and educate the general public about the Company's new
technology. This exposure will possibly facilitate a demand for the other
PetroMoly products as well. During this campaign, distribution will be
maintained through fulfillment houses. Later a full-scale retail campaign is
planned as the product is sold in the auto after-market stores and retail
chains. Reports to management show this oil additive product, being a new
technology in a proven direct response category, is projected to carry an
enormous demand.
With a proper financing, along with the progressing sales relationships
maturing and the new product lines being marketed, the Company expects operating
margins and revenues to improve appreciably during fiscal 1999.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 129, Disclosure of Information
about Capital Structure ("SFAS 129"), effective for periods ending after
December 15, 1997, establishes standards for disclosing information about an
entity's capital structure. SFAS 129 requires disclosure of the pertinent
rights and privileges of various securities outstanding (stock, options,
warrants, preferred stock, debt and participating rights) including dividend and
liquidations preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 has had no
effect on the Company as it currently discloses the information specified.
In June 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position are unaffected by
implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) 130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from investments
by owners and distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
SFAS 131, "Disclosure about Segments of a Business Enterprise", establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company only operates in one segment of business, the
marketing and distribution of engine lubrication products.
11
<PAGE>
PART II
OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits -- Financial Data Schedule
(b) Reports on Form 8-K -- None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WORLDWIDE PETROMOLY, INC.
Date: November 23, 1997 By: /s/ Gilbert Gertner
-----------------------
Gilbert Gertner, Chairman, and Chief
Executive Officer
By: /s/ Lance Rosmarin
-------------------------
Lance Rosmarin, President, and Chief
Financial and Accounting Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 12785
<SECURITIES> 951448
<RECEIVABLES> 198520
<ALLOWANCES> 0
<INVENTORY> 73522
<CURRENT-ASSETS> 313785
<PP&E> 119653
<DEPRECIATION> 6142
<TOTAL-ASSETS> 433438
<CURRENT-LIABILITIES> 306994
<BONDS> 0
<COMMON> 6914773
0
0
<OTHER-SE> (5390083)
<TOTAL-LIABILITY-AND-EQUITY> 433438
<SALES> 53136
<TOTAL-REVENUES> 53136
<CGS> 37122
<TOTAL-COSTS> 37122
<OTHER-EXPENSES> 372263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (356249)
<INCOME-TAX> 0
<INCOME-CONTINUING> (356249)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (356249)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
