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, 2000
[ ] 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 [ ]
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS
At November 17, 2000, 24,748,815 shares of common stock, no par value,
were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONTENTS
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Page(s)
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and June 30, 2000. . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three months
ended September 30, 2000 and 1999 (both unaudited) . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . 8 - 12
PART II - OTHER INFORMATION
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Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 13
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2
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<TABLE>
<CAPTION>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
2000 2000
-------------- ------------
<S> <C> <C>
(Unaudited)
ASSETS
-----------------------------------------------------
Current Assets:
Cash and Cash Equivalents . . . . . . . . . . . . . . . $ 107,122 $ 170,858
Accounts Receivable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . 275,776 411,905
Affiliated Companies. . . . . . . . . . . . . . . . . 5,684 5,684
Inventories . . . . . . . . . . . . . . . . . . . . . . 211,810 198,976
Prepaid Expense and Other . . . . . . . . . . . . . . . 81,173 79,884
-------------- ------------
Total Current Assets. . . . . . . . . . . . . . . . . . 681,565 867,307
-------------- ------------
Property and Equipment, Net (Note 3). . . . . . . . . . 85,271 92,297
-------------- ------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . $ 766,836 $ 959,604
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------
Current Liabilities:
Accounts Payable and Accrued Expenses . . . . . . . . . $ 444,011 $ 556,058
Notes Payable . . . . . . . . . . . . . . . . . . . . . 3,625 3,625
-------------- ------------
Total Current Liabilities . . . . . . . . . . . . . . . 447,636 559,683
Advances From Stockholder . . . . . . . . . . . . . . . 962,378 934,378
-------------- ------------
Total Liabilities . . . . . . . . . . . . . . . . . . . 1,410,014 1,494,061
-------------- ------------
Stockholders' Equity:
Preferred stock, no par value, 10,000,000 shares
authorized, none issued . . . . . . . . . . . . . . . . -- --
Common stock, no par value, 800,000,000 shares
authorized; 24,398,815 issued and outstanding. . . . 12,837,379 12,635,379
Accumulated Deficit . . . . . . . . . . . . . . . . . . (13,480,557) (13,169,836)
Total Stockholders' Equity. . . . . . . . . . . . . . . (643,178) (534,457)
-------------- ------------
Total Liabilities and Stockholders' Equity. . . . . . . $ 766,836 $ 959,604
============== ============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
2000 1999
------------ ------------
(Unaudited) (Unaudited)
Net Sales . . . . . . . . . . . . . . . . . . . . . $ 103,558 $ 188,135
Cost of Sales . . . . . . . . . . . . . . . . . . . 69,489 89,700
------------ ------------
Gross Profit. . . . . . . . . . . . . . . . . . . . 34,069 98,435
Selling, Administrative
and General Expenses. . . . . . . . . . . . . . . . 344,790 365,140
------------ ------------
(Loss) From Operations. . . . . . . . . . . . . . . (310,721) (266,705)
Other Income, Net . . . . . . . . . . . . . . . . . 147,370
------------ ------------
Net (Loss). . . . . . . . . . . . . . . . . . . . . $ (310,721) $ (119,335)
============ ============
Net (Loss) per Share. . . . . . . . . . . . . . . . $ (.01) $ (.01)
============ ============
Weighted Average Number of
Common Shares Outstanding . . . . . . . . . . . . . 23,240,391 21,566,802
============ ============
See accompanying notes to consolidated financial statements
4
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<TABLE>
<CAPTION>
WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three Months Ended
September 30,
2000 1999
-------------- -----------
<S> <C> <C>
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Loss. . . . . . . . . . . . . . . . . . . . . . $ (310,721) $ (119,335)
Adjustments to reconcile
Net Loss to Net Cash used in Operating Activities
Depreciation. . . . . . . . . . . . . . . . . . . . 9,876 7,026
Changes in Assets and Liabilities
Accounts Receivable . . . . . . . . . . . . . . . . 136,129 159,776
Inventories . . . . . . . . . . . . . . . . . . . . (12,834) (17,248)
Prepaid Expense and Other Assets. . . . . . . . . . ( 1,289) (58,707)
Accounts Payable and Accrued Expenses . . . . . . . (112,047) (196,211)
-------------- -----------
Net Cash used in Operating Activities . . . . . . . . (290,886) (224,699)
-------------- -----------
Cash Flows from Investing Activities:
Capital Expenditures . . . . . . . . . . . . . . (2,850)
-------------- -----------
Net Cash provided by Investing Activities . . . . . (2,850) --
Cash Flows from Financing Activities:
Proceeds from private offering 202,000
Borrowing from shareholder . . . . . . . . . . . . 28,000 86,800
-------------- -----------
Net Cash provided by Financing Activities . . . . . 230,000 86,000
Net increase (decrease) in Cash and Cash Equivalents. (63,736) (137,899)
Cash and Cash Equivalents, Beginning of Period. . . . 170,858 603,336
-------------- -----------
Cash and Cash Equivalents, End of Period. . . . . . . $ 107,122 $ 465,437
============== ===========
</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, 2000 and
June 30, 2000:
September 30 June 30
------------- ---------
Office furnishings and equipment $ 167,845 $164,995
Machinery and equipment. . . . . 17,616 17,616
Vehicles . . . . . . . . . . . . 12,062 12,062
------------- ---------
197,523 194,673
Less accumulated depreciation. . (112,252) (102,376)
------------- ---------
Net property and equipment . . . $ 85,271 $ 92,297
============= =========
6
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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 June 30, 2000 and
1999:
2000 1999
------------ ------------
Net operating loss carryforwards $ 3,613,000 $ 2,593,000
Amortization expense 25,500 25,500
Bad debt expense 7,000 7,000
------------ ------------
Gross deferred tax asset 3,645,500 2,625,500
Valuation allowance (3,645,500) (2,625,500)
------------ ------------
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.
At June 30, 2000, the Company had net operating loss carryforwards totaling
approximately $ available to reduce future taxable income through the year
2013. The net operating loss carryforwards expire as follows:
Year 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 2,180,000
Year ended June 30, 2015 3,000,000
----------
$10,580,000
==========
7
<PAGE>
WORLDWIDE PETROMOLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information Regarding and Factors Affecting Forward-looking Statements of future
events or circumstances.
The Company is including the following cautionary statement in this Form
10-QSB to make applicable and take advantage of the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical facts.
Certain statements in this Form 10-QSB are forward-looking statements. Words
such as "expects", "anticipates", "estimates" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those projected. Such risks and uncertainties are set forth below. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result, be achieved, or be accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause material adverse affects
on the Company's financial condition and results of operations: market
acceptance and demand for the Company's products, competitive factors, the
ability of the Company to obtain acceptable forms and amounts of financing. The
Company has no obligation to update or revise these forward-looking statements
to reflect the occurrence
RESULTS OF OPERATIONS -GENERAL
In the first fiscal quarter of the year 2001's operation, the Company has
continued to expand various aspects of its marketing approach. The focus has
been on expanding and improving the product lines and developing direct
marketing sales to enhance sales volume, spending the appropriate and necessary
amount of capital for additional product certification and quality control, and
continuing its new concepts that further display the Company's technology and
product lines in new markets as well as strengthen existing markets. The two
areas of primary focus have shifted from prior years' concentrated strategy,
which was the commercial and industrial market, to now include the
retail/passenger car market.
Management's strategy to gain retail acceptance and credibility was launched in
1999 by its specially formulated Moly racing-oil, designed for INDY style
motors, which was tested last year, and used by veteran driver Robby Unser who
introduced PetroMoly's successful debut in the 1999 Indy Racing League (IRL),
including an eighth place finish at the Indianapolis 500, and a second place
finish at the league's Atlanta race. This quarter, the racing activities have
continued in an attempt to enhance the Company's image and overall awareness, by
setting the tone of which the Company's top of the line products are to be
exposed to the market. The primary objective to the Company's paid racing
sponsorships this quarter has been to capture some planned shots for an
advertising video, that illustrate the Company's technology in very extreme
situations, and gain testimonials from the users. Well known IRL drivers such
as, Jacques Lazier, Richie Hearn and Davey Hamilton are also now added to the
list of PetroMoly users, both past or present. Also, the Company continued its
product development by successfully focusing on applying the proprietary
technology to market new products such as high performance a 2-cycle oil
treatment for use in various small engines and a radiator treatment for use all
passenger cars. The company has continued its development of cutting oils for
threading, armament oil to private label, a
8
<PAGE>
moly-grease, an emissions reducing fuel treatment, and presently has nationwide
distribution of its very effective oil additive called PetroMoly Oil Treatment
designed for automobiles and light trucks. The Company has had a
distribution/purchase agreement with PEP Boys for the oil treatment, and the
Company has plans to introduce its family of products through other distribution
channels. So far the sales results have been slow to mature. This quarter the
Company has invested in advertising spots for various strategic markets by
airing more sixty-second radio ads that are aimed at creating brand awareness.
Management believes that the awareness that is anticipated will aide the company
to gain market share in both the retail and commercial/industrial sectors in
these strategic markets.
This quarter the Company has invested in additional research and development to
further test the limits of its proprietary technology in the areas of fuel
savings, engine metal ware reduction, and various environmental benefits. The
Company has continued field testing and objective independent lab testing of its
fully formulated engine oils, while several major multinational customers
continue evaluation tests of the PetroMoly products on their complex high-end
machinery and fleet vehicles. These tests have been complex and time consuming,
and the results have established the effectiveness of the PetroMoly products.
Management continues to anticipate increases in revenue and the size of the
customer base related to contracts and agreements in the foreseeable future.
THREE MONTHS ENDED SEPTEMBER 30,2000, COMPARED TO THREE MONTHS ENDED SEPTEMBER
--------------------------------------------------------------------------------
30, 1999
--------
Total net sales for the three months ended September 30, 2000 were $103,558 as
compared to $ 188,135 for the three months ended September 30, 1999, a 45%
decrease. The reason for the decrease is credited due to Management's decision
to focus on direct marketing strategies. There has been a seasonal drop in
demand for automotive products in the last quarter. In the three quarters of
fiscal 2000 versus an earlier strategy to concentrate the sales resources on
procuring a few large industrial customers that are known industry leaders.
Sales discounts and selective sampling of products, together with long attentive
testing periods continued to be practiced to educate the strategic customers
about the new lubricant technology. Management anticipates sales to increase
rather significantly in the coming quarters due to its direct marketing efforts
planned launch late in the second fiscal quarter
The Company continued to benefit from publicity from its association with
Continental Airlines, and this has led to discussions and testing with other
industry related companies. This quarter, the Company's distributor in
California, EFFS, has ordered additional bulk shipments at discounted cost in a
continuing joint effort with the Company to expand its market share in
industrial fleets as well as retail shipments. The Company continued to receive
a considerable amount of attention from the IRL racing sponsorship, and racing
results of racecars using PetroMoly products. Management believes that the
present sales and marketing strategy will reward the Company with increased
revenues, PetroMoly product awareness and fiscal commitments.
9
<PAGE>
Cost of sales as a percentage of net sales was increased from 47% for the three
months ended September 30, 1999, to 66 % for the three months ended September
30, 2000. This quarter's gross margins' average were significantly changed by
the normal promotional bulk discounts with the Company's retail distributors in
an effort to expand to new retail markets. The margins consisted of several
factors which include: the Company's negotiated costs of production with its
suppliers as well as freight rates for distribution; profit margins on its oil
treatment products; and expanded services to its customers such as promotional
activities in the racing market, that generate revenue with a very low cost of
sales. This quarter represents a more consistent margin as seen in the June 30
year end statement. A drop in costs is expected in future periods due to the
economies of scale with management's anticipated increased volume production
runs. The demand associated with the caliber of customers that the Company has
been targeting, as well as the projected increase in retail demand from the
anticipated brand awareness campaign could qualify the Company for a decrease in
the cost of production runs with only a few, or in some cases one, consummated
commitment.
Selling, general and administrative expenses increase to $344,790 for the
three months ended September 30, 2000, from $ 365,140 for the three months ended
September 30, 1999. The decrease in expenses was mainly due to 1999'research and
development, promotional and racing expenses, along with the marketing expenses
associated with the advertising and awareness campaign and common shares issued
for services during the period.
LIQUIDITY AND CAPITAL RESOURCES.
At September 30, the Company had positive working capital in the amount
of $233,929, as compared to working capital of $307,604 at June 30, 2000.
Operating activities for the three months ended September 30, 2000 used cash of
$290,886 compared to $224,699 for the three months ended September 30, 1999.
This 22% reduction is the result of a "scale down" policy of operating cost.
As of September 30, 2000, the Company had no material commitments for capital
expenditures.
At September 30, 2000, the Company has recorded a full valuation allowance
against all deferred tax assets because it could not determine whether it was
more likely or not that the deferred tax asset would be utilized.
For the three months ended September 30, 2000 and 1999, the Company
incurred net losses totaling $310,721 and $119,335 respectively. In the event
that the Company is unable to generate sufficient revenues from operations, or
is unable to obtain additional financing, it may be unable to continue to
develop and support its present cost levels and continue as a going concern. The
Company is presently seeking to raise additional equity through the sale of its
common stock for financing to develop a professionally developed brand awareness
advertising campaign and to expand its marketing efforts in order to generate
additional revenues. No assurance can be given that the Company will be
successful in achieving its revenue growth strategy; or that it will obtain
financing at terms that are acceptable to the Company.
10
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THE YEAR 2000 ISSUE
WE MAY STILL EXPERIENCE DISRUPTION IN OUR BUSINESS AS A RESULT OF THE YEAR
2000. Even though the date is now past January 1, 2000, and the Company has not
experienced any immediate adverse impact from the transition to the year 2000,
it cannot provide any assurance that its suppliers and customers have not been
affected in a manner that is not yet apparent. In addition, certain computer
programs which were date sensitive to the year 2000 may not have been programmed
to process the year 2000 as a leap year, and any negative consequential effects
remain unknown. As a result, the Company will continue to monitor its year 2000
compliance and the year 2000 compliance of its suppliers and customers. In
assessing the effect of the year 2000 problem, management determined that there
existed two general areas that needed to be evaluated: - Internal infrastructure
and - Supplier/third-party relationships. A discussion of the various activities
related to assessment and actions resulting from those evaluations is set forth
below. INTERNAL INFRASTRUCTURE.
The Company verified that all of its personal computers and software are Year
2000 compliant. The Company replaced or upgraded all items that were not to Year
2000 compliant. The costs related to these efforts were not material. 31
SUPPLIERS/THIRD-PARTY RELATIONSHIPS. The Company relies on its outside vendors
for water, electrical, and telecommunications services as well as climate
control, building access, and other infrastructure services. Although the
Company has not experienced any delays or interruptions in its service, it has
received any assurance of compliance from the providers of these services. Any
failure of these third-parties to resolve year 2000 problems with their systems
could have a material adverse effect on the Company's operations.
CONTINGENCY PLANS. Based on the above actions, the Company has not developed a
formal contingency plan to be implemented as part of its efforts to identify and
correct year 2000 problems affecting our internal systems. However, if it deems
necessary, the Company may take the following actions: - Accelerated replacement
of affected equipment or software; - Short to medium-term use of backup
equipment and software; - Increased work hours for Company personnel; - Other
similar approaches. If the Company is required to implement any of these
contingency plans, such plans could have a material adverse effect on its
business. Based on the actions taken to date, and the lack of any problems to
date, the Company is reasonably certain that it has identified and resolved all
year 2000 problems that could hurt its business.
OUTLOOK
During the past two quarters the Company has laid the groundwork to begin
its strategic focus of expanding to the development of a retail and direct
marketing approach that encompasses a brand and product awareness campaign in
key markets. This approach is expected to increase sales volumes and promote
relationships with automotive after-market chains while enhancing our presence
with the leaders in the industrial markets, which are end users, or already have
established lines of distribution and marketing capital. The brand awareness
began with the INDY race car/Robby Unser sponsorship and it has been very well
received by various automotive retail chains that the Company wants to carry its
PetroMoly Products. The media campaign has already began in several key markets,
and will roll out to other markets over the next two quarters providing the
capital is available.
Management also continues to plan for its technology to be used by other
existing brands, in the form of licensing, additive supplier or otherwise. This
plan requires an additional investment in both time and finances as the
completed packages have demands that extensively demonstrate answers to
marketability, and liability concerns. The Company is presently exploring
various methods to satisfy various issues that a strategic alliance may present
in effort to enhance the plausibility of such. Management believes the issues
at hand are easily resolved and also believe that a potential alliance would be
viewed positively by the investment community and likewise may translate to
greater shareholder value.
With the progressing sales relationships maturing and the new product lines
being marketed, the Company expects operating margins and revenues to improve
during fiscal 2001.
11
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
During the three months ended September 30, 2000, there were no
transactions that were effected by the Company in reliance upon exemptions from
registration under the Securities Act of 1933 as amended (the "Act") as provided
in Section 4(2) thereof.
SIGNATURES
In accordance with the requirements of Section 13 of 15(d) of the Exchange
Act, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 20, 2000.
Worldwide PetroMoly, Inc.
2000 By: /s/ Gilbert Gertner
Gilbert Gertner
Director and
Chairman of the Board
Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons in the capacities and on the dates
indicated:
November 20, 2000 By: /s/ Gilbert Gertner
Gilbert Gertner
Director and
Chairman of the Board
November 20, 2000 By: /s/ Lance Rosmarin
Lance Rosmarin
Director, President,
Secretary and
Chief Financialand Accounting Officer
12
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