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, 1999
[ ] 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 CORPORATE ISSUERS
At February 1, 2000, 21,332,080 shares of common stock, no par value,
were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
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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, 1999
(unaudited) and June 30, 1999. . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three months
ended September 30, 1999 and 1998 (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 - 11
PART II - OTHER INFORMATION
- --------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 12
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1999 1999
------------- -----------
(Unaudited)
ASSETS
- -----------------------------------------------------
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Current Assets:
Cash and Cash Equivalents $ 363,282 $ 603,336
Accounts Receivable:
Trade 299,681 270,794
Affiliated Companies - 20,383
Notes Receivable-Related Parties - -
Inventories 171,488 115,690
Prepaid Expense and Other 987,627 936,340
------------- -----------
Total Current Assets 1,822,078 1,946,543
------------- -----------
Property and Equipment, Net (Note 3) 87,694 102,523
------------- -----------
Total Assets $ 1,909,772 $2,049,066
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------
Current Liabilities:
Accounts Payable and Accrued Expenses $ 473,993 $ 496,173
Notes Payable 3,625
------------- -----------
Total Current Liabilities 473,993 499,798
Advances From Stockholder 570,538 233,636
------------- -----------
Total Liabilities 1,044,531 733,434
------------- -----------
Stockholders' Equity:
Preferred stock, no par value, 10,000,000 shares
authorized, none issued -- --
Common stock, no par value, 800,000 shares
authorized; 21,282,080 issued and outstanding;
3,000,000 reserved for stock options 11,454,871 11,454,871
Accumulated Deficit (10,589,630) (10,139,239)
Total Stockholders' Equity (865,241) 1,315,632
------------- -----------
Total Liabilities and Stockholders' Equity $ 1,909,772 $2,049,066
============= ===========
</TABLE>
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, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Net Sales . . . . . . . . . $ 311,408 $ 139,610 $ 499,543 $ 192,746
Cost of Sales . . . . . . . 206,950 92,338 296,650 129,460
------------ ------------ ------------ ------------
Gross Profit. . . . . . . . 104,458 47,272 202,893 63,286
Selling, Administrative
and General Expenses. . . . 451,964 214,173 817,104 950,598
------------ ------------ ------------ ------------
(Loss) From Operations. . . (347,506) (166,901) (614,211) (523,150)
Other Income, Net . . . . . 16,737 -0- 163,820 -0-
------------ ------------ ------------ ------------
Net (Loss). . . . . . . . . $ (331,056) $ (166,901) (450,391) $ (523,150)
============ ============ ============ ============
Net (Loss) per Share. . . . $ (.02) $ (.01) $ (.02) $ (.03)
============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding . 21,200,664 16,747,500 21,010,664 16,747,500
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
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WORLDWIDE PETROMOLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended
December 31,
1999 1998
------------ -------------
(Unaudited) (Unaudited)
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Cash Flows from Operating Activities:
Net Loss $ (450,391) $ (523,150)
Adjustments to reconcile
Net Loss to Net Cash used in Operating Activities
Depreciation 15,629 12,283
Changes in Assets and Liabilities
Accounts Receivable (8,504) (18,479)
Inventories (55,798) (14,609)
Prepaid Expense and Other Assets (51,287) 17,629
Accounts Payable and Accrued Expenses (22,180) 110,209
------------ -------------
Net Cash used in Operating Activities (572,531) (416,117)
------------ -------------
Cash Flows from Investing Activities:
Certificates of Deposit - 276,579
Capital Expenditures (800) (5,286)
Related Party Loan-Repayments - 12,000
------------ -------------
Net Cash provided by(used in) Investing Activities (800) 283,293
Cash Flows from Financing Activities:
Proceeds from options exercised - 19,600
Borrowing/repayment of shareholder loans 336,902 284,373
Borrowing of Notes Payable (3,625) (160,000)
------------ -------------
Net Cash provided by Financing Activities 333,277 143,973
------------ -------------
Net increase (decrease) in Cash and Cash Equivalents (240,054) 11,149
Cash and Cash Equivalents, Beginning of Period 603,336 34,375
------------ -------------
Cash and Cash Equivalents, End of Period $ 363,282 $ 45,524
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
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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 December 31, 1999
and June 30, 1999:
December 31 June 30
----------- ---------
Office furnishings and equipment $ 142,391 $141,591
Machinery and equipment 17,616 17,616
Vehicles 12,062 12,062
----------- ---------
172,069 171,269
Less accumulated depreciation (84,375) (68,746)
----------- ---------
Net property and equipment $ 87,694 $102,523
=========== =========
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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 December 31, 1999:
Net operating loss carryforwards $ 2,680,000
Stock options granted to non-employees 827,000
Amortization expense 25,500
Bad debt expense 7,000
------------
Gross deferred tax asset 3,539,500
------------
Valuation allowance (3,539,500)
------------
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 December 31, the Company had net operating loss carryforwards
totaling approximately $7,880,000 available to reduce future taxable income
through the year 2015 (see table).
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 2,180,000
Year ended June 30, 2015 300,000
-----------
Total $ 7,880,000
===========
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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
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 of future events or
circumstances.
RESULTS OF OPERATIONS -GENERAL
In the second fiscal quarter of the year 2000's operation, the Company
has continued to refocus various aspects of its marketing approach and the
Company's infrastructure. The focus has been on expanding and improving the
product lines and developing retail lines of distribution 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 last year's concentrated strategy which
was the commercial and industrial market, to the retail/passenger car
market.
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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 to enhance the Company's image in the retail market
place, by setting the tone of which the Company's top of the line products are
to be exposed to the market. Also, the Company continued its product
development by successfully focusing on applying the proprietary technology to
produce new products such as high performance gear oil treatment and straight
track oil for competition drag racing engines. The company has continued its
development of cutting oils for threading, armament oil to private label, a
two-cycle engine oil additive for motorcycles and outboard motors, a
moly-grease, an emissions reducing fuel treatment, and now has nationwide
distribution of its very effective oil additive called PetroMoly Oil Treatment
designed for automobiles and light trucks. The Company presently has a
distribution/purchase agreement with PEP Boys, "the nations leading automotive
retail and service chain" for the oil treatment, and the Company has plans to
introduce its family of products through this same distribution channel.
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 an increase
revenue and the size of the customer base related to contracts and
agreements
THREE MONTHS ENDED DECEMBER 30, 1999, COMPARED TO THREE MONTHS ENDED
DECEMBER 30, 1998
Total net sales for the three months ended December 31, 1999 were
$311,408 as compared to $ 139,610 for the three months ended December 31,
1998,a 223% increase. The reason for the increase is credited to Management's
decision to expand into retail markets in the last two quarters of fiscal
1998 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. 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 in 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.
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Cost of sales as a percentage of net sales was very similar from 66% for
the three months ended December 31, 1998, to 66% for the three months
ended December 31, 1999. The 1999 quarter's gross margins' average were
significantly skewed down by the temporary promotional bulk discounts with the
Company's distributors in an effort to expand to new industrial markets. The
margins were maintained as the result of several factors which include: the
Company's negotiated lower costs of production with its suppliers as well as
more favorable freight rates for distribution; higher 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. A
more consistent drop in costs should be realized due to the economies of
scale with 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 $ 451,962 for the
three months ended December 31, 1999, from $ 214,173 for the three months
ended December 31, 1998. The increase in expenses was mainly due to necessary
research, both product and promotional, along with the marketing expenses
associated with the upcoming advertising and awareness campaign.
LIQUIDITY AND CAPITAL RESOURCES.
At December 31, 1999, the Company had positive working capital in the
amount of $1,348,085, including $935,047 in prepaid expense, as compared to
working capital of $ 1,446,745 at June 30, 1999. The 1999 calculation in
working capital was primarily the reclassification of company assets.
Operating activities for the six months ended December 31, 1999 used cash
of $333,227 compared to $143,973 for the six months ended December 31, 1998.
This use of cash was principally the result of the Company's net loss, less
the modification for the changes in operating assets and liabilities,
principally prepaid expenses and accounts payable. Also the borrowing of
notes payable was $160,000 in December ended 1998 compared to $3,625 in December
ended 1999.
As of December 31, 1999, the Company had no material commitments for
capital expenditures.
At December 31, 1999, 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 December 31, 1999 and 1998, the Company incurred
net losses totaling $ 331,056 and $166,901 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.
THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs and hardware with
embedded date technology (embedded chips) using two digits to define the
applicable year rather than four digits. Any programs or hardware that are time
sensitive and have not been determined to be Year 2000 compliant may recognize a
date using "00" as the year 1900 rather than the year 2000. Such improper date
recognition could, in turn, result in erroneous processing of data, or, in
extreme situations, system failure.
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The Company is currently implementing a Year 2000 program which encompasses
performing an inventory of information technology and non-information technology
systems, assessing the potential problem areas, testing the systems for Year
2000 readiness, and modifying systems that are not Year 2000 compliant.
To date, inventory and assessment are in progress for all core systems that
are essential for business operations. The Company believes all of its core
systems are Year 2000 compliant. The Company's management estimates that the
work they have completed represents more than seventy-five percent of the work
involved preparing the Company's systems for the Year 2000.
Although the Company was and remains ready to continue business activities
without interruption by a "Year 2000 problem", Company management recognizes the
general ongoing uncertainty inherent in the Year 2000 issue, in part because of
the uncertainty about the Year 2000 readiness of third parties. Under a "worst
case Year 2000 scenario", it may be necessary for the Company to temporarily
interrupt normal business activities or operations. The Company has begun, but
not yet completed, development of a contingency plan to deal with the most
likely worst case Year 2000 scenario".
Based on a current assessment, the Company's total cost of becoming Year
2000 compliant is not expected to be significant to its financial position,
results of operations or cash flows and is estimated to be less than $10,000.
There can be no assurances that the Company will not experience serious,
unanticipated negative consequences and/or material costs caused by undetected
errors or defects in the technology used in its internal systems or in the
technology used by its venders or customers. The occurrence of any of the
foregoing could have a material adverse effect on the Company's business,
operating results or financial condition. The Company has taken additional
steps in sending out questionnaires to its vendors and major customers
concerning their respective Year 2000 compliance status. So far all major
accounts, both vendors and customers have reported that they do not anticipate
any material adverse effect on the Company's on-going servicing relationships.
To date the company has not experienced any problems associated with Year 2000
programming issues.
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 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 the 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.
With the progressing sales relationships maturing and the new product lines
being marketed, the Company expects operating margins and revenues to improve
during fiscal 2000.
11
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PART II - OTHER INFORMATION
Item 2. Changes in Securities
During the three months ended December 31, 1999, 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K -- None
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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 February 17, 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:
__________________ 2000 By: /s/ Gilbert Gertner
-------------------------
Gilbert Gertner
Director and
Chairman of the Board
__________________ 2000 By: /s/ Lance Rosmarin
-------------------------
Lance Rosmarin
Director, President,
Secretary and
Chief Financialand Accounting Officer
13
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<PERIOD-START> OCT-01-1999
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<SECURITIES> 0
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