UNITED STATES 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, 2003
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-08835
WORLDTEQ GROUP INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 03-7392107
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification No.)
30 West Gude Drive, Suite 470
Rockville, MD 20850
(Address of principal executive offices, including zip code)
(240) 403-2000
(Registrant's telephone number, including area code)
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 10, 2003, there were 31,561,746 shares of common stock,
$.001 par value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
WORLDTEQ GROUP INTERNATIONAL, INC. FORM 10-QSB
For the Third Quarter Ended September 30, 2003
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a. Consolidated Balance Sheets as of September 30,
2003(Unaudited)
b. Consolidated Statements of Operations for the three and nine-
month periods ended September 30, 2003 and 2002(unaudited)
c. Consolidated Statements of Cash Flows for the nine-month
period ended September 30, 2003 and 2002 (Unaudited)
d. Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Forward Looking Information
Various forward-looking statements have been made in this Form 10-QSB.
Forward-looking statements may also be in the Company's other reports filed
under the Securities Exchange Act of 1934, in its press releases and in other
documents. In addition, from time to time, the Company, through its management,
may make oral forward-looking statements.
Forward-looking statements are only expectations, and involve known and unknown
risks and uncertainties, which may cause actual results in future periods and
other future events to differ materially from what is currently anticipated.
Certain statements in this Form 10-QSB, including those relating to the
Company's expected results, the accuracy of data relating to, and anticipated
levels of, its future revenues, gross margins and earnings, its anticipated cash
requirements and sources, are forward-looking statements. Such statements
involve risks and uncertainties, which may cause results to differ materially
from those set forth in these statements. Factors which may cause actual results
in future periods to differ from current expectations include, among other
things, the continued availability of sufficient working capital, the
availability of adequate sources of capital, the successful integration of new
employees into existing operations, the continued desirability and customer
acceptance of existing and future products, the success of competitive products,
the success of the Company's programs to strengthen its operational and
accounting controls and procedures. In addition to these factors, the economic
and other factors identified in this Form 10-QSB, including but not limited to
the risk factors discussed herein and in the Company's previously filed public
documents could affect the forward-looking statements contained in herein and
therein.
Forward-looking statements generally refer to future plans and performance, and
are identified by the words "believe", "expect", "anticipate", "optimistic",
"intend", "aim", "will" or the negative thereof and similar expressions. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of which they are made. The Company undertakes
no obligation to update publicly or revise any forward-looking statements.
Financial Statements and Notes
In the opinion of management, the accompanying unaudited financial statements
included in this Form 10-QSB reflect all adjustments necessary for a fair
presentation of the results of operations for the periods presented. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
--------------------------
September 30,
Assets 2003
---------------
(unaudited)
Current Assets
Cash $ -
Restricted cash 55,000
Accounts receivable 44,113
Receivable from affiliate 19,026
Total Assets 118,139
---------------
Current Liabilities
Accounts payable $ 232,419
Accrued expenses 37,631
Note payable 46,136
---------------
Total Current Liabilities 316,186
Long Term Liabilities
Note payable to shareholder 90,847
---------------
Total Liabilities 407,033
---------------
Stockholders' Equity
Convertible preferred stock, $.001 par value,
5,000,000 shares authorized, 1,115,533 shares
issued and outstanding, both periods 1,055
Common stock, $.001 par value, 100,000,000
shares authorized, 27,561,746 shares issued
and outstanding 27,562
Paid in capital 20,668,750
Retained deficit (20,986,261)
---------------
Total Stockholders' Equity (288,894)
---------------
---------------
Total Liabilities and Stockholders' Equity $ 118,139
===============
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
-----------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Sales $ 174,051 $ 927,022 $ 764,896 $ 3,581,769
Cost of sales 57,573 533,679 371,603 1,742,741
General & administrative 103,504 448,663 540,043 1,534,306
Bad debts - 92,155 - 208,599
------------ ------------ ------------ ------------
Total operating expenses 161,077 1,074,497 911,646 3,485,646
------------ ------------ ------------ ------------
Income From Operations 12,974 (147,475) (146,750) 96,123
Other Income
Interest expense (3,012) (9,069) (22,424) (31,663)
Gain on acquisition of
customer list - 414,428 - 27,000
------------ ------------ ------------ ------------
Net Income $ 9,962 $ 257,884 $ (169,174) $ 478,888
============ ============ ============ ============
Other Comprehensive Income
Unrealized gain on
marketable securities - 27,000 - 27,000
------------ ------------ ------------ ------------
Net comprehensive income $ 9,962 $ 284,884 $ (169,174) $ 505,888
============ ============ ============ ============
Basic and diluted income
(loss) per share $ 0.00 $ 0.02 $ (0.01) $ 0.04
Weighted average shares
outstanding 24,763,923 11,730,000 22,586,032 11,415,000
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
-----------
Nine Months Ended
September 30,
------------------------
Cash Flows Used in Operating Activities 2003 2002
----------- -----------
Net income (loss) $ (178,101) $ 478,888
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 56,721 83,295
Bad debt expense - 208,599
Gain on sale of equipment - (1,732)
Gain on customer acquisition - (414,428)
Changes in:
Accounts receivable 34,861 (398,194)
Other current assets 12,574 (5,577)
Accounts payable (59,582) 103,647
Accrued expenses and deferred revenue 18,264 (106,984)
----------- -----------
Net Cash Used By Operating Activities (115,263) (52,486)
----------- -----------
Cash Flows Used In Investing Activities
Purchases of equipment - (104,744)
Proceeds from sale of fixed asset - 1,813
Purchase of available for sale securities - (3,000)
Purchase of customer list - (1,145)
----------- -----------
Net Cash Used by Investing Activities - (107,076)
----------- -----------
Cash Flows Provided By Financing Activities
Proceeds from shareholder notes payable 87,830 129,528
Payments on shareholder note payable - (95,207)
Shareholder contributions to capital - 171,667
Payments on note payable (2,567) (31,250)
----------- -----------
Net Cash Provided By Financing Activities 85,263 174,738
----------- -----------
Net Change In Cash (30,000) 15,176
Cash - beginning of period 85,000 103,045
----------- -----------
Cash - end of period $ 55,000 $ 118,221
=========== ===========
Non-cash transactions:
Stock issued for notes payable $ 150,000 $ -
=========== ===========
Liabilities assumed by networld acquiror $ 435,666
=========== ===========
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of WorldTeq Group
International, Inc. ("WorldTeq") have been prepared in accordance with
accounting principles generally accepted in the United States of America and the
rules of the Securities and Exchange Commission ("SEC"), and should be read in
conjunction with the audited financial statements and notes thereto contained in
WorldTeq's latest Annual Report filed with the SEC on Form 10-KSB. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
2002, as reported in the 10-KSB, have been omitted.
NOTE 2 - SALE OF SUBSIDIARY
In May 2003, Worldteq sold its Networld subsidiary to an entity owned by the
majority stockholder and former president for $1. Worldteq recorded the sale as
a credit to additional paid in capital for the net liabilities totaling
approximately $435,000.
NOTE 3 - COMMON STOCK
In September 2003, the board of directors approved the conversion of $100,000 of
notes payable to stockholder into 5,353,511 shares of common stock. In addition,
the board approved the conversion of $50,000 of the note payable to affiliate
into 588,235 shares of common stock.
NOTE 4 - SUBSEQUENT EVENT
In October 2003, Worldteq's board of directors approved an option plan which
authorized 5,000,000 shares of common stock to be issued to employees, directors
and consultants. In October, Worldteq issued option to purchase 2,000,000 shares
at $.05 per share to a consultant. The consultant exercised the options and
Worldteq received $100,000.
In October 2003, Worldteq issued a consultant warrants to acquire 1,000,000
shares of common stock at $.10 for services provided. The warrants will be
valued using black scholes.
ITEM 1 - OTHER INFORMATION:
CHANGES TO THE BOARD OF DIRECTORS
We have undergone changes to our board of directors during the reporting period.
On October 29, 2003 Mr. Donald Dea resigned from our Board of Directors. The
resignation was not motivated in any way by a disagreement with the Company's
operations. Mr. Dea served on the Finance Committee. Concurrently with his
resignation, the Board appointed board member Mr. Brian Rosinski and Mr. Tim
Carnahan
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS
While our company has been somewhat stagnant during the last few quarters, we
have continued on removing certain unprofitable long distance products and have
recently refocused our long distance service to include new business customer
plans. We are currently focusing on the small and medium sized business market
on the telecom side. With monthly revenues on the telecom business are growing,
with the addition of three new agent contracts that are currently bringing in
customers daily, the newly launched MonEcard product will only enhance this
growth.
In order for the company to survive and have the opportunity to prosper we made
many tough decisions in the last quarter. We decided to cut certain business
segments that did not focus on our long-term growth plans and we cut costs that
were not related to these growth plans. The company also felt it was important
to reduce debt, both short term and long term. We reduced much of our long-term
debt by converting some of the debt into equity. We reduced our monthly costs at
WorldTeq Corp by 300% as we identified and dismissed personnel that were not
needed for our new direction. We have also outsourced many of our daily
functions to competent organizations that specialize in these areas.
RESULTS OF OPERATIONS
Total net sales for the three months ended September 30, 2003 were $174,051, as
compared to $927,022 the same 3 months ended September 30, 2002. The decrease in
sales were primarily attributable to the loss of revenue generated by NetWorld,
which has been sold, market competition and the further increase in focusing
away from wholesale customers. Gross profit as a percentage of revenue has
increased to 66.9% of sales as compared to 42.4% of sales during the previous
period in 2002. This increase in gross profits is due in part to cost cutting
measures and lower costs from our vendors.
General and administrative expenses decreased significantly to $103,504 from
$448,663 for the three months ended September 30, 2003, and September 30, 2002,
respectively and to $540,043 from $1,543,306 for the nine months ended September
30, 2003 and 2002, respectively; this was primarily due to the continued
reduction of support staff that were not used to concentrate on new growth
plans. Additionally, the outsourcing of specific functions to specialized
organizations helped to bring expenses down.
The recent benefit we have seen from the all around reduction of costs is the
net profit of $9,962 realized during the quarter ending September 30, 2003 as
compared to a net loss of ($32,603) realized during the prior quarter of this
year ending June 30, 2003
LIQUIDITY AND CAPITAL RESOURCES
We are currently seeking additional capital so we may increase our operations
and execute our business plan as intended, as outlined in the announcement
of our recent agreement with Aero Financial. Although we have no current
commitments for capital, we may raise additional funds through: public offerings
of equity, securities convertible into equity or debt, private offerings of
securities or debt, or other sources.
Our investors should assume that any additional funding will cause substantial
dilution to current stockholders. In addition, we may not be able to raise
additional funds on favorable terms, if at all.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 31.1 - Certification of Chief Executive Officer and Chief
Financial Officer of WORLDTEQ GROUP INTERNATIONAL required by Rule 13a - 14(1)
or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 -- Certification of Chief Executive Officer and
Chief Financial Officer of Worlteq Group International, Inc. pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.
(b) Reports on Form 8-K
No Form 8-K (s) were filled during the quarter ending September 30, 2003
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.
WORLDTEQ GROUP INTERNATIONAL
Date: November 19, 2003 By: /s/ Jeffrey Lieberman
-------------------------
Jeffrey Lieberman
Chief Executive Officer and
President