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: June 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 August 15, 2003, there were 21,630,000 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 June 30, 2003
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a. Consolidated Balance Sheets as of June 30, 2003(Unaudited) and
December 31, 2002
b. Consolidated Statements of Operations for the three and six
month periods ended June 30, 2003 and 2002
c. Consolidated Statements of Cash Flows for the six month period
ended June 30, 2003 and 2002
d. Notes to Consolidated Financial Statements
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 SHEETS
---------------------------
June 30, December 31,
Assets 2003 2002
------------- --------------
(unaudited)
Current Assets:
Restricted cash $ 55,000 $ 85,000
Accounts receivable 41,220 78,974
Other current assets 12,285 12,574
------------- --------------
Total Current Assets 108,505 176,548
------------- --------------
Equipment 405,284 405,284
Accumulated depreciation (384,192) (330,711)
------------- --------------
Net fixed assets 21,092 74,573
------------- --------------
Total Assets $ 129,597 $ 251,121
============= ==============
Current Liabilities
Accounts payable $ 274,430 $ 646,263
Accrued expenses 33,292 15,717
Deferred revenue 25,763 51,616
Note payable to shareholder 232,038 144,208
Note payable 96,136 98,703
------------- --------------
Total Current Liabilities 661,659 956,507
------------- --------------
Commitments and Contingencies - -
Stockholders' Deficit
Series A convertible preferred stock, $.001 par;
4,749,989 liquidation value 5,000,000 shares
authorized;1,055,553 shares issued and outstanding 1,055 1,055
Common stock, $.001 par value, 100,000,000
shares authorized, 21,630,000 shares issued
and outstanding 21,630 21,630
Paid in capital 20,441,476 20,089,016
Retained deficit (20,996,223) (20,817,087)
------------- --------------
Total Stockholders' Deficit (532,062) (705,386)
------------- --------------
Total Liabilities and Stockholders' Deficit $ 129,597 $ 251,121
============= ==============
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
-----------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ----------- ------------ -----------
Sales $ 208,401 $ 1,502,636 $ 590,845 $ 2,654,747
Cost of sales 104,970 628,459 314,030 1,209,062
Selling, general and
administrative 126,328 720,348 436,539 1,202,086
------------ ----------- ------------ -----------
Income (loss) from operations (22,897) 153,829 (159,724) 243,599
Interest expense 9,706 12,156 19,412 22,594
------------ ----------- ------------ -----------
Net income (loss) $ (32,603) $ 141,673 $ (179,136) $ 221,005
============ =========== ============ ===========
Basic and diluted income
(loss) per share $ (0.00) $ 0.01 $ (0.01) $ 0.01
============ =========== ============ ===========
Weighted average shares
outstanding 21,630,000 17,830,000 21,630,000 17,830,000
============ =========== ============ ===========
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
-----------
Six Months Ended
June 30,
----------------------
Cash Flows Used in Operating Activities 2003 2002
---------- ----------
Net income (loss) $(179,136) $ 221,005
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 53,484 32,872
Bad debt expense - 116,444
Change in:
Accounts receivable 37,754 (384,147)
Other current assets 289 (7,231)
Accounts payable (19,373) 97,332
Accrued expenses and deferred revenue (8,281) (38,201)
---------- ----------
Net Cash Provided By Operating Activities (115,263) 38,074
---------- ----------
Cash Flows Used In Investing Activities
Purchases of equipment - (104,744)
Cash Flows Provided By Financing Activities
Proceeds from shareholder notes payable 87,830 126,528
Payments on shareholder note payable - (114,457)
Shareholder contributions to capital - 171,667
Payments on note payable (2,567) (48,797)
---------- ----------
Net Cash Provided By Financing Activities 85,263 134,941
---------- ----------
Net change in cash (30,000) 68,271
Cash - beginning of period 85,000 103,045
---------- ----------
Cash - end of period $ 55,000 $ 171,316
========== ==========
NON-CASH FINANCING ACTIVITIES:
------------------------------
Liabilities assumed by Networld acquiror $ 352,560 $ -
========== ==========
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 $352,000.
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 discontinued certain unprofitable business segments and sold Networld in
order to focus on some exciting new opportunities. We are currently focusing on
the small and medium sized business market on the telecom side, while leveraging
some new and unique technologies with our billing system and financial services
products. Recently we sold NetWorld of Ohio Inc., our Internet arm, to a
company owned by the majority stockholder and former president of Worldteq.
RESULTS OF OPERATIONS
Total net sales for the three months ended June 30, 2003 were $208,401, as
compared to $1,502,636 the same 3 months ended June 30, 2002. Net decreased from
$141,673 and 221,005 for the three and six months ended June 30, 2002,
respectively to a net loss of $32,603 and $179,136 for the three and six months
ended June 30, 2003. This decrease was primarily attributable to market
competition and a change in focus for the company away from wholesale customers
Gross profit as a percentage of revenue has decreased slightly to 49.5% of sales
as compared to 58% of sales during the same 3-month period in 2002 due primarily
to an increase in sales compensation and increased competition during the
quarter.
General and administrative expenses decreased significantly to $126,328 from
$720,348 for the three months ended June 30, 2003, and June 30, 2002,
respectively and to $436,539 from $1,202,086 for the six months ended June 30,
2003 and 2002, respectively; this was primarily due to the reduction of support
staff and cost containment in various departments.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ending June 20, 2003 we eliminated non-productive assets and
pared down our workforce to reduce overhead.
Net cash used in operating activities for six months ended June 30, 2003 was
115,263. The negative cash provided by operating activities was primarily
attributable to the decrease in sales. Net financing activities provided
$85,830 for the six months ended June 30, 2003 which resulted from advances
from the majority stockholder.
Cash at end of June 2003 amounted to $55,000. Our current assets for June 30,
2003 are lower than our current liabilities. We believe our current cash
position June 30, 2003 of $55,000 should be sufficient along with anticipated
operating cash flow to fund our operations in the next 12 months.
We are currently seeking additional capital so we may increase our operations
and execute our business plan as intended. 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
The Company filed Form 8-K on February 6, 2003 relating the
former CEO taking a leave of absence after being convicted in the United States
District Court in Miami.
The Company filed Form 8-KA on May 27, 2003 containing Item 5 -
Completion of Subsidiary Sale, disclosing the sale of Networld.
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: August 21, 2003 By: /s/ Jeffrey Lieberman
-----------------------
Jeffrey Lieverman
Chief Executive Officer and
President