CHPI Form 10-KSB 12/31/2004
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
| x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGEACT OF 1934 FOR FISCAL YEAR ENDED DECEMBER 31,
2004 |
| o |
TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
Commission
file number 000- 27243
WORLDTEQ
GROUP INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
|
Nevada |
03-7392107 |
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(State
or other jurisdiction
of |
(I.R.S.
Employer |
incorporation
or organization) |
Identification
No.) |
30
West Gude Drive, Rockville, Maryland 20850
(Address
of principal executive offices) (Zip Code)
(301) 728-8744
(Issuer's
telephone number, including area code)
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Exchange Act: COMMON
STOCK, $0.001 PAR VALUE
(Title of
Class)
Check
whether the issuer (1) filed all reports required to be filed by Section13 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 [ ]
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Documents
incorporated by reference: Portions of several 8K announcements during the year
are incorporated by reference in Part III hereof.
TRANSITIONAL
SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE) YES [ ] NO [X ]
The Index
of Exhibits filed with this Report begins on page 20
.
WorldTeq
Group International Inc.'s revenues for its most recent fiscal year ended
December 31, 2004 were $400,813.
On
December 31, 2004, the aggregate market value of the voting stock of WorldTeq
Group
International, Inc. (consisting of common stock, $0.001 par value) held
by
non-affiliates
of the Registrant (approximately 21,000,000 shares) was approximately
$2,310,000 based on the closing price for such common stock ($0.11)
on said date as reported by the OTC Bulletin Board.
As of
December 31, 2004, there were 40,706,190 outstanding common shares of
WorldTeq
Group International, Inc. common stock.
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WORLDTEQ
GROUP INTERNATIONAL, INC. |
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FORM
10-KSB |
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TABLE
OF CONTENTS |
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Page |
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PART
I |
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Item
1. Description of Business |
3 |
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Item
2. Description of Property. |
12 |
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Item
3. Legal Proceedings. |
12 |
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Item
4. Submission of Matters to a Vote of Security Holders |
12 |
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PART
II |
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Item
5. Market for Common Equity and Related Stockholder Matters
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12 |
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Item
6. Management's Discussion and Analysis or Plan of
Operation |
14 |
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Item
7. Financial Statements. |
16 |
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Item
8. Changes In and Disagreements with Accountants on |
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Accounting
and Financial Disclosure |
16 |
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PART
III |
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Item
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange
Act |
16 |
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Item
10. Executive Compensation |
19 |
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Item
11. Security Ownership of Certain Beneficial Owners and Management |
20 |
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Item
12. Certain Relationships and Related Transactions. |
21 |
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Item
13. Exhibits and Reports on Form 8-K. |
23 |
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Signatures
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25 |
PART
I
FORWARD
LOOKING STATEMENTS
In
addition to historical information, this Report contains
forward-lookingstatements.
Such forward-looking statements are generally accompanied by words such as
"intends," "projects," "strategies," "believes," "anticipates," "plans,"
and
similar terms that convey the uncertainty of future events or outcomes. The
forward-looking
statements contained herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in ITEM 6 of this Report,
the section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date
hereof and are in all cases subject to the Company's ability to cure its
current
liquidity problems. There is no assurance that the Company will be able
to
generate sufficient revenues from its current business activities to meet
day-to-day
operation liabilities or to pursue the business objectives discussed
herein.
The
forward-looking statements contained in this Report also may be impacted by
future
economic conditions. Any adverse effect on general economic conditions
and
consumer confidence may adversely affect the business of the Company.
WorldTeq
Group International, Inc. undertakes no obligation to publicly
revisethese
forward-looking statements to reflect events or circumstances that arise
after the
date hereof. Factors that could cause actual results or conditions to
differ
from those anticipated by these and other forward-looking statements
include
those more fully described in the "Risk Factors" section and elsewhere
in this
report. In addition, readers should carefully review the risk factors
described
in other documents the Company files from time to time with the Securities
and Exchange Commission.
ITEM 1.
DESCRIPTION OF BUSINESS
CORPORATE
HISTORY
WorldTeq
Group International, Inc. was incorporated under the laws of Nevada on
October
13, 1997, and was originally named Halo Holdings of Nevada, Inc. On October
15, 2001, we amended our articles of incorporation to adopt our current
name,
which we believe more accurately reflects the business in which we are now
engaged.
From the
date of our incorporation in 1997 until early 1999 our company was engaged
in skydiving and related business ventures. Between February and April
1999 we
sold our skydiving business and acquired three companies which were providers
of Internet connectivity and related products and services. Specifically,
in February 1999 we acquired Virtual Information Express, Inc. a Maryland
corporation, which provided outsourced Internet services such as e-commerce
applications and collaborative technologies. In March 1999, we acquired
Computer Ease LLC, a Maryland limited liability company which provided
Web
design and development services to corporate clients and associations.
Computer
Ease was merged into our subsidiary A1 Internet Services, Inc., a Delaware
corporation. In April 1999 we acquired Networld Ohio, Inc., an Ohio corporation,
which is an Internet service provider ("ISP") based in Freemont, Ohio. In
March 1999 we wound down Virtual Information Express. In November of
2000 we
formed WorldTeq Corporation, a Delaware Corporation, to focus on adding
Long
Distance services to our product line. In May of 2003 Networld Ohio, Inc.,
a wholly
owned subsidiary of WorldTeq Group International, Inc., was sold to our
former
president, Bruce Bertman for $1. WorldTeq recorded the sale as a credit
to
additional paid in capital for the net liabilities totaling approximately
$435,000.
Early in 2003 the company began a
proactive approach to expand its business by searching for merger and
acquisition candidates that would be beneficial to the company and it’s
shareholders. In
September of 2003 WorldTeq added financial services to its product line in
the form of Payroll services through its stored-value debit card product,
MonEcard. While much time and money was invested in attempting to enter and
succeed in the payroll service market, WorldTeq found it difficult to build and
maintain a customer base. The product has not been entirely shelved and the
company is currently looking into the retail aspect of the market in offering
the cards direct to single end-users or through a newtwork of resellers and
multi-level marketing organizations. During most of 2004, the company developed
a new online service, MundoTeq.com and soft launched the product in mid-October.
MundoTeq.com was created to be one of the first all Spanish web portals.
The goal
was to make MundoTeq a place where all Spanish-speaking residents of the U.S.
can get news, entertainment, shopping and much more! Early in 2005 it was
decided to temporarily shelve the project for both lack
of major funding for marketing and to allow management to fully concentrate on
the company’s latest merger opportunity, to be discussed in a following section.
MundoTeq can either be re-launched in the future or can be sold as a complete
business.
OVERVIEW
Currently,
we are a switch-less and facilities-based provider of Internet protocol and
traditional
fiber-based communications services, including voice and data, along
with toll
free and related services. We market our services to groups specializing
in specific ethnic demographics, residential communities located in major
metropolitan areas, associations, network marketing organizations, and
multi-level-marketing
organizations (MLM's). Our goal is to become a leading provider
of communication services, including voice, data and Internet services to our
targeted markets, comprised of affinity communities. We provide our services
through a flexible network of owned, contracted facilities and resale
arrangements. We have an extensive network available
to us of IP gateways, international gateways, and domestic
switches.
Through
our subsidiary WorldTeq Corporation we provide agents, associations, and
businesses
with opportunities to generate revenues by supplying those associations,
individuals, and businesses with Internet technology and communications
solutions and services. Our products and services enable the agents
and affinity groups to offer their members, customers and others a variety
of revenue producing solutions and services without making large investments
in technology, infrastructure or staff. The principal products and services
which we offer are:
- - Long
Distance Service
- - Toll
Free Products
- -
Financial Services / Corporate Payroll Solutions
- -
Billing Services
- -
Online Spanish language portal
RECENT
DEVELOPMENTS
The
company recently announced in the form of an 8-K filed with the SEC that it has
signed a plan of exchange to acquire Harbin Yinhai Technology Development
Company Ltd.
On
January 21, 2005, the Registrant executed a Plan of Exchange (the "Agreement"),
between and among the Registrant, Harbin Yinhai Technology Development
Company Ltd., a corporation organized and existing under the laws of
the
Peoples' Republic of China ("Yinhai"), and Progressive Media Group, Inc.,
XCL
Partners, Inc., Aero Financial, Inc. and Triple S Parts, Inc. (collectively,
the
"Consultants").
Pursuant
to and at the closing of the Agreement, the shareholders of Yinhai (the "Yinhai
Shareholders") will exchange all of their shares of registered capital of Yinhai
for 12,211,857 shares of common stock of the Registrant, or approximately 90% of
the Registrant's then outstanding shares of common stock. Upon completion of the
exchange, the registered capital of Yinhai will be transferred to the
Registrant, and Yinhai will become a wholly-owned subsidiary of the Registrant.
An executed copy of the Agreement is attached hereto as Exhibit
XXX
Yinhai is
a commercial printing company located in Harbin, Peoples' Republic of
China,
that, among other things, prints forms for use by banks in the Harbin
area, and
it has approximately 200 employees. It had unaudited revenue of approximately
US$8.6 million in fiscal 2003, and net income of approximately US$1.57
million.
The
company has filed a 14C and has obtained written consent from the majority of
the stockholders as of April 7, 2005, approving (i) a reverse split of the
Company’s common stock at a ratio of 1:30 (the "Reverse
Split"), and (ii) an amendment to the Company's Articles of Incorporation
changing the name of the Company to "China Printing Inc." (the "Name Change").
The Board of Directors of the Company unanimously approved the Name Change on
March 31, 2005 and the Reverse Split on April 1, 2005. Under Section 78.320 of
the corporate law of the State of Nevada, action by stockholders may be taken
without a meeting, without prior notice, by written consent of the holders of
outstanding stock having at least a majority of the voting power that would be
necessary to authorize the action at a meeting. No other vote or stockholder
action is required. You are hereby being provided with notice of the approval of
the Reverse Split and Name Change by less than unanimous written consent of the
stockholders of the Company.
As a
legal matter, the exchange transaction will become effective when
Articles
of
Exchange are filed with the Secretary of State of the State of
Nevada
pursuant
to the Nevada Revised Statutes Section 92A-200. The name change has taken effect
and the company is now registered as China Printing Inc. and trades under the
symbol CHPI on the OTC BB.
2004 KEY
POINTS
During
2004, WorldTeq has had a considerably negative year as far as its staple
business goes. Due to the concentration on developing MundoTeq and searching for
quality M&A candidates, WorldTeq witnessed its revenues cut to 50% and
because of capital investment in the development of MundoTeq the company
operated throughout the year at a loss. However, as the year ended , it appeared
that the company had found a good match in its search for M&A candidates and
discussions began in what has become the course we are on now of the merging of
Yinhai and WorldTeq.
EMPLOYEES
As of
December 31, 2004 we had 3 full time employees and 1 part time employee
categorized as follows:
- - 2
full time employees in administration staff; and
- - 1
full time and 1 part-time employee in product development and technical
operations
There are
no collective bargaining agreements in effect. We believe the relationships
with our employees are good.
INTELLECTUAL
PROPERTY
We have
no patented technology that would preclude or inhibit competitors from
entering
our market. We have entered into confidentiality and invention assignment
agreements with our employees to limit access to and disclosure of our
proprietary information. We intend to apply for copyrights as we develop new
products
and solutions. There can be no assurance that these measures will prove
sufficient
to prevent misappropriation of our intellectual property or to deter
independent
third-party development of similar products.
The FCC
has jurisdiction over all U.S. telecommunications common carriers to
the
extent they provide interstate or international communications services.
Wile
WorldTeq acts as a carrier reseller we still can be subject to the rules
and
regulations set, so that the FCC's current and future policies could have a
material
adverse effect on our business, operating results and financial condition.
In
accordance with the FCC's Detariffing Order, our rates, terms and conditions
for
interstate and international services are no longer set forth in tariffs
filed
with the FCC. Nonetheless, we remain subject to the FCC's general requirements
that rates must be just and reasonable, and not unreasonably discriminatory,
and are also subject to the FCC's jurisdiction over complaints regarding
our services. The detariffing of domestic interstate and international
services may pose additional risks for us because we will no longer
have the benefit of the "filed rate doctrine." This doctrine enabled us
to bind
our customers to the terms and conditions of the tariff without having
each
customer sign a written contract and enabled us to change rates and services
on one day's notice. Since the rates and terms of service are no longer
tariffed,
we may be subjected to increased risk of claims from customers involving
terms of service and rates that could impact our financial
operations.
RISK
FACTORS
You
should consider carefully the risks described below and other information in
this Form
10-KSB. If any of the events identified in the following risk factors
actually
occur, they could materially adversely affect our business, financial
condition
and results of operations.
WE HAVE A
HISTORY OF LOSSES AND CANNOT BE CERTAIN WE WILL ACHIEVE POSITIVE CASH
FLOW
Since
inception, we have incurred significant operating losses and negative cash
flow from
operations. Although we have made significant steps toward profitability,
we can give no assurances that we will not have continuing operating
losses in the future. In the third quarter of 2003, we had our first
profitable
quarter in a year and a half; however, there are no assurances that this will
continue.
Even
thereafter, we cannot be certain that we will achieve or sustain positive
cash flow
or profitability from our operations. Our net losses and negative cash
flow from
operating activities are likely to continue even longer than we currently
anticipate if:
- - We
cannot establish and maintain a customer base that generates sufficient
revenue;
- -
Prices for our products or services decline faster than we have anticipated;
- - We
cannot remain competitive in the innovation and quality of our products;
and
- - We
cannot attract and retain qualified personnel.
OUR
ABILITY TO ACHIEVE OUR OBJECTIVES IS SUBJECT TO FINANCIAL, COMPETITIVE,
REGULATORY,
LEGAL, TECHNICAL AND OTHER FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.
PURCHASES
AND SALES OF OUR STOCK ARE SUBJECT TO PENNY STOCK REGULATIONS
Our stock
has had a market price of less than $5.00 per share. The SEC has adopted
regulations which generally define "penny stock" to be any equity security
that has a market price (as defined) less than $5.00 per share or an
exercise
price less than $5.00 per share, subject to certain exceptions. During
periods
when our common stock does not qualify for inclusion on the NASDAQ Small
Cap
Market or is removed there from, the common stock may become subject to
rules
that impose additional sales practice requirements on broker-dealers who
sell such
securities to persons other than established customers and accredited
investors
(generally those with assets in excess of $1,000,000 or annual income
exceeding
$200,000, or $300,000 together with their spouse). For transactions covered
by these rules, the broker-dealer must make a special suitability determination
for the purchase of such securities and have received the purchaser's
written consent to the transaction prior to the purchase. Additionally,
for any transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a disclosure schedule
prepared
by the SEC relating to the penny stock market. The broker-dealer also
must
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and
the broker-dealer's presumed control over the market. Finally, monthly
statements
must be sent disclosing recent price information for the penny stock
held in
the account and information on the limited market in penny stocks. Consequently,
the "penny stock" rules may restrict the ability of broker-dealers to sell
our common stock and may affect the ability of investors to sell our
common
stock in the public market.
OUR
LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO ASSESS OUR PAST PERFORMANCE AND
FUTURE PROSPECTS
We have
limited historical operating and financial information, which may make
ur
performance and our prospects difficult to evaluate. We have acquired five
companies
since the beginning of 1999 and disposed of substantially all of the
businesses
in which we were engaged in prior years. This limits the comparability
of our operating and financial information from period to period.
Our
prospects need to be considered in light of the substantial risks, expenses,
uncertainties
and difficulties frequently encountered by companies in the new nd
rapidly evolving markets for Internet products and services. Such risks
include
the possibility that:
- - We
may be unable to increase and sustain levels of interest in our products
nd
services by Associations, membership marketing companies and ISPs;
- - We
may fail to sell our products successfully through our direct sales force;
- - Our
competitors may develop services or products similar or superior to our
own;
- -
Market prices for our products and services may fall as a result of competition
or other factors;
- - We
may be unable to identify, attract, motivate and retain qualified personnel;
and
- - We
may fail to fully integrate our existing operations the technology and
operations
with any of the businesses that we might acquire.
We cannot
be sure that we will be successful in addressing such risks, and the
failure
to do so could have a material adverse impact on our business,
financial
condition
and results of operation.
WE ARE
DEPENDENT ON GLOBAL CROSSING FOR LONG DISTANCE AND OTHER VOICE
SERVICES
Our
ability to offer end-user access to a tier one Voice network on an affordable
basis is dependent upon our relationship with Global Crossing. If this
relationship were to be terminated, or if the terms were to be substantially
amended, we might be required to enter into arrangements for services
with other providers on less favorable terms. There is no assurance that we
would be able to purchase voice services on comparable terms, and there
is no
assurance that we would be able to pass on additional costs to our customers.
Our inability to obtain minutes on comparable terms could materially
and
adversely affect our business, financial condition and results of operations.
WE RELY
ON OTHERS TO MARKET OUR PRODUCTS AND SERVICES TO END-USERS
We
believe that we may derive the majority of our recurring revenues from
subscription
fees and fees for value added services paid by end-users of our products
and services. The amount of these revenues is dependent upon the level
of
success achieved by resellers, membership marketing companies and multi-level
market
organizations (MLM's) in marketing our products and services to their
members
and customers. If sales to end-users do not meet our expectations, our
business
would be adversely affected and we would be required to develop alternate
marketing and sales strategies.
WE ARE
SUBJECT TO RISKS AS WE MAKE ACQUISITIONS AND ENGAGE IN STRATEGIC ALLIANCES
As part
of our business strategy, we may acquire, make investments in, or enter
into
strategic alliances with companies in complementary businesses, so as to
optimize
our market presence in the regions we presently serve and expand into
other
regions. In particular, we intend to acquire local and regional ISPs and
E-commerce
companies. Any such future acquisitions, investments or strategic alliances
would involve risks, such as:
- -
Incorrect assessment of the value, strengths and weaknesses of acquisition
and
investment opportunities;
- -
Underestimating the difficulty of integrating the operations and personnel
of newly
acquired companies;
- -
Potential disruption of our ongoing business, including possible diversions
of
resources and management time;
- -
Potential inability to maintain uniform standards, control, procedures and
policies;
and
- - The
threat of impairing relationships with employees and customers as a result of
changes in management or ownership.
We cannot
assure that we will be successful in overcoming these risks. Moreover,
we cannot
be certain that any desired acquisition, investment or strategic alliance
could be made in a timely manner or on terms and conditions acceptable
to us.
Neither can we assure that we will be successful in identifying attractive
acquisition candidates. We expect that competition for such acquisitions
may be significant. Competition for Internet companies is based on a number
of factors including price, terms and conditions, size, access to capital,
and ability to offer cash, stock or other forms of consideration. We
may
compete with others who have similar acquisition strategies, many of whom
may be
larger and have access to greater financial and other resources than
those
available to us at any given time.
An
additional risk associated with acquisitions is that many attractive
acquisition
candidates do not have audited financial statements and have varying
degrees
of internal controls. Although we may believe that the available financial
information for a particular business is reliable, we cannot guarantee
that a
subsequent audit would not reveal matters of significance, including but
not
limited to those in connection with liabilities, contingent or otherwise. We
expect
that, from time to time in the future, we will enter into acquisition
agreements,
the pro forma effect of which are not known and cannot be
predicted.
SALES OF
SHARES BY OUR SHAREHOLDERS COULD DEPRESS OUR STOCK PRICE
The
market price of our common stock could drop as a result of sales of a large
number of
our shares in the public market. The perception that such sales may occur
could have the same effect. As of January 31, 2004, our executive officers,
directors and affiliates owned, directly or indirectly, less then 1%
of our
common stock.
WE ARE
SUBJECT TO SECURITY AND FRAUD RISKS
Despite
our efforts to implement network security measures, such as limiting
physical
and network access to our computers, our Internet infrastructure is vulnerable
to computer viruses, break-ins and similar disruptive problems caused
by
customers, employees or other Internet users. Computer viruses, break-ins or
other
disruptive or security problems could lead to interruptions, delays or
cessation
in service to our Internet customers. Further, such inappropriate or
unauthorized
use of the Internet could also potentially jeopardize the security of
confidential information stored in the computer systems of our customers and
other
parties connected to the Internet, which may deter potential customers and
give rise
to liability to users whose security or privacy has been violated. The
security
and privacy concerns of existing and potential customers may inhibit
the
growth of the Internet service industry in general and our customer base and
revenues
in particular. A significant security breach could result in a loss of
customers,
damage to our reputation, direct damages, costs of repair and detection
and other expenses. In addition, our revenues for any given period may
be
adversely affected by fraud or debt collection problems that we experience.
The
occurrence of any of these events could have a material adverse effect our
business,
results of operations and financial condition.
WE MAY BE
HURT BY SYSTEM FAILURES
Our
success is largely dependent upon our ability to deliver high speed,
uninterrupted
access to the Internet. Any system failure that causes interruptions
in our operations could have a material adverse effect on us. We currently
rely upon our vendor's Internet Network. Failures in this or any other
telecommunications
network on which we rely would result in customers' receiving no or
diminished access to the Internet.
WE ARE
SUBJECT TO INTELLECTUAL PROPERTY RISKS
Legal
standards relating to the validity, enforceability and scope of protection
of
intellectual property rights in Internet-related industries are uncertain and
still
evolving and we cannot be certain as to the future viability or value of
any of
our intellectual property rights or those of other companies within the
IT
industry. We cannot assure that the steps we have taken to protect our
intellectual
property rights will be adequate or that third parties will not infringe
or misappropriate our proprietary rights. Any such infringement or misappropriation,
should it occur, could have a material adverse effect on our business,
results of operations and financial condition. Furthermore, we cannot
be
certain that our business activities will not infringe the proprietary rights
of others
or that such other parties will not assert infringement claims against
us. We
anticipate that we may be subject to claims in the ordinary course of our
business,
including claims of alleged infringement of the trademarks and other
intellectual
property rights of third parties due to the dissemination of our content
or the provision of access by our online services to content made available
by third parties. Such claims and any resultant litigation, should it
occur,
could subject us to significant liability for damages and could result in
invalidation
of our property rights and, even if not meritorious, could be time-consuming
and expensive to defend, and could result in the diversion of management
time and attention, any of which could have a material adverse effect
on our
business, results of operations and financial condition.
We regard
substantial elements of our products and services as proprietary, and
we
attempt to protect them by relying on trademark, service mark, trade dress,
copyright
and trade secret laws and restrictions on disclosure and transfer of
title. We
also enter into confidentiality agreements with our employees, suppliers,
distributors, consultants, vendors and customer and license agreements
with third parties and generally seek to control access to and distribution
of our technology, documentation and other proprietary information. We are
pursuing the registration of our service marks, but we currently have no
patents
or applications for patents pending for our products or services. Effective
service mark, copyright and trade secret protection may not be available.
WE DO NOT
EXPECT TO PAY DIVIDENDS
The
Company does not anticipate paying cash dividends in the foreseeable
future.
ITEM 2.
LEGAL PROCEEDINGS
From time
to time we are involved in litigation incidental to the conduct of our
business.
We are not currently a party to any lawsuit or proceeding which, in the
opinion of management, is likely to have a material adverse effect on our
business,
financial condition or results of operations. We are pursuing through
legal
channels the collection of several cases, one in the amount of $3,400,000
where we
have a default judgment against St. Andrews Telecommunications and are
investigating
the possibility of pursuing the management and shareholders to collect.
We have filed in District Court in Montgomery County MD a suit to collect
$337,000 by Zenex Telecommunications; this debt has a signed promissory
note and
guarantee from the public company parent Zenex International.
In the
beginning of 2003, our former President and Chief Executive Officer, Mr.
Bruce
Bertman, was convicted in the Southern District of Florida for wire, mail
and
securities fraud and conspiracy in connection with the sale of WorldTeq
Group
International common stock. There are no allegations of financial statement
impropriety, unlike recent actions taken against companies such as WorldCom.
We have no reason to believe our financial statements as filed with the SEC
are in any way inaccurate or will in any way require restatement.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No
matters were submitted during the fourth quarter of the fiscal year covered
by this
Report to a vote of security holders, through the solicitation of proxies
or otherwise. The annual shareholder meeting has been postponed to a
date in
the near future.
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On
October 10, 1998 shares of our common stock, par value $.001, were initially
available
to the public on the OTC Bulletin Board under the symbol "HALO". On May 24,
1999 the board of directors and shareholders approved a name change to
A1
Internet.com Inc. and the symbol was changed to "AWON".
On
January 4, 1999, the SEC approved amendments to Rules of the National
Association
of Securities Dealers that limit quotations on the OTC Bulletin Board to
the stock of companies that are registered with the SEC under the Securities
Exchange Act of 1934. The letter "E" is affixed to ticker symbols of
those
companies that have not completed the registration process with the SEC as
of a
certain date and indicates that the affected company will be removed from
the OTC
Bulletin board within 30 days. On November 19, 1999, an "E" was affixed
to our
OTC Bulletin Board trading symbol and our common stock began trading
under the
symbol "AWONE." Our common stock was removed from the OTC Bulletin Board on
December 16, 1999, because we had not then completed the registration
process,
and began trading on the "Pink Sheets" of the National Quotation Bureau,
LLC. The closing price of our common stock on the OTC Bulletin Board
$4.125 as
of December 15, 1999.
In March
2000, we completed our registration under the Securities Exchange Act
of 1934,
as amended. On March 20, 2000, our common stock was once again listed
on the
OTC Bulletin Board and began trading under the symbol "AWON." In late
2000 an
"E" was affixed to our OTC Bulletin Board trading symbol and our
common
stock
began trading under the symbol "AWONE. The closing price of our common
stock on
the "Pink Sheets" of the National Quotation Bureau, LLC was $.26 as
of
December
31, 2001. On March 22, 2002 our common stock was again listed on the
OTC
Bulletin Board and began trading under the symbol "WTEQ" to reflect our name
change.
The closing price of our common stock on the OTC was $0.11 as of December
31, 2004. Starting in April of 2005 the company has changed it’s name as part of
the merger conditions to China Printing Inc. and began trading under the symbol
“CPHI”
The
following table sets forth, on a per share basis, the high and low sale
prices
for our common stock as reported by the OTC Bulletin Board Market, for
the
periods indicated. Such prices reflect inter-dealer prices, without retail
mark-up,
mark-down or commission, and do not necessarily represent actual
transactions.
| |
HIGH |
LOW |
|
2003 |
|
|
|
1st
Quarter |
0.090
|
0.040 |
|
2nd
Quarter |
0.090
|
0.020 |
|
3rd
Quarter |
0.110
|
0.010 |
|
4th
Quarter |
0.130
|
0.050 |
| |
|
|
|
2004 |
|
|
|
1st
Quarter |
0.280
|
0.100 |
|
2nd
Quarter |
0.360
|
0.130 |
|
3rd
Quarter |
0.200
|
0.080 |
|
4th
Quarter |
0.140
|
0.090 |
We have
not declared any cash dividends on the common stock. We intend to
retainfuture
earnings, if any, for use in our business and do not anticipate paying
regular
cash dividends on the common stock.
Approximately
12,941,866shares of common stock issued to stockholders are available for resale
under Rule 144, subject to notice, volume and manner of sale restrictions under
that rule As of December 31, 2004, the Company had approximately 40,706,190
shares issued and outstanding of the common stock. As of December 31, 2004, we
had approximately 80 holders of our common stock. The number of record holders
was determined from the records of our transfer agent and does not include
beneficial owners of common stock whose shares are held in the names of various
security brokers, dealers, and registered clearing agencies. The transfer agent
for the Company is Corporate Stock Transfer, Inc. at 3200 Cherry Creek Drive
South, Suite 430, Denver, Colorado 80209.
RECENT
SALE OF UNREGISTERED SECURITIES:
There
were no sales made of unregistered common stock during the year ended
December
31, 2004
OPTIONS
AND WARRANTS:
In
February 2004, we registered 3,350,000 shares under our 2004 Employee Stock
Option
Plan on a Form S-8. We granted our CEO, Jeffrey Lieberman an option to
purchase
2,000,000 shares at an exercise price of $0.13 per share. We also granted
our VP of Sales, Brian Rosinski an option to purchase 350,000 shares at
an
exercise price of $0.13 per share. For both options, 16.667% of the Shares
subject
to the Option shall vest six months after February 25, 2004, and 1/36 of
the
Shares subject to the Option shall vest each month thereafter, subject to
the
Optionee continuing to be a Service Provider on such dates.
In
February of 2004 the company issued 2,000,000 stock purchase warrants at .05
cents per share to XCL Partners for $100,000.
On June
21, 2004 the company filed an SB-2 that allows the company to issue up to
8,000,000 shares of common stock, that are issuable upon exercise of common
stock purchase warrants. In December 2004, in exchange for services, we issued
stock purchase warrants to XCL
Partners, Inc. to purchase 2,000,000 shares of common stock at an exercise
price of
$0.07 per share. In addition, we also
issued a stock purchase warrant to Chesapeake Group, Inc. to purchase 1,000,000
shares of common stock at an exercise price of $.07 per share.
the
issuance of 2 million warrants at an exercise price of 7 cents to XCL Partners
and 1 million warrants an exercise price of 7 cents to Chesapeake Group. Both
organizations are Investor Relations firms, and are to provide WorldTeq with
business development and strategic consulting services, including formal
presentations to potential business partners for merger and acquisition
opportunities.
ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The
following discussion and analysis of the financial condition and results of
operations
should be read in conjunction with the financial statements, related
notes,
and other detailed information included elsewhere in this Form 10-KSB.
Certain
information contained below and elsewhere in this Form 10-KSB, including
information
regarding our plans and strategy for our business, are forward-looking
statements. See "Note Regarding Forward-Looking Statements."
LIQUIDITY
AND CAPITAL RESOURCES
RESULTS
OF OPERATIONS
Total
sales for the year ending 2004 decreased from 2003 by 80% to $820,933. This was
largely due to the reorganization of the company that included the
discontinuation of unprofitable business segments, such as the wholesale
telecommunications business and the sale of a subsidiary during the year,
Networld. The company concentrated its efforts during the first three quarters
of the year on automating back office processes to allow us to greatly reduce
monthly expenses. Additionally, we spent most of the year developing new
products that should be much more profitable. We created new plans and refocused
our sales efforts from residential long distance to business long distance. We
began the early stages of developing MundoTeq, a Spanish Internet web portal and
the development of our own proprietary VOIP network. As a result of the change
of focus, our telecommunications revenue accounted for 70% of our total revenue
for 2003. Our net loss for the year ending 2003 was $298,418 or $0.01 per share,
compared to $536,797 for 2002, an improvement of 44% over the period ending
December 31, 2002. Our total operating loss for the period ending December 31,
2003 was $368,880
Cost of
sales for 2003 decreased from 2002 by 79%. This is due to the sale of Networld
and the removal of the unprofitable wholesale telecommunications
business.
Selling,
General and Administrative expenses for the period ending December 31, 2003
decreased by $1,199,217 or 65% compared to the same period ending 2002. The sale
of Networld greatly reduced these expenses. Additionally, because of our
reorganization efforts in WorldTeq Corporation and the automation of our back
office we were able to greatly decrease our monthly expenses. We do anticipate a
slight increase in 2004 due to the fact we are launching new products in 2004.
While costs will be kept to a minimum because of our back office automation, we
are expecting additional costs with our new MundoTeq and VoIP products.
These
new costs
will be directly related to new revenues. Our bad debt expense for 2003 totaled
$24,920 compared to $667,981 in 2002. This is due to the fact that while we had
one large customer last year who defaulted, the improvements in our new billing
system make sure non paying customers are no longer running long distance
traffic through us.
Interest
expense dropped by 73% to $12,107 and depreciation expense dropped 22% and
totaled $37,091 for the period ending December 31, 2003.
In May of
2003 we successfully concluded the sale of our subsidiary NetWorld Ohio and we
realized a one-time gain in 2003 plus a reduction in our overall debt total by
approximately $400,000.
To meet
our growth expectations, we anticipate that we will need to add up to 6 to 8
additional employees in the areas of sales, marketing, and sales support over
the next twelve months. However, we do not see a need to invest further in our
back office infrastructure such as servers, office equipment, and software to
sustain our growth projections for the next 2 years, based on the infrastructure
need for current product offerings.
ITEM 7.
FINANCIAL STATEMENTS
Information
with respect to this item is contained in the Consolidated Financial
Statements
beginning on page F-1 of this Report. Such information is incorporated
herein by reference.
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART
III
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH
SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth information regarding the executive officers and
directors
of the Company as of March 5, 2004.
|
Name |
Age |
Position |
Since |
| |
|
|
|
|
Jeff
Lieberman |
36 |
President,
Treasurer and
Chairman of the Board
of Directors |
February
2003 |
| |
|
|
|
|
Brian
Rosinski |
29
|
Secretary
and Director |
April
2003 |
| |
|
|
|
|
Timothy
Carnahan |
36 |
Director,
and Chairman Of
the Compensation Committee |
October
2003 |
JEFF
LIEBERMAN - Mr. Lieberman serves as our President, Treasurer and Chairman
of the
Board of Directors. Mr. Lieberman has more than 10 years of experience in
the high
technology industry. He has been with the company since its inception
as a
private company through its acquisition by HALO Holdings in 1999 until
today. He
graduated from the University of Maryland in 1991 with a Bachelor of
Science
Degree in Personnel Management and Labor Relations. After completion of
his
degree he studied for and passed his Series 6, 63, and series 7 tests to
become a
fully licensed stockbroker and financial planner. After a short internship
with a small firm he accepted a position in 1991 with Robinson &
Lukens, a
conservative brokerage house located in Washington D.C. There he worked
very closely with many retired clients with a structured focus on income
and money
preservation investment strategies.
TIMOTHY
CARNAHAN - Mr. Carnahan serves as Director and Chairman of the Compensation
Committee. Mr. Carnahan is the President and Founder of CYIOS
Corporation,
a Washington DC based firm, founded in 1994. CYIOS is a defense contractor
offering services and products that reduce the time frame for achieving
mission-critical goals. With the Department of Defense being CYIOS's
major
customer, Mr. Carnahan has security clearance at the Pentagon. CYIOS
built the
Army Knowledge Online (AKO) to facilitate greater knowledge transfer
amongst
Army personnel. Mr. Carnahan attended Old Dominion University in Norfolk,
VA from 1985 to 1989. He graduates with a Bachelors degree in Computer
Science.
BRIAN
ROSINSKI - Mr. Rosinski serves as our Vice President of Sales, Secretary
and
Director. Mr. Rosinski has more than 7 years of experience in the high
technology
and customer service industries. He has been with the company since 2001.
Prior to his involvement with WorldTeq, Mr. Rosinski managed a customer
service
call center for Teligent, Inc. from September 1999 until March
2001.
|
KEY
CONSULTANTS |
|
| |
|
|
The
following lists the key consultants to WorldTeq as of March 5,
2004: |
| |
|
|
Name |
Field |
|
|
|
|
XCL
Partners |
Investment
Banking Consultant |
|
|
|
|
Chesapeake |
Investor
Relations Consultant |
|
|
|
| |
|
|
There
are no other officers or significant
employees. |
FAMILY
RELATIONSHIPS.
No family
relationships exist between the directors and the officers.
LEGAL
PROCEEDINGS.
CURRENT
DIRECTORS, EXECUTIVE OFFICERS AND THOSE NOMINATED TO BECOME A DIRECTOR
OR
OFFICER:
During
the past five years, no current director, current executive officer,
person
nominated to become a director of the Company:
(1) was a
general partner or executive officer of any business against which any
bankruptcy petition was filed, either at the time of the bankruptcy
or two years prior to that time; The officers and directors of the
Company due to the Operating Subsidiary filing a voluntary petition under
Chapter 11 of the Bankruptcy Code.
(2) was
convicted in a criminal proceeding or named subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
(3) was
subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities;
or
(4) was
found by a court of competent jurisdiction (in a civil action), the SEC or
the Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed,
suspended or vacated.
CONTROL
PERSONS:
In the
beginning of 2003, our former CEO and current control person, Bruce Bertman,
was convicted in the Southern District of Florida for wire, mail and
securities
fraud and conspiracy in connection with the sale of WorldTeq Group International
common stock. There are no allegations of financial statement impropriety,
unlike recent actions taken against companies such as WorldCom. We have no
reason to believe our financial statements as filed with the SEC are in
any way
inaccurate or will in any way require restatement.
OUTSTANDING
ISSUES INVOLVING PRIOR DIRECTORS AND/OR BOARD MEMBERS:
On March
30, 1999, our wholly-owned subsidiary, Skydive USA, was sold to Larry
Kerschenbaum
and Thomas Keese, two of our founding shareholders, officers and
directors.
In consideration for Skydive USA, Messrs. Kerschenbaum and Keese returned
to us a total of 400,000 shares of our outstanding common stock.
The
company has a confessed judgment on file from Mr. Kerschenbaum in the amount
of
$262,213.21 and has perfected its position in the state of Florida. The
company
feels there is little chance of collection and has written this amount
off.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 and the rules thereunder
require
WorldTeq's officers and directors, and persons who beneficially own more
than ten
percent of a registered class of WorldTeq's equity securities, to file
reports
of ownership and changes in ownership with the Securities and Exchange
Commission
and to furnish WorldTeq with copies.
Based on its
reviews of the copies of the Section 16(a) forms received by it, or
written representations from certain reporting persons, WorldTeq Group
International,
Inc. believes that, during the last fiscal year, the following individuals
satisfied their Section 16(a) filing requirements however on an untimely
basis: Jeff Lieberman and Brian Rosinski.
CODE OF
ETHICS
On March
31, 2004, the Board of Directors of the Company adopted a written Code
of Ethics
designed to deter wrongdoing and promote honest and ethical conduct,
full,
fair and accurate disclosure, compliance with laws, prompt
internal reporting and accountability to adherence to the Code of Ethics.
This Code
of Ethics has been filed with the Securities and Exchange Commissionas an
Exhibit to this Form 10-KSB.
ITEM 10.
EXECUTIVE COMPENSATION
(a)
GENERAL. No salary or regular compensation is paid to our directors.
Pursuant
to our By-laws, directors are eligible to be reimbursed for their actual
out of pocket expenses incurred in attending Board of Directors meetings
and other
director functions, as well as fixed fees and other compensation to be
determined
by the Board of Directors. No such compensation or expense reimbursements
have been requested by the directors or paid to date. Salary amounts
paid and stock options granted to our executive officers are detailed in
subsection
(b) below.
(b)
SUMMARY COMPENSATION TABLE. The following table sets forth certain summary
information
concerning the compensation paid to the Chief Executive Officer and certain
executive officers for the fiscal years ended December 31, 2002 and 2003.
SUMMARY
COMPENSATION TABLE
| |
|
|
|
|
|
|
|
|
| |
Annual
Compensation |
Long
Term Compensation |
|
|
Name
and Principal Position |
Year |
Salary
($) |
Bonus
($) |
Other
Annual Compensation ($) |
Restricted
Stock
Award(s) ($) |
Securities
Underlying
Options
(#) |
LTIP
Payouts ($) |
Other
($) |
| |
|
|
|
|
|
|
|
|
| Jeff
Lieberman,
CEO,
President,
Treasurer
and
Chairman
of the
Board |
2002
2003 |
96,000 (5)
51,321 |
|
50,000
50,000 |
N/A
N/A |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Brian
Rosinski, (1)
Secretary
and
Director |
2002
2003 |
27,000
30,113
|
|
|
N/A
N/A |
|
|
|
| |
|
|
|
|
|
|
|
|
| Tim
Carnahan, (2)
Director |
2002
2003 |
|
|
N/A
0 |
N/A
N/A |
|
|
|
| |
|
|
|
|
|
|
|
|
| Donald Dea (3) |
2002
2003 |
0
0 |
|
100,000
N/A |
N/A
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Lori Samuelson (4) |
2002 |
48,000 |
|
50,000 |
N/A |
|
|
|
(1) Mr.
Rosinski has been a full time employee since 2001. He became a director and
executive officer in April 2003.
(2) Mr.
Carnahan has been a director since 2003. Mr. Carnahan did not receive any salary
or bonus.
(3) Mr.
Dea joined us as director in October 1999. He resigned in October 2003. Mr. Dea
did not receive any salary or
bonus.
(4) Mrs.
Samuelson was a full time employee of the company since 1999. She resigned as
assistant secretary in 2003 and as an employee.
(5) Mr.
Lieberman has been a full time employee of the company since 1999.
(c)
OPTION/SAR GRANTS. The Company has established the 2000 Incentive and
Non-statutory
Stock Option Plan, which authorizes the issuance of up to 5,000,000
shares of the Company's common stock. The Plan will remain in effect
until
2010 unless terminated earlier by an action of the Board. All employees,
board
members and consultants of the Company are eligible to receive options
under the
Plan at the discretion of the Board. Options issued under the Plan vest
according to the individual option agreement for each grantee. During 2002
and 2003
no options were issued under this plan.
In 2003
the Company established the WorldTeq 2003 Individual Employee Stock Plan
(the
"2003 Plan"), which authorized the issuance of up to 5,000,000 shares of
the
Company's common stock. The 2003 Plan will remain in effect until August 1,
2007
unless terminated earlier either by action of the board or an event specified
under the 2003 Plan. All employees, board members and consultants of
the
Company are eligible to receive options under the Plan at the discretion of
the
Board. Options issued under the Plan vest according to the individual option
agreement
for each grantee. During fiscal year 2003 the company issued 4,000,000
warrants with a strike price of $.05 per share. Additionally the company
granted 1,000,000 warrants with a strike price of $.10 per share.
The
following table sets forth certain summary information concerning options
granted
to officers and directors in fiscal year 2003:
| |
Option/SAR
Grants in Last Fiscal Year |
|
|
| |
|
|
|
|
| |
Individual
Grants |
|
|
| |
|
|
|
|
| |
|
%
of Total |
|
|
| |
Number
of Securities |
Options/SARs |
|
|
| |
Underlying |
Granted
to |
Exercise
or |
|
| |
Options/SARs |
Employees
in |
Base
Price |
Expiration |
|
Name |
Granted
(#) |
Fiscal
Year |
($/Sh) |
Date |
| |
|
|
|
|
|
Jeff
Lieberman, |
|
|
|
|
|
CEO,
President, Treasurer and |
|
|
|
|
|
Chairman
of the Board |
0 |
0 |
|
|
| |
|
|
|
|
|
Brian
Rosinski, |
|
|
|
|
|
Secretary
and Director |
0 |
0 |
|
|
| |
|
|
|
|
|
Tim
Carnahan, (2) |
|
|
|
|
|
Director
|
0 |
0 |
|
|
(d)
AGGREGATE OPTION/SAR EXERCISES.
The
following table summarizes information about options outstanding at
December
31,
2003:
|
Range
of Exercise prices |
Number |
Outstanding
Remaining Contractual Life |
| |
|
|
|
$
.05 |
3,000,000
|
2006 |
|
$
.05 |
2,000,000
|
N/A |
|
$
.27 |
850,000
|
2006 |
|
$
.10 |
1,000,000
|
N/A |
(e) LONG
TERM INCENTIVE PLAN AWARDS. No long-term incentive plans have been awarded.
(f)
COMPENSATION OF DIRECTORS. No salary or regular compensation is paid to our
directors.
Our directors are entitled to reimbursement of out of pocket expenses
incurred
in connection with their duties as directors. To date, no such expenses
have been
requested or paid.
(g)
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT. - None
(h)
REPORT ON REPRICING OF OPTIONS/SARs. None.
The
Company intends to maintain insurance against all liability incurred by its
officers
and directors in defense of any actions to which they may be made parties
by reason of their positions as officers and directors and is in the
process
of obtaining this insurance.
Nevada
law authorizes a Nevada corporation to indemnify its officers and directors
against claims or liabilities arising out of such person's conduct as
officers
or directors if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company.
The Articles of Incorporation provide for indemnification of the directors
and officers of the Company. In addition, the Bylaws of the Company provide
for indemnification of the directors, officers, employees, or agents of
the
Company. In general, these provisions provide for indemnification in
instances
when such persons acted in good faith and in a manner they reasonably
believed
to be in or not opposed to the best interests of the Company.
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the ownership of
WorldTeq
Group International's common stock and Series A preferred stock as of
December
31, 2003, by each shareholder known by us to be the beneficial owner of
more than
5% of WorldTeq Group International's common stock, each director and
all
executive officers and directors as a group. Unless otherwise indicated by
footnote,
each of the shareholders named in the table has sole voting and investment
power with respect to the shares of common stock beneficially
owned.
|
TITLE
OF CLASS |
NAME
AND ADDRESS |
Number
of |
%
OF |
|
|
|
|
|
|
Common |
Jeff
Lieberman |
266,000(1) |
1.23 |
|
|
30
West Gude Drive |
|
|
|
|
Rockville,
MD 20850 |
|
|
|
|
|
|
|
|
Common |
Bruce
Bertman |
12,357,511 |
36.7% |
|
|
10101
Johns Drive |
|
|
|
|
Damascus,
MD 20872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
All
Executive officers and |
|
|
|
|
Directors
and affiliates as a group |
266,000(2) |
34.57 |
Notes:
(1) Mr.
Lieberman is our CEO and Chairman, and has sole voting authority
for all
of these shares.
(2) Total
includes, Mr. Jeff Lieberman only.
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) The
following transactions have been undertaken within the last three years
with
related parties. BRUCE BERTMAN
In May
2003, WorldTeq sold its Networld subsidiary to an entity owned by Bruce
Bertman
for $1. WorldTeq recorded the sale as a credit to additional paid
in
capital
for the net liabilities totaling approximately $435,000.
In
September 2003, the board of directors approved the conversion of $100,000 of
notes
payable to Bruce Bertman into 5,353,511 shares of common stock. The number
of shares
issued was determined based on the formula outlined in Bruce Bertman's
Secured
Convertible Promissory Note. The Note allowed Mr. Bertman to convert at
the lower
of either $.10 per share or the average closing bid price of WTEQ common
stock for the prior 20-day period. The average closing bid was $0.018714
per share
for the period ended August 18, 2003 when Mr. Bertman converted.
ITEM 13.
EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST
OF EXHIBITS
List of
Exhibits
| 3.1 |
The
articles of incorporation of Registrant (incorporated by reference to the
Registrant's Registration Statement on Form 10-SB12G/A filed with the
Commission on November 17, 1999, No. 000-27243). |
| 3.2 |
Bylaws
of Registrant (incorporated by reference to the Registrant's Registration
Statement on Form 10-SB12G/A filed with the Commission on November 17,
1999, No. 000-27243). [ |
| 10.1 |
WorldTeq
2003 Individual Stock Plan of the Registrant (incorporated by reference to
the Registrant's Registration Statement on Form S-8 filed with the
Commission on October 29, 2003, No. 333-110047). |
| 23.1 |
Consent
of Independent Auditor |
* Filed herewith
(b)
REPORTS ON FORM 8-K
The
following reports on Form 8-K were filed by the Company during the fiscal
quarter ended December 31, 2003:
None
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT
FEES. Total annual audit fees billed for professional services rendered by
Malone and Bailey PLLC during the 2004and 2004fiscal years for the audit
of
our
annual financial statements and the review of the financial statements included
in our quarterly reports on Form 10-QSB, or services that are normally provided
by Malone and Bailey PLLC in connection with statutory and regulatory filings or
engagements for those fiscal years, totaled $15,000 and $19,000,
respectively.
AUDIT-RELATED
FEES. Total annual audit fees billed during the 2004 and 2003 fiscal
years for assurance and related services by Malone and Bailey PLLC that
are
reasonably related to the performance of the audit or review of WorldTeq
Group
International, Inc.'s financial statements and not reported in the paragraph
above under "Audit Fees" were $XX and $XX, respectively.
TAX FEES.
None.
ALL OTHER
FEES. There were no fees billed by Malone and Bailey PLLC during our
2003 and
2002 fiscal years for any other services rendered to WorldTeq Group International,
Inc. other than the amounts set forth above.
SIGNATURE
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused
this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
WorldTeq
Group International, Inc.
/s/
Jeffrey Lieberman
-----------------------------
Jeffrey
Lieberman
Chief
Executive Officer,
President,
Treasurer and Chairman of the Board
In
accordance with the Exchange Act, this report has been signed below by the
following
persons on behalf of the registrant and in the capacities and on the
dates
indicated.
/s/
Jeffrey Lieberman
-----------------------------
Jeffrey
Lieberman
Chief
Executive Officer,
President,
Treasurer and Chairman of the Board
/s/ Brian
Rosinski
-----------------------------
Brian
Rosinski
Secretary
and Director
Dated:
May 5, 2005
|
WORLDTEQ
GROUP INTERNATIONAL, INC. |
|
|
CONSOLIDATED
BALANCE SHEET |
|
|
DECEMBER
31, 2004 |
|
| |
|
|
|
ASSETS |
|
|
|
| |
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
Restricted
cash |
|
|
- |
|
|
Trade
accounts receivable, net of allowance for doubtful accounts of $0
|
|
$ |
35,914 |
|
|
Other
Current Assets |
|
$ |
848 |
|
| |
|
|
|
|
|
Total
current |
|
$ |
36,762 |
|
| |
|
|
|
|
| |
|
|
|
|
|
EQUIPMENT,
net |
|
$ |
7,185 |
|
|
CUSTOMER
BASE |
|
$ |
38,542 |
|
| |
|
|
|
|
|
Total
assets |
|
$ |
82,489 |
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT |
|
|
|
|
| |
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
Convertible
notes payable to stockholder |
|
$ |
187,432 |
|
|
Convertible
notes payable |
|
$ |
0 |
|
|
Accounts
payable |
|
$ |
327,272 |
|
|
Accrued
expenses |
|
$ |
4,800 |
|
|
Payroll
Liabilities & Taxes |
|
|
45,727 |
|
| |
|
|
|
|
|
Total
current liabilities |
|
$ |
567,031 |
|
| |
|
|
|
|
|
LONG
TERM LIABILITIES |
|
|
|
|
|
Long
Term note payable to stockholder |
|
$ |
0 |
|
| |
|
|
|
|
|
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 |
|
|
911 |
|
|
Common
stock, $.001 par; 100,000,000 shares authorized; |
|
|
|
|
|
29,561,746
shares issued and outstanding |
|
|
38,706 |
|
|
Additional
paid-in capital |
|
|
22,104,807 |
|
|
Accumulated
deficit |
|
|
(22,262,299 |
) |
| |
|
|
|
|
|
Total
stockholders' deficit |
|
|
(117,875 |
) |
| |
|
|
|
|
|
Total
liabilities and stockholders' deficit |
|
$ |
449,156 |
|
| |
|
|
|
|
| |
|
|
|
|
|
See
accompanying summary of accounting policies and notes to financial
statements. |
|
WORLDTEQ
GROUP INTERNATIONAL, INC. |
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
|
YEARS
ENDED DECEMBER 31, 2004 and 2003 |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
Sales |
|
$ |
341,199 |
|
$ |
820,933 |
|
| |
|
|
|
|
|
|
|
|
Cost
of sales |
|
|
299,618 |
|
|
483,519
|
|
|
Selling,
general and administrative |
|
|
817,332 |
|
|
696,018 |
|
|
Bad
debts |
|
|
- |
|
|
24,920 |
|
|
Depreciation |
|
|
12,690 |
|
|
37,091 |
|
| |
|
|
|
|
|
|
|
|
Total
operating expenses |
|
|
1,129,640 |
|
|
1,241,548 |
|
| |
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(788,441 |
) |
|
(420,615 |
) |
| |
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE) |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Forgiveness
of debt |
|
|
- |
|
|
81,088 |
|
Interest
expense |
|
|
(5,350 |
) |
|
(12,107 |
) |
| Other
Expenses |
|
|
(301,171 |
) |
|
- |
|
| |
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) |
|
$ |
(1,093,913 |
) |
$ |
(351,634 |
) |
| |
|
|
|
|
|
|
|
|
Basic
& Diluted loss per share: |
|
$ |
(0.019 |
) |
$ |
(0.015 |
) |
| |
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding |
|
|
35,106,190 |
|
|
23,612,937 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
See
accompanying summary of accounting policies and notes to financial
statements. |
WORLDTEQ
GROUP INTERNATIONAL, INC.
NOTES TO
FINANCIAL STATEMENTS
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES
Basis of
presentation: WorldTeq Group International, Inc. was originally created to act
as a holding for a multiple of wholly-owned subsidiaries and that financial
statements of all subsidiaries would be consolidated into one. During 2004
WorldTeq Corporation was the only subsidiary reporting financial statements for
said consolidation. Significant inter-company accounts and transactions have
been
eliminated.
Estimates
and assumptions: Preparing financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and
assumptions that affect the reported amounts of assets, liabilities, revenue
and
expenses at the balance sheet date and for the period then ended. Actual
results
could differ from these estimates.
Cash and
cash equivalents include all highly liquid investments purchased with
original
maturities of three months or less. Restricted cash is a credit card
merchant
cash deposit to secure customer credit card long distance payments.
Revenue
recognition. Revenue from long-distance services is recognized
when services are rendered. Deferred revenue represents collected prepaid
long-distance services.
An
allowance for doubtful accounts is provided based on credit
experience.
Property
and Equipment. The Company calculates depreciation for financial reporting
for its computers and other equipment using the straight-line method
over the
useful lives of the assets, estimated at 3 - 5 years.
Income
taxes. Income taxes are computed using the tax liability method of accounting,
whereby deferred income taxes are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates that will be in effect when the differences
reverse.
Loss per
Share. Basic loss per share equals net loss divided by weighted average
shares
outstanding during the year. Diluted earnings per share include the impact of
common stock equivalents using the treasury stock method when the effect is
dilutive. There were no common stock equivalents during 2004 or
2003.
New
Accounting Principles. WorldTeq does not expect the adoption of recently
issued
accounting pronouncements to have a significant impact on its financial
position,
results of operations or cash flow.
NOTE
2 - GOING CONCERN
The
financial statements have been prepared assuming that WorldTeq will continue
as a
going concern. WorldTeq has a significant accumulated deficit and
working
capital
deficiency at December 31, 2004 and is unable to meet its obligations as they
come due; all of which raise substantial doubt about WorldTeq's ability to
continue
as a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or to the amounts and classification of liabilities that might be necessary
should WorldTeq be unable to continue as a going concern.
The
continued support of WorldTeq's creditors, lenders and shareholders is
required
in order for WorldTeq to continue as a going concern. Management's plans to
support WorldTeq's operations include cutting overhead costs, borrowing
additional
funds and raising additional capital. WorldTeq's inability to obtain
additional
capital or obtain such capital on favorable terms could have a material
adverse effect on its financial position, results of operations and its
ability
to continue operations.
NOTE
3- NOTE PAYABLE TO STOCKHOLDER
In
February 2003, WorldTeq signed a note with the majority stockholder. This note
is secured by all asset of WorldTeq, bears interest at 8% andis due in monthly
installments of $4,000, with the balance due February 2004. The note
is convertible at the option of the holder at $.10 per share or the average
of the closing bid price for the prior 20 day period. During 2003, the
holder of
the note converted $100,000 into 5,343,511 shares of
common stock. On March 31, 2005, the Corporation’s debt to Bruce Bertman was
settled in exchange for the new issuance of 1,696,969 shares of common stock of
the Corporation.
NOTE
4 - NOTE PAYABLE
This note
is past due and incurs interest at 15% and is convertible at the option of
the holder at $.10 per share or the average of the closing price for
the prior
20 day period. During 2003, the holder of the note converted $50,000
into
588,235 shares of common stock. On March 31, 2005, the Corporation’s
debt to Howard Lieberman was settled in exchange for the new issuance of 581,818
shares of common stock of the Corporation.
NOTE
5 - INCOME TAXES
WorldTeq
has had losses since inception and therefore has no income tax liability.
The net deferred tax asset generated by the loss carry-forward has been
fully reserved. The cumulative net operating loss carry-forward is approximately
$20,400,000 at December 31, 2004, and will expire in various years through
2023.
Deferred
income taxes consist of the following at December 31, 2004:
Long-term:
Deferred
tax assets $ 6,900,000
Valuation
allowance (6,900,000)
------------
$ -
============
NOTE
6 - PREFERRED STOCK
Series A
Convertible Preferred Stock was issued in 1999 for net proceeds of 3,602,560.
It is convertible into the Company's common stock at any time at the
option of
the holder on a one-for-one basis. This series is non-voting and pays
no
dividends. The liquidation value is $4.50 per share.
Note
7 - COMMON STOCK
In 2004,
WorldTeq issued 3,000,000 shares of common stock for $210,000 related
to the
exercise of warrants issued during 2003.
In 2005,
note holders converted $188,000 into 2,278,787 shares of common sotck
(see
notes 3 and 4).
NOTE
8 - STOCK OPTIONS AND WARRANTS
WorldTeq's
Stock Option Plan provides for the grant of both qualified and non-qualified
options to directors, employees and consultants of WorldTeq, and opportunities
for directors, officers, employees and consultants of WorldTeq to make
purchases of stock in WorldTeq. In addition, WorldTeq issues stock warrants
from time
to time to employees, consultants, stockholders and creditors as additional
financial incentives. The plan and warrants issuance are administered
by the
Board of Directors of WorldTeq, who have substantial discretion to determine
which persons, amounts, time, price, exercise terms, and restrictions,
if
any.
WorldTeq
uses the intrinsic value method of calculating compensation expense for
employees,
as described and recommended by APB Opinion 25, and allowed by FASB Statement
123. During the years ended December 31, 2004 and 2004, no compensation
expense was recognized for the issuance of options and warrants to employees,
because no option prices were below market prices at the date of grant
No
options were issued to employees in 2003. On February 25th of 2004,
2,000,000 options were granted to Jeffrey Lieberman (Optionee) at 13 cents.
16.667% of the the Options began to vest six months after the vesting
commencement date of 2/2/05, and 1/36 of the Shares subject to the Option shall
vest each month thereafter, ubject to the Optionee continuing to be a
Service Provider on such dates. On February 25th of 2004,
350,000 options were granted to Brian Rosinski (Optionee) at 13 cents. 16.667%
of the the Options began to vest six months after the vesting commencement date
of 2/2/05, and 1/36 of the Shares subject to the Option shall vest each month
thereafter, subject to the Optionee continuing to be a Service Provider on such
dates.
During
the year ended December 31, 2003, WorldTeq issued 2,000,000 options to
consultants
whose stock-based compensation must be recorded at fair value calculated
using Black Scholes. The compensation cost record for these warrants
was
$53,000. Variables used in the Black-Scholes option-pricing model include
(1) 1.5%
risk-free interest rate, (2) expected life of one year, (3) 100% volatility
and (4) zero expected dividends.
| |
|
|
|
Weighted |
|
Weighted |
|
|
|
| |
|
|
|
Average |
|
average |
|
|
|
| |
|
Options |
|
Share
Price |
|
Warrants |
|
Share
Price |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2002: |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Outstanding,
2001 |
|
|
1,232,000 |
|
|
.29 |
|
|
4,036,650 |
|
$ |
66 |
|
|
Granted |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2002 |
|
|
1,232,000 |
|
|
.29 |
|
|
4,036,650 |
|
|
.66 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
- |
|
|
- |
|
|
2,000,000 |
|
|
.10 |
|
|
Excersiced |
|
|
- |
|
|
- |
|
|
(2,000,000 |
) |
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2003 |
|
|
1,232,000
$ |
|
|
.29 |
|
|
4,036,650 |
|
$ |
.66 |
|
Options
outstanding and exercisable as of December 31, 2003: |
|
|
|
|
|
|
|
| |
|
Outstanding |
|
Exercisable |
|
|
|
| |
|
Number |
|
Remaining |
|
Number |
|
|
Exercise
Price |
|
of
Shares |
|
life |
|
of
Shares |
|
| |
|
|
|
|
|
|
|
|
.29 |
|
|
87,000 |
|
|
2
years |
|
|
87,000 |
|
|
.29 |
|
|
145,000 |
|
|
3
years |
|
|
145,000 |
|
|
.29 |
|
|
600,000 |
|
|
4
years |
|
|
600,000 |
|
|
.29 |
|
|
400,000 |
|
|
5
years |
|
|
400,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
1,232,000 |
|
|
|
|
|
1,232,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Warrants
out standing and exercisable as of December 31, 2003: |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
Exercisable |
|
|
|
|
|
|
|
|
Number |
|
|
Remaining |
|
|
Number |
|
|
Exercise
Price |
|
|
of
Shares |
|
|
life |
|
|
of
Shares |
|
| |
|
|
|
|
|
|
|
|
|
|
|
5.50 |
|
|
386,650 |
|
|
1
years |
|
|
386,650 |
|
|
2.75 |
|
|
150,000 |
|
|
3
years |
|
|
150,000 |
|
|
10 |
|
|
500,000 |
|
|
1
years |
|
|
500,000 |
|
|
.03 |
|
|
3,000,000 |
|
|
3
years |
|
|
3,000,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
4,036,650 |
|
|
|
|
|
4,036,650 |
|
NOTE
9 - COMMITMENTS AND CONTINGENCIES
WorldTeq
has a dispute with its former long-distance carrier, relating to the
balance
due owed to the carrier in 2002 when the relationship terminated. At
December
31, 2002 WorldTeq had a liability recorded of approximately $222,000
and
received a credit totaling approximately $81,000 during 2003 leaving a
liability
of approximately $141,000 at December 31, 2003. However, Worldteq had
been
invoiced approximately $710,000. The disputed difference of approximately
$488,000
relates mainly to charges incurred at various payphones. WorldTeq obtained
a waiver from liability from the payphones owner and from Qwest for any
of these
charges. Management is currently in contact with Qwest and the differences
are being reviewed by the Qwest. Management believes WorldTeq is not
liable
for the charges since waivers were obtained and has not recorded any
liability
related to these payphone fees. If WorldTeq is ultimately responsible
for the
charges they would be required to record an additional liability of approximately
$488,000. The carrier has not made demand for payment of the balance
since early 2003.
NOTE
11 - MAJOR CUSTOMERS AND VENDORS
One
customer accounted for approximately 40% of Worldteq's revenues in 2004 and2003.
Global Crossing accounted for approximately 100% of long-distance
carrier
purchases
in 2004 and 2003.
NOTE
12 - SUBSEQUENT EVENTS
In
January and February 2004 Worldteq received $100,000 from the exercise of
2,000,000
options issued in 2004.
In
February 2004, Worldteq purchased long-distance customer base for $50,000 in
cash.