UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
OR
{_} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000-27243
WORLDTEQ GROUP INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
=============================================================
Nevada 03-7392107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
30 West Gude Drive, Rockville, Maryland 20850
(Address of principal executive offices) (Zip/Postal Code)
(888) 263-7776
(Telephone Number)
-------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
{X} YES {_} NO
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date. There were 51,432,190 common stock
shares, par value $0.001, as of August 5, 2005.
Note Regarding FORWARD-LOOKING STATEMENTS
In addition to historical information, this Report contains forward-looking
statements. 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 2 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 revise
these 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 of the
Company's Registration Statement filed with the Securities and Exchange
Commission (the "SEC") on April 20, 2004 on Form 10KSB. 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.
Part I
Financial Information
Item 1. Financial Statement
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
June 30, 2005
(unaudited)
-----------
Assets
Current Assets:
Restricted Cash $ 0
Accounts Receivable 80,085
Other Current Assets 73,694
--------------
Total current assets 153,779
--------------
Equipment, net 7,730
Customer base 32,292
--------------
Total assets $ 193,801
==============
Current Liabilities
Convertible note payable to stockholder $ 0
Convertible note payable 0
Accounts Payable 280034
Accrued expenses 71,845
--------------
Total current liabilities 351,879
--------------
Commitments and contingencies
Stockholders' Deficit
Convertible preferred stock, $.001 par value,
5,000,000 shares authorized, 911,553 shares
issued and outstanding 911
Common stock, $.001 par value, 100,000,000
shares authorized, 32,706,190 shares issued
and outstanding 3,569
Paid in capital 22,608,000
Retained deficit (22,770,559)
--------------
Total stockholders' deficit (158,079)
--------------
Total liabilities and stockholders' deficit $ 193,801
==============
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
2005 2004 2005 2004
---------------- ---------------- ---------------- ----------------
Sales $ 95,228 $ 106,398 $ 147,603 $ 223,938
Cost of Sales 25,963 78,689 $ 37,295 $ 161,381
---------------- ---------------- ---------------- ----------------
Gross profit 69,265 27,709 110,307 62,557
Selling, general and administrative expenses 63,951 188,681 144,361 503,110
---------------- ---------------- ---------------- ----------------
Income (loss) from operations 5,314 (160,973) (34,054) (440,553)
Interest Expense 5,800 2,850 5,800 5,738
---------------- ---------------- ---------------- ----------------
Net income (loss) $ (486) $ (163,823) (39,954) (446,291)
================ ================ ================ ================
Basic and diluted income (loss) per share: $ (0.00) $ (0.00) $ (0.01) $ (0.01)
================ ================ ================ ================
Weighted Average Shares Outstanding 32,539,523 32,539,523 31,408,042 31,408,042
================ ================ ================ ================
WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CASH FLOWS
----------------------------------
(unaudited)
-----------
Six Months Ended
June 30,
----------------------------
Cash Flows Used in Operating Activities 2005 2004
----------------------------
Net Income (Loss) $ (39,954) $ (446,291)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 5,705 15,189
Stock For Services 0 180,000
Stock option expense 0 220,000
Change in:
Accounts Receivable (33,973) (40,635)
Other Current Assets (88,173) (4,573)
Accounts Payable 35,163 (27,081)
Accrued Expenses - -
Deferred Revenue - -
------------- -------------
Net Cash Used In Operating Activities (121,232) (103,391)
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Cash Flows Used In Investing Activities
Purchases of customer base (0) (54,609)
------------- -------------
Cash Flows Provided By Financing Activities
Proceeds from shareholder note payable - -
Exercise of stock options 100,000 100,000
Payments on note payable (2,644) (2,000)
Stock Issued For Cash 60,000
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Net cash from financing activities 97,356 158,000
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Net Change in Cash (23,876) -
Cash - beginning of year 0 31,807
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Cash - End of Quarter $ (23,876) $ 31,807
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WORLDTEQ GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
June 30, 2005
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The interim financial statements and summarized notes included herein were
prepared in accordance with accounting principals generally accepted in the
United States of America for interim financial information, pursuant to rules
and regulations of the Securities and Exchange Commission. Because certain
information and notes normally included in complete financial statements
prepared in accordance with accounting principals generally accepted in the
United States of America were condensed or omitted pursuant to such rules and
regulations, it is suggested that these financial statements be read in
conjunction with the Consolidated Financial Statements and the Notes thereto,
included in Worldteq's Report 10KSB-A filed May 18, 2004. These interim
financial statements and notes hereto reflect all adjustments that are, in the
opinion of management, necessary for a fair statement of results for the interim
periods presented. Such financial results should not be construed as necessarily
indicative of future results.
STOCK BASED COMPENSATION:
The Company accounts for its employee stock-based compensation plans under
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees. Worldteq granted options to purchase 2,350,000 shares of common
stock to two employees during the three months ending March 31, 2004. All
options begin vesting six months after the date issued, February 25, 2004, and
vest 1/36 each month thereafter, have an exercise price of $.13 per share and
expire 10 years from the date of grant.
The following table illustrates the effect on net loss and net loss per share if
Worldteq had applied the fair value provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.
Six Months Ended
June 30,
----------------------------
2005 2004
------------- -------------
Net loss available to common $ (39,954) $ (446,291)
Less: stock based compensation
determined under fair value
based method - -
------------- -------------
Pro forma net loss $ (39,954) $ (446,291)
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Basic and diluted net loss per share
As reported $ (0.01) $ (0.01)
============= =============
Pro forma $ (0.01) $ (0.01)
============= =============
ITEM 2. 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 10QSB.
Certain information contained below and elsewhere in this Form 10QSB, including
information regarding our plans and strategy for our business, are
forward-looking statements. See "Note Regarding Forward-Looking Statements."
Our business plan for the next twelve months is to demonstrate the efficacy of
our product candidate in animal models. It is necessary for us to establish
evidence of efficacy of our approach in order to advance to subsequent
milestones.
OVERVIEW
The Company is 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 payroll services and 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
- Billing Services
RECENT DEVELOPMENTS
During the second quarter of 2005, WorldTe concentrated all its efforts on
closing The proposed merger with Yin Hai Harbin of China. Unfortunately, as of
the writing of this 10Q, Harbin had decided to discontinue the merger based on
our inability to get re-listed with the OTC-BB. Since then the company has been
re-listed and we are actively looking for another merger candidate at this time.
FINANCIAL CONDITION
We have limited financial resources and currently do such a small amount of
business that the company cannot pay its staff on a regular basis. The company
is aggressively looking for a merger candidate.
RESULTS OF OPERATIONS
Total sales for the second quarter 2005 was $95,228 as compared to $106,398 for
the quarter ended June 30, 2004, an approximately 10% decrease.
The continuing decrease in revenues is primarily due to the loss of long
distance customers as they leave to sign on with the competitions unlimited
plans.
Our net loss for the quarter ending June 30, 2005 was $587 or less then $.01 per
share, as compared to $163,823 for the same period in 2004
Selling, general and administrative expenses for the second quarter of fiscal
2005 were $63,951 as compared to $188,681 for the same quarter in fiscal 2004.
Cost of sales for the second quarter of fiscal 2005 was $25,963 as compared to
$37,295 for the same quarter in fiscal 2004. This decrease of 20% was primarily
attributable to efficiencies in our sales organization, but also slightly lower
sales.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the period ended June 30th, 2005 and
2004 was $0.00 and $31,807 respectively, this in part due to the committed
expenses for the marketing of MundoTeq
The Company, at June 30th, 2005 and Year End of 2004, respectively, had total
assets of approximately $153,779 and $164,479.
Off-Balance Sheet Arrangements
------------------------------
The Company does not have any off-balance sheet arrangements with any party.
Critical Accounting Estimates
-----------------------------
There have been no material changes in our critical accounting policies or
critical accounting estimates since 2000 nor have we adopted an accounting
policy that has or will have a material impact on our consolidated financial
statements. For further discussion of our accounting policies see Footnote 1
"Summary of Significant Accounting Policies" in this Quarterly Report on Form
10-QSB and the Notes to Consolidated Financial Statements in our Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2003.
ITEM 3. Controls and Procedures
(a) The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the chief executive officer and the principal financial officer of the
Company concluded that the Company's disclosure controls and procedures were
adequate.
(b) Changes in internal controls. The Company made no significant changes in its
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities
In January 2004, in exchange for services, we issued stock purchase warrants to
XCL Partners, Inc. to purchase 1,000,000 shares of common stock at an exercise
price of $0.15 per share, 1,000,000 shares of common stock at an exercise price
of $0.20 per share, and 2,000,000 shares of common stock at an exercise price of
$0.25 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 $.25 per share.
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.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed by the Company during the fiscal
quarter ended June 30, 2003:
None
SIGNATURE
In accordance with the requirements 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/ Jeff Lieberman
-----------------------------
Jeff 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/ Jeff Lieberman
-----------------------------
Jeff Lieberman
Chief Executive Officer,
President,
Treasurer, and
Chairman of the Board
Dated: August 23, 2004