UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-SA
[X] SEMIANNUAL REPORT PURSUANT TO REGULATION A
or
[ ] SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A
For the fiscal semiannual period ended June 30, 2020
CW PETROLEUM CORP
(Exact name of issuer as specified in its charter)
| Wyoming | 20-2765559 | |
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
Christopher Williams
Chief Executive Officer
CW Petroleum Corp
23501 Cinco Ranch Blvd., Ste H120 - #325
Katy, Texas 77494
(Full mailing address of principal executive offices)
(713) 857-8142
(Issuer’s telephone number, including area code)
Item 1. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included in Item 3 (Financial Statements) of this report, and together with our audited consolidated financial statements and the related notes included in our Form 1-K for the fiscal year ended December 31, 2019. Historical results are not necessarily indicative of future results.
The company increased its first 6-months sales to $3,462,230 in 2020 vs $2,860,453 in 2019. This was achieved by nearly doubling its’ volume of refined product sales. Due to COVID-19, the price of our refined products decreased by almost 30%. On an equivalent price basis to 2019, our 6-month 2020 sales would have been $4,500,899.
The company’s’ long-term goal is be listed on the NASDAQ so it can provide greater market exposure for its shareholders.
The company has engaged a Global Investment Bank to raise capital to expand its’ nationwide growth.
Under the Reg A rules for financial reporting, the company is obligated to file unaudited semi-annual and audited annual financial statements.
Due to the high working capital requirements for the acquisition of inventory over the last few years, the company’s growth has been limited. With the potential of additional capital from the Reg 1-A and recent marketing efforts, management believes that the company will be on track to expand its’ sales of Biodiesel, Gasoline, Diesel Fuel, and Specialty Fuel Blends utilizing the company’s own trucking operation and the various Pipelines on which it is approved to ship refined products.
Certain statements and other information set forth in this semi-annual report on Form 1-SA may address or relate to future events and expectations and as such constitute “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to our plans, objectives, projections, expectations and intentions and other statements identified by words such as “may”, “could”, “would”, “should”, “will”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar expressions. Forward-looking statements include, but are not limited to, statements about: expectations regarding our future revenue, the timing and release of our games, the implementation of our business model, our ability to enter into further licensing and publishing agreements, proceeds, timing and other expectations regarding the sale of Fig Game Shares, our expectations regarding our cash flow, our financial performance, our ability to obtain funding for our operations, our expectations regarding our cost of revenue, operating expenses and capital expenditures, and our future capital requirements.
All forward-looking statements are predictions or projections and involve known and unknown risks, estimates, assumptions, uncertainties and other factors that may cause our actual transactions, results, performance, achievements and outcomes to differ adversely from those expressed or implied by such forward-looking statements. You should not place undue reliance on forward-looking statements.
The cautionary statements set forth in the section entitled “Risk Factors” in our Annual Statement on Form 1-K (File No. 24R-00176), which was filed with the Securities and Exchange Commission, or SEC, on April 30, 2019 identify important factors that you should consider in evaluating our forward-looking statements. These factors include, among other things: (1) our history of losses; (2) our ability to continue as a going concern; (3) we may not be able to have our content accepted by the marketplace; (4) markets for our products and services; (5) our cash flows; (6) our operating performance; (7) our financing activities; (8) Our ability to compete effectively; (9) our ability to source and finance video entertainment products (10) our tax status; (11) national, international and local economic and business conditions that could affect our business; (12) industry developments affecting our business, financial condition and results of operations; and (13) governmental approvals, actions and initiatives and changes in laws and regulations or the interpretation thereof, including without limitation tax laws, regulations and interpretations.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be given that the expectations reflected in our forward-looking statements will be attained or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law, to re-issue this report or otherwise make public statements in order to update our forward-looking statements beyond the date of this report.
Operations
Our revenue for the six months ended June 30, 2020 was approximately $3.5 million, a 18% increase from the six months ended June 30, 2019 revenue of $2.9 million. We recognized $107,017 in bonuses or rebates in the six months ended June 30, 2020 as opposed to $24,387 in the six months ended June 30, 2019.
Cost of revenue amounted to $2.8 million for the six months ended June 30, 2020, a 19% increase from the prior six months ended June 30, 2019 total of $2.4 million resulting in part by the increase in sales.
Our gross margin on total costs of revenue amounted to approximately $664 thousand in the six months ended June 30, 2020, a 33% increase from the prior six months ended June 30, 2019 total of approximately $500 thousand.
For the six months ended June 30, 2020, we produced net income of $122,073, a 38% increase from the six months ended June 30, 2019 net income of $88,575, resulting primarily from the significant increase in our operations offset by a reduction in our margins of two percent (2%).
Liquidity
CW has no committed sources of funds and will be dependent on funds provided or obtained by the existing shareholders until other sources of funds are obtained. The existing shareholder’s ability to provide funds is limited. All funding to date has been provided by the shareholders, operations and equipment financing.
On June 30, 2020, our cash balance amounted to approximately $553 thousand compared to approximately $248 thousand at the end of 2019. Our net working capital has increased by approximately $343,531.
Cash Flow
Cash generated from operations for the six months ended June 30, 2020 amounted to $243 thousand, a 126% increase from the six months ended June 30, 2019. This increase resulted primarily from an increase in net income offset by increased other current assets.
During the six months ended June 30, 2020, our cash used in investing activities was $2 thousand, a decrease from the six months ended June 30, 2019, due to the acquisition of assets in 2019.
Cash used in financing activities for the six months ended June 30, 2020 was about $64 thousand due to debt payments on installment notes on transportation equipment offset by proceeds from an SBA loan. Cash used in financing activities for the six months ended June 30, 2019 was about $23 thousand due to debt payments on installment notes on transportation equipment.
Trends
Our only trend information relates to the price of oil. We have a limited capacity of inventory storage and containment facilities which limited our revenue capacity. Therefor increases and decreases in revenue a primarily attributable to the price of diesel fuel, gasoline, and biodiesel.
Item 2. Other Information
NONE
Item 3. Financial Statements
CW PETROLEUM CORP
Index to Consolidated Financial Statements
June 30, 2020
| F-1 |
Consolidated Balance Sheets
(Unaudited)
June 30, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 552,844 | $ | 248,475 | ||||
| Accounts receivable | ||||||||
| Trade, net | 180,899 | 177,030 | ||||||
| Inventory | 127,607 | 127,607 | ||||||
| Fuel bond | 2,000 | 2,000 | ||||||
| Other current assets | 70,000 | - | ||||||
| Total current assets | 933,350 | 555,112 | ||||||
| Property and equipment, net | 448,988 | 526,575 | ||||||
| Other assets | 5,763 | 3,234 | ||||||
| Total assets | $ | 1,388,101 | $ | 1,084,921 | ||||
| LIABILITES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 293,130 | $ | 175,664 | ||||
| Short term notes payable – related party | 295,000 | 300,000 | ||||||
| Current maturities of long-term debt | 64,093 | 141,852 | ||||||
| Total current liabilities | 652,223 | 617,516 | ||||||
| Long-term debt, net | 544,568 | 394,668 | ||||||
| Total liabilities | $ | 1,196,791 | $ | 1,012,184 | ||||
| Shareholders’ equity (deficit) | ||||||||
| Preferred stock –1,000,000 shares authorized, issued and outstanding with a par value of $.0001 per share | 100 | 100 | ||||||
| Common stock – 99,000,000 shares authorized, $0.0001 par value 12,973,500 issued and outstanding as of June 30, 2020 and December 31, 2019 | 1,297 | 1,297 | ||||||
| Stock payable | 300 | 300 | ||||||
| Additional Paid-in capital | 404,690 | 404,690 | ||||||
| Accumulated deficit | (211,577 | ) | (333,650 | ) | ||||
| Treasury stock, at cost (1,400 shares at $2.50) | (3,500 | ) | - | |||||
| Total shareholders’ equity (deficit) | 191,310 | 72,737 | ||||||
| Total liabilities and shareholders’ equity (deficit) | $ | 1,388,101 | $ | 1,084,921 | ||||
The accompanying notes are an integral part of these financial statements
| F-2 |
Consolidated Statements of Operations
(Unaudited)
| Six Months Ended | ||||||||
| June 30, 2020 | June 30, 2019 | |||||||
| Operations | ||||||||
| Revenue | ||||||||
| Fuel sales | $ | 3,355,213 | $ | 2,836,066 | ||||
| Bonuses and rebates | 107,017 | 24,387 | ||||||
| Total revenue | 3,462,230 | 2,860,453 | ||||||
| Cost of revenue | ||||||||
| Cost of fuel sold | 2,640,130 | 2,269,585 | ||||||
| Freight | 100,450 | 23,200 | ||||||
| Transport costs | 58,020 | 67,765 | ||||||
| Total cost of revenue | 2,798,600 | 2,360,550 | ||||||
| Margin on operations | 663,630 | 499,903 | ||||||
| Gain on sale of asset | 1,121 | - | ||||||
| Operating expenses | 509,810 | 389,337 | ||||||
| Earnings (loss) from operations | 154,941 | 110,565 | ||||||
| Other expense, net | 30,373 | 21,989 | ||||||
| Loss before income taxes | 124,568 | 88,576 | ||||||
| Income tax recovery | ||||||||
| Current | 2,495 | - | ||||||
| Net income (loss) | $ | 122,073 | $ | 88,575 | ||||
| Earnings Per Share | ||||||||
| Weighted average shares outstanding | 12,595,349 | 11,698,500 | ||||||
| Basic and fully diluted loss per share | $ | (0.01 | ) | $ | (0.01 | ) | ||
The accompanying notes are an integral part of these financial statements
| F-3 |
Consolidated Statements of Changes in Shareholders’ Equity
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
Six Months Ended June 30, 2020
| Common Stock | Preferred Stock | Treasury | Paid-In | Stock | Accumulated | |||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Stock | Capital | Payable | Deficit | Total | |||||||||||||||||||||||||||
| Balance December 31, 2019 | 12,973,500 | $ | 1,297 | 1,000,000 | $ | 100 | $ | - | $ | 404,690 | $ | 300 | $ | (333,650 | ) | $ | 72,737 | |||||||||||||||||||
| Repurchase of common stock | - | - | - | - | (3,500 | ) | - | - | - | (3,500 | ) | |||||||||||||||||||||||||
| Net income (loss) for the year ended December 31, 2019 | - | - | - | - | - | - | - | 122,073 | 122,073 | |||||||||||||||||||||||||||
| Balance June 30, 2020 | 12,973,500 | $ | 1,297 | 1,000,000 | $ | 100 | $ | (3,500 | ) | $ | 404,690 | $ | 300 | $ | (211,577 | ) | $ | 191,310 | ||||||||||||||||||
Six Months Ended June 30, 2019
| Common Stock | Preferred Stock | Treasury | Paid-In | Stock | Accumulated | |||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Stock | Capital | Payable | Deficit | Total | |||||||||||||||||||||||||||
| Balance December 31, 2019 | 11,698,500 | $ | 1,170 | 1,000,000 | $ | 100 | $ | - | $ | 198,567 | $ | - | $ | (286,495 | ) | $ | (86,658 | ) | ||||||||||||||||||
| Net income (loss) for the year ended December 31, 2019 | - | - | - | - | - | - | - | 88,575 | 88,575 | |||||||||||||||||||||||||||
| Balance June 30, 2020 | 11,698,500 | $ | 1,170 | 1,000,000 | $ | 100 | $ | - | $ | 198,567 | $ | - | $ | (197,920 | ) | $ | 1,917 | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements
| F-4 |
Consolidated Statements of Cash Flow
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, 2020 | June 30, 2019 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 122,073 | $ | 88,575 | ||||
| Depreciation | 80,552 | 68,585 | ||||||
| Gain on sale of asset | (1,121 | ) | - | |||||
| Changes in | ||||||||
| Accounts receivable | (3,869 | ) | (65,510 | ) | ||||
| Other current assets | (70,000 | ) | - | |||||
| Accounts payable and accrued expenses | 117,466 | 15,522 | ||||||
| Other assets | (2,529 | ) | - | |||||
| Net cash provided by operations | 242,572 | 107,172 | ||||||
| Cash flows from investing activities | ||||||||
| Acquisition of property and equipment | (4,995 | ) | (10,000 | ) | ||||
| Cash received from sale of fixed assets | 3,151 | - | ||||||
| Net cash used in investing activities | (1,844 | ) | (10,000 | ) | ||||
| Cash flows from financing activities | ||||||||
| Purchase of treasury stock | (3,500 | ) | - | |||||
| Debt proceeds | 150,000 | - | ||||||
| Debt payments | (82,859 | ) | (52,658 | ) | ||||
| Cash flows used in financing activities | 63,641 | (52,658 | ) | |||||
| Net increase in cash and cash equivalents | 304,369 | 44,513 | ||||||
| Cash and cash equivalents | ||||||||
| Beginning of year | 248,475 | 180,260 | ||||||
| End of year | $ | 552,844 | 224,774 | |||||
| Supplemental disclosures | ||||||||
| Cash paid for interest | $ | (11,703 | ) | (11,703 | ) | |||
| Non-cash financing and investing activities | ||||||||
| Installment notes issued for property acquisitions | $ | - | (107,958 | ) | ||||
The accompanying notes are an integral part of these financial statements
| F-5 |
Notes to Consolidated Financial Statements
For the Six Months Ended June 30, 2020
(Unaudited)
Note 1 - Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying consolidated balance sheets as of June 30, 2020 and December 31, 2019, which was derived from audited financial statements, and the unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information, the instructions to Form 1-SA and Article 10 of Regulation S-X. In the opinion of management, the accompanying unaudited, consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2020, and the cash flows and results of operations for the six-month periods ended June 30, 2020 and 2019. Such adjustments consisted only of normal recurring items. The results of operations for the six-month periods ended June 30, 2020 and 2019 are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements contained in the Company’s Offering Statement (Regulation A) on Form 1-K filed on April 21, 2020, and it is suggested that these interim consolidated financial statements be read in conjunction therewith.
Earnings per Common Share
Basic earnings per common share is computed by dividing net income attributable to CW Petroleum Corp and available to common shareholders by the sum of the weighted average number of shares of common stock. Diluted earnings per common share is computed by dividing net income attributable to us and available to common shareholders by the sum of the weighted average number of shares of common stock and the number of additional shares of common stock that would have been outstanding if our outstanding potentially dilutive securities had been issued. We currently have no common stock equivalents.
Accounting Pronouncements Recently Issued and Adopted
In 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) guidance on leases, with amendments issued in 2018. The guidance requires lessees to recognize most leases on the balance sheet but does not change the manner in which expenses are recorded in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The two permitted transition methods under the guidance are the modified retrospective transition approach, which requires application of the guidance for all comparative periods presented, and the cumulative effect adjustment approach, which requires prospective application at the adoption date. The Company adopted the standard on January 1, 2019. The Company does not have any long-term lease as of June 30, 2020, as such the adoption of the standard has no impact on the Company’s financial statement and disclosures.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). ASU 2018-18 clarifies when certain transactions between collaborative arrangement participants should be accounted for under ASC 606 and incorporates unit-of-account guidance consistent with ASC 606 to aid in this determination. ASU 2018-18 is effective for public companies for annual and interim periods beginning after December 15, 2019, with early adoption permitted. ASU 2018-18 should generally be applied retrospectively to the date of initial application of Topic 606. The Company adopted the standard on January 1, 2020. The Company does not have any collaborative arrangements as of June 30, 2020, as such the adoption of the standard has no material impact on the Company’s financial statement disclosures.
Accounting Pronouncements Recently Issued and Not Yet Adopted
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. The Company will adopt the new standard effective January 1, 2021 and does not expect the adoption of this guidance to have a material impact on the Company’s financial statements.
| F-6 |
CW PETROLEUM CORP
Notes to Consolidated Financial Statements
For the Six Months Ended June 30, 2020
(Unaudited)
Note 2 - Accounts Receivable
CW has accounts receivable of $180,899 and $177,030, net of an allowance for bad debt of $23,118 and $23,118, as of June 30, 2020 and December 31, 2019, respectively. Accounts receivable are written-off when it becomes apparent based upon age or customer circumstances that such amounts will not be collected.
The following table sets forth activities in our allowance for bad debt:
| Description | June 30, 2020 | December 31, 2019 | ||||||
| Balance as of beginning of period | $ | 23,118 | $ | 21,349 | ||||
| Charges to provision for bad debt | - | 1,769 | ||||||
| Balance as of end of period | $ | 23,118 | $ | 23,118 | ||||
Note 3 – Inventories
Inventories as of June 30, 2020 and December 31, 2019, consists of the following:
| Description | June 30, 2020 | December 31, 2019 | ||||||
| Tank Heel Inventory | $ | 127,607 | $ | 127,607 | ||||
| Total | $ | 127,607 | $ | 127,607 | ||||
Tank heel inventory represents the cost of fuel maintained in storage tanks owned by other parties to assure maintenance of capacity.
| F-7 |
CW PETROLEUM CORP
Notes to Consolidated Financial Statements
For the Six Months Ended June 30, 2020
(Unaudited)
Note 4 - Property and Equipment
The amount of property and equipment as of June 30, 2020 and December 31, 2019, consist of the following:
| Description | June 30, 2020 | December 31, 2019 | ||||||
| Furniture, fixtures and equipment | $ | 17,932 | $ | 25,220 | ||||
| Transportation equipment | 942,087 | 993,928 | ||||||
| Total property cost | $ | 960,019 | $ | 1,019,148 | ||||
| Accumulated depreciation | 511,031 | 492,573 | ||||||
| Property and equipment, net | $ | 448,988 | $ | 526,575 | ||||
For the six months ended June 30, 2020 and 2019, CW recorded depreciation expense of $80,552 and $68,585, respectively. We acquired equipment of $4,995 and $10,000 during the six months ended June 30, 2020 and 2019, respectively.
Note 5 - Debt
CW has installment notes payable secured by our transportation equipment. Interest rates range from 2% to 18% per annum and averaged 7.98% and 6.98% as of June 30, 2020 and December 31, 2019, respectively. The terms of these notes range from 36 to 72 months and average 59. Total monthly payments under these notes amounted to $8,191 and $12,956 as of June 30, 2020 and December 31, 2019, respectively.
During the six months ended June 30, 2020, CW acquired notes of $0 for property and equipment and made repayments of $82,859 and acquired notes of $0 for property and equipment and made repayments of $52,658 during the six months ended June 30, 2019.
Economic Injury Disaster Loan
On May 31, 2020, The Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business.
Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is up to $150,000, with proceeds to be used for working capital purposes. The Company has secured an EIDL loan in the amount of $150,000. Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including principal and interest, are due monthly beginning May 31, 2021 (twelve months from the date of the SBA Note (defined below)) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Note. In connection therewith, the Company received a $2,000 advance, which does not have to be repaid.
| F-8 |
CW PETROLEUM CORP
Notes to Consolidated Financial Statements
For the Six Months Ended June 30, 2020
(Unaudited)
As of June 30, 2020, the aggregate annual maturities of debt are as follows:
| Six Months Ended June 30, 2020 | Amount | |||
| 2020 | $ | 64,093 | ||
| 2021 | 112,342 | |||
| 2022 | 110,770 | |||
| 2023 | 79,643 | |||
| 2024 | 65,551 | |||
| Thereafter | 176,352 | |||
| Total | $ | 608,661 | ||
Note 6 – Related Party Transactions
Short term notes payable includes $295,000 and $295,000 as of June 30, 2020 and 2019, respectively of noninterest-bearing loans from related parties. Interest expense of $11,703 and $11,703 was imputed for the six months ended June 30, 2020 and 2019.
The Company leases land for storage of transportation equipment on a month to month lease from its President for $1,500 per month.
Note 7 – Concentrations
Accounts receivable as of June 30, 2020 are concentrated among two customers representing 63% and 10% of accounts receivable. As of December 31, 2019, three customers make up 76%, 14% and 10% of accounts receivable.
Revenue includes a significant concentration among customers for the six-month ended June 30, 2020, in which two customers represent 73% and 16% of revenue.
Revenue includes a significant concentration among customers for the year ended December 31, 2019, in which two customers represent 73% and 16% of revenue.
Note 8 – Subsequent Events
Subsequent events have been evaluated through August 10, 2020, the date these financial statements were available to be released and noted no other events requiring disclosure.
| F-9 |
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CW PETROLEUM CORP
| By: | /s/ Christopher Williams, President | |
| Date: August 10, 2020 | ||
Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.
| By: | /s/ Christopher Williams, President | |
| Date: August 10, 2020 | ||
