As filed with the Securities and Exchange Commission on September 26, 2001
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Worldwide PetroMoly, Inc.
(Exact name of registrant as specified in charter)
Colorado 4832 84-1125214
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of incorporation Classification Code Number) Identification
or organization) Number)
12600 Deerfield Parkway, Suite 100
Alpharetta, Georgia 30004
(678) 762-3295
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive office)
Robert S. Vail
Chief Financial Officer
12600 Deerfield Parkway, Suite 100
Alpharetta, Georgia 30004
(678) 762-3295
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Melissa McMorries, Esq.
James W. Maxson, Esq.
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, NE
Suite 2400
Atlanta, GA 30308
(404) 815-2400
Approximate date of proposed sale to the public:
From time to time after the effective date of this
Registration Statement as per the terms of the
Equity Line of Credit Agreement
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Share Offering Price Registration Fee
------------------------------------ ---------------------- ------------------ ---------------------- --------------------
Common Stock, 200,000,000(1) $0.10(1) $20,000,000(2) $5,000
no par value per share
Common Stock, 175,000 $0.10(1) $ 17,500 $ 4.38
no par value per share,
underlying warrants(3)
==================================== ====================== ================== ====================== ====================
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(1) Estimated solely for purposes of calculating the amount of the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based
upon the average of the closing bid and asked priced for our common stock $0.10
as reported on the Over the Counter Bulletin Board on September 21, 2001.
(2)This represents the maximum purchase price that Grenville Financial, Ltd. is
obligated to pay us under the equity line of credit agreement.
(3) These shares of Common Stock are issuable upon the exercise of warrants
issued to Grenville Financial, Ltd. The exercise price will be 110% of the bid
price on the trading day immediately preceding the execution of the equity line
agreement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PROSPECTUS
200,175,000 Shares
Worldwide PetroMoly, Inc.
Common Stock
This prospectus will be used in connection with the resale by Grenville
Financial, Ltd., the selling shareholder, of up to 200,000,000 shares of our
common stock that may be issued by us to the selling shareholder pursuant to an
equity line of credit agreement.
This prospectus is also registering the resale of 175,000 shares of our
common stock issuable upon exercise of warrants issued to Grenville Financial,
Ltd.
The shares may be sold from time to time for the account of Grenville
Financial, Ltd. We will receive no proceeds from the sale of the shares by
Grenville. We will receive cash upon Grenville's purchase of the shares from us
as described below and equal to the amount of the exercise price of the warrants
issued to Grenville, if it chooses to exercise its warrants.
The price at which the common stock will be sold by us to Grenville
will be a percentage of the volume weighted average daily price of our common
stock price for each trading day in the twenty-day valuation period provided for
in the equity line agreement. The percentage of discount at which we sell our
stock to Grenville will depend upon the amounts that we draw down under the
equity line agreement:
o for draw downs up to an aggregate of $2,000,000, we will sell our
shares to Grenville at a price equal to 92% of our common stock's
volume weighted average daily price;
o for draw downs over $2,000,000 and up to an aggregate of $6,000,000, we
will sell our shares to Grenville at a price equal to 93% of our common
stock's volume weighted average daily price; and
o for draw downs over $6,000,000 and up to an aggregate of $20,000,000,
we will sell our shares to Grenville at a price equal to 94% of our
common stock's volume weighted average daily price.
When we sell our common stock to Grenville, we will receive the sale
price, minus the fees paid to our placement agents, and finder's fee paid to
Grenville's placement agent aggregating 7% of the gross proceeds. We are also
required to issue warrants for our common stock to our placement agents as set
forth in the "Equity Line Agreement" section of this prospectus beginning on
page 10.
Grenville Financial, Ltd. is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with their resale of our common stock.
Our common stock is traded in the over-the-counter market on the NASD
"Over the Counter Bulletin Board" under the symbol "MOLY." The closing bid price
of our common stock on September 25, 2001 was $.09 per share. There is only a
limited market for our common stock and, therefore, Grenville may have
difficulty selling our shares.
THE PURCHASE OF THE COMMON STOCK CARRIES WITH IT A HIGH DEGREE OF RISK, SUCH AS
LOSS OF THE ENTIRE PURCHASE PRICE. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September __, 2001.
TABLE OF CONTENTS
PROSPECTUS SUMMARY...........................................................1
SELECTED CONSOLIDATED FINANCIAL DATA.........................................3
RISK FACTORS.................................................................5
FORWARD LOOKING STATEMENTS...................................................9
EQUITY LINE AGREEMENT.......................................................10
USE OF PROCEEDS.............................................................12
DETERMINATION OF OFFERING PRICE.............................................12
DILUTION....................................................................12
CAPITALIZATION..............................................................13
SELLING SECURITY HOLDER.....................................................13
PLAN OF DISTRIBUTION........................................................14
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS............................................................15
SECURITY OWNERSHIP OF MANAGEMENT............................................16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.............................17
EXECUTIVE COMPENSATION......................................................18
DESCRIPTION OF SECURITIES...................................................19
HISTORY.....................................................................20
DESCRIPTION OF BUSINESS.....................................................20
ADDITIONAL TRANSACTIONS.....................................................25
LEGAL PROCEEDINGS...........................................................25
MANAGEMENT'S DISCUSSION AND ANALYSIS........................................26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................29
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....................30
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY...............................................30
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.....................................31
i
PROSPECTUS SUMMARY
The following summary may not contain all the information that is important
to you. You should carefully review the information appearing elsewhere in this
prospectus, in particular the "Risk Factors" section and the Consolidated
Financial Statements and Notes thereto. The Summary Consolidated Financial Data
is at the end of the prospectus summary.
The Company
Until the merger between its subsidiary PetroMerger, Inc. and Small
Town Radio, Inc., Worldwide PetroMoly, Inc. was engaged in the business of
manufacturing, marketing and distributing a line of engine oil additives
designed to enhance and maintain engines. Worldwide PetroMoly Inc.'s lubricant
business was operated entirely out of its wholly-owned subsidiary, Worldwide
PetroMoly Corporation. Worldwide PetroMoly, Inc. was unable to create a
sustained commercial market for its lubricant products, and Worldwide PetroMoly
Corporation incurred significant and on-going losses. In March 2001, Small Town
Radio, Inc. and Worldwide PetroMoly, Inc. entered into a merger agreement which
became effective on June 1, 2001. In the merger, Small Town Radio, Inc. merged
with PetroMerger, Inc., a wholly-owned subsidiary of Worldwide PetroMoly, Inc.
The holders of Small Town Radio, Inc.'s common stock now own approximately 75%
of the common stock of Worldwide PetroMoly, Inc. On June 7, 2001 Worldwide
PetroMoly, Inc. completed the sale of Worldwide PetroMoly Corporation to Mr.
Gilbert Gertner, the former Chairman of the Board of Directors of Worldwide
PetroMoly, Inc., as contemplated in the merger agreement. For more information
on the sale of Worldwide PetroMoly Corporation, see "Additional Transactions" on
p. 25.
Small Town Radio, Inc., now a wholly-owned subsidiary of Worldwide
PetroMoly, Inc., was incorporated in the State of Georgia on March 13, 2000.
From the date of its incorporation, Small Town Radio, Inc.'s founding
shareholders have investigated and developed a plan of operation pursuant to
which Small Town Radio will acquire and operate radio stations in geographically
contiguous, small, non-rated markets, initially located in rural areas of
Southeast. Until our regular annual shareholders' meeting, we will retain the
name Worldwide PetroMoly, Inc. in our charter, but will conduct our business
under the name of our wholly-owned subsidiary, Small Town Radio, Inc.
Our address is 12600 Deerfield Parkway, Suite 100, Alpharetta, Georgia
30004, and our telephone number is (678) 762-3295.
The Offering
On September 25, 2001, we entered into a private equity line of credit
agreement with Grenville Financial, Ltd. for the issuance and sale, from time to
time, of shares of our common stock. This equity line of credit agreement
establishes what is sometimes termed an equity line of credit or an equity draw
down facility. Under this arrangement, we, at our sole discretion, may make up
to 24 draw down requests over a two year period, pursuant to which Grenville
Financial, Ltd. is obligated to purchase up to $20,000,000 of our common stock
from us at prices that will vary based on the market price of our common stock,
but will always be at a percentage below the market price of our common stock.
We will receive no proceeds from Grenville Financial, Ltd.'s resales of our
common stock under this prospectus.
Shares of common stock offered pursuant up to 200,000,000
to the equity line agreement by
Grenville Financial, Ltd., the selling
shareholder
Shares of common stock offered upon the 175,000
exercise of warrants by Grenville
Financial, Ltd., the selling shareholder
Offering price To be determined at the time
of sale by Grenville Financial,
Ltd.
Common stock outstanding 160,800,859
1
Use of proceeds We will not receive any
proceeds from the shares
offered by Grenville Financial,
Ltd. However, we will receive
the proceeds from the sale of
shares to Grenville under the
equity line agreement. We
expect to use all of the
proceeds we receive from these
sales pursuant to the equity
line agreement for working
capital and general corporate
purposes. See "Use of Proceeds"
on p. 12.
Dividend policy We currently intend to retain
any future earnings to fund the
development and growth of our
business. Therefore, we do not
currently anticipate paying
cash dividends.
2
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related Notes
thereto, and "Management's Discussion and Analysis" beginning on p. 26.
For financial reporting purposes, the transaction constitutes a reverse
acquisition due to the former Small Town Radio stockholders owning approximately
75% of the outstanding stock of the combined entity immediately following the
transaction. The purchase method of accounting was utilized to record the
transaction resulting in marking the assets and liabilities of Worldwide
PetroMoly, Inc., the acquired entity for reporting purposes, to their fair
values through an allocation of the purchase price. Any excess of purchase price
remaining after the allocation of the purchase price to the assets and
liabilities is recorded as goodwill and amortized over a period of time.
In addition, the purchase method of accounting requires that operations
of the acquired entity for reporting purposes (PetroMoly) only be reflected in
the statement of operations subsequent to the date of the acquisition. For this
reason, the historical statement of operations only reflects Worldwide
PetroMoly, Inc. d/b/a Small Town Radio, Inc.'s operations for the short period
ended June 30, 2000. The year ended June 30, 2001 reflects the operations of
only Worldwide PetroMoly, Inc. d/b/a Small Town Radio, Inc. to the date of
acquisition and the consolidated company's operations thereafter.
The comparability of our operating results has been materially impacted
by the change in the reporting entity if the reader looks at previous filings by
the registrant for the year ended June 30, 2000. The year ended June 30, 2001,
reflects the operations of only Small Town Radio, Inc. to the date of
acquisition and the consolidated operations thereafter.
The statement of operations data for the periods ending June 30,
2001and 2000 have been audited by BKD, LLP, independent auditors, and are
included at the end of this prospectus. See "Management's Discussion and
Analysis" beginning on p. 26.
Summary Consolidated Financial Data:
Statement of Operations
Period From
Year ended Inception to
June 30, June 30,
2001 2000
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REVENUES: $ - $ -
EXPENSES:
Operating Expenses
Organization and start-up 899,415 49,971
All other 22,140 -
Interest expense 1,269 -
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Net Loss (922,824) (49,971)
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3
Net loss per share $ (0.01) $ -
Weighted average number of shares 69,844,439 51,733,930
Balance Sheet
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Total Assets $ 17,263 $ -
Total liabilities 974,571 49,971
Deficit accumulated during the
development stage (972,795) (49,971)
Stockholders' Deficit (957,308) (49,971)
Total liabilities and stockholders' equity $ 17,263 $ -
4
RISK FACTORS
A purchase of our common stock is subject to a number of risks. You should
carefully consider the risk factors described below, together with the other
information included in this prospectus and registration statement, before any
shares of our common stock are purchased.
Risks relating to Worldwide PetroMoly, Inc. and our business,
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operations and acquisition strategy.
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WE ARE A DEVELOPMENT STAGE COMPANY WITH VERY LIMITED OPERATING HISTORY AND HAVE
RECENTLY EXPERIENCED A CHANGE OF CONTROL, WHICH MAY MAKE IT DIFFICULT FOR US TO
OPERATE SUCCESSFULLY.
Until the change in control of Worldwide PetroMoly, Inc. in June 2001,
as described in this prospectus under the heading " Description of Business," we
were, functionally, a holding company for our operating subsidiary, Worldwide
PetroMoly Corporation. Subsequent to the change in control, we sold Worldwide
PetroMoly Corporation and our sole remaining operating subsidiary is Small Town
Radio, Inc. Small Town Radio, Inc. was incorporated on March 13, 2000; however,
Small Town Radio, Inc. has had no significant operations to date, and has
generated no revenue. As a practical matter, our operating history to date is so
limited that it is not a useful basis for predicting our future performance. We
cannot assure you that the operations of Small Town Radio, Inc., our only
operating subsidiary and our sole business, will be successful.
OUR ACQUISITION STRATEGY MAY FAIL FOR A NUMBER OF REASONS, INCLUDING THE
UNAVAILABILITY OF SUITABLE ACQUISITION CANDIDATES OR OUR INABILITY TO OBTAIN
ADEQUATE FINANCING.
We intend to pursue growth through the acquisition of individual radio
stations in small, generally non-rated markets. Currently, we only have a
tentative agreement for the purchase of four radio stations in Southwest
Georgia. This acquisition is contingent upon, among other things, sufficient
financing to pay the purchase price, which we currently do not have. We cannot
predict whether we will be successful in pursuing acquisition opportunities or
what the consequences of these acquisitions will be. We are pursuing other
acquisition opportunities; however, other than the four stations noted above, we
currently have no commitments to acquire any specific station or material
assets. Also, while we have had limited success thus far in identifying
appropriate acquisition candidates, we cannot give assurances that we will be
able to continue to do so.
In order to meet our requirements as an appropriate acquisition
candidate, a radio station must be in a small, non-rated market. We are focusing
on stations that either have positive cash flow, or that we reasonably believe
could have positive cash flow in the near term. There are only a limited number
of radio stations in the Southeast that meet these requirements, and we may be
unable to identify a sufficient number of acquisition candidates that will allow
us to build the network contemplated by our business plan.
Even if we are able to locate a sufficient number of radio stations
that meet our requirements, we cannot guarantee that we will have sufficient
financing to allow us to acquire the stations. We currently have no revenue, and
no viable source of financing other than the equity line. If we are unable to
locate financing, or if the equity line agreement does not yield sufficient
funds, we may be unable to acquire any radio stations.
Our acquisition strategy also involves numerous other risks, including
negotiating definitive purchase agreements on satisfactory terms from small, and
in many cases, family-owned, radio stations, and the retooling of stations from
traditional delivery formats to a digital transmission environment.
IN ORDER TO EXECUTE OUR ACQUISITION STRATEGY, AND TO CONVERT OUR STATIONS TO A
DIGITAL AUDIO BROADCAST FORMAT, WE WILL NEED SIGNIFICANT AMOUNTS OF CAPITAL, BUT
WE CURRENTLY HAVE NO RELIABLE SOURCE OF FINANCING.
If consummated, the acquisition of the radio stations that we hope to
acquire will require substantial capital. We estimate that we will have
significant capital requirements for the remainder of 2001, including
approximately $3-4 million to acquire a sufficient number of stations to begin
to build our network. Additionally, we plan to convert all radio stations that
we acquire from a traditional broadcast format to digital audio broadcast, which
will require a significant additional capital investment. Currently, we have not
been able to secure a reliable source of financing. There is no guarantee that
we will be able to obtain the financing required to fund our capital
requirements. The amount of our future capital requirements will depend upon
many factors, including the volume of future acquisitions as well as regulatory,
technological and competitive developments in the radio broadcasting industry,
and may differ materially from our current estimates.
5
BECAUSE OF OUR LIMITED OPERATIONS AND THE FACT THAT WE ARE CURRENTLY GENERATING
NO REVENUE, WE ARE UNABLE TO SERVICE OUR DEBT OBLIGATIONS.
We currently have approximately $120,000 in debt pursuant to promissory
notes issued by us. We are presently unable to meet our interest obligations
under these notes. We are also trying to secure additional debt financing by
borrowing money from a bank, but have not yet succeeded in doing so. Our ability
to satisfy our current debt service obligations, and any additional obligations
we might incur will depend upon our future financial and operating performance,
which, in turn, are subject to prevailing economic conditions and financial,
business, competitive, legislative and regulatory factors, many of which are
beyond our control. If our cash flow and capital resources continue to be
insufficient to fund our debt service obligations, we may be forced to reduce or
delay planned acquisitions, expansion and capital expenditures, sell assets,
obtain additional equity capital or restructure our debt. We cannot assure you
that our operating results, cash flow and capital resources will be sufficient
for payment of our debt service and other obligations in the future.
THE BUSINESS OF OPERATING RADIO STATIONS IS SUBJECT TO MANY DIFFERENT VARIABLES
OUTSIDE OF OUR CONTROL, ANY OF WHICH COULD HAVE AN ADVERSE IMPACT ON OUR ABILITY
TO SUCCESSFULLY OPERATE OUR BUSINESS.
As an owner and operator of radio stations, our operations are subject
to numerous variables outside of our control, many of which could have a
material adverse effect upon our financial performance. These variables include
economic conditions, both generally and specific to the radio broadcasting
industry, shifts in population and other demographics, shifts in audience
tastes, the level of competition for advertising dollars with other radio
stations, television stations and other entertainment and communications media,
fluctuations in operating costs, technological changes and innovations, changes
in labor conditions; and changes in laws and governmental regulations and
policies and actions of federal regulatory bodies, including the Department of
Justice, the Federal Trade Commission and the Federal Communications Commission.
Although we believe that if we are able to complete the acquisition of the radio
stations contemplated by our business plan, we will be positioned to compete
effectively in those respective markets, but we cannot assure you that any
individual station will be able to maintain or increase its current audience
ratings and advertising revenues, and all of the factors above could potentially
adversely impact our operations.
COMPETITION IN THE RADIO BROADCASTING BUSINESS IS INTENSE, AND WE MAY BE UNABLE
TO SUCCEED IF OUR COMPETITORS HAVE MORE FUNDING OR BETTER MARKETING.
Radio broadcasting is a highly competitive business. The radio stations
that we intend to acquire if we are able to successfully execute our business
plan will compete for audiences and advertising revenues within their respective
markets directly with other radio stations, as well as with other media such as
newspapers, magazines, cable and broadcast television, outdoor advertising and
direct mail. Market share is subject to change, and any adverse change in a
particular market could have a material adverse effect on the revenue of
stations located in that market. Currently, the radio market in the Southeastern
United States, where we plan to make our acquisitions, is not marked by intense
competition; however, this is subject to change. If another radio station in one
of our markets were to convert its programming format to a format similar to one
of our stations, or if a new station were to adopt a format competitive with our
stations, or if an existing competitor were to strengthen its operations, our
stations could suffer a reduction in our listening audience and/or advertising
revenue and could require increased promotional and other expenses.
Additionally, our business could be adversely affected if a large player in the
radio industry were to decide to adopt an acquisition plan similar to ours. A
large competitor could purchase a number of stations in the markets in which we
wish to compete and, as a result, drive up the prices that we must pay for
stations as well as force us to allocate significantly more of our resources to
promotional activities than we have currently planned.
BECAUSE MOST OF OUR REVENUES WILL COME FROM THE SALE OF ADVERTISING TIME ON OUR
STATIONS, OUR BUSINESS IS PARTICULARLY SUSCEPTIBLE TO DOWNTURNS IN THE ECONOMY.
We expect that approximately 98% of our revenue will initially come
from the sale of advertising time on our radio stations. Our broadcasting
revenue would likely be adversely affected by a national recession. In fact, the
slowdown in the U.S. economy over the last twelve months has already caused a
decrease in spending by businesses on advertising of over 20%. If this trend
continues, and the economy slows further, this decrease in spending on
advertising may have an adverse impact on our business and profitability. In
addition, because a substantial portion of our revenue will be derived from
local advertisers, our ability to generate advertising revenue in specific
markets could be adversely affected by local or regional economic downturns. For
example, in some of the markets in which we plan to operate there is a single
dominant employer (such as a military base, a college, university or large
manufacturing plant). If a downturn in the economy results in a dominant
6
employer in one of our markets initiating layoffs, or if the U.S. Congress
decides to close a military base in one of our markets, this could result in
local businesses in that market reducing their advertising budgets, which, in
turn, would impact our broadcast cash flow and profitability. See "Management's
Discussion and Analysis".
IF WE LOSE EITHER OF OUR TWO KEY PERSONNEL, WE MAY BE UNABLE TO SUCCESSFULLY
EXECUTE OUR BUSINESS PLAN; BECAUSE WE CURRENTLY ONLY HAVE TWO EMPLOYEES, THEY
MAY BE UNABLE TO SUCCESSFULLY MANAGE THE BUSINESS.
Our business is presently managed by two key employees, the Chief
Executive Officer, Donald Boyd, and the Chief Financial Officer and Chairman of
the Board of Directors, Robert Vail. If we lose either of Messrs. Boyd or Vail,
it could have a material adverse effect on our operations, and our ability to
execute our business plan might be negatively impacted. We have entered into
employment agreements with both of Messrs. Boyd and Vail, which include
provisions restricting their ability to use our confidential information should
they leave the company. However, Messrs. Boyd and Vail may leave the company if
they choose to do so, and we cannot guarantee that they will not choose to do
so, or that we would be able to hire similarly qualified executives if either of
them should choose to leave. Additionally, the acquisition of radio stations is
critical to our success and management will need to devote the majority of its
time to negotiating, closing and then operating these acquisitions. This will
result in the diversion of management's attention from other business concerns
and could affect our ability to manage other aspects of our business. We cannot
assure you that our management will be able to manage effectively the resulting
business or that such acquisitions will benefit the company.
THERE MAY BE CHANGES IN THE LAWS GOVERNING THE ABILITY OF OWNERS AND OPERATORS
OF RADIO STATIONS TO OWN LARGE NUMBERS OF STATIONS IN THE SAME OR CONTIGUOUS
MARKETS.
The Telecommunications Act of 1996 permits consolidated ownership of
radio broadcasting stations in the markets in which we plan to operate. The
changes in the law regarding ownership of radio stations contained in this act
permitted us to create a business plan based on the ownership of several
stations in the same and contiguous markets. There has recently been a change in
the U.S. presidency, and there are some in Congress who would like to change the
law to impose more limited ownership rules. We have no way to predict whether
the administration or Congress will take such action, but should this occur, our
business plan and operations could be severely impacted, and we may be required
to divest ourselves of stations in certain markets.
IT IS OUR POLICY NOT TO PAY DIVIDENDS.
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all of our future earnings, if any, for use in our
business and therefore do not anticipate paying any cash dividends on our common
stock in the foreseeable future.
Risks relating to approval by Federal Communications Commission of transfer of
------------------------------------------------------------------------------
broadcast licenses.
-------------------
THE FEDERAL COMMUNICATIONS COMMISSION MAY NOT APPROVE OF A TRANSFER OF A LICENSE
TO US, AND OTHERS MAY OBJECT TO THE TRANSFER OF LICENSES TO US.
The Federal Communications Commission's rules and regulations prohibit
the assignment or transfer of a broadcast license without their prior approval.
In determining whether to grant approval, the Federal Communications Commission
considers a number of factors pertaining to the licensee (and proposed
licensee), including:
o compliance with the various rules limiting common ownership of media
properties in a given market;
o the "character" of the licensee and those persons holding
"attributable" interests in the licensee;
o compliance with the regulations on alien ownership as well as
compliance with other Federal Communications Commission regulations and
policies.
Whenever we purchase a radio station, we must obtain Federal
Communications Commission consent to assign or transfer control of the broadcast
license associated with that station. The application must be placed on public
notice for not less than 30 days, during which time period petitions to deny or
other objections to the application may be filed by interested parties,
including members of the public. We cannot assure you that we will be able to
comply with all Federal Communications Commission rules and regulations required
to permit transfer of a license, or that it will approve the assignment or
7
transfer of a broadcast license, even if all requirements are met. Because we
plan to purchase stations in small, non-rated markets where the stations may
have been operating for many years in the local community with local ownership,
individuals or businesses in that community may object to the assignment or
transfer of the broadcast license to an entity outside of the community and file
a petition or objection with the Federal Communications Commission to block
assignment or transfer of a license to us. If such a petition or objection is
filed, we cannot assure you that we will be able to successfully overcome the
objection.
EVEN IF THE FEDERAL COMMUNICATIONS COMMISSION APPROVES OF THE TRANSFER OF A
LICENSE TO US, WE MAY NOT BE ABLE TO SATISFY THE ON-GOING REQUIREMENTS FOR
MAINTAINING A LICENSE.
Once the transfer of a broadcast license is granted, the Federal
Communications Commission imposes various rules and regulations on a licensee,
compliance with which is required if the business wishes to keep its broadcast
license. These requirements include, indecency in broadcasting rules,
requirements for public service announcements, not discriminating against
certain points of view in granting air time to special interest groups or
political parties and complying with foreign ownership rules. While we will try
diligently to satisfy all such requirements, we cannot guarantee that we will
always be able to do so, and that we will not have a license or licenses
revoked.
Risks relating to the equity line agreement
-------------------------------------------
THE EQUITY LINE OF CREDIT AGREEMENT WILL HAVE A DILUTIVE IMPACT ON THE OWNERSHIP
OF OUR COMMON STOCK, AND MAY HAVE AN ADVERSE IMPACT ON THE MARKET PRICE OF OUR
COMMON STOCK.
The resale of the common stock that we may issue under the equity line
agreement would increase the number of our publicly traded shares, which could
depress the market price of our common stock. Moreover, as all the shares we may
issue under the equity line agreement would be available for immediate resale,
the mere prospect of our sales under the equity line agreement could depress the
market price of our common stock. Additionally, the shares of our common stock
issuable under the equity line agreement will be sold to the purchaser at a
discount from the then trading price immediately subsequent to our request. The
issuance of shares under the equity line agreement will therefore dilute the
equity interest of our existing shareholders and could have an adverse impact on
the market price of our common stock. The dilution may cause our shareholders to
sell their shares, which would contribute to a downward movement in the price of
our common stock.
WE MAY BE UNABLE TO ACCESS ALL OR PART OF OUR EQUITY LINE FACILITY UNDER THE
EQUITY LINE AGREEMENT.
If our stock price and trading volume fall below certain established
levels, then we will not be able to draw down all $20,000,000 potentially
available under the equity line agreement. The amounts that we are entitled to
draw down under the equity line facility is tied to our common stock's trading
volume and price. Since the change in control of our company, our trading volume
has been very light and the price has traded mostly in the $0.10-0.15 range. If
there is not an appropriate increase in the trading volume of our common stock,
we will only be able to draw down small amounts under the equity line facility.
In addition, even if there is a substantial increase in the trading volume of
our common stock, business and economic conditions may not make it feasible for
us to make a draw down pursuant to this facility. In addition, if we are unable
to keep a registration statement effective for those shares of common stock
subject to the equity line agreement, or if our common stock is removed from the
Over the Counter Bulletin Board, or if we experience a material adverse change
to our business that is not cured within 30 days of written notice, the equity
line agreement may terminate, or we may not be able to draw down any funds.
OUR COMMON STOCK MAY BE REMOVED FROM THE OVER THE COUNTER BULLETIN BOARD
QUOTATION SYSTEM IF WE DO NOT KEEP OUR FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION CURRENT.
Our common stock is quoted on the Over the Counter Bulletin Board. In
order to continue to be included in the Over the Counter Bulletin Board, we must
maintain current filings with the Securities and Exchange Commission. We cannot
assure you that we will be able to maintain current filings with the Securities
and Exchange Commission, and our failure to maintain current filings may result
in our stock being removed from the Over the Counter Bulletin Board quotation
system. If our common stock were removed from the Over the Counter Bulletin
Board, we would not be able to draw down any additional funds under the equity
line facility. Also, if our common stock is removed from listing on the Over the
Counter Bulletin Board, it will become more difficult for us to raise funds
through the sale of our common stock or securities convertible into our common
stock.
8
FORWARD LOOKING STATEMENTS
Various statements, estimates, predictions and projections stated under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," and elsewhere in
this prospectus and registration statement, are "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. These statements appear in a number of places in this offering
prospectus and registration statement and include statements regarding the
intent, belief or current expectations of Worldwide PetroMoly, Inc. or our
officers with respect to, among other things, the use of proceeds from the
equity line agreement, the ability to successfully implement our operating and
acquisition strategies, including trends affecting our business, financial
condition and results of operations. While these forward-looking statements and
the related assumptions are made in good faith and reflect our current judgment
regarding the direction of the related business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested herein. These statements are
based upon a number of assumptions and estimates which are inherently subject to
significant uncertainties and contingencies, many of which are beyond our
control and reflect future business decisions which are subject to change. Some
of these assumptions inevitably will not materialize, and unanticipated events
will occur which will affect our results. Some important factors (but not
necessarily all factors) that could affect our revenues, growth strategies,
future profitability and operating results, or that otherwise could cause actual
results to differ materially from those expressed in or implied by any
forward-looking statement, include the following:
o our ability to successfully implement our acquisition and operating
strategies;
o our ability to manage rapid expansion;
o the success or failure of acquisitions and other opportunities that we
may pursue;
o changes in the availability of debt or equity capital and increases in
borrowing costs or interest rates;
o changes in regional and national business and economic conditions,
including the rate of inflation;
o changing demographics;
o changes in the laws and government regulations applicable to us;
o increased competition; and
o the other matters referred to below or elsewhere in this prospectus and
registration statement.
Prospective investors are urged to carefully consider these factors in
connection with the forward-looking statements. We do not intend to publicly
release any revisions to any forward-looking statements contained in this
offering memorandum herein to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.
9
EQUITY LINE AGREEMENT
We entered into an equity line agreement on September 25, 2001, with
the selling shareholder, Grenville Financial, Ltd., a British Virgin Islands
corporation, pursuant to which we may issue and sell, from time to time, shares
of our common stock to Grenville Financial, Ltd. in return for cash, up to an
aggregate of $20,000,000. Pursuant to the requirements of the equity line
agreement, we have filed a registration statement, of which this prospectus
forms a part, in order to permit Grenville to resell to the public any shares
that we sell to it pursuant to the equity line agreement.
Grenville has committed to provide us up to $20,000,000 over a 24 month
period as we request it. We are not required to make any draws under the equity
line, and there is no minimum amount that we are required to draw under the
line. Once every 30 calendar days, we may request a draw on the equity line
facility. The draw request acts as a put notice, pursuant to which Grenville is
obligated to purchase a number of our shares equal to the amount of cash we
request. For instance, if we request $150,000, Grenville will be obligated to
purchase that number of our shares equal in value to $150,000.
The minimum amount we can request for each draw must be at least
$150,000. The maximum amount we can request for each draw is limited to 10% of
the volume weighted average daily price of our common stock for the twenty
trading days immediately preceding the delivery of a draw request. The maximum
amount we can request is also limited if we cannot make a draw down request
that, individually or in the aggregate, would cause Grenville Financial, Ltd. to
own more than 4.99% of our outstanding common stock at any given time.
The per share dollar amount that Grenville will pay us for our common
stock for each draw request will include:
o an 8% discount to our common stock's average daily market price for
draw requests up to the aggregate of $2,000,000;
o a 7% discount to our common stock's average daily market price for draw
requests, in the aggregate, between $2,000,000 and $6,000,000;
o a 6% discount to our common stock's average daily market price for draw
requests, in the aggregate, between $6,000,000 up to $20,000,000.
If any of the following events occur during the 20 days following a
draw down request, the amount of cash that we receive will be reduced by 1/20:
o the volume weighted average price of our common stock is less than the
minimum floor price that our Board of Directors designates pursuant to
the equity line agreement;
o our common stock is suspended from trading for more than three hours,
in the aggregate, or if any trading day is shortened because of a
public holiday; or
o for each trading day in which there has been:
o the receipt of any requests for additional information by the SEC
during the period of effectiveness of the registration statement
for amendments or supplements to the registration statement or
related prospectus;
o the issuance by the SEC of any stop order suspending the
effectiveness of the registration statement or the initiation of
any proceedings for that purpose;
o receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
registrable securities;
o the occurrence of any event that makes any statement made in the
registration statement or related prospectus untrue in any
material respect or that requires the making of any changes in
the registration statement; and
o our reasonable determination that a post-effective amendment to
the registration statement would be appropriate.
10
For each draw request that we make to Grenville, we will receive cash
equal to the amount of the draw request. We will then be required to pay a
placement fee equal to 2% of the gross proceeds of the draw request to Pacific
Resources Group, Inc., a placement fee equal to 3% of the gross proceeds of the
draw request to Atlas Capital Services, Inc., and a finders fee equal to 2% of
the gross proceeds to Libra Finance, S.A. (for a total of 7% of the cash from
each draw request paid to these placement agents) for their services in
assisting us obtain the equity line.
Necessary Conditions Before Grenville Financial, Ltd. Is Obligated to
---------------------------------------------------------------------
Purchase Our Shares
-------------------
The following conditions must be satisfied before Grenville is
obligated to purchase any of our shares of common stock pursuant to a draw down
request:
o a registration statement for the shares must be declared effective by
the Securities and Exchange Commission and must remain effective and
available as of the draw down settlement date for making resales of the
common shares purchased by Grenville;
o trading in our common shares must not have been suspended by the
Securities and Exchange Commission or the Over the Counter Bulletin
Board quotation system;
o we must not have merged or consolidated with or into another company or
transferred all or substantially all of our assets to another company,
unless the acquiring company has agreed to honor the equity line
agreement; and
o no statute, rule, regulation, executive order, decree, ruling or
injunction may be in effect which prohibits consummation of the
transactions contemplated by the equity line agreement.
Issuance of Warrants
In connection with the equity line agreement, we issued a warrant to
purchase up to 175,000 shares of our common stock to Grenville at the initial
closing for its services in facilitating the equity line agreement. The warrant
has a term from its date of issuance of three years. The exercise price of the
warrant is $.077, which is 110% of the closing bid price of our common stock on
the trading day immediately prior to the execution of the equity line agreement.
Grenville is under no obligation to exercise this warrant. We are also required
to issue warrants to Pacific Resources Group, Inc. and Atlas Capital Services,
Inc., our placement agents, equal to 2% and 3%, respectively, of the shares
purchased by Grenville pursuant to each draw request. The warrants that we issue
to Pacific Resources Group, Inc. and Atlas Capital Services, Inc. will
exercisable for a period of five years with an exercise price equal to the per
share price paid by Grenville pursuant to each draw request. The warrants
issuable to our placement agents are not being registered for resale in this
registration statement and prospectus.
11
USE OF PROCEEDS
We will not receive any proceeds from Grenville's sale of our shares.
However, we will receive the proceeds from any sale of our common stock by us to
Grenville under the equity line agreement described in this prospectus.
We expect to use substantially all the net proceeds that we receive
from our sale of shares to Grenville for general corporate purposes, including
working capital, for acquisition of our network of radio stations and to design
and build a studio facility in Atlanta, Georgia. Initially, the majority of the
proceeds will go toward the acquisition of the radio broadcast stations that
will comprise our network. Many of the stations that we plan to acquire are "mom
and pop" operations located in the Southeastern United States. The amounts we
actually expend for working capital and other purposes after we complete our
initial acquisitions may vary significantly and will depend on a number of
factors including the actual net proceeds received, the amount of our future
revenues and other factors described under "Risk Factors." Accordingly, we will
retain broad discretion in the allocation of the net proceeds.
DETERMINATION OF OFFERING PRICE
Our common stock offered by this prospectus may be offered for sale by
Grenville from time to time in transactions on the Over the Counter Bulletin
Board quotation system, in negotiated transactions, or otherwise, or by a
combination of these methods, at fixed prices, which may be changed, at market
prices at the time of the sale, at prices related to market prices or at
negotiated prices. As such, the offering price is indeterminate as of the date
of this prospectus.
DILUTION
The deficit in tangible net book value of Worldwide PetroMoly, Inc. as
of June 30, 2001 was approximately a negative $957,000 or ($.006) per share of
Common Stock. The pro forma deficit in tangible book value per share represents
our total tangible assets less our total liabilities at June 30, 2001, divided
by, 160,800,859, the number of shares of our common stock outstanding at
September 17, 2001. After giving effect to the issuance of 200,000,000 shares,
the maximum number estimated to be issued, our pro forma tangible net book value
as of June 30, 2001 would have been a positive $17,042,692 or $.058 per share.
This represents an immediate increase in pro forma net tangible book value per
share of approximately $.064 to existing stockholders, and an immediate dilution
of about $.092 per share to new investors.
Assumed public offering price per share $ 0.10
Pro forma net tangible book value per share as of June 30, 2001 $ (0.006)
Increase in net book value per share attributable to new investors $ 0.051
Adjusted pro forma net tangible book value after the offering $ 0.045
Dilution per share to new investors $ (0.055)
The following table summarizes, on a pro forma basis as of June 30, 2001, the
number of shares of our common stock purchased from us, the total consideration
paid to us, and the average price per share paid by existing shareholders and to
be paid by Grenville Financial Ltd., assuming a constant price of $.10 per
share.
TOTAL AVERAGE
SHARES PURCHASED CONSIDERATION PAID PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
Existing shareholders (1) 160,800,859 54.67% $ (957,308) N/A $ (0.006)
Grenville Financial Ltd. 133,333,333 45.33% $ 20,000,000 100.00% $ 0.150
--------------------------------------------------------------------------
294,134,192 100.00% $ 19,042,692 100.00% $ 0.065
==========================================================================
(1) Total consideration for the existing shareholders represents the
total stockholders' equity at June 30, 2001.
12
CAPITALIZATION
Our actual capitalization is presented in the financial statements
located elsewhere in this prospectus. Adjusted capitalization reflects only the
issuance of shares through this offering. Pro forma stockholders' equity at June
30, 2001, adjusted to reflect the sale of $20,000,000 of common stock would be
approximately $16,363,000, regardless of the number of shares sold. The number
of shares to be issued will vary depending upon the average price received for
the shares. The number of shares to be issued, assuming various average prices
over the 24 months during which the equity line is in place, is presented in the
following table:
---------------------------------------------------------------------------------------------------------------
Average price per share $ 0.100 $ 0.125 $ 0.150 $ 0.175 $ 0.200
---------------------------------------------------------------------------------------------------------------
Number of shares issued to 200,000,000 160,000,000 133,333,333 14,285,714 100,000,000
raise $20,000,000 gross
---------------------------------------------------------------------------------------------------------------
Shares outstanding at August
24, 2001 160,800,859 160,800,859 160,800,859 160,800,859 160,800,859
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Total shares issued and 360,800,859 320,800,859 294,134,192 275,086,573 260,800,859
outstanding
---------------------------------------------------------------------------------------------------------------
Pro Forma stockholders' equity $16,362,692 $16,362,692 $16,362,692 $16,362,692 $16,362,692
at 6/30/01
---------------------------------------------------------------------------------------------------------------
SELLING SECURITY HOLDER
Grenville Financial, Ltd., the selling shareholder, is engaged in the
business of investing in publicly traded equity securities for its own account.
Grenville Financial, Ltd.'s principal offices are located at Trident Chambers,
Road Town, Tortola, B.V.I. Grenville does not own any of our securities as of
the date of this prospectus. Other than its obligation to purchase common shares
under the equity line agreement, it has no other commitments or arrangements to
purchase or sell any of our securities. There are no business relationships
between Grenville and us other than as contemplated by the equity line
agreement.
Assuming we issued all 200,175,000 shares of our common stock to
Grenville Financial, Ltd. on September 25, 2001, that would equal approximately
124% of our current issued and outstanding stock; or, 45% of our issued and
outstanding stock on a fully diluted basis, assuming no other issuances were
made. However, at no time may Grenville own more than 4.99% of our Common Stock.
If Grenville's ownership of our Common Stock reaches 4.99%, we will be unable to
make further draw requests on the equity line until it has sold a sufficient
number of shares to bring it under the 4.99% ownership threshold.
Neither Grenville, nor any officer, director or employee of Grenville
have held any positions or offices or had material relationships with us or any
of our affiliates within the past three years. If, in the future, the
relationship of Grenville or any officer, director or employee of Grenville with
us changes, we will amend or supplement this prospectus to update this
disclosure.
13
PLAN OF DISTRIBUTION
Grenville Financial, Ltd. is offering shares of our common stock for
its account as statutory underwriter, and not for our account. We will not
receive any proceeds from the sale of our common stock by Grenville. Grenville
may be offering for sale up to 200,000,000 shares of our common shares which it
may acquire pursuant to the terms of the equity line agreement more fully
described under the section of this prospectus entitled "Equity Line Agreement."
Grenville Financial, Ltd. may also offer for sale 175,000 shares of our common
stock issuable to it upon the exercise of warrants we issued to it in connection
with equity line agreement. Grenville is a statutory underwriter within the
meaning of the Securities Act of 1933 in connection with such sales of common
shares and will be acting as an underwriter in its resales of our common stock
under this prospectus. Grenville has, prior to any sales, agreed not to effect
any offers or sales of the common shares in any manner other than as specified
in this prospectus and not to purchase or induce others to purchase common
shares in violation of any applicable state and federal securities laws, rules
and regulations and the rules and regulations of NASD. We will pay the costs of
registering the shares under this prospectus, including legal fees.
To permit Grenville to resell the common stock issued to it under the
equity line agreement, we agreed to register those shares and to maintain that
registration. To that end, we have agreed with Grenville that we will prepare
and file such amendments and supplements to the registration statement and the
prospectus as may be necessary in accordance with the Securities Act of 1933 and
the rules and regulations promulgated thereunder, to keep it effective until the
earliest of any of the following dates:
o the date after which all of the shares held by Grenville or its
transferees that are covered by the registration statement have been
sold by Grenville or its transferees pursuant to such registration
statement;
o the date after which all of the shares held by Grenville or its
transferees that are covered by the registration statement may be sold,
in the opinion of our counsel, without restriction under the Securities
Act of 1933; or
o the date after which all of the shares held by Grenville or its
transferees may be sold without any volume or manner limitations
pursuant to Rule 144(k) under the Securities Act of 1933.
Sales may be made on the Over the Counter Bulletin Board, on the over
the counter market or otherwise at prices and at terms then prevailing or at
prices related to the then current market price, or in negotiated private
transactions, or in a combination of these methods. Grenville Financial, Ltd.
will act independently of us in making decisions with respect to the form,
timing, manner and size of each sale. We have been informed by Grenville that
there are no existing arrangements between it and any other stockholder, broker,
dealer, underwriter or agent relating to the distribution of this prospectus.
Grenville Financial, Ltd. may resell shares of our common stock in one
or more of the following manners:
o a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as a principal to facilitate the transaction;
o purchases by a broker or dealer for its account under this prospectus;
or
o ordinary brokerage transactions and transactions in which the broker
solicits purchases.
Grenville will pay all commissions and its own expenses, if any,
associated with the sale of our common stock that it acquires under the equity
line agreement, other than the expenses associated with preparing this
prospectus and the registration statement, and any amendments thereto, of which
it is a part.
14
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to our
executive officers and directors.
Officers and Directors Age Position
---------------------- --- --------
Donald Boyd 34 President
Robert S. Vail 55 Chairman of Board of Directors,
Chief Financial Officer
William Fleming 55 Director
Lauren Kahn 47 Director
John McMullan 65 Director
William L. Ross 55 Director
Lance J. Rosmarin 39 Director
Norton Cooper 68 Director
----------
Donald Boyd - Mr. Boyd is our President. Mr. Boyd is a radio station
executive with 15 years experience in the radio broadcast industry. From June
1995 to June 1998, Mr. Boyd owned and operated a profitable radio station in
Gainesville, Florida. From June 1998 to December 1999, Mr. Boyd was a manager
with Dickey Brothers Broadcasting, Inc. Most recently, Mr. Boyd was Regional
General Manager for Root Communication, where he had profit and operations
responsibility for seven stations in three markets similar to the type targeted
by Worldwide PetroMoly, Inc. Mr. Boyd joined the company on July 30, 2001.
Robert S. Vail - Mr. Vail is our Chief Financial Officer and Chairman
of the Board. Mr. Vail has been a member and Chairman of our Board of Directors
since June 2001. From November 1999 to January 2001, Mr. Vail was an independent
financial consultant, providing consulting services to public companies. From
March 1998 to August 1999, Mr. Vail was the Chief Financial Officer of
Integrated Spatial Information Solutions, Inc., a provider of consulting
services in the geographical information systems industry. From December 1990 to
March 1998, Mr. Vail was the Director of Administration of the Houston office of
Price Waterhouse.
William L. Ross, PhD - Dr. Ross has been a member of our Board of
Directors since June, 2001. Dr. Ross has been in private practice as a clinical
psychologist since 1978. From 1992 to the present, Dr. Ross has practiced in
Fernandina Beach, Florida. In addition to his clinical experience, Dr. Ross has
experience in providing management training services including executive
development, recruitment evaluation and communication skills development
William Fleming - Mr. Fleming is the principal at William Fleming &
Associates, which has provided financial consulting services to radio stations,
including emerging companies, for more than 18 years. In particular, Mr. Fleming
has focused his work on smaller, emerging companies, radio entrepreneurs, and
first time owners. Mr. Fleming is also a co-owner of 4 radio stations in
Indiana. Mr. Fleming has been a member of our Board of Directors since June
2001.
Lauren Kahn - Ms. Kahn is President, founder and owner of Media
Staffing Network, which specializes in finding, placing and training candidates
for the advertising, broadcast (including radio, cable, direct response, new
media and outdoor and print industries). Ms. Kahn founded her business in 1993,
then called Rep Temps and renamed Media Staffing Network in 1998. Ms. Kahn has
over 25 years of hands-on management experience, including approximately 15
years in the radio industry.
John McMullan, CPA - Since 1990, Mr. McMullan has been the CEO of
Camden Real Estate Company, a family-owned real estate investment company. Mr.
McMullan is a CPA in the State of Georgia, and, in addition to serving as CEO of
Camden Real Estate Company, Mr. McMullan acts as a consultant to the long-term
health care industry.
Lance J. Rosmarin -- Mr. Rosmarin is a Member of our Board of
Directors, and was our former Chief Financial and Accounting Officer, Secretary
and President. From 1990 to 1993, Mr. Rosmarin was employed by Gertner, Aron,
Ledet and Lewis Investments. Mr. Rosmarin served as Vice President and Secretary
and was a Director of Citadel Computer Systems, Inc. (CITN) (1993-1996), as well
as serving as an officer and director of several private companies. From 1993 to
June 1, 2001, Mr. Rosmarin was Secretary, Treasurer and a Director of Worldwide
PetroMoly Corporation, and from July 1996, Mr. Rosmarin was Chief Financial and
Accounting Officer of Worldwide PetroMoly, Inc., and was its President from
January 1998 to June 1, 2001.
15
Norton Cooper -- Mr. Cooper became a Director of the Company in January
1998. Since 1992, Mr. Cooper has been the Chief Executive Officer of Financial
Entrepreneurs Incorporated of Las Vegas (FEI), a company engaged in strategic
financial planning.
Directors are elected to serve one year terms and until their earlier
resignation or removal.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of September 24, 2001, certain
information with respect to beneficial share ownership by each of our executive
officers and directors, and by all executive officers and directors as a group.
Except as otherwise indicated, the shareholders listed have sole investment and
voting power with respect to their shares. The amounts and percentages are based
on 160,800,859 shares of common stock outstanding as of September 24, 2001.
Number of Common Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class
---------------------------------------------------------------------------------------
Robert S. Vail 15,695,520 9.8%
12600 Deerfield Parkway, Suite 100
Alpharetta, Georgia 30004
---------------------------------------------------------------------------------------
Donald L. Boyd (1)
12600 Deerfield Parkway, Suite 100
Alpharetta, Georgia 30004 2,000,000 1.2%
---------------------------------------------------------------------------------------
William Fleming
176 North Beacon St.
Hartford, Connecticut 06105 3,899,840 2.4%
---------------------------------------------------------------------------------------
John McMullan
Suite 850, 100 Colony Square
1175 Peachtree St., N.E.
Atlanta, Georgia 30361 4,399,840 2.7%
---------------------------------------------------------------------------------------
Lauren Kahn
Suite 825
150 East Huron
Chicago, Illinois 60611 3,899,840 2.4%
---------------------------------------------------------------------------------------
William L. Ross, PhD 28 South 10th St.
Fernandina Beach, Florida 32034 3,899,840 2.4%
---------------------------------------------------------------------------------------
Norton Cooper
7143 Almaden Lane
Carlsbad, CA 92009 3,180,000 2.0%
---------------------------------------------------------------------------------------
Lance J. Rosmarin
1300 Post Oak Blvd., Suite 1985
Houston, TX 77056 3,700,000 2.3%
---------------------------------------------------------------------------------------
All officers and directors as a group 40,674,880 25.3%
---------------------------------------------------------------------------------------
(1) includes 2,000,000 shares issuable upon exercise of options.
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 24, 2001, certain
information with respect to beneficial share ownership by all person known to
management to own more than 5% of our outstanding common stock. Except as
otherwise indicated, the shareholders listed have sole investment and voting
power with respect to their shares. The amounts and percentages are based on
160,800,859 shares of common stock outstanding as of September 24, 2001.
Number of Common Shares Percent
Name and Address of Beneficial Owner Beneficially Owned Class
---------------------------------------------------------------------------------------
Gilbert Gertner
1300 Post Oak Blvd., Suite 1985
Houston, TX 77056 24,450,000 15.2%
---------------------------------------------------------------------------------------
Beachside Commons I, Inc.
401 Centre Street, 2nd Floor
Fernandina Beach, Florida 32034 15,695,520 9.8%
---------------------------------------------------------------------------------------
Porter Lane Investments, Inc. (1)
5255 Porter Lane
Gainesville, Georgia 30506 15,109,200 9.4%
---------------------------------------------------------------------------------------
Irish Investments, LLC
2413 First Avenue., Suite K-3
Fernandina Beach, Florida 32034 15,695,520 9.8%
---------------------------------------------------------------------------------------
Bolling Investments, LLC (2) 15,662,600 9.7%
257 Bolling Road, N.E.
Atlanta, Georgia 30305
---------------------------------------------------------------------------------------
(1) Including personal holdings of Gerald Sullivan, sole shareholder of Porter
Lane Investments.
(2) Includes personal holdings (563,680 shares) of Wayne Shortridge, principal,
and his pro rata share of stock held by other entities in which he has an
ownership interest.
17
EXECUTIVE COMPENSATION
Donald Boyd, our President, has an employment contract with Small Town
Radio, Inc. for a term of two years pursuant to which he will receive annual
compensation of $175,000 for his services as President. Mr. Boyd's employment
contract was effective as of August 1, 2001. Pursuant to the terms of his
employment contract, Mr. Boyd received options for 4,000,000 shares of our
common stock, 2,000,000 of which are immediately exercisable and 2,000,000 of
which will vest on July 30, 2004, but may become exercisable earlier pursuant to
a schedule tied to the number of acquisitions that we make. Until we have
provided medical insurance to Mr. Boyd, we will reimburse him for up to $600 a
month for medical insurance expenses. Mr. Boyd will also receive a monthly
automobile allowance in the amount of $600, and a one-time relocation allowance
in the gross amount of $10,000.
Robert S. Vail, Small Town Radio's Chief Financial Officer and Chairman
of the Board, earned $15,000 per month for the period January 2001 through June
30, 2001 for consulting services provided to Small Town Radio, Inc., and
following the merger, to Worldwide PetroMoly, Inc. Mr. Vail has an employment
contract with Small Town Radio, Inc. for a term of two years that was effective
as of August 1, 2001, pursuant to which he will receive $120,000 a year in
compensation for his services as our Chief Financial Officer. Mr. Vail is
entitled to receive reimbursement for reasonable temporary housing expenses for
the six month period from August 1, 2001 to January 31, 2002. Mr. Vail will also
receive a monthly automobile allowance in the amount of $500, and a one-time
relocation allowance in the gross amount of $25,000.
Summary Compensation Table
--------------------------
----------------------------------------------------------------- --------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------------------------------------- --------------------------------------------------
Awards Payouts
------------------------- -------- ---------- ------------------- --------------------------- ----------------------
Name and Principal Other Securities All Other
Position Annual Restricted Underlying Comp-
Compensation Stock Options/ LTIP ensation
Year Salary Bonus ($) Awards SARs (Payout) ($)
($) ($) ($) (#) ($)
------------------------- -------- ---------- -------- ---------- ------------- ------------- ----------- ----------
Robert S. Vail (1) 2001 -- -- $90,000 -- -- -- --
------------------------- -------- ---------- -------- ---------- ------------- ------------- ----------- ----------
Gilbert Gertner(2) 2001 -- -- -- -- -- -- --
------------------------- -------- ---------- -------- ---------- ------------- ------------- ----------- ----------
(1) Mr. Vail was paid as a consultant from January 2001 through June 30, 2001.
Mr. Vail did not have a written agreement for his services.
(2) Mr. Gertner was the Chief Executive Officer and Chairman of the Board of
Worldwide PetroMoly, Inc. prior to its acquisition of Small Town Radio, Inc.
Although Mr. Gertner was entitled to $180,000 per year, and a $950 per month
automobile allowance, he waived all compensation for the 2001 fiscal year.
Compensation to Directors
-------------------------
Messrs. Cooper and Rosmarin received 3,000,000 shares of Small Town
Radio, Inc. common stock each in return for serving on our Board of Directors.
These shares were converted to shares of Worldwide PetroMoly, Inc. in the
merger. Messrs. McMullan, Ross and Fleming, and Ms. Kahn each received 3,899,840
shares of Small Town Radio, Inc. common stock for serving on our Board of
Directors. Their shares were converted to shares of Worldwide PetroMoly, Inc. in
the merger. Mr. Vail receives no additional compensation for serving on our
Board of Directors, and no fees are paid to our directors for attendance at
Board of Directors' meetings. We have agreed to reimburse our directors for any
travel expenses incurred in connection with travel to Board of Directors'
meetings. Our officers are appointed by our Board of Directors and serve at its
discretion. Our bylaws provide for the indemnification of directors and officers
to the fullest extent authorized, permitted or allowed by Colorado law, our
state of incorporation.
18
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue a total of 800,000,000 shares of no par value
per share common stock. As of September 25, 2001, there were 160,800,859 shares
of our common stock outstanding, held by approximately 2100 holders of record.
Each holder of common stock is entitled to one vote per share in all matters to
be voted on by the shareholders. Our Articles of Incorporation and bylaws do not
provide for cumulative voting in elections of directors or any other matters
brought before shareholder meetings.
Holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the Board of Directors out of
funds legally available for payment. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of Worldwide PetroMoly, Inc., the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities. The common stock has no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable.
Preferred Stock
Our Board of Directors is authorized by our Articles of Incorporation to
issue up to 10,000,000 shares of one or more series of no par value preferred
stock. No shares of preferred stock have been authorized for issuance by our
Board of Directors, and we have no present plans to issue any shares. In the
event that the Board of Directors issues shares of serial preferred stock, it
may exercise its discretion in establishing the terms of such preferred stock.
Our Board of Directors may determine the voting rights, if any, of the
series of preferred stock being issued, including the right to:
o vote separately or as a single class with the common stock and/or other
series of preferred stock; have more or less voting power per share
than that possessed by the common stock or other series of preferred
stock; and
o vote on specific matter presented to the shareholders or on all of such
matters or upon the occurrence of any specified event or condition.
If our company liquidates, dissolves or winds up, the holders of our
preferred stock may be entitled to receive preferential cash distributions fixed
by our Board of Directors when creating the particular preferred stock series
before the holders of our common stock are entitled to receive anything.
Preferred stock authorized by our Board of Directors could be redeemable or
convertible into shares of any other class or series of our stock.
The issuance of preferred stock by our Board of Directors could
adversely affect the rights of holders of the common stock by, among other
things, establishing preferential dividends, liquidation rights or voting
powers.
Stock Option Plans
Prior to the merger, Worldwide Petromoly, Inc. had three stock option
plans, the Ogden, McDonald & Company 1996 Stock Option Plan (Worldwide
PetroMoly, Inc.'s predecessor), the 1999 Consulting Services Plan and Agreement,
and the Year 2000 Employee and Consultant Stock and Stock Option Plan. All
options have been granted under all three plans. Under the 1996 plan, there are
outstanding options to purchase 393,000 shares of common stock at exercise
prices ranging from $.13 per share to $1.00 per share. Under the 2000 plan,
there are outstanding options to purchase 240,000 shares of common stock at
exercise prices ranging from $.06 per share to $.13 per share. There is also an
option for 100,000 shares for an exercise price of $1.00 that was granted
outside of any of the three plans above to an employee of Worldwide Petromoly,
Inc. All options granted under the 1999 plan have been exercised.
In August 2001, we adopted our Stock Incentive Plan, under which
20,000,000 shares are available for award to eligible persons. As of September
18, 2001, we have awarded non-qualified options for 4,000,000 shares at $.14 per
share (2,000,000 of which are vested) and has issued 1,924,183 shares as
compensation to consultants.
19
HISTORY
Worldwide PetroMoly, Inc., formerly known as Ogden, McDonald & Company,
was incorporated under Colorado law on October 13, 1989. Ogden, McDonald &
Company was originally formed for the purpose of seeking out acquisitions of
properties, businesses, or merger candidates, without limitation as to the
nature of the business operations or geographic location of the acquisition
candidate. On July 22, 1996, Ogden, McDonald & Company completed a transaction
pursuant to which the shareholders of Worldwide PetroMoly Corporation, a Texas
corporation, acquired approximately 90.6% of the shares outstanding in Ogden,
McDonald & Company, and Worldwide PetroMoly Corporation became a wholly owned
subsidiary of Ogden, McDonald & Company. On October 11, 1996, Ogden, McDonald &
Company changed its name to Worldwide PetroMoly, Inc.
From July 22, 1996, until June 1, 2001, Worldwide PetroMoly, Inc.,
through Worldwide PetroMoly Corporation, engaged in the business of
manufacturing, marketing and distributing a line of molybdenum fortified
lubricant products called PetroMoly(TM), an engine oil additive designed to
enhance and maintain engines. Worldwide PetroMoly, Inc.'s lubricant business was
operated entirely out of Worldwide PetroMoly Corporation. Worldwide PetroMoly,
Inc. was unable to create a sustained commercial market for its lubricant
products, and Worldwide PetroMoly Corporation incurred significant and on-going
losses.
On June 1, 2001, Worldwide PetroMoly, Inc. consummated a transaction
pursuant to which Small Town Radio, Inc., a Georgia corporation, was merged into
a subsidiary of Worldwide PetroMoly, Inc., created for the purpose of this
merger. Pursuant to this transaction, all of the outstanding shares of Small
Town Radio, Inc. were exchanged for shares of Worldwide PetroMoly, Inc.'s common
stock. As a result, the former shareholders of Small Town Radio, Inc. now
beneficially own an aggregate of 118,467,860 shares approximately 75% of
Worldwide PetroMoly, Inc.'s outstanding common stock as of the effective date of
the merger. Also, and in connection with the acquisition of Small Town Radio,
Inc. by Worldwide PetroMoly, Inc., on June 7, 2001 all of the share capital of
Worldwide PetroMoly Corporation was sold to Mr. Gilbert Gertner, the former
Chairman of the Board of Worldwide PetroMoly, Inc. See "Additional Transactions"
on p. 25. Small Town Radio, Inc. is now the sole remaining subsidiary of
Worldwide PetroMoly, Inc. and all of Worldwide PetroMoly, Inc.'s business is
conducted through it operating subsidiary, Small Town Radio, Inc. The focus of
Worldwide PetroMoly, Inc.'s business is now the acquisition and operation of
radio stations, generally located in small, non-rated markets.
DESCRIPTION OF BUSINESS
Overview
--------
Our business strategy is to secure through acquisition a significant
number of radio stations in its target markets, generally smaller, less
populated areas near, but not in, mid-sized and larger markets. We intend
initially to acquire radio stations in rural sections of South Georgia, and then
expand into additional, geographically contiguous markets in the Southeast. We
believe that a network of stations in contiguous broadcast areas with two or
three common programming formats will provide an advertising and listener base
of significant size.
We believe that acquiring radio stations in small, less populated
markets represent attractive opportunities, because they are generally
characterized by:
o a small number of stations, few of which have professional sales staff
which solicit advertising from the business community;
o a greater need for radio advertising compared to the national average,
especially by those businesses that need to recruit consumer
transactions from nearby cities and towns;
o opportunities for substantial growth in advertising revenues as
national and regional retailers expand into smaller, less populated
areas;
o a weaker competitive environment, as compared to major metropolitan
areas, comprised of small independent operators, many of whom lack the
capital to produce locally-originated programming and/or to employ more
sophisticated research, marketing, management and sales techniques; and
o less direct format competition due to a smaller number of stations in
any given market, and relative consistent listener interests such that
two or three programming formats may reach a dominant share of the
market.
20
These market characteristics, coupled with the opportunity to establish
contiguous coverage across multiple radio station markets, create the potential
for revenue growth and cost efficiencies.
If we are able to obtain a reliable source of financing, we plan to
acquire up to twenty stations meeting our acquisition profile by the end of 2002
and up to forty such stations by the end of 2003, however we can give no
assurances that we will be able to complete these acquisitions. We plan to
acquire stations which utilize both "frequency modulation" ("FM") and "amplitude
modulation" ("AM"). Assuming that we are able to successfully execute our
acquisition plan, we will continue to look to acquire additional geographically
contiguous stations in small non-rated markets in order to build a group of
stations that can be operated as a network, in order to achieve operating
efficiencies and marketing leverage derived from a larger advertising customer
and listener base. Currently, we only have one tentative agreement to acquire
for the purchase of four radio stations in Southwest Georgia. This acquisition
is contingent upon, among other things, sufficient financing to pay the purchase
price, which we currently do not have.
Operating Strategy. Our operating strategy is to maximize the
geographical coverage of our network of radio stations, thereby increasing the
number of available listeners and advertisers and, we believes consequently,
broadcast revenue and cash flow. To achieve these goals, we intend to:
o secure and maintain a leadership position by owning a network of
stations with contiguous broadcast coverage to increase the overall
size of the markets served;
o coordinate programming, promotional and sales strategies among each
group of local stations to enhance revenue opportunities and maximize
cost efficiencies within each market;
o implement a regional sales staff and marketing initiatives to maximize
its share of local advertising revenue in each market, as well as
across the broadcast network;
o combine market research with an assessment of its competitors'
vulnerabilities in order to identify significant and sustainable target
audiences;
o achieve a significant penetration of the listener market with the use
of two or three programming formats within the network; and
o centralize operating activities across the region, with programming
that appeals to the collective market, while customizing local
programming.
Ownership of Geographically Contiguous Stations. We will attempt to
secure and maintain a leadership position in the markets we serve by creating
geographical signal coverage, not only in those markets in which we will own
stations, but also in adjacent markets. By coordinating programming, promotional
and sales strategies within each local station at the regional level, we will
attempt to capture a wide demographic range of listeners, thus providing a
broader appeal to advertisers.
We will provide a mix of local inventory of available advertising time
and spots on our network of stations. By offering both local advertising and
access to adjacent markets through our network of stations, we believe that we
will strengthen relationships with advertisers, and maximize the value of its
advertising inventory.
We also intend to develop regional programming and sales resources for
our radio station network to enhance the growth potential of under-performing
stations. Through consolidation into a common studio broadcasting facility, we
believe that we can reduce the risks associated with the implementation of
station performance improvements, such as new format launches and technical
upgrades. We believe that this strategy will permit combined programming with
regional appeal, while maintaining a level of localized input. We intend to
achieve cost savings within a market by consolidating facilities, sales and
administrative personnel, management and operating resources, such as on-air
talent, programming and music research, and reducing other redundant expenses.
Sales and Marketing Initiatives. We intend to maximize our share of
local advertising revenue in each of our markets through sales and marketing
initiatives. Because many of the radio stations that we may acquire have no
dedicated or trained sales staff, we believe that we can derive significant
benefits from creating or expanding the sales forces of acquired stations. We
intend to maximize our revenue by utilizing sophisticated inventory management
techniques to provide sales personnel with frequent price adjustments based on
regional and local market conditions. We expect to strengthen relationships with
some advertisers by offering on-site events staged at, and broadcast from, the
advertiser's business location.
21
Targeted Programming and Promotion. To maintain or improve our position
in each market, we will combine market research with an assessment of
competitors' vulnerabilities in order to identify significant and sustainable
target audiences. We will then tailor the programming, marketing and promotion
of each radio station to maximize its appeal to the targeted audience. We will
attempt to build strong markets by:
o creating distinct, highly visible profiles with regional appeal for its
on-air personalities, particularly those broadcasting during morning
drive time, which traditionally airs between 6:00 a.m. and 10:00 a.m.;
o utilizing multiple formats, which can reach a dominant portion of the
population in these smaller markets;
o formulating recognition for our network, in addition to the individual
stations, to promote listenership and advertising leverage across the
entire geographical area; and
o actively participating in community events and charities.
Combination of Centralized Operations and Local Presence. We believe
that radio requires a local presence, both in its programming and by being
active in the community. Accordingly, although much of our operations will be
centralized, we will maintain a "Community Coordinator" within each market.
Further, the sales staff will actively participate in the community and maintain
valuable relationships within the area. From a broadcast standpoint, we intend
to incorporate local news and information into our regional programming format,
so that programming content will both appeal to the population within the entire
region as well as provide localized content that is supportive of the station
community.
Source of Revenues
------------------
We expect that virtually all of our broadcast revenue will be generated
from the sale of local and regional advertising for broadcast on our radio
stations. We expect to receive additional revenue from the sale of national
advertising, network compensation payments and other miscellaneous transactions.
The major categories of advertisers include telephone companies, restaurants,
fast food chains, automotive companies and grocery stores.
We will use a centralized regional sales staff structure. Individual
salespersons will be assigned to a listening area instead of a specific station.
The sales staff will solicit advertising either directly from the local
advertiser or indirectly through advertising agencies. We expect that most sales
will be generated through direct solicitation of the local advertisers. We
believe that we can better understand the advertiser's business needs and more
effectively design advertising campaigns to sell the advertiser's products
through these direct relationships. Where desired, we will produce commercials
for the advertisers in our centralized studios to be located in the Atlanta
area. We intend to make national sales through a firm specializing in radio
advertising sales on the national level in exchange for a commission based on
gross revenue. Regional sales, which we define as sales to advertisers located
in regions surrounding our markets but not necessarily physically located within
a market, will be handled by our regional sales staff.
Depending on the programming format of a particular station, we will
estimate the optimum number of advertising spots available. The number of
advertisements that can be broadcast without jeopardizing listening levels is
limited in part by the format of a particular station. We will strive to
maximize station revenue by managing advertising inventory, and will adjust
pricing based on local market conditions and the ability to provide advertisers
with an effective means of reaching a targeted demographic group. Each station
will have a general target level of on-air inventory. This target level may be
different at different times of the day, but tends to remain stable over time.
Selling activity is based on demand for the radio stations' on-air inventory
and, in general, we intend to respond to this demand by varying prices rather
than the target inventory level for a particular station.
22
Competition
-----------
The radio broadcasting industry is highly competitive. The success of
each station depends largely upon audience ratings and its share of the overall
advertising revenue within its market. Stations compete for listeners and
advertising revenue directly with other radio stations within their respective
markets. Radio stations compete for listeners primarily on the basis of program
content that appeals to a particular demographic group. Building a strong
listener base consisting of a specific demographic group in a market enables an
operator to attract advertisers seeking to reach those listeners. Companies that
operate radio stations must be alert to the possibility of another station
changing format to compete directly for listeners and advertisers. A station's
decision to convert to a format similar to that of another radio station in the
same geographic area may result in lower ratings and advertising revenue,
increased promotion and other expenses and, consequently, lower broadcast cash
flow.
Factors that are material to a radio station's competitive position
include management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. Recent changes in Federal Communications Commission policies and
rules permit increased ownership and operation of multiple local radio stations.
We believe that radio stations that elect to take advantage of joint
arrangements such as local marketing agreements or joint sales agreements may in
certain circumstances have lower operating costs and may be able to offer
advertisers more attractive rates and services.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the Federal Communications Commission, and the number of radio
stations that can operate in a given market is limited by the availability of FM
and AM radio frequencies allotted by the Federal Communications Commission to
communities in that market, as well as by its multiple ownership rules
regulating the number of stations that may be owned and controlled by a single
entity. The Federal Communications Commission's multiple ownership rules have
changed significantly as a result of the Telecommunications Act of 1996.
Stations compete for advertising revenue with other media, including
newspapers, broadcast television, cable television, magazines, direct mail,
coupons and outdoor advertising. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems, by satellite and by digital audio broadcasting. Digital audio
broadcasting may deliver by satellite to nationwide and regional audiences,
multi-channel, multi-format, digital radio services with sound quality
equivalent to compact discs. The delivery of information through the Internet
also could create a new form of competition.
Properties and Facilities
-------------------------
The types of properties required to support radio stations include
offices, studios, transmitter sites and antenna sites. The transmitter and
antenna sites are generally located to provide maximum market coverage. Most of
our station acquisitions will include substantial land at the transmitter site,
as well as facilities that have historically been used for local studio space
and offices. While we expect to maintain a small office in each market for
Community Coordinators and sales staff, these are expected to be modest
facilities that can be maintained at nominal expense. Accordingly, we will
likely sell, or lease the studio space that we acquire. With regard to the
transmitter facilities, which are generally located at the tower location for
each station, we intend to install the minimum studio equipment necessary to
perform local broadcasting, on an emergency basis. This will give us significant
flexibility while gaining operational cost advantages of consolidating studio
operations at a centralized studio facility to be located in the Atlanta
metropolitan area. We will own or lease substantially all of our operating
equipment, consisting principally of transmitting antennae, transmitters, studio
equipment and general office equipment.
We currently lease approximately 500 feet of office space located at
12600 Deerfield Parkway, Suite 100, Alpharetta, Georgia 30004, which is our
principal executive office. Additionally we plan to obtain or build studio space
in the Atlanta, Georgia metropolitan area.
Federal Regulation of Radio Broadcasting
----------------------------------------
The ownership, operation and sale of broadcast stations are subject to
the jurisdiction of the FCC, which acts under authority derived from the
Communications Act of 1934, as amended, and the Telecommunications Act 1996,
which made changes in several broadcast laws. Among other things, the Federal
Communications Commission.
23
o assigns frequency bands for broadcasting;
o determines whether to approve changes in ownership or control of
station licenses;
o regulates equipment used by stations;
o adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of
stations; and
o has the power to impose penalties for violations of its rules under the
Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific Federal Communications Commissions
regulations and policies. Failure to observe these or other rules and policies
can result in the imposition of various sanctions, including fines, the grant of
abbreviated license renewal terms or, for particularly egregious violations, the
denial of a license renewal application, the revocation of a license or the
denial of Federal Communications Commission consent to acquire additional
broadcast properties.
License Grant and Renewal. Radio stations operate under renewable
broadcasting licenses that are ordinarily granted by the Federal Communications
Commission for maximum terms of eight years. Licenses are renewed through an
application to the Federal Communications Commission. Petitions to deny license
renewals can be filed by interested parties, including members of the public.
These petitions may raise various issues before the Federal Communications
Commission. The Federal Communications Commission is required to hold hearings
on renewal applications if it is unable to determine that renewal of a license
would serve the public interest, convenience and necessity, or if a petition to
deny raises a substantial and material question of fact as to whether the grant
of the renewal application would be inconsistent with the public interest,
convenience and necessity. If, as a result of an evidentiary hearing, the
Federal Communications Commission determines that the licensee has failed to
meet certain requirements and that no mitigating factors justify the imposition
of a lesser sanction, then it may deny a license renewal application.
We are not currently aware of any facts that would prevent the timely
renewal of the licenses to operate the broadcast stations that we intend to
acquire, although we cannot assure you that all of these licenses will be
renewed. We are not currently aware of any facts that would prevent the timely
transfer to us of the licenses held by the current owners of the radio stations
that we intend to purchase.
Multiple Ownership Rules. The Communications Act and Federal
Communications Commission rules impose specific limits on the number of
commercial radio stations an entity can own, or in which it can hold an
attributable interest, in a single local market. These rules preclude us from
acquiring certain stations that we might otherwise seek to acquire. The rules
also effectively prevent us from selling stations in a market to a buyer that
has reached its ownership limit in the market. The local radio ownership rules
are as follows:
o In markets with 45 or more commercial radio stations,
ownership is limited to eight commercial stations, no more than five of
which can be either AM or FM;
o In markets with 30 to 44 commercial radio stations, ownership
is limited to seven commercial stations, no more than four of which can
be either AM or FM;
o In markets with 15 to 29 commercial radio stations, ownership
is limited to six commercial stations, no more than four of which can
be either AM or FM; and
o In markets with 14 or fewer commercial radio stations,
ownership is limited to five commercial stations or no more than 50.0%
of the market's total, whichever is lower, and no more than three of
which can be either AM or FM.
In addition, Federal Communications Commission rules restrict an entity's
ability to own, or hold on attributable interest in, radio stations and
television stations or newspapers in a single local market. An officer or
director of, or the holder of 5% or more of the voting stock in, a broadcast
license, generally is included among those deemed to hold an attributable
interest in that license.
Programming and Operation. The Communications Act requires broadcasters
to serve the public interest. Since 1981, the Federal Communications Commission
gradually has relaxed or eliminated many of the more formalized procedures it
developed to promote the broadcast of types of programming responsive to the
needs of a station's community of license. However, licensees continue to be
24
required to present programming that is responsive to community problems, needs
and interests and to maintain records demonstrating such responsiveness.
Complaints from listeners concerning a station's programming will be considered
when it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time.
Stations also must pay regulatory and application fees and follow
various Federal Communications Commission rules that regulate, among other
things, political advertising, and the broadcast of obscene or indecent
programming, sponsorship identification and technical operations, including
limits on radio frequency radiation.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary fines, the grant of short
(less than the maximum) renewal terms or, for particularly egregious violations,
the denial of a license renewal application or the revocation of a license.
In 1985, the Federal Communications Commission adopted rules regarding
human exposures to levels of radio frequency radiation. These rules require
applicants for new broadcast stations, renewals of broadcast licenses or
modifications of existing licenses to inform the Federal Communications
Commission at the time of filing such applications whether a new or existing
broadcast facility would expose people to radio frequency radiation in excess of
its guidelines. In August 1996, the Federal Communications Commission adopted
more restrictive radiation limits. These limits became effective on September 1,
1997 and govern applications filed after that date.
ADDITIONAL TRANSACTIONS
Worldwide PetroMoly, Inc. entered into an agreement with Gilbert
Gertner, the former Chairman of the Board of Worldwide PetroMoly, Inc., for the
assumption by him of the assets and liabilities of Worldwide PetroMoly
Corporation and the purchase of all of Worldwide PetroMoly Corporation's issued
and outstanding shares held by Worldwide PetroMoly, Inc.
Worldwide PetroMoly, Inc. determined that Worldwide PetroMoly
Corporation's negative net worth, limited assets, ongoing losses and lack of
reasonable prospects to improve its business, the assumption by Mr. Gertner of
Worldwide PetroMoly Corporation's assets and liabilities, and the potential to
receive profit (as discussed below), should there be any, from Mr. Gertner's
continuing operations of Worldwide PetroMoly Corporation as a separate business
entity, rendered the consideration for the purchase agreement appropriate for
this arms-length negotiated transaction. In addition, and in consideration of
the cancellation of approximately $1.5 million in indebtedness owed by Worldwide
PetroMoly, Inc. to Mr. Gertner, we issued 13 million shares of our common stock
to Mr. Gertner. The shares issued to Gertner are "restricted securities" (as
defined in Rule 144 promulgated under the Act) and accordingly may not be sold
or transferred by the holder thereof unless registered under the Act or
transferred pursuant to an exemption therefrom. On June 7, 2001, as contemplated
by the terms and conditions of the purchase agreement, we completed the sale of
our automotive lubricant business conducted by Worldwide PetroMoly Corporation
to Mr. Gertner.
Pursuant to the terms of the purchase agreement, Mr. Gertner has agreed
to pay us a percentage ranging from 5% to 10% of any profits generated by the
sale of Worldwide PetroMoly Corporation's assets, in the event of a sale, or a
percentage of the net profits, ranging from 5% to 10%, from its continuing
business operations, should there be any, for a period of eighteen months
following the closing of the merger between Petromerger, Inc. and Small Town
Radio, Inc.
LEGAL PROCEEDINGS
We are not currently involved in any legal proceeding associated with
the conduct of our business.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with our
Consolidated Financial Statements and Notes thereto included elsewhere in this
prospectus. This discussion contains forward-looking statements based on current
expectations which involve risks and uncertainties. Actual results and the
timing of certain events may differ significantly from those projected in such
forward-looking statements due to a number of factors, including those set forth
in the section entitled "Risk Factors" and elsewhere in this prospectus.
Going Concern
-------------
In connection with their audit report on our consolidated financial
statements as of June 30, 2001, BKD, LLP, our independent certified public
accountants, expressed substantial doubt about our ability to continue as a
going concern because such continuance is dependent upon our ability to raise
capital.
We have explored, and continue to explore all avenues possible to raise
the funds required. We have no revenue producing activity and do not anticipate
having any until we can purchase operating radio stations. We cannot close a
transaction to acquire a radio station until we have raised sufficient capital
to pay the purchase price. We also need capital to fund overhead and
administrative costs as well as transaction expenses. At June 30, 2001, accounts
payable to vendors totaled $576,000, with $493,000 owed to suppliers and vendors
who are working with us and an additional $80,000 was settled in July 2001 in
exchange for shares of restricted stock. Effective August 1, 2001, we began
incurring payroll and related costs of approximately $30,000 per month. A loan
from a director for $50,000 was obtained on August 3, 2001 to help fund
operations in the short term. We estimate that the minimum level of funding that
we will require to meet our operating requirements through December 31, 2001 is
approximately $300,000.
Ultimately, we must achieve profitable operations if we are to be a
viable entity. We intend to purchase existing operations that are currently
operating at breakeven or are individually profitable. Although we believe that
there is a reasonable basis to believe that we will successfully raise the
needed funds, we cannot assure you that we will be able to raise sufficient
capital to sustain operations before we can purchase radio stations or that we
will be able to achieve, or maintain, a level of profitability sufficient to
meet the operating expenses of the corporate office.
Cash Flow
---------
We have a working capital deficit of $969,000 at June 30, 2001 compared
to a deficit of $50,000 at June 30, 2000. This increase in working capital
deficit resulted from the loss for the year.
For the fiscal year ended June 30, 2001, operations used $71,000 of
cash and investing activity used $2,000. Financing activities generated $76,000
during the period and consisted solely of stockholder contributions, $9,000, and
stockholder loans, $67,500. We expect to continue to have operating cash flow
deficiencies for the near term, and for the remainder of the 2002 fiscal year.
Capital Resources
-----------------
We currently have limited sources of capital, including the public and
private placement of equity securities and the possibility of debt. With
virtually no assets, the availability of funds from traditional sources of debt
will be limited, and will almost certainly involve pledges of assets or
guarantees by officers, directors and stockholders. Stockholders and directors
have advanced funds to us in the past, but we cannot assure you that they will
be a source of funds in the future.
As of June 30, 2001, we had minimal cash. We estimate that, based upon
our current business plan for acquisitions, operations and capital expenditures,
we will require up to $13,900,000 over the next two years. After the first year,
the cash generated from operations should be such that we will not need
additional funds except to pay for the acquisition of stations, which could be
postponed. The estimated funding required for the first year of our business
plan is $7,700,000. We believe that the funding generated by the equity line,
plus debt financing available to fund radio station acquisitions, will be
sufficient to fund cash requirements for the next year of operations.
26
Operations Outlook
------------------
We are a development stage radio broadcasting company focused on
acquiring, developing and operating groups of radio stations in small, generally
non-rated markets, including areas not included in metropolitan markets. Our
current activities are generally focused in the portion of the Southeast termed
the "Sunbelt". The geographic area of interest is generally defined as eastern
Mississippi to South Carolina, north of I-10 and south of I-20; however, we may
acquire a station or stations outside this area if we are presented an
attractive opportunity that does not dilute our ability to manage our overall
network of stations. Our long-term goal is to build a geographically contiguous
group of stations that can be operated as a network. We believe that we can
achieve operating efficiencies and marketing leverage that come through the
existence of a larger advertising customer and listener base.
We have had discussions with companies and/or individuals that operate
radio stations in Southern Georgia, Northern Florida and Southeastern South
Carolina about purchasing these stations. We have executed letters of intent to
acquire two stations, and asset purchase agreements for four stations in
Southwest Georgia. The terms for the acquisition of four stations in Southwest
Georgia, to be purchased from one seller, Merchant Broadcast Systems of
Southwest Georgia, include WBBK-FM & AM, licensed to Blakely, Georgia, and
WGMK-FM and WSEM-AM, licensed to Donalsonville, Georgia. The purchase agreement
is subject to satisfactory due diligence, approval by our Board, and approval by
the Federal Communications Commission.
The purchase price for radio stations varies significantly depending
upon the market served. In the very small, non-rated markets, the prices average
about $350,000 per station, (AM's typically less, FM's typically higher). In a
few instances, we have had discussions with stations in larger markets, some of
which are rated markets. The stations in the larger markets that we have
looked at typically have significantly higher purchase prices, but usually
report much higher revenue and cash flow.
Our principal source of revenue will be the sale of broadcasting time
for advertising. As a result, our revenue will be determined primarily by the
advertising rates our radio stations charge. Correspondingly, the rates will be
based upon the individual station's ability to attract audiences in the
demographic groups targeted by its advertisers. The traditional means of
measuring this ability to attract audiences is the periodic Arbitron Radio
Market Reports. As our targeted stations are in non-rated markets, this measure
will generally not be available. We will have to rely on the ability of our
sales staff to convince potential customers of the effectiveness of radio as an
advertising medium and to creatively demonstrate the share of the market that
advertising on our stations will reach.
The number of advertisements that can be broadcast without jeopardizing
listening levels (market share) are limited in part by the format of a
particular station. Each of our stations will have a general pre-determined
level of on-air inventory that it makes available for advertising. Available
inventory may vary at different times of the day but tends to remain stable over
time. Much of our selling activity will be based on demand for the stations'
on-air inventory and, in general, we will respond to this demand by varying
prices rather than by changing the available inventory.
In the broadcasting industry, radio stations often utilize trade, or
barter, agreements to exchange advertising time for goods or services, such as
other media advertising, travel or lodging, in lieu of cash. In order to
preserve the majority of on-air inventory for cash advertising, we intend to
enter into trade agreements only if the goods or services bartered to us will be
used in our business. We expect to minimize our use of trade agreements and
anticipate that no more than 10% of our broadcast revenues will be paid for in
trade. In addition, we generally do not expect to preempt advertising spots paid
in cash with advertising spots paid in trade.
Revenue in the radio broadcasting industry is typically seasonal, with
the first calendar quarter producing the lowest revenue of the year and the
fourth calendar quarter producing the highest revenue for the year. We expect
that our revenue stream for any particular station will reflect similar seasonal
variations. Our operating results in any period may be affected by marketing and
promotion expenses that do not necessarily produce commensurate revenues until
the resultant commercials are broadcast in future periods.
The primary operating expenses incurred in the ownership and operation
of radio stations include employee salaries and commissions, programming
expenses and marketing and promotional expenses. We will strive to control these
expenses with centralized studios and administrative functions and the use of
regional marketing teams. We also will incur significant depreciation and
amortization expense as a result of our acquisitions of stations.
If our results become comparable to our typical target radio stations,
we will derive approximately 83% of net broadcast revenues from local and
regional advertising in the markets in which we operate, and the remainder will
result principally from the sale of national advertising. Local and regional
27
advertising will be sold primarily by the sales staff deployed throughout the
geographic area covered by our signal. To generate national advertising sales,
we will engage national advertising representative firms. We believe that the
volume of national advertising revenue tends to adjust to shifts in a station's
audience share position more rapidly than does the volume of local and regional
advertising revenue. Therefore, we will focus on sales of local and regional
advertising.
Our financial results are dependent on a number of factors, including
the general strength of the local and national economies, population growth, the
ability to provide popular programming, local market and regional competition,
relative efficiency of radio broadcasting compared to other advertising media,
signal strength and government regulation and policies. From time to time the
markets in which we plan to operate will experience weak economic conditions
that may negatively affect our revenue. We believe, however, that this impact
will be somewhat mitigated by our diverse geographical presence.
The performance of a radio station group such as ours is customarily
measured by its ability to generate broadcast cash flow. Although broadcast cash
flow is not a measure of performance calculated in accordance with generally
accepted accounting principles, we believe that broadcast cash flow is accepted
by the broadcasting industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of broadcasting
companies. Nevertheless, this measure should not be considered in isolation or
as a substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining our operating performance or
liquidity that is calculated in accordance with generally accepted accounting
principles.
Results of Operations for the Year ended June 30, 2001 and for the Period from
------------------------------------------------------------------------------
Inception to June 30, 2000.
---------------------------
The acquisition of Small Town Radio, Inc. by Worldwide Petromoly, Inc
constituted a reverse acquisition for financial reporting purposes. The purchase
method of accounting, used to record the transaction, requires that operations
of the acquired entity may only be reflected in the statement of operations
subsequent to the date of the acquisition. As a result of this, the historical
statement of operations for Worldwide Petromoly, Inc. d/b/a Small Town Radio,
Inc. only reflects Small Town Radio Inc.'s operations for the year ended June
30, 2001. We are, and continue to be, a development stage enterprise focused on
entering the broadcasting industry by acquiring operating radio stations. During
the entire year ended June 30, 2001, we focused our efforts on researching the
industry, identifying stations within a selected geographical market that might
be available for purchase, and trying to secure financing for the operation.
The operating loss for the year ended June 30, 2001 was $922,000, an
increase of $872,000 over the period from inception (April 2000) to June 30,
2000. There were no revenues during the year. Organizational and start-up
expenses of $899,000 (consisting principally of legal fees of $524,000 and
consulting fees of $372,000) made up most of the loss for the year. Interest
expense of $1,000 brought the total loss for the year to $923,000.
The operating loss and net loss for the period from inception to June
30, 2000 was $50,000 and consisted solely of organizational and start-up
expenses. There was no revenue during the period and no interest expense.
28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Agreement with Porter Lane Investments, Inc. - At the time of its
founding, Small Town Radio, Inc. entered into a consulting agreement with Porter
Lane Investments, Inc., under which Porter Lane Investments, Inc. was to provide
certain consulting services to Small Town Radio, Inc. The agreement called for
monthly payments of $16,000, additional payments to be made upon completion of
acquisitions and financing arrangements, and had a term of five years. The
agreement was amended on July 16, 2001 to delete the provision for additional
payments and to provide for a termination date of May 31, 2002. Subsequently,
Porter Lane Investments, Inc. and Small Town Radio, Inc. agreed to terminate the
agreement effective July 31, 2001, with one additional month's payment of
$16,000.
From March 2000 through June 30, 2001, Small Town Radio had incurred
expenses of $280,000 under this agreement. There had been no payments made under
the agreement. In August, 2001 as part of the termination of our agreement with
Porter Lane Investments Inc., it agreed to satisfy $240,000 of the $280,000 then
owed to it by having us issue shares of our common stock directly to individual
consultants who had performed consulting services for us through Porter Lane
Investments Inc.
Fees payable to Robert S. Vail - Robert S. Vail, the Chief Financial
Officer and a director, has been involved since the inception of Small Town
Radio, Inc. His services to Small Town Radio, Inc., through July 31, 2001 were
on a consulting basis, and all compensation was accrued, and not paid. For the
period from inception through July 31, 2001, an aggregate of $105,000 remains
unpaid.
Note payable to Bolling Investments, LLC - Bolling Investments, LLC,
one of Small Town Radio's founding shareholders, and Wayne Shortridge, the sole
principal of Bolling Investments, LLC, has made four separate loans to Small
Town Radio, Inc., totaling $67,500. The loans are evidenced by four demand notes
that bear interest at 12% per annum.
Note payable to John McMullan - John McMullan, a director, provided a
loan to us for $50,000. This loan is evidenced by a ninety (90) day demand note
that bears interest in the amount of 8% per annum. Mr. McMullan was also issued
500,000 shares of restricted stock (valued at $30,000 at September 19, 2001) in
connection with this loan.
29
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares of common stock are traded on Nasdaq's Over the Counter
Bulletin Board under the symbol "MOLY."
Our range of high and low sales prices per share as quoted (without
retail markup or markdown and without commissions) on the Over the Counter
Bulletin Board for each quarter within the last two fiscal years is provided
below. The figures shown below reflect inter-dealer prices, without retail
markup, markdown or commission, and may not necessarily represent actual
transactions:
-------------------- -------------------- ----------------------
QUARTER HIGH PRICE LOW PRICE
-------------------- -------------------- ----------------------
7/1/01(1) 0.1900 0.0600
-------------------- -------------------- ----------------------
6/30/01 0.2700 0.0625
-------------------- -------------------- ----------------------
3/31/01 0.4062 0.0781
-------------------- -------------------- ----------------------
12/31/00 0.3125 0.0625
-------------------- -------------------- ----------------------
9/30/00 0.4062 0.1875
-------------------- -------------------- ----------------------
6/30/00 0.6875 0.2500
-------------------- -------------------- ----------------------
3/31/00 1.0000 0.4688
-------------------- -------------------- ----------------------
12/31/99 0.9375 0.4688
-------------------- -------------------- ----------------------
9/30/99 1.2656 0.7188
-------------------- -------------------- ----------------------
(1) Through September 24, 2001.
As of September 24, 2001 we have approximately 2100 current holders of
record of our common stock.
We have paid no dividends in the past two fiscal years, and are
unlikely to do so in the foreseeable future.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY
Indemnification of Directors and Officers
Sections 7-109-102 and 7-109-107 of the Colorado Business Corporation
Law and Article 13 of our Amended and Restated Articles of Incorporation provide
for indemnification of our Directors and officers in a variety of circumstances,
which may include liabilities under the Act. Article 13 provides that unless
otherwise determined by our Board of Directors that the actions in question
violate the provisions of Article 13, we shall indemnify to the full extent
permitted by the laws of Colorado as from time to time in effect, the persons
described in Sections 7-109-102 and 7-109-107 of the Colorado law.
Commission Position on Indemnification For Securities Act Liability
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to our directors, officers and
controlling persons pursuant to the foregoing positions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
30
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 9, 2001 the Board of Directors of the Registrant approved the
engagement of BKD, LLP ("BKD") as the Registrant's principal accountant to
replace Jackson & Rhodes P.C. ("Jackson & Rhodes"), the previous accountant. The
Board approved the engagement of BKD because it had the resources needed to
serve the Registrant as its business grows.
Jackson & Rhodes' report on the Registrant's financial statements for
each of the last two years did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the Registrant's two most recent fiscal years and the subsequent
interim periods preceding the replacement of Jackson & Rhodes, there were no
disagreements with Jackson & Rhodes on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of Jackson & Rhodes, would
have caused it to make a reference to the subject matter of the disagreement(s)
in connection with its report.
Jackson & Rhodes did not advise the Registrant during the Registrant's
two most recent fiscal years or during the subsequent interim periods preceding
Jackson & Rhodes replacement:
(a) that the internal controls necessary for the
Registrant to develop reliable financial statements
did not exist;
(b) that information had come to its attention that had
led it to no longer be able to rely on management's
representations, or that had made it unwilling to
be associated with the financial statements
prepared by management;
(c) (i) of the need to expand significantly the scope
of its audit, or that information had come to its
attention during the two most recent fiscal years
or any subsequent interim period that if further
investigated might (A) materially have impacted the
fairness or reliability of either: a previously
issued audit report or the underlying financial
statements, or the financial statements issued or
to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial
statements covered by an audit report or (B) have
caused it to be unwilling to rely on management's
representations or be associated with the
Registrant's financial statements; or (ii) that due
to its dismissal, or for any other reason, it did
not so expand the scope of its audit or conduct
such further investigation; or
(d) (i) that information had come to its attention that
it had concluded materially impacts the fairness or
reliability of either (A) a previously issued audit
report or the underlying financial statements, or
(B) the financial statements issued or to be issued
covering the fiscal period(s) subsequent to the
date of the most recent financial statements
covered by an audit report; or (ii) due to its
dismissal, or for any other reason, the issue has
not been resolved to its satisfaction prior to its
dismissal.
Jackson & Rhodes was authorized by the Registrant to respond fully to
inquiries of BKD.
31
Except such advice as has been provided by BKD in connection with
auditing services related to the preparation of historical financials for the
Registrant's recently acquired subsidiary and accounting services related to the
preparation of certain pro forma financial information, during the two most
recent fiscal years and during the interim period prior to engaging BKD, neither
the Registrant nor anyone on its behalf consulted BKD regarding either: (a) the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Registrant's financial statements, and neither a written report nor oral
advice was provided to the Registrant that BKD concluded was an important factor
considered by the Registrant in reaching a decision as to an accounting,
auditing or financial reporting issue; or (b) any matter that was the subject of
either a disagreement or any other event described above.
32
Independent Accountants' Report
The Board of Directors
Worldwide PetroMoly, Inc. d/b/a Small Town Radio
Alpharetta, Georgia
We have audited the accompanying consolidated balance sheet of Worldwide
PetroMoly, Inc. d/b/a Small Town Radio as of June 30, 2001 and 2000, and the
related statements of operations, stockholders' deficit, and cash flows for the
year ended June 30, 2001 and period from inception to June 30, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Worldwide PetroMoly,
Inc. d/b/a Small Town Radio as of June 30, 2001 and 2000, and the results of
their operations and their cash flows for the year ended June 30, 2001 and
period from inception to June 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in the notes to
the consolidated financial statements, the Company's continuance is dependent on
its ability to raise capital. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
\s\ BKD, LLP
Indianapolis, Indiana
July 25, 2001
F-1
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Consolidated Statement of Operations
Period From
Year Ended Inception to
June 30, June 30,
2001 2000
-------------------------------------------------------------------------------------------------
Net Sales $ 0 $ 0
---------------------------------------
Operating Expenses
Organizational and start-up expenses 899,415 49,971
Professional fees 10,000
Rent 3,369
Director compensation 6,193
Depreciation 105
Other 2,473
---------------------------------------
921,555 49,971
---------------------------------------
Operating Loss (921,555) (49,971)
Other Expense--interest (1,269)
---------------------------------------
Loss Before Income Taxes (922,824) (49,971)
Income Tax Benefit 0 0
---------------------------------------
Net Loss $(922,824) $(49,971)
=======================================
Basis Earnings Per Share $ (.01) $0
Weighted-Average Shares Outstanding 69,844,439 51,733,930
See notes to consolidated financial statements.
F-2
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Consolidated Balance Sheet
June 30 2001 2000
-------------------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash $ 3,396
Deposit 2,076
-------------------------------------
Total current assets 5,472
Property and Equipment, net 1,791
Other 10,000
-------------------------------------
$17,263 $0
=====================================
Liabilities and Stockholders' Deficit
Current Liabilities
Notes payable--stockholders $ 67,500
Accounts payable 575,802 $49,971
Accounts payable--stockholders 330,000
Accrued expenses 1,269
-------------------------------------
Total current liabilities 974,571 49,971
-------------------------------------
Commitments and Contingencies
Stockholders' Deficit
Preferred stock, no stated value
Authorized--10,000,000 shares
Issued and outstanding--none
Common stock, no par value
Authorized--800,000,000 shares
Issued and outstanding--157,726,675 and 51,733,930 shares 12,383,424
Additional paid-in capital (12,367,937)
Deficit accumulated during the development stage (972,795) (49,971)
-------------------------------------
(957,308) (49,971)
-------------------------------------
$17,263 $ 0
=====================================
See notes to consolidated financial statements.
F-3
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Consolidated Statement of Stockholders' Deficit
Deficit
Accumulated
Number Additional During the
of Common Paid-in Development
Shares Stock Capital Stage Total
------------------------------------------------------------------------------------------------------------------------------
Balances, April 1, 2000
Net loss $ (49,971) $ (49,971)
Issuance of common stock 51,733,930
-----------------------------------------------------------------------------------------
Balances, June 30, 2000 51,733,930 (49,971) (49,971)
Net loss (922,824) (922,824)
Issuance of common stock--no
consideration 85,044,986
Issuance of common stock--non-cash
consideration 20,397,760 $ 6,787 6,787
Equity adjustment resulting from
reverse acquisition 12,376,637 $(12,376,637)
Stockholder contribution 8,700 8,700
-----------------------------------------------------------------------------------------
Balances, June 30, 2001 157,176,676 $12,383,424 $(12,367,937) $(972,795) $(957,308)
=========================================================================================
See notes to consolidated financial statements.
F-4
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Consolidated Statement of Cash Flows
Period From
Year Ended Inception to
June 30, June 30,
2001 2000
----------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net loss $(922,824) $(49,971)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation 105
Stock issued for director and professional fees 6,787
Changes in assets and liabilities
Deposit (2,076)
Other asset (10,000)
Accounts payable 525,831 49,971
Accounts payable--stockholders 330,000
Accrued expenses 1,269
--------------------------------------
Net cash used by operating activities (70,908)
--------------------------------------
Investing Activity--purchase of property and equipment (1,896)
--------------------------------------
Financing Activities
Net increase in notes payable--stockholders 67,500
Stockholder contribution 8,700
--------------------------------------
Net cash provided by financing activities 76,200
--------------------------------------
Net Increase in Cash 3,396
Cash, Beginning of Period 0 0
--------------------------------------
Cash, End of Period $ 3,396 $ 0
======================================
See notes to consolidated financial statements.
F-5
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Notes to Consolidated Financial Statements
(1) Nature of Operations and Summary of Significant Accounting Policies
NATURE OF OPERATIONS
Worldwide PetroMoly, Inc. d/b/a Small Town Radio (Company) is a development
stage enterprise. The Company is currently focused on securing financing to
allow it to enter the broadcasting industry through a series of radio station
acquisitions.
The Company's target markets are generally smaller, less populated areas near,
but not in, mid-sized and larger markets. The Company intends to initially
acquire stations in rural sections of South Georgia, and then expand into
additional, geographically contiguous markets in the Southeast. Acquisition of
the target stations will be dependent upon approval of the Federal
Communications Commission (FCC).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVERSE ACQUISITION AND DISPOSITION
On June 1, 2001, Worldwide PetroMoly, Inc. (PetroMoly) acquired Small Town
Radio, Inc., a development stage enterprise, through the issuance of 118,467,860
unregistered shares of PetroMoly common stock to Small Town Radio's
stockholders. For financial reporting purposes, the transaction constitutes a
reverse acquisition due to the former Small Town Radio stockholders owning
approximately 75% of the outstanding stock of the combined entity immediately
following the transaction. The purchase method of accounting was utilized to
record the transaction resulting in marking the assets and liabilities of
PetroMoly, the acquired entity for reporting purposes, to their fair values
through an allocation of the purchase price. Any excess of purchase price
remaining after the allocation of the purchase price to the assets and
liabilities is recorded as goodwill and amortized over a period of time.
In addition, the purchase method of accounting requires that operations of the
acquired entity for reporting purposes (PetroMoly) only be reflected in the
statement of operations subsequent to the date of the acquisition. For this
reason, the historical statement of operations only reflects Small Town Radio,
Inc.'s operations for the short period ended June 30, 2000. The year ended June
30, 2001 reflects the operations of only Small Town Radio, Inc. to the date of
acquisition and the consolidated Company's operations thereafter.
On June 7, 2001, PetroMoly sold its interest in Worldwide PetroMoly, Corp., a
wholly owned subsidiary to Gilbert Gertner, a stockholder and previous chairman
of the board of PetroMoly. Prior to its disposition, Worldwide PetroMoly, Corp.
was PetroMoly's only operating subsidiary and represented 100% of the assets,
liabilities and operations of the consolidated entity. No gain or loss resulted
from the sale of the subsidiary, as the sale price at June 7, 2001 was utilized
in marking its assets and liabilities to fair value at June 1, 2001 under the
purchase method of accounting.
A provision in the sale agreement entitles PetroMoly to a portion of any
operating profits and net proceeds from sale of Worldwide PetroMoly Corp. if
either transpires prior to December 7, 2002.
F-6
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Notes to Consolidated Financial Statements
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the operations of Worldwide
PetroMoly, Inc. d/b/a Small Town Radio and its wholly-owned subsidiary, Small
Town Radio, Inc. They also include the accounts of Worldwide PetroMoly, Corp.
for the period from June 1, 2001 to June 7, 2001.
ORGANIZATIONAL AND START-UP EXPENSES
The Company has expensed all organizational and start-up expenses.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed using the
straight-line method. Property and equipment at June 30, 2001 consists of
computer equipment and is being depreciated over three years.
EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted-average common
shares outstanding during each year. Diluted earnings per share have not been
presented due to the Company incurring a loss from continuing operations.
NON-CASH CONSIDERATION
The Company issued 20,397,760 shares of common stock to directors and third
parties for services provided. The dollar amounts assigned these transactions
were based on the fair value of the services rendered.
(2) Property and Equipment
Property and equipment consist of the following:
June 30 2001
-------------------------------------------------------------------------------------------------------
Equipment $1,896
Accumulated depreciation (105)
---------------
$1,791
===============
(3) Income Tax
Income tax expense consists of the following:
Period From
Year Ended Inception to
June 30, June 30,
2001 2000
-------------------------------------------------------------------------------------------------------
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34% $(313,760) $(16,990)
Change in valuation allowance 313,760 16,990
--------------------------------------
Actual tax expense $ 0 $ 0
======================================
F-7
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Notes to Consolidated Financial Statements
The components of the deferred tax asset is as follows:
June 30 2001 2000
-----------------------------------------------------------------------------------------------
Asset
Organizational and start-up expenses $322,791 $16,990
Net operating loss carryforward 7,959
Valuation allowance (330,750) (16,990)
----------------------------------
$ 0 $ 0
==================================
The valuation allowance at June 30, 2001 is $330,750 and was increased by
$313,760. During the current year, the increase in the valuation allowance was
due to additional losses incurred by a development stage enterprise.
At June 30, 2001, the Company had a net operating loss carryforward for tax
purposes of $23,409. This loss carryforward expires in the year 2016.
(4) Stock Options
The Company maintains an incentive stock option plan which is accounted for in
accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for
Stock Issued to Employees.
No options were granted after the acquisition date (June 1, 2001) and therefore
no compensation cost has been recognized in the accompanying financial
statements.
The following is a summary of the status of the Company's stock option plan.
Year Ended June 30 2001
----------------------------------------------------------------------------------------------------------
Weighted-
Average
Options Shares Exercise Price
----------------------------------------------------------------------------------------------------------
Outstanding, beginning of year 0
Options transferred as a result of the reverse acquisition 733,000 $.37
-------------------
Outstanding, end of year 733,000
===================
F-8
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Notes to Consolidated Financial Statements
At June 30, 2001, the 733,000 options outstanding have exercise prices ranging
from $.06 to $1.00 and a weighted-average remaining contractual life of two
years.
The following summarizes the outstanding options at June 30, 2001.
Exercise Expiration
Number of Options Price Date
------------------------------------------------------------------------------------------------------
10,000 $.13 1/01/2002
110,000 .25 1/01/2002
15,000 .50 1/01/2002
60,000 1.00 1/01/2002
100,000 1.00 9/15/2002
20,000 .13 1/01/2003
160,000 .25 1/01/2003
5,000 .50 1/01/2003
13,000 1.00 1/01/2003
50,000 .09 12/06/2003
150,000 .06 1/02/2004
35,000 .09 1/02/2004
5,000 .13 1/03/2004
(5) Related Party Transactions
At June 30, 2001, the Company had outstanding notes payable to certain
stockholders of $67,500. These notes are unsecured, payable upon demand, and
bear interest at 12%. At June 30, 2001, interest was current on these
obligations. Management believes the fair value of this and all of the Company's
financial instruments approximate book values at June 30, 2001.
At June 30, 2001, the Company had outstanding accounts payable to stockholders
of $330,000 for consulting services provided. This entire amount is included in
organizational and start-up expenses for the year ended June 30, 2001.
F-9
WORLDWIDE PETROMOLY, INC. D/B/A SMALL TOWN RADIO
Notes to Consolidated Financial Statements
(6) Financial Condition and Going Concern
The Company's continuance is dependent on raising capital. The Company is
confident that the necessary capital will be raised and has entered into
discussions to do so with certain individuals. However, as of the date of these
consolidated financial statements, no formal agreements exist.
The accompanying consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to secure the
necessary capital and continue as a going concern.
(7) Subsequent Event
At June 30, 2001, the Company had a consulting agreement with a third party that
called for monthly payments of $40,000 until May 2002. In July 2001, the Company
issued 1,200,000 restricted common shares as payment in full for services
through September 2001, at which point the consulting agreement terminates.
The Company also had a consulting agreement with a stockholder requiring monthly
payments of $16,000 until June 2002. In July 2001, the parties amended the
agreement to provide for a termination date of July 31, 2001 and a termination
fee of $16,000.
F-10
BACK COVER OF THE PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Indemnification of Directors and Officers
Sections 7-109-102 and 7-109-107 of the Colorado Law ("Colorado Law")
and Article 13 of our Amended and Restated Articles of Incorporation provide for
indemnification of our Directors and officers in a variety of circumstances,
which may include liabilities under the Act. Article 13 provides that unless
otherwise determined by our Board of Directors that the actions in question
violate the provisions of the Article, we shall indemnify to the full extent
permitted by the laws of Colorado as from time to time in effect, the persons
described in Sections 7-109-of Colorado Law.
The general effect of the provisions in our Amended and Restated
Articles of Incorporation and Colorado Law is to provide that we shall indemnify
our Directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with the defense or settlement of any judicial
or administrative proceedings in which they have become involved by reason of
their status as corporate Directors or officers, if they acted in good faith and
in the reasonable belief that their conduct was neither unlawful (in the case of
criminal proceedings) nor inconsistent with our best interests, nor derived any
improper personal benefits. With respect to legal proceedings by or in the right
of the company in which a director or officer is adjudged liable for improper
performance of his duty to the company or another enterprise which such person
served in a similar capacity at the request of the company, indemnification is
limited by such provisions to that amount which is permitted by the court.
We intend to maintain officers' and Directors' liability insurance
which will insure against liabilities that our officers and Directors may incur
in such capacities.
Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the Common Stock being registered, all of which will be paid by the
Registrant. All amounts are estimates.
Registration fee.......................................... $ 5,000
Legal fees and expenses................................... $100,000
Accounting fees and expenses.............................. 80,000
Transfer agent and registrar fees......................... 40,000
Printing and engraving expenses........................... 80,000
Miscellaneous expenses.................................... 10,000
---------
Total........................................... 315,000
Recent Sales of Unregistered Securities
During the three years immediately preceding the date of the filing of
this registration statement, we made the following sales of securities were made
that were not registered under the Act:
On January 12, 1999 the we issued 25,000 shares of our common stock to
Elizabeth Barasch, valued at $.56 per share, in lieu of compensation for sales
work. Such issuance was pursuant to the exemption provided in Section 4(2) of
the Securities Act for transactions by an issuer not involving a public
offering.
On January 21, 1999 we issued 100,000 shares of our common stock, at
$.50 per share, to John W. Larkin, in a private placement of the shares for
which we received $50,000. We also issued 100,000 shares to Benjamin Barnes,
valued at $.63 per share, for consulting services. We also issued 10,000 shares
to Barry Silverman, valued at $.63 per share, for services associated with an
advertising campaign. Such issuances were pursuant to the exemption provided in
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering.
On February 9, 1999 we issued 166,667 shares of our common stock, at
$.50 per share, to Steve Wadley, in a private placement of the shares for which
we received $83,333. We also issued 166,667 shares to Jeff Goldstein, in a
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private placement of the shares at $.50 per share, for which we received
$83,333. We also issued 166,666 shares to Gregory Greenstein, in a private
placement of the shares at $.50 per share, for which we received $83,333. Such
issuances were pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
On February 12, 1999 we issued 125,000 shares of our common stock to
Jeffrey Newport, valued at $2.00 per share, for consulting services. Such
issuance was pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
On February 26, 1999 we issued 10,000 shares of our common stock to
William Compton, in a private placement of the shares at $1.00 per share, for
which we received $10,000. We also issued 10,000 shares to Dale F. Rabinowitz,
in a private placement of the shares at $1.00 per share, for which we received
$10,000. Such issuances were pursuant to the exemption provided in Section 4(2)
of the Securities Act for transactions by an issuer not involving a public
offering.
On March 1, 1999 we issued 850,000 shares of our common stock to Team
Pelfrey, LLC valued at $1.94 per share, for a racing team sponsorship and
advertising program. We also issued 150,000 shares to RPM Indy, LLC, valued at
$1.94 per share, for brokering the Team Pelfrey sponsorship. Such issuances were
pursuant to the exemption provided in Section 4(2) of the Securities Act for
transactions by an issuer not involving a public offering.
On July 29, 1999 we issued 75,000 shares of our common stock to Barry
Silverman, valued at $1.00 per share, in lieu of compensation for consulting
services. Such issuance was pursuant to the exemption provided in Section 4(2)
of the Securities Act for transactions by an issuer not involving a public
offering.
On September 15, 1999 we issued 10,000 shares of our common stock to
William Compton, in a private placement of the shares at $1.00 per share, for
which we received $10,000. We also issued 10,000 shares to Dale F. Rabinowitz,
in a private placement of the shares at $1.00 per share, for which we received
$10,000. We also issued 30,000 shares to Tim Neff, valued at $1.01 per share,
for services. Such issuances were pursuant to the exemption provided in Section
4(2) of the Securities Act for transactions by an issuer not involving a public
offering.
On November 22, 1999 we issued 250,000 shares of our common stock to
International Equities Group, valued at $.75 per share, for investor relations
services. Such issuance was pursuant to the exemption provided in Section 4(2)
of the Securities Act for transactions by an issuer not involving a public
offering.
On January 6, 2000 we issued 200,000 shares of our common stock to
Valerie Donnell, valued at $.53 per share, in lieu of compensation. We also
issued 500,000 shares to Lance J. Rosmarin, valued at $.53 per share, in lieu of
compensation. Such issuances were pursuant to the exemption provided in Section
4(2) of the Securities Act for transactions by an issuer not involving a public
offering.
On May 14, 2000 we issued 20,000 shares of our common stock to Jacques
Lazier, valued at $.43 per share, in lieu of compensation for advertising and
promotional services. We also issued 33,235 shares to RPM Indy LLC, valued at
$.43 per share, for services rendered. We also issued 75,000 shares to
Pagan-Lewis Motors, Inc., valued at $.43 per share, for a racing team
sponsorship and advertising. We also issued 110,000 shares to Stuart LLC, in a
private placement of the shares at $.43 per share, for which we received
$47,300. Such issuances were pursuant to the exemption provided in Section 4(2)
of the Securities Act for transactions by an issuer not involving a public
offering.
On June 8, 2000 we issued 100,000 shares of our common stock to
Truscelli Racing Team, LLC, valued at $.35 per share, for a racing team
sponsorship and advertising. We also issued 7,500 shares to Greg Paull, valued
at $.35 per share, for services. We also issued 10,000 shares to RPM Indy LLC,
valued at $.35 per share, for services rendered. We also issued 125,000 shares
to Stuart LLC, in a private placement of the shares at $.35 per share, for which
we received $43,750. Such issuances were pursuant to the exemption provided in
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering.
II-2
On August 22, 2000 we issued 85,000 shares of our common stock to
Cahill Racing, valued at $.28 per share, for a racing team sponsorship and
advertising. We also issued 15,000 shares to RPM Indy, LLC, valued at $.28 per
share, for brokering the Cahill Racing relationship. We also issued 400,000
shares to Mid-America Motor Sports, valued at $.28 per share, for a racing team
sponsorship and advertising. We also issued 60,000 shares to RPM Indy, LLC,
valued at $.28 per share, for brokering the Mid-America Motor Sports
relationship. Such issuances were pursuant to the exemption provided in Section
4(2) of the Securities Act for transactions by an issuer not involving a public
offering.
On August 23, 2000 we issued 550,000 shares of our common stock to
Stuart LLC, in a private placement of the shares at $.25 per share, for which we
received $137,500. Such issuance was pursuant to the exemption provided in
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering.
On August 24, 2000 we issued 200,000 shares of our common stock to
Gilbert Gertner, valued at $.24 per share, for reimbursement of expenditures on
our behalf. We also issued 200,000 shares to Lance J. Rosmarin, valued at $.24
per share, for reimbursement of expenditures made on our behalf. We also issued
200,000 shares to Richmond Securities Ltd., valued at $.24 per share, for
reimbursement of expenditures made on our behalf. Such issuances were pursuant
to the exemption provided in Section 4(2) of the Securities Act for transactions
by an issuer not involving a public offering.
On September 26, 2000 we issued 125,000 shares of our common stock to
Empire Multimedia Marketing, Inc., valued at $.25 per share, for services in
producing an infomercial. We also issued 125,000 shares to International Energy
Consultants, valued at $.25 per share, for services in producing an infomercial.
Such issuances were pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
On October 22, 2000 we issued 50,000 shares of our common stock to
Jacques Lazier, valued at $.23 per share, for services rendered. We also issued
50,000 shares to Robby Unser, valued at $.23 per share, for services rendered.
Such issuances were pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
On June 1, 2001, in connection with the merger of Small Town Radio,
Inc. into our subsidiary, PetroMerger, Inc., we issued 118,467,860 shares of our
common stock to the holders of shares of Small Town Radio, Inc.'s common stock.
Such issuance was pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
On June 7, 2001 we issued 13,000,000 shares of our common stock to
Gilbert Gertner, in consideration of the cancellation of a debt owed to Mr.
Gertner in the amount of $1,560,000. Such issuance was pursuant to the exemption
provided in Section 4(2) of the Securities Act for transactions by an issuer not
involving a public offering.
On August 3, 2001 we issued 500,000 shares of our common stock to John
F. McMullan, in consideration of a $50,000 loan made by Mr. McMullan to us. Such
issuance was pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
On August 15, 2001 we issued 1,200,000 shares of our common stock to
Numark Capital Corp., valued at $.12 per share, for investor relations services.
Such issuance was pursuant to the exemption provided in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
II-3
Exhibits
EXHIBIT NO. EXHIBIT
1.1 Private Equity Line of Credit Agreement by and among Grenville
Financial, Ltd. and Worldwide PetroMoly, Inc., dated as of
September 25, 2001.
2.1 Agreement and Plan of Merger between and among Small Town Radio,
Inc., Worldwide PetroMoly, Inc., Petro Merger, Inc., Gilbert
Gertner and certain individual shareholders of Small Town Radio,
Inc., as amended and restated, dated April 30, 2001 (originally
filed as Exhibit 2.1 to the Company's Current Report on Form 8-K
dated March 27, 2001, then filed, as amended and restated, as
Exhibit 2.2 to the Company's Current Report on Form 8-K dated May
7, 2001, both of which are incorporated herein by reference).
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 The description of the Company's common stock is incorporated
herein by reference to the description thereof contained in the
Company's Registration Statement on Form 10-SB, filed on August
11, 1994 and amended on October 18, 1994, pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (File No.
0-24682).
4.2 Worldwide PetroMoly, Inc. Stock Incentive Plan, as adopted on
August 8, 2001 (filed with the Company's Registration Statement
on Form S-8 (File No. 333-67404) and incorporated herein by
reference).
5.1 Legal Opinion of Krys, Boyle, Freedman & Sawyer, P.C. as to the
validity of the securities being registered.
10.1.1 Consulting Agreement by and between the Company and Porter Lane
Investments, Inc. ("Porter Lane"), dated as of March 13, 2000.
10.1.2 First Amended Consulting Agreement by and between the Company and
Porter Lane, dated as of April 16, 2001.
10.1.3 First Amendment to First Amended Consulting Agreement with Porter
Lane, dated July 31, 2001.
10.1.4 Letter Agreement relating to termination of Consulting Agreement
with Porter Lane, dated August 10, 2001.
10.2 Agreement of Lease between the Company and HQ Global Workplaces,
Inc. dated April 9, 2001.
10.3 Letter Agreement by and between the Company and Lgk Media
Staffing Network, Inc., dated April 17, 2001.
10.4 Studio Design Agreement between the Company and Harris
Corporation, dated April 20, 2001.
10.5 Consulting Agreement between the Company and NuMark Corporation,
dated July 18, 2001.
10.6 Stock Purchase Agreement by and between the Company and Gilbert
Gertner, dated June 7, 2001 (filed with the Company's Current
Report on Form 8-K filed June 15, 2001 and incorporated herein by
reference).
10.7 Letter Agreement between the Company and Atlas Capital Services,
Inc. for business development services, dated June 20, 2001.
10.8 Letter Agreement between the Company and Pacific Resource Group,
Inc. for business development services, dated June 21, 2001.
10.9 Agreement by and between the Company and ceoHeadlines, Inc.,
dated as of August 13, 2001.
10.10 Purchase and Sale Agreement by and between the Company and
Merchants Broadcasting Systems of Southwest Georgia, dated as of
August 16, 2001.
II-4
10.11 Consulting Agreement by and between the Company and Richard P.
Smyth, dated as of September 10, 2001.
10.12 Demand Note issued by Small Town Radio, Inc. to Bolling
Investments, LLC with respect to a $5,000 loan, dated February
12, 2001.
10.13 Demand Note issued by Small Town Radio, Inc. to Wayne Shortridge
with respect to a $25,000 loan, dated March 26, 2001.
10.14 Demand Note issued by the Company to Wayne Shortridge with
respect to a $25,000 loan, dated June 4, 2001.
10.15 Demand Note issued by the Company to Bolling Investments, LLC
with respect to a $12,500 loan, dated June 29, 2001.
10.17 Demand Note issued by the Company to John F. McMullan with
respect to a $50,000 loan, dated August 3, 2001.
10.18 Letter of Intent between the Company and Media Services Group,
Inc. to enter into an asset purchase agreement with Fall Line
Media, Inc., dated August 7, 2001.
10.19 Letter of Intent between the Company and Greenwood Communications
Corporation to purchase certain assets, dated August 13, 2001.
10.20 Letter Agreement between the Company and Kempff Communications
Company for payment of brokerage commissions, dated August 13,
2001.
10.21 Employment Agreement by and between the Company and Donald L.
Boyd, dated as of July 30, 2001.
10.22 Employment Agreement by and between the Company and Robert S.
Vail, dated as of August 1, 2001.
16 Letter to Company from Jackson & Rhodes, P.C. dated July 10, 2001
(filed as Exhibit 16.1 to the Company's Current Report on Form
8-K dated July 13, 2001 and incorporated herein by reference).
21 List of Subsidiaries.
23.1 Consent of BKD, LLP.
23.2 Consent of Krys, Boyle, Freedman & Sawyer, P.C. (incorporated by
reference to Exhibit 5.1 herein).
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Corporate
Stock Transfer Corporation, 3200 Cherry Creek Dr. S., Suite 430, Denver,
Colorado, 80209. Its telephone number for such purposes is (303) 282-4800.
Additional Information
In addition, we file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any documents we file at the Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Our filings are also available to the public from the Commission's
website at http://www.sec.gov.
Undertakings
(a) We hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in this Registration Statement; and
II-5
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to our directors, officers and controlling
persons pursuant to the foregoing positions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than by payment by us of expenses incurred or paid by a director, officer
or controlling person in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the mater has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Alpharetta, State of Georgia, on September 25,
2001.
WORLDWIDE PETROMOLY, INC.
By: /s/ Robert S. Vail
----------------------------------------
Robert S. Vail
Chairman and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Norton Cooper Director September 25, 2001
-------------------------
Norton Cooper
/s/ William Fleming Director September 25, 2001
-------------------------
William Fleming
/s/ Lauren Kahn Director September 25, 2001
-------------------------
Lauren Kahn
/s/ John McMullan Director September 25, 2001
-------------------------
John McMullan
/s/ Lance Rosmarin Director September 25, 2001
-------------------------
Lance Rosmarin
/s/ William Ross Director September 25, 2001
-------------------------
William Ross
/s/ Robert S. Vail Director September 25, 2001
-------------------------
Robert S. Vail
II-7
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
1.1 Private Equity Line of Credit Agreement by and among Grenville
Financial, Ltd. and Worldwide PetroMoly, Inc., dated as of
September 25, 2001.
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
5.1 Legal Opinion of Krys, Boyle, Freedman & Sawyer, P.C. as to the
validity of the securities being registered.
10.1.1 Consulting Agreement by and between the Company and Porter Lane
Investments, Inc. ("Porter Lane"), dated as of March 13, 2000.
10.1.2 First Amended Consulting Agreement by and between the Company and
Porter Lane, dated as of April 16, 2001.
10.1.3 First Amendment to First Amended Consulting Agreement with Porter
Lane, dated July 31, 2001.
10.1.4 Letter Agreement relating to termination of Consulting Agreement
with Porter Lane, dated August 10, 2001.
10.2 Agreement of Lease between the Company and HQ Global Workplaces,
Inc. dated April 9, 2001.
10.3 Letter Agreement by and between the Company and Lgk Media
Staffing Network, Inc., dated April 17, 2001.
10.4 Studio Design Agreement between the Company and Harris
Corporation, dated April 20, 2001.
10.5 Consulting Agreement between the Company and NuMark Corporation,
dated July 18, 2001.
10.7 Letter Agreement between the Company and Atlas Capital Services,
Inc. for business development services, dated June 20, 2001.
10.8 Letter Agreement between the Company and Pacific Resource Group,
Inc. for business development services, dated June 21, 2001.
10.9 Agreement by and between the Company and ceoHeadlines, Inc.,
dated as of August 13, 2001.
10.10 Purchase and Sale Agreement by and between the Company and
Merchants Broadcasting Systems of Southwest Georgia, dated as of
August 16, 2001.
10.11 Consulting Agreement by and between the Company and Richard P.
Smyth, dated as of September 10, 2001.
10.12 Demand Note issued by Small Town Radio, Inc. to Bolling
Investments, LLC with respect to a $5,000 loan, dated February
12, 2001.
10.13 Demand Note issued by Small Town Radio, Inc. to Wayne Shortridge
with respect to a $25,000 loan, dated March 26, 2001.
10.14 Demand Note issued by the Company to Wayne Shortridge with
respect to a $25,000 loan, dated June 4, 2001.
10.15 Demand Note issued by the Company to Bolling Investments, LLC
with respect to a $12,500 loan, dated June 29, 2001.
10.17 Demand Note issued by the Company to John F. McMullan with
respect to a $50,000 loan, dated August 3, 2001.
10.18 Letter of Intent between the Company and Media Services Group,
Inc. to enter into an asset purchase agreement with Fall Line
Media, Inc., dated August 7, 2001.
10.19 Letter of Intent between the Company and Greenwood Communications
Corporation to purchase certain assets, dated August 13, 2001.
10.20 Letter Agreement between the Company and Kempff Communications
Company for payment of brokerage commissions, dated August 13,
2001.
10.21 Employment Agreement by and between the Company and Donald L.
Boyd, dated as of July 30, 2001.
10.22 Employment Agreement by and between the Company and Robert S.
Vail, dated as of August 1, 2001.
21 List of Subsidiaries.
23.1 Consent of BKD, LLP.