Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: September 30, 2018

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from__________ to __________

COMMISSION FILE NUMBER: 000-55554

Worldwide Specialty Chemicals Inc.

(Exact name of registrant as specified in its charter)

Delaware	47-5048026
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Downtown Republic Center, Suite 3100

325 N. Saint Paul Street

Dallas, TX 75201

Tel: (469) 513-4198

(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated Filer o
Non-accelerated filer o	Smaller reporting company x
Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of Registrant’s shares of common stock, $0.0001 par value, outstanding as of November 14, 2018, was 25,471,293.

TABLE OF CONTENTS

			Page

PART I. FINANCIAL INFORMATION			3

	Item 1	Consolidated Financial Statements	3

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 4	Controls and Procedures	17

PART II. OTHER INFORMATION			18

	Item 1	Legal Proceedings	18

	Item 1A	Risk Factors	18

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	18

	Item 3	Defaults Upon Senior Securities	18

	Item 4	Mine Safety Disclosures	18

	Item 5	Other Information	18

	Item 6	Exhibits	19

SIGNATURES			20

PART 1 - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

WORLDWIDE SPECIALTY CHEMICALS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2018			December 31, 2017
	(Unaudited)			(Audited)

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	83,419		$	275,886
Accounts receivable		150,296			49,603
Inventory		48,374			62,541
Prepaid expenses		10,455			8,205
Other current assets		770			31,102
Total current assets		293,314			427,337

GOODWILL		2,294,952			2,294,952

FIXED ASSETS
Vehicles and trailers		247,969			223,413
Equipment		459,631			420,004
Leasehold improvements		28,854			28,855
		736,454			672,272
Accumulated depreciation		(116,798	)		(83,288	)
Fixed assets, net		619,656			588,984

TOTAL ASSETS	$	3,207,922		$	3,311,273

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	264,551		$	224,244
Accrued expenses		83,779			19,949
Due to CBI		–			4,463
Notes payable, current portion		35,333			35,650
Total current liabilities		383,663			284,306

NON-CURRENT LIABILITIES
Notes payable, net of current portion		81,348			73,662

TOTAL LIABILITIES		465,011			357,968

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

Preferred stock, $0.0001 par value, 20,000,000 shares authorized; no shares issued or outstanding		–			–
Common stock, $0.0001 par value, 100,000,000 shares authorized; 25,421,293 issued and outstanding shares as of September 30, 2018 and 24,300,326 issued and outstanding shares as of December 31, 2017		2,545			2,430
Additional paid-in capital		9,928,347			7,661,882
Accumulated deficit		(7,187,981	)		(4,711,007	)

TOTAL STOCKHOLDERS’ EQUITY		2,742,911			2,953,305

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	3,207,922		$	3,311,273

The accompanying footnotes are an integral part of these consolidated financial statements.

WORLDWIDE SPECIALTY CHEMICALS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended September 30, 2018			For the Three Months Ended September 30, 2017			For the Nine Months Ended September 30, 2018			For the Nine Months Ended September 30, 2017
Revenues	$	396,497		$	355,159		$	962,084		$	855,663
Cost of goods sold		244,131			195,975			649,624			427,595

Gross profit		152,366			159,184			312,460			428,068

Operating expenses
General and administrative		638,339			642,293			2,631,899			1,732,251
Selling		35,458			43,857			96,215			103,277
Depreciation and amortization		8,773			19,734			43,851			56,133

Total operating expenses		682,570			705,884			2,771,965			1,891,661

Other income and (expense)
Interest income		4			–			11			30
Interest expense		(2,838	)		(66,140	)		(7,644	)		(169,368	)
Other expense		–			–			(15,439	)		–

Total other expense		(2,834	)		(66,140	)		(23,072	)		(169,338	)

Net loss	$	(533,038	)	$	(612,840	)	$	(2,482,578	)	$	(1,632,931	)

Basic and diluted - loss per share	$	(0.02	)	$	(0.07	)	$	(0.10	)	$	(0.21	)

Basic and diluted - weighted average shares		25,288,731			9,270,726			24,855,416			7,903,205

The accompanying footnotes are an integral part of these consolidated financial statements.

WORLDWIDE SPECIALTY CHEMICALS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30, 2018			For the Nine Months Ended September 30, 2017
Cash Flows from Operating Activities
Net loss	$	(2,482,578	)	$	(1,632,931	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		43,851			56,133
Interest expense accrued		–			166,658
Loss on disposal of assets		10,730			–
Allowance for doubtful accounts		–			238,306
Share based compensation		1,122,460			53,969
Common stock issued for services		–			150,666
Change in current assets and current liabilities:
Accounts receivable		(100,693	)		(339,935	)
Inventory		14,167			4,773
Prepaid expenses		(2,250	)		5,742
Other current assets		30,332			(11,995	)
Accounts payable and accrued expenses		109,574			5,645
Due to CBI		(4,463	)		2,796
Net cash used in operating activities		(1,258,870	)		(1,300,173	)

Cash Flows from Investing Activities
Purchase of property and equipment		(51,438	)		(144,752	)
Acquisition, net of cash acquired		–			(1,128,954	)
Total cash used in investing activities		(51,438	)		(1,273,706	)

Cash Flows from Financing Activities
Proceeds from sale of common stock		1,144,120			887,500
Proceeds from notes payable		–			2,500,000
Payments on notes payable		(26,279	)		(596,355	)
Net cash provided by financing activities		1,117,841			2,791,145

Net change in cash and cash equivalents		(192,467	)		217,266

Cash at beginning of period		275,886			50,202
Cash at end of period	$	83,419		$	267,468

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest	$	7,645		$	938

NON CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment purchased under financing agreement		–			29,916
Acquisition of KT Chemicals, Inc. under a short term promissory note	$	–		$	2,700,000
Acquisition of assets under a financing agreement	$	33,813		$	–

The accompanying footnotes are an integral part of these consolidated financial statements.

WORLDWIDE SPECIALTY CHEMICALS INC. AND SUBSIDIARIES

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

1. NATURE OF BUSINESS

Worldwide Specialty Chemicals Inc. (“Company”), a Delaware corporation formed in March of 2014 and based in downtown Dallas, Texas. The Company is an international specialty chemicals company with many products that are friendly to the environment and are marketed through KT Chemicals, Inc. and Safeway Pest Elimination LLC, both of which are wholly owned subsidiaries, and PCNM LLC, a 49% investment. On February 15, 2017, the Company acquired 100% ownership of KT Chemicals, Inc. (“KT”), a Texas corporation founded in February 2014. KT is also a specialty chemicals company, serving as both manufacturer and distributor of environmentally safe, specialty chemicals. KT is located at 1002 North Central Expressway, Suite 499, Richardson, Texas 75080. Safeway Pest Elimination, LLC and PCNM LLC are newly created operating companies in 2018.

KT’s products utilize all-natural and renewable resources, contain no dangerous chemicals or additives, and offer “green” solutions to its customers. KT’s product line includes asphalt release agents, industrial cleaners, environmental remediation gels, odor control agents, and consumer friendly cleaners for a wide range of uses, including construction, environmental remediation, hazardous materials clean-up, nuclear decommissioning, industrial cleaning, and odor control.

Safeway Pest Elimination, LLC’s will have products that are generally safe for people, pets and plants. Two (2) initial major product lines that SPE plans to market will each be non-toxic compounds.

PCNM LLC is a qualified Service Disabled Veteran Owned Small Business (“SDVOSB”) which allows the company to market its products to government agencies that have specific contracts that must be awarded to a SDVOSM.

The Company currently operates from several corporate and subsidiary offices around the country. The Company also operates from a 20,000 square foot chemical production and distribution facility, from which it markets a number of specialty chemicals.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting polices consistently applied in the preparation of the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) is as follows.

Basis of Consolidation

The consolidated financial statements include the accounts of KT Chemicals, Inc., Safeway Pest Elimination LLC (“SPE”), both of which are wholly owned subsidiaries of the Company and PCNM LLC (“PCNM”), a 49% investment. PCNM’s remaining 51% ownership is owned by an employee of the Company. The Company evaluated its investment in PCNM to determine if it represented a variable interest in a Variable Interest Entity (“VIE”). The Company determined that it had a variable interest in a VIE, and that it was the primary beneficiary of the VIE. During the nine months ended September 30, 2018, SPE and PCNM did not engage in any material transactions.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial reporting and the instructions for Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they include all information and footnote disclosures necessary for a complete presentation of the financial position, results of operations, cash flows, and stockholder’s equity in conformity with GAAP. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

The condensed consolidated balance sheet data as of December 31, 2017 was derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s most recently filed Form 10-K as of and for the year end December 31, 2017 that was filed on July 17, 2018.

Operating results for the nine months ended September 30, 2018, are not necessarily indicative of the results that can be expected for the year ending December 31, 2018.

Use of Estimates

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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, using the modified retrospective transition method. Under Topic 606, the Company recognizes revenue when it transfers control of promised goods or services to its customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once a contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Fair Value of Financial Instruments

FASB ASC 825-10 requires disclosure of fair value information about certain financial instruments, including, but not limited to, cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable, accrued expenses and notes payable. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management at September 30, 2018 and December 31, 2017. The carrying value of the financial instruments included in the Company’s financial statements approximated their fair values.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at, or approximate, fair value as of the reporting date because of their short-term nature.

The carrying value of the notes payable approximates fair value as they bear market rates of interest.

Basic and Diluted Net Loss Per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding. Diluted loss per share has not been presented because there are no dilutive items. Diluted earnings loss per share is based on the assumption that all dilutive stock options, warrants, and convertible debt are converted or exercised by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Options, warrants and/or convertible debt will have a dilutive effect, during periods of net profit, only when the average market price of the common stock during the period exceeds the exercise or conversion price of the items.

For the nine months ended September 30, 2018 and 2017, approximately 572,668 and 3,485,000 common stock warrants, respectively, and 5,059,750 and 2,646,000 common stock options, respectively, were not added to the diluted average shares because inclusion of such warrants and options would be antidilutive.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an initial maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash balances at several financial institutions located throughout the United States, which at times may exceed insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are trade receivables from product sales recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable, and current economic conditions. The determination of the collectability of amounts due requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer account, and the financial condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. At September 30, 2018 and December 31, 2017, the allowance for doubtful accounts was $0.

Inventory

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in first-out basis. The carrying value of inventory is reduced for estimated obsolescence. The Company evaluates the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand.

The following table sets forth the components of the Company’s inventory balances as of September 30, 2018 and December 31, 2017:

	September 30, 2018		December 31, 2017
Finished goods	$	17,414	$	22,753
Raw materials		27,500		35,557
Packaging supplies		3,460		4,231
	$	48,374	$	62,541

Prepaid Expenses

Prepaid expenses consist of expenses the Company has paid for prior to the service or good being provided. These prepaid expenses will be recorded as expense at the time the service has been provided.

Fixed Assets

Fixed assets consist of furniture, fixtures and office equipment, vehicles and trailers, equipment and leasehold improvements that are stated at cost, less accumulated depreciation. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to earnings over their estimated service lives (3 – 10 years) under the straight-line method.

Maintenance and repairs are charged to earnings as incurred; major repairs and replacements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in operations.

Property and equipment operated under material leases which transfer substantially all benefits and risks associated with the assets to the Company are capitalized. An asset and liability equal to the present or fair value, if appropriate, of minimum payments over the term of the leases are recorded. Depreciation of the asset is computed using the straight-line method over the life of the asset. Costs associated with operating leases are expensed as incurred.

Goodwill

Goodwill represents the excess of the value of the purchase price and related costs over the identifiable assets from business acquisitions. The Company conducts an annual impairment assessment, at the reporting unit level, of its recorded goodwill. The Company assesses qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors evaluated by the Company include: macro-economic conditions of the local business environment, overall financial performance, and other entity specific factors as deemed appropriate. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a two-step impairment test is performed. Management determined, by assessing the qualitative factors, that it is more likely than not that the fair value of the reporting unit is greater than its carrying value. Management does not consider the value of goodwill recorded for KT in the accompanying consolidated balance sheets to be impaired as of September 30, 2018 and December 31, 2017.

License Fee

Effective December 31, 2016, the Company entered into an Exclusive Patent License Agreement with CBI Polymers, Inc. (“CBI”), pursuant to which the Company would sell DeconGel^™ and pay 10% of the net selling price to CBI, as a license fee.

Share-Based Compensation

The Company recognizes compensation expense for all share-based payments in accordance with ASC Topic 718, Compensation — Stock Compensation, (ASC 718). Under the fair value recognition provisions of ASC 718, the Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. The fair value at the measurement date of stock options is estimated using the Black-Scholes option-pricing model. Compensation expense is recognized on a straight-line basis over the vesting period based on the estimated number of stock options that are expected to vest.

Income Taxes

The Company accounts for Federal and state income taxes using the asset and liability approach for financial accounting and reporting for income taxes based on tax effects of differences between the financial statement and tax basis of assets and liabilities.

The Company accounts for all uncertain tax positions in accordance with ASC Topic 740 – Income Taxes (ASC 740). ASC 740 provides guidance on de-recognition, classification, interest and penalties and disclosure related to uncertain income tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. There were no accrued interest or penalties as of September 30, 2018 and December 31, 2017.

From time to time, the Company may be audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes. The Company’s federal returns since 2014 are still subject to examination by taxing authorities.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred substantial operating losses during its first two years of operations resulting in an accumulated deficit of $7,187,981 and $4,711,007 at September 30, 2018 and December 31, 2017, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are being issued. As such, the Company will need to arrange for additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand.

The Company is actively seeking growth of its service offerings, both organically and via new client relationships. In the ordinary course of the Company’s business, management is trying to raise additional capital through sales of common stock as well as seeking debt financing from third parties. There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations, including potential discontinuance of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders. Additionally, incurring additional indebtedness could involve an increased debt service cash obligation, as well as the imposition of covenants that restrict the Company’s operations or the Company’s ability to perform on its current debt service requirements. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recently Issued Accounting Pronouncements

Pronouncements Recently Adopted

In July 2015, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), which modifies existing requirements regarding measuring inventory at the lower of cost and market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (“NRV”), and NRV less an approximately normal profit margin. ASU 2015-11 replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. This standard is effective for the Company prospectively beginning January 1, 2017. Adoption of ASU 2015-11 did not have a material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective beginning on January 1, 2017 with early application permitted as of the beginning of any interim or annual reporting period. Adoption of ASU 2015-17 did not have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”). The amendments in this Update are to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The financial impact of this ASU did not have a significant impact on the Company’s financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes existing revenue recognition guidance under GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this principle, and will require companies to use more judgment and make more estimates than under the current guidance. The guidance was originally effective for public entities for interim and annual periods beginning after December 15, 2016 and allows for adoption using a full retrospective method, or a modified retrospective method. Early adoption was originally not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date for public entities to annual periods beginning after December 15, 2017 and for interim periods within those fiscal years. Early adoption of the standard is permitted for annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify various aspects of Topic 606, including the identification of performance obligations and the implementation of licensing guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, to clarify aspects of Topic 606, including assessing the collectability criterion, presentation of sales taxes and other similar taxes collected from customers, noncash consideration, contract modifications at transition and completed contracts at transition. Adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, ASU 2017-01 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017, and interim periods within those annual periods. Adoption of ASU 2017-01 did not have a material impact on the Company’s consolidated financial statements.

On May 10, 2017, the FASB issued ASU No. 2017-09, Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), clarifying when a change to the terms or conditions of a stock-based payment award must be accounted for as a modification. ASU 2017-09 requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. ASU 2017-09 is effective for the Company on a prospective basis beginning on January 1, 2018. Adoption of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - a consensus of the Emerging Issues Task Force (“ASU 2016-15”). ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Certain issues addressed in this guidance include - debt payments or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, distributions received from equity method investments and beneficial interests in securitization transactions. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Adoption of ASU 2016-15 did not have a material impact on the Company’s consolidated financial statements.

Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU Update No. 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP - which requires only capital leases to be recognized on the balance sheet - the new ASU will require both types of leases to be recognized on the balance sheet. ASU 2016-02 is effective for the years beginning after December 15, 2018 and for all periods presented. Early application of the amendments in this ASU is permitted. The financial impact of this ASU has not been determined but is not expected to be significant.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill impairment (“ASU 2017-04”), which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be determined by the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the effect of ASU 2017-04.

3. DUE TO / FROM

As of September 30, 2018 and December 31, 2017, the Company owed CBI, a related party, $0 and $4,463, respectively for license fees payable related to the Company’s Exclusive Patent License.

4. NOTES PAYABLE

The Company has three notes payable with separate financial institutions relating to the purchase of certain of the Company’s vehicles and equipment. The balance outstanding under these notes payable was $116,681 and $109,312 at September 30, 2018 and December 31, 2017, respectively. The notes payable bear interest ranging from 3.95% - 5.99% with principal and interest due monthly. The notes mature in July 2020, December 2020 and February 2023.

5. ACCRUED EXPENSES

Accrued expenses consist of the following as of September 30, 2018 and December 31, 2017:

	September 30, 2018		December 31, 2017
Credit card payables	$	48,893	$	–
Employee payables		14,261		–
Other accrued expenses		20,625		19,949
	$	83,779	$	19,949

6. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

Leases

The Company leases various office space on a month to month basis. Rental expense for the nine months ended September 30, 2018 and 2017, was $130,631 and $28,761, respectively.

Concentrations

As of September 30, 2018, the Company had ten (10) customers which made up 57% of the outstanding accounts receivable balance as compared to the period ending December 31, 2017 when four (4) customers made up 49% of the outstanding receivables.

7. STOCKHOLDERS’ EQUITY

Common Stock and Preferred Stock

As of September 30, 2018 and December 31, 2017, the authorized share capital of the Company consisted of 100,000,000 shares of common stock with $0.0001 par value, and 20,000,000 shares of preferred stock also with $0.0001 par value. No other classes of stock are authorized.

Common Stock

During the nine months ended September 30, 2018, the Company sold 583,635 common shares at $1.50 per share for a total cash amount of $875,454. See Note 10 for additional sales of common shares subsequent to September 30, 2018.

Warrants

During the nine months ended September 30, 2018, 537,332 warrants were exercised at $.50 per share for a total cash amount of $268,666.

As of September 30, 2018 and December 31, 2017, 572,668 and 1,110,000 common stock warrants were outstanding, respectively, with an exercise price of $0.50.

Stock option plan

During 2017, the Company established the Worldwide Specialty Chemicals Inc. First Amended Stock Option Plan (the “Plan”). The Board of Directors of the Company has the authority and discretion to grant stock options. The initial maximum number of shares of stock that may be issued pursuant to the exercise of options under the Plan was 2,000,000. Eligible individuals include any employee or director of the Company and any consultant providing services to the Company. The expiration date and exercise price for each stock option grant are as established by the Board of Directors of the Company. No option may be issued under the Plan after February 1, 2027. The Plan has since been amended to increase the maximum of shares that may be issued. On July 10, 2018, the Plan was amended to increase the maximum number of shares of stock that may be issued to 5,500,000.

During the nine months ended September 30, 2018, the Company granted 1,620,000 common stock options with an exercise price of $1.50 per share. The fair value of the common stock options granted was $1,493,339 and will be amortized over twenty months.

8. RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2018, the Company incurred consulting fees of $149,980 to three current shareholders and one former shareholder. The unpaid balance due was $145,000 and $77,000 as of September 30, 2018 and December 31, 2017, respectively, and is included in accounts payable in the accompanying consolidated financial statements.

The Company is in effect a sales representative of CBI pursuant to the Exclusive Patent License Agreement between the Company and CBI. CBI and the Company are companies under the common control of E. Thomas Layton, the Company’s chairman and chief executive officer. There are no other transactions or contracts between CBI and the Company other than those discussed in this report.

The Company was also a sales representative of KT Chemicals, Inc., which was partially owned by E. Thomas Layton until immediately prior to the Company’s acquisition of KT on February 15, 2017.

The Company has a 49% ownership in PCNM. PCNM’s remaining 51% ownership is owned by an employee. During the nine months ended September 30, 2018, PCNM did not engage in material transactions.

9. INCOME TAXES

For the nine months ended September 30, 2018 and 2017, the effective tax rate of 0% varies from the U.S. federal statutory rate primarily due to net losses and the valuation allowance associated with the net operating loss carryforwards. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. The Company continues to record a full valuation allowance against its net deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance. Based on the Company’s review of this evidence at September 30, 2018, management determined that a full valuation allowance against all of the Company’s deferred tax assets at September 30, 2018 was appropriate.

10. SUBSEQUENT EVENTS

On October 16, 2018 Dean Hamada exercised 50,000 stock options at $.01 per share.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with its unaudited interim condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2017.

FORWARD-LOOKING STATEMENTS

The discussion contained herein contains "forward-looking statements" that involve risk and uncertainties. These statements may be identified by the use of terminology such as "believes," "expects," "may," "should" or anticipates" or expressing this terminology negatively or similar expressions or by discussions of strategy. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Company’s actual results could differ materially from those discussed in this report.

BUSINESS AND PLAN OF OPERATION

Worldwide Specialty Chemicals Inc., based in downtown Dallas, Texas, is an international specialty chemical company with many products that are friendly to the environment. The common description is “green chemicals.” The Company has degreed chemists on staff with years of successful experience in the specialty chemical industry. The term “specialty chemicals” is best defined by those chemicals whose formulas allow the chemical compounds to perform a specific function for a class of customers. The Company’s products have been used successfully in a diverse array of applications, including:

The Company currently operates from several corporate and subsidiary offices around the country. One subsidiary operates from a 20,000 square foot chemical production and distribution facility, from which it markets a number of specialty chemicals. Most of the chemical formulas are considered trade secrets. For certain specific markets, the Company provides customized applications systems that assure safe and proportioned product delivery. The Company may elect to apply for patents on one or more of the chemical formulas and application systems.

The Company is a Delaware corporation formed in March of 2014. On February 15, 2017, the Company acquired 100% ownership of KT Chemicals, Inc., a Texas corporation founded in February 2014. In 2018, the Company founded Safeway Pest Elimination, LLC and became a 49% owner of PCNM LLC. The Company anticipates continuing to acquire, merge with, and/or start other industry specific specialty chemical subsidiaries.

KT Chemicals, Inc. is also a specialty chemicals company, serving as both manufacturer and distributor of environmentally safe, specialty chemicals. KT Chemicals is located at 1002 North Central Expressway, Suite 499, Richardson, Texas 75080. KT Chemicals’ products utilize all-natural and renewable resources, contain no dangerous chemicals or additives, and offer “green” solutions to its customers. Its product line includes asphalt release agents, industrial cleaners, environmental remediation gels, odor control agents, and consumer friendly cleaners for a wide range of uses, including construction, environmental remediation, hazardous materials clean-up, nuclear decommissioning, industrial cleaning, and odor control. KT Chemicals takes pride in noting that all of the ingredients in its products are selected from the EPA’s Design for the Environment (DfE) list.

LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended September 30, 2018, the primary sources of liquidity were gross profits from KT Chemicals and cash flows from financing activities, and in particular, proceeds from the sale of common stock.

As of September 30, 2018, the Company had total assets of $3,207,922, consisting primarily of current assets of $83,419 in cash, $150,296 in receivables, $48,374 in inventory, and long term assets of $2,294,952 in goodwill and $619,656 in fixed assets. As of December 31, 2017, the Company had total assets of $3,311,273, consisting of current assets of $275,886 in cash, $49,603 in receivables, $62,541 in inventory, $8,205 in prepaid expenses and $31,102 in other current assets. The decrease in total assets of $103,351 was primarily due to the decrease in its cash of $192,467 offset by the increase in its accounts receivable of $100,693 as a result of KT’s increase in sales.

As of September 30, 2018, the Company had total liabilities of $465,011 including $348,330 in current payables and accrued expenses and $116,681 in notes payable. As of December 31, 2017, the Company had liabilities totaling $357,968 including $244,193 in accounts payable and accrued expenses, and $109,312 in notes payable. The increase in liabilities of $107,043 was largely due to the decrease in the Company’s days outstanding of its accounts receivables.

At September 30, 2018, the Company had an accumulated stockholders’ equity of $2,742,911 and an accumulated stockholders’ equity of $2,953,305 at December 31, 2017. The decrease is result of the items discussed above.

RESULTS OF OPERATIONS

On February 15, 2017, the Company acquired KT Chemicals, Inc. and as a result, the operations of the Company include nine months of KT’s operations for the nine months ended September 30, 2018 compared to seven and one-half months of operations for the nine months ended September 30, 2017. The Company continued to concentrate its efforts on (a) testing and marketing of its products; (b) customer acquisition; (c) sourcing and developing new products to fulfill customers’ requirements; and (d) starting other specific industry chemical subsidiaries.

Comparison of the three and nine-month periods ended September 30, 2018, and September 30, 2017.

Revenues

For the three months ended September 30, 2018, the Company had revenues of $396,497, and $355,159 for the same period in 2017. For the nine months ended September 30, 2018, the Company had revenues of $962,084, and $855,663 for the same period in 2017. The increase in year to date revenues is primarily the result of the Company recording nine months of KT’s operations for the nine months ended September 30, 2018 compared to seven and one-half months of operations for the same period in 2017, as the Company acquired KT on February 15, 2017.

Operating Expenses

For the three months and nine months ended September 30, 2018, the Company’s operating expenses totaled $682,570 and $2,771,966, respectively. During the same periods in 2017, the Company’s operating expenses totaled $705,884 and $1,891,661, respectively. The increase is each period is primarily related to 1) nine months of KT’s operating expenses being recorded during 2018; 2) professional fees relating to marketing and business development; and 3) share based compensation expense.

GOING CONCERN

The accompanying consolidated financial statements are presented on a going concern basis. The Company’s financial condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company has limited cash, its current liabilities exceeded its current assets as of September 30, 2018 and the Company has incurred reoccurring losses from operations during the three months and nine months ended September 30, 2018. The Company is relying on capital from investors to meet the majority of its operating expenses.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of its President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, its disclosure controls and procedures are effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

As indicated in the Company’s Form 10-K filed on July 17, 2018, the Company’s Principal Executive Officer and Principal Financial Officer concluded that its internal control over financial reporting was not effective during the 2017 fiscal year at the reasonable assurance level, as a result of a material weakness primarily related to a lack of a sufficient number of personnel with appropriate training and experience in accounting principles generally accepted in the United States of America (GAAP), inadequate segregation of duties, and lack of audit committee and outside directors. For the period ending September 30, 2018, the President and Chief Executive Officer and Vice President of Finance are now in full control of all accounting systems in each of the companies operating divisions. In addition, the President and Chief Executive Officer and Vice President of Finance control all capital expenditures, salaries, consulting fee and have set limits on all of these expenditures. In the opinion of management these controls are adequate.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the period covered by this report, there were changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially improve, the Company’s internal control over financial reporting. The Vice President of Finance established procedures whereby there is full-time access to subsidiaries books and records. Any required adjustments are now entered on a monthly basis. Vice President of Finance now reconciles all subsidiary bank statements.

The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There have been no material changes to the risks to the Company’s business from those described in its Form 10-K for the year end December 31, 2017 as filed with the SEC on July 17, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

To assist the Company obtain and preserve working capital to support its current operations, the Company entered into the following transactions:

During the three months ended September 30, 2018, the Company sold 227,068 common shares at $1.50 per share for a total cash amount of $340,602 and issued 125,000 common shares upon the exercise of warrants at $.50 per share for a total cash amount of $62,500.

The sales of the securities identified above were made pursuant to privately negotiated transactions that did not involve a public offering of securities and, accordingly, the Company believes that these transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Regulation D promulgated under the Securities Act. Each investor represented that such investor either (A) is an “accredited investor,” (B) has such knowledge and experience in financial and business matters that the investor is capable of evaluating the merits and risks of acquiring the shares of Company common stock, or (C) appointed an appropriate person to act as the investor’s purchaser representative in connection with evaluating the merits and risks of acquiring the shares of Company common stock. The investors received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

ITEM 6. - EXHIBITS

Exhibit No.	Description

31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (extensible Business Reporting Language);
		(i)	Consolidated Balance Sheets at September 30, 2018 and December 31, 2017,
		(ii)	Consolidated Statement of Operations for the three months and nine months ended September 30, 2018 and 2017,
		(iii)	Consolidated Statement of Cash Flows for the nine months ended September 30, 2018 and 2017, and
		(iv)	Notes to Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 14, 2018

	Worldwide Specialty Chemicals Inc.


	By:	/s/ E. Thomas Layton
		E. Thomas Layton
		CEO and Director


	By:	/s/ Paul O. Williams
		Paul O. Williams
		CFO and Director

Worldwide Specialty Chemicals Inc. 10-Q