<PAGE> 1
FORM 10-KSB
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1998
OR
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File No. 0-9249
UNITED TRANS-WESTERN, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1519286
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 - 3795 Carey Road
Victoria, British Columbia,
Canada V8Z 6T8
(address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code: (250) 475-6000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
(Title of Class)
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 of the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB, or any
amendment to this Form 10-KSB.
YES [X] NO [ ]
<PAGE> 2
The registrant's revenues for its most recent fiscal year were zero.
The aggregate market value of the voting stock held by nonaffiliates of
the registrant is not presently determinable. See "Item 5. Market for
Registrant's Common Stock and Related Stockholder Matters."
The number of shares outstanding of each of the registrant's classes of
common stock, as of April 15, 1999, was 8,859,155 shares of common stock.
Transactional Small Business Disclosure Format (check one):
YES [X] NO [ ]
PART I
Item 1. Description of Business
Development of Business
The Company emerged from bankruptcy in August 1986 and was actively
engaged in the business of acquiring and developing oil and gas properties until
January 1994, when it sold all of its remaining oil and gas properties. The
proceeds from the property sale were used to repay all of the Company's bank
debt and a significant portion of indebtedness to affiliates.
In early 1997, the Company privately placed 160,000 shares of newly
issued common stock for $160,000. Substantially all of this amount was used to
pursue a joint venture interest with a regional Chinese energy company through
the Company's subsidiary UTW China Ltd. The interest in the subsidiary and
resource property was disposed of during 1998 with the accumulated debt being
assumed by the purchaser. The purchaser, First Oil Limited, has assumed full
responsibility to move the project forward. United Trans-Western, Inc. has
retained a 0.4% overriding royalty interest in the project. Further, there is
provision for United Trans-Western, Inc. to recover its investment of $134,582
from future revenues from the project. There is no indication as to when
revenues can be expected.
BUSINESS ACTIVITY
During the year, the Company focused mainly on the development of
shredding and grinding of used tires. Extensive negotiations leading to an
interim agreement to acquire an existing shredding and grinding operation in
Texas were undertaken. This operation has an existing stockpile of 150,000 tons
of shredded rubber which would be valuable for grinding and supplying to the
proposed rubber reactivation plant. After the completion of due diligence,
management decided to defer this acquisition pending a restructuring of this
operation and further development of reactivation facilities.
In March, 1998, the Company retained joint venture rights as a joint
venture partner with Rebound Rubber Corporation. These were usage rights of the
proprietory technology owned by Rebound Rubber Corporation within the United
States. Extensive efforts for the funding of a reactivation facility either by
debt, equity or a combination of both was not successful. In December, 1998, the
Company received an offer from Landstar, Inc. to acquire its joint venture
interest for $100,000 and 8,500,000 shares of Landstar, Inc. This offer has been
accepted by the Company and will close in 1999. In addition, the Company has
verbally agreed with Landstar, Inc. to supply crumb rubber to reactivation
plants as they are set up. Formal contracts will be negotiated on a plant by
plant basis.
<PAGE> 3
During 1999, management will be identifying existing shredding and
grinding operations in order to meet its commitment to Landstar, Inc. to supply
crumb rubber to reactivation plants. Negotiations will be reopened with the
Texas operations in an effort to renegotiate terms for the acquisition of this
operation.
Item 2. Properties
Corporate Headquarters
The Company's corporate headquarters are currently located in Victoria,
British Columbia, Canada.
Other Properties
The Company does not own or lease any properties other than the
corporate offices described above.
Item 3. Legal Proceedings
There are no material pending or, to the Company's knowledge, threatened
lawsuits against the Company requiring disclosure under this Item 3.
Item 4. Submission of Matters to a Vote
During the fourth quarter of the year ended December 31, 1998, no
matters were submitted to a vote of security holders through solicitation of
proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company shares are currently traded over the counter on the Canadian
Dealer Network (CDN) with the trading symbol UTWI. As at April 15, 1999, there
were approximately 900 record shareholders of the common stock of the Company.
The Company has not paid dividends on its common stock and the Board of
Directors presently intends to continue the policy of retaining any earnings for
use in the Company's operations.
Item 6. Management's Discussion and Analysis of Plan of Operation
Plan of Operation
The Company will be actively identifying target shredding and grinding
operations for possible acquisition as soon as working capital is available.
This will be provided in part on the closing of the sale to Landstar, Inc. At
the first available opportunity, the management of the Texas plant will be
approached to renegotiate the acquisition of that operation. Previous due
diligence indicates that substantial funding will be required in order to
upgrade facilities and increase production of crumb rubber to the levels
anticipated to be required by Landstar, Inc.
It is intended that the sole focus of the Company be the shredding and
grinding of used tires for the production and supply of crumb rubber to
Landstar, Inc.
<PAGE> 4
Management's Discussion and Analysis
Results of Operations
The Company had no operating revenues during 1998. Nevertheless, the
Company has created and preserved significant equity by accepting the Landstar,
Inc. offer. The ownership of 8,500,000 shares makes the Company the largest
shareholder of Landstar, Inc. and will benefit from the expected future
development of their reactivation plants. In addition, the Company will be able
to grow contemporaneously with Landstar, Inc. through the steady supply of raw
material.
The Company incurred expenses of $100,237 during the year. This amount
is net of recoveries of expense previously incurred by a subsidiary company, UTW
(China) Limited. Other expenses were incurred for professional fees, management
and directors fees accrued, investor relations and general and administrative
expenses.
Item 7. Financial Statements
Audited financial statements for the year ended December 31, 1998 are
attached herewith.
<PAGE> 5
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
For the fiscal year ended December 31, 1998, there were no disagreements
between the Company and Hein + Associates LLP on matters of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Hein +
Associates LLP would have caused it to make a reference to the subject matter of
the disagreements in connection with its reports.
PART III
Item 9. Directors and Executive Officers of the Registrant
The following table sets forth certain information as of April 15, 1999
concerning the directors and executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
D. Elroy Fimrite 49 President, Director and CEO
Scott B. Randolph 46 Vice-president and Director
Michael Pinch, CA 54 Secretary and Director
</TABLE>
Each director serves until the next annual meeting of stockholders and
until his successor is duly elected and qualified. Officers serve at the
discretion of the Board of Directors.
D. Elroy Fimrite - Director since May 1997 at which time he became President of
the Company. Mr. Fimrite has served as a director of several public
companies. From 1985 to 1996, Mr. Fimrite owned and operated several
private companies in which varying business activities were conducted.
Scott B. Randolph - Director and Vice President since May, 1997. Mr. Randolph
has been project manager for OCGI Management, Inc. for 25 years and has
extensive experience in the oil and gas industry.
Michael C. Pinch - Secretary and Chief Financial Officer since June 1997 and
director since November, 1997. Mr. Pinch has served as a director and
financial consultant to several private and public companies over the
past several years and currently focuses on the management and
administration of public companies.
Item 10. Executive Compensation
Management salaries of $72,000 were accrued to the two senior officers
of the Company but remain unpaid. Directors fees of $1,000 per month for each
month of service was accrued but remained unpaid as at December 31, 1998.
The Company has no formal employment agreement with any of its officers
or directors as at December 31, 1998. The Company has no retirement, profit
sharing, pension or insurance plans covering them. No officer received any
bonus, restricted stock award, options or stock appreciation rights, long-term
incentive plan payouts, insurance or other benefits from the Company during the
year ended December 31, 1998.
<PAGE> 6
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information indicating the Common Stock
beneficially owned as of April 15, 1999, by each director, by all officers and
directors as a group and by each person known to the Company to be the
beneficial owner of more than five percent of the Company's common stock:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Beneficial Ownership(1)(2) Class
- ---- -------------------------- -----------
<S> <C> <C>
J. W. Brown 1,009,459(3) 11.39
D. Elroy Fimrite 92,300 0.96
Michael C. Pinch 16,000 0.02
</TABLE>
(1) Pursuant to Rule 13(d)-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or to
direct the disposition) with respect to a security whether through any
arrangement, understanding, relationship or otherwise.
(2) Except as otherwise indicated, the named person has sole voting and
investment power with respect to the Common Stock set forth opposite his
name.
(3) Shared voting and investment power with respect to 272,898 of these
shares as a result of being a principal of Premier Capital, Ltd.
Item 12. Certain Relationships and Related Transactions
Kentucky Financial Inc. is related to the Company by common directors.
Kentucky Financial Inc. provided funding to the Company and, as at December 31,
1998, an amount of $172,688 was owing as described in the notes to the audited
financial statements.
Shina Investments Ltd. is wholly owned by a director of the Company.
Shina Investments Ltd. is owed $6,000 as at December 31, 1998 for administrative
services provided in the previous year.
A stockholder has advanced $4,653 to the Company which remains unpaid at
December 31, 1998.
Item 13. Exhibits and Reports on Form 8-K
None
<PAGE> 7
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto authorized, on the 15th
day of April, 1999.
UNITED TRANS-WESTERN, INC.
(Registrant)
By: /s/ D. ELROY FIMRITE
-------------------------------------
D. Elroy Fimrite
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITIES DATE
---- ---------- ----
<S> <C> <C>
/s/ D. ELROY FIMRITE President and Director Apr. 15/99
- ---------------------------------- CEO
D. Elroy Fimrite
/s/ MICHAEL C. PINCH Secretary and Director Apr. 15/99
- --------------------------------- CFO
Michael C. Pinch
</TABLE>
<PAGE> 8
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
United Trans-Western, Inc.
We have audited the accompanying consolidated balance sheet of United
Trans-Western, Inc. as of December 31, 1998, and the related consolidated
statements of operations, changes in stockholders' deficit and cash flows for
the years ended December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of United Trans-Western, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1, in
January 1994 the Company sold substantially all of its oil and gas properties.
Subsequent to the sale, the Company has been without significant assets or
business operations, which raises substantial doubt about its ability to
continue as a going concern. Management's plans for the Company are discussed in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
HEIN + ASSOCIATES LLP
Dallas, Texas
April 12, 1999
F-1
<PAGE> 9
UNITED TRANS-WESTERN, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSET -
<S> <C>
Cash $ 13
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 141,907
Advances from and accrued expenses due related parties 270,532
-----------
Total current liabilities 412,439
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value; 50,000,000 shares authorized,
8,852,842 shares issued and outstanding 88,588
Additional paid-in capital 1,918,366
Accumulated deficit (2,419,380)
-----------
Total stockholders' deficit (412,426)
-----------
Total liabilities and stockholders' deficit $ 13
===========
</TABLE>
See accompanying notes to these financial statements.
F-2
<PAGE> 10
UNITED TRANS-WESTERN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUES $ -- $ --
COSTS AND EXPENSES:
Oil and gas exploration project expenses -- 105,843
General and administrative 205,039 343,036
Interest expense, net 83 113
----------- -----------
Total Costs and Expenses 205,122 448,992
----------- -----------
LOSS FROM CONTINUING OPERATIONS (205,122) (448,992)
DISCONTINUED OPERATIONS - gain on disposal of
subsidiary 104,885 --
----------- -----------
NET LOSS $ (100,237) $ (448,992)
=========== ===========
LOSS PER SHARE (Basic and diluted):
Continuing operations $ (.02) $ (.05)
=========== ===========
Net loss $ (.01) $ (.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,858,842 8,832,436
=========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-3
<PAGE> 11
UNITED TRANS-WESTERN, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1997 8,698,842 $ 86,988 $ 1,739,286 $(1,870,151) $ (43,877)
Sale of 160,000 shares 160,000 1,600 158,400 -- 160,000
Contributed capital -- -- 6,300 -- 6,300
Net loss -- -- -- (448,992) (448,992)
----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1997 8,858,842 88,588 1,903,986 (2,319,143) (326,569)
Contributed capital -- -- 14,380 -- 14,380
Net loss -- -- -- (100,237) (100,237)
----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1998 8,858,842 $ 88,588 $ 1,918,366 $(2,419,380) $ 412,426
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-4
<PAGE> 12
UNITED TRANS-WESTERN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(100,237) $(448,992)
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on disposal of subsidiary (104,885) --
Amortization expense -- 15,000
Change in other current assets 75,000 --
Change in accounts payable and accrued expenses 113,195 186,514
--------- ---------
Net cash used in operating activities (16,927) (247,478)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) of advances from related parties (3,985) 81,323
Capital contributions, including collection of receivable 20,680 --
Proceeds from issuance of stock -- 160,000
--------- ---------
Net cash provided by financing activities 16,695 241,323
--------- ---------
NET DECREASE IN CASH (232) (6,155)
CASH AT BEGINNING OF YEAR 245 6,400
--------- ---------
CASH AT END OF YEAR $ 13 $ 245
========= =========
</TABLE>
See accompanying notes to these financial statements.
F-5
<PAGE> 13
UNITED TRANS-WESTERN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
United Trans-Western, Inc. ("UTW" or the "Company") emerged from
bankruptcy on August 29, 1986. The Company is incorporated in Delaware
and until January 1994 was engaged in oil and gas producing activities.
In January 1994 the Company sold all of its oil and gas properties and
paid most of its liabilities. In January 1997, an 80% owned subsidiary
UTW-China, was created to purchase and develop properties owned by the
government of the People's Republic of China. The Company did not
proceed beyond the initial phase of this project, and sold its rights in
1998 to rework certain oil fields in China. Rebound Rubber Corporation
("RRC") was a wholly-owned subsidiary of the Company during 1997. RRC
has acquired technology from the Guangzhou Research Institute for
Utilization of Reclaimed Resources (Guangzhou Institute) for the
recycling and reactivation of used rubber. The Guangzhou Institute is
located in the People's Republic of China and is registered there as a
research development unit for developing waste material recycling
methods. During 1998 the Company returned its ownership interest in RRC
to the party from which it had been acquired and retained certain rights
to the technology as explained in Note 3. As also explained in Note 3,
all assets, liabilities and expenses of RRC have been removed from these
financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the financial
and income tax reporting bases of assets and liabilities. The deferred
tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when
the assets and liabilities are recovered or settled.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiary until its disposal in 1998. All significant
intercompany accounts and transactions are eliminated in consolidation.
Statements of Cash Flows
For purposes of the statement of cash flows, the Company considers cash
on deposit and all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Net Loss Per Common Share
Net loss per common share has been computed based upon the weighted
average number of common shares outstanding during each year.
Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed above, in
January 1994 the Company sold substantially all of its oil and gas
properties. Subsequent to the sale, the Company has been without
significant assets or business operations, which raises substantial
doubt about its ability to continue as a going concern. Management
intends to attempt to acquire businesses or assets by issuing Company
stock or by arranging financing with third parties in order to return
the Company to the status of an operating business concern. As described
in Note 1, the Company entered into two business ventures in China in
1997, neither of which are currently being actively
F-6
<PAGE> 14
UNITED TRANS-WESTERN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
pursued by the Company. Funding received by the Company in 1998 and 1997
has been provided primarily by a related party.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
3. INVESTMENT IN RRC
During 1997, the Company acquired 100% of the outstanding shares of RRC
for $1,000. RRC's sole stockholder became an officer and director of the
Company. RRC had obtained the exclusive right to use certain technology
developed by the Guangzhou Institute (see Note 1). RRC acquired the
technology rights with an initial payment of $310,000 in April 1997. The
balance of $590,000 was due prior to December 31, 1997; however,
extensions were obtained and the final payment was made in April 1998.
The agreement with the Guangzhou Institute anticipates the use of this
technology in the recycling and reactivation of used rubber tires and
other products, as well as the further development of the existing
technology. As explained in Note 1, subsequent to December 31, 1997, RRC
was returned to the individual from whom it was acquired. However, the
Company retained the right to use the technology jointly with RRC in
consideration of efforts and certain costs incurred by UTW on behalf of
RRC. UTW agreed to sell its rights to the technology to a third party in
January 1999. All expenditures of RRC were advanced by KFI (see Note 5).
Since the Company's control of RRC was temporary, the accounts of RRC
were removed from the Company's financial statements as of December 31,
1997.
4. INTEREST IN UTW-CHINA
The Company had an interest in rights to rework certain oil fields in
China through a subsidiary as described in Note 1. The Company sold its
interest in the subsidiary in 1998 and recorded a gain on discontinued
operations of $104,885. The Company's costs in connection with this
project of about $135,000 had been charged to operations in 1997. The
party that acquired the subsidiary agreed to pay the Company for its
costs out of 50% of revenue generated from the project, if any.
5. RELATED PARTY TRANSACTIONS
During 1997, Kentucky Financial, Inc. (KFI), which is affiliated with
the officer and director who sold to the Company and later reacquired
RRC, made advances in the amount of $310,000 on behalf of RRC for
transactions with Guangzhou Institute (see Note 3). In addition, KFI
provided funding to RRC in 1997 of $100,000 for development costs and
$112,900 for administrative costs. As explained in Note 3, the advances
applicable to RRC of $522,900 have not been reflected in the
accompanying financial statements. KFI and other related parties
(directors and stockholders) also made advances in 1998 and 1997 to the
Company for operating expenses and are due certain amounts for directors
fees and management fees. The total due related parties at December 31,
1998 was $270,532. These advances are non-interest bearing and contain
no specific repayment terms.
F-7
<PAGE> 15
UNITED TRANS-WESTERN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. COMMON STOCK
The Company issued 160,000 shares of common stock in a private placement
in February 1997 for $160,000 in cash.
In 1997, certain stockholders of the Company sold shares of the Company
for which rules of the Securities and Exchange Commission deemed there
to be profits totaling approximately $21,000, which were required to be
contributed to the Company. Of this amount, $6,300 and $14,380 were
reflected as capital contributions in 1998 and 1997, respectively.
7. INCOME TAXES
The Company had substantial Federal income tax net operating loss
carryforwards, statutory depletion carryforwards and investment tax
credit carryforwards available at December 31, 1998. However, following
a change in control of the Company in January 1994, use of the
carryforwards were severely limited. Net operating loss carryforwards
subsequent to the change in control, which may be applied to offset
future taxable income, amounted to approximately $660,000 at December
31, 1998 and will expire in 2010 through 2018.
The components of the Company's deferred tax assets and liabilities at
December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax asset - net operating loss carryforward $ 225,000 $ 200,000
Less valuation allowance (225,000) (200,000)
--------- ---------
Net deferred tax $ - $ -
========= =========
</TABLE>
F-8
