U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB/A
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended April 3, 1998.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT.
For the transition period from __________ to __________
Commission file number 33-11062-D
UNITED SHIELDS CORPORATION
(Exact name of small business issuer as specified in its charter)
Colorado 84-1049047
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
655 Eden Park Drive, Suite 260, Cincinnati, Ohio 45202
(Address of principal executive offices)
(513) 241-7470
(Issuer's telephone number)
_________________________________________________________________
(Former name, former address and formal fiscal year, if changes
since last report.)
Check whether the issuer (1) filed all reports required to be
filed by Section 3 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports to be
filed by sections 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
__________ shares as of ________________.
Transitional Small Business Disclosure Format (check one):
Yes No X
UNITED SHIELDS CORPORATION
INDEX
Page No.
Item 1. Financial Statements
Consolidated Balance Sheets for December 31,
1997 and for the quarter ended April 3, 1998 3
Consolidated Statement of Operations for
the quarter ended April 3, 1998 compared to
the quarter ended March 31, 1997 5
Consolidated Statement of Cash Flows for
the quarter ended April 3, 1998 compared to
the quarter ended March 31, 1997 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information 12
Item 2. Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
United Shields Corporation
Consolidated Balance Sheet
12/31/97 4/3/98
Current Assets:
Cash $ 512,839 $ 26,826
Accounts receivable, net $ 1,375,475 $ 1,453,885
Other receivables $ 45,247 $ 5,162
Inventory $ 1,424,661 $ 1,338,373
Prepaid expenses and deposits $ 101,701 $ 106,138
Refundable income taxes $ 123,440 $ 123,440
Total current assets $ 3,583,363 $ 3,053,824
Property and Equipment, at cost
Land $ 224,045 $ 399,838
Machinery & Equipment $ 3,435,526 $ 3,436,612
Office furniture and fixtures $ 106,482 $ 111,171
Vehicles $ 21,850 $ 21,851
Building and leasehold improvements $ 1,415,956 $ 1,253,069
$ 5,203,859 $ 5,222,541
Less accumulated depreciation $ (1,915) $ (161,148)
Net property, plant and equipment $ 5,201,944 $ 5,061,393
Other Assets:
Deposits $ 58,647 $ 58,649
Investments subsidiary $ 30,000 $ 39,094
Investment in Master Molders $ 510,000 $ 511,390
Cash surrender value in Life ins. $ 1,030,365 $ 1,047,865
Deferred income taxes $ - $ -
Other $ 1,403 $ 6,395
Goodwill, net $ 5,347,940 $ 5,258,550
Total other assets $ 6,978,355 $ 6,921,943
Total Assets $15,763,662 $15,037,160
<PAGE>
United Shields Corporation
Consolidated Balance Sheet
12/31/97 4/3/98
LIABILITIES & SHAREHOLDERS EQUITY
Current Liabilities:
Current portion of long term debt $ - $ -
Capital lease obligation-current $ 121,635 $ 132,041
Accounts payable $ 1,496,165 $ 1,608,571
Accounts payable - In Flow $ 449,577 $ 449,577
Accrued interest $ 82,910 $ 82,910
Accrued Taxes $ 56,945 $ 11,531
Accrued & Other Current Liabilities $ 573,718 $ 485,932
Total current liabilities $ 2,779,950 $ 2,770,562
Note Payable L-T ILC $ - $ -
Note Payable L-T RH $ 3,727,081 $ 2,118,881
Long Term Debt - First Union Bank $ 4,551,000 $ 4,410,060
Capital lease obligations $ 140,895 $ 70,769
Deferred compensation $ 625,357 $ 625,357
Total Liabilities $11,824,283 $ 9,986,541
Stockholders' Equity
Common Stock $ 115,301 $ 120,015
Additional paid in capital $ 4,238,236 $ 7,085,247
Retained Earnings $(2,008,324) $(2,008,324)
Stock Subscriptions $ 1,594,166 $ 161,849
Net Income $ - $ (306,881)
Total stockholders' equity $ 3,939,379 $ 5,041,731
Total liab'y. & stockholders equity $15,763,662 $15,037,160
<PAGE>
United Shields Corporation
Consolidated Statement of Operations
For the quarter ended:
12/31/97 4/3/98
ASSETS
Net sales $ - $ 3,224,061
Cost of goods sold $ - $ 2,579,939
Gross Profit $ - $ 644,122
Operating expenses:
Selling, general & admin. $ 43,658 $ 550,467
Depreciation $ - $ 159,232
Amoritz'n. $ 5,000 $ 89,390
Total operating expenses $ 48,658 $ 799,089
Operating income/(loss) $ (48,658) $ (154,967)
Other income/(expenses)
Interest income $ 28 $ 18,595
Loss from subsidiary $ -
Interest expense $ - $ (152,921)
Other income or (expense) $ - $ (12,588)
Gain/(loss) on sale/leaseback $ - $ (5,000)
Earnings before inc. taxes $ (48,630) $ (306,881)
Income taxes $ 0 $ 0
Net earnings $ (48,630) $ (306,881)
Weighted avg # of shares outstanding $10,590,100 $11,980,834
Net loss per common share $ (0.01) $ (0.03)
<PAGE>
USC and Subsidiaries
Consolidated Statement of Cash Flows
For the quarter ended:
April 3, March 31,
1998 1997
Cash flows from operating activities:
Net Income (Loss) (306,881) (48,630)
Adjust'ts to reconcile net inc. to net cash
provided by operating activities:
Depreciation and Goodwill amortization 248,622 5,000
(Increase) decrease in accts. receivable (38,325)
(Increase) decrease in inventories 86,288
(Increase) decrease in ppd exp and deposits (4,439)
(Increase) decrease in other assets (4,992)
Increase (decrease) in accts. payable 112,406 232,768
Increase (decrease) in accrued expenses (132,200)
Increase (decrease) in accts. payable
stockholder (15,200)
-------- --------
NET CASH FROM OPERATING ACTIVITIES: (39,521)(291,598)
Cash Flows from investing activities
Net purchases of plant, property, & equip't. (18,682) --
Investment in Target Companies (9,094) --
Investment in Master Molders (1,390) --
Increase in CSV of life insurance (17,500) --
--------- -------
NET CASH FROM INVESTING ACTIVITIES (46,666) --
Cash from Financing Activities:
Borrowings on notes payable stockholders -- 19,000
Payments on notes payable (548,900) --
Principal reduction on notes payable (140,940) --
Increase/(decrease) in capital lease (59,720) --
Issued common stock & subscriptions 349,734 274,964
--------- --------
NET CASH FROM FINANCING ACTIVITIES: (399,826) 293,964
NET INCREASE/(DECREASE) IN CASH (486,013) 2,366
CASH AT BEGINNING OF THE YEAR 512,839 107
---------- -------
CASH AT END OF THE PERIOD 26,826 2,473
---------- -------
---------- -------
<PAGE>
UNITED SHIELDS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 3, 1998
1. Basis of Presentation
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the consolidated financial statements for the
respective periods. Interim results are not necessarily
indicative of results for a full year. The consolidated financial
statements should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto for
the fiscal year ended December 31, 1997.
2. Change of Accounting Period
Effective January 1, 1998, the Company changed its accounting
period from a calendar year-end to a 52/53 week fiscal year. All
accounting periods will end on Friday. The year-end will always
be the last Friday of the calendar year.
3. Net Loss Per Share
The Company has adopted Statement of Financial Accounting
Standards No. 128, Earning per Share (SFAS No. 128).
The Company's basic and undiluted net loss per share amounts have
been computed by dividing net loss by the weighted average number
of outstanding common shares. There were no diluted securities
outstanding at April 3, 1998 and March 31, 1997.
4. Issuance of Shares by Private Placement
In the first quarter ending April 3, 1998, the Company sold 97,125
shares of its common stock at $4.00 per share. Total net proceeds
of $349,733 were used to fund operations.
5. Issuing of Warrants
Effective March 30, 1998, the Company issued 500,000 warrants to a
merchant banker/stockholder in connection with the amendment of a
note payable. These warrants are exercisable immediately at $4
per share for a period of up to 5 years. The total value of the
note payable has been allocated to the note payable and warrants
based upon the relative fair values. The value allocated to the
warrants, $1,059,500, has been recorded as paid in capital and a
reduction to notes payable.<PAGE>
6. Contingencies
The Company is involved in litigation and other matters which
involves routine matters incident to the Company's business. In
the opinion of management, the ultimate disposition of such
litigation and matters will not have a material effect upon the
Company's financial statements.
7. Subsequent Events
From April 4, 1998 through May 12, 1998, 59,825 shares of the
Company's stock have been sold through a private placement
offering with net proceeds of $212,397.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results
of Operations.
Overview
The Company operates as a holding and marketing company,
acquiring operating companies engaged in blow molding and
injection molding plastics businesses in a range of press
capacities from 22 ton to 700 ton clamp pressure, providing a
fully integrated company that can provide its customers with
"one-stop shopping" for their blow molding and injection molding
needs.
Additionally, the Company intends to develop further its existing
food and beverage packaging business. The Company is seeking
potential acquisition candidates involved in blow molding and
injection molding plastics manufacturing, production, packaging,
and distribution that will complement the Company's business and
increase the Company's asset and revenue base. Management expects
that it is possible that during the second quarter of 1998, the
Company will enter into letters of intent to acquire some of those
companies. Acquisitions may involve a number of risks, some of
which could have a material adverse effect on the Company's
operations and financial results including, without limitation,
whether the Company will have the ability to integrate several
acquisitions at the same time successfully (if the Company is able
to acquire several companies within a short period of time);
whether the Company can integrate businesses that may be diverse
with respect to type of business, geographic area, or customer
base; the risk of the diversion of management's attention among
acquired businesses and in seeking additional acquisition
opportunities; the risk of a dependence on retaining, hiring and
training key personnel; and adverse short-term effects on
operating results and amortization of acquired intangible assets.
There can be no assurance that the Company will be successful in
consummating the acquisition of candidates or in integrating
acquired businesses.
Plastics Division
The Plastics Division currently is comprised of R.P.
Industries of Ohio, Inc. ("RPI"). The Company has operations in
Chester, Virginia and Oxford, North Carolina, with approximately
40 molding machines ranging in capacity from 22 tons to 700 tons
of clamp pressure. The Company manufactures component parts and
finished products primarily for original equipment manufacturers
in the southeast and mid-Atlantic regions and markets in Indiana,
Illinois and Canada. Secondary operations include hot stamping,
sonic welding, pad printing, chemical bonding, heat transfer decal
application, spray painting, drilling and assembly.
The Company intends to continue acquiring operating companies
engaged in the blow molding and injection molding industry in an
effort to create a fully integrated company that can provide its
customers with "one-stop shopping" for their blow molding and
injection molding needs. The Company expects to target
financially- sound acquisition candidates that have developed a
unique process, design or product within the blow molding and
injection molding industry. The Company believes that
consolidation within such industry will occur as a result of what
it believes is a trend of customers desiring to reduce the number
of vendors they use. As the Company increases its holdings within
the industry, it believes it will benefit from the ability to
service a broad range of blow molding and injection molding needs
adequately, thereby providing customers with an option currently
not readily available within the industry. Additionally, by
targeting acquisition candidates with a unique process, design or
product, the Company believes it will be able to offer a unique
range of plastics blow molding and injection molding services
currently not available.
Food and Beverage Packaging
The HeaterMeals Company ("HeaterMeals") manufactures and
markets portable electrochemical heating devices and a line of
shelf-stable meals with a patented self-heating device. The
self-heating
device is comprised of metallic alloy powder embedded with
plastic that generates heat when activated by water, but is
flameless, non-toxic and flexible in design. Since 1990, the
Company has sold over 80 million flameless ration heaters ("FRH")
to government contractors which incorporate the FRH into
Meals-Ready-to-Eat,
or MRE's, for the United States military. Since
1996, the Company has sold over 1.2 million shelf-stable meals
under the trademark "HeaterMeals"(R). HeaterMeals(R) is an
assortment of breakfast and dinner entrees packaged with the
patented self-heating device, utensil pack and water activation
pouch, distributed to truckstops throughout the United States,
approximately 1200 grocery stores located in Kentucky, Ohio,
Indiana and Michigan and various specialty retail outlets and
catalogues. The Company intends to expand its marketing and sales
of the HeaterMeals(R) brand by broadening the geographic
distribution of the products, creating new meals for new target
audiences where the convenience of the self-heating feature is
important, developing direct marketing opportunities, and
exploiting the self-heating technology in other commercial
categories.
Although not the only contemplated use for the Company's
patented collapsible plastic bottle (the "Bottle"), the Company,
through UNSC, Inc. ("UNSC"), owns marketing rights for the Bottle
for retail/consumer sale of water and water-based beverages and
pre-packed powdered instant drink mixes. The Bottle can be shipped
and stored in its collapsible state and water or other liquids can
be added manually, without the use of special equipment. The
Company believes that the convenience of being able to add liquids
to the Bottle at any stage in the sales and distribution chain
will enable the Company to market the Bottle for a variety of
uses. The Company believes that in addition to uses within the
food and beverage industry, the Bottle may provide the medical
industry with a clean, safe and inexpensive alternative to glass
containers.
Financing Management's Plan of Operation
The Company has borrowed funds from NAVICAP Corporation
("NAVICAP") to finance ongoing operations while the Company is
seeking acquisition candidates and pursuing the necessary
financing to complete those acquisitions. NAVICAP is a
Cincinnati-based
merchant banking firm which invests in various companies,
including the Company. NAVICAP currently owns 1,274,220 shares of
Common Stock of the Company. In addition, the directors and
officers of NAVICAP own 243,270 shares of Common Stock. The
Company borrowed $85,000 from NAVICAP on December 12, 1995
pursuant to a promissory note, which was due and payable on March
31, 1997, and bears interest at the rate of 8% per annum. As of
December 31, 1997, the principal balance due to NAVICAP on this
note was $63,318.70. As of the date hereof, NAVICAP has not made
a demand for payment. On May 22, 1997, the Company signed an
open-ended promissory note with NAVICAP to borrow up to
$3,000,000, with interest at 12% per annum, due on or before
September 24, 1997. On December 1, 1997, the Company and NAVICAP
amended this note to increase the principal amount to $3,500,000
and to make the note payable on demand. On December 31, 1997, the
Company and NAVICAP amended and restated the note to permit the
Company to borrow up to $4 million from NAVICAP. On March 30,
1998, the Company and NAVICAP again amended the note to provide
for a maturity date of September 30, 1999, but NAVICAP reserved
the right to call the note in the event that the Company receives
third-party funding or has free cash flow in excess of $50,000, in
which case NAVICAP may call the note to the extent of an amount
equal to 80% of the third-party funding or free cash flow. The
note bears interest at 12% per annum. This note has been secured
by the pledge by Mr. T. J. Tully and certain of his family members
of 3,000,000 shares of Common Stock. In connection with the note,
the Company has granted NAVICAP a warrant to purchase 500,000
shares at an exercise price of $4.00 per share, exercisable at any
time up to March 30, 2003. As of April 3, 1998, the principal due
under the open-ended note was $2,118,681. The total interest due
NAVICAP, including under both promissory notes, as of April 3,
1998, was $82,910.00. In addition, NAVICAP has advised the
Company that it may continue to loan funds against the open-ended
promissory note for the purpose of completing additional
acquisitions.
The following is a discussion of the results of operations
for the quarter ended April 3, 1998, compared with the quarter
ended March 31, 1997, and changes in financial condition during
the first quarter of 1998.
Acquisitions
The Company, in contemplation of a prospective acquisitions,
is currently performing its due diligence on two injection molding
companies. In addition, the Company is continuing its
negotiations
with the owners of Master Molders, Inc. to arrive at an agreement
satisfactory to both parties.
Private Placement
During the first quarter of 1998 the Company has sold 97,125
shares through a private placement, pursuant to Rules 506 of
Regulation D, promulgated under the Securities Act of 1933, as
amended, with net proceeds of $349,733. This brings the total
shares sold in the current private placement program to 318,917
with total net proceeds of $1,179,891.
Net Sales and Net Income (Loss)
United Shields Corporation did not own an operating company
during the first quarter of 1997. Therefore, the operating
results for the quarter ended April 3, 1998 represent the
Company's first complete quarter of operations for USC with its
wholly owned subsidiaries, HeaterMeals and RPI. Net sales for the
first quarter ended April 3, 1998 were $3,224,061. HeaterMeals
contributed net sales of $849,520, and RPI contributed net sales
of $2,374,541. The first quarter net loss was ($306,886), which
consists of USC net loss of ($266,977), HeaterMeals net loss of
$105,182) and RPI net income of $65,273. EBITDA for the quarter
ended April 3, 1998 was $76,067.
Operating Costs and Expenses
United Shields Corporation did not own an operating company
during the first quarter of 1997. Gross margin for the first
quarter ended April 3, 1998 was 20.00%.
Net Interest Expense
NAVICAP waived its interest charges for the first quarter of
1998, which provided a reduction of interest expenses in the
amount of $106,773. This resulted in net interest expense of
$5,000 compared to $75,827 in interest expense for the quarter
ended March 31, 1997. The 1998 interest expense waived by NAVICAP
was incurred due to borrowings for acquisitions and operations.
Tax Rate
The tax rates for the quarter ended April 3, 1998 are zero
due to current net losses.
Financial Condition
The total current assets of the Company were $3,053,824 for
the first quarter ended April 3, 1998, down $529,539 compared to
$3,583,363 at December 31, 1997. Working capital was $283,262 on
April 3, 1998, compared with $803,413 as of December 31, 1997.
During the quarter the Company reduced its reporting liabilities
to NAVICAP by $1,608,400. This was accomplished by issuing
500,000 five-year stock purchase warrants to NAVICAP,
with a value of $1,059,500, and principal repayments of $548,900.
However, the full amount still owed to NAVICAP is $3,178,181.
Total stockholders' equity increased by $1,102,352 during the
quarter ended April 3, 1998. The changes in stockholders equity
were due to the following: a net loss of ($306,881), 500,000
stock purchase warrants issued to NAVICAP with a value of
$1,059,500 and stock sold in the private placement with net
proceeds of $349,733.
United Shields Corporation is evaluating various financing
options, including issuing debt and equity to finance future
acquisitions.
<PAGE>
PART II - Other Information
Item 2 - Change in Securities
Issuance of Shares in Connection with the Acquisition of RPI.
On October 22, 1997, the Company entered into a definitive
agreement with RPI pursuant to which RPI received 993,384 shares
of the Company's Common Stock to be distributed to RPI's
shareholders on the date of the merger, December 31, 1997.
Issuance of Warrants to NAVICAP. The Company has reduced its
debt to NAVICAP in part by issuing 500,000 five-year stock
purchase warrants to NAVICAP. On March 30, 1998 the Company
issued 500,000 five-year stock purchase warrants, worth $1,059,500
to NAVICAP.
Item 6 - Exhibits
Exhibit 3.2 Bylaws of Registrant
Exhibit 10.1 Promissory Note to NAVICAP Corporation
Exhibit 10.2 Amendment to Revolving Credit and Security
Agreement with First Union
Exhibit 27 Financial Data Schedule
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
UNITED SHIELDS CORPORATION
Date May 21, 1998 /s/ T.J. Tully
T.J. Tully
Chairman of the Board
and Chief Executive Officer
Date May 21, 1998 /s/ Beverly R. Gill
Beverly R. Gill
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> APR-03-1998
<CASH> 26,826
<SECURITIES> 0
<RECEIVABLES> 1,453,885
<ALLOWANCES> 0
<INVENTORY> 1,338,373
<CURRENT-ASSETS> 3,053,824
<PP&E> 5,222,541
<DEPRECIATION> 161,148
<TOTAL-ASSETS> 15,037,160
<CURRENT-LIABILITIES> 2,770,562
<BONDS> 0
120,015
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 15,037,160
<SALES> 3,224,061
<TOTAL-REVENUES> 3,224,061
<CGS> 2,579,939
<TOTAL-COSTS> 2,579,939
<OTHER-EXPENSES> 799,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,921
<INCOME-PRETAX> (306,881)
<INCOME-TAX> 0
<INCOME-CONTINUING> (306,881)
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<NET-INCOME> (306,881)
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