<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15960
U.S. Technologies Inc.
(Exact name of Registrant as specified in its charter.)
State of Delaware 73-1284747
(State of Incorporation) (I. R. S. Employer
Identification No.)
3901 Roswell Road, Suite 300
Marietta, Georgia 30062
(Address of principal executive offices.)
Registrant's telephone number,
including area code: (770) 565-4311
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 [..]
The number of shares outstanding of the Registrant's common stock, par value
$0.02, at April 30, 1998, was 29,195,278 shares.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
U.S. TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
----------- ----
<S> <C> <C>
Current assets:
Cash in bank $ 144,721 $ 489
Accounts receivable, trade 486,396 341,327
Inventories 163,830 74,933
Prepaid expenses 49,325 4,244
------------ ------------
Total current assets 844,272 420,993
------------ ------------
Property and equipment, net 133,893 137,024
------------ ------------
Other assets:
Accounts receivable, related party 296,630 296,305
Other assets 15,257 15,420
------------ ------------
Total other assets 311,887 311,725
------------ ------------
Total assets $ 1,290,052 $ 869,742
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
Current liabilities:
Accounts payable, trade $ 603,956 $ 567,841
Accrued expenses 717,672 666,991
Notes payable, current portion 35,888 35,753
------------ ------------
Total current liabilities 1,357,516 1,270,585
------------ ------------
Notes payable 16,295 19,068
------------ ------------
Stockholders' equity (capital deficit):
Preferred stock; $.02 par value; 10,000,000 shares
authorized; no shares issued -- --
Common stock; $.02 par value; 40,000,000 shares
authorized; 29,195,278 and 28,632,063 shares
issued and outstanding at March 31, 1998
and December 31, 1997, respectively 583,906 572,642
Additional paid-in capital 12,605,029 12,392,016
Accumulated deficit (13,059,102) (13,170,977)
Stock receivable (213,592) (213,592)
------------ ------------
Total stockholders' equity (capital deficit) (83,759) (419,911)
------------ ------------
Total liabilities and stockholders' equity (capital deficit) $ 1,290,052 $ 869,742
============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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U.S. Technologies Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Net Sales $ 1,510,563 $ 671,787
------------ ------------
Operating costs and expenses:
Cost of sales 997,589 668,968
Selling expense 37,131 23,901
General and administrative expense 381,426 222,708
------------ ------------
Total operating costs and expenses 1,416,146 915,577
------------ ------------
Income (loss) from operations 94,417 (243,790)
Other income (expense)
Other income 19,753 4,501
Interest expense (2,295) (3,770)
------------ ------------
Total other income (expense) 17,458 731
------------ ------------
Net earnings (loss) $ 111,875 $ (243,059)
============ ============
Net earnings (loss) per share:
Basic $ 0.00 $ (0.01)
============ ============
Diluted $ 0.00 $ (0.01)
============ ============
Shares used in per share calculation:
Basic 28,826,286 22,223,725
============ ============
Diluted 28,998,161 22,223,725
============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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U.S. Technologies Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 111,875 $ (243,059)
Adjustments to reconcile net earnings (loss)
to net cash used in operating activities:
Depreciation and amortization 14,114 124,746
Changes in certain assets and liabilities:
Accounts receivable (145,069) (46,011)
Inventories (88,897) (39,991)
Prepaid expense (45,081) (18)
Accounts payable 36,115 (65,522)
Accrued expenses 50,681 (9,406)
------------ ------------
Net cash used in operating activities (66,262) (279,261)
------------ ------------
Cash flows from investing activities:
Equipment purchases (10,983) (8,924)
Increase in other assets (162) --
------------ ------------
Net cash used in investing activities (11,145) (8,924)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 224,277 289,500
Payments of notes payable (2,638) --
------------ ------------
Net cash provided by financing activities 221,639 289,500
------------ ------------
Increase in cash 144,232 1,315
Cash, beginning of period 489 1,548
------------ ------------
Cash, end of period $ 144,721 $ 2,863
============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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U.S. Technologies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to form 10-Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. These statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1997 Form 10-K as filed with the Securities and
Exchange Commission.
The results of operations for the periods presented are not necessarily
indicative of the operating results for the full year.
2. EARNINGS PER SHARE
The Company has adopted the provisions of SFAS No. 128, "Earnings per Share",
which is effective for fiscal years ending after December 15, 1997. Basic
earnings per common share is based on the weighted average number of common
shares outstanding during the period. Diluted earnings per share includes the
dilutive effect of common stock equivalents. For the three months ended March
31, 1997 diluted earnings per share have not been presented because stock
options and warrants which comprised common stock equivalents would have been
anti-dilutive.
The following tables represent required disclosure of the reconciliation of the
numerators and denominators of the basic and diluted earnings (loss) per share
computations:
<TABLE>
<CAPTION>
Earnings Per
(loss) Shares share
(Numerator) (Denominator) amount
----------- ------------- ------
<S> <C> <C> <C>
Three months ended March 31, 1998:
Net earnings $ 111,875 28,826,286 $0.00
Effect of dilutive potential common shares:
Stock options -- 171,875
Warrants -- --
--------- ----------
Diluted earnings per share:
Net earnings available to common shareholders
plus assumed conversions $ 111,875 28,998,161 $0.00
========= ========== ======
Three months ended March 31, 1997:
Net (loss) $(243,059) 22,223,725 $(0.01)
Effect of dilutive potential common shares:
Stock options -- --
--------- ----------
Diluted (loss) per share:
Net (loss) available to common shareholders
plus assumed conversions $(243,059) 22,223,725 $(0.01)
========= ========== ======
</TABLE>
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3. ACCOUNTS RECEIVABLE
Accounts receivable - trade at March 31, 1998, and December 31, 1997, is net of
an allowance for doubtful accounts in the amount of $13,000 and $18,000,
respectively.
4. INVENTORIES
At March 31, 1998, and December 31, 1997, inventories consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 123,829 $ 59,848
Work in progress 40,001 15,085
--------- ---------
$ 163,830 $ 74,933
========= =========
</TABLE>
Consistent with the Company's plans to dispose of its obsolete raw materials
inventory, the value of the obsolete raw materials has been written off against
the related valuation allowance.
5. PROPERTY AND EQUIPMENT
At March 31, 1998, and December 31, 1997, property and equipment consist of the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Equipment $ 987,948 $ 983,099
Furniture and fixtures 176,957 170,823
Leasehold improvements 123,520 123,520
----------- -----------
1,288,425 1,277,442
Less accumulated depreciation (1,154,532) (1,140,418)
----------- -----------
$ 133,893 $ 137,024
=========== ===========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the consolidated
financial statements of the Company (including the notes thereto) included in
the Company's form 10-K for the year ended December 31, 1997.
General
In January 1997, the Company was acquired by a group of individuals led by the
Company's Chairman and CEO, Mr. Kenneth H. Smith. As a part of the acquisition
the former management and Board of Directors resigned. During 1997 the new
management team was assembled, the Company's mission statement was revised, and
the Company's operations were restructured.
U.S. Technologies Inc. (the "Company") is an "outsourcing company" soliciting
manufacturing, assembly, repair, kitting and customer call center services from
Fortune 1000 businesses. The Company performs its services utilizing prison
labor under the Prison Industry Enhancement Program ("PIE"). The PIE program was
created by Congress in 1979 to encourage States and local units of government to
establish employment opportunities for prisoners that approximate private sector
work opportunities. The program is designed to place inmates in a realistic
working environment, pay them the local prevailing wage for similar work, and
enable them to acquire marketable skills to increase their potential for
successful rehabilitation and meaningful employment upon release. The PIE
Program has two primary objectives:
To generate products and services that enable prisoners to make a
contribution to society, help offset the cost of their incarceration,
compensate crime victims, and provide inmate family support.
To provide a means of reducing prison idleness, increasing inmate job
skills, and improving the prospects for successful inmate transition
to the community upon release.
To serve its clients the Company has established U.S. Technologies Inc. as the
parent organization to provide management and financial resources to its
wholly-owned operating subsidiaries. The operating subsidiaries are
Labor-to-Industry Inc. ("LTI"), which operates the Company's manufacturing
outsourcing operations, and Service-to-Industry Inc. ("STI"), formed in March
1998, which will operate the Company's service outsourcing operations. Each
subsidiary negotiates an agreement with a prison under which facilities and
participants are available to the Company.
Overview
The Company reported significant losses during the last several years for a
variety of reasons. During 1995, the Company attempted, with little success, to
rebuild its customer base, most of which had been lost in 1994 due to poor
production and quality at the Company's PIE operation at LTI. In response to
this, the Company began a search to find and acquire products or technologies
which could be produced with the Company's PIE labor force. Unfortunately, the
plan to acquire companies and products did not succeed and the Company did not
begin to take steps to control costs or reduce the size of its work force. In
1996, these same problems persisted while staffing and expenses continued
unabated.
In January 1997, as part of the transaction through which control of the Company
passed to the new management team, the Company began to receive a significant
infusion of equity capital which ultimately totaled approximately $536,000. This
capital infusion was used to finance the significant expansion of the Company's
operations. The new management team took immediate steps to cut costs and
improve production management, product quality and customer service. All these
steps resulted in an immediate increase in revenues with existing customers and
opportunities to serve new
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customers. These steps also resulted in the recognition of a restructuring
charge to recognize the cost of severance and lay-off of excess personnel of
approximately $197,000.
The new management team also made a thorough evaluation of the value of the
assets acquired by prior management and took appropriate steps to write off the
value of assets which would not be realized, totaling approximately $1,409,000,
and obsolete inventory, in the amount of approximately $307,000. The new
management team also acted to resolve most of the outstanding litigation,
inherited from prior management, recognizing a charge of approximately $252,000.
Results of Operations
The following analyses compares the results of operations for the three months
ended March 31, 1998 to the three months ended March 31, 1997.
During the three months ended March 31, 1998 the Company had net income of
$111,875 or $0.00 per weighted-average share. During the three months ended
March 31, 1997 the company reported net losses of $(243,059) or $(0.01) per
weighted-average share. Net sales during the three months ended March 31,
1998 were $1,510,563, compared to $671,787 during the three months ended
March 31, 1997. The increase in net sales in the amount of $838,776,
representing 125%, was the result of improvements instituted by the Company's
new management which included; converting all sales employees to
commission-only sales agents, improved bidding techniques, improved product
quality and faster service.
The Company's new management took steps during the three months ended March
31, 1997 to evaluate the carrying value of assets, assess the Company's
staffing levels, and resolve outstanding litigation. The Company's actions as
a result of this process resulted in the following charges recognized as of
the beginning of the second quarter of 1997:
Effective on April 1, 1997 the Company recognized a $1,408,839 non-cash
charge for the impairment of long lived assets to write-off all remaining
assets described as investments in technologies and goodwill. These
included the remaining unamortized cost of acquired technologies and
goodwill of acquired companies. The assets and technologies, which had
been inactive during 1997 and 1996, were thoroughly evaluated by the
Company's new management and found to have no value. During the first
quarter of 1997, amortization of these assets totaled $111,078.
Effective on April 1, 1997 the Company recognized a charge to restructure
the Company's operations in the amount of $196,903, representing the costs
of severance to terminate thirteen management, sales and administrative
positions and lay-off 50 inmates at LTI. The Company also recognized a
charge in the amount of $252,256, representing an accrual for losses from
a variety of lawsuits with third parties and the Company's former
management.
Finally, on April 1, 1997, the Company recognized a non-cash charge to
adjust its reserve for obsolescence to write-off all remaining obsolete
inventory in the amount of $306,888.
In the three months ended March 31, 1998 cost of goods sold was $997,589
which represented 66% of net sales. During the three months ended March 31,
1997 cost of goods sold was $668,968 which represented 100% of net sales. The
improvement in the Company's cost of goods sold is a direct result of changes
instituted by the Company's new management, including, improved production
management, improved purchasing procedures, improved bidding procedures and
improved quality.
Selling expenses during the three months ended March 31, 1998 were $37,131,
representing 2% of net sales. During the three months ended March 31, 1997,
selling expenses in the amount of $23,901 represented 4% of net sales. These
expenses decreased primarily due to the increase in
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sales revenue combined with the conversion of the Company's full time sales
employees into independent sales agents, compensated on a commission only
basis.
General and administrative expenses during the three months ended March 31,
1998 were $381,426, which represented 25% of net sales. During the three
months ended March 31, 1997, general and administrative expenses were
$222,708 which represented 33% of net sales. The increase in general and
administrative expenses is the result of the formation of the Company's
management team who are actively working to develop all areas of the
Company's business.
The Company did not recognize a current tax provision for the three months ended
March 31, 1998 as a result of the utilization of a portion of its net operating
loss carryforward. The Company also did not recognize a deferred tax provision,
for the use of its net deferred tax asset, due to a corresponding reduction in
the related valuation allowance. The 100% valuation allowance against the
Company's approximately $3,720,000 net deferred tax asset continues to be
recognized at March 31, 1998. As a result of the series of transactions through
which the Company's new management gained control in 1997, the Company is
limited in the utilization of prior accumulated net operating losses and
anticipates that approximately $600,000 per year of net operating losses are
available to offset future annual taxable income. The Company expects to pay
taxes in 1998 in accordance with the provisions of the alternative minimum tax
and various state income tax laws as the Company's operations are anticipated to
expand.
Liquidity and Capital Resources
During the three months ended March 31, 1998 and 1997, the Company experienced
negative operating cash flows of $66,262 and $279,261 respectively. Negative
operating cash flows in the three months ended March 31, 1998 resulted from
increases in accounts receivable of $145,069, and inventory of $88,897,
attributable to increased sales volume. Negative operating cash flows in the
three months ended March 31, 1997 resulted principally from the operating loss
incurred during that period, which was largely offset by depreciation and
amortization of $124,746. The primary uses of cash during the three months ended
March 31, 1997 was the reduction of accounts payable and the increase in
accounts receivable attributable to increased sales volume over preceding
quarters.
Cash provided by financing activities of $224,277 and $289,500 during the three
months ended March 31, 1998 and 1997, respectively, was primarily due to the
receipt of net proceeds from the issuance of common stock. On January 12, 1998,
the Company issued 4% convertible subordinated debentures and 275,000 common
stock purchase warrants exercisable at $1.00 per share, through a private
placement to certain foreign investors pursuant to a claim of exemption under
Regulation "S" promulgated by the Securities and Exchange Commission under the
Securities Act of 1933. The net proceeds to the Company, after legal and other
costs, was $224,277, which was used to liquidate certain 1996 liabilities at a
substantial discount and provide working capital to support the Company's
operations. On February 25, 1998 and March 5, 1998, the holders of the
debentures converted the amounts outstanding into 563,215 shares of the
Company's common stock. All of the warrants remain outstanding. During the three
months ended March 31, 1997, as a result of the acquisition of the Company by
the investor group led by Mr. Smith, $289,500 was contributed to working
capital. This contribution significantly improved the Company's financial
condition thus strengthening the Company's relationships with vendors and
allowing the Company to finance significant increases in sales volume.
The Company has been able to increase its sales volume in the first three months
of 1998, by approximately 125%, and substantial progress was made by improving
all aspects of operating costs. As a result of these efforts and the equity
infusion described above, net working capital improved by $336,408 from a
negative $849,652 as of December 31, 1997, to a negative $513,244 as of March
31, 1998. Accounts receivable increased by $145,609 to $486,396, representing
approximately 29 days' sales, at March 31, 1998, from $341,327, representing
approximately 30 days' sales as of December 31, 1997. Inventory increased by
$88,897 to $163,830 at March 31, 1998 from $74,933 at December 31, 1997,
primarily as a result of increases in work in progress inventory. Prepaid
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expenses increased by $45,081 to $49,325 as of March 31, 1998 as a result of a
deposit related to the Company's pending start-up of customer call center
operations. Accounts payable increased by $36,115 to $603,956, representing
approximately 54 days' cost of sales, at March 31, 1998, from $567,84,
representing approximately 66 days' cost of sales, at December 31, 1997,
excluding the charge to the Company's inventory valuation allowance, described
above.
Many of the improvements described above were the result of new management's
efforts to improve relations with its customers and suppliers. In an effort to
improve cash flow from operations, during 1997, management also reached an
agreement with its largest customer by which this customer pays for products
produced by the Company on the 15th and 30th of each month. The Company has also
negotiated favorable terms for payment with several key suppliers and one former
supplier.
The Company's operating budgets for 1998 call for total revenues of
approximately $10,000,000 from a total of seven operating facilities, of which
the LTI facility in Lockhart, Texas will contribute approximately $8,000,000.
Net income from all operations is anticipated to be approximately $700,000. The
Company's performance in the first quarter of 1998 met its first quarter goals
toward achieving the 1998 budget.
The Company's growth plans include the entry into non-garment cut-and-sew
operations and a customer call center. The Company is currently involved in
substantial discussions with several states in which the Company has been
invited to develop secure call center operations in women's correctional
facilities. The Company has also entered into substantial discussions with a
furniture manufacturer who plans to repatriate a furniture assembly operation
currently performed outside the United States.
Most of these expansions will not require significant up-front capital
investments. At the Company's recently opened cut-and-sew operation at a WCC
correctional facility in McFarland, California, its initial start-up investment
was approximately $10,000. This operation is the first to take advantage of
WCC's effort to identify products which it currently buys from outside
suppliers, which will now be made by inmates at a WCC facility in which the
Company is operating a PIE business. Management believes that the cash flow
generated from operations is adequate to enable the Company to continue to
expand its Lockhart, Texas operations and expand into the remaining five new
facilities planned for 1998.
The Company's total debt as of March 31, 1998 was $52,183. Management believes
that, if it chose to do so, approximately $500,000 of additional financing could
be provided through borrowings secured by the Company's assets. These assets
include accounts receivable from Fortune 1000 companies, inventory and fixed
assets, all of which are currently unencumbered.
The Company's 1998 plans call for expansion into new prison facilities. The
timetable for the expansion could be accelerated with the infusion of additional
capital. The Company is continuing to negotiate with potential investors for
additional capital. In January 1998, the Company obtained, before costs and
expenses, $275,000 of new capital. The initial terms of the new funding could
have allowed the Company to access up to $1,000,000 of capital, however,
management determined that its cash needs did not warrant the cost of capital of
the additional funding. Furthermore, management was in negotiations with
additional potential investors with more favorable funding terms. The Company
currently has a letter of intent which is subject to due diligence from a
potential investor to provide $5,000,000 of funding through the issuance of
convertible preferred stock. There is no guarantee that this funding will take
place.
The Company's continued existence is dependent upon its ability to continue to
resolve its unfavorable liquidity status. While there is no assurance that such
problems can be resolved, the Company believes there is a reasonable expectation
of achieving that goal through cash generated from operations, the expansion of
operations and the sale of additional stock through private placements.
Management believes that it has demonstrated significant progress towards
resolving its liquidity problems. The Company has now been profitable for three
successive quarters on consistently
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improving sales volumes and has demonstrated the ability to raise additional
equity capital when it has been to the Company's advantage to do so.
Inflation
Inflation has not had a material impact on the Company's operations.
New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 128, " Earnings per
Share," is effective for fiscal years ending after December 15, 1997. This
statement established standards for computing and presenting earnings per share.
The provisions of this pronouncement have been reflected in the accompanying
financial statements.
SFAS No. 130, "Reporting Comprehensive Income," effective for fiscal years
beginning after December 15, 1997, establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. This statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company has addressed the
requirements of SFAS No. 130 and no material impact on the financial statements
is expected.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," effective for fiscal years beginning after December 15, 1997,
establishes standards for reporting information about operating segments in
annual financial statements and interim financial reports issued to
shareholders. Generally certain financial information is required to be reported
on the basis that it is used internally for evaluating performance of and
allocation of resources to operating segments. The Company has not yet
determined to what extent the standard will impact its current practice of
reporting operating segment information.
Computer Systems
The Company is currently evaluating its computer systems to determine whether
modifications and expenditures will be necessary to make its systems and those
of its vendors compliant with year 2000 requirements. These requirements have
arisen due to the widespread use of computer programs that rely on two-digit
date codes to perform computations or decision-making functions. Many of these
programs may fail as a result of their inability to properly interpret date
codes beginning January 1, 2000. For example, such programs may interpret "00"
as the year 1900 rather than 2000. In addition, some equipment, being controlled
by microprocessor chips, may not deal appropriately with the year "00". The
Company believes it will timely meet its year 2000 compliance requirements and
does not anticipate that the cost of compliance will have a material adverse
effect on its business, financial condition or results of operations. However,
there can be no assurance that all necessary modifications will be identified
and corrected or that unforeseen difficulties or costs will not arise. In
addition, there can be no assurance that the systems of other companies on which
the Company's systems rely will be modified on a timely basis, or that the
failure by another company to properly modify its systems will not negatively
impact the Company's systems or operations.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements in this quarterly report on form 10-Q contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which statements can generally be identified by
use of forward-looking terminology, such as "may," "will," "expect," "estimate,"
"anticipate," "believe," "target," "plan," "project," or "continue" or the
negatives thereof or other variations thereon or similar terminology, and are
made on the basis of management's plans and current analyses of the Company, its
business and the industry as a whole. These forward-looking statements are
subject to risks and uncertainties, including, but not limited to, economic
conditions,
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competition, interest rate sensitivity and exposure to regulatory and
legislative changes. The above factors, in some cases, have affected, and in the
future could affect, the Company's financial performance and could cause actual
results for 1998 and beyond to differ materially from those expressed or implied
in such forward-looking statements, even if experience or future changes make it
clear that any projected results expressed or implied therein will not be
realized.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in several lawsuits related to prior management and
claims against companies acquired or controlled by prior management. Several of
these suits claim that the Company is liable as a successor in interest for
amounts owed by entities whose assets were acquired by The Company. The
aggregate amount claimed under these lawsuits, including interest and attorney
fees is approximately $103,000. Management is vigorously defending these
lawsuits and believes that it will prevail.
The Company is involved in several lawsuits brought by former management
officials who claim they are entitled to certain severance benefits and back
pay. The aggregate amount claimed under these lawsuits, including interest and
attorney fees is approximately $444,000. Management is vigorously defending
these lawsuits and is asserting numerous counterclaims. The Company believes
that it will prevail.
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
No changes in the rights of the Company's Security holders occurred during the
period covered by this Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Security holders during the period
covered by this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The following exhibit is filed with this report:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
On January 27, 1998, the Company filed a report on form 8-K describing the
issuance on January 12, 1998, of $275,000 of 4% convertible debentures and
275,000 in $1.00 warrants in a private placement to certain non U.S. investors,
exempt from registration under "Regulation S".
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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.
U.S. TECHNOLOGIES INC.
DATE: May 4, 1998 BY: /s/ K. H. Smith
-----------------------------
K. H. Smith
President and CEO
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 144,721
<SECURITIES> 0
<RECEIVABLES> 486,396
<ALLOWANCES> 13,000
<INVENTORY> 163,830
<CURRENT-ASSETS> 844,272
<PP&E> 1,288,425
<DEPRECIATION> 1,154,532
<TOTAL-ASSETS> 1,290,052
<CURRENT-LIABILITIES> 1,357,516
<BONDS> 16,295
0
0
<COMMON> 583,906
<OTHER-SE> (667,665)
<TOTAL-LIABILITY-AND-EQUITY> 1,290,052
<SALES> 1,510,563
<TOTAL-REVENUES> 1,510,563
<CGS> 997,589
<TOTAL-COSTS> 1,416,146
<OTHER-EXPENSES> (19,753)
<LOSS-PROVISION> (6,000)
<INTEREST-EXPENSE> 2,295
<INCOME-PRETAX> 111,875
<INCOME-TAX> 0
<INCOME-CONTINUING> 111,875
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,875
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
