<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, 2000
[ ] 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.)
2001 Pennsylvania Avenue, NW, Suite 675
Washington, DC 20006
(Address of principal executive offices.)
Registrant's telephone number,
including area code: (202) 466-3100
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, as of May 5, 2000 was 29,482,286 shares.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
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U.S. TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,877,385 $ 9,451
Trade Accounts receivable, net of reserves of $206,000
at March 31, 2000 and December 31, 1999 324,001 195,289
Inventories 284,790 260,575
Prepaid expenses 276,409 39,340
------------ ------------
Total current assets 2,762,585 504,655
------------ ------------
Property and equipment, net of accumulated depreciation
of $1,361,738 and $1,329,988 at March 31, 2000 and
December 31, 1999 532,942 571,383
------------ ------------
Other assets:
Notes receivable 414,730 --
Other assets -- 16,058
------------ ------------
Total other assets 414,730 568,983
------------ ------------
Total assets $ 3,710,257 $ 1,092,096
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 28,627 $ 27,270
Accounts payable 968,091 1,004,237
Accrued expenses 349,266 267,587
------------ ------------
Total current liabilities 1,345,984 1,299,094
------------ ------------
Long-term debt less current maturities -- 13,794
------------ ------------
Total liabilities 1,345,984 1,312,888
------------ ------------
Shareholders' equity:
Common stock; $.02 par value; 40,000,000 shares
authorized; 29,849,278 and 29,195,278 issued and outstanding
at March 31, 2000 and December 31, 1999, respectively 597,176 583,906
Series A convertible preferred stock:
$0.02 par value; 10,000,000 shares authorized;
500,000 issued and outstanding 5,000,000 5,000,000
Series A convertible preferred stock:
subscribed but unissued 1,231,703 289,703
Series C mandatorily convertible preferred stock:
$0.02 par value; 8,750 shares authorized;
subscribed but unissued 1,800,928 --
Additional paid-in capital 12,465,198 12,275,655
Accumulated deficit (18,352,843) (17,992,167)
Stock receivable (150,205) (150,205)
Treasury stock, at cost, 400,000 shares held (227,684) (227,684)
------------ ------------
Total shareholders' equity 2,364,273 (220,792)
------------ ------------
Total liabilities and shareholders' equity $ 3,710,257 $ 1,092,096
============ ============
</TABLE>
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The accompanying notes are an integral part of the consolidated financial
statements.
U.S. Technologies Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended March 31,
---------------
2000 1999
---------- ----------
<S> <C> <C>
Net Sales $ 476,526 $1,870,284
Operating costs and expenses:
Cost of sales 627,277 2,036,641
Selling expense 15,923 18,389
General and administrative expense 210,999 824,966
---------- ----------
Total operating costs and expenses 854,199 2,879,996
---------- ----------
(Loss) from operations (377,673) (1,009,712)
Other income (expense)
Interest, net 3,254 (35,256)
Other, net 13,743 (61,713)
Gain on sale of subsidiary -- 1,168,994
---------- ----------
Total other income (expense) 16,997 1,072,025
---------- ----------
Income (loss) before income taxes $ (360,676) $ 62,313
Provision for income taxes -- --
---------- ----------
Net income (loss) $ (360,676) $ 62,313
========== ==========
Net income (loss) per share:
Basic $ (0.01) $ 0.00
========== ==========
Diluted $ (0.01) $ 0.00
========== ==========
Shares used in per share calculation:
Basic 28,924,838 28,795,278
========== ==========
Diluted 28,924,838 29,087,678
========== ==========
</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,
------------------------------
2000 1999
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (360,676) $ 62,313
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Depreciation and amortization 31,750 26,742
Gain on sale of Subsidiary -- (1,168,994)
Advances, net of deficit in operating
results, to subsidiary prior to sale -- (570,318)
Changes in certain assets and liabilities:
Accounts receivable (128,712) (111,346)
Inventories (24,215) (61,871)
Prepaid expense (237,069) (77,684)
Accounts payable (36,146) 208,320
Accrued expenses 81,679 76,697
---------- -----------
Net cash used in operating activities (673,389) (1,616,141)
---------- -----------
Cash flows from investing activities:
Equipment purchases -- (6,774)
Advances to former shareholder -- (200,000)
Advances to internet companies (414,730) --
Proceeds from sale of subsidiary -- 1,076,000
Change in other assets 22,749 34,590
---------- -----------
Net cash provided by (used in) investing activities (391,981) 903,816
Cash flows from financing activities:
Proceeds from exercise of stock
options and warrants 202,813 --
Proceeds from convertible preferred stock
subscriptions net of costs 2,742,928 643,329
Payments of notes payable (12,437) (3,096)
---------- -----------
Net cash provided by financing activities 2,933,304 640,233
---------- -----------
Net cash provided (used) 1,867,934 (72,092)
Cash and cash equivalents, beginning of period 9,451 110,140
---------- -----------
Cash and cash equivalents, end of period $1,877,385 $ 38,048
========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
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U.S. TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. This information reflects all adjustments which are, in the opinion
of management, necessary for a fair presentation of the statement of financial
position of the Company as of March 31, 2000 and the results of operations and
cash flows for the three months ended March 31, 2000. All adjustments made have
been of a normal recurring nature. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The Company
believes that disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
2. NATURE OF OPERATIONS
OUTSOURCING OPERATIONS
U.S. Technologies Inc. (the "Company"), is an "outsourcing company" that
provides manufacturing, assembly, repair, kitting and fulfillment services to
Fortune 1000 and other select businesses. The Company performs its services
utilizing prison labor under the Prison Industry Enhancement Program ("PIE").
Congress created the PIE program 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.
E2E ACQUISITION
On February 22, 2000, the Company announced that it reached a definitive
agreement to acquire E2Enet, Inc. ("E2E"), a privately held Internet incubator
company. On April 5, 2000, this agreement was amended so the acquisition could
qualify as a tax-free transaction. E2E has made early stage investments in
several development stage business-to-business (B2B) and business-to-consumer
(B2C) e-commerce businesses. The Company's acquisition of E2E closed on April
12, 2000.
The Company believes that its acquisition of E2E will provide the Company with
a platform to establish a position in the growing e-commerce industry. The
Company believes that the completion of the E2E Acquisition will enhance the
Company's opportunities for both investment in and creative development of
promising early stage B2B and B2C e-commerce ventures. Further investments in
this industry are intended primarily to comprise controlled subsidiaries
engaged in the development or operation of B2B business. The Company also is in
the process of expanding its management team to include technology and
e-commerce expertise.
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The Company intends to restructure some of E2E's investments in its portfolio
companies and provide these entities with additional working capital to
stimulate their further growth and expansion. E2E's initial investment in
Buyline.net, Inc. ("Buyline") will be restructured and increased so that
Buyline becomes a controlled operating subsidiary. On February 28, 2000, the
Company and Buyline, an E2E portfolio company, entered into an Agreement in
Principle (the "Buyline Agreement"), which provided for (1) the conversion to
Buyline's common stock of E2E's existing loans to Buyline (including accrued
interest), (2) acknowledgment of in kind services already rendered by E2E, and
(3) an additional $1,000,000 cash investment by the Company through E2E.
Simultaneous with entering into the Buyline Agreement, the Company hired a
technology executive who has become Buyline's President and Chief Executive
Officer. The Company presently completed definitive documentation for, and
closed, the Buyline restructuring on April 26, 2000. As a result, the Company,
through E2E, will be the controlling shareholder of Buyline, and will designate
and supervise the Buyline management team.
On March 13, 2000, the Company reached an agreement with Vipro Corporation
("Vipro") to invest and, on April 12, 2000, did invest through E2E an
additional $1,000,000 in Vipro, another E2E portfolio company, for additional
equity in the form of shares of Vipro's Series B Convertible Preferred Stock.
3. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
4. INVENTORIES
At March 31, 2000, and December 31, 1999, inventories consisted of the
following:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Raw materials $247,047 $217,348
Work in progress 14,989 42,180
Finished Goods 22,754 1,047
-------- --------
$284,790 $260,575
======== ========
</TABLE>
5. NOTES RECEIVABLE
During the quarter ended March 31, 2000, the Company advanced cash, to be used
for working capital, to primarily Buyline.net, Inc. ("Buyline") and Portris,
LLC ("Portris"). Buyline is an E2E portfolio company. See note 2 above. As of
March 31, 2000, the Company had advanced $350,000 to Buyline. Portris is a
software company that has developed an information management system that
facilitates performance of interactive team oriented projects over the
internet. On April 12, 2000, the Company signed a letter of intent with
Portris. Under the terms of the letter of intent the Company will receive a
30.4% equity interest in Portris for $380,000, including an amount of $50,000,
which is included in the Company's notes receivable as of March 31, 2000.
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6. CONVERTIBLE PREFERRED STOCK
On the closing date of the E2E Acquisition, the Company sold, in two private
placement transactions, 125,000 shares of its Series A Convertible Preferred
Stock ("Series A Preferred") to USV Partners LLC ("USV") at a purchase price of
$10 per share and 5,184 shares of its Series C Mandatorily Convertible
Preferred Stock ("Series C Preferred") at a purchase price of $1,000 per share.
Of the 5,184 shares of Series C Preferred issued, USV purchased 2,120 shares
for $2,120,000. Gregory Earls, the Co-Chairman and the Co-Chief Executive
Officer of the Company, is the sole member of the management of USV.
The proceeds of $6,309,000 raised through the recent sales of the Series A
Preferred and Series C Preferred will be used primarily to finance additional
investments in new and existing internet businesses that focus on B2B and B2C
e-commerce, the payment of costs incurred and liabilities assumed in connection
with the E2E Acquisition and related business transactions and ongoing working
capital needs.
When the E2E Acquisition closed, E2E's former stockholders were issued a total
of 1,120,000 shares of the Company's Series B Mandatorily Convertible Preferred
Stock (the "Series B Preferred"). Upon their mandatory conversion as described
below, these shares of Series B Preferred will be converted into 56,000,000
shares of the Company's common stock, par value $0.02 ("Common Stock").
The Company's capital stock is presently comprised of common stock, par value
$0.02 ("Common Stock"), Series A Preferred, Series B Preferred and Series C
Preferred. Except as explained below with respect to the Charter Amendment
(defined and discussed below), each holder of Series A Preferred is entitled to
vote as if converted to Common Stock on all matters that require a vote of the
holders of the Company's capital stock.
USV is the holder of all issued and outstanding shares of Series A Preferred.
Under the Certificate of Designations, Rights and Preferences, as amended,
setting forth the rights and preferences of the Series A Preferred, USV has the
right to convert its shares of Series A Preferred to Common Stock at any time.
Upon the conversion of all of the Series A Preferred, USV would be entitled to
receive 51,229,508 shares of Common Stock. USV and the Company entered into an
agreement, dated March 1, 2000, whereby USV waived its right to convert its
shares of Series A Preferred until an appropriate amendment is made to the
Company's Restated Certificate of Incorporation. This amendment will increase
the number of shares of Common Stock that the Company is authorized to issue to
an amount sufficient for all of the Company's outstanding convertible
securities, warrants and options to be converted or exercised (the "Charter
Amendment"). USV has committed to convert its Series A Preferred shares to
Common Stock once the Charter Amendment is effective.
Under the definitive agreement containing the terms and conditions of the E2E
Acquisition, the Company is required to call a meeting of its stockholders to
approve the Charter Amendment. Upon the acceptance of the Charter Amendment for
filing by the Secretary of State of the State of Delaware, the Series B
Preferred and the Series C Preferred will automatically be converted into
shares of Common Stock.
The terms of the Series B Preferred and the Series C Preferred do not permit
the holders thereof to vote on the Charter Amendment, but otherwise permit them
to vote as if the Series B Preferred and Series C Preferred were already
converted to Common Stock. Accordingly, the Charter Amendment will be presented
for approval by the holders of outstanding shares of Common Stock and Series A
Preferred, voting together as a single class.
7. SEGMENT INFORMATION
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<PAGE> 9
During 1998, the Company adopted SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
their financial statements. The standard defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision makers in
deciding how to allocate resources and in assessing the performance. The
Company's chief operating decision makers aggregate operating segments based on
the location of the segment and whether it is prison-based or free-world. Based
on the quantitative thresholds specified in SFAS 131, the Company has
determined that it has three reportable segments for the quarter ended March
31, 2000. The three reportable segments are USXX (Washington, DC), LTI
(Lockhart, Texas) ("LTI Lockhart"), and LTI (Blythe, California) ("LTI Blythe").
USXX is the corporate office, LTI Lockhart is a prison-based manufacturer of
computer circuit boards and LTI Blythe is a prison-based manufacturer of
modular office furniture components.
Based on the quantitative thresholds specified in SFAS 131, the Company has
determined that it had four reportable segments during the quarter ended March
31, 1999. In addition to the three reportable segments identified above, the
Company owned, until its sale in February 1999, a controlling interest in TMD.
Segment amounts disclosed are prior to any elimination entries made in the
consolidation.
Summary information by segment as of and for the three months ended March 31,
2000 and 1999 follow (in thousands):
<TABLE>
<CAPTION>
LTI LTI
USXX Lockhart TMD(1) Blythe Other Total
------ -------- -------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
2000
Net sales $ --- $ 359 $ -- $ 102 $ 16 $ 477
Operating Profit (loss) (151) (200) -- (19) (8) (378)
Total Assets 4,863 675 -- 389 127 6,054
1999
Net sales $ --- $ 749 $ 948 $ 173 $ -- $ 1,870
Operating Profit (loss) (539) (240) (66) (136) (29) (1,010)
Total Assets 4,249 979 --- 370 194 5,792
</TABLE>
(1) TMD was sold by the Company on February 12, 1999. The operating results
include activity through that date.
8. EARNINGS PER SHARE
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The Company has adopted the provisions of Statements of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share", which was 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 does not include the dilutive effect of
common stock equivalents for the three months ended March 31, 2000 because
stock options and warrants which comprised common stock equivalents would have
been anti-dilutive. Diluted earnings per share include the dilutive effect of
common stock equivalents for the three months ended March 31, 1999 because
stock options and warrants which comprised common stock equivalents were
dilutive.
<TABLE>
<CAPTION>
Per
(Loss) Shares share
(Numerator) (Denominator) amount
---------- ------------- --------
<S> <C> <C> <C>
Three months ended March 31, 2000:
Net (loss) $(360,676) 28,924,838 $ (0.01)
Effect of dilutive potential common shares:
Stock options -- --
Warrants -- --
--------- ----------
Diluted net (loss) $(360,676) 28,924,838 $ (0.01)
========= ========== ========
Three months ended March 31, 1999:
Net income $ 62,313 28,795,278 $ 0.00
Effect of dilutive potential common shares:
Stock options -- 17,400
Warrants -- 275,000
--------- ----------
Diluted net income $ 62,313 29,087,678 $ 0.00
========= ========== ========
</TABLE>
9. RECENT ACCOUNTING PRONOUNCEMENTS
None.
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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, 1999.
Results of Operations
The following analysis compares the results of operations for the three-month
period ended March 31, 2000 to the comparable period ended March 31, 1999.
Net sales during the three months ended March 31, 2000 were $476,526, compared
to $1,870,284 during the three months ended March 31, 1999. The decrease in
net sales, in the amount of $1,393,758, was primarily due to the sale of TMD
during February 1999. During the quarter ended March 31, 1999, TMD had
accounted for approximately $948,000 of the Company's net sales. The remainder
of the sales decline was due to a decline in sales in the Company's LTI
Lockhart facility, which occurred as a result of the reorganization of the
facility during the second half of the year ended December 31, 1999 and is
continuing. This reorganization included the hiring of a new plant manager, the
installation of new equipment that will replace tasks which were previously
performed manually which is expected to enable an increased sales effort.
In the three months ended March 31, 2000, cost of goods sold was $627,277,
which represented 132% of net sales. During the three months ended March 31,
1999, cost of goods sold was $2,036,641, which represented 109% of net sales.
The increase in the cost of goods sold percentage was a result of inventory
adjustments to reflect loss of certain customers while reducing manufacturing
payroll and fixed costs to match the decline in sales.
Selling expenses during the three months ended March 31, 2000 were $15,923,
representing 3% of net sales. During the three months ended March 31, 1999,
selling expenses in the amount of $18,389 represented 1% of net sales. These
expenses increased as a percentage primarily due to fixed compensation
arrangements with a contract sales person.
General and administrative expenses during the three months ended March 31,
2000 were $210,999, which represented 44% of net sales. During the three months
ended March 31, 1999, general and administrative expenses were $824,966,
which also represented 44% of net sales. The Company has made significant
changes in its overhead structure since the quarter ended March 31, 1999,
enabling the Company to maintain the same percentage relationship even though
net sales have decreased by approximately 74%. These changes primarily involved
reduction of corporate staff and their associated expenses.
During the three months ended March 31, 2000, the Company had a net loss of
$(360,676) or $(0.01) per weighted-average share. During the three months ended
March 31, 1999 the company reported net earnings of $62,313 or $0.00 per
weighted-average share. The Company's net income for the quarter ended March
31, 1999, included a gain of $1,168,994, on the sale of the Company's interest
in TMD. Except for the gain on the sale of TMD, the Company would have reported
a loss of $(1,106,681) or approximately $(0.04) per share for the quarter ended
March 31, 1999.
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Liquidity and Capital Resources
During the three months ended March 31, 2000 and 1999, the Company experienced
negative operating cash flows of $673,389 and $1,616,141 respectively.
Negative operating cash flows in the three months ended March 31, 2000 resulted
principally from the $(360,676) net loss incurred during that period and
increases in prepaid expenses and accounts receivable of $237,069 and $128,712,
respectively. The increase in prepaid expenses includes approximately $225,000
in legal costs associated with the E2E acquisition, which closed on April 12,
2000. Negative operating cash flows in the three months ended March 31, 1999,
resulted primarily from a loss, net of the gain on the sale of TMD, of
$(1,106,681), advances to TMD of $570,318 and an increase in accounts
receivable of $111,346. These unfavorable impacts on operating cash flow were
partially offset by increases in accounts payable and accrued expenses of
$208,320 and $76,697, respectively.
Net cash used in investing activities of $391,981 during the three months ended
March 31, 2000, was primarily the result of cash advances to internet
companies, associated with the acquisition of E2E by the Company, of $414,730.
Net cash provided by investing activities of $903,816 during the three months
ended March 31, 1999 was primarily the result of cash proceeds from the sale of
TMD of $1,076,000, reduced by an advance to the former officer and shareholder
who purchased TMD from the Company, of $200,000.
Net cash provided by financing activities of $2,933,304 during the three months
ended March 31, 2000 was primarily due to the receipt of net proceeds from the
subscription of preferred stock of $2,742,928 and proceeds from the exercise of
common stock options and warrants of $202,813. Net cash provided by financing
activities of $640,233 during the three months ended March 31, 1999 was
primarily due to the receipt of net proceeds from the subscription of preferred
stock.
As identified by the above discussion and analysis, the Company did not produce
a profit from operations in the quarter ended March 31, 2000. Management has
initiated steps to further reorganize the Company, increase sales and reduce
unnecessary costs. However, returning the Company to profitability will require
additional investment and working capital. To provide for this investment and
working capital, the Company raised, during the period January 1 through May 1,
2000, approximately $6,309,000 through the subscriptions of its Series A
Preferred and Series C Preferred.
FORWARD-LOOKING INFORMATION
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, 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 2000 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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The "forward-looking statements" contained in this report may also concern
prospective events regarding acquisitions and investments, and prospects for
such acquisitions and investments. The Company cautions that actual
developments and results may differ materially from our expectations for such
prospective future events. There can be no assurance that the conditions
necessary to completing any prospective acquisition, investment or related
financing transaction will be satisfied, or that any such prospective event
will occur. Additional investment by the Company or an unrelated person in any
entity that is a part of our investment portfolio provides no assurance that
such portfolio company will succeed or that our investments will be recovered
or profitable. The Company's assets and operations, including results of
operation, would be affected materially by either occurrence of any such event
or the failure of any such event to occur, by the extent to which E2E and our
portfolio companies continue to have access to financing sources on reasonable
terms in order to pursue its and our business plans, by the success or failure
of the business plans of E2E and our portfolio companies, by economic
conditions generally and particularly in the developing e-commerce market, by
competition and technological changes in E2E's and our portfolio companies'
industries and businesses, and by the results of E2E and our portfolio
companies' operations if and when operating.
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PART II. OTHER INFORMATION
ITEM 1. THROUGH ITEM 4. Not applicable.
ITEM 5. OTHER INFORMATION.
During March 2000, the Company began staffing the facility it will manage for
American Quantum Cycles in the Wackenhut Corrections Corporation facility
located in South Bay, Florida. Using a combination of free-world employees and
prisoners the Company will perform the functions of fabricating, painting and
polishing motorcycle parts. The Company will manage various aspects of the
manufacturing process for American Quantum, while American Quantum will retain
responsibility for monitoring quality control. Production activities under this
agreement will commence during the second quarter of 2000, with the first phase
consisting of the polishing of aluminum and stainless steel motorcycle parts.
On April 12, 2000, the Company signed a letter of intent with Web
Milestones.com, LLC. Web Milestones.com, LLC is an internet services company
that will initially provide a site for publishing obituary notices that can be
accessed through the Internet's World Wide Web. Under the terms of the letter
of intent the Company will receive a 40% equity interest in WebObits for
$400,000.
On March 7, 2000, the Company received notification of a claim from the legal
counsel for Carlton Technologies & Services, Inc. ("Carlton"), a Canadian
company which had made loans to the Company prior to December 31, 1996. The
Company reported in its annual report for the year ended December 31, 1996 that
the Company had issued shares of its common stock in repayment of these loans
from Carlton. The Company also reported that the value of the shares issued to
Carlton exceeded the amount of the loans from Carlton by approximately
$150,000, an amount which has since been reported as a reduction of the
Company's shareholder equity. Carlton's claim asserts that it owes no such
amount to the Company, has not received all of the common shares to which it is
entitled and is owed approximately $78,000, as compensation for the common
shares that Carlton asserts have not been issued. The Company has referred this
claim to its legal counsel and as of the date of this report can not determine
the validity of the Carlton claim.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
A list of exhibits included as part of this report
is set forth in the Exhibit Index appearing
elsewhere in this report, and is incorporated by
reference.
(b) Reports on form 8-K
During the quarter for which this report is filed, Registrant
filed a Current Report on form 8-K dated February 28, 2000.
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27.1 Financial Data Schedule, submitted to the Commission in
electronic format
</TABLE>
15
<PAGE> 16
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 duly authorized officers.
U.S. TECHNOLOGIES INC.
(Registrant)
Date: May 15, 2000 /s/ Gregory Earls
------------------------------
Gregory Earls
Co-Chief Executive Officer
Date: May 15, 2000 /s/ James V. Warren
------------------------------
James V. Warren
Co-Chief Executive Officer
16
<PAGE> 17
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27.1 Financial Data Schedule, submitted to the Commission in
electronic format
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 2000, UNAUDITED FINANCIAL STATEMENTS OF U.S. TECHNOLOGIES, INC., AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS IN FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000. (IN THOUSANDS)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,877
<SECURITIES> 0
<RECEIVABLES> 530
<ALLOWANCES> 206
<INVENTORY> 285
<CURRENT-ASSETS> 2,763
<PP&E> 1,895
<DEPRECIATION> 1,362
<TOTAL-ASSETS> 3,710
<CURRENT-LIABILITIES> 1,346
<BONDS> 0
0
8,033
<COMMON> 597
<OTHER-SE> (6,266)
<TOTAL-LIABILITY-AND-EQUITY> 3,710
<SALES> 477
<TOTAL-REVENUES> 477
<CGS> 627
<TOTAL-COSTS> 627
<OTHER-EXPENSES> 227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (361)
<INCOME-TAX> 0
<INCOME-CONTINUING> (361)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (361)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
