_________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1995
Commission File Number 33-24608-LA
USA INTERNATIONAL CHEMICAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4068292
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
20720 Ventura Boulevard, Suite 210,
Woodland Hills, California 91364
(Address of principal executive offices)
(818) 346-9595
(Registrant's telephone number, including area code)
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: [ ]
Common Stock, $.00001 par value, 1,329,809 issued and outstanding
as of November 10, 1995.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) 3
F-1 to F-6
ITEM 2. Management's Discussion and Analysis 4
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 6
ITEM 2. Changes in Securities 6
ITEM 3. Defaults upon Senior Securities 6
ITEM 4. Submission of Matters to a Vote of
Security Holders 6
ITEM 5. Other Information 6
ITEM 6. Exhibits and Reports on Form 8-K 6
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
USA International Chemical, Inc.
We have reviewed the accompanying balance sheet of USA
International Chemical, Inc. as of September 30, 1995 and the
related statements of operations and accumulated deficit and cash
flows for the three-month periods ended September 30, 1995 and
1994. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical review procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above, for them to be in conformity with generally
accepted accounting principles.
As discussed in Note 1, certain conditions indicate that the
Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments
to the financial statements that might be necessary should the
Company be unable to continue as a going concern.
The balance sheet of USA International Chemical, Inc. as of June
30, 1995 and the related statements of operations, stockholders'
deficit and cash flows (not presented herein) were audited by
Ernst & Young LLP whose report dated September 8, 1995 expressed
an unqualified opinion on those statements and included an
explanatory paragraph that described the going concern
uncertainty discussed in Note 1.
BLOCK & HANDELMAN
Los Angeles, California
November 6, 1995
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND JUNE 30, 1995
ASSETS
September 30, June 30,
1995 1995
(Unaudited) (Audited)
CURRENT ASSETS
Cash $1,244 $1,502
TOTAL CURRENT ASSETS 1,244 1,502
TOTAL ASSETS $1,244 $1,502
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $3,581 $2,479
TOTAL CURRENT LIABILITIES 3,581 2,479
STOCKHOLDERS' DEFICIT
Common stock, $.00001 par value,
authorized 50,000,000 shares,
issued and outstanding
1,329,809 shares (Notes 1 and 4) 13 13
Additional paid-in capital 248,967 238,967
Accumulated deficit (251,317) (239,957)
TOTAL STOCKHOLDERS' DEFICIT (2,337) (977)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $1,244 $1,502
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Three Months Ended
September 30,
1995 1994
SALES (Note 3) $ - $ 34,320
COST OF SALES - 17,377
GROSS PROFIT - 16,943
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 10,560 1,806
(LOSS) INCOME FROM OPERATIONS (10,560) 15,137
OTHER INCOME (EXPENSE)
Interest income (Note 2) - 271
Interest expense (Note 2) - (1,038)
- (767)
(LOSS) INCOME BEFORE INCOME TAX
PROVISION (10,560) 14,370
PROVISION FOR INCOME TAX 800 800
NET (LOSS) INCOME (11,360) 13,570
ACCUMULATED DEFICIT,
beginning of period (239,957) (232,337)
ACCUMULATED DEFICIT,
end of period $(251,317) $(218,767)
NET (LOSS) INCOME PER SHARE
(Note 4) $ (.01) $ .01
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 4) $1,329,809 $1,124,809
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Three Months Ended
September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $(11,360) $13,570
ADJUSTMENTS TO RECONCILE NET (LOSS)
INCOME TO NET CASH (USED) PROVIDED
BY OPERATING ACTIVITIES:
Changes in:
Accounts receivable -net - 917
Accounts payable 1,102 (2,283)
1,102 (1,366)
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (10,258) 12,204
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in related party loans - (69,495)
Capital contributions 10,000 56,996
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 10,000 (12,499)
NET DECREASE IN CASH (258) (295)
CASH, at beginning of period 1,502 295
CASH, at end of period $1,244 $ -
Supplemental Disclosures of Cash Flow Information:
Income taxes paid 800 800
Interest paid - 1,038
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments necessary to present
fairly its financial position and the results of its operations
and cash flows for the periods shown. Such adjustments consisted
only of normal recurring items.
The results of operations for the three-month periods are not
necessarily indicative of the results to be expected for a full
year of operations.
The financial statements and notes are presented as permitted by
Form 10-QSB and do not contain certain information included in
the annual financial statements and notes.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
On September 23, 1994, the Company's former President and
Secretary and an affiliate of the Company, USA International
Defense Systems, Inc., (Sellers) and the Company finalized a
Stock Purchase Agreement whereby, the Sellers agreed to sell to
Shane Investment Company, Inc. (Buyer) 88,200,000 shares of the
Company's common stock for consideration of $69,000 in cash.
Pursuant to the agreement, to complete the sale of stock, the
Company's former President was required to repay his loan to the
Company and the Company was required to repay its loan to USA
International Defense Systems, Inc. and liquidate all other
liabilities outstanding at the date of the sale. The liabilities
were liquidated through the capital contribution into the Company
by its former President of $56,996 prior to the sale. Upon
closing and consummation of the agreement, all then current
members of the Company's Board of Directors tendered their
resignations as Directors, and Shane Investment Company's
nominees were appointed to replace them on the Board. During the
three months ended September 30, 1995 and 1994, the Company did
not pay or accrue any amounts for compensation to officers.
The Company has undergone a change in management. Management
recognizes that the Company has a history of losses and is
evaluating various alternatives to recapitalize the Company which
may provide the opportunity for the Company to continue as a
going concern.
It is not possible to predict the success of management's
efforts. If management is unable to achieve any of its goals,
the Company will find it necessary to undertake actions as may be
appropriate to continue operations. The financial statements do
not reflect any adjustments that might result from the outcome of
this uncertainty.
NOTE 2 - RELATED PARTY TRANSACTIONS
Loans made to the former President of the Company were due on
demand, with interest at 6.5% per annum. The loans were repaid
in full in August, 1994.
Interest income for the three months ended September 30, 1994
included interest of $271 earned from the officer's loans.
Advances were due to a former affiliate, USA International
Defense Systems, Inc. (Defense) at June 30, 1994. The advances
were payable on demand and bore interest at 6.5% per annum. The
advances were repaid in full during September, 1994.
Interest expense for the three months September 30, 1994 included
interest incurred on these advances of $1,038.
The Company and Defense shared common office facilities in Santa
Monica, California until September 23, 1994. Defense charged the
Company $300 per month for its share of occupancy expenses.
After the sale of stock in September 1994 (Note 1), the Company
maintained its executive officers in space provided by the
Company's President at no charge.
NOTE 3 - MAJOR CUSTOMERS
The Company had no sales for the three-month period ended
September 30, 1995.
During the three months ended September 30, 1994, 89.9% and
10.1%, respectively, of the Company's sales were made to the
Government of Taiwan and a single foreign customer in Singapore.
NOTE 4 - NET (LOSS) INCOME PER SHARE
Net (loss) income per share has been computed based on the
weighted average common shares outstanding during each period.
On April 19, 1995, the Company's stockholders approved a one for
100 reverse stock split with respect to outstanding Common Stock.
All references to share and per share amounts of Common Stock
have been adjusted to give effect to the reverse stock split.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30,
1995 as Compared to the Three Months Ended September 30, 1994:
Operating Activities
There were no sales for the quarter ended September 30,
1995. Due to the change of control of the Company in September,
1994, the Company is not expected to pursue any of the Company's
former chemical or skin care products sales business.
Consequently, until the Company's current management develops or
acquires new business lines, no operating revenues are expected.
Sales for the quarter ended September 30, 1994 were $34,320
and were made prior to the change of control of the Company. A
sale of $30,847 of chemical products to the Government of Taiwan
accounted for most of the Company's sales volume during the
quarter. Gross profit for the quarter totaled $16,943. Gross
profit, as a percentage of sales, was 49.4% due to the high
margin sale to the Government of Taiwan.
Interest income for the three months ended September 30,
1994 consisted of interest earned of $271 from officer loans
which were repaid in August 1994.
Operating expenses totaled $10,560 during the quarter ended
September 30, 1995 compared to $1,806 for the same quarter of
1994. The $8,754 increase was a direct result of higher legal
and accounting fees incurred in connection with the Company's
annual audit.
Accounts payable increased $1,102 from $2,479 at June 30,
1995 to $3,581 at September 30, 1995. The increase resulted from
higher professional fees incurred in connection with the
Company's annual audit.
During the three months ended September 30, 1995, net cash
used by operations was $10,258. During the three months ended
September 30, 1994, net cash of $12,204 was provided by
operations.
Net loss totaled $11,360 for the three months ended
September 30, 1995 compared to net income of $13,570 for the
three months ended September 30, 1994, a decrease of $24,930.
The decrease resulted primarily from the Company's having no
operating revenues and incurring higher administrative expenses
in the current quarter.
In light of the foregoing, the Company will attempt to keep
administrative expenses to a minimum. However, operating losses
are anticipated until the Company establishes new lines of
business.
For the foreseeable future, the Company's sole activity is
expected to be the identification and evaluation of suitable
business opportunities which could result in an acquisition by or
combination with the Company. There can be no assurance,
however, that the Company will be successful in its efforts, or
that other types of business transactions might not be
considered.
Capital Resources and Liquidity
Pursuant to the terms of a Stock Purchase Agreement the
Company liquidated its assets and liabilities during the three
months ended September 30, 1994. Since September 30, 1994, the
Company has generated no revenues from operations. During the
three months ended September 30, 1995, capital was provided for
operations from $10,000 in contributions from two of the
Company's principal stockholders.
The Company expects to fund its ongoing capital needs
through investments in or advances to the Company by its
principal stockholders or other affiliates of the Company.
During the three months ended September 30, 1994, the
Company's then President repaid his loan receivable of $28,969.
Borrowings of $98,464 from an affiliated corporation were
repaid by the Company during the three months ended September 30,
1994.
FINANCIAL CONDITION AS OF SEPTEMBER 30, 1995
The following financial summary shows the deficit of the
Company:
September 30, June 30,
1995 1995
(Unaudited) Audited
Total Assets $ 1,244 $ 1,502
Total Liabilities 3,581 2,479
Stockholders' Deficit $ (2,337) $ (977)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company, or to which
the Company or any of its officers or directors are a party, and
to the knowledge of the Company's management, no claims have been
made against the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No Exhibits
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the Registrant caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
USA INTERNATIONAL CHEMICAL, INC.
Dated: November 13, 1995
Yale Farar, President and
Chief Financial Officer
(Principal Accounting Person)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-QSB
FOR THE PERIOD ENDED 9-30-95 FOR USA INTERNATIONAL CHEMICAL, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000840399
<NAME> USA INTERNATIONAL CHEM
<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-START> JUL-01-1995
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</TABLE>
