__________________________________________________________________________
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 MARCH 31, 1996
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.
incorporation or organization) Employer 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: <checked-box> NO: <square>
Common Stock, $.00001 par value, 1,335,809 issued and outstanding as of
May 10, 1996.
__________________________________________________________________________
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
2483(b).jhj -1-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Set forth herein at pages F-1 to F-6
2483(b).jhj -2-
<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 March 31, 1996 and the related statements of operations and
accumulated deficit and cash flows for the three-month and nine-month periods
ended March 31, 1996 and 1995. 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
May 6, 1996
F-1
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
BALANCE SHEETS
MARCH 31, 1996 AND JUNE 30, 1995
ASSETS
March 31, June 30,
1996 1995
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash $ 74 $ 1,502
TOTAL CURRENT ASSETS 74 1,502
TOTAL ASSETS $ 74 $ 1,502
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 170 $ 2,479
TOTAL CURRENT LIABILITIES 170 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 261,967 238,967
Accumulated deficit (262,076) (239,957)
TOTAL STOCKHOLDERS' DEFICIT (96) (977)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 74 $ 1,502
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations.
F-2
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995
Three Months Ended Nine Months Ended
MARCH 31 MARCH 31
1996 1995 1996 1995
SALES (Note 3) $ - $ - $ - $ 34,320
COST OF SALES - - - 17,377
GROSS PROFIT - - - 16,943
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,219 6,087 21,319 17,000
LOSS FROM OPERATIONS (5,219) (6,087) (21,319) (57)
OTHER INCOME (EXPENSE)
Interest income (Note 2) - - - 271
Interest expense (Note 2) - (242) - (1,476)
- (242) - (1,205)
LOSS BEFORE INCOME
TAX PROVISION (5,219) (6,329) (21,319) (1,262)
PROVISION FOR INCOME TAX - - 800 800
NET LOSS $ (5,219) $ (6,329) (22,119) (2,062)
ACCUMULATED DEFICIT,
beginning of period (239,957) (232,337)
ACCUMULATED DEFICIT,
end of period $ (262,076) $ (234,399)
NET LOSS PER SHARE
(Note 4) $ - $ (.01) $ (.02) $ -
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 4) 1,329,809 1,124,809 1,329,809 1,124,809
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations.
F-3
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
Nine Months Ended
MARCH 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (22,119) $ (2,062)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED BY OPERATING ACTIVITIES:
Changes in:
Accounts receivable - net - 917
Accounts payable (2,309) (1,494)
Income taxes payable - (800)
(2,309) (1,377)
NET CASH USED BY
OPERATING ACTIVITIES (24,428) (3,439)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in related party loans - (69,495)
Capital contributions 23,000 74,496
NET CASH PROVIDED BY
FINANCING ACTIVITIES 23,000 5,001
NET (DECREASE) INCREASE IN CASH (1,428) 1,562
CASH, at beginning of period 1,502 295
CASH, at end of period $ 74 $ 1,857
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 800 $ 1,600
Interest paid $ - $ 1,038
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations.
F-4
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996 AND 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 and nine-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 nine months ended March 31, 1996 and 1995, 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 return the Company to an
operating entity, 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 operating. The financial statements do not reflect any
adjustments that might result from the outcome of this uncertainty.
F-5
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
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 nine months ended March 31, 1995 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 nine months ended March 31, 1995 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 offices in space provided by the Company's President
at no charge.
NOTE 3 - MAJOR CUSTOMERS
The Company had no sales for the nine-month period ended March 31,
1996.
During the nine months ended March 31, 1995, 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 PER SHARE
Net loss 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.
F-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1996
AS COMPARED TO THE NINE MONTHS ENDED MARCH 31, 1995:
OPERATING ACTIVITIES
There have been no sales for the nine months ended March 31, 1996. Due
to the change of control of the Company in September, 1994, the Company is
not pursuing 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 nine months ended March 31, 1995 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 nine-month period. Gross profit for the
nine-month period 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 nine months ended March 31, 1995 consisted of
interest earned of $271 from officer loans which were repaid in August 1994.
Operating expenses totaled $21,319 during the nine-months ended March
31, 1996 compared to $17,000 for the same period of 1995. The $4,319
increase was a direct result of higher legal and accounting fees incurred in
connection with the Company's annual audit.
During the nine months ended March 31, 1996, net cash used by operations
was $24,428. During the nine months ended March 31, 1995, net cash of $3,439
was used by operations.
Accounts payable decreased $2,309 from $2,479 at June 30, 1995 to $170
at March 31, 1996. The decrease resulted from the use of available cash to
reduce these accounts payable.
Net loss totaled $22,119 for the nine months ended March 31, 1996
compared to a net loss of $2,062 for the nine months ended March 31, 1995, an
increase in net loss of $20,057. The increase in net loss resulted primarily
from the Company's having no operating revenues and incurring higher
administrative expenses in the current nine-month period.
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 nine months ended March 31,
1995. Since September 30, 1994, the Company has generated no revenues from
operations. During the nine months ended March 31, 1996, capital was
provided for operations from contributions from two of the Company's
principal stockholders.
Net cash of $23,000 was provided by financing activities for the nine
months ended March 31, 1996. Net cash provided by financing activities for
the nine months ended March 31, 1995 was $5,001.
During the nine months ended March 31, 1996 and 1995, respectively, two
principal stockholders contributed a total of $23,000 and $17,500
respectively, to the Company to fund its operations.
During the nine months ended March 31, 1995, the Company's then
President repaid his loan receivable of $28,969 and contributed capital of
$56,996 to the Company to pay its liabilities.
Borrowings of $98,464 from an affiliated corporation were repaid by the
Company during the nine months ended March 31, 1995.
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.
FINANCIAL CONDITION AS OF MARCH 31, 1996
The following financial summary shows the deficit of the Company:
March 31, June 30,
1996 1995
(UNAUDITED) (AUDITED)
Total Assets $ 74 $ 1,502
Total Liabilities 170 2,479
Stockholders' Deficit $ (96) $ (977)
- 4 -
<PAGE>
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: May 10, 1996
\S\ YALE FARAR
Yale Farar, President and
Chief Financial Officer
(Principal Accounting Person)
- 5 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE PERIOD ENDED MARCH 31, 1996 FOR USA INTERNATIONAL CHEMICAL, INC.
AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000840399
<NAME> USA INTERNATIONAL CHEMICAL, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1996
<PERIOD-END> MAR-31-1996
<CASH> 74
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 74
<CURRENT-LIABILITIES> 170
<BONDS> 0
13
0
<COMMON> 0
<OTHER-SE> (109)
<TOTAL-LIABILITY-AND-EQUITY> 74
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,319)
<INCOME-TAX> 800
<INCOME-CONTINUING> (22,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,119)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
