__________________________________________________________________________
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 DECEMBER 31, 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 Identification Number)
incorporation or organization)
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, 1,329,809 issued and outstanding as of
January 31, 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
-1-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Set forth herein at pages F-1 to F-6
-2-
<PAGE>
[ Letterhead of ]
[ Block & Handelman ]
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 December 31, 1995 and the related statements of operations and
accumulated deficit and cash flows for the three-month and six-month periods
ended December 31, 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
February 5, 1996
F-1
<PAGE>
USA INTERNATIONAL CHEMICAL, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND JUNE 30, 1995
ASSETS
December 31, June 30,
1995 1995
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash $ 690 $ 1,502
TOTAL CURRENT ASSETS 690 1,502
TOTAL ASSETS $ 690 $ 1,502
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 567 $ 2,479
TOTAL CURRENT LIABILITIES 567 2,479
STOCKHOLDERS' EQUITY (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 256,967 238,967
Accumulated deficit (256,857) (239,957)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 123 (977)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 690 $ 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 SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
Three Months Ended Six Months Ended
DECEMBER 31 DECEMBER 31
1995 1994 1995 1994
SALES (Note 3) $ - $ - $ - $ 34,320
COST OF SALES - - - 17,377
GROSS PROFIT - - - 16,943
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,540 9,107 16,100 10,913
(LOSS) INCOME FROM
OPERATIONS (5,540) (9,107) (16,100) 6,030
OTHER INCOME (EXPENSE)
Interest income (Note 2) - - - 271
Interest expense (Note 2) - (196) - (1,234)
- (196) - (963)
(LOSS) INCOME BEFORE
INCOME TAX PROVISION (5,540) (9,303) (16,100) 5,067
PROVISION FOR INCOME TAX - - 800 800
NET (LOSS) INCOME $ (5,540) $ (9,303) (16,900) 4,267
ACCUMULATED DEFICIT,
beginning of period (239,957) (232,337)
ACCUMULATED DEFICIT,
end of period $ (256,857) $ (228,070)
NET (LOSS) INCOME PER SHARE
(Note 4) $ - $ (.01) $ (.01) $ -
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)
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
Six Months Ended
DECEMBER 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (16,900) $ 4,267
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES:
Changes in:
Accounts receivable - net - 917
Accounts payable (1,912) (1,880)
Income taxes payable - (800)
(1,912) (1,763)
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (18,812) 2,504
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in related party loans - (69,495)
Capital contributions 18,000 67,496
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 18,000 (1,999)
NET (DECREASE) INCREASE IN CASH (812) 505
CASH, at beginning of period 1,502 295
CASH, at end of period $ 690 $ 800
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ - $ 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
SIX MONTHS ENDED DECEMBER 31, 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 six-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 six months ended December 31, 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.
USA INTERNATIONAL CHEMICAL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 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 six months ended December 31, 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 six months December 31, 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 offices in space provided by the Company's President
at no charge.
NOTE 3 - MAJOR CUSTOMERS
The Company had no sales for the six-month period ended December 31,
1995.
During the six months ended December 31, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
AS COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 1994:
OPERATING ACTIVITIES
There were no sales for the six months ended December 31, 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 six months ended December 31, 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 six-month period. Gross profit for the six-
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 six months ended December 31, 1994 consisted of
interest earned of $271 from officer loans which were repaid in August 1994.
Operating expenses totaled $16,100 during the six-months ended December
31, 1995 compared to $10,913 for the same period of 1994. The $5,187 increase
was a direct result of higher legal and accounting fees incurred in connection
with the Company's annual audit.
During the six months ended December 31, 1995, net cash used by operations
was $18,812. During the six months ended December 31, 1994, net cash of $2,504
was provided by operations.
Accounts payable decreased $1,912 from $2,479 at June 30, 1995 to $567 at
December 31, 1995. The decrease resulted from the use of available cash to
reduce these accounts payable.
Net loss totaled $16,900 for the six months ended December 31, 1995
compared to net income of $4,267 for the six months ended December 31, 1994, a
decrease of $21,167. The decrease resulted primarily from the Company's having
no operating revenues and incurring higher administrative expenses in the
current six-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 six months ended December 31, 1994.
Since September 30, 1994, the Company has generated no revenues from
operations. During the six months ended December 31, 1995, capital was
provided for operations from contributions from two of the Company's principal
stockholders.
Net cash of $18,000 was provided by financing activities for the six
months ended December 31, 1995. Net cash used by financing activities for the
six months ended December 31, 1994 was $1,999.
During the six months ended December 31, 1995 and 1994, respectively, two
principal stockholders contributed a total of $18,000 and $10,500 to the
Company to fund its operations.
During the six months ended December 31, 1994, 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 six months ended December 31, 1994.
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 DECEMBER 31, 1995
The following financial summary shows the equity (deficit) of the Company:
December 31, June 30,
1995 1995
(UNAUDITED) (AUDITED)
Total Assets $ 690 $ 1,502
Total Liabilities 567 2,479
Stockholders' Equity $ 123 $ (977)
(Deficit)
-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: February 13, 1996
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 USA INTERNATIONAL CHEMICAL, INC. FOR THE PERIOD ENDED DECEMBER 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 690
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 690
<CURRENT-LIABILITIES> 567
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 110
<TOTAL-LIABILITY-AND-EQUITY> 690
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,100)
<INCOME-TAX> 800
<INCOME-CONTINUING> (16,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,900)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
